exv10w20



 







EXHIBIT 10.20




Federal FFEL










Origination/Servicing Agreement




Consolidation Loan Funding, LLC




March 1, 2002




AFSA Data Corporation




 









 








TABLE OF CONTENTS

(continued)




	 	 	 	 	 	 	 
	 	 	 	 	Page
	1.

	 	AFSA OBLIGATIONS
	 	 	1	 
	2.

	 	LENDER OBLIGATIONS
	 	 	4	 
	3.

	 	BANKING
	 	 	4	 
	4.

	 	CHARGES
	 	 	5	 
	5.

	 	TERM AND TERMINATION
	 	 	6	 
	6.

	 	EXAMINATION OF RECORDS
	 	 	7	 
	7.

	 	EXCLUSION OF WARRANTIES AND LIMITATIONS OF AFSA’S LIABILITY
	 	 	7	 
	8.

	 	INDEMNIFICATION
	 	 	9	 
	9.

	 	CONTINGENCY PLAN
	 	 	10	 
	10.

	 	FINANCIAL AND ADMINISTRATIVE RESPONSIBILITY
	 	 	10	 
	11.

	 	AUDITS
	 	 	11	 
	12.

	 	WAIVER OF JURY TRIAL
	 	 	11	 
	13.

	 	MISCELLANEOUS
	 	 	11	 
	14.

	 	AFSA REPRESENTATIONS AND WARRANTIES
	 	 	14	 
	Signature Page	 	 	15	 
	 
	 	 	 	 	 	 
	EXHIBIT A

EXHIBIT B

EXHIBIT C

EXHIBIT D

EXHIBIT E

EXHIBIT E-1

EXHIBIT F

	 	ORIGINATION SERVICES

POST-ORIGINATION SERVICES

SERVICING FEES

NOTE EXAMINATION ELECTION

BLANKET CURE TERMS

CURE FEES

PLUS CREDIT REVIEW SERVICES TERMS
	 	 	16

20

22

26

28

31

32	 






-i-









 










THIS AGREEMENT is made and entered into as of March 1, 2002 by and between AFSA Data Corporation
(“AFSA”) and Consolidation Loan Funding, LLC, the beneficial owner (but not the legal titleholder)
of certain Student Loans (“LENDER”) at Long Beach, California, with reference to the following
facts:





	A.  	AFSA has developed and is marketing a computerized origination, billing, record keeping,
accounting, reporting and loan management service designated as the “Guaranteed Student Loan
Processing Service” (the “Service”).
	 
	B.  	LENDER desires AFSA to assist it in managing its Federal Stafford (SSL), Federal PLUS and
Federal Consolidation loans through the use of the Service.





Now, Therefore, AFSA and LENDER hereby agree as follows:





	1.  	AFSA Obligations.






	A.  	AFSA shall service LENDER’s Federal Stafford (SSL), Federal PLUS and Federal
Consolidation loan accounts as provided herein, and any similar student loan accounts
as may be mutually agreed upon (the “Accounts”). For the purposes of this Agreement,
an “Account” shall mean one or more loans having the same holder, borrower (and student
in the case of a Federal PLUS loan), loan program, Guarantor, maturity date and
repayment terms. Stafford loans, whether subsidized or unsubsidized, shall be
considered to have been made under the same loan program.
	 
	B.  	AFSA shall perform all services and duties customary to the servicing of
student loans in accordance with generally established procedures and industry
standards and practices, including specifically the services and duties specified in
Exhibit A (Origination Services), Exhibit B (Post-Origination Services) and Exhibit F
(PLUS Credit Review Services Terms) attached to this Agreement. Such services and
duties shall be performed with respect to each Account until such Account is paid in
full (whether by the borrower or through the payment of Guarantee benefits or
otherwise) or deconverted from AFSA’s servicing system in accordance with this
Agreement, or this Agreement is otherwise terminated in accordance with Section 5
below.
	 
	C.  	AFSA shall perform its services and duties hereunder in material compliance
with, and as required by, (i) the Higher Education Act, (ii) the applicable Guarantor
Regulations, (iii) the applicable Contract of Insurance or Guarantee, and (iv) any
other laws and regulations governing the servicing of the Accounts, and the foregoing
requirements shall determine the general scope of services hereunder. For purposes of
this Agreement, the “Higher Education Act” means Part B of Title IV of the Higher
Education Act of 1965, as amended from time to time, and the rules and regulations of
the U.S. Department of Education or any successor thereto (the “Department”)
promulgated thereunder, as amended from time to time, and “Guarantor Regulations” means
any manual of policies and procedures to be followed under the guarantee program
operated by applicable




1









 












	 	   	guarantor of the loans involved (the “Guarantor”), as well as all supplements,
amendments, bulletins and updates, and all other written or unwritten policies,
procedures, rules and regulations promulgated or adopted, formally or informally, by
such Guarantor relating to its guarantee program or the administration,
interpretations, claims review or enforcement policies, procedures and practices
thereunder, as the same are reasonably interpreted and understood by AFSA from time
to time.






	 	D.  	Within a reasonable period after delivery of the loan files to AFSA (generally
within 30 days unless otherwise expressly agreed), AFSA shall (i) establish and
maintain records received by AFSA with respect to each Account and complete records of
AFSA’s servicing of the Account from the date such servicing commenced, (ii) maintain
possession of original promissory notes, loan applications and other required
supplements that it receives from LENDER, stored in a fire-rated, secure vault facility
located at 2277 E. 220th Street, Long Beach, California or 501 Bleecker Street, Utica,
New York, (iii) otherwise commence servicing the Accounts relating to such loan
documents, and (iv) microfilm or otherwise reproduce the promissory notes, loan
applications, and other required supplements and cause such reproductions to be stored
at Brambles Information Management Corporation or any equivalent facility.
	 
	 	E.  	If requested in writing by LENDER, for any loans not originated by AFSA for
LENDER hereunder, AFSA shall make a Full Note Examination or an Abbreviated Note
Examination of the original promissory note and other loan documentation for each
Account following receipt by AFSA for servicing, as requested by LENDER on Exhibit D
(Note Examination Election). Following such initial election, LENDER may from time to
time with AFSA’s consent, which consent shall not be unreasonably withheld, select a
different loan examination option for a particular set of loans or for all subsequent
loans by making a new election with respect thereto or by other appropriate written
notice to AFSA.
	 
	 	F.  	By undertaking the loan examination and other duties provided above, AFSA
assumes no responsibility for the origination, disbursement, documentation or prior
servicing of any loan (except to the extent that AFSA performed or was obligated to
perform any of these services), it being understood and agreed that the originator
and/or prior servicer (if applicable) shall be responsible for all aspects of each loan
prior to the date on which AFSA is required to commence servicing of such loan
hereunder. AFSA shall not be liable in the overall conduct of the loan examination for
the entire portfolio being purchased by LENDER for failure, despite its reasonable
efforts, to detect any prior defect or note any exception during the loan examination
process. In the event of any such defect or exception, LENDER shall exhaust all
recourse and remedies against the original lender, prior servicer, or other responsible
parties before asserting any claim against AFSA related thereto. The microfilm or
other reproduction of each borrower file made by AFSA following delivery to AFSA for
servicing shall be




2









 












	 	   	prima facie evidence of the record of loan documentation received and reviewed by
AFSA.
	 
	 	G.  	If requested in writing by LENDER, AFSA shall provide cure services for loans
that are unguaranteed due to non-AFSA errors, as provided in Exhibit E (Blanket Cure
Terms).
	 
	 	H.  	If AFSA reasonably determines that any Account has been rejected by a Guarantor
and cannot or is not to be cured hereunder, LENDER is responsible for providing
direction to AFSA upon AFSA’s written request for the disposition of such Account,
which shall remain on AFSA’s servicing system pending such direction from LENDER. If
LENDER instructs AFSA to deconvert any Accounts, AFSA shall promptly provide the
following deconversion services:






	 	(1)  	Any files related to Accounts to be returned to LENDER shall be
assembled in substantially the manner in which they were received by AFSA,
including any pertinent documents or information received or created by AFSA
during its servicing;
	 
	 	(2)  	The files related to such Accounts shall be properly deposited
in the U.S. Mail as certified or registered mail addressed to LENDER unless
otherwise agreed by LENDER and AFSA. AFSA shall not be liable for any losses,
costs or damages incurred by LENDER if files are lost after being properly
deposited in the U.S. Mail. If so instructed by LENDER at any time, AFSA shall
procure at LENDER’s expense such available insurance coverage as LENDER may
desire with respect to such shipments;
	 
	 	(3)  	A transmittal shall be provided by AFSA to LENDER listing each
Account and certain other mutually-agreeable Account information; and
	 
	 	(4)  	Each Account record shall be removed from the AFSA servicing
system.






	 	   	The deconversion and file preparation and shipping fees specified in Exhibit C
(Servicing Fees) shall apply to and shall be payable concurrently with any
deconversion of rejected Accounts as provided above, as well as any deconversion of
Accounts following any expiration or termination of this Agreement, or any other
removal of Accounts from this Agreement; provided, however, that no such fees shall
be charged for any deconversion of Accounts upon termination of this Agreement
pursuant to Section 5.B. (upon AFSA breach) or 5.C. or 5.D. (except for
reimbursement of reasonable shipping charges as provided therein).






	 	I.  	If any of the Accounts are guaranteed by a Guarantor which permits electronic
interface or expedited or express claims filing or review processing (for example,
Texas Guaranteed Student Loan Corporation’s Claims Automated Processing System (TGSLC’s
CAPS) or Northwest Education Loan Association’s Express Claim Program (NELA’s ECP)),
AFSA may participate therein on LENDER’s




3









 






	 	   	behalf. In such event, AFSA is hereby authorized to enter into any participation
agreement or similar documentation required by such Guarantor on LENDER’s behalf as
its agent in order to participate therein.
	 
	 	J.  	In originating Consolidation Loans hereunder, AFSA shall use best efforts to
meet the servicing goals as set forth on Attachment 1 to Exhibit A (Consolidation Loan
Origination Servicing Goals).






	2.  	     LENDER Obligations.






	 	A.  	LENDER shall promptly transmit or cause to be transmitted to AFSA any material
written communications it receives at any time with respect to any borrower’s Account,
including but not limited to letters, notices of death or disability, adjudications of
bankruptcy and like documents, and forms requesting deferment of repayment or loan
cancellations. AFSA will have no liability for reliance upon information that would
have been corrected by timely transmittal to it of any such written communication, and
shall not bear any related servicing or other costs which reasonably could have been
avoided thereby.
	 
	 	B.  	LENDER shall examine all reports submitted to it by AFSA promptly upon receipt
and promptly notify AFSA of any discovered errors. AFSA shall not be responsible for
damages or losses caused by any error disclosed by a report to LENDER unless such error
is brought to AFSA’s attention within sixty (60) days after receipt by LENDER. This
time restriction shall be extended for the 799 ED Billing Form, for which the LENDER
shall have 180 days to bring an error to the attention of AFSA.
	 
	 	C.  	LENDER shall be responsible for assuring that the form documents to be used in
the origination of the Accounts (other than such documents created independently by
AFSA) are in compliance with all applicable federal, state and local laws and
regulations, including without limitation any consumer loan laws or disclosure
requirements applicable thereto, and shall defend, indemnify and hold AFSA harmless
from any violation or non-compliance with any of the foregoing.






	3.  	      Banking.






	 	A.  	AFSA shall establish a disbursement bank account for loan origination. Such
bank account shall be in a bank designated by AFSA which is reasonably acceptable to
LENDER. Funding of said account shall be by wire transfer on a schedule which
complements the mutually agreed upon disbursement schedule.
	 
	 	B.  	All borrower and other remittances shall be deposited to an AFSA account at a
remittance banking/lock box facility at a bank selected by AFSA which is reasonably
acceptable to LENDER, with all earnings on such account being retained by AFSA. Such
remittances shall be promptly processed and posted to borrower Accounts and the
associated funds shall be transferred to LENDER by ACH or wire transfer on a mutually
acceptable schedule.




4









 












	4.  	      Charges.






	 	A.  	LENDER shall pay AFSA for services rendered in the prior month according to the
schedule of fees in Exhibit C (Servicing Fees), within fifteen (15) days after receipt
of an invoice sent by AFSA to LENDER. Payments become delinquent if not received by
AFSA within thirty (30) days from the date the invoice is received by LENDER, and
thereafter shall incur a late charge of one and one-half percent (1-1/2%) per month
until paid.
	 
	 	B.  	The fees specified in Exhibit C shall remain fixed during the first twelve (12)
months of this Agreement. Unless otherwise expressly agreed, charges during each
subsequent twelve (12) month period of this Agreement may be increased over such fees
charged during the previous twelve (12) month period by an amount equal to the greater
of (i) the percentage increase in the U.S. Department of Labor’s Consumer Price Index
for Urban Wage Earners and Clerical Workers, U.S. City Average (1982-84=100) (the
“CPI”) for the most recent, twelve (12) month period available at the time of each
annual adjustment, or (ii) three percent (3%) per annum. (If at any adjustment date
the CPI is no longer published, then any replacement index specified by the Bureau of
Labor Statistics or successor U.S. governmental agency shall be substituted therefor,
with appropriate application of any necessary conversion formula as may be specified by
such agency, or if no such replacement index has been so specified, then a comparable
cost-of-living index as may be mutually agreed between the parties shall be used.)
	 
	 	C.  	AFSA’s fees are subject to adjustment by AFSA (i) in the event of any increase
in telephone or postage rates, or (ii) as provided in Section 5.C below.
	 
	 	D.  	In addition to any other servicing fees or expense reimbursements to which AFSA
shall be entitled under this Agreement, LENDER agrees to reimburse AFSA for (i) any
sales or use taxes or similar taxes now or hereafter imposed upon any goods or services
provided by or activities of AFSA hereunder, and (ii) any expenses which AFSA incurs as
a result of any additional work required due to any transfer of the guarantee on
serviced loans to a new or successor Guarantor, or any Guarantor error, or any testing,
reconciliation or remediation project or other non-routine activity required by the
particular needs of Guarantor or LENDER or resulting from third party errors.
	 
	 	E.  	In the event of any good faith dispute by LENDER regarding any amount billed by
AFSA, LENDER may by written notice to AFSA detailing the grounds for the dispute
withhold payment of such disputed amount for a reasonable period pending resolution of
the dispute, but shall pay the undisputed portion billed when and as due. If the
dispute has not been mutually resolved within sixty (60) days after the date initially
due, LENDER shall deposit the withheld amount into an independent escrow reasonably
satisfactory to AFSA pending mutual agreement or court decision regarding proper
disposition of such funds. Failure of LENDER to pay the undisputed portion of a
billing or to place any disputed amount in escrow as provided above shall constitute a
default hereunder.




5









 












	 	F.  	AFSA shall have the right to offset any amounts due from AFSA to LENDER against
the servicing fees or other amounts due AFSA hereunder.






	5.  	     Term and Termination.






	 	A.  	This Agreement is for a term beginning March 1, 2002, and ending on the fifth
(5th) anniversary of such date; provided, however, that unless either party shall give
the other written notice of its intention not to renew this Agreement at least ninety
(90) days prior to its scheduled expiration date, this Agreement shall automatically
renew for successive twelve (12)-month periods thereafter, subject to any renegotiated
terms which may be mutually desired.
	 
	 	B.  	Either party may terminate this Agreement before its expiration upon a material
breach by the other party, if such breach has not been cured within ninety (90) days
after written notice of such material breach has been sent to the other party, which
written notice shall specify in reasonable detail the alleged breach and reference this
provision; provided, however, that the notice and cure period shall only be thirty (30)
days if the breach is the non-payment of AFSA’s fees or other charges.
	 
	 	C.  	In the event of changes in the Higher Education Act, Guarantor Regulations, or
other current or future law, regulation or other requirement applicable to the serviced
loans, including without limitation, any changes in any interpretation, claims review
or enforcement policies, procedures or practices with respect thereto (and including,
without limitation, implementation or enforcement of third-party servicer regulations
promulgated by the Department), which in AFSA’s reasonable determination expose AFSA to
materially increased risk of liability to the Secretary of Education, LENDER or any
other party, impose materially increased duties or obligations upon AFSA, cause AFSA to
incur materially additional expense, or materially restrict or derogate from AFSA’s
indemnification rights or liability limitations under this Agreement, AFSA shall have
the right, at its option, to (i) terminate this Agreement upon 180 days’ prior written
notice to LENDER, or (ii) propose to LENDER an amendment to this Agreement which in
AFSA’s reasonable judgment appropriately addresses the increased risk, duties or
obligations (which may include an adjustment to AFSA’s fees and/or expense
reimbursements), and if the parties are unable to agree upon such amendment within
thirty (30) days after the same is submitted to LENDER, AFSA shall be entitled to
terminate this Agreement upon 180 days’ prior written notice to LENDER. AFSA shall not
be entitled to charge any deconversion fees hereunder in connection with the
deconversion of LENDER’s loans from AFSA’s system following any termination by AFSA
under this Section 5.C, but AFSA shall be entitled to receive reimbursement of its
reasonable file preparation and shipping costs.
	 
	 	D.  	In the event that AFSA announces or actually commences a wind-down of its
servicing activities for the purpose of exiting the student loan servicing business,
LENDER shall have the right, at its option, to terminate this Agreement upon 90




6









 






	 	   	days’ prior written notice to AFSA. In such event AFSA shall not be entitled to
charge any deconversion fees hereunder in connection with the deconversion of
LENDER’s loans from AFSA’s system following any termination by AFSA under this
Section 5.D, but AFSA shall be entitled to receive reimbursement of its reasonable
file preparation and shipping costs.






	6.  	      Examination of Records.





LENDER or its agent shall have the right, at reasonable hours and under reasonable circumstances on
a mutually-agreeable schedule, to examine all LENDER’s assigned student loan records and material
serviced by AFSA that it deems necessary to determine compliance with this Agreement. AFSA shall
submit to like examination by any governmental agency or authority having supervisory jurisdiction
over LENDER.





	7.  	      Exclusion of Warranties and Limitations of AFSA’s Liability.






	 	A.  	AFSA shall be entitled to reasonably rely upon any information or data supplied
to it by LENDER, any party on LENDER’s behalf, or any third party normally relied upon
by servicers in the student loan industry, and shall have no liability for any error or
loss caused by such information or data being incomplete or inaccurate. AFSA shall not
be responsible for reviewing and verifying the compliance of forms and processes
prescribed by the Secretary or Guarantor with applicable state and federal laws and
regulations, and AFSA shall be fully entitled to rely upon and use such materials and
processes, unless notified to the contrary by LENDER, and shall have no liability for
any damages or loss resulting from such use absent such notice.
	 
	 	B.  	AFSA shall use due care and diligence in performing its services in a timely
manner consistent with the applicable student loan program as reasonably interpreted
and understood by AFSA. AFSA hereby excludes and disclaims any and all other
warranties with respect to its services under this Agreement, and no employee, agent or
representative of AFSA has the authority to bind AFSA to any other oral or written
representation or warranty. LENDER will review all processing output, reports and
other information provided to it by AFSA and will use due care and diligence to detect
and notify AFSA of any errors therein which LENDER discovers. Upon prompt notification
to or discovery by AFSA of any processing error or data inaccuracy, AFSA shall
re-perform any processing to the extent practicable and necessary, without charge if
AFSA is at fault and otherwise at a rate equal, in AFSA’s best and reasonable judgment,
to the greater of its original charge for such processing or its direct and allocated
indirect cost of such reprocessing. AFSA agrees to provide, at cost to LENDER if
necessitated by the nature of the data submitted, such evidence as LENDER may
reasonably require which will verify the complete and proper execution of the
corrections.
	 
	 	C.  	AFSA shall be entitled to cure at its own expense any error or omission in the
performance of its duties under this Agreement by the reperformance of such




7









 






	 	   	duties to the extent such reperformance will reasonably eliminate or mitigate any
losses to LENDER caused by such error or omission.
	 
	 	D.  	Notwithstanding the form in which any legal or equitable action may be brought,
whether in contract, tort, negligence, strict liability or otherwise, AFSA’s liability,
if any, arising out of or in any way related to any act or omission by AFSA in
connection with this Agreement or its services hereunder, including but not limited to
errors due to AFSA, its equipment, operators, programmers, or program, shall be limited
to direct losses of principal and interest on rejected claims resulting directly and
primarily from AFSA’s negligence or willful misconduct. In the event a loan is
rejected by a Guarantor directly and primarily due to AFSA’s negligence or willful
misconduct, and AFSA is unable to cure the loan within twelve (12) months of the final
reject date, AFSA shall reimburse LENDER for all principal and accrued interest loss
thereon (including such loss during the period of non-guarantee) by the end of the
thirteenth (13th) month following the final reject date, and the loan shall thereupon
be assigned and transferred to AFSA or its designee, and this shall be the sole and
exclusive remedy of LENDER relating to such occurrences.
	 
	 	E.  	If applicable, and notwithstanding any other provision of this Agreement,
AFSA’s liability, if any, arising out of or in any way related to any act or omission
by AFSA in connection with any loans which (i) entered repayment status prior to the
date that AFSA’s assumes servicing responsibility, or (ii) have previously been cured
following non-AFSA servicing error (i.e., rehab loans), shall be limited to general
money damages in an aggregate amount with respect to any Account not to exceed the
amount paid for AFSA’s services by LENDER with respect to such Account, and this shall
be the sole and exclusive remedy of LENDER relating to such occurrences.
	 
	 	F.  	AFSA shall have no liability for its failure to comply with any law, rule,
regulation or other requirement applicable to any of the serviced loans, including
without limitation any change in any interpretation, claim reviews or enforcement
policies, procedures or practices with respect thereto, (i) which was not articulated
in writing and actually made known to AFSA or the student loan servicing industry
generally a reasonable period in advance of its implementation, (ii) which is
inconsistent with general industry practices or prior Guarantor conduct or requirements
unless and until AFSA shall have been notified thereof and had a reasonable opportunity
to comply with such new requirement and then only with respect to servicing performed
after the date thereof (i.e., not on a retroactive basis with respect to servicing
which has previously occurred based upon prior requirements), or (iii) during any
period in which the Department and/or any Guarantor shall have indicated that it will
not enforce any such requirement, even if such requirement may legally be in effect.
	 
	 	G.  	In no event, regardless of AFSA’s ability to reperform or cure any error, shall
AFSA be liable under any circumstances, (i) for any incidental, indirect, special,
punitive or consequential damages, or (ii) for failure to provide services herein for




8









 






	 	   	reasons beyond its reasonable control, or (iii) for any violation of applicable law,
regulation or other requirement under this Agreement, where AFSA’s action or
inaction was not negligent as determined by reference to legally relevant factors
(including without limitation general industry standards in effect at such time), or
(iv) for any losses, liabilities or expenses directly or indirectly arising in whole
or in part from or relating to any Guarantor error, or (v) for any losses,
liabilities or expenses directly or indirectly arising in whole or in part from or
relating to any data transmission or electronic data interchange (EDI) failure or
error not primarily and directly due to AFSA’s negligence, or (vi) for the
uncollectibility or non-payment of any amounts payable on or with respect to
Accounts serviced hereunder, or the failure of any Guarantor to pay any claim on a
loan Account for any reason (including but not limited to the bankruptcy or
insolvency of the Guarantor) except where the uncollectibility or failure to pay
such claim is directly and primarily as a result of AFSA’s negligence or willful
misconduct as provided hereinabove. These limitations on AFSA’s liability and
exclusion of damages are independent of any other remedy or provision herein and
shall not be affected by AFSA’s inability to reperform or cure any error or any
failure of any other remedy or provision.
	 
	 	H.  	AFSA’s sole liability under or in connection with this Agreement or its
services, whether in contract, tort, negligence, strict liability, pursuant to
violation of statute or regulation, or under any other theory, shall be limited as
provided in this Section 7 and Section 8, and the provisions hereof shall constitute
the sole and exclusive remedy of LENDER for breaches hereof by AFSA.
	 
	 	I.  	No claim or action, regardless of form, arising out of or in any way related to
any act or omission by AFSA in connection with this Agreement or its services hereunder
shall be brought by LENDER more than one year after LENDER discovers the act or
omission by AFSA giving rise to such claim or action. In the case of rejected claims
filed by LENDER due to AFSA negligence or willful misconduct, such one-year period
shall commence at the end of the 13th month following the final reject date.
	 
	 	J.  	The parties agree that the foregoing provisions shall survive the termination
of this Agreement and have been reflected in the amount of the charges payable by
LENDER to AFSA for the Service, are an essential part of the basis for the bargain
between the parties, and that AFSA would not have entered into this Agreement but for
such provisions.






	8.  	      Indemnification.






	 	A.  	If AFSA or LENDER is required to appear in or is made a defendant in any legal
action or other proceeding commenced by a borrower or other third party with respect to
any loan Account for which services are provided hereunder, subject to the limitations
contained in this Agreement, LENDER shall defend and indemnify AFSA against, and hold
it harmless from, all claims, losses, liabilities, and reasonable expenses (including
reasonable attorneys’ fees) arising thereunder,




9









 






	 	   	unless and until a final judgment is entered by a court properly holding that the
claim or action resulted directly and primarily from the negligence or willful
misconduct by AFSA under this Agreement, in which case AFSA shall thereafter defend
and indemnify LENDER against, and hold it harmless from, all claims, losses,
liabilities, and expenses (including reasonable attorneys’ fees) arising from such
negligence or willful misconduct (subject to Section 7 above). In particular,
without limiting the foregoing, it is understood that AFSA shall be entitled to a
defense and indemnity as provided above where a student alleges that he or she did
not receive a proper education and/or was defrauded by the school or lender, or that
a prior or subsequent servicer or collection agency committed any error or
misconduct or violated any law or regulation.
	 
	 	B.  	Notwithstanding the foregoing, AFSA will further defend, indemnify and save
LENDER harmless from and against any and all claims, losses and liability relating to
(i) any infringement or threatened infringement of any patent, copyright trademark,
trade secret or other proprietary rights of any third party, or (ii) any physical loss
or damage to property of a third party, or (iii) any loss or damage arising from bodily
injury, including death, when such loss or damage is caused by the negligent acts,
omissions or intentional wrongdoing of AFSA, its employees, subcontractors or agents
and which arise out of the performance of this Agreement, provided that (a) LENDER
gives AFSA prompt written notice of any such claim of loss or damage and, (b) if such
loss or damage involves claims by third parties, LENDER allows AFSA to control, and
reasonably cooperates with AFSA in, any related defense and all related settlement
negotiations.






	9.  	      Contingency Plan.





AFSA shall maintain a reasonably comprehensive contingency plan for disaster recovery and continued
servicing of the Accounts (the “Plan”) and allow LENDER to review said Plan at AFSA’s site. Such
review shall be no more frequently than on an annual basis or within sixty (60) days of
implementing any material changes to the Plan.





	10.  	      Financial and Administrative Responsibility.






	 	A.  	Each party hereto represents that it is currently in compliance with, and
agrees to maintain its compliance with, all financial and administrative responsibility
standards or requirements which may be established from time to time by the Department
or any Guarantor for participation in the Title IV, Higher Education Act programs for
which AFSA provides services hereunder. Each party shall have the right to terminate
this Agreement upon ninety (90) days’ written notice to the other in the event that the
Department’s financial or administrative responsibility standards or requirements are
hereafter changed and as a result such party does not thereafter satisfy such standards
or requirements.
	 
	 	B.  	AFSA agrees to provide LENDER with annual consolidated audited financial
statements, as soon as the same are made available to AFSA during the term of this
Agreement.




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	 	C.  	AFSA agrees to maintain insurance bonds and other insurance in full force and
effect at all times during the term of this Agreement that meet the following
requirements: (i) a fidelity bond (or direct surety bond) with a policy limit of not
less than $50,000,000, a deductible of not more than $1,000,000 and per occurrence
coverage of not less than $50,000,000; and (ii) an errors and omissions policy with a
policy limit of not less than $50,000,000 in the aggregate per occurrence (with no per
occurrence coverage minimum), and a deductible of not more than $1,000,000.






	11.  	Audits.





AFSA agrees to provide LENDER with (i) a copy of AFSA’s annual SAS 70 servicer audit without
charge, and (ii) a copy of AFSA’s Lender Audit Guide audit report, as required by the Department
under the Higher Education Act, at a prorated charge consistent with the manner charged by AFSA
generally to its other clients.




LENDER acknowledges that AFSA shall have the right and obligation to cooperate fully with
independent auditors, the Secretary of Education, the Department’s Inspector General, the
Comptroller General of the United States, and any applicable Guarantor, or their authorized
representatives, in the conduct of audits, investigations, and program reviews with respect to
LENDER or the Title IV, Higher Education Act programs administered by AFSA for LENDER, as
authorized by law. Furthermore, LENDER agrees to provide AFSA with written notice and copies of
all audit reports or findings (preliminary or final) relating to AFSA’s administration of any
aspect of such program for LENDER, as soon as such audit reports or findings are available to
LENDER. LENDER further agrees to indemnify, reimburse and hold AFSA harmless from the cost of
cooperating with, responding to or appealing any such audit report or finding (including any
reasonable cost of an attestation engagement performed for any such response or appeal, attorneys’
fees and costs), unless such audit was caused by any AFSA misconduct.





	12.  	Waiver of Jury Trial.





THE PARTIES HEREBY EXPRESSLY WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE
OF ACTION ARISING UNDER THIS AGREEMENT OR ANY OTHER DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH, OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE
PARTIES HERETO WITH RESPECT TO THIS AGREEMENT OR ANY SUCH OTHER DOCUMENT OR AGREEMENT, OR THE
SERVICES AND TRANSACTIONS RELATED HERETO OR THERETO, WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER IN CONTRACT, TORT OR OTHERWISE.





	13.  	Miscellaneous.






	 	A.  	All specifications, tapes, data cards, programs, forms and procedures used or
developed by AFSA in connection with this Agreement (except those supplied by LENDER)
shall be and remain the sole property of AFSA.




11









 






	 	B.  	All information belonging to LENDER shall be retained by AFSA in confidence.
AFSA shall not use, make, and/or maintain a list of LENDER’S Account names, addresses,
and/or account numbers for any purpose other than fulfillment of its duties as Servicer
under this Agreement. Upon termination or expiration of this Agreement, AFSA shall
deconvert the loan Accounts as provided in Section 1.H above. This provision shall
survive termination of this Agreement.
	 
	 	C.  	Both parties agree to maintain the confidentiality of this Agreement and all
amendments hereto, and the terms hereof, and any audit reports or findings (preliminary
or final) relating to AFSA’s administration of any Title IV, Higher Education Act
program for LENDER, and not to disclose or deliver the same (or any copies, excerpts or
summaries thereof) to the Department, any other government agency, national accrediting
agency, or any other third party (whether pursuant to regulation, governmental request,
or otherwise) without first using best efforts to give the other party prior written
notice of such intention, which notice shall be sent by fax, Federal Express or other
overnight delivery service, and addressed to the other party. The other party may, at
its option, thereupon take appropriate steps to assure that any such information which
may be entitled to protection from disclosure under the Freedom of Information Act
(FOIA) is so protected, and the first party shall cooperate with such efforts to
protect from FOIA disclosure any information of the other party which the other party
believes to constitute trade secrets, or of a commercial or financial interest, or of a
privileged or confidential nature, etc., including the inclusion with such disclosure
or delivery of appropriate submissions asserting protection from FOIA disclosure.
Notwithstanding the foregoing, either party may disclose or deliver any of the
foregoing to their independent auditors on a confidential basis, provided that such
auditors shall not disclose or deliver the same without the disclosing party first
complying with this paragraph.
	 
	 	D.  	This Agreement and its performance shall be governed by the internal laws of
the State of California.
	 
	 	E.  	This Agreement may not be assigned except to an entity succeeding to
substantially all of the business or assets of the assigning party, with written notice
to the other party; provided, however, that LENDER may collaterally assign its interest
hereunder to a trustee under an indenture pursuant to which the Lender incurs
indebtedness (the “Trustee”). The Trustee shall be a third party beneficiary hereof,
entitled to enforce the provisions of this Agreement against AFSA.
	 
	 	F.  	AFSA reserves the right to change any part or all of the Service; provided,
however, that such change shall not abrogate or in any way modify the substantive
provisions of, and general duties of AFSA under, this Agreement.
	 
	 	G.  	LENDER agrees to provide AFSA upon request with LENDER’s current financial
statements and such other financial information as AFSA may request from time to time.




12









 






	 	H.  	If either party is rendered unable, wholly or in part, to carry out its
obligations under this Agreement (other than the payment of money) by reason of any act
of God, civil disturbance, strike or labor unrest, breakdown or interruption of power
or communications systems, computer or other equipment failure, failure of
subcontractors or suppliers, or other circumstances or event outside such party’s
reasonable control (whether or not similar to the foregoing), the obligations of such
party shall be suspended to the extent thereof, and such party shall not be liable to
the other party for any non-performance hereunder or incomplete performance as a result
of such occurrence.
	 
	 	I.  	This Agreement supersedes any prior agreement and contains the entire agreement
of the parties on the subject matter hereof. No other agreement, statement or promise
made by any party to any employee, officer or agent of the other party to this
Agreement, or any other person, that is not in writing and signed by both parties to
this Agreement, shall be binding upon them. No waiver, alteration or modification of
the Agreement shall bind AFSA or LENDER unless in writing and duly executed by AFSA and
LENDER.
	 
	 	J.  	In the event any Account is transferred off AFSA’s servicing system, whether in
connection with a termination or expiration of this Agreement, a sale of Accounts, or
otherwise, unless otherwise expressly provided herein or agreed in writing at the time
of such transfer off, LENDER agrees to pay AFSA the deconversion and file preparation
and shipping fees specified in Exhibit C (Servicing Fees).
	 
	 	K.  	Any notice required under this Agreement (including any Exhibit) shall be in
writing and shall be effective upon personal delivery or facsimile transmission or upon
receipt after being sent by Federal Express or mailed by registered or certified mail,
return receipt requested, postage pre-paid, addressed as follows: If to AFSA, at One
World Trade Center, Suite 2200, Long Beach, California 90831-2200, Attn: President, or
if to LENDER to:
	 
	 	   	Consolidation Loan Funding, LLC

c/o CLF Management Corp.

Attn: Mr. Ryan D. Katz, President

5005 Wateridge Vista Dr., Suite 150

San Diego, CA 92121
	 
	 	   	With copies to:
	 
	 	   	The Bank of New York Trust Company of Florida, N.A.

Attn: Corporate Trust Manager

10161 Centurion Parkway, 2nd Floor

Jacksonville, FL 32256
	 
	 	   	and
	 
	 	   	John J. Witmeyer III, Esq.

Ford Marrin Esposito Mitmeyer & Gleser, L.L.P.




13









 






	 	   	Wall Street Plaza

New York, NY 10005-1875
	 
	 	   	Each party may specify a different address by sending to the other written notice of
such different address as provided herein.






	 	L.  	The section captions in this Agreement are for convenience only and will not be
deemed part of this Agreement or used in the interpretation thereof. Both parties and
their counsel have participated in the preparation, drafting and negotiation of this
Agreement. Accordingly, this Agreement shall be construed according to its fair
language and any ambiguities shall not be resolved against either party as the drafting
party.
	 
	 	M.  	The invalidity, illegality or unenforceability of any provision or term of this
Agreement in any instance shall not affect the validity or enforceability of such
provision in any other instance or the validity or enforceability of any other
provision, and each such provision shall be enforced to the fullest extent possible.
	 
	 	N.  	This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original and all of which taken together shall constitute one and the same
agreement.






	14.  	      AFSA Representations and Warranties.





AFSA hereby represents and warrants to LENDER the following:





	 	(i)  	AFSA is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, and is duly qualified or licensed to do
business and in good standing under the laws of each jurisdiction where the performance
of, and consummation of the transactions contemplated by, this Agreement requires it to
be so qualified or licensed. AFSA is eligible as a third party servicer to service
LENDER’s loans under the Higher Education Act and applicable Guarantor Rules and
Regulations.
	 
	 	(ii)  	AFSA has full power and authority under its organizational documents to execute
and deliver this Agreement and to perform its obligations under, and consummate the
transactions contemplated by this Agreement.
	 
	 	(iii)  	This Agreement has been duly authorized, executed and delivered by AFSA and
constitutes a valid, legal and binding agreement of AFSA, enforceable against it in
accordance with its terms, except to the extent that enforcement may be limited by
applicable bankruptcy or insolvency laws and by general principles of equity. Neither
the execution, delivery or performance by AFSA of this Agreement will conflict with or
result in a breach or violation of or default under any of (i) organizational documents
of AFSA, (ii) any laws applicable to AFSA in effect as of the date hereof affecting the
Accounts, (iii) any judgment, order, injunction, award or decree of any court, agency
or authority, or (iv) any contract, instrument, or agreement to which it is a party or
may be subject.




14









 






	 	(iv)  	AFSA owns or has the right to use the Service including any databases, output
formats, computer systems, software, know-how, technologies, and processes used by it
to perform its obligations hereunder, and such property does not and will not infringe
upon or violate any patent, copyright, or other proprietary rights of any third party.
	 
	 	(v)  	There is no legal action, claim, proceeding, investigation, or controversy
pending or to the best of AFSA’s knowledge threatened against it, which would
materially and adversely affect its ability to perform its obligations under this
Agreement.





Executed as of the day and year first above written.




AFSA DATA CORPORATION




	 	 	 
	By

	 	/s/ Steven E. Snyder
	

	 	 
	Title

	 	Steven E. Snyder, President
	 
	 	 
	By

	 	/s/ Meliss Hankin
	

	 	 
	Title

	 	Meliss Hankin, Senior Vice President






CONSOLIDATION LOAN FUNDING, LLC

By: CLF Management Corp., Manager




	 	 	 
	By

	 	/s/ Ryan D. Katz
	

	 	 
	

	 	Ryan D. Katz, President






15









 






EXHIBIT A

ORIGINATION SERVICES




GSL Origination Service consists of the following activities, applicant notices, and reports.





	I.  	      ACTIVITIES






	 	1.  	Open and date stamp incoming mail.
	 
	 	2.  	Enter manually or electronically all loan applications data onto the Loan
Origination System.
	 
	 	3.  	Validation of applications for completeness and accuracy.
	 
	 	4.  	Attempt to obtain information for incomplete applications by telephone and if
unsuccessful by correspondence.
	 
	 	5.  	Transmit loans to the Guarantor and receive approved/rejected loans from the
Guarantor.
	 
	 	6.  	Process loan cancellations.
	 
	 	7.  	Disburse loan proceeds as scheduled by Lender and/or schools.
	 
	 	8.  	Convert disbursed loans to the Loan Servicing System.
	 
	 	9.  	Perform Guarantor reporting on behalf of the Lender and in compliance with the
applicable Guarantor program requirements.
	 
	 	10.  	Borrower files will be secured and fire protected to the degree it will not
obstruct processing during the Origination process.
	 
	 	11.  	Respond to telephone and written inquiries from borrowers and schools.
	 
	 	12.  	All other origination activities required of a lender under the HEA and
Guarantor Regulations within the scope of AFSA’s responsibilities hereunder.





In connection with the foregoing origination services, LENDER authorizes AFSA to review and approve
the loan application on LENDER’s behalf, and where required by the applicable Guarantor, execute
the loan application on LENDER’s behalf to indicate such approval. Unless otherwise expressly
requested by LENDER in writing to AFSA, AFSA shall be authorized to approve any loan application on
LENDER’s behalf, which appears to be properly completed, by the borrower and the school, without
regard to the identity of the borrower or the school.





	II.  	      APPLICANT NOTICES
	 
	•  	Validation Incomplete Letter - Requests information from the borrower
that is missing or invalid on their application.




16









 






	•  	 	Lender Reject Letter - Notifies the borrower that the lender has
rejected their loan application.
	 
	•  	 	Disclosure Statement - Loan document produced by the system letter
generator and replaces the state printed disclosure. Disclosure
statement printing by AFSA allows full electronic interface with the
Guarantor, enhancing processing time and reducing paper flow.
	 
	•  	 	Loan Cancellation Letter - Notifies the borrower that the lender has
received and processed the borrower’s or school’s request to cancel
their loan.






	 	•  	Borrower Request
	 
	 	•  	School Request






	•  	Loan Recovery Letter - Notifies the borrower that the lender has
received and processed their returned disbursement check.
	 
	•  	Validation Approval Letter - Notifies the applicant that their loan
application has been approved by the lender and Guarantor and their
scheduled disbursement date.
	 
	•  	Other - All other notices required of a lender under the HEA and
Guarantor Regulations within the scope of AFSA’s responsibilities
hereunder.
	 
	III.  	REPORTS
	 
	•  	Application Error Report - AFSA internal report used to identify
applications that did not pass the system validation program.
Validation is established using the lenders unique lender policy as
well as the loan program and Guarantor requirements.
	 
	•  	Disbursement Listing - Report provided to the lender and user as a
check roster. This report provides the lender with accounting entry
information.
	 
	•  	Undisbursed Commitments Report - Provides the lender with detailed
information on an individual loan basis, about undisbursed loan
commitments.
	 
	•  	Undisbursed Funds Analysis - Provides the lender with detailed
information on an individual loan basis, about undisbursed loan
commitments. The report can be used as a tool to provide schools
with information about future disbursements to borrowers attending
that institution.
	 
	•  	Undisbursed Analysis by Date - Provides the lender with detailed
information on an individual loan basis, about undisbursed loan
commitments. The report can be used as a tool to provide the lender
with cash flow projections to fund their student loans.
	 
	•  	Validation Acceptance Report - AFSA internal report used to identify
those loans, which passed validation. The report displays key data
elements to verify their correct entry.




17









 












	•  	Approved Loan Listing - AFSA internal report which provides evidence
of loan guarantee by the Guarantor. This report enables reduced
application processing time and paper flow. This report allows AFSA
full electronic interface with the Guarantor, enhancing processing
time and reducing paper flow.
	 
	•  	Application Status Grand Totals - Provides the lender with management
information concerning the total number of applications and
corresponding dollar amounts for specific loan application status.
	 
	•  	Lender Month End Manifest - Provides the lender with required
Guarantor month end reporting of loan origination activity. The
report is used to pay the lender insurance premium (guarantee) fees.
	 
	•  	Lender Month End Manifest Detail - Provides the lender with borrower
level detail of transaction activity to support the Lender Month End
Manifest.




18









 











ATTACHMENT 1




Consolidation Loan Origination Servicing Goals




AFSA will use best efforts to originate and process Consolidation Loans for LENDER in accordance
with the following Servicing Goals:




	 	 	 	 	 
	*

	 	Receive Applications
	 	 0
	 	 	 	 	 
	*

	 	Data Entry
	 	 1 Business Day
	 	 	 	 	 
	*

	 	Create/Mail LVC’s
	 	 1 Business Day
	 	 	 	 	 
	*

	 	Process LVC’s
	 	 12 Business Days—based on prior experience with Direct Loan Division and other servicers
	 	 	 	 	 
	*

	 	Disburse/Fund
	 	 2 Business Days—assumes LENDER will fund within 24 hours of AFSA requesting funds
	 	 	 	 	 
	*

	 	Convert
	 	 1 Business Day
	 	 	 	 	 
	*

	 	Request Guarantees
	 	 3 Business Days






Notwithstanding the foregoing, the parties acknowledge that AFSA does not completely control these
processes and can only meet the foregoing servicing goals based on the timely performance of LENDER
in funding loans and its other obligations hereunder, and of lenders/holders (other than AFSA)
involved in the origination process.




19









 








EXHIBIT B

POST-ORIGINATION SERVICES





	1.  	LOAN CONVERSION





At the time of purchase or placement of a loan with AFSA for servicing, the loan shall be converted
and a note examination may be conducted in accordance to predetermined criteria. The tasks
involved in loan conversion generally include:





	   	Origination and Verification of Account Data

Generation of Receipt of Loans Transferred

Account Package Preparation

Generation of Exceptions Report

Renegotiation of Rejected Accounts

Reconciliation and Balancing

Keypunch Account Data

Microfilm and Microfiche Copies

Run Serialization Crosscheck

Edit and Error Correction

Appropriate Vault Space

Generate Sale Transmittal

Mail Conversion Notification to Borrower
	 
	2.  	BORROWER RELATIONS





Borrower relations begin during In-school Status and continue throughout the life of the loan.
During this period, the Service generally provides the following printed notices to the borrower
and required telephone contacts:





	   	Introductory Letter

Pre-Grace Statement

Separation Data Change Letters

Disclosure Statement

Phone/Address Verification

Grace Expiration/First Payment Reminder

Student Status Verification (as required)

Skip Trace Locate Letters

Response to Borrower Inquiry Letters

Deferment Processed Notices:






	 	   	Continuing

Forbearance

Unemployment

Other Deferment






	   	   Billing Notices:






	 	   	Interim Interest Notices

Regular Installment and Past Due Payment Notices






	   	   Interim and Payout Demand Notices




20









 












	   	Telephone Contacts:






	 	   	Due Diligence Borrower Calls

Due Diligence Parent/Relative Calls

Skip Tracing Calls

Response to Borrower Inquiry Calls





     All other activities of this nature required of a lender under the HEA and Guarantor
Regulations within the scope of AFSA’s responsibilities hereunder.




	3.  	RELATED LOAN SERVICING ACTIVITIES





Related loan servicing activities include:





	   	Lock Box Remittance Banking

Payment Processing

Name/Address Updates

Payment Research and Special Handling

Interest Capitalization

Payment Reapplication

Internal Audit of Default Claim

Diligent Skip-Tracing and Pursuit of Payments from Delinquent Borrowers

Claim Preparation and Submission

Reperformance/Renegotiation





     All other activities of this nature required of a lender under the HEA and Guarantor
Regulations within the scope of AFSA’s responsibilities hereunder.




	4.  	REPORTING





Record keeping and accounting are performed as part of the Service. A series of monthly reports
are provided to LENDER regarding the status of its loans. This reporting includes:





	   	Loans Transferred/Removed Ledger

Student Loan Ledger

Monthly Transaction Report

Accounting Entry Summary Report

Portfolio Summary and Analysis — Characteristics

Portfolio Summary and Analysis — Delinquency

Portfolio Summary and Analysis — Maturity Analysis

Portfolio Summary and Analysis — Reconciliation

Delinquent Report and Summary

Name/Address Report

Paid-in-Full Ledger

Receipt for Loans Transferred

Customer Service Report Card

Department of Education Form 799 (or its successor), which will be submitted in time for
LENDER to consolidate that information with that of other servicers, unless the Department
of Education will accept unconsolidated 799 reports




21









 











EXHIBIT C

SERVICING FEES





	 	 	 	 	 	 	 
	ORIGINATION
SERVICES*

FEDERAL SSL/PLUS
	 	 	Manual	 	 	Automated
	 
	 	 	 	 	 	 
	Less than $2.5 Million/Year
	 	 	 $16.00	 	 	 $10.50
	 
	 	 	 	 	 	 
	Greater than $2.5 Million/Year
	 	 	 $10.50	 	 	 $8.95
	 
	 	 	 	 	 	 
	CONSOLIDATION
	 	 	$55 per funded	 	 	 
	 
	 	 	application; $20 for	 	 	$55 per funded
	 
	 	 	each application not	 	 	application; $20 for each
	 
	 	 	funded	 	 	application not funded
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	SET UP FEES FOR NEWLY
	 	 	 	 	 	 
	ORIGINATED LOANS**
	 	 	 	 	 	 
	FEDERAL SSL/PLUS
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Fee per Disbursement
	 	 	 $2.30	 	 	 $1.30
	 	 	 	 	 	 	 





	 	 	 	 	 	 	 
	MONTHLY SERVICING
	 	 	 	Grace and	 	Consolidation
	FEDERAL FFEL
	 	In-school+	 	Repayment+#	 	Repayment#
	 
	 	 	 	 	 	 
	Per Month^
	 	 $1.44	 	 $3.18	 	 $3.00
	 





	 	 	 
	DEFAULT RELATED FEES^^
	 	 
	FEDERAL FFEL
	 	 
	 
	 	 
	Claim Filing
	 	$20.20 +50 BP
	Resubmission
	 	$20.20
	Underpaid Claim Processing
	 	$20.20
	DDB Certification
	 	$22.40
	Resales
	 	$28.00
	Repurchases
	 	$20.20
	Recalls
	 	$20.20









	*  	Loans originated by AFSA will be disbursed from an AFSA maintained bank account. A separate
loan origination and set-up fee is charged for each type of loan originated based upon each
application.
	 
	**  	Client disbursed loans will be placed with AFSA within 30 days of disbursement. Automated
fee assumes that data will be transmitted in a format acceptable to AFSA.
	 
	+   	 In-school and grace status accounts with one or more unsubsidized FFELP loans are charged an additional $.20 per month.



22









 






	#  	Repayment fees are charged the month an account is set up for servicing and continue through the month following the month
an account is paid in full by the borrower, guarantor, or is otherwise removed from the system.
	 
	^   	 Delinquency surcharge of $3.00 per account delinquent over 30 days if portfolio
delinquency exceeds AFSA’s average delinquency by more than 1% for the month.
	 
	^^   	 Assumes guarantor policies, procedures and practices are in accordance with generally
established industry standards.




23









 











ADDITIONAL AND OPTIONAL SERVICES




	 	 	 	 	 	 
	 	Ad Hoc Reporting

	 	 	 $75/hour; $200 minimum per report	 
	 	Bond Swap

	 	 	 $2.00/account	 
	 	Borrower Incentive Programs

	 	 	 $3,000 one-time program set-up
fee, plus
 $2.00 set-up fee per participating borrower	 
	 	Deconversion

	 	 	 $40/account during the term and
$25/account at expiration	 
	 	Paper or Fiche Reports

	 	 	 Quotation	 
	 	File Preparation

	 	 	 Cost plus 20%	 
	 	File Shipping

	 	 	 Cost plus 20%	 
	 	Initial Portfolio Conversion Fees

	 	 	 Quotation	 
	 	Late Charges

	 	 	 25% of Collected Amount	 
	 	Legal Review of Documents

	 	 	 Cost plus 20%	 
	 	Loan Consolidation

	 	 	 $100/application	 
	 	Master File Tape (Standard Format)

	 	 	 $100/each	 
	 	NSF Charges

	 	 	 Direct Cost	 
	 	On-line Access Via the Internet

	 	 	 $150/month first 2 users;

$50/month for each user >2	 
	 	Overpaid Refunds

	 	 	 $3.40/each	 
	 	PLUS Credit Review

	 	 	 $3.30/application	 
	 	PLUS Pre-Approval

	 	 	 $5.00/decision	 
	 	Post-Conversion Research

	 	 	 $20/hour	 
	 	Private Loan Program Setup

	 	 	 $5,000	 
	 	Sales Extracts

	 	 	 $1,000 per extract; 2 extracts
included in each sale transaction	 
	 	Securitization Setup

	 	 	 $15,000 + Bond Swap Fee	 
	 	Special Reports

	 	 	 Programming time at $85/hr;

testing time at $45/hr	 
	 





24









 






	 	 	 	 	 	 
	 	Special Activities (Requested by

Client or Guarantor)

	 	 	 Quotation	 
	 	Special Delivery (Requested by Client)

	 	 	 Cost plus 20%	 
	 	Tax Notices and IRS Reporting (1098E)

	 	 	 $0.65/notice	 
	 	Wire Transfer Fees > 5/month

	 	 	 Direct Cost	 
	 





NOTE: Minimum monthly billing: $500.00.




25









 








EXHIBIT D

NOTE EXAMINATION ELECTION




LENDER hereby makes the following election with respect to any Note Examination or other document
examination to be performed by AFSA in connection with loan files to be serviced by AFSA hereunder
(other than any loans which may be originated by AFSA for LENDER):




AFSA ENCOURAGES ALL LENDERS TO HAVE A NOTE EXAMINATION PERFORMED UPON ALL NON-AFSA ORIGINATED FILES
TO BE DELIVERED TO AFSA FOR SERVICING, SO AS TO MINIMIZE TO THE EXTENT POSSIBLE THE LIKELIHOOD OF
LOSSES OR OTHER SERVICING PROBLEMS WHICH MAY RESULT FROM MISSING OR INADEQUATE LOAN DOCUMENTATION.
IF LENDER ELECTS NOT TO HAVE A NOTE EXAMINATION, LENDER THEREBY AGREES TO ACCEPT FULL
RESPONSIBILITY FOR ANY LOSSES OR SERVICING ERRORS WHICH RESULT IN WHOLE OR IN PART FROM MISSING OR
INADEQUATE LOAN DOCUMENTATION. NOTWITHSTANDING LENDER’S ELECTION, AFSA’S LIABILITY FOR ANY LOSSES
ARISING FROM ITS FAILURE TO DETECT MISSING, INCOMPLETE, INACCURATE, OR ERRONEOUS DATA OR DOCUMENTS
SHALL BE SUBJECT TO THE LIABILITY LIMITATIONS SPECIFIED IN SECTIONS 1.F AND 7 OF THE SERVICING
AGREEMENT.




____ FULL NOTE EXAMINATION





	 	   	If LENDER has elected Full Note Examination, AFSA agrees to undertake a general review in
accordance with standard industry practice of the loan documentation listed on note
examination checklists to be generated by AFSA and approved by LENDER. By undertaking such
review, however, AFSA does not guarantee or assure the genuineness, accuracy, completeness
or compliance of such documentation with any contract or with applicable law and regulation.





____ ABBREVIATED NOTE EXAMINATION





	 	   	If LENDER has elected Abbreviated Note Examination, AFSA agrees to undertake a general
review in accordance with standard industry practice of the loan documentation listed for
the categories of data selected by LENDER from note examination checklists to be generated
by AFSA and approved by LENDER. By undertaking such review, however, AFSA does not
guarantee or assure the genuineness, accuracy, completeness or compliance of such
documentation with any contract or with applicable law and regulation. LENDER acknowledges
and agrees that it shall be responsible for any losses or servicing errors which result in
whole or in part from missing or inadequate loan documentation which might have been
discovered in a Full Note Examination.





____ NO NOTE EXAMINATION





	 	   	By electing and instructing AFSA not to undertake any Note Examination or other document
examination prior to commencing servicing, LENDER acknowledges and agrees that LENDER
assumes the risk and full responsibility for missing or inadequate loan documentation and
for any losses or servicing errors that might have been avoided




26









 






	 	   	had a Full Note Examination been undertaken, and agrees that AFSA shall not be liable under
any circumstances for any such losses or servicing errors.




27









 











EXHIBIT E

BLANKET CURE TERMS




The following Blanket Cure Terms shall apply between LENDER and AFSA when in the course of its
servicing, AFSA submits claims to Guarantors which are rejected by the Guarantor for servicing
errors which occurred prior to AFSA’s servicing or for which AFSA is otherwise not liable under the
Servicing Agreement.





	1.  	      Cure Services for Rejected Account(s)






	 	A.  	For any Account rejected by the Guarantor in whole or in part because of
servicing error which occurred prior to AFSA’s servicing or for which AFSA is otherwise
not liable under the Servicing Agreement, AFSA and/or an outside collection agency
selected by AFSA will attempt to reinstate the guaranty (cure) on the Account under the
terms and conditions specified below and for the fees specified herein.
	 
	 	B.  	Cure services shall generally include.






	 	(1)  	Using best efforts to locate the borrower in the event the
borrower’s address is invalid;
	 
	 	(2)  	Upon location, certifying, in a manner acceptable to the
Department and the applicable Guarantor, that the borrower has been located in
the event a “locate cure” is required;
	 
	 	(3)  	Performing all written and telephone contacts as required for
locate cure by the Department and the Guarantor necessary to claim file the
Account with the Guarantor; and/or
	 
	 	(4)  	Using best efforts to cause the borrower to make one full
payment or return a signed repayment obligation (RO) in the event a “payment or
RO cure” is required.






	 	C.  	AFSA will use best efforts to undertake such cure services within 30 days of
receipt of a rejected Account. If AFSA is unable to cure the Account within an
approximate 45-day period following commencement of cure services, or if AFSA in its
sole judgment determines not to attempt to cure the Account itself, AFSA will place the
Account with a “1st placement” outside collection agency for a period generally not
longer than 180 days. If the “1st placement” collection agency is unable to cure the
Account within the specified time frame, AFSA will then place the Account with a “2nd
placement” collection agency for a period generally not longer than 270 days. If the
“2nd placement” collection agency is unable to cure the Account within the specified
time frame, AFSA will then place the Account with a “3rd placement” collection agency
for a period generally not longer than an additional 270 days. Following placement
with any outside collection agency, AFSA shall only be responsible for administrative
services in




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	 	   	interfacing with such agency on the Accounts involved. AFSA shall not have any
responsibility for training or otherwise supervising the outside collection agency
or its personnel.
	 
	 	D.  	For the cure services specified herein, LENDER shall pay to AFSA a fee for each
Account cured as specified in Exhibit E-1. Such fees are subject to adjustment from
time to time upon 30 days’ prior written notice from AFSA to LENDER.
	 
	 	E.  	If LENDER wishes AFSA to arrange on LENDER’s behalf for additional collection
agency services on rejected Accounts for which no cure is successfully accomplished
hereunder, the terms applicable thereto are set forth in Exhibit E-2. If no Exhibit
E-2 is attached, AFSA shall not provide such services.






	2.  	      Limitations on AMA’s Liability






	 	A.  	LENDER acknowledges that in placing Accounts with outside collection agencies,
AFSA is merely providing an administrative service to LENDER. Accordingly, AFSA does
not guarantee the success of its or any outside collection agency’s cure efforts and
shall not otherwise be responsible for the failure of any cure efforts to reinstate or
obtain payment of any Account. AFSA makes no warranties or representations, expressed
or implied, regarding the cure services or the outside collection agencies used.
	 
	 	B.  	Subject to the provisions set forth herein, in the event of any error by AFSA
for which AFSA would be liable under the Servicing Agreement, AFSA shall be responsible
only for reperformance of any cure activity or erroneous processing to the extent
practicable and necessary without charge to LENDER. With respect to cure services
under this Exhibit, AFSA shall not otherwise be liable for damages or other monetary
relief except in the case of AFSA’s gross negligence or willful misconduct.
	 
	 	C.  	AFSA shall not under any circumstances, regardless of any failure of the
foregoing remedies, be liable for (i) the error or misconduct of any outside collection
agency, or (ii) for losses or damages caused by circumstances or events beyond AFSA’s
reasonable control, or (iii) for any special, indirect, incidental, punitive, or
consequential damages of any nature.






	3.  	      Termination





The cure services provided for in this Exhibit may be terminated by either party upon 30 days’
written notice to the other. Termination shall not affect any payment obligations of the parties
arising from services provided during the term of the Servicing Agreement, or from cures obtained
on Accounts after termination. Following termination, unless otherwise instructed by LENDER in
writing, AFSA shall permit the outside collection agencies to continue to work any Accounts already
placed which such agencies believe will result in a cure within a reasonable period of time
following termination. All other Accounts shall be recalled from such agencies within 30 days
after termination.




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	4.  	Exclusions and Deconversion





LENDER hereby gives approval for AFSA to undertake the cure services outlined in Section 1 of this
Exhibit on Accounts with a principal balance outstanding (PBO) of $500 or greater. Accounts with
PROs less than the aforementioned amount or Accounts which are not successfully cured within the
time frames described above will be deconverted for the fees specified in the Servicing Agreement.





	5.  	Incorporation by Reference





The terms of the Servicing Agreement are incorporated herein by reference and shall be applicable
to the cure services contemplated by this Exhibit, to the extent not inconsistent with or contrary
to any provision herein. In the event of any conflict, the terms of this Exhibit shall prevail.




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EXHIBIT E-1

CURE FEES




     Subject to the Blanket Cure Terms to which this Exhibit E-1 is attached, the following fees
shall apply to all services provided thereunder:



	 	 	 	 	 	 	 
	 	 	 	 	Cure Fee/Account
	I.
	 	Accounts Successfully Cured Internally by AFSA	 	$	200.00	 
	II.
	 	Accounts Successfully Cured by Agency - 1st Placement	 	$	275.00	 
	III.
	 	Accounts Successfully Cured by Agency - 2nd Placement	 	$	400.00	 
	IV.
	 	Accounts Successfully Cured by Agency - 3rd Placement	 	$	500.00	 






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EXHIBIT F

PLUS CREDIT REVIEW SERVICES TERMS




     AFSA shall provide the following PLUS Credit Review Services, subject to all of the terms and
conditions of the Servicing Agreement to which this Exhibit F is attached.




	1.  	      Definitions






	 	A.  	As used herein the following words shall have the meanings respectively
indicated:





“Adverse Credit” or “Adverse Credit history” means that the credit history of an Applicant reflects
any condition or event which would at the time of such Loan Application disqualify the Applicant
from eligibility for a PLUS Loan under the Higher Education Act or any applicable Guarantor
Regulations. As of the effective date hereof, each of the following is understood to be a
disqualifying Adverse Credit item which will be identified by AFSA on its credit review reports:





	 	(a)  	any account or debt shown on the Applicant’s credit report is
ninety (90) or more days delinquent as of the date of the credit report; or
	 
	 	(b)  	at any time during the five (5) years preceding the date of the
credit report, the Applicant has been the subject of a default determination,
bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment, or
write-off of a Higher Education Act, Title IV debt.





“Applicant” means an individual who has submitted a Loan Application to LENDER.




“Borrower” means an individual who is the maker or co-maker of a promissory note and who obtains a
PLUS Loan from LENDER in accordance with the Higher Education Act and any applicable Guarantor
Regulations.




“Educational Institution” means any institution of postsecondary education which is an “eligible
institution” under the Higher Education Act and is eligible under any applicable Guarantor
Regulations.




“Loan Application” means the application for a PLUS Loan, which application must be executed by a
prospective Borrower, certified by an Educational Institution, and accepted by LENDER.




“PLUS Loan” means a loan made under the Federal PLUS Program established under the Higher Education
Act.




“Servicing Agreement” shall mean the Servicing Agreement between AFSA and LENDER to which these
PLUS Credit Review Services Terms are attached, or to which they relate.





	 	B.  	Any other capitalized terms used herein shall have the same meanings as set
forth in the Servicing Agreement, unless the context otherwise requires.




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	2.  	      Credit Review Services






	 	A.  	AFSA and LENDER hereby agree to a PLUS credit review services arrangement
whereby—






	 	(1)  	LENDER agrees to make PLUS Loans to individuals eligible to be
Borrowers pursuant to the terms of the Higher Education Act and any applicable
Guarantor Regulations;
	 
	 	(2)  	AFSA agrees to act as an agent of LENDER for the receipt,
evaluation, handling and maintenance of certain PLUS Loan credit information on
behalf of LENDER, in order to assist LENDER in making decisions with respect to
the approval or denial of PLUS Loans consistent with the terms of the Higher
Education Act and any applicable Guarantor Regulations; and
	 
	 	(3)  	LENDER makes the final lending decision, in accordance with the
procedures established herein and such credit history appeal processes
(relating to credit report errors or extenuating circumstances) as may be
further determined by LENDER.






	 	B.  	AFSA agrees to provide the following credit review services on behalf of
LENDER:






	 	(1)  	Review Loan Applications for information required by credit
bureaus for performing a credit check. In this regard, LENDER shall assure
that all Loan Applications with co-Applicants shall include the social security
number of each Applicant. LENDER or the Educational Institution of the
Applicant(s) will be contacted if additional information is required.
	 
	 	(2)  	Generate and submit to a national credit bureau appropriate
Applicant information for the purpose of obtaining credit information for each
Applicant.
	 
	 	(3)  	Receive and evaluate a credit report from a national credit
bureau for each Applicant. AFSA shall be entitled to rely upon all information
furnished to AFSA by a national credit bureau and shall not be liable or
responsible in any manner for any inaccuracy or error contained in the credit
report obtained by AFSA on LENDER’s behalf from a national credit bureau.
	 
	 	(4)  	Identify each Applicant for a PLUS Loan who does not
have an Adverse Credit history by generating and providing to LENDER a
disbursement report related to loan origination.
	 
	 	(5)  	Identify each Applicant for a PLUS Loan who has an Adverse
Credit history by generating and providing to LENDER a credit review report
which:




33









 












	 	a.  	Lists the name, address, and social security
number of each Applicant who has an Adverse Credit history;
	 
	 	b.  	Lists the Adverse Credit factors found on the
Applicant’s credit bureau report which, absent extraordinary
circumstances, require credit denial; and
	 
	 	c.  	Provides the name and address of the credit
bureau accessed for the Adverse Credit history information.






	 	(6)  	Generate and mail to the Applicant an “adverse action” letter
on behalf of LENDER and in LENDER’s name with respect to each Applicant who has
been identified as having an Adverse Credit history, within 30 days after AFSA
receives a completed Loan Application from LENDER and the credit bureau report
and otherwise comply with the Equal Credit Opportunity Act (ECOA) and
Regulation B thereunder to the extent applicable to AFSA’s services.
	 
	 	(7)  	Upon request by LENDER from time to time, return the original
or a copy of each Loan Application processed by AFSA (other than electronically
transmitted Loan Applications, which will not be transmitted to LENDER) for
which an Adverse Credit history exists, and other information in AFSA’s
possession regarding its review of such Loan Application.
	 
	 	(8)  	Maintain accurate books and records of all transactions
hereunder, including Adverse Credit history reports of Applicants processed for
LENDER hereunder.






	 	C.  	LENDER agrees that, with respect to all PLUS Loans processed under these PLUS
Credit Review Services Terms, it will:






	 	(1)  	Assure that all information set forth in Loan Applications and
all other information provided to AFSA in connection with the performance of
its services hereunder is accurate and complete.
	 
	 	(2)  	Be responsible for handling and evaluating all appeals of
credit denial.
	 
	 	(3)  	Communicate, if appropriate after the credit denial appeal
process is completed, its approval of a Loan Application to AFSA for each
Applicant which AFSA previously identified as possessing an Adverse Credit
history by submitting a letter attached to the Loan Application (or a copy of
the Loan Application) requesting the PLUS Loan to be guaranteed, due to. error
or other extenuating circumstances relating to the original credit information
obtained by AFSA on LENDER’s behalf, and properly documenting such error
correction or other extenuating circumstances.






	 	D.  	Nothing contained in these PLUS Credit Review Services Terms shall make AFSA a
loan production office or a holder or originator of any PLUS Loan, the




34









 






	 	   	application of which has been processed hereunder. LENDER acknowledges that it has
sole authority and responsibility for the decision to approve or deny PLUS Loans
hereunder.






	3.  	Term





The credit review services contemplated by these PLUS Credit Review Services Terms shall commence
on the date first mentioned above and continue until the sooner of (i) termination by either party,
with or without cause, upon not less than thirty (30) days’ written notice to the other party; or
(ii) automatic termination upon the termination or expiration of the Servicing Agreement.





	4.  	Liability Limitations





In performing its PLUS Loan credit review services and other Loan Application processing functions,
AFSA shall only be liable for its own gross negligence or intentional misconduct. AFSA shall have
no responsibility for the inaccuracy or incompleteness of any Loan Application or credit bureau
report or the information contained thereon, or for any credit decision made by the Lender.
Subject to the foregoing, the provisions of the Servicing Agreement limiting AFSA’s liability are
also hereby incorporated by reference and shall be binding between the parties hereto with respect
to the PLUS Loan credit review services and other matters contemplated herein.





	5.  	Incorporation by Reference





The terms of the Servicing Agreement are incorporated herein by reference and shall be applicable
to the PLUS Loan credit review services, to the extent not inconsistent with or contrary to any
provision herein. In the event of any conflict, the terms of this Exhibit shall prevail.





35