GUARANTY AGREEMENT between THE EDUCATION RESOURCES INSTITUTE, INC. and UNION FEDERAL SAVINGS BANK
EXHIBIT
99.27
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Confidential
Materials omitted and filed separately with the
Securities
and Exchange Commission. Asterisks denote
omissions.
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between
THE
EDUCATION RESOURCES INSTITUTE, INC.
and
UNION
FEDERAL SAVINGS BANK
This
Guaranty Agreement (this
“Agreement”) is made as of this 26th day of
March,
2007, 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 UNION FEDERAL SAVINGS BANK, (the “LENDER”), a federal
savings bank organized under the laws of the United States and having a place
of
business located at 0000 Xxxxxxx Xxxxxx Xxxxxx, Xxxxx Xxxxxxxxxx,
XX 00000.
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, 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:
Section
1: DEFINITIONS
As
used
in this Agreement the following terms shall have the following
meanings:
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1.1
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“Borrower”
shall mean the person, or all persons collectively, including all
students, cosigners, coborrowers, guarantors, endorsers, and accommodation
parties, who have executed 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.
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1.2
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“Custodian”
shall mean U.S. Bank National Association, its successors and assigns,
in
its capacity as Depository Institution under the Security Agreement
of
even date herewith and as Bank under the Control Agreement of even
date
herewith (together, “Security Documents”), or a successor Bank or
alternative Depository Institution appointed in accordance with the
Security Documents.
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1.3
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“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.
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1.4
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“FMC”
shall mean The First Marblehead Corporation, a Delaware corporation
located at 000 Xxxxxxxx Xx., 00xx
Xxxxx,
Xxxxxx, XX 00000.
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1.5
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“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.
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1.6
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“Guaranty
Event” shall mean any of the following events with respect to a
Loan:
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a.
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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,
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b.
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the
filing of a petition in bankruptcy with respect to a Borrower,
or
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c.
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the
death of a Borrower.
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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.
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1.7
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“Loan”
shall mean a loan of funds, including all disbursements thereof,
made by
the LENDER to a Borrower under the
Program.
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1.8
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“Loan
Origination Agreement” means the agreement of that name between LENDER and
XXXX dated as of March 26, 2007, as it may be amended from time to
time.
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1.9
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“Note
Purchase Agreement” means the agreement of that name between LENDER and
FMC dated as of March 26, 2007, as it may be amended from time to
time.
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1.10
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“Program”
shall mean the UFSB Astrive Loan Program, as more fully described
in the
Program Guidelines.
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1.11
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“Program
Guidelines” shall mean the UFSB Astrive Loan 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.
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1.12
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“Promissory
Note” shall mean a promissory note, credit agreement or other agreement
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.
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1.13
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“Purchase
Transaction” shall have the meaning set forth in the Note Purchase
Agreement.
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1.14
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“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, one of FMC’s affiliates or an SPE formed by
FMC.
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1.15 “Security
Documents” shall have the meaning assigned to it in Section 1.2.
1.16 “Subsequent
Guaranty Fee” shall mean any Guaranty Fee identified on Schedule3.3 as payable
after initial loan disbursement. Such fees are generally
captioned“Subsequent” on Schedule 3.3.
Section
2: GUARANTY
OF LOANS
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2.1
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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.
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2.2
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TERI’s
guaranty is conditioned upon the
following:
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a.
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The
LENDER must have filed its Guaranty Claim within the time period
and
following the procedures specified in the Program
Guidelines.
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b.
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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.
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c.
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The
LENDER shall have paid to XXXX the Total Guaranty Fee, as set forth
in
column 7 of Schedule 3.3 attached hereto (including amounts delivered
to
the Custodian under the Security Agreement), for the Loan in
question.
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d.
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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.
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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.
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2.3
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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.
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2.4
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XXXX
may deny the LENDER’s Guaranty Claim on any Loan on the grounds of Due
Diligence deficiencies. If XXXX properly denies the LENDER’s
Guaranty Claim on any Loan on the grounds of 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.
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2.5
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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.
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2.6
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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
XXXX
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.
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2.7
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XXXX
will permit the LENDER, any duly designated representative of the
LENDER,
or any regulatory body having jurisdiction over the LENDER (subject
to
written notice being provided to XXXX by the LENDER, identifying
the
requesting party and date of the review), to examine and audit the
books
and records, internal controls, security policies, business resumption,
continuity, recovery and contingency plans of XXXX pertaining to
the
Loans, and to denied or withdrawn applications that XXXX has processed
or
is processing for the Lender, at any time during TERI’s regular business
hours, provided that in the case of the LENDER or its representative,
absent good cause, (i) XXXX must be given ten (10) business days’ notice
thereof, (ii) no more than one such audit may be conducted in any
twelve-month period, provided however that two such audits may be
performed in the first twelve (12) months following the date of this
Agreement, and (iii) such audits shall be combined with any inspection
by
such entity of TERI’s operations under the Loan Origination
Agreement. However, at no time except for cause will audits by
the LENDER or its representative be performed during the months of
July,
August, September and October. Regulatory agencies can have
access to records when they deem necessary without prior
notice. Any such examination by Lender is solely for the
benefit of Lender and shall not affect any obligation of XXXX hereunder
or
be a defense in a proceeding against XXXX arising out of an alleged
breach
of TERI’s obligations hereunder that Lender knew or should have known of
TERI’s breach or noncompliance. XXXX will also provide the
Lender with a copy of its audited financial statements on request
by
Lender. Such financial statements include a balance sheet,
statement of income, and statement of changes in net assets as of
the end
and for the fiscal year just closed, and certified by an independent
certified public accountant. On or before April
30, 2006, XXXX
shall implement a system that will automatically provide annual financial
statements to Lender without request.
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2.8
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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 breach of this Agreement and do not
arise out of the LENDER’s actions or omissions. “Expense” includes,
without limitation, the LENDER’s reasonable attorney’s
fees. Except as set forth in section 5.9 hereof, 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 or expressly permitted
under
the Program Guidelines.
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2.9
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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.
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Section
3: OBLIGATIONS
OF THE LENDER
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3.1
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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.
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3.2
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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.
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3.3
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The
LENDER will pay a guaranty fee for each Loan (the “Guaranty Fee”) at such
times and in such amounts as set forth on Schedule 3.3, attached
hereto.
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a.
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If
the terms of Schedule 3.3 call for any Guaranty Fees to be paid 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).
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b.
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In
the event that a Guaranty Claim is made with respect to a Loan before
a
Total Guaranty Fee is scheduled to be paid by the LENDER for such
Loan,
the unpaid balance of the Total Guaranty Fee shall become immediately
due
and payable.
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c.
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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.
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d.
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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.
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e.
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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.
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f.
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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 Security
Documents.
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g.
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As
set forth in footnote four (4) to Schedule
3.3, Lender shall pay to XXXX an additional
Subsequent Administrative Guaranty Fee at the time of each Purchase
Transaction (and be reimbursed in the Purchase Transaction as provided
in
the Note Purchase Agreement). The fee shall be computed by (a) determining
the product of the risk-weighted administration fee percentage for
each
pricing tier multiplied by the principal amount of the Loans being
sold by
the Lender in each pricing tier, (b) adding together all such products
to
produce a risk-weighted administrative allowance, and (c) subtracting
the
amount of Initial Administrative Guaranty Fees (as defined in Schedule
3.3) already paid to XXXX by the Lender. If the computation produces
a
negative number, no supplemental fee is due. The risk-weighted
administrative fee percentages are set forth in Schedule 3.3, column
4b
attached hereto.
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h.
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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 [**] percent ([**]%) 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.
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i.
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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 Custodian
will
refund all or part of any 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.
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3.4
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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) XXXX
determines 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.
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3.5
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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, 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.
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3.6
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LENDER
will indemnify XXXX and hold it harmless from and against any loss,
cost,
damage or expense that XXXX may suffer as a result of claims to the
extent
they arise out of LENDER’s breach of 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 in any suit upon a Promissory
Note. “Expense” includes, without limitation, TERI’s reasonable
attorney’s fees.
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Section
4: REPRESENTATIONS
AND WARRANTIES
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4.1
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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.
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4.2
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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.
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Section
5: MISCELLANEOUS
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5.1
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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.
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5.2
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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
party
from 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.
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5.3
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This
Agreement (including the Program Guidelines and all exhibits and
schedules
hereto), together with (i) the Security Documents 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.
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5.4
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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.
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5.5
|
Each
of the parties will timely implement, if it has not already, and
will
maintain a reasonable business continuity plan (“Business Continuity
Plan”). If a disaster occurs which in a party’s reasonable
determination affects that party’s ability to perform its obligations
hereunder, that party shall institute its Business Continuity
Plan. Each party shall share with the other its Business
Continuity Plan and each party hereto hereby acknowledges receipt
of such
plans. Each party agrees to update their Business Continuity
Plan as required by changes to business practices or
methodology. Each party agrees to provide the other with notice
of any substantial or material changes to their Business Continuity
Plan
upon request from the other party. 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.
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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.
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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.
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a.
|
The
LENDER may, without TERI’s consent, assign any Loan, together with the
provisions hereof as applicable to such Loan, to another entity
participating in the Program, or to an SPE formed by the LENDER,
in each
case upon written notice to XXXX.
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Notwithstanding
the foregoing, XXXX specifically acknowledges that the LENDER expects
to
assign Loans to an affiliate of LENDER in a temporary financing
transaction and then repurchase such Loans prior to sale to FMC or
an SPE
sponsored by FMC, and this Agreement shall inure to the benefit of
such
affiliate of Lender upon purchase of any Loans and back to LENDER
upon
repurchase of such Loans. No notice or consent to the assignment
of rights
under this Agreement shall be necessary in connection with either
such
purchase by an affiliate of LENDER in a temporary financing transaction
or
repurchase by LENDER.
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b.
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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.
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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.
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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.
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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 guaranty 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.
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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 its President. Either party
may from time to time change the person, address or fax number for
notice
purposes by formal notice to the other
party.
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5.9
|
For
the 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 the Program Guidelines attached hereto. 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 Risk-Based Pricing it has offered to LENDER. 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 Risk-Based Pricing does
not
extend beyond the pricing actually included in the Program Guidelines
attached hereto.
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5.10
|
During
the term of this Guaranty Agreement, XXXX hereby grants to LENDER
a
royalty-free, limited, non-exclusive, and non-transferable license
to use
the registrations, trade names, trademarks, trade styles, trade dress,
designs, logos, service marks and other related identifying marks
owned by
XXXX ("XXXX Service Marks"), and any replacement, substitute, or
successor
XXXX Service Marks, solely in connection with Lender's marketing
activities with respect to the
Program.
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In
addition, XXXX is the sole and exclusive owner and copyright holder
of
certain promotional materials, including without limitation, printed
materials, brochures, flyers, inserts, telephone scripts, and web
pages
that XXXX may provide to LENDER for use in marketing the Program
("XXXX
Marketing Materials"). XXXX hereby grants to LENDER a royalty-free,
non-transferable, limited and non-exclusive right and license to
use,
copy, display, modify and create derivative works from the XXXX Marketing
Materials solely in connection with marketing the Program; provided,
however, that LENDER acknowledges and agrees that XXXX shall retain
all
right, title and interest in and to the XXXX Marketing Materials,
including all copyright interests
therein.
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LENDER
shall comply with the standards established by XXXX from time to
time with
respect to the form of the XXXX Service Marks and their usage. The
licenses granted to LENDER shall not be assigned, transferred or
sublicensed, by operation of law or otherwise, without the prior
written
consent of XXXX. LENDER acknowledges that the XXXX Service
Marks and XXXX Marketing Materials, all rights therein, and the goodwill
associated therewith, are, and shall remain, the exclusive property
of
XXXX. LENDER shall take no action which shall adversely affect
TERI's exclusive ownership of the XXXX Service Marks or the XXXX
Marketing
Materials or the goodwill associated with the XXXX Service Marks
or the
XXXX Marketing Materials. LENDER shall notify XXXX, in writing,
promptly upon acquiring knowledge of any infringing use of any of
the XXXX
Service Marks or the XXXX Marketing Materials by any third
party.
|
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. Either party may request, in writing, modifications to 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. Modifications shall take effect as soon after XXXX and the LENDER’s
loan servicer shall be able to adjust their systems to accept loans made on
the
modified terms, and the LENDER agrees to take such actions as are reasonably
necessary to ensure that its loan 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 the date first set
forth
above, and shall continue until July 1, 2011. 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 ninety (90) days prior to the end of the then-current
term.
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|
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 such modification shall have the option of terminating
this
Agreement effective immediately upon written notice of termination
to the
other party, provided that the terminating party does so within thirty
(30) days of the end of the thirty (30) day period provided in Section
6
for the resolution of any differences. In the event that the
Program Guidelines modification procedure set forth in Section 6.2
expires
and the parties have not resolved their differences, either party
may
exercise an option to terminate this Agreement on one (1) days’ advance
written notice to the other party, provided that both parties agree
that
Loans already in process that are disbursed within sixty (60) days
of
notice of termination for failure to agree on Program Guidelines
modifications will continue to be governed by the terms of this
Agreement.
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|
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.
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|
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 thirty (30) 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:
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|
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
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|
e.
|
Information
concerning Loans and Borrowers that comes into TERI’s possession shall be
considered Confidential Information of the LENDER; however, XXXX
in its
capacity as guarantor may retain and use such Confidential Information,
provided such retention and use is permitted by and consistent with
the
provisions of Title V of the Xxxxx-Xxxxx-Xxxxxx Act (the “GLB
Act”).
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|
|
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.
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|
8.2
|
In
accordance with the provisions of Title V of the Xxxxx-Xxxxx-Xxxxxx
Act
(the “GLB Act”) and the Federal Trade Commission privacy rule issued
thereunder at 16 C.F.R. 313, “Privacy of Consumer Financial
Information” (the “Privacy Rule”), XXXX agrees, as a financial institution
subject to the Privacy Rule, to respect and protect the security
and
confidentiality of any “nonpublic personal information” (as defined in the
GLB Act and the Privacy Rule) 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 the Privacy
Rule.
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|
|
Notwithstanding
the foregoing, XXXX may purchase credit score analysis and validation
services from time to time from consumer reporting agencies. In order
to
perform the score analysis and validation services, the consumer
reporting
agencies may access personal information about applicants and borrowers,
including (i) application information and loan servicing data
concerning loans funded by LENDER and guaranteed by XXXX,
(ii) application data concerning loan applications that were approved
but not funded (e.g., due to withdrawal of the loan application),
and
(iii) application data concerning denied applications. In order to
facilitate the analysis of this data and the score validation process,
XXXX may retain third party database vendors to receive and store
this
data in a secure database, and to provide XXXX and the consumer reporting
agencies with restricted access to such information. In order to
comply with applicable privacy laws, TERI will contract with the
consumer
reporting agencies and such third party database vendors to ensure
that
the information is protected and used only for the purposes of providing
the score validation and analysis
services.
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8.3
|
Without
limiting the foregoing, XXXX may retain as its own property and 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. 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. | UNION FEDERAL SAVINGS BANK | |||
|
By:
/s/
Xxxxxxx X. Xxxxxxxx, Xx.
|
By:/s/
Xxxxxxx X. Xxxx, XX
|
|||
| Print Name: Xxxxxxx X. Xxxxxxxx, Xx. | Print Name:Xxxxxxx X. Xxxx, XX | |||
|
Title:
Treasurer and
CFO
|
Title:
President
|
TABLE
OF
EXHIBITS
Exhibit
A
– Program Guidelines for UFSB Astrive Loan Program**
Exhibit
B
– Servicer Data Requirements**
Schedule
3.3 – Guaranty Fee Amounts**
**Confidential
treatment has been requested for
this
exhibit or schedule in its entirety.
EXHIBIT
A
Program
Guidelines for UFSB Astrive Loan Program
[**]
EXHIBIT
B
Servicer
Data Requirements
[**]
Schedule
3.3 – Guaranty Fee Amounts
[**]
