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Exhibit 10(e)
GUARANTEE AGREEMENT
BETWEEN
MASSACHUSETTS HIGHER EDUCATION ASSISTANCE CORPORATION
DOING BUSINESS AS AMERICAN STUDENT ASSISTANCE GUARANTOR
AND
THE FIRST NATIONAL BANK OF CHICAGO, NOT IN ITS INDIVIDUAL CAPACITY
BUT SOLELY AS ELIGIBLE LENDER TRUSTEE
ON BEHALF OF KEYCORP STUDENT LOAN TRUST 1996-A
WHEREAS, Massachusetts Higher Education Assistance Corporation doing
business as American Student Assistance Guarantor (hereinafter "ASA"), of 330
Stuart Street, Boston, Massachusetts 02116, a private nonprofit corporation
created by Chapter 298 of the Acts of 1956 of the Commonwealth of Massachusetts,
administers several loan guarantee programs providing financial assistance to
and on behalf of students enrolled in programs higher education; and
WHEREAS,The First National Bank of Chicago, Dot in its individual
capacity but solely as Eligible Lender trustee on behalf of KeyCorp Student Loan
Trust 1996-A, pursuant to the Trust Agreement dated as of __________, 1996,
between KeyBank USA, National Association, and the Eligible Lender Trustee, as
the same may be amended, including by way of amendment and restatement, from
time to time (the "Trust Agreement"), with its principal office located at One
First National Plaza, Suite 0126, Chicago, Illinois 60670, Attention: Corporate
Trust Administration (hereinafter "LENDER"), qualifies as an eligible lender
under one or more of these programs, fulfilling such criteria as have been set
forth by federal and state statute and regulation, and those set forth by the
Board of Directors of ASA pertaining to the particular program; and
WHEREAS, LENDER is wiling to hold loans made to eligible borrowers as
such are defined in this agreement and in the policies of ASA, and ASA is
willing to guarantee the payment of principal and interest in the event of the
borrower's default of repayment in accordance with the terms and conditions set
forth herein;
NOW THEREFORE, in consideration of the mutual covenants contained
herein, ASA and LENDER agree as follows:
SECTION 1. DEFINITIONS
1. "AGREEMENT" - shall mean this GUARANTEE agreement to the extent that
LENDER and ASA have indicated the willingness of each to participate in the
programs as evidenced by signature or initial.
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2. "BORROWER" - shall mean any person or persons executing a promissory
note individually or jointly for the purpose of obtaining funds pursuant to
loans held by LENDER under one of the programs authorized by this Agreement.
3. "DEFAULT" - shall mean the failure of the BORROWER and endorser, if
any, or joint BORROWERS on a PLUS loan, to make an installment payment when due,
or to meet other terms of the promissory note, if ASA finds it reasonable to
conclude that the BORROWER and endorser, if any, no longer intend to honor the
obligation to repay, provided that this failure persists for (1) 180 days for a
loan repayable in monthly installments; or (2) 240 days for a loan repayment in
less frequent installments.
4. "DUE DILIGENCE" - shall mean the utilization by LENDER of policies,
practices and procedures in the origination, servicing and collection of loans
which are consistent with LENDER's policies, practices and procedures applicable
to its other consumer loan and credit portfolios and which comply with the
requirements of federal and state statute and regulation and ASA policies. DUE
DILIGENCE includes, but is not limited to, the remission of guarantee fees to
ASA in an amount and time frame as specified by ASA.
5. "FORMS" - shall mean such application forms, promissory notes and
administrative forms as are provided by and/or required by ASA for participation
in any of the programs authorized by this AGREEMENT.
6. "GUARANTEE" - shall mean the guarantee of payment given by ASA to
LENDER by which ASA covenants to pay to LENDER such principal and interest as
may be provided by the terms of each program after being assured that LENDER has
exercised DUE DILIGENCE in its origination, servicing and collection and that
the necessary documents have been submitted to ASA in the form required.
7. "LIMITATION, SUSPENSION OR TERMINATION" - shall mean the
restrictions imposed by ASA upon LENDER's continued participation in any of the
programs authorized by this AGREEMENT. The cause of such restrictions, the
process by which such restrictions may be imposed, and their nature and scope
are set forth in Section 3 of this AGREEMENT.
8. "RESERVE FUND" - shall mean the reserve account maintained by ASA as
a source from which to pay loan losses and to assure LENDER of ASA's ability to
perform its commitments to LENDER under this Agreement.
9. "SCHOOL" - shall mean a public or independent college, professional,
scientific, technical or vocational institution offering programs of
postsecondary education which are approved for participation in any of the
programs authorized by this AGREEMENT.
10. "FEDERAL FAMILY EDUCATION LOAN PROGRAM" - shall mean the Stafford
Loan, PLUS Loan, Supplementary Loans for Students, Consolidation Loan programs
and other federal education loan programs administered by ASA.
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SECTION 2. TERMS AND CONDITIONS OF LOANS ORIGINATED AND HELD UNDER THE FEDERAL
FAMILY EDUCATION LOAN PROGRAM ADMINISTERED BY ASA
1. Statutes governing the FEDERAL FAMILY EDUCATION LOAN PROGRAM are
enacted as Part B of Title IV of the Higher Education Act of 1965, as amended
(20 U.S.C section 1071 et seq.) (hereinafter the "Higher Education Act").
Regulations affecting program administration are adopted by the Secretary of the
and "USDOE" and are published in the Code of Federal Regulations. Proposed
revisions to such Regulations are published in the Federal Register.
2. ASA participates in the FEDERAL FAMILY EDUCATION LOAN PROGRAM as a
private nonprofit guarantee agency pursuant to several contractual agreements
with USDOE. These agreements confer eligibility upon borrowers to receive full
or partial interest subsidy, upon lenders to receive special allowance payments
and upon ASA to receive insurance and reinsurance payments in the event of
death, disability, bankruptcy or DEFAULT. ASA hereby represents and covenants
that it will structure and operate its programs in such a manner as to preserve
to the fullest extent possible the benefits of these federal agreements.
3. As security for the performance of its obligations hereunder, ASA
covenants and agrees that it will, at all times, maintain a reserve consisting
of cash, certificates of deposit, marketable securities or other assets having
value of not less than the minimum requirement, as set forth in the Higher
Education Act, and all implementing regulations, as amended.
4. LENDER covenants that it will comply with all applicable
requirements of federal and state statutes and regulations and with all
requirements of policies of ASA, which are published or of which LENDER is
advised. Further LENDER will administer the ASA FEDERAL FAMILY EDUCATION LOAN
PROGRAM in conformity with sound lending practices and standards of DUE
DILIGENCE as applied to the programs.
5. In its administration of the FEDERAL FAMILY EDUCATION LOAN PROGRAM,
LENDER shall utilize forms approved and distributed by ASA and/or by USDOE.
LENDER will also be authorized to collect and shall collect such fees as may be
required of the BORROWER, by ASA, or USDOE, and shall direct the payment or
allocation of such fees as directed.
6. In the event of the DEFAULT, death, total and permanent disability
or discharge in bankruptcy of a BORROWER, as such events are defined in
applicable law and regulation, ASA will accept a claim for payment upon its
GUARANTEE and, if satisfied the standards of DUE DILIGENCE have been met, make
payment to LENDER in an amount equal to the outstanding and unpaid principal
amount plus interest accrued since the date of last payment or maturity to the
date of payment by ASA. In addition, in the event that ASA fails to pay a claim
to LENDER timely in accordance with applicable federal law and regulation, ASA
shall, upon written request from LENDER, pay to LENDER an amount equivalent to
the applicable federal special
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allowance payment, if any, calculated for the period between termination of the
Secretary's obligation to pay special allowance to LENDER and the date of
payment by ASA.
7. LENDER agrees that it will prepare and make available such reports
or other information as may be reasonably required by ASA or USDOE and further,
that independent auditors or authorized representatives of ASA or USDOE shall
have access to the operations and financial records and procedures pertaining to
the Stafford, Plus, SLS and Consolidation programs or any other federal program
administered by ASA, to the extent applicable.
8. If LENDER shall violate, or fail to comply with, any of the terms of
this Agreement, it shall become liable to ASA in an amount equal to the damages
sustained by ASA by virtue of such violation or failure to comply. ASA may, at
its option, and in addition to any other remedies available to it at law or in
equity, invoke and apply the provisions of Section 3. of this AGREEMENT relating
to LIMITATION, SUSPENSION OR TERMINATION. If ASA shall violate, or fail to
comply with, any of the terms of this AGREEMENT, it shall become liable to
LENDER in an amount equal to the damages sustained by LENDER by virtue of such
violations or failure to comply. In no event shall either party be liable for
any profits lost, or for any special, consequential, incidental or contingent
damages, arising out of or in connection with the AGREEMENT (even if it has been
advised of the possibility of such damages by the other party).
SECTION 3. LIMITATION, SUSPENSION AND TERMINATION OF LENDER PARTICIPATION
1. Lenders participating in the FEDERAL FAMILY EDUCATION LOAN PROGRAM
administered ASA are expected to administer their loan portfolios in accordance
with applicable federal and state law and regulations, ASA policies, and sound
lending practices.
2. In the event that ASA determines that LENDER's administration of
such programs does not satisfy the required levels of DUE DILIGENCE or ASA
receives reliable information that LENDER is in violation of applicable laws,
regulations, special arrangements, agreements, or limitations. ASA will inform
LENDER of the noted deficiencies and of corrective actions required in order to
continue participation.
3. LENDER shall implement the recommended corrective action and/or take
other action to rectify each of the administrative deficiencies noted by ASA
within the time specified by ASA or as agreed to by LENDER and ASA.
4. In the event that LENDER falls to rectify such deficiencies in a
timely and prudent manner, ASA may, in its discretion, impose LIMITATION,
SUSPENSION OR TERMINATION sanctions as it may deem appropriate, after affording
LENDER an opportunity to respond ASA may impose such sanctions on LENDER without
a hearing, however, if ASA determines that emergency action is necessary in
order to prevent monetary loss to ASA and the federal government. LENDER may
appeal any LIMITATION, SUSPENSION OR TERMINATION sanctions by ASA.
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5. LIMITATION sanctions provide for the continued participation of
LENDER but subject to such special conditions, procedures or timetables as may
be established by ASA.
6. SUSPENSION sanctions include the temporary termination of LENDER's
eligibility for participation for a specified period of time or until LENDER
satisfies the standards established by ASA to remove the SUSPENSION.
7. TERMINATION sanctions may be invoked by ASA where the administrative
deficiencies are substantial and where LENDER has not taken timely corrective
action. TERMINATION of LENDER's eligibility for participation will be effected
after having provided LENDER with an opportunity for a hearing. Restoration of
LENDER's eligibility for participation can be accomplished only upon submission
of a new application for such participation and ASA's approval of such
application after consideration of eligibility standards then required by the
Board of Directors.
8. Any LIMITATION, SUSPENSION OR TERMINATION hereunder shall be
prospective only and shall not affect the obligations of the parties hereto
which were incurred prior to such LIMITATION, SUSPENSION OR TERMINATION.
SECTION 4. GENERAL PROVISIONS
1. This AGREEMENT may be modified only by written agreement of the
parties hereto. Any waiver, modification or failure to insist upon the strict
performance of the duties of either party to this AGREEMENT shall not be
construed as a waiver or modification generally or of such particular condition
in a subsequent instance.
2. Notwithstanding any other provision, condition or agreement herein,
and pursuant to Section 4042 of the Student Loan Reform Act of 1993, amending
Section 422 of the Higher Education Act (20 US.C Section,1072), this AGREEMENT
may be terminated by the Secretary upon thirty (30) days' notice to the
contracting parties if the Secretary determines that this AGREEMENT includes an
impermissible transfer of the reserve funds or assets of a guarantee agency or
is otherwise inconsistent with the terms and purposes of Section 422 of the
Higher Education Act.
3. This AGREEMENT may be terminated by either party at anytime by
providing at least thirty (30) days' written notice of such termination to the
other party hereto. Such termination, however, shall be prospective only and
shall not affect the obligations of the parties hereto which were incurred prior
to such termination.
4. By checking below, LENDER signifies its intent to participate in the
programs checked.
[x] Participation in the Federal Stafford Loan Program
[x] Participation in the unsubsidized Federal Stafford Loan
Program
[x] Participation in the Federal PLUS Loan Program
[x] Participation in the Federal Supplemental Loans for
Students (SLS) Program
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IN WITNESS WHEREOF, ASA and LENDER have caused this instrument to be
executed by duly authorized officers and affixed with the corporate seal of each
as of the day and year indicated below.
THE FIRST NATIONAL BANK OF CHICAGO, NOT IN ITS INDIVIDUAL CAPACITY
BUT SOLELY AS ELIGIBLE LENDER TRUSTEE ON BEHALF OF KEYCORP STUDENT
LOAN TRUST 1996-A
By:
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Printed Name:
--------------------------
Title:
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Date: , 1996
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Witness:
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EIN#: 36-7111819
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Lender Code: 833220
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MASSACHUSETTS HIGHER EDUCATION ASSISTANCE CORPORATION
D/B/A AMERICAN STUDENT ASSISTANCE GUARANTOR
By:
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Printed Name:
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Title:
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Date: , 1996
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Witness:
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RIDER TO GUARANTEE AGREEMENT BETWEEN
AMERICAN STUDENT ASSISTANCE GUARANTOR
AND THE FIRST NATIONAL BANK OF CHICAGO, NOT IN ITS
INDIVIDUAL CAPACITY BUT SOLELY AS ELIGIBLE LENDER TRUSTEE
ON BEHALF OF KEYCORP STUDENT LOAN TRUST 1996-A,
DATED AS OF __________, 1996
Reference is made to a certain Guarantee Agreement of even date
herewith (the "Agreement") by and between Massachusetts Higher Education
Assistance Corporation doing business as American Student Assistance Guarantor
("ASA") and The First National Bank of Chicago, not in its individual capacity
but solely as Eligible Lender Trustee on behalf of KeyCorp Student Loan Trust
1996-A (the "Lender"), pursuant to the Trust Agreement dated as of __________,
1996, between KeyBank USA, National Association, and the Eligible Lender
Trustee, as the same may be amended, including by way of amendment and
restatement, from time to time.
1. This Rider to the Agreement is made a part thereof and to the extent
any conflict exists between the provisions of the Agreement and those in this
Rider, the provisions in this Rider shall control.
2. Capitalized terms used herein and not otherwise defined shall have
the meanings assigned thereto in the Higher Education Act of 1965, as amended,
Title IV, Part B.
3. The foregoing provisions of the Agreement notwithstanding, the
following provision shall apply:
The rights and obligations accruing under the Agreement shall
be applicable to and enforceable by and against the Lender,
not in its individual capacity but solely as Eligible Lender
Trustee on behalf of KeyCorp Student Loan Trust 1996-A,
notwithstanding the fact that it may purchase rather than
itself originate such loans, guaranteed by ASA under the
Agreement, as shall be identified, referenced and contained in
the KeyCorp Student Loan Trust 1996-A; provided, however, that
ASA shall he provided reasonable notice of any proposed sale
to and purchase by the Lender of such loans pursuant to the
terms of the Trust by or on behalf of the Lender.
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4. This Rider to the Agreement is also a part of a certain Certificate
of Comprehensive Insurance of even date between ASA and the Lender, and shall
apply thereto upon the same terms and conditions as are contained herein.
5. ASA agrees upon written request to furnish a supply of its most
recent audited financial statements to any holder of record of notes,
certificates or other securities issued by KeyCorp Student Loan Trust 1996-A,
provided, however, that ASA may, in its discretion, first verify the identity of
any such bolder of record with KeyBank USA, National Association, prior to
fulfilling this requirement.
6. Except as provided herein, the Agreement and the Certificate of
Comprehensive Insurance shall remain in full force and effect.
THE FIRST NATIONAL BANK OF CHICAGO, NOT IN ITS INDIVIDUAL
CAPACITY BUT SOLELY AS ELIGIBLE LENDER TRUSTEE
ON BEHALF OF KEYCORP STUDENT LOAN TRUST 1996-A
By:
--------------------------
Printed Name:
--------------------------
Title:
--------------------------
Date: , 1996
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MASSACHUSETTS HIGHER EDUCATION ASSISTANCE CORPORATION
D/B/A AMERICAN STUDENT ASSISTANCE GUARANTOR
By:
--------------------------
Printed Name:
--------------------------
Title:
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Date: , 1996
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CERTIFICATE OF COMPREHENSIVE INSURANCE
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(For Consolidation Loans made in accordance with the Federal Family Education
Loan Program of the Higher Education Act of 1965, as amended.
Massachusetts Higher Education Assistance Corporation doing business as American
Student Assistance Guarantor (hereinafter the "Agency") authorizes that all
Consolidation Loans made in conformity with the requirements of the Federal
Family Education Loan Program of the Higher Education Act of 1965, as amended,
by The First National Bank of Chicago, not in its individual capacity but solely
as Eligible Lender Trustee on behalf of KeyCorp Student Loan Trust 1996-A,
pursuant to the Trust Agreement dated as of __________, 1996, between KeyBank
USA, National Association, and the Eligible Lender Trustee, as the same may be
amended, including by way of amendment and restatement, from time to time
(hereinafter the "Lender"), are fully insured against loss of principal and
interest by the Agency, provided:
1. The Lender has determined to its satisfaction, in accordance with
reasonable and prudent business practices, for each loan being
consolidated -
(a) that the loan is a legal, valid, and binding obligation of the
borrower;
(b) that such loan was made and serviced in compliance with
applicable laws and regulations; and
(c) that the insurance on such loan is in full force and effect.
2. The Consolidation Loan(s) will be made on or after July 1, 1987, unless
limited by the Act.
3. The total unpaid principal amount of all Consolidation Loans made under
this certificate is equal to or less than $500,000,000.00.
4. If the Lender, prior to expiration of this certification, no longer
proposes to acquire Consolidated Loans, the Lender will so notify the
Agency in order that the certificate may be terminated. Such
termination shall not affect the insurance on any Consolidation Loan
acquired prior to such termination.
5. The Lender's loan consolidation program practices are subject to the
Agency's Guaranteed Loan Program Lender Participation Limitation,
Suspension or Termination procedures. The insurance on any loan(s) made
under this certificate prior to the Agency's imposition of a
limitation, suspension or termination action shall not be affected by
such action.
6. The Lender complies with the Agency's Federal Consolidation Loan
policies and procedures.
7. The Lender notifies the Agency of the alternative repayment terms which
will be offered by the Lender.
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The Agency's office at 330 Stuart Street, Boston, Massachusetts 02116, is
designated as the office which will process claims and perform other related
administrative functions.
_________________________________ _______________________________________
President Date
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