SERVICING AGREEMENT
among
SMS STUDENT LOAN TRUST 1997-A
as Issuer,
USA GROUP LOAN SERVICES, INC.
as Servicer,
USA GROUP SECONDARY MARKET SERVICES, INC.
as Seller,
and
THE FIRST NATIONAL BANK OF CHICAGO,
not in its individual capacity but solely
as Eligible Lender Trustee,
Dated as of April 1, 1997
1
SERVICING AGREEMENT dated as of April 1,
1997, among SMS STUDENT LOAN TRUST 1997-A, a Delaware
trust (the "Issuer"), USA GROUP LOAN SERVICES, INC.,
as servicer (the "Servicer"), USA GROUP SECONDARY
MARKET SERVICES, INC., as Seller (the "Seller") and
THE FIRST NATIONAL BANK OF CHICAGO, a national
banking association, solely as eligible lender
trustee and not in its individual capacity (the
"Eligible Lender Trustee").
WHEREAS the Issuer desires to purchase from the Seller (and,
with respect to legal title to the student loans, NBD as trustee on behalf of
the Seller) a portfolio of federally reinsured student loans purchased in the
ordinary course of business by the Seller;
WHEREAS the Eligible Lender Trustee is willing to hold legal
title to, and serve as eligible lender trustee with respect to, such student
loans on behalf of the Issuer; and
WHEREAS the Servicer is willing to service such student loans
and undertake certain administrative functions with respect thereto.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND USAGE
Capitalized terms used but not defined herein are defined in
Appendix A to the Administration Agreement, dated as of April 1, 1997, among the
Issuer, the Seller, as Administrator, and Bankers Trust Company, as Indenture
Trustee, which also contains rules as to usage and construction that shall be
applicable herein.
ARTICLE II
CUSTODY OF FINANCED STUDENT LOANS
SECTION 2.01. CUSTODY OF STUDENT LOAN FILES. To assure uniform
quality in servicing the Financed Student Loans and to reduce administrative
costs, the Issuer hereby revocably appoints the Servicer, and the Servicer
hereby accepts such appointment, to act for the benefit of the Issuer and the
1
Indenture Trustee as Custodian of the following documents or instruments which
are hereby constructively delivered to the Indenture Trustee, as pledgee of the
Issuer (or will be constructively delivered to the Indenture Trustee, as pledgee
of the Issuer, in the case of New Loans and Serial Loans, as of the applicable
Transfer Date, in the case of Qualified Substitute Student Loans, as of the date
of the relevant Assignment to the Issuer, in the case of Consolidation Loans
originated during the Revolving Period by the Eligible Lender Trustee on behalf
of the Issuer, as of the applicable date of origination or in the case of
Consolidation Loans the principal balances of which are increased by the
principal balances of any related Add-on Consolidation Loans, as of the
applicable Add-on Consolidation Loan Funding Date) with respect to each Financed
Student Loan:
(a) the original fully executed copy of the note evidencing
the Financed Student Loan (including the original loan application
fully executed by the Borrower); and
(b) any and all other documents and computerized records that
the Servicer shall keep on file, in accordance with its customary
procedures, relating to such Financed Student Loan or any Obligor with
respect thereto.
SECTION 2.02. DUTIES OF SERVICER AS CUSTODIAN. (a)
SAFEKEEPING. The Servicer shall maintain custody of the Student Loan Files for
the benefit of the Issuer and the Indenture Trustee and maintain such accurate
and complete accounts, records and computer systems pertaining to each Student
Loan File as shall enable the Issuer to comply with the Basic Documents. In
performing its duties as custodian the Servicer shall act with reasonable care,
using that degree of skill and attention that the Servicer exercises with
respect to the student loan files relating to all comparable Student Loans that
the Servicer services and shall ensure that it complies with all applicable
Federal and State laws, including the Higher Education Act, with respect
thereto. The Servicer shall conduct, or cause to be conducted, periodic audits
of the Student Loan Files held by it under this Agreement and of the related
accounts, records and computer systems, in such a manner as shall enable the
Issuer or the Indenture Trustee to verify the accuracy of the Servicer's record
keeping. The Servicer shall promptly report to the Issuer and the Indenture
Trustee any failure on its part to hold the Student Loan Files and maintain its
accounts, records and computer systems as herein provided and promptly take
appropriate action to remedy any such failure. Nothing herein shall be deemed to
require an initial review or any periodic review by the Issuer, the Eligible
Lender Trustee or the Indenture Trustee of the Student Loan Files.
2
(b) MAINTENANCE OF RECORDS. The Servicer shall maintain each
Student Loan File at one of the locations specified in Schedule A to this
Agreement or at such other office as shall be specified by written notice to the
Issuer and the Indenture Trustee not later than 90 days after any change in
location. Upon reasonable prior notice of not less than three Business Days, the
Servicer shall make available to the Issuer and the Indenture Trustee or their
respective duly authorized representatives, attorneys or auditors a list of
locations of the Student Loan Files and the related accounts, records and
computer systems maintained by the Servicer.
(c) RELEASE OF DOCUMENTS. Upon instruction from the Indenture
Trustee, the Servicer shall, as soon as practicable, release any Student Loan
File to the Indenture Trustee, the Indenture Trustee's agent, or the Indenture
Trustee's designee, as the case may be, at such place or places as the Indenture
Trustee may designate.
SECTION 2.03. INSTRUCTIONS; AUTHORITY TO ACT. The Servicer
shall be deemed to have received proper instructions with respect to the Student
Loan Files upon its receipt of written instructions signed by a Responsible
Officer of the Indenture Trustee.
SECTION 2.04. CUSTODIAN'S INDEMNIFICATION. The Servicer as
Custodian shall pay for any actual loss, liability or expense, including
reasonable attorneys' fees, that may be imposed on, incurred by or asserted
against the Issuer, the Eligible Lender Trustee or the Indenture Trustee or any
of their officers, directors, employees and agents as a result of any improper
act or omission in any way relating to the maintenance and custody by the
Servicer as Custodian of the Student Loan Files as required by this Agreement
where the final determination that any such improper act or omission by the
Servicer resulted in such loss, liability or expense is established by a court
of law, by an arbitrator, or by way of settlement agreed to by the Servicer;
PROVIDED, HOWEVER, that the amount of any liability with respect to any Financed
Student Loan shall not exceed the amount that would have been paid if such
Student Loan had been accepted and paid by the related Guarantor as a claim, and
PROVIDED, FURTHER, that the Servicer shall not be liable to the Eligible Lender
Trustee for any portion of any such amount resulting from the willful
misfeasance, bad faith or negligence of the Eligible Lender Trustee and the
Servicer shall not be liable to the Indenture Trustee for any portion of any
such amount resulting from the willful misfeasance, bad faith or negligence of
the Indenture Trustee. This provision shall not be construed to limit the
Servicer's or any other party's rights, obligations, liabilities, claims or
defenses which arise as a
3
matter of law or pursuant to any other provision of this
Agreement.
SECTION 2.05. EFFECTIVE PERIOD AND TERMINATION. The
appointment of Loan Services as Custodian shall become effective as of the
Closing Date and shall continue in full force and effect for so long as
Loan Services shall remain the Servicer hereunder. If all the rights and
obligations of Loan Services shall have been terminated under Section 6.01,
the appointment of Loan Services as Custodian shall be terminated
simultaneously with the effectiveness of such termination. As soon as
practicable on or after any termination of such appointment and in any event
within ninety (90) days, Loan Services shall deliver possession of the Student
Loan Files to the Indenture Trustee or the Indenture Trustee's agent at such
place or places as the Indenture Trustee may reasonably designate. Loan
Services will continue to hold the Student Loan Files as agent of the Indenture
Trustee until the Student Loan Files are transferred.
ARTICLE III
ADMINISTRATION AND SERVICING OF STUDENT LOANS
SECTION 3.01. DUTIES OF SERVICER. The Servicer, for the
benefit of the Issuer (to the extent provided herein), shall manage, service,
administer and make collections on the Financed Student Loans with reasonable
care, using that degree of skill and attention that the Servicer exercises with
respect to all comparable Student Loans that it services. Without limiting the
generality of the foregoing or of any other provision set forth in this
Agreement and notwithstanding any other provision to the contrary set forth
herein, the Servicer shall manage, service, administer and make collections with
respect to the Financed Student Loans (other than collection of any Interest
Subsidy Payments and Special Allowance Payments, which the Eligible Lender
Trustee will perform on behalf of the Trust) in accordance with, and otherwise
comply with, all applicable Federal and state laws, including any applicable
standards, guidelines and requirements of the Higher Education Act and the
applicable Guarantee Agreement, the failure to comply with which would adversely
affect the eligibility of one or more of the Financed Student Loans for Federal
reinsurance or Interest Subsidy Payments, Special Allowance Payments or
Guarantee Payments or would have an adverse effect on the Noteholders or the
Company. The Servicer also hereby acknowledges that its obligation to service
the Financed Student Loans includes all Consolidation Loans originated by the
Issuer during the Revolving Period, any Consolidation Loan supplemented from
time to time during and after the Revolving Period by the addition of the
principal
4
balance of any related Add-on Consolidation Loan, any Qualified Substitute
Student Loans conveyed to the Issuer pursuant to Section 3.02 of the Loan Sale
Agreement and those New Loans and Serial Loans conveyed to the Eligible Lender
Trustee on behalf of the Trust pursuant to Section 2.02 of the Loan Sale
Agreement and the related Transfer Agreement, a copy of which shall be delivered
to the Servicer by the Seller promptly upon execution thereof; PROVIDED that any
failure by the Seller to so deliver a Transfer Agreement shall not affect the
Servicer's obligations hereunder to service all the Financed Student Loans.
The Servicer's duties shall include collection and posting of all
payments, responding to inquiries of borrowers on such Financed Student Loans,
monitoring borrowers' status, making required disclosures to borrowers,
investigating delinquencies, sending payment coupons to borrowers and otherwise
establishing repayment terms, reporting tax information to borrowers, if
applicable, accounting for collections and furnishing monthly and annual
statements with respect thereto to the Administrator. Subject to the provisions
of Section 3.02, the Servicer shall follow its customary standards, policies and
procedures in performing its duties as Servicer. Without limiting the generality
of the foregoing, the Servicer is authorized and empowered to execute and
deliver, on behalf of itself, the Issuer, the Eligible Lender Trustee, the
Indenture Trustee, the Company and the Noteholders or any of them, instruments
of satisfaction or cancellation, or partial or full release or discharge, and
all other comparable instruments, with respect to such Financed Student Loans;
PROVIDED, HOWEVER, that the Servicer agrees that it will not (a) permit any
rescission or cancellation of a Financed Student Loan except as ordered by a
court of competent jurisdiction or governmental authority or as otherwise
consented to in writing by the Eligible Lender Trustee and the Indenture Trustee
or (b) reschedule, revise, defer or otherwise compromise with respect to
payments due on any Financed Student Loan except pursuant to any applicable
Deferral or Forbearance periods or otherwise in accordance with all applicable
standards, guidelines and requirements with respect to the servicing of the
Financed Student Loans; PROVIDED FURTHER, HOWEVER, that the Servicer shall not
agree to any decrease of the interest rate on, or the principal amount payable
with respect to, any Financed Student Loan.
The Servicer, for the benefit of the Issuer and the Indenture Trustee
(to the extent provided herein), shall promptly and routinely furnish the
Eligible Lender Trustee and the Indenture Trustee with copies of all material
reports, records, and other documents and data as required by this Agreement or
as may otherwise be required by the Higher Education Act. All material
correspondence received by the Servicer relating to
5
individual Student Loans shall be maintained in microcopy form or in summary
form in an automated history file established by the Servicer. The Servicer
shall furnish in good condition all forms and supplies as specified in this
Agreement and any Schedules hereto. The Eligible Lender Trustee and the
Indenture Trustee may transmit Financed Student Loan account data to the
Servicer on these forms or by any other mutually acceptable means. In performing
its duties hereunder, the Servicer will be guided by and comply with the Higher
Education Act and applicable requirements of the related Guarantor. The Servicer
agrees to produce a clear and precise audit trail for each Financed Student Loan
and to comply with such other reporting, servicing, and operating standards as
are contained in this Agreement.
The Eligible Lender Trustee on behalf of the Issuer hereby grants a
power of attorney and all necessary authorization to the Servicer to maintain
any and all collection procedures with respect to the Financed Student Loans,
including filing, pursuing and recovering claims against the Guarantors for
Guarantee Payments and taking any steps to enforce such Financed Student Loans
such as commencing a legal proceeding to enforce a Financed Student Loan in the
name of the Issuer, the Eligible Lender Trustee, the Indenture Trustee, the
Company or the Noteholders. The Eligible Lender Trustee or the Indenture Trustee
shall upon the written request of the Servicer or the Administrator furnish the
Servicer or the Administrator with any other powers of attorney and other
documents reasonably necessary or appropriate to enable the Servicer or the
Administrator to carry out their servicing and administrative duties hereunder.
SECTION 3.02. COLLECTION OF STUDENT LOAN PAYMENTS. (a) The
Servicer shall make reasonable efforts (including all efforts that may be
specified under the Higher Education Act or any Guarantee Agreement) to collect
all payments called for under the terms and provisions of the Financed Student
Loans as and when the same shall become due and shall follow such collection
procedures as it follows with respect to all comparable Student Loans that it
services. The Servicer shall allocate collections with respect to the Financed
Student Loans between principal and interest in accordance with the terms of
each such loan. The Servicer may in its discretion waive any late payment charge
or any other fees that may be collected in the ordinary course of servicing a
Financed Student Loan.
(b) The Servicer shall make reasonable efforts to claim,
pursue and collect all Guarantee Payments from the Guarantors pursuant to the
Guarantee Agreements with respect to any of the Financed Student Loans as and
when the same shall become due and payable, shall comply with the Higher
Education Act and all other applicable laws and agreements with respect to
6
claiming, pursuing and collecting such payments and shall follow such practices
and procedures as it follows with respect to all comparable guarantee agreements
and student loans that it services. In connection therewith, the Servicer is
hereby authorized and empowered to convey to the related Guarantor the note and
the related Student Loan File representing any Financed Student Loan in
connection with submitting a claim to the applicable Guarantor for a Guarantee
Payment in accordance with the terms of the applicable Guarantee Agreement.
(c) The Eligible Lender Trustee shall, with the assistance of
the Servicer as set forth below and on behalf of the Issuer, make reasonable
efforts to claim, pursue and collect all Interest Subsidy Payments and Special
Allowance Payments from the Department with respect to any of the Financed
Student Loans as and when the same shall become due and payable, shall comply
with all applicable laws and agreements with respect to claiming, pursuing and
collecting such payments and shall follow such practices and procedures as the
Servicer follows with respect to Student Loans serviced by it. All amounts so
collected by the Eligible Lender Trustee with respect to Financed Student Loans
shall constitute Monthly Available Funds for the applicable Monthly Collection
Period and Available Funds for the applicable Collection Period, and shall be
deposited into the Collection Account in accordance with Section 4.01. In
connection therewith, the Servicer shall prepare and file with the Department on
a timely basis all claims forms and other documents and filings necessary or
appropriate in connection with the claiming of Interest Subsidy Payments and
Special Allowance Payments on behalf of the Eligible Lender Trustee and shall
otherwise assist the Eligible Lender Trustee in pursuing and collecting such
Interest Subsidy Payments and Special Allowance Payments from the Department.
The Eligible Lender Trustee shall upon the written request of the Servicer
furnish the Servicer with any power of attorney and other documents reasonably
necessary or appropriate to enable the Servicer to prepare and file such claims
forms and other documents and filings.
The Eligible Lender Trustee may permit trusts, other than the Trust,
established by the Seller to securitize student loans to use the Department
lender identification number applicable to the Trust. In such event, the
Eligible Lender Trustee may claim and collect Interest Subsidy Payments and
Special Allowance Payments with respect to Financed Student Loans in the Trust
and student loans in such other trusts using such common lender identification
number. Notwithstanding anything herein or in the Basic Documents to the
contrary, any amounts assessed against payments (including, but not limited to,
Interest Subsidy Payments and Special Allowance Payments) due from the
Department to any such other trust using such common lender identification
7
number as a result of amounts (including, but not limited to, Consolidation
Fees) owing to the Department from the Trust will be deemed for all purposes
hereof and of the Basic Documents (including for purposes of determining amounts
paid by the Department with respect to the student loans in the Trust and such
other trust) to have been assessed against the Trust and shall be deducted by
the Eligible Lender Trustee or the Servicer and paid to such other trust from
any collections made by them which would otherwise have been payable to the
Collection Account for the Trust. If so specified in the servicing agreement
applicable to any such other trust, any amounts assessed against payments due
from the Department to the Trust as a result of amounts owing to the Department
from such other trust using such common lender identification number will be
deemed to have been assessed against such other trust and will be deducted by
the Eligible Lender Trustee or the Servicer from any collections made by them
which would otherwise be payable to the collection account for such other trust
and paid to the Trust.
SECTION 3.03. REALIZATION UPON STUDENT LOANS. For the benefit
of the Issuer, the Servicer shall use reasonable efforts consistent with its
customary servicing practices and procedures and including all efforts that may
be specified under the Higher Education Act or the applicable Guarantee
Agreement in its servicing of any delinquent Financed Student Loans.
SECTION 3.04. NO IMPAIRMENT. The Servicer shall not
impair the rights of the Issuer, the Eligible Lender Trustee, the
Indenture Trustee, the Company or the Noteholders in the Financed
Student Loans.
SECTION 3.05. PURCHASE OF STUDENT LOANS;
REIMBURSEMENT. (a) Upon the discovery by the Servicer, the Eligible Lender
Trustee, the Indenture Trustee or the Seller of any breach pursuant to Sections
3.01, 3.02, 3.03 or 3.04 hereof the party discovering the breach shall give
prompt written notice to the others. If the breach is not cured within sixty
(60) days after the Servicer becomes aware or receives written notice (whichever
is earlier) of such breach, the Servicer shall purchase or arrange for the
purchase of any Student Loan in which the interests of the Noteholders, the
Issuer, the Indenture Trustee or the Eligible Lender Trustee are materially and
adversely affected by such breach as of the first day succeeding the end of such
60-day period that is the last day of a Monthly Collection Period (it being
understood that any such breach that does not affect the related Guarantor's
obligation to guarantee payment of such Student Loan will not be considered to
have a material adverse effect for this purpose and it being further understood
that any dispute as to whether such Guarantor's obligation has been so affected
so as to create such a material
8
adverse effect, shall be resolved, for so long as the Notes are Outstanding, by
the Indenture Trustee, whose determination shall be dispositive, and after the
Notes are no longer Outstanding, by the Eligible Lender Trustee, whose
determination shall then be dispositive); PROVIDED, HOWEVER, that during each
12-month period following the Cutoff Date or an anniversary of the Cutoff Date
(a "Servicer Liability Period"), the Servicer will be obligated to purchase
Student Loans only to the extent its total liability incurred during the then
current Servicer Liability Period for such purchases and any other liabilities
under this Agreement exceeds an amount (the "Servicer Liability Limit") equal to
0.15% of the outstanding principal balance of the Financed Student Loans as of
the Cutoff Date or, after the first anniversary of the Cutoff Date, as of the
preceding April 1.
(b) In consideration of the purchase of any such Student Loan
pursuant to this Section 3.05, the Servicer shall remit, in the manner specified
in Section 4.01, the Purchase Amount and the Issuer shall execute such
assignments and other documents reasonably requested by the Servicer in order to
effect the transfer of such Student Loan to the Servicer or its designee;
PROVIDED, HOWEVER, that the Servicer's total liability for losses for rejected
claims by the Guarantors for any Financed Student Loan based on any breach
pursuant to Sections 3.01, 3.02, 3.03, or 3.04 hereof will not exceed that
amount which the related Guarantor would have been obligated to pay with respect
to such loan had its obligation to guarantee payment thereof not been affected
by the Servicer's breach. Subject to Section 5.02, the exclusive remedy of the
Noteholders, the Issuer, the Indenture Trustee, and the Eligible Lender Trustee
and the entire liability of Servicer for such a breach shall be limited to
requiring the Servicer to purchase Financed Student Loans pursuant to this
Section 3.05.
SECTION 3.06. SERVICING FEE. The Servicing Fee for each
calendar month (the "Servicing Fee") shall be equal to the lesser of (I) one
twelfth of 1.0% of the aggregate principal balance of the Financed Student Loans
as of the last day of the preceding calendar month and (II) the sum of (i)
one-twelfth of the In-School Percentage of the principal balance of each
Financed Student Loan as of the last day of the preceding calendar month which
was an In-School Loan on such date or, if the average principal balance of the
In-School Loans as of such date was $2,500 or less, $1.50 per Borrower Account
for each such loan, (ii) one-twelfth of the GRDF Percentage of the principal
balance as of the last day of the preceding calendar month of each Financed
Student Loan which was a Grace, Repayment, Deferral or Forbearance Student Loan
as of such date or, if the average principal balance of such loans as of such
date was $3,000 or less, $3.00 per Borrower Account for each such loan, (iii) a
fee
9
of $1.00 for each notification sent by the Servicer during the preceding
calendar month on behalf of the Trust to a borrower providing information to
such borrower with respect to Federal Consolidation Loan programs, (iv) a
one-time fee of $75.00 for each Federal Consolidation Loan originated by the
Eligible Lender Trustee on behalf of the Trust during the preceding calendar
month, (v) a fee of $25.00 for each Financed Student Loan for which, during the
preceding calendar month, claim documentation was completed and provided to the
Guarantor or for which the Servicer performed bankruptcy or ineligible Borrower
Account processing (that, in the case of ineligible Borrower Account processing,
resulted in a demand letter being sent to the borrower), in each case as
required by the claims processing requirements of the Guarantor, (vi) a fee of
$.05 per Financed Student Loan for storing and warehousing the applicable loan
documentation for each such loan during the preceding calendar month, (vii) a
one-time fee of $2.00 for each Serial Loan transferred by the Seller to the
Trust during the preceding calendar month, (viii) a fee equal to one-twelfth of
the product of (a) the aggregate outstanding principal balance of the Financed
Student Loans as of the last day of the preceding calendar month and (b) .05%,
which fee will be payable so long as 34 C.F.R. ss. 682.413 or any successor
section remains in effect and (ix) a fee of $70.00 per hour for system
development requests made by the Eligible Lender Trustee on behalf of the Trust
and provided by the Servicer during the preceding calendar month. For purposes
of making the determinations set forth in clauses (i) and (ii) of the preceding
sentence, the "In-School Percentage" and "GRDF Percentage" shall each be
determined based on the average principal balance of the In-School Loans and the
Grace, Repayment, Deferral and Forbearance Loans, respectively, as of the last
day of the preceding calendar month, as follows:
10
AVERAGE IN-SCHOOL AVERAGE
PRINCIPAL PERCENTAGE PRINCIPAL GRDF
BALANCE BALANCE PERCENTAGE
------------------ ------------- --------------- ----------------
$2,501 - $3,000 $3,001 -
.625% $3,400 1.100%
$3,001 - $3,500 .525% $3,401 - .950%
$3,900
$3,501 - $4,000 .450% $3,901 - .830%
$4,400
$4,001 - $4,750 .375% $4,401 - .740%
$4,800
$4,751 - $5,500 .310% $4,801 - .650%
$5,400
$5,501 - $6,250 .260% $5,401 - .575%
$6,000
$6,251 and .230% $6,001 - .510%
above $6,600
$6,601 - .475%
$7,200
$7,201 - .450%
$10,000
$10,001 - .350%
$13,000
$13,001 and .300%
above
The Servicing Fee (together with any portion of the Servicing Fee that
remains unpaid from prior Monthly Payment Dates) will be payable on each Monthly
Payment Date and will be paid solely out of Monthly Available Funds in the case
of each Monthly Payment Date that is not a Quarterly Payment Date (and out of
Available Funds in the case of each Quarterly Payment Date) and amounts on
deposit in the Reserve Account on such Monthly Payment Date (including each
Quarterly Payment Date) as provided in Sections 2(d)(iv)(A), 2(d)(v)(A) and
2(e)(iv)(A) of the Administration Agreement. To the extent that, for any Monthly
Payment Date, the Servicing Fee is the amount calculated as described in clause
(I) of the first sentence of the preceding paragraph, then an amount (the
"Servicing Fee Shortfall") equal to the excess of the amount described in clause
(II) of such sentence over the amount described in clause (I) of such sentence
shall be payable on the next succeeding Quarterly Payment Date (or if such
Monthly Payment Date is also a Quarterly Payment Date, on such Quarterly Payment
Date) from any remaining Reserve Account Excess as provided in Section 2(e)(ii)
of the Administration Agreement. To the extent such remaining Available Funds
are insufficient to pay the Servicing Fee Shortfall on any
11
Distribution Date, the Seller shall be required to pay any unpaid Servicing Fee
Shortfall directly to the Servicer out of its own funds. The Servicer will be
obligated to perform its servicing obligations whether or not it receives any
amounts in respect of Servicing Fee Shortfalls.
SECTION 3.07. SERVICER'S REPORT. On or before the fifteenth
day of each month (or, if any such day is not a Business Day, on the next
succeeding Business Day), the Servicer shall deliver to the Administrator a
servicer's report with respect to the preceding calendar month containing all
information necessary for the Administrator to prepare the Administrator's
Certificate, referred to in Section 2(b)(ii) of the Administration Agreement,
covering such preceding calendar month.
SECTION 3.08. ANNUAL STATEMENT AS TO COMPLIANCE; NOTICE OF
DEFAULT. (a) The Servicer shall deliver to the Eligible Lender Trustee and the
Indenture Trustee (with a copy to the Seller), on or before April 30 of each
year beginning April 30, 1998, an Officers' Certificate of the Servicer, dated
as of December 31 of the preceding year, stating that (i) a review of the
activities of the Servicer during the preceding 12-month period (or, in the case
of the first such certificate, during the period from the Closing Date to
December 31, 1997 or, as specified below, to September 30, 1997) and of its
performance has been made under such officers' supervision and (ii) to the best
of such officers' knowledge, based on such review, the Servicer has fulfilled
all its obligations under this Agreement in all material respects throughout
such year (or in the case of the first such Officer's Certificate, such shorter
period) or, if there has been a default in the fulfillment of any such
obligation, specifying each such default known to such officers and the nature
and status thereof; PROVIDED that, at the option of the Servicer, the Servicer
may date the initial such Officer's Certificate as of September 30, 1997, and,
in such case, shall deliver such Officer's Certificate on or before December 31,
1997 and thereafter shall deliver such Officer's Certificate, dated as of
September 30 of each succeeding year, on or before December 31 of such year. The
Indenture Trustee shall send a copy of each such Officers' Certificate and each
report referred to in this Section 3.08 to the Rating Agencies. A copy of each
such Officers' Certificate and each report referred to in this Section 3.08 may
be obtained by any Noteholder or Note Owner by a request in writing to the
Eligible Lender Trustee addressed to its Corporate Trust Office, together with
evidence satisfactory to the Eligible Lender Trustee that such Person is one of
the foregoing parties. Upon the telephone request of the Eligible Lender
Trustee, the Indenture Trustee will promptly furnish the
12
Eligible Lender Trustee a list of Noteholders as of the date specified by the
Eligible Lender Trustee.
(b) The Servicer shall deliver to the Eligible Lender Trustee,
the Indenture Trustee, the Seller and the Rating Agencies, promptly after having
obtained knowledge thereof, but in no event later than five Business Days
thereafter, written notice in an Officers' Certificate of the Servicer of any
event which with the giving of notice or lapse of time, or both, would become a
Servicer Default under Section 6.01 or would cause the Servicer to fail to meet
any Rating Agency Condition.
SECTION 3.09. ANNUAL INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS'
REPORT. The Servicer shall cause a firm of independent certified public
accountants, which may also render other services to the Servicer, the Seller or
their Affiliates, to deliver to the Eligible Lender Trustee and the Indenture
Trustee (with a copy to the Seller) within 180 days of the end of the Servicer's
regular fiscal-year ended September 30 or calendar-year audit period, an audit
report that encompasses the Servicer's portion of the annual Lender Audit (as
defined in the Higher Education Act), or any successor thereto, as required of a
lender under the Higher Education Act, for the preceding year (or, in the case
of the first such report, during the period from the Closing Date to December
31, 1997 or, as the case may be, to September 30, 1997). The Indenture Trustee
shall send a copy of each such report to the Rating Agencies.
Such report will also indicate that the firm is independent of
the Servicer within the meaning of the Code of Professional Ethics of the
American Institute of Certified Public
Accountants.
SECTION 3.10. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION
REGARDING FINANCED STUDENT LOANS. Upon at least three Business Days' prior
notice, the Servicer shall provide the Noteholders access to the Student Loan
Files in such cases where the Noteholders shall be required by applicable
statutes or regulations to review such documentation, as demonstrated by
evidence satisfactory to the Servicer in its reasonable judgment. Access shall
be afforded without charge, but only upon reasonable request and during the
normal business hours at the respective offices of the Servicer. Nothing in this
Section shall affect the obligation of the Servicer to observe any applicable
law prohibiting disclosure of information regarding the Obligors and the failure
of the Servicer to provide access to information as a result of such obligation
shall not constitute a breach of this Section.
13
SECTION 3.11. SERVICER EXPENSES. The Servicer shall be
required to pay all expenses incurred by it in connection with its activities
hereunder, including fees and disbursements of independent accountants, taxes
imposed on the Servicer, and expenses incurred in connection with distributions
and reports to the Administrator or the Noteholders, as the case may be.
SECTION 3.12. APPOINTMENT OF SUBSERVICER. The Servicer may at
any time appoint a subservicer to perform all or any portion of its obligations
as Servicer hereunder; PROVIDED, HOWEVER, that the Rating Agency Condition shall
have been satisfied in connection therewith; PROVIDED FURTHER that the Servicer
shall remain obligated and be liable to the Issuer, the Eligible Lender Trustee,
the Indenture Trustee and the Noteholders for the servicing and administering of
the Financed Student Loans in accordance with the provisions hereof without
diminution of such obligation and liability by virtue of the appointment of such
subservicer and to the same extent and under the same terms and conditions as if
the Servicer alone were servicing and administering the Financed Student Loans.
The fees and expenses of the subservicer shall be as agreed between the Servicer
and its subservicer from time to time and none of the Issuer, the Eligible
Lender Trustee, the Indenture Trustee or the Noteholders shall have any
responsibility therefor.
ARTICLE IV
DEPOSITS INTO THE COLLECTION ACCOUNT
SECTION 4.01. DEPOSITS INTO THE COLLECTION ACCOUNT. (a) The
Servicer shall deposit into the Collection Account (in the case of clauses (i)
and (ii) within two Business Days of receipt of freely available funds
therefor):
(i) all identifiable payments received by the Servicer by or
on behalf of Obligors on the Financed Student Loans, including any
Guarantee Payments with respect to the Financed Student Loans;
(ii) all Liquidation Proceeds on the Financed Student
Loans;
(iii) with respect to Purchased Student Loans, the aggregate
Purchase Amounts, when such amounts are due, as provided in Section
3.05 hereof; and
(iv) all other amounts required to be deposited into
the Collection Account by the Servicer pursuant to the terms
hereof.
14
(b) The Eligible Lender Trustee shall deposit into the
Collection Account within two Business Days of the receipt thereof, the
aggregate amount of Interest Subsidy Payments and Special Allowance Payments
received by it with respect to the Financed Student Loans.
(c) The Seller shall deposit into the Collection Account, the
aggregate Purchase Amount with respect to Purchased Student Loans and all other
amounts to be paid by the Seller under Section 3.02 and 5.01 of the Loan Sale
Agreement when such amounts are due, as provided in Section 3.03 of the Loan
Sale Agreement.
(d) The Indenture Trustee, at the written direction of the
Administrator, shall withdraw from the Collateral Reinvestment Account and
deposit into the Collection Account on each Determination Date during the
Revolving Period, an amount equal to the Capitalized Interest Amount for the
preceding Collection Period, as provided in Section 2(f) of the Administration
Agreement.
(e) The Indenture Trustee, at the written direction of the
Administrator, shall withdraw from the Collateral Reinvestment Account and
deposit into the Collection Account on any date during the Revolving Period
specified by the Administrator, such amounts as the Administrator may determine
are needed to make required distributions from Monthly Available Funds or
Available Funds, as the case may be, on Monthly Payment Dates.
ARTICLE V
THE SERVICER
SECTION 5.01. REPRESENTATIONS OF SERVICER. The Servicer makes the following
representations on which the Issuer is deemed to have relied in acquiring
(through the Eligible Lender Trustee) the Financed Student Loans and appointing
the Servicer as servicer hereunder. The representations speak as of the
execution and delivery of this Agreement and as of the Closing Date in the case
of the Initial Financed Student Loans, and will be deemed to speak as of the
applicable Transfer Date, in the case of New Loans and Serial Loans, as of the
date of the relevant Assignment in the case of any Qualified Substitute Student
Loan, as of the date of origination in the case of any Consolidation Loan added
to the Trust during the Revolving Period and as of the applicable Add-on
Consolidation Loan Funding Date in the case of any Consolidation Loan the
principal balance of
15
which has been increased by the principal balance of a related Add-on
Consolidation Loan, but shall survive the sale, transfer and assignment of the
Financed Student Loans to the Eligible Lender Trustee on behalf of the Issuer
(and the origination of such Consolidation Loans) and the pledge thereof to the
Indenture Trustee pursuant to the Indenture.
(a) ORGANIZATION AND GOOD STANDING. The Servicer is duly
organized and validly existing as a corporation in good standing under
the laws of the State of Delaware, with the power and authority to own
its properties and to conduct its business as such properties are
currently owned and such business is presently conducted, and has the
legal right to service the Financed Student Loans.
(b) POWER AND AUTHORITY OF THE SERVICER. The Servicer has the
corporate power and authority to execute and deliver this Agreement and
to carry out its terms, and the execution, delivery and performance of
this Agreement has been duly authorized by the Servicer by all
necessary corporate action.
(c) BINDING OBLIGATION. This Agreement constitutes a legal,
valid and binding obligation of the Servicer, enforceable in accordance
with its terms, subject to applicable bankruptcy, insolvency,
reorganization and similar laws relating to creditors' rights generally
and subject to general principles of equity.
(d) NO VIOLATION. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof
or thereof do not conflict with, result in any breach of any of the
terms and provisions of, nor constitute (with or without notice or
lapse of time or both) a default under, the certificate of
incorporation or by-laws of the Servicer, or any indenture, agreement
or other instrument to which the Servicer is a party or by which it
shall be bound; nor result in the creation or imposition of any Lien
upon any of its properties pursuant to the terms of any such indenture,
agreement or other instrument; nor violate any law or, to the knowledge
of the Servicer, any order, rule or regulation applicable to the
Servicer of any court or of any Federal or state regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Servicer or its properties. Performance by the
Servicer of its servicing duties with respect to the Financed Student
Loans, and compliance by the Servicer with the terms of this Agreement,
will not result in the loss of any Guarantee Payments by the Trust or
any reinsurance payments with
16
respect to any Financed Student Loan by the applicable
Guarantor.
(e) NO PROCEEDINGS. There are no proceedings or investigations
pending against the Servicer or, to its best knowledge, threatened
against the Servicer, before any court, regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over
the Servicer or its properties: (i) asserting the invalidity of this
Agreement or any of the other Basic Documents to which the Servicer is
a party, (ii) seeking to prevent the issuance of the Notes or the
consummation of any of the transactions contemplated by this Agreement,
or any of the other Basic Documents, (iii) seeking any determination or
ruling that could reasonably be expected to have a material and adverse
effect on the performance by the Servicer of its obligations under, or
the validity or enforceability of, this Agreement, any of the other
Basic Documents or the Notes or (iv) seeking to affect adversely the
Federal or state income tax attributes of the Issuer or the Notes.
(f) ALL CONSENTS. All authorizations, consents, orders or
approvals of or registrations or declarations with any court,
regulatory body, administrative agency or other government
instrumentality required to be obtained, effected or given by the
Servicer in connection with the execution and delivery by the Servicer
of this Agreement and the performance by the Servicer of its duties
contemplated by this Agreement have in each case been duly obtained,
effected or given and are in full force and effect.
SECTION 5.02. INDEMNITIES OF SERVICER.
(a) The Servicer shall be liable in accordance herewith only to
the extent of the obligations specifically undertaken by the
Servicer under this Agreement.
The Servicer shall pay for any loss, liability or expense,
including reasonable attorney's fees, that may be imposed on, incurred by or
asserted against the Issuer, the Eligible Lender Trustee, the Indenture Trustee,
the Seller, the Administrator, or the Noteholders or any of the officers,
directors, employees and agents of the Issuer, the Eligible Lender Trustee, the
Indenture Trustee, the Administrator or the Seller to the extent that such loss,
liability or expense arose out of, or was imposed upon any such Person through,
the negligence, willful misfeasance or bad faith of the Servicer in the
performance of its obligations and duties under this Agreement or by reason of
the reckless disregard of its obligations and duties under this Agreement, where
the final determination that any such loss, liability or expense arose out
17
of, or was imposed upon any such Person through, any such negligence, willful
misfeasance, bad faith or recklessness on the part of the Servicer is
established by a court of law, by an arbitrator or by way of settlement agreed
to by the Servicer; PROVIDED, HOWEVER, that the Servicer's obligation arising
under this Section 5.02 shall apply only to the extent that the sum of such
obligation and any other liabilities of the Servicer under this Agreement
exceeds the Servicer Liability Limit for any Servicer Liability Period (as such
terms are defined in Section 3.05). Notwithstanding the foregoing, if the
Servicer is rendered unable, in whole or in part, by a force outside the control
of the parties hereto (including acts of God, acts of war, fires, earthquakes
and other disasters) to satisfy its obligations under this Agreement, the
Servicer shall not be deemed to have breached any such obligation upon delivery
of written notice of such event to the other parties hereto, for so long as the
Servicer remains unable to perform such obligation as a result of such event.
For purposes of this Section, in the event of the termination
of the rights and obligations of Loan Services as Servicer pursuant to Section
6.01, or a resignation by such Servicer pursuant to this Agreement, such
Servicer shall be deemed to be the Servicer pending appointment of a successor
Servicer pursuant to Section 6.02.
Liability of the Servicer under this Section shall survive the
resignation or removal of the Eligible Lender Trustee or the Indenture Trustee
or the termination of this Agreement and shall include reasonable fees and
expenses of counsel and expenses of litigation. If the Servicer shall have made
any indemnity payments pursuant to this Agreement and the Person to or on behalf
of whom such payments are made thereafter collects any of such amounts from
others, such person shall promptly repay such amounts to the Servicer, without
interest.
(b) Except with respect to liabilities relating to rejected
claims by the Guarantors, the Seller agrees to indemnify and hold harmless the
Servicer from any liability incurred by the Servicer under subsection (a) above
as a result of the Servicer's ordinary negligence.
SECTION 5.03. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, SERVICER. The Servicer hereby agrees that, upon (a) any merger
or consolidation of the Servicer into another Person, (b) any merger or
consolidation to which the Servicer shall be a party resulting in the creation
of another Person or (c) any Person succeeding to the properties and assets of
the Servicer substantially as a whole, the Servicer shall (i) cause such Person
(if other than the Servicer) to execute an
18
agreement of assumption to perform every obligation of the Servicer hereunder,
(ii) deliver to the Eligible Lender Trustee and Indenture Trustee an Officers'
Certificate and an Opinion of Counsel each stating that such consolidation,
merger or succession and such agreement of assumption comply with this Section
and that all conditions precedent provided for in this Agreement relating to
such transaction have been complied with, (iii) cause the Rating Agency
Condition to have been satisfied with respect to such transaction and (iv) cure
any existing Servicer Default or any continuing event which, after notice or
lapse of time or both, would become a Servicer Default. Upon compliance with the
foregoing requirements, such Person shall be the successor to the Servicer under
this Agreement without further act on the part of any of the parties to this
Agreement. Notwithstanding anything herein to the contrary, compliance with
clauses (i), (ii), (iii) and (iv) above shall be conditions to the consummation
of any of the transactions referred to in clause (a), (b) or (c) above.
SECTION 5.04. LIMITATION ON LIABILITY OF SERVICER AND OTHERS.
Neither the Servicer nor any of the directors, officers, employees or agents of
the Servicer shall be under any liability to the Issuer or the Noteholders,
except as provided under this Agreement, for any action taken or for refraining
from the taking of any action pursuant to this Agreement or for errors in
judgment; PROVIDED, HOWEVER, that this provision shall not protect the Servicer
or any such person against any liability that would otherwise be imposed by
reason of willful misfeasance, bad faith or negligence in the performance of
duties or by reason of reckless disregard of obligations and duties under this
Agreement. The Servicer and any director, officer, employee or agent of the
Servicer may rely in good faith on any document of any kind prima facie properly
executed and submitted by any person respecting any matters arising under this
Agreement.
Except as provided in this Agreement, the Servicer shall not
be under any obligation to appear in, prosecute or defend any legal action that
shall not be incidental to its duties to service the Student Loans in accordance
with this Agreement, and that in its opinion may involve it in any expense or
liability; PROVIDED, HOWEVER, that the Servicer may undertake any reasonable
action that it may deem necessary or desirable in respect of this Agreement and
the other Basic Documents and the rights and duties of the parties to this
Agreement and the other Basic Documents and the interests of the Noteholders
under the Indenture.
SECTION 5.05. LOAN SERVICES NOT TO RESIGN AS SERVICER.
Subject to the provisions of Section 5.03, Loan Services shall
not resign from the obligations and duties hereby imposed on it
19
as Servicer under this Agreement except upon determination that the performance
of its duties under this Agreement shall no longer be permissible under
applicable law. Notice of any such determination permitting the resignation of
Loan Services shall be communicated to the Eligible Lender Trustee, the
Indenture Trustee and the Rating Agencies at the earliest practicable time (and,
if such communication is not in writing, shall be confirmed in writing at the
earliest practicable time) and any such determination shall be evidenced by an
Opinion of Counsel to such effect delivered to the Eligible Lender Trustee and
the Indenture Trustee concurrently with or promptly after such notice. No such
resignation shall become effective until the Indenture Trustee or a Successor
Servicer shall have assumed the responsibilities and obligations of Loan
Services in accordance with Section 6.02.
ARTICLE VI
DEFAULT
SECTION 6.01. SERVICER DEFAULT. If any one of the
following events (a "Servicer Default") shall occur and be
continuing:
(a) any failure by the Servicer to deliver to the Indenture
Trustee for deposit in any of the Trust Accounts any payment required
by the Basic Documents, which failure continues unremedied for three
Business Days after written notice of such failure is received by the
Servicer from the Eligible Lender Trustee, the Indenture Trustee or the
Administrator or after discovery of such failure by an officer of the
Servicer; or
(b) any failure by the Servicer duly to observe or to perform
in any material respect any other covenants or agreements of the
Servicer set forth in this Agreement or any other Basic Document, which
failure shall (i) materially and adversely affect the rights of
Noteholders and (ii) continue unremedied for a period of thirty (30)
days after the date on which written notice of such failure, requiring
the same to be remedied, shall have been given (A) to the Servicer, by
the Indenture Trustee, the Eligible Lender Trustee or (B) to the
Servicer, and to the Indenture Trustee, the Administrator and the
Eligible Lender Trustee by Noteholders representing not less than 25%
of the Outstanding Amount of the Notes; or
(c) any limitation, suspension or termination by the
Department of the Servicer's eligibility to service Student
20
Loans which materially and adversely affects its ability to
service the Financed Student Loans; or
(d) an Insolvency Event occurs with respect to the
Servicer;
then, and in each and every case, so long as the Servicer Default shall not have
been remedied, either the Indenture Trustee or the Noteholders of Notes
evidencing not less than 75% of the Outstanding Amount of the Notes by notice
then given in writing to the Servicer (and to the Indenture Trustee and the
Eligible Lender Trustee if given by the Noteholders) may terminate all the
rights and obligations (other than the obligations set forth in Section 5.02) of
the Servicer under this Agreement. On or after the receipt by the Servicer of
such written notice, all authority and power of the Servicer under this
Agreement, whether with respect to the Notes, the Financed Student Loans or
otherwise, shall, without further action, pass to and be vested in the Indenture
Trustee or such successor Servicer as may be appointed under Section 6.02; and,
without limitation, the Indenture Trustee and the Eligible Lender Trustee are
hereby authorized and empowered to execute and deliver, for the benefit of the
predecessor Servicer, as attorney-in-fact or otherwise, any and all documents
and other instruments, and to do or accomplish all other acts or things
necessary or appropriate to effect the purposes of such notice of termination,
whether to complete the transfer and endorsement of the Financed Student Loans
and related documents, or otherwise. The predecessor Servicer shall cooperate
with the successor Servicer, the Indenture Trustee and the Eligible Lender
Trustee in effecting the termination of the responsibilities and rights of the
predecessor Servicer under this Agreement, including the transfer to the
successor Servicer for administration by it of all cash amounts that shall at
the time be held by the predecessor Servicer for deposit, or shall thereafter be
received by it with respect to a Financed Student Loan. All reasonable costs and
expenses (including attorneys' fees) incurred in connection with transferring
the Student Loan Files to the successor Servicer and amending this Agreement and
any other Basic Documents to reflect such succession as Servicer pursuant to
this Section shall be paid by the predecessor Servicer upon presentation of
reasonable documentation of such costs and expenses. Upon receipt of notice of
the occurrence of a Servicer Default, the Eligible Lender Trustee shall give
notice thereof to the Rating Agencies.
SECTION 6.02. APPOINTMENT OF SUCCESSOR. (a) Upon
receipt by the Servicer of notice of termination pursuant to Section 6.01, or
the resignation by the Servicer in accordance with the terms of this Agreement,
the predecessor Servicer shall continue to perform its functions as Servicer
under this
21
Agreement, in the case of termination, only until the date specified in such
termination notice or, if no such date is specified in a notice of termination,
until receipt of such notice and, in the case of resignation, until the later of
(x) the date 120 days from the delivery to the Eligible Lender Trustee and the
Indenture Trustee of written notice of such resignation (or written confirmation
of such notice) in accordance with the terms of this Agreement and (y) the date
upon which the predecessor Servicer shall become unable to act as Servicer as
specified in the notice of resignation and accompanying Opinion of Counsel. In
the event of the termination hereunder of the Servicer, the Issuer shall appoint
a successor Servicer acceptable to the Indenture Trustee, and the successor
Servicer shall accept its appointment by a written assumption in form acceptable
to the Indenture Trustee and the Administrator. In the event that a successor
Servicer has not been appointed at the time when the predecessor Servicer has
ceased to act as Servicer in accordance with this Section, the Indenture Trustee
without further action shall automatically be appointed the successor Servicer
and the Indenture Trustee shall be entitled to the Servicing Fee.
Notwithstanding the above, the Indenture Trustee shall, if it shall be unwilling
or legally unable so to act, appoint or petition a court of competent
jurisdiction to appoint, any established institution whose regular business
shall include the servicing of student loans, as the successor to the Servicer
under this Agreement; PROVIDED, HOWEVER, that such right to appoint or to
petition for the appointment of any such successor Servicer shall in no event
relieve the Indenture Trustee from any obligations otherwise imposed on it under
the Basic Documents until such successor has in fact assumed such appointment.
(b) Upon appointment, the successor Servicer (including the
Indenture Trustee acting as successor Servicer) shall be the successor in all
respects to the predecessor Servicer and shall be subject to all the
responsibilities, duties and liabilities placed on the predecessor Servicer that
arise thereafter or are related thereto and shall be entitled to an amount
agreed to by such successor Servicer (which shall not exceed the Servicing Fee,
unless such compensation arrangements will not result in a downgrading of the
ratings of the Notes by any Rating Agency) and all the rights granted to the
predecessor Servicer by the terms and provisions of this Agreement.
(c) The Servicer may not resign unless it is prohibited from
serving as such by law as evidenced by an Opinion of Counsel to such effect
delivered to the Indenture Trustee and the Eligible Lender Trustee.
Notwithstanding the foregoing or anything to the contrary herein or in the other
Basic Documents, the Indenture Trustee, to the extent it is acting as successor
22
Servicer pursuant hereto, shall be entitled to resign to the extent a qualified
successor Servicer has been appointed and has assumed all the obligations of the
Servicer in accordance with the terms of this Agreement and the other Basic
Documents.
SECTION 6.03. NOTIFICATION TO NOTEHOLDERS AND THE COMPANY.
Upon any termination of, or appointment of a successor to, the Servicer pursuant
to this Article VI, the Indenture Trustee shall give prompt written notice
thereof to Noteholders, the Administrator, the Company and the Rating Agencies
(which, in the case of any such appointment of a successor, shall consist of
prior written notice thereof to the Rating Agencies).
SECTION 6.04. WAIVER OF PAST DEFAULTS. The Note holders of
Notes evidencing not less than a majority of the Outstanding Amount of the Notes
may, on behalf of all Noteholders, waive in writing any default by the Servicer
in the performance of its obligations hereunder, and any consequences thereof,
except a default in making any required deposits to or payments from any of the
Trust Accounts (or giving instructions regarding the same) in accordance with
this Agreement. Upon any such waiver of a past default, such default shall cease
to exist, and any Servicer Default arising therefrom shall be deemed to have
been remedied for every purpose of this Agreement. No such waiver shall extend
to any subsequent or other default or impair any right consequent thereto.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. AMENDMENT. This Agreement may be amended by the
Servicer and the Eligible Lender Trustee, with the consent of the Indenture
Trustee, but without the consent of any of the Noteholders, to cure any
ambiguity, to correct or supplement any provisions in this Agreement or for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions in this Agreement or of modifying in any manner the rights of
the Noteholders; PROVIDED, HOWEVER, that such action shall not, as evidenced by
an Opinion of Counsel delivered to the Eligible Lender Trustee and the Indenture
Trustee, adversely affect in any material respect the interests of any
Noteholder.
This Agreement may also be amended from time to time by the
Servicer and the Eligible Lender Trustee, with the consent of the Indenture
Trustee, the consent of the Noteholders of Notes evidencing not less than a
majority of the Outstanding Amount of the Notes, for the purpose of adding any
provisions to or
23
changing in any manner or eliminating any of the provisions of this Agreement or
of modifying in any manner the rights of the Noteholders; PROVIDED, HOWEVER,
that no such amendment shall (a) increase or reduce in any manner the amount of,
or accelerate or delay the timing of, collections of payments with respect to
Financed Student Loans or distributions that shall be required to be made for
the benefit of the Noteholders or (b) reduce the aforesaid percentage of the
Outstanding Amount of the Notes, the Noteholders of which are required to
consent to any such amendment, without the consent of all outstanding
Noteholders.
Promptly after the execution of any such amendment or consent
(or, in the case of the Rating Agencies, five Business Days prior thereto), the
Eligible Lender Trustee shall furnish written notification of the substance of
such amendment or consent to the Indenture Trustee and each of the Rating
Agencies.
It shall not be necessary for the consent of Noteholders
pursuant to this Section to approve the particular form of any proposed
amendment or consent, but it shall be sufficient if such consent shall approve
the substance thereof.
Prior to the execution of any amendment to this Agreement, the
Eligible Lender Trustee and the Indenture Trustee shall be entitled to receive
and rely upon an Opinion of Counsel stating that the execution of such amendment
is authorized or permitted by this Agreement and the Opinion of Counsel referred
to in Section 6.02(f) of the Loan Sale Agreement. The Eligible Lender Trustee
and the Indenture Trustee may, but shall not be obligated to, enter into any
such amendment which affects the Eligible Lender Trustee's or the Indenture
Trustee's, as applicable, own rights, duties or immunities under this Agreement
or otherwise.
SECTION 7.02. PROTECTION OF INTERESTS IN TRUST. (a) The
Servicer shall not change its name, identity or corporate structure in any
manner that would, could or might make any financing statement or continuation
statement filed in accordance with Section 6.02(a) of the Loan Sale Agreement
seriously misleading within the meaning of ss.9-402(7) of the UCC, unless it
shall have given the Eligible Lender Trustee, the Indenture Trustee and the
Rating Agencies at least five days' prior written notice thereof and shall have
promptly filed appropriate amendments to all previously filed financing
statements or continuation statements.
(b) The Servicer shall have an obligation to give the Eligible
Lender Trustee and the Indenture Trustee at least sixty (60) days' prior written
notice of any relocation of its principal executive office if, as a result of
such relocation,
24
the applicable provisions of the UCC would require the filing of any amendment
of any previously filed financing or continuation statement or of any new
financing statement and shall promptly file any such amendment. The Servicer
shall at all times maintain each office from which it shall service Financed
Student Loans, and its principal executive office, within the United States of
America.
(c) The Servicer shall maintain accounts and records of each
Student Loan accurately and in sufficient detail to permit (i) the reader
thereof to know at any time the status of such Financed Student Loan, including
payments and recoveries made and payments owing (and the nature of each) and
(ii) reconciliation between payments or recoveries on (or with respect to) each
Financed Student Loan and the amounts from time to time deposited in the
Collection Account in respect of such Financed Student Loan.
(d) The Servicer shall, by use of a distinct identification
code, maintain its computer systems so that, from and after the time of sale
under this Agreement of the Financed Student Loans, the Servicer's master
computer records (including any backup archives) that refer to a Student Loan
shall indicate clearly the interest of the Issuer, the Eligible Lender Trustee
and the Indenture Trustee in such Student Loan and that such Student Loan is
owned by the Eligible Lender Trustee on behalf of the Issuer and has been
pledged to the Indenture Trustee. Indication of the Issuer's, the Eligible
Lender Trustee's and the Indenture Trustee's interest in a Student Loan shall be
deleted from or modified on the Servicer's computer systems when, and only when,
the related Financed Student Loan shall have been paid in full or repurchased.
(e) If at any time the Servicer shall propose to sell, grant a
security interest in, or otherwise transfer any interest in student loans to any
prospective purchaser, lender or other transferee, the Servicer shall give to
such prospective purchaser, lender or other transferee computer tapes, records
or printouts (including any restored from backup archives) that, if they shall
refer in any manner whatsoever to any Financed Student Loan, shall indicate
clearly that such Financed Student Loan has been sold and is owned by the
Eligible Lender Trustee on behalf of the Issuer and has been pledged to the
Indenture Trustee.
(f) The Servicer shall permit the Indenture Trustee and its
agents at any time during normal business hours to inspect, audit and make
copies of and abstracts from the Servicer's records regarding any Financed
Student Loan; PROVIDED, HOWEVER, that the Servicer is given reasonable prior
notice of at least 3 Business Days.
25
(g) Upon request, at any time the Eligible Lender Trustee or
the Indenture Trustee shall have reasonable grounds to believe that such request
would be necessary in connection with its performance of its duties under the
Basic Documents, the Servicer shall furnish to the Eligible Lender Trustee or to
the Indenture Trustee (in each case, with a copy to the Administrator), within
five (5) Business Days, a list of all Financed Student Loans (by borrower social
security number, type of loan and date of issuance) then held as part of the
Trust, and shall cause the Administrator to furnish to the Eligible Lender
Trustee or to the Indenture Trustee, within 20 Business Days thereafter, a
comparison of such list to the list of Initial Financed Student Loans set forth
in Schedule A to the Loan Sale Agreement as of the Closing Date, and, for each
Financed Student Loan that has been added to or removed from the pool of loans
held by the Eligible Lender Trustee on behalf of the Issuer, information as to
the date as of which and circumstances under which each such Financed Student
Loan was so added or removed.
SECTION 7.03. NOTICES. Unless otherwise agreed by the
recipient, all demands, notices and communications upon or to the Seller, NBD,
the Servicer, the Eligible Lender Trustee, the Indenture Trustee, the
Administrator or the Rating Agencies under this Agreement shall be in writing,
personally delivered or mailed by certified mail, return receipt requested (or
in the form of telex or facsimile notice, followed by written notice delivered
as aforesaid or postage prepaid, first class mail), and shall be deemed to have
been duly given upon receipt;
(a) in the case of the Seller, to
USA Group Secondary Market Services, Inc.
00 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000-0000
Attention: President and Chief Executive Officer
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to:
Office of the General Counsel
USA Group, Inc.
00 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
26
(b) in the case of NBD, to
NBD Bank, N.A., as
trustee for USA Group
Secondary Market Services, Inc.
Xxx Xxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
(c) in the case of the Servicer, to
USA Group Loan Services, Inc.
00 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to
Office of the General Counsel
USA Group, Inc.
00 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
(d) in the case of the Issuer, to
Student Loan Trust 1997-A
c/o First Chicago Delaware, Inc.
FCC National Bank
000 Xxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000,
with a copy to the Eligible Lender Trustee
at the Corporate Trust Office of the
Eligible Lender Trustee
(e) in the case of the Eligible Lender Trustee, at the
Corporate Trust Office of the Eligible Lender
Trustee;
(f) in the case of the Indenture Trustee, at its
Corporate Trust Office;
27
(g) in the case of the Administrator, to
USA Group Secondary Market Services, Inc.
00 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000-0000
Attention: President and Chief Executive Officer
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to:
Office of the General Counsel
USA Group, Inc.
00 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
(h) in the case of Moody's, to
Xxxxx'x Investors Service, Inc.
00 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: ABS Monitoring Department
Telephone: (000) 000-0000
(i) in the case of Fitch, to
Fitch Investors Service, L.P.
Xxx Xxxxx Xxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Asset Backed Monitoring Unit
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
or, as to each of the foregoing, at such other address as shall be designated by
written notice to the other parties.
SECTION 7.04. ASSIGNMENT. Notwithstanding anything to the
contrary contained herein, except as provided in the succeeding sentence, as
provided in Section 5.03 and as provided in the provisions of this Agreement
concerning the resignation of the Servicer, this Agreement may not be assigned
by the Servicer. This Agreement may only be assigned by the Eligible Lender
Trustee to its permitted successor pursuant to the Trust Agreement.
SECTION 7.05. LIMITATIONS ON RIGHTS OF OTHERS. The provisions
of this Agreement are solely for the benefit of the Servicer, the Issuer and the
Eligible Lender Trustee and for the benefit of the Administrator, the Indenture
Trustee and the Noteholders, as third party beneficiaries, and nothing in this
28
Agreement, whether express or implied, shall be construed to give to any other
Person any legal or equitable right, remedy or claim in the Trust Estate or
under or in respect of this Agreement or any covenants, conditions or provisions
contained herein.
SECTION 7.06. SEVERABILITY. Any provision of this Agreement
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
SECTION 7.07. SEPARATE COUNTERPARTS. This Agreement may be
executed by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument.
SECTION 7.08. HEADINGS. The headings of the various
Articles and Sections herein are for convenience of reference
only and shall not define or limit any of the terms or provisions
hereof.
SECTION 7.09. GOVERNING LAW. This Agreement shall be construed
in accordance with the laws of the State of Indiana, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
SECTION 7.10. NON-PETITION COVENANTS. Notwithstanding any
prior termination of this Agreement, the Servicer shall not, prior to the date
which is one year and one day after the termination of this Agreement with
respect to the Issuer, acquiesce, petition or otherwise invoke or cause the
Issuer to invoke the process of any court or government authority for the
purpose of commencing or sustaining a case against the Issuer under any Federal
or state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Issuer or any substantial part of its property, or ordering the winding
up or liquidation of the affairs of the Issuer.
SECTION 7.11. LIMITATION OF LIABILITY OF ELIGIBLE LENDER
TRUSTEE AND INDENTURE TRUSTEE. (a) Notwithstanding anything contained herein to
the contrary, this Agreement has been signed by The First National Bank of
Chicago not in its individual capacity but solely in its capacity as Eligible
Lender Trustee of the Issuer and in no event shall The First National Bank of
Chicago in its individual capacity or, except as
29
expressly provided in the Trust Agreement, as beneficial owner of the Issuer
have any liability for the representations, warranties, covenants, agreements or
other obligations of the Issuer hereunder or in any of the certificates, notices
or agreements delivered pursuant hereto as to all of which recourse shall be had
solely to the assets of the Issuer.
(b) Notwithstanding anything contained herein to the contrary,
this Agreement has been accepted by Bankers Trust Company not in its individual
capacity but solely as Indenture Trustee and in no event shall Bankers Trust
Company have any liability for the representations, warranties, covenants,
agreements or other obligations of the Issuer hereunder or in any of the
certificates, notices or agreements delivered pursuant hereto, as to all of
which recourse shall be had solely to the assets of the Issuer.
30
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective officers as of the day and
year first above written.
SMS STUDENT LOAN TRUST 1997-A,
by THE FIRST NATIONAL BANK
OF CHICAGO, not in its
individual capacity but
solely as Eligible Lender
Trustee on behalf of the
Trust,
by
Name:
Title:
USA GROUP LOAN SERVICES, INC.
by
Name:
Title:
USA GROUP SECONDARY MARKET
SERVICES, INC.
by
Name:
Title:
31
THE FIRST NATIONAL
BANK OF CHICAGO,
not in its
individual
capacity but
solely as
Eligible Lender
Trustee,
by
Name:
Title:
Acknowledged and accepted
as of the day and year first
above written:
BANKERS TRUST COMPANY, not in
its individual capacity but
solely as Indenture Trustee
by
Name:
Title:
32
SCHEDULE A
The Servicer shall maintain each Student Loan File at one of the locations
listed below:
(a) USA Group Loan Services, Inc.
00 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
(b) USA Group Loan Services, Inc.
00000 XXX Xxxxxxx
Xxxxxxx, XX 00000
(c) USA Group Loan Services, Inc.
c/o Indianapolis Vault Company
000 Xxxx Xxxxxxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
(d) USA Group Loan Services, Inc.
c/o Indianapolis Vault Company
0000 Xxxxxxxxxx Xxxx
Xxxxxxxxxxxx, XX 00000
33
