EXHIBIT 10.1
SERVICING AGREEMENT
THIS SERVICING AGREEMENT (the "Agreement") dated as of May 15, 1998,
between EMT Corp., (the "Issuer") and EFS Services, Inc., an Indiana corporation
(the "Servicer").
WHEREAS, the Issuer desires to purchase through KeyBank, Indiana N.A.
as Eligible Lender Trustee ("Eligible Lender Trustee") student loans in the
ordinary course of business using financing provided through the issuance of
student loan asset backed notes (the "Notes") issued pursuant to a certain Trust
Agreement (Trust Agreement) dated as of May 15, 1998 by and between Issuer and
NBD BANK, N.A., as Trustee ("Trustee");
WHEREAS, the Servicer is willing to service such student loans with
respect thereto;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I -- DEFINITIONS
SECTION 1. Capitalized terms used but not defined herein are defined in
the Trust Agreement.
ARTICLE II -- SERVICER DUTIES
SECTION 2.1. DUTIES OF SERVICER. Issuer hereby employs Servicer as
agent to service the Loans and Servicer agrees to service such Loans in
accordance with and subject to the terms of this Agreement. The Servicer, for
the benefit of the Issuer, shall service the Loans in accordance with all
applicable Federal and State laws, including all applicable standards,
guidelines and requirements of the Higher Education Act and any Guarantor.
The Servicer's duties shall include collection and posting of all
payments responding to inquiries of borrowers on such Loans, monitoring
borrowers' status, making required disclosures to borrowers, sending bills or
payment coupons to borrowers and otherwise establishing repayment terms,
reporting tax information to borrowers, if applicable, accounting for
collections and furnishing monthly and annual statements with respect thereto to
the Issuer, as requested.
Without limiting the generality of the foregoing, the Servicer is
authorized and empowered to execute and deliver, on behalf of itself, the
Issuer, the Eligible Lender Trustee, the Trustee or the Noteholders, instruments
of satisfaction or cancellation, or partial or full release or discharge, and
all other comparable instruments, with respect to such Loans; PROVIDED, HOWEVER,
that
the Servicer agrees that it will not (a) permit any rescission or cancellation
of a Loan except as ordered by a court of competent jurisdiction or governmental
authority or as otherwise consented to in writing by the Issuer or (b)
reschedule, revise, defer or otherwise compromise with respect to payments due
on any Loan except pursuant to any applicable deferral or forbearance periods or
otherwise in accordance with all applicable standards, guidelines and
requirements with respect to the servicing of the Loans. The Servicer also shall
be responsible for maintaining each Guarantee Agreement, including advising the
Eligible Lender Trustee of any action required to be taken to maintain each such
Guarantee Agreement.
SECTION 2.2. COLLECTION OF LOAN PAYMENTS. The Servicer shall make all
efforts that may be specified under the Higher Education Act or by any Guarantor
to collect all payments called for under the terms and provisions of the Loans
as and when the same shall become due and shall follow such collection
procedures as it follows with respect to all comparable student loans that it
services for itself and others. The Servicer may in its discretion waive any
late payment charge or any other fees that may be charged in the ordinary course
of servicing a Loan.
The Servicer shall make reasonable efforts to collect all amounts from
the Guarantors with respect to any of the Loans as and when the same shall
become due and payable, shall comply with all applicable laws and agreements
with respect to collecting such payments and shall follow such practices and
procedures as it follows with respect to all student loans that it services for
others. In connection therewith, the Servicer is hereby authorized and empowered
to convey to any Guarantor the note and the related Loan files representing any
Loan in connection with submitting a claim to such Guarantor whereupon the lien
of the Trustee relating to such Loan shall be released.
The Servicer shall make reasonable efforts to collect all Interest
Subsidy Payments and Special Allowance Payments from the Department with respect
to any of the Loans as and when the same shall become due and payable. In
connection therewith, the Servicer shall prepare and file with the Department
all forms and other documents and filings necessary or appropriate in connection
with the collection of Interest Subsidy Payments and Special Allowance Payments.
SECTION 2.3. WARRANTY. EXCEPT AS SPECIFICALLY PROVIDED HEREIN, THE
SERVICER MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO ITS SERVICING FUNCTIONS
AND SHALL NOT BE LIABLE OR ACCOUNTABLE TO THE ISSUER OR ELIGIBLE LENDER TRUSTEE,
EXCEPT FOR DAMAGES RESULTING FROM ACTS BY THE SERVICER WHICH CONSTITUTE
NEGLIGENCE OR MISCONDUCT. The Servicer's liability for negligence or misconduct
with respect to servicing a Loan shall not exceed the principal amount of the
Loan and accrued interest which are not paid by the Guarantor of the Loan,
together with accrued interest subsidies and special allowance payments which
are not paid by the Department of
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Education of the Federal Government, by reason of the Servicer's servicing
deficiencies after efforts by the Servicer to cure such deficiency within the
time period permitted by the Guarantor. The Servicer shall pay the Issuer any
damages owing hereunder within 10 days after the Guarantor time period lapses
but, in any event, within 90 days from the date of first rejection of a claim.
Upon payment to the Issuer by the Servicer of any damages owing hereunder, the
Loan involved shall be assigned to the Servicer by the Issuer.
SECTION 2.4. Term and Fees. The Servicer agrees to service all Loans
submitted by the Issuer for the life of the Loan. The Issuer agrees to pay the
Servicer a monthly fee of one-twelfth of 1.20% of the outstanding principal
balance of the Loans as of each month end. Such fee shall be payable within 10
days of receipt by the Issuer of an invoice detailing such fee.
SECTION 2.5. NOTICE OF DEFAULT. The Servicer shall deliver to the
Eligible Lender Trustee, the Trustee, the Issuer and the Rating Agencies,
promptly after having obtained knowledge thereof, but in no event later than
five Business Days thereafter, written notice of any event which with the giving
of notice or lapse of time, or both, would become a Servicer Default under
Section 4.1.
SECTION 2.6. ANNUAL AUDIT. The Servicer shall cause a firm of
independent certified public accountants to perform an annual audit on the
Servicer and to issue an audit opinion addressed to the Servicer within 90 days
after each fiscal year end of the Servicer. The Servicer will deliver to the
Trustee and the Rating Agencies a copy of the audited financial statements of
the Servicer and related audit opinion. In addition, the Servicer will have
performed all other reviews and examinations required to be performed by the
Department of Education and/or the Higher Education Act relating to guaranteed
student loan servicers.
SECTION 2.7. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING
LOANS. Upon reasonable prior notice, the Servicer shall provide access to the
Loan files to the Eligible Lender Trustee and the Noteholders if the Noteholders
shall be required by applicable statutes or regulations to review such
documentation, as demonstrated by evidence satisfactory to the Servicer in its
reasonable judgment. Access shall be afforded without charge, but only upon
reasonable request and during the normal business hours at the respective
offices of the Servicer.
SECTION 2.8. APPOINTMENT OF SUBSERVICER. The Servicer may, at any time,
appoint a subservicer to perform all or any portion of its obligations as
Servicer hereunder; provided that the Servicer shall remain obligated and be
liable to the Issuer, the Eligible Lender Trustee, the Trustee and the
Noteholders for the servicing of the Loans in accordance with the provisions
hereof.
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SECTION 2.9. COLLECTIONS. The Servicer shall deposit with the Trustee
into the Loan Account all payments of principal received and to the Interest
Account all interest, special allowance and interest subsidy payments received
with respect to the Loans. The Servicer and each subservicer shall remit to such
Accounts every two days all payments received with respect to the Loans.
ARTICLE III -- SERVICER REPRESENTATIONS
SECTION 3.1. REPRESENTATIONS OF SERVICER. The Servicer makes the
following representations on which the Issuer is deemed to have relied.
(a) ORGANIZATION. The Servicer is duly incorporated and validly
existing as a corporation under the laws of the State of its incorporation, with
the power and authority to own its properties and to conduct its business as
such properties are currently owned and such business is presently conducted
and had at all relevant times, and has, the power, authority and legal right, to
service the Loans.
(b) DUE QUALIFICATION. The Servicer is duly qualified to do business
and has obtained all necessary licenses and approvals in all jurisdictions in
which the ownership and lease of property or the conduct of its business
(including the servicing of the Loans as required by this Agreement) shall
require such qualifications.
(c) POWER AND AUTHORITY. The Servicer has the corporate power and
authority to execute and deliver this Agreement and to carry out its terms; and
the execution, delivery and performance of this Agreement has been duly
authorized by the Servicer by all necessary corporate action.
(d) BINDING OBLIGATION. This Agreement constitutes a legal, valid and
binding obligation of the Servicer, enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization and similar laws
relating to creditors' rights generally and subject to general principles of
equity
(e) ALL CONSENTS. All authorizations, consents, orders or approvals of
or registrations or declarations with any court, regulatory body, administrative
agency or other government instrumentality required to be obtained, effected or
given by the Servicer in connection with the execution and delivery of this
Agreement, have been duly obtained, effected or given and are in full force and
effect.
SECTION 3.2. MERGER OR SALE OF, AND ASSUMPTION OF THE OBLIGATIONS OF
THE SERVICER. If the Servicer is sold or merged into another party, such party,
which will acquire or succeed to the properties and assets of the Servicer
substantially as a whole, shall be the successor Servicer without the execution
or filing of
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any document or any further act by any of the parties to this Agreement;
pROVIDED, HOWEVER, that the Servicer hereby covenants that it will not
consummate any of the foregoing transactions except upon satisfaction of the
following: (i) the surviving Servicer executes an agreement of assumption to
perform every obligation of the Servicer under this Agreement, (ii) immediately
after giving effect to such transaction no representation or warranty made
pursuant to Section 3.1 shall have been breached, (iii) the Servicer shall have
delivered to the Eligible Lender Trustee and the Trustee an Opinion of Counsel
stating that such sale or merger complies with this Section and that all
conditions precedent, if any, provided for in this Agreement relating to such
transaction have been complied with.
SECTION 3.3 SERVICER NOT TO RESIGN. The Servicer shall not resign from
the obligations and duties imposed on it as Servicer under this Agreement until
a successor Servicer has been hired by the Issuer and has assumed all the
obligations hereunder.
ARTICLE IV -- DEFAULTS
SECTION 4.1. SERVICER DEFAULT. If any failure by the Servicer to
observe or to perform in any material respect any covenants or agreements of the
Servicer set forth in this Agreement which failure shall (i) materially and
adversely affect the rights of Noteholders and (ii) continue unremedied for a
period of 60 days after the date on which written notice of failure, requiring
the same to be remedied, shall have been given to the Servicer by the Trustee,
or the Noteholders representing not less than 25% of the Outstanding Amount of
the Notes; as applicable, (a "Servicer Default"), then, and in each and every
case, so long as the Servicer Default shall not have been remedied, either the
Trustee or the Noteholders of Notes evidencing not less than 25% of the
Outstanding Amount of the Notes, by notice then given in writing to the Servicer
(and to the Trustee and the Eligible Lender Trustee if given by the Noteholders)
may terminate all rights and obligations of the Servicer under this Agreement
effective upon the appointment and acceptance of a successor Servicer. On or
after the receipt by the Servicer of such written notice, all authority and
power of the Servicer under this Agreement, whether with respect to the Notes,
the Loans or otherwise, shall, without further action, pass to and be vested in
the successor Servicer as may be hired, and, without limitation, the Trustee and
the Eligible Lender Trustee are hereby authorized and empowered to execute and
deliver, for the benefit of the Servicer as attorney-in-fact or otherwise, any
and all documents and other instruments, and to do or accomplish all other acts
necessary or appropriate to effect the purposes of such notice of termination,
whether to complete the transfer and endorsement of the Loans and related
documents, or otherwise. The Servicer shall cooperate with the successor
Servicer, the Trustee and the Eligible
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Lender Trustee in effecting the termination of the responsibilities and rights
of the Servicer under this Agreement.
SECTION 4.2. APPOINTMENT OF SUCCESSOR. Upon receipt by the Servicer of
a notice of termination or the resignation by the Servicer in accordance with
the terms of this Agreement, the Servicer shall continue to perform its
functions as Servicer under this Agreement until the Issuer shall hire a
successor Servicer acceptable to the Trustee and the successor Servicer shall
accept its appointment by a written assumption.
ARTICLE V -- OTHER
SECTION 5.1. Amendment. This Agreement may be amended by the Servicer
and Issuer to cure any ambiguity, to correct or supplement any provisions in
this Agreement or with the consent of the Trustee for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions in
this Agreement, PROVIDED, HOWEVER, that such action shall not adversely affect
in any material respect the interests of any Noteholder.
This Agreement may also be amended from time to time by the Servicer
and the Issuer with the consent of the Noteholders evidencing not less than a
majority of the Outstanding Amount of the Notes for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement; PROVIDED, HOWEVER, that no such amendment shall (a) increase or
reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments with respect to Loans or distributions that shall be
required to be made for the benefit of the Noteholders or (b) reduce the
aforesaid percentage of the Outstanding Amount of the Notes, the Noteholders of
which are required to consent to any such amendment, without the consent of all
outstanding Noteholders.
Promptly after the execution of any amendment, the Trustee shall
furnish written notification of the substance of such amendment to the Rating
Agencies.
SECTION 5.2. Notices. All demands, notices and communications to the
Servicer under this Agreement shall be in writing, personally delivered or
mailed by certified mail, return receipt requested (or in the form of telex or
facsimile notice, followed by written notice delivered as aforesaid) and shall
be deemed to have been duly given upon receipt by the Servicer.
SECTION 5.3. ASSIGNMENT. Except as provided in this Agreement, this
Agreement may not be assigned by the Servicer without the consent of the Issuer
and the Trustee. The parties covenant and agree that the Issuer shall pledge and
assign its
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right, title and interest under this Agreement to the Trustee pursuant to the
Trust Agreement and the Pledge Agreement.
SECTION 5.4. LIMITATIONS ON RIGHTS OF OTHERS. The provisions of this
Agreement are solely for the benefit of the Servicer, the Issuer and the
Eligible Lender Trustee, the Trustee and the Noteholders and nothing in this
Agreement, whether express or implied, shall be construed to give to any other
Person any legal or equitable right, remedy or claim in the Trustee Estate in
respect of this Agreement or any covenants, conditions or provisions contained
herein.
SECTION 5.5. SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 5.6. SEPARATE COUNTERPARTS. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 5.7. HEADINGS. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
SECTION 5.8. GOVERNING LAW. This Agreement shall be construed in
accordance with the laws of the State of Indiana without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
SECTION 5.9. ARBITRATION. In the event of any dispute between the
parties pursuant to or concerning the terms and provisions of this Agreement or
the transactions contemplated hereby or any Loan purchased by the Issuer from
Lender, either party may by written notice to the other party, elect to submit
such dispute to arbitration for resolution. The arbitration shall be conducted
under the auspices and in accordance with the rules of the American Arbitration
Association by an arbitrator mutually acceptable to the parties (or if the
parties cannot agree, by an arbitrator designated by the American Arbitration
Association). The arbitration shall take place in Indianapolis, Indiana, and the
decision of the arbitrator shall be binding on the parties and shall be subject
to full enforcement in a court of competent jurisdiction. The arbitrator shall
have authority to award
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attorney fees and the costs incurred in connection with the arbitration to
either party.
SECTION 5.10. FORCE MAJEUR. The Servicer and the Issuer shall both be
excused from any breach of or failure to perform under this Agreement if
performance is prohibited or prevented by any applicable law, rule or
regulation; or if such breach or failure results from any acts of God, strikes
or other labor disputes, failures of third parties war, riots or civil
disturbances or any other cause beyond its reasonable control which hinders or
prevents its performance under this Agreement.
SECTION 5.11. TRUSTEE RIGHTS. The Eligible Lender Trustee and Trustee
shall each be a third party beneficiary of this Agreement and entitled to
enforce it in the same manner and as fully as Issuer.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective officers as of the day and year first above
written.
EFS SERVICES, INC.
By: /s/ Xxxx X. Xxxxxxxxx
-------------------------------
Name: Xxxx X. Xxxxxxxxx
Title: Chairman and
Chief Executive Officer
EMT Corp.
By: /s/ Xxxxxxx X.Xxxxxx
-------------------------------
Name: Xxxxxxx X.Xxxxxx
Title: Treasurer
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