Exhibit 10.87
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "AGREEMENT") dated as of ____
___, 2003, is by and among NELNET, INC. "DEBTOR" and M&I XXXXXXXX & XXXXXX BANK,
as agent for itself and the other Secured Parties, as that term is defined in
the Credit Agreement described below (the "AGENT").
R E C I T A L S:
The Debtor and NATIONAL EDUCATION LOAN NETWORK, INC., as
borrowers (collectively, "BORROWERS"), are entering into that certain Credit
Agreement dated of even date herewith with M&I XXXXXXXX & ILSLEY BANK, SUNTRUST
BANK, FIRST NATIONAL BANK OF OMAHA and FIFTH THIRD BANK, INDIANA (the "BANKS")
(such agreement, as it may be amended or otherwise modified from time to time,
herein the "CREDIT AGREEMENT"). The execution and delivery of this Agreement is
a condition to the Bank's entering into the Credit Agreement and making the
extensions of credit thereunder.
NOW, THEREFORE, in consideration of the premises and for other
good and valuable consideration, the adequacy, receipt and sufficiency of which
are hereby acknowledged, and in order to induce the Banks to make the Loans
under the Credit Agreement and the other Secured Parties to extend credit to
Borrowers, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. As used in this Agreement, the
following terms have the following meanings:
"COLLATERAL" has the meaning specified in SECTION 2.1
of this Agreement.
"GENERAL INTANGIBLES" means any "GENERAL
INTANGIBLES," as such term is defined in Article or Chapter 9 of the
UCC, now owned or hereafter acquired by the Debtor and, in any event,
shall include, without limitation, each of the following, whether now
owned or hereafter acquired by the Debtor: (a) books, records, data,
plans, manuals, computer software, computer tapes, computer disks,
computer programs, source codes, object codes and rights of the Debtor
to retrieve data and other information from third parties; (b) contract
rights including, without limitation, all right, title and interest in
and to the Servicing Contracts and any documentation pursuant to which
any of the other Collateral was acquired which include, without
limitation, the following: (i) all rights of the Debtor to receive
moneys due and to become due under or pursuant to such agreements, (ii)
all rights of the Debtor to receive proceeds of any insurance,
indemnity, warranty, or guaranty with respect to such agreements, (iii)
all claims of the Debtor for damages arising out of or for breach of or
default under such agreements, (iv) all rights of the Debtor to
terminate such agreements, to perform thereunder and to compel
performance and otherwise exercise all rights and remedies thereunder,
and (v) any rights to Liens arising under or as a result of any such
agreement; (c) all rights of the Debtor to
payment under letters of credit and similar agreements, including
without limitation, all letter of credit rights and other supporting
obligations; (d) choses in action and causes of action of the Debtor
(whether arising in contract, tort or otherwise and whether or not
currently in litigation) and all judgments in favor of the Debtor,
including without limitation, all commercial tort claims; (e) rights
and claims of the Debtor under warranties and indemnities; (f) rights
of the Debtor under any insurance, surety or similar contract or
arrangement; and (g) all payment intangibles.
"OBLIGATIONS" means all "OBLIGATIONS" (as such term
is defined in the Credit Agreement); provided that the obligations
secured hereby shall be limited to an aggregate amount equal to the
largest amount that would not render the Debtor's obligations hereunder
subject to avoidance under Section 544 or 548 of the United States
Bankruptcy Code or under any applicable state law relating to
fraudulent transfers or conveyances.
"PROCEEDS" means any "PROCEEDS," as such term is
defined in Article or Chapter 9 of the UCC and, in any event, shall
include, but not be limited to: (a) any and all proceeds of any
insurance, indemnity, warranty or guaranty payable to the Debtor from
time to time with respect to any of the Collateral; (b) any and all
payments (in any form whatsoever) made or due and payable to the Debtor
from time to time in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of the
Collateral by any Governmental Authority (or any Person acting, or
purporting to act, for or on behalf of any Governmental Authority); (c)
all instruments, documents, chattel paper and general intangibles
received or arising in connection with a disposition of Collateral; (d)
all dividends or other distributions relating to any of the Collateral;
and (e) any and all other amounts or property from time to time paid,
payable, distributed or distributable under, in connection with or in
exchange for any of the Collateral and all other payment intangibles
relating thereto.
"SERVICING CONTRACT" means an arrangement, whether or
not in writing, pursuant to which the Debtor has the right to service
Student Loans for other Persons.
"UCC" means the Uniform Commercial Code as in effect
in the State of Wisconsin from time to time. For purposes of all
provisions of this agreement, if, by applicable law, the perfection or
effect of perfection or non-perfection of the security interest created
hereunder in any Collateral is governed by the Uniform Commercial Code
as in effect on or after the date hereof in any other jurisdiction,
"UCC' means the Uniform Commercial Code as in effect in such other
jurisdiction for purposes of the provisions hereof relating to such
perfection or the effect of perfection or non-perfection.
Section 1.2 Other Definitional Provisions. Terms used herein
that are defined in the Credit Agreement and are not otherwise defined herein
shall have the meanings therefor specified in the Credit Agreement. References
to "SECTIONS," "SUBSECTIONS," "EXHIBITS" and "SCHEDULES" shall be to Sections,
subsections, Exhibits and Schedules, respectively, of this Agreement unless
otherwise specifically provided. All definitions contained in this Agreement are
equally applicable to the singular and plural forms of the terms defined. All
references to statutes and regulations shall include any amendments of the same
and any successor statutes and
regulations. References to particular sections of the UCC should be read to
refer also to parallel sections of the Uniform Commercial Code as enacted in
each state or other jurisdiction where any portion of the Collateral is or may
be located. Terms used herein, which are defined in the UCC, unless otherwise
defined herein or in the Credit Agreement, shall have the meanings determined in
accordance with the UCC.
ARTICLE II
SECURITY INTEREST
Section 2.1 Security Interest. As collateral security for the
prompt payment and performance in full when due of the Obligations (whether at
stated maturity, by acceleration or otherwise), the Debtor hereby pledges and
assigns to the Agent, and grants to the Agent a continuing lien on and security
interest in, all of the Debtor's right, title and interest in and to the
following, whether now owned or hereafter arising or acquired and wherever
located (collectively, the "COLLATERAL"):
(a) all rights of the Debtor under all Servicing
Contracts now owned or hereafter acquired by the Debtor;
(b) all rights of the Debtor to receive payments
under or by virtue of the Servicing Contracts described in clause (a)
preceding, whether as servicing fees, servicing income, damages,
amounts payable upon the cancellation of termination of any such
Servicing Contract, or otherwise;
(c) all General Intangibles of the Debtor
relating to or arising out of the Collateral described in clauses (a)
and (b) preceding;
(d) all rights of the Debtor under any Hedging
Agreement now or hereafter entered into by the Debtor to protect the
Debtor against changes in the value of any of the Collateral described
in clauses (a), (b) and (c) preceding; and
(e) all products and Proceeds, in cash or
otherwise, of any of the Collateral described in clauses (a), (b), (c)
and (d) preceding.
Section 2.2 Debtor Remains Liable. Notwithstanding anything to
the contrary contained herein, (a) the Debtor shall remain liable under the
documentation included in the Collateral to the extent set forth therein to
perform all of its duties and obligations thereunder to the same extent as if
this Agreement had not been executed, (b) the exercise by the Agent of any of
its rights or remedies hereunder shall not release the Debtor from any of its
duties or obligations under such documentation, (c) the Agent shall not have any
obligation under any of such documentation included in the Collateral by reason
of this Agreement, and (d) the Agent shall not be obligated to perform any of
the obligations of the Debtor thereunder or to take any action to collect or
enforce any claim for payment assigned hereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into the Credit Agreement and the
other Secured Parties to extend credit to the Borrowers, the Debtor represents
and warrants to the Bank and the other Secured Parties that:
Section 3.1 Current Servicing Contracts. Attached hereto as
SCHEDULE 3.1 is a true and complete list of all of its Servicing Contracts in
effect on the date hereof. Each of the Servicing Contracts listed in SCHEDULE
3.1 contain provisions that are consistent with those set forth in the form of
Agreement attached hereto as SCHEDULE 3.1A, except that the life of loan
servicing provision found in SECTION 1.2 of SCHEDULE 3.1A appears only in the
Servicing Contracts so noted. The termination, indemnification, and liability
provision of each Servicing Contract listed in SCHEDULE 3.1 are substantially
similar to those provisions contained in SCHEDULE 3.1A.
Section 3.2 Office Locations; Fictitious Names; Tax I.D.
Number. Its principal place of business, chief executive office and jurisdiction
of organization are located at the place or places identified for it on SCHEDULE
3.2. Within the last four months it has not had any other chief place of
business, chief executive office, or jurisdiction of organization except as
disclosed on SCHEDULE 3.2. SCHEDULE 3.2 also sets forth all other places where
it keeps its books and records relating to the Collateral. It does not do
business and has not done business during the past five years under any
trade-name or fictitious business name except as disclosed on SCHEDULE 3.2. Its
United States Federal Income Tax I.D. Number and organizational number is
identified on SCHEDULE 3.2.
Section 3.3 Ownership of Collateral. It is the legal and
equitable owner of the Collateral owned by it, free and clear of all Liens,
except the Lien created hereby.
Section 3.4 Validity of Service Contracts. Each Servicing
Contract is in full force and effect, each Servicing Contract is legal, valid,
and enforceable in accordance with its terms, except as limited by bankruptcy,
insolvency and similar laws of general application affecting the rights of
creditors and general principles of equity, and, to the best of its knowledge,
no default or event of default exists under any Servicing Contract that could
have a Material Adverse Effect.
Section 3.5 Consents; Status. No consent or approval of any
Person, including any Governmental Authority, is required for it to execute,
deliver and perform this Agreement, or for the validity and enforceability of
the Lien and security interest in the Collateral created hereby, that in each
case has not been obtained and is not in full force and effect. It is approved
by, and qualified and in good standing with, all Governmental Authorities
necessary for it to service the Student Loans under the Servicing Contracts.
ARTICLE IV
COVENANTS
The Debtor covenants and agrees with the Agent that until the
Obligations are paid and performed in full and all commitments under the Credit
Agreement have expired or have been terminated:
Section 4.1 Payment Obligations. It shall, in accordance with
its customary business practices, endeavor to collect or cause to be collected
from each obligor on the Collateral, as and when due, any and all amounts owing
under the Collateral. Without the prior written consent of the Agent, it shall
not, except in the ordinary course of business, (a) grant any extension of time
for any payment with respect to any of the Collateral, (b) compromise, compound,
or settle any of the Collateral for less than the full amount thereof, (c)
release, in whole or in part, any Person liable for payment of any of the
Collateral, (d) allow any credit or discount for payment with respect to any of
the Collateral, or (e) release any Lien or guaranty securing any payment
obligation under the Collateral.
Section 4.2 Further Assurances. At any time and from time to
time, upon the request of the Agent, and at its sole expense, it shall, promptly
execute and deliver all such further agreements, documents and instruments and
take such further action as the Agent may reasonably deem necessary or
appropriate to preserve and perfect its security interest in the Collateral and
carry out the provisions and purposes of this Agreement or to enable the Agent
to exercise and enforce its rights and remedies hereunder with respect to any of
the Collateral. Without limiting the generality of the foregoing, it shall upon
reasonable request by the Agent: (a) authorize the Agent to file such financing
statements as the Agent may from time to time require; (b) take such action as
the Agent may request to permit the Agent to have control over any investment
property; (c) deliver to the Agent all Collateral the possession of which is
necessary to perfect its security interest therein, duly endorsed and/or
accompanied by duly executed instruments of transfer or assignment, all in form
and substance satisfactory to the Agent; and (d) execute and deliver to the
Agent such other agreements, documents and instruments as the Agent may
reasonably require to perfect and maintain the validity, effectiveness and
priority of the Liens intended to be created by the Loan Documents.
Section 4.3 Corporate Changes. It shall not change its name,
identity, jurisdiction of organization, or corporate structure in any manner
that might make any financing statement filed in connection with this Agreement
seriously misleading or its United States Federal Tax I.D. Number unless such
action is permitted or not restricted by the Credit Agreement and it shall have
given the Agent thirty (30) days prior written notice thereof and shall have
taken all action reasonably deemed necessary or desirable by the Agent to
protect its security interest in the Collateral with the perfection and priority
thereof required by the Loan Documents. It shall not change its principal place
of business, chief executive office or the place where it keeps its books and
records unless it shall have given the Agent thirty (30) days prior written
notice thereof and shall have taken all action deemed necessary or desirable by
the Agent to cause its security interest in the Collateral to be perfected with
the priority required by the Loan Documents.
Section 4.4 Performance of Servicing Contracts. It will, at
its expense: (a) perform and observe all of the material terms and provisions of
the Servicing Contracts to be performed or observed by it in accordance with
their terms and with applicable laws and regulations of Governmental
Authorities, maintain the Servicing Contracts in full force and effect, enforce
the Servicing Contracts in accordance with their respective terms, and take all
action to such end as may be from time to time reasonably requested by the Agent
and (b) from time to time (1) furnish to the Agent such information and requests
regarding the Servicing Contracts as the Agent may reasonably request and (2)
upon reasonable request of the Agent make to any other party to any Servicing
Contract such demands and requests for information and reports or for action as
it is entitled to make thereunder.
Section 4.5 Modification to Servicing Contracts. It will not
amend or otherwise modify the terms and conditions of any Servicing Contract if
such amendment or modification could have a Material Adverse Effect.
ARTICLE V
RIGHTS OF THE AGENT
Section 5.1 POWER OF ATTORNEY. THE DEBTOR HEREBY IRREVOCABLY
CONSTITUTES AND APPOINTS THE AGENT AND ANY OFFICER OR AGENT THEREOF, WITH FULL
POWER OF SUBSTITUTION, AS ITS TRUE AND LAWFUL ATTORNEY-IN-FACT WITH FULL
IRREVOCABLE POWER AND AUTHORITY IN THE NAME OF THE DEBTOR OR IN ITS OWN NAME, TO
TAKE, WHEN AN EVENT OF DEFAULT EXISTS, ANY AND ALL ACTIONS AND TO EXECUTE ANY
AND ALL DOCUMENTS AND INSTRUMENTS WHICH THE AGENT AT ANY TIME AND FROM TIME TO
TIME DEEMS NECESSARY OR DESIRABLE TO ACCOMPLISH THE PURPOSES OF THIS AGREEMENT
AND, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, IT HEREBY GIVES THE AGENT
THE POWER AND RIGHT ON ITS BEHALF AND IN ITS OWN NAME TO DO ANY OF THE FOLLOWING
WHEN AN EVENT OF DEFAULT EXISTS, WITH NOTICE TO THE DEBTOR BUT WITHOUT THE
CONSENT OF THE DEBTOR:
(a) to demand, xxx for, collect or receive, in
the name of it or in its own name, any money or property at any time
payable or receivable on account of or in exchange for any of the
Collateral and, in connection therewith, endorse checks, notes, drafts,
acceptances, money orders, documents of title or any other instruments
for the payment of money under the Collateral or any policy of
insurance;
(b) to pay or discharge taxes, Liens or other
encumbrances levied or placed on or threatened against the Collateral;
(c) to notify post office authorities to change
the address for delivery of mail of the Debtor to an address designated
by the Agent and to receive, open, and dispose of mail addressed to the
Debtor;
(d) (A) to direct account debtors and any other
parties liable for any payment under any of the Collateral to make
payment of any and all monies due and to become due thereunder directly
to the Agent or as the Agent shall direct (the Debtor agrees that if
any Proceeds of any Collateral shall be received by it after such a
direction from the Agent, it shall promptly deliver such Proceeds to
the Agent with any necessary endorsements, and until such Proceeds are
delivered to the Agent, such Proceeds shall be held in trust by it for
the benefit of the Agent and shall not be commingled with any other of
its funds or property); (B) to receive payment of and receipt for any
and all monies, claims and other amounts due and to become due at any
time in respect of or arising out of any Collateral; (C) to sign and
endorse any assignments, proxies, stock powers, verifications and
notices in connection with accounts or payment obligations and other
documents relating to the Collateral; (D) to commence and prosecute any
suit, action or proceeding at law or in equity in any court of
competent jurisdiction to collect the Collateral or any part thereof
and to enforce any other right in respect of any Collateral; (E) to
defend any suit, action or proceeding brought against it with respect
to any Collateral; (F) to settle, compromise or adjust any suit, action
or proceeding described above and, in connection therewith, to give
such discharges or releases as the Agent may deem appropriate; (G) to
add or release any guarantor, endorser, surety or other party to any of
the Collateral; (H) to renew, extend or otherwise change the terms and
conditions of any of the Collateral; (I) to make, settle, compromise or
adjust any claims under or pertaining to any of the Collateral
(including claims under any policy of insurance); and (J) to sell,
transfer, pledge, convey, make any agreement with respect to or
otherwise deal with any of the Collateral as fully and completely as
though the Agent were the absolute owner thereof for all purposes, and
to do, at the Agent's option and the Debtor's expense, at any time, or
from time to time, all acts and things which the Agent deems necessary
to protect, preserve, maintain, or realize upon the Collateral and the
Agent's security interest therein.
THIS POWER OF ATTORNEY IS A POWER COUPLED WITH AN INTEREST AND
SHALL BE IRREVOCABLE UNTIL TERMINATION OF THIS AGREEMENT IN ACCORDANCE WITH
SECTION 7.11. The Agent shall be under no duty to exercise or withhold the
exercise of any of the rights, powers, privileges and options expressly or
implicitly granted to the Agent in this Agreement, and shall not be liable for
any failure to do so or any delay in doing so. Neither the Agent nor any Person
designated by the Agent shall be liable for any act or omission or for any error
of judgment or any mistake of fact or law, except any of the same resulting from
its or their gross negligence or willful misconduct. This power of attorney is
conferred on the Agent solely to protect, preserve, maintain and realize upon
its security interest in the Collateral. The Agent shall not be responsible for
any decline in the value of the Collateral and shall not be required to take any
steps to preserve rights against prior parties or to protect, preserve or
maintain any Lien given to secure the Collateral.
Section 5.2 Assignment by the Agent. The Agent may at anytime
assign or otherwise transfer all or any portion of their rights and obligations
under this Agreement and the other Loan Documents (including, without
limitation, the Obligations) to any other Person, to the extent permitted by,
and upon the conditions contained in, the Credit Agreement, and such Person
shall thereupon become vested with all the benefits thereof granted to the
Agent, herein or otherwise.
ARTICLE VI
DEFAULT, RIGHTS AND REMEDIES
If an Event of Default exists, the Agent shall have the
following rights and remedies:
(a) In addition to all other rights and remedies
granted to the Agent in this Agreement or in any other Loan Document or
by applicable law, the Agent shall have all of the rights and remedies
of a secured party under the UCC (whether or not the UCC applies to the
affected Collateral). Without limiting the generality of the foregoing,
the Agent may (A) without demand or notice to it, collect, receive or
take possession of the Collateral or any part thereof and for that
purpose the Agent may enter upon any premises on which the Collateral
is located and remove the Collateral therefrom or render it inoperable,
and/or (B) sell, lease or otherwise dispose of the Collateral, or any
part thereof, in one or more parcels at public or private sale or
sales, at the Agent's offices or elsewhere, for cash, on credit or for
future delivery, and upon such other terms as the Agent may deem
commercially reasonable or otherwise as may be permitted by law. The
Agent shall have the right at any public sale or sales, and, to the
extent permitted by applicable law, at any private sale or sales, to
bid (which bid may be, in whole or in part, in the form of cancellation
of indebtedness) and become a purchaser of the Collateral or any part
thereof free of any right or equity of redemption on the part of the
Debtor, which right or equity of redemption is hereby expressly waived
and released by the Debtor. Upon the request of the Agent, the Debtor
shall assemble the Collateral and make it available to the Agent at
anyplace designated by the Agent that is reasonably convenient to it
and the Agent. The Debtor agrees that the Agent shall not be obligated
to give more than ten (10) days prior written notice of the time and
place of any public sale or of the time after which any private sale
may take place and that such notice shall constitute reasonable notice
of such matters. The Agent shall not be obligated to make any sale of
Collateral if it shall determine not to do so, regardless of the fact
that notice of sale of Collateral may have been given. The Agent may,
without notice or publication, adjourn any public or private sale or
cause the same to be adjourned from time to time by announcement at the
time and place fixed for sale, and such sale may, without further
notice, be made at the time and place to which the same was so
adjourned. The Debtor shall be liable for all reasonable expenses of
retaking, holding, preparing for sale or the like, and all reasonable
attorneys' fees, legal expenses and other costs and expenses incurred
by the Agent in connection with the collection of the Obligations and
the enforcement of the Agent's rights under this Agreement. The Debtor
shall remain liable for any deficiency if the Proceeds of any sale or
other disposition of the Collateral applied to the Obligations are
insufficient to pay the Obligations in full to the extent provided in
the Loan Documents. The Agent may apply the Collateral against the
Obligations as provided in the Credit Agreement. The Debtor waives all
rights of marshalling, valuation and appraisal in respect of the
Collateral. Any cash held by the Agent as Collateral and all cash
proceeds received by the Agent in respect of any sale of, collection
from or other realization upon all or any part of the Collateral may,
in the discretion of the Agent, be held by the Agent as collateral for,
and then or at any time thereafter applied in whole or in part by the
Agent against, the Obligations in the order
permitted by the Credit Agreement. Any surplus of such cash or cash
proceeds and interest accrued thereon, if any, held by the Agent and
remaining after payment in full of all the Obligations shall be
promptly paid over to the Debtor or to whomsoever may be lawfully
entitled to receive such surplus; provided that the Agent shall have no
obligation to invest or otherwise pay interest on any amounts held by
it in connection with or pursuant to this Agreement.
(b) The Agent may cause any or all of the Collateral
held by it to be transferred into the name of the Agent or the name or
names of the Agent's nominee or nominees.
(c) The Agent may exercise any and all of the rights
and remedies of the Debtor under or in respect of the Collateral,
including, without limitation, any and all rights of it to demand or
otherwise require payment of any amount under, or performance of any
provision of, any of the Collateral.
(d) The Agent may collect or receive all money or
property at any time payable or receivable on account of or in exchange
for any of the Collateral, but shall be under no obligation to do so.
(e) On any sale of the Collateral, the Agent is
hereby authorized to comply with any limitation or restriction with
which compliance is necessary, in the view of the Agent's counsel, in
order to avoid any violation of applicable law or in order to obtain
any required approval of the purchaser or purchasers by any applicable
Governmental Authority.
ARTICLE VII
MISCELLANEOUS
Section 7.1 No Waiver; Cumulative Remedies. No failure on the
part of the Agent to exercise and no delay in exercising, and no course of
dealing with respect to, any right, power or privilege under this Agreement
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power or privilege under this Agreement preclude any other or further
exercise thereof or the exercise of any other right, power, or privilege. The
rights and remedies provided for in this Agreement are cumulative and not
exclusive of any rights and remedies provided by law.
Section 7.2 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the Debtor and the Agent and respective
successors and assigns, except that Debtor may not assign any of its rights or
obligations under this Agreement without the prior written consent of the Agent.
Section 7.3 AMENDMENT; ENTIRE AGREEMENT. THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES
HERETO AND SUPERSEDES ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS
AND UNDERSTANDINGS,
WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE
CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT OPAL
AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS AMONG THE PARTIES HERETO. The provisions of this Agreement may be
amended or waived only by an instrument in writing signed by the Debtor and the
Agent.
Section 7.4 Notices. All notices and other communications
provided for in this Agreement shall be given or made in accordance with the
Credit Agreement.
Section 7.5 Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Wisconsin and
applicable laws of the United States of America.
Section 7.6 Headings. The headings, captions, and arrangements
used in this Agreement are for convenience only and shall not affect the
interpretation of this Agreement.
Section 7.7 Survival of Representations and Warranties. All
representations and warranties made in this Agreement or in any certificate
delivered pursuant hereto shall survive the execution and delivery of this
Agreement, and no investigation by the Agent shall affect the representations
and warranties or the right of the Agent or the Bank to rely upon them.
Section 7.8 Counterparts. This Agreement may be executed in
any number of counterparts and on telecopy counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
agreement.
Section 7.9 Waiver of Bond. In the event the Agent seeks to
take possession of any or all of the Collateral by judicial process, the Debtor
hereby irrevocably waives any bonds and any surety or security relating thereto
that may be required by applicable law as an incident to such possession, and
waives any demand for possession prior to the commencement of any such suit or
action.
Section 7.10 Severability. Any provision of this Agreement
which is determined by a court of competent jurisdiction to be 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 of this Agreement, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 7.11 Termination. If all of the Obligations shall have
been paid and performed in full, all commitments of the Bank shall have expired
or terminated, the Agent shall, upon the written request of the Debtor, execute
and deliver to the Debtor a proper instrument or instruments acknowledging the
release and termination of the security interests created by this Agreement, and
shall duly assign and deliver to the Debtor (without recourse and without any
representation or warranty) such of the Collateral as may be in the possession
of the Agent and has not previously been sold or otherwise applied pursuant to
this Agreement.
Section 7.12 Obligations Absolute. All rights and remedies of
the Agent hereunder, and all obligations of the Debtor hereunder, shall be
absolute and unconditional irrespective of: (a) any lack of validity or
enforceability of any of the Loan Documents; or (b) any change in the time,
manner, or place of payment of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any consent to any departure
from any of the Loan Documents; any exchange, release, or non-perfection of any
Collateral, or any release or amendment or waiver of or consent to any departure
from any guarantee, for all or any of the Obligations; or any other circumstance
that might otherwise constitute a defense available to, or a discharge of, a
third party pledgor.
Section 7.13 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, THE DEBTOR HEREBY IRREVOCABLY AND EXPRESSLY WAIVES
ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER
BASED UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THE LOAN
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THE ACTIONS OF THE AGENT OR
ANY SECURED PARTY IN THE NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT THEREOF.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first written above.
DEBTOR:
NELNET, INC.
By: /s/ XXXXX XXXXXX
___________________________
Name: Xxxxx Xxxxxx
_______________________
Title: Chief Financial Officer
______________________
AGENT:
M&I XXXXXXXX & XXXXXX BANK,
as Agent for the Secured Parties
By: /s/ XXXX X. XXXXXX
___________________________
Name: Xxxx X. Xxxxxx
_______________________
Title: Vice President
______________________
[Signature Page to Nelnet, Inc. Security Agreement]
SCHEDULE 3.1
TO
SECURITY AGREEMENT
CURRENT FFELP LOAN SERVICING CLIENTS
1) AmSouth Bank of Alabama (Remote)
2) Arkansas Student Loan Authority (LIFE OF LOAN)
3) Bank of America NT&SA (LIFE OF LOAN)
4) Bank One Corporation (LIFE OF LOAN)
5) Brazos Higher Education Service Corporation
6) California Higher Education Loan Authority (2) (LIFE OF LOAN)
7) Citibank, New York State (LIFE OF LOAN)
8) Class Credit/Hibernia (LIFE OF LOAN)
9) Comerica Bank (LIFE OF LOAN)
10) Credit Union of Denver
11) College Loan Corporation (LIFE OF LOAN)
12) Colorado Student Obligation Bond Authority
13) Central Texas Higher Education Authority
14) Chase Manhattan Bank, N.A.
15) Education Finance Group
16) First National Bank of Ft. Xxxxxxx (LIFE OF LOAN)
17) Florida Educational Loan Marketing Corporation (LIFE OF LOAN)
18) Greater Texas Student Loan Corporation
19) Illinois Designated Account Purchase Program (FFELP Full Service and
Remote) (LIFE OF LOAN)
20) Key Bank (LIFE OF LOAN)
21) Louisiana Public Facilities Authority
22) Manufacturers and Traders Bank (LIFE OF LOAN)
23) Maine Education Loan Marketing Corporation (LIFE OF LOAN)
24) Mesa County Teachers Federal Credit Union (LIFE OF LOAN)
25) Michigan Higher Education Student Loan Authority
26) Michigan National Bank/MN Finance/Standard Federal (LIFE OF LOAN)
27) Minnesota Higher Education Services Office
28) Mountain States Bank (LIFE OF LOAN)
29) Navy Federal Credit Union (LIFE OF LOAN)
30) NHELP (LIFE OF LOAN)
31) NSA, Bank of Oklahoma (LIFE OF LOAN)
32) NES, Bank of Oklahoma (LIFE OF LOAN)
33) Norlarco Credit Union (LIFE OF LOAN)
34) Northwestern Area Credit Union (LIFE OF LOAN)
35) Xxxxx Fargo Bank, N.A. (LIFE OF LOAN)
36) North Texas Higher Education Authority
37) Orange County Teachers Federal Credit Union (LIFE OF LOAN)
38) Pinnacle Bank of Papillion (LIFE OF LOAN)
39) North Fork Bank (LIFE OF LOAN)
40) Rhode Island Student Loan Authority (FFELP Full Service and Remote)
41) San Antonio Federal Credit Union (LIFE OF LOAN)
42) Strident Loan Acquisition Authority (LIFE OF LOAN)
43) Student Loan Finance Association
44) Student Loan Funding Corporation (LIFE OF LOAN)
45) Space Age Federal Credit Union (LIFE OF LOAN)
46) Sun Trust Bank (LIFE OF LOAN)
47) Union Bank & Trust Company
48) University Federal Credit Union (LIFE OF LOAN)
49) University of Missouri Kansas City (LIFE OF LOAN)
50) NELnet (LIFE OF LOAN)
51) U.S. Bank N.A.
52) USA Education (LIFE OF LOAN)
53) Utah Higher Education Assistance Authority (LIFE OF LOAN IN EVENT OF
SALE)
54) Alabama Higher Education Loan (Remote)
55) Colorado Student Loan Program (Remote)
56) Regions Financial Corporation (Remote)
57) National Higher Education Loan Program (Remote)
58) Oklahoma Student Loan Authority (Remote)
SCHEDULE 3.1A
TO
SECURITY AGREEMENT
LOAN APPLICATION PROCESSING,
DISBURSEMENT AND SERVICING AGREEMENT
-FEDERAL FAMILY EDUCATION LOAN PROGRAM-
THIS LOAN APPLICATION PROCESSING, DISBURSEMENT AND SERVICING
AGREEMENT (the "Agreement") is entered into as of the _____ day of _________
2001, (the "Effective Date") by and between NELNET, INC. ("Servicer"), and
_____________________, ("Lender").
WHEREAS, Servicer is in the loan application processing,
disbursement and servicing business in the States of Colorado, Nebraska and
Florida, and in the ordinary course of such business processes applications,
disburses and services 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, and rules and regulations promulgated
thereunder as in effect from time to time (collectively, the "Education Act");
and,
WHEREAS, Servicer has developed and/or has available to it the
systems and services to enable it to process applications, disburse and service
Education Loans in accordance with the Education Act and with rules and
regulations previously promulgated by _____________________, which constitute
all of the Guarantors for all Education Loans which are to be serviced hereunder
("Guarantor(s)") as in effect from time to time (collectively, "Regulations");
and
WHEREAS, Lender in the ordinary course of its business makes
or acquires Education Loans; and
WHEREAS, Lender desires to retain Servicer to process
applications, disburse and service its Education Loans.
NOW THEREFORE, in consideration of the premises and the
mutual covenants hereinafter set forth, the parties agree as follows:
AGREEMENT
1. TERM; LIFE OF LOAN SERVICING; REMOVAL; SERIAL LOANS.
1.1 TERM. With respect to application processing and
disbursements only, the initial term of this Agreement shall be from the
Effective Date for a period of five (5) years ("Initial Term") subject to
earlier termination pursuant to the terms herein. The Initial Term of this
Agreement may be renewed for an additional period of time upon mutual agreement
of the parties ("Additional Term"). Upon expiration of the Initial or Additional
Terms, all terms and conditions of this Agreement with respect to application
processing and disbursements, except
Section 12, shall continue on a month to month basis until either party
terminates this Agreement, with or without cause, upon sixty (60) days written
notice to the other party. If this Agreement continues on a month to month basis
after expiration, the "Servicing Fees" (as set forth in this Agreement and
Schedule "A") will increase by two percent (2%). Servicer also reserves the
right, at any other time after expiration of the Initial Term or any Additional
Term, to increase, decrease, modify and/or change the Servicing Fees as provided
for in Section 13 and Schedule "A", in such manner as Servicer may determine,
upon sixty (60) days prior written notice to Lender.
1.2 LIFE OF LOAN SERVICING. The parties acknowledge that
in order to avoid disruption and maintain continuity of service to the maker(s)
of a note securing an Education Loan ("Borrowers"), it has become customary in
the industry to have Education Loans serviced for the life of the Education Loan
by a single servicer. Accordingly, with respect to all post-disbursement
servicing, Lender hereby agrees that it will ensure that all Education Loans
originated, acquired, held, or sold by the Lender under the Education Act and
subject to this Agreement will remain with Servicer for the life of the loan,
which means until the Education Loan is paid in full by the Borrower or
Guarantor.
In the event the Lender desires to sell any of its Education
Loans, the Lender will sell the Education Loans to a purchaser maintaining a
servicing agreement with Servicer which provides for servicing of such Education
Loans on a life of loan basis.
If the Lender desires to sell its Education Loans to a
purchaser that does not have such an agreement with Servicer, Lender shall
require such purchaser to execute a servicing agreement with Servicer in order
to have the Education Loans serviced on a life of loan basis by Servicer.
The intent of this section is to assure that every Education
Loan will remain with Servicer for servicing for the life of the loan.
Notwithstanding the foregoing, this section will not apply in
the event: Servicer is in material breach of this Agreement and fails to cure
such breach under the provisions set forth in Section 23(a) hereof.
1.3 APPROVED REMOVAL OF EDUCATION LOANS. If Lender sells
or removes any Education Loan from the Servicer system with Servicer's prior
written approval (i.e., for reasons such as serialization, but subject to
Servicer's sole discretion), Lender agrees to pay to Servicer a removal fee of
Twenty-One dollars ($21.00) per "Account Group" (as defined below) transferred
off the Servicer's servicing system plus any other expenses related to
additional, special or unique requests of the Lender.
1.4 SERIAL LOANS. Notwithstanding any other provision to
the contrary in this Agreement, Servicer shall have the right to originate and
service all Education Loans that are "serial" (as that term is commonly
understood with respect to Education Loans) to Education Loans originated and/or
serviced hereunder. This provision shall survive the termination of this
Agreement for so long as Lender is directly or indirectly engaged in the
business of making Education Loans under the FFEL Program; provided, however,
that if an "eligible institution" as
defined in the Education Act ("Eligible Institution") or a Borrower requests in
writing that Servicer not provide either origination or servicing for a serial
loan, then Lender shall not be required to use Servicer for origination or
servicing for such serial loan as requested by the Eligible Institution or
borrower; Lender shall not request an Eligible Institution or Borrower to give
such request to Sender.
APPLICATION PROCESSING AND DISBURSEMENT SERVICES
2.1. APPLICATION PROCESSING. Servicer shall maintain a
special post office drawer or box for purposes of receiving applications
directly from Eligible Institutions, Borrowers or Lender. Servicer shall process
applications received at the drawer or box or otherwise received at Servicer's
office, as follows:
(a) Servicer shall verify that all Education
Loan applications and supporting documents are complete, provided,
however, Servicer shall not be required to verify any information
included in an Education Loan application (except to the extent
required by the Education Act or applicable Regulations of the
Guarantor);
(b) Servicer shall perform acts necessary to
secure disbursement approval and insurance coverage of the principal
and interest on the Education Loan from the applicable Guarantor and
shall be responsible for all communication and contact with such
Guarantor necessary or appropriate to accomplish such approval and
coverage;
(c) Servicer shall prepare and mail directly to
Borrower all notices, statements and disclosures required under the
Education Act;
(d) Servicer shall, if necessary, prepare and
mail directly to Borrower a replacement or other necessary promissory
note, together with appropriate instructions for execution and delivery
of the promissory note and any related documentation;
Lender shall be solely responsible for payment to the U.S. Government of
origination or other fees required by the Education Act, and for all fees
required by any central disbursement agent, unless the parties agree otherwise
in writing.
If Lender is utilizing a third party disbursement agent to disburse its
Education Loans prior to delivery of the Education Loans to Servicer, Servicer
will have no liability or responsibility for the tasks set forth in subsections
(a) - (d) above nor for reconciliation issues arising from such process.
2.2. DISBURSEMENT SERVICES. Servicer shall prepare the
disbursement checks made payable to the appropriate Borrowers, or shall make
other allowable arrangements for the disbursement of Education Loan proceeds,
and shall mail the checks or deliver the funds, to the appropriate location.
Servicer will print Lender's logo on checks if requested.
2.3. PLUS LOAN SERVICES. If applicable, Servicer shall
perform credit review services (as required under the Education Act) on
Borrowers to whom Lender agrees to make Education Loans which are PLUS loans
authorized under Section 428B of the Education Act
("PLUS Loans"). Servicer agrees to act as Lender's agent for the receipt,
evaluation, handling and maintenance of certain PLUS Loan credit information, in
order to assist Lender in making decisions with respect to the approval or
denial of PLUS Loans, consistent with the terms of the Education Act and
Regulations. Lender will make the final lending decision, according to the
procedures stated in this Agreement and such reasonable appeal processes as
Lender determines and directs. Servicer will, with respect to PLUS Loans:
(a) Accept PLUS Loan applications or pre-approval
requests for purposes of performing credit
evaluation;
(b) Receive and evaluate (based on Education Act
requirements and Lender's reasonable guidelines) a
credit report from the credit-reporting agency for
each applicant, and report the results of such
evaluation to the appropriate Eligible Institution
within twenty-four hours of receipt. Servicer may
rely upon all information contained in such report or
otherwise provided by the credit reporting agency and
shall have no liability for inaccurate or erroneous
information contained therein.
(c) Identify each applicant for a PLUS Loan who does not
have an adverse credit history by generating and
providing to Lender a disbursement report related to
Education Loan origination.
(d) According to Education Act requirements, generate and
provide to the PLUS Loan applicant an "adverse
action" letter in compliance with the Equal Credit
Opportunity Act on behalf of Lender with respect to
each applicant identified as having an adverse credit
history, within thirty (30) days after Servicer
receives both the completed Education Loan
application and the credit history, and provide a
copy of such letter or otherwise identify such
applicants to Lender.
(e) Lender agrees that with respect to all PLUS Loans
processed under this Agreement, it will ensure that
all information in Loan applications and other
information provided to Servicer in connection with
its performance of the services hereunder is accurate
and complete.
(f) Lender will be responsible for handling and
evaluating all appeals of denied credit, including,
if appropriate following appeal, communicating in
writing its approval of a PLUS Loan application
previously denied, and requesting guarantee of the
PLUS Loan due to error or other reasons relating to
the original credit history and properly documenting
the same.
Nothing in this Agreement shall make Servicer a loan production office or holder
or originator of PLUS Loans processed under this Agreement. Lender acknowledges
its sole liability for the decision to approve or deny PLUS Loan applications,
and will hold Servicer harmless against claims arising out of such decisions.
2.4. FUNDING OF LOANS.
(a) Servicer shall maintain an account for purposes of
disbursing proceeds of Education Loans pursuant to
this Agreement. Servicer shall notify Lender each
"Business Day" (Monday - Friday, except Federally
recognized holidays) of the disbursement amount
required to fund the Education Loans processed in
accordance with this Agreement. Promptly upon such
notification, Lender shall cause such account to be
credited with "same day" funds in such amount. If
Servicer fails to notify Lender, Lender shall
promptly credit such account with the required funds
on the next Business Day and shall not be liable to
Servicer, the Eligible Institutions or Borrowers for
failure to credit the account on such day; provided,
however, Lender shall use its best efforts to credit
the account with "same day" funds regardless of when
notification is received from Servicer. Lender shall
cause all Education Loans originated in accordance
with this Agreement to be promptly funded as set
forth above.
(b) Failure to Fund. If Lender fails to fund the
Servicer's account at the instructed level, Lender
shall pay Servicer a fee of Two Hundred dollars
($200.00) per day the account is not funded. Should
this failure persist for three (3) consecutive days,
Servicer reserves the right to terminate its
obligation to furnish the funding services. Servicer
shall be entitled to earnings, if any, on the funding
account.
(c) Return of Deposits. Amounts deposited with Servicer
but not disbursed by reason of an Education Loan
being canceled, shall be returned to Lender promptly,
and in no event later than one (1) week after
Servicer's receipt of the written notice of
cancellation or return of the check with respect to
such cancelled Education Loan.
3. REPORTS.
(a) Standard Reports. Standard reports will be furnished
to Lender via U.S. Mail, first class, postage
prepaid, or as otherwise mutually agreed.
(b) Special Reports. At Lender's request, Servicer will
furnish such special reports as can be reasonably
provided by Servicer, provided, however, that Lender
will compensate Servicer for such reports as a
"Special Service" as indicated in Schedule "A".
4. REVIEW OF OUTPUT AND REPORTS. Servicer shall make
commercially reasonable efforts to verify that all output, including reports,
are correct and complete in all material respects. Lender shall, however, review
each output, especially reports, thoroughly upon receipt to verify completeness
and accuracy. Problems identified with output and/or the underlying Education
Loan data shall be reported by Lender to Servicer within forty-five (45) days of
the date the output was generated. Erroneous data and/or output programs so
reported will be corrected, and affected reports will be rerun at no additional
charge. Problems reported
to Servicer after forty-five (45) days may be subject to a time and materials
charge at Servicer's option to correct output retroactively. Servicer shall have
no liability for errors that could reasonably be expected to be identified by
Lender personnel familiar with the Education Loan program and Lender's Education
Loan portfolio, or for errors that are not reported within forty-five (45) days.
POST-DISBURSEMENT SERVICING
5. DELIVERY AND CONVERSION OF EDUCATION LOANS FOR
SERVICING AND COLLECTION. Subject to Servicer's scheduling requirements, Lender
may from time to time deliver or cause to be delivered Education Loans to
Servicer with respect to which processing has been completed and proceeds have
been disbursed to the Borrowers prior to the date of delivery ("Converted
Education Loans") to be serviced pursuant to the terms of this Agreement. Lender
shall transmit to Servicer all documentation required by Servicer to enable it
to service the Converted Education Loans (the "Loan Documentation"). Upon
receipt of the Loan Documentation, Servicer shall verify only the presence of
the promissory note, the original Borrower application, and proof of
disbursement. Servicer is willing to use reasonable efforts to identify previous
servicing errors or omissions in this process, if requested by Lender, for a fee
to be mutually agreed upon following Servicer's review of the portfolio.
However, Servicer shall not be liable or responsible for the consequences of any
errors it does or does not detect in such file review, nor for missing or
incorrect documentation at conversion.
6. PORTFOLIOS SUBJECT TO REJECTION BY SERVICER. Lender
acknowledges that servicing certain types of Education Loan portfolios poses a
risk of financial hardship for Servicer. Therefore, Servicer may in its
discretion reject certain Education Loans or Education Loan portfolios
("Rejected Loans") prior to placing such loans on the Servicer system. Servicer
shall provide Lender with reasonable notice prior to transfer to Servicer's
system as to Servicer's determination that Education Loans are deemed to be
Rejected Loans. Servicer shall have no right to reject or decline Education
Loans after the loans are transferred to the Servicer system.
7. CONVERSION OF DELINQUENT LOANS. Servicer is agreeable
to the conversion of delinquent Education Loans to its system for servicing. If
a loan is one hundred eighty (180) days or more past due, however, Servicer will
not be responsible for any Guarantor claim rejects or interest denials due to
untimely guarantee claim filing.
8. SERVICING OF EDUCATION LOANS. Upon acceptance of any
Education Loan into Servicer's computer system and after the sale date (if
applicable) of the Education Loan to Lender, or following application processing
arid disbursement of Education Loans originated under this Agreement, Servicer
shall service the Education Loan in accordance with the Education Act, and this
Agreement, including the following:
(a) Servicer will service the Education Loans in such a
manner as to maintain the guarantee thereon in full
force at all times, subject to Section 16, below.
(b) Servicer shall prepare and mail all required
statements, notices, disclosures and demands directly
to the Borrower.
(c) Servicer shall retain records of contacts,
follow-ups, collection efforts and correspondence
regarding each Education Loan.
(d) Servicer 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 (for Converted Education Loans, from
the conversion date to the Servicer system).
(e) Servicer shall process all deferments and
forbearances.
(f) Servicer shall process all address changes and update
address changes accordingly.
(g) Servicer shall retain all documents it receives
pertaining to each Education Loan, in accordance with
the filing requirements set forth in the most current
"Common Manual - Unified Student Loan Policy". Such
retention may be on magnetic tape, microfilm, laser
disk or other related medium.
(h) When necessary and allowable by the Education Act,
Servicer shall take all steps necessary to file a
claim for loss with Guarantor.
(i) Servicer shall provide data as required to Guarantor.
Any requirements beyond those found in the Common
Manual shall be billed to the Lender at a price to be
mutually agreed upon. Servicer shall have no
liability for late filing of claims if the
information required for such filing has been
requested from Lender but not received within seven
days of such request.
(j) Servicer shall process and add repurchase Education
Loans from the Guarantor to the Servicer Servicing
System as required by the Education Act or upon the
request of Lender. The fee for such repurchase is
provided in Schedule A.
(k) Servicer shall provide such other services as
Servicer customarily provides and deems appropriate.
9. SYSTEM UPDATES. Lender agrees that in the course of
its Education Loan servicing activities, Servicer may rely on, without
independently verifying, all data entries, manipulations and representations
provided to Servicer by Lender, Eligible Institutions, and Borrowers with
respect to the Education Loans, including but not limited to, Eligible
Institutions/Borrower certification, eligibility, enrollment, and Eligible
Institution or Borrower demographics, including data entries provided to
Servicer electronically, via the Internet or otherwise, and that Servicer shall
have no liability for incorrect information or the consequences thereof, which
is provided by Lender, Eligible Institutions, or Borrowers.
10. CURE SERVICING. At Lender's request Servicer agrees
to perform additional servicing activities not required under the terms of this
Agreement for Converted Education Loans transferred to Servicer, which have
previously not been 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"). Utilizing Cure Procedures
approved by the Guarantor, Servicer will use its best efforts to cure all
defects caused by Lender or unreasonable acts of the Guarantor(s) (as defined in
Section 17 below). Servicer makes no representation or warranty that the
guarantee on any Education Loan will be reinstated regardless of whether
Servicer follows the Cure Procedures approved by the Guarantor.
11. WRITE OFF GUIDELINES. The Servicer shall use the
following guidelines in determining whether to write off and terminate efforts
to collect or service a Borrower's Account:
Account Balance* Process Requirements
---------------- --------------------
$0 - $100.00 Writeoff thirty (30) days after the last
payment was made, and if applicable,
forward notes to Borrower.
$100.01 + Recover such amount by filing a supplemental
claim, if applicable, or service as
normal.
*Account Balance includes both principal and interest
If the Borrower's final payment results in an overpayment equal to or greater
than ten dollars ($10.00), the Servicer shall notify the Lender no later than
forty-five (45) days after receipt to refund the entire overpayment to the
Borrower. If the overpayment is less than ten dollars ($10.00), the Servicer
shall write off the amount, but in each case shall notify the Lender by listing
the dollar amount and Borrower Account within thirty (30) days. To the extent a
law requires refunds of less than $10.00, Servicer shall refund such overpayment
upon notification by Lender of such law and the specific requirements thereof.
12. REPORTS TO LENDER. On or before the 15th day of each
month, (or by the 15th day following quarter end, as applicable) unless some
other time is provided herein, Servicer shall prepare and deliver the following
reports to Lender, or to such other person as Lender may designate, with respect
to activity during the preceding month:
(a) Total Principal Report (Daily);
(b) Interest Reconcile Report (Daily)
(c) Refund Reconcile Report (Daily);
(d) Daily Monetary Transaction Summary (Daily, Monthly);
(e) Portfolio Report (Monthly);
(f) Claims Delinquency Detail (Monthly);
(g) Computation of Interest and Special Allowance
Payments (currently reported on E.D. Form 799). Data
will be computed commencing with the date Education
Loans appear on the records of Servicer (Quarterly).
Lender shall receive one copy of each of the above reports at
no cost. Servicer will provide extra copies at the request of Lender, and Lender
will pay the cost of the copies. Any customized reports shall be provided at an
additional cost to be mutually agreed upon by Servicer and Lender.
13. SERVICING FEES.
13.1. Lender shall pay to Servicer, on or before the 15th
day of each month (or within fifteen (15) days of billing statement) the fees
provided in Schedule A ("Servicing Fees") for and in consideration of the
services performed by Servicer hereunder for the preceding month. After the
first twelve (12) months of this Agreement, the Servicing Fees shall be subject
to change by Servicer at any time, upon sixty (60) days written notice, but
changes will not occur more frequently than once every twelve (12) months. No
change will result in an increase that exceeds two percent (2%) for any twelve
(12) month period.
In the event Servicing Fees are not paid within thirty (30)
days of the billing statement, Lender agrees to pay a late fee of one and
one-half percent (1 1/2%) per month against the entire outstanding balance of
the account including any prior late fees outstanding. Servicer also reserves
the rights to (a) withhold transfer of borrower payments; (b) withhold reports
otherwise due; and (c) terminate this Agreement without notice if nonpayment
persists for sixty (60) days or more from billing.
13.2. POSTAGE EXPENSES. In addition to the foregoing,
Lender also agrees that Servicer may pass on to Lender the cost of actual
increases in postage rates by the United States Postal Service.
13.3. MATERIAL CHANGES. The parties agree that should
Servicer be required to make material changes to its current Lender servicing
practices or servicing system due to changes to the Education Act, Regulations
of the Guarantor, and/or business environment, or to other costs beyond
Servicer's control, Servicer may increase the Servicing Fees with Lender to
reasonably reflect those increased costs at any time during this Agreement.
13.4. RIGHT TO OFFSET. In the event that the Servicer does
not receive payment from Lender with respect to any Education Loan or services
provided under this Agreement, or in the event that the Servicer is notified
that funds are owed to the Secretary of Education, the Servicer shall notify
Lender of such nonpayment or monies owed. In such event, the Servicer may, at
its discretion, use funds received on Lender's behalf to offset or pay any
monies due the Secretary of Education or any invoice due the Servicer plus
interest provided that the invoice has not been paid, the amount is undisputed
as of the date of payment, and ninety (90) days have elapsed since the mailing
of the invoice to Lender.
14. LOAN PAYMENTS. Borrowers will be directed to make all
Education Loan payments to a lockbox established by Servicer. All cash receipts
will be remitted once a week to Lender or as Lender may otherwise reasonably
request.
15. INQUIRIES. Servicer shall answer all inquiries
regarding Education Loans, Eligible Institution status or refunds, and Lender
shall cooperate to the extent necessary to gather the information needed to
answer such inquiries. Such inquiries may be referred to the Eligible
Institution which the student Borrower attended or is attending, if necessary.
Servicer shall have no responsibility for any disputes between Borrowers and
Eligible Institutions regarding tuition, registration, attendance, or quality of
education/training.
16. AGENT AUTHORIZATION. Lender authorizes Servicer to
act as Lender's agent in the processing and servicing of Lender's Education
Loans. This authorization includes but is not limited to all correspondence and
liaison necessary with Guarantor regarding Lender's Education Loans, assignment
of claims to Guarantor and any/or all other communications, correspondence,
signatures or other acts appropriate to service Lender's Education Loans in
accordance with the Education Act and/or Regulations of the Guarantor.
17. LIABILITY OF SERVICER. Servicer assumes no
responsibility or liability for any claims, liabilities, losses, guarantee
rejects, or interest denials that are related to servicing of the Education
Loans prior to (a) Servicer processing the application of the Education Loan,
(b) placing of the Education Loan on Servicer's system, or (c) prior to the date
Lender holds ownership of the Education Loan. Servicer assumes no liability for
the failure of any Borrower to repay their Education Loan, nor for the failure
of the United States government to pay any principal, interest, subsidy or
special allowance, nor for the failure of Guarantor to make a required payment
of any principal and/or interest on any of Lender's Education Loans. Servicer
shall not be responsible for consequences of unreasonable acts of any Guarantor.
For purposes of this Agreement, unreasonable acts of the Guarantor shall include
but not be limited to: Guarantor actions that are outside the scope of industry
custom; oral commitments accepted in practice discontinued without sufficient
advance notice; retroactive implementation of a regulation without sufficient
prior notification or clarification; Guarantor servicing deficiencies that
preclude Servicer from performing requirements correctly or timely; Guarantor
submission of data to the incorrect entity; Guarantor submission of data in a
format that is not usable, legible or readable; refusal of the Guarantor to
acknowledge data or documentation; unscheduled changes in normal business hours;
enforcement of an unwritten policy or standard; interpretation of a policy,
standard or regulation in a manner inconsistent with the Common Manual,
Guarantor's manual or Department of Education clarification; or any other acts
of the Guarantor of a similar nature.
If Servicer takes or fails to take any action in connection
with servicing responsibilities under this Agreement (whether or not such action
or inaction amounts to negligence) which causes any Education Loan subject to
this Agreement to be denied the benefit of any applicable guarantee, Servicer
shall have a reasonable time to cause such benefits of the guarantee to be
reinstated. If such benefits are not reinstated within twelve (12) months of
denial by Guarantor or the Department of Education, Lender agrees to sign a Loan
Sale Agreement to sell the Education Loan to another Eligible Lender (as defined
in the Act) of Servicer's choice ("Buyer"). Subject to the terms of the Loan
Sale Agreement, Buyer will purchase the Education Loan from Lender for an amount
equal to the amount the Guarantor would have paid if the Education Loan had been
accepted and paid by the Guarantor as a claim (which may include but is not
limited to lost principal, interest including interest penalties for due
diligence violations, and special allowance payments), and title to the
Education Loan will thereby be transferred to
Buyer. Lender shall repurchase any Education Loan on which the guarantee is
fully reinstated, from Buyer at an amount equal to the then outstanding
principal balance plus all accrued interest due thereon, less the amount subject
to Lender Risk Sharing under the Education Act. Notwithstanding any other
provision in this Agreement to the contrary, if Servicer performs its duties
under this paragraph, then Servicer shall not be deemed to be in breach of this
Agreement for failure to service properly.
Lender's remedies for breach of this Agreement by Servicer
shall be limited to this section. In no event will Servicer be liable under any
theory of tort, contract, strict liability or other legal or equitable theory
for any lost profits or exemplary, punitive, special, incidental, indirect or
consequential damages, each of which is hereby excluded by agreement of the
parties regardless of whether or not Servicer has been advised of the
possibility of such damages. Any action for the breach of any provisions of this
Agreement shall be commenced within one (1) year after the Education Loan leaves
the Servicer's servicing system.
18. INDEMNIFICATION. Lender shall indemnify and hold
Servicer harmless from and against all claims, liabilities, losses, damages,
costs and expenses (including reasonable attorney's fees) asserted against or
incurred by Servicer as a result of Servicer complying with any instruction or
directive by Lender. Lender shall further indemnify and hold Servicer harmless
from and against all claims, liabilities, losses, damages, costs and expenses
(including reasonable attorney's fees) asserted against or incurred by Servicer
as a result of actions not the fault of or not caused solely by a negligent act
of Servicer, its agents or employees, including all claims, liabilities, losses,
damages and costs caused in part or in whole by or the fault of the Lender, a
prior holder, owner or Lender, a prior servicer or any other party connected in
any manner to the Education Loan or Education Loans resulting in the claim,
liability, loss, damage, cost, or expense.
19. DISCLOSURE OF INFORMATION. (a) All data, information,
records, correspondence, reports or other documentation received by Servicer
pursuant to this Agreement from Lender, the Eligible Institution which the
student attended, or the Borrower, or prepared and maintained by Servicer in the
course of its activities under this Agreement shall be released or divulged only
to Lender, Eligible Institutions, guarantee agencies, regulatory bodies, other
parties necessary to accommodate enforceability of the Education Loan,
Servicer's affiliates or as otherwise required by law. With respect to
information or documents relating to a particular Borrower, Servicer may release
or divulge that information or those documents to that Borrower, Eligible
Institutions, or such other parties as Servicer may be directed in writing by
Lender or such Borrower, or as otherwise required by law.
(b) Servicer shall establish and maintain policies and
procedures designed to ensure the confidentiality of the Lender information
(non-public personal information). Among other things, Servicer acknowledges
that it is against Federal law to disclose non-public personal information
received from a financial institution under certain circumstances. Servicer and
Lender agree to comply with the provisions of the Xxxxx-Xxxxx-Xxxxxx Act and all
implementing rules and regulations (collectively "GLB") regarding consumer
financial privacy, to the extent each of their actions and responsibilities
hereunder are impacted.
(c) Lender acknowledges that it holds the "Customer
Relationship" (as defined in GLB) with Education Loan borrowers and thereby has
the responsibility to provide required privacy policies and notices to such
borrowers. Upon request, Servicer will assist Lender with such services at an
additional fee to be negotiated separately from this Agreement.
20. CONFIDENTIALITY.
20.1. Lender 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 Servicer to any third party or use the same in competition with Servicer. 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 Servicer
that is not generally known by the public. Servicer and Lender specifically
agree that the format used to transfer Lender's data contains confidential and
proprietary trade secret information that is the exclusive property of Servicer.
Servicer makes no claim to the specific data contained in any printout given to
Lender and recognizes that said data is the exclusive property of Lender.
Servicer and Lender 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 Servicer's computer program are trade secrets of, proprietary to, and
owned exclusively by Servicer.
20.2. In accordance with applicable law, the Lender agrees
that in the event Servicer grants access to any Confidential Information, to
forever thereafter keep the same confidential. Lender also agrees to keep
Confidential Information and material (both written and verbal) relating to any
Lender, vendor, or other party transacting business with Servicer. Lender, its
agents and employees, further agrees not to release, share, use, or disclose the
same without the prior written permission of Servicer except to only those of
Lender's employees, agents, or advisors having a need to know the same for
purposes related to this Agreement.
20.3. Lender, its agents, employees, and advisors,
recognize the disclosure of Confidential Information by Lender, or Lender's
agents or advisors may give rise to irreparable injury to Servicer inadequately
compensable in damages and that accordingly, Servicer 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 the Lender
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.
21. INTELLECTUAL PROPERTY PROTECTION. The parties agree
that all right, title and interest of whatever nature in Servicer's user
manuals, training materials, computer programs (including both source and object
code), routines, structures, layout, report formats, together with all
subsequent versions, enhancements and supplements to said programs, all
copyright rights, and all oral or written information relating to Servicer's
intellectual property
conveyed in confidence by Servicer to Lender pursuant to this Agreement which is
not generally known to the public and which gives Servicer an advantage over its
competitors who do not know or use such information are also Confidential
Information. All forms of Servicer's intellectual property of whatever nature is
and shall remain the sole and exclusive property of Servicer. Lender may only
use aforementioned materials and tools in form and manner approved by Servicer
in writing.
22. MODIFICATION OF EQUIPMENT, COMPUTER PROGRAMS AND
PROCEDURES. The Servicer reserves the right to change any part or all of its
equipment and computer programs, and its procedures, reports and services,
relating to the manner of, or the methodology used in, servicing Education Loans
as set forth in this Agreement without the prior consent of the Lender;
provided, however, that in no event shall such change abrogate or in any way
modify the obligations of the Servicer to comply with the Education Act and
Regulations as set forth above. It is specifically understood that the intent of
this paragraph is to allow the Servicer flexibility in the methods and
techniques of servicing subject to full compliance with this Agreement.
23. TERMINATION.
a. If at any time during this Agreement either party
refuses or fails to perform in a material fashion any
portion of this Agreement, the other party will
provide written notice describing the nonperformance.
If the nonperforming party fails or refuses to
correct the nonperformance within thirty (30) days
after receipt of written notice, the other party may
terminate this Agreement.
b. If the delinquency rate of the Lender's portfolio of
Education Loans being serviced hereunder (as
calculated during month-end processing in accordance
with the formula described below) exceeds twenty
percent (20%) for any three consecutive months during
the term of this Agreement, the Servicer may
terminate the Agreement by providing sixty (60) days
prior written notice to the Lender. The Servicer may,
at its option, propose modified servicing fees in
lieu of exercising the termination provisions of this
section. Delinquency rate is defined as the number of
Accounts 31- 270 days delinquent divided by the total
number of Accounts in repayment status.
24. PROCEDURES IN EVENT OF SERVICER BREACH. If this
Agreement is terminated by Lender due to a breach by Servicer, a deconversion
fee of Three dollars ($3.00) per Account plus any other reasonable expenses
incurred in connection with the transfer of Lender's files and other required
information and reports off of the Servicer system, shall be paid by Lender. In
such case, Servicer shall turn over to Lender all Education Loan files in
accordance with acceptable standards as described in the Common Manual to
support claims filing function. Servicer shall make available to Lender the
original promissory note, along with an electronic record of Servicer servicing
documenting information related to deferments, forbearances, disbursements, and
guarantees (the "Electronic History"). Electronic History shall be provided in
Servicer's standard format.
25. NOTICES. All notices or communications between the
parties shall be addressed as follows: If to Servicer: President, Nelnet, Inc.,
0000 Xxxxxxxxxx Xxxxxxx, Xxxxxxxxxxxx, XX, 00000, with a copy to General
Counsel, Nelnet Corporation, 0000 Xxxxx Xxxxxx Xxxx, Xxxxx 000, Xxxxxx, XX
00000, and if to Lender: _________________ or to such other address as may be
indicated by the parties. Any notice shall be deemed given upon mailing if by
registered or certified mail, and upon receipt in every other case.
26. GOVERNING LAW. This Agreement is executed and
delivered within the State of Colorado. The parties agree this Agreement shall
be construed, interpreted and applied in accordance with the laws of the State
of Colorado, and that the state and Federal courts and authorities within
Colorado shall have sole jurisdiction and venue over all controversies which may
arise with respect to the execution, interpretation and compliance with this
Agreement.
27. CHANGES IN WRITING. This Agreement, including this
provision, shall not be modified or changed except by a writing signed by all
parties hereto.
28. SEVERABILITY. If 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, the invalid provisions will be
reduced in scope or eliminated by the court to the extent deemed necessary by
the court to render the remaining provisions of this Agreement reasonable and
enforceable.
29. PERSONS BOUND. This Agreement shall be binding upon
and inure to the benefit of the parties hereto, their legal representatives,
successors and assigns.
30. 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. However, notwithstanding the previous
sentence, Servicer may in its sole discretion, without Lender's consent, assign
or delegate any of its duties or obligations hereunder to an entity affiliated
with Servicer. In such case, the assignee or delegate shall be bound by all
terms and conditions of this Agreement related to such assignment or delegation.
31. 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.
32. 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.
33. FORCE MAJEURE. The foregoing provisions of this
Agreement are subject to the following limitation: If by reason of a force
majeure Servicer is unable in whole or in part to carry out any agreement on its
part herein contained, Servicer 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 States of
Colorado, Nebraska or Florida or Cities of Aurora, Colorado, Lincoln, Nebraska
or Jacksonville, Florida, 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 Servicer.
34. HIRING. Lender agrees that during the term of this
Agreement and any extensions or renewals thereof, and for one year thereafter,
Lender shall not solicit for hire, or knowingly allow its employees to solicit
for hire, any employees of Servicer without the prior written consent of
Servicer.
35. AUDITS. Lender, at its own expense, with prior notice
to Servicer and during Servicer's normal business hours, may perform or arrange
to have audits performed of Servicer's servicing activities on Lender's
Education Loans. Servicer shall provide up to forty (40) hours of audit
assistance per year. Lender will reimburse Servicer for its staff time and
expense beyond said forty (40) hours.
36. CORPORATE OBLIGATION. This Agreement is solely a
corporate obligation of Servicer and Lender and no personal liability against
any parent, subsidiary, affiliate, incorporator, member, officer, employee, or
trustee, past present, or future of the parties shall attach to any of the
foregoing as a result of this Agreement, the provision of the Services pursuant
to this Agreement, or any breach of this Agreement; the parties hereto agreeing
that the sole recourse is against the Servicer (or its successors) or the Lender
(or its successors). Notwithstanding the foregoing, any incorporator, member,
officer, employee, or trustee shall have responsibility to the extent such
individual receives a fraudulent conveyance from Servicer or Lender.
37. 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.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
NELNET, INC.
By:_____________________________________
Name: Xxxxxx X. Xxxxxxxx
Title: Sr. Vice President/General Counsel
LENDER
By:_______________________________________
Name:_____________________________________
(Please Print)
Title:____________________________________
SCHEDULE A
TO
LOAN APPLICATION PROCESSING,
DISBURSEMENT AND SERVICING AGREEMENT
SCHEDULE 3.2
TO
SECURITY AGREEMENT
Office Locations; Fictitious Names; Tax I.D. Number; Organizational Number
OFFICE LOCATIONS:
Headquarters Office: 0000 Xxxxx Xxxxxx Xxxx
Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Other Locations: 000 Xxxxx 00xx Xxxxx 000
Xxxxxxx Xxxxxxxx
First Trust Center
000 Xxxx Xxxxx Xxxxxx, Xxxxx 0000
Xx. Xxxx, Xxxxxxxxx
0000 Xxxxxxxxxx Xxxxxxx
Xxxxxxxxxxxx, Xxxxxxx
NAMES:
Current Name: NELNET, Inc.
Prior Names: NELNET Loan Services, Inc., UNIPAC
Service Corporation
Fictitious Names: None
TAX PAYER I.D. NO.: 00-0000000
