CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE OMISSIONS. |
Note: This Agreement contains confidential & proprietary
information and may not be disclosed without the consent of both parties or as required by law
GUARANTY AGREEMENT
between
THE EDUCATION RESOURCES INSTITUTE, INC.
and
BANK OF AMERICA, N.A.
(Bank of America Direct to Consumer Loan Program)
This Guaranty Agreement (this “Agreement”) is made as of this 30th day
of June, 2003, by and between The Education Resources Institute, Inc.
(“XXXX”), a private non-profit corporation organized under Chapter 180
of the Massachusetts General Laws with its principal place of business at 00 Xx.
Xxxxx Xxxxxx, 0xx Xxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, and Bank of
America, N.A., (the “LENDER”), a national banking association
organized under the laws of the United States and having a place of business
located at 000 Xxxxxxxx Xxxx., Xxx Xxxxxxx, Xxxxxxxxxx.
WHEREAS, XXXX is in the business of providing financial assistance in the form
of loan guaranties to and on behalf of students enrolled in programs of higher
education and their parents at XXXX-approved schools; and
WHEREAS, the LENDER is willing to make Loans to eligible Borrowers under the
Program (as defined in Section 1), and XXXX is willing to guaranty the payment
of principal and interest against the Borrowers’ default or certain other
events as more fully described below, in accordance with the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained herein, XXXX
and the LENDER agree as follows:
As used in this Agreement the following terms shall have the
following meanings:
| 1.1 |
“Agent” shall mean U.S. Bank National Association, a national banking
association, its successors and assigns, in its capacity as Agent under the
Deposit and Security Agreement among XXXX, the LENDER, the Agent, and the First
Marblehead Corporation (“FMC”) of even date herewith (the
“Deposit and Security Agreement”).
|
| 1.2 |
“Borrower” shall mean the person, or all persons collectively,
including all students, cosigners, coborrowers, guarantors, endorsers, and
accommodation parties, who execute a Promissory Note individually or, in the
case of multiple Borrowers, severally and jointly, for the purpose of obtaining
funds from the LENDER under the Program.
|
| 1.3 |
“Due Diligence” shall mean the utilization by the LENDER of policies,
practices and procedures in the origination, servicing and collection of Loans
that comply with the standards set forth in the Program Guidelines and that
comply with the requirements of federal and state law and regulation, and, to
the extent not inconsistent with the foregoing, that are in accord with the
LENDER’s policies, practices and procedures applicable to its other
consumer loan and credit portfolios and with sound lending practices utilized
through the consumer lending industry.
|
| 1.4 |
“Guaranty Claim” shall mean a claim by the LENDER to XXXX for a
guaranty payment with respect to a Loan pursuant to Section 2.1 of this
Agreement.
|
| 1.5 |
“Guaranty Event” shall mean any of the following events with respect
to a Loan:
|
| |
a. |
failure of a Borrower to make monthly principal and/or interest payments on a
Loan when due, provided such failure persists for a period of one hundred eighty
(180) consecutive days,
|
| |
b. |
the filing of a petition in bankruptcy with respect to a Borrower, or
|
| |
c. |
the death of a Borrower.
|
| |
For Loans on which the Borrower is two or more persons, none of the above, with
the exception of paragraph b., shall be a Guaranty Event unless one or more such
events shall have occurred with respect to all such persons. The foregoing
notwithstanding, if a Borrower files a petition in bankruptcy pursuant to
Chapter 7 of the U.S. Bankruptcy Code and does not seek a discharge of the
affected Loan(s) under 11 U.S.C. §523(a)(8)(B) of the U.S. Bankruptcy Code,
the LENDER at TERI’s request will withdraw its guaranty claim unless or
until one of the other Guaranty Events shall have occurred with respect thereto.
|
| 1.6 |
“Loan” shall mean a loan of funds, including all disbursements
thereof, made by the LENDER to a Borrower under the Program.
|
| 1.7 |
“Note Purchase Agreement” means the agreement of that name between
LENDER and FMC dated as of June 30, 2003, as it may be amended from time to
time.
|
| 1.8 |
“Ongoing Guaranty Fee” means any periodic, continuing guaranty fees
set forth on Schedule 3.3 attached hereto.
|
| 1.9 |
“Program” shall mean the Bank of America Direct to Consumer Loan
Program, as more fully described in the Program Guidelines.
|
| 1.10 |
“Program Guidelines” shall mean the Bank of America Direct to Consumer
Program Guidelines attached hereto as Exhibit A, and all changes thereto as
provided in Section 6 hereof. The Program Guidelines (a) consist of the Program
Overview, the XXXX Underwriting, Origination and Loan Term Guidelines, the
Servicing Guidelines, and Program Borrower Documents (consisting of the forms of
Promissory Note and Truth in Lending Disclosure) and (b) are hereby incorporated
in this Agreement by reference and made a part hereof.
|
| 1.11 |
“Promissory Note” shall mean a promissory note executed by a Borrower
evidencing a Loan, in the form attached hereto as part of the Program Guidelines
or as approved pursuant to Section 3.2 below.
|
| 1.12 |
“Securitization Transaction” shall mean and refer to (a) a purchase of
Loans guaranteed hereunder by a special purpose entity (“SPE”) formed
by FMC, which purchase is funded through the issuance of debt instruments or
other securities by such entity, the repayment of which is supported by payments
on the Loans or (b) any other transaction whereby a Loan is transferred from the
LENDER to FMC or one of its affiliates.
|
| Section 2: |
GUARANTY OF LOANS
|
| 2.1 |
XXXX hereby guarantees to the LENDER, unconditionally except as set forth in
Section 2.2 below, the payment of 100% of the principal of and accrued interest
on every Loan as to which a Guaranty Event has occurred. “Accrued
interest” shall mean interest accrued and unpaid to the date of payment in
full by XXXX of a Guaranty Claim, less any interest that shall have accrued
after the filing of a Guaranty Claim but before XXXX shall have received all the
documentation necessary to process the Guaranty Claim as set forth in the
Program Guidelines. XXXX will use all reasonable efforts to make payment on its
guaranty within sixty (60) days, and will in any event make payment within
ninety (90) days, of receipt by XXXX of a Guaranty Claim from the LENDER stating
the name of the Borrower and the type of Guaranty Event that has occurred
accompanied by the full claim documentation required in the Program Guidelines.
|
| 2.2 |
TERI's guaranty is conditioned upon the following:
|
| |
a. |
The LENDER must have filed its Guaranty Claim within the time period and
following the procedures specified in the Program Guidelines.
|
| |
b. |
The LENDER and its predecessors in interest must at all times have exercised Due
Diligence with respect to the Loan in question (or shall have cured any failure
to exercise Due Diligence under the reinstatement provisions in Section 2.4
hereof and the Program Guidelines), and must have complied with all other
requirements of the Program Guidelines applicable to the Loan.
|
| |
c. |
The LENDER shall have paid to XXXX the Initial Guaranty Fee (as defined in
Section 3.3.a. below) for the Loan in question, shall have paid to XXXX all
Ongoing Guaranty Fees due and payable up to the filing of the Guaranty Claim,
and shall have paid to the Agent any Subsequent Guaranty Fee (as defined in
Section 3.3.b. below) for the Loan in question which is due and payable as
provided in Section 3.3.b.
|
| |
d. |
XXXX must have received from the LENDER the original Promissory Note relating to
the Loan in question, enforceable against the Borrower (except as provided in
this Section 2.2.d., below), endorsed to XXXX in such manner as to transfer to
XXXX all rights in and title to such Promissory Note, free and clear of all
liens and encumbrances, and of all defenses, counterclaims, offsets, and rights
of rescission that might be raised by the Borrower. Submission of a Guaranty
Claim to XXXX shall constitute the LENDER’s certification that the
conditions of 2.2.b. and 2.2.d. have been met, and XXXX is entitled to rely on
such certification.
Subsections 2.2.b. and 2.2.d. above notwithstanding, if a Loan that is the
subject of a Guaranty Claim was originated by XXXX on behalf of the LENDER
pursuant to a Loan Origination Agreement between the parties, (i) XXXX will not
deny the LENDER’s Guaranty Claim on such Loan if the sole basis for denial
is a violation of the Program Guidelines or a violation of Massachusetts or
federal law committed by XXXX in the origination process, and (ii) XXXX will
have no recourse against the LENDER in the event that TERI’s actions or
omissions in the origination process shall have given rise to a successful
defense in favor of the Borrower in a suit on the Promissory Note relating to
such Loan.
|
| 2.3 |
TERI’s guaranty obligation with respect to any Loan shall not be terminated
or otherwise affected or impaired (i) by the LENDER’s granting an extension
of time to the Borrower to make scheduled payments, or by any other indulgence
the LENDER may grant to the Borrower, provided that all extensions and other
indulgences meet the forbearance standards and other requirements of the Program
Guidelines; or, Section 2.2.d. above notwithstanding, (ii) because of any fraud
in the execution of the Promissory Note relating to such Loan,
(iii) because of any illegal or improper acts of the Borrower, or (iv)
because the Borrower may be relieved of liability for such Loan due to lack of
contractual capacity or any other statutory exemption.
|
| 2.4 |
XXXX may deny the LENDER’s Guaranty Claim on any Loan on the grounds of
deficiencies in Due Diligence other than those deficiencies in the origination
process (“Non-Origination Due Diligence”). If XXXX properly denies the
LENDER’s Guaranty Claim on any Loan on the grounds of Non-Origination Due
Diligence deficiencies, the LENDER may thereafter require that XXXX reinstate
the guaranty of such Loan if (a) the LENDER corrects such deficiencies and
receives four (4) consecutive full on-time monthly payments from the Borrower,
according to any schedule permitted by the Program Guidelines, and if at the
time of the LENDER’s request the Borrower is within thirty (30) days of
being current on all principal and interest payments on such Loan, or (b) the
LENDER satisfies any other method of cure set forth in the Program Guidelines.
|
| 2.5 |
TERI’s guaranty hereunder is a continuing and absolute guaranty of payment
and not merely of collection, covering Loans made in accordance herewith either
(i) prior to termination of this Agreement, or (ii) based upon applications
received by the LENDER prior to such termination; and such termination shall not
affect TERI’s obligations to the LENDER then existing, whether direct or
indirect, absolute or contingent, then due or thereafter to become due.
|
| 2.6 |
XXXX agrees not to exercise any right of subrogation, reimbursement, indemnity,
contribution or the like against the Borrower of any Loan unless and until all
of TERI’s obligations to the LENDER under this Agreement with respect to
such Loan have been satisfied in full, except to the extent that it is deemed a
valid claimant as a contingent creditor, for example, under Title 11 of the
United States Code (the “Bankruptcy Code”), or applicable state law.
|
| 2.7 |
XXXX will permit the LENDER, any duly designated representative of the LENDER,
or any governmental body having jurisdiction over the LENDER (subject to written
notice being provided to XXXX by the LENDER, identifying the requesting party
and the date of the review), to examine and audit the books and records of XXXX
pertaining to the Loans, at any time during TERI’s regular business hours,
provided that in the case of examinations by the LENDER or its representative,
absent good cause (i) XXXX must be given ten (10) business days’ prior
written notice and, (ii) no more than one such audit may be conducted with
respect to any twelve-month period or will take place in any twelve-month
period. In no event will any audit be performed during July, August, September,
or October in any year except at the request of a regulatory authority having
jurisdiction over the LENDER.
|
| 2.8 |
XXXX will indemnify the LENDER and hold it harmless from and against any loss,
cost, damage or expense that the LENDER may suffer as a result of claims to the
extent they arise out of TERI’s actions or omissions relative to the
LENDER’s participation in the Program and do not arise out of the
LENDER’s actions or omissions. “Expense” includes, without
limitation, the LENDER’s reasonable attorney’s fees. XXXX will further
indemnify the LENDER and hold it harmless from and against any claim brought
against the LENDER by any Borrower based on actions or omissions of the LENDER
that were mandated under the Program Guidelines.
|
| 2.9 |
Although the LENDER agrees not to use any loan servicer not approved by XXXX,
the LENDER acknowledges that TERI’s approval of a servicer is in no way an
endorsement of such servicer and that XXXX shall have no liability to the LENDER
for any losses arising from such servicer’s failure to comply with Due
Diligence or the Program Guidelines or applicable law, nor shall XXXX be
required to honor any claim submitted by such servicer if the claim does not
comply with the requirements of this Agreement.
|
| 2.10 |
Upon the request of LENDER, XXXX shall provide to LENDER a Certificate of
Guaranty substantially in the form attached hereto as Exhibit C.
|
| Section 3: |
OBLIGATIONS OF THE LENDER
|
| 3.1 |
In originating, servicing, disbursing, and collecting Loans, the LENDER will
comply, and cause its servicer and others acting on its behalf to comply, at all
times with all Program Guidelines (including Due Diligence requirements) and all
applicable requirements of federal and state laws and regulations.
|
| 3.2 |
The LENDER will use Promissory Notes, Loan applications, disclosure statements,
and other forms mutually agreeable to the parties. The forms of Promissory
Notes, Loan applications and disclosure statement attached hereto as part of the
Program Guidelines are agreed to be satisfactory to both parties. Without
limiting the generality of Sections 3.1 and 4.1, the LENDER warrants the
conformity of such instruments and any agreed successors thereto with all
applicable legal requirements, other than those of federal and Massachusetts
laws and regulations, and XXXX warrants their conformity with Massachusetts and
federal laws. In addition, upon TERI’s request, the LENDER will submit to
XXXX sample copies of promotional and marketing materials used in connection
with the Program. No such delivery of materials shall constitute or be construed
as a representation or warranty by XXXX that such materials comply with
applicable law or with the LENDER’s obligations under this Agreement, and
no such delivery shall excuse the LENDER’s performance of any of its
obligations under this Agreement.
|
| 3.3 |
The LENDER will pay a guaranty fee for each Loan (the "Guaranty Fee") as
follows:
|
| |
a. |
At the time of each disbursement of the Loan, the LENDER will promptly remit to
XXXX one and [**] of the principal amount of the Loan disbursed (the
“Initial Guaranty Fee”).
|
| |
b. |
At such times as are set forth in Schedule 3.3 attached hereto and incorporated
herein by reference, such additional fees as are set forth in the fifth and
sixth columns of Schedule 3.3 (“Subsequent Guaranty Fee”).
|
| |
i. |
If the terms of Schedule 3.3 call for any Guaranty Fees to be paid to XXXX or to
the Agent concurrent with the Securitization Transaction, the LENDER shall pay
such fees directly (and be reimbursed in the Securitization Transaction to the
extent provided in the Note Purchase Agreement).
|
| |
ii. |
In the event that a Guaranty Claim is made with respect to a Loan before a
Subsequent Guaranty Fee is scheduled to be paid by the LENDER for such Loan, the
Subsequent Guaranty Fee shall become immediately due and payable.
|
| |
iii. |
In the event that a loan is prepaid in full prior to the date that a Subsequent
Guaranty Fee is scheduled to be paid by the LENDER for such Loan, the Subsequent
Guaranty Fee shall nevertheless become due and payable at the time that would
have applied if such prepayment had not occurred. For example, if a Subsequent
Guaranty Fee is due at the time of a Securitization Transaction and a Loan is
prepaid before it is eligible for Securitization, then the Subsequent Guaranty
Fee with respect to such Loan shall become due at the first Securitization
Transaction in which such Loan would have been eligible for inclusion, had
prepayment not occurred.
|
| |
iv. |
In the event that FMC fails to purchase any Loan under the Note Purchase
Agreement, and the LENDER sells such Loan to a third party, the Guaranty Fees
due with respect to such loan at the time of a Securitization Transaction will
instead be paid by the LENDER at the time the loan is sold to the third party.
|
| |
v. |
In the event FMC has no further right or obligation under the Note Purchase
Agreement to purchase a Loan in a Securitization Transaction, the LENDER shall
pay all Subsequent Guaranty Fees that are due to be paid at the time of
securitization as set forth in Schedule 3.3. Such fees shall be payable (A) with
respect to any Loan already funded, within thirty (30) days after presentation
of an invoice by XXXX to the Lender, and (B) with respect to Loans funded after
the date of such invoice, at the time of disbursement.
|
| |
vi. |
In the event that the LENDER fails to sell any Loan to FMC because the LENDER
has breached the Note Purchase Agreement, the LENDER shall pay all Subsequent
Guaranty Fees that are due to be paid at the time of securitization as set forth
in Schedule 3.3. Such fees shall be payable directly to XXXX and shall not be
subject to the Deposit and Security Agreement.
|
| |
c. |
Failure to remit any Guaranty Fee within thirty (30) days of the time set forth
above will not affect the validity of the guaranty for any Loan for which the
Guaranty Fee has already been paid in full, but, as a result, XXXX will have the
right, at its discretion to (i) void its obligation to guarantee or collect the
Loan to which such Guaranty Fee relates or (ii) collect the amount of any such
Guaranty Fee and to add interest at the rate of eighteen percent (18%) per annum
from the disbursement date of the Loan to which such Guaranty Fee relates, plus
any costs (including attorneys’ fees and expenses) incurred by XXXX in
collecting or attempting to collect such Guaranty Fee from the LENDER.
|
| |
d. |
Anything in the Program Guidelines to the contrary notwithstanding, if the
LENDER is required under the terms of a Promissory Note to refund all or part of
the Guaranty Fees identified above to a Borrower, XXXX will refund all or part
of the Initial Guaranty Fee it has received and the Agent will refund all or
part of any Subsequent Guaranty Fee it has received (in each case related to the
refund to such Borrower) to the LENDER upon being so advised by the LENDER in
writing.
|
| |
e. |
If Schedule 3.3 provides for any Ongoing Guaranty Fee, LENDER shall promptly
remit such fee at the times set forth in Schedule 3.3.
|
| 3.4 |
If XXXX shall have purchased a Loan pursuant to Section 2.1 above, the LENDER
will promptly repurchase such Loan upon request from XXXX if (i) XXXX succeeds,
after purchasing, in obtaining from the Borrower three full consecutive on-time
monthly payments, according to any schedule permitted by the Program Guidelines,
provided that on the date of TERI’s notice to repurchase, the Borrower is
within thirty (30) days of being current on his or her payments on such Loan,
and provided further that this repurchase obligation may be invoked by XXXX only
once as to any Loan (in which case, the Loan shall be considered
“rehabilitated”); or (ii) if XXXX should determine that the Loan does
not meet the conditions set forth in subsections b., c. and d. of Section 2.2
above. With respect to the repurchase of any Guaranteed Loan pursuant to this
Section 3.4, the repurchase price shall be equal to (1) the remaining unpaid
principal balance of such Loan, plus (2) any accrued and unpaid interest
thereon.
|
| 3.5 |
To the extent permitted by applicable law, the LENDER will (i) deliver to XXXX
such reports, documents, and other information concerning the Loans as XXXX may
reasonably require to perform its role as loan origination servicer, and (ii)
permit independent auditors, authorized representatives of XXXX and governmental
agencies, if any, having regulatory authority over XXXX, to have access to the
operational and financial records and procedures directly applicable to Loans
and to the LENDER’s participation in the Program. LENDER will cause its
loan servicer to deliver to XXXX such reports, documents, and other detailed
information concerning each Loan as XXXX may reasonably require. LENDER shall
provide a monthly report containing the information set forth on Exhibit B
hereto at LENDER’s expense; XXXX shall arrange directly with the loan
servicer to receive the report. Any other reporting or information shall be
provided upon TERI’s agreement to reimburse LENDER for its incremental cost
of such report.
|
| 3.6 |
If the LENDER should violate any term of this Agreement, it will be liable to
XXXX for all loss, cost, damage or expense sustained by XXXX as a result. The
LENDER will indemnify XXXX and hold it harmless from and against all loss, cost,
damage or expense that XXXX may suffer as a result of claims to the extent they
arise out of the LENDER’s actions or omissions relative to the
LENDER’s participation in the Program unless such actions or omissions are
specifically required by this Agreement, and do not arise out of TERI’s
actions or omissions. The LENDER will similarly indemnify XXXX with respect to
any defenses arising from the LENDER’s violation of or failure to comply
with any law, regulation or order, or any term of this Agreement, that may be
raised by a Borrower to any suit upon a Promissory Note. “Expense”
includes, without limitation, TERI’s reasonable attorney’s fees.
|
| Section 4: |
REPRESENTATIONS AND WARRANTIES
|
| 4.1 |
Each party represents and warrants to the other that its execution, delivery and
performance of this Agreement are within its power and authority, have been
authorized by proper proceedings, and do not and will not contravene any
provision of law or such party’s organizational documents or by-laws or
contravene any provision of, or constitute an event of default or an event
which, with the lapse of time or with the giving of notice or both, would
constitute an event of default, under any other agreement, instrument or
undertaking by which such party is bound. Each party represents and warrants
that it has and will maintain in full force and effect all licenses required
under applicable state, federal, local or other law for the conduct of all
activities contemplated by this Agreement and comply with all requirements of
such applicable law relative to its licenses and the conduct of all activities
contemplated by this Agreement. This Agreement and all of its terms and
provisions are and shall remain the legal and binding obligation of the parties,
enforceable in accordance with its terms subject to bankruptcy and insolvency
laws. The warranties given herein shall survive any termination of this
Agreement.
|
| 4.2 |
The parties acknowledge that XXXX is not an insurer or reinsurer and the LENDER
expressly waives all claims it might otherwise have under applicable law were
XXXX to be held by any court or regulatory agency to be acting as an insurer or
reinsurer hereunder. The only obligations of XXXX to the LENDER shall be those
expressly set forth herein.
|
| 5.1 |
Neither party is or will hold itself out to be the agent, partner, or joint
venturer of the other party with regard to any transaction under or pursuant to
this Agreement.
|
| 5.2 |
Each party’s respective rights, remedies, powers, privileges, and
discretions (“Rights and Remedies”) shall be cumulative and not
exclusive. No delay or omission by either party in exercising or enforcing any
of its Rights and Remedies shall operate as to constitute a waiver of them. No
waiver by a party of any default under this Agreement shall operate as a waiver
of any subsequent or other default under this Agreement. No single or partial
exercise by a party of any of its Rights and Remedies shall preclude the other
of further exercise of such Rights and Remedies. No waiver or modification by a
party of the Rights and Remedies on any one occasion shall be deemed a
continuing waiver. A party may exercise its various Rights and Remedies at such
time or times and in such order of preference as it in its sole discretion may
determine. In no event will either party be liable to the other for special,
incidental, or consequential damages, including but not limited to lost profits,
even if advised in advance of the possibility of the same, or for punitive or
exemplary damages, provided that such exclusions shall not apply to the
indemnification against an award of such damages pursuant to a third party
claim.
|
| 5.3 |
This Agreement (including the Program Guidelines and all exhibits and schedules
hereto), together with (i) the Deposit and Security Agreement and (ii) the Loan
Origination Agreement, of even date herewith, between XXXX and the LENDER ((i)
and (ii) together, the “Ancillary Agreements”), represents the entire
understanding of the parties with respect to the subject matter hereof. This
Agreement, together with any contemporaneous contract concerning credit analysis
and the Ancillary Agreements, supersedes all prior communications whatsoever
between the parties relative in any way to Loans or the LENDER’s
participation in the Program. This Agreement may be modified only by written
agreement of the parties hereto, except as may otherwise be set forth herein.
|
| 5.4 |
Any determination that any provision of this Agreement is invalid, illegal, or
unenforceable in any respect shall not affect the validity, legality, or
enforceability of such provision in any other instance and shall not affect the
validity, legality, or enforceability of any other provision of this Agreement.
|
| 5.5 |
Each of the parties will timely implement, if it has not already, and will
maintain, a reasonable disaster recovery plan. Subject to the foregoing, no
party hereto shall be responsible for, or in breach of this Agreement if it is
unable to perform as a result of delays or failures due to any cause beyond its
control, howsoever arising, and not due to its own act or negligence and that
cannot be overcome by the exercise of due diligence. Such causes shall include,
but not be limited to, labor disturbances, riots, fires, earthquakes, floods,
storms, lightning, epidemics, wars, hostilities, terrorist acts, civil disorder,
expropriation or confiscation of property, failure or delay by carriers,
interference by civil and military authorities whether by legal proceeding or in
fact and whether purporting to act under some constitution, decree, law or
otherwise, acts of God and perils of the sea.
|
| 5.6 |
This Agreement shall be governed by and construed in accordance with the laws of
the Commonwealth of Massachusetts, without regard to the conflict of laws
provisions thereof.
|
| 5.7 |
This Agreement will be binding on the parties’ respective successors and
assigns. Except as otherwise set forth in this Section 5.7, this Agreement may
not be assigned by either party without the other’s written consent.
|
| |
a. |
The LENDER may, without TERI’s consent, assign any Loan, together with the
provisions hereof as applicable to such Loan, to an affiliate, another entity
participating in the Program, or to an SPE formed by the LENDER, in each case
upon written notice to XXXX.
|
| |
b. |
XXXX specifically acknowledges that FMC or an SPE sponsored by FMC is expected
to purchase some or all of the Loans, and this Agreement shall inure to the
benefit of FMC or any such SPE upon such purchase. No notice of such purchase or
consent to the assignment of the LENDER’s rights under this Agreement in
connection with a purchase of some or all of the Loans by FMC or any SPE
sponsored by FMC shall be necessary.
|
| |
c. |
In assigning any Loan and its rights under this Agreement relating to such Loan
in accordance with Section 5.7(a), (i) the LENDER’s written notice to XXXX
must be made within thirty (30) days after said assignment and must identify
each Loan to which such assignment relates, and (ii) XXXX will fully cooperate
with any Securitization Transaction or other sale of a portfolio of Loans,
provided it is given thirty (30) days advance written notice of the date that
information or documents are required of it and provided that its reasonable
legal fees and other expenses incurred in connection with such transaction are
reimbursed by the seller of such Loans.
|
| |
d. |
Except for any assignment hereunder to FMC or any SPE sponsored by FMC in
connection with a purchase of Loans as described in subsection b. above, no
assignment of Loans or the LENDER’s rights hereunder without TERI’s
express written consent shall release the LENDER from any liability to XXXX
under this Agreement arising out of the LENDER’s ownership of such Loans
(whether arising prior to, as a result of or after the sale of such Loans by the
LENDER) including, without limitation, the LENDER’s obligation to pay any
unpaid Guaranty Fees and to repurchase Loans pursuant to Section 3.4.
|
| |
e. |
The Lender acknowledges that XXXX has outsourced or subcontracted some or all of
its administrative functions, including but not limited to the processing of
guarantee claims, to First Marblehead Education Resources, Inc. In addition, the
Lender acknowledges that XXXX has subcontracted and may hereafter subcontract
any administrative obligations necessary or convenient to XXXX to perform its
obligations hereunder, and that such subcontracts do not and shall not require
the consent of the LENDER. Such outsourcing or subcontracting shall not relieve
XXXX of its obligations under this Agreement. Any and all subcontractors used by
XXXX shall be held to the same confidentiality restrictions of Section 8 hereof.
|
| 5.8 |
Notice for any purpose hereunder may be given by any means requiring receipt
signature, or by facsimile transmission confirmed by first class mail. In the
case of XXXX, notices should be sent to its President, and if by fax, to (000)
000-0000. In the case of the LENDER, notices should be sent to Xxxxx Xxxxxx, 000
Xxxxxxxx Xxxx., 0xx Xxxxx, XX 9-169-04-02, Xxx Xxxxxxx, XX 00000, and
if by fax, to ___________. Either party may from time to time change the person,
address or fax number for notice purposes by formal notice to the other party.
|
| 5.9 |
For the Bank of America Direct to Consumer Loan Program, XXXX has established a
system of risk-based pricing based on tiered guaranty fees and/or tiered
interest rates that correspond to the actual risk of lending to borrowers with
lesser creditworthiness (“Risk-Based Pricing”) The Risk-Based Pricing
system is set forth in Schedule 3.3 attached hereto (“Bank of America
Direct to Consumer Risk-Based Pricing”). XXXX bases Risk-Based Pricing upon
the projected net cost of defaults, which XXXX believes provides business
justification for the pricing levels set forth in the Bank of America Direct to
Consumer Risk-Based Pricing. Any representation or warranty of compliance with
federal or state law made by XXXX in this Guaranty Agreement, or the Loan
Origination Agreement between the parties of same date, that may relate to Bank
of America Direct to Consumer Risk-Based Pricing extends only to pricing
specifically included in the Program Guidelines and in Schedule 3.3 attached
hereto, and does not extend to any charges not actually included in Schedule 3.3
attached hereto.
|
| Section 6: |
CHANGES TO PROGRAM GUIDELINES
|
The parties agree that the Program Guidelines will need to be
updated and modified from time to time to respond to changed conditions. The
parties intend to make such modifications in a manner that does not interfere
with the ordinary advertising and origination cycle for education loans.
Amendments necessary to meet state or federal regulatory requirements may be
made at any time. With respect to all other changes, the parties shall exchange
requests for modification of the Program Guidelines, including without
limitation any requested changes to the provisions of the Program Guidelines
concerning the Guaranty Fees, in the first part of the first calendar quarter of
each year. Each party shall respond in writing to proposals from the other
within thirty (30) days, and both parties will attempt to resolve any
differences within thirty (30) days after receiving a response to a request. All
modifications must be mutually acceptable. Any modifications approved by the
parties and not requiring system adjustments by the LENDER’s loan servicer
shall take effect within thirty (30) days after approval. Modifications
requiring system adjustments by the LENDER’s loan servicer shall take
effect as soon after approval as such servicer shall be able to adjust its
systems to accept loans made on the modified terms, and the LENDER agrees to
take such actions as are reasonably necessary to ensure that such servicer
adjusts its systems as promptly as practicable. The parties shall use their best
efforts to conclude all negotiations of proposed changes prior to May 1 of each
year. The foregoing process shall not apply to modification of the Servicing
Guidelines, which are subject to the modification process contained therein.
| Section 7: |
TERM AND TERMINATION
|
| 7.1 |
The initial term of this Agreement shall commence on [**], and shall continue
until the first anniversary of such date. Thereafter, this Agreement shall
automatically renew for successive one-year terms unless either party provides
written notice of non-renewal and termination not less than [**] days prior to
the end of the then-current term.
|
| 7.2 |
In the event that the parties are unable to agree on a proposed modification to
the Program Guidelines as provided in Section 6, above, the party proposing the
modification shall have the option of terminating this Agreement effective
immediately upon written notice of termination to the other party, provided that
the party desiring to exercise this option to terminate does so within [**] days
of the end of the [**] day period provided in Section 6 for the resolution of
any differences.
|
| 7.3 |
To the extent permitted by applicable law, if either party should become subject
to bankruptcy, receivership, or other proceedings affecting the rights of its
creditors generally, the party becoming subject to such proceedings will
promptly notify the other party thereof, and this Agreement will be deemed
terminated immediately upon the initiation of such proceedings without the need
of notice to the other party.
|
| 7.4 |
Termination shall be prospective only and shall not affect the obligations of
the parties hereto which were incurred prior to such termination or any of the
warranties and indemnities contained herein or the provisions of Section 8 below
(regarding confidentiality). Not less than [**] days prior to the effective date
of termination, XXXX may, by additional notice to the Lender, terminate its
obligation to assume the guaranty of all or any subset of otherwise qualifying
Loans as to which a commitment to lend is made after the Lender’s receipt
of such additional notice. In the absence of such additional notice XXXX will,
subject to the terms and conditions of this Agreement, assume the guaranty of
all Loans as to which a commitment to lend is made prior to the effective date
of termination. In the event this Agreement terminates or expires and only one
disbursement of a multi-disbursement loan has been made prior to that date, the
other disbursement will also be guaranteed pursuant to the terms of this
Agreement.
|
| Section 8: |
CONFIDENTIALITY; RESTRICTIONS ON USE OF INFORMATION
|
| 8.1 |
During the course of negotiating this Agreement and hereafter during the
pendency of this Agreement, the parties from time to time may have revealed or
may hereafter reveal to each other certain information concerning their
respective business plans, business methods, financial data and projections,
and/or information that is not generally known in the student loan industry,
including, without limitation, the terms and conditions of this Agreement. All
the foregoing is referred to herein as “Confidential Information.” In
TERI’s case, its Confidential Information also includes, but is not limited
to, information concerning the operation of its telephone and on-line loan
applications procedures, and its online credit scoring system. Each party will
use reasonable efforts to preserve the confidentiality of Confidential
Information contained herein or disclosed to it by the other party, such efforts
to be not less vigilant than those that such party uses to protect its own
proprietary information. The foregoing is subject to the following
qualifications:
|
| |
a. |
No party will be so bound with respect to information that is or becomes public
knowledge in the student loan industry (but if it does so through any fault of
such party that fault will be considered a material breach of this Agreement);
|
| |
b. |
No party will be so bound with respect to information that is now or hereafter
comes into its possession by its own documented independent efforts or from a
third party who, so far as the recipient party has reason to believe, is under
no comparable restriction with respect to such information;
|
| |
c. |
Either party may disclose Confidential Information to its attorneys, auditors,
agents, and consultants who are bound to maintain the confidentiality of such
information;
|
| |
d. |
Either party may disclose Confidential Information in the context of any
regulatory review of its operations or as compelled by law, regulation, or court
order, provided that in the context of a court order the party required to
disclose will (i) give the other party prompt written notice upon learning of
the requirement so that the other party may take appropriate action to prevent
or limit the disclosure, (ii) consult with the other party and use all
reasonable efforts to agree on the nature, form, timing and content of the
disclosure, (iii) except as otherwise agreed under (ii), disclose no more than
its counsel advises is legally required, and (iv) inform the Court and all
counsel concerned that such information is and should be treated as confidential
information of the other party; and
|
| |
e. |
Information concerning Loans and Borrowers that comes into TERI’s
possession, including but not limited to the information provided to XXXX
pursuant to Section 3.5 hereof, shall not be considered Confidential Information
of the Lender.
|
| |
f. |
Without limiting the foregoing, XXXX may disclose any of the LENDER’s
Confidential Information to any entity to which XXXX subcontracts its
obligations under this Agreement pursuant to Section 5.7(e) hereof. In such
event, XXXX will only disclose Confidential Information when necessary to assist
XXXX in carrying out its functions under this Agreement and under circumstances
that require the disclosee to refrain from redisclosure to any other third
party.
|
| 8.2 |
In accordance with the provisions of Title V of the Xxxxx-Xxxxx-Xxxxxx Act (the
“GLB Act”) and Federal Reserve Board Regulation P (“Regulation
P”), XXXX, as loan guarantor and loan origination servicer agrees, as a
financial institution subject to Regulation P, to respect and protect the
security and confidentiality of any “nonpublic personal information”
(as defined in the GLB Act and Regulation P) relating to applicants for Loans
and to Borrowers, including, where applicable, the restrictions on the re-use
and disclosure of such information set forth in the GLB Act and Regulation P.
|
| 8.3 |
Without limiting the foregoing, XXXX may retain as its own property, and use
solely for the purpose of operating a loan guaranty business, any data it
receives in its capacity as a loan guarantor. In addition, XXXX may use for any
lawful purpose any or all aggregated or de-identified data concerning Loan
applicants and Borrowers, which does not include the name, address or social
security number of the Loan applicants or Borrowers. Such information does not
constitute “non-public personal information” under Section 509(4) of
the GLB Act, therefore XXXX may sell, assign, transfer or disclose such
information to third parties including, without limitation, FMC, who may also
use such information for any lawful purpose.
|
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK
IN WITNESS WHEREOF, XXXX and the LENDER have caused this Agreement to be
executed by their duly authorized officers under seal as of the day and year
indicated above.
THE EDUCATION RESOURCES
INSTITUTE, INC.
By: /s/ Xxxxxxxx X. X'Xxxxx
Print Name: Xxxxxxxx X. X'Xxxxx
Title: President
|
BANK OF AMERICA, N.A.
By: /s/ Xxxxx Xxxxxx
Print Name: Xxxxx Xxxxxx
Title: Senior Vice President
|
TABLE OF EXHIBITS
Exhibit A – Program Guidelines for Bank of America Direct to
Consumer Loan Program
Exhibit B – Servicer Data Requirements
Schedule 3.3 – Guaranty Fee Amounts
Exhibit C – Certificate of Guaranty
EXHIBIT A
Program Guidelines for Bank of America Direct to Consumer Loan Program
[**]
EXHIBIT B
Servicer Data Requirements
[**]
SCHEDULE 3.3 TO GUARANTY AGREEMENT BETWEEN XXXX AND BANK OF AMERICA
[**]
Exhibit C
[**]
