1025-00007 · Quorum Insurance Holdings · UCC Filings & Perfection

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MEMORANDUM

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT

TO: Douglas Carmichael, Partner; Yuki Nakamura, Associate — Calderwood & Harkness LLP

FROM: Carlos Espinoza, Associate — Calderwood & Harkness LLP

DATE: September 19, 2022

RE: UCC Article 9 Perfection and Priority Analysis — Quorum Receivables Funding 2022-1 LLC Insurance Premium Finance ABS ($500,000,000)

Matter No.: 1025-00007

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I. Executive Summary

This memorandum analyzes the perfection of security interests under Article 9 of the Uniform Commercial Code (the "UCC") at each transfer level in the proposed $500,000,000 asset-backed securitization of insurance premium finance receivables originated by Quorum Premium Finance LLC ("QPF"). The transaction contemplates the issuance of three classes of notes—the Class A Notes ($375,000,000), the Class B Notes ($75,000,000), and the Class C Notes ($35,000,000)—by Quorum Receivables Funding 2022-1 LLC ("QRF 2022-1"), a bankruptcy-remote special purpose entity organized as a Delaware limited liability company. The notes will be secured by a pool of insurance premium finance receivables originated by QPF and transferred through an intermediate special purpose vehicle, Quorum Receivables Holding LLC ("QRH"). This memorandum was prepared at the request of Douglas Carmichael and Yuki Nakamura in connection with the firm's representation of Quorum Insurance Holdings Corp. ("QIH"), the transaction Sponsor.

The memorandum analyzes three distinct transfer and grant levels:

1. Transfer 1: The transfer from QPF (as Seller) to QRH (as Depositor/Intermediate SPV) under the Receivables Sale Agreement, intended as a true sale with a back-up security interest granted by QPF in favor of QRH.

2. Transfer 2: The transfer from QRH (as Transferor) to QRF 2022-1 (as Issuer) under the Receivables Transfer Agreement, intended as a true sale or capital contribution with a back-up security interest granted by QRH in favor of QRF 2022-1.

3. Grant 3: The grant of a security interest from QRF 2022-1 to Calvoneth Trust Company, N.A. ("Calvoneth Trust") (as Indenture Trustee) under the Grant of Security Interest (Pledge Agreement) for the benefit of the holders of the Class A Notes, Class B Notes, and Class C Notes.

At each level, the transfers are structured as true sales for bankruptcy-remoteness and accounting purposes. However, back-up security interests are granted at the first two levels to protect against the risk that a court could recharacterize one or both of the transfers as a secured financing rather than a true sale. At the third level—the grant from QRF 2022-1 to Calvoneth Trust—the transaction is structured as a grant of a security interest, not a sale, and therefore requires perfection by filing. This memorandum addresses the perfection requirements for the back-up security interests at the first two levels and the primary security interest grant at the third level.

The filing jurisdiction for all three UCC-1 financing statements is the Delaware Secretary of State. Each debtor entity—QPF, QRH, and QRF 2022-1—is organized as a limited liability company under the laws of the State of Delaware, and under UCC § 9-301(1) and § 9-307(e), the law of the jurisdiction in which a registered organization is organized governs the perfection, the effect of perfection or non-perfection, and the priority of a security interest in the debtor's collateral.

Conclusion: Upon proper filing of the three UCC-1 financing statements with the Delaware Secretary of State and execution of the Account Control Agreement with Calvoneth Trust (as securities intermediary) with respect to the transaction's deposit accounts, each security interest will be a perfected, first-priority security interest in the described collateral, subject to customary assumptions and qualifications set forth herein and in the related opinion letters being prepared by this firm. All three draft UCC-1 financing statements have been prepared and are on file with the working group but have not been filed, as the transaction is currently in shelved/dormant status.

II. Transaction Structure Overview

A. Parties and SPV Chain

The following is a summary of the principal entities in the securitization chain, together with their relevant organizational details:

Quorum Insurance Holdings Corp. ("QIH") — QIH is a Delaware corporation, publicly traded on the New York Stock Exchange under the ticker symbol QIHC. QIH's principal executive offices are located at 400 Atlantic Street, Suite 2200, Stamford, Connecticut 06901. QIH serves as the Sponsor and ultimate Parent in the securitization structure. QIH is the sole shareholder of QPF and provides certain administrative services to the securitization entities pursuant to the Administration Agreement.

Quorum Premium Finance LLC ("QPF") — QPF is a Delaware limited liability company and a wholly owned subsidiary of QIH. QPF serves as the Originator, Seller, and Servicer of the insurance premium finance receivables in the securitization. QPF's Employer Identification Number (EIN) is 84-2653198. The Manager of QPF is Sandra Ling-Hwang, who also serves as the Treasurer of QIH. QPF originates insurance premium finance loans to commercial policyholders across all 50 states. As of the cut-off date, QPF's total receivables portfolio was approximately $2.1 billion, of which the initial securitized pool of approximately $612 million represents approximately 29%.

Quorum Receivables Holding LLC ("QRH") — QRH is a Delaware limited liability company organized as a bankruptcy-remote intermediate special purpose vehicle. The sole member of QRH is QPF. QRH was formed on August 3, 2022, and its Delaware Secretary of State file number is 7894228. QRH's EIN is 88-1247619. QRH's Independent Manager is Eleanor M. Vasquez, who is employed by Fortbridge Corporate Services LLC, an independent director services firm. QRH's sole purpose is to acquire insurance premium finance receivables from QPF under the Receivables Sale Agreement and to transfer such receivables to QRF 2022-1 under the Receivables Transfer Agreement. QRH maintains separateness covenants in its LLC Agreement designed to ensure its status as a bankruptcy-remote entity distinct from QPF and QIH.

Quorum Receivables Funding 2022-1 LLC ("QRF 2022-1") — QRF 2022-1 is a Delaware limited liability company organized as a bankruptcy-remote special purpose vehicle. The sole member of QRF 2022-1 is QRH. QRF 2022-1 was formed on August 3, 2022, and its Delaware Secretary of State file number is 7894231. QRF 2022-1's EIN is 88-1247653. QRF 2022-1's Independent Manager is Timothy R. Callan, who is also employed by Fortbridge Corporate Services LLC. QRF 2022-1 is the Issuer of the Notes in the securitization. Its sole purpose is to acquire insurance premium finance receivables from QRH, hold such receivables, issue the Notes, and grant a security interest in all of its assets to Calvoneth Trust for the benefit of the noteholders. QRF 2022-1 maintains separateness covenants in its LLC Agreement prohibiting it from incurring additional indebtedness, granting additional liens or security interests, or engaging in any business other than the issuance of the Notes and the holding of the receivables and related collateral.

Calvoneth Trust Company, N.A. ("Calvoneth Trust") — Calvoneth Trust is a national banking association with its Corporate Trust Office located at 600 Travis Street, Suite 5800, Houston, Texas 77002. The Senior Trust Officer assigned to this transaction is Gerald K. Fontaine. Calvoneth Trust serves in multiple capacities in the securitization, including as Indenture Trustee, Paying Agent, Calculation Agent, Securities Intermediary (with respect to the transaction accounts), and Custodian (with respect to the receivable files). In its capacity as Indenture Trustee, Calvoneth Trust holds the security interest granted by QRF 2022-1 for the benefit of the holders of the Class A Notes, Class B Notes, and Class C Notes.

B. Flow of Receivables and Security Interests

The flow of receivables and security interests through the SPV chain proceeds as follows:

Step 1 — Origination and Sale to QRH: QPF originates insurance premium finance loans to commercial policyholders across all 50 states. These loans finance the payment of insurance premiums for commercial property, casualty, liability, workers' compensation, and other lines of insurance coverage. Under the Receivables Sale Agreement, QPF sells, transfers, assigns, and otherwise conveys to QRH all of its right, title, and interest in and to the receivables identified on the applicable schedule of receivables, together with all related rights, collections, and proceeds. The transfer is intended to constitute a true sale for all purposes. As a protective measure against recharacterization, QPF grants to QRH a back-up security interest in all such receivables and related collateral. QPF retains the obligation to service the receivables pursuant to the Servicing Agreement.

Step 2 — Transfer from QRH to QRF 2022-1: Under the Receivables Transfer Agreement, QRH transfers, assigns, and otherwise conveys to QRF 2022-1 all of its right, title, and interest in and to the receivables acquired from QPF, together with all related rights, collections, and proceeds. This transfer is intended to constitute a true sale or, in the alternative, a capital contribution from QRH (as sole member) to QRF 2022-1. As a protective measure against recharacterization, QRH grants to QRF 2022-1 a back-up security interest in all such receivables and related collateral.

Step 3 — Grant of Security Interest to Calvoneth Trust: Under the Grant of Security Interest (Pledge Agreement), and as further set forth in the Indenture, QRF 2022-1 grants to Calvoneth Trust, for the benefit of the holders of the Notes, a first-priority security interest in all of QRF 2022-1's right, title, and interest in and to the receivables, collections, proceeds, accounts, contract rights, general intangibles, and all other assets of QRF 2022-1, whether now existing or hereafter acquired. This grant secures the obligations of QRF 2022-1 under the Notes and the Indenture.

The initial receivables pool, as of the cut-off date of June 30, 2022, has an aggregate outstanding principal balance of approximately $612,000,000. The pool consists of approximately 82,400 individual insurance premium finance loans with a weighted average annual percentage rate (APR) of 7.85% and an average individual loan balance of approximately $7,427. The receivables have a range of original terms, typically between 9 and 12 months, and are payable in monthly installments.

C. Revolving Structure

The transaction contemplates a revolving period and an amortization period, structured as follows:

Revolving Period: During the initial 24-month period following the closing date (the "Revolving Period"), collections on the receivables may be used by QRF 2022-1 to acquire new eligible receivables from QRH (which in turn acquires them from QPF) rather than being applied to principal payments on the Notes. This revolving mechanism allows the receivables pool to be replenished as existing receivables amortize or are paid off, maintaining the aggregate pool balance at or near the target level.

Amortization Period: Following the expiration of the Revolving Period, the transaction enters a 12-month amortization period during which collections are applied sequentially to principal payments on the Notes in order of priority (Class A, then Class B, then Class C). The legal final maturity date of the Notes is 42 months from the closing date, providing an additional six months beyond the scheduled amortization period to accommodate any delays in collections or liquidation of remaining receivables.

During the Revolving Period, new receivables acquired by QRF 2022-1 must satisfy the Eligible Receivables Criteria set forth in the Receivables Transfer Agreement. These criteria include, among other things, requirements relating to the receivable's currency, payment status, obligor creditworthiness, remaining term, and compliance with applicable state insurance premium finance laws. Receivables that satisfy the Eligible Receivables Criteria will be subject to the same UCC filings and security interest grants that cover the initial pool of receivables.

The after-acquired property provisions contained in each of the three UCC-1 financing statements and in each of the underlying security agreements (including the back-up security interest grants and the Grant of Security Interest) are specifically designed to cover receivables acquired during the Revolving Period. Under UCC § 9-204(a), a security agreement may create a security interest in after-acquired collateral, and the collateral descriptions in the UCC-1 filings include "now existing or hereafter created or acquired" language sufficient to cover the revolving pool. Accordingly, no additional UCC filings are required when new receivables are added to the pool during the Revolving Period.

III. Characterization of the Receivables Under UCC Article 9

A. Nature of Insurance Premium Finance Receivables

Insurance premium finance receivables are the obligations of commercial policyholders to repay financing provided by QPF for the payment of insurance premiums. In a typical insurance premium finance transaction, QPF advances funds to an insurance carrier or insurance agent on behalf of a commercial policyholder to pay all or a portion of the policyholder's insurance premium. The policyholder then repays QPF in installments over a period typically ranging from 9 to 12 months, together with a finance charge calculated at an agreed annual percentage rate. Each such obligation constitutes a receivable.

Each receivable is, at its core, a right to payment of a monetary obligation arising out of a loan or credit transaction. The policyholder's obligation to repay QPF is a contractual obligation created by the premium finance agreement between QPF and the policyholder. The receivables are not themselves insurance policies, nor are they rights to receive insurance benefits. Rather, they are loan repayment obligations that happen to arise in the context of insurance premium financing.

The receivables are secured by assignments of unearned premium refund rights from insurance carriers. Specifically, as part of each premium finance agreement, the policyholder assigns to QPF its right to receive any unearned premium refund from the insurance carrier in the event the insurance policy is cancelled. This assignment provides QPF with a security interest in the unearned premium refund, which can be realized upon cancellation of the insurance policy if the policyholder defaults on the premium finance loan. However, for purposes of UCC Article 9 characterization of the receivables themselves, the relevant analysis focuses on the nature of the receivable—i.e., the right to payment of the loan repayment obligation—rather than on the nature of the underlying collateral securing the receivable.

B. "Account" vs. "Payment Intangible" Analysis

The proper characterization of the insurance premium finance receivables under UCC Article 9 is a threshold question that affects the method of perfection and, in certain circumstances, whether automatic perfection is available. The two principal characterization candidates are "account" and "payment intangible."

Definition of "Account." UCC § 9-102(a)(2) defines "account" as a right to payment of a monetary obligation, whether or not earned by performance:

(i) for property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of;

(ii) for services rendered or to be rendered;

(iii) for a policy of insurance issued or to be issued;

(iv) for a secondary obligation incurred or to be incurred;

(v) for energy provided or to be provided;

(vi) for the use or hire of a vessel under a charter or other contract;

(vii) arising out of the use of a credit or charge card or information contained on or for use with the card; or

(viii) as winnings in a lottery or other game of chance operated or sponsored by a State, governmental unit of a State, or person licensed or authorized to operate the game by a State or governmental unit of a State.

The definition of "account" is an enumerated list; a right to payment qualifies as an "account" only if it falls within one of the listed subcategories.

Definition of "Payment Intangible." UCC § 9-102(a)(61) defines "payment intangible" as "a general intangible under which the account debtor's principal obligation is a monetary obligation." A "general intangible" is defined in UCC § 9-102(a)(42) as "any personal property, including things in action, other than accounts, chattel paper, commercial tort claims, deposit accounts, documents, goods, instruments, investment property, letter-of-credit rights, letters of credit, money, and oil, gas, or other minerals before extraction." The definition of "general intangible" is thus a residual category—it captures any personal property that does not fall within one of the other specifically defined categories of collateral.

The Key Question. The central question is whether the insurance premium finance receivables are "accounts"—specifically under clause (iii) of the definition, which covers rights to payment "for a policy of insurance issued or to be issued"—or "payment intangibles" (as general intangibles under which the account debtor's principal obligation is a monetary obligation).

Analysis of the "Insurance Policy" Account Prong. The most plausible argument for treating the receivables as "accounts" is that they might fall within clause (iii) of the definition—rights to payment "for a policy of insurance issued or to be issued." However, upon careful analysis, this argument is not persuasive. The receivables do not arise from the issuance of insurance policies. Rather, they arise from premium finance loan agreements under which QPF advances funds to pay insurance premiums on behalf of policyholders. The policyholders' obligations to repay QPF are obligations arising under credit or loan agreements, not obligations arising from or "for" insurance policies.

To illustrate the distinction: when an insurance company issues a policy to a policyholder, the policyholder owes the insurance company a premium. The premium obligation is a right to payment "for a policy of insurance issued or to be issued"—it is the consideration for the issuance of the insurance policy. That premium obligation, owed by the policyholder to the insurance company, would properly be classified as an "account" under clause (iii). However, when QPF makes a loan to the policyholder to finance the payment of that insurance premium, a new and distinct obligation arises—the policyholder's obligation to repay the premium finance loan. This loan repayment obligation is not a right to payment "for a policy of insurance." It is a right to repayment of a loan. The insurance policy is the underlying context for the loan, but it is not the subject matter of the payment obligation. The obligor's payment obligation arises from the premium finance agreement (a credit or loan instrument), not from the insurance policy itself.

Other Account Subcategories. The receivables also do not fit within any of the other enumerated subcategories of "account." They do not arise from the sale, lease, licensing, assignment, or other disposition of property (clause (i)). They do not arise from the rendering of services (clause (ii)). They do not arise from secondary obligations (clause (iv)), the provision of energy (clause (v)), the use or hire of a vessel (clause (vi)), credit or charge card transactions (clause (vii)), or lottery winnings (clause (viii)). The receivables are loan repayment obligations, and loan repayment obligations are not enumerated within the definition of "account."

Conclusion on Characterization. The insurance premium finance receivables are most properly characterized as "payment intangibles"—that is, general intangibles under which the account debtor's principal obligation is the monetary obligation to repay the premium finance loan. The receivables are personal property (rights to payment) that do not fall within the definition of "account" or any other specifically defined category of UCC Article 9 collateral (e.g., they are not chattel paper, instruments, or deposit accounts). Because the principal obligation of the account debtors (the policyholders) under the receivables is a monetary obligation (repayment of the premium finance loan), the receivables satisfy the definition of "payment intangible."

Note on Alternative Characterization. We recognize that some commentators and practitioners in the insurance premium finance industry have taken the position that insurance premium finance receivables may be classified as "accounts" under a broader interpretation of clause (iii), reasoning that the receivables arise out of or in connection with insurance policies. We believe this interpretation stretches the statutory language beyond its intended scope, but we acknowledge the possibility that a court could adopt this alternative view. Accordingly, as discussed in Section III.C below, we address perfection under both characterizations and recommend a filing approach that ensures perfection regardless of which characterization is adopted.

C. Significance of Characterization for Perfection Method

The characterization of the receivables as either "payment intangibles" or "accounts" has significant implications for the method of perfection, as summarized below:

Payment Intangibles. Under UCC § 9-309(3), a security interest created by the sale of a payment intangible is automatically perfected upon attachment without the need for any filing or other action by the secured party. This means that if the transfers from QPF to QRH and from QRH to QRF 2022-1 are respected as true sales of payment intangibles, the security interests of QRH and QRF 2022-1 in the receivables are automatically perfected upon attachment—i.e., upon the effective date of the transfer. No UCC-1 filing is required for perfection in a true sale scenario involving payment intangibles.

However, if the transfers are not sales—that is, if a court were to recharacterize a purported true sale as a secured financing—then the automatic perfection rule of § 9-309(3) would not apply. Instead, perfection of the security interest would require filing a UCC-1 financing statement under UCC § 9-310, which provides the general rule that filing is required to perfect a security interest.

Accounts. Under UCC § 9-310, perfection of a security interest in accounts—whether the transfer constitutes a sale or a grant of a security interest—generally requires the filing of a UCC-1 financing statement. UCC § 9-309(2) does provide for automatic perfection upon the sale of accounts, but only where the assignment "does not by itself or in conjunction with other assignments to the same assignee transfer a significant part of the assignor's outstanding accounts." Given the size of the receivables pool at issue ($612 million out of QPF's total $2.1 billion portfolio, or approximately 29%), the § 9-309(2) exception is inapplicable. The transfer of 29% of QPF's outstanding accounts would constitute a "significant part" of QPF's outstanding accounts by any reasonable measure, and therefore filing would be required even if the receivables were classified as accounts and the transfer constituted a sale.

Recommendation. We recommend filing UCC-1 financing statements at each transfer level regardless of whether the receivables are characterized as payment intangibles or accounts. Filing is the only perfection method that provides protection across all possible scenarios:

(a) If the receivables are payment intangibles and the transfer is a true sale, automatic perfection applies and the filing serves as a belt-and-suspenders measure;

(b) If the receivables are payment intangibles and the transfer is recharacterized as a secured financing, filing is required under § 9-310;

(c) If the receivables are accounts and the transfer is a true sale, filing is required under § 9-310 (the § 9-309(2) de minimis exception does not apply); and

(d) If the receivables are accounts and the transfer is recharacterized as a secured financing, filing is required under § 9-310.

In each of these scenarios, filing a UCC-1 financing statement is either required or provides additional protection. Accordingly, the filing-based perfection approach is the correct strategy for this transaction.

D. Related Collateral Items

In addition to the insurance premium finance receivables themselves, the security interests at each transfer level cover a number of related categories of collateral. The perfection requirements for each category are summarized below:

Collections and Proceeds of Receivables. The security interests at each level cover all collections on the receivables and all proceeds (as defined in UCC § 9-102(a)(64)) of the receivables. Under UCC § 9-315(a)(2), a security interest attaches to any identifiable proceeds of collateral. Under UCC § 9-315(c) and (d), a security interest in identifiable proceeds is automatically perfected for 20 days after the debtor receives the proceeds. After 20 days, perfection of the security interest in proceeds continues if the proceeds are identifiable cash proceeds, or if a filed financing statement covers the original collateral and the proceeds are of a type that would be covered by such financing statement, or if certain other conditions are met. The broad collateral descriptions in the UCC-1 filings (covering receivables, collections, proceeds, general intangibles, and accounts) are designed to ensure continued perfection in proceeds beyond the initial 20-day period.

Rights Under Insurance Policies (Unearned Premium Refund Rights). As discussed in Section VII.A below, each premium finance receivable is secured by an assignment of the policyholder's right to receive unearned premium refunds from the insurance carrier. These refund rights are general intangibles under UCC Article 9, and perfection of a security interest in general intangibles requires filing under UCC § 9-310. The UCC-1 collateral descriptions at each level include references to these rights.

Bank Accounts. The transaction involves several deposit accounts maintained by Calvoneth Trust as securities intermediary: the collection account, the payment account, the reserve account, and the liquidity reserve account. Perfection of a security interest in deposit accounts is achieved through control under UCC § 9-104 and § 9-314. Under UCC § 9-104, a secured party has "control" of a deposit account if (a) the secured party is the bank with which the deposit account is maintained, (b) the debtor, the secured party, and the bank have agreed in an authenticated record that the bank will comply with instructions originated by the secured party directing disposition of the funds in the deposit account without further consent by the debtor, or (c) the secured party becomes the bank's customer with respect to the deposit account. The Account Control Agreement (execution draft v2, dated October 12, 2022) establishes Calvoneth Trust's control over each of the transaction's deposit accounts. Filing alone is not sufficient for priority with respect to deposit accounts; under UCC § 9-327, a security interest perfected by control has priority over a security interest perfected only by filing.

Books and Records. The security interests cover all books, records, data, and files relating to the receivables. To the extent these items constitute general intangibles, perfection by filing is appropriate and is covered by the UCC-1 filings.

General Intangibles Relating to the Receivables. This broad category includes contract rights, rights under the transaction documents, goodwill associated with the receivables business (to the extent transferable), and any other intangible property related to the receivables. Perfection of security interests in general intangibles is achieved by filing under UCC § 9-310, and the UCC-1 collateral descriptions include appropriate references to general intangibles.

IV. UCC-1 Filing Requirements at Each Transfer Level

A. Transfer 1: QPF (Seller/Debtor) → QRH (Purchaser/Secured Party)

1. Filing Details

The first UCC-1 financing statement is filed to perfect the back-up security interest granted by QPF in favor of QRH in connection with the sale of receivables under the Receivables Sale Agreement. The filing details are as follows:

• Debtor: Quorum Premium Finance LLC

The debtor name must be the exact legal name of QPF as reflected in its Certificate of Formation filed with the Delaware Secretary of State. Under UCC § 9-503(a)(1), a financing statement sufficiently provides the name of a registered organization only if the name on the financing statement is "the name that is stated to be the registered organization's name on the public organic record most recently filed with or issued or enacted by the registered organization's jurisdiction of organization which purports to state, amend, or restate the registered organization's name." Accordingly, the name "Quorum Premium Finance LLC" must be verified against the current Certificate of Formation (or any amendment thereto) on file with the Delaware Secretary of State.

• Secured Party: Quorum Receivables Holding LLC

• Filing Office: Delaware Secretary of State, Division of Corporations, John G. Townsend Building, 401 Federal Street, Suite 4, Dover, Delaware 19901. QPF is a Delaware limited liability company, and under UCC § 9-301(1) and § 9-307(e), the Delaware Secretary of State is the proper filing office for perfection of a security interest in QPF's collateral.

• Collateral Description: All insurance premium finance receivables now existing or hereafter created or acquired, together with all collections, proceeds, related rights, unearned premium refund rights, and general intangibles associated therewith, sold, transferred, or otherwise conveyed by QPF to QRH under the Receivables Sale Agreement dated as of the Closing Date, and all replacements and substitutions therefor.

• Purpose: This filing serves as a back-up security interest to protect against recharacterization of the true sale of receivables from QPF to QRH as a secured financing. The filing also serves as a belt-and-suspenders measure in the event the receivables are characterized as "accounts" (in which case filing is required even for a true sale) and provides protection in the event that the automatic perfection available under § 9-309(3) for sales of payment intangibles is for any reason unavailable or inapplicable.

2. Analysis. The perfection analysis for Transfer 1 depends on the characterization of the transfer and the characterization of the receivables:

If the transfer from QPF to QRH is respected as a true sale: For receivables characterized as payment intangibles, automatic perfection applies upon attachment under UCC § 9-309(3), and the UCC-1 filing provides additional protection. For receivables characterized as accounts, filing is required under UCC § 9-310 to perfect the interest of QRH as purchaser (the de minimis exception under § 9-309(2) is inapplicable given the size of the pool).

If the transfer is recharacterized as a secured financing: Filing is required under UCC § 9-310 to perfect QRH's security interest, regardless of whether the receivables are characterized as payment intangibles or accounts. In a recharacterization scenario, QRH would be treated as a secured party (not a purchaser), and automatic perfection under § 9-309(3) would not be available because that provision applies only to sales of payment intangibles, not to security interests in payment intangibles.

In all scenarios, filing provides protection, and the UCC-1 filing at this level is essential to the overall perfection structure of the securitization.

The debtor name on the UCC-1 must use QPF's exact legal name as stated in its Certificate of Formation on file with the Delaware Secretary of State. Any error in the debtor's name that would cause the financing statement to be "seriously misleading" under UCC § 9-506(b) would render the filing ineffective. Under § 9-506(c), a financing statement that fails sufficiently to provide the name of the debtor is "seriously misleading" unless a search of the filing office's records under the debtor's correct name, using the filing office's standard search logic, would disclose the financing statement. Prior to closing, we must verify QPF's exact legal name against the most recent filing with the Delaware Secretary of State and confirm that the name on the draft UCC-1 matches precisely.

3. Priority Considerations

To ensure that QRH's security interest in the receivables has first priority, no prior UCC-1 filings against QPF covering insurance premium finance receivables should exist. Under UCC § 9-322(a)(1), conflicting perfected security interests rank according to priority in time of filing or perfection, with the first to file or perfect having priority.

A comprehensive UCC search must be conducted against QPF with the Delaware Secretary of State to confirm that no prior filings exist covering the insurance premium finance receivables or any broader category of collateral that would encompass the receivables (such as a filing covering "all assets" or "all accounts and general intangibles"). Additionally, a search should be conducted to confirm that QPF has not granted any prior security interests in receivables to any warehouse lender, credit facility lender, or other secured party.

QPF maintains a total receivables portfolio of approximately $2.1 billion. If QPF has an existing warehouse facility or revolving credit facility secured by receivables, the securitized receivables must be released from any existing security interest prior to closing. Release letters, termination statements (UCC-3 filings), or intercreditor arrangements will need to be obtained. This is an open item that must be addressed prior to closing, as discussed further in Section XI.B below.

The QPF→QRH UCC-1 filing should be among the first filings at closing to establish priority under the first-to-file-or-perfect rule of § 9-322(a)(1). All three UCC-1 filings should be filed simultaneously at closing.

B. Transfer 2: QRH (Transferor/Debtor) → QRF 2022-1 (Transferee/Secured Party)

1. Filing Details

The second UCC-1 financing statement is filed to perfect the back-up security interest granted by QRH in favor of QRF 2022-1 in connection with the transfer of receivables under the Receivables Transfer Agreement. The filing details are as follows:

• Debtor: Quorum Receivables Holding LLC

The debtor name must be the exact legal name of QRH as reflected in its Certificate of Formation filed with the Delaware Secretary of State. The same exact-name requirements discussed in Section IV.A.1 above apply with equal force to QRH.

• Secured Party: Quorum Receivables Funding 2022-1 LLC

• Filing Office: Delaware Secretary of State. QRH is a Delaware limited liability company, and the Delaware Secretary of State is the proper filing office under UCC § 9-301(1) and § 9-307(e).

• Collateral Description: All insurance premium finance receivables, collections, proceeds, related rights, unearned premium refund rights, and general intangibles transferred by QRH to QRF 2022-1 under the Receivables Transfer Agreement dated as of the Closing Date, and all replacements and substitutions therefor.

• Purpose: This filing serves as a back-up security interest to protect against recharacterization of the true sale or capital contribution from QRH to QRF 2022-1 as a secured financing. As with Transfer 1, the filing also provides belt-and-suspenders protection regardless of whether the receivables are characterized as payment intangibles or accounts.

2. Analysis. The perfection analysis for Transfer 2 is substantially identical to the analysis for Transfer 1, as set forth in Section IV.A.2 above. Whether the transfer from QRH to QRF 2022-1 is characterized as a true sale, a capital contribution, or a secured financing, and whether the receivables are characterized as payment intangibles or accounts, filing a UCC-1 financing statement with the Delaware Secretary of State provides perfection or additional protection in all scenarios.

QRH is a newly formed, single-purpose entity with no assets other than the receivables transferred from QPF and no operations other than those contemplated by the securitization documents. The likelihood of competing security interests or prior liens is minimal. Nevertheless, a UCC search against QRH with the Delaware Secretary of State should be conducted prior to closing to confirm a clean record and to satisfy the diligence requirements for the delivery of a first-priority lien opinion.

QRH's sole member is QPF, and QRH's sole purpose is to acquire and hold receivables from QPF and transfer them to QRF 2022-1. QRH does not and will not engage in any other business activities or incur any other indebtedness, as required by its separateness covenants and the limitations in its LLC Agreement.

3. Priority Considerations

QRH is a newly formed bankruptcy-remote entity, formed on August 3, 2022, with Delaware Secretary of State file number 7894228. No prior liens or UCC filings should exist against QRH, but a UCC search will be conducted to confirm this.

The separateness covenants in the QRH LLC Agreement and the appointment of Eleanor M. Vasquez of Fortbridge Corporate Services LLC as independent manager further support the bankruptcy-remote structure and reduce the risk that QRH will grant any competing security interests. The LLC Agreement prohibits QRH from incurring indebtedness, granting liens, merging with or into any other entity, or changing its name or jurisdiction of organization without the prior written consent of specified parties (including the Indenture Trustee, once the Indenture is executed). These covenants are designed to maintain the integrity of the SPV chain and prevent any interference with the perfection and priority of the security interests.

C. Grant 3: QRF 2022-1 (Debtor/Issuer) → Calvoneth Trust (Secured Party/Indenture Trustee)

1. Filing Details

The third UCC-1 financing statement is filed to perfect the security interest granted by QRF 2022-1 to Calvoneth Trust under the Grant of Security Interest (Pledge Agreement) and the Indenture. Unlike the first two filings, which serve as back-up security interests, this filing is the primary perfection mechanism for the security interest that secures the Notes. The filing details are as follows:

• Debtor: Quorum Receivables Funding 2022-1 LLC

The debtor name must be the exact legal name of QRF 2022-1 as reflected in its Certificate of Formation filed with the Delaware Secretary of State. The same exact-name requirements discussed above apply.

• Secured Party: Calvoneth Trust Company, National Association, as Indenture Trustee for the benefit of the holders of the Class A Notes, Class B Notes, and Class C Notes issued pursuant to the Indenture dated as of the Closing Date

The secured party designation should include the full legal name of Calvoneth Trust and its capacity as Indenture Trustee. Under UCC § 9-503(d), a financing statement that provides the name of the secured party's representative is sufficient for purposes of the secured party name requirement.

• Filing Office: Delaware Secretary of State. QRF 2022-1 is a Delaware limited liability company, and the Delaware Secretary of State is the proper filing office under UCC § 9-301(1) and § 9-307(e).

• Collateral Description: All right, title, and interest of Quorum Receivables Funding 2022-1 LLC in and to (i) all insurance premium finance receivables, whether now existing or hereafter acquired, (ii) all collections and proceeds thereof, (iii) all accounts, including without limitation the collection account, payment account, reserve account, and liquidity reserve account, (iv) all rights under the Receivables Transfer Agreement, the Servicing Agreement, the Back-Up Servicing Agreement, the Liquidity Facility Agreement, and the Administration Agreement, (v) all books, records, files, and data relating to the foregoing, and (vi) all general intangibles, contract rights, instruments, and other property of every kind and nature, in each case whether now existing or hereafter acquired or arising.

• Purpose: This filing perfects the security interest granted by QRF 2022-1 to Calvoneth Trust for the benefit of the noteholders. This is the primary grant of a security interest in the securitization; it is not a back-up filing. The security interest secures QRF 2022-1's obligations under the $375,000,000 Class A Notes, $75,000,000 Class B Notes, and $35,000,000 Class C Notes, as well as QRF 2022-1's other obligations under the Indenture.

2. Analysis. This third filing is the most critical filing in the securitization. It perfects the security interest that directly secures the $485,000,000 in aggregate principal amount of issued Notes (with an additional approximately $15,000,000 in overcollateralization and retained interest held by QRH or its designee). The aggregate capitalization of QRF 2022-1 at closing, including Notes and retained interests, will total approximately $500,000,000 (plus additional overcollateralization from the excess of the initial pool balance of $612,000,000 over the face amount of the Notes).

The receivables held by QRF 2022-1 are the same receivables originally originated by QPF and transferred through QRH. Their characterization as payment intangibles (or, alternatively, accounts) is discussed in Section III above. Regardless of characterization, filing is required under UCC § 9-310 to perfect the Indenture Trustee's security interest. Unlike the first two transfer levels, where the transfers are intended as true sales and the UCC filings serve as back-up, the grant from QRF 2022-1 to Calvoneth Trust is a grant of a security interest (not a sale), and therefore automatic perfection under § 9-309(3) is not available. Filing is the mandatory perfection method for this level of the structure.

For deposit accounts—specifically the collection account, payment account, reserve account, and liquidity reserve account—perfection is achieved through control under the Account Control Agreement with Calvoneth Trust as securities intermediary, as discussed in Section III.D above. Under UCC § 9-327(1), a security interest held by a secured party having control of the deposit account has priority over a conflicting security interest held by a secured party that does not have control. Under UCC § 9-327(3), a security interest held by the securities intermediary (or by the bank with which the deposit account is maintained) has priority over a security interest held by any other secured party. Because Calvoneth Trust serves as both the securities intermediary with respect to the transaction accounts and the Indenture Trustee holding the security interest for the benefit of the noteholders, Calvoneth Trust's control-based security interest in the deposit accounts will have priority over any other security interest.

The dual perfection mechanism—filing with respect to the receivables and related collateral, plus control with respect to the deposit accounts—provides the highest level of protection for the noteholders and is consistent with market standard practice in ABS transactions.

3. Priority Considerations

QRF 2022-1 is a newly formed bankruptcy-remote entity, formed on August 3, 2022, with Delaware Secretary of State file number 7894231. No prior liens or UCC filings should exist against QRF 2022-1. A UCC search will be conducted prior to closing to confirm a clean record.

Timothy R. Callan of Fortbridge Corporate Services LLC serves as the independent manager of QRF 2022-1. The separateness covenants in the QRF 2022-1 LLC Agreement prohibit QRF 2022-1 from incurring additional indebtedness, granting additional security interests, merging with or into any other entity, changing its name or jurisdiction of organization, or engaging in any business other than the issuance of the Notes and the holding and management of the receivables and related collateral, in each case without the prior written consent of the Indenture Trustee. These covenants are critical structural protections that prevent QRF 2022-1 from creating any competing security interests that could challenge Calvoneth Trust's first-priority lien.

Northvane Bank Liquidity Facility. We note that the transaction documents contemplate a $25,000,000 liquidity facility provided by Northvane Bank (the "Liquidity Facility"). We need to confirm that the Liquidity Facility Agreement is structured such that any obligations of QRF 2022-1 under the Liquidity Facility are either (a) secured by the same security interest grant under the Indenture and the Grant of Security Interest, such that Northvane Bank's claims are subject to the payment waterfall and priority provisions of the Indenture, or (b) subordinated to the claims of the noteholders. Based on our preliminary review of the draft Indenture, the payment waterfall provides for the following priority of payments from available funds: (1) Indenture Trustee fees and expenses, (2) Servicer fee and back-up servicing fee, (3) interest on the Class A Notes, (4) interest on the Class B Notes, (5) interest on the Class C Notes, (6) replenishment of the reserve account and liquidity reserve account, (7) principal on the Class A Notes, (8) principal on the Class B Notes, (9) principal on the Class C Notes, (10) Northvane Bank liquidity facility repayment, and (11) residual distributions to the holder of the retained interest. This payment waterfall indicates that Northvane Bank's claims are structurally subordinated to the noteholders' claims in the payment priority. However, we must confirm the specific terms of the Liquidity Facility Agreement and ensure that Northvane Bank does not hold a separate or competing security interest in QRF 2022-1's assets outside of the Indenture structure.

V. Perfection Timing and Continuation

A. Filing Timing

All three UCC-1 financing statements should be filed simultaneously at or immediately prior to the closing of the securitization transaction. The simultaneous filing of all three statements ensures that the entire chain of security interests is perfected at the same time, eliminating any gap in perfection between the different transfer levels.

Under UCC § 9-322(a), priority among perfected security interests in the same collateral is determined by the first to file or perfect. By filing all three UCC-1 financing statements at closing—before any other party has the opportunity to file competing claims against the receivables at any level of the SPV chain—the transaction parties establish first-priority security interests at each level.

Pre-filing before closing is permissible under UCC § 9-502(d), which provides that a financing statement may be filed before a security agreement is made or a security interest otherwise attaches. Pre-filing can be advantageous because it establishes a filing date (and therefore a priority date) before the closing, reducing the risk that an intervening filing by a third party could claim priority. However, pre-filing also creates certain risks: if the transaction does not close, the financing statement will remain on file and may need to be terminated; additionally, a pre-filed financing statement may raise questions or concerns among QPF's existing lenders or counterparties if they become aware of the filing through their own UCC search activities.

Recommendation: We recommend filing the three UCC-1 financing statements on the closing date. Given that the transaction is currently in shelved/dormant status, we do not recommend filing until the deal is reactivated and a definitive closing date has been established. The draft UCC-1 financing statements have been prepared and are on file with the working group, ready for filing upon reactivation. Upon reactivation, the filings can be submitted electronically to the Delaware Secretary of State, which typically processes electronic filings within 24 hours.

B. Continuation Statements

Under UCC § 9-515(a), a financing statement filed in the filing office is effective for a period of five years after the date of filing, subject to the filing of a continuation statement. If a continuation statement is not timely filed, the financing statement lapses and any security interest perfected by the filing becomes unperfected.

The legal final maturity of the Notes is 42 months (3.5 years) from the closing date. Because the five-year effectiveness period of the initial UCC-1 filings exceeds the 42-month legal final maturity, the initial filings should remain effective throughout the entire life of the transaction without the need for continuation statements. Assuming a closing date in late 2022 or early 2023, the initial filings would remain effective until late 2027 or early 2028, while the legal final maturity of the Notes would occur in mid-2026 or mid-2027.

However, we note two scenarios in which continuation statements could become necessary:

First, if the transaction is extended or amended such that the legal final maturity is extended beyond the five-year effectiveness period of the initial filings, continuation statements (filed on Form UCC-3) must be filed to prevent lapse. Under UCC § 9-515(d), a continuation statement must be filed within six months before the expiration of the five-year period. A continuation statement filed outside this six-month window (either too early or too late) is ineffective.

Second, if the transaction experiences delays in winding down after the legal final maturity—for example, if receivables remain outstanding and collections are still being received after the scheduled maturity date—the financing statements should remain in effect until all obligations under the Indenture have been satisfied and discharged.

The Indenture and the Servicing Agreement should include covenants requiring the Servicer (QPF) and the Administrator (QIH) to file continuation statements as necessary to maintain the effectiveness of the UCC-1 financing statements throughout the life of the transaction. We will review the draft Indenture and Servicing Agreement to confirm that appropriate continuation filing covenants are included.

C. Amendment Filings

Under UCC § 9-507(c), if a debtor changes its name such that the financing statement on file becomes "seriously misleading" under UCC § 9-506, the financing statement is effective to perfect a security interest in collateral acquired by the debtor before the change and within four months after the change. However, the financing statement is not effective to perfect a security interest in collateral acquired by the debtor more than four months after the change, unless an amendment to the financing statement reflecting the new name is filed within the four-month period.

Similarly, if a debtor changes its jurisdiction of organization (e.g., by redomiciling from Delaware to another state), the perfection of the security interest could be affected, as the filing would no longer be in the correct jurisdiction. Under UCC § 9-316, if the debtor changes its location to a new jurisdiction, a security interest perfected by filing in the original jurisdiction remains perfected for one year after the change, but will become unperfected after one year unless the secured party files in the new jurisdiction within that period.

The LLC Agreements for QRH and QRF 2022-1 include covenants prohibiting name changes, mergers, consolidations, conversions, or changes of organizational jurisdiction without the prior written consent of the Indenture Trustee. These are standard bankruptcy-remote covenants that mitigate the risk of a debtor name change or jurisdictional change that could affect the effectiveness of the UCC-1 filings. The QPF LLC Agreement should also include comparable covenants, and we will confirm this in our review of the final transaction documents.

In the unlikely event that any debtor entity does change its legal name or jurisdiction of organization (with appropriate consents), a UCC-3 amendment must be filed promptly—within four months of a name change and within one year of a jurisdictional change—to maintain the effectiveness of the financing statement.

VI. True Sale vs. Secured Financing — Impact on UCC Analysis

A. True Sale Implications

The transfers of receivables from QPF to QRH and from QRH to QRF 2022-1 are structured as true sales of the receivables for all legal, accounting, and tax purposes. If these transfers are respected as true sales, the receivables are owned by QRF 2022-1 free and clear of any interest of QPF or QRH, other than QPF's retained servicing rights under the Servicing Agreement (which are contractual rights to service the receivables in exchange for a servicing fee, and do not constitute an ownership interest in the receivables themselves).

The true sale characterization is the foundation of the bankruptcy-remote structure. If the transfers are true sales, the receivables held by QRF 2022-1 are not property of QPF's bankruptcy estate in the event of a QPF bankruptcy. QPF's creditors—including QPF's general unsecured creditors and any secured creditors of QPF—cannot reach the receivables held by QRF 2022-1, and a bankruptcy trustee or debtor-in-possession for QPF cannot use, sell, or otherwise exercise control over the receivables. This insulation from the Originator's bankruptcy is the central credit enhancement that an asset-backed securitization provides to investors.

For UCC perfection purposes, the true sale characterization has the following implications:

If the receivables are characterized as payment intangibles, a true sale results in automatic perfection of the buyer's interest under UCC § 9-309(3). The UCC-1 filing at each transfer level (Transfers 1 and 2) serves as additional, belt-and-suspenders protection but is not strictly required for perfection in a true sale scenario involving payment intangibles.

If the receivables are characterized as accounts, a true sale still requires filing for perfection under UCC § 9-310, as the de minimis exception of § 9-309(2) does not apply to the transfer at issue.

Separate true sale opinions are being prepared by this firm. Sylvia Hartwell of Calderwood & Harkness is drafting the true sale opinions addressing both the QPF→QRH transfer under the Receivables Sale Agreement and the QRH→QRF 2022-1 transfer under the Receivables Transfer Agreement. The current drafts of these opinions are dated October 8, 2022, and remain subject to review and finalization in connection with the reactivation of the transaction.

B. Recharacterization Risk and Back-Up Security Interest

Notwithstanding the parties' intent that the transfers constitute true sales, there is a risk that a court—most likely a bankruptcy court presiding over a bankruptcy case involving QPF—could recharacterize one or both of the transfers as a secured financing rather than a true sale. In a recharacterization scenario, the transferor (QPF or QRH, as applicable) would be deemed the owner of the receivables, and the transferee (QRH or QRF 2022-1, as applicable) would be deemed to hold a security interest in the receivables rather than outright ownership.

If such a recharacterization were to occur, the UCC-1 filings at each transfer level would become critically important. In a recharacterization scenario, the transferee's interest in the receivables would be treated as a security interest, and that security interest would need to be perfected under UCC Article 9 in order to be effective against the transferor's bankruptcy trustee and other creditors. The UCC-1 filings at Transfers 1 and 2 ensure that, even if the true sales are recharacterized, the transferees hold perfected, first-priority security interests in the receivables.

The risk of recharacterization is mitigated by a number of structural and documentary features of the transaction:

(a) Transfer of risks and benefits: The transaction documents provide for the transfer of substantially all economic risks and benefits of ownership of the receivables from the seller to the buyer at each transfer level. QRH bears the credit risk of the receivables after the transfer from QPF, and QRF 2022-1 bears the credit risk after the transfer from QRH.

(b) Limited recourse: The seller's repurchase obligations at each level are limited to repurchase obligations triggered by breaches of representations and warranties regarding the characteristics of individual receivables. There is no general recourse from the buyer back to the seller for credit losses, delinquencies, or defaults on the receivables.

(c) Non-consolidation opinions: Non-consolidation opinions are being prepared for QRF 2022-1 and QRH, with current drafts dated October 5, 2022. These opinions address the risk that a bankruptcy court could substantively consolidate the assets and liabilities of QRF 2022-1 or QRH with those of QPF or QIH.

(d) Separateness covenants and independent managers: QRH and QRF 2022-1 each maintain separateness covenants in their LLC Agreements and have appointed independent managers from Fortbridge Corporate Services LLC (Eleanor M. Vasquez for QRH; Timothy R. Callan for QRF 2022-1). The independent managers are required to consider the interests of the entity's creditors before consenting to any voluntary bankruptcy filing, providing an additional layer of protection against involuntary commingling of the SPV's affairs with those of the Sponsor.

(e) Compliance with true sale factors: The transaction documents are designed to comply with the factors identified by courts in determining whether a transfer of receivables constitutes a true sale or a secured financing, including arm's length pricing (the purchase price reflects fair market value consideration), transfer of legal title (QRH and QRF 2022-1 receive legal title to the receivables), the parties' expressed intent (the transaction documents expressly state the parties' intent that the transfers constitute true sales), and the absence of an obligation to return the receivables to the seller.

While no structural feature can eliminate recharacterization risk entirely, the combination of the foregoing factors, together with the back-up UCC-1 filings, provides robust protection against the consequences of recharacterization.

VII. Specific Collateral Perfection Issues

A. Unearned Premium Refund Rights

Each insurance premium finance receivable originated by QPF is secured by an assignment of the policyholder's right to receive an unearned premium refund from the insurance carrier in the event that the insurance policy is cancelled prior to the expiration of its term. These unearned premium refund rights constitute a critical credit enhancement for the receivables, as they provide a source of recovery in the event that a policyholder defaults on the premium finance loan and QPF (or its assignee) elects to cancel the insurance policy and collect the unearned premium refund from the carrier.

Under UCC Article 9, the unearned premium refund rights are properly classified as "general intangibles." They are rights to payment from insurance carriers that do not fall within the definition of "account" (which covers the insured's premium obligation to the carrier for the policy, not the carrier's obligation to refund unearned premiums to the insured or its assignee), "chattel paper," "instruments," or any other specifically defined category of UCC Article 9 collateral.

Perfection of a security interest in

MEMORANDUM
PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT
TO: Douglas Carmichael, Partner; Yuki Nakamura, Associate — Calderwood & Harkness LLP
FROM: Carlos Espinoza, Associate — Calderwood & Harkness LLP
DATE: September 19, 2022
RE: UCC Article 9 Perfection and Priority Analysis — Quorum Receivables Funding 2022-1 LLC Insurance Premium Finance ABS ($500,000,000)
Matter No.: 1025-00007
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I. Executive Summary
This memorandum analyzes the perfection of security interests under Article 9 of the Uniform Commercial Code (the "UCC") at each transfer level in the proposed $500,000,000 asset-backed securitization of insurance premium finance receivables originated by Quorum Premium Finance LLC ("QPF"). The transaction contemplates the issuance of three classes of notes—the Class A Notes ($375,000,000), the Class B Notes ($75,000,000), and the Class C Notes ($35,000,000)—by Quorum Receivables Funding 2022-1 LLC ("QRF 2022-1"), a bankruptcy-remote special purpose entity organized as a Delaware limited liability company. The notes will be secured by a pool of insurance premium finance receivables originated by QPF and transferred through an intermediate special purpose vehicle, Quorum Receivables Holding LLC ("QRH"). This memorandum was prepared at the request of Douglas Carmichael and Yuki Nakamura in connection with the firm's representation of Quorum Insurance Holdings Corp. ("QIH"), the transaction Sponsor.
The memorandum analyzes three distinct transfer and grant levels:
1. Transfer 1: The transfer from QPF (as Seller) to QRH (as Depositor/Intermediate SPV) under the Receivables Sale Agreement, intended as a true sale with a back-up security interest granted by QPF in favor of QRH.
2. Transfer 2: The transfer from QRH (as Transferor) to QRF 2022-1 (as Issuer) under the Receivables Transfer Agreement, intended as a true sale or capital contribution with a back-up security interest granted by QRH in favor of QRF 2022-1.
3. Grant 3: The grant of a security interest from QRF 2022-1 to Calvoneth Trust Company, N.A. ("Calvoneth Trust") (as Indenture Trustee) under the Grant of Security Interest (Pledge Agreement) for the benefit of the holders of the Class A Notes, Class B Notes, and Class C Notes.
At each level, the transfers are structured as true sales for bankruptcy-remoteness and accounting purposes. However, back-up security interests are granted at the first two levels to protect against the risk that a court could recharacterize one or both of the transfers as a secured financing rather than a true sale. At the third level—the grant from QRF 2022-1 to Calvoneth Trust—the transaction is structured as a grant of a security interest, not a sale, and therefore requires perfection by filing. This memorandum addresses the perfection requirements for the back-up security interests at the first two levels and the primary security interest grant at the third level.
The filing jurisdiction for all three UCC-1 financing statements is the Delaware Secretary of State. Each debtor entity—QPF, QRH, and QRF 2022-1—is organized as a limited liability company under the laws of the State of Delaware, and under UCC § 9-301(1) and § 9-307(e), the law of the jurisdiction in which a registered organization is organized governs the perfection, the effect of perfection or non-perfection, and the priority of a security interest in the debtor's collateral.
Conclusion: Upon proper filing of the three UCC-1 financing statements with the Delaware Secretary of State and execution of the Account Control Agreement with Calvoneth Trust (as securities intermediary) with respect to the transaction's deposit accounts, each security interest will be a perfected, first-priority security interest in the described collateral, subject to customary assumptions and qualifications set forth herein and in the related opinion letters being prepared by this firm. All three draft UCC-1 financing statements have been prepared and are on file with the working group but have not been filed, as the transaction is currently in shelved/dormant status.
II. Transaction Structure Overview
A. Parties and SPV Chain
The following is a summary of the principal entities in the securitization chain, together with their relevant organizational details:
Quorum Insurance Holdings Corp. ("QIH") — QIH is a Delaware corporation, publicly traded on the New York Stock Exchange under the ticker symbol QIHC. QIH's principal executive offices are located at 400 Atlantic Street, Suite 2200, Stamford, Connecticut 06901. QIH serves as the Sponsor and ultimate Parent in the securitization structure. QIH is the sole shareholder of QPF and provides certain administrative services to the securitization entities pursuant to the Administration Agreement.
Quorum Premium Finance LLC ("QPF") — QPF is a Delaware limited liability company and a wholly owned subsidiary of QIH. QPF serves as the Originator, Seller, and Servicer of the insurance premium finance receivables in the securitization. QPF's Employer Identification Number (EIN) is 84-2653198. The Manager of QPF is Sandra Ling-Hwang, who also serves as the Treasurer of QIH. QPF originates insurance premium finance loans to commercial policyholders across all 50 states. As of the cut-off date, QPF's total receivables portfolio was approximately $2.1 billion, of which the initial securitized pool of approximately $612 million represents approximately 29%.
Quorum Receivables Holding LLC ("QRH") — QRH is a Delaware limited liability company organized as a bankruptcy-remote intermediate special purpose vehicle. The sole member of QRH is QPF. QRH was formed on August 3, 2022, and its Delaware Secretary of State file number is 7894228. QRH's EIN is 88-1247619. QRH's Independent Manager is Eleanor M. Vasquez, who is employed by Fortbridge Corporate Services LLC, an independent director services firm. QRH's sole purpose is to acquire insurance premium finance receivables from QPF under the Receivables Sale Agreement and to transfer such receivables to QRF 2022-1 under the Receivables Transfer Agreement. QRH maintains separateness covenants in its LLC Agreement designed to ensure its status as a bankruptcy-remote entity distinct from QPF and QIH.
Quorum Receivables Funding 2022-1 LLC ("QRF 2022-1") — QRF 2022-1 is a Delaware limited liability company organized as a bankruptcy-remote special purpose vehicle. The sole member of QRF 2022-1 is QRH. QRF 2022-1 was formed on August 3, 2022, and its Delaware Secretary of State file number is 7894231. QRF 2022-1's EIN is 88-1247653. QRF 2022-1's Independent Manager is Timothy R. Callan, who is also employed by Fortbridge Corporate Services LLC. QRF 2022-1 is the Issuer of the Notes in the securitization. Its sole purpose is to acquire insurance premium finance receivables from QRH, hold such receivables, issue the Notes, and grant a security interest in all of its assets to Calvoneth Trust for the benefit of the noteholders. QRF 2022-1 maintains separateness covenants in its LLC Agreement prohibiting it from incurring additional indebtedness, granting additional liens or security interests, or engaging in any business other than the issuance of the Notes and the holding of the receivables and related collateral.
Calvoneth Trust Company, N.A. ("Calvoneth Trust") — Calvoneth Trust is a national banking association with its Corporate Trust Office located at 600 Travis Street, Suite 5800, Houston, Texas 77002. The Senior Trust Officer assigned to this transaction is Gerald K. Fontaine. Calvoneth Trust serves in multiple capacities in the securitization, including as Indenture Trustee, Paying Agent, Calculation Agent, Securities Intermediary (with respect to the transaction accounts), and Custodian (with respect to the receivable files). In its capacity as Indenture Trustee, Calvoneth Trust holds the security interest granted by QRF 2022-1 for the benefit of the holders of the Class A Notes, Class B Notes, and Class C Notes.
B. Flow of Receivables and Security Interests
The flow of receivables and security interests through the SPV chain proceeds as follows:
Step 1 — Origination and Sale to QRH: QPF originates insurance premium finance loans to commercial policyholders across all 50 states. These loans finance the payment of insurance premiums for commercial property, casualty, liability, workers' compensation, and other lines of insurance coverage. Under the Receivables Sale Agreement, QPF sells, transfers, assigns, and otherwise conveys to QRH all of its right, title, and interest in and to the receivables identified on the applicable schedule of receivables, together with all related rights, collections, and proceeds. The transfer is intended to constitute a true sale for all purposes. As a protective measure against recharacterization, QPF grants to QRH a back-up security interest in all such receivables and related collateral. QPF retains the obligation to service the receivables pursuant to the Servicing Agreement.
Step 2 — Transfer from QRH to QRF 2022-1: Under the Receivables Transfer Agreement, QRH transfers, assigns, and otherwise conveys to QRF 2022-1 all of its right, title, and interest in and to the receivables acquired from QPF, together with all related rights, collections, and proceeds. This transfer is intended to constitute a true sale or, in the alternative, a capital contribution from QRH (as sole member) to QRF 2022-1. As a protective measure against recharacterization, QRH grants to QRF 2022-1 a back-up security interest in all such receivables and related collateral.
Step 3 — Grant of Security Interest to Calvoneth Trust: Under the Grant of Security Interest (Pledge Agreement), and as further set forth in the Indenture, QRF 2022-1 grants to Calvoneth Trust, for the benefit of the holders of the Notes, a first-priority security interest in all of QRF 2022-1's right, title, and interest in and to the receivables, collections, proceeds, accounts, contract rights, general intangibles, and all other assets of QRF 2022-1, whether now existing or hereafter acquired. This grant secures the obligations of QRF 2022-1 under the Notes and the Indenture.
The initial receivables pool, as of the cut-off date of June 30, 2022, has an aggregate outstanding principal balance of approximately $612,000,000. The pool consists of approximately 82,400 individual insurance premium finance loans with a weighted average annual percentage rate (APR) of 7.85% and an average individual loan balance of approximately $7,427. The receivables have a range of original terms, typically between 9 and 12 months, and are payable in monthly installments.
C. Revolving Structure
The transaction contemplates a revolving period and an amortization period, structured as follows:
Revolving Period: During the initial 24-month period following the closing date (the "Revolving Period"), collections on the receivables may be used by QRF 2022-1 to acquire new eligible receivables from QRH (which in turn acquires them from QPF) rather than being applied to principal payments on the Notes. This revolving mechanism allows the receivables pool to be replenished as existing receivables amortize or are paid off, maintaining the aggregate pool balance at or near the target level.
Amortization Period: Following the expiration of the Revolving Period, the transaction enters a 12-month amortization period during which collections are applied sequentially to principal payments on the Notes in order of priority (Class A, then Class B, then Class C). The legal final maturity date of the Notes is 42 months from the closing date, providing an additional six months beyond the scheduled amortization period to accommodate any delays in collections or liquidation of remaining receivables.
During the Revolving Period, new receivables acquired by QRF 2022-1 must satisfy the Eligible Receivables Criteria set forth in the Receivables Transfer Agreement. These criteria include, among other things, requirements relating to the receivable's currency, payment status, obligor creditworthiness, remaining term, and compliance with applicable state insurance premium finance laws. Receivables that satisfy the Eligible Receivables Criteria will be subject to the same UCC filings and security interest grants that cover the initial pool of receivables.
The after-acquired property provisions contained in each of the three UCC-1 financing statements and in each of the underlying security agreements (including the back-up security interest grants and the Grant of Security Interest) are specifically designed to cover receivables acquired during the Revolving Period. Under UCC § 9-204(a), a security agreement may create a security interest in after-acquired collateral, and the collateral descriptions in the UCC-1 filings include "now existing or hereafter created or acquired" language sufficient to cover the revolving pool. Accordingly, no additional UCC filings are required when new receivables are added to the pool during the Revolving Period.
III. Characterization of the Receivables Under UCC Article 9
A. Nature of Insurance Premium Finance Receivables
Insurance premium finance receivables are the obligations of commercial policyholders to repay financing provided by QPF for the payment of insurance premiums. In a typical insurance premium finance transaction, QPF advances funds to an insurance carrier or insurance agent on behalf of a commercial policyholder to pay all or a portion of the policyholder's insurance premium. The policyholder then repays QPF in installments over a period typically ranging from 9 to 12 months, together with a finance charge calculated at an agreed annual percentage rate. Each such obligation constitutes a receivable.
Each receivable is, at its core, a right to payment of a monetary obligation arising out of a loan or credit transaction. The policyholder's obligation to repay QPF is a contractual obligation created by the premium finance agreement between QPF and the policyholder. The receivables are not themselves insurance policies, nor are they rights to receive insurance benefits. Rather, they are loan repayment obligations that happen to arise in the context of insurance premium financing.
The receivables are secured by assignments of unearned premium refund rights from insurance carriers. Specifically, as part of each premium finance agreement, the policyholder assigns to QPF its right to receive any unearned premium refund from the insurance carrier in the event the insurance policy is cancelled. This assignment provides QPF with a security interest in the unearned premium refund, which can be realized upon cancellation of the insurance policy if the policyholder defaults on the premium finance loan. However, for purposes of UCC Article 9 characterization of the receivables themselves, the relevant analysis focuses on the nature of the receivable—i.e., the right to payment of the loan repayment obligation—rather than on the nature of the underlying collateral securing the receivable.
B. "Account" vs. "Payment Intangible" Analysis
The proper characterization of the insurance premium finance receivables under UCC Article 9 is a threshold question that affects the method of perfection and, in certain circumstances, whether automatic perfection is available. The two principal characterization candidates are "account" and "payment intangible."
Definition of "Account." UCC § 9-102(a)(2) defines "account" as a right to payment of a monetary obligation, whether or not earned by performance:
(i) for property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of;
(ii) for services rendered or to be rendered;
(iii) for a policy of insurance issued or to be issued;
(iv) for a secondary obligation incurred or to be incurred;
(v) for energy provided or to be provided;
(vi) for the use or hire of a vessel under a charter or other contract;
(vii) arising out of the use of a credit or charge card or information contained on or for use with the card; or
(viii) as winnings in a lottery or other game of chance operated or sponsored by a State, governmental unit of a State, or person licensed or authorized to operate the game by a State or governmental unit of a State.
The definition of "account" is an enumerated list; a right to payment qualifies as an "account" only if it falls within one of the listed subcategories.
Definition of "Payment Intangible." UCC § 9-102(a)(61) defines "payment intangible" as "a general intangible under which the account debtor's principal obligation is a monetary obligation." A "general intangible" is defined in UCC § 9-102(a)(42) as "any personal property, including things in action, other than accounts, chattel paper, commercial tort claims, deposit accounts, documents, goods, instruments, investment property, letter-of-credit rights, letters of credit, money, and oil, gas, or other minerals before extraction." The definition of "general intangible" is thus a residual category—it captures any personal property that does not fall within one of the other specifically defined categories of collateral.
The Key Question. The central question is whether the insurance premium finance receivables are "accounts"—specifically under clause (iii) of the definition, which covers rights to payment "for a policy of insurance issued or to be issued"—or "payment intangibles" (as general intangibles under which the account debtor's principal obligation is a monetary obligation).
Analysis of the "Insurance Policy" Account Prong. The most plausible argument for treating the receivables as "accounts" is that they might fall within clause (iii) of the definition—rights to payment "for a policy of insurance issued or to be issued." However, upon careful analysis, this argument is not persuasive. The receivables do not arise from the issuance of insurance policies. Rather, they arise from premium finance loan agreements under which QPF advances funds to pay insurance premiums on behalf of policyholders. The policyholders' obligations to repay QPF are obligations arising under credit or loan agreements, not obligations arising from or "for" insurance policies.
To illustrate the distinction: when an insurance company issues a policy to a policyholder, the policyholder owes the insurance company a premium. The premium obligation is a right to payment "for a policy of insurance issued or to be issued"—it is the consideration for the issuance of the insurance policy. That premium obligation, owed by the policyholder to the insurance company, would properly be classified as an "account" under clause (iii). However, when QPF makes a loan to the policyholder to finance the payment of that insurance premium, a new and distinct obligation arises—the policyholder's obligation to repay the premium finance loan. This loan repayment obligation is not a right to payment "for a policy of insurance." It is a right to repayment of a loan. The insurance policy is the underlying context for the loan, but it is not the subject matter of the payment obligation. The obligor's payment obligation arises from the premium finance agreement (a credit or loan instrument), not from the insurance policy itself.
Other Account Subcategories. The receivables also do not fit within any of the other enumerated subcategories of "account." They do not arise from the sale, lease, licensing, assignment, or other disposition of property (clause (i)). They do not arise from the rendering of services (clause (ii)). They do not arise from secondary obligations (clause (iv)), the provision of energy (clause (v)), the use or hire of a vessel (clause (vi)), credit or charge card transactions (clause (vii)), or lottery winnings (clause (viii)). The receivables are loan repayment obligations, and loan repayment obligations are not enumerated within the definition of "account."
Conclusion on Characterization. The insurance premium finance receivables are most properly characterized as "payment intangibles"—that is, general intangibles under which the account debtor's principal obligation is the monetary obligation to repay the premium finance loan. The receivables are personal property (rights to payment) that do not fall within the definition of "account" or any other specifically defined category of UCC Article 9 collateral (e.g., they are not chattel paper, instruments, or deposit accounts). Because the principal obligation of the account debtors (the policyholders) under the receivables is a monetary obligation (repayment of the premium finance loan), the receivables satisfy the definition of "payment intangible."
Note on Alternative Characterization. We recognize that some commentators and practitioners in the insurance premium finance industry have taken the position that insurance premium finance receivables may be classified as "accounts" under a broader interpretation of clause (iii), reasoning that the receivables arise out of or in connection with insurance policies. We believe this interpretation stretches the statutory language beyond its intended scope, but we acknowledge the possibility that a court could adopt this alternative view. Accordingly, as discussed in Section III.C below, we address perfection under both characterizations and recommend a filing approach that ensures perfection regardless of which characterization is adopted.
C. Significance of Characterization for Perfection Method
The characterization of the receivables as either "payment intangibles" or "accounts" has significant implications for the method of perfection, as summarized below:
Payment Intangibles. Under UCC § 9-309(3), a security interest created by the sale of a payment intangible is automatically perfected upon attachment without the need for any filing or other action by the secured party. This means that if the transfers from QPF to QRH and from QRH to QRF 2022-1 are respected as true sales of payment intangibles, the security interests of QRH and QRF 2022-1 in the receivables are automatically perfected upon attachment—i.e., upon the effective date of the transfer. No UCC-1 filing is required for perfection in a true sale scenario involving payment intangibles.
However, if the transfers are not sales—that is, if a court were to recharacterize a purported true sale as a secured financing—then the automatic perfection rule of § 9-309(3) would not apply. Instead, perfection of the security interest would require filing a UCC-1 financing statement under UCC § 9-310, which provides the general rule that filing is required to perfect a security interest.
Accounts. Under UCC § 9-310, perfection of a security interest in accounts—whether the transfer constitutes a sale or a grant of a security interest—generally requires the filing of a UCC-1 financing statement. UCC § 9-309(2) does provide for automatic perfection upon the sale of accounts, but only where the assignment "does not by itself or in conjunction with other assignments to the same assignee transfer a significant part of the assignor's outstanding accounts." Given the size of the receivables pool at issue ($612 million out of QPF's total $2.1 billion portfolio, or approximately 29%), the § 9-309(2) exception is inapplicable. The transfer of 29% of QPF's outstanding accounts would constitute a "significant part" of QPF's outstanding accounts by any reasonable measure, and therefore filing would be required even if the receivables were classified as accounts and the transfer constituted a sale.
Recommendation. We recommend filing UCC-1 financing statements at each transfer level regardless of whether the receivables are characterized as payment intangibles or accounts. Filing is the only perfection method that provides protection across all possible scenarios:
(a) If the receivables are payment intangibles and the transfer is a true sale, automatic perfection applies and the filing serves as a belt-and-suspenders measure;
(b) If the receivables are payment intangibles and the transfer is recharacterized as a secured financing, filing is required under § 9-310;
(c) If the receivables are accounts and the transfer is a true sale, filing is required under § 9-310 (the § 9-309(2) de minimis exception does not apply); and
(d) If the receivables are accounts and the transfer is recharacterized as a secured financing, filing is required under § 9-310.
In each of these scenarios, filing a UCC-1 financing statement is either required or provides additional protection. Accordingly, the filing-based perfection approach is the correct strategy for this transaction.
D. Related Collateral Items
In addition to the insurance premium finance receivables themselves, the security interests at each transfer level cover a number of related categories of collateral. The perfection requirements for each category are summarized below:
Collections and Proceeds of Receivables. The security interests at each level cover all collections on the receivables and all proceeds (as defined in UCC § 9-102(a)(64)) of the receivables. Under UCC § 9-315(a)(2), a security interest attaches to any identifiable proceeds of collateral. Under UCC § 9-315(c) and (d), a security interest in identifiable proceeds is automatically perfected for 20 days after the debtor receives the proceeds. After 20 days, perfection of the security interest in proceeds continues if the proceeds are identifiable cash proceeds, or if a filed financing statement covers the original collateral and the proceeds are of a type that would be covered by such financing statement, or if certain other conditions are met. The broad collateral descriptions in the UCC-1 filings (covering receivables, collections, proceeds, general intangibles, and accounts) are designed to ensure continued perfection in proceeds beyond the initial 20-day period.
Rights Under Insurance Policies (Unearned Premium Refund Rights). As discussed in Section VII.A below, each premium finance receivable is secured by an assignment of the policyholder's right to receive unearned premium refunds from the insurance carrier. These refund rights are general intangibles under UCC Article 9, and perfection of a security interest in general intangibles requires filing under UCC § 9-310. The UCC-1 collateral descriptions at each level include references to these rights.
Bank Accounts. The transaction involves several deposit accounts maintained by Calvoneth Trust as securities intermediary: the collection account, the payment account, the reserve account, and the liquidity reserve account. Perfection of a security interest in deposit accounts is achieved through control under UCC § 9-104 and § 9-314. Under UCC § 9-104, a secured party has "control" of a deposit account if (a) the secured party is the bank with which the deposit account is maintained, (b) the debtor, the secured party, and the bank have agreed in an authenticated record that the bank will comply with instructions originated by the secured party directing disposition of the funds in the deposit account without further consent by the debtor, or (c) the secured party becomes the bank's customer with respect to the deposit account. The Account Control Agreement (execution draft v2, dated October 12, 2022) establishes Calvoneth Trust's control over each of the transaction's deposit accounts. Filing alone is not sufficient for priority with respect to deposit accounts; under UCC § 9-327, a security interest perfected by control has priority over a security interest perfected only by filing.
Books and Records. The security interests cover all books, records, data, and files relating to the receivables. To the extent these items constitute general intangibles, perfection by filing is appropriate and is covered by the UCC-1 filings.
General Intangibles Relating to the Receivables. This broad category includes contract rights, rights under the transaction documents, goodwill associated with the receivables business (to the extent transferable), and any other intangible property related to the receivables. Perfection of security interests in general intangibles is achieved by filing under UCC § 9-310, and the UCC-1 collateral descriptions include appropriate references to general intangibles.
IV. UCC-1 Filing Requirements at Each Transfer Level
A. Transfer 1: QPF (Seller/Debtor) → QRH (Purchaser/Secured Party)
1. Filing Details
The first UCC-1 financing statement is filed to perfect the back-up security interest granted by QPF in favor of QRH in connection with the sale of receivables under the Receivables Sale Agreement. The filing details are as follows:
• Debtor: Quorum Premium Finance LLC
The debtor name must be the exact legal name of QPF as reflected in its Certificate of Formation filed with the Delaware Secretary of State. Under UCC § 9-503(a)(1), a financing statement sufficiently provides the name of a registered organization only if the name on the financing statement is "the name that is stated to be the registered organization's name on the public organic record most recently filed with or issued or enacted by the registered organization's jurisdiction of organization which purports to state, amend, or restate the registered organization's name." Accordingly, the name "Quorum Premium Finance LLC" must be verified against the current Certificate of Formation (or any amendment thereto) on file with the Delaware Secretary of State.
• Secured Party: Quorum Receivables Holding LLC
• Filing Office: Delaware Secretary of State, Division of Corporations, John G. Townsend Building, 401 Federal Street, Suite 4, Dover, Delaware 19901. QPF is a Delaware limited liability company, and under UCC § 9-301(1) and § 9-307(e), the Delaware Secretary of State is the proper filing office for perfection of a security interest in QPF's collateral.
• Collateral Description: All insurance premium finance receivables now existing or hereafter created or acquired, together with all collections, proceeds, related rights, unearned premium refund rights, and general intangibles associated therewith, sold, transferred, or otherwise conveyed by QPF to QRH under the Receivables Sale Agreement dated as of the Closing Date, and all replacements and substitutions therefor.
• Purpose: This filing serves as a back-up security interest to protect against recharacterization of the true sale of receivables from QPF to QRH as a secured financing. The filing also serves as a belt-and-suspenders measure in the event the receivables are characterized as "accounts" (in which case filing is required even for a true sale) and provides protection in the event that the automatic perfection available under § 9-309(3) for sales of payment intangibles is for any reason unavailable or inapplicable.
2. Analysis. The perfection analysis for Transfer 1 depends on the characterization of the transfer and the characterization of the receivables:
If the transfer from QPF to QRH is respected as a true sale: For receivables characterized as payment intangibles, automatic perfection applies upon attachment under UCC § 9-309(3), and the UCC-1 filing provides additional protection. For receivables characterized as accounts, filing is required under UCC § 9-310 to perfect the interest of QRH as purchaser (the de minimis exception under § 9-309(2) is inapplicable given the size of the pool).
If the transfer is recharacterized as a secured financing: Filing is required under UCC § 9-310 to perfect QRH's security interest, regardless of whether the receivables are characterized as payment intangibles or accounts. In a recharacterization scenario, QRH would be treated as a secured party (not a purchaser), and automatic perfection under § 9-309(3) would not be available because that provision applies only to sales of payment intangibles, not to security interests in payment intangibles.
In all scenarios, filing provides protection, and the UCC-1 filing at this level is essential to the overall perfection structure of the securitization.
The debtor name on the UCC-1 must use QPF's exact legal name as stated in its Certificate of Formation on file with the Delaware Secretary of State. Any error in the debtor's name that would cause the financing statement to be "seriously misleading" under UCC § 9-506(b) would render the filing ineffective. Under § 9-506(c), a financing statement that fails sufficiently to provide the name of the debtor is "seriously misleading" unless a search of the filing office's records under the debtor's correct name, using the filing office's standard search logic, would disclose the financing statement. Prior to closing, we must verify QPF's exact legal name against the most recent filing with the Delaware Secretary of State and confirm that the name on the draft UCC-1 matches precisely.
3. Priority Considerations
To ensure that QRH's security interest in the receivables has first priority, no prior UCC-1 filings against QPF covering insurance premium finance receivables should exist. Under UCC § 9-322(a)(1), conflicting perfected security interests rank according to priority in time of filing or perfection, with the first to file or perfect having priority.
A comprehensive UCC search must be conducted against QPF with the Delaware Secretary of State to confirm that no prior filings exist covering the insurance premium finance receivables or any broader category of collateral that would encompass the receivables (such as a filing covering "all assets" or "all accounts and general intangibles"). Additionally, a search should be conducted to confirm that QPF has not granted any prior security interests in receivables to any warehouse lender, credit facility lender, or other secured party.
QPF maintains a total receivables portfolio of approximately $2.1 billion. If QPF has an existing warehouse facility or revolving credit facility secured by receivables, the securitized receivables must be released from any existing security interest prior to closing. Release letters, termination statements (UCC-3 filings), or intercreditor arrangements will need to be obtained. This is an open item that must be addressed prior to closing, as discussed further in Section XI.B below.
The QPF→QRH UCC-1 filing should be among the first filings at closing to establish priority under the first-to-file-or-perfect rule of § 9-322(a)(1). All three UCC-1 filings should be filed simultaneously at closing.
B. Transfer 2: QRH (Transferor/Debtor) → QRF 2022-1 (Transferee/Secured Party)
1. Filing Details
The second UCC-1 financing statement is filed to perfect the back-up security interest granted by QRH in favor of QRF 2022-1 in connection with the transfer of receivables under the Receivables Transfer Agreement. The filing details are as follows:
• Debtor: Quorum Receivables Holding LLC
The debtor name must be the exact legal name of QRH as reflected in its Certificate of Formation filed with the Delaware Secretary of State. The same exact-name requirements discussed in Section IV.A.1 above apply with equal force to QRH.
• Secured Party: Quorum Receivables Funding 2022-1 LLC
• Filing Office: Delaware Secretary of State. QRH is a Delaware limited liability company, and the Delaware Secretary of State is the proper filing office under UCC § 9-301(1) and § 9-307(e).
• Collateral Description: All insurance premium finance receivables, collections, proceeds, related rights, unearned premium refund rights, and general intangibles transferred by QRH to QRF 2022-1 under the Receivables Transfer Agreement dated as of the Closing Date, and all replacements and substitutions therefor.
• Purpose: This filing serves as a back-up security interest to protect against recharacterization of the true sale or capital contribution from QRH to QRF 2022-1 as a secured financing. As with Transfer 1, the filing also provides belt-and-suspenders protection regardless of whether the receivables are characterized as payment intangibles or accounts.
2. Analysis. The perfection analysis for Transfer 2 is substantially identical to the analysis for Transfer 1, as set forth in Section IV.A.2 above. Whether the transfer from QRH to QRF 2022-1 is characterized as a true sale, a capital contribution, or a secured financing, and whether the receivables are characterized as payment intangibles or accounts, filing a UCC-1 financing statement with the Delaware Secretary of State provides perfection or additional protection in all scenarios.
QRH is a newly formed, single-purpose entity with no assets other than the receivables transferred from QPF and no operations other than those contemplated by the securitization documents. The likelihood of competing security interests or prior liens is minimal. Nevertheless, a UCC search against QRH with the Delaware Secretary of State should be conducted prior to closing to confirm a clean record and to satisfy the diligence requirements for the delivery of a first-priority lien opinion.
QRH's sole member is QPF, and QRH's sole purpose is to acquire and hold receivables from QPF and transfer them to QRF 2022-1. QRH does not and will not engage in any other business activities or incur any other indebtedness, as required by its separateness covenants and the limitations in its LLC Agreement.
3. Priority Considerations
QRH is a newly formed bankruptcy-remote entity, formed on August 3, 2022, with Delaware Secretary of State file number 7894228. No prior liens or UCC filings should exist against QRH, but a UCC search will be conducted to confirm this.
The separateness covenants in the QRH LLC Agreement and the appointment of Eleanor M. Vasquez of Fortbridge Corporate Services LLC as independent manager further support the bankruptcy-remote structure and reduce the risk that QRH will grant any competing security interests. The LLC Agreement prohibits QRH from incurring indebtedness, granting liens, merging with or into any other entity, or changing its name or jurisdiction of organization without the prior written consent of specified parties (including the Indenture Trustee, once the Indenture is executed). These covenants are designed to maintain the integrity of the SPV chain and prevent any interference with the perfection and priority of the security interests.
C. Grant 3: QRF 2022-1 (Debtor/Issuer) → Calvoneth Trust (Secured Party/Indenture Trustee)
1. Filing Details
The third UCC-1 financing statement is filed to perfect the security interest granted by QRF 2022-1 to Calvoneth Trust under the Grant of Security Interest (Pledge Agreement) and the Indenture. Unlike the first two filings, which serve as back-up security interests, this filing is the primary perfection mechanism for the security interest that secures the Notes. The filing details are as follows:
• Debtor: Quorum Receivables Funding 2022-1 LLC
The debtor name must be the exact legal name of QRF 2022-1 as reflected in its Certificate of Formation filed with the Delaware Secretary of State. The same exact-name requirements discussed above apply.
• Secured Party: Calvoneth Trust Company, National Association, as Indenture Trustee for the benefit of the holders of the Class A Notes, Class B Notes, and Class C Notes issued pursuant to the Indenture dated as of the Closing Date
The secured party designation should include the full legal name of Calvoneth Trust and its capacity as Indenture Trustee. Under UCC § 9-503(d), a financing statement that provides the name of the secured party's representative is sufficient for purposes of the secured party name requirement.
• Filing Office: Delaware Secretary of State. QRF 2022-1 is a Delaware limited liability company, and the Delaware Secretary of State is the proper filing office under UCC § 9-301(1) and § 9-307(e).
• Collateral Description: All right, title, and interest of Quorum Receivables Funding 2022-1 LLC in and to (i) all insurance premium finance receivables, whether now existing or hereafter acquired, (ii) all collections and proceeds thereof, (iii) all accounts, including without limitation the collection account, payment account, reserve account, and liquidity reserve account, (iv) all rights under the Receivables Transfer Agreement, the Servicing Agreement, the Back-Up Servicing Agreement, the Liquidity Facility Agreement, and the Administration Agreement, (v) all books, records, files, and data relating to the foregoing, and (vi) all general intangibles, contract rights, instruments, and other property of every kind and nature, in each case whether now existing or hereafter acquired or arising.
• Purpose: This filing perfects the security interest granted by QRF 2022-1 to Calvoneth Trust for the benefit of the noteholders. This is the primary grant of a security interest in the securitization; it is not a back-up filing. The security interest secures QRF 2022-1's obligations under the $375,000,000 Class A Notes, $75,000,000 Class B Notes, and $35,000,000 Class C Notes, as well as QRF 2022-1's other obligations under the Indenture.
2. Analysis. This third filing is the most critical filing in the securitization. It perfects the security interest that directly secures the $485,000,000 in aggregate principal amount of issued Notes (with an additional approximately $15,000,000 in overcollateralization and retained interest held by QRH or its designee). The aggregate capitalization of QRF 2022-1 at closing, including Notes and retained interests, will total approximately $500,000,000 (plus additional overcollateralization from the excess of the initial pool balance of $612,000,000 over the face amount of the Notes).
The receivables held by QRF 2022-1 are the same receivables originally originated by QPF and transferred through QRH. Their characterization as payment intangibles (or, alternatively, accounts) is discussed in Section III above. Regardless of characterization, filing is required under UCC § 9-310 to perfect the Indenture Trustee's security interest. Unlike the first two transfer levels, where the transfers are intended as true sales and the UCC filings serve as back-up, the grant from QRF 2022-1 to Calvoneth Trust is a grant of a security interest (not a sale), and therefore automatic perfection under § 9-309(3) is not available. Filing is the mandatory perfection method for this level of the structure.
For deposit accounts—specifically the collection account, payment account, reserve account, and liquidity reserve account—perfection is achieved through control under the Account Control Agreement with Calvoneth Trust as securities intermediary, as discussed in Section III.D above. Under UCC § 9-327(1), a security interest held by a secured party having control of the deposit account has priority over a conflicting security interest held by a secured party that does not have control. Under UCC § 9-327(3), a security interest held by the securities intermediary (or by the bank with which the deposit account is maintained) has priority over a security interest held by any other secured party. Because Calvoneth Trust serves as both the securities intermediary with respect to the transaction accounts and the Indenture Trustee holding the security interest for the benefit of the noteholders, Calvoneth Trust's control-based security interest in the deposit accounts will have priority over any other security interest.
The dual perfection mechanism—filing with respect to the receivables and related collateral, plus control with respect to the deposit accounts—provides the highest level of protection for the noteholders and is consistent with market standard practice in ABS transactions.
3. Priority Considerations
QRF 2022-1 is a newly formed bankruptcy-remote entity, formed on August 3, 2022, with Delaware Secretary of State file number 7894231. No prior liens or UCC filings should exist against QRF 2022-1. A UCC search will be conducted prior to closing to confirm a clean record.
Timothy R. Callan of Fortbridge Corporate Services LLC serves as the independent manager of QRF 2022-1. The separateness covenants in the QRF 2022-1 LLC Agreement prohibit QRF 2022-1 from incurring additional indebtedness, granting additional security interests, merging with or into any other entity, changing its name or jurisdiction of organization, or engaging in any business other than the issuance of the Notes and the holding and management of the receivables and related collateral, in each case without the prior written consent of the Indenture Trustee. These covenants are critical structural protections that prevent QRF 2022-1 from creating any competing security interests that could challenge Calvoneth Trust's first-priority lien.
Northvane Bank Liquidity Facility. We note that the transaction documents contemplate a $25,000,000 liquidity facility provided by Northvane Bank (the "Liquidity Facility"). We need to confirm that the Liquidity Facility Agreement is structured such that any obligations of QRF 2022-1 under the Liquidity Facility are either (a) secured by the same security interest grant under the Indenture and the Grant of Security Interest, such that Northvane Bank's claims are subject to the payment waterfall and priority provisions of the Indenture, or (b) subordinated to the claims of the noteholders. Based on our preliminary review of the draft Indenture, the payment waterfall provides for the following priority of payments from available funds: (1) Indenture Trustee fees and expenses, (2) Servicer fee and back-up servicing fee, (3) interest on the Class A Notes, (4) interest on the Class B Notes, (5) interest on the Class C Notes, (6) replenishment of the reserve account and liquidity reserve account, (7) principal on the Class A Notes, (8) principal on the Class B Notes, (9) principal on the Class C Notes, (10) Northvane Bank liquidity facility repayment, and (11) residual distributions to the holder of the retained interest. This payment waterfall indicates that Northvane Bank's claims are structurally subordinated to the noteholders' claims in the payment priority. However, we must confirm the specific terms of the Liquidity Facility Agreement and ensure that Northvane Bank does not hold a separate or competing security interest in QRF 2022-1's assets outside of the Indenture structure.
V. Perfection Timing and Continuation
A. Filing Timing
All three UCC-1 financing statements should be filed simultaneously at or immediately prior to the closing of the securitization transaction. The simultaneous filing of all three statements ensures that the entire chain of security interests is perfected at the same time, eliminating any gap in perfection between the different transfer levels.
Under UCC § 9-322(a), priority among perfected security interests in the same collateral is determined by the first to file or perfect. By filing all three UCC-1 financing statements at closing—before any other party has the opportunity to file competing claims against the receivables at any level of the SPV chain—the transaction parties establish first-priority security interests at each level.
Pre-filing before closing is permissible under UCC § 9-502(d), which provides that a financing statement may be filed before a security agreement is made or a security interest otherwise attaches. Pre-filing can be advantageous because it establishes a filing date (and therefore a priority date) before the closing, reducing the risk that an intervening filing by a third party could claim priority. However, pre-filing also creates certain risks: if the transaction does not close, the financing statement will remain on file and may need to be terminated; additionally, a pre-filed financing statement may raise questions or concerns among QPF's existing lenders or counterparties if they become aware of the filing through their own UCC search activities.
Recommendation: We recommend filing the three UCC-1 financing statements on the closing date. Given that the transaction is currently in shelved/dormant status, we do not recommend filing until the deal is reactivated and a definitive closing date has been established. The draft UCC-1 financing statements have been prepared and are on file with the working group, ready for filing upon reactivation. Upon reactivation, the filings can be submitted electronically to the Delaware Secretary of State, which typically processes electronic filings within 24 hours.
B. Continuation Statements
Under UCC § 9-515(a), a financing statement filed in the filing office is effective for a period of five years after the date of filing, subject to the filing of a continuation statement. If a continuation statement is not timely filed, the financing statement lapses and any security interest perfected by the filing becomes unperfected.
The legal final maturity of the Notes is 42 months (3.5 years) from the closing date. Because the five-year effectiveness period of the initial UCC-1 filings exceeds the 42-month legal final maturity, the initial filings should remain effective throughout the entire life of the transaction without the need for continuation statements. Assuming a closing date in late 2022 or early 2023, the initial filings would remain effective until late 2027 or early 2028, while the legal final maturity of the Notes would occur in mid-2026 or mid-2027.
However, we note two scenarios in which continuation statements could become necessary:
First, if the transaction is extended or amended such that the legal final maturity is extended beyond the five-year effectiveness period of the initial filings, continuation statements (filed on Form UCC-3) must be filed to prevent lapse. Under UCC § 9-515(d), a continuation statement must be filed within six months before the expiration of the five-year period. A continuation statement filed outside this six-month window (either too early or too late) is ineffective.
Second, if the transaction experiences delays in winding down after the legal final maturity—for example, if receivables remain outstanding and collections are still being received after the scheduled maturity date—the financing statements should remain in effect until all obligations under the Indenture have been satisfied and discharged.
The Indenture and the Servicing Agreement should include covenants requiring the Servicer (QPF) and the Administrator (QIH) to file continuation statements as necessary to maintain the effectiveness of the UCC-1 financing statements throughout the life of the transaction. We will review the draft Indenture and Servicing Agreement to confirm that appropriate continuation filing covenants are included.
C. Amendment Filings
Under UCC § 9-507(c), if a debtor changes its name such that the financing statement on file becomes "seriously misleading" under UCC § 9-506, the financing statement is effective to perfect a security interest in collateral acquired by the debtor before the change and within four months after the change. However, the financing statement is not effective to perfect a security interest in collateral acquired by the debtor more than four months after the change, unless an amendment to the financing statement reflecting the new name is filed within the four-month period.
Similarly, if a debtor changes its jurisdiction of organization (e.g., by redomiciling from Delaware to another state), the perfection of the security interest could be affected, as the filing would no longer be in the correct jurisdiction. Under UCC § 9-316, if the debtor changes its location to a new jurisdiction, a security interest perfected by filing in the original jurisdiction remains perfected for one year after the change, but will become unperfected after one year unless the secured party files in the new jurisdiction within that period.
The LLC Agreements for QRH and QRF 2022-1 include covenants prohibiting name changes, mergers, consolidations, conversions, or changes of organizational jurisdiction without the prior written consent of the Indenture Trustee. These are standard bankruptcy-remote covenants that mitigate the risk of a debtor name change or jurisdictional change that could affect the effectiveness of the UCC-1 filings. The QPF LLC Agreement should also include comparable covenants, and we will confirm this in our review of the final transaction documents.
In the unlikely event that any debtor entity does change its legal name or jurisdiction of organization (with appropriate consents), a UCC-3 amendment must be filed promptly—within four months of a name change and within one year of a jurisdictional change—to maintain the effectiveness of the financing statement.
VI. True Sale vs. Secured Financing — Impact on UCC Analysis
A. True Sale Implications
The transfers of receivables from QPF to QRH and from QRH to QRF 2022-1 are structured as true sales of the receivables for all legal, accounting, and tax purposes. If these transfers are respected as true sales, the receivables are owned by QRF 2022-1 free and clear of any interest of QPF or QRH, other than QPF's retained servicing rights under the Servicing Agreement (which are contractual rights to service the receivables in exchange for a servicing fee, and do not constitute an ownership interest in the receivables themselves).
The true sale characterization is the foundation of the bankruptcy-remote structure. If the transfers are true sales, the receivables held by QRF 2022-1 are not property of QPF's bankruptcy estate in the event of a QPF bankruptcy. QPF's creditors—including QPF's general unsecured creditors and any secured creditors of QPF—cannot reach the receivables held by QRF 2022-1, and a bankruptcy trustee or debtor-in-possession for QPF cannot use, sell, or otherwise exercise control over the receivables. This insulation from the Originator's bankruptcy is the central credit enhancement that an asset-backed securitization provides to investors.
For UCC perfection purposes, the true sale characterization has the following implications:
If the receivables are characterized as payment intangibles, a true sale results in automatic perfection of the buyer's interest under UCC § 9-309(3). The UCC-1 filing at each transfer level (Transfers 1 and 2) serves as additional, belt-and-suspenders protection but is not strictly required for perfection in a true sale scenario involving payment intangibles.
If the receivables are characterized as accounts, a true sale still requires filing for perfection under UCC § 9-310, as the de minimis exception of § 9-309(2) does not apply to the transfer at issue.
Separate true sale opinions are being prepared by this firm. Sylvia Hartwell of Calderwood & Harkness is drafting the true sale opinions addressing both the QPF→QRH transfer under the Receivables Sale Agreement and the QRH→QRF 2022-1 transfer under the Receivables Transfer Agreement. The current drafts of these opinions are dated October 8, 2022, and remain subject to review and finalization in connection with the reactivation of the transaction.
B. Recharacterization Risk and Back-Up Security Interest
Notwithstanding the parties' intent that the transfers constitute true sales, there is a risk that a court—most likely a bankruptcy court presiding over a bankruptcy case involving QPF—could recharacterize one or both of the transfers as a secured financing rather than a true sale. In a recharacterization scenario, the transferor (QPF or QRH, as applicable) would be deemed the owner of the receivables, and the transferee (QRH or QRF 2022-1, as applicable) would be deemed to hold a security interest in the receivables rather than outright ownership.
If such a recharacterization were to occur, the UCC-1 filings at each transfer level would become critically important. In a recharacterization scenario, the transferee's interest in the receivables would be treated as a security interest, and that security interest would need to be perfected under UCC Article 9 in order to be effective against the transferor's bankruptcy trustee and other creditors. The UCC-1 filings at Transfers 1 and 2 ensure that, even if the true sales are recharacterized, the transferees hold perfected, first-priority security interests in the receivables.
The risk of recharacterization is mitigated by a number of structural and documentary features of the transaction:
(a) Transfer of risks and benefits: The transaction documents provide for the transfer of substantially all economic risks and benefits of ownership of the receivables from the seller to the buyer at each transfer level. QRH bears the credit risk of the receivables after the transfer from QPF, and QRF 2022-1 bears the credit risk after the transfer from QRH.
(b) Limited recourse: The seller's repurchase obligations at each level are limited to repurchase obligations triggered by breaches of representations and warranties regarding the characteristics of individual receivables. There is no general recourse from the buyer back to the seller for credit losses, delinquencies, or defaults on the receivables.
(c) Non-consolidation opinions: Non-consolidation opinions are being prepared for QRF 2022-1 and QRH, with current drafts dated October 5, 2022. These opinions address the risk that a bankruptcy court could substantively consolidate the assets and liabilities of QRF 2022-1 or QRH with those of QPF or QIH.
(d) Separateness covenants and independent managers: QRH and QRF 2022-1 each maintain separateness covenants in their LLC Agreements and have appointed independent managers from Fortbridge Corporate Services LLC (Eleanor M. Vasquez for QRH; Timothy R. Callan for QRF 2022-1). The independent managers are required to consider the interests of the entity's creditors before consenting to any voluntary bankruptcy filing, providing an additional layer of protection against involuntary commingling of the SPV's affairs with those of the Sponsor.
(e) Compliance with true sale factors: The transaction documents are designed to comply with the factors identified by courts in determining whether a transfer of receivables constitutes a true sale or a secured financing, including arm's length pricing (the purchase price reflects fair market value consideration), transfer of legal title (QRH and QRF 2022-1 receive legal title to the receivables), the parties' expressed intent (the transaction documents expressly state the parties' intent that the transfers constitute true sales), and the absence of an obligation to return the receivables to the seller.
While no structural feature can eliminate recharacterization risk entirely, the combination of the foregoing factors, together with the back-up UCC-1 filings, provides robust protection against the consequences of recharacterization.
VII. Specific Collateral Perfection Issues
A. Unearned Premium Refund Rights
Each insurance premium finance receivable originated by QPF is secured by an assignment of the policyholder's right to receive an unearned premium refund from the insurance carrier in the event that the insurance policy is cancelled prior to the expiration of its term. These unearned premium refund rights constitute a critical credit enhancement for the receivables, as they provide a source of recovery in the event that a policyholder defaults on the premium finance loan and QPF (or its assignee) elects to cancel the insurance policy and collect the unearned premium refund from the carrier.
Under UCC Article 9, the unearned premium refund rights are properly classified as "general intangibles." They are rights to payment from insurance carriers that do not fall within the definition of "account" (which covers the insured's premium obligation to the carrier for the policy, not the carrier's obligation to refund unearned premiums to the insured or its assignee), "chattel paper," "instruments," or any other specifically defined category of UCC Article 9 collateral.
Perfection of a security interest in

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