CONFIDENTIAL — DRAFT — SUBJECT TO CHANGE
RECEIVABLES SALE AGREEMENT
dated as of [●], 2022
between
QUORUM PREMIUM FINANCE LLC, as Seller,
and
QUORUM RECEIVABLES HOLDING LLC, as Purchaser
EXECUTION DRAFT v3 — October 12, 2022
Calderwood & Harkness LLP Counsel to Seller 601 Lexington Avenue New York, NY 10022 Matter No. 1025-00007
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RECITALS
WHEREAS, Quorum Premium Finance LLC ("Seller" or "QPF"), a Delaware limited liability company with its principal office at 400 Atlantic Street, Suite 2200, Stamford, CT 06901, is engaged in the business of originating and servicing insurance premium finance loans to commercial policyholders across all 50 states of the United States of America;
WHEREAS, Quorum Receivables Holding LLC ("Purchaser" or "QRH"), a Delaware limited liability company, is a bankruptcy-remote special purpose entity whose sole member is Seller, formed for the sole purpose of acquiring, holding, and transferring certain receivables as described herein;
WHEREAS, Seller desires to sell, transfer, assign, and convey to Purchaser, and Purchaser desires to purchase and accept from Seller, certain insurance premium finance receivables and related rights, on the terms and conditions set forth herein;
WHEREAS, the receivables acquired by Purchaser hereunder are intended to be further transferred by Purchaser to Quorum Receivables Funding 2022-1 LLC ("QRF 2022-1"), a bankruptcy-remote Delaware limited liability company, which will issue asset-backed notes in an aggregate principal amount of $500,000,000 in a private placement pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended;
WHEREAS, it is the intention of the parties that each transfer of Receivables hereunder shall constitute a "true sale" of such Receivables from Seller to Purchaser and not a pledge of, or the grant of a security interest in, such Receivables by Seller to Purchaser;
WHEREAS, Quorum Insurance Holdings Corp. ("QIH"), a Delaware corporation and the ultimate parent of both Seller and Purchaser, has authorized the transactions contemplated hereby by resolutions of its Board of Directors dated July 27, 2022; and
WHEREAS, the parties wish to set forth herein the terms and conditions governing the sale and purchase of such Receivables.
NOW, THEREFORE, in consideration of the mutual agreements, provisions, and covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I — DEFINITIONS
Section 1.01 — Defined Terms
As used in this Agreement, the following terms shall have the following meanings:
"Accounts" means any and all deposit accounts maintained by Purchaser or QRF 2022-1 at Calvoneth Trust Company, N.A., including the Collection Account, the Reserve Account, and any other accounts established pursuant to the Indenture or the other Transaction Documents.
"Addition Date" means, during the Revolving Period, the date on which Seller sells Subsequent Receivables to Purchaser hereunder, which shall occur on a monthly basis on the fifteenth (15th) day of each calendar month (or, if such day is not a Business Day, the next succeeding Business Day).
"Addition Date Certificate" means a certificate substantially in the form of Exhibit A hereto, to be delivered by Seller on each Addition Date during the Revolving Period, certifying that each Subsequent Receivable satisfies the Eligible Receivable criteria and that no Early Amortization Event has occurred or is continuing.
"Aggregate Receivables Balance" means, as of any date of determination, the aggregate outstanding principal balance of all Receivables in the Pool as of such date. As of the Initial Cut-Off Date, the Aggregate Receivables Balance was $612,000,000.
"Agreement" means this Receivables Sale Agreement, as the same may be amended, restated, supplemented, or otherwise modified from time to time in accordance with its terms.
"Amortization Period" means the twelve (12) month period following the end of the Revolving Period, during which Collections on the Receivables in the Pool shall be applied to pay down the Notes and other Senior Obligations in accordance with the payment waterfall set forth in the Indenture.
"Average Loan Balance" means, as of any date of determination, the average outstanding principal balance of the Receivables in the Pool, calculated by dividing the Aggregate Receivables Balance by the total number of Receivables in the Pool. As of the Initial Cut-Off Date, the Average Loan Balance was approximately $7,427 ($612,000,000 ÷ 82,400 loans).
"Back-Up Servicer" means Northvane Bank, National Association, or any successor thereto, in its capacity as back-up servicer under the Servicing Agreement.
"Business Day" means any day other than a Saturday, a Sunday, or a day on which banking institutions in New York, New York or Houston, Texas are authorized or required by law, regulation, or executive order to close.
"Closing Date" means the date on which the initial purchase of Receivables occurs, as set forth in the Note Purchase Agreement.
"Collections" means all cash collections and other cash proceeds of the Receivables, including all scheduled payments of principal and interest received from Obligors, all unearned premium refund proceeds received from Insurance Carriers, all liquidation proceeds, all recoveries with respect to Defaulted Receivables, and any investment earnings on amounts on deposit in the Accounts, but excluding any amounts in respect of the Servicing Fee.
"Concentration Limit" means, as of any date of determination, the following limitations on the composition of the Pool: (a) no single Obligor may represent more than 0.75% of the Aggregate Receivables Balance; (b) no single state may represent more than 20% of the Aggregate Receivables Balance; and (c) no single Insurance Carrier may represent more than 15% of the Aggregate Receivables Balance.
"Cut-Off Date" means (a) with respect to the initial Receivables, June 30, 2022 (the "Initial Cut-Off Date"), and (b) with respect to Subsequent Receivables, the last day of the calendar month immediately preceding the applicable Addition Date.
"Defaulted Receivable" means any Receivable as to which any scheduled payment of principal or interest is more than sixty (60) days past due as of the date of determination.
"Delinquency Rate" means, as of any date of determination, the ratio, expressed as a percentage, of the aggregate outstanding principal balance of all Receivables that are sixty (60) or more days past due to the Aggregate Receivables Balance as of such date. As of the Initial Cut-Off Date, the Delinquency Rate was 0.87%.
"Early Amortization Event" has the meaning set forth in Section 10.01.
"Eligible Receivable" means a Receivable satisfying all of the criteria set forth in Section 2.06 hereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder.
"Event of Default" has the meaning set forth in the Indenture.
"Indenture" means the Indenture dated as of [●], 2022, between QRF 2022-1, as issuer, and Calvoneth Trust Company, N.A., as indenture trustee, as the same may be amended, restated, supplemented, or otherwise modified from time to time.
"Indenture Trustee" means Calvoneth Trust Company, National Association, a national banking association, in its capacity as trustee under the Indenture, with its corporate trust office located at 600 Travis Street, Suite 5800, Houston, TX 77002, or any successor trustee appointed in accordance with the terms of the Indenture.
"Independent Manager" means, with respect to Purchaser, Eleanor M. Vasquez, an individual who is not, and has not been for at least three years prior to her appointment, a member, manager, officer, employee, partner, or affiliate of Purchaser, Seller, QIH, or any of their respective affiliates, and who has been appointed as an independent manager of Purchaser pursuant to an Independent Manager Agreement with Fortbridge Corporate Services LLC.
"Initial Cut-Off Date" means June 30, 2022.
"Insurance Carrier" means the insurance company that issued the insurance policy the premiums for which are financed by the related Receivable.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder.
"Legal Final Maturity" means the date that is forty-two (42) months from the Closing Date.
"Net Loss Rate" means, as of any date of determination, the annualized ratio, expressed as a percentage, of the aggregate outstanding principal balance of Receivables charged off during the applicable measurement period (net of recoveries received during such period) to the average Aggregate Receivables Balance during such period. The three-year historical average Net Loss Rate for the period from January 1, 2019 through December 31, 2021 was 0.42%.
"Note Purchase Agreement" means the Note Purchase Agreement dated as of [●], 2022, among QRF 2022-1, as issuer, QIH, as sponsor, and Ridgeline Capital Markets LLC, as initial purchaser, as the same may be amended, restated, supplemented, or otherwise modified from time to time.
"Noteholders" means the holders from time to time of the Notes.
"Notes" means, collectively, the Class A Notes in an aggregate initial principal amount of $375,000,000, the Class B Notes in an aggregate initial principal amount of $75,000,000, and the Class C Notes in an aggregate initial principal amount of $35,000,000, each issued by QRF 2022-1 under the Indenture.
"Obligor" means the commercial policyholder obligated to make payments of principal and interest under a Receivable.
"Person" means any individual, corporation, limited liability company, partnership, joint venture, association, trust, unincorporated organization, governmental authority, or any other entity.
"Pool" or "Receivables Pool" means all Receivables sold by Seller to Purchaser and held by Purchaser (or subsequently transferred to QRF 2022-1) at any time, together with all Related Rights and proceeds thereof.
"Purchase Price" has the meaning set forth in Section 2.03.
"Purchaser" means Quorum Receivables Holding LLC, a Delaware limited liability company.
"QIH" means Quorum Insurance Holdings Corp., a Delaware corporation and the ultimate parent of Seller and Purchaser.
"QRF 2022-1" means Quorum Receivables Funding 2022-1 LLC, a bankruptcy-remote Delaware limited liability company.
"Rating Agencies" means Brindoval Ratings Inc. and Pinnacle Rating Services LLC.
"Receivable" means an insurance premium finance loan originated by Seller to a U.S. commercial policyholder, evidenced by a premium finance agreement executed by the related Obligor, and secured by the right to receive unearned premium refunds from the related Insurance Carrier upon cancellation of the financed insurance policy.
"Receivables Schedule" means, with respect to the initial Receivables, Schedule I attached hereto, and with respect to Subsequent Receivables, the schedule delivered by Seller to Purchaser on each Addition Date identifying each Subsequent Receivable in the form set forth in Exhibit B hereto.
"Receivables Transfer Agreement" means the Receivables Transfer Agreement dated as of [●], 2022, between Purchaser and QRF 2022-1, pursuant to which Purchaser transfers Receivables to QRF 2022-1, as the same may be amended, restated, supplemented, or otherwise modified from time to time.
"Related Rights" means, with respect to each Receivable, all related security interests in favor of Seller (including the assignment of unearned premium refund rights), all rights to receive unearned premium refunds from the related Insurance Carrier, all insurance policy cancellation rights, all notices and correspondence with Insurance Carriers, all servicer files and records relating to such Receivable, all rights to enforce the Receivable against the Obligor, and all proceeds of the foregoing.
"Repurchase Price" has the meaning set forth in Section 4.03.
"Revolving Period" means the period commencing on the Closing Date and ending on the date that is twenty-four (24) months from the Closing Date, unless earlier terminated upon the occurrence of an Early Amortization Event.
"Seller" means Quorum Premium Finance LLC, a Delaware limited liability company.
"Senior Obligations" means all amounts owing by QRF 2022-1 to the Noteholders, the Indenture Trustee, the Back-Up Servicer, and other secured parties under the Indenture and the other Transaction Documents, in each case to the extent senior in right of payment to the Subordinated Note.
"Servicer" means Quorum Premium Finance LLC, in its capacity as servicer of the Receivables under the Servicing Agreement, or any successor servicer appointed in accordance therewith.
"Servicer Default" has the meaning set forth in the Servicing Agreement.
"Servicing Agreement" means the Servicing Agreement dated as of [●], 2022, among QRF 2022-1, as issuer, QPF, as servicer, and Calvoneth Trust Company, N.A., as indenture trustee and back-up servicer, as the same may be amended, restated, supplemented, or otherwise modified from time to time.
"Servicing Fee" means the fee payable to the Servicer under the Servicing Agreement, equal to 1.00% per annum of the outstanding Aggregate Receivables Balance, calculated and payable monthly on each payment date.
"SOFR" means the Secured Overnight Financing Rate as published by the Federal Reserve Bank of New York (or any successor administrator).
"Sponsor" means Quorum Insurance Holdings Corp.
"Subordinated Note" means the promissory note substantially in the form of Exhibit C hereto, evidencing the deferred and subordinated portion of the Purchase Price payable by Purchaser to Seller, which is subordinated in right of payment to all Notes and other Senior Obligations under the Indenture.
"Subsequent Receivables" means Receivables sold by Seller to Purchaser on any Addition Date after the Closing Date during the Revolving Period.
"Transaction Documents" means, collectively, this Agreement, the Receivables Transfer Agreement, the Indenture, the Note Purchase Agreement, the Servicing Agreement, the Subordinated Note, and each other agreement, document, certificate, or instrument delivered in connection with the transactions contemplated hereby.
"UCC" means the Uniform Commercial Code as in effect in the relevant jurisdiction from time to time.
"Unearned Premium" means the portion of the insurance premium that has been financed by the related Receivable but not yet earned by the related Insurance Carrier as of the date of determination.
"Weighted Average APR" means, as of any date of determination, the weighted average annual percentage rate of the Receivables in the Pool, weighted by the outstanding principal balance of each Receivable. As of the Initial Cut-Off Date, the Weighted Average APR was 7.85%.
Section 1.02 — Rules of Construction
Unless the context otherwise requires, the following rules of construction shall apply to this Agreement:
(a) References in this Agreement to any Article, Section, Exhibit, or Schedule are to the specified Article, Section, Exhibit, or Schedule of or to this Agreement unless otherwise expressly indicated.
(b) The headings and captions contained in this Agreement are inserted for convenience of reference only and shall not affect the meaning or interpretation of any provision hereof.
(c) The word "including" (and variations thereof) means "including without limitation" and shall not be construed to limit any general statement which it follows to the specific or similar items or matters immediately following it.
(d) References to any statute, law, rule, or regulation include all amendments thereto and any successor statutes, laws, rules, or regulations, and all rules, regulations, and guidance promulgated thereunder from time to time.
(e) References to any Person include such Person's successors and permitted assigns.
(f) The words "hereof," "herein," "hereunder," and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement.
(g) Terms defined in the singular shall have the corresponding meaning in the plural, and vice versa.
(h) References to "dollars" or "$" shall mean the lawful currency of the United States of America.
(i) Terms used but not otherwise defined herein that are defined in the UCC shall have the meanings assigned to them in the applicable UCC; provided that, if any such term is defined differently in different Articles of the UCC, the definition in Article 9 of the UCC shall control.
Section 1.03 — SOFR Benchmark Replacement
Notwithstanding anything to the contrary herein or in any other Transaction Document, if a Benchmark Transition Event and its related Benchmark Replacement Date have occurred with respect to SOFR, then the applicable Benchmark Replacement will replace SOFR for all purposes hereunder and under the other Transaction Documents in respect of any determination on or after such Benchmark Replacement Date. The "Benchmark Replacement" shall be the first alternative set forth in the order below that can be determined by the Indenture Trustee (in consultation with the Servicer): (a) the sum of (i) the alternate benchmark rate that has been selected or recommended by the Board of Governors of the Federal Reserve System or any committee officially endorsed or convened thereby for the applicable tenor, and (ii) the related Benchmark Replacement Adjustment; or (b) the sum of (i) the ISDA Fallback Rate and (ii) the related Benchmark Replacement Adjustment; or (c) the sum of (i) such alternate benchmark rate as has been selected by the Servicer (with the consent of the Indenture Trustee, such consent not to be unreasonably withheld) as the replacement for the then-current Benchmark for the applicable tenor, and (ii) the related Benchmark Replacement Adjustment, subject in each case to confirmation from the Rating Agencies that such replacement will not result in a downgrade or withdrawal of the ratings on the Notes.
ARTICLE II — SALE AND PURCHASE OF RECEIVABLES
Section 2.01 — Sale of Initial Receivables
(a) On the Closing Date, Seller hereby sells, transfers, assigns, conveys, and delivers to Purchaser, without recourse except as expressly provided herein, all of Seller's right, title, and interest in and to:
(i) each Receivable identified on the Initial Cut-Off Date Schedule attached hereto as Schedule I (each such Receivable, an "Initial Receivable");
(ii) all Related Rights with respect to each such Initial Receivable;
(iii) all Collections on or in respect of such Initial Receivables received on or after the Initial Cut-Off Date of June 30, 2022; and
(iv) all proceeds of the foregoing, in whatever form and wherever located.
(b) The initial Receivables Pool consists of approximately 82,400 insurance premium finance loans originated by Seller, with an aggregate outstanding principal balance of $612,000,000 as of the Initial Cut-Off Date of June 30, 2022. The Initial Receivables are more fully described in Schedule I hereto and in the data tape verified by Veristead Analytics LLC.
(c) Purchaser hereby accepts such sale, transfer, assignment, conveyance, and delivery and agrees to pay the Purchase Price therefor in accordance with Section 2.03.
(d) Seller acknowledges that, following the sale of the Initial Receivables hereunder, Purchaser intends to transfer such Receivables to QRF 2022-1 pursuant to the Receivables Transfer Agreement, and Seller consents to such further transfer.
Section 2.02 — Sale of Subsequent Receivables
(a) During the Revolving Period (which shall be the twenty-four (24) month period commencing on the Closing Date, unless earlier terminated upon the occurrence of an Early Amortization Event), Seller shall sell, transfer, assign, convey, and deliver to Purchaser, on each Addition Date, additional Receivables originated by Seller since the immediately preceding Cut-Off Date (each such Receivable, a "Subsequent Receivable"), together with all Related Rights with respect thereto, all Collections thereon received on or after the applicable Cut-Off Date, and all proceeds thereof.
(b) Each Subsequent Receivable must satisfy all of the Eligible Receivable criteria set forth in Section 2.06 at the time of transfer to Purchaser. Seller shall not transfer any Receivable that does not satisfy each and every one of such criteria.
(c) On each Addition Date, Seller shall deliver to Purchaser an Addition Date Certificate substantially in the form of Exhibit A hereto, executed by an authorized officer of Seller, certifying that:
(i) each Subsequent Receivable being sold on such Addition Date satisfies all of the Eligible Receivable criteria set forth in Section 2.06;
(ii) the representations and warranties of Seller set forth in Article III and Article IV are true and correct in all material respects as of such Addition Date (or, if any such representation or warranty is expressly stated to be made as of a specific date, as of such specific date);
(iii) no Event of Default, Early Amortization Event, or Servicer Default has occurred and is continuing; and
(iv) after giving effect to the addition of such Subsequent Receivables, the Aggregate Receivables Balance will be at least $450,000,000 and no Concentration Limit will be exceeded.
(d) The Aggregate Receivables Balance after each addition of Subsequent Receivables must be at least $450,000,000, which is the minimum pool balance required to be maintained during the Revolving Period.
(e) After giving effect to each addition of Subsequent Receivables, the following Concentration Limits must remain satisfied:
(i) no single Obligor may represent more than 0.75% of the Aggregate Receivables Balance;
(ii) no single state may represent more than 20% of the Aggregate Receivables Balance; and
(iii) no single Insurance Carrier may represent more than 15% of the Aggregate Receivables Balance.
(f) Seller shall deliver to Purchaser a Receivables Schedule substantially in the form of Exhibit B hereto on each Addition Date, identifying each Subsequent Receivable by the data fields set forth in such Exhibit.
Section 2.03 — Purchase Price
(a) The purchase price for each Receivable (the "Purchase Price") shall be the fair market value of such Receivable, determined as the outstanding principal balance of such Receivable as of the applicable Cut-Off Date, multiplied by a purchase price percentage, less a discount reflecting:
(i) the credit risk of the Receivable, including the historical default and loss experience of Seller's insurance premium finance receivables portfolio;
(ii) the time value discount, based on the expected remaining term and the applicable market discount rate; and
(iii) the servicing fee payable to the Servicer in respect of such Receivable.
(b) The purchase price percentage shall be no less than [●]% of the outstanding principal balance of such Receivable as of the applicable Cut-Off Date, and shall be determined by Seller and Purchaser with reference to arm's-length pricing methodologies to support the characterization of the transfer as a true sale. The parties acknowledge that the purchase price percentage has been established with reference to market benchmarks and third-party valuation analyses, and reflects the fair market value of the Receivables at the time of sale.
(c) Payment of the Purchase Price may be made in one or more of the following forms:
(i) in cash;
(ii) by contribution to the capital of Purchaser;
(iii) by a combination of cash and capital contribution; or
(iv) by a deferred purchase price payable from Collections in accordance with the payment waterfall set forth in the Indenture and evidenced by the Subordinated Note.
(d) To the extent any portion of the Purchase Price is deferred, such deferred amount shall be evidenced by a Subordinated Note substantially in the form of Exhibit C hereto, which shall be subordinated in right of payment to all Notes and other Senior Obligations under the Indenture. The Subordinated Note shall be payable solely from Collections remaining after the payment in full of all Senior Obligations in accordance with the payment waterfall.
(e) Seller and Purchaser shall maintain detailed records of each Purchase Price determination, including the methodology, inputs, and calculations used to establish the purchase price percentage for each transfer, and shall make such records available for review by the Indenture Trustee and the Rating Agencies upon reasonable request.
Section 2.04 — True Sale; Characterization
(a) True Sale Intent. It is the express intent of Seller and Purchaser that each sale, transfer, assignment, and conveyance of Receivables by Seller to Purchaser hereunder shall constitute a "true sale" of such Receivables from Seller to Purchaser for all purposes, and shall not constitute a pledge of, or a grant of a security interest in, such Receivables by Seller to Purchaser. The parties acknowledge that the structure of the transactions contemplated hereby, including the pricing, the risk allocation, and the non-recourse nature of the transfer, has been designed to achieve true sale treatment.
(b) Consistent Treatment. Each party shall treat the transactions contemplated hereby as a sale for all purposes, including:
(i) for accounting purposes, subject to applicable accounting standards (including GAAP and ASC 860);
(ii) for regulatory purposes; and
(iii) for federal, state, and local income, franchise, and other tax purposes.
(c) Structural Considerations. The parties have structured the Purchase Price, the non-recourse nature of the transfer, the assumption of risk of loss by Purchaser, and the allocation of the benefits and burdens of ownership to support and evidence the intent that each transfer hereunder constitutes a true sale. Without limiting the foregoing, the parties note that: (i) the Purchase Price represents fair market value consideration; (ii) Seller transfers to Purchaser all of its right, title, and interest in the Receivables without recourse (except as expressly provided in Section 4.03); (iii) Purchaser bears the credit risk of loss on the Receivables following transfer; and (iv) Seller does not retain any right to repurchase the Receivables other than in connection with a breach of its representations and warranties.
(d) Books and Records. Seller shall reflect the transfer of Receivables hereunder as a sale on its books and records and shall not carry the Receivables as assets on its financial statements after the applicable transfer date. Purchaser shall reflect the Receivables as assets on its own books and records from and after the applicable transfer date.
(e) Back-Up Security Interest. If, notwithstanding the foregoing intent of the parties and the structural protections described in this Section 2.04, any court of competent jurisdiction or other governmental authority determines that any transfer of Receivables hereunder does not constitute a true sale but rather constitutes a secured lending or similar transaction, then Seller hereby grants to Purchaser a first-priority security interest in all of Seller's right, title, and interest in and to all Receivables, all Related Rights, all Collections, and all proceeds of the foregoing (the "Back-Up Security Interest"), to secure all obligations of Seller to Purchaser hereunder. Such Back-Up Security Interest shall be perfected by the UCC filings described in Article IX hereof.
(f) Authorization to File. Seller hereby authorizes Purchaser (and the Indenture Trustee, on behalf of Purchaser) to prepare, execute, and file UCC financing statements and any amendments, continuations, or assignments thereof as may be necessary or advisable to perfect the Back-Up Security Interest granted pursuant to paragraph (e) above, all as more fully described in Article IX.
Section 2.05 — No Assumption of Liabilities
(a) Purchaser does not assume, and shall not be deemed to have assumed, any liabilities or obligations of Seller in connection with the purchase of Receivables hereunder, except for those obligations expressly assumed by Purchaser under this Agreement and the other Transaction Documents.
(b) Seller retains all liabilities and obligations related to the origination of the Receivables, including without limitation any claims, actions, losses, or liabilities arising from:
(i) violations of applicable law (including usury laws, premium finance licensing requirements, and consumer protection laws) in connection with the origination of any Receivable;
(ii) any misrepresentation or omission of material information in connection with the origination of any Receivable;
(iii) any defect in the documentation evidencing any Receivable that arose prior to the date of transfer; and
(iv) any claim by an Obligor or Insurance Carrier relating to the conduct of Seller prior to the date of transfer.
Section 2.06 — Eligible Receivable Criteria
Each Receivable sold or transferred by Seller to Purchaser hereunder must, at the time of sale, satisfy all of the following criteria (each such criterion, an "Eligible Receivable Criterion"):
(a) Origination. The Receivable was originated by Seller in the ordinary course of Seller's insurance premium finance business and in accordance with Seller's customary underwriting guidelines and origination procedures.
(b) Currency. The Receivable is denominated in United States Dollars.
(c) Security. The Receivable is secured by the Obligor's valid assignment to Seller of the Obligor's right to receive unearned premium refunds from the related Insurance Carrier upon cancellation of the financed insurance policy.
(d) Original Term. The Receivable has an original term not exceeding twelve (12) months from its date of origination.
(e) Obligor Type. The Obligor is a U.S. commercial policyholder and is not a natural person acting primarily for personal, family, or household purposes. The transaction evidenced by the Receivable does not constitute a "consumer credit transaction" within the meaning of the Truth in Lending Act, Regulation Z, or any analogous state consumer protection statute.
(f) Current Status. The Receivable is not a Defaulted Receivable — no payment of principal or interest under such Receivable is more than sixty (60) days past due as of the applicable Cut-Off Date.
(g) Legal Compliance. The Receivable was originated in compliance with all applicable federal, state, and local usury laws and premium finance licensing requirements in the jurisdiction where the Obligor is located and in the jurisdiction where the Receivable was originated, and all required disclosures and notices were provided to the Obligor in connection with the origination of the Receivable.
(h) No Liens. The Receivable is not subject to any lien, claim, charge, encumbrance, or security interest of any kind (other than the interests of Purchaser created hereunder, the interests of QRF 2022-1 created under the Receivables Transfer Agreement, and the interests of the Indenture Trustee created under the Indenture).
(i) Enforceability. The Receivable constitutes a valid and binding obligation of the Obligor, enforceable against the Obligor in accordance with its terms, subject to applicable bankruptcy, insolvency, receivership, reorganization, moratorium, and similar laws affecting the enforcement of creditors' rights generally and subject to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law).
(j) Insurance Policy Status. The related insurance policy has not been cancelled or terminated, and the related Insurance Carrier has not sent a notice of non-renewal with respect to such policy, except to the extent such cancellation, termination, or non-renewal triggers the Obligor's obligation to pay the Receivable in full and the right to receive unearned premium refunds remains enforceable.
(k) Good Title. Seller has good and marketable title to the Receivable, free and clear of all liens, charges, and encumbrances, other than liens created under the Transaction Documents.
(l) Concentration Limits. The Receivable does not cause any Concentration Limit to be exceeded after giving effect to the proposed transfer:
(i) no single Obligor shall represent more than 0.75% of the Aggregate Receivables Balance;
(ii) no single state shall represent more than 20% of the Aggregate Receivables Balance; and
(iii) no single Insurance Carrier shall represent more than 15% of the Aggregate Receivables Balance.
(m) Licensing. The Receivable was originated by Seller at a time when Seller was duly licensed as a premium finance company in the applicable state, and such license was in full force and effect at the time of origination.
(n) No Material Modification. The Receivable has not been modified, amended, waived, or restructured in any material respect since its date of origination, except in accordance with Seller's customary and prudent servicing practices as described in the Servicing Agreement.
Section 2.07 — Obligations of Seller Regarding Collections
(a) Until a Receivable is transferred to Purchaser hereunder, Seller shall hold all Collections received with respect to such Receivable in trust for the benefit of Purchaser and shall segregate and identify such Collections in its books and records.
(b) Following the transfer of a Receivable to Purchaser, all Collections received by Seller in respect of such Receivable shall be remitted to the Collection Account maintained at Calvoneth Trust Company, N.A. in accordance with the terms and conditions of the Servicing Agreement, including the remittance timing and procedures set forth therein.
(c) Seller shall not commingle Collections with its own funds, except to the extent expressly permitted by the Servicing Agreement during any applicable two-Business Day commingling period. In the event that Seller's credit rating is downgraded below the minimum levels specified in the Servicing Agreement, such commingling period shall be reduced or eliminated as provided therein, and Seller shall remit Collections directly to the Collection Account on the Business Day of receipt.
(d) Seller shall maintain records sufficient to identify all Collections received in respect of each Receivable and to reconcile such Collections with the amounts remitted to the Collection Account.
ARTICLE III — REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser as of the date hereof, and as of each Addition Date (except where any representation or warranty is stated to be made as of a specific date, in which case such representation or warranty shall be made only as of such specific date), as follows:
Section 3.01 — Organization and Good Standing
(a) Seller is a limited liability company duly organized, validly existing, and in good standing under the laws of the State of Delaware.
(b) Seller has its principal office at 400 Atlantic Street, Suite 2200, Stamford, CT 06901.
(c) Seller is duly qualified to do business and is in good standing as a foreign limited liability company in each state of the United States and in each other jurisdiction where the character of the properties owned, leased, or operated by it or the nature of its business activities requires such qualification, and where the failure to so qualify would have a material adverse effect on Seller's ability to perform its obligations under this Agreement or on the validity, collectability, or enforceability of the Receivables.
(d) Seller's Employer Identification Number is 84-2653198.
Section 3.02 — Authority; Binding Obligation
(a) Seller has all necessary limited liability company power and authority to execute, deliver, and perform this Agreement and each other Transaction Document to which it is a party, and to sell, transfer, assign, and convey the Receivables as contemplated hereby.
(b) The execution, delivery, and performance of this Agreement and each other Transaction Document to which Seller is a party have been duly authorized by all necessary action on the part of Seller, including the authorizing resolutions certified in the Manager's Certificate of Sandra Ling-Hwang dated July 27, 2022, and no further action or proceeding on the part of Seller is required.
(c) This Agreement constitutes a legal, valid, and binding obligation of Seller, enforceable against Seller in accordance with its terms, subject to applicable bankruptcy, insolvency, receivership, reorganization, moratorium, fraudulent conveyance, and other similar laws affecting the enforcement of creditors' rights generally and subject to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law).
Section 3.03 — No Conflict
The execution, delivery, and performance of this Agreement and the other Transaction Documents by Seller, and the sale, transfer, assignment, and conveyance of the Receivables hereunder, do not and will not:
(a) conflict with or violate Seller's Certificate of Formation or Limited Liability Company Agreement, each as currently in effect;
(b) conflict with or violate any applicable law, rule, regulation, judgment, order, writ, injunction, or decree of any court or governmental authority binding on Seller or its properties;
(c) result in the creation or imposition of any lien, charge, or encumbrance on any Receivable or any Related Rights (other than the liens and interests created under the Transaction Documents); or
(d) result in a breach of, or constitute a default (or an event that, with the giving of notice or the lapse of time, or both, would constitute a default) under, any material contract, agreement, lease, indenture, mortgage, or other instrument to which Seller is a party or by which Seller or any of its properties is bound.
Section 3.04 — Consents and Approvals
No consent, approval, authorization, order, registration, filing, or qualification of or with any court, governmental authority, regulatory body, or any other Person is required for Seller's execution, delivery, and performance of this Agreement and the other Transaction Documents, or for the consummation of the transactions contemplated hereby, except for (a) UCC filings required under Article IX hereof, and (b) such other filings, consents, and approvals as have been or will be obtained, made, or given on or prior to the Closing Date.
Section 3.05 — No Litigation
No action, suit, proceeding, claim, or investigation is pending or, to Seller's knowledge after due inquiry, threatened against Seller before any court, arbitrator, or governmental authority that would, individually or in the aggregate, reasonably be expected to (a) materially and adversely affect Seller's ability to perform its obligations under this Agreement or any other Transaction Document, (b) materially and adversely affect the validity, collectability, or enforceability of the Receivables, or (c) materially and adversely affect the validity or enforceability of this Agreement or any other Transaction Document.
Section 3.06 — Compliance with Laws
(a) Seller is in compliance in all material respects with all applicable federal, state, and local laws, rules, regulations, orders, and decrees, including without limitation all laws and regulations relating to insurance premium finance lending, usury, licensing, consumer protection, privacy, data security, anti-money laundering, and sanctions.
(b) Seller is duly licensed as a premium finance company in each of the fifty (50) states in which it originates Receivables. A complete listing of Seller's premium finance company licenses, including license numbers and expiration dates, is set forth on Schedule III hereto. Each such license is in full force and effect, and Seller has not received any written notice of any pending or threatened revocation, suspension, or material modification of any such license.
Section 3.07 — Financial Condition
(a) The audited consolidated financial statements of Seller's ultimate parent, Quorum Insurance Holdings Corp. (QIH), as audited by Meridian Ledger LLP (Robert Falcone, engagement partner), for the fiscal year ended December 31, 2021, which have been furnished to Purchaser, present fairly in all material respects the consolidated financial position, results of operations, and cash flows of QIH as of the dates and for the periods indicated therein, in conformity with generally accepted accounting principles applied on a consistent basis throughout the periods covered thereby (except as may be indicated in the notes thereto). QIH's consolidated revenue for the fiscal year ended December 31, 2021 was $3,800,000,000.
(b) QPF's total insurance premium finance receivables portfolio was approximately $2,100,000,000 as of the date hereof, and Seller has provided to Purchaser and the Rating Agencies a complete and accurate description of the composition, credit quality, and performance history of such portfolio.
(c) Since December 31, 2021, there has been no material adverse change in the business, operations, financial condition, or prospects of Seller or QIH.
Section 3.08 — Solvency