Exhibit 10.1
SERVICING AGREEMENT
THIS SERVICING AGREEMENT (the "Servicing Agreement") entered into as
of the 1st day of July 1997 by and among Student Loan Finance Corporation, a
corporation organized under the laws of the State of South Dakota (the
"Servicer"), Education Loans Incorporated,a corporation organized under the laws
of the State of Delaware (the "Issuer"), and First Bank National Association, a
national banking association headquartered in Minneapolis, Minnesota, as trustee
(the "Trustee").
W I T N E S E T H:
WHEREAS, the Servicer services student loans ("Student Loans") which
are guaranteed under a guaranty program established by a state or a private
nonprofit corporation pursuant to the requirements of the Higher Education Act
of 1965, as amended from time to time, and the rules and regulations promulgated
thereunder (the "Higher Education Act"); and
WHEREAS, the Servicer has established its Student Loan Purchase
Program pursuant to which it causes the acquisition of certain Student Loans
from lenders ("Lenders") eligible to originate or hold such Student Loans under
the Higher Education Act; and
WHEREAS, pursuant to the Servicer's Student Loan Purchase Program, the
Issuer has entered into or will enter into (including, without limitation, by
assignment and assumption) Student Loan Purchase Agreements ("Student Loan
Purchase Agreements") with certain Lenders pursuant to which it has agreed to
cause the purchase of or will cause the purchase of Student Loans by the Trustee
(for the account and on behalf of the Issuer) from such Lenders;
WHEREAS, under certain circumstances, the Issuer also will cause the
origination of Student Loans by the Trustee (for the account and on behalf of
the Issuer) (Student Loans purchased or originated under the Indenture
hereinafter described are hereinafter referred to as "Financed Student Loans");
and
WHEREAS, the Issuer initially will obtain funds necessary to originate
and purchase Student Loans through the issuance by Education Loans Incorporated
(formerly known as Student Loan Finance Corporation), a South Dakota nonprofit
corporation (the "Original Issuer"), of its Student Loan Asset-Backed Callable
Notes, Series 1997-1 (the "Series 1997-1 Notes") and the immediate assumption by
the Issuer of all of the Original Issuer's liabilities and obligations with
respect to the Series 1997-1 Notes, and the subsequent issuance from time to
time by the Issuer of additional notes (together with the Series 1997-1 Notes,
the "Notes"), all pursuant to an Indenture of Trust, dated as of July 1, 1997
(as amended or supplemented, the "Indenture") between the
Original Issuer and the Trustee, as Trustee, and with respect to which the
Original Issuer has assigned all its rights to the Issuer and the Issuer has
assumed all the Original Issuer's obligations; and
WHEREAS, the principal of and interest on the Notes is to be paid from
repayment of Financed Student Loans and other trust assets pledged under the
Indenture; and
WHEREAS, the Issuer wishes to provide for the origination, acquisition
and servicing of the Financed Student Loans in the manner provided in the
Student Loan Purchase Agreements and the Indenture; and
WHEREAS, copies of (i) the executed Student Loan Purchase Agreements,
(ii) the Indenture and (iii) the Plan for Doing Business of the Original Issuer,
dated as of July 1, 1997 (the "Plan for Doing Business") have been furnished to
the Servicer, and the Servicer has read and reviewed each thereof in detail; and
WHEREAS, the Issuer wishes to retain the Servicer to provide services
in connection with the origination, acquisition, servicing and collection of the
Financed Student Loans in accordance with the requirements of the Higher
Education Act, the Guarantee Program, the Student Loan Purchase Agreements and
the Indenture, and the Servicer is willing to undertake such obligations on the
terms hereinafter specified; and,
WHEREAS, the Issuer also wishes to retain the Servicer to perform
other administrative requirements on behalf of the Issuer, including those
required to allow the Issuer to satisfy certain requirements under the
Indenture;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto agree as follows:
1. Term. The term of this Servicing Agreement shall commence as of
the date hereof and shall continue for so long as any of the Notes shall remain
Outstanding (as defined in the Indenture) unless this Servicing Agreement is
terminated in accordance with the terms hereof.
2. Definitions. In addition to terms elsewhere defined in this
Servicing Agreement, and except as otherwise provided herein or as the context
may otherwise require or suggest, initially capitalized terms used herein shall
have the meanings assigned thereto in the Indenture, or if not defined therein,
in the Student Loan Purchase Agreements.
3. Agreement to Provide Services with respect to Financed Student
Loans; Cooperation.
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a. The Servicer shall provide services to the Issuer in
connection with the origination and acquisition of Student
Loans to be Financed in accordance with this Servicing
Agreement. The Servicer shall commence servicing the Financed
Student Loans as of the day they are Financed and shall
service the Financed Student Loans in accordance with this
Servicing Agreement. The Servicer may perform all or part of
its origination, acquisition, and servicing activities
hereunder through a subcontractor. The Servicer shall perform
or shall cause its subcontractor to perform all services
hereunder in compliance with the Higher Education Act,
applicable requirements of the Guarantee Agency and all other
applicable federal, state and local laws and regulations. The
Servicer shall be responsible for the performance of its
obligations hereunder, whether such obligations are performed
by the Servicer or by its subcontractor, and the Servicer
shall be responsible for any fees and payments required by
the subcontractor. A subcontractor shall be subject to the
same obligations relating to audits, examinations and
inspections as to which the Servicer is subject hereunder.
The Servicer shall provide the Issuer and the Trustee with
prior written notice of any subcontractor relationship.
b. The Issuer and the Trustee shall, in accordance with the
provisions of the Indenture, cooperate with the Servicer in
delivering or causing to be delivered Financed Student Loans
to the Servicer for origination, acquisition and servicing
in accordance with this Servicing Agreement.
4. Acquisition Process. The Issuer, the Trustee and the Servicer
agree that:
a. Unless and until otherwise directed in writing by the
Issuer, the Servicer shall provide to the Trustee all
certificates and directions required to be delivered by the
Issuer to the Trustee under the Indenture in connection with
the Financing through acquisition of Eligible Loans and
Student Loans thereunder.
b. Pursuant to the Student Loan Purchase Agreements, the
Servicer will, on behalf of the Issuer and the Trustee,
require that each
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Lender transfer to the Servicer (or the Servicer's bailee),
on or before each applicable Loan Purchase Date, physical
custody and possession of documentation and information
relating to Student Loans scheduled to be sold to the
Trustee on behalf of the Issuer on each such Loan Purchase
Date. Such documentation and information so transferred
will include (i) the documents described in Exhibit B
attached to the Student Loan Purchase Agreements (the "Loan
Documents"), and (ii) such additional documentation or
information relating to the Student Loans as the Servicer
shall reasonably require for the purpose of allowing the
Student Loans to be properly serviced by the Servicer.
c. Within a reasonable period after delivery to the Servicer
(but in no event longer than 10 Business Days unless
otherwise expressly agreed) of the documentation and
information relating to the Student Loans identified in
Section 4(b) above, the Servicer shall (i) establish and
maintain all records delivered to the Servicer with respect
to each Financed Student Loan, and complete records of the
Servicer's servicing of the Financed Student Loan from the
date such servicing commenced, (ii) maintain possession of
the loan documents described in Section 6(p) and (r) hereof
that it receives as required hereunder, and (iii) image,
microfilm or otherwise reproduce such documents and cause
such reproductions to be stored at a separate location.
d. In the course of establishing the records relating to each
Financed Student Loan as described in Section 4(c) hereof,
the Servicer shall make note of any item which comes to the
attention of the Servicer during the establishment process
(it being understood that the Servicer will not be
conducting a complete file and note examination of each
Student Loan to be Financed) which would make it appear that
any Student Loan has not been properly originated, disbursed
and documented or has not had due diligence exercised with
respect thereto, in the origination, disbursement,
administration, servicing and collection thereof, in
accordance with the requirements of the Higher Education
Act, the
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Guarantee Program and the applicable Student Loan Purchase
Agreement. The Servicer shall give Lenders a reasonable
opportunity to correct any exceptions or problems identified
by the Servicer and to provide such documentation and
information to the Servicer as shall be necessary to correct
such exceptions or problems. Except as otherwise permitted
under the Indenture, if such exceptions or problems are not
corrected, the Servicer shall return to the Lenders, in
accordance with procedures and under the conditions
specified in the sections of the Student Loan Purchase
Agreements relating to the rejection or repurchase of
Student Loans, any documents and information related to
Student Loans which have exceptions or problems resulting in
such loans not being Eligible Loans.
e. The Servicer shall (i) establish a course of communication
with each Lender sufficient to ensure that the Servicer
receives notice from each Lender of all transactions with
respect to each Student Loan prior to the required time of
delivery by the Servicer to the Trustee of the documents
required by Section 4(a) hereof, and (ii) load all
information necessary for servicing Financed Student Loans
into its servicing system so that servicing and collection
of Financed Student Loans on the basis of "simple interest"
can commence as of the Loan Purchase Date as required by
Section 3 hereof. If interest has been collected on any
Student Loan to be purchased by the Trustee (for the account
and on behalf of the Issuer) on the basis of the "rule of
78's", the Servicer shall cause the Lender wishing to sell
such loan to convert the remaining repayment schedule for
each such Student Loan so that it may be collected on the
basis of "simple interest".
f. The Issuer and the Trustee shall promptly after each Loan
Purchase Date, upon request by the Servicer, provide to the
Servicer any additional documentation or information related
to the Financed Student Loans which either of them may have
in their possession or may reasonably be able to obtain.
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g. The Servicer shall, promptly after each Loan Purchase Date,
notify the Borrower under each Financed Student Loan
purchased on such Loan Purchase Date of the assignment and
transfer to the Trustee (for the account and on behalf of
the Issuer) of the Lender's interest in each such Financed
Student Loan and shall direct each such Borrower thereafter
to make all payments on such Financed Student Loan directly
to the Servicer until otherwise notified by the Trustee. If
a Financed Student Loan has been converted from repayment
under the rule of 78's to repayment under the simple
interest method, as required by Section 4(e) hereof, the
Lender shall notify the Borrower and shall obtain the
written consent of the Borrower and take whatever additional
action may be necessary to effect such conversion of
repayment method in accordance with applicable legal
requirements. Each Borrower notification shall include all
information required to be included by the Higher Education
Act and the requirements of the Guarantee Agency.
h. The assignment of each Financed Student Loan to the Trustee
(for the account and on behalf of the Issuer) shall be
reported by the Servicer promptly after each applicable Loan
Purchase Date to the Secretary of Education and/or the
Guarantee Agency, as appropriate, and the Trustee, by a
properly completed Loan Transfer Report in the form required
by the Secretary of Education and/or the Guarantee Agency.
i. If the Servicer at any time becomes aware of an event which
would (i) allow the Issuer to reject a Student Loan under
the applicable Student Loan Purchase Agreement, or (ii)
allow the Issuer to require a Lender to repurchase a
Financed Eligible Loan or Financed Student Loan or to
substitute an Eligible Loan under the applicable Student
Loan Purchase Agreement, then the Servicer shall so notify
the Issuer. If the Servicer or the Issuer determine that
such a Student Loan should be rejected or repurchased, the
Trustee shall take such action as shall be necessary to
allow the Issuer and the Trustee to enforce their respective
rights under the applicable Student Loan Purchase Agreement.
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5. Origination Process. The Issuer, the Trustee and the Servicer
agree that:
a. Unless and until otherwise directed in writing by the
Issuer, the Servicer shall provide to the Trustee all
certificates and directions required to be delivered by the
Issuer to the Trustee under the Indenture in connection with
the Financing through origination of Eligible Loans and
Student Loans thereunder.
b. The Servicer shall provide disbursement and origination
services in connection with the origination and disbursement
of Eligible Loans under the Indenture. The Servicer shall
perform all services and duties customary to the origination
and disbursement of Student Loans in accordance with
generally accepted industry standards and practices and in
compliance with the Higher Education Act, applicable
requirements of the Guarantee Agency and all other
applicable federal, state and local laws and regulations.
6. Servicing. The Servicer agrees that each of the Financed Student
Loans, while held under the Indenture shall be serviced by it in accordance with
the procedures established in the Higher Education Act and the Guarantee Program
regulations. Additionally, the Servicer shall perform at least the following
minimum duties, obligations and functions in connection with its servicing of
such Financed Student Loans:
a. Maintain a complete and separate file concerning each
Financed Student Loan, which file (i) shall include, without
limitation, the documentation relating to each of the
Financed Student Loans listed and described in Exhibit B to
the applicable Student Loan Purchase Agreement, and at least
the following information relating to each of the Financed
Student Loans: name and social security number of Eligible
Borrower, actual or estimated graduation date of the
student, payment status, days delinquent, number of payments
made, next payment due date, date of last payment received,
total amount disbursed, beginning of deferments and
forbearances, and ending of deferments and forbearances; and
(ii) shall be maintained in a manner sufficient to allow
separate identification of the Financed Student Loans
securing the Notes from other loans serviced or owned by the
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Servicer (including those owned by or on behalf of the
Issuer).
b. Take all steps necessary to maintain the Insurance and
Guarantee coverage on each Financed Student Loan in full
force and effect at all times.
c. Exercise reasonable discretion in approving borrower
requests for forbearance (as permitted under the Higher
Education Act and the Guarantee Program regulations) where
such approval will not adversely affect the financial
viability of the Issuer and will not violate the covenants
set forth in the Indenture.
d. Exercise due diligence (within the meaning of the Higher
Education Act and the Guarantee Program regulations) in the
servicing, administration and collection of all Financed
Student Loans.
e. Attempt to collect or cause to be collected all payment of
principal and interest, Special Allowance Payments, and
Guarantee payments with respect to each Financed Student
Loan and, with respect thereto, (A)(i) cause all interest
subsidy payments and Special Allowance Payments to be
forwarded by the Secretary of Education directly to the
Trustee for immediate deposit into the appropriate fund or
account under the Indenture and (ii) deposit all other such
payments immediately upon receipt into a lock-box account
(which shall be part of the Revenue Fund) to be established
by the Trustee in the name of and for the account of the
Trustee under circumstances which provide for investment of
such payments in accordance with the requirements of the
Indenture applicable to moneys on deposit in the Revenue
Fund. Upon submission by the Servicer to the Secretary of
Education of a billing for interest subsidy payments or
Special Allowance Payments, the Servicer shall, upon
request, provide to the Trustee and the Issuer a written
statement indicating (a) the amount billed for interest
subsidy payments and (b) the principal amount in each
Special Allowance Payment category for which the billing is
submitted, for use by the Trustee and the Issuer in
verifying amounts
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billed for and received with respect thereto from the
Secretary of Education. In the event of discrepancies or
disputes with the Secretary of Education, the Servicer shall
be responsible for representing the interests of the Issuer
and the Trustee in effecting a settlement with the Secretary
of Education of such discrepancies or disputes. The
Servicer shall direct the transfer from time to time of the
Balances in the lock-box account to the Trustee for deposit
in the appropriate Fund or Account under the Indenture;
provided, however, that the Balances in the lock-box account
as of the last day of any calendar month shall, at a
minimum, be transferred on or before the 12th day of the
next succeeding month (or the next preceding Business Day if
such 12th day is not a Business Day), to the Trustee for
deposit in the appropriate Fund or Account under the
Indenture. On or before the date of any transfer, the
Servicer shall deliver by facsimile, hand or mail by U.S.
express mail (or other substantially equivalent means
acceptable to the Trustee) a statement to the Trustee
indicating the portion of the payments transferred on such
date which represents (x) principal payments from any source
with respect to Financed Student Loans, and (y) interest
payments from any source with respect to Financed Student
Loans.
f. Retain summary records of all contacts, follow-ups and
collection efforts (showing at least the date and subject of
each communication with the Borrower or endorser for
collection of each delinquent Financed Student Loan) and
records of all correspondence (including, without
limitation, changes for which records are required to be
maintained by the Higher Education Act and the Guarantee
Program regulations) relating to each Financed Student Loan.
g. Prepare and maintain all appropriate accounting records with
respect to all transactions related to each Financed Student
Loan, including, but not limited to, accounting for all
payments of principal, interest, and Guarantee payments with
respect to each Financed Student Loan and Special
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Allowance Payments relating to all Financed Student Loans.
h. Handle the processing of all adjustments including, without
limitation, forbearances, reinstatements, deferments,
refunds and loans paid in full.
i. Handle the processing of all address changes and the
updating of the address records accordingly.
j. In the case of defaulted Financed Student Loans, take all
steps necessary to file and prove a claim for loss with the
Secretary of Education or the Guarantee Agency, as the case
may be and as required, and assume responsibility for all
necessary communication and contact with the Secretary of
Education or the Guarantee Agency, as the case may be and as
required, to recover on such defaulted Financed Student
Loans within the time required by the Higher Education Act
and the requirements of the Guarantee Agency.
k. In the case of a claim for loss being denied by the
Secretary of Education or the Guarantee Agency, as the case
may be, under circumstances resulting in a Lender being
required by a Student Loan Purchase Agreement to repurchase
a Financed Student Loan, take such action as shall be
necessary to allow the Issuer or the Trustee to cause such
Lender to repurchase such Financed Student Loan or to
substitute a different Eligible Loan in accordance with the
requirements of the applicable Student Loan Purchase
Agreement.
l. Prepare and file with the Secretary of Education or the
Guarantee Agency, as the case may be and as required, a
Lender's manifest of Financed Student Loans on all new
accounts, accounts paid in full and accounts converted to a
repayment basis.
m. Prepare and furnish to the Issuer and the Trustee by the
10th day of each month the following reports with respect to
activity concerning each Financed Student Loan during the
preceding month:
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(1) upon request, computer generated reports showing, in
reasonable detail, all transactions during such
preceding month concerning each Financed Student Loan
serviced by the Servicer;
(2) upon request, a report showing the unpaid principal
balance of each Financed Student Loan as of the last
day of such preceding month;
(3) upon request, with respect to Financed Student Loans in
repayment, a delinquency report or reports showing all
accounts past due as of the last day of such preceding
month in categories of 0-30 days, 31-60 days, 61-90
days, 91-120 days, 121-150 days, 151-180 days, and over
180 days.
(4) upon request, a report of Financed Student Loans paid
in full during such preceding month;
(5) a report specifying the number of and the aggregate
unpaid principal amount of claims made during such
preceding month on defaulted Financed Student Loans and
during the then current fiscal year of the Issuer and
the number and aggregate amount of such claims which
were rejected by the Guarantee Agency, if any, during
such month and during the then current fiscal year of
the Issuer, the number and aggregate unpaid principal
amount of Financed Student Loans being serviced by the
Servicer as of the last day of such preceding month,
and the aggregate unpaid principal amount of defaulted
Financed Student Loans as of the last day of such
preceding month;
(6) copies of all formal reports filed by the Servicer with
respect to Financed Student Loans with any person or
entity and such other reports which are available to
the Servicer and which may be reasonably requested from
time to time by the Issuer or the Trustee;
n. With respect to Financed Student Loans in repayment, prepare
and furnish to the Issuer
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and the Trustee upon request, copies of all file updates and
transactions listings including, without limitation, credits
applied, Financed Student Loans paid and exceptions
listings.
o. Identify on the servicing system the Notes as the source of
financing for each such Financed Student Loan.
p. Maintain a duplicate or copy of the file or record (which
may be on microfilm or computer tape) pertaining to each
Financed Student Loan at a location separate and apart from
that at which the original of such file is maintained (such
duplicate file shall include, without limitation, a copy of
each loan application, interim and payout note(s) if
applicable, Certificate of Insurance, Contract of Insurance,
Guarantee Agreement, disclosure statement and Secretary of
Education Loan Transfer Statement, where applicable).
q. Maintain the original promissory note pertaining to each
Financed Student Loan to be maintained in secure storage
facilities to protect, to the extent reasonable and possible
under the circumstances, such original file concerning each
Financed Student Loan.
r. Obtain and maintain imaged or microfilm copies and/or back-
up computer tapes (but in any case a copy of the promissory
note relating to each Financed Student Loan) at a separate
location adequate to ensure against loss or damage to the
files pertaining to the Financed Student Loans by reason of
any casualty or theft; obtain and maintain in force adequate
insurance for loss or damage to the file pertaining to the
Financed Student Loans by reason of any casualty or theft;
and the Servicer shall be liable for any costs associated
with, or loss to the Issuer resulting from, the
reconstruction of data related to the Financed Student Loans
in the event of natural disaster or the malfunction of any
computer systems.
s. Maintain in force fidelity bonds upon all personnel of the
Servicer insuring against any loss of money or other
property which the Trustee, the Issuer or the Servicer might
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suffer as a consequence of any fraudulent or dishonest act
of such personnel, in an amount required by any supervisory
agency of federal or state government having jurisdiction,
but if not so required, then in an amount equal to at least
the Servicer's current coverage amounts and deductibles (as
evidenced by the insurance certificate delivered to the
Issuer herewith) or such lesser amount as shall be in
writing determined from time to time by the Issuer, with the
approval of the Trustee to be sufficient.
t. Answer all lawful inquiries received by the Servicer from
Lenders, Borrowers, Eligible Institutions, the Secretary of
Education, the Guarantee Agency, the Issuer or the Trustee
pertaining to Financed Student Loans, school status or
refunds, and cooperate to the extent necessary to gather the
information needed to answer such inquiries, provided,
however, that such inquiries may be referred to the Eligible
Institution which a student attended or is attending, if
necessary, and the Servicer shall have no responsibility
with respect to disputes between a Borrower and such
Eligible institution regarding tuition or registration.
u. Any communication received by the Servicer which is in the
nature of a complaint, shall be immediately answered by the
Servicer.
v. The Servicer shall file with the Secretary of Education in
an accurate, timely and complete manner "Lenders Request for
Payment of Interest and Special Allowance" (ED Form 799), or
such other form or request for payment directly to the
Trustee of interest subsidy payments and Special Allowance
Payments as the Secretary of Education may require, from
time to time but in no event later than fifteen (15)
Business Days after the end of each calendar quarter.
In addition, the Servicer agrees that it will, for the servicing fees specified
in Section 18 hereof, perform all servicing obligations relating to Financed
Student Loans required of the Issuer or the Trustee, or which the Issuer or the
Trustee is required to cause the Servicer to perform.
7. Due Diligence. The Servicer agrees that in discharging its
obligations hereunder it shall:
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a. Exercise due diligence in the origination, disbursement,
administration, servicing and collection of all Financed
Student Loans as the term "due diligence" is used in the
Higher Education Act and the Guarantee Program regulations;
b. Exercise reasonable care and diligence in the origination,
disbursement, acquisition, administration and collection of
all Financed Student Loans;
c. Attempt to collect or cause to be collected the Financed
Student Loans in a competent, diligent and orderly fashion,
and in a manner substantially in accordance with the
requirements of the Higher Education Act, the Secretary of
Education, the Guarantee Agency, the Indenture (including
specifically but without limitation the provisions of
Sections 5.5 through 5.8 of the Indenture), the Student Loan
Purchase Agreements and each applicable Federal
Reimbursement Contract and Guarantee Agreement; and
d. Exercise reasonable prudence in those aspects of the
administration of the Program which are within its area of
responsibility.
8. Liaison with Lenders, Eligible Institutions and Other Parties.
The Servicer shall maintain one or more toll-free WATS telephone lines to
provide telephone access to its Student Loan servicing office in Aberdeen, South
Dakota, by the Issuer, the Trustee, Lenders, Borrowers and Eligible
Institutions. The applicable numbers for such telephone lines shall be provided
in writing to the Issuer and the Trustee and to each Borrower. The Issuer, the
Trustee and each such Borrower shall be promptly advised in writing of each
change to such telephone number.
9. Right of Inspection; Availability of Records; Audits.
a. Subject to any restrictions of applicable law, the Issuer,
the Trustee, the Guarantee Agency, the Secretary or any
successor thereto, the Comptroller of the Currency and/or
any governmental agency having jurisdiction over the Issuer
or the Trustee (and, in each case, such entities'
representatives) (any such entity being referred to herein
as the "Examiner"), shall have the right, at any time and
from time to time, during normal business
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hours, and upon reasonable notice to the Servicer (which may
be less than 5 days), to examine and audit any and all of
the Servicer's records or accounts pertaining to any
Financed Student Loan. Under the preceding sentence, the
Examiner shall have the right to examine and make copies of
any documents related to Financed Student Loans and to
interview personnel involved in the servicing. Subject to
any access restrictions in any agreement for provision of
computer or data processing equipment or related services,
the Servicer shall make available to the Examiner without
charge all manuals, forms, files and descriptions of the
software necessary to enable the Examiner to interpret and
analyze the information and reports produced by the system,
it being understood that the Servicer shall retain all
title, rights and interest thereto and therein.
b. The Issuer and the Trustee shall each have the right to
require the Servicer to furnish such documents as it in its
sole discretion from time to time deems necessary to
determine that the Servicer has complied with the provisions
of this Servicing Agreement, the Student Loan Purchase
Agreements and the Indenture, including, without limitation,
Sections 5.5 through 5.8 of the Indenture.
c. If and to the extent required by the Higher Education Act
and the Guarantee Program regulations, the Servicer shall
cause to have prepared and shall submit to the Secretary of
Education and the Guarantee Agencies on or before the
respective due dates thereof:
(1) any third-party servicer compliance audits and audited
financial statements required under the Higher
Education Act and the Guarantee Program regulations
relating to the Servicer and its servicing of Financed
Student Loans; and,
(2) any lender compliance audits required under the Higher
Education Act and the Guarantee Program regulations
relating to the Trustee (as the holder of the Financed
Student Loans) and the Financed Student Loans.
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The Servicer shall provide to the Issuer and the Trustee
promptly after it becomes available (and in no event later
than 10 Business Days) a copy of each such audit and any
other audit or report required by the Secretary of
Education, any Guaranty Agency or other third party in
connection with the Servicer's activities in originating,
acquiring and servicing the Financed Student Loans.
d. The Servicer shall provide to the Issuer and the Trustee
copies of its annual third party (SAS70) audit reports, if
such reports are prepared, promptly following the Servicer's
receipt thereof.
e. The Servicer shall provide to the Issuer and the Trustee its
annual financial statements, audited by a firm of
independent certified public accountants, within one hundred
twenty (120) days of the end of each fiscal year of the
Servicer; and its quarterly unaudited financial statements,
within forty-five (45) days of the end of each fiscal
quarter of the Servicer.
f. If reports are not prepared and submitted under Section 9(c)
hereof or if the Trustee determines it is necessary as part
of a request under Section 9(b) hereof, upon the request of
the Trustee or the Issuer, the Servicer shall undergo an
annual audit, examination and review conducted by a firm of
independent public accountants with experience in auditing
student loan program operations under the Higher Education
Act, independently selected by the Issuer (or the Trustee if
the Issuer fails to make such selection), of its systems,
programs, procedures, services and operations to determine
the Servicer's compliance with this Agreement. If any such
audit, examination and review shall indicate to the Issuer
or the Trustee that the Servicer is not in material
compliance with its obligations under this Servicing
Agreement, this Servicing Agreement may be terminated by the
Issuer or the Trustee on the basis of Section 11(a)(3)
hereof (an audit, examination or review under this
subsection, however, is not required for a termination under
Section 11(a)(3)).
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g. The costs of audits and reports prepared under subsections
(c) through (f) above shall be paid by the Servicer.
10. Amendments; Benefits; Termination. The Servicing Agreement (a)
may be amended, supplemented or modified only by written instrument duly
executed by all parties hereto and only upon the receipt of a written
certificate from the Issuer and the Trustee that such amendment, supplement or
modification will not deprive any holder of the Notes in any material respect of
the security afforded by this Servicing Agreement, (b) shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns, and (c) except as provided in Section 11 hereof, may not be
terminated (except for cause) or assigned by any party hereto without the prior
written consent of the other parties hereto, provided, that the Trustee may make
an assignment to its successor as trustee under the Indenture if the Trustee
shall cease serving as trustee under the Indenture.
11. Termination.
a. The Servicing Agreement shall terminate:
(1) upon the expiration of the term stated in Section 1
hereof;
(2) If the Servicer shall:
(a) admit in writing its inability to pay its debts
generally as they become due;
(b) consent to the appointment of a custodian (as that
term is defined in the federal Bankruptcy Code) for or
assignment to a custodian of the whole or any
substantial part of the Servicer's property, or fail to
stay, set aside or vacate within sixty (60) days from
the date of entry thereof any order or decree entered
by a court of competent jurisdiction ordering such
appointment or assignment;
(c) commence any proceeding or file a petition under
the provisions of the federal Bankruptcy Code for
liquidation, reorganization or adjustment of debts, or
under any insolvency law or other statute or law
providing for the modification or adjustment of the
rights of creditors, or fail to stay, set aside or
vacate within
17
sixty (60) days from the date of entry thereof any
order or decree entered by a court of competent
jurisdiction pursuant to an involuntary proceeding,
whether under federal or state law, providing for
liquidation or reorganization of the Servicer or
modification or adjustment of the rights of creditors;
or
(d) contest in writing the validity or enforceability
of this Agreement as a whole or deny in writing that
this Agreement as a whole is binding upon the Servicer;
(3) upon written notice by the Issuer or the Trustee to the
Servicer, if the Servicer materially breaches its
obligations, or any representation or warranty, under
this Servicing Agreement or upon written notice by the
Issuer or the Trustee to the Servicer on the basis of
Section 9(f) hereof; or,
(4) upon written notice by the Issuer or the Trustee to the
Servicer, if at any time the Guarantee Agency or the
Department of Education has issued a notice of
suspension or termination against the Servicer, or has
suspended or terminated the payment of all claims with
respect to Financed Student Loans or, in the case of
the Department of Education, all Special Allowance
Payments or interest benefit payments with respect to
Financed Student Loans as a result of actions or
omissions of the Servicer (it being understood that the
cessation of less than all such claims or payments may
constitute a breach under Section 11(a)(3) hereof).
Notwithstanding the foregoing, any termination pursuant to
clauses (3) or (4) of this subsection (a) will be subject to
the following conditions. If such breach under clause (3)
or suspension or termination under clause (4) is capable of
being cured within ninety (90) days without, in the judgment
of the Trustee, adversely affecting the security provided to
the Noteholders by the Financed Student Loans and the
related Guarantee payments, Special Allowance Payments and
18
interest subsidy payments, the Servicer shall have the right
to cure such breach, within ninety (90) days of the date the
Servicer learns of such breach or receives notice of such
breach from the Issuer or the Trustee, prior to such
termination. If such breach is not capable of being cured
in the manner specified above, no termination pursuant to
clause (3) or (4) shall occur if, in the judgment of the
Trustee, such breach or suspension or termination will not
adversely affect the security provided the Noteholders by
the Financed Student Loans and the related Guarantee,
Special Allowance Payments and interest subsidy payments.
The Servicer agrees to promptly notify the Trustee and the
Issuer of any occurrence or condition which constitutes (or
which with the passage of time or the giving of notice or
both would constitute) an event permitting the termination
of this Agreement.
b. If this Servicing Agreement shall be terminated under
subsection (a) or if any Financed Student Loan is sold or
otherwise transferred by the Trustee (for the account and on
behalf of the Issuer) to another person, then any Financed
Student Loans then being serviced hereunder (or the
particular Financed Student Loans that are sold or otherwise
transferred, as the case may be) shall be transferred by the
Servicer to a servicing system of the Issuer, the Trustee or
their designee and (i) the Servicer shall promptly provide
the Issuer and the Trustee with every reasonable and
necessary assistance, including data processing support, to
timely transfer the Financed Student Loans and all
promissory notes and all records related to the Financed
Student Loans (including system records), together with all
necessary or proper assignments, transfers and documents of
authority, and (ii) the actual documented costs and expenses
of such transfer and of the conversion by the replacement
servicer of such Financed Student Loans to such replacement
servicing system shall be paid by the Servicer if such
termination is by the Issuer or the Trustee by reason of the
occurrence of an event described in Section 11 (a)(2),
(a)(3) or (a)(4). There shall be no
19
additional charge to the Issuer or the Trustee for the
Servicer's handling of assignments and transfers of Financed
Student Loans in the ordinary course.
c. If this Servicing Agreement shall be terminated under
subsection (a), the Servicer agrees that it shall continue
to perform all its obligations under this Servicing
Agreement until a successor servicer has been appointed or
until otherwise directed in writing by the Trustee.
12. Disposition of Files on Termination. Upon termination of this
Servicing Agreement all files and information held by the Servicer in connection
herewith (including computer information) will be turned over to the Issuer or
its designee in such form (which may include microfilm) as the Issuer may
reasonably request, upon reimbursement by the Issuer for reasonable costs,
except as otherwise specified in Section 11(b) above.
13. Servicer Not Agent. The Servicer is not, and shall not hold
itself out to be, the agent of the Issuer or the Trustee except for the specific
limited purposes set forth in this Servicing Agreement. Except as set forth in
this Servicing Agreement, the Issuer and the Trustee may not direct the methods
or means by which the Servicer shall accomplish its duties under this Servicing
Agreement.
14. Maintenance of Records.
a. The Servicer shall retain information and documentation
pertaining to the Financed Student Loans (including, but not
limited to, the information and documentation to be
delivered to the Servicer in accordance with Section 3
hereof) which comes into the physical custody or possession
of the Servicer as a result of this Servicing Agreement or
by the servicing of the Financed Student Loans by the
Servicer, unless and until the Trustee shall notify the
Servicer in writing to the contrary, whereupon such physical
custody and possession shall be transferred in the manner
directed by the Trustee. The Trustee may nevertheless elect
to retain such original documentation as it may, upon the
advice of Counsel, consider necessary or advisable to
protect its first security interest in the Financed Student
Loans.
20
b. The Servicer shall maintain original documentation and
system records for each Financed Student Loan, segregated
from any other loans or assets of the Servicer or any other
party and clearly labeled so as to identify the Financed
Student Loans as property of the Trustee (for the account
and on behalf of the Issuer) and as security for the Notes,
provided that the Servicer may combine original
documentation and system records for each consolidated
serial loan so long as the Servicer does so in a manner
which will ensure that each Financed Student Loan comprising
such a consolidated serial loan may be separately identified
and transferred or sold. The Servicer shall hold such
documentation and records subject to this Servicing
Agreement and the Indenture. From time to time the Servicer
shall, upon request by the Trustee or the Issuer and the
Trustee, submit such information and take such action as may
be reasonably required by the Trustee or the Issuer and the
Trustee, to assure that the Financed Student Loans are
maintained in a proper and secure condition.
c. Except as required by law and permitted by Section 6(t)
hereof, the Servicer shall maintain the confidentiality of
the information provided hereunder and shall not disclose or
in any way communicate such information to third parties
without the express written consent of the Issuer and the
Trustee. The Servicer shall provide a proper security
system for access to original documents and to its computer
system.
d. With respect to the original promissory note relating to
each Financed Student Loan, the obligations of the Servicer
shall be only to the Trustee during the time the Notes are
Outstanding (as defined in the Indenture) and the Issuer
shall have no authority during the time the Notes are
Outstanding to direct the Servicer in its activities with
respect to such original promissory notes.
15. Representations, Warranties and Agreements. The Servicer hereby
represents, warrants and agrees as follows:
a. The Servicer is duly organized and validly existing as a
corporation in good standing
21
under the laws of the State of South Dakota and is duly
qualified to conduct its business in good standing in the
State of South Dakota and is qualified to do business in all
other States where action by the Servicer is required to
carry out the obligations of the Servicer under this
Servicing Agreement.
b. The Servicer has the power and authority (corporate and
other) to own its assets and carry on its business as now
being conducted and to enter into, and perform in accordance
with the terms of, this Servicing Agreement.
c. The Servicer has, and its officers acting on its behalf
have, full legal authority to engage in the transactions
contemplated by this Servicing Agreement; the execution and
delivery of this Servicing Agreement, the consummation of
the transactions herein contemplated and compliance with the
terms, conditions and provisions of this Servicing Agreement
do not and will not conflict with or result in a breach of
any of the terms, conditions or provisions of the articles
of incorporation or bylaws of the Servicer or any agreement
or instrument to which the Servicer is a party or by which
it is bound, or constitute a default thereunder; the
Servicer is not a party to or bound by any agreement or
instrument or subject to any charter or other corporate
restriction or judgment, order, writ, injunction, decree,
law, rule or regulation which may materially and adversely
affect the ability of the Servicer to perform its
obligations under this Servicing Agreement, and this
Servicing Agreement constitutes a valid and binding
obligation of the Servicer enforceable against it in
accordance with its terms, and no consent, approval,
license, exemption or authorization of, or filing or
registration with, any government or governmental body (i)
which has not been made or obtained is required in
connection with the execution and delivery of this Servicing
Agreement, and (ii) which has not been or will not be made
or obtained is or will be required in connection with the
consummation of the transactions herein contemplated.
22
16. Notification to Borrowers. The parties hereto acknowledge and
agree that each Student Loan Purchase Agreement provides that the Lender which
is a party thereto shall notify each Borrower under each Financed Student Loan
of the assignment and transfer to the Trustee (but for the account and on behalf
of the Issuer) of the Lender's interest in such Financed Student Loan and shall
direct the Borrower to make all payments thereon directly to the Servicer until
otherwise notified by the Trustee. To the extent permitted by the Higher
Education Act and the Guarantee Program regulations, the Servicer may, on behalf
of the Issuer, waive this requirement of any Lender if the notice is sent by the
Servicer on behalf of such Lender.
17. Obligations to Forward Payments. The parties hereto acknowledge
and agree that each Student Loan Purchase Agreement provides that if the Lender
which is a party thereto is, after any Loan Purchase Date (as defined in the
Student Loan Purchase Agreement), the recipient of any funds, from whatever
source received, which constitute payment of principal, interest or Special
Allowance Payments accrued with respect to any Financed Student Loan for any
period subsequent to such Loan Purchase Date, such Lender shall promptly remit,
or cause to be remitted, all such funds to the Servicer or in such manner as the
Trustee may otherwise direct. If any such funds shall he received by the
Trustee or by a person to whom the Trustee has directed such funds to be
remitted, the Trustee shall furnish the Servicer with prompt advice as to the
receipt of any such funds.
18. Servicing Fees; No Petition. The Issuer shall pay, or shall
cause the Trustee to pay, from funds available for such purpose under the
Indenture to the Servicer, for the performance of the Servicer's functions
(including, without limitation, management and administrative functions) under
this Servicing Agreement, a monthly fee in an amount each month equal to
0.104167% of the outstanding principal balance of all Financed Student Loans as
of the last day of the immediately preceding month. Such fee shall be paid to
the Servicer on a monthly basis within fifteen (15) days of receipt by the
Trustee, of an itemized written monthly billing statement from the Servicer. If
the Servicer believes that it is necessary to increase the monthly fee payable
hereunder, it shall provide a written request to the Issuer and the Trustee of
its need for an increase in such fee, together with all information required
under the Indenture for the Trustee to approve an increase in the fees payable
hereunder. The Servicer acknowledges that such fee shall not be increased
unless the conditions for increasing such fees under the Indenture have been
satisfied.
The Servicer acknowledges that the Issuer and the Trustee contemplate
paying all servicing fees payable under this Servicing Agreement solely from
funds available for such purpose in the Administration Fund created under the
Indenture, which funds are primarily dependent upon collection by the Servicer
and receipt by
23
the Trustee of payments with respect to the Financed Student Loans. The Servicer
covenants and agrees to continue to be bound by the terms and provisions of this
Servicing Agreement relating to the Financed Student Loans in all respects, and
to perform for a period of 120 days its obligations hereunder, regardless of the
receipt or non-receipt on a timely basis by it of any payments in respect of
servicing fees.
The Servicer, by entering into this Servicing Agreement, covenants and
agrees that it will not at any time institute against the Issuer, or join in any
institution against the Issuer of, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings under any United
States Federal or state bankruptcy or similar law in connection with any
obligation relating to this Servicing Agreement.
19. Cooperation. Each party covenants and agrees to fully cooperate
with the other parties hereto to facilitate the transactions contemplated
hereunder and by the Student Loan Purchase Agreements and the Indenture.
20. Payment of Expenses. Each party to this Servicing Agreement
shall pay its own expenses incurred in connection with the preparation,
execution and delivery of this Servicing Agreement, including, but not limited
to, the fees and expenses of legal counsel.
21. Administrative Functions of the Servicer. The Issuer, the
Trustee and the Servicer agree that the Servicer shall perform the following
administrative functions on behalf of the Issuer as part of its responsibilities
under this Agreement.
a. Provide all necessary personnel, facilities, equipment,
forms and supplies for operating the Program in accordance
with Sections 5.5 through 5.8 of the Indenture;
b. Disseminate information on the Program to Lenders and to
student financial aid officers in Eligible Institutions and
to other persons as necessary;
c. Control and account for the receipt and expenditure of the
Issuer's funds in accordance with the resolutions of the
Issuer's board of directors and the Indenture and maintain
accurate and complete records on all aspects of the Program,
which records shall be available for inspection at any time
by any director or officer of the Issuer and by auditors
employed by the Issuer;
24
d. Review all statements and reports to the Issuer required of
the Trustee, the Servicer and the Lender in accordance with
the provisions of the Indenture, this Servicing Agreement
and the Student Loan Purchase Agreements; and
e. Prepare and submit to the Trustee on or before the 25th day
of each month (and if such day is not a Business Day, on the
next succeeding Business Day), the monthly reports required
to be delivered to the Noteholders pursuant to Section 5.23
of the Indenture, the form of which is included as Exhibit A
hereto. The Servicer also shall (i) determine the Net Loan
Rate and notify the Trustee and the Auction Agent thereof at
the times required by the Indenture, and (ii) prepare for
filing, and provide such other assistance as is required by
the Issuer to file, any other reports required to be filed
by the Issuer under the Indenture or under any applicable
law, including without limitation, the Higher Education Act
and any federal and state securities laws.
22. Servicer as Bailee
a. The Servicer, in holding Loan Documents relating to the
Financed Student Loans, holds such Loan Documents as bailee
for and on behalf of the Trustee.
b. No Loan Documents held by the Servicer on behalf of the
Trustee hereunder shall be released or delivered to the
Issuer or any other person (other than claim filings in the
ordinary course with the Guaranty Agencies and sales or
transfers permitted under Section 4.2 of the Indenture)
without the prior written consent of the Trustee.
c. The Servicer shall maintain all Loan Documents in a manner
which clearly identifies them as being held by the Servicer
as bailee for and on behalf of the Trustee and not for or on
behalf of the Issuer or any other person.
d. No assignment or purported assignment by the Issuer or any
other person (other than the Trustee) of any Loan Documents
held by the Servicer on behalf of the Trustee hereunder
25
shall be recognized by the Servicer, and the Servicer shall
provide immediate notice to the Trustee upon receiving
notice of any such assignment or purported assignment.
e. The Servicer hereby represents, warrants and acknowledges
that the Servicer, in serving as bailee under this Section,
is acting exclusively as the bailee and agent of the
Trustee, and not of the Issuer or any other person, with
respect to the Loan Documents.
f. The Servicer hereby waives any lien which the Servicer might
have pursuant to statute or otherwise available at law or in
equity on the Financed Student Loans and the Loan Documents
held by the Servicer on behalf of the Trustee hereunder,
including all monies and proceeds derived therefrom or
relating thereto.
23. Plan for Doing Business of Original Issuer. In providing
administrative services on behalf of the Issuer hereunder, the Servicer agrees
to operate the Program in compliance with the Plan for Doing Business. The
Servicer shall comply with the Plan for Doing Business while the Plan for Doing
Business is required to be in effect, so that the receipt of Special Allowance
Payments by the Trustee with respect to Financed Student Loans will not be
adversely affected. Such compliance shall include, without limitation,
satisfying the assurances of the Original Issuer contained under the headings of
the Plan for Doing Business relating to Sections 438(e)(2)(A), (C), (D) (which
includes Section 438(e)(3) of the Higher Education Act), (E) and (F) of the
Higher Education Act. The Servicer shall advise the Original Issuer if any
amendments to the Plan for Doing Business are required from time to time, and
shall assist the Original Issuer in preparing and filing any such amendments to
the Plan for Doing Business.
24. Indemnification. The Servicer shall indemnify and hold
harmless the Issuer and the Trustee from and against any loss, cost, damage or
expense, including reasonable attorney's fees, to the extent that such loss,
cost, damage or expense arises out of the Servicer's failure to perform its
obligations under this Agreement. In addition, and without limiting the
generality of the foregoing, the Servicer shall defend and indemnify the Issuer
and the Trustee against, and hold each harmless from, all claims, losses,
liabilities and expenses (including reasonable attorneys' fees) arising from or
in connection with:
a. any claim of infringement of any patent, trade secret,
copyright, trademark, service xxxx, trade name or other
proprietary right alleged to have occurred as a result of
the
26
performance of services hereunder by the Servicer; or
b. any claim by an employee of the Servicer arising in
consequence of, or relating to, the employee's employment by
the Servicer.
25. Miscellaneous.
a. Any material written communication received at any time by
the Issuer or the Trustee with respect to a Financed Student
Loan or the Borrower under such a Financed Student Loan
shall be immediately transmitted by the Issuer or the
Trustee, as the case may be, to the Servicer. Such
communications shall include but not be limited to letters,
notices of death or disability, adjudications of bankruptcy
and like documents, and forms requesting forbearance,
deferment of repayment or loan cancellations.
b. This Servicing Agreement shall be governed by the laws of
the State of South Dakota.
c. All covenants and agreements herein contained shall extend
to and be obligatory upon all successors and assigns of the
respective parties hereto.
d. This Servicing Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and
all of which shall be deemed to constitute but one and the
same instrument.
e. If any provisions of this Servicing Agreement shall be held,
or deemed to be, or shall, in fact, be inoperative or
unenforceable as applied in any particular situation, such
circumstance shall not have the effect of rendering any
other provision or provisions herein contained invalid,
inoperative or unenforceable to any extent whatsoever. The
invalidity of any one or more phrases, sentences, clauses or
paragraphs herein contained shall not affect the remaining
portions of this Servicing Agreement or any part hereof.
f. All notices, requests, demands or other instruments which
may or are required to be
27
given by any party to another party, shall be in writing,
and each shall be deemed to have been properly given when
served personally on an officer of the party to which such
notice is to be given, or upon expiration of a period of 48
hours (excluding weekends and holidays) from and after the
postmark thereof when mailed postage prepaid by registered
or certified mail, requesting return receipt, addressed as
follows:
If intended for the Issuer:
Education Loans Incorporated
Xxxxx 000
000 Xxxxx Xxxxxx Xxxxxxxxx
Xxxxxxxx, Xxxxx Xxxxxx 00000
Attention: President
or, if intended for the Trustee:
First Bank National Association
X.X. Xxx 0000
000 Xxxxx Xxxx Xxxxxx
Xxxxx Xxxxx, Xxxxx Xxxxxx 00000-0000
Attention: Corporate Trust Department
or, if intended for the Servicer:
Student Loan Finance Corporation
000 Xxxxx Xxxxxx Xxxxxxxxx
Xxxxxxxx, Xxxxx Xxxxxx 00000
Attention: President
Any party may change the address to which subsequent notices
are to be sent to it by notice to the others given as
aforesaid, but any such notice of change, if sent by mail,
shall not be effective until the fifth business day after it
is mailed.
g. This Servicing Agreement may not be terminated by any party
hereto except in the manner and with the effect herein
specifically provided.
h. Time is of the essence in this Servicing Agreement.
i. No remedy by the terms of this Servicing Agreement conferred
upon or reserved to the Trustee or the Issuer is intended to
be
28
exclusive of any other remedy, but each and every such
remedy shall be cumulative and in addition to every other
remedy given under this Servicing Agreement or existing at
law or in equity or by statute on or after the date of this
Servicing Agreement including, without limitation, the right
to such equitable relief by way of injunction, mandatory or
prohibitory, to prevent the breach or threatened breach of
any of the provisions of this Servicing Agreement or to
enforce the performance hereof.
j. This Servicing Agreement has been made and entered into not
only for the benefit of the Issuer, the Trustee and the
Servicer, but also for the benefit of all holders of
Outstanding Notes, and its provisions may be enforced not
only by the parties to this Servicing Agreement but also by
the holders of Outstanding Notes in the manner and to the
extent such holders may enforce provisions of the Indenture.
The Servicer specifically acknowledges the rights of the
Trustee pursuant to Section 6.3 of the Indenture.
k. Any information required by this Servicing Agreement to be
provided by the Servicer with respect to a Financed Student
Loan may in the case of Financed Student Loans that have
been consolidated be provided with respect to the
consolidated Financed Student Loan, provided that such
information at a minimum meets the requirements of the
Secretary of Education and the Guarantee Agency, as the case
may be, for the collection by the Trustee of interest
subsidy payments, Special Allowance Payments, and claim
payments, and provides sufficient information as requested
by the Issuer to enable the Issuer to comply with any
arbitrage requirements under the Internal Revenue Code of
1986, as amended, and the regulations thereunder.
l. The Servicer specifically acknowledges that the Issuer will
be making representations and warranties regarding the
Student Loans to be Financed as part of the proposed public
offering of the Notes based in part on the accuracy of the
Servicer's representations and warranties in this Servicing
Agreement. The Servicer agrees to cooperate with the Issuer
29
and to furnish all information in its possession appropriate
for inclusion in the Issuer's Prospectus. The Servicer
agrees to indemnify and save the Trustee, the Issuer and the
underwriters for the Notes harmless of, from and against any
and all loss, cost, damage or expense, including reasonable
attorneys' fees, incurred by reason of any breach of the
Servicer's warranties or representations hereunder or any
false or misleading representations of the Servicer or any
failure to disclose any matter which makes the warranties
and representations herein misleading or any inaccuracy in
any information furnished by the Servicer in connection
herewith.
30
IN WITNESS WHEREOF, the parties have hereunto set their hands by their
officers thereunto duly authorized and executed this Servicing Agreement as of
the day and year first above written.
EDUCATION LOANS INCORPORATED
BY:_________________________________________
Its __________
STUDENT LOAN FINANCE CORPORATION
BY:_________________________________________
Its President
FIRST BANK NATIONAL ASSOCIATION
BY:_________________________________________
Its:________________________________________
31
EXHIBIT A
Student Loan Finance Corporation
Noteholders' Statement Pursuant to Section 5.23 of the Indenture and Section 21
of the Servicing Agreement (Unaudited)
Education Loans Incorporated
Student Loan Asset-Backed Callable Notes, Series 1997-1
Report for the Month Ended __________, ____ [sample for July 31, 1997]
I. Noteholder Information
A. Identification of Notes
Series Description Cusip # Due Date
---------------------------------------------------------------------------
1997-1A Senior Tax Exempt Auction Rate Notes... #####___# June 1, 2020
1997-1B Senior Tax Exempt Auction Rate Notes... #####___# June 1, 2020
1997-1C Senior Tax Exempt Auction Rate Notes... #####___# June 1, 2020
1997-1D Senior Tax Exempt Auction Rate Notes... #####___# June 1, 2020
1997-1E Senior Tax Exempt Auction Rate Notes... #####___# June 1, 2020
1997-1F Senior Tax Exempt Fixed Rate Notes..... #####___# June 1, 2010
1997-1F Senior Tax Exempt Fixed Rate Notes..... #####___# June 1, 2020
1997-1G Senior Taxable Auction Rate Notes...... #####___# June 1, 2020
1997-1H Senior Taxable Auction Rate Notes...... #####___# June 1, 2020
1997-1I Senior Taxable LIBOR Rate Notes........ #####___# June 1, 2002
1997-1J Senior Taxable LIBOR Rate Notes........ #####___# June 1, 2020
1997-1K Subordinate Tax Exempt Fixed Rate Notes #####___# June 1, 2020
1997-1L Subordinate Taxable LIBOR Rate Notes... #####___# June 1, 2020
B. Notification of Prepayments of LIBOR Rate Notes
Determination Date - Aug. 12, 1997 Record Date - Aug. 31, 1997 Prepayment Date - Sept. 1, 1997
---------------------------------- --------------------------- -------------------------------
Aggregate Payments
-------------------------------------------------------------------- Principal Applicable
Interest on Carry- Carry-Over Amount After Interest Rate
Series Principal Interest Over Amounts Amounts Total Prepayment On Notes
----------------------------------------------------------------------------------------------------------------------
1997-1I $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 0.0000%
1997-1J 0.00 0.00 0.00 0.00 0.00 0.00 0.0000
1997-1L 0.00 0.00 0.00 0.00 0.00 0.00 0.0000
-----------------------------------------------------------------------------------------------------
Total $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
=====================================================================================================
Payment Per $100,000 Unit
-------------------------------------------------------------------- Principal Principal
Interest on Carry- Carry-Over Amount After Factor After
Series Principal Interest Over Amounts Amounts Total Prepayment Prepayment
----------------------------------------------------------------------------------------------------------------------
1997-1I $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 0.0000000
1997-1J 0.00 0.00 0.00 0.00 0.00 0.00 0.0000000
1997-1L 0.00 0.00 0.00 0.00 0.00 0.00 0.0000000
32
C. Principal Outstanding - July, 1997
----------------------------------
Principal Principal Principal
Outstanding, Payments Outstanding
Series Start of Month During Month End of Month
------------------------------------------------------
1997-1A $0.00 $0.00 $0.00
1997-1B 0.00 0.00 0.00
1997-1C 0.00 0.00 0.00
1997-1D 0.00 0.00 0.00
1997-1E 0.00 0.00 0.00
1997-1F:
6-1-10 0.00 0.00 0.00
6-1-20 0.00 0.00 0.00
1997-1G 0.00 0.00 0.00
1997-1H 0.00 0.00 0.00
1997-1I 0.00 0.00 0.00
1997-1J 0.00 0.00 0.00
1997-1K 0.00 0.00 0.00
1997-1L 0.00 0.00 0.00
-----------------------------------------
Totals $0.00 $0.00 $0.00
=========================================
D. Accrued Interest Outstanding - July, 1997
-----------------------------------------
Accrued Interest Interest Interest Accrued Interest Interest
Outstanding, Accrued Payments Outstanding, Rate As Of
Series Start of Month During Month During Month End of Month End of Month Net Loan Rate
--------------------------------------------------------------------------------------------------------
1997-1A $0.00 $0.00 $0.00 $0.00 0.0000%
1997-1B 0.00 0.00 0.00 0.00 0.0000
1997-1C 0.00 0.00 0.00 0.00 0.0000
1997-1D 0.00 0.00 0.00 0.00 0.0000
1997-1E 0.00 0.00 0.00 0.00 0.0000
1997-1F:
6-1-10 0.00 0.00 0.00 0.00 0.0000
6-1-20 0.00 0.00 0.00 0.00 0.0000
1997-1G 0.00 0.00 0.00 0.00 0.0000 0.0000%
1997-1H 0.00 0.00 0.00 0.00 0.0000 0.0000
1997-1I 0.00 0.00 0.00 0.00 0.0000 0.0000
1997-1J 0.00 0.00 0.00 0.00 0.0000 0.0000
1997-1K 0.00 0.00 0.00 0.00 0.0000
1997-1L 0.00 0.00 0.00 0.00 0.0000 0.0000
-----------------------------------------------------------
Totals $0.00 $0.00 $0.00 $0.00
===========================================================
33
E. Noteholders' Interest Carry-Over Amounts - July, 1997
Carry-Over Carry-Over
Amounts, Additions Payments Amounts,
Series Start of Month During Month During Month End of Month
--------------------------------------------------------------------------------
1997-1G $0.00 $0.00 $0.00 $0.00
1997-1H 0.00 0.00 0.00 0.00
1997-1I 0.00 0.00 0.00 0.00
1997-1J 0.00 0.00 0.00 0.00
1997-1L 0.00 0.00 0.00 0.00
-----------------------------------------------------------------
Totals $0.00 $0.00 $0.00 $0.00
=================================================================
F. Noteholders' Accrued Interest on Carry-Over Amounts - July, 1997
Accrued Interest Interest Accrued
Interest, Accrued Payments Interest,
Series Start of Month During Month During Month End of Month
--------------------------------------------------------------------------------
1997-1G $0.00 $0.00 $0.00 $0.00
1997-1H 0.00 0.00 0.00 0.00
1997-1I 0.00 0.00 0.00 0.00
1997-1J 0.00 0.00 0.00 0.00
1997-1L 0.00 0.00 0.00 0.00
----------------------------------------------------------------
Totals $0.00 $0.00 $0.00 $0.00
================================================================
II. Fund Information
A. Reserve Fund - July, 1997
Tax Exempt Taxable Total
-----------------------------
Balance, Start of Month.......................... $0.00 $0.00 $0.00
Additions During Month........................... 0.00 0.00 0.00
Withdrawals During Month......................... 0.00 0.00 0.00
-----------------------------
Balance, End of Month............................ $0.00 $0.00 $0.00
=============================
B. Acquisition Fund (Unexpended Portion) - July, 1997
Tax Exempt Taxable Total
-----------------------------
Balance, Start of Month.......................... $0.00 $0.00 $0.00
Withdrawals for Acquisition of Eligible Loans:
Principal Acquired............................. 0.00 0.00 0.00
Premiums and Related Acquisition Costs......... 0.00 0.00 0.00
-----------------------------
Balance, End of Month............................ $0.00 $0.00 $0.00
=============================
34
III. Student Loan Information
A. Student Loan Principal Outstanding - July, 1997
Tax Exempt Taxable Total
----------------------------------
Balance, Start of Month..................... $ 0.00 $ 0.00 $ 0.00
Loans Purchased/Originated.................. 0.00 0.00 0.00
Capitalized Interest........................ 0.00 0.00 0.00
Less: Principal Payments Received.......... (0.00) (0.00) (0.00)
----------------------------------
Balance, End of Month....................... $ 0.00 $ 0.00 $ 0.00
==================================
B. Composition of Student Loan Portfolio as of July 31, 1997
Amount
--------
Aggregate Outstanding Principal Balance........................... $0.00
Number of Borrowers............................................... 0
Average Outstanding Principal Balance per Borrower................ $ 0
Number of Loans (Promissory Notes)................................ 0
Average Outstanding Principal Balance Per Loan.................... $ 0
Repayment Status Loans:
Weighted Average Remaining Term (Months)....................... 0
Weighted Average Payments Received (Months).................... 0
Weighted Average Interest Rate.................................... 0.00%
C. Distribution of Student Loan Portfolio by Loan Type as of July 31, 1997
Outstanding Percent By
Number Principal Outstanding
Loan Types Of Loans Balance Balance
--------------------------------------------------------------------------------
Xxxxxxxx - Subsidized................ 0 $1.00 100.0%
Xxxxxxxx - Unsubsidized.............. 0 0.00 0.0
Xxxxxxxx - Nonsubsidized............. 0 0.00 0.0
PLUS................................. 0 0.00 0.0
SLS.................................. 0 0.00 0.0
Consolidation........................ 0 0.00 0.0
-------------------------------------
Total................................ 0 $1.00 100.0%
=====================================
D. Distribution of Student Loan Portfolio by Interest Rate as of July 31, 1997
Outstanding Percent By
Number Principal Outstanding
Interest Rate Of Loans Balance Balance
--------------------------------------------------------------------------------
Less Than 7.00%................ 0 $1.00 100.0%
7.00% to 7.49%................. 0 0.00 0.0
7.50% to 7.99%................. 0 0.00 0.0
8.00% to 8.49%................. 0 0.00 0.0
8.50% to 8.99%................. 0 0.00 0.0
9.00% to 9.49%................. 0 0.00 0.0
9.50% or Greater............... 0 0.00 0.0
-------------------------------------------
Total.......................... 0 $1.00 100.0%
===========================================
35
E. Distribution of Student Loan Portfolio by School Type as of July 31, 1997
Outstanding Percent By
Number Principal Outstanding
School Type Of Loans Balance Balance
--------------------------------------------------------------------------------
Under 4 Year............ 0 $1.00 100.0%
4 and 5 Year............ 0 0.00 0.0
Proprietary............. 0 0.00 0.0
Consolidation........... 0 0.00 0.0
Other/Unknown........... 0 0.00 0.0
--------------------------------------------------
Total................... 0 $1.00 100.0%
==================================================
F. Distribution of Student Loan Portfolio by Borrower Payment Status as of
July 31, 1997
Outstanding Percent By
Number Principal Outstanding
Borrower Payment Status Of Loans Balance Balance
--------------------------------------------------------------------------------
School................... 0 $0.00 0.0%
Grace.................... 0 0.00 0.0
Repayment................ 0 1.00 100.0
Deferment................ 0 0.00 0.0
Forbearance.............. 0 0.00 0.0
Claims................... 0 0.00 0.0
--------------------------------------------
Total.................... 0 $1.00 100.0%
============================================
G. Distribution of Repayment Status Loans by Year of Repayment as of July 31,
1997
Outstanding Percent By
Number Principal Outstanding
Year of Repayment Of Loans Balance Balance
--------------------------------------------------------------------------------
First Year............... 0 $1.00 100.0%
Second Year.............. 0 0.00 0.0
Third Year............... 0 0.00 0.0
Fourth Year and Greater.. 0 0.00 0.0
------------------------------------------------
Total.................... 0 $1.00 100.0%
================================================
36
H. Distribution of Repayment Status Loans by Remaining Term as of July 31,
1997
Outstanding Percent By
Number Principal Outstanding
Remaining Term Of Loans Balance Balance
--------------------------------------------------------------------------------
1 to 12 Months........... 0 $1.00 100.0%
13 to 24 Months.......... 0 0.00 0.0
25 to 36 Months.......... 0 0.00 0.0
37 to 48 Months.......... 0 0.00 0.0
49 to 60 Months.......... 0 0.00 0.0
61 to 72 Months.......... 0 0.00 0.0
73 to 84 Months.......... 0 0.00 0.0
85 to 96 Months.......... 0 0.00 0.0
97 to 108 Months......... 0 0.00 0.0
109 to 120 Months........ 0 0.00 0.0
121 to 180 Months........ 0 0.00 0.0
181 to 240 Months........ 0 0.00 0.0
241 to 300 Months........ 0 0.00 0.0
Over 300 Months.......... 0 0.00 0.0
--------------------------------------------
Total.................... 0 $1.00 100.0%
============================================
I. Distribution of Student Loan Portfolio by Delinquency Status as of July 31,
1997
Percent by Outstanding Balance
-------------------------------
Outstanding Repayment,
Number Principal Deferment, All Loans in
Delinquency Status Of Borrowers Balance Forbearance and Portfolio
Claims Status
Loans Only
----------------------------------------------------------------------------------------
31 - 60 Days................ 0 $1.00 100.0% 100.0%
61 to 90 Days............... 0 0.00 0.0% 0.0%
91 to 120 Days.............. 0 0.00 0.0% 0.0%
121 to 180 Days............. 0 0.00 0.0% 0.0%
181 to 270 Days............. 0 0.00 0.0% 0.0%
Over 270 Days............... 0 0.00 0.0% 0.0%
Claims Filed, Not Yet Paid.. 0 0.00 0.0% 0.0%
----------------------------------------------------------
Total....................... 0 $1.00 100.0% 100.0%
==========================================================
J. Distribution of Student Loan Portfolio by Guarantee Status as of July 31,
1997
Outstanding Percent By
Number Principal Outstanding
Guarantee Status Of Loans Balance Balance
--------------------------------------------------------------------------------
Guaranteed 100%....... 0 $1.00 100.0%
Guaranteed 98%........ 0 0.00 0.0%
Unguaranteed.......... 0 0.00 0.0%
-----------------------------------------------
Total................. 0 $1.00 100.0%
===============================================
37
K. Distribution of Student Loan Portfolio by Guarantee Agency as of July 31,
1997
Outstanding Percent By
Number Principal Outstanding
Guarantee Agency Of Loans Balance Balance
--------------------------------------------------------------------------------
EAC.......................... 0 $1.00 100.0%
PHEAA........................ 0 0.00 0.0%
Other Guarantee Agencies..... 0 0.00 0.0%
Unguaranteed................. 0 0.00 0.0%
---------------------------------------------
Total........................ 0 $1.00 100.0%
=============================================
L. Distribution of Student Loan Portfolio by Range of Principal Balance as of
July 31, 1997
Outstanding Percent By
Number Principal Outstanding
Principal Balance Range Of Borrowers Balance Balance
--------------------------------------------------------------------------------
Less Than $1,000......... 0 $1.00 100.0%
$1,000 to $1,999......... 0 0.00 0.0
$2,000 to $2,999......... 0 0.00 0.0
$3,000 to $3,999......... 0 0.00 0.0
$4,000 to $4,999......... 0 0.00 0.0
$5,000 to $5,999......... 0 0.00 0.0
$6,000 to $6,999......... 0 0.00 0.0
$7,000 to $7,999......... 0 0.00 0.0
$8,000 to $8,999......... 0 0.00 0.0
$9,000 to $9,999......... 0 0.00 0.0
$10,000 to $10,999....... 0 0.00 0.0
$11,000 to $11,999....... 0 0.00 0.0
$12,000 to $12,999....... 0 0.00 0.0
$13,000 to $13,999....... 0 0.00 0.0
$14,000 to $14,999....... 0 0.00 0.0
$15,000 or Greater....... 0 0.00 0.0
-------------------------------------------------
Total.................... 0 $1.00 100.0%
=================================================
38
M. Distribution of Student Loan Portfolio by Borrowers' Address as of July 31,
1997 (Based on Address as of August 4, 1997)
Outstanding Percent By
Number Principal Outstanding
State of Borrowers' Address Of Loans Balance Balance
--------------------------------------------------------------------------------
South Dakota................. 0 $1.00 100.0%
Minnesota.................... 0 0.00 0.0
North Dakota................. 0 0.00 0.0
Iowa......................... 0 0.00 0.0
Nebraska..................... 0 0.00 0.0
Colorado..................... 0 0.00 0.0
Washington................... 0 0.00 0.0
Oregon....................... 0 0.00 0.0
California................... 0 0.00 0.0
Texas........................ 0 0.00 0.0
Wisconsin.................... 0 0.00 0.0
Illinois..................... 0 0.00 0.0
Idaho........................ 0 0.00 0.0
Arizona...................... 0 0.00 0.0
Alaska....................... 0 0.00 0.0
Others Less Than 1% Each..... 0 0.00 0.0
---------------------------------------------
Total........................ 0 $1.00 100.0%
=============================================
39
N. Fees and Expenses Accrued For/Through July, 1997
For The 1
Month Ended
July, 1997 July 31, 1997
----------------------------------
Servicing Fees........................ $0.00 $0.00
Indenture Trustee Fees................ 0.00 0.00
Broker/Dealer Fees.................... 0.00 0.00
Auction Agent Fees.................... 0.00 0.00
Other Permitted Expenses.............. 0.00 0.00
----------------------------------
Total................................. $0.00 $0.00
==================================
O. Principal Write-Offs and Recoveries For/Through July, 1997
For The 1
Month Ended
July, 1997 July 31, 1997
----------------------------------
Principal Write-Offs:
2% Losses on 98% Claims............ $0.00 $0.00
Other Write-Offs................... 0.00 0.00
Recoveries............................ 0.00 0.00
----------------------------------
Net Write-Offs........................ $0.00 $0.00
==================================
P. Ratio of Assets to Liabilities as of July 31, 1997
Amount
--------
Total Indenture Assets................ $ 1.00
Total Indenture Liabilities........... 1.00
--------
Ratio................................. 100.0%
========
40
