SERVICING AGREEMENT
among
SMS STUDENT LOAN TRUST 1998-A
as Issuer,
USA GROUP LOAN SERVICES, INC.
as Servicer,
USA GROUP SECONDARY MARKET SERVICES, INC.
as Seller,
and
THE FIRST NATIONAL BANK OF CHICAGO,
not in its individual capacity but solely
as Eligible Lender Trustee
Dated as of May 1, 1998
1
SERVICING AGREEMENT dated as of May 1, 1998, among SMS STUDENT LOAN
TRUST 1998-A, a Delaware trust (the "Issuer"), USA GROUP LOAN SERVICES, INC., as
servicer (the "Servicer"), USA GROUP SECONDARY MARKET SERVICES, INC., as Seller
(the "Seller"), and THE FIRST NATIONAL BANK OF CHICAGO, a national banking
association, solely as eligible lender trustee and not in its individual
capacity (the "Eligible Lender Trustee").
WHEREAS the Issuer desires to purchase from the Seller (and, with
respect to legal title to the student loans, NBD as trustee on behalf of the
Seller) a portfolio of federally reinsured student loans purchased in the
ordinary course of business by the Seller; and
WHEREAS the Eligible Lender Trustee is willing to hold legal title
to, and serve as eligible lender trustee with respect to, such student loans on
behalf of the Issuer; and
WHEREAS the Servicer is willing to service such student loans and
undertake certain administrative functions with respect thereto.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I
Definitions and Usage
Capitalized terms used but not defined herein are defined in Appendix
A to the Administration Agreement, dated as of May 1, 1998, among the Issuer,
the Seller, as Administrator, and Bankers Trust Company, as Indenture Trustee,
which also contains rules as to usage and construction that shall be applicable
herein.
ARTICLE II
Custody of Financed Student Loans
SECTION 2.01. Custody of Student Loan Files. To assure uniform
quality in servicing the Financed Student Loans and to reduce administrative
costs, the Issuer hereby revocably appoints the Servicer, and the Servicer
hereby accepts such appointment, to act for the benefit of the Issuer and the
Indenture Trustee as Custodian of the following documents or instruments which
are hereby constructively delivered to the
1
Indenture Trustee, as pledgee of the Issuer (or will be constructively delivered
to the Indenture Trustee, as pledgee of the Issuer, in the case of New Loans and
Serial Loans, as of the applicable Transfer Date, in the case of Qualified
Substitute Student Loans, as of the date of the relevant Assignment to the
Issuer, in the case of Consolidation Loans originated during the Revolving
Period by the Eligible Lender Trustee on behalf of the Issuer, as of the
applicable date of origination or in the case of Consolidation Loans the
principal balances of which are increased by the principal balances of any
related Add-on Consolidation Loans, as of the applicable Add-on Consolidation
Loan Funding Date) with respect to each Financed Student Loan:
(a) the original fully executed copy of the note evidencing the
Financed Student Loan (including the original loan application fully
executed by the Borrower); and
(b) any and all other documents and computerized records that the
Servicer shall keep on file, in accordance with its customary procedures,
relating to such Financed Student Loan or any Obligor with respect
thereto.
SECTION 2.Duties of Servicer as Custodian. (a) Safekeeping. The
Servicer shall maintain custody of the Student Loan Files for the benefit of the
Issuer and the Indenture Trustee on behalf of the Noteholders, the Subordinate
Note Insurer and the Swap Counterparty and maintain such accurate and complete
accounts, records and computer systems pertaining to each Student Loan File as
shall enable the Issuer to comply with the Basic Documents. In performing its
duties as custodian, the Servicer shall act with reasonable care, using that
degree of skill and attention that the Servicer exercises with respect to the
student loan files relating to all comparable Student Loans that the Servicer
services and shall ensure that it complies with all applicable federal and state
laws, including the Higher Education Act, with respect thereto. The Servicer
shall conduct, or cause to be conducted, periodic audits of the Student Loan
Files held by it under this Agreement and of the related accounts, records and
computer systems, in such a manner as shall enable the Issuer, the Indenture
Trustee, the Subordinate Note Insurer or the Swap Counterparty to verify the
accuracy of the Servicer's record keeping. The Servicer shall promptly report to
the Issuer, the Indenture Trustee, the Subordinate Note Insurer and the Swap
Counterparty any failure on its part to hold the Student Loan Files and maintain
its accounts, records and computer systems as herein provided and promptly take
appropriate action to remedy any such failure. Nothing herein shall be deemed to
require an initial review or any periodic review by the Issuer, the Eligible
Lender Trustee or the Indenture Trustee of the Student Loan Files.
2
(b) Maintenance of Records. The Servicer shall maintain each Student
Loan File at one of the locations specified in Schedule A to this Agreement or
at such other office as shall be specified by written notice to the Issuer, the
Indenture Trustee, the Subordinate Note Insurer and the Swap Counterparty not
later than 90 days after any change in location. Upon reasonable prior notice of
not less than three Business Days, the Servicer shall make available to the
Issuer, the Indenture Trustee, the Subordinate Note Insurer and the Swap
Counterparty or their respective duly authorized representatives, attorneys or
auditors a list of locations of the Student Loan Files and the related accounts,
records and computer systems maintained by the Servicer.
(c) Release of Documents. Upon instruction from the Indenture
Trustee, the Servicer shall, as soon as practicable, release any Student Loan
File to the Indenture Trustee, the Indenture Trustee's agent, or the Indenture
Trustee's designee, as the case may be, at such place or places as the Indenture
Trustee may designate.
SECTION 2.03. Instructions; Authority To Act. The Servicer shall be
deemed to have received proper instructions with respect to the Student Loan
Files upon its receipt of written instructions signed by a Responsible Officer
of the Indenture Trustee.
SECTION 2.04. Custodian's Indemnification. The Servicer as Custodian
shall pay for any actual loss, liability or expense, including reasonable
attorneys' fees, that may be imposed on, incurred by or asserted against the
Issuer, the Eligible Lender Trustee or the Indenture Trustee or any of their
officers, directors, employees and agents as a result of any improper act or
omission in any way relating to the maintenance and custody by the Servicer as
Custodian of the Student Loan Files as required by this Agreement where the
final determination that any such improper act or omission by the Servicer
resulted in such loss, liability or expense is established by a court of law, by
an arbitrator, or by way of settlement agreed to by the Servicer; provided,
however, that the amount of any liability with respect to any Financed Student
Loan shall not exceed the amount that would have been paid if such Student Loan
had been accepted and paid by the related Guarantor as a claim, and provided,
further, that the Servicer shall not be liable to the Eligible Lender Trustee
for any portion of any such amount resulting from the willful misfeasance, bad
faith or negligence of the Eligible Lender Trustee and the Servicer shall not be
liable to the Indenture Trustee for any portion of any such amount resulting
from the willful misfeasance, bad faith or negligence of the Indenture Trustee.
This provision shall not be
3
construed to limit the Servicer's or any other party's rights, obligations,
liabilities, claims or defenses which arise as a matter of law or pursuant to
any other provision of this Agreement.
SECTION 2.05. Effective Period and Termination. The appointment of
Loan Services as Custodian shall become effective as of the Closing Date and
shall continue in full force and effect for so long as Loan Services shall
remain the Servicer hereunder. If all the rights and obligations of Loan
Services shall have been terminated under Section 6.01, the appointment of Loan
Services as Custodian shall be terminated simultaneously with the effectiveness
of such termination. As soon as practicable on or after any termination of such
appointment and in any event within ninety (90) days, Loan Services shall
deliver possession of the Student Loan Files to the Indenture Trustee or the
Indenture Trustee's agent at such place or places as the Indenture Trustee may
reasonably designate. Loan Services will continue to hold the Student Loan Files
as agent of the Indenture Trustee until the Student Loan Files are transferred.
ARTICLE III
Administration and Servicing of Student Loans
SECTION 3.01. Duties of Servicer. The Servicer, for the benefit of
the Issuer (to the extent provided herein), the Noteholders, the Subordinate
Note Insurer and the Swap Counterparty, shall manage, service, administer and
make collections on the Financed Student Loans with reasonable care, using that
degree of skill and attention that the Servicer exercises with respect to all
comparable Student Loans that it services. Without limiting the generality of
the foregoing or of any other provision set forth in this Agreement and
notwithstanding any other provision to the contrary set forth herein, the
Servicer shall manage, service, administer and make collections with respect to
the Financed Student Loans (other than collection of any Interest Subsidy
Payments and Special Allowance Payments, which the Eligible Lender Trustee will
perform on behalf of the Trust) in accordance with, and otherwise comply with,
all applicable federal and state laws, including any applicable standards,
guidelines and requirements of the Higher Education Act and the applicable
Guarantee Agreement, the failure to comply with which would adversely affect the
eligibility of one or more of the Financed Student Loans for federal reinsurance
or Interest Subsidy Payments, Special Allowance Payments or Guarantee Payments
or would have an adverse effect on the Noteholders, the Subordinate Note
Insurer, the Swap Counterparty or the Company. The Servicer also hereby
acknowledges that its
4
obligation to service the Financed Student Loans includes all Consolidation
Loans originated by the Issuer during the Revolving Period, any Consolidation
Loan supplemented from time to time during and after the Revolving Period by the
addition of the principal balance of any related Add-on Consolidation Loan, any
Qualified Substitute Student Loans conveyed to the Issuer pursuant to Section
3.02 of the Loan Sale Agreement and those New Loans and Serial Loans conveyed to
the Eligible Lender Trustee on behalf of the Trust pursuant to Section 2.02 of
the Loan Sale Agreement and the related Transfer Agreement, a copy of which
shall be delivered to the Servicer by the Seller promptly upon execution
thereof; provided, however, that any failure by the Seller to so deliver a
Transfer Agreement shall not affect the Servicer's obligations hereunder to
service all the Financed Student Loans.
The Servicer's duties shall include collection and posting of all
payments, responding to inquiries of borrowers on such Financed Student Loans,
monitoring borrowers' status, making required disclosures to borrowers,
investigating delinquencies, sending payment coupons to borrowers and otherwise
establishing repayment terms, reporting tax information to borrowers, if
applicable, accounting for collections and furnishing monthly and annual
statements with respect thereto to the Administrator. Subject to the provisions
of Section 3.02, the Servicer shall follow its customary standards, policies and
procedures in performing its duties as Servicer. Without limiting the generality
of the foregoing, the Servicer is authorized and empowered to execute and
deliver, on behalf of itself, the Issuer, the Eligible Lender Trustee, the
Indenture Trustee, the Company and the Noteholders or any of them, instruments
of satisfaction or cancellation, or partial or full release or discharge, and
all other comparable instruments, with respect to such Financed Student Loans;
provided, however, that the Servicer agrees that it will not (a) permit any
rescission or cancellation of a Financed Student Loan except as ordered by a
court of competent jurisdiction or governmental authority or as otherwise
consented to in writing by the Eligible Lender Trustee and the Indenture Trustee
or (b) reschedule, revise, defer or otherwise compromise with respect to
payments due on any Financed Student Loan except pursuant to any applicable
Deferral or Forbearance periods or otherwise in accordance with all applicable
standards, guidelines and requirements with respect to the servicing of the
Financed Student Loans; and provided, further, that the Servicer shall not agree
to any decrease of the interest rate on, or the principal amount payable with
respect to, any Financed Student Loan.
The Servicer, for the benefit of the Issuer (to the extent
provided herein) and the Indenture Trustee on behalf of the
5
Noteholders and the Subordinate Note Insurer, shall promptly and routinely
furnish the Eligible Lender Trustee and the Indenture Trustee with copies of all
material reports, records, and other documents and data as required by this
Agreement or as may otherwise be required by the Higher Education Act. All
material correspondence received by the Servicer relating to individual Student
Loans shall be maintained in microcopy form or in summary form in an automated
history file established by the Servicer. The Servicer shall furnish in good
condition all forms and supplies as specified in this Agreement and any
Schedules hereto. The Eligible Lender Trustee and the Indenture Trustee may
transmit Financed Student Loan account data to the Servicer on these forms or by
any other mutually acceptable means. In performing its duties hereunder, the
Servicer will be guided by and comply with the Higher Education Act and
applicable requirements of the related Guarantor. The Servicer agrees to produce
a clear and precise audit trail for each Financed Student Loan and to comply
with such other reporting, servicing, and operating standards as are contained
in this Agreement.
The Eligible Lender Trustee on behalf of the Issuer hereby grants a power
of attorney and all necessary authorization to the Servicer to maintain any and
all collection procedures with respect to the Financed Student Loans, including
filing, pursuing and recovering claims against the Guarantors for Guarantee
Payments and taking any steps to enforce such Financed Student Loans such as
commencing a legal proceeding to enforce a Financed Student Loan in the name of
the Issuer, the Eligible Lender Trustee, the Indenture Trustee, the Company or
the Noteholders. The Eligible Lender Trustee or the Indenture Trustee shall upon
the written request of the Servicer or the Administrator furnish the Servicer or
the Administrator with any other powers of attorney and other documents
reasonably necessary or appropriate to enable the Servicer or the Administrator
to carry out their servicing and administrative duties hereunder.
SECTION 3.02. Collection of Student Loan Payments. (a) The Servicer
shall make reasonable efforts (including all efforts that may be specified under
the Higher Education Act or any Guarantee Agreement) to collect all payments
called for under the terms and provisions of the Financed Student Loans as and
when the same shall become due and shall follow such collection procedures as it
follows with respect to all comparable Student Loans that it services. The
Servicer shall allocate collections with respect to the Financed Student Loans
between principal and interest in accordance with the terms of each such loan.
The Servicer may in its discretion waive any late payment charge or any other
fees that may be collected in the ordinary course of servicing a Financed
Student Loan.
6
(b) The Servicer shall make reasonable efforts to claim, pursue and
collect all Guarantee Payments from the Guarantors pursuant to the Guarantee
Agreements with respect to any of the Financed Student Loans as and when the
same shall become due and payable, shall comply with the Higher Education Act
and all other applicable laws and agreements with respect to claiming, pursuing
and collecting such payments and shall follow such practices and procedures as
it follows with respect to all comparable guarantee agreements and student loans
that it services. In connection therewith, the Servicer is hereby authorized and
empowered to convey to the related Guarantor the note and the related Student
Loan File representing any Financed Student Loan in connection with submitting a
claim to the applicable Guarantor for a Guarantee Payment in accordance with the
terms of the applicable Guarantee Agreement.
(c) The Eligible Lender Trustee shall, with the assistance of the
Servicer as set forth below and on behalf of the Issuer, make reasonable efforts
to claim, pursue and collect all Interest Subsidy Payments and Special Allowance
Payments from the Department with respect to any of the Financed Student Loans
as and when the same shall become due and payable, shall comply with all
applicable laws and agreements with respect to claiming, pursuing and collecting
such payments and shall follow such practices and procedures as the Servicer
follows with respect to Student Loans serviced by it. All amounts so collected
by the Eligible Lender Trustee with respect to Financed Student Loans shall
constitute Monthly Available Funds for the applicable Monthly Collection Period
and Available Funds for the applicable Collection Period, and shall be deposited
into the Collection Account in accordance with Section 4.01. In connection
therewith, the Servicer shall prepare and file with the Department on a timely
basis all claims forms and other documents and filings necessary or appropriate
in connection with the claiming of Interest Subsidy Payments and Special
Allowance Payments on behalf of the Eligible Lender Trustee and shall otherwise
assist the Eligible Lender Trustee in pursuing and collecting such Interest
Subsidy Payments and Special Allowance Payments from the Department. The
Eligible Lender Trustee shall upon the written request of the Servicer furnish
the Servicer with any power of attorney and other documents reasonably necessary
or appropriate to enable the Servicer to prepare and file such claims forms and
other documents and filings.
The Eligible Lender Trustee may permit trusts, other than the Trust,
established by the Seller to securitize student loans to use the Department
lender identification number applicable to the Trust. In such event, the
Eligible Lender Trustee may claim and collect Interest Subsidy Payments and
Special Allowance Payments with respect to Financed Student Loans in the Trust
and
7
student loans in such other trusts using such common lender identification
number. Notwithstanding anything herein or in the Basic Documents to the
contrary, any amounts assessed against payments (including, but not limited to,
Interest Subsidy Payments and Special Allowance Payments) due from the
Department to any such other trust using such common lender identification
number as a result of amounts (including, but not limited to, Consolidation
Fees) owing to the Department from the Trust will be deemed for all purposes
hereof and of the Basic Documents (including for purposes of determining amounts
paid by the Department with respect to the student loans in the Trust and such
other trust) to have been assessed against the Trust and shall be deducted by
the Eligible Lender Trustee or the Servicer and paid to such other trust from
any collections made by them which would otherwise have been payable to the
Collection Account for the Trust. If so specified in the servicing agreement
applicable to any such other trust, any amounts assessed against payments due
from the Department to the Trust as a result of amounts owing to the Department
from such other trust using such common lender identification number will be
deemed to have been assessed against such other trust and will be deducted by
the Eligible Lender Trustee or the Servicer from any collections made by them
which would otherwise be payable to the collection account for such other trust
and paid to the Trust.
SECTION 3.03. Realization upon Student Loans. For the benefit of the
Issuer, the Servicer shall use reasonable efforts consistent with its customary
servicing practices and procedures and including all efforts that may be
specified under the Higher Education Act or the applicable Guarantee Agreement
in its servicing of any delinquent Financed Student Loans.
SECTION 3.04. No Impairment. The Servicer shall not
impair the rights of the Issuer, the Eligible Lender Trustee, the
Indenture Trustee, the Company, the Noteholders, the Subordinate
Note Insurer or the Swap Counterparty in the Financed Student
Loans.
SECTION 3.05. Purchase of Student Loans; Reimbursement. (a) Upon the
discovery by the Servicer, the Eligible Lender Trustee, the Indenture Trustee or
the Seller of any breach pursuant to Sections 3.01, 3.02, 3.03 or 3.04 hereof,
the party discovering the breach shall give prompt written notice to the others.
If the breach is not cured within sixty (60) days after the Servicer becomes
aware or receives written notice (whichever is earlier) of such breach, the
Servicer shall purchase or arrange for the purchase of any Student Loan in which
the interests of the Noteholders, the Issuer, the Indenture Trustee, the
Eligible Lender Trustee, the Subordinate Note Insurer or the Swap Counterparty
are materially and adversely
8
affected by such breach as of the first day succeeding the end of such 60-day
period that is the last day of a Monthly Collection Period (it being understood
that any such breach that does not affect the related Guarantor's obligation to
guarantee payment of such Student Loan will not be considered to have a material
adverse effect for this purpose and it being further understood that any dispute
as to whether such Guarantor's obligation has been so affected so as to create
such a material adverse effect, shall be resolved, for so long as the Notes are
Outstanding, by the Indenture Trustee, whose determination shall be dispositive,
and after the Notes are no longer Outstanding, by the Eligible Lender Trustee,
whose determination shall then be dispositive); provided, however, that during
each 12-month period following the Cutoff Date or an anniversary of the Cutoff
Date (each, a "Servicer Liability Period"), the Servicer will be obligated to
purchase Student Loans only to the extent its total liability incurred during
the then current Servicer Liability Period for such purchases and any other
liabilities under this Agreement exceeds an amount (the "Servicer Liability
Limit") equal to 0.15% of the principal balances of the Financed Student Loans
outstanding as of the Cutoff Date or, after the first anniversary of the Cutoff
Date, as of the preceding July 31.
(b) In consideration of the purchase of any such Student Loan
pursuant to this Section 3.05, the Servicer shall remit, in the manner specified
in Section 4.01, the Purchase Amount and the Issuer shall execute such
assignments and other documents reasonably requested by the Servicer in order to
effect the transfer of such Student Loan to the Servicer or its designee;
provided, however, that the Servicer's total liability for losses for rejected
claims by the Guarantors for any Financed Student Loan based on any breach
pursuant to Sections 3.01, 3.02, 3.03 or 3.04 hereof will not exceed that amount
which the related Guarantor would have been obligated to pay with respect to
such loan had its obligation to guarantee payment thereof not been affected by
the Servicer's breach. Subject to Section 5.02, the exclusive remedy of the
Noteholders, the Issuer, the Indenture Trustee, and the Eligible Lender Trustee
and the entire liability of Servicer for such a breach shall be limited to
requiring the Servicer to purchase Financed Student Loans pursuant to this
Section 3.05.
SECTION 3.06. Servicing Fee. The Servicing Fee for each calendar
month (the "Servicing Fee") shall be equal to the lesser of (a) one-twelfth of
1.0% (of 0.50% with respect to any calendar month beginning with July 2008) of
the aggregate principal balances of the Financed Student Loans outstanding as of
the last day of the preceding calendar month and (b) the sum of (i) one-twelfth
of the In-School Percentage of the principal balance of each Financed Student
Loan as of the last day of the
9
preceding calendar month which was an In-School Loan on such date or, if the
average principal balance of the In-School Loans as of such date was $2,500 or
less, $1.50 per Borrower Account for each such loan, (ii) one-twelfth of the
GRDF Percentage of the principal balance as of the last day of the preceding
calendar month of each Financed Student Loan which was a Grace, Repayment,
Deferral or Forbearance Student Loan as of such date or, if the average
principal balance of such loans as of such date was $3,000 or less, $3.00 per
Borrower Account for each such loan, (iii) a fee of $1.00 for each notification
sent by the Servicer during the preceding calendar month on behalf of the Trust
to a borrower providing information to such borrower with respect to Federal
Consolidation Loan programs, (iv) a one-time fee of $75.00 for each Federal
Consolidation Loan originated by the Eligible Lender Trustee on behalf of the
Trust during the preceding calendar month, (v) a fee of $25.00 for each Financed
Student Loan for which, during the preceding calendar month, claim documentation
was completed and provided to the Guarantor or for which the Servicer performed
bankruptcy or ineligible Borrower Account processing (that, in the case of
ineligible Borrower Account processing, resulted in a demand letter being sent
to the borrower), in each case as required by the claims processing requirements
of the Guarantor, (vi) a fee of $.05 per Financed Student Loan for storing and
warehousing the applicable loan documentation for each such loan during the
preceding calendar month, (vii) a one-time fee of $2.00 for each Serial Loan
transferred by the Seller to the Trust during the preceding calendar month,
(viii) a fee equal to one-twelfth of the product of (A) the aggregate
outstanding principal balance of the Financed Student Loans as of the last day
of the preceding calendar month and (B) .05%, which fee will be payable so long
as 34 C.F.R. ss. 682.413 or any successor section remains in effect and (ix) a
fee of $70.00 per hour for system development requests made by the Eligible
Lender Trustee on behalf of the Trust and provided by the Servicer during the
preceding calendar month. For purposes of making the determinations set forth in
clauses (i) and (ii) of the preceding sentence, the "In-School Percentage" and
"GRDF Percentage" shall each be determined based on the average principal
balance of the In-School Loans and the Grace, Repayment, Deferral and
Forbearance Loans, respectively, as of the last day of the preceding calendar
month, as follows:
10
Average Principal In-School Average Principal e
Balance Percentage Balance GRDF Percentag
---------------- --------- ---------------- -------------
$2,501 - $3,000 0.625% $3,001 - $3,400 1.100%
$3,001 - $3,500 0.525% $3,401 - $3,900 0.950%
$3,501 - $4,000 0.450% $3,901 - $4,400 0.830%
$4,001 - $4,750 0.375% $4,401 - $4,800 0.740%
$4,751 - $5,500 0.310% $4,801 - $5,400 0.650%
$5,501 - $6,250 0.260% $5,401 - $6,000 0.575%
$6,251 and above 0.230% $6,001 - $6,600 0.510%
$6,601 - $7,200 0.475%
$7,201 - $10,000 0.450%
$10,001 - $13,000 0.350%
$13,001 and above 0.300%
The Servicing Fee (together with any portion of the Servicing Fee that
remains unpaid from prior Monthly Payment Dates) will be payable on each Monthly
Payment Date and will be paid solely out of Monthly Available Funds in the case
of each Monthly Payment Date that is not a Quarterly Payment Date (and out of
Available Funds in the case of each Quarterly Payment Date) and amounts on
deposit in the Reserve Account on such Monthly Payment Date (including each
Quarterly Payment Date) as provided in Sections 2(d)(iv)(A), 2(d)(v)(A) and
2(e)(iv)(A) of the Administration Agreement. To the extent that, for any Monthly
Payment Date, the Servicing Fee is the amount calculated as described in clause
(a) of the first sentence of the preceding paragraph, then an amount (the
"Servicing Fee Shortfall") equal to the excess of the amount described in clause
(b) of such sentence over the amount described in clause (a) of such sentence
shall be payable on the next succeeding Quarterly Payment Date (or if such
Monthly Payment Date is also a Quarterly Payment Date, on such Quarterly Payment
Date) from any remaining Reserve Account Excess as provided in Section 2(e)(ii)
of the Administration Agreement. To the extent such remaining Available Funds
are insufficient to pay the Servicing Fee Shortfall on any Distribution Date,
the Seller shall be required to pay any unpaid Servicing Fee Shortfall directly
to the Servicer out of its own funds. The Servicer will be obligated to perform
its servicing obligations whether or not it receives any amounts in respect of
Servicing Fee Shortfalls.
SECTION 3.07. Servicer's Report. On or before the fifteenth day of
each month (or, if any such day is not a Business Day, on the next succeeding
Business Day), the Servicer shall deliver to the Administrator a servicer's
report with respect to the preceding calendar month containing all information
necessary for the Administrator to prepare the Administrator's Certificate,
referred to in Section 2(b)(ii) of
11
the Administration Agreement, covering such preceding calendar
month.
SECTION 3.08. Annual Statement as to Compliance; Notice of Default.
(a) The Servicer shall deliver to the Eligible Lender Trustee, the Indenture
Trustee, the Subordinate Note Insurer and the Swap Counterparty (with a copy to
the Seller), on or before April 30 of each year beginning April 30, 1998, an
Officers' Certificate of the Servicer, dated as of December 31 of the preceding
year, stating that (i) a review of the activities of the Servicer during the
preceding 12-month period (or, in the case of the first such certificate, during
the period from the Closing Date to December 31, 1998 or, as specified below, to
September 30, 1998) and of its performance has been made under such officers'
supervision and (ii) to the best of such officers' knowledge, based on such
review, the Servicer has fulfilled all its obligations under this Agreement in
all material respects throughout such year (or in the case of the first such
Officers' Certificate, such shorter period) or, if there has been a default in
the fulfillment of any such obligation, specifying each such default known to
such officers and the nature and status thereof; provided, however, that, at the
option of the Servicer, the Servicer may date the initial such Officers'
Certificate as of September 30, 1998, and, in such case, shall deliver such
Officer's Certificate on or before December 31, 1998 and thereafter shall
deliver such Officer's Certificate, dated as of September 30 of each succeeding
year, on or before December 31 of such year. The Indenture Trustee shall send a
copy of each such Officers' Certificate and each report referred to in this
Section 3.08 to the Rating Agencies. A copy of each such Officers' Certificate
and each report referred to in this Section 3.08 may be obtained by any
Noteholder or Note Owner by a request in writing to the Eligible Lender Trustee
addressed to its Corporate Trust Office, together with evidence satisfactory to
the Eligible Lender Trustee that such Person is one of the foregoing parties.
Upon the telephone request of the Eligible Lender Trustee, the Indenture Trustee
will promptly furnish the Eligible Lender Trustee a list of Noteholders as of
the date specified by the Eligible Lender Trustee.
(b) The Servicer shall deliver to the Eligible Lender Trustee, the
Indenture Trustee, the Seller, the Subordinate Note Insurer, the Swap
Counterparty and the Rating Agencies, promptly after having obtained knowledge
thereof, but in no event later than five Business Days thereafter, written
notice in an Officers' Certificate of the Servicer of any event which with the
giving of notice or lapse of time, or both, would become a Servicer Default
under Section 6.01 or would cause the Servicer to fail to meet any Rating Agency
Condition.
12
SECTION 3.09. Annual Independent Certified Public Accountants'
Report. The Servicer shall cause a firm of independent certified public
accountants, which may also render other services to the Servicer, the Seller or
their Affiliates, to deliver to the Eligible Lender Trustee, the Indenture
Trustee, the Subordinate Note Insurer and the Swap Counterparty (with a copy to
the Seller) within 180 days of the end of the Servicer's regular fiscal-year
ended September 30 or calendar-year audit period, an audit report that
encompasses the Servicer's portion of the annual Lender Audit (as defined in the
Higher Education Act), or any successor thereto, as required of a lender under
the Higher Education Act, for the preceding year (or, in the case of the first
such report, during the period from the Closing Date to December 31, 1998 or, as
the case may be, to September 30, 1998). The Indenture Trustee shall send a copy
of each such report to the Rating Agencies and the Subordinate Note Insurer.
Such report will also indicate that the firm is independent of the
Servicer within the meaning of the Code of Professional Ethics of the American
Institute of Certified Public
Accountants.
SECTION 3.10. Access to Certain Documentation and Information
Regarding Financed Student Loans. Upon at least three Business Days' prior
notice, the Servicer shall provide the Noteholders access to the Student Loan
Files in such cases where the Noteholders shall be required by applicable
statutes or regulations to review such documentation, as demonstrated by
evidence satisfactory to the Servicer in its reasonable judgment. Access shall
be afforded without charge, but only upon reasonable request and during the
normal business hours at the respective offices of the Servicer. Nothing in this
Section shall affect the obligation of the Servicer to observe any applicable
law prohibiting disclosure of information regarding the Obligors and the failure
of the Servicer to provide access to information as a result of such obligation
shall not constitute a breach of this Section.
SECTION 3.11. Servicer Expenses. The Servicer shall be required to
pay all expenses incurred by it in connection with its activities hereunder,
including fees and disbursements of independent accountants, taxes imposed on
the Servicer, and expenses incurred in connection with distributions and reports
to the Administrator or the Noteholders, as the case may be.
SECTION 3.12. Appointment of Subservicer. The Servicer may at any
time appoint a subservicer to perform all or any portion of its obligations as
Servicer hereunder; provided, however, that the Rating Agency Condition shall
have been satisfied in connection therewith; and provided, further, that
13
the Servicer shall remain obligated and be liable to the Issuer, the Eligible
Lender Trustee, the Indenture Trustee, the Subordinate Note Insurer and the
Noteholders for the servicing and administering of the Financed Student Loans in
accordance with the provisions hereof without diminution of such obligation and
liability by virtue of the appointment of such subservicer and to the same
extent and under the same terms and conditions as if the Servicer alone were
servicing and administering the Financed Student Loans. The fees and expenses of
the subservicer shall be as agreed between the Servicer and its subservicer from
time to time and none of the Issuer, the Eligible Lender Trustee, the Indenture
Trustee, the Subordinate Note Insurer or the Noteholders shall have any
responsibility therefor.
ARTICLE IV
Deposits into the Collection Account
SECTION 4.01. Deposits into the Collection Account. (a) The Servicer
shall deposit into the Collection Account (in the case of clauses (i) and (ii)
within two Business Days of receipt of freely available funds therefor):
(i) all identifiable payments received by the Servicer by or on
behalf of Obligors on the Financed Student Loans, including any Guarantee
Payments with respect to the Financed Student Loans;
(ii) all Liquidation Proceeds on the Financed Student
Loans;
(iii) with respect to Purchased Student Loans, the aggregate Purchase
Amounts, when such amounts are due, as provided in Section 3.05 hereof;
and
(iv) all other amounts required to be deposited into the Collection
Account by the Servicer pursuant to the terms hereof.
(b) The Eligible Lender Trustee shall deposit into the Collection
Account within two Business Days of the receipt thereof, the aggregate amount of
Interest Subsidy Payments and Special Allowance Payments received by it with
respect to the Financed Student Loans.
(c) The Seller shall deposit into the Collection Account, the
aggregate Purchase Amount with respect to Purchased Student Loans and all other
amounts to be paid by the Seller under Section 3.02 and 5.01 of the Loan Sale
Agreement when such
14
amounts are due, as provided in Section 3.03 of the Loan Sale
Agreement.
(d) The Indenture Trustee, at the written direction of the
Administrator, shall withdraw from the Collateral Reinvestment Account and
deposit into the Collection Account on each Determination Date during the
Revolving Period, an amount equal to the Capitalized Interest Amount for the
preceding Collection Period, as provided in Section 2(f) of the Administration
Agreement.
(e) The Indenture Trustee, at the written direction of the
Administrator, shall withdraw from the Collateral Reinvestment Account and
deposit into the Collection Account on any date during the Revolving Period
specified by the Administrator, such amounts as the Administrator may determine
are needed to make required distributions from Monthly Available Funds or
Available Funds, as the case may be, on Monthly Payment Dates.
ARTICLE V
The Servicer
SECTION 5.01. Representations of Servicer. The Servicer makes the
following representations on which the Issuer is deemed to have relied in
acquiring (through the Eligible Lender Trustee) the Financed Student Loans and
appointing the Servicer as servicer hereunder. The representations speak as of
the execution and delivery of this Agreement and as of the Closing Date in the
case of the Initial Financed Student Loans, and will be deemed to speak as of
the applicable Transfer Date, in the case of New Loans and Serial Loans, as of
the date of the relevant Assignment in the case of any Qualified Substitute
Student Loan, as of the date of origination in the case of any Consolidation
Loan added to the Trust during the Revolving Period and as of the applicable
Add-on Consolidation Loan Funding Date in the case of any Consolidation Loan the
principal balance of which has been increased by the principal balance of a
related Add-on Consolidation Loan, but shall survive the sale, transfer and
assignment of the Financed Student Loans to the Eligible Lender Trustee on
behalf of the Issuer (and the origination of such Consolidation Loans) and the
pledge thereof to the Indenture Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Servicer is duly organized
and validly existing as a corporation in good standing under the laws of
the State of Delaware, with the power and authority to own its properties
and to conduct its
15
business as such properties are currently owned and such business is
currently conducted, and has the legal right to service the Financed
Student Loans.
(b) Power and Authority of the Servicer. The Servicer has the
corporate power and authority to execute and deliver this Agreement and to
carry out its terms, and the execution, delivery and performance of this
Agreement have been duly authorized by the Servicer by all necessary
corporate action.
(c) Binding Obligation. This Agreement constitutes a legal, valid and
binding obligation of the Servicer, enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization and
similar laws relating to creditors' rights generally and subject to
general principles of equity.
(d) No Violation. The consummation of the transactions contemplated
by this Agreement and the fulfillment of the terms hereof or thereof do
not conflict with, result in any breach of any of the terms and provisions
of, or constitute (with or without notice or lapse of time or both) a
default under, the certificate of incorporation or by-laws of the
Servicer, or any indenture, agreement or other instrument to which the
Servicer is a party or by which it shall be bound; or result in the
creation or imposition of any Lien upon any of its properties pursuant to
the terms of any such indenture, agreement or other instrument; or violate
any law or, to the knowledge of the Servicer, any order, rule or
regulation applicable to the Servicer of any court or of any federal or
state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Servicer or its properties.
Performance by the Servicer of its servicing duties with respect to the
Financed Student Loans, and compliance by the Servicer with the terms of
this Agreement, will not result in the loss of any Guarantee Payments by
the Trust or any reinsurance payments with respect to any Financed Student
Loan by the applicable Guarantor.
(e) No Proceedings. There are no proceedings or investigations
pending against the Servicer or, to its best knowledge, threatened against
the Servicer, before any court, regulatory body, administrative agency or
other governmental instrumentality having jurisdiction over the Servicer
or its properties: (i) asserting the invalidity of this Agreement or any
of the other Basic Documents to which the Servicer is a party, (ii)
seeking to prevent the
16
issuance of the Notes or the consummation of any of the transactions
contemplated by this Agreement, or any of the other Basic Documents, (iii)
seeking any determination or ruling that could reasonably be expected to
have a material and adverse effect on the performance by the Servicer of
its obligations under, or the validity or enforceability of, this
Agreement, any of the other Basic Documents or the Notes or (iv) seeking
to affect adversely the federal or state income tax attributes of the
Issuer or the Notes.
(f) All Consents. All authorizations, consents, licenses, orders or
approvals of or registrations or declarations with any court, regulatory
body, administrative agency or other government instrumentality required
to be obtained, effected or given by the Servicer in connection with the
execution and delivery by the Servicer of this Agreement and the
performance by the Servicer of its duties contemplated by this Agreement
have in each case been duly obtained, effected or given and are in full
force and effect.
SECTION 5.02. Indemnities of Servicer. (a) The
Servicer shall be liable in accordance herewith only to the
extent of the obligations specifically undertaken by the Servicer
under this Agreement.
The Servicer shall pay for any loss, liability or expense, including
reasonable attorneys' fees, that may be imposed on, incurred by or asserted
against the Issuer, the Eligible Lender Trustee, the Indenture Trustee, the
Seller, the Administrator or the Noteholders or any of the officers, directors,
employees and agents of the Issuer, the Eligible Lender Trustee, the Indenture
Trustee, the Administrator or the Seller to the extent that such loss, liability
or expense arose out of, or was imposed upon any such Person through, the
negligence, willful misfeasance or bad faith of the Servicer in the performance
of its obligations and duties under this Agreement or by reason of the reckless
disregard of its obligations and duties under this Agreement, where the final
determination that any such loss, liability or expense arose out of, or was
imposed upon any such Person through, any such negligence, willful misfeasance,
bad faith or recklessness on the part of the Servicer is established by a court
of law, by an arbitrator or by way of settlement agreed to by the Servicer;
provided, however, that the Servicer's obligation arising under this Section
5.02 shall apply only to the extent that the sum of such obligation and any
other liabilities of the Servicer under this Agreement exceeds the Servicer
Liability Limit for any Servicer Liability Period (as such terms are defined in
Section 3.05). Notwithstanding the foregoing, if the Servicer is
17
rendered unable, in whole or in part, by a force outside the control of the
parties hereto (including acts of God, acts of war, fires, earthquakes and other
disasters) to satisfy its obligations under this Agreement, the Servicer shall
not be deemed to have breached any such obligation upon delivery of written
notice of such event to the other parties hereto, for so long as the Servicer
remains unable to perform such obligation as a result of such event.
For purposes of this Section, in the event of the termination of the
rights and obligations of Loan Services as Servicer pursuant to Section 6.01, or
a resignation by such Servicer pursuant to this Agreement, such Servicer shall
be deemed to be the Servicer pending appointment of a successor Servicer
pursuant to Section 6.02.
Liability of the Servicer under this Section shall survive the
resignation or removal of the Eligible Lender Trustee or the Indenture Trustee
or the termination of this Agreement and shall include reasonable fees and
expenses of counsel and expenses of litigation. If the Servicer shall have made
any indemnity payments pursuant to this Agreement and the Person to or on behalf
of whom such payments are made thereafter collects any of such amounts from
others, such Person shall promptly repay such amounts to the Servicer, without
interest.
(b) Except with respect to liabilities relating to rejected claims by
the Guarantors, the Seller agrees to indemnify and hold harmless the Servicer
from any liability incurred by the Servicer under subsection (a) above as a
result of the Servicer's ordinary negligence.
SECTION 5.03. Merger or Consolidation of, or Assumption of the
Obligations of, Servicer. The Servicer hereby agrees that, upon (a) any merger
or consolidation of the Servicer into another Person, (b) any merger or
consolidation to which the Servicer shall be a party resulting in the creation
of another Person or (c) any Person succeeding to the properties and assets of
the Servicer substantially as a whole, the Servicer shall (i) cause such Person
(if other than the Servicer) to execute an agreement of assumption to perform
every obligation of the Servicer hereunder, (ii) deliver to the Eligible Lender
Trustee, the Indenture Trustee, the Subordinate Note Insurer and the Swap
Counterparty an Officers' Certificate and an Opinion of Counsel each stating
that such consolidation, merger or succession and such agreement of assumption
comply with this Section and that all conditions precedent provided for in this
Agreement relating to such transaction have been complied with, (iii) cause the
Rating Agency Condition to have been satisfied with respect to such transaction,
(iv) cure any existing Servicer Default or any
18
continuing event which, after notice or lapse of time or both, would become a
Servicer Default and (v) provide the Subordinate Note Insurer and the Swap
Counterparty 10 Business Days' prior written notice. Upon compliance with the
foregoing requirements, such Person shall be the successor to the Servicer under
this Agreement without further act on the part of any of the parties to this
Agreement. Notwithstanding anything herein to the contrary, compliance with
clauses (i), (ii), (iii), (iv) and (v) above shall be conditions to the
consummation of any of the transactions referred to in clause (a), (b) or (c)
above.
SECTION 5.04. Limitation on Liability of Servicer and Others. Neither
the Servicer nor any of the directors, officers, employees or agents of the
Servicer shall be under any liability to the Issuer or the Noteholders, except
as provided under this Agreement, for any action taken or for refraining from
the taking of any action pursuant to this Agreement or for errors in judgment;
provided, however, that this provision shall not protect the Servicer or any
such Person against any liability that would otherwise be imposed by reason of
willful misfeasance, bad faith or negligence in the performance of duties or by
reason of reckless disregard of obligations and duties under this Agreement. The
Servicer and any director, officer, employee or agent of the Servicer may rely
in good faith on any document of any kind prima facie properly executed and
submitted by any person respecting any matters arising under this Agreement.
Except as provided in this Agreement, the Servicer shall not be under
any obligation to appear in, prosecute or defend any legal action that shall not
be incidental to its duties to service the Student Loans in accordance with this
Agreement and that in its opinion may involve it in any expense or liability;
provided, however, that the Servicer may undertake any reasonable action that it
may deem necessary or desirable in respect of this Agreement and the other Basic
Documents and the rights and duties of the parties to this Agreement and the
other Basic Documents and the interests of the Noteholders under the Indenture.
SECTION 5.05. Loan Services Not to Resign as Servicer. Subject to the
provisions of Section 5.03, Loan Services shall not resign from the obligations
and duties hereby imposed on it as Servicer under this Agreement except upon
determination that the performance of its duties under this Agreement shall no
longer be permissible under applicable law. Notice of any such determination
permitting the resignation of Loan Services shall be communicated to the
Eligible Lender Trustee, the Indenture Trustee, the Rating Agencies, the
Subordinate Note Insurer and the Swap Counterparty at the earliest practicable
time (and, if such communication is not in writing, shall be confirmed in
19
writing at the earliest practicable time) and any such determination shall be
evidenced by an Opinion of Counsel to such effect delivered to the Eligible
Lender Trustee, the Indenture Trustee, the Subordinate Note Insurer and the Swap
Counterparty concurrently with or promptly after such notice. No such
resignation shall become effective until the Indenture Trustee or a Successor
Servicer acceptable to the Subordinate Note Insurer shall have assumed the
responsibilities and obligations of Loan Services in accordance with Section
6.02.
ARTICLE VI
Default
SECTION 6.01. Servicer Default. If any one of the
following events (each, a "Servicer Default") shall occur and be
continuing:
(a) any failure by the Servicer to deliver to the Indenture Trustee
for deposit in any of the Trust Accounts any payment required by the Basic
Documents, which failure continues unremedied for three Business Days
after written notice of such failure is received by the Servicer from the
Eligible Lender Trustee, the Indenture Trustee or the Administrator or
after discovery of such failure by an officer of the Servicer; or
(b) any failure by the Servicer duly to observe or to perform in any
material respect any other covenants or agreements of the Servicer set
forth in this Agreement or any other Basic Document, which failure shall
(i) materially and adversely affect the rights of Noteholders, the
Subordinate Note Insurer or the Swap Counterparty and (ii) continue
unremedied for a period of thirty (30) days after the date of discovery of
such failure by an officer of the Servicer or on which written notice of
such failure, requiring the same to be remedied, shall have been given (A)
to the Servicer, by the Indenture Trustee, the Eligible Lender Trustee or
(B) to the Servicer, the Indenture Trustee, the Administrator and the
Eligible Lender Trustee by Noteholders representing not less than 25% of
the Outstanding Amount of the Notes; or
(c) any limitation, suspension or termination by the Department of
the Servicer's eligibility to service Student Loans which materially and
adversely affects its ability to service the Financed Student Loans; or
20
(d) an Insolvency Event occurs with respect to the Servicer;
then, and in each and every case, so long as the Servicer Default shall not have
been remedied, either the Indenture Trustee (with the prior written consent of
the Subordinate Note Insurer) or the Noteholders of Notes evidencing not less
than 75% of the Outstanding Amount of the Notes (with the prior written consent
of the Subordinate Note Insurer) by notice then given in writing to the Servicer
(and to the Indenture Trustee and the Eligible Lender Trustee if given by the
Noteholders) may terminate all the rights and obligations (other than the
obligations set forth in Section 5.02) of the Servicer under this Agreement;
provided, however, that if the Senior Notes are not Outstanding, then the
Subordinate Note Insurer shall have the exclusive right to terminate the
Servicer after a Servicer Default. On or after the receipt by the Servicer of
such written notice, all authority and power of the Servicer under this
Agreement, whether with respect to the Notes, the Financed Student Loans or
otherwise, shall, without further action, pass to and be vested in the Indenture
Trustee or such successor Servicer (acceptable to the Subordinate Note Insurer)
as may be appointed under Section 6.02; and, without limitation, the Indenture
Trustee and the Eligible Lender Trustee are hereby authorized and empowered to
execute and deliver, for the benefit of the predecessor Servicer, as
attorney-in-fact or otherwise, any and all documents and other instruments, and
to do or accomplish all other acts or things necessary or appropriate to effect
the purposes of such notice of termination, whether to complete the transfer and
endorsement of the Financed Student Loans and related documents, or otherwise.
The predecessor Servicer shall cooperate with the successor Servicer, the
Indenture Trustee, the Eligible Lender Trustee and the Subordinate Note Insurer
in effecting the termination of the responsibilities and rights of the
predecessor Servicer under this Agreement, including the transfer to the
successor Servicer for administration by it of all cash amounts that shall at
the time be held by the predecessor Servicer for deposit, or shall thereafter be
received by it with respect to a Financed Student Loan. All reasonable costs and
expenses (including attorneys' fees) incurred in connection with transferring
the Student Loan Files to the successor Servicer and amending this Agreement and
any other Basic Documents to reflect such succession as Servicer pursuant to
this Section shall be paid by the predecessor Servicer upon presentation of
reasonable documentation of such costs and expenses. Upon receipt of notice of
the occurrence of a Servicer Default, the Eligible Lender Trustee shall give
notice thereof to the Rating Agencies.
SECTION 6.02. Appointment of Successor. (a) Upon
receipt by the Servicer of notice of termination pursuant to
21
Section 6.01, or the resignation by the Servicer in accordance with the terms of
this Agreement, the predecessor Servicer shall continue to perform its functions
as Servicer under this Agreement, in the case of termination, only until the
date specified in such termination notice or, if no such date is specified in a
notice of termination, until the successor Servicer acceptable to the
Subordinate Note Insurer shall have accepted and assumed the responsibilities of
the Servicer hereunder and, in the case of resignation, until the later of (x)
the date 120 days from the delivery to the Eligible Lender Trustee, and the
Indenture Trustee and the Subordinate Note Insurer of written notice of such
resignation (or written confirmation of such notice) in accordance with the
terms of this Agreement and (y) the date upon which the predecessor Servicer
shall become unable to act as Servicer as specified in the notice of resignation
and accompanying Opinion of Counsel. In the event of the termination hereunder
of the Servicer, the Issuer shall appoint a successor Servicer acceptable to the
Indenture Trustee and the Subordinate Note Insurer, and the successor Servicer
shall accept its appointment by a written assumption in form acceptable to the
Indenture Trustee, the Administrator and the Subordinate Note Insurer. In the
event that a successor Servicer has not been appointed at the time when the
predecessor Servicer has ceased to act as Servicer in accordance with this
Section, the Indenture Trustee without further action shall automatically be
appointed the successor Servicer and the Indenture Trustee shall be entitled to
the Servicing Fee. Notwithstanding the above, the Indenture Trustee shall, if it
shall be unwilling or legally unable so to act, appoint (with the prior written
consent of the Subordinate Note Insurer) or petition a court of competent
jurisdiction to appoint, any established institution (acceptable to the
Subordinate Note Insurer) the regular business of which shall include the
servicing of student loans, as the successor to the Servicer under this
Agreement; provided, however, that such right to appoint or to petition for the
appointment of any such successor Servicer shall in no event relieve the
Indenture Trustee from any obligations otherwise imposed on it under the Basic
Documents until such successor has in fact assumed such appointment.
(b) Upon appointment, the successor Servicer (including the Indenture
Trustee acting as successor Servicer) shall be the successor in all respects to
the predecessor Servicer and shall be subject to all the responsibilities,
duties and liabilities placed on the predecessor Servicer that arise thereafter
or are related thereto and shall be entitled to an amount agreed to by such
successor Servicer (which shall not exceed the Servicing Fee, unless the
Subordinate Note Insurer shall have given its prior written consent and such
compensation arrangements will not result in a downgrading of the Class A-1
22
Notes, the Class A-2 Notes or the Subordinate Notes by any Rating Agency without
regard to the Subordinate Note Insurance Policy) and all the rights granted to
the predecessor Servicer by the terms and provisions of this Agreement.
(c) The Servicer may not resign unless it is prohibited from serving
as such by law as evidenced by an Opinion of Counsel to such effect delivered to
the Indenture Trustee and the Eligible Lender Trustee and the Subordinate Note
Insurer. Notwithstanding the foregoing or anything to the contrary herein or in
the other Basic Documents, the Indenture Trustee, to the extent it is acting as
successor Servicer pursuant hereto, shall be entitled to resign to the extent a
qualified successor Servicer acceptable to the Subordinate Note Insurer has been
appointed and has assumed all the obligations of the Servicer in accordance with
the terms of this Agreement and the other Basic Documents.
SECTION 6.03. Notification to Noteholders and the Company. Upon any
termination of, or appointment of a successor to, the Servicer pursuant to this
Article VI, the Indenture Trustee shall give prompt written notice thereof to
Noteholders, the Administrator, the Company, the Rating Agencies and the
Subordinate Note Insurer (which, in the case of any such appointment of a
successor, shall consist of prior written notice thereof to the Rating Agencies
and the Subordinate Note Insurer.
SECTION 6.04. Waiver of Past Defaults. The Note holders of Notes
evidencing not less than a majority of the Outstanding Amount of the Notes (with
the prior written consent of the Subordinate Note Insurer) or, if the Senior
Notes are not Outstanding, the Subordinate Note Insurer may, on behalf of all
Noteholders, waive in writing any default by the Servicer in the performance of
its obligations hereunder, and any consequences thereof, except a default in
making any required deposits to or payments from any of the Trust Accounts (or
giving instructions regarding the same) in accordance with this Agreement to the
extent provided in such waiver. Upon any such waiver of a past default, such
default shall cease to exist, and any Servicer Default arising therefrom shall
be deemed to have been remedied for every purpose of this Agreement. No such
waiver shall extend to any subsequent or other default or impair any right
consequent thereto.
23
ARTICLE VII
Miscellaneous
SECTION 7.01. Amendment. This Agreement may be amended by the
Servicer and the Eligible Lender Trustee, with the prior written consent of the
Indenture Trustee, but without the consent of any of the Noteholders, to cure
any ambiguity, to correct or supplement any provisions in this Agreement or for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions in this Agreement or of modifying in any manner the rights
of the Noteholders; provided, however, that such action shall not, as evidenced
by an Opinion of Counsel delivered to the Eligible Lender Trustee, the Indenture
Trustee and the Subordinate Note Insurer, adversely affect in any material
respect the interests of any Noteholder.
This Agreement may also be amended from time to time by the Servicer
and the Eligible Lender Trustee, with the prior written consent of the Indenture
Trustee, the Noteholders of Notes evidencing not less than a majority of the
Outstanding Amount of the Notes, the Subordinate Note Insurer and the Swap
Counterparty, for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Agreement or of modifying in
any manner the rights of the Noteholders; provided, however, that no such
amendment shall (a) increase or reduce in any manner the amount of, or
accelerate or delay the timing of, collections of payments with respect to
Financed Student Loans or distributions that shall be required to be made for
the benefit of the Noteholders or (b) reduce the aforesaid percentage of the
Outstanding Amount of the Notes, the Noteholders of which are required to
consent to any such amendment, without the consent of all outstanding
Noteholders; and provided, further, that the prior written consent of the
Subordinate Note Insurer shall not be required if an Opinion of Counsel is
delivered to the Subordinate Note Insurer stating that the proposed amendment to
this Agreement will not adversely affect, in any material respect interests of
the Noteholders or the Subordinate Note Insurer.
Promptly after the execution of any such amendment or consent (or, in
the case of the Rating Agencies, five Business Days prior thereto), the Eligible
Lender Trustee shall furnish written notification of the substance of such
amendment or consent to the Indenture Trustee, each of the Rating Agencies and
the Subordinate Note Insurer.
It shall not be necessary for the consent of
Noteholders pursuant to this Section to approve the particular
24
form of any proposed amendment or consent, but it shall be sufficient if such
consent shall approve the substance thereof.
Prior to the execution of any amendment to this Agreement, the
Eligible Lender Trustee, the Indenture Trustee, the Subordinate Note Insurer and
the Swap Counterparty shall be entitled to receive and rely upon an Opinion of
Counsel stating that the execution of such amendment is authorized or permitted
by this Agreement and the Opinion of Counsel referred to in Section 6.02(f) of
the Loan Sale Agreement. The Eligible Lender Trustee and the Indenture Trustee
may, but shall not be obligated to, enter into any such amendment which affects
the Eligible Lender Trustee's or the Indenture Trustee's, as applicable, own
rights, duties or immunities under this Agreement or otherwise.
SECTION 7.02. Protection of Interests in Trust. (a) The Servicer
shall not change its name, identity or corporate structure in any manner that
would, could or might make any financing statement or continuation statement
filed in accordance with Section 6.02(a) of the Loan Sale Agreement seriously
misleading within the meaning of ss.9-402(7) of the UCC, unless it shall have
given the Eligible Lender Trustee, the Indenture Trustee, the Subordinate Note
Insurer, the Swap Counterparty and the Rating Agencies at least five days' prior
written notice thereof and shall have promptly filed appropriate amendments to
all previously filed financing statements or continuation statements.
(b) The Servicer shall have an obligation to give the Eligible Lender
Trustee, the Indenture Trustee, the Subordinate Note Insurer and the Swap
Counterparty at least sixty (60) days' prior written notice of any relocation of
its principal executive office if, as a result of such relocation, the
applicable provisions of the UCC would require the filing of any amendment of
any previously filed financing or continuation statement or of any new financing
statement and shall promptly file any such amendment. The Servicer shall at all
times maintain each office from which it shall service Financed Student Loans,
and its principal executive office, within the United States of America.
(c) The Servicer shall maintain accounts and records of each Student
Loan accurately and in sufficient detail to permit (i) the reader thereof to
know at any time the status of such Financed Student Loan, including payments
and recoveries made and payments owing (and the nature of each) and (ii)
reconciliation between payments or recoveries on (or with respect to) each
Financed Student Loan and the amounts from time to time deposited in the
Collection Account in respect of such Financed Student Loan.
25
(d) The Servicer shall, by use of a distinct identification code,
maintain its computer systems so that, from and after the time of sale under
this Agreement of the Financed Student Loans, the Servicer's master computer
records (including any backup archives) that refer to a Student Loan shall
indicate clearly the interest of the Issuer, the Eligible Lender Trustee and the
Indenture Trustee in such Student Loan and that such Student Loan is owned by
the Eligible Lender Trustee on behalf of the Issuer and has been pledged to the
Indenture Trustee. Indication of the Issuer's, the Eligible Lender Trustee's and
the Indenture Trustee's interest in a Student Loan shall be deleted from or
modified on the Servicer's computer systems when, and only when, the related
Financed Student Loan shall have been paid in full or repurchased.
(e) If at any time the Servicer shall propose to sell, grant a
security interest in, or otherwise transfer any interest in student loans to any
prospective purchaser, lender or other transferee, the Servicer shall give to
such prospective purchaser, lender or other transferee computer tapes, records
or printouts (including any restored from backup archives) that, if they shall
refer in any manner whatsoever to any Financed Student Loan, shall indicate
clearly that such Financed Student Loan has been sold and is owned by the
Eligible Lender Trustee on behalf of the Issuer and has been pledged to the
Indenture Trustee.
(f) The Servicer shall permit the Indenture Trustee, the Subordinate
Note Insurer and the Swap Counterparty and their respective agents at any time
during normal business hours to inspect, audit and make copies of and abstracts
from the Servicer's records regarding any Financed Student Loan; provided,
however, that the Servicer is given reasonable prior notice of at least three
(3) Business Days.
(g) Upon request, at any time the Eligible Lender Trustee or the
Indenture Trustee shall have reasonable grounds to believe that such request
would be necessary in connection with its performance of its duties under the
Basic Documents, the Servicer shall furnish to the Eligible Lender Trustee the
Indenture Trustee or the Subordinate Note Insurer (in each case, with a copy to
the Administrator), within five (5) Business Days, a list of all Financed
Student Loans (by borrower social security number, type of loan and date of
issuance) then held as part of the Trust, and shall cause the Administrator to
furnish to the Eligible Lender Trustee or the Indenture Trustee or the
Subordinate Note Insurer, within 20 Business Days thereafter, a comparison of
such list to the list of Initial Financed Student Loans set forth in Schedule A
to the Loan Sale Agreement as of the Closing Date, and, for each Financed
Student Loan that has been added to or removed from the pool of loans held by
the
26
Eligible Lender Trustee on behalf of the Issuer, information as to the date as
of which and circumstances under which each such Financed Student Loan was so
added or removed.
SECTION 7.03. Notices. Unless otherwise agreed by the recipient, all
demands, notices and communications upon or to the Seller, NBD, the Servicer,
the Eligible Lender Trustee, the Indenture Trustee, the Administrator, the
Rating Agencies, the Subordinate Note Insurer or the Swap Counterparty under
this Agreement shall be in writing, personally delivered or mailed by certified
mail, return receipt requested (or in the form of telex or facsimile notice,
followed by written notice delivered as aforesaid or postage prepaid, first
class mail), and shall be deemed to have been duly given upon receipt;
(a) in the case of the Seller, to
USA Group Secondary Market Services, Inc.
00 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000-0000
Attention: President and Chief Executive Officer
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to:
Office of the General Counsel
USA Group, Inc.
00 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000;
(b) in the case of NBD, to
NBD Bank, N.A., as
trustee for USA Group
Secondary Market Services, Inc.
Xxx Xxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000;
(c) in the case of the Servicer, to
USA Group Loan Services, Inc.
00 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000-0000
Attention: President
Telephone: (000) 000-0000
27
Telecopy: (000) 000-0000
with a copy to
Office of the General Counsel
USA Group, Inc.
00 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000;
(d) in the case of the Issuer, to
Student Loan Trust 1998-A
c/o First Chicago Delaware, Inc.
FCC National Bank
000 Xxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000,
with a copy to the Eligible Lender Trustee
at the Corporate Trust Office of the
Eligible Lender Trustee;
(e) in the case of the Eligible Lender Trustee, at the Corporate
Trust Office of the Eligible Lender
Trustee;
(f) in the case of the Indenture Trustee, at its Corporate Trust
Office;
(g) in the case of the Administrator, to
USA Group Secondary Market Services, Inc.
00 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000-0000
Attention: President and Chief Executive Officer
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to:
Office of the General Counsel
USA Group, Inc.
00 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000;
(h) in the case of Moody's, to
Xxxxx'x Investors Service, Inc.
00 Xxxxxx Xxxxxx
00
Xxx Xxxx, Xxx Xxxx 00000
Attention: ABS Monitoring Department
Telephone: (000) 000-0000
Facsimile: (000) 000-0000;
(i) in the case of Fitch, to
Fitch IBCA, Inc.
Xxx Xxxxx Xxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Asset Backed Monitoring Unit
Telephone: (000) 000-0000
Facsimile: (000) 000-0000;
(j) in the case of the Subordinate Note Insurer, to MBIA Insurance
Corporation 000 Xxxx Xxxxxx
Xxxxxx, Xxx Xxxx 00000
Attention: Insured Portfolio Management -
Structured Finance (IPM-SF)
SMS Student Loan Trust 1998-A
$21,350,000 Floating Rate Asset-
Backed Subordinate Notes
Facsimile: (000) 000-0000
Telephone confirmation: (000) 000-0000; and
(k) in the case of the Swap Counterparty, to
General Re Financial Products Corporation
Rockefeller Center
000 Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Head of Operations
Facsimile: (000) 000-0000
Telephone confirmation: (000) 000-0000;
or, as to each of the foregoing, at such other address as shall be designated by
written notice to the other parties.
SECTION 7.04. Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in the succeeding sentence, as provided in
Section 5.03 and as provided in the provisions of this Agreement concerning the
resignation of the Servicer, this Agreement may not be assigned by the Servicer.
This Agreement may only be assigned by the Eligible Lender Trustee to its
permitted successor pursuant to the Trust Agreement.
SECTION 7.05. Limitations on Rights of Others. The
provisions of this Agreement are solely for the benefit of the
Servicer, the Issuer and the Eligible Lender Trustee and for the
benefit of the Administrator, the Indenture Trustee, the
29
Subordinate Note Insurer and the Noteholders, as third party beneficiaries, and
nothing in this Agreement, whether express or implied, shall be construed to
give to any other Person any legal or equitable right, remedy or claim in the
Trust Estate or under or in respect of this Agreement or any covenants,
conditions or provisions contained herein. The Indenture Trustee, the
Subordinate Note Insurer and the Swap Counterparty are express third-party
beneficiaries and may enforce the provisions of this Agreement as if they were
parties hereto; provided, however, that in the case of the Subordinate Note
Insurer such right to enforcement and the right to provide consents or waivers
pursuant to the provisions of this Agreement or to take other actions as
provided herein are conditioned upon there not having occurred and being
continuing an Insurer Default and, in the case of the Swap Counterparty, such
right to enforcement and the right to provide consents or waivers pursuant to
the provisions hereof or to take other actions as provided herein are
conditioned upon its not being in default under the Swap Agreement.
SECTION 7.06. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 7.07. Separate Counterparts. This Agreement may be executed
by the parties hereto in separate counterparts, each of which when so executed
and delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 7.08. Headings. The headings of the various
Articles and Sections herein are for convenience of reference
only and shall not define or limit any of the terms or provisions
hereof.
SECTION 7.09. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of Indiana, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
SECTION 7.10. Non-Petition Covenants. Notwithstanding any prior
termination of this Agreement, the Servicer shall not, prior to the date which
is one year and one day after the termination of this Agreement with respect to
the Issuer or the Company, acquiesce, petition or otherwise invoke or cause the
Issuer or the Company to invoke the process of any court or
30
government authority for the purpose of commencing or sustaining a case against
the Issuer or the Company under any federal or state bankruptcy, insolvency or
similar law or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Issuer or any substantial part of
its property, or ordering the winding up or liquidation of the affairs of the
Issuer.
SECTION 7.11. Limitation of Liability of Eligible Lender Trustee and
Indenture Trustee. (a) Notwithstanding anything contained herein to the
contrary, this Agreement has been signed by The First National Bank of Chicago
not in its individual capacity but solely in its capacity as Eligible Lender
Trustee of the Issuer and in no event shall The First National Bank of Chicago
in its individual capacity or, except as expressly provided in the Trust
Agreement, as beneficial owner of the Issuer have any liability for the
representations, warranties, covenants, agreements or other obligations of the
Issuer hereunder or in any of the certificates, notices or agreements delivered
pursuant hereto as to all of which recourse shall be had solely to the assets of
the Issuer.
(b) Notwithstanding anything contained herein to the contrary, this
Agreement has been accepted by Bankers Trust Company not in its individual
capacity but solely as Indenture Trustee and in no event shall Bankers Trust
Company have any liability for the representations, warranties, covenants,
agreements or other obligations of the Issuer hereunder or in any of the
certificates, notices or agreements delivered pursuant hereto, as to all of
which recourse shall be had solely to the assets of the Issuer.
31
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective officers as of the day and year first above
written.
SMS STUDENT LOAN TRUST 1998-A,
By: THE FIRST NATIONAL BANK OF CHICAGO,
not in its individual capacity
but solely as Eligible Lender
Trustee on behalf of the Trust
By:
Name:
Title:
USA GROUP LOAN SERVICES, INC.
By:
Name:
Title:
USA GROUP SECONDARY MARKET
SERVICES, INC.
By:
Name:
Title:
32
THE FIRST NATIONAL BANK OF CHICAGO, not in
its individual capacity but solely as
Eligible Lender Trustee
By:
Name:
Title:
Acknowledged and accepted
as of the day and year first
above written:
BANKERS TRUST COMPANY, not in
its individual capacity but
solely as Indenture Trustee
By:
Name:
Title:
33
SCHEDULE A
The Servicer shall maintain each Student Loan File at one of the locations
listed below:
(a) USA Group Loan Services, Inc.
00 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
(b) USA Group Loan Services, Inc.
00000 XXX Xxxxxxx
Xxxxxxx, XX 00000
(c) USA Group Loan Services, Inc.
c/o Indianapolis Vault Company
0000 Xxxxxxxxxx Xxxx
Xxxxxxxxxxxx, XX 00000
(d) USA Group Loan Services, Inc.
c/o Indianapolis Vault Company
0000 Xxxx 00xx Xxxxxx
Xxxxxxxxxxxx, XX 00000
