Exhibit 10.2
SUBSERVICING AGREEMENT
This Subservicing Agreement (the "Agreement") is entered into and
effective as of the 1st day of February, 2002, by and between Nelnet Loan
Services, Inc., a Nebraska corporation, Aurora, Colorado, herein referred to as
"Nelnet" and EFS Services, Inc., an Indiana corporation, herein referred to as
"EFS."
WHEREAS, EFS is in the loan servicing business in the State of Indiana,
and in the ordinary course of such business has processed and serviced loans to
student/parent borrowers (the "Education Loans") which are made and guaranteed
in accordance with the provisions of the Higher Education Act of 1965, as
amended (the "Education Act") (references hereinafter to the "Education Act"
include rules and regulations promulgated thereunder as in effect from time to
time); and
WHEREAS, Nelnet has developed and/or has available to it the systems and
services to enable it to process and service Education Loans in accordance with
the Education Act; and those Guarantee Agencies as mutually agreed to by the
parties ("Guarantor(s)") shall be the Guarantor(s) for all Education Loans which
Nelnet presents for servicing hereunder; and
WHEREAS, Nelnet has developed and/or has available to it the systems and
services to enable it to process and service Education Loans in accordance with
the Rules and Regulations (the "Regulations") promulgated by Guarantor
(references hereinafter to the "Regulations" include Rules and Regulations
promulgated thereunder as in effect from time to time); and
WHEREAS, EFS has entered into a Loan Servicing Agreement (the "EFS
Servicing Agreement") with EMT Corp. ("EMT") dated May 15, 1998, under which EFS
acts as primary servicer for EMT and EMT in the ordinary course of its business
makes or acquires Education Loans; and
WHEREAS, EFS desires to retain Nelnet to process and subservice
Education Loans beneficially owned by EMT.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth, the parties agree as follows:
1. TERM.
1.1 The term of this Agreement shall be from the date first set forth
above until the earlier of (i) termination of the Trust Agreement between EMT
and Zions First National Bank as successor trustee (the "Trustee"), dated as of
May 15, 1998, as supplemented (the "Trust Agreement"), (ii) termination of the
EFS Servicing Agreement, (iii) early termination after material default by
Nelnet as provided in Section 15 of this Agreement, and (iv) the Education Loans
serviced under this Agreement are paid in full.
1.2 Upon the termination of this Agreement, Nelnet shall turn over to
EFS all Education Loan files complete with all information contained therein and
all current computer information on the Education Loans under service pursuant
to this Agreement in such form or fashion as EFS shall reasonably specify. EFS
and Nelnet specifically agree that the format used to transfer EFS's data
contains confidential and proprietary trade secret information which is the
exclusive property of Nelnet. Nelnet makes no claim to the specific data
contained in any printout given to EFS and recognizes that said data is the
exclusive property of EFS. EFS and Nelnet agree, however, that all aspects of
the underlying computer program, algorithms, methods of processing, specific
design and layout, report format, and the unique processing techniques and
interactions of the various aspects of Nelnet's computer program are trade
secrets of, proprietary to, and owned exclusively by Nelnet. At such
deconversion, a minimum fee of $12.00 per account plus any other reasonable
expenses incurred in connection with the transfer of such files and other
information shall be paid by EFS. The confidentiality provisions of this
paragraph shall survive any termination or expiration of this Agreement.
2. DELIVERY OF COMPLETED EDUCATION LOANS FOR SERVICING AND COLLECTION.
Subject to Nelnet's scheduling requirements, EMT may from time to time deliver
or cause to be delivered to Nelnet Education Loans with respect to which loan
processing has been completed and loan proceeds have been disbursed to the
student/parent borrowers prior to the date of delivery ("Completed Education
Loans") to be serviced pursuant to the terms of this Agreement. EMT shall
transmit to Nelnet all such loan documentation as required by Nelnet to enable
it to service the Completed Education Loans as provided herein.
3. SERVICING OF COMPLETED EDUCATION LOANS. Upon acceptance of any
Completed Education Loan into Nelnet's computer system and after the sale date
(if applicable) of the Completed Education Loan to EMT, Nelnet shall service
such Education Loan in accordance with the Education Act, the Regulations and
the provisions of this Agreement, including the following:
(a) Nelnet shall take all steps necessary to maintain the insurance
and guarantees on Education Loans in full force at all times.
(b) Nelnet shall prepare and mail directly to the student/parent
borrower all required statements, notices, disclosures and
demands.
(c) Nelnet shall retain records of contacts, follow-ups, collection
efforts and correspondence regarding each Education Loan.
(d) Nelnet shall provide accounting for all transactions related to
individual Education Loans, including, but not limited to,
accounting for all payments of principal and interest upon such
Education Loans.
(e) Nelnet shall process all deferments and forbearances.
(f) Nelnet shall process all address changes and update address
changes accordingly.
(g) Nelnet shall retain all documents received by Nelnet pertaining
to each Education Loan.
(h) When necessary and allowable by the Education Act, Nelnet shall
take all steps necessary to file a claim for loss with
Guarantor, and shall be responsible for all communication and
contact with that agency necessary or appropriate to accomplish
the same.
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(i) Nelnet shall provide EMT a Manifest of Education Loans on all
new accounts, accounts paid in full or converted to repayment,
and provide any other information required by Guarantor.
(j) Nelnet shall provide such other services as Nelnet customarily
provides and deems appropriate.
4. ADDITIONAL SERVICING ACTIVITIES. At the request of EMT or EFS, Nelnet
agrees to perform additional servicing activities not required under the terms
of this Agreement for those Education Loans transferred to Nelnet as Completed
Education Loans which have not been previously serviced in accordance with the
Education Act and Regulations, and which require additional servicing activity
to attempt to maintain or reinstate the loans' principal and interest guarantee
from the Guarantor ("Cure Procedures"). Nelnet, utilizing Cure Procedures
approved by the Guarantor, will use its best efforts to cure all prior servicing
defects. Nelnet makes no representation or warranty that the guarantee on each
Education Loan will be reinstated regardless of Nelnet following the Cure
Procedures as approved by the Guarantor. EFS agrees to pay Nelnet those fees for
Cure Services described in Schedule A hereto under the topic entitled
"Additional Servicing Activity."
5. PORTFOLIOS SUBJECT TO REJECTION BY NELNET. EFS acknowledges that
certain loan portfolio types pose a risk of financial hardship for Nelnet to
service under this Agreement. Nelnet may in its discretion, prior to placing
such loans in the Nelnet system, reject certain loans or loan portfolios
("Rejected Loans"). Nelnet shall provide EFS with reasonable advance notice as
to any Rejected Loans which Nelnet declines to place on its system. Nelnet shall
have no right to reject or decline loans after the loans are transferred to the
Nelnet system.
6. REPORTS TO EMT. On or before the 15th day of each month, unless some
other time is provided herein, Nelnet shall prepare and deliver to EMT, or to
such other person as EMT may designate, the following reports with respect to
activity during the preceding month:
(a) As of the last day of each month, an unaudited statement, in
reasonable detail, of all transactions during that month on
Completed Education Loans serviced by Nelnet for EMT;
(b) Processing Status Report (daily);
(c) Check Register (daily);
(d) Posting Ledger (daily/monthly);
(e) Statistical Report (monthly);
(f) Loan Ledger/Alpha Report (monthly);
(g) Guarantor Manifest (monthly);
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(h) Delinquency Report (daily/monthly);
(i) Claims Activity Report (monthly).
EMT shall receive at no cost one copy of each of the foregoing reports.
Nelnet will provide extra copies at the request of EMT. EFS shall reimburse
Nelnet its cost in producing such extra copies.
7. INTEREST COMPUTATION. Nelnet shall provide on a quarterly basis
statistical data for the computation of interest and special allowance billable
to the U.S. Department of Education for EMT's Education Loans. Data will be
computed commencing with the date Education Loans appear on the records of
Nelnet.
8. SERVICE FEE TO NELNET. EFS shall pay to Nelnet, on or before the 15th
day of each month, or within fifteen (15) days of billing statement, for and in
consideration of the services performed by Nelnet hereunder for the preceding
month, the fee provided for in Schedule A to this Agreement ("Servicing Fee").
The Servicing Fee shall be subject to change every twelve (12) months. Such
change shall not result in an increase that will exceed three percent (3%) for
any twelve (12) month period. In the event Servicing Fees are not paid within
thirty (30) days of the billing statement, EFS agrees Nelnet will have the
following rights to (a) withhold transfer of borrower payments to the extent of
Servicing Fees owed; (b) withhold reports otherwise due; (c) impose a late
charge of one and one-half percent (l1/2%) per month against the entire
outstanding balance of the account including any prior late charge; and (d)
terminate services with notice if nonpayment persists for sixty (60) days from
billing or more.
The parties agree that should Nelnet be required to make material
changes to its current servicing practices or servicing system due to changes to
the Education Act, Regulations, and/or business environment, or to other costs
beyond Nelnet's control, including but not limited to postal fees, Nelnet may
renegotiate the Servicing Fees with EFS to reasonably reflect those increased
costs at any time during the term of this Agreement.
9. LOAN PAYMENTS. Student/parent borrowers will make all loan payments
to a third party lockbox established by Nelnet. All cash receipts will be
remitted once a week to EMT or as Nelnet may otherwise reasonably request.
10. DISCLOSURE OF INFORMATION. All data, information, records,
correspondence, reports or other documentation received by Nelnet pursuant to
this Agreement from EFS, EMT or the school which the student attended or from
the student/parent borrower, or prepared and maintained by Nelnet in the course
of its activities under this Agreement shall be released or divulged only to EFS
and EMT with respect to information or documents relating to a particular
student/parent borrower, to that student/parent borrower, or to such other
parties as Nelnet may be directed in writing by EFS or such student/parent
borrower. Nothing in this Section 10 shall affect Nelnet's or EFS's obligation
to observe applicable law prohibiting disclosure of information regarding
borrowers or the right of Nelnet or EFS not to disclose any information relating
to the strategic plans or opportunities of its student lending or loan servicing
business.
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11. INTELLECTUAL PROPERTY PROTECTION. Notwithstanding anything in this
Agreement to the contrary, it is the express intention of the parties to this
Agreement that all right, title and interest of whatever nature in Nelnet's user
manuals, training materials, all computer programs, routines, structures,
layout, report formats, together with all subsequent versions, enhancements and
supplements to said programs, all copyright rights (including both source and
object code) and all oral or written information relating to Nelnet's programs
conveyed in confidence by Nelnet to EFS pursuant to this Agreement which is not
generally known to the public and which give Nelnet an advantage over its
competitors who do not know or use such information (hereinafter collectively
referred to as "Trade Secrets"), and all other forms of intellectual property of
whatever nature is and shall remain the sole and exclusive property of Nelnet.
12. INQUIRIES. Nelnet shall answer all inquiries received by it
pertaining to Education Loans, school status or refunds, and EFS shall cooperate
to the extent necessary to gather the information needed to answer such
inquiries. Such inquiries may be referred to the school which the student
borrower attended or is attending, if necessary. Nelnet shall have no
responsibility for any disputes between student/parent borrowers and schools
regarding tuition, registration, attendance, or quality of education/training.
13. AGENT AUTHORIZATION. EFS hereby authorizes Nelnet to act on behalf
of and as EMT's agent in the application processing and servicing of EMT
Education Loans. Such authorization will include but not be limited to all
correspondence and liaison necessary with Guarantor regarding EMT Education
Loans, assignment of claims to Guarantor and any/or all other communications,
correspondence, signatures or other acts appropriate to service EMT's Education
Loans in accordance with the Education Act and/or Regulations.
14. LIABILITY OF NELNET. Nelnet assumes no responsibility or liability
for failure of EFS or EMT to exercise reasonable care or due diligence and the
results thereof, in making or servicing an Education Loan prior to (a) Nelnet
processing the application of the Education Loan, or (b) placing of the
Education Loan on Nelnet's system and prior to the date EMT holds ownership of
the Education Loan. Nelnet also assumes no liability for the failure of any
student/parent borrower to repay his or her loan, nor the failure of the United
States government to pay any principal, interest, subsidy or special allowance,
nor for the failure of Guarantor to make payment of any principal and/or
interest on any of EMT's Education Loans. Nelnet shall not be responsible for
consequences of unreasonable acts of any Guarantor. In the event Nelnet shall
take any action or fail to take any action which causes any Education Loan in
EMT's portfolio to be denied the benefit of any applicable guarantee, Nelnet
shall have a reasonable time to cause the benefits of the guarantee to be
reinstated. If the guarantee is not reinstated within twelve (12) months of
denial by Guarantor, Nelnet shall pay EMT or Trustee an amount equal to the
outstanding balance plus all accrued interest and other fees due on the
Education Loan to the date of purchase and thereupon Nelnet shall be subrogated
to all rights of EMT respecting the applicable Education Loan and title to such
Education Loan will thereby be transferred to Nelnet or its eligible lender
trustee. In such event, EMT shall perform such further acts as shall be
necessary or appropriate to subrogate the Education Loan to Nelnet. For any
subrogated Education Loan for which the guarantee is fully reinstated by
Guarantor, EFS shall cause EMT to pay Nelnet an amount equal to the then
outstanding principal balance, plus all accrued interest due thereon, whereupon
the subrogation rights of Nelnet shall terminate. In such event, Nelnet agrees
to perform such further acts as shall be necessary or appropriate to reconvey
the Education Loan to EMT.
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15. TERMINATION OPTION. If at any time during the term of this Agreement
either party refuses or fails to perform in a material fashion any portion of
this Agreement, and fails or refuses to correct said action or lack of action
within thirty (30) days after receipt of written notice, the other party may,
upon thirty (30) days written notice, terminate this Agreement.
16. INDEMNIFICATION. EFS shall indemnify and hold Nelnet harmless from
and against all claims, liabilities, losses, damages, costs and expenses
(including reasonable attorney's fees) asserted against or incurred by Nelnet as
a result of Nelnet complying with any instruction or directive by EFS and Nelnet
shall in like manner indemnify EFS for any miscompliance with any such
instruction or directive by Nelnet. EFS shall further indemnify and hold Nelnet
harmless from and against all claims, liabilities, losses, damages, costs and
expenses (including reasonable attorney's fees) asserted against or incurred by
Nelnet as a result of actions not the fault of or not caused by a negligent act
of Nelnet, its agents or employees, including all claims, liabilities, losses,
damages and costs caused by or the fault of EFS, a prior holder, owner or
lender, a prior servicer or any other party connected in any manner to the loan
or loans resulting in the claim, liability, loss, damage or cost.
17. STATUTE OF LIMITATIONS. Any action for the breach of any provisions
of this Agreement shall be commenced within two years after the cause of action
has occurred. A cause of action occurs when the breach occurs, regardless of the
aggrieved party's lack of knowledge of the breach.
18. NOTICES. All notices or communications by one of the parties hereto
to the other shall respectfully be addressed as follows: EFS Services, Inc.,
0000 Xxxxxxxxx Xxxxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxxxxxxxx, Xxxxxxx 00000-0000,
and Nelnet Loan Services, Inc., 0000 Xxxxx Xxxxxx Xxxx, Xxxxx 000, Xxxxxx,
Xxxxxxxx 00000, or to such other address as may be indicated from time to time
by one of the parties to the other party. Except as otherwise expressly
provided, any notice shall have been deemed to have been given upon mailing
thereof when mailed by registered or certified mail, and upon receipt in every
other case.
19. GOVERNING LAW. This Agreement is executed and delivered within the
State of Colorado, and the parties hereto agree that is shall be construed,
interpreted and applied in accordance with the laws of that State, and that the
courts and authorities within the State of Colorado shall have sole jurisdiction
and venue over all controversies which may arise with respect to the execution,
interpretation and compliance with this Agreement.
20. CHANGES IN WRITING. This Agreement, including this provision hereof,
shall not be modified or changed in any manner except only by a writing signed
by all parties hereto.
21. SEVERABILITY. In the event a court of competent jurisdiction finds
any of the provisions of this Agreement to be so overly broad as to be
unenforceable or invalid for any other reason, it is the parties' intent that
such invalid provisions be reduced in scope or eliminated by the court, but only
to the extent deemed necessary by the court to render the provisions of this
Agreement reasonable and enforceable.
22. PERSONS BOUND. This Agreement shall be binding upon and inure to the
benefit of the parties hereto, their legal representatives, heirs, successors
and assigns.
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23. ASSIGNMENT. This Agreement shall not be assigned by either party
without the prior written consent of the other party, which consent shall not be
unreasonably withheld.
24. MUTUAL RELEASE. Each of the parties to this Agreement releases the
other party from any and all claims, or causes of the other arising from any
event or transaction occurring prior to the execution of this Agreement. This
release is an independent covenant between the parties, and will survive any
termination of this Agreement.
25. TITLES. The titles used in this Agreement are intended for
convenience and reference only. They are not intended and shall not be construed
to be a substantive part of this Agreement or in any other way to affect the
validity, construction or effect of any of the provisions of this Agreement.
26. WAIVER. The waiver or failure of either party to exercise in any
respect any
right provided for herein shall not be deemed a waiver of any further right
hereunder.
27. CONFIDENTIALITY.
27.1 EFS (subject to the provisions of Section 10 hereof) agrees not to
disclose any provisions or portions of this Agreement, "Trade Secrets" (as
defined below) or financial information (collectively, "Confidential
Information") concerning or belonging to Nelnet to any third party or use the
same in competition with Nelnet. For purposes of this Agreement, Confidential
Information does not include "Nonpublic Personal Information" as defined in GLB.
"Trade Secret" shall mean the whole or any portion or phase of any technical
information, design, process, procedure, formula, improvement, algorithm,
method, technique, confidential business or financial information, or other
information relating to any business of Nelnet that is not generally known by
the public. EFS and Nelnet specifically agree that the format used to transfer
EFS's data contains confidential and proprietary trade secret information that
is the exclusive property of Nelnet. Nelnet makes no claim to the specific data
contained in any printout given to Nelnet and recognizes that said data is the
exclusive property of EFS. EFS and Nelnet agree, however, that all aspects of
the underlying computer program, algorithms, methods of processing, specific
design and layout, report format, and the unique processing techniques and
interactions of the various aspects of Nelnet's computer program are trade
secrets of, proprietary to, and owned exclusively by Nelnet.
27.2 In accordance with applicable law, EFS agrees that in the event
Nelnet grants access to any Confidential Information, to forever thereafter keep
the same confidential. EFS also agrees to keep Confidential Information and
material (both written and verbal) relating to Nelnet, any vendor or other party
transacting business with Nelnet. EFS, including its respective agents and
employees, further agrees not to release, share, use, or disclose the same
without the prior written permission of Nelnet except to only those of EFS's
employees, agents, or advisors having a need to know the same for purposes
related to this Agreement.
27.3 EFS, its agents, employees, and advisors, recognize the disclosure
of Confidential Information by EFS, or EFS's agents or advisors may give rise to
irreparable injury to Nelnet inadequately compensable in damages and that
accordingly, Nelnet may seek and obtain injunctive relief or damages against the
disclosure or threatened disclosure, in addition to any other legal remedies,
including attorney's fees, which may be available. The parties agree, however,
that the duty to protect Confidential Information shall not include data,
information, or materials which EFS can demonstrate is publicly available by
other than unauthorized disclosures by other parties. All confidentiality
requirements shall survive the termination or cancellation of this Agreement.
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28. FORCE MAJEURE. The foregoing provisions of this Agreement are
subject to the following limitation: If by reason of a force majeure Nelnet is
unable in whole or in part to carry out any agreement on its part herein
contained, Nelnet shall not be deemed in default during the continuance of such
inability. The term "force majeure" as used herein shall mean, without
limitation, the following: acts of God, strikes, lockouts, or other industrial
disturbances; acts of public enemies; order or restraint of any kind of the
government of the United States of America or of the State of Colorado or City
of Aurora or any of their departments, agencies or officials, or any civil or
military authority; insurrections; riots; landslides; earthquakes; fires;
storms; droughts; floods; explosions; breakage or accident to machinery,
equipment, transmission pipes or canals; or any other cause or event not
reasonably within the control of Nelnet.
29. ENTIRE AGREEMENT. This is the entire and exclusive statement of the
Agreement between the parties, which supersedes and merges all prior proposals,
understandings and all other agreements oral and written, between the parties
relating to this Agreement.
30. NELNET AS SUBSERVICER. Nelnet acknowledges EFS as the primary
servicer to EMT pursuant to the EFS Servicing Agreement. Nelnet agrees to act as
subservicer of the Education Loans to be serviced under the EFS Servicing
Agreement. Furthermore, in the event EFS for any reason ceases to act as primary
servicer of the loans, Nelnet agrees to service the Education Loans of EMT as
the servicer under the terms of the EFS Servicing Agreement and agrees to accept
assignment of the EFS Servicing Agreement upon assignment thereof by EFS. This
Section 30 shall survive termination of the Agreement.
31. TRUSTEE AS THIRD PARTY BENEFICIARY. This Agreement has been made and
entered into not only for the benefit of EFS and Nelnet but also for the benefit
of the Trustee in connection with the financing of Education Loans, and upon
assignment by EFS to the Trustee, its provisions may be enforced not only by the
parties to this Agreement but by the Trustee. The foregoing creates a permissive
right on behalf of the Trustee, and the Trustee shall not be under any duties or
obligations hereunder.
This Agreement shall inure to the benefit of the Trustee and its
successors and assigns. Without limiting the generality of the foregoing, all
representations, covenants and agreements in this Agreement which expressly
confer rights upon the Trustee shall be for the benefit of and run directly to,
the Trustee, and the Trustee shall be entitled to rely on and enforce such
representations, covenants and agreements to the same extent as if it were a
party hereto. The foregoing creates a permissive right on behalf of the Trustee,
and the Trustee shall not be under any duties or obligations hereunder.
If there is an Event of Default under the Trust Agreement and the
Trustee forecloses on its security interest on the Education Loans, then the
Trustee shall assume all duties and obligations of Nelnet hereunder.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, the parties hereto have executed this Subservicing
Agreement as of the date first written above.
NELNET LOAN SERVICES, INC.
By:
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Name:
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Title:
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EFS SERVICES, INC.
By:
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Name:
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Title:
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SCHEDULE "A"
FFELP LOAN SERVICING FEES
All fees shall be as set forth in the Servicing Agreement between EFS and EMT
Corp., which is incorporated herein by this reference.
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