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CONFIDENTIAL MATERIALS
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.
ASTERISKS DENOTE
OMISSIONS.
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Exhibit
99.10
GUARANTY
AGREEMENT
between
THE EDUCATION RESOURCES
INSTITUTE, INC.
and
CHARTER ONE BANK,
N.A.
This Guaranty
Agreement (this “Agreement”) is made as of this 25th
day of March, 2004, by and between The Education Resources
Institute, Inc. ("TERI"), a private non-profit corporation
organized under Chapter 180 of the Massachusetts General Laws with
its principal place of business at 31 St. James Avenue, 6
th Floor, Boston, Massachusetts 02116, and Charter One
Bank, N.A., (the “LENDER”), a national banking
association organized under the laws of the United States and
having a place of business located at 1215 Superior Avenue,
Cleveland, Ohio 44114, and a student loan department located at 833
Broadway, Albany, NY 12207.
WHEREAS, TERI
is in the business of providing financial assistance in the form of
loan guaranties to and on behalf of students enrolled in programs
of higher education and their parents at TERI-approved schools;
and
WHEREAS, the
LENDER is willing to make Loans to eligible Borrowers under the
Program, and TERI is willing to guaranty the payment of principal
and interest against the Borrowers' default or certain other events
as more fully described below, in accordance with the terms and
conditions set forth in this Agreement.
NOW, THEREFORE,
in consideration of the mutual covenants contained herein, TERI and
the LENDER agree as follows:
Section
1:
DEFINITIONS
As used in this
Agreement the following terms shall have the following
meanings:
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1.1
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“Borrower” shall mean the person, or
all persons collectively, including all students, cosigners,
coborrowers, guarantors, endorsers, and accommodation parties, who
execute a Promissory Note individually or, in the case of multiple
Borrowers, severally and jointly, for the purpose of obtaining
funds from the LENDER under the Program.
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1.2
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“Custodian” shall mean U.S. Bank
National Association, its successors and assigns, in its capacity
as Depository Institution under the Security Agreement of even date
herewith and as Bank under the Control Agreement of even date
herewith (together, “Security Documents”), or a
successor custodian (alternative Depository Institution or Bank, as
the case may be) appointed in accordance with the Security
Documents.
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1.3
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"Due Diligence"
shall mean the utilization by the LENDER of policies,
practices
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and procedures
in the origination, servicing and collection of Loans that comply
with the standards set forth in the Program Guidelines and that
comply with the requirements of federal and state law and
regulation.
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1.4
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“FMC” shall mean The First
Marblehead Corporation, a Delaware corporation located at 800
Boylston St., 34 th Floor, Boston, MA 02199.
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1.5
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“Guaranty
Claim” shall mean a claim by the LENDER to TERI for a
guaranty payment with respect to a Loan pursuant to Section 2.1 of
this Agreement.
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1.6
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"Guaranty
Event" shall mean any of the following events with respect to a
Loan:
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a.
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failure of a
Borrower to make monthly principal and/or interest payments on a
Loan when due, provided such failure persists for a period of one
hundred eighty (180) consecutive days,
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b.
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the filing of a
petition in bankruptcy with respect to a Borrower, or
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c.
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the death of a
Borrower.
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For Loans on
which the Borrower is two or more persons, none of the above, with
the exception of paragraph b., shall be a Guaranty Event unless one
or more such events shall have occurred with respect to all such
persons. The foregoing notwithstanding, if a Borrower files a
petition in bankruptcy pursuant to Chapter 7 of the U.S. Bankruptcy
Code and does not seek a discharge of the affected Loan(s) under 11
U.S.C. §523(a)(8)(B) of the U.S. Bankruptcy Code, the LENDER
at TERI's request will withdraw its guaranty claim unless or until
one of the other Guaranty Events shall have occurred with respect
thereto.
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1.7
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"Loan" shall
mean a loan of funds, including all disbursements thereof, made by
the LENDER to a Borrower under the Program.
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1.8
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“Loan
Origination Agreement” means the agreement of that name
between LENDER and TERI dated as of March 25, 2004, as it may be
amended from time to time.
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1.9
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“Note
Purchase Agreement” means the agreement of that name between
LENDER and FMC dated as of March 25, 2004, as it may be amended
from time to time.
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1.10
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“Program” shall mean the Charter One
Start Education Loan Program, as more fully described in the
Program Guidelines.
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1.11
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"Program
Guidelines" shall mean the Charter One Start Education Loan Program
Guidelines attached hereto as Exhibit A, and all changes thereto as
provided in Section 6 hereof. The Program Guidelines (a) consist of
the Program Overview, the TERI Underwriting, Origination and Loan
Term Guidelines, the Servicing Guidelines, and Program Borrower
Documents (consisting of the forms of Promissory Note and Truth in
Lending Disclosure) and (b) are hereby incorporated in this
Agreement by reference and made a part hereof.
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1.12
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"Promissory
Note" shall mean a promissory note executed by a Borrower
evidencing a Loan, in the form attached hereto as part of the
Program Guidelines or as approved pursuant to Section 3.2
below.
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1.13
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“Securitization Transaction” shall
mean and refer to (a) a purchase of Loans guaranteed hereunder by a
special purpose entity (“SPE”) formed by FMC, which
purchase is funded through the issuance of debt instruments or
other securities by such entity, the repayment of which is
supported by payments on the Loans or (b) any other transaction
whereby a Loan is transferred from the LENDER to FMC or one of its
affiliates.
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1.14
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“Security
Documents” shall have the meaning assigned to it in Section
1.2.
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Section
2:
GUARANTY OF
LOANS
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2.1
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TERI hereby
guarantees to the LENDER, unconditionally except as set forth in
Section 2.2 below, the payment of 100% of the principal of and
accrued interest on every Loan as to which a Guaranty Event has
occurred. “Accrued interest" shall mean interest accrued and
unpaid to the date of payment in full by TERI of a Guaranty Claim,
less any interest that shall have accrued after the filing of a
Guaranty Claim but before TERI shall have received all the
documentation necessary to process the Guaranty Claim as set forth
in the Program Guidelines. TERI will use all reasonable efforts to
make payment on its guaranty within sixty (60) days, and will in
any event make payment within ninety (90) days, of receipt by TERI
of a Guaranty Claim from the LENDER stating the name of the
Borrower and the type of Guaranty Event that has occurred
accompanied by the full claim documentation required in the Program
Guidelines.
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2.2
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TERI's guaranty
is conditioned upon the following:
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a.
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The LENDER must
have filed its Guaranty Claim within the time period and following
the procedures specified in the Program Guidelines.
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b.
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The LENDER and
its predecessors in interest must at all times have exercised Due
Diligence with respect to the Loan in question (or shall have cured
any failure to exercise Due Diligence under the reinstatement
provisions in Section 2.4 hereof and the Program Guidelines), and
must have complied with all other requirements of the Program
Guidelines applicable to the Loan.
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c.
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The LENDER
shall have paid to TERI the Initial Guaranty Fee (as defined in
Section 3.3.a. below) for the Loan in question, and shall have paid
to the Custodian any Subsequent Guaranty Fee (as defined in Section
3.3.b. below) for the Loan in question that is due and payable as
provided in Section 3.3.b. below.
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d.
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TERI must have
received from the LENDER the original Promissory Note relating to
the Loan in question, enforceable against the Borrower (except as
provided in this Section 2.2.d., below), endorsed to TERI in such
manner as to transfer to TERI all rights in and title to such
Promissory Note, free and clear of all liens and encumbrances, and
of all defenses, counterclaims, offsets, and rights of rescission
that might be raised by the Borrower. Submission of a Guaranty
Claim to TERI shall constitute the LENDER's certification that the
conditions of 2.2.b. and 2.2.d. have been met, and TERI is entitled
to rely on such certification.
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Subsections
2.2.b. and 2.2.d. above notwithstanding, if a Loan that is the
subject of a Guaranty Claim was originated by TERI on behalf of the
LENDER pursuant to a Loan Origination Agreement between the
parties, (i) TERI will not deny the LENDER's Guaranty Claim on such
Loan if the sole basis for denial is a violation of the Program
Guidelines or a violation of Massachusetts or federal law committed
by TERI in the origination process, and (ii) TERI will have no
recourse against the LENDER in the event that TERI’s actions
or omissions in the origination process shall have given rise to a
successful defense in favor of the Borrower in a suit on the
Promissory Note relating to such Loan.
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2.3
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TERI's guaranty
obligation with respect to any Loan shall not be terminated or
otherwise affected or impaired (i) by the LENDER’s granting
an extension of time to the Borrower to make scheduled payments, or
by any other indulgence the LENDER may grant to the Borrower,
provided that all extensions and other indulgences meet the
forbearance standards and other requirements of the Program
Guidelines; or, Section 2.2.d. above notwithstanding, (ii) because
of any fraud in the execution of the Promissory Note relating to
such Loan, (iii) because of any illegal or improper acts of
the Borrower, or (iv) because the Borrower may be relieved of
liability for such Loan due to lack of contractual capacity or any
other statutory exemption.
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2.4
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TERI may deny
the LENDER’s Guaranty Claim on any Loan on the grounds of Due
Diligence deficiencies. If TERI properly denies the LENDER’s
Guaranty Claim on any Loan on the grounds of Due Diligence
deficiencies, the LENDER may thereafter require that TERI reinstate
the guaranty of such Loan if (a) the LENDER corrects such
deficiencies and receives four (4) consecutive full on-time monthly
payments from the Borrower, according to any schedule permitted by
the Program Guidelines, and if at the time of the LENDER’s
request the Borrower is within thirty (30) days of being current on
all principal and interest payments on such Loan, or (b) the LENDER
satisfies any other method of cure set forth in the Program
Guidelines.
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2.5
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TERI's guaranty
hereunder is a continuing and absolute guaranty of payment and not
merely of collection, covering Loans made in accordance herewith
either (i) prior to termination of this Agreement, or (ii) based
upon applications received by the LENDER prior to such termination;
and such termination shall not affect TERI's obligations to the
LENDER then existing, whether direct or indirect, absolute or
contingent, then due or thereafter to become due.
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2.6
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TERI agrees not
to exercise any right of subrogation, reimbursement, indemnity,
contribution or the like against the Borrower of any Loan unless
and until all of TERI's obligations to the LENDER under this
Agreement with respect to such Loan have been satisfied in full,
except to the extent that it is deemed a valid claimant as a
contingent creditor, for example, under Title 11 of the United
States Code (the "Bankruptcy Code"), or applicable state
law.
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2.7
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TERI will
permit the LENDER, any duly designated representative of the
LENDER, or any governmental body having jurisdiction over the
LENDER (subject to written notice being provided to TERI by the
LENDER, identifying the requesting party and the date of the
review), to examine and audit the books and records of TERI
pertaining to the Loans, at any time during TERI's regular business
hours, provided that in the case of examinations by the LENDER or
its representative, absent good cause (i) TERI must be given ten
(10) business days' prior written notice and, (ii) no more than one
such audit may be conducted with respect to any twelve-month period
or will take place in any twelve-month period. In no event will any
audit be performed during July, August, September, or October in
any year except at the request of a regulatory authority having
jurisdiction over the LENDER.
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2.8
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TERI will
indemnify the LENDER and hold it harmless from and against any
loss, cost, damage or expense that the LENDER may suffer as a
result of claims to the extent they arise out of TERI's breach of
this Agreement and do not arise out of the LENDER’s actions
or omissions. "Expense" includes, without limitation, the
LENDER’s reasonable attorney's fees. TERI will further
indemnify the LENDER and hold it harmless from and against any
claim brought against the LENDER by any Borrower based on actions
or omissions of the LENDER that were mandated under the Program
Guidelines.
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2.9
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Although the
LENDER agrees not to use any loan servicer not approved by TERI,
the LENDER acknowledges that TERI's approval of a servicer is in no
way an endorsement of such servicer and that TERI shall have no
liability to the LENDER for any losses arising from such servicer's
failure to comply with Due Diligence or the Program Guidelines or
applicable law, nor shall TERI be required to honor any claim
submitted by such servicer if the claim does not comply with the
requirements of this Agreement.
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Section
3:
OBLIGATIONS OF THE
LENDER
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3.1
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In originating,
servicing, disbursing, and collecting Loans, the LENDER will
comply, and cause its servicer and others acting on its behalf to
comply, at all times with all Program Guidelines (including Due
Diligence requirements) and all applicable requirements of federal
and state laws and regulations.
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3.2
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The LENDER will
use Promissory Notes, Loan applications, disclosure statements, and
other forms mutually agreeable to the parties. The forms of
Promissory Notes, Loan applications and disclosure statement
attached hereto as part of the Program Guidelines are agreed to be
satisfactory to both parties. Without limiting the generality of
Sections 3.1 and 4.1, the LENDER warrants the conformity of such
instruments and any agreed successors thereto with all applicable
legal requirements, other than those of federal and Massachusetts
laws and regulations, and TERI warrants their conformity with
Massachusetts and federal laws. In addition, upon TERI’s
request, the LENDER will submit to TERI sample copies of
promotional and marketing materials used in connection with the
Program. No such delivery of materials shall constitute or be
construed as a representation or warranty by TERI that such
materials comply with applicable law or with the LENDER’s
obligations under this Agreement, and no such delivery shall excuse
the LENDER’s performance of any of its obligations under this
Agreement.
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3.3
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The LENDER will
pay a guaranty fee for each Loan (the "Guaranty Fee") as
follows:
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a.
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At the time of
each disbursement of the Loan, the LENDER will promptly remit to
TERI [**] of the principal amount of the Loan disbursed (the
“Initial Guaranty Fee”).
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b.
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At such times
as are set forth in Schedule 3.3 attached hereto and incorporated
herein by reference, such additional fees as are set forth in the
fifth and sixth columns of Schedule 3.3 (“Subsequent Guaranty
Fee”).
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i.
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If the terms of
Schedule 3.3 call for any Guaranty Fees to be paid concurrent with
the Securitization Transaction, the LENDER shall pay such fees
directly (and be reimbursed in the Securitization Transaction to
the extent provided in the Note Purchase Agreement).
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ii.
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In the event
that a Guara
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