Exhibit 10.6
AGREEMENT TO GUARANTEE LOANS
THIS AGREEMENT is entered into as of the 11th day of July, 1997, by and between
UNITED STUDENT AID FUNDS, INC., a private, nonprofit corporation organized under
the General Corporation Law of the State of Delaware ("USA Funds") and First
Bank National Association as Trustee for Education Loans, Inc. ("Lender").
WITNESSETH:
WHEREAS, USA Funds, a nonprofit corporation with objectives and purposes which
are exclusively educational and charitable, has entered into agreements with the
U.S. Secretary of Education pursuant to the Act; and
WHEREAS, the Lender is desirous of lending money to encourage education through
the Loan Program of USA Funds in the manner described in this Agreement; and
WHEREAS, the Lender has full legal power and authority to contract for the
performance of such guarantee services, qualifies as an "eligible lender" under
the Act and is prepared to engage in the transactions contemplated by this
Agreement; and
WHEREAS, USA Funds is desirous of making its Loan Program and related services
available to the Lender, subject to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the initial loan which the Lender makes,
causes to be made or acquires, and in further consideration of the foregoing
premises and the mutual covenants contained in this Agreement, and of other good
and valuable consideration, the receipt of which is hereby acknowledged, USA
Funds and the Lender agree as follows:
ARTICLE I DEFINITIONS
As used herein, the following words have the meanings respectively indicated:
"Act" means Title IV of the Higher Education Act of 1965 (20 U.S.C. (S) 1071 et
seq.) as amended and in effect from time to time, or any successor enactment
thereto, and the effective regulations promulgated thereunder and any binding
directives issued by the U.S. Department of Education.
"Agreement" means this Agreement to Guarantee Loans between USA Funds and the
Lender.
"Borrower" means an individual who is the maker of a Note and who obtains a Loan
from the Lender in accordance with the Act and the Loan Program.
"Default" means with respect to any Note, the occurrence of any event that
constitutes a default under the terms of the Act.
"Educational Institution" means any institution of postsecondary education that
is an "eligible institution" under the Act and is eligible under the Loan
Program.
"Federal Reinsurance" means the obligation assumed by the Federal government as
set forth in the Act and contracts between USA Funds and the U.S. Department of
Education.
"Guarantee" means a commitment by USA Funds to pay the Lender a percentage of
the unpaid principal balance plus accrued unpaid interest of a Loan upon
submission by the Lender of a valid claim and supporting documentation in
accordance with the Act, the Loan Program, and the Policies.
"Guarantee Fee" means a charge based upon the principal Loan amount, which
charge is collected from the Lender by USA Funds. The Lender may cause this
charge to be passed on to the Borrower.
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Agreement to Guarantee Loans page 1 May 15, 1997
"Guarantee Reserve" means an account maintained by USA Funds for the Guarantee
of Loans and payment of claims in accordance with the terms of this Agreement.
"Limitation" means an action taken by USA Funds that restricts the Lender's
participation in the Loan Program.
"Loan" means a disbursement(s) of money, contingent upon an agreement to repay,
made by the Lender pursuant to the Act, the Loan Program, and the Policies.
"Loan Application" means the application for a Loan on a form approved by the
U.S. Department of Education and USA Funds, which form must be executed by an
applicant, certified by an Educational Institution, and accepted by a Lender in
accordance with the Policies.
"Loan Program" means the procedures and policies for implementing and
maintaining a Loan Guarantee under the provisions of the Act, Policies,
applicable law, and regulations, and as otherwise agreed to by and between the
Lender and USA Funds.
"Note" means a promissory note of a Borrower for a Loan set forth upon the
appropriate form approved by USA Funds, which note meets the criteria set forth
by the Policies and the Act.
"Policies" mean the policies adopted and issued by USA Funds describing the
administration of the Loan Program, including any subsequently issued written
notices.
"Special Allowance" means those sums which are payable by the U.S. Department of
Education to the Lender under the Act.
"Student" means an "eligible student" as described in the Act.
"Suspension" means the temporary ineligibility of the Lender from participation
in the Loan Program.
"Termination" means the removal of the Lender from participation in the Loan
Program.
ARTICLE II PROGRAM ADMINISTRATION
A. By this Agreement USA Funds and the Lender hereby agree to participate in
the Loan Program as follows:
1. The Lender agrees to make Loans or cause Loans to be made to eligible
Borrowers pursuant to the terms of the Loan Program;
2. USA Funds agrees to Guarantee Loans originated and maintained in accordance
with the terms of the Loan Program; and
3. USA Funds agrees to provide certain administrative services in connection
with each Loan Guarantee as required by the Loan Program and the Act.
B. Loans may be originated only on behalf of Students attending Educational
Institutions.
C. Administrative services that USA Funds shall provide for the Lender under
the Loan Program in accordance with this Agreement and the Policies are as
follows:
1. Processing Loan Applications to determine if such Loan Applications are
eligible for Guarantee;
2. Recording Borrower status from time to time as reported by the Lender and
Educational institutions;
3. Providing certain management and information reports for the Lender and
Educational Institutions; and
4. Providing preclaims assistance and claims processing for delinquent and
defaulted Loans.
D. The Lender agrees that, in respect of all Loans made or acquired by it
under the Loan Program of USA Funds and all Notes held or acquired by the Lender
from time to time, it will:
1. Comply with the Act;
2. Cause reasonable care and diligence to be exercised in the making,
servicing and collection of Loans, as prescribed in the Policies;
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3. Use the Loan Application, Note and such other forms developed or otherwise
approved by USA Funds;
4. Cause a Guarantee Fee to be paid to USA Funds in accordance with the
requirements of the Loan Program and Article IV of this Agreement:
5. Comply with all procedures, policies and conditions on its part to be
performed as set forth in this Agreement and the Policies; except when the
provisions of this Agreement or the Policies are inconsistent with the Act as a
result of changes to the Act, in which case the Act is controlling;
6. Comply with all Federal and state laws and regulations applicable to the
Loan Program, including but not limited to applicable portions of the Federal
Consumer Credit Protection Act and the Equal Credit Opportunity Act; and
7. Provide promptly to USA Funds such information and reports as may from time
to time be reasonably requested by USA Funds.
E. The Lender shall cause all Loan disbursements to be made by check or draft
requiring the personal endorsement of the Borrower or by electronic funds
transfer. Except as expressly provided in the Act, the Lender will not accept
authorization of anyone, even by power of attorney, to endorse a check or draft
on behalf of the Borrower. The Lender shall cause the Loan to be disbursed
jointly to the Borrower and the Educational Institution if so required by the
terms of the Loan Program.
F. USA Funds will in accordance with the Act continue its Guarantee of a Loan
if an extension of the maturity date is required as a result of the Borrower's
eligibility under the Act for a deferment or forbearance; provided, however,
that such continuance of USA Funds' Guarantee of a Loan shall be only for so
long as an extension of the maturity date is in accordance with the Act and the
Loan Program.
G. The Lender will pursuant to the direction of USA Funds repay or cause the
repayment of any Special Allowance received by the Lender under the Act to which
the Lender is not rightfully entitled.
H. Subject to the prior written approval of the Lender, which approval shall
not be unreasonably withheld, USA Funds may transfer the Guarantee of Loans to
any other guarantor which has given to USA Funds its prior written approval of
such transfer.
I. By this Agreement, USA Funds and the Lender agree that upon the filing of a
claim by the Lender, such claim will be processed in the following manner:
1. In the event of a Default in respect of a Loan, the Lender will follow (or
cause to be followed) the procedure set forth in the Policies. USA Funds does
not guarantee payment by the Borrower of any delinquency charges imposed for
late payments and will not accept a Default claim based solely on non-payment of
such charges. Upon receipt by USA Funds from the Lender (or servicer) of a
Default notice together with the Note (assigned to USA Funds), the Loan
Application, and evidence satisfactory to USA Funds that the Loan evidenced by
such Note was originated and serviced, and collection efforts were made, in
accordance with applicable laws and regulations and with the Policies, USA Funds
will pay to the Lender the amount of the unpaid balance of principal and
interest due on such Note under the terms of the Act and the Policies (other
than any portion of such interest payable by the U.S. Department of Education
under the Act), provided the Lender has complied in all material respects with
the requirements of the Loan Program, this Agreement, and the Policies in
respect of such Note. USA Funds will thereupon succeed to all the rights of the
Lender under such Note. No claim submitted to USA Funds by the Lender with
respect to a Loan that has been Guaranteed will be paid by USA Funds unless USA
Funds has received from the Lender (or Servicer) the appropriate documentation.
2. Upon bankruptcy, death, or permanent and total disability, as defined in
the Act, of the Borrower USA Funds will pay to the Lender the amount of the
unpaid balance of principal and interest due on such Loan under the terms of the
Act and the Policies (other than any portion of such interest payable by the
U.S. Department of Education under the Act), provided the Lender has complied in
all material respects with the requirements of the Loan Program, this
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Agreement to Guarantee Loans May 15, 1997
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Agreement and the Policies in respect of such Loan.
J. Nothing contained in this Agreement shall obligate the Lender to make,
certify, cause to certify or acquire any particular Loan or number of Loans
under this Loan Program.
K. The Lender will permit the U.S. Secretary of Education or USA Funds or both
to examine during normal business hours all Loan records and files, upon
reasonable notice and at reasonable intervals, for the purpose of verifying the
accuracy of information provided by the Lender under the Act and in order to
conduct an audit and compliance review.
L. If USA Funds determines that the Lender has violated the terms of this
Agreement or the Loan Program, USA Funds shall take such action as is necessary
to protect its interests. This action may include but not be limited to
implementation of the Limitation, Suspension, or Termination procedures set out
in the Policies.
ARTICLE III REPRESENTATIONS, WARRANTIES AND COVENANTS BY THE LENDER
The Lender represents and warrants to, and covenants with, USA Funds that:
A. The Lender is a duly authorized "eligible lender" under the Act in every
state in which it is originating Loans under the Act as well as the state in
which it is organized and incorporated and has authorized the execution and
delivery of this Agreement.
B. The Lender is and will continue to qualify at all times during the term of
this Agreement as an "eligible lender" under the Act.
C. The Lender will, at all times, conform its actions, policies and procedures
to the Act, this Agreement and all applicable Federal and state laws and
regulations.
ARTICLE IV GUARANTEE FEE AND GUARANTEE RESERVE
A. As partial payment for the administrative services provided by USA Funds
for the Lender and in order for USA Funds to maintain a Guarantee Reserve
sufficient to Guarantee Loans in accordance with this Agreement USA Funds will
charge to the Lender and the Lender may charge each Borrower a Guarantee Fee
which fee shall not exceed the amount allowable under the Loan Program.
B. The Lender shall be billed monthly by USA Funds with an itemized statement
listing each Loan Application Guaranteed and the Guarantee Fee. USA Funds will
automatically place the Lender on the Guarantee Fee billing system. The Lender
must pay any Guarantee Fee due within thirty (30) days of billing. The Lender
will be charged interest at the rate of one percent (1 %) per month, twelve
percent (12%) per annum, for past due Guarantee Fee bills. If the Guarantee Fee
for a Loan is not paid within one hundred twenty (120) calendar days the
Guarantee on that Loan will be canceled.
C. So long as the Lender is current in its payment of Guarantee Fee billings,
USA Funds will Guarantee each new Loan made to a Borrower by the Lender pursuant
to this Agreement; provided, however, that USA Funds shall not be obligated to
Guarantee any such Loan if:
1. Such Guarantee would cause the aggregate amount of unpaid principal and
interest of all Notes to exceed the Guarantee capacity of USA Funds for the Loan
Program or the Educational Institution allocation for which the Guarantee is to
be issued, or
2. USA Funds in its sole discretion determines that the procedures and
requirements of the Act and other applicable law and regulations, this
Agreement, or the Policies have not been complied with in respect to such Loan.
D. The Guarantee Reserve of USA Funds will be held, maintained, and invested
solely in accordance with the prevailing standards of prudent management in the
disposition of funds required of fiduciaries by Title 12, Section 3302 of the
Delaware Code of 1953, as amended. By execution hereof, Lender consents to the
management of said funds pursuant to the investment policies and procedures
adopted by USA Funds from time to time.
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Agreement to Guarantee Loans May 15, 1997
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ARTICLE V TERMINATION
Except with respect to Loans that have been Guaranteed by USA Funds and continue
to be outstanding under this Agreement, this Agreement may be terminated by
either party with or without cause upon not less than ninety (90) calendar days
written notice to the other party. Such termination will not affect any Notes
that are outstanding or duties arising prior to the effective date of the
termination.
ARTICLE VI LIMITATION OF LIABILITY AND INDEMNIFICATION
A. If the Lender violates or fails to comply with any applicable law or
governmental regulations in respect of a Loan or participation in the Loan
Program, then the Lender agrees to assume liability for, and does hereby
indemnify, protect, and keep harmless USA Funds, its successors and assigns,
from and against, any and all liabilities, losses, and claims, imposed on,
incurred by, or asserted against USA Funds, relating to or arising out of such
violation or failure by the Lender to comply, regardless of whether USA Funds
purchased such Loan from the Lender.
B. The liability of USA Funds under this Agreement shall be limited to payment
of the Guarantee under Paragraph I of Article II of this Agreement and this
shall constitute its sole liability under this Agreement. USA Funds shall not
be liable for any indirect, incidental or consequential damages [including but
not limited to lost profits, lost revenue, or failure to realize expected
savings} regardless of the form of the action and whether such damages are
foreseeable.
ARTICLE VII MISCELLANEOUS
A. Assignment/Subcontract. This Agreement will inure to the benefit of and be
binding upon the parties and their respective successors and permitted assigns;
provided, however, that:
1. This Agreement may not be assigned in whole or in part by USA Funds without
the prior express written consent of Lender, which consent will not be
unreasonably withheld; provided, however, that USA Funds shall have the right
without the consent of Lender to assign its rights and obligations hereunder to
any affiliate or any transferee of all or substantially all of the assets of USA
Funds, which contracts with the U.S. Department of Education (or its successors)
under the Act, or to subcontract its obligations to any person.
2. Lender shall not assign any rights or obligations under the Agreement in
whole or in part without the prior express written consent of USA Funds, which
consent will not be unreasonably withheld; provided, however, that Lender shall
have the right without the consent of USA Funds to assign its rights and
obligations hereunder to any affiliate or any transferee of all or substantially
all of the assets of Lender, or to subcontract is obligations to any person.
B. Amendment. Except as otherwise provided in this Agreement, this Agreement
may not be varied by oral agreement, but only as agreed to in writing by all
parties.
C. Waiver of Rights. No failure by any party to exercise, or any delay in
exercising, and no course of dealing with respect to any right of such party or
any obligation of any other party under this Agreement will operate as a waiver,
unless, and only to the extent, agreed to in writing by all parties. Any single
or partial exercise by any party of its rights shall not preclude such party
from any other or further exercise of such right or the exercise of any other
right. Any single or partial waiver by any party of any obligation of any other
party under this Agreement will constitute a waiver of such obligation only as
specified in such waiver and will not constitute a waiver of any other
obligation.
D. Cumulative Remedies. Except as otherwise provided in this Agreement, no
remedy by the terms of this Agreement conferred upon or reserved to a party is
intended to be exclusive of any other remedy, but each and every such remedy
shall be cumulative and in addition to every other remedy given under this
Agreement or existing at law or in equity or by statute on or after the date of
this Agreement including, without limitation, the right to such equitable relief
by way of injunction to prevent the breach
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or threatened breach of any of the provisions of this Agreement or to enforce
the performance.
E. Severability. Any provision of this Agreement that is held to be
prohibited, unenforceable, or not authorized by any court of competent
jurisdiction will, as to such jurisdiction, be ineffective to the extent of such
prohibition, unenforceability, or non-authorization without invalidating the
remaining provisions or affecting the validity, enforceability, or legality of
such provision in any other jurisdiction.
F. Governing Law; Venue; Entire Agreement. Except to the extent that this
Agreement may be governed by Federal law, this Agreement is governed by,
interpreted, construed and enforced in accordance with the laws of the State of
Indiana, without reference to its principles of conflict of laws. A lawsuit
under this Agreement shall only be brought in a court of competent jurisdiction
located within the State of Indiana.
This Agreement constitutes the entire agreement between the parties and
supersedes any and all prior agreements, written or oral, not incorporated
herein, with respect to the subject matter of this Agreement. All prior
writings, correspondence, memoranda, agreements, representations, statements,
warranties, covenants, negotiations, and undertakings, express or implied, of
any kind or character whatsoever with respect to the subject matter of this
Agreement are superseded.
G. Notices. Any notice required or permitted by this Agreement shall be in
writing and shall be deemed to have been given if sent by first class mail,
overnight carrier, facsimile, or personal delivery, addressed (i) if to USA
Funds, to the attention of General Counsel, Legal Division, at 00 Xxxxx Xxxxxxxx
Xxxxxx, Xxxxxxxxxxxx, Xxxxxxx 00000, (ii) if to the Lender, at the address
indicated in this Agreement, or (iii) at such other address as the party to be
notified has designated upon reasonable notice. Notices made pursuant to this
paragraph by facsimile, overnight carrier, or personal delivery will be deemed
to be effective upon receipt. Notices made pursuant to this paragraph by first
class mail will be deemed to be effective no later than the fifth business day
following the mailing of such notice.
H. Confidential/Proprietary Materials. The terms and conditions of this
Agreement shall be considered confidential. All materials, procedures, written
instruments, files, and records developed by either party specifically pursuant
to this Agreement are and shall be treated as proprietary in nature. Each party
to this Agreement has developed or may develop materials, procedures, written
instruments, files, or records which may be similar to those involved in this
Agreement. Neither party to this Agreement shall have or acquire any
proprietary or any other right whatsoever in any such materials, procedures,
written instruments, files, or records developed by the other party. Neither
party to this Agreement may benefit from, deal in, sell, license, publish, use,
or otherwise exploit for any purpose those materials, procedures, written
instruments, files, or records developed by the other party except as expressly
provided in this Agreement. This Agreement shall not in any way restrict the
right of each party, for its own exclusive benefit, to deal in, sell, license,
publish, use, or otherwise exploit for all purposes those materials, procedures,
written instruments, files, or records developed by it.
1. No Recourse. No recourse under or upon this Agreement or any claim based
thereon shall be had against any incorporator, member, officer, employee, or
trustee, as such, past, present, or future, of a party or of any successor
organizations, either directly or through a party or any successor
organizations. This Agreement is solely a corporate obligation and no personal
liability against any incorporator, member, officer, employee, or trustee, past,
present, or future of the parties shall attach through a party or any successor
corporations, because of this Agreement.
J. Execution. This Agreement will not be binding on either party until it has
been executed and delivered by both parties. Delivery may be by facsimile.
This Agreement may be executed in any number of counterparts, each of which
shall be an original, but which together constitute one and the same instrument.
K. Interpretation/Construction. In this Agreement unless the context
otherwise requires:
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Agreement to Guarantee Loans May 15, 1997
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Any headings preceding the texts of the several articles and sections of this
Agreement, and any table of contents or marginal notes appending to copies,
shall be solely for convenience of reference and shall not constitute a part of
this Agreement, nor shall they affect its meaning, construction or effect.
The parties agree that each party and its counsel reviewed this Agreement and
that this Agreement shall be construed as a whole according to its fair meaning
and not strictly for or against a party.
L. Authority. The parties represent that the undersigned are duly authorized
representatives of the parties.
M. Independent Parties. The parties agree that no legal relationship of any
kind exists as a result of this Agreement, other than the covenants expressly
contained herein. This Agreement shall not constitute, create, give effect to
or otherwise imply a joint venture, partnership or business organization of any
kind. The parties to this Agreement are independent parties and the personnel
of one party shall not be deemed the personnel of the other. Nothing in this
Agreement shall grant to either party any right to make commitments of any kind
or to create any obligation for or on behalf of the other without the prior
written consent of the other party, except to the extent stated herein.
N. Force Majeure. If a party is delayed from completing performance of any or
all of its obligations under this Agreement by an act of God or any other
occurrence beyond its reasonable control, then performance shall be excused for
as long as it is reasonably necessary to complete performance.
O. Litigation Costs and Attorney Fees. If any action, at law or equity,
including an action for declaratory relief, is brought to enforce or interpret
this Agreement, then the prevailing party shall be entitled to recover its
reasonable costs, expenses, and attorney fees from the other party, in addition
to any other relief that may be awarded.
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IN WITNESS WHEREOF, United Student Aid Funds, Inc. and the Lender have each
caused this Agreement to Guarantee Loans to be executed by their respective
authorized officers and to take effect on the date first above written.
First Bank National Association UNITED STUDENT AID FUNDS, INC.
as Trustee for Education Loans, Inc.
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Lender
By: /s/ Xxxx Xxxxxxxx By: /x/ Xxxx Xxxx
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Authorized Signature Authorized Signature
Xxxx X. Xxxxxxxx, Senior Vice President Xxxx Xxxx, Senior Vice President
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Printed Name, Title Printed Name, Title 7/17/97
First Bank Place, 601 2nd Ave. South
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Address
Xxxxxxxxxxx, XX 00000
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City, State, Zip
00-0000000
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Federal Identification Number
833405
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ED Lender Code Number
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