EXHIBIT 10.1
SERVICING AND ADMINISTRATION AGREEMENT*
among
EDUCATION LOANS INCORPORATED,
as Issuer
STUDENT LOAN FINANCE CORPORATION,
as Servicer and Administrator
and
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
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Dated as of December 1, 1999
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* As amended by an Amendment No. 1 to Servicing Agreement, dated as of December
1, 2000, and an Amendment No. 2 to Servicing Agreement, dated as of July 1,
2001.
SERVICING AND ADMINISTRATION AGREEMENT
THIS SERVICING AND ADMINISTRATION AGREEMENT (the "Agreement") entered
into as of the 1st day of December, 1999 by and among Student Loan Finance
Corporation, a corporation organized under the laws of the State of South Dakota
("SLFC," and, in its capacity as servicer hereunder, the "Servicer," and, in its
capacity as administrator hereunder, the "Administrator"), Education Loans
Incorporated, a corporation organized under the laws of the State of Delaware
(the "Issuer"), and U.S. Bank National Association, a national banking
association headquartered in Minneapolis, Minnesota, in its capacity as trustee
under the Indenture hereinafter referred to (the "Trustee").
W I T N E S E T H:
WHEREAS, the Servicer services student loans ("Student Loans") which
have been (1) guaranteed under a guaranty program established by a state or a
private nonprofit corporation pursuant to the requirements of the Higher
Education Act of 1965, as amended from time to time, and the rules and
regulations promulgated thereunder (the "Higher Education Act")(such Student
Loans being herein referred to as "FFELP Loans"), or (2) have been originated
under certain loan programs (the "Alternative Loan Programs") established by
SLFC to make amounts available for the post-secondary education of eligible
students in excess of the amounts available through FFELP Loans (such Student
Loans being herein referred to as "Alternative Loans"); and
WHEREAS, SLFC has established its Student Loan Purchase Program
pursuant to which it acquires or causes the acquisition of certain Student Loans
from lenders ("Lenders") eligible to originate or hold such Student Loans under
the Higher Education Act or under an Alternative Loan Program, as applicable;
and
WHEREAS, pursuant to SLFC's Student Loan Purchase Program, the Issuer
has entered into or will enter into Student Loan Purchase Agreements ("Issuer
Student Loan Purchase Agreements") (1) with certain Lenders pursuant to which
the Issuer agrees to cause the purchase of FFELP Loans by the Trustee (for the
account and on behalf of the Issuer) from such Lenders, and (2) with SLFC
pursuant to which the Issuer has agreed to cause the purchase of Alternative
Loans by the Trustee (for the account and on behalf of the Issuer) from SLFC;
and
WHEREAS, pursuant to SLFC's Student Loan Purchase Program, GOAL
Funding, Inc., a Delaware corporation ("GOAL Funding"), has entered into or will
enter into Student Loan Purchase Agreements ("GOAL Funding Student Loan Purchase
Agreements" and, together with the Issuer Student Loan Purchase Agreements,
collectively the " Student Loan Purchase Agreements") (1) with certain Lenders
pursuant to which GOAL Funding agrees to cause the purchase of FFELP Loans by
U.S. Bank National Association, as trustee for GOAL Funding (in such capacity,
the "GOAL Funding Trustee") (for the account and on behalf of GOAL Funding) from
such Lenders, and (2) with SLFC pursuant to which GOAL Funding has agreed to
cause the purchase of Alternative Loans by the GOAL Funding Trustee (for the
account and on behalf of GOAL Funding) from SLFC; and
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WHEREAS, SLFC, as servicer and administrator (in such capacities, the
"GOAL Funding Servicer"), has, pursuant to a servicing and administration
agreement with GOAL Funding and the GOAL Funding Trustee (the "GOAL Funding
Servicing Agreement"), agreed to service the Student Loans originated on behalf
of GOAL Funding or purchased by GOAL Funding under the GOAL Funding Student Loan
Purchase Agreements while such Student Loans are pledged under GOAL Funding's
warehouse financing; and
WHEREAS, the Issuer will enter into Transfer Agreements ("Transfer
Agreements") with the Trustee, GOAL Funding and the GOAL Funding Trustee,
pursuant to which the Issuer will purchase from GOAL Funding FFELP Loans and
Alternative Loans previously originated on behalf of GOAL Funding or purchased
pursuant to GOAL Funding Student Loan Purchase Agreements ("GOAL Funding Student
Loans") and will be assigned all right, title and interest of GOAL Funding in
such agreements with respect to the Student Loans so sold; and
WHEREAS, under certain circumstances, the Issuer also will cause the
origination of Student Loans by the Trustee (for the account and on behalf of
the Issuer) (Student Loans purchased or originated under the Indenture
hereinafter described are herein referred to as "Financed Student Loans"); and
WHEREAS, the Issuer initially will obtain funds necessary to originate
and purchase Student Loans through the issuance, pursuant to an Indenture of
Trust, dated as of December 1, 1999 (as amended or supplemented, the
"Indenture"), between the Issuer and the Trustee, as Trustee, of its Student
Loan Asset-Backed Notes, Senior Series 1999-1A and B and Subordinate Series
1999-1C (the "Series 1999-1 Notes," and, together with any additional notes
issued under the Indenture, the "Notes"); and
WHEREAS, the principal of and interest on the Notes is to be paid from
repayment of Financed Student Loans and other trust assets pledged under the
Indenture; and
WHEREAS, the Issuer wishes to provide for the origination, acquisition
and servicing of the Financed Student Loans in the manner provided in the
Student Loan Purchase Agreements and the Indenture; and
WHEREAS, copies of (i) the executed Student Loan Purchase Agreements,
(ii) the executed Transfer Agreements and (iii) the Indenture have been or will
be furnished to the Servicer; and
WHEREAS, the Issuer wishes to retain the Servicer to provide services
in connection with the origination, acquisition, servicing and collection of the
Financed Student Loans in accordance with the requirements of the Higher
Education Act, the Guarantee Program, the Alternative Loan Programs, the Student
Loan Purchase Agreements, the Transfer Agreements and the Indenture, and the
Servicer is willing to undertake such obligations on the terms hereinafter
specified; and
WHEREAS, the Issuer wishes to retain the Administrator to perform other
administrative requirements on behalf of the Issuer, including those required to
allow the Issuer to satisfy certain requirements under the Indenture;
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NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto agree as follows:
1. Term. The term of this Agreement shall commence as of the date
hereof and shall continue for so long as any of the Notes shall remain
Outstanding, unless this Agreement is terminated in accordance with the terms
hereof.
2. Definitions. In addition to terms elsewhere defined in this
Agreement, and except as otherwise provided herein or as the context may
otherwise require or suggest, initially capitalized terms used herein shall have
the meanings assigned thereto in the Indenture, or if not defined therein, in
the Student Loan Purchase Agreements.
3. Agreement to Provide Services with respect to Financed Student
Loans; Cooperation.
a. The Servicer shall provide services to the Issuer in
connection with the origination and acquisition of Student
Loans to be Financed in accordance with this Agreement. The
Servicer shall commence servicing the Financed Student Loans
as of the day they are Financed and shall service the Financed
Student Loans in accordance with this Agreement. The Servicer
may perform all or part of its origination, acquisition, and
servicing activities hereunder through a subcontractor. The
Servicer shall perform or shall cause its subcontractor to
perform all services hereunder in compliance with the Higher
Education Act, applicable requirements of each Guarantee
Agency and each Alternative Loan Program and all other
applicable federal, state and local laws and regulations. The
Servicer shall be responsible for the performance of its
obligations hereunder, whether such obligations are performed
by the Servicer or by its subcontractor, and the Servicer
shall be responsible for any fees and payments required by the
subcontractor. A subcontractor shall agree to reasonable
audits, examinations and inspections with respect to the
performance of its activities on behalf of the Servicer. The
Servicer shall provide the Issuer and the Trustee with prior
written notice of any subcontractor relationship (other than
the existing relationships with AFSA Data Corporation and
Great Lakes Higher Education Servicing Corporation). No such
subcontractor relationship (other than the existing
relationships with AFSA Data Corporation and Great Lakes
Higher Education Servicing Corporation) shall be entered into
unless the Trustee has received written confirmation from each
Rating Agency that such relationship will not result in the
reduction or withdrawal of the rating on any Note.
b. The Issuer and the Trustee shall, in accordance with the
provisions of the Indenture, cooperate with the Servicer in
delivering or causing to be delivered Financed Student Loans
to the Servicer for origination, acquisition and servicing in
accordance with this Agreement.
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4. Acquisition Process. The Issuer, the Trustee and the Servicer agree
that:
a. Unless and until otherwise directed in writing by the Issuer,
the Servicer shall provide to the Trustee all certificates and
directions required to be delivered by the Issuer to the
Trustee under the Indenture in connection with the Financing
through acquisition of Eligible Loans and Student Loans
thereunder.
b. (1) Pursuant to the Issuer Student Loan Purchase Agreements,
the Servicer will, on behalf of the Issuer and the Trustee,
require that each Lender (in the case of FFELP Loans) or SLFC
(in the case of Alternative Loans) transfer to the Servicer or
the Servicer's bailee (or, in the case of the promissory notes
relating to Alternative Loans, to the Trustee or a custodian
designated by the Trustee or, to the extent not required under
the Indenture to be transferred to the Trustee, to the
Servicer or the Servicer's Bailee), on or before each
applicable Loan Purchase Date, physical custody and possession
of documentation and information relating to Student Loans
scheduled to be sold to the Trustee on behalf of the Issuer on
each such Loan Purchase Date. Such documentation and
information so transferred will include (i) the documents
described in Exhibit A (in the case of Issuer Student Loan
Purchase Agreements relating to Alternative Loans) or Exhibit
B (in the case of Issuer Student Loan Purchase Agreements
relating to FFELP Loans) attached to the Issuer Student Loan
Purchase Agreements (the "Loan Documents"), and (ii) such
additional documentation or information relating to the
Student Loans as the Servicer shall reasonably require for the
purpose of allowing the Student Loans to be properly serviced
by the Servicer.
(2) Pursuant to the Transfer Agreements, the Servicer will, on
behalf of the Issuer and the Trustee, require that GOAL
Funding transfer, or cause to be transferred, to the Servicer
or the Servicer's bailee (or, in the case of the promissory
notes relating to Alternative Loans, to the Trustee or a
custodian designated by the Trustee or, to the extent not
required under the Indenture to be transferred to the Trustee,
to the Servicer or the Servicer's Bailee), on or before each
applicable Loan Purchase Date (which term, as used in this
Agreement with respect to the purchase of Financed GOAL
Funding Student Loans, means the date of purchase of such
loans under the applicable Transfer Agreement), physical
custody and possession of documentation and information
relating to Student Loans scheduled to be sold to the Trustee
on behalf of the Issuer on each such Loan Purchase Date. Such
documentation and information so transferred will include (i)
the documents described in Exhibit A (in the case of GOAL
Funding Student Loan Purchase Agreements relating to
Alternative Loans) or Exhibit B (in the case of GOAL Funding
Student Loan Purchase Agreements relating to FFELP Loans)
attached to the GOAL Funding Student Loan Purchase Agreements
(the "Loan Documents"), and (ii) such additional documentation
or information relating to the Student Loans as
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the Servicer shall reasonably require for the purpose of
allowing the Student Loans to be properly serviced by the
Servicer.
c. Within a reasonable period after delivery to the Servicer (but
in no event longer than 10 Business Days unless otherwise
expressly agreed) of the documentation and information
relating to the Student Loans identified in Section 4(b)
above, the Servicer shall (i) establish and maintain all
records delivered to the Servicer with respect to each
Financed Student Loan, and complete records of the Servicer's
servicing of the Financed Student Loan from the date such
servicing commenced, (ii) maintain possession of the loan
documents described in Section 6(p) and (r) hereof that it
receives as required hereunder, and (iii) image, microfilm or
otherwise reproduce such documents and cause such
reproductions to be stored at a separate location.
d. In the course of establishing the records relating to each
Financed Student Loan as described in Section 4(c) hereof, the
Servicer shall make note of any item which comes to the
attention of the Servicer during the establishment process (it
being understood that the Servicer will not be conducting a
complete file and note examination of each Student Loan to be
Financed) which would make it appear that any Student Loan has
not been properly originated, disbursed and documented or has
not had due diligence exercised with respect thereto, in the
origination, disbursement, administration, servicing and
collection thereof, in accordance with the requirements of the
Higher Education Act, the Guarantee Program or Alternative
Loan Program, as appropriate, and the applicable Student Loan
Purchase Agreement. The Servicer shall give Lenders (in the
case of FFELP Loans) or SLFC (in the case of Alternative
Loans), as appropriate, a reasonable opportunity (but in no
event longer than 30 days or such greater period of time as
the Trustee shall consent to in writing) to correct any
exceptions or problems identified by the Servicer and to
provide such documentation and information to the Servicer as
shall be necessary to correct such exceptions or problems.
Except as otherwise permitted under the Indenture, if such
exceptions or problems are not corrected, the Servicer shall
return to the Lenders (in the case of FFELP Loans) or SLFC (in
the case of Alternative Loans), as appropriate, in accordance
with procedures and under the conditions specified in the
sections of the Student Loan Purchase Agreements relating to
the rejection or repurchase of Student Loans, any documents
and information related to Student Loans which have exceptions
or problems resulting in such loans not being Eligible Loans.
e. The Servicer shall (i) establish a course of communication
with each Lender (in the case of FFELP Loans), SLFC (in the
case of Alternative Loans) and the GOAL Funding Servicer (in
the case of Financed GOAL Funding Student Loans) sufficient to
ensure that the Servicer receives notice from each Lender,
SLFC and the GOAL Funding Servicer of all
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transactions with respect to each Student Loan prior to the
required time of delivery by the Servicer to the Trustee of
the documents required by Section 4(a) hereof, and (ii) load
all information necessary for servicing Financed Student Loans
into its servicing system so that servicing and collection of
Financed Student Loans on the basis of "simple interest" can
commence as of the Loan Purchase Date or purchase date as
required by Section 3 hereof. If interest has been collected
on any Student Loan to be purchased by the Trustee (for the
account and on behalf of the Issuer) on the basis of the "rule
of 78's," the Servicer shall cause the Lender (in the case of
FFELP Loans), SLFC (in the case of Alternative Loans) or GOAL
Funding or the GOAL Funding Servicer (in the case of Financed
GOAL Funding Student Loans) wishing to sell such loan to
convert the remaining repayment schedule for each such Student
Loan so that it may be collected on the basis of "simple
interest."
f. The Issuer and the Trustee shall promptly after each Loan
Purchase Date, upon request by the Servicer, provide to the
Servicer any additional documentation or information related
to the Financed Student Loans which either of them may have in
their possession or may reasonably be able to obtain.
g. The Servicer shall, promptly after each Loan Purchase Date,
notify the Borrower under each Financed Student Loan purchased
on such Loan Purchase Date of the assignment and transfer to
the Trustee (for the account and on behalf of the Issuer) of
the Lender's (in the case of FFELP Loans), SLFC's (in the case
of Alternative Loans) or GOAL Funding's (in the case of
Financed GOAL Funding Student Loans) interest in each such
Financed Student Loan and shall direct each such Borrower
thereafter to make all payments on such Financed Student Loan
directly to the Servicer until otherwise notified by the
Trustee. If a Financed Student Loan has been converted from
repayment under the rule of 78's to repayment under the simple
interest method, as required by Section 4(e) hereof, the
Lender (in the case of FFELP Loans), SLFC (in the case of
Alternative Loans) or GOAL Funding or the GOAL Funding
Servicer (in the case of Financed GOAL Funding Student Loans)
shall notify the Borrower and shall obtain the written consent
of the Borrower and take whatever additional action may be
necessary to effect such conversion of repayment method in
accordance with applicable legal requirements. Each Borrower
notification shall include any information required to be
included by the Higher Education Act and the requirements of
the Guarantee Agency or Alternative Loan Program, as
appropriate.
h. The assignment of each Financed FFELP Loan to the Trustee (for
the account and on behalf of the Issuer) shall be reported by
the Servicer promptly after each applicable Loan Purchase Date
to the Secretary of Education and/or the Guarantee Agency, as
appropriate, and the Trustee,
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by a properly completed Loan Transfer Report in the form
required by the Secretary of Education and/or the Guarantee
Agency.
i. If the Servicer at any time becomes aware of an event which
would (i) allow the Issuer to reject a Student Loan under the
applicable Student Loan Purchase Agreement, or (ii) allow the
Issuer to require a Lender (in the case of FFELP Loans) or
SLFC (in the case of Alternative Loans) to repurchase a
Financed Eligible Loan or Financed Student Loan or to
substitute an Eligible Loan under the applicable Student Loan
Purchase Agreement, then the Servicer shall so notify the
Issuer. If the Servicer or the Issuer determine that such a
Student Loan should be rejected or repurchased, the Trustee
shall take such action as shall be necessary to allow the
Issuer and the Trustee to enforce their respective rights
under the applicable Student Loan Purchase Agreement.
5. Origination Process. The Issuer, the Trustee and the Servicer agree
that:
a. Unless and until otherwise directed in writing by the Issuer,
the Servicer shall provide to the Trustee all certificates and
directions required to be delivered by the Issuer to the
Trustee under the Indenture in connection with the Financing
through origination of Eligible Loans and Student Loans
thereunder.
b. The Servicer shall provide disbursement and origination
services in connection with the origination and disbursement
of Eligible Loans under the Indenture. The Servicer shall
perform all services and duties customary to the origination
and disbursement of Student Loans in accordance with generally
accepted industry standards and practices and in compliance
with the Higher Education Act, applicable requirements of the
Guarantor and each Alternative Loan Program and all other
applicable federal, state and local laws and regulations.
6. Servicing. The Servicer agrees that each of the Financed Student
Loans, while held under the Indenture, shall be serviced by it in accordance
with the procedures established in the Higher Education Act, the Guarantee
Program regulations and, where applicable, each Alternative Loan Program.
Additionally, the Servicer shall perform at least the following minimum duties,
obligations and functions in connection with its servicing of such Financed
Student Loans:
a. Maintain a complete and separate file concerning each Financed
Student Loan, which file (i) shall include, without
limitation, the Loan Documents, and at least the following
information relating to each of the Financed Student Loans:
name and social security number of Eligible Borrower, actual
or estimated graduation date of the student, payment status,
days delinquent, number of payments made, next payment due
date, date of last payment received, total amount disbursed,
beginning of deferments and forbearances, and ending of
deferments and forbearances; and (ii) shall be
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maintained in a manner sufficient to allow separate
identification of the Financed Student Loans securing the
Notes from other loans serviced or owned by the Servicer
(including those owned by or on behalf of the Issuer).
b. Take all steps necessary to maintain the Guarantee coverage on
each Financed FFELP Loan in full force and effect at all
times.
c. Exercise reasonable discretion in approving borrower requests
for forbearance (as permitted under the Higher Education Act
and the Guarantee Program regulations or the applicable
Alternative Loan Program, as appropriate) where such approval
will not adversely affect the financial viability of the
Issuer and will not violate the covenants set forth in the
Indenture.
d. Exercise due diligence (within the meaning of the Higher
Education Act, the Guarantee Program regulations and the
Alternative Loan Programs) in the servicing, administration
and collection of all Financed Student Loans.
e. Attempt to collect or cause to be collected all payment of
principal and interest, Special Allowance Payments, and
Guarantee payments with respect to each Financed Student Loan
and, with respect thereto, (A) (i) cause all interest subsidy
payments and Special Allowance Payments to be forwarded by the
Secretary of Education directly to the Trustee for immediate
deposit into the appropriate Fund or Account under the
Indenture and (ii) deposit all other such payments immediately
upon receipt into a lock-box account (which shall be part of
the Revenue Fund) to be established by the Trustee in the name
of and for the account of the Trustee under circumstances
which provide for investment of such payments in accordance
with the requirements of the Indenture applicable to moneys on
deposit in the Revenue Fund. Upon submission by the Servicer
to the Secretary of Education of a billing for interest
subsidy payments or Special Allowance Payments, the Servicer
shall, upon request, provide to the Trustee and the Issuer a
written statement indicating (a) the amount billed for
interest subsidy payments and (b) the principal amount in each
Special Allowance Payment category for which the billing is
submitted, for use by the Trustee and the Issuer in verifying
amounts billed for and received with respect thereto from the
Secretary of Education. In the event of discrepancies or
disputes with the Secretary of Education, the Servicer shall
be responsible for representing the interests of the Issuer
and the Trustee in effecting a settlement with the Secretary
of Education of such discrepancies or disputes. The Servicer
shall direct the transfer from time to time of the balances in
the lock-box account to the Trustee for deposit in the
appropriate Fund or Account under the Indenture; provided,
however, that the balances in the lock-box account as of the
last day of any calendar month shall, at a minimum, be
transferred on or before the 12th day of the next succeeding
month (or the next
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preceding Business Day if such 12th day is not a Business
Day), to the Trustee for deposit in the appropriate Fund or
Account under the Indenture. On or before the date of any
transfer, the Servicer shall deliver by facsimile, hand or
mail by U.S. express mail (or other substantially equivalent
means acceptable to the Trustee) a statement to the Trustee
indicating the portion of the payments transferred on such
date which represents (x) principal payments from any source
with respect to Financed Student Loans, and (y) interest
payments from any source with respect to Financed Student
Loans.
f. Retain summary records of all contacts, follow-ups and
collection efforts (showing at least the date and subject of
each communication with the Borrower or endorser for
collection of each delinquent Financed Student Loan) and
records of all correspondence (including, without limitation,
changes for which records are required to be maintained by the
Higher Education Act, the Guarantee Program regulations and,
where applicable, each Alternative Loan Program) relating to
each Financed Student Loan.
g. Prepare and maintain all appropriate accounting records with
respect to all transactions related to each Financed Student
Loan, including, but not limited to, accounting for all
payments of principal, interest, and Guarantee payments with
respect to each Financed Student Loan and Special Allowance
Payments relating to all Financed FFELP Loans.
h. Handle the processing of all adjustments including, without
limitation, forbearances, reinstatements, deferments, refunds
and loans paid in full.
i. Handle the processing of all address changes and the updating
of the address records accordingly.
j. In the case of defaulted Financed FFELP Loans, take all steps
necessary to file and prove a claim for loss with the
Secretary of Education or the Guarantee Agency, as the case
may be and as required, and assume responsibility for all
necessary communication and contact with the Secretary of
Education or the Guarantee Agency, as the case may be and as
required, to recover on such defaulted Financed FFELP Loans
within the time required by the Higher Education Act and the
requirements of the Guarantee Agency. In the case of defaulted
Financed Alternative Loans, take all steps necessary to
recover on such defaulted Financed Alternatives Loans in
accordance with the requirements of the applicable Alternative
Loan Program.
k. In the case of a claim for loss being denied by the Secretary
of Education or the Guarantee Agency, as the case may be,
under circumstances resulting in a Lender being required by a
Student Loan Purchase Agreement to repurchase a Financed FFELP
Loan, take such action as shall be necessary to allow the
Issuer or the Trustee to cause such Lender
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to repurchase such Financed FFELP Loan or to substitute a
different Eligible Loan in accordance with the requirements of
the applicable Student Loan Purchase Agreement.
l. Prepare and file with the Secretary of Education or the
Guarantee Agency, as the case may be and as required, a
Lender's manifest of Financed FFELP Loans on all new accounts,
accounts paid in full and accounts converted to a repayment
basis.
m. Prepare and furnish to the Issuer and the Trustee by the l0th
day of each month the following reports with respect to
activity concerning each Financed Student Loan during the
preceding month:
(1) upon request, computer generated reports showing, in
reasonable detail, all transactions during such
preceding month concerning each Financed Student Loan
serviced by the Servicer;
(2) upon request, a report showing the unpaid principal
balance of each Financed Student Loan as of the last
day of such preceding month;
(3) upon request, with respect to Financed Student Loans
in repayment, a delinquency report or reports showing
all accounts past due as of the last day of such
preceding month in categories of 0-30 days, 31-60
days, 61-90 days, 91-120 days, 121-150 days, 151-180
days, 181-270 days and over 270 days;
(4) upon request, a report of Financed Student Loans paid
in full during such preceding month;
(5) a report specifying the number of and the aggregate
unpaid principal amount of claims made during such
preceding month on defaulted Financed Student Loans
and during the then current fiscal year of the Issuer
and the number and aggregate amount of such claims
which were rejected by the Guarantee Agency, if any,
during such month and during the then current fiscal
year of the Issuer, the number and aggregate unpaid
principal amount of Financed Student Loans being
serviced by the Servicer as of the last day of such
preceding month, and the aggregate unpaid principal
amount of defaulted Financed Student Loans as of the
last day of such preceding month; and
(6) copies of all formal reports filed by the Servicer
with respect to Financed Student Loans with any
person or entity and such other reports which are
available to the Servicer and which may be reasonably
requested from time to time by the Issuer or the
Trustee.
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n. With respect to Financed Student Loans in repayment, prepare
and furnish to the Issuer and the Trustee upon request, copies
of all file updates and transactions listings, including,
without limitation, credits applied, Financed Student Loans
paid and exceptions listings.
o. Identify on the servicing system the Notes as the source of
financing for each such Financed Student Loan.
p. Maintain a duplicate or copy of the file or record (which may
be on microfilm or computer tape) pertaining to each Financed
Student Loan at a location separate and apart from that at
which the original of such file is maintained (such duplicate
file to include, without limitation, a copy of each loan
application, interim and payout note(s) if applicable,
Guarantee Agreement, disclosure statement and Secretary of
Education Loan Transfer Statement, where applicable).
q. Maintain the original promissory note pertaining to each
Financed Student Loan (other than Financed Alternative Loans
held by the Trustee or a custodian designated by the Trustee)
to be maintained in secure storage facilities to protect, to
the extent reasonable and possible under the circumstances,
such original file concerning such Financed Student Loan.
r. Obtain and maintain imaged or microfilm copies and/or back-up
computer tapes (but in any case a copy of the promissory note
relating to each Financed Student Loan) at a separate location
adequate to ensure against loss or damage to the files
pertaining to the Financed Student Loans by reason of any
casualty or theft; obtain and maintain in force adequate
insurance for loss or damage to the file pertaining to the
Financed Student Loans by reason of any casualty or theft; and
the Servicer shall be liable for any costs associated with, or
loss to the Issuer resulting from, the reconstruction of data
related to the Financed Student Loans in the event of natural
disaster or the malfunction of any computer systems.
s. Maintain in force fidelity bonds upon all personnel of the
Servicer insuring against any loss of money or other property
which the Trustee, the Issuer or the Servicer might suffer as
a consequence of any fraudulent or dishonest act of such
personnel, in an amount required by any supervisory agency of
federal or state government having jurisdiction, but if not so
required, then in an amount equal to at least the Servicer's
current coverage amounts and deductibles (as evidenced by the
insurance certificate delivered to the Issuer herewith) or
such lesser amount as shall be in writing determined from time
to time by the Issuer, with the approval of the Trustee, to be
sufficient.
t. Answer all lawful inquiries received by the Servicer from
Lenders (in the case of FFELP Loans), SLFC (in the case of
Alternative Loans), the GOAL Funding Servicer (in the case of
Financed GOAL Funding Student
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Loans), Borrowers, Eligible Institutions, the Secretary of
Education, the Guarantee Agency, the Issuer or the Trustee
pertaining to Financed Student Loans, school status or
refunds, and cooperate to the extent necessary to gather the
information needed to answer such inquiries; provided,
however, that such inquiries may be referred to the Eligible
Institution which a student attended or is attending, if
necessary, and the Servicer shall have no responsibility with
respect to disputes between a Borrower and such Eligible
institution regarding tuition or registration.
u. Any communication received by the Servicer which is in the
nature of a complaint, shall be immediately answered by the
Servicer.
v. File with the Secretary of Education in an accurate, timely
and complete manner "Lenders Request for Payment of Interest
and Special Allowance" (ED Form 799), or such other form or
request for payment directly to the Trustee of interest
subsidy payments and Special Allowance Payments as the
Secretary of Education may require, from time to time but in
no event later than fifteen (15) Business Days after the end
of each calendar quarter.
In addition, the Servicer agrees that it will, for the fees specified in Section
18 hereof, perform all servicing obligations relating to Financed Student Loans
required of the Issuer or the Trustee, or which the Issuer or the Trustee is
required to cause the Servicer to perform.
7. Due Diligence. The Servicer agrees that in discharging its
obligations hereunder it shall:
a. Exercise due diligence in the origination, disbursement,
administration, servicing and collection of all Financed
Student Loans as the term "due diligence" is used in the
Higher Education Act and the Guarantee Program regulations;
b. Exercise reasonable care and diligence in the origination,
disbursement, acquisition, administration and collection of
all Financed Student Loans;
c. Attempt to collect or cause to be collected the Financed
Student Loans in a competent, diligent and orderly fashion,
and in a manner substantially in accordance with the
requirements of the Higher Education Act, the Secretary-of
Education, the Guarantee Agency, the Indenture (including
specifically but without limitation the provisions of Sections
5.5 through 5.8 of the Indenture), the Alternative Loan
Programs, the Student Loan Purchase Agreements and each
applicable Federal Reimbursement Contract and Guarantee
Agreement; and
d. Exercise reasonable prudence in those aspects of the
administration of the Program which are within its area of
responsibility.
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8. Liaison with Lenders, SLFC, GOAL Funding, Eligible Institutions and
Other Parties. The Servicer shall maintain one or more toll-free WATS telephone
lines to provide telephone access to its Student Loan servicing office in
Aberdeen, South Dakota, by the Issuer, the Trustee, Lenders, SLFC, GOAL Funding,
Borrowers and Eligible Institutions. The applicable numbers for such telephone
lines shall be provided in writing to the Issuer and the Trustee and to each
Borrower. The Issuer, the Trustee and each such Borrower shall be promptly
advised in writing of each change to such telephone number.
9. Right of Inspection; Availability of Records; Audits.
a. Subject to any restrictions of applicable law, the Issuer, the
Trustee, each Guarantee Agency, the Secretary or any successor
thereto, the Comptroller of the Currency and/or any
governmental agency having jurisdiction over the Issuer or the
Trustee (and, in each case, such entities' representatives)
(any such entity being referred to herein as the "Examiner"),
shall have the right, at any time and from time to time,
during normal business hours, and upon reasonable notice to
the Servicer (which may be less than 5 days), to examine and
audit any and all of the Servicer's records or accounts
pertaining to any Financed Student Loan. Under the preceding
sentence, the Examiner shall have the right to examine and
make copies of any documents related to Financed Student Loans
and to interview personnel involved in the servicing. Subject
to any access restrictions in any agreement for provision of
computer or data processing equipment or related services, the
Servicer shall make available to the Examiner without charge
all manuals, forms, files and descriptions of the software
necessary to enable the Examiner to interpret and analyze the
information and reports produced by the system, it being
understood that the Servicer shall retain all title, rights
and interest thereto and therein.
b. The Issuer and the Trustee shall each have the right to
require the Servicer to furnish such documents as it in its
sole discretion from time to time deems necessary to determine
that the Servicer has complied with the provisions of this
Agreement, the Student Loan Purchase Agreements and the
Indenture, including, without limitation, Sections 5.5 through
5.8 of the Indenture.
c. If and to the extent required by the Higher Education Act and
the Guarantee Program regulations, the Servicer shall cause to
have prepared and shall submit to the Secretary of Education
and the Guarantee Agencies on or before the respective due
dates thereof:
(1) any third-party servicer compliance audits and
audited financial statements required under the
Higher Education Act and the Guarantee Program
regulations relating to the Servicer and its
servicing of Financed FFELP Loans; and,
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(2) any lender compliance audits required under the
Higher Education Act and the Guarantee Program
regulations relating to the Trustee (as the holder of
the Financed FFELP Loans) and the Financed FFELP
Loans.
The Servicer shall provide to the Issuer and the Trustee
promptly after it becomes available (and in no event later
than 10 Business Days) a copy of each such audit and any other
audit or report required by the Secretary of Education, any
Guaranty Agency or other third party in connection with the
Servicer's activities in originating, acquiring and servicing
the Financed FFELP Loans.
d. The Servicer shall provide to the Issuer and the Trustee
copies of its annual third party (SAS70) audit reports, if
such reports are prepared, promptly following the Servicer's
receipt thereof.
e. The Servicer shall provide to the Issuer and the Trustee its
annual financial statements, audited by a firm of independent
certified public accountants, within one hundred twenty (120)
days of the end of each fiscal year of the Servicer; and its
quarterly unaudited financial statements, within forty-five
(45) days of the end of each fiscal quarter of the Servicer.
f. If reports are not prepared and submitted under Section 9(c)
hereof or if the Trustee determines it is necessary as part of
a request under Section 9(b) hereof, upon the request of the
Trustee or the Issuer, the Servicer shall undergo an annual
audit, examination and review conducted by a firm of
independent public accountants with experience in auditing
student loan program operations under the Higher Education
Act, independently selected by the Issuer (or the Trustee if
the Issuer fails to make such selection), of its systems,
programs, procedures, services and operations to determine the
Servicer's compliance with this Agreement. If any such audit,
examination and review shall indicate to the Issuer or the
Trustee that the Servicer is not in material compliance with
its obligations under this Agreement, this Agreement may be
terminated by the Issuer or the Trustee on the basis of
Section 11(a)(3) hereof (an audit, examination or review under
this subsection, however, is not required for a termination
under Section 11(a)(3)).
g. The costs of audits and reports prepared under subsections (c)
through (f) above shall be paid by the Servicer.
10. Amendments; Benefits; Termination. This Agreement (a) may be
amended, supplemented or modified only by written instrument duly executed by
all parties hereto and only upon the receipt of a written certificate from the
Issuer and the Trustee that such amendment, supplement or modification will not
deprive any Holder of the Notes in any material respect of the security afforded
by this Agreement, (b) shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and assigns, and (c) except
as
14
provided in Section 11 hereof, may not be terminated (except for cause) or
assigned by any party hereto without the prior written consent of the other
parties hereto; provided that the Trustee may make an assignment to its
successor as trustee under the Indenture if the Trustee shall cease serving as
trustee under the Indenture.
11. Termination.
a. This Agreement shall terminate with respect to the Servicer
(in the case of any of the following events relating solely to
the Servicer) or the Administrator (in the case of any of the
following events relating solely to the Administrator) or both
(in the case of any of the following events relating to both
the Servicer and the Administrator):
(1) upon the expiration of the term stated in Section 1
hereof;
(2) if the Servicer or the Administrator shall:
(a) admit in writing its inability to pay its
debts generally as they become due;
(b) consent to the appointment of a custodian
(as that term is defined in the federal
Bankruptcy Code) for or assignment to a
custodian of the whole or any substantial
part of the property of the Servicer or the
Administrator, as the case may be, or f ail
to stay, set aside or vacate within sixty
(60) days from the date of entry thereof any
order or decree entered by a court of
competent jurisdiction ordering such
appointment or assignment;
(c) commence any proceeding or file a petition
under the provisions of the federal
Bankruptcy Code for liquidation,
reorganization or adjustment of debts, or
under any insolvency law or other statute or
law providing for the modification or
adjustment of the rights of creditors, or
fail to stay, set aside or vacate within
sixty (60) days from the date of entry
thereof any order or decree entered by a
court of competent jurisdiction pursuant to
an involuntary proceeding, whether under
federal or state law, providing for
liquidation or reorganization of the
Servicer or the Administrator, as the case
may be, or modification or adjustment of the
rights of creditors; or
(d) contest in writing the validity or
enforceability of this Agreement as a whole
or deny in writing that this Agreement as a
whole is binding upon the Servicer or the
Administrator, as the case may be;
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(3) upon written notice by the Issuer or the Trustee to
the Servicer or the Administrator, as applicable, if
the Servicer or the Administrator materially breaches
its obligations, or any representation or warranty,
under this Agreement or upon written notice by the
Issuer or the Trustee to the Servicer on the basis of
Section 9(f) hereof; or
(4) upon written notice by the Issuer or the Trustee to
the Servicer, if at any time the Guarantee Agency or
the Department of Education has issued a notice of
suspension or termination against the Servicer, or
has suspended or terminated the payment of all claims
with respect to Financed FFELP Loans or, in the case
of the Department of Education, all Special Allowance
Payments or interest benefit payments with respect to
Financed FFELP Loans as a result of actions or
omissions of the Servicer (it being understood that
the cessation of less than all such claims or
payments may constitute a breach under Section
11(a)(3) hereof).
Notwithstanding the foregoing, any termination pursuant to
clauses (3) or (4) of this subsection (a) will be subject to
the following conditions. If such breach under clause (3) or
suspension or termination under clause (4) is capable of being
cured within ninety (90) days without, in the judgment of the
Trustee, adversely affecting the security provided to the
Noteholders by the Financed Student Loans and the related
Guarantee payments, Special Allowance Payments and interest
subsidy payments, the Servicer or the Administrator, as the
case may be, shall have the right to cure such breach, within
ninety (90) days of the date the Servicer or the
Administrator, as the case may be, learns of such breach or
receives notice of such breach from the Issuer or the Trustee,
prior to such termination. If such breach is not capable of
being cured in the manner specified above, no termination
pursuant to clause (3) or (4) shall occur if, in the judgment
of the Trustee, such breach or suspension or termination will
not adversely affect the security provided the Noteholders by
the Financed Student Loans and any related Guarantee, Special
Allowance Payments and interest subsidy payments.
Each of the Servicer and the Administrator agrees to promptly
notify the Trustee, the Issuer and each Rating Agency of any
occurrence or condition which constitutes (or which with the
passage of time or the giving of notice or both would
constitute) an event permitting the termination of this
Agreement.
b. If this Agreement shall be terminated with respect to the
Servicer under subsection (a), or if any Financed Student Loan
is sold or otherwise transferred by the Trustee (for the
account and on behalf of the Issuer) to another person, then
any Financed Student Loans then being serviced hereunder (or
the particular Financed Student Loans that are sold or
16
otherwise transferred, as the case may be) shall be
transferred by the Servicer to a servicing system of the
Issuer, the Trustee or their designee and (i) the Servicer
shall promptly provide the Issuer and the Trustee with every
reasonable and necessary assistance, including data processing
support, to timely transfer the Financed Student Loans and all
promissory notes and all records related to the Financed
Student Loans (including system records), together with all
necessary or proper assignments, transfers and documents of
authority, and (ii) the actual documented costs and expenses
of such transfer and of the conversion by the replacement
servicer of such Financed Student Loans to such replacement
servicing system shall be paid by the Servicer if such
termination is by the Issuer or the Trustee by reason of the
occurrence of an event described in Section 11(a)(2), (3) or
(4). There shall be no additional charge to the Issuer or the
Trustee for the Servicer's handling of assignments and
transfers of Financed Student Loans in the ordinary course.
c. If this Agreement shall be terminated with respect to the
Servicer or the Administrator, or both, under subsection (a),
the terminated party agrees that it shall continue to perform
all its obligations under this Agreement until a successor
servicer or administrator, as the case may be, has been
appointed or until otherwise directed in writing by the
Trustee.
12. Disposition of Files on Termination. Upon termination of this
Agreement with respect to the Servicer or the Administrator, all files and
information held by the Servicer or the Administrator, as the case may be, in
connection herewith (including computer information) will be turned over to the
Issuer or its designee in such form (which may include microfilm) as the Issuer
may reasonably request, upon reimbursement by the Issuer for reasonable costs,
except as otherwise specified in Section 11(b) above.
13. Servicer and Administrator Not Agents. Neither the Servicer nor the
Administrator is, nor shall they hold themselves out to be, the agent of the
Issuer or the Trustee except for the specific limited purposes set forth in this
Agreement. Except as set forth in this Agreement, the Issuer and the Trustee may
not direct the methods or means by which the Servicer or the Administrator shall
accomplish its duties under this Agreement.
14. Maintenance of Records.
a. The Servicer shall retain information and documentation
pertaining to the Financed Student Loans (including, but not
limited to, the information and documentation to be delivered
to the Servicer in accordance with Section 3 hereof) which
comes into the physical custody or possession of the Servicer
as a result of this Agreement or by the servicing of the
Financed Student Loans by the Servicer, unless and until the
Trustee shall notify the Servicer in writing to the contrary,
whereupon such physical custody and possession shall be
transferred in the manner directed by the Trustee.
Nevertheless, the Trustee shall retain possession of the
original Student Loan Note with respect to each Alternative
Loan and may elect to retain
17
such other original documentation as it may, upon the advice
of Counsel, consider necessary or advisable to protect its
first security interest in the Financed Student Loans.
b. The Servicer shall maintain original documentation and system
records for each Financed Student Loan, segregated from any
other loans or assets of the Servicer or any other party and
clearly labeled so as to identify the Financed Student Loans
as property of the Trustee (for the account and on behalf of
the Issuer) and as security for the Notes, provided that the
Servicer may combine original documentation and system records
for each consolidated serial loan so long as the Servicer does
so in a manner which will ensure that each Financed Student
Loan comprising such a consolidated serial loan may be
separately identified and transferred or sold. The Servicer
shall hold such documentation and records subject to this
Agreement and the Indenture. From time to time the Servicer
shall, upon request by the Trustee or the Issuer and the
Trustee, submit such information and take such action as may
be reasonably required by the Trustee or the Issuer and the
Trustee, to assure that the Financed Student Loans are
maintained in a proper and secure condition.
c. Except as required by law and permitted by Section 6(t)
hereof, the Servicer shall maintain the confidentiality of the
information provided hereunder and shall not disclose or in
any way communicate such information to third parties without
the express written consent of the Issuer and the Trustee. The
Servicer shall provide a proper security system for access to
original documents and to its computer system.
d. With respect to the original promissory note relating to each
Financed Student Loan held by the Servicer or its bailee, the
obligations of the Servicer shall be only to the Trustee
during the time the Notes are Outstanding and the Issuer shall
have no authority during the time the Notes are Outstanding to
direct the Servicer in its activities with respect to such
original promissory notes.
15. Representations, Warranties and Agreements. SLFC hereby represents,
warrants and agrees as follows:
a. SLFC is duly organized and validly existing as a corporation
in good standing under the laws of the State of South Dakota
and is duly qualified to conduct its business in good standing
in the State of South Dakota and is qualified to do business
in all other States where action by SLFC is required to carry
out the obligations of the Servicer and the Administrator
under this Agreement.
b. SLFC has the power and authority (corporate and other) to own
its assets and carry on its business as now being conducted
and to enter into, and perform in accordance with the terms
of, this Agreement.
18
c. SLFC has, and its officers acting on its behalf have, full
legal authority to engage in the transactions contemplated by
this Agreement; the execution and delivery of this Agreement,
the consummation of the transactions herein contemplated and
compliance with the terms, conditions and provisions of this
Agreement do not and will not conflict with or result in a
breach of any of the terms, conditions or provisions of the
articles of incorporation or bylaws of SLFC or any agreement
or instrument to which SLFC is a party or by which it is
bound, or constitute a default thereunder; SLFC is not a party
to or bound by any agreement or instrument or subject to any
charter or other corporate restriction or judgment, order,
writ, injunction, decree, law, rule or regulation which may
materially and adversely affect the ability of SLFC to perform
its obligations under this Agreement, and this Agreement
constitutes a valid and binding obligation of SLFC enforceable
against it in accordance with its terms, and no consent,
approval, license, exemption or authorization of, or filing or
registration with, any government or governmental body (i)
which has not been made or obtained is required in connection
with the execution and delivery of this Agreement, and (ii)
which has not been or will not be made or obtained is or will
be required in connection with the consummation of the
transactions herein contemplated.
16. Notification to Borrowers. The parties hereto acknowledge and agree
that each Student Loan Purchase Agreement provides that the Lender (in the case
of FFELP Loans) or SLFC (in the case of Alternative Loans), as the case may be,
which is a party thereto, and that each Transfer Agreement provides that GOAL
Funding, shall, to the extent required by the Higher Education Act and the
Guarantee Program regulations or the Alternative Loan Program, as appropriate,
notify, or cause to be notified, each Borrower under each Financed Student Loan
of the assignment and transfer to the Trustee (but for the account and on behalf
of the Issuer) of the Lender's, SLFC's or GOAL Funding's interest in such
Financed Student Loan and shall direct the Borrower to make all payments thereon
directly to the Servicer until otherwise notified by the Trustee. To the extent
permitted by the Higher Education Act and the Guarantee Program regulations or
the Alternative Loan Program, as appropriate, the Servicer may, on behalf of the
Issuer, waive this requirement of any Lender (in the case of FFELP Loans), SLFC
(in the case of Alternative Loans) or GOAL Funding (in the case of Financed GOAL
Funding Student Loans) if the notice is sent by the Servicer on behalf of such
Lender, SLFC or GOAL Funding.
17. Obligations to Forward Payments. The parties hereto acknowledge and
agree that each Student Loan Purchase Agreement provides that if the Lender (in
the case of FFELP Loans) or SLFC (in the case of Alternative Loans), as the case
may be, which is a party thereto, and that each Transfer Agreement provides that
if GOAL Funding, after any Loan Purchase Date, is the recipient of any funds,
from whatever source received, which constitute payment of principal, interest
or Special Allowance Payments accrued with respect to any Financed Student Loan
for any period subsequent to such Loan Purchase Date, such Lender, SLFC or GOAL
Funding shall promptly remit, or cause to be remitted, all such funds to the
Servicer or in such manner as the Trustee may otherwise direct. If any such
funds shall he received by the Trustee or by a person to whom the Trustee has
directed such funds to be remitted, the Trustee shall furnish the Servicer with
prompt advice as to the receipt thereof.
19
18. Fees; No Petition. Subject to the following paragraph, the Issuer
shall pay, or shall cause the Trustee to pay, from funds available for such
purpose under the Indenture, to the Servicer and the Administrator, for the
performance of the Servicer's and the Administrator's functions under this
Agreement, a monthly fee in an amount each month equal to .0875% of the
outstanding principal balance of all Financed Student Loans as of the last day
of the immediately preceding month; provided, however, that such monthly fee
shall be reduced by an amount equal to the Administrative Expenses incurred by
the Issuer for employee compensation, subject to a maximum amount for each
calendar year of $50,000, unless the Servicer agrees to a higher amount. Such
fee shall be paid to the Servicer on a monthly basis within fifteen (15) days of
receipt by the Trustee of an itemized written monthly billing statement from the
Servicer. The Servicer shall promptly remit to the Administrator its allocable
portion (equal to one-fourth) of such fee. If the Servicer or the Administrator
believes that it is necessary to increase the monthly fee payable hereunder, it
shall provide a written request to the Issuer and the Trustee of its need for an
increase in such fee, together with all information required under the Indenture
for the Trustee to approve an increase in the fees payable hereunder. Each of
the Servicer and the Administrator acknowledges that such fee shall not be
increased unless the conditions for increasing such fee under the Indenture have
been satisfied.
Notwithstanding the provisions of the preceding paragraph, 1/7th of the
monthly fee otherwise payable pursuant to such paragraph will be deferred (any
such fees herein referred to as "Deferred Fees") if and for so long as any Notes
are Outstanding and either of the following conditions (a "Fee Deferral
Condition") exist:
(1) as of the first Monthly Payment Date following a calendar
quarter, (a) the ▇▇▇ Spread (as hereinafter defined) shall have been
greater than 1% per annum for the preceding three (3) consecutive
calendar quarters, and (b) the Trustee shall not have received, within
five (5) Business Days after such Monthly Payment Date, a Corporation
Certificate that, based on a Cash Flow Projection (a copy of which
shall be provided to each Rating Agency), continuing to pay the full
monthly fees hereunder will not materially adversely affect the
Issuer's ability to pay Debt Service on the Outstanding Notes and
Outstanding Other Obligations, Carry-Over Amounts (including accrued
interest thereon) with respect to Outstanding Notes, Administrative
Expenses or Note Fees or to make the required deposits to the credit of
the Indemnification Fund; or
(2) as of the last day of the preceding month, the Subordinate
Percentage is equal to or less than 96%.
Any Deferred Fees will become payable at such time as the applicable
Fee Deferral Condition ceases to exist and will be paid at the rate of 1/12th of
the Deferred Fees for each of the following twelve (12) months, or at such other
rate as will not, based on a Cash Flow Projection (a copy of which shall be
provided to each Rating Agency), materially adversely affect the Issuer's
ability to pay Debt Service on the Outstanding Notes and Outstanding Other
Obligations, Carry-Over Amounts (including accrued interest thereon) with
respect to Outstanding Notes, Administrative Expenses or Note Fees or to make
the required deposits to the credit of the Indemnification Fund. As used in this
paragraph, "▇▇▇ Spread" means, for any calendar quarter, the amount by which the
average of One-Month LIBOR for each Business Day during such quarter exceeds the
average of the bond equivalent yields of the 91-day U.S.
20
Treasury Bills auctioned during such calendar quarter. The Trustee shall
determine the ▇▇▇ Spread for each calendar quarter no later than the first
Monthly Payment Date following such calendar quarter. The Servicer shall
determine the Subordinate Percentage as of the end of each month and shall
include such percentage in the monthly report prepared and submitted to the
Trustee in accordance with the first sentence of Section 21(d) hereof.
Each of the Servicer and the Administrator acknowledges that the Issuer
and the Trustee contemplate paying all fees payable under this Agreement solely
from funds available for such purpose in the Administration Fund created under
the Indenture, which funds are primarily dependent upon collection by the
Servicer and receipt by the Trustee of payments with respect to the Financed
Student Loans. Each of the Servicer and the Administrator covenants and agrees
to continue to be bound by the terms and provisions of this Agreement relating
to the Financed Student Loans in all respects, and to perform for a period of
one hundred twenty (120) days its obligations hereunder, regardless of the
receipt or non-receipt on a timely basis by it of any payments in respect of
fees under this Agreement.
Each of the Servicer and the Administrator, by entering into this
Agreement, covenants and agrees that it will not at any time institute against
the Issuer, or join in any institution against the Issuer of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under any United States Federal or state bankruptcy or similar law
in connection with any obligation relating to this Agreement.
19. Cooperation. Each party covenants and agrees to fully cooperate
with the other parties hereto to facilitate the transactions contemplated
hereunder and by the Student Loan Purchase Agreements and the Indenture.
20. Payment of Expenses. Each party to this Agreement shall pay its own
expenses incurred in connection with the preparation, execution and delivery of
this Agreement, including, but not limited to, the fees and expenses of legal
counsel.
21. Administrative Functions to be Performed by Servicer and
Administrator. The Issuer, the Trustee and the Servicer agree that the Servicer
shall perform the following administrative functions on behalf of the Issuer as
part of its responsibilities under this Agreement.
a. Provide all necessary personnel, facilities, equipment, forms
and supplies for operating the Program in accordance with
Sections 5. 5 through 5.8 of the Indenture;
b. Disseminate information on the Program to Lenders and to
student financial aid officers in Eligible Institutions and to
other persons as necessary;
c. Maintain accurate and complete records on all aspects of the
Program, which records shall be available for inspection at
any time by any director or officer of the Issuer and by
auditors employed by the Issuer; and
21
d. Prepare and submit to the Trustee on or before the 25th day of
each month (and if such day is not a Business Day, on the next
succeeding Business Day), the monthly reports required to be
delivered to the Noteholders pursuant to Section 5.23 of the
Indenture, the form of which is included as Exhibit A hereto.
The Servicer also shall (i) determine the Net Loan Rate and
notify the Trustee and the Auction Agent thereof at the times
required by the Indenture, and (ii) prepare for filing, and
provide such other assistance as is required by the Issuer to
file, any other reports required to be filed by the Issuer
under the Higher Education Act and any Alternative Loan
Program.
The Issuer, the Trustee and the Administrator agree that the
Administrator shall, on behalf of the Issuer and as part of its responsibilities
under this Agreement, cause the duties and responsibilities of the Issuer under
the Indenture to be performed, including, but not limited to, the actions set
forth below. The Administrator shall advise the Issuer when action by the Issuer
is necessary to comply with the Issuer's duties under the Indenture and the
agreements relating thereto. The Administrator shall prepare, or shall cause the
preparation by other appropriate persons of, all such documents, reports,
filings, instruments, certificates and opinions (other than those to be prepared
by the Servicer as part of its responsibilities under this Agreement) as it
shall be the duty of the Issuer to prepare, file or deliver pursuant to the
Indenture. In furtherance of the foregoing, the Administrator shall take all
appropriate action, including but not limited to, the following:
1. obtaining and preserving the Issuer's qualification to do
business in each jurisdiction in which such qualification is
or shall be necessary to protect the validity and
enforceability of the Indenture, the Notes and each instrument
and agreement included in the Trust Estate;
2. preparing all supplements, amendments, financing statements,
continuation statements, instruments of further assurance and
other instruments, in accordance with the relevant provisions
of the Indenture, necessary to protect the Trust Estate;
3. arranging for the delivery of any opinions of counsel and
certificates of officers of the Issuer and other statements
required under the relevant provisions of the Indenture;
4. preparing and obtaining documents and instruments required for
the release of the Issuer from its obligations under the
Indenture;
5. monitoring the Issuer's obligations as to the satisfaction and
discharge of the Indenture;
6. preparing, obtaining or filing the instruments and other
documents required for the release of Trust Estate from the
lien of the Indenture;
22
7. taking such actions as may be required of the Issuer under the
Indenture upon the occurrence and continuance of a default or
an Event of Default thereunder;
8. causing the directions of the Issuer to be carried out in
connection with opening one or more accounts in the Issuer's
name, preparing any orders of the Issuer and other documents
required, and taking all other actions necessary, with respect
to investment and reinvestment of funds in the Funds and
Accounts established under the Indenture in accordance with
the investment criteria and requirements of the Indenture and
the investment policies adopted by the Issuer from time to
time;
9. preparing or coordinating the obtaining of all documents
required with respect to any requests by the Issuer of the
Trustee to take any action under the Indenture;
10. preparing orders of the Issuer and obtaining all documents as
necessary or required for the execution of any amendments or
supplements to the Indenture;
11. preparing and delivering to the Trustee any agreements with
respect to notice provisions; and
12. taking such actions as may be required of the Issuer under any
agreement between the Issuer and other parties relating to the
Indenture.
13. The Servicer, on behalf of itself and on behalf of the Issuer,
as the case may be, shall provide all notices and perform all
other activities required of the Servicer or of the Issuer to
comply with the requirements of the ▇▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act and
regulations promulgated thereunder in connection with the
origination, acquisition, holding and servicing of the
Financed Student Loans and in connection with otherwise
performing services hereunder.
22. Servicer as Bailee.
a. The Servicer, in holding Loan Documents relating to the
Financed Student Loans, holds such Loan Documents as bailee
for and on behalf of the Trustee.
b. No Loan Documents held by the Servicer on behalf of the
Trustee hereunder shall be released or delivered to the Issuer
or any other person (other than claim filings in the ordinary
course with the Guaranty Agencies and sales or transfers
permitted under the Indenture) without the prior written
consent of the Trustee.
c. The Servicer shall maintain all Loan Documents in a manner
which clearly identifies them as being held by the Servicer as
bailee for and on
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behalf of the Trustee and not for or on behalf of the Issuer
or any other person.
d. No assignment or purported assignment by the Issuer or any
other person (other than the Trustee) of any Loan Documents
held by the Servicer on behalf of the Trustee hereunder shall
be recognized by the Servicer, and the Servicer shall provide
immediate notice to the Trustee upon receiving notice of any
such assignment or purported assignment.
e. The Servicer hereby represents, warrants and acknowledges that
the Servicer, in serving as bailee under this Section, is
acting exclusively as the bailee and agent of the Trustee, and
not of the Issuer or any other person, with respect to the
Loan Documents.
f. The Servicer hereby waives any lien which the Servicer might
have pursuant to statute or otherwise available at law or in
equity on the Financed Student Loans and the Loan Documents
held by the Servicer on behalf of the Trustee hereunder,
including all monies and proceeds derived therefrom or
relating thereto.
23. Indemnification. The Servicer and the Administrator shall each
indemnify and hold harmless the Issuer and the Trustee from and against any
loss, cost, damage or expense, including reasonable attorney's fees, to the
extent that such loss, cost, damage or expense arises out of the failure of the
Servicer or the Administrator, as the case may be, to perform its obligations
under this Agreement. In addition, and without limiting the generality of the
foregoing, the Servicer and the Administrator shall each defend and indemnify
the Issuer and the Trustee against, and hold each harmless from, all claims,
losses, liabilities and expenses (including reasonable attorneys' fees) arising
from or in connection with:
a. any claim of infringement of any patent, trade secret,
copyright, trademark, service ▇▇▇▇, trade name or other
proprietary right alleged to have occurred as a result of the
performance of services hereunder by the Servicer or the
Administrator, as the case may be; or
b. any claim by an employee of the Servicer or the Administrator,
as the case may be, arising in consequence of, or relating to,
the employee's employment by the Servicer or the
Administrator, as applicable.
24. Miscellaneous.
a. Any material written communication received at any time by the
Issuer or the Trustee with respect to a Financed Student Loan
or the Borrower under such a Financed Student Loan shall be
immediately transmitted by the Issuer or the Trustee, as the
case may be, to the Servicer. Such communications shall
include, but not be limited to, letters, notices of death or
disability, adjudications of bankruptcy and like documents,
and forms requesting forbearance, deferment of repayment or
loan cancellations.
24
b. This Agreement shall be governed by the laws of the State of
South Dakota.
c. All covenants and agreements herein contained shall extend to
and be obligatory upon all successors and assigns of the
respective parties hereto.
d. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original and all of which
shall be deemed to constitute but one and the same instrument.
e. If any provisions of this Agreement shall be held, or deemed
to be, or shall, in fact, be inoperative or unenforceable as
applied in any particular situation, such circumstance shall
not have the effect of rendering any other provision or
provisions herein contained invalid, inoperative or
unenforceable to any extent whatsoever. The invalidity of any
one or more phrases, sentences, clauses or paragraphs herein
contained shall not affect the remaining portions of this
Agreement or any part hereof.
f. All notices, requests, demands or other instruments which may
or are required to be given by any party to another party,
shall be in writing, and each shall be deemed to have been
properly given when served personally on an officer of the
party to which such notice is to be given, or upon expiration
of a period of forty-eight (48) hours (excluding weekends and
holidays) from and after the postmark thereof when mailed
postage prepaid by registered or certified mail, requesting
return receipt, addressed as follows:
if intended for the Issuer:
Education Loans Incorporated
▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
if intended for the Trustee:
U.S. Bank National Association
▇.▇. ▇▇▇ ▇▇▇▇
141 North Main Avenue, Suite 300
Sioux Falls, South Dakota 57104-6429
Attention: Corporate Trust Department
if intended for the Servicer or the Administrator:
Student Loan Finance Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Any party may change the address to which subsequent notices
are to be sent to it by notice to the others given as
aforesaid, but any such notice of change, if sent by mail,
shall not be effective until the fifth business day after it
is mailed.
g. This Agreement may not be terminated by any party hereto
except in the manner and with the effect herein specifically
provided.
h. Time is of the essence in this Agreement.
i. No remedy by the terms of this Agreement conferred upon or
reserved to the Trustee or the Issuer is intended to be
exclusive of any other remedy, but each and every such remedy
shall be cumulative and in addition to every other remedy
given under this Agreement or existing at law or in equity or
by statute on or after the date of this Agreement, including,
without limitation, the right to such equitable relief by way
of injunction, mandatory or prohibitory, to prevent the breach
or threatened breach of any of the provisions of this
Agreement or to enforce the performance hereof.
j. This Agreement has been made and entered into not only for the
benefit of the Issuer, the Trustee, the Servicer and the
Administrator, but also for the benefit of all Noteholders,
and its provisions may be enforced not only by the parties to
this Agreement but also by each Noteholder in the manner and
to the extent such Noteholders may enforce provisions of the
Indenture. The Servicer specifically acknowledges the rights
of the Trustee pursuant to Section 6.3 of the Indenture.
k. Any information required by this Agreement to be provided by
the Servicer with respect to a Financed Student Loan may in
the case of Financed Student Loans that have been consolidated
be provided with respect to a consolidated Financed Student
Loan, provided that such information at a minimum meets the
requirements of the Secretary of Education and the Guarantee
Agency, as the case may be, for the collection by the Trustee
of interest subsidy payments, Special Allowance Payments, and
claim payments, and provides sufficient information as
requested by the Issuer to enable the Issuer to comply with
any arbitrage requirements under the Internal Revenue Code of
1986, as amended, and the regulations thereunder.
l. SLFC specifically acknowledges that the Issuer will be making
representations and warranties regarding the Student Loans to
be Financed as part of the proposed public offering of the
Notes based in part on the accuracy of SLFC's and warranties
in this Agreement. SLFC agrees to
26
cooperate with the Issuer and to furnish all information in
its possession appropriate for inclusion in the Issuer's
Prospectus. SLFC agrees to indemnify and save the Trustee, the
Issuer and the underwriters for the Notes harmless of, from
and against any and all loss, cost, damage or expense,
including reasonable attorneys' fees, incurred by reason of
any breach of SLFC's warranties or representations hereunder
or any false or misleading representations of SLFC or any
failure to disclose any matter which makes the warranties and
representations herein misleading or any inaccuracy in any
information furnished by SLFC in connection herewith.
m. It is hereby acknowledged and agreed that the Trustee will be
serving as "Eligible Lender Trustee" under the Indenture and
that (i) legal title to all Financed Student Loans
constituting FFELP Loans will, pursuant to the applicable
FFELP Loan Purchase Agreement, be transferred to the Trustee
in such capacity for the benefit of the Issuer, and (ii) upon
such transfer, the Trustee will be the legal owner and the
Issuer will be the beneficial owner of such FFELP Loans.
25. Indemnification with respect to Prior Servicing. Pursuant to the
Series 1999-1 Transfer Agreement, the Series 2000-1 Transfer Agreement and the
Series 2001-1 Transfer Agreement (as such terms are defined in the Indenture),
the Issuer and the Trustee have purchased or will purchase student loans
described therein (the "Previously Transferred Student Loans") from GOAL Funding
and the GOAL Funding Trustee, which Previously Transferred Student Loans were,
prior to such purchase, serviced by the Servicer under the GOAL Funding
Servicing Agreement. Pursuant to other Transfer Agreements to be entered into,
the Issuer and the Trustee will purchase student loans described therein (the
"Subsequent Transferred Student Loans") from GOAL Funding and the GOAL Funding
Trustee, which Subsequent Transferred Student Loans will, prior to such
purchase, have been serviced by the Servicer under the GOAL Funding Servicing
Agreement. The Servicer hereby agrees to indemnify and hold harmless the Issuer
and the Trustee from and against any loss, cost, damage or expense, including
reasonable attorney's fees, to the extent that such loss, cost, damage or
expense arises out of the failure of the Servicer to have performed its
obligations under the GOAL Funding Servicing Agreement.
27
IN WITNESS WHEREOF, the parties have hereunto set their hands by their
officers thereunto duly authorized and executed this Agreement as of the day and
year first above written.
EDUCATION LOANS INCORPORATED
By:
----------------------------------
President
STUDENT LOAN FINANCCORPORATION,
as Servicer and Administrator
By:
----------------------------------
President
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
By:
----------------------------------
Its
----------------------------------
28
EXHIBIT A
Student Loan Finance Corporation
Monthly Statement Pursuant to Section 5.23 of the Indenture and Section 21 of
the Servicing and Administration Agreement (Unaudited)
Education Loans Incorporated
Student Loan Asset-Backed Notes
Report for the Month Ended _____________, ____ [sample for _____, 1999]
29
