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
____________________________
Dated as of December 1, 1999
____________________________
================================================================================
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
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
-2-
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;
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.
-3-
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.
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), 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), 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)
-4-
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 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.
-5-
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 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
-6-
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, 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
-7-
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 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
-8-
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 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.
-9-
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 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;
-10-
(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.
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
FFELP Loan to be maintained in secure storage facilities to
protect, to the extent reasonable and possible under the
circumstances, such original file concerning each Financed FFELP
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
-11-
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 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:
-12-
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.
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
-13-
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,
(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.
-14-
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
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:
-15-
(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;
(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).
-16-
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 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.
-17-
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 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
-18-
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 FFELP Loan, 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.
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
-19-
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.
18. Fees; No Petition. 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,
-20-
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.
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;
-21-
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
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;
-22-
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;
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.
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
-23-
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 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 xxxx, 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.
-------------
-24-
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.
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
Xxxxx 000
000 Xxxxx Xxxxxx Xxxxxxxxx
Xxxxxxxx, Xxxxx Xxxxxx 00000
Attention: President
if intended for the Trustee:
-25-
U.S. Bank National Association
X.X. Xxx 0000
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
000 Xxxxx Xxxxxx Xxxxxxxxx
Xxxxxxxx, Xxxxx Xxxxxx 00000
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
-26-
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 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 (as defined in the Indenture), the Issuer and
the Trustee have purchased student loans described therein (the "Series 1999-1
Transferred Student Loans") from GOAL Funding and the GOAL Funding Trustee,
which Series 1999-1 Transferred Student Loans were, prior to such purchase,
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:/s/ A. Norgrin Xxxxxxxxx
----------------------------
President
STUDENT LOAN FINANCE
CORPORATION, as Servicer and
Administrator
By:/s/ A. Norgrin Xxxxxxxxx
----------------------------
President
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
By: /s/ Xxxxxx X. Xxxxxx
----------------------------
Its Trust Officer
-------------------------
-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-
