NOTE PURCHASE AGREEMENT TERI-GUARANTEED START EDUCATION LOAN PROGRAM CHARTER ONE BANK, N.A

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

ASTERISKS DENOTE OMISSIONS.  

 

Exhibit 99.4

NOTE PURCHASE AGREEMENT

TERI-GUARANTEED START EDUCATION LOAN PROGRAM

CHARTER ONE BANK, N.A.

 

 

This Note Purchase Agreement, by and between Charter One Bank, N.A. ("Program Lender"), a national banking association organized under the laws of the United States and having a principal office located at 1215 Superior Avenue, Cleveland, Ohio 44114, and THE FIRST MARBLEHEAD CORPORATION, a Delaware corporation having a principal place of business at 800 Boylston Street, 34 ^th Floor, Boston, Massachusetts 02199-8157 (“FMC”), is made as of March 25 2004;

 

W I T N E S S E T H:

 

WHEREAS, Program Lender is in the business of making education loans under education lending programs, including, without limitation, the Start Education Loan Program (as defined in Section 1); and

WHEREAS, FMC exists to provide funds for education loans for the benefit of students at Participating Institutions (as defined in Section 1); and

WHEREAS, in order to facilitate funding of Start Education Conforming Loans (as defined in Section 1), Program Lender has agreed to sell, from time to time, pools containing Start Education Conforming Loans originated by Program Lender to FMC or a Purchaser Trust (as defined in Section 1); and

WHEREAS, the Start Education Conforming Loans are made by Program Lender and purchased by FMC on the condition that they qualify for and in fact are covered by a guaranty issued by The Education Resources Institute, Inc. (“TERI”).

NOW, THEREFORE, in consideration of these presents and the covenants contained herein, the parties hereto hereby agree as follows:

I.   Definitions . Capitalized terms used herein without definition have the meanings set forth in the Program Guidelines.

“Affiliate” shall mean, as to any person, any other person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such person. A person shall be deemed to control another person if the controlling person possesses, directly or indirectly, the power to direct or to cause the direction of the management and policies of the other person, whether through the ownership of voting securities, by contract or otherwise.

“Ambac” means Ambac Assurance Corporation.

“Business Day” shall mean any day other than: (a) a Saturday or Sunday, or (b) a day on which banking institutions in the State of Ohio are required or authorized by law or executive order to be closed.

“Collateral” has the meaning set forth in the Security Agreement.

“Custodian” means U.S. Bank National Association, its successors and assigns, in its capacity as Bank under the Security Agreement of even date herewith and as Depository Institution under the Control Agreement of event date herewith (collectively, “Security Documents”), or a successor custodian appointed in accordance with the Security Documents.

“Direct to Consumer” loans are those Start Education Conforming Loans for which proof of enrollment, but no school certification, is obtained, as set forth in the Program Guidelines. “Direct to Consumer” loans are identified in Schedule 3.3 of the Guaranty Agreement under the heading “Charter One Direct to Consumer Start Education Referral Loan Products.”

“First Marblehead” or “FMC” shall mean The First Marblehead Corporation, a Delaware corporation.

“First Payment Date” means the date when the first monthly payment is due with respect to a particular Start Education Conforming Loan.

“Guaranty Agreement” means the Guaranty Agreement between Program Lender and TERI dated March 25, 2004, as it may be amended from time to time.

“Loan” shall mean a loan of funds, including all disbursements thereof, made by the Program Lender to a Borrower (as defined in the Guaranty Agreement) under the Start Education Program.

“MBIA” means MBIA Insurance Corporation.

“Minimum Purchase Price” has the meaning set forth in Section 2.04.

“Note Insurer” means Ambac, MBIA, or any other provider of credit insurance or note insurance with respect to the obligations of the Purchaser Trust.

    “Option Period” means, with respect to any particular Start Education Conforming Loan, the period beginning on the first date such loan becomes a “Seasoned Loan” and ending [**] days thereafter or such longer period as the parties may agree to in writing.

“Origination Agreement” refers to (a) the Origination Agreement to be entered into between TERI and Program Lender with respect to origination of Start Education Conforming Loans, as amended from time to time, and (b) any subsequent agreement relating to origination services provided to Program Lender with respect to Start Education Notes purchased under this Agreement that is acceptable in form and substance to each of FMC and TERI.

    “Origination Records” means and refers to the original Start Education Loan Application and Note, a form of cosigner notice when required under 16 C.F.R. § 444, and any other standardized documentation specified from time to time in the Program Guidelines as required to be received by the Servicer from the Program Lender in order to service Start Education Conforming Loans adequately and accurately.

“Participating Institution” means an educational institution approved by TERI for receipt of Start Education Conforming Loan funds.

“PHEAA” shall mean the Pennsylvania Higher Education Assistance Agency, a public corporation and government instrumentality organized under the laws of the Commonwealth of Pennsylvania, and having an address at 1200 North Seventh Street, Harrisburg, Pennsylvania 17102.

“Pledged Account” has the meaning set forth in the Security Agreement.

“Program Guidelines” means the Program Guidelines attached to the Guaranty Agreement as Exhibit A.

“Purchase Date” shall mean the date of consummation of a Securitization Transaction with respect to a particular Pool of Seasoned Loans originated by Program Lender, which date: (a) shall be set by written notice from FMC to Program Lender, given to Program Lender not less than five (5) Business Days in advance of the specified date, and (b) shall occur [**] for each loan in such Pool.

“Purchaser Trust” shall mean and refer to a trust or other SPE formed by FMC or by any Affiliate of FMC for the purpose of purchasing Start Education Conforming Loans. Any action required or permitted to be taken by FMC hereunder may be taken by a Purchaser Trust with respect to a particular Pool.

“Rating Agencies” shall mean and refer to Standard and Poor's Corporation and/or Moody's Investors Service, Inc., and/or Fitch Investors Services.

“Referral Marketing Agreements” shall mean those contracts of same name between Wholesale Marketer and marketing entities (“Referral Marketers”) under which such Referral Marketers market the Start Education Loan Program to prospective borrowers.

“School Channel” loans are those Start Education Conforming Loans for which school certification is obtained, as set forth in the Program Guidelines. “School Channel” loans are identified in Schedule 3.3 of the Guaranty Agreement under the heading “Charter One Bank School Channel Start Education Referral Loan Products.”

“Seasoned Loan” means a Start Education Conforming Loan as of (i) [**] days after the last disbursement for School Channel Start Education Conforming Loans and (ii) [**] days after the last disbursement of the Direct to Consumer Start Education Conforming Loans, but, in either case, shall exclude any loan disbursed by paper check if the paper check has not yet been paid by the drawee. In the event a disbursement check is paid by the drawee more than (i) [**] days after it is written and the loan is fully disbursed for School Channel Start Education Conforming Loans and (ii) [**] days after it is written for Direct to Consumer Start Education Conforming Loans, the loan shall become a Seasoned Loan on the date of such payment. For purposes of computation of the Minimum Purchase Price, the term also includes defaulted Start Education Conforming Loans not yet purchased by TERI.

“Securitization Costs” means the actual costs and expenses incurred by FMC, the Purchaser Trust, and all others entitled to payment for expenses by the Purchaser Trust or FMC, in connection with a Securitization Transaction including, without limitation, the following:

“Securitization Transaction” shall mean and refer to the purchase of a Pool of Seasoned Loans by FMC or a Purchaser Trust funded through the issuance and sale of commercial paper, certificates, bonds or other securities or evidences of indebtedness, the repayment of which is supported by payments on the Seasoned Loans included in such Pool. A Securitization Transaction may include, without limitation, a continuing series of transactions occurring on a periodic basis in which Program Lender makes a sale of then-outstanding Seasoned Loans to a Purchaser Trust, which Purchaser Trust in turn either utilizes the Pool directly as collateral for its own debt or resells the Pool (in whole or in part) in further sales to a securitization conduit providing financing to the Purchaser Trust.

“Servicer” shall mean and refer to PHEAA, or such other servicer as may be approved by FMC and TERI and retained by the holder of Start Education Conforming Loans in accordance with the terms hereof and of the Guaranty Agreement.

“Servicing Agreement” refers to: (a) the Servicing Agreement between Servicer and Program Lender with respect to servicing of Start Education Conforming Loans, as amended from time to time, and (b) any subsequent servicing agreement between Program Lender and the Servicer governing servicing of Start Education Conforming Loans purchased under this Agreement, in either case such agreement and any amendment thereto to be satisfactory in form and substance to FMC and its counsel.

“SPE” means a special purpose entity formed and operated for the sole purpose of acting as purchaser and owner of Start Education Conforming Loans.

“Start Education Conforming Loans” shall mean Loans (a) made in accordance with and conforming to the requirements of the Program Guidelines at the time the Loans were made, (b) serviced by the Servicer in accordance with the Program Guidelines, and (c) covered by and subject to all the benefits of the Guaranty Agreement.

“Start Education Loan Pool” or “Pool” shall mean and refer to a group of Start Education Notes purchased and pledged or intended to be purchased and pledged as collateral in a particular Securitization Transaction.

“Start Education Notes” shall mean notes or other forms of consumer debt instruments, evidencing Start Education Conforming Loans.

“Start Education Program” shall mean the Start Education Loan Program described in the Program Guidelines.

“TERI Insolvency Event” means (1) the commencement by TERI of a voluntary petition under the federal bankruptcy laws, as now constituted or hereafter amended, or any other applicable federal or state bankruptcy, insolvency or other similar laws, (2) the consent by TERI to the appointment of or taking possession by a receiver, liquidator, trustee, custodian (or other similar official) of or for TERI or for any substantial part of its property, (3) the making by TERI of any assignment for the benefit of creditors, (4) the insolvency or the failure of TERI generally to pay its debts as such debts become due, or (5) a default under one or more Guaranty Agreements to which TERI is a party because of a failure to pay claims, or the taking of action by TERI in furtherance of any of the foregoing.

“Term” shall mean the period commencing on the effective date hereof and ending upon termination hereof, all as set forth in Article X.

“Trust Agreement” means, with respect to any particular Securitization Transaction, the agreement pursuant to which a Purchaser Trust is formed.

“Trust Indenture” means, with respect to any particular Securitization Transaction, the agreement pursuant to which FMC or a Purchaser Trust issues evidences of indebtedness secured by the payments on the related Start Education Conforming Loans.

“Wholesale Marketer” means FMC, in its capacity as Wholesale Marketer under the Wholesale Marketing Agreement.

“Wholesale Marketing Agreement” means the Wholesale Marketing Agreement of substantially even date herewith between FMC and Program Lender.

II.   Agreement for Purchase and Sale of Notes .

2.01.   Purchase and Sale; Best Efforts by Program Lender .

On each Purchase Date during the Term of this Agreement and subject to the conditions set forth herein, Program Lender shall sell to FMC or a designee Purchaser Trust, and FMC or such Purchaser Trust shall purchase, every Seasoned Loan owned by Program Lender on the Purchase Date. Program Lender shall enter into and perform its obligations under the Wholesale Marketing Agreement.

2.02.   Pre-Closing Information; FMC Best Efforts .

Program Lender will cause Servicer or TERI, as applicable, to inform FMC periodically of information reasonably requested by FMC in anticipation of a Securitization Transaction, including, without limitation, the number of Seasoned Loans ready for purchase, the amount of paid and unpaid principal and accrued interest with respect to each such Seasoned Loan, payment status (including defaulted loans presented for guaranty payment), and the identity of Participating Institutions affected by the Securitization, together with the information contained in PHEAA's MR-50 and MR-53 reports and TERI's weekly origination report, which reports shall be provided in electronic media in the Servicer's or TERI's standard format. FMC will use its best efforts to specify a Purchase Date and consummate a Securitization Transaction in which a Purchaser Trust will purchase all of the Seasoned Loans, at least twice per calendar year. FMC shall have the sole and exclusive right to purchase all Start Education Conforming Loans [**] for each such loan, which right may be assigned to one or more Purchaser Trusts. Program Lender agrees, in consideration of FMC's undertaking pursuant to this section, not to sell to any third person any interest in any Start Education Conforming Loans originated by Program Lender [**]. FMC may reschedule the Purchase Date without penalty of any kind, provided that the Purchase Date occurs prior to the conclusion of the Option Period for each and every Seasoned Loan affected.

2.03.   Pool Supplement .

Each purchase and sale of the Seasoned Loans included in a Pool on a Purchase Date shall be made pursuant to a Pool Supplement substantially in the form of Exhibit A which shall: (1) set forth the Minimum Purchase Price for the Seasoned Loans included in the Pool, (2) incorporate by reference the terms and conditions of this Agreement applicable to sales of Start Education Conforming Loans, and (3) include a Schedule of Seasoned Loans setting forth the details and characteristics of each such Seasoned Loan included in the Pool. Each Pool Supplement shall be executed by an authorized agent of each Purchaser Trust and the Program Lender and shall be delivered on the related Purchase Date. The Purchaser Trust shall provide a preliminary settlement sheet in the form of Schedule 1 to the Pool Supplement not less than two (2) Business Days prior to the Purchase Date.

2.04.   Minimum Purchase Price .

 

On the Purchase Date, Program Lender shall assign and convey all Start Education Conforming Loans originated by Program Lender included in the Pool to FMC, or a Purchaser Trust, in consideration of receipt of the Minimum Purchase Price therefor. For purposes of this Agreement the term “Minimum Purchase Price” shall mean the sum of the following amounts with respect to each of the Start Education Conforming Loans to be purchased:

(a)	The unpaid principal amount ([**]) of the Start Education Seasoned Loans in the Pool [**]; plus

(b)	[**] accrued and unpaid interest on such Start Education Conforming Loans,[**]; plus

(c)	[**] fees paid by the Program Lender to The Education Resource Institute, Inc. (TERI) with respect to such Start Education Conforming Loans [**]; plus

(d)	The amount of any Guaranty Fees paid by Program Lender to TERI at the time of the Securitization Transaction [**]; plus

(e)	A marketing fee and loan premium, [**]:

1.	[**]% with respect to School Channel K-12 Creditworthy Loans; plus

2.	[**]% with respect to School Channel Continuing Education Creditworthy Loans in [**]& [**]; plus

3.	[**]% with respect to School Channel Undergraduate Creditworthy Loans in [**]& [**]; plus

4.	[**]% with respect to School Channel Graduate Creditworthy Loans in [**]& [**]; plus

5.	[**]% with respect to School Channel Graduate Credit-ready Loans; plus

6.	[**]% with respect to K-12 Direct to Consumer Creditworthy Loans; plus

7.	[**]% with respect to Continuing Education Direct to Consumer Creditworthy Loans in [**]&[**]; plus

8.	[**]% with respect to all Continuing Education Direct to Consumer Creditworthy Loans in[**]; plus

9.	[**]% with respect to all Undergraduate Direct to Consumer Creditworthy Loans in [**]&[**]; plus

10.	[**]% with respect to all Undergraduate Direct to Consumer Creditworthy Loans in [**]; plus

11.	[**]% with respect to all Graduate Direct to Consumer Creditworthy Loans in [**]& [**]; plus

12.	[**]% with respect to all Graduate Direct to Consumer Creditworthy Loans in

2.05	Inclusion of Other Loans in Securitization Transaction

FMC and any Purchaser Trust Agree that Seasoned Loans will not be included in a particular Securitization Transaction with loans originated by any financial institution other than the Program Lender, unless (a) any such financial institution is on the most recent list submitted to and approved by the Program Lender on an annual basis (the “Approved List”) or (b) the Program Lender has given its prior written consent to the inclusion of loans from a particular financial institution in the Securitization Transaction in question. The Program Lender agrees that the following shall constitute the initial Approved List, effective until the first anniversary of the date of this Agreement: [**].

III.   Procedures and Conditions for Transfer .

3.01.   Conveyances of Start Education Conforming Loans; Conditions to Purchase .

(a)   On each Purchase Date, upon execution and delivery of the related Pool Supplement, Program Lender shall sell, transfer, assign, set over and otherwise convey to FMC or the Purchaser Trust, without recourse, all right, title and interest of Program Lender in and to:

(b)   The obligation of FMC and/or any Purchaser Trust to purchase the Seasoned Loans on the related Purchase Date shall be subject to satisfaction of the following conditions (any of which may be waived by FMC or such Purchaser Trust, in whole or in part in its sole discretion):

(c)   The obligation of Program Lender to sell the Seasoned Loans included in the Pool on a related Purchase Date is subject to satisfaction of the following conditions (any of which may be waived by Program Lender in whole or in part, in its sole discretion):

On the Purchase Date, Program Lender shall deliver to the Servicer, as agent for the Purchaser Trust, and/or to the trustee of the Trust Indenture, each Start Education Note evidencing a Seasoned Loan included in the Pool and the related Origination Records. If a Co-Lender Indemnification Agreement is required as a condition of FMC’s or any Purchaser Trust’s obligations under Section 3.01(b)(8) hereof, Program Lender shall execute and deliver a Co-Lender Indemnification Agreement to each lender selling loans in the Securitization Transaction.

In each Pool Supplement, Program Lender shall confirm and certify its representations and warranties contained herein as if fully set forth in the Pool Supplement.

3.04.   Rights Transferred .

The transfer of funds pursuant to Section 2.04 hereof shall constitute, and the delivery to FMC, or its designated Purchaser Trust of each Pool Supplement shall evidence, a sale and assignment to FMC or the Purchaser Trust of the related Seasoned Loans and of all of Program Lender's interest in such Seasoned Loans. As purchaser of such Seasoned Loans, FMC or the Purchaser Trust shall receive: (i) interest on such Seasoned Loans from and after the Purchase Date, and (ii) any and all other payments and recoveries received by the Servicer or Program Lender from the borrowers and co-signers of such Seasoned Loans, or others pursuant to, or in respect of, such Seasoned Loans from and after the Purchase Date, and all proceeds thereof.

3.05.   Subsequent Receipts .

In the event that Program Lender shall receive, subsequent to any such assignment, any amounts whatsoever in respect to the Seasoned Loans so assigned in the nature of those described in Section 3.04 above, such amounts shall be held by Program Lender in trust for FMC or the Purchaser Trust to which it has sold the Notes, and the Program Lender shall deliver such amounts within ten (10) business days to the trustee under the Trust Indenture.

3.06.   Assignment of Origination Rights .  

Program Lender shall insure that Program Lender’s rights under the Servicing Agreement and the Origination Agreement with respect to any matters occurring prior to the Purchase Date and affecting the Seasoned Loans included in each Pool shall be transferred to FMC or the Purchaser Trust by execution and delivery of a Pool Supplement. Program Lender shall require the party who originated each such Seasoned Loan to complete any loan origination services being performed for Program Lender on the Purchase Date so that complete Origination Records are ready for transfer to the Purchaser Trust (or to Servicer on its behalf).

3.07.   No Assumption of Liability to Fund Start Education Loan Notes .

By their purchase of Seasoned Loans (and any related Start Education Notes), neither FMC nor any Purchaser Trust, shall assume any liability, responsibility or obligation with respect to any disbursements or reimbursements that are due and owing, or which are, or may be alleged to be due and owing, by Program Lender to any Participating Institution or to any Seasoned Loan borrower by reason of the Seasoned Loans included in the Pool and evidenced by the Start Education Notes. Program Lender shall be solely responsible to fulfill its obligations under any agreements it may have with any Participating Institution regarding origination and funding of such Seasoned Loans. Notwithstanding the foregoing, FMC or the Purchaser Trust shall assume from Program Lender any liability to repurchase from TERI a defaulted Loan upon cure of the default, with respect to any Loan that would be a Seasoned Loan but for such default and purchase by TERI. Such repurchase obligation shall be governed by the Certificate of Guaranty described in Section 3.01(b)(6), above.

3.08.   Servicing and Origination Costs.

Program Lender shall be solely responsible for and shall pay all costs due to any third party from Program Lender (including, without limitation, amounts due to TERI or Servicer) with respect to origination of Start Education Conforming Loans and with respect to loan servicing of Start Education Conforming Loans incurred prior to purchase of a Start Education Conforming Loan hereunder. FMC shall be solely responsible for and shall pay any obligations it has incurred in connection with the Start Education Conforming Loans and shall be solely responsible for arranging and paying all costs for servicing of the Start Education Conforming Loans after purchase of such Loans.

3.09. Securitization Costs.   FMC or the Purchaser Trust shall be solely responsible for and shall pay any Securitization Costs and any and all obligations it has incurred in connection with the purchase, financing of purchase and securitization of the Seasoned Loans.

3.10. Effect of Loan Cancellations . In the event that the Borrower cancels a Seasoned Loan in a manner and at a time permitted under the Program Guidelines, if that Seasoned Loan has already been purchased under this Agreement, Program Lender will return to the Purchaser Trust all amounts received by it with respect to such purchase. FMC shall prepare an accounting of all such cancellations within 30 days after the last date permitted for cancellation of Seasoned Loans purchased on a particular Purchase Date.

IV.   Limitation of Obligations of FMC and Purchaser Trust .

4.01.   FMC's obligation in connection with the purchase of Seasoned Loans is limited to using its best efforts to cause a Securitization Transaction to occur and to use the proceeds thereof to fund the purchase of Seasoned Loans by FMC or a Purchaser Trust. Upon the designation of a Purchase Date and, if applicable, a Purchaser Trust by FMC, FMC shall be obligated to cause the consummation of a Securitization Transaction and the payment of the Minimum Purchase Price to Program Lender; provided, however , that the obligation of FMC and any Purchaser Trust to consummate the Securitization Transaction shall be conditioned upon and subject to the receipt by the Purchaser Trust of Securitization Transaction proceeds, net of Securitization Costs equal to or greater than the Minimum Purchase Price.

V.   Representations and Warranties .

5.01.   Representations and Warranties of FMC .

FMC makes the following representations and warranties as of the date hereof, as of the date of each purchase of Seasoned Loans and as of any other date specified below. FMC shall cause each Purchaser Trust to make substantially the same representations and warranties in a Pool Supplement as of the date of each purchase of Seasoned Loans:

(a)   FMC represents and warrants that it is and shall remain a Delaware corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and has the requisite corporate authority to conduct all activities and consummate all transactions contemplated by this Agreement.

(b)   FMC has all requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement, and has duly authorized the execution, delivery and performance of, and has duly executed and delivered this Agreement, and this Agreement constitutes the legal, valid and binding obligation of FMC enforceable against FMC in accordance with its terms, except that such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws.

(c)   Neither the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby, nor the fulfillment of or compliance with the terms and conditions hereof, will conflict with, or result in a breach of, or constitute a default under, any of the terms, conditions or provisions of any legal restriction or any agreement or instrument to which FMC is now a party or by which it is bound.

5.02.   Representations and Warranties of Program Lender .

Program Lender makes the following representations and warranties as of the date hereof, as of the date of each sale of Seasoned Loans to FMC or a Purchaser Trust, and as of any other date specified below:

(a)   Program Lender represents and warrants that it is, and shall continue to be, a national banking association duly organized, validly existing and in good standing under the laws of the United States, and has the requisite authority to conduct all activities and consummate all transactions contemplated by this Agreement.

(b)   Program Lender has all requisite power and authority to execute, deliver and perform its obligations under this Agreement, and has duly authorized the execution, delivery and performance of, and has duly executed and delivered this Agreement, and this Agreement, together with each Pool Supplement executed pursuant hereto, constitutes the legal, valid and binding obligation of Program Lender enforceable against Program Lender in accordance with its terms, except as such enforceability may be limited by (i) receivership, conservatorship and supervisory powers of bank regulatory agencies generally, (ii) applicable bankruptcy, receivership, conservatorship, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally from time to time in effect, or (iii) general principles of equity.

(c)   Neither the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby, nor the fulfillment of or compliance with the terms and conditions hereof, will conflict with, or result in a breach of, or constitute a default under, any of the terms, conditions or provisions of any legal restriction or any agreement or instrument to which Program Lender is now a pa