Exhibit 10.38


 


Confidential
Materials omitted and filed separately with the


Securities
and Exchange Commission.  Asterisks
denote omissions.


 


PRIVATE
STUDENT LOAN MONOGRAM PROGRAM AGREEMENT


BETWEEN


PENNSYLVANIA HIGHER EDUCATION ASSISTANCE AGENCY


AND


THE FIRST MARBLEHEAD CORPORATION


 


THIS PRIVATE STUDENT LOAN
PROGRAM AGREEMENT (this “Agreement”) is made and dated as of February 5,
2010, by and between the Pennsylvania Higher Education Assistance Agency (d/b/a
American Education Services), a public corporation and governmental
instrumentality organized under the laws of the Commonwealth of Pennsylvania,
1200 North Seventh Street, Harrisburg, Pennsylvania 17102 (“Servicer”) and The
First Marblehead Corporation, having an address at 800 Boylston Street, 34th
Floor, Boston, Massachusetts 02199 (“FMC”).


 


RECITALS


 


WHEREAS, Servicer was
created by the Commonwealth of Pennsylvania by the Act of August 7, 1963,
P.L. 549 for the purpose of improving higher educational opportunities and to
that end Servicer is empowered to make, guarantee, undertake commitments to
make or acquire and participate with lending or postsecondary institutions in
the making of loans, servicing of loans, or otherwise providing loans of money
to students; and


 


WHEREAS, Servicer has
developed its loan servicing system (the “Loan Servicing System”) for the
purpose of servicing Student Loans (as defined herein); and


 


WHEREAS, Servicer has
developed various web-based products (“PHEAA Web-based Products”), which
provide on-line automated capabilities to enhance services rendered to student
borrowers; and


 


WHEREAS, Servicer has
developed support services (“Support Services”) to enhance the Loan Servicing
System and the PHEAA Web-based Products (collectively the “PHEAA System”), to
include technical support, help desk, communications support, and information
technology staff time; and


 


WHEREAS, the Servicer
has expertise in the business of servicing private student loans and other
education loans for lenders; and


 


WHEREAS, certain
financial institutions (the “Lender Participants”) and FMC have created a group
of education loan programs (“Programs”), and FMC and the Lender Participants
are responsible for structuring and assisting in implementing the Programs; and


 


WHEREAS, the Lender
Participants and FMC desire to utilize the expertise of the Servicer to service
such education loans on behalf of the Lender Participants and the Lender
Participants desire to have FMC or an affiliate thereof provide Administrator
Services (as defined below) in connection with a Private Student Loan Servicing
Agreements among Servicer, each Lender Participant, and FMC (the “Lender
Participant Servicing Agreements”); and


 


WHEREAS, Servicer and
FMC will work collaboratively on future refinements and enhancements to the
servicing procedures for the Programs; and


 


WHEREAS, Servicer and
FMC desire to set forth certain terms and conditions related to FMC’s role in
providing Administrator Services;


 


NOW, THEREFORE, in
consideration of the mutual covenants and promises contained in this Agreement
and other valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, and intending to be legally 


 

















 


bound, Servicer and FMC (hereinafter, the
“Parties”) do hereby agree to the following:


 


SECTION 1.  DEFINITIONS


 


1.01         “Account” means
the Student Loans collectively of an individual Borrower owned by an Owner and
for which FMC (and its affiliates) serves as Program Administrator, which are
serviced pursuant to the Lender Participant Servicing  Agreements.


 


1.02         “Administrator
Services” means the services provided by FMC or its affiliates, and includes,
but is not limited to post-disbursement portfolio administration, as further
described in this Agreement.


 


1.03         “Agreement”
means this Private Student Loan Program Agreement, including each Schedule
provided for herein and each amendment hereafter adopted.


 


1.04         “Borrower”
means an individual who is the maker of a Credit Agreement and who obtains a
Student Loan. “Borrower” includes both the primary obligor and any Cosigner.


 


1.05         “Business Days”
means a day of the year other than a Saturday or Sunday, or a day on which the
Servicer or FMC is required or authorized by law to remain closed, and on which
either does remain closed.


 


1.06         “Change of
Control” means the sale to any other entity, individual or group of all or
substantially all of the entity’s assets used to perform the Services.


 


1.07         “Cosigner”
means an individual who is the maker of a Credit Agreement as a cosigner on a
Student Loan.


 


1.08         “Credit
Agreement” shall mean the promissory note or credit agreement executed by a
Borrower evidencing a Student Loan.


 


1.09         “Customer
Service Schedule” means the schedule of that name attached hereto and as
amended by agreement of the Parties.


 


1.10         “Effective Date”
means the date this Agreement has been executed by all Parties and is approved
as to form and legality by the Office of Attorney General of the Commonwealth
of Pennsylvania.


 


1.11         “Fee Schedule”
means the schedule of that name attached hereto and as amended by agreement of
the Parties.


 


1.12         “FMC” means The
First Marblehead Corporation in its capacities as “FMC” and “Program
Administrator” (as defined herein).


 


1.13         “FMC
Administrator Loans” shall have the meaning assigned to it in Section 2.02.


 


1.14         “FMER” means
First Marblehead Education Resources, Inc., an affiliate of FMC.


 


1.15         “Lender
Participant” means a financial institution which is a lender in one or more of
the Programs.


 


1.16         “Milestone”
shall have the meaning given to it in Section 4.02(d).


 


1.17         “Private Student
Loan” or “PSL” means an education loan funded by a Lender Participant to
finance the costs of higher education (or private K-12 education) that is not
guaranteed by the United States Department of Education nor by any state or
agency of any state.


 


1.18         “Program
Administrator” means FMC (and its affiliate FMER) in its performance of
Administrator Services as set forth in this Agreement.


 


1.19         “Remedial
Action Plan” has the meaning given to it in Section 4.03(d).


 


2

















 


1.20         “Service”, “Services”,
“Serviced”, “Servicing” shall mean to perform, the terms and conditions of the
Credit Agreements, the Servicing Guidelines, and the terms and conditions of
this Agreement: duties, obligations, and procedures that are required of
Servicer hereunder and under the Lender Participant Servicing Agreements in
connection with Student Loans.


 


1.21         “Servicing
Guidelines” means, as applicable, the Servicing Guidelines for one or more
Private Student Loan programs that have been issued by a Lender Participant and
approved by FMC and Servicer attached to and made part of each Lender
Participant Servicing Agreement, all as may amended by the Parties pursuant to
the terms thereof.


 


1.22         “Service Level
Schedule” means the Service Level
Schedule attached hereto, as amended by agreement of the parties.


 


1.23         “Statement of
Work” means the document that includes, without limitation, the requirements
for FMC-requested changes to the Loan Origination System or procedures, as well
as the identified persons working on the project, time estimates for
completion, the costs for the project and any recurring fees thereafter.


 


1.24         “Student Loan”
means any of, and “Student Loans” means all, the Private Student Loans executed
by a Borrower, funded by a Lender Participant, administered by Program
Administrator, and Serviced by the Servicer pursuant to a Lender Participant
Servicing Agreement.


 


1.25         “System Access
Schedule” means the schedule of that name attached hereto and as amended by
agreement of the Parties.


 


SECTION 2.  SCOPE OF AGREEMENT


 


2.01        Services.  The Servicer agrees, in consideration of
certain fees, to perform the Services set forth in this Agreement, including
each Schedule (including without limitation the Service Level Schedule and the
Customer Service Schedule) attached hereto, and any additional Services which
FMC or Lender Participant requests and the Servicer agrees to provide with
respect to the Servicing of Student Loans in accordance with the Servicing
Guidelines, for which account information and/or documentation shall be
delivered to the Servicer.


 


2.02        Role
of FMC as Program Administrator.


 


Servicer acknowledges that
FMC (including its affiliates), may enter Lender Participant Servicing
Agreements from time to time with Servicer and Lender Participants to act as
Program Administrator with respect to Private Student Loans.


 


Servicer hereby authorizes
FMC to offer Servicer’s post-disbursement servicing and FMC’s administration
services to prospective Lender Participants. Upon the execution and
effectiveness of a Lender Participant Servicing Agreement, Servicer shall (a) perform
all services set forth in such Lender Participant Servicing Agreement for the
Private Student Loans owned by the Lender Participant (the “FMC Administrator
Loans”), and (b) where appropriate, communicate with Program Administrator
on behalf of the Lender Participant for the Student Loans so owned and
identified. Without limiting the foregoing, Servicer shall provide the Services
(as set forth in this Agreement and/or required by the Servicing Guidelines) to
Lender Participant and Program Administrator, including but not limited to:


 


i.              product set-up
and conversion;


ii.             loan document
custodial services;


iii.            remote system
access;


iv.            reports,
records, and other documents and data;


v.             customer
service;


vi.            borrower
billing and correspondence;


vii.           collection of
borrower payments;


viii.          privacy policy
distribution;


 


3

















 


 


ix.            due diligence
and default prevention (except as set forth in Section 4.21);


x.             governmental
reporting and reporting to consumer reporting agencies; and


xi.            copies of
required notices, including but not limited to notices of failed standards,
security breaches, and OFAC violations.


 


SECTION 3.  TERM OF AGREEMENT


 


This Agreement shall
commence on the Effective Date and shall continue for a period of three (3) years,
and thereafter for so long as any Lender Participant Servicing Agreement shall
remain in effect, unless this Agreement is terminated by either party pursuant
to Section 14. With respect to product setup and conversion services, this
Agreement shall continue for a period of three (3) years from the date
first set forth above, unless earlier terminated by either Party pursuant to
the provisions of this Agreement, and shall automatically renew for an
additional one (1) year period, unless terminated by any Party by written
notice of non-renewal to the other given at least one hundred and eighty (180)
days prior to the end of the then current term. 
The fees charged for the Services shall be subjected to annual
adjustment under the terms and conditions of Section 5.05.


 


SECTION 4.  SERVICING DUTIES


 


4.01        Servicing Duties.  Servicer shall provide and
perform the Services in full compliance with: the terms of this Agreement and the Servicing Guidelines.  The Lender Participant shall be responsible
for the legal compliance of the content of the Program Guidelines, Credit
Agreements, privacy policies and disclosures and notices required by state law.


 


4.02        Product Setup and Conversion.   Servicer
agrees to perform product set-up and conversion Services with respect to any
FMC Administrator Loans which shall include, without limitation, the following:


 


(a)           Credit
Agreement Forms.  Servicer shall promptly review Credit
Agreement forms that are proposed by Lender Participant (or Program
Administrator on behalf of Lender Participant) and, after mutual resolution of
any comments thereon that affect the Servicing of such forms, accept such forms
for purposes of product set-up and conversion.


 


(b)           Servicing
System Adaptation.  Servicer shall promptly review education loan
product terms and pricing matrices proposed by Lender Participant (or Program
Administrator on behalf of Lender Participant) for the launch of new products
and shall establish appropriate Servicing matrices and programs to support such
product terms and pricing as of a mutually agreed product launch date. The
parties shall publish a mutually agreeable program launch date for each program.
For new loan programs, where changes do not require system changes other than
table set-up, Servicer shall make every effort to meet live program dates
requested by FMC, which date shall be no less than thirty (30) days, but not
more than sixty (60) days from the date Servicer accepts (such acceptance not
to be unreasonably withheld) the product and pricing matrix (or similar
document containing the same information) for such program; provided, however,
that the Servicer agrees to use commercially reasonable efforts to complete the
set-up process in a shorter time frame on a case-by-case basis in order to
accommodate the business needs of Lender Participant. For existing loan
programs, where changes do not require system changes other than table set-up,
Servicer shall make every effort to meet live program dates requested by FMC,
which date shall be no less than fourteen (14) days, but not more than thirty
(30) days from the date Servicer accepts (such acceptance not to be
unreasonably withheld) the product and pricing matrix (or similar document
containing the same information) for modifications to such program. Lender
Participant (and Program Administrator on its behalf) shall have the right to
audit Servicer’s Servicing matrices and program setup as set forth in Section 4.02(d) below.


 


(c)           Conversion.  Servicer agrees to accurately
convert all FMC Administrator Loan origination data provided by Program
Administrator, which is necessary for servicing hereunder onto the PHEAA
System. Servicer shall also, in a timely manner, return to the Servicer
Relations Group at Program Administrator all loan files sent to the Servicer in
error. Upon the identification of files which were sent in error, Servicer
shall have no responsibility for such files other than the return of such files
to Program Administrator or 


 


4

















 


Lender
Participant.


 


(d)           Periodic Audit. Servicer
agrees that, no more than twice per calendar year, and no less than thirty (30)
days after receipt of written notice, it shall cooperate with audits by Lender
Participant or Program Administrator of the product set-up and conversion
Services and communication and other protocols necessary for the efficient and
accurate performance thereof. If any audit reveals any failure to adequately
perform any such matter, Servicer shall within thirty (30) days of its receipt
of the results of such audit, publish a remedial action plan that includes a
schedule of tasks and objectives to be completed (each such task or objective,
a “Milestone”) and provides for reports to Program Administrator or Lender
Participant with respect to each Milestone (“Remedial Action Plan”). Upon
completion of the Remedial Action Plan, Program Administrator or Lender
Participant may, at a time mutually agreeable to the Parties, perform an
additional audit to validate successful completion of the Remedial Action Plan.


 


4.03        System
Changes.  The
Servicer has the right to change any part or all of its equipment, the PHEAA
System, computer programs, and its procedures relating to the manner of or the
methodology used in servicing the Student Loans, subject to the following:


 


(a)           In no event shall such
change abrogate or in any way modify the obligations of the Servicer to Service
the Student Loans in full compliance with all applicable federal and state laws
and regulations, the terms and conditions of the Credit Agreements, the
Servicing Guidelines, or the terms of this Agreement.


 


(b)           The Parties agree that they
shall make reasonable efforts to provide information about the nature and
effect of changes that the Parties reasonably believe may affect the operations
or processes of the other(s) and shall determine the extent to which the
other Parties need to be involved in the testing of changes to its own
system.  The parties shall discuss
proposed implementation dates for system changes and shall make best efforts to
avoid implementation dates that will have a material adverse impact on the
operations of the other party.


 


(c)           Collaborative Efforts for Refinements
and Enhancements and Statements of Work


 


(i)            Servicer and FMC will meet,
not less than quarterly, for the purpose of discussing future enhancements to
the functions performed by Servicer consistent with the Program Guidelines.


 


(ii)           For any enhancement,
modification, or change to the PHEAA System or to the procedures necessary for
the Servicer to fulfill their obligations under this Agreement, a Statement of
Work will be negotiated and executed to outline the requirements, expectations
and fees.


 


4.04        System Access.   Servicer shall, upon the agreement
of each Lender Participant, provide FMC as Program Administrator and FMER as
agent for Program Administrator with web-based access to Student Loan files, or
portions thereof, in accordance with the terms of the System Access Schedule,
which shall set forth, without limitation, the type of access and/or online
services that must be available to each type of user and the minimum user
access security requirements that must be implemented on Servicer’s PHEAA
System.  Servicer shall at all times
maintain the security of user access to the PHEAA System in conformity with the
security provisions of the System Access Schedule, which shall include, without
limitation, Servicer’s review of the individual user access rights of Servicer
employees and other users no less frequently than every six months.


 


4.05        System Parameters.  The Servicer is responsible for designing,
implementing and maintaining the PHEAA System in order to remain in compliance
with the requirements of this Agreement.


 


4.06        Training.  Servicer will assume
responsibility, at its expense, for training of its staff to meet the
requirements of this Agreement, including all Schedules hereto.


 


5

















 


SECTION 5. 
CHARGES AND PAYMENTS


 


5.01        Fees.  The
Servicer shall provide all aspects of the Services at its sole cost and
expense, except as otherwise provided in this Agreement, and shall be
compensated for the Servicing of Student Loans as set forth this Agreement,
including without limitation the Fee Schedule.


 


5.02        Rate Changes Other than
Annual Adjustments.  To
the extent that an increase occurs in the costs incurred by the Servicer in
providing the Services hereunder due to: (a) changes in the Servicing Guidelines,
this Agreement, or any Lender Participant Servicing Agreement, (b) legislative
and regulatory changes beyond the control of the Servicer which pertain to the
manner of Servicing of the Student Loans in accordance with this Agreement or
any Lender Participant Servicing Agreement, (c) changes in United States
Postal Service postage rates, or (d) material changes requested by a
Lender Participant or Program Administrator in the Services provided herein,
the Servicer shall have the right to make a compensating increase to the
Servicing fees set forth herein and in the Fee Schedule.


 


Such increase shall be
limited to Servicer’s actual incremental cost increase resulting from such
changes.  Servicer shall give Program
Administrator and affected Lender Participants sixty (60) days prior written
notice before implementing any such increase in Servicing fees pursuant to this
Section. Such notice shall set forth the basis of, as well as the computation
used in determining, any increase.


 


5.03        Invoices.  Servicer agrees that invoices for its
Services shall be rendered to FMC, based on the Services provided pursuant to
each of the Lender Participant Servicing Agreements.  All invoices shall be sent to FMC as Program
Administrator. FMC shall, as Program Administrator, forward to each Lender
Participant an invoice for the Services of the Servicer and its services as the
Program Administrator, and shall provide a copy of such invoice to Servicer.
Under the terms of the Lender Participant Servicing Agreement, the Lender
Participant shall remit payment to Servicer for the Services and the services
of the Program Administrator. Servicer shall hold in trust for Program
Administrator and, within ten (10) Business Days after receipt from Lender
Participant, forward to Program Administrator the balance of the fees which
were remitted by Lender Participant to Servicer which are in excess of the
invoiced amounts for each Lender Participant. Any disputes that arise related
to the payments remitted by the Lender Participants and/or the invoices
rendered by FMC to each Lender Participant, in addition to reconciliation of
payments and invoices, shall be resolved by FMC. In the event that the Servicer’s
fees in the monthly invoice exceed the monthly fees to be paid to the Servicer
in the Lender Participant Servicing Agreement (“Excess Monthly Charges”), FMC
shall pay the Excess Monthly Charges to the Servicer on or before the invoice
payment date, and FMC shall be responsible for recoupment of the payment of
Excess Monthly Charges from the Lender Participant.


 


5.04        Adjustments
to Programs. Servicer and Program
Administrator, on behalf of the Lender Participants, shall discuss future
enhancements to the Services, the PHEAA System, and the Servicing Guidelines as
identified in Section 4.03(c).


 


5.05        Annual
Adjustment of Fees.  On or before the end of the ninth month after
the Effective Date of this Agreement, and annually thereafter, Servicer may
propose new fees to be effective upon the anniversary of the Effective Date.
 Servicer shall provide documentation to FMC to justify any increase in
fees.  The increased fee can be based on additional costs documented by
Servicer to service the loans and/or equal to 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 (CPI/W) for the most recent twelve (12)
month period available at the time of each proposed adjustment.  Such
increase shall be effective upon the anniversary of the Effective Date.  Consent
to increases to fees based on the documented costs of the Servicer will not be
unreasonably withheld.  Any annual adjustment of fees shall be agreed upon
mutually by both parties.


 


5.06        Audit Follow-Up. In the event
that any financial audit conducted pursuant to any Lender Participant Servicing
Agreement reveals that any charges or expenses have been overbilled or
underbilled, then adjustments in fees and invoices shall be made as necessary
on a prospective basis in future months to correct errors or maintain compliance
with the Fee Schedule, this Agreement, or the Lender Participant Servicing
Agreement, or Servicer or FMC shall render a payment to the other party as
necessary to correct the discrepancy.


 


6

















 


SECTION 6.  LIABILITY


 


Servicer
agrees to pay FMC for any claim, loss, liability or expense, including
reasonable attorney’s fees (collectively referred to herein as “Loss”), which
arises out of or relates to the Servicer’s acts or omissions with respect to
the Services provided to Program Administrator under this Agreement, where the
final determination of liability on the part of the Servicer to Program
Administrator is established by the Commonwealth’s Board of Claims, a court of
law with competent jurisdiction over the Servicer or by way of settlement
agreed to by the Servicer. Further, nothing herein shall be read or
construed as a waiver of the sovereign immunity of the Commonwealth of
Pennsylvania, except to the extent authorized by the laws of said Commonwealth.


 


The Commonwealth of
Pennsylvania has created the Board of Claims, pursuant to the provisions of the
act of May 20, 1937, P.L. 728, as amended by the act of October 5,
1978, Act No. 260, 72 P.S. 4651-1 et seq., for the adjustment of claims
arising from contracts entered into by the Commonwealth or an agency of the
Commonwealth. Subject to the statutory jurisdictional requirements, any and all
claims against Servicer respecting any matter pertaining to this Agreement or
any part thereof may be instituted in the Board of Claims.


 


Program
Administrator agrees to pay Servicer for any Loss arising out of or relating to
Program Administrator’s acts or omissions with respect to the Student Loans
covered by this Agreement, where the final determination of liability on the
part of Program Administrator is established by a court of law or by way of
settlement agreed to by Program Administrator.


 


This
provision shall not be construed to limit the Servicer’s or Program
Administrator’s rights, obligations, liabilities, claims or defenses which
arise as a matter of law or pursuant to any other provision of this Agreement.


 


SECTION 7.
ASSIGNMENT


 


This Agreement and all the
rights and obligations of any Party hereunder may not, without the prior
written consent of the other Parties, which consent shall not be unreasonably
withheld, be assigned or subcontracted by any Party.  Any successor must acquire substantially all
of the assets or business of a Party, and have the ability to perform the
duties and obligations under the terms and conditions hereof.


 


SECTION 8.         TERMINATION


 


8.01        Termination
by Owner/FMC.  This
Agreement may be terminated at the option of Program Administrator upon the
occurrence of any of the following:


 


(a)           The Servicer’s failure to
perform or observe any of the provisions or covenants of this Agreement and its
referenced schedules, in any material respect;


 


(b)           If the Servicer
shall (i) discontinue business, or (ii) generally not pay its debts
as such debts become due, or (iii) make a general assignment for the
benefit of creditors, or (iv) admit by answer, default or otherwise the
material allegations of petitions filed against it in any bankruptcy,
reorganization, insolvency or other proceedings (whether federal or state),
relating to relief of debtors, or (v) suffer or permit to continue
unstayed and in effect for thirty (30) consecutive days, any judgment, decree
or order, entered by a court of competent jurisdiction, which approves a
petition seeking its reorganization or appoints a receiver, custodian, trustee,
interim trustee or liquidator for itself or all or a substantial part of its
assets, or (vi) take or omit any action in order thereby to effect any of
the foregoing;


 


(c)           If Servicer is the subject
of a Change of Control, Program Administrator shall have the right to terminate
this Agreement upon a minimum of thirty (30) Business Days prior written
notice. Such right of termination may be exercised any time beginning upon the
earlier of consummation of the Change of Control transaction or public
announcement that such a transaction is pending.


 


In the event of an event of
default as set forth in Section 8.01(a) above, the Servicer shall
have the right to cure any such breach or error to Program Administrator’s full
satisfaction within thirty (30) days of written notice from Program
Administrator.


 


7

















 


8.02        Termination by the Servicer. This
Agreement may be terminated at the option of the Servicer upon the occurrence
of any of the following:


 


(a)           Program
Administrator’s failure to perform or observe any of the provisions or
covenants of this Agreement and its referenced schedules, in any material
respect; or


 


(b)           If Program
Administrator shall (a) discontinue business, or (b) generally not
pay its debts as such debts become due, or (c) make a general assignment
for the benefit of creditors, or (d) admit by answer, default or otherwise
the material allegations of petitions filed against it in any bankruptcy,
reorganization, insolvency or other proceeding (whether federal or state)
relating to relief of debtors, or (e) suffer or permit to continue
unstayed and in effect for thirty (30) consecutive days, any judgment, decree
or order, entered by a court of competent jurisdiction, which approves a
petition seeking its reorganization or appoints a receiver, custodian, trustee,
interim trustee or liquidator for itself or all or a substantial part of its
assets, or (f) take or omit any action in order thereby to effect any of
the foregoing.


 


In the event of an event of
default as set forth in Section 8.02(a), Program Administrator shall have
the right to cure any such breach or error to Servicer’s full satisfaction
within thirty (30) days of written notice from Servicer.


 


8.03        Effect of Termination.  With
respect to FMC Administrator Loans, without the taking of any action by
Servicer or Lender Participants, this Agreement confers the rights and remedies
of FMC as Program Administrator upon each Lender Participant in the event that
the loan program agreement between FMC and the Lender Participant governing FMC’s
role as Program Administrator is terminated.


 


SECTION 9.  MISCELLANEOUS PROVISIONS


 


9.01        Notices.  All notices, approvals, consents, requests or
other written communications regarding this Agreement are to be addressed as
noted below.


 


	
  If to FMC:

  	
  General Counsel

  
	
   

  	
  The First Marblehead
  Corporation

  
	
   

  	
  The Prudential Tower

  
	
   

  	
  800 Boylston Street, 34th Floor

  
	
   

  	
  Boston, Massachusetts
  02199-8157

  
	
   

  	
   

  
	
  If to Servicer:

  	
  General Counsel

  
	
   

  	
  Pennsylvania Higher
  Education Assistance Agency

  
	
   

  	
  1200 North Seventh Street

  
	
   

  	
  Harrisburg, Pennsylvania
  17102

  



 


9.02        Relationship.  The Parties to this Agreement intend that the
Servicer shall render the Services contemplated by this Agreement as an
independent contractor.  The Servicer and
its employees, agents, and servants are not to be considered agents or
employees of FMC, for any purpose whatsoever.


 


9.03        Non-Exclusive Agreement.  Nothing contained herein shall be construed
to create an exclusive arrangement as to Servicer or FMC. The parties
understand and agree that they each may enter into other agreements in
connection with the servicing of Private Student Loans in the future.


 


9.04        Survival.  The obligations and duties of each Party
under Section 6 (Liability) shall survive the termination or expiration of
this Agreement.


 


9.05        Entire
Understanding.  This
Agreement, including without limitation all Schedules attached hereto, along
with the Lender Participant Servicing Agreements, represent the entire
understanding of the parties with respect to the subject matter hereof, and
supersede all previous discussions and correspondence with respect thereto, and
no representations, warranties or agreements, express or implied, of any kind
with respect to such subject matter have been made by any Party to the other,
except as expressly set forth herein or in such other agreements.


 


9.06        Interpretation of Documents.  In the event of a conflict between this
Private Student Loan Program Agreement and a Schedule attached hereto, this
Agreement shall control.


 


8

















 


9.07        Cooperation.    FMC
and the Servicer agree that they will cooperate fully with one another in order
to carry out the terms and provisions of the Agreement during the term of this
Agreement.  Cooperation under this Section shall
include, but not be limited to, each Party using reasonable means to ensure
successful, normal, daily processing of Student Loans and related operations
and functions.  Each Party agrees to
support the reasonable routine efforts of the other Party and to work to
resolve any disputes which may arise during such periods referenced above, and
to continue to work together in a professional, business-like manner during all
phases, functions and processes defined in this Agreement.


 


9.08        Authorization. Each of the
undersigned represents that he or she has the authority to execute this
Agreement on behalf of the respective Party.


 


9.09        Amendments; Changes;
Modifications.  This
Agreement (a) may be amended, supplemented, or modified only by written
instrument duly executed by the Parties; (b) such written instrument shall
be incorporated into this Agreement; and (c) shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors and assigns.


 


9.10        No Waiver.  Any failure by
FMC or the Servicer to insist upon the strict performance by the other of any
of the terms and provisions of this Agreement shall not be deemed to be a
continuing waiver of any such terms and provisions, and notwithstanding any
such failure, such Party shall have the right thereafter to insist upon the
resumption of strict performance by the other of any and all of the terms and
provisions hereof.  The rights and
remedies herein provided are cumulative and not exclusive of any rights or
remedies provided by law.


 


9.11        Law
Governing.  This
Agreement is being delivered in and shall be construed in accordance with the
laws of the Commonwealth of Pennsylvania, without regard to any principles of
conflict of laws.


 


9.12        Counterparts.  This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original and all of
which together shall be deemed to be one of and the same document.


 


9.13        Unenforceability.  If any provision of this Agreement shall be
held to be invalid or unenforceable, such invalidity or unenforceability shall
not affect or impair the validity or enforceability of the remaining provisions
of this Agreement, which shall remain in full force and effect, and the Parties
hereto shall continue to be bound thereby.


 


IN WITNESS WHEREOF, the
Parties hereto have caused this Agreement to be duly executed as of the month,
day and the year first-above written.


 


 


	
  PENNSYLVANIA
  HIGHER EDUCATION

  	
   

  	
  THE FIRST
  MARBLEHEAD

  
	
  ASSISTANCE
  AGENCY

  	
   

  	
  CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
             /s/
  James L. Preston

  	
   

  	
             /s/
  Stein Skaane

  
	
  Name: James L.
  Preston

  	
   

  	
  Name: Stein Skaane

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title: President and
  CEO

  	
   

  	
  Title: Managing Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Approved as to form and
  legality

  	
   

  	
  Approved as to form and legality

  



 


9

















 


	
             /s/
  Jason Swartley

  	
   

  	
             /s/
  Robert A. Mulle

  
	
  PHEAA General Counsel

  	
   

  	
  Deputy Attorney General

  



 


10






 










 


INDEX TO SCHEDULES


 


Fee Schedule


 


System Access Schedule


 


Customer Service Schedule


 


Service Level Schedule


 


11

















 


FEE
SCHEDULE FOR


PRIVATE
STUDENT LOAN MONOGRAM PROGRAM AGREEMENT


DATED
FEBRUARY 5, 2009


BETWEEN


PENNSYLVANIA
HIGHER EDUCATION ASSISTANCE AGENCY,


AND


THE
FIRST MARBLEHEAD CORPORATION (“AGREEMENT”)


 


The fee for the Services
provided by Servicer, together with services provided by FMC as Program
Administrator, shall be payable to Servicer by the Lender Participants as set
forth in this Fee Schedule and Section 5 of the Agreement.


 


I.              DEFINITIONS:


 


Capitalized terms used in
this Fee Schedule have the meanings assigned to them in the Agreement. In
addition to the words and terms elsewhere defined in this Agreement, the
following terms shall have the following meanings unless the Agreement
indicates a contrary meaning or intent:


 


A.            An “Account” is to refer to
the Credit Agreements collectively of an individual Borrower of a particular
Student Loan type in the same status.


 


B.            An “Interim Account” is to
refer to Credit Agreements collectively of an individual Borrower that
constitute (1) an In-School (Enrolled) Account, or (2) a Grace
Account.


 


C.            A “Repayment Account” is to
refer to the Credit Agreements of an individual Borrower under the terms of
which the repayment period has commenced, but which is not an In-School
(Enrolled) Account.


 


D.            An “In-School (Enrolled)
Account” is to refer to the Credit Agreements collectively of an individual
Borrower with respect to which principal and interest payments are deferred
because the Borrower is enrolled at an eligible institution, whether before of
after the repayment period begins.


 


E.             A “Grace Account” is to
refer to the Credit Agreements collectively of an individual Borrower (1) with
respect to which the Borrower has ceased to be enrolled at an eligible
institution, and (2) under the terms of which the repayment period has not
yet commenced.


 


F.             “Standard Conversion” means
the conversion of a Borrower’s Account from data provided in hard-copy format
or by electronic means.


 


G.            “On-System Conversion” means
the conversion of a Borrower’s account that the Servicer is currently Servicing
for an owner or holder other than the proposed new owner or holder.


 


II.            SERVICING
FEES:


 


1.             Monthly Servicing
Fees—Interim Account Status:


 


The Servicing fee for
Student Loans in Interim Account status shall be payable by the Owner on a
pro-rated monthly basis and shall be equal to [**] basis points per annum based
upon the ending principal balance of the Student Loans at month end.


 


([**] x ending principal
balance at month end divided by [**])


 


2.             Monthly Servicing
Fees—Repayment Account Status (other than Student Loans in Owner-caused Cure
status):


 


(a) Ending Principal Balance < $[**]. If the ending principal
balance of the Student Loans (including Student


 


12

















 


Loans in Interim Account
status and Repayment Account status) at month end is less than [**] ($[**]),
then the Servicing fee for loans in Repayment Account status shall be payable
by the Owner on a pro-rated monthly basis and shall be equal to [**] basis
points per annum based upon the ending principal balance of the Student Loans
at each month end.


 


([**] x ending principal
balance at month end divided by [**])


 


(b) Ending Principal Balance > or Equal to $[**] and < or Equal to $[**]. If the ending principal balance
of the Student Loans (including Student Loans in Interim Account status and
Repayment Account status) at month end is [**] dollars ($[**]) or more, but
less than or equal to [**] dollars ($[**]), then the Servicing fee for loans in
Repayment Account status shall be payable by the Owner on a pro-rated monthly
basis and shall be equal to [**] basis points per annum based upon the ending
principal balance of the Student Loans at each month end.


 


([**] x ending principal
balance at month end divided by [**])


 


(c) Ending Principal Balance > $[**]. If the ending principal
balance of the Student Loans (including Student Loans in Interim Account status
and Repayment Account status) at month end is greater than [**] dollars
($[**]), then the Servicing fee for loans in Repayment Account status shall be
payable by the Owner on a pro-rated monthly basis and shall be equal to (i) for
the first $[**] of the ending principal balance of the Student Loans, [**]
basis points per annum based upon the ending principal balance of the Student
Loans at each month end; and (ii) for the ending principal balance of the
Student Loans in excess of $[**], [**] basis points per annum based upon the
ending principal balance of the Student Loans at each month end.


 


For the first $[**]:


[**]
x ending principal balance at month end divided by [**])


 


For amounts in excess of
$[**]


([**] x ending principal
balance at month end divided by [**])


 


(d) Loans in Repayment over 120 Months. Notwithstanding
subsections (a), (b), and (c) above, the Servicing fee for loans in
Repayment Account status shall be [**] basis points for all Student Loans that
have been Serviced by Servicer for over 120 months that are not thirty (30) or
more days delinquent.


 


(e) Delinquent Accounts. Notwithstanding subsections (a), (b),
(c), and (d) above, the Servicing fee for loans in Repayment Account
status shall be [**] basis points for all Student Loans thirty (30) days or
more delinquent until the Student Loan is outsourced for collections, and for
Student Loans outsourced for collections as of the end of the month, the
Servicing fee for loans in Repayment Account status shall be [**] basis points.


 


([**] x ending principal
balance of Student Loans 30 or more days delinquent divided by [**])


([**] x ending principal
balance of Student Loans outsourced for collections divided by [**])


 


III.           CONVERSION
FEES


 


1.             Interim Account—External


 


	
  a.

  	
  Initial Exam:

  	
  $[**] per loan

  
	
  b.

  	
  Serial Exam:

  	
  $[**] per loan

  
	
  c.

  	
  Abbreviated Note Exam:

  	
  $[**]per loan

  



 


2.             Interim Account—On System


 


	
  a.

  	
  Full Note Exam:

  	
  $[**] per loan

  
	
  b.

  	
  Waived Exam:

  	
  [**]

  



 


	
  3.             Repayment Account:

  	
  Quote

  



 


13

















 


	
  4.             Reconversion Fee:

  	
  $[**] per loan

  



 


	
  5.             Rehabilitation
  Reconversion Fee

  	
  $[**] per loan

  



 


IV.           DUE
DILIGENCE/PRE-CLAIMS/CLAIMS PROCESSING


 


1.             Skip Trace


 


	
  a.

  	
  Placement:

  	
  [**]

  
	
  b.

  	
  Locate:

  	
  $[**] per loan

  



 


2.             Late Fees:              [**]% of all collected late
fee revenue on delinquent accounts


 


3.             Third Party Referral (referral to
third party under contract with the Servicer for core/collection after
successful location):             $[**] per
Borrower per bond issue


 


4.             Claim
Processing:                 The Owner shall
pay a claim processing fee of $[**] for each defaulted Student Loan per claim
package filed. Claim processing shall include, without limitation, presentation
to Insurer of all documentation required under the Servicing Guidelines, in the
form required thereunder.  Servicer will
provide DDB Certification and Closed School Certification at no charge.


 


V.            CURE
SERVICING—Owner-Caused Cures


 


	
  1.             Monthly fee

  	
  $[**] per account

  
	
  2.             Skip Tracing—Locate

  	
  $[**] per account

  
	
  3.             Third Party Referral

  	
  $[**] per account

  
	
  4.             Guaranty Reinstated/Default
  Claim Paid

  	
  $[**] per account

  
	
  5.             Correction of Owner Error  

  	
  $[**] per error

  



 


VI.           MISCELLANEOUS
FEES


 


	
  1.             Deconversion to Owner

  	
  $[**] per loan

  
	
  2.             Return of Records to Owner

  	
  $[**] per loan

  
	
   

  	
   

  
	
  3.             Early Termination

  	
  $[**] per Account

  
	
   

  	
   

  
	
  4.             Ad Hoc Projects/Reporting (fees to be
  pre-identified by the Servicer and billed as identified)

  



 


	
  a.

  	
  Computer Programmer

  	
  $[**]/hour

  
	
  b.

  	
  Computer Analyst

  	
  $[**]/hour

  
	
  c.

  	
  CPU Run Time

  	
  $[**]/hour

  
	
  d.

  	
  Staff Services

  	
  $[**]/hour

  
	
  e.

  	
  Legal Services

  	
  $[**]/hour

  
	
  f.

  	
  GLB extract files

  	
  [**] for no charge

  
	
   

  	
   

  	
  $[**] for each in excess
  of [**]

  



 


5.             Securitization (Financing,
Bond Issue)


 


	
  a.

  	
  Set-up Fee

  	
  $[**] per financing

  (includes [**] hours of legal services per financing)

  
	
  b.

  	
  Financing Legal Services

  	
  $[**]/hour (in excess of
  [**] hours per financing)

  
	
  c.

  	
  Post Closing, Loan
  Transfer within a financing

  	
  $[**] per Borrower per
  transfer

  



 


14

















 


	
  6.             Mailings

  	
   

  



 


	 
	
  a.

  	
  GLB privacy notices

  	
  $[**] per notice

  
	 
	
  b.

  	
  IRS Forms 1098/1099

  	
  $[**] per notice

  
	 
	
  c.

  	
  Other mailings or notices/
  Special delivery notices

  	
  Quote

  
	
   

  	
   

  
	
  7.             Basic Monthly Reporting

  	
  [**]

  
	
   

  	
   

  
	
  8.             SAS 70 Audit

  	
  [**]

  
	
   

  	
   

  
	
  9.             Lender’s Audit Guide

  	
  [**]

  
	
   

  	
   

  
	
  10.           Borrower Incentive
  Programs

  	
  Quote

  
				



 


VII.         ANNUAL ADJUSTMENT OF FEES


 


On
or before the end of the ninth month after the Effective Date of this
Agreement, and annually thereafter, Servicer may propose new fees to be
effective upon the anniversary of the Effective Date.  Servicer shall
provide documentation to FMC to justify any increase in fees.  The
increased fee can be based on additional costs documented by Servicer to
service the loans and/or equal to 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 (CPI/W) for the most recent twelve (12) month
period available at the time of each proposed adjustment.  Such increase
shall be effective upon the anniversary of the Effective Date.  Consent to
increases to fees based on the documented costs of the Servicer will not be
unreasonably withheld.  Any annual adjustment of fees shall be agreed upon
mutually by both parties.


 


15

















 


PRIVATE
STUDENT LOAN MONOGRAM PROGRAM AGREEMENT


BETWEEN


PENNSYLVANIA HIGHER EDUCATION ASSISTANCE  AGENCY


AND


THE FIRST MARBLEHEAD CORPORATION


 


SYSTEM ACCESS SCHEDULE


 


All
system access shall be limited to view only option.


 


1.
Lender Participant and Program Administrator.


 


Servicer shall provide
Program Administrator, upon approval by the Lender Participants, with
web-based, view-only Account access, which shall include the ability to view
loan servicing screens including but not limited to Borrower information,  Account history and due diligence records.


 


Individual users shall
obtain remote access within five (5) Business Days of receipt of notice
and additional necessary information from Program Administrator, as applicable
that such individual requires remote access.


 


2. FMC/FMDS/FMER/FMLOS USER
ACCESS SECURITY REQUIREMENTS


 


The Servicer Relations group
of Program Administrator will be responsible for notifying the Servicer to add
and delete Program Administrator and FMER employees who need, or no longer
need, access as appropriate.  On a quarterly
basis, Servicer will provide Program Administrator with a report of Program
Administrator and FMER employees who have system access to Borrower
information.  Program Administrator shall
be responsible for the accuracy of such reports and shall be liable for the
inaccuracy thereof in accordance with Section 6 (Liability) of this
Agreement.


 


16

















 


PRIVATE
STUDENT LOAN MONOGRAM PROGRAM AGREEMENT


BETWEEN


PENNSYLVANIA HIGHER EDUCATION ASSISTANCE-AGENCY


AND


THE FIRST MARBLEHEAD CORPORATION


 


CUSTOMER SERVICE SCHEDULE


 


1. Call Monitoring.


 


Servicer shall monitor on a
monthly basis a minimum of [**]% of the calls received per customer service
representative for quality.


 


2. Customer Service Hours of
Operation


 


The Servicer shall maintain
minimum customer service hours of operation Monday through Friday.  The Servicer and the Program Administrator
shall agree on these minimum hours of operation.  Program Administrator, at the direction of a
Lender Participant, reserves the right to request an increase and/or decrease
in these hours upon written notice to Servicer, and Servicer agrees to
accommodate such requests to the extent feasible under the circumstances.


 


3. Collections Hours of
Operation


 


Servicer shall maintain
minimum hours of operations for collection activities.  The Servicer and the Program Administrator
shall agree on these minimum hours of operation.  Program Administrator, at the direction of a
Lender Participant, reserves the right to request an increase and/or decrease
in these hours upon written notice to Servicer, and Servicer agrees to
accommodate such requests to the extent feasible under the circumstances.


 


4. Borrower Satisfaction
Surveys


 


The Servicer shall work with
Program Administrator to develop telephonic borrower satisfaction surveys to
measure the customer experience through various channels including mail,
internet, and Voice Response Unit.  If
surveys demonstrate customer service issues that require remedial action,
Servicer shall collaborate with Program Administrator to resolve such issues.


 


5. Borrower
Correspondence/Complaints


 


All correspondence received by Servicer
relating to individual Borrower Accounts shall be maintained by the Servicer
and shall be made available to Program Administrator during Servicer’s normal
business hours.  Servicer shall be
responsible for handling all customer service complaints.  Copies of escalated customer complaints from
Borrowers and Servicer’s response thereto are to be forwarded to Program
Administrator on a weekly basis. 
Complaints with respect to Student Loans and/or Borrowers received from
any regulatory body or federal or state agency shall be handled as exceptions
and, if allowed, Service shall contact Program Administrator immediately.


 


17

















 


PRIVATE
STUDENT LOAN MONOGRAM PROGRAM AGREEMENT


BETWEEN


PENNSYLVANIA HIGHER EDUCATION ASSISTANCE-AGENCY


AND


THE FIRST MARBLEHEAD CORPORATION


 


SERVICE LEVEL AGREEMENTS


 


Servicer agrees to adhere to
the Service Level Agreement (SLA) outlined below.


 


The Servicer will provide
Program Administrator with monthly reports setting forth Servicer’s performance
relative to the below SLA for the month covered by the report, the month prior
to the month covered by the report, and the Servicer’s year-to-date average performance
level through the month covered by the report. These reports will be made
available to Program Administrator no later than fifteen (15) Business Days
following the last day of the month covered by the report.


 


I.             Customer Service Standards:


 


Telephone and Internet Chat
Standards:


 


·      Average Speed of Answer: [**] seconds or less.


·      Abandonment Percentage: Average not greater than [**]%.


·      Call Blockage: [**]% or less.


·      Call Quality Assessment: Average rating not less than [**]% - utilizing
Servicer’s evaluation form as set forth and incorporated herein at Exhibit 1.


·      Borrower Satisfaction:  Average
rating in annual survey not less than [**]%.


 


Correspondence Standards


 


·      Mail sorted and distributed within: 
Servicer’s Service Objective: 
[**]% within one Business Day not to exceed two Business Days on
average.


·      General
Borrower correspondence answered within [**] Business Days of receipt on
average — Servicer’s Service Objective: [**] days.  During peak processing months of January through
March, August, and October, correspondence answered within [**] Business Days
of receipt on average.  (This standard
shall not apply to any correspondence involving death, disability, or
bankruptcy Accounts.)


·      Borrower Email
Correspondence:  Answered within an
average of [**] Business Days of receipt.


·      School Correspondence:
Answered within [**] Business Days of receipt on average — Servicer’s Service
Objective: [**] days.  During peak
processing months of January through March, July, and September school
correspondence answered within [**] Business Days of receipt on average.


·      Clearinghouse Correspondence
(Manual Processing Only):  Answered
within [**] Business 


 


18

















 


Days of receipt on average —
Servicer’s Service Objective: [**] days. 
During peak processing months of January through March, June, and October through
November Clearinghouse correspondence answered within [**] Business Days
of receipt on average.


·      Deferment Processing:
Processed within [**] Business Days of receipt on average — Servicer’s Service
Objective: [**] days.  During peak
processing months of February and August through November deferments
processed within [**] Business Days of receipt on average.


·      Forbearance Processing:
Processed within [**] Business Days of receipt on average — Servicer’s Service
Objective: [**] days.  During peak
processing months of January through March,  August, November through December forbearances
processed within [**] Business Days of receipt on average.


·      Miscellaneous Account
Reviews and adjustments completed within [**] Business Days of receipt on
average — there are exceptions to this process.


 


II.            Payment Processing


 


·      Non-Exception Loan Payments: Posted within an average of [**] Business Day
of receipt — [**]% of the time.


·      Exception Loan Payments: Processed/resolved within an average of [**]
Business Days of receipt — [**]% of the time


 


III.        Fraud Prevention


 


Fraud
notification to Program Administrator within [**] Business Days of initial
notification.


 


IV.           System Requirements


 


·      System Availability (scheduled CICS system up
time): [**]% or better.  This standard
shall not include the measurement for web based applications, batch processes,
or scheduled CICS down time including but not limited to Sunday maintenance.


 


·      Screen
Navigation - Servicer shall provide an
average internal CICS response time of less than [**]. This measurement shall only be
applicable to Servicer’s provision of screen navigation and shall not be
impacted nor include measurement relative to users’ internet based access to
the screens because AES/PHEAA has no ability to control response times for
users’ ISP connections or internal
network performance. Servicer
shall report the internal average response time on a monthly basis for the CICSL0PA
system including the availability percentage for that system for normal
scheduled hours of usage.


 


V.            Conversion


 


·      Servicer
shall convert all FMC Administrator Student Loan origination data necessary for
servicing hereunder onto its Servicing System within [**] days of receipt
of complete Student Loan files containing critical and non-critical
documentation from FMER.


 


19