Calderwood & Harkness LLP Matter No. 1025-00007
RECEIVABLES TRANSFER AGREEMENT
dated as of [●], 2022
between
QUORUM RECEIVABLES HOLDING LLC, a Delaware limited liability company, as Transferor
and
QUORUM RECEIVABLES FUNDING 2022-1 LLC, a Delaware limited liability company, as Transferee
Execution Draft v3 — October 12, 2022
Draft — Subject to Review and Comment — Not for Execution
$375,000,000 Class A Notes $75,000,000 Class B Notes $35,000,000 Class C Notes
TABLE OF CONTENTS
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RECEIVABLES TRANSFER AGREEMENT
This RECEIVABLES TRANSFER AGREEMENT (this "Agreement") is made and entered into as of [●], 2022, by and between:
(1) QUORUM RECEIVABLES HOLDING LLC, a Delaware limited liability company (the "Transferor" or "QRH"); and
(2) QUORUM RECEIVABLES FUNDING 2022-1 LLC, a Delaware limited liability company (the "Transferee," "Issuer," or "QRF 2022-1").
Each of QRH and QRF 2022-1 is sometimes referred to herein individually as a "Party" and collectively as the "Parties."
RECITALS
WHEREAS:
A. QRH is a limited liability company duly organized and validly existing under the laws of the State of Delaware (Delaware Secretary of State File No. 7894228), and is a bankruptcy-remote special purpose entity whose sole member is Quorum Premium Finance LLC ("QPF"), a Delaware limited liability company. QRH was organized on August 3, 2022, for the limited purpose of acquiring insurance premium finance receivables from QPF and transferring such receivables to the Transferee in accordance with the terms and conditions set forth herein and in the other Transaction Documents;
B. QRF 2022-1 is a limited liability company duly organized and validly existing under the laws of the State of Delaware (Delaware Secretary of State File No. 7894231), and is a bankruptcy-remote special purpose entity organized on August 3, 2022, whose sole member is QRH. QRF 2022-1 was formed for the limited purpose of acquiring and holding insurance premium finance receivables transferred to it by QRH and issuing asset-backed notes secured by such receivables and the related property;
C. QRH has acquired, and will from time to time hereafter acquire, insurance premium finance receivables from QPF pursuant to that certain Receivables Sale Agreement, dated as of [●], 2022 (as amended, supplemented, or otherwise modified from time to time, the "Sale Agreement"), between QPF, as Seller, and QRH, as Purchaser, pursuant to which QPF sells, assigns, and transfers to QRH all of QPF's right, title, and interest in and to such receivables and related property;
D. QRH desires to transfer, and QRF 2022-1 desires to acquire, such receivables and related property from QRH, either as a contribution to the capital of QRF 2022-1 or as a sale, in each case on the terms and subject to the conditions set forth in this Agreement;
E. QRF 2022-1 will issue $375,000,000 aggregate principal amount of Class A Notes, $75,000,000 aggregate principal amount of Class B Notes, and $35,000,000 aggregate principal amount of Class C Notes (collectively, the "Notes") pursuant to an Indenture dated as of [●], 2022 (as amended, supplemented, or otherwise modified from time to time, the "Indenture"), between QRF 2022-1, as Issuer, and Calvoneth Trust Company, National Association, as indenture trustee (the "Trustee"), which Notes will be secured by the Transferred Receivables and the related property transferred to QRF 2022-1 pursuant to this Agreement;
F. QRF 2022-1 will grant a first-priority security interest in the Transferred Receivables and related collateral to the Trustee for the benefit of the Noteholders pursuant to the Grant of Security Interest dated as of [●], 2022 (the "Grant of Security Interest" or "Pledge Agreement"), between QRF 2022-1 and Calvoneth Trust Company, National Association, as Trustee;
G. Brindoval Ratings Inc. and Pinnacle Rating Services LLC have each assigned preliminary ratings to the Notes as follows: Class A Notes — AAA(cr) (Brindoval) and Aaa(p) (Pinnacle); Class B Notes — A(cr) (Brindoval) and A1(p) (Pinnacle); Class C Notes — BBB(cr) (Brindoval) and Baa2(p) (Pinnacle), and the consummation of the transactions contemplated by this Agreement and the other Transaction Documents is a condition precedent to the final issuance and confirmation of such ratings; and
H. As a back-up to the characterization of the transfers hereunder as contributions or sales, QRH desires to grant to QRF 2022-1 a security interest in the Transferred Receivables and Related Property to secure all of QRH's obligations hereunder, all as more fully described in Article VI hereof.
NOW, THEREFORE, in consideration of the mutual covenants, agreements, representations, and warranties set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:
ARTICLE I — DEFINITIONS
Section 1.01 — Defined Terms
As used in this Agreement, the following terms shall have the meanings set forth below:
"Accounts" means, collectively, the collection account, the payment account, the reserve account, and the liquidity reserve account, in each case as established and maintained pursuant to the Account Control Agreement dated as of [●], 2022, among QRF 2022-1, the Servicer, and Calvoneth Trust Company, National Association, as securities intermediary and account bank.
"Administration Agreement" means the Administration Agreement dated as of [●], 2022, between QRF 2022-1 and Quorum Insurance Holdings Corp., as Administrator, as amended, supplemented, or otherwise modified from time to time.
"Affiliate" means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with, such Person. For purposes of this definition, "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise.
"Aggregate Outstanding Pool Balance" means, as of any date of determination, the aggregate outstanding principal balance of all Eligible Receivables held by QRF 2022-1 at such time, after giving effect to all Collections received and all Transfers consummated on or prior to such date.
"Agreement" means this Receivables Transfer Agreement, as it may be amended, supplemented, or otherwise modified from time to time in accordance with the terms hereof.
"Amortization Period" means the period commencing on the earliest to occur of (a) the expiration of the Revolving Period, (b) the occurrence of an Early Amortization Event, or (c) the Legal Final Maturity Date, and ending on the date on which all Notes have been paid in full and the Indenture has been discharged. The Amortization Period is expected to have a duration of approximately twelve (12) months.
"Applicable Law" means, with respect to any Person, any federal, state, or local statute, law, regulation, rule, ordinance, order, judgment, decree, or other governmental requirement applicable to such Person or its properties, assets, or business, including, without limitation, all applicable insurance premium finance laws, usury laws, and consumer protection laws of each state in which a Receivable was originated.
"Back-Up Servicer" means Northvane Bank, National Association, in its capacity as back-up servicer under the Back-Up Servicing Agreement, or any successor back-up servicer appointed thereunder.
"Back-Up Servicing Agreement" means the Back-Up Servicing Agreement dated as of [●], 2022, among QRF 2022-1, QPF (as Servicer), Northvane Bank, National Association (as Back-Up Servicer), and Calvoneth Trust Company, National Association (as Trustee), as amended, supplemented, or otherwise modified from time to time.
"Bankruptcy Code" means Title 11 of the United States Code, 11 U.S.C. Sections 101 et seq., as amended from time to time.
"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 be closed.
"Certificate of Formation" means, with respect to any limited liability company, the certificate of formation of such limited liability company as filed with the Delaware Secretary of State, as the same may be amended or restated from time to time.
"Class A Notes" means the $375,000,000 aggregate principal amount of Class A Notes issued by QRF 2022-1 under the Indenture, bearing a fixed rate of interest and having preliminary ratings of AAA(cr) by Brindoval Ratings Inc. and Aaa(p) by Pinnacle Rating Services LLC.
"Class B Notes" means the $75,000,000 aggregate principal amount of Class B Notes issued by QRF 2022-1 under the Indenture, bearing a fixed rate of interest and having preliminary ratings of A(cr) by Brindoval Ratings Inc. and A1(p) by Pinnacle Rating Services LLC.
"Class C Notes" means the $35,000,000 aggregate principal amount of Class C Notes issued by QRF 2022-1 under the Indenture, bearing a fixed rate of interest and having preliminary ratings of BBB(cr) by Brindoval Ratings Inc. and Baa2(p) by Pinnacle Rating Services LLC.
"Closing Date" means the date on which all conditions precedent to the initial Transfer set forth in Section 2.04 and in the Indenture have been satisfied or waived, and on which the Notes are first issued under the Indenture.
"Collections" means all cash collections and other cash proceeds of the Transferred Receivables received by the Servicer or otherwise, including, without limitation, all scheduled payments of principal and interest, all prepayments, all late charges, all unearned premium refunds received from Insurance Carriers, and all amounts received upon the liquidation, cancellation, or other disposition of any Transferred Receivable or the underlying insurance policy.
"Concentration Limits" means the following portfolio concentration limits, each measured as of the applicable Transfer Date after giving effect to the applicable Transfer: (i) no single obligor shall represent more than 0.75% of the Aggregate Outstanding Pool Balance; (ii) no single state of origination shall represent more than 20% of the Aggregate Outstanding Pool Balance; and (iii) no single Insurance Carrier shall represent more than 15% of the Aggregate Outstanding Pool Balance.
"Contribution" means a contribution to the capital of QRF 2022-1 of Receivables and Related Property by QRH.
"Custodian" means Calvoneth Trust Company, National Association, in its capacity as custodian of the receivable files under the Custodian Agreement dated as of [●], 2022, or any successor custodian appointed thereunder.
"Custodian Agreement" means the Custodian Agreement dated as of [●], 2022, among QRF 2022-1, QPF (as Servicer), and Calvoneth Trust Company, National Association (as Custodian), as amended, supplemented, or otherwise modified from time to time.
"Cut-Off Date" means (a) with respect to the Initial Transferred Receivables, June 30, 2022, and (b) with respect to any Subsequent Transferred Receivables, the applicable Transfer Date.
"Default" means, with respect to any Receivable, the occurrence of any event that, with the giving of notice or the passage of time or both, would constitute an Event of Default under the related premium finance agreement.
"Delinquency Rate" means, as of any date of determination, the ratio (expressed as a percentage) of (a) the aggregate outstanding principal balance of all Transferred Receivables with respect to which any scheduled payment is 60 or more days past due as of such date, to (b) the Aggregate Outstanding Pool Balance as of such date.
"Early Amortization Event" has the meaning assigned to such term in Section 5.01 of this Agreement.
"Eligible Receivable" means a Receivable that satisfies all of the criteria set forth in Section 3.03 of this Agreement as of the applicable Transfer Date.
"Event of Default" means an "Event of Default" as defined in the Indenture.
"Governmental Authority" means any federal, state, local, or foreign court, governmental agency, authority, instrumentality, regulatory body, or other governmental or quasi-governmental entity or self-regulatory organization.
"Grant of Security Interest" or "Pledge Agreement" means the Grant of Security Interest dated as of [●], 2022, from QRF 2022-1 to Calvoneth Trust Company, National Association, as Trustee, for the benefit of the Noteholders, as amended, supplemented, or otherwise modified from time to time.
"Indenture" means the Indenture dated as of [●], 2022, between QRF 2022-1, as Issuer, and Calvoneth Trust Company, National Association, as Trustee, as amended, supplemented, or otherwise modified from time to time, pursuant to which the Notes are issued and the security interest in the Transferred Receivables and Related Property is granted to the Trustee for the benefit of the Noteholders.
"Independent Manager" means (a) with respect to QRF 2022-1, Timothy R. Callan, and (b) with respect to QRH, Eleanor M. Vasquez, in each case appointed by Fortbridge Corporate Services LLC in accordance with the applicable Limited Liability Company Agreement, and any successor Independent Manager appointed in accordance with the terms thereof. Each Independent Manager must satisfy the independence criteria set forth in the applicable Limited Liability Company Agreement.
"Initial Pool Balance" means $612,000,000, being the aggregate outstanding principal balance of the Initial Transferred Receivables as of the Cut-Off Date.
"Initial Transferred Receivables" means the Receivables identified on the Schedule of Receivables attached hereto as Exhibit A, representing approximately 82,400 insurance premium finance loans with an aggregate outstanding principal balance of $612,000,000 as of the Cut-Off Date.
"Insurance Carrier" means the property and casualty insurance carrier that issued the insurance policy financed by a Receivable, including any successor or assignee of such insurance carrier.
"Legal Final Maturity Date" means the date that is forty-two (42) months from the Closing Date.
"Lien" means any mortgage, pledge, hypothecation, assignment, charge, deposit arrangement, encumbrance, lien (statutory or otherwise), security interest, or other preferential arrangement of any kind or nature whatsoever, including any conditional sale or title retention agreement, any financing lease involving substantially the same economic effect as any of the foregoing, and the filing of any financing statement (other than a protective filing) under the UCC or comparable law of any jurisdiction.
"Limited Liability Company Agreement" means (a) with respect to QRH, the Amended and Restated Limited Liability Company Agreement of QRH dated as of August 3, 2022, as amended from time to time, and (b) with respect to QRF 2022-1, the Amended and Restated Limited Liability Company Agreement of QRF 2022-1 dated as of August 3, 2022, as amended from time to time.
"Liquidity Facility" means the $25,000,000 revolving credit facility provided by Northvane Bank, National Association, to QRF 2022-1 pursuant to the Liquidity Facility Agreement dated as of [●], 2022, as amended, supplemented, or otherwise modified from time to time.
"Liquidity Facility Agreement" means the Liquidity Facility Agreement dated as of [●], 2022, between QRF 2022-1 and Northvane Bank, National Association, as amended, supplemented, or otherwise modified from time to time.
"Material Adverse Effect" means a material adverse effect on (a) the financial condition, business, operations, or properties of QRH or QRF 2022-1, (b) the ability of QRH to perform its obligations under this Agreement or any other Transaction Document, (c) the validity or enforceability of this Agreement or any other Transaction Document, (d) the status, priority, or perfection of QRF 2022-1's ownership interest or the Trustee's security interest in the Transferred Receivables and Related Property, or (e) the collectibility of the Transferred Receivables, taken as a whole.
"Minimum Pool Balance" means $450,000,000, which is the minimum Aggregate Outstanding Pool Balance required to be maintained during the Revolving Period.
"Net Loss Rate" means, for any period, the ratio (expressed as a percentage) of (a) the aggregate principal balance of all Transferred Receivables that became Defaulted Receivables during such period (net of recoveries received during such period with respect to previously Defaulted Receivables) to (b) the average Aggregate Outstanding Pool Balance during such period.
"Note Purchase Agreement" means the Note Purchase Agreement dated as of [●], 2022, among QRF 2022-1, Quorum Insurance Holdings Corp., and Ridgeline Capital Markets LLC, as placement agent, as amended, supplemented, or otherwise modified from time to time.
"Noteholders" means the registered holders of the Notes from time to time.
"Notes" means, collectively, the Class A Notes, the Class B Notes, and the Class C Notes, in each case as issued by QRF 2022-1 under the Indenture.
"Obligor" means, with respect to any Receivable, the Person obligated to make payments of principal and interest under the related premium finance agreement.
"Officer's Certificate" means a certificate signed by an authorized officer, manager, or authorized person of the applicable entity, which certificate shall certify as to the matters set forth therein.
"Overcollateralization Amount" means $15,000,000, representing 3.0% of the aggregate initial principal amount of the Notes ($500,000,000), or such greater amount as may be required under the Indenture.
"Performance Guaranty" means the Performance Guaranty dated as of [●], 2022, executed by Quorum Insurance Holdings Corp. in favor of QRF 2022-1, the Trustee, and the Noteholders, as amended, supplemented, or otherwise modified from time to time.
"Person" means an individual, corporation, limited liability company, partnership, joint venture, trust, unincorporated organization, governmental authority, or any other entity of whatever nature.
"Premium Finance Agreement" means the insurance premium finance agreement entered into between QPF (or its predecessor in interest) and the Obligor, pursuant to which the Obligor has agreed to repay amounts advanced by QPF to finance the payment of insurance premiums.
"QPF" or "Originator" means Quorum Premium Finance LLC, a Delaware limited liability company, in its capacity as originator of the Receivables and as the sole member of QRH.
"QIH" or "Sponsor" means Quorum Insurance Holdings Corp., a Delaware corporation, the ultimate parent company of QPF and QRH.
"Rating Agencies" means, collectively, Brindoval Ratings Inc. and Pinnacle Rating Services LLC, and their respective successors.
"Receivable" means an insurance premium finance loan originated by QPF in the ordinary course of its insurance premium finance lending business, representing the obligation of a U.S. commercial policyholder to repay amounts advanced by QPF to finance insurance premiums payable with respect to one or more property and casualty insurance policies, including all rights to payment thereunder and all security interests in unearned premium refund rights related thereto.
"Related Property" means, with respect to each Transferred Receivable, all of the following: (i) all rights to unearned premium refunds from the applicable Insurance Carrier with respect to the insurance policy or policies financed by such Receivable; (ii) all security interests in such unearned premium refund rights held by QRH or QPF; (iii) all Collections with respect to such Receivable; (iv) all related books, records, and documentation, including the related Premium Finance Agreement, payment histories, and correspondence files; and (v) all proceeds (as defined in the UCC) of any and all of the foregoing.
"Repurchase Price" has the meaning assigned to such term in Section 4.03 of this Agreement.
"Revolving Period" means the period commencing on the Closing Date and ending on the earlier of (a) the date that is twenty-four (24) months after the Closing Date and (b) the occurrence of an Early Amortization Event, during which period QRF 2022-1 may acquire Subsequent Transferred Receivables from QRH using available Collections.
"Sale Agreement" means the Receivables Sale Agreement dated as of [●], 2022, between QPF, as Seller, and QRH, as Purchaser, as amended, supplemented, or otherwise modified from time to time.
"Servicer" means QPF, in its capacity as servicer of the Transferred Receivables under the Servicing Agreement, or any successor servicer (including the Back-Up Servicer, if appointed as successor servicer) appointed thereunder.
"Servicer Default" means a "Servicer Default" as defined in the Servicing Agreement.
"Servicing Agreement" means the Servicing Agreement dated as of [●], 2022, among QRF 2022-1, QPF (as Servicer), and Calvoneth Trust Company, National Association (as Trustee), as amended, supplemented, or otherwise modified from time to time.
"Subsequent Transfer Certificate" means a certificate substantially in the form of Exhibit B hereto, delivered by QRH to QRF 2022-1 and the Trustee on each Subsequent Transfer Date.
"Subsequent Transfer Date" means each date during the Revolving Period on which QRH transfers additional Receivables and Related Property to QRF 2022-1 in accordance with Section 2.02 of this Agreement.
"Subsequent Transferred Receivables" means all Receivables and Related Property transferred from QRH to QRF 2022-1 after the Closing Date during the Revolving Period pursuant to Section 2.02 of this Agreement.
"Transaction Documents" means, collectively, this Agreement, the Sale Agreement, the Indenture, the Notes, the Servicing Agreement, the Back-Up Servicing Agreement, the Administration Agreement, the Note Purchase Agreement, the Liquidity Facility Agreement, the Account Control Agreement, the Custodian Agreement, the Grant of Security Interest, the Performance Guaranty, and each other document, instrument, or agreement delivered in connection with the transactions contemplated hereby or thereby, in each case as amended, supplemented, or otherwise modified from time to time.
"Transfer" means each contribution or sale of Receivables and Related Property by QRH to QRF 2022-1 pursuant to this Agreement, including the transfer of the Initial Transferred Receivables on the Closing Date and each transfer of Subsequent Transferred Receivables on a Subsequent Transfer Date.
"Transfer Certificate" means, with respect to the Initial Transferred Receivables, an Officer's Certificate certifying as to the matters set forth in Section 2.04, and with respect to Subsequent Transferred Receivables, a Subsequent Transfer Certificate in the form of Exhibit B.
"Transfer Date" means (a) with respect to the Initial Transferred Receivables, the Closing Date, and (b) with respect to Subsequent Transferred Receivables, each Subsequent Transfer Date.
"Transferred Receivables" means, collectively, the Initial Transferred Receivables and all Subsequent Transferred Receivables transferred by QRH to QRF 2022-1 pursuant to this Agreement.
"Trustee" means Calvoneth Trust Company, National Association, a national banking association, in its capacity as indenture trustee under the Indenture, or any successor trustee appointed thereunder.
"UCC" means the Uniform Commercial Code as in effect from time to time in the State of Delaware or, where the context so requires, the State of New York, or any other applicable jurisdiction.
Section 1.02 — Rules of Construction
(a) Unless the context otherwise requires, the terms defined in this Agreement include the plural as well as the singular, and words importing any gender shall include each other gender. The words "include," "includes," and "including" shall be deemed to be followed by the phrase "without limitation." The word "or" shall not be exclusive.
(b) All references herein to "Articles," "Sections," "Exhibits," and "Schedules" shall be deemed to refer to Articles, Sections, Exhibits, and Schedules of this Agreement unless otherwise specified. All references to "herein," "hereof," "hereunder," and "hereby" refer to this Agreement as a whole and not to any particular provision hereof.
(c) The headings of the Articles, Sections, Exhibits, and Schedules contained in this Agreement are inserted for convenience of reference only and shall not affect the meaning, interpretation, or construction of this Agreement.
(d) All accounting terms used but not specifically defined herein shall be construed in accordance with generally accepted accounting principles in the United States of America ("GAAP") as in effect from time to time.
(e) All references to statutes and related regulations shall include any amendments, modifications, and successor provisions thereof from time to time, unless otherwise expressly provided herein.
(f) This Agreement shall be interpreted in accordance with and governed by the laws of the State of New York, as set forth in Section 9.03 hereof.
Section 1.03 — Incorporation by Reference
Capitalized terms used but not otherwise defined in this Agreement shall have the meanings assigned to such terms in the Indenture, the Sale Agreement, or the Servicing Agreement, as applicable. In the event of any conflict or inconsistency between a definition set forth in this Agreement and a definition set forth in any other Transaction Document, the definition set forth in this Agreement shall control for purposes of this Agreement.
ARTICLE II — TRANSFER OF RECEIVABLES
Section 2.01 — Transfer of Initial Transferred Receivables
(a) On the Closing Date, and subject to the satisfaction of the conditions precedent set forth in Section 2.04, QRH hereby irrevocably transfers, contributes, conveys, assigns, and sets over to QRF 2022-1, without recourse (except as expressly provided in Section 3.05 and Section 4.03 hereof), all of QRH's right, title, and interest in and to the following property (collectively, the "Initial Transferred Property"):
(i) the Initial Transferred Receivables, consisting of approximately 82,400 insurance premium finance loans with an aggregate outstanding principal balance of $612,000,000 as of the Cut-Off Date (June 30, 2022), each as identified on the Schedule of Receivables attached hereto as Exhibit A;
(ii) all Related Property with respect to such Initial Transferred Receivables, including, without limitation, all rights to unearned premium refunds from the applicable Insurance Carriers, all security interests in such unearned premium refund rights, all Collections, all related books and records, and all proceeds of the foregoing; and
(iii) all rights of QRH under the Sale Agreement with respect to such Initial Transferred Receivables to the extent transferable, including, without limitation, QRH's right to require QPF to repurchase Receivables pursuant to the Sale Agreement.
(b) The transfer of the Initial Transferred Receivables and Related Property pursuant to this Section 2.01 is intended to constitute either (i) a contribution to the capital of QRF 2022-1 or (ii) a true sale of the Initial Transferred Receivables and Related Property to QRF 2022-1, in each case an absolute and irrevocable transfer of all legal and equitable title to such property from QRH to QRF 2022-1. The Parties intend that after giving effect to each Transfer, QRF 2022-1 shall own all right, title, and interest in and to the Transferred Receivables and Related Property, free and clear of any Lien (other than the Liens created by the Transaction Documents in favor of the Trustee for the benefit of the Noteholders).
(c) On the Closing Date, QRH shall deliver or cause to be delivered to QRF 2022-1 (or to the Trustee or the Custodian on behalf of QRF 2022-1, as directed by QRF 2022-1) all of the following:
(i) the Schedule of Receivables in the form attached hereto as Exhibit A, which schedule shall list each Initial Transferred Receivable in reasonable detail, including the information described on Exhibit A;
(ii) all receivable files and documentation relating to the Initial Transferred Receivables, including original or copies of all Premium Finance Agreements, payment records, and related documents, to the extent in the possession or control of QRH;
(iii) an Officer's Certificate of QRH certifying that all conditions precedent set forth in Section 2.04 have been satisfied; and
(iv) such other documents, instruments, and certificates as may be reasonably requested by QRF 2022-1, the Trustee, or the Rating Agencies.
(d) QRH represents and acknowledges that, following the transfer of the Initial Transferred Receivables pursuant to this Section 2.01, QRH shall have no further right, title, or interest in or to the Initial Transferred Receivables or the Related Property, except as expressly provided in this Agreement.
Section 2.02 — Transfer of Subsequent Receivables During the Revolving Period
(a) During the Revolving Period (i.e., the twenty-four (24) month period commencing on the Closing Date), QRH shall transfer, contribute, convey, assign, and set over to QRF 2022-1, on each Subsequent Transfer Date, additional Receivables and related Related Property (the "Subsequent Transferred Receivables"), without recourse (except as expressly provided in Section 3.05 and Section 4.03 hereof), subject to the satisfaction of the conditions set forth in Section 2.04 hereof.
(b) Each transfer of Subsequent Transferred Receivables shall be evidenced by the delivery by QRH to QRF 2022-1 and the Trustee of a Subsequent Transfer Certificate substantially in the form of Exhibit B attached hereto, together with an updated Schedule of Receivables identifying the Subsequent Transferred Receivables being transferred on such Subsequent Transfer Date. Each Subsequent Transfer Certificate shall be executed by Sandra Ling-Hwang, as Manager of QRH, or by such other authorized person of QRH as may be designated in writing by QRH to QRF 2022-1 and the Trustee.
(c) QRF 2022-1 shall use Collections received during the Revolving Period to acquire Subsequent Transferred Receivables from QRH, and QRH shall use commercially reasonable efforts to ensure that the Aggregate Outstanding Pool Balance is maintained at or above the Minimum Pool Balance of $450,000,000 at all times during the Revolving Period. The purchase price for Subsequent Transferred Receivables shall be equal to the aggregate outstanding principal balance of such Receivables as of the applicable Subsequent Transfer Date, plus accrued and unpaid interest thereon.
(d) Each transfer of Subsequent Transferred Receivables shall be deemed to constitute either a contribution to the capital of QRF 2022-1 or a true sale, in each case on the same terms and subject to the same conditions as the transfer of the Initial Transferred Receivables under Section 2.01 hereof, and all of the provisions of this Agreement applicable to the Initial Transferred Receivables shall apply to the Subsequent Transferred Receivables, mutatis mutandis.
(e) QRH shall not be obligated to transfer any Subsequent Transferred Receivable that does not satisfy the Eligible Receivable criteria set forth in Section 3.03 hereof, and QRF 2022-1 shall not be obligated to accept any Subsequent Transferred Receivable that does not satisfy such criteria.
Section 2.03 — Characterization of Transfer; True Sale Intent
(a) True Sale / True Contribution Intent. It is the express intent of the Parties that each Transfer of Receivables and Related Property under this Agreement shall constitute either (i) a true and absolute sale or (ii) a true and absolute capital contribution of such Receivables and Related Property from QRH to QRF 2022-1, and, in each case, shall not constitute a pledge of, or the grant of a security interest in, such Receivables and Related Property by QRH to QRF 2022-1 to secure any obligation of QRH.
(b) Each Transfer hereunder is made without recourse to QRH, except that QRH shall be obligated to repurchase Receivables that breach the representations and warranties set forth in Section 3.03 and Section 3.04, as provided in Section 4.03 hereof.
(c) QRH and QRF 2022-1 shall each treat each Transfer of Receivables hereunder as a sale or capital contribution for all purposes, including financial accounting purposes (in accordance with GAAP), federal and state income tax purposes, and regulatory reporting purposes. Without limiting the foregoing, each Party shall reflect each Transfer on its books and records as a sale or contribution, as applicable, and not as a secured lending transaction or a financing.
(d) The Parties acknowledge and agree that the following factors, among others, support the characterization of each Transfer as a true sale or true contribution:
(i) each Transfer is absolute and irrevocable, and QRH retains no right to require the return of any Transferred Receivable (except in connection with a repurchase under Section 4.03);
(ii) following each Transfer, QRH retains no ownership interest, legal or equitable, in the Transferred Receivables or the Related Property;
(iii) QRF 2022-1, and not QRH, bears the risk of loss on the Transferred Receivables, including credit risk, interest rate risk, and prepayment risk;
(iv) QRH has no obligation to repurchase any Transferred Receivable (except in the case of a breach of an eligibility representation or warranty as provided in Section 4.03);
(v) each Transfer is recorded on the books and records of each Party as a sale or contribution, and not as a financing;
(vi) each Party has taken all steps reasonably necessary to evidence and reflect each Transfer as a sale or contribution, including, without limitation, the filing of UCC financing statements, the delivery of receivable files, and the maintenance of separate books and records; and
(vii) the consideration paid by QRF 2022-1 for the Transferred Receivables constitutes reasonably equivalent value and fair consideration.
(e) Neither QRH nor any of its Affiliates shall take any action, or fail to take any action, that is inconsistent with the ownership of the Transferred Receivables by QRF 2022-1 following each Transfer. Without limiting the generality of the foregoing, QRH shall not file any tax return, financial statement, or regulatory filing, or make any statement in any judicial or administrative proceeding, that is inconsistent with such ownership, unless required to do so by Applicable Law or by a final, non-appealable order of a court of competent jurisdiction.
Section 2.04 — Conditions to Each Transfer
(a) The obligation of QRH to transfer, and the obligation of QRF 2022-1 to accept, any Receivables and Related Property on any Transfer Date (whether the Closing Date or any Subsequent Transfer Date) is subject to the satisfaction of each of the following conditions precedent on or prior to such Transfer Date:
(i) No Early Amortization Event. No Early Amortization Event shall have occurred and be continuing as of such Transfer Date, and no event shall have occurred that, after giving effect to such Transfer, would constitute an Early Amortization Event.
(ii) Eligible Receivable Criteria. Each Receivable to be transferred on such Transfer Date shall satisfy all of the Eligible Receivable criteria set forth in Section 3.03 of this Agreement as of such Transfer Date.
(iii) Representations and Warranties. Each of the representations and warranties of QRH set forth in Article III of this Agreement shall be true and correct in all material respects (or, in the case of any representation or warranty that is qualified by materiality, in all respects) as of such Transfer Date, as if made on and as of such Transfer Date (except to the extent that any such representation or warranty relates to an earlier date, in which case such representation or warranty shall be true and correct as of such earlier date).
(iv) Concentration Limits. After giving effect to such Transfer, the Concentration Limits shall be satisfied: (A) no single Obligor shall represent more than 0.75% of the Aggregate Outstanding Pool Balance; (B) no single state of origination shall represent more than 20% of the Aggregate Outstanding Pool Balance; and (C) no single Insurance Carrier shall represent more than 15% of the Aggregate Outstanding Pool Balance.
(v) Minimum Pool Balance. After giving effect to such Transfer (to the extent such Transfer occurs during the Revolving Period), the Aggregate Outstanding Pool Balance shall be at least equal to the Minimum Pool Balance of $450,000,000.
(vi) Transfer Certificate and Schedule. QRH shall have delivered to QRF 2022-1 and the Trustee the applicable Transfer Certificate (or, in the case of a Subsequent Transfer, a Subsequent Transfer Certificate in the form of Exhibit B) and an updated Schedule of Receivables identifying the Receivables to be transferred on such Transfer Date.
(vii) No Servicer Default. No Servicer Default shall have occurred and be continuing under the Servicing Agreement as of such Transfer Date.
(viii) No Indenture Event of Default. No Event of Default under the Indenture shall have occurred and be continuing as of such Transfer Date.
(b) The delivery by QRH of a Transfer Certificate on any Transfer Date shall constitute a certification by QRH that each of the conditions set forth in this Section 2.04 has been satisfied as of such Transfer Date.
Section 2.05 — Acceptance by Transferee
Upon satisfaction of the conditions set forth in Section 2.04, QRF 2022-1 shall accept each Transfer and shall hold the Transferred Receivables and Related Property as owner thereof, subject in all cases to the Lien of the Indenture and the Grant of Security Interest in favor of the Trustee for the benefit of the Noteholders. QRF 2022-1 acknowledges that, simultaneously with or promptly following its acquisition of the Transferred Receivables, it will grant (or has granted) to the Trustee a first-priority perfected security interest in all Transferred Receivables, Related Property, Collections, and Accounts pursuant to the Grant of Security Interest and the Indenture, and that the Trustee's security interest therein constitutes a first-priority Lien. QRF 2022-1's acceptance of each Transfer shall be evidenced by its countersignature on the applicable Transfer Certificate or Subsequent Transfer Certificate, as applicable, or by such other means as the Parties may agree.
Section 2.06 — No Assumption of Obligations
QRF 2022-1 does not, by virtue of its acceptance of the Transferred Receivables and Related Property hereunder, assume or become liable for any obligations or liabilities of QRH or QPF to any Obligor, any Insurance Carrier, or any other Person with respect to the Transferred Receivables, except as may be expressly set forth in this Agreement, the Servicing Agreement, or the other Transaction Documents. Without limiting the foregoing, QRF 2022-1 shall have no obligation to any Obligor under any Premium Finance Agreement other than obligations, if any, expressly assumed by the Servicer under the Servicing Agreement. The servicing and administration of the Transferred Receivables shall be conducted by the Servicer in accordance with the terms of the Servicing Agreement.
ARTICLE III — REPRESENTATIONS AND WARRANTIES
Section 3.01 — Representations and Warranties of QRH
QRH hereby represents and warrants to QRF 2022-1, the Trustee, and the Noteholders, as of the Closing Date and as of each Subsequent Transfer Date (except where a representation or warranty is expressly made as of a specific date), as follows:
(a) Organization and Standing. QRH is a limited liability company duly organized, validly existing, and in good standing under the laws of the State of Delaware (Delaware Secretary of State File No. 7894228). QRH is qualified to do business and is in good standing in each other jurisdiction where the failure to be so qualified or in good standing could reasonably be expected to have a Material Adverse Effect.
(b) Power and Authority. QRH has full limited liability company power and authority to (i) own its properties and conduct its business as presently conducted, (ii) execute, deliver, and perform its obligations under this Agreement and each other Transaction Document to which it is a party, and (iii) transfer the Transferred Receivables and Related Property to QRF 2022-1 as contemplated by this Agreement.
(c) Due Authorization. The execution, delivery, and performance by QRH of this Agreement and each other Transaction Document to which it is a party have been duly authorized by all necessary limited liability company action on the part of QRH, including, without limitation, the approval of its sole member (QPF) and its independent manager (Eleanor M. Vasquez, appointed by Fortbridge Corporate Services LLC). No further consent, approval, authorization, or action by, or filing with, any Governmental Authority or any other Person is required in connection with the execution, delivery, or performance of this Agreement by QRH, other than (i) UCC filings, (ii) filings with the Securities and Exchange Commission, and (iii) such other filings or approvals as have been obtained and are in full force and effect.
(d) Valid and Binding Obligation. This Agreement constitutes, and each other Transaction Document to which QRH is a party, when duly executed and delivered by QRH, will constitute, a valid and binding obligation of QRH, enforceable against QRH in accordance with its respective terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, and other similar laws affecting creditors' rights generally, and subject to general principles of equity (whether considered in a proceeding in equity or at law).
(e) No Conflicts. The execution, delivery, and performance by QRH of this Agreement and the other Transaction Documents to which it is a party, and the consummation of the transactions contemplated hereby and thereby, do not and will not (i) violate QRH's Certificate of Formation or Limited Liability Company Agreement, (ii) violate any Applicable Law to which QRH or its properties or assets are subject, (iii) result in a breach of or default under any indenture, loan agreement, mortgage, deed of trust, or other agreement or instrument to which QRH is a party or by which QRH or its properties or assets may be bound, or (iv) result in the creation or imposition of any Lien (other than Liens created by the Transaction Documents) upon any of QRH's properties or assets.
(f) No Liens. Immediately prior to each Transfer, QRH is the sole owner of, and has good and marketable title to, the applicable Receivables and Related Property being transferred on such Transfer Date, free and clear of any Lien, claim, encumbrance, or security interest of any kind whatsoever (other than (i) the security interest granted to QRH under the Sale Agreement, which security interest is deemed released simultaneously with the transfer of such Receivables to QRF 2022-1 hereunder, and (ii) the back-up security interest granted under Article VI hereof). Following each Transfer, QRF 2022-1 will acquire good and marketable title to such Receivables and Related Property, free and clear of any Lien other than the Liens created by the Transaction Documents.
(g) Bankruptcy Remoteness. QRH has been operated since the date of its formation, and will continue to be operated, in compliance with the separateness covenants and other provisions set forth in its Limited Liability Company Agreement, including those covenants designed to maintain QRH's status as a bankruptcy-remote, special purpose entity. QRH has at all times maintained its separate legal existence from QPF, QIH, QRF 2022-1, and each other Affiliate.
(h) No Consolidation. No event has occurred, and no condition exists, that could reasonably be expected to give rise to the substantive consolidation of QRH with QIH, QPF, QRF 2022-1, or any other Affiliate in any bankruptcy, insolvency, reorganization, or similar proceeding.
(i) Tax Status. QRH is, and at all times since its formation has been, treated as a disregarded entity for United States federal income tax purposes. QRH has not made, and will not make, any election to be treated as a corporation or an association taxable as a corporation for United States federal income tax purposes.
(j) UCC Filings. QRH has taken, or will take on or prior to the Closing Date, all actions necessary to perfect QRF 2022-1's ownership interest in, or security interest in (as applicable), the Transferred Receivables and Related Property under the UCC, including, without limitation, the filing of UCC-1 financing statements with the Delaware Secretary of State naming QRH as debtor and QRF 2022-1 as secured party, substantially in the form set forth in Exhibit C hereto. All such filings have been, or will be, duly authorized and properly executed.
(k) Solvency. QRH is solvent, and will not be rendered insolvent by any Transfer contemplated under this Agreement. After giving effect to each Transfer, (i) QRH will be able to pay its debts as they become due, (ii) the fair value of QRH's assets will exceed the sum of its liabilities, and (iii) QRH will have adequate capital for the conduct of its business.
(l) Compliance with Law. QRH is in compliance with all Applicable Laws in all material respects, including, without limitation, all laws, rules, and regulations applicable to the acquisition, holding, and transfer of Receivables.
(m) No Litigation. There is no action, suit, proceeding, investigation, or claim pending or, to the knowledge of QRH, threatened against QRH before any Governmental Authority that could reasonably be expected to have a Material Adverse Effect.
(n) No Insolvency. No order for relief has been entered with respect to QRH under the Bankruptcy Code or any other applicable insolvency law, and QRH has not made a general assignment for the benefit of creditors, and no petition for the appointment of a receiver, trustee, or liquidator of QRH or of any substantial portion of its assets has been filed.
Section 3.02 — Representations and Warranties of QRF 2022-1
QRF 2022-1 hereby represents and warrants to QRH, the Trustee, and the Noteholders, as of the Closing Date and as of each Subsequent Transfer Date (except where a representation or warranty is expressly made as of a specific date), as follows:
(a) Organization and Standing. QRF 2022-1 is a limited liability company duly organized, validly existing, and in good standing under the laws of the State of Delaware (Delaware Secretary of State File No. 7894231). QRF 2022-1 is qualified to do business and is in good standing in each other jurisdiction where the failure to be so qualified or in good standing could reasonably be expected to have a Material Adverse Effect.
(b) Power and Authority. QRF 2022-1 has full limited liability company power and authority to (i) own its properties and conduct its business as presently conducted, (ii) execute, deliver, and perform its obligations under this Agreement and each other Transaction Document to which it is a party, and (iii) accept the Transferred Receivables and Related Property and issue the Notes as contemplated by the Transaction Documents.
(c) Due Authorization. The execution, delivery, and performance by QRF 2022-1 of this Agreement and each other Transaction Document to which it is a party have been duly authorized by all necessary limited liability company action on the part of QRF 2022-1, including, without limitation, the approval of its sole member (QRH) and its independent manager (Timothy R. Callan, appointed by Fortbridge Corporate Services LLC). No further consent, approval, authorization, or action by, or filing with, any Governmental Authority or any other Person is required in connection with the execution, delivery, or performance of this Agreement by QRF 2022-1, other than (i) UCC filings, (ii) filings with the Securities and Exchange Commission, and (iii) such other filings or approvals as have been obtained and are in full force and effect.
(d) Valid and Binding Obligation. This Agreement constitutes, and each other Transaction Document to which QRF 2022-1 is a party, when duly executed and delivered by QRF 2022-1, will constitute, a valid and binding obligation of QRF 2022-1, enforceable against QRF 2022-1 in accordance with its respective terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, and other similar laws affecting creditors' rights generally, and subject to general principles of equity (whether considered in a proceeding in equity or at law).
(e) Bankruptcy Remoteness. QRF 2022-1 has been operated since the date of its formation, and will continue to be operated, in compliance with the separateness covenants and other provisions set forth in its Limited Liability Company Agreement, including those covenants designed to maintain QRF 2022-1's status as a bankruptcy-remote, special purpose entity. QRF 2022-1 has at all times maintained its separate legal existence from QPF, QIH, QRH, and each other Affiliate.
(f) Registered Agent. QRF 2022-1's registered agent in the State of Delaware is Ashgrove Services Inc., 28 Liberty Street, New York, New York 10005 (or such other registered agent as QRF 2022-1 may designate from time to time in accordance with Applicable Law).
(g) Purpose Limitation. QRF 2022-1 was formed solely for the purpose of (i) acquiring and holding Receivables and Related Property, (ii) issuing the Notes and granting a security interest in the Transferred Receivables and Related Property to the Trustee for the benefit of the Noteholders, and (iii) engaging in activities that are incidental, necessary, or convenient to the accomplishment of the foregoing purposes. QRF 2022-1 has not engaged, and will not engage, in any other business or activity.
(h) No Conflicts. The execution, delivery, and performance by QRF 2022-1 of this Agreement and the other Transaction Documents to which it is a party, and the consummation of the transactions contemplated hereby and thereby, do not and will not (i) violate QRF 2022-1's Certificate of Formation or Limited Liability Company Agreement, (ii) violate any Applicable Law, or (iii) result in a breach of or default under any agreement or instrument to which QRF 2022-1 is a party.
Section 3.03 — Eligible Receivable Criteria
Each Receivable transferred by QRH to QRF 2022-1 under this Agreement must satisfy all of the following criteria as of the applicable Transfer Date in order to constitute an "Eligible Receivable" for purposes of this Agreement:
(i) Origination. The Receivable was originated by QPF in the ordinary course of its insurance premium finance lending business, in accordance with QPF's underwriting policies and procedures, and in compliance with all Applicable Laws.
(ii) Currency. The Receivable is denominated and payable in United States dollars.
(iii) Secured by Unearned Premiums. The Receivable is secured by a valid and enforceable security interest in unearned premium refund rights from the applicable Insurance Carrier with respect to the insurance policy or policies financed by such Receivable.
(iv) Original Term. The original term of the Receivable (measured from the date of origination to the scheduled final payment date) does not exceed twelve (12) months.
(v) Commercial Obligor. The Obligor under the Receivable is a commercial policyholder (i.e., a business entity or organization) domiciled in the United States and is not a natural person or consumer. The Receivable does not constitute a "consumer credit transaction" as defined in the Truth in Lending Act (15 U.S.C. Section 1602) or Regulation Z (12 C.F.R. Part 1026).
(vi) No Default. The Receivable is not in default. As of the applicable Transfer Date, no scheduled payment on such Receivable is more than sixty (60) days past due.
(vii) Compliance with Law. The Receivable was originated, and the related Premium Finance Agreement was executed, in compliance with all applicable usury laws, insurance premium finance licensing laws, and all other Applicable Laws of the jurisdiction in which such Receivable was originated.
(viii) Valid Agreement. The Receivable arises under a valid and enforceable Premium Finance Agreement that is in full force and effect and has not been rescinded, cancelled, or terminated (except in connection with the normal cancellation of the underlying insurance policy and the receipt of unearned premium refunds).
(ix) Concentration Limits. After giving effect to the Transfer of such Receivable, the Concentration Limits are satisfied: (A) no single Obligor represents more than 0.75% of the Aggregate Outstanding Pool Balance; (B) no single state of origination represents more than 20% of the Aggregate Outstanding Pool Balance; and (C) no single Insurance Carrier represents more than 15% of the Aggregate Outstanding Pool Balance.
(x) No Disputes. The Receivable is not subject to any dispute, offset, defense, or counterclaim asserted or threatened by the Obligor as of the applicable Transfer Date, and QRH has no knowledge of any facts or circumstances that could reasonably be expected to give rise to any such dispute, offset, defense, or counterclaim.
(xi) No Liens. The Receivable is not subject to any Lien, security interest, or encumbrance of any kind whatsoever, other than the interests created by the Transaction Documents. Neither QRH, QPF, nor any of their respective Affiliates has sold, assigned, pledged, or otherwise encumbered such Receivable to any Person other than as contemplated by the Transaction Documents.
(xii) Valid True Sale from QPF to QRH. The Receivable has been the subject of a valid and effective true sale from QPF to QRH under the Sale Agreement, and QRH has acquired good and marketable title to such Receivable free and clear of any Lien (other than the interests created by the Transaction Documents).