Exhibit 99.2
=============================================================================
SERVICING AGREEMENT
among
▇▇▇▇▇ FARGO STUDENT LOAN TRUST 2001-1
as Issuer,
▇▇▇▇▇ FARGO BANK SOUTH DAKOTA, NATIONAL ASSOCIATION
as Servicer,
▇▇▇▇▇ FARGO STUDENT LOANS RECEIVABLES I, LLC
as Depositor,
and
BANK ONE, NATIONAL ASSOCIATION
not in its individual capacity but solely
as Eligible Lender Trustee
Dated as of November 1, 2001
==============================================================================
TABLE OF CONTENTS
Page
ARTICLE I
Definitions and Usage
ARTICLE II
Custody of Financed Student Loans
SECTION 2.01. Custody of Student Loan Files........................... 4
SECTION 2.02. Duties of Servicer as Custodian......................... 5
SECTION 2.03. Instructions; Authority To Act.......................... 5
SECTION 2.04. Custodian's Indemnification............................. 6
SECTION 2.05. Effective Period and Termination........................ 6
ARTICLE III
Administration and Servicing of Student Loans
SECTION 3.01. Duties of Servicer...................................... 6
SECTION 3.02. Collection of Student Loan Payments..................... 8
SECTION 3.03. Realization upon Student Loans.......................... 9
SECTION 3.04. No Impairment........................................... 10
SECTION 3.05. Purchase of Student Loans; Reimbursement................ 10
SECTION 3.06. Servicing Fee........................................... 10
SECTION 3.07. Servicer's Report....................................... 11
SECTION 3.08. Annual Statement as to Compliance; Notice of Default.... 12
SECTION 3.09. Annual Independent Certified Public Accountants' Report. 12
SECTION 3.10. Access to Certain Documentation and Information
Regarding Financed Student Loans........................ 13
SECTION 3.11. Servicer Expenses....................................... 13
SECTION 3.12. Appointment of Subservicers............................. 13
ARTICLE IV
Deposits into the Collection Account
SECTION 4.01. Deposits into the Collection Account.................... 14
ARTICLE V
The Servicer
SECTION 5.01. Representations of Servicer............................. 14
SECTION 5.02. Indemnities of Servicer................................. 16
SECTION 5.03. Merger or Consolidation of, or Assumption of the
Obligations of, Servicer................................ 17
SECTION 5.04. Limitation on Liability of Servicer and Others......... 17
SECTION 5.05. ▇▇▇▇▇ Fargo Bank South Dakota, National Association
Not to Resign as Servicer............................... 18
ARTICLE VI
Default
SECTION 6.01. Servicer Default........................................ 18
SECTION 6.02. Appointment of Successor................................ 19
SECTION 6.03. Notification to Noteholders............................. 20
SECTION 6.04. Waiver of Past Defaults................................. 20
ARTICLE VII
Termination
SECTION 7.01. Termination............................................. 20
ARTICLE VIII
Miscellaneous
SECTION 8.01. Amendment............................................... 21
SECTION 8.02. Protection of Interests in Trust........................ 22
SECTION 8.03. Notices................................................. 23
SECTION 8.04. Assignment.............................................. 25
SECTION 8.05. Limitations on Rights of Others......................... 25
SECTION 8.06. Severability............................................ 26
SECTION 8.07. Separate Counterparts................................... 26
SECTION 8.08. Headings................................................ 26
SECTION 8.09. Governing Law........................................... 26
SECTION 8.10. Non-Petition Covenants.................................. 26
SECTION 8.11. Limitation of Liability of Eligible Lender Trustee
and Indenture Trustee................................... 26
SERVICING AGREEMENT dated as of November 1, 2001 among ▇▇▇▇▇ Fargo
Student Loan Trust 2001-1, a Delaware trust (the "Issuer"), ▇▇▇▇▇ Fargo Bank
South Dakota, National Association, as servicer (the "Servicer"), ▇▇▇▇▇ Fargo
Student Loans Receivables I, LLC, as depositor (the "Depositor"), and Bank
One, National Association ("Bank One"), a national banking association, solely
as eligible lender trustee and not in its individual capacity (the "Eligible
Lender Trustee").
WHEREAS, the Issuer desires to purchase from the Depositor (and, with
respect to legal title to the student loans, Bank One as trustee on behalf of
the Depositor) a portfolio of federally reinsured student loans purchased in
the ordinary course of business by the Depositor; and
WHEREAS, the Eligible Lender Trustee is willing to hold legal title
to, and serve as eligible lender trustee with respect to, such student loans
on behalf of the Issuer; and
WHEREAS, the Servicer is willing to service such student loans and
undertake certain administrative functions with respect thereto.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I
Definitions and Usage
Capitalized terms used but not defined herein are defined in Appendix
A to the Administration Agreement, dated as of November 1, 2001, among the
Issuer, ▇▇▇▇▇ Fargo Bank Minnesota, National Association, as Administrator,
and JPMorgan Chase Bank, as Indenture Trustee, which also contains rules as to
usage and construction that shall be applicable herein.
ARTICLE II
Custody of Financed Student Loans
SECTION 2.01. Custody of Student Loan Files.
To assure uniform quality in servicing the Financed Student Loans and to
reduce administrative costs, the Issuer hereby revocably appoints the
Servicer, and the Servicer hereby accepts such appointment, to act for the
benefit of the Issuer and the Indenture Trustee as Custodian of the following
documents or instruments which are hereby constructively delivered to the
Indenture Trustee, as pledgee of the Issuer (or will be constructively
delivered to the Indenture Trustee, as pledgee of the Issuer, in the case of
Prefunded Loans and Serial Loans, as of the applicable Transfer Date, in the
case of Qualified Substitute Student Loans, as of the date of the relevant
Assignment to the Issuer, in the case of Consolidation Loans originated during
the Funding Period by the Eligible Lender Trustee on behalf of the Issuer, as
of the applicable date of origination or in the case of Consolidation Loans
the principal balances of which are increased by the principal balances of any
related Add-on Consolidation Loans, as of the applicable Add-on Consolidation
Loan Funding Date) with respect to each Financed Student Loan:
4
(a) the original fully executed copy of the note evidencing the
Financed Student Loan (including the original loan application fully
executed by the Borrower); and
(b) any and all other documents and computerized records that the
Servicer shall keep on file, in accordance with its customary procedures,
relating to such Financed Student Loan or any Obligor with respect
thereto.
SECTION 2.02. Duties of Servicer as Custodian.
(a) Safekeeping. The Servicer shall maintain custody of the Student
Loan Files for the benefit of the Issuer and the Indenture Trustee on behalf
of the Noteholders and maintain such accurate and complete accounts, records
and computer systems pertaining to each Student Loan File as shall enable the
Issuer to comply with the Basic Documents. In performing its duties as
custodian, the Servicer shall act with reasonable care, using that degree of
skill and attention that the Servicer exercises with respect to the student
loan files relating to all comparable Student Loans that the Servicer services
and shall ensure that it complies with all applicable federal and state laws,
including the Higher Education Act, with respect thereto. The Servicer shall
conduct, or cause to be conducted, periodic audits of the Student Loan Files
held by it under this Agreement and of the related accounts, records and
computer systems, in such a manner as shall enable the Issuer or the Indenture
Trustee to verify the accuracy of the Servicer's record keeping. The Servicer
shall promptly report to the Issuer and the Indenture Trustee and any failure
on its part to hold the Student Loan Files and maintain its accounts, records
and computer systems as herein provided and promptly take appropriate action
to remedy any such failure. Nothing herein shall be deemed to require an
initial review or any periodic review by the Issuer, the Eligible Lender
Trustee or the Indenture Trustee of the Student Loan Files.
(b) Maintenance of Records. The Servicer shall maintain each Student
Loan File at one of the locations specified in Schedule A to this Agreement or
at such other office as shall be specified by written notice to the Issuer and
the Indenture Trustee not later than 90 days after any change in location.
Upon reasonable prior notice of not less than three Business Days, the
Servicer shall make available to the Issuer and the Indenture Trustee or their
respective duly authorized representatives, attorneys or auditors a list of
locations of the Student Loan Files and the related accounts, records and
computer systems maintained by the Servicer.
(c) Release of Documents. Upon instruction from the Indenture
Trustee, the Servicer shall, as soon as practicable, release any Student Loan
File to the Indenture Trustee, the Indenture Trustee's agent, or the Indenture
Trustee's designee, as the case may be, at such place or places as the
Indenture Trustee may designate.
SECTION 2.03. Instructions; Authority To Act.
The Servicer shall be deemed to have received proper instructions with respect
to the Student Loan Files upon its receipt of written instructions signed by a
Responsible Officer of the Indenture Trustee.
5
SECTION 2.04. Custodian's Indemnification.
The Servicer as Custodian shall pay for any actual loss, liability or expense,
including reasonable attorneys' fees, that may be imposed on, incurred by or
asserted against the Issuer, the Eligible Lender Trustee or the Indenture
Trustee or any of their officers, directors, employees and agents as a result
of any improper act or omission in any way relating to the maintenance and
custody by the Servicer as Custodian of the Student Loan Files as required by
this Agreement where the final determination that any such improper act or
omission by the Servicer resulted in such loss, liability or expense is
established by a court of law, by an arbitrator, or by way of settlement
agreed to by the Servicer; provided, however, that the amount of any liability
with respect to any Financed Student Loan shall not exceed the amount that
would have been paid if such Student Loan had been accepted and paid by the
related Guarantor as a claim, and provided, further, that the Servicer shall
not be liable to the Eligible Lender Trustee for any portion of any such
amount resulting from the willful misfeasance, bad faith or negligence of the
Eligible Lender Trustee and the Servicer shall not be liable to the Indenture
Trustee for any portion of any such amount resulting from the willful
misfeasance, bad faith or negligence of the Indenture Trustee. This provision
shall not be construed to limit the Servicer's or any other party's rights,
obligations, liabilities, claims or defenses which arise as a matter of law or
pursuant to any other provision of this Agreement.
SECTION 2.05. Effective Period and Termination.
The appointment of ▇▇▇▇▇ Fargo Bank South Dakota, National Association as
Custodian shall become effective as of the Closing Date and shall continue in
full force and effect for so long as ▇▇▇▇▇ Fargo Bank South Dakota, National
Association shall remain the Servicer hereunder. If all the rights and
obligations of ▇▇▇▇▇ Fargo Bank South Dakota, National Association shall have
been terminated under Section 6.01, the appointment of ▇▇▇▇▇ Fargo Bank South
Dakota, National Association as Custodian shall be terminated simultaneously
with the effectiveness of such termination. As soon as practicable on or after
any termination of such appointment and in any event within ninety (90) days,
▇▇▇▇▇ Fargo Bank South Dakota, National Association shall deliver possession
of the Student Loan Files to the Indenture Trustee or the Indenture Trustee's
agent at such place or places as the Indenture Trustee may reasonably
designate. ▇▇▇▇▇ Fargo Bank South Dakota, National Association will continue
to hold the Student Loan Files as agent of the Indenture Trustee until the
Student Loan Files are transferred.
ARTICLE III
Administration and Servicing of Student Loans
SECTION 3.01. Duties of Servicer.
The Servicer, for the benefit of the Issuer (to the extent provided herein),
and the Noteholders, shall manage, service, administer and make collections on
the Financed Student Loans with reasonable care, using that degree of skill
and attention that the Servicer exercises with respect to all comparable
Student Loans that it services. Without limiting the generality of the
foregoing or of any other provision set forth in this Agreement and
notwithstanding any other provision to the contrary set forth herein, the
Servicer shall manage, service, administer and make collections with respect
to the Financed Student Loans (other than collection of any Interest Subsidy
6
Payments and Special Allowance Payments, which the Eligible Lender
Trustee will perform on behalf of the Trust) in accordance with, and otherwise
comply with, all applicable federal and state laws, including any applicable
standards, guidelines and requirements of the Higher Education Act and the
applicable Guarantee Agreement, the failure to comply with which would
adversely affect the eligibility of one or more of the Financed Student Loans
for federal reinsurance or Interest Subsidy Payments, Special Allowance
Payments or Guarantee Payments or would have an adverse effect on the
Noteholders. The Servicer also hereby acknowledges that its obligation to
service the Financed Student Loans includes all Consolidation Loans originated
by the Issuer during the Funding Period, any Consolidation Loan supplemented
from time to time during and after the Funding Period by the addition of the
principal balance of any related Add-on Consolidation Loan, any Qualified
Substitute Student Loans conveyed to the Issuer pursuant to Section 3.02 of
the Loan Sale Agreement and those Prefunded Loans and Serial Loans conveyed to
the Eligible Lender Trustee on behalf of the Trust pursuant to Section 2.02 of
the Loan Sale Agreement and the related Transfer Agreement, a copy of which
shall be delivered to the Servicer by the Seller and the Depositor promptly
upon execution thereof; provided, however, that any failure by the Seller and
the Depositor to so deliver a Transfer Agreement shall not affect the
Servicer's obligations hereunder to service all the Financed Student Loans.
The Servicer's duties shall include collection and posting of all
payments, responding to inquiries of borrowers on such Financed Student Loans,
monitoring borrowers' status, making required disclosures to borrowers,
investigating delinquencies, sending payment coupons to borrowers and
otherwise establishing repayment terms, reporting tax information to
borrowers, if applicable, accounting for collections and furnishing monthly
and annual statements with respect thereto to the Administrator. Subject to
the provisions of Section 3.02, the Servicer shall follow its customary
standards, policies and procedures in performing its duties as Servicer.
Without limiting the generality of the foregoing, the Servicer is authorized
and empowered to execute and deliver, on behalf of itself, the Issuer, the
Eligible Lender Trustee, the Indenture Trustee and the Noteholders or any of
them, instruments of satisfaction or cancellation, or partial or full release
or discharge, and all other comparable instruments, with respect to such
Financed Student Loans; provided, however, that the Servicer agrees that it
will not (a) permit any rescission or cancellation of a Financed Student Loan
except as ordered by a court of competent jurisdiction or governmental
authority or as otherwise consented to in writing by the Eligible Lender
Trustee and the Indenture Trustee or (b) reschedule, revise, defer or
otherwise compromise with respect to payments due on any Financed Student Loan
except pursuant to any applicable Deferral or Forbearance periods or otherwise
in accordance with all applicable standards, guidelines and requirements with
respect to the servicing of the Financed Student Loans; and provided, further,
that the Servicer shall not agree to any decrease of the interest rate on, or
the principal amount payable with respect to, any Financed Student Loan.
The Servicer, for the benefit of the Issuer (to the extent provided
herein) and the Indenture Trustee on behalf of the Noteholders, shall promptly
and routinely furnish the Eligible Lender Trustee and the Indenture Trustee
with copies of all material reports, records, and other documents and data as
required by this Agreement or as may otherwise be required by the Higher
Education Act. All material correspondence received by the Servicer relating
to individual Student Loans shall be maintained in microcopy form or in
summary form in an automated history file established by the Servicer. The
Servicer shall furnish in good condition all forms and supplies as specified
in this Agreement and any Schedules hereto. The Eligible
7
Lender Trustee and the Indenture Trustee may transmit Financed Student Loan
account data to the Servicer on these forms or by any other mutually
acceptable means. In performing its duties hereunder, the Servicer will be
guided by and comply with the Higher Education Act and applicable requirements
of the related Guarantor. The Servicer agrees to produce a clear and precise
audit trail for each Financed Student Loan and to comply with such other
reporting, servicing, and operating standards as are contained in this
Agreement.
The Eligible Lender Trustee on behalf of the Issuer hereby grants a
power of attorney and all necessary authorization to the Servicer to maintain
any and all collection procedures with respect to the Financed Student Loans,
including filing, pursuing and recovering claims against the Guarantors for
Guarantee Payments and taking any steps to enforce such Financed Student Loans
such as commencing a legal proceeding to enforce a Financed Student Loan in
the name of the Issuer, the Eligible Lender Trustee, the Indenture Trustee or
the Noteholders. The Eligible Lender Trustee or the Indenture Trustee shall
upon the written request of the Servicer or the Administrator furnish the
Servicer or the Administrator with any other powers of attorney and other
documents reasonably necessary or appropriate to enable the Servicer or the
Administrator to carry out their servicing and administrative duties
hereunder.
The Servicer acknowledges the duties and obligations assigned to it
under the Administration Agreement, Section 6.07 of the Indenture and Section
6.07 of the Trust Agreement and agrees to perform each of the duties and
obligations assigned to it thereunder in each case with the same effect as if
they were set forth in full herein.
SECTION 3.02. Collection of Student Loan Payments.
(a) The Servicer shall make reasonable efforts (including all efforts
that may be specified under the Higher Education Act or any Guarantee
Agreement) to collect all payments called for under the terms and provisions
of the Financed Student Loans as and when the same shall become due and shall
follow such collection procedures as it follows with respect to all comparable
Student Loans that it services. The Servicer shall allocate collections with
respect to the Financed Student Loans between principal and interest in
accordance with the terms of each such loan. The Servicer may in its
discretion waive any late payment charge or any other fees that may be
collected in the ordinary course of servicing a Financed Student Loan.
(b) The Servicer shall make reasonable efforts to claim, pursue and
collect all Guarantee Payments from the Guarantors pursuant to the Guarantee
Agreements with respect to any of the Financed Student Loans as and when the
same shall become due and payable, shall comply with the Higher Education Act
and all other applicable laws and agreements with respect to claiming,
pursuing and collecting such payments and shall follow such practices and
procedures as it follows with respect to all comparable guarantee agreements
and student loans that it services. In connection therewith, the Servicer is
hereby authorized and empowered to convey to the related Guarantor the note
and the related Student Loan File representing any Financed Student Loan in
connection with submitting a claim to the applicable Guarantor for a Guarantee
Payment in accordance with the terms of the applicable Guarantee Agreement.
(c) The Eligible Lender Trustee shall, with the assistance of the
Servicer as set forth below and on behalf of the Issuer, make reasonable
efforts to claim, pursue and collect all
8
Interest Subsidy Payments and Special Allowance Payments from the Department
with respect to any of the Financed Student Loans as and when the same shall
become due and payable, shall comply with all applicable laws and agreements
with respect to claiming, pursuing and collecting such payments and shall
follow such practices and procedures as the Servicer follows with respect to
Student Loans serviced by it. All amounts so collected by the Eligible Lender
Trustee with respect to Financed Student Loans shall constitute Monthly
Available Funds for the applicable Monthly Collection Period and Available
Funds for the applicable Collection Period, and shall be deposited into the
Collection Account in accordance with Section 4.01. In connection therewith,
the Servicer shall prepare and file with the Department on a timely basis all
claims forms and other documents and filings necessary or appropriate in
connection with the claiming of Interest Subsidy Payments and Special
Allowance Payments on behalf of the Eligible Lender Trustee and shall
otherwise assist the Eligible Lender Trustee in pursuing and collecting such
Interest Subsidy Payments and Special Allowance Payments from the Department.
The Eligible Lender Trustee shall upon the written request of the Servicer
furnish the Servicer with any power of attorney and other documents reasonably
necessary or appropriate to enable the Servicer to prepare and file such
claims forms and other documents and filings.
The Eligible Lender Trustee may permit trusts, other than the Trust,
established by the Depositor to securitize student loans to use the Department
lender identification number applicable to the Trust. In such event, the
Eligible Lender Trustee may claim and collect Interest Subsidy Payments and
Special Allowance Payments with respect to Financed Student Loans in the Trust
and student loans in such other trusts using such common lender identification
number. Notwithstanding anything herein or in the Basic Documents to the
contrary, any amounts assessed against payments (including, but not limited
to, Interest Subsidy Payments and Special Allowance Payments) due from the
Department to any such other trust using such common lender identification
number as a result of amounts (including, but not limited to, Consolidation
Fees) owing to the Department from the Trust will be deemed for all purposes
hereof and of the Basic Documents (including for purposes of determining
amounts paid by the Department with respect to the student loans in the Trust
and such other trust) to have been assessed against the Trust and shall be
deducted by the Eligible Lender Trustee or the Servicer and paid to such other
trust from any collections made by them which would otherwise have been
payable to the Collection Account for the Trust. If so specified in the
servicing agreement applicable to any such other trust, any amounts assessed
against payments due from the Department to the Trust as a result of amounts
owing to the Department from such other trust using such common lender
identification number will be deemed to have been assessed against such other
trust and will be deducted by the Eligible Lender Trustee or the Servicer from
any collections made by them which would otherwise be payable to the
collection account for such other trust and paid to the Trust.
SECTION 3.03. Realization upon Student Loans.
For the benefit of the Issuer, the Servicer shall use reasonable efforts
consistent with its customary servicing practices and procedures and including
all efforts that may be specified under the Higher Education Act or the
applicable Guarantee Agreement in its servicing of any delinquent Financed
Student Loans.
9
SECTION 3.04. No Impairment.
The Servicer shall not impair the rights of the Issuer, the Eligible Lender
Trustee, the Indenture Trustee, the Depositor, the Noteholders or the Swap
Counterparty in the Financed Student Loans.
SECTION 3.05. Purchase of Student Loans; Reimbursement.
(a) Upon the discovery by the Servicer, the Eligible Lender Trustee,
the Indenture Trustee or the Seller of any breach pursuant to Sections 3.01,
3.02, 3.03 or 3.04 hereof, the party discovering the breach shall give prompt
written notice to the others. If the breach is not cured within sixty (60)
days after the Servicer becomes aware or receives written notice (whichever is
earlier) of such breach, the Servicer shall purchase or arrange for the
purchase of any Student Loan in which the interests of the Noteholders, the
Issuer, the Indenture Trustee or the Eligible Lender Trustee are materially
and adversely affected by such breach as of the first day succeeding the end
of such 60-day period that is the last day of a Monthly Collection Period (it
being understood that any such breach that does not affect the related
Guarantor's obligation to guarantee payment of such Student Loan will not be
considered to have a material adverse effect for this purpose and it being
further understood that any dispute as to whether such Guarantor's obligation
has been so affected so as to create such a material adverse effect, shall be
resolved, for so long as the Notes are Outstanding, by the Indenture Trustee,
whose determination shall be dispositive, and after the Notes are no longer
Outstanding, by the Eligible Lender Trustee, whose determination shall then be
dispositive); provided, however, that during each 12-month period following
the Cutoff Date or an anniversary of the Cutoff Date (each, a "Servicer
Liability Period"), the Servicer will be obligated to purchase Student Loans
only to the extent its total liability incurred during the then current
Servicer Liability Period for such purchases and any other liabilities under
this Agreement exceeds an amount (the "Servicer Liability Limit") equal to
0.15% of the principal balances of the Financed Student Loans outstanding as
of the Cutoff Date or, after the first anniversary of the Cutoff Date, as of
the preceding November 1.
(b) In consideration of the purchase of any such Student Loan
pursuant to this Section 3.05, the Servicer shall remit, in the manner
specified in Section 4.01, the Purchase Amount and the Issuer shall execute
such assignments and other documents reasonably requested by the Servicer in
order to effect the transfer of such Student Loan to the Servicer or its
designee; provided, however, that the Servicer's total liability for losses
for rejected claims by the Guarantors for any Financed Student Loan based on
any breach pursuant to Sections 3.01, 3.02, 3.03 or 3.04 hereof will not
exceed that amount which the related Guarantor would have been obligated to
pay with respect to such loan had its obligation to guarantee payment thereof
not been affected by the Servicer's breach. Subject to Section 5.02, the
exclusive remedy of the Noteholders, the Issuer, the Indenture Trustee, and
the Eligible Lender Trustee and the entire liability of Servicer for such a
breach shall be limited to requiring the Servicer to purchase Financed Student
Loans pursuant to this Section 3.05.
SECTION 3.06. Servicing Fee.
(a) The Servicing Fee for each calendar month (the "Servicing Fee")
shall be an amount equal to the sum of (i) $1.75 for each Billing Account
having one or more Financed Student
10
Loans that during the prior calendar month was an In-School Loan or a Grace
Loan and (ii) $3.25 for each Billing Account having one or more Financed
Student Loans that during the prior calendar month was a Repayment Loan, a
Deferral Loan or a Forbearance Loan. After the third anniversary of the
Closing Date, the Servicing Fee may be increased based on the Servicer's costs
with consent of the Issuer (including the costs of any Subservicer); provided,
however, that the Servicing Fee will not be in excess of the Servicing Fee set
forth in the immediately preceding sentence plus 2% per annum.
(b) The Servicing Fee (together with any portion of the Servicing Fee
that remains unpaid from prior Monthly Payment Dates) will be payable on each
Monthly Payment Date and will be paid solely out of Monthly Available Funds in
the case of each Monthly Payment Date that is not a Quarterly Payment Date
(and out of Available Funds in the case of each Quarterly Payment Date) and
amounts on deposit in the Reserve Account (or available from draws on the
Demand Note or withdrawals from the Demand Note Account to the extent provided
in the Administration Agreement) on such Monthly Payment Date (including each
Quarterly Payment Date) as provided in Sections 2(d)(iv), 2(d)(v)(A) and
2(e)(iv)(A) of the Administration Agreement.
SECTION 3.07. Servicer's Reporting Obligations.
(a) On or before the fifteenth day of each month (or, if any such day
is not a Business Day, on the next succeeding Business Day), the Servicer
shall deliver to the Administrator a servicer's report with respect to the
preceding calendar month containing all information necessary for the
Administrator to prepare the Administrator's Certificate, referred to in
Section 2(b)(ii) of the Administration Agreement, covering such preceding
calendar month.
(b) The Servicer shall provide to the Eligible Lender Trustee (i) a
list of jurisdictions in which the Issuer is required to be licensed and (ii)
any other information necessary for the Eligible Lender Trustee to fulfill its
obligations under Section 7.08 of the Trust Agreement.
(c) The Servicer shall deliver to the Eligible Lender Trustee, the
Indenture Trustee, the Rating Agencies and the Administrator, an Officers'
Certificate of the Servicer containing all the information necessary:
(A) to pay the Department any Consolidation Fees due and
payable to the Department, to the extent such
Consolidation Fees are not being deducted by the
Department out of Special Allowance Payments or Interest
Subsidy Payments, which Officers' Certificate shall be
delivered on the date that is three Business Days prior to
the date such fees are to be remitted to the Department;
(B) during the Funding Period to pay the Depositor,
pursuant to Section 2.02 of the Loan Sale Agreement, on
each Transfer Date, the Loan Purchase Amount for Prefunded
Loans or Serial Loans purchased by the Eligible Lender
Trustee on behalf of the Issuer on such date and, on each
Transfer Date after the end of the Funding Period and on
or prior to October 31, 2003, the Loan Purchase Amount for
Serial Loans so
11
purchased on such date, which Officers' Certificate, in
each case, shall be delivered on the Business Day
preceding such Transfer Date;
(C) to pay the Servicer the Servicing Fee due on each
Monthly Payment Date pursuant to Section 2(d)(iv),
2(d)(v)(A) and 2(e)(iv)(A); and
(D) to make all the distributions required by Sections
2(d), 2(e), and 2(f) for the Monthly Collection Period or
Collection Period, as the case may be, preceding the date
of such Officers' Certificate, which Officer's Certificate
shall be delivered on each Determination Date.
(d) On each Determination Date, the Servicer shall calculate all
amounts required to determine the amounts to be deposited in the Collection
Account and the other Trust Accounts and the amounts to be distributed
therefrom on the related Monthly Payment Date, Quarterly Payment Date or other
dates from which amounts therein are to be distributed.
(e) On each Determination Date, the Servicer shall prepare and
provide to the Administrator the report required pursuant to Section 2(g) of
the Administration Agreement.
SECTION 3.08. Annual Statement as to Compliance; Notice of Default.
(a) The Servicer shall deliver to the Depositor, the Eligible Lender
Trustee and the Indenture Trustee (with a copy to the Seller), on or before
March 31 of each year beginning 2003, an Officers' Certificate of the
Servicer, dated as of December 31 of the preceding year, stating that (i) a
review of the activities of the Servicer during the preceding 12-month period
(or, in the case of the first such certificate, during the period from the
Closing Date to December 31, 2002 and of its performance has been made under
such officers' supervision and (ii) to the best of such officers' knowledge,
based on such review, the Servicer has fulfilled all its obligations under
this Agreement in all material respects throughout such year (or in the case
of the first such Officers' Certificate, such shorter period) or, if there has
been a default in the fulfillment of any such obligation, specifying each such
default known to such officers and the nature and status thereof. The
Indenture Trustee shall send a copy of each such Officers' Certificate and
each report referred to in this Section 3.08 to the Rating Agencies. A copy of
each such Officers' Certificate and each report referred to in this Section
3.08 may be obtained by any Noteholder or Note Owner by a request in writing
to the Eligible Lender Trustee addressed to its Corporate Trust Office,
together with evidence satisfactory to the Eligible Lender Trustee that such
Person is one of the foregoing parties. Upon the telephone request of the
Eligible Lender Trustee, the Indenture Trustee will promptly furnish the
Eligible Lender Trustee a list of Noteholders as of the date specified by the
Eligible Lender Trustee.
(b) The Servicer shall deliver to the Depositor, Eligible Lender
Trustee, the Indenture Trustee, the Seller and the Rating Agencies, promptly
after having obtained knowledge thereof, but in no event later than five
Business Days thereafter, written notice in an Officers' Certificate of the
Servicer of any event which with the giving of notice or lapse of time, or
both, would become a Servicer Default under Section 6.01 or would cause the
Servicer to fail to meet any Rating Agency Condition.
SECTION 3.09. Annual Independent Certified Public Accountants' Report.
12
The Servicer shall cause a firm of independent certified public accountants,
which may also render other services to the Servicer, the Seller, the
Depositor their Affiliates, to deliver to the Depositor, the Eligible Lender
Trustee and the Indenture Trustee (with a copy to the Seller) within 180 days
of the end of the Servicer's regular fiscal-year ended 2002 or calendar-year
audit period, an audit report that encompasses the Servicer's portion of the
annual Lender Audit (as defined in the Higher Education Act), or any successor
thereto, as required of a lender under the Higher Education Act, for the
preceding year (or, in the case of the first such report, during the period
from the Closing Date to December 31, 2002). The Indenture Trustee shall send
a copy of each such report to the Rating Agencies.
Such report will also indicate that the firm is independent of the
Servicer within the meaning of the Code of Professional Ethics of the American
Institute of Certified Public Accountants.
SECTION 3.10. Access to Certain Documentation and Information
Regarding Financed Student Loans.
Upon at least three Business Days' prior notice, the Servicer shall provide
the Noteholders access to the Student Loan Files in such cases where the
Noteholders shall be required by applicable statutes or regulations to review
such documentation, as demonstrated by evidence satisfactory to the Servicer
in its reasonable judgment. Access shall be afforded without charge, but only
upon reasonable request and during the normal business hours at the respective
offices of the Servicer. Nothing in this Section shall affect the obligation
of the Servicer to observe any applicable law prohibiting disclosure of
information regarding the Obligors and the failure of the Servicer to provide
access to information as a result of such obligation shall not constitute a
breach of this Section.
SECTION 3.11. Servicer Expenses.
The Servicer shall be required to pay all expenses incurred by it in
connection with its activities hereunder, including fees and disbursements of
independent accountants, taxes imposed on the Servicer, and expenses incurred
in connection with distributions and reports to the Administrator or the
Noteholders, as the case may be.
SECTION 3.12. Appointment of Subservicers.
(a) The Servicer may at any time appoint one or more subservicers to
perform all or any portion of its obligations as Servicer hereunder (including
but not limited to the Servicer's obligations as Custodian); provided,
however, that the Servicer shall remain obligated and be liable to the Issuer,
the Eligible Lender Trustee, the Indenture Trustee and the Noteholders for the
servicing, custody and administering of the Financed Student Loans in
accordance with the provisions hereof without diminution of such obligation
and liability by virtue of the appointment of such subservicer and to the same
extent and under the same terms and conditions as if the Servicer alone were
servicing and administering the Financed Student Loans. The fees and expenses
of the subservicer shall be as agreed between the Servicer and its subservicer
from time to time and none of the Issuer, the Eligible Lender Trustee, the
Indenture Trustee or the Noteholders shall have any responsibility therefor.
13
(b) As of the Closing Date, the Servicer has appointed UNIPAC Service
Corporation, as Subservicer to service the Financed Student Loans pursuant to
a Subservicing Agreement.
ARTICLE IV
Deposits into the Collection Account
SECTION 4.01. Deposits into the Collection Account.
(a) The Servicer shall deposit into the Collection Account (in the
case of clauses (i) and (ii) within two Business Days of receipt of freely
available funds therefor):
(i) all identifiable payments received by the Servicer by or
on behalf of Obligors on the Financed Student Loans, including any
Guarantee Payments with respect to the Financed Student Loans;
(ii) all Liquidation Proceeds on the Financed Student Loans;
(iii) with respect to Purchased Student Loans, the aggregate
Purchase Amounts, when such amounts are due, as provided in Section
3.05 hereof; and
(iv) all other amounts required to be deposited into the
Collection Account by the Servicer pursuant to the terms hereof;
provided, however, that for so long as (i) the Servicer's short-term
unsecured obligations are rated at least "A-1" by S&P, "P-1" by ▇▇▇▇▇'▇ and
"F-1" by Fitch, (ii) a Servicer Default has not occurred and is not continuing
and (iii) ▇▇▇▇▇ Fargo Bank South Dakota, National Association is the Servicer,
the Servicer will be required to make the deposits to the Collection Account
set forth in this clause (a) with respect to each Collection Period not later
than the Business Day preceding the related Quarterly Payment Date.
(b) The Eligible Lender Trustee shall deposit into the Collection
Account within two Business Days of the receipt thereof, the aggregate amount
of Interest Subsidy Payments and Special Allowance Payments received by it
with respect to the Financed Student Loans.
(c) The Seller shall deposit into the Collection Account, the
aggregate Purchase Amount with respect to Purchased Student Loans and all
other amounts to be paid by the Seller or the Depositor under Section 3.02 of
the Loan Sale Agreement when such amounts are due, as provided in Section 3.03
of the Loan Sale Agreement.
ARTICLE V
The Servicer
SECTION 5.01. Representations of Servicer.
14
The Servicer makes the following representations on which the Issuer is deemed
to have relied in acquiring (through the Eligible Lender Trustee) the Financed
Student Loans and appointing the Servicer as servicer hereunder. The
representations speak as of the execution and delivery of this Agreement and
as of the Closing Date in the case of the Initial Financed Student Loans, and
will be deemed to speak as of the applicable Transfer Date, in the case of
Prefunded Loans and Serial Loans, as of the date of the relevant Assignment in
the case of any Qualified Substitute Student Loan, as of the date of
origination in the case of any Consolidation Loan added to the Trust during
the Funding Period and as of the applicable Add-on Consolidation Loan Funding
Date in the case of any Consolidation Loan the principal balance of which has
been increased by the principal balance of a related Add-on Consolidation
Loan, but shall survive the sale, transfer and assignment of the Financed
Student Loans to the Eligible Lender Trustee on behalf of the Issuer (and the
origination of such Consolidation Loans) and the pledge thereof to the
Indenture Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Servicer is a national
banking association duly organized and validly existing in good standing
under the laws of the United States. It has all requisite power and
authority to execute, deliver and perform its obligations under this
Agreement.
(b) Power and Authority of Servicer. The Servicer has taken all
action necessary to authorize the execution and delivery by it of this
Agreement, and this Agreement will be executed and delivered by one of
its officers who is duly authorized to execute and deliver this Agreement
on its behalf.
(c) Binding Obligation. This Agreement constitutes a legal, valid
and binding obligation of the Servicer, enforceable in accordance with
its terms, subject to applicable bankruptcy, insolvency, reorganization
and similar laws relating to creditors' rights generally and subject to
general principles of equity.
(d) No Violation. The consummation of the transactions contemplated
by this Agreement and the fulfillment of the terms hereof or thereof do
not conflict with, result in any material breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of time or
both) a default under, the charter or by-laws of the Servicer, or any
material indenture, agreement or other instrument to which the Servicer
is a party or by which it shall be bound; or result in the creation or
imposition of any Lien upon any of its material properties pursuant to
the terms of any such indenture, agreement or other instrument; or
violate any law or, to the knowledge of the Servicer, any order, rule or
regulation applicable to the Servicer of any court or of any federal or
state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Servicer or its properties.
Performance by the Servicer of its servicing duties with respect to the
Financed Student Loans, and compliance by the Servicer with the terms of
this Agreement, will not result in the loss of any Guarantee Payments by
the Trust or any reinsurance payments with respect to any Financed
Student Loan by the applicable Guarantor.
(e) No Proceedings. There are no proceedings or investigations
pending against the Servicer or, to its best knowledge, threatened
against the Servicer, before any
15
court, regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Servicer or its properties:
(i) asserting the invalidity of this Agreement or any of the other Basic
Documents to which the Servicer is a party, (ii) seeking to prevent the
issuance of the Notes or the consummation of any of the transactions
contemplated by this Agreement, or any of the other Basic Documents,
(iii) seeking any determination or ruling that could reasonably be
expected to have a material and adverse effect on the performance by the
Servicer of its obligations under, or the validity or enforceability of,
this Agreement, any of the other Basic Documents or the Notes or (iv)
seeking to affect adversely the federal or state income tax attributes of
the Issuer or the Notes.
(f) All Consents. All authorizations, consents, licenses, orders or
approvals of or registrations or declarations with any court, regulatory
body, administrative agency or other government instrumentality required
to be obtained, effected or given by the Servicer in connection with the
execution and delivery by the Servicer of this Agreement and the
performance by the Servicer of its duties contemplated by this Agreement
have in each case been duly obtained, effected or given and are in full
force and effect.
SECTION 5.02. Indemnities of Servicer.
The Servicer shall be liable in accordance herewith only to the extent of the
obligations specifically undertaken by the Servicer under this Agreement.
The Servicer shall pay for any loss, liability or expense, including
reasonable attorneys' fees, that may be imposed on, incurred by or asserted
against the Issuer, the Eligible Lender Trustee, the Indenture Trustee, the
Depositor, the Seller, the Administrator or the Noteholders or any of the
officers, directors, employees and agents of the Issuer, the Eligible Lender
Trustee, the Indenture Trustee, the Depositor, the Administrator or the Seller
to the extent that such loss, liability or expense arose out of, or was
imposed upon any such Person through, the negligence, willful misfeasance or
bad faith of the Servicer in the performance of its obligations and duties
under this Agreement or by reason of the reckless disregard of its obligations
and duties under this Agreement, where the final determination that any such
loss, liability or expense arose out of, or was imposed upon any such Person
through, any such negligence, willful misfeasance, bad faith or recklessness
on the part of the Servicer is established by a court of law, by an arbitrator
or by way of settlement agreed to by the Servicer; provided, however, that the
Servicer's obligation arising under this Section 5.02 shall apply only to the
extent that the sum of such obligation and any other liabilities of the
Servicer under this Agreement exceeds the Servicer Liability Limit for any
Servicer Liability Period (as such terms are defined in Section 3.05).
Notwithstanding the foregoing, if the Servicer is rendered unable, in whole or
in part, by a force outside the control of the parties hereto (including acts
of God, acts of war, fires, earthquakes and other disasters) to satisfy its
obligations under this Agreement, the Servicer shall not be deemed to have
breached any such obligation upon delivery of written notice of such event to
the other parties hereto, for so long as the Servicer remains unable to
perform such obligation as a result of such event.
For purposes of this Section, in the event of the termination of the
rights and obligations of ▇▇▇▇▇ Fargo Bank South Dakota, National Association
as Servicer pursuant to Section 6.01, or
16
a resignation by such Servicer pursuant to this Agreement, such Servicer shall
be deemed to be the Servicer pending appointment of a successor Servicer
pursuant to Section 6.02.
Liability of the Servicer under this Section shall survive the
resignation or removal of the Eligible Lender Trustee or the Indenture Trustee
or the termination of this Agreement and shall include reasonable fees and
expenses of counsel and expenses of litigation. If the Servicer shall have
made any indemnity payments pursuant to this Agreement and the Person to or on
behalf of whom such payments are made thereafter collects any of such amounts
from others, such Person shall promptly repay such amounts to the Servicer,
without interest.
The Servicer shall pay reasonable compensation to the Indenture
Trustee and shall reimburse the Indenture Trustee for all reasonable expenses,
disbursements and advances, and indemnify, defend and hold harmless the
Indenture Trustee and its officers, directors, employees and agents from and
against all costs, expenses, losses, claims, damages and liabilities, to the
extent and in the manner provided in, and subject to the limitations of,
Section 6.07 of the Indenture.
SECTION 5.03. Merger or Consolidation of, or Assumption of
the Obligations of, Servicer.
The Servicer hereby agrees that, upon (a) any merger or consolidation of the
Servicer into another Person, (b) any merger or consolidation to which the
Servicer shall be a party resulting in the creation of another Person or (c)
any Person succeeding to the properties and assets of the Servicer
substantially as a whole, the Servicer shall (i) cause such Person (if other
than the Servicer) to execute an agreement of assumption to perform every
obligation of the Servicer hereunder, (ii) deliver to the Eligible Lender
Trustee and the Indenture Trustee an Officers' Certificate and an Opinion of
Counsel each stating that such consolidation, merger or succession and such
agreement of assumption comply with this Section and that all conditions
precedent provided for in this Agreement relating to such transaction have
been complied with, (iii) cause the Rating Agency Condition to have been
satisfied with respect to such transaction and (iv) cure any existing Servicer
Default or any continuing event which, after notice or lapse of time or both,
would become a Servicer Default. Upon compliance with the foregoing
requirements, such Person shall be the successor to the Servicer under this
Agreement without further act on the part of any of the parties to this
Agreement. Notwithstanding anything herein to the contrary, compliance with
clauses (i), (ii), (iii) and (iv) above shall be conditions to the
consummation of any of the transactions referred to in clause (a), (b) or (c)
above.
SECTION 5.04. Limitation on Liability of Servicer and Others.
Neither the Servicer nor any of the directors, officers, employees or agents
of the Servicer shall be under any liability to the Issuer or the Noteholders,
except as provided under this Agreement, for any action taken or for
refraining from the taking of any action pursuant to this Agreement or for
errors in judgment; provided, however, that this provision shall not protect
the Servicer or any such Person against any liability that would otherwise be
imposed by reason of willful misfeasance, bad faith or negligence in the
performance of duties or by reason of reckless disregard of obligations and
duties under this Agreement. The Servicer and any director, officer, employee
or agent of the Servicer may rely in good faith on any document of any kind
prima
17
facie properly executed and submitted by any person respecting any matters
arising under this Agreement.
Except as provided in this Agreement, the Servicer shall not be under
any obligation to appear in, prosecute or defend any legal action that shall
not be incidental to its duties to service the Student Loans in accordance
with this Agreement and that in its opinion may involve it in any expense or
liability; provided, however, that the Servicer may undertake any reasonable
action that it may deem necessary or desirable in respect of this Agreement
and the other Basic Documents and the rights and duties of the parties to this
Agreement and the other Basic Documents and the interests of the Noteholders
under the Indenture.
SECTION 5.05. ▇▇▇▇▇ Fargo Bank South Dakota, National
Association Not to Resign as Servicer.
Subject to the provisions of Section 5.03, ▇▇▇▇▇ Fargo Bank South Dakota,
National Association shall not resign from the obligations and duties hereby
imposed on it as Servicer under this Agreement except upon determination that
the performance of its duties under this Agreement shall no longer be
permissible under applicable law. Notice of any such determination permitting
the resignation of ▇▇▇▇▇ Fargo Bank South Dakota, National Association shall
be communicated to the Eligible Lender Trustee, the Indenture Trustee and the
Rating Agencies at the earliest practicable time (and, if such communication
is not in writing, shall be confirmed in writing at the earliest practicable
time) and any such determination shall be evidenced by an Opinion of Counsel
to such effect delivered to the Eligible Lender Trustee and the Indenture
Trustee concurrently with or promptly after such notice. No such resignation
shall become effective until the Indenture Trustee or a Successor Servicer
shall have assumed the responsibilities and obligations of ▇▇▇▇▇ Fargo Bank
South Dakota, National Association in accordance with Section 6.02.
ARTICLE VI
Default
SECTION 6.01. Servicer Default.
If any one of the following events (each, a "Servicer Default") shall occur
and be continuing:
(a) any failure by the Servicer to deliver to the Indenture
Trustee for deposit in any of the Trust Accounts any payment required
by the Basic Documents, which failure continues unremedied for three
Business Days after written notice of such failure is received by the
Servicer from the Eligible Lender Trustee, the Indenture Trustee or
the Administrator or after discovery of such failure by an officer of
the Servicer; or
(b) any failure by the Servicer duly to observe or to
perform in any material respect any other covenants or agreements of
the Servicer set forth in this Agreement or any other Basic Document,
which failure shall (i) materially and adversely affect the rights of
Noteholders and (ii) continue unremedied for a period of thirty (30)
days after the date of discovery of such failure by an officer of the
Servicer or on which written notice of such failure, requiring the
same to be remedied, shall have been given (A) to the
18
Servicer, by the Depositor, the Indenture Trustee, the Eligible
Lender Trustee or (B) to the Servicer, the Indenture Trustee, the
Administrator and the Eligible Lender Trustee by Noteholders
representing not less than 25% of the Outstanding Amount of the
Notes; or
(c) any limitation, suspension or termination by the
Department of the Servicer's eligibility to service Student Loans
which materially and adversely affects its ability to service the
Financed Student Loans; or
(d) an Insolvency Event occurs with respect to the
Servicer;
then, and in each and every case, so long as the Servicer Default shall not
have been remedied, either the Indenture Trustee or the Noteholders of Notes
evidencing not less than 75% of the Outstanding Amount of the Notes by notice
then given in writing to the Servicer (and to the Indenture Trustee and the
Eligible Lender Trustee if given by the Noteholders) may terminate all the
rights and obligations (other than the obligations set forth in Section 5.02)
of the Servicer under this Agreement. On or after the receipt by the Servicer
of such written notice, all authority and power of the Servicer under this
Agreement, whether with respect to the Notes, the Financed Student Loans or
otherwise, shall, without further action, pass to and be vested in the
Indenture Trustee or such successor Servicer as may be appointed under Section
6.02; and, without limitation, the Indenture Trustee and the Eligible Lender
Trustee are hereby authorized and empowered to execute and deliver, for the
benefit of the predecessor Servicer, as attorney-in-fact or otherwise, any and
all documents and other instruments, and to do or accomplish all other acts or
things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement of the Financed
Student Loans and related documents, or otherwise. The predecessor Servicer
shall cooperate with the successor Servicer, the Indenture Trustee and the
Eligible Lender Trustee in effecting the termination of the responsibilities
and rights of the predecessor Servicer under this Agreement, including the
transfer to the successor Servicer for administration by it of all cash
amounts that shall at the time be held by the predecessor Servicer for
deposit, or shall thereafter be received by it with respect to a Financed
Student Loan. All reasonable costs and expenses (including attorneys' fees)
incurred in connection with transferring the Student Loan Files to the
successor Servicer and amending this Agreement and any other Basic Documents
to reflect such succession as Servicer pursuant to this Section shall be paid
by the predecessor Servicer upon presentation of reasonable documentation of
such costs and expenses. Upon receipt of notice of the occurrence of a
Servicer Default, the Eligible Lender Trustee shall give notice thereof to the
Rating Agencies.
SECTION 6.02. Appointment of Successor.
(a) Upon receipt by the Servicer of notice of termination pursuant to
Section 6.01, or the resignation by the Servicer in accordance with the terms
of this Agreement, the predecessor Servicer shall continue to perform its
functions as Servicer under this Agreement, in the case of termination, only
until the date specified in such termination notice or, if no such date is
specified in a notice of termination, until receipt of such notice and, in the
case of resignation, until the later of (x) the date 120 days from the
delivery to the Eligible Lender Trustee, and the Indenture Trustee of written
notice of such resignation (or written confirmation of such notice) in
accordance with the terms of this Agreement and (y) the date upon which the
predecessor Servicer shall become unable to act as Servicer as specified in
the notice of resignation and
19
accompanying Opinion of Counsel. In the event of the termination hereunder of
the Servicer, the Issuer shall appoint a successor Servicer acceptable to the
Indenture Trustee, and the successor Servicer shall accept its appointment by
a written assumption in form acceptable to the Indenture Trustee and the
Administrator. In the event that a successor Servicer has not been appointed
at the time when the predecessor Servicer has ceased to act as Servicer in
accordance with this Section, the Indenture Trustee without further action
shall automatically be appointed the successor Servicer and the Indenture
Trustee shall be entitled to the Servicing Fee. Notwithstanding the above, the
Indenture Trustee shall, if it shall be unwilling or legally unable so to act,
appoint or petition a court of competent jurisdiction to appoint, any
established institution the regular business of which shall include the
servicing of student loans, as the successor to the Servicer under this
Agreement; provided, however, that such right to appoint or to petition for
the appointment of any such successor Servicer shall in no event relieve the
Indenture Trustee from any obligations otherwise imposed on it under the Basic
Documents until such successor has in fact assumed such appointment.
(b) Upon appointment, the successor Servicer (including the Indenture
Trustee acting as successor Servicer) shall be the successor in all respects
to the predecessor Servicer and shall be subject to all the responsibilities,
duties and liabilities placed on the predecessor Servicer that arise
thereafter or are related thereto and shall be entitled to an amount agreed to
by such successor Servicer (which shall not exceed the Servicing Fee, unless
such compensation arrangements will not result in a downgrading of the Notes
by any Rating Agency) and all the rights granted to the predecessor Servicer
by the terms and provisions of this Agreement.
(c) The Servicer may not resign unless it is prohibited from serving
as such by law as evidenced by an Opinion of Counsel to such effect delivered
to the Indenture Trustee and the Eligible Lender Trustee. Notwithstanding the
foregoing or anything to the contrary herein or in the other Basic Documents,
the Indenture Trustee, to the extent it is acting as successor Servicer
pursuant hereto, shall be entitled to resign to the extent a qualified
successor Servicer has been appointed and has assumed all the obligations of
the Servicer in accordance with the terms of this Agreement and the other
Basic Documents.
SECTION 6.03. Notification to Noteholders.
Upon any termination of, or appointment of a successor to, the Servicer
pursuant to this Article VI, the Indenture Trustee shall give prompt written
notice thereof to Noteholders, the Administrator, the Eligible Lender Trustee
and the Rating Agencies (which, in the case of any such appointment of a
successor, shall consist of prior written notice thereof to the Rating
Agencies).
SECTION 6.04. Waiver of Past Defaults.
The Noteholders of Notes evidencing not less than a majority of the
Outstanding Amount of the Notes may, on behalf of all Noteholders, waive in
writing any default by the Servicer in the performance of its obligations
hereunder, and any consequences thereof, except a default in making any
required deposits to or payments from any of the Trust Accounts (or giving
instructions regarding the same) in accordance with this Agreement to the
extent provided in such waiver. Upon any such waiver of a past default, such
default shall cease to exist, and any
20
Servicer Default arising therefrom shall be deemed to have been remedied for
every purpose of this Agreement. No such waiver shall extend to any subsequent
or other default or impair any right consequent thereto.
ARTICLE VII
Termination
SECTION 7.01. Optional Purchase of All Financed Student Loans.
As of the last day of any Collection Period immediately preceding a Quarterly
Payment Date as of which the then outstanding Pool Balance (not including, for
this purpose, accrued interest except to the extent such interest will be
capitalized upon commencement of Repayment) is 10 % or less of the sum of (i)
the Initial Pool Balance and (ii) the Prefunding Account Closing Date Deposit,
the Servicer will have the option to purchase the Trust Estate, other than the
Trust Accounts. To exercise such option, the Servicer will deposit in the
Collection Account an amount equal to the Minimum Purchase Price; provided,
however, that the Servicer may not effect such purchase if the aggregate
amount to be so deposited in the Collection Account would exceed an amount
equal to the lesser of (i) the aggregate Purchase Amounts of the Financed
Student Loans as of the end of the Collection Period immediately preceding
such Quarterly Payment Date and (ii) the fair market value of the Financed
Student Loans determined by the Indenture Trustee based on the average of bids
or appraisals submitted by not less than two Persons who are Independent of
the Servicer and who in the normal course of their business participate in the
secondary market for the sale or financing of federal student loans.
ARTICLE VIII
Miscellaneous
SECTION 8.01. Amendment.
This Agreement may be amended by the Depositor, the Servicer and the Eligible
Lender Trustee, with the prior written consent of the Indenture Trustee, but
without the consent of any of the Noteholders, to cure any ambiguity, to
correct or supplement any provisions in this Agreement or for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions in this Agreement or of modifying in any manner the rights of the
Noteholders; provided, however, that such action shall not, as evidenced by an
Opinion of Counsel delivered to the Eligible Lender Trustee and the Indenture
Trustee, adversely affect in any material respect the interests of the
Noteholders.
This Agreement may also be amended from time to time by the
Depositor, the Servicer and the Eligible Lender Trustee, with the prior
written consent of the Indenture Trustee and the Noteholders of Notes
evidencing not less than a majority of the Outstanding Amount of the Notes,
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement or of modifying in any
manner the rights of the Noteholders; provided, however, that no such
amendment shall (a) increase or reduce in any manner the amount of, or
accelerate or delay the timing of, collections of payments with respect to
Financed
21
Student Loans or distributions that shall be required to be made for the
benefit of the Noteholders or (b) reduce the aforesaid percentage of the
Outstanding Amount of the Notes, the Noteholders of which are required to
consent to any such amendment, without the consent of all outstanding
Noteholders.
Promptly after the execution of any such amendment or consent (or, in
the case of the Rating Agencies, five Business Days prior thereto), the
Eligible Lender Trustee shall furnish written notification of the substance of
such amendment or consent to the Indenture Trustee and each of the Rating
Agencies.
It shall not be necessary for the consent of Noteholders pursuant to
this Section to approve the particular form of any proposed amendment or
consent, but it shall be sufficient if such consent shall approve the
substance thereof.
Prior to the execution of any amendment to this Agreement, the
Eligible Lender Trustee and the Indenture Trustee shall be entitled to receive
and rely upon an Opinion of Counsel stating that the execution of such
amendment is authorized or permitted by this Agreement and the Opinion of
Counsel referred to in Section 6.02(f) of the Loan Sale Agreement. The
Eligible Lender Trustee and the Indenture Trustee may, but shall not be
obligated to, enter into any such amendment which affects the Eligible Lender
Trustee's or the Indenture Trustee's, as applicable, own rights, duties or
immunities under this Agreement or otherwise.
SECTION 8.02. Protection of Interests in Trust.
(a) The Servicer shall not change its name, identity or structure in
any manner that would, could or might make any financing statement or
continuation statement filed in accordance with Section 6.02(a) of the Loan
Sale Agreement seriously misleading within the meaning of ss. 9-506(b) of the
UCC, unless it shall have given the Eligible Lender Trustee, the Indenture
Trustee and the Rating Agencies at least five days' prior written notice
thereof and shall have promptly filed appropriate amendments to all previously
filed financing statements or continuation statements.
(b) The Servicer shall have an obligation to give the Eligible Lender
Trustee and the Indenture Trustee at least sixty (60) days' prior written
notice of any change of its location for purposes of the UCC if, as a result
thereof, the applicable provisions of the UCC would require the filing of any
amendment of any previously filed financing or continuation statement or of
any new financing statement and shall promptly file any such amendment.
(c) The Servicer shall maintain accounts and records of each Student
Loan accurately and in sufficient detail to permit (i) the reader thereof to
know at any time the status of such Financed Student Loan, including payments
and recoveries made and payments owing (and the nature of each) and (ii)
reconciliation between payments or recoveries on (or with respect to) each
Financed Student Loan and the amounts from time to time deposited in the
Collection Account in respect of such Financed Student Loan.
(d) The Servicer shall, by use of a distinct identification code,
maintain its computer systems so that, from and after the time of sale under
this Agreement of the Financed Student Loans, the Servicer's master computer
records (including any backup archives) that refer to a
22
Student Loan shall indicate clearly the interest of the Issuer, the Eligible
Lender Trustee and the Indenture Trustee in such Student Loan and that such
Student Loan is owned by the Eligible Lender Trustee on behalf of the Issuer
and has been pledged to the Indenture Trustee. Indication of the Issuer's, the
Eligible Lender Trustee's and the Indenture Trustee's interest in a Student
Loan shall be deleted from or modified on the Servicer's computer systems
when, and only when, the related Financed Student Loan shall have been paid in
full or repurchased.
(e) If at any time the Servicer shall propose to sell, grant a
security interest in, or otherwise transfer any interest in student loans to
any prospective purchaser, lender or other transferee, the Servicer shall give
to such prospective purchaser, lender or other transferee computer tapes,
records or printouts (including any restored from backup archives) that, if
they shall refer in any manner whatsoever to any Financed Student Loan, shall
indicate clearly that such Financed Student Loan has been sold and is owned by
the Eligible Lender Trustee on behalf of the Issuer and has been pledged to
the Indenture Trustee.
(f) The Servicer shall permit the Indenture Trustee and its agents at
any time during normal business hours to inspect, audit and make copies of and
abstracts from the Servicer's records regarding any Financed Student Loan;
provided, however, that the Servicer is given reasonable prior notice of at
least three (3) Business Days.
(g) Upon request, at any time the Eligible Lender Trustee or the
Indenture Trustee shall have reasonable grounds to believe that such request
would be necessary in connection with its performance of its duties under the
Basic Documents, the Servicer shall furnish to the Eligible Lender Trustee or
the Indenture Trustee (in each case, with a copy to the Administrator), within
five (5) Business Days, a list of all Financed Student Loans (by borrower
social security number, type of loan and date of issuance) then held as part
of the Trust, and shall cause the Administrator to furnish to the Eligible
Lender Trustee or to the Indenture Trustee, within 20 Business Days
thereafter, a comparison of such list to the list of Initial Financed Student
Loans set forth in Schedule A to the Loan Sale Agreement as of the Closing
Date, and, for each Financed Student Loan that has been added to or removed
from the pool of loans held by the Eligible Lender Trustee on behalf of the
Issuer, information as to the date as of which and circumstances under which
each such Financed Student Loan was so added or removed.
SECTION 8.03. Notices.
Unless otherwise agreed by the recipient, all demands, notices and
communications upon or to the Depositor, the Seller, the Servicer, the
Eligible Lender Trustee, the Indenture Trustee, the Administrator, the Rating
Agencies or the Swap Counterparty under this Agreement shall be in writing,
personally delivered or mailed by certified mail, return receipt requested (or
in the form of telex or facsimile notice, followed by written notice delivered
as aforesaid or postage prepaid, first class mail), and shall be deemed to
have been duly given upon receipt;
(a) in the case of the Depositor, to
▇▇▇▇▇ Fargo Student Loans Receivables I, LLC
Sixth and Marquette
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
23
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
(b) in the case of the Seller, to
▇▇▇▇▇ Fargo Bank South Dakota, National Association
▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Senior Regional Credit Officer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
(c) in the case of the Servicer, to
▇▇▇▇▇ Fargo Bank South Dakota, National Association
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
(d) in the case of the Issuer, to
▇▇▇▇▇ Fargo Student Loan Trust ▇▇▇▇-▇
▇/▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, National Association
Sixth and Marquette
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Asset Backed Administration
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to the Eligible Lender Trustee
at the Corporate Trust Office of the
Eligible Lender Trustee;
(e) in the case of the Eligible Lender Trustee, at the
Corporate Trust Office of the Eligible Lender Trustee;
(f) in the case of the Indenture Trustee, at its
Corporate Trust Office;
(g) in the case of the Administrator, to
▇▇▇▇▇ Fargo Bank Minnesota, National Association
Sixth and Marquette
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Asset Backed Administration
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
24
(h) in the case of Moody's, to
▇▇▇▇▇'▇ Investors Service, Inc.
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ABS Monitoring Department
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇;
(i) in the case of Fitch, to
Fitch, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Asset Backed Monitoring Unit
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇; and
(j) in the case of Standard & Poor's,
a division of The ▇▇▇▇▇▇-▇▇▇▇ Companies, Inc., to
Standard & Poor's
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Asset Backed Surveillance Department
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(k) in the case of the Swap Counterparty,
to the addresses set forth in the Swap Agreement
or, as to each of the foregoing, at such other address as shall be designated
by written notice to the other parties.
SECTION 8.04. Assignment.
Notwithstanding anything to the contrary contained herein, except as provided
in the succeeding sentence, as provided in Section 5.03 and as provided in the
provisions of this Agreement concerning the resignation of the Servicer, this
Agreement may not be assigned by the Servicer. This Agreement may only be
assigned by the Eligible Lender Trustee to its permitted successor pursuant to
the Trust Agreement.
SECTION 8.05. Limitations on Rights of Others.
The provisions of this Agreement are solely for the benefit of the Servicer,
the Issuer and the Eligible Lender Trustee and for the benefit of the
Administrator, the Indenture Trustee and the Noteholders, as third party
beneficiaries, and nothing in this Agreement, whether express or implied,
shall be construed to give to any other Person any legal or equitable right,
remedy or claim in the Trust Estate or under or in respect of this Agreement
or any covenants, conditions or
25
provisions contained herein. The Indenture Trustee is an express third-party
beneficiary and may enforce the provisions of this Agreement as if it were a
party hereto.
SECTION 8.06. Severability.
Any provision of this Agreement that 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 8.07. 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 8.08. 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 8.09. Governing Law.
This Agreement shall be construed in accordance with the laws of the State of
New York, without reference to its conflict of law provisions, and the
obligations, rights and remedies of the parties hereunder shall be determined
in accordance with such laws.
SECTION 8.10. Non-Petition Covenants.
Notwithstanding any prior termination of this Agreement, the Servicer shall
not, prior to the date which is one year and one day after the termination of
this Agreement with respect to the Issuer or the Depositor, acquiesce,
petition or otherwise invoke or cause the Issuer or the Depositor to invoke
the process of any court or government authority for the purpose of commencing
or sustaining a case against the Issuer or the Depositor under any federal or
state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar
official of the Issuer or any substantial part of its property, or ordering
the winding up or liquidation of the affairs of the Issuer.
SECTION 8.11. Limitation of Liability of Eligible Lender Trustee
and Indenture Trustee.
(a) Notwithstanding anything contained herein to the contrary (other
than pursuant to subsection (d)), this Agreement has been signed by Bank One
not in its individual capacity but solely in its capacity as Eligible Lender
Trustee of the Issuer and in no event shall Bank One in its individual
capacity or, except as expressly provided in the Trust Agreement, as
beneficial owner of the Issuer have any liability for the representations,
warranties, covenants, agreements or other obligations of the Issuer hereunder
or in any of the certificates, notices or agreements
26
delivered pursuant hereto as to all or which recourse shall be had solely to
the assets of the Issuer.
(b) Notwithstanding anything contained herein to the contrary (other
than pursuant to subsection (d)), this Agreement has been accepted by JPMorgan
Chase Bank not in its individual capacity but solely as Indenture Trustee and
in no event shall JPMorgan Chase Bank have any liability for the
representations, warranties, covenants, agreements or other obligations of the
Issuer hereunder or in any of the certificates, notices or agreements
delivered pursuant hereto, as to all of which recourse shall be had solely to
the assets of the Issuer.
(c) Notwithstanding any other provision in this Agreement or the
other Basic Documents, nothing in this Agreement or the other Basic Documents
shall be construed to limit the legal responsibility of the Eligible Lender
Trustee or the Indenture Trustee, to the U.S. Secretary of Education or a
Guarantor for any violations of statutory or regulatory requirements that may
occur with respect to loans held by the Eligible Lender Trustee or the
Indenture Trustee pursuant to, or to otherwise comply with their obligations
under, the Higher Education Act or implementing regulations.
[Signatures Follow on Next Page]
27
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective officers as of the day and year first
above written.
▇▇▇▇▇ FARGO STUDENT LOAN TRUST 2001-1,
as Issuer
By: BANK ONE, NATIONAL ASSOCIATION, not in its
individual capacity but solely as Eligible
Lender Trustee on behalf of the Issuer
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Vice President
▇▇▇▇▇ FARGO BANK SOUTH DAKOTA, National
Association, as Servicer
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Senior Vice President
▇▇▇▇▇ FARGO STUDENT LOANS RECEIVABLES I, LLC,
as Depositor
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇▇
Title: President and CEO
BANK ONE, NATIONAL ASSOCIATION,
not in its individual capacity but
solely as Eligible Lender Trustee
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Vice President
28
Acknowledged and accepted as of the day and year first above written:
JPMORGAN CHASE BANK,
not in its individual capacity but
solely as Indenture Trustee
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
29
SCHEDULE A
The Servicer shall maintain each Student Loan File at one of the locations
listed below:
UNIPAK
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ Fargo Bank South Dakota,
National Association
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇