LOAN PROGRAM AGREEMENT by FIRST MARBLEHEAD CORP
Company: FIRST MARBLEHEAD CORP
SEC CIK: 1262279
SEC Type: EX-10.39
SIC Code: 6141
SIC Industry: PERSONAL CREDIT INSTITUTIONS
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
LOAN PROGRAM AGREEMENT
This Loan Program Agreement (the Agreement) is entered into this 20th day of April, 2010 (the Execution Date), by and among First Marblehead Education Resources, Inc., a Delaware corporation having its principal offices at One Cabot Road, Medford, Massachusetts 02155 (FMER), The First Marblehead Corporation, a Delaware corporation having its principal offices at 800 Boylston Street, 34th Floor, Boston, Massachusetts 02199 (FMC), and SunTrust Bank, a Georgia state-chartered banking corporation having an office located at 1001 Semmes Avenue, Richmond, Virginia 23224 (SunTrust). FMER, FMC and SunTrust are hereinafter collectively referred to as the Parties and each individually as a Party.
WHEREAS, FMER and/or FMC are in the business of providing private student loan outsourcing solutions, such as program design, marketing, processing, underwriting, origination and/or portfolio administration services, to banks and other financial institutions;
WHEREAS, FMC desires to provide certain credit enhancement with respect to Loans (as defined below) originated under this Agreement;
WHEREAS, SunTrust desires to retain FMER to provide the student loan outsourcing solutions as set forth in this Agreement; and
WHEREAS, the Parties will enter into a Servicing Agreement executed and effective in 2010, with the Pennsylvania Higher Education Assistance Agency (the Servicing Agreement).
NOW THEREFORE, in consideration of the promises and the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE 1. DEFINITIONS; RULES OF CONSTRUCTION
1.1 Definitions. Capitalized terms used in this Agreement have the meanings set forth below.
Additional Institution means a post-secondary educational institution located in a SunTrust Sales State that has a cumulative cohort default rate of over [**]% in the past two cohort years, as reported by the U.S. Department of Education, but which shall nevertheless be treated as an Eligible Institution under this Agreement, under the terms set forth in Section 2.8.1. The list of Additional Institutions as of the Execution Date is set forth in the Program Guidelines.
Advertising Firms has the meaning set forth in Section 2.7.1 herein.
Affiliate means, with respect to an entity, another entity that at the time in question, directly or indirectly, owns or controls, is owned or controlled by, or is under common ownership or common control with the first entity. For purposes of this Agreement, control shall mean the power to direct the management or affairs of an entity, the terms common control and controlled by shall have meanings correlative to the foregoing, and ownership shall mean the beneficial ownership of more than fifty per cent (50%) of the equity securities of the entity.
Applicant means all co-applicants for a Loan under the Program Guidelines, including any proposed Borrower and any proposed Cosigner who begins an Application, regardless of whether the Application is complete.
Applicant Information has the meaning set forth in Section 126.96.36.199 herein.
Application means a consumers application, whether in whole or in part, for a Loan under this Program and originated via FMCs or FMERs URI/URL or the SunTrust URI/URL.
Application and Solicitation Disclosure means the disclosure required by 12 C.F.R. § 226.47(a) and Section 128(e)(1) of the federal Truth-in-Lending Act.
Approval Disclosure means the disclosure required by 12 C.F.R. § 226.47(b) and Section 128(e)(2) of the federal Truth-in-Lending Act.
Approved Collectors means a subcontracted collection agency used by FMER and identified on Schedule 2 to Exhibit D.
Article 9 has the meaning set forth in Section 7.1.10 herein.
Average Daily Balance means the average daily principal (including financed fees) and accrued interest balance of all Loans in a Pool during a given calendar month, as reported by the Servicer as of the last day of such month.
Books and Records means all books and records necessary to service and collect the Loans and specifically relating to the Loans, including: Applications, statements, credit and collection files, file maintenance data, Credit Agreements, disclosure statements, credit information files, correspondence, whether in documentary form or on magnetic tape, computer disk or other form, and any other records that evidence ownership or relate to servicing, administering or enforcing the Loans. Books and Records shall not include general corporate financial and other records, income tax returns, specific files of individual employees or other corporate records not specifically relating to the Loans or which relate to the Loans with respect to which information relating to the Loans cannot reasonably be extracted.
Borrower means the individual person, or all individual persons collectively, including all Student Borrowers and Cosigners, who execute a Credit Agreement individually or, in the case of multiple Borrowers, severally and jointly, for the purpose of obtaining a Loan from SunTrust under the Program, and who have proceeds disbursed under the Credit Agreement.
Business Day means any day other than (a) a Saturday or a Sunday, or (b) a day on which banking institutions in the State of Georgia are authorized or obligated by law or executive order to be closed.
CDAs has the meaning set forth in Section 188.8.131.52 herein.
Change in Control means any of the following with respect to any of the Parties: (1) the acquisition or a series of acquisitions within six (6) months of each other by any other entity, individual or group (within the meaning of Sections 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the Exchange Act) of beneficial ownership (as defined in Rule 13d-3 promulgated under the Exchange Act) of more than fifty percent (50%) of the common stock and/or other securities which have more than fifty percent (50%) of the combined voting power of the securities entitled to vote in the election of directors of such Party; or (2) the sale of all or substantially all of the assets of such Party to any other entity, individual or group; or (3) the reorganization, merger or consolidation of such Party in which the shareholders of such Party immediately before such event will not immediately thereafter own more than fifty percent (50%) of the combined voting power entitled to vote in the election of directors of the reorganized, merged or consolidated Partys voting securities. A Change in Control shall not include any transactions with an entity that is an Affiliate of such Party immediately prior to such transaction.
Charged Off Loan means a Loan that is at least [**] days delinquent in principal and interest or interest only or partial interest payments or that has experienced an event of default, as set forth in the Program Guidelines.
Collegiate Custom Choice means the product sourced through the FMC URI/URL.
Combination Program means a private student loan program that offers [**] to Applicant(s) simultaneously when the Applicant(s) is/are configuring a loan by selecting specific loan terms and parameters.
Commodity Vendors has the meaning set forth in Section 2.7.3 herein.
Compensation Schedule means the schedule attached hereto as Exhibit B, showing FMCs compensation for each Pricing Segment.
Confidential Business Information has the meaning set forth in Section 14.2.3 herein.
Consumer Information means (a) nonpublic personal information as such term is defined by the Privacy Requirements; and (b) any personally identifiable information or records in any form (oral, written, graphic, electronic, machine-readable, or otherwise) relating to a consumer, including a consumers name, address, telephone number, Social Security number, e-mail address, account number, loan payment or transactional account history, account status; and the fact that the consumer has a relationship with SunTrust.
Cosigner means a person other than the Student Borrower who executes a Credit Agreement with a Student Borrower and thereby assumes joint and several liability for the Loan.
Costs and Fees has the meaning set forth in Section 17.3 herein.
Credit Agreement means the loan request and credit agreement, or other form of consumer debt instrument, evidencing a Borrowers obligation to repay the Loan, in the form attached to the Program Guidelines.
Damages has the meaning set forth in Section 16.1 herein.
Default Prevention Services means the services described in Section 4.6 herein.
Delinquent Loan means any Loan other than a Charged Off Loan with respect to which any payment is [**] days or more past due.
Disbursed Loan Amount means the total principal balance (including financed fees) of Loans actually disbursed to the Borrowers Eligible Institution, by means of electronic transfer or paper check, net of post-disbursement cancellations whether in whole or part, and subject to the Program Guidelines.
Disbursement Date means the date or dates on which Loan funds are transmitted to the Student Borrowers Eligible Institution or to the CDA, which date shall be no earlier than the end of the cancellation period set forth in the Final Disclosure in accordance with the Requirements of Law.
Disclosing Party has the meaning set forth in Section 14.2.5 herein.
Early Awareness Services means the services described in Section 4.5 herein.
Effective Date means the date established in the Effective Date Communication pursuant to Section 18.1.1 of this Agreement.
Effective Date Communication has the meaning set forth in Section 18.1.1 herein.
Effectiveness Conditions has the meaning set forth in Section 18.1.1 herein.
Eligible Institution means a post secondary educational institution approved by SunTrust for receipt of Loan funds in conformity with Program Guidelines and included in the list of Eligible Institutions adopted as of the Execution Date in Section 2.8 and set forth in the Program Guidelines.
Execution Date has the meaning set forth in the first paragraph of this Agreement.
Expected Charged Off Loan Volume means, as established by the Parties from time to time, (a) initially, the Expected Loan Volume that is expected to become a Charged Off Loan, and (b) for each calendar quarter after Loan origination begins, the total principal (including financed fees) and accrued interest on the Disbursed Loan Amount that is expected to default (within the meaning set forth in the Program Guidelines). The Expected Charged Off Loan Volume shall change each quarter during the Term to reflect the distribution of the Disbursed Loan Amount in Loan pricing tiers.
Expected Loan Volume means the total principal amount (including financed fees) of Loans expected to be funded by SunTrust for the related Pool during each 12-month period subsequent to the Effective Date of this Agreement.
Final Disclosure means the disclosure required by 12 C.F.R. § 226.47(c) and Section 128(e)(4) of the federal Truth-in-Lending Act.
Final Services Termination Period has the meaning set forth in Section 18.1.2.
Fixed Rate Loan means any Loan with respect to which the interest rate for such Loan is determined in relation to a specific fixed rate for the term of the Loan.
FM Indemnified Party means FMC, FMER, each Affiliate of FMC, each Affiliate of FMER, and each of the respective current, former and future officers, directors and employees of any of the foregoing.
FMC Custom Model Property means, for the purposes of this Agreement, FMCs custom and proprietary score model and all deliverables, materials, software, flowcharts, ideas, concepts, designs, and reports or other analyses which relate to FMCs custom and proprietary score model including any modifications, enhancements or derivative works thereof.
FMC Intellectual Property, as used in Section 16.2 and Section 16.3 only, has the meaning set forth in Section 16.2 herein.
FMC Materials means all promotional material prepared by FMC in providing Production Support Services, including responses to Eligible Institutions requests for proposals, printed materials, brochures, email content, television and radio content, telemarketing scripts, fliers, inserts and any web sites or web pages promoting Program Loans.
FMC Production Support Services Activities has the meaning set forth in Section 2.3.
FMC Production Support Services Work Product has the meaning set forth in Section 2.3.
FMC Sales States has the meaning set forth in Section 2.2.1 and listed in Schedule 1 to Exhibit E hereto.
FMC Share of Portfolio Yield means, for any given month, the aggregate total for all Pricing Segments of the amount to be earned by FMC for the Loans in each Pricing Segment, calculated as (a) the amount of the margin earned by FMC for the Loans in each Pricing Segment as shown on the Compensation Schedule, divided by the Borrower margin in each such Pricing Segment, multiplied by (b) the Monthly Accrued Interest less, with respect to Variable Rate Loans, interest accrued attributable to the LIBOR index.
FMC URI/URL means a dedicated web link obtained and maintained by FMC which tracks consumer traffic and loan application requests resulting from FMCs marketing efforts in connection with the Program.
FMC Website means the FMC-created and managed website separate and apart from the SunTrust Website used to direct potential Borrowers to the Program online application.
FMER Funding Account means an account in FMERs name maintained at a FDIC-insured depository institution, into which FMER will deposit Loan funds for disbursement after receiving them from the SunTrust Disbursement Account via automated clearinghouse debit.
Force Majeure Event has the meaning given such term in Section 19.11 herein.
Forward Looking Materials has the meaning set forth in Section 4.1.3.
Fraud Database Data has the meaning set forth in Section 3.10.2.
Governmental Authority means the federal government of the United States, any state government, or any political subdivision of either, or any agency, court or body of the federal government of the United States, of any state, or of any other political subdivision of either, exercising executive, legislative, judicial, regulatory or administrative functions.
Indemnified Party means a SunTrust Indemnified Party or a FM Indemnified Party, as applicable.
Indemnifying Party means a Party that is obligated to indemnify an Indemnified Party pursuant to the provisions of Section 16 herein.
Information Security Program means the written policies and procedures adopted and maintained to (a) ensure the security and confidentiality of Consumer Information; (b) protect against any anticipated threats or hazards to the security or integrity of Consumer Information; and (c) protect against unauthorized access to or use of Consumer Information that could result in substantial harm or inconvenience to SunTrust or any consumer.
Initial Participation Account Deposit means [**] percent ([**]%) of the product of the Expected Loan Volume for the Pool, multiplied by the Participation Percentage.
Initial Vendors means the vendors shown on Schedule 4 to Exhibit D.
Insurance Requirements has the meaning set forth in Section 10.1 herein.
Intellectual Property has the meaning set forth in Section 11.1 herein.
Interagency Guidelines means the applicable Interagency Guidelines Establishing Information Security Standards and codified at 12 C.F.R. Parts 30, 208, 211, 225, 263, 308, 364, 568, and 570.
Loan means a loan of funds, including all disbursements thereof and financed fees, made by SunTrust to a Borrower under the Program.
Loan Origination Fee means a fee that is: (i) charged by SunTrust to the Borrower of a Loan; (ii) equal to the amount set forth in the Pricing Schedule; and (iii) financed as a part of the Loan amount.
Loan Processing Fees means that fee set forth in Section 6.3.1 herein.
Loan Processing Services means those services set forth in Article 3 herein.
Marketers has the meaning set forth in Section 2.7.1 herein.
MG Private Student Loan Trust 2010-1 means the trust to be established by FMC to purchase and hold Charged Off Loans.
Monthly Accrued Interest means, for each calendar month, the amount of interest that accrues on all outstanding Loans in a given Pricing Segment during such month.
Notice has the meaning set forth in Section 17.1 herein.
NPPI has the meaning set forth in Section 14.2.4 herein.
OFAC has the meaning set forth in Section 3.8.1 herein.
Online Application System means the internet-based system used by FMER for the (a) intake of Application information from Applicants, (b) rendering and reporting of credit decisions on Applications, (c) delivery of Credit Agreements and disclosures required by Requirements of Law, including Truth-in-Lending Disclosures, and (d) loan status information and details.
Outstanding Loan Volume means, with respect to any Pool, the amount of Loan volume that remains outstanding to SunTrust, and is not a Charged Off Loan for which a payment from the Participation Account has previously been made, as reflected on the Servicers servicing system and reported by the Servicer to SunTrust and FMC on a monthly basis.
Participation Account means an interest-bearing account held by SunTrust for the benefit of FMC and SunTrust at SunTrust, which account shall hold Participation Account Deposits made by FMC and shall be subject to the terms of this Agreement.
Participation Account Administrative Fee for each month during the Term, means [**]% multiplied by the Average Daily Balance, divided by [**]. During the Term, the Participation Account Administrative Fee shall be modified quarterly as set forth in Section 7.1.5 of the Agreement to reflect the extent to which the distribution of the Disbursed Loan Amount among pricing tiers changes the Projected Default Rate for the Pool.
Participation Account Deposits has the meaning set forth in Section 7.1.1 herein.
Participation Account Excess Percentage has the meaning set forth in Section 7.1.6 herein.
Participation Account Payment means the payments which are made by SunTrust to FMC from the Participation Account pursuant to Section 7.1.6.
Participation Cap shall mean [**] dollars ($[**]), inclusive of the amount of the Initial Participation Account Deposit for each Pool, plus any amount over [**] dollars ($[**]) associated with the credit enhancement of Loans funded pursuant to Sections 7.1.11 and 18.4.
Participation Interest means the Participation Percentage multiplied by Expected Loan Volume. During the Term, the Participation Interest shall be modified quarterly as set forth in Sections 7.1.1 and 7.1.3 of the Agreement to reflect the extent to which the distribution of the Disbursed Loan Amount among Borrower pricing tiers changes the Projected Default Rate for the Pool.
Participation Percentage means an amount equal to [**] times the Projected Default Rate.
Person means a natural person, a partnership, a corporation, a limited liability company, a joint stock company, a business trust or other entity or association.
Personnel means the employees, contractors, subcontractors, and agents of a Party.
Pool means Loans funded during a 12-month period commencing on the Effective Date of this Agreement or any anniversary thereof.
Portfolio Management Services means Default Prevention Services and Early Awareness Services and all other services to be provided pursuant to Sections 4.4 through and including 4.8 herein.
Portfolio Yield means the sum of Monthly Accrued Interest for all Loans for which are not Charged Off Loans.
Pricing Schedule means the loan pricing for each Pricing Segment set forth in the Program Guidelines, including the Borrower loan pricing portion which SunTrust may modify from time to time, subject to the provisions of Section 3.7.
Pricing Segment means each of the [**] discrete interest rate and fee combinations shown in the Pricing Schedule, with, as of the Execution Date, [**] discrete interest rate and fee combinations for Fixed Rate Loans and [**] discrete interest rate and fee combinations for Variable Rate Loans, along with each discrete interest rate and fee combination shown in the Pricing Schedules adopted after the Execution Date.
Privacy Requirements means (a) Title V of the Gramm-Leach-Bliley Act, 15 U.S.C. 6801 et seq.; (b) federal regulations implementing such act and codified at 12 C.F.R. Parts 40, 216, 332, and 573; (c) Interagency Guidelines; and (d) other applicable federal and state laws, rules, regulations, and orders relating to the privacy and security of Consumer Information.
Production Support Plan means the FMC plan for selling the Program to Eligible Institutions in the FMC Sales States, as set forth in Schedule 2 to Exhibit E attached hereto, as modified by written agreement of SunTrust and FMC from time to time.
Production Support Reports has the meaning set forth in Section 2.5 herein.
Production Support Services means the support services to be provided pursuant to Article 2 herein.
Program means SunTrusts loan program as described in the Program Guidelines.
Program Administration Services means Program analytics and development, administration of post-disbursement loan servicing, and Participation Account administration services to be provided pursuant to Sections 4.1, 4.2, and Article 7 of the Agreement.
Program Administration Services Fee means the fee paid to FMC pursuant to Section 6.5 hereof calculated as the FMC Share of Portfolio Yield, less the Program Support Services Fee, less the Participation Account Administration Fee.
Program Guidelines means the Program Guidelines attached to the Agreement as Exhibit F, which include loan origination guidelines, underwriting guidelines, product terms and features, Borrower fees, Borrower Credit Agreements, Servicing Guidelines, Applicant disclosures and forms of Truth-in-Lending Disclosure Statements and other disclosures required by Requirements of Law.
Program Support Services means those services set forth in Article 4 herein.
Program Support Services Fee means the fee paid to FMC pursuant to Section 6.4.1 hereof.
Projected Default Rate means a percentage, the numerator of which shall be the Expected Charged Off Loan Volume and the denominator of which