SERVICING AGREEMENT

SERVICING AGREEMENT
Execution Draft v3 — Dated as of October 12, 2022
among
QUORUM RECEIVABLES FUNDING 2022-1 LLC a Delaware limited liability company, as Issuer
QUORUM PREMIUM FINANCE LLC a Delaware limited liability company, as Servicer
and
CALVONETH TRUST COMPANY, NATIONAL ASSOCIATION a national banking association, as Indenture Trustee
________________________________________
Relating to the Indenture dated as of [●], 2022 between Quorum Receivables Funding 2022-1 LLC, as Issuer, and Calvoneth Trust Company, National Association, as Indenture Trustee
________________________________________
Rule 144A / Regulation S Private Placement
Prepared by Calderwood & Harkness LLP 601 Lexington Avenue, New York, NY 10022
TABLE OF CONTENTS
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This SERVICING AGREEMENT (this "Agreement"), dated as of October 12, 2022, is entered into by and among QUORUM RECEIVABLES FUNDING 2022-1 LLC, a Delaware limited liability company (the "Issuer"), QUORUM PREMIUM FINANCE LLC, a Delaware limited liability company (the "Servicer"), and CALVONETH TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity but solely as indenture trustee (the "Trustee") under the Indenture referred to below.
WHEREAS, the Issuer intends to issue its Class A Notes, Class B Notes, and Class C Notes (collectively, the "Notes") pursuant to that certain Indenture dated as of [●], 2022, between the Issuer and the Trustee (the "Indenture"), the proceeds of which will be used to acquire certain insurance premium finance receivables (the "Receivables") originated by the Servicer and transferred to the Issuer through Quorum Receivables Holding LLC ("QRH"), as depositor;
WHEREAS, the Issuer desires to appoint the Servicer to manage, service, administer, and collect on the Receivables on the Issuer's behalf, and the Servicer desires to accept such appointment upon the terms and conditions set forth herein;
WHEREAS, the Trustee has been requested to acknowledge and consent to such appointment for the benefit of the Noteholders and the other Secured Parties under the Indenture;
NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained, 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 AND INTERPRETATION
Section 1.01. Definitions.
For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires, the following terms shall have the meanings assigned to them below:
"Accounts" means, collectively, the Collection Account, the Payment Account, the Reserve Account, and the Liquidity Reserve Account, each maintained at Calvoneth Trust Company, N.A. in its capacity as Securities Intermediary, and each established and maintained pursuant to the Account Control Agreement.
"Account Control Agreement" means the Account Control Agreement dated as of the Closing Date among the Issuer, the Trustee, and Calvoneth Trust Company, N.A. as Securities Intermediary.
"Administration Agreement" means the Administration Agreement dated as of [●], 2022 between the Issuer 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.
"Amortization Period" means the 12-month period commencing on the earlier of (i) the end of the Revolving Period and (ii) the date of occurrence of an Early Amortization Event.
"Available Funds" has the meaning set forth in Section 5.02.
"Back-Up Servicer" means Northvane Bank, National Association, having its principal office at 200 Vesey Street, New York, NY 10281, in its capacity as back-up servicer under the Back-Up Servicing Agreement, or any successor thereto.
"Back-Up Servicing Agreement" means the Back-Up Servicing Agreement dated as of [●], 2022 among the Issuer, the Servicer, Northvane Bank, N.A., and the Trustee.
"Business Day" means any day other than a Saturday, a Sunday, or a day on which commercial banks in New York, New York, Houston, Texas, or Wilmington, Delaware are authorized or required by law to be closed.
"Class A Notes" means the $375,000,000 aggregate principal amount of Class A Notes issued under the Indenture (preliminary CUSIP: 74892TAA3), rated 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 under the Indenture (preliminary CUSIP: 74892TAB1), rated A(cr) by Brindoval and A1(p) by Pinnacle.
"Class C Notes" means the $35,000,000 aggregate principal amount of Class C Notes issued under the Indenture (preliminary CUSIP: 74892TAC9), rated BBB(cr) by Brindoval and Baa2(p) by Pinnacle.
"Closing Date" means [●], 2022.
"Collection Account" means the segregated deposit account of the Issuer established and maintained at Calvoneth Trust Company, N.A. as Securities Intermediary pursuant to the Account Control Agreement.
"Collection Period" means each calendar month; provided that the initial Collection Period shall commence on the Cut-Off Date and end on the last day of the calendar month in which the Closing Date occurs, and the final Collection Period shall end on the date on which the Notes are paid in full.
"Collections" means all cash collections and other amounts received with respect to the Receivables during the applicable period, including (i) scheduled principal and interest payments, (ii) prepayments, (iii) late fees, (iv) unearned premium refunds paid by insurance carriers, (v) recoveries on Defaulted Receivables, and (vi) all other payments received in respect of the Receivables.
"Concentration Limits" means the following pool concentration limits: (i) single obligor exposure shall not exceed 0.75% of the Pool Balance; (ii) single state exposure shall not exceed 20% of the Pool Balance; and (iii) single insurance carrier exposure shall not exceed 15% of the Pool Balance.
"Controlling Class" means, at any time, (i) the Class A Notes so long as any Class A Notes are outstanding; (ii) thereafter, the Class B Notes so long as any Class B Notes are outstanding; and (iii) thereafter, the Class C Notes.
"Credit Enhancement" means, with respect to (i) the Class A Notes, 25.0%, consisting of subordination of Class B (15.0%), Class C (7.0%), and Overcollateralization (3.0%); (ii) the Class B Notes, 10.0%, consisting of Class C (7.0%) and Overcollateralization (3.0%); and (iii) the Class C Notes, 3.0%, consisting of Overcollateralization only.
"Cut-Off Date" means June 30, 2022.
"Defaulted Receivable" means any Receivable with respect to which any scheduled payment is more than 60 days past due.
"Delinquency Rate" means, with respect to any Determination Date, the ratio, expressed as a percentage, of (i) the aggregate outstanding balance of Receivables with respect to which any scheduled payment is 60 or more days past due, to (ii) the aggregate Pool Balance, in each case as of the last day of the preceding Collection Period.
"Determination Date" means the 10th day of each calendar month, or if such day is not a Business Day, the next succeeding Business Day.
"Early Amortization Event" has the meaning set forth in Section 7.01.
"Eligible Investments" has the meaning set forth in the Indenture.
"Eligible Receivable" means any Receivable satisfying the criteria set forth in Section 2.08.
"Event of Insolvency" means, with respect to any Person, (i) the filing of a voluntary petition in bankruptcy by such Person; (ii) the filing of an involuntary petition in bankruptcy against such Person that is not dismissed within 60 days; (iii) the appointment of a receiver, custodian, or trustee for such Person or a substantial part of its assets; (iv) the making of an assignment for the benefit of creditors; or (v) the admission by such Person in writing of its inability to pay its debts as they become due.
"Indenture" means the Indenture dated as of [●], 2022 between the Issuer and the Trustee (execution draft v4), as amended, supplemented, or otherwise modified from time to time.
"Independent Manager" means Timothy R. Callan, appointed by Fortbridge Corporate Services LLC as independent manager of the Issuer, or any successor independent manager appointed in accordance with the Issuer's limited liability company agreement.
"Initial Pool Balance" means $612,000,000, being the aggregate outstanding principal balance of the Receivables as of the Cut-Off Date.
"Issuer" means Quorum Receivables Funding 2022-1 LLC, a Delaware limited liability company (Delaware Secretary of State File No. 7894231; EIN: 88-1247653).
"Legal Final Maturity Date" means the Payment Date occurring in the 42nd month following the Closing Date.
"Liquidity Facility" means the $25,000,000 committed liquidity facility provided by Northvane Bank, N.A. to the Issuer pursuant to the Liquidity Facility Agreement.
"Liquidity Facility Agreement" means the Liquidity Facility Agreement dated as of [●], 2022 between the Issuer and Northvane Bank, N.A.
"Liquidity Reserve Account" means the account so designated among the Accounts.
"Manager's Certificate" means the certificate dated July 27, 2022 executed by Sandra Ling-Hwang, as Manager of the Servicer, certifying, among other things, the authorizing resolutions of the Servicer with respect to the transactions contemplated hereby.
"Minimum Pool Balance" means $450,000,000, being the minimum aggregate Pool Balance required to be maintained during the Revolving Period.
"Monthly Servicer Report" means the report required to be delivered by the Servicer pursuant to Section 6.01, substantially in the form of Exhibit A.
"Net Loss Rate" means, as of any Determination Date, realized losses on Defaulted Receivables net of recoveries, expressed as a percentage of the average Pool Balance, calculated on a three-month rolling average basis.
"Notes" means, collectively, the Class A Notes, the Class B Notes, and the Class C Notes.
"Noteholders" means the holders of the Notes from time to time.
"Offering Memorandum" means the offering memorandum, dated on or about the Closing Date, relating to the offer and sale of the Notes pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended.
"Overcollateralization Amount" means $15,000,000, representing 3.0% of the $500,000,000 aggregate principal amount of Notes issued on the Closing Date.
"Payment Account" means the account so designated among the Accounts.
"Payment Date" means the 15th day of each calendar month, or if such day is not a Business Day, the next succeeding Business Day.
"Payment Waterfall" means the sequential priority of payments set forth in Section 5.04.
"Performance Guaranty" means the Performance Guaranty dated as of the Closing Date executed by Quorum Insurance Holdings Corp. in favor of Calvoneth Trust Company, N.A., as Trustee, guaranteeing certain obligations of the Servicer.
"Person" means any individual, corporation, limited liability company, partnership, joint venture, association, trust, or other entity, or any government or agency or political subdivision thereof.
"Pool Balance" means, at any time, the aggregate outstanding principal balance of all Receivables in the pool at such time.
"Rating Agencies" means, collectively, Brindoval Ratings Inc. (Brindoval Engagement No. CR-SF-2022-08812) and Pinnacle Rating Services LLC (Pinnacle Engagement No. PRS-2022-ABS-3347).
"Receivables" means the insurance premium finance receivables originated by the Servicer and transferred to the Issuer through QRH pursuant to the Receivables Sale Agreement and the Receivables Transfer Agreement.
"Receivables Sale Agreement" means the Receivables Sale Agreement dated as of [●], 2022 between the Servicer and QRH.
"Receivables Transfer Agreement" means the Receivables Transfer Agreement dated as of [●], 2022 between QRH and the Issuer.
"Reserve Account" means the account so designated among the Accounts.
"Revolving Period" means the 24-month period commencing on the Closing Date, subject to earlier termination upon the occurrence of an Early Amortization Event.
"Securities Intermediary" means Calvoneth Trust Company, N.A., acting in such capacity under the Account Control Agreement.
"Servicer" means Quorum Premium Finance LLC, a Delaware limited liability company (EIN: 84-2653198), in its capacity as servicer hereunder, or any Successor Servicer appointed in accordance with this Agreement.
"Servicer Default" has the meaning set forth in Section 8.01.
"Servicing Fee" means the fee payable to the Servicer as compensation for its services hereunder, calculated at the Servicing Fee Rate on the outstanding Pool Balance and payable monthly on each Payment Date. Based on the Initial Pool Balance, the monthly Servicing Fee is approximately $510,000 ($612,000,000 × 1.00% ÷ 12).
"Servicing Fee Rate" means 1.00% per annum.
"Servicing Standard" has the meaning set forth in Section 3.01.
"SOFR" means the Secured Overnight Financing Rate as administered by the Federal Reserve Bank of New York (or a successor administrator).
"Sponsor" means Quorum Insurance Holdings Corp., a Delaware corporation (NYSE: QIHC; EIN: 82-4391067), having its principal executive offices at 400 Atlantic Street, Suite 2200, Stamford, CT 06901.
"Successor Servicer" has the meaning set forth in Section 8.04.
"Transaction Documents" means this Agreement, the Indenture, the Receivables Sale Agreement, the Receivables Transfer Agreement, the Back-Up Servicing Agreement, the Administration Agreement, the Account Control Agreement, the Liquidity Facility Agreement, the Performance Guaranty, and the Notes.
"Trustee" means Calvoneth Trust Company, National Association, having a corporate trust office at 600 Travis Street, Suite 5800, Houston, TX 77002, in its capacity as indenture trustee under the Indenture.
"Verification Agent" means Veristead Analytics LLC, having its principal office at 100 Summer Street, Suite 1500, Boston, MA 02110.
"Weighted Average APR" means the pool-weighted average annual percentage rate applicable to the Receivables, which was 7.85% as of the Cut-Off Date.
Section 1.02. Rules of Construction.
For purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires:
(a) The terms "herein," "hereof," "hereto," "hereunder," and similar terms refer to this Agreement as a whole and not to any particular Article, Section, or subdivision;
(b) The headings of Articles, Sections, and subdivisions are for convenience of reference only and shall not affect the construction or interpretation of any provision hereof;
(c) Words importing the singular number include the plural and vice versa; words importing any gender include all other genders;
(d) References to any law, statute, rule, or regulation shall be deemed to refer to such law, statute, rule, or regulation as amended, restated, supplemented, or otherwise modified from time to time, and to any successor thereto;
(e) References to any agreement shall be deemed to refer to such agreement as amended, restated, supplemented, or otherwise modified from time to time in accordance with its terms;
(f) All references to dollar amounts ("$") are references to United States dollars;
(g) All references to times of day are references to Eastern Time (New York) unless otherwise expressly indicated; and
(h) References to the Uniform Commercial Code ("UCC") shall be deemed to refer to the Uniform Commercial Code as in effect from time to time in the State of New York or the State of Delaware, as the context requires.
Section 1.03. Incorporation of Indenture Definitions.
Capitalized terms used but not otherwise defined in this Agreement shall have the respective meanings assigned to them in the Indenture. In the event of any conflict between the definitions set forth in this Agreement and the definitions set forth in the Indenture, the definitions in the Indenture shall control.
ARTICLE II
APPOINTMENT OF SERVICER; ACCEPTANCE; SERVICING TRANSFERRED RECEIVABLES
Section 2.01. Appointment.
The Issuer hereby appoints Quorum Premium Finance LLC as the initial Servicer of the Receivables, and the Trustee, acting for the benefit of the Noteholders and other Secured Parties, hereby acknowledges and consents to such appointment. The Servicer hereby accepts such appointment and agrees to service, manage, administer, and collect the Receivables on behalf of the Issuer in accordance with the terms of this Agreement and the Servicing Standard. This appointment shall become effective as of the Closing Date and shall continue in full force and effect until terminated in accordance with Article VIII.
Section 2.02. Acceptance by Servicer.
The Servicer accepts the appointment set forth in Section 2.01 and represents and covenants that:
(a) it possesses the organizational capacity, operational infrastructure, personnel, technology systems, and licenses necessary to service the Receivables in all 50 states in which the Receivables have been or may be originated;
(b) as of the Closing Date, it services an aggregate insurance premium finance receivables portfolio of approximately $2,100,000,000; and
(c) it has been continuously engaged in the origination and servicing of insurance premium finance loans since the date of its formation, and it will devote such resources, personnel, and management attention to servicing the Receivables as are necessary or appropriate to satisfy its obligations hereunder.
Section 2.03. Scope of Servicing Duties.
Subject to and in accordance with the terms of this Agreement and the Servicing Standard, the Servicer shall manage, service, administer, and make Collections on the Receivables on behalf of the Issuer. Without limiting the generality of the foregoing, the Servicer's duties shall include:
(a) billing obligors and processing payments (including scheduled payments, prepayments, and partial payments);
(b) managing delinquencies and initiating collection actions in accordance with the Servicer's customary collection procedures;
(c) enforcing remedies against obligors on Defaulted Receivables, including cancellation of underlying insurance policies where permitted;
(d) processing and pursuing unearned premium refund claims with insurance carriers;
(e) maintaining complete and accurate records with respect to each Receivable;
(f) making all reports and remittances required hereunder to the Trustee, the Back-Up Servicer, the Verification Agent, the Rating Agencies, and the Issuer; and
(g) taking such other actions as are customary and reasonable for the servicing of insurance premium finance receivables.
The Servicer shall service the Receivables in substantially the same manner as it services comparable insurance premium finance receivables held in its own portfolio. Nothing in this Agreement shall be deemed to create, and the Servicer shall not be deemed to owe, any fiduciary duty to the Noteholders or any other Person.
Section 2.04. Subservicing.
The Servicer may delegate any of its servicing duties hereunder to one or more qualified subservicers; provided, however, that any such delegation shall be subject to each of the following conditions:
(a) the Servicer shall have received the prior written consent of the Trustee, which consent shall not be unreasonably withheld or delayed;
(b) the Servicer shall have delivered written notice of the proposed subservicing arrangement to each Rating Agency not less than 15 Business Days prior to the effective date thereof;
(c) each Rating Agency shall have provided written confirmation that such subservicing arrangement will not result in a downgrade, qualification, or withdrawal of any rating then assigned to any Class of Notes;
(d) the subservicing agreement shall obligate the subservicer to service the applicable Receivables in accordance with the Servicing Standard;
(e) notwithstanding any such delegation, the Servicer shall remain primarily liable to the Issuer, the Trustee, and the Noteholders for the full and timely performance of all duties delegated to any subservicer; and
(f) no delegation of servicing duties to any Affiliate of the Servicer shall be effective without the prior written consent of the Trustee.
Section 2.05. Power of Attorney.
The Issuer hereby irrevocably constitutes and appoints the Servicer, with full power of substitution, as the Issuer's true and lawful attorney-in-fact, coupled with an interest, with full authority in the place and stead of the Issuer and in the name of the Issuer or otherwise, from time to time in the Servicer's discretion, to take any action and to execute any instrument that the Servicer reasonably determines to be necessary or advisable to service the Receivables, including without limitation:
(a) executing assignments, endorsements, and other instruments of transfer;
(b) filing insurance claims and processing unearned premium refund claims;
(c) initiating and prosecuting collection actions, suits, and proceedings against obligors;
(d) filing and prosecuting proofs of claim in any bankruptcy, insolvency, or similar proceeding involving any obligor; and
(e) communicating with obligors, insurance carriers, and other counterparties on behalf of the Issuer.
The power of attorney granted hereunder is limited to actions reasonably related to the performance of the Servicer's duties under this Agreement.
Section 2.06. Authorization.
The Servicer represents that it has been duly authorized to enter into and perform its obligations under this Agreement, as evidenced by the Manager's Certificate dated July 27, 2022, executed by Sandra Ling-Hwang as Manager of the Servicer, certifying the authorizing resolutions of the Servicer.
Section 2.07. Identification of Receivables.
The Servicer shall maintain accurate and complete records identifying each Receivable in the pool, including without limitation the following data elements: (i) obligor name and identifying information; (ii) outstanding principal balance; (iii) payment schedule; (iv) APR; (v) original and remaining term; (vi) state of origination; (vii) insurance carrier and policy information; and (viii) any assignments or modifications. Such records shall be maintained in electronic format and made available to the Trustee, the Back-Up Servicer, and the Verification Agent as provided herein.
As of the Cut-Off Date, the pool consisted of approximately 82,400 Receivables with an average outstanding balance of approximately $7,427, a weighted average original term of 9.2 months, and a weighted average remaining term of 5.7 months.
Section 2.08. Eligible Receivable Criteria.
The Servicer shall ensure that each Receivable transferred to the Issuer, whether on the Closing Date or during the Revolving Period, satisfies each of the following criteria (an "Eligible Receivable") as of the applicable transfer date:
(i) it was originated by the Servicer in the ordinary course of its business;
(ii) it is denominated and payable in U.S. dollars;
(iii) it is secured by the unearned premium refund rights of the obligor under the applicable insurance policy;
(iv) it has an original term not exceeding 12 months;
(v) the related obligor is a commercial policyholder located in the United States;
(vi) it is not, as of the applicable transfer date, a Defaulted Receivable (i.e., no scheduled payment is more than 60 days past due);
(vii) it complies with all applicable usury laws and premium finance company licensing requirements in the state of origination;
(viii) its transfer to the Issuer will not cause any Concentration Limit to be exceeded (single obligor ≤ 0.75%, single state ≤ 20%, single insurance carrier ≤ 15%);
(ix) it constitutes the legal, valid, and binding obligation of the related obligor, enforceable in accordance with its terms; and
(x) it has been the subject of a true sale from the Servicer to QRH pursuant to the Receivables Sale Agreement and from QRH to the Issuer pursuant to the Receivables Transfer Agreement.
The Servicer shall certify compliance with the Eligible Receivable criteria in each Monthly Servicer Report with respect to any Receivables added to the pool during the related Collection Period.
ARTICLE III
SERVICING STANDARD AND PROCEDURES
Section 3.01. Servicing Standard.
The Servicer shall service and administer the Receivables with reasonable care, using that degree of skill, attention, and diligence as a prudent premium finance company would exercise in servicing comparable insurance premium finance receivables held in its own portfolio (the "Servicing Standard"). In performing its duties hereunder, the Servicer shall (a) act in the best interests of the Issuer and, indirectly, the Noteholders; (b) comply with all applicable federal, state, and local laws, rules, and regulations, including all state premium finance licensing requirements; and (c) refrain from taking any action, or failing to take any action, that would impair the first-priority perfected security interest of the Trustee in the Receivables, the Collections, or any other collateral pledged under the Indenture.
Section 3.02. Collection Procedures.
The Servicer shall use commercially reasonable efforts to collect all amounts due on the Receivables as and when they become due. Without limitation, the Servicer's standard collection activities shall include:
(a) sending invoices, billing statements, and payment reminders to obligors in accordance with the terms of each premium finance agreement;
(b) processing electronic funds transfer, ACH, check, and other payments received from obligors;
(c) applying payments to principal, interest, and fees in accordance with the terms of the applicable premium finance agreement;
(d) initiating follow-up contact with obligors within five (5) Business Days of any missed payment due date;
(e) sending delinquency notices at 15, 30, and 45 days past due;
(f) initiating formal collection procedures, including notice of intent to cancel the underlying insurance policy and pursuit of the unearned premium refund, no later than the 60th day past due; and
(g) processing insurance carrier unearned premium refund claims in accordance with applicable state law and the terms of the applicable premium finance agreement and carrier arrangements.
Section 3.03. Delinquency Management.
The Servicer shall maintain and implement a delinquency management program consistent with its customary practices and the Servicing Standard. With respect to any Receivable that becomes 60 or more days past due (as of the Cut-Off Date, the 60+ day Delinquency Rate was 0.87%):
(a) the Servicer shall promptly initiate cancellation of the underlying insurance policy where permitted by the terms of the applicable premium finance agreement and applicable law, and shall request the unearned premium refund from the applicable insurance carrier;
(b) the Servicer shall apply any unearned premium refund received to reduce the outstanding balance of the Defaulted Receivable; and
(c) if the unearned premium refund is insufficient to satisfy the outstanding balance in full, the resulting deficiency shall be recorded as a realized loss for purposes of calculating the Net Loss Rate.
The Servicer shall maintain a delinquency tracking system and shall include in each Monthly Servicer Report delinquency data stratified by aging bucket (current, 1-29 days, 30-59 days, 60-89 days, and 90+ days past due).
Section 3.04. Loss Mitigation and Recovery.
The Servicer shall use commercially reasonable efforts to maximize recoveries on Defaulted Receivables. Recovery efforts may include, without limitation:
(a) pursuit of unearned premium refunds from insurance carriers;
(b) direct collection action against obligors;
(c) engagement of qualified third-party collection agencies (subject to the subservicing restrictions in Section 2.04); and
(d) compromise and settlement of claims; provided, that no individual compromise or settlement involving a reduction of the outstanding balance in excess of $50,000 shall be entered into without the prior written consent of the Trustee.
For informational purposes, the Servicer's historical three-year average Net Loss Rate for its comparable premium finance portfolio for the period 2019-2021 was 0.42%.
Section 3.05. Insurance Policy Cancellation Procedures.
When authorized by the terms of the applicable premium finance agreement and applicable state law, the Servicer shall cancel insurance policies securing Defaulted Receivables in accordance with the applicable state insurance and premium finance statutes. The Servicer shall (a) give all statutorily required advance notices of cancellation to the obligor and the applicable insurance carrier; (b) calculate and claim the unearned premium refund from the insurance carrier promptly following cancellation; and (c) deposit all unearned premium refunds received into the Collection Account in accordance with Article IV.
Section 3.06. Maintenance of Records.
The Servicer shall maintain complete and accurate records with respect to each Receivable, including:
(a) the original premium finance agreement and any amendments or modifications thereto;
(b) the complete billing and payment history;
(c) all material correspondence with the obligor;
(d) insurance policy information, including the carrier name, policy number, premium amount, and policy term;
(e) records of any cancellation of the underlying insurance policy and any unearned premium refund claim; and
(f) any assignments, endorsements, or other instruments of transfer.
All such records shall be maintained in accordance with the Servicer's customary record retention policies but in no event for less than the later of (i) 36 months after the final payment on such Receivable and (ii) the Legal Final Maturity Date. Upon reasonable prior notice and during normal business hours, all such records shall be made available for inspection and copying by the Trustee, the Back-Up Servicer, and the Verification Agent (Veristead Analytics LLC).
Section 3.07. Compliance with Laws.
The Servicer shall comply with all applicable federal, state, and local laws, rules, and regulations in connection with the servicing of the Receivables, including without limitation:
(a) state premium finance company licensing and reporting requirements in each of the 50 states;
(b) state usury laws;
(c) federal and state consumer protection laws, to the extent applicable to commercial obligors;
(d) all applicable privacy and data security laws, including the Gramm-Leach-Bliley Act and applicable state data privacy statutes; and
(e) all applicable anti-money laundering and sanctions laws.
The Servicer shall promptly notify the Trustee and the Issuer of any material non-compliance with applicable law of which it becomes aware.
Section 3.08. Insurance.
The Servicer shall at all times maintain in full force and effect (a) errors and omissions insurance in an amount not less than $10,000,000 per occurrence, (b) fidelity bond coverage in an amount not less than $10,000,000, and (c) such other insurance coverages as are customary for servicers of premium finance receivables portfolios of comparable size and character, in each case with insurers and on terms reasonably satisfactory to the Trustee. Upon request, the Servicer shall furnish the Trustee with certificates of insurance evidencing such coverages.
ARTICLE IV
COLLECTIONS AND REMITTANCES
Section 4.01. Collection Account.
All Collections received by the Servicer in respect of the Receivables shall be deposited into the Collection Account maintained at Calvoneth Trust Company, N.A., as Securities Intermediary, subject to the Account Control Agreement. The Servicer shall remit all Collections to the Collection Account not later than the second (2nd) Business Day following the Servicer's receipt thereof.
Section 4.02. Commingling.
The Servicer shall not commingle Collections with its own funds or with the funds of any other Person for more than two (2) Business Days following receipt. During any such interim period, the Servicer shall hold all Collections in trust for the benefit of the Issuer, the Trustee, and the Noteholders. If the short-term unsecured credit rating of the Servicer or the Sponsor is downgraded below A-2 by Brindoval Ratings Inc. or below P-2 by Pinnacle Rating Services LLC, the Servicer shall thereafter remit all Collections to the Collection Account on the same Business Day as receipt (i.e., no commingling period shall be permitted).
Section 4.03. Daily Reports.
The Servicer shall furnish to the Trustee, in electronic format, on each Business Day, a report showing with respect to the immediately preceding Business Day:
(a) total Collections received;
(b) a breakdown of Collections by type (scheduled payments, prepayments, late fees, unearned premium refunds, recoveries on Defaulted Receivables, and other);
(c) the amount remitted, or to be remitted, to the Collection Account; and
(d) any adjustments, offsets, or reversals.
Section 4.04. Monthly Remittance.
Not later than the third (3rd) Business Day prior to each Payment Date, the Servicer shall deliver to the Trustee a written calculation of the amounts available for distribution on such Payment Date, together with instructions for the application of Available Funds in accordance with the Payment Waterfall set forth in Section 5.04.
Section 4.05. Investment of Collections.
Pending distribution in accordance with the Payment Waterfall, amounts on deposit in the Collection Account and the other Accounts shall be invested in Eligible Investments as directed in writing by the Servicer, subject to the maturity and credit quality restrictions set forth in the Indenture. All investment earnings on amounts on deposit in the Accounts shall constitute part of Available Funds for the applicable Payment Date.
ARTICLE V
DISTRIBUTIONS AND PAYMENT WATERFALL
Section 5.01. Payment Dates.
Distributions to Noteholders and other parties entitled to receive amounts hereunder shall be made on each Payment Date, being the 15th day of each calendar month or, if such day is not a Business Day, the next succeeding Business Day. The first Payment Date shall be [●], 2022.
Section 5.02. Determination of Available Funds.
On each Determination Date, the Servicer shall calculate the amount of Available Funds for the related Payment Date, which shall consist of the sum of:
(a) all Collections received during the preceding Collection Period and on deposit in the Collection Account;
(b) all investment earnings on amounts on deposit in the Accounts;
(c) any amounts drawn under the Liquidity Facility for application on such Payment Date; and
(d) any other amounts received by or on behalf of the Issuer in respect of the Receivables during the preceding Collection Period.
Section 5.03. Servicer's Calculation.
The Servicer shall calculate the amounts payable to each Class of Notes and to each other party entitled to receive amounts on each Payment Date, and shall deliver such calculations to the Trustee together with the Monthly Servicer Report. The Trustee, in its capacity as calculation agent under the Indenture, shall be entitled to verify the Servicer's calculations, but shall have no independent duty to recompute the same.
Section 5.04. Payment Waterfall.
On each Payment Date, the Trustee shall apply Available Funds in the following order of priority (the "Payment Waterfall"), in each case to the extent of Available Funds remaining after payment of amounts having higher priority:
First: To the Trustee, the Trustee Fee and all unpaid fees, expenses, and indemnification amounts owed to the Trustee under this Agreement and the Indenture (the annual Trustee Fee is $35,000 plus $5,000 per Payment Date for distribution calculations);
Second: To the Servicer, the accrued and unpaid Servicing Fee (1.00% per annum on the outstanding Pool Balance, payable monthly; approximately $510,000 per month at the Initial Pool Balance);
Third: To the Class A Noteholders, accrued and unpaid interest on the Class A Notes (coupon guidance: SOFR + 125 bps);
Fourth: To the Class B Noteholders, accrued and unpaid interest on the Class B Notes (coupon guidance: SOFR + 210 bps);
Fifth: To the Class C Noteholders, accrued and unpaid interest on the Class C Notes (coupon guidance: SOFR + 375 bps);
Sixth: To the Class A Noteholders, principal on the Class A Notes, until paid in full;
Seventh: To the Class B Noteholders, principal on the Class B Notes, until paid in full;
Eighth: To the Class C Noteholders, principal on the Class C Notes, until paid in full;
Ninth: To replenish the Overcollateralization Amount to its target level of $15,000,000; and
Tenth: The residual, if any, to the Issuer, for distribution ultimately to the Sponsor.
Notwithstanding the foregoing, during the Revolving Period, principal payments shall not be made to Noteholders pursuant to priorities Sixth through Eighth; instead, Available Funds that would otherwise be applied under such priorities shall be applied by the Servicer to acquire additional Eligible Receivables in accordance with Section 5.05.
Section 5.05. Distributions During Revolving Period.
During the Revolving Period, principal Collections shall be reinvested by the Servicer, on behalf of the Issuer, in newly originated Eligible Receivables satisfying the criteria in Section 2.08 and the Concentration Limits. Interest and fee amounts shall be distributed on each Payment Date in accordance with priorities First through Fifth and, if applicable, Ninth and Tenth of the Payment Waterfall. The Servicer shall use commercially reasonable efforts to maintain the Pool Balance at or above the Minimum Pool Balance of $450,000,000 throughout the Revolving Period.
Section 5.06. Distributions During Amortization Period.
During the Amortization Period, principal Collections shall no longer be reinvested but shall be distributed on each Payment Date sequentially to Noteholders in accordance with priorities Sixth, Seventh, and Eighth of the Payment Waterfall, subject to higher-ranking payments. The Servicer shall continue to collect on outstanding Receivables and to remit all Collections for distribution in accordance with the Payment Waterfall until all Notes are paid in full.
ARTICLE VI
REPORTING OBLIGATIONS
Section 6.01. Monthly Servicer Report.
Not later than the 10th day of each calendar month (or, if not a Business Day, the next succeeding Business Day), the Servicer shall deliver to the Trustee, the Back-Up Servicer, each Rating Agency, and the Issuer a Monthly Servicer Report substantially in the form of Exhibit A, which shall include the following information with respect to the preceding Collection Period:
(a) the Pool Balance as of the last day of the preceding Collection Period;
(b) the number of Receivables in the pool;
(c) aggregate Collections received during the Collection Period, broken down by type (scheduled payments, prepayments, late fees, unearned premium refunds, recoveries, and other);
(d) delinquency data, stratified by aging bucket (current, 1-29 days, 30-59 days, 60-89 days, and 90+ days past due);
(e) the 60+ day Delinquency Rate, together with a comparison to the trigger level of 3.50%;
(f) realized net losses and recoveries during the Collection Period;
(g) the three-month rolling average Net Loss Rate, together with a comparison to the trigger level of 2.00%;
(h) the Weighted Average APR and weighted average remaining term of the pool;
(i) concentration data, including the top single obligor, the top 10 obligors, geographic concentration by state (top three states and top five states), and insurance carrier concentration (as of the Cut-Off Date, the largest single obligor represented 0.38% ($2,325,600) of the pool; the top 10 obligors aggregated 2.14% ($13,096,800); and the top three states were Texas (14.2%), California (11.8%), and Florida (9.6%), aggregating 35.6%);
(j) new Receivables added to the pool during the Collection Period (during the Revolving Period) and a certification of compliance with the Eligible Receivable criteria and the Concentration Limits;
(k) the calculation of Available Funds for the related Payment Date;
(l) the application of Available Funds pursuant to the Payment Waterfall;
(m) the status of each Early Amortization Event trigger and whether any such trigger has been breached;
(n) any Servicer Default or potential Servicer Default; and
(o) any material changes in the Servicer's servicing policies, procedures, systems, or key personnel.
Section 6.02. Annual Compliance Certificate.
Not later than 90 days after the end of each fiscal year of the Servicer, the Servicer shall deliver to the Trustee and each Rating Agency an officer's certificate, signed by a responsible officer of the Servicer, substantially in the form of Exhibit C, certifying:
(a) that the Servicer has complied in all material respects with its obligations under this Agreement during such fiscal year;
(b) whether any Servicer Default occurred during such fiscal year (and, if so, providing a description of each such default and its current status); and
(c) the Servicer's compliance with the Servicing Standard.
Section 6.03. Annual Independent Public Accountant's Report.
Not later than 90 days after the end of each fiscal year of the Servicer, the Servicer shall cause Meridian Ledger LLP (or another PCAOB-registered public accounting firm acceptable to the Trustee and each Rating Agency) to deliver to the Trustee and each Rating Agency a report on the Servicer's compliance with the servicing criteria set forth in this Agreement, prepared in accordance with attestation standards established by the American Institute of Certified Public Accountants. As of the date hereof, the engagement partner is Robert Falcone.
Section 6.04. Assessment of Compliance with Servicing Criteria.
The Servicer shall deliver annually, together with the report required by Section 6.03, an assessment of the Servicer's compliance with the servicing criteria specified in this Agreement, in a form consistent with applicable SEC guidance to the extent relevant to Rule 144A transactions (including Item 1122 of Regulation AB, to the extent voluntarily incorporated by reference).
Section 6.05. Rating Agency Notifications.
The Servicer shall promptly notify Brindoval Ratings Inc. (Attention: Andrew Petrosian) and Pinnacle Rating Services LLC (Attention: Monica Sung), and shall provide reasonable supporting information, upon the occurrence of any of the following:
(a) any Servicer Default or potential Servicer Default;
(b) any Early Amortization Event or potential Early Amortization Event;
(c) any material change in the Servicer's servicing policies, procedures, or systems;
(d) any change in the identity of the Servicer;
(e) any material litigation or regulatory action involving the Servicer relating to premium finance activities; and
(f) any downgrade or withdrawal of the credit ratings of the Servicer or the Sponsor.
Section 6.06. Access to Records and Information.
The Servicer shall provide to the Trustee, the Back-Up Servicer, the Verification Agent (Veristead Analytics LLC; Attention: Katharine Drummond), and any Noteholder holding not less than 25% in outstanding principal amount of any Class of Notes, reasonable access to the servicing records, information, and systems relating to the Receivables, upon reasonable prior written notice and during normal business hours. The Servicer shall reasonably cooperate with any agreed-upon procedures engagement or audit conducted by or on behalf of any such Person.
Section 6.07. Notices to Trustee.
The Servicer shall promptly notify the Trustee (Attention: Gerald K. Fontaine, Calvoneth Trust Company, N.A.) of:
(a) any breach by the Servicer of any representation, warranty, or covenant under this Agreement or any other Transaction Document;
(b) any pending or threatened litigation, arbitration, or regulatory proceeding involving the Servicer that could reasonably be expected to materially impair the Servicer's ability to perform its duties hereunder; and
(c) any event that has resulted in, or with the giving of notice or the passage of time would result in, an Early Amortization Event under Section 7.01.
ARTICLE VII
EARLY AMORTIZATION EVENTS
Section 7.01. Early Amortization Events.
Each of the following shall constitute an "Early Amortization Event" hereunder:
(a) the three-month rolling average Net Loss Rate exceeds 2.00%;
(b) the 60+ day Delinquency Rate exceeds 3.50%;
(c) an Available Funds Cap Deficit (as defined in the Indenture) exists for two consecutive Payment Dates;
(d) a Servicer Default under Section 8.01 has occurred and is continuing beyond any applicable cure period;
(e) the credit rating of the Servicer or the Sponsor (as guarantor under the Performance Guaranty) is downgraded below BB(cr) by Brindoval Ratings Inc. or below Ba2(p) by Pinnacle Rating Services LLC; or
(f) the Pool Balance falls below the Minimum Pool Balance of $450,000,000 during the Revolving Period and is not restored as provided in Section 7.03.
Section 7.02. Consequences of Early Amortization Event.
Upon the occurrence and continuance of any Early Amortization Event:
(a) the Revolving Period shall automatically terminate on the earliest date on which the Servicer knew or should have known of such Early Amortization Event;
(b) the Amortization Period shall commence;
(c) principal Collections shall no longer be reinvested but shall instead be applied on each subsequent Payment Date to pay down the Notes sequentially in accordance with the Payment Waterfall; and
(d) the Servicer shall promptly (and in any event within two (2) Business Days) notify the Trustee, the Back-Up Servicer, and each Rating Agency of the occurrence of such Early Amortization Event.
Section 7.03. Cure Provisions.
Certain Early Amortization Events may be cured as follows:
(a) With respect to Section 7.01(f) (Pool Balance below Minimum Pool Balance): such Early Amortization Event may be cured, prior to the effective commencement of the Amortization Period, by the Servicer or the Sponsor causing additional Eligible Receivables to be transferred to the Issuer sufficient to restore the Pool Balance to at least the Minimum Pool Balance of $450,000,000 within 30 Business Days of the initial breach.
(b) The Early Amortization Events described in Section 7.01(a) (Net Loss Rate trigger) and Section 7.01(b) (Delinquency Rate trigger) are not subject to cure; once triggered, the resulting Amortization Period shall be irrevocable.
The Trustee shall have no duty to independently monitor or verify the occurrence of any Early Amortization Event trigger and shall be entitled conclusively to rely on the Monthly Servicer Report and any notices delivered by the Servicer pursuant to Section 7.02(d).
ARTICLE VIII
SERVICER DEFAULTS AND SERVICER TERMINATION
Section 8.01. Servicer Defaults.
Each of the following shall constitute a "Servicer Default" hereunder:
(a) any failure by the Servicer to remit any required payment or deposit to the Collection Account within two (2) Business Days of the date required;
(b) any failure by the Servicer to deliver the Monthly Servicer Report or any other report required under this Agreement within five (5) Business Days of the date required;
(c) any breach by the Servicer of any material representation, warranty, or covenant contained in this Agreement, the Receivables Sale Agreement, or any other Transaction Document, which breach is not cured within 30 days after written notice thereof from the Trustee; provided, that if such breach is not reasonably susceptible of cure within 30 days, the cure period shall be extended for so long as the Servicer is diligently pursuing a cure, up to a maximum of 60 days in the aggregate;
(d) any representation or warranty made by the Servicer in any Transaction Document proves to have been materially incorrect when made and, if capable of cure, is not cured within 30 days after written notice thereof from the Trustee;
(e) the Servicer becomes subject to an Event of Insolvency;
(f) a final, non-appealable judgment or order for the payment of money in excess of $5,000,000 is entered against the Servicer and remains unsatisfied, unbonded, or unstayed for a period of 60 consecutive days;
(g) any governmental authority revokes, suspends, or materially restricts the Servicer's premium finance company license in any state or states representing, in the aggregate, more than 5% of the Pool Balance;
(h) the credit rating of the Servicer or the Sponsor is downgraded below BB(cr) by Brindoval Ratings Inc. or below Ba2(p) by Pinnacle Rating Services LLC; or
(i) the Sponsor fails to perform any of its obligations under the Performance Guaranty and such failure is not cured within any applicable grace period specified therein.
Section 8.02. Notice of Servicer Default.
The Servicer shall promptly, and in any event within two (2) Business Days after becoming aware thereof, notify the Trustee, the Back-Up Servicer, and each Rating Agency in writing of the occurrence of any Servicer Default or any event that, with the giving of notice or the passage of time, would constitute a Servicer Default. The Trustee shall give notice of any Servicer Default of which it has actual knowledge to all Noteholders within five (5) Business Days after receipt of notice thereof.
Section 8.03. Trustee's Right to Terminate.
Upon the occurrence and continuance of any Servicer Default beyond any applicable cure period, the Trustee, acting at the written direction of holders of not less than a majority in outstanding principal amount of the Controlling Class, may (and shall, if so directed) terminate all of the Servicer's rights and obligations under this Agreement by delivery of written notice thereof to the Servicer. Upon such termination:
(a) the Trustee shall promptly appoint the Back-Up Servicer (Northvane Bank, N.A.) as Successor Servicer; and
(b) if the Back-Up Servicer is unable or unwilling to serve as Successor Servicer, the Trustee shall use commercially reasonable efforts to appoint another Person meeting the qualifications set forth in Section 8.05 as Successor Servicer.
Section 8.04. Successor Servicer.
Upon the effective date of the appointment of a Successor Servicer:
(a) the terminated Servicer shall reasonably cooperate in the orderly transfer of servicing duties to the Successor Servicer, including the transfer of all records, data, files, and systems access, and shall continue to perform servicing duties during any transition period, not to exceed 90 days;
(b) the Successor Servicer shall assume all duties and obligations of the Servicer under this Agreement (subject to Section 8.05);
(c) the Successor Servicer shall be entitled to the Servicing Fee accruing on and after the effective date of its appointment;
(d) the transfer of servicing shall be facilitated by the "warm standby" procedures set forth in the Back-Up Servicing Agreement with Northvane Bank, N.A.; and
(e) the Successor Servicer's fee shall not exceed the Servicing Fee Rate of 1.00% per annum unless otherwise agreed in writing by the Trustee and holders of a majority in outstanding principal amount of the Controlling Class.
Section 8.05. Qualifications of Successor Servicer.
Any Successor Servicer appointed hereunder shall satisfy each of the following qualifications:
(a) it shall be legally qualified and licensed as a premium finance company (or equivalent) in all states in which the Receivables were originated;
(b) it shall have demonstrated experience servicing insurance premium finance receivables portfolios with an aggregate outstanding balance of not less than $500,000,000;
(c) it shall maintain credit ratings acceptable to each Rating Agency such that its appointment as Successor Servicer will not, in the reasonable determination of each Rating Agency, result in a downgrade, qualification, or withdrawal of any rating then assigned to any Class of Notes; and
(d) it shall have adequate systems, infrastructure, and personnel to assume servicing of the Receivables within a reasonable transition period.
Section 8.06. Waiver of Defaults.
Holders of not less than a majority in outstanding principal amount of the Controlling Class may, by written notice delivered to the Trustee, waive any Servicer Default; provided, however, that a Servicer Default arising under Section 8.01(e) (Event of Insolvency) may not be waived. Any such waiver shall be limited to the specific Servicer Default identified therein and shall not extend to any subsequent or other Servicer Default.
ARTICLE IX
SERVICING FEE
Section 9.01. Servicing Fee.
As compensation for its services hereunder, the Servicer shall be entitled to receive a fee (the "Servicing Fee") equal to 1.00% per annum of the outstanding Pool Balance, which shall accrue daily and be payable monthly on each Payment Date, in arrears, from Available Funds in accordance with the Payment Waterfall (priority Second). At the Initial Pool Balance of $612,000,000, the monthly Servicing Fee is approximately $510,000 ($612,000,000 × 1.00% ÷ 12). The Servicing Fee shall be computed on the basis of a 360-day year and the actual number of days elapsed in the applicable period.
Section 9.02. Reimbursement of Expenses.
The Servicer shall bear all ordinary costs and expenses incurred in connection with its servicing of the Receivables, including without limitation personnel costs, technology and systems costs, billing and collection expenses, and insurance premiums. Extraordinary expenses incurred by the Servicer, including litigation costs for enforcement actions exceeding $100,000 individually, may be reimbursed from Collections, subject to the Payment Waterfall and the prior written approval of the Trustee, which approval shall not be unreasonably withheld.
Section 9.03. Servicing Fee Upon Termination.
Upon the termination of the Servicer's appointment hereunder, the terminated Servicer shall be entitled to receive Servicing Fees accrued through, but not beyond, the effective date of termination. Any accrued but unpaid Servicing Fee as of the termination date shall be payable in accordance with the Payment Waterfall.
ARTICLE X
REPRESENTATIONS AND WARRANTIES OF THE SERVICER
The Servicer represents and warrants to the Issuer and the Trustee, for the benefit of the Noteholders, as of the Closing Date (and as of each date on which additional Receivables are transferred to the Issuer, other than in the case of Sections 10.01, 10.02, and 10.03, as of such date), as follows:
Section 10.01. Organization and Good Standing.
The Servicer is a limited liability company duly organized, validly existing, and in good standing under the laws of the State of Delaware. The Servicer is duly qualified to do business and is in good standing in each jurisdiction in which the nature of its business or the ownership of its properties requires such qualification. The Servicer is licensed as a premium finance company (or equivalent) in each of the 50 states.
Section 10.02. Authorization; No Conflict.
The Servicer has full limited liability company power and authority to execute, deliver, and perform its obligations under this Agreement. The execution, delivery, and performance of this Agreement have been duly authorized by all necessary limited liability company action on the part of the Servicer (as certified in the Manager's Certificate of Sandra Ling-Hwang dated July 27, 2022). The execution, delivery, and performance of this Agreement do not (a) conflict with the certificate of formation or limited liability company agreement of the Servicer, (b) violate any applicable law, or (c) constitute a default under any material agreement to which the Servicer is a party.
Section 10.03. Enforceability.
This Agreement constitutes the legal, valid, and binding obligation of the Servicer, enforceable against the Servicer in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, and similar laws affecting creditors' rights generally, and to general principles of equity.
Section 10.04. No Litigation.
There is no pending or, to the knowledge of the Servicer, threatened litigation, arbitration, or administrative proceeding against the Servicer that would, if adversely determined, materially impair the Servicer's ability to perform its duties under this Agreement or would materially and adversely affect the Receivables.
Section 10.05. Compliance with Laws.
The Servicer is in compliance in all material respects with all applicable laws, rules, and regulations relating to its business and the origination and servicing of insurance premium finance receivables.
Section 10.06. No Default.
The Servicer is not in default under any material agreement to which it is a party, and no event has occurred that, with the giving of notice or the passage of time, would constitute a Servicer Default hereunder.
Section 10.07. Solvency.
The Servicer is solvent and will not be rendered insolvent by the transactions contemplated by this Agreement or the other Transaction Documents. The Servicer has sufficient capital to carry on its business as now conducted and as proposed to be conducted, and does not intend to incur, or believe it will incur, debts beyond its ability to pay as they mature.
Section 10.08. Financial Condition.
The financial condition of the Servicer is substantially as disclosed in the Offering Memorandum. The Sponsor reported fiscal year 2021 consolidated revenue of $3,800,000,000 and, as of the date hereof, maintains unsecured credit ratings of BBB from Brindoval Ratings Inc. and Baa2 from Pinnacle Rating Services LLC.
Section 10.09. Accuracy of Information.
All information provided by the Servicer to the Trustee, the Rating Agencies, the Back-Up Servicer, or the Verification Agent in connection with the Receivables and this Agreement is true, correct, and complete in all material respects and does not omit any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
ARTICLE XI
COVENANTS OF THE SERVICER
Section 11.01. Maintenance of Existence.
The Servicer shall preserve and maintain its existence as a limited liability company duly organized, validly existing, and in good standing under the laws of the State of Delaware, and its qualification to do business in each jurisdiction in which such qualification is necessary for the performance of its duties hereunder.
Section 11.02. Maintenance of Licenses.
The Servicer shall obtain and maintain in full force and effect all licenses, permits, and authorizations required for the origination and servicing of insurance premium finance receivables in each of the 50 states.
Section 11.03. Notice of Material Events.
The Servicer shall promptly notify the Trustee, the Back-Up Servicer, and each Rating Agency of:
(a) any Servicer Default or event that, with the giving of notice or the passage of time, would constitute a Servicer Default;
(b) any material adverse change in the Servicer's financial condition, business, or operations;
(c) any change in the senior management of the Servicer responsible for its servicing operations;
(d) any material litigation, arbitration, or regulatory proceeding involving the Servicer;
(e) any loss, revocation, or suspension of any material license held by the Servicer; and
(f) any change in the credit ratings of the Servicer or the Sponsor.
Section 11.04. Books and Records.
The Servicer shall maintain books and records relating to the Receivables in accordance with generally accepted accounting principles in the United States and applicable law.
Section 11.05. Cooperation with Back-Up Servicer.
The Servicer shall cooperate with the Back-Up Servicer (North