Document:

exv10w31

 

EXHIBIT 10.31

	 	 	 
	Federal FFEL
	 	 	 	 
	 
	Origination/Servicing Agreement

Consolidation Loan Funding II, LLC

January 1, 2004

One World Trade Center, Suite 2200, Long Beach, CA 90831, 310/513-2700

2277 East 220th Street, Long Beach, CA 90810, 310/513-2700

2505 South Finley Road, Lombard, IL 60148, 630/620-2700

501 Bleecker Street, Utica NY 13501, 315/738-2300

 

 

	 	 	 
	

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TABLE OF CONTENTS

	 	 	 	 	 	 	 
	Section	 	 	 	Page	 
	1.
	 	ACS Obligations	 	 	1	 
	2.
	 	LENDER Obligations	 	 	4	 
	3.
	 	Banking	 	 	5	 
	4.
	 	Charges	 	 	5	 
	5.
	 	Term and Termination	 	 	6	 
	6.
	 	Examination of Records	 	 	7	 
	7.
	 	Exclusion of Warranties and Limitations of ACS’s Liability	 	 	7	 
	8.
	 	Indemnification	 	 	10	 
	9.
	 	Contingency Plan	 	 	11	 
	10.
	 	Financial and Administrative Responsibility	 	 	11	 
	11.
	 	Audits	 	 	12	 
	12.
	 	Waiver of Jury Trial	 	 	12	 
	13.
	 	Miscellaneous	 	 	12	 
	14.
	 	ACS Representations and Warranties	 	 	15	 
	EXHIBIT A ORIGINATION SERVICES	 	 	 	 
	EXHIBIT B POST-ORIGINATION SERVICES	 	 	 	 
	EXHIBIT C SERVICING FEES	 	 	 	 
	EXHIBIT D NOTE EXAMINATION ELECTION	 	 	 	 
	EXHIBIT E BLANKET CURE TERMS	 	 	 	 
	EXHIBIT F PLUS CREDIT REVIEW SERVICES TERMS	 	 	 	 

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THIS AGREEMENT is made and entered into as of January 1, 2004 by and between ACS Education
Services, Inc. (“ACS”), f/k/a AFSA Data Corporation and Consolidation Loan Funding II, 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.  	ACS 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 ACS to assist it in managing its Federal Stafford (SSL), Federal PLUS and
Federal Consolidation loans through the use of the Service.

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

	1.  	ACS Obligations.

	 	A.  	ACS 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.  	ACS 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 ACS’s servicing system in accordance with this Agreement, or this
Agreement is otherwise terminated in accordance with Section 5 below.
	 
	 	C.  	ACS 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

	 	 	 	 	 
	 
	

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	 	   	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 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 ACS from time to time.
	 
	 	D.  	Within a reasonable period after delivery of the loan files to ACS (generally
within 30 days unless otherwise expressly agreed), ACS shall (i) establish and maintain
records received by ACS with respect to each Account and complete records of ACS’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 ACS for
LENDER hereunder, ACS 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 ACS for servicing, as requested by LENDER on Exhibit D
(Note Examination Election). Following such initial election, LENDER may from time to
time with ACS’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 ACS.
	 
	 	F.  	By undertaking the loan examination and other duties provided above, ACS
assumes no responsibility for the origination, disbursement, documentation or prior
servicing of any loan (except to the extent that ACS 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 ACS is required to commence

	 	 	 	 	 
	 
	

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	 	   	servicing of such loan hereunder. ACS 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 ACS
related thereto. The microfilm or other reproduction of each borrower file made by
ACS following delivery to ACS for servicing shall be prima facie evidence of the
record of loan documentation received and reviewed by ACS.
	 
	 	G.  	If requested in writing by LENDER, ACS shall provide cure services for loans
that are unguaranteed due to non-ACS errors, as provided in Exhibit E (Blanket Cure
Terms).
	 
	 	H.  	If ACS 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 ACS upon ACS’s written request for the disposition of such Account, which
shall remain on ACS’s servicing system pending such direction from LENDER. If LENDER
instructs ACS to deconvert any Accounts, ACS 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 ACS,
including any pertinent documents or information received or created by ACS
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 ACS. ACS 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, ACS 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 ACS to LENDER listing each
Account and certain other mutually-agreeable Account information; and
	 
	 	(4)  	Each Account record shall be removed from the ACS 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,

	 	 	 	 	 
	 
	

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	 	   	that no such fees shall be charged for any deconversion of Accounts upon termination
of this Agreement pursuant to Section 5.B. (upon ACS 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)),
ACS may participate therein on LENDER’s behalf. In such event, ACS 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, ACS 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 ACS 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. ACS 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 ACS promptly upon receipt
and promptly notify ACS of any discovered errors. ACS shall not be responsible for
damages or losses caused by any error disclosed by a report to LENDER unless such error
is brought to ACS’s attention within sixty (60) days after receipt by LENDER. This
time restriction shall be extended for the Lender Reporting System (LaRS) quarterly
reports, for which the LENDER shall have 90 days to bring an error to the attention of
ACS.
	 
	 	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
ACS) 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 ACS harmless from
any violation or non-compliance with any of the foregoing.

	 	 	 	 	 
	 
	

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	3.  	Banking.

	 	A.  	ACS shall establish a disbursement bank account for loan origination. Such
bank account shall be in a bank designated by ACS 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 ACS account at a
remittance banking/lock box facility at a bank selected by ACS which is reasonably
acceptable to LENDER, with all earnings on such account being retained by ACS. 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.  	Charges.

	 	A.  	LENDER shall pay ACS 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 ACS to LENDER. Payments become delinquent if not received by ACS
within thirty (30) days from the invoice date, 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 until March 1, 2004. 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.  	ACS ‘s fees are subject to adjustment by ACS (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 ACS
shall be entitled under this Agreement, LENDER agrees to reimburse ACS for (i)

	 	 	 	 	 
	 
	

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	 	   	any sales or use taxes or similar taxes now or hereafter imposed upon any goods or
services provided by or activities of ACS hereunder, and (ii) any expenses which ACS
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
ACS, LENDER may by written notice to ACS 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 ACS 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.
	 
	 	F.  	ACS shall have the right to offset any amounts due from ACS to LENDER against
the servicing fees or other amounts due ACS hereunder.

	5.  	Term and Termination.

	 	A.  	This Agreement is for a term beginning January 1, 2004, and ending on March 1,
2009; 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 (I2)-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 ACS’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

	 	 	 	 	 
	 
	

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	 	   	thereto (and including, without limitation, implementation or enforcement of
third-party servicer regulations promulgated by the Department), which in ACS’s
reasonable determination expose ACS to materially increased risk of liability to the
Secretary of Education, LENDER or any other party, impose materially increased
duties or obligations upon ACS, cause ACS to incur materially additional expense, or
materially restrict or derogate from ACS’s indemnification rights or liability
limitations under this Agreement, ACS 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 ACS’s reasonable judgment
appropriately addresses the increased risk, duties or obligations (which may include
an adjustment to ACS’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, ACS shall be entitled to terminate this Agreement upon 180
days’ prior written notice to LENDER. ACS shall not be entitled to charge any
deconversion fees hereunder in connection with the deconversion of LENDER’s loans
from ACS’s system following any termination by ACS under this Section 5.C, but ACS
shall be entitled to receive reimbursement of its reasonable file preparation and
shipping costs.
	 
	 	D.  	In the event that ACS 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 days’
prior written notice to ACS. In such event ACS shall not be entitled to charge any
deconversion fees hereunder in connection with the deconversion of LENDER’s loans from
ACS’s system following any termination by ACS under this Section 5.D, but ACS 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 ACS that it deems necessary to determine compliance with this Agreement. ACS shall
submit to like examination by any governmental agency or authority having supervisory jurisdiction
over LENDER.

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

	 	A.  	ACS 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

	 	 	 	 	 
	 
	

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	 	  	inaccurate. ACS 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 ACS 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.  	ACS 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 ACS. ACS hereby excludes and disclaims any and all other warranties

with respect to its services under this Agreement, and no employee, agent or
representative of ACS has the authority to bind ACS to any other oral or written
representation or warranty. LENDER will review all processing output, reports and
other information provided to it by ACS and will use due care and diligence to detect
and notify ACS of any errors therein which LENDER discovers. Upon prompt notification
to or discovery by ACS of any processing error or data inaccuracy, ACS shall re-perform
any processing to the extent practicable and necessary, without charge if ACS is at
fault and otherwise at a rate equal, in ACS’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. ACS 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.  	ACS 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 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, ACS’s liability,
if any, arising out of or in any way related to any act or omission by ACS in
connection with this Agreement or its services hereunder, including but not limited to
errors due to ACS, its equipment, operators, programmers, or program, shall be limited
to direct losses of principal and interest on rejected claims resulting directly and
primarily from ACS’s negligence or willful misconduct. In the event a loan is rejected
by a Guarantor directly and primarily due to ACS’s negligence or willful misconduct,
and ACS is unable to cure the loan within twelve (12) months of the final reject date,
ACS 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 ACS or its

	 	 	 	 	 
	 
	

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	 	   	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, ACS’s
liability, if any, arising out of or in any way related to any act or omission by ACS
in connection with any loans which (i) entered repayment status prior to the date that
ACS’s assumes servicing responsibility, or (ii) have previously been cured following
non-ACS 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
ACS’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.  	ACS 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 ACS 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 ACS 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 ACS’s ability to reperform or cure any error, shall
ACS be liable under any circumstances, (i) for any incidental, indirect, special,
punitive or consequential damages, or (ii) for failure to provide services herein for
reasons beyond its reasonable control, or (iii) for any violation of applicable law,
regulation or other requirement under this Agreement, where ACS’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 ACS’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

	 	 	 	 	 
	 
	

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	 	   	Guarantor) except where the uncollectibility or failure to pay such claim is
directly and primarily as a result of ACS’s negligence or willful misconduct as
provided hereinabove. These limitations on ACS’s liability and exclusion of damages
are independent of any other remedy or provision herein and shall not be affected by
ACS’s inability to reperform or cure any error or any failure of any other remedy or
provision.
	 
	 	H.  	ACS’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 ACS
	 
	 	I.  	No claim or action, regardless of form, arising out of or in any way related to
any act or omission by ACS 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 ACS giving rise to such claim or action. In the case of rejected claims
filed by LENDER due to ACS 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 ACS for the Service, are an essential part of the basis for the bargain
between the parties, and that ACS would not have entered into this Agreement but for
such provisions.

	8.  	Indemnification.

	 	A.  	If ACS 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 ACS against, and hold it
harmless from, all claims, losses, liabilities, and reasonable expenses (including
reasonable attorneys’ fees) arising thereunder, 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 ACS under this Agreement, in
which case ACS 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 ACS
shall be entitled to a defense and indemnity as provided above where a student alleges
that he or she

	 	 	 	 	 
	 
	

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	 	   	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, ACS 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 ACS, its employees, subcontractors or agents and
which arise out of the performance of this Agreement, provided that (a) LENDER gives
ACS 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 ACS to control, and reasonably
cooperates with ACS in, any related defense and all related settlement negotiations.

	9.  	Contingency Plan.

ACS 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 ACS’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 ACS 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.  	ACS agrees to provide LENDER with annual consolidated audited financial
statements, as soon as the same are made available to ACS during the term of this
Agreement.
	 
	 	C.  	ACS 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

	 	 	 	 	 
	 
	

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	 	   	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.

ACS agrees to provide LENDER with (i) a copy of ACS’s annual SAS 70 servicer audit without charge,
and (ii) a copy of ACS’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 ACS generally to
its other clients.

LENDER acknowledges that ACS 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 ACS for LENDER, as authorized
by law. Furthermore, LENDER agrees to provide ACS with written notice and copies of all audit
reports or findings (preliminary or final) relating to ACS’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 ACS 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 ACS 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 ACS in connection with this Agreement (except those supplied by LENDER)
shall be and remain the sole property of ACS.

	 	 	 	 	 
	 
	

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	 	B.  	All information belonging to LENDER shall be retained by ACS in confidence.
ACS 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, ACS 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 ACS’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 ACS.
	 
	 	F.  	ACS 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 ACS under, this Agreement.

	 	 	 	 	 
	 
	

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	 	G.  	LENDER agrees to provide ACS upon request with LENDER’s current financial
statements and such other financial information as ACS may request from time to time.
	 
	 	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 ACS or LENDER unless in writing and duly executed by ACS and
LENDER.
	 
	 	J.  	In the event any Account is transferred off ACS’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 ACS 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 ACS, at One
World Trade Center, Suite 2200, Long Beach, California 90831-2200, Attn: President, or
if to LENDER to:

Consolidation Loan Funding II, LLC

c/o CLF Il Management Corp.

Attn: Mr. Ryan D. Katz, President

9477 Waples Street

Suite 100

San Diego, CA 92121

With copies to:

	 	 	 	 	 
	 
	

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The Bank of New York Trust Company, 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.

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.  	ACS Representations and Warranties.
	 
	   	ACS hereby represents and warrants to LENDER the following:

	 	(i)  	ACS 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. ACS is eligible as a third
party servicer to service LENDER’s loans under the Higher Education Act
and applicable Guarantor Rules and Regulations.

	 	 	 	 	 
	 
	

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	 	(ii)  	ACS 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 ACS and constitutes a valid, legal and
binding agreement of ACS, 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 ACS of this
Agreement will conflict with or result in a breach or violation of or
default under any of (i) organizational documents of ACS, (ii) any laws
applicable to ACS 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.
	 
	 	(iv)  	ACS 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 ACS’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.

ACS EDUCATION SERVICES, INC.

	 	 	 	 	 
	By:

	 	 /s/ Steven E. Snyder	 	 
	

	 	 	 	 
	

	 	Steven E. Snyder, Managing Director	 	 
	 
	 	 	 	 
	By:

	 	 /s/ Meliss Hankin	 	 
	

	 	 	 	 
	

	 	Meliss Hankin, Senior Vice President	 	 

	 	 	 	 	 
	 
	

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CONSOLIDATION LOAN FUNDING II, LLC

By: CLF II Management
Corp., Manager

	 	 	 	 	 
	By:

	 	 /s/ Ryan D. Katz	 	 
	

	 	 	 	 
	

	 	Ryan D. Katz, President President	 	 

	 	 	 	 	 
	 
	

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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 ACS’s responsibilities hereunder.

In connection with the foregoing origination services, LENDER authorizes ACS 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 ACS, ACS 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.

	 	 	 	 	 
	 
	

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	II.  	APPLICANT NOTICES
	 
	•  	Validation Incomplete Letter - Requests information from the
borrower that is missing or invalid on their application.
	 
	•  	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 ACS 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 ACS’s responsibilities
hereunder.
	 
	III.  	REPORTS
	 
	•  	Application Error Report — ACS 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

	 	 	 	 	 
	 
	

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	   	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 — ACS internal report
used to identify those loans, which passed
validation. The report displays key data elements to
verify their correct entry.
	 
	•  	Approved Loan Listing — ACS internal report which
provides evidence of loan guarantee by the Guarantor.
This report enables reduced application processing
time and paper flow. This report allows ACS 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.

	 	 	 	 	 
	 
	

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ATTACHMENT 1

Consolidation Loan Origination Servicing Goals

ACS 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 ACS requesting funds
	 
	 	 	 	 
	*
	 	Convert	 	1 Business Day
	 
	 	 	 	 
	*
	 	Request Guarantees	 	3 Business Days

Notwithstanding the foregoing, the parties acknowledge that ACS 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 ACS)
involved in the origination process.

	 	 	 	 	 
	 
	

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EXHIBIT B

POST-ORIGINATION
SERVICES

	1.  	LOAN CONVERSION

At the time of purchase or placement of a loan with ACS 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

	 	 	 	 	 
	 
	

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Billing
Notices:

   Interim Interest Notices

Regular
Installment and Past Due Payment Notices

Interim
and Payout Demand Notices

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 ACS’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 ACS’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

	 	 	 	 	 
	 
	

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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 Lender Reporting System (LaRS) reports (or their successor)

	 	 	 	 	 
	 
	

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EXHIBIT C

SERVICING FEES

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	Manual	 	 	 	Automated	 
	ORIGINATION SERVICES*
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	FEDERAL SSL/PLUS
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Less than $2.5 Million/Year
	 	 	 	 	 	 	$	16.48	 	 	 	$	10.82	 
	Greater than $2.5 Million/Year
	 	 	 	 	 	 	$	10.82	 	 	 	$	9.22	 
	 	 	 	 	 	 	 
	CONSOLIDATION – Modified**
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	First 40,000 Consolidations through December 31, 2004
	 	 	 	 	 	 	 	 	 	 	 	$	22.00	 
	40,001 + through December 31, 2004
	 	 	 	 	 	 	 	 	 	 	 	$	20.00	 
	CONSOLIDATION – Full
	 	 	 	 	 	 	 	 	 	 	 	$	56.65	 
	 	 	 	 	 	 	 
	SET UP
FEES FOR NEWLY ORIGINATED LOANS***

	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	FEDERAL SSL/PLUS
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Fee per Disbursement
	 	 	 	 	 	 	$	2.37	 	 	 	$	1.34	 
	 	 	 	 	 	 	 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Grace and	 	 	Consolidation	 
	 	 	In-school+	 	 	Repayment+#	 	 	Repayment+#	 
	MONTHLY
SERVICING FEDERAL FFEL

	 	 	 	 	 	 	 	 	 	 	 	 
	Per Month^
	 	$	1.48	 	 	$	3.31	 	 	$	3.12	 
	 
	DEFAULT RELATED FEES^^
	 	 	 	 	 	 	 	 	 	 	 	 
	FEDERAL FFEL
	 	 	 	 	 	 	 	 	 	 	 	 
	Claim Filing
	 	$	20.81 +50 BP	 	 	 	 	 	 	 	 	 
	Resubmission
	 	$	20.81	 	 	 	 	 	 	 	 	 
	Underpaid Claim Processing
	 	$	20.81	 	 	 	 	 	 	 	 	 
	DDB Certification
	 	$	23.07	 	 	 	 	 	 	 	 	 
	Resales
	 	$	28.84	 	 	 	 	 	 	 	 	 
	Repurchases
	 	$	20.81	 	 	 	 	 	 	 	 	 
	Recalls
	 	$	20.81	 	 	 	 	 	 	 	 	 

	 	 	 	 	 
	 
	

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	*

	 	Loans originated by ACS will be disbursed from an ACS maintained bank account. A separate
loan origination and set-up fee is charged for each type of loan originated based upon each
application.
	 
	 	 
	**

	 	Beginning January 1, 2005, the parties shall annually determine ongoing consolidation
origination fees based on the volume levels for each prior contract year.
	 
	 	 
	***

	 	Client disbursed loans will be placed with ACS within 30 days of disbursement. Automated fee
assumes that data will be transmitted in a format acceptable to ACS.
	 
	 	 
	+

	 	In-school and grace status accounts with one or more unsubsidized
FFELP loans are charged an additional $.20 per month.
	 
	 	 
	#

	 	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 $3.09 per account delinquent over 30 days if
portfolio delinquency exceeds ACS’s average delinquency by more than
1% for the month.
	 
	 	 
	^^

	 	Assumes guarantor policies, procedures and practices are in accordance
with generally established industry standards.

	 	 	 	 	 
	 
	

	 	Confidential and Proprietary
	 	26

 

	 	 	 	 	 
	

	 	FEDERAL FFEL	 	 
	 	 	 
	

	 	 ORIGINATION/SERVICING AGREEMENT	 	 

ADDITIONAL AND OPTIONAL SERVICES

	 	 	 	 	 	 
	 	Ad Hoc Reporting
	 	 	$75/hour; $206 minimum per report	 
	 	Bond Swap
	 	 	$2.06/account	 
	 	Borrower Incentive Programs
	 	 	$3,090 one-time program set-up fee, plus	 
	 	 
	 	 	$2.00 set-up fee per participating borrower	 
	 	Conversion Fees:
	 	 	 	 
	 	Interim Automated or On System No
	 	 	$3.00	 
	 	Exam
	 	 	 	 
	 	Repay Automated or On System No Exam
	 	 	$3.75	 
	 	Cure Fees
	 	 	Cost plus 15%	 
	 	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%	 
	 	Master File Tape (Standard Format)
	 	 	$103/each	 
	 	NSF Charges
	 	 	Direct Cost	 
	 	On-line Access Via the Internet
	 	 	$150/month first 2 users; $50/month fore  ach user >2	 
	 	Overpaid Refunds
	 	 	$3.50/each	 
	 	PLUS Credit Review
	 	 	$3.40/application	 
	 	PLUS Pre-Approval
	 	 	$5.00/decision	 
	 	Post-Conversion Research
	 	 	$20/hour	 
	 	Privacy Notices (for Gramm-Leach-Bliley compliance)
	 	 	ACS mails notices: $.97 per mailing Lender
mails notices: No charge, but if ACS
supplies labels to Lender, charge is $.41
per paper label or $.13 per electronic
label
	 
	 	Private Loan Program Setup
	 	 	$5,000	 
	 

	 	 	 	 	 
	 
	

	 	Confidential and Proprietary
	 	27

 

 

	 	 	 	 	 
	

	 	FEDERAL FFEL	 	 
	 	 	 
	

	 	 ORIGINATION/SERVICING AGREEMENT	 	 

	 	 	 	 	 	 
	 	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	 
	 	Special Activities (Requested by Client or Guarantor)
	 	 	Quotation	 
	 	Special Delivery (Requested by Client)
	 	 	Cost plus 20%	 
	 	Tax Notices and IRS Reporting (1098E)
	 	 	$0.75/notice	 
	 	Wire Transfer Fees> 5/month
	 	 	Direct Cost	 
	 

     NOTE: Minimum monthly billing: $500.00.

	 	 	 	 	 
	 
	

	 	Confidential and Proprietary
	 	28

 

 

	 	 	 	 	 
	

	 	FEDERAL FFEL	 	 
	 	 	 
	

	 	 ORIGINATION/SERVICING AGREEMENT	 	 

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 ACS in connection with loan files to be serviced by ACS hereunder
(other than any loans which may be originated by ACS for LENDER):

ACS ENCOURAGES ALL LENDERS TO HAVE A NOTE EXAMINATION PERFORMED UPON ALL NON-ACS ORIGINATED FILES
TO BE DELIVERED TO ACS 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, ACS’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.

3⁄4      FULL NOTE EXAMINATION

If LENDER has elected Full Note Examination, ACS 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 ACS and approved by LENDER. By undertaking such
review, however, ACS does not guarantee or assure the genuineness, accuracy, completeness or
compliance of such documentation with any contract or with applicable law and regulation.

3⁄4      ABBREVIATED NOTE EXAMINATION

If LENDER has elected Abbreviated Note Examination, ACS 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
ACS and approved by LENDER. By undertaking such review, however, ACS 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.

	 	 	 	 	 
	 
	

	 	Confidential and Proprietary
	 	29

 

 

	 	 	 	 	 
	

	 	FEDERAL FFEL	 	 
	 	 	 
	

	 	 ORIGINATION/SERVICING AGREEMENT	 	 

3⁄4      NO NOTE EXAMINATION

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

	 	 	 	 	 
	 
	

	 	Confidential and Proprietary
	 	30

 

 

	 	 	 	 	 
	

	 	FEDERAL FFEL	 	 
	 	 	 
	

	 	 ORIGINATION/SERVICING AGREEMENT	 	 

EXHIBIT E

BLANKET CURE TERMS

The following Blanket Cure Terms shall apply between LENDER and ACS when in the course of its
servicing, ACS submits claims to Guarantors which are rejected by the Guarantor for servicing
errors which occurred prior to ACS’s servicing or for which ACS 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 ACS’s servicing or for which ACS is otherwise
not liable under the Servicing Agreement, ACS and/or an outside collection agency
selected by ACS 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.  	ACS will use best efforts to undertake such cure services within 30 days of
receipt of a rejected Account. If ACS is unable to cure the Account within an
approximate 45-day period following commencement of cure services, or if ACS in its
sole judgment determines not to attempt to cure the Account itself, ACS will place the
Account with an outside collection agency. If the collection agency is unable to cure
the Account, ACS may then place the Account with a different collection agency(ies).
Following placement with any outside collection agency, ACS shall only be responsible
for administrative services in interfacing with such agency on the Accounts involved.
ACS shall not have any responsibility for training or otherwise supervising the outside
collection agency or its personnel.

	 	 	 	 	 
	 
	

	 	Confidential and Proprietary
	 	31

 

 

	 	 	 	 	 
	

	 	FEDERAL FFEL	 	 
	 	 	 
	

	 	 ORIGINATION/SERVICING AGREEMENT	 	 

	 	D.  	For the cure services specified herein. LENDER shall pay to
ACS a fee for each Account cured as specified in Exhibit C. Such fee
is subject to adjustment from time to time upon 30 days' prior written
notice from ACS to LENDER.

     2. Limitations on ACS’s Liability

	 	A.  	LENDER acknowledges that in placing Accounts with outside collection agencies,
ACS is merely providing an administrative service to LENDER. Accordingly, ACS 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. ACS 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 ACS
for which ACS would be liable under the Servicing Agreement, ACS 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, ACS shall not otherwise be liable for damages or other monetary
relief except in the case of ACS’s gross negligence or willful misconduct.
	 
	 	C.  	ACS 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 ACS’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, ACS 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.

4. Exclusions and Deconversion

LENDER hereby gives approval for ACS to undertake the cure services outlined in Section 1 of this
Exhibit on Accounts with a principal balance outstanding (PBO) of $500 or greater.

	 	 	 	 	 
	 
	

	 	Confidential and Proprietary
	 	32

 

 

	 	 	 	 	 
	

	 	FEDERAL FFEL	 	 
	 	 	 
	

	 	 ORIGINATION/SERVICING AGREEMENT	 	 

Accounts with PBOs 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.

	 	 	 	 	 
	 
	

	 	Confidential and Proprietary
	 	33

 

 

	 	 	 	 	 
	

	 	FEDERAL FFEL	 	 
	 	 	 
	

	 	 ORIGINATION/SERVICING AGREEMENT	 	 

EXHIBIT F

PLUS CREDIT REVIEW SERVICES TERMS

ACS 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 ACS 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
writeoff 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 ACS and LENDER to which these PLUS
Credit Review Services Terms are attached, or to which they relate.

	 	 	 	 	 
	 
	

	 	Confidential and Proprietary
	 	34

 

 

	 	 	 	 	 
	

	 	FEDERAL FFEL	 	 
	 	 	 
	

	 	 ORIGINATION/SERVICING AGREEMENT	 	 

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

2. Credit Review Services

	 	A.  	ACS 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)  	ACS 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.  	ACS 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. ACS shall be entitled to rely upon all information
furnished to ACS 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 ACS on LENDER’s behalf from a national credit bureau.

	 	 	 	 	 
	 
	

	 	Confidential and Proprietary
	 	35

 

 

	 	 	 	 	 
	

	 	FEDERAL FFEL	 	 
	 	 	 
	

	 	 ORIGINATION/SERVICING AGREEMENT	 	 

	 	(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:

	 	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 ACS
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 ACS’s services.
	 
	 	(7)  	Upon request by LENDER from time to time, return the original
or a copy of each Loan Application processed by ACS (other than electronically
transmitted Loan Applications, which will not be transmitted to LENDER) for
which an Adverse Credit history exists, and other information in ACS’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 ACS 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.

	 	 	 	 	 
	 
	

	 	Confidential and Proprietary
	 	36

 

 

	 	 	 	 	 
	

	 	FEDERAL FFEL	 	 
	 	 	 
	

	 	 ORIGINATION/SERVICING AGREEMENT	 	 

	 	(3)  	Communicate after the credit denial appeal process is
completed, its approval of a Loan Application to ACS for each Applicant which
ACS 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 ACS 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 ACS a
loan production office or a holder or originator of any PLUS Loan,
the 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,
ACS shall only be liable for its own gross negligence or intentional misconduct. ACS 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 ACS’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.

	 	 	 	 	 
	 
	

	 	Confidential and Proprietary
	 	37exv10w32

 

EXHIBIT 10.32

Guarantee Agreement

Between

Massachusetts Higher Education Assistance Corporation

And

The Bank of New York as eligible Lender Trustee for Higher
Education Funding I

     WHEREAS, The Massachusetts Higher Education Assistance Corporation doing business as
American Student Assistance (hereinafter “ASA”), at 330 Stuart Street, Boston, Massachusetts 02116,
a private nonprofit corporation created by Chapter 298 of the Acts of 1956 of the Commonwealth,
administers several loan guarantee programs providing financial assistance to and on behalf of
students enrolled in programs of higher education; and

     WHEREAS, The Bank of New York as Eligible Lender Trustee for Higher Education Funding I
(hereinafter “LENDER”), qualifies as an eligible lender under one or more of these programs,
fulfilling such criteria as have been set forth by federal and state statute and regulation, and
those set forth by the Board of Directors of ASA pertaining to the particular program; and

     WHEREAS, LENDER is willing to make loans to eligible borrowers as such are defined in this
agreement and in the policies of ASA, and ASA is willing to guarantee the payment of principal and
interest in the event of the borrower’s default of repayment in accordance with the terms and
conditions set forth herein.

     NOW THEREFORE, in consideration of the mutual covenants contained herein, ASA and LENDER agree
as follows:

Section 1. DEFINITIONS

     1. These definitions are meant to incorporate and be consistent
with the more detailed definitions within the Federal Family Education Loan
Program Regulations located at 34 C.F.R. § 682 et seq.

     2. “AGREEMENT” — shall mean this GUARANTEE agreement to the extent
that LENDER and ASA have indicated the willingness of each to participate in
the programs as evidenced by signature or initial.

     3. “BORROWER” — shall mean any person or persons executing a
promissory note individually or jointly for the purpose of obtaining funds from
LENDER under one of the programs authorized by this Agreement.

 

	4.  	“DEFAULT” — shall mean the failure of the BORROWER to repay
borrowed amounts when due, and/or the failure of the BORROWER to comply with
the terms of the promissory note.
	 
	5.  	“DUE DILIGENCE” — shall mean the utilization by LENDER of
policies, practices and procedures in the origination, servicing and collection
of loans which are consistent with LENDER’s policies, practices and procedures
applicable to its other consumer loan and credit portfolios and which comply
with the requirements of federal and state statute and regulation and ASA
policies. DUE DILIGENCE includes, but is not limited to, the remission of
guarantee fees to ASA in an amount and time frame as specified by ASA.
	 
	6.  	“FEDERAL STUDENT LOAN RESERVE FUND” (referred to as Federal
Fund) shall mean the reserve account maintained by ASA as a source from which
to pay insurance claims and to assure LENDER of the ASA’s ability to perform
its commitments to LENDER under this Agreement.
	 
	7.  	“FORMS” — shall mean such application forms, promissory notes
and administrative forms as are provided by and/or required by ASA for
participation in any of the programs authorized by this AGREEMENT.
	 
	8.  	“GUARANTEE” — shall mean the guarantee of payment given by ASA
to LENDER by which ASA covenants to pay to LENDER such principal and interest
as may be provided by the terms of each program after being assured that LENDER
has exercised DUE DILIGENCE in its origination, servicing and collection and
that the necessary documents have been submitted to ASA in the form required.
	 
	9.  	“LIMITATION, SUSPENSION OR TERMINATION” — shall mean the
restrictions imposed by ASA upon LENDER’s continued participation in any of the
programs authorized by this AGREEMENT. The cause of such restrictions, the
process by which such restrictions may be imposed, and their nature and scope
are set forth in Section 3 of this AGREEMENT.
	 
	10.  	“SCHOOL” — Shall mean an institution of higher education as
that term is defined in section 481 of the ACT and 34 CFR 682.200, whose
programs satisfy the definition of “eligible program” in 34 CFR 668 and which
has in effect a current agreement with the Secretary under 34 CFR 682.600.
	 
	11.  	“FEDERAL FAMILY EDUCATION LOAN PROGRAM” shall mean the Federal
Stafford Loan, Federal PLUS Loan, Federal Supplementary Loans for Students,
Federal Consolidation Loan and other federal education loan programs
administered by ASA.

	   	Section 2. TERMS AND CONDITIONS OF LOANS ORIGINATED AND HELD UNDER THE FEDERAL FAMILY EDUCATION
LOAN PROGRAM ADMINISTERED BY ASA

	1.  	Statutes governing the FEDERAL FAMILY EDUCATION LOAN PROGRAM
are enacted as Part B of Title IV of The Higher Education Act of 1965, as
amended (20 United States Code Section 1071 et seq.). Regulations affecting
program administration are adopted by

2

 

the Secretary of the United States
Department of Education and are published in the Code of Federal Regulations.
Proposed revisions to such Regulations are published in the Federal Register.

	2.  	ASA participates in the FEDERAL FAMILY EDUCATION LOAN PROGRAM
as a private nonprofit guarantee agency pursuant to contractual agreements with
the United States Department of Education. These agreements confer eligibility
upon BORROWERS to receive full or partial interest subsidy, upon lenders to
receive interest and special allowance payments and upon ASA to receive
insurance and reinsurance payments in the event of death, disability,
bankruptcy, closed school, false certification or DEFAULT. ASA hereby
represents and covenants that it will structure and operate its programs in
such a manner as to preserve to the full extent possible the benefits of these
federal agreements.

	3.  	LENDER covenants that it will comply with all applicable
requirements of federal and state statutes and regulations and with all
requirements and policies of ASA. Furthermore, LENDER will administer the
FEDERAL FAMILY EDUCATION LOAN PROGRAM in conformity with sound lending
practices and standards of DUE DILIGENCE as applied to the programs.

	4.  	In its administration of the FEDERAL FAMILY EDUCATION LOAN
PROGRAM, LENDER shall utilize forms approved and distributed by ASA and/or by
the United States Department of Education. LENDER will also be authorized to
collect and shall collect such fees as may be required of the BORROWER, by ASA,
or the United States Department of Education, and shall apply the payment or
allocation of such fees as directed.

	5.  	In the event of the DEFAULT, death, total and permanent
disability, closed school, false certification or discharge in bankruptcy of a
BORROWER, as such events are defined in applicable law and regulation, ASA will
accept a claim for payment upon its GUARANTEE and, if satisfied that the loan
is based on an enforceable note and that standards of DUE DILIGENCE have been
met, make payment to LENDER in an amount equal to the outstanding and unpaid
principal amount plus interest accrued since the date of last payment or
maturity to the date of payment by ASA, to the extent that such interest does
not exceed the maximum number of days authorized by ASA or federal law and
regulations.

	6.  	LENDER agrees that it will prepare and make available such
reports or other information as may be reasonably required by ASA or the United States Department of Education and further, that independent auditors or
authorized representatives of ASA or such Department shall have access to
the operations and financial records and procedures pertaining to the
Stafford, PLUS, SLS and Consolidation programs or any other federal program
administered by ASA.

	 
	7.  	If LENDER shall violate, or fail to comply with, any of the
terms of this Agreement, it shall become liable to ASA in an amount equal to
the damages sustained by ASA by virtue of such violation or failure to comply.
ASA may, at its option, and in addition to any other remedies available to it
at law or in equity, invoke and apply the provisions of Section 3 of this
AGREEMENT relating to LIMITATION, SUSPENSION OR TERMINATION.

3

 

Section 3. LIMITATION, SUSPENSION OR TERMINATION OF LENDER PARTICIPATION

	1.  	As a lender participating in the FEDERAL FAMILY EDUCATION LOAN
PROGRAM administered by ASA, LENDER shall administer its loan portfolio(s) in
accordance with applicable federal and state law and regulations, with ASA
policies, and with sound lending practices.

	2.  	In the event that ASA determines that LENDER’s administration
of such programs does not satisfy the required levels of DUE DILIGENCE or that
the DEFAULT or delinquency rate of loans originated or held by LENDER is
excessive, ASA will inform LENDER of the noted deficiencies and of corrective
actions required in order to continue participation.

	3.  	LENDER shall implement the recommended corrective action and/or
take other action to rectify each of the administrative deficiencies noted by
ASA within the time specified by ASA or as agreed to by LENDER and ASA.

	4.  	In the event that LENDER fails to rectify such deficiencies in
a timely and prudent manner, ASA may, in its discretion, impose LIMITATION,
SUSPENSION OR TERMINATION sanctions as it may deem appropriate, after affording
LENDER an opportunity to respond. However, ASA may impose such sanctions on
LENDER without a hearing if ASA determines that emergency action is necessary
in order to prevent monetary loss to ASA and the federal government. LENDER
may appeal any LIMITATION, SUSPENSION OR TERMINATION sanctions by ASA.

	5.  	LIMITATION sanctions provide for the continued participation of
LENDER but subject to such special conditions, procedures or timetables as may
be established by ASA.
	 
	6.  	SUSPENSION sanctions include the temporary termination of
LENDER’s eligibility for participation for a specified period of time or until
LENDER satisfies the standards established by ASA to remove the SUSPENSION.

	7.  	TERMINATION sanctions may be invoked by ASA where the
administrative deficiencies are substantial and where LENDER has not taken
timely corrective action. TERMINATION of LENDER’S eligibility for
participation will be effected after having provided LENDER with an opportunity
for a hearing. Restoration of LENDER’s eligibility for participation can be
accomplished only upon submission of a new application for such participation
and ASA’s approval of such application after consideration of eligibility
standards then required by the Board of Directors.

     Any LIMITATION, SUSPENSION OR TERMINATION hereunder shall be prospective only and shall
not affect the obligations of the parties hereto which were incurred prior to such LIMITATION,
SUSPENSION OR TERMINATION.

     The AGREEMENT may be modified only by written agreement of the parties hereto. Any
waiver, modification or failure to insist upon the strict performance of the duties of either

4

 

party to this AGREEMENT shall not be construed as a waiver or modification generally or of
such particular condition in a subsequent instance.

     This AGREEMENT may be terminated by either party at anytime by providing at least thirty (30)
days’ written notice of such termination to the other party hereto. Such termination, however,
shall be prospective only and shall not affect the obligations of the parties hereto, which were
incurred prior to such termination.

     IN WITNESS WHEREOF, ASA and LENDER have caused this instrument to be executed by duly
authorized officers and affixed with the corporate seal of each as of the day and year indicated
below.

     By checking below, LENDER signifies its intent to participate in the programs checked.

	 	[X]   	Participation in the Federal (Subsidized and Unsubsidized) Stafford Loan
Programs
	 
	 	[X]    	Participation in the Federal PLUS Loan Program
	 
	 	[X]    	 Participation in the Federal Consolidation Loan Program
	 
	 	[  ]   	 Participation in the Federal Loan Rehabilitation Program
	 
	 	[  ]   	 Participation in the ASA Lender of Last Resort Program

MASSACHUSETTS HIGHER EDUCATION ASSISTANCE CORPORATION doing business as AMERICAN STUDENT ASSISTANCE

	 	 	 	 	 
	

	 	By:
	 	/s/ Debra J. Chromy
	

	 	 	 	

	 
	 	 	 	 
	

	 	Printed Name:
	 	Debra J. Chromy
	 
	 	 	 	 
	

	 	Title:
	 	Vice President
	 
	 	 	 	 
	

	 	Date:
	 	February 5, 2004
	
	 	 	 	 

5

 

THE BANK OF NEW YORK AS ELIGIBLE LENDER TRUSTEE FOR HIGHER EDUCATION FUNDING I

	 	 	 	 	 
	

	 	By:
	 	/s/ Craig S. Wenzler
	

	 	 	 	

	 
	 	 	 	 
	

	 	Printed Name:
	 	Craig S. Wenzler
	 
	 	 	 	 
	

	 	Title:
	 	Assistant Vice President
	 
	 	 	 	 
	

	 	Date:	 	 
	

	 	 	 	

	 
	 	 	 	 
	

	 	EIN #:	 	 
	

	 	 	 	

	 
	 	 	 	 
	

	 	Lender Code:
	 	834117
	

	 	 	 	 

6

 

CERTIFICATE OF COMPREHENSIVE INSURANCE

For Consolidation Loans made in accordance with The Federal Family Education Loan Program (“FFELP”)
of the Higher Education Act of 1965, as amended and formerly known as the Guaranteed Student Loan
programs.

Massachusetts Higher Education Assistance Corporation doing business as American Student Assistance
(“ASA”), herein referred to as the “Agency,” authorizes that all Consolidation Loans made in
conformity with the requirements of the FFELP of the Higher Education Act of 1965, as amended
(“Act”), by The Bank of New York as Eligible Lender Trustee for Higher Education Funding I, herein
referred to as the “Lender,” are fully insured against loss of principal and interest by the
Agency, provided:

	 	1.  	The Lender has determined to its satisfaction, in accordance
with reasonable and prudent business practices, that for each loan being
consolidated -

	 	(a)  	the loan is a legal, valid, and binding
obligation of the borrower;
	 
	 	(b)  	such loan was made and serviced in compliance
with applicable laws and regulations; and
	 
	 	(c)  	the insurance on such loan is in full force and
effect.

	 	2.  	The Consolidation Loan(s) are made on or after July 1, 1987,
unless limited by the Act.
	 
	 	3.  	The total unpaid principal amount of all Consolidation Loans
made under this certificate is equal to or less than $1,000,000,000.
	 
	 	4.  	If the Lender, prior to expiration of this certification (which
occurs upon reaching of the dollar limit), no longer proposes to make
Consolidation Loans, the Lender shall notify the Agency so that the certificate
may be terminated. Such termination shall not affect the insurance on any
Consolidation Loan made prior to such termination.
	 
	 	5.  	The Lender’s loan consolidation program practices are subject
to the Agency’s FFELP Lender Participation Limitation, Suspension or
Termination procedures. The insurance on any loan(s) made under this
certificate prior to the Agency’s imposition of a limitation, suspension or
termination action shall not be affected by such action.
	 
	 	6.  	The Lender complies with the Agency’s Federal Consolidation
Loan policies and procedures. (As published in the Common Manual and/or
provided by the guarantor).

 

 

	 	7.  	The Lender notifies the Agency of the alternative repayment
terms which will be offered by the Lender.

Please note that the Agency reserves the right to change or modify the total amount of insurance
granted to the Lender under this Certificate, provided the Agency so notifies the Lender promptly
thereafter.

The Agency’s office at 330 Stuart Street, Boston, Massachusetts 02116 is designated as the office
which will process claims and perform other related administrative functions.

	 	 	 
	/s/ Debra J. Chromy

	 	2-5-04
	

	 	

	Debra J. Chromy

	 	Date

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