Document:

Exhibit 10.40

 

Confidential Materials omitted and filed
separately with the

Securities and Exchange Commission.  Asterisks denote omissions.

 

CERTIFICATE OF
SATISFACTION and

FIRST AMENDMENT TO LOAN
PROGRAM AGREEMENT

 

This Certificate of Satisfaction and First Amendment
to Loan Program Agreement (the “Certificate and Amendment”) is entered
into this 15th day of July, 2010, by and among First
Marblehead Education Resources, Inc., a Delaware corporation having its
principal offices at One Cabot Road, Medford, Massachusetts 02155 (“FMER”),
The First Marblehead Corporation, a Delaware corporation having its principal
offices at 800 Boylston Street, 34th Floor,
Boston, Massachusetts 02199 (“FMC”), and SunTrust Bank, a Georgia
state-chartered banking corporation having an office located at 1001 Semmes
Avenue, Richmond, Virginia 23224 (“SunTrust”).  Capitalized terms used in this Certificate
and Amendment without definition have the meanings assigned to them in the Loan
Program Agreement (as defined below).

 

WHEREAS, FMER, FMC, and SunTrust executed the Loan Program
Agreement by and among the Parties dated as of April 20, 2010 (the “Loan
Program Agreement”); and

 

WHEREAS, pursuant to Section 18.1.1 of the Loan Program
Agreement, the Parties agreed to the Effectiveness Conditions, the satisfaction
or waiver of which was required prior to the establishment of the Effective
Date of the Loan Program Agreement; and

 

WHEREAS, the Parties agree that each of the Effectiveness
Conditions has been satisfied or waived, as more fully set forth in this
Certificate and Amendment; and

 

WHEREAS, the Parties desire to execute this Certificate and
Amendment as the Effective Date Communication contemplated by Section 18.1.1 of
the Loan Program Agreement, and hereby to establish the Effective Date as July
15, 2010; and

 

WHEREAS, the Parties desire to amend the Loan Program
Agreement as set forth in this Certificate and Amendment.

 

NOW THEREFORE, in consideration of the promises and the
mutual covenants and agreements contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties agree as follows:

 

1.                                      Satisfaction or
Waiver of Effectiveness Conditions. The Parties agree that, as
of July 15, 2010:

 

(a) Each of SunTrust, FMC, and the Servicer has
executed the Servicing Agreement, a copy of which is attached hereto as Exhibit
A;

 

(b) SunTrust, FMC and FMER have agreed to amend the
Loan Program Agreement in lieu of entering into a Participation Account Deposit
Agreement, and accordingly each of them hereby (i) waives the Effectiveness
Condition with respect to a Participation Account Deposit Agreement set forth
in Section 18.1.1(b) of the Loan Program Agreement, and (ii) agrees to amend
the Loan Program Agreement as set forth in Section 3 of this Certificate and
Amendment;

 

(c) Except for items identified by SunTrust prior to
the date hereof as items to be addressed by the Parties after the Effective
Date, the Program Guidelines attached to this Certificate and Amendment as Exhibit
B are hereby approved and adopted by the Parties, including the Servicing
Guidelines, the forms of Credit Agreements and Truth-in-Lending Disclosures
contained therein;

 

(d) Documents attached hereto as Exhibits C1, C2,
and C3 establishing and governing the purchase of Charged Off Loans by MG
Student Loan Trust 2010-1 are hereby approved by FMC and SunTrust in
substantially the form attached hereto;

 

 

(e) Except for items identified by SunTrust prior to
the date hereof as items to be addressed by the Parties after the Effective
Date, SunTrust hereby approves the Online Application System, including
processes for complying with Title X, as set forth in the Program Guidelines;

 

(f) Except for items identified by SunTrust prior to
the date hereof as items to be addressed by the Parties after the Effective
Date, SunTrust hereby approves the FMC Website and FMC Materials, as provided
to SunTrust prior to the Effective Date; and

 

(g) The TransUnion Addenda (TransUnion Master
Services and FICO Score Services) required by TransUnion LLC have been
executed, copies of which are attached to this Certificate and Amendment as Exhibits
D1 and D2, and the Agreement for Fair Isaac Score Services entered among
TransUnion, Fair Isaac Corporation, and SunTrust has been executed as of the
date of this Certificate and Amendment.

 

2.                                      Effective Date
Communication; Establishment of Effective Date. The Parties agree that:

 

(a) this Certificate and Amendment shall and hereby
does constitute the Effective Date Communication required pursuant to Section
18.1.1 of the Loan Program Agreement; and

 

(b) the Effective Date is hereby established as July
15, 2010.

 

3.                                      Amendments to
Loan Program Agreement Related to Participation Account. The Parties
hereby agree to amend the Loan Program Agreement, effective immediately, to:

 

(a) delete the first paragraph of Section 7.1, prior
to the beginning of Section 7.1.1, in its entirety and insert in place thereof
and in substitution therefor the following:

 

“7.1                         Participation by FMC.  In connection with
Loans originated and funded under the terms of this Agreement, FMC agrees to
fund the Participation Account for charge off coverage and credit enhancement
purposes.  The Participation Account
shall be governed by this Article VII and the other provisions of this
Agreement relating to the Participation Account (including, for example,
Section 18.3.1) or otherwise necessary for the interpretation of this Article
VII or any such provisions, including any definitions or other provisions set
forth in Article I.  SunTrust agrees to
compensate FMC, by paying to FMC an undivided fractional interest in the
Portfolio Yield from its portfolio of such Loans, in addition to the other fees
and amounts payable to FMC pursuant to Article VI and this Article VII.”

 

(b) add the following sentence as the new final
sentence of Section 7.1.6:

 

“SunTrust shall be required to withdraw the amount
of each such Participation Account Payment from the Participation Account and
make each such Participation Account Payment to FMC no later than thirty (30)
days after receipt of monthly reporting from the Servicer for the month in
question.”

 

(c) delete Section 7.1.8 in its entirety and insert
in place thereof and in substitution therefor the following:

 

“7.1.8             Monthly Statement; Review of Participation
Reporting.  For so long
as there are any funds in the Participation Account, SunTrust shall deliver to
FMC, at its address provided pursuant to Section 19.1, no later than fifteen
(15) days following the end of any calendar month, a written statement for the
previous calendar month setting forth the balance of the Participation Account
as of the last date of such month and all transactions with respect to funds in
the Participation Account during such month, including all deposits, withdrawals,
payments 

 

2

 

of interest (and the associated Effective Interest
Rate during such period) and any other changes in the balance of the
Participation Account, and the corresponding dates thereof within the
period.  FMC shall review such monthly
Participation Account statement during the first ten (10) days after receiving
it and shall notify the SunTrust in writing (which may be in the form of an
email communication) if it in good faith disputes any items in such report
during such 10-day period.  If FMC
disputes any item in the statement, the payments required in Section 7.1.4
relating to a disputed item shall be withheld until such dispute is resolved to
the satisfaction of FMER, SunTrust and FMC. 
If, within thirty (30) days of receiving a notice of dispute, the
Parties are unable to resolve the dispute, any Party may invoke the dispute
resolution procedures of this Agreement.”

 

(d)  delete
the third and fourth sentences of Section 7.1.10 in their entirety;

 

(e)  add the
following paragraphs as a new Sections 7.1.12, 7.1.13 and 7.1.14, respectively,
of the Agreement:

 

“7.1.12        Interest on the Participation Account.  For so long as any funds or other amounts
remain in the Participation Account, all such amounts shall bear interest on a
monthly variable rate. The rate for each month shall be no less than the
three-month London interbank offered rate, as published in the “Money Rates”
table of The Wall Street Journal Eastern Edition
(“LIBOR”) on a particular calendar day of the previous month, as
established by SunTrust from time to time with prior notice to FMC, [**] basis
points ([**]%) (the “Effective Interest Rate”). If The Wall
Street Journal Eastern Edition is no longer available, FMC and
SunTrust shall mutually adopt an alternate source for the three-month LIBOR
index.

 

7.1.13              Additional Provisions Related to the
Participation Agreement. 
SunTrust acknowledges and agrees that the Participation Account shall be
a restricted account to be used solely for the purposes described in this
Agreement.  SunTrust further agrees that
it shall not, and has no right to pursuant to this Agreement or otherwise, to
withdraw, release, assign or otherwise transfer any funds, accrued interest, or
other amounts or assets contained in the Participation Account (any of the
foregoing, “Participation Account Assets”) for any purpose or to pay any
funds or other amounts from the Participation Account to SunTrust or to any
other Person except as and to the extent specifically authorized by this
Article VII.  Except with respect to
withdrawals, releases, payments and the enforcement of its security interest
specifically authorized by this Agreement, SunTrust further acknowledges and
agrees that it shall not transfer, assign or grant any control over the
Participation Account or any Participation Account Assets to any other
financial institution or other Person, including any Affiliate of SunTrust,
without the prior written consent of FMC. 
In the event that SunTrust desires to request such consent of FMC,
SunTrust acknowledges and agrees that FMC shall be entitled to require that an
agreement among FMC, SunTrust and such other Person regarding deposits,
withdrawals, procedures and other matters with respect to the Participation Account
and this Agreement be entered into prior to any such movement or transfer of
the Participation Account or any Participation Account Assets, such agreement
to be reasonably satisfactory to FMC.

 

7.1.14              Additional Representations, Warranties and
Covenants of SunTrust Related to Participation Account.  SunTrust hereby represents, warrants and
covenants to FMC and FMER that, as of the Effective Date, throughout the Term
of this Agreement and until such time as no Participation Account Assets remain
in the Participation Account:

 

(a) it is an organization
engaged in the business of banking and is acting in such capacity in
maintaining the Participation Account at SunTrust hereunder;

 

3

 

(b) it has established the
Participation Account as set forth in this Agreement, and will maintain it in
the manner set forth herein until such time as no funds remain in the
Participation Account;

 

(c) it has not entered into
any currently effective agreement with any Person under which SunTrust may be
obligated to comply with any instructions with respect to the Participation
Account or any Participation Account Assets originated by a Person other than
SunTrust or FMC; and SunTrust will not enter into any agreement with any Person
under which SunTrust may be obligated to comply with any such instructions
originated by a Person other than SunTrust or FMC;

 

(d) except for the claims
and interests of SunTrust and FMC, SunTrust does not know or have notice of any
claim to, or interest in, the Participation Account; SunTrust will keep the
Participation Account and the Participation Account Assets free from all other
security interests and all liens, encumbrances, garnishments, attachments,
executions, levies and rights of any Person other than SunTrust or FMC;

 

(e) if SunTrust obtains any
knowledge of any Person asserting any lien, encumbrance or adverse claim
(including any writ, garnishment, judgment, warrant of attachment, execution or
similar process) against the Participation Account, SunTrust will promptly
notify FMC thereof;

 

(f) all cash and money
delivered to SunTrust by FMC pursuant to this Agreement for deposit in the
Participation Account will be promptly credited to the Participation Account;

 

(g) it shall not change a
name, account number or designation of the Participation Account without the
prior written consent of FMC.

 

4.                                      Amendments to
Loan Program Agreement Related to Compensation Schedule. In addition,
the Parties hereby agree to amend the Loan Program Agreement to delete that
portion of the Compensation Schedule (Exhibit B to the Loan Program Agreement)
labeled “FMC Variable Rate Compensation” and adopt in place thereof and in
substitution therefor the Compensation Schedule labeled “Amended FMC Variable
Rate Compensation” and attached to this Certificate and Amendment as Exhibit
E.

 

5.                                      Multiple
Counterparts.  This
Certificate and Amendment may be executed in multiple counterparts, each of
which shall be deemed an original for all purposes and all of which shall be deemed,
collectively, one agreement.

 

6.                                      GOVERNING LAW.  THIS CERTFICIATE AND AMENDMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE
OF GEORGIA, WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR
RULE THAT WOULD CAUSE THE APPLICATION OF LAWS OF ANY JURISDICTION OTHER THAN TO
THOSE OF THE STATE OF GEORGIA.  EACH
PARTY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM
ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS CERTIFICATE AND AMENDMENT,
ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF ANY SUCH RIGHTS OR
OBLIGATIONS.

 

7.                                      Permitted
Filing.  Each Party may file this
Certificate and Amendment (with redactions as permitted by Requirements of Law)
with the appropriate state or federal regulators, including the Securities and
Exchange Commission, as required by such regulators.

 

8.                                      Full Force and
Effect. As amended in this Certificate and Amendment, the Loan Program
Agreement remains in full force and effect according to its terms.

 

[Signatures appear on next page]

 

4

 

IN WITNESS WHEREOF, the parties hereto have caused this
Certificate and Amendment to be executed by their respective officers, being
first duly authorized, as of the day and year first above written.

 

	
  SUNTRUST
  BANK

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ W. Mark Smith

  	
   

  
	
  Name:

  	
  W. Mark Smith

  	
   

  
	
  Title:

  	
  Executive Vice President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  THE FIRST MARBLEHEAD
  CORPORATION

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Daniel Maxwell Meyers

  	
   

  
	
  Name:

  	
  Daniel Maxwell Meyers

  	
   

  
	
  Title:

  	
  President and CEO

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  FIRST MARBLEHEAD EDUCATION
  RESOURCES, INC.

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Michael Plunkett

  	
   

  
	
  Name:

  	
  Michael Plunkett

  	
   

  
	
  Title:

  	
  President

  	
   

  

 

 

TABLE OF EXHIBITS

 

Exhibit A—Servicing Agreement

 

Exhibit B—Program Guidelines**

 

with Servicing Guidelines, Forms of Credit
Agreements and Truth-in-Lending Disclosures

 

Exhibit C1—Trust Agreement for MG Student Loan Trust 2010-1

 

Exhibit C2—Administration Agreement

 

Exhibit C3—Special Servicing Agreement

 

Exhibit D1—TransUnion Addendum

 

Exhibit D2—TransUnion FICO Addendum

 

Exhibit E—Amended Compensation Schedule for Variable Rate Loans**

 

**Confidential treatment has
been requested for this exhibit in its entirety.

 

 

EXHIBIT A

 

Servicing Agreement

 

 

PRIVATE STUDENT LOAN SERVICING AGREEMENT

FOR THE CUSTOM CHOICE PROGRAM

AMONG

PENNSYLVANIA HIGHER EDUCATION ASSISTANCE AGENCY,

SUNTRUST BANK

AND

THE FIRST
MARBLEHEAD CORPORATION

 

THIS PRIVATE STUDENT LOAN SERVICING AGREEMENT FOR
THE CUSTOM CHOICE PROGRAM (this “Agreement”) is made and dated as of July 15,
2010 (the “Effective Date”) , by and among the Pennsylvania Higher Education
Assistance Agency (d/b/a American Education Services), a public corporation and
governmental instrumentality organized under the laws of the Commonwealth of
Pennsylvania, having an address at 1200 North Seventh Street, Harrisburg,
Pennsylvania 17102 (“Servicer”), SunTrust Bank, a Georgia State Bank, having an
address at 1001 Semmes Avenue, Richmond Virginia 23224 (“Lender”) and The First
Marblehead Corporation, a Delaware corporation, having an address at 800
Boylston Street, 34th Floor, Boston, Massachusetts 02199 (“FMC”).

 

RECITALS

 

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

 

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

 

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

 

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

 

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

 

WHEREAS,  Lender and
FMC have created the Custom Choice education loan program (“Program”),which is described
in the Program Guidelines (defined below), and FMC and Lender are responsible
for structuring and assisting in implementing the Program; and

 

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

 

WHEREAS, the Lender desires to have FMC and/or one or more
of its Affiliates provide Administrator Services (as defined below) in
connection with this Agreement; and

 

WHEREAS, Lender and FMC desire to utilize the expertise of
the Servicer to service such education loans in the Program consistent with
this Agreement on behalf of FMC and Lender;

 

NOW, THEREFORE, in consideration of the mutual covenants
and promises contained in this Agreement and other valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, and intending to be
legally bound, Servicer, Lender and FMC (hereinafter, collectively, the “Parties”
and each, individually, a Party) do hereby agree to the following:

 

1

 

SECTION 1. 
DEFINITIONS

 

1.01                        “Account” means
the Loans collectively of an individual Borrower owned by Lender and for which
FMC (and its Affiliates) serves as Program Administrator, which are serviced
pursuant to this Agreement.

 

1.02                        “Additional Deferment for Re-enrollment” has the meaning given to it in
Section F.4 of the Servicing Guidelines.

 

1.03                        “Adequately
Protected” has the meaning given to it in Section 11.14.

 

1.04                        “Administrator
Services” means the services provided by FMC or its Affiliates, and includes,
but is not limited to post-disbursement portfolio administration, as further
described in Section 2.03 of this Agreement.

 

1.05                        “Affiliate”
means, with respect to an entity, another entity that at the time in question,
directly or indirectly, owns or controls, is owned or controlled by, or is
under common ownership or common control with the first entity.  For purposes of this Agreement, “control”
shall mean the power to direct the management or affairs of an entity, the
terms “common control” and “controlled by” shall have meanings correlative to
the foregoing, and “ownership” shall mean the beneficial ownership of more than
fifty per cent (50%) of the equity securities of the entity.

 

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

 

1.07                        “Applicant”
means all co-applicants for a Loan under the Program Guidelines, including any
proposed Borrower and any proposed Cosigner who begins an Application,
regardless of whether the Application is completed.

 

1.08                        “Application”
means a consumer’s application, whether in whole or in part, for a Loan under
this Program.

 

1.09                        “Approval Disclosure” means the disclosure required by 12 C.F.R. §
226.47(b) and Section 128(e)(2) of the federal Truth-in-Lending Act, provided
to the Borrower(s) by FMER, a copy of which FMER forwards to Servicer as part
of the Loan file.

 

1.10                        “Approved School” means an institution of higher education eligible for
participation in programs under Title IV of the Higher Education Act of 1965,
as amended.

 

1.11                        “Armed Forces
Forbearance” has the meaning given to it in Section G.8 of the Servicing
Guidelines.

 

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

 

1.13                        “Breach”, for
purposes of Section 11.20, has the meaning given to it in Section 11.20.

 

1.14                        “Business Days”
means any day other than a Saturday or Sunday, or a day on which the Servicer,
Lender, or FMC is required or authorized by law to remain closed and on which
any such Party does remain closed.

 

1.15                        “Cancellation Window” has the meaning given to it in Section D.1 of the
Servicing Guidelines.

 

1.16                        “Change of
Control” means, with respect to Servicer, the sale to any entity, individual or
group of all or substantially all of Servicer’s assets used to perform the
Services or the reorganization, merger or consolidation of Servicer with or
into another entity.

 

1.17                        “Charged Off
Loan” means a Loan that is at least [**] days delinquent in principal and
interest or interest only or partial interest payments or that has experienced
a “Charge Off”, as set forth in Section L.1 of the Servicing 

 

2

 

Guidelines.

 

1.18                        “Charged Off Loan Roster” has the meaning given to it in Section L.2 of
the Servicing Guidelines.

 

1.19                        “Clearinghouse” has the meaning given to it in Section F.1 of the
Servicing Guidelines.

 

1.20                        “Confidential
Business Information” has the meaning assigned to it in Section 11.02(c).

 

1.21                        “Cosigner”
means a person other than the Student Borrower who executes a Credit Agreement
with a Student Borrower and thereby assumes joint and several liability for the
Loan.

 

1.22                        “Cosigner
Release” has the meaning given to it in Section E.7.b of the Servicing
Guidelines.

 

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

 

1.24                        “Custom Choice”
means the Program.

 

1.25                        “Default
Prevention Vendor” has the meaning given to it in Section 4.20.

 

1.26                        “Delinquency
Guidelines” has the meaning given to it in Section 4.20.

 

1.27                        “Disclosing
Party” has the meaning given to it in Section 11.02(e).

 

1.28                         “Early
Termination Fees” shall mean the fees for early termination set forth in the
Fee Schedule.

 

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

 

1.30                        “Existing
Servicing Agreement” means, together (i) as to FMC, the Amended and Restated
Private Loan Servicing Agreement between FMC and Servicer dated as of September
28, 2006, as amended and (ii) as to Lender, any servicing agreement between
Lender and Servicer which predates the Effective Date.

 

1.31                        “Fee Schedule”
means the Schedule C attached hereto, as such schedule may be amended, modified
or supplemented by the Parties from time to time pursuant to the terms and
provisions hereof.

 

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

 

1.33                        “FMC
Administrator Loans” shall have the meaning assigned to it in Section 2.03.

 

1.34                        “FMER” means
First Marblehead Education Resources, Inc., an Affiliate of FMC.

 

1.35                        “Force Majeure”
has the meaning given to it in Section 10.01.

 

1.36                        “Full Deferment” has the meaning given to it in Section E.2.b of the
Servicing Guidelines.

 

1.37                        “Governmental
Authority” means the federal government of the United States, any state
government, or any political subdivision of either, or any agency, court or
body of the federal government of the United States, of any state, or of any
other political subdivision of either, exercising executive, legislative,
judicial, regulatory or administrative functions.

 

1.38                        “Graduation Benefit” has the meaning given to it in Section E.7.d of the
Servicing Guidelines.

 

3

 

1.39                        “Identity Theft
Procedures” means the Procedures for Fraud Notification set forth in Section I
of the Servicing Guidelines and as may be amended by agreement of the Parties
pursuant to the terms thereof.

 

1.40                        “Immediate Repayment” has the meaning given to it in Section E.2.a
of the Servicing Guidelines.

 

1.41                        “Interest Only” has the meaning given to it in Section E.2.c of the
Servicing Guidelines.

 

1.42                        “In-School Deferment” has the meaning given to it in Section F.1 of
the Servicing Guidelines.

 

1.43                        “Late Fees” has
the meaning given to it in Section 4.13.

 

1.44                        “Late School
Notification Forbearance” has the meaning given to it in Section G.5 of
the Servicing Guidelines.

 

1.45                        “Lender” means
SunTrust Bank.

 

1.46                        “Loan” means a
loan of funds, including all disbursements thereof and financed fees, made by
Lender to a Borrower under the Program.

 

1.47                        “Loan File”
means Loan documentation and records required to be maintained by the Servicer
pursuant to the Servicing Guidelines.

 

1.48                        “Loan Origination Fee” means a fee that is:  (i) charged by Lender to the Borrower of
a Loan; (ii); and (ii) financed as a part of the Loan amount.

 

1.49                        “Loan Program
Agreement” means that certain Loan Program Agreement, executed as of April 20,
2010, between Lender and FMC.

 

1.50                        “Loss” has the
meaning given to it in Section 9.

 

1.51                        “Material
Adverse Change” means, with respect to
the Servicer, Lender or FMC, any condition or event that is reasonably likely
to have a material adverse effect on (i) the business operations, property
or condition (financial or otherwise) or prospects of the Party or (ii) the
validity or enforceability of this Agreement or any of the Schedules or
Exhibits hereunder.

 

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

 

1.53                        “Natural Disaster Forbearance” has the meaning given to
it in Section G.7 of the Servicing Guidelines.

 

1.54                        “Notice” has
the meaning assigned to it in Section 12.01.

 

1.55                        “NPPI” has the
meaning given to it in Section 11.02(d).

 

1.56                        “Operational
Audit” has the meaning given to it in Section 7.01.

 

1.57                        “Original
Credit Agreement” means the signed first or first two pages of the Credit
Agreement (beginning with the Borrower and Lender name and ending with a
signature or signatures).

 

1.58                        “Outsourced
Loan” has the meaning given to it in Section 4.20.

 

1.59                        “Partial Interest Payment” has the meaning given to it in Section E.2.d
of the Servicing Guidelines.

 

1.60                        “Person” means
a natural person, limited or unlimited liability corporation, limited liability
company, limited liability partnership, partnership, association, trust or any
other legal entity having the capacity to contract.

 

4

 

1.61                        “Personnel”
means the employees, contractors, subcontractors, and agents of the specified
Party.

 

1.62                        “PHEAA System”
means the Loan Servicing System, the Web-Based Products and the Support
Services developed and maintained by Servicer for the Servicing of Loans.

 

1.63                        “Program
Guidelines” means, solely for the purpose of identifying Loans to be Serviced
under the Agreement, the Servicing Guidelines for the Program as they may be
modified from time to time by a writing signed by the Parties.

 

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

 

1.65                        “Proprietary
Information” has the meaning given to it in Section 11.02(a).

 

1.66                        “Receiving
Party” has the meaning given to it in Section 11.02(f).

 

1.67                        “Remedial
Action Plan” has the meaning given to it in Section 4.02(d).

 

1.68                        “Repayment Date” has the meaning given to it in Section E.1 of the
Servicing Guidelines.

 

1.69                        “Repayment Option” has the meaning given to it in Section E.2 of the
Servicing Guidelines.

 

1.70                        “Required
Reports Schedule” means the Schedule A attached hereto, as such schedule may be
amended, modified or supplemented by the Parties from time to time pursuant to
the terms and provisions hereof.

 

1.71

 

1.72                        “Sarbanes-Oxley”
has the meaning given to it in Section 7.02.

 

1.73                        “Sensitive
Customer Information” has the meaning given to it in Section 11.20.

 

1.74                        “Service”, “Services”,
“Serviced”, “Servicing” shall mean to perform, in full compliance with terms
and conditions of the Credit Agreements, the Servicing Guidelines, and the
terms and conditions of this Agreement including, but not limited to, all
duties, obligations, and procedures that are required of Servicer hereunder in
connection with Loans.

 

1.75                        “Servicing
Guidelines” means the Servicing Guidelines for the Program and approved by FMC
and Servicer attached hereto as Exhibit A and as may amended by the
Parties pursuant to the terms thereof.

 

1.76                        “Student Borrower” means the individual person who is enrolled
at an institution of higher education eligible for the Program at the time of
Application, executes a Credit Agreement for the purpose of obtaining a Loan
from Lender under the Program, and who has proceeds disbursed under the Credit
Agreement.

 

1.77                        “Subject
Delinquency Period” has the meaning given to it in Section 4.20.

 

1.78                        “System Access
Schedule” means the Schedule B attached hereto, as such schedule may be
amended, modified or supplemented by the Parties from time to time pursuant to
the terms and provisions hereof.

 

1.79                        “Third Party
Service Provider” has the meaning given to it in Section 11.21.

 

1.80                        “Trade Secrets”
has the meaning given to it in Section 11.02(b).

 

5

 

SECTION 2. 
SCOPE OF AGREEMENT

 

2.01                        Existing
Servicing Agreement.  The
Parties hereby agree that, this Agreement shall not supersede or replace any
Existing Servicing Agreement between Lender and Servicer and any such Existing
Servicing Agreement remains in full force and effect in accordance with its
terms.

 

2.02                        Services.  The Servicer agrees, in consideration of
certain fees, to perform the Services set forth in this Agreement, including
the Services set forth on each Schedule and Exhibit hereto, and any
additional Services which Lender requests and the Servicer agrees to provide
with respect to the Servicing of Loans in accordance with the Servicing
Guidelines, for which account information and/or documentation shall be
delivered to the Servicer.

 

2.03                        Role
of FMC as Program Administrator.  Lender hereby appoints FMC (including its
Affiliate FMER), as Program Administrator with respect to the Loans.
Accordingly, Servicer shall (a) perform all services set forth in this
Agreement for the Loans originated by the Lender and identified (at the loan
program level) by FMC and Lender in product set-up and conversion (the “FMC
Administrator Loans”), and (b) where appropriate, communicate with Program
Administrator on behalf of the Lender for the Loans so originated and
identified. All actions of the Program Administrator shall be made on behalf of
Lender.   Directives provided by the
Program Administrator to the Servicer and all modifications to this Agreement
or the Servicing Guidelines shall be subject to Lender’s prior written
approval, which shall not be unreasonably withheld. Program Administrator, and
not Servicer, shall be required to obtain Lender’s written approval in all
cases prior to providing such directive to Servicer. Without limiting the
foregoing, Servicer shall provide the Services (as set forth in this Agreement
and/or required by the Servicing Guidelines) to Program Administrator on behalf
of Lender, including but not limited to:

 

i.                                          product set-up
and conversion (as set forth in further detail in Section 4.02);

ii.                                       loan document
custodial services;

iii.                                    remote system
access;

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

v.                                      customer
service;

vi.                                   borrower
billing and correspondence;

vii.                                collection of
borrower payments;

viii.                             privacy policy
distribution;

ix.                                   due diligence
and default prevention (except as set forth in Section 4.20);

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

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

 

Notwithstanding the foregoing, Lender shall (a) have
direct, view-only system access to the PHEAA System as set forth in Schedule B,
(b) contact Servicer directly in the event of escalated customer service
issues that require Lender’s prompt attention for regulatory, accounting, or
other reasons, and (c) have the right to audit Servicer directly as set
forth in Section 7.

 

SECTION 3.                         TERM OF AGREEMENT

 

This Agreement shall commence on the Effective Date
and shall continue until such time as the principal of and interest on the
Loans which are the subject of this Agreement are paid in full, unless earlier
terminated by any Party pursuant to Section 14. With respect to product
set-up and conversion services (as set forth in further detail in Section 4.02),
this Agreement shall continue for a period of two (2) years from the
Effective Date, unless earlier terminated by any Party pursuant to the
provisions of this Agreement, and shall automatically renew for an additional
one (1) year period, unless terminated by any Party by written notice of
non-renewal to the other Parties given at least one hundred and eighty (180)
days prior to the end of the then current term.

 

6

 

SECTION 4. 
Servicing Duties

 

4.01                        Servicing
Duties.  Servicer shall provide and perform the
Services in full compliance with: the terms of this Agreement; the Servicing Guidelines; and the
terms and conditions of the Credit Agreements. Lender shall be responsible for
the compliance of the Servicing Guidelines, Credit Agreements, privacy policies
and disclosures and notices required with all federal and state laws and
regulations.

 

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

 

(a)                                 Credit Agreement Forms.  Servicer shall promptly review Credit
Agreement forms that are proposed by Program Administrator and, after mutual
resolution of any comments thereon that affect the Servicing of Loans in
connection with such forms, accept such forms for purposes of product set-up
and conversion. The Parties may propose changes to the Credit Agreement forms
from time to time. After mutual resolution of any comments thereon by the
Parties, the Parties shall accept such forms for the origination (by FMER) and
Servicing (by Servicer) for new Loans.

 

(b)                                 Servicing System Adaptation.  Servicer shall promptly review the Program
product terms and pricing matrices proposed by Program Administrator for the
Program launch and shall establish appropriate Servicing matrices and programs
to support such product terms and pricing as of a mutually agreed Program
launch date. The Parties shall publish a mutually agreeable launch date for the
Program. Where changes do not require system changes other than table set-up,
Servicer shall use commercially reasonable efforts to meet live Program dates
requested by FMC, which date shall be no less than thirty (30) days, but not
more than sixty (60) days from the date Servicer accepts (such acceptance not
to be unreasonably withheld) the product and pricing matrix (or similar
document containing the same information) for the Program; provided, however,
that the Servicer agrees to use commercially reasonable efforts to complete the
set-up process in a shorter time frame on a case-by-case basis in order to
accommodate the business needs of Lender.  
All changes or modifications must be provided to Servicer in writing,
and formal amendments or addenda shall be signed prior to implementation.

 

It is understood and
agreed by the Parties that Program Loans have both a fixed rate and variable
rate option. The fixed rate for each Borrower who chooses the fixed rate option
shall be provided by FMER to the Servicer in the servicer disbursement file at
the Loan level. Program Administrator shall provide Servicer with updated
pricing matrices (or similar document containing the same information)
reflecting (i) changes to variable rate tiers, and, notwithstanding the
time frames set forth in the previous paragraph, such changes shall be
effective in the PHEAA System no less than fourteen (14) days, but not more
than thirty (30) days from the date Servicer receives the updated pricing
matrix (or similar document containing the same information), and (ii) changes
to fixed rate tiers, and, notwithstanding the time frames set forth in the
previous paragraph, such changes shall be effective in the PHEAA System not
more than fourteen (14) days from the date Servicer receives the updated
pricing matrix (or similar document containing the same information).

 

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

 

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

 

7

 

Remedial
Action Plan.

 

4.03                        Service Levels. Servicer agrees that, with respect to the Program, it shall adhere to the
Service Level Agreement and customer service schedule set forth in the Private
Student Loan Program Agreement between Servicer and Program Administrator dated
as of February 5, 2010.

 

4.04                        Custody Procedure.  If an applicable document has been forwarded
to the Servicer, the Servicer shall hold all Original Credit Agreements and
related documents Serviced hereunder on behalf of the Lender and shall retain
each such Credit Agreement and Loan File until seven (7) years after the
earlier of (a) the date upon which the Loan evidenced by such Credit
Agreement and related documents is paid in full or (b) the date upon which
the Loan is removed from Servicer’s Loan Servicing System.  The Servicer shall maintain all Original
Credit Agreements that have an original, wet signature in a fire resistant
vault equipped with a fire suppression system which is connected to an alarm
and a security locking system.  Servicer
shall create electronic records of all Original Credit Agreements and related
documents at no additional cost to Lender and shall maintain such electronic
records on-site at the Servicer’s Servicing center at Harrisburg, PA and at an
off-site facility, including but not limited to copies of electronic records of
Credit Agreements, and related documents. Upon request by the Lender, the
Servicer shall supply Lender electronic copies of Original Credit Agreements
and all related documents.  Lender or its
designated agent shall have the right to inspect all security procedures during
Servicer’s regular business
hours.  The Servicer shall provide Lender
with sixty (60) days advance notice of any change in the physical location of
the Original Credit Agreements and related documents or any relocation of the
Servicer’s Servicing center.  All
Original Credit Agreements at all times shall be stored in a state other than
the State of Louisiana.

 

4.05                        Lost or Damaged Records.  In the event that records or other data
submitted to the Servicer in connection with the Servicing is lost or damaged
while in the possession, control or custody of the Servicer or its agents, such
lost or damaged records or data shall be reproduced by the Servicer at the
Servicer’s own cost and expense from image
duplicates in the Servicer’s possession or under the Servicer’s control
and the Servicer shall pay all liabilities, damages, costs, losses, fees and
expenses, incurred by Lender as a result of such lost or damaged records or
data, including but not limited to reasonable attorney’s fees.  If a Loan becomes uncollectible or
unenforceable due to loss or destruction of the Credit Agreement or
Truth-in-Lending Disclosure Statements in the possession, control or custody of
the Servicer (including the loss of the signature page of any Borrower on
a Credit Agreement) or its agents the Servicer shall, on demand, pay to the
Lender, the principal balance (including capitalized interest) plus any unpaid
interest due on any such Loan and the Lender shall thereupon assign all of its
right, title and interest in any such loan to the Servicer.

 

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

 

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

 

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

 

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

 

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

 

8

 

(ii)                                  Servicer and
FMC shall negotiate and execute a Statement of Work to outline the requirements,
expectations and fees relating to any enhancement, modification, or change to
the PHEAA System or to the procedures necessary for the Servicer to fulfill its
obligations under this Agreement.

 

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

 

4.08                        System
Parameters.  The Servicer shall design, implement and
maintain the PHEAA System in order to remain in compliance with the
requirements of this Agreement.

 

4.09                        Training.  Servicer shall assume
responsibility, at its expense, for training of its staff to meet the
requirements of this Agreement, including all Schedules and Exhibits hereto.

 

4.10                        Customer
Service.  Servicer
shall implement, maintain and monitor all Services which interface with
Borrowers in accordance with the Customer Service Schedule, which shall include
without limitation:

 

(a)                                 Minimum
customer service hours of operation;

 

(b)                                 Call monitoring
and quality control; and,

 

(c)                                  Borrower
customer satisfaction surveys.

 

4.11                        Borrower Correspondence.  Lender shall have the right to request
changes to, and approve the form and substance of, all correspondence sent to
Borrowers that is customizable by the Servicer at the Lender level, including
but not limited to pre-repayment letters and collection correspondence that
Servicer is required to send to Borrowers pursuant to the Servicing Guidelines
or any federal or state regulation. Servicer’s inability to customize at the
Lender level shall not excuse its obligation to comply with all applicable
laws. Lender shall bear all compliance responsibility for the language of
correspondence changes requested by Lender and implemented by Servicer.
Requested changes to letters shall be completed within a timely manner in
accordance with a schedule adopted by mutual agreement of the Parties.

 

Program Administrator and Servicer have instituted
the functionality to identify specific loans for which correspondence with
Borrowers may be enhanced.  From time to
time, Program Administrator, on behalf of Lender, shall designate those borrower
segments that will receive enhanced correspondence. Fees for such
correspondence shall be paid by Program Administrator.

 

4.12                        Payment Collections.  All sums received by the Servicer with
respect to any Loans, whether attributable to principal, interest, or late fees
shall be received in trust for the benefit of the Lender.  All funds received by or on behalf of
Borrowers shall be deposited in a Servicer-owned and maintained clearing
account.  Within an average of [**]
Business Days, all cleared,
identified, and available funds from Loans shall be electronically transmitted
to an account designated by Lender. Lender authorizes Servicer to withdraw
monies from Servicer-owned clearing accounts to refund overpayments made by a
Borrower or to correct monies deposited therein in error. Servicer shall obtain
Lender’s authorization prior to making any withdrawals made necessary by
circumstances that are not enumerated in this Section 4.12.

 

9

 

4.13                        Late
Fees.  Lender and
Servicer agree that a Borrower in repayment status (which refers to a Borrower’s
Loan(s) Serviced under the terms of this Agreement for which, under the
terms of the Borrower’s Credit Agreement(s), the repayment period has
commenced, and includes Accounts in post-grace period deferment or forbearance)
may be assessed late fees when principal and interest payments (and not
interest only payments, partial interest payments, or payments in any reduced
payment plan) are overdue, to the extent allowed by applicable law and the
terms of the Credit Agreement(s) (herein referred to as “Late Fees”).    Any application of Late Fees is subject to
Program Administrator’s approval of the Late Fee system, and in accordance with
this section.  At the direction of Lender,
the Program Administrator shall notify Servicer, in writing, of the Late Fees
criteria which Lender desires the Servicer to apply to each Loan type.  Such criteria shall include, but not be
limited to, Late Fee amounts, time period and applicable state law in which
Late Fees will be assessed to Loan Accounts. 
At Lender’s direction, Program Administrator on behalf of Lender shall
establish different Late Fee criteria for Loans having different Lender
codes.  Directions as to Late Fee
criteria shall apply to all loans for the Lender code in question.  Late Fee criteria for some product types may
include “no late fee.”  The Servicer
reserves the right to submit questions pertaining to the requirements regarding
the assessment of Late Fees to a particular Loan portfolio and Program
Administrator shall respond to Servicer’s questions within thirty (30) days.
Late Fees shall be deducted from any payment(s) received from Borrowers as
directed by Program Administrator.  The
Parties agree that no late fees charged on any Loan shall be included in any
settlement between Servicer and Lender related to such Loan.

 

4.14                        Reports and Forms. During the term of this
Agreement, the Servicer shall promptly and routinely furnish to Lender and
Program Administrator, on behalf of Lender, copies of all material reports,
records, and other documents and data as required by the Servicing Guidelines
or as otherwise required by this Agreement, including the reports set forth on
the Required Reports Schedule.  All
monthly reports shall be delivered in accordance with (a) the data
security requirements of a secure communication protocol developed by the
Parties from time to time, and (b) the Required Reports Schedule, unless
otherwise expressly provided for herein. The Servicer shall furnish to Lender
and Program Administrator, on behalf of Lender, in good condition all forms and
supplies necessary or appropriate to perform the Services, including, but not
limited to, letters, invoices, and forbearance applications, as specified in the
Schedules hereto and any written and signed amendments thereto.  In addition, Servicer shall provide Program
Administrator with additional reporting as reasonably requested from time to
time, upon the express direction and authorization by Lender.  In the event that any reports are not
delivered as provided for by the Servicing Guidelines or as otherwise required
by this Agreement, including the reports set forth on the Required Reports
Schedule, all fees due and owing the Servicer under this Agreement may be
withheld until such reports are received by the Lender and the Program
Administrator.  The Servicer shall not
have failed this standard if reports are delayed for any reason beyond its
control. The Servicer shall furnish in good condition all forms and supplies
necessary or appropriate to perform the Services, including, but not limited
to, letters, invoices, and forbearance applications, as specified in the
Schedule(s) and any written and signed amendments thereto.

 

4.15                        Governmental Reporting.  The preparation and submission of any and all
governmental reports or requests for data shall be the responsibility of
Lender.  The Servicer shall, however,
supply supporting data and reports as required by this Agreement, including all
Schedules and Exhibits hereto, without additional charge. Subject to Servicer’s
reasonable charges, Servicer shall also provide such other information (not
otherwise required hereunder) as may be requested by Lender which may be
required under applicable law or this Agreement to enable Lender to fulfill any
governmental reporting requirements.

 

4.16                      Tax
Reporting. Servicer shall provide tax information reporting
on IRS Form 1098 and IRS Form 1099 to Borrowers and the U.S. Internal
Revenue Service.  If applicable, the
Servicer will be responsible for remittances to the Federal government of these
tax returns.

 

4.17                        Reports
to Consumer Reporting Agencies. The Servicer shall provide
any and all reports on Accounts serviced hereunder required by this Agreement
to the appropriate consumer reporting agencies or credit information service
and shall correct any errors caused by the incorrect reporting of information
as set forth in Section M.1 of the Servicing Guidelines. If Lender (or
Program Administrator on behalf of Lender) directs Servicer to make a report or
change of credit information which had been reported to a consumer reporting
agency, and such report or change is outside the Servicer’s customary
practices, including but not limited to as part of a legal settlement 

 

10

 

with a Borrower, then the Servicer may condition
making such report or change on the completion of an acceptable writing that
allocates the compliance, regulatory, and legal risk of making the requested
report or correction.

 

4.18                        Data Error Correction; Account Adjustment.  In the event that any data file transmitted
to Lender and/or Program Administrator contains a material error, Servicer
shall, within [**] Business Day of discovery of such error, notify Program Administrator
and/or Lender, as applicable, of such error. Servicer shall use best efforts to
provide a corrected file as soon as possible but no later than [**] Business
Days. For purposes of this Section 4.18, a material error includes,
without limitation:

 

(a)                                 Failure to
follow data format requirements or file naming conventions established by the
Parties;

 

(b)                                 Data corruption;

 

(c)                                  More than [**]
percent ([**]%) of the entries in the file are substantively incorrect (e.g.,
misposting);

 

(d)                                 Failure of the file properly
to link data to other files delivered by Servicer; or

 

(e)                                  Any systemic error in the
file (e.g., failure to update LIBOR Index).

 

In addition, notwithstanding Section 9 of this
Agreement, if Servicer or Lender (or Program Administrator on behalf of Lender)
becomes aware of any material error in any Account, and Lender (or Program
Administrator on behalf of Lender) requests that the Servicer make any
correction or adjustment to such Account, the Servicer shall make such
correction or adjustment as promptly as practicable and, upon request, provide
written confirmation that the correction or adjustment has been made. The
Servicer shall make such corrections and adjustments without charge to the
extent that the error was a result of its action or omission.

 

4.19                        Identity
Theft Procedures. The Parties hereby adopt the Identity Theft
Procedures, as set forth in the Servicing Guidelines attached hereto and as
amended from time to time by agreement of the Parties.  Program Administrator, Lender, and the
Servicer may suggest changes to the Identity Theft Procedures from time to
time.

 

4.20                        Outsourced
Default Prevention; Modification of Responsibilities. Lender and the
Servicer acknowledge and agree that due diligence and skip tracing activities
contemplated by the Delinquency section of the Servicing Guidelines (the “Delinquency
Guidelines”) during the [**] through [**] day of delinquency (the “Subject
Delinquency Period”) for Loans may, at the option of the Lender, be performed
by a vendor approved by the Parties in writing and managed by Program
Administrator or its Affiliates (each, a “Default Prevention Vendor”) for all
or part of such period and not by Servicer (each such loan, for that time
period, and for the purpose of due diligence activities only, an “Outsourced
Loan”). All Parties acknowledge the transmission of information to and from
Default Prevention Vendors will require programming by Servicer, and therefore,
reasonable notice is necessary before any such activity can commence or
terminate.  Lender hereby authorizes, as
of the Effective Date, the use of Default Prevention Vendors as contemplated in
this Section 4.20 and authorizes the Servicer to provide loan-level data
on a daily basis to FMER and the Default Prevention Vendors as necessary for
performing default prevention activities for Outsourced Loans. Any reversal of
or modification to an outsourcing program will require reasonable notice, and
may require programming changes to allow Servicer to resume Servicing of such
loans. More specifically:

 

(a)                                 For any
Outsourced Loan, Servicer shall not be responsible for performing the
Delinquency Guidelines for the Subject Delinquency Period.

 

(b)                                 For any Loan not
outsourced to a Default Prevention Vendor, Servicer will be responsible for
delinquency servicing and skip tracing requirement for loans not in the Subject
Delinquency Period.

 

(c)                                  Servicer shall
maintain responsibility for filing for pre-claim assistance in accordance with
the Servicing Guidelines, with the information that exists on the Servicer’s
system.

 

(d)                                 For any
Outsourced Loan, Servicer will not be responsible for initiating skip-tracing
activities during the Subject Delinquency Period.  Servicer shall update contact information
within its system, if in the normal course of business Servicer or Default
Prevention Vendor obtains or receives new contact information.

 

11

 

(e)                                  For any
Outsourced Loan, Servicer will remain responsible for all loan servicing
activities other than the Delinquency Guidelines, including but not limited to,
the processing of deferments, forbearance, and MGRS forms, general
correspondence, and borrower payments.

 

(f)                                   For rolling
delinquent accounts, i.e., Outsourced Loans which have Borrower payments
applied that result in the account falling into the prior delinquency bucket or
being brought current, Servicer will follow the Servicing Guidelines, which
state that in the event of a rolling account, the servicer will resume
scheduled delinquency servicing activities at the point in which the
delinquency rolls into the previous delinquency bucket.  Servicer will not be required to make up
missed due diligence activities in the bucket the delinquency rolls into if the
day delinquent on which the servicing resumes is after the first scheduled
activity.

 

(g)                                  Servicer shall
remain responsible for the reporting of loan information to the credit bureaus
for all Loans in compliance with the Servicing Guidelines, with the information
that exists on the Servicer’s system as of the day of reporting.

 

(h)                                 For all Loans,
Servicer shall remain responsible for sending final demand letters for the
amount delinquent on the loan at the appropriate day of delinquency to both the
primary Borrower and the Cosigner, if any.

 

(i)                                     Program Administrator,
and not Servicer, shall be responsible to Lender for the actions of Default
Prevention Vendors. In all situations where the Default Prevention Vendor
performed or performs activities which include procedures not in compliance
with the Remote Access, Confidentiality and Indemnification Agreement, and such
activities have an impact on Servicer’s due diligence obligations or cause
incorrect information to exist on the PHEAA System, Program Administrator shall
be responsible to Lender, and Lender waives any and all noncompliance by
Servicer which may result.

 

SECTION 5. 
AFFIRMATIVE COVENANTS

 

From
the date hereof, Servicer covenants and agrees to the following:

 

5.01                      Government Approvals.  The Servicer shall maintain all licenses,
permits, approvals and qualifications necessary to carry out its obligations
under this Agreement.

 

5.02                        Insurance.  Servicer and
subcontractors engaged by Servicer to provide Services under this Agreement
(which shall not include the Default Prevention Vendors) shall also be required
to maintain the insurance described herein at limits acceptable to Servicer and
Lender:

 

(a)                                 Commercial
General Liability insurance on an occurrence basis, on Insurance Services
Office (“I.S.O.”) form CG 00 01 or its equivalent, at a limit not less than
$1,000,000 per occurrence/$2,000,000 aggregate. 
The required limits may be arranged through a combination of primary and
excess policies, as needed.

 

(b)                                 Automobile
Liability insurance for any vehicles operated by the Servicer or its employees
in connection with work or Services performed under this Agreement, including
owned, non-owned, borrowed, and hired autos, at limits not less than $1,000,000
per accident.

 

(c)                                  For contracts
where Servicer’s Personnel will have access to or control over physical or
electronic property of Lender and/or their customers and/or clients, Employee
Dishonesty coverage (also known as a Fidelity Bond), covering all employees and
agents of the Servicer, at a limit not less than $10,000,000 for each
occurrence. This policy shall extend to the misappropriation of physical or
electronic property of others in the possession or control of Servicer
Personnel.

 

All coverage shall be maintained with insurers
licensed to transact insurance business in the state(s) where Servicer
maintains offices or operations. The Insurers shall have an A. M. Best rating
of A1 or better; deviations from that standard are subject to review and
written approval by Lender. All certificates of insurance shall include

 

12

 

an undertaking by the insurer to provide 30 days
prior written notice of cancellation or material change in coverage(s).

 

Upon Lender’s request, Servicer shall provide Lender
or FMC with a copy of the certificate of insurance. Regardless of any
limitations to any indemnification by Servicer as may be stated elsewhere in
this Agreement, Servicer expressly understands and agrees that if Servicer
fails to maintain any of the required insurance coverages, Servicer shall be
directly liable for claims that would otherwise be covered by the insurance
required of Servicer, its vendors and/or subcontractors. Servicer shall also be
responsible for the payment of any applicable deductibles.

 

Insurance requirements for Default Prevention Vendors
and the Program Administrator shall be as set forth in the Loan Program
Agreement.

 

5.03                        Notification. 
Servicer shall promptly notify Lender in writing within five (5) Business
Days after its General Counsel has knowledge of (a) the occurrence of any
event which, if it had existed on the date of this Agreement, would have
required qualification of the representations and warranties set forth in Section 6
(Representations and Warranties) herein; (b) a Material Adverse Change, including but not limited to, material
financial difficulty, other catastrophic event, material change in strategic
goals, or significant staffing changes; or (c) any litigation which
if adversely determined would cause a Material Adverse Change.

 

5.04                        Accuracy of Reports.  All reports, transmittals, records or data
files required, maintained or provided by Servicer hereunder shall be accurate
in all material respects, and Lender shall have the right to rely thereon.

 

5.05                        Work
Performed in United States.  Unless this Agreement specifically provides
otherwise, all Services must be performed in the United States and all
Proprietary Information and NPPI must be stored, maintained, accessed from, and
utilized only by employees and sub-contractors in the United States.

 

5.06                        No
Subcontractors. With the exception of skip tracing and collection
or default prevention services (with respect to the latter, in accordance with
the parameters set forth in this Agreement and/or the Servicing Guidelines),
the Servicer shall not utilize or engage a subcontractor to perform any
Services under this Agreement without the prior written consent of Lender.  To the extent subcontractors perform any
services under this Agreement, the Servicer shall be liable for the performance
of such subcontractors.  The Servicer
shall cause each subcontractor agreement or agreement relating to skip tracing
services to contain terms at least as restrictive as Section 11 hereof
with respect to confidentially and privacy and security obligations. Servicer
shall advise Lender upon periodic request of the entities to which it has
subcontracted skip tracing services.

 

5.07                        OFAC Check.  All
Servicer employees performing services or supporting Servicer activities under
this Agreement, regardless of their location, shall be validated by Servicer to
not be on any list published and maintained by the United States government of
Persons with whom any U.S. Person is prohibited from conducting business.  Currently, the lists of such Persons can be
found on the following web sites:

 

(i)                                     Denied Persons List on the
Bureau of Industry and Security at

http://www.bis.doc.gov/dpl/Default.shtm.

 

(ii)                                  The Specially
Designated Nationals and Blocked Persons List of the Office of Foreign Assets
Control — Department of Treasury at

http://www.treas.gov/offices/enforcement/ofac/sdn/.

 

(iii)                               Office of Foreign Assets
Control — Recent OFAC Actions

http://www.treas.gov/offices/enforcement/ofac/actions/.

 

(iv)                              Palestinian Legislative
Council (PLC) List
http://www.treas.gov/offices/enforcement/ofac/programs/terror/ns/index.shtml.

 

Servicer shall conduct periodic reviews, no less
frequently than annually, of the lists mentioned above.  Servicer shall report to Lender and Program
Administrator immediately if the name of any Servicer employee performing 

 

13

 

the services matches with the name of any Person
listed on any list published by the United States government of Persons with
whom any U.S. Person is prohibited from doing business.

 

5.08                        FACT
Act.  Servicer’s performance of its
Servicing obligations under this Agreement shall include, without limitation,
compliance with the requirements imposed on Lender, as identified by Lender and
as included in this Agreement or the Servicing Guidelines, as a user and
furnisher of consumer report information under the Fair and Accurate Credit
Transactions Act of 2003 and all regulations issued pursuant thereto,
including, without limitation, timely and lawful response to any identity theft
report received from any Borrower or consumer reporting agency and the
obligation to respond to a credit report reinvestigation request in accordance
with the Identity Theft Procedures. 
Servicer shall notify Lender if it becomes aware that any Borrower is on
any list published and maintained by the government of the United States of
America of persons or entities with whom the Lender’s transaction of business
is restricted, as those lists are currently set forth in Section 5.07
above.

 

5.09                        Further Assurances.  At any time, upon the reasonable request of
Lender (or the Program Administrator on its behalf) and subject to Servicer’s
reasonable charges and reimbursement of any out-of-pocket expenses, Servicer
shall execute and deliver to such requesting Party or its designee such other
certificates, agreements and instruments and take such actions as such
requesting Party or its designee may reasonably request in connection with the
requesting party’s compliance with any legal or regulatory requirements,
including, without limitation, any certifications required to be delivered by
such requesting Party under any Securities and Exchange Commission or other
securities requirement or in connection with the Sarbanes-Oxley Act of 2002.

 

5.10                        Change
of Control. Servicer shall provide
Lender and Program Administrator written notice within five (5) Business
Days after a public announcement that a Change of Control transaction involving
Servicer is pending.

 

SECTION 6. 
REPRESENTATIONS AND WARRANTIES.   Each Party is bound by the representations and
warranties specifically designated to it within this Agreement and any Exhibit attached
hereto.

 

Servicer Representations and Warranties.  The Servicer represents and warrants to
Lender and Program Administrator (and these warranties and representations
shall be deemed continuing and repeated as of the date each Loan shall become
subject to this Agreement) as follows:

 

6.01                        Existence.  The Servicer is a public
corporation duly organized and validly existing and in good standing under the
laws of the Commonwealth of Pennsylvania, and is duly qualified to do business
in all jurisdictions where its failure to so qualify would materially impair
its ability to perform its obligations under this Agreement.

 

6.02                        Right
to Act.  No registration with or
approval of any governmental agency (except for approval as to form and
legality by the Attorney General for the Commonwealth of Pennsylvania) is
required for the due execution and delivery or enforceability of this
Agreement. The Servicer has legal power to execute and deliver this Agreement
under the laws of Pennsylvania and to perform such Services and observe the
provisions herein under the laws of Pennsylvania. By executing and delivering
this Agreement, and by performing and observing the provisions of this
Agreement, the Servicer will not violate any existing provision of its Articles
of Incorporation or its bylaws or any applicable law or violate or otherwise
become in default under any existing contract or other obligation binding upon
the Servicer. The officers executing and delivering this Agreement have been
duly authorized to do so, and this Agreement is legally binding upon the
Servicer and enforceable against the Servicer in every respect.

 

6.03                        Intellectual Property and Software Rights.   Servicer’s performance of
its obligations under this Agreement will not infringe any patent, trademark,
copyright, or any trade secret or other proprietary right of any third party.
Servicer is the lawful owner or licensee of any software programs or other
materials used by Servicer in the performance of the Services called for in
this Agreement.

 

6.04                        Accuracy and Continued Validity of Servicer’s Financial Status.   The Servicer has published on
its web site financial reports, which in the reasonable opinion of the Servicer
fairly and accurately reflect the financial operations of the Servicer and that
there has been no Material Adverse Change with respect to the Servicer since
the date the report was provided which would require revision of the same.  No representation or warranty made by the
Servicer under this Agreement and no statement made by the Servicer in any
financial statement, 

 

14

 

certification, report, exhibit or document furnished
by the Servicer to Lender pursuant to or in connection with this Agreement is
false or misleading in any material respect (including by omission of material
information necessary to make such representation, statement or warranty not
misleading) as of the date given or made.

 

6.05                        OFAC Check. 
Neither Servicer, nor any of its subsidiaries, Affiliates, directors,
officers, agents, or employees is:

 

(a)                                 an individual
or entity that is listed in the annex to, or is otherwise subject to the
prohibitions contained in, Executive Order No. 13224 on Terrorist Financing,
effective September 24, 2001 or the Office of Foreign Asset Control (“OFAC”)
regulations;

 

(b)                                 an individual
or entity with whom Lender is prohibited from dealing or otherwise engaging in
business under any U.S. law, regulation, executive order and/or lists published
by OFAC (including those executive orders and lists published by OFAC);

 

(c)                                  an individual
or entity that is named on the most current list of “Specially Designated
Nationals and Blocked Persons” published by OFAC on its official website or any
replacement website or other replacement official publication of such list; or

 

(d)                                 an individual
or entity with which any financial institution is prohibited from dealing or
otherwise engaging in any transaction under any laws or regulations related to
terrorism or money laundering.

 

6.06                        Litigation.  There is no action, order, writ, injunction,
judgment or decree outstanding or claim, suit, litigation, proceeding, labor
dispute, arbitral action or investigation pending, or to the actual knowledge
of the Servicer threatened, against or relating to the Servicer that would
likely have a material adverse effect on this Agreement or on its business or
financial condition, its ability to consummate the transactions contemplated
hereby or perform its obligations hereunder, or which could materially impair
the enforceability of the Loans.

 

6.07                        No
Conflicts or Consents.  The Servicer is not a party to or bound by
any agreement or instrument or subject to any charter or other restriction or
any judgment, order, writ, injunction, decree, law or regulation which now or
in the future may substantially and adversely affect the ability of the
Servicer to perform its obligations under this Agreement or which requires the
consent of any third person, other than the Office of the Pennsylvania Attorney
General, to the execution of this Agreement or the consummation of the
transactions contemplated herein.

 

6.08                        True
Statements.   No information, certificate of an officer of
Servicer, statement furnished in writing, or report required hereunder
delivered to the Lender or FMC will, to the knowledge of Servicer, contain any
untrue statement of a material fact or omit a material fact necessary to make
the information, certificate, statement or report not misleading.

 

6.09                        Compliance with Laws.   Notwithstanding
the language set forth in Section 4.01, in performing the Services
hereunder, Servicer will comply with: 
the Fair Debt Collection Practices Act, as amended; the Fair Credit
Reporting Act, as amended; and the consumer protection laws created by the
Federal Trade Commission, pursuant to the FTC Act, as amended.  Servicer further agrees in performing
services hereunder, it shall not, directly or indirectly knowingly,
discriminate against a consumer on the basis of gender, age, race, color,
religion, national origin, childbearing or familial status, marital status,
ethnic group, veteran status, disability, receipt of income from any public
assistance program, or any classification protected by applicable federal law.
Servicer shall use reasonable commercial efforts to comply with other
applicable state or federal laws or regulations relating to the administering,
communicating, servicing, and collection of educational loans, which have been
identified by Lender or FMC to Servicer. 
In the event Servicer has not violated any applicable provisions of the
Fair Debt Collection Practices Act and Servicer must engage in a legal
proceeding solely as a result of the mini-Miranda contained in a letter
received by a party to a lawsuit, Lender will indemnify Servicer for such
litigation costs; provided, however, such indemnification would not apply where
the mini-Miranda is required under applicable state law as identified by
Lender.

 

15

 

6.10                        Ongoing
Obligation.  If at any
time during the term of this Agreement, any of the representations contained in
this Section 6 are no longer true, Servicer will immediately notify Lender
and Lender shall have the right to terminate this Agreement pursuant to Section 14.02.

 

Representations And Warranties of Lender and First Marblehead. Lender and
Program Administrator represent and warrant to each other and to Servicer (and
these warranties and representations shall be deemed continuing and repeated as
of the date each Loan shall become subject to this Agreement) as follows:

 

6.11                        Organization.  It is duly organized, validly existing and in
good standing under the laws of its state of organization and/or the United
States, and has full power and authority to conduct its business as it is
presently being conducted.

 

6.12                        Authorization.  It has all necessary authority and has taken
all necessary action to enter into this Agreement, to consummate the
transactions contemplated hereby and to perform its obligations hereunder.  This Agreement has been duly executed and
delivered by each of FMC and Lender and is a legal, valid and binding
obligation of each Party, enforceable against it in accordance with its terms,
except as the enforcement thereof may be limited by applicable bankruptcy,
insolvency, rearrangement, reorganization or similar debtor relief legislation
affecting the rights of creditors generally from time to time in effect and by
general principles of equity (regardless of whether such enforcement is sought
in a proceeding at law or in equity) and the discretion of the court before
which any such proceeding may be brought.

 

6.13                        Absence
of Conflicts.  Neither the
execution and delivery of this Agreement by either FMC or Lender nor the
performance by either Party of its obligations hereunder will result in (i) a
violation of the articles of incorporation or charter documents of such Party,
or (ii) a breach of, or a default under any contract, agreement,
instrument, lease, commitment, franchise, license, permit or authorization to
which such Party is a party or by which it or its assets are bound, which
breach or default would have a material adverse effect on its business or
financial condition or its ability to consummate the transactions contemplated
hereby, or (iii) a violation by such Party of any Requirements of Law,
which violation would have a material adverse effect on such Party’s business
or financial condition, its ability to consummate the transactions contemplated
hereby or perform its obligations hereunder, or which could materially impair
the enforceability of the Loans.

 

6.14                        Consents
and Approvals.  Each of FMC
and Lender has obtained any and all consents, approvals or authorizations of,
and made any and all declarations, filings or registrations with, any
governmental authority, or any other Person, required to be obtained or made by
such Party in order to execute, deliver and perform its obligations under this
Agreement or consummate the transactions contemplated hereby, except where the
failure to do so would not have a material adverse effect on its business or
financial condition, its ability to consummate the transactions contemplated
hereby or perform its obligations hereunder, or which would not materially
impair the enforceability of the Loans.

 

6.15                        Litigation.  There is no action, order, writ, injunction,
judgment or decree outstanding or claim, suit, litigation, proceeding, labor
dispute, arbitral action or investigation pending, or to the actual knowledge
of either FMC or Lender threatened, against or relating to such Party that
would likely have a material adverse effect on this Agreement or on its
business or financial condition, its ability to consummate the transactions
contemplated hereby or perform its obligations hereunder, or which could
materially impair the enforceability of the Loans.

 

6.16                        Compliance
with Law.  It does and
will at all times comply with all applicable Requirements of Law, in all
material respects including the provisions of Title X and the marketing and
conduct requirements of Section 1011 thereof, 15 U.S.C. § 1650, and its
implementing regulations set forth in 34 C.F.R. § 601.21, as applicable to
activities conducted in connection with the Program.

 

6.17                        Intellectual
Property.  It owns, or has
the right to use under valid and enforceable agreements, all intellectual
property rights reasonably necessary for and related to its performance under
this Agreement and such performance will not infringe or violate any
intellectual property rights of any other Person.

 

SECTION 7. 
INSPECTIONS: AUDITS

 

7.01                        Audit
of Books and Records. Lender, its accountants, auditors,
representatives, Program Administrator on its behalf, and any Federal, state or
local governmental or quasi-governmental officials with regulatory authority
over 

 

16

 

Lender shall have the absolute right, at Lender’s
expense, upon not less than thirty (30) days prior written notice (or such
shorter notice period as required by law), at any time during or after the term
hereof:

 

(i) to audit or examine all books, records,
documents, other writings, information, whether in hard copies, electronic form
or otherwise, relating to Services to be provided by Servicer under this
Agreement at the location(s) where Servicer maintains such books, records,
documents, writings and information;

 

(ii) to conduct such other examinations, tests
or investigations with respect to the Services to be provided under this
Agreement as Lender may deem necessary or desirable in Lender’s sole and
absolute discretion and at Lender’s expense, it being acknowledged and agreed
by Servicer that Lender shall have rights of access to books, records,
documents, other writings and information, whether in hard copies, electronic
form or otherwise, relating to the Services to be provided by Servicer under
this Agreement, at any time during normal business hours.

 

On-site examination of documents held in safekeeping
and imaged records or related documentation will be performed with as little
disruption as possible to Servicer’s normal operation.  All questions
arising during the course of the audit will be coordinated by the chief auditor
and directed to the individual(s) designated by Servicer.  Servicer
will designate a sufficient number of liaison personnel so as to be able to
respond timely to audit questions.  All Lender out-of-pocket expenses,
non-Servicer personnel costs and copying expenses relating to such review,
audit and copying shall be borne by Lender.

 

Notwithstanding the foregoing, Program Administrator
shall, on behalf of Lender, conduct each calendar quarter an operational audit
to test the Servicer’s compliance with the requirements of this Agreement and
the Servicing Guidelines (each, an “Operational Audit”). If in an Operational
Audit Program Administrator determines that Servicer has failed to adequately
and/or properly perform its obligations hereunder or under the Servicing
Guidelines, Program Administrator and Servicer shall work in good faith to
remedy the errors or inadequacies prior to the next Operational Audit, and
shall present to Lender for its approval recommended modifications to this
Agreement and/or the Servicing Guidelines designed to improve efficiency,
customer service, and/or loan performance.

 

7.02                      Sarbanes
Oxley Compliance.  If requested by Lender,
Servicer shall participate in Sarbanes-Oxley Act of 2002 (“Sarbanes Oxley”)
compliance testing conducted by Lender with respect to the Services on a
quarterly basis and shall provide documents and information as reasonably
requested by Lender to conduct such compliance testing. Servicer agrees to
provide any assistance reasonably requested by Lender to enable Lender to
comply with Sarbanes Oxley, the rules of the Public Company Accounting
Oversight Board and rules of the Securities and Exchange Commission
relating to disclosure controls and procedures and inquiries by the SEC or
other regulatory agency. Such assistance shall include but shall not be limited
to: (i) documenting Servicer’s controls and procedures relating to the
Services; (ii) cooperating with Lender’s auditors in connection with the
testing of such controls and procedures; (iii) making quarterly
representations or certifications to Lender regarding any material changes to
such controls and procedures; (iv) remediating any material weakness or
significant deficiency that would prevent Lender from complying with Sarbanes
Oxley or any rules or regulations promulgated thereunder; and (v) providing
an unqualified SAS 70 Type 2 Report issued by an independent certified public
accounting (CPA) firm in connection with its provision of the Services.

 

7.03                      SAS
70 Audit. Servicer will engage, at its expense, an
independent CPA firm that adheres to professional standards established by the
American Institute of Certified Public Accountants (AICPA) to conduct reviews
of Servicer’s general controls associated with Servicer’s facilities, as well
as the controls associated with the Services and the programs used to provide
the Services, including but not limited to controls over information technology
and related processes.  The scope of the
audit shall include all such matters as Servicer’s auditor deems necessary or
required to meet regulatory compliance standards, including but not limited to
an examination of the record keeping system and other equipment and software
used by Servicer. Such reviews shall be performed at such frequency and times
as Servicer shall determine, but shall be performed at least once annually.
Within thirty (30) days of the receipt by Servicer, Servicer shall provide
Lender with a copy of each report submitted by Servicer’s independent
accountants regarding any of the matters set forth in this paragraph. All such
reviews shall comply with AICPA Statement on Auditing Standards (SAS) No. 70,
and the reports obtained shall be of the type generally referred to (depending
on the publication) as either Type “II” or “B”. In a Type II report, the
Servicer’s auditor will express an opinion on (1) whether the Servicer’s
description of its controls presents 

 

17

 

fairly, in all material respects, the relevant
aspects of the Servicer’s organizational controls that had been placed in
operation as of a specific date, and (2) whether the controls were suitably
designed to achieve specified control objectives, and (3) whether the
controls that were tested were operating with sufficient effectiveness to
provide reasonable, but not absolute, assurance that the control objectives
were achieved during the period specified. If the Servicer’s audit of
procedures reveals exceptions or control deficiencies, then Servicer shall take
steps to correct the control objective, at no cost to Lender.

 

7.04                        Operational
Audits. Upon thirty (30) days prior written notice from
Lender, and subject to Servicer’s reasonable security requirements, Servicer
shall provide to Lender (and Lender’s internal and external auditors,
inspectors, regulators and other representatives that Lender may designate from
time to time) access at reasonable hours to Servicer’s Personnel, to the
facilities at or from which Services are then being provided, and to Servicer’s
records and other pertinent information, all to the extent relevant to the
Services and Servicer’s obligations under this Agreement. Such access shall be
provided for the purpose of performing audits and inspections of Servicer and
its businesses and to examine Servicer’s performance of loan servicing under
this Agreement including (i) verifying the integrity of the Servicer data;
(ii) examining the controls (e.g., organizational controls, input/output
controls, system modification controls, system design controls and access
controls) and the security, disaster recovery and back-up practices and
procedures; (iii) examining Servicer’s measurement, monitoring and
management tools; and (iv) enabling Lender to meet applicable legal,
regulatory and contractual requirements. Servicer shall provide any assistance
reasonably requested by Lender or its designee in conducting any such audit.

 

7.05                        Regulatory
Audits. Within thirty (30) days of
its receipt, Servicer shall provide Lender with a summary of any audit results
performed by a federal or state regulator concerning the Services provided
under this Agreement, including but not limited to the Department of Education.
The content of any such summary shall be subject to Servicer’s reasonable
security requirements. When the regulatory auditor’s procedures reveal
exceptions or control deficiencies, then Servicer shall take steps to correct
the control design deficiency or operating effectiveness deficiency in all
material respects. If such audit reveals that the services provided by Servicer
do not cause Servicer’s operations to meet the auditor’s recommendation, then
Servicer shall provide such further services as are necessary to bring its
operations into conformance with the auditor’s recommendations to such level
and degree, at no cost to Lender.

 

7.06                        Financial
and Other Information. Servicer shall provide
Lender with the following:

 

(a)                                 Within forty-five
(45) days after the end of each of the first three quarters of each fiscal
year, unaudited financial statements of Servicer for such quarter, setting
forth the information called for as of the end of, and for such quarter as
described in paragraph (b) of this Section 7.06 will be posted to the
Servicer’s web site; and

 

(b)                                 Within one
hundred twenty (120) days after the close of each fiscal year of Servicer, a
copy of an annual report as to the obligations and activities of Servicer
during such fiscal year will be posted to Servicer’s web site, and financial
statements for such fiscal year, setting forth in reasonable detail:

 

(i)                                     the balance
sheet for Servicer and its programs showing the assets and liabilities of such
programs at the end of such fiscal year;

 

(ii)                                  a statement of
Servicer’s revenues and expenses in accordance with the categories or
classifications established by Servicer for its operating and program purposes
and showing the revenues and program expenses during such fiscal year; and

 

(iii)                               a statement of
changes in financial position, including changes in financial position of
Servicer’s programs, as of the end of such fiscal year.

 

The annual report shall be accompanied by a report
of an independent auditor stating that the financial statements present fairly,
in all material respects, the net assets of the Servicer as of the years
stated, and its changes in net assets and cash flows for the years then ended,
in conformity with accounting principles generally accepted in the United States
of America.

 

18

 

7.07                      Annual
Statement as to Compliance.  Upon request, the Servicer shall deliver an
annual report to Lender on or prior to March 31 of each year commencing March 31
of the year following execution of this Agreement, signed by the Chief
Executive Officer (“CEO”) of the Servicer, stating that (a) a review of
the activities of the Servicer, and the Servicer’s performance under this
Agreement, for the previous twelve (12) months ending September 30 has
been made under such CEO’s supervision and (b) to the best of such CEO’s
knowledge, based on such review, the Servicer has or has caused to be performed
all of its obligations under this Agreement throughout such year and that no
default has occurred, or if such a default has occurred and is continuing,
specifying each such event, the nature and status thereof and the steps
necessary to remedy such affair. In the event that the Servicer has delegated
any servicing responsibilities with respect to the Loans to a subservicer or
subcontractor, the Servicer shall deliver a similar annual report by any such
subservicer or subcontractor as described above as and when required with
respect to the Servicer.

 

7.08                      Cooperation
with Audits; Follow-Up. Servicer shall fully
cooperate with any audit(s) conducted by either Lender, Lender’s agent, or
a U.S. federal agency pursuant to this Agreement. Servicer shall be entitled to
charge Lender for the management hours or fees with respect to the time spent
by Servicer’s management and employees reasonably necessary in providing
assistance to Lender, Lender’s internal and external auditors, or any
governmental authority performing any audits, compliance, security and control
testing. If any audit report establishes that Servicer’s performance of the
Services is not in compliance with the terms of this Agreement, Servicer shall
submit to Lender within thirty (30) days of its receipt of the relevant audit
report a plan to improve Servicer’s performance to the level required by this
Agreement.

 

7.09                        Accelerated
and Emergency Audits.  In
the event that Lender has the right to terminate this Agreement under Section 14
(Termination), whether or not such right is exercised, Lender shall have the
right to perform or cause to be performed any audit, examination or inspection
described in this Agreement, upon providing to the Servicer proof of the cause
for such right of termination, without any limitations or requirements as to
notice, frequency, duration, business interruption, or other such limitation or
requirement for the benefit of the Servicer. All costs of such an accelerated
or emergency audit shall be borne by Lender.

 

SECTION 8. 
CHARGES AND PAYMENTS.

 

8.01                        Fees. 
The Servicer shall provide all aspects of the
Services at its sole cost and expense, except as otherwise provided in this
Agreement, and shall be compensated by Lender as set forth in this Agreement
and in the Fee Schedule. The fee for the Services provided by
Servicer, together with services provided by FMC as Program Administrator, both
under this Agreement and the Loan Program Agreement between Lender and FMC,
shall be payable by the Lender to the Servicer, on a pro-rated monthly basis
and shall be equal to 100 basis points per annum based upon the ending principal
balance of the Student Loans at each month end, as reflected in the Servicer’s
monthly MR-53 report or any similar report that replaces such MR-53 report.

 

8.02                        Invoices.  Invoices for the Servicer’s Services and the Program
Administrator’s charges, including the collection of Late Fees collected on
behalf of Lender as set forth in
Section 4.13 herein and the
Fee Schedule, shall be rendered
by the Program Administrator after each month end with payment to be paid by
Lender to Servicer. All invoices are
payable net forty-five (45) days from the date of the invoice.  If
full payment is not received within sixty (60) days from date of invoice,
except as to amounts which are under dispute, such non-payment shall constitute
a default hereunder and, shall entitle Servicer at any time thereafter, to
notify Lender of such default and if such default is not cured within thirty
(30) days from the date of such written notice, Servicer at its option, may
immediately terminate this Agreement. Lender
shall report any disputes to the Program Administrator regarding an invoice
within sixty (60) days of the date of the invoice, and the Program
Administrator shall research the disputed item and respond to Lender.

 

8.03                        Adjustments to Programs.  Servicer, Lender and Program Administrator, on behalf of the Lender,
shall discuss future enhancements to the Services, the PHEAA System, and the
Servicing Guidelines as identified in Section 4.06(c).

 

19

 

SECTION 9.  LIABILITY

 

Servicer agrees to pay Lender or FMC, as applicable,
for any claim, loss, liability or expense, including reasonable attorney’s fees
(collectively referred to herein as “Loss”), which arises out of or relates to
the Servicer’s acts or omissions with respect to the Services provided under
this Agreement, including but not limited to Losses (a) that arise from Servicer’s failure to perform its
obligations under this Agreement in compliance with the Servicing Guidelines,
or (b) related to the Servicer’s performance of its obligations under this
Agreement or the Servicing Guidelines, where the final determination of
liability on the part of the Servicer to Lender or FMC, as applicable, is
established by a court of law with competent jurisdiction over the Servicer, or
by way of settlement agreed to by the Servicer. Further, nothing herein shall
be read or construed as a waiver of the sovereign immunity of the Commonwealth
of Pennsylvania, except to the extent authorized by the laws of said
Commonwealth.

 

Lender and/or FMC, as applicable, agrees to pay
Servicer for any Loss arising out of or relating to Lender’s or FMC’s acts or
omissions with respect to the Loans covered by this Agreement, including but
not limited to a determination that the
procedures in the Servicing Guidelines are found to be in violation of a state
or federal law, where the final determination of liability on the part
of Lender and/or FMC, as applicable, is established by a court of law or by way
of settlement agreed to by Lender and/or FMC.

 

The maximum liability on
the part of Servicer under this Agreement for all Losses incurred by Lender on
Loans Serviced by the Servicer as a result of Servicing deficiencies shall not
exceed [**] percent ([**]%) of the total dollar value of the Loans
Serviced by Servicer for Lender under this Agreement.

 

This provision shall take effect as of the date on
which each individual Loan is converted to the Servicer’s Loan Servicing
System.

 

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

 

SECTION 10. 
FORCE MAJEURE

 

10.01                 Neither Servicer nor Lender
shall be liable for any failure or delay in the performance of its obligations
under this Agreement to the extent such failure or delay is caused by any acts
of war, terrorism, civil riots or rebellions, fires, earthquakes, floods,
storms, lightning, epidemics, quarantines, embargoes and other similar unusual
governmental actions, extraordinary elements of nature or acts of God,
expropriation or confiscation or property, failure or delay by carriers,
judicial or governmental action, interference by civil and military authorities
whether by legal proceeding or in fact and whether purporting to act under some
constitution, decree, law, or otherwise, emergency regulation or labor dispute
or unrest, provided that and only to the extent that Servicer or Lender could
not reasonably circumvent the failure or delay through the use of commercially
reasonable alternate sources, workaround plans or other means (“Force Majeure”).
An event shall not be considered a Force Majeure event to the extent that
proper implementation of the Business Continuity Plan (as defined below) would have
enabled the Party to continue performance hereunder in a timely manner. The
occurrence of a Force Majeure event shall not excuse any Party from having in
place reasonable safeguarding plans and procedures adequate for protecting all
Proprietary Information and NPPI of Lender.

 

Notwithstanding any other
provision of this Section, a Force Majeure event shall obligate and require the
affected Party to commence its Disaster Recovery Plan (as defined below). If
any Force Majeure event prevents, hinders or delays performance of the critical
Services for more than three (3) Business Days or results in data loss in
excess of forty-eight (48) hours, Lender may procure any affected Services from
an alternate source at Lender’s cost and expense.  If the Force Majeure event continues to
prevent, hinder or delay performance of any Services which are of a critical
nature for an additional four (4) Business Days, Lender shall have the
right to terminate this Agreement on not less than fifteen (15) days prior
written notice to Servicer, provided that Servicer will be responsible to
continue Services up to the effective date of such termination.  Lender shall not be required to pay any Early
Termination or Record Return/Deconversion Fees for a termination of this
Agreement pursuant to this Section.

 

20

 

SECTION 11. 
CONFIDENTIAL INFORMATION/PRIVACY/SECURITY

 

11.01                 Proprietary
Information Access or Exchange.  In the performance of this Agreement, each
Party may disclose to the other Parties certain Proprietary Information.

 

11.02                 Definitions.  For the purposes of this
Agreement, the following terms will have the definitions set forth below.

 

(a)                               “Proprietary Information” means Trade Secrets, Confidential
Business Information, and NPPI.

 

(b)                                 “Trade Secrets” will include without limitation and without regard
to form, technical or non-technical data, formulae, patterns, design, business
logic, presentation or strategy, new products, marketing plans, ideas,
know-how, inventions, compilations, programs, software programs, devices,
methods, techniques, drawings, processes, financial data, financial plans,
product plans, non-public forecasts, studies, projections, analyses, all
customer data of any kind, lists of actual or potential customers, business and
contractual relationships, literary, artistic, graphical or other works and
improvements, or any other information similar to the foregoing that: (a) derives
economic value, actual or potential, from not being generally known and not being
readily ascertainable by proper means to other persons who can obtain economic
value from its disclosure or use; and (b) is the subject of efforts that
are reasonable under the circumstances to maintain its secrecy.  In each case whether or not patentable,
copyrightable or otherwise subject to intellectual or industrial property
protection, and whether or not registrable or subject to any registrations or
applications therefore, and any of the same relating to or owned by any
subsidiary or affiliate of the Disclosing Party.  For the sake of clarity, “Trade Secrets” will
include information provided to any Party by any third parties, which such
Party is obligated to hold in confidence.

 

(c)                                  “Confidential Business Information” means any valuable, secret business
information, other than Trade Secrets, that is designated or identified as
confidential at the time of the disclosure or is by its nature clearly
recognizable as confidential information to a reasonably prudent person with
knowledge of the Disclosing Party’s business and industry.  Confidential Business Information includes
but is not limited to default and
recovery statistics, loan program parameters, risk management strategies,
recovery strategies,

 

(d)                                 “NPPI” means non-public, personally identifiable information of
Disclosing Party’s customers, Disclosing Party’s Personnel or other
individuals, which has been provided to Receiving Party by such persons or
their representatives.  More
specifically, records in any form (oral, written, graphic, electronic,
machine-readable, or otherwise) relating to a Borrower, such as a Borrower’s
name, address, telephone number combined with information including, but not
limited to, a social security number, loan payment or transactional account
history, account status, and the fact that the Borrower has a relationship with
Lender; other Borrower information; or other documentation received by Servicer
pursuant to the Agreement from FMC, or from the Borrower, or from the school
which Borrower attends, or information prepared and maintained by Servicer in
the course of its activities under this Agreement.

 

(e)                                  “Disclosing Party” means the Party disclosing any Proprietary
Information hereunder, whether such disclosure is directly from or through the
Disclosing Party’s Personnel.

 

(f)                                   “Receiving Party” means the Party receiving any Proprietary
Information hereunder, whether such disclosure is received directly from or
through the Receiving Party’s Personnel.

 

11.03                 Exclusions.  Notwithstanding the definition of
Proprietary Information above, Proprietary Information does not include any
information that: (a) was in the Receiving Party’s possession before being
disclosed to it by the Disclosing Party without a duty of confidentiality on
the Receiving Party; (b) is or becomes a matter of public knowledge
through no fault of the Receiving Party; (c) is rightfully received by the
Receiving Party from a third party without a duty of confidentiality; (d) is
disclosed by the Disclosing Party to a third party without a duty of confidentiality
on the third party; (e) is independently developed by the Receiving Party
without use of or reference to the Disclosing Party’s Proprietary Information;
or (f) is disclosed by the Receiving Party with the Disclosing Party’s
prior written approval without a duty of confidentiality on the Party making
such disclosure or 

 

21

 

the third party to which
disclosure is authorized.  In addition,
notwithstanding anything else contained in this Section 11 or this
Agreement, nothing in this Section 11 will be construed to prohibit
disclosure of any information to regulatory agencies, attorneys, accountants,
who are obliged to respect the confidentiality thereof.  No such sharing with Recipient’s regulatory
agencies, accountants or attorneys, however, shall relieve Recipient from its
obligations or liability hereunder with respect to any unauthorized disclosure
of Proprietary Information, whether by its own actions or by the actions of its
regulators, accountants or attorneys.

 

11.04                 Ownership and Restrictions on Use.  The
Receiving Party acknowledges and agrees that except to the extent otherwise
expressly provided herein, the Proprietary Information of the Disclosing Party
will remain the sole and exclusive property of the Disclosing Party or a third
party providing such information to the Disclosing Party, and the disclosure of
such information to the Receiving Party does not confer upon it any license,
interest, or right of any kind in or to the Proprietary Information, except as
provided under this Agreement.  At all
times and notwithstanding any termination or expiration of this Agreement, the
Receiving Party agrees that it will:  (a) hold
in strict confidence and not disclose to any third party the Proprietary
Information of the Disclosing Party, except as approved in writing by the
Disclosing Party; (b) only permit access to the Proprietary Information of
the Disclosing Party to those of its Personnel who have a need to know and have
signed confidentiality agreements or are otherwise bound by confidentiality
obligations substantially similar to those contained in this Agreement; (c) be
responsible to the Disclosing Party for any third party’s use and disclosure of
the Proprietary Information provided to such third party by the Receiving
Party; (d) only use Proprietary Information that it receives to carry out
the purposes of the Agreement and for no other purpose whatsoever; and (e) use
at least the same degree of care it would use to protect its own Proprietary
Information of like importance, but in no event less than a reasonable degree
of care, including maintaining information security standards for such
Proprietary Information as are commercially reasonable and customary for the
type of information.  Specifically, with
regard to NPPI, Servicer will comply with the information security standards
specific to such information set forth in this Agreement.  No Party will communicate any information to
the other Party in violation of the proprietary rights of any third party.  All Parties agree not to disclose
Proprietary Information to any competitors of the Disclosing Party The Parties further agree the Disclosing Party retains
all right, title and interest in and to all of its Proprietary Information and
any intellectual property and industrial rights therein, including (without
limitation) any patents, copyrights and registrations thereof and applications
therefor, and the Disclosing Party will have all the rights and remedies
available to it as a result of such right, title and interest.  This Agreement does not grant or constitute
an assignment of or license in or to any such Proprietary Information or
intellectual or industrial property, including, without limitation, for the
development, manufacture or sale by Receiving Party of products or services
based on Proprietary Information or for any other use of Proprietary
Information by Receiving Party except as expressly provided herein.

 

11.05                 Required Disclosures. 
Receiving Party’s duty hereunder shall not extend to such Proprietary
Information which is compelled by a validly issued subpoena, court order,
governmental request or request of a law enforcement agency; provided, however,
if the Lender or FMC is required by a Governmental Authority or law to disclose
any of the Proprietary Information of the Disclosing Party, the Receiving Party
must, if legally permissible: (i) first give written notice of such
required disclosure to the Disclosing Party; (ii) make a reasonable effort
to obtain a protective order requiring that the Proprietary Information so
disclosed be used only for the purposes for which disclosure is required; (iii) take
reasonable steps to allow the Disclosing Party to seek to protect the
confidentiality of the Proprietary Information which, in the opinion of its
legal counsel, it is required to disclose. 
The foregoing requirements will not apply and are not intended to limit
any Party’s ability to fully comply with requests for information from
regulators of the Internal Revenue Services, as permitted by the last sentence
of Section 11.03.  FMC and Lender acknowledge,
understand, and agree that any information, proprietary or otherwise, which is
provided by FMC or Lender to Servicer and which qualifies as a “public record”
under Pennsylvania’s Right-to-Know Law, 65 P.S. §§67.101 et seq.,
as amended, and as may be further amended in the future, may be subject to
disclosure by Servicer.  FMC and Lender
accordingly waive and release Servicer from any actions at law or in equity
from compliance with any such disclosure. 
FMC and Lender further acknowledge, understand, and agree that any such
disclosure does not constitute breach of any confidentiality provision
otherwise provided for in this Agreement. 
In the event Servicer is required to make such disclosure, Servicer
shall make commercially reasonable effort to notify FMC or Lender in writing in
advance of any disclosure request or of other pending 

 

22

 

legal action instituted to enforce disclosure of
this Agreement or any information, proprietary or otherwise, which is provided
by FMC or Lender to Servicer hereunder.

 

11.06                 Notice of Unauthorized Disclosures.  Each
Party to this Agreement will immediately notify the other Parties in writing
upon discovery of any loss or unauthorized disclosure of the Proprietary
Information of the other Parties.

 

11.07                 Limit on Reproductions.  The
Receiving Party will not reproduce the Disclosing Party’s Proprietary
Information in any form except as reasonably necessary to fulfill such Party’s
duties and obligations and otherwise comply with the agreements of such Party
under this Agreement.  Any reproduction
of any Proprietary Information by the Receiving Party will remain the property
of the Disclosing Party and will contain any and all confidential or
proprietary notices or legends that appear on the original, unless otherwise
authorized in writing by the Disclosing Party.

 

11.08                 Document Destruction — Information Erasure. 
Except as otherwise set forth in this Agreement, upon the earlier
of:  termination of this Agreement, the
written request of the Disclosing Party, or when no longer needed by any Party
for fulfillment of its obligations under this Agreement, each Receiving Party
will either: (a) promptly return to the Disclosing Party all documents and
other tangible (including electronic) materials containing the Disclosing Party’s
Proprietary Information, including all copies thereof in its possession or
control; or (b) erase or destroy all such materials by the following
methods.  If return, erasure, or
destruction is not feasible, then the Receiving Party may maintain the
Disclosing Party’s Proprietary Information in compliance with the requirements
of the confidentiality and information security provisions of this Agreement;
provided, however, that when the return, destruction, or erasure of any such
materials becomes feasible for the Receiving Party, the Receiving Party must
comply with the requirements of (a) or (b) above within sixty (60)
calendar days.  Upon request, Receiving
Party shall also provide to the Disclosing Party a written certification of
destruction signed by an officer of the Receiving Party duly authorized to
legally bind the Receiving Party certifying and warranting that no copies of the Proprietary Information have
been retained;

 

	
  TYPE OF PROPRIETARY INFORMATION 

  STORED OR USED

  	
   

  	
  DESTRUCTION
  METHOD

  
	
  Hard Copy

  	
   

  	
  Shredding, pulverizing, burning, or other suitable
  destruction method so that any Proprietary Information is not readable at all
  and cannot be reassembled or reconstructed in any way so that it is
  practicably readable.

  
	
   

  	
   

  	
   

  
	
  Electronic Tangible Media, such as CDs, Disks, Tapes

  	
   

  	
  Destruction or erasure of such media so that any
  Proprietary Information is not readable at all and cannot be reassembled or
  reconstructed in any way so that it is practicably readable.

  
	
   

  	
   

  	
   

  
	
  Hard Drive Storage or similar Computer or Device
  Storage

  	
   

  	
  Erasure or elimination of Proprietary Information
  from such device so that any Proprietary Information is not readable at all
  and cannot be reassembled or reconstructed in any way so that it is
  practicably readable.

  

 

11.09                 Equitable Relief.  If
any Party should breach or threaten to breach any provision of this Section 11
of the Agreement, the non-breaching Party, in addition to any other remedy it
may have at law or in equity, will be entitled to seek a restraining order,
injunction, or other similar remedy in order to specifically enforce the
provisions of this Section.  Each Party specifically
acknowledges that money damages alone may be an inadequate remedy for the
injuries and damages that would be suffered and incurred by the non-breaching
Party as a result of a breach of any provision of this Section.  In the event that any Party should seek an
injunction hereunder, the other Parties hereby waive any requirement for the
submission of proof of the economic value of any Proprietary Information or the
posting of a bond or any other security.

 

23

 

11.10                 Survival.  The
obligations set forth in this Section 11 as they pertain to Proprietary
Information, shall survive termination of this Agreement and continue for so
long as the relevant information remains Proprietary Information.

 

11.11                 Prior Agreements.  The
provisions set forth in this Agreement are only relevant to the Program and
this Agreement and do not affect any Prior Agreement between the Parties.

 

11.12                 Information Related to Tax Structure and Treatment.  It
is the Parties’ mutual intent that the tax structure and tax treatment of the
transactions contemplated by this Agreement will not be confidential and, that
notwithstanding anything herein to the contrary, each Party and its Personnel
may disclose to any and all Persons of any kind, the tax structure and tax
treatment of the transactions contemplated herein such that the transactions
will be treated as not having been offered under conditions of confidentiality
for purposes of Section 1.6011-4(b)(3) (or any successor provision)
of the Treasury Regulations promulgated under Section 6011 of the Internal
Revenue Code of 1986, as amended, and any comparable provision in the law of
any other jurisdiction.

 

11.13                 General
Security Requirements.  All Parties
will provide information, data back-up procedures, and information security so
as to reasonably ensure that any Proprietary Information provided by another
Party is not lost, stolen, modified, disclosed to or accessed by any other
party (other than those permitted parties under Section 11 of this
Agreement) without the Disclosing Party’s prior written approval.  Such security measures will equal or exceed
standard industry practices for similar entities dealing with Proprietary
Information.  All Parties warrant to the
other Parties that it will reasonably monitor, evaluate and adjust its
information security systems and procedures, its data security systems, and its
processes in response to relevant changes in technology, changes in the
sensitivity of any Proprietary Information, and internal and external threats
to information security.  All Parties
will promptly notify the Disclosing Party of: (a) any unauthorized
possession, use, or knowledge or attempt thereof, of the data-processing files,
transmission messages, or other Lender Proprietary Information by any person or
entity that may become known; (b) the effect of such; and (c) the
corrective action the Receiving Party has taken in response thereto.

 

11.14                 Encryption.  All Parties represent and
warrant not to use, reproduce, transform or store any of the Proprietary Information
in any externally accessible computer or electronic information retrieval
system unless such system is adequately protected against unauthorized
access.  “Adequately Protected” means
whole disk encryption of all laptop computers maintaining Proprietary
Information on such devices; password protection on personal digital assistants
(PDAs) that do not contain or provide access to NPPI; encryption on other
portable devices and portable media including, but not limited to, thumb
drives, tapes, and CDs which maintain or have access to Proprietary
Information.  Servicer shall use a
digital certificate on the web server to enable the use of SSL and HTTPS
protocols. All internet transfers of Proprietary Information and screen images
of the same shall be encrypted.  All
encryption must meet a minimum standard of Advanced Encryption Standard
algorithm with a minimum key strength of 256 bit.  Notwithstanding the foregoing, one
product currently used by Servicer which allows third parties to access the
Servicer’s system is in the process of being increased to at least this minimum
standard.

 

11.15                 Information
Security Audits.  During the term
of this Agreement, and for one (1) year following termination Lender may
provide prior written notice to Servicer or the intent to review the summary of
the information security program, at Servicer’s Headquarters, upon reasonable
notice of not less than 30 days.

 

11.16                 Servicer
Firewall(s).

 

(a)                               Servicer will
create its firewall rules based on the principle of least access needed.  This means that the firewall(s) will
only pass the traffic necessary for the system applications utilized by
Servicer in providing Services hereunder to function to the backend servers,
and any unnecessary traffic will be blocked.

 

(b)                                 Servicer will
segregate the Internet environment used to provide service to its clients from
the intranet environment used by internal Servicer personnel.

 

(c)                                  An encrypted
session will be used for connectivity between Lender, FMC and Servicer over the
internet.

 

24

 

11.17                 User
Authentication Processes. 
Servicer will follow its existing policies, procedures, and standards
for authentication.  Servicer will
provide Lender with access to such policies and procedures at Servicer’s place
of business.

 

11.18                 Intrusion
Detection.  Servicer will
maintain a current industry standard intrusion detection monitoring system that
protects its infrastructure against system risk from outside users and
vendors.  Servicer will actively monitor
the intrusion monitoring system and develop escalation procedures to notify
Lender personnel in the event of a security breach pursuant to Section 11.20.

 

11.19                 Risk
Assessment.  Servicer shall
comply with industry best practices and standards regarding information
security.  Servicer shall at a minimum
conduct external and internal scans and audits of the Servicer’s network. On an
on-going basis, Servicer shall scan and audit for any malicious code, viruses
or known threats so that Servicer may protect its network accordingly.  Additionally, on an annual basis, Servicer
shall engage external vendors to conduct blind intrusion testing to verify
Servicer’s then current information security, controls, standards, and
procedures.

 

11.20                 Procedures
for Security Breaches.  For purposes of
this Section, “Breach” is defined as an incident of unauthorized access by a
third party to Sensitive Customer Information maintained by Servicer.

 

“Sensitive Customer Information” shall mean a
Borrower’s first and last name, address or telephone number in conjunction with
the Borrower’s (a) social security number; (b) driver’s license
number; (c) financial account number (other than AES account number); or (d) credit
or debit card number, in conjunction with the personal identification number or
password that would permit access to the customer’s debit or credit card
account.

 

In the event Servicer knows or reasonably believes
that there has been a Breach, Servicer shall take the following actions:

 

(a)                                 immediately
notify Lender of such unauthorized access or attempted unauthorized access;

 

(b)                                 take reasonable
steps to remedy the circumstances that permitted any such unauthorized access
to occur;

 

(c)                                  take reasonable
steps to prohibit further disclosure of Proprietary Information or Consumer
Information;

 

(d)                                 upon request,
cooperate with Lender or its agents to investigate the scope and content of the
unauthorized access; and

 

(e)                                  Cooperate with
Lender as necessary to facilitate Lender’s compliance with any applicable
federal or state law regarding unauthorized access of customer personal
information.

 

Notwithstanding the foregoing, when the role of
Servicer in the Breach is unclear, Servicer will contact Owner for guidance on
a case by case basis.

 

11.21                 Lender’s
Request for Disclosure of Proprietary Information.  Notwithstanding the
foregoing, in the event Lender desires to utilize data or account
aggregation/warehouse web sites or databases (for example, ELMNET), data or
account switches or exchanges (for example, METEOR), or other similar “single
inquiry” service provider or technology (hereinafter collectively “Third Party
Service Provider”) which requires Servicer to disclose (via data transmission
or some other similar methodology) Confidential Information of the Lender, the
Lender, or Program Administrator at Lender’s direction, shall:

 

(a)                                 provide
Servicer prior written notice of Lender’s desire to utilize such service and
provide to Servicer all information necessary for Servicer to effectuate such
transmission; and

 

(b)                                 in the event of
misappropriation of any nature whatsoever following transmission by Servicer,
indemnify, defend and hold Servicer harmless for any claim, loss, liability or
expense, including reasonable attorney’s fees and court costs, arising out of
or relating to the Lender’s or Third Party Service Provider’s acts or
omissions.  This provision shall not be
construed to limit the Lender’s or the Servicer’s rights, obligations,
liabilities, claims or defenses that arise as a matter of law or pursuant to
any other provision of this Agreement.

 

25

 

SECTION 12. 
DISPUTE RESOLUTION

 

12.01                 Except as otherwise
expressly set forth in this Agreement, the Parties agree that any dispute
arising in connection with the interpretation of this Agreement or the
performance of any Party under this Agreement or otherwise relating to this
Agreement will be treated in accordance with the procedures set forth in this Section 12,
prior to the resort by any Party to litigation in connection with such
dispute.  The dispute will be referred for resolution first to a Senior
Vice President for Lender, the General Counsel or Chief Financial Officer for
FMC, and General Counsel for Servicer.  Such procedure will be invoked by
any Party presenting to the other Parties a Notice of Request for Resolution of
Dispute (a “Notice”) identifying the issues in dispute sought to be
addressed hereunder.  A telephone or
personal conference of those executives will be held within fifteen (15) Business
Days after the delivery of the Notice.  In the event that the telephone or
personal conference between these executives does not take place or does not
resolve the dispute, any Party may proceed to litigation pursuant to section 9.

 

SECTION 13. ASSIGNMENT; SALE OF LOANS.

 

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

 

13.02                 Assignment
of Loans from Lender to FMC. The Parties acknowledge
and agree that Lender shall assign Charged Off Loans to FMC (or an Affiliate
thereof) for collection under the terms and conditions of the Loan Program
Agreement and within the time frame set forth in the Servicing Guidelines and
that after the Servicer completes the processes required in the Servicing
Guidelines with respect to Charged Off Loans, such Loans shall no longer be
serviced by Servicer under this Agreement.

 

13.03                 Notice Requirement Prior to Sale of Loans.  Lender shall use best efforts
to notify the Servicer, in writing, sixty (60) days prior to any sale of Loans,
and shall notify Servicer, in writing, no less than forty-five (45) days prior
to any sale of Loan, currently housed on the Loan Servicing System as to (a) the
anticipated sale date and (b) the characteristics of the Loans to be sold.
The Lender will notify the Servicer of the sale date no later than five (5) days
prior to the sale. Within thirty (30) days of its receipt of the above initial
notice, the Servicer shall provide Lender with available transfer dates.  Actual transfer dates shall be mutually
agreed upon.

 

SECTION 14.      TERMINATION

 

14.01                 Borrower’s Loan.  This Agreement shall
terminate as to a specific Borrower’s Loan on the earliest of:

 

(a)                               the month following the
month during which (i) the principal, interest, Late Fees, and any other
fees, if any, have been fully paid and remitted to the Lender, and (ii) the
Borrower has been notified that the Loan has been paid in full;

 

(b)                               with respect to a Charged
Off Loan, the end of the month during which such Charged Off Loan is
transferred to FMC or its Affiliate for collection, as set forth in Section 13.02;
or

 

(c)                                the end of the month
following the month during which the sale or transfer of such Loan occurs where
Servicer does not continue Servicing such Loan, subject to the provisions set
forth in Section 13.03 (Notice Requirement Prior to Sale of Loans) hereof.

 

14.02.              Termination by Lender/Resignation by FMC.  This Agreement may be terminated at the
option of Lender upon the occurrence of any of the following:

 

(a)                                 Any of Servicer’s
representations or warranties made in or pursuant to this Agreement shall have
been incorrect or misleading in any material respect when made;

 

26

 

(b)                                 The Servicer’s failure to perform
or observe any of the provisions or covenants of this Agreement and/or its
referenced Schedules and Exhibits, in any material respect (including, without
limitation, any breach of the provisions of Section 4.12 (Collections), all of which shall be deemed
material or Section 11.15(b));

 

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

 

(d)                                 Change of Control.  Notwithstanding Section 13.01
(Assignment by Servicer), if Servicer is the subject of a Change of Control,
Lender and FMC shall have the right to terminate this Agreement upon a minimum
of thirty (30) Business Days prior written notice. Such right of termination
must be exercised within sixty (60) days of the date on which Lender received
notice of such Change of Control from the Servicer. Following Servicer’s
receipt of notice and information to support the termination hereunder from
Lender, Servicer shall work diligently with Lender and Program Administrator to
carry out the deconversion of the Loans off of the Servicer’s Loan Servicing
System within a timeframe reasonably agreeable to the Parties but in any event
shall be begun within ninety (90) Business Days from the Servicer’s receipt of
notice and the Parties shall use their best efforts to complete the
deconversion process within 24 months from the date it begins.  There will be a charge to Lender of Early
Termination Fees as detailed in the Fee Schedule attached hereto arising from
Lender’s termination of the Agreement pursuant to this Section. Lender shall be
responsible for any and all fees arising under this Agreement and the attached
Fee Schedule that are incurred by Lender hereunder prior to Lender’s
termination of this Agreement and complete deconversion pursuant to this
Section.

 

In
the event of an event of default as set forth in Section 14.02(a) or (b) above,
the Servicer shall have the right to cure any such breach or error to Lender
and FMC’s full satisfaction within thirty
(30) days of written notice from
Lender or FMC. Notwithstanding the foregoing, Servicer shall have the right to
cure any breach of Section 4.12 (Collections) within five (5) (not thirty (30)) days after written notice from
Lender or FMC. In the event that: (i)  Servicer fails to cure such default and the Agreement is terminated
pursuant to Section 14.02 (a) or (b) or (ii) this Agreement
is terminated pursuant to Section 14.01 or 14.02 (c), or Sections 4.02(d),
6.10, 10.01, there will be no
charge to Lender or FMC for Early Termination Fees or Record
Return/Deconversion Fees.  In the event
the Agreement is terminated prior to the end of the initial term for any reason
other than those stated in the foregoing sentence (including without limitation termination under Section 14.02(d)),
Lender shall be responsible for the payment of Early Termination Fees and Record Return/Deconversion Fees as
detailed in the Fee Schedule.

 

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

 

(a)                                 Lender or FMC’s
failure to perform or observe any of the provisions or covenants of this
Agreement and/or its referenced Schedules and Exhibits, in any material
respect; or

 

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

 

27

 

In the event of an event of default as set forth in Section 14.03(a) or
(b) above, Lender and FMC shall each have the right to cure any such
breach or error to Servicer’s
full satisfaction within thirty
(30) days of written notice from
Servicer.

 

In
the event Lender or FMC fails to
cure such default and the Agreement is terminated pursuant to Section 14.03(a) or
(b), Lender (or FMC, to the extent termination by Servicer is attributable to
the actions or omissions of FMC) shall pay Servicer the Early Termination Fees and Record Return/Deconversion Fees
set forth in the Fee Schedule.

 

14.04.              Record Return/Deconversion.  Upon termination of this Agreement in full or
in part with respect to any Loan or Loans whether by virtue of the passage of
time or otherwise, the Servicer shall, regardless of any Lender or FMC default
or any other reason, return to Lender all records, data processing records,
reports, documents and correspondence, including Original Credit Agreements,
Applications, payment histories, due diligence histories, and copies of
microfilm documents maintained by the Servicer in connection with the Servicing
of the Loans (or such Loans as applicable). Servicer shall maintain a copy of
all records and reports which related to the Servicing of Loans generally for
seven (7) years after any deconversion. 
Upon the return of the Loan records, Lender agrees to pay the Record
Return/Deconversion Fee, as set forth in the Fee Schedule, except under the
circumstances specifically set forth in this Agreement, and such records will
be returned to Lender by Servicer as
provided below or as otherwise mutually agreed in writing by the
Parties.  Upon any termination or expiration of this
Agreement, any deconversion and transfer of the Accounts to Lender or its new
servicer shall be on an orderly schedule reasonably determined by the Servicer,
with Lender’s approval.  To the extent
that the Servicer continues to provide Servicing for any Accounts after the
termination or expiration date pending such scheduled deconversion and
transfer, the terms of this Agreement shall remain in effect and the Servicer’s
fees shall continue to be paid hereunder with respect to such Accounts during
such period.

 

14.05                 Transition
Period Rights.  If this
Agreement is terminated pursuant to Sections 14.02, 4.02(d), 6.10, or 10.01,
upon demand by the Lender, Servicer shall continue to Service the Loans at
rates charged to the Program Administrator for Lender’s Program at the time of
such termination, until such time as all loans have been successfully
deconverted.  Lender shall have the right
to access the Servicer’s facilities and access to Loan data in the same manner
as was permitted during the term of this Agreement.  Servicer has the obligation upon termination
or expiration to provide, and Lender has the absolute right to obtain, all of
its Proprietary Information and NPPI at any time.

 

SECTION 15.  MISCELLANEOUS
PROVISIONS

 

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

 

	
  If
  to FMC:

  	
  General Counsel

  
	
   

  	
  The
  First Marblehead Corporation

  
	
   

  	
  The Prudential Tower

  
	
   

  	
  800 Boylston Street, 34th Floor

  
	
   

  	
  Boston, Mass. 02199-8157

  

 

28

 

	
  If to Lender:

  	
  SunTrust
  Bank

  
	
   

  	
  Attn:
  W. Mark Smith

  
	
   

  	
  Executive
  Vice President

  
	
   

  	
  1001
  Semmes Avenue

  
	
   

  	
  Mail
  Code CS-RVW-7900

  
	
   

  	
  Richmond,
  VA 23224

  
	
   

  	
   

  
	
   

  	
  With
  a copy to:

  
	
   

  	
  SunTrust
  Bank

  
	
   

  	
  Legal
  Department

  
	
   

  	
  303
  Peachtree Street, N.E., 36th Floor

  
	
   

  	
  Atlanta,
  GA 30308

  
	
   

  	
   

  
	
  If to Servicer:

  	
  General Counsel

  
	
   

  	
  Pennsylvania Higher Education Assistance Agency

  
	
   

  	
  1200 North Seventh Street

  
	
   

  	
  Harrisburg, Pennsylvania 17102

  

 

15.02                 Relationship.  The
Parties to this Agreement intend that the Servicer shall render the Services
contemplated by this Agreement as an independent contractor.  The Servicer and its employees, agents, and
servants are not to be considered agents or employees of Lender or FMC, for any
purpose whatsoever. Nothing herein contained, nor any action taken by the
Servicer under this Agreement, shall be deemed or construed to give the
Servicer any right, title or interest either in law or in equity in and to any
Loan being Serviced by Servicer.

 

15.03                 Non-Exclusive Agreement for FMC and Lender.  Nothing contained herein shall be construed
to create an exclusive arrangement as to Lender or FMC. The Servicer
understands and agrees that Lender and FMC may enter into other agreements for
the servicing of Private Loans in the future.

 

15.04                 Survival.  Any and all
provisions, promises, and warranties contained herein, which by their nature or
effect are required or intended to be observed, kept or performed after
expiration or termination of this Agreement (including , without limitation,
representations and warranties, confidentiality, information security, audit
rights, indemnification, limitation of liability, dispute resolution and
miscellaneous provisions), will survive the expiration or termination of this
Agreement and remain binding upon and for the benefit of the Parties hereto.

 

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

 

15.06                 Interpretation of Documents.  In the event of a conflict between this
Agreement and a Schedule or Exhibit attached hereto, this Agreement shall
control.

 

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

 

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

 

15.09                 Amendments; Changes; Modifications.  This Agreement (a) may be amended,
supplemented, or modified only by written instrument duly executed by the
Parties; (b) such written instrument shall be incorporated into this 

 

29

 

Agreement;
and (c) shall be binding upon and shall inure to the benefit of the
Parties hereto and their respective successors and assigns.  The Servicing Guidelines may be amended or
modified by addendum duly executed by the Parties outside this Agreement.

 

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

 

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

 

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

 

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

 

SECTION 16.  REMOVAL OF
PROGRAM ADMINISTRATOR

 

16.01                 Upon the
occurrence of any of the events set forth in Section 14.02(a) — (d),
FMC may at its option resign as Program Administrator upon thirty (30) days
written notice to Lender and Servicer. In addition, Lender may remove FMC as
Program Administrator upon the terms and conditions set forth in the Loan
Program Agreement. Upon the effective date of such resignation or removal,
Lender shall become Program Administrator hereunder without the taking of
further action by Lender, and Servicer’s fees for services provided hereunder
shall thereafter be only the Servicing fees previously charged by Servicer to
Program Administrator for Lender’s Program, unless otherwise agreed by Lender
and Servicer in writing. If additional Services are requested by Lender,
pricing for such services shall be negotiated between Servicer and Lender.

 

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]

 

30

 

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

 

	
  PENNSYLVANIA HIGHER EDUCATION

  	
   

  	
  THE FIRST MARBLEHEAD

  
	
  ASSISTANCE AGENCY

  	
   

  	
  CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/
  James L. Preston

  	
   

  	
   

  	
  /s/
  Michael Plunkett

  
	
  Name:

  	
  James
  L. Preston

  	
   

  	
  Name:

  	
  Michael
  Plunkett

  
	
  Title:

  	
  President
  and CEO

  	
   

  	
  Title:

  	
  Managing Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SUNTRUST BANK

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/
  W. Mark Smith

  	
   

  	
   

  
	
  Name:

  	
  W.
  Mark Smith

  	
   

  	
   

  
	
  Title:

  	
  Executive
  Vice President

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Approved as to form and legality

  	
   

  	
  Approved as to form and legality

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Jason Swartley

  	
   

  	
   

  	
  /s/ Robert A. Mulle

  
	
  PHEAA General Counsel

  	
   

  	
  Deputy Attorney General

  

 

31

 

INDEX TO SCHEDULES AND
EXHIBITS

 

	
  Schedule A

  	
  Required
  Reports Schedule

  
	
  Schedule B

  	
  System
  Access Schedule

  
	
  Schedule C

  	
  Fee
  Schedule

  
	
  Exhibit A

  	
  Servicing Guidelines

  

 

32

 

Schedule
A

 

PRIVATE STUDENT LOAN SERVICING AGREEMENT

 

AMONG

PENNSYLVANIA HIGHER EDUCATION ASSISTANCE  AGENCY,

SUNTRUST BANK,

 

AND

 

THE FIRST
MARBLEHEAD CORPORATION

 

REQUIRED REPORTS SCHEDULE

 

Servicer
shall electronically deliver to Program Administrator and/or Lender (as
specified below), within the time periods specified below, the data elements
that are, as of the Effective Date, contained in the reports specified below:

 

1.                                      MR-01 Report,
delivered weekly to Program Administrator and Lender.

 

2.                                    MR-50 Report, delivered to
Program Administrator and Lender within five (5) Business Days after the
end of each calendar month.

 

3.                                      MR-53 Report,
delivered to Program Administrator and Lender within five (5) Business
Days after the end of each calendar month.

 

4.                                      Asset
Management Reports (AMR), delivered to Lender within five (5) Business
Days after the end of each calendar month.

 

5.                                      Such other
reports identified and mutually adopted.

 

33

 

Schedule
B

 

PRIVATE STUDENT LOAN SERVICING AGREEMENT

 

AMONG

PENNSYLVANIA HIGHER EDUCATION ASSISTANCE  AGENCY,

SUNTRUST BANK,

 

AND

 

THE FIRST MARBLEHEAD CORPORATION

 

SYSTEM ACCESS SCHEDULE

 

All
system access shall be limited to view only option.

 

1.
LENDER AND PROGRAM ADMINISTRATOR.

 

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

 

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

 

2.
BORROWERS.

 

Servicer
shall provide Borrowers and Cosigners with limited access to their Account
information through Servicer’s established borrower portal.  Access is limited to view-only, with the
ability to submit queries and request or print forms as necessary.

 

3.
FMC/FMER AND LENDER USER ACCESS SECURITY REQUIREMENTS

 

Upon
approval by Lender of the Program Administrator’s access, the Servicer
Operations Group of Program Administrator will be responsible for notifying the
Servicer to add and delete Program Administrator Personnel who need, or no
longer need, access as appropriate.  On a
quarterly basis, Servicer will provide Program Administrator with a report of
Program Administrator Personnel who have system access to Borrower
information.  Program Administrator shall
confirm the accuracy of such reports within ten (10) days of receipt
thereof and, to the extent notice of any inaccuracies is not provided to
Servicer by such time, Program Administrator shall be liable for the inaccuracy
thereof in accordance with Section 9 (Liability) of this Agreement.

 

Lender
will be responsible for notifying the Servicer to add and delete Lender
Personnel who need, or no longer need, access as appropriate.  On a quarterly basis, Servicer will provide
Lender with a report of Lender Personnel who have system access to Borrower
information.  Lender shall confirm the
accuracy of such reports within ten (10) days of receipt thereof and, to
the extent notice of any inaccuracies is not provided to Servicer by such time,
Lender shall be liable for the inaccuracy thereof in accordance with Section 9
(Liability) of this Agreement.

 

 

Schedule
C

 

PRIVATE STUDENT LOAN SERVICING AGREEMENT

 

AMONG

PENNSYLVANIA HIGHER EDUCATION ASSISTANCE  AGENCY,

SUNTRUST BANK,

 

AND

 

THE FIRST MARBLEHEAD CORPORATION

 

FEE SCHEDULE

 

	
  1.

  	
   

  	
  Deconversion
  to Lender

  	
   

  	
  $[**]
  per loan

  
	
  2.

  	
   

  	
  Record
  Return Fee to Lender

  	
   

  	
  $[**]
  per loan

  
	
  3.

  	
   

  	
  Reconversion
  Fee:

  	
   

  	
  $[**]
  per loan

  
	
  4.

  	
   

  	
  Early
  Termination Fee

  	
   

  	
  $[**]
  per Account

  
	
  5.

  	
   

  	
  Ad
  Hoc Projects/Reporting (fees to be pre-identified by the Servicer
  in a Statement of Work and billed to Program Administrator)

  
	
  6.

  	
   

  	
  Late
  Fees

  	
   

  	
  [**]%
  of all late fees collected on delinquent Loans

  

 

 

Exhibit A —Servicing Guidelines

 

[**]

 

A
total of twenty-three pages were omitted pursuant to a request for
confidential treatment.

 

 

EXHIBIT B

 

Program Guidelines

with Servicing Guidelines, Forms of Credit Agreements and
Truth-in-Lending Disclosures

 

[**]

 

A
total of two hundred thirty-four pages were omitted pursuant to a request
for confidential treatment.

 

 

EXHIBIT C1

Trust Agreement

 

 

 

 

MG STUDENT LOAN TRUST 2010-1

 

 

TRUST AGREEMENT

 

 

Among

 

 

[U.S. BANK NATIONAL ASSOCIATION]

as TRUSTEE

 

 

[U.S. BANK TRUST NATIONAL ASSOCIATION]

as RESIDENT TRUSTEE

 

 

THE NATIONAL COLLEGIATE FUNDING II, LLC

as OWNER

 

 

and

 

 

SUNTRUST BANK

with respect to Sections 2.03, 2.05(b), 4.02(d), 9.01, 9.06,

10.01(ii), 12.01 and 13.01 and Articles V and VI only

 

Dated as of

July     , 2010

 

 

 

 

TABLE OF CONTENTS

 

 

	
   

  	
  Page

  
	
   

  	
   

  
	
  ARTICLE I DEFINITIONS

  	
  1

  
	
   

  	
   

  
	
  Section 1.01

  	
  Capitalized Terms

  	
  1

  
	
   

  	
   

  	
   

  
	
  ARTICLE II ORGANIZATION

  	
  4

  
	
   

  	
   

  	
   

  
	
  Section 2.01

  	
  Name

  	
  4

  
	
  Section 2.02

  	
  Office

  	
  4

  
	
  Section 2.03

  	
  Purposes and Powers

  	
  4

  
	
  Section 2.04

  	
  Appointment of the Trustees

  	
  5

  
	
  Section 2.05

  	
  Appointment of Special Servicer

  	
  5

  
	
  Section 2.06

  	
  Declaration of Trust

  	
  6

  
	
  Section 2.07

  	
  No Liability of Owners for Expenses or Obligations of Trust

  	
  6

  
	
  Section 2.08

  	
  Situs of Trust

  	
  6

  
	
   

  	
   

  	
   

  
	
  ARTICLE III TRUST
  CERTIFICATES AND TRANSFER OF INTEREST

  	
  6

  
	
   

  	
   

  	
   

  
	
  Section 3.01

  	
  Issuance of Trust Certificate

  	
  6

  
	
  Section 3.02

  	
  Registration and Transfer of Certificates

  	
  6

  
	
  Section 3.03

  	
  Lost, Stolen, Mutilated or Destroyed Certificates

  	
  7

  
	
  Section 3.04

  	
  Limitation on Transfer of Ownership Rights

  	
  7

  
	
  Section 3.05

  	
  Assignment of Right to Distributions

  	
  8

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV CONCERNING THE
  OWNERS

  	
  8

  
	
   

  	
   

  	
   

  
	
  Section 4.01

  	
  Action by Owners with Respect to Certain Matters

  	
  8

  
	
  Section 4.02

  	
  Action Upon Instructions

  	
  9

  
	
  Section 4.03

  	
  Majority Control

  	
  9

  
	
  Section 4.04

  	
  Representations and Warranties of NCF II

  	
  10

  
	
  Section 4.05

  	
  Power of Attorney

  	
  10

  
	
   

  	
   

  	
   

  
	
  ARTICLE V INVESTMENT,
  APPLICATION OF TRUST FUNDS

  	
  10

  
	
   

  	
   

  	
   

  
	
  Section 5.01

  	
  Investment of Trust Funds

  	
  10

  
	
  Section 5.02

  	
  Application of Funds

  	
  11

  
	
  Section 5.03

  	
  Remittance of Recoveries to the Participation Account

  	
  11

  
	
  Section 5.04

  	
  Distribution Date Statement

  	
  11

  
	
  Section 5.05

  	
  Method of Payment

  	
  12

  
	
  Section 5.06

  	
  No Segregation of Funds; No Interest

  	
  12

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI TRUST LOANS

  	
  12

  
	
   

  	
   

  	
   

  
	
  Section 6.01

  	
  Acquisition of Trust Loans

  	
  12

  
	
  Section 6.02

  	
  Application of Funds in the Participation Account

  	
  12

  

 

i

 

	
  ARTICLE VII TAX
  CHARACTERIZATION

  	
  12

  
	
   

  	
   

  	
   

  
	
  Section 7.01

  	
  Tax Characterization

  	
  12

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII FEDERAL INCOME
  TAX ALLOCATIONS

  	
  13

  
	
   

  	
   

  	
   

  
	
  Section 8.01

  	
  Federal Income Tax Allocations

  	
  13

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX AUTHORITY AND
  DUTIES OF THE TRUSTEES

  	
  13

  
	
   

  	
   

  	
   

  
	
  Section 9.01

  	
  General Authority

  	
  13

  
	
  Section 9.02

  	
  Specific Authority

  	
  13

  
	
  Section 9.03

  	
  General Duties

  	
  13

  
	
  Section 9.04

  	
  Accounting and Reports to the Owners, the Internal Revenue
  Service and Others

  	
  13

  
	
  Section 9.05

  	
  Signature of Returns

  	
  14

  
	
  Section 9.06

  	
  Right to Receive and Rely Upon Instructions

  	
  14

  
	
  Section 9.07

  	
  No Duties Except as Specified in this Agreement or in
  Instructions

  	
  14

  
	
  Section 9.08

  	
  No Action Except Under Specified Documents or Instructions

  	
  14

  
	
  Section 9.09

  	
  Restriction

  	
  14

  
	
   

  	
   

  	
   

  
	
  ARTICLE X CONCERNING THE
  TRUSTEES

  	
  15

  
	
   

  	
   

  	
   

  
	
  Section 10.01

  	
  Acceptance of Trusts and Duties

  	
  15

  
	
  Section 10.02

  	
  Furnishing of Documents

  	
  15

  
	
  Section 10.03

  	
  Reliance; Advice of Counsel

  	
  16

  
	
  Section 10.04

  	
  Not Acting in Individual Capacity

  	
  16

  
	
  Section 10.05

  	
  Representations and Warranties of Resident Trustee

  	
  16

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI COMPENSATION OF
  TRUSTEES

  	
  16

  
	
   

  	
   

  	
   

  
	
  Section 11.01

  	
  Fees and Expenses of the Trustees

  	
  16

  
	
  Section 11.02

  	
  Indemnification

  	
  16

  
	
  Section 11.03

  	
  Payments to the Trustees

  	
  17

  
	
   

  	
   

  	
   

  
	
  ARTICLE XII TERMINATION OF
  TRUST

  	
  17

  
	
   

  	
   

  	
   

  
	
  Section 12.01

  	
  Termination of Trust

  	
  17

  
	
  Section 12.02

  	
  Distribution of Assets

  	
  17

  
	
  Section 12.03

  	
  No Termination by Owners

  	
  18

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIII SUCCESSOR
  TRUSTEES AND ADDITIONAL TRUSTEES

  	
  18

  
	
   

  	
   

  	
   

  
	
  Section 13.01

  	
  Resignation of Trustees; Appointment of Successor

  	
  18

  
	
  Section 13.02

  	
  Appointment of Additional Trustees

  	
  19

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIV TAX MATTERS
  PARTNER

  	
  19

  
	
   

  	
   

  	
   

  
	
  Section 14.01

  	
  Tax Matters Partner

  	
  19

  
	
  Section 14.02

  	
  Notice of Tax Audit

  	
  19

  
	
  Section 14.03

  	
  Authority to Extend Period for Assessing Tax

  	
  19

  

 

ii

 

	
  Section 14.04

  	
  Choice of Forum for Filing Petition for Readjustment

  	
  19

  
	
  Section 14.05

  	
  Authority to Bind Owners by Settlement Agreement

  	
  19

  
	
  Section 14.06

  	
  Notices Sent to the Internal Revenue Service

  	
  20

  
	
  Section 14.07

  	
  Indemnification of Tax Matters Partner

  	
  20

  
	
  Section 14.08

  	
  Approval of Tax Matters Partner’s Decisions

  	
  20

  
	
  Section 14.09

  	
  Participation by Owners in Internal Revenue Service
  Administrative Proceedings

  	
  20

  
	
   

  	
   

  	
   

  
	
  ARTICLE XV MISCELLANEOUS

  	
  20

  
	
   

  	
   

  	
   

  
	
  Section 15.01

  	
  Supplements and Amendments

  	
  20

  
	
  Section 15.02

  	
  No Legal Title to Trust Property in Owner

  	
  20

  
	
  Section 15.03

  	
  Limitations on Rights of Others

  	
  21

  
	
  Section 15.04

  	
  Notices

  	
  21

  
	
  Section 15.05

  	
  Severability

  	
  21

  
	
  Section 15.06

  	
  Separate Counterparts

  	
  21

  
	
  Section 15.07

  	
  Successors and Assigns

  	
  21

  
	
  Section 15.08

  	
  Headings

  	
  21

  
	
  Section 15.09

  	
  Governing Law

  	
  21

  
	
  Section 15.10

  	
  Third Party Beneficiaries

  	
  22

  
	
  Section 15.11

  	
  General Interpretive Principles

  	
  22

  
	
   

  	
   

  
	
  SCHEDULE
  I

  	
  CAPITAL
  CONTRIBUTIONS AND PERCENTAGE INTERESTS

  
	
   

  	
   

  
	
  EXHIBIT A

  	
  FORM OF
  TRUST CERTIFICATE

  
	
  EXHIBIT B

  	
  FORM OF
  ACCESSION AGREEMENT

  
	
  EXHIBIT C
  

  	
  FORM OF
  CERTIFICATE OF TRUST

  

 

iii

 

TRUST
AGREEMENT, dated as of July     , 2010, among The
National Collegiate Funding II, LLC, a Delaware limited liability company (“NCF
II”), [U.S. Bank National Association], a national banking association (the
“Trustee”), [U.S. Bank Trust National Association], a national banking
association (the “Resident Trustee” and, together with the Trustee, the “Trustees”),
and, with respect to Sections 2.03, 2.05(b), 4.02(d), 9.01, 9.06, 10.01(ii),
12.01 and 13.01 and Articles V and VI only, SunTrust Bank, a Georgia
state-chartered banking corporation (“SunTrust”).

 

WHEREAS,
the trust created hereby shall be known as the “MG Student Loan Trust 2010-1”
(the “Trust”), in which name the Trustees may conduct the business of
the Trust, make and execute contracts, and sue and be sued; and

 

WHEREAS,
the Trust has been created to hold Trust Loans (as defined below) pursuant to
the terms and conditions of the Loan Program Agreement (as defined below) for
the benefit of SunTrust and The First Marblehead Corporation, a Delaware
corporation (“FMC”).

 

NOW
THEREFORE, in consideration of the premises and of the mutual agreements herein
contained and of other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE I

DEFINITIONS

 

Section 1.01          Capitalized Terms.  Capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned to such terms in the
Loan Program Agreement.  For all purposes
of this Agreement, the following terms shall have the meanings set forth below:

 

“Administration
Agreement” means the Administration Agreement, dated as of July    ,
2010, among the Trust, the Trustee, and First Marblehead Data Services, Inc.,
as Administrator, as it may be amended from time to time.

 

“Administrator”
means First Marblehead Data Services, Inc., a Massachusetts corporation,
as Administrator under the Administration Agreement, or any successor
Administrator as appointed pursuant to the terms of the Administration
Agreement.

 

“Affiliate”
means, with respect to any specified Person, any other Person controlling or
controlled by or under common control with such specified Person.  For the purposes of this definition, “control”
when used with respect to any specified Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms “controlling”
and “controlled” have meanings correlative to the foregoing.

 

“Agreement”
means this Trust Agreement, as it may be amended or restated from time to time.

 

“Authorized
Officer” means any officer of the Trustee or the Resident Trustee who is
authorized to act for the Trustee or the Resident Trustee, as the case may be,
in matters relating to, and binding upon, the Trust and whose name appears on a
list of such authorized officers furnished by the Trustee or the Resident
Trustee, as the case may be, as such list may be amended or supplemented from
time to time.

 

“Bankruptcy
Action” has the meaning set forth in Section 4.01(b)(iv).

 

“Beneficial
Interest” as to any Owner, means all or any part of the interest of that
Owner in the Trust, including without limitation its (a) right to a
distributive share of the assets of the Trust, and (b)

 

 

right
to direct or consent to actions of the Trustee and otherwise participate in the
management of and control the affairs of the Trust.

 

“Business
Day” means any day that is not a Saturday, Sunday or any other day on which
commercial banking institutions in Delaware, Georgia or Massachusetts are
authorized or obligated by law or executive order to be closed.

 

“Capital
Contribution” means the amount of money contributed or deemed to have been
contributed by an Owner to the capital of the Trust, which shall be as set
forth on Schedule I to this Agreement.

 

“Certificate
of Trust” means the Certificate of Trust of the Trust filed with the
Secretary of State.

 

“Code”
means the Internal Revenue Code of 1986, as amended.

 

“Deemed
Distribution” shall have the meaning set forth in Section 5.03.

 

“Distribution”
means any money or other property distributed to an Owner with respect to its
Beneficial Interest; provided that any
money in the Participation Account shall not be eligible for Distribution to an
Owner.

 

“Distribution
Date” means the third Business Day following a day on which the Trustee
receives instructions from the Administrator pursuant to Section 5.02 (provided that the Administrator shall not deliver such
instructions more than three times in any calendar month), or such other
Business Day as the Administrator and Trustee shall agree in writing.

 

“Distribution
Date Statement” means the statement described as such in Section 5.04.

 

“Eligible
Investments” means those investments designated in writing from time to
time by the Administrator to the Trustee or, if no written directions are
given, shall mean [**].

 

“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended.

 

“Fiscal
Year” means the twelve-month period ending on June 30 each year or
such portion thereof as the Trust may be in existence.

 

“FMC”
means The First Marblehead Corporation, a Delaware corporation.

 

“FMC
Deemed Distribution” shall have the meaning set forth in Section 5.03.

 

“FMER”
means First Marblehead Education Resources, Inc., a Delaware corporation.

 

“Loan
Program Agreement” means the Loan Program Agreement, executed April 20,
2010, by and among FMER, FMC and SunTrust.

 

“Majority
Owners” shall have the meaning set forth in Section 4.03.

 

“1933
Act” has the meaning set forth in Section 3.02(a).

 

“Owner”
means NCF II and any other Person who becomes an owner of a Beneficial
Interest.

 

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“Participation
Account Deposit Agreement” means the Participation Account Deposit
Agreement, dated as of July
          , 2010 by and
between SunTrust and FMC.

 

“Percentage
Interest” means the initial undivided beneficial interest in the Trust
Property of an Owner expressed as a percentage of the total initial undivided
beneficial interests in the Trust Property. References to Percentage Interests
herein shall be solely for the purpose of certificating Owners’ interests
hereunder and for any other purpose specified in this Agreement.

 

“Periodic
Filings” means any filings or submissions that the Trust is required to
make with any state or federal regulatory agency or under the Code.

 

“Person”
means any individual, corporation, partnership, joint venture, limited
liability company, association, trust (including any beneficiary thereof),
estate, custodian, nominee, unincorporated organization or government or any
agency or political subdivision thereof.

 

“Plan”
has the meaning set forth in Section 3.04(b).

 

“Plan
Assets” has the meaning set forth in Section 3.04(b).

 

“Regulations”
means the federal income tax regulations promulgated by the United States
Treasury Department under the Code as such Regulations may be amended from time
to time.

 

“Resident
Trustee” means [U.S. Bank Trust National Association, a national banking
association with its principal place of business in the State of Delaware], not
in its individual capacity but solely as trustee, or any successor thereto,
duly appointed in accordance with Section 13.01 hereof.

 

“Secretary
of State” means the office of the Secretary of State of the State of
Delaware.

 

“Special
Servicer” means FMER as Special Servicer under the Special Servicing
Agreement, or any successor Special Servicer as appointed pursuant to the terms
of the Special Servicing Agreement.

 

“Special
Servicing Agreement” means the Special Servicing Agreement, dated as of July
    , 2010, between FMER, FMC, the Trust and, solely for
purposes of Sections 2(B)(v), 2(B)(vi), 5, 7, 18(A) and 18(G) only,
SunTrust.

 

“Statutory
Trust Statute” means the Delaware Statutory Trust Act, 12 Del. Code §3801 et seq.

 

“SunTrust”
means SunTrust Bank, a Georgia state-chartered banking corporation.

 

“Transfer”
means the sale, transfer or other assignment of all of an Owner’s right, title
and interest in all or a portion of such Owner’s Beneficial Interest.

 

“Trust”
means the MG Student Loan Trust 2010-1 established by this Agreement.

 

“Trust
Certificate” means a certificate evidencing the Beneficial Interest of an Owner
in substantially the form attached hereto as Exhibit A.

 

“Trust
Loan” means (i) any Charged Off Loan and (ii) any Purchased Loan,
in each case which has been assigned to the Trust from time to time pursuant to
the Loan Program Agreement.

 

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“Trust
Property” means all right, title and interest of the Trust or the Trustee
on behalf of the Trust in and to any property contributed to the Trust by the
Owners or otherwise acquired by the Trust.

 

“Trust
Related Agreements” means any instruments or agreements signed by the
Trustee on behalf of the Trust, including without limitation, the
Administration Agreement and the Special Servicing Agreement.

 

“Trustee”
means [U.S. Bank National Association], not in its individual capacity but
solely as trustee, or any successor thereto, duly appointed in accordance with Section 13.01
hereof.

 

“Trustees”
mean the Resident Trustee and the Trustee. 
For the avoidance of doubt, unless the context requires otherwise, the
singular term “Trustee” does not include the Resident Trustee.

 

ARTICLE II

ORGANIZATION

 

Section 2.01                                Name.  The Trust
continued hereby shall be known as the MG Student Loan Trust 2010-1, in which
name the Trustees may take any action as provided herein.

 

Section 2.02                                Office.  The
principal place of business and principal office of the Trust shall be in care
of the Resident Trustee, at the address set forth in Section 15.04.  The Trust shall also have an office at [One
Federal Street, Boston, Massachusetts 02110].

 

Section 2.03                                Purposes and Powers.

 

(a)                                  The purpose of the Trust is, and the Trust shall have power and authority
and is hereby authorized, and each of the Trustees in the name and on behalf of
the Trust is hereby authorized, to engage in the following activities and only
these activities:

 

(i)                                     To acquire and manage Trust Loans in accordance with the terms and
conditions of the Loan Program Agreement and the Special Servicing Agreement;

 

(ii)                                  To engage in those activities and to enter into such agreements that are
required in connection with the Participation Account, including distributions
made to the Participation Account pursuant to the Loan Program Agreement and
the Participation Account Deposit Agreement;

 

(iii)                               To enter into, execute, deliver and perform the Trust Related Agreements
and to provide for the administration of the Trust and the servicing and
management of Trust Loans;

 

(iv)                              To engage in those activities and to enter into such agreements that are
necessary, suitable or convenient to accomplish the foregoing or are incidental
thereto or connected therewith; and

 

(v)                                 To engage in such other activities as may be required in connection with
the acquisition, management or disposition of the Trust Property and
Distributions to Owners.

 

(b)                                 The operations of the Trust shall be conducted as follows:

 

(i)                                     The Trust will act solely in its own name and the Trustee or other agents
selected in accordance with this Agreement will act on behalf of the Trust
subject to direction by the 

 

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Owners
or SunTrust, as applicable, and as provided herein, but such action shall not
be in violation of the terms of this Agreement;

 

(ii)                                  The Trust shall ensure that all Recoveries on the Charged Off Loans shall
be deposited into the Participation Account in accordance with the terms and
conditions of the Loan Program Agreement and the Special Servicing Agreement;

 

(iii)                               The Trust shall ensure that all collections on the Purchased Loans shall
be deposited into the [NCF II Account] in accordance with the terms and
conditions of the Special Servicing Agreement;

 

(iv)                              The Trust’s funds and assets shall at all times be maintained separately
from those of the Owners and any of their respective Affiliates;

 

(v)                                 The Trust shall maintain complete and correct books, minutes of the
meetings and proceedings of the Owners, and records of accounts;

 

(vi)                              The Trust shall conduct its business at the office of the Resident
Trustee and will use stationery and other business forms of the Trust under its
own name and not that of the Owners or any of their respective Affiliates, and
will avoid the appearance (A) of conducting business on behalf of any
Owner or any Affiliate of an Owner or (B) that the assets of the Trust and
the Trust Loans are available to pay the creditors of the Trustees or any
Owner.  For the avoidance of doubt, the
assets of the Trust shall not include the Participation Account;

 

(vii)                           To the extent not otherwise paid by another Person, the Trust’s operating
expenses shall be paid out of its own funds, which shall not include any funds
in the Participation Account; and

 

(viii)                        The Trust shall not incur, guarantee or assume any debt nor hold itself
out as being liable for the debts of any entity, including any Owner or any Affiliates
of any Owner.

 

(c)                                  For the avoidance of doubt,
the Trust shall not have the power or authority to sell or otherwise dispose of
any Charged Off Loans except for depositing Recoveries in the Participation
Account in accordance with the terms and conditions of the Loan Program
Agreement and the Special Servicing Agreement.

 

Section 2.04                                Appointment of the Trustees.  NCF
II hereby appoints the Trustee and the Resident Trustee as trustees of the
Trust, to have all the rights, powers and authority set forth herein and in the
Statutory Trust Statute.  The Trustee
acknowledges receipt in trust from NCF II, of the sum of One Dollar ($1.00),
constituting the initial Trust Property.

 

Section 2.05                                Appointment of Special Servicer.

 

(a)                                  The Trust hereby hires, designates and appoints FMER as the Special
Servicer under the Special Servicing Agreement to perform the Special Services
(as defined in the Special Servicing Agreement), and the Special Servicer
accepts such appointment and agrees to perform such duties with respect to the
Trust Loans in accordance with the terms of this Agreement and the Special
Servicing Agreement.

 

(b)                                 In the event of the resignation or removal of the Special Servicer
pursuant to the Special Servicing Agreement, SunTrust shall, in accordance with
the terms and conditions of the Special 

 

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Servicing Agreement, appoint a successor to the
Special Servicer to perform the Special Services for the Charged Off Loans held
by the Trust.

 

Section 2.06                                Declaration of Trust.  The
Trustee hereby declares that it will hold the Trust Property in trust upon and
subject to the conditions set forth herein for the use and benefit of the
Owners, subject to the obligations of the Trustee under this Agreement.  It is the intention of the parties hereto
that the Trust constitute a statutory trust under the Statutory Trust Statute
and that this Agreement constitute the governing instrument of the Trust.  The Trustees are hereby authorized and
directed to execute and file a certificate of trust with the Secretary of State
in the form attached as Exhibit C hereto.

 

Section 2.07                                No Liability of Owners for Expenses or
Obligations of Trust.  No Owner shall be liable for any liability,
expense or other obligation of the Trust.

 

Section 2.08                                Situs of Trust.  The Trust
will be located in the State of Delaware. 
The Trust shall not have any employees in any state other than in the
State of Delaware and payments will be received by the Trustee on behalf of the
Trust only in the Commonwealth of Massachusetts, the State of Delaware or the
State of Georgia and payments will be made by the Trustee on behalf of the
Trust only from the Commonwealth of Massachusetts, the State of Delaware or the
State of Georgia.

 

ARTICLE III

TRUST CERTIFICATES AND TRANSFER OF INTEREST

 

Section 3.01                                Issuance of Trust Certificate.

 

(a)                                  As of the date hereof, as set forth on Schedule I attached hereto,
NCF II has been issued a Trust Certificate evidencing one hundred percent
(100%) of the Beneficial Interest in the Trust.

 

(b)                                 Each Trust Certificate shall be executed by manual signature on behalf of
the Resident Trustee by one of its Authorized Officers.  Trust Certificates bearing the manual
signature of an individual who was, at the time when such signature was
affixed, authorized to sign on behalf of the Resident Trustee shall bind the
Trust, notwithstanding that such individual has ceased to be so authorized
prior to the delivery of such Trust Certificate or does not hold such office at
the date of such Trust Certificate.  Each
Trust Certificate shall be dated the date of its issuance.

 

Section 3.02                                Registration and Transfer of Certificates.

 

(a)                                  The Resident Trustee shall maintain at its office referred to in Section 2.02,
or at the office of any agent appointed by it and approved in writing by the
Owners at the time of such appointment, a register for the registration and
Transfer of Trust Certificates.  No
Transfer of a Beneficial Interest shall be made unless such Transfer is made
pursuant to an effective registration statement under the Securities Act of
1933, as amended (the “1933 Act”), and state securities laws, or is
exempt from the registration requirements under the 1933 Act and state
securities laws.

 

(b)                                 The registered Owner of any Trust Certificate may Transfer all or any
portion of the Beneficial Interest evidenced by such Trust Certificate upon
surrender thereof to the Resident Trustee accompanied by the documents required
by Section 3.04.  Such Transfer may
be made by the registered Owner in person or by its attorney duly authorized in
writing upon surrender of the Trust Certificate to the Resident Trustee
accompanied by a written instrument of Transfer and with such signature
guarantees and evidence of authority of the Persons signing the instrument of
Transfer as the Resident Trustee may reasonably require.  Promptly upon the receipt of such documents
and receipt by the Resident Trustee of the transferor’s Trust Certificate, the
Resident Trustee shall (i) record the name of such transferee as an 

 

6

 

Owner and its Percentage Interest in the Trust
Certificate register, (ii) in the name and on behalf of the Trust issue,
execute and deliver to such Owner a Trust Certificate evidencing such Percentage
Interest and (iii) notify the Trustee in writing of such transfer and the
details thereof.  In the event a
transferor Transfers only a portion of its Beneficial Interest, the Resident
Trustee shall register and issue to such transferor a new Trust Certificate
evidencing such transferor’s new Percentage Interest.  Subsequent to a Transfer and upon the
issuance of the new Trust Certificate or Trust Certificates, the Resident
Trustee shall cancel and destroy the Trust Certificate surrendered to it in connection
with such Transfer.  Each of the Trustees
may treat the Person in whose name any Trust Certificate is registered as the
sole Owner of the Beneficial Interest in the Trust evidenced by such Trust
Certificate.

 

(c)                                  As a condition precedent to any registration of Transfer, the Resident
Trustee may require the payment of a sum sufficient to cover the payment of any
tax or taxes or other governmental charges required to be paid in connection
with such Transfer and any other reasonable expenses connected therewith.

 

(d)                                 The Trust Certificates may not be acquired or held by or for the account
of a Plan, except as permitted under Section 3.04(b) herein.

 

Section 3.03                                Lost, Stolen, Mutilated or Destroyed
Certificates.  If (a) any mutilated Trust Certificate
is surrendered to the Resident Trustee, or (b) the Resident Trustee
receives evidence to its satisfaction that any Trust Certificate has been
destroyed, lost or stolen, and upon proof of ownership satisfactory to the
Resident Trustee together with such security or indemnity as may be requested
by the Resident Trustee to save it harmless, unless the Trust has notice that
the Trust Certificate has been acquired by a protected purchaser and the
Resident Trustee has actual knowledge or has received written notice thereof,
the Resident Trustee in the name and on behalf of the Trust shall execute and
deliver a new Trust Certificate for the same Percentage Interest as the Trust
Certificate so mutilated, destroyed, lost or stolen, of like tenor and bearing
a different issue number, with such notations, if any, as the Resident Trustee
shall determine.  In connection with the
issuance of any new Trust Certificate under this Section 3.03, the
Resident Trustee may require the payment by the registered Owner thereof of a
sum sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto and any other expenses (including the reasonable
fees and expenses of the Resident Trustee) connected therewith.  Any replacement Trust Certificate issued pursuant
to this Section 3.03 shall constitute complete and indefeasible evidence
of ownership of a Beneficial Interest, as if originally issued, whether or not
the lost, stolen or destroyed Trust Certificate shall be found at any time.

 

Section 3.04                                Limitation on Transfer of Ownership Rights.

 

(a)                                  No Transfer of all or any part of a Beneficial Interest after the date
hereof shall be made to any Person unless (i) such Person delivers to the
Resident Trustee an accession agreement substantially in the form of Exhibit B
hereof, and (ii) the Resident Trustee shall have received a written
opinion of counsel in form and substance satisfactory to the Resident Trustee
stating that such Transfer is exempt from the 1933 Act and any applicable state
securities laws.

 

(b)                                 No Transfer of all or any part of a Beneficial Interest shall be made to
any employee benefit plan or certain other retirement plans and arrangements,
including individual retirement accounts and annuities, Keogh plans and bank
collective investment funds and insurance company general or separate accounts
in which such plans, accounts or arrangements are invested, that are subject to
ERISA or Section 4975 of the Code (collectively, “Plan”), nor to
any Person acting, directly or indirectly, on behalf of any such Plan or any
Person acquiring the Beneficial Interest with “plan assets” of a Plan within
the meaning of the ERISA and Department of Labor regulation promulgated at 29
C.F.R. § 2510.3-101 (“Plan Assets”) unless the Resident Trustee is
provided with an opinion of counsel which establishes to 

 

7

 

the satisfaction of the
Resident Trustee that the purchase of the Beneficial Interest is permissible
under applicable law, will not constitute or result in any prohibited
transaction under ERISA or Section 4975 of the Code and will not subject the
Owners, the Trustees or the Trust to any obligation or liability (including
obligations or liabilities under ERISA or Section 4975 of the Code) in
addition to that undertaken in this Agreement, which opinion of counsel shall
not be an expense of the Owners, the Trustees or the Trust.

 

(c)                                  No Transfer of all or any part of a Beneficial Interest shall be
permitted, and no such transfer shall be effective hereunder, if such transfer
would potentially cause the Trust to be classified as a publicly traded
partnership, taxable as a corporation for federal income tax purposes, by
causing the Trust to have more than 100 Owners at any time during any taxable
year of the Trust.

 

(d)                                 Notwithstanding any other provision herein or elsewhere, to the fullest
extent permitted by law, other than to receive and examine the same to
determine whether any accession agreement, opinion of counsel or other document
or instrument that is required to be and is delivered to the Resident Trustee
pursuant to this Section 3.04 substantially conforms on its face to the
requirements therefor set forth in this Section 3.04, the Resident Trustee
shall have no obligation or responsibility for determining or ensuring that any
issuance, Transfer, or exchange or proposed or purported issuance, Transfer or
exchange of all or any part of a Beneficial Interest or Trust Certificate is
permitted under or in accordance or compliance with this Agreement, the 1933
Act or any other applicable federal or state securities law, and neither of the
Trustees shall have any personal liability to any Person in connection with any
issuance, Transfer or exchange or proposed or purported issuance, Transfer or
exchange (and/or registration thereof) that is not permitted under or in
accordance or compliance with this Agreement, the 1933 Act or any other
applicable federal or state securities law.

 

Section 3.05                                Assignment of Right to Distributions.  An
Owner may assign all or any part of its right to receive Distributions
hereunder, but such assignment (in the absence of a permitted Transfer) shall
effect no change in the ownership of the Trust.

 

ARTICLE IV

CONCERNING THE OWNERS

 

Section 4.01                                Action by Owners with Respect to Certain Matters.

 

(a)                                  Each of the Trustees will take such action or refrain from taking such
action under this Agreement or any Trust Related Agreement as it shall be
directed in writing to take or refrain from taking pursuant to an express
provision of this Agreement or such Trust Related Agreement or, with respect to
nonministerial matters, as it shall be directed by the Majority Owners.

 

(b)                                 Without limiting the generality of the foregoing, in connection with the
following nonministerial matters, neither of the Trustees will take any action,
nor will they have authority to take any such action, unless they receive prior
written approval from the Majority Owners:

 

(i)                                     Initiate any claim or lawsuit by the Trust and compromise any claim or
lawsuit brought by or against the Trust, except for claims or lawsuits
initiated in the ordinary course of business by the Trust or its agents or
nominees for collection on the Trust Loans;

 

(ii)                                  Amend, change or modify this Agreement or any Trust Related Agreement;

 

(iii)                               To the fullest extent permitted by applicable law, file a voluntary
petition in bankruptcy for the Trust; and

 

8

 

(iv)                              To the fullest extent permitted by applicable law, (A) institute
proceedings to have the Trust declared or adjudicated bankrupt or insolvent, (B) consent
to the institution of bankruptcy or insolvency proceedings against the Trust, (C) file
a petition or consent to a petition seeking reorganization or relief on behalf
of the Trust under any applicable federal or state law relating to bankruptcy, (D) consent
to the appointment of a receiver, liquidator, assignee, trustee, sequestrator
(or any similar official) of the Trust or a substantial portion of the property
of the Trust, (E) make any assignment for the benefit of the Trust’s
creditors, (F) cause the Trust to admit in writing its inability to pay
its debts generally as they become due, or (G) take any action, or cause
the Trust to take any action, in furtherance of any of the foregoing (any of
the above, a “Bankruptcy Action”). 
To the fullest extent permitted by applicable law, no Owner shall have
the power to take, and no Owner shall take, any Bankruptcy Action with respect
to the Trust or direct either of the Trustees to take any Bankruptcy Action
with respect to the Trust.

 

(c)                                  No Owner shall take any action to cause the filing of an involuntary
petition in bankruptcy against the Trust.

 

Section 4.02                                Action Upon Instructions.

 

(a)                                  The Trustees shall take such action or actions as may be specified in this
Agreement or in any instructions delivered in accordance with this Article IV
or Article IX; provided, however,
that neither of the Trustees shall be required to take any such action if it
shall have reasonably determined, or shall have been advised by counsel, that
such action (i) is contrary to the terms hereof or of any document
contemplated hereby to which the Trust or either of the Trustees is a party or
is otherwise contrary to law, (ii) is likely to result in personal
liability on the part of either of the Trustees, unless the Owners shall have
provided to the Trustees indemnification or security reasonably satisfactory to
the Trustees against all costs, expenses and liabilities arising from the
Trustees’ taking of such action, or (iii) would adversely affect the
status of the Trust for federal income tax purposes.

 

(b)                                 No Owner shall direct the Trustees to take or refrain from taking any
action contrary to this Agreement or any Trust Related Agreement, nor shall the
Trustees be obligated to follow any such direction, if given.

 

(c)                                  Notwithstanding anything contained herein or in any Trust Related
Agreement to the contrary, the Trustees shall not be required to take any
action in any jurisdiction other than in the State of Delaware if the taking of
such action will (i) require the consent or approval or authorization or
order from, or the giving of notice to, or the registration with or taking of
any action in respect of, any state or other governmental authority or agency
of any jurisdiction other than the State of Delaware; (ii) result in any
fee, tax or other governmental charge under the laws of any jurisdiction or any
political subdivision thereof in existence on the date hereof other than the
State of Delaware becoming payable by either of the Trustees; or (iii) subject
either of the Trustees to personal jurisdiction in any jurisdiction other than
the State of Delaware for causes of action arising from acts unrelated to the
consummation of the transactions by the Trustees contemplated hereby.

 

(d)                                 The Trustees shall not have the power to remove the Administrator under
the Administration Agreement or appoint a successor Administrator pursuant to
the Administration Agreement without written instruction by the Owners and
SunTrust.

 

Section 4.03                                Majority Control. 
Except as otherwise expressly provided in this Agreement, any action
which may be taken or consent or instructions which may be given by the Owners
under this Agreement may be taken by the Owners holding in the aggregate more
than fifty percent (50%) of the Percentage Interests at the time of such action
(the “Majority Owners”).  Any
written notice of the 

 

9

 

Owners delivered
pursuant to this Agreement shall be effective only if signed by the Majority
Owners at the time of the delivery of such notice.

 

Section 4.04                                Representations and Warranties of NCF II.  NCF
II hereby represents and warrants to the Trustees as follows:

 

(a)                                  Upon the receipt of the Trust Property by the Trustees under this Agreement,
the Trustees on behalf of the Trust will have good title to the Trust Property
free and clear of any lien.

 

(b)                                 Except for the filing of the Certificate of Trust with the Secretary of
State, no consent, approval, authorization or order of, or filing with, any
court or regulatory, supervisory or governmental agency or body is required
under current law in connection with the execution, delivery or performance by
NCF II of this Agreement or the consummation of the transactions contemplated
hereby; provided, however, that no
representation or warranty is made herein as to compliance with federal
securities laws, the securities or “blue sky” laws of any state or any state
statute or regulation that requires licensure or registration of small loan
lenders, loan brokers or loan arrangers.

 

(c)                                  This Agreement has been duly and validly authorized, executed and
delivered by, and constitutes a valid and binding agreement of, NCF II,
enforceable in accordance with its terms.

 

Section 4.05                                Power of Attorney.

 

(a)                                  General.  Each Owner hereby irrevocably constitutes and
appoints the Administrator, with full power of substitution, such Owner’s true
and lawful attorney-in-fact, in such Owner’s name, place and stead, with full
power to act jointly and severally, to make, execute, sign, acknowledge, swear
to, verify, deliver, file, record and publish the following documents:

 

(i)                                     Any certificate, instrument or document to be filed by the Owners under
the laws of any state, or with any governmental agency in connection with this
Agreement;

 

(ii)                                  Any certificate, instrument or document which may be required to effect
the continuation or the termination of the Trust, including any amendments to
this Agreement; provided that such continuation
or termination is in accordance with the terms of this Agreement; and

 

(iii)                               Any written notice, instruction, instrument or document under Article XIII
of this Agreement.

 

(b)                                 Duration of Power of Attorney.  It is expressly intended by each of the
Owners that the Power of Attorney granted under this Section 4.05 is
coupled with an interest, and it is agreed that such Power of Attorney shall
survive (i) the dissolution, death or incompetency of any Owner and (ii) the
assignment by any Owner of the whole or any portion of such Owner’s Beneficial
Interest.

 

ARTICLE V

INVESTMENT, APPLICATION OF TRUST FUNDS

 

Section 5.01                                Investment of Trust Funds. 
Unless otherwise directed in writing by the Owners, income with respect
to and proceeds of the Trust Property which is received by the Trustee more than
one day prior to a Distribution Date shall be invested and reinvested by the
Trustee in Eligible Investments; provided,
however, that Recoveries shall,
at no time, be invested by the Trustee in Eligible Investments.  Interest earned from such investment and
reinvestment shall be credited to the Trust Property.

 

10

 

Section 5.02                                Application of Funds. 
Income with respect to and proceeds of Trust Property (other than
Recoveries) held by the Trustee on a Distribution Date shall be applied by the
Trustee on such Distribution Date in accordance with written instructions of
the Administrator received by the Trustee not less than three Business Days
prior to such Distribution Date, in the following order:

 

(a)                                  First, to the extent
not paid by another Person, to pay any amounts due to the Trustee or the
Resident Trustee under this Agreement;

 

(b)                                 Second, to the extent
not paid by another Person, to pay any amounts due to the Administrator under
the Administration Agreement;

 

(c)                                  Third, to the extent
not paid by another Person, to pay any amounts then due to the Special Servicer
under the Special Servicing Agreement and to any other Person under the Trust
Related Agreements;

 

(d)                                 Fourth, to the extent
not paid by another Person, to pay any other expenses of the Trust; and

 

(e)                                  Fifth, to the Owners, pro rata
based upon their Percentage Interests.

 

All
payments to be made under this Agreement by the Trustee shall be made only from
the income and proceeds of the Trust Property (other than Recoveries) and only
to the extent that the Trustee has actually received such income or proceeds.

 

Section 5.03                                Remittance of Recoveries to the Participation
Account.  All Recoveries received by the Trustee or the
Trust (including any such amounts received by the Special Servicer and
deposited into the FMER Collection Account (as defined in the Special Servicing
Agreement)) shall be remitted to the Participation Account on a [weekly] basis
in accordance with the terms and conditions of the Special Servicing
Agreement.  Any amounts remitted to the
Participation Account by the Trustee or the Trust, including but not limited to
Recoveries, shall be deemed to be a distribution by the Trust to the Owners with
respect to their Beneficial Interest (each a “Deemed Distribution”); provided that, for so long as the sole
Owner of the Trust is NCF II, NCF II hereby agrees that any amounts remitted to
the Participation Account by the Trustee or the Trust and which is a Deemed
Distribution to the Owner shall further be deemed a distribution to FMC in its
capacity as the sole member of NCF II pursuant to and in accordance with the
terms and conditions of that certain Limited Liability Company Agreement of NCF
II effective as of April 13, 2009 (each, a “FMC Deemed Distribution”).  Notwithstanding the Deemed Distribution and
the FMC Deemed Distribution, once any amounts, including but not limited to
Recoveries, are remitted to the Participation Account by the Trustee or the
Trust, (a) such amounts shall be the property of FMC or SunTrust, as
determined in accordance with the Loan Program Agreement, (b) such amounts
shall be distributed pursuant to the terms and conditions of the Loan Program
Agreement, and (c) FMC’s rights to such amounts deposited into the Participation
Account shall be limited to those rights set forth in the Loan Program
Agreement and shall be subject to the rights of SunTrust pursuant to the Loan
Program Agreement.

 

Section 5.04                                Distribution Date Statement. 
Unless otherwise instructed in writing by the Administrator or the
Majority Owners, with each Distribution to an Owner pursuant to Section 5.02,
the Trustee shall deliver a “Distribution Date Statement” setting forth,
for the period since the preceding Distribution Date (or in the case of the
initial Distribution Date, since the formation of the Trust):

 

(a)                                  Income and proceeds received
by the Trustee with respect to the Trust Property (other than Recoveries);

 

11

 

(b)                                 Amounts paid to the Trustee
and the Resident Trustee;

 

(c)                                  Amounts paid to any Person
pursuant to a Trust Related Agreement; and

 

(d)                                 Amounts paid for other
expenses of the Trust.

 

Section 5.05                                Method of Payment. 
Except as set for in Section 5.03, all amounts payable to an Owner
pursuant to this Agreement shall be paid by the Trustee to the Owner by check
payable to the Owner, mailed first class to the address of the Owner appearing
on the register maintained pursuant to Section 3.02, or by crediting the
amount to be distributed to the Owner to an account maintained by the Owner
with the Trustee or by transferring such amount by wire transfer in immediately
available funds to a banking institution with bank wire transfer facilities for
the account of the Owner, as instructed in writing from time to time by the
Owner.  The Trustee may require the Owner
to pay any wire transfer fees incurred in connection with any wire transfer
made to the Owner.

 

Section 5.06                                No Segregation of Funds; No Interest. 
Subject to Section 5.01 and except for funds to be deposited in the
Participation Account pursuant to the Loan Program Agreement, the Special
Servicing Agreement and the Participation Account Deposit Agreement, funds
received by the Trustee need not be segregated in any manner except to the
extent required by law and may be deposited under such general conditions as
may be prescribed by law, and the Trustee shall not be personally liable for
any interest thereon.

 

ARTICLE VI

TRUST LOANS

 

Section 6.01                                Acquisition of Trust Loans.  From
time to time the Trustee, on behalf of the Trust, shall accept Trust Loans as
are delivered to it pursuant to the Loan Program Agreement.  The Trustee, on behalf of the Trust, shall
not be allowed to transfer, sell, or otherwise dispose of one or more Charged Off Loans except for depositing Recoveries in the Participation
Account in accordance with the terms and conditions of the Loan Program
Agreement and the Special Servicing Agreement.

 

Section 6.02                                Application of Funds in the Participation
Account.  The Participation Account is not Trust
Property and any amounts deposited in the Participation Account, including, but
not limited to, Recoveries, shall be distributed pursuant to the terms and
conditions of the Loan Program Agreement and shall not be distributed pursuant
to this Agreement.

 

ARTICLE VII

TAX CHARACTERIZATION

 

Section 7.01                                Tax Characterization.  It is
the intention of the parties hereto that, solely for purposes of federal income
taxes, state and local income taxes, and any other taxes imposed on, measured
by or based upon gross or net income, (a) if there is only one Owner, the
Trust shall be treated as a disregarded entity of its owner pursuant to §
301.7701-2(c)(2) of the Regulations, (b) if there is more than one
Owner, the Trust shall be treated as a partnership, and (c) the provisions
of this Agreement shall be construed in accordance with such intent.  The parties hereto agree that, unless
otherwise required by appropriate tax authorities, the Trust will file or cause
to be filed annual or other necessary returns, reports and other forms
consistent with such characterization of the Trust.

 

12

 

ARTICLE VIII

FEDERAL INCOME TAX ALLOCATIONS

 

Section 8.01                                Federal Income Tax Allocations.  Net
income of the Trust for any period as determined for federal income tax
purposes (and each item of income, gain, loss and deduction entering into the
computation thereof) shall be allocated to the Owners, pro rata based upon their Percentage Interests.

 

ARTICLE IX

AUTHORITY AND DUTIES OF THE TRUSTEES

 

Section 9.01                                General Authority.  The
Trustees are authorized to take all actions required or permitted to be taken
by them pursuant to the terms of this Agreement, the Trust Related Agreements
and the Statutory Trust Statute.  The
Trustees are further authorized from time to time to take such action as the
Administrator, the Special Servicer, or SunTrust, as the case may be, directs
in writing with respect to the Trust Related Agreements.

 

Section 9.01                                Specific Authority.  The
Trustees are hereby authorized and directed to take the following actions:

 

(a)                                  Execute the Certificate of Trust;

 

(b)                                 Execute and deliver each of the Trust Related Agreements and the Trust
Certificates on behalf of the Trust and any other document contemplated by the
foregoing, in each case in such form as the Administrator shall approve, as
evidenced conclusively by the Trustee’s or the Resident Trustee’s execution
thereof; and

 

(c)                                  Execute and deliver on behalf of the Trust any documents necessary or
appropriate, in such form as the Administrator shall approve, as evidenced
conclusively by the Trustee’s or the Resident Trustee’s execution thereof,
relating to the acquisition, servicing and management of Trust Loans.

 

Section 9.03                                General Duties.  It shall
be the duty of the Trustees to discharge (or cause to be discharged) all of
their respective responsibilities pursuant to the terms of this Agreement in
the interest of the Owners. 
Notwithstanding the foregoing, the Trustees shall be deemed to have
discharged their duties and responsibilities hereunder and under the Trust
Related Agreements to the extent (a) the Administrator has agreed herein
or in the Administration Agreement to perform such acts or to discharge such duties
of the Trustees hereunder or under any Trust Related Agreement, and the
Trustees shall not be held liable for the default or failure of the
Administrator to carry out its obligations hereunder or under the
Administration Agreement, and (b) the Special Servicer has agreed herein
or in the Special Servicing Agreement to perform such acts or to discharge such
duties of the Trustees hereunder or under any Trust Related Agreements, and the
Trustees shall not be held liable for the default or failure of the Special
Servicer to carry out its obligations hereunder or under the Special Servicing
Agreement.

 

Section 9.04                                Accounting and Reports to the Owners, the
Internal Revenue Service and Others.  The
Administrator shall (a) maintain or cause to be maintained the books of
the Trust on a fiscal year basis using the accrual method of accounting, (b) deliver
to each Owner, within 90 days of the end of each Fiscal Year, or more often, as
may be required by the Code and the Regulations thereunder, a copy of the annual
financial statement of the Trust for such Fiscal Year and a statement in such
form and containing such information as may be required by such Regulations,
and as is necessary and appropriate to enable each Owner to prepare its federal
and state income tax returns, (c) prepare (or cause to be prepared) and
file such tax returns and reports relating to the Trust, and make such
elections, as may from 

 

13

 

time to time be required
under any applicable state or federal statute or rule or regulation
thereunder, (d) cause such tax returns to be signed in the manner required
by law, (e) collect or cause to be collected any withholding tax required
by the Code to be withheld by the Trust with respect to Distributions to Owners
who are nonresident aliens or foreign corporations, and (f) cause to be
mailed to each Owner copies of all such reports and tax returns of the Trust.

 

Section 9.05                                Signature of Returns.  The
Trustee shall sign on behalf of the Trust, as the same are presented to the
Trustee for execution, the tax returns and other Periodic Filings of the Trust,
unless applicable law requires an Owner to sign such documents, in which case,
so long as NCF II is an Owner and applicable law allows NCF II to sign any such
document, NCF II shall sign such document and such document shall not be
presented to either of the Trustees for signature.  At any time that NCF II is not an Owner, or
is otherwise not allowed by law to sign any such document, then the Owner
required by law to sign such document shall sign and such document shall not be
presented to either of the Trustees for signature.

 

Section 9.06                                Right to Receive and Rely Upon Instructions.  In
the event that either of the Trustees is unable to decide between alternative
courses of action, or is unsure as to the application of any provision of this
Agreement or any Trust Related Agreement, or such provision is ambiguous as to
its application, or is or appears to be in conflict with any other applicable
provision, or in the event that this Agreement or any Trust Related Agreement
permits any determination by the Trustees or is silent or is incomplete as to
the course of action which either of the Trustees is required to take with
respect to a particular set of facts, the Trustees may give notice (in such
form as shall be appropriate under the circumstances) to the Owners or
SunTrust, as applicable, requesting instructions and, to the extent that the
Trustees shall have acted or refrained from acting in good faith in accordance
with any instructions received from the Owners or SunTrust, as applicable, the
Trustees shall not be liable to any Person on account of such action or
inaction.  If the Trustees shall not have
received appropriate instructions within ten days of such notice (or within
such shorter period of time as may be specified in such notice) the Trustees
may, but shall be under no duty to, take or refrain from taking such action,
not inconsistent with this Agreement or the Trust Related Agreements, as either
of the Trustees shall deem to be in the best interests of the Owners, and the
Trustees shall have no liability to any Person for such action or inaction.

 

Section 9.07                                No Duties Except as Specified in this
Agreement or in Instructions.  The
Trustees shall not have any duty or obligation to manage, make any payment in
respect of, register, record, sell, dispose of or otherwise deal with the Trust
Property or to otherwise take or refrain from taking any action under, or in
connection with, this Agreement or any document contemplated hereby to which
either of the Trustees or the Trust is a party, except as expressly provided by
the terms of this Agreement, and no implied duties or obligations (including
without limitation fiduciary duties) shall be read into this Agreement against
the Trustees, and no authority or authorization of either of the Trustees shall
be construed as a duty.  Each of the
Trustees nevertheless agrees that it will, at its own cost and expense, promptly
take all action as may be necessary to discharge any liens on any part of the
Trust Property, which result from claims against the Trustees personally that
are not related to the ownership or the administration of the Trust Property or
the transactions contemplated by the Trust Related Agreements.

 

Section 9.08                                No Action Except Under Specified Documents or
Instructions.  The Trustees shall not manage, control, use,
sell, dispose of or otherwise deal with any part of the Trust Property except (a) in
accordance with the powers granted to and the authority conferred upon the
Trustees pursuant to this Agreement, and (b) in accordance with
instructions delivered to the Trustees pursuant to Section 9.06 and Article IV
hereof.

 

Section 9.09                                Restriction. 
Notwithstanding anything herein to the contrary, the Trustees shall not
take any action (a) that is inconsistent with the purposes of the Trust or
(b) that to the actual 

 

14

 

knowledge of the Trustees
would result in the Trust being treated as an association taxable as a
corporation for federal income tax purposes.

 

ARTICLE X

CONCERNING THE TRUSTEES

 

Section 10.01                          Acceptance of Trusts and Duties.  Each
of the Trustees accepts the trusts hereby created and agrees to perform its
duties hereunder with respect to the same but only upon the terms of this
Agreement.  Neither of the Trustees shall
be personally liable under any circumstances, except (a) for its own
willful misconduct, bad faith or gross negligence, (b) for liabilities
arising from its failure to perform obligations expressly undertaken by it in
the last sentence of Section 9.07, (c) for the inaccuracy of its
representations and warranties contained in Section 10.05, or (d) for
taxes, fees or other charges on, based on or measured by any fees, commissions
or compensation received by it in connection with any of the transactions
contemplated by this Agreement or the Trust Related Agreements.  In particular, but not by way of limitation:

 

(i)                                     Neither of the
Trustees shall be personally liable for any error of judgment made in good
faith by any of its Authorized Officers;

 

(ii)                                  Neither of the
Trustees shall be personally liable with respect to any action taken or omitted
to be taken by it in good faith in accordance with the written instructions of
the Administrator, the Special Servicer, the Owners or SunTrust, as applicable;

 

(iii)                               No provision of
this Agreement shall require either of the Trustees to expend or risk its
personal funds or otherwise incur any financial liability in the performance of
any of its rights or powers hereunder if the Trustee or the Resident Trustee
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured or
provided to it;

 

(iv)                              Under no
circumstance shall the Trustees be personally liable for any indebtedness of
the Trust hereunder or under any Trust Related Agreement;

 

(v)                                 The Trustees
shall not be personally responsible for or in respect of the validity or
sufficiency of this Agreement or for the due execution hereof by NCF II, or for
the form, character, genuineness, sufficiency, value or validity of any Trust
Loan or Trust Certificate (other than with respect to the due execution thereby
by an Authorized Officer of the Resident Trustee on behalf of the Trust), or
for or in respect of the validity or sufficiency of the Administration
Agreement or the Trust Related Agreements; and

 

(vi)                              The Trustees
shall have no duty to monitor or supervise the Administrator or the Special
Servicer and shall not be liable for the default or misconduct of the
Administrator or the Special Servicer under any of the Trust Related Agreements
or otherwise and the Trustees shall have no obligation or liability to perform
the obligations of the Trust hereunder or under any Trust Related Agreement
that are required to be performed by the Administrator under the Administration
Agreement or by the Special Servicer under the Special Servicing Agreement.

 

Section 10.02                          Furnishing of Documents.  The
Trustee shall furnish to the Owners, promptly upon receipt thereof, duplicates
or copies of all material reports, notices, requests, demands, certificates,
financial statements and any other instruments furnished to the Trustee
hereunder (other than documents originated by or otherwise furnished to such
Owners).

 

15

 

Section 10.03                          Reliance; Advice of Counsel.

 

(a)                                  The Trustees shall incur no liability to anyone in acting upon any
signature, instrument, notice, resolution, request, consent, order,
certificate, report, opinion, note or other document or paper believed by it to
be genuine and believed by it to be signed by a proper Person.  The Trustees may accept a certified copy of a
resolution of the board of directors or other governing body of any corporate
party as conclusive evidence that such resolution has been duly adopted by such
body and that the same is in full force and effect.  As to any fact or matter the manner of
ascertainment of which is not specifically prescribed herein, the Trustees may
for all purposes hereof require and rely on a certificate, signed by the
president or any vice president or by the treasurer or any assistant treasurer
or the secretary of the relevant party or other appropriate Person, as to such
fact or matter, and such certificate shall constitute full protection to the
Trustees for any action taken or omitted to be taken by it in good faith in
reliance thereon.

 

(b)                                 In the exercise, performance or administration of its powers and duties hereunder
and in the performance of its duties and obligations under any of the Trust
Related Agreements, the Trustees (i) may act directly or, at the expense
of the Trust, through agents or attorneys pursuant to agreements entered into
with any of them, and the Trustees shall not be liable for the default or
misconduct of such agents or attorneys if such agents or attorneys shall have
been selected by either of the Trustees with reasonable care; and (ii) may,
at the expense of the Trust, consult with counsel, accountants and other
skilled persons to be selected with reasonable care and employed by it, and the
Trustees shall not be liable for anything done, suffered or omitted in good
faith by them in accordance with the advice or opinion of any such counsel,
accountants or other skilled persons.

 

Section 10.04                          Not Acting in Individual Capacity. 
Except as expressly provided in this Article X, in accepting the
trusts hereby created, each of the Trustees acts solely as trustee hereunder
and not in its individual capacity, and all Persons having any claim against
the Trustees by reason of the transactions contemplated by this Agreement or
the Trust Related Agreements shall look only to the Trust Property (other than
Recoveries) for payment or satisfaction thereof.

 

Section 10.05                          Representations and Warranties of Resident
Trustee.  The Resident Trustee represents and warrants
to NCF II that it meets the requirements of section 3807(a) of the
Statutory Trust Statute.

 

ARTICLE XI

COMPENSATION OF TRUSTEES

 

Section 11.01                          Fees and Expenses of the Trustees.  The
Trustees shall be entitled to compensation for their services hereunder from
the Trust and, to the extent not paid by the Administrator on behalf of the
Trust, each of the Trustees shall receive such compensation from FMC, as set
forth in a separate fee agreement with FMC and NCF II.  Each of the Trustees shall be entitled to be
reimbursed by the Trust for its reasonable expenses hereunder and, to the
extent not paid by the Administrator on behalf of the Trust, the Trustees shall
receive such reimbursement from FMC, including the reasonable compensation,
expenses and disbursements of such agents, representatives, experts and counsel
as the Trustees may employ in connection with the exercise and performance of
their rights and duties under this Agreement and the Trust Related Agreements.

 

Section 11.02                          Indemnification.  The Owners
shall be jointly and severally liable for, and hereby agree to, indemnify [U.S.
Bank National Association], individually and as Trustee, [U.S. Bank Trust
National Association], individually and as Resident Trustee, and their
respective Affiliates, successors, assigns, agents and servants, from and
against any and all liabilities, obligations, losses, damages, taxes 

 

16

 

(other than taxes
incurred as the result of the payment of fees and expenses pursuant to Section 11.01),
claims, actions, suits, costs, expenses and disbursements (including legal fees
and expenses) of any kind and nature whatsoever which may be imposed on,
incurred by or asserted at any time against the Trustee or the Resident Trustee
(whether or not indemnified against by other parties) in any way relating to or
arising out of this Agreement, any Trust Related Agreement, the Trust, the
administration of the Trust Property, the management of the Trust Loans or the
action or inaction of the Trustee or the Resident Trustee hereunder, except
only that the Owners shall not be required to indemnify the Trustee or the
Resident Trustee for expenses arising or resulting from any of the matters
described in clauses (a) through (d) of the second sentence of Section 10.01.  The indemnities contained in this Section 11.02
and all other rights, benefits, protections, privileges, immunities, and
indemnities of the Trustees shall survive the resignation or removal of either
of the Trustees and termination of this Agreement.  The obligations of the Owners pursuant to
this Section 11.02 shall be borne in proportion to their respective
Percentage Interests.

 

Section 11.03                          Payments to the Trustees.  Any
amounts paid to the Trustees from the Trust Property pursuant to this Article XI
shall be deemed not to be part of the Trust Property immediately after such
payment.

 

ARTICLE XII

TERMINATION OF TRUST

 

Section 12.01                          Termination of Trust.

 

(a)                                  The Trust created hereby shall dissolve upon the last day of the month
following (a) the month during which the principal and interest balance of
each Trust Loan has been fully paid or otherwise discharged, whether by
settlement or other means, pursuant to the Special Servicing Agreement  and (b) the final Distribution by the
Trustee of all funds or other property or proceeds of the Trust Property in
accordance with the terms of this Agreement and the Trust Related Agreements.

 

(b)                                 The bankruptcy, death, incapacity, dissolution or termination of any
Owner shall not operate to dissolve the Trust or terminate this Agreement, nor
entitle such Owner’s legal representatives or heirs to claim an accounting or
to take any action or proceeding in any court for a partition or winding up of
the Trust Property, nor otherwise affect the rights, obligations and
liabilities of the parties hereto.

 

(c)                                  Upon completion of the winding up of the Trust following the dissolution
of the Trust pursuant to this Article XII, the Resident Trustee shall
cause a Certificate of Termination to be filed with the Secretary of State,
whereupon, except as otherwise provided in this Agreement, this Agreement shall
be of no further force or effect and the Trust shall terminate.

 

Section 12.02                          Distribution of Assets.  Upon
dissolution of the Trust, the Trustee shall take full account of the Trust
assets (which shall not include any funds in the Participation Account) and
liabilities, shall liquidate the assets as promptly as is consistent with
obtaining the fair value thereof, and shall apply and distribute the proceeds
therefrom, in accordance with written instructions of the Administrator, in the
following order:

 

(a)                                  To the payment of the expenses of liquidation and the debts and
liabilities of the Trust;

 

(b)                                 To the setting up of reserves which may be necessary or appropriate for
anticipated obligations or contingencies of the Trust arising out of or in
connection with the operation of the Trust. 
Such reserves may be paid over by the Trustee to an escrow agent or
trustee selected by the Administrator to be disbursed by such escrow agent or
trustee in payment of any of such obligations or contingencies 

 

17

 

and, if any balance
remains at the expiration of such period as the Administrator shall deem
advisable, to be distributed by such escrow agent or trustee in the manner
hereinafter provided; and

 

(c)                                  To each of the Owners, pro rata
in accordance with its Percentage Interest.

 

If, at the time of liquidation, the Administrator
shall determine that an immediate sale of some or all of the assets would cause
undue loss to the Owners, the Administrator may, in order to avoid such loss
and with the consent of the Owners, direct the Trustee to defer liquidation.

 

Section 12.03                          No Termination by Owners.  The
Owners shall not be entitled to terminate or revoke the Trust established
hereunder.

 

ARTICLE XIII

SUCCESSOR TRUSTEES AND ADDITIONAL TRUSTEES

 

Section 13.01                          Resignation of Trustees; Appointment of
Successor.

 

(a)                                  Either of the Trustees may resign at any time without cause by giving at
least 60 days’ prior written notice to the Administrator, the Owners and
SunTrust, such resignation to be effective upon the acceptance of appointment
by a successor Trustee or Resident Trustee, as applicable, under Section 13.01(b).  In addition, the Majority Owners may at any
time remove either of the Trustees without cause by an instrument in writing
delivered to the Trustee or Resident Trustee, as applicable, the Administrator
and SunTrust, such removal to be effective upon the acceptance of appointment
by a successor Trustee or Resident Trustee, as applicable, under Section 13.01(b).  In case of the resignation or removal of
either of the Trustees, the Owners may appoint a successor Trustee or Resident
Trustee, as applicable, by an instrument signed by the Owners.  If a successor Trustee or Resident Trustee,
as applicable, shall not have been appointed within 30 days after the giving of
written notice of such resignation or the delivery of the written instrument
with respect to such removal, the Trustee or Resident Trustee, as applicable,
or the Owners may, at the expense of the Trust, apply to any court of competent
jurisdiction to appoint a successor Trustee or Resident Trustee, as applicable,
to act until such time, if any, as a successor Trustee or Resident Trustee, as
applicable, shall have been appointed as provided above.  Any successor Trustee or Resident Trustee, as
applicable, so appointed by such court shall immediately and without further
act be superseded by any successor Trustee or Resident Trustee, as applicable,
appointed as above provided within one year from the date of the appointment by
such court.

 

(b)                                 Any successor Trustee or Resident Trustee, as applicable, however
appointed, shall execute and deliver to the predecessor Trustee or Resident
Trustee, as applicable, an instrument accepting such appointment, and thereupon
such successor Trustee or Resident Trustee, as applicable, without further act
(except for the filing required under Section 13.01(e) below), shall become
vested with all the estates, properties, rights, powers, duties and trust of
the predecessor Trustee or Resident Trustee, as applicable, in the trusts
hereunder with like effect as if originally named the Trustee or Resident
Trustee, as applicable, herein; but nevertheless, upon the written request of
such successor Trustee or Resident Trustee, as applicable, and the payment of
all fees and indemnities or other amounts due the predecessor Trustee or
Resident Trustee, as applicable, such predecessor Trustee or Resident Trustee,
as applicable, shall execute and deliver an instrument transferring to such
successor Trustee or Resident Trustee, as applicable, upon the trusts herein
expressed, all the estates, properties, rights, powers, duties and trusts of
such predecessor Trustee or Resident Trustee, as applicable, and such
predecessor Trustee or Resident Trustee, as applicable, shall duly assign,
transfer, deliver and pay over to such successor Trustee or Resident Trustee,
as applicable, all funds or other property then held or subsequently received
by such predecessor Trustee or Resident Trustee, as applicable, upon the trusts
herein expressed.

 

18

 

(c)                                  Any successor Trustee, however appointed, shall be a national bank and
any Resident Trustee, however, appointed, shall meet the requirements of
section 3807(a) of the Statutory Trust Statute.

 

(d)                                 Any Person into which the Trustee or Resident Trustee, as applicable, may
be merged or converted or with which it may be consolidated, or any Person
resulting from any merger, conversion or consolidation to which the Trustee or
Resident Trustee, as applicable, shall be a party, or any Person to which
substantially all the corporate trust business of the Trustee or Resident
Trustee, as applicable, may be transferred, shall, subject to the terms of Section 13.01(c),
be the Trustee or Resident Trustee, as applicable, under this Agreement without
further act.

 

(e)                                  Any successor Resident Trustee appointed pursuant to this Article XIII
shall file an amendment to the Certificate of Trust with the Secretary of State
reflecting the name and principal place of business of such successor Resident
Trustee.

 

Section 13.02                          Appointment of Additional Trustees.  At
any time or times for the purpose of meeting any legal requirements of any
jurisdiction in which any part of the Trust Property may at the time be
located, the Trustee and the Administrator, acting jointly, by an instrument in
writing, may appoint one or more individuals or other Persons approved by the
Administrator and the Trustee to act as separate trustee or separate trustees
of all or any part of the Trust Property to the full extent that local law
makes it necessary or appropriate for such separate trustee or separate
trustees to act alone.  If the
Administrator shall not have joined in such appointment within 15 days after
the receipt of such request, the Trustee, acting alone, shall have the power to
make such appointment.

 

ARTICLE XIV

TAX MATTERS PARTNER

 

Section 14.01                          Tax Matters Partner.  The
tax matters partner (within the meaning of section 6231(a)(7) of the Code
and applicable Regulations) of the Trust for all federal income tax purposes
set forth in the Code shall be NCF II, provided
that the Trust is treated as a partnership for federal income tax
purposes.  Subject to Section 14.08,
the tax matters partner shall have the authority to represent the Trust and
perform the duties imposed on the tax matters partner under the Code, and as
set forth in this Article XIV.

 

Section 14.02                          Notice of Tax Audit.  The
tax matters partner shall give prompt notice to the Owners upon receipt of
advice that the Internal Revenue Service intends to examine Trust income tax
returns for any year.

 

Section 14.03                          Authority to Extend Period for Assessing Tax. 
Subject to Section 14.08, the tax matters partner shall have the
authority to extend the period for assessing any tax imposed on any Owner under
the Code by any agreement as provided for under section 6229(b)(1)(B) of
the Code.

 

Section 14.04                          Choice of Forum for Filing Petition for
Readjustment.  Any petition for readjustment may, but is not
required to, be filed by the tax matters partner in accordance with section
6226(a) of the Code in the United States District Court for the district
in which the Trust’s principal place of business is located, or the United
States Claims Court.

 

Section 14.05                          Authority to Bind Owners by Settlement Agreement. 
Subject to Section 14.08, the tax matters partner shall enter into
a settlement agreement in accordance with section 6224(c)(3) of the Code
as directed by the Owners.

 

19

 

Section 14.06                          Notices Sent to the Internal Revenue Service.  The
tax matters partner shall use its best efforts to furnish to the Internal
Revenue Service the name, address, profits interest and taxpayer identification
number of each Owner and any additional information it receives from each Owner
regarding any change in that Owner’s name, address, profits interest and
taxpayer identification number.  In no
event shall the tax matters partner be liable, responsible or accountable in
damages or otherwise to the Owner for any loss in connection with furnishing
such information to the Internal Revenue Service if the tax matters partner
acts in good faith and is not guilty of fraud or gross negligence.

 

Section 14.07                          Indemnification of Tax Matters Partner.  The
Trust shall indemnify and save harmless the tax matters partner against any
loss, damage, cost or expense (including attorneys’ fees) incurred by it as a
result of any act performed or omitted on behalf of the Trust or any Owner or
in furtherance of the Trust’s interests or the interests of the Owner, in its
capacity as tax matters partner, without, however, relieving the tax matters
partner of liability for bad faith, fraud or gross negligence.

 

Section 14.08                          Approval of Tax Matters Partner’s Decisions.  The
tax matters partner shall call a meeting of the Owners at any time in order to
discuss any decisions the tax matters partner may propose to make, notice of
which shall be included in the notice of such meeting.  The tax matters partner shall make no
decision and take no action with respect to the determination, assessment or
collection of any tax imposed by the Code on the Owners unless and until such
decision has been approved by the Owners.

 

Section 14.09                          Participation by Owners in Internal Revenue
Service Administrative Proceedings.  Nothing
contained in this Article XIV shall be construed to take away from any
Owner any right granted to such person by the Code to participate in any manner
in administrative proceedings of the Internal Revenue Service.

 

ARTICLE XV

MISCELLANEOUS

 

Section 15.01                          Supplements and Amendments.  This
Agreement may be amended only by a written instrument signed by the Trustees
and the Majority Owners at the time of such amendment; provided, however, that Sections 2.03,
2.05(b), 4.02(d), 9.01, 9.06, 10.01(ii), 12.01 and 13.01 and Articles V and VI
of this Agreement may be amended only by a written instrument signed by the
Trustees, the Majority Owners at the time of such amendment, and SunTrust; provided further that if, in the opinion
of either of the Trustees, any instrument required to be so executed adversely
affects any right, duty or liability of, or benefit, protection, privilege,
immunity or indemnity in favor of, either of the Trustees under this Agreement
or any of the documents contemplated hereby to which either of the Trustees or
the Trust is a party, or would cause or result in any conflict with or breach
of any terms, conditions or provisions of, or default under, the charter
documents or by-laws of either of the Trustees or any document contemplated
hereby to which either of the Trustees is a party, either of the Trustees may
in its sole discretion decline to execute such instrument.

 

Section 15.02                          No Legal Title to Trust Property in Owner.  Legal
title to all Trust Property shall be vested at all times in the Trust as a
separate legal entity, except where the laws of any jurisdiction require title
to be vested in a trustee in which case legal title shall be vested in the
Trustee on behalf of the Trust.  The
Trustee shall have no duty or obligation to independently investigate whether
legal title to any Trust Property is deemed vested in the Trustee.  The Owners shall not have legal title to any
part of the Trust Property and shall only have an undivided beneficial interest
therein.  No transfer, by operation of
law or otherwise, of any right, title and interest of the Owners in and to
their undivided Beneficial Interests in the Trust Property hereunder shall
operate to terminate this Agreement or the trusts hereunder or entitle any
successor transferee to an accounting or to the transfer to it of legal title
to any part of the Trust Property.

 

20

 

Section 15.03                          Limitations on Rights of Others. 
Nothing in this Agreement, whether express or implied, shall be
construed to give to any Person other than the Trust, the Trustees, SunTrust,
FMC, the Administrator and the Owners any legal or equitable right, remedy or
claim in the Trust Property under or in respect of this Agreement or any
covenants, conditions or provisions contained herein.

 

Section 15.04                          Notices.  Unless
otherwise expressly specified or permitted by the terms hereof, all notices
shall be in writing and delivered by hand or mailed by certified mail, postage
prepaid, if to the Trustee, addressed to: [U.S. Bank National Association, One
Federal Street, Boston, Massachusetts 02110, Attention: Corporate Trust
Administration], or to such other address as the Trustee may have set forth in
a written notice to the Owners; and if the Resident Trustee, addressed to:
[U.S. Bank Trust National Association, 300 Delaware Avenue, 9th Floor, Wilmington, Delaware 19801, Attention:
Corporate Trust Administration]; if to an Owner, addressed to it at the address
provided to the Resident Trustee by such Owner and set forth for such Owner in
the register maintained by the Resident Trustee, and if to SunTrust, addressed
to: SunTrust Bank, 1001 Semmes Avenue, Mail Code CS-RVW-7900, Richmond,
Virginia 23224, Attention: W. Mark Smith, with a copy to: SunTrust Bank, 303
Peachtree Street, N.E., 36th Floor,
Atlanta, Georgia 30308, Attention: Legal Department.  Whenever any notice in writing is required to
be given by either of the Trustees hereunder, such notice shall be deemed given
and such requirement satisfied 72 hours after such notice is mailed by
certified mail, postage prepaid, addressed as provided above; any notice given
by an Owner to either of the Trustees shall be effective upon receipt by an
Authorized Officer of the Trustee or Resident Trustee, as applicable.  A copy of any notice delivered to either of
the Trustees shall also be delivered by the Person giving such notice to the
Administrator, addressed to: First Marblehead Data Services, Inc., The
Prudential Tower, 800 Boylston Street - 34th Floor, Boston, Massachusetts
02199-8157, Attention: Ms. Rosalyn Bonaventure, with a copy to The First
Marblehead Corporation, The Prudential Tower, 800 Boylston Street - 34th Floor,
Boston, Massachusetts 02199-8157, Attention: Corporate Law Department, or to
such other addresses as the Administrator may have set forth in a written
notice to the Trustees.

 

Section 15.05                          Severability.  Any
provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

 

Section 15.06                          Separate Counterparts.  This
Agreement may be executed by the parties hereto in separate counterparts, each
of which when so executed and delivered shall be an original, but all such
counterparts shall together constitute but one and the same instrument.

 

Section 15.07                          Successors and Assigns.  All
covenants and agreements contained herein shall be binding upon, and inure to
the benefit of, the Trustees and their respective successors and assigns and
each Owner and its successors and permitted assigns, all as herein
provided.  Any request, notice,
direction, consent, waiver or other instrument or action by an Owner shall bind
the successors and assigns of such Owner.

 

Section 15.08                          Headings.  The
headings of the various Articles and Sections herein are for convenience of
reference only and shall not define or limit any of the terms or provisions
hereof.

 

Section 15.09                          Governing Law.  This
Agreement shall in all respects be governed by, and construed in accordance
with, the laws of the State of Delaware (excluding conflict of law rules),
including all matters of construction, validity and performance.

 

21

 

Section 15.10                          Third Party Beneficiaries.  This
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective successors and assigns. 
FMC shall be a third party beneficiary to this Agreement for purposes of
Section 2.03(c), Section 5.03 and Article VI and shall be
entitled to enforce such provisions against NCF II and the Trust as if it was a
party hereto.

 

Section 15.11                          General Interpretive Principles.  For
purposes of this Agreement, except as otherwise expressly provided or unless
the context otherwise requires:

 

(a)                                  The defined terms in this Agreement include the plural as well as the
singular, and the use of any gender herein shall be deemed to include any other
gender;

 

(b)                                 Accounting terms not otherwise defined herein have the meanings assigned
to them in accordance with generally accepted accounting principles as in
effect on the date hereof;

 

(c)                                  References herein to “Articles,” “Sections,” “paragraphs” and other
subdivisions without reference to a document are to designated Articles,
Sections, paragraphs and other subdivisions of this Agreement;

 

(d)                                 A reference to a paragraph without further reference to a Section is
a reference to such paragraph as contained in the same Section in which
the reference appears, and this rule shall also apply to subparagraphs and
other subdivisions;

 

(e)                                  The words “herein,” “hereof,” “hereunder” and other words of similar
import refer to this Agreement as a whole and not to any particular provision;
and

 

(f)                                    The term “include” or “including” shall mean without limitation by reason
of enumeration.

 

[Remainder of page intentionally blank]

 

22

 

IN
WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to the
duly executed by their respective officers hereunto duly authorized, as of the
day and year first above written.

 

 

	
   

  	
  [U.S.
  BANK NATIONAL ASSOCIATION], not in its

  individual capacity except as expressly provided herein,

  but
  solely as Trustee

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
  [U.S.
  BANK TRUST NATIONAL ASSOCIATION],

  not in its individual capacity except as expressly

  provided herein, but solely as Resident Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
  THE
  NATIONAL COLLEGIATE FUNDING II, LLC,

  as Owner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Gary
  F. Santo, Jr.

  
	
   

  	
   

  	
  Title:

  	
  Vice
  President

  

 

 

[Signatures continue]

 

 

Trust
Agreement

 

 

With
respect to Sections 2.03, 2.05(b), 4.02(d), 9.01, 9.06, 10.01(ii), 12.01 and
13.01 and Articles V and VI only:

 

	
   

  	
  SUNTRUST
  BANK

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 

[Signatures continue]

 

 

Trust
Agreement

 

 

	
  ACKNOWLEDGED
  AND AGREED AS TO

  SECTION 2.03, ARTICLE V AND

  ARTICLE VI ONLY

  	
   

  
	
   

  	
   

  
	
  THE
  FIRST MARBLEHEAD CORPORATION

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

 

[Signatures continue]

 

 

Trust
Agreement

 

 

	
  ACKNOWLEDGED AND AGREED

  	
   

  
	
   

  	
   

  
	
  FIRST MARBLEHEAD DATA SERVICES, INC.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:  Rosalyn Bonaventure

  	
   

  
	
   

  	
  Title:  President

  	
   

  

 

 

[End signatures]

 

 

Trust
Agreement

 

 

SCHEDULE I

 

CAPITAL CONTRIBUTIONS AND PERCENTAGE INTERESTS

 

	
  Owner

  	
   

  	
  Capital Contribution

  	
   

  	
  Percentage Interest

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The
  National Collegiate Funding II, LLC

  	
   

  	
  $

  	
  1.00

  	
   

  	
  100

  	
  %

  
							

 

 

EXHIBIT A

 

MG STUDENT LOAN TRUST 2010-1

 

TRUST CERTIFICATE

UNDER THE TRUST AGREEMENT, DATED

as of July     , 2010

 

Certificate
No.                        

 

THE BENEFICIAL INTEREST IN THE TRUST REPRESENTED BY THIS
TRUST CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAW, AND MAY NOT BE
DIRECTLY OR INDIRECTLY OFFERED OR SOLD OR OTHERWISE DISPOSED OF (INCLUDING
PLEDGED) BY THE HOLDER HEREOF UNLESS IN THE OPINION OF COUNSEL SATISFACTORY TO
THE RESIDENT TRUSTEE, SUCH TRANSACTION IS EXEMPT FROM REGISTRATION UNDER THE
ACT AND STATE SECURITIES LAWS.  THE
TRANSFER OF THIS TRUST CERTIFICATE WILL NOT BE EFFECTIVE UNLESS THE TRANSFEREE
HAS DELIVERED TO THE RESIDENT TRUSTEE A LETTER IN THE FORM REQUIRED BY SECTION 3.04(a) OF
THE TRUST AGREEMENT.

 

NO TRANSFER OF THIS CERTIFICATE MAY BE MADE TO ANY PLAN
SUBJECT TO ERISA OR SECTION 4975 OF THE CODE OR ANY PERSON ACTING ON
BEHALF OF SUCH A PLAN EXCEPT IN ACCORDANCE WITH SECTION 3.04(b) OF
THE TRUST AGREEMENT.

 

[U.S.
Bank Trust National Association], not in its individual capacity, but solely as
resident trustee (the “Resident Trustee”) under the Trust Agreement,
dated as of July        , 2010 (the “Trust
Agreement”), with [U.S. Bank National Association], not in its individual
capacity but solely as trustee (the “Trustee” and together with the
Resident Trustee, the “Trustees”), The National Collegiate Funding II,
LLC, as owner (the “Owner”) of beneficial interests in the trust created
thereby, and, with respect to Sections 2.03, 2.05(b), 4.02(d), 9.01, 9.06,
10.01(ii), 12.01 and 13.01 and Articles V and VI only, SunTrust Bank, hereby
certifies on behalf of the MG Student Loan Trust 2010-1 (the “Trust”)
that                                 
is the owner of an undivided beneficial interest equal to the percentage listed
on Schedule I to the Trust Agreement in the Trust Property provided for
and created by the Trust Agreement.  This
Trust Certificate is issued pursuant to and is entitled to the benefits of the
Trust Agreement, and each Owner by acceptance hereof shall be bound by the
terms of the Trust Agreement.  Reference
is hereby made to the Trust Agreement for a statement of the rights and
obligations of the Owner hereof.  The
Trustees may treat the person shown on the register maintained by the Resident
Trustee pursuant to Section 3.02 of the Trust Agreement as the absolute
Owner hereof for all purposes.

 

Capitalized
terms used herein without definition have the meanings ascribed to them in or
by reference in the Trust Agreement.

 

TRANSFER
OF THIS TRUST CERTIFICATE IS SUBJECT TO CERTAIN RESTRICTIONS AND LIMITATIONS
SET FORTH IN THE TRUST AGREEMENT.  In the
manner more fully set forth in, and as limited by, the Trust Agreement, this
Trust Certificate may be transferred upon the books of the Trust maintained by
the Resident Trustee by the registered Owner in person or by his attorney duly
authorized in writing upon surrender of this Trust Certificate to the Resident
Trustee accompanied by a written instrument of transfer and with such signature
guarantees and evidence of authority of the Persons signing the instrument of
transfer as the Resident Trustee may reasonably require, whereupon the Resident
Trustee shall issue in the name of the transferee a Trust Certificate or Trust
Certificates 

 

 

evidencing
the amount and extent of interest of the transferee.  The Owner hereof, by its acceptance of this
Trust Certificate, warrants and represents to the Resident Trustee, the Trustee
and to the Owners of the other Trust Certificates issued under the Trust
Agreement and agrees not to transfer this Trust Certificate except in
accordance with the Trust Agreement.

 

This
Trust Certificate may not be acquired or held by a Plan.  By accepting and holding this Trust
Certificate, the Owner hereof shall be deemed to have represented and warranted
that it is not a Plan, unless it has provided the opinion of counsel described
in Section 3.04(b) of the Trust Agreement.

 

This
Trust Certificate and the Trust Agreement shall in all respects be governed by,
and construed in accordance with, the laws of the State of Delaware (excluding
conflict of law rules), including all matters of construction, validity and
performance.

 

IN
WITNESS WHEREOF, the Resident Trustee, pursuant to the Trust Agreement, has
caused this Trust Certificate to be issued in the name and on behalf of the
Trust as of the date hereof.

 

 

	
   

  	
  MG STUDENT LOAN TRUST 2010-1 

   

  By:
  [U.S. BANK TRUST NATIONAL

  ASSOCIATION], not in its individual capacity, but 

  solely as Resident Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
   

  
				

 

A-2

 

EXHIBIT B

 

FORM OF ACCESSION AGREEMENT

 

[Date]

[Name]

[Address]

Attention:

 

Dear
Sirs:

 

We
refer to the Trust Agreement, dated as of July      ,
2010 (the “Trust Agreement”), among The National Collegiate Funding II,
LLC (the “Company”), [U.S. Bank National Association] (in its capacity
as trustee thereunder, the “Trustee”), [U.S. Bank Trust National
Association] (in its capacity as resident trustee thereunder, the “Resident
Trustee”), and, with respect to Sections 2.03, 2.05(b), 4.02(d), 9.01,
9.06, 10.01(ii), 12.01 and 13.01 and Articles V and VI only, SunTrust
Bank.  We propose to purchase a
beneficial interest in the MG Student Loan Trust 2010-1, a Delaware statutory
trust (the “Trust”) formed pursuant to the Trust Agreement.  Capitalized terms used herein without
definition have the meanings given them in the Trust Agreement.

 

1.                                       We understand
that our Trust Certificate is not being registered under the Securities Act of
1933, as amended (the “1933 Act”), or any state securities or “Blue Sky”
law and is being sold to us in a transaction that is exempt from the
registration requirements of the 1933 Act and any applicable state laws.

 

2.                                       We have
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of an investment in the Trust, we are able to
bear the economic risk of investment in the Trust and we are an “accredited
investor” as defined in Regulation D under the 1933 Act.

 

3.                                       We acknowledge
that none of the Trust, the Company, the Trustee or the Resident Trustee has
advised us concerning the federal or state income tax consequences of owning a
beneficial interest in the Trust, including the tax status of the Trust or the
likelihood that distributions from the Trust would be characterized as “unrelated
business income” for federal tax purposes, and we have consulted with our own
tax advisor with respect to such matters.

 

4.                                       We are
acquiring our Trust Certificate for our own account and not for the benefit of
any other person and not with a view to any distribution of our Beneficial
Interest in the Trust subject, nevertheless, to the understanding that
disposition of our property shall at all times be and remain within our
control.

 

5.                                       We agree that
our Beneficial Interest in the Trust must be held indefinitely by us unless
subsequently registered under the 1933 Act and any applicable state securities
or “Blue Sky” law or unless exemptions from the registration requirements of
the 1933 Act and applicable state laws are available.

 

6.                                       We agree that
in the event that at some future time we wish to dispose of or exchange any of
our Beneficial Interest in the Trust, we will not transfer or exchange any of
our Beneficial Interest in the Trust unless we have satisfied the requirements
set forth in Section 3.04 of the Trust Agreement, and either:

 

 

(A)                              (1) the
transfer or exchange is made to an Eligible Purchaser (as defined below), (2) a
letter to substantially the same effect as this letter is executed promptly by
such Eligible Purchaser, and (3) all offers or solicitations in connection
with the sale (if a sale), whether made directly or through any agent acting on
our behalf, are limited only to Eligible Purchasers and are not made by means
of any form of general solicitation or general advertising whatsoever; or

 

(B)                                our Beneficial
Interest in the Trust is sold in a transaction that does not require
registration under the 1933 Act and any applicable State “Blue Sky” law.

 

“Eligible
Purchaser” means a corporation, partnership or other entity which we have
reasonable grounds to believe and do believe can make representations with
respect to itself to substantially the same effect as the representations set
forth herein.

 

7.                                       We understand
that our Trust Certificate bears a legend to substantially the following effect:

 

THE
BENEFICIAL INTEREST IN THE TRUST REPRESENTED BY THIS TRUST CERTIFICATE HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”),
OR ANY STATE SECURITIES LAW, AND MAY NOT BE DIRECTLY OR INDIRECTLY OFFERED
OR SOLD OR OTHERWISE DISPOSED OF (INCLUDING PLEDGED) BY THE HOLDER HEREOF
UNLESS IN THE OPINION OF COUNSEL SATISFACTORY TO THE RESIDENT TRUSTEE SUCH
TRANSACTION IS EXEMPT FROM REGISTRATION UNDER THE ACT AND STATE SECURITIES
LAWS. THE TRANSFER OF THIS TRUST CERTIFICATE WILL NOT BE EFFECTIVE UNLESS THE
TRANSFEREE HAS DELIVERED TO THE RESIDENT TRUSTEE A LETTER IN THE FORM REQUIRED
BY SECTION 3.04(a) OF THE TRUST AGREEMENT.

 

NO
TRANSFER OF THIS CERTIFICATE MAY BE MADE TO ANY PLAN SUBJECT TO ERISA OR SECTION 4975
OF THE CODE OR ANY PERSON ACTING ON BEHALF OF SUCH A PLAN EXCEPT IN ACCORDANCE
WITH SECTION 3.04(b) OF THE TRUST AGREEMENT.

 

8.                                       We agree to be
bound by all terms and conditions of our Trust Certificate and the Trust
Agreement.

 

[Remainder of page intentionally left blank]

 

B-2

 

	
   

  	
  Very
  truly yours,

  
	
   

  	
   

  
	
   

  	
  [PURCHASER]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
  Accepted
  and Acknowledged this          th day of 

                              ,
                 .

  
	
   

  
	
  MG STUDENT LOAN TRUST
  2010-1   

   

  By: [U.S. BANK TRUST NATIONAL  

  ASSOCIATION], not in its individual capacity, but  

  solely as Resident Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
					

 

 

EXHIBIT C

 

FORM OF 

CERTIFICATE OF TRUST

OF

MG STUDENT LOAN TRUST 2010-1

 

This
Certificate of Trust of the MG Student Loan Trust 2010-1 (the “Trust”),
is being duly executed and filed on behalf of the Trust by the undersigned, as
trustees, to form a statutory trust under the Delaware Statutory Trust Act (12
Del. C. § 3801 et seq.) (the “Act”).

 

(i)            Name.  The name of the statutory trust formed hereby
is the MG Student Loan Trust 2010-1.

 

(ii)           Delaware Trustee.  The name and business address of a trustee of
the Trust which has its principal place of business in the State of Delaware
are [U.S. Bank Trust National Association, 300 Delaware Avenue, 9th Floor, Wilmington, Delaware 19801, Attention:
Corporate Trust Administration].

 

(iii)          Effective Date.  This Certificate of Trust shall be effective
upon filing.

 

IN
WITNESS WHEREOF, the undersigned have duly executed this Certificate of Trust
in accordance with § 3811(a)(1) of the Act.

 

 

	
   

  	
  [U.S.
  BANK TRUST NATIONAL ASSOCIATION], not in its 

  individual capacity but solely as Resident Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  [U.S.
  BANK NATIONAL ASSOCIATION], not in its 

  individual capacity but solely as Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 

EXHIBIT C2

Administration Agreement

 

 

ADMINISTRATION AGREEMENT

 

ADMINISTRATION
AGREEMENT, dated as of July     , 2010 (as amended
from time to time, this “Agreement”), among MG STUDENT LOAN TRUST
2010-1, a Delaware statutory trust (the “Trust”), [U.S. BANK NATIONAL
ASSOCIATION], not in its individual capacity but solely as a trustee of the
Trust (the “Trustee”), and FIRST MARBLEHEAD DATA SERVICES, INC., a
Massachusetts corporation having a place of business at 800 Boylston St., 34th Floor, Boston, MA 02199 (the “Administrator”).
Capitalized terms used and not otherwise defined herein shall have the meanings
assigned to such terms in the Trust Agreement or the Loan Program Agreement
(each as defined below), as applicable.

 

WHEREAS,
the Trust (a) will be assigned (i) Charged Off Loans and (ii) Purchased
Loans (collectively, the “Trust Loans”) from time to time pursuant to
that certain Loan Program Agreement executed April 20, 2010 (the “Loan
Program Agreement”), by and among First Marblehead Education Resources, Inc.,
The First Marblehead Corporation, and SunTrust Bank, a Georgia state-chartered
banking corporation (“SunTrust”); and (b) has issued a trust
certificate (the “Trust Certificate”) pursuant to a Trust Agreement
dated as of July     , 2010 (the “Trust Agreement”)
among the Trustee, The National Collegiate Funding II, LLC (the “Owner”
and together with any other beneficial
owner of the Trust, the “Owners”), a resident trustee (together
with the Trustee, the “Trustees”) and, with respect to Sections 2.03,
2.05(b), 4.02(d), 9.01, 9.06, 10.01(ii), 12.01 and 13.01 and Articles V and VI
only, SunTrust;

 

WHEREAS,
pursuant to the Trust Agreement, the Trust, the Trustee, and one or more Owners
are required to perform certain duties in connection with the Trust Loans;

 

WHEREAS,
the Trust, the Trustee, and the Owners desire to have the Administrator perform
certain of the duties of the Trust and the Trustee referred to in the Trust
Agreement and the Trust Related Agreements and to provide such additional
services consistent with the terms of this Agreement and the Trust Related
Agreements as the Trust, the Trustee, and the Owners may from time to time
request; and

 

WHEREAS,
the Administrator has the capacity to provide the services required hereby and
is willing to perform such services for the Trust, the Trustee, and the Owners
on the terms set forth herein.

 

NOW,
THEREFORE, in consideration of the mutual covenants contained herein, and other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties agree as follows:

 

1.             Duties of the Administrator.

 

(a)           Duties with Respect to the Trust
Related Agreements.  The Administrator
agrees to perform all its duties as Administrator and the duties of the Trust
under the Trust Related Agreements.  In
addition, the Administrator shall consult with the Trustee regarding the duties
of the Trust under the Trust Related Agreements.  The Administrator shall monitor the
performance of the Trust under the Trust Related Agreements and shall advise
the Trustee when action is necessary to comply with the Trust’s duties under
the Trust Related Agreements.  The
Administrator shall prepare for execution by the Trust, or shall cause the
preparation by other appropriate persons or entities of, all such documents,
reports, filings, instruments, certificates and opinions that it shall be the
duty of the Trust to prepare, file or deliver pursuant to the Trust Related
Agreements.

 

 

(b)           Additional Duties.

 

(i)            In
addition to the duties of the Administrator set forth above, the Administrator
shall perform, or cause to be performed, its duties and obligations and the
duties and obligations of the Trust, and the Trustee on behalf of the Trust,
under the Trust Agreement including, without limitation, those duties and
obligations set forth on Schedule A hereto.  In furtherance thereof, the Trust shall
execute and deliver to the Administrator and to each successor Administrator
appointed pursuant to the terms hereof, one or more powers of attorney
substantially in the form of Exhibit A hereto, appointing the
Administrator as the attorney-in-fact of the Trust, for the purpose of
executing on behalf of the Trust all such documents, reports, filings,
instruments, certificates and opinions as are required to be executed by the
Trust pursuant to such agreements. 
Subject to Section 5 of this Agreement, and in accordance with the
written instructions of the Trust, the Owners, or the Trustee, the
Administrator shall administer, perform or supervise the performance of such
other activities in connection with the Trust Loans as are not covered by any
of the foregoing provisions and as are expressly requested by the Trust, the
Trustee, or the Owners and are
reasonably within the capability of the Administrator.  The Administrator agrees to perform such
obligations and deliver such notices as are specified as to be performed or
delivered by the Administrator under the Trust Agreement.

 

(ii)           In
carrying out the foregoing duties or any of its other obligations under this
Agreement, the Administrator may enter into transactions or otherwise deal with
any of its Affiliates.

 

(iii)          In
carrying out any of its obligations under this Agreement, the Administrator may
act either directly or through agents, attorneys, accountants, independent
contractors and auditors and may enter into agreements with any of them.

 

(iv)          In
carrying out its duties under this Agreement with respect to delinquent or
defaulted Trust Loans, the Administrator may retain and employ agents to
service, manage, enforce, collect or dispose of such Trust Loans and to
commence any actions or proceedings the agents deem necessary, appropriate or
desirable in connection therewith.

 

(c)           Non-Ministerial Matters.

 

(1)           With
respect to matters that in the reasonable judgment of the Administrator are
non-ministerial, the Administrator shall not be under any obligation to take
any action, and in any event shall not take any action unless the Administrator
shall have received instructions from the Trustee or the Owners in accordance
with the Trust Agreement.  For the
purpose of the preceding sentence, “non-ministerial matters” shall include,
without limitation:

 

(A)          The amendment of or any supplement to the Trust Related
Agreements; and

 

(B)           The
initiation of any claim or lawsuit by the Trust and the compromise of any
action, claim or lawsuit brought by or against the Trust, except for claims or
lawsuits in the ordinary course of business brought by or against the Trust, or
by its agents or nominees, relating to the enforcement or collection of the
Trust Loans owned by the Trust.

 

(ii)           Notwithstanding
anything to the contrary in this Agreement, the Administrator shall not be
obligated to, and shall not, take any action that the Trustee or any Owner
directs the Administrator not to take on behalf of the Trust.

 

2

 

(d)           Actions on behalf of the Owners.  Pursuant to Section 4.05 of the Trust
Agreement, the initial Owner has appointed the Administrator as its true and
lawful attorney-in-fact with respect to certain matters described in such Section
4.05.

 

2.             Records. 
The Administrator shall maintain appropriate books of account and
records relating to services performed hereunder, which books of account and
records shall be accessible for inspection by the Trustee and the Owners at any
time during normal business hours. The Administrator shall maintain or cause to
be maintained the books of the Trust on the basis of a fiscal year ending June 30,
using the accrual method of accounting, in accordance with generally accepted
accounting principles, and shall comply with the other requirements set forth
in Section 9.04 of the Trust Agreement.

 

3.             Compensation.  As compensation for the performance of the
Administrator’s obligations under this Agreement and as reimbursement for its
expenses related thereto, the Administrator shall be entitled to reimbursement
for all its expenses incurred in performing its obligations hereunder and any
other expenses incurred by the Administrator on behalf of the Trust by the
Trust in accordance with the terms and conditions of the Trust Agreement.  For the avoidance of doubt, Recoveries shall
not be available to reimburse the Administrator for its expenses hereunder.

 

4.             Additional Information to be Furnished.  The Administrator shall furnish to the
Trustee and the Owners from time to time such additional information regarding
the Trust Loans as the Trustee or the Owners shall reasonably request.

 

5.             Independence of the Administrator.  For all purposes of this Agreement, the
Administrator shall be an independent contractor and shall not be subject to
the supervision of the Trust, the Trustees, or the Owners with respect to the
manner in which it accomplishes the performance of its obligations
hereunder.  Unless expressly authorized
by the Trust, the Trustees, or the Owners, the Administrator shall have no
authority to act for or represent the Trust, the Trustees, or the Owners,
respectively, in any way other than as specified hereunder and shall not
otherwise be deemed an agent of the Trust, the Trustees, or the Owners.

 

6.             No Joint Venture. 
Nothing contained in this Agreement (a) shall constitute the
Administrator and any of the Trust, the Trustees, or any Owner as members of
any partnership, joint venture, association, syndicate, unincorporated business
or other separate entity, (b) shall be construed to impose any liability
as such on any of them, or (c) shall be deemed to confer on any of them
any express, implied or apparent authority to incur any obligation or liability
on behalf of the others.

 

7.             Other Activities of the Administrator.  Nothing herein shall prevent the
Administrator or its Affiliates from engaging in other businesses or, in its or
their sole discretion, from acting in a similar capacity as an administrator
for any other person or entity even though such person or entity may engage in
business activities similar to those of the Trust, the Trustees, or the Owners.

 

8.             Term of Agreement; Resignation and Removal of
Administrator.

 

(a)           This Agreement shall continue in
force until the termination of the Trust, upon which event this Agreement shall
automatically terminate.

 

(b)           Subject to Section 8(d) of
this Agreement, the Owners may remove the Administrator without cause by
providing the Administrator with at least 15 days’ prior written notice;
provided that the Owners simultaneously provide SunTrust with a copy of any
such notice under this Section 8(b).

 

3

 

(c)           Subject to Section 8(d) of
this Agreement, the Owners may remove the Administrator immediately upon
written notice of termination if any of the following events shall occur:

 

(i)            The
Administrator shall default in the performance of any of its duties under this
Agreement and, after written notice of such default, shall not cure such
default within ten days (or, if such default cannot be cured in such time, the
Administrator shall not give within ten days such assurance of cure as shall be
reasonably satisfactory to the Trustee);

 

(ii)           A
court having jurisdiction in the premises shall enter a decree or order for
relief, and such decree or order shall not have been vacated within 60 days,
with respect to any involuntary case commenced against the Administrator under
any applicable bankruptcy, insolvency or other similar law now or hereafter in
effect or shall appoint a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official for the Administrator or any substantial part
of its property or order the winding-up or liquidation of its affairs; or

 

(iii)          The
Administrator shall commence a voluntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, shall consent to
the entry of an order for relief in an involuntary case under any such law, or
shall consent to the appointment of a receiver, liquidator, assignee, trustee,
custodian, sequestrator or similar official for it or any substantial part of
its property, shall consent to the taking of possession by any such official of
any substantial part of its property, shall make any general assignment for the
benefit of its creditors or shall fail generally to pay its debts as they
become due;

 

provided that the Owners simultaneously provide SunTrust with a copy of any such
notice under this Section 8(c).  The
Administrator agrees that if any of the events specified in clauses (ii) or
(iii) of this Section 8(c) shall occur, it shall give written
notice thereof to the Trustee within two Business Days after the happening of
such event.

 

(d)           No removal of the Administrator
pursuant to this Section 8 shall be effective until (i) a successor
Administrator shall have been appointed by the Owners, on behalf of the Trust
and (ii) such successor Administrator shall have agreed in writing to be
bound by the terms of this Agreement in the same manner as the Administrator is
bound hereunder.

 

9.             Action upon Termination or Removal.  Promptly upon the effective date of
termination of this Agreement or the removal of the Administrator pursuant to Section 8
of this Agreement, the Administrator shall (a) be entitled to be paid by
the Trust in accordance with the terms and conditions of the Trust Agreement
all reimbursable expenses accruing to it to the date of such termination or
removal and (b) deliver to the successor Administrator all property and
documents of or relating to the Trust Loans then in the custody of the
Administrator.  In the event of the
removal of the Administrator pursuant to Sections 8(b) or (c) of this
Agreement, the Administrator, for a period of not less than 120 days following
notice of such removal, shall cooperate with the Trust and take all reasonable
steps requested to assist the Trust in making an orderly transfer of the duties
of the Administrator.

 

10.           Limitation of Liability of Trustee.  Notwithstanding anything contained herein to
the contrary, this Agreement has been executed by [U.S. Bank National
Association], not in its individual capacity but solely in its capacity as
Trustee of the Trust, and in no event shall [U.S. Bank National Association] in
its individual capacity or any Owner of the Trust have any liability for the
representations, warranties, covenants, agreements or other obligations of the
Trust hereunder, as to all of which recourse shall be had solely to the assets
of the Trust.  For all purposes of this
Agreement, in the performance of any duties or obligations of the Trustee or the
Trust hereunder, the Trustee shall be subject to, and entitled to the benefits
of, the terms and provisions of Articles IX, X and XI of the Trust Agreement.

 

4

 

11.           Indemnification.  The Administrator shall indemnify the Trust
and the Trustees (as such and in their individual capacities) and their
respective agents (each, an “Indemnified Person”) for, and hold them
harmless against, any losses, liability or expense, including reasonable
attorneys fees’ and expenses, obligations, damages, claims, actions, and suits
of any kind and nature whatsoever which may be imposed on, incurred by or
asserted at any time against the Indemnified Person in the absence of willful misconduct,
negligence or bad faith on the part of the Indemnified Person, arising out of
the willful misconduct, negligence or bad faith of the Administrator in the
performance of the Administrator’s duties contemplated by this Agreement; provided, however, that the Administrator shall not be required to indemnify an
Indemnified Person so long as the Administrator has acted pursuant to the
instructions of the Trust, the Trustee, or the Owners in accordance with
Sections 1(b) or 1(c) of this Agreement.

 

12.           Miscellaneous.

 

(a)           Amendments. This Agreement may
be amended only by a written instrument signed by the parties hereto; provided
that any amendment must be accompanied by the written consent of the Trustee
and the Owners.

 

(b)           Successors and Assigns.  This Agreement may be assigned by the
Administrator, without the consent of the Trustee or the Owners, to a
corporation or other organization that is a successor (by merger, consolidation
or purchase of assets) to the Administrator; provided that such successor
organization executes and delivers to the Trustee and the Owners an agreement
in which such corporation or other organization agrees to be bound hereunder in
the same manner as the Administrator is bound hereunder.  Subject to the foregoing, this Agreement
shall bind any such permitted successors or assigns of the parties hereto.

 

(c)           Notices.  Any notice, report or other communication
given hereunder shall be in writing and addressed as follows:

 

(i)                                     If to the Trust, to:

 

MG Student Loan Trust 2010-1

[c/o U.S. Bank National Association, as Trustee

One Federal Street

Boston, MA 02110

Attention: Corporate Trust Administration]

 

(ii)                                  If to the Administrator, to:

 

First Marblehead Data Services, Inc.

The Prudential Tower

800 Boylston Street, 34th Floor

Boston, MA 02199-8157

Attention:  Ms. Rosalyn Bonaventure

 

with a copy to:

 

The First Marblehead Corporation

The Prudential Tower

800 Boylston Street, 34th Floor

 

5

 

Boston, MA 02199-8157

Attention: Corporate Law Department

 

(iii)                               If to the Trustee, to:

 

[U.S. Bank National Association, as Trustee

One Federal Street

Boston,
MA 02110

Attention: Corporate Trust Administration]

 

If to the Owner, to:

 

The National Collegiate Funding II, LLC

c/o The First Marblehead Corporation

The Prudential Tower

800 Boylston Street, 34th Floor

Boston, MA 02199-8157

Attention: Corporate Law Department

 

or
to such other address as any party shall have provided to the other parties in
writing.  Any notice required to be in
writing hereunder shall be deemed given if such notice is mailed by certified
mail, postage prepaid, or hand-delivered to the address of such party as
provided above.

 

(d)           Governing
Law.  This Agreement shall be
governed by, and construed in accordance with, the laws of the State of New
York, without giving effect to conflicts of laws provisions thereof.

 

(e)           Headings.  The section headings hereof have been
inserted for convenience of reference only and shall not be construed to affect
the meaning, construction or effect of this Agreement.

 

(f)            Counterparts.  This Agreement may be executed in
counterparts, each of which when so executed shall together constitute but one
and the same agreement.

 

(g)           Severability.  Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

 

(h)           No
Petition.  The parties hereto will
not at any time institute against the Trust any bankruptcy proceeding under any
United States federal or state bankruptcy or similar law in connection with any
obligations of the Trust under any Trust Related Agreement.

 

[Remainder of page intentionally blank]

 

6

 

IN WITNESS WHEREOF, the parties have caused this Administration
Agreement to be duly executed and delivered as of the day and year first above
written.

 

	
   

  	
  MG STUDENT LOAN TRUST 2010-1

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  [U.S. Bank National Association], not in its individual 

  capacity but solely as Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  [U.S. BANK NATIONAL ASSOCIATION],

  
	
   

  	
  not in its individual capacity but solely as

  
	
   

  	
  Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  FIRST MARBLEHEAD DATA SERVICES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Rosalyn Bonaventure

  
	
   

  	
   

  	
  President

  

 

Administration Agreement

 

 

EXHIBIT A

POWER OF ATTORNEY

 

	
  STATE
  OF DELAWARE

  	
  )

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  )

  	
   

  	
   

  	
   

  	
   

  
	
  COUNTY
  OF NEW CASTLE 

  	
  )

  	
   

  	
   

  	
   

  	
   

  

 

KNOW
ALL MEN BY THESE PRESENTS, that MG Student Loan Trust 2010-1 (the “Trust”),
does hereby make, constitute and appoint First Marblehead Data Services, Inc.
as administrator under the Administration Agreement dated as of July     ,
2010 (the “Administration Agreement”), among the Trust; [U.S. Bank
National Association], as Trustee; and First Marblehead Data Services, Inc.,
as Administrator, as the same may be amended from time to time, as well as its
agents and attorneys, as Attorney-in-Fact to execute on behalf of the Trust all
such documents, reports, filings, instruments, certificates and opinions as it
shall be the duty of the Trust to prepare, file or deliver pursuant to the
Trust Related Agreements, including, without limitation, in connection with the
acquisition, servicing, management,
enforcement, collection or disposition of the Trust Loans and the
preparation, filing and audit of federal, state and local tax returns
pertaining to the Trust, and with full power to perform any and all acts
associated with such matters that the Trust could perform, including without
limitation, the right to distribute and receive confidential information,
defend and assert positions in response to audits, initiate and defend
litigation, and to execute waivers of restrictions on assessments of
deficiencies, consents to the extension of any statutory or regulatory time
limit, and settlements.

 

All
powers of attorney for these purposes heretofore filed or executed by the Trust
are hereby revoked.

 

Capitalized
terms that are used and not otherwise defined herein shall have the meanings
ascribed thereto in the Administration Agreement.

 

EXECUTED
as of July     , 2010.

 

	
   

  	
  MG STUDENT LOAN TRUST 2010-1

  
	
   

  	
   

  	
   

  
	
   

  	
  By:    [U.S. Bank National
  Association], not in its 

  individual capacity but solely as Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 

SCHEDULE A

 

Duties of the Trust or Trustee

Performed by the Administrator under the Trust Agreement

 

(A)                              Paying
to the Trustee its fees and expenses as are set forth in Section 11.01.

 

(B)                                Furnishing
documents to the Owners under Section 10.02.

 

(C)                                Filing a
Certificate of Termination of the Trust upon termination pursuant to
Section 12.01.

 

(D)                               Appointing
separate trustees under Section 13.02.

 

(E)                                 Obtaining
execution by the Owners of any amendment to the Trust Agreement thereunder.

 

(F)                                 To engage in
such activities as may be required for the acquisition, management, collection
or disposition of Trust Property.

 

(G)                                To open one or more bank
accounts on behalf of the Trust, to fund such accounts and to disburse amounts
from such accounts.

 

Duties of the Administrator under the Trust Agreement

 

(A)                              Providing for the
acquisition, management, collection or disposition of Trust Property.

 

(B)                                Providing written
instructions to the Trustee as required under Section 5.02.

 

(C)                                Filing tax returns, reports
and forms under Section 9.04.

 

(D)                               Interpreting
and applying the provisions set forth in Articles V, VII, VIII and XII
regarding application of funds, allocations of profit and loss and
distributions of Trust assets, to resolve any ambiguities that may result from
such application and to provide the Trustee, and the Owners with clarification
of any provision as may be necessary or appropriate.

 

 

EXHIBIT C3

Special Servicing Agreement

 

 

SPECIAL SERVICING AGREEMENT

 

This
Special Servicing Agreement, dated as of July        ,
2010 (this “Agreement”), is entered into by and among First Marblehead
Education Resources, Inc., a Delaware corporation having a place of
business at 800 Boylston St., 34th Floor,
Boston, Massachusetts 02199 (“FMER”), as the Special Servicer (together
with its successors and assigns, the “Special Servicer”); MG Student
Loan Trust 2010-1, a Delaware statutory trust (the “Trust”); and solely
for purposes of Sections 2(B)(v), 2(B)(vi), 5, 7, 18(A) and 18(G),
SunTrust Bank, a Georgia state-chartered banking corporation having an office
located at 1001 Semmes Avenue, Richmond, Virginia 23224 (“SunTrust Bank”).

 

WHEREAS,
the Special Servicer, and other subservicing agents appointed from time to time
by the Special Servicer, as provided herein, are experts in the management of
student loan collections; and

 

WHEREAS,
the Trust is appointing the Special Servicer as a servicer under the Trust
Agreement (as defined below), to perform certain limited duties with respect to
student loans owned by the Trust (“Trust Loans”).

 

NOW,
THEREFORE, in consideration of the promises and the mutual covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:

 

Section 1.               Definitions.  Capitalized terms used and not
otherwise defined herein shall have the meanings assigned to such terms in the
Loan Program Agreement (as defined below) or Trust Agreement, as applicable.
For purposes of this Agreement, the following capitalized terms shall have the
respective meanings set forth below:

 

“Loan
Program Agreement” means that certain Loan Program Agreement executed April 20,
2010, by and among FMER, The First Marblehead Corporation, and SunTrust Bank.

 

“Trust
Agreement” means that certain Trust Agreement dated as of July       ,
2010 by and among The National Collegiate Funding II, LLC, [U.S. Bank National
Association], as Trustee, [U.S. Bank Trust National Association], as Resident
Trustee, and, with respect to Sections 2.03, 2.05(b), 4.02(d), 9.01, 9.06,
10.01(ii), 12.01 and 13.01 and Articles V and VI only, SunTrust Bank.

 

“Trust
Loan” means (i) any Charged Off Loan and (ii) any Purchased Loan,
in each case which has been assigned to the Trust from time to time pursuant to
the Loan Program Agreement.

 

Section 2.               Appointment;
Special Servicing Duties.

 

A.            Appointment.  The Trust hereby hires, designates and
appoints the Special Servicer to perform the Special Services (as defined
below), and the Special Servicer accepts such appointment and agrees to perform
the Special Services with respect to the Trust Loans, in accordance with the
terms of this Agreement and the Trust Agreement.

 

B.            Special Services.  The Special Servicer shall take such actions
as it shall deem reasonably necessary or appropriate to administer and oversee
the enforcement and collection of Trust Loans to maximize the collection of amounts
payable on the Trust Loans (collectively, the “Special Services”),
including without limitation:

 

(i)                                     Retaining and entering into agreements with licensed collection agencies
and other legally authorized persons (the “Subservicers”) engaged in
providing 

 

 

default collection
services, in form and substance satisfactory to the Special Servicer, pursuant
to which the Subservicers, for and on behalf of the Trust, will contact
borrowers with respect to the Trust Loans, and seek enforcement and collection
of such Trust Loans;

 

(ii)                                  At the sole discretion of the Special Servicer, (a) performing
periodic audits of Subservicers for compliance and performance reviews and (b) providing
oversight of the activities of Subservicers with regard to account management,
litigation assistance, and/or settlement strategies;

 

(iii)                               Replacing any Subservicer who, in the sole judgment of the Special
Servicer, is deemed to be deficient or negligent in performing the duties
outlined in its subservicing agreement with the Special Servicer;

 

(iv)                              Requiring, in the applicable subservicing agreement, the Subservicers to
provide certain monthly reports to the Special Servicer with respect to Trust
Loans serviced by such Subservicer, in each case, in form and substance
satisfactory to the Special Servicer;

 

(v)                                 Remitting and causing each Subservicer to remit weekly to the FMER
Collection Account (as defined below), Recoveries collected on all Charged Off
Loans serviced by such Subservicer for the Trust;

 

(vi)                              Establishing and maintaining an account or accounts (“FMER Collection
Account”) for the deposit by each Subservicer of Recoveries on all Charged
Off Loans serviced by each Subservicer and depositing on a [weekly] basis in
the Participation Account all Recoveries so deposited in the FMER Collection
Account;

 

(vii)                           Remitting and causing each Subservicer to remit weekly to the Purchased
Loan Collection Account (as defined below), net collections collected on all
Purchased Loans serviced by such Subservicer for the Trust;

 

(viii)                        Maintaining the [“Third Party” account currently at U.S. Bank] (“Purchased
Loan Collection Account”) for the deposit by each Subservicer of net
collections on all Purchased Loans serviced by each Subservicer and depositing
on a [monthly] basis in the [NCF II Account] all net collections so deposited
in the Purchased Loan Collection Account;

 

(ix)                                Reviewing default notification packages (which packages shall contain the
information, reports and documents required in the Servicing Guidelines)
prepared by the Servicer with respect to Trust Loans to confirm, on the basis
of such review, that the Servicer has complied with the Servicing Guidelines in
servicing the Trust Loans;

 

(x)                                   Receiving reports from Subservicers related to payments with respect to
Trust Loans and updating records with respect to Trust Loans as interest and
other charges accrue and amounts are collected;

 

(xi)                                Transferring all collection activities to Subservicers, provided that the Special Servicer shall not be required to
transfer such collection activities if the 

 

2

 

Administrator determines
that it is likely that collections would not be maximized on such Trust Loans
if the collection activities were transferred to Subservicers;

 

(xii)                             Retaining counsel on behalf of the Trust (whether directly or through
collection agencies) to further pursue enforcement and collection of Trust
Loans, including through litigation and bankruptcy or probate proceedings; and

 

(xiii)                          Negotiating any settlement or compromise of any claim with respect to a
Trust Loan, which in the reasonable judgment of the Special Servicer or the
applicable Subservicer is more likely to produce greater proceeds of collection
than by virtue of a forbearance, payment arrangement or other accommodation
with the Borrower.

 

Section 3.               Subservicers.    In
carrying out its duties under this Agreement, the Special Servicer may retain
and employ Subservicers to perform any of the Special Services, and to commence
any actions or proceedings the Subservicers deem necessary or appropriate in
connection with such enforcement or collection efforts on Trust Loans.

 

Section 4.               Servicing
Fee.  As compensation for the performance of the Special Servicer’s obligations
under this Agreement and as reimbursement for its expenses related thereto, the
Special Servicer shall not receive any fee under this Agreement, but rather
shall receive only the fee set forth in Section 6.4.1 of the Loan Program
Agreement, paid to the Servicer and then remitted to FMER by the Servicer.

 

Section 5.               Term of Agreement; Resignation and Removal of
Special Servicer.

 

A.            This Agreement shall continue in
force until the principal and interest balance of each Trust Loan has been
fully paid or otherwise discharged, whether by settlement or other means, upon
which event this Agreement shall automatically terminate.

 

B.            Subject to Section 5(C) of
this Agreement, the Trustee shall remove the Special Servicer by delivering to
the Special Servicer written notice of termination if any of the following
events shall occur:

 

(i)                                     The Special Servicer shall default in the performance of any of its
duties under this Agreement and, after written notice of such default, shall
not cure such default within 45 days (or such longer period as shall be reasonably
satisfactory to the Trustee);

 

(ii)                                  A court of competent jurisdiction shall enter a decree or order for
relief, and such decree or order shall not have been vacated within 60 days,
with respect to any involuntary case commenced against the Special Servicer
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect or shall appoint a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official for the Special Servicer
or any substantial part of its property or order the winding-up or liquidation
of its affairs; or

 

(iii)                               The Special Servicer shall commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, shall
consent to the entry of an order for relief in an involuntary case under any
such 

 

3

 

law, or shall consent to
the appointment of a receiver, liquidator, assignee, trustee, custodian,
sequestrator or similar official for it or any substantial part of its
property, shall consent to the taking of possession by any such official of any
substantial part of its property, shall make any general assignment for the
benefit of its creditors or shall fail generally to pay its debts as they become
due.

 

The Special Servicer agrees that if any of the
events specified in clauses (ii) or (iii) of this Section 5(B) shall
occur, it shall give written notice thereof to the Trustee, within five (5) Business
Days after the happening of such event.

 

C.            No removal of the Special Servicer
pursuant to this Section 5 shall be effective until a Successor Special
Servicer (as defined below) shall have agreed in writing to be bound by the
terms of this Agreement or a substantially similar agreement providing for the
collection of Trust Loans.

 

Section 6.               Action
upon Termination or Removal. 
Promptly upon the effective date of termination of this Agreement or
removal of the Special Servicer pursuant to Section 5 of this Agreement,
the Special Servicer shall forthwith upon such termination pursuant to Section 5
of this Agreement deliver to the Trust or its designee, all property and
documents of or relating to the Trust Loans then in the custody of the Special
Servicer pursuant to this Agreement.  In
the event of the removal of the Special Servicer pursuant to Section 5 of
this Agreement, the Special Servicer, for a period of not less than 120 days
following notice of such removal, shall cooperate with the Trust and take all
reasonable steps requested to assist the Trust in making an orderly transfer of
the duties of the Special Servicer to the applicable Successor Special
Servicer, including, without limitation, remitting or causing the Subservicers
to remit net collections received on Trust Loans to the FMER Collection Account
or the Purchased Loan Collection Account, as applicable.

 

Section 7.               Successor
Special Servicer.

 

A.            In the event of the removal of the
Special Servicer pursuant to Section 5 of this Agreement, SunTrust Bank
shall have the right in its discretion to appoint a successor Special Servicer
(“Charged Off Loans Successor Special Servicer”) to assume the rights,
duties and obligations of the Special Servicer and/or the Subservicers solely
related to the Charged Off Loans under this Agreement.

 

B.            In the event of the removal of the
Special Servicer pursuant to Section 5 of this Agreement, the Trustee, at
the direction of the Owners, shall have the right in its discretion to appoint
a successor Special Servicer (“Purchased Loans Successor Special Servicer”
and together with the Charged Off Loans Successor Special Servicer, the “Successor
Special Servicer”) to assume the rights, duties and obligations of the
Special Servicer and/or the Subservicers solely related to the Purchased Loans
under this Agreement; provided that the Purchased Loans Successor Special
Servicer and the Trust shall enter into a new agreement for the servicing of
the Purchased Loans, which such agreement shall contain terms no less favorable
to the Trust than those contained in this Agreement (the “Purchased Loans
Servicing Agreement”).

 

C.            In order to facilitate the
performance of the applicable Successor Special Servicer’s duties under this
Agreement or the Purchased Loans Servicing Agreement, as the case may be, for a
period of not less than 120 days following the removal of the Special Servicer
pursuant to Section 5 of this Agreement the Special Servicer will provide
to the applicable Successor Special Servicer reasonable access, during normal
business hours and upon reasonable prior notice (and subject to standard
confidentiality restrictions), to all files, systems and employees of the
Special Servicer then used in the provision of the Special Services with
respect to the Trust Loans.  Without
limiting the generality of the foregoing, the Special Servicer agrees to
cooperate with the applicable Successor Special Servicer (or its 

 

4

 

designee) to facilitate
the orderly transfer of its duties under this Agreement, including without
limitation, notifying the Subservicers, collection agents and other appropriate
parties of the transfer of the Special Servicer function and providing (or
causing the Subservicers to provide) the applicable Successor Special Servicer
with all documents and records in electronic or other form reasonably requested
by the applicable Successor Special Servicer to enable the applicable Successor
Special Servicer or its designee to assume the Special Servicer’s functions
under this Agreement and shall, as applicable, (i) deposit into the
Participation Account all Recoveries deposited into the FMER Collection Account
during such period and (ii) deposit into the [NCF II Account] all net
collections deposited into the Purchased Loan Collection Account during such
period.

 

D.            In the event that a Successor
Special Servicer begins performing the Special Services, it shall be authorized
to accept and rely on all of the accounting, records (including computer
records) and work of the Special Servicer or any Subservicer (collectively, the
“Predecessor Work Product”) without any audit or other examination
thereof, and it shall have no duty, responsibility, obligation or liability for
the acts and omissions of the Special Servicer or of Subservicers.  If any error, inaccuracy, omission or
incorrect or non-standard practice or procedure (collectively, “Errors”)
exist in any Predecessor Work Product and such Errors make it materially more
difficult to service or would cause or materially contribute to the Successor
Special Servicer making or continuing any Errors (collectively, “Continued
Errors”), the Successor Special Servicer shall have no duty,
responsibility, obligation or liability for such Continued Errors, which shall
be the responsibility of Special Servicer. 
In performing the obligations of the Special Servicer under this
Agreement, the Successor Special Servicer shall be entitled to rely
conclusively on the reports and other information which it may receive from a
Subservicer, including as to the accuracy and completeness thereof.

 

E.             Out of pocket costs and expenses
(including the fees of its counsel and agents) incurred by the Successor
Special Servicer in connection with the transition of services hereunder during
the 120 day period following notice of the removal of FMER as Special Servicer
shall be borne by FMER.  To the extent
that such expenses are not paid by FMER (but without limiting or discharging
its liability therefor), such expenses shall be paid by FMDS, as Administrator,
who may seek reimbursement from the Trust.

 

Section 8.               Representations
and Warranties.

 

A.            The Special Servicer hereby makes
the following representations and warranties to the Trust:

 

(i)                                     Organization and Good Standing.  The Special Servicer is an entity duly
organized, validly existing, and in good standing under the laws of its state
of incorporation or formation or the laws of the United States, and is in
compliance with the laws of each state in which any of its property is located
to the extent necessary to perform its obligations hereunder.

 

(ii)                                  No Violation.  Neither the execution and delivery by the
Special Servicer of this Agreement, nor the consummation by it of the
transactions contemplated hereby, nor the performance of and compliance by the
Special Servicer with the provisions hereof, will conflict with or result in a
breach or violation of, or constitute a default (or an event which, with notice
or the lapse of time, or both, would constitute a default) under, the
organizational documents (its articles of incorporation or charter or by-laws)
of the Special Servicer, any of the provisions of any judgment, decree, demand,
or order of any federal, state, or local court binding on the Special Servicer,
or any of the provisions of any indenture, mortgage, contract, instrument, or
other document to which the Special Servicer 

 

5

 

is a party or by which it
is bound, or result in the creation or imposition of any lien, charge, or
encumbrance upon any of its properties pursuant to the terms of any indenture,
mortgage, contract, instrument, or other document. Neither the execution and
delivery by the Special Servicer of this Agreement, nor the consummation by it
of the transactions contemplated hereby, nor the performance of and compliance
by the Special Servicer with the provisions hereof, will, to its knowledge,
result in a breach of any law, rule or regulation of any federal, state or
local governmental or regulatory authority binding on the Special
Servicer.  The Special Servicer is not
otherwise in violation of any law, rule, regulation, judgment, decree, demand,
or order (of any federal, state or local governmental or regulatory authority
or court), which violation, in the Special Servicer’s good faith and reasonable
judgment, is likely to affect materially and adversely either its ability to
perform its obligations hereunder, or the financial condition of the Special
Servicer.

 

(iii)                               Authorization and Enforceability.  The execution and delivery by the Special
Servicer of this Agreement, the consummation of the transactions contemplated
hereby, and the performance and compliance by the Special Servicer with the
terms hereof are within the powers of the Special Servicer, and have been duly
authorized by all necessary action on the part of the Special Servicer. All
organizational resolutions and consents necessary for the Special Servicer to
enter into and consummate all transactions contemplated hereby have been
obtained. This Agreement has been duly executed and delivered by the Special
Servicer and constitutes the legal, valid and binding obligation of the Special
Servicer, enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium, and other
similar laws affecting creditors’ rights generally, and to general principles
of equity, regardless of whether such enforcement is considered in a proceeding
in equity or at law. The Special Servicer has not failed to obtain any consent,
approval, authorization, or order of, or failed to cause any registration or
qualification with, any court or regulatory authority or other governmental
body having jurisdiction over the Special Servicer, which consent, approval,
authorization, order, registration, or qualification is required for, and the
absence of which would materially adversely affect, the legal and valid
execution, delivery, and performance of this Agreement by the Special Servicer.

 

(iv)                              Approvals and Permits.  The Special Servicer possesses such
certificates, authorizations, licenses, and permits issued by the appropriate
state, federal, and foreign regulatory agencies or bodies necessary to conduct
the business now operated by it, and it has not received any notice of
proceedings relating to the revocation or modification of any such certificate,
authorization, or permit which, singly or in the aggregate, if the subject of
an unfavorable decision, ruling, or finding, would materially and adversely
affect the ability of the Special Servicer to perform its obligations
hereunder.

 

(v)                                 No Litigation.  No litigation is pending or, to the best of
the Special Servicer’s knowledge, threatened against it, which, if determined
adversely to the Special Servicer would prohibit the Special Servicer from
entering into this Agreement or, in the good faith and reasonable judgment of
the Special Servicer, is likely to materially and adversely affect either its
ability to perform its obligations hereunder or the financial condition of the
Special Servicer.

 

6

 

Section 9.               Indemnification.  The Special Servicer will indemnify the
Trust, the Trustee, and their respective officers, directors, employees and
agents for, and hold them harmless against, any losses, liability or expense,
including reasonable attorneys’ fees and expenses, incurred in the absence of
willful misconduct, negligence or bad faith on the part of the Trust, the
Trustee and their respective agents, arising out of the willful misconduct,
negligence or bad faith of the Special Servicer (or its agents) in the
performance of the Special Servicer’s duties contemplated by this Agreement; provided that neither the Special Servicer nor any of its
directors, officers, employees or agents shall be liable for any action taken
or for refraining from the taking of any action pursuant to instructions or
directions from the Administrator or the Trustee or in accordance with this
Agreement.

 

Section 10.             Records;
Inspection.  The Special Servicer shall maintain appropriate books of account and
records relating to services performed hereunder, which books of account and
records shall be accessible for inspection by the Trustee at any time during
normal business hours.  The Special
Servicer hereby grants the Trustee the right to perform ongoing due diligence
review of the Special Servicer’s activities hereunder at the sole cost and
expense of the Special Servicer; provided that
such due diligence be conducted in a reasonable manner, convenient to the
Special Servicer.

 

Section 11.             Reporting;
Additional Information to be Furnished. 
On the tenth (10th) Business Day
after the end of each calendar month, the Special Servicer shall furnish the
Administrator on behalf of the Trust, an electronically transferred data file
containing a monthly collection report regarding
the Trust Loans in a form
satisfactory to the Administrator.  The
Special Servicer shall furnish to the Administrator on behalf of the Trust from
time to time such additional information regarding the Trust Loans as the
Administrator on behalf of the Trust shall reasonably request.

 

Section 12.             Subservicing
Agreements.  The Special Servicer
will cause each subservicing agreement with a Subservicer to contain provisions
consistent with this Agreement, including provisions requiring the applicable
Subservicer to maintain adequate records and procedures with respect to a Trust
Loan and its performance.  Each
subservicing agreement shall be terminable by the Special Servicer (including
for the avoidance of doubt, the Successor Special Servicer acting as successor
Special Servicer) upon 30 days written notice, and shall provide that any
Successor Special Servicer shall succeed to the Special Servicer
thereunder.  The Special Servicer shall
promptly provide the Trustee copies of all existing subservicing agreements
with a Subservicer upon written request.

 

Section 13.             Amendments.  This
Agreement may be amended from time to time by the parties hereto, provided that
any amendment must be accompanied by the written consent of the Administrator.

 

Section 14.             Independence of the Special Servicer.  For
all purposes of this Agreement, the Special Servicer shall be an independent
contractor and shall not be subject to the supervision of the Trust with
respect to the manner in which it accomplishes the performance of its obligations
hereunder.  Unless expressly authorized
by the Trust, the Special Servicer shall have no authority to act for or
represent the Trust in any way other than as specified hereunder.

 

Section 15.             No Joint Venture. 
Nothing contained in this Agreement (A) shall constitute the Special
Servicer and the Trust as members of any partnership, joint venture,
association, syndicate, unincorporated business or other separate entity, (B)
shall be construed to impose any liability as such on any of them, or (C) shall
be deemed to confer on any of them any express, implied or apparent authority
to incur any obligation or liability on behalf of the other.

 

Section 16.             Other Activities of the Special Servicer. 
Nothing herein shall prevent the Special Servicer or its Affiliates from
engaging in other businesses or, in its or their sole discretion, from acting
in 

 

7

 

a similar capacity as servicer for any other person
or entity even though such person or entity may engage in business activities
similar to those of the Trust.

 

Section 17.             Notices.  Any notice, report or other communication
given hereunder shall be in writing and addressed as follows:

 

If to the Special
Servicer, to:

 

First
Marblehead Education Resources, Inc.

The
Prudential Tower

800
Boylston Street – 34th Floor

Boston, MA 02199-8157

Attention: Ms. Rosalyn Bonaventure

 

With
a copy to:

 

The
First Marblehead Corporation

The
Prudential Tower

800
Boylston Street - 34th Floor

Boston,
MA 02199-8157

Attention:
Corporate Law Department

 

If to the Trust to:

 

MG
Student Loan Trust 2010-1

[c/o
U.S. Bank National Association, as Trustee

One
Federal Street

Boston,
MA 02110

Attention:
Corporate Trust Administration]

 

With
a copy to:

 

First
Marblehead Data Services, Inc.

The Prudential Tower

800 Boylston Street - 34th Floor

Boston, MA 02199-8157

Attention:  Ms. Rosalyn Bonaventure

 

Or
to such other address as any party shall have provided to the other parties in
writing.  Any notice required to be in
writing hereunder shall be deemed given if such notice is mailed by certified
mail, postage prepaid, sent by overnight courier for next-day delivery or
hand-delivered to the address of such party as provided above.

 

Section 18.             Miscellaneous.

 

A.            Successors and Assigns.  This Agreement may not be assigned by the
Special Servicer unless such assignment is previously consented to in writing
by the Trustee and SunTrust Bank; provided that, if the assignment of this
Agreement relates solely to matters related to Purchased Loans, the consent of
SunTrust Bank shall not be required.  An
assignment with such consent, if accepted by the assignee, shall bind the
assignee hereunder in the same manner as the Special Servicer is bound
hereunder.  Notwithstanding the
foregoing, this Agreement may be assigned by the Special Servicer, without the 

 

8

 

consent of the Trustee or SunTrust Bank to a
corporation or other organization that is a successor (by merger, consolidation
or purchase of assets) to the Special Servicer; provided that such successor organization executes
and delivers to the Trustee and the other parties hereto an agreement in which
such corporation or other organization agrees to be bound hereunder in the same
manner as the Special Servicer is bound hereunder.  Subject to the foregoing, this Agreement
shall bind any such permitted successors or assigns of the parties hereto.

 

B.            Governing Law.  This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, without giving
effect to conflicts of laws provisions thereof.

 

C.            Headings.  The section headings hereof have been
inserted for convenience of reference only and shall not be construed to affect
the meaning, construction or effect of this Agreement.

 

D.            Counterparts.  This Agreement may be executed in
counterparts, each of which when so executed shall together constitute but one
and the same agreement.

 

E.             Severability.  Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

 

F.             Limitation of Liability of
Trustee.  Notwithstanding anything
contained herein to the contrary, this instrument has been executed by [U.S.
Bank National Association], not in its individual capacity but solely in its capacity
as Trustee of the Trust, and in no event shall [U.S. Bank National Association]
in its individual capacity or any Owner of the Trust have any liability for the
representations, warranties, covenants, agreements or other obligations of the
Trust hereunder, as to all of which recourse shall be had solely to the assets
of the Trust.  For all purposes of this
Agreement, in the performance of any duties or obligations of the Trust
hereunder, the Trustee shall be subject to, and entitled to the benefits of,
the terms and provisions of Articles IX and X of the Trust Agreement.

 

G.            Third Party Beneficiary.  The parties hereto acknowledge that SunTrust
Bank is a third party beneficiary hereof and is entitled to enforce their
respective rights hereunder as if actually a party hereto.

 

H.            No Petition.  The parties hereto will not at any time
institute against the Trust any bankruptcy proceeding under any United States
federal or state bankruptcy or similar law in connection with any obligations
of the Trust.

 

[SIGNATURE PAGE FOLLOWS]

 

9

 

IN
WITNESS WHEREOF, the parties hereto have caused this Special Servicing
Agreement to be duly executed by their respective officers hereunto duly
authorized, as of the day and year first above written.

 

	
   

  	
  FIRST
  MARBLEHEAD EDUCATION 

  RESOURCES,
  INC., as the Special Servicer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MG
  STUDENT LOAN TRUST 2010-1

  
	
   

  	
   

  
	
   

  	
  By: [U.S. Bank National Association], not in its 

  individual capacity but solely as Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  FOR
  PURPOSES OF SECTIONS 2(B)(v), 

  2(B)(vi),
  5, 7, 18(A) and 18(G):

  
	
   

  	
   

  	
   

  
	
   

  	
  SUNTRUST
  BANK

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ACKNOWLEDGED
  AND CONFIRMED:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  FIRST
  MARBLEHEAD DATA SERVICES, 

  INC., as Administrator

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 

EXHIBIT D1

TransUnion Addendum

 

 

TransUnion Addendum

 

AGENT ADDENDUM TO THE TRANSUNION
MASTER SERVICES

AGREEMENT FOR CONSUMER REPORTING
AND ANCILLARY SERVICES

 

This Agent Addendum (“Addendum”), effective the 15th day of July, 2010 (the “Effective Date”),
by and between Trans Union LLC, with its principal place of business located at
555 West Adams, Chicago, Illinois 60661 (“TransUnion”), SunTrust Bank,
with its principal place of business located at 303 Peachtree Street, Atlanta,
GA 30308 (“SUBSCRIBER”), and First Marblehead Education Resources, Inc.,
with its principal place of business located at One Cabot Road, Medford,
Massachusetts 02155 (“Agent”), is meant to modify the terms of the
Master Agreement for Consumer Reporting and Ancillary Services entered between
TransUnion and Subscriber on or about August 26, 2003 (the “MSA”).

 

RECITALS

 

WHEREAS, SUBSCRIBER has entered into an agreement with
Agent for the purpose of conducing the project indicated on the attached
Schedule A (the “Project”);

 

WHEREAS, the Project requires TransUnion to disclose
Services and Services Information directly to Agent on behalf of SUBSCRIBER;

 

WHEREAS, SUBSCRIBER desires TransUnion disclose such
Services and Services Information directly to Agent, and TransUnion has agreed
to such disclosure, subject to the terms contained in both the MSA and this
Addendum; and,

 

WHEREAS, SUBSCRIBER desires that TransUnion invoice Agent
for the Services and Services Information disclosed to Agent as more fully
explained herein.

 

NOW, THEREFORE, in exchange for the mutual promises and
covenants contained herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto agree
as follows:

 

1.               The forgoing Recitals are
hereby incorporated by reference as a material part of this Agreement.

 

2.               Capitalized terms not
defined herein shall have the definition ascribed in the MSA.

 

3.               SUBSCRIBER hereby appoints
Agent its agent with all necessary authority to disclose to, and, request and
receive from, TransUnion, Services or Services Information.  Moreover, SUBSCRIBER hereby authorizes
TransUnion to disclose Services and Services information to Agent.

 

4.               SUBSCRIBER hereby represents
to TransUnion that it has entered into a written agreement with Agent
containing obligations and restrictions consistent with its obligations and
restrictions under the MSA.  SUBSCRIBER
further agrees to enforce such obligations and restrictions against Agent to
the satisfaction of TransUnion, and to immediately notify TransUnion upon the
discovery of any violation of such obligations and restrictions by Agent.  In the event SUBSCRIBER fails to enforce said
obligations and restrictions to TransUnion’s satisfaction, SUBSCRIBER hereby
agrees to assign to TransUnion all such enforcement rights against Agent.

 

5.               TransUnion, subject to the
terms of the MSA and this Addendum, agrees to: 1) disclose Services and
Services Information to Agent on behalf of SUBSCRIBER; and, 2) allow Agent to
access Services and Services Information on behalf of Subscriber.

 

 

6.               Agent certifies that it will
request and use any information provided as part of the TransUnion services
pursuant to this Addendum in compliance with the terms and conditions of the
MSA and only on behalf of SUBSCRIBER one-time and only for the specific
permissible purpose certified by SUBSCRIBER at the time of its request.  Agent further certifies that it will limit the
disclosure of Services and Services Information to those individuals inside its
organization with a “need to know”, and that it will not disclose such
information to any third party other than the SUBSCRIBER.

 

7.               SUBSCRIBER and Agent shall
at all times be responsible for compliance with, and any violation of, the
terms, certifications, obligations and restrictions as set forth in the MSA
with respect to Services and/or Services Information disclosed to Agent,
including, but not limited to, those terms related to compliance with laws and
security.  Moreover, and without regard
to any cap on liability set forth in the MSA, SUBSCRIBER and Agent shall
jointly and severally defend, indemnify and hold TransUnion harmless from and
against any and all claims, expenses, costs, damages, settlements, judgments or
awards, including attorney’s fees, directly or indirectly resulting from, or
alleged to have directly or indirectly resulted from, disclosure hereunder.

 

8.               SUBSCRIBER authorizes, and
TransUnion agrees, that for any Services and/or Services Information accessed
by its Agent, TransUnion will invoice SUBSCRIBER care-of
Agent, at a rate previously agreed upon by TransUnion and Agent, at the
following address One Cabot Road , Medford, Massachusetts 02155, which may be
changed upon written notice to TransUnion in accordance with Paragraph 11.  Agent shall remit to TransUnion payment to
TransUnion Invoice within thirty (30) days of the invoice date, regardless
whether or not it has collected such payment from SUBSCRIBER.  Without limiting any of TransUnion’s remedies
for non payment or late payment of invoices, invoices which are not paid by
Agent within sixty (60) days of the invoice date shall be subject to a late
charge of one and one-half percent (1.5%) per month (18% per year) or the
maximum allowed by law, whichever is less. 
If collection efforts are required, Agent shall pay all costs of
collection, including reasonable attorneys’ fees.

 

9.               Notwithstanding the
forgoing, SUBSCRIBER, in accordance with the terms of the MSA, shall remain
responsible for payment of any unpaid or untimely paid invoices, as well as any
fees associated therewith, submitted to SUBSCRIBER care-of
Agent.

 

10.         Agent recognizes the
confidential nature of the information contained in the TransUnion
invoice(s).  Agent shall keep all
information in any way related to the TransUnion invoice(s), whether received
from either TransUnion or SUBSCRIBER, in confidence and shall not use such
information except for purposes of this Addendum, nor disclose such information
to any person or persons outside of its organization.  Moreover, Agent shall limit the disclosure of
such information inside its organization to employees having a need to know who
are subject to written obligations of confidentiality substantially similar to
those contained herein.  Furthermore, no
information related to the TransUnion invoice(s), whether received from
TransUnion or SUBSCRIBER, shall be copied or duplicated in any form or manner
except as necessary to carry out the purpose of this Addendum.

 

11.         All notices and
correspondence required under the Addendum shall be sent to the Parties at the
following addresses.  Either party may
change such name and address by notice to the other in accordance herewith.  Any such change shall take effect immediately
upon receipt of such notice.

 

2

 

	
  If to TransUnion:

  TransUnion LLC

  555 West Adams

  Chicago, IL 60661

  Attn:
  General Counsel

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  If to SunTrust:

  SunTrust Bank

  1001 Semmes Avenue

  Mail Code CS-RVW-7900

  Richmond, VA 23224

  Attn:  Mark Smith, Executive
  Vice President

  	
   

  	
  With a copy to:

  SunTrust Bank

  Legal Department

  303 Peachtree St., NE – 36th Floor

  Atlanta,
  GA 30308

  
	
   

  	
   

  	
   

  
	
  If to FMER:

  First Marblehead Education Resources, Inc.

  One Cabot Road

  Medford, MA 02155

  Attn:  Managing Director

  	
   

  	
  With a copy to:

  The First Marblehead Corporation

  Legal Department

  800 Boylston Street, 34th Floor

  Boston,
  MA 02199-8157

  

 

12.         All terms of the MSA are
incorporated into this Addendum and are expressly applicable to all orders and
payments hereunder.  In the event of a
conflict between any of the terms of this Addendum and those of the MSA, the
terms of this Addendum shall govern.  The
remaining terms of the MSA shall at all times remain in full force and effect.

 

13.         This Addendum shall be
coterminous with the MSA unless earlier terminated by SUBSCRIBER in accordance
with the termination provisions contained in the MSA or by TransUnion upon
written notice to SUBSCRIBER.

 

[Signatures appear on next page]

 

3

 

IN WITNESS WHEREOF, the parties, intending to
be legally bound, have caused this Addendum to be executed by their duly
authorized representatives as of the Effective Date.

 

 

	
  TransUnion LLC

  	
   

  	
  SunTrust
  Bank

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  Steve Sassaman

  	
   

  	
  By:

  	
  /s/
  Joe McDonald

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Steve
  Sassaman, Executive Vice President

  	
   

  	
   

  	
  Joe
  McDonald, First Vice-President

  
	
   

  	
  Name
  and Title of Signer

  	
   

  	
   

  	
  Name
  and Title of Signer

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  As
  of 7/15/10

  	
   

  	
   

  	
  July
  15, 2010

  
	
   

  	
  Date
  Signed

  	
   

  	
   

  	
  Date
  Signed

  

 

	
   

  	
   

  	
   

  
	
  First Marblehead Education Resources,
  Inc.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  Michael Plunkett

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Michael
  Plunkett, Managing Director

  	
   

  	
   

  
	
   

  	
  Name
  and Title of Signer

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  28
  July 2010

  	
   

  	
   

  
	
   

  	
  Date
  Signed

  	
   

  	
   

  

 

4

 

Schedule A

 

Project
Description: Custom Choice Loansm Student Loan
Origination

 

All
SUBSCRIBER orders placed hereunder shall be made under the following TransUnion
Subscriber Code: [**].

 

5

 

EXHIBIT D2

TransUnion FICO Addendum

 

 

AGENT ADDENDUM

 

AGENT SERVICE ADDENDUM TO THE
FICO SCORE SERVICES AGREEMENT

 

This Agent Service Addendum (the “Addendum”), effective the 15th day of July, 2010 (the “Effective Date”),
by and between Trans Union LLC, with its principal place of business located at
555 West Adams, Chicago, Illinois 60661 (“TransUnion”), Fair Isaac
Corporation, with its principal place of business located at 901 Marquette
Avenue Suite 3200 Minneapolis, MN 55402 (“FICO”), SunTrust Bank, with
a place of business located at 1001 Semmes Avenue, Richmond, Virginia 23224 (“SUBSCRIBER”),
and First Marblehead Education Resources, Inc. with its principal place of
business located at One Cabot Road, Medford, Massachusetts 02155 (“Agent”),
and is intended to modify the terms of the Agreement for Fair Isaac Score
Services entered between TransUnion, FICO and SUBSCRIBER on or about July 15th, 2010 (the “FICO
Agreement”) as more fully explained herein.

 

RECITALS

 

WHEREAS, SUBSCRIBER has entered into an agreement with
Agent for the purpose of conducing the project indicated on the attached
Schedule A (the “Project”);

 

WHEREAS, the Project requires TransUnion to disclose FICO
Score Services directly to Agent on behalf of SUBSCRIBER;

 

WHEREAS, SUBSCRIBER desires TransUnion disclose such FICO
Score Services directly to Agent, and TransUnion and FICO have agreed to such
disclosure, subject to the terms contained in both the FICO Agreement and this
Addendum; and,

 

WHEREAS, SUBSCRIBER desires that TransUnion invoice Agent
for the FICO Score Services disclosed to Agent as more fully explained herein.

 

NOW, THEREFORE, in exchange for the mutual promises and
covenants contained herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:

 

1.               The forgoing Recitals are
hereby incorporated by reference as a material part of this Agreement.

 

2.               Capitalized terms not
defined herein shall have the definition ascribed in the FICO AGREEMENT.

 

3.               SUBSCRIBER hereby appoints
Agent its agent with all necessary authority to request and receive from
TransUnion, FICO Score Services. Moreover, SUBSCRIBER hereby authorizes
TransUnion to disclose FICO Score Services to Agent.

 

4.               SUBSCRIBER shall at all
times be responsible and ensure Agent’s compliance with the terms and
conditions of the FICO AGREEMENT. Additionally SUBSCRIBER hereby represents to
TransUnion and FICO that it has entered into a written agreement with Agent
containing obligations and restrictions consistent with its obligations and
restrictions under the FICO AGREEMENT. SUBSCRIBER further agrees to enforce
such obligations and restrictions against Agent to the satisfaction of
TransUnion and FICO, and to immediately notify TransUnion and FICO upon the
discovery of any 

 

1

 

violation
of such obligations and restrictions by Agent. In the event SUBSCRIBER fails to
enforce said obligations and restrictions to TransUnion’s and/or FICO’s satisfaction,
SUBSCRIBER hereby agrees to assign to TransUnion and/or FICO, as the case may
be, all such enforcement rights against Agent.

 

5.               TransUnion and FICO, subject
to the terms of the FICO AGREEMENT and this Addendum, agrees to: 1) disclose
FICO Score Services to Agent on behalf of SUBSCRIBER.

 

6.               Agent certifies that it will
request and use any information provided as part of the FICO Score Services in
compliance with the terms and conditions of the FICO AGREEMENT and only on
behalf of SUBSCRIBER. Agent further certifies that it will limit the disclosure
of FICO Score Services to those individuals inside its organization with a “need
to know”, and that it will not disclose such information to any third party
other than the SUBSCRIBER.

 

7.               SUBSCRIBER and Agent shall
at all times be responsible for compliance with, and any violation of, the
terms, certifications, obligations and restrictions as set forth in the FICO
AGREEMENT with respect to the FICO Score Services disclosed to Agent,
including, but not limited to, those terms related to compliance with laws and
security. Moreover, and without regard to any cap on liability set forth in the
FICO Agreement, SUBSCRIBER and Agent shall jointly and severally defend,
indemnify and hold TransUnion and FICO harmless from and against any and all
claims, expenses, costs, damages, settlements, judgments or awards, including
attorney’s fees, directly or indirectly resulting from, or alleged to have
directly or indirectly resulted from, disclosure hereunder.

 

8.               SUBSCRIBER authorizes, and
TransUnion agrees, that for any Services and/or Services Information accessed
by its Agent, TransUnion will invoice SUBSCRIBER care-of Agent, at a rate
previously agreed upon by TransUnion and Agent, at the following address First
Marblehead Education Resources, Inc., Loan Origination, One Cabot Road,
Medford, MA 02155, which may be changed by SUBSCRIBER or Agent upon written
notice to TransUnion in accordance with paragraph 11. Notwithstanding the
forgoing, SUBSCRIBER, in accordance with the terms of the FICO Agreement, shall
remain responsible for payment of any unpaid or untimely paid invoices, as well
as any fees associated therewith, submitted to SUBSCRIBER care-of Agent.

 

9.               Notwithstanding the
forgoing, SUBSCRIBER, in accordance with the terms of the FICO AGREEMENT, shall
remain responsible for payment of any unpaid or untimely paid invoices, as well
as any fees associated therewith, submitted to SUBSCRIBER care-of
Agent.

 

10.         Agent recognizes the
confidential nature of the information contained in the TransUnion invoice(s).
Agent shall keep all information in any way related to the TransUnion
invoice(s), whether received from either TransUnion or SUBSCRIBER, in
confidence and shall not use such information except for purposes of this
Addendum, nor disclose such information to any person or persons outside of its
organization. Moreover, Agent shall limit the disclosure of such information
inside its organization to employees having a need to know who are subject to
written obligations of confidentiality substantially similar to those contained
herein. Furthermore, no information related to the TransUnion invoice(s),
whether received from TransUnion or SUBSCRIBER, shall be copied or 

 

2

 

duplicated
in any form or manner except as necessary to carry out the purpose of this
Addendum.

 

11.         All notices and
correspondence required under the Addendum shall be sent to the Parties at the
following addresses. Either party may change such name and address by notice to
the other in accordance herewith. Any such change shall take effect immediately
upon receipt of such notice.

 

	
  TransUnion
  LLC

  	
  SunTrust
  Bank (Subscriber)

  
	
  555
  West Adams

  	
  1001
  Semmes Avenue

  
	
  Chicago, IL
  60661

  	
  Richmond,
  Virginia 23224

  
	
  Attn:
  General Counsel

  	
  Attn:
  W. Mark Smith

  
	
   

  	
  Executive
  Vice President

  
	
   

  	
   

  
	
  FMER
  Loan Originations (Agent)

  	
   

  
	
  One
  Cabot Road

  	
   

  
	
  Medford,
  Massachusetts 02155

  	
   

  
	
  Attn:
  Managing Director

  	
   

  

 

12.         All terms of the FICO
AGREEMENT are incorporated into this Addendum and are expressly applicable to
all orders and payments hereunder. In the event of a conflict between any of
the terms of this Addendum and those of the FICO AGREEMENT, the terms of this
Addendum shall govern. The remaining terms of the FICO AGREEMENT shall at all
times remain in full force and effect.

 

13.         This Addendum shall be
coterminous with the FICO AGREEMENT unless earlier terminated by SUBSCRIBER in
accordance with the termination provisions contained in the FICO AGREEMENT or
by TransUnion or FICO upon written notice to SUBSCRIBER.

 

[Signatures appear on next page.]

 

3

 

IN
WITNESS WHEREOF, the parties, intending to be legally bound, have
caused this Addendum to be executed by their duly authorized representatives as
of the Effective Date.

 

 

	
  Trans Union LLC

  	
   

  	
  SunTrust
  Bank

  
	
  for itself and Fair Isaac
  Corporation

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  Steve Sassaman

  	
   

  	
  By:

  	
  /s/
  Joe McDonald

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Steve
  Sassaman, EVP

  	
   

  	
   

  	
  Joe
  McDonald, First Vice-President

  
	
   

  	
  Name
  and Title of Signer

  	
   

  	
   

  	
  Name
  and Title of Signer

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  As
  of 7/15/10

  	
   

  	
   

  	
  July 15,
  2010

  
	
   

  	
  Date
  Signed

  	
   

  	
   

  	
  Date
  Signed

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  First Marblehead Education
  Resources, Inc.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  Michael Plunkett

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Michael
  Plunkett, Managing Director

  	
   

  	
   

  	
   

  
	
   

  	
  Name
  and Title of Signer

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  28
  July 2010

  	
   

  	
   

  	
   

  
	
   

  	
  Date
  Signed

  	
   

  	
   

  	
   

  

 

4

 

Schedule A

 

Project
Name: Custom Choice LoanSM Student Loan Origination

 

Project
Description:

 

All
SUBSCRIBER orders placed hereunder shall be made under the following TransUnion
Subscriber Code(s): [**].

 

5

 

EXHIBIT E

Amended FMC Variable Rate Compensation

 

Adopted
as part of Exhibit B to the Loan Program Agreement

 

Margin to be Earned by FMC by Pricing Segment

 

FM Variable Rate Compensation

 

	
  Repayment

  Type

  	
   

  	
  Repayment

  Term

  	
   

  	
  1

  	
   

  	
  2

  	
   

  	
  3

  	
   

  	
  4

  	
   

  	
  5

  	
   

  	
  6

  	
   

  
	
  [**]

  	
   

  	
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  %

  	
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  %uilexh4-5.htm

EXHIBIT 4.5

EXECUTION COPY

___________________________________________________________________________________________________________________________________

$400,000,000

 

CREDIT AGREEMENT

 

Dated as of November 17, 2010

 

among

 

UIL HOLDINGS CORPORATION

 

THE UNITED ILLUMINATING COMPANY

 

and the other Borrowers from time to time parties hereto

 

as Borrowers

 

THE BANKS NAMED HEREIN

 

as Banks

 

JPMORGAN CHASE BANK, N.A.

 

and

 

UNION BANK, N.A.

 

as

 

LC Banks

 

and

 

JPMORGAN CHASE BANK, N.A.

 

as Administrative Agent

 

___________________________________________________________________________________________________________________________________

UNION BANK, N.A.

Syndication Agent

and

J.P. MORGAN SECURITIES INC.

and

UNION BANK, N.A.

Joint Lead Arrangers

 

1197483

  

  

  

TABLE OF CONTENTS

	  	  	
Page

	  	  	  
	ARTICLE I     DEFINITIONS AND ACCOUNTING TERMS	  	
1

	  	
SECTION 1.01.

	
Certain Defined Terms.

	  	
1

	  	
SECTION 1.02.

	
Computation of Time Periods.

	  	
12

	  	
SECTION 1.03.

	
Accounting Terms.

	  	
12

	  	  	  	  
	ARTICLE II   AMOUNTS AND TERMS OF THE EXTENSIONS OF CREDIT	  	
12

	  	
SECTION 2.01.

	
The Advances.

	  	
12

	  	
SECTION 2.02.

	
Making the Advances.

	  	
13

	  	
SECTION 2.03.

	
Letters of Credit.

	  	
14

	  	
SECTION 2.04.

	
Fees.

	  	
20

	  	
SECTION 2.05.

	
Changes in the Commitments.

	  	
21

	  	
SECTION 2.06.

	
Repayment of Advances.

	  	
22

	  	
SECTION 2.07.

	
Interest on Advances.

	  	
22

	  	
SECTION 2.08.

	
Additional Interest on Eurodollar Rate Advances.

	  	
23

	  	
SECTION 2.09.

	
Interest Rate Determination.

	  	
23

	  	
SECTION 2.10.

	
Voluntary Conversion of Advances.

	  	
24

	  	
SECTION 2.11.

	
Optional Prepayments of Advances.

	  	
24

	  	
SECTION 2.12.

	
Increased Costs.

	  	
25

	  	
SECTION 2.13.

	
Illegality.

	  	
26

	  	
SECTION 2.14.

	
Payments and Computations.

	  	
26

	  	
SECTION 2.15.

	
Sharing of Payments, Etc.

	  	
27

	  	
SECTION 2.16.

	
Taxes.

	  	
28

	  	  	  	  
	ARTICLE III   CONDITIONS PRECEDENT	  	
29

	  	
SECTION 3.01.

	
Conditions Precedent to Initial Extension of Credit.

	  	
29

	  	
SECTION 3.02.

	
Conditions Precedent to Each Extension of Credit.

	  	
30

	  	
SECTION 3.03.

	
Conditions Precedent to Initial Extension of Credit

to New Borrowers.

	  	
 

31

	  	  	  	  
	ARTICLE IV   REPRESENTATIONS AND WARRANTIES	  	
32

	  	
SECTION 4.01.

	
Representations and Warranties of Each Borrower.

	  	
32

	  	  	  	  
	ARTICLE V   COVENANTS OF THE BORROWERS	  	
36

	  	
SECTION 5.01.

	
Affirmative Covenants.

	  	
36

	  	
SECTION 5.02.

	
Negative Covenants.

	  	
39

	  	
SECTION 5.03.

	
Financial Covenants.

	  	
41

	  	  	  	  
	ARTICLE VI   EVENTS OF DEFAULT	  	
42

	  	
SECTION 6.01.

	
Events of Default.

	  	
42

	  	
SECTION 6.02.

	
Cash Collateral Account.

	  	
43

  

i

  

	  	  	
Page

	  	  	  
	ARTICLE VII    THE ADMINISTRATIVE AGENT	  	
44

	  	
SECTION 7.01.

	
Authorization and Action.

	  	
44

	  	
SECTION 7.02.

	
Administrative Agent’s Reliance, Etc.

	  	
45

	  	
SECTION 7.03.

	
JPMorgan and Affiliates.

	  	
45

	  	
SECTION 7.04.

	
Bank Credit Decision.

	  	
45

	  	
SECTION 7.05.

	
Indemnification.

	  	
46

	  	
SECTION 7.06.

	
Successor Administrative Agent.

	  	
46

	  	
SECTION 7.07.

	
Other Agents.

	  	
47

	  	  	  
	ARTICLE VIII   MISCELLANEOUS	  	
47

	  	
SECTION 8.01.

	
Amendments, Etc.

	  	
47

	  	
SECTION 8.02.

	
Notices, Etc.

	  	
48

	  	
SECTION 8.03.

	
No Waiver; Remedies.

	  	
48

	  	
SECTION 8.04.

	
Costs, Expenses, Taxes and Indemnification.

	  	
49

	  	
SECTION 8.05.

	
Right of Set-off.

	  	
50

	  	
SECTION 8.06.

	
Binding Effect; Participations and Assignments; No Fiduciary Relationship.

	  	
50

	  	
SECTION 8.07.

	
Confidentiality

	  	
54

	  	
SECTION 8.08.

	
Governing Law; Consent to Jurisdiction; Waiver of Jury Trial; Certain Disclosures.

	  	
 

55

	  	
SECTION 8.09.

	
Execution in Counterparts.

	  	
55

	  	
SECTION 8.10.

	
USA PATRIOT Act Notice.

	  	
56

	  	
SECTION 8.11.

	
Defaulting Banks.

	  	
56

	
Schedule I

	
-

	
List of Applicable Lending Offices

	  	  	  
	
Schedule II

	
-

	
Transferred Letters of Credit

	  	  	  
	
Schedule 4.01(h)

	
-

	
Agreements Imposing Dividend Restrictions

	  	  	  
	
Schedule 5.02

	
-

	
Existing Liens

	  	  	  
	
Exhibit A

	
-

	
Form of Notice of Borrowing

	  	  	  
	
Exhibit B

	
-

	
Form of Request for Issuance

	  	  	  
	
Exhibit C

	
-

	
Form of Joinder Agreement

	  	  	  
	
Exhibit D-1

	
-

	
Form of Opinion of Counsel to the Original Borrowers

	  	  	  
	
Exhibit D-2

	
-

	
Form of Opinion of Counsel to the New Borrowers

	  	  	  
	
Exhibit E

	
-

	
Form of Opinion of Special New York Counsel to the Administrative Agent

  

ii

  

CREDIT AGREEMENT

Dated as of November 17, 2010

UIL HOLDINGS CORPORATION, a Connecticut corporation (the “Parent”), THE UNITED ILLUMINATING COMPANY, a specially chartered Connecticut corporation (“UI” and, together with the Parent and the other Persons that from time to time become parties hereto pursuant to Section 3.03, the “Borrowers”), the banks parties hereto (the “Banks”), JPMORGAN CHASE BANK, N.A. (“JPMorgan”) and UNION BANK, N.A., as LC Banks (as defined below), and JPMorgan, as administrative agent (the “Administrative Agent”) for the Banks and the LC Banks hereunder, agree as follows:

 

 

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

 

SECTION 1.01. Certain Defined Terms.

 

As used in this agreement (this “Agreement”), the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):

 

“Administrative Agent” has the meaning specified in the recital of parties to this Agreement.

 

“Advance” means an advance by a Bank to a Borrower as part of a Borrowing and refers to a Base Rate Advance or a Eurodollar Rate Advance, each of which shall be a “Type” of Advance.

 

“Affiliate” means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Person.

 

“Applicable Lending Office” means, with respect to each Bank, such Bank’s Domestic Lending Office in the case of a Base Rate Advance and such Bank’s Eurodollar Lending Office in the case of a Eurodollar Rate Advance.

 

“Applicable Margin” means with respect to any Base Rate Advance and any Eurodollar Rate Advance made to any Borrower, at all times during which any Applicable Rating Level set forth below is in effect for such Borrower, the rate per annum (except as provided below) for such Type of Advance set forth below next to such Applicable Rating Level:

 

  

  

  

 

 

	
 

Applicable Rating Level

	
Applicable Margin

For Eurodollar Rate

Advances

	
Applicable Margin

For Base Rate

Advances

	
1

	
1.30%

	
0.30%

	
2

	
1.50%

	
0.50%

	
3

	
1.70%

	
0.70%

	
4

	
1.90%

	
0.90%

	
5

	
2.10%

	
1.10%

provided, that the Applicable Margins set forth above will increase, for each Applicable Rating Level, upon the occurrence and during the continuance of any Event of Default by 2.0% per annum.

 

A change in the Applicable Margin resulting from a change in the Applicable Rating Level shall become effective upon the date of announcement of a change in the Reference Ratings that results in a change in the Applicable Rating Level.

 

“Applicable Rating Level” for any Borrower shall be determined in accordance with the Reference Ratings as follows:

 

	
Reference Ratings

	
Applicable Rating Level

	
A3 or higher by Moody’s or A- or higher by S&P

	
1

	
Baa1 by Moody’s or BBB+ by S&P

	
2

	
Baa2 by Moody’s or BBB by S&P

	
3

	
Baa3 by Moody’s or BBB- by S&P

	
4

	
lower than Baa3 by Moody’s or BBB- by S&P or no such Reference Rating

	
5

For the purposes of the foregoing, if the Reference Ratings issued by Moody’s or S&P are not the same (i.e., a “split rating”), the higher of such Reference Ratings shall control, unless (i) such Reference Ratings differ by more than one level, in which case the Reference Rating one level below the higher of the two Reference Ratings shall control, or (ii) a Reference Rating is below Baa3 or BBB- (as applicable), in which case the lower of the two Reference Ratings shall control.  The Applicable Rating Level for any Borrower shall be redetermined on the date of announcement of a change in the Reference Ratings for such Borrower.

 

“Bankruptcy Event” means, with respect to any Person, such Person becomes the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee, administrator, custodian, assignee for the benefit of creditors or similar Person charged with the

 

 

  

2

  

reorganization or liquidation of its business appointed for it, or, in the good faith determination of the Administrative Agent, has taken any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any such proceeding or appointment, provided that a Bankruptcy Event shall not result solely by virtue of any ownership interest, or the acquisition of any ownership interest, in such Person by a governmental authority or instrumentality thereof if and for so long as such ownership interest does not result in or provide such Person with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Person (or such governmental authority or instrumentality) to reject, repudiate, disavow or disaffirm obligations such as those under this Agreement.

 

“Banks” means the Banks listed on the signature pages hereof and their successors and permitted assigns pursuant to Section 8.06.

 

“Base Rate” means, for any period, a fluctuating interest rate per annum as shall be in effect from time to time which rate per annum shall at all times be equal to the highest of:

 

(i)           the rate of interest announced publicly by JPMorgan in New York, New York, from time to time as JPMorgan’s prime rate;

 

(ii)           the sum of 1/2 of 1% per annum plus the Federal Funds Rate; and

 

(iii)          LIBOR, as appearing on Page 3750 of the Dow Jones Market Service (or another commercially available source providing quotations of LIBOR as designated by the Administrative Agent from time to time) at 11:00 a.m. (London time) such day for a term of one month (or if no such rates are quoted on such day, the previous day for which quotations are available) (the “One-Month LIBOR Rate”) plus 1%; provided, however, if more than one rate is specified on such service, the applicable rate shall be the arithmetic mean of all such rates plus 1%.

 

The Base Rate shall change concurrently with each change in such prime rate, the Federal Funds Rate or the One-Month LIBOR Rate, as the case may be.

 

“Base Rate Advance” means an Advance that bears interest as provided in Section 2.07(a).

 

“Base Rate Borrowing” means a Borrowing composed of Base Rate Advances.

 

“Berkshire Gas” means The Berkshire Gas Company, a Massachusetts corporation.

 

“Borrower” has the meaning specified in the recital of parties to this Agreement.

 

“Borrowing” means a borrowing by a Borrower consisting of simultaneous Advances of the same Type and, in the case of Eurodollar Rate Advances, having Interest Periods of the same duration, made by each of the Banks pursuant to Section 2.01 or Converted pursuant to Section 2.09 or 2.10.

 

  

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“Business Day” means a day of the year other than a Saturday, Sunday or a public or bank holiday in New York City, Connecticut or Massachusetts, and, if the applicable Business Day relates to any Eurodollar Rate Advances, on which dealings are carried on in the London interbank market.

 

“Cash Collateral Account” has the meaning specified in Section 6.02.

 

“Change of Control” means (i) the Parent shall fail to own 100% of the common equity interests in any Borrower, free and clear of all Liens and encumbrances, or (ii) the occurrence, after the date of this Agreement, of (A) any Person or two or more Persons acting in concert acquiring beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended), directly or indirectly, of securities of the Parent (or other securities convertible into such securities) representing 50% or more of the combined voting power of all securities of the Parent entitled to vote in the election of directors; or (B) individuals who at the beginning of the term of this Agreement were directors ceasing for any reason to constitute a majority of the Board of Directors of the Parent unless the Persons replacing such individuals were nominated by the stockholders or the Board of Directors of the Parent in accordance with the Parent’s Bylaws; or (C) any Person or two or more Persons acting in concert acquiring by contract or otherwise, or entering into a contract or arrangement which upon consummation will result in its or their acquisition of, or control over, securities of the Parent (or other securities convertible into such securities) representing 50% or more of the combined voting power of all securities of the Parent entitled to vote in the election of directors.

 

“Commitment” has the meaning specified in Section 2.01 hereof.

 

“Commitment Increase” shall have the meaning given such term in Section 2.05(b).

 

“Commitment Percentage” shall mean, as to any Bank as of any date of determination, the percentage describing such Bank’s pro rata share of the Commitments on such date.

 

“Connecticut Gas” means Connecticut Natural Gas Corporation, a Connecticut corporation.

 

“Consolidated Capital” of any Borrower means the sum of (i) Consolidated Debt of such Borrower and (ii) the consolidated equity of all classes of stock (whether common, preferred or preference) of such Borrower, in each case determined in accordance with GAAP, except that unrealized gains and losses reflected in other comprehensive income in respect of qualified and non-qualified defined benefit pension plans, as well as other post-retirement benefit plans of such Borrower and its Consolidated Subsidiaries, for any period shall be excluded for purposes of such determination.

 

“Consolidated Debt” of any Borrower means the total principal amount of all Debt of such Borrower and its Consolidated Subsidiaries.

 

“Consolidated Subsidiary” means, with respect to any Person at any time, any Subsidiary or other Person the accounts of which would be consolidated with those of such first Person in its consolidated financial statements in accordance with GAAP.

 

  

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“Convert”, “Conversion” and “Converted” each refers to a conversion of Advances of one Type into Advances of another Type pursuant to Section 2.09 or 2.10 or the selection of a new, or the renewal of the same, Interest Period for Eurodollar Rate Advances pursuant to Section 2.09 or 2.10.

 

“Credit Parties” means the Administrative Agent, the LC Banks and the Banks.

 

“Debt” of any Person means, without duplication, (i)  all indebtedness of such Person for borrowed money, (ii) all obligations of such Person for the deferred purchase price of property or services (other than trade payables not overdue by more than 60 days incurred in the ordinary course of such Person’s business), (iii) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (iv) all obligations of such Person as lessee under leases that have been, in accordance with GAAP, recorded as capital leases, (v) all obligations of such Person in respect of reimbursement agreements with respect to acceptances, letters of credit (other than trade letters of credit) or similar extensions of credit, (vi) all reasonably quantifiable obligations under indemnities or under support or capital contribution agreements and other reasonably quantifiable obligations (contingent or otherwise) to purchase or otherwise to assure a creditor against loss in respect of, or to assure an obligee against loss in respect of, all Debt of others referred to in clauses (i) through (v) above guaranteed directly or indirectly in any manner by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement (A) to pay or purchase such Debt or to advance or supply funds for the payment or purchase of such Debt, (B) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Debt or to assure the holder of such Debt against loss, (C) to supply funds to or in any other manner invest in the debtor (including any agreement to pay for property or services irrespective of whether such property is received or such services are rendered) or (D) otherwise to assure a creditor against loss, and (vii) preferred securities issued by any Consolidated Subsidiary of the Borrower held directly or indirectly by any person other than the Parent; provided, however, for the avoidance of doubt, “Debt” shall not include any obligation of any Person under indemnities, reimbursement agreements or similar arrangements with respect to surety bonds and other performance guaranties.

 

“Defaulting Bank” shall mean any Bank, as reasonably determined by the Administrative Agent, that (i) has failed, within three Business Days after the date required to be funded or paid, (A) to fund any portion of its Advances, (B) to fund its Commitment Percentage of any Unreimbursed LC Disbursement or (C) to pay over to any Credit Party any other amount required to be paid by it under this Agreement, unless, in the case of clause (A) above, such Bank notifies the Administrative Agent in writing that such failure is the result of such Bank’s good faith determination that a condition precedent to funding (specifically identified and including the particular default, if any) has not been satisfied, (ii) has notified the Borrowers or any Credit Party in writing that it does not intend to comply with any of its funding obligations under this Agreement or has made a public statement to the effect that it does not intend to comply with its funding obligations under this Agreement (unless such writing or public statement indicates that such position is based on such Bank’s good faith determination that a condition precedent (specifically identified and including the particular default, if any) to funding an Advance cannot be satisfied) or generally under other agreements in which it commits to extend credit, (iii) has failed, within three Business Days after request by the Administrative Agent, acting in good

 

  

5

  

faith, to provide a certification in writing from an authorized officer of such Bank that it will comply with its obligations to fund prospective Advances, provided that such Bank shall cease to be a Defaulting Bank pursuant to clause (iii) upon such requesting party’s receipt of such certification in form and substance satisfactory to it and the Administrative Agent, or (iv) has become the subject of a Bankruptcy Event.

 

“Domestic Lending Office” means, with respect to any Bank, the office of such Bank specified as its “Domestic Lending Office” opposite its name on Schedule I hereto or such other office of such Bank as such Bank may from time to time specify to the Borrowers and the Administrative Agent.

 

“Environmental Event” with respect to any Borrower means (i) the generation, storage, disposal, removal, transportation or treatment of Hazardous Materials in violation of applicable law (A) on any real property owned, occupied or operated by such Borrower or any Person for whose conduct such Borrower is responsible (“Real Property”), or (B) in the vicinity of any Real Property, which through soil or ground water migration is reasonably likely to come to be located at or on such Real Property; (ii) the receipt by such Borrower of any written notice or claim of any violation of any Environmental Law or of any action based upon nuisance, negligence or other tort theory alleging liability on the basis of improper generation, storage, disposal, removal, transportation or treatment of Hazardous Materials on any Real Property; or (iii) the presence or release of Hazardous Materials at or from any Real Property, that has resulted in contamination or deterioration of any portion of such property in or to a level of contamination greater than the levels permitted or established by any governmental authority having jurisdiction over the Borrower or any Real Property.

 

“Environmental Laws” means any and all federal, state and local statutes, laws, regulations, ordinances, judgments, orders, decrees, and permits and all other governmental rules, concessions, grants, franchises, licenses, agreements or other governmental restrictions relating to the environment or the release of any materials into the environment, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, the Clean Water Act (33 U.S.C. Sections 1251 et seq.), the Clean Air Act (42 U.S.C. Sections 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. Section 2601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. Sections 1801 et seq.), and the Resource Conservation and Recovery Act (42 U.S.C. Sections 6901 et seq.).

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder.

 

“ERISA Event” means (i) the occurrence of a reportable event, within the meaning of Section 4043 of ERISA, unless the 30-day notice requirement with respect thereto has been waived by the PBGC; (ii) the provision by the administrator of any Plan of notice of intent to terminate such Plan, pursuant to Section 4041(a)(2) of ERISA (including any such notice with respect to a plan amendment referred to in Section 4041(e) of ERISA); (iii) the cessation of operations at a facility in the circumstances described in Section 4062(e) of ERISA; (iv) the withdrawal by the Borrower or an Affiliate of the Borrower from a Multiple-Employer Plan during a plan year for which it was a “substantial employer”, as defined in Section 4001(a)(2) of ERISA; (v) the failure by the Borrower or an Affiliate of the Borrower to make a payment to a

 

  

6

  

Plan required under Section 302(f)(1) of ERISA, which Section imposes a Lien for failure to make required payments; (vi) the adoption of an amendment to a Plan requiring the provision of security to such Plan, pursuant to Section 307 of ERISA; or (vii) the institution by the PBGC of proceedings to terminate a Plan, pursuant to Section 4042 of ERISA, or the occurrence of any event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, a Plan, and, in the case of any event described in clause (ii), (iv), (v), (vi) or (vii), the then-present value of such Plan’s vested benefits exceeds the then-current value of assets accumulated in such Plan by more than $10,000,000 (or in the case of withdrawal of a “substantial employer” (as defined in Section 4001(a)(2) of ERISA), the withdrawing employer’s proportionate share of such excess shall exceed such amount) and, in any other case, the net liability of any Borrower and its affiliates in respect of such event exceeds $10,000,000.

 

“Eurocurrency Liabilities” has the meaning assigned to that term in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time.

 

“Eurodollar Lending Office” means, with respect to any Bank, the office of such Bank specified as its “Eurodollar Lending Office” opposite its name on Schedule I hereto, or such other office of such Bank as such Bank may from time to time specify to the Borrower and the Administrative Agent.

 

“Eurodollar Rate” means, for the Interest Period for each Eurodollar Rate Advance comprising part of the same Borrowing an interest rate per annum equal to the rate appearing on page 3750 of the Dow Jones Market Service (or on any successor or substitute page of such Service, or any successor to or substitute for such Service, providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Administrative Agent from time to time) at 11:00 a.m. (London time), two Business Days prior to the commencement of such Interest Period, for dollar deposits (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period.  If such rate is not available at such time for any reason, then the “Eurodollar Rate” for such Interest Period shall be the rate per annum determined by the Administrative Agent to be the rate (rounded upward to the nearest 1/16 of 1%) at which deposits in U.S. dollars of $5,000,0000 for delivery on the first day of such Interest Period and with a term equivalent to such Interest Period would be offered by JPMorgan’s (or its Affiliate’s) principal London branch to major banks in the London interbank eurodollar market at their request at approximately 11:00 a.m. (London time) two Business Days prior to the commencement of such Interest Period; subject, however, to the provisions of Section 2.09 hereof.

 

“Eurodollar Rate Advance” means an Advance that bears interest as provided in Section 2.07(b).

 

“Eurodollar Rate Borrowing” means a Borrowing composed of Eurodollar Rate Advances.

 

“Eurodollar Rate Reserve Percentage” of any Bank for the Interest Period for any Eurodollar Rate Advance means the reserve percentage applicable during such Interest Period (or if more than one such percentage shall be so applicable, the daily average of such percentages for

 

  

7

  

those days in such Interest Period during which any such percentage shall be so applicable) under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for such Bank with respect to liabilities or assets consisting of or including Eurocurrency Liabilities having a term equal to such Interest Period.

 

“Event of Default” has the meaning specified in Section 6.01.

 

“Extension of Credit” shall mean (i) the making of an Advance or (ii) (A) the issuance of a Letter of Credit or (B) the amendment of any Letter of Credit having the effect of extending the stated termination date thereof or increasing the maximum amount available to be drawn thereunder.

 

“Facility Fee Percentage” shall mean, at all times during which any Applicable Rating Level set forth below is in effect for the Parent, the rate per annum set forth below next to the Applicable Rating Level of the Parent:

 

	
Applicable Rating Level

	
Facility Fee

Percentage

	
1

	
0.20%

	
2

	
0.25%

	
3

	
0.30%

	
4

	
0.35%

	
5

	
0.40%

A change in the Facility Fee Percentage resulting from a change in the Applicable Rating Level of the Parent shall become effective upon the date of announcement of a change in the Reference Ratings that results in a change in the Applicable Rating Level of the Parent.

 

“Federal Funds Rate” means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.

 

“Fronting Commitment” shall mean, with respect to any LC Bank, the aggregate stated amount of all Letters of Credit that such LC Bank agrees to issue, as such amount may be modified from time to time pursuant to agreement among such LC Bank, the Borrowers and the Administrative Agent.  The Fronting Commitment of JPMorgan on the date hereof is

 

  

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$25,000,000.  The Fronting Commitment of Union Bank, N.A. on the date hereof is $25,000,000.  The Fronting Commitment with respect to any Bank or Affiliate thereof that becomes an LC Bank after the date hereof shall be the amount agreed upon among the Borrowers, the Administrative Agent and such LC Bank at the time such Bank or Affiliate thereof becomes an LC Bank; and provided further that, at no time shall LC Outstandings be greater than $50,000,000.

 

“GAAP” has the meaning specified in Section 1.03.

 

“Hazardous Materials” means any solid wastes, toxic or hazardous substances, wastes or contaminants, polychlorinated biphenyls, paint containing lead, urea, formaldehyde foam insulation and discharges of sewage or effluent, as any of such terms is defined from time to time in or for the purposes of any Environmental Laws, friable asbestos, pesticides, petroleum or petroleum products.

 

“Interest Period” means, for each Eurodollar Rate Advance constituting part of the same Borrowing, the period commencing on the date of such Eurodollar Rate Advance or the date of the Conversion of any Advance into such a Eurodollar Rate Advance and ending on the last day of the period selected by the applicable Borrower pursuant to the provisions below and, thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of the period selected by such Borrower pursuant to the provisions below.  The duration of each such Interest Period shall be one week or one, two, three or six months or such other periods acceptable to all the Banks, as the applicable Borrower may select, upon notice received by the Administrative Agent in accordance with Section 2.02(a) or Section 2.10; provided, however, that:

 

(i)           the duration of any Interest Period that commences before the Maturity Date and otherwise ends after the Maturity Date shall end on the Maturity Date;

 

(ii)           if any Interest Period begins on a day for which there is no corresponding day in the calendar month during which such Interest Period is to end, such Interest Period shall end on the last Business Day of such month; and

 

(iii)           whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day, provided, that if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Business Day.

 

“Joinder Agreement” means an agreement, substantially in the form of Exhibit C, by a New Borrower and accepted by the Administrative Agent.

 

“JPMorgan” has the meaning specified in the recital of parties to this Agreement.

 

“LC Bank” means JPMorgan, Union Bank, N.A. and any other Bank or any Affiliate thereof that agrees to issue Letters of Credit pursuant to Section 2.03.

 

  

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“LC Commitment” means, for each Bank, the obligation of such Bank to participate in the LC Outstandings.  “LC Commitments” shall refer to the aggregate of the Banks’ LC Commitments hereunder.

 

“LC Outstandings” of any Borrower shall mean, on any date of determination, the sum of (i) the undrawn stated amounts of all Letters of Credit that were issued for the account of such Borrower and that are outstanding on such date plus (ii) the aggregate principal amount of all Unreimbursed LC Disbursements of such Borrower.

 

“Letter of Credit” shall mean a standby letter of credit issued by an LC Bank pursuant to Section 2.03, as such standby letter of credit may from time to time be amended, modified or extended in accordance with the terms of this Agreement.

 

“Letter of Credit Fee” shall have the meaning assigned to that term in Section 2.04(b).

 

“Lien” has the meaning specified in Section 5.02(a).

 

“Loan Document” means this Agreement, any Joinder Agreement, any agreement referred to in Section 2.04(c) or (d) and any promissory notes delivered pursuant to Section 2.01(b), 3.01(a) or 3.03(b).

 

“Majority Banks” means at any time, if there are Advances outstanding, Banks holding in excess of 50% of the Advances then outstanding, or, if there are no Advances outstanding, Banks holding in excess of 50% of the Commitments.

 

“Maturity Date” means November 17, 2014 or the earlier date of termination in whole of the Commitments pursuant to Section 2.05 or Section 6.01 hereof.

 

“Moody’s” shall mean Moody’s Investors Service, Inc., or any successor thereto.

 

“Multiple-Employer Plan” means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (i) is maintained for employees of any Borrower or an Affiliate of such Borrower and at least one Person other than such Borrower and its Affiliates or (ii) was so maintained and in respect of which such Borrower or an Affiliate of such Borrower could have liability under Section 4064 or 4069 of ERISA in the event such plan has been or were to be terminated.

 

“New Borrower” has the meaning specified in Section 3.03.

 

“Non-Defaulting Bank” means, at the time of determination, a Bank that is not a Defaulting Bank.

 

“Notice of Borrowing” has the meaning specified in Section 2.02(a) hereof.

 

“Old Credit Agreement” means the Credit Agreement, dated as of December 22, 2006, as amended, among the Parent , UI, certain banks and the administrative agent party thereto.

 

“Original Borrower” has the meaning specified in Section 3.01.

 

  

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“Outstanding Credits” of any Borrower shall mean, on any date of determination, an amount equal to (i) the aggregate principal amount of all Advances outstanding to such Borrower on such date plus (ii) the LC Outstandings of such Borrower on such date.

 

“Parent” has the meaning specified in the recital of parties to this Agreement.

 

“PBGC” means the Pension Benefit Guaranty Corporation or any successor thereto.

 

“Purchase Agreement” means the Purchase Agreement, dated as of May 25, 2010, between Iberdrola USA, Inc. and the Parent.

 

“Person” means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof.

 

“Plan” means a Single-Employer Plan or a Multiple-Employer Plan.

 

“Reference Ratings” means, with respect to any Borrower, the ratings assigned by S&P and Moody’s to the long-term senior unsecured non-credit enhanced debt of such Borrower (the “Borrower Debt”); provided that:

 

(i)           if neither S&P nor Moody’s maintains a rating on the Borrower Debt of a Borrower, then the Reference Ratings shall be based on the ratings assigned by Moody’s and S&P to the long-term senior secured debt (the “Secured Debt”) of such Borrower, but such ratings shall be deemed to correspond to the Applicable Rating Level that is one level lower than the level that would otherwise correspond to such Secured Debt ratings; and

 

(ii)           if neither S&P nor Moody’s maintains a rating on the Borrower Debt of a Borrower or on the Secured Debt of a Borrower, then the Reference Rating of such Borrower shall be based on such Borrower’s long-term corporate/issuer ratings maintained by S&P and Moody’s.

 

“Request for Issuance” shall mean a request made pursuant to Section 2.03(a) in the form of Exhibit B.

 

“S&P” shall mean Standard & Poor’s Ratings Services, a division of The McGraw Hill Companies, Inc., or any successor thereto.

 

“Single-Employer Plan” means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (i) is maintained for employees of a Borrower or an Affiliate of such Borrower and no Person other than such Borrower and its Affiliates, or (ii) was so maintained and in respect of which such Borrower or an Affiliate of such Borrower could have liability under Section 4069 of ERISA in the event such plan has been or were to be terminated.

 

“Southern Connecticut” means The Southern Connecticut Gas Company, a Connecticut corporation.

 

  

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“Subsidiary” of any Person means any corporation, partnership, joint venture, limited liability company, trust or estate of which (or in which) more than 50% of (i) the issued and outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), (ii) the interest in the capital or profits of such limited liability company, partnership or joint venture or (iii) the beneficial interest in such trust or estate is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person’s other Subsidiaries.

 

“Type” has the meaning assigned to such term in the definition of “Advance” when used in such context.

 

“UI” has the meaning specified in the recital of parties to this Agreement.

 

“Unreimbursed LC Disbursement” shall mean the unpaid obligation (or, if the context so requires, the amount of such obligation) of any Borrower to reimburse an LC Bank for a payment made by such LC Bank under a Letter of Credit, but shall not include any portion of such obligation that has been repaid with the proceeds of Advances hereunder.

 

SECTION 1.02. Computation of Time Periods.

 

In this Agreement in the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including” and the words “to” and “until” each means “to but excluding”.

 

SECTION 1.03. Accounting Terms. 

 

All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles consistent with those applied in the preparation of the financial statements referred to in Section 4.01(e) hereof (“GAAP”).

 

 

ARTICLE II

AMOUNTS AND TERMS OF THE EXTENSIONS OF CREDIT

 

SECTION 2.01. The Advances.

 

(a) Each Bank severally agrees, on the terms and conditions hereinafter set forth, to make Advances to the Borrowers from time to time on any Business Day during the period from the date hereof until the day immediately preceding the Maturity Date in an aggregate amount not to exceed at any time outstanding the amount set opposite such Bank’s name on Schedule I hereto as such amount may be reduced or increased pursuant to Section 2.05 hereof (such Bank’s “Commitment”); provided, however, that (i) the Outstanding Credits of the Parent shall not exceed $400,000,000 at any time, (ii) the Outstanding Credits of UI shall not exceed $250,000,000 at any time, (iii) the Outstanding Credits of each of Southern Connecticut and Connecticut Gas shall not exceed $150,000,000 at any time, and (iv) the Outstanding Credit of Berkshire Gas shall not exceed $50,000,000 at any time; and provided further, the aggregate

 

  

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Outstanding Credits of all of the Borrowers shall not exceed the amount of the Commitments at any time.  Each Base Rate Borrowing shall be in an integral multiple of $1,000,000, and each Eurodollar Rate Borrowing shall be in an aggregate amount not less than $5,000,000, or an integral multiple of $1,000,000 in excess thereof.  Each Borrowing shall consist of Advances of the same Type and, in the case of Eurodollar Rate Advances, having Interest Periods of the same duration, made on the same day to a single Borrower by the Banks ratably according to their respective Commitments.  Within the limits of each Bank’s Commitment, the Borrowers may from time to time borrow, repay, prepay pursuant to Section 2.11 hereof, reborrow under this Section 2.01 and request the issuance of Letters of Credit under Section 2.03.

 

(b) Any Bank may request that any Advances made by it be evidenced by one or more promissory notes.  In such event, each Borrower shall prepare, execute and deliver to such Bank one or more promissory notes payable to the order of such Bank (or, if requested by such Bank, to such Bank and its assignees) and in a form approved by the Administrative Agent.

 

SECTION 2.02. Making the Advances.

 

(a) Each Borrowing shall be made on notice, given not later than 11:00 A.M. (New York City time) on the date of a proposed Base Rate Borrowing or on the third Business Day prior to the date of a proposed Eurodollar Rate Borrowing, by the applicable Borrower to the Administrative Agent, which shall give to each Bank prompt notice thereof by telecopier, telex or cable.  Each such notice of a Borrowing (a “Notice of Borrowing”) shall be by telecopier, telex or cable, confirmed immediately in writing, in substantially the form of Exhibit A hereto, specifying therein the requested (i) date of such Borrowing, (ii) Type of Advances constituting such Borrowing, (iii) aggregate amount of such Borrowing, and (iv) in the case of a Eurodollar Rate Borrowing, the initial Interest Period for each of the Advances constituting such Borrowing.  Each Bank shall, before 12:00 noon (New York City time) on the date of such Borrowing, make available for the account of its Applicable Lending Office to the Administrative Agent at its address referred to in Section 8.02 such Bank’s ratable portion of such Borrowing, in same day funds.  After the Administrative Agent’s receipt of such funds and upon fulfillment of the applicable conditions set forth in Article III, the Administrative Agent will make such funds available to the applicable Borrower at the Administrative Agent’s aforesaid address.

 

(b) Each Notice of Borrowing shall be irrevocable and binding on the Borrower that delivers such Notice of Borrowing.  In the case of any Borrowing that the related Notice of Borrowing specifies is to be comprised of Eurodollar Rate Advances, the applicable Borrower shall indemnify each Bank against any loss, cost or expense incurred by such Bank as a result of any failure to fulfill on or before the date specified in such Notice of Borrowing for such Borrowing the applicable conditions set forth in Article III, including, without limitation, any loss (including loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Bank to fund the Advance to be made by such Bank as part of such Borrowing when such Advance, as a result of such failure, is not made on such date.

 

(c) Unless the Administrative Agent shall have received notice from a Bank prior to the date of any Borrowing that such Bank will not make available to the Administrative Agent such Bank’s ratable portion of such Borrowing, the Administrative Agent may assume that such

 

  

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Bank has made such portion available to the Administrative Agent on the date of such Borrowing in accordance with subsection (a) of this Section 2.02 and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount.  If and to the extent that such Bank shall not have so made such ratable portion available to the Administrative Agent, such Bank and the applicable Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent, at (i) in the case of such Borrower, the interest rate applicable at the time to Advances constituting such Borrowing and (ii) in the case of such Bank, the Federal Funds Rate.  If such Bank shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Bank’s Advance as part of such Borrowing for purposes of this Agreement.

 

(d) The failure of any Bank to make the Advance to be made by it as part of any Borrowing shall not relieve any other Bank of its obligation, if any, hereunder to make its Advance on the date of such Borrowing, but no Bank shall be responsible for the failure of any other Bank to make the Advance to be made by such other Bank on the date of any Borrowing.

 

SECTION 2.03. Letters of Credit.

 

(a) Upon the written request of a Borrower and subject to the terms and conditions hereof, each LC Bank, in reliance upon the agreements of the other Banks set forth in this Section 2.03, shall issue one or more Letters of Credit hereunder for the account of such Borrower, provided that no LC Bank shall be required to issue Letters of Credit having stated amounts, in the aggregate, greater than such LC Bank’s Fronting Commitment.  Each Letter of Credit shall be issued in a form acceptable to the applicable LC Bank, and each Borrower shall execute and deliver to each LC Bank such standard letter of credit applications or continuing agreements for standby letters of credit as such LC Bank may reasonably request.  Each Letter of Credit shall be issued (or the stated maturity thereof extended or terms thereof modified or amended) on not less than two Business Days’ (or such shorter period as may be agreed to by the applicable Borrower and the applicable LC Bank) prior notice thereof by delivery of a Request for Issuance of a Letter of Credit to such LC Bank (which shall promptly forward copies thereof to the Administrative Agent for distribution to the Banks).  Each such Request for Issuance shall specify (i) the date (which shall be a Business Day) of issuance of such Letter of Credit (or the date of effectiveness of such extension, modification or amendment) and the stated expiry date thereof (which shall be no later than the third Business Day preceding the Maturity Date), (ii) the proposed stated amount of such Letter of Credit, (iii) the name and address of the beneficiary of such Letter of Credit and (iv) a statement of drawing conditions applicable to such Letter of Credit, and if such request for issuance relates to an amendment or modification of a Letter of Credit, it shall be accompanied by the consent of the beneficiary of the Letter of Credit thereto.  Each request for issuance of a Letter of Credit shall be irrevocable unless modified or rescinded by the applicable Borrower not less than one Business Day prior to the proposed date of issuance (or effectiveness) specified therein and, in any event, not later than the actual issuance (or effectiveness) specified therein.  Not later than 12:00 noon on the proposed date of issuance (or effectiveness) specified in such request for issuance of a Letter of Credit, and upon fulfillment of the applicable conditions precedent and the other requirements set forth herein, the applicable LC Bank shall issue (or extend, amend or modify) such Letter of Credit and provide notice and a

 

  

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copy thereof to the applicable Borrower and to the Administrative Agent.  The Administrative Agent shall furnish (i) to each Bank, a copy of such notice and (ii) to each Bank that may so request, a copy of such Letter of Credit.  Each LC Bank shall provide to the Administrative Agent, on a monthly basis, a list of the amounts and expiration dates of all undrawn Letters of Credit issued by such LC Bank, a copy of which list the Administrative Agent shall furnish to each Bank that may so request.

 

(b) No Letter of Credit shall be requested or issued hereunder if, after giving effect to the issuance thereof, (i) the LC Outstandings would exceed $50,000,000, (ii) the aggregate Outstanding Credits would exceed the aggregate Commitments, (iii) the Outstanding Credits of the Parent would exceed $400,000,000, (iv) the Outstanding Credits of UI would exceed $250,000,000, (v) the Outstanding Credits of either Southern Connecticut or Connecticut Gas would exceed $150,000,000, or (vi) the Outstanding Credits of Berkshire Gas would exceed $50,000,000.  No LC Bank shall be under any obligation to issue any Letter of Credit if (A) any order, judgment or decree of any governmental authority or arbitrator shall by its terms purport to enjoin or restrain such LC Bank from issuing such Letter of Credit, (B) any law applicable to such LC Bank or any request or directive (whether or not having the force of law) from any governmental authority with jurisdiction over such LC Bank shall prohibit, or request that such LC Bank refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon such LC Bank with respect to such Letter of Credit any restriction, reserve or capital requirement (for which such LC Bank is not otherwise compensated hereunder) not in effect on the date hereof, or shall impose upon such LC Bank any unreimbursed loss, cost or expense that was not applicable on the date hereof and that such LC Bank in good faith deems material to it or (C) the issuance of such Letter of Credit would violate one or more policies of such LC Bank.

 

(c) Each Borrower hereby agrees to pay to the Administrative Agent for the account of the applicable LC Bank, on demand made by such LC Bank or the Administrative Agent, on and after each date on which such LC Bank shall pay any amount under any Letter of Credit issued by it for the account of such Borrower, a sum equal to the amount so paid plus interest on such amount from the date so paid by such LC Bank until repayment to such LC Bank in full at a fluctuating interest rate per annum equal to the Base Rate plus the Applicable Margin for Base Rate Advances plus, if any amount paid by such LC Bank under a Letter of Credit is not reimbursed by such Borrower within one Business Day (whether with the proceeds of Advances or otherwise), 2%.

 

(d) No Letter of Credit shall be amended or modified after issuance without the prior written consent of the Borrower for the account of which such Letter of Credit was issued, which consent may be sent by telecopy.

 

(e) Each Bank, upon issuance of a Letter of Credit, shall be deemed to have purchased without recourse a risk participation from the applicable LC Bank in such Letter of Credit and the rights and obligations arising thereunder, in each case in an amount equal to its Commitment Percentage of the obligations under such Letter of Credit, and shall absolutely, unconditionally and irrevocably assume, as primary obligor and not as surety, and be obligated to pay to the applicable LC Bank therefor and discharge when due, its Commitment Percentage of the obligations arising under such Letter of Credit.  Without limiting the scope and nature of each

 

  

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Bank’s participation in any Letter of Credit, if an LC Bank shall not have been reimbursed in full for any payment made by such LC Bank under any Letter of Credit on the date of such payment, such LC Bank shall promptly notify the Administrative Agent, and the Administrative Agent shall promptly notify each Bank of such Unreimbursed LC Disbursement and the amount thereof.  Upon receipt of such notice from the Administrative Agent, each Bank shall pay to the Administrative Agent for the account of such LC Bank an amount equal to such Bank’s Commitment Percentage of such Unreimbursed LC Disbursement, plus interest on such amount at a rate per annum equal to the Federal Funds Rate from the date of such payment by such LC Bank to the date of payment to such LC Bank by such Bank.  All such payments by each Bank shall be made in United States dollars and in same day funds not later than 3:00 P.M. on the later to occur of (A) the Business Day immediately following the date of such payment by such LC Bank and (B) the Business Day on which such Bank shall have received notice of such Unreimbursed LC Disbursement; provided, however, that if such notice is received by such Bank later than 11:00 A.M. on such Business Day, such payment shall be payable on the next Business Day.  Each Bank agrees that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever.  If a Bank shall have paid to such LC Bank its Commitment Percentage of any Unreimbursed LC Disbursement, together with all interest thereon required by the second sentence of this subsection (e), such Bank shall be entitled to receive its Commitment Percentage of all interest paid by the applicable Borrower in respect of such Unreimbursed LC Disbursement.  If such Bank shall have made such payment to such LC Bank, but without all such interest thereon required by the second sentence of this subsection (e), such Bank shall be entitled to receive its Commitment Percentage of the interest paid by the applicable Borrower in respect of such Unreimbursed LC Disbursement only from the date it shall have paid all interest required by the second sentence of this subsection (e).

 

(f) The failure of any Bank to make any payment to an LC Bank in accordance with subsection (e) above shall not relieve any other Bank of its obligation to make payment, but neither such LC Bank nor any Bank shall be responsible for the failure of any other Bank to make such payment.  If any Bank shall fail to make any payment to an LC Bank in accordance with subsection (e) above, then such Bank shall pay to such LC Bank forthwith on demand such corresponding amount together with interest thereon, for each day until the date such amount is repaid to such LC Bank at the Federal Funds Rate.  Nothing herein shall in any way limit, waive or otherwise reduce any claims that any party hereto may have against any non-performing Bank.

 

(g) The payment obligations of each Borrower under Section 2.03(c) in respect of any payment under any Letter of Credit issued for the account of such Borrower shall be absolute, unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including, without limitation, the following circumstances:

 

(i) any lack of validity or enforceability of this Agreement or any other agreement or instrument relating thereto or to such Letter of Credit;

 

(ii) any amendment or waiver of, or any consent to departure from, the terms of this Agreement or such Letter of Credit;

 

  

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(iii) the existence of any claim, set-off, defense or other right that such Borrower may have at any time against any beneficiary, or any transferee, of such Letter of Credit (or any Person for which any such beneficiary or any such transferee may be acting), or any other Person, whether in connection with this Agreement, the transactions contemplated thereby or by such Letter of Credit, or any unrelated transaction;

 

(iv) any statement or any other document presented under such Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect;

 

(v) payment in good faith by an LC Bank under a Letter of Credit against presentation of a draft or certificate that does not comply with the terms of such Letter of Credit;

 

(vi) any failure to issue a Letter of Credit (or any amendment thereto) in accordance with the specifications set forth by the applicable Borrower pursuant to Section 2.03(a), provided that such Borrower may cause such a Letter of Credit (or such amendment) to be replaced or rescinded if (A) it provides written notice to the applicable LC Bank (which shall promptly forward copies to the Administrative Agent for distribution to the Banks) of any discrepancy from such specifications within three Business Days after the Borrower shall have received a copy of such Letter of Credit (or such amendment), (B) such discrepancy is material and consequential, and (C) the beneficiary of such Letter of Credit consents in writing to such replacement or revocation;

 

(vii) any claim or potential claim for breach of warranty by the applicable LC Bank, the Banks or the applicable Borrower against the beneficiary of a Letter of Credit;

 

(viii) any action or inaction taken or not taken by an LC Bank or any of its correspondents in connection with any Letter of Credit or any sight draft, certificate or other document presented pursuant thereto, if taken or not taken, as the case may be, in good faith and in conformity with applicable law.

 

(h) Without limiting any other provision of this Section 2.03, for purposes of this Section 2.03 each LC Bank and any of its correspondents:

 

(i) may rely upon any oral, telephonic, telegraphic, facsimile, electronic, written or other communication believed in good faith to have been authorized by the applicable Borrower, whether or not given or signed by an authorized person of such Borrower;

 

(ii) shall not be responsible for errors, omissions, interruptions or delays in transmission or delivery of any message, advice or document in connection with a Letter of Credit, whether transmitted by courier or facsimile, or for errors in interpretation of technical terms or in translation (and such LC Bank and its correspondents may transmit Letter of Credit terms without translating them), other than those errors resulting from gross negligence or willful misconduct of such LC Bank or such correspondent, as the case may be;

 

  

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(iii) shall not be responsible, absent the gross negligence or willful misconduct of such LC Bank or its correspondents, for verifying the identity or authority of any signer of, or the form, accuracy, genuineness, falsification or legal effect of, any draft, certificate or other document presented under any Letter of Credit if such draft, certificate or other document on its face appears to be in order;

 

(iv) shall not be responsible for any acts or omissions by, or the solvency of, the beneficiary of any Letter of Credit or any other person or entity having any role in any transaction underlying such Letter of Credit;

 

(v) may accept or pay as complying with the terms and conditions of any Letter of Credit, any draft, certificate or other document appearing on its face (A) substantially to comply with the terms and conditions of such Letter of Credit, (B) to be signed or presented by, or issued to any successor of, the beneficiary or any other person required or authorized by such Letter of Credit to sign or present any sight draft, certificate or other document under such Letter of Credit, including any administrator, executor, personal representative, trustee in bankruptcy, debtor in possession, liquidator, receiver, or successor by merger or consolidation, or any other person or entity purporting to act as the representative of or in place of any of the foregoing, or (C) to have been signed, presented or issued after a change of name of the beneficiary of such Letter of Credit;

 

(vi) may disregard any discrepancies known to it in any Letter of Credit that do not reduce, in the good faith judgment of such LC Bank or its correspondents, the value of the performance to the applicable Borrower by the beneficiary of such Letter of Credit in any transaction underlying such Letter of Credit;

 

(vii) shall not be responsible for the effectiveness or suitability of any Letter of Credit with respect to the applicable Borrower’s purpose in requesting such Letter of Credit;

 

(viii) shall not be liable to any Borrower for any consequential or special damages, or for any damages resulting from any change in the value of any goods or other property subject to or underlying any Letter of Credit;

 

(ix) absent any gross negligence or willful misconduct on part of such LC Bank or its correspondents, may honor a previously dishonored presentation under a Letter of Credit, whether pursuant to court order, to settle or compromise any claim wrongfully dishonored, or otherwise, and shall be entitled to reimbursement of amounts paid under such Letter of Credit to the same extent as if such presentation had been honored initially; and

 

(x) may pay amounts owed to any paying or negotiating bank (designated or permitted by the terms of any Letter of Credit) claiming that it rightfully honored, under the laws or practices of the place where it is located, any sight draft, certificate or other document presented under any Letter of Credit.

 

  

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(i) Each Borrower assumes all risks of the acts and omissions of any beneficiary or transferee of any Letter of Credit.  Neither the Administrative Agent, any LC Bank, the Banks nor any of their respective officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be liable or responsible for (i) the use that may be made of such Letter of Credit or any acts or omissions of any beneficiary or transferee thereof in connection therewith; (ii) the validity, sufficiency or genuineness of documents, or of any endorsement thereon made by another Person, even if such documents should prove to be in any or all respects invalid, insufficient, fraudulent or forged; (iii) payment by any LC Bank against presentation of documents that do not comply with the terms of a Letter of Credit, including failure of any documents to bear any reference or adequate reference to such Letter of Credit; or (iv) any other circumstances whatsoever in making or failing to make payment under a Letter of Credit, except that the applicable Borrower shall have the right to bring suit against the applicable LC Bank, and such LC Bank shall be liable to such Borrower, to the extent of any direct, as opposed to consequential, damages suffered by such Borrower that such Borrower proves (as determined in a final judgment by a court of competent jurisdiction) were caused by such LC Bank’s willful misconduct or gross negligence, including such LC Bank’s willful failure to make timely payment under such Letter of Credit following the presentation to it by the beneficiary thereof of a draft and accompanying certificate(s) that strictly comply with the terms and conditions of such Letter of Credit.  In furtherance and not in limitation of the foregoing, any LC Bank may accept sight drafts and accompanying certificates presented under any Letter of Credit issued by such LC Bank that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary, and payment against such documents shall not constitute willful misconduct or gross negligence by such LC Bank. Notwithstanding the foregoing, no Bank shall be obligated to indemnify the LC Bank for damages caused by any LC Bank’s willful misconduct or gross negligence.

 

(j) Each Borrower acknowledges that the rights and obligations of the applicable LC Bank under any Letter of Credit are independent of the existence, performance or nonperformance of any contract or arrangement underlying such Letter of Credit. Each LC Bank may, without incurring any liability to any Borrower or impairing its entitlement to reimbursement under this Agreement, honor any Letter of Credit despite notice from the applicable Borrower of, and without any duty to inquire into, any defense to payment or any adverse claims or other rights against the beneficiary of the applicable Letter of Credit or any other Person.  Each LC Bank shall have no duty to request or require the presentation of any document, including any default certificate, not required to be presented under the terms and conditions of any Letter of Credit.  Each LC Bank shall have no duty to seek any waiver of discrepancies from the applicable Borrower, nor any duty to grant any waiver of discrepancies that such Borrower approves or requests.  Each LC Bank shall have no duty to extend the expiration date or term of any Letter of Credit or, except as provided under Section 2.03(g)(vi), to issue a replacement letter of credit on or before the expiration date of such Letter of Credit or the end of such term.  No LC Bank shall be liable to any Borrower under this Section 2.03(j) for any action or inaction by it, unless such action or inaction results from such LC Bank’s gross negligence or willful misconduct, as determined in a final judgment by a court of competent jurisdiction.

 

(k) Unless otherwise expressly agreed by the applicable LC Bank and the applicable Borrower when a Letter of Credit is issued, the rules of the “International Standby Practices

 

  

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1998” written by the Institute of International Banking Law & Practice (or such later version thereof as may be in effect at the time of issuance) shall apply to each Letter of Credit.

 

(l) Notwithstanding any provision to the contrary contained in this Agreement, each Borrower and each Bank shall have the right to bring suit against any LC Bank, and such LC Bank shall be liable to such Borrower and such Bank, to the extent of any direct, as opposed to consequential, damages suffered by such Borrower or such Bank that such Borrower or such Bank proves were caused by such LC Bank’s willful misconduct or gross negligence.

 

(m) In addition to the LC Banks named herein, the Borrowers may from time to time appoint one or more other Banks (with the consent of any such Bank, which consent may be withheld in the sole discretion of each Bank) to act, either directly or through an Affiliate of such Bank, as an LC Bank hereunder.  Any such appointment and the terms thereof, including, without limitation, the Fronting Commitment of such LC Bank, shall be evidenced in a separate written agreement executed by the Borrowers and the applicable LC Bank, a copy of which agreement shall be delivered by the Borrowers to the Administrative Agent.  The Administrative Agent shall give prompt notice of any such appointment to the other Banks.  Upon such appointment, if and for so long as such Bank shall have any obligation to issue any Letters of Credit hereunder or any Letter of Credit issued by such Bank shall remain outstanding, such Bank shall be deemed to be, and shall have all the rights and obligations of, an “LC Bank” under this Agreement.

 

(n) Each LC Bank may resign at any time that no Letter of Credit issued by such LC Bank remains outstanding by giving written notice thereof to the Administrative Agent and the Borrowers.

 

(o) Subject to the satisfaction of the applicable conditions precedent set forth in Sections 3.01 and 3.02, and the execution and delivery by each applicable Borrower of such standard letter of credit applications or continuing agreements for standby letters of credit as each applicable LC Bank may reasonably request, each letter of credit issued under the Old Credit Agreement and identified on Schedule II to this Agreement shall be deemed to be a Letter of Credit issued under this Agreement by the applicable LC Bank.

 

SECTION 2.04. Fees.

 

(a) Except as set forth in Section 8.11(a), the Parent agrees to pay to the Administrative Agent for the account of each Bank a facility fee on the total amount of such Bank’s Commitment from the date hereof until the later of the Maturity Date and the date all Advances are paid in full and there are no LC Outstandings at the rate per annum equal, regardless of usage, to the Facility Fee Percentage from time to time in effect.  Such fee shall be payable quarterly in arrears on the last day of each March, June, September and December during such period, commencing on December 31, 2010, and on such later date to occur.

 

(b) Each Borrower agrees to pay to the Administrative Agent for the account of each Bank a letter of credit fee (the “Letter of Credit Fee”), at a rate per annum equal to the Applicable Margin for Eurodollar Rate Advances made to such Borrower on the daily average amount of such Bank’s Commitment Percentage multiplied by the LC Outstandings of such

 

  

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Borrower, from the date hereof until the later of the Maturity Date and the date on which there are no LC Outstandings, payable quarterly in arrears on the last day of each March, June, September and December during such period, commencing on December 31, 2010, and on such later date to occur.

 

(c) The Parent agrees to pay to the Administrative Agent an agency fee in such amounts and payable at such times, as shall be agreed to between them in writing.

 

(d) Each Borrower agrees to pay to each LC Bank the issuance and other fees as may be separately agreed by such Borrower and such LC Bank with respect to Letters of Credit issued by such LC Bank.

 

SECTION 2.05. Changes in the Commitments.

 

(a) The Parent shall have the right, upon at least three Business Days’ notice to the Administrative Agent, to terminate in whole or reduce ratably in part the unused portions of the respective Commitments of the Banks, provided that the aggregate amount of the Commitments of the Banks shall not be reduced to an amount that is less than the aggregate Outstanding Credits at such time and provided, further, that each partial reduction shall be in the aggregate amount of $10,000,000 or an integral multiple of $1,000,000 in excess thereof and provided, further, that any such termination or reduction shall not affect the Borrowers’ rights under Section 2.05(b) below.  Once terminated or reduced, a Commitment may not be reinstated.  The Administrative Agent shall promptly notify each Bank and LC Bank of any reduction in the Commitments pursuant to this Section 2.05.

 

(b) (i)  On any date prior to the Maturity Date, the Borrowers may increase the aggregate amount of the Commitments by up to $100,000,000 (any such increase, a “Commitment Increase”) up to a maximum aggregate amount of $500,000,000 by designating either one or more of the existing Banks (each of which, in its sole discretion, may determine whether and to what degree to participate in such Commitment Increase) or one or more assignees reasonably acceptable to the Administrative Agent and each LC Bank that at the time agree, in the case of an existing Bank, to increase its Commitment (an “Increasing Bank”) and, in the case of any other assignee (an “Additional Bank”), to become a party to this Agreement.  The sum of the increases in the Commitments of the Increasing Banks pursuant to this subsection (b) plus the Commitments of the Additional Banks upon giving effect to the Commitment Increase shall not in the aggregate exceed the amount of the Commitment Increase.  The Borrowers shall provide prompt notice of any proposed Commitment Increase pursuant to this Section 2.05(b) to the Administrative Agent, which shall promptly provide a copy of such notice to the Banks.

 

(ii) Any Commitment Increase shall become effective upon (A) the receipt by the Administrative Agent of (1) an agreement in form and substance satisfactory to the Administrative Agent signed by each Borrower, each Increasing Bank, each Additional Bank and each LC Bank, setting forth the new Commitments of each such Bank and setting forth the agreement of each Additional Bank to become a party to this Agreement and to be bound by all the terms and provisions hereof binding upon each Bank and the consent of each LC to such Commitment Increase, and (2) such customary opinions of

 

  

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counsel for the Borrowers with respect to the Commitment Increase as the Administrative Agent may reasonably request, (B) the funding by each Bank of the Advance(s) to be made by each such Bank described in paragraph (iii) below and (C) receipt by the Administrative Agent of a certificate (the statements contained in which shall be true) of a duly authorized officer of each Borrower stating that both before and after giving effect to such Commitment Increase (1) no Event of Default or event that with the giving of notice or the passage of time, or both, would constitute an Event of Default has occurred and is continuing, and (2) all representations and warranties made by such Borrower in this Agreement are true and correct in all material respects.

 

(iii) Upon the effective date of any Commitment Increase, each Borrower shall be deemed to have prepaid its outstanding Borrowings (if any) in full, and shall simultaneously be deemed to have made new Borrowings hereunder in an amount equal to such prepayment, so that, after giving effect thereto, the Borrowings are held ratably by the Banks in accordance with their respective Commitments (after giving effect to such Commitment Increase).  Prepayments made under this paragraph (iii) shall not be subject to the notice requirements of Section 2.11.

 

(iv) Notwithstanding any provision contained herein to the contrary, from and after the date of any Commitment Increase and the making of any Advances on such date pursuant to paragraph (iii) above, all calculations and payments of the fees payable to the Banks under Section 2.04 and of interest on the Advances shall take into account the actual Commitment of each Bank and the principal amount outstanding of each Advance made by such Bank during the relevant period of time.

 

SECTION 2.06. Repayment of Advances.

 

Each Borrower shall repay to the Administrative Agent for the ratable account of the Banks on the Maturity Date the aggregate principal amount of the Advances made to such Borrower then outstanding.  Without limiting the foregoing, each Borrower (other than the Parent) shall repay each Advance made to such Borrower no later than the 364th day following the date such Advance was made, unless, in the case of each such Borrower, such Borrower shall have delivered to the Administrative Agent evidence reasonably satisfactory to it that no authorization or approval or other action by, and no notice to or filing with, any governmental authority is required for the borrowing by such Borrower of Advances that are outstanding for more than 364 days, other than such authorizations and approvals that have been obtained and are in full force and effect, and such actions, notices and filings that have been duly completed.

 

SECTION 2.07. Interest on Advances.

 

Each Borrower shall pay interest on the unpaid principal amount of each Advance made by each Bank to such Borrower from the date of such Advance until such principal amount shall be paid in full, at the following rates per annum:

 

(a) Base Rate Advances.  If such Advance is a Base Rate Advance, a rate per annum equal at all times to the Base Rate plus the Applicable Margin for such Borrower, payable

  

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quarterly on the last day of each March, June, September and December during the term hereof, on the Maturity Date and on the date such Base Rate Advance shall be Converted or paid in full.

 

(b) Eurodollar Rate Advances.  If such Advance is a Eurodollar Rate Advance, a rate per annum equal at all times during the Interest Period for such Advance to the Eurodollar Rate for such Interest Period plus the Applicable Margin for such Borrower, payable on the last day of such Interest Period, provided, however, that if the Interest Period for such Advance is greater than three months then interest shall also be payable at the end of each three month interval following the date of such Advance.

 

SECTION 2.08. Additional Interest on Eurodollar Rate Advances.

 

Each Borrower shall pay to each Bank, so long as such Bank shall be required under regulations of the Board of Governors of the Federal Reserve System to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency Liabilities, additional interest on the unpaid principal amount of each Eurodollar Rate Advance of such Bank made to such Borrower, from the date of such Advance until such principal amount is paid in full, at an interest rate per annum equal at all times to the remainder obtained by subtracting (i) the Eurodollar Rate for the Interest Period for such Advance from (ii) the rate obtained by dividing such Eurodollar Rate by a percentage equal to 100% minus the Eurodollar Rate Reserve Percentage of such Bank for such Interest Period, payable on each date on which interest is payable on such Advance.  Such additional interest shall be determined by such Bank and notified to the applicable Borrower through the Administrative Agent.

 

SECTION 2.09. Interest Rate Determination.

 

(a) The Administrative Agent shall give prompt notice to the applicable Borrower and the Banks of the applicable interest rate determined by the Administrative Agent for purposes of Section 2.07(a) or (b) hereof.

 

(b) If, with respect to any Eurodollar Rate Advances, (i) the Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Borrowers) that, by reason of circumstances affecting the relevant interbank market, adequate means do not exist for ascertaining the Eurodollar Rate for such Interest Period, or (ii) the Majority Banks notify the Administrative Agent that the Eurodollar Rate for any Interest Period for such Advances will not adequately reflect the cost to such Majority Banks of making, funding or maintaining their respective Eurodollar Rate Advances for such Interest Period, the Administrative Agent shall forthwith so notify the Borrowers and the Banks, whereupon

 

(i) each Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance, and

 

(ii) the obligation of the Banks to make, or to Convert Advances into, Eurodollar Rate Advances shall be suspended until the Administrative Agent shall notify the Borrowers and the Banks that the circumstances causing such suspension no longer exist.

 

  

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(c) If the applicable Borrower shall fail to select the duration of any Interest Period for any Eurodollar Rate Advances in accordance with the provisions contained in the definition of “Interest Period” in Section 1.01, the Administrative Agent will forthwith so notify such Borrower and the Banks, and such Advances will automatically, on the last day of the then existing Interest Period therefor, Convert into Base Rate Advances.

 

(d) On the date on which the aggregate unpaid principal amount of Advances constituting any Borrowing shall be reduced, by payment or prepayment or otherwise, to less than $1,000,000, such Advances shall, if they are Eurodollar Rate Advances, automatically Convert into Base Rate Advances, and on and after such date the right of the applicable Borrower to Convert such Advances into Eurodollar Rate Advances shall terminate; provided, however, that if and so long as each such Advance shall be of the same Type and have the same Interest Period as Advances constituting another Borrowing or other Borrowings made to such Borrower, and the aggregate unpaid principal amount of all such Advances shall equal or exceed $1,000,000, such Borrower shall have the right to continue all such Advances as, or to Convert all such Advances into, Advances of such Type having such Interest Period.

 

SECTION 2.10. Voluntary Conversion of Advances.

 

So long as no Event of Default with respect to a Borrower or event that would constitute an Event of Default with respect to such Borrower but for the requirement that notice be given or time elapse or both has occurred and is continuing, then such Borrower may on any Business Day, upon notice given to the Administrative Agent not later than 11:00 A.M. (New York City time) on the third Business Day prior to the date of the proposed Conversion and subject to the provisions of Sections 2.09 and 2.13 hereof, Convert all Advances of one Type constituting the same Borrowing into Advances of another Type or Advances of the same Type to a new Interest Period; provided, however, that any Conversion of any Eurodollar Rate Advances into Base Rate Advances or Eurodollar Rate Advances into Eurodollar Rate Advances having new Interest Periods shall be made on, and only on, the last day of an Interest Period for such Eurodollar Rate Advances, unless such Borrower shall also reimburse the Banks in respect thereof pursuant to Section 8.04(b) hereof on the date of such Conversion.  Each such notice of a Conversion shall, within the restrictions specified above, specify (i) the date of such Conversion, (ii) the Advances to be Converted, and (iii) if such Conversion is into or relating to Eurodollar Rate Advances, the duration of the Interest Period for each such Advance.  The Administrative Agent shall promptly notify each Bank of any notice received from a Borrower pursuant to this Section.

 

SECTION 2.11. Optional Prepayments of Advances.

 

Upon notice, given not later than 11:00 a.m. (New York City time) on the date of a proposed prepayment for Base Rate Advances and on the third Business Day prior to the date of such prepayment for Eurodollar Rate Advances, each Borrower may, and if such notice is given such Borrower shall, prepay the outstanding principal amounts of the Advances constituting part of the same Borrowing in whole or ratably in part, together with accrued interest to the date of such prepayment on the principal amount prepaid; provided, however, that (i) each partial prepayment shall be in an aggregate principal amount not less than $5,000,000 or an integral multiple of $1,000,000 in excess thereof (or, if less, the aggregate amount of all Advances constituting the same Borrowing), and (ii) in the case of any such prepayment of a Eurodollar

 

  

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Rate Advance, such Borrower shall be obligated to reimburse the Banks in respect thereof pursuant to Section 8.04(b).  Except as provided in this Section 2.11, no Borrower shall have any right to prepay any principal amount of any Advances.

 

SECTION 2.12. Increased Costs.

 

(a) If, due to either (i) the introduction of or any change (other than any change by way of imposition or increase of reserve requirements in the case of Eurodollar Rate Advances included in any Bank’s Eurodollar Rate Reserve Percentage) in or in the interpretation of any law or regulation or (ii) the compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law), including without limitation all requests, rules, guidelines and directives in connection with the Dodd-Frank Wall Street Reform and Consumer Protection Act regardless of the date enacted, adopted or issued, there shall be any increase in the cost to any Bank of agreeing to make or making, funding or maintaining Eurodollar Rate Advances or of any LC Bank of issuing or maintaining any Letter of Credit, then the Parent shall from time to time, upon demand by such Bank or LC Bank, as the case may be (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Bank or LC Bank, as the case may be, additional amounts sufficient to compensate such Bank or LC Bank, as the case may be, for such increased cost.  A certificate as to the amount of such increased cost, submitted to the Borrowers and the Administrative Agent by such Bank, shall be conclusive and binding for all purposes, absent manifest error.

 

(b) If any Bank or LC Bank determines that compliance with any law or regulation or any guideline or request from any central bank or other governmental authority (whether or not having the force of law) affects or would affect the amount of capital required or expected to be maintained by such Bank or LC Bank or any corporation controlling such Bank or LC Bank and that the amount of such capital is increased by or based upon the existence of such Bank’s commitment to lend hereunder and other commitments of this type or such LC Bank’s commitment to issue Letters of Credit, then, upon demand by such Bank or LC Bank, as the case may be (with a copy of such demand to the Administrative Agent), the Parent shall immediately pay to the Administrative Agent for the account of such Bank or LC Bank, from time to time as specified by such Bank, additional amounts sufficient to compensate such Bank or such corporation in the light of such circumstances, to the extent that such Bank reasonably determines such increase in capital to be allocable to the existence of such Bank’s commitment to lend or to issue Letters of Credit, as the case may be, hereunder.  For the avoidance of doubt, this Section 2.12(b) shall apply to all requests, rules, guidelines or directives concerning capital adequacy issued in connection with the Dodd-Frank Wall Street Reform and Consumer Protection Act regardless of the date adopted, issued, promulgated and implemented.  A certificate as to such amounts submitted to the Borrowers and the Administrative Agent by such Bank shall be conclusive and binding for all purposes, absent manifest error.

 

(c) Each Bank and each LC Bank will notify the Borrowers and the Administrative Agent of any increase in cost incurred by such Bank or LC Bank, as the case may be, pursuant to subsection (a) or of any determination made by such Bank, or LC Bank, as the case may be, pursuant to subsection (b) as promptly as practicable.  Each Bank will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of,

 

 

  

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such compensation and will not, in the reasonable judgment of such Bank, be otherwise disadvantageous to such Bank.

 

SECTION 2.13. Illegality. 

 

Notwithstanding any other provision of this Agreement, if any Bank shall notify the Administrative Agent that the introduction of or any change in or in the interpretation of any law or regulation makes it unlawful, or any central bank or other governmental authority asserts that it is unlawful, for such Bank or its Eurodollar Lending Office to perform its obligations hereunder to make Eurodollar Rate Advances or to fund or maintain Eurodollar Rate Advances hereunder, (i) the obligation of the Banks to make, or to Convert Advances into, Eurodollar Rate Advances shall be suspended until the Administrative Agent shall notify the Borrowers and the Banks that the circumstances causing such suspension no longer exist and (ii) each Borrower shall forthwith prepay in full all Eurodollar Rate Advances of all Banks then outstanding to such Borrower, together with interest accrued thereon, unless such Borrower, within five Business Days of notice from the Administrative Agent, Converts all Eurodollar Rate Advances of all Banks then outstanding to such Borrower into Base Rate Advances in accordance with Section 2.10; provided, however, that no Borrower will be permitted to Convert such Eurodollar Rate Advances to Base Rate Advances if the applicable law or regulation requires immediate compliance on the part of such affected Bank.

 

SECTION 2.14. Payments and Computations.

 

(a) Each Borrower shall make each payment to be made by such Borrower hereunder, without condition or deduction for counterclaim, defense, recoupment or setoff, not later than 11:00 A.M. (New York City time) on the day when due in U.S. dollars to the Administrative Agent at its address at 10 South Dearborn, Chicago, Illinois 60603, Mid Corp Loan & Agency, in same day funds.  The Administrative Agent will promptly thereafter cause to be distributed like funds relating to the payment of principal, interest or facility fees ratably (other than amounts payable pursuant to Section 2.08, 2.12 or 2.15 hereof and except as provided otherwise in Sections 2.15(b) and 8.11) to the Banks for the account of their respective Applicable Lending Offices, and like funds relating to the payment of any other amount payable to any Bank to such Bank for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement.

 

(b) Each Borrower hereby authorizes each Bank, if and to the extent payment owed by such Borrower to such Bank is not made (to such Bank or to the Administrative Agent for such Bank) when due hereunder, to charge from time to time against any or all of such Borrower’s accounts with such Bank any amount so due.

 

(c) All computations of interest based on clause (a) of the definition of “Base Rate” shall be made by the Administrative Agent on the basis of a year of 365 or 366 days, as the case may be, and all computations of interest based on clause (b) or (c) of the definition of “Base Rate” or on the Eurodollar Rate and of all fees (including, without limitation, fees under Sections 2.04(a) and (b)) shall be made by the Administrative Agent, and all computations of interest pursuant to Section 2.08 shall be made by a Bank, in each case on the basis of a year of 360 days for the actual number of days (including the first day but excluding the last day) occurring in the

 

  

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period for which such interest or fees are payable.  Each determination by the Administrative Agent (or, in the case of Section 2.08 hereof, by a Bank) of an interest rate hereunder shall be conclusive and binding for all purposes, absent manifest error.

 

(d) Whenever any payment hereunder shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or fees, as the case may be; provided, however, if such extension would cause payment of interest on or principal of Eurodollar Rate Advances to be made in the next following calendar month, such payment shall be made on the next preceding Business Day.

 

(e) Unless the Administrative Agent shall have received notice from such Borrower prior to the date on which any payment is due to the Banks hereunder from such Borrower that such Borrower will not make such payment in full, the Administrative Agent may assume that such Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each Bank on such due date an amount equal to the amount then due such Bank.  If and to the extent that such Borrower shall not have so made such payment in full to the Administrative Agent, each Bank shall repay to the Administrative Agent forthwith on demand such amount distributed to such Bank together with interest thereon for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to the Administrative Agent, at the Federal Funds Rate.

 

(f) Notwithstanding anything to the contrary contained herein, any amount payable by any Borrower hereunder, other than the principal amount of the Advances, that is not paid when due (whether at stated maturity, by acceleration or otherwise) shall bear interest from the date when due until paid in full at a rate equal at all times to the sum of the Base Rate plus the Applicable Margin in effect for the applicable Borrower, plus 2% per annum, payable upon demand.

 

SECTION 2.15. Sharing of Payments, Etc. 

 

(a) If any Bank shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the Advances made by it (other than pursuant to Section 2.08 or 2.12 hereof) in excess of its ratable share of payments on account of the Advances or Unreimbursed LC Disbursements obtained by all the Banks, such Bank shall forthwith purchase from the other Banks such participations in their Advances or Unreimbursed LC Disbursements (as applicable) as shall be necessary to cause such purchasing Bank to share the excess payment ratably with each of them, provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Bank, such purchase from each Bank shall be rescinded and such Bank shall repay to the purchasing Bank the purchase price to the extent of such recovery together with an amount equal to such Bank’s ratable share (according to the proportion of (i) the amount of such Bank’s required repayment to (ii) the total amount so recovered from the purchasing Bank) of any interest or other amount paid or payable by the purchasing Bank in respect of the total amount so recovered.  The Borrower agrees that any Bank so purchasing a participation from another Bank pursuant to this Section 2.15 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-

 

  

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off) with respect to such participation as fully as if such Bank were the direct creditor of the Borrower in the amount of such participation.

 

(b) If any Bank shall fail to make any payment required to be made by it pursuant to Sections 2.02(a), 2.03(e) or 7.05, then the Administrative Agent may, in its discretion and notwithstanding any contrary provision hereof, (i) apply any amounts thereafter received by the Administrative Agent for the account of such Bank for the benefit of the Administrative Agent and the LC Banks to satisfy such Bank’s obligations to it or them under such Section until all such unsatisfied obligations are fully paid, and/or (ii) hold any such amounts in a segregated account as cash collateral for, and application to, any future funding obligations of such Bank under any such Section in any order as determined by the Administrative Agent in its discretion until all such unsatisfied payment obligations of such Bank are fully paid.

 

SECTION 2.16. Taxes.

 

(a) Any and all payments by each Borrower hereunder shall be made, in accordance with Section 2.14, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges, or withholdings, and all liabilities with respect thereto, excluding, in the case of each Credit Party, federal, state, local or foreign taxes imposed on its net income and franchise taxes imposed on it by the jurisdiction under the laws of which such Credit Party is organized or any political subdivision thereof and, in the case of each Bank, taxes imposed on its overall net income and franchise taxes imposed on it by the jurisdiction of such Bank’s Applicable Lending Office or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as “Taxes”).  If any Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to any Credit Party, (i) the sum payable shall be increased as may be necessary so that after making all required deductions for Taxes (including deductions applicable to additional sums payable under this Section 2.16) such Credit Party receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Borrower shall make such deductions and (iii) such Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law.

 

(b) Each Borrower will indemnify each Credit Party for the full amount of Taxes (including, without limitation, any Taxes imposed by any jurisdiction on amounts payable under this Section 2.16) paid by such Credit Party and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally asserted.  This indemnification shall be made within 30 days from the date such Credit Party makes written demand therefor.

 

(c) Within 30 days after the date of any payment of Taxes by any Credit Party, such Borrower will furnish to the Administrative Agent, at its address referred to in Section 8.02, the original or a certified copy of a receipt evidencing payment thereof.

 

(d) Each Credit Party, within 30 days following receipt of any refund of amounts with respect to Taxes for which such Credit Party was previously indemnified under Section 2.16(a) or (b) (as determined by such Credit Party in its sole discretion), shall pay to each Borrower such refunded amounts.

 

  

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(e) Each Bank that is organized under the laws of a jurisdiction outside of the United States agrees that, on or prior to the date upon which it shall become a party hereto, and upon the reasonable request from time to time of any Borrower or the Administrative Agent, such Bank will deliver to such Borrower and the Administrative Agent duly completed copies of such form or forms as may from time to time be prescribed by the United States Internal Revenue Service indicating that such Bank is entitled to receive payments without deduction or withholding of any United States Federal income taxes, as permitted by the Code.  Each Bank that delivers to any Borrower and the Administrative Agent the form or forms referred to in the preceding sentence further undertakes to deliver to such Borrower and the Administrative Agent further copies of such form or forms, or successor applicable form or forms, as the case may be, as and when any previous form filed by it hereunder shall expire or shall become incomplete or inaccurate in any respect, unless such Bank is no longer permitted under United States law to deliver such form or forms.  Each such Bank represents and warrants that each such form supplied by it to the Administrative Agent and any Borrower pursuant to this subsection (e), and not superseded by another form supplied by it, is or will be, as the case may be, complete and accurate.

 

(f) Any Bank claiming any additional amounts payable pursuant to this Section 2.16 shall use its best efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Applicable Lending Office if the making of such a change would avoid the need for, or reduce the amount of, any such additional amounts which may thereafter accrue and would not, in the reasonable judgment of such Bank, be otherwise disadvantageous to such Bank.

 

(g) Without prejudice to the survival of any other agreement of the Borrowers hereunder, the agreements and obligations of each Borrower contained in this Section 2.16 shall survive the payment in full of principal and interest hereunder.

 

(h) Nothing set forth in this Section 2.16 shall require any Credit Party to disclose to any Borrower any tax return filed by such Person or any Affiliate of such Person.

 

 

ARTICLE III

CONDITIONS PRECEDENT

 

SECTION 3.01. Conditions Precedent to Initial Extension of Credit. 

 

The obligation of each Bank to make its initial Advance to the Parent or UI (each, an “Original Borrower”) and of the LC Banks to issue the initial Letter of Credit for the account of any Original Borrower is subject to the conditions precedent that each of the Administrative Agent, the LC Banks and the Banks shall have received on or before the day of the initial Extension of Credit payment of all fees then due and payable to the Administrative Agent, each LC Bank and the Banks, respectively, and the following, each dated such day, in form and substance satisfactory to the Administrative Agent and (except for the promissory notes referred to in (a) below) in sufficient copies for each Bank:

 

(a) Promissory notes of each Original Borrower payable to the order of each Bank requesting such a note in a form acceptable to the Administrative Agent.

 

  

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(b) Certified copies of the resolutions of the Board of Directors of each Original Borrower approving this Agreement and the other Loan Documents to which such Original Borrower is a party, and of all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Agreement and such other Loan Documents, together with certified copies of the certificate of incorporation and bylaws (or equivalent documents) of each Original Borrower, and a certificate from the Secretary of State of the State of Connecticut (or other appropriate authority of such jurisdiction) evidencing the legal existence of each Original Borrower.

 

(c) A certificate of the Secretary or an Assistant Secretary of each Original Borrower certifying the names and true signatures of the officers of such Original Borrower authorized to sign this Agreement, the other Loan Documents to which such Original Borrower is a party and the other documents to be delivered hereunder and attesting to the accuracy of the representations and warranties of such Original Borrower set forth in Section 4.01.

 

(d) A favorable opinion of Wiggin and Dana LLP, counsel for the Borrowers, substantially in the form of Exhibit D-1 hereto and as to such other matters as any Bank or LC Bank through the Administrative Agent may reasonably request.

 

(e) A favorable opinion of King & Spalding LLP, counsel for the Administrative Agent, substantially in the form of Exhibit E hereto.

 

(f) Evidence that the “Commitments” under, and as defined in, the Old Credit Agreement have been terminated, and all amounts outstanding under the Old Credit Agreement have been paid in full by the Original Borrowers (or will be paid in full upon the application of the proceeds of the initial Borrowings hereunder).

 

(g) A certified copy of the Purchase Agreement which shall be a true, correct and complete copy thereof.

 

(h) Such information as shall be sufficient for the Administrative Agent and each Bank to verify the identity of each Original Borrower for purposes of complying with the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001), as contemplated by Section 8.10 hereof.

 

(i) Such other information or documentation as the Administrative Agent reasonably requests for any Original Borrower.

 

SECTION 3.02. Conditions Precedent to Each Extension of Credit. 

 

The obligation of each Bank to make an Advance on the occasion of each Borrowing (including the initial Borrowing) and of each LC Bank to issue any Letter of Credit (including the initial Letter of Credit) or to amend any Letter of Credit having the effect of extending the stated termination date thereof or increasing the maximum amount available to be drawn thereunder shall be subject to the further conditions precedent that on the date of such Extension of Credit, (i) the applicable Borrower shall certify that the following statements shall be true (and each of the giving of the applicable Notice of Borrowing or Request for Issuance and the acceptance by such Borrower of the proceeds of such Borrowing or the issuance or amendment

 

  

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of such Letter of Credit (as the case may be) shall constitute a representation and warranty by such Borrower that on the date of such Extension of Credit such statements are true):

 

(a) The representations and warranties of such Borrower contained in Section 4.01 (other than the last sentence of subsections (e)(i) and (e)(ii), as applicable, and subsection (g)(ii) thereof, except in the case of the initial Extension of Credit) are true and correct in all material respects on and as of the date of such Extension of Credit, before and after giving effect to such Extension of Credit and to the application of the proceeds therefrom, as though made on and as of such date, and

 

(b) No event has occurred and is continuing, or would result from such Extension of Credit or from the application of the proceeds therefrom, that constitutes an Event of Default or would constitute an Event of Default but for the requirement that notice be given or time elapse or both;

 

and (ii) the Administrative Agent shall have received such other approvals, opinions or documents as any Bank or LC Bank through the Administrative Agent may reasonably request.

 

SECTION 3.03. Conditions Precedent to Initial Extension of Credit to New Borrowers.

 

The obligation of each Bank to make its initial Advance to any of Southern Connecticut, Connecticut Gas and Berkshire Gas (each, a “New Borrower”) and of the LC Banks to issue any Letter of Credit for the account of any New Borrower is subject to the satisfaction of: (i) the conditions precedent with respect to the Original Borrowers set forth in Section 3.01, (ii) the conditions precedent with respect to such New Borrower set forth in Section 3.02 and (iii) the condition precedent that each of the Administrative Agent, the LC Banks and the Banks shall have received the following, each in form and substance satisfactory to the Administrative Agent and (except for the promissory notes referred to in (b) below) in sufficient copies for each Bank:

 

(a) A Joinder Agreement, duly executed by such New Borrower;

 

(b) Promissory notes of such New Borrower payable to the order of each Bank requesting such a note in a form acceptable to the Administrative Agent.

 

(c) Certified copies of the resolutions of the Board of Directors of such New Borrower approving this Agreement and the other Loan Documents to which such New Borrower is a party, and of all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Agreement and such other Loan Documents and the applicable Joinder Agreement, together with certified copies of the certificate of incorporation and bylaws (or equivalent documents) of such New Borrower, and a certificate from the Secretary of state of organization of such New Borrower (or other appropriate authority of such jurisdiction) evidencing the legal existence of such New Borrower.

 

(d) A certificate of the Secretary or an Assistant Secretary of such New Borrower certifying the names and true signatures of the officers of such New Borrower authorized to sign the Joinder Agreement and the other Loan Documents to which such New Borrower is a party

 

 

  

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and the other documents to be delivered hereunder and attesting to the accuracy of the representations and warranties of such New Borrower set forth in Section 4.01.

 

(e) A revised Schedule 4.01(h), with such information regarding such New Borrower as may be required to make the representation and warranty set forth in Section 4.01(h) true and correct with respect to such New Borrower.

 

(f) A revised Schedule 5.02, describing Liens on the property of such New Borrower and its Subsidiaries existing on the date of the execution and delivery of the Joinder Agreement described in subsection (a) above.

 

(g) A favorable opinion of Wiggin and Dana LLP, counsel for the Borrowers, substantially in the form of Exhibit D-2 hereto and as to such other matters as any Bank or LC Bank through the Administrative Agent may reasonably request.

 

(h) Evidence that the commitments under Iberdrola USA, Inc.’s $475,000,000 Second Amended and Restated Credit Agreement, dated as of May 16, 2007, as amended, with respect to each New Borrower, Iberdrola USA, Inc.’s $100,00,000 Intercompany Loan Agreement, dated as of October 20, 2009, as amended, between Southern Connecticut and Energy East Corporation, and Iberdrola USA, Inc.’s $100,000,000 Intercompany Loan Agreement, dated as of October 20, 2009, as amended, between Connecticut Gas and Energy East Corporation, each as described in the Purchase Agreement (as in effect on the date hereof), and such entity’s other liquidity facilities with other financial institutions have been terminated and all amounts outstanding thereunder have been paid in full.

 

(i) Such information as shall be sufficient for the Administrative Agent and each Bank to verify the identity of such New Borrower for purposes of complying with the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001), as contemplated by Section 8.10 hereof.

 

(j) Such other information or documentation as the Administrative Agent reasonably requests for such New Borrower.

 

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

 

SECTION 4.01. Representations and Warranties of Each Borrower.

 

Each Borrower represents and warrants as follows with respect to itself only (x) in the case of each Original Borrower, on the date hereof, (y) in the case of each New Borrower, on the date it executes and delivers a Joinder Agreement pursuant to Section 3.03, and (z) in the case of any Borrower, at such other times as specified herein:

 

(a) Such Borrower is a corporation duly incorporated and validly existing under the laws of the jurisdiction where it is organized and is duly qualified to do business, and is in good standing, in every jurisdiction where the nature of its business requires it to be so qualified.  Except where failure to procure the same will not materially affect the conduct of its business,

 

  

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such Borrower has validly procured and now possesses all franchises, rights, licenses and permits and other similar authorizations which are required for its present operations by each jurisdiction in which it is carrying on any material portion of its business.  Such Borrower is in compliance in all material respects with all applicable laws, rules, regulations and orders (such compliance to include, without limitation, compliance with ERISA, all Environmental Laws and payment of all taxes, assessments and governmental charges imposed upon it or upon its property, except to the extent contested in good faith), non-compliance with which would materially adversely affect the business, operations, affairs, assets, condition, financial or otherwise, or prospects of such Borrower or in any way affect the ability of such Borrower to perform its obligations under this Agreement or any other Loan Document to which such Borrower is a party.

 

(b) The execution, delivery and performance by such Borrower of each Loan Document to which such Borrower is a party and all other instruments and documents to be delivered hereunder, and the transactions contemplated hereby and thereby, are within such Borrower’s corporate powers, have been duly authorized by all necessary corporate action, do not contravene (i) such Borrower’s certificate of incorporation or bylaws or (ii) any law, rule, regulation, order or judgment applicable to, or any contractual restriction binding on or affecting, such Borrower, and do not result in or require the creation of any Lien, security interest or other charge or encumbrance upon or with respect to any of its properties, except pursuant to this Agreement.

 

(c) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by such Borrower of each Loan Document to which such Borrower is a party or any other document or instrument to be delivered by such Borrower hereunder.

 

(d) This Agreement and any other Loan Document to which such Borrower is a party are, and any promissory note when delivered pursuant to Section 2.01(b) will be, the legal, valid and binding obligations of such Borrower enforceable against such Borrower in accordance with their respective terms, except as limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights and (ii) general principles of equity that restrict the availability of equitable remedies.

 

(e) (i)           With respect to the Parent, the consolidated balance sheet (including the notes thereto) of the Parent and its Subsidiaries as at December 31, 2009 and the related consolidated statements of income and retained earnings of the Parent and its Subsidiaries for the fiscal year then ended, audited by PricewaterhouseCoopers LLP, independent public accountants, and the unaudited consolidated balance sheet of the Parent and its Subsidiaries as at September 30, 2010, and the related consolidated statements of income of the Parent and its Subsidiaries for the fiscal quarter then ended, certified by the chief financial officer of the Parent, copies of which have been furnished to each Bank and LC Bank, fairly present (subject, in the case of such balance sheet and statements of income for the fiscal quarter ended September 30, 2010, to normal year-end adjustments) the consolidated financial condition of the Parent and its Subsidiaries as at such dates and the consolidated results of the operations of the Parent and its Subsidiaries for the periods ended on such dates, all in accordance with GAAP.  Except as described in said September 30, 2010 financial statements, since December 31, 2009 there has

 

  

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been no material adverse change in the business, operations, affairs, assets, condition, financial or otherwise, or prospects of the Parent and its Subsidiaries on a consolidated basis.

 

(ii) With respect to UI, the consolidated balance sheet (including the notes thereto) of UI and its Subsidiaries as at December 31, 2009 and the related statements of income and retained earnings of UI and its Subsidiaries for the fiscal year then ended, audited by PricewaterhouseCoopers LLP, independent public accountants, and the unaudited consolidated balance sheet of UI and its Subsidiaries as at June 30, 2010, and the related unaudited consolidated statements of income of UI and its Subsidiaries for the fiscal quarter then ended, copies of which have been furnished to each Bank and LC Bank, fairly present (subject, in the case of such balance sheet and statements of income for the fiscal quarter ended June 30, 2010, to normal year-end adjustments) the financial condition of UI as at such dates and the results of the operations of UI for the periods ended on such dates, all in accordance with GAAP.  Except as described in said June 30, 2010 financial statements, since December 31, 2009 there has been no material adverse change in the business, operations, affairs, assets, condition, financial or otherwise, of UI and its Subsidiaries on a consolidated basis.

 

(iii) With respect to each New Borrower, the consolidated balance sheet (including the notes thereto) of such New Borrower and its Subsidiaries as at December 31, 2009 and the related statements of income and retained earnings of such New Borrower and its Subsidiaries for the fiscal year then ended, audited by PricewaterhouseCoopers LLP, independent public accountants, and the unaudited consolidated balance sheet of such New Borrower and its Subsidiaries as at September 30, 2010, and the related unaudited consolidated statements of income of such New Borrower and its Subsidiaries for the fiscal quarter then ended, copies of which have been furnished to each Bank and LC Bank, fairly present (subject, in the case of such balance sheet and statements of income for the fiscal quarter ended September 30, 2010, to normal year-end adjustments) the financial condition of such New Borrower as at such dates and the results of the operations of such New Borrower for the periods ended on such dates, all in accordance with GAAP.  Except as described in said September 30, 2010 financial statements, since December 31, 2009 there has been no material adverse change in the business, operations, affairs, assets, condition, financial or otherwise, of such New Borrower and its Subsidiaries on a consolidated basis.

 

(f) There has not been any failure by such Borrower or, in the case of the Parent, UI or any other Borrower to file at or prior to the time required any report or other filing with any regulatory or other governmental authority having jurisdiction over it, which failure would materially adversely affect the business, operations, affairs, assets, condition, financial or otherwise, or prospects of such Borrower and its Subsidiaries, taken as a whole.

 

(g) Except as described in the Parent’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009 or in the Parent’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2010 (including in each case, the notes in the financial statements included therein) or in the Purchase Agreement (as in effect on the date hereof), there are neither (i) any actions, suits or proceedings pending or, to the knowledge of such Borrower, threatened against or affecting such Borrower or any of its Subsidiaries or the property of such Borrower or any of

 

  

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its Subsidiaries in any court or before any arbitrator of any kind or before or by any governmental body, nor (ii) any developments or determinations in any such suits or proceedings, which actions, suits, proceedings, developments or determinations may materially adversely affect the business, operations, affairs, assets, condition, financial or otherwise, or prospects of such Borrower and its Subsidiaries, taken as a whole, or that may materially adversely affect the ability of such Borrower to perform its obligations under any Loan Document to which such Borrower is a party.  Neither such Borrower nor, in the case of the Parent, any other Borrower is in default with respect to any order of any court, arbitrator or governmental body, except for defaults with respect to orders of governmental agencies, which defaults are not material to the business or operations of such Borrower or, in the case of the Parent, such other Borrower.

 

(h) Schedule 4.01(h) hereto (as revised pursuant to Section 3.03(e)) is a complete list of all agreements, contracts, arrangements and other obligations imposing restrictions on the ability of any Borrower (other than Parent), to make or declare any dividends or distributions to its shareholders.

 

(i) No proceeds of any Advance will be used by such Borrower to acquire any security in any transaction that is subject to Sections 13 and 14 of the Securities Exchange Act of 1934, other than, in the case of the Parent, the repurchase of stock of the Parent.

 

(j) Such Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System), and no proceeds of any Advance will be used to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock.

 

(k) Such Borrower is not an “investment company” as defined in, or is otherwise subject to regulation under, the Investment Company Act of 1940.

 

(l) No ERISA Event has occurred or is reasonably expected to occur with respect to any Plan which reasonably could be expected to materially adversely affect the business, operations, affairs, assets or condition, financial or otherwise, or prospects of such Borrower and its subsidiaries on a consolidated basis, or the ability of such Borrower to perform its obligations hereunder.  Such Borrower is not an employer under any Multiple-Employer Plan.

 

(m)  Such Borrower and, in the case of the Parent, each other Borrower carries insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which such Borrower and, in the case of the Parent, each other Borrower operates.

 

(n) No Environmental Event has occurred and is continuing except for such Environmental Events as have been disclosed to the Banks and LC Banks in writing, and as do not, in the reasonable opinion of such Borrower, materially adversely affect the assets, liabilities, financial condition, business, operations or prospects of such Borrower.

 

  

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(o) Such Borrower and each of its Subsidiaries has filed all tax returns (Federal, state and local) required to be filed and paid taxes shown thereon to be due, including interest and penalties, or, to the extent such Borrower or such Subsidiary is contesting in good faith an assertion of liability based on such returns, has provided adequate reserves in accordance with generally accepted accounting principles for payment thereof.

 

(p) The information (other than any financial projections) furnished by or on behalf of such Borrower to the Administrative Agent or any Bank or LC Bank in connection with the syndication or negotiation of this Agreement or included herein or delivered pursuant hereto is and will, when taken as a whole, be complete and correct in all material respects and does not and will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not misleading in light of the circumstances under which such statements were or are made.  The financial projections, if any, that have been or will be prepared by such Borrower and made available to the Administrative Agent or any Bank or LC Bank have been or will be prepared in good faith based upon assumptions that management of the Borrowers believes in good faith to be reasonable (it being understood that such projections are subject to significant uncertainties and contingencies, many of which are beyond the Borrowers’ control, and that no assurance can be given that the projections will be realized).

 

 

ARTICLE V

COVENANTS OF THE BORROWERS

 

SECTION 5.01. Affirmative Covenants.

 

So long as any Bank shall have any Commitment hereunder or any Advance or Letter of Credit shall remain outstanding, each Borrower will (with the exception of subsection (k), which shall apply to only the Parent) and the Parent will cause each other Borrower to, unless the Majority Banks shall otherwise consent in writing:

 

(a) Compliance with Laws, Etc.  Comply in all material respects with all applicable laws, rules, regulations and orders (such compliance to include, without limitation, compliance with ERISA and all Environmental Laws), non-compliance with which would materially adversely affect the business, operations, affairs, assets or condition, financial or otherwise, or prospects of such Person or in any way affect the ability of such Borrower to perform its obligations under this Agreement and the other Loan Documents to which such Borrower is a party.

 

(b) Preservation of Corporate Existence.  Preserve and maintain its corporate existence, rights, licenses, permits, franchises and privileges in the jurisdiction of its incorporation, and qualify and remain qualified in good standing as a foreign corporation in each jurisdiction where the failure of such Person to preserve and maintain such existence, rights, franchises, privileges and qualification would materially adversely affect the interests of the Banks or the LC Banks under this Agreement, or the ability of such Borrower to perform its obligations under this Agreement and the other Loan Documents to which such Borrower is a party.

 

  

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(c) Performance and Compliance with Other Agreements.  Perform and comply with each of the material provisions of each indenture, credit agreement, contract or other agreement by which such Person or its properties are bound, non-performance or non-compliance with which would have a material adverse effect upon the business or credit of such Person or in any way affect the ability of such Borrower to perform its obligations under this Agreement and the other Loan Documents to which such Borrower is a party.

 

(d) Maintenance of Insurance.  Maintain insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which such Person operates.

 

(e) Visitation Rights.  Subject to applicable law, during normal business hours and upon reasonable notice, permit the Administrative Agent or any of the Banks or LC Banks or any agents or representatives thereof, to examine and make copies of and abstracts from the records and books of account of, and visit the properties of, such Person and to discuss the affairs, finances and accounts of such Person with any of its officers or directors; provided, that such records and books of accounts and information concerning the affairs, finances and accounts of such Person are not subject to legal privilege that, in the good faith judgment of such Borrower, may be lost or impaired by virtue of such disclosure, and provided, further that if such Borrower’s confidentiality obligations to Persons that are not Affiliates of such Borrower do not permit such Borrower to disclose such records and books of account or such information concerning the affairs, finances and accounts of such Person, then such Borrower shall not be obligated to do so, and provided, further that by requesting any such copy or abstract, by visiting such properties, and by requesting information concerning such affairs, finances and accounts of such Person, the Administrative Agent or any LC Bank or Bank (a “Requesting Person”), or any agent or representative thereof, will be deemed to have agreed that all such information received by the Requesting Person in response to such request or in the course of such visit will constitute “Information”, as defined in Section 8.07, and that the Requesting Person will use such Information in accordance with the provisions of Section 8.07.

 

(f) Keeping of Books.  Keep proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of such Person in accordance with generally accepted accounting principles consistent with those applied in the preparation of the financial statements of such Borrower referred to in Section 4.01(e) hereof.

 

(g) Maintenance of Properties, Etc.  Maintain and preserve all of its properties that are used or useful in the conduct of its business in good working order and condition, ordinary wear and tear excepted.

 

(h) Payment of Taxes, Etc.  Pay and discharge before the same shall become delinquent all taxes, assessments and governmental charges, royalties or levies imposed upon it or upon its property, except to the extent the same are being contested in good faith by appropriate proceedings and for which such Person has set aside adequate reserves in accordance with GAAP for the payment thereof.

 

  

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(i) Reporting Requirements.  Furnish to each of the Banks:

 

(i) as soon as available and in any event within 60 days after the end of each of the first three quarters of each fiscal year of such Borrower, (A) in the case of the Parent, the Parent’s Quarterly Report on Form 10-Q for such fiscal quarter, and (B) in the case of each other Borrower, the unaudited consolidated balance sheet of such Borrower and its Subsidiaries for such fiscal quarter and the related consolidated statements of income for such Borrower and its Subsidiaries, in each case, together with a certificate of the chief financial officer of such Borrower (x) stating that no event has occurred and is continuing that constitutes an Event of Default with respect to such Borrower or would constitute an Event of Default with respect to such Borrower but for the requirement that notice be given or time elapse or both, or, if an Event of Default with respect to such Borrower or an event that would constitute an Event of Default with respect to such Borrower has occurred and is continuing, a statement as to the nature thereof and the action that such Borrower proposes to take with respect thereto and (y) demonstrating compliance with Section 5.03 hereof for and as of the end of such quarter, such demonstration to be in a schedule which sets forth the computations used in demonstrating such compliance;

 

(ii) as soon as available and in any event within 120 days after the end of each fiscal year of such Borrower, (A) in the case of the Parent, the Parent’s Annual Report on Form 10-K for such fiscal year, and (B) in the case of each other Borrower, the consolidated balance sheet of such Borrower and its Subsidiaries for such fiscal year and the related statements of income and retained earnings for such Borrower and its Subsidiaries, audited by PricewaterhouseCoopers LLP (or another nationally recognized accounting firm), in each case, together with a certificate of the chief financial officer of such Borrower (x) stating that no event has occurred and is continuing that constitutes an Event of Default with respect to such Borrower or would constitute an Event of Default with respect to such Borrower but for the requirement that notice be given or time elapse or both, or, if an Event of Default with respect to such Borrower or an event that would constitute an Event of Default with respect to such Borrower has occurred and is continuing, a statement as to the nature thereof and the action that such Borrower proposes to take with respect thereto and (y) demon­strating compliance with Section 5.03 hereof for and as of the end of the last fiscal quarter, such demonstration to be in a schedule which sets forth the computations used in demonstrating such compliance;

 

(iii) promptly after the sending or filing thereof, copies of all reports that such Borrower sends to any of its shareholders and copies of all other reports and registration statements that such Borrower files with the Securities and Exchange Commission or any national securities exchange, other than registration statements relating to employee benefit plans, and to registrations of securities for any selling security holder;

 

(iv) promptly after the filing or receiving thereof, copies of all reports and notices with respect to any Reportable Event defined in Article IV of ERISA that such Borrower files under ERISA with the Internal Revenue Service or the PBGC or the U.S. Department of Labor or which such Borrower receives from the PBGC;

 

  

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(v) as soon as possible and in any event within five days after the occurrence of each Event of Default applicable to such Borrower or each event that, with the giving of notice or lapse of time or both, would constitute an Event of Default applicable to such Borrower, the statement of the chief financial officer or chief accounting officer of such Borrower setting forth details of such Event of Default or event and the action that such Borrower proposes to take with respect thereto;

 

(vi) as soon as possible and in any event within five days after the commencement thereof or any adverse determination or development therein, notice of all actions, suits and proceedings that may adversely affect such Borrower’s ability to perform its obligations under the Agreement; and

 

(vii) subject to applicable law, during normal business hours and upon reasonable notice, such other information, documents, records or reports respecting the business, operations, affairs, assets or condition, financial or otherwise, or prospects of such Borrower or LC Bank as any Bank through the Administrative Agent may from time to time reasonably request; provided, that such records and books of accounts and information concerning the affairs, finances and accounts of such Person are not subject to legal privilege that, in the good faith judgment of such Borrower, may be lost or impaired by virtue of such disclosure, and provided, further that if such Borrower’s confidentiality obligations to Persons that are not Affiliates of such Borrower do not permit such Borrower to disclose such records and books of account or such information concerning the affairs, finances and accounts of such Person, then such Borrower shall not be obligated to do so, and provided, further that by requesting any such information, documents, records or reports, the Requesting Person will be deemed to have agreed that the Requesting Person will use the information, documents, records or reports received in response to such request for the Requesting Person’s own use in connection with this Agreement, and will keep such information, documents, records or reports confidential and will not (except as required by applicable law, regulation or legal or audit  process), without such Borrower’s prior written consent, disclose any of such information, documents, records or reports to any third person in any manner whatsoever.

 

(j) Use of Proceeds.  Use the proceeds of Advances for general corporate purposes including, among other things, supporting the commercial paper program and the money market loan program of such Borrower or the repurchase of stock of the Parent.

 

(k) Ownership of Subsidiaries.  The Parent will own at all times, directly or indirectly and free and clear of all Liens, 100% of the capital stock or other ownership interest of UI and each New Borrower following the acquisition of such New Borrower by the Parent or any of its Subsidiaries, other than preferred stock of UI, Connecticut Gas, Southern Connecticut and Berkshire Gas issued and outstanding from time to time.

 

SECTION 5.02. Negative Covenants.

 

So long as any Bank shall have any Commitment hereunder or any Advance or Letter of Credit shall remain outstanding, such Borrower, with the exception of subsections (c) and (e),

 

 

  

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which shall apply to only the Parent, will not, and the Parent will not cause or permit any other Borrower to, without the written consent of the Majority Banks:

 

(a) Liens, Etc.  Create, assume or suffer to exist any mortgage, deed of trust, pledge, lien, security interest or other charge or encumbrance, or any other type of preferential arrangement (each of the foregoing, a “Lien”), upon or with respect to any of its properties or rights, whether now owned or hereafter acquired, or assign as collateral any right to receive income, services or property; provided, however, that the following shall be permitted to exist:

 

(i) Liens for taxes, assessments or governmental charges not delinquent;

 

(ii) Liens for workmen’s compensation awards and similar obligations not delinquent;

 

(iii) Liens for taxes, assessments or governmental charges delinquent but the validity of which is being contested at the time in good faith by appropriate proceedings;

 

(iv) Liens existing upon any property acquired by such Person in the ordinary course of business (other than any such Lien created in contemplation of such acquisition);

 

(v) Liens arising in connection with sales or transfers of, or financings secured by, accounts receivable or related contracts;

 

(vi) Liens securing obligations incurred in the ordinary course of business in respect of any interest rate, currency or commodity swap or hedge or any other interest rate, currency or commodity risk protection arrangement;

 

(vii) Liens in respect of property of any Borrower or any Subsidiary of such Borrower (A) existing on the date hereof (in the case of each Original Borrower) and described in Schedule 5.02 or (B) existing on the date of the Purchase Agreement and as permitted by such agreement (in the case of any New Borrower);

 

(viii) Liens in respect of property acquired or constructed by any Borrower or any Subsidiary of such Borrower after the date hereof that are created at the time of or within 120 days after acquisition or completion of construction of such property to secure Debt assumed or incurred to finance all or any part of the purchase price or cost of construction of such property, provided that in any such case (A) no such Lien shall extend to or cover any other property of such Borrower or any Subsidiary of such Borrower, as the case may be, and (B) the aggregate principal amount of Debt secured by all such Liens in respect of any such property shall not exceed the cost of such property and any improvements then being financed;

 

(ix) extensions, renewals or replacements of any Liens permitted by clause (vii) or (viii) above (including successive extensions, renewals and replacements), provided in each case that the principal amount of Debt (or the maximum commitment therefore) secured by any such Lien is not increased and such Lien does not extend to or

 

 

  

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cover any property other than the property covered by such Lien on the date of such extension, renewal or replacement; and

 

(x) Liens created by or resulting from litigation or legal proceedings that are currently being contested in good faith by appropriate proceedings and do not involve amounts that in the aggregate would exceed $10,000,000; and

 

(xi) Liens incidental to the normal conduct of the business of any Borrower or any Subsidiary of such Borrower or the ownership of its property that are not incurred in connection with the incurrence of Debt and that do not in the aggregate materially impair the use of such property in the operation of the business of such Borrower and its Subsidiaries taken as a whole or the value of such property for the purposes of such business.

 

(b) Mergers, Sale of Assets, Etc.  Merge or consolidate with any Person or sell, assign, lease, transfer or otherwise dispose of, (whether in one transaction or a series of transactions) all or substantially all of its assets or properties (whether now owned or hereafter acquired) or any material asset or property to any Person, except for the following (with such exceptions not being intended to characterize the assets described therein as “material” or otherwise):  (i) dispositions of receivables; (ii) dispositions arising in the ordinary course of its business as conducted on the date hereof; (iii) dispositions of assets having an aggregate fair market value of less than $20,000,000 in connection with sale leaseback transactions with respect to such assets where such Borrower or one of its Subsidiaries is the lessee of such assets; (iv) the merger of any Subsidiary of such Borrower into any other Subsidiary of such Borrower; and (v) the sale of UI’s Electric Systems Work Center Facility located in Shelton, Connecticut.

 

(c) Dividend Restrictions.  Cause or permit any other Borrower or any Subsidiary of the Parent that directly or indirectly owns equity interests in any Borrower to enter into any agreement, contract, arrangement or other obligation if the effect of such agreement, contract, arrangement or other obligation is to impose any restriction on the ability of such Person to make or declare any dividends or distributions to its shareholder that is more restrictive than any such restriction existing on the date hereof.

 

(d) Change in Nature of Business.  Make any material change in the nature of its business as conducted on the date hereof.

 

(e) Additional Debt of Parent.  The Parent shall not create, incur, assume or suffer to exist any Debt, other than (i) Debt (including the Advances of the Parent) of up to $525,000,000 to finance the acquisition of Southern Connecticut, Connecticut Gas and Berkshire Gas and (ii) additional Debt (including the Advances of the Parent) not exceeding $400,000,000 in an aggregate principal amount at any one time outstanding.

 

SECTION 5.03. Financial Covenant.

 

So long as any Bank shall have any Commitment hereunder or any Advance or Letter of Credit shall remain outstanding, each Borrower will maintain a ratio of Consolidated Debt to Consolidated Capital, as of the last day of each March, June, September and December, of not greater than 0.65 to 1.00.

 

  

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ARTICLE VI

EVENTS OF DEFAULT

 

SECTION 6.01. Events of Default.

 

If any of the following events (as to the applicable Borrower, except, in the case of subsection (j), which shall apply to all Borrowers, an “Event of Default”) shall occur and be continuing with respect to any Borrower:

 

(a) Such Borrower shall fail to pay any principal of any Advance when due, or shall fail to pay any interest on any Advance or any facility fees, Letter of Credit Fees or other amounts payable hereunder or under any other Loan Document within 3 Business Days of when due; or

 

(b) Any representation or warranty made, or deemed made, by such Borrower herein or by such Borrower (or any of its officers) in connection with this Agreement shall prove to have been incorrect in any material respect when made or deemed made; or

 

(c) Such Borrower shall fail to perform or observe any of the covenants and agreements contained in Section 5.01(i)(v), Section 5.02 or Section 5.03; or

 

(d) Such Borrower shall fail to perform or observe any other term, covenant or agreement contained in this Agreement or in any other Loan Document on its part to be performed or observed and any such failure shall remain unremedied for 10 days after written notice thereof shall have been given to such Borrower by the Administrative Agent or any Bank or LC Bank; or

 

(e) Such Borrower or, in the case of the Parent, any other Borrower shall fail to pay when due any interest or principal due with respect to any Debt outstanding in the principal or notional amount of at least $10,000,000, or any interest or premium thereon in an aggregate amount of at least $10,000,000, when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt; or any other default under any agreement or instrument relating to any such Debt, or any other event, shall occur and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such default or event is to accelerate, or to permit the acceleration of, the maturity of such Debt; or any such Debt shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), prior to the stated maturity thereof; or

 

(f) Such Borrower or, in the case of the Parent, any other Borrower shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against such Person seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debts, or seeking the entry of an order for relief or the appointment of a receiver,

 

  

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trustee or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against such Person (but not instituted by such Person) such proceeding shall continue undismissed or unstayed for a period of 30 days, or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, such Person or any substantial part of the property of such Person) shall occur or such Person shall consent to or acquiesce in any such proceeding; or such Person shall take any corporate action to authorize any of the actions set forth above in this subsection; or

 

(g) Any judgment or order for the payment of money in excess of $10,000,000 shall be rendered against the Borrower or, in the case of the Parent, any other Borrower and enforcement proceedings shall have been commenced by any creditor upon such judgment or order or there shall be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or

 

(h) Any ERISA Event shall have occurred with respect to a Plan and, 30 days after notice thereof shall have been given to such Borrower by the Administrative Agent or any Bank, such ERISA Event shall still exist; or

 

(i) An Environmental Event shall have occurred that materially adversely affects the assets, liabilities, financial condition, business, operations or prospects of such Borrower; or

 

(j) A Change of Control shall occur;

 

then, and in any such event, (i) each Eurodollar Rate Advance then outstanding to such Borrower will, at the end of the Interest Period applicable to such Advance, Convert to a Base Rate Advance and (ii) the Administrative Agent (A) shall at the request, or may with the consent, of the Majority Banks, declare the obligation of each Bank to make Advances to such Borrower and of each LC Bank to issue or amend Letters of Credit for the account of such Borrower, to be terminated, whereupon the same shall forthwith terminate, and (B) shall at the request, or may with the consent, of the Majority Banks, by notice to such Borrower, declare the Advances (if any) of such Borrower, all interest thereon and all other amounts payable by such Borrower under this Agreement and each other Loan Document to which such Borrower is a party to be forthwith due and payable, whereupon such Advances, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by each Borrower; provided, however, that in the event of an actual or deemed entry of an order for relief with respect to any Borrower under the Federal Bankruptcy Code, (A) the obligation of each Bank to make Advances to such Borrower and of each LC Bank to issue or amend Letters of Credit for the account of such Borrower, shall automatically be terminated and (B) the Advances, all such interest and all such other amounts payable by such Borrower shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by each Borrower.

 

SECTION 6.02. Cash Collateral Account.

 

  

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Notwithstanding anything to the contrary contained herein, no notice given or declaration made by the Administrative Agent pursuant to Section 6.01 shall affect the obligation of any LC Bank to make any payment under any Letter of Credit in accordance with the terms of such Letter of Credit; provided, however, that upon the occurrence and during the continuance of any Event of Default with respect to any Borrower, the Administrative Agent shall at the request, or may with the consent, of the Majority Banks, upon notice to such Borrower, require such Borrower to deposit with the Administrative Agent an amount in the cash collateral account (such Borrower’s “Cash Collateral Account”) described below equal to the aggregate maximum amount available to be drawn under all Letters of Credit issued for the account of such Borrower and outstanding at such time; provided, however, that in the event of an actual or deemed entry of an order for relief with respect to any Borrower under the Federal Bankruptcy Code, such Borrower shall automatically deposit with the Administrative Agent in the Cash Collateral Account an amount equal to the aggregate maximum amount available to be drawn under all Letters of Credit issued for the account of such Borrower and outstanding at such time, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by each Borrower.  Such Cash Collateral Account shall at all times be free and clear of all rights or claims of third parties.  Each Cash Collateral Account shall be maintained with the Administrative Agent in the name of, and under the sole dominion and control of, the Administrative Agent, and amounts deposited in each Cash Collateral Account shall bear interest at a rate equal to the rate generally offered by the Administrative Agent for deposits equal to the amount deposited by such Borrower in its Cash Collateral Account, for a term to be determined by the Administrative Agent in its sole discretion.  Each Borrower hereby grants to the Administrative Agent for the benefit of the Banks and the LC Banks a Lien on, and hereby assigns to the Administrative Agent for the benefit of the Banks and the LC Banks all of its right, title and interest in, such Borrower’s Cash Collateral Account and all funds from time to time on deposit therein to secure its reimbursement obligations in respect of Letters of Credit issued for the account of such Borrower.  If any drawings then outstanding or thereafter made are not reimbursed in full immediately upon demand or, in the case of subsequent drawings, upon being made, then, in any such event, the Administrative Agent may, and, upon such Borrower’s request, shall, apply the amounts then on deposit in such Borrower’s Cash Collateral Account, in such priority as the Administrative Agent shall elect, toward the payment in full of any or all of such Borrower’s obligations hereunder as and when such obligations shall become due and payable.  Upon the earlier to occur of (i) payment in full, after the termination of the Letters of Credit issued for the account of a Borrower, of all such obligations and (ii) the date on which all Events of Default with respect to such Borrower shall have been cured or waived, the Administrative Agent will repay and reassign to such Borrower any cash then on deposit in such Borrower’s Cash Collateral Account, and the Lien of the Administrative Agent on such Cash Collateral Account and the funds therein shall automatically terminate.

 

 

ARTICLE VII

THE ADMINISTRATIVE AGENT

 

SECTION 7.01. Authorization and Action.

 

Each Bank and LC Bank hereby appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are

 

  

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delegated to the Administrative Agent by the terms hereof, together with such powers as are reasonably incidental thereto.  As to any matters not expressly provided for by this Agreement, the Administrative Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Majority Banks, and such instructions shall be binding upon all Banks and LC Banks; provided, however, that the Administrative Agent shall not be required to take any action that exposes the Administrative Agent to personal liability or which is contrary to this Agreement or applicable law.

 

SECTION 7.02. Administrative Agent’s Reliance, Etc.

 

Neither the Administrative Agent nor any of its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement, except for its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, the Administrative Agent: (i) may treat the payee of any promissory note delivered pursuant to Section 2.01(b) as the holder thereof until the Administrative Agent receives written notice of the assignment or transfer thereof signed by such payee and in form reasonably satisfactory to the Administrative Agent; (ii) may consult with legal counsel (including counsel for the Borrowers), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (iii) makes no warranty or representation to any Bank  or LC Bank and shall not be responsible to any Bank or LC Bank for any statements, warranties or representations made in or in connection with this Agreement; (iv) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement on the part of any Borrower or to inspect the property (including the books and records) of any Borrower or any of its subsidiaries; (v) shall not be responsible to any Bank or LC Bank for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; and (vi) shall incur no liability under or in respect of this Agreement by acting upon any notice, consent, certificate or other instrument or writing (which may be by telecopier, telegram, cable or telex) believed by it to be genuine and signed or sent by the proper party or parties.

 

SECTION 7.03. JPMorgan and Affiliates.

 

With respect to its Commitment, and the Advances made by it, JPMorgan shall have the same rights and powers under this Agreement as any other Bank or LC Bank, as applicable, and may exercise the same as though it were not the Administrative Agent; and the terms “Bank”, “Banks”, “LC Bank” and “LC Banks” shall, unless otherwise expressly indicated, include JPMorgan in its individual capacity.  JPMorgan and its Affiliates may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of business with, any Borrower, any of its Subsidiaries and any Person who may do business with or own securities of any Borrower or any such Subsidiary, all as if JPMorgan were not the Administrative Agent and without any duty to account therefor to the Banks or LC Banks.

 

SECTION 7.04. Bank Credit Decision.

 

  

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Each Bank and LC Bank acknowledges that it has, independently and without reliance upon the Administrative Agent, any other Bank or LC Bank or any Person identified in this Agreement as a Joint Lead Arranger or a Syndication Agent and based on the financial statements referred to in Section 4.01 hereof and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement.  Each Bank and LC Bank also acknowledges that it will, independently and without reliance upon the Administrative Agent, any other Bank or LC Bank or any Person identified in this Agreement as a Joint Lead Arranger or a Syndication Agent and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement.

 

SECTION 7.05. Indemnification.

 

The Banks agree to indemnify the Administrative Agent and each LC Bank (to the extent not reimbursed by the Borrowers), ratably according to the respective principal amounts of the Advances held by each of them (or if no Advances are at the time outstanding, ratably according to their Commitment Percentages), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against the Administrative Agent or such LC Bank, as the case may be, in any way relating to or arising out of this Agreement or any action taken or omitted by the Administrative Agent or such LC Bank, as the case may be, under this Agreement, provided that no Bank shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Administrative Agent’s gross negligence or willful misconduct.  Without limitation of the foregoing, each Bank agrees to reimburse the Administrative Agent or such LC Bank, as the case may be, promptly upon demand for its ratable share of any out-of-pocket expenses (including counsel fees) incurred by the Administrative Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, to the extent that the Administrative Agent or such LC Bank, as the case may be, is not reimbursed for such expenses by the Borrowers.

 

SECTION 7.06. Successor Administrative Agent.

 

The Administrative Agent may resign at any time by giving written notice thereof to the Banks and the Borrowers and may be removed at any time with or without cause by the Majority Banks.  Upon any such resignation or removal, the Majority Banks shall have the right to appoint a successor Administrative Agent.  If no successor Administrative Agent shall have been so appointed by the Majority Banks, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent’s giving of notice of resignation or the Majority Banks’ removal of the retiring Administrative Agent, then the retiring Administrative Agent may, on behalf of the Banks, appoint a successor Administrative Agent, which shall be a commercial bank organized under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $250,000,000.  Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights,

 

  

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powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement.  After any retiring Administrative Agent’s resignation or removal hereunder as Administrative Agent, the provisions of this Article VII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement.

 

SECTION 7.07. Other Agents.

 

No Person identified in this Agreement as a Joint Lead Arranger or a Syndication Agent shall have any right, power, obligation, liability, responsibility or duty under this Agreement except in its capacity as a Bank or an LC Bank.  Without limiting the foregoing, no such Person shall have or be deemed to have a fiduciary relationship with any Bank.

 

 

ARTICLE VIII

MISCELLANEOUS

 

SECTION 8.01. Amendments, Etc.

 

No amendment or waiver of any provision of this Agreement or any other Loan Document, nor consent to any departure by any Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Majority Banks, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, waiver or consent shall, unless in writing and signed by all the Banks, do any of the following:  (i) waive any of the conditions specified in Section 3.01, 3.02 or 3.03 hereof, (ii) except as provided in Section 2.05(b) or 8.11, increase the Commitment of any Bank or subject any Bank to any additional obligations, (iii) reduce the principal of, or interest on, the outstanding Advances or any fees, Letter of Credit reimbursement obligations or other amounts payable hereunder or under any other Loan Document, (iv) except as provided in Section 8.11, postpone any date fixed for any payment of principal of, or interest on, the outstanding Advances or any fees, Letter of Credit reimbursement obligations or other amounts payable hereunder or under any other Loan Document, (v) except as provided in Section 8.11, change the percentage of the Commitments or of the aggregate unpaid principal amount of the outstanding Advances, or the number of Banks, that shall be required for the Banks or any of them to take any action hereunder or (vi) amend the definition of Majority Banks or this Section 8.01; and provided, further, that (A) no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Banks required above to take such action, affect the rights or duties of the Administrative Agent under this Agreement, (B) no amendment, waiver or consent shall, unless in writing and signed by the affected LC Bank in addition to the Banks required above to take such action, affect the rights or duties of such LC Bank under this Agreement, and (C) this Agreement may be amended and restated without the consent of any Bank, LC Bank or the Administrative Agent if, upon giving effect to such amendment and restatement, such Bank, LC Bank or the Administrative Agent, as the case may be, shall no longer be a party to this Agreement (as so amended and restated) or have any Commitment or other obligation hereunder or under any Letter of Credit and shall have been paid in full all amounts payable hereunder and each other Loan Document to such Bank, LC Bank or the Administrative Agent, as the case may be.

 

  

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SECTION 8.02. Notices, Etc.

 

(a)           All notices and other communications provided for hereunder shall be in writing (including telegraphic communication) and mailed, telecopied, telexed, telegraphed or delivered, if to any Borrower, at its address at 157 Church Street, P.O. Box 1564, New Haven, Connecticut 06506-0901, Attention:  Treasurer; telecopy no. 203-499-2414; if to any Bank, at its Domestic Lending Office specified opposite its name on Schedule I hereto; if to any LC Bank, to it at such address as shall be designated by such LC Bank in a written notice to the other  parties; and if to the Administrative Agent, at its address at 10 South Dearborn, Chicago, Illinois 60603, Letter of Credit Servicing Team, Attention: Jetuan A. Patterson, Telecopy Number. (312) 385-7107; or, as to each party, at such other address as shall be designated by such party in a written notice to the other parties, provided that materials required to be delivered pursuant to Section 5.01(i)(i), (ii) or (iii) shall be delivered to the Administrative Agent as specified in Section 8.02(b) or as otherwise specified to the Borrowers by the Administrative Agent.  All such notices and communications shall, when mailed, telecopied, telexed, telegraphed or e-mailed, be effective when deposited in the mails, sent by telecopy or telex, delivered to the telegraph company or confirmed by e-mail, respectively, addressed as aforesaid, except that notices and communications delivered pursuant to Article II or VII shall not be effective until received.

 

(b)           So long as JPMorgan or any of its Affiliates is the Administrative Agent, materials required to be delivered pursuant to Section 5.01(i)(i), (ii) and (iii) shall be delivered to the Administrative Agent in an electronic medium in a format acceptable to the Administrative Agent and the Banks by e-mail at large.corporate.agency@jpmchase.com.  The Borrowers agree that the Administrative Agent may make such materials, as well as any other written information, documents, instruments and other material relating to the Borrowers, any of their Subsidiaries or any other materials or matters relating to this Agreement or any of the transactions contemplated hereby (collectively, the “Communications”) available to the Banks by posting such notices on Intralinks or a substantially similar electronic system (the “Platform”).  The Borrowers acknowledge that (i) the distribution of material through an electronic medium is not necessarily secure and that there are confidentiality and other risks associated with such distribution, (ii) the Platform is provided “as is” and “as available” and (iii) neither the Administrative Agent nor any of its Affiliates warrants the accuracy, adequacy or completeness of the Communications or the Platform and each expressly disclaims liability for errors or omissions in the Communications or the Platform.  No warranty of any kind, express, implied or statutory, including, without limitation, any warranty of merchantability, fitness for a particular purpose, non-infringement of third party rights or freedom from viruses or other code defects, is made by the Administrative Agent or any of its Affiliates in connection with the Platform.

 

SECTION 8.03. No Waiver; Remedies.

 

No failure on the part of any Bank, any LC Bank or the Administrative Agent to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right.  The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

 

  

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SECTION 8.04. Costs, Expenses, Taxes and Indemnification.

 

(a) Each Borrower agrees to pay on demand all reasonable costs and expenses in connection with the preparation, execution, delivery, modification and amendment of this Agreement and the other documents to be delivered hereunder, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Administrative Agent and each LC Bank with respect thereto and with respect to advising the Administrative Agent as to its rights and responsibilities under this Agreement and the other Loan Documents.  Each Borrower further agrees to pay on demand all costs and expenses of the Administrative Agent, the Banks and the LC Banks, if any (including, without limitation, reasonable fees and expenses of counsel for the Administrative Agent and counsel for each Bank and LC Bank), in connection with the enforcement (whether through negotiations, legal proceedings or otherwise) of this Agreement and the other documents to be delivered hereunder, including, without limitation, reasonable counsel fees and expenses of the Administrative Agent, the Banks and the LC Banks in connection with the enforcement of rights under this Section 8.04(a).  In addition, each Borrower shall pay any and all stamp and other taxes payable or determined to be payable in connection with the execution and delivery of this Agreement and the other documents to be delivered hereunder, and agrees to save the Administrative Agent and each Bank, LC Bank and their Affiliates harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such taxes.

 

(b) If any payment of principal of, or Conversion of, any Eurodollar Rate Advance of any Borrower is made other than on the last day of the Interest Period for such Eurodollar Rate Advance, as a result of a payment or Conversion pursuant to Section 2.09(f), 2.12 or 2.13 hereof, or any acceleration of the maturity of the Advances of any Borrower pursuant to Section 6.01 hereof or if any Borrower fails to borrow or Convert (including, without limitation, failure to borrow or Convert resulting from any failure to fulfill on the date specified for such Borrowing or Conversion the applicable conditions set forth in Article III hereof) in accordance with notices delivered pursuant to Section 2.02 or 2.10 hereof or for any other reason, such Borrower shall, upon demand by any Bank (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Bank any amounts required to compensate such Bank for any additional losses, costs or expenses which it may reasonably incur as a result of such payment or Conversion, including, without limitation, any loss (including loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by any Bank to fund or maintain such Eurodollar Rate Advance.

 

(c) Each Borrower hereby agrees to indemnify and hold harmless each Bank, each LC Bank the Administrative Agent, counsel to the Administrative Agent and their respective officers, directors, partners, employees, Affiliates and advisors (each, an “Indemnified Person”) from and against any and all claims, damages, losses, liabilities, costs, or expenses (including reasonable attorney’s fees and expenses, whether or not such Indemnified Person is named as a party to any proceeding or is otherwise subjected to judicial or legal process arising from any such proceeding and whether or not such proceeding is brought by such Borrower or any of its Affiliates or any of their respective directors, securityholders or creditors, an Indemnified Person or any other Person) that any of them may incur or which may be claimed against any of them by any Person:

 

  

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(i) by reason of or in connection with the execution, delivery, or performance of this Agreement, or the use by each Borrower of the proceeds of any Advance or any Letter of Credit; and

 

(ii) in connection with or resulting from the utilization, storage, disposal, treatment, generation, transportation, release, or ownership of any Hazardous Material (A) at, upon, or under any property of each Borrower or any of its Affiliates or (B) by or on behalf of each Borrower or any of its Affiliates at any time and in any place.

 

(d) Each Borrower’s obligations under this Section 8.04 shall survive the repayment of all amounts owing to the Banks, the LC Bank and the Administrative Agent hereunder and the termination of the Commitments and the expiry of all Letters of Credit.  If and to the extent that the obligations of any Borrower under this Section 8.04 are unenforceable for any reason, such Borrower agrees to make the maximum contribution to the payment and satisfaction thereof which is permissible under applicable law.

 

(e) To the extent permitted by applicable law, no Borrower shall assert, and each Borrower hereby waives, any claim against any Indemnified Person, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any transaction, agreement or instrument contemplated hereby, any Advance or any Letter of Credit or the use or intended use of the proceeds thereof.

 

SECTION 8.05. Right of Set-off.

 

Upon the occurrence and during the continuance of any Event of Default with respect to any Borrower, each Bank and each LC Bank is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Bank or such LC Bank, as the case may be, to or for the credit or the account of such Borrower against any and all of the obligations of such Borrower now or hereafter existing under this Agreement and the other Loan Documents, whether or not such Bank or such LC Bank, as the case may be, shall have made any demand under this Agreement or such other Loan Documents and although such obligations may be unmatured.  Each Bank and each LC Bank agrees promptly to notify such Borrower after any such set-off and application made by such Bank or such LC Bank, as the case may be, provided that the failure to give such notice shall not affect the validity of such set-off and application.  The rights of each Bank and each LC Bank under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) that such Bank or such LC Bank, as the case may be, may have.

 

SECTION 8.06. Binding Effect; Participations and Assignments; No Fiduciary Relationship.

 

(a) This Agreement shall become effective when it shall have been executed by the Original Borrower and the Administrative Agent and when the Administrative Agent shall have been notified by each Bank and LC Bank that such Bank and LC Bank has executed it and thereafter shall be binding upon and inure to the benefit of the Original Borrowers, the

 

  

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Administrative Agent, each Bank and each LC Bank and their respective successors and assigns, except that the Original Borrowers shall not have the right to assign their respective rights hereunder or any interest herein without the prior written consent of the Banks.  This Agreement shall become effective as to a New Borrower when such New Borrower shall have executed a Joinder Agreement accepted by the Administrative Agent, and thereafter this Agreement shall be binding upon and inure to the benefit of such New Borrower, except that such New Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Banks.

 

(b) Each Bank may sell participations to one or more banks or other entities in or to all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment and the Advances owing to it); provided, however, that (i) such Bank’s obligations under this Agreement (including, without limitation, its Commitment to the Borrowers hereunder) shall remain unchanged, (ii) such Bank shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) such Bank shall remain the holder of any promissory notes held pursuant to Section 2.01(b) for all purposes of this Agreement, (iv) the Borrowers, the Administrative Agent, the other Banks and the LC Banks shall continue to deal solely and directly with such Bank in connection with such Bank’s rights and obligations under this Agreement, and (v) such Bank shall retain the sole right to enforce the obligations of the Borrowers under this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement (other than amendments, modifications or waivers (x) decreasing any fees payable hereunder or the amount of principal of, or the rate at which interest is payable on, the Advances, (y) extending any scheduled principal payment date or date fixed for the payment of interest on the Advances or (z) extending the Commitments).

 

(c) Any Bank shall have the right to assign its Commitment, Advances and other rights and obligations hereunder, with the prior consent of the Borrowers (which consent shall not be unreasonably withheld and which consent shall not be required if and for so long as an Event of Default has occurred and is continuing), and the Administrative Agent and each LC Bank (which consents shall not be unreasonably withheld), in accordance with subsection (e) below; provided that each assignment shall be in a minimum amount of $10,000,000 and in increments of $1,000,000 in excess thereof (or the total amount of such assigning Bank’s Commitment, Advances and other rights and obligations hereunder); and further provided that no Borrower shall be responsible for any costs or expenses relating to such assignment.

 

(d) If any Bank shall have made a demand for compensation under Section 2.12 or 2.16 hereof or shall become a Defaulting Bank, then within 15 days of such demand for compensation (and without relieving the applicable Borrower of its obligation to pay such compensation, if applicable) or such Bank’s becoming a Defaulting Bank, the applicable Borrower may demand that such Bank assign (at the cost and expense of such Borrower) in accordance with this Section, to an assignee designated by such Borrower and reasonably acceptable to the Administrative Agent and each LC Bank, all (but not less than all) of such Bank’s Commitment, Advances and other rights and obligations hereunder; provided, (i) that any such demand by such Borrower during the continuance of an Event of Default or an event which with the giving of notice or the passage of time, or both, would constitute an Event of Default, shall be ineffective without the consent of such Bank and the Majority Banks and (ii) as of the

 

  

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effective date of any assignment pursuant to this Section 8.06(d), such Borrower shall have satisfied all of its obligations under this Agreement with respect to the assigning Bank and paid all costs and expenses relating to such assignment.  If within the period ending on the later to occur of the date 30 days from the date of such Borrower’s demand and the last day of the longest of the then current Interest Periods for such Advances, any such assignee so designated shall fail to consummate such assignment for any reason, or if such Borrower shall fail to designate an assignee reasonably acceptable to the Administrative Agent and each LC Bank, then such demand by such Borrower shall become ineffective.  Notwithstanding anything set forth above in this subsection (d) to the contrary, no Borrower shall be entitled to compel such an assignment by any Bank making a demand for compensation under Section 2.12(a) hereof if, prior to or promptly following any such demand by such Borrower, such Bank shall have changed or shall change its Applicable Lending Office for its Eurodollar Rate Advances so as to eliminate the further incurrence of such increased cost.

 

(e) Upon its receipt of an assignment agreement executed by an assigning Bank and an assignee pursuant to subsection (c) or (d) above and, if the assignee is not a party to this Agreement immediately prior to such assignment, a $3,500 administrative fee, the Administrative Agent shall (i) accept such assignment agreement, (ii) record the information contained therein in its records and (iii) give prompt notice thereof to the Borrowers; provided, however, such administrative fee shall not be required if the proposed assignee is an Affiliate of an assigning Bank.

 

(f) By executing and delivering an assignment agreement, the Bank assignor thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows:  (i) other than as provided in such assignment agreement, such assigning Bank makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or any other instrument or document furnished pursuant hereto or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; (ii) such assigning Bank makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Borrower or the performance or observance by any Borrower of any of its obligations under this Agreement or any other instrument or document furnished pursuant hereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Section 4.01(e) hereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such assignment agreement; (iv) such assignee will, independently and without reliance upon the Administrative Agent, such assigning Bank or any other Bank or LC Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers as are reasonably incidental thereto; and (vi) such assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement are required to be performed by it as a Bank.

 

  

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(g) Notwithstanding anything to the contrary contained herein, any Bank (a “Granting Bank”) may grant to a special purpose funding vehicle (an “SPC”) of such Granting Bank identified as such in writing from time to time by the Granting Bank to the Administrative Agent and the Borrowers, the option to provide to the Borrowers all or any part of any Advance that such Granting Bank would otherwise be obligated to make to the Borrowers pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any such SPC to make any Advance, (ii) if such SPC elects not to exercise such option or otherwise fails to provide all or any part of such Advance, the Granting Bank shall be obligated to make such Advance pursuant to the terms hereof and (iii) no SPC or Granting Bank shall be entitled to receive any greater amount pursuant to Section 2.08, 2.12 or 2.16 than the Granting Bank would have been entitled to receive had the Granting Bank not otherwise granted such SPC the option to provide any Advance to the Borrowers.  The making of an Advance by an SPC hereunder shall utilize the Commitment of the Granting Bank to the same extent, and as if, such Advance were made by such Granting Bank.  Each party hereto hereby agrees that no SPC shall be liable for any indemnity or similar payment obligation under this Agreement for which a Bank would otherwise be liable so long as, and to the extent that, the related Granting Bank provides such indemnity or makes such payment.  In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior indebtedness of any SPC, it will not institute against or join any other person in instituting against such SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under the laws of the United States or any State thereof.  Notwithstanding the foregoing, the Granting Bank unconditionally agrees to indemnify each Borrower, the Administrative Agent, each Bank and each LC Bank against all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be incurred by or asserted against the Borrower, the Administrative Agent, such Bank or such LC Bank, as the case may be, in any way relating to or arising as a consequence of any such forbearance or delay in the initiation of any such proceeding against its SPC.  Each party hereto hereby acknowledges and agrees that no SPC shall have the rights of a Bank hereunder, such rights being retained by the applicable Granting Bank.  Accordingly, and without limiting the foregoing, each party hereby further acknowledges and agrees that no SPC shall have any voting rights hereunder and that the voting rights attributable to any Advance made by an SPC shall be exercised only by the relevant Granting Bank and that each Granting Bank shall serve as the administrative agent and attorney-in-fact for its SPC and shall on behalf of its SPC receive any and all payments made for the benefit of such SPC and take all actions hereunder to the extent, if any, such SPC shall have any rights hereunder.  In addition, notwithstanding anything to the contrary contained in this Agreement any SPC may (i) with notice to, but without the prior written consent of any other party hereto, assign all or a portion of its interest in any Advances to the Granting Bank and (ii) in accordance with this Section 8.06(g), disclose on a confidential basis any Confidential Information relating to its Advances to any rating agency, commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancement to such SPC.  This Section may not be amended without the prior written consent of each Granting Bank, all or any part of whose Advance is being funded by an SPC at the time of such amendment.

 

(h) Any Bank may, in connection with any completed or proposed participation, assignment or grant to an SPC pursuant to this Section 8.06, disclose to the participant or

 

  

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assignee or proposed participant or assignee, any information relating to any Borrower furnished to such Bank by or on behalf of such Borrower; provided, that, prior to any such disclosure, the participant or assignee or proposed participant or assignee shall agree to preserve the confidentiality of any confidential information relating to such Borrower received by it from such Bank.

 

(i) Anything in this Section 8.06 to the contrary notwithstanding, any Bank may assign and pledge all or any portion of its Commitment and the Advances owing to it to any Federal Reserve Bank (and its transferees) as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any Operating Circular issued by such Federal Reserve Bank, provided, that no such assignment shall release the assigning Bank from its obligations hereunder.

 

(j) Each Borrower agrees that the Credit Parties do not have any fiduciary, advisory or agency relationship with such Borrower and are not advising such Borrower as to any legal, accounting, regulatory or tax matters as a result of the transactions contemplated by this Agreement.  Each Borrower waives, to the fullest extent permitted by law, any claims it may have against the Credit Parties for breach of fiduciary duty or alleged breach of fiduciary duty and agrees that the Credit Parties will have no liability (whether direct or indirect) to such Borrower in respect of such a fiduciary duty claim or to any Person asserting a fiduciary duty claim on such Borrower’s behalf, including such Borrower’s equity holders, employees or creditors.

 

SECTION 8.07. Confidentiality

 

(a) Each of the Administrative Agent, each Bank and each LC Bank agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (i) to its and its Affiliates' directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (ii) to the extent requested by any regulatory authority, (iii) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (iv) to any other party to this Agreement, (v) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder, (vi) subject to an agreement containing provisions substantially the same as those of this Section, to (A) any assignee of or participant in, or any prospective assignee of or participant in, any of its rights or obligations under this Agreement or (B)  any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrowers and their obligations, (vii) with the consent of the Borrowers or (viii) to the extent such Information (A) becomes publicly available other than as a result of a breach of this Section or (B) becomes available to the Administrative Agent, the Banks or the LC Banks on a nonconfidential basis from a source other than the Borrower.

 

(b) For purposes of this Section 8.07 the term “Information” means all information received from any Borrower relating to any Borrower or its business, other than any such information that is available to the Administrative Agent, the Banks or the LC Banks on a nonconfidential basis prior to disclosure by any Borrower; provided that, in the case of

 

  

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information received from any Borrower after the date hereof, such information is clearly identified at the time of delivery as confidential.  Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

 

SECTION 8.08. Governing Law; Consent to Jurisdiction; Waiver of Jury Trial; Certain Disclosures.

 

(a) This Agreement shall be governed by, and construed in accordance with, the law of the State of New York.

 

(b) Each Borrower hereby irrevocably (i) submits to the jurisdiction of any New York State or Federal court sitting in New York City in any action or proceeding arising out of or relating to this Agreement, (ii) agrees that all claims in respect of such action or proceeding may be heard and determined in such New York State or Federal court, (iii) waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding and (iv) waives all right to trial by jury in any action, proceeding or counterclaim arising out of or relating to this Agreement or any other instrument or document delivered hereunder or thereunder.  Each Borrower irrevocably consents to the service of any and all process in any such action or proceeding by the mailing of copies of such process to such Borrower at its address specified in Section 8.02 hereof.  Each Borrower agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

 

(c) Nothing in this Section shall affect the right of the Administrative Agent, the Banks or the LC Banks to serve legal process in any other manner permitted by law or affect the right of the Administrative Agent, the Banks or the LC Banks to bring any action or proceeding against any Borrower or its property in the courts of any other jurisdictions.

 

(d) Notwithstanding anything else contained in this Agreement, each party hereto (and each employee, representative, or other agent of such party) may disclose to any and all Persons, without limitation of any kind, the U.S. tax treatment and U.S. tax structure of the transactions contemplated by this Agreement and all materials of any kind (including opinions or other tax analyses) that are provided to any party relating to such U.S. tax treatment and U.S. tax structure, other than any information for which nondisclosure is reasonably necessary in order to comply with applicable securities laws.

 

SECTION 8.09. Execution in Counterparts.

 

This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

 

  

55

  

SECTION 8.10. USA PATRIOT Act Notice.

 

Each Bank that is subject to the Act (as hereinafter defined) and the Administrative Agent (for itself and not on behalf of any Bank) hereby notifies each Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is required to obtain, verify and record information that identifies such Borrower, which information includes the name and address of such Borrower and other information that will allow such Bank or the Administrative Agent, as applicable, to identify such Borrower in accordance with the Act.

 

SECTION 8.11. Defaulting Banks.

 

Notwithstanding any provision of this Agreement to the contrary, if any Bank becomes a Defaulting Bank, then the following provisions shall apply for so long as such Bank is a Defaulting Bank:

 

(a) Facility fees shall cease to accrue pursuant to Section 2.04 on the unused portion of the Commitment of such Defaulting Bank; and

 

(b) the Commitment of such Defaulting Bank shall not be included in determining whether the Majority Banks have taken or may take any action hereunder (including any consent to any amendment, waiver or other modification pursuant to Section 8.01); provided, that this paragraph (b) shall not apply to the vote of a Defaulting Bank in the case of an amendment, waiver or other modification pursuant to clauses (i) through (vi) of Section 8.01.

 

(c) if any LC Outstandings exist at the time such Bank becomes a Defaulting Bank, then:

 

(i) all or any part of the LC Outstandings of such Defaulting Bank shall be reallocated among the non-Defaulting Banks in accordance with their respective Commitment Percentages but only to the extent (x) the sum of all non-Defaulting Banks’ Outstanding Credits plus such Defaulting Bank’s LC Outstandings does not exceed the total of all non-Defaulting Banks’ Commitments, (y) the sum of each non-Defaulting Bank’s Outstanding Credits plus the portion of such Defaulting Bank’s LC Outstandings allocated to such non-Defaulting Bank does not exceed such non-Defaulting Bank’s Commitment and (z) the sum of each non-Defaulting Bank’s Outstanding Credits with respect to any Borrower plus the portion of such Defaulting Bank’s LC Outstandings with respect to such Borrower allocated to such non-Defaulting Bank does not exceed such non-Defaulting Bank’s Commitment Percentage of the sublimit applicable to such Borrower pursuant to Section 2.01(a);

 

(ii) if the reallocation described in clause (i) above cannot, or can only partially, be effected, the applicable Borrower shall within one Business Day following notice by the Administrative Agent cash collateralize for the benefit of the LC Banks only such Borrower’s obligations corresponding to such Defaulting Bank’s LC Outstandings (after giving effect to any partial reallocation pursuant to clause (i) above) in a manner reasonably acceptable to such Borrower, the Administrative Agent and the applicable LC Banks for so long as such LC Outstandings are outstanding;

 

  

56

  

(iii) if any Borrower cash collateralizes any portion of such Defaulting Bank’s LC Outstandings pursuant to clause (ii) above, such Borrower shall not be required to pay any fees to such Defaulting Bank pursuant to Section 2.04(b) with respect to such Defaulting Bank’s LC Outstandings during the period such Defaulting Bank’s LC Outstandings is cash collateralized;

 

(iv) if the LC Outstandings of the non-Defaulting Banks are reallocated pursuant to clause (i) above, then the fees payable to the Banks pursuant to Section 2.04(b) shall be adjusted in accordance with such non-Defaulting Banks’ Applicable Percentages;

 

(v) if all or any portion of such Defaulting Bank’s LC Outstandings are neither reallocated nor cash collateralized pursuant to clause (i) or (ii) above, then, without prejudice to any rights or remedies of any LC Bank or any other Bank hereunder, all facility fees that otherwise would have been payable to such Defaulting Bank (solely with respect to the portion of such Defaulting Bank’s Commitment that was utilized by such LC Outstandings) and the Letter of Credit Fees payable under Section 2.04(b) with respect to such Defaulting Bank’s LC Outstandings shall be payable to the Administrative Agent, for the account of the LC Banks (ratably in accordance with the respective aggregate stated amounts of the Letters of Credit issued by the LC Banks), until and to the extent that such LC Outstandings are reallocated and/or cash collateralized; and

 

(vi) so long as such Bank is a Defaulting Bank, no LC Bank shall be required to issue, amend or increase any Letter of Credit, unless it is satisfied that the related exposure and the Defaulting Bank’s LC Outstandings will be 100% covered by the Commitments of the non-Defaulting Banks and/or cash collateral will be provided by the Borrower in accordance with Section 8.11(c), and participating interests in any newly issued or increased Letter of Credit shall be allocated among non-Defaulting Banks in a manner consistent with Section 8.11(c)(i) (and such Defaulting Bank shall not participate therein).

 

If (i) a Bankruptcy Event with respect to a Parent of any Bank shall occur following the date hereof and for so long as such event shall continue or (ii) any LC Bank has a good faith belief that any Bank has defaulted in fulfilling its obligations under one or more other agreements in which such Bank commits to extend credit, no LC Bank shall be required to issue, amend or increase any Letter of Credit, unless the LC Banks shall have entered into arrangements with the Borrower or such Bank, satisfactory to such LC Banks to defease any risk to it in respect of such Bank hereunder.

 

In the event that the Administrative Agent, the Borrower and the LC Banks each agrees that a Defaulting Bank has adequately remedied all matters that caused such Bank to be a Defaulting Bank, then LC Outstandings of the Banks shall be readjusted to reflect the inclusion of such Bank’s Commitment, and on such date such Bank shall purchase at par such of the Advances of the other Banks as the Administrative Agent shall determine may be necessary in order for such Bank to hold such Advances in accordance with its Commitment Percentage.

 

 

 

 

 

 

[Signature pages follow]

  

57

  

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.

 

	  	  	  	
UIL HOLDINGS CORPORATION

	  	  	  	  
	  	  	
By:

	
/s/ Richard J. Nicholas

	  	  	  	
Richard J. Nicholas

	  	  	  	
Executive Vice President

	  	  	  	
And Chief Financial Officer

	  	  	  	
THE UNITED ILLUMINATNG COMPANY

	  	  	  	  
	  	  	
By:

	
/s/ Richard J. Nicholas

	  	  	  	
Richard J. Nicholas

	  	  	  	
Executive Vice President

	  	  	  	
And Chief Financial Officer

 

 

 

 

 

 

[SIGNATURE PAGE TO UIL HOLDINGS CORPORATION AND UNITED ILLUMINATING COMPANY CREDIT AGREEMENT]

  

S-1

  

 

	  	  	  	
JPMORGAN CHASE BANK, N.A., as

	  	  	  	
Administrative Agent

	  	  	  	  
	  	  	
By:

	
/s/ Kenneth Coons

	  	  	  	
Name: Kenneth Coons

	  	  	  	
Title: AVP/Underwriter

	  	  	  	  

 

 

 

 

 

 

[SIGNATURE PAGE TO UIL HOLDINGS CORPORATION AND UNITED ILLUMINATING COMPANY CREDIT AGREEMENT]

  

S-2

  

 

	  	  	  	
JPMORGAN CHASE BANK, N.A.

	  	  	  	  
	  	  	
By:

	
/s/ Kenneth Coons

	  	  	  	
Name: Kenneth Coons

	  	  	  	
Title: AVP/Underwriter

	  	  	  	  

 

 

 

 

 

 

[SIGNATURE PAGE TO UIL HOLDINGS CORPORATION AND UNITED ILLUMINATING COMPANY CREDIT AGREEMENT]

  

S-3

  

 

	  	  	  	
UNION BANK, N.A.

	  	  	  	  
	  	  	
By:

	
/s/ Jeff Fesenmaier

	  	  	  	
Name: Jeff Fesenmaier

	  	  	  	
Title: Vice President

	  	  	  	  

 

 

 

 

 

 

[SIGNATURE PAGE TO UIL HOLDINGS CORPORATION AND UNITED ILLUMINATING COMPANY CREDIT AGREEMENT]

  

S-4

  

 

	  	  	  	
BANK OF AMERICA, N.A.

	  	  	  	  
	  	  	
By:

	
/s/ James M. Clark III

	  	  	  	
Name: James M. Clark III

	  	  	  	
Title: Senior Vice President

	  	  	  	  

 

 

 

 

 

 

[SIGNATURE PAGE TO UIL HOLDINGS CORPORATION AND UNITED ILLUMINATING COMPANY CREDIT AGREEMENT]

  

S-5

  

 

	  	  	  	
MORGAN STANLEY BANK, N.A.

	  	  	  	  
	  	  	
By:

	
/s/ Ryan Vetsch

	  	  	  	
Name: Ryan Vetsch

	  	  	  	
Title: Authorized Signatory

	  	  	  	  

 

 

 

 

 

 

[SIGNATURE PAGE TO UIL HOLDINGS CORPORATION AND UNITED ILLUMINATING COMPANY CREDIT AGREEMENT]

  

S-6

  

 

	  	  	  	
RBS CITIZENS, N.A.

	  	  	  	  
	  	  	
By:

	
/s/ Anthony Castellon

	  	  	  	
Name: Anthony Castellon

	  	  	  	
Title: Senior Vice President

	  	  	  	  

 

 

 

 

 

 

[SIGNATURE PAGE TO UIL HOLDINGS CORPORATION AND UNITED ILLUMINATING COMPANY CREDIT AGREEMENT]

  

S-7

  

 

	  	  	  	
TD BANK, N.A.

	  	  	  	  
	  	  	
By:

	
/s/ Ted Hopkinson

	  	  	  	
Name: Ted Hopkinson

	  	  	  	
Title: Managing Director

	  	  	  	  

 

 

 

 

 

 

[SIGNATURE PAGE TO UIL HOLDINGS CORPORATION AND UNITED ILLUMINATING COMPANY CREDIT AGREEMENT]

  

S-8

  

 

	  	  	  	
WELLS FARGO BANK, N.A.

	  	  	  	  
	  	  	
By:

	
/s/ Keith Luettel

	  	  	  	
Name: Keith Luettel

	  	  	  	
Title: Vice President

	  	  	  	  

 

 

 

 

 

 

[SIGNATURE PAGE TO UIL HOLDINGS CORPORATION AND UNITED ILLUMINATING COMPANY CREDIT AGREEMENT]

  

S-9

  

 

	  	  	  	
GOLDMAN SACHS BANK USA

	  	  	  	  
	  	  	
By:

	
/s/ Mark Walton

	  	  	  	
Name: Mark Walton

	  	  	  	
Title: Authorized Signatory

	  	  	  	  

 

 

 

 

 

 

[SIGNATURE PAGE TO UIL HOLDINGS CORPORATION AND UNITED ILLUMINATING COMPANY CREDIT AGREEMENT]

  

S-10

  

 

	  	  	  	
PCN BANK, N.A.

	  	  	  	  
	  	  	
By:

	
/s/ Robert M. Martin

	  	  	  	
Name: Robert M. Martin

	  	  	  	
Title: Senior Vice President

	  	  	  	  

 

 

 

 

 

 

[SIGNATURE PAGE TO UIL HOLDINGS CORPORATION AND UNITED ILLUMINATING COMPANY CREDIT AGREEMENT]

  

S-11

  

 

	  	  	  	
SOVEREIGN BANK

	  	  	  	  
	  	  	
By:

	
/s/ A. Neil Sweeny

	  	  	  	
Name: A. Neil Sweeny

	  	  	  	
Title: Senior Banker

	  	  	  	  

 

 

 

 

 

 

[SIGNATURE PAGE TO UIL HOLDINGS CORPORATION AND UNITED ILLUMINATING COMPANY CREDIT AGREEMENT]

  

S-12

  

 

	  	  	  	
WEBSTER BANK, NATIONAL ASSOCIATION

	  	  	  	  
	  	  	
By:

	
/s/ Michele L. Lynch

	  	  	  	
Name: Michele L. Lynch

	  	  	  	
Title: Vice President

	  	  	  	  

 

 

 

 

 

 

[SIGNATURE PAGE TO UIL HOLDINGS CORPORATION AND UNITED ILLUMINATING COMPANY CREDIT AGREEMENT]

  

S-13

  

 

	  	  	  	
PEOPLE’S UNITED BANK

	  	  	  	  
	  	  	
By:

	
/s/ Richard J. Iovanne

	  	  	  	
Name: Richard J. Iovanne

	  	  	  	
Title: Senior Commercial Loan Officer, SVP

	  	  	  	  

 

 

 

 

 

 

[SIGNATURE PAGE TO UIL HOLDINGS CORPORATION AND UNITED ILLUMINATING COMPANY CREDIT AGREEMENT]

  

S-14

  

 

	  	  	  	
TAIPEI FUBON COMMERCIAL BANK

CO., LTD.

	  	  	  	  
	  	  	
By:

	
/s/ Robin Wu

	  	  	  	
Name: Robin Wu

	  	  	  	
Title: Vice President &

Deputy Branch Manager

	  	  	  	  

 

 

 

 

 

 

[SIGNATURE PAGE TO UIL HOLDINGS CORPORATION AND UNITED ILLUMINATING COMPANY CREDIT AGREEMENT]

  

S-15

  

 

	  	  	  	
MEGA INTERNATIONAL COMMERCIAL

	  	  	  	
BANK CO., LTD., LOS ANGELES BRANCH

	  	  	
By:

	
/s/ Chia Jang Liu

	  	  	  	
Name: Chia Jang Liu

	  	  	  	
Title: SVP & GM

	  	  	  	  

 

 

 

 

 

 

[SIGNATURE PAGE TO UIL HOLDINGS CORPORATION AND UNITED ILLUMINATING COMPANY CREDIT AGREEMENT]

  

S-16

  

SCHEDULE I

$400,000,000 Credit Agreement

UIL Holdings Corporation

The United Illuminating Company

and the Other Borrowers from time to time Parties Hereto

	
 

Name of Bank

	
 

Commitment

	  	
 

	
JPMorgan Chase Bank, N.A.

	
$55,000,000

	
Union Bank, N.A.

	
$55,000,000

	
Bank of America, N.A.

	
$47,500,000

 

 

	
Morgan Stanley Bank, N.A

	
$47,500,000

 

 

	
RBS Citizens, N.A.

	
$47,500,000

 

 

	
TD Bank, N.A.

 

 

	
$25,000,000

	
Wells Fargo Bank, N.A.

 

 

	
$25,000,000

	
Goldman Sachs Bank USA

	
$15,000,000

 

 

	
PNC Bank, N.A.

 

 

	
$15,000,000

	
Sovereign Bank

	
$15,000,000

 

 

	
Webster Bank, National Association

 

 

	
$15,000,000

 

 

 

 

  

  

  

 

 

	
 

Name of Bank

	
 

Commitment

	
People’s United Bank

	
$15,000,000

 

 

	
Taipei Fubon Commercial Bank, Co., Ltd.

	
$12,500,000

 

 

	
Mega International

Commercial Bank Co., Ltd. Los Angles Branch

	
$10,000,000

 

 

  

  

  

SCHEDULE II

Transferred Letters of Credit

	
Letter of Credit No.

	
LC Bank

	
Date of Issuance

	
Stated Amount

	
Expiry Date

	
TPTS-305398

	
JPMorgan Chase Bank, N.A.

	
March 4, 2008

	
$1,025,000.00

	
January 31, 2011

	
TPTS-745791

	
JPMorgan Chase Bank, N.A.

	
March 19, 2009

	
$1.00

	
December 31, 2010

	  	  	  	  	  
	  	  	  	  	  

  

  

  

Schedule 4.01(h)

AGREEMENTS IMPOSING RESTRICTIONS ON ABILITY OF UI TO PAY OR DECLARE DIVIDENDS

	
1.

	
Indenture, dated as of May 1, 1991, of The United Illuminating Company to The Bank of New York, as Trustee.  Currently, there are no securities outstanding under this Indenture.

  

  

  

Schedule 5.02

EXISTING LIENS

None

  

  

  

EXHIBIT A

NOTICE OF BORROWING

[Date]

JPMorgan Chase Bank, N.A., as Administrative Agent

  for the Banks parties

  to the Credit Agreement

  referred to below

[ADDRESS INFORMATION]

Attention:                        [CONTACT INFORMATION]

Ladies and Gentlemen:

The undersigned, [UIL HOLDINGS CORPORATION][THE UNITED ILLUMINATING COMPANY] [and the other borrowers from time to time parties thereto], refers to the Credit Agreement, dated as of November 17, 2010 (as amended or supplemented, the “Credit Agreement”, the terms defined therein being used herein as therein defined), among the undersigned, [The United Illuminating Company][UIL Holdings Corporation] [The Southern Connecticut Gas Company] [Connecticut Natural Gas Corporation] [The Berkshire Gas Company], certain Banks and LC Banks parties thereto and JPMorgan, N.A., as Administrative Agent, and hereby gives you notice, irrevocably, pursuant to Section 2.02 of the Credit Agreement that the undersigned hereby requests a Borrowing under the Credit Agreement, and in that connection sets forth below the information relating to such Borrowing (the “Proposed Borrowing”) as required by Section 2.02(a) of the Credit Agreement:

(a)           The Business Day of the Proposed Borrowing is ______________, 200_.

(b)           The Type of Advances comprising the Proposed Borrowing is [Base Rate Advances] [Eurodollar Rate Advances].

(c)           The aggregate amount of the Proposed Borrowing is $__________.

(d)           The Interest Period for each Eurodollar Rate Advance made as part of the Proposed Borrowing is __ [week] [month[s]].

  

  

  

The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Proposed Borrowing:

(a)           the representations and warranties of the undersigned contained in Section 4.01 (other than the last sentence of subsections (e)(i) and (e)(ii), as applicable, and subsection (g)(ii) thereof except in the case of the initial Extension of Credit) of the Credit Agreement are correct, before and after giving effect to the Proposed Borrowing and to the application of the proceeds therefrom, as though made on and as of such date; and

(b)           no event has occurred and is continuing, or would result from such Proposed Borrowing or from the application of the proceeds therefrom, that constitutes an Event of Default with respect to the undersigned or would constitute an Event of Default with respect to the undersigned but for the requirement that notice be given or time elapse or both.

Very truly yours,

[UIL HOLDINGS CORPORATION]

[THE UNITED ILLUMINATING COMPANY]

[THE SOUTHERN CONNECTICUT GAS COMPANY]

[CONNECTICUT NATURAL GAS CORPORATION]

[THE BERKSHIRE GAS COMPANY]

By________________________________

  Name:

  Title:

cc: JPMorgan Chase Bank, N.A.

     [JPMORGAN ADDRESS INFORMATION]

  

2

  

EXHIBIT B

FORM OF REQUEST FOR ISSUANCE

 

[Date]

JPMorgan, N.A., as Administrative Agent

  for the Banks parties

  to the Credit Agreement

  referred to below

[JPMORGAN ADDRESS INFORMATION]

Attention:                        [CONTACT INFORMATION]

Ladies and Gentlemen:

The undersigned, [UIL HOLDINGS CORPORATION][THE UNITED ILLUMINATING COMPANY] [and the other borrowers from time to time parties thereto], refers to the Credit Agreement, dated as of November 17, 2010 (as amended or supplemented, the “Credit Agreement”, the terms defined therein being used herein as therein defined), among the undersigned, [The United Illuminating Company][UIL Holdings Corporation] [The Southern Connecticut Gas Company] [Connecticut Natural Gas Corporation] [The Berkshire Gas Company], certain Banks and LC Banks parties thereto and JPMorgan Chase Bank, N.A., as Administrative Agent, and hereby gives you notice pursuant to Section 2.03(b) of the Credit Agreement that the undersigned hereby requests the [issuance] [extension] [modification] [amendment] [of Letter of Credit No. ______, issued ______ (the “Specified Letter of Credit”)] of a Letter of Credit (the “Specified Letter of Credit”) in accordance with the following terms:

(i)           the LC Bank is _____________;

(ii)           the requested date of [issuance] [extension] [modification] [amendment] of the Specified Letter of Credit (which is a Business Day) is _____________;

(iii)           the expiration date of the Specified Letter of Credit requested hereby is ___________;1

(iv)           the requested stated amount of the Specified Letter of Credit is _______________;2

____________________________

 

1  Expiry date shall be no later than the third Business Day preceding the Maturity Date.

2  Must be minimum $100,000.

 

  

  

  

(v)           the beneficiary of the Specified Letter of Credit is _____________, with an address at ______________; and

(vi)   [the conditions under which a drawing may be made under the Specified Letter of Credit are as follows: ___________________; and] 3

[(iii)           the Specified Letter of Credit is to be [extended] [modified] [amended] as follows: _____________; and] 4

(__)           any other additional conditions are as follows: ___________________.

The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the [issuance] [extension] [modification] [amendment] of the Specified Letter of Credit:

 

(A)           the representations and warranties of the undersigned contained in Section 4.01 (other than the last sentence of subsections (e)(i) and (e)(ii), as applicable, and subsection (g)(ii) thereof) of the Credit Agreement are correct, before and after giving effect to the proposed [issuance] [extension] [modification] [amendment] of the Specified Letter of Credit as though made on and as of such date; and

(b)           no event has occurred and is continuing, or would result from such proposed [issuance] [extension] [modification] [amendment] of the Specified Letter of Credit that constitutes an Event of Default or would constitute an Event of Default but for the requirement that notice be given or time elapse or both.

 

                              [UIL HOLDINGS CORPORATION]

                              [THE UNITED ILLUMINATING COMPANY]

                              [THE SOUTHERN CONNECTICUT GAS COMPANY]

                              [CONNECTICUT NATURAL GAS CORPORATION]

                              [THE BERKSHIRE GAS COMPANY]

 

 

	  	  	
By

	
 

	  	  	  	
Name: 

	  	  	  	
Title: 

	  	  	  	  

 

 

_________________________

  

3 Insert for an issuance of a new Letter of Credit. 

4 Insert for an extension, modification or amendment.

  

2

  

cc: JPMorgan Chase Bank, N.A.

     [JPMORGAN ADDRESS INFORMATION]

  

3

  

EXHIBIT C

FORM OF JOINDER AGREEMENT

This JOINDER AGREEMENT is made as of [INSERT DATE] by ______________________________, a ___________________________ (the “Company”) and delivered pursuant to Section 3.03 of the Credit Agreement (as defined below).

 

Reference is made to (i) the Credit Agreement, dated as of November 17, 2010, as modified, supplemented or amended from time to time, including as of the date hereof (the “Credit Agreement”), among UIL Holdings Corporation, The United Illuminating Company, [OTHER BORROWERS], certain Banks and LC Banks parties thereto and JPMorgan Chase Bank, N.A., as administrative agent for the Banks and LC Banks (the “Administrative Agent”), and (ii) the other Loan Documents referred to in the Credit Agreement, as the same may be modified, supplemented or amended from time to time.  Capitalized terms defined in the Credit Agreement are used herein as defined therein.

 

The Company hereby agrees that, effective as of the date hereof, it hereby is, and shall be deemed to be, a Borrower and a New Borrower under the Credit Agreement and agrees that, from the date hereof and so long as any Bank shall have any Commitment hereunder or any Advance or Letter of Credit shall remain outstanding, the Company has assumed the obligations of a Borrower and a New Borrower under, the Company shall be deemed to be a party to, and the Company shall perform, comply with and be subject to and bound by, each of the terms, provisions and waivers of, the Credit Agreement and each of the other Loan Documents that are stated to apply to or are made by a Borrower or a New Borrower (except to the extent that any such term, provision, waiver or Loan Document applies by its terms, or is made specifically by, any Borrower other than the Company).  Without limiting the generality of the foregoing, the Company hereby represents and warrants that (i) each of the representations and warranties set forth in Article IV of the Credit Agreement that applies to a Borrower is true and correct in all material respects as to the Company on and as of the date hereof as if made on and as of the date hereof by the Company (except to the extent that any such representation and warranty applies by its terms to any Borrower other than the Company), and (ii) the Company has heretofore received a true and correct copy of the Credit Agreement and each of the other Loan Documents (including any modifications thereof or supplements or waivers thereto) as in effect on the date hereof.

 

The Company hereby makes, affirms, and ratifies in favor of the Banks, the LC Banks and the Administrative Agent each of the terms, provisions and waivers of the Credit Agreement and each of the other Loan Documents that are stated to apply to or are made by a Borrower or a New Borrower (except to the extent that any such term, provision, waiver or Loan Document applies by its terms, or is made specifically by, any Borrower other than the Company).

 

In furtherance of the foregoing, the Company shall execute and deliver or cause to be executed and delivered at any time and from time to time such further instruments and documents and do or cause to be done such further acts as may be reasonably necessary or proper in the opinion of Administrative Agent to carry out more effectively the provisions and purposes of this Joinder Agreement.

 

  

  

  

IN WITNESS WHEREOF, the Company has duly executed this Joinder Agreement and delivered the same to the Administrative Agent for the benefit of the Administrative Agent, the Banks and the LC Banks, as of the date and year first above written.

 

 

                           

 

	 	             [NAME OF NEW BORROWER]
	 	 	 	 
	  	  	
By

	
 

	  	  	  	
Name: 

	  	  	  	
Title: 

	  	  	  	  

 

 

 

 

Acknowledged:

 

JPMORGAN CHASE BANK, N.A.,

as Administrative Agent

 

 

	
By

	
 

	  	
Name: 

	  	
Title: 

	  	  

 

 2

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