<PAGE>
As filed with the Securities and Exchange Commission on December 10, 1996
Registration No. 33-94846
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
AMENDMENT NO. 4
to
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
-----------------------
SIGNET BANK
(formerly known as Signet Bank/Maryland)
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Virginia 6022 54-1088621
(State or other jurisdic- (Primary Standard Industrial (I.R.S. employer
tion of incorporation Classification Code Number) identification number)
or organization)
</TABLE>
7 North Eighth Street
Richmond, Virginia 23219
(804) 747-2000
(Address, including zip code, and telephone
number, including area code, of
registrant's principal executive offices)
-----------------------
Sara R. Wilson
Executive Vice President, General
Counsel and Corporate Secretary
Signet Bank
7 North Eighth Street
P.O. Box 25970
Richmond, Virginia 23260
(804) 771-7416
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
----------------------
Copies to:
<TABLE>
<S> <C>
Joseph C. Carter, III, Esq. Daniel M. Rossner, Esq.
McGuire, Woods, Battle & Boothe, L.L.P. Brown & Wood LLP
One James Center, 901 East Cary Street One World Trade Center
Richmond, Virginia 23219 New York, New York 10048
</TABLE>
Approximate date of commencement of proposed sale to the public: As
soon after the effective date of this Registration Statement as market
conditions warrant.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box.[_]
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, please check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statements for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule
462(b) under the Securities Act, check the following box and list the Securities
Act registration statement number of earlier effective registration statements
for the same offering.[_]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box.[_]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===================================================================================================================================
Proposed Proposed
Title of Each Maximum Maximum
Class of Securities Amount to be Offering Price Aggregate Amount of
to be Registered Registered per Unit (1) Offering Price (1) Registration Fee(2)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Asset Backed Notes and
Asset Backed Certificates...... $580,420,500 100% $580,420,500 $200,145
===================================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of determining the amount of the
registration fee in accordance with Rule 457 under the Securities Act of
1933.
(2) Previously paid.
-----------------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
EXPLANATORY NOTE
Signet Bank intends to make an offering of a portion of the securities
registered under this registration statement as permitted by Rule 430A. The form
of prospectus supplement contained herein is for such offering only and will,
when completed, be filed pursuant to Rule 424(b). Prospectus supplements used in
connection with offerings of other securities registered hereunder will include
only the basic prospectus and may be in a different form and contain other
information.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED WITHOUT THE DELIVERY OF A FINAL PROSPECTUS +
+SUPPLEMENT AND PROSPECTUS. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING +
+PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN +
+OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN +
+WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION+
+OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION DATED DECEMBER 10, 1996
PROSPECTUS SUPPLEMENT TO
PROSPECTUS DATED DECEMBER 10, 1996
$
SIGNET STUDENT LOAN TRUST 1996-A
$ Floating Rate Class A-1 Asset Backed Notes
$ Floating Rate Class A-2 Asset Backed Notes
$ Floating Rate Asset Backed Certificates
--------
Signet Bank
Seller
--------
The Signet Student Loan Trust 1996-A, a statutory Delaware business trust,
(the "Trust") will issue $ aggregate principal amount of Floating Rate
Class A-1 Asset Backed Notes (the "Class A-1 Notes"), $ aggregate
principal amount of Floating Rate Class A-2 Asset Backed Notes (the "Class
A-2 Notes" and, together with the Class A-1 Notes, the "Notes") and $
aggregate principal amount of Floating Rate Asset Backed Certificates
(the "Certificates"). The Assets of the Trust will include a pool of
guaranteed education loans to students and parents of students
purchased by The First National Bank of Chicago, as eligible lender
trustee on behalf of the Trust (the "Eligible Lender Trustee"), from
Signet Bank (the "Seller") (such loans, together with any Additional
Student Loans acquired from the Seller, the "Financed Student
Loans"), collections and other payments with respect to the
Financed Student Loans, and monies on deposit in certain trust
accounts (including the Collection Account, the Reserve Account
and the Pre-Funding Account).
(Continued on following page)
--------
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FACTORS SET FORTH UNDER "RISK
FACTORS" HEREIN AT PAGE S-21 AND IN THE ACCOMPANYING PROSPECTUS AT PAGE 14.
--------
THE CERTIFICATES REPRESENT BENEFICIAL INTERESTS IN, AND THE NOTES REPRESENT
OBLIGATIONS OF, THE TRUST ONLY AND DO NOT REPRESENT INTERESTS IN OR
OBLIGATIONS OF THE SELLER, THE ELIGIBLE LENDER TRUSTEE, THE MASTER
SERVICER, THE INDENTURE TRUSTEE, ANY SUBSERVICER, ANY GUARANTOR OR ANY
AFFILIATE THEREOF. NEITHER THE CERTIFICATES NOR THE NOTES ARE GUARANTEED
OR INSURED BY ANY GOVERNMENTAL AGENCY.
--------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURI-
TIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PRO-
SPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Price to the Underwriting Proceeds to the
Public(1) Discount(2) Seller(1)(3)
------------ ------------ ---------------
<S> <C> <C> <C>
Per Class A-1 Note.........................
Per Class A-2 Note.........................
Per Certificate............................
Total......................................
</TABLE>
(1) Plus accrued interest, if any, from , .
(2) Underwriting discount only applies to $ aggregate principal amount of
Class A-1 Notes, $ aggregate principal amount of Class A-2 Notes and
$ aggregate principal amount of Certificates that are offered by .
(3) Before deducting offering expenses payable by the Seller, estimated at
$ .
--------
The Notes and the Certificates are offered by the several Underwriters
subject to prior sale, and subject to the Underwriters' right to reject orders
in whole or in part. It is expected that delivery of the Notes and the
Certificates in book-entry form will be made through the facilities of The
Depository Trust Company on the Same Day Funds Settlement System and in the
case of the Notes, Cedel Bank, societe anonyme, and the Euroclear System on or
about December , 1996.
[Underwriters]
The date of this Prospectus Supplement is , 1996.
<PAGE>
(Continued from preceding page)
The Notes will be collateralized by the assets of the Trust. The interests
of the Certificateholders in the assets of the Trust will be subordinated to
payments of interest and principal due on the Notes to the extent described
herein. After the Closing Date, certain Additional Fundings will be made from
time to time by or on behalf of the Trust, as described herein.
Subject to certain limitations described herein, the per annum rate of
interest for each Interest Period, other than the initial Interest Period,
will equal one-month LIBOR (determined as described herein) plus % with
respect to the Class A-1 Notes and one month LIBOR plus % with respect to
the Class A-2 Notes. Interest for the initial Interest Period will be
calculated as described herein. Interest on the Notes will be payable monthly
on or about the twenty-fifth day of each month or, if any such day is not a
business day, on the next succeeding business day (each, an "Interest Payment
Date"), commencing January 27, 1997. Principal on the Notes will be payable
quarterly on or about each January 25, April 25, July 25 and October 25 of
each year, commencing on April 25, 1997 (each, a "Distribution Date")
provided, however, that no principal payments with respect to the Class A-2
Notes will be made until the Class A-1 Notes are paid in full. Interest for
each Interest Period, other than the initial Interest Period, at a rate per
annum equal, subject to certain limitations described herein, to one-month
LIBOR plus %, on the Certificates will be distributed on each Interest
Payment Date. Interest for the initial Interest Period will be calculated as
described herein. Principal on the Certificates will be distributed on each
Distribution Date; provided, however, that no principal payments with respect
to the Certificates will be made until the Class A-2 Notes are paid in full.
The final Distribution Date for the Class A-1 Notes will be the
Distribution Date, the final Distribution Date for the Class A-2 Notes will be
the Distribution Date and the final Distribution Date for the
Certificates will be the Distribution Date. However, payment in full of
the Notes and the Certificates could occur other than on such dates as
described herein. In addition, the outstanding Class A-2 Notes will be
redeemed and the Certificates will be repaid on any Distribution Date on which
the Seller exercises its option to purchase the Financed Student Loans,
exercisable when the aggregate principal balance of the Financed Student Loans
is reduced to 10% or less of the sum of the Initial Pool Balance plus the Pre-
Funded Amount as of the Closing Date.
Signet Bank, a Virginia banking corporation ("Signet"), will serve as Master
Servicer and Administrator for the Financed Student Loans. The Financed
Student Loans will include loans guaranteed to the extent described herein by
Texas Guaranteed Student Loan Corporation ("TGSLC"), United Student Aid Funds
("USAF") and Educational Credit Management Corporation ("ECMC") (each of
TGSLC, USAF and ECMC a "Guarantor", and, collectively, the "Guarantors"),
which are in each case reinsured to the extent described herein by the United
States Department of Education (the "Department"). All of the Guarantors are
Federal Guarantors (as defined in the Prospectus).
------------
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION ABOUT THE
OFFERING OF THE NOTES AND THE CERTIFICATES. ADDITIONAL INFORMATION IS
CONTAINED IN THE PROSPECTUS, AND PROSPECTIVE INVESTORS ARE URGED TO READ BOTH
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS IN FULL. SALES OF THE NOTES OR
THE CERTIFICATES MAY NOT BE CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED BOTH
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. TO THE EXTENT ANY STATEMENTS IN
THIS PROSPECTUS SUPPLEMENT CONFLICT WITH STATEMENTS IN THE PROSPECTUS, THE
STATEMENTS IN THIS PROSPECTUS SUPPLEMENT SHALL CONTROL.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES AND THE
CERTIFICATES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
REPORTS TO SECURITYHOLDERS
Unless and until Definitive Notes or Definitive Certificates are issued,
quarterly and annual unaudited reports containing information concerning the
Financed Student Loans will be prepared by the Administrator and sent on
behalf of the Trust only to Cede & Co. ("Cede"), as nominee of The Depository
Trust Company ("DTC") and registered holder of the Notes and the Certificates.
Such reports will not constitute financial statements prepared in accordance
with generally accepted accounting principles. See "Certain Information
Regarding the Securities--Book-Entry Registration" and "--Reports to
Securityholders" in the Prospectus. The Trust will file with the Securities
and Exchange Commission (the "Commission") such periodic reports as are
required under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations of the Commission thereunder.
S-2
<PAGE>
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere herein and in the Prospectus. Certain
capitalized terms used herein are defined elsewhere in this Prospectus
Supplement on the pages indicated in the "Index of Principal Terms" or, to the
extent not defined herein, have the meanings assigned to such terms in the
Prospectus.
Issuer...................... Signet Student Loan Trust 1996-A (the "Trust")
Securities Offered.......... Floating Rate Class A-1 Asset Backed Notes (the
"Class A-1 Notes") in the aggregate principal
amount of $ , Floating Rate Class A-2 Asset
Backed Notes (the "Class A-2 Notes" and, together
with the Class A-1 Notes, the "Notes") in the
aggregate principal amount of $ and Floating
Rate Asset Backed Certificates (the
"Certificates" and, together with the Notes, the
"Securities") in the aggregate principal amount
of $ .
Persons acquiring beneficial ownership interests
in the Notes will hold their interests in the
Notes through The Depository Trust Company
("DTC") in the United States or Cedel Bank,
societe anonyme ("Cedel") or the Euroclear System
("Euroclear") in Europe and persons acquiring
beneficial ownership interests in the
Certificates will hold their interests in the
Certificates through DTC. See "Description of the
Securities--Book-Entry Registration" herein.
Seller...................... Signet Bank, a Virginia banking corporation
("Signet"), as seller (the "Seller"). See "The
Seller, the Master Servicer and the Subservicers"
and "Assumption of Signet's Obligations" in the
Prospectus.
Master Servicer............. Signet, as Master Servicer on behalf of the Trust
(the "Master Servicer") pursuant to a Master
Servicing Agreement to be dated as of December ,
1996 (as amended and supplemented from time to
time, the "Master Servicing Agreement") among the
Trust, the Master Servicer and the Eligible
Lender Trustee. See "The Seller, the Master
Servicer and the Subservicers" in the Prospectus.
Eligible Lender Trustee..... The First National Bank of Chicago, a national
banking association, as trustee under the Trust
Agreement and holder of legal title to the
Financed Student Loans on behalf of the Trust
(the "Eligible Lender Trustee"). See "Formation
of the Trust" herein and "Formation of the
Trust--Eligible Lender Trustee" in the
Prospectus.
Indenture Trustee........... The Bank of New York, a New York banking
corporation (the "Indenture Trustee"), as trustee
under the Indenture.
Administrator............... Signet, as administrator (the "Administrator") on
behalf of the Trust pursuant to an Administration
Agreement to be dated as of December , 1996 (as
amended and supplemented from time to time, the
"Administration Agreement"), among the
Administrator, the Trust and the Indenture
Trustee.
S-3
<PAGE>
The Trust................... The Trust will be established under the laws of
Delaware by (i) a Trust Agreement to be dated as
of December , 1996 (as amended and supplemented
from time to time, the "Trust Agreement"), among
the Seller, a newly-organized affiliate of the
Seller which will be formed prior to the Closing
Date (the "Company") and the Eligible Lender
Trustee and (ii) the filing of a certificate of
trust with the Delaware Secretary of State. The
activities of the Trust and the Eligible Lender
Trustee are limited by the terms of the Trust
Agreement to acquiring, owning and managing the
Financed Student Loans and the other assets of
the Trust as described herein, issuing the
Securities, making payments thereon and other
activities related thereto.
Assets of the Trust......... The assets of the Trust will include the
following:
A. Financed Student
Loans................... The Financed Student Loans will consist of
certain guaranteed education loans to students
and parents of students ("Student Loans") and
will include rights to receive payments made with
respect to such Financed Student Loans and the
proceeds thereof. On or prior to December , 1996
(the "Closing Date"), the Seller will sell
Student Loans (the "Initial Financed Student
Loans") having an aggregate principal balance of
approximately $415,760,332 (the "Initial Pool
Balance") as of November 2, 1996 (the "Cutoff
Date"), to the Eligible Lender Trustee on behalf
of the Trust pursuant to a Loan Sale Agreement to
be dated as of December , 1996 (as amended and
supplemented from time to time, the "Loan Sale
Agreement"), among the Seller, the Trust and the
Eligible Lender Trustee. Following the Cutoff
Date, it is anticipated that, subject to certain
conditions described herein, additional Student
Loans (the "Additional Student Loans," and
together with the Initial Financed Student Loans,
the "Financed Student Loans") will be acquired by
the Trust, as described below.
The Financed Student Loans are guaranteed to the
extent described herein as to the payment of
principal and interest by Texas Guaranteed
Student Loan Corporation ("TGSLC"), United
Student Aid Funds ("USAF") and Educational Credit
Management Corporation ("ECMC") (each of TGSLC,
USAF, and ECMC a "Guarantor", and, collectively,
the "Guarantors"), which are in each case
reinsured to the extent described herein by the
Department. All of the Guarantors are Federal
Guarantors (as defined in the Prospectus).
Financed Student Loans made before October l,
1993 are 100% guaranteed by the applicable
Guarantor, and reinsured against default by the
Department up to 100% of Guarantee Payments.
Financed Student Loans made on or after October
l, 1993 are 98% guaranteed by the applicable
Guarantor, and reinsured against default by the
Department up to a maximum of 98% of Guarantee
Payments. All references herein to the guarantee
and reinsurance coverage with respect to the
Financed Student Loans shall be understood to
mean such 100% guarantee, and 100% maximum
reinsurance coverage, respectively, with
S-4
<PAGE>
respect to Financed Student Loans made before
October l, 1993 and such 98% guarantee and 98%
maximum reinsurance coverage, respectively, with
respect to Financed Student Loans made on or
after October l, 1993. As of the Cutoff Date,
35.85% by principal balance of the Initial
Financed Student Loans were made before October
1, 1993, and 64.15% by principal balance were
made after that date.
Certain incentive programs currently or hereafter
made available by the Seller to borrowers may
also be made available by the Master Servicer to
borrowers with Financed Student Loans. Any such
incentive program that effectively reduces
borrower payments on Financed Student Loans and
is not required by the Act will be applicable to
the Financed Student Loans only if and to the
extent that the Master Servicer received payment
from the Seller in an amount sufficient to offset
such effective yield reductions. See "Risk
Factors--Changes in Repayment Terms of Financed
Student Loans Pursuant to Incentive Programs"
herein.
As of the Cutoff Date, the weighted average
interest rate per annum with respect to the
Initial Financed Student Loans was approximately
8.33% (based on the applicable interest rates as
of the Cutoff Date), the weighted average
remaining term to maturity (exclusive of any
future deferral or forbearance periods and
assuming expected graduation dates and typical
grace periods) of the Initial Financed Student
Loans was approximately 130.52 months and the
weighted average original term to maturity
(exclusive of any future deferral or forbearance
periods) of the Initial Financed Student Loans
was approximately 163.86 months. As of the Cutoff
Date, approximately 5.17% by principal balance of
the Initial Financed Student Loans are guaranteed
by TGSLC, approximately 71.93% by USAF and
approximately 22.90% by ECMC, and all of the
Financed Student Loans are reinsured by the
Department. See "The Financed Student Loan Pool"
herein.
Following the Closing Date, the Eligible Lender
Trustee on behalf of the Trust will be obligated
from time to time, subject to certain conditions
described herein, to purchase from the Seller,
subject to the availability thereof, Federal
Student Loans which (i) are made to a borrower
who is also a borrower under at least one
outstanding Initial Financed Student Loan, (ii)
are made under the same loan program as such
Initial Financed Student Loan and (iii) have the
same Guarantor as such Initial Financed Student
Loan (each a "Serial Loan," and collectively the
"Serial Loans"). Serial Loans will be made at the
discretion and in accordance with usual business
practices of the Seller. Each such purchase of a
Serial Loan will be made by the Eligible Lender
Trustee on behalf of the Trust pursuant to a
transfer agreement (each a "Transfer Agreement")
between the Seller, the Trust and the Eligible
Lender Trustee. During the Funding Period
(described below), each purchase of a Serial Loan
will be funded by means of a transfer from the
Pre-Funding
S-5
<PAGE>
Account, of an amount equal to the principal
balance owed by the applicable borrower thereon
plus accrued interest thereon expected to be
capitalized upon repayment. Following the end of
the Funding Period, such purchases will be funded
by amounts representing distributions of
principal on the outstanding Financed Student
Loans which would otherwise have been part of the
Available Funds of the Trust, as described under
"Description of the Transfer and Servicing
Agreements--Distributions" herein.
The Eligible Lender Trustee will not be permitted
to purchase from the Seller any Federal
Consolidation Loans with respect to a Financed
Student Loan or otherwise after the Closing Date.
Any Federal Consolidation Loan made with respect
to a Financed Student Loan after the Closing
Date, whether made by the Seller or another
lender, will result in a prepayment to the Trust
of such Financed Student Loan. See "Description
of the Transfer and Servicing Agreements--
Additional Fundings" herein.
As described under "The Federal Family Education
Loan Program" in the Prospectus, during certain
qualifying periods, interest on certain of the
Financed Student Loans is not required to be paid
currently, but instead is added to the
outstanding principal balance of the loan at the
end of the qualifying period. In order to
minimize the possibility that the failure to
receive current interest payments on such loans
during such periods will result in a shortfall in
the amount required to be distributed on the
Securities, amounts on deposit in the Pre-Funding
Account will be deposited into the Collection
Account during the Funding Period in lieu of
current interest payments on such loans as
described herein under "Description of the
Transfer and Servicing Agreements--Additional
Fundings". Following the end of the Funding
Period, the Pre-Funding Account will cease to be
available as a source to fund such interest
payments and thereafter such payments will be
funded through the application of amounts which
would otherwise have been distributable in
respect of the Principal Distribution Amount for
the related Distribution Date, as described
herein under "Description of the Transfer and
Servicing Agreements--Distributions".
The application, during the Funding Period, of
amounts in the Pre-Funding Account (i) by the
Eligible Lender Trustee on behalf of the Trust to
purchase Serial Loans, and (ii) by the Trust to
make deposits into the Collection Account in lieu
of collections of interest on Financed Student
Loans to the extent such interest is not paid
currently but will be capitalized and added to
the principal balance of the Financed Student
Loans, and the application, after the end of the
Funding Period, of amounts representing
distributions of principal on the outstanding
Financed Student Loans (i) by the Eligible Lender
Trustee on behalf of the Trust to purchase Serial
Loans and (ii) by the Trust to make deposits into
the Collection
S-6
<PAGE>
Account in lieu of collections of interest on
Financed Student Loans to the extent such
interest is not paid currently but will be
capitalized and added to the principal balance of
the Financed Student Loans, is referred to herein
as "Additional Fundings".
B. Pre-Funding Account .... During the period (the "Funding Period") from the
Closing Date until the first to occur of (i) the
Distribution Date on which the amount on deposit
in the Pre-Funding Account is less than $100,000,
(ii) an Event of Default occurring under the
Indenture, a Servicer Default occurring under the
Master Servicing Agreement or an Administrator
Default occurring under the Administration
Agreement, (iii) certain events of insolvency
occurring with respect to the Company, or (iv)
the last day of the Collection Period preceding
the Distribution Date, an account will be
maintained in the name of the Indenture Trustee
(the "Pre-Funding Account"). The amount on
deposit in the Pre-Funding Account (the "Pre-
Funded Amount") on the Closing Date will equal
$ (which will be deposited out of the net
proceeds of the sale of the Securities) and,
during the Funding Period, will be reduced from
time to time by the amount thereof used to make
Additional Fundings in accordance with the Loan
Sale Agreement. The Seller expects that the
amount of Additional Fundings during the Funding
Period will approximate 100% of the initial Pre-
Funded Amount by the last day of the Collection
Period preceding the Distribution Date. Any
Pre-Funded Amount remaining at the end of the
Funding Period will be distributed to
Noteholders, in the order of priority set forth
herein, as a payment of principal. See
"Description of the Transfer and Servicing
Agreements--Additional Fundings" herein.
"Collection Period" means each period of three
calendar months from and including the date next
following the end of the preceding Collection
Period (or, with respect to the first Collection
Period, the period beginning on the Cutoff Date
and ending on March 31, 1997).
C. Collection Account ..... The Master Servicer will be required to remit all
collections received with respect to the Financed
Student Loans, and the Eligible Lender Trustee
will be required to remit Interest Subsidy
Payments and Special Allowance Payments it
receives with respect to the Financed Student
Loans, in each case within two business days of
receipt thereof to one or more accounts in the
name of the Indenture Trustee (the "Collection
Account"). If, however, certain conditions
described in the Prospectus are satisfied, such
collections received by the Master Servicer and
the Eligible Lender Trustee will be remitted to
the Administrator, who will not be required to
deposit such amounts into the Collection Account
generally until on or before the business day
preceding each Distribution Date and who, while
it is holding such amounts, will not be required
to segregate such amounts from its other funds.
See "Description of the Transfer
S-7
<PAGE>
and Servicing Agreements--Payments on Student
Loans" in the Prospectus.
Pursuant to the Administration Agreement, the
Administrator will have the power to instruct the
Indenture Trustee to withdraw funds on deposit in
the Collection Account and to apply such funds
(a) on each Interest Payment Date that is not a
Distribution Date, to the following (in the
priority indicated): (i) the Servicing Fee and
all overdue Servicing Fees to the Master
Servicer; (ii) the Administration Fee and all
overdue Administration Fees to the Administrator;
(iii) the Noteholders' Interest Distribution
Amount to the Class A-1 Noteholders and the Class
A-2 Noteholders on a pro rata basis (based on the
ratio of the portion of the Noteholders' Interest
Distribution Amount accrued with respect to each
such class to the Noteholders' Interest
Distribution Amount); and (iv) the
Certificateholders' Interest Distribution Amount
to the Certificateholders and (b) on each
Distribution Date to the following (in the
priority indicated): (i) the Servicing Fee and
all overdue Servicing Fees to the Master
Servicer; (ii) the Administration Fee and all
overdue Administration Fees to the Administrator;
(iii) the Noteholders' Interest Distribution
Amount to the Class A-1 Noteholders and the Class
A-2 Noteholders on a pro rata basis (based on the
ratio of the portion of the Noteholders' Interest
Distribution Amount accrued with respect to each
such Class to the Noteholders' Interest
Distribution Amount); (iv) the
Certificateholders' Interest Distribution Amount
to the Certificateholders; (v) the Noteholders'
Principal Distribution Amount to the Class A-1
Noteholders until the outstanding principal
balance of the Class A-1 Notes is zero and then
to the Class A-2 Noteholders; (vi) on each
Distribution Date on and after which the Notes
are paid in full, the Certificateholders'
Principal Distribution Amount to the
Certificateholders; and (vii) to the Reserve
Account, any remaining amounts after application
of clauses (i) through (vi) above. See
"Description of the Transfer and Servicing
Agreements--Distributions--Distributions from
Collection Account".
D. Reserve Account ........ Pursuant to the Administration Agreement, an
account in the name of the Indenture Trustee (the
"Reserve Account") will be established and
maintained by the Administrator with Signet Trust
Company, an affiliate of the Seller, and will be
an asset of the Trust. The Seller will make an
initial deposit into the Reserve Account on the
Closing Date of cash or Eligible Investments
equal to $ (the "Reserve Account Initial
Deposit"). The Reserve Account Initial Deposit
will be augmented on each Distribution Date by
the deposit into the Reserve Account of any
Available Funds for such Distribution Date
remaining after making all distributions required
to be made from Available Funds on such date. See
"Description of the Transfer and Servicing
Agreements--Distributions" herein.
If the amount on deposit in the Reserve Account
on any Distribution Date (after giving effect to
all deposits thereto or withdrawals made
S-8
<PAGE>
therefrom in respect of shortfalls in
distributions required to be made from Available
Funds on such Distribution Date) is greater than
the Specified Reserve Account Balance for such
Distribution Date, the Administrator will
instruct the Indenture Trustee to distribute the
amount of such excess (the "Reserve Account
Excess") to the following (in the priority
indicated): (i) to the payment of the unpaid
principal amount of the Notes and the
Certificates in the order of priority set forth
herein, until the unpaid principal balance of the
Notes and the Certificates equals the Pool
Balance plus the Pre-Funded Amount as of the
close of business on the last day of the related
Collection Period, (ii) to the Noteholders, the
aggregate unpaid amount of any Noteholders'
Interest LIBOR Carryover, (iii) to the
Certificateholders, the aggregate unpaid amount
of any Certificateholders' Interest LIBOR
Carryover, (iv) if such Distribution Date is on
or subsequent to the Distribution Date and
the Pool Balance on such Distribution Date is
equal to 10% or less of the Initial Pool Balance
plus the Pre-Funded Amount as of the Closing
Date, to the payment of the unpaid principal
balance of the Notes, in the order of priority
set forth herein, until the principal balance of
the Notes has been reduced to zero, and then to
the payment of the unpaid principal balance of
the Certificates until the principal balance of
the Certificates has been reduced to zero, and
(v) to the Seller and the Company, 99% and 1%,
respectively, of any such excess after the
payment of clauses (i) and (iv) above, and, upon
such payment to the Seller, the Noteholders and
the Certificateholders will not have any rights
in, or claims to, such amounts. As of the Closing
Date, the aggregate principal balance of the
Notes and the Certificates will equal
approximately % of the Initial Pool Balance. All
distributions of principal on the Notes and the
Certificates as described in clause (i) of this
paragraph shall be allocated to the Class A-1
Notes until the principal balance of the Class A-
1 Notes has been reduced to zero, then to the
Class A-2 Notes until the principal balance of
the Class A-2 Notes has been reduced to zero and
then to the Certificates until the principal
balance of the Certificates has been reduced to
zero.
The "Specified Reserve Account Balance" with
respect to any Distribution Date generally will
be equal to the greater of (i) % of the sum of
the Pool Balance (as hereinafter defined) and the
Pre-Funded Amount as of the close of business on
the last day of the related Collection Period and
(ii) $ ; provided, however, that such balance
will be subject to adjustment in certain
circumstances described herein and in no event
will such balance exceed the sum of the Pool
Balance plus the Pre-Funded Amount. See
"Description of the Transfer and Servicing
Agreements--Credit Enhancement--Reserve Account"
herein and "Description of the Transfer and
Servicing Agreements--Credit and Cash Flow
Enhancement--Reserve Account" in the Prospectus.
Amounts on deposit in the Reserve Account will be
available (a) on each Interest Payment Date that
is not a Distribution Date and on each
S-9
<PAGE>
Distribution Date prior to the January 2000
Distribution Date, to cover any shortfalls (in
the priority indicated) in payments of (i) the
Servicing Fee and all overdue Servicing Fees,
(ii) the Administration Fee and all overdue
Administration Fees, (iii) the Noteholders'
Interest Distribution Amount and (iv) the
Certificateholders' Interest Distribution Amount
and (b) on each Distribution Date on and after
the January 2000 Distribution Date, to cover any
shortfalls (in the priority indicated) in
payments of (i) the Servicing Fee and all overdue
Servicing Fees, (ii) the Administration Fee and
all overdue Administration Fees, (iii) the
Noteholders' Interest Distribution Amount, (iv)
the Certificateholders' Interest Distribution
Amount, (v) the Noteholders' Principal
Distribution Amount and (vi) the
Certificateholders' Principal Distribution Amount
for such Distribution Date in each case for which
Available Funds for such Distribution Date (or
Monthly Available Funds for such Interest Payment
Date) are insufficient to make such payments and
distributions. Amounts on deposit in the Reserve
Account other than amounts in excess of the
Specified Reserve Account Balance will not be
available to cover any Noteholders' Interest
LIBOR Carryover or Certificateholders' Interest
LIBOR Carryover. See "Risk Factors--Subordination
of the Certificates" and "Description of the
Transfer and Servicing Agreements--Credit
Enhancement--Reserve Account" herein.
The funding and maintenance of the Reserve
Account is intended to enhance the likelihood of
timely payment to the Noteholders on each
Interest Payment Date that is not a Distribution
Date of the Noteholders' Interest Distribution
Amount and on and after the January 2000
Distribution Date of the Noteholders'
Distribution Amount and to the Certificateholders
on each Interest Payment Date that is not a
Distribution Date of the Certificateholders'
Interest Distribution Amount and on and after the
January 2000 Distribution Date of the
Certificateholders' Distribution Amount. In
certain circumstances, however, the Reserve
Account could be depleted and shortfalls in
distributions and resulting losses to the
Noteholders or the Certificateholders could
occur. See "Risk Factors--Limited Assets of the
Trust" and "Description of the Transfer and
Servicing Agreements--Credit Enhancement" herein.
E. The Transfer and
Servicing Agreements ... Under the Loan Sale Agreement, the Seller will
sell the Financed Student Loans to the Trust,
with the Eligible Lender Trustee holding legal
title thereto. Under the Master Servicing
Agreement, the Master Servicer will agree with
the Trust to be responsible for servicing,
managing, maintaining custody of and making
collections on the Financed Student Loans.
Subject to the terms and conditions described
herein and in the Master Servicing Agreement, the
Master Servicer may delegate certain of its
obligations under the Master Servicing Agreement
to one or more subservicers but no such
delegation shall relieve the Master Servicer from
its responsibilities
S-10
<PAGE>
to service the Financed Student Loans as if it
alone were servicing the Financed Student Loans.
See "The Seller, the Master Servicer and the
Subservicers" and "Description of Transfer and
Servicing Agreements--Servicing Procedures" in
the Prospectus and "The Financed Student Loan
Pool" herein. The obligations of the Seller and
the Master Servicer under the Loan Sale Agreement
and the Master Servicing Agreement include the
following:
Under the Loan Sale Agreement, the Seller will be
obligated to repurchase and, under the Master
Servicing Agreement, the Master Servicer will be
obligated to purchase, any Financed Student Loan
if the interests of the Noteholders or the
Certificateholders therein are materially
adversely affected by a breach of any
representation, warranty or covenant (including
the Master Servicer's covenant to service all the
Financed Student Loans in accordance with
applicable laws, restrictions and guidelines)
made by the Seller or the Master Servicer, as the
case may be, with respect to the Financed Student
Loan, if the breach has not been cured within 120
days following the discovery by or notice to the
Seller or the Master Servicer, as the case may
be, of the breach (it being understood that any
such breach that does not affect any Guarantor's
obligation to guarantee payment of such Financed
Student Loan will not be considered to have a
material adverse effect for this purpose). In
addition, the Seller and Master Servicer,
respectively, will be obligated to reimburse the
Trust with respect to a Financed Student Loan for
any accrued interest amounts not guaranteed by a
Guarantor due to, or any lost Interest Subsidy
Payments or Special Allowance Payments as a
result of, a breach of the Seller's or the Master
Servicer's respective representations and
warranties with respect to such Financed Student
Loan.
The Master Servicer will receive a monthly fee
(the "Servicing Fee") with respect to each
Financed Student Loan equal to one-twelfth of the
product of (i) % per annum and (ii) the Pool
Balance as of the close of business on the last
day of the calendar month immediately preceding
such Interest Payment Date. The Servicing Fee
will be payable from (i) in the case of each
Interest Payment Date that is not a Distribution
Date, Monthly Available Funds and (ii) in the
case of each Distribution Date, Available Funds,
in each case on deposit in the Collection Account
and from amounts on deposit in the Reserve
Account on each Interest Payment Date, commencing
January 27, 1997.
Pursuant to the Administration Agreement, the
Administrator will agree with the Trust to be
responsible for, among other things, preparing
and filing with the Department all appropriate
claims forms and other documents and filings on
behalf of the Eligible Lender Trustee in order to
claim the Interest Subsidy Payments and Special
Allowance Payments from the Department in respect
of the Financed Student Loans entitled thereto
and preparing and providing
S-11
<PAGE>
monthly, quarterly and annual statements to the
Eligible Lender Trustee and the Indenture Trustee
with respect to distributions to Noteholders and
Certificateholders.
As compensation for the performance of the
Administrator's obligations under the
Administration Agreement and as reimbursement for
its expenses related thereto, the Administrator
will be entitled to receive a monthly
administration fee (the "Administration Fee")
payable as provided herein on each Interest
Payment Date in an amount equal to one-twelfth of
the product of (i) % per annum and (ii) the
Pool Balance as of the close of business on the
last day of the calendar month immediately
preceding such Interest Payment Date. The
Administration Fee will be payable from (i) in
the case of each Interest Payment Date that is
not a Distribution Date, Monthly Available Funds
and (ii) in the case of each Distribution Date,
Available Funds, in each case on deposit in the
Collection Account and from amounts on deposit in
the Reserve Account on each Interest Payment
Date, commencing January 27, 1997.
The Securities.............. The Securities will consist of the Class A-1
Notes, the Class A-2 Notes and the Certificates.
As described more fully herein, the investment
characteristics of the Notes and Certificates
will differ in significant respects as will the
investment characteristics of the Class A-1 Notes
and the Class A-2 Notes. See "Risk Factors--
Certain Differences Between the Class A-1 Notes,
the Class A-2 Notes and the Certificates" herein.
Such differing characteristics will be due
primarily, in the case of the Certificates as
compared to the Notes, to the subordination of
the interests of the Certificateholders in the
assets of the Trust to payments of interest and
principal on the Notes to the extent described
herein, and in the case of the Class A-2 Notes as
compared to the Class A-1 Notes, to fact that no
principal payments will be made on the Class A-2
Notes until the principal amount of the Class A-1
Notes has been paid in full. See "Description of
the Transfer and Servicing Agreements--Credit
Enhancement" herein. As a result, the rate at
which interest accrues on the Certificates
exceeds the Note Interest Rate and the Class A-2
Rate exceeds the Class A-1 Rate. See "Description
of the Securities--the Notes" and "--the
Certificates" herein.
I. The Notes .............. The Trust will issue the Notes pursuant to an
indenture to be dated as of December , 1996 (as
amended and supplemented from time to time, the
"Indenture"), between the Trust and the Indenture
Trustee. The Notes will be secured by the assets
of the Trust.
A. Interest ............... Except as described in the following paragraph,
each of the Class A-1 Notes and the Class A-2
Notes will bear interest at the respective rates
per annum (the "Class A-1 Rate" or the "Class A-2
Rate" and, collectively, the "Note Interest
Rates"), equal to one-month LIBOR for such
Interest Period (determined as described
S-12
<PAGE>
herein) plus % in the case of Class A-1 Notes
(the "Class A-1 LIBOR Rate"), and %, in the
case of Class A-2 Notes (the "Class A-2 LIBOR
Rate"); provided, however, that with respect to
the initial Interest Period, the Class A-1 LIBOR
Rate and the Class A-2 LIBOR Rate shall equal (i)
% and %, respectively. See "Description of
the Securities--Determination of LIBOR" herein.
Interest on the outstanding principal amount of
the Notes will accrue from the Closing Date or
from the most recent Interest Payment Date on
which interest has been paid to but excluding the
following Interest Payment Date (each an
"Interest Period") and will be payable on the
twenty-fifth day of each month (or, if any such
date is not a business day, on the next
succeeding business day) (each, an "Interest
Payment Date"), commencing January 27, 1997, to
holders of record of the Class A-1 Notes (the
"Class A-1 Noteholders") and holders of record of
the Class A-2 Notes (the "Class A-2 Noteholders"
and, together with the Class A-1 Noteholders, the
"Noteholders") as of the related Record Date.
"Record Date" means, with respect to any Interest
Payment Date or Distribution Date, the twenty-
fourth day of the month in which such Interest
Payment Date or Distribution Date, as the case
may be, occurs. Interest will be calculated on
the basis of the actual number of days elapsed in
each Interest Period divided by 360. See
"Description of the Securities".
Notwithstanding the foregoing, if either Note
Interest Rate for any such Interest Period
calculated on the basis of LIBOR is greater than
the Student Loan Rate, then such Note Interest
Rate for such Interest Payment Date will be the
Student Loan Rate. The "Student Loan Rate" for
any Interest Period will equal the product of (a)
the quotient obtained by dividing (i) 360 by (ii)
the actual number of days elapsed in such
Interest Period and (b) the percentage equivalent
of a fraction, (i) the numerator of which is
equal to Expected Interest Collections for such
Interest Period less the Servicing Fee and the
Administration Fee with respect to such Interest
Period, and (ii) the denominator of which is the
outstanding principal balance of the Securities
as of the first day of such Interest Period.
"Expected Interest Collections" means, with
respect to any Interest Period, the sum of (i)
the amount of interest accrued, net of any
Monthly Rebate Fees (as described under "Risk
Factors--Fees Payable on Certain Financed Student
Loans Prior to Distributions on the Securities"
herein) and other amounts required by the Act to
be paid to the Department or to be repaid to
borrowers, with respect to the Financed Student
Loans for the calendar month preceding the
related Interest Payment Date (the "Student Loan
Rate Accrual Period") whether or not such
interest is actually paid, (ii) all Interest
Subsidy Payments and Special Allowance Payments
estimated to have accrued for such Student Loan
Rate Accrual Period, whether or not actually
received and (iii) Investment Earnings (as
defined in "Description of the Transfer and
Servicing Agreements--Accounts" in the
Prospectus) for such Student Loan Rate Accrual
Period.
S-13
<PAGE>
If the Class A-1 Rate or the Class A-2 Rate for
any Interest Payment Date is based on the Student
Loan Rate, the excess of (a) the amount of
interest on the Class A-1 Notes or the Class A-2
Notes, as the case may be, that would have
accrued in respect of the related Interest Period
had interest been calculated based on LIBOR over
(b) the amount of interest on the Class A-1 Notes
or the Class A-2 Notes, as the case may be,
actually accrued in respect of such Interest
Period based on the Student Loan Rate will be
paid on the Distribution Date immediately
following such Interest Payment Date (or, if such
Interest Payment Date is a Distribution Date, on
such Distribution Date) or on any subsequent
Distribution Date out of the Reserve Account
Excess, if any, for such Distribution Date after
making all required prior distributions of such
excess as described herein under "Description of
the Transfer and Servicing Agreements--Credit
Enhancement--Reserve Account". Such excess,
together with the unpaid portion of any such
excess from prior Interest Payment Dates, and
interest accrued thereon calculated based on the
Class A-1 LIBOR Rate or the Class A-2 LIBOR Rate,
as applicable, is collectively referred to as the
"Noteholders' Interest LIBOR Carryover". See
"Description of the Transfer and Servicing
Agreements--Distributions". The rating of the
Notes does not address the likelihood of the
payment of any Noteholders' Interest LIBOR
Carryover. See "--Rating of the Securities".
On each Interest Payment Date, the Eligible
Lender Trustee will distribute pro rata to the
holders of record of Notes as of the preceding
Record Date interest at the applicable Note
Interest Rates on the outstanding principal
balance of the Notes on the immediately preceding
Distribution Date, after giving effect to all
distributions of principal to Noteholders on such
preceding Distribution Date (or, in the case of
the first Distribution Date, on the Closing
Date). See "Description of the Transfer and
Servicing Agreements--Statements to Indenture
Trustee and Trust" in the Prospectus.
B. Principal .............. Principal of the Notes will be payable on each
Distribution Date in an amount equal to the
Noteholders' Principal Distribution Amount for
such Distribution Date. The Noteholders'
Principal Distribution Amount generally will be
equal to the amount of principal paid or, in
certain cases, due to be paid with respect to the
Financed Student Loans (including any realized
losses thereon) during the related Collection
Period less, if such Collection Period is after
the end of the Funding Period, the sum of (i) any
such amount applied by the Eligible Lender
Trustee on behalf of the Trust during such
Collection Period to purchase Serial Loans, as
described herein, and (ii) accrued and unpaid
interest on the Financed Student Loans for such
Collection Period to the extent such interest
will be capitalized and added to the principal
balance of such Financed Student Loans, upon the
commencement of repayment of such Financed
Student Loans, as described herein. See
"Description of the Transfer and
S-14
<PAGE>
Servicing Agreements--Distributions" herein. In
addition, on each Distribution Date the Excess
Distribution Amount, if any, for such
Distribution Date will be applied, as described
herein, to the unpaid principal balance of the
Notes in the order of priority set forth herein.
See "Description of the Transfer and Servicing
Agreements--Credit Enhancement--Reserve Account"
herein.
In addition, on or after the Distribution
Date, if the Pool Balance on such Distribution
Date is less than 10% of the Initial Pool Balance
plus the Pre-Funded Amount as of the Closing
Date, any Reserve Account Excess remaining after
payment of certain amounts as described in
"Description of the Transfer and Servicing
Agreements--Credit Enhancement--Reserve Account,"
will be applied to the unpaid principal balance
of the Notes, in the order of priority set forth
herein, until the principal balance of the Notes
has been reduced to zero and then to the unpaid
principal balance of the Certificates until the
principal balance of the Certificates has been
reduced to zero.
The aggregate amount distributable as principal
on the Notes will be applied on each Distribution
Date, first, to the principal balance of the
Class A-1 Notes until such principal balance is
reduced to zero and then to the principal balance
of the Class A-2 Notes until such principal
balance is reduced to zero.
The outstanding principal amount, if any, of the
Class A-1 Notes will be payable in full on the
Distribution Date (the "Class A-1 Final
Maturity Date") and the outstanding principal
amount of the Class A-2 Notes will be payable in
full on the Distribution Date (the "Class A-
2 Final Maturity Date"). However, the actual
maturity of the Notes could occur other than on
such dates as a result of a variety of factors
including prepayments of the Financed Student
Loans. See "Risk Factors--Yield and Prepayment
Considerations" herein.
C. Mandatory Redemption ... If any amount remains on deposit in the Pre-
Funding Account on the last day of the Funding
Period after giving effect to all Additional
Fundings to be made on or prior to such date,
such amount will be used on the Distribution Date
on or immediately following such date to redeem
the Class A-1 Notes up to an amount not to exceed
their outstanding principal balance, then to
redeem the Class A-2 Notes up to an amount not to
exceed their outstanding principal amount and
then to redeem the Certificates. The aggregate
principal amount of Notes to be redeemed will be
an amount equal to the amount then on deposit in
the Pre- Funding Account.
II. The Certificates ....... Concurrently with the issuance of the Notes, the
Trust will issue the Certificates pursuant to the
Trust Agreement. The Certificates represent
undivided participation interests in the Trust. A
portion of the Certificates will be held by the
Company and the remaining Certificates will be
sold to third party investors that are expected
to
S-15
<PAGE>
be unaffiliated with the Seller, the Master
Servicer, the Trust, the Guarantors or the
Department. The initial principal balance of the
Certificates will equal $ . See "Formation of
the Trust--The Trust" herein.
A. Interest ............... Except as described in the following paragraph,
interest on the Certificates will accrue for each
Interest Period at a rate per annum (the
"Certificate Rate") equal to one-month LIBOR for
such Interest Period (determined as described
herein) plus % (the "Certificate LIBOR Rate");
provided, however, that with respect to the
initial Interest Period, the Certificate LIBOR
Rate shall equal %. See "Description of the
Securities--Determination of LIBOR". Interest
will be calculated on the basis of the actual
number of days elapsed in each Interest Period
divided by 360.
Notwithstanding the foregoing, if the Certificate
Rate for such Interest Period calculated on the
basis of the Certificate LIBOR Rate is greater
than the Student Loan Rate, then the Certificate
Rate for such Interest Payment Date will be the
Student Loan Rate. If the Certificate Rate for
any Interest Payment Date is based on the Student
Loan Rate, the excess of (a) the amount of
interest on the Certificates that would have
accrued in respect of the related Interest Period
had interest been calculated based on LIBOR over
(b) the amount of interest on the Certificates
actually accrued in respect of such Interest
Period based on the Student Loan Rate will be
paid on the Distribution Date immediately
following such Interest Payment Date (or, if such
Interest Payment Date is a Distribution Date, on
such Distribution Date) or on any subsequent
Distribution Date out of the Reserve Account
Excess, if any, for such Distribution Date after
making all required prior distributions of such
excess as described herein under "Description of
the Transfer and Servicing Agreements--Credit
Enhancement--Reserve Account". Such excess,
together with the unpaid portion of any such
excess from prior Interest Payment Dates (and
interest accrued thereon calculated based on the
Certificate LIBOR Rate), is collectively referred
to as the "Certificateholders' Interest LIBOR
Carryover". See "Description of the Transfer and
Servicing Agreements--Distributions". The rating
of the Certificates does not address the
likelihood of the payment of any
Certificateholders' Interest LIBOR Carryover. See
"--Rating of the Securities" herein.
On each Interest Payment Date, the Eligible
Lender Trustee will distribute pro rata to the
holders of record of Certificates (the
"Certificateholders" and, together with the
Noteholders, the "Securityholders") as of the
preceding Record Date interest at the Certificate
Rate on the Certificate Balance on the
immediately preceding Distribution Date, after
giving effect to all distributions of principal
to Certificateholders on such preceding
Distribution Date (or, in the case of the first
Distribution Date, on the Closing Date).
S-16
<PAGE>
B. Principal .............. Principal of the Certificates will be payable on
each Distribution Date on and after which the
Notes have been paid in full in an amount
generally equal to the amount of principal paid
with respect to the Financed Student Loans
(including any realized losses thereon) during
the related Collection Period less, if such
Collection Period is after the end of the Funding
Period, the sum of (i) any such amount applied by
the Eligible Lender Trustee on behalf of the
Trust during such Collection Period to purchase
Serial Loans, as described herein, and (ii)
accrued and unpaid interest on the Financed
Student Loans for such Collection Period to the
extent such interest will be capitalized and
added to the principal balance of such Financed
Student Loans upon the commencement of repayment
of such Financed Student Loans, as described
herein. See "Description of the Transfer and
Servicing Agreements--Distributions" herein. In
addition, on each Distribution Date on and after
which the Notes have been paid in full, the
Excess Distribution Amount, if, any for such
Distribution Date will be applied to the unpaid
principal balance of the Certificates. See
"Description of the Transfer and Servicing
Agreements--Credit Enhancement--Reserve Account"
herein.
The outstanding principal amount of the
Certificates will be payable in full on the
Distribution Date (the "Final Maturity Date").
However, the actual maturity of the Certificates
could occur other than on such date as a result
of a variety of factors. See "The Financed
Student Loan Pool--Yield and Prepayment
Considerations" herein.
C. Subordination of the
Certificates ............ The interests of Certificateholders in the assets
of the Trust will be subordinated to payments of
interest and principal due on the Notes to the
extent described herein. This subordination is
intended to enhance the likelihood of regular
receipt by the holders of Notes of the full
amount of scheduled payments of principal and
interest due them and to protect them against
losses. See "Risk Factors--Subordination of the
Certificates" and "Description of the Transfer
and Servicing Agreements--Credit Enhancement--
Subordination of the Certificates" herein.
Auction of Trust Assets .... Any Financed Student Loans remaining in the Trust
as of the end of the Collection Period
immediately preceding the Distribution Date
will be offered for sale by the Indenture
Trustee. The Seller, its affiliates and unrelated
third parties may offer bids to purchase such
Financed Student Loans on such Distribution Date.
If at least two bids are received, the Indenture
Trustee will accept the highest bid equal to or
in excess of the greater of (x) the Purchase
Amounts of such Financed Student Loans as of the
end of the Collection Period immediately
preceding such Distribution Date or (y) an amount
that would be sufficient to (i) reduce the
outstanding principal amount of each class of
Notes then outstanding on such Distribution Date
to zero, (ii) pay to the Noteholders the
S-17
<PAGE>
Noteholders' Interest Distribution Amount payable
on such Distribution Date, if any, (iii) reduce
the Certificate Balance of the Certificates on
such Distribution Date to zero and (iv) pay to
the Certificateholders the Certificateholders'
Interest Distribution Amount payable on such
Distribution Date (the "Minimum Purchase Price").
If at least two bids are not received or the
highest bid is not equal to or in excess of the
Minimum Purchase Price, the Indenture Trustee
will not consummate such sale. The proceeds of
any such sale will be used first to redeem any
outstanding Class A-1 Notes, second to redeem any
outstanding Class A-2 Notes and third to retire
any outstanding Certificates on such Distribution
Date. If the sale is not consummated in
accordance with the foregoing, the Indenture
Trustee may, but shall not be under any
obligation to, solicit bids for sale of the
Financed Student Loans on future Distribution
Dates upon terms similar to those described
above. In the event the Financed Student Loans
are not sold in accordance with the foregoing, on
each Distribution Date on and after the
Distribution Date, if the Pool Balance is equal
to 10% or less of the Initial Pool Balance plus
the Pre-Funded Amount as of the Closing Date, a
portion of the Reserve Account Excess, if any,
with respect to such Distribution Date will be
distributed to the Noteholders and the
Certificateholders in the priority described
herein as payments of principal. No assurance can
be given as to whether the Indenture Trustee will
be successful in soliciting acceptable bids to
purchase the Financed Student Loans on either the
Distribution Date or any subsequent
Distribution Date. See "Description of the
Transfer and Servicing Agreements--Termination"
herein.
Optional Purchase .......... The Seller may repurchase all remaining Financed
Student Loans, and thus effect the early
retirement of the Notes and the Certificates, on
any Distribution Date on or after which the Pool
Balance is equal to 10% or less of the Initial
Pool Balance plus the Pre-Funded Amount as of the
Closing Date, at a price equal to the Minimum
Purchase Price for such Financed Student Loans as
of the end of the preceding Collection Period.
See "Description of the Transfer and Servicing
Agreements--Termination" herein, and "Description
of the Transfer and Servicing Agreements--
Termination--Optional Redemption" in the
Prospectus.
The "Pool Balance" at any time represents the
aggregate principal balance of the Financed
Student Loans at the end of the preceding
Collection Period (including accrued interest
thereon through the end of such Collection Period
to the extent such interest will be capitalized
upon commencement of repayment), after giving
effect to the following, without duplication: (i)
all payments received by the Trust during such
Collection Period from or on behalf of borrowers,
Guarantors and, with respect to certain payments
on certain Financed Student Loans, the Department
(collectively, "Obligors"), (ii) all Purchase
Amounts received by the Trust for such Collection
Period from the Seller or the Master Servicer,
S-18
<PAGE>
(iii) all Additional Fundings made with respect
to such Collection Period and (iv) all losses
realized on Financed Student Loans liquidated
during such Collection Period.
"Purchase Amount" with respect to a Financed
Student Loan means (i) the unpaid balance owed by
the applicable borrower thereon plus accrued
interest thereon to the date of purchase and (ii)
if the outstanding principal balance of the Notes
and the Certificates is greater than the Pool
Balance plus the Pre-Funded Amount, an amount
equal to the product of (a) 10 % and (b) the sum
of the unpaid principal balance of such loan plus
the accrued interest to be capitalized, if any.
Tax Considerations ......... Although there is no specific authority with
respect to the characterization for federal or
Maryland income tax purposes of securities having
the same terms as the Notes, in the opinion of
McGuire, Woods, Battle & Boothe, L.L.P., federal
and state tax counsel for the Trust ("Tax
Counsel"), the Notes will be characterized as
debt for federal income tax purposes and the
Notes will be characterized as debt for Maryland
state income tax purposes.
In the opinion of Tax Counsel for the Trust, for
federal income tax purposes the Trust will not be
characterized as an association (or publicly
traded partnership) taxable as a corporation. The
Certificateholders, the Seller and the Company,
as owner of all amounts not otherwise required to
be distributed to Noteholders or
Certificateholders or to pay expenses of the
Trust, will agree to treat the Trust as a
partnership in which they are partners.
Alternative characterizations are possible, but
would not result in materially adverse federal
income tax consequences to Certificateholders. In
the opinion of Tax Counsel for the Trust, the
same characterizations would apply for Maryland
state income tax purposes as for federal income
tax purposes. However, there are no cases or
rulings on similar transactions involving a trust
that issues debt and equity interests with terms
similar to those of the Notes and the
Certificates.
Due to the method of allocation of Trust income
to the Certificateholders, cash basis holders
may, in effect, be required to report income from
the Certificates on an accrual basis. In
addition, because tax allocations and tax
reporting will be done on a uniform basis, but
Certificateholders may be purchasing Certificates
at different times and at different prices,
Certificateholders may be required to report on
their tax returns taxable income that is greater
or less than the amount reported to them by the
Trust. Finally, Noteholders and
Certificateholders may be required to accrue any
Noteholders' Interest LIBOR Carryover and
Certificateholders' Interest LIBOR Carryover,
respectively, in income in advance of the receipt
of cash with respect to such amounts regardless
of whether such Noteholders or Certificateholders
are on the cash or accrual methods of accounting.
S-19
<PAGE>
See "Federal Income Tax and State Tax
Consequences" herein and "Federal Income Tax
Consequences" and "State Tax Consequences" in the
Prospectus for additional information concerning
the application of federal and Maryland state tax
laws with respect to the Notes and the
Certificates.
ERISA Considerations ....... Subject to the considerations discussed under
"ERISA Considerations--The Notes" herein and in
the Prospectus, the Notes are eligible for
purchase by employee benefit plans.
The Certificates may not be acquired by any
employee benefit plan subject to the Employee
Retirement Income Security Act of 1974, as
amended ("ERISA"), or by any individual
retirement account. See "ERISA Considerations--
The Certificates" herein and in the Prospectus.
Rating of the Securities ... It is a condition to the issuance and sale of the
Notes and the Certificates that the Notes be
rated in the highest investment rating category
by at least two nationally recognized rating
agencies and that the Certificates be rated in
the "A" rating category by at least two such
rating agencies. A rating is not a recommendation
to buy, sell or hold securities and may be
subject to revision or withdrawal at any time by
the assigning rating agency. The rating agencies
do not evaluate, and the ratings of the
Securities do not address, the likelihood of
payment of the Noteholders' Interest LIBOR
Carryover or the Certificateholders' Interest
LIBOR Carryover. There can be no assurance as to
whether any additional rating agency will rate
the Notes or the Certificates, or if one does,
what rating would be assigned by such other
rating agency.
S-20
<PAGE>
RISK FACTORS
Prospective purchasers of the Securities should consider, among other
things, the following factors (as well as the factors set forth under "Risk
Factors" in the Prospectus) in connection with an investment therein:
Limited Liquidity of the Securities. The Securities will not be listed on
any national securities exchange. There is currently no secondary market for
the Securities. The Underwriters intend to make a market in the Securities but
have no obligation to do so. Neither Signet nor any affiliate of Signet
intends to make a market in the Securities. There can be no assurance that a
secondary market will develop or, if a secondary market does develop, that it
will provide the Securityholders with liquidity of investment or that it will
continue for the life of the Securities. As a result, investors must be
prepared to bear the risk of holding the Securities for as long as the
Securities are outstanding.
Subordination of the Certificates. The rights of Certificateholders to
receive payments of interest are subordinated to the rights of the Noteholders
to receive payments of interest and the rights of the Certificateholders to
receive payments of principal are subordinated to the rights of the
Noteholders to receive payments of interest and principal. Consequently,
Monthly Available Funds or Available Funds, as the case may be, on deposit in
the Collection Account and the Reserve Account on (i) any Interest Payment
Date will be applied to the payment of interest on the Notes before payment of
interest on the Certificates and (ii) any Interest Payment Date that is also a
Distribution Date, will be applied to the payment of interest on the Notes
before payment of interest and principal on the Certificates and will be
applied to the payment on the Notes of the Noteholders' Principal Distribution
Amount before payment of principal on the Certificates. If amounts otherwise
allocable to the Certificates are used to fund payments of principal and
interest on the Notes, distributions with respect to the Certificates may be
delayed or reduced and Certificateholders may suffer a loss. Notwithstanding
the foregoing, distributions to Certificateholders of amounts representing the
Certificateholders' Distribution Amount will not be subordinated to the
payment of any Noteholders' Interest LIBOR Carryover that may exist from time
to time or to the payment, in the order specified herein, of principal on the
Notes or in respect of the Certificates out of the Reserve Account Excess to
the extent that the aggregate unpaid principal balance of the Notes and the
Certificates exceeds the Pool Balance and the Pre-Funded Amount as of the last
day of the related Collection Period or to the extent otherwise required on or
after the Distribution Date. See "Description of the Transfer and
Servicing Agreements--Credit Enhancement--Reserve Account". The
Certificateholders bear directly the credit and other risks associated with an
undivided interest in the Trust. See "Description of the Transfer and
Servicing Agreements--Distributions" and "--Credit Enhancement--Subordination
of the Certificates" herein.
Limited Assets of the Trust. The Trust does not have, nor is it permitted or
expected to have, any significant assets or sources of funds other than the
Financed Student Loans (and the related Guarantee Agreements), the Collection
Account, the Pre-Funding Account and the Reserve Account. The Notes represent
obligations solely of the Trust, and the Certificates represent interests
solely in the Trust and its assets, and neither the Notes nor the Certificates
will be insured or guaranteed by the Seller, the Master Servicer, any
subservicer, the Guarantors, the Eligible Lender Trustee, the Indenture
Trustee, the Department or any affiliate thereof. Consequently, holders of the
Notes and the Certificates must rely for repayment upon payments with respect
to the Financed Student Loans and, to the extent available under the
circumstances described herein, amounts on deposit in the Pre-Funding Account
and the Reserve Account. The Pre-Funding Account will only be available during
the Funding Period to cover obligations of the Trust relating to Additional
Fundings and is not intended to cover losses on the Financed Student Loans.
Similarly, amounts to be deposited in the Reserve Account are limited in
amount and will be reduced, subject to a specified minimum, as the Pool
Balance is reduced. In addition, as a general matter, funds in the Reserve
Account will first be made available to cover shortfalls in distributions of
interest on the Notes before covering shortfalls in distributions of interest
or principal on the Certificates and to cover shortfalls in distributions of
principal on the Notes before covering shortfalls of principal on the
Certificates. If the Reserve Account is exhausted, the Trust will depend
solely on payments with respect to the Financed Student Loans to make payments
on the Notes and distributions on the Certificates. Consequently, if payments
with respect to the Financed Student Loans are insufficient to make the
required
S-21
<PAGE>
payments on the Notes and distributions on the Certificates, the Noteholders
and Certificateholders could suffer a loss. Noteholders and Certificateholders
will have no claim to any amounts properly distributed to the Seller or the
Master Servicer from time to time as described herein and in the Prospectus
and the Seller and the Master Servicer shall in no event be required to refund
such distributed amounts. See "Description of the Transfer and Servicing
Agreements--Distributions" and "--Credit Enhancement" herein.
Issuance of the Securities in an Aggregate Principal Balance that Exceeds
the Initial Pool Balance plus the Pre-Funded Amount as of the Closing Date. As
of the Closing Date, the aggregate principal balance of the Notes and
Certificates will be equal to approximately % of the Initial Pool Balance
plus Pre-Funded Amount as of the Closing Date. As a result, Noteholders and
Certificateholders will be reliant on the availability of Reserve Account
Excess to bring the aggregate principal balance of the Notes and the
Certificates into parity with the Pool Balance and the Pre-Funded Amount. The
availability of Reserve Account Excess will in turn generally be dependent on
(a) Available Funds for any Distribution Date being in excess of the amount
necessary to pay (i) the Servicing Fee and all prior unpaid Servicing Fees,
(ii) the Administration Fee and all prior unpaid Administration Fees, (iii)
the Noteholders' Interest Distribution Amount, (iv) the Certificateholders'
Interest Distribution Amount, (v) the Noteholders' Principal Distribution
Amount and (vi) on each Distribution Date on and after which the Notes have
been paid in full, the Certificateholders' Principal Distribution Amount for
such Distribution Date; and/or (b) declines in the Specified Reserve Account
Balance that exceed any amounts required to be withdrawn for any Distribution
Date from the Reserve Account to make up shortfalls required to be paid
therefrom. At such time as the aggregate principal balance of the Notes and
the Certificates has been reduced so that it equals the Pool Balance plus the
Pre-Funded Amount, any Reserve Account Excess will not be available to pay
principal of the Notes or the Certificates until, under certain circumstances,
on or after the Distribution Date. See "Description of the Transfer and
Servicing Agreements--Credit Enhancement--Reserve Account" herein.
To the extent that Noteholders and the Certificateholders are reliant on
excess interest collections on the Financed Student Loans to repay a portion
of the principal balance of the Notes and the Certificates, Noteholders and
Certificateholders could be adversely affected by an increase in the rate of
prepayments on the Financed Student Loans or an increase in LIBOR, since
either such increase would diminish the amount of such excess interest that
would subsequently be available to pay such principal. In addition, payments
on the Notes and the Certificates may be more sensitive to rates of default on
the Financed Student Loans than would be the case were the principal balance
of the Notes and the Certificates not issued in an amount in excess of the
Initial Pool Balance, particularly with respect to those Financed Student
Loans first disbursed after October 1, 1993 which are 98% insured by a
Guarantor (rather than 100% so insured as is the case for such loans first
disbursed prior to such date). As a result, if an Event of Default under the
Indenture or an Insolvency Event with respect to the Company should occur and
the Financed Student Loans were liquidated at a time when the outstanding
principal of the Notes and the Certificates exceeded the aggregate principal
balance of the Financed Student Loans, unless such Financed Student Loans are
liquidated at a premium, Noteholders and Certificateholders may suffer a loss
as a result thereof.
Yield Considerations Related to the Pre-Funding Account. On the Closing
Date, the Eligible Lender Trustee on behalf of the Trust will own the
approximately $ outstanding principal amount of Financed Student Loans and
the $ Pre-Funded Amount on deposit in the Pre-Funding Account. If the sum
of (i) the principal amount of Serial Loans available to be acquired from the
Seller during the Funding Period plus the premium paid thereon and (ii) the
amount of interest on the Financed Student Loans capitalized and not paid
currently by or on behalf of the borrowers during the Funding Period is less
than the Pre-Funded Amount, the Trust will have insufficient opportunities to
make Additional Fundings during the Funding Period, thereby resulting in a
prepayment of principal to Noteholders as described in the following
paragraph.
To the extent that amounts on deposit in the Pre-Funding Account have not
been fully applied to Additional Fundings by the Trust by the end of the
Funding Period, the Noteholders will receive as a prepayment of principal an
amount equal to the Pre-Funded Amount remaining in the Pre-Funding Account
following any Additional Fundings on the last Distribution Date in the Funding
Period, in the order of priority set forth herein. It is anticipated that the
amount of Additional Fundings made by the Trust will not be exactly equal to
the amount
S-22
<PAGE>
on deposit in the Pre-Funding Account and that therefore there will be at least
a nominal amount of principal prepaid to the Noteholders. Such prepayments may
have the effect of reducing the yield on the Notes.
Changes in Characteristics of the Financed Student Loan Pool Due to
Additional Fundings. Except for the criteria described under the "The Financed
Student Loan Pool", there will be no other required characteristics of the
Additional Student Loans. Therefore, upon the transfer of the Additional
Student Loans to the Eligible Lender Trustee on behalf of the Trust, the
aggregate characteristics of the entire pool of Financed Student Loans,
including the distribution by loan type, the distribution by interest rate, the
distribution by principal balance and the distribution by remaining term to
scheduled maturity may vary from those of the Initial Financed Student Loans as
of the Cutoff Date. See "The Financed Student Loan Pool" herein.
Yield and Prepayment Considerations. The rate of payment of principal of the
Notes and the Certificates and the yield on the Notes and the Certificates is
uncertain and will be affected by prepayments of the Financed Student Loans
that may occur as described below. All the Financed Student Loans are
prepayable in whole or in part by the borrowers at any time (including by means
of Federal Consolidation Loans as discussed below) or as a result of a borrower
default, death, disability or bankruptcy, or school closure or false
certification and subsequent liquidation or collection of Guarantee Payments
with respect thereto. The rate of such prepayments cannot be predicted and may
be influenced by a variety of economic, social and other factors, including as
described below. In general, the rate of prepayments may tend to increase to
the extent that alternative financing becomes available at prevailing interest
rates which fall significantly below the interest rates applicable to the
Financed Student Loans. However, because all of the Financed Student Loans bear
interest at a rate that either actually or effectively is floating, it is
impossible to determine whether changes in prevailing interest rates will be
similar to or vary from changes in the interest rates on the Financed Student
Loans. To the extent borrowers of Financed Student Loans elect to borrow
Federal Consolidation Loans, whether from the Seller or another lender, such
Financed Student Loans will be prepaid. Any such prepayment will result in a
principal prepayment on the Securities. See "Federal Family Education Loan
Program--Federal Consolidation Loan Program" in the Prospectus.
The rate of principal payments on the Notes and the Certificates, the amount
of principal and interest payments on the Notes and the Certificates and the
yield to maturity of the Notes and the Certificates will be directly related to
the rate of payments of principal on the Financed Student Loans. The timing of
changes and the rate of prepayments may significantly affect an investor's
actual yield to maturity, even if the average rate of principal prepayments is
consistent with an investor's expectations. In general, the earlier a
prepayment of principal of a Financed Student Loan, the greater the effect on
an investor's yield to maturity. The effect on an investor's yield as a result
of principal prepayments occurring at a rate higher (or lower) than the rate
anticipated by the investor during the period immediately following the
issuance of the Notes and the Certificates will not be offset by a subsequent
equivalent reduction (or increase) in the rate of principal prepayments. See
"Weighted Average Life of the Securities" in the Prospectus.
In administering the Federal Direct Consolidation Loan Program (See "Federal
Family Education Loan Program--Legislative and Administrative Matters" in the
Prospectus), the Department has indicated that it will permit borrowers with
Federal Student Loans to consolidate their outstanding student loans at
interest rates below those which would apply if they consolidated their
outstanding student loans by means of a Federal Consolidation Loan under the
Federal Consolidation Loan Program. The availability of such lower-rate
consolidation loans may increase the likelihood that a Financed Student Loan
will be prepaid. Any such prepayment will result in a principal prepayment on
the Securities. See "Risk Factors--Yield and Prepayment Considerations" in the
Prospectus regarding the Federal Direct Consolidation Loan Program.
Furthermore, the Seller is obligated to repurchase any Financed Student Loan
pursuant to the Loan Sale Agreement as a result of a breach of any of its
representations and warranties, and the Master Servicer is obligated to
purchase any Financed Student Loan pursuant to the Master Servicing Agreement
as a result of a breach of certain covenants with respect to such Financed
Student Loan, in each case where such breach materially adversely affects the
interests of the Certificateholders or the Noteholders in that Financed Student
Loan and is not cured within the applicable cure period (it being understood
that any such breach that does not affect any Guarantor's obligation
S-23
<PAGE>
to guarantee payment of such Financed Student Loan will not be considered to
have a material adverse effect for this purpose). Any such purchase or
repurchase will result in a principal prepayment on the Securities. See
"Description of the Transfer and Servicing Agreements--Sale of Student Loans;
Representations and Warranties" and "--Servicer Covenants" in the Prospectus.
See also "Description of the Transfer and Servicing Agreements--Termination",
regarding the Seller's option to purchase the Financed Student Loans when the
aggregate Pool Balance is less than or equal to 10% of the Initial Pool Balance
plus the Pre-Funded Amount as of the Closing Date, and "Description of the
Transfer and Servicing Agreements--Insolvency Event" in the Prospectus
regarding the sale of Financed Student Loans if a Company Insolvency Event
occurs.
On the other hand, scheduled payments with respect to, and maturities of, the
Financed Student Loans may be extended, including pursuant to Grace Periods,
Deferral Periods and Forbearance Periods or as a result of the conveyance of
Serial Loans to the Eligible Lender Trustee on behalf of the Trust during or
after the Funding Period as described herein. In that event, the fact that such
Serial Loans will have varying maturities and, after the termination of the
Funding Period, will be purchased with principal distributions on the Financed
Student Loans which may otherwise have been applied to amortize the Notes or
the Certificates may lengthen the remaining term of the Financed Student Loans
and the average life of the Notes and the Certificates. In addition, such
Serial Loans may have, and certain of the Initial Financed Student Loans have,
stated maturities which occur after the Final Maturity Date. The application,
after the end of the Funding Period, of amounts which would otherwise have been
distributable in respect of the Principal Distribution Amount for a related
Distribution Date to make interest distributions to Noteholders and
Certificateholders in lieu of collections of interest on certain Financed
Student Loans on which interest is not currently required to be paid will also
have the effect of lengthening the average life of the Notes and Certificates
over what it would have been had such amounts been applied to amortize the
Notes and the Certificates.
Any Financed Student Loans remaining in the Trust as of the end of the
Collection Period immediately preceding the Distribution Date will be
offered for sale by the Indenture Trustee. If acceptable bids to purchase such
Financed Student Loans on such Distribution Date are received, as described
herein, the proceeds of the sale will be applied on such Distribution Date to
redeem any outstanding Notes and to retire any outstanding Certificates on such
date. In addition, if acceptable bids to purchase such Financed Student Loans
on such Distribution Date are not received, the sale of such Financed Student
Loans may occur on a subsequent Distribution Date, as described herein, and
applied on such date to redeem any outstanding Notes and retire any outstanding
Certificates. No assurance can be given as to whether the Indenture Trustee
will be successful in soliciting acceptable bids to purchase the Financed
Student Loans on the Distribution Date or any subsequent Distribution Date.
See "Description of the Transfer and Servicing Agreements--Termination" herein.
In addition, if the sale of Financed Student Loans is not consummated in
accordance with the foregoing, on each Distribution Date on and after the
Distribution Date if the Pool Balance is equal to 10% or less of the Initial
Pool Balance plus the Pre-Funded Amount as of the Closing Date, the Reserve
Account Excess, if any, remaining after the payment of any Noteholders'
Interest LIBOR Carryover and Certificateholders' Interest LIBOR Carryover with
respect to such Distribution Date will be distributed to the Noteholders and
Certificateholders in the order of priority described herein as payments of
principal which will have the effect of accelerating the amortization the Notes
and the Certificates.
The rate of payment of principal of the Notes and the Certificates and the
yield on the Notes and the Certificates may also be affected by the rate of
defaults resulting in losses on Liquidated Student Loans, by the severity of
those losses and by the timing of those losses, which may affect the ability of
the Guarantors to make Guarantee Payments with respect thereto. The rate,
severity or timing of defaults or the ability of the Guarantor to make
guarantee payments on the Financed Student Loans cannot be predicted.
Any reinvestment risks resulting from a faster or slower incidence of
prepayment of Financed Student Loans will be borne entirely by the
Securityholders. Such reinvestment risks may include the risk that interest
rates and
S-24
<PAGE>
the relevant spreads above particular interest rate bases are lower at the
time Securityholders receive payments from the Trust than such interest rates
and such spreads would otherwise have been had such prepayments not been made
or had such prepayments been made at a different time. The yield on the Notes
and Certificates may also be reduced by the discharge of any Noteholders'
Interest LIBOR Carryover and Certificateholders' Interest LIBOR Carryover
remaining after distribution of all Available Funds on the respective final
maturity date of the Notes and Certificates.
Holders of Notes or Certificates should consider, in the case of Notes or
Certificates, as the case may be, purchased at a discount, the risk that a
slower than anticipated rate of principal payments on the Financed Student
Loans could result in an actual yield that is less than the anticipated yield
and, in the case of Notes or Certificates, as the case may be, purchased at a
premium, the risk that a faster than anticipated rate of principal payments on
the Financed Student Loans could result in an actual yield that is less than
the anticipated yield.
Certain Differences Between the Class A-1 Notes, the Class A-2 Notes and the
Certificates. Because the Class A-2 Noteholders will receive no payments of
principal until the Class A-1 Notes have been paid in full and the
Certificateholders will receive no payments of principal until the Class A-2
Notes have been paid in full, the Class A-1 Notes and, to a lesser extent, the
Class A-2 Notes bear relatively greater risk than do the Certificates of an
increased rate of principal repayments with respect to the Financed Student
Loans (whether as a result of voluntary prepayments or liquidations due to
default or breach). In addition, the Class A-1 Noteholders generally bear the
risk of principal prepayments as a result of any remaining Pre-Funded Amount
at the end of the Funding Period. On the other hand, Certificateholders, and
to a lesser extent Class A-2 Noteholders, bear a greater risk of loss of
principal than do Class A-1 Noteholders in the event of a shortfall in
Available Funds and amounts on deposit in the Reserve Account because the
Certificates do not receive principal distributions until the Class A-2 Notes
are paid in full and the Class A-2 Notes do not receive principal payments
until the Class A-1 Notes are paid in full.
Basis Risk. Each Note Interest Rate and the Certificate Rate are generally
based on one-month LIBOR and are calculated based on the actual number of days
elapsed in each Interest Period divided by 360. The Seller cannot make any
representation as to what rate one-month LIBOR may be at any time in the
future. Financed Student Loans, however, generally bear interest at an
effective rate (taking into account any Special Allowance Payments) equal to
the average bond equivalent rates of 91-day Treasury bills auctioned for each
quarter (or, in certain circumstances, 52-week Treasury bills) plus margins
specified for such Financed Student Loans under "Federal Family Education Loan
Program" in the Prospectus calculated on the basis of the actual number of
days since the last day through which interest on such Financed Student Loan
was paid in full and the actual number of days in the year. The Class A-1
LIBOR Rate, the Class A-2 LIBOR Rate and the Certificate LIBOR Rate may not
increase or decrease at the same time or at the same rate as the Student Loan
Rate. As a result, if in respect of any Interest Payment Date the Student Loan
Rate has not increased as fast as the respective Note or Certificate Rate, and
consequently there does not exist a positive spread between (a) the Student
Loan Rate and (b) the applicable Note Interest Rate or the Certificate Rate
based on the Class A-1 LIBOR Rate, the Class A-2 LIBOR Rate or the Certificate
LIBOR Rate, as the case may be, the applicable Note Interest Rate or the
Certificate Rate, as applicable, for such Interest Payment Date will be the
Student Loan Rate. See "Description of the Securities--The Notes--
Distributions of Interest" and "--The Certificates--Distributions of Interest"
herein. Any Noteholders' Interest LIBOR Carryover or Certificateholders'
Interest LIBOR Carryover arising as a result of the applicable Note Interest
Rate or the Certificate Rate being determined on the basis of the Student Loan
Rate will be paid on the Distribution Date immediately following such Interest
Payment Date (or, if such Interest Payment Date is a Distribution Date, on
such Distribution Date) or on any succeeding Distribution Date out of the
Reserve Account Excess, if any, for such Distribution Date after making any
required distributions out of such excess in respect of principal payments on
the Notes or Certificates. Payment of such amounts, however, will not be
covered, in the case of the Notes, by subordination of distributions of the
Certificateholders' Distribution Amount in respect of the Certificates
(although distributions of any Certificateholders' Interest LIBOR Carryover
will be subordinated to payment of any Noteholders' Interest LIBOR Carryover).
See "Description of the Transfer and Servicing Agreements--Distributions"
herein .
S-25
<PAGE>
Fees Payable on Certain Financed Student Loans Prior to Distributions on the
Securities. Under the Federal Consolidation Program, the Trust will be
obligated to pay to the Department a monthly rebate fee (the "Monthly Rebate
Fee") at an annualized rate of 1.05% of the outstanding principal balance on
the last day of each month plus accrued interest thereon of each Federal
Consolidation Loan which is a part of the Trust, which rebate will be payable
prior to distributions to the Noteholders or the Certificateholders and which
rebate will reduce the amount of funds which would otherwise be available to
make distributions on the Securities and will reduce the Student Loan Rate.
Limited Nature of Ratings of the Securities. It is a condition to the
issuance and sale of each class of the Notes and of the Certificates that the
Notes be rated in the highest investment rating category by at least two
rating agencies and that the Certificates be rated in the "A" rating category
by at least two rating agencies. A rating is not a recommendation to purchase,
hold or sell Securities, inasmuch as such rating does not comment as to market
price or suitability for a particular investor. The ratings of the Securities
address the likelihood of the ultimate payment of principal of and timely
payment of interest on the Securities pursuant to their terms. However, the
rating agencies do not evaluate, and the ratings of the Securities do not
address, the likelihood of payment of the Noteholders' Interest LIBOR
Carryover or the Certificateholders' Interest LIBOR Carryover. There can be no
assurance that a rating will remain for any given period of time or that a
rating will not be lowered or withdrawn entirely by a rating agency if in its
judgment circumstances in the future so warrant. There can be no assurance as
to whether any additional rating agency will rate the Notes or the
Certificates, or if one does, what rating would be assigned by such other
rating agency. A downgrade or withdrawal of a rating on the Notes or the
Certificates may limit their liquidity or may negatively impact the price a
holder of either Security would receive upon its sale.
Changes in Repayment Terms of Financed Student Loans Pursuant to Incentive
Programs. The Seller currently makes available and may hereafter make
available certain incentive programs to borrowers. Under these programs, the
Seller retains the option to terminate or change the terms of the incentives
with respect to any or all of the borrower's loans, including loans originated
prior to the termination or change which have been or will be assigned to the
Trust. It cannot be predicted with certainty which borrowers will qualify or
decide to participate in these programs.
The effect of these incentive programs may be to reduce the yield on the
Initial Financed Student Loans or on Student Loans which may be added to the
Trust through Additional Fundings. If any such incentive program does reduce
the yield on the affected Financed Student Loan and is not required by the
Act, such program will be applicable to Financed Student Loans in the Trust
only if and to the extent that the Trust receives payment from the Seller in
an amount sufficient to offset such yield reduction. To the extent that the
Master Servicer makes such benefits available to borrowers with Financial
Student Loans, the effect of such benefits may be faster amortization of
principal of the affected Financial Student Loans.
FORMATION OF THE TRUST
THE TRUST
Signet Student Loan Trust 1996-A will be a statutory Delaware business trust
formed under the laws of the State of Delaware pursuant to the Trust Agreement
for the transactions described herein and in the Prospectus and a certificate
of trust filed with the Delaware Secretary of State. The Trust will not engage
in any activity other than (i) acquiring, holding and managing the Financed
Student Loans and the other assets of the Trust and proceeds therefrom, (ii)
issuing the Certificates and the Notes, (iii) making payments thereon, (iv)
purchasing Serial Loans and (v) engaging in other activities that are
necessary, suitable or convenient to accomplish the foregoing or are
incidental thereto or connected therewith.
The Trust will be initially capitalized with equity of $ (excluding
amounts deposited in the Reserve Account by the Seller on the Closing Date)
representing the initial principal balance of the Certificates. Certificates
with an initial principal balance of approximately $ will be held by the
Company. The
S-26
<PAGE>
remaining Certificates will be sold to third-party investors by the
Certificate Underwriters and the Bank that are expected to be unaffiliated
with the Seller, the Company, the Master Servicer, the Guarantors, the Trust
or the Department. The equity of the Trust, together with the proceeds from
the sale of the Notes, will be used by the Eligible Lender Trustee to purchase
on behalf of the Trust the Initial Financed Student Loans from the Seller
pursuant to the Loan Sale Agreement and to fund the deposit of the Pre-Funded
Amount. The Seller will use a portion of the net proceeds it receives from the
sale of the Financed Student Loans to make the Reserve Account Initial
Deposit. Upon the consummation of such transactions, the property of the Trust
will consist of (a) a pool of Student Loans, legal title to which is held by
the Eligible Lender Trustee on behalf of the Trust, (b) all funds collected in
respect thereof on or after the Cutoff Date and (c) all moneys and investments
on deposit in the Collection Account, the Pre-Funding Account and the Reserve
Account. The Notes will be collateralized by the property of the Trust. As of
the Closing Date, the aggregate principal balance of the Notes and the
Certificates will equal approximately % of the Initial Pool Balance. The
Collection Account, the Reserve Account and the Pre-Funding Account will be
maintained in the name of the Indenture Trustee for the benefit of the
Noteholders and the Certificateholders. To facilitate servicing and to
minimize administrative burden and expense, the Master Servicer will be
appointed custodian of the promissory notes representing the Financed Student
Loans by the Eligible Lender Trustee.
The Trust will use funds on deposit in the Pre-Funding Account during the
Funding Period to acquire Serial Loans and purchase capitalized interest on
certain Financed Student Loans, each of which will constitute property of the
Trust. See "Description of the Transfer and Servicing Agreements--Additional
Fundings" herein. In addition, after the Funding Period, Serial Loans and
capitalized interest will be added to the Trust to the extent that the
Eligible Lender Trustee on behalf of the Trust purchases such loans and
capitalized interest from the Seller. Any such conveyance during or after the
Funding Period of such Serial Loans and capitalized interest is conditioned on
compliance with the procedures described in the Loan Sale Agreement. The
Seller expects that the amount of Additional Fundings during the Funding
Period will approximate 100% of the initial Pre-Funded Amount by the last day
of the Collection Period preceding the Distribution Date; however, there
can be no assurance that a sufficient amount of Additional Fundings will be
made by such date. If the Pre-Funded Amount has not been reduced to zero by
the end of the Funding Period, the Noteholders will receive any amounts
remaining in the Pre-Funding Account as a payment of principal in the order of
priority set forth herein. There can be no assurance as to the amount of
Additional Fundings that will occur after the Funding Period. See "Description
of the Transfer and Servicing Agreements--Additional Fundings" herein.
The Trust's principal offices are in , , in care of The First National
Bank of Chicago, as Eligible Lender Trustee, at the address listed below.
CAPITALIZATION OF THE TRUST
The following table illustrates the capitalization of the Trust as of the
Cutoff Date, as if the issuance and sale of the Securities offered hereby had
taken place on such date:
<TABLE>
<S> <C>
Floating Rate Class A-1 Asset Backed Notes.......................... $
Floating Rate Class A-2 Asset Backed Notes..........................
Floating Rate Asset Backed Certificates.............................
---
Total............................................................. $
===
</TABLE>
ELIGIBLE LENDER TRUSTEE
The First National Bank of Chicago is the Eligible Lender Trustee for the
Trust under the Trust Agreement. The First National Bank of Chicago is a
national banking association whose principal offices are located at One First
National Plaza, Suite 0126, Chicago, Illinois 60670 and whose New York offices
are located at First Chicago Trust Company of New York, 14 Wall Street, New
York, New York 10005. The Eligible Lender Trustee will acquire on behalf of
the Trust legal title to all the Financed Student Loans acquired from time to
time pursuant to the Loan Sale Agreement. The Eligible Lender Trustee on
behalf of the Trust will enter into a
S-27
<PAGE>
Guarantee Agreement with each of the Guarantors with respect to such Financed
Student Loans. The Eligible Lender Trustee qualifies as an eligible lender and
owner of all Financed Student Loans for all purposes under the Act and the
Guarantee Agreements. Failure of the Financed Student Loans to be owned by an
eligible lender would result in the loss of any Guarantee Payments from any
Guarantor and any Federal Assistance with respect to such Financed Student
Loans. See "The Student Loan Pools" in the Prospectus. The Eligible Lender
Trustee's liability in connection with the issuance and sale of the Notes and
the Certificates is limited solely to the express obligations of the Eligible
Lender Trustee set forth in the Trust Agreement, the Loan Sale Agreement and
the Master Servicing Agreement. See "Description of the Securities" and
"Description of the Transfer and Servicing Agreements" herein and in the
Prospectus. The Seller and its affiliates may maintain normal commercial
banking relations with the Eligible Lender Trustee.
THE FINANCED STUDENT LOAN POOL
The pool of Financed Student Loans will include the Initial Financed Student
Loans purchased by the Eligible Lender Trustee on behalf of the Trust as of
the Cutoff Date and any Additional Student Loans made or acquired by the
Eligible Lender Trustee on behalf of the Trust after the Closing Date.
The Initial Financed Student Loans were selected from Signet's portfolio of
Student Loans by employing several criteria, including, but limited to, as of
the Cutoff Date, the following: each Initial Financed Student Loan (i) is
guaranteed as to principal and interest by a Guarantor pursuant to a Guarantee
Agreement and the Guarantor is, in turn, reinsured by the Department in
accordance with the FFELP, (ii) contains terms in accordance with those
required by the FFELP, the Guarantor and other applicable requirements, (iii)
is not more than 90 days past due as of the Cutoff Date, (iv) did not have a
borrower who was noted in the records of the Master Servicer as being
currently involved in a bankruptcy proceeding and (v) is not subject to any
obligation by Signet to sell such loan to a third party.
Following the Closing Date, the Eligible Lender Trustee on behalf of the
Trust will be obligated from time to time to purchase from the Seller, subject
to the availability thereof, Serial Loans and capitalized interest on certain
Financed Student Loans owned by the Seller. During the Funding Period, such
purchases will be funded by means of a transfer of amounts on deposit in the
Pre-Funding Account as described herein. Following the end of the Funding
Period, such purchases will be funded by amounts representing distributions of
principal on the outstanding Financed Student Loans which would otherwise have
been part of the Available Funds of the Trust, provided such Serial Loans meet
certain criteria described herein. See "Description of the Transfer and
Servicing Agreements--Additional Fundings" herein.
No selection procedures believed by the Seller to be adverse to the
Securityholders were used or will be used in selecting the Financed Student
Loans. However, except for the criteria described in the preceding paragraphs
and under "Description of the Transfer and Servicing Agreements--Additional
Fundings" herein, there will be no required characteristics of the Serial
Loans. Therefore, following the transfer of Serial Loans to the Eligible
Lender Trustee on behalf of the Trust, the aggregate characteristics of the
entire pool of Financed Student Loans, including the composition of the
Financed Student Loans, the distribution by loan type, the distribution by
interest rate, the distribution by principal balance and the distribution by
remaining term to scheduled maturity described in the following tables, may
vary from those of the Initial Financed Student Loans as of the Cutoff Date.
In addition, the distribution by weighted average interest rate applicable to
the Financed Student Loans on any date following the Cutoff Date may vary from
that set forth in the following tables as a result of variations in the
effective rates of interest applicable to the Financed Student Loans.
Moreover, the information described below with respect to the original term to
maturity and remaining term of maturity of the Initial Financed Student Loans
as of the Cutoff Date may vary from the actual term to maturity of any of the
Financed Student Loans as a result of the granting of deferral and forbearance
periods with respect thereto.
S-28
<PAGE>
Set forth below in the following tables is a description of certain
additional characteristics of the Initial Financed Student Loans as of the
Cutoff Date:
COMPOSITION OF THE INITIAL FINANCED STUDENT LOANS
AS OF THE CUTOFF DATE
<TABLE>
<S> <C>
Aggregate Outstanding Principal Balance(1).................. $415,760,332.40
Number of Borrowers......................................... 52,068
Average Outstanding Principal Balance Per Borrower.......... $ 7,984.95
Number of Loans............................................. 105,965
Average Outstanding Principal Balance Per Loan.............. $ 3,923.56
Weighted Average Remaining Term to Maturity(2).............. 130.52
Weighted Average Annual Borrower Interest Rate(3)........... 8.33%
</TABLE>
- --------
(1) Includes net principal balance due from Obligors, plus accrued interest
thereon estimated to be $5,173,672 as of the Cutoff Date to be capitalized
upon commencement of repayment.
(2) Determined from the Cutoff Date to the stated maturity date of the
applicable Initial Financed Student Loan, assuming repayment commences
promptly upon expiration of the typical Grace period following the
expected graduation date and without giving effect to any Deferral or
Forbearance periods that may be granted in the future. See "The Federal
Family Education Loan Program" in the Prospectus.
(3) Determined using the interest rates applicable to the Initial Financed
Student Loans as of the Cutoff Date, excluding Special Allowance Payments.
The weighted average spread, including Special Allowance Payments, to the
91-day or 52-week T-Bill rate, as applicable, was 3.09% as of the Cutoff
Date and would have been 3.13% if all of the Initial Financed Student
Loans were in repayment as of the Cutoff Date. However, because all the
Initial Financed Student Loans effectively bear interest at a variable
rate per annum, there can be no assurance that the foregoing percentage
will remain applicable to the Initial Financed Student Loans at any time
after the Cutoff Date. See "The Federal Family Education Loan Program" in
the Prospectus.
DISTRIBUTION OF THE INITIAL FINANCED STUDENT LOANS
BY LOAN TYPE AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
AGGREGATE PERCENT OF POOL
NUMBER OF OUTSTANDING BY OUTSTANDING
LOAN TYPE LOANS PRINCIPAL BALANCE(1) PRINCIPAL BALANCE
--------- --------- -------------------- -----------------
<S> <C> <C> <C>
Consolidation Loans....... 6,032 $104,836,996.17 25.21%
Subsidized Stafford
Loans.................... 72,840 210,706,524.65 50.68
Unsubsidized Stafford
Loans.................... 14,248 50,393,864.77 12.12
SLS Loans................. 6,210 23,883,041.01 5.74
PLUS Loans................ 6,635 25,939,905.80 6.24
------- --------------- ------
Total................... 105,965 $415,760,332.40 100.00%
======= =============== ======
</TABLE>
- --------
(1) Includes net principal balance due from Obligors, plus accrued interest
thereon estimated to be $5,173,672 as of the Cutoff Date to be capitalized
upon commencement of repayment.
S-29
<PAGE>
DISTRIBUTION OF THE INITIAL FINANCED STUDENT LOANS
BY INTEREST RATES AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
AGGREGATE PERCENT OF POOL
RANGE OF INTEREST NUMBER OUTSTANDING BY OUTSTANDING
RATES(1) OF LOANS PRINCIPAL BALANCE(2) PRINCIPAL BALANCE
----------------- -------- -------------------- -----------------
<S> <C> <C> <C>
Less than 7.50%........... 661 $ 4,291,650.28 1.03%
7.50% to 7.99%............ 5,657 23,752,652.86 5.71
8.00% to 8.49%............ 82,515 264,086,498.37 63.52
8.50% to 8.99%............ 12,910 51,374,246.78 12.36
9.00% to 9.49%............ 4,137 70,954,742.33 17.07
Greater than 9.49%........ 85 1,300,541.78 0.31
------- --------------- ------
Total................... 105,965 $415,760,332.40 100.00%
======= =============== ======
</TABLE>
- --------
(1) Determined using the interest rates applicable to the Initial Financed
Student Loans as of the Cutoff Date. However, because all the Initial
Financed Student Loans effectively bear interest as a variable rate per
annum, there can be no assurance that the foregoing information will
remain applicable to the Initial Financed Student Loans at any time after
the Cutoff Date. See "The Federal Family Education Loan Program" in the
Prospectus.
(2) Includes net principal balance due from Obligors, plus accrued interest
thereon estimated to be $5,173,672 as of the Cutoff Date to be capitalized
upon commencement of repayment.
DISTRIBUTION OF THE INITIAL FINANCED STUDENT LOANS
BY OUTSTANDING PRINCIPAL BALANCE AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
AGGREGATE PERCENT OF POOL
RANGE OF OUTSTANDING NUMBER OUTSTANDING BY OUTSTANDING
PRINCIPAL BALANCES OF LOANS PRINCIPAL BALANCE(1) PRINCIPAL BALANCE
-------------------- -------- -------------------- -----------------
<S> <C> <C> <C>
Less than $1,000.00....... 11,092 $ 7,300,582.36 1.76%
$ 1,000.00 to $ 1,999.99.. 21,813 32,538,529.22 7.83
$ 2,000.00 to $ 2,999.99.. 27,779 69,706,633.92 16.77
$ 3,000.00 to $ 3,999.99.. 13,467 46,384,080.86 11.16
$ 4,000.00 to $ 4,999.99.. 7,859 34,998,324.43 8.42
$ 5,000.00 to $ 5,999.99.. 10,040 54,620,259.85 13.14
$ 6,000.00 to $ 6,999.99.. 2,622 16,919,659.13 4.07
$ 7,000.00 to $ 7,999.99.. 2,644 19,774,524.62 4.76
$ 8,000.00 to $ 8,999.99.. 2,518 21,276,264.95 5.12
$ 9,000.00 to $ 9,999.99.. 747 7,063,096.23 1.70
$10,000.00 to $10,999.99.. 792 8,338,521.46 2.01
$11,000.00 to $11,999.99.. 723 8,314,758.87 2.00
$12,000.00 to $12,999.99.. 529 6,604,971.88 1.59
$13,000.00 to $13,999.99.. 336 4,529,575.79 1.09
$14,000.00 to $14,999.99.. 300 4,349,154.75 1.05
$15,000.00 and above...... 2,704 73,041,394.08 17.57
------- --------------- ------
Total..................... 105,965 $415,760,332.40 100.00%
======= =============== ======
</TABLE>
- --------
(1) Includes net principal balance due from Obligors, plus accrued interest
thereon estimated to be $5,173,672 as of the Cutoff Date to be capitalized
upon commencement of repayment.
S-30
<PAGE>
DISTRIBUTION OF THE INITIAL FINANCED
STUDENT LOANS BY SCHOOL TYPE
<TABLE>
<CAPTION>
AGGREGATE
OUTSTANDING PERCENT OF POOL
NUMBER PRINCIPAL BY OUTSTANDING
SCHOOL TYPE OF LOANS BALANCE(1) PRINCIPAL BALANCE
----------- -------- --------------- -----------------
<S> <C> <C> <C>
2-year institutions............... 7,320 $ 19,248,548.97 4.63%
4-year institutions............... 77,628 252,381,238.82 60.70
Consolidation..................... 6,032 104,836,996.17 25.22
Graduate.......................... 1,461 7,422,225.94 1.79
Proprietary/Vocational............ 10,638 20,830,141.84 5.01
Not identified.................... 2,886 11,041,180.66 2.66
------- --------------- ------
Total........................... 105,965 $415,760,332.40 100.00%
======= =============== ======
</TABLE>
- --------
(1) Includes net principal balance due from Obligors, plus accrued interest
thereon estimated to be $5,173,672 as of the Cutoff Date to be capitalized
upon commencement of repayment.
DISTRIBUTION OF THE INITIAL FINANCED STUDENT LOANS BY REMAINING TERM TO
SCHEDULED MATURITY AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
AGGREGATE PERCENT OF POOL
NUMBER OF MONTHS REMAINING NUMBER OF OUTSTANDING BY OUTSTANDING
TO SCHEDULED MATURITY(1) LOANS PRINCIPAL BALANCE(2) PRINCIPAL BALANCE
-------------------------- --------- -------------------- -----------------
<S> <C> <C> <C>
Less than 13................ 599 $ 328,752.50 0.08%
13 to 24.................... 3,024 2,576,057.94 0.62
25 to 36.................... 3,814 4,824,977.58 1.16
37 to 48.................... 3,663 5,954,005.03 1.43
49 to 60.................... 3,618 7,115,010.34 1.71
61 to 72.................... 5,627 13,390,855.10 3.22
73 to 84.................... 6,697 16,348,230.36 3.93
85 to 96.................... 8,463 23,563,354.98 5.67
97 to 108................... 11,963 41,646,920.47 10.02
109 to 120.................. 25,390 93,290,362.65 22.44
121 to 132.................. 22,913 92,894,139.66 22.34
133 to 144.................. 3,612 15,660,999.18 3.77
145 and greater............. 6,582 98,166,666.61 23.61
------- -------------- ------
Total..................... 105,965 415,760,332.40 100.00%
======= ============== ======
</TABLE>
- --------
(1) Determined from the Cutoff Date to the stated maturity date of the
applicable Initial Financed Student Loan, assuming repayment commences
promptly upon expiration of the typical Grace period following the
expected graduation date and without giving effect to any Deferral or
Forbearance periods that may be granted in the future. See "The Federal
Family Education Loan Program" in the Prospectus.
(2) Includes net principal balance due from Obligors, plus accrued interest
thereon estimated to be $5,173,672 as of the Cutoff Date to be capitalized
upon commencement of repayment.
S-31
<PAGE>
DISTRIBUTION OF THE INITIAL FINANCED STUDENT LOANS
BY LOAN PAYMENT STATUS AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
AGGREGATE PERCENT OF POOL
NUMBER OF OUTSTANDING BY OUTSTANDING
LOAN PAYMENT STATUS(1) LOANS PRINCIPAL BALANCE(2) PRINCIPAL BALANCE
---------------------- --------- -------------------- -----------------
<S> <C> <C> <C>
In-School................. 3,303 $ 11,128,850.01 2.68%
Grace..................... 16,340 62,803,857.55 15.11
Deferral.................. 12,229 45,140,034.93 10.86
Forbearance............... 8,026 36,767,887.26 8.84
Repayment (3).............
First year in
repayment.............. 31,916 124,846,026.97 30.03
Second year in
repayment.............. 14,861 61,873,395.76 14.88
Third year in
repayment.............. 10,179 48,927,351.80 11.77
More than 3 years in
repayment.............. 9,111 24,272,928.12 5.84
------- --------------- ------
Total..................... 105,965 $415,760,332.40 100.00%
======= =============== ======
</TABLE>
- --------
(1) Refers to the status of the borrower of each Initial Financed Student Loan
as of the Cutoff Date; such borrower may still be attending school ("In-
School"), may be in a grace period prior to repayment commencing
("Grace"), may be repaying such loan ("Repayment") or may have temporarily
ceased repaying such loan through a deferral ("Deferral") or a forbearance
("Forbearance") period. See "The Federal Family Education Loan Program" in
the Prospectus.
(2) Includes net principal balance due from Obligors, plus accrued interest
thereon estimated to be $5,173,672 as of the Cutoff Date to be capitalized
upon commencement of repayment.
(3) The weighted average number of months in repayment for all Initial
Financed Student Loans currently in repayment is 15.99, calculated as the
term to maturity at the commencement of repayment less the number of
months remaining to scheduled maturity as of the Cutoff Date.
SCHEDULED WEIGHTED AVERAGE MONTHS IN STATUS OF THE INITIAL FINANCED STUDENT
LOANS BY CURRENT LOAN PAYMENT STATUS AS OF THE CUTOFF DATE(1)
<TABLE>
<CAPTION>
SCHEDULED MONTHS IN STATUS
CURRENT BORROWER ----------------------------------------------
PAYMENT STATUS IN-SCHOOL GRACE DEFERRAL FORBEARANCE REPAYMENT
---------------- --------- ----- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
In-School................... 15.59 7.01 0.00 0.00 120.00
Grace....................... 0.00 2.06 0.00 0.00 116.76
Deferral.................... 0.00 0.00 14.21 0.00 123.88
Forbearance................. 0.00 0.00 0.00 4.61 145.47
Repayment................... 0.00 0.00 0.00 0.00 129.30
</TABLE>
- --------
(1) Determined without giving effect to any deferral or forbearance periods
that may be granted in the future.
S-32
<PAGE>
GEOGRAPHIC DISTRIBUTION OF THE
INITIAL FINANCED STUDENT LOANS AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
AGGREGATE PERCENT OF POOL
NUMBER OF OUTSTANDING BY OUTSTANDING
STATE(1) LOANS PRINCIPAL BALANCE(2) PRINCIPAL BALANCE
-------- --------- -------------------- -----------------
<S> <C> <C> <C>
Alabama..................... 1,886 5,558,570.29 1.34%
Alaska...................... 95 382,720.80 0.09
Arizona..................... 334 2,347,987.69 0.56
Arkansas.................... 184 1,068,585.74 0.26
California.................. 1,660 10,216,142.96 2.46
Colorado.................... 452 2,621,288.89 0.63
Connecticut................. 474 2,342,369.64 0.56
Delaware.................... 365 1,384,380.95 0.33
District of Columbia........ 2,048 8,997,096.98 2.16
Florida..................... 3,183 13,974,155.90 3.36
Georgia..................... 1,674 7,594,914.87 1.83
Hawaii...................... 89 427,117.42 0.10
Idaho....................... 94 968,326.40 0.23
Illinois.................... 936 4,996,411.53 1.20
Indiana..................... 557 2,748,383.00 0.66
Iowa........................ 121 823,656.92 0.20
Kansas...................... 216 1,217,920.85 0.29
Kentucky.................... 997 4,101,562.88 0.99
Louisiana................... 399 2,368,745.75 0.57
Maine....................... 93 604,049.14 0.15
Maryland.................... 31,360 110,773,875.10 26.64
Massachusetts............... 824 4,253,436.86 1.02
Michigan.................... 745 4,190,013.01 1.01
Minnesota................... 257 2,049,285.55 0.49
Mississippi................. 261 1,310,779.02 0.32
Missouri.................... 336 2,447,091.33 0.59
Montana..................... 58 439,457.77 0.11
Nebraska.................... 93 635,711.04 0.15
Nevada...................... 78 426,212.13 0.10
New Hampshire............... 130 714,799.97 0.17
New Jersey.................. 1,567 7,327,152.64 1.76
New Mexico.................. 126 824,756.53 0.20
New York.................... 2,381 12,327,516.57 2.97
North Carolina.............. 8,817 28,673,011.26 6.90
North Dakota................ 31 401,673.71 0.10
Ohio........................ 1,463 7,123,404.29 1.71
Oklahoma.................... 196 1,246,693.58 0.30
Oregon...................... 227 1,448,194.68 0.35
Pennsylvania................ 2,035 10,143,876.63 2.44
Puerto Rico................. 62 297,831.97 0.07
Rhode Island................ 116 660,638.00 0.16
South Carolina.............. 961 4,065,266.22 0.98
South Dakota................ 36 279,687.48 0.07
Tennessee................... 967 4,863,609.52 1.17
Texas....................... 3,263 15,605,547.54 3.75
Utah........................ 92 832,196.37 0.20
Vermont..................... 79 395,767.10 0.10
Virgin Islands.............. 77 302,363.97 0.07
Virginia.................... 31,889 108,756,871.79 26.16
Washington.................. 377 2,603,675.56 0.63
West Virginia............... 595 2,030,490.92 0.49
Wisconsin................... 256 2,029,513.33 0.49
Wyoming..................... 31 286,570.90 0.07
Other....................... 322 1,248,971.46 0.30
------- -------------- ------
Total..................... 105,965 415,760,332.40 100.00%
======= ============== ======
</TABLE>
S-33
<PAGE>
- --------
(1) Based on the permanent billing addresses of the borrowers of the Initial
Financed Student Loans shown on the Master Servicer's records as of the
Cutoff Date.
(2) Includes net principal balance due from Obligors, plus accrued interest
thereon estimated to be $5,173,672 as of the Cutoff Date to be capitalized
upon commencement of repayment.
DISTRIBUTION OF INITIAL FINANCED STUDENT
LOANS BY DATE OF DISBURSEMENT
<TABLE>
<CAPTION>
AGGREGATE PERCENT OF POOL BY
NUMBER OUTSTANDING OUTSTANDING
DISBURSEMENT DATE(1) OF LOANS PRINCIPAL BALANCE(2) PRINCIPAL BALANCE
-------------------- -------- -------------------- ------------------
<S> <C> <C> <C>
October 1, 1993 and
thereafter............... 54,078 $266,692,331.38 64.15%
Pre-October 1, 1993....... 51,887 149,068,001.02 35.85
------- --------------- ------
Total................... 105,965 $415,760,332.40 100.00%
======= =============== ======
</TABLE>
- --------
(1) Student Loans disbursed prior to October 1, 1993 are 100% guaranteed by
the applicable Guarantor, and reinsured against default by the Department
up to a maximum of 100% of the Guarantee Payments. Student Loans disbursed
on or after October 1, 1993 are 98% guaranteed by the applicable
Guarantor, and reinsured against default by the Department up to a maximum
of 98% of the Guarantee Payments.
(2) Includes net principal balance due from Obligors, plus accrued interest
thereon estimated to be $5,173,672 as of the Cutoff Date to be capitalized
upon commencement of repayment.
Each of the Financed Student Loans provides or will provide for the
amortization of the outstanding principal balance of such Financed Student
Loan over a series of regular payments. Except as set forth below, each
regular payment consists of an installment of interest which is calculated on
the basis of the outstanding principal balance of such Financed Student Loan
multiplied by the applicable interest rate and further multiplied by the
period elapsed (as a fraction of a calendar year) since the preceding payment
of interest was made. As payments are received in respect of such Financed
Student Loan, the amount received is applied first to interest accrued to the
date of payment and the balance is applied to reduce the unpaid principal
balance. Accordingly, if a borrower pays a regular installment before its
scheduled due date, the portion of the payment allocable to interest for the
period since the preceding payment was made will be less than it would have
been had the payment been made as scheduled, and the portion of the payment
applied to reduce the unpaid principal balance will be correspondingly
greater. Conversely, if a borrower pays a monthly installment after its
scheduled due date, the portion of the payment allocable to interest for the
period since the preceding payment was made will be greater than it would have
been had the payment been made as scheduled, and the portion of the payment
applied to reduce the unpaid principal balance will be correspondingly less.
In either case, subject to any applicable Deferral Periods or Forbearance
Periods, and except as set forth below, the borrower pays a regular
installment until the final scheduled payment date, at which time the amount
of the final installment is increased or decreased as necessary to repay the
then outstanding principal balance of such Financed Student Loan.
The Seller makes available to certain of its borrowers with Student Loan
certain payment terms which may result in the lengthening of the remaining
terms of the Student Loans. For example, not all of the loans owned by the
Seller provide for level payments throughout the repayment term of the loans.
Certain of the loans provide for a "graduated phase in" of the amortization of
principal with a greater portion of principal amortization being required in
the latter stages than would be the case if amortization were on a level
payment basis. The Seller also offers an income-sensitive repayment plan,
pursuant to which repayments are based on the borrower's income. Under that
plan, ultimate repayment may be delayed up to five years. Borrowers under the
Financed Student Loans will continue to be eligible for such graduated payment
and income-sensitive repayment plans.
GUARANTEE OF FINANCED STUDENT LOANS
By the Closing Date, the Eligible Lender Trustee will have entered into a
Guarantee Agreement with each of the Guarantors pursuant to which each of the
Guarantors has agreed to serve as Guarantor for certain of the
S-34
<PAGE>
Financed Student Loans. The following table provides information with respect
to the portion of the Initial Financed Student Loans guaranteed by each
Guarantor:
DISTRIBUTION OF INITIAL FINANCED STUDENT LOANS BY GUARANTEE AGENCY AS OF THE
CUTOFF DATE
<TABLE>
<CAPTION>
AGGREGATE PERCENT OF
OUTSTANDING POOL BY
PRINCIPAL OUTSTANDING
NUMBER OF BALANCE OF PRINCIPAL
LOANS LOANS BALANCE
NAME OF GUARANTEE AGENCY GUARANTEED GUARANTEED(1) GUARANTEED
------------------------ ---------- --------------- -----------
<S> <C> <C> <C>
Educational Credit Management
Corporation(2)..................... 32,268 $ 95,208,799.75 22.90%
Texas Guaranteed Student Loan
Corporation........................ 2,686 21,512,866.34 5.17
United Student Aid Funds............ 71,011 299,038,666.31 71.93
------- --------------- ------
Total............................. 105,965 $415,760,332.40 100.00%
======= =============== ======
</TABLE>
- --------
(1) Includes net principal balance due from Obligors, plus accrued interest
thereon estimated to be $5,173,672 as of the Cutoff Date to be capitalized
upon commencement of repayment.
(2) The Financed Student Loans guaranteed by ECMC were originally guaranteed
by the Virginia State Education Assistance Authority ("SEAA") until June
30, 1996. After that date, the Department designated ECMC as guarantor to
assume SEAA's guarantee obligations and to provide future guarantees of
student loans in Virginia. The historical information presented herein is
for SEAA.
Pursuant to its Guarantee Agreement, each of the Guarantors guarantees
payment of 100% of the principal (including any interest capitalized from time
to time) and accrued interest for each Financed Federal Student Loan
guaranteed by it as to which any one of the following events has occurred:
(a) failure by the borrower thereof to make monthly principal or interest
payments on such Financed Student Loan when due, provided such failure
continues for a statutorily determined period of time of at least 180
days (except that such guarantee against such failures will be 98% of
principal and at least 98% of accrued interest for loans first
disbursed on or after October 1, 1993);
(b) any filing by or against the borrower thereof of a petition in
bankruptcy pursuant to any chapter of the Federal bankruptcy code, as
amended;
(c) the death of the borrower thereof; or
(d) the total and permanent disability of the borrower thereof to work and
earn money or attend school, as certified by a qualified physician.
When these conditions are satisfied, the Act requires the Guarantor
generally to pay the claim within 90 days of its submission by the lender. The
obligations of each Guarantor pursuant to its Guarantee Agreement are
obligations solely of such Guarantor, and are not supported by the full faith
and credit of the federal or any state government. However, the Act provides
that if the Secretary of Education (the "Secretary") determines that a Federal
Guarantor is unable to meet its insurance obligations, the Secretary shall
assume responsibility for all functions of the Guarantor under the loan
insurance program of such Guarantor. The Secretary is authorized, among other
things, to take those actions necessary to ensure the continued availability
of Federal Student Loans to residents of the state or states in which the
Guarantor did business, the full honoring of all guarantees issued by a
Guarantor prior to the assumption by the Secretary of the functions of such
Guarantor, and the proper servicing of Federal Student Loans guaranteed by the
Guarantor prior to the Secretary's assumption of the functions of such
Guarantor. Pursuant to the Higher Education Amendments of 1992, under Section
432(o) of the Act if the Department has determined that a Guarantor is unable
to meet its insurance obligations, the loan holder may submit claims directly
to the Department and the Department is required to pay the full Guarantee
Payment due with respect thereto in accordance with guarantee claim processing
standards no more stringent than those of the Guarantor. However, the
Department's obligation to pay guarantee claims directly in this
S-35
<PAGE>
fashion is contingent upon the Department making the determination referred to
above. There can be no assurance that the Department would ever make such a
determination with respect to a Guarantor or, if such a determination was
made, whether such determination or the ultimate payment of such guarantee
claims would be made in a timely manner. For a further discussion of the
Secretary's authority in the event a Guarantor is unable to meet its insurance
obligations, see "Federal Family Education Loan Program--Federal Guarantors"
and "--Federal Insurance and Reinsurance of Federal Guarantors" in the
Prospectus.
Each Guarantor's guarantee obligations with respect to any Financed Student
Loan guaranteed by it are conditioned upon the satisfaction of all the
conditions set forth in the Guarantee Agreement. These conditions typically
include, but are not limited to, the following: (i) the origination and
servicing of such Financed Student Loan being performed in accordance with the
Act and other applicable requirements, (ii) the timely payment to the
Guarantor of the guarantee fee payable with respect to such Financed Student
Loan, (iii) the timely submission to the Guarantor of all required pre-claim
delinquency status notifications and of the claim with respect to such
Financed Student Loan and (iv) the transfer and endorsement of the promissory
note evidencing such Financed Student Loan to the Guarantor upon and in
connection with making a claim to receive Guarantee Payments thereon. Failure
to comply with any of the applicable conditions, including the foregoing, may
result in the refusal of the Guarantor to honor its Guarantee Agreement with
respect to such Financed Student Loan, in the denial of guarantee coverage
with respect to certain accrued interest amounts with respect thereto or in
the loss of certain Interest Subsidy Payments and Special Allowance Payments
with respect thereto. Under the Master Servicing Agreement and the Loan Sale
Agreement, such failure to comply would constitute a breach of the Master
Servicer's covenants or the Seller's representations and warranties, as the
case may be, and would create an obligation of the Master Servicer or the
Seller, as the case may be, to purchase or repurchase such Financed Student
Loan and to reimburse the Trust for such non-guaranteed interest amounts or
such lost Interest Subsidy Payments and Special Allowance Payments with
respect thereto or, in the case of a breach by the Seller, to substitute other
loans for such loan. See "Description of the Transfer and Servicing
Agreements--Sale of Financed Student Loans; Representations and Warranties"
and "--Servicer Covenants" in the Prospectus .
Set forth below is certain current and historical information with respect
to each Guarantor in its capacity as a Guarantor of all education loans
guaranteed by it:
Guarantee Volume. The following table sets forth the approximate aggregate
principal amount of federally reinsured education loans (including loans under
the Parent Loans to Undergraduate Students (PLUS) program but excluding
Federal Consolidation Loans) that have first become guaranteed by each of the
Guarantors and by all guarantors in each of the last five federal fiscal years
for which information is available:*
STAFFORD, SLS AND PLUS LOANS GUARANTEED
(DOLLARS IN MILLIONS)
FEDERAL FISCAL YEAR
<TABLE>
<CAPTION>
GUARANTEE AGENCY 1989 1990 1991 1992 1993
---------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
TGSLC...................... $ 830.7 $ 703.5 $ 706.4 $ 699.7 $ 813.9
USAF....................... 1,594.0 1,939.4 2,546.0 2,864.3 3,493.9
SEAA**..................... 176.1 260.6 273.1 263.2 332.9
All Guarantee Agencies..... 12,464.2 12,290.8 13,500.0 14,749.2 17,863.1
</TABLE>
- --------
* The information set forth in the table above has been obtained from the
Department's Guaranteed Student Loan Programs Data Books (each, a "DOE
Data Book") for Fiscal Years 1989, 1990, 1991, 1992 and 1993 (with respect
to fiscal years 1989 through 1993) has not been audited, and is not
guaranteed as to accuracy or completeness, and is not to be construed as a
representation, by the Seller, the Underwriters or any Guarantor. The
Department of Education ceased publication of the DOE Data Book after
Fiscal Year 1993.
S-36
<PAGE>
** The Financed Student Loans guaranteed by ECMC were originally guaranteed by
SEAA until June 30, 1996. After that date, the Department designated ECMC
as guarantor to assume SEAA's guarantee obligations and to provide future
guarantees of student loans in Virginia. The historical information
presented herein is for SEAA.
Reserve Ratio. Each Guarantor's reserve ratio is determined by dividing its
cumulative cash reserves by the original principal amount of the outstanding
loans it has agreed to guarantee. The term "cumulative cash reserves" refers
to cash reserves plus (i) sources of funds (including insurance premiums,
state appropriations, federal advances, federal reinsurance payments,
administrative cost allowances, collections on claims paid and investment
earnings) minus (ii) uses of funds (including claims paid to lenders,
operating expenses, lender fees, the Department's share of collections on
claims paid, returned advances and reinsurance fees). The "original principal
amount of outstanding loans" consists of the original principal amount of
loans guaranteed by such Guarantor minus (i) the original principal amount of
loans canceled, claims paid, loans paid in full and loan guarantees
transferred from such Guarantor to other guarantors plus (ii) the original
principal amount of loans guaranteed to such Guarantor from other guarantors.
The following table sets forth each Guarantor's reserve ratios and the
national average reserve ratio for all guarantors for the last five federal
fiscal years for which information is available:*
RESERVE RATIO
FEDERAL FISCAL YEAR
<TABLE>
<CAPTION>
GUARANTEE AGENCY 1989 1990 1991 1992 1993
---------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
TGSLC.......................................... 0.7% 0.6% 0.6% 1.0% 1.1%
USAF........................................... 0.5 0.2 0.1 1.0 1.3
SEAA**......................................... 2.4 1.6 0.9 0.9 0.8
National Average............................... 0.7 1.0 0.8 1.6 1.7
</TABLE>
- --------
* The information set forth in the table above has been obtained from the
Department of Education's Guaranteed Student Loan Programs Data Books
(each, a "DOE Data Book") for Fiscal Years 1989, 1990, 1991, 1992 and 1993
(with respect to fiscal years 1989 through 1993) has not been audited, and
is not guaranteed as to accuracy or completeness, and is not to be
construed as a representation, by the Seller, the Underwriters or any
Guarantor. The Department ceased publication of the DOE Data Book after
Fiscal Year 1993.
** The Financed Student Loans guaranteed by ECMC were originally guaranteed by
SEAA until June 30, 1996. After that date, the Department designated ECMC
as guarantor to assume SEAA's guarantee obligations and to provide future
guarantees of student loans in Virginia. The historical information
presented herein is for SEAA.
Recovery Rates. A Guarantor's recovery rate, which provides a measure of the
effectiveness of the collection efforts against defaulting borrowers after the
guarantee claim has been satisfied, is determined by dividing the amount
recovered from borrowers by such Guarantor by the aggregate amount of default
claims paid by such Guarantor during the applicable federal fiscal year with
respect to borrowers. The table below sets forth the recovery rates for each
Guarantor for the last five federal fiscal years shown:*
RECOVERY RATIO
FEDERAL FISCAL YEAR
<TABLE>
<CAPTION>
GUARANTEE AGENCY 1989 1990 1991 1992 1993
---------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
TGSLC...................................... 16.4% 15.6% 18.2% 28.0% 70.9%
USAF....................................... 26.0 23.2 21.2 30.7 34.0
SEAA**..................................... 60.9 76.1 28.0 38.9 46.0
National Average........................... 33.0 31.7 31.1 48.0 35.1
</TABLE>
S-37
<PAGE>
- --------
* The information set forth in the table above has been obtained from the DOE
Data Book for Fiscal Years 1989, 1990, 1991, 1992 and 1993 (with respect to
fiscal years 1989 through 1993) has not been audited, and is not guaranteed
as to accuracy or completeness, and is not to be construed as a
representation, by the Seller, the Underwriters or any Guarantor. The
Department ceased publication of the DOE Data Book after Fiscal Year 1993.
** The Financed Student Loans guaranteed by ECMC were originally guaranteed by
SEAA until June 30, 1996. After that date, the Department designated ECMC
as guarantor to assume SEAA's guarantee obligations and to provide future
guarantees of student loans in Virginia. The historical information
presented herein is for SEAA.
Claims Rate. For at least one of the five federal fiscal years 1991 through
1995, each Guarantor experienced a claims rate in excess of 5%. For each
federal fiscal year that such Guarantor experienced a claims rate in excess of
5%, the claims of such Guarantor were not fully reimbursed by the Department.
See "Federal Family Education Loan Program--Federal Insurance and Reinsurance
of Federal Guarantors" in the Prospectus. No assurance can be made that any of
the Guarantors will continue to receive full reimbursement for reinsurance
claims (or the full 98% maximum reimbursement for loans first disbursed on or
after October 1, 1993). The following table sets forth the claims rate of each
Guarantor and the national average for all federal guarantors for each of the
last five federal fiscal years shown:*
CLAIMS RATE
FEDERAL FISCAL YEAR
<TABLE>
<CAPTION>
GUARANTEE AGENCY 1991 1992 1993 1994 1995
---------------- ----- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
TGSLC..................................... 10.52% 8.85% 4.99% 5.21% 4.97%
USAF...................................... 8.41 4.99 6.89 4.99 4.69
SEAA**.................................... 5.16 6.25 4.53 3.71 2.18
National Average.......................... 4.51 4.15 3.83 *** ***
</TABLE>
- --------
* The information set forth in the table above with respect to the individual
guarantors has been obtained from the guarantors and the National Average
information has been obtained from the DOE Data Book for Fiscal Years 1991,
1992 and 1993 (with respect to fiscal years 1991 through 1993) has not been
audited, and is not guaranteed as to accuracy or completeness, and is not
to be construed as a representation, by the Seller or the Underwriters. The
Department ceased publication of the DOE Data Book after Fiscal Year 1993.
** The Financed Student Loans guaranteed by ECMC were originally guaranteed by
SEAA until June 30, 1996. After that date, the Department designated ECMC
as guarantor to assume SEAA's guarantee obligations and to provide future
guarantees of student loans in Virginia. The historical information
presented herein is for SEAA.
*** Not Available
Each Guarantor has agreed that it will provide a copy of its most recent
financial statements to Securityholders, upon receipt of a written request,
directed: if to TGSLC, Texas Guaranteed Student Loan Corporation, P.O. Box
201725, Austin, TX 78720; if to USAF, United Student Aid Funds, Inc., P.O. Box
6180, Indianapolis, IN 46206; if to ECMC, Educational Credit Management
Corporation, 101 East 5th Street, Suite 2400, St. Paul, MN 55101.
SUBSERVICING
The Master Servicer may from time to time employ subservicers with respect
to all or any portion of the Financed Student Loans; provided, however, that
no such subservicer shall be engaged unless the Master Servicer shall have
received prior written notice from each of the rating agencies that the
engagement of such subservicer shall not cause such rating agency to lower its
then-current rating on any of the Securities. Notwithstanding the use of any
subservicer, the Master Servicer shall remain responsible for the servicing of
the Financed Student Loans under the Master Servicing Agreement as if it alone
were servicing such loans. See "The Seller, the Master Servicer and the
Subservicers" in the Prospectus.
S-38
<PAGE>
DESCRIPTION OF THE SECURITIES
GENERAL
The Notes will be issued pursuant to the terms of the Indenture and the
Certificates will be issued pursuant to the terms of the Trust Agreement, in
each case substantially in the form filed as an exhibit to the Registration
Statement. The following summary describes certain terms of the Notes, the
Certificates, the Indenture and the Trust Agreement. The summary does not
purport to be complete and is qualified in its entirety by reference to the
provisions of the Notes, the Certificates, the Indenture and the Trust
Agreement. The following summary supplements and, to the extent inconsistent
therewith, replaces the description of the general terms and provisions of the
Notes, the Certificates, the Indenture and the Trust Agreement set forth in
the Prospectus, to which description reference is hereby made.
THE NOTES
Distributions of Interest. Interest will accrue on the principal balance of
the Class A-1 Notes and the Class A-2 Notes at a rate per annum (calculated as
provided below) equal to the Class A-1 Rate and the Class A-2 Rate,
respectively. Interest will accrue from and including the Closing Date or from
the most recent Interest Payment Date on which interest has been paid to but
excluding the current Interest Payment Date (each an "Interest Period") and
will be payable to the Noteholders monthly on each Interest Payment Date.
Interest accrued as of any Interest Payment Date but not paid on such Interest
Payment Date will be due on the next Interest Payment Date together with an
amount equal to interest on such amount at the applicable rate per annum.
Interest payments on the Notes for any Interest Payment Date will generally be
funded from (i) in the case of each Interest Payment Date that is not a
Distribution Date, Monthly Available Funds and (ii) in the case of each
Interest Payment Date that is a Distribution Date, Available Funds, in each
case on deposit in the Collection Account and from amounts on deposit in the
Reserve Account remaining after the distribution of the Servicing Fee and the
Administration Fee for such Interest Payment Date. If such sources are
insufficient to pay the Noteholders' Interest Distribution Amount for such
Interest Payment Date, such shortfall will be allocated pro rata to the Class
A-1 Notes and the Class A-2 Notes (based upon the the ratio of the portion of
the Noteholders' Interest Distribution Amount accrued with respect to each
such Class to the Noteholders' Interest Distribution Amount). See "Description
of the Transfer and Servicing Agreements--Distributions" and "--Credit
Enhancement" herein.
The "Class A-1 Rate" for each Interest Period will be equal to the lesser of
(a) the Class A-1 LIBOR Rate for such Interest Period and (b) the Student Loan
Rate for such Interest Period. The "Class A-2 Rate" for each Interest Period
will be equal to the lesser of (a) the Class A-2 LIBOR Rate for such Interest
Period and (b) the Student Loan Rate for such Interest Period.
The "Class A-1 LIBOR Rate" shall be equal to one-month LIBOR for such
Interest Period (determined as described herein) plus %; provided, however,
that with respect to the initial Interest Period the Class A-1 LIBOR Rate
shall equal %.
The "Class A-2 LIBOR Rate" shall be equal to one-month LIBOR for such
Interest Period (determined as described herein) plus %; provided, however,
that with respect to the initial Interest Period the Class A-2 LIBOR Rate
shall equal %.
The "Student Loan Rate" for any Interest Period will equal the product of
(a) the quotient obtained by dividing (i) 360 by (ii) the actual number of
days elapsed in such Interest Period and (b) the percentage equivalent of a
fraction, (i) the numerator of which is equal to Expected Interest Collections
for such Interest Period less the Servicing Fees and the Administration Fee
with respect to such Interest Period and (ii) the denominator of which is the
outstanding principal balance of the Securities as of the first day of such
Interest Period.
"Expected Interest Collections" means, with respect to any Interest Period,
the sum of (i) the amount of interest accrued, net of Monthly Rebate Fees and
other amounts required by the Act to be paid to the Department
S-39
<PAGE>
or to be repaid to borrowers, with respect to the Financed Student Loans for
the related Student Loan Rate Accrual Period (whether or not such interest is
actually paid), (ii) all Interest Subsidy Payments and Special Allowance
Payments estimated to have accrued for such Student Loan Rate Accrual Period,
whether or not actually received and (iii) Investment Earnings for such
Student Loan Rate Accrual Period.
On each Distribution Date, any Noteholders' Interest LIBOR Carryover
incurred and unpaid to and including such Distribution Date will be payable on
such Date but only out of any Reserve Account Excess after the payment of any
portion of such excess required to be distributed as principal on the Notes or
the Certificates. Any amount of Noteholders' Interest LIBOR Carryover
remaining unpaid on the respective final maturity date of the Class A-1 Notes
and Class A-2 Notes will never become due and payable and will be discharged
as to the Class A-1 or Class A-2 Notes, as applicable, on such date.
Distributions of Principal. Principal payments will be made to the
Noteholders on each Distribution Date, in an amount generally equal to the
Principal Distribution Amount for such Distribution Date, until the principal
balance of the Notes is reduced to zero. Payments on the Notes of the
Noteholders' Principal Distribution Amount will generally be derived from
Available Funds and amounts on deposit in the Reserve Account remaining after
the distribution of the Servicing Fee and all overdue Servicing Fees, the
Administration Fee and all overdue Administration Fees, the Noteholders'
Interest Distribution Amount and the Certificateholders' Interest Distribution
Amount. See "Description of the Transfer and Servicing Agreements--
Distributions" and "--Credit Enhancement" herein. If such sources are
insufficient to pay the Noteholders' Principal Distribution Amount for such
Distribution Date, such shortfall will be added to the principal payable to
the Noteholders on subsequent Distribution Dates. Principal payments on the
Notes will be applied on each Distribution Date, first, to the principal
balance of the Class A-1 Notes until such principal balance is reduced to zero
and then to the principal balance of the Class A-2 Notes until such principal
balance is reduced to zero.
In addition, after the Distribution Date if the Pool Balance is less
than 10% of the sum of the Initial Pool Balance plus the Pre-Funded Amount as
of the Closing Date, the Reserve Account Excess, if any, for such Distribution
Date after making any required distributions of such excess will be applied
(i) to pay the principal on the Class A-1 Notes until the principal balance of
such Class A-1 Notes is reduced to zero, (ii) to pay the principal balance of
the Class A-2 Notes until the principal balance of such Class A-2 Notes is
reduced to zero and (iii) to pay the principal balance of the Certificates
until the principal balance of the Certificates is reduced to zero. The
amount, if any, available to be distributed as set forth in the preceding
sentence will not be part of the Principal Distribution Amount for a
Distribution Date and Noteholders will have no entitlement thereto except to
the extent of any such amount of which there can be no assurance. See
"Description of the Transfer and Servicing Agreements--Credit Enhancement--
Reserve Account" herein.
The aggregate outstanding principal amount of the Class A-1 Notes will be
payable in full on the Distribution Date (the "Class A-1 Final Maturity
Date") and the aggregate outstanding principal amount of the Class A-2 Notes
will be payable in full on the Distribution Date (the "Class A-2 Final
Maturity Date"). However, the actual maturity of the Class A-1 Notes or the
Class A-2 Notes could occur other than on such date as a result of a variety
of factors including prepayments of the Financed Student Loans. See "Risk
Factors--Yield and Prepayment Considerations" herein.
Mandatory Redemption. If any amounts remain on deposit in the Pre-Funding
Account on the last day of the Funding Period after giving effect to all
Additional Fundings on or prior to such date, such amounts will be used on the
Distribution Date on or immediately following such date to redeem, in order,
the Class A-1 Notes, the Class A-2 Notes and the Certificates, each in an
amount not to exceed their outstanding principal balance. The aggregate
principal amounts of Notes to be redeemed will be an amount equal to the
amount then on deposit in the Pre- Funding Account on the last day of the
Funding Period.
THE CERTIFICATES
Distributions of Interest. Certificateholders will be entitled to
distributions in an amount equal to the amount of interest that would accrue
on the Certificate Balance at the Certificate Rate, commencing with the
S-40
<PAGE>
, 1996 Interest Payment Date. Such amounts will be distributable monthly on
each Interest Payment Date. That interest entitlement will accrue from and
including the Closing Date or from the most recent Interest Payment Date on
which interest distributions have been made to but excluding the current
Interest Payment Date and will be calculated as provided below. Interest
distributions due for any Distribution Date but not distributed on such
Interest Payment Date will be due on the next Interest Payment Date increased
by an amount equal to interest on such amount at the Certificate Rate.
Interest distributions with respect to the Certificates for such Interest
Payment Date will generally be funded from the portion of (i) in the case of
each Interest Payment Date that is not a Distribution Date, Monthly Available
Funds and (ii) in the case of each Distribution Date, Available Funds, in each
case on deposit in the Collection Account and from amounts on deposit in the
Reserve Account remaining after the distribution of the Servicing Fee and all
overdue Servicing Fees, the Administration Fee and all overdue Administration
Fees and the Noteholders' Interest Distribution Amount for such Interest
Payment Date. If such sources are insufficient to pay the Certificateholders'
Interest Distribution Amount for such Interest Payment Date, no other source
will be available to cover such shortfall on such date. See "Description of
the Transfer and Servicing Agreements--Distributions" and "--Credit
Enhancement--Reserve Account" herein.
The "Certificate Rate" for each Interest Period will be equal to the lesser
of (a) the Certificate LIBOR Rate for such Interest Period and (b) the Student
Loan Rate for such Interest Period.
The "Certificate LIBOR Rate" shall be equal to one-month LIBOR for such
Interest Period (determined as described herein) plus %; provided, however,
that with respect to the initial Interest Period the Certificate LIBOR Rate
shall equal %.
On each Distribution Date, any Certificateholders' Interest LIBOR Carryover
incurred and unpaid to and including such Distribution Date will be payable on
such Distribution Date but only to the extent of any Reserve Account Excess
remaining after the payment of (i) any portion of such amount required to be
distributed as principal on the Notes and Certificates and (ii) any
Noteholders' Interest LIBOR Carryover. Any amount of Certificateholders'
Interest LIBOR Carryover remaining after distribution of all Available Funds
on the Final Maturity Date will never become due and will be discharged on
such date.
Distributions of Principal. Certificateholders will be entitled to
distributions on each Distribution Date on and after which the Notes are paid
in full in an amount generally equal to the Principal Distribution Amounts for
such Distribution Date. Distributions with respect to Principal Distribution
Amount on the Certificates for such Distribution Date will generally be funded
from the portion of Available Funds and amounts on deposit in the Reserve
Account remaining after distribution of the Servicing Fee, the Administration
Fee and the Certificateholders' Interest Distribution Amount for such
Distribution Date. See "Description of the Transfer and Servicing Agreements--
Distributions" and "--Credit Enhancement--Reserve Account" herein. If such
sources are insufficient to pay the Certificateholders' Principal Distribution
Amount for such Distribution Date, no other source will be available to cover
such shortfall on such date.
In addition, on each Distribution Date on and after the Notes are paid in
full and the Pool Balance is less than 10% of the Initial Pool Balance plus
the Pre-Funded Amount, the Reserve Account Excess, if any, for such
Distribution Date will be applied to pay the principal on the Certificates.
The amount, if any, available to be distributed as set forth in the preceding
sentence will not be part of the Principal Distribution Amount for a
Distribution Date and Certificateholders will have no entitlement thereto
except to the extent of any such amount of which there can be no assurance.
See "Description of the Transfer and Servicing Agreements--Credit
Enhancement--Reserve Account" herein.
The outstanding principal amount of the Certificates will be payable in full
on the Distribution Date (the "Final Maturity Date"). The actual date on
which the aggregate outstanding principal and accrued interest of the
Certificates will be paid in full may be other than such date, however, based
on a variety of factors, including those described under "The Financed Student
Loan Pool--Maturity and Prepayment Considerations" herein.
S-41
<PAGE>
Subordination of the Certificates. The rights of Certificateholders to
receive payments of interest are subordinated to the rights of the Noteholders
to receive payments of interest and the rights of the Certificateholders to
receive payments of principal are subordinated to the rights of the
Noteholders to receive payments of interest and principal. Consequently,
Monthly Available Funds or Available Funds, as the case may be, on deposit in
the Collection Account and amounts on deposit in the Reserve Account on (i)
any Interest Payment Date that is not a Distribution Date will be applied to
the payment of interest on the Notes before payment of interest on the
Certificates and (ii) any Interest Payment Date that is also a Distribution
Date will be applied to the payment of interest on the Notes before payment of
interest and principal on the Certificates and will be applied to the payment
of the Noteholders' Principal Distribution Amount before payment of principal
on the Certificates. No distributions in respect of principal of the
Certificates will be made until the Distribution Date on or after which the
Notes have been paid in full. Moreover, on any Distribution Date, the Reserve
Account Excess, if any, with respect to such Distribution Date will be applied
to the payment of the Noteholders' Interest LIBOR Carryover prior to any
distribution thereof to Certificateholders to cover the Certificateholders'
Interest LIBOR Carryover, provided that such amounts will first be applied to
reduce to the aggregate principal balance of Notes and the Certificates by the
amount of any Excess Distribution Amount for such Distribution Date. If
amounts otherwise allocable to the Certificates are used to fund payments of
interest and principal on the Notes, distributions with respect to the
Certificates may be delayed or reduced and Certificateholders may suffer a
loss. See "Risk Factors--Subordination of the Certificates" herein.
DETERMINATION OF LIBOR
Pursuant to the Administration Agreement the Administrator will determine
LIBOR for purposes of calculating the Certificate LIBOR Rate, the Class A-1
LIBOR Rate and the Class A-2 LIBOR Rate for each given Interest Period on the
second business day prior to the commencement of each Interest Period (or in
the case of the initial Interest Period, , 1996, (each, a "LIBOR
Determination Date"). For purposes of calculating LIBOR, a business day is any
day on which banks in London and New York City are open for the transaction of
international business. Interest due for any Interest Period will be
determined based on the actual number of days in such Interest Period over a
360-day year.
"LIBOR" means, with respect to any Interest Period, the London interbank
offered rate for deposits in U.S. dollars having a maturity of one month
commencing on the related LIBOR Determination Date (the "Index Maturity")
which appears on Telerate Page 3750 as of 11:00 a.m., London time, on such
LIBOR Determination Date. If such rate does not appear on Telerate Page 3750,
the rate for that day will be determined on the basis of the rates at which
deposits in U.S. dollars, having the Index Maturity and in a principal amount
of not less than U.S. $1,000,000, are offered at approximately 11:00 a.m.,
London time, on such LIBOR Determination Date to prime banks in the London
interbank market by the Reference Banks. The Administrator will request the
principal London office of each of such Reference Banks to provide a quotation
of its rate. If at least two such quotations are provided, the rate for that
day will be the arithmetic mean of the quotations. If fewer than two
quotations are provided, the rate for that day will be the arithmetic mean of
the rates quoted by major banks in New York City, selected by the
Administrator, at approximately 11:00 a.m., New York City time, on such LIBOR
Determination Date for loans in U.S. dollars to leading European banks having
the Index Maturity and in a principal amount equal to an amount of not less
than U.S. $[ ].
"Telerate Page 3750" means the display page 3750 designated on the Dow Jones
Telerate Service (or such other page as may replace that page on that service
for the purpose of displaying comparable rates or prices).
"Reference Banks" means four major banks in the London interbank market
selected by the Administrator.
BOOK-ENTRY REGISTRATION
DTC is a limited purpose trust company organized under the laws of the State
of New York, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York UCC and a "clearing agency registered
pursuant to Section 17A of the Exchange Act. DTC was created to hold
securities for its
S-42
<PAGE>
participating organizations ("Participants") and to facilitate the clearance
and settlement of securities transactions between Participants through
electronic book-entries, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks,
trust companies and clearing corporations and may include any underwriters,
agents or dealers with respect to the Securities offered hereby. Indirect
access to the DTC system also is available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly ("Indirect
Participants").
Securityholders that are not Participants or Indirect Participants but
desire to purchase, sell or otherwise transfer ownership of, or other
interests in, Securities may do so only through Participants and Indirect
Participants. In addition, Securityholders will receive all distributions of
principal and interest from the Indenture Trustee or the Eligible Lender
Trustee, as applicable (the "Applicable Trustee"), through Participants and
Indirect Participants. Under a book-entry format, Securityholders may
experience some delay in their receipt of payments, since such payments will
be forwarded by the Applicable Trustee to Cede, as nominee for DTC. DTC will
forward such payments to its Participants, which thereafter will forward them
to Indirect Participants or Securityholders. It is anticipated that the only
"Securityholder," "Certificateholder" and "Noteholder" will be Cede, as
nominee for DTC. Securityholders will not be recognized by the Applicable
Trustee as Noteholders or Certificateholders, as such terms are used in the
Indenture and the Trust Agreement, respectively and Securityholders will be
permitted to exercise the rights of Securityholders only indirectly through
DTC and its Participants (who in turn will exercise their rights through DTC).
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
Securities among Participants on whose behalf it acts with respect to the
Securities and to receive and transmit distributions of principal of, and
interest on, the Securities. Participants and Indirect Participants with which
Securityholders have accounts with respect to the Securities similarly are
required to make book-entry transfers and receive and transmit such payments
on behalf of their respective Securityholders. Accordingly, although
Securityholders will not possess Securities, the Rules provide a mechanism by
which Participants will receive payments and will be able to transfer their
interests.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a
Securityholder to pledge Securities to persons or entities that do not
participate in the DTC system, or to otherwise act with respect to such
Securities, may be limited due to the lack of a physical certificate for such
Securities.
Cedel is incorporated under the laws of Luxembourg as a professional
depository. Cedel holds securities for its participating organizations ("Cedel
Participants") and facilitates the clearance and settlement of securities
transactions between Cedel Participants through electronic book-entry changes
in accounts of Cedel Participants, thereby eliminating the need for physical
movement of certificates. Cedel provides to its Cedel Participants, among
other things, services for safekeeping, administration, clearance and
settlement of internationally traded securities and securities lending and
borrowing. Cedel interfaces with domestic markets in several countries. As a
professional depository, Cedel is subject to regulation by the Luxembourg
Monetary Institute. Cedel Participants are recognized financial institutions
around the world, including underwriters, securities brokers and dealers,
banks, trust companies, clearing corporations and certain other organizations
and may include any underwriters, agents or dealers with respect to the
Securities offered hereby. Indirect access to Cedel is also available to
others, such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a Cedel Participant, either directly
or indirectly.
Euroclear was created in 1968 to hold securities for its participants
("Euroclear Participants") and to clear and settle transactions between
Euroclear Participants through simultaneous electronic book-entry delivery
against payment, thereby eliminating the need for physical movement of
certificates and any risk from lack of simultaneous transfers of securities
and cash. The Euroclear System includes various other services, including
securities lending and borrowing and interfaces with domestic markets in
several countries generally similar to the arrangements for cross-market
transfers with DTC described above. The Euroclear System is operated by the
S-43
<PAGE>
Brussels, Belgium office of Morgan Guaranty Trust Company of New York (the
"Euroclear Operator" or "Euroclear"), under contract with Euroclear Clearance
Systems, S.C., a Belgian cooperative corporation (the "Cooperative"). All
operations are conducted by the Euroclear Operator, and all Euroclear
securities clearance accounts and Euroclear cash accounts are accounts with
the Euroclear Operator, not the Cooperative. The Cooperative establishes
policy for the Euroclear System on behalf of Euroclear Participants. Euroclear
Participants include banks (including central banks), securities brokers and
dealers and other professional financial intermediaries and may include any
underwriters, agents or dealers with respect to the Securities offered hereby.
Indirect access to Euroclear is also available to other firms that clear
through or maintain a custodial relationship with a Euroclear Participant,
either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it
is regulated and examined by the Board of Governors of the Federal Reserve
System and the New York State Banking Department, as well as the Belgian
Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian
law (collectively, the "Terms and Conditions"). The Terms and Conditions
govern transfers of securities and cash within the Euroclear System,
withdrawals of securities and cash from the Euroclear System, and receipts of
payments with respect to securities in Euroclear. All securities in Euroclear
are held on a fungible basis without attribution of specific certificates to
specific securities clearance accounts. The Euroclear Operator acts under the
Terms and Conditions only on behalf of Euroclear Participants and has no
record of or relationship with persons holding through Euroclear Participants.
Distributions with respect to Notes held through Cedel or Euroclear will be
credited to the cash accounts of Cedel Participants or Euroclear Participants
in accordance with the relevant system's rules and procedures, to the extent
received by its Depositary. Such distributions will be subject to tax
reporting in accordance with relevant United States tax laws and regulations.
Cedel or the Euroclear Operator, as the case may be, will take any other
action permitted to be taken by a beneficial holder of Notes under the
Indenture on behalf of a Cedel Participant or Euroclear Participant only in
accordance with its relevant rules and procedures and subject to its
Depositary's ability to effect such actions on its behalf through DTC.
Noteholders may hold their Securities through DTC (in the United States) or
Cedel or Euroclear (in Europe) if they are participants of such systems, or
indirectly through organizations which are participants in such systems.
The Notes will initially be registered in the name of Cede & Co., the
nominee of DTC. Cedel and Euroclear will hold omnibus positions on behalf of
their participants through customers' securities accounts in Cedel's and
Euroclear's names on the books of their respective depositaries which in turn
will hold such positions in customers' securities accounts in the
depositaries' names on the books of DTC. Citibank, N.A. ("Citibank") will act
as depositary for Cedel and Morgan Guaranty Trust Company of New York
("Morgan") will act as depositary for Euroclear (in such capacities,
individually the "Depositary" and collectively the "Depositaries").
Transfers between Participants will occur in accordance with DTC Rules.
Transfers between Cedel Participants and Euroclear Participants will occur in
accordance with their respective rules and operating procedures.
Because of time-zone differences, credits of securities received in Cedel or
Euroclear as a result of a transaction with a Participant will be made during
subsequent securities settlement processing and dated the business day
following the DTC settlement date. Such credits or any transactions in such
securities settled during such processing will be reported to the relevant
Euroclear or Cedel Participants on such business day. Cash received in Cedel
or Euroclear as a result of sales of securities by or through a Cedel
Participant or Euroclear Participant to a DTC Participant will be received
with value on the DTC settlement date but will be available in the relevant
Cedel or Euroclear cash account only as of the business day following
settlement in DTC.
S-44
<PAGE>
Cross-market transfers between persons holding Notes directly or indirectly
through DTC, on the one hand, and directly or indirectly through Cedel
Participants or Euroclear Participants, on the other, will be effected in DTC
in accordance with DTC Rules on behalf of the relevant European international
clearing system by its Depositary; however, such cross-market transactions
will require delivery of instructions to the relevant European international
clearing system by the counterparty in such system in accordance with its
rules and procedures and within its established deadlines (European time). The
relevant European international clearing system will, if the transaction meets
its settlement requirements, deliver instructions to its Depositary to take
action to effect final settlement on its behalf by delivering or receiving
securities in DTC, and making or receiving payment in accordance with normal
procedures for same-day funds settlement applicable to DTC. Cedel Participants
and Euroclear Participants may not deliver instructions to the Depositaries.
DTC has advised the Administrator that it will take any action permitted to
be taken by a Securityholder under the Indenture or the Trust Agreement, as
the case may be, only at the direction of one or more Participants to whose
accounts with DTC the Securities are credited. DTC may take conflicting
actions with respect to other undivided interests to the extent that such
actions are taken on behalf of Participants whose holdings include such
undivided interests.
Although DTC, Cedel and Euroclear have agreed to the foregoing procedures in
order to facilitate transfers of interests in the Notes among Participants of
DTC, Cedel and Euroclear, they are under no obligation to perform or continue
to perform such procedures and such procedures may be discontinued at any
time.
NEITHER THE TRUST, THE SELLER, THE MASTER SERVICER, ANY SUBSERVICER, THE
ADMINISTRATOR, THE ELIGIBLE LENDER TRUSTEE, THE INDENTURE TRUSTEE NOR THE
UNDERWRITERS WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO ANY PARTICIPANTS,
CEDEL PARTICIPANTS OR EUROCLEAR PARTICIPANTS OR THE PERSONS FOR WHOM THEY ACT
AS NOMINEES WITH RESPECT TO (L) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC,
CEDEL OR EUROCLEAR OR ANY PARTICIPANT, (2) THE PAYMENT BY DTC, CEDEL OR
EUROCLEAR OR ANY PARTICIPANT OF ANY AMOUNT DUE TO ANY BENEFICIAL OWNER IN
RESPECT OF THE PRINCIPAL AMOUNT OR INTEREST ON THE SECURITIES, (3) THE
DELIVERY BY ANY PARTICIPANT, CEDEL PARTICIPANT OR EUROCLEAR PARTICIPANT OF ANY
NOTICE TO ANY BENEFICIAL OWNER WHICH IS REQUIRED OR PERMITTED UNDER THE TERMS
OF THE INDENTURE OR THE TRUST AGREEMENT TO BE GIVEN TO SECURITYHOLDERS OR (4)
ANY OTHER ACTION TAKEN BY DTC AS THE SECURITYHOLDER.
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
GENERAL
The following is a summary of certain terms of the Loan Sale Agreement,
pursuant to which the Eligible Lender Trustee on behalf of the Trust will
purchase the Financed Student Loans; the Master Servicing Agreement pursuant
to which the Master Servicer will service the Financed Student Loans; the
Administration Agreement, pursuant to which the Administrator will undertake
certain other administrative duties and functions with respect to the Trust
and the Financed Student Loans and the Trust Agreement, pursuant to which the
Trust will be created and the Certificates will be issued (collectively, the
"Transfer and Servicing Agreements"). Forms of the Transfer and Servicing
Agreements have been filed as exhibits to the Registration Statement. A copy
of the Transfer and Servicing Agreements will be filed with the Commission
following the issuance of the Securities. This summary does not purport to be
complete and is subject to, and qualified in its entirety by reference to, all
the provisions of the Transfer and Servicing Agreements. The following summary
supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the Transfer and Servicing
Agreements set forth in the Prospectus, to which description reference is
hereby made.
S-45
<PAGE>
SALE OF FINANCED STUDENT LOANS; REPRESENTATIONS AND WARRANTIES
Information with respect to the sale of the Initial Financed Student Loans
from the Seller to the Eligible Lender Trustee on behalf of the Trust on the
Closing Date pursuant to the Loan Sale Agreement and the representations and
warranties by the Seller in connection therewith and in connection with the
purchase of Student Loans by the Trust pursuant to Additional Fundings is set
forth under "Description of the Transfer and Servicing Agreements" in the
Prospectus. If the Seller is required under the Loan Sale Agreement to
repurchase a Financed Student Loan, the Purchase Amount for such loan will be
10% of the principal balance of such Financed Student Loan so long as the
outstanding principal balance of the Notes and the Certificates exceeds the
Pool Balance plus the Pre-Funded Amount as of the date of such purchase and
100% of the outstanding principal balance of such Financed Student Loan
thereafter, plus, in either case, accrued interest thereon to the date of such
purchase. The net proceeds received from the sale of the Notes and the
Certificates will be applied to the purchase of the Initial Financed Student
Loans and to the deposit of the Pre-Funded Amount in the Pre-Funding Account.
ADDITIONAL FUNDINGS
Following the Closing Date, the Eligible Lender Trustee on behalf of the
Trust will be obligated from time to time, subject to the conditions described
below, to purchase from the Seller Federal Student Loans which (i) are made to
a borrower who is also a borrower under at least one outstanding Initial
Financed Student Loan, (ii) are made under the same loan program as such
Initial Financed Student Loan and (iii) have the same Guarantor as such
Initial Financed Student Loan (each a "Serial Loan" and collectively, the
"Serial Loans"). Serial Loans will be made by the Seller at the discretion and
in accordance with usual business practices of the Seller.
During the Funding Period, each purchase of a Serial Loan will be funded by
means of a transfer from the Pre-Funding Account of an amount equal to the
principal balance owed by the applicable borrower thereon plus accrued
interest thereon expected to be capitalized upon repayment (the "Loan Purchase
Amount"). Following the end of the Funding Period, such purchases will be
funded by amounts on deposit in the Collection Account representing
distributions of principal on the outstanding Financed Student Loans which
otherwise would have been part of the Available Funds of the Trust, as
described under "Description of the Transfer and Servicing Agreements--
Distributions" herein.
A purchase of Serial Loans will be prohibited at any time after (i) an Event
of Default occurs under the Indenture, a Servicer Default occurs under the
Master Servicing Agreement or an Administrator Default occurs under the
Administration Agreement or (ii) certain events of insolvency occur with
respect to the Company.
On certain dates designated by the Seller (each, a "Transfer Date"), the
Seller will sell and assign, without recourse, to the Eligible Lender Trustee
on behalf of the Trust, its entire interest in the specified Serial Loans
(collectively, the "Additional Student Loans") made during the period
preceding such Transfer Date, in each case as of the date specified in the
applicable Transfer Agreement to be delivered on such Transfer Date (each, a
"Subsequent Cutoff Date"). Subject to the satisfaction of the foregoing
conditions, the Seller will convey the Additional Student Loans to the
Eligible Lender Trustee on behalf of the Trust on each such Transfer Date
pursuant to the Loan Sale Agreement and the applicable Transfer Agreement (a
"Transfer Agreement") executed by the Seller, the Master Servicer, the
Eligible Lender Trustee and the Administrator on such Transfer Date. Each such
Transfer Agreement will include as an exhibit a schedule identifying each
Additional Student Loan transferred on such Transfer Date. Upon such
conveyance of Additional Student Loans to the Eligible Lender Trustee on
behalf of the Trust, the Pool Balance will increase in an amount equal to the
Loan Purchase Amount of the Additional Student Loans and an amount equal to
the Loan Purchase Amount of such Additional Student Loans will be withdrawn,
during the Funding Period from the Pre-Funding Account on such date and
transferred to the Seller, and after the Funding Period, from the Collection
Account in the manner described above.
S-46
<PAGE>
As described under "The Family Education Loan Program" in the Prospectus,
during certain qualifying periods, interest on certain Financed Student Loans
is not required to be currently paid, but instead is added to the outstanding
principal balance of the loan at the end of the qualifying period. In order to
minimize the possibility that the failure to receive current interest payments
on such loans during such periods will result in a shortfall of the amount
required to be distributed on the Notes and the Certificates, amounts on
deposit in the Pre-Funding Account will be applied during the Funding Period
to make deposits in the Collection Account in lieu of current collections of
interest on such loans. Use of the funds in the Pre-Funding Account will be
limited solely to making these deposits in lieu of current collections of
interest on these loans and the purchase of Serial Loans as discussed above.
Following the end of the Funding Period, the Pre-Funding Account will cease to
be available as a source to fund such deposits in the Collection Account, and
thereafter such payments will be funded through the application of amounts
which would otherwise have been distributable in respect of the Principal
Distribution Amount for the related Distribution Date, as described under "--
Distributions" below.
ACCOUNTS
In addition to the Collection Account referred to in the Prospectus under
"Description of the Transfer and Servicing Agreements--Accounts", the
Administrator will establish and maintain the Pre-Funding Account and the
Reserve Account, in the name of the Indenture Trustee on behalf of the
Noteholders and the Certificateholders.
SERVICING COMPENSATION; ADMINISTRATION FEE
The Master Servicer will be entitled to receive monthly with respect to each
Financed Student Loan the Servicing Fee in an amount equal to one-twelfth of
the product of (a) % per annum and (b) the Pool Balance as of the close of
business on the last day of the preceding calendar month. The Servicing Fee
(together with any portion of the Servicing Fee that remains unpaid from prior
Interest Payment Dates) will be payable on each Interest Payment Date and will
be paid solely out of Monthly Available Funds in the case of an Interest
Payment Date that is not a Distribution Date (and out of Available Funds in
the case of each Distribution Date) and amounts on deposit in the Reserve
Account on such date.
As compensation for the performance of the Administrator's obligations under
the Administration Agreement and as reimbursement for its expenses related
thereto, the Administrator will be entitled to receive monthly in arrears on
each Interest Payment Date the Administration Fee in an amount equal to one-
twelfth of the product of (i) % per annum and (ii) the Pool Balance as of
the close of business on the last day of the calendar month immediately
preceding such date.
DISTRIBUTIONS
Deposits to Collection Account. On or about the third business day prior to
each Interest Payment Date (the "Determination Date"), the Administrator will
provide the Indenture Trustee with certain information with respect to the
preceding Collection Period or Monthly Collection Period, including the amount
of Available Funds or Monthly Available Funds received with respect to the
Financed Student Loans and the aggregate Purchase Amount relating to the
Financed Student Loans to be repurchased by the Seller or to be purchased by
the Master Servicer.
"Monthly Collection Period" means, with respect to any Interest Payment Date
that is not a Distribution Date, the calendar month immediately preceding the
month of such Interest Payment Date (or, with respect to the first Monthly
Collection Period, the period beginning on the Cutoff Date and ending on
December 31, 1996).
For purposes hereof, the term "Monthly Available Funds" means, with respect
to each Interest Payment Date that is not a Distribution Date, the sum of the
following amounts with respect to the related Monthly Collection Period: (i)
all collections received by the Master Servicer on the Financed Student Loans
(including any Guarantee Payments received with respect to the Financed
Student Loans); (ii) any Interest Subsidy
S-47
<PAGE>
Payments and Special Allowance Payments received by the Eligible Lender
Trustee during such Monthly Collection Period with respect to the Financed
Student Loans; (iii) all proceeds of the liquidation of defaulted Financed
Student Loans ("Liquidated Student Loans"), which became Liquidated Student
Loans during such Monthly Collection Period in accordance with the Master
Servicer's customary servicing procedures, net of expenses incurred by the
Master Servicer in connection with such liquidation and any amounts required
by law to be remitted to the borrower on such Liquidated Student Loans
("Liquidation Proceeds"), and all recoveries in respect of Liquidated Student
Loans which were written off in prior Monthly Collection Periods; (iv) that
portion of amounts released from the Pre-Funding Account with respect to
Additional Fundings relating to those interest amounts on the Financed Student
Loans which are or will be capitalized; (v) the aggregate Purchase Amounts
received for those Financed Student Loans repurchased by the Seller or
purchased by the Master Servicer under an obligation which arose during the
related Monthly Collection Period; (vi) Investment Earnings for such
Distribution Date and (vii) with respect to each Interest Payment Date other
than a Distribution Date and other than an Interest Payment Date immediately
succeeding a Distribution Date, Monthly Available Funds remaining from the
Monthly Collection Period relating to the preceding Interest Payment Date,
after giving effect to the application of such Monthly Available Funds on such
preceding Interest Payment Date; provided, however, that if with respect to
any such Interest Payment Date there would not be sufficient funds, after
application of Monthly Available Funds (as defined above) and amounts
available from the Reserve Account, to pay any of the items specified in
clauses (i) through (iv) respectively under the first paragraph of "--
Distributions--Distributions from Collection Account," then Monthly Available
Funds for such Interest Payment Date will include, in addition to the Monthly
Available Funds (as defined above), amounts on deposit in the Collection
Account on the Determination Date relating to such Interest Payment Date which
would have constituted Monthly Available Funds for the Interest Payment Date
succeeding such Interest Payment Date up to the amount necessary to pay such
items, and the Monthly Available Funds for such succeeding Interest Payment
Date will be adjusted accordingly; and provided, further, that Monthly
Available Funds will exclude (A) all payments and proceeds (including
Liquidation Proceeds) of any Financed Student Loans the Purchase Amount of
which has been included in Monthly Available Funds for a prior Collection
Period, (B) except as expressly included in clause (iv) above, amounts
released from the Pre-Funding Account, (C) any Monthly Rebate Fees paid and
other amounts required by the Act to be paid to the Department or to be repaid
to borrowers, with respect to the Financed Student Loans during the related
Monthly Collection Period as described under "Risk Factors--Fees Payable on
Certain Financed Student Loans Prior to Distributions on the Securities" and
(D) any collections in respect of principal on the Financed Student Loans
applied by the Eligible Lender Trustee on behalf of the Trust after the end of
the Funding Period to purchase Serial Loans during the related Monthly
Collection Period as described under "--Additional Fundings" above.
The term "Available Funds" means, with respect to a Distribution Date and
the related Collection Period, the sum of the amounts specified in clauses
(i)-(vi) of the definition of Monthly Available Funds for each of the three
Monthly Collection Periods included in such Collection Period; provided,
however, that if with respect to any Distribution Date there would not be
sufficient funds, after application of Available Funds (as defined above) and
amounts available from the Reserve Account, to pay any of the items specified
in clauses (i) through (vi) respectively under the second paragraph of "--
Distributions--Distributions from Collection Account," then Available Funds
for such Distribution Date will include, in addition to the Available Funds
(as defined above), amounts on deposit in the Collection Account on the
Determination Date relating to such Distribution Date which would have
constituted Available Funds for the Distribution Date succeeding such
Distribution Date up to the amount necessary to pay such items, and the
Available Funds for such succeeding Distribution Date will be adjusted
accordingly; and provided, further, that Available Funds will exclude (A) all
payments and proceeds (including Liquidation Proceeds) of any Financed Student
Loans the Purchase Amount of which has been included in Available Funds for a
prior Collection Period, (B) except as expressly included in clause (iv) of
the definition of Monthly Available Funds, amounts released from the Pre-
Funding Account, (C) any Monthly Rebate Fees and other amounts required by the
Act to be paid to the Department or to be repaid to borrowers, with respect to
the Financed Student Loans paid during the related Collection Period on behalf
of the Trust, (D) any collections in respect of principal on the Financed
Student Loans applied by the Eligible Lender Trustee on behalf of the Trust
after the end of the Funding Period to purchase Serial Loans during the
related Collection
S-48
<PAGE>
Period as described under "--Additional Fundings" above, and (E) the Servicing
Fee and all overdue Servicing Fees, the Administration Fee and all overdue
Administration Fees, the Noteholders' Interest Distribution Amount and the
Certificateholders' Interest Distribution Amount paid on each Interest Payment
Date that is not a Distribution Date during the related Collection Period.
Distributions from Collection Account. On each Interest Payment Date that is
not a Distribution Date the Administrator will instruct the Indenture Trustee
to make the following distributions in the order of priority specified below,
to the extent of Monthly Available Funds for the related Monthly Collection
Period: (i) the Servicing Fee for such Interest Payment Date and all overdue
Servicing Fees to the Master Servicer, (ii) the Administration Fee for such
Interest Payment Date and all overdue Administration Fees to the
Administrator, (iii) the Noteholders' Interest Distribution Amount to the
Class A-1 Noteholders and the Class A-2 Noteholders, on a pro rata basis and
(iv) the Certificateholders' Interest Distribution Amount to the
Certificateholders.
On each Distribution Date, the Administrator will instruct the Indenture
Trustee to make the following deposits and distributions, in the amounts and
in the order of priority specified below, to the extent of the Available Funds
for the related Collection Period:
(i) to the Master Servicer, the Servicing Fee for such Distribution Date
and all prior unpaid Servicing Fees;
(ii) to the Administrator, the Administration Fee for such Distribution
Date and all unpaid Administration Fees;
(iii) to the Class A-1 Noteholders and the Class A-2 Noteholders, on a
pro rata basis, the Noteholders' Interest Distribution Amount (based on the
ratio of the portion of the Noteholders' Interest Distribution Amount
accrued with respect to each such Class to the Noteholders' Interest
Distribution Amount);
(iv) to the Certificateholders, the Certificateholders' Interest
Distribution Amount;
(v) to the Class A-1 Noteholders until the outstanding principal balance
of the Class A-1 Notes is zero and then to the Class A-2 Noteholders, the
Noteholders' Principal Distribution Amount;
(vi) on each Distribution Date on and after which the Notes have been
paid in full, to the Certificateholders, the Certificateholders' Principal
Distribution Amount; and
(vii) to the Reserve Account, any remaining amounts after application of
clauses (i) through (vi).
For purposes hereof, the following terms have the following meanings:
"Certificate Balance" equals $ as of the Closing Date and, thereafter,
equals the initial Certificate Balance, reduced by all amounts allocable to
principal previously distributed to Certificateholders.
"Certificateholders' Distribution Amount" means, with respect to any
Distribution Date, the Certificateholders' Interest Distribution Amount for
such Distribution Date plus, for each Distribution Date on and after which the
Notes have been paid in full, the Certificateholders' Principal Distribution
Amount for such Distribution Date.
"Certificateholders' Interest Carryover Shortfall" means, with respect to
any Interest Payment Date, the excess of (i) the Certificateholders' Interest
Distribution Amount on the preceding Interest Payment Date over (ii) the
amount of interest actually distributed to the Certificateholders on such
preceding Interest Payment Date, plus interest on the amount of such excess,
to the extent permitted by law, at the Certificate Rate from such preceding
Interest Payment Date to the current Interest Payment Date.
"Certificateholders' Interest Distribution Amount" means, with respect to
any Interest Payment Date, the sum of (i) the amount of interest accrued at
the Certificate Rate for the related Interest Period on the outstanding
Certificate Balance on the immediately preceding Distribution Date after
giving effect to all distributions of principal to Certificateholders on such
Distribution Date (or in the case of the first three Interest Payment Dates,
on the Closing Date) and (ii) the Certificateholders' Interest Carryover
Shortfall for such Interest Payment Date;
S-49
<PAGE>
provided, however, that the Certificateholders' Interest Distribution Amount
will not include any Certificateholders' Interest LIBOR Carryover.
"Certificateholders' Principal Carryover Shortfall" means, as of the close
of any Distribution Date on or after which the Notes have been paid in full,
the excess of (i) the sum of the Certificateholders' Principal Distribution
Amount on such Distribution Date and any outstanding Certificateholders'
Principal Carryover Shortfall for the preceding Distribution Date over (ii)
the amount of principal actually distributed to the Certificateholders on such
Distribution Date.
"Certificateholders' Principal Distribution Amount" means, on each
Distribution Date on and after which the principal balance of the Notes has
been paid in full, the sum of (a) the Principal Distribution Amount for such
Distribution Date (or, in the case of the Distribution Date on which the
principal balance of the Notes is paid in full, any remaining Principal
Distribution Amount not otherwise distributed to Noteholders on such
Distribution Date) and (b) the Certificateholders' Principal Carryover
Shortfall as of the close of the preceding Distribution Date; provided,
however, that the Certificateholders' Principal Distribution Amount will in no
event exceed the Certificate Balance. In addition, on the Final Maturity Date,
or on the related Distribution date following a sale of the Financed Student
Loans in the manner described under "--Termination", the principal required to
be distributed to the Certificateholders will include the amount required to
reduce the outstanding Certificate Balance to zero.
"Noteholders' Distribution Amount" means, with respect to any Distribution
Date, the sum of the Noteholders' Interest Distribution Amount and the
Noteholders' Principal Distribution Amount for such Distribution Date.
"Noteholders' Interest Carryover Shortfall" means, with respect to any
Interest Payment Date, the excess of (i) the Noteholders' Interest
Distribution Amount on the preceding Interest Payment Date over (ii) the
amount of interest actually distributed to the Noteholders on such preceding
Interest Payment Date, plus interest on the amount of such excess, to the
extent permitted by law, at the weighted average interest rate borne by the
Class A-1 Notes and the Class A-2 Notes from such preceding Interest Payment
Date to the current Interest Payment Date.
"Noteholders' Interest Distribution Amount" means, with respect to any
Interest Payment Date, the sum of (i) the amount of interest accrued at the
respective Note Interest Rate for the related Interest Period on the
outstanding principal balance of each class of Notes on the immediately
preceding Distribution Date after giving effect to all distributions of
principal to holders of Notes of such class on such Distribution Date (or in
the case of the first three Interest Payment Dates, on the Closing Date) and
(ii) the Noteholders' Interest Carryover Shortfall for such Interest Payment
Date; provided, however, that the Noteholders' Interest Distribution Amount
will not include any Noteholders' Interest LIBOR Carryover.
"Noteholders' Principal Carryover Shortfall" means, as of the close of any
Distribution Date, the excess of (i) the sum of the Noteholders' Principal
Distribution Amount on such Distribution Date and any outstanding Noteholders'
Principal Carryover Shortfall for the preceding Distribution Date over (ii)
the amount of principal actually distributed to the Noteholders on such
Distribution Date.
"Noteholders' Principal Distribution Amount" means, with respect to any
Distribution Date, the Principal Distribution Amount for such Distribution
Date plus the Noteholders' Principal Carryover Shortfall as of the close of
the preceding Distribution Date; provided, however, that the Noteholders'
Principal Distribution Amount will not exceed the outstanding principal
balance of the Notes. In addition, (i) on the Class A-1 Final Maturity Date,
or on the related Distribution Date following a sale of the Financed Student
Loans in the manner described in "--Termination," the principal required to be
distributed to Class A-1 Noteholders will include the amount required to
reduce the outstanding principal balance of the Class A-1 Notes to zero and
(ii) on the Class A-2 Final Maturity Date, or on the related Distribution Date
following a sale of the Financed Student Loans in the manner described in "--
Termination," the principal required to be distributed to the Class A-2
Noteholders will include the amount required to reduce the outstanding
principal balance of the Class A-2 Notes to zero.
S-50
<PAGE>
"Principal Distribution Adjustment" means, with respect to any Distribution
Date, the amount of Available Funds on such Distribution Date to be used to
make additional principal distributions to Noteholders (and, after the Notes
have been paid in full, Certificateholders) to account for (i) the amount of
any insignificant balance remaining outstanding as of such Distribution Date
on a Financed Student Loan after receipt of a final payment from a borrower or
Guarantor, when such insignificant balances are waived in the ordinary course
of business by the Master Servicer at the direction of the Administrator in
accordance with the Master Servicing Agreement or (ii) the amount of principal
collections erroneously treated as interest collections including, without
limitation, by reason of the failure by a borrower to capitalize interest that
had been expected to be capitalized; provided, however, that the Principal
Distribution Adjustment for any Distribution Date shall not exceed the lesser
of (x) $100,000 and (y) the Reserve Account Excess, if any, remaining after
giving effect to all distributions to be made on such Distribution Date other
than distributions to the Seller out of such excess.
"Principal Distribution Amount" means, with respect to any Distribution
Date, the sum of the following amounts with respect to the related Collection
Period: (i) that portion of all collections received by the Master Servicer on
the Financed Student Loans that is allocable to principal (including the
portion of any Guarantee Payments received that is allocable to principal of
the Financed Student Loans) less, if such Collection Period is after the end
of the Funding Period, the sum of (x) any such collections which are applied
by the Trust during such Collection Period to purchase Serial Loans and (y)
accrued and unpaid interest on the Financed Student Loans for such Collection
Period to the extent such interest is not currently being paid but will be
capitalized upon commencement of repayment of such Financed Student Loans;
(ii) all Liquidation Proceeds attributable to the principal amount of Financed
Student Loans which became Liquidated Student Loans during such Collection
Period in accordance with the Master Servicer's customary servicing
procedures, together with all Realized Losses on such Financed Student Loans;
(iii) to the extent attributable to principal, the Purchase Amount received
with respect to each Financed Student Loan repurchased by the Seller or
purchased by the Master Servicer as a result of a breach of a representation,
warranty or covenant under an obligation which arose during the related
Collection Period; (iv) the aggregate amount deposited in the Collection
Account following a sale of the Financed Student Loans in the manner described
under "--Termination" and (v) the Principal Distribution Adjustment, if any,
provided, however, that the Principal Distribution Amount will exclude all
payments and proceeds (including Liquidation Proceeds) of any Financed Student
Loans the Purchase Amount of which has been included in Available Funds for a
prior Collection Period.
"Realized Losses" means the excess of the principal balance of the
Liquidated Student Loans over Liquidation Proceeds to the extent allocable to
principal.
CREDIT ENHANCEMENT
Reserve Account. Pursuant to the Administration Agreement and the Loan Sale
Agreement, the Reserve Account will be created with an initial deposit by the
Seller on the Closing Date of cash or Eligible Investments in an amount equal
to the Reserve Account Initial Deposit. The Reserve Account will be augmented
on each Distribution Date by the deposit therein of the amount, if any, of
Available Funds remaining after payment of the Servicing Fee and all overdue
Servicing Fees, the Administration Fee and all overdue Administration Fees,
the Noteholders' Distribution Amount and the Certificateholders' Distribution
Amount, all for such Distribution Date. See "--Distributions" herein. As
described below, subject to certain limitations, amounts on deposit in the
Reserve Account will be released to the Seller to the extent that the amount
on deposit in the Reserve Account exceeds the Specified Reserve Account
Balance for such date.
"Specified Reserve Account Balance" with respect to any Distribution Date
means the greater of:
(a) % of the sum of the Pool Balance and the Pre-Funded Amount as of
the close of business on the last day of the related Collection Period; and
(b) $ ; provided, however, that the Specified Reserve Account Balance
shall in no event exceed the sum of the outstanding principal amount of the
Notes and the outstanding principal balance of the Certificates.
S-51
<PAGE>
If the amount on deposit in the Reserve Account on any Distribution Date
(after giving effect to all deposits thereto or withdrawals made therefrom in
respect of shortfalls in distributions required to be made from Available
Funds on such Distribution Date) is greater than the Specified Reserve Account
Balance for such Distribution Date, subject to certain limitations, the
Administrator will instruct the Indenture Trustee to distribute the amount of
such excess (the "Reserve Account Excess") to the following (in the priority
indicated): (i) to the payment of the unpaid principal amount of the Notes and
the Certificates, in the order of priority set forth herein, until the unpaid
principal balance of the Notes and the Certificates equals the Pool Balance
plus the Pre-Funded Amount of the close of business on the last day of the
related Collection Period (ii) to the Noteholders, the aggregate unpaid amount
of any Noteholders' Interest LIBOR Carryover, (iii) to the Certificateholders,
the aggregate unpaid amount of any Certificateholders' Interest LIBOR
Carryover and (iv) if such Distribution Date is on or after the
Distribution Date and the Pool Balance on such Distribution Date is equal to
10% or less of the Initial Pool Balance plus the Pre-Funded Amount as of the
Closing Date, to the payment of the unpaid principal balance of the Notes, in
the order of priority set forth herein, until the principal balance of the
Notes has been reduced to zero, and then to the payment of the unpaid
principal balance of the Certificates until the principal balance of the
Certificates is reduced to zero and (v) to the Seller and the Company, 99% and
1%, respectively, of any such excess after the payment of clauses (i) and (iv)
above, and, upon such payment to the Seller, the Noteholders and the
Certificateholders will not have any rights in, or claims to, such amounts. As
of the Closing Date, the aggregate principal balance of the Notes and the
Certificates will equal approximately % of the Initial Pool Balance. All
distributions of principal on the Notes and the Certificates as described in
clause (i) of this paragraph shall be allocated to the Class A-1 Notes until
the principal balance of the Class A-1 Notes has been reduced to zero, then to
the Class A-2 Notes until the principal balance of the Class A-2 Notes has
been reduced to zero and then to the Certificates until the principal balance
of the Certificates has been reduced to zero.
Subject to the limitation described in the preceding paragraph, amounts held
from time to time in the Reserve Account will continue to be held for the
benefit of the Trust. Funds will be withdrawn from cash in the Reserve Account
on (a) each Interest Payment Date that is not a Distribution Date and on each
Distribution Date prior to the January 2000 Distribution Date to the extent
that the amount of Monthly Available Funds on such Interest Payment Date is
insufficient to pay (i) the Servicing Fee and all overdue Servicing Fees, (ii)
the Administration Fee and all overdue Administration Fees, (iii) the
Noteholders' Interest Distribution Amount and (iv) the Certificateholders'
Interest Distribution Amount and (b) on any Distribution Date on or after the
January 2000 Distribution Date to the extent Available Funds on such
Distribution Date is insufficient to pay any of the items specified in clauses
(i) through (vi) respectively, of the second paragraph under "--
Distributions--Distributions from Collection Account" herein. Such funds will
be paid from the Reserve Account to the persons and in the order of priority
specified for distributions out of the Collection Account on such dates. As a
result of the subordination of the Certificates to the Notes described
elsewhere herein, however, any amounts that the Certificateholders would
otherwise receive from the Reserve Account in respect of the
Certificateholders' Interest Distribution Amount on an Interest Payment Date
will be paid to Noteholders until the Noteholders' Interest Distribution
Amount for such Interest Payment Date has been paid in full.
The Reserve Account is intended to enhance the likelihood of timely receipt
by the Noteholders and the Certificateholders of the full amount of principal
and interest due them and to decrease the likelihood that the Noteholders or
the Certificateholders will experience losses. In certain circumstances,
however, the Reserve Account could be depleted. If the amount required to be
withdrawn from the Reserve Account to cover shortfalls in the amount of
Monthly Available Funds or Available Funds, as the case may be, exceeds the
amount of cash in the Reserve Account, Noteholders or Certificateholders could
incur losses or a temporary shortfall in the amount of principal and interest
distributed to the Noteholders or the Certificateholders could result which
could, in turn, increase the average life of the Notes or the Certificates.
Moreover, amounts on deposit in the Reserve Account other than any Reserve
Account Excess not required to pay principal on the Notes will not be
available to cover any aggregate unpaid Noteholders' Interest LIBOR Carryover
or Certificateholders' Interest LIBOR Carryover.
Subordination of the Certificates. The rights of Certificateholders to
receive payments of interest are subordinated to the rights of the Noteholders
to receive payments of interest and the rights of the
S-52
<PAGE>
Certificateholders to receive payments of principal are subordinated to the
rights of the Noteholders to receive payments of interest and principal to the
extent of the Noteholders' Principal Distribution Amount. This subordination
is intended to increase the likelihood of timely receipt by the Noteholders of
the maximum amount of interest to which they are entitled to receive on any
Distribution Date. The Certificateholders will not be entitled to any payments
of principal until the Notes are paid in full. See "Description of the
Securities--The Certificates--Subordination of the Certificates" herein.
INSOLVENCY EVENT
If an Insolvency Event occurs with respect to the Company, the Financed
Student Loans will be liquidated and the Trust will be terminated 90 days
after the date of such Insolvency Event, unless, before the end of such 90-day
period, the related Eligible Lender Trustee shall have received written
instructions from (i) the holders of each class of Notes representing more
than 50% of the aggregate unpaid principal amount of each such class of Notes
and (ii) the holders of the Certificates (other than the Seller or the
Company) representing more than 50% of the aggregate unpaid principal amount
of each such class (not including the principal amount of Certificates held by
the Seller or the Company), in each case to the effect that each such group
disapproves of the liquidation of the Financed Student Loans and termination
of the Trust. Promptly after the occurrence of an Insolvency Event with
respect to the Company, notice thereof is required to be given such
Noteholders and Certificateholders; provided, however, that any failure to
give such required notice will not prevent or delay termination of the Trust.
Upon termination of the Trust, the Eligible Lender Trustee will direct the
Indenture Trustee promptly to sell the assets of the Trust (other than the
Trust Accounts) in a commercially reasonable manner and on commercially
reasonable terms. The proceeds from any such sale, disposition or liquidation
of the Financed Student Loans will be treated as collections thereon and
deposited in the Collection Account. If the proceeds from the liquidation of
the Financed Student Loans and any amounts on deposit in the Reserve Account,
if any, available therefor are not sufficient to pay the Notes and the
Certificates in full, the amount of principal returned to such Noteholders and
Certificateholders will be reduced and some or all of such Noteholders and
such Certificateholders will incur a loss. "Insolvency Event" means, with
respect to any Person, any of the following events or actions: certain events
of insolvency, readjustment of debt, marshaling of assets and liabilities or
similar proceedings with respect to such Person and certain actions by such
Person indicating its insolvency, reorganization pursuant to bankruptcy
proceedings or inability to pay its obligations. Notwithstanding the
foregoing, if the Company provides the Indenture Trustee and the Eligible
Lender Trustee an opinion of special tax counsel in form and substance
satisfactory to the Indenture Trustee and the Eligible Lender Trustee that the
foregoing provisions are not necessary for the Trust to be treated as a
partnership for federal income and Maryland state tax purposes, then such
provisions shall be of no force or effect as of the date of the delivery of
such opinion.
COMPANY LIABILITY
Under the Trust Agreement, the Company will agree to be liable directly to
an injured party for the entire amount of any losses, claims, damages or
liabilities (other than those incurred by a Noteholder or a Certificateholder
in the capacity of an investor with respect to the Trust) arising out of or
based on the arrangement created by the Trust Agreement as though such
arrangement created a partnership under the Delaware Revised Uniform Limited
Partnership Act in which such Company was a general partner. Notwithstanding
the foregoing, if the Company provides the Indenture Trustee and the Eligible
Lender Trustee an opinion of Tax Counsel in form and substance satisfactory to
the Indenture Trustee and the Eligible Lender Trustee that the foregoing
provisions are not necessary for the Trust to be treated as a partnership for
federal income and Maryland state tax purposes, then such provisions shall be
of no force or effect as of the date of the delivery of such opinion.
TERMINATION
Certain information regarding termination of the Trust is set forth in
"Description of the Transfer and Servicing Agreements--Termination" in the
Prospectus.
S-53
<PAGE>
Any Financed Student Loans remaining in the Trust as of the end of the
Collection Period immediately preceding the Distribution Date will be
offered for sale by the Indenture Trustee. The Seller, its affiliates and
unrelated third parties may offer bids to purchase such Financed Student Loans
on such Distribution Date. If at least two bids are received, the Indenture
Trustee will accept the highest bid equal to or in excess of the greater of
(x) the Purchase Amount of such Financed Student Loans as of the end of the
Collection Period immediately preceding such Distribution Date or (y) an
amount that would be sufficient to (i) reduce the outstanding principal amount
of each class of Notes then outstanding on such Distribution Date to zero,
(ii) pay to the Noteholders the Noteholders' Interest Distribution Amount
payable on such Distribution Date, if any, (iii) reduce the Certificate
Balance of the Certificates on such Distribution Date to zero and (iv) pay to
the Certificateholders the Certificateholders' Interest Distribution Amount
payable on such Distribution Date, if any (the "Minimum Purchase Price"). If
at least two bids are not received or the highest bid is not equal to or in
excess of the Minimum Purchase Price for the Financed Student Loans, the
Indenture Trustee will not consummate such sale. The proceeds of any such sale
will be used to redeem any outstanding Notes and to retire any outstanding
Certificates on such Distribution Date. If the sale is not consummated in
accordance with the foregoing, the Indenture Trustee may, but shall not be
under any obligation to, solicit bids to purchase the Financed Student Loans
on future Distribution Dates upon terms similar to those described above. No
assurance can be given as to whether the Trustee will be successful in
soliciting acceptable bids to purchase the Financed Student Loans on either
the Distribution Date or any subsequent Distribution Date. In the event
the Financed Student Loans are not sold in accordance with the foregoing, on
each Distribution Date on and after the Distribution Date, if the Pool
Balance is equal to 10% or less of the Initial Pool Balance plus the Pre-
Funded Amount as of the Closing Date a portion of the Reserve Account Excess,
if any, with respect to such Distribution Date will be distributed to the
Noteholders and the Certificateholders in the priority described herein as
payments of principal.
OPTIONAL REDEMPTION
The Seller may at its option purchase from the Eligible Lender Trustee, as
of the end of any Collection Period immediately preceding a Distribution Date,
if the then outstanding Pool Balance is 10% or less of the Initial Pool
Balance plus the Pre-Funded Amount as of the Closing Date, all Financed
Student Loans at a price equal to the Minimum Purchase Price as of the end of
such Collection Period, which amounts will be used to retire the Notes and
Certificates concurrently therewith. Upon termination of the Trust, all right
title and interest in the Financed Student Loans and other funds of the Trust,
after giving effect to any final distributions to Noteholders and
Certificateholders therefrom, will be conveyed and transferred to the Seller.
FEDERAL INCOME TAX AND STATE TAX CONSEQUENCES
In the opinion of Tax Counsel, the Trust will not constitute an association
(or a publicly traded partnership) taxable as a corporation and the Notes will
constitute indebtedness for federal income tax purposes. Furthermore, Tax
Counsel is of the opinion that the discussions herein under "Federal Income
Tax and State Tax Consequences" and in the Prospectus under "Federal Income
Tax Consequences" and "State Tax Consequences" are correct in all material
respects.
The stated interest on the Notes will be taxable to a Noteholder as ordinary
income when received or accrued in accordance with such Noteholder's method of
tax accounting. It is not anticipated that the Trust will treat the Notes as
issued with "original issue discount" within the meaning of Section 1273 of
the Code ("OID"), because the Trust intends to treat the stated interest as a
"qualified floating rate" for OID purposes. However, it is unclear how the
Noteholders' Interest LIBOR Carryover will be included in income. Therefore,
the Noteholders may be required to accrue such amount in income in advance of
the receipt of cash with respect to such amount regardless of whether such
Noteholders are on the cash or accrual methods of accounting. Furthermore, the
regulations pertaining to OID could be read as requiring that the stated
interest be treated as
S-54
<PAGE>
"contingent interest" for purposes of computing OID. A holder who purchases a
Note at a discount that exceeds a statutorily defined de minimis amount will
be subject to the "market discount" rules of the Code. A holder who purchases
a Note at a premium will be subject to the premium amortization rules of the
Code.
The tax items of a partnership are allocable to the partners in accordance
with the Code, Treasury regulations and the partnership agreement (here, the
Trust Agreement and related documents). The Trust Agreement will provide, in
general, that the Certificateholders will be allocated taxable income of the
Trust for each Interest Period equal to the sum of (i) the interest that
accrues on the Certificates in accordance with their terms for such Interest
Period, including interest at the Certificate Rate for such Interest Period
and interest on amounts previously due on the Certificates but not yet
distributed; (ii) any Trust income attributable to discount on Student Loans
that corresponds to any excess of the principal amount of the Certificates
over their initial issue price; and (iii) all other amounts of income payable
to the Certificateholders for such Interest Period. All remaining taxable
income of the Trust will be allocated to the Seller. Based on the economic
arrangement of the parties, this approach for allocating Trust income should
be permissible under applicable Treasury regulations, although no assurance
can be given that the IRS would not require a greater amount of income to be
allocated to Certificateholders. Moreover, even under the foregoing method of
allocation, Certificateholders may be allocated income equal to the entire
amount of interest accruing on the Certificates for an Interest Period, based
on the Certificate Rate plus the other items described above, even though the
Trust might not have sufficient cash to make current cash distributions of
such amount. Thus, cash basis holders will in effect be required to report
income from the Certificates on the accrual basis and Certificateholders may
become liable for taxes on Trust income even if they have not received cash
from the Trust to pay such taxes. Furthermore, Certificateholders may be
required to accrue the Certificateholder's Interest LIBOR Carryover in advance
of the receipt of cash with respect to such carryover, regardless of whether
such Certificateholders are on the cash or accrual method of accounting. In
addition, because tax allocations and tax reporting will be done on a uniform
basis for all Certificateholders but Certificateholders may be purchasing
Certificates at different times and at different prices, Certificateholders
may be required to report on their tax returns taxable income that is greater
or less than the amount reported to them by the Trust.
Prospective purchasers should see "Federal Income Tax Consequences" and
"State Tax Consequences" in the Prospectus for a discussion of the application
of certain additional federal income tax laws and certain state tax laws to
the Trust and the Securities.
ERISA CONSIDERATIONS
THE NOTES
The Notes may be purchased by an employee benefit plan or an individual
retirement account (a "Plan") subject to ERISA or Section 4975 of the Code. A
fiduciary of a Plan must determine that the purchase of a Note is consistent
with its fiduciary duties under ERISA and does not result in a nonexempt
prohibited transaction as defined in Section 406 of ERISA or Section 4975 of
the Code. Employee benefit plans which are governmental plans (as defined in
Section 3(33) of ERISA) are not subject to the fiduciary responsibility or
prohibited transaction provisions of ERISA or the Code.
THE CERTIFICATES
The Certificates may not be purchased by a Plan or by any entity whose
underlying assets include plan assets by reason of a plan's investment in the
entity (each, a "Benefit Plan"). Such purchase of an equity interest in the
Trust will result in the assets of the Trust being deemed assets of a Benefit
Plan for the purposes of ERISA and the Code, and certain transactions
involving the Trust may then be deemed to constitute prohibited transactions
under Section 406 of ERISA and Section 4975 of the Code. A violation of the
"prohibited transaction" rules may result in an excise tax or other penalties
and liabilities under ERISA and the Code for such persons. By its acceptance
of a Certificate, each Certificateholder will be deemed to have represented
and warranted that it is not a Benefit Plan.
S-55
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in an Underwriting Agreement
relating to the Notes (the "Note Underwriting Agreement"), the Seller has
agreed to cause the Trust to sell to each of the Class A-1 Note Underwriters
and the Class A-2 Note Underwriters named below (collectively, the "Note
Underwriters"), and each of the Note Underwriters has severally agreed to
purchase, the principal amount of Notes set forth opposite its name below:
CLASS A-1 NOTES
<TABLE>
<CAPTION>
CLASS A-1 NOTE UNDERWRITERS PRINCIPAL AMOUNT
- --------------------------- ----------------
<S> <C>
---
Total........................................................
===
</TABLE>
CLASS A-2 NOTES
<TABLE>
<CAPTION>
CLASS A-2 NOTE UNDERWRITERS PRINCIPAL AMOUNT
- --------------------------- ----------------
<S> <C>
---
Total........................................................
===
</TABLE>
In addition, Signet will directly offer $ and $ principal amount of the
Class A-1 Notes and the Class A-2 Notes, respectively. Signet will not make a
market in the Notes.
The Note Underwriters and the Signet propose initially to offer the Notes to
the public initially at the public offering prices set forth on the cover page
of this Prospectus, and the Note Underwriters may offer the Notes to certain
dealers at such prices less a concession of % per Class A-1 Note and %
per Class A-2 Note. The Note Underwriters may allow, and such dealers may
reallow a discount of % per Class A-1 Note and % per Class A-2 Note on
sale to certain other dealers. After the initial public offering of the Notes,
the public offering prices and the concessions and discounts to dealers may be
changed by the Note Underwriters.
Subject to the terms and conditions set forth in an Underwriting Agreement
relating to the Certificates (the "Certificate Underwriting Agreement" and,
together with the Note Underwriting Agreement, the "Underwriting Agreements"),
the Seller has agreed to cause the Trust to sell to each of the Certificate
Underwriters named below (the "Certificate Underwriters" and, together with
the Note Underwriters, the "Underwriters"), and each of the Certificate
Underwriters has severally agreed to purchase, the principal amount of
Certificates set forth opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
CERTIFICATE UNDERWRITERS OF CERTIFICATE
- ------------------------ ----------------
<S> <C>
---
Total........................................................
===
</TABLE>
In addition, Signet will directly offer $ principal amount of the
Certificates. Signet will not make a market in the Certificates.
S-56
<PAGE>
The Certificate Underwriters and Signet propose initially to offer the
Certificates to the public initially at the public offering price set forth on
the cover page of this Prospectus, and the Certificate Underwriters may offer
the Certificates to certain dealers at such price less a concession of % per
Certificate. The Certificate Underwriters may allow, and such dealers may
reallow a discount of % per Certificate on sale to certain other dealers.
After the initial public offering of the Certificates, the public offering
price and the concession and discount to dealers may be changed by the
Certificate Underwriters.
The Underwriting Agreements provide that the Seller will indemnify the
Underwriters against certain liabilities, including liabilities under
applicable securities laws, or contribute to payments the Underwriters may be
required to make in respect thereof.
The Trust may, from time to time in the ordinary course of business, but is
under no obligation to, invest the funds in the Trust Accounts in Eligible
Investments acquired from the Underwriters.
The closing of the sale of the Certificates is conditioned on the closing of
the sale of the Notes and the closing of the sale of the Notes is conditioned
on the closing of the sale of the Certificates.
In the ordinary course of their respective businesses, the Underwriters and
their respective affiliates have engaged and may engage in investment banking
and/or commercial banking transactions with the Seller and its affiliates.
LEGAL MATTERS
Certain legal matters relating to the Securities will be passed upon for the
Trust, the Seller, the Master Servicer and the Administrator by McGuire,
Woods, Battle & Boothe, L.L.P., Richmond, Virginia and for the Underwriters by
Brown & Wood LLP, New York, New York. Certain federal and Maryland income and
corporate tax matters and other matters will be passed upon for the Trust by
McGuire, Woods, Battle & Boothe, L.L.P.
S-57
<PAGE>
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Notes of
Signet Student Loan Trust 1996-A (the "Global Securities") will be available
only in book-entry form. Investors in the Global Securities may hold such
Global Securities through any of DTC, Cedel or Euroclear. The Global
Securities will be tradeable as home market instruments in both the European
and U.S. domestic markets. Initial settlement and all secondary trades will
settle in same-day funds.
Secondary market trading between investors holding Global Securities through
Cedel and Euroclear will be conducted in the ordinary way in accordance with
their normal rules and operating procedures and in accordance with
conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities through
DTC will be conducted according to the rules and procedures applicable to U.S.
corporate debt obligations.
Secondary cross-market trading between Cedel or Euroclear and DTC
Participants holding Notes will be effected on a delivery-against-payment
basis through the respective Depositaries of Cedel and Euroclear (in such
capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing
organizations or their Participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name of
Cede as nominee of DTC. Investors' interests in the Global Securities will be
represented through financial institutions acting on their behalf as direct
and indirect Participants in DTC. As a result, Cedel and Euroclear will hold
positions on behalf of their Participants through their respective
Depositaries, which in turn will hold such positions in accounts as DTC
Participants.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices specified by the Underwriter. Investor securities
custody accounts will be credited with their holdings against payment in same-
day funds on the settlement date.
Investors electing to hold their Global Securities through Cedel or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global Securities will be credited to
the securities custody accounts on the settlement date against payment in
same-day funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to insure that settlement can be made on the desired
value date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled in same-day funds.
Trading between Cedel and/or Euroclear Participants. Secondary market
trading between Cedel Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
S-58
<PAGE>
Trading between DTC Seller and Cedel or Euroclear Purchaser. When Global
Securities are to be transferred from the account of a DTC Participant to the
account of a Cedel Participant or a Euroclear Participant, the purchaser will
send instructions to Cedel or Euroclear through a Cedel Participant or
Euroclear Participant at least one business day prior to settlement. Cedel or
Euroclear will instruct the respective Depositary, as the case may be, to
receive the Global Securities against payment. Payment will include interest
accrued on the Global Securities from and including the last coupon payment
date to and excluding the settlement date, on the basis of the actual number
of days in such accrual period and year assumed to consist of 360 days. For
transactions settling on the 31st of the month, payment will include interest
accrued to and excluding the first day of the following month. Payment will
then be made by the respective Depositary of the DTC Participant's account
against delivery of the Global Securities. After settlement has been
completed, the Global Securities will be credited to the respective clearing
system and by the clearing system, in accordance with its usual procedures, to
the Cedel Participant's or Euroclear Participant's account. The securities
credit will appear the next day (European time) and the cash debt will be
back-valued to, and the interest on the Global Securities will accrue from,
the value date (which would be the preceding day when settlement occurred in
New York). If settlement is not completed on the intended value date (i.e.,
the trade fails), the Cedel or Euroclear cash debt will be valued instead as
of the actual settlement date.
Cedel Participants and Euroclear Participants will need to make available to
the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to preposition funds for
settlement, either from cash on hand or existing lines of credit, as they
would for any settlement occurring within Cedel or Euroclear. Under this
approach, they may take on credit exposure to Cedel or Euroclear until the
Global Securities are credited to their accounts one day later.
As an alternative, if Cedel or Euroclear has extended a line of credit to
them, Cedel Participants or Euroclear Participants can elect not to
preposition funds and allow that credit line to be drawn upon the finance
settlement. Under this procedure, Cedel Participants or Euroclear Participants
purchasing Global Securities would incur overdraft charges for one day,
assuming they cleared the overdraft when the Global Securities were credited
to their accounts. However, interest on the Global Securities would accrue
from the value date. Therefore, in many cases the investment income on the
Global Securities earned during that one-day period may substantially reduce
or offset the amount of such overdraft charges, although this result will
depend on each Cedel Participant's or Euroclear Participant's particular cost
of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities
to the respective European Depositary for the benefit of Cedel Participants or
Euroclear Participants. The sale proceeds will be available to the DTC seller
on the settlement date. Thus, to the DTC Participants a cross-market
transaction will settle no differently than a trade between two DTC
Participants.
Trading between Cedel or Euroclear Seller and DTC Purchaser. Due to time
zone differences in their favor, Cedel Participants and Euroclear Participants
may employ their customary procedures for transactions in which Global
Securities are to be transferred by the respective clearing system, through
the respective Depositary, to a DTC Participant. The seller will send
instructions to Cedel or Euroclear through a Cedel Participant or Euroclear
Participant at least one business day prior to settlement. In these cases
Cedel or Euroclear will instruct the respective Depositary, as appropriate, to
deliver the Global Securities to the DTC Participant's account against
payment. Payment will include interest accrued on the Global Securities from
and including the last interest payment to and excluding the settlement date
on the basis of the actual number of days in such accrual period and a year
assumed to consist of 360 days. For transactions settling on the 31st of the
month, payment will include interest accrued to and excluding the first day of
the following month. The payment will then be reflected in the account of the
Cedel Participant or Euroclear Participant the following day, and receipt of
the cash proceeds in the Cedel Participant's or Euroclear Participant's
account would be back-valued to the value date (which would be the preceding
day, when settlement occurred in New York). Should the Cedel Participant or
Euroclear Participant have a line of credit with its respective clearing
system and elect to be in debt in anticipation of receipt of the sale proceeds
in its account, the back-valuation will extinguish any overdraft
S-59
<PAGE>
incurred over that one-day period. If settlement is not completed on the
intended value date (i.e., the trade fails), receipt of the cash proceeds in
the Cedel Participant's or Euroclear Participant's account would instead be
valued as of the actual settlement date.
Finally, day traders that use Cedel or Euroclear and that purchase Global
Securities from DTC Participants for delivery to Cedel Participants or
Euroclear Participants should note that these trades would automatically fail
on the sale side unless affirmative action were taken. At least three
techniques should be readily available to eliminate this potential problem:
(a) borrowing through Cedel or Euroclear for one day (until the purchase
side of the day trade is reflected in their Cedel or Euroclear accounts) in
accordance with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC Participant no
later than one day prior to settlement, which would give the Global
Securities sufficient time to be reflected in their Cedel or Euroclear
account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade so
that the value date for the purchase from the DTC Participant is at least
one day prior to the value date of the sale to the Cedel Participant or
Euroclear Participant.
CERTAIN U.S. FEDERAL WITHHOLDING TAXES AND DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities through Cedel or Euroclear (or
through DTC if the holder has an address outside the U.S.) will be subject to
30% U.S. withholding tax that generally applies to payments of interest
(including original issue discount) on registered debt issued by U.S. Persons,
unless (i) each clearing system, bank or other financial institution that
holds customers' securities in the ordinary course of its trade or business in
the chain of intermediaries between such beneficial owner and the U.S. entity
required to withhold tax complies with applicable certification requirements
and (ii) such beneficial owners take one of the following steps to obtain an
exemption or reduced tax rate:
Exemption for non-U.S. Persons (Form W-8). Beneficial owners of Global
Securities that are non-U.S. Persons can obtain a complete exemption from the
withholding tax by filing a signed Form W-8 (Certificate of Foreign Status).
If the information shown on Form W-8 changes, a new Form W-8 must be filed
within 30 days of such change.
Exemption for non-U.S. Persons with effectively connected income (Form
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its
conduct of a trade or business in the United States, can obtain an exemption
from the withholding tax by filing Form 4224 (Exemption from Withholding of
Tax on Income Effectively Connected with the Conduct of a Trade or Business in
the United States).
Exemption or reduced rate for non-U.S. Persons resident in treaty countries
(Form 1001). Non-U.S. Persons that are beneficial owners of Global Securities
residing in a country that has a tax treaty with the United States can obtain
an exemption or reduced tax rate (depending on the treaty terms) by filing
Form 1001 (Ownership, Exemption or Reduced Rate Certificate). If the treaty
provides for a reduced rate, withholding tax will be imposed at that rate
unless the filer alternatively files Form W-8. Form 1001 may be filed by the
Noteholder or his agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The holder of a Global Security
or, in the case of a Form 1001 or a Form 4224 filer, his agent, files by
submitting the appropriate form to the person through whom it
S-60
<PAGE>
holds (the clearing agency, in the case of persons holding directly on the
books of the clearing agency). Form W-8 and Form 1001 are effective for three
calendar years and Form 4224 is effective for one calendar year.
The term "U.S. Person" means (i) a citizen or resident of the United States,
(ii) a corporation or partnership organized in or under the laws of the United
States or any political subdivision thereof or (iii) an estate or trust the
income of which is includible in gross income for United States tax purposes,
regardless of its source (except, with respect to the tax year of any trust
that begins after December 31, 1996, a trust whose administration is subject
to the primary supervision of a United States court and which has one or more
United States fiduciaries who have authority to control all substantial
decisions of the trust). This summary of documentation requirements does not
deal with all aspects of U.S. Federal income tax withholding that may be
relevant to foreign holders of the Global Securities. Investors are advised to
consult their own tax advisors for specific tax advice concerning their
holding and disposing of the Global Securities. See, also, "Federal Tax
Consequences--Tax Consequences to Holders of the Notes--Foreign Holders" in
the Prospectus.
S-61
<PAGE>
INDEX OF PRINCIPAL TERMS
Set forth below is a list of the defined terms used in this Prospectus
Supplement and the pages on which the definitions of such terms may be found
herein.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Additional Fundings...................... S-2, S-4, S-6, S-7, S-9, S-47, S-53
Additional Student Loans................. S-4, S-47
Administration Agreement................. S-4
Administration Fee....................... S-12
Administrator............................ S-3
Available Funds.......................... S-49
Benefit Plan............................. S-57
Cede..................................... S-2
CEDEL.................................... S-3
Certificate Balance...................... S-50
Certificate LIBOR Rate................... S-15, S-42
Certificate Rate......................... S-15, S-42
Certificate Underwriters................. S-58
Certificate Underwriting Agreement....... S-58
Certificateholders....................... S-14, S-16
Certificateholders' Distribution Amount.. S-50
Certificateholders' Interest Carryover
Shortfall............................... S-50
Certificateholders' Interest Distribution
Amount.................................. S-51
Certificateholders' Interest LIBOR
Carryover............................... S-16
Certificateholders' Principal Carryover
Shortfall............................... S-51
Certificateholders' Principal
Distribution Amount..................... S-51
Certificates............................. S-1, S-3
Class A-1 Final Maturity Date............ S-15, S-41
Class A-1 LIBOR Rate..................... S-12, S-40
Class A-1 Noteholders.................... S-13
Class A-1 Notes.......................... S-1, S-3
Class A-1 Rate........................... S-12, S-40
Class A-2 Final Maturity Date............ S-15, S-41
Class A-2 LIBOR Rate..................... S-12, S-40
Class A-2 Noteholders.................... S-13
Class A-2 Notes.......................... S-1, S-3
Class A-2 Rate........................... S-12, S-40
Closing Date............................. S-4
Collection Account....................... S-7
Collection Period........................ S-7
Company.................................. S-4
Cumulative cash reserves................. S-37
Cutoff Date.............................. S-4
Deferral................................. S-32
Department............................... S-2
Determination Date....................... S-48
Distribution Date........................ S-2
DOE Data Book............................ S-37-S-39
DTC...................................... S-2, S-3
Eligible Lender Trustee.................. S-1, S-3
ERISA.................................... S-19
</TABLE>
S-62
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Exchange Act........................................................ S-2
Expected Interest Collections....................................... S-13, S-40
Final Maturity Date................................................. S-17, S-42
Financed Student Loans.............................................. S-1, S-4
Forbearance......................................................... S-32
Funding Period...................................................... S-7
Global Securities................................................... S-59
Grace............................................................... S-32
Guarantor........................................................... S-2, S-4
In-School........................................................... S-32
Indenture........................................................... S-12
Indenture Trustee................................................... S-3
Index Maturity......................................................
Initial Financed Student Loans...................................... S-4
Initial Pool Balance................................................ S-4
Insolvency Event.................................................... S-55
Interest Payment Date............................................... S-2, S-13
Interest Period..................................................... S-13, S-40
LIBOR............................................................... S-43
LIBOR Determination Date............................................ S-43
Liquidated Student Loans............................................ S-49
Liquidation Proceeds................................................ S-49
Loan Sale Agreement................................................. S-4
Master Servicer..................................................... S-3
Master Servicing Agreement.......................................... S-3
Minimum Purchase Price.............................................. S-54
Monthly Available Funds............................................. S-48
Monthly Collection Period........................................... S-48
Monthly Rebate Fee.................................................. S-25
Note Interest Rates................................................. S-12
Note Underwriters................................................... S-57
Note Underwriting Agreement......................................... S-56
Noteholders......................................................... S-13
Noteholders' Distribution Amount.................................... S-51
Noteholders' Interest Carryover Shortfall........................... S-51
Noteholders' Interest Distribution Amount........................... S-51
Noteholders' Interest LIBOR Carryover............................... S-14
Noteholders' Principal Carryover Shortfall.......................... S-51
Noteholders' Principal Distribution Amount.......................... S-51
Notes............................................................... S-1, S-3
Obligors............................................................ S-18
Plan................................................................ S-56
Pool Balance........................................................ S-18
Pre-Funded Amount................................................... S-7
Pre-Funding Account................................................. S-7
Principal Distribution Adjustment................................... S-52
Principal Distribution Amount....................................... S-52
Purchase Amount..................................................... S-18
Realized Losses..................................................... S-52
Record Date......................................................... S-13
Reference Banks..................................................... S-43
Repayment........................................................... S-32
Reserve Account..................................................... S-8
</TABLE>
S-63
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Reserve Account Initial Deposit..................................... S-8
Secretary........................................................... S-36
Securities.......................................................... S-3
Securityholders..................................................... S-14, S-16
Seller.............................................................. S-1, S-3
Serial Loan......................................................... S-5, S-47
Serial Loans........................................................ S-5, S-47
Servicing Fee....................................................... S-11
Signet.............................................................. S-2, S-3
Specified Reserve Account Balance................................... S-53
Student Loan Rate................................................... S-13, S-40
Student Loan Rate Accrual Period.................................... S-13
Student Loans....................................................... S-4
Subsequent Cutoff Date.............................................. S-47
Telerate Page 3750.................................................. S-43
Transfer Agreement.................................................. S-5, S-47
Transfer and Servicing Agreements................................... S-46
Transfer Date....................................................... S-47
Trust............................................................... S-1, S-3
Trust Agreement..................................................... S-4
U.S. Person......................................................... S-62
Underwriters........................................................ S-58
Underwriting Agreements............................................. S-57
</TABLE>
S-64
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
Eligible Lender Trustee.............................................S-1,.S-3
ERISA...................................................................S-19
Excess Distribution Amount...............................................S-9
Exchange Act.............................................................S-2
Expected Interest Collections.....................................S-13,.S-40
Final Maturity Date...............................................S-17,.S-42
Financed Student Loans..............................................S-1,.S-4
Forbearance.............................................................S-32
Funding Period...........................................................S-7
Global Securities.......................................................S-59
Grace...................................................................S-32
Guarantor...........................................................S-2,.S-4
In-School...............................................................S-32
Indenture...............................................................S-12
Indenture Trustee........................................................S-3
Initial Financed Student Loans...........................................S-4
Initial Pool Balances....................................................S-4
Insolvency Event........................................................S-55
Interest Payment Date............................................. S-2,.S-13
Interest Period...................................................S-13,.S-40
LIBOR...................................................................S-43
LIBOR Determination Date................................................S-43
Liquidated Student Loans................................................S-49
Liquidation Proceeds....................................................S-49
Loan Sale Agreement......................................................S-4
Master Servicer..........................................................S-3
Master Servicing Agreement...............................................S-3
Minimum Purchase Price..................................................S-55
Monthly Available Funds.................................................S-48
Monthly Collection Period...............................................S-48
Monthly Rebate Fee......................................................S-25
Note Interest Rates.....................................................S-12
Note Underwriters.......................................................S-57
Noteholders.............................................................S-13
Noteholders' Distribution Amount........................................S-51
Noteholders' Interest Carryover Shortfall...............................S-51
Noteholders' Interest Distribution Amount...............................S-51
Noteholders' Interest LIBOR Carryover...................................S-14
Noteholders' Principal Carryover Shortfall..............................S-51
Noteholders' Principal Distribution Amount..............................S-51
Notes...............................................................S-1,.S-3
Obligors................................................................S-18
Plan....................................................................S-56
Pool Balance............................................................S-18
Pre-Funded Amount........................................................S-7
Pre-Funding Account......................................................S-7
Principal Distribution Adjustment.......................................S-52
Principal Distribution Amount...........................................S-52
Purchase Amount.........................................................S-18
Realized Losses.........................................................S-52
Record Date.............................................................S-13
</TABLE>
S-65
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
Reference Banks.........................................................S-43
Repayment...............................................................S-32
Reserve Account..........................................................S-8
Reserve Account Initial Deposit..........................................S-8
Secretary...............................................................S-36
Securities...............................................................S-3
Securityholders...................................................S-14, S-16
Seller..............................................................S-1, S-3
Serial Loan........................................................S-5, S-47
Serial Loans.......................................................S-5, S-47
Servicing Fee...........................................................S-11
Signet..............................................................S-2, S-3
Specified Reserve Account Balance.......................................S-53
Student Loan Rate.................................................S-13, S-40
Student Loan Rate Accrual Period........................................S-13
Student Loans............................................................S-4
Subsequent Cutoff Date..................................................S-47
Telerate Page 3750......................................................S-43
Transfer Agreement.................................................S-5, S-47
Transfer and Servicing Agreements.......................................S-46
Transfer Date...........................................................S-47
Trust...............................................................S-1, S-3
Trust Agreement..........................................................S-4
U.S. Person.............................................................S-62
Underwriters............................................................S-58
Underwriting Agreements.................................................S-57
</TABLE>
S-66
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT +
+SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY +
+NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH +
+OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR +
+QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION DATED DECEMBER , 1996
PROSPECTUS
THE SIGNET STUDENT LOAN TRUSTS
ASSET-BACKED NOTES
ASSET-BACKED CERTIFICATES
----------
SIGNET BANK
SELLER AND MASTER SERVICER
----------
The Asset-Backed Notes (the "Notes") and the Asset-Backed Certificates (the
"Certificates" and, together with the Notes, the "Securities") described herein
may be sold from time to time in one or more series, in amounts, at prices and
on terms to be determined at the time of sale and to be set forth in a
supplement to this Prospectus (a "Prospectus Supplement"). Each series of
Securities, which will include one or more classes of Notes and one or more
classes of Certificates, will be issued by a trust to be formed with respect to
such series (each, a "Trust"). Each Trust will be formed pursuant to a Trust
Agreement to be entered into among Signet Bank, as seller of the Student Loans
(as defined below) ("Signet" or the "Seller"), an affiliate of the Seller
specified in the related Prospectus Supplement (the "Company") and the Eligible
Lender Trustee specified in the related Prospectus Supplement (the "Eligible
Lender Trustee"). The Notes of each series will be issued and secured pursuant
to an Indenture between the Trust and the Indenture Trustee specified in the
related Prospectus Supplement (the "Indenture Trustee") and will represent
indebtedness of the related Trust. The Certificates of a series will represent
fractional undivided interests in the related Trust. The property of each Trust
will include education loans to students and parents of dependent students (the
"Student Loans"), and certain monies due or received thereunder on and after
the applicable Cutoff Date set forth in the related Prospectus Supplement, all
as described herein and in the related Prospectus Supplement.
Each class of Securities of any series will represent the right to receive a
specified amount of payments of principal and interest on the related Student
Loans, at the rates, on the dates and in the manner described herein and in the
related Prospectus Supplement. The right of each class of Securities to receive
payments may be senior or subordinate to the rights of one or more of the other
classes of such series. Distributions on Certificates of a series may be
subordinated in priority to payments due on the related Notes to the extent
described herein and in the related Prospectus Supplement. A series may include
one or more classes of Notes and Certificates which differ as to the timing and
priority of payment, interest rate or amount of distributions in respect of
principal or interest or both. The rate of payment in respect of principal of
the Notes and distributions in respect of the Certificate Balance of the
Certificates of any class will depend on the priority of payment of such class
and the rate and timing of payments (including prepayments, defaults, guarantee
payments, liquidations and repurchases of Student Loans) on the related Student
Loans. A rate of payment lower or higher than that anticipated may affect the
weighted average life of each class of Securities in the manner described
herein and in the related Prospectus Supplement.
----------
THE NOTES OF A GIVEN SERIES REPRESENT OBLIGATIONS OF, AND THE CERTIFICATES OF
SUCH SERIES REPRESENT BENEFICIAL INTERESTS IN, THE RELATED TRUST ONLY AND DO
NOT REPRESENT OBLIGATIONS OF OR INTERESTS IN, AND ARE NOT GUARANTEED OR
INSURED BY THE SELLER, THE MASTER SERVICER, THE ADMINISTRATOR, ANY
SUBSERVICER, ANY GUARANTOR OR ANY AFFILIATE THEREOF. NEITHER THE NOTES
NOR THE CERTIFICATES ARE GUARANTEED BY ANY GOVERNMENTAL AGENCY.
----------
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FACTORS SET FORTH UNDER "RISK
FACTORS" HEREIN BEGINNING ON PAGE 14 AND IN THE RELATED PROSPECTUS SUPPLEMENT
AT PAGE S-21.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURI-
TIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
----------
Retain this Prospectus for future reference. This Prospectus may not be used
to consummate sales of Securities offered hereby unless accompanied by a
Prospectus Supplement.
The date of this Prospectus is December , 1996
<PAGE>
AVAILABLE INFORMATION
The Seller, as originator of each Trust, has filed with the Securities and
Exchange Commission (the "Commission") a Registration Statement (together with
all amendments and exhibits thereto, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Securities offered hereby. This Prospectus, which forms part of the
Registration Statement, does not contain all the information contained
therein. For further information, reference is made to the Registration
Statement which may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549; and at the Commission's regional offices at Seven World Trade Center,
New York, New York 10048, and 500 West Madison Street, 14th Floor, Chicago,
Illinois 60661. Copies of the Registration Statement may be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission maintains a Web
site at http://www. sec.gov containing reports, proxy and information
statements and other information regarding registrants, including the Seller,
that file electronically with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Seller, as originator of any Trust, pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as
amended, subsequent to the date of this Prospectus and prior to the
termination of the offering of the Securities shall be deemed to be
incorporated by reference in this Prospectus. Any statement contained herein
or in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus
to the extent that a statement contained herein or in any subsequently filed
document which also is to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus.
The Seller will provide without charge to each person, including any
beneficial owner of Securities, to whom a copy of this Prospectus is
delivered, on the written or oral request of any such person, a copy of any or
all of the documents incorporated herein or in any related Prospectus
Supplement by reference, except the exhibits to such documents (unless such
exhibits are specifically incorporated by reference in such documents).
Requests for such copies should be directed to Treasury Department, Signet
Banking Corporation, 7 North Eighth Street, Richmond, Virginia 23219
(Telephone: (804) 771-7060).
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION..................................................... 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................... 2
SUMMARY OF TERMS.......................................................... 6
RISK FACTORS.............................................................. 14
Failure to Comply with Student Loan Origination and Servicing Procedures
for Federal Student Loans.............................................. 14
Failure to Comply with Student Loan Origination and Servicing Procedures
for Private Student Loans.............................................. 14
Variability of Actual Cash Flows........................................ 15
Inability of Related Indenture Trustee to Liquidate Student Loans....... 15
Unsecured Nature of Student Loans; Financial Status of Federal
Guarantor.............................................................. 15
Default Risk on Certain Student Loans................................... 16
Fees Payable on Certain Financed Student Loans Prior to Distributions on
the Securities......................................................... 16
Change in Law........................................................... 16
Subordination of the Certificates....................................... 17
Limited Assets of the Trust............................................. 17
Use of the Pre-Funding Account or Collateral Reinvestment Account to
Make Additional Fundings; Changes in Characteristics of the Student
Loan Pool.............................................................. 17
Yield and Prepayment Considerations..................................... 17
Servicer Default........................................................ 18
Consolidation of Federal Benefit Billings and Receipts with Other
Trusts................................................................. 19
Certain Legal Aspects................................................... 19
Book-Entry Registration................................................. 21
FORMATION OF THE TRUSTS................................................... 21
The Trusts.............................................................. 21
Eligible Lender Trustee................................................. 21
USE OF PROCEEDS........................................................... 22
THE SELLER, THE MASTER SERVICER AND THE SUBSERVICERS...................... 22
The Seller and the Master Servicer...................................... 22
The Subservicers........................................................ 22
ASSUMPTION OF SIGNET'S OBLIGATIONS........................................ 22
THE STUDENT LOAN POOLS.................................................... 23
General................................................................. 23
Origination and Marketing Process....................................... 24
Servicing and Collections Process....................................... 24
Claims and Recovery Rates............................................... 25
FEDERAL FAMILY EDUCATION LOAN PROGRAM..................................... 25
General................................................................. 25
Legislative and Administrative Matters.................................. 26
Eligible Lenders, Students and Educational Institutions................. 27
Financial Need Analysis................................................. 28
Special Allowance Payments.............................................. 28
Federal Stafford Loans.................................................. 29
Interest.............................................................. 29
Interest Subsidy Payments............................................. 29
Loan Limits........................................................... 30
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Repayment.............................................................. 31
Grace Periods, Deferral Periods, Forbearance Periods................... 31
Federal Unsubsidized Stafford Loans...................................... 31
Federal PLUS and Federal SLS Loan Programs............................... 31
Loan Limits............................................................ 32
Interest............................................................... 32
Repayment, Deferments.................................................. 32
Federal Consolidation Loan Program....................................... 33
Federal Guarantors....................................................... 34
Federal Insurance and Reinsurance of Federal Guarantors.................. 34
PRIVATE STUDENT AND OTHER LOAN PROGRAMS.................................... 36
WEIGHTED AVERAGE LIFE OF THE SECURITIES.................................... 36
POOL FACTORS AND TRADING INFORMATION....................................... 37
DESCRIPTION OF THE NOTES................................................... 37
General.................................................................. 37
Principal and Interest on the Notes...................................... 38
The Indenture............................................................ 39
Modification of Indenture.............................................. 39
Events of Default; Rights Upon Event of Default........................ 39
Certain Covenants...................................................... 41
Annual Compliance Statement............................................ 42
Indenture Trustee's Annual Report...................................... 42
Satisfaction and Discharge of Indenture................................ 42
The Indenture Trustee.................................................. 42
DESCRIPTION OF THE CERTIFICATES............................................ 42
General.................................................................. 42
Principal and Interest in Respect of the Certificates.................... 43
CERTAIN INFORMATION REGARDING THE SECURITIES............................... 43
Fixed Rate Securities.................................................... 43
Floating Rate Securities................................................. 44
Book-Entry Registration.................................................. 44
Definitive Securities.................................................... 45
List of Securityholders.................................................. 46
Reports to Securityholders............................................... 46
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS....................... 46
General.................................................................. 46
Sale of Student Loans; Representations and Warranties.................... 47
Additional Fundings...................................................... 48
Accounts................................................................. 48
Servicing Procedures..................................................... 49
Payments on Student Loans................................................ 50
Servicer Covenants....................................................... 50
Servicer Compensation.................................................... 51
Distributions............................................................ 51
Credit and Cash Flow Enhancement......................................... 52
General................................................................ 52
Reserve Account........................................................ 52
Statements to Indenture Trustee and Trust................................ 52
Evidence as to Compliance................................................ 53
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Certain Matters Regarding the Master Servicer............................ 54
Servicer Default......................................................... 54
Rights Upon Servicer Default............................................. 54
Waiver of Past Defaults.................................................. 55
Amendment................................................................ 55
Payment of Notes......................................................... 56
Termination.............................................................. 56
Optional Redemption.................................................... 56
Auction of Student Loans............................................... 56
Administration Agreement................................................. 56
CERTAIN LEGAL ASPECTS OF THE STUDENT LOANS................................. 57
Transfer of Student Loans................................................ 57
Certain Matters Relating to Receivership................................. 58
Consumer Protection Laws................................................. 59
Loan Origination and Servicing Procedures Applicable to Student Loans.... 59
Student Loans Generally Not Subject to Discharge In Bankruptcy........... 60
FEDERAL INCOME TAX CONSEQUENCES............................................ 60
Tax Characterization of the Trust........................................ 60
Tax Consequences to Holders of the Notes................................. 61
Treatment of the Notes as Indebtedness................................. 61
Original Issue Discount................................................ 61
Interest Income on the Notes........................................... 61
Sale or Other Disposition.............................................. 62
Foreign Holders........................................................ 62
Backup Withholding..................................................... 63
Possible Alternative Treatments of the Notes........................... 63
Tax Consequences to Holders of the Certificates.......................... 63
Treatment of the Trust as a Partnership................................ 63
Partnership Taxation................................................... 63
Computation of Income.................................................. 64
Determining the Bases of Trust Assets.................................. 64
Discount and Premium................................................... 65
Disposition of Certificates............................................ 65
Allocations Between Transferors and Transferees........................ 65
Section 754 Election................................................... 66
Administrative Matters................................................. 66
Tax Consequences to Foreign Certificateholders......................... 66
Backup Withholding..................................................... 67
STATE TAX CONSEQUENCES..................................................... 67
Tax Consequences with Respect to the Notes............................... 68
Tax Consequences with Respect to the Certificates........................ 68
ERISA CONSIDERATIONS....................................................... 68
The Notes................................................................ 68
The Certificates......................................................... 68
PLAN OF DISTRIBUTION....................................................... 69
LEGAL MATTERS.............................................................. 69
INDEX OF PRINCIPAL TERMS................................................... 70
</TABLE>
5
<PAGE>
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus and by reference to
the information with respect to the Securities of any series contained in the
related Prospectus Supplement to be prepared and delivered in connection with
the offering of such Securities. Certain capitalized terms used in this
Prospectus are defined elsewhere herein on the pages indicated in the "Index of
Principal Terms."
Issuer...................... With respect to each series of Securities, the
trust to be formed pursuant to a Trust Agreement
(as amended and supplemented from time to time, a
"Trust Agreement") among the Seller, the Company
and the Eligible Lender Trustee for such Trust
(the "Trust" or the "Issuer").
Seller...................... Signet Bank, a Virginia banking corporation
("Signet"), as seller (the "Seller"). See
"Assumption of Signet's Obligations".
Master Servicer............. Signet, as master servicer on behalf of the Trust
(the "Master Servicer") pursuant to a Master
Servicing Agreement (as amended and supplemented
from time to time, the "Master Servicing
Agreement") among the Trust, the Master Servicer
and the Eligible Lender Trustee. See "The Seller,
the Master Servicer and the Subservicers" and
"Description of the Transfer and Servicing
Agreements--Servicing Procedures".
Eligible Lender Trustee..... For each trust, such entity as is specified as
the Eligible Lender Trustee in the related
Prospectus Supplement.
Indenture Trustee........... With respect to each series of Securities, the
Indenture Trustee specified in the related
Prospectus Supplement.
Administrator............... Signet in its capacity as administrator (the
"Administrator").
The Notes................... Each series of Securities will include one or
more classes of Notes, which will be issued
pursuant to an Indenture between the Trust and
the related Indenture Trustee (as amended and
supplemented from time to time, an "Indenture").
Notes will be available for purchase in
denominations of $1,000 and integral multiples
thereof and will be available in book-entry form
only or as provided in the Prospectus Supplement.
Noteholders will be able to receive Definitive
Notes only in the limited circumstances described
herein or in the related Prospectus Supplement.
See "Certain Information Regarding the
Securities--Definitive Securities".
Each class of Notes will have a stated principal
amount and will bear interest at a specified rate
or rates (with respect to each class of Notes,
the "Interest Rate"). Each class of Notes may
have a different Interest Rate, which may be a
fixed, variable or adjustable Interest Rate, or
any combination of the foregoing. The related
Prospectus Supplement will specify the Interest
Rate for each class of Notes, or the method for
determining the Interest Rate.
6
<PAGE>
With respect to a series that includes two or
more classes of Notes, each class may differ as
to timing and priority of payments, seniority,
allocations of losses, Interest Rate or amount of
payments of principal or interest, or payments of
principal or interest in respect of any such
class or classes may or may not be made upon the
occurrence of specified events.
The Certificates............ Each series of Securities may include one or more
classes of Certificates which will be issued
pursuant to the related Trust Agreement.
Certificates will be available for purchase in a
minimum denomination of $1,000 and in integral
multiples of $1,000 in excess thereof and will be
available in book-entry form or as provided in
the Prospectus Supplement. Certificateholders
will be able to receive Definitive Certificates
only in the limited circumstances described
herein or in the related Prospectus Supplement.
See "Certain Information Regarding the
Securities--Definitive Securities".
Each class of Certificates will have a stated
Certificate Balance specified in the related
Prospectus Supplement (the "Certificate Balance")
and will accrue interest on such Certificate
Balance at a specified rate (with respect to each
class of Certificates, the "Pass-Through Rate").
Each class of Certificates may have a different
Pass-Through Rate, which may be a fixed, variable
or adjustable Pass-Through Rate or any
combination of the foregoing. The related
Prospectus Supplement will specify the Pass-
Through Rate for each class of Certificates or
the method for determining the Pass- Through
Rate.
With respect to a series that includes two or
more classes of Certificates, each class may
differ as to timing and priority of
distributions, seniority, allocations of losses,
Pass-Through Rate or amount of distributions in
respect of principal or interest, or
distributions in respect of principal or interest
in respect of any such class or classes may or
may not be made upon the occurrence of specified
events. Distributions in respect of the
Certificates may be subordinated in priority of
payment to payments on the Notes, if so provided
in the Prospectus Supplement.
Assets of the Trust......... The assets of each Trust will include a pool of
student loans consisting of education loans to
students and parents of dependent students
("Student Loans"), which will include rights to
receive payments made with respect to such
Student Loans and the proceeds thereof. On or
prior to the Closing Date specified in the
related Prospectus Supplement with respect to a
Trust (a "Closing Date"), the Seller will sell
Student Loans having an aggregate principal
balance specified in the related Prospectus
Supplement as of the date specified therein (a
"Cutoff Date"), to the Eligible Lender Trustee on
behalf of the Trust pursuant to a Loan Sale
Agreement (as amended and supplemented from time
to time, a "Loan Sale
7
<PAGE>
Agreement") among the Seller, the related Trust
and the related Eligible Lender Trustee. The
property of each Trust will also include amounts
on deposit in certain trust accounts, including
the related Collection Account, any Reserve
Account, any Pre-Funding Account, any Collateral
Reinvestment Account and any other account
identified in the applicable Prospectus
Supplement.
The Student Loans sold to any Trust will be
selected from Student Loans owned by the Seller
based on criteria specified in the applicable
Loan Sale Agreement and described herein and in
the related Prospectus Supplement.
Unless otherwise specified in the applicable
Prospectus Supplement, each Student Loan sold to
any Trust will, subject to compliance with
specific origination and servicing procedures
prescribed by federal and guarantor regulations,
be guaranteed as to the payment of principal and
interest by either (i) a state or private non-
profit guarantor (each, a "Federal Guarantor"),
which agency is reinsured by the United States
Department of Education (the "Department") for
between 80% and 100% of the amount of default
claims paid by such Federal Guarantor for a given
federal fiscal year for loans disbursed prior to
October 1, 1993, for 78% to 98% of default claims
paid for loans disbursed on or after October 1,
1993, and for 100% of death, disability,
bankruptcy, closed school and false certification
claims paid ("Federal Student Loans"), (ii) a
state or private guarantor (each, a "Private
Guarantor" and together with the Federal
Guarantors, the "Guarantors") that is not
reinsured by the Department ("Private Student
Loans") or (iii) a system of self insurance
(items (ii) and (iii) collectively, "Private
Student Loans"). Amounts paid by a Guarantor
pursuant to its guarantee are herein referred to
as "Guarantee Payments". See "Federal Family
Education Loan Program--Federal Guarantors", "--
Federal Insurance and Reinsurance of Federal
Guarantors" and "Private Student Loan Programs".
If so provided in the related Prospectus
Supplement, during the period (the "Funding
Period") from the Closing Date until the first to
occur of (i) the amount on deposit in the Pre-
Funding Account being less than an amount
specified in the related Prospectus Supplement,
(ii) an Event of Default occurring under the
Indenture, a Servicer Default occurring under the
Master Servicing Agreement or an Administrator
Default occurring under the Administration
Agreement, (iii) certain events of insolvency
occurring with respect to the Seller or (iv) the
last day of the Collection Period preceding a
Distribution Date specified in the related
Prospectus Supplement, an account will be
maintained in the name of the Indenture Trustee
(the "Pre-Funding Account"). The amount on
deposit in the Pre-Funding Account (the "Pre-
Funded Amount") on the Closing Date will equal an
amount specified in the related Prospectus
Supplement (which will be deposited out of the
net proceeds of the sale of the related
Securities) and, during the Funding Period, will
be reduced from time to time by the amount
thereof used to make Additional Fundings.
8
<PAGE>
In addition, if so provided in the related
Prospectus Supplement, in lieu of a Funding
Period, during the period (the "Revolving
Period") from the Closing Date until the first to
occur of (i) an event described in clauses (ii)
or (iii) of the preceding paragraph or of such
additional event or events as are described in
the related Prospectus Supplement as having such
effect (each, an "Early Amortization Event") or
(ii) the last day of the Collection Period
preceding a Distribution Date specified in the
related Prospectus Supplement, an account will be
maintained in the name of the Indenture Trustee
(the "Collateral Reinvestment Account"). The
amount on deposit in the Collateral Reinvestment
Account on the Closing Date may, if so specified
in the related Prospectus Supplement, include an
amount specified in the related Prospectus
Supplement (which will be deposited out of the
net proceeds of the sale of the related
Securities) and, during the Revolving Period
principal will not be distributed on the
Securities of the related series and principal
collections, together with (if and to the extent
described in the related Prospectus Supplement)
interest collections on the Student Loans to be
distributed therefrom, will be deposited from
time to time in the Collateral Reinvestment
Account and will be used to make Additional
Fundings.
Additional Fundings will consist of one or more
of the following, in each case if and to the
extent specified in the related Prospectus
Supplement: (i) interest payments to Noteholders
and Certificateholders in lieu of collections of
interest on certain of the Student Loans to the
extent such interest is not paid currently but
will be capitalized and added to the principal
balance of such Student Loans; (ii) payments to
purchase from the Seller during a Funding Period
or a Revolving Period, certain additional Student
Loans made to borrowers who have existing Student
Loans that are part of the pool of Student Loans
of a series as of the Cutoff Date ("Existing
Borrowers") and, in the case of a Revolving
Period, made to borrowers which may include, but
will not be limited to, borrowers who at the time
of such purchase by the Trust have existing
Student Loans that are part of such pool; and
(iii) payments to fund the origination by the
related Trust under certain circumstances of
certain additional Student Loans. If so provided
in the related Prospectus Supplement, Additional
Fundings may continue to occur after the Funding
Period or Revolving Period. Additional Fundings
occurring after the Funding Period or Revolving
Period will be funded from distributions on the
related Student Loans in the manner specified in
the related Prospectus Supplement. See
"Description of the Transfer and Servicing
Agreements--Additional Fundings".
The Higher Education Act.... To the extent Student Loans to be sold by the
Seller to a Trust consist of Federal Student
Loans originated pursuant to the federal family
education loan program under the Higher Education
Act of 1965, as amended (the "Act"), such Student
Loans will be guaranteed as to the payment of
principal and interest by a state or private non-
profit
9
<PAGE>
guarantor (each, a "Federal Guarantor"). The
Federal Guarantors each have reinsurance
contracts with the Secretary of the Department of
Education (the "Department"). The Department
reimburses to the Federal Guarantors claims paid
by the Federal Guarantors. The amount of such
reinsurance payment is calculated annually and is
subject to reduction based upon the annual claims
rate of the Federal Guarantor to the Department
calculated to equal the amount of federal
reimbursement as a percentage of the original
principal amount of guaranteed loans held by such
Federal Guarantor in repayment on the last day of
the prior fiscal year. Regardless of the level of
reinsurance that the applicable Federal Guarantor
receives from the Department, the Eligible Lender
Trustee, on behalf of each Trust, will continue
to be entitled to reimbursement for the
applicable guaranteed portion of a Federal
Student Loan (either 98% or 100%, as applicable)
from such Federal Guarantor. The obligations of
the Federal Guarantors to the holders of Federal
Student Loans, such as the Eligible Lender
Trustee, on behalf of each Trust, are payable
from the general funds available to each such
Federal Guarantor, including cash on deposit
therewith, reimbursements received from the
Department and reserve funds maintained by the
Federal Guarantors as required by the Act. The
Act provides that, subject to the provisions
thereof, including the proper origination and
servicing of Federal Student Loans, a Federal
Guarantor has a contractual right to reinsurance
payments by the Department. In addition, the Act
provides that if the Department determines that a
Federal Guarantor is unable to meet its insurance
obligations to holders of Federal Student Loans,
such as the Eligible Lender Trustee, on behalf of
each Trust, then the holders of Federal Student
Loans guaranteed by such Federal Guarantor may
submit guarantee claims directly to the
Department and the Department is required to pay
to the holders the full insurance obligation of
such Federal Guarantor until such time as the
obligations are transferred by the Department to
a new Federal Guarantor capable of meeting such
obligations or until a qualified successor
assumes such obligations. There can be no
assurance that the Department would ever make
such a determination with respect to a Federal
Guarantor or, if such a determination was made,
whether such determination or the ultimate
payment of such guarantee claims would be made in
a timely manner. In addition, failure to properly
originate or service a Student Loan can cause a
Student Loan to lose its guarantee. See "Risk
Factors--Failure to Comply with Student Loan
Origination and Servicing Procedures for Federal
Student Loans" and "--Unsecured Nature of Federal
Student Loans; Financial Status of Federal
Guarantor" herein and "Federal Family Educational
Loan Program" herein for a more complete
description of the Act.
Credit and Cash Flow
Enhancement................. Credit or cash flow enhancement with respect to a
Trust or any class or classes of Securities may
include any one or more of the following:
subordination of one or more other classes of
Securities, a Reserve Account, over-
collateralization, letters of credit, credit or
9--1
<PAGE>
liquidity facilities, surety bonds, guaranteed
investment contracts, repurchase obligations,
other agreements with respect to third-party
payments or other support, cash deposits or other
arrangements. Any form of credit or cash flow
enhancement may have certain limitations and
exclusions from coverage thereunder, which will
be described in the related Prospectus
Supplement.
Reserve Account............. An account in the name of the related Indenture
Trustee (the "Reserve Account") may be
established and maintained by the Administrator
with the Indenture Trustee in accordance with the
directions of the Administrator and will be an
asset of the applicable Trust, as described in
the Prospectus Supplement. To the extent
specified in the related Prospectus Supplement,
the Seller will make an initial deposit into the
Reserve Account on the Closing Date having a
value equal to the amount specified in the
Prospectus Supplement (the "Reserve Account
Initial Deposit"); the Reserve Account Initial
Deposit will be augmented on each Distribution
Date by the deposit into the Reserve Account of
any remaining Available Funds for such
Distribution Date. See "Description of the
Transfer and Servicing Agreements--Distributions"
in the related Prospectus Supplement.
Amounts in the Reserve Account will be available
to cover shortfalls in amounts due to the holders
of those classes of Securities specified in the
related Prospectus Supplement in the manner and
under the circumstances specified herein and
therein. The related Prospectus Supplement will
also specify to whom and the manner and
circumstances under which amounts on deposit in
the Reserve Account (after giving effect to all
other required distributions to be made by the
applicable Trust) in excess of the Specified
Reserve Account Balance (as defined in the
related Prospectus Supplement) will be
distributed.
Transfer and Servicing
Agreements.................. With respect to each Trust, the Seller will sell
the related Student Loans to such Trust pursuant
to a Loan Sale Agreement, with the related
Eligible Lender Trustee holding legal title
thereto. The rights and benefits of such Trust
and the Eligible Lender Trustee under the Loan
Sale Agreement will be assigned to the Indenture
Trustee as collateral for the Notes of the
related series. Pursuant to a Master Servicing
Agreement among the related Trust, the Master
Servicer and the Eligible Lender Trustee (the
"Master Servicing Agreement"), the Master
Servicer will agree with such Trust to be
responsible for servicing, managing and
maintaining the custody of, and making
collections on, the Student Loans and preparing
and filing with the Department and the applicable
Federal Guarantor all appropriate claim forms and
other documents and filings on behalf of the
Eligible Lender Trustee in order to claim the
Interest Subsidy Payments and Special Allowance
Payments from the Department in respect of the
Federal Student Loans entitled thereto. Subject
to the terms and conditions of the Master
Servicing Agreement, the Master
10
<PAGE>
Servicer may delegate certain of its obligations
under the Master Servicing Agreement to one or
more student loan servicers (each a
"Subservicer"), but no such delegation shall
relieve the Master Servicer from its
responsibilities to service the Student Loans as
if it alone were servicing the Student Loans. See
"The Seller, the Master Servicer and the
Subservicers" and "Description of the Transfer
and Servicing Agreements--Servicing Procedures"
herein.
The Seller will be obligated under the related
Loan Sale Agreement to repurchase, and the Master
Servicer will be obligated under the related
Master Servicing Agreement to purchase, to the
extent specified in the related Prospectus
Supplement, any Student Loan if the interest of
such Trust therein is materially adversely
affected by a breach of any representation,
warranty or covenant (including the Master
Servicer's covenant to service all the Student
Loans in accordance with applicable laws,
restrictions and guidelines) made by the Seller
or the Master Servicer, as the case may be, with
respect to the Student Loans, if the breach has
not been cured within 120 days following the
discovery by or notice to the Seller or Master
Servicer, as the case may be, of the breach (it
being understood that any such breach that does
not affect any Guarantor's obligation to
guarantee payment of such Student Loan will not
be considered to have a material adverse effect
for this purpose). In the event that Notes of any
series remain outstanding and there is a dispute
regarding whether the interests of the related
Trust are materially adversely affected by any
such breach, the determination as to whether the
interests of such Trust are so affected will be
made by the Indenture Trustee. In such event, the
determination of the Indenture Trustee will be
dispositive. In the event only Certificates
remain outstanding, any such determination will
be made by the Eligible Lender Trustee and its
determination will be dispositive. In addition,
if so specified in the related Prospectus
Supplement, the Seller or the Master Servicer, as
the case may be, will be obligated to reimburse
such Trust for any accrued interest amounts not
guaranteed by a Guarantor due to, or any Interest
Subsidy Payments or Special Allowance Payments
lost as a result of a breach of, the Seller's
representations and warranties or the Master
Servicer's covenants, as the case may be, with
respect to any Student Loan. The liability of the
Seller or the Master Servicer, as the case may
be, will not exceed the amount that the Guarantor
would have paid if the Student Loan had been
accepted and paid by the Guarantor as a claim.
The Master Servicer will receive a fee (the
"Servicing Fee") equal to a specified percentage
of the Pool Balance, as set forth in the related
Prospectus Supplement, together with any other
administrative fees and similar charges specified
in the related Prospectus Supplement. The
Servicing Fee will be payable out of Available
Funds and amounts on deposit in the Reserve
Account on the date specified in the related
Prospectus Supplement. See "Description of the
Transfer and Servicing Agreements--Servicing
Compensation" herein and in the related
Prospectus Supplement.
11
<PAGE>
In addition, the Administrator will undertake
certain administrative duties with respect to
such Trust under an Administration Agreement
among the Trust, the Administrator and the
Indenture Trustee (as amended and supplemented
from time to time, the "Administration
Agreement"). See "Description of the Transfer and
Servicing Agreements--Administration Agreement".
Termination................. The obligations of the Seller, the Master
Servicer, the Administrator, the Eligible Lender
Trustee and the Indenture Trustee relating to a
particular trust will terminate upon the latest
of (i) the maturity or other liquidation of the
last Student Loan in such Trust and the
disposition of any amount received upon
liquidation of any such remaining Student Loans
or (ii) the payment to the Noteholders and the
Certificateholders of the related series of all
amounts required to be paid to them. See
"Description of the Transfer and Servicing
Agreements--Termination".
Optional Redemption......... If the Seller exercises its option to purchase
the Student Loans of a Trust in the manner and on
the respective terms and conditions described
under "Description of the Transfer and Servicing
Agreements--Termination--Optional Redemption",
the outstanding Notes will be redeemed and the
Certificateholders will receive a distribution as
set forth in the related Prospectus Supplement.
Such a prepayment of the Notes or the
Certificates could have an effect on the yield
realized thereon. See "Risk Factors--Yield and
Prepayment Considerations".
Mandatory Redemption........ If specified in the applicable Prospectus
Supplement, to the extent that amounts on deposit
in the Pre-Funding Account or Collateral
Reinvestment Account for a series have not been
fully applied to Additional Fundings by the Trust
by the end of the Funding Period or Revolving
Period, respectively, the related Noteholders or
the Certificateholders may receive as a
prepayment of principal an amount equal to the
amount remaining in the Pre-Funding Account or
Collateral Reinvestment Account following any
Additional Fundings on the last Distribution Date
in such period. See "Description of the Notes--
Principal and Interest on the Notes" and
"Description of the Certificates--Principal and
Interest in Respect of the Certificates".
Auction of Student Loans.... If so provided in the related Prospectus
Supplement, all remaining Student Loans held by a
Trust will be offered for sale by the Indenture
Trustee on any Distribution Date occurring on or
after a date specified in such Prospectus
Supplement. The Seller and unrelated third
parties may offer bids for such Student Loans.
The Indenture Trustee will accept the highest bid
equal to or in excess of the aggregate Purchase
Amounts of such Student Loans as of the end of
the Collection Period immediately preceding the
related Distribution Date. The proceeds of such
sale will be used to redeem all related Notes and
to retire the Certificates. See "Description of
the Transfer and Servicing Agreements--
Termination--Auction of Student Loans".
12
<PAGE>
Tax Considerations.......... Upon the issuance of each series of Securities,
except as otherwise provided in the related
Prospectus Supplement, McGuire, Woods, Battle &
Boothe, L.L.P., as federal and state tax counsel
to the applicable Trust ("Tax Counsel"), will
deliver an opinion to the effect that, for
federal income tax purposes: (i) the Notes of
such series will be characterized as debt and
(ii) the Trust will not be characterized as an
association (or a publicly traded partnership)
taxable as a corporation.
Unless otherwise specified in the applicable
Prospectus Supplement, each Noteholder, by the
acceptance of a Note of a given series, will
agree to treat such note as indebtedness, and
each Certificateholder, by the acceptance of a
Certificate of a given series, will agree to
treat the related Trust as a partnership in which
such Certificateholder is a partner for federal
income and state and local income tax and
franchise tax purposes. Alternative
characterizations of such Trust and such
Certificates are possible, but would not result
in materially adverse tax consequences to
Certificateholders.
Due to the method of allocation of Trust income
to the Certificateholders, cash basis holders
may, in effect, be required to report income from
the Certificates on an accrual basis. In
addition, because tax allocations and tax
reporting will be done on a uniform basis, but
Certificateholders may be purchasing Certificates
at different times and at different prices,
Certificateholders may be required to report on
their tax returns taxable income that is greater
or less than the amount reported to them by the
Trust.
The Trust with respect to each series of
Securities will be established under the laws of
the state specified in the related Prospectus
Supplement and (except in certain circumstances
described under "Assumption of Signet's
Obligations") will be managed by the
Administrator in the State of Maryland. See
"Federal Income Tax Consequences" for additional
information concerning the application of federal
tax laws with respect to the Notes and the
Certificates.
ERISA Considerations........ Subject to the considerations discussed under
"ERISA Considerations" herein and unless
otherwise specified in the related Prospectus
Supplement, the Notes of each series are eligible
for purchase by employee benefit plans.
The Certificates may not be acquired by any
employee benefit plan subject to the Employee
Retirement Income Security Act of 1974, as
amended ("ERISA"), or by any individual
retirement account. See "ERISA Considerations"
herein.
13
<PAGE>
RISK FACTORS
Failure to Comply with Student Loan Origination and Servicing Procedures for
Federal Student Loans. The Federal Family Education Loan Program ("FFELP")
under Title IV of the Higher Education Act of 1965, as amended (such Act,
together with all rules and regulations promulgated thereunder by the
Department and/or the Guarantors, the "Act"), including the implementing
regulations thereunder, requires lenders making and servicing student loans
and guarantors guaranteeing student loans to follow specified procedures,
including due diligence procedures, to ensure that the student loans are
properly made and disbursed to, and repaid on a timely basis by or on behalf
of, borrowers. Certain of those procedures, which are specifically set forth
in the Act, are summarized herein. See "The Student Loan Pools--Servicing and
Collection Procedures", "Federal Family Education Loan Program" and
"Description of the Transfer and Servicing Agreements--Servicing Procedures".
Failure of the Master Servicer to follow the proper servicing procedures or
failure of the originator of the loan to follow procedures relating to the
origination of any Federal Student Loans may result in the Department's
refusal to make reinsurance payments to the Federal Guarantor or to make
Interest Subsidy Payments and Special Allowance Payments to the related
Eligible Lender Trustee with respect to such Federal Student Loans or in the
Federal Guarantor's refusal to honor its Guarantee Agreements with the related
Eligible Lender Trustee with respect to such Federal Student Loans (each a
"Guarantee Agreement" and collectively, the "Guarantee Agreements"). See
"Formation of the Trusts--Eligible Lender Trustee". Failure of the Federal
Guarantor to receive reinsurance payments from the Department could adversely
affect the Federal Guarantor's ability or legal obligation to make Guarantee
Payments to the related Eligible Lender Trustee. Loss of any such Guarantee
Payments, Interest Subsidy Payments or Special Allowance Payments could
adversely affect the amount of Available Funds for any Collection Period and
the Trust's ability to pay principal and interest on the related Notes and
Certificates.
If a breach of the representations, warranties or covenants of the Seller or
the Master Servicer, as the case may be, with respect to a Federal Student
Loan has a material adverse effect on the interest of the related Trust
therein and such breach is not cured within any applicable cure period, such
Trust will have the right under the related Loan Sale Agreement and Master
Servicing Agreement to cause the Seller to repurchase, or the Master Servicer
to purchase, such Federal Student Loan. In addition, each Trust will have the
right, under certain circumstances specified in the related Loan Sale
Agreement and Master Servicing Agreement, to cause the Seller or the Master
Servicer, as the case may be, to reimburse such Trust for any accrued interest
amounts not guaranteed by a Federal Guarantor, or any Interest Subsidy
Payments and Special Allowance Payments lost with respect to a Federal Student
Loan as a result of a breach of the Seller's representations and warranties or
the Master Servicer's covenants, as the case may be, with respect to such
Federal Student Loan. The repurchase and reimbursement obligations of the
Seller and the Master Servicer will constitute the sole remedy available to or
on behalf of a Trust, the related Certificateholders or the related
Noteholders for any such uncured breach. See "Description of the Transfer and
Servicing Agreements--Sale of Student Loans; Representations and Warranties"
and "--Servicer Covenants". There can be no assurance, however, that the
Seller will have the financial resources, or the Master Servicer will have the
ability, to meet these obligations. The failure of the Seller to so
repurchase, or the Master Servicer to arrange for the repurchase of, a Federal
Student Loan would constitute a breach of the related Loan Sale Agreement and
Master Servicing Agreement, enforceable by the related Eligible Lender Trustee
on behalf of such Trust and the related Certificateholders or by the related
Indenture Trustee on behalf of the Noteholders of the related series, but
would not constitute an Event of Default under each indenture or permit the
exercise of remedies thereunder.
Failure to Comply with Student Loan Origination and Servicing Procedures for
Private Student Loans. Private Student Loans may be self-insured or insured by
a third-party Private Guarantor. The programs under which Private Student
Loans will be insured by third parties may prescribe rules and procedures
applicable to originating and servicing Private Student Loans, which
procedures will be similar to those set forth above with respect to Federal
Student Loans. Failure to make or service properly a Private Student Loan in
accordance
14
<PAGE>
with those procedures could adversely affect the Eligible Lender Trustee's
ability to obtain Guarantee Payments from a Private Guarantor. Loss of such
Guarantee Payments could adversely affect the amount of Available Funds for
any Collection Period and the Trust's ability to pay principal and interest on
the Notes and the Certificates. Under certain circumstances the Trust has the
right, pursuant to the related Loan Sale Agreement or Master Servicing
Agreement, as applicable, to cause the Seller to repurchase, or the Master
Servicer to purchase, a Private Student Loan. See "Description of the Transfer
and Servicing Agreements--Sale of Student Loans; Representations and
Warranties" and "--Servicer Covenants". There can be no assurance, however,
that the Seller or the Master Servicer will have the financial resources to do
so.
Variability of Actual Cash Flows. Amounts received with respect to the
Student Loans for a particular Collection Period may vary greatly in both
timing and amount from the payments actually due on the Student Loans as of
such Collection Period for a variety of economic, social and other factors,
including both individual factors, such as additional periods of deferral or
forbearance prior to or after a borrower's commencement of repayment, and
general factors, such as a general economic downturn which could increase the
amount of defaulted Student Loans. Failures by borrowers to pay timely the
principal and interest on the Student Loans will affect the amount of
Available Funds on a Distribution Date, which may reduce the amount of
principal and interest paid to the holders of the Securities of the related
series on such Distribution Date. Moreover, failures by student loan borrowers
generally to pay timely the principal and interest due on their student loans
could obligate the respective Guarantor to make payments thereon, which could
adversely affect the solvency of the Guarantor and its ability to meet its
guarantee obligations (including with respect to the Student Loans). The
inability of any Guarantor to meet its guarantee obligations could reduce the
amount of principal and interest paid to the holders of the Securities of the
related series on a Distribution Date. The effect of such factors, including
the effect on a Guarantor's ability to meet its guarantee obligations with
respect to the Student Loans, on a Trust's ability to pay principal and
interest with respect to the Securities, is impossible to predict. Pursuant to
the Higher Education Amendments of 1992 (the "1992 Amendments"), under Section
432(o) of the Act if the Department has determined that a Federal Guarantor is
unable to meet its insurance obligations, the loan holder may submit claims
directly to the Department and the Department is required to pay the full
Guarantee Payment due with respect thereto in accordance with guarantee claim
processing standards no more stringent than those of the Federal Guarantor.
However, the Department's obligation to pay guarantee claims directly in this
fashion is contingent upon the Department making the determination referred to
above. There can be no assurance that the Department would ever make such a
determination with respect to a Federal Guarantor or, if such a determination
was made, whether such determination or the ultimate payment of such guarantee
claims would be made in a timely manner.
Inability of Related Indenture Trustee to Liquidate Student Loans. If an
Event of Default occurs under the related Indenture, subject to certain
conditions, the related Indenture Trustee is authorized, without the consent
of the Certificateholders of the related series, to sell the Student Loans
pledged thereunder. There can be no assurance, however, that the related
Indenture Trustee will be able to find a purchaser for the Student Loans in a
timely manner or that the market value of such Student Loans will be equal to
the aggregate outstanding principal amount of the Securities and accrued
interest thereon. If the proceeds of any such sale, together with amounts then
available in any Reserve Account or pursuant to any other credit enhancement
specified as being available therefor in the related Prospectus Supplement, do
not equal or exceed the aggregate outstanding principal amount of Notes and
accrued interest thereon, the Noteholders of the related series will suffer a
loss. In such circumstances, the Certificateholders, to the extent the
Certificates of such series are subordinated to the Notes of such series, will
also suffer a loss.
Unsecured Nature of Student Loans; Financial Status of Federal
Guarantor. The Act and the programs under which Private Student Loans are
insured require all Student Loans to be unsecured. As a result, the only
security for payment of the Student Loans are the Guarantee Agreements between
the related Eligible Lender Trustee and the Guarantors. A deterioration in the
financial status of the Guarantors and their ability to honor guarantee claims
with respect to the Student Loans could result in a failure by the Guarantor
to make Guarantee Payments to such Eligible Lender Trustee. One of the primary
causes of a possible deterioration in a Guarantor's
15
<PAGE>
financial status is the amount and percentage of defaulting Student Loans
guaranteed by a Federal Guarantor. Moreover, to the extent that default
reimbursement claims submitted by a Federal Guarantor for any fiscal year
exceed certain specified levels, the Department's obligation to reimburse the
Federal Guarantor for default claim losses is reduced on a sliding scale from
100% to a minimum of 80% (98% to 78%, respectively, for default claim losses
for Federal Student Loans made on or after October l, 1993). Death,
disability, bankruptcy, closed school and false certification claims are
reimbursed 100% by the Department. Private Guarantors are not entitled to any
federal reinsurance or assistance from the Department. Although each Private
Guarantor maintains a loan loss reserve intended to absorb losses arising from
its guarantee commitments, there can be no assurance that the amount of such
reserve will be sufficient to cover the obligations of such Private Guarantor
over the term of Private Student Loans insured by a Private Guarantor. No
assurance exists that any Guarantor will have the financial resources to make
all Guarantee Payments to a given Trust in respect of the related Student
Loans that may arise from time to time. See "The Federal Family Education Loan
Program--Guarantors" and "--Federal Insurance and Reinsurance of Federal
Guarantors".
Default Risk on Certain Student Loans. Under the Omnibus Budget
Reconciliation Act of 1993, Student Loans first disbursed on or after October
1, 1993 are 98% insured by the applicable Guarantor. As a result, to the
extent a borrower of such a Student Loan defaults, the Trust will experience a
loss of 2% of outstanding principal and accrued interest on each such Student
Loan and a reduction in the funds which would otherwise be available to make
distributions on the Notes and the Certificates. A defaulted loan will be
fully assigned to the applicable Guarantor in exchange for a guarantee payment
on the 98% guaranteed portion and the Trust may have no right thereafter to
pursue the borrower for the 2% unguaranteed portion. Student Loans continue to
be 100% guaranteed in the event of death, disability or bankruptcy of the
borrower and a closing of or false certification by the borrower's school
regardless of disbursement date.
Fees Payable on Certain Financed Student Loans Prior to Distributions on the
Securities. Under the Federal Consolidation Program, the Trust will be
obligated to pay to the Department a monthly rebate fee (the "Monthly Rebate
Fee") at an annualized rate of 1.05% of the outstanding principal balance on
the last day of each month plus accrued interest thereon of each Federal
Consolidation Loan which is a part of the Trust, which rebate will be payable
prior to distributions to the Noteholders or the Certificateholders and which
rebate will reduce the amount of funds which would otherwise be available to
make distributions on the Securities and will reduce the Student Loan Rate. In
addition, if specified in the related Prospectus Supplement, the Trust or the
Eligible Lender Trustee may originate Federal Student Loans. In such cases,
the Trust may be required to pay to the Department a 0.50% origination fee
(the "Federal Origination Fee") on the initial principal balance of each
Student Loan which is originated on its behalf by the Eligible Lender Trustee
(i.e., each Federal Student Loan originated on its behalf by the Eligible
Lender Trustee during the Funding Period), which fee will be deducted by the
Department out of Interest Subsidy and Special Allowance Payments. If
sufficient Interest Subsidy and Special Allowance Payments are not due to the
Trust to cover the amount of the Federal Origination Fee, the balance of such
Federal Origination Fee will be deferred by the Department until sufficient
Interest Subsidy and Special Allowance Payments accrue to cover such fee. If
such amounts never accrue, the Trust would be obligated to pay any remaining
fee from other assets of the Trust prior to making distributions to
Noteholders or Certificateholders. The offset of Interest Subsidy and Special
Allowance Payments, and the payment of any remaining fee from other Trust
assets, will further reduce the amount of Available Funds (or Monthly
Available Funds) from which payments to Noteholders and Certificateholders may
be made. Furthermore, any offset of Interest Subsidy and Special Allowance
Payments will further reduce the Student Loan Rate.
Change in Law. No assurance can be made that the Act or other relevant
federal or state laws, rules and regulations and the programs implemented
thereunder will not be amended or modified in the future in a manner that will
adversely impact the programs described in this Prospectus and the guaranteed
student loans made thereunder, including the Student Loans, or the Guarantors.
In addition, existing legislation and future measures to reduce the federal
budget deficit or for other purposes may adversely affect the amount and
nature of federal financial assistance available with respect to these
programs or even abolish these programs. In recent years, federal budget
legislation has provided for the recovery of certain funds held by the Federal
Guarantors in order
16
<PAGE>
to achieve reductions in federal spending. No assurance can be made that
future federal budget legislation or administrative actions will not adversely
affect expenditures by the Department or the financial condition of the
Federal Guarantors. See "Federal Family Education Loan Program--Legislative
and Administrative Matters" and "--Federal Guarantors".
Subordination of the Certificates. To the extent specified in the related
Prospectus Supplement, distributions of interest and principal on the
Certificates of a series may be subordinated in priority of payment to
interest and principal due on the Notes of such series.
Limited Assets of the Trust. Each Trust will not have, nor is it permitted
or expected to have, any significant assets or sources of funds other than the
Student Loans and, to the extent provided in the related Prospectus
Supplement, a Reserve Account and any other credit enhancement. The Notes of
any series will represent obligations solely of, and the Certificates of such
series will represent interests solely in, the related Trust and neither the
Notes nor the Certificates of such series will be insured or guaranteed by the
Seller, the Master Servicer, the Administrator, any Federal Guarantor, any
Subservicer, the applicable Eligible Lender Trustee, the applicable Indenture
Trustee or any other person or entity. Consequently, holders of the Securities
of any series must rely for repayment upon payments on the related Student
Loans and, if and to the extent available, amounts on deposit in the Reserve
Account (if any) and other credit enhancement (if any), all as specified in
the related Prospectus Supplement.
Use of the Pre-Funding Account or Collateral Reinvestment Account to Make
Additional Fundings; Changes in Characteristics of the Student Loan Pool. The
use of a Pre-Funding Account or Collateral Reinvestment Account to add Student
Loans to a Trust after the applicable Closing Date will cause the aggregate
characteristics of the entire pool of Student Loans with respect to such
Trust, including, if and to the extent set forth in the related Prospectus
Supplement, the composition of such pool and in the case of a Revolving
Period, of the borrowers thereof, the applicable Guarantors thereof (if, as
may be so specified in the related Prospectus Supplement, the Guarantors with
respect to Student Loans added after the Closing Date may include Guarantors
other than those represented in such pool as of the Closing Date and named in
such Prospectus Supplement) and the distribution by loan type, interest rate,
principal balance and remaining term to stated maturity to vary, possibly
significantly, from those of the applicable pool as existing on the Closing
Date and described in the related Prospectus Supplement.
To the extent that amounts on deposit in the Pre-Funding Account or
Collateral Reinvestment Account for a series have not been fully applied to
Additional Fundings by the Trust by the end of the Funding Period or the
Revolving Period, the related Noteholders or Certificateholders may receive as
a prepayment of principal an amount equal to the amount remaining in the Pre-
Funding Account or Collateral Reinvestment Account following any Additional
Fundings on the last day of the final Collection Period in such applicable
period. It is anticipated that, in the case of each series, the amount of
Additional Fundings made by the Trust will not be exactly equal to the amount
on deposit in the Pre-Funding Account or Collateral Reinvestment Account and
that therefore there may be at least a nominal amount of principal prepaid to
the Noteholders or Certificateholders. See also "--Yield and Prepayment
Considerations" and "Risk Factors--Yield and Prepayment Considerations" in the
related Prospectus Supplement regarding the risk to Noteholders and
Certificateholders of prepayments in connection with the making of Federal
Consolidation Loans both during and after the Funding Period or Revolving
Period.
Yield and Prepayment Considerations. All the Student Loans are prepayable at
any time. (For this purpose the term "prepayments" includes prepayments in
full or in part (including pursuant to Federal Consolidation Loans) and
liquidations due to default (including receipt of Guarantee Payments). The
rate of prepayments on the Student Loans may be influenced by a variety of
economic, social and other factors affecting borrowers, including interest
rates and the availability of alternative financing. In addition, under
certain circumstances, the Seller or the Master Servicer will be obligated to
purchase or arrange for the purchase of Student Loans from the Trust pursuant
to the related Loan Sale Agreement or Master Servicing Agreement, as
applicable, as a result of breaches of their respective representations,
warranties or covenants. See "Description of the Transfer and
17
<PAGE>
Servicing Agreements--Sale of Student Loans; Representations and Warranties"
and "--Servicer Covenants". Moreover, a borrower of Federal Student Loans may
elect to borrow a Federal Consolidation Loan to consolidate and refinance such
Federal Student Loans. The related Prospectus Supplement will describe whether
and under what circumstances such Trust may originate or acquire the resulting
Federal Consolidation Loan if at all. No assurance can be made that borrowers
with Federal Student Loans will not seek to obtain Federal Consolidation Loans
with respect to such Federal Student Loans or, if they do so, that such
Federal Consolidation Loans will be held by the related Eligible Lender
Trustee on behalf of the Trust, if so permissible. See "The Federal Family
Education Loan Program".
The Federal Direct Consolidation Loan Program provides borrowers with the
opportunity to consolidate outstanding student loans at interest rates below,
and income-contingent repayment terms that some borrowers may find preferable
to, those that would be available from the Seller on a loan originated by the
Seller under the Federal Consolidation Loan Program. The availability of such
lower-rate, income-contingent loans may decrease the likelihood that the
Seller, if so permitted by the Transfer and Servicing Agreements, would be the
originator of a Consolidation Loan with respect to borrowers with Federal
Student Loans, as well as increase the likelihood that a Federal Student Loan
in the Trust will be prepaid through the issuance of a Federal Direct
Consolidation Loan.
On the other hand, scheduled payments with respect to, and maturities of,
the Student Loans may be extended as a result of Grace Periods, Deferral
Periods and, under certain circumstances, Forbearance Periods, which may
lengthen the remaining term of the Student Loans and the average life of the
Notes and the Certificates. See "The Federal Family Education Loan Program".
In addition, the Seller makes available to certain of its Student Loan
borrowers certain payment terms which may result in the lengthening of the
remaining terms of the Student Loans. For example, not all of the loans owned
by the Seller provide for level payments throughout the repayment term of the
loans. Certain of the loans provide for a "graduated phase in" of the
amortization of principal with a greater portion of principal amortization
being required in the latter stages of the life of the loan than would be the
case if amortization were on a level payment basis. The Seller also offers an
income-sensitive repayment plan, pursuant to which repayments are based on the
borrower's income. Under that plan, ultimate repayment may be delayed up to
five years. Borrowers under the Financed Student Loans will continue to be
eligible for such graduated payment and income-sensitive repayment plans.
Any reinvestment risks resulting from a faster or slower incidence of
prepayment of Student Loans (or from the occurrence or non-occurrence of any
redemption of Securities or auction of Student Loans or the timing of any such
occurrence) will be borne entirely by the Noteholders and the
Certificateholders. Such reinvestment risks may include the risk that interest
rates and the relevant spreads above particular interest rate bases are lower
at the time Securityholders receive payments from the Trust than such interest
rates and such spreads would otherwise have been had such prepayments not been
made or had such prepayments been made at a different time. See also
"Description of the Transfer and Servicing Agreements--Insolvency Event"
regarding the sale of the Student Loans if an Insolvency Event occurs with
respect to the Company and "--Termination" regarding the Seller's option to
repurchase the Student Loans.
Noteholders and Certificateholders should consider, in the case of Notes or
Certificates, as the case may be, purchased at a discount, the risk that a
slower than anticipated rate of principal payments on the Student Loans (or
any anticipated redemption of the Securities or auction of the Student Loans
not occurring or occurring later than anticipated) could result in an actual
yield that is less than the anticipated yield and, in the case of Notes or
Certificates, as the case may be, purchased at a premium, the risk that a
faster than anticipated rate of principal payments on the Student Loans (or
any anticipated redemption of the Securities or auction of the Student Loans
occurring earlier than anticipated or the occurrence of any unanticipated
redemption of the Securities or auction of the Student Loans) could result in
an actual yield that is less than the anticipated yield. See "Weighted Average
Life of the Securities".
Servicer Default. Unless otherwise specified in the related Prospectus
Supplement with respect to a given series of Securities, in the event of a
Servicer Default, the Indenture Trustee or 75% (by principal amount) of the
18
<PAGE>
Noteholders with respect to such series, as described under "Description of
the Transfer and Servicing Agreements--Rights upon Servicer Default," may
remove the Master Servicer without the consent of the Eligible Lender Trustee
or any of the Certificateholders with respect to such series. Moreover, only
the Indenture Trustee or the Noteholders with respect to such series, and not
the Eligible Lender Trustee or the Certificateholders, have the ability to
remove the Master Servicer if a Servicer Default occurs. In addition, the
Noteholders with respect to such series have the ability, with certain
specified exceptions, to waive defaults by the Master Servicer, including
defaults that could materially adversely affect the Certificateholders with
respect to such series. See "Description of the Transfer and Servicing
Agreements--Waiver of Past Defaults".
Consolidation of Federal Benefit Billings and Receipts with Other
Trusts. Due to a recent change in Department policy limiting the granting of
new lender identification numbers, the Eligible Lender Trustee is allowed
under the Trust Agreements to permit trusts established by the Seller to
securitize Student Loans to use a common Department lender identification
number. The billings submitted to the Department for Interest Subsidy and
Special Allowance Payments on loans in such Trusts will be consolidated with
the billings for such payments for Student Loans in such other Trusts using
the same lender identification number and payments on such billings will be
made by the Department in lump sum form. Such lump sum payments will then be
allocated among the various trusts using the lender identification number.
In addition, the sharing of the lender identification number by a Trust with
other Trusts may result in the receipt of claim payments by guarantors in lump
sum form. In that event, such payments would be allocated among the trusts in
a manner similar to the allocation process for Interest Subsidy and Special
Allowance Payments.
The Department regards the Eligible Lender Trustee as the party primarily
responsible to the Department for any liabilities owed to the Department or
guarantors resulting from the Eligible Lender Trustee's activities in the
FFELP. As a result, if the Department or a guarantor were to determine that
the Eligible Lender Trustee owes a liability to the Department or a guarantor
on any Student Loan for which the Eligible Lender Trustee is or was legal
titleholder, including loans held in a Trust, the Department or guarantor may
seek to collect that liability by offset against payments due the Eligible
Lender Trustee under such Trust. In the event that the Department or guarantor
determines such a liability exists in connection with a Trust using the shared
lender identification number, the Department or a guarantor would be likely to
collect that liability by offset against amounts due the Eligible Lender
Trustee under the shared lender identification number, including amounts owed
in connection with such Trusts.
In addition, Trusts using a shared lender identification number may in a
given quarter incur fees associated with the origination of Federal Student
Loans that exceed the Interest Subsidy and Special Allowance Payments payable
by the Department on the loans in such other Trusts, resulting in the
consolidated payment from the Department received by the Eligible Lender
Trustee under such lender identification number for that quarter equaling an
amount that is less than the amount owed by the Department on the loans in the
Trust for that quarter.
The Trust Agreement for trusts established by the Seller which will share
lender identification numbers will require such Trusts to indemnify the other
Trusts for a shortfall or an offset by the Department or a guarantor arising
from the Student Loans held by the Eligible Lender Trustee on such Trust's
behalf. Such indemnification may reduce the amount available to make
distributions on Securities issued by a particular Trust.
Certain Legal Aspects. The Seller will warrant to each Trust in the related
Loan Sale Agreement that the sale of the Student Loans by the Seller to such
Trust is a valid sale of the Student Loans by the Seller to such Trust.
Notwithstanding the foregoing, in the event of an insolvency of the Seller, it
is possible that a conservator or receiver for, or a creditor of, the Seller
may argue that each transaction between the Seller and a Trust was a pledge of
the related Student Loans in connection with a borrowing by the Seller rather
than a true sale. Such an attempt, even if unsuccessful, could result in
delays in distributions on the Securities. In addition, if the transfer of the
Student Loans to the Eligible Lender Trustee is deemed to create a security
interest therein, a tax or government lien on property of the Seller arising
before the Student Loans came into existence may have priority over the
Eligible Lender Trustee's interest in such Student Loans.
19
<PAGE>
The Seller is chartered under the laws of Virginia. In Virginia, the Virginia
State Corporation Commission (the "SCC"), which supervises and examines the
Seller, may apply to any Virginia court having jurisdiction over the
appointment of receivers to appoint a receiver upon determination that certain
events relating to the Seller's financial condition have occurred. The SCC is
authorized, but not required, to apply for the appointment of the Federal
Deposit Insurance Corporation ("FDIC") as receiver and, as a matter of federal
law, the FDIC would be authorized, but not obligated, to accept such
appointment. The SCC has informally indicated that it would seek to have the
FDIC appointed as receiver in any receivership proceeding involving a bank such
as the Seller. Virginia law sets forth certain powers that could be exercised
by the FDIC upon its appointment as receiver. There are no Virginia statutory
provisions governing the appointment of a conservator for a Virginia-chartered
bank.
The Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA") significantly expanded the powers of the FDIC as a conservator or
receiver of insolvent banks. To the extent that the Seller has granted a first
priority perfected security interest in the Student Loans to each Trust, and
the interest is validly perfected and was not taken in contemplation of
insolvency or with the intent to hinder, delay or defraud the Seller's
creditors, that security interest should not be subject to avoidance by the
FDIC as conservator or receiver of the Seller. If, however, the FDIC were to
take a contrary position, such as by requiring the Indenture Trustee or
Eligible Lender Trustee with respect to each Trust to establish its rights in
the related Student Loans by submitting to and complying with the
administrative claims procedure established under FIRREA, delays in payments on
the Securities and possible reductions in the amounts of those payments could
occur. In addition, under FIRREA, the FDIC may disaffirm or repudiate any
contract to which an insolvent bank is a party, the performance of which is
determined to be burdensome, and the disaffirmance of which is determined to
promote the orderly administration of such bank's affairs. If the FDIC were to
contend successfully that the Securities of any series evidence a secured
borrowing and that it has the power to repudiate such Securities, the effect of
such repudiation should be to accelerate the maturities of such Securities. In
the event of such acceleration, the amount paid on such Securities would
depend, among other things, on the amount which could be realized from the sale
or other disposition of the related Student Loans at such time. Although each
Master Servicing Agreement will provide for the replacement of the Seller as
Master Servicer in the event of the appointment of a conservator or receiver of
the Seller, the FDIC as conservator or receiver may enforce most types of
contracts, including a Master Servicing Agreement, pursuant to their terms,
notwithstanding any such provision. The FDIC, as conservator or receiver, may
also transfer to a new obligor an insolvent bank's assets and liabilities
(including, in the event that the Securities of any series were deemed to
evidence a secured borrowing, the related Student Loans and the liability
evidenced by such Securities) without the approval of the bank's creditors
(including, in the event such Securities were deemed to evidence a secured
borrowing, holders of such Securities).
If an Insolvency Event with respect to the Company occurs, the Indenture
Trustee will, except under certain limited circumstances, promptly sell,
dispose of or otherwise liquidate the related Student Loans in a commercially
reasonable manner on commercially reasonable terms. The proceeds from any such
sale, disposition or liquidation of Student Loans will be treated as
collections on the Student Loans and deposited in the Collection Account of the
related Trust. If the proceeds from the liquidation of the Student Loans and
any amounts on deposit in the Reserve Account (if any) with respect to any
Trust and any amounts available from any credit enhancement, if any, are not
sufficient to pay the Notes and Certificates of the related series in full, the
amount of principal returned to Noteholders or Certificateholders will be
reduced and Noteholders and Certificateholders will incur a loss. See
"Description of the Transfer and Servicing Agreements--Insolvency Event".
Numerous federal and state consumer protection laws and related regulations
impose substantial requirements upon lenders and servicers involved in consumer
finance. Also, some state laws impose finance charge ceilings and other
restrictions on certain consumer transactions and require contract disclosures
in addition to those required under federal law. These requirements impose
specific statutory liability that could affect an assignee's ability to enforce
consumer finance contracts such as the Student Loans. In addition, the remedies
available to the related Indenture Trustee or the Noteholders of the related
series upon an Event of Default under the Indenture may not be readily
available or may be limited by applicable state and federal laws.
20
<PAGE>
Book-Entry Registration. Each class of the Notes and the Certificates of a
given series will be initially represented by one or more certificates
registered in the name of Cede & Co. ("Cede"), or any other nominee for DTC
set forth in the related Prospectus Supplement (Cede, or such other nominee,
"DTC's Nominee"), and will not be registered in the names of the holders of
the Securities of such series or their nominees. Because of this, unless and
until Definitive Securities for such series are issued, holders of such
Securities will not be recognized by the applicable Indenture Trustee or
Eligible Lender Trustee as "Noteholders", "Certificateholders" or
"Securityholders", as the case may be (as such terms are used herein or in the
related Indenture and Trust Agreement, as the case may be). Hence, unless and
until Definitive Securities (as defined below) are issued, holders of such
Securities will only be able to exercise the rights of Securityholders
indirectly through DTC and its participating organizations. See "Certain
Information Regarding the Securities--Book-Entry Registration" and "--
Definitive Securities".
FORMATION OF THE TRUSTS
THE TRUSTS
With respect to each series of Securities, the Seller will establish a
separate Trust pursuant to the respective Trust Agreement for the transactions
described herein and in the related Prospectus Supplement. The property of
each Trust will consist of (a) a pool of Student Loans, legal title to which
is held by the related Eligible Lender Trustee on behalf of each Trust, (b)
all funds collected or to be collected in respect thereof (including any
Guarantee Payments with respect thereto) on or after the applicable Cutoff
Date and (c) all moneys and investments on deposit in the Collection Account,
any Reserve Account and any other trust accounts or any other form of credit
or cash flow enhancement that may be obtained for the benefit of holders of
one or more classes of such Securities. To the extent provided in the
applicable Prospectus Supplement, the Notes will be collateralized by the
property of the related Trust. To facilitate servicing and to minimize
administrative burden and expense, the Master Servicer will retain possession
of the promissory notes representing the Student Loans and the other documents
related thereto as custodian for each Trust and the related Eligible Lender
Trustee.
The principal offices of each Trust and the related Eligible Lender Trustee
will be specified in the applicable Prospectus Supplement.
ELIGIBLE LENDER TRUSTEE
The Eligible Lender Trustee for each Trust will be such entity as is
specified in the related Prospectus Supplement. The Eligible Lender Trustee on
behalf of the related Trust will acquire legal title to all the related
Student Loans acquired pursuant to the related Loan Sale Agreement and will
enter into a Guarantee Agreement with each of the Guarantors with respect to
such Student Loans. Each Eligible Lender Trustee will qualify as an eligible
lender and owner of all Federal Student Loans and Private Student Loans for
all purposes under the Act and the Guarantee Agreements. Failure of the
Federal Student Loans to be owned by an eligible lender would result in the
loss of any Federal Guarantee Payments from any Federal Guarantor and any
Federal Assistance with respect to such Federal Student Loans. See "The
Federal Family Education Loan Program--Eligible Lenders, Students and
Institutions" and "--Federal Insurance and Reinsurance of Federal Guarantors".
An Eligible Lender Trustee's liability in connection with the issuance and
sale of the Notes and the Certificates is limited solely to the express
obligations of the Eligible Lender Trustee set forth in the related Trust
Agreement and the related Loan Sale Agreement. An Eligible Lender Trustee may
resign at any time, in which event the Administrator, or its successor, will
be obligated to appoint a successor trustee. The Administrator of a Trust may
also remove the Eligible Lender Trustee if the Eligible Lender Trustee ceases
to be eligible to continue as Eligible Lender Trustee under the related Trust
Agreement or if the Eligible Lender Trustee becomes insolvent. In such
circumstances, the Administrator will be obligated to appoint a qualified
successor trustee. Any resignation or removal of an Eligible Lender Trustee
and appointment of a successor trustee will not become effective until
acceptance of the appointment by the successor trustee.
21
<PAGE>
USE OF PROCEEDS
Unless otherwise provided in the related Prospectus Supplement, the net
proceeds from the sale of Securities of a given series will be applied by the
applicable Trust to purchase the related Student Loans on the Closing Date
from the Seller and to make the initial deposit into the Reserve Account, the
Pre-Funding Account and the Collateral Reinvestment Account, if any. Unless
otherwise specified in the related Prospectus Supplement, the Seller will use
such net proceeds paid to it with respect to any such Trust for general
corporate purposes.
THE SELLER, THE MASTER SERVICER AND THE SUBSERVICERS
THE SELLER AND THE MASTER SERVICER
Signet will act as Seller and Master Servicer with respect to the Student
Loans of each Trust. Signet is a Virginia banking corporation providing a wide
variety of banking and financial services to corporate, institutional and
individual customers through branch offices and automated teller machines
located throughout Virginia, Maryland and the District of Columbia. Signet is
a wholly-owned subsidiary of Signet Banking Corporation, a Virginia
corporation and a bank holding company. Signet (and its predecessors) have
been originating student loans for over 25 years.
The Master Servicer will be responsible for servicing the Student Loans
acquired by the Eligible Lender Trustee on behalf of the related Trust in
accordance with the terms set forth in the Master Servicing Agreement,
pursuant to which it is required to maintain its eligibility as a third-party
servicer under the Act. Certain data processing and administrative functions
are performed on behalf of Signet by Electronic Data Systems. The Master
Servicer may perform its servicing obligations under the Master Servicing
Agreement through one or more Subservicing Agreements with other student loan
servicers (each, a "Subservicer" and a "Subservicing Agreement"). Such
Subservicing Agreements may be terminated by the Master Servicer with notice,
and the Subservicing Agreements may not have a term which extends to the
maturity date of a series of Securities. In the event such Subservicing
Agreements are terminated or are not renewed or extended, the Trust may
experience delays in collections on the Student Loans until the servicing
obligations of such Subservicer are transferred and assumed by another
Subservicer. See "--The Subservicers" below.
THE SUBSERVICERS
The Master Servicer may from time to time enter into agreements with
Subservicers to the extent specified in the related Prospectus Supplement. As
the scheduled termination date of any Subservicing Agreement may be prior to
the maturity date of a series of Securities, successor subservicers not
identified herein or in the relevant Prospectus Supplement may be engaged to
subservice a portion of the related Student Loans; provided, however, that no
successor subservicer shall be engaged unless the Master Servicer shall have
received prior written notice from each of the Rating Agencies that the
engagement of such successor subservicer shall not cause such Rating Agency to
lower its then-current rating on any of the Securities. Any successor
subservicer shall be deemed a Subservicer under each of the Loan Sale and
Master Servicing Agreements. Notwithstanding the provisions of any
Subservicing Agreement, each Master Servicing Agreement will provide that the
Master Servicer will remain liable for its servicing duties and obligations
under the Master Servicing Agreement as if the Master Servicer were servicing
the Student Loans.
ASSUMPTION OF SIGNET'S OBLIGATIONS
Signet and its parent, Signet Banking Corporation, may from time to time
consider a transfer of its student lending business to another party, which
may or may not be affiliated with Signet (an "Assuming Entity"). The effect of
such a transfer would be, among other things, to transfer Signet's student
lending business and the loans arising in connection therewith, which would
include all, but not less than all, of the Student Loans (the "Assigned
Assets"), together with all servicing and administrative functions and other
obligations under the
22
<PAGE>
Loan Sale Agreement, the Master Servicing Agreement, the Administration
Agreement and the related transactions contemplated thereby (collectively, the
"Assumed Agreements" and the "Assumed Obligations"), to the Assuming Entity.
Pursuant to each of the Assumed Agreements, Signet is permitted to assign,
convey and transfer the Assigned Assets and the Assumed Obligations to the
Assuming Entity, without the consent or approval of the Noteholders or the
Certificateholders, if the following conditions, among others, are satisfied:
(i) the Assuming Entity, Signet, the Eligible Lender Trustee, and the Indenture
Trustee shall have entered into an Assumption Agreement providing for the
Assuming Entity to assume the Assumed Obligations, (ii) all filings required to
continue the perfection of the interest of the Eligible Lender Trustee or the
Indenture Trustee in the Student Loans shall have been duly made and copies
thereof shall have been delivered by Signet to the Eligible Lender Trustee and
the Indenture Trustee, (iii) if the Assuming Entity is a savings and loan
association, a national banking association, a bank or other entity that is not
subject to Title 11 of the United States Code (a "Non-Code Entity"), Signet
shall have delivered notice of such transfer and assumption to each Rating
Agency (in which case there is no requirement that such transfer and assumption
will not result in a downgrade of the Notes and the Certificates) or, if such
Assuming Entity is not a Non-Code Entity, the Seller shall have received
written notice from each Rating Agency that such transfer and assumption will
not have the effect of reducing the then current rating of the Notes and the
Certificates, (iv) the Trustee shall have received an opinion of counsel with
respect to clause (ii) above as to certain other matters specified in the
Assumed Agreements and (v) the Eligible Lender Trustee and the Indenture
Trustee shall have received opinions of counsel acceptable to such Trustees
that for Federal, State and local income and franchise tax purposes and for
income and franchise tax purposes of the jurisdiction in which the Assuming
Entity engages in its principal servicing activities, if different from
Maryland, (x) following the transaction the Trust will not be deemed to be an
association (or publicly traded partnership) taxable as a corporation and (y)
such transaction will not affect the tax characterization as debt of any Notes
or Certificates that were characterized as debt at the time of their issuance
and will not cause a taxable event to the holders of the Notes or Certificates
(an opinion of counsel with respect to any matter to the effect referred to in
clauses (x) and (y) with respect to any action is referred to herein as a "Tax
Opinion"). The Assumed Agreements provide that Signet may enter into amendments
to the Assumed Agreements to permit the transfer and assumption described above
without the consent of the holders of any Notes or Certificates. After any
permitted transfer and assumption, the Assuming Entity will be considered to be
"Signet", the "Seller", the "Master Servicer" and the "Administrator", as
applicable, for all purposes hereof, and Signet Bank will have no further
liability or obligation under the Assumed Agreements.
THE STUDENT LOAN POOLS
GENERAL
The Student Loans to be sold by the Seller to the Eligible Lender Trustee on
behalf of a Trust pursuant to the related Loan Sale Agreement will be selected
from the portfolio of Student Loans originated under the Federal Family
Education Loan Program or a private guarantee program by several criteria,
including that, each Student Loan (i) is self insured or guaranteed as to
principal and interest by a Guarantor (and, in the case of Federal Student
Loans, that Guarantor is a Federal Guarantor and is in turn reinsured by the
Department in accordance with the terms of the Federal Family Education Loan
Program), (ii) was originated in the United States of America, its territories
or its possessions under and in accordance with the Federal Family Education
Loan Program or a specified private guarantee program, (iii) contains terms in
accordance with those required by the Federal Family Education Loan Program or
a specified private guarantee program, the applicable Guarantee Agreements and
other applicable requirements, (iv) provides for regular payments that fully
amortize the amount financed over its original term to maturity (exclusive of
any deferral or forbearance periods), (v) is not more than 90 days delinquent
and (vi) satisfies the other criteria, if any, set forth in the related
Prospectus Supplement. No selection procedures believed by the Seller to be
adverse to the Securityholders of any series will be used in selecting the
related Student Loans.
The Student Loans that comprise assets of each Trust will be held by the
related Eligible Lender Trustee, as trustee on behalf of such Trust. The
Eligible Lender Trustee will also enter into, on behalf of such Trust,
23
<PAGE>
Guarantee Agreements with the Guarantors specified in the applicable
Prospectus Supplement pursuant to which each of such Student Loans will be
guaranteed by one of such Guarantors. See "Formation of the Trusts--Eligible
Lender Trustee".
Information with respect to each pool of Student Loans for a given Trust
will be set forth in the related Prospectus Supplement, including, but not
limited to, to the extent appropriate, the composition, the distribution by
loan type, loan payment status, and states of borrowers' residence and the
portion of such Student Loans guaranteed by the specified Guarantors.
In the case of each series for which the related Trust may acquire or
originate Student Loans after the related Cutoff Date, information with
respect to the Student Loans eligible to be acquired or originated by the
related Trust will be set forth in the related Prospectus Supplement as will
information regarding the duration and conditions of the related Funding
Period or Revolving Period, the circumstances under which Additional Fundings
will be made during such Funding Period or Revolving Period, and, if
Additional Fundings may continue to be made after the Funding Period or
Revolving Period, the circumstances under which such Additional Fundings will
be made.
ORIGINATION AND MARKETING PROCESS
The Act and the private guarantee programs specify rules regarding loan
origination practices, which lenders must comply with in order for the Student
Loans to be guaranteed and to be eligible to receive Federal Assistance, in
the case of Federal Student Loans, and the benefits of the private guarantee
program, in the case of Private Student Loans. Lenders of Federal Student
Loans are prohibited from offering points, premiums, payments or other
inducements, directly or indirectly, to any educational institution, guarantor
or individual in order to secure Federal Student Loan applications, and no
lender may conduct unsolicited mailings of Federal Student Loan applications
to students who have not previously received student loans from that lender.
Generally the student and school complete the combined application with
promissory note and mail it either to a lender or directly to the applicable
Guarantor. Both the lender and such Guarantor must approve such application,
including confirming that such application is complete and that it (and the
prospective borrower and institution) complies with all applicable
requirements of the Act and the requirements of such Guarantor. The Act
requires that each Guarantor have procedures designed to assure that it
guarantees Federal Student Loans only to students attending institutions which
meet the requirements of the Act. Certain lenders establish maximum default
rates for institutions whose students they will serve. Each lender will only
make loans that are approved by the applicable Guarantor (consistent with the
approval requirements of the Act and the Guarantor). For each such application
that is approved, the applicable Guarantor will issue a guarantee certificate
to the lender, which will then cause the loan to be disbursed (typically in
multiple installments) and a disclosure statement confirming the terms of the
Student Loan to be sent to the student (or parent) borrower. These procedures
differ slightly for Consolidation Loans.
SERVICING AND COLLECTIONS PROCESS
The applicable Guarantee Agreements, and the Act in the case of Federal
Student Loans, require the holder of Student Loans to cause specified
procedures, including due diligence procedures and the taking of specific
steps at specific intervals, to be performed with respect to the servicing of
the Student Loans. These procedures are designed to ensure that such Student
Loans are repaid on a timely basis by or on behalf of borrowers. The Master
Servicer agrees to perform such servicing and collection procedures with
respect to the Student Loans on behalf of each Trust pursuant to the related
Master Servicing Agreement. Such procedures generally include periodic
attempts to contact any delinquent borrower by telephone and by mail,
commencing with one written notice within the first ten days of delinquency
and including multiple written notices and telephone calls to the borrower
thereafter at specified times during any such delinquency. All telephone calls
and letters are registered, and a synopsis of each call or the mailing of each
letter is noted in the Master Servicer's loan file for the
24
<PAGE>
borrower. The Master Servicer is also required to perform skip tracing
procedures on delinquent borrowers whose current location is unknown,
including contacting such borrowers' schools and references. Failure to comply
with the established procedures could adversely affect the ability of a given
Eligible Lender Trustee, as holder of legal title to the Student Loans on
behalf of the related Trust, to realize the benefits of any Guarantee
Agreement or, in the case of Federal Student Loans, to receive the benefits of
Federal Assistance from the Department with respect thereto. Failure to comply
with certain of the established procedures with respect to a Student Loan may
also result in the denial of coverage under a Guarantee Agreement for certain
accrued interest amounts, in circumstances where such failure has not caused
the loss of the guarantee of the principal of such Student Loan. See "Risk
Factors--Failure to Comply with Student Loan Origination and Servicing
Procedures for Federal Student Loans" and "--Failure to Comply with Student
Loan Origination and Servicing Procedures for Private Student Loans".
At prescribed times prior to submitting a claim for payment under a
Guarantee Agreement for a delinquent Student Loan, the Master Servicer
generally is required to notify the applicable Guarantor of the existence of
such delinquency. These notices advise the Guarantor of seriously delinquent
accounts and allow the Guarantor to make additional attempts to collect on
such loans prior to the filing of claims. Any Student Loan which becomes 180
days delinquent is considered to be in default, after which the Master
Servicer will submit a claim for reimbursement therefor to the applicable
Guarantor. Failure to file a claim within specified time frames of delinquency
may result in denial of the guarantee claim with respect to such Student Loan,
and failure to file such a claim within certain shorter specified time frames
of delinquency may result in a denial of certain interest amounts included in
such claims. The Master Servicer's failure to file a guarantee claim in a
timely fashion would constitute a breach of its covenants and would, if as a
result of such failure the related guarantee payment is no longer available to
the related Trust, create an obligation of the Master Servicer to arrange for
the purchase of the applicable Student Loan from the applicable Eligible
Lender Trustee on behalf of the related Trust. The obligation of the Master
Servicer to arrange for such a purchase will constitute the sole remedy
available to Securityholders or the Eligible Lender Trustee for such a failure
by the Master Servicer. See "Description of the Transfer and Servicing
Agreements--Servicer Covenants".
CLAIMS AND RECOVERY RATES
Certain historical information concerning the Guarantors for the Student
Loans with respect to each series of Securities, including but not limited to
guarantee claims and recovery rates, will be set forth in each Prospectus
Supplement. There can be no assurance that the claim and recovery experience
on any pool of Student Loans with respect to a given Trust will be comparable
to prior experience or to any such information.
FEDERAL FAMILY EDUCATION LOAN PROGRAM
GENERAL
The Act provides for loans to be made to students or parents of dependent
students enrolled in eligible institutions to finance a portion of the costs
of attending school. As described herein, payment of principal and interest
with respect to the Federal Student Loans is guaranteed by the applicable
Guarantor against default, death, bankruptcy or disability of the applicable
borrower and claims of school closure and false certification. The Guarantors
are entitled, subject to certain conditions, to be reimbursed by the
Department for from 100% to 78% of the amount of each Guarantee Payment made
pursuant to a program of federal reinsurance under the Act. In addition, the
related Eligible Lender Trustee, as a holder of the Federal Student Loans on
behalf of a Trust, is entitled to receive from the Department certain interest
subsidy payments and special allowance payments with respect to certain of
such Federal Student Loans as described herein.
FFELP provides for loans to students and parents of dependent students which
are (i) insured by a Guarantor and reinsured by the federal government or (ii)
directly insured by the federal government. Several types of Federal Student
Loans are currently authorized under the Act: (i) loans to students who
demonstrate need
25
<PAGE>
("Federal Stafford Loans"); (ii) loans to students who do not demonstrate need
or who need additional loans to supplement their Federal Stafford Loans
("Federal Unsubsidized Stafford Loans"); (iii) loans to parents of students
("Federal PLUS Loans") who are dependents and whose need exceeds the available
Federal Unsubsidized Stafford Loans and/or Stafford Loans and (iv) loans to
consolidate the borrower's obligations under various federally authorized
student loan programs into a single loan ("Federal Consolidation Loans").
Prior to July 1, 1994, the Act also authorized loans to graduate and
professional students, independent undergraduate students and, under certain
circumstances, dependent undergraduate students to supplement their Federal
Stafford Loans ("Federal Supplemental Loans to Students" or "Federal SLS
Loans"). The description and summaries of the Act, FFELP, the Guarantee
Agreements and the other statutes, regulations and amendments referred to in
this Prospectus do not purport to be comprehensive and are qualified in their
entirety by reference to each such statute, regulation or document. There can
be no assurance that future amendments or modifications will not materially
change any of the terms or provisions of the programs described in this
Prospectus or of the statutes and regulations implementing these programs. See
"Risk Factors --Change in Law".
LEGISLATIVE AND ADMINISTRATIVE MATTERS
Both the Act and the regulations promulgated thereunder have been the
subject of extensive amendments in recent years and there can be no assurance
that further amendment will not materially change the provisions described
herein or the effect thereof. The 1992 Amendments extended the principal
provisions of FFELP to October l, 1998 (or in the case of borrowers who have
received loans prior to that date, September 30, 2002, except that authority
to make Federal Consolidation Loans expires on September 30, 1998).
The Omnibus Budget Reconciliation Act of 1993 (the "1993 Act") made a number
of changes to the Federal Student Loan programs, including imposing certain
fees on lenders or holders of Federal Student Loans and affecting the
Department's financial assistance to Federal Guarantors, including the
reduction of the percentage of claim payments the Department will reimburse to
Federal Guarantors and reducing more substantially the insurance premiums and
default collections that Federal Guarantors are entitled to receive and/or
retain. In addition, such legislation contemplates replacement of a minimum of
approximately 60% of the Federal Student Loan programs with direct lending by
the Department by 1998. The expansion of the new program may involve further
reductions in the volume of loans made under the existing programs, and/or the
prepayment of existing FFELP loans via the Federal Direct Consolidation Loan
Program. The volume of existing loans that may be prepaid in this fashion is
not determinable at this time. This reduction could result in increased costs
for the Master Servicer or any Subservicer due to reduced economics of scale.
Such cost increases could affect the ability of the Master Servicer to satisfy
its obligation to service the Student Loans or the obligations of the Seller
and the Servicer to repurchase the Student Loans in the event of certain
breaches of their respective representations and warranties or covenants. See
"Description of the Transfer and Servicing Agreements--Sale of Student Loans;
Representations and Warranties" and "--Servicer Covenants". Such volume
reductions could also reduce revenues received by Federal Guarantors that are
available to pay claims on defaulted Student Loans. Finally, the level of
competition in existence in the secondary market for loans made under the
existing programs could be reduced, resulting in fewer potential buyers of
Federal Student Loans and lower prices available in the secondary market for
those loans. Such a price reduction could have an adverse effect on the
ability of the Indenture Trustee to sell the Student Loans pursuant to an
auction or upon a liquidation or termination of the Trust. See "Description of
the Transfer and Servicing Agreements--Termination" and "Description of the
Notes--The Indenture--Events of Default; Rights Upon Events of Default".
On April 29, 1994, the Department published regulations amending the Student
Assistance General Provisions and FFELP regulations effective July l, 1994.
These regulations, among other things, establish requirements governing
contracts between holders of Federal Student Loans and third-party servicers,
established standards of administrative and financial responsibility for
third-party servicers that administer any aspect of a guarantor's or lender's
participation in the FFELP, and established sanctions for third-party
servicers that fail to conform their administrative practices to such
regulations.
26
<PAGE>
Under these regulations, a third-party servicer (such as the Master Servicer
and, with respect to certain other holders, any Subservicer) is jointly and
severally liable with its client lenders for liabilities to the Department
arising from the servicer's violation of applicable requirements. In addition,
if a servicer fails to meet standards of financial responsibility or
administrative capability included in the new regulations, or violates other
FFELP requirements, the new regulations authorize the Department to fine the
servicer and/or limit, suspend or terminate the servicer's eligibility to
contract to service Federal Student Loans. The effect of such a limitation,
suspension, or termination on a servicer's eligibility to service loans
already on its system, or to accept new loans for servicing under existing
contracts, is unclear. No assurance exists that the Master Servicer or a
Subservicer will not be held liable by the Department for liabilities arising
out of its FFELP activities for a Trust or other client lenders, or that its
eligibility will not be limited, suspended, or terminated in the future. If
the Master Servicer or a Subservicer were to be held liable or its eligibility
limited, suspended, or terminated, the Master Servicer's ability to properly
service Student Loans and to satisfy its obligation to arrange the purchase of
loans as to which it breaches its covenants under the applicable Master
Servicing Agreement could be adversely affected. In such event, a Servicer
Default under the related Master Servicing Agreement could occur resulting in
the removal of the Master Servicer and the appointment of a successor Master
Servicer by the Indenture Trustee or the holders of Notes of the related
series evidencing not less than 75% in principal amount of such then
outstanding Notes. See "Description of the Transfer and Servicing Agreements--
Rights Upon Servicer Default".
ELIGIBLE LENDERS, STUDENTS AND EDUCATIONAL INSTITUTIONS
Lenders eligible to make loans under FFELP generally include banks, savings
and loan associations, credit unions, pension funds, insurance companies, and
under certain conditions, schools and guarantors. Federal Student Loans may
only be made to a "qualified student", generally defined as a United States
citizen or national or otherwise eligible individual under federal regulations
who (a) has been accepted for enrollment or is enrolled and is maintaining
satisfactory progress at an eligible school, (b) is carrying at least one-half
of the normal full-time academic workload for the course of study the student
is pursuing, as determined by such institution, (c) has agreed to notify
promptly the holder of the loan of any address change and (d) meets the
application "need" requirements for the particular loan program. Each loan is
to be evidenced by an unsecured promissory note.
Eligible schools include institutions of higher education and proprietary
institutions. Institutions of higher education must meet certain standards,
which generally provide that the institution (i) only admits persons that have
a high school diploma or its equivalent; (ii) is legally authorized to operate
within the state; (iii) provides not less than a two-year program with credit
acceptable toward a bachelor's degree; (iv) is a public or non-profit
institution and (v) is accredited by a nationally recognized accrediting
agency or is determined by the Department to meet the standards of an
accredited institution. Eligible proprietary institutions include business,
trade and vocational schools meeting standards which provide that the
institution (i) only admits persons that have a high school diploma or its
equivalent, or persons that are beyond the age of compulsory school attendance
and have the ability to benefit from the training offered (as defined in the
Act); (ii) is authorized by the state to provide a program of vocational
education designed to fit individuals for useful employment in recognized
occupations; (iii) provides at least a six-month training program to prepare
students for gainful employment in a recognized occupation; (iv) has been in
existence for at least two years and (v) is accredited by a nationally
recognized accrediting agency or association.
With specified exceptions, institutions are excluded from consideration as
educational institutions if the institution (i) offers more than 50 percent of
its courses by correspondence, (ii) enrolls 50 percent or more of its students
in correspondence courses, (iii) has a student enrollment in which more than
25 percent of the students are incarcerated, or (iv) has a student enrollment
in which more than 50 percent of the students are admitted without a high
school diploma or its equivalent on the basis of their ability to benefit from
the education provided (as defined by statute and regulation). Further,
schools are specifically excluded from participation if (i) the educational
institution has filed for bankruptcy, (ii) the owner, or its chief executive
officer, has been convicted or pleaded nolo contendere or guilty to a crime
involving the acquisition, use or expenditure of federal student aid funds, or
has been judicially determined to have committed fraud involving funds under
the student aid
27
<PAGE>
program or (iii) the educational institution has a cohort default rate in
excess of the rate prescribed by the Act. In order to participate in the
program, the eligibility of a school must be approved by the Department under
standards established by regulation.
FINANCIAL NEED ANALYSIS
Federal Student Loans may generally be made in amounts, subject to certain
limits and conditions, to cover the student's estimated costs of attendance,
including tuition and fees, books, supplies, room and board, transportation
and miscellaneous personal expenses (as determined by the institution). With
the exception of certain borrowers under the Federal Unsubsidized Stafford
Loan, Federal PLUS Loan, and Federal Consolidation Loan programs, each
borrower must undergo a financial need analysis, which requires the borrower
to submit a financial need analysis form to a multiple data entry processor
which forwards the information to the federal central processor. The central
processor evaluates the parents' and student's financial condition under
federal guidelines and calculates the amount that the student and/or the
family must contribute towards the student's cost of education (the "family
contribution"). After receiving information on the family contribution, the
institution then subtracts the family contribution from the cost for the
student to attend such institution to determine the student's eligibility for
grants, loans, and work assistance. The difference between the amount of
grants and Federal Stafford Loans for which the borrower is eligible and the
student's estimated cost of attendance (the "Unmet Need") may be borrowed
through Federal Unsubsidized Stafford Loans and, after exhausting Federal
Unsubsidized Stafford Loan limits, Federal SLS and Federal PLUS Loans. Parents
may finance the family contribution amount through their own resources or
through Federal PLUS Loans.
SPECIAL ALLOWANCE PAYMENTS
The Act provides for quarterly special allowance payments ("Special
Allowance Payments") to be made by the Department to holders of Federal
Student Loans to the extent necessary to ensure that such holder receives at
least a specified market interest rate of return on such loans. The rates for
Special Allowance Payments are based on formulas that differ according to the
type of loan, the date the loan was originally made or insured and the type of
funds used to finance such loan (tax-exempt or taxable). A Special Allowance
Payment is made for each of the 3-month periods ending March 31, June 30,
September 30, and December 31. The Special Allowance Payment equals the
average unpaid principal balance (including interest permitted to be
capitalized) of all eligible loans held by such holder during such period
multiplied by the special allowance percentage. The special allowance
percentage is computed by (i) determining the average of the bond equivalent
rates of 91-day Treasury bills auctioned for such 3-month period, (ii)
subtracting the applicable borrower interest rate on such loan from such
average, (iii) adding the applicable Special Allowance Margin (as set forth
below) to the resultant percentage, and (iv) dividing the resultant percentage
by 4, provided, that, if the amount determined by the application of clauses
(i), (ii) and (iii) is in the negative, the Special Allowance Margin is zero.
<TABLE>
<CAPTION>
DATE OF DISBURSEMENT SPECIAL ALLOWANCE MARGIN
-------------------- ------------------------
<S> <C>
Prior to 10/17/86........... 3.50%
10/17/86-09/30/92........... 3.25%
10/01/92-06/30/95........... 3.10%
07/01/95-06/30/98........... 2.50% (Federal Stafford Loans and Federal
Unsubsidized Stafford Loans that are in school,
grace or deferment) 3.10% (Federal Stafford Loans
and Federal Unsubsidized Stafford Loans that are in
repayment and all other loans)
</TABLE>
Special Allowance Payments are available on variable rate Federal PLUS and
Federal SLS Loans only if the variable rate, which is reset annually based on
the 52-week Treasury Bill, exceeds the applicable maximum rate. Such maximum
is generally between 9% and 12%.
28
<PAGE>
FEDERAL STAFFORD LOANS
The Act provides for (i) federal insurance or reinsurance of Federal
Stafford Loans made by eligible lenders to qualified students, (ii) federal
interest subsidy payments on certain eligible Federal Stafford Loans to be
paid by the Department to holders of the loans in lieu of the borrower making
interest payments ("Interest Subsidy Payments") and (iii) Special Allowance
Payments representing an additional subsidy paid by the Department to the
holders of eligible Federal Stafford Loans (such federal reinsurance
obligations, together with those obligations referred to in clauses (ii) and
(iii) above, being collectively referred to herein as "Federal Assistance").
Interest. The borrower's interest rate on a Federal Stafford Loan may be
fixed or variable. Federal Stafford Loan interest rates are summarized in the
chart below.
<TABLE>
<CAPTION>
TRIGGER DATE(1) BORROWER RATE(2) MAXIMUM RATE INTEREST RATE MARGIN
--------------- ------------------------ ----------------- --------------------
<C> <S> <C> <C>
Prior to 01/01/81.. 7% 7% N/A
01/01/81-09/12/83.. 9% 9% N/A
09/13/83-06/30/88.. 8% 8% N/A
07/01/88-09/30/92.. 8% for 48 months; 8% for 48 months, 3.25%
thereafter, 91-Day then 10%
Treasury + Interest Rate
Margin
10/01/92-06/30/94.. 91-Day Treasury + 9% 3.10%
Interest Rate Margin
07/01/94-06/30/95.. 91-Day Treasury + 8.25% 3.10%
Interest Rate Margin
07/01/95-06/30/98.. 91-Day Treasury + 8.25% 2.50% (in school,
Interest Rate Margin grace or deferment);
3.10% (in repayment)
</TABLE>
- --------
(1) The Trigger Date for Federal Stafford Loans made before October 1, 1992
is the first day of enrollment period for which a borrower's first
Federal Stafford Loans is made and for Federal Stafford Loans made on
October 1, 1992 and after the Trigger Date is the date of the
disbursement of a borrower's first Federal Stafford Loan.
(2) The rate for variable rate Federal Stafford Loans applicable for any 12-
month period beginning on July 1 and ending on June 30, is determined on
the preceding June 1 and is equal to the lesser of (a) the applicable
Maximum Rate or (b) the sum of (i) the bond equivalent rate of 91-day
Treasury bills auctioned at the final auction held prior to such June 1
and (ii) the applicable Interest Rate Margin.
The 1992 Amendments provide that, for fixed rate loans made on or after July
23, 1992 and for certain loans made to new borrowers on or after July 1, 1988,
the lender must have converted by January 1, 1995 the interest rate on such
loans to an annual interest rate adjusted each July 1 equal to (1) for certain
loans made between July 1, 1988 and July 23, 1992, the 91-day Treasury bill
rate at the final auction prior to the preceding June 1 plus 3.25% and (2) for
loans made on or after July 23, 1992, the 91-day Treasury bill rate at the
final auction prior to the preceding June 1 plus 3.10%, in each case capped at
the applicable interest rate for such loan existing prior to the conversion.
The variable interest rate does not apply to loans made prior to July 23, 1992
during the first 48 months of repayment.
Interest Subsidy Payments. The Department is responsible for paying interest
on Federal Stafford Loans while the borrower is a qualified student, during a
grace period or during certain deferral periods. The Department makes
quarterly Interest Subsidy Payments to the owner of Federal Stafford Loans in
the amount of interest accruing on the unpaid balance thereof prior to the
commencement of repayment or during any Deferral Periods. The Act provides
that the owner of an eligible Federal Stafford Loan shall be deemed to have a
contractual right against the United States of America to receive Interest
Subsidy Payments (and Special Allowance Payments) in accordance with its
provisions. Receipt of Interest Subsidy Payments and Special Allowance
Payments is conditioned on compliance with the requirements of the Act,
including satisfaction of certain need-based criteria (and the delivery of
sufficient information by the borrower and the lender to the Department to
confirm the foregoing) and continued eligibility of such loan for federal
reinsurance. Such
29
<PAGE>
eligibility may be lost, however, if the loans are not held by an eligible
lender, in accordance with the requirement of the Act and the applicable
Federal Guarantee Agreements. See "--Eligible Lenders, Students and
Institutions" above; "Risk Factors--Failure to Comply with Student Loan
Origination and Servicing Procedures for Federal Student Loans"; "Formation of
the Trust--Eligible Lender Trustee" and "Description of the Transfer and
Servicing Agreements--Servicing Procedures". The Seller expects that
substantially all of the Federal Stafford Loans that are conveyed to a Trust
will be eligible to receive Interest Subsidy Payments and Special Allowance
Payments.
Interest Subsidy Payments and Special Allowance Payments are generally
received within 45 days to 60 days after submission to the Department of the
applicable claim forms for any given calendar quarter, although there can be
no assurance that such payments will in fact be received from the Department
within that period. See "Risk Factors--Variability of Actual Cash Flows;
Inability of Related Indenture Trustee to Liquidate Student Loans". The Master
Servicer has agreed to prepare and file with the Department all such claims
forms and any other required documents or filings on behalf of each Eligible
Lender Trustee as owner of the related Federal Student Loans on behalf of each
Trust. The Master Servicer has also agreed to assist each Eligible Lender
Trustee in monitoring, pursuing and obtaining such Interest Subsidy Payments
and Special Allowance Payments, if any, with respect to such Federal Student
Loans. Each Eligible Lender Trustee will be required to remit Interest Subsidy
Payments and Special Allowance Payments it receives with respect to such
Federal Student Loans within two business days of receipt thereof to the
related Collection Account.
Loan Limits. The Act requires that loans be disbursed by eligible lenders in
at least two separate and equal disbursements. The Act limited the amount a
student can borrow in any academic year and the amount he or she can have
outstanding in the aggregate. The following chart sets forth the current and
historic loan limits.
<TABLE>
<CAPTION>
ALL STUDENTS (1) INDEPENDENT STUDENTS (1)
---------------- ---------------------------
BASE AMOUNT ADDITIONAL
SUBSIDIZED AND UNSUBSIDIZED
SUBSIDIZED UNSUBSIDIZED ON ONLY ON OR
SUBSIDIZED ON OR AFTER OR AFTER AFTER TOTAL
BORROWER'S ACADEMIC LEVEL PRE-1/1/87 1/1/87 10/1//93(2) 7/1/94(3) AMOUNT
- ------------------------- ---------- ----------- ---------------- ---------------------------
<S> <C> <C> <C> <C> <C>
Undergraduate (per year)
1st year............... $ 2,500 $ 2,625 $ 2,625 $ 4,000 $ 6,625
2nd year............... $ 2,500 $ 2,625 $ 3,500 $ 4,000 $ 7,500
3rd year and above..... $ 2,500 $ 4,000 $ 5,500 $ 5,000 $ 10,500
Graduate (per year)...... $ 5,000 $ 7,500 $ 8,500 $ 10,000 $ 18,500
Aggregate Limited
Undergraduate.......... $12,500 $17,250 $23,000 $ 23,000 $ 46,000
Graduate (including
undergraduate)........ $25,000 $54,750 $65,500 $ 73,000 $ 138,500
</TABLE>
- --------
(1) The loan limits are inclusive of both Federal Stafford Loans and Federal
Direct Student Loans.
(2) These amounts represent the combined maximum loan amount per year for
Federal Stafford and Federal Unsubsidized Stafford Loans. Accordingly, the
maximum amount that a student may borrow under an Federal Unsubsidized
Loan is the difference between the combined maximum loan amount and the
amount the student received in the form of a Federal Stafford Loan.
(3) Independent undergraduate students, graduate students or professional
students may borrow these additional amounts. In addition, dependent
undergraduate students may also receive these additional loan amounts if
the parents of such students are unable to provide the family contribution
amount and it is unlikely that the student's parents will qualify for a
Federal PLUS Loan.
The annual loan limits are reduced in some instances where the student has
less than a full academic year remaining in his or her program. The Department
has discretion to raise these limits to accommodate highly specialized or
exceptionally expensive courses of study.
30
<PAGE>
Repayment. Repayment of principal on a Federal Stafford Loan generally does
not commence while a student remains a qualified student, but generally begins
upon expiration of the applicable grace period, as described below. Any
borrower may voluntarily prepay without premium or penalty any loan and in
connection therewith may waive any Grace Period or Deferral Period. In
general, each loan must be scheduled for repayment over a period of not more
than ten years after the commencement of repayment. The Act currently requires
minimum annual payments of $600 or, if greater, the amount of accrued interest
for that year, unless the borrower and the lender agree to lesser payments.
Effective July 1, 1993, the Act and regulations promulgated thereunder require
lenders to offer graduated or income-sensitive repayment schedules to all
borrowers who receive a loan on or after such date.
Grace Periods, Deferral Periods, Forbearance Periods. Repayment of principal
on a Federal Stafford Loan must generally commence following a period of (a)
not less than 9 months or more than 12 months (with respect to loans for which
the applicable interest rate is 7% per annum) and (b) not more than 6 months
(with respect to loans for which the applicable interest rate is 9% per annum
or 8% per annum and for loans to first time borrowers on or after July l,
1988) after the borrower ceases to pursue at least a half-time course of study
(a "Grace Period"). However, during certain other periods (each, a "Deferral
Period") and subject to certain conditions, no principal repayments need be
made, including periods when the student has returned to an eligible
educational institution on a full-time basis or is pursuing studies pursuant
to an approved graduate fellowship program, or when the student is a member of
the Armed Forces or a volunteer under the Peace Corps Act or the Domestic
Volunteer Service Act of 1973, or when the borrower is temporarily totally
disabled, or periods during which the borrower may defer principal payments
because of temporary financial hardship. For new borrowers to whom loans are
first disbursed on or after July l, 1993, payment of principal may be deferred
only while the borrower is at least a half-time student or is in an approved
graduate fellowship program or is enrolled in a rehabilitation program, or
when the borrower is seeking but unable to find full-time employment, subject
to a maximum deferment of three years, or when for any reason the lender
determines that payment of principal will cause the borrower economic
hardship, also subject to a maximum deferment of three years. The 1992
Amendments also permit forbearance of loan collection in certain circumstances
(each such period, a "Forbearance Period").
FEDERAL UNSUBSIDIZED STAFFORD LOANS
The Federal Unsubsidized Stafford Loan program created under the 1992
Amendments is designed for students who do not qualify for the maximum Federal
Stafford Loan due to parental and/or student income and assets in excess of
permitted amounts. The basic requirements for Federal Unsubsidized Stafford
Loans are essentially the same as those for the Federal Stafford Loans,
including with respect to provisions governing the interest rate, the annual
loan limits and the Special Allowance Payments. The terms of the Federal
Unsubsidized Stafford Loans, however, differ in some respects. The federal
government does not make Interest Subsidy Payments on Federal Unsubsidized
Stafford Loans. The borrower must either begin making interest payments within
60 days after the time the loan is disbursed or permit capitalization of the
interest by the lender until repayment begins. Prior to July 1, 1994, Federal
Unsubsidized Stafford Loan borrowers were required to pay, upon disbursement,
a 6.5% insurance fee to the Department, though no guarantee fee may be charged
by the applicable Federal Guarantor. Effective July 1, 1994, the maximum
insurance premium is reduced to l% and the origination fee is 3%. Subject to
the same loan limits established for Federal Stafford Loans, the student may
borrow up to the amount of such student's Unmet Need. Lenders are authorized
to make Federal Unsubsidized Stafford Loans for periods of enrollment
beginning on or after October l, 1992.
FEDERAL PLUS AND FEDERAL SLS LOAN PROGRAMS
The Act authorizes Federal PLUS Loans to be made to parents of eligible
dependent students and Federal SLS Loans to be made to certain categories of
students. After July l, 1993, only parents who do not have an adverse credit
history are eligible for Federal PLUS Loans. The basic provisions applicable
to Federal PLUS and Federal SLS Loans are similar to those of Federal Stafford
Loans with respect to the federal insurance and reinsurance on the loans.
However, Federal PLUS and Federal SLS Loans differ from Federal Stafford
Loans, particularly because Interest Subsidy Payments are not available under
the Federal PLUS and Federal SLS Programs and in some instances Special
Allowance Payments are more restricted.
31
<PAGE>
Loan Limits. Federal PLUS and Federal SLS Loans disbursed prior to July l,
1993 are limited to $4,000 per academic year with a maximum aggregate amount
of $20,000. Federal SLS Loan limits for loans disbursed on or after July l,
1993 depended upon the class year of the student and the length of the
academic year. The annual loan limit for Federal SLS Loans first disbursed on
or after July l, 1993 ranged from $4,000 for first and second year
undergraduate borrowers to $10,000 for graduate borrowers, with a maximum
aggregate amount of $23,000 for undergraduate borrowers and $73,000 for
graduate and professional borrowers. After July l, 1994, for purposes of new
loans being originated, the Federal SLS programs will be merged with the
Federal Unsubsidized Stafford Loan program with the borrowing limits
reflecting the combined eligibility under both programs. The only limit on the
annual and aggregate amounts of Federal PLUS Loans first disbursed on or after
July l, 1993 is the cost of the student's education less other financial aid
received, including scholarship, grants and other student loans.
Interest. The interest rate determination for a PLUS or SLS loan is
dependent on when the loan was originally made and disbursed and the period of
enrollment. The interest rates for PLUS and SLS loans are summarized in the
following chart.
<TABLE>
<CAPTION>
TRIGGER DATE BORROWER RATE(1) MAXIMUM RATE(2) INTEREST RATE MARGIN
------------ --------------------------------------- ---------------- --------------------
<S> <C> <C> <C>
Prior to 10/01/81....... 9% 9% N/A
10/01/81-10/30/82....... 14% 14% N/A
11/01/82-06/30/87....... 12% 12% N/A
07/01/87-09/30/92....... 52-Week Treasury + Interest Rate Margin 12% 3.25%
10/01/92-06/30/94....... 52-Week Treasury + Interest Rate Margin PLUS 10% SLS 11% 3.10%
After 06/30/94.......... 52-Week Treasury + Interest Rate Margin 9% 3.10%
(SLS repealed 07/01/94)
</TABLE>
- --------
(1) The Trigger Date for PLUS and SLS loans made before October 1, 1992 is
the first day of enrollment period for which the loan is made, and for
PLUS and SLS loans made on October 1, 1992 and after the Trigger Date is
the date of the disbursement of the loan, respectively.
(2) For PLUS or SLS loans that carry a variable rate, the rate is set
annually for 12-month periods beginning on July 1 and ending on June 30
on the preceding June 1 and is equal to the lessor of (a) the applicant
maximum rate or (b) the sum of (i) the bond equivalent rate of 52-week
Treasury bills auctioned at the final auction held prior to such June 1,
and (ii) the applicable Interest Rate Margin.
A holder of a PLUS or SLS loan is eligible to receive Special Allowance
Payments during any such 12-month period if (a) the sum of (i) the bond
equivalent rate of 52-week Treasury bills auctioned at the final auction held
prior to such June 1 and (ii) the Interest Rate Margin exceeds (b) the Maximum
Rate.
Repayment, Deferments. The 1992 Amendments provide Federal SLS borrowers
with the option to defer commencement of repayment of principal until the
commencement of repayment of Federal Stafford Loans. Otherwise, repayment of
principal of Federal PLUS and Federal SLS Loans is required to commence no
later than 60 days after the date of disbursement of such loan, subject to
certain deferral and forbearance provisions. The deferral provisions which
apply are more limited than those which apply to Federal Stafford Loans.
Repayment of interest, however, may be deferred and capitalized during certain
periods of educational enrollments and periods of unemployment or hardship as
specified under the Act. Further, whereas Interest Subsidy Payments are not
available for such deferments, interest may be capitalized during such periods
upon agreement of the lender and borrower. Maximum loan repayment periods and
minimum payment amounts are the same as for Federal Stafford Loans.
A borrower may refinance all outstanding Federal PLUS Loans under a single
repayment schedule for principal and interest, with the new repayment period
calculated from the date of repayment of the most recent included loan. The
interest rate of such refinanced loan shall be the weighted average of the
rates of all Federal PLUS Loans being refinanced. A second type of refinancing
enables an eligible lender to reissue a Federal PLUS Loan which was initially
originated at a fixed rate prior to July l, 1987 in order to permit the
borrower to obtain
32
<PAGE>
the variable interest rate available on Federal PLUS Loans on and after July
1, 1987. If a lender is unwilling to refinance the original Federal PLUS Loan,
the borrower may obtain a loan from another lender for the purpose of
discharging the loan and obtaining a variable interest rate.
FEDERAL CONSOLIDATION LOAN PROGRAM
The Act authorizes a program under which certain borrowers may consolidate
one or more of their Federal Student Loans as well as loans made pursuant to
the Perkins and Health Professional Student Loan Programs into a single loan
(a "Federal Consolidation Loan") insured and reinsured on a basis similar to
Federal Stafford Loans. Federal Consolidation Loans may be made in an amount
sufficient to pay outstanding principal, unpaid interest and late charges on
all federally insured or reinsured student loans incurred under FFELP selected
by the borrower, as well as loans made pursuant to various other federal
student loan programs and which may have been made by different lenders. Under
this program, a lender may make a Federal Consolidation Loan to an eligible
borrower at the request of the borrower if the lender holds an outstanding
loan of the borrower or the borrower certifies that he has been unable to
obtain a Federal Consolidation Loan from the holders of the outstanding loans
made to the borrower. Borrowers that are unable to obtain a Federal
Consolidation Loan from an eligible lender or a Federal Consolidation Loan
with an income-sensitive repayment plan acceptable to the borrower may obtain
a Federal Consolidation Loan under the direct loan program. Federal
Consolidation Loans that are made on or after July 1, 1994 will have no
minimum loan amount, although Federal Consolidation Loans for less than $7,500
must be repaid in ten years. Applications for Federal Consolidation Loans
received on or after January l, 1993 but prior to July l, 1994, are available
only to borrowers who have aggregate outstanding student loan balances of at
least $7,500; for applications received before January l, 1993, Federal
Consolidation Loans are available only to borrowers who have aggregate
outstanding student loan balances of at least $5,000. The borrowers must be
either in repayment status or in a grace period preceding repayment and, for
applications received prior to January l, 1993 the borrower must not be
delinquent by more than 90 days on any student loan payment; for applications
received on or after January 1, 1993 delinquent or defaulted borrowers are
eligible to obtain Federal Consolidation Loans if they will reenter repayment
through loan consolidation. For applications received on or after January l,
1993, borrowers may within 180 days of the origination of a Federal
Consolidation Loan add additional loans made prior to consolidation ("Add-on
Consolidation Loans") for consolidation therewith. For applications received
on or after January l, 1993, married couples who agree to be jointly and
severally liable will be treated as one borrower for purposes of loan
consolidation eligibility.
Federal Consolidation Loans bear interest at a rate which equals the
weighted average of interest rates on the unpaid principal balance of
outstanding loans, rounded to the nearest whole percent, with a minimum rate
of 9% for loans originated prior to July 1, 1994. For Federal Consolidation
Loans made on or after July 1, 1994, such weighted average interest rate must
be rounded up to the nearest whole percent. Interest on Federal Consolidation
Loans accrues and, for applications received prior to January l, 1993, is to
be paid without Interest Subsidy by the Department. For Federal Consolidation
Loans received on or after January l, 1993, all interest of the borrower is
paid during all periods of Deferment. However, Federal Consolidation Loan
applications received on or after August 10, 1993 will only be subsidized if
all of the underlying loans being consolidated were subsidized Federal
Stafford Loans. Borrowers may elect to accelerate principal payments without
penalty. Further, no insurance premium may be charged to a borrower and no
insurance premium may be charged to a lender in connection with a Federal
Consolidation Loan. However, lenders must pay a monthly rebate fee at an
annualized rate of 1.05% for loans disbursed on or after October l, 1993. The
rate for Special Allowance Payments for Federal Consolidation Loans is
determined in the same manner as for Federal Stafford Loans.
Repayment of Federal Consolidation Loans begins 60 days after discharge of
all prior loans which are consolidated. Repayment schedules must include, for
applications received on or after January l, 1993, the establishment of
graduated or income sensitive repayment plans, subject to certain limits
applicable to the sum of the Federal Consolidation Loan and the amount of the
borrower's other eligible student loans outstanding. The lender may, at its
option, include such graduated and income sensitive repayment plans for
applications received prior to that date. Generally, depending on the total of
loans outstanding, repayment may be scheduled
33
<PAGE>
over periods no shorter than ten but not more than twenty-five years in
length. For applications received on or after January l, 1993, the maximum
maturity schedule is 30 years for Federal Consolidation Loans of $60,000 or
more.
All eligible loans of a borrower paid in full through consolidation are
discharged in the consolidation process when the new Federal Consolidation
Loan is issued.
FEDERAL GUARANTORS
The Act authorizes Federal Guarantors to support education financing and
credit needs of students at post-secondary schools. The Act encourages every
state either to establish its own agency or to designate another Federal
Guarantor in cooperation with the Secretary. Under various programs throughout
the United States of America, Federal Guarantors insure and sometimes service
guaranteed student loans. The Federal Guarantors are reinsured by the federal
government for from 80% to 100% of each default claim paid, depending on their
claims experience, for loans disbursed prior to October l, 1993 and from 78%
to 98% of each default claim paid for loans disbursed on or after October l,
1993. Federal Guarantors are reinsured by the federal government for 100% of
death, disability, and bankruptcy claims paid. See "--Federal Insurance and
Reinsurance of Federal Guarantors" below.
Federal Guarantors collect a one-time insurance premium ranging from 0% to
3% of the principal amount of each guaranteed loan, depending on the Federal
Guarantor. Federal Guarantors are prohibited from charging insurance premiums
on loans made under the Federal Unsubsidized Stafford Loan program prior to
July 1, 1994. On such loans made prior to July 1, 1994, the Act requires that
a 6.5% combined loan origination fee and insurance premium be paid by the
borrower on Federal Unsubsidized Stafford Loans. This fee is passed through to
the Department by the originating lender. Effective July 1, 1994, the maximum
insurance premium and origination fee for Federal Stafford Loans and Federal
Unsubsidized Stafford Loans will be 1% and 3%, respectively.
Each Federal Student Loan to be sold to an Eligible Lender Trustee on behalf
of a Trust will be guaranteed as to principal and interest by a Federal
Guarantor pursuant to a Guarantee Agreement between such Federal Guarantor and
the applicable Eligible Lender Trustee. The applicable Prospectus Supplement
for each Trust will identify each related Federal Guarantor for the Federal
Student Loans held by such Trust as of the applicable Closing Date and the
amount of such Federal Student Loans it is guaranteeing for such Trust.
The 1993 Act granted the Department broad powers over Federal Guarantors and
their reserves. These powers include the authority to require a Federal
Guarantor to return all reserve funds to the Department if the Department
determines such action is necessary to ensure an orderly termination of the
Federal Guarantor, to serve the best interests of the student loan programs or
to ensure the proper maintenance of such Federal Guarantor's funds or assets.
The Department is also now authorized to direct a Federal Guarantor to return
a portion of its reserve funds which the Department determines is unnecessary
to pay the program expenses and contingent liabilities of the Federal
Guarantor and/or to cease any activities involving the use of the Federal
Guarantor's reserve funds or assets which the Department determines is a
misapplication or otherwise improper. The Department may also terminate a
Federal Guarantor's reinsurance agreement if the Department determines that
such action is necessary to protect the federal fiscal interest or to ensure
an orderly transition to full implementation of direct federal lending. These
various changes create a significant risk that the resources available to the
Federal Guarantors to meet their guarantee obligations will be significantly
reduced.
FEDERAL INSURANCE AND REINSURANCE OF FEDERAL GUARANTORS
A Federal Student Loan is considered to be in default for purposes of the
Act when the borrower fails to make an installment payment when due, or to
comply with other terms of the loan, and if the failure persists for 180 days,
as specified by the Act. Under certain circumstances a loan deemed ineligible
for Federal Reinsurance may be restored to eligibility. Procedures for such
restoration of eligibility are discussed below.
34
<PAGE>
If the loan in default is covered by federal loan insurance in accordance
with the provisions of the Act, the Department is to pay the applicable
Federal Guarantor, as insurance beneficiary, the amount of the loss sustained
thereby, upon notice and determination of such amount, within 90 days of such
notification, subject to reduction as described below.
If the loan is guaranteed by a Federal Guarantor, the eligible lender is
reimbursed by the Federal Guarantor for 100% (or not less than 98% for loans
disbursed on or after October l, 1993) of the unpaid principal balance of the
loan plus accrued and unpaid interest on any loan defaulted so long as the
eligible lender has properly originated and serviced such loan. Under the Act,
the Department enters into a guarantee agreement with each Federal Guarantor,
which provides for federal reinsurance for amounts paid to eligible lenders by
the Federal Guarantor with respect to defaulted loans.
Pursuant to such agreements, the Department also agrees to reimburse a
Federal Guarantor for 100% of the amounts expended in connection with a claim
resulting from the death, bankruptcy, total and permanent disability of a
borrower, the death of a student whose parent is the borrower of a Federal
PLUS Loan or claims by borrowers who received loans on or after January l,
1986 and who are unable to complete the programs in which they are enrolled
due to school closure or borrowers whose borrowing eligibility was falsely
certified by the eligible institution; such claims are not included in
calculating a Federal Guarantor's claims rate experience for federal
reinsurance purposes. The Department is also required to repay the unpaid
balance of any loan if the borrower files for relief under Chapter 12 or 13 of
the Bankruptcy Code or files for relief under Chapter 7 or 11 of the
Bankruptcy Code and commences an action for a determination of
dischargeability under Section 523(a)(8)(b) of the Bankruptcy Code, and is
authorized to acquire the loans of borrowers who are at high risk of default
and who request an alternative repayment option from the Department.
The amount of such reinsurance payment to the Federal Guarantor for default
claims is subject to reduction based upon the annual default claims rate of
the Federal Guarantor, calculated to equal the amount of federal reinsurance
as a percentage of the original principal amount of guaranteed loans in
repayment on the last day of the prior federal fiscal year. The formula is
summarized as follows:
<TABLE>
<CAPTION>
REIMBURSEMENT TO FEDERAL GUARANTOR
CLAIMS RATE OF FEDERAL GUARANTOR BY THE DEPARTMENT OF EDUCATION (1)
- -------------------------------- ----------------------------------------------------
<S> <C>
0% to and including 5%; 100%
Greater than 5% to and 100% of claims to and including 5%; 90% of claims
including 9%; greater than 5%
Greater than 9% 100% of claims to and including 5%; 90% of claims
greater than 5% to and including 9%; and 80% of
claims greater than 9%
</TABLE>
- --------
(1) The federal reimbursement is reduced to 98%, 88% and 78% for loans
disbursed on or after October l, 1993.
The claims experience is not accumulated from year to year, but is
determined solely on the basis of claims in any one federal fiscal year
compared with the original principal amount of loans in repayment at the
beginning of that year.
The 1992 Amendments to the Act addressed education loan industry concerns
regarding the Department's commitment to providing support in the event of
Federal Guarantor failures. Pursuant to the 1992 Amendments, Federal
Guarantors are required to maintain specified reserve fund levels. Such levels
are defined as 0.5% of the total attributable amount of all outstanding loans
guaranteed by the Federal Guarantor for the fiscal year of the Federal
Guarantor that begins in 1993, 0.7% for the Federal Guarantor's fiscal year
beginning in 1994, 0.9% for the Federal Guarantor's fiscal year beginning in
1995, and 1.1% for the Federal Guarantor's fiscal year beginning on or after
January l, 1996. If the Federal Guarantor fails to achieve the minimum reserve
level in any two consecutive years, if the Federal Guarantor's federal annual
claims rate equals or exceeds 9% or if the Department determines the Federal
Guarantor's administrative or financial condition jeopardizes its continued
35
<PAGE>
ability to perform its responsibilities, the Department may require the
Federal Guarantor to submit and implement a management plan to address the
deficiencies. The Department may terminate the Federal Guarantor's agreements
with the Department if the Guarantor fails to submit the required plan, or
fails to improve its administrative or financial condition substantially, or
if the Department determines the Federal Guarantor is in danger of financial
collapse. In such event, the Department is required to assume responsibility
for the functions of such Federal Guarantor and in connection therewith is
authorized to undertake specified actions to assure the continued payment of
claims, including maturity advances to Federal Guarantors to cover immediate
cash needs, transferring of guarantees to another Federal Guarantor, or
transfer of guarantees to the Department itself. No assurance can be made that
the Department will under any given circumstance exercise its right to
terminate a reimbursement agreement with a Federal Guarantor or make a
determination that such Federal Guarantor is unable to meet its guarantee
obligations.
The Act requires that, subject to compliance with the Act, the Secretary
must pay all amounts which may be required to be paid under the Act as a
result of certain events of death, disability, bankruptcy, school closure or
false certification by the educational institution described therein. It
further provides that Federal Guarantors shall be deemed to have a contractual
right against the United States of America to receive reinsurance in
accordance with its provisions. In addition, the 1992 Amendments provide that
if the Department determines that a Federal Guarantor is unable to meet its
insurance obligations, holders of loans may submit insurance claims directly
to the Department until such time as the obligations are transferred to a new
Federal Guarantor capable of meeting such obligations or until a successor
Federal Guarantor assumes such obligations. No assurance can be made that the
Department would under any given circumstances assume such obligation to
assure satisfaction of a guarantee obligation by exercising its right to
terminate a reimbursement agreement with a Federal Guarantor or by making a
determination that such Federal Guarantor is unable to meet its guarantee
obligations.
PRIVATE STUDENT AND OTHER LOAN PROGRAMS
A description of each private guarantee or other student loan program
relating to the Private Student Loans or other student loans in a Trust will
be set forth in the related Prospectus Supplement.
WEIGHTED AVERAGE LIFE OF THE SECURITIES
The weighted average life of the Notes and the Certificates of any series
will generally be influenced by the rate at which the principal balances of
the related Student Loans are paid, which payment may be in the form of
scheduled amortization or prepayments. (For this purpose, the term
"prepayments" includes prepayments in full or in part (including pursuant to
Federal Consolidation Loans), as a result of (i) borrower default, death,
disability or bankruptcy, (ii) a closing or a false certification by the
borrower's school and (iii) subsequent liquidation or collection of Guarantee
Payments with respect thereto and as a result of Student Loans being
repurchased by the Seller or the Master Servicer for administrative reasons.)
All of the Student Loans are prepayable at any time without penalty to the
borrower. The rate of prepayment of Student Loans is influenced by a variety
of economic, social and other factors, including as described below and in the
applicable Prospectus Supplement. In general, the rate of prepayments may tend
to increase to the extent that alternative financing becomes available at
prevailing interest rates which fall significantly below the interest rates
applicable to the Student Loans. However, because many of the Student Loans
bear interest that either actually or effectively is floating, it is
impossible to predict whether changes in prevailing interest rates will be
similar to or will vary from changes in the interest rates on the Student
Loans. In addition, under certain circumstances, the Seller or the Master
Servicer will be obligated to repurchase or arrange for the repurchase of
Student Loans from a given Trust pursuant to the related Loan Sale Agreement
or Master Servicing Agreement, as applicable, as a result of breaches of
applicable representations and warranties or covenants. See "Description of
the Transfer and Servicing Agreements--Sale of Student Loans; Representations
and Warranties" and "--Servicer Covenants". See also "Description of the
Transfer and Servicing Agreements--Termination" regarding the Master
Servicer's option to purchase the Student Loans from a given Trust and "--
Insolvency Event" regarding the sale of the Student
36
<PAGE>
Loans if an Insolvency Event with respect to the Seller or the Company occurs.
In addition, if specified in the related Prospectus Supplement, the initial
principal balance of the Notes and the Certificates may exceed the initial
pool balance of the Student Loans in the Trust. In such case, amounts
representing interest payments on Student Loans in excess of certain amounts
required to be paid to the Noteholders and the Certificateholders, may be used
to reduce the principal balance of the Notes and the Certificates, thus
reducing the weighted average life of the Notes and the Certificates. Also, in
the case of a Trust having a Funding Period or Revolving Period, the addition
of Student Loans to the Trust during such period could affect the weighted
average life of the Securities of the related series. See "Description of the
Transfer and Servicing Agreements--Additional Fundings" herein.
Scheduled payments with respect to, and maturities of, the Student Loans may
be extended, including pursuant to applicable grace, deferral and forbearance
periods. The rate of payment of principal of the Notes and the Certificates
and the yield on the Notes and the Certificates may also be affected by the
rate of defaults resulting in losses on Student Loans, by the severity of
those losses and by the timing of those losses, which may affect the ability
of the Guarantors to make Guarantee Payments with respect thereto.
In light of the above considerations, there can be no assurance as to the
amount of principal payments to be made on the Notes or the Certificates of a
given series on each Distribution Date, since such amount will depend, in
part, on the amount of principal collected on the related pool of Student
Loans during the applicable Collection Period. Any reinvestment risks
resulting from a faster or slower incidence of prepayment of Student Loans
will be borne entirely by the Noteholders and the Certificateholders of a
given series. The related Prospectus Supplement will set forth certain
additional information with respect to the maturity and prepayment
considerations applicable to the particular pool of Student Loans and the
related series of Securities.
POOL FACTORS AND TRADING INFORMATION
Each of the "Note Pool Factor" for each class of Notes and the "Certificate
Pool Factor" for each class of Certificates (each, a "Pool Factor") will be a
seven-digit decimal which the Master Servicer will compute prior to each
Distribution Date indicating the remaining outstanding principal balance of
such class of Notes or the remaining Certificate Balance for such class of
Certificates, respectively, as of that Distribution Date (after giving effect
to distributions to be made on such Distribution Date), as a fraction of the
initial outstanding principal balance of such class of the Notes or the
initial Certificate Balance, for such class of Certificates, respectively.
Each Pool Factor will be 1.0000000 as of the Closing Date, and thereafter will
decline to reflect reductions in the outstanding principal balance of the
applicable class of Notes or reductions of the Certificate Balance of the
applicable class of Certificates, as applicable. A Securityholder's portion of
the aggregate outstanding principal balance of the related class of Notes or
of the aggregate outstanding Certificate Balance for the related class of
Certificates, as applicable, is the product of (i) the original denomination
of that Securityholder's Note or Certificate and (ii) the applicable Pool
Factor.
Unless otherwise provided in the related Prospectus Supplement with respect
to each Trust, the Securityholders will receive reports on or about each
Distribution Date concerning the payments received on the Student Loans, the
Pool Balance (as such term is defined in the related Prospectus Supplement,
the "Pool Balance"), the applicable Pool Factor and various other items of
information. Securityholders of record during any calendar year will be
furnished information for tax reporting purposes not later than the latest
date permitted by law. See "Certain Information Regarding the Securities--
Reports to Securityholders".
DESCRIPTION OF THE NOTES
GENERAL
With respect to each Trust, one or more classes of Notes of a given series
will be issued pursuant to the terms of an Indenture, a form of which has been
filed as an exhibit to the Registration Statement of which this Prospectus is
a part. The following summary describes certain terms of the Notes and the
Indenture. The
37
<PAGE>
summary does not purport to be complete and is qualified in its entirety by
reference to all the provisions of the Notes and the Indenture.
Each class of Notes will initially be represented by one or more Notes, in
each case registered in the name of the nominee of DTC (together with any
successor depository selected by the Administrator, the "Depository") except
as set forth below or in the related Prospectus Supplement. The Notes will be
available for purchase in denominations of $1,000 and integral multiples
thereof in book-entry form only or as specified in the related Prospectus
Supplement. The Seller has been informed by DTC that DTC's nominee will be
Cede, unless another nominee is specified in the related Prospectus
Supplement. Accordingly, such nominee is expected to be the holder of record
of the Notes of each class. Unless and until Definitive Notes (as defined
below) are issued under the limited circumstances described herein or in the
related Prospectus Supplement, no Noteholder will be entitled to receive a
physical certificate representing a Note. All references herein and in the
related Prospectus Supplement to actions by Noteholders refer to actions taken
by DTC upon instructions from its participating organizations (the
"Participants") and all references herein to distributions, notices, reports
and statements to Noteholders refer to distributions, notices, reports and
statements to DTC or its nominee, as the registered holder of the Notes, as
the case may be, for distribution to Noteholders in accordance with DTC's
procedures with respect thereto. See "Certain Information Regarding the
Securities--Book-Entry Registration" and "--Definitive Securities".
PRINCIPAL AND INTEREST ON THE NOTES
The timing and priority of payment, seniority, allocations of losses,
Interest Rate and amount of or method of determining payments of principal and
interest on each class of Notes of a given series will be described in the
related Prospectus Supplement. The right of holders of any class of Notes to
receive payments of principal and interest may be senior or subordinate to the
rights of holders of any other class or classes of Notes of such series, as
described in the related Prospectus Supplement. Unless otherwise provided in
the related Prospectus Supplement, payments of interest on the Notes of such
series will be made prior to payments of principal thereon. Each class of
Notes may have a different Interest Rate, which may be a fixed, variable or
adjustable Interest Rate or any combination of the foregoing. The related
Prospectus Supplement will specify the Interest Rate for each class of Notes
of a given series or the method for determining such Interest Rate. See also
"Certain Information Regarding the Securities--Fixed Rate Securities" and "--
Floating Rate Securities". One or more classes of Notes of a series may be
redeemable in whole or in part under the circumstances specified in the
related Prospectus Supplement, including as a result of the Seller's
exercising its option to purchase the related Student Loans.
Unless otherwise specified in the related Prospectus Supplement, payments to
Noteholders of all classes within a series in respect of interest will have
the same priority. Under certain circumstances, the amount available for such
payments could be less than the amount of interest payable on the Notes on any
of the dates specified for payments in the related Prospectus Supplement
(each, a "Distribution Date"), in which case each class of Noteholders will
receive its ratable share (based upon the aggregate amount of interest due to
such class of Noteholders) of the aggregate amount available to be distributed
in respect of interest on the Notes of such series. See "Description of the
Transfer and Servicing Agreements--Distributions" and "--Credit and Cash Flow
Enhancement".
In the case of a series of Notes which includes two or more classes of
Notes, the sequential order and priority of payment in respect of principal
and interest, and any schedule or formula or other provisions applicable to
the determination thereof, of each such class will be set forth in the related
Prospectus Supplement. Payments in respect of principal and interest of any
class of Notes will be made on a pro rata basis among all the Noteholders of
such class.
In the case of a series of Notes relating to a Trust having a Pre-Funding
Account or Collateral Reinvestment Account, the Notes of such series will be
redeemed in part on the Distribution Date on or immediately following the last
day of the related Funding Period or Revolving Period, respectively, in the
event that any amount remains
38
<PAGE>
on deposit in the applicable account after giving effect to all Additional
Fundings on or prior to such date, in an aggregate principal amount described
in the related Prospectus Supplement.
See "Description of the Transfer and Servicing Agreements--Credit and Cash
Flow Enhancement--Reserve Account" for a description of the Reserve Account
and the distribution of amounts in excess of the Specified Reserve Account
Balance (as defined in the related Prospectus Supplement).
THE INDENTURE
Modification of Indenture. With respect to each Trust, with the consent of
the holders of a majority of the outstanding Notes of the related series, the
Indenture Trustee and the Trust may execute a supplemental indenture to add
provisions to, or change in any manner or eliminate any provisions of, the
Indenture with respect to the Notes, or to modify (except as provided below)
in any manner the rights of the related Noteholders.
Without the consent of the holder of each such outstanding Note affected
thereby, however, no supplemental indenture will (i) change the due date of
any installment of principal of or interest on any such Note or reduce the
principal amount thereof, the interest rate specified thereon or the
redemption price with respect thereto or change any place of payment where or
the coin or currency in which any such Note or any interest thereon is
payable, (ii) impair the right to institute suit for the enforcement of
certain provisions of the related Indenture regarding payment, (iii) reduce
the percentage of the aggregate amount of the outstanding Notes of such
series, the consent of the holders of which is required for any such
supplemental indenture or the consent of the holders of which is required for
any waiver of compliance with certain provisions of the related Indenture or
of certain defaults thereunder and their consequences as provided for in such
Indenture, (iv) modify or alter the provisions of the related Indenture
regarding the voting of Notes held by the applicable Trust, the Seller, an
affiliate of either of them or any obligor on such Notes, (v) reduce the
percentage of the aggregate outstanding amount of such Notes, the consent of
the holders of which is required to direct the related Eligible Lender Trustee
on behalf of the applicable Trust to sell or liquidate the Student Loans if
the proceeds of such sale would be insufficient to pay the principal amount
and accrued but unpaid interest on the outstanding Notes of such series, (vi)
decrease the percentage of the aggregate principal amount of such Notes
required to amend the sections of the related Indenture which specify the
applicable percentage of aggregate principal amount of such Notes necessary to
amend the related Indenture or certain other related agreements or (vii)
permit the creation of any lien ranking prior to or on a parity with the lien
of the related Indenture with respect to any of the collateral for the Notes
of such series or, except as otherwise permitted or contemplated in such
Indenture, terminate the lien of such Indenture on any such collateral or
deprive the holder of any Note of the security afforded by the lien of such
Indenture.
The applicable Trust and the related Indenture Trustee may also enter into
supplemental indentures without obtaining the consent of Noteholders of such
series, for the purpose of adding any provisions to or changing in any manner
or eliminating any of the provisions of the related Indenture or of modifying
in any manner the rights of Noteholders of such series so long as such action
will not, in the opinion of counsel satisfactory to the applicable Indenture
Trustee, materially and adversely affect the interest of any Noteholder of
such series and in the circumstances described under the heading "Assumption
of Signet's Obligations".
Events of Default; Rights Upon Event of Default. With respect to the Notes
of a given series, unless otherwise specified in the related Prospectus
Supplement, an "Event of Default" under the related indenture will consist of
the following: (i) a default for five days or more in the payment of any
interest on any such Note after the same becomes due and payable; (ii) a
default in the payment of the principal of or any installment of the principal
of any such Note when the same becomes due and payable; (iii) a default in the
observance or performance of any covenant or agreement of the applicable Trust
made in the related Indenture and the continuation of any such default for a
period of thirty days after notice thereof is given to the applicable Trust by
the applicable Indenture Trustee or to the applicable Trust and the applicable
Indenture Trustee by the holders of at least 25% in principal amount of such
Notes then outstanding; provided, however, that if the Trust demonstrates that
it is making a good faith attempt to cure such default, such thirty-day period
may be extended
39
<PAGE>
by the Indenture Trustee to ninety days; (iv) any representation or warranty
made by the applicable Trust in the related Indenture or in any certificate
delivered pursuant thereto or in connection therewith having been incorrect in
a material respect as of the time made, and such breach not having been cured
within thirty days after notice thereof is given to such Trust by the
applicable Indenture Trustee or to such Trust and the applicable Indenture
Trustee by the holders of at least 25% in principal amount of the Notes of
such series then outstanding; provided, however, that if the Trust
demonstrates that it is making a good faith attempt to cure such breach, such
thirty-day period may be extended by the Indenture Trustee to ninety days or
(v) certain events of bankruptcy, insolvency, receivership or liquidation of
such Trust. However, the amount of principal required to be distributed to
Noteholders of such series under the related Indenture on any Distribution
Date will generally be limited to amounts available after payment of all prior
obligations of such Trust. Therefore, unless otherwise specified in the
related Prospectus Supplement, the failure to pay principal on a class of
Notes generally will not result in the occurrence of an Event of Default until
the final scheduled Distribution Date for such class of Notes. If, with
respect to any series of Notes, interest is paid at a variable rate based on
an index, the related Prospectus Supplement may provide that, in the event
that, for any Distribution Date, the Interest Rate as calculated based on the
index is less than an alternate rate calculated for such Distribution Date
based on interest collections on the Student Loans (the amount of such
difference, the "Index Shortfall Carryover"), the Interest Rate for such
Distribution Date shall be such alternate rate and the Interest Shortfall
Carryover shall be payable as described in such Prospectus Supplement. Unless
otherwise provided in such Prospectus Supplement, payment of the Index
Shortfall Carryover shall be lower in priority than payment of interest on the
Notes at the Interest Rate (whether the Interest Rate is based on the index or
such alternate rate) and, accordingly, the nonpayment of the Interest
Shortfall Carryover on any Distribution Date shall not generally constitute a
default in the payment of interest on such Notes.
If an Event of Default should occur and be continuing with respect to the
Notes of any series, the related Indenture Trustee or holders of at least 66
2/3% in principal amount of such Notes then outstanding may declare the
principal of such Notes to be immediately due and payable. Unless otherwise
specified in the related Prospectus Supplement, such declaration may be
rescinded by the holders of a majority in principal amount of such notes then
outstanding if (i) the Eligible Lender Trustee on behalf of the related Trust
has paid or deposited with the Indenture Trustee a sum sufficient to pay (A)
all payments of principal of and interest on all Notes and all other amounts
that would then be due under the related Indenture or upon such Notes if the
Event of Default giving rise to such acceleration had not occurred and (B) all
sums paid or advanced by the Indenture Trustee under the related Indenture and
the reasonable compensation, expenses, disbursements and advances of the
Indenture Trustee and its agents and counsel and (ii) all Events of Default,
other than the nonpayment of the principal of the Notes that has become due
solely by such acceleration, have been cured or, under the circumstances
described below, waived.
If the Notes of any series have been declared to be due and payable
following an Event of Default with respect thereto, the related Indenture
Trustee may, in its discretion, exercise remedies as a secured party, require
the related Eligible Lender Trustee to sell the Student Loans or elect to have
the related Eligible Lender Trustee maintain possession of the Student Loans
and continue to apply collections with respect to such Student Loans as if
there had been no declaration of acceleration. Unless otherwise specified in
the related Prospectus Supplement, however, the related Indenture Trustee is
prohibited from directing the related Eligible Lender Trustee to sell the
Student Loans following an Event of Default, other than a default in the
payment of any principal or a default for five days or more in the payment of
any interest on any Note with respect to any series, unless (i) the holders of
all such outstanding Notes consent to such sale, (ii) the proceeds of such
sale are sufficient to pay in full the principal of and the accrued interest
on such outstanding Notes at the date of such sale or (iii) the related
Indenture Trustee determines that the collections on the Student Loans would
not be sufficient on an ongoing basis to make all payments on such Notes as
such payments would have become due if such obligations had not been declared
due and payable, and the related Indenture Trustee obtains the consent of the
holders of at least 66 2/3% of the aggregate principal amount of such Notes
then outstanding.
Subject to the provisions of the applicable Indenture relating to the duties
of the related Indenture Trustee, if an Event of Default should occur and be
continuing with respect to a series of Notes, the related Indenture
40
<PAGE>
Trustee will be under no obligation to exercise any of the rights or powers
under the applicable Indenture at the request or direction of any of the
holders of such Notes, if such Indenture Trustee reasonably believes it will
not be adequately indemnified against the costs, expenses and liabilities
which might be incurred by it in complying with such request. Subject to such
provisions for indemnification and certain limitations contained in the
related Indenture, the holders of a majority in principal amount of the
outstanding Notes of a given series will have the right to direct the time,
method and place of conducting any proceeding or any remedy available to such
Indenture Trustee and the holders of a majority in principal amount of such
Notes then outstanding may, in certain cases, waive any default with respect
thereto, except a default in the payment of principal or interest or a default
in respect of a covenant or provision of the applicable Indenture that cannot
be modified without the waiver or consent of all the holders of such
outstanding Notes.
Unless otherwise specified in the related Prospectus Supplement, no holder
of Notes of any series will have the right to institute any proceeding with
respect to the related Indenture, unless (i) such holder previously has given
to the applicable Indenture Trustee written notice of a continuing Event of
Default, (ii) the holders of not less than 25% in principal amount of such
outstanding Notes have requested in writing that such Indenture Trustee
institute such proceeding in its own name as Indenture Trustee, (iii) such
holder or holders have offered such Indenture Trustee reasonable indemnity,
(iv) such Indenture Trustee has for 60 days failed to institute such
proceeding and (v) no direction inconsistent with such written request has
been given to such Indenture Trustee during such 60-day period by the holders
of a majority in principal amount of such outstanding Notes.
In addition, each Indenture Trustee and the related Noteholders will
covenant that they will not at any time institute against the applicable Trust
any bankruptcy, reorganization or other proceeding under any federal or state
bankruptcy or similar law.
With respect to any Trust, none of the related Indenture Trustee, the
Seller, the Administrator, the Master Servicer or the Eligible Lender Trustee
in its individual capacity, nor any holder of a Certificate representing an
ownership interest in the applicable Trust, nor any of their respective
owners, beneficiaries, agents, officers, directors, employees, successors or
assigns will, in the absence of an express agreement to the contrary, be
personally liable for the payment of the principal of or interest on the Notes
or for the agreements of the Trust contained in the Indenture.
Certain Covenants. Except as described under "Assumption of Signet's
Obligations," each Indenture will provide that the related Trust may not
consolidate with or merge into any other entity, unless (i) the entity formed
by or surviving such consolidation or merger is organized under the laws of
the United States of America, any state or the District of Columbia, (ii) such
entity expressly assumes such Trust's obligation to make due and punctual
payments upon the Notes of the related series and the performance or
observance of every agreement and covenant of such Trust under the related
Indenture, (iii) no Event of Default shall have occurred and be continuing
immediately after such merger or consolidation, (iv) such Trust has been
advised that the rating of the Notes and the Certificates of the related
series would not be reduced or withdrawn by the Rating Agencies as a result of
such merger or consolidation and (v) such Trust has received an opinion of
counsel to the effect that such consolidation or merger would have no material
adverse federal or Maryland state tax consequence to such Trust or to any
Certificateholder or Noteholder of the related series.
Each Trust will not, among other things, (i) except as expressly permitted
by the applicable Indenture, the applicable Transfer and Servicing Agreements
or certain related documents (collectively, the "Related Documents"), sell,
transfer, exchange or otherwise dispose of any of the assets of such Trust,
(ii) claim any credit on or make any deduction from the principal and interest
payable in respect of the Notes of the related series (other than amounts
withheld under the Code or applicable state law) or assert any claim against
any present or former holder of such Notes because of the payment of taxes
levied or assessed upon such Trust, (iii) except as contemplated by the
Related Documents, dissolve or liquidate in whole or in part, (iv) permit the
validity or effectiveness of the applicable Indenture to be impaired or permit
any person to be released from any covenants or obligations with respect to
such Notes under the applicable Indenture except as may be expressly
41
<PAGE>
permitted thereby or (v) permit any lien, charge, excise, claim, security
interest, mortgage or other encumbrance to be created on or extend to or
otherwise arise upon or burden the assets of the Trust or any part thereof, or
any interest therein or the proceeds thereof, except as expressly permitted by
the Related Documents.
No Trust may engage in any activity other than as specified under the
section of the related Prospectus Supplement entitled "Formation of the
Trust--The Trust". No Trust will incur, assume or guarantee any indebtedness
other than indebtedness incurred pursuant to the Notes of a related series and
the applicable Indenture or otherwise in accordance with the Related
Documents.
Annual Compliance Statement. Each Trust will be required to file annually
with the applicable Indenture Trustee a written statement as to the
fulfillment of its obligations under the related Indenture.
Indenture Trustee's Annual Report. Each Indenture Trustee will be required
to mail each year to all related Noteholders a brief report relating to, among
other things, its eligibility and qualification to continue as such Indenture
Trustee under the applicable Indenture, any amounts advanced by it under the
Indenture, the amount, interest rate and maturity date of certain indebtedness
owing by such Trust to the applicable Indenture Trustee in its individual
capacity, the property and funds physically held by the applicable Indenture
Trustee as such and any action taken by it that materially affects the related
Notes and that has not been previously reported.
Satisfaction and Discharge of Indenture. An Indenture will be discharged
with respect to the collateral securing the related Notes upon the delivery to
the related Indenture Trustee for cancellation of all such Notes or, with
certain limitations, upon deposit with such Indenture Trustee of funds
sufficient for the payment in full of all such Notes.
The Indenture Trustee. The Indenture Trustee for a series of Notes will be
specified in the related Prospectus Supplement. The Indenture Trustee for any
series may resign at any time, in which event the Issuer will be obligated to
appoint a successor trustee for such series. The Issuer may also remove any
such Indenture Trustee if such Indenture Trustee ceases to be eligible to
continue as such under the related Indenture or if such Indenture Trustee
becomes insolvent. In such circumstances, the Issuer will be obligated to
appoint a successor trustee for the applicable series of Notes. Any
resignation or removal of the Indenture Trustee and appointment of a successor
trustee for any series of Notes does not become effective until acceptance of
the appointment by the successor trustee for such series.
DESCRIPTION OF THE CERTIFICATES
GENERAL
With respect to each Trust, one or more classes of Certificates of a given
series will be issued pursuant to the terms of a Trust Agreement, a form of
which has been filed as an exhibit to the Registration Statement of which this
Prospectus is a part. The following summary describes certain terms of the
Certificates and the Trust Agreement. The summary does not purport to be
complete and is qualified in its entirety by reference to all the provisions
of the Certificates and the Trust Agreement.
Each class of Certificates will initially be represented by a single
Certificate registered in the name of the Depository, except as set forth
below. Except for the Certificates of a given series purchased by the Company,
the Certificates will be available for purchase in minimum denominations of
$1,000 and integral multiples of $1,000 in excess thereof in book-entry form
only, or as set forth in the related Prospectus Supplement. The Seller has
been informed by DTC that DTC's nominee will be Cede, unless another nominee
is specified in the related Prospectus Supplement. Accordingly, such nominee
is expected to be the holder of record of the Certificates of any series that
are not purchased by the Company. Unless and until Definitive Certificates (as
defined below) are issued under the limited circumstances described herein or
in the related Prospectus Supplement, no Certificateholder (other than the
Seller) will be entitled to receive a physical certificate representing a
Certificate. All references herein and in the related Prospectus Supplement to
actions by Certificateholders refer to actions
42
<PAGE>
taken by DTC upon instructions from the Participants and all references herein
and in the related Prospectus Supplement to distributions, notices, reports
and statements to Certificateholders refer to distributions, notices, reports
and statements to DTC or its nominee, as the registered holder of the
Certificates, as the case may be, for distribution to Certificateholders in
accordance with DTC's procedures with respect thereto. See "Certain
Information Regarding the Securities--Book-Entry Registration" and "--
Definitive Securities". Certificates of a given series owned by the Company or
its affiliates will be entitled to equal and proportionate benefits under the
applicable Trust Agreement, except that, assuming that all Certificates of a
given series are not all owned by the Company and its affiliates, such
Certificates will be deemed not to be outstanding for the purpose of
determining whether the requisite percentage of Certificateholders have given
any request, demand, authorization, direction, notice, consent or other action
under the Related Documents (other than the commencement by the related Trust
of a voluntary proceeding in bankruptcy as described under "Description of the
Transfer and Servicing Agreements--Insolvency Event" in the Prospectus
Supplement).
PRINCIPAL AND INTEREST IN RESPECT OF THE CERTIFICATES
The timing and priority of distributions, seniority, allocations of losses,
Pass-Through Rate and amount of or method of determining distributions with
respect to principal and interest of each class of Certificates of a given
series will be described in the related Prospectus Supplement. Distributions
of interest on such Certificates will be made on each Distribution Date and
will be made prior to distributions with respect to principal of such
Certificates. Each class of Certificates may have a different Pass-Through
Rate, which may be a fixed, variable or adjustable Pass-Through Rate or any
combination of the foregoing. The related Prospectus Supplement will specify
the Pass-Through Rate for each class of Certificates of a given series or the
method for determining such Pass-Through Rate. See also "Certain Information
Regarding the Securities--Fixed Rate Securities" and "--Floating Rate
Securities". Unless otherwise provided in the related Prospectus Supplement,
distributions in respect of the Certificates of a given series may be
subordinate to payments in respect of the Notes of such series as more fully
described in the related Prospectus Supplement. Distributions in respect of
interest on and principal of any class of Certificates will be made on a pro
rata basis among all the Certificateholders of such class.
In the case of a series of Certificates which includes two or more classes
of Certificates, the timing, sequential order, priority of payment or amount
of distributions in respect of interest and principal, and any schedule or
formula or other provisions applicable to the determination thereof, of each
such class shall be as set forth in the related Prospectus Supplement.
In the case of a series of Certificates relating to a Trust having a Pre-
Funding Account or Collateral Reinvestment Account, cash distributions to
Certificateholders of such series may be made on the Distribution Date on or
immediately following the last day of the related Funding Period or Revolving
Period, respectively, in the event that any amount remains on deposit in the
applicable account after giving effect to all Additional Fundings on or prior
to such date, in an aggregate principal amount described in the related
Prospectus Supplement.
See "Description of the Transfer and Servicing Agreements--Credit and Cash
Flow Enhancement--Reserve Account" for a description of the Reserve Account
and the distribution of amounts in excess of the Specified Reserve Account
Balance (as defined in the related Prospectus Supplement).
CERTAIN INFORMATION REGARDING THE SECURITIES
FIXED RATE SECURITIES
Each class of Securities may bear interest at a fixed rate per annum ("Fixed
Rate Securities") or at a variable or adjustable rate per annum ("Floating
Rate Securities"), as more fully described below and in the applicable
Prospectus Supplement. Each class of Fixed Rate Securities will bear interest
at the applicable per annum Interest Rate or Pass-Through Rate, as the case
may be, specified in the applicable Prospectus
43
<PAGE>
Supplement. Unless otherwise set forth in the applicable Prospectus
Supplement, interest on each class of Fixed Rate Securities will be computed
on the basis of a 360-day year of twelve 30-day months. See "Description of
the Notes--Principal and Interest on the Notes" and "Description of the
Certificates--Principal and Interest in Respect of the Certificates".
FLOATING RATE SECURITIES
Each class of Floating Rate Securities will bear interest for each
applicable Interest Reset Period (as such term is defined in the related
Prospectus Supplement with respect to a class of Floating Rate Securities,
"Interest Reset Period") at a rate per annum determined by reference to an
interest rate basis (the "Base Rate"), plus or minus the Spread, if any, or
multiplied by the Spread Multiplier, if any, in each case as specified in the
related Prospectus Supplement. The "Spread" is the number of basis points (one
basis point equals one one-hundredth of a percentage point) that may be
specified in the applicable Prospectus Supplement as being applicable to such
class, and the "Spread Multiplier" is the percentage that may be specified in
the applicable Prospectus Supplement as being applicable to such class.
The applicable Prospectus Supplement will designate a Base Rate for a given
Floating Rate Security based on LIBOR, commercial paper rates, Federal funds
rates, U.S. Government treasury securities rates, negotiable certificates of
deposit rates or another rate or rates as set forth in such Prospectus
Supplement.
As specified in the applicable Prospectus Supplement, Floating Rate
Securities of a given class may also have either or both of the following (in
each case expressed as a rate per annum): (i) a maximum limitation, or
ceiling, on the rate at which interest may accrue during any interest period
and (ii) a minimum limitation, or floor, on the rate at which interest may
accrue during any interest period. In addition to any maximum interest rate
that may be applicable to any class of Floating Rate Securities, the interest
rate applicable to any class of Floating Rate Securities will in no event be
higher than the maximum rate permitted by applicable law, as the same may be
modified by United States law of general application.
Each Trust with respect to which a class of Floating Rate Securities will be
issued will appoint, and enter into agreements with, a calculation agent
(each, a "Calculation Agent") to calculate interest rates on each such class
of Floating Rate Securities issued with respect thereto. The applicable
Prospectus Supplement will set forth the identity of the Calculation Agent for
each such class of Floating Rate Securities of a given series, which may be
the Administrator, the Eligible Lender Trustee or the Indenture Trustee with
respect to such series. All determinations of interest by the Calculation
Agent shall, in the absence of manifest error, be conclusive for all purposes
and binding on the holders of Floating Rate Securities of a given class.
Unless otherwise specified in the applicable Prospectus Supplement, all
percentages resulting from any calculation of the rate of interest on a
Floating Rate Security will be rounded, if necessary, to the nearest 1/100,000
of 1% (.0000001), with five one-millionths of a percentage point rounded
upward.
BOOK-ENTRY REGISTRATION
DTC is a limited purpose trust company organized under the laws of the State
of New York, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the UCC and a "clearing agency" registered pursuant to
Section 17A of the Exchange Act. DTC was created to hold securities for its
Participants and to facilitate the clearance and settlement of securities
transactions between Participants through electronic book-entries, thereby
eliminating the need for physical movement of certificates. Participants
include securities brokers and dealers, banks, trust companies and clearing
corporations. Indirect access to the DTC system also is available to others
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly ("Indirect Participants").
Securityholders that are not Participants or Indirect Participants but
desire to purchase, sell or otherwise transfer ownership of, or other
interests in, Securities may do so only through Participants and Indirect
Participants. In addition, Securityholders will receive all distributions of
principal and interest from the related
44
<PAGE>
Indenture Trustee or the related Eligible Lender Trustee, as applicable (the
"Applicable Trustee"), through Participants and Indirect Participants. Under a
book-entry format, Securityholders may experience some delay in their receipt
of payments, since such payments will be forwarded by the Applicable Trustee
to DTC's nominee. DTC will forward such payments to its Participants, which
thereafter will forward them to Indirect Participants or Securityholders.
Except for the Company with respect to any series of Securities, it is
anticipated that the only "Securityholder", "Certificateholder" and
"Noteholder" will be DTC's nominee. Securityholders will not be recognized by
the Applicable Trustee as Noteholders or Certificateholders, as such terms are
used in each Indenture and each Trust Agreement, respectively, and
Securityholders will be permitted to exercise the rights of Securityholders
only indirectly through DTC and its Participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
Securities among Participants on whose behalf it acts with respect to the
Securities and to receive and transmit distributions of principal of, and
interest on, the Securities. Participants and Indirect Participants with which
Securityholders have accounts with respect to the Securities similarly are
required to make book-entry transfers and receive and transmit such payments
on behalf of their respective Securityholders. Accordingly, although
Securityholders will not possess Securities, the Rules provide a mechanism by
which Participants will receive payments and will be able to transfer their
interests.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a
Securityholder to pledge Securities to persons or entities that do not
participate in the DTC system, or to otherwise act with respect to such
Securities, may be limited due to the lack of a physical certificate for such
Securities.
DTC has advised the Seller that it will take any action permitted to be
taken by a Securityholder under the related Indenture or the related Trust
Agreement, as the case may be, only at the direction of one or more
Participants to whose accounts with DTC the Securities are credited. DTC may
take conflicting actions with respect to other undivided interests to the
extent that such actions are taken on behalf of Participants whose holdings
include such undivided interests.
Except as required by law, neither the Administrator nor the Applicable
Trustee will have any liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests of the Securities
held by DTC's nominee or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
DEFINITIVE SECURITIES
Except with respect to the Certificates of a given series that may be
purchased by the Company, the Notes and the Certificates of a given series
will be issued in fully registered, certificated form ("Definitive Notes" and
"Definitive Certificates", respectively, and collectively referred to herein
as "Definitive Securities") to Noteholders or Certificateholders or their
respective nominees, rather than to DTC or its nominee, only if (i) the
related Administrator advises the Applicable Trustee in writing that DTC is no
longer willing or able to discharge properly its responsibilities as
depository with respect to the Securities and the Administrator is unable to
locate a qualified successor, (ii) the Administrator, at its option, elects to
terminate the book-entry system through DTC or (iii) after the occurrence of
an Event of Default or a Servicer Default, Securityholders representing at
least a majority of the outstanding principal amount of the Notes or the
Certificates, as the case may be, of such series advise the Applicable Trustee
through DTC in writing that the continuation of a book-entry system through
DTC (or a successor thereto) with respect to such Notes or Certificates is no
longer in the best interest of the holders of such Securities.
Upon the occurrence of any event described in the immediately preceding
paragraph, the Applicable Trustee will be required to notify all applicable
Securityholders of a given series through Participants of the availability of
Definitive Securities. Upon surrender by DTC of the Definitive Securities
representing the corresponding Securities and receipt of instructions for re-
registration, the Applicable Trustee will reissue such Securities as
Definitive Securities to such Securityholders.
45
<PAGE>
Distributions of principal of, and interest on, such Definitive Securities
will thereafter be made by the Applicable Trustee in accordance with the
procedures set forth in the related Indenture or the related Trust Agreement,
as the case may be, directly to holders of Definitive Securities in whose
names the Definitive Securities were registered at the close of business on
the applicable date of record specified for such Securities in the related
Prospectus Supplement. Such distributions will be made by check mailed to the
address of such holder as it appears on the register maintained by the
Applicable Trustee. The final payment on any such Definitive Security,
however, will be made only upon presentation and surrender of such Definitive
Security at the office or agency specified in the notice of final distribution
to applicable Securityholders.
Definitive Securities will be transferable and exchangeable at the offices
of the Applicable Trustee or of a registrar named in a notice delivered to
holders of Definitive Securities. No service charge will be imposed for any
registration of transfer or exchange, but the Applicable Trustee may require
payment of a sum sufficient to cover any tax or other governmental charge
imposed in connection therewith.
LIST OF SECURITYHOLDERS
Unless otherwise specified in the related Prospectus Supplement, holders of
Notes evidencing not less than 25% of the aggregate outstanding principal
balance of such Notes may, by written request to the related Indenture
Trustee, obtain access to the list of all Noteholders maintained by such
Indenture Trustee for the purpose of communicating with other Noteholders with
respect to their rights under the related Indenture or such Notes. Such
Indenture Trustee may elect not to afford the requesting Noteholders access to
the list of Noteholders if it agrees to mail the desired communication or
proxy, on behalf and at the expense of the requesting Noteholders, to all
Noteholders of such series.
Unless otherwise specified in the related Prospectus Supplement, three or
more Certificateholders of such series or one or more holders of such
Certificates evidencing not less than 25% of the Certificate Balance of such
Certificates may, by written request to the related Eligible Lender Trustee,
obtain access to the list of all Certificateholders for the purpose of
communicating with other Certificateholders with respect to their rights under
the related Trust Agreement or under such Certificates.
REPORTS TO SECURITYHOLDERS
With respect to each series of Securities, on each Distribution Date, the
Applicable Trustee will provide to Securityholders of record as of the related
date of record a statement setting forth substantially the same information as
is required to be provided on the periodic report provided to the related
Indenture Trustee and the related Trust described under "Description of
Transfer and Servicing Agreements--Statements to Indenture Trustee and Trust".
The statements provided to Securityholders will not constitute financial
statements prepared in accordance with generally accepted accounting
principles.
Within the prescribed period of time for tax reporting purposes after the
end of each calendar year during the term of each Trust, the Applicable
Trustee will mail to each person who at any time during such calendar year was
a Securityholder with respect to such Trust and received any payment thereon,
a statement containing certain information for the purposes of such
Securityholder's preparation of federal income tax returns. See "Federal
Income Tax Consequences".
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
GENERAL
The following is a summary of certain terms of each Loan Sale Agreement and
Master Servicing Agreement, pursuant to which the related Eligible Lender
Trustee on behalf of a Trust will purchase Student Loans from the Seller and
the Master Servicer will service the same; each Administration Agreement,
pursuant to which the Administrator will undertake certain administrative
duties with respect to a Trust and the Student
46
<PAGE>
Loans; and each Trust Agreement, pursuant to which a Trust will be created and
the related Certificates will be issued (collectively, the "Transfer and
Servicing Agreements"). Forms of each of the Transfer and Servicing Agreements
have been filed as exhibits to the Registration Statement of which this
Prospectus is a part. The summary does not purport, however, to be complete
and is qualified in its entirety by reference to all of the provisions of the
Transfer and Servicing Agreements.
SALE OF STUDENT LOANS; REPRESENTATIONS AND WARRANTIES
On or prior to the Closing Date specified with respect to any given Trust in
the related Prospectus Supplement (the "Closing Date"), the Seller will sell
and assign to the related Eligible Lender Trustee on behalf of such Trust,
without recourse, its entire interest in the Student Loans, all collections
received and to be received with respect thereto for the period on and after
the Cutoff Date pursuant to the Loan Sale Agreement. Each Student Loan will be
identified in schedules appearing as an exhibit to such Loan Sale Agreement.
Each Eligible Lender Trustee will, concurrently with such sale and assignment,
execute, authenticate and deliver the related Certificates and Notes. The net
proceeds received from the sale of the related Notes and Certificates will be
applied to the purchase of the Student Loans.
In each Loan Sale Agreement, the Seller will make certain representations
and warranties with respect to the Student Loans transferred to a Trust for
the benefit of the Certificateholders and the Noteholders of a given series,
including, among other things, that (i) each Student Loan, on the date on
which it is transferred to such Trust, is free and clear of all security
interests, liens, charges and encumbrances and no offsets, defenses or
counterclaims have been asserted or threatened; (ii) the information provided
with respect to the Student Loans is true and correct as of the Cutoff Date
and (iii) each Student Loan, at the time it was originated, complied and, at
the Closing Date, complies in all material respects with applicable federal
and state laws (including, without limitation, the Act (in the case of Federal
Student Loans), consumer credit, truth in lending, equal credit opportunity
and disclosure laws) and applicable restrictions imposed by FFELP, in the case
of Federal Student Loans, the applicable private guarantee program, in the
case of Private Student Loans, or, in all cases, any Guarantee Agreement.
Following the discovery by or notice to the Seller of a breach of any
representation or warranty with respect to any Student Loan that materially
and adversely affects the interests of the related Certificateholders or the
Noteholders in such Student Loan (it being understood that any such breach
that does not affect any Guarantor's obligation to guarantee payment of such
Student Loan will not be considered to have such a material adverse effect),
the Seller will, unless such breach is cured within 120 days, repurchase such
Student Loan from the related Eligible Lender Trustee, as of the first day
following the end of such 120-day period that is the last day of a Collection
Period, at a price equal to the unpaid principal balance owed by the
applicable borrower thereon plus (i) accrued interest thereon to the day of
repurchase and (ii) any premium paid to the Seller in the initial sale of such
Student Loan to the Trust (the "Purchase Amount"). Alternatively, the Seller
may, at its option, remit all or a portion of the Purchase Amount by
substituting into the related Trust a Student Loan that meets certain criteria
set forth in the related Loan Sale Agreement for the Student Loan as to which
the breach has occurred. In addition, the Seller will reimburse the related
Trust for any accrued interest amounts that a Guarantor refuses to pay
pursuant to its Guarantee Agreement, or for any Interest Subsidy Payments and
Special Allowance Payments that are lost or that must be repaid to the
Department in the case of Federal Student Loans, with respect to a Student
Loan as a result of a breach of any such representation or warranty by the
Seller. The repurchase, substitution and reimbursement obligations of the
Seller will constitute the sole remedy available to or on behalf of a Trust,
the related Certificateholders or the related Noteholders for any such uncured
breach. The Seller's repurchase and reimbursement obligations are contractual
obligations pursuant to a Loan Sale Agreement that may be enforced against the
Seller, but the breach of which will not constitute an Event of Default.
To assure uniform quality in servicing and to reduce administrative costs,
the Master Servicer will be appointed custodian of the promissory notes
representing the Student Loans and any other related documents by the related
Eligible Lender Trustee on behalf of each Trust. The Seller's and the Master
Servicer's records and computer systems will reflect the sale and assignment
by the Seller of the Student Loans to the related Eligible
47
<PAGE>
Lender Trustee on behalf of the related Trust, and Uniform Commercial Code
("UCC") financing statements reflecting such sale and assignment will be filed
by the Administrator.
ADDITIONAL FUNDINGS
In the case of a Trust having a Pre-Funding Account or a Collateral
Reinvestment Account, such Trust will use funds on deposit in the Pre-Funding
Account from time to time during the related Funding Period or Revolving
Period, respectively, (i) to deposit into the Collection Account in lieu of
collections of interest on certain of the Student Loans to the extent such
interest is not paid currently but will be capitalized and added to the
principal balance of such Student Loans and (ii) to fund the addition of
Student Loans to the Trust under the circumstances and having the
characteristics described in the related Prospectus Supplement ("Additional
Fundings"). Such additional Student Loans may be purchased by the Trust from
the Seller or may be originated by the Trust, if and to the extent specified
in the related Prospectus Supplement.
There can be no assurance that substantially all of the amounts on deposit
in any Pre-Funding Account or Collateral Reinvestment Account will be expended
during the related Funding Period or Revolving Period, respectively. If the
amount initially deposited into a Pre-Funding Account or Collateral
Reinvestment Account for a series has not been reduced to zero by the end of
the related Funding Period or Revolving Period, respectively, the amounts
remaining on deposit therein will be distributed to the related
Securityholders in the amounts described in the related Prospectus Supplement.
If and to the extent specified in the related Prospectus Supplement, the
related Trust may use distributions on the Student Loans, or may exchange
Student Loans with the Seller, in order to pay for Additional Fundings after
the Funding Period.
ACCOUNTS
With respect to each Trust, the Administrator will establish and maintain
with the applicable Indenture Trustee one or more accounts, in the name of the
Indenture Trustee on behalf of the related Noteholders and Certificateholders,
into which all payments made on or with respect to the related Student Loans
will be deposited (the "Collection Account"). Any other accounts to be
established with respect to a Trust, including any Reserve Account and any
Pre-Funding Account and any Collateral Reinvestment Account, will be described
in the related Prospectus Supplement.
For any series of Securities, funds in the Collection Account, any Reserve
Account, any Pre-Funding Account and any Collateral Reinvestment Account and
any other accounts identified as such in the related Prospectus Supplement
(collectively, the "Trust Accounts") will be invested solely as provided in
the applicable Transfer and Servicing Agreements in Eligible Investments.
"Eligible Investments" shall mean book-entry securities, negotiable
instruments or securities represented by instruments in bearer or registered
form which evidence: (a) direct obligations of, and obligations fully
guaranteed as to timely payment of principal and interest by, the United
States of America, (b) demand deposits, time deposits or certificates of
deposit (having original maturities of no more than 365 days) of depository
institutions or trust companies incorporated under the laws of the United
States of America or any state thereof (or domestic branches of foreign banks)
and subject to supervision and examination by federal or state banking or
depository institution authorities, provided that at the time of the Trust's
investment or contractual commitment to invest therein, the short-term debt
rating of such depository institution or trust company shall have a rating
acceptable to each Rating Agency, (c) commercial paper or other short-term
obligations having, at the time of the Trust's investment or contractual
commitment to invest therein, a rating acceptable to each Rating Agency, (d)
demand deposits, time deposits and certificates of deposit which are fully
insured by the FDIC, with a party the commercial paper of which has a credit
rating acceptable to each Rating Agency, (e) notes or bankers' acceptances
(having original maturities of no more than 365 days) issued by any depository
institution or trust company referred to in (b) above, (f) investments in
money market funds having a rating acceptable to each Rating Agency, (g) time
deposits (having maturities of not more than 30 days), other than as referred
to in clause (d) above, with a party the commercial paper of which has a
48
<PAGE>
credit rating acceptable to each Rating Agency or (h) any other investments
approved in writing by each Rating Agency. An investment by the Trust in
Eligible Investments will not cause a Trust to be required to register under
the Investment Company Act of 1940. Except as described below or in the related
Prospectus Supplement, Eligible Investments are limited to obligations or
securities that mature not later than the business day immediately preceding
the next applicable Distribution Date. However, to the extent permitted by the
Rating Agencies, funds in any Reserve Account may be invested in securities
that will not mature prior to the date of the next distribution with respect to
such Securities and will not be sold to meet any shortfalls. Thus, the amount
of cash in any Reserve Account at any time may be less than the balance of the
Reserve Account. If the amount required to be withdrawn from any Reserve
Account to cover shortfalls in collections on the related Student Loans (as
provided in the related Prospectus Supplement) exceeds the amount of cash in
the Reserve Account, a temporary shortfall in the amounts distributed to the
related Noteholders or Certificateholders could result, which could, in turn,
increase the average life of the Notes or the Certificates of such series.
Except as otherwise specified in the related Prospectus Supplement, investment
earnings on funds deposited in the Trust Accounts, net of losses and investment
expenses (collectively, "Investment Earnings"), will be deposited in the
Collection Account on each Distribution Date and will be treated as collections
of interest on the related Student Loans.
The Trust Accounts will be maintained as Eligible Deposit Accounts. "Eligible
Deposit Account" means either (a) a segregated account with an Eligible
Institution or (b) a segregated trust account with the corporate trust
department of a depository institution organized under the laws of the United
States of America or any one of the states thereof or the District of Columbia
(or any domestic branch of a foreign bank), having corporate trust powers and
acting as trustee for funds deposited in such account, so long as any of the
securities of such depository institution have a credit rating from each Rating
Agency in one of its generic rating categories which signifies investment
grade. "Eligible Institution" means either Signet Trust Company or a depository
institution organized under the laws of the United States of America or any one
of the states thereof or the District of Columbia (or any domestic branch of a
foreign bank), (i) which has either (A) a long-term unsecured debt rating
acceptable to the Rating Agencies or (B) a short-term unsecured debt rating or
certificate of deposit rating acceptable to the Rating Agencies and (ii) whose
deposits are insured by the FDIC.
SERVICING PROCEDURES
Pursuant to each Master Servicing Agreement, the Master Servicer has agreed
to be responsible for servicing, and performing all other related tasks with
respect to, all the Student Loans acquired from time to time on behalf of each
Trust. The Master Servicer is required pursuant to the related Master Servicing
Agreement to be responsible for performing all services and duties customary to
the servicing of Student Loans (including all collection practices), and to do
so in compliance with, and to otherwise comply with, all standards and
procedures provided for in the Act, the Guarantee Agreements and all other
applicable federal and state laws. The Master Servicer is also required to
maintain its eligibility as a third-party servicer under the Act.
The Master Servicer may from time to time perform a portion of its servicing
obligations under the applicable Loan Sale Agreement through Subservicing
Agreements with unrelated third-party student loan servicers approved by the
Rating Agencies ("Subservicers"). Notwithstanding the provisions of any
Subservicing Agreement, each Master Servicing Agreement will provide that the
Master Servicer will remain liable for its servicing duties and obligations
under the Master Servicing Agreement as if the Master Servicer were servicing
the Student Loans.
The Master Servicing Agreement provides that the Master Servicer shall
terminate all of the rights and obligations of a Subservicer with respect to
all Student Loans being serviced by such Subservicer in the event of a breach
by such Subservicer of a Subservicing Agreement if the Master Servicer
reasonably considers such termination to be in the best interests of the
Certificateholders and Noteholders. Upon termination or expiration of any
Subservicing Agreement, the Master Servicer has agreed to take all appropriate
steps to maintain adequate provisions for the administration, servicing,
custody and collection of the Student Loans, including without limitation, the
appointment of any successor Subservicer, as the case may be, pursuant to the
terms of a Subservicing Agreement which satisfies the criteria described above.
In the event a Subservicer is removed, the
49
<PAGE>
Master Servicer will continue to be responsible for servicing the related
Student Loans. In the event the Master Servicer is terminated, the successor
Master Servicer will succeed to all of the rights and obligations of the
predecessor Master Servicer under each of the Subservicing Agreements,
including the right to terminate any such Subservicer as described above. The
termination of the Master Servicer may not result in the termination of any
Subservicer.
Without limiting the foregoing, the responsibilities of the Master Servicer
with respect to each Trust under the related Master Servicing Agreement
include, but are not limited to, the following: collecting and depositing into
the Collection Account all payments with respect to the Student Loans,
including claiming and obtaining any Guarantee Payments, any Interest Subsidy
Payments and Special Allowance Payments with respect to Student Loans,
responding to inquiries from borrowers on the Student Loans, investigating
delinquencies and sending out statements and payment coupons. In addition, the
Master Servicer will keep ongoing records with respect to such Student Loans
and collections thereon and will furnish monthly and annual statements with
respect to such information to the Administrator, in accordance with the
Master Servicer's customary practices with respect to the Seller and as
otherwise required in the related Master Servicing Agreement.
PAYMENTS ON STUDENT LOANS
With respect to each Trust, the Master Servicer will deposit all payments on
Student Loans and all proceeds of Student Loans received by it during each
collection period specified in the related Prospectus Supplement (each, a
"Collection Period") into the related Collection Account within two business
days of receipt thereof. The Eligible Lender Trustee will deposit all Interest
Subsidy Payments and all Special Allowance Payments with respect to the
Federal Student Loans received by it during each Collection Period into the
Collection Account within two business days of receipt thereof.
However, in the event that the Administrator satisfies certain requirements
and the Rating Agencies affirm their ratings of the Notes and the Certificates
at the initial level, then so long as Signet is the Administrator and provided
that (i) there exists no Administrator Default (as described below) and (ii)
each other condition as may be specified by the Rating Agencies is satisfied,
the Master Servicer and the Eligible Lender Trustee will pay all the amounts
referred to in the preceding paragraph that would otherwise be deposited into
the Collection Account to the Administrator, and the Administrator will not be
required to deposit such amounts into the Collection Account until on or
before the business day immediately preceding each Distribution Date. In such
event, the Administrator will deposit the aggregate Purchase Amount of Student
Loans repurchased by the Seller and purchased by the Master Servicer into the
Collection Account on or before the business day preceding each Distribution
Date. Pending deposit into the Collection Account, collections may be invested
by the Administrator at its own risk and for its own benefit, and will not be
segregated from other funds of the Administrator.
SERVICER COVENANTS
With respect to each Trust, in the related Master Servicing Agreement, the
Master Servicer will covenant that: (a) it will duly satisfy all obligations
on its part to be fulfilled under or in connection with the Student Loans,
maintain in effect all qualifications required in order to service the Student
Loans and comply in all material respects with all requirements of law in
connection with servicing the Student Loans, the failure to comply with which
would have a materially adverse effect on the related Certificateholders or
Noteholders; (b) it will not permit any rescission or cancellation of a
Student Loan except as ordered by a court of competent jurisdiction or other
government authority or as otherwise consented to by the related Eligible
Lender Trustee and the related Indenture Trustee; (c) it will not, nor will it
permit any Subservicer to, impair the rights of the related Certificateholders
and the related Noteholders in the Student Loans and (d) it will not, nor will
it permit any Subservicer to, reschedule, revise, defer or otherwise
compromise with respect to payments due on any Student Loan except pursuant to
any applicable deferral or forbearance periods or otherwise in accordance with
its guidelines for servicing student loans in general and those of the Seller
in particular and any applicable FFELP, private guarantee program or Guarantor
requirements.
50
<PAGE>
Under the terms of each Master Servicing Agreement, if the Administrator or
the Master Servicer discovers, or receives written notice, that any covenant
of the Master Servicer set forth above has not been complied with in all
material respects and such noncompliance has not been cured within 120 days
thereafter and has a materially adverse effect on the interest of the related
Certificateholders or Noteholders in any Student Loan, unless such breach is
cured or unless the Seller is otherwise required to purchase the related
Student Loan as a result of a breach of the Seller's warranties in the related
Loan Sale Agreement, the Master Servicer will arrange for the purchase of such
Student Loan as of the first day following the end of such 120-day period that
is the last day of a Collection Period. In that event, the Master Servicer
will arrange to be deposited into the Collection Account an amount equal to
the Purchase Amount of such Student Loan and the related Trust's interest in
any such purchased Student Loan will be automatically assigned to the Master
Servicer or its designee. Upon such assignment, the Master Servicer or its
designee will be entitled to all payments made on the Student Loan. In
addition, if so specified in the related Prospectus Supplement, the Master
Servicer will reimburse the related Trust for any accrued interest amounts
that a Federal Guarantor refuses to pay pursuant to its Federal Guarantee
Agreement, or for any Interest Subsidy Payments and Special Allowance Payments
that are lost or that must be repaid to the Department, with respect to a
Federal Student Loan as a result of a breach of any such covenant of the
Master Servicer.
SERVICER COMPENSATION
Unless otherwise specified in the related Prospectus Supplement with respect
to any Trust, the Master Servicer will be entitled to receive the Servicing
Fee for each Collection Period (as set forth in the related Prospectus
Supplement) together with any other administrative fees and similar charges
specified in the related Prospectus Supplement, as compensation for performing
the functions as servicer for the related Trust described above (the
"Servicing Fee"). The Servicing Fee (together with any portion of the
Servicing Fee that remains unpaid from prior Distribution Dates) will be paid
prior to any payment in respect of the related Securities, as specified in the
applicable Prospectus Supplement.
The Servicing Fee will compensate the Master Servicer for performing the
functions of a third-party servicer of student loans as an agent for their
beneficial owner, including collecting and posting all payments, responding to
inquiries of borrowers on the Student Loans, investigating delinquencies,
pursuing, filing and directing the payment of any Guarantee Payments, Interest
Subsidy Payments or Special Allowance Payments, accounting for collections and
furnishing periodic accounting reports to the Administrator with respect to
distributions.
DISTRIBUTIONS
With respect to each series of Securities, beginning on the Distribution
Date specified in the related Prospectus Supplement, distributions of
principal and interest on each class of such Securities entitled thereto will
be made by the applicable Trustee to the Noteholders and the
Certificateholders of such series. The timing, calculation, allocation, order,
source, priorities of and requirements for all payments to each class of
Noteholders and all distributions to each class of Certificateholders of such
series will be set forth in the related Prospectus Supplement.
With respect to each Trust, on each Distribution Date, collections on the
related Student Loans will be distributed from the Collection Account to
Noteholders and Certificateholders to the extent provided in the related
Prospectus Supplement. Credit and cash flow enhancement, such as a Reserve
Account, will be available to cover any shortfalls in the amount available for
distribution on such date to the extent specified in the related Prospectus
Supplement. As more fully described in the related Prospectus Supplement, and
unless otherwise specified therein, distributions in respect of principal of a
class of Securities of a given series will be subordinate to distributions in
respect of interest on such class, and distributions in respect of the
Certificates of such series may be subordinate to distributions in respect of
the Notes of such series.
51
<PAGE>
CREDIT AND CASH FLOW ENHANCEMENT
General. The amounts and types of credit enhancement arrangements and the
provider thereof, if applicable, with respect to each class of Securities of a
given series, if any, will be set forth in the related Prospectus Supplement.
If and to the extent provided in the related Prospectus Supplement, credit
enhancement may be in the form of subordination of one or more classes of
Securities, Reserve Accounts, over-collateralization, letters of credit,
credit or liquidity facilities, surety bonds, guaranteed investment contracts,
repurchase obligations, other agreements with respect to third-party payments
or other support, cash deposits or such other arrangements as may be described
in the related Prospectus Supplement or any combination of two or more of the
foregoing. If specified in the applicable Prospectus Supplement, credit
enhancement for a class of Securities may cover one or more other classes of
Securities of the same series, and credit enhancement for a series of
Securities may cover one or more other series of Securities.
The presence of a Reserve Account and other forms of credit enhancement for
the benefit of any class or series of Securities is intended to enhance the
likelihood of receipt by the Securityholders of such class or series of the
full amount of principal and interest due thereon and to decrease the
likelihood that such Securityholders will experience losses. Unless otherwise
specified in the related Prospectus Supplement, the credit enhancement for a
class or series of Securities will not provide protection against all risks of
loss and will not guarantee repayment of the entire principal balance and
interest thereon. If losses occur which exceed the amount covered by any
credit enhancement or which are not covered by any credit enhancement,
Securityholders of any class or series will bear their allocable share of
deficiencies, as described in the related Prospectus Supplement. In addition,
if a form of credit enhancement covers more than one series of Securities,
Securityholders of any such series will be subject to the risk that such
credit enhancement will be exhausted by the claims of Securityholders of other
series.
Reserve Account. If so provided in the related Prospectus Supplement,
pursuant to the related Loan Sale Agreement, the Seller will establish for a
series or class of Securities an account, as specified in the related
Prospectus Supplement (the "Reserve Account"), which will be maintained in the
name of the applicable Indenture Trustee. Unless otherwise provided in the
related Prospectus Supplement, the Reserve Account will be funded by an
initial deposit by the Seller on the Closing Date in the amount set forth in
the related Prospectus Supplement. As further described in the related
Prospectus Supplement, the amount on deposit in the Reserve Account will be
increased on each Distribution Date thereafter up to the Specified Reserve
Account Balance (as defined in the related Prospectus Supplement) by the
deposit therein of the amount of collections on the related Student Loans
remaining on each such Distribution Date after the payment of all other
required payments and distributions on such date. Amounts in the Reserve
Account will be available to cover shortfalls in amounts due to the holders of
those classes of Securities specified in the related Prospectus Supplement in
the manner and under the circumstances specified therein. The related
Prospectus Supplement will also specify to whom and the manner and
circumstances under which amounts on deposit in the Reserve Account (after
giving effect to all other required distributions to be made by the applicable
Trust) in excess of the Specified Reserve Account Balance (as defined in the
related Prospectus Supplement) will be distributed.
STATEMENTS TO INDENTURE TRUSTEE AND TRUST
Prior to each Distribution Date with respect to each series of Securities,
the Administrator will prepare and provide to the related Indenture Trustee
and the related Eligible Lender Trustee as of the close of business on the
last day of the preceding Collection Period a statement, which will include
the following information (and any other information so specified in the
related Prospectus Supplement) with respect to such Distribution Date or the
preceding Collection Period as to the Notes and the Certificates of such
series, to the extent applicable:
(i) the amount of the distribution allocable to principal of each class
of the Notes and the Certificates;
(ii) the amount of the distribution allocable to interest on each class
of the Notes and the Certificates, together with the interest rates
applicable with respect thereto;
(iii) the Pool Balance as of the close of business on the last day of the
preceding Collection Period;
52
<PAGE>
(iv) the aggregate outstanding principal balance and the Note Pool Factor
of each class of the Notes, and the Certificate Balance and the Certificate
Pool Factor for each class of the Certificates as of such Distribution
Date, each after giving effect to payments allocated to principal reported
under clause (i) above;
(v) the amount of the Servicing Fee and the Administration Fee paid to
the Master Servicer and the Administrator, respectively, with respect to
such Collection Period;
(vi) the Interest Rate or Pass-Through Rate for the next period for any
class of Notes or Certificates of such series with variable or adjustable
rates;
(vii) the amount of the aggregate realized losses, if any, for such
Collection Period;
(viii) the Noteholders' Interest Carryover Shortfall, the Noteholders'
Principal Carryover Shortfall, the Certificateholders' Interest Carryover
Shortfall and the Certificateholders' Principal Carryover Shortfall (each
as defined in the related Prospectus Supplement), if any, in each case as
applicable to each class of Securities, and the change in such amounts from
the preceding statement;
(ix) the aggregate Purchase Amounts for Student Loans, if any, that were
repurchased in such Collection Period;
(x) the balance of the Reserve Account (if any) on such Distribution
Date, after giving effect to changes therein on such Distribution Date;
(xi) for each date during the Funding Period (if any), the remaining Pre-
Funded Amount or, for each date during the Revolving Period (if any), the
amount on deposit in the Collateral Reinvestment Account; and
(xii) the principal balance and number of Student Loans conveyed to or
originated by the Trust during such Collection Period.
Each amount set forth pursuant to subclauses (i), (ii), (v) and (viii) with
respect to the Notes or the Certificates of any series will also be expressed
as a dollar amount per $1,000 of the initial principal balance of such Notes
or the initial Certificate Balance of such Certificates, as applicable.
EVIDENCE AS TO COMPLIANCE
Each Master Servicing Agreement will provide that a firm of independent
public accountants will furnish to the related Trust and Indenture Trustee
annually a statement (based on the examination of certain documents and
records and on such accounting and auditing procedures considered appropriate
under the circumstances) as to compliance by the Master Servicer during the
preceding twelve months (or, in the case of the first such certificate, the
period from the applicable Closing Date) with all applicable standards under
the Master Servicing Agreement relating to the servicing of student loans, the
Master Servicer's accounting records and computer files with respect thereto,
the Master Servicer's eligibility under the Act and certain other matters.
Each Master Servicing Agreement will also provide for delivery to the
related Trust and Indenture Trustee, concurrently with the delivery of each
statement of compliance referred to above, of a certificate signed by an
officer of the Master Servicer stating that, to his knowledge, the Master
Servicer has fulfilled its obligations under such Master Servicing Agreement
throughout the preceding twelve months (or, in the case of the first such
certificate, the period from the applicable Closing Date) or, if there has
been a default in the fulfillment of any such obligation, describing each such
default. The Master Servicer has agreed to give the Administrator, the related
Indenture Trustee and Eligible Lender Trustee notice of certain Servicer
Defaults under such Master Servicing Agreement.
Copies of such statements and certificates may be obtained by
Securityholders by a request in writing addressed to the applicable Trustee.
53
<PAGE>
CERTAIN MATTERS REGARDING THE MASTER SERVICER
Except as described under "Assumption of Signet's Obligations" herein, each
Master Servicing Agreement will provide that the Master Servicer may not
resign from its obligations and duties as Master Servicer thereunder, except
upon determination that the Master Servicer's performance of such duties is no
longer permissible under applicable law. No such resignation will become
effective until the related Indenture Trustee or a successor servicer has
assumed the Master Servicer's servicing obligations and duties under the
Master Servicing Agreement.
Each Master Servicing Agreement will further provide that neither the Master
Servicer nor any of its directors, officers, employees or agents will be under
any liability to the related Trust or the related Noteholders or
Certificateholders for taking any action or for refraining from taking any
action pursuant to the related Master Servicing Agreement, or for errors in
judgment; provided, however, that neither the Master Servicer nor any such
person will be protected against any liability that would otherwise be imposed
by reason of willful misfeasance, bad faith or negligence in the performance
of the Master Servicer's duties thereunder or by reason of reckless disregard
of its obligations and duties thereunder. In addition, each Master Servicing
Agreement will provide that the Master Servicer is under no obligation to
appear in, prosecute, or defend any legal action that is not incidental to its
servicing responsibilities under such Master Servicing Agreement and that, in
its opinion, may cause it to incur any expense or liability. Each Master
Servicing Agreement will, however, provide that the Master Servicer may
undertake any reasonable action that it deems necessary or desirable in
respect of the Master Servicing Agreement and the interests of the
Securityholders.
Under the circumstances specified in each Master Servicing Agreement, any
entity into which the Master Servicer may be merged or consolidated, or any
entity resulting from any merger or consolidation to which the Master Servicer
is a party, or any entity succeeding to the business of the Master Servicer,
which corporation or other entity in each of the foregoing cases assumes the
obligations of the Master Servicer, will be the successor of the Master
Servicer under such Master Servicing Agreement.
SERVICER DEFAULT
Except as otherwise provided in the related Prospectus Supplement, a
"Servicer Default" under each Master Servicing Agreement will occur in the
event of (a) any failure by the Master Servicer to deliver to the Indenture
Trustee for deposit in any of the Trust Accounts any required payment, which
failure continues unremedied for five business days after written notice from
such Indenture Trustee or the related Eligible Lender Trustee is received by
the Master Servicer or after discovery by the Master Servicer, (b) any failure
by the Master Servicer to observe or perform in any material respect any other
covenant or agreement of the Master Servicer under the related Master
Servicing Agreement, which failure materially and adversely affects the rights
of the Noteholders or Certificateholders and which remains unremedied for 120
days after the giving of written notice of such failure, (c) any limitation,
suspension or termination by the Secretary of the Master Servicer's or any
Subservicer's eligibility to service Student Loans which materially and
adversely affects its ability to service the Student Loans in the related
Trust or (d) an Insolvency Event with respect to the Master Servicer occurs.
"Insolvency Event" means, with respect to any Person, any of the following
events or actions: certain events of insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings with respect to
such Person and certain actions by such Person indicating its insolvency,
reorganization pursuant to bankruptcy proceedings or inability to pay its
obligations.
RIGHTS UPON SERVICER DEFAULT
Unless otherwise specified in the related Prospectus Supplement, as long as
a Servicer Default under a Master Servicing Agreement remains unremedied, the
related Indenture Trustee or holders of Notes of the related series evidencing
not less than 75% in principal amount of such then outstanding Notes may
terminate all the rights and obligations of the Master Servicer under such
Master Servicing Agreement, whereupon a successor servicer appointed by the
related Indenture Trustee or such Indenture Trustee will succeed to all the
responsibilities, duties and liabilities of the Master Servicer under such
Master Servicing Agreement, and will be
54
<PAGE>
entitled to similar compensation arrangements. If, however, a conservator,
receiver or similar official has been appointed for the Master Servicer, and
no Servicer Default other than such appointment has occurred, such
conservator, receiver or official may have the power to prevent such Indenture
Trustee or such Noteholders from effecting such a transfer. In the event that
such Indenture Trustee is unwilling or unable to so act, it may appoint, or
petition a court of competent jurisdiction for the appointment of, a successor
whose regular business includes the servicing of student loans. Such Indenture
Trustee may make such arrangements for compensation to be paid, which in no
event may be greater than the servicing compensation to the Master Servicer
under such Master Servicing Agreement, unless such compensation arrangements
will not result in a downgrading of such Notes and Certificates by any Rating
Agency. In the event a Servicer Default occurs and is continuing, such
Indenture Trustee or such Noteholders, as described above, may remove the
Master Servicer, without the consent of the related Eligible Lender Trustee or
any of the Certificateholders of the related series. Moreover, only the
Indenture Trustee or the Noteholders, and not the Eligible Lender Trustee or
the Certificateholders, have the ability to remove the Master Servicer if a
Servicer Default occurs and is continuing.
WAIVER OF PAST DEFAULTS
With respect to each Trust, unless otherwise specified in the related
Prospectus Supplement, the holders of Notes evidencing at least a majority in
principal amount of the then outstanding Notes (or the holders of Certificates
evidencing not less than a majority of the outstanding Certificate Balance, in
the case of any Servicer Default which does not adversely affect the Indenture
Trustee or the Noteholders) of the related series may, on behalf of all such
Noteholders and Certificateholders, waive any default by the Master Servicer
in the performance of its obligations under the related Master Servicing
Agreement and its consequences, except a default in making any required
deposits to or payments from any of the Trust Accounts in accordance with such
Master Servicing Agreement. Therefore, such Noteholders have the ability,
except as noted above, to waive defaults by the Master Servicer which could
materially adversely affect such Certificateholders. No such waiver will
impair such Noteholders' or Certificateholders' rights with respect to
subsequent defaults.
AMENDMENT
Unless otherwise provided in the related Prospectus Supplement, each of the
Transfer and Servicing Agreements may be amended by the parties thereto,
without the consent of the related Noteholders or Certificateholders, for the
purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of such Transfer and Servicing Agreements, of modifying
in any manner the rights of such Noteholders or Certificateholders or in
connection with a permitted specified merger or other transaction involving
the Seller, the Master Servicer or the Administrator, provided that such
action will not, in the opinion of counsel satisfactory to the related
Indenture Trustee and Eligible Lender Trustee, materially and adversely affect
the interest of any such Noteholder or Certificateholder or in the
circumstances described under the heading "Assumption of Signet's Obligations"
herein. Unless otherwise provided in the related Prospectus Supplement, each
of the Transfer and Servicing Agreements may also be amended by the Seller,
the Administrator, the Master Servicer, the related Eligible Lender Trustee
and the related Indenture Trustee, as applicable, with the consent of the
holders of Notes of the related series evidencing at least a majority in
principal amount of such then outstanding Notes and the holders of
Certificates of the related series evidencing at least a majority of the
Certificate Balance for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of such Transfer and Servicing
Agreements or of modifying in any manner the rights of such Noteholders or
Certificateholders; provided, however, that no such amendment may (i) increase
or reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments (including any Guarantee Payments) with respect to the
Student Loans or distributions that are required to be made for the benefit of
such Noteholders or Certificateholders or (ii) reduce the aforesaid percentage
of such Notes or Certificates which are required to consent to any such
amendment, without the consent of the holders of all such outstanding Notes
and Certificates.
55
<PAGE>
PAYMENT OF NOTES
Upon the payment in full of all outstanding Notes of a given series and the
satisfaction and discharge of the related Indenture, the Eligible Lender
Trustee will succeed to all the rights of the Indenture Trustee, and the
Certificateholders of such series will succeed to all the rights of the
Noteholders of such series, under the related Master Servicing Agreement,
except as otherwise provided therein.
TERMINATION
With respect to each Trust, the obligations of the Seller, the Master
Servicer, the Administrator, the related Eligible Lender Trustee and the
related Indenture Trustee pursuant to the related Transfer and Servicing
Agreements will terminate upon the later of (i) the maturity or other
liquidation of the last related Student Loan and the disposition of any amount
received upon liquidation of any such remaining Student Loans and (ii) the
payment to the Noteholders and the Certificateholders of the related series of
all amounts required to be paid to them pursuant to such Transfer and
Servicing Agreements.
Optional Redemption. Unless otherwise provided in the related Prospectus
Supplement, in order to avoid excessive administrative expense, the Seller
will be permitted at its option to repurchase from the related Eligible Lender
Trustee, as of the end of any Collection Period immediately preceding a
Distribution Date, if the then outstanding Pool Balance is 10% or less of the
Initial Pool Balance (as defined in the related Prospectus Supplement, the
"Initial Pool Balance") plus the Pre-Funded Amount, if any, as of the Closing
Date, all remaining related Student Loans at a price equal to the aggregate
Purchase Amounts thereof as of the end of such Collection Period, which
amounts will be used to retire the related Notes and Certificates concurrently
therewith. Upon termination of a Trust, as more fully described in the related
Prospectus Supplement, all right, title and interest in the Student Loans and
other funds of such Trust, after giving effect to any final distributions to
Noteholders and Certificateholders of the related series therefrom, will be
conveyed and transferred to the Seller.
Auction of Student Loans. If so provided in the related Prospectus
Supplement, all remaining Student Loans held by a Trust will be offered for
sale by the Indenture Trustee on any Distribution Date occurring on or after a
date specified in such Prospectus Supplement. The Seller and unrelated third
parties may offer bids for such Student Loans. If at least two bids are
received, the Indenture Trustee will accept the highest bid equal to or in
excess of the greater of (x) the Purchase Amount of such Student Loans as of
the end of the Collection Period immediately preceding such Distribution Date
or (y) an amount that would be sufficient to (i) reduce the outstanding
principal amount of each class of Notes and Certificates then outstanding on
such Distribution Date to zero and to pay all amounts representing accrued
interest on the Notes and the Certificates (the "Minimum Purchase Price"). If
at least two bids are not received or the highest bid is not equal to or in
excess of the Minimum Purchase Price for such Student Loans, the Indenture
Trustee will not consummate such sale. The proceeds of any such sale will be
used to redeem any outstanding Notes and to retire any outstanding
Certificates on such Distribution Date. If the sale is not consummated in
accordance with the foregoing, the Indenture Trustee may, but shall not be
under any obligation to, solicit bids to purchase such Student Loans on future
Distribution Dates upon terms similar to those described above. No assurance
can be given as to whether the Trustee will be successful in soliciting
acceptable bids to purchase the Student Loans.
ADMINISTRATION AGREEMENT
The Administrator will enter into an agreement (as amended and supplemented
from time to time, an "Administration Agreement") with each Trust and the
related Indenture Trustee pursuant to which the Administrator will agree, to
the extent provided therein, to provide the notices and to perform other
administrative obligations required by the related Indenture, the related
Trust Agreement, the related Loan Sale Agreement and the related Master
Servicing Agreement. Unless otherwise specified in the related Prospectus
Supplement with respect to any Trust, as compensation for the performance of
the Administrator's obligations under the applicable Administration Agreement
and as reimbursement for its expenses related thereto, the
56
<PAGE>
Administrator will be entitled to an administration fee as specified in the
related Prospectus Supplement (the "Administration Fee").
Except as otherwise provided in the related Prospectus Supplement, an
"Administrator Default" will occur under an Administration Agreement in the
event of (a) a failure by the Administrator to direct the Indenture Trustee to
make any required distributions from any of the Trust Accounts, which failure
continues unremedied for five business days after written notice from the
Indenture Trustee or the Eligible Lender Trustee of such failure, (b) any
failure by the Administrator to observe or perform in any material respect any
other covenant or agreement of the Administrator in the Administration
Agreement which failure materially and adversely affects the rights of the
Noteholders or Certificateholders and which remains unremedied for 120 days
after the giving of written notice of such failure or (c) an Insolvency Event
with respect to the Administrator occurs.
Unless otherwise specified in the related Prospectus Supplement, the
procedures for terminating the rights and obligations of the Administrator and
appointing a successor Administrator following the occurrence of an
Administrator Default under the Administration Agreement and for waiving
defaults by the Administrator under the Administration Agreement will be
identical to those for replacing the Master Servicer and appointing a
successor Master Servicer following the occurrence of a Servicer Default under
the Master Servicing Agreement and for waiving defaults by the Master Servicer
under the Master Servicing Agreement, except that such procedures will apply
to the Administrator and the Administration Agreement rather than the Master
Servicer and the Master Servicing Agreement.
CERTAIN LEGAL ASPECTS OF THE STUDENT LOANS
TRANSFER OF STUDENT LOANS
The Seller intends that the transfer of the Student Loans by it to the
related Eligible Lender Trustee on behalf of each Trust will constitute a
valid sale and assignment of such Student Loans. Notwithstanding the
foregoing, if the transfer of the Student Loans is deemed to be an assignment
of collateral as security for the benefit of a Trust, a security interest in
the Federal Student Loans created on behalf of the Eligible Lender Trustee
may, pursuant to the provisions of 20 U.S.C. (S)1087-2(d)(3), be perfected
either through the taking of possession of such loans or the filing of notice
of such security interest in the manner provided by the applicable state law
version Uniform Commercial Code ("UCC") for perfection of security interests
in accounts. A financing statement or statements covering the Student Loans
will be filed under the UCC to protect the interest of the Eligible Lender
Trustee in the event the transfer by the Seller is deemed to be subject to the
UCC.
If the transfer of the Student Loans is deemed to be an assignment as
security for the benefit of a Trust, there are certain limited circumstances
under the UCC in which prior or subsequent transferees of Student Loans coming
into existence after the Closing Date could have an interest in such Student
Loans with priority over the related Eligible Lender Trustee's interest. A tax
or other government lien on property of the Seller arising prior to the time a
Student Loan comes into existence may also have priority over the interest of
the related Eligible Lender Trustee in such Student Loan. Under the related
Loan Sale Agreement, however, the Seller will warrant that it has caused the
Student Loans to be transferred to the related Eligible Lender Trustee on
behalf of a Trust free and clear of the lien of any third-party. In addition,
the Seller will covenant that it will not sell, pledge, assign, transfer or
grant any lien on any Student Loan (or any interest therein) other than to the
related Eligible Lender Trustee on behalf of a Trust, except as provided
below.
Pursuant to each Master Servicing Agreement, the Master Servicer as
custodian on behalf of the related Trust will have custody of the promissory
notes evidencing the Student Loans following the sale of the Student Loans to
the related Eligible Lender Trustee. Although the accounts and computer
records of the Seller and Master Servicer will be marked to indicate the sale
and although the Seller will cause UCC financing statements to be filed with
the appropriate authorities, the Student Loans will not be physically
segregated, stamped or otherwise marked to indicate that such Student Loans
have been sold to such Eligible Lender Trustee. If, through inadvertence or
otherwise, any of the Student Loans were sold to another party, or a security
interest therein
57
<PAGE>
were granted to another party, that purchased (or took such security interest
in) any of such Student Loans in the ordinary course of its business and took
possession of such Student Loans, then the purchaser (or secured party) might
acquire an interest in the Student Loans superior to the interest of the
Eligible Lender Trustee if the purchaser (or secured party) acquired (or took
a security interest in) the Student Loans for new value and without actual
knowledge of the related Eligible Lender Trustee's interest. See "Description
of the Transfer and Servicing Agreements--Sale of Student Loans;
Representations and Warranties".
With respect to each Trust, in the event of a Servicer Default resulting
solely from certain events of insolvency or bankruptcy that may occur with
respect to the Seller or the Master Servicer, a court, conservator, receiver
or liquidator may have the power to prevent either the related Indenture
Trustee or Noteholders of the related series from appointing a successor
Servicer. See "Description of the Transfer and Servicing Agreements--Rights
Upon Servicer Default".
CERTAIN MATTERS RELATING TO RECEIVERSHIP
The Seller will warrant to each Trust in the related Loan Sale Agreement
that the sale of the Student Loans to such Trust is a valid sale of the
Student Loans by the Seller to such Trust. Notwithstanding the foregoing, in
the event of an insolvency of the Seller, it is possible that a conservator or
receiver for, or a creditor of, the Seller may argue that each transaction
between the Seller and a Trust was a pledge of the related Student Loans in
connection with a borrowing by the Seller rather than a true sale. Such an
attempt, even if unsuccessful, could result in delays in distributions on the
Securities.
The Seller is chartered under the laws of Virginia. In Virginia, the SCC
which supervises and examines the Seller, may apply to any Virginia court
having jurisdiction over the appointment of receivers to appoint a receiver
upon determination that certain events relating to the Seller's financial
condition have occurred. The SCC is authorized, but not required, to apply for
the appointment of the FDIC as receiver and, as a matter of federal law, the
FDIC would be authorized, but not obligated, to accept such appointment. The
SCC has informally indicated that it would seek to have the FDIC appointed as
receiver in any receivership proceeding involving a bank such as the Seller.
Virginia law sets forth certain powers that could be exercised by the FDIC
upon its appointment as receiver. There are no Virginia statutory provisions
governing the appointment of a conservator for a Virginia-chartered bank.
The Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA") significantly expanded the powers of the FDIC as a conservator or
receiver of insolvent banks. To the extent that the Seller has granted a first
priority perfected security interest in the Student Loans to each Trust, and
the interest is validly perfected and was not taken in contemplation of
insolvency or with the intent to hinder, delay or defraud the Seller's
creditors, that security interest should not be subject to avoidance by the
FDIC as conservator or receiver of the Seller. If, however, the FDIC were to
take a contrary position, such as by requiring the Indenture Trustee or
Eligible Lender Trustee with respect to each Trust to establish its rights in
the related Student Loans by submitting to and complying with the
administrative claims procedure established under FIRREA, delays in payments
on the Securities and possible reductions in the amounts of those payments
could occur. In addition, under FIRREA, the FDIC may disaffirm or repudiate
any contract to which an insolvent bank is a party, the performance of which
is determined to be burdensome, and the disaffirmance of which is determined
to promote the orderly administration of such bank's affairs. If the FDIC were
to contend successfully that the Securities of any series evidence a secured
borrowing and that it has the power to repudiate such Securities, the effect
of such repudiation should be to accelerate the maturities of such Securities.
In the event of such acceleration, the amount paid on such Securities would
depend, among other things, on the amount which could be realized from the
sale or other disposition of the related Student Loans at such time. Although
each Master Servicing Agreement will provide for the replacement of the Seller
as Master Servicer in the event of the appointment of a conservator or
receiver of the Seller, the FDIC as conservator or receiver may enforce most
types of contracts, including a Master Servicing Agreement, pursuant to their
terms, notwithstanding any such provision. The FDIC, as conservator or
receiver, may also transfer to a new obligor an insolvent bank's assets and
liabilities (including,
58
<PAGE>
in the event that the Securities of any series were deemed to evidence a
secured borrowing, the related Student Loans and the liability evidenced by
such Securities) without the approval of the bank's creditors (including, in
the event such Securities were deemed to evidence a secured borrowing, holders
of such Securities).
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related regulations
impose substantial requirements upon lenders and servicers involved in
consumer finance. Also, some state laws impose finance charge ceilings and
other restrictions on certain consumer transactions and require contract
disclosures in addition to those required under federal law. These
requirements impose specific statutory liabilities upon lenders who fail to
comply with their provisions. In certain circumstances, a Trust may be liable
for certain violations of consumer protection laws that apply to the Student
Loans, either as assignee or as the party directly responsible for obligations
arising after the transfer. For a discussion of a Trust's rights if the
Student Loans were not originated or serviced in compliance in all material
respects with applicable laws, see "Description of the Transfer and Servicing
Agreements--Sale of Student Loans; Representations and Warranties" and "--
Servicer Covenants".
LOAN ORIGINATION AND SERVICING PROCEDURES APPLICABLE TO STUDENT LOANS
The Act, including the implementing regulations thereunder (in the case of
Federal Student Loans) and the private guarantee programs (in the case of
Private Student Loans) impose specified requirements, guidelines and
procedures with respect to originating and servicing student loans such as the
Student Loans. Generally, those procedures require that completed loan
applications be processed, a determination of whether an applicant is an
eligible borrower under applicable standards (including a review of a
financial need analysis in the case of Federal Student Loans and the
performance of a creditworthiness evaluation in the case of Private Student
Loans) be made, the borrower's responsibilities under the loan be explained to
him or her, the promissory note evidencing the loan be executed by the
borrower and then that the loan proceeds be disbursed in a specified manner by
the lender. After the loan is made, the lender must establish repayment terms
with the borrower, properly administer deferrals and forbearance and credit
the borrower for payments made thereon. If a borrower becomes delinquent in
repaying a loan, a lender or a servicing agent must perform certain collection
procedures (primarily telephone calls and demand letters) which vary depending
upon the length of time a loan is delinquent. The Master Servicer has agreed
pursuant to the related Master Servicing Agreement to perform collection and
servicing procedures on behalf of the related Trust. However, failure to
follow these procedures or failure of the originator of the loan to follow
procedures relating to the origination of any Federal Student Loans could
result in adverse consequences. In the case of the Federal Student Loans, any
such failure could result in the Department's refusal to make reinsurance
payments to the Federal Guarantors or to make Interest Subsidy Payments and
Special Allowance Payments to the Eligible Lender Trustee with respect to such
Federal Student Loans or in the Federal Guarantors' refusal to honor their
Guarantee Agreements with the Eligible Lender Trustee with respect to such
Federal Student Loans. Failure of the Federal Guarantors to receive
reinsurance payments from the Department could adversely affect the Federal
Guarantors' ability or legal obligation to make Guarantee Payments to the
related Eligible Lender Trustee with respect to such Federal Student Loans. In
the case of the Private Student Loans, failure to make or service properly
such Private Student Loans in accordance with such procedures could adversely
affect the related Eligible Lender Trustee's ability to obtain Guarantee
Payments from the Private Guarantors.
Loss of any such Guarantee Payments, Interest Subsidy Payments or Special
Allowance Payments could adversely affect the amount of Available Funds on any
Distribution Date and the related Trust's ability to pay principal and
interest on the Notes of the related series and to make distributions in
respect of the Certificates of the related series. Under certain
circumstances, the related Trust has the right, pursuant to the related Loan
Sale Agreement and Master Servicing Agreement, to cause the Seller to
repurchase any Student Loan, or to cause the Master Servicer to arrange for
the purchase of any Student Loan, if a breach of the representations,
warranties or covenants of the Seller or the Servicer, as the case may be,
with respect to such Student Loan has a material adverse effect on the
interest of the Trust therein and such breach is not cured within any
applicable cure period.
59
<PAGE>
See "Description of the Transfer and Servicing Agreements--Sale of Student
Loans; Representations and Warranties" and "--Servicer Covenants". The failure
of the Seller to so purchase, or of the Servicer to arrange for the purchase
of, a Student Loan would constitute a breach of the related Loan Sale
Agreement and Master Servicing Agreement, enforceable by the related Eligible
Lender Trustee on behalf of the related Trust or by the related Indenture
Trustee on behalf of the Noteholders of the related series, but would not
constitute an Event of Default under the Indenture.
STUDENT LOANS GENERALLY NOT SUBJECT TO DISCHARGE IN BANKRUPTCY
Student Loans are generally not dischargeable by a borrower in bankruptcy
pursuant to the U.S. Bankruptcy Code, unless (a) such Student Loan first
became due before seven years (exclusive of any applicable suspension of the
repayment period) before the date of the bankruptcy or (b) excepting such debt
from discharge will impose an undue hardship on the debtor and the debtor's
dependents.
FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of federal income tax consequences of the
purchase, ownership and disposition of the Notes and the Certificates. The
summary does not purport to deal with federal income tax consequences
applicable to all categories of holders, some of which may be subject to
special rules. For example, it does not discuss the tax treatment of
Noteholders or Certificateholders that are insurance companies, regulated
investment companies or dealers in securities. Moreover, there are no cases or
Internal Revenue Service ("IRS") rulings on similar transactions involving
both debt and equity interests issued by a trust with terms similar to those
of the Notes and the Certificates. As a result, the IRS may disagree with all
or a part of the discussion below. Prospective investors are urged to consult
their own tax advisors in determining the federal, state, local, foreign and
any other tax consequences to them of the purchase, ownership and disposition
of the Notes and the Certificates.
The following summary is based upon current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), the Treasury regulations
promulgated thereunder and judicial or ruling authority, all of which are
subject to change, which change may be retroactive. In addition to the
specific opinions referred to under "Tax Characterization of the Trust" and
"Tax Consequences to Holders of the Notes--Treatment of the Notes as
Indebtedness" below, each Trust will be provided with an opinion of Tax
Counsel stating that the discussion herein under "Federal Income Tax
Consequences" is correct in all material respects. An opinion of Tax Counsel,
however, is not binding on the IRS or the courts. No ruling on any of the
issues discussed below will be sought from the IRS. For purposes of the
following summary, references to the Trust, the Notes, the Certificates and
related terms, parties and documents shall be deemed to refer, unless
otherwise specified herein, to each Trust and the Notes, Certificates and
related terms, parties and documents applicable to such Trust.
TAX CHARACTERIZATION OF THE TRUST
Tax Counsel will deliver its opinion that each Trust will not be an
association (or publicly traded partnership) taxable as a corporation for
federal income tax purposes. This opinion will be based on the assumption that
the terms of the related Trust Agreement and related documents will be
complied with, and on counsel's conclusions that (1) such Trust will not have
certain characteristics necessary for a business trust to be classified as an
association taxable as a corporation and (2) the nature of the income of such
Trust will exempt it from the rule that certain publicly traded partnerships
are taxable as corporations.
If a Trust were taxable as a corporation for federal income tax purposes,
such Trust would be subject to corporate income tax on its taxable income.
Such Trust's taxable income would include all of its income on the Student
Loans, and would be reduced by its expenses, including the interest expense on
the Notes. Any such corporate income tax could materially reduce cash
available to make payments on the Notes and distributions on the Certificates,
and Certificateholders could be liable for any such tax that is unpaid by such
Trust.
60
<PAGE>
TAX CONSEQUENCES TO HOLDERS OF THE NOTES
Treatment of the Notes as Indebtedness. The Seller and the Company will
agree, and the Noteholders will agree by their purchase of Notes, to treat the
Notes as debt for federal, state and local income and franchise tax purposes.
Tax Counsel will, except as otherwise provided in the related Prospectus
Supplement, deliver an opinion to the Trust that the Notes will be classified
as debt for federal income tax purposes. The discussion below assumes this
characterization of the Notes is correct.
Original Issue Discount. The discussion below assumes that all payments on
the Notes are denominated in U.S. dollars, that the interest formula for the
Notes meets the requirements for "qualified stated interest" under Treasury
regulations (the "OID Regulations") relating to original issue discount
("OID"), and that any OID on the Notes (i.e., any excess of the stated
redemption price at maturity of the Notes, generally the principal amount of
the Notes, over their issue price) does not exceed a de minimis amount (i.e.,
1/4% of their principal amount multiplied by the number of full years included
in their term), all within the meaning of the OID Regulations. If these
conditions are not satisfied with respect to any given series of Notes,
additional tax considerations with respect to such Notes will be disclosed in
the related Prospectus Supplement. The OID Regulations do not address their
application to debt instruments such as the Notes that are subject to
prepayment based on the prepayment of other debt instruments. The legislative
history of the OID provisions of the Code provides, however, that the
calculation and accrual of OID should be based on the prepayment assumption
used by the parties in pricing the transaction. In the event that any of the
Notes are issued with OID, the prepayment assumption will be set forth in the
related Prospectus Supplement. Furthermore, although premium amortization and
accrued market discount on debt instruments such as the Notes, which are
subject to prepayment based on the payments on other debt instruments, is to
be determined under regulations yet to be issued, the legislative history of
these Code provisions provides that the same prepayment assumption used to
calculate OID, whether or not the debt instrument is issued with OID, should
be used. The OID Regulations are effective for debt instruments, such as the
Notes, issued on or after April 4, 1994.
Interest Income on the Notes. Based on the above assumptions, except as
discussed below or in the related Prospectus Supplement the Notes will not be
considered issued with OID. The stated interest thereon will be taxable to a
Noteholder as ordinary interest income when received or accrued in accordance
with such Noteholder's method of tax accounting. Under the OID Regulations, a
holder of a Note that was issued with a de minimis amount of OID must include
such OID in income, on a pro rata basis, as principal payments are made on the
Note. Alternatively, a Noteholder may elect to accrue all interest and
discount (including de minimis market discount or OID), as adjusted by any
premium, in income as interest, based on a constant yield method. If such an
election were made with respect to a Note with market discount, the Noteholder
would be deemed to have made an election to include in income currently market
discount with respect to all debt instruments having market discount that such
Noteholder acquires during the year of the election and thereafter. Similarly,
a Noteholder that makes this election for a Note that is acquired at a premium
will be deemed to have made an election to amortize bond premium with respect
to all debt instruments having amortizable bond premium that such Noteholder
owns or acquires. The election to accrue interest, discount and premium under
a constant yield method with respect to a Note is irrevocable without the
consent of the IRS. A purchaser who buys a Note for more or less than its
principal amount generally will be subject, respectively, to the premium
amortization or market discount rules of the Code.
"Qualified Stated Interest", which is taxable in accordance with the
holder's method of accounting, is interest that is unconditionally payable
(i.e., late payments are penalized) at least annually at a single fixed rate.
The Company intends to treat the interest paid on the Notes as Qualified
Stated Interest.
A holder of a Note that has a fixed maturity date of not more than one year
from the issue date of such Note (a "Short-Term Note") may be subject to
special rules. An accrual basis holder of a Short-Term Note (and certain cash
method holders, including regulated investment companies, banks and securities
dealers, as set forth in Section 1281 of the Code) generally will be required
to report interest income as interest accrues on a ratable basis over the term
of each interest period or, at the election of the holder, on a constant yield
basis (i.e., treating
61
<PAGE>
the instrument as accruing interest at a single rate). Cash basis holders of a
Short-Term Note will, in general, be required to report interest income as
interest is paid (or, if earlier, upon the taxable disposition of the Short-
Term Note). However, a cash basis holder of a Short-Term Note reporting
interest income as it is paid may be required to defer a portion of any
interest expense otherwise deductible on indebtedness incurred to purchase or
carry the Short-Term Note until the taxable disposition of the Short-Term
Note. A cash basis taxpayer may elect under Section 1282 of the Code to accrue
interest income on all nongovernment debt obligations with a term of one year
or less, in which case the taxpayer would include interest on the Short-Term
Note in income as it accrues, but would not be subject to the interest expense
deferral rule referred to in the preceding sentence. Certain special rules
apply if a Short-Term Note is purchased for more or less than its principal
amount.
Sale or Other Disposition. If a Noteholder sells a Note, the holder will
recognize gain or loss in an amount equal to the difference between the amount
realized on the sale and the holder's adjusted tax basis in the Note. The
adjusted tax basis of a Note to a particular Noteholder will equal the
holder's cost for the Note, increased by any market discount, acquisition
discount, OID and gain previously included by such Noteholder in income with
respect to the Note and decreased by the amount of bond premium (if any)
previously amortized and by the amount of principal payments previously
received by such Noteholder with respect to such Note. Any such gain or loss
will be capital gain or loss if the Note was held as a capital asset, except
for gain representing accrued interest and accrued market discount not
previously included in income. Capital losses generally may be used only to
offset capital gains.
Foreign Holders. Interest paid (or accrued) to a Noteholder who is for
United States federal income tax purposes a nonresident alien, foreign
corporation, foreign estate or trust, foreign partnership or other non-United
States person (a "foreign person") generally will be considered "portfolio
interest", and generally will not be subject to United States federal income
tax and withholding tax, provided, that (i) the interest is not effectively
connected with the conduct of a trade or business within the United States by
the foreign person, (ii) the foreign person is neither actually or
constructively a "10 percent shareholder" of the Trust, the Seller or the
Company (including a holder of 10% of the outstanding Certificates) nor a
"controlled foreign corporation" with respect to which the Trust, the Seller
or the Company is a "related person" within the meaning of the Code and (iii)
the foreign person provides the Trustee or other person who is otherwise
required to withhold U.S. tax with respect to the Notes with an appropriate
statement (on Form W-8 or a similar form), signed under penalties of perjury,
certifying that the beneficial owner of the Note is a foreign person and
providing the foreign person's name and address. If a Note is held through a
securities clearing organization or certain other financial institutions, the
organization or institution may provide the relevant signed statement to the
withholding agent; in that case, however, the signed statement must be
accompanied by a Form W-8 or substitute form provided by the foreign person
that owns the Note. If such interest is not portfolio interest, then it will
be subject to United States federal income and withholding tax at a rate of
30%, unless reduced or eliminated pursuant to an applicable tax treaty.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a Note by a foreign person generally will be exempt
from United States federal income and withholding tax, provided that (i) such
gain is not effectively connected with the conduct of a trade or business in
the United States by the foreign person and (ii) in the case of an individual
foreign person, the foreign person is not present in the United States for 183
days or more in the taxable year.
If the interest, gain or income on a Note held by a foreign person is
effectively connected with the conduct of a trade or business in the United
States by the foreign person (although exempt from the withholding tax
previously discussed if the holder provides an appropriate statement), the
holder generally will be subject to United States federal income tax on the
interest, gain or income at regular federal income tax rates. In addition, if
the foreign person is a foreign corporation, it may be subject to a branch
profits tax equal to 30% of its "effectively connected earnings and profits"
within the meaning of the Code for the taxable year, as adjusted for certain
items, unless it qualifies for a lower rate under an applicable tax treaty (as
modified by the branch profits tax rules).
62
<PAGE>
Backup Withholding. Each holder of a Note (other than an exempt holder such
as a corporation, tax-exempt organization, qualified pension and profit-
sharing trust, individual retirement account or nonresident alien who provides
certification as to status as a nonresident) will be required to provide,
under penalties of perjury, a certificate setting forth the holder's name,
address, correct federal taxpayer identification number and a statement that
the holder is not subject to backup withholding. Should a nonexempt Noteholder
fail to provide the required certification, the Trust will be required to
withhold 31% of the amount otherwise payable to the holder, and remit the
withheld amount to the IRS as a credit against the holder's federal income tax
liability.
Possible Alternative Treatments of the Notes. If, contrary to the opinion of
Tax Counsel, the IRS successfully asserted that one or more of the Notes did
not represent debt for federal income tax purposes, the Notes would be treated
as equity interests in the Trust. If so treated, the Trust might be taxable as
a corporation with the adverse consequences described above (and the taxable
corporation would not be able to reduce its taxable income by deductions for
interest expense on Notes recharacterized as equity). Alternatively, and most
likely in the view of Tax Counsel, the Trust would be treated as a publicly
traded partnership that would not be taxable as a corporation because it would
meet certain qualifying income tests. Nonetheless, treatment of the Notes as
equity interests in such a publicly traded partnership could have adverse tax
consequences to certain holders. For example, income to foreign holders might
be subject to U.S. tax and U.S. tax return filing and withholding
requirements, and individual holders might be subject to certain limitations
on their ability to deduct their share of Trust expenses.
TAX CONSEQUENCES TO HOLDERS OF THE CERTIFICATES
The following discussion assumes that all payments on the Certificates are
denominated in U.S. dollars, that a series of Securities includes a single
class of Certificates and that any such Certificates are sold to persons other
than the Seller. If these conditions are not satisfied with respect to any
given series of Certificates, any additional tax considerations with respect
to such Certificates will be disclosed in the applicable Prospectus
Supplement.
Treatment of the Trust as a Partnership. The Seller, the Company and the
Master Servicer will agree, and the Certificateholders will agree by their
purchase of Certificates, to treat the Trust as a partnership for purposes of
federal, state and local income tax, franchise tax and any other tax measured
in whole or in part by income, with the assets of the partnership being the
assets held by the Trust, the partners of the partnership being the
Certificateholders (including the Seller and the Company in their capacity as
recipients of distributions from the Reserve Account, if any), and the Notes
being debt of the partnership. However, the proper characterization of the
arrangement involving the Trust, the Certificateholders, the Noteholders, the
Seller, the Company and the Master Servicer is not clear because there is no
authority on transactions comparable to that contemplated herein.
Under the provisions of Subchapter K of the Code, a partnership is not
considered to be a separate taxable entity. Instead, partnership income is
taxed directly to the partners and each partner generally is viewed as owning
a direct undivided interest in each partnership asset. The partnership
generally is treated as an entity, however, for purposes of computing
partnership income, determining the tax consequences of transactions between a
partner and the partnership, and characterizing the gain on the sale or
exchange of a partnership interest. The following discussion is a summary of
some of the material federal income tax consequences of classifying the Trust
as a partnership. Prospective owners of Certificates should consult their own
tax advisors regarding the federal income tax consequences discussed below, as
well as any other material federal income tax consequences that may result
from applying the provisions of Subchapter K to the ownership and transfer of
a Trust Certificate.
Partnership Taxation. As a partnership, the Trust will not be subject to
federal income tax. Rather, each Certificateholder will be required to
separately take into account such holder's allocated share of income, gains,
losses, deductions and credits of the Trust. The Trust's income will consist
primarily of interest and finance charges earned on the Student Loans
(including appropriate adjustments for market discount, OID and bond premium),
investment income from investments of amounts on deposit in any related Trust
Accounts and any
63
<PAGE>
gain upon collection or disposition of Student Loans. The Trust's deductions
will consist primarily of interest accruing with respect to the Notes,
servicing and other fees, and losses or deductions upon collection or
disposition of Student Loans.
The tax items of a partnership are allocable to the partners in accordance
with the Code, Treasury regulations and the partnership agreement (here, the
Trust Agreement and related documents). The Trust Agreement will provide, in
general, that the Certificateholders will be allocated taxable income of the
Trust for each Interest Period (as defined in the applicable Prospectus
Supplement, an "Interest Period") equal to the sum of (i) the interest that
accrues on the Certificates in accordance with their terms for such Interest
Period, including interest accruing at the Pass-Through Rate for such Interest
Period and interest on amounts previously due on the Certificates but not yet
distributed; (ii) any Trust income attributable to discount on the Student
Loans that corresponds to any excess of the principal amount of the
Certificates over their initial issue price; and (iii) all other amounts of
income payable to the Certificateholders for such Interest Period. All
remaining taxable income of the Trust will be allocated between the Seller and
the Company. Based on the economic arrangement of the parties, this approach
for allocating Trust income should be permissible under applicable Treasury
regulations, although no assurance can be given that the IRS would not require
a greater amount of income to be allocated to Certificateholders. Moreover,
even under the foregoing method of allocation, Certificateholders may be
allocated income equal to the entire amount of interest accruing on the
Certificates for an Interest Period, based on the Pass-Through Rate plus the
other items described above, even though the Trust might not have sufficient
cash to make current cash distributions of such amount. Thus, cash basis
holders will in effect be required to report income from the Certificates on
the accrual basis and Certificateholders may become liable for taxes on Trust
income even if they have not received cash from the Trust to pay such taxes.
In addition, because tax allocations and tax reporting will be done on a
uniform basis for all Certificateholders but Certificateholders may be
purchasing Certificates at different times and at different prices,
Certificateholders may be required to report on their tax returns taxable
income that is greater or less than the amount reported to them by the Trust.
An individual taxpayer's share of expenses of the Trust (including fees to
the Master Servicer but not interest expenses) are miscellaneous itemized
deductions which generally are deductible to the extent they exceed two
percent of the individual's adjusted gross income. However, an individual
taxpayer may be required to reduce his or her itemized deductions further if
such taxpayer's income exceeds certain annual levels. Accordingly, such
deductions might be disallowed to the individual in whole or in part and might
result in such holder being taxed on an amount of income that exceeds the
amount of cash actually distributed to such holder over the life of the Trust.
The Trust intends to make all tax calculations relating to income and
allocations to Certificateholders on an aggregate basis. If the IRS were to
require that such calculations be made separately for each of the Student
Loans, the Trust might be required to incur additional expense but it is
believed that there would not be a material adverse effect on
Certificateholders.
Computation of Income. Taxable income of the Trust will be computed at the
Trust level and then allocated pro rata to the Certificateholders.
Consequently, the method of accounting for taxable income will be chosen by,
and any elections (such as those described above with respect to the market
discount rules) will be made by, the Trust rather than the Certificateholders.
The Trust intends, to the extent possible, to (i) have the taxable income of
the Trust computed under the accrual method of accounting and (ii) adopt a
calendar-year taxable year for computing the taxable income of the Trust. The
tax year of the Trust, however, is generally determined by reference to the
tax years of the Certificateholders. As a result, an owner of a Certificate
would be required to include its pro rata share of Trust income for a taxable
year as determined by the Trust in such Certificateholder's gross income for
its taxable year in which the taxable year of the Trust ends.
Determining the Bases of Trust Assets. The Trust will become a partnership
on the first date when Trust Certificates are held by more than one person. On
that date, each of the Certificateholders should be treated as having
purchased a pro rata share of the assets of the Trust (subject to the
liability for the Notes) followed immediately by a deemed contribution of such
assets to the newly formed partnership. The partnership's basis in
64
<PAGE>
the Trust's assets would therefore equal the sum of the Certificateholders'
bases in their respective interests in the Trust's assets immediately prior to
the deemed contribution to the partnership. To the extent that the fair market
value of the assets deemed contributed to the partnership varied from the
bases of such assets to the partnership, the allocation of taxable income to
the Certificateholders would be adjusted in accordance with Code Section
704(c) to account for such variations.
Under Code Section 708 a partnership is considered to terminate if 50% or
more of the partnership interests are sold or exchanged within a 12-month
period. If such a termination occurs, the partnership is deemed to distribute
its assets to its partners who are then deemed to recontribute those assets to
a new partnership. The new partnership would have a basis in those assets
equal to the basis of the contributing partners in their partnership
interests. If the Trust were characterized as a partnership and a sale of
Certificates terminated the partnership under Code Section 708, the
purchaser's basis in its ownership interest would automatically be reflected
in its pro rata portion of the Trust's assets.
Discount and Premium. To the extent that OID, if any, on the Student Loans
exceeds a de minimis amount, the Trust would have OID income. As indicated
above, a portion of such OID income may be allocated to the
Certificateholders.
Moreover, the purchase price paid by the Trust for the Student Loans may be
greater or less than the remaining principal balance of the Student Loans at
the time of purchase. If so, the Student Loans will have been acquired at a
premium or discount, as the case may be. (As indicated above, the Trust will
make this calculation on an aggregate basis, but might be required to
recompute it on a loan by loan basis.)
If the Trust acquires the Student Loans at a market discount or premium, the
Trust will elect to include any such discount in income currently as it
accrues over the life of the Student Loans or to offset any such premium
against interest income on the Student Loans. As indicated above, a portion of
such market discount income or premium deduction may be allocated to
Certificateholders.
Disposition of Certificates. Generally, capital gain or loss will be
recognized on a sale of Certificates in an amount equal to the difference
between the amount realized and the seller's tax basis in the Certificates
sold. To the extent that the Trust is characterized as a partnership, a
Certificateholder's tax basis in a Certificate will generally equal the
holder's cost increased by the holder's share of Trust income (net of
deductions) and decreased by any distributions received with respect to such
Certificate. In addition, both the tax basis in the Certificate and the amount
realized on a sale of a Certificate would include the holder's share of the
Notes and other liabilities of the Trust. A holder acquiring Certificates at
different prices may be required to maintain a single aggregate adjusted tax
basis in such Certificates, and, upon sale or other disposition of some of the
Certificates, allocate a pro rata portion of such aggregate tax basis to the
Certificates sold (rather than maintaining a separate tax basis in each
Certificate for purposes of computing gain or loss on a sale of that
Certificate).
Any gain on the sale of a Certificate attributable to the holder's share of
unrecognized accrued market discount on the Student Loans generally would be
treated as ordinary income to the holder and could give rise to special tax
reporting requirements. The Trust does not expect to have any other assets
that would give rise to such special reporting requirements.
If a Certificateholder is required to recognize an aggregate amount of
income (not including income attributable to disallowed itemized deductions
described above) over the life of the Certificates that exceeds the aggregate
cash distributions with respect thereto, such excess will generally give rise
to a capital loss upon the retirement of the Certificates.
Allocations Between Transferors and Transferees. In general, the Trust's
taxable income and losses will be determined monthly and the tax items for a
particular calendar month will be apportioned among the Certificateholders in
proportion to the principal amount of Certificates owned by them as of the
close of the last day of such month. As a result, a holder purchasing
Certificates may be allocated tax items (which will affect the tax liability
and tax basis of the holder) attributable to periods before the actual
transaction.
65
<PAGE>
The use of such a monthly convention may not be permitted by existing laws
and regulations. If a monthly convention is not allowed (or only applies to
transfers of less than all of the partner's interest), taxable income or
losses of the Trust might be reallocated among the Certificateholders. The
Seller and the Company are authorized to revise the Trust's method of
allocation between transferors and transferees to conform to a method
permitted by future laws, regulations or other IRS guidance.
Section 754 Election. In the event that a Certificateholder sells a
Certificate at a profit (or loss), the purchasing Certificateholder will have
a higher (or lower) basis in the Certificate than the selling
Certificateholder had. The tax basis of the Trust's assets will not be
adjusted to reflect that higher (or lower) basis unless the Trust were to file
an election under Section 754 of the Code. In order to avoid the
administrative complexities that would be involved in keeping accurate
accounting records, as well as potentially onerous information reporting
requirements, the Trust will not make such election. As a result,
Certificateholders might be allocated a greater or lesser amount of Trust
income than would be appropriate based on their own purchase price for
Certificates.
Administrative Matters. The Eligible Lender Trustee is required to keep or
cause to be kept complete and accurate books of the Trust. Such books will be
maintained for financial reporting and tax purposes on an accrual basis and
the taxable year of the Trust will be the calendar year. The Eligible Lender
Trustee will file a partnership information return (IRS Form 1065) with the
IRS for each taxable year of the Trust and will report each
Certificateholder's allocable share of items of Trust income and expense to
holders and the IRS on Schedule K-l. The Trust will provide the Schedule K-1
information to nominees that fail to provide the Trust with the information
statement described below and such nominees will be required to forward such
information to the beneficial owners of the Certificates. Generally, holders
must file tax returns that are consistent with the information returns filed
by the Trust or be subject to penalties unless the holder notifies the IRS of
all such inconsistencies.
Under Section 6031 of the Code, any person that holds Certificates as a
nominee at any time during a calendar year is required to furnish the Trust
with a statement containing certain information on the nominee, the beneficial
owners and the Certificates so held. Such information includes (i) the name,
address and taxpayer identification number of the nominee and (ii) as to each
beneficial owner (x) the name, address and identification number of such
person, (y) whether such person is a United States person, a tax-exempt entity
or a foreign government, an international organization, or any wholly owned
agency or instrumentality of either of the foregoing and (z) certain
information on Certificates that were held, bought or sold on behalf of such
person throughout the year. In addition, brokers and financial institutions
that hold Certificates through a nominee are required to furnish directly to
the Trust information as to themselves and their ownership of Certificates. A
clearing agency registered under Section 17A of the Exchange Act that holds
Certificates as a nominee is not required to furnish any such information
statement to the Trust. The information referred to above for any calendar
year must be furnished to the Trust on or before the following January 31.
Nominees, brokers and financial institutions that fail to provide the Trust
with the information described above may be subject to penalties.
The Company will be designated as the "tax matters partner" in the related
Trust Agreement and, as such, will be responsible for representing the
Certificateholders in any dispute with the IRS. The Code provides for
administrative examination of a partnership as if the partnership were a
separate and distinct taxpayer. Generally, the statute of limitations for
partnership items does not expire before three years after the date on which
the partnership information return is filed. Any adverse determination
following an audit of the return of the Trust by the appropriate taxing
authorities could result in an adjustment of the returns of the
Certificateholders, and, under certain circumstances, a Certificateholder may
be precluded from separately litigating a proposed adjustment to the items of
the Trust. An adjustment could also result in an audit of a
Certificateholder's returns and adjustments of items not related to the income
and losses of the Trust.
Tax Consequences to Foreign Certificateholders. It is not clear whether the
Trust would be considered to be engaged in a trade or business in the United
States for purposes of federal withholding taxes with respect to non-U.S.
persons because there is no clear authority dealing with that issue under
facts substantially similar to
66
<PAGE>
those described herein. Although it is not expected that the Trust would be
engaged in a trade or business in the United States for such purposes, the
Trust will withhold as if it were so engaged in order to protect the Trust
from possible adverse consequences of a failure to withhold. The Trust expects
to withhold on the portion of its taxable income that is allocable to foreign
Certificateholders pursuant to Section 1446 of the Code, as if such income
were effectively connected to a U.S. trade or business, at a rate of 35% for
foreign holders that are taxable as corporations and 39.6% for all other
foreign holders. Subsequent adoption of Treasury regulations or the issuance
of other administrative pronouncements may require the Trust to change its
withholding procedures. In determining a holder's withholding status, the
Trust may rely on IRS Form W-8, IRS Form W-9 or the holder's certification of
nonforeign status signed under penalties of perjury.
Each foreign holder might be required to file a U.S. individual or corporate
income tax return (including in the case of a corporation, the branch profits
tax) on its share of the Trust's income. Each foreign holder must obtain a
taxpayer identification number from the IRS and submit that number to the
Trust on Form W-8 in order to assure appropriate crediting of the taxes
withheld. A foreign holder generally would be entitled to file with the IRS a
claim for refund with respect to taxes withheld by the Trust, taking the
position that no taxes were due because the Trust was not engaged in a U.S.
trade or business. However, interest payments made (or accrued) to a
Certificateholder who is a foreign person generally will be considered
guaranteed payments to the extent such payments are determined without regard
to the income of the Trust. If these interest payments are properly
characterized as guaranteed payments, then the interest will not be considered
"portfolio interest." As a result, Certificateholders will be subject to
United States federal income tax and withholding tax at a rate of 30 percent,
unless reduced or eliminated pursuant to an applicable treaty. In such case, a
foreign holder would only be entitled to claim a refund for that portion of
the taxes in excess of the taxes that should be withheld with respect to the
guaranteed payments.
Backup Withholding. Distributions made on the Certificates and proceeds from
the sale of the Certificates will be subject to a "Backup" withholding tax of
31% if, in general, the Certificateholder fails to comply with certain
identification procedures, unless the holder is an exempt recipient under
applicable provisions of the Code.
THE FEDERAL TAX DISCUSSIONS SET FORTH ABOVE ARE INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A NOTEHOLDER'S OR
CERTIFICATEHOLDER'S PARTICULAR TAX SITUATION. PROSPECTIVE PURCHASERS SHOULD
CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF NOTES AND CERTIFICATES, INCLUDING THE
TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE
POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
STATE TAX CONSEQUENCES
The loan origination and servicing activities to be undertaken by the Master
Servicer will predominantly take place in Maryland.
Because of the variation in each state's tax laws based in whole or in part
upon income, it is impossible to predict tax consequences to holders of Notes
and Certificates in all of the state taxing jurisdictions in which they are
already subject to tax. Noteholders and Certificateholders are urged to
consult their own tax advisors with respect to state tax consequences arising
out of the purchase, ownership and disposition of Notes and Certificates.
The State of Maryland imposes an individual income tax and a corporate
income tax. This discussion is based upon present provisions of Maryland
statutes and the regulations promulgated thereunder, and applicable judicial
or ruling authority, all of which are subject to change, which change may be
retroactive. No ruling on any of the issues discussed below will be sought
from the Maryland Department of Revenue.
67
<PAGE>
TAX CONSEQUENCES WITH RESPECT TO THE NOTES
Tax Counsel will deliver an opinion to the Trust that, assuming the Notes
are treated as debt for federal income tax purposes, the Notes will be treated
as debt for Maryland individual income and corporate income tax purposes.
Accordingly, Noteholders not otherwise subject to taxation in Maryland should
not become subject to taxation in Maryland solely because of a holder's
ownership of Notes. However, a Noteholder already subject to Maryland's
individual income tax or corporate income tax could be required to pay
additional Maryland tax as a result of the holder's ownership or disposition
of Notes.
TAX CONSEQUENCES WITH RESPECT TO THE CERTIFICATES
Tax Counsel will deliver an opinion that, if the arrangement created by the
Trust Agreement is treated as a partnership, not taxable as a corporation, for
federal income tax purposes, the same treatment should also apply for Maryland
tax purposes. As a result, the partnership should not be subject to the
Maryland corporate income tax (if such taxes were applicable, however, they
could result in reduced distributions to Certificateholders). Moreover,
Certificateholders that are not otherwise subject to tax in Maryland should
not be subject to Maryland individual income or corporate income tax with
respect to income from the partnership, unless in the unlikely event the Trust
is considered to be carrying on business in Maryland.
ERISA CONSIDERATIONS
THE NOTES
Unless otherwise specified in the Prospectus Supplement, the Notes of each
series may be purchased by an employee benefit plan (as defined in Section
3(3) of ERISA) that is subject to the provisions of Title I of ERISA by a plan
described in Section 4975(e)(1) of the Code, including an individual
retirement account (a "Plan"). A fiduciary of the Plan must determine that the
purchase of a Note is consistent with its fiduciary duties under ERISA and
does not result in a nonexempt prohibited transaction as defined in Section
406 of ERISA or Section 4975 of the Code. Employee plans which are government
plans (as defined in Section 3(32) of ERISA) and certain church plans (as
defined in Section 3(33) of ERISA) are not subject to the fiduciary
responsibility or prohibited transaction provisions of ERISA or the Code.
THE CERTIFICATES
Unless otherwise specified in the Prospectus Supplement, the Certificates of
each series may not be purchased by a Plan or by any entity whose underlying
assets include plan assets by reason of a plan's investment in the entity
(each, a "Benefit Plan"). Such purchase of an equity interest in the Trust
will result in the assets of the Trust being deemed assets of a Benefit Plan
for the purposes of, ERISA and the Code, and certain transactions involving
the Trust may then be deemed to constitute prohibited transactions under
Section 406 of ERISA and Section 4975 of the Code. A violation of the
"prohibited transaction" rules may result in an excise tax or other penalties
and liabilities under ERISA and the Code for such persons.
By its acceptance of a Certificate, each Certificateholder will be deemed to
have represented and warranted that it is not a Benefit Plan.
If a given series of Certificates may be acquired by a Benefit Plan because
of the application of an exception contained in a regulation issued by the
United States Department of Labor (the "Plan Assets Regulation"), such
exception will be discussed in the related Prospectus Supplement.
* * *
A plan fiduciary considering the purchase of Securities of a given series
should consult its tax and/or legal advisors regarding whether the assets of
the related Trust would be considered plan assets the possibility of exemptive
relief from the prohibited transaction rules and other issues and their
potential consequences.
68
<PAGE>
PLAN OF DISTRIBUTION
On the terms and conditions set forth in an underwriting agreement with
respect to the Notes of a given series and an underwriting agreement with
respect to the Certificates of such series (collectively, the "Underwriting
Agreements"), the Seller will agree to cause the related Trust to sell to the
underwriters named therein and in the related Prospectus Supplement, and each
of such underwriters will severally agree to purchase, the principal amount of
each class of Notes and Certificates, as the case may be, of the related
series set forth therein and in the related Prospectus Supplement.
In each of the Underwriting Agreements with respect to any given series of
Securities, the several underwriters will agree, subject to the terms and
conditions set forth therein, to purchase all the Notes and Certificates, as
the case may be, described therein which are offered hereby and by the related
Prospectus Supplement if any of such Notes and Certificates, as the case may
be, are purchased.
Each Prospectus Supplement will either (i) set forth the price at which each
class of Notes and Certificates, as the case may be, being offered thereby
will be offered to the public and any concessions that may be offered to
certain dealers participating in the offering of such Notes and Certificates,
as the case may be or (ii) specify that the related Notes and Certificates, as
the case may be, are to be resold by the underwriters in negotiated
transactions at varying prices to be determined at the time of such sale.
After the initial public offering of any such Notes and Certificates, as the
case may be, such public offering prices and such concessions may be changed.
Each Underwriting Agreement will provide that the Seller will indemnify the
underwriters against certain civil liabilities, including liabilities under
the Securities Act, or contribute to payments the several underwriters may be
required to make in respect thereof.
Each Trust may, from time to time in the ordinary course of business, but is
under no obligation to, invest the funds in its Trust Accounts in Eligible
Investments acquired from such underwriters.
Pursuant to each of the Underwriting Agreements with respect to a given
series of Securities, the closing of the sale of any class of Securities
subject to either thereof will be conditioned on the closing of the sale of
all other such classes subject to either thereof.
The place and time of delivery for the Securities in respect of which this
Prospectus is delivered will be set forth in the related Prospectus
Supplement.
LEGAL MATTERS
Certain legal matters relating to the Securities of any series will be
passed upon for the related Trust, the Seller, the Master Servicer and the
Administrator by McGuire, Woods, Battle & Boothe, L.L.P., Richmond, Virginia,
and for the underwriters for such series by the law firm specified in the
related Prospectus Supplement. Certain federal and Maryland State income and
corporate income tax and other matters will be passed upon for each Trust by
McGuire, Woods, Battle & Boothe, L.L.P.
69
<PAGE>
INDEX OF PRINCIPAL TERMS
Set forth below is a list of the defined terms used in this Prospectus and
the pages on which the definitions of such terms may be found herein.
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
1992 Amendments.......................................................... 18
1993 Act................................................................. 10, 19
Act...................................................................... 16
Add-on Consolidation Loans............................................... 36
Additional Fundings...................................................... 50
Administration Agreement................................................. 13, 59
Administration Fee....................................................... 59
Administrator............................................................ 7
Administrator Default.................................................... 59
Applicable Trustee....................................................... 47
Assigned Assets.......................................................... 25
Assumed Agreements....................................................... 25
Assumed Obligations...................................................... 25
Assuming Entity.......................................................... 25
Benefit Plan............................................................. 70
Calculation Agent........................................................ 47
Cede..................................................................... 23
Certificate Balance...................................................... 8
Certificate Pool Factor.................................................. 40
Certificates............................................................. 1
Closing Date............................................................. 9, 49
Code..................................................................... 62
Collection Account....................................................... 51
Collection Period........................................................ 52
Commission............................................................... 2
Cutoff Date.............................................................. 9
Deferral Period.......................................................... 33
Definitive Certificates.................................................. 48
Definitive Notes......................................................... 48
Definitive Securities.................................................... 48
Department............................................................... 9
Depository............................................................... 40
Distribution Date........................................................ 41
DTC's Nominee............................................................ 23
Eligible Deposit Account................................................. 51
Eligible Institution..................................................... 51
Eligible Investments..................................................... 48
Eligible Lender Trustee.................................................. 1
ERISA.................................................................... 15
Event of Default......................................................... 42
Existing Borrowers....................................................... 10
Family contribution...................................................... 30
FDIC..................................................................... 23, 60
Federal Assistance....................................................... 31
Federal Consolidation Loan............................................... 36
Federal Consolidation Loans.............................................. 28
Federal Direct Consolidation Loan Program................................ 19
</TABLE>
70
<PAGE>
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Federal Guarantor....................................................... 9
Federal Origination Fee................................................. 19
Federal PLUS Loans...................................................... 28
Federal SLS Loans....................................................... 28
Federal Stafford Loans.................................................. 28
Federal Student Loans................................................... 9
Federal Supplemental Loans to Students.................................. 28
Federal Tax Counsel..................................................... 14
Federal Unsubsidized Stafford Loans..................................... 28
FFELP................................................................... 16
FIRREA.................................................................. 23, 60
Fixed Rate Securities................................................... 46
Floating Rate Securities................................................ 46
Forbearance Period...................................................... 34
Foreign person.......................................................... 64
Funding Period.......................................................... 9
Grace Period............................................................ 33
Guarantee Agreement..................................................... 16
Guarantee Agreements.................................................... 16
Guarantee Payments...................................................... 9
Guarantors.............................................................. 9
Indenture............................................................... 7
Indenture Trustee....................................................... 1
Index Shortfall Carryover............................................... 42
Indirect Participants................................................... 47
Insolvency Event........................................................ 57
Interest Rate........................................................... 8
Interest Reset Period................................................... 46
Interest Subsidy Payments............................................... 31
Investment Earnings..................................................... 51
IRS..................................................................... 62
Issuer.................................................................. 7
Loan Sale Agreement..................................................... 9
Loan Servicing Agreement................................................ 7, 12
Master Servicer......................................................... 7
Minimum Purchase Price.................................................. 56
Monthly Rebate Fee...................................................... 18
Note Pool Factor........................................................ 40
OID..................................................................... 63
OID Regulations......................................................... 63
Participants............................................................ 41
Pass-Through Rate....................................................... 8
Plan.................................................................... 70
Pool Balance............................................................ 40
Pool Factor............................................................. 40
Pre-Funding Account..................................................... 10
Pre-Funding Amount...................................................... 10
Private Guarantor....................................................... 9
Private Student Loans................................................... 9
Prospectus Supplement................................................... 1
Purchase Amount......................................................... 50
</TABLE>
71
<PAGE>
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Qualified Stated Interest............................................... 63
Qualified student....................................................... 29
Registration Statement.................................................. 2
Related Documents....................................................... 44
Reserve Account......................................................... 11, 54
Reserve Account Initial Deposit......................................... 11
Revolving Period........................................................ 10
Secretary............................................................... 22
Securities.............................................................. 1
Securities Act.......................................................... 2
Seller.................................................................. 1, 7
Servicer Default........................................................ 22, 56
Servicing Fee........................................................... 13, 53
Short-Term Note......................................................... 63
Signet.................................................................. 1, 7
Special Allowance Payments.............................................. 30
Spread.................................................................. 46
Spread Multiplier....................................................... 46
Student Loans........................................................... 1, 9
Subservicer............................................................. 12, 25
Subservicers............................................................ 52
Subservicing Agreement.................................................. 25
Tax Opinion............................................................. 26
Transfer and Servicing Agreements....................................... 49
Trust................................................................... 1, 7
Trust Accounts.......................................................... 51
Trust Agreement......................................................... 7
UCC..................................................................... 50
Underwriting Agreements................................................. 71
Unmet Need.............................................................. 30
</TABLE>
72
<PAGE>
- -------------------------------------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMA-
TION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS SUPPLEMENT
OR THE ACCOMPANYING PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REP-
RESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY
ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR
IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO
SO OR TO ANYONE WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEI-
THER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY
SALE SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT INFORMATION
HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THIS
PROSPECTUS SUPPLEMENT OR PROSPECTUS.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Summary of Terms.......................................................... S- 3
Risk Factors.............................................................. S-21
Formation of the Trust.................................................... S-26
The Financed Student Loan Pool............................................ S-28
Description of the Securities............................................. S-39
Description of the Transfer and Servicing Agreements...................... S-45
Federal Income Tax and State Tax Consequences............................. S-54
ERISA Considerations...................................................... S-55
Underwriting.............................................................. S-56
Legal Matters............................................................. S-57
Annex I--Global Clearance, Settlement and Tax Documentation Procedures.... S-58
Index of Principal Terms.................................................. S-62
PROSPECTUS
Available Information..................................................... 2
Incorporation of Certain Documents by Reference........................... 2
Summary of Terms.......................................................... 6
Risk Factors.............................................................. 14
Formation of the Trusts................................................... 21
Use of Proceeds........................................................... 22
The Seller, the Master Servicer and the Subservicers...................... 22
Assumption of Signet's Obligations........................................ 22
The Student Loan Pools.................................................... 23
Federal Family Education Loan Program..................................... 25
Private Student and Other Loan Programs................................... 36
Weighted Average Life of the Securities................................... 36
Pool Factors and Trading Information...................................... 37
Description of the Notes.................................................. 37
Description of the Certificates........................................... 42
Certain Information Regarding the Securities.............................. 43
Description of the Transfer and Servicing Agreements...................... 46
Certain Legal Aspects of the Student Loans................................ 57
Federal Income Tax Consequences........................................... 60
State Tax Consequences.................................................... 67
ERISA Considerations...................................................... 68
Plan of Distribution...................................................... 69
Legal Matters............................................................. 69
Index of Principal Terms.................................................. 70
</TABLE>
------------
UNTIL 90 DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT, ALL DEALERS EF-
FECTING TRANSACTIONS IN THE SECURITIES DESCRIBED IN THIS PROSPECTUS SUPPLE-
MENT, WHETHER OR NOT PARTICIPATING IN THE DISTRIBUTION, MAY BE REQUIRED TO DE-
LIVER THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER THIS PROSPECTUS SUPPLEMENT AND THE PRO-
SPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENT
OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$
SIGNET STUDENT LOAN TRUST 1996-A
$
Floating Rate Class A-1 Asset Backed Notes
$
Floating Rate Class A-2 Asset Backed Notes
$
Floating Rate Asset Backed Certificates
PROSPECTUS SUPPLEMENT
Signet Bank
Seller and Master Servicer
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Expenses in connection with the offering of the Notes and the
Certificates being registered herein are estimated as follows:
<TABLE>
<S> <C>
SEC registration fee.....................................$200,145
Legal fees and expenses.................................. 200,000
Accounting fees and expenses............................. 25,000
Blue Sky fees and expenses............................... 15,000
Rating agency fees....................................... 330,000
Eligible Lender Trustee fees and expenses................ 9,000
Indenture Trustee fees and expenses...................... 6,500
Printing expenses........................................ 50,000
Miscellaneous............................................ 20,000
Total...............................................$855,645
</TABLE>
Item 15. Indemnification of Directors and Officers.
Article 10 of the Virginia Stock Corporation Act and the Articles of
Incorporation of Signet provide for indemnification of the Banks's directors and
officers and limitation of liability in a variety of circumstances, which may
include liability under the Securities Act of 1933. In addition, the Bank
carries insurance on behalf of directors, officers, employees or agents which
may cover liabilities under the Securities Act of 1933.
Item 16. Exhibits.
<TABLE>
<S> <C>
1.1 Form of Underwriting Agreement for Notes
1.2 Form of Underwriting Agreement for Certificates
3.1 Articles of Incorporation of Signet Bank (Incorporated
by reference from a Registration Statement on Form S-11
No. 33-97660)
3.2 Bylaws of Signet Bank (Incorporated by reference from a
Registration Statement on Form S-11 No. 33-97660)
3.3 Form of Articles of Incorporation of Signet Student
Loan Corporation (the "Company")
3.4 Form of Bylaws of the Company
3.5 Form of Certificate of Trust for the Trusts (included
as an exhibit to Exhibit 4.2)
4.1 Form of Indenture between the Trust and the Indenture
Trustee (included as an exhibit thereto a form of Note)
4.2 Form of Trust Agreement among the Seller, the Company
and the Eligible Lender Trustee (included as an exhibit
thereto a form of Certificate)
</TABLE>
II-1
<PAGE>
<TABLE>
<S> <C>
4.3 Form of Note (included as an exhibit to Exhibit 4.1)
4.4 Form of Certificate (included as an exhibit to Exhibit 4.2)
5.1 Opinion of McGuire, Woods, Battle & Boothe, L.L.P. with respect to legality
8.1 Opinion of McGuire, Woods, Battle & Boothe, L.L.P. with respect to tax matters
23.1 Consent of McGuire, Woods, Battle & Boothe, L.L.P. (included as part of Exhibit 5.1 and 8.1)
24.1 Powers of Attorney (Previously filed)
25.1 Statement of Eligibility under the Trust Indenture Act of 1939 of the Indenture Trustee
99.1 Form of Loan Sale Agreement among the Seller, the Trust and the Eligible Lender Trustee
99.2 Form of Master Servicing Agreement among the Master Servicer, the Trust and the Eligible Lender
Trustee
99.3 Form of Administration Agreement among the Trust, the Indenture Trustee and Signet Bank, as
Administrator
</TABLE>
- -------------------------------------
* To be filed by amendment.
Item 17. Undertakings.
(a) As to Rule 415:
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made
of the securities registered hereby, a post-effective amendment to this
Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933, as amended;
(ii) to reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or the
most recent post-effective amendment hereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in this Registration Statement; and
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in this Registration
Statement or any material change to such information in this
Registration Statement;
provided, however, that the undertakings set forth in clauses (i) and (ii) above
do not apply if the information required to be included in a post-effective
amendment by those clauses is contained in periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange
Act of 1934, as amended, that are incorporated by reference in this Registration
Statement.
(2) That, for the purposes of determining any liability under the
Securities Act of 1933, as amended, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona bide offering thereof.
II-2
<PAGE>
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) As to documents subsequently filed that are incorporated by
reference:
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, as amended, each
filing of the Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934, as amended, that is incorporated
by reference in this Registration Statement shall be deemed to be a new
registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) The undersigned Registrant hereby undertakes to provide to the
Underwriter at the closing specified in the Underwriting Agreements Notes and
Certificates in such denominations and registered in such names are required by
the Underwriter to permit prompt delivery to each purchaser.
(d) As to indemnification:
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions described under Item 15, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is therefor unenforceable. In the event that a claim
for indemnification against such liabilities (other than payment by the
Registrant of expenses incurred or paid by a director, officer of controlling
person of such Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, such Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(e) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, as amended, the information omitted from the form of prospectus filed
as part of this Registration Statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the Securities
Act of 1933, as amended, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement or amendment to be signed
on its behalf by the undersigned, thereunto duly authorized in the City of
Richmond, State of Virginia, on December 10, 1996.
SIGNET BANK, as
originator of the Trust (Registrant)
By: /s/ Wallace B. Millner, III
-------------------------------------------
Wallace B. Millner, III
Vice Chairman and Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement or amendment has been signed below on December 10, 1996,
by the following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<S> <C>
/s/ Robert M. Freeman * Chairman of the Board
- ------------------------------------
Robert M. Freeman
/s/ Malcolm S. McDonald * President, Chief Executive Officer
- ------------------------------------ (Principal Executive Officer) and
Malcolm S. McDonald Director
/s/ Wallace B. Millner, III Vice Chairman and Chief
- ------------------------------------ Financial Officer (Principal
Wallace B. Millner, III Financial Officer)
/s/ T. Gaylon Layfield, III * Vice Chairman, Chief Operating
- ------------------------------------ Officer and Director
T. Gaylon Layfield, III
/s/ W. H. Catlett, Jr. * Executive Vice President and
- ------------------------------------ Controller (Principal Accounting
W. H. Catlett, Jr. Officer)
/s/ J. Henry Butta * Director
- ------------------------------------
J. Henry Butta
/s/ Norwood H. Davis, Jr. * Director
- ------------------------------------
Norwood H. Davis, Jr.
/s/ William C. DeRusha * Director
- ------------------------------------
William C. DeRusha
/s/ C. Stephenson Gillispie, Jr. * Director
- ------------------------------------
C. Stephenson Gillispie, Jr.
</TABLE>
II-4
<PAGE>
<TABLE>
<S> <C>
/s/ Bruce C. Gottwald * Director
- ------------------------------------
Bruce C. Gottwald
* Director
- ------------------------------------
William R. Harvey
/s/ Elizabeth G. Helm * Director
- ------------------------------------
Elizabeth G. Helm
/s/ Robert M. Heyssel * Director
- ------------------------------------
Robert M. Heyssel
/s/ Henry A. Rosenberg, Jr. * Director
- ------------------------------------
Henry A. Rosenberg, Jr.
/s/ Louis B. Thalheimer * Director
- ------------------------------------
Louis B. Thalheimer
</TABLE>
* By: /s/ Wallace B. Millner, III
----------------------------
Wallace B. Millner, III
Attorney-in-Fact
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description Page
- ------- ----------- ----
<C> <S> <C>
1.1 Form of Underwriting Agreement for Notes
1.2 Form of Underwriting Agreement for Certificates
3.1 Articles of Incorporation of Signet Bank *
3.2 Bylaws of Signet Bank *
3.3 Form of Articles of Incorporation of Signet Student Loan Corporation
(the "Company")
3.4 Bylaws of the Company
3.5 Form of Certificate of Trust for the Trusts (included
as an exhibit to Exhibit 4.2)
4.1 Form of Indenture between the Trust and the Indenture
Trustee (included as an exhibit thereto a form of Note)
4.2 Form of Trust Agreement among the Seller, Signet and the Eligible Lender
Trustee (included as an exhibit thereto a form of Certificate)
4.3 Form of Note (included as an exhibit to Exhibit 4.1)
4.4 Form of Certificate (included as an exhibit to Exhibit 4.2)
5.1 Opinion of McGuire, Woods, Battle & Boothe, L.L.P. with respect
to legality
8.1 Opinion of McGuire, Woods, Battle & Boothe, L.L.P. with respect
to tax matters
23.1 Consent of McGuire, Woods, Battle & Boothe, L.L.P. (included as
part of Exhibit 5.1 and 8.1)
24.1 Powers of Attorney (previously filed)
25.1 Statement of Eligibility under the Trust Indenture Act of 1939 of
the Indenture Trustee
99.1 Form of Loan Sale Agreement among the Seller, the Trust and the Eligible
Lender Trustee
99.2 Form of Master Servicing Agreement among the Master Servicer, the Trust and
the Eligible Lender Trustee
99.3 Form of Administration Agreement among the Trust, the Indenture Trustee
and Signet Bank, as Administrator
</TABLE>
- ---------------------
* Incorportate by reference from a Registration Statement on Form S-11
(No. 33-97660)
<PAGE>
EX1.1
B&W Draft
12/10/96
SIGNET STUDENT LOAN TRUST 1996-A
$[ ]
FLOATING RATE CLASS A-1 ASSET BACKED NOTES, AND
$[ ]
FLOATING RATE CLASS A-2 ASSET BACKED NOTES
NOTE UNDERWRITING AGREEMENT
---------------------------
[ ], 1996
CS First Boston Corporation
As Representative of the
several Underwriters
Park Avenue Plaza
New York, NY 10055
Dear Sirs:
1. Introductory. Signet Bank, a Virginia banking corporation
------------
("Signet" or the "Seller"), proposes to cause Signet Student Loan Trust 1996-A
(the "Trust") to issue and sell $[ ] principal amount of its Floating
Rate Class A-1 Asset Backed Notes and $[ ] principal amount of its
Floating Rate Class A-2 Asset Backed Notes (collectively, the "Notes") to the
underwriters named in Schedule I hereto (the "Underwriters") for whom you (the
"Representative") are acting as representative. The assets of the Trust
include, among other things, a pool of student loans (the "Initial Financed
Student Loans") and certain monies due thereunder on and after [ ],
1996 (the "Cutoff Date"). Such Initial Financed Student Loans will be sold to
the Eligible Lender Trustee (as defined below) on behalf of the Trust by the
Seller pursuant to a sale agreement, dated as of [ ], 1996 (the "Loan
Sale Agreement") among the Trust, the Seller and The First National Bank of
Chicago, a national banking association, as eligible lender trustee (the
"Eligible Lender Trustee"). Under certain circumstances after the Closing Date
(as defined below), the Eligible Lender Trustee, acting on behalf of the Trust,
may acquire additional student loans ("Additional Acquired Student Loans",
together with the Initial Financed Student Loans, the "Financed Student Loans").
The Financed Student Loans are to be serviced by Signet as master servicer (the
"Master Servicer") pursuant to a master servicing
<PAGE>
agreement, dated as of [ ], 1996 (the "Master Servicing Agreement"),
among the Trust, the Master Servicer and the Eligible Lender Trustee. The Notes
will be issued pursuant to an Indenture to be dated as of [ ], 1996 (as
amended and supplemented from time to time, the "Indenture"), between the Trust
and The Bank of New York, a New York banking corporation, as indenture trustee
(the "Indenture Trustee"). The Certificates will be issued pursuant to a trust
agreement to be dated as of [ ], 1996 (the "Trust Agreement"), among
the Seller, as Depositor, Signet Student Loan Corporation, a Virginia
corporation (the "Company"), and the Eligible Lender Trustee. An individual
residing in Delaware will be appointed as a co-trustee under the Trust Agreement
pursuant to a co-trustee agreement, dated as of [ ], 1996 (the "Co-
Trustee Agreement"), between such individual and the Eligible Lender Trustee.
Simultaneously with the issuance and sale of the Notes as contemplated
herein, the Trust will issue $[ ] principal amount of its Floating Rate
Asset Backed Certificates (the "Certificates"). The Certificates will be sold
pursuant to an underwriting agreement dated the date hereof (the "Certificate
Underwriting Agreement") between the Seller and the Underwriters. The Notes and
the Certificates are hereinafter referred to collectively as the "Securities."
Capitalized terms used and not otherwise defined herein shall have the
meanings given to them in Appendix A hereto.
2. Representations and Warranties of the Seller. (a) The Seller
--------------------------------------------
represents and warrants to and agrees with the several Underwriters that:
(i) The Seller meets the requirements for use of Form S-3 under
the Securities Act of 1933, as amended (the "Act"), and has filed with the
Securities and Exchange Commission (the "Commission") a registration
statement (Registration No. 33-94846) on such Form, including a related
preliminary basic prospectus and a preliminary prospectus supplement, for
the registration under the Act of the offering and sale of the Securities.
The Seller may have filed one or more amendments thereto, each of which
amendments has previously been furnished to the Representative. The Seller
will next file with the Commission (i) prior to the effectiveness of such
registration statement, an amendment thereto (including the form of final
basic prospectus and the form of final prospectus supplement relating to
the Securities), (ii) after effectiveness of such registration statement, a
final basic prospectus and a final prospectus supplement relating to the
Securities in accordance with Rules 430A and 424(b)(1) or (4) under the
Act, or (iii) a final basic
2
<PAGE>
prospectus and a final prospectus supplement relating to the Securities in
accordance with Rules 415 and 424(b)(2) or (5).
In the case of clauses (ii) and (iii), the Seller has included in such
registration statement, as amended at the Effective Date, all information
(other than Rule 430A Information) required by the Act and the rules
thereunder to be included in the Prospectus with respect to the Notes and
the offering thereof. As filed, such amendment and form of final
prospectus supplement, or such final prospectus supplement, shall include
all Rule 430A Information, together with all other such required
information, with respect to the Notes and the offering thereof and, except
to the extent that the Representative shall agree in writing to a
modification, shall be in all substantive respects in the form furnished to
the Representative prior to the Execution Time or, to the extent not
completed at the Execution Time, shall contain only such specific
additional information and other changes (beyond that contained in the
latest preliminary basic prospectus and preliminary prospectus supplement,
if any, that have previously been furnished to the Representative) as the
Seller has advised the Representative, prior to the Execution Time, will be
included or made therein. If the Registration Statement contains the
undertaking specified by Regulation S-K Item 512(a), the Registration
Statement, at the Execution Time, meets the requirements set forth in Rule
415(a)(1)(x).
For purposes of this Agreement, "Effective Time" means the date and
time as of which such registration statement, or the most recent post-
effective amendment thereto, if any, was declared effective by the
Commission, and "Effective Date" means the date of the Effective Time.
"Execution Time" shall mean the date and time that this Agreement is
executed and delivered by the parties hereto. Such registration statement,
as amended at the Effective Time, including all information deemed to be a
part of such registration statement as of the Effective Time pursuant to
Rule 430A(b) under the Act, and including the exhibits thereto and any
material incorporated by reference therein, is hereinafter referred to as
the "Registration Statement". "Basic Prospectus" shall mean any prospectus
referred to above contained in the Registration Statement at the Effective
Date, including any Preliminary Prospectus Supplement. "Preliminary
Prospectus Supplement" shall mean the preliminary prospectus supplement to
the Basic Prospectus which describes the Notes and the offering thereof and
is used prior to filing of the Prospectus. "Prospectus" shall mean the
prospectus supplement relating to the Securities that is first filed
pursuant to Rule 424(b) after the Execution Time, together with the Basic
3
<PAGE>
Prospectus or, if no filing pursuant to Rule 424(b) is required, shall mean
the prospectus supplement relating to the Notes, including the Basic
Prospectus, included in the Registration Statement at the Effective Date.
"Rule 430A Information" means information with respect to the Notes and the
offering of the Securities permitted to be omitted from the Registration
Statement when it becomes effective pursuant to Rule 430A. "Rule 415",
"Rule 424", "Rule 430A" and "Regulation S-K" refer to such rules or
regulations under the Act. Any reference herein to the Registration
Statement, a Preliminary Prospectus Supplement or the Prospectus shall be
deemed to refer to and include the documents incorporated by reference
therein pursuant to Item 12 of Form S-3 which were filed under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), on or
before the Effective Date of the Registration Statement or the issue date
of the Basic Prospectus, such Preliminary Prospectus Supplement or the
Prospectus, as the case may be; and any reference herein to the terms
"amend", "amendment" or "supplement" with respect to the Registration
Statement, the Basic Prospectus, any Preliminary Prospectus Supplement or
the Prospectus shall be deemed to refer to and include the filing of any
document under the Exchange Act after the Effective Date of the
Registration Statement, or the issue date of the Basic Prospectus, to any
Preliminary Prospectus Supplement or the Prospectus, as the case may be,
deemed to be incorporated therein by reference.
(ii) On the Effective Date and on the date of this Agreement, the
Registration Statement did or will, and, when the Prospectus is first filed
(if required) in accordance with Rule 424(b) and on the Closing Date (as
defined below), the Prospectus (and any supplements thereto) will, comply
in all material respects with the applicable requirements of the Act, the
Exchange Act and the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"), and the respective rules and regulations of the Commission
thereunder (the "Rules and Regulations"); on the Effective Date, the
Registration Statement did not or will not contain any untrue statement of
a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein not
misleading; and, on the Effective Date, the Prospectus (together with any
supplement thereto) will not, include any untrue statement of a material
fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that the Seller makes no
-------- -------
representations or warranties as to the information contained in or omitted
from the Registration Statement or the
4
<PAGE>
Prospectus (or any supplement thereto) in reliance upon and in conformity
with information furnished in writing to the Seller by any Underwriter
through the Representative specifically for use in the Registration
Statement or the Prospectus (or any supplement thereto).
(iii) The Seller's representations and warranties in the Loan
Sale Agreement, the Administration Agreement and the Trust Agreement will
be true and correct in all material respects as of the Closing Date and
each such representation and warranty will be true and correct in all
material respects on each date thereafter if and to the extent that on such
date such representation and warranty is made again by the Seller pursuant
to the terms of the related agreement.
(iv) This Agreement has been duly authorized, executed and
delivered by the Seller. The execution, delivery and performance of this
Agreement and the issuance and sale of the Notes and compliance with the
terms and provisions hereof will not result in a breach or violation of any
of the terms and provisions of, or constitute a default under, any
agreement or instrument to which the Seller is a party or by which the
Seller is bound or to which any of the properties of the Seller is subject
which could reasonably be expected to have a material adverse effect on the
transactions contemplated herein. The Seller has full power (corporate and
other) and authority to cause the Trust to authorize, issue and sell the
Notes, all as contemplated by this Agreement.
(v) Other than as contemplated by this Agreement or as disclosed
in the Prospectus, there is no broker, finder or other party that is
entitled to receive from the Seller or any of its affiliates or an
underwriter any brokerage or finder's fee or other fee or commission as a
result of any of the transactions contemplated by this Agreement.
(vi) All legal or governmental proceedings, contracts or
documents of a character required to be described in the Registration
Statement or the Prospectus or to be filed as an exhibit to the
Registration Statement have been so described or filed as required.
(vii) The Seller's assignment and delivery of the Initial
Financed Student Loans to the Eligible Lender Trustee on behalf of the
Trust as of the Closing Date and of the Additional Acquired Student Loans
from time to time
5
<PAGE>
thereafter pursuant to the Loan Sale Agreement will vest in the Eligible
Lender Trustee on behalf of the Trust all the Seller's right, title and
interest therein, subject to no prior lien, mortgage, security interest,
pledge, adverse claim, charge or other encumbrance.
(viii) The Trust's assignment of the Financed Student Loans to
the Indenture Trustee pursuant to the Indenture will vest in the Indenture
Trustee, for the benefit of the Noteholders, a first priority perfected
security interest therein, subject to no prior lien, mortgage, security
interest, pledge, adverse claim, charge or other encumbrance.
(b) The Seller hereby agrees with the Underwriters that, for all
purposes of this Agreement, the only information furnished to the Seller by the
Underwriters through the Representative specifically for use in the Registration
Statement, the Prospectus, or any amendment or supplement thereto, or any
related preliminary prospectus, are the statements with respect to stabilization
on the second page of, and the statements under the caption "Underwriting" in,
the preliminary prospectus and the Prospectus.
3. Purchase, Sale and Delivery of the Notes. On the basis of the
----------------------------------------
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Seller agrees to cause the Trust to
sell to the Underwriters, and the Underwriters agree, severally and not jointly,
to purchase from the Trust, the respective principal amounts of the Class A-1
Notes set forth opposite the names of the Underwriters in Schedule I hereto at a
purchase price of [ ]% of the principal amount thereof and the respective
principal amounts of the Class A-2 Notes set forth opposite the names of the
Underwriters in Schedule I hereto at a purchase price of [ ]% of the principal
amount thereof.
The Seller will deliver the Notes to the Representative for the
respective accounts of the Underwriters, against payment of the purchase price
to or upon the order of the Seller by wire transfer or check in Federal (same
day) Funds, at the office of Brown & Wood llp, One World Trade Center, New York,
New York 10048-0557, at 10:00 a.m., New York time, on [ ], 1996, or at
such other time not later than seven full business days thereafter as the
Representative and the Seller determine, such time being herein referred to as
the "Closing Date". The Notes to be so delivered will be initially represented
by one or more Notes registered in the name of Cede & Co., the nominee of The
Depository Trust Company ("DTC"). The interests of beneficial owners of the
Notes will be represented by book entries on the records of DTC and
participating members thereof. Definitive
6
<PAGE>
Notes will be available only under the limited circumstances specified in the
Indenture.
4. Offering by the Underwriters. It is understood that, after the
----------------------------
Registration Statement becomes effective, the several Underwriters propose to
offer the Notes for sale to the public (which may include selected dealers) as
set forth in the Prospectus.
5. Covenants of the Seller. The Seller covenants and agrees with the
-----------------------
several Underwriters that:
(a) The Seller will use its best efforts to cause the Registration
Statement, and any amendment thereto, if not effective at the Execution Time, to
become effective. Prior to the termination of the offering of the Notes, the
Seller will not file any amendment of the Registration Statement or supplement
to the Prospectus unless the Seller has furnished the Representative a copy for
its review prior to filing and will not file any such proposed amendment or
supplement to which the Representative reasonably objects. Subject to the
foregoing sentence, if the Registration Statement has become or becomes
effective pursuant to Rule 430A, or filing of the Prospectus is otherwise
required under Rule 424(b), the Seller will file the Prospectus, properly
completed, and any supplement thereto, with the Commission pursuant to and in
accordance with the applicable paragraph of Rule 424(b) within the time period
prescribed and will provide evidence satisfactory to the Representative of such
timely filing.
(b) The Seller will advise the Representative promptly of any
proposal to amend or supplement the registration statement as filed or the
related prospectus or the Registration Statement or the Prospectus and will not
effect such amendment or supplementation without the consent of the
Representative prior to the Closing Date, and thereafter will not effect any
such amendment or supplementation to which the Representative reasonably
objects; the Seller will also advise the Representative promptly of any request
by the Commission for any amendment of or supplement to the Registration
Statement or the Prospectus or for any additional information; and the Seller
will also advise the Representative promptly of the effectiveness of the
Registration Statement and of any amendment or supplement to the Registration
Statement or the Prospectus and of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or the
institution or threat of any proceeding for that purpose and the Seller will use
its best efforts to prevent the issuance of any such stop order and to obtain as
soon as possible the lifting of any issued stop order.
(c) If, at any time when a prospectus relating to the Notes is
required to be delivered under the Act, any event occurs
7
<PAGE>
as a result of which the Prospectus as then amended or supplemented would
contain an untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, or if it is necessary at any time to
amend the Registration Statement or supplement the Prospectus to comply with the
Act or the Exchange Act, the Seller promptly will prepare and file, or cause to
be prepared and filed, with the Commission an amendment or supplement which will
correct such statement or omission, or an amendment or supplement which will
effect such compliance. Neither the consent of the Representative to, nor the
delivery of the several Underwriters of, any such amendment or supplement shall
constitute a waiver of any of the conditions set forth in Section 6.
(d) As soon as practicable, but not later than the Availability Date
(as defined below), the Seller will cause the Trust to make generally available
to Noteholders an earnings statement of the Trust covering a period of at least
twelve months beginning after the Effective Date which will satisfy the
provisions of Section 11(a) of the Act and Rule 158 of the applicable Rules and
Regulations thereunder. For the purpose of the preceding sentence,
"Availability Date" means the 45th day after the end of the fourth fiscal
quarter following the fiscal quarter that includes the original effective date
of the Registration Statement, except that, if such fourth fiscal quarter is the
last quarter of the Trust's fiscal year, "Availability Date" means the 90th day
after the end of such fourth fiscal quarter.
(e) The Seller will furnish to the Representative copies of the
Registration Statement (two of which will be signed and will include all
exhibits), each related preliminary prospectus, the Prospectus and all
amendments and supplements to such documents, in each case as soon as available
and in such quantities as the Representative reasonably requests.
(f) The Seller will arrange for the qualification of the Notes for
sale under the laws of such states as the several Underwriters may require and
will continue such qualifications in effect so long as required for the
distribution.
(g) For a period from the date of this Agreement until the retirement
of the Notes, or until such time as the several Underwriters shall cease to
maintain a secondary market in the Notes, whichever occurs first, the Seller
will deliver to the Representative the annual statements of compliance and the
annual independent certified public accountants' reports furnished to the
Indenture Trustee or the Eligible Lender Trustee pursuant to the Master
Servicing Agreement, as soon as such statements and reports are furnished to the
Indenture Trustee or the Eligible Lender Trustee.
8
<PAGE>
(h) So long as any of the Notes are outstanding, the Seller will
furnish to the Representative (i) as soon as practicable after the end of the
fiscal year all documents required to be distributed to Noteholders or filed
with the Commission on behalf of the Trust pursuant to the Exchange Act, or any
order of the Commission thereunder and (ii) from time to time, any other
information concerning the Seller as the Representative may reasonably request.
(i) On or before the Closing Date, the Seller shall mark its
accounting and other records, if any, relating to the Initial Financed Student
Loans and shall cause the Master Servicer to mark the computer records of the
Master Servicer relating to the Initial Financed Student Loans to show the
absolute ownership by the Eligible Lender Trustee on behalf of the Trust of the
Initial Financed Student Loans, and from and after the Closing Date the Seller
will take, and cause the Master Servicer to take, such actions with regard to
any Additional Acquired Student Loans at the time of the conveyance thereof to
the Trust and neither the Seller nor the Master Servicer shall take any action
inconsistent with the ownership by the Eligible Lender Trustee on behalf of the
Trust of the Financed Student Loans, other than as permitted by the Loan Sale
Agreement or the Master Servicing Agreement.
(j) To the extent, if any, that the rating provided with respect to
the Notes by the rating agency or agencies that initially rate the Notes is
conditional upon the furnishing of documents or the taking of any other actions
by the Seller agreed upon on or prior to the Closing Date, the Seller shall
furnish or shall cause to be furnished such documents and take any such other
actions. A copy of any such document shall be provided to the Representative at
the time it is delivered to the rating agencies.
(k) For the period beginning on the date of this Agreement and ending
90 days after the Closing Date, none of the Seller and any trust originated,
directly or indirectly, by the Seller will, without the prior written consent of
the Representative, offer to sell or sell notes (other than the Notes)
collateralized by, or certificates (other than the Certificates) evidencing an
ownership interest in, student loans; provided, however, that this shall not be
-------- -------
construed to prevent the sale of student loans by the Seller.
(l) The Seller will apply the net proceeds of the offering and the
sale of the Notes and the Certificates that it receives in the manner set forth
in the Prospectus under the caption "Use of Proceeds".
(m) The Seller will pay all expenses incident to the performance of
its obligations under this Agreement, including
9
<PAGE>
(i) the printing and filing of the documents (including the Registration
Statement and Prospectus), (ii) the preparation, issuance and delivery of the
Notes to the Representative, (iii) the fees and disbursements of the Seller's
counsel and accountants, (iv) the qualification of the Notes under securities
laws in accordance with the provisions of Section 5(f), including filing fees
and the fees and disbursements of counsel for the Representative in connection
therewith and in connection with the preparation of any blue sky or legal
investment survey, if any is requested, (v) the printing and delivery to the
Representative of copies of the Registration Statement as originally filed and
of each amendment thereto, (vi) the printing and delivery to the Representative
of copies of any blue sky or legal investment survey prepared in connection with
the Notes, (vii) any fees charged by rating agencies for the rating of the Notes
and (viii) the fees and expenses, if any, incurred with respect to any filing
with the National Association of Securities Dealers, Inc.
6. Conditions of the Obligations of the Underwriters. The
-------------------------------------------------
obligations of the several Underwriters to purchase and pay for the Notes will
be subject to the accuracy of the representations and warranties on the part of
the Seller herein, to the accuracy of the written statements of officers of the
Seller made pursuant to the provisions of this Section, to the performance by
the Seller of its obligations hereunder and to the following additional
conditions precedent:
(a) If the Effective Time is not prior to the execution and delivery
of this Agreement, the Effective Time shall have occurred not later than 6:00
p.m. New York City time on the date of this Agreement or such later time or date
as shall have been consented to by the Representative.
(b) If the Effective Time is prior to the execution and delivery of
this Agreement, the Prospectus and any supplements thereto shall have been filed
with the Commission in accordance with the Rules and Regulations and Section
5(a) hereof. Prior to the Closing Date, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or, to the knowledge of
the Seller or the Representative, shall be contemplated by the Commission.
(c) On or prior to the Closing Date, the Representative shall have
received a letter dated the Closing Date, in form and substance satisfactory to
the Representative and its counsel, from [ ] with respect to certain
agreed-upon procedures, substantially in the form of the drafts to which the
Representative has previously agreed and otherwise in form and substance
reasonably satisfactory to the Representative and its counsel.
10
<PAGE>
(d) Subsequent to the execution and delivery of this Agreement, there
shall not have occurred (i) any change, or any development involving a
prospective change, in or affecting particularly the business or properties of
the Trust, the Seller, the Master Servicer or the Company which, in the judgment
of the Representative, materially impairs the investment quality of the Notes or
makes it impractical or inadvisable to market the Notes; (ii) any downgrading in
the rating of any debt securities of the Seller or the Master Servicer by any
"nationally recognized statistical rating organization" (as defined for purposes
of Rule 436(g) under the Act), or any public announcement that any such
organization has under surveillance or review its rating of any debt securities
of the Seller or the Master Servicer (other than an announcement with positive
implications of a possible upgrading, and no implication of a possible
downgrading, of such rating); (iii) any suspension or limitation of trading in
securities generally on the New York Stock Exchange, or any setting of minimum
prices for trading on such exchange; (iv) any suspension of trading of any
securities of the Seller or the Master Servicer on any exchange or in the over-
the-counter market; (v) any banking moratorium declared by Federal or New York
authorities; or (vi) any outbreak or escalation of major hostilities in which
the United States is involved, any declaration of war by Congress, or any other
substantial national or international calamity or emergency if, in the judgment
of the Representative, the effect of any such outbreak, escalation, declaration,
calamity or emergency makes it impractical or inadvisable to proceed with
completion of the sale of and payment for the Notes.
(e) The Representative shall have received an opinion of [
], Esq., General Counsel of Signet Bank, as counsel for the Seller, dated the
Closing Date, in the form attached hereto as Exhibit A, or as is otherwise
satisfactory in form and substance to the Representative and its counsel.
(f) The Representative shall have received an opinion of McGuire,
Woods, Battle & Boothe, L.L.P., counsel to the Seller and the Trust, dated the
Closing Date, in the form attached hereto as Exhibit B, or as is otherwise
satisfactory in form and substance to the Representative and its counsel.
(g) The Representative shall have received an opinion addressed to
the several Underwriters of McGuire, Woods, Battle & Boothe, L.L.P., in its
capacity as counsel for the Seller and the Trust, dated the Closing Date, in
form and substance satisfactory to the Representative and its counsel, to the
effect that the statements in the Prospectus under the headings "Certain Federal
Income Tax Consequences", "Certain State Tax Consequences" and "ERISA
Considerations", to the extent that they constitute statements of matters of law
or legal conclusions with respect thereto, have been prepared or reviewed by
such counsel and
11
<PAGE>
accurately describe the material consequences to holders of the Notes under
Virginia law and ERISA.
(h) The Representative shall have received an opinion addressed to the
several Underwriters of McGuire, Woods, Battle & Boothe, L.L.P., as counsel for
the Seller, the Company and the Trust, dated the Closing Date, in form and
substance satisfactory to the Representative and its counsel, concerning (i) the
true sale of the Financed Student Loans from the Seller to the Trust and (ii)
the nonconsolidation of the Company with the Seller and the Seller's other
affiliates in the event of a bankruptcy or insolvency of the Seller or the
Seller's other affiliates.
(i) The Representative shall have received an opinion of Richards,
Layton & Finger, special Delaware counsel for the Trust, dated the Closing Date,
in form and substance satisfactory to the Representative and its counsel, to the
effect that:
(i) The Trust Agreement constitutes the valid and binding
obligation of the Eligible Lender Trustee, the Delaware Trustee, the
Depositor and the Company, enforceable against the Eligible Lender Trustee,
the Delaware Trustee, the Depositor and the Company, in accordance with its
terms subject to (i) applicable bankruptcy, insolvency, moratorium,
receivership, reorganization, fraudulent conveyance and similar laws
relating to and affecting the rights and remedies of creditors generally,
and (ii) principles of equity (regardless of whether considered and applied
in a proceeding in equity or at law).
(ii) The Trust has been duly formed and is validly existing as
a business trust under the Business Trust Statute. The Trust Agreement
authorizes the Trust to execute and deliver the Trust Agreement, the
Indenture, the Master Servicing Agreement, the Loan Sale Agreement and the
Administration Agreement to issue the Certificates and the Notes and to
grant the Trust Estate to the Indenture Trustee as security for the Notes.
(iii) Assuming that the Certificates have been duly executed
and issued by the Trust and duly authenticated by the Eligible Lender
Trustee in accordance with the Trust Agreement and delivered to and paid
for by the purchaser thereof pursuant to the Certificate Underwriting
Agreement, the Certificates have been validly issued and are entitled to
the benefits of the Trust Agreement.
(iv) Except for the timely filing in the future of continuation
statements with respect to the financing statements, no other filing is
required in the State of
12
<PAGE>
Delaware in order to make effective the lien of the Indenture. Insofar as
Article 9 of the Delaware Uniform Commercial Code, 6 Del. C. (S)9-101 et
--
seq. (the "UCC"), applies (without regard to conflict of laws principles)
---
and assuming that the security interest in that portion of the Collateral
that consists of general intangibles and accounts, as defined under the
UCC, has been duly created and has attached, the Indenture Trustee has a
perfected security interest in such general intangibles and accounts and
the proceeds thereof and, assuming that the UCC search accurately lists all
of the financing statements filed naming the Trust as debtor and describing
any portion of the Collateral consisting of such general intangibles and
accounts and the proceeds thereof, such security interest of the Indenture
Trustee will be prior to the security interest of all other creditors of
the Trust whose security interests are perfected solely by filing UCC
financing statements in the State of Delaware, excluding purchase money
security interests under (S)9-312 of the UCC and temporarily perfected
security interests in proceeds under (S) 9-306 of the UCC.
(v) Under (S)3805(b) of the Business Trust Statute, no
creditor of any Certificateholder shall have any right to obtain possession
of, or otherwise exercise legal or equitable remedies with respect to, the
property of the Trust except in accordance with the terms of the Trust
Agreement.
(vi) Under (S) 3805(c) of the Business Trust Statute, and
assuming that the Loan Sale Agreement conveys good title to the Initial
Financed Student Loans to the Trust as a true sale and not as a security
arrangement, the Trust rather than the Certificateholders is the owner of
the Initial Financed Student Loans.
(vii) The Delaware Trustee is not required to hold legal title
to the Trust Estate in order for the Trust to qualify as a business trust
under the Act.
(viii) The execution and delivery by the Eligible Lender
Trustee or the Delaware Trustee of the Trust Agreement and, on behalf of
the Trust, of the Trust Agreement, the Indenture, the Master Servicing
Agreement, the Loan Sale Agreement and the Administration Agreement do not
require any consent, approval or authorization of, or any registration of
filing with, any governmental authority of the State of Delaware, except
for the filing of the Certificate of Trust with the Secretary of State.
(ix) Neither the consummation by the Eligible Lender Trustee or
the Delaware Trustee of the transactions contemplated in the Trust
Agreement or, on behalf of the
13
<PAGE>
Trust, the transactions contemplated in the Trust Agreement, the Indenture,
the Master Servicing Agreement, the Loan Sale Agreement and the
Administration Agreement nor the fulfillment of the terms thereof by the
Eligible Lender Trustee or the Delaware Trustee will conflict with or
result in a breach or violation of any law of the State of Delaware.
(j) The Representative shall have received an opinion of The Law
Department of The First National Bank of Chicago, counsel to the Eligible Lender
Trustee, dated the Closing Date and satisfactory in form and substance to the
Representative and its counsel, to the effect that:
(i) The Eligible Lender Trustee is a national banking
association duly organized and validly existing under the laws of the
United States.
(ii) The Eligible Lender Trustee has the full corporate trust
power to accept the office of eligible lender trustee under the Trust
Agreement and to enter into and perform its obligations under the Trust
Agreement, the Master Servicing Agreement, the Loan Sale Agreement and the
Co-Trustee Agreement and, on behalf of the Trust, under the Indenture, the
Master Servicing Agreement, the Loan Sale Agreement, the Administration
Agreement and the Guarantee Agreements.
(iii) The execution and delivery of the Trust Agreement, the
Master Servicing Agreement, the Loan Sale Agreement and the Co-Trustee
Agreement by the Eligible Lender Trustee and the Indenture, the Master
Servicing Agreement, the Loan Sale Agreement, the Administration Agreement
and the Guarantee Agreements by the Eligible Lender Trustee on behalf of
the Trust, and the performance by the Eligible Lender Trustee of its
obligations under the Trust Agreement, the Master Servicing Agreement, the
Loan Sale Agreement and the Co-Trustee Agreement, as well as the
performance by the Eligible Lender Trustee of its obligations on behalf of
the Trust under the Indenture, the Master Servicing Agreement, the Loan
Sale Agreement, the Administration Agreement and the Guarantee Agreements
have been duly authorized by all necessary action of the Eligible Lender
Trustee and each has been duly executed and delivered by the Eligible
Lender Trustee.
(iv) The Trust Agreement, the Master Servicing Agreement, the
Loan Sale Agreement and the Co-Trustee Agreement constitute valid and
binding obligations of the Eligible Lender Trustee enforceable against the
Eligible Lender Trustee in accordance with their terms,
14
<PAGE>
and the Indenture, the Master Servicing Agreement, the Loan Sale Agreement,
the Administration Agreement and the Guarantee Agreements constitute the
valid and binding obligations of the Trust enforceable against the Trust in
accordance with their terms, except as the enforceability thereof may be
(a) limited by bankruptcy, insolvency, reorganization, moratorium,
liquidation or other similar laws affecting the rights of creditors
generally, and (b) subject to general principals of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at
law).
(v) The execution and delivery by the Eligible Lender Trustee
of the Trust Agreement, the Master Servicing Agreement, the Loan Sale
Agreement and the Co-Trustee Agreement and by the Eligible Lender Trustee
on behalf of the Trust of the Indenture, the Master Servicing Agreement,
the Loan Sale Agreement, the Administration Agreement and the Guarantee
Agreements do not require any consent, approval or authorization of, or any
registration or filing with, any applicable governmental authority which
has not been obtained or done.
(vi) Each of the Certificates has been duly executed and
delivered by the Eligible Lender Trustee, as eligible lender trustee and
authenticating agent. Each of the Notes has been duly executed and
delivered by the Eligible Lender Trustee on behalf of the Trust.
(vii) Neither the consummation by the Eligible Lender Trustee
of the transactions contemplated in the Trust Agreement, the Master
Servicing Agreement, the Loan Sale Agreement or the Co-Trustee Agreement,
the consummation by the Trust of the transactions contemplated in the
Indenture or the Administration Agreement nor the fulfillment of the terms
thereof by the Eligible Lender Trustee or the Trust, as the case may be,
will conflict with, result in a breach or violation of, or constitute a
default under any law or the Articles of Association, By-Laws or other
organizational documents of the Eligible Lender Trustee or the terms of any
indenture or other agreement or instrument known to such counsel and to
which the Eligible Lender Trustee or any of its subsidiaries is a party or
is bound or any judgment, order or decree known to us to be applicable to
the Eligible Lender Trustee or any of its subsidiaries, of any court,
regulatory body, administrative agency, governmental body or arbitrator
having jurisdiction over the Eligible Lender Trustee or any of its
subsidiaries.
15
<PAGE>
(viii) There are no actions, suits or proceedings pending or,
to the best of such counsel's knowledge after due inquiry, threatened
against the Eligible Lender Trustee (as eligible lender trustee under the
Trust Agreement or in its individual capacity) before or by any
governmental authority that might materially and adversely affect the
performance by the Eligible Lender Trustee of its obligations under, or the
validity or enforceability of, the Trust Agreement, the Master Servicing
Agreement, the Loan Sale Agreement or the Co-Trustee Agreement.
(ix) The execution, delivery and performance by the Eligible
Lender Trustee of the Trust Agreement, the Master Servicing Agreement, the
Loan Sale Agreement and the Co-Trustee Agreement, and the execution,
delivery and performance by the Eligible Lender Trustee on behalf of the
Trust of the Indenture, the Master Servicing Agreement, the Loan Sale
Agreement, the Administration Agreement and any Guarantee Agreement will
not subject any of the property or assets of the Trust, or any portion
thereof, to any liens created by or arising under the Eligible Lender
Trustee that are unrelated to the transactions contemplated in such
agreements.
(k) The Representative shall have received an opinion of Emmet,
Marvin & Martin, counsel to the Indenture Trustee, dated the Closing Date and
satisfactory in form and substance to the Representative and its counsel, to the
effect that:
(i) The Indenture Trustee is a banking corporation validly existing
under the laws of the State of New York.
(ii) The Indenture Trustee has the requisite power and authority to
execute, deliver and perform its obligations under the Indenture and the
Administration Agreement and has taken all necessary action to authorize
the execution, delivery and performance by it of the Indenture and the
Administration Agreement.
(iii) Each of the Indenture and the Administration Agreement has
been duly executed and delivered by the Indenture Trustee and constitutes a
legal, valid and binding obligation of the Trustee, enforceable against the
Indenture Trustee in accordance with its respective terms, except that such
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium, liquidation, or other similar laws applicable to banking
corporations affecting the enforcement of creditors' rights generally, and
by general principles of equity, including, without limitation, concepts of
materiality, reasonableness, good faith and fair
16
<PAGE>
dealing (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(iv) The Notes have been duly authenticated by the Indenture
Trustee in accordance with the terms of the Indenture.
(l) The Representative shall have received an opinion of counsel
acceptable to it of each of [ , , ,
and , each dated the Closing Date, and satisfactory in form and
substance to the Representative and its counsel, to the effect that:
(i) The Guarantor has been duly incorporated and is validly
existing as a non-profit corporation in good standing under the laws of the
State of its incorporation with full power and authority (corporate and
other) to own its properties and conduct its business, as presently
conducted by it, and to enter into and perform its obligations under the
Guarantee Agreement (and the agreements with the Department under Section
428 of the Higher Education Act to the extent relevant to the Guarantor's
obligations under such Guarantee Agreement), and had at all relevant times,
and now has, the power, authority and legal right to guarantee the Financed
Student Loans covered by such Guarantee Agreement and to receive, subject
to compliance with all applicable conditions, restrictions and limitations
of the Higher Education Act and any rules, regulations and interpretations
thereunder, reinsurance payments from the Department with respect to claims
paid by it on such Financed Student Loans.
(ii) The Guarantor is duly qualified to do business and is in
good standing, and has obtained all necessary licenses and approvals in
each jurisdiction in which failure to qualify or to obtain such license or
approval would render the Guarantor's obligation under the Guarantee
Agreement to guarantee the Financed Student Loans covered thereby
unenforceable by or on behalf of the Trust.
(iii) The Guarantee Agreement (and the agreements with the
Department under Section 428 of the Higher Education Act to the extent
relevant to the Guarantor's obligations under such Guarantee Agreement)
have been duly authorized, executed and delivered by the Guarantor and are
the legal, valid and binding obligation of the Guarantor enforceable
against the Guarantor in accordance with their terms, except that (x) the
enforceability thereof may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights and (y) the remedy of specific performance
and injunctive and other forms of equitable relief may be
17
<PAGE>
subject to equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
(iv) Neither the execution and delivery by the Guarantor of the
Guarantee Agreement, nor the consummation by the Guarantor of the
transactions contemplated therein nor the fulfillment of the terms thereof
by the Guarantor will conflict with, result in a breach, violation or
acceleration of, or constitute a default under, any terms or provision of
the charter or by-laws of the Guarantor or of any indenture or other
agreement or instrument to which the Guarantor is a party or by which the
Guarantor is bound, or result in a violation of or contravene the terms of
any statute, order or regulation applicable to the Guarantor of any court,
regulatory body, administrative agency or governmental body having
jurisdiction over the Guarantor.
(v) There are no actions, proceedings or investigations pending
or, to the best of such counsel's knowledge after due inquiry, threatened
against the Guarantor before or by any governmental authority that might
materially and adversely affect the performance by the Guarantor of its
obligations under, or the validity or enforceability of, the Guarantee
Agreement.
(vi) The Guarantor is a "guarantor" covered by the provisions of
Section 432(o) of the Higher Education Act.
(m) The Representative shall have received an opinion addressed to
the several Underwriters of Brown & Wood llp, in its capacity as special counsel
to the several Underwriters, dated the Closing Date, with respect to the
validity of the Notes and the Certificates and such other related matters as the
Representative shall reasonably require and the Seller shall have furnished or
caused to be furnished to such counsel such documents as they may reasonably
request for the purpose of enabling them to pass upon such matters.
(n) The Representative shall have received an opinion of Dean,
Blakey & Moskowitz, special student loan counsel to the several Underwriters, or
in the case of (iii) below, special student loan counsel to the Seller and the
Eligible Lender Trustee, dated the Closing Date, and satisfactory in form and
substance to the Representative and its counsel, to the effect that:
(i) The Basic Documents, and the transactions contemplated by the
Basic Documents, conform in all material respects to the applicable
requirements of the Higher Education Act, and that, upon the due
authorization, execution and delivery of the Basic
18
<PAGE>
Documents and the consummation of such transactions, the Financed Student
Loans, legal title to which will be held by the Eligible Lender Trustee on
behalf of the Trust, will qualify, subject to compliance with all
applicable origination and servicing requirements with respect thereto, to
receive all applicable federal assistance payments, including federal
reinsurance and federal interest subsidies and special allowance payments,
with respect thereto.
(ii) To the extent that the statements in the Prospectus purport
to summarize or describe provisions of the Higher Education Act, or
constitute statements of matters of law or legal conclusions with respect
to the Higher Education Act, such statements have been prepared or reviewed
by such counsel and accurately describe the material consequences to
holders of Certificates under the Higher Education Act.
(iii) Such counsel has examined the Registration Statement and
the Prospectus, and nothing has come to such counsel's attention that would
lead such counsel to believe that, solely with respect to the Higher
Education Act and the student loan business, the Registration Statement or
the Prospectus or any amendment or supplement thereto as of the respective
dates thereof or on the Closing Date contains an untrue statement of a
material fact or omits to state a material fact necessary in order to make
the statements therein not misleading.
(iv) Each of the Seller and the Eligible Lender Trustee is an
"eligible lender" as such term is defined in Section 435(d) of the Higher
Education Act for purposes of holding legal title to the Financed Student
Loans.
(v) [ ] is a private non-profit Family Federal Education Loan
Program ("FFELP") guaranty agency (a "Guaranty Agency") covered by the
provisions of Section 432(o) of the Higher Education Act. In the event that
the United States Secretary of Education (the "Secretary") determines that
a Guaranty Agency is unable to meet its insurance obligations under Title
IV-B of the Higher Education Act of 1965, as amended (the "Act"), the
Secretary is required by Section 432(o) of the Act to pay otherwise valid
insurance claims submitted directly to the Secretary by FFELP lenders on
loans insured by such Guaranty Agency in the full amount of the Guaranty
Agency's insurance obligation thereon and in accordance with insurance
requirements no more stringent than those of the Guaranty Agency.
19
<PAGE>
(o) The Representative shall have received certificates dated the
Closing Date of any two of the Chairman of the Board, the President, any
Executive Vice President, Senior Vice President or Vice President, the
Treasurer, any Assistant Treasurer, the Secretary, the Assistant Secretary, the
principal financial officer or the principal accounting officer of each of the
Seller and the Master Servicer in which such officers shall state that, to the
best of their knowledge after reasonable investigation, (i) the representations
and warranties of the Seller or the Master Servicer, as the case may be,
contained in the Trust Agreement, the Loan Sale Agreement, the Administration
Agreement and the Master Servicing Agreement, as applicable, are true and
correct in all material respects, that each of the Seller and the Master
Servicer has complied with all agreements and satisfied all conditions on its
part to be performed or satisfied under such agreements at or prior to the
Closing Date, in the case of the certificate from the Seller only, that no stop
order suspending the effectiveness of the Registration Statement has been issued
and no proceedings for that purpose have been instituted or are contemplated by
the Commission, and (ii) since December 31, 1995, except as may be disclosed in
the Prospectus or in such certificate, no material adverse change, or any
development involving a prospective material adverse change, in or affecting
particularly the business or properties of the Trust, the Company, the Seller or
the Master Servicer, as applicable, has occurred.
(p) The Representative shall have received evidence satisfactory to it
that, on or before the Closing Date, UCC-1 financing statements have been or are
being filed in the office of the Secretary of State of the States of Delaware
and Illinois and the Commonwealth of Virginia reflecting the transfer of the
interest of the Seller in the Financed Student Loans to the Eligible Lender
Trustee on behalf of the Trust and the proceeds thereof to the Trust and the
grant of the security interest by the Trust in the Financed Student Loans and
the proceeds thereof to the Indenture Trustee.
(q) The Representative shall have received a certificate, dated the
Closing Date, from a responsible officer acceptable to it of each Guarantor, to
the effect that such officer has reviewed the Prospectus Supplement and that the
information therein regarding the Guarantor is fair and accurate in all material
respects.
(r) Each of the Class A-1 Notes and the Class A-2 Notes shall be rated
"AAA" by Fitch Investors Service, L.P., Moody's Investors Service, Inc. and
Standard & Poor's Ratings Services, and no rating agency shall have placed
either of the Class A-1 Notes or the Class A-2 Notes under surveillance or
review with possible negative implications.
20
<PAGE>
(s) The issuance of the Certificates and the Notes shall not have
resulted in a reduction or withdrawal by any Rating Agency of the current rating
of any outstanding securities issued or originated by the Seller or any of its
affiliates.
(t) On the Closing Date, $[ ] aggregate principal amount of
the Certificates shall have been issued and sold.
The Seller will provide or cause to be provided to the Representative
such conformed copies of such of the foregoing opinions, certificates, letters
and documents as the Representative reasonably requests.
7. Indemnification and Contribution. (a) The Seller will
--------------------------------
indemnify and hold each Underwriter harmless against any losses, claims, damages
or liabilities to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Registration Statement,
the preliminary Basic Prospectus, Preliminary Prospectus Supplement (if any),
the Basic Prospectus, or the Prospectus or any amendment or supplement thereto,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse each Underwriter for any
legal or other expenses reasonably incurred by such Underwriter in connection
with investigating or defending any such loss, claim, damage, liability or
action as such expenses are incurred; provided, however, that the Seller will
-------- -------
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement in or omission or alleged omission from any of such documents
in reliance upon and in conformity with written information furnished to the
Seller by any Underwriter specifically for use therein.
(b) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Seller against any losses, claims, damages or liabilities
to which the Seller may become subject, under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in the Registration Statement, the preliminary
Basic Prospectus, Preliminary Prospectus Supplement (if any), Basic Prospectus,
or the Prospectus or any amendment or supplement thereto or arise out of or are
based upon the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each
21
<PAGE>
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information relating to such Underwriter and
furnished to the Seller by such Underwriter through the Representative
specifically for use therein, and will reimburse any legal or other expenses
reasonably incurred by the Seller in connection with investigating or defending
any such loss, claim, damage, liability or action as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under
subsection (a) or (b) above, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
under subsection (a) or (b) above. In case any such action is brought against
any indemnified party and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party (who shall not, except with the consent of the indemnified
party, be counsel to the indemnifying party), and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof and approval by the indemnified party of the counsel appointed
by the indemnifying party, the indemnifying party will not be liable to such
indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation. In no event shall the
indemnifying party be liable for fees and expenses for more than one counsel
separate from their own counsel for all indemnified parties in connection with
any one action or related actions in the same jurisdiction arising out of the
same general allegations or circumstances unless any such indemnified party
shall have been advised by such counsel that there may be one or more legal
defenses available to it which are different from or additional to or in
conflict with those available to the other indemnified parties and in the
reasonable judgment of such counsel it is advisable for such indemnified party
to employ separate counsel. An indemnifying party will not, without the prior
written consent of the indemnified party, settle or compromise or consent to the
entry of any judgment with respect to any pending or threatened claim, action,
suit or proceeding in respect of which indemnification or contribution may be
sought hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes
22
<PAGE>
an unconditional release of each indemnified party from all liability arising
out of such claim, action, suit or proceeding.
(d) If the indemnification provided for in this Section is unavailable
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnifying party as a result of the losses, claims, damages or
liabilities referred to in subsection (a) or (b) above (i) in such proportion as
is appropriate to reflect the relative benefits received by the Seller on the
one hand and the Underwriters on the other from the offering of the Notes or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Seller on the one hand and the Underwriters on the other in connection with
the statements or omissions which resulted in such losses, claims, damages or
liabilities as well as any other relevant equitable considerations. The
relative benefits received by the Seller on the one hand and the Underwriters on
the other shall be deemed to be in the same proportion as the total net proceeds
from the offering (before deducting expenses) of the Notes received by the
Seller bear to the total underwriting discounts and commissions applicable to
the Notes received by the Underwriters. The relative fault shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Seller or by the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement or omission. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities referred to in the first sentence of this
subsection (d) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any action or claim which is the subject of this subsection (d).
Notwithstanding the provisions of this subsection (d), no Underwriter shall be
required to contribute any amount in excess of the amount by which the
underwriting discount or commission applicable to the Notes exceeds the amount
of any damages which such Underwriter has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
(e) The obligations of the Seller under this Section shall be in
addition to any liability which the Seller may otherwise have and shall extend,
upon the same terms and
23
<PAGE>
conditions, to each person, if any, who controls any Underwriter within the
meaning of the Act; and the obligations of the Underwriters under this Section
shall be in addition to any liability which the respective Underwriters may
otherwise have and shall extend, upon the same terms and conditions, to each
director of the Seller, to each officer of the Seller who has signed the
Registration Statement and to each person, if any, who controls the Seller
within the meaning of the Act.
8. Survival of Representations and Obligations. The respective
-------------------------------------------
indemnities, agreements, representations, warranties and other statements of the
Seller or its officers and of the several Underwriters set forth in or made
pursuant to this Agreement or contained in certificates of officers of the
Seller submitted pursuant hereto shall remain operative and in full force and
effect, regardless of any investigation or statement as to the results thereof,
made by or on behalf of any Underwriter, the Seller or any of their respective
representatives, officers or directors or any controlling person, and will
survive delivery of and payment for the Notes. If for any reason the purchase
of the Notes by the Underwriters is not consummated, the Seller shall remain
responsible for the expenses to be paid or reimbursed by the Seller pursuant to
Section 5 and the respective obligations of the Seller and the Underwriters
pursuant to Section 7 shall remain in effect. If for any reason the purchase of
the Notes by the Underwriters is not consummated (other than because of a
failure to satisfy the conditions set forth in items (iii), (v) and (vi) of
Section 6(d)), the Seller will reimburse the Underwriters for all out-of-pocket
expenses (including fees and disbursements of counsel) reasonably incurred by
them in connection with the offering of the Notes.
9. Notices. All communications hereunder will be in writing
-------
and, if sent to the Underwriters, will be mailed, delivered or telegraphed and
confirmed to the Representative at Park Avenue Plaza, New York, N.Y. 10055,
Attention: Investment Banking--Transactions Advisory Group; if sent to the
Seller, will be mailed, delivered or telegraphed, and confirmed to it at Signet
Bank, 7 North 8th Street, Richmond, Virginia 23219, Attention: Treasurer;
provided, however, that any notice to an Underwriter pursuant to Section 7 will
- -------- -------
be mailed, delivered or telegraphed and confirmed to such Underwriter. Any such
notice will take effect at the time of receipt.
10. Successors. This Agreement will inure to the benefit of and
----------
be binding upon the parties hereto and their respective successors and the
officers and directors and controlling persons referred to in Section 7, and no
other person will have any right or obligations hereunder.
24
<PAGE>
11. Representation of Underwriters. The Representative shall act for
------------------------------
the several Underwriters in connection with this financing, and any action taken
by the Representative will be binding upon all the Underwriters.
12. Counterparts. This Agreement may be executed in any number
------------
of counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
13. Applicable Law. This Agreement will be governed by, and
--------------
construed in accordance with, the laws of the State of New York.
25
<PAGE>
If the foregoing is in accordance with the Representative's
understanding of our agreement, kindly sign and return to us one of the
counterparts hereof, whereupon it will become a binding agreement between the
Seller and the several Underwriters in accordance with its terms.
Very truly yours,
SIGNET BANK
By: ___________________________
Name:
Title:
The foregoing Note
Underwriting Agreement is
hereby confirmed and
accepted as of the date
first written above.
CS FIRST BOSTON CORPORATION
By:_______________________
Name:
Title:
Acting on behalf of itself and as
Representative of the several Underwriters
26
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Principal Amount of Principal Amount of
Underwriter Class A-1 Notes Class A-2 Notes
- ---------------------------- ----------------------- -----------------------
<S> <C> <C>
CS First Boston Corporation $ $
------------------- -------------------
[other Underwriters] $ $
------------------- -------------------
Total $ $
------------------- -------------------
</TABLE>
27
<PAGE>
APPENDIX A
[See Appendix A to Administration Agreement]
28
<PAGE>
EXHIBIT A
[Letterhead of Signet Bank]
[ ], 1996
CS First Boston Corporation
Park Avenue Plaza
New York, New York 10055
[other Underwriters]
Re: Floating Rate Asset Backed Notes
and Floating Rate Asset Backed Certificates
-------------------------------------------
Gentlemen:
I am the General Counsel of Signet Bank (the "Seller") and have acted as
counsel to the Seller in connection with the issuance and sale by Signet Student
Loan Trust 1996-A (the "Trust") of (i) $[ ] principal amount of its
Floating Rate Class A-1 Asset Backed Notes and $[ ] principal amount of
its Floating Rate Class A-2 Asset Backed Notes (collectively, the "Notes")
pursuant to the Note Underwriting Agreement dated [ ], 1996 between the
Seller and the Underwriters named therein (the "Note Underwriting Agreement")
and (ii) Floating Rate Asset Backed Certificates in the aggregate principal
amount of $[ ] (the "Certificates") pursuant to the Certificate
Underwriting Agreement dated [ ], 1996 between the Seller and the
Underwriters named therein (the "Certificate Underwriting Agreement" and,
together with the Note Underwriting Agreement, the "Underwriting Agreements").
Except as otherwise indicated herein, capitalized terms are defined as set forth
in the Underwriting Agreements. As used herein, (i) "Principal Documents" shall
mean, collectively, the Trust Agreement, the Loan Sale Agreement, the
Administration Agreement and the Master Servicing Agreement.
Based upon and subject to the limitations and qualifications set forth
below, I am of the opinion that:
A-1
<PAGE>
(1) The Seller has been duly organized and is validly existing as a
banking corporation in good standing under the laws of the Commonwealth of
Virginia, with full power (corporate and other) and authority to own its
properties and to conduct its business as now conducted by it and to enter into
and perform its obligations under the Underwriting Agreements and the Principal
Documents, and had, at all relevant times and now has the corporate power and
authority, and legal right, to acquire, own, sell and service the Initial
Financed Student Loans and any Additional Acquired Student Loans consistent with
all applicable conditions, restrictions and limitations of the Higher Education
Act.
(2) The Seller has executed and delivered the written order to the
Eligible Lender Trustee to authenticate the Certificates and such action has
been duly authorized by the Seller. When the Certificates have been duly
executed, authenticated, and delivered in accordance with the Trust Agreement
and the Certificates have been delivered and paid for pursuant to the
Certificate Underwriting Agreement, the Certificates will be validly issued and
entitled to the benefits of the Trust Agreement, subject, as to the
enforceability thereof, to bankruptcy, reorganization, insolvency, moratorium
and other laws affecting creditors' rights generally and by the application of
general principles of equity.
(3) The Seller has executed and delivered the written order to the
Eligible Lender Trustee to execute and deliver the Issuer Order to the Indenture
Trustee and such action has been duly authorized by the Seller. When the Notes
have been duly executed, delivered, and authenticated in accordance with the
Indenture and delivered and paid for pursuant to the Note Underwriting
Agreement, the Notes will be validly issued and entitled to the benefits of the
Indenture, subject, as to the enforceability thereof, to bankruptcy,
reorganization, insolvency, moratorium and other laws affecting creditors'
rights generally and by the application of general principles of equity.
(4) The Seller has duly authorized, executed, and delivered the
Underwriting Agreements and the Principal Documents and such Principal Documents
are legal, valid and binding obligations of the Seller, enforceable against the
Seller, subject, as to the enforceability thereof, to bankruptcy,
reorganization, insolvency, moratorium and other laws affecting creditors'
rights generally and to the application of general principles of equity.
(5) Neither the transfer of the Initial Financed Student Loans or the
Additional Acquired Student Loans by the Seller to the Eligible Lender Trustee
on behalf of the Trust, nor the assignment by the Seller of the Trust Estate to
the Trust, nor the grant by the Trust of the security interest in the Collateral
to the Indenture Trustee pursuant to the Indenture, nor the
A-2
<PAGE>
execution and delivery by the Seller of the Underwriting Agreements and the
Principal Documents, nor the consummation of the transactions contemplated by
the Underwriting Agreements or the Principal Documents nor the performance by
the Seller of its obligations thereunder will (i) violate the Articles of
Incorporation and by-laws, as amended, of the Seller, (ii) breach, or result in
a default under or acceleration of, any existing obligation of the Seller in any
indenture, agreement, or instrument known to me, after due inquiry and
reasonable investigation, which breach or default would reasonably be expected
to have a material adverse effect on the condition of the Seller, financial or
otherwise, or adversely affect the transactions contemplated by the Principal
Documents, (iii) violate or contravene the terms of any court order, or (iv)
violate applicable provisions of statutory law or regulation.
(6) There are no actions, proceedings or investigations pending against
the Seller or, to my knowledge, threatened against the Seller before any court,
administrative agency, or tribunal (i) asserting the invalidity of the Trust or
any of the Underwriting Agreements or Principal Documents, (ii) seeking to
prevent the consummation of any of the transactions contemplated by any of the
Underwriting Agreements or the Principal Documents or the execution and delivery
thereof, or (iii) that could reasonably be expected to materially and adversely
affect the enforceability of the Underwriting Agreements or Principal Documents
against the Seller or the ability of the Seller to perform its obligations
thereunder.
(7) No consent, approval, authorization, or order of, or filing with, any
court or governmental agency or body is required of the Seller for the
consummation of the transactions contemplated in the Underwriting Agreements or
Principal Documents, except such consents, approvals, authorizations, or orders
as have been obtained or such filings as have been made.
(8) Nothing has come to our attention that would lead us to believe that
the representations and warranties of the Seller contained in the Principal
Documents are other than as stated therein.
(9) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the Commonwealth of Virginia,
with full power (corporate and other) and authority to own its properties and to
conduct its business as now conducted by it and to enter into and perform its
obligations under the Trust Agreement.
(10) The Company has duly authorized, executed, and delivered the Trust
Agreement and the Trust Agreement is a legal, valid and binding obligation of
the Company, enforceable against
A-3
<PAGE>
the Company, subject, as to the enforceability thereof, to bankruptcy,
reorganization, insolvency, moratorium and other laws affecting creditors'
rights generally and by the application of general principles of equity.
(11) Neither the execution and delivery by the Company of the Trust
Agreement, nor the consummation of the transactions contemplated thereby nor the
performance by the Company of its obligations thereunder will (i) violate the
Articles of Incorporation and by-laws, as amended, of the Company, (ii) breach,
or result in a default under or acceleration of, any existing obligation of the
Company in any indenture, agreement, or instrument known to me, after due
inquiry and reasonable investigation, which breach or default would reasonably
be expected to have a material adverse effect on the condition of the Company,
financial or otherwise, or adversely affect the transactions contemplated by the
Principal Documents, (iii) violate or contravene the terms of any court order,
or (iv) violate applicable provisions of statutory law or regulation.
(12) There are no actions, proceedings or investigations pending against
the Company or, to my knowledge, threatened against the Company before any
court, administrative agency, or tribunal (i) asserting the invalidity of the
Trust Agreement or any of the other Principal Documents, (ii) seeking to prevent
the consummation of any of the transactions contemplated by any of the
Underwriting Agreements or the Principal Documents or the execution and delivery
thereof, or (iii) that could reasonably be expected to materially and adversely
affect the enforceability of the Trust Agreement against the Company or the
ability of the Company to perform its obligations thereunder.
(13) No consent, approval, authorization, or order of, or filing with, any
court or governmental agency or body is required of the Company for the
consummation of the transactions contemplated in the Trust Agreement, except
such consents, approvals, authorizations, or orders as have been obtained or
such filings as have been made.
(14) There are no legal or governmental proceedings pending or threatened
against the Seller, the Company or the Master Servicer that are required to be
disclosed in the Registration Statement, other than those disclosed therein.
(15) There are no contracts, indentures, mortgages, loan agreements,
notes, leases, or other instruments to which the Seller, the Company or the
Master Servicer is a party that are required to be described or referred to in
the Registration Statement or to be filed as exhibits thereto other than those
described or referred to or filed or incorporated by reference as exhibits
thereto.
A-4
<PAGE>
For purposes of this opinion, I have assumed that (i) the Underwriting
Agreements and the Principal Documents have been duly executed and delivered by
all parties thereto (other than the Seller and the Company) and are valid and
binding upon and enforceable against such parties, subject, as to the
enforceability thereof, to bankruptcy, reorganization, insolvency, moratorium
and other laws affecting creditors' rights generally and by the application of
general principles of equity.
The opinions expressed herein are limited to matters of Federal law and the
laws of the Commonwealth of Virginia, without giving effect to principles of
conflicts of laws.
This opinion is rendered solely to the addressee hereof, for its use in
connection with the transactions contemplated by the Underwriting Agreements and
Principal Documents and may not be relied upon for any other purpose or by any
other person.
Very truly yours,
-----------------------------
[ ]
General Counsel
A-5
<PAGE>
EXHIBIT B
[Letterhead of McGuire, Woods, Battle & Boothe, L.L.P.]
[ ], 1996
CS First Boston Corporation
Park Avenue Plaza
New York, New York 10055
[other Underwriters]
Re: Floating Rate Asset Backed Notes
and Floating Rate Asset Backed
Certificates
---------------------------------
Gentlemen:
We have acted as counsel to Signet Bank (the "Seller") and Signet Student
Loan Trust 1996-A (the "Trust") in connection with the issuance by the Trust of
the Floating Rate Class A-1 Asset Backed Notes in the aggregate principal amount
of $_______ and the Floating Rate Class A-2 Asset Backed Notes in the aggregate
principal amount of $________ (collectively, the "Notes") and the Floating Rate
Asset Backed Certificates in the aggregate principal amount of $____________.
This opinion letter is furnished to you pursuant to Section 6(f) of the Note
Underwriting Agreement (the "Note Underwriting Agreement") dated [ ],
1996 between the Seller and the Underwriters named therein and Section 6(f) of
the Certificate Underwriting Agreement (the "Certificate Underwriting
Agreement") dated [ ], 1996 between the Seller and the Underwriters
named therein. Except as otherwise indicated herein, capitalized terms used in
this opinion letter are defined as set forth in the Underwriting Agreements.
We have examined such documents, records and matters of law as we have
deemed necessary for purposes of this opinion letter, and based thereupon and
subject to the foregoing, we are of the opinion that:
(1) The Indenture creates a valid security interest in the Financed
Student Loans, including all moneys paid thereunder on or after the Cutoff
Date, in favor of the Indenture Trustee, as trustee for the benefit of the
Noteholders, that has been duly perfected by the filing of
B-1
<PAGE>
financing statements executed by the Eligible Lender Trustee in the offices
indicated in Schedule __ hereto, provided, that, this opinion does not in
any way derogate the conclusion expressed in paragraph ___ hereto [true
sale paragraph]. The filing of such financing statements has perfected a
first priority security interest in such Student Loans, including all
moneys paid thereunder, except for Liens the priority of which is
determined under the provisions of applicable law without regard to the
filing of record of a financing statement in the offices listed on Schedule
__ hereto or Liens the priority of which does require such a filing, but,
upon such filing, may relate back to a date prior to the date on which the
security interest was perfected. No filings or other actions, other than
the filing of appropriate UCC continuation statements, are necessary to
maintain the perfection and priority of such security interest. We call
your attention to the fact that unless appropriate financing statements are
timely filed in the appropriate offices, perfection of the security
interest in the Financed Student Loans, including all moneys paid
thereunder, will be terminated if the Trust hereafter changes its name,
identity or corporate structure so that the financing statements filed in
the offices indicated on Schedule __ hereto become seriously misleading.
(2) A security interest in the Financed Student Loans may, pursuant
to the provisions of 20 U.S.C. (S) 1087-2(d)(3), be perfected in the manner
provided by the UCC for perfection of a security interest in accounts.
(3) The Seller is not, and will not as a result of the offer and
sale of the Notes and Certificates as contemplated in the Prospectus and
the Note Underwriting Agreement and the Certificate Underwriting Agreement
become, an "investment company" as defined in the Investment Company Act or
a company "controlled by" an "investment company" within the meaning of the
Investment Company Act.
(4) All actions required to be taken and all filings required to be
made by the Seller or the Trust under the Act and the Exchange Act prior to
the sale of the Notes and the Certificates have been duly taken or made.
(5) The Trust Agreement need not be qualified under the Trust
Indenture Act of 1939, and the Trust is not required to register under the
Investment Company Act.
(6) The Indenture has been duly qualified under the Trust Indenture
Act.
(7) The Trust has been duly formed, is validly existing and is in
good standing under the laws of the State
B-2
<PAGE>
of Delaware, with full power and authority to own its assets and conduct
its business as described in the Prospectus.
(8) The Trust has duly authorized the Indenture, the Loan Sale
Agreement, the Master Servicing Agreement and the Administration Agreement,
and, when duly executed and delivered by the other parties thereto, they
will be valid and binding obligations of the Trust, enforceable against the
Trust in accordance with their terms, subject, as to the enforceability
thereof, to bankruptcy, reorganization, insolvency, moratorium and other
laws affecting creditors' rights generally and by the application of
general principles of equity.
(9) The Registration Statement has become effective under the Act;
any required filing of the Prospectus (and any Supplement thereto) pursuant
to Rule 424(b) promulgated under the Act has been made in the manner and
within the time period required under such rule; no stop order suspending
the effectiveness of the Registration Statement has been issued and, to our
knowledge, no proceedings for that purpose are pending or threatened by the
Commission.
(10) The Basic Documents, and the transactions contemplated by the
Basic Documents, conform in all material respects to the applicable
requirements of the Higher Education Act, and, upon the due authorization,
execution and delivery of the Basic Documents and the consummation of such
transactions, the Financed Student Loans, legal title to which will be held
by the Eligible Lender Trustee on behalf of the Trust, will qualify,
subject to compliance with all applicable origination and servicing
requirements with respect thereto, to receive all applicable federal
assistance payments, including federal reinsurance and federal interest
subsidies and special allowance payments, with respect thereto.
(11) We have examined the Registration Statement and the Prospectus
(and any Supplement thereto), and nothing has come to our attention that
would lead us to believe that, solely with respect to the Higher Education
Act and the student loan business, the Registration Statement or the
Prospectus or any amendment or supplement thereto as of the respective
dates thereof or on the Closing Date contains an untrue statement of a
material fact or omits to state a material fact necessary in order to make
the statements therein not misleading.
(12) The Eligible Lender Trustee is an "eligible lender" as such
term is defined in Section 435(d) of the
B-3
<PAGE>
Higher Education Act for purposes of holding legal title to the Financed
Student Loans.
(13) The statements contained in the Prospectus under the headings
"Risk Factors -- Certain Legal Aspects" and "Certain Legal Aspects of the
Student Loans", to the extent that they describe legal matters, present
fair summaries of such legal matters.
(14) The statements contained in the Prospectus under the captions
"Description of the Securities", "Description of the Transfer and Servicing
Agreements", "Description of the Notes" and "Description of the
Certificates", insofar as such statements purport to summarize the
provisions of the Certificates, the Notes, the Indenture, the
Administration Agreement, the Loan Sale Agreement, the Master Servicing
Agreement and the Trust Agreement, present fair summaries of such
provisions.
We have participated in the preparation of the Registration Statement and
the Prospectus (and any supplement thereto). From time to time we have had
discussions with the officers and employees of the Seller and your employees and
counsel concerning the information contained in the Registration Statement and
the Prospectus (and any supplement thereto). Based thereupon we are of the
opinion that (a) the Registration Statement (except for the financial
statements, financial schedules and other numerical, financial and statistical
information contained therein and the Form T-1 included therein, as to all of
which we express no view) at the time the Registration Statement became
effective under the Act complied as to form in all material respects with the
Act and the Trust Indenture and the rules and regulations thereunder and (b) the
Prospectus (and any supplement thereto) (except for the financial statements,
financial schedules and other numerical, financial and statistical information
contained therein, as to all of which we express no view) as of its date
complied as to form with the Act and the rules and regulations thereunder.
Based upon the participation and discussions described above, no facts have come
to our attention to cause us to believe that (a) the Registration Statement
(except for the financial statements, financial schedules and other numerical,
financial and statistical information contained therein, as to which we express
no view) at the time the Registration Statement became effective under the Act
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading or (b) the Prospectus (and any Supplement thereto) (except for
the financial statements, financial schedules and other numerical, financial and
statistical information contained therein, as to all of which we express no
view) as of its date or the date hereof contained or contains any untrue
statement of a material
B-4
<PAGE>
fact or omitted or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
[McGuire, Woods, Battle & Boothe, L.L.P. will rely on the opinion of Brown
& Wood LLP with respect to certain matters of New York law and on Richards,
Layton & Finger with respect to certain matters of Delaware law.]
Very truly yours,
B-5
<PAGE>
EX.1.2
B&W Draft
12/10/96
SIGNET STUDENT LOAN TRUST 1996-A
$_________
FLOATING RATE ASSET BACKED CERTIFICATES
CERTIFICATE UNDERWRITING AGREEMENT
----------------------------------
[ ], 1996
CS First Boston Corporation
As Representative of the
several Underwriters
Park Avenue Plaza
New York, NY 10055
Dear Sirs:
1. Introductory. Signet Bank, a Virginia banking corporation
------------
("Signet" or the "Seller"), proposes to cause Signet Student Loan Trust 1996-A
(the "Trust") to issue and sell $[ ] principal amount of its Floating
Rate Asset Backed Certificates (the "Certificates") to the underwriters
named in Schedule I hereto (the "Underwriters") for whom you (the
"Representative") are acting as representative. The assets of the Trust
include, among other things, a pool of student loans (the "Initial Financed
Student Loans") and certain monies due thereunder on and after [ ], 1996
(the "Cutoff Date"). Such Initial Financed Student Loans will be sold to the
Eligible Lender Trustee (as defined below) on behalf of the Trust by the Seller
pursuant to a sale agreement, dated as of [ ], 1996 (the "Loan Sale
Agreement") among the Trust, the Seller and The First National Bank of Chicago,
a national banking association, as eligible lender trustee (the "Eligible Lender
Trustee"). Under certain circumstances after the Closing Date (as defined
below), the Eligible Lender Trustee, acting on behalf of the Trust, may acquire
additional student loans ("Additional Acquired Student Loans", together with the
Initial Financed Student Loans, the "Financed Student Loans"). The Financed
Student Loans are to be serviced by Signet as master servicer (the "Master
Servicer") pursuant to a master servicing agreement, dated as of [ ],
1996 (the "Master Servicing Agreement") among the Trust, the Master Servicer and
the Eligible Lender Trustee. The Certificates will be issued pursuant to a
trust agreement to be dated as of [ ], 1996 (the "Trust Agreement"),
among the Seller, as Depositor, Signet Student Loan
<PAGE>
Corporation, a Virginia corporation (the "Company"), and the Eligible Lender
Trustee. An individual residing in Delaware will be appointed as a co-trustee
under the Trust Agreement pursuant to a co-trustee agreement, dated as of
[ ], 1996 (the "Co-Trustee Agreement"), between such individual and the
Eligible Lender Trustee.
Simultaneously with the issuance and sale of the Certificates as
contemplated herein, the Trust will issue $[ ] principal amount of
its Floating Rate Class A-1 Asset Backed Notes and $[ ] principal
amount of its Floating Rate Class A-2 Asset Backed Notes (collectively, the
"Notes"). The Notes will be sold pursuant to an underwriting agreement dated
the date hereof (the "Note Underwriting Agreement") between the Seller and the
Underwriters. The Notes and the Certificates are hereinafter referred to
collectively as the "Securities."
Capitalized terms used and not otherwise defined herein shall have the
meanings given to them in Appendix A hereto.
2. Representations and Warranties of the Seller. (a) The Seller
--------------------------------------------
represents and warrants to and agrees with the several Underwriters that:
(i) The Seller meets the requirements for use of Form S-3 under
the Securities Act of 1933, as amended (the "Act"), and has filed with the
Securities and Exchange Commission (the "Commission") a registration
statement (Registration No. 33-94846) on such Form, including a related
preliminary basic prospectus and a preliminary prospectus supplement, for
the registration under the Act of the offering and sale of the Securities.
The Seller may have filed one or more amendments thereto, each of which
amendments has previously been furnished to the Representative. The Seller
will next file with the Commission (i) prior to the effectiveness of such
registration statement, an amendment thereto (including the form of final
basic prospectus and the form of final prospectus supplement relating to
the Securities), (ii) after effectiveness of such registration statement, a
final basic prospectus and a final prospectus supplement relating to the
Securities in accordance with Rules 430A and 424(b)(1) or (4) under the
Act, or (iii) a final basic prospectus and a final prospectus supplement
relating to the Securities in accordance with Rules 415 and 424(b)(2) or
(5).
In the case of clauses (ii) and (iii), the Seller has included in such
registration statement, as amended at the Effective Date, all information
(other than Rule 430A Information) required by the Act and the rules
thereunder to
2
<PAGE>
be included in the Prospectus with respect to the Certificates and the
offering thereof. As filed, such amendment and form of final prospectus
supplement, or such final prospectus supplement, shall include all Rule
430A Information, together with all other such required information, with
respect to the Certificates and the offering thereof and, except to the
extent that the Representative shall agree in writing to a modification,
shall be in all substantive respects in the form furnished to the
Representative prior to the Execution Time or, to the extent not completed
at the Execution Time, shall contain only such specific additional
information and other changes (beyond that contained in the latest
preliminary basic prospectus and preliminary prospectus supplement, if any,
that have previously been furnished to the Representative) as the Seller
has advised the Representative, prior to the Execution Time, will be
included or made therein. If the Registration Statement contains the
undertaking specified by Regulation S-K Item 512(a), the Registration
Statement, at the Execution Time, meets the requirements set forth in Rule
415(a)(1)(x).
For purposes of this Agreement, "Effective Time" means the date and
time as of which such registration statement, or the most recent post-
effective amendment thereto, if any, was declared effective by the
Commission, and "Effective Date" means the date of the Effective Time.
"Execution Time" shall mean the date and time that this Agreement is
executed and delivered by the parties hereto. Such registration statement,
as amended at the Effective Time, including all information deemed to be a
part of such registration statement as of the Effective Time pursuant to
Rule 430A(b) under the Act, and including the exhibits thereto and any
material incorporated by reference therein, is hereinafter referred to as
the "Registration Statement". "Basic Prospectus" shall mean any prospectus
referred to above contained in the Registration Statement at the Effective
Date, including any Preliminary Prospectus Supplement. "Preliminary
Prospectus Supplement" shall mean the preliminary prospectus supplement to
the Basic Prospectus which describes the Certificates and the offering
thereof and is used prior to filing of the Prospectus. "Prospectus" shall
mean the prospectus supplement relating to the Securities that is first
filed pursuant to Rule 424(b) after the Execution Time, together with the
Basic Prospectus or, if no filing pursuant to Rule 424(b) is required,
shall mean the prospectus supplement relating to the Certificates,
including the Basic Prospectus, included in the Registration Statement at
the Effective Date. "Rule 430A Information" means information with respect
to the Certificates and the offering of the Securities permitted to be
omitted from the Registration Statement when it becomes
3
<PAGE>
effective pursuant to Rule 430A. "Rule 415", "Rule 424", "Rule 430A" and
"Regulation S-K" refer to such rules or regulations under the Act. Any
reference herein to the Registration Statement, a Preliminary Prospectus
Supplement or the Prospectus shall be deemed to refer to and include the
documents incorporated by reference therein pursuant to Item 12 of Form S-3
which were filed under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), on or before the Effective Date of the Registration
Statement or the issue date of the Basic Prospectus, such Preliminary
Prospectus Supplement or the Prospectus, as the case may be; and any
reference herein to the terms "amend", "amendment" or "supplement" with
respect to the Registration Statement, the Basic Prospectus, any
Preliminary Prospectus Supplement or the Prospectus shall be deemed to
refer to and include the filing of any document under the Exchange Act
after the Effective Date of the Registration Statement, or the issue date
of the Basic Prospectus, to any Preliminary Prospectus Supplement or the
Prospectus, as the case may be, deemed to be incorporated therein by
reference.
(ii) On the Effective Date and on the date of this Agreement, the
Registration Statement did or will, and, when the Prospectus is first filed
(if required) in accordance with Rule 424(b) and on the Closing Date (as
defined below), the Prospectus (and any supplements thereto) will, comply
in all material respects with the applicable requirements of the Act, the
Exchange Act and the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"), and the respective rules and regulations of the Commission
thereunder (the "Rules and Regulations"); on the Effective Date, the
Registration Statement did not or will not contain any untrue statement of
a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein not
misleading; and, on the Effective Date, the Prospectus (together with any
supplement thereto) will not, include any untrue statement of a material
fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that the Seller makes no
-------- -------
representations or warranties as to the information contained in or omitted
from the Registration Statement or the Prospectus (or any supplement
thereto) in reliance upon and in conformity with information furnished in
writing to the Seller by any Underwriter through the Representative
specifically for use in the Registration Statement or the Prospectus (or
any supplement thereto).
4
<PAGE>
(iii) The Seller's representations and warranties in the Loan
Sale Agreement, the Administration Agreement and the Trust Agreement will
be true and correct in all material respects as of the Closing Date and
each such representation and warranty will be true and correct in all
material respects on each date thereafter if and to the extent that on such
date such representation and warranty is made again by the Seller pursuant
to the terms of the related agreement.
(iv) This Agreement has been duly authorized, executed and
delivered by the Seller. The execution, delivery and performance of this
Agreement and the issuance and sale of the Certificates and compliance with
the terms and provisions hereof will not result in a breach or violation of
any of the terms and provisions of, or constitute a default under, any
agreement or instrument to which the Seller is a party or by which the
Seller is bound or to which any of the properties of the Seller is subject
which could reasonably be expected to have a material adverse effect on the
transactions contemplated herein. The Seller has full power (corporate and
other) and authority to cause the Trust to authorize, issue and sell the
Certificates, all as contemplated by this Agreement.
(v) Other than as contemplated by this Agreement or as disclosed
in the Prospectus, there is no broker, finder or other party that is
entitled to receive from the Seller or any of its affiliates or an
underwriter any brokerage or finder's fee or other fee or commission as a
result of any of the transactions contemplated by this Agreement.
(vi) All legal or governmental proceedings, contracts or
documents of a character required to be described in the Registration
Statement or the Prospectus or to be filed as an exhibit to the
Registration Statement have been so described or filed as required.
(vii) The Seller's assignment and delivery of the Initial
Financed Student Loans to the Eligible Lender Trustee on behalf of the
Trust as of the Closing Date and of the Additional Acquired Student Loans
from time to time thereafter pursuant to the Loan Sale Agreement will vest
in the Eligible Lender Trustee on behalf of the Trust all the Seller's
right, title and interest therein, subject to no prior lien, mortgage,
security interest, pledge, adverse claim, charge or other encumbrance.
5
<PAGE>
(viii) The Trust's assignment of the Financed Student Loans to
the Indenture Trustee pursuant to the Indenture will vest in the Indenture
Trustee, for the benefit of the Noteholders, a first priority perfected
security interest therein, subject to no prior lien, mortgage, security
interest, pledge, adverse claim, charge or other encumbrance.
(b) The Seller hereby agrees with the Underwriters that, for all
purposes of this Agreement, the only information furnished to the Seller by the
Underwriters through the Representative specifically for use in the Registration
Statement, the Prospectus, or any amendment or supplement thereto, or any
related preliminary prospectus, are the statements with respect to stabilization
on the second page of, and the statements under the caption "Underwriting" in,
the preliminary prospectus and the Prospectus.
3. Purchase, Sale and Delivery of the Certificates. On the basis
-----------------------------------------------
of the representations, warranties and agreements herein contained, but subject
to the terms and conditions herein set forth, the Seller agrees to cause the
Trust to sell to the Underwriters, and the Underwriters agree, severally and not
jointly, to purchase from the Trust, at a purchase price of [ ]% of the
principal amount thereof, the respective principal amounts of the Certificates
set forth opposite the names of the Underwriters in Schedule I hereto.
The Seller will deliver the Certificates to the Representative for the
accounts of the Underwriters, against payment of the purchase price to or upon
the order of the Seller by wire transfer or check in Federal (same day) Funds,
at the office of Brown & Wood llp, One World Trade Center, New York, New York
10048-0557, at 10:00 A.M., New York time, on [ ], 1996, or at such
other time not later than seven full business days thereafter as the
Representative and the Seller determine, such time being herein referred to as
the "Closing Date". The Certificates to be so delivered will be initially
represented by one or more Certificates registered in the name of Cede & Co.,
the nominee of The Depository Trust Company ("DTC"). The interests of
beneficial owners of the Certificates will be represented by book entries on the
records of DTC and participating members thereof. Definitive Certificates will
be available only under the limited circumstances specified in the Trust
Agreement.
4. Offering by the Underwriters. It is understood that, after the
----------------------------
Registration Statement becomes effective, the several Underwriters propose to
offer the Certificates for sale to the public (which may include selected
dealers) as set forth in the Prospectus.
6
<PAGE>
5. Covenants of the Seller. The Seller covenants and agrees with the
-----------------------
several Underwriters that:
(a) The Seller will use its best efforts to cause the Registration
Statement, and any amendment thereto, if not effective at the Execution Time, to
become effective. Prior to the termination of the offering of the Certificates,
the Seller will not file any amendment of the Registration Statement or
supplement to the Prospectus unless the Seller has furnished the Representative
a copy for its review prior to filing and will not file any such proposed
amendment or supplement to which the Representative reasonably objects. Subject
to the foregoing sentence, if the Registration Statement has become or becomes
effective pursuant to Rule 430A, or filing of the Prospectus is otherwise
required under Rule 424(b), the Seller will file the Prospectus, properly
completed, and any supplement thereto, with the Commission pursuant to and in
accordance with the applicable paragraph of Rule 424(b) within the time period
prescribed and will provide evidence satisfactory to the Representative of such
timely filing.
(b) The Seller will advise the Representative promptly of any proposal
to amend or supplement the registration statement as filed or the related
prospectus or the Registration Statement or the Prospectus and will not effect
such amendment or supplementation without the consent of the Representative
prior to the Closing Date, and thereafter will not effect any such amendment or
supplementation to which the Representative reasonably objects; the Seller will
also advise the Representative promptly of any request by the Commission for any
amendment of or supplement to the Registration Statement or the Prospectus or
for any additional information; and the Seller will also advise the
Representative promptly of the effectiveness of the Registration Statement and
of any amendment or supplement to the Registration Statement or the Prospectus
and of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the institution or threat of any
proceeding for that purpose and the Seller will use its best efforts to prevent
the issuance of any such stop order and to obtain as soon as possible the
lifting of any issued stop order.
(c) If, at any time when a prospectus relating to the Certificates is
required to be delivered under the Act, any event occurs as a result of which
the Prospectus as then amended or supplemented would contain an untrue statement
of a material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it is necessary at any time to amend the
Registration Statement or supplement the Prospectus to comply with the Act or
the Exchange Act, the Seller promptly will prepare and file, or cause to be
prepared and filed, with the Commission an amendment or supplement which will
correct such
7
<PAGE>
statement or omission, or an amendment or supplement which will effect such
compliance. Neither the consent of the Representative to, nor the delivery of
the several Underwriters of, any such amendment or supplement shall constitute a
waiver of any of the conditions set forth in Section 6.
(d) As soon as practicable, but not later than the Availability Date
(as defined below), the Seller will cause the Trust to make generally available
to Certificateholders an earnings statement of the Trust covering a period of at
least twelve months beginning after the Effective Date which will satisfy the
provisions of Section 11(a) of the Act and Rule 158 of the applicable Rules and
Regulations thereunder. For the purpose of the preceding sentence,
"Availability Date" means the 45th day after the end of the fourth fiscal
quarter following the fiscal quarter that includes the original effective date
of the Registration Statement, except that, if such fourth fiscal quarter is the
last quarter of the Trust's fiscal year, "Availability Date" means the 90th day
after the end of such fourth fiscal quarter.
(e) The Seller will furnish to the Representative copies of the
Registration Statement (two of which will be signed and will include all
exhibits), each related preliminary prospectus, the Prospectus and all
amendments and supplements to such documents, in each case as soon as available
and in such quantities as the Representative reasonably requests.
(f) The Seller will arrange for the qualification of the Certificates
for sale under the laws of such states as the several Underwriters may require
and will continue such qualifications in effect so long as required for the
distribution.
(g) For a period from the date of this Agreement until the retirement
of the Certificates, or until such time as the several Underwriters shall cease
to maintain a secondary market in the Certificates, whichever occurs first, the
Seller will deliver to the Representative the annual statements of compliance
and the annual independent certified public accountants' reports furnished to
the Indenture Trustee or the Eligible Lender Trustee pursuant to the Master
Servicing Agreement, as soon as such statements and reports are furnished to the
Indenture Trustee or the Eligible Lender Trustee.
(h) So long as any of the Certificates are outstanding, the Seller
will furnish to the Representative (i) as soon as practicable after the end of
the fiscal year all documents required to be distributed to Certificateholders
or filed with the Commission on behalf of the Trust pursuant to the Exchange
Act, or any order of the Commission thereunder and (ii)
8
<PAGE>
from time to time, any other information concerning the Seller as the
Representative may reasonably request.
(i) On or before the Closing Date, the Seller shall mark its
accounting and other records, if any, relating to the Initial Financed Student
Loans and shall cause the Master Servicer to mark the computer records of the
Master Servicer relating to the Initial Financed Student Loans to show the
absolute ownership by the Eligible Lender Trustee on behalf of the Trust of the
Initial Financed Student Loans, and from and after the Closing Date the Seller
will take, and cause the Master Servicer to take, such actions with regard to
any Additional Acquired Student Loans at the time of the conveyance thereof to
the Trust, and neither the Seller nor the Master Servicer shall take any action
inconsistent with the ownership by the Eligible Lender Trustee on behalf of the
Trust of the Financed Student Loans, other than as permitted by the Loan Sale
Agreement or the Master Servicing Agreement.
(j) To the extent, if any, that the rating provided with respect to
the Certificates by the rating agency or agencies that initially rate the
Certificates is conditional upon the furnishing of documents or the taking of
any other actions by the Seller agreed upon on or prior to the Closing Date, the
Seller shall furnish or shall cause to be furnished such documents and take any
such other actions. A copy of any such document shall be provided to the
Representative at the time it is delivered to the rating agencies.
(k) For the period beginning on the date of this Agreement and ending
90 days after the Closing Date, none of the Seller and any trust originated,
directly or indirectly, by the Seller will, without the prior written consent of
the Representative, offer to sell or sell notes (other than the Notes)
collateralized by, or certificates (other than the Certificates) evidencing an
ownership interest in, student loans; provided, however, that this shall not be
-------- -------
construed to prevent the sale of student loans by the Seller.
(l) The Seller will apply the net proceeds of the offering and the
sale of the Certificates and the Notes that it receives in the manner set forth
in the Prospectus under the caption "Use of Proceeds".
(m) The Seller will pay all expenses incident to the performance of
its obligations under this Agreement, including (i) the printing and filing of
the documents (including the Registration Statement and Prospectus), (ii) the
preparation, issuance and delivery of the Certificates to the Representative,
(iii) the fees and disbursements of the Seller's counsel and accountants, (iv)
the qualification of the Certificates under securities laws in accordance with
the provisions of Section
9
<PAGE>
5(f), including filing fees and the fees and disbursements of counsel for the
Representative in connection therewith and in connection with the preparation of
any blue sky or legal investment survey, if any is requested, (v) the printing
and delivery to the Representative of copies of the Registration Statement as
originally filed and of each amendment thereto, (vi) the printing and delivery
to the Representative of copies of any blue sky or legal investment survey
prepared in connection with the Certificates, (vii) any fees charged by rating
agencies for the rating of the Certificates and (viii) the fees and expenses, if
any, incurred with respect to any filing with the National Association of
Securities Dealers, Inc.
6. Conditions of the Obligations of the Underwriters. The
-------------------------------------------------
obligations of the several Underwriters to purchase and pay for the Certificates
will be subject to the accuracy of the representations and warranties on the
part of the Seller herein, to the accuracy of the written statements of officers
of the Seller made pursuant to the provisions of this Section, to the
performance by the Seller of its obligations hereunder and to the following
additional conditions precedent:
(a) If the Effective Time is not prior to the execution and delivery
of this Agreement, the Effective Time shall have occurred not later than 6:00
p.m. New York City time on the date of this Agreement or such later time or date
as shall have been consented to by the Representative.
(b) If the Effective Time is prior to the execution and delivery of
this Agreement, the Prospectus and any supplements thereto shall have been filed
with the Commission in accordance with the Rules and Regulations and Section
5(a) hereof. Prior to the Closing Date, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or, to the knowledge of
the Seller or the Representative, shall be contemplated by the Commission.
(c) On or prior to the Closing Date, you shall have received a letter
dated the Closing Date, in form and substance satisfactory to the Representative
and its counsel, from [ ] with respect to certain agreed-upon
procedures substantially in the form of the drafts to which the Representative
has previously agreed and otherwise in form and substance reasonably
satisfactory to the Representative and its counsel.
(d) Subsequent to the execution and delivery of this Agreement, there
shall not have occurred (i) any change, or any development involving a
prospective change, in or affecting particularly the business or properties of
the Trust, the Seller, the Master Servicer or the Company which, in the judgment
of the Representative, materially impairs the investment quality of the
10
<PAGE>
Certificates or makes it impractical or inadvisable to market the Certificates;
(ii) any downgrading in the rating of any debt securities of the Seller or the
Master Servicer by any "nationally recognized statistical rating organization"
(as defined for purposes of Rule 436(g) under the Act), or any public
announcement that any such organization has under surveillance or review its
rating of any debt securities of the Seller or the Master Servicer (other than
an announcement with positive implications of a possible upgrading, and no
implication of a possible downgrading, of such rating); (iii) any suspension or
limitation of trading in securities generally on the New York Stock Exchange, or
any setting of minimum prices for trading on such exchange; (iv) any suspension
of trading of any securities of the Seller or the Master Servicer on any
exchange or in the over-the-counter market; (v) any banking moratorium declared
by Federal or New York authorities; or (vi) any outbreak or escalation of major
hostilities in which the United States is involved, any declaration of war by
Congress, or any other substantial national or international calamity or
emergency if, in the judgment of the Representative, the effect of any such
outbreak, escalation, declaration, calamity or emergency makes it impractical or
inadvisable to proceed with completion of the sale of and payment for the
Certificates.
(e) The Representative shall have received an opinion of [ ],
General Counsel of Signet Bank, as counsel for the Seller, dated the Closing
Date, in the form attached hereto as Exhibit A, or as is otherwise satisfactory
in form and substance to the Representative and its counsel.
(f) The Representative shall have received an opinion of McGuire,
Woods, Battle & Boothe, L.L.P., counsel to the Seller and the Trust, dated the
Closing Date, in the form attached hereto as Exhibit B, or as is otherwise
satisfactory in form and substance to the Representative and its counsel.
(g) The Representative shall have received an opinion addressed to the
several Underwriters of McGuire, Woods, Battle & Boothe, L.L.P., in its capacity
as counsel for the Seller and the Trust, dated the Closing Date, in form and
substance satisfactory to the Representative and its counsel, to the effect that
the statements in the Prospectus under the headings "Certain Federal Income Tax
Consequences", "Certain State Tax Consequences" and "ERISA Considerations", to
the extent that they constitute statements of matters of law or legal
conclusions with respect thereto, have been prepared or reviewed by such counsel
and accurately describe the material consequences to holders of the Certificates
under Virginia law and ERISA.
(h) The Representative shall have received an opinion addressed to the
several Underwriters of McGuire, Woods, Battle & Boothe, L.L.P., in its capacity
as counsel for the Seller, the
11
<PAGE>
Company and the Trust, dated the Closing Date, in form and substance
satisfactory to the Representative and its counsel, concerning (i) the true sale
of the Financed Student Loans from the Seller to the Trust and (ii) the
nonconsolidation of the Company with the Seller and the Seller's other
affiliates in the event of a bankruptcy or insolvency of the Seller or the
Seller's other affiliates.
(i) The Representative shall have received an opinion of Richards,
Layton & Finger, special Delaware counsel for the Trust, dated the Closing Date,
in form and substance satisfactory to the Representative and its counsel, to the
effect that:
(i) The Trust Agreement constitutes the valid and binding
obligation of the Eligible Lender Trustee, the Delaware Trustee, the
Depositor and the Company, enforceable against the Eligible Lender Trustee,
the Delaware Trustee, the Depositor and the Company, in accordance with its
terms subject to (i) applicable bankruptcy, insolvency, moratorium,
receivership, reorganization, fraudulent conveyance and similar laws
relating to and affecting the rights and remedies of creditors generally,
and (ii) principles of equity (regardless of whether considered and applied
in a proceeding in equity or at law).
(ii) The Trust has been duly formed and is validly existing as
a business trust under the Business Trust Statute. The Trust Agreement
authorizes the Trust to execute and deliver the Trust Agreement, the
Indenture, the Master Servicing Agreement, the Loan Sale Agreement and the
Administration Agreement to issue the Certificates and the Notes and to
grant the Trust Estate to the Indenture Trustee as security for the Notes.
(iii) Assuming that the Certificates have been duly executed
and issued by the Trust and duly authenticated by the Eligible Lender
Trustee in accordance with the Trust Agreement and delivered to and paid
for by the purchaser thereof pursuant to the Certificate Underwriting
Agreement, the Certificates have been validly issued and are entitled to
the benefits of the Trust Agreement.
(iv) Except for the timely filing in the future of continuation
statements with respect to the financing statements, no other filing is
required in the State of Delaware in order to make effective the lien of
the Indenture. Insofar as Article 9 of the Delaware Uniform Commercial
Code, 6 Del. C. (S)9-101 et seq. (the "UCC"), applies (without regard to
-- ---
conflict of laws principles) and assuming that the security interest in
that portion of the
12
<PAGE>
Collateral that consists of general intangibles and accounts, as defined
under the UCC, has been duly created and has attached, the Indenture
Trustee has a perfected security interest in such general intangibles and
accounts and the proceeds thereof and, assuming that the UCC search
accurately lists all of the financing statements filed naming the Trust as
debtor and describing any portion of the Collateral consisting of such
general intangibles and accounts and the proceeds thereof, such security
interest of the Indenture Trustee will be prior to the security interest of
all other creditors of the Trust whose security interests are perfected
solely by filing UCC financing statements in the State of Delaware,
excluding purchase money security interests under (S)9-312 of the UCC and
temporarily perfected security interests in proceeds under (S) 9-306 of the
UCC.
(v) Under (S)3805(b) of the Business Trust Statute, no creditor
of any Certificateholder shall have any right to obtain possession of, or
otherwise exercise legal or equitable remedies with respect to, the
property of the Trust except in accordance with the terms of the Trust
Agreement.
(vi) Under (S) 3805(c) of the Business Trust Statute, and
assuming that the Loan Sale Agreement conveys good title to the Initial
Financed Student Loans to the Trust as a true sale and not as a security
arrangement, the Trust rather than the Certificateholders is the owner of
the Initial Financed Student Loans.
(vii) The Delaware Trustee is not required to hold legal title
to the Trust Estate in order for the Trust to qualify as a business trust
under the Act.
(viii) The execution and delivery by the Eligible Lender
Trustee or the Delaware Trustee of the Trust Agreement and, on behalf of
the Trust, of the Trust Agreement, the Indenture, the Master Servicing
Agreement, the Loan Sale Agreement and the Administration Agreement do not
require any consent, approval or authorization of, or any registration of
filing with, any governmental authority of the State of Delaware, except
for the filing of the Certificate of Trust with the Secretary of State.
(ix) Neither the consummation by the Eligible Lender Trustee or
the Delaware Trustee of the transactions contemplated in the Trust
Agreement or, on behalf of the Trust, the transactions contemplated in the
Trust Agreement, the Indenture, the Master Servicing Agreement, the Loan
Sale Agreement and the Administration Agreement nor the fulfillment of the
terms thereof by the Eligible Lender Trustee or the Delaware Trustee will
conflict with or result
13
<PAGE>
in a breach or violation of any law of the State of Delaware.
(j) The Representative shall have received an opinion of the Law
Department of The First National Bank of Chicago, counsel to the Eligible Lender
Trustee, dated the Closing Date and satisfactory in form and substance to the
Representative and its counsel, to the effect that:
(i) The Eligible Lender Trustee is a national banking association
duly organized and validly existing under the laws of the United States.
(ii) The Eligible Lender Trustee has the full corporate trust
power to accept the office of eligible lender trustee under the Trust
Agreement and to enter into and perform its obligations under the Trust
Agreement, the Master Servicing Agreement, the Loan Sale Agreement and the
Co-Trustee Agreement and, on behalf of the Trust, under the Indenture, the
Master Servicing Agreement, the Loan Sale Agreement, the Administration
Agreement and the Guarantee Agreements.
(iii) The execution and delivery of the Trust Agreement, the
Master Servicing Agreement, the Loan Sale Agreement and the Co-Trustee
Agreement by the Eligible Lender Trustee and the Indenture, the Master
Servicing Agreement, the Loan Sale Agreement, the Administration Agreement
and the Guarantee Agreements by the Eligible Lender Trustee on behalf of
the Trust, and the performance by the Eligible Lender Trustee of its
obligations under the Trust Agreement, the Master Servicing Agreement, the
Loan Sale Agreement and the Co-Trustee Agreement, as well as the
performance by the Eligible Lender Trustee of its obligations on behalf of
the Trust under the Indenture, the Master Servicing Agreement, the Loan
Sale Agreement, the Administration Agreement and the Guarantee Agreements
have been duly authorized by all necessary action of the Eligible Lender
Trustee and each has been duly executed and delivered by the Eligible
Lender Trustee.
(iv) The Trust Agreement, the Master Servicing Agreement, the
Loan Sale Agreement and the Co-Trustee Agreement constitute valid and
binding obligations of the Eligible Lender Trustee enforceable against the
Eligible Lender Trustee in accordance with their terms, and the Indenture,
the Master Servicing Agreement, the Loan Sale Agreement, the Administration
Agreement and the Guarantee Agreements constitute the valid and binding
obligations of the Trust enforceable against the Trust in accordance with
their terms, except as the
14
<PAGE>
enforceability thereof may be (a) limited by bankruptcy, insolvency,
reorganization, moratorium, liquidation or other similar laws affecting the
rights of creditors generally, and (b) subject to general principals of
equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(v) The execution and delivery by the Eligible Lender Trustee of
the Trust Agreement, the Master Servicing Agreement, the Loan Sale
Agreement and the Co-Trustee Agreement and by the Eligible Lender Trustee
on behalf of the Trust of the Indenture, the Master Servicing Agreement,
the Loan Sale Agreement, the Administration Agreement and the Guarantee
Agreements do not require any consent, approval or authorization of, or any
registration or filing with, any applicable governmental authority which
has not been obtained or done.
(vi) Each of the Certificates has been duly executed and
delivered by the Eligible Lender Trustee, as eligible lender trustee and
authenticating agent. Each of the Notes has been duly executed and
delivered by the Eligible Lender Trustee on behalf of the Trust.
(vii) Neither the consummation by the Eligible Lender Trustee
of the transactions contemplated in the Trust Agreement, the Master
Servicing Agreement, the Loan Sale Agreement or the Co-Trustee Agreement,
the consummation by the Trust of the transactions contemplated in the
Indenture or the Administration Agreement nor the fulfillment of the terms
thereof by the Eligible Lender Trustee or the Trust, as the case may be,
will conflict with, result in a breach or violation of, or constitute a
default under any law or the Articles of Association, By-Laws or other
organizational documents of the Eligible Lender Trustee or the terms of any
indenture or other agreement or instrument known to such counsel and to
which the Eligible Lender Trustee or any of its subsidiaries is a party or
is bound or any judgment, order or decree known to us to be applicable to
the Eligible Lender Trustee or any of its subsidiaries, of any court,
regulatory body, administrative agency, governmental body or arbitrator
having jurisdiction over the Eligible Lender Trustee or any of its
subsidiaries.
(viii) There are no actions, suits or proceedings pending or,
to the best of such counsel's knowledge after due inquiry, threatened
against the Eligible Lender Trustee (as eligible lender trustee under the
15
<PAGE>
Trust Agreement or in its individual capacity) before or by any
governmental authority that might materially and adversely affect the
performance by the Eligible Lender Trustee of its obligations under, or the
validity or enforceability of, the Trust Agreement, the Master Servicing
Agreement, the Loan Sale Agreement or the Co-Trustee Agreement.
(ix) The execution, delivery and performance by the Eligible
Lender Trustee of the Trust Agreement, the Master Servicing Agreement, the
Loan Sale Agreement and the Co-Trustee Agreement, and the execution,
delivery and performance by the Eligible Lender Trustee on behalf of the
Trust of the Indenture, the Master Servicing Agreement, the Loan Sale
Agreement, the Administration Agreement and any Guarantee Agreement will
not subject any of the property or assets of the Trust, or any portion
thereof, to any liens created by or arising under the Eligible Lender
Trustee that are unrelated to the transactions contemplated in such
agreements.
(k) The Representative shall have received an opinion of counsel
acceptable to it of each of [ ,
, , ,
and ], each dated the Closing Date, and satisfactory in
form and substance to the Representative and its counsel, to the effect that:
(i) The Guarantor has been duly incorporated and is validly
existing as a non-profit corporation in good standing under the laws of the
State of its incorporation with full power and authority (corporate and
other) to own its properties and conduct its business, as presently
conducted by it, and to enter into and perform its obligations under the
Guarantee Agreement (and the agreements with the Department under Section
428 of the Higher Education Act to the extent relevant to the Guarantor's
obligations under such Guarantee Agreement), and had at all relevant times,
and now has, the power, authority and legal right to guarantee the Financed
Student Loans covered by such Guarantee Agreement and to receive, subject
to compliance with all applicable conditions, restrictions and limitations
of the Higher Education Act and any rules, regulations and interpretations
thereunder, reinsurance payments from the Department with respect to claims
paid by it on such Financed Student Loans.
(ii) The Guarantor is duly qualified to do business and is in
good standing, and has obtained all necessary licenses and approvals in
each jurisdiction in which failure
16
<PAGE>
to qualify or to obtain such license or approval would render the
Guarantor's obligation under the Guarantee Agreement to guarantee the
Financed Student Loans covered thereby unenforceable by or on behalf of the
Trust.
(iii) The Guarantee Agreement (and the agreements with the
Department under Section 428 of the Higher Education Act to the extent
relevant to the Guarantor's obligations under such Guarantee Agreement)
have been duly authorized, executed and delivered by the Guarantor and are
the legal, valid and binding obligation of the Guarantor enforceable
against the Guarantor in accordance with their terms, except that (x) the
enforceability thereof may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights and (y) the remedy of specific performance
and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
(iv) Neither the execution and delivery by the Guarantor of the
Guarantee Agreement, nor the consummation by the Guarantor of the
transactions contemplated therein nor the fulfillment of the terms thereof
by the Guarantor will conflict with, result in a breach, violation or
acceleration of, or constitute a default under, any terms or provision of
the charter or by-laws of the Guarantor or of any indenture or other
agreement or instrument to which the Guarantor is a party or by which the
Guarantor is bound, or result in a violation of or contravene the terms of
any statute, order or regulation applicable to the Guarantor of any court,
regulatory body, administrative agency or governmental body having
jurisdiction over the Guarantor.
(v) There are no actions, proceedings or investigations pending
or, to the best of such counsel's knowledge after due inquiry, threatened
against the Guarantor before or by any governmental authority that might
materially and adversely affect the performance by the Guarantor of its
obligations under, or the validity or enforceability of, the Guarantee
Agreement.
(vi) The Guarantor is a "guarantor" covered by the provisions of
Section 432(o) of the Higher Education Act.
(l) The Representative shall have received an opinion addressed to
the several Underwriters of Brown & Wood llp, in its capacity as special counsel
to the several Underwriters, dated the Closing Date, with respect to the
validity of the Certificates and the Notes and such other related matters as the
Representative shall reasonably require and the Seller and the
17
<PAGE>
Company shall have furnished or caused to be furnished to such counsel such
documents as they may reasonably request for the purpose of enabling them to
pass upon such matters.
(m) The Representative shall have received an opinion of Dean, Blakey
& Moskowitz, special student loan counsel to the several Underwriters, or in the
case of (iii) below, special student loan counsel to the Seller and the Eligible
Lender Trustee, dated the Closing Date, and satisfactory in form and substance
to the Representative and its counsel, to the effect that:
(i) The Basic Documents, and the transactions contemplated by the
Basic Documents, conform in all material respects to the applicable
requirements of the Higher Education Act, and that, upon the due
authorization, execution and delivery of the Basic Documents and the
consummation of such transactions, the Financed Student Loans, legal title
to which will be held by the Eligible Lender Trustee on behalf of the
Trust, will qualify, subject to compliance with all applicable origination
and servicing requirements with respect thereto, to receive all applicable
federal assistance payments, including federal reinsurance and federal
interest subsidies and special allowance payments, with respect thereto.
(ii) To the extent that the statements in the Prospectus purport
to summarize or describe provisions of the Higher Education Act, or
constitute statements of matters of law or legal conclusions with respect
to the Higher Education Act, such statements have been prepared or reviewed
by such counsel and accurately describe the material consequences to
holders of Certificates under the Higher Education Act.
(iii) Such counsel has examined the Registration Statement and
the Prospectus, and nothing has come to such counsel's attention that would
lead such counsel to believe that, solely with respect to the Higher
Education Act and the student loan business, the Registration Statement or
the Prospectus or any amendment or supplement thereto as of the respective
dates thereof or on the Closing Date contains an untrue statement of a
material fact or omits to state a material fact necessary in order to make
the statements therein not misleading.
(iv) Each of the Seller and the Eligible Lender Trustee is an
"eligible lender" as such term is defined in Section 435(d) of the Higher
Education Act for purposes of holding legal title to the Financed Student
Loans.
18
<PAGE>
(v) [ ] is a private non-profit Family
Federal Education Loan Program ("FFELP") guaranty agency (a "Guaranty
Agency") covered by the provisions of Section 432(o) of the Higher
Education Act. In the event that the United States Secretary of Education
(the "Secretary") determines that a Guaranty Agency is unable to meet its
insurance obligations under Title IV-B of the Higher Education Act of 1965,
as amended (the "Act"), the Secretary is required by Section 432(o) of the
Act to pay otherwise valid insurance claims submitted directly to the
Secretary by FFELP lenders on loans insured by such Guaranty Agency in the
full amount of the Guaranty Agency's insurance obligation thereon and in
accordance with insurance requirements no more stringent than those of the
Guaranty Agency.
(n) The Representative shall have received certificates dated the
Closing Date of any two of the Chairman of the Board, the President, any
Executive Vice President, Senior Vice President or Vice President, the
Treasurer, any Assistant Treasurer, the Secretary, any Assistant Secretary, the
principal financial officer or the principal accounting officer of each of the
Seller and the Master Servicer in which such officers shall state that, to the
best of their knowledge after reasonable investigation, (i) the representations
and warranties of the Seller or the Master Servicer, as the case may be,
contained in the Trust Agreement, the Loan Sale Agreement, the Administration
Agreement and the Master Servicing Agreement, as applicable, are true and
correct in all material respects, that each of the Seller and the Master
Servicer has complied with all agreements and satisfied all conditions on its
part to be performed or satisfied under such agreements at or prior to the
Closing Date, in the case of the certificate from the Seller only, that no stop
order suspending the effectiveness of the Registration Statement has been issued
and no proceedings for that purpose have been instituted or are contemplated by
the Commission, and (ii) since December 31, 1995, except as may be disclosed in
the Prospectus or in such certificate, no material adverse change, or any
development involving a prospective material adverse change, in or affecting
particularly the business or properties of the Trust, the Company, the Seller or
the Master Servicer, as applicable, has occurred.
(o) The Representative shall have received evidence satisfactory
to it that, on or before the Closing Date, UCC-1 financing statements have been
or are being filed in the office of the Secretary of State of the States of
Delaware and Illinois and the Commonwealth of Virginia reflecting the transfer
of the interest of the Seller in the Financed Student Loans to the Eligible
Lender Trustee on behalf of the Trust and the proceeds thereof to the Trust and
the grant of the security interest by
19
<PAGE>
the Trust in the Financed Student Loans and the proceeds thereof to the
Indenture Trustee.
(p) The Representative shall have received a certificate, dated
the Closing Date, from a responsible officer acceptable to it of each Guarantor,
to the effect that such officer has reviewed the Prospectus Supplement and that
the information therein regarding the Guarantor is fair and accurate in all
material respects.
(q) The Certificates shall be rated at least "A" by Fitch
Investors Service, L.P., Moody's Investors Service, Inc. and Standard & Poor's
Ratings Services, and no rating agency shall have placed the Certificates under
surveillance or review with possible negative implications.
(r) The issuance of the Notes and the Certificates shall not have
resulted in a reduction or withdrawal by any Rating Agency of the current rating
of any outstanding securities issued or originated by the Seller or any of its
affiliates.
(s) On the Closing Date, $[ ] aggregate principal amount of the
Notes shall have been issued and sold.
The Seller will provide or cause to be provided to the
Representative such conformed copies of such of the foregoing opinions,
certificates, letters and documents as the Representative reasonably requests.
7. Indemnification and Contribution. (a) The Seller will indemnify
--------------------------------
and hold each Underwriter harmless against any losses, claims, damages or
liabilities to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Registration Statement,
the preliminary Basic Prospectus, Preliminary Prospectus Supplement (if any),
the Basic Prospectus or the Prospectus or any amendment or supplement thereto,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse each Underwriter for any
legal or other expenses reasonably incurred by such Underwriter in connection
with investigating or defending any such loss, claim, damage, liability or
action as such expenses are incurred; provided, however, that the Seller will
-------- -------
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement in or omission or alleged omission from any of such
20
<PAGE>
documents in reliance upon and in conformity with written information furnished
to the Seller by any Underwriter specifically for use therein.
(b) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Seller against any losses, claims, damages or liabilities
to which the Seller may become subject, under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in the Registration Statement, the preliminary
Basic Prospectus, Preliminary Prospectus Supplement (if any), Basic Prospectus
or the Prospectus or any amendment or supplement thereto, or arise out of or are
based upon the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with written information relating to such
Underwriter and furnished to the Seller by such Underwriter through the
Representative specifically for use therein, and will reimburse any legal or
other expenses reasonably incurred by the Seller in connection with
investigating or defending any such loss, claim, damage, liability or action as
such expenses are incurred.
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under
subsection (a) or (b) above, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
under subsection (a) or (b) above. In case any such action is brought against
any indemnified party and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party (who shall not, except with the consent of the indemnified
party, be counsel to the indemnifying party), and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof and approval by the indemnified party of the counsel appointed
by the indemnifying party, the indemnifying party will not be liable to such
indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs
21
<PAGE>
of investigation. In no event shall the indemnifying party be liable for fees
and expenses for more than one counsel separate from their own counsel for all
indemnified parties in connection with any one action or related actions in the
same jurisdiction arising out of the same general allegations or circumstances
unless any such indemnified party shall have been advised by such counsel that
there may be one or more legal defenses available to it which are different from
or additional to or in conflict with those available to the other indemnified
parties and in the reasonable judgment of such counsel it is advisable for such
indemnified party to employ separate counsel. An indemnifying party will not,
without the prior written consent of the indemnified party, settle or compromise
or consent to the entry of any judgment with respect to any pending or
threatened claim, action, suit or proceeding in respect of which indemnification
or contribution may be sought hereunder (whether or not the indemnified parties
are actual or potential parties to such claim or action) unless such settlement,
compromise or consent includes an unconditional release of each indemnified
party from all liability arising out of such claim, action, suit or proceeding.
(d) If the indemnification provided for in this Section is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnifying party as a result of the losses,
claims, damages or liabilities referred to in subsection (a) or (b) above (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Seller on the one hand and the Underwriters on the other from the offering
of the Certificates or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Seller on the one hand and the Underwriters on the other
in connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities as well as any other relevant equitable
considerations. The relative benefits received by the Seller on the one hand
and the Underwriters on the other shall be deemed to be in the same proportion
as the total net proceeds from the offering (before deducting expenses) of the
Certificates received by the Seller bear to the total underwriting discounts and
commissions applicable to the Certificates received by the Underwriters. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Seller or by the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such untrue
statement or omission. The amount
22
<PAGE>
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities referred to in the first sentence of this subsection (d)
shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any action
or claim which is the subject of this subsection (d). Notwithstanding the
provisions of this subsection (d), no Underwriter shall be required to
contribute any amount in excess of the amount by which the underwriting discount
or commission applicable to the Certificates exceeds the amount of any damages
which such Underwriter has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.
(e) The obligations of the Seller under this Section shall be in
addition to any liability which the Seller may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls any
Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section shall be in addition to any liability which the
respective Underwriters may otherwise have and shall extend, upon the same terms
and conditions, to each director of the Seller, to each officer of the Seller
who has signed the Registration Statement and to each person, if any, who
controls the Seller within the meaning of the Act.
8. Survival of Representations and Obligations. The respective
-------------------------------------------
indemnities, agreements, representations, warranties and other statements of the
Seller or its officers and of the several Underwriters set forth in or made
pursuant to this Agreement or contained in certificates of officers of the
Seller submitted pursuant hereto shall remain operative and in full force and
effect, regardless of any investigation or statement as to the results thereof,
made by or on behalf of any Underwriter, the Seller or any of their respective
representatives, officers or directors or any controlling person, and will
survive delivery of and payment for the Certificates. If for any reason the
purchase of the Certificates by the Underwriters is not consummated, the Seller
shall remain responsible for the expenses to be paid or reimbursed by the Seller
pursuant to Section 5 and the respective obligations of the Seller and the
Underwriters pursuant to Section 7 shall remain in effect. If for any reason
the purchase of the Certificates by the Underwriters is not consummated (other
than because of a failure to satisfy the conditions set forth in items (iii),
(v) and (vi) of Section 6(d)), the Seller will reimburse the Underwriters for
all out-of-pocket expenses (including fees and disbursements of
23
<PAGE>
counsel) reasonably incurred by them in connection with the offering of the
Certificates.
9. Notices. All communications hereunder will be in writing and, if
-------
sent to the Underwriters, will be mailed, delivered or telegraphed and confirmed
to the Representative at Park Avenue Plaza, New York, N.Y. 10055, Attention:
Investment Banking--Transactions Advisory Group; if sent to the Seller, will be
mailed, delivered or telegraphed, and confirmed to it at Signet Bank, 7 North
8th Street, Richmond, Virginia 23219, Attention: Treasurer; provided, however,
-------- -------
that any notice to an Underwriter pursuant to Section 7 will be mailed,
delivered or telegraphed and confirmed to such Underwriter. Any such notice
will take effect at the time of receipt.
10. Successors. This Agreement will inure to the benefit of and be
----------
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 7, and no other
person will have any right or obligations hereunder.
11. Representation of Underwriters. The Representative shall act for
------------------------------
the several Underwriters in connection with this financing, and any action taken
by the Representative will be binding upon the Underwriters.
12. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
13. Applicable Law. This Agreement will be governed by, and
--------------
construed in accordance with, the laws of the State of New York.
24
<PAGE>
If the foregoing is in accordance with the Representative's
understanding of our agreement, kindly sign and return to us one of the
counterparts hereof, whereupon it will become a binding agreement between the
Seller and the several Underwriters in accordance with its terms.
Very truly yours,
SIGNET BANK
By: ___________________________
Name:
Title:
The foregoing Certificate
Underwriting Agreement is
hereby confirmed and
accepted as of the date
first written above.
CS FIRST BOSTON CORPORATION
By:_______________________
Name:
Title:
Acting on behalf of itself and as
Representative of the several Underwriters
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Principal Amount of
Underwriter Certificates
- --------------------------------- -------------------------
<S> <C>
CS First Boston Corporation $
_____________________
[other Underwriters] $
_____________________
Total $
_____________________
</TABLE>
<PAGE>
APPENDIX A
[See Appendix A to Administration Agreement]
<PAGE>
EXHIBIT A
[Letterhead of Signet Bank]
[ ], 1996
CS First Boston Corporation
Park Avenue Plaza
New York, New York 10055
[other Underwriters]
Re: Floating Rate Asset Backed Notes
and Floating Rate Asset Backed Certificates
-------------------------------------------
Gentlemen:
I am the General Counsel of Signet Bank (the "Seller") and have acted as
counsel to the Seller in connection with the issuance and sale by Signet Student
Loan Trust 1996-A (the "Trust") of (i) $[ ] principal amount of its
Floating Rate Class A-1 Asset Backed Notes and $[ ] principal amount of
its Floating Rate Class A-2 Asset Backed Notes (collectively, the "Notes")
pursuant to the Note Underwriting Agreement dated [ ], 1996 between the
Seller and the Underwriters named therein (the "Note Underwriting Agreement")
and (ii) Floating Rate Asset Backed Certificates in the aggregate principal
amount of $[ ] (the "Certificates") pursuant to the Certificate
Underwriting Agreement dated [ ], 1996 between the Seller and the
Underwriters named therein (the "Certificate Underwriting Agreement" and,
together with the Note Underwriting Agreement, the "Underwriting Agreements").
Except as otherwise indicated herein, capitalized terms are defined as set forth
in the Underwriting Agreements. As used herein, (i) "Principal Documents" shall
mean, collectively, the Trust Agreement, the Loan Sale Agreement, the
Administration Agreement and the Master Servicing Agreement.
A-1
<PAGE>
Based upon and subject to the limitations and qualifications set forth
below, I am of the opinion that:
(1) The Seller has been duly organized and is validly existing as a banking
corporation in good standing under the laws of the Commonwealth of Virginia,
with full power (corporate and other) and authority to own its properties and to
conduct its business as now conducted by it and to enter into and perform its
obligations under the Underwriting Agreements and the Principal Documents, and
had, at all relevant times and now has the corporate power and authority, and
legal right, to acquire, own, sell and service the Initial Financed Student
Loans and any Additional Acquired Student Loans consistent with all applicable
conditions, restrictions and limitations of the Higher Education Act.
(2) The Seller has executed and delivered the written order to the Eligible
Lender Trustee to authenticate the Certificates and such action has been duly
authorized by the Seller. When the Certificates have been duly executed,
authenticated, and delivered in accordance with the Trust Agreement and the
Certificates have been delivered and paid for pursuant to the Certificate
Underwriting Agreement, the Certificates will be validly issued and entitled to
the benefits of the Trust Agreement, subject, as to the enforceability thereof,
to bankruptcy, reorganization, insolvency, moratorium and other laws affecting
creditors' rights generally and by the application of general principles of
equity.
(3) The Seller has executed and delivered the written order to the Eligible
Lender Trustee to execute and deliver the Issuer Order to the Indenture Trustee
and such action has been duly authorized by the Seller. When the Notes have
been duly executed, delivered, and authenticated in accordance with the
Indenture and delivered and paid for pursuant to the Note Underwriting
Agreement, the Notes will be validly issued and entitled to the benefits of the
Indenture, subject, as to the enforceability thereof, to bankruptcy,
reorganization, insolvency, moratorium and other laws affecting creditors'
rights generally and by the application of general principles of equity.
(4) The Seller has duly authorized, executed, and delivered the
Underwriting Agreements and the Principal Documents and such Principal Documents
are legal, valid and binding obligations of the Seller, enforceable against the
Seller, subject, as to the enforceability thereof, to bankruptcy,
reorganization, insolvency, moratorium and other laws affecting creditors'
rights generally and to the application of general principles of equity.
(5) Neither the transfer of the Initial Financed Student Loans or the
Additional Acquired Student Loans by the Seller to
A-2
<PAGE>
the Eligible Lender Trustee on behalf of the Trust, nor the assignment by the
Seller of the Trust Estate to the Trust, nor the grant by the Trust of the
security interest in the Collateral to the Indenture Trustee pursuant to the
Indenture, nor the execution and delivery by the Seller of the Underwriting
Agreements and the Principal Documents, nor the consummation of the transactions
contemplated by the Underwriting Agreements or the Principal Documents nor the
performance by the Seller of its obligations thereunder will (i) violate the
Articles of Incorporation and by-laws, as amended, of the Seller, (ii) breach,
or result in a default under or acceleration of, any existing obligation of the
Seller in any indenture, agreement, or instrument known to me, after due inquiry
and reasonable investigation, which breach or default would reasonably be
expected to have a material adverse effect on the condition of the Seller,
financial or otherwise, or adversely affect the transactions contemplated by the
Principal Documents, (iii) violate or contravene the terms of any court order,
or (iv) violate applicable provisions of statutory law or regulation.
(6) There are no actions, proceedings or investigations pending against the
Seller or, to my knowledge, threatened against the Seller before any court,
administrative agency, or tribunal (i) asserting the invalidity of the Trust or
any of the Underwriting Agreements or Principal Documents, (ii) seeking to
prevent the consummation of any of the transactions contemplated by any of the
Underwriting Agreements or the Principal Documents or the execution and delivery
thereof, or (iii) that could reasonably be expected to materially and adversely
affect the enforceability of the Underwriting Agreements or Principal Documents
against the Seller or the ability of the Seller to perform its obligations
thereunder.
(7) No consent, approval, authorization, or order of, or filing with, any
court or governmental agency or body is required of the Seller for the
consummation of the transactions contemplated in the Underwriting Agreements or
Principal Documents, except such consents, approvals, authorizations, or orders
as have been obtained or such filings as have been made.
(8) Nothing has come to our attention that would lead us to believe that
the representations and warranties of the Seller contained in the Principal
Documents are other than as stated therein.
(9) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the Commonwealth of Virginia,
with full power (corporate and other) and authority to own its properties and to
conduct its business
A-3
<PAGE>
as now conducted by it and to enter into and perform its obligations under the
Trust Agreement.
(10) The Company has duly authorized, executed, and delivered the Trust
Agreement and the Trust Agreement is a legal, valid and binding obligation of
the Company, enforceable against the Company, subject, as to the enforceability
thereof, to bankruptcy, reorganization, insolvency, moratorium and other laws
affecting creditors' rights generally and by the application of general
principles of equity.
(11) Neither the execution and delivery by the Company of the Trust
Agreement, nor the consummation of the transactions contemplated thereby nor the
performance by the Company of its obligations thereunder will (i) violate the
Articles of Incorporation and by-laws, as amended, of the Company, (ii) breach,
or result in a default under or acceleration of, any existing obligation of the
Company in any indenture, agreement, or instrument known to me, after due
inquiry and reasonable investigation, which breach or default would reasonably
be expected to have a material adverse effect on the condition of the Company,
financial or otherwise, or adversely affect the transactions contemplated by the
Principal Documents, (iii) violate or contravene the terms of any court order,
or (iv) violate applicable provisions of statutory law or regulation.
(12) There are no actions, proceedings or investigations pending against
the Company or, to my knowledge, threatened against the Company before any
court, administrative agency, or tribunal (i) asserting the invalidity of the
Trust Agreement or any of the other Principal Documents, (ii) seeking to prevent
the consummation of any of the transactions contemplated by any of the
Underwriting Agreements or the Principal Documents or the execution and delivery
thereof, or (iii) that could reasonably be expected to materially and adversely
affect the enforceability of the Trust Agreement against the Company or the
ability of the Company to perform its obligations thereunder.
(13) No consent, approval, authorization, or order of, or filing with, any
court or governmental agency or body is required of the Company for the
consummation of the transactions contemplated in the Trust Agreement, except
such consents, approvals, authorizations, or orders as have been obtained or
such filings as have been made.
(14) There are no legal or governmental proceedings pending or threatened
against the Seller, the Company, or the Master Servicer that are required to be
disclosed in the Registration Statement, other than those disclosed therein.
A-4
<PAGE>
(15) There are no contracts, indentures, mortgages, loan agreements,
notes, leases, or other instruments to which the Seller, the Company, or the
Master Servicer is a party that are required to be described or referred to in
the Registration Statement or to be filed as exhibits thereto other than those
described or referred to or filed or incorporated by reference as exhibits
thereto.
For purposes of this opinion, I have assumed that the Underwriting
Agreements and the Principal Documents have been duly executed and delivered by
all parties thereto (other than the Seller and the Company) and are valid and
binding upon and enforceable against such parties, subject, as to the
enforceability thereof, to bankruptcy, reorganization, insolvency, moratorium
and other laws affecting creditors' rights generally and by the application of
general principles of equity.
The opinions expressed herein are limited to matters of Federal law and the
laws of the Commonwealth of Virginia, without giving effect to principles of
conflicts of laws.
This opinion is rendered solely to the addressee hereof, for its use in
connection with the transactions contemplated by the Underwriting Agreements and
Principal Documents and may not be relied upon for any other purpose or by any
other person.
Very truly yours,
-----------------------------
[ ]
General Counsel
A-5
<PAGE>
EXHIBIT B
[Letterhead of McGuire, Woods, Battle & Boothe, L.L.P.]
[ ], 1996
CS First Boston Corporation
Park Avenue Plaza
New York, New York 10055
[other Underwriters]
Re: Floating Rate Asset Backed Notes
and Floating Rate Asset Backed
Certificates
--------------------------------
Gentlemen:
We have acted as counsel to Signet Bank (the "Seller") and Signet
Student Loan Trust 1996-A (the "Trust") in connection with the issuance by the
Trust of the Floating Rate Class A-1 Asset Backed Notes in the aggregate
principal amount of $_______ and the Floating Rate Class A-2 Asset Backed Notes
in the aggregate principal amount of $________ (collectively, the "Notes") and
the Floating Rate Asset Backed Certificates in the aggregate principal amount of
$____________. This opinion letter is furnished to you pursuant to Section 6(f)
of the Note Underwriting Agreement (the "Note Underwriting Agreement") dated
[ ], 1996 between the Seller and the Underwriters named therein and
Section 6(f) of the Certificate Underwriting Agreement (the "Certificate
Underwriting Agreement") dated [ ], 1996 between the Seller and the
Underwriters named therein. Except as otherwise indicated herein, capitalized
terms used in this opinion letter are defined as set forth in the Underwriting
Agreements.
We have examined such documents, records and matters of law as we have
deemed necessary for purposes of this opinion letter, and based thereupon and
subject to the foregoing, we are of the opinion that:
(1) The Indenture creates a valid security interest in the Financed
Student Loans, including all moneys paid thereunder on or after the Cutoff
Date, in favor of the
B-1
<PAGE>
Indenture Trustee, as trustee for the benefit of the Noteholders, that has
been duly perfected by the filing of financing statements executed by the
Eligible Lender Trustee in the offices indicated in Schedule __ hereto,
provided, that, this opinion does not in any way derogate the conclusion
expressed in paragraph ___ hereto [true sale paragraph]. The filing of
such financing statements has perfected a first priority security interest
in such Student Loans, including all moneys paid thereunder, except for
Liens the priority of which is determined under the provisions of
applicable law without regard to the filing of record of a financing
statement in the offices listed on Schedule __ hereto or Liens the priority
of which does require such a filing, but, upon such filing, may relate back
to a date prior to the date on which the security interest was perfected.
No filings or other actions, other than the filing of appropriate UCC
continuation statements, are necessary to maintain the perfection and
priority of such security interest. We call your attention to the fact
that unless appropriate financing statements are timely filed in the
appropriate offices, perfection of the security interest in the Financed
Student Loans, including all moneys paid thereunder, will be terminated if
the Trust hereafter changes its name, identity or corporate structure so
that the financing statements filed in the offices indicated on Schedule __
hereto become seriously misleading.
(2) A security interest in the Financed Student Loans may, pursuant to
the provisions of 20 U.S.C. (S) 1087-2(d)(3), be perfected in the manner
provided by the UCC for perfection of a security interest in accounts.
(3) The Seller is not, and will not as a result of the offer and sale
of the Notes and Certificates as contemplated in the Prospectus and the
Note Underwriting Agreement and the Certificate Underwriting Agreement
become, an "investment company" as defined in the Investment Company Act or
a company "controlled by" an "investment company" within the meaning of the
Investment Company Act.
(4) All actions required to be taken and all filings required to be
made by the Seller or the Trust under the Act and the Exchange Act prior to
the sale of the Notes and the Certificates have been duly taken or made.
(5) The Trust Agreement need not be qualified under the Trust
Indenture Act of 1939, and the Trust is not required to register under the
Investment Company Act.
B-2
<PAGE>
(6) The Indenture has been duly qualified under the Trust Indenture
Act.
(7) The Trust has been duly formed, is validly existing and is in good
standing under the laws of the State of Delaware, with full power and
authority to own its assets and conduct its business as described in the
Prospectus.
(8) The Trust has duly authorized the Indenture, the Loan Sale
Agreement, the Master Servicing Agreement and the Administration Agreement,
and, when duly executed and delivered by the other parties thereto, they
will be valid and binding obligations of the Trust, enforceable against the
Trust in accordance with their terms, subject, as to the enforceability
thereof, to bankruptcy, reorganization, insolvency, moratorium and other
laws affecting creditors' rights generally and by the application of
general principles of equity.
(9) The Registration Statement has become effective under the Act; any
required filing of the Prospectus (and any Supplement thereto) pursuant to
Rule 424(b) promulgated under the Act has been made in the manner and
within the time period required under such rule; no stop order suspending
the effectiveness of the Registration Statement has been issued and, to our
knowledge, no proceedings for that purpose are pending or threatened by the
Commission.
(10) The Basic Documents, and the transactions contemplated by the
Basic Documents, conform in all material respects to the applicable
requirements of the Higher Education Act, and, upon the due authorization,
execution and delivery of the Basic Documents and the consummation of such
transactions, the Financed Student Loans, legal title to which will be held
by the Eligible Lender Trustee on behalf of the Trust, will qualify,
subject to compliance with all applicable origination and servicing
requirements with respect thereto, to receive all applicable federal
assistance payments, including federal reinsurance and federal interest
subsidies and special allowance payments, with respect thereto.
(11) We have examined the Registration Statement and the Prospectus
(and any Supplement thereto), and nothing has come to our attention that
would lead us to believe that, solely with respect to the Higher Education
Act and the student loan business, the Registration Statement or the
Prospectus or any amendment or supplement thereto as of the respective
dates thereof or on the Closing Date contains an
B-3
<PAGE>
untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements therein not misleading.
(12) The Eligible Lender Trustee is an "eligible lender" as such term
is defined in Section 435(d) of the Higher Education Act for purposes of
holding legal title to the Financed Student Loans.
(13) The statements contained in the Prospectus under the headings
"Risk Factors -- Certain Legal Aspects" and "Certain Legal Aspects of the
Student Loans," to the extent that they describe legal matters, present
fair summaries of such legal matters.
(14) The statements contained in the Prospectus under the captions
"Description of the Securities," "Description of the Transfer and Servicing
Agreements, "Description of the Notes" and "Description of the
Certificates," insofar as such statements purport to summarize the
provisions of the Certificates, the Notes, the Indenture, the
Administration Agreement, the Loan Sale Agreement, the Master Servicing
Agreement and the Trust Agreement, present fair summaries of such
provisions.
We have participated in the preparation of the Registration Statement
and the Prospectus (and any supplement thereto). From time to time we have had
discussions with the officers and employees of the Seller and your employees and
counsel concerning the information contained in the Registration Statement and
the Prospectus (and any supplement thereto). Based thereupon we are of the
opinion that (a) the Registration Statement (except for the financial
statements, financial schedules and other numerical, financial and statistical
information contained therein and the Form T-1 included therein, as to all of
which we express no view) at the time the Registration Statement became
effective under the Act complied as to form in all material respects with the
Act and the Trust Indenture and the rules and regulations thereunder and (b) the
Prospectus (and any supplement thereto) (except for the financial statements,
financial schedules and other numerical, financial and statistical information
contained therein, as to all of which we express no view) as of its date
complied as to form with the Act and the rules and regulations thereunder.
Based upon the participation and discussions described above, no facts have come
to our attention to cause us to believe that (a) the Registration Statement
(except for the financial statements, financial schedules and other numerical,
financial and statistical information contained therein, as to which we express
no view) at the time the Registration Statement became effective under the
B-4
<PAGE>
Act contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading or (b) the Prospectus (and any Supplement thereto)
(except for the financial statements, financial schedules and other numerical,
financial and statistical information contained therein, as to all of which we
express no view) as of its date or the date hereof contained or contains any
untrue statement of a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
[McGuire, Woods, Battle & Boothe, L.L.P. will rely on the opinion of Brown
& Wood llp with respect to certain matters of New York law and on Richards,
Layton & Finger with respect to certain matters of Delaware law.]
Very truly yours,
B-5
<PAGE>
Exhibit 3.3
DRAFT
12/10/96
SIGNET STUDENT LOAN CORPORATION
ARTICLES OF INCORPORATION
ARTICLE I
NAME
The name of the Corporation is Signet Student Loan Corporation.
ARTICLE II
PURPOSES
The purposes for which the Corporation is organized are limited to the
following:
(i) to be a party to trust agreements (or other similar documents) entered into
with one or more entities serving as eligible lender or other trustee and the
parent or one or more affiliates of the Corporation; providing for, among other
things, the issuance of securities representing beneficial ownership interests
in, or secured by, primarily one or more pools of student or other loans and
related assets (each a "Trust");
(ii) to acquire, own, hold, transfer, assign, pledge and otherwise deal with
trust certificates and other securities issued by the Trusts ("Trust
Securities");
(iii) for Federal tax purposes, to serve as general partner of the Trusts; and
(iv) to engage in any activity and to exercise any powers permitted to
corporations under the laws of the Commonwealth of Virginia that are incident to
the foregoing and necessary or convenient to accomplish the foregoing; provided,
however, that the Corporation shall not have the power to issue debt obligations
or incur, assume or guarantee any additional debt. The Corporation shall not
engage in any business or activity other than in connection with or relating to
the activities described above.
ARTICLE III
CAPITAL STOCK
A. Authorized Stock. The aggregate number of shares that the Corporation
----------------
shall have authority to issue and the par value per share are as follows:
Class Number of Shares Par Value Per Share
----- ---------------- -------------------
Common Stock 5,000 $0.01
<PAGE>
B. Preemptive Rights. No holder of outstanding shares shall have any
-----------------
preemptive right with respect to (i) any shares of any class of the Corporation,
whether now or hereafter authorized, (ii) any warrants, rights or options to
purchase any such shares or (iii) any obligations convertible into or
exchangeable for any such shares or into warrants, rights or options to purchase
any such shares.
ARTICLE IV
BOARD OF DIRECTORS; OTHER MATTERS
A. The affairs of the Corporation shall be managed by a board of directors
consisting of three members. At least one director of the Corporation (the
"Outside Director") shall not be a director, officer or employee of, or direct
or indirect beneficial owner of 1% or more of the voting securities of, or
member of the immediate family of any such director, officer, employee or
beneficial owner of, the Corporation's parent, Signet Banking Corporation
("Signet"), or any corporate affiliate of Signet. In addition, no person shall
be an Outside Director if such person, or any member of such person's immediate
family, shall have a direct or indirect beneficial ownership of the voting
securities of Signet or any corporate affiliate of Signet which would be in
excess of 5% of such person's net worth. Notwithstanding the foregoing, the
Outside Director may be a director of one other corporation that is an affiliate
of Signet, provided such corporation is formed with purposes limited to those
similar to the purposes of the Corporation. For the purposes of the foregoing,
an "affiliate" of an entity is an entity controlling, controlled by or under
common control with such entity. Should any Outside Director resign, die, become
disabled or incapacitated, or be prevented from acting, the affairs of the
Corporation shall and may be managed by the remaining directors, who shall
promptly replace the aforementioned Outside Director with a person meeting the
requirements set forth above.
B. The Corporation shall maintain a principal office through which its
business shall be conducted, which office may be separately denoted space at the
offices of Signet.
C. The Corporation shall maintain corporate records and books of account
and shall not commingle its corporate records and books of account with the
corporate records and books of account of Signet.
D. The Board of Directors of the Corporation shall hold appropriate
meetings to authorize all of its corporate actions. Regular meetings of the
Board of Directors shall be held not less frequently than three times per annum.
E. The funds and other assets of the Corporation shall not be commingled
with those of any other corporation.
F. The Corporation shall pay its own expenses and shall not hold itself
out as being liable for the debts of any other party.
G. The Corporation shall not form, or cause to be formed, any
subsidiaries.
2
<PAGE>
H. The Corporation shall act solely in its corporate name and through its
duly authorized officers or agents in the conduct of its business, and shall
conduct its business so as not to mislead others as to the identity with which
they are concerned.
I. Meetings of the shareholders of the Corporation shall be held not less
frequently than one time per annum.
J. The Corporation shall operate in such a manner that it would not be
substantively consolidated in the trust estate of any other entity.
ARTICLE V
PROHIBITED TRANSACTIONS
Notwithstanding any other provision of these Articles of Incorporation and
any provision of law that otherwise so empowers the Corporation, so long as any
Trust Securities are outstanding, the Corporation shall not do any of the
following:
(i) dissolve or liquidate, in whole or in part;
(ii) merge or consolidate with any other corporation other than a
corporation wholly owned, directly or indirectly, by any entity owning 100%
of the stock of the Corporation and having articles of incorporation
containing provisions identical to the provisions of Articles II and IV and
this Article V;
(iii) without the unanimous approval of the Board of Directors (including
the Outside Director), institute proceedings to be adjudicated a bankrupt
or insolvent, or consent to the institution of bankruptcy or insolvency
proceedings against it, or file a petition or answer or consent seeking
reorganization or relief under the Federal Bankruptcy laws, or consent to
the filing of any such petition or to the appointment of a receiver,
liquidator, assignee, trustee, conservator, sequestrator (or other similar
official) of the Corporation or of any substantial part of the
Corporation's property, or make an assignment for the benefit of creditors,
or admit in writing its inability to pay its debts generally as they become
due, or take corporate action in furtherance of any such action; or
(iv) amend these Articles of Incorporation to alter in any manner or delete
Article II or this Article V or, without the prior written affirmation of
each statistical rating organization then rating any Trust Securities that
such action will not cause the withdrawal or downgrading of any rating then
assigned by such organization to any outstanding Trust Securities, Article
IV.
3
<PAGE>
ARTICLE VI
REGISTERED OFFICE AND REGISTERED AGENT
The address of the initial registered office of the Corporation, which
is located in the City of Richmond, Virginia is _______________, Richmond,
Virginia. The initial registered agent of the Corporation is ___________, whose
business office is identical with the registered office and who is a resident of
Virginia and a member of the Virginia State Bar.
ARTICLE VII
LIMIT ON LIABILITY AND INDEMNIFICATION
A. Definitions. For purposes of this Article the following definitions
-----------
shall apply:
(i) "Corporation" means this Corporation only and no predecessor
-----------
entity or other legal entity;
(ii) "expenses" include counsel fees, expert witness fees, and costs
--------
of investigation, litigation and appeal, as well as any amounts expended
in asserting a claim for indemnification;
(iii) "liability" means the obligation to pay a judgment, settlement,
---------
penalty, fine, or other such obligation, including, without limitation,
any excise tax assessed with respect to an employee benefit plan;
(iv) "legal entity" means a corporation, partnership, joint venture,
------------
trust, employee benefit plan or other enterprise;
(v) "predecessor entity" means a legal entity, the existence of
------------------
which ceased upon its acquisition by the Corporation in a merger or
otherwise; and
(vi) "proceeding" means any threatened, pending, or completed
----------
action, suit, proceeding or appeal whether civil, criminal,
administrative or investigative and whether formal or informal.
B. Limit on Liability. In every instance in which the Virginia Stock
------------------
Corporation Act, as it exists on the date hereof or may hereafter be amended,
permits the limitation or elimination of liability of directors or officers of a
corporation to the corporation or its shareholders, the directors and officers
of this Corporation shall not be liable to the Corporation or its shareholders.
C. Indemnification of Directors and Officers. The Corporation shall
-----------------------------------------
indemnify any individual who is, was or is threatened to be made a party to a
proceeding (including a proceeding by or in the right of the Corporation or by
or on behalf of its shareholders) because such individual is or was a director
or officer of the Corporation or because such individual is or was serving the
Corporation, or any other legal entity in any capacity at the request of the
Corporation while a director or officer of the Corporation or because such
individual is or was
4
<PAGE>
serving the Corporation, against all liabilities and reasonable expenses
incurred in the proceeding except such liabilities and expenses as are incurred
because of such individual's willful misconduct or knowing violation of the
criminal law. Service as a director or officer of a legal entity controlled by
the Corporation shall be deemed service at the request of the Corporation. The
determination that indemnification under this Section C is permissible and the
evaluation as to the reasonableness of expenses in a specific case shall be
made, in the case of a director, as provided by law, and in the case of an
officer, as provided in Section D of this Article; provided, however, that if a
majority of the directors of the Corporation has changed after the date of the
alleged conduct giving rise to a claim for indemnification, such determination
and evaluation shall, at the option of the person claiming indemnification, be
made by special legal counsel agreed upon by the Board of Directors and such
person. Unless a determination has been made that indemnification is not
permissible, the Corporation shall make advances and reimbursements for expenses
incurred by a director or officer in a proceeding upon receipt of an undertaking
from such director or officer to repay the same if it is ultimately determined
that such director or officer is not entitled to indemnification. Such
undertaking shall be an unlimited, unsecured general obligation of the director
or officer and shall be accepted without reference to such director's or
officer's ability to make repayment. The termination of a proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
---- ----------
its equivalent shall not of itself create a presumption that a director or
officer acted in such a manner as to make such director or officer ineligible
for indemnification. The Corporation is authorized to contract in advance to
indemnify and make advances and reimbursements for expenses to any of its
directors or officers to the same extent provided in this Section C.
D. Indemnification of Others. The Corporation may, to a lesser
-------------------------
extent or to the same extent that it is required to provide indemnification and
make advances and reimbursements for expenses to its directors and officers
pursuant to Section C, provide indemnification and make advances and
reimbursements for expenses to its employees and agents, the directors,
officers, employees and agents of its subsidiaries and predecessor entities, and
any person serving any other legal entity in any capacity at the request of the
Corporation, and may contract in advance to do so. The determination that
indemnification under this Section D is permissible, the authorization of such
indemnification and the evaluation as to the reasonableness of expenses in a
specific case shall be made as authorized from time to time by general or
specific action of the Board of Directors, which action may be taken before or
after a claim for indemnification is made, or as otherwise provided by law. No
person's rights under Section C of this Article shall be limited by the
provisions of this Section D.
E. Miscellaneous. The rights of each person entitled to indemnification
-------------
under this Article shall inure to the benefit of such person's heirs, executors
and administrators. Special legal counsel selected to make determinations under
this Article may be counsel for the Corporation. Indemnification pursuant to
this Article shall not be exclusive of any other right of indemnification to
which any person may be entitled, including indemnification pursuant to a valid
contract, indemnification by legal entities other than the Corporation and
indemnification under policies of insurance purchased and maintained by the
Corporation or others. However, no person shall be entitled to indemnification
by the Corporation to the extent such person is
5
<PAGE>
indemnified by another, including an insurer. The Corporation is
authorized to purchase and maintain insurance against any liability it may have
under this Article or to protect any of the persons named above against any
liability arising from their service to the Corporation or any other legal
entity at the request of the Corporation regardless of the Corporation's power
to indemnify against such liability. The provisions of this Article shall not be
deemed to preclude the Corporation from entering into contracts otherwise
permitted by law with any individuals or legal entities, including those named
above. If any provision of this Article or its application to any person or
circumstance is held invalid by a court of competent jurisdiction, the
invalidity shall not affect other provisions or applications of this Article,
and to this end the provisions of this Article are severable.
F. Amendments. No amendment, modification or repeal of this Article
----------
shall diminish the rights provided hereunder to any person arising from conduct
or events occurring before the adoption of such amendment, modification or
repeal.
Dated: _____________, 1996
By: ______________________________
, Incorporator
6
<PAGE>
Exhibit 3.4
Draft
12/10/96
SIGNET STUDENT LOAN CORPORATION
BYLAWS
<PAGE>
TABLE OF CONTENTS
ARTICLE I
MEETINGS OF SHAREHOLDERS
1.1 Place and Time of Meetings.......................................... 4
1.2 Annual Meeting...................................................... 4
1.3 Special Meetings.................................................... 4
1.4 Record Dates........................................................ 4
1.5 Notice of Meetings.................................................. 5
1.6 Waiver of Notice; Attendance at Meeting............................. 6
1.7 Quorum and Voting Requirements...................................... 7
1.8 Action Without Meeting.............................................. 7
ARTICLE II
DIRECTORS
2.1 General Powers...................................................... 8
2.2 Term and Election................................................... 8
2.3 Removal; Vacancies.................................................. 9
2.4 Annual and Regular Meetings......................................... 9
2.5 Special Meetings.................................................... 10
2.6 Notice of Meetings.................................................. 10
2.7 Waiver of Notice; Attendance at Meeting............................. 10
2.8 Quorum; Voting...................................................... 11
2.9 Telephonic Meetings................................................. 11
2.10 Action Without Meeting............................................. 12
2.11 Compensation....................................................... 12
ARTICLE III
OFFICERS
3.1 Officers............................................................ 12
3.2 Election; Term...................................................... 13
3.3 Removal of Officers................................................. 13
3.4 Duties of Officers.................................................. 13
ARTICLE IV
SHARE CERTIFICATES
4.1 Form................................................................ 13
4.2 Transfer............................................................ 14
4.3 Restrictions on Transfer............................................ 14
4.4 Lost or Destroyed Share Certificates................................ 14
<PAGE>
ARTICLE V
MISCELLANEOUS PROVISIONS
5.1 Corporate Seal....................................................... 15
5.2 Fiscal Year.......................................................... 15
5.3 Amendments........................................................... 15
3
<PAGE>
SIGNET STUDENT LOAN CORPORATION
BYLAWS
ARTICLE I
MEETINGS OF SHAREHOLDERS
1.1 Place and Time of Meetings. Meetings of shareholders shall be
held at such place, either within or without the Commonwealth of Virginia, and
at such time as may be provided in the notice of the meeting and approved by the
Chairman of the Board of Directors (the "Chairman"), the President or the Board
of Directors.
1.2 Annual Meeting. The annual meeting of shareholders shall be held
on the second Tuesday in July of each year or on such date as may be designated
by resolution of the Board of Directors from time to time for the purpose of
electing directors and conducting such other business as may properly come
before the meeting.
1.3 Special Meetings. Special meetings of the shareholders may be
called by the Chairman, the President or the Board of Directors and shall be
called by the Secretary upon demand of share holders as required by law. Only
business within the purpose or purposes described in the notice for a special
meeting of shareholders may be conducted at the meeting.
1.4 Record Dates. The record date for determining shareholders
entitled to demand a special meeting is the date the first shareholder signs the
demand that the meeting be held.
Except as is provided in the preceding paragraph, the Board of
Directors may fix, in advance, a record date to make a determination of
shareholders for any purpose, such date to be not more than
4
<PAGE>
70 days before the meeting or action requiring a determination of shareholders.
If no such record date is set, then the record date shall be the close of
business on the day before the date on which the first notice is given.
When a determination of shareholders entitled to notice of or to vote
at any meeting of shareholders has been made, such determination shall be
effective for any adjournment of the meeting unless the Board of Directors fixes
a new record date, which it shall do if the meeting is adjourned to a date more
than 120 days after the date fixed for the original meeting.
1.5 Notice of Meetings. Written notice stating the place, day and
hour of each meeting of shareholders and, in case of a special meeting, the
purpose or purposes for which the meeting is called shall be given not less than
10 nor more than 60 days before the date of the meeting (except when a different
time is required in these Bylaws or by law) either personally or by mail,
telephone, telegraph, teletype, telecopy or other form of wire or wireless
communication, or by private courier to each shareholder of record entitled to
vote at such meeting and to such nonvoting shareholders as may be required by
law. If mailed, such notice shall be deemed to be effective when deposited in
first class United States mail with postage thereon prepaid and addressed to the
shareholder at his address as it appears on the share transfer books of the
Corporation. If given in any other manner, such notice shall be deemed to be
effective (i) when given personally or by telephone, (ii) when sent by
telegraph, teletype, telecopy or other form of wire or wireless communication or
(iii) when given to a private courier to be delivered.
If a meeting is adjourned to a different date, time or place, notice
need not be given if the new date, time or place is announced at the meeting
before adjournment. However, if a new record date for an adjourned meeting is
fixed, notice of the adjourned meeting shall be given to
5
<PAGE>
shareholders as of the new record date unless a court provides otherwise.
1.6 Waiver of Notice; Attendance at Meeting. A shareholder may waive
any notice required by law, the Articles of Incorporation or these Bylaws before
or after the date and time of the meeting that is the subject of such notice.
The waiver shall be in writing, be signed by the shareholder entitled to the
notice and be delivered to the Secretary for inclusion in the minutes or filing
with the corporate records.
A shareholder's attendance at a meeting (i) waives objection to lack
of notice or defective notice of the meeting unless the shareholder, at the
beginning of the meeting, objects to holding the meeting or transacting business
at the meeting and (ii) waives objection to consideration of a particular matter
at the meeting that is not within the purpose or purposes described in the
meeting notice unless the shareholder objects to considering the matter when it
is presented.
1.7 Quorum and Voting Requirements. Unless otherwise required by
law, a majority of the votes entitled to be cast on a matter constitutes a
quorum for action on that matter. Once a share is represented for any purpose
at a meeting, it is deemed present for quorum purposes for the remainder of the
meeting and for any adjournment of that meeting unless a new record date is or
shall be set for that adjourned meeting. If a quorum exists, action on a
matter, other than the election of directors, is approved if the votes cast
favoring the action exceed the votes cast opposing the action unless a greater
number of affirmative votes is required by law. Directors shall be elected by a
plurality of the votes cast by the shares entitled to vote in the election at a
meeting at which a quorum is present. Less than a quorum may adjourn a meeting.
1.8 Action Without Meeting. Action required or permitted to be taken
at a meeting of the shareholders may be taken without a meeting and without
action by the Board of Directors if the
6
<PAGE>
action is taken by all the shareholders entitled to vote on the action. The
action shall be evidenced by one or more written consents describing the action
taken, signed by all the shareholders entitled to vote on the action and
delivered to the Secretary for inclusion in the minutes or filing with the
corporate records. Action taken by unanimous consent shall be effective
according to its terms when all consents are in the possession of the
Corporation unless the consent specifies a different effective date, in which
event the action taken shall be effective as of the date specified therein
provided that the consent states the date of execution by each shareholder. A
shareholder may withdraw a consent only by delivering a written notice of
withdrawal to the Corporation prior to the time that all consents are in the
possession of the Corporation.
If not otherwise fixed pursuant to the provisions of Section 1.4, the
record date for determining shareholders entitled to take action without a
meeting is the date the first shareholder signs the consent described in the
preceding paragraph.
ARTICLE II
DIRECTORS
2.1 General Powers. The Corporation shall have a Board of Directors.
All corporate powers shall be exercised by or under the authority of, and the
business and affairs of the Corporation managed under the direction of, its
Board of Directors, subject to any limitation set forth in the Articles of
Incorporation.
7
<PAGE>
2.2 Term and Election. Each director shall hold office until his
death, resignation, retirement or removal or until his successor is elected.
Except as provided in Section 2.3 of this Article, the directors (other than
initial directors) shall be elected by the holders of the common shares at the
annual meeting of shareholders and those persons who receive the greatest number
of votes shall be deemed elected even though they do not receive a majority of
the votes cast. No individual shall be named or elected as a director without
his prior consent.
2.3 Removal; Vacancies. The shareholders may remove one or more
directors, with or without cause, if the number of votes cast for such removal
constitutes a majority of the votes entitled to be cast at an election of
directors. A director may be removed by the shareholders only at a meeting
called for the purpose of removing him and the meeting notice must state that
the purpose, or one of the purposes of the meeting, is removal of the director.
A vacancy on the Board of Directors, including a vacancy resulting
from the removal of a director, may be filled by (i) the shareholders, (ii) the
Board of Directors or (iii) the affirmative vote of a majority of the remaining
directors though less than a quorum of the Board of Directors and may, in the
case of a resignation that will become effective at a specified later date, be
filled before the vacancy occurs, but the new director may not take office until
the vacancy occurs.
2.4 Annual and Regular Meetings. An annual meeting of the Board of
Directors, which shall be considered a regular meeting, shall be held
immediately following each annual meeting of shareholders for the purpose of
electing officers and carrying on such other business as may properly come
before the meeting. The Board of Directors may also adopt a schedule of
additional meetings which shall be considered regular meetings. Regular
meetings shall be held at such times and at such places, within or without the
Commonwealth of Virginia, as the Chairman, the President or the
8
<PAGE>
Board of Directors shall designate from time to time. If no place is
designated, regular meetings shall be held at the principal office of the
Corporation.
2.5 Special Meetings. Special meetings of the Board of Directors may
be called by the Chairman, the President or a majority of the directors of the
Corporation and shall be held at such times and at such places, within or
without the Commonwealth of Virginia, as the person or persons calling the
meetings shall designate. If no such place is designated in the notice of a
meeting, it shall be held at the principal office of the Corporation.
2.6 Notice of Meetings. No notice need be given of regular meetings of
the Board of Directors.
Notices of special meetings of the Board of Directors shall be given
to each director in person or delivered to his residence or business address (or
such other place as he may have directed in writing) not less than twenty-four
(24) hours before the meeting by mail, messenger, telecopy, telegraph, or other
means of written communication or by telephoning such notice to him. Any such
notice shall set forth the time and place of the meeting and state the purpose
for which it is called.
2.7 Waiver of Notice; Attendance at Meeting. A director may waive
any notice required by law, the Articles of Incorporation or these Bylaws before
or after the date and time stated in the notice and such waiver shall be
equivalent to the giving of such notice. Except as provided in the next
paragraph of this section, the waiver shall be in writing, signed by the
director entitled to the notice and filed with the minutes or corporate records.
A director's attendance at or participation in a meeting waives any
required notice to him of the meeting unless the director, at the beginning of
the meeting or promptly upon his arrival, objects
9
<PAGE>
to holding the meeting or transacting business at the meeting and does not
thereafter vote for or assent to action taken at the meeting.
2.8 Quorum; Voting. A majority of the number of directors fixed in
these Bylaws shall constitute a quorum for the transaction of business at a
meeting of the Board of Directors. If a quorum is present when a vote is taken,
the affirmative vote of a majority of the directors present is the act of the
Board of Directors. A director who is present at a meeting of the Board of
Directors or a committee of the Board of Directors when corporate action is
taken is deemed to have assented to the action taken unless (i) he objects, at
the beginning of the meeting or promptly upon his arrival, to holding it or
transacting specified business at the meeting or (ii) he votes against or
abstains from the action taken.
2.9 Telephonic Meetings. The Board of Directors may permit any or
all directors to participate in a regular or special meeting by or conduct the
meeting through the use of any means of communication by which all directors
participating may simultaneously hear each other during the meeting. A director
participating in a meeting by this means is deemed to be present in person at
the meeting.
2.10 Action Without Meeting. Action required or permitted to be
taken at a meeting of the Board of Directors may be taken without a meeting if
the action is taken by all members of the Board. The action shall be evidenced
by one or more written consents stating the action taken, signed by each
director either before or after the action is taken and included in the minutes
or filed with the corporate records. Action taken under this section shall be
effective when the last director signs the consent unless the consent specifies
a different effective date, in which event the action taken is effective as of
the date specified therein, provided the consent states the date of execution
10
<PAGE>
by each director.
2.11 Compensation. The Board of Directors may fix the compensation
of directors and may provide for the payment of all expenses incurred by them in
attending meetings of the Board of Directors.
ARTICLE III
OFFICERS
3.1 Officers. The officers of the Corporation shall be a Chairman of
the Board of Directors, a President, a Secretary and a Treasurer, and, in the
discretion of the Board of Directors, one or more Vice-Presidents and such other
officers as may be deemed necessary or advisable to carry on the business of the
Corporation. Any two or more offices may be held by the same person.
3.2 Election; Term. Officers shall be elected at the annual meeting
of the Board of Directors and may be elected at such other time or times as the
Board of Directors shall determine. They shall hold office, unless removed,
until the next annual meeting of the Board of Directors or until their
successors are elected. Any officer may resign at any time upon written notice
to the Board of Directors and such resignation shall be effective when notice is
delivered unless the notice specifies a later effective date.
3.3 Removal of Officers. The Board of Directors may remove any officer
at any time, with or without cause.
11
<PAGE>
3.4 Duties of Officers. The President shall be the Chief Executive
Officer of the Corporation. He and the other officers shall have such powers
and duties as generally pertain to their respective offices as well as such
powers and duties as may be delegated to them from time to time by the Board of
Directors. The Chief Executive Officer, if he is present, shall be chairman of
all meetings of the shareholders, the Board of Directors and any committee of
which he is a member.
ARTICLE IV
SHARE CERTIFICATES
4.1 Form. Shares of the Corporation shall, when fully paid, be
uncertificated or evidenced by certificates containing such information as is
required by law and approved by the Board of Directors. Certificates shall be
signed by the President and the Secretary and may (but need not) be sealed with
the seal of the Corporation. The seal of the Corporation and any or all
signatures on a share certificate may be facsimile. If any officer who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer before such certificate is issued it may be
issued by the Corporation with the same effect as if he were such officer on the
date of issue.
4.2 Transfer. The Board of Directors may make rules and regulations
concerning the issue, registration and transfer of certificates representing the
shares of the Corporation. Transfers of shares and of the certificates
representing such shares shall be made upon the books of the Corporation by
surrender of the certificates representing such shares accompanied by written
assign-
12
<PAGE>
ments given by the owners or their attorneys-in-fact.
4.3 Restrictions on Transfer. A lawful restriction on the transfer
or registration of transfer of shares is valid and enforceable against the
holder or a transferee of the holder if the restriction complies with the
requirements of law and its existence is noted conspicuously on the front or
back of the certificate representing the shares. Unless so noted, a restriction
is not enforceable against a person without knowledge of the restriction.
4.4 Lost or Destroyed Share Certificates. The Corporation may issue
a new share certificate in the place of any certificate theretofore issued which
is alleged to have been lost or destroyed and may require the owner of such
certificate, or his legal representative, to give the Corporation a bond, with
or without surety, or such other agreement, undertaking or security as the Board
of Directors shall determine is appropriate, to indemnify the Corporation
against any claim that may be made against it on account of the alleged loss or
destruction or the issuance of any such new certificate.
ARTICLE V
MISCELLANEOUS PROVISIONS
5.1 Corporate Seal. The corporate seal of the Corporation shall be
circular and shall have inscribed thereon, within and around the circumference
"SIGNET STUDENT LOAN CORPORATION". In the center shall be the word "SEAL".
5.2 Fiscal Year. The fiscal year of the Corporation shall be
determined in the discretion of the Board of Directors, but in the absence of
any such determination it shall be the calendar year.
13
<PAGE>
5.3 Amendments. These Bylaws may be amended or repealed, and new
Bylaws may be made at any regular or special meeting of the Board of Directors.
Bylaws made by the Board of Directors may be repealed or changed and new Bylaws
may be made by the shareholders, and the shareholders may prescribe that any
Bylaw made by them shall not be altered, amended or repealed by the Board of
Directors.
14
<PAGE>
Exhibit 4.1
B&W DRAFT
12/10/96
================================================================================
INDENTURE
between
SIGNET STUDENT LOAN TRUST 1996-A,
as Issuer
and
THE BANK OF NEW YORK,
not in its individual capacity but
solely as Indenture Trustee
Dated as of [ , 1996]
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
Definitions and Usage
SECTION 1.01. Definitions and Usage...................................... 2
SECTION 1.02. Incorporation by Reference of Trust
Indenture Act.............................................. 2
ARTICLE II
The Notes
SECTION 2.01. Form....................................................... 3
SECTION 2.02. Execution, Authentication and Delivery..................... 3
SECTION 2.03. Temporary Notes............................................ 4
SECTION 2.04. Registration; Registration of Transfer and Exchange........ 5
SECTION 2.05. Mutilated, Destroyed, Lost or Stolen Notes................. 6
SECTION 2.06. Persons Deemed Owner....................................... 7
SECTION 2.07. Payment of Principal and Interest;
Defaulted Interest; Noteholders'
Interest LIBOR Carryover................................... 7
SECTION 2.08. Cancellation............................................... 9
SECTION 2.09. Release of Collateral...................................... 10
SECTION 2.10. Book-Entry Notes........................................... 10
SECTION 2.11. Notices to Clearing Agency................................. 11
SECTION 2.12. Definitive Notes........................................... 11
ARTICLE III
Covenants
SECTION 3.01. Payment to Noteholders..................................... 12
SECTION 3.02. Maintenance of Office or Agency............................ 12
SECTION 3.03. Money for Payments To Be Held in Trust..................... 12
SECTION 3.04. Existence.................................................. 14
SECTION 3.05. Protection of Indenture Trust Estate....................... 15
SECTION 3.06. Opinions as to Indenture Trust Estate...................... 15
SECTION 3.07. Performance of Obligations;
Servicing of Student Loans................................. 16
SECTION 3.08. Negative Covenants......................................... 19
SECTION 3.09. Annual Statement as to Compliance.......................... 20
SECTION 3.10. Issuer May Consolidate, etc.,
Only on Certain Terms...................................... 20
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SECTION 3.11. Successor or Transferee.................................... 22
SECTION 3.12. No Other Business.......................................... 22
SECTION 3.13. No Borrowing............................................... 22
SECTION 3.14. Obligations of Servicers and Administrator................. 22
SECTION 3.15. Guarantees, Loans, Advances and
Other Liabilities.......................................... 23
SECTION 3.16. Capital Expenditures....................................... 23
SECTION 3.17. Restricted Payments........................................ 23
SECTION 3.18. Notice of Events of Default................................ 23
SECTION 3.19. Further Instruments and Acts............................... 24
SECTION 3.20. Removal of Administrator................................... 24
ARTICLE IV
Satisfaction and Discharge
SECTION 4.01. Satisfaction and Discharge of Indenture.................... 24
SECTION 4.02. Application of Trust Money................................. 25
SECTION 4.03. Repayment of Moneys Held by Paying Agent................... 26
SECTION 4.04. Auction of Financed Student Loans.......................... 26
ARTICLE V
Remedies
SECTION 5.01. Events of Default.......................................... 27
SECTION 5.02. Acceleration of Maturity;
Rescission and Annulment................................... 28
SECTION 5.03. Collection of Indebtedness and
Suits for Enforcement by Indenture Trustee................. 29
SECTION 5.04. Remedies; Priorities....................................... 32
SECTION 5.05. Optional Preservation of
the Indenture Trust Estate................................. 34
SECTION 5.06. Limitation of Suits........................................ 34
SECTION 5.07. Unconditional Rights of Noteholders
To Receive Principal and Interest.......................... 35
SECTION 5.08. Restoration of Rights and Remedies......................... 35
SECTION 5.09. Rights and Remedies Cumulative............................. 35
SECTION 5.10. Delay or Omission Not a Waiver............................. 36
SECTION 5.11. Control by Noteholders..................................... 36
SECTION 5.12. Waiver of Past Defaults.................................... 36
SECTION 5.13. Undertaking for Costs...................................... 37
SECTION 5.14. Waiver of Stay or Extension Laws........................... 37
SECTION 5.15. Action on Notes............................................ 38
SECTION 5.16. Performance and Enforcement
of Certain Obligations..................................... 38
</TABLE>
<PAGE>
<TABLE>
<S> <C>
ARTICLE VI
The Indenture Trustee
SECTION 6.01. Duties of Indenture Trustee................................ 39
SECTION 6.02. Rights of Indenture Trustee................................ 40
SECTION 6.03. Individual Rights of Indenture Trustee..................... 41
SECTION 6.04. Indenture Trustee's Disclaimer............................. 41
SECTION 6.05. Notice of Defaults......................................... 42
SECTION 6.06. Reports by Indenture Trustee to Noteholders................ 42
SECTION 6.07. Compensation and Indemnity................................. 42
SECTION 6.08. Replacement of Indenture Trustee........................... 43
SECTION 6.09. Successor Indenture Trustee by Merger...................... 44
SECTION 6.10. Appointment of Co-Trustee or Separate Trustee.............. 45
SECTION 6.11. Eligibility; Disqualification.............................. 46
SECTION 6.12. Preferential Collection of
Claims Against Issuer...................................... 47
ARTICLE VII
Noteholders' Lists and Reports
SECTION 7.01. Issuer To Furnish Indenture Trustee Names and
Addresses of Noteholders................................... 47
SECTION 7.02. Preservation of Information;
Communications to Noteholders.............................. 47
SECTION 7.03. Reports by Issuer.......................................... 48
ARTICLE VIII
Accounts, Disbursements and Releases
SECTION 8.01. Collection of Money........................................ 49
SECTION 8.02. Trust Accounts............................................. 49
SECTION 8.03. General Provisions Regarding Accounts...................... 51
SECTION 8.04. Release of Indenture Trust Estate.......................... 51
SECTION 8.05. Opinion of Counsel......................................... 52
ARTICLE IX
Supplemental Indentures
SECTION 9.01. Supplemental Indentures Without
Consent of Noteholders..................................... 53
SECTION 9.02. Supplemental Indentures with
Consent of Noteholders..................................... 54
SECTION 9.03. Execution of Supplemental Indentures....................... 56
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SECTION 9.04. Effect of Supplemental Indenture........................... 56
SECTION 9.05. Conformity with Trust Indenture Act........................ 56
SECTION 9.06. Reference in Notes to Supplemental Indentures.............. 57
ARTICLE X
Redemption of Notes
SECTION 10.01. Redemption................................................ 57
SECTION 10.02. Form of Redemption Notice................................. 58
SECTION 10.03. Notes Payable on Redemption Date.......................... 58
ARTICLE XI
Miscellaneous
SECTION 11.01. Compliance Certificates and Opinions...................... 58
SECTION 11.02. Form of Documents Delivered to Indenture Trustee.......... 61
SECTION 11.03. Acts of Noteholders....................................... 62
SECTION 11.04. Notices to Indenture Trustee,
Issuer and Rating Agencies................................ 62
SECTION 11.05. Notices to Noteholders; Waiver............................ 63
SECTION 11.06. Alternate Payment and Notice Provisions................... 64
SECTION 11.07. Conflict with Trust Indenture Act......................... 64
SECTION 11.08. Effect of Headings and Table of Contents.................. 64
SECTION 11.09. Successors and Assigns.................................... 64
SECTION 11.10. Separability.............................................. 65
SECTION 11.11. Benefits of Indenture..................................... 65
SECTION 11.12. [Reserved]................................................ 65
SECTION 11.13. Governing Law............................................. 65
SECTION 11.14. Counterparts.............................................. 65
SECTION 11.15. Recording of Indenture.................................... 65
SECTION 11.16. Trust Obligations......................................... 65
SECTION 11.17. No Petition............................................... 66
SECTION 11.18. Inspection................................................ 66
</TABLE>
EXHIBIT A - Form of Class A-1 Note
EXHIBIT B - Form of Class A-2 Note
EXHIBIT C - Class A-1 Note Depository Agreement
EXHIBIT D - Class A-2 Note Depository Agreement
<PAGE>
INDENTURE dated as of [ , 1996], between SIGNET STUDENT LOAN TRUST
1996-A, a Delaware trust (the "Issuer"), and THE BANK OF NEW YORK, a New York
banking corporation, as trustee and not in its individual capacity (the
"Indenture Trustee").
Each party agrees as follows for the benefit of the other party and for the
equal and ratable benefit of the holders of the Issuer's Floating Rate Class A-1
Asset Backed Notes (the "Class A-1 Notes") and Floating Rate Class A-2 Asset
Backed Notes (the "Class A-2 Notes" and, together with the Class A-1 Notes, the
"Notes"):
GRANTING CLAUSE
The Issuer (and, with respect to the Financed Student Loans, the Eligible
Lender Trustee) hereby Grants to the Indenture Trustee at the Closing Date, as
trustee for the benefit of the Noteholders, all the Issuer's right, title and
interest in and to the following:
(a) the Financed Student Loans, and all obligations of the Obligors
thereunder including all moneys paid thereunder on or after the Cutoff Date
(or, in the case of Additional Student Loans, on and after the related
Subsequent Cutoff Date);
(b) the Loan Sale Agreement, including the right of the Issuer to
cause the Seller to repurchase Financed Student Loans from the Issuer under
circumstances described therein;
(c) the Master Servicing Agreement, including the right of the Issuer
to cause the Master Servicer to purchase Financed Student Loans from the
Issuer under the circumstances described therein;
(d) each Guarantee Agreement, including the right of the Issuer to
cause the related Guarantor to make Guarantee Payments in respect of the
Financed Student Loans;
(e) all funds on deposit from time to time in the Trust Accounts,
including the Reserve Account Initial Deposit and the Pre-Funded Amount,
and in all investments and proceeds thereof (including all income thereon);
and
(f) all present and future claims, demands, causes and choses in
action in respect of any or all of the foregoing and all payments on or
under and all proceeds of every kind and nature whatsoever in respect of
any or all of the
<PAGE>
foregoing, including all proceeds of the conversion, voluntary or
involuntary, into cash or other liquid property, all cash proceeds,
accounts, accounts receivable, notes, drafts, acceptances, chattel paper,
checks, deposit accounts, insurance proceeds, condemnation awards, rights
to payment of any and every kind and other forms of obligations and
receivables, instruments and other property which at any time constitute
all or part of or are included in the proceeds of any of the foregoing
(collectively, the "Collateral").
The foregoing Grant is made in trust to secure the payment of principal of
and interest on, and any other amounts owing in respect of, the Notes, equally
and ratably without prejudice, priority or distinction, and to secure compliance
with the provisions of this Indenture, all as provided in this Indenture.
The Indenture Trustee, as Indenture Trustee on behalf of the Noteholders,
acknowledges such Grant, accepts the trusts under this Indenture in accordance
with the provisions of this Indenture and agrees to perform its duties required
in this Indenture to the best of its ability to the end that the interests of
the Noteholders may be adequately and effectively protected.
ARTICLE I
Definitions and Usage
---------------------
SECTION 1.01. Definitions and Usage. Except as otherwise specified herein
---------------------
or as the context may otherwise require, capitalized terms used but not defined
herein are defined in Appendix A to the Administration Agreement, dated as of [
], 1996 among the Issuer, Signet Bank, as Administrator, and the Indenture
Trustee, which also contains rules as to usage that shall be applicable herein.
SECTION 1.02. Incorporation by Reference of Trust Indenture Act. Whenever
-------------------------------------------------
this Indenture refers to a provision of the TIA, the provision is incorporated
by reference in and made a part of this Indenture. The following TIA terms used
in this Indenture have the following meanings:
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Notes.
"indenture security holder" means a Noteholder.
2
<PAGE>
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Indenture Trustee.
"obligor" on the indenture securities means the Issuer and any other
obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rule have
the meaning assigned to them by such definitions.
ARTICLE II
The Notes
---------
SECTION 2.01. Form. The Class A-1 Notes and Class A-2 Notes, in each case
----
together with the Indenture Trustee's certificate of authentication, shall be in
substantially the forms set forth in Exhibits A and B, respectively, with such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture and may have such letters, numbers or
other marks of identification and such legends or endorsements placed thereon as
may, consistently herewith, be determined by the officers executing such Notes,
as evidenced by their execution of the Notes. Any portion of the text of any
Note may be set forth on the reverse thereof, with an appropriate reference
thereto on the face of the Note.
The Definitive Notes shall be typewritten, printed, lithographed or
engraved or produced by any combination of these methods (with or without steel
engraved borders), all as determined by the officers executing such Notes, as
evidenced by their execution of such Notes.
Each Note shall be dated the date of its authentication. The terms of the
Notes set forth in Exhibits A and B are part of the terms of this Indenture.
SECTION 2.02. Execution, Authentication and Delivery. The Notes shall be
--------------------------------------
executed on behalf of the Issuer by any of its Authorized Officers. The
signature of any such Authorized Officer on the Notes may be manual or
facsimile.
Notes bearing the manual or facsimile signature of individuals who were at
any time Authorized Officers of the Issuer shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior
3
<PAGE>
to the authentication and delivery of such Notes or did not hold such offices at
the date of such Notes.
The Indenture Trustee shall upon Issuer Order authenticate and deliver
Class A-1 Notes for original issue in an aggregate principal amount of $[ ]
and Class A-2 Notes for original issue in an aggregate principal amount of
$[ ]. The aggregate principal amount of Class A-1 and Class A-2 Notes
outstanding at any time may not exceed such respective amounts except as
provided in Section 2.05.
Each Note shall be dated the date of its authentication. The Notes shall
be issuable as registered Notes in the minimum denomination of $1,000 and in
integral multiples of $1,000 in excess thereof.
No Note shall be entitled to any benefit under this Indenture or be valid
or obligatory for any purpose, unless there appears on such Note a certificate
of authentication substantially in the form provided for herein executed by the
Indenture Trustee by the manual signature of one of its authorized signatories,
and such certificate upon any Note shall be conclusive evidence, and the only
evidence, that such Note has been duly authenticated and delivered hereunder.
SECTION 2.03. Temporary Notes. Pending the preparation of Definitive
---------------
Notes, the Issuer may execute, and upon receipt of an Issuer Order the Indenture
Trustee shall authenticate and deliver, temporary Notes which are printed,
lithographed, typewritten, mimeographed or otherwise produced, of the tenor of
the Definitive Notes in lieu of which they are issued and with such variations
not inconsistent with the terms of this Indenture as the officers executing such
Notes may determine, as evidenced by their execution of such Notes.
If temporary Notes are issued, the Issuer will cause Definitive Notes to be
prepared without unreasonable delay. After the preparation of Definitive Notes,
the temporary Notes shall be exchangeable for Definitive Notes upon surrender of
the temporary Notes at the office or agency of the Issuer to be maintained as
provided in Section 3.02, without charge to the Noteholder. Upon surrender for
cancellation of any one or more temporary Notes, the Issuer shall execute and
the Indenture Trustee shall authenticate and deliver in exchange therefor a like
principal amount of Definitive Notes of authorized denominations. Until so
exchanged, the temporary Notes shall in all respects be entitled to the same
benefits under this Indenture as Definitive Notes.
4
<PAGE>
SECTION 2.04. Registration; Registration of Transfer and Exchange. The
---------------------------------------------------
Issuer shall cause to be kept a register (the "Note Register") in which, subject
to such reasonable regulations as it may prescribe, the Issuer shall provide for
the registration of Notes and the registration of transfers of Notes. The
Indenture Trustee shall be "Note Registrar" for the purpose of registering Notes
and transfers of Notes as herein provided. Upon any resignation of any Note
Registrar, the Issuer shall promptly appoint a successor or, if it elects not to
make such an appointment, assume the duties of Note Registrar.
If a Person other than the Indenture Trustee is appointed by the Issuer as
Note Registrar, the Issuer will give the Indenture Trustee prompt written notice
of the appointment of such Note Registrar and of the location, and any change in
the location, of the Note Register, and the Indenture Trustee shall have the
right to inspect the Note Register at all reasonable times and to obtain copies
thereof, and the Indenture Trustee shall have the right to rely upon a
certificate executed on behalf of the Note Registrar by an Executive Officer
thereof as to the names and addresses of the Noteholders and the principal
amounts and number of such Notes.
Upon surrender for registration of transfer of any Note at the office or
agency of the Issuer to be maintained as provided in Section 3.02, if the
requirements of Section 8-401(1) of the UCC are met, the Issuer shall execute,
and the Indenture Trustee shall authenticate and the Noteholder shall obtain
from the Indenture Trustee, in the name of the designated transferee or
transferees, one or more new Notes in any authorized denominations, of the same
class and a like aggregate principal amount.
At the option of the Noteholder, Notes may be exchanged for other Notes in
any authorized denominations, of the same class and a like aggregate principal
amount, upon surrender of the Notes to be exchanged at such office or agency.
Whenever any Notes are so surrendered for exchange, if the requirements of
Section 8-401(1) of the UCC are met, the Issuer shall execute, and the Indenture
Trustee shall authenticate and, the Noteholder shall obtain from the Indenture
Trustee, the Notes which the Noteholder making the exchange is entitled to
receive.
All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Issuer, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
5
<PAGE>
Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed by, or be accompanied by a written instrument of
transfer in form satisfactory to the Note Registrar duly executed by the
Noteholder thereof or such Noteholder's attorney duly authorized in writing,
with such signature guaranteed by an "eligible guarantor institution" meeting
the requirements of the Note Registrar, which requirements include membership or
participation in Securities Transfer Agent's Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Note Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Exchange Act.
No service charge shall be made to a Noteholder for any registration of
transfer or exchange of Notes, but the Indenture Trustee may require payment of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of Notes,
other than exchanges pursuant to Section 2.03 or 9.06 not involving any
transfer.
The preceding provisions of this Section notwithstanding, the Issuer shall
not be required to make and the Note Registrar need not register transfers or
exchanges of Notes selected for redemption or of any Note for a period of 15
days preceding the due date for any payment with respect to the Note.
SECTION 2.05. Mutilated, Destroyed, Lost or Stolen Notes. If (i) any
------------------------------------------
mutilated Note is surrendered to the Indenture Trustee, or the Indenture Trustee
receives evidence to its satisfaction of the destruction, loss or theft of any
Note, and (ii) there is delivered to the Indenture Trustee such security or
indemnity as may be required by it to hold the Issuer and the Indenture Trustee
harmless, then, in the absence of notice to the Issuer, the Note Registrar or
the Indenture Trustee that such Note has been acquired by a bona fide purchaser,
and provided that the requirements of Section 8-405 of the UCC are met, the
Issuer shall execute and upon its request the Indenture Trustee shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Note, a replacement Note of the same class; provided,
--------
however, that if any such destroyed, lost or stolen Note, but not a mutilated
- -------
Note, shall have become or within 15 days shall be due and payable, or shall
have been called for redemption, instead of issuing a replacement Note, the
Issuer may pay such destroyed, lost or stolen Note when so due or payable or
upon the Redemption Date without surrender thereof. If, after the delivery of
such replacement Note or payment of a destroyed, lost or stolen Note pursuant to
the proviso to the preceding sentence, a bona fide purchaser of the original
Note in lieu of which such replacement Note was issued
6
<PAGE>
presents for payment such original Note, the Issuer and the Indenture Trustee
shall be entitled to recover such replacement Note (or such payment) from the
Person to whom it was delivered or any Person taking such replacement Note from
such Person to whom such replacement Note was delivered or any assignee of such
Person, except a bona fide purchaser, and shall be entitled to recover upon the
security or indemnity provided therefor to the extent of any loss, damage, cost
or expense incurred by the Issuer or the Indenture Trustee in connection
therewith.
Upon the issuance of any replacement Note under this Section, the Issuer
may require the payment by the Noteholder thereof of a sum sufficient to cover
any tax or other governmental charge that may be imposed in relation thereto and
any other reasonable expenses (including the fees and expenses of the Indenture
Trustee) connected therewith.
Every replacement Note issued pursuant to this Section in replacement of
any mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Issuer, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes.
SECTION 2.06. Persons Deemed Owner. Prior to due presentment for
--------------------
registration of transfer of any Note, the Issuer, the Indenture Trustee and any
agent of the Issuer or the Indenture Trustee may treat the Person in whose name
any Note is registered (as of the day of determination) as the owner of such
Note for the purpose of receiving payments of principal of, interest (and any
Noteholders' Interest LIBOR Carryover), if any, on such Note and for all other
purposes whatsoever, whether or not such Note be overdue, and neither the
Issuer, the Indenture Trustee nor any agent of the Issuer or the Indenture
Trustee shall be affected by notice to the contrary.
SECTION 2.07. Payment of Principal and Interest; Defaulted Interest;
------------------------------------------------------
Noteholders' Interest LIBOR Carryover. (a) The Notes shall accrue interest as
- -------------------------------------
provided in the forms of the Class A-1 Note and Class A-2 Note set forth in
Exhibits A and B, respectively, and such interest shall be payable on each
Interest Payment Date as specified therein, subject to Section 3.01. Any
installment of interest (and any Noteholders' Interest LIBOR
7
<PAGE>
Carryover) or principal, if any, payable on any Note which is punctually paid or
duly provided for by the Issuer on the applicable Interest Payment Date or
Distribution Date shall be paid to the Person in whose name such Note (or one or
more Predecessor Notes) is registered on the Record Date by check mailed first-
class, postage prepaid to such Person's address as it appears on the Note
Register on such Record Date, except that, unless Definitive Notes have been
issued pursuant to Section 2.12, with respect to Notes registered on the Record
Date in the name of the nominee of the Clearing Agency (initially, such nominee
to be Cede & Co.), payment will be made by wire transfer in immediately
available funds to the account designated by such nominee and except for the
final installment of principal payable with respect to such Note on a
Distribution Date or on the Class A-1 Final Maturity Date or the Class A-2 Final
Maturity Date, as the case may be, which shall be payable as provided below.
The funds represented by any such checks returned undelivered shall be held in
accordance with Section 3.03.
(b) The principal of each Note shall be payable in installments on each
Distribution Date as provided in the forms of the Class A-1 Note and Class A-2
Note set forth in Exhibits A and B, respectively. Notwithstanding the
foregoing, the entire unpaid principal amount of the Notes shall be due and
payable, if not previously paid, on the date on which an Event of Default shall
have occurred and be continuing, if the Indenture Trustee or the Noteholders of
the Notes representing not less than a majority of the Outstanding Amount of the
Notes have declared the Notes to be immediately due and payable in the manner
provided in Section 5.02. All principal payments on each class of Notes shall
be made pro rata to the Noteholders of such class entitled thereto. The
Indenture Trustee shall notify the Person in whose name a Note is registered at
the close of business on the Record Date preceding the Distribution Date on
which the Issuer expects that the final installment of principal of and interest
(and any Noteholders' Interest LIBOR Carryover) on such Note will be paid. Such
notice shall be mailed or transmitted by facsimile prior to such final
Distribution Date and shall specify that such final installment will be payable
only upon presentation and surrender of such Note and shall specify the place
where such Note may be presented and surrendered for payment of such
installment. Notices in connection with redemptions of Notes shall be mailed to
Noteholders as provided in Section 10.02.
(c) If the Issuer defaults in a payment of interest on the Notes, the
Issuer shall pay defaulted interest (plus interest on such defaulted interest to
the extent lawful) at the applicable Note Interest Rate in any lawful manner.
The Issuer may pay such defaulted interest to the persons who are Noteholders on
a subsequent special record date, which date shall be at least five
8
<PAGE>
Business Days prior to the payment date. The Issuer shall fix or cause to be
fixed any such special record date and payment date, and, at least 15 days
before any such special record date, the Issuer shall mail to the Indenture
Trustee a notice which the Indenture Trustee will, as soon as practicable,
distribute to each Noteholder that states the special record date, the payment
date and the amount of defaulted interest to be paid.
(d) The Noteholders' Interest LIBOR Carryover for any class of Notes for
each Distribution Date (including all unpaid Noteholders' Interest LIBOR
Carryover for such class for prior Distribution Dates and interest accrued
thereon at the Class A-1 Rate or the Class A-2 Rate, as applicable, calculated
based on LIBOR for each applicable LIBOR Reset Period) shall be payable on each
Distribution Date solely to the extent of funds required and available to be
distributed to Noteholders by the Indenture Trustee pursuant to Sections
2(e)(ii)(B) or 2(e)(iii) of the Administration Agreement. Any Noteholders'
Interest LIBOR Carryover for any class of Notes, if any, payable with respect to
such class on the applicable Distribution Date shall be paid to the Person in
whose name such Note (or one or more Predecessor Notes) is registered on the
applicable Record Date by check mailed first-class postage prepaid to such
Person's address as it appears on the Note Register on such Record Date, except
that, unless Definitive Notes have been issued pursuant to Section 2.12, with
respect to the Notes registered on the Record Date in the name of the nominee of
the Clearing Agency (initially, such nominee to be Cede & Co.), payment will be
made by wire transfer in immediately available funds to the account designated
by such nominee. The funds represented by any such checks returned undelivered
shall be held in accordance with Section 3.03.
SECTION 2.08. Cancellation. All Notes surrendered for payment,
------------
registration of transfer, exchange or redemption shall, if surrendered to any
Person other than the Indenture Trustee, be delivered to the Indenture Trustee
and shall be promptly cancelled by the Indenture Trustee. The Issuer may at any
time deliver to the Indenture Trustee for cancellation any Notes previously
authenticated and delivered hereunder which the Issuer may have acquired in any
manner whatsoever, and all Notes so delivered shall be promptly cancelled by the
Indenture Trustee. No Notes shall be authenticated in lieu of or in exchange
for any Notes cancelled as provided in this Section, except as expressly
permitted by this Indenture. All cancelled Notes may be held or disposed of by
the Indenture Trustee in accordance with its standard retention or disposal
policy as in effect at the time, unless the Issuer shall direct by an Issuer
Order that they be returned to it and so long as such Issuer Order is timely and
the Notes have not been previously disposed of by the Indenture Trustee.
9
<PAGE>
SECTION 2.09. Release of Collateral. Subject to Section 11.01 and the
---------------------
terms of the Basic Documents, the Indenture Trustee shall release property from
the lien of this Indenture only upon receipt of an Issuer Request accompanied by
an Officers' Certificate of the Issuer, an Opinion of Counsel and Independent
Certificates in accordance with TIA (S)(S) 314(c) and 314(d)(1) or an Opinion of
Counsel in lieu of such Independent Certificates to the effect that the TIA does
not require any such Independent Certificates.
SECTION 2.10. Book-Entry Notes. The Notes, upon original issuance, will
----------------
be issued in the form of typewritten Notes representing the Book-Entry Notes, to
be delivered to The Depository Trust Company, the initial Clearing Agency, by,
or on behalf of, the Issuer. Such Notes shall initially be registered on the
Note Register in the name of Cede & Co., the nominee of the initial Clearing
Agency, and no Note Owner will receive a Definitive Note (as defined below)
representing such Note Owner's interest in such Note, except as provided in
Section 2.12. Unless and until definitive, fully registered Notes (the
"Definitive Notes") have been issued to Note Owners pursuant to Section 2.12:
(i) the provisions of this Section shall be in full force and
effect;
(ii) the Note Registrar and the Indenture Trustee may deal with
the Clearing Agency for all purposes (including the payment of principal of
and interest and other amounts on the Notes) as the authorized
representative of the Note Owners;
(iii) to the extent that the provisions of this Section
conflict with any other provisions of this Indenture, the provisions of
this Section shall control;
(iv) the rights of Note Owners shall be exercised only through
the Clearing Agency and shall be limited to those established by law and
agreements between such Note Owners and the Clearing Agency and/or the
Clearing Agency Participants pursuant to the Note Depository Agreements.
Unless and until Definitive Notes are issued pursuant to Section 2.12, the
Clearing Agency will make book-entry transfers among the Clearing Agency
Participants and receive and transmit payments of principal of and interest
and other amounts on the Notes to such Clearing Agency Participants; and
(v) whenever this Indenture requires or permits actions to be
taken based upon instructions or directions of
10
<PAGE>
Noteholders of Notes evidencing a specified percentage of the Outstanding
Amount of the Notes, the Clearing Agency shall be deemed to represent such
percentage only to the extent that it has received instructions to such
effect from Note Owners and/or Clearing Agency Participants owning or
representing, respectively, such required percentage of the beneficial
interest in the Notes and has delivered such instructions to the Indenture
Trustee.
SECTION 2.11. Notices to Clearing Agency. Whenever a notice or other
--------------------------
communication to the Noteholders is required under this Indenture, unless and
until Definitive Notes shall have been issued to Note Owners pursuant to Section
2.12, the Indenture Trustee shall give all such notices and communications
specified herein to be given to Noteholders to the Clearing Agency.
SECTION 2.12. Definitive Notes. If (i) the Administrator advises the
----------------
Indenture Trustee in writing that the Clearing Agency is no longer willing or
able to properly discharge its responsibilities with respect to the Notes, and
the Administrator is unable to locate a qualified successor, (ii) the
Administrator at its option advises the Indenture Trustee in writing that it
elects to terminate the book-entry system through the Clearing Agency or (iii)
after the occurrence of an Event of Default, a Servicer Default or an
Administrator Default, Note Owners representing beneficial interests aggregating
at least a majority of the Outstanding Amount of the Notes advise the Clearing
Agency (which shall then notify the Indenture Trustee) in writing that the
continuation of a book-entry system through the Clearing Agency is no longer in
the best interests of the Note Owners, then the Indenture Trustee will cause the
Clearing Agency to notify all Note Owners, through the Clearing Agency, of the
occurrence of any such event and of the availability of Definitive Notes to Note
Owners requesting the same. Upon surrender to the Indenture Trustee of the
typewritten Notes representing the Book-Entry Notes by the Clearing Agency,
accompanied by registration instructions, the Issuer shall execute and the
Indenture Trustee shall authenticate the Definitive Notes in accordance with the
instructions of the Clearing Agency. None of the Issuer, the Note Registrar or
the Indenture Trustee shall be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be protected in relying on,
such instructions. Upon the issuance of Definitive Notes, the Indenture Trustee
shall recognize the holders of the Definitive Notes as Noteholders.
11
<PAGE>
ARTICLE III
Covenants
---------
SECTION 3.01. Payment to Noteholders. The Issuer will duly and punctually
----------------------
pay the principal of (subject to the parenthetical in the following sentence),
interest, if any, on and any Noteholders' Interest LIBOR Carryover (but only to
the extent provided in Sections 2.07(d) and 8.02(c)) with respect to the Notes
in accordance with the terms of the Notes and this Indenture. Without limiting
the foregoing, subject to Section 8.02(c), the Issuer will cause to be
distributed that portion of the amounts on deposit in the Trust Accounts on an
Interest Payment Date and a Distribution Date (other than any Eligible
Investments deposited therein that will mature on the Business Day preceding a
subsequent Distribution Date) which the Noteholders are entitled to receive
pursuant to the Administration Agreement to Class A-1 Noteholders and Class A-2
Noteholders in accordance with the Administration Agreement. Amounts properly
withheld under the Code by any Person from a payment to any Noteholder of
interest (including any Noteholders' Interest LIBOR Carryover) and/or principal
shall be considered as having been paid by the Issuer to such Noteholder for all
purposes of this Indenture.
SECTION 3.02. Maintenance of Office or Agency. The Issuer will maintain
-------------------------------
in the Borough of Manhattan, The City of New York, an office or agency where
Notes may be surrendered for registration of transfer or exchange, and where
notices and demands to or upon the Issuer in respect of the Notes and this
Indenture may be served. The Issuer hereby initially appoints the Indenture
Trustee to serve as its agent for the foregoing purposes. The Issuer will give
prompt written notice to the Indenture Trustee of the location, and of any
change in the location, of any such office or agency. If at any time the Issuer
shall fail to maintain any such office or agency or shall fail to furnish the
Indenture Trustee with the address thereof, such surrenders, notices and demands
may be made or served at the Corporate Trust Office, and the Issuer hereby
appoints the Indenture Trustee as its agent to receive all such surrenders,
notices and demands.
SECTION 3.03. Money for Payments To Be Held in Trust. As provided in
--------------------------------------
Section 8.02(a) and (b), all payments of amounts due and payable with respect to
any Notes that are to be made from amounts distributed from the Collection
Account or any other Trust Account pursuant to Section 8.02(c) shall be made on
behalf of the Issuer by the Indenture Trustee or by another Paying Agent, and no
amounts so distributed from the Collection Account
12
<PAGE>
for payments of Notes shall be paid over to the Issuer except as provided in
this Section.
On or before the Business Day next preceding each Interest Payment Date or
Distribution Date and Redemption Date, the Issuer shall distribute or cause to
be distributed to the Indenture Trustee (or any other Paying Agent) an aggregate
sum sufficient to pay the amounts then becoming due under the Notes, such sum to
be held in trust for the benefit of the Persons entitled thereto and (unless the
Paying Agent is the Indenture Trustee) shall promptly notify the Indenture
Trustee of its action or failure so to act.
The Issuer will cause each Paying Agent other than the Indenture Trustee to
execute and deliver to the Indenture Trustee an instrument in which such Paying
Agent shall agree with the Indenture Trustee (and if the Indenture Trustee acts
as Paying Agent, it hereby so agrees), subject to the provisions of this
Section, that such Paying Agent will:
(i) hold all sums held by it for the payment of amounts due
with respect to the Notes in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise disposed
of as herein provided and pay such sums to such Persons as herein provided;
(ii) give the Indenture Trustee notice of any default by the
Issuer of which it has actual knowledge (or any other obligor upon the
Notes) in the making of any payment required to be made with respect to the
Notes;
(iii) at any time during the continuance of any such default,
upon the written request of the Indenture Trustee, forthwith pay to the
Indenture Trustee all sums so held in trust by such Paying Agent;
(iv) immediately resign as a Paying Agent and forthwith pay to
the Indenture Trustee all sums held by it in trust for the payment of Notes
if at any time it ceases to meet the standards required to be met by a
Paying Agent at the time of its appointment; and
(v) comply with all requirements of the Code with respect to
the withholding from any payments made by it on any Notes of any applicable
withholding taxes imposed thereon and with respect to any applicable
reporting requirements in connection therewith.
13
<PAGE>
The Issuer may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, by Issuer Order direct
any Paying Agent to pay to the Indenture Trustee all sums held in trust by such
Paying Agent, such sums to be held by the Indenture Trustee upon the same trusts
as those upon which the sums were held by such Paying Agent; and upon such
payment by any Paying Agent to the Indenture Trustee, such Paying Agent shall be
released from all further liability with respect to such money.
Subject to applicable laws with respect to escheat of funds, any money held
by the Indenture Trustee or any Paying Agent in trust for the payment of any
amount due with respect to any Note and remaining unclaimed for two years after
such amount has become due and payable shall be discharged from such trust and
be paid to the Issuer on Issuer Request; and the Noteholder thereof shall
thereafter, as an unsecured general creditor, look only to the Issuer for
payment thereof (but only to the extent of the amounts so paid to the Issuer),
and all liability of the Indenture Trustee or such Paying Agent with respect to
such trust money shall thereupon cease; provided, however, that the Indenture
-------- -------
Trustee or such Paying Agent, before being required to make any such repayment,
shall at the expense and direction of the Issuer cause to be published once, in
a newspaper published in the English language, customarily published on each
Business Day and of general circulation in The City of New York, notice that
such money remains unclaimed and that, after a date specified therein, which
shall not be less than 30 days from the date of such publication, any unclaimed
balance of such money then remaining will be repaid to the Issuer. The
Indenture Trustee shall also adopt and employ, at the expense of the Issuer, any
other reasonable means of notification of such repayment (including mailing
notice of such repayment to Noteholders whose Notes have been called but have
not been surrendered for redemption or whose right to or interest in moneys due
and payable but not claimed is determinable from the records of the Indenture
Trustee or of any Paying Agent, at the last address of record for each such
Noteholder).
SECTION 3.04. Existence. The Issuer will keep in full effect its
---------
existence, rights and franchises as a trust under the laws of the State of
Delaware (unless it becomes, or any successor Issuer hereunder is or becomes,
organized under the laws of any other State or of the United States of America,
in which case the Issuer will keep in full effect its existence, rights and
franchises under the laws of such other jurisdiction) and will obtain and
preserve its qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this
14
<PAGE>
Indenture, the Notes, the Collateral and each other instrument or agreement
included in the Indenture Trust Estate.
SECTION 3.05. Protection of Indenture Trust Estate. The Issuer will from
------------------------------------
time to time execute and deliver all such supplements and amendments hereto and
all such financing statements, continuation statements, instruments of further
assurance and other instruments, and will take such other action necessary or
advisable to:
(i) maintain or preserve the lien and security interest (and
the priority thereof) of this Indenture or carry out more effectively the
purposes hereof;
(ii) perfect, publish notice of or protect the validity of any
Grant made or to be made by this Indenture;
(iii) enforce any of the Collateral; or
(iv) preserve and defend title to the Indenture Trust Estate and
the rights of the Indenture Trustee and the Noteholders in such Indenture
Trust Estate against the claims of all persons and parties. It shall be
the responsibility of the Issuer to prepare such instruments.
The Issuer hereby designates the Indenture Trustee its agent and attorney-in-
fact to execute any financing statement, continuation statement or other
instrument required to be executed pursuant to this Section.
SECTION 3.06. Opinions as to Indenture Trust Estate. (a) On the Closing
-------------------------------------
Date, the Issuer shall furnish to the Indenture Trustee an Opinion of Counsel
either stating that, in the opinion of such counsel, such action has been taken
with respect to the recording and filing of this Indenture, any indentures
supplemental hereto, and any other requisite documents, and with respect to the
execution and filing of any financing statements and continuation statements, as
are necessary to perfect and make effective the lien and security interest of
this Indenture and reciting the details of such action, or stating that, in the
opinion of such counsel, no such action is necessary to make such lien and
security interest effective.
(b) On or before ______ in each calendar year, beginning in 1997, the
Issuer shall furnish to the Indenture Trustee an Opinion of Counsel either
stating that, in the opinion of such counsel, such action has been taken with
respect to the recording, filing, re-recording and refiling of this Indenture,
any indentures supplemental hereto and any other requisite documents and with
respect to the execution and filing of any
15
<PAGE>
financing statements and continuation statements as is necessary to maintain the
lien and security interest created by this Indenture and reciting the details of
such action or stating that in the opinion of such counsel no such action is
necessary to maintain such lien and security interest. Such Opinion of Counsel
shall also describe the recording, filing, re-recording and refiling of this
Indenture, any indentures supplemental hereto and any other requisite documents
and the execution and filing of any financing statements and continuation
statements that will, in the opinion of such counsel, be required to maintain
the lien and security interest of this Indenture until _________ in the
following calendar year.
SECTION 3.07. Performance of Obligations; Servicing of Student Loans. (a)
------------------------------------------------------
The Issuer will not take any action and will use its best efforts not to permit
any action to be taken by others that would release any Person from any of such
Person's material covenants or obligations under any instrument or agreement
included in the Indenture Trust Estate or that would result in the amendment,
hypothecation, subordination, termination or discharge of, or impair the
validity or effectiveness of, any such instrument or agreement, except as
expressly provided in this Indenture, the Loan Sale Agreement, the Master
Servicing Agreement or such other instrument or agreement.
(b) The Issuer may contract with other Persons to assist it in performing
its duties under this Indenture, and any performance of such duties by a Person
identified to the Indenture Trustee in an Officers' Certificate of the Issuer
shall be deemed to be action taken by the Issuer. Initially, the Issuer has
contracted with the Master Servicer and the Administrator to assist the Issuer
in performing its duties under this Indenture.
(c) The Issuer will punctually perform and observe all its obligations and
agreements contained in this Indenture, the other Basic Documents and in the
instruments and agreements included in the Indenture Trust Estate, including
filing or causing to be filed all UCC financing statements and continuation
statements required to be filed by the terms of this Indenture, the Loan Sale
Agreement and the Master Servicing Agreement in accordance with and within the
time periods provided for herein and therein. Except as otherwise expressly
provided therein, the Issuer shall not waive, amend, modify, supplement or
terminate any Basic Document or any provision thereof without the consent of the
Indenture Trustee or the Noteholders of at least a majority of the Outstanding
Amount of the Notes.
16
<PAGE>
(d) If the Issuer shall have knowledge of the occurrence of a Servicer
Default under the Master Servicing Agreement, or an Administrator Default under
the Administration Agreement, the Issuer shall promptly notify the Indenture
Trustee and the Rating Agencies thereof, and shall specify in such notice the
action, if any, the Issuer is taking with respect to such default. If a
Servicer Default shall arise from the failure of the Master Servicer to perform
any of its duties or obligations under the Master Servicing Agreement with
respect to the Financed Student Loans, the Issuer shall take all reasonable
steps available to it to enforce its rights under the Basic Documents in respect
of such failure.
(e) As promptly as possible after the giving of notice of termination to
the Master Servicer of the Master Servicer's rights and powers pursuant to
Section 6.01 of the Master Servicing Agreement, the Issuer shall appoint a
successor master servicer (the "Successor Master Servicer"), and such Successor
Master Servicer shall accept its appointment by a written assumption in a form
acceptable to the Indenture Trustee. In the event that a Successor Master
Servicer has not been appointed and accepted its appointment at the time when
the Master Servicer ceases to act as Master Servicer, the Indenture Trustee
without further action shall automatically be appointed the Successor Master
Servicer. The Indenture Trustee may resign as the Master Servicer by giving
written notice of such resignation to the Issuer and in such event will be
released from such duties and obligations, such release not to be effective
until the date a new master servicer enters into an agreement with the Issuer as
provided below; provided, however, that nothing herein shall require or permit
the Indenture Trustee to act as Master Servicer, or otherwise service the
Financed Student Loans, in violation of the Higher Education Act. Upon delivery
of any such notice to the Issuer, the Issuer shall obtain a new master servicer
as the Successor Master Servicer under the Master Servicing Agreement. Any
Successor Master Servicer other than the Indenture Trustee shall (i) be an
established institution (A) that satisfies any requirements of the Higher
Education Act applicable to servicers, (B) the appointment of which satisfies
the Rating Agency Condition and (C) whose regular business includes the
servicing or administration of student loans and (ii) enter into a Master
Servicing Agreement with the Issuer having substantially the same provisions as
the provisions of the Master Servicing Agreement applicable to the Master
Servicer. If within 30 days after the delivery of the notice referred to above,
the Issuer shall not have obtained such a new servicer, the Indenture Trustee
may appoint or may petition a court of competent jurisdiction to appoint, a
Successor Master Servicer; provided, however, that such right to appoint or to
-------- -------
petition for the appointment of any such successor shall in no event relieve
17
<PAGE>
the Indenture Trustee from any obligations otherwise imposed on it under the
Basic Documents until such successor has in fact assumed such appointment. In
connection with any such appointment, the Indenture Trustee may make such
arrangements for the compensation of such successor as it and such successor
shall agree, subject to the limitations set forth below and in the Master
Servicing Agreement, and in accordance with Section 6.02 of the Master Servicing
Agreement, the Issuer shall enter into an agreement with such successor for the
servicing of the Financed Student Loans (such agreement to be in form and
substance satisfactory to the Indenture Trustee). If the Indenture Trustee
shall succeed as provided herein to the Master Servicer's duties as servicer
with respect to the Financed Student Loans, it shall do so in its individual
capacity and not in its capacity as Indenture Trustee and, accordingly, the
provisions of Article VI hereof shall be inapplicable to the Indenture Trustee
in its duties as the successor to the Master Servicer and the servicing of the
Financed Student Loans. In case the Indenture Trustee shall become successor to
the Master Servicer under the Master Servicing Agreement, the Indenture Trustee
shall be entitled to appoint as Master Servicer any one of its affiliates,
provided that such appointment shall not affect or alter in any way the
liability of the Indenture Trustee as a successor for the performance of the
duties and obligations of the Master Servicer in accordance with the terms
hereof.
(f) Upon any termination of the Master Servicer's rights and powers
pursuant to the Master Servicing Agreement, the Issuer shall promptly notify the
Indenture Trustee. As soon as a Successor Master Servicer is appointed, the
Issuer shall notify the Indenture Trustee of such appointment, specifying in
such notice the name and address of such Successor Master Servicer.
(g) Without derogating from the absolute nature of the assignment granted
to the Indenture Trustee under this Indenture or the rights of the Indenture
Trustee hereunder, the Issuer agrees that it will not, without the prior written
consent of the Indenture Trustee or the Noteholders of at least a majority in
Outstanding Amount of the Notes, amend, modify, waive, supplement, terminate or
surrender, or agree to any amendment, modification, supplement, termination,
waiver or surrender of, the terms of any Collateral or the Basic Documents,
except to the extent otherwise provided in the Master Servicing Agreement, or
waive timely performance or observance by the Master Servicer, the Seller, the
Issuer, the Administrator or the Eligible Lender Trustee under the Loan Sale
Agreement, the Master Servicing Agreement or the Administration Agreement;
provided, however, that no such amendment shall (i) increase or reduce in any
- -------- -------
manner the amount of, or accelerate or delay the timing of, distributions that
are required to be made for the benefit of the
18
<PAGE>
Noteholders, or (ii) reduce the aforesaid percentage of the Notes which are
required to consent to any such amendment, without the consent of the
Noteholders of all the Outstanding Notes. If any such amendment, modification,
supplement or waiver shall be so consented to by the Indenture Trustee or such
Noteholders, the Issuer agrees, promptly following a request by the Indenture
Trustee to do so, to execute and deliver, in its own name and at its own
expense, such agreements, instruments, consents and other documents as the
Indenture Trustee may deem necessary or appropriate in the circumstances.
SECTION 3.08. Negative Covenants. So long as any Notes are Outstanding,
------------------
the Issuer shall not:
(i) except as expressly permitted by this Indenture or any
other Basic Document, sell, transfer, exchange or otherwise dispose of any
of the properties or assets of the Issuer, including those included in the
Indenture Trust Estate, unless directed to do so by the Indenture Trustee
(which direction the Indenture Trustee shall not give without the consent
of each of the Rating Agencies);
(ii) claim any credit on, or make any deduction from the
principal or interest (including any Noteholders' Interest LIBOR Carryover)
payable in respect of, the Notes (other than amounts properly withheld from
such payments under the Code or applicable state law) or assert any claim
against any present or former Noteholder by reason of the payment of the
taxes levied or assessed upon any part of the Indenture Trust Estate; or
(iii) (A) permit the validity or effectiveness of this
Indenture to be impaired, or permit the lien of this Indenture to be
amended, hypothecated, subordinated, terminated or discharged, or permit
any Person to be released from any covenants or obligations with respect to
the Notes under this Indenture except as may be expressly permitted hereby,
(B) permit any lien, charge, excise, claim, security interest, mortgage or
other encumbrance (other than the lien of this Indenture) to be created on
or extend to or otherwise arise upon or burden the Indenture Trust Estate
or any part thereof or any interest therein or the proceeds thereof (other
than tax liens and other liens that arise by operation of law, in each case
arising solely as a result of an action or omission of the related Obligor,
and other than as expressly permitted by the Basic Documents) or (C) permit
the lien of this Indenture not to constitute a valid first priority (other
than with respect to any such tax or other lien) security interest in the
Indenture Trust Estate.
19
<PAGE>
SECTION 3.09. Annual Statement as to Compliance. The Issuer will deliver
---------------------------------
to the Indenture Trustee, within 120 days after the end of each fiscal year of
the Issuer (commencing with the fiscal year 199_), an Officers' Certificate of
the Issuer stating that:
(i) a review of the activities of the Issuer during such year
and of performance under this Indenture has been made under such Authorized
Officers' supervision; and
(ii) to the best of such Authorized Officers' knowledge, based on
such review, the Issuer has complied with all conditions and covenants
under this Indenture throughout such year, or, if there has been a default
in the compliance of any such condition or covenant, specifying each such
default known to such Authorized Officers and the nature and status
thereof.
SECTION 3.10. Issuer May Consolidate, etc., Only on Certain Terms. (a)
---------------------------------------------------
The Issuer shall not consolidate or merge with or into any other Person, unless:
(i) the Person (if other than the Issuer) formed by or
surviving such consolidation or merger shall be a Person organized and
existing under the laws of the United States of America or any State and
shall expressly assume, by an indenture supplemental hereto, executed and
delivered to the Indenture Trustee, in form satisfactory to the Indenture
Trustee, the due and punctual payment of the principal of, interest on and
any Noteholders' Interest LIBOR Carryover, if any, with respect to all
Notes and the performance or observance of every agreement and covenant of
this Indenture on the part of the Issuer to be performed or observed, all
as provided herein;
(ii) immediately after giving effect to such transaction, no
Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied
with respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel (and
shall have delivered copies thereof to the Indenture Trustee) to the effect
that such transaction will not have any material adverse tax consequence to
the Issuer, any Noteholder or any Certificateholder;
20
<PAGE>
(v) any action as is necessary to maintain the lien and
security interest created by this Indenture shall have been taken; and
(vi) the Issuer shall have delivered to the Indenture Trustee an
Officers' Certificate of the Issuer and an Opinion of Counsel each stating
that such consolidation or merger and such supplemental indenture comply
with this Article III and that all conditions precedent herein provided for
relating to such transaction have been complied with (including any filing
required by the Exchange Act).
(b) The Issuer shall not convey or transfer all or substantially all its
properties or assets, including those included in the Indenture Trust Estate, to
any Person, unless:
(i) the Person that acquires by conveyance or transfer the
properties and assets of the Issuer the conveyance or transfer of which is
hereby restricted shall (A) be a United States citizen or a Person
organized and existing under the laws of the United States of America or
any State, (B) expressly assumes, by an indenture supplemental hereto,
executed and delivered to the Indenture Trustee, in form satisfactory to
the Indenture Trustee, the due and punctual payment of the principal of,
interest on and Noteholders' Interest LIBOR Carryover, if any, with respect
to all Notes and the performance or observance of every agreement and
covenant of this Indenture on the part of the Issuer to be performed or
observed, all as provided herein, (C) expressly agrees by means of such
supplemental indenture that all right, title and interest so conveyed or
transferred shall be subject and subordinate to the rights of Noteholders,
(D) unless otherwise provided in such supplemental indenture, expressly
agrees to indemnify, defend and hold harmless the Issuer against and from
any loss, liability or expense arising under or related to this Indenture
and the Notes and (E) expressly agrees by means of such supplemental
indenture that such Person (or if a group of Persons, then one specified
Person) shall make all filings with the Commission (and any other
appropriate Person) required by the Exchange Act in connection with the
Notes;
(ii) immediately after giving effect to such transaction, no
Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied
with respect to such transaction;
21
<PAGE>
(iv) the Issuer shall have received an Opinion of Counsel (and
shall have delivered copies thereof to the Indenture Trustee) to the effect
that such transaction will not have any material adverse tax consequence to
the Issuer, any Noteholder or any Certificateholder;
(v) any action as is necessary to maintain the lien and
security interest created by this Indenture shall have been taken; and
(vi) the Issuer shall have delivered to the Indenture Trustee an
Officers' Certificate of the Issuer and an Opinion of Counsel each stating
that such conveyance or transfer and such supplemental indenture comply
with this Article III and that all conditions precedent herein provided for
relating to such transaction have been complied with (including any filing
required by the Exchange Act).
SECTION 3.11. Successor or Transferee. (a) Upon any consolidation or
-----------------------
merger of the Issuer in accordance with Section 3.10(a), the Person formed by or
surviving such consolidation or merger (if other than the Issuer) shall succeed
to, and be substituted for, and may exercise every right and power of, the
Issuer under this Indenture with the same effect as if such Person had been
named as the Issuer herein.
(b) Upon a conveyance or transfer of all the assets and properties of the
Issuer pursuant to Section 3.10(b), Signet Student Loan Trust 1996-A will be
released from every covenant and agreement of this Indenture to be observed or
performed on the part of the Issuer with respect to the Notes immediately upon
the delivery by the Issuer of written notice to the Indenture Trustee stating
that Signet Student Loan Trust 1996-A is to be so released.
SECTION 3.12. No Other Business. The Issuer shall not engage in any
-----------------
business other than financing, purchasing, owning, selling and managing the
Financed Student Loans in the manner contemplated by this Indenture and the
other Basic Documents and activities incidental thereto.
SECTION 3.13. No Borrowing. The Issuer shall not issue, incur, assume,
------------
guarantee or otherwise become liable, directly or indirectly, for any
indebtedness except for the Notes.
SECTION 3.14. Obligations of Master Servicer and Administrator. The
------------------------------------------------
Issuer shall cause the Master Servicer to comply with Sections 3.07, 3.08, 3.09
and 3.10 of the Master Servicing Agreement and shall cause the Administrator to
comply with Section 2(h) of the Administration Agreement.
22
<PAGE>
SECTION 3.15. Guarantees, Loans, Advances and Other Liabilities. Except
-------------------------------------------------
as contemplated by the Basic Documents or this Indenture, the Issuer shall not
make any loan or advance or credit to, or guarantee (directly or indirectly or
by an instrument having the effect of assuring another's payment or performance
on any obligation or capability of so doing or otherwise), endorse or otherwise
become contingently liable, directly or indirectly, in connection with the
obligations, stocks or dividends of, or own, purchase, repurchase or acquire (or
agree contingently to do so) any stock, obligations, assets or securities of, or
any other interest in, or make any capital contribution to, any other Person.
SECTION 3.16. Capital Expenditures. The Issuer shall not make any
--------------------
expenditure (by long-term or operating lease or otherwise) for capital assets
(either realty or personalty).
SECTION 3.17. Restricted Payments. The Issuer shall not, directly or
-------------------
indirectly, (i) pay any dividend or make any distribution (by reduction of
capital or otherwise), whether in cash, property, securities or a combination
thereof, to the Eligible Lender Trustee or any owner of a beneficial interest in
the Issuer or otherwise with respect to any ownership or equity interest or
security in or of the Issuer or to the Master Servicer or the Administrator,
(ii) redeem, purchase, retire or otherwise acquire for value any such ownership
or equity interest or security or (iii) set aside or otherwise segregate any
amounts for any such purpose; provided, however, that the Issuer may make, or
-------- -------
cause to be made, distributions to the Master Servicer, the Eligible Lender
Trustee, the Indenture Trustee, the Certificateholders, the Noteholders, the
Administrator and the Seller as contemplated by, and to the extent funds are
available for such purpose under, the Loan Sale Agreement, the Master Servicing
Agreement or the Administration Agreement. The Issuer will not, directly or
indirectly, make payments to or distributions from the Collection Account except
in accordance with this Indenture and the other Basic Documents.
SECTION 3.18. Notice of Events of Default. The Issuer shall give the
---------------------------
Indenture Trustee and the Rating Agencies prompt written notice of each Event of
Default hereunder and each default on the part of the Seller, the Master
Servicer or the Administrator of its obligations under the Loan Sale Agreement,
the Master Servicing Agreement or the Administration Agreement. In addition,
the Issuer shall deliver to the Indenture Trustee, within five days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
the Issuer of any event which with the giving of notice and the lapse of time
would become an Event of Default under Section 5.01(iii), its status and what
action the Issuer is taking or proposes to take with
23
<PAGE>
respect thereto. The Indenture Trustee shall provide notice to the Noteholders
of each default or other event of which it receives notice pursuant to this
Section 3.18, promptly after receipt of such Notice.
SECTION 3.19. Further Instruments and Acts. Upon request of the Indenture
----------------------------
Trustee, the Issuer will execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
SECTION 3.20. Removal of Administrator. So long as any Notes are
------------------------
Outstanding, the Issuer shall not remove the Administrator without cause unless
the Rating Agency Condition shall have been satisfied in connection with such
removal.
ARTICLE IV
Satisfaction and Discharge
--------------------------
SECTION 4.01. Satisfaction and Discharge of Indenture. This Indenture
---------------------------------------
shall cease to be of further effect with respect to the Notes except as to (i)
rights of registration of transfer and exchange, (ii) substitution of mutilated,
destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments
of principal thereof and interest (including any Noteholders' Interest LIBOR
Carryover) thereon, (iv) Sections 3.03, 3.04, 3.05, 3.08, 3.10, 3.12 and 3.13,
(v) the rights, obligations and immunities of the Indenture Trustee hereunder
(including the rights of the Indenture Trustee under Section 6.07 and the
obligations of the Indenture Trustee under Section 4.02) and (vi) the rights of
Noteholders as beneficiaries hereof with respect to the property so deposited
with the Indenture Trustee payable to all or any of them, and the Indenture
Trustee, on demand of and at the expense of the Issuer, shall execute proper
instruments acknowledging satisfaction and discharge of this Indenture with
respect to the Notes, when:
(A) either
(1) all Notes theretofore authenticated and delivered (other
than (i) Notes that have been destroyed, lost or stolen and that have
been replaced or paid as provided in Section 2.05 and (ii) Notes for
whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Issuer and thereafter repaid to
the Issuer or discharged from such trust, as provided in Section 3.03)
have been delivered to the Indenture Trustee for cancellation; or
24
<PAGE>
(2) all Notes not theretofore delivered to the Indenture Trustee
for cancellation
(i) have become due and payable,
(ii) will become due and payable at the Class A-1 Final
Maturity Date or the Class A-2 Final Maturity Date, as the case
may be, within one year, or
(iii) are to be called for redemption within one
year under arrangements satisfactory to the Indenture Trustee for
the giving of notice of redemption by the Indenture Trustee in
the name, and at the expense, of the Issuer,
and the Issuer, in the case of (i), (ii) or (iii) above, has
irrevocably deposited or caused to be irrevocably deposited with the
Indenture Trustee cash or direct obligations of or obligations
guaranteed by the United States of America (which will mature prior to
the date such amounts are payable), in trust for such purpose, in an
amount sufficient to pay and discharge the entire indebtedness on such
Notes not theretofore delivered to the Indenture Trustee for
cancellation as of such day of discharge or when due on the Class A-1
Final Maturity Date or the Class A-2 Final Maturity Date, as the case
may be;
(B) the Issuer has paid or caused to be paid all other sums
payable hereunder by the Issuer; and
(C) the Issuer has delivered to the Indenture Trustee an
Officers' Certificate of the Issuer, an Opinion of Counsel and (if
required by the TIA or the Indenture Trustee) an Independent
Certificate from a firm of certified public accountants, each meeting
the applicable requirements of Section 11.01(a) and, subject to
Section 11.02, each stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of this
Indenture have been complied with.
SECTION 4.02. Application of Trust Money. All moneys deposited with the
--------------------------
Indenture Trustee pursuant to Section 4.01 hereof shall be held in trust and
applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Paying Agent, as the
Indenture Trustee may determine, to the Noteholders of the particular Notes for
the payment or redemption of which such
25
<PAGE>
moneys have been deposited with the Indenture Trustee, of all sums due and to
become due thereon for principal and interest (including any Noteholders'
Interest LIBOR Carryover); but such moneys need not be segregated from other
funds except to the extent required herein, in the Master Servicing Agreement or
the Administration Agreement or required by law.
SECTION 4.03. Repayment of Moneys Held by Paying Agent. In connection
----------------------------------------
with the satisfaction and discharge of this Indenture with respect to the Notes,
all moneys then held by any Paying Agent other than the Indenture Trustee under
the provisions of this Indenture with respect to such Notes shall, upon demand
of the Issuer, be paid to the Indenture Trustee to be held and applied according
to Section 3.03 and thereupon such Paying Agent shall be released from all
further liability with respect to such moneys.
SECTION 4.04. Auction of Financed Student Loans. The Indenture Trustee
---------------------------------
shall offer the Financed Student Loans for sale as of the last day of the
Collection Period that ends in [ ], 200_ and shall accept bids on behalf of
the Issuer for such purpose. If with respect to the last date of such Collection
Period, the Indenture Trustee receives no bid to purchase the Financed Student
Loans, or no bid that it may, as specified below, accept, the Indenture Trustee
shall offer the Financed Student Loans for sale as of the last day of each, or
any, of the succeeding Collection Periods until a bid is received that may, as
specified below, be accepted by the Indenture Trustee. With respect to any
attempt to arrange for the purchase of the Financed Student Loans, the Indenture
Trustee shall accept the highest bid submitted so long as (i) at least two bids
to purchase the Financed Student Loans as of the last day of the applicable
Collection Period are received and (ii) the highest such bid is at least equal
to the Minimum Purchase Price as of the last day of the applicable Collection
Period. Any attempt to arrange for the purchase of the Financed Student Loans
and the consummation of any such sale shall be conducted by the Indenture
Trustee in a commercially reasonable manner. The Indenture Trustee shall provide
notice of any such attempt at least 60 days prior to the last day of the related
Collection Period to the Seller, the Master Servicer, each Subservicer, the
Eligible Lender Trustee, the Rating Agencies, each Noteholder and each
Certificateholder, and any such Person or their respective Affiliates or any
other Person may submit a timely bid for the purchase of the Financed Student
Loans.
26
<PAGE>
ARTICLE V
Remedies
--------
SECTION 5.01. Events of Default. "Event of Default", wherever used
-----------------
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(i) default in the payment of any interest (including, subject
to the limitations of Sections 2.07(d) and 8.02(c), any Noteholders'
Interest LIBOR Carryover) on any Note when the same becomes due and
payable, and such default shall continue for a period of five days; or
(ii) default in the payment of the principal of any Note when the
same becomes due and payable; or
(iii) default in the observance or performance of any covenant
or agreement of the Issuer made in this Indenture (other than a covenant or
agreement, a default in the observance or performance of which is elsewhere
in this Section specifically dealt with), or any representation or warranty
of the Issuer made in this Indenture or in any certificate or other writing
delivered pursuant hereto or in connection herewith proving to have been
incorrect in any material respect as of the time when the same shall have
been made, and such default shall continue or not be cured, or the
circumstance or condition in respect of which such misrepresentation or
warranty was incorrect shall not have been eliminated or otherwise cured,
for a period of 60 (or, in the circumstances provided below, 120) days
after there shall have been given, by registered or certified mail, to the
Issuer by the Indenture Trustee or to the Issuer and the Indenture Trustee
by the Noteholders of at least 25% of the Outstanding Amount of the Notes,
a written notice specifying such default or incorrect representation or
warranty and requiring it to be remedied and stating that such notice is a
notice of Default hereunder; provided, that, if at the end of such 60-day
period, the Indenture Trustee determines that a good faith effort to cure
or eliminate the Default has commenced, the Indenture Trustee may extend
such 60-day period to 120 days; or
(iv) the filing of a decree or order for relief by a court having
jurisdiction in the premises in respect of the
27
<PAGE>
Issuer or any substantial part of the Indenture Trust Estate in an
involuntary case under any applicable Federal or state bankruptcy,
insolvency or other similar law now or hereafter in effect, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official of the Issuer or for any substantial part of the Indenture Trust
Estate, or ordering the winding-up or liquidation of the Issuer's affairs,
and such decree or order shall remain unstayed and in effect for a period
of 60 consecutive days; or
(v) the commencement by the Issuer of a voluntary case under any
applicable Federal or state bankruptcy, insolvency or other similar law now
or hereafter in effect, or the consent by the Issuer to the entry of an
order for relief in an involuntary case under any such law, or the consent
by the Issuer to the appointment or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official
of the Issuer or for any substantial part of the Indenture Trust Estate, or
the making by the Issuer of any general assignment for the benefit of
creditors, or the failure by the Issuer generally to pay its debts as such
debts become due, or the taking of action by the Issuer in furtherance of
any of the foregoing.
SECTION 5.02. Acceleration of Maturity; Rescission and Annulment. If an
--------------------------------------------------
Event of Default should occur and be continuing, then and in every such case the
Indenture Trustee or the Noteholders of Notes representing not less than 66-2/3%
of the Outstanding Amount of the Notes may declare all the Notes to be
immediately due and payable, by a notice in writing to the Issuer (and to the
Indenture Trustee if given by Noteholders), and upon any such declaration the
unpaid principal amount of such Notes, together with accrued and unpaid interest
thereon through the date of acceleration, shall become immediately due and
payable.
At any time after such declaration of acceleration of maturity has been
made and before a judgment or decree for payment of the money due has been
obtained by the Indenture Trustee as hereinafter in this Article V provided, the
Noteholders of Notes representing a majority of the Outstanding Amount of the
Notes, by written notice to the Issuer and the Indenture Trustee, may rescind
and annul such declaration and its consequences if:
(i) the Issuer has paid or deposited with the Indenture Trustee a
sum sufficient to pay:
(A) all payments of principal of and interest on all Notes
and all other amounts that would then be due
28
<PAGE>
hereunder or upon such Notes if the Event of Default giving rise to
such acceleration had not occurred; and
(B) all sums paid or advanced by the Indenture Trustee
hereunder and the reasonable compensation, expenses, disbursements and
advances of the Indenture Trustee and its agents and counsel; and
(ii) all Events of Default, other than the nonpayment of the
principal of the Notes that has become due solely by such acceleration,
have been cured or waived as provided in Section 5.12.
No such rescission shall affect any subsequent default or impair any right
consequent thereto.
SECTION 5.03. Collection of Indebtedness and Suits for Enforcement by
-------------------------------------------------------
Indenture Trustee. (a) The Issuer covenants that if (i) default is made in the
- -----------------
payment of any interest (including, subject to the limitations of Sections
2.07(d) and 8.02(c), any Noteholders' Interest LIBOR Carryover) on any Note when
the same becomes due and payable, and such default continues for a period of
five days, or (ii) default is made in the payment of the principal of or any
installment of the principal of any Note when the same becomes due and payable,
the Issuer will, upon demand of the Indenture Trustee, pay to it, for the
benefit of the Noteholders, the whole amount then due and payable on such Notes
for principal and interest (and any Noteholders' Interest LIBOR Carryover), with
interest upon the overdue principal, and, to the extent payment at such rate of
interest shall be legally enforceable, upon overdue installments of interest
(and any Noteholders' Interest LIBOR Carryover), at the rate specified in
Section 2.07 and in addition thereto such further amount as shall be sufficient
to cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Indenture Trustee and
its agents and counsel.
(b) In case the Issuer shall fail forthwith to pay such amounts upon such
demand, the Indenture Trustee, in its own name and as trustee of an express
trust, may institute a Proceeding for the collection of the sums so due and
unpaid, and may prosecute such Proceeding to judgment or final decree, and may
enforce the same against the Issuer or other obligor upon such Notes and collect
in the manner provided by law out of the property of the Issuer or other obligor
upon such Notes, wherever situated, the moneys adjudged or decreed to be
payable.
(c) If an Event of Default occurs and is continuing, the Indenture Trustee
may, as more particularly provided in Section 5.04, in its discretion, proceed
to protect and enforce its
29
<PAGE>
rights and the rights of the Noteholders, by such appropriate Proceedings as the
Indenture Trustee shall deem most effective to protect and enforce any such
rights, whether for the specific enforcement of any covenant or agreement in
this Indenture or in aid of the exercise of any power granted herein, or to
enforce any other proper remedy or legal or equitable right vested in the
Indenture Trustee by this Indenture or by law.
(d) In case there shall be pending, relative to the Issuer or any other
obligor upon the Notes or any Person having or claiming an ownership interest in
the Indenture Trust Estate, Proceedings under Title 11 of the United States Code
or any other applicable Federal or state bankruptcy, insolvency or other similar
law, or in case a receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Issuer or its property or such other obligor or Person,
or in case of any other comparable judicial Proceedings relative to the Issuer
or other obligor upon the Notes, or to the creditors or property of the Issuer
or such other obligor, the Indenture Trustee, irrespective of whether the
principal of any Notes shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Indenture Trustee shall
have made any demand pursuant to the provisions of this Section, shall be
entitled and empowered, by intervention in such proceedings or otherwise:
(i) to file and prove a claim or claims for the whole amount of
principal and interest (including any Noteholders' Interest LIBOR
Carryover) owing and unpaid in respect of the Notes and to file such other
papers or documents as may be necessary or advisable in order to have the
claims of the Indenture Trustee (including any claim for reasonable
compensation to the Indenture Trustee and each predecessor Indenture
Trustee, and their respective agents, attorneys and counsel, and for
reimbursement of all expenses and liabilities incurred, and all advances
made, by the Indenture Trustee and each predecessor Indenture Trustee,
except as a result of negligence or bad faith) and of the Noteholders
allowed in such Proceedings;
(ii) unless prohibited by applicable law and regulations, to vote
on behalf of the Noteholders in any election of a trustee, a standby
trustee or Person performing similar functions in any such Proceedings;
(iii) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute all amounts
received with respect to the claims
30
<PAGE>
of the Noteholders and of the Indenture Trustee on their behalf; and
(iv) to file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the
Indenture Trustee or the Noteholders allowed in any judicial proceedings
relative to the Issuer, its creditors and its property;
and any trustee, receiver, liquidator, custodian or other similar official in
any such Proceeding is hereby authorized by each of such Noteholders to make
payments to the Indenture Trustee, and, in the event that the Indenture Trustee
shall consent to the making of payments directly to such Noteholders, to pay to
the Indenture Trustee such amounts as shall be sufficient to cover reasonable
compensation to the Indenture Trustee, each predecessor Indenture Trustee and
their respective agents, attorneys and counsel, and all other expenses and
liabilities incurred, and all advances made, by the Indenture Trustee and each
predecessor Indenture Trustee except as a result of negligence or bad faith.
(e) Nothing herein contained shall be deemed to authorize the Indenture
Trustee to authorize or consent to or vote for or accept or adopt on behalf of
any Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Noteholder thereof or to
authorize the Indenture Trustee to vote in respect of the claim of any
Noteholder in any such proceeding except, as aforesaid, to vote for the election
of a trustee in bankruptcy or similar Person.
(f) All rights of action and of asserting claims under this Indenture, or
under any of the Notes, may be enforced by the Indenture Trustee without the
possession of any of the Notes or the production thereof in any trial or other
Proceedings relative thereto, and any such action or Proceedings instituted by
the Indenture Trustee shall be brought in its own name as trustee of an express
trust, and any recovery of judgment, subject to the payment of the expenses,
disbursements and compensation of the Indenture Trustee, each predecessor
Indenture Trustee and their respective agents and attorneys, shall be for the
ratable benefit of the Noteholders.
(g) In any Proceedings brought by the Indenture Trustee (and also any
Proceedings involving the interpretation of any provision of this Indenture to
which the Indenture Trustee shall be a party), the Indenture Trustee shall be
held to represent all the Noteholders, and it shall not be necessary to make any
Noteholder a party to any such Proceedings.
31
<PAGE>
SECTION 5.04. Remedies; Priorities. (a) If an Event of Default shall
--------------------
have occurred and be continuing, the Indenture Trustee may do one or more of the
following (subject to Section 5.05):
(i) institute Proceedings in its own name and as trustee of an
express trust for the collection of all amounts then payable on the Notes
or under this Indenture with respect thereto, whether by declaration or
otherwise, enforce any judgment obtained, and collect from the Issuer and
any other obligor upon such Notes moneys adjudged due;
(ii) institute Proceedings from time to time for the complete or
partial foreclosure of this Indenture with respect to the Indenture Trust
Estate;
(iii) exercise any remedies of a secured party under the UCC
and take any other appropriate action to protect and enforce the rights and
remedies of the Indenture Trustee and the Noteholders; and
(iv) sell the Indenture Trust Estate or any portion thereof or
rights or interest therein, at one or more public or private sales called
and conducted in any manner permitted by law;
provided, however, that the Indenture Trustee may not sell or otherwise
- -------- -------
liquidate the Indenture Trust Estate following an Event of Default, other than
an Event of Default described in Section 5.01(i) or (ii), unless (A) the
Noteholders of 100% of the Outstanding Amount of the Notes consent thereto, (B)
the proceeds of such sale or liquidation distributable to the Noteholders are
sufficient to discharge in full all amounts then due and unpaid upon such Notes
for principal and interest or (C) the Indenture Trustee determines that the
Indenture Trust Estate will not continue to provide sufficient funds for the
payment of principal of and interest on the Notes as they would have become due
if the Notes had not been declared due and payable, and the Indenture Trustee
obtains the consent of Noteholders of 66-2/3% of the Outstanding Amount of the
Notes. In determining such sufficiency or insufficiency with respect to clauses
(B) and (C), the Indenture Trustee may, but need not, obtain and rely upon an
opinion of an Independent investment banking or accounting firm of national
reputation as to the feasibility of such proposed action and as to the
sufficiency of the Indenture Trust Estate for such purpose.
(b) If the Indenture Trustee collects any money or property pursuant to
this Article V, it shall pay out the money or property in the following order:
32
<PAGE>
FIRST: to the Indenture Trustee for amounts due under Section 6.07;
SECOND: to the Master Servicer for due and unpaid Servicing Fees;
THIRD: to Noteholders for amounts due and unpaid on the Notes for
interest, ratably, without preference or priority of any kind, according to
the amounts due and payable on the Notes for interest;
FOURTH: to the Issuer for distribution of interest due and unpaid to
the Certificateholders;
FIFTH: to Class A-1 Noteholders for amounts due and unpaid on the
Class A-1 Notes for principal, ratably, without preference or priority of
any kind, according to the amounts due and payable on the Class A-1 Notes
for principal;
SIXTH: to Class A-2 Noteholders for amounts due and unpaid on the
Class A-2 Notes for principal, ratably, without preference or priority of
any kind, according to the amounts due and payable on the Class A-2 Notes
for principal;
SEVENTH: to the Issuer for distribution of principal due and unpaid
to the Certificateholders;
EIGHTH: to Noteholders for any unpaid Noteholders' Interest LIBOR
Carryover, ratably, without preference or priority of any kind, according
to the amount of such Noteholders' Interest LIBOR Carryover attributable to
each Note;
NINTH: to the Issuer for distribution to the Certificateholders of
any unpaid Certificateholders' Interest LIBOR Carryover; and
TENTH: to the Issuer, for distribution in accordance with the terms
of the Administration Agreement.
The Indenture Trustee may fix a record date and payment date for any
payment to Noteholders pursuant to this Section. At least 15 days before such
record date, the Issuer shall mail to each Noteholder and the Indenture Trustee
a notice that states the record date, the payment date and the amount to be
paid.
33
<PAGE>
SECTION 5.05. Optional Preservation of the Indenture Trust Estate. If the
---------------------------------------------------
Notes have been declared to be due and payable under Section 5.02 following an
Event of Default and such declaration and its consequences have not been
rescinded and annulled, the Indenture Trustee may, but need not, elect to
maintain possession of the Indenture Trust Estate. It is the desire of the
parties hereto and the Noteholders that there be at all times sufficient funds
for the payment of principal of and interest (including any Noteholders'
Interest LIBOR Carryover) on the Notes, and the Indenture Trustee shall take
such desire into account when determining whether to maintain possession of the
Indenture Trust Estate. In determining whether to maintain possession of the
Indenture Trust Estate, the Indenture Trustee may, but need not, obtain and rely
upon an opinion (which shall be obtained at the expense of the Issuer) of an
Independent investment banking or accounting firm of national reputation as to
the feasibility of such proposed action and as to the sufficiency of the
Indenture Trust Estate for such purpose.
SECTION 5.06. Limitation of Suits. No Noteholder shall have any right to
-------------------
institute any Proceeding, judicial or otherwise, with respect to this Indenture,
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless:
(i) such Noteholder has previously given written notice to the
Indenture Trustee of a continuing Event of Default;
(ii) the Noteholders of not less than 25% of the Outstanding
Amount of the Notes have made written request to the Indenture Trustee to
institute such Proceeding in respect of such Event of Default in its own
name as Indenture Trustee hereunder;
(iii) such Noteholder or Noteholders have offered to the
Indenture Trustee reasonable indemnity against the costs, expenses and
liabilities to be incurred in complying with such request;
(iv) the Indenture Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute such
Proceeding; and
(v) no direction inconsistent with such written request has
been given to the Indenture Trustee during such 60-day period by the
Noteholders of a majority of the Outstanding Amount of the Notes;
34
<PAGE>
it being understood and intended that no one or more Noteholders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other
Noteholders or to obtain or to seek to obtain priority or preference over any
other Noteholders or to enforce any right under this Indenture, except in the
manner herein provided.
In the event the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Noteholders, each
representing less than a majority of the Outstanding Amount of the Notes, the
Indenture Trustee in its sole discretion may determine what action, if any,
shall be taken, notwithstanding any other provisions of this Indenture.
SECTION 5.07. Unconditional Rights of Noteholders To Receive Principal and
------------------------------------------------------------
Interest. Notwithstanding any other provisions in this Indenture, any
- --------
Noteholder shall have the right, which is absolute and unconditional, to receive
payment of the principal of and interest, if any, on such Note on or after the
respective due dates thereof expressed in such Note or in this Indenture (or, in
the case of redemption, on or after the Redemption Date) and to institute suit
for the enforcement of any such payment, and such right shall not be impaired
without the consent of such Noteholder.
SECTION 5.08. Restoration of Rights and Remedies. If the Indenture
----------------------------------
Trustee or any Noteholder has instituted any Proceeding to enforce any right or
remedy under this Indenture and such Proceeding has been discontinued or
abandoned for any reason or has been determined adversely to the Indenture
Trustee or to such Noteholder, then and in every such case the Issuer, the
Indenture Trustee and the Noteholders shall, subject to any determination in
such Proceeding, be restored severally and respectively to their former
positions hereunder, and thereafter all rights and remedies of the Indenture
Trustee and the Noteholders shall continue as though no such Proceeding had been
instituted.
SECTION 5.09. Rights and Remedies Cumulative. No right or remedy herein
------------------------------
conferred upon or reserved to the Indenture Trustee or to the Noteholders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
35
<PAGE>
SECTION 5.10. Delay or Omission Not a Waiver. No delay or omission of the
------------------------------
Indenture Trustee or any Noteholder to exercise any right or remedy accruing
upon any Default shall impair any such right or remedy or constitute a waiver of
any such Default or an acquiescence therein. Every right and remedy given by
this Article V or by law to the Indenture Trustee or to the Noteholders may be
exercised from time to time, and as often as may be deemed expedient, by the
Indenture Trustee or by the Noteholders, as the case may be.
SECTION 5.11. Control by Noteholders. The Noteholders of a majority of
----------------------
the Outstanding Amount of the Notes shall have the right to direct the time,
method and place of conducting any Proceeding for any remedy available to the
Indenture Trustee with respect to the Notes or exercising any trust or power
conferred on the Indenture Trustee; provided that
--------
(i) such direction shall not be in conflict with any rule of law
or with this Indenture;
(ii) subject to the express terms of Section 5.04, any direction
to the Indenture Trustee to sell or liquidate the Indenture Trust Estate
shall be by the Noteholders of 100% of the Outstanding Amount of the Notes;
(iii) if the conditions set forth in Section 5.05 have been
satisfied and the Indenture Trustee elects to retain the Indenture Trust
Estate pursuant to such Section, then any direction to the Indenture
Trustee by Noteholders of less than 100% of the Outstanding Amount of the
Notes to sell or liquidate the Indenture Trust Estate shall be of no force
and effect; and
(iv) the Indenture Trustee may take any other action deemed
proper by the Indenture Trustee that is not inconsistent with such
direction;
provided, however, that, subject to Section 6.01, the Indenture Trustee need not
- -------- -------
take any action that it determines might involve it in liability or might
materially adversely affect the rights of any Noteholders not consenting to such
action.
SECTION 5.12. Waiver of Past Defaults. Prior to the time a judgment or
-----------------------
decree for payment of money due has been obtained as described in Section 5.02,
the Noteholders of not less than a majority of the Outstanding Amount of the
Notes may waive any past Default and its consequences except a Default (a) in
payment when due of principal of or interest (including, subject to the
limitations of Sections 2.07(d) and 8.02(c), any Noteholders' Interest LIBOR
Carryover) on any of the Notes or (b) in respect
36
<PAGE>
of a covenant or provision hereof which cannot be modified or amended without
the consent of each Noteholder. In the case of any such waiver, the Issuer, the
Indenture Trustee and the Noteholders shall be restored to their former
positions and rights hereunder, respectively; but no such waiver shall extend to
any subsequent or other Default or impair any right consequent thereto.
Upon any such waiver, such Default shall cease to exist and be deemed to
have been cured and not to have occurred for every purpose of this Indenture;
but no such waiver shall extend to any subsequent or other Default or impair any
right consequent thereto.
SECTION 5.13. Undertaking for Costs. All parties to this Indenture agree,
---------------------
and each Noteholder by such Noteholder's acceptance of any Note shall be deemed
to have agreed, that any court may in its discretion require, in any suit for
the enforcement of any right or remedy under this Indenture, or in any suit
against the Indenture Trustee for any action taken, suffered or omitted by it as
Indenture Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to (a) any suit instituted by the
Indenture Trustee, (b) any suit instituted by any Noteholder, or group of
Noteholders, in each case holding in the aggregate more than 10% of the
Outstanding Amount of the Notes or (c) any suit instituted by any Noteholder for
the enforcement of the payment of principal of or interest (including any
Noteholders' Interest LIBOR Carryover) on any Note on or after the respective
due dates expressed in such Note and in this Indenture (or, in the case of
redemption, on or after the Redemption Date).
SECTION 5.14. Waiver of Stay or Extension Laws. The Issuer covenants (to
--------------------------------
the extent that it may lawfully do so) that it will not at any time insist upon,
or plead or in any manner whatsoever, claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter in
force, that may affect the covenants or the performance of this Indenture; and
the Issuer (to the extent that it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law, and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Indenture
Trustee, but will suffer and permit the execution of every such power as though
no such law had been enacted.
37
<PAGE>
SECTION 5.15. Action on Notes. The Indenture Trustee's right to seek and
---------------
recover judgment on the Notes or under this Indenture shall not be affected by
the seeking, obtaining or application of any other relief under or with respect
to this Indenture. Neither the lien of this Indenture nor any rights or
remedies of the Indenture Trustee or the Noteholders shall be impaired by the
recovery of any judgment by the Indenture Trustee against the Issuer or by the
levy of any execution under such judgment upon any portion of the Indenture
Trust Estate or upon any of the assets of the Issuer. Any money or property
collected by the Indenture Trustee shall be applied in accordance with Section
5.04(b).
SECTION 5.16. Performance and Enforcement of Certain Obligations. (a)
--------------------------------------------------
Promptly following a request from the Indenture Trustee to do so and at the
Administrator's expense, the Issuer shall take all such lawful action as the
Indenture Trustee may request to compel or secure the performance and observance
by the Seller, the Administrator, the Master Servicer and any Subservicer, as
applicable, of each of their obligations to the Issuer under or in connection
with the Loan Sale Agreement, the Master Servicing Agreement and the
Administration Agreement and to exercise any and all rights, remedies, powers
and privileges lawfully available to the Issuer under or in connection with the
Loan Sale Agreement, the Master Servicing Agreement and the Administration
Agreement to the extent and in the manner directed by the Indenture Trustee,
including the transmission of notices of default on the part of the Seller, the
Master Servicer or the Administrator thereunder and the institution of legal or
administrative actions or proceedings to compel or secure performance by the
Seller, the Master Servicer or the Administrator of each of their obligations
under the Loan Sale Agreement, the Master Servicing Agreement or the
Administration Agreement.
(b) If an Event of Default has occurred and is continuing, the Indenture
Trustee may, and at the direction (which direction shall be in writing or by
telephone (confirmed in writing promptly thereafter)) of the Noteholders of 66-
2/3% of the Outstanding Amount of the Notes shall, exercise all rights,
remedies, powers, privileges and claims of the Issuer against the Seller, the
Master Servicer or the Administrator under or in connection with the Loan Sale
Agreement, the Master Servicing Agreement or the Administration Agreement,
including the right or power to take any action to compel or secure performance
or observance by the Seller, the Master Servicer or the Administrator of each of
their obligations to the Issuer thereunder and to give any consent, request,
notice, direction, approval, extension or waiver under the Loan Sale Agreement,
the
38
<PAGE>
Master Servicing Agreement or the Administration Agreement and any right of the
Issuer to take such action shall be suspended.
ARTICLE VI
The Indenture Trustee
---------------------
SECTION 6.01. Duties of Indenture Trustee. (a) If an Event of Default
---------------------------
has occurred and is continuing, the Indenture Trustee shall exercise the rights
and powers vested in it by this Indenture and use the same degree of care and
skill in their exercise as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Indenture Trustee undertakes to perform such duties and
only such duties as are specifically set forth in this Indenture and no
implied covenants or obligations shall be read into this Indenture against
the Indenture Trustee; and
(ii) in the absence of bad faith on its part, the Indenture
Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Indenture Trustee and conforming to the
requirements of this Indenture; provided, however, that the Indenture
-------- -------
Trustee shall examine such certificates and opinions to determine whether
they conform to the requirements of this Indenture.
(c) The Indenture Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section;
(ii) the Indenture Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer unless it is proved
that the Indenture Trustee was negligent in ascertaining the pertinent
facts; and
(iii) the Indenture Trustee shall not be liable with respect to
any action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Sections 5.02, 5.11, 5.12 and 5.16.
39
<PAGE>
(d) Every provision of this Indenture that in any way relates to the
Indenture Trustee is subject to paragraphs (a), (b), (c) and (g) of this
Section.
(e) The Indenture Trustee shall not be liable for interest on any money
received by it except as the Indenture Trustee may agree in writing with the
Issuer.
(f) Money held in trust by the Indenture Trustee need not be segregated
from other funds except to the extent required by law or the terms of this
Indenture or the Master Servicing Agreement.
(g) No provision of this Indenture shall require the Indenture Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayments
of such funds or adequate indemnity satisfactory to it against any loss,
liability or expense is not reasonably assured to it.
(h) Except as expressly provided in the Basic Documents, the Indenture
Trustee shall have no obligation to administer, service or collect the Financed
Student Loans or to maintain, monitor or otherwise supervise the administration,
servicing or collection of the Financed Student Loans.
(i) In the event that the Indenture Trustee is the Paying Agent or the Note
Registrar, the rights and protections afforded to the Indenture Trustee pursuant
to this Indenture shall also be afforded to the Indenture Trustee in its
capacity as Paying Agent or Note Registrar.
(j) Every provision of this Indenture relating to the conduct or affecting
the liability of or affording protection to the Indenture Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
SECTION 6.02. Rights of Indenture Trustee. (a) The Indenture Trustee may
---------------------------
rely on any document believed by it to be genuine and to have been signed or
presented by the proper Person. The Indenture Trustee need not investigate any
fact or matter stated in such document.
(b) Before the Indenture Trustee acts or refrains from acting in connection
with any matter contemplated by this Indenture or other Basic Documents, it may
require an Officers' Certificate of the Issuer or an Opinion of Counsel. The
Indenture Trustee shall not be liable for any action it takes or
40
<PAGE>
omits to take in good faith in reliance on such Officers' Certificate or Opinion
of Counsel.
(c) The Indenture Trustee may exercise any of the trusts and powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys or a custodian or nominee, and the Indenture Trustee shall
not be responsible for any misconduct or negligence on the part of, or for the
supervision of, any such agent, attorney, custodian or nominee appointed with
due care by it hereunder.
(d) The Indenture Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers; provided, however, that the Indenture Trustee's conduct does
-------- -------
not constitute willful misconduct, negligence or bad faith.
(e) The Indenture Trustee may consult with counsel, and the advice or
opinion of counsel with respect to legal matters relating to this Indenture and
the other Basic Documents and the Notes shall be full and complete authorization
and protection from liability in respect to any action taken, omitted or
suffered by it hereunder in good faith and in accordance with the advice or
opinion of such counsel.
(f) Subject to clauses (a), (b), (c) and (g) of Section 6.01 hereof, the
Indenture Trustee shall be under no obligation to exercise any of the rights or
powers vested in it by this Indenture at the request or direction of any
Noteholder pursuant to this Indenture, unless such Noteholder shall have offered
to the Indenture Trustee security or indemnity reasonably satisfactory to the
Indenture Trustee against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction.
SECTION 6.03. Individual Rights of Indenture Trustee. The Indenture
--------------------------------------
Trustee in its individual or any other capacity may become the owner or pledgee
of Notes and may otherwise deal with the Issuer or its Affiliates with the same
rights it would have if it were not Indenture Trustee. Any Paying Agent, Note
Registrar, co-registrar or co-paying agent may do the same with like rights.
However, the Indenture Trustee must comply with Sections 6.11 and 6.12.
SECTION 6.04. Indenture Trustee's Disclaimer. The Indenture Trustee shall
------------------------------
not be responsible for and makes no representation as to the validity or
adequacy of this Indenture or the Notes, it shall not be accountable for the
Issuer's use of the proceeds from the Notes, and it shall not be responsible for
any statement of the Issuer in the Indenture or in any document
41
<PAGE>
issued in connection with the sale of the Notes or in the Notes other than the
Indenture Trustee's certificate of authentication.
SECTION 6.05. Notice of Defaults. If a Default occurs and is continuing
------------------
and if it is either actually known or written notice of the existence thereof
has been delivered to a Responsible Officer of the Indenture Trustee, the
Indenture Trustee shall mail notice of the Default to each Noteholder and to the
Rating Agencies promptly after the Indenture Trustee obtains such knowledge or
receives such notice of the Default within 90 days after it occurs. Except in
the case of a Default in payment of principal of or interest (including any
Noteholders' Interest LIBOR Carryover) on any Note (including payments pursuant
to the mandatory redemption provisions of such Note), the Indenture Trustee may
withhold the notice if and so long as a committee of its Responsible Officers in
good faith determines that withholding the notice is in the interests of
Noteholders.
SECTION 6.06. Reports by Indenture Trustee to Noteholders. The Paying
-------------------------------------------
Agent shall deliver to each Noteholder (and to each Person who was a Noteholder
at any time during the applicable calendar year) such information as may be
required to enable such holder to prepare its Federal and state income tax
returns. Within 60 days after each December 31 beginning with the December 31
following the date of this Indenture, the Indenture Trustee shall mail to each
Noteholder a brief report as of such December 31 that complies with TIA (S)
313(a) if required by said section. The Indenture Trustee shall also comply
with TIA (S) 313(b). A copy of each such report required pursuant to TIA (S)
313(a) or (b) shall, at the time of such transmission to Noteholders, be filed
by the Indenture Trustee with the Commission and with each securities exchange,
if any, upon which the Notes are listed, provided that the Issuer has previously
notified the Indenture Trustee of such listing.
SECTION 6.07. Compensation and Indemnity. The Issuer shall cause the
--------------------------
Administrator to pay to the Indenture Trustee from time to time reasonable
compensation for its services and shall cause the Administrator to reimburse the
Indenture Trustee for all reasonable out-of-pocket expenses incurred or made by
it, including costs of collection, in addition to the compensation for its
services. Such expenses shall include the reasonable compensation and expenses,
disbursements and advances of the Indenture Trustee's agents, counsel,
accountants and experts. The Indenture Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express trust. The Issuer
shall cause the Administrator to indemnify the Indenture Trustee, its officers,
directors, employees and agents against any and all loss, liability or expense
(including attorneys' fees and
42
<PAGE>
expenses) incurred by it in connection with the administration of this trust and
the performance of its duties hereunder and under the other Basic Documents.
The Indenture Trustee shall notify the Issuer and the Administrator promptly of
any claim for which it may seek indemnity. Failure by the Indenture Trustee to
so notify the Issuer and the Administrator shall not relieve the Issuer or the
Administrator of its obligations hereunder and under the other Basic Documents.
The Issuer shall cause the Administrator to defend the claim and the
Administrator shall not be liable for any additional legal fees and expenses of
the Indenture Trustee after it has assumed such defense; provided, however,
-------- -------
that, in the event that there may be a conflict between the positions of the
Indenture Trustee and the Administrator in conducting the defense of such claim,
the Indenture Trustee shall be entitled to separate counsel the fees and
expenses of which shall be paid by the Administrator on behalf of the Issuer.
Neither the Issuer nor the Administrator need reimburse any expense or indemnify
against any loss, liability or expense incurred by the Indenture Trustee through
the Indenture Trustee's own willful misconduct, negligence or bad faith.
The Issuer's and Administrator's payment obligations to the Indenture
Trustee pursuant to this Section shall survive the discharge of this Indenture.
When the Indenture Trustee incurs expenses after the occurrence of a Default
specified in Section 5.01(iv) or (v) with respect to the Issuer, the expenses
are intended to constitute expenses of administration under Title 11 of the
United States Code or any other applicable Federal or state bankruptcy,
insolvency or similar law.
SECTION 6.08. Replacement of Indenture Trustee. No resignation or removal
--------------------------------
of the Indenture Trustee and no appointment of a successor Indenture Trustee
shall become effective until the acceptance of appointment by the successor
Indenture Trustee pursuant to this Section 6.08. The Indenture Trustee may
resign at any time by so notifying the Issuer. The Noteholders of a majority in
Outstanding Amount of the Notes may remove the Indenture Trustee by so notifying
the Indenture Trustee and may appoint a successor Indenture Trustee. The Issuer
shall remove the Indenture Trustee if:
(i) the Indenture Trustee fails to comply with Section 6.11;
(ii) an Insolvency Event occurs with respect to the Indenture
Trustee;
(iii) a receiver or other public officer takes charge of the
Indenture Trustee or its property; or
43
<PAGE>
(iv) the Indenture Trustee otherwise becomes incapable of
acting.
If the Indenture Trustee resigns or is removed or if a vacancy exists in
the office of Indenture Trustee for any reason (the Indenture Trustee in such
event being referred to herein as the retiring Indenture Trustee), the Issuer
shall promptly appoint a successor Indenture Trustee. A former Indenture
Trustee shall not be liable for any acts or omissions of any successor Indenture
Trustee.
A successor Indenture Trustee shall deliver a written acceptance of its
appointment to the retiring Indenture Trustee and to the Issuer and shall notify
the Rating Agencies in writing of such acceptance. Thereupon the resignation or
removal of the retiring Indenture Trustee shall become effective, and the
successor Indenture Trustee shall have all the rights, powers and duties of the
Indenture Trustee under this Indenture. The successor Indenture Trustee shall
mail a notice of its succession to Noteholders. The retiring Indenture Trustee
shall promptly transfer all property held by it as Indenture Trustee to the
successor Indenture Trustee.
If a successor Indenture Trustee does not take office within 60 days after
the retiring Indenture Trustee resigns or is removed, the retiring Indenture
Trustee, the Issuer or the Noteholders of a majority in Outstanding Amount of
the Notes may petition any court of competent jurisdiction for the appointment
of a successor Indenture Trustee.
If the Indenture Trustee fails to comply with Section 6.11, any Noteholder
may petition any court of competent jurisdiction for the removal of the
Indenture Trustee and the appointment of a successor Indenture Trustee.
Notwithstanding the replacement of the Indenture Trustee pursuant to this
Section, the Issuer's and the Administrator's obligations under Section 6.07
shall continue for the benefit of the retiring Indenture Trustee.
SECTION 6.09. Successor Indenture Trustee by Merger. If the Indenture
-------------------------------------
Trustee consolidates with, merges or converts into, or transfers all or
substantially all its corporate trust business or assets to, another corporation
or banking association, the resulting, surviving or transferee corporation
without any further act shall be the successor Indenture Trustee; provided that
such corporation or banking association shall be otherwise qualified and
eligible under Section 6.11. The Indenture Trustee shall provide Rating
Agencies prior written notice of any such transaction.
44
<PAGE>
In case at the time such successor or successors by merger, conversion or
consolidation to the Indenture Trustee shall succeed to the trusts created by
this Indenture any of the Notes shall have been authenticated but not delivered,
any such successor to the Indenture Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Indenture Trustee may authenticate such
Notes either in the name of any predecessor hereunder or in the name of the
successor to the Indenture Trustee; and in all such cases such certificates
shall have the full force which it is anywhere in the Notes or in this Indenture
provided that the certificate of the Indenture Trustee shall have.
SECTION 6.10. Appointment of Co-Trustee or Separate Trustee. (a)
---------------------------------------------
Notwithstanding any other provisions of this Indenture, at any time, for the
purpose of meeting any legal requirement of any jurisdiction in which any part
of the Indenture Trust Estate may at the time be located, the Indenture Trustee
shall have the power and may execute and deliver all instruments to appoint one
or more Persons to act as a co-trustee or co-trustees, or separate trustee or
separate trustees, of all or any part of the Indenture Trust Estate, and to vest
in such Person or Persons, in such capacity and for the benefit of the
Noteholders, such title to the Indenture Trust Estate, or any part hereof, and,
subject to the other provisions of this Section, such powers, duties,
obligations, rights and trusts as the Indenture Trustee may consider necessary
or desirable. No co-trustee or separate trustee hereunder shall be required to
meet the terms of eligibility as a successor trustee under Section 6.11 and no
notice to Noteholders of the appointment of any co-trustee or separate trustee
shall be required under Section 6.08 hereof. The Indenture Trustee shall notify
the Rating Agencies of any appointment of a co-trustee or separate trustee
hereunder.
(b) Every separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Indenture Trustee shall be conferred or imposed upon and
exercised or performed by the Indenture Trustee and such separate trustee
or co-trustee jointly (it being understood that such separate trustee or
co-trustee is not authorized to act separately without the Indenture
Trustee joining in such act), except to the extent that under any law of
any jurisdiction in which any particular act or acts are to be performed
the Indenture
45
<PAGE>
Trustee shall be incompetent or unqualified to perform such act or acts, in
which event such rights, powers, duties and obligations (including the
holding of title to the Indenture Trust Estate or any portion thereof in
any such jurisdiction) shall be exercised and performed singly by such
separate trustee or co-trustee, but solely at the direction of the
Indenture Trustee;
(ii) no trustee hereunder shall be personally liable by reason
of any act or omission of any other trustee hereunder; and
(iii) the Indenture Trustee may at any time accept the
resignation of or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Indenture Trustee
shall be deemed to have been given to each of the then separate trustees and co-
trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Indenture and
the conditions of this Article VI. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Indenture Trustee or separately, as may be provided therein, subject to all the
provisions of this Indenture, specifically including every provision of this
Indenture relating to the conduct of, affecting the liability of, or affording
protection to, the Indenture Trustee. Every such instrument shall be filed with
the Indenture Trustee.
(d) Any separate trustee or co-trustee may at any time constitute the
Indenture Trustee, its agent or attorney-in-fact with full power and authority,
to the extent not prohibited by law, to do any lawful act under or in respect of
this Indenture on its behalf and in its name. If any separate trustee or co-
trustee shall die, become incapable of acting, resign or be removed, all its
estates, properties, rights, remedies and trusts shall vest in and be exercised
by the Indenture Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
SECTION 6.11. Eligibility; Disqualification. The Indenture Trustee shall
-----------------------------
at all times satisfy the requirements of TIA (S) 310(a). The Indenture Trustee
shall have a combined capital and surplus of at least $50,000,000 as set forth
in its most recent published annual report of condition and it shall have a long
term debt rating of Baa3 or better by Moody's. The Indenture Trustee shall
comply with TIA (S) 310(b), including the optional provision permitted by the
second sentence of TIA
46
<PAGE>
(S) 310(b)(9); provided, however, that there shall be excluded from the
-------- -------
operation of TIA (S) 310(b)(1) any indenture or indentures under which other
securities of the Issuer are outstanding if the requirements for such exclusion
set forth in TIA (S) 310(b)(1) are met.
SECTION 6.12. Preferential Collection of Claims Against Issuer. The
------------------------------------------------
Indenture Trustee shall comply with TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). An Indenture Trustee who has resigned or
been removed shall be subject to TIA (S) 311(a) to the extent indicated.
ARTICLE VII
Noteholders' Lists and Reports
------------------------------
SECTION 7.01. Issuer To Furnish Indenture Trustee Names and Addresses of
----------------------------------------------------------
Noteholders. The Issuer will furnish or cause to be furnished to the Indenture
- -----------
Trustee (a) not more than five days after the earlier of (i) each Record Date
and (ii) three months after the last Record Date, a list, in such form as the
Indenture Trustee may reasonably require, of the names and addresses of the
Noteholders as of such Record Date, (b) at such other times as the Indenture
Trustee may request in writing, within 30 days after receipt by the Issuer of
any such request, a list of similar form and content as of a date not more than
10 days prior to the time such list is furnished; provided, however, that so
-------- -------
long as the Indenture Trustee is the Note Registrar, no such list shall be
required to be furnished.
SECTION 7.02. Preservation of Information; Communications to Noteholders.
----------------------------------------------------------
(a) The Indenture Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of the Noteholders contained in the most
recent list furnished to the Indenture Trustee as provided in Section 7.01 and
the names and addresses of Noteholders received by the Indenture Trustee in its
capacity as Note Registrar. The Indenture Trustee may destroy any list
furnished to it as provided in such Section 7.01 upon receipt of a new list so
furnished.
(b) Noteholders may communicate pursuant to TIA (S) 312(b) with other
Noteholders with respect to their rights under this Indenture or under the
Notes.
(c) The Issuer, the Indenture Trustee and the Note Registrar shall have the
protection of TIA (S)312(c).
47
<PAGE>
(d) The Indenture Trustee shall furnish to the Noteholders promptly upon
receipt of a written request therefor, duplicates or copies of all reports,
notices, requests, demands, certificates, financial statements and any other
instruments furnished to the Indenture Trustee under the Basic Documents.
(e) The Indenture Trustee shall provide notice to the Noteholders as
provided in Section 9.02 of the Trust Agreement, and shall provide notice to
Noteholders of any amendment or supplement to the Trust Agreement as provided in
Section 11.01 of the Trust Agreement.
SECTION 7.03. Reports by Issuer. (a) The Issuer shall:
-----------------
(i) file with the Indenture Trustee, within 15 days after the
Issuer is required to file the same with the Commission, copies of the
annual reports and of the information, documents and other reports (or
copies of such portions of any of the foregoing as the Commission may from
time to time by rules and regulations prescribe) which the Issuer may be
required to file with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act;
(ii) file with the Indenture Trustee and the Commission in
accordance with rules and regulations prescribed from time to time by the
Commission such additional information, documents and reports with respect
to compliance by the Issuer with the conditions and covenants of this
Indenture as may be required from time to time by such rules and
regulations; and
(iii) supply to the Indenture Trustee (and the Indenture
Trustee shall transmit by mail to all Noteholders described in TIA (S)
313(c)) such summaries of any information, documents and reports required
to be filed by the Issuer pursuant to clauses (i) and (ii) of this Section
7.03(a) as may be required by rules and regulations prescribed from time to
time by the Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of the Issuer
shall end on December 31 of each year.
(c) Copies of all reports to be sent to the Indenture Trustee under this
Section 7.03 shall be mailed to the Rating Agencies by the Issuer at the same
time.
48
<PAGE>
ARTICLE VIII
Accounts, Disbursements and Releases
------------------------------------
SECTION 8.01. Collection of Money. Except as otherwise expressly provided
-------------------
herein, the Indenture Trustee may demand payment or delivery of, and shall
receive and collect, directly and without intervention or assistance of any
fiscal agent or other intermediary, all money and other property payable to or
receivable by the Indenture Trustee pursuant to this Indenture. The Indenture
Trustee shall apply all such money received by it on behalf of itself and the
Noteholders pursuant to the Loan Sale Agreement, the Master Servicing Agreement
or the Administration Agreement as provided in this Indenture. Except as
otherwise expressly provided in this Indenture, if any default occurs in the
making of any payment or performance under any agreement or instrument that is
part of the Indenture Trust Estate, the Indenture Trustee may take such action
as may be appropriate to enforce such payment or performance, including the
institution and prosecution of appropriate Proceedings. Any such action shall
be without prejudice to any right to claim a Default under this Indenture and
any right to proceed thereafter as provided in Article V.
SECTION 8.02. Trust Accounts. (a) On or prior to the Closing Date, the
--------------
Issuer shall cause the Administrator to establish and maintain, in the name of
the Indenture Trustee, for the benefit of the Noteholders and the
Certificateholders, the Trust Accounts as provided in Section 2(c) of the
Administration Agreement.
(b) On or before the Business Day preceding each Interest Payment Date and
Distribution Date, all Monthly Available Funds with respect to the preceding
Monthly Collection Period (or in the case of a Distribution Date, Available
Funds with respect to the preceding Collection Period) will be deposited in the
Collection Account as provided in Section 4.01 of the Master Servicing
Agreement. On each Interest Payment Date that is not a Distribution Date, the
Noteholders' Interest Distribution Amount with respect to the preceding Monthly
Collection Period, and on each Distribution Date, the Noteholders' Distribution
Amount with respect to the preceding Collection Period will be distributed from
the Collection Account and any other Trust Account to the Indenture Trustee (or
any other Paying Agent) on behalf of the Noteholders as provided in Sections
2(d) and 2(e) of the Administration Agreement.
(c) On each Interest Payment Date that is not a Distribution Date or
Redemption Date, the Indenture Trustee (or any other Paying Agent) shall
distribute all amounts received by
49
<PAGE>
it on behalf of Noteholders pursuant to paragraph (b) above to Noteholders in
respect of the Notes to the extent of amounts due and unpaid on the Notes for
interest (but not for any Noteholders' Interest LIBOR Carryover) in the
following amounts and in the following order of priority: the Noteholders'
Interest Distribution Amount, to the Class A-1 Noteholders and the Class A-2
Noteholders; provided that if there are not sufficient funds received to pay the
entire amount of accrued and unpaid interest then due on the Notes, the amounts
so received shall be applied to the payment of such interest on the Notes on a
pro rata basis.
(d) On each Distribution Date and Redemption Date, the Indenture Trustee
(or any other Paying Agent) shall distribute all amounts received by it on
behalf of Noteholders pursuant to paragraph (b) above to Noteholders in respect
of the Notes to the extent of amounts due and unpaid on the Notes for principal,
interest and any Noteholders' Interest LIBOR Carryover in the following amounts
and in the following order of priority:
(i) the Noteholders' Interest Distribution Amount, to the Class
A-1 Noteholders and the Class A-2 Noteholders in an amount equal to the
accrued and unpaid interest on the Notes; provided that if there are not
sufficient funds received to pay the entire amount of accrued and unpaid
interest then due on the Notes, the amounts so received shall be applied to
the payment of such interest on the Notes on a pro rata basis;
(ii) the Noteholders' Principal Distribution Amount plus any
amount payable out of Reserve Account Excess as principal to the
Noteholders pursuant to Section 2(e)(ii)(A) of the Administration
Agreement, to the Class A-1 Noteholders until the Outstanding Amount of the
Class A-1 Notes is reduced to zero and then to the Class A-2 Noteholders
until the Outstanding Amount of the Class A-2 Notes is reduced to zero;
(iii) the Noteholders' Interest LIBOR Carryover, if any, to
the Class A-1 Noteholders and the Class A-2 Noteholders; provided that if
insufficient funds are received to pay the entire Noteholders' Interest
LIBOR Carryover then outstanding, the amounts so received shall be applied
to the payment of such Noteholders' Interest LIBOR Carryover on a pro rata
basis; and
(iv) any amount payable out of Reserve Account Excess as
principal to the Noteholders pursuant to Section 2(e)(ii)(D) of the
Administration Agreement, to the Class A-1 Noteholders until the
Outstanding Amount of the Class
50
<PAGE>
A-1 Notes is reduced to zero and then to the Class A-2 Noteholders until
the Outstanding Amount of the Class A-2 Notes is reduced to zero.
SECTION 8.03. General Provisions Regarding Accounts. (a) So long as no
-------------------------------------
Default shall have occurred and be continuing, all or a portion of the funds in
the Trust Accounts shall be invested in Eligible Investments and reinvested by
the Indenture Trustee upon Issuer Order, subject to the provisions of Section
2(c) of the Administration Agreement. All income or other gain from investments
of moneys deposited in the Trust Accounts shall be deposited by the Indenture
Trustee in the Collection Account, and any loss resulting from such investments
shall be charged to such Trust Account. The Issuer will not direct the
Indenture Trustee to make any investment of any funds or to sell any investment
held in any of the Trust Accounts unless the security interest granted and
perfected in such account will continue to be perfected in such investment or
the proceeds of such sale, in either case without any further action by any
Person, and, in connection with any direction to the Indenture Trustee to make
any such investment or sale, if requested by the Indenture Trustee, the Issuer
shall deliver to the Indenture Trustee an Opinion of Counsel, acceptable to the
Indenture Trustee, to such effect.
(b) Subject to Section 6.01(c), the Indenture Trustee shall not in any way
be held liable by reason of any insufficiency in any of the Trust Accounts
resulting from any loss on any Eligible Investment included therein except for
losses attributable to the Indenture Trustee's failure to make payments on such
Eligible Investments issued by the Indenture Trustee, in its commercial capacity
as principal obligor and not as trustee, in accordance with their terms.
(c) If (i) the Issuer shall have failed to give investment directions for
any funds on deposit in the Trust Accounts to the Indenture Trustee by 10:00
a.m. New York time (or such other time as may be agreed by the Issuer and
Indenture Trustee) on any Business Day; or (ii) a Default shall have occurred
and be continuing with respect to the Notes but the Notes shall not have been
declared due and payable pursuant to Section 5.02, or, if such Notes shall have
been declared due and payable following an Event of Default, amounts collected
or receivable from the Indenture Trust Estate are being applied in accordance
with Section 5.05 as if there had not been such a declaration; then the
Indenture Trustee shall, to the fullest extent practicable, invest and reinvest
funds in the Trust Accounts in one or more Eligible Investments.
51
<PAGE>
SECTION 8.04. Release of Indenture Trust Estate. (a) Subject to the
---------------------------------
payment of its fees and expenses pursuant to Section 6.07, the Indenture Trustee
may, and when required by the provisions of this Indenture shall, execute
instruments to release property from the lien of this Indenture, or convey the
Indenture Trustee's interest in the same, in a manner and under circumstances
that are not inconsistent with the provisions of this Indenture. No party
relying upon an instrument executed by the Indenture Trustee as provided in this
Article VIII shall be bound to ascertain the Indenture Trustee's authority,
inquire into the satisfaction of any conditions precedent or see to the
application of any moneys.
(b) The Indenture Trustee shall, at such time as there are no Notes
Outstanding and all sums due the Indenture Trustee pursuant to Section 6.07 have
been paid, release any remaining portion of the Indenture Trust Estate that
secured the Notes from the lien of this Indenture and release to the Issuer or
any other Person entitled thereto any funds then on deposit in the Trust
Accounts. The Indenture Trustee shall release property from the lien of this
Indenture pursuant to this Section 8.04(b) only upon receipt of an Issuer
Request accompanied by an Officers' Certificate of the Issuer, an Opinion of
Counsel and (if required by the TIA) Independent Certificates in accordance with
TIA (S)(S) 314(c) and 314(d)(1) meeting the applicable requirements of Section
11.01.
SECTION 8.05. Opinion of Counsel. The Indenture Trustee shall receive at
------------------
least seven days' notice when requested by the Issuer to take any action
pursuant to Section 8.04(a), accompanied by copies of any instruments involved,
and the Indenture Trustee shall also require, as a condition to such action, an
Opinion of Counsel, in form and substance satisfactory to the Indenture Trustee,
stating the legal effect of any such action, outlining the steps required to
complete the same, and concluding that all conditions precedent to the taking of
such action have been complied with and such action will not materially and
adversely impair the security for the Notes or the rights of the Noteholders in
contravention of the provisions of this Indenture; provided, however, that such
-------- -------
Opinion of Counsel shall not be required to express an opinion as to the fair
value of the Indenture Trust Estate. Counsel rendering any such opinion may
rely, without independent investigation, on the accuracy and validity of any
certificate or other instrument delivered to the Indenture Trustee in connection
with any such action.
52
<PAGE>
ARTICLE IX
Supplemental Indentures
-----------------------
SECTION 9.01. Supplemental Indentures Without Consent of Noteholders. (a)
------------------------------------------------------
Without the consent of any Noteholders but with prior notice to the Rating
Agencies, the Issuer and the Indenture Trustee, when authorized by an Issuer
Order, at any time and from time to time, may enter into one or more indentures
supplemental hereto (which shall conform to the provisions of the Trust
Indenture Act as in force at the date of the execution thereof), in form
satisfactory to the Indenture Trustee, for any of the following purposes:
(i) to correct or amplify the description of any property at
any time subject to the lien of this Indenture, or, better to assure,
convey and confirm unto the Indenture Trustee any property subject or
required to be subjected to the lien of this Indenture, or to subject to
the lien of this Indenture additional property;
(ii) to evidence the succession, in compliance with the
applicable provisions hereof, of another person to the Issuer, and the
assumption by any such successor of the covenants of the Issuer herein and
in the Notes contained;
(iii) to add to the covenants of the Issuer, for the benefit of
the Noteholders, or to surrender any right or power herein conferred upon
the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any
property to or with the Indenture Trustee;
(v) to cure any ambiguity, to correct or supplement any
provision herein or in any supplemental indenture which may be inconsistent
with any other provision herein or in any supplemental indenture or to make
any other provisions with respect to matters or questions arising under
this Indenture or in any supplemental indenture; provided that such action
shall not materially adversely affect the interests of the Noteholders;
(vi) to evidence and provide for the acceptance of the
appointment hereunder by a successor trustee with respect to the Notes and
to add to or change any of the provisions of this Indenture as shall be
necessary to facilitate the administration of the trusts hereunder by more
than one trustee, pursuant to the requirements of Article VI; or
53
<PAGE>
(vii) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the qualification
of this Indenture under the TIA or under any similar Federal statute
hereafter enacted and to add to this Indenture such other provisions as may
be expressly required by the TIA.
The Indenture Trustee is hereby authorized to join in the execution of any
such supplemental indenture and to make any further appropriate agreements and
stipulations that may be therein contained.
(b) The Issuer and the Indenture Trustee, when authorized by an Issuer
Order, may, also without the consent of any of the Noteholders but with prior
notice to the Rating Agencies, enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to, or changing in
any manner or eliminating any of the provisions of, this Indenture or of
modifying in any manner the rights of the Noteholders under this Indenture;
provided, however, that such action shall not, as evidenced by an Opinion of
- -------- -------
Counsel, adversely affect in any material respect the interests of any
Noteholder.
SECTION 9.02. Supplemental Indentures with Consent of Noteholders. The
---------------------------------------------------
Issuer and the Indenture Trustee, when authorized by an Issuer Order, also may,
with prior notice to the Rating Agencies and with the consent of the Noteholders
of not less than a majority of the Outstanding Amount of the Notes, by Act of
such Noteholders delivered to the Issuer and the Indenture Trustee, enter into
an indenture or indentures supplemental hereto for the purpose of adding any
provisions to, or changing in any manner or eliminating any of the provisions
of, this Indenture or of modifying in any manner the rights of the Noteholders
under this Indenture; provided, however, that no such supplemental indenture
-------- -------
shall, without the consent of the Noteholder of each Outstanding Note affected
thereby:
(i) change the date of payment of any installment of principal
of or interest (including any Noteholders' Interest LIBOR Carryover) on any
Note, or reduce the principal amount thereof, the interest rate thereon or
the Redemption Price with respect thereto, change the provisions of this
Indenture relating to the application of collections on, or the proceeds of
the sale of, the Indenture Trust Estate to payment of principal of or
interest (including any Noteholders' Interest LIBOR Carryover) on the
Notes, or change any place of payment where, or the coin or currency in
which, any Note or the interest thereon is payable, or impair the right to
institute suit for the enforcement of the provisions of this Indenture
requiring the application
54
<PAGE>
of funds available therefor, as provided in Article V, to the payment of
any such amount due on the Notes on or after the respective due dates
thereof (or, in the case of redemption, on or after the Redemption Date);
(ii) reduce the percentage of the Outstanding Amount of the
Notes, the consent of the Noteholders of which is required for any such
supplemental indenture, or the consent of the Noteholders of which is
required for any waiver of compliance with certain provisions of this
Indenture or certain defaults hereunder and their consequences provided for
in this Indenture;
(iii) modify or alter the provisions of the proviso to the
definition of the term "Outstanding";
(iv) reduce the percentage of the Outstanding Amount of the
Notes required to direct the Indenture Trustee to direct the Issuer to sell
or liquidate the Indenture Trust Estate pursuant to Section 5.04;
(v) modify any provision of this Section except to increase any
percentage specified herein or to provide that certain additional
provisions of this Indenture or the other Basic Documents cannot be
modified or waived without the consent of the Noteholder of each
Outstanding Note affected thereby;
(vi) modify any of the provisions of this Indenture in such
manner as to affect the calculation of the amount of any payment of
interest (including any Noteholders' Interest LIBOR Carryover) due or any
Note on any Interest Payment Date or principal due on any Note on any
Distribution Date (including the calculation of any of the individual
components of such calculation) or to affect the rights of the Noteholders
to the benefit of any provisions for the mandatory redemption of the Notes
contained herein; or
(vii) permit the creation of any lien ranking prior to or on a
parity with the lien of this Indenture with respect to any part of the
Indenture Trust Estate or, except as otherwise permitted or contemplated
herein, terminate the lien of this Indenture on any property at any time
subject hereto or deprive any Noteholder of any Note of the security
provided by the lien of this Indenture.
The Indenture Trustee may in its discretion determine whether or
not any Notes would be affected by any supplemental indenture and any
such determination shall be conclusive upon the Noteholders of all
Notes, whether
55
<PAGE>
theretofore or thereafter authenticated and delivered hereunder. The
Indenture Trustee shall not be liable for any such determination made
in good faith.
It shall not be necessary for any Act of Noteholders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the Issuer and the Indenture Trustee of any
supplemental indenture pursuant to this Section, the Indenture Trustee shall
mail to the Noteholders of the Notes to which such amendment or supplemental
indenture relates and to the Rating Agencies a notice setting forth in general
terms the substance of such supplemental indenture. Any failure of the
Indenture Trustee to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such supplemental
indenture.
SECTION 9.03. Execution of Supplemental Indentures. In executing, or
------------------------------------
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modifications thereby of the trusts created
by this Indenture, the Indenture Trustee shall receive, and subject to Sections
6.01 and 6.02, shall be fully protected in relying upon, an Opinion of Counsel
stating that the execution of such supplemental indenture is authorized or
permitted by this Indenture. The Indenture Trustee may, but shall not be
obligated to, enter into any such supplemental indenture that affects the
Indenture Trustee's own rights, duties, liabilities or immunities under this
Indenture or otherwise.
SECTION 9.04. Effect of Supplemental Indenture. Upon the execution of any
--------------------------------
supplemental indenture pursuant to the provisions hereof, this Indenture shall
be and be deemed to be modified and amended in accordance therewith with respect
to the Notes affected thereby, and the respective rights, limitations of rights,
obligations, duties, liabilities and immunities under this Indenture of the
Indenture Trustee, the Issuer and the Noteholders shall thereafter be
determined, exercised and enforced hereunder subject in all respects to such
modifications and amendments, and all the terms and conditions of any such
supplemental indenture shall be and are deemed to be part of the terms and
conditions of this Indenture for any and all purposes.
SECTION 9.05. Conformity with Trust Indenture Act. Every amendment of
-----------------------------------
this Indenture and every supplemental indenture executed pursuant to this
Article IX shall conform to the requirements of the Trust Indenture Act as then
in effect so long
56
<PAGE>
as this Indenture shall then be qualified under the Trust Indenture Act.
SECTION 9.06. Reference in Notes to Supplemental Indentures. Notes
---------------------------------------------
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Indenture Trustee shall,
bear a notation in form approved by the Indenture Trustee as to any matter
provided for in such supplemental indenture. If the Issuer or the Indenture
Trustee shall so determine, new Notes so modified as to conform, in the opinion
of the Indenture Trustee and the Issuer, to any such supplemental indenture may
be prepared and executed by the Issuer and authenticated and delivered by the
Indenture Trustee in exchange for Outstanding Notes.
ARTICLE X
Redemption of Notes
-------------------
SECTION 10.01. Redemption. (a) In the event that on the Distribution
----------
Date on which the Funding Period ends (or on the Distribution Date on or
immediately following the last day of the Funding Period, if the Funding Period
does not end on a Distribution Date) any amount remains on deposit in the Pre-
Funding Account after giving effect to the making of all Additional Fundings,
including any such Additional Fundings on such Redemption Date, the Class A-1
Notes (and, to the extent all the Class A-1 Notes are paid in full, the Class A-
2 Notes) will be redeemed in part, on a pro rata basis, in an aggregate
principal amount equal to the amount then on deposit in the Pre-Funding Account.
(b) In the event that the assets of the Trust are sold pursuant to Section
9.02 of the Trust Agreement or the Financed Student Loans are sold pursuant to
Section 4.04 hereof, that portion of the amounts on deposit in the Trust
Accounts to be distributed to the Noteholders shall be paid to the Noteholders
up to the Outstanding Amount of the Notes and all accrued and unpaid Interest
thereon and any accrued Noteholders' Interest LIBOR Carryover with respect
thereto (but only to the extent provided by Sections 2.07(d) and 8.02(c)
hereof). If amounts are to be paid to Noteholders pursuant to this Section
10.01, the Administrator or the Issuer shall, to the extent practicable, furnish
notice of such Event to the Indenture Trustee not later than 25 days prior to
the Redemption Date whereupon all such amounts shall be payable on the
Redemption Date.
57
<PAGE>
SECTION 10.02. Form of Redemption Notice. Notice of redemption under
-------------------------
Section 10.01 shall be given by the Indenture Trustee by first-class mail,
postage prepaid, or by facsimile, mailed or transmitted on or prior to the
applicable Redemption Date to each Noteholder, as of the close of business on
the Record Date preceding the applicable Redemption Date, at such Noteholder's
address or facsimile number appearing in the Note Register.
All notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price; and
(iii) the place where such Notes are to be surrendered for
payment of the Redemption Price (which shall be the office or agency of the
Issuer to be maintained as provided in Section 3.02).
Notice of redemption of the Notes shall be given by the Indenture Trustee
in the name and at the expense of the Issuer. Failure to give notice of
redemption, or any defect therein, to any Noteholder of any Note shall not
impair or affect the validity of the redemption of any other Note.
SECTION 10.03. Notes Payable on Redemption Date. The Notes or portions
--------------------------------
thereof to be redeemed shall on the Redemption Date become due and payable at
the Redemption Price and (unless the Issuer shall default in the payment of the
Redemption Price) no interest shall accrue on the Redemption Price for any
period after the date to which accrued interest is calculated for purposes of
calculating the Redemption Price.
ARTICLE XI
Miscellaneous
-------------
SECTION 11.01. Compliance Certificates and Opinions. (a) Upon any
------------------------------------
application or request by the Issuer to the Indenture Trustee to take any action
under any provision of this Indenture, the Issuer shall furnish to the Indenture
Trustee (i) an Officers' Certificate of the Issuer stating that all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with, (ii) an Opinion of Counsel stating that in the
opinion of such counsel all such conditions precedent, if any, have been
complied with and (iii) (if required by the TIA) an Independent Certificate from
a firm of certified public accountants meeting the
58
<PAGE>
applicable requirements of this Section, except that, in the case of any such
application or request as to which the furnishing of such documents is
specifically required by any provision of this Indenture, no additional
certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include:
(i) a statement that each signatory of such certificate or
opinion has read or has caused to be read such covenant or condition and
the definitions herein relating thereto;
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(iii) a statement that, in the opinion of each such signatory,
such signatory has made such examination or investigation as is necessary
to enable such signatory to express an informed opinion as to whether such
covenant or condition has been complied with; and
(iv) a statement as to whether, in the opinion of each such
signatory, such condition or covenant has been complied with.
(b)(i) Prior to the deposit of any Collateral or other property or
securities with the Indenture Trustee that is to be made the basis for the
release of any property or securities subject to the lien of this Indenture, the
Issuer shall, in addition to any obligation imposed in Section 11.01(a) or
elsewhere in this Indenture, furnish to the Indenture Trustee an Officers'
Certificate of the Issuer certifying or stating the opinion of each person
signing such certificate as to the fair value (within 90 days of such deposit)
to the Issuer of the Collateral or other property or securities to be so
deposited.
(ii) Whenever the Issuer is required to furnish to the Indenture
Trustee an Officers' Certificate of the Issuer certifying or stating the
opinion of any signer thereof as to the matters described in clause (i)
above, the Issuer shall also deliver to the Indenture Trustee an
Independent Certificate as to the same matters, if the fair value to the
Issuer of the securities to be so deposited and of all other such
securities made the basis of any such withdrawal or release since the
commencement of the then current fiscal
59
<PAGE>
year of the Issuer, as set forth in the certificates delivered pursuant to
clause (i) above and this clause (ii), is 10% or more of the Outstanding
Amount of the Notes, but such a certificate need not be furnished with
respect to any securities so deposited, if the fair value thereof to the
Issuer as set forth in the related Officers' Certificate is less than
$25,000 or less than one percent of the Outstanding Amount of the Notes.
(iii) Other than any property released as contemplated by
clause (v) below, whenever any property or securities are to be released
from the lien of this Indenture, the Issuer shall also furnish to the
Indenture Trustee an Officers' Certificate of the Issuer certifying or
stating the opinion of each person signing such certificate as to the fair
value (within 90 days of such release) of the property or securities
proposed to be released and stating that in the opinion of such person the
proposed release will not impair the security under this Indenture in
contravention of the provisions hereof.
(iv) Whenever the Issuer is required to furnish to the Indenture
Trustee an Officers' Certificate of the Issuer certifying or stating the
opinion of any signer thereof as to the matters described in clause (iii)
above, the Issuer shall also furnish to the Indenture Trustee an
Independent Certificate as to the same matters if the fair value of the
property or Securities and of all other property, other than property as
contemplated by clause (v) below, or securities released from the lien of
this Indenture since the commencement of the then-current calendar year, as
set forth in the certificates required by clause (iii) above and this
clause (iv), equals 10% or more of the Outstanding Amount of the Notes, but
such certificate need not be furnished in the case of any release of
property or securities if the fair value thereof as set forth in the
related Officers' Certificate is less than $25,000 or less than one percent
of the then Outstanding Amount of the Notes.
(v) Notwithstanding Section 2.09 or any other provision of this
Section, the Issuer may, without compliance with the requirements of the
other provisions of this Section, (A) collect, liquidate, sell or otherwise
dispose of Financed Student Loans as and to the extent permitted or
required by the Basic Documents and (B) make cash payments out of the Trust
Accounts as and to the extent permitted or required by the Basic Documents,
so long as the Issuer shall deliver to the Indenture Trustee every three
months, commencing [ , 1997], an Officers' Certificate of the
Issuer stating that all the dispositions
60
<PAGE>
of Collateral described in clauses (A) and (B) above that occurred during
the immediately preceding three calendar months (or the period from the
Closing Date in the case of the [ , 1997] Officer's Certificate)
were in the ordinary course of the Issuer's business and that the proceeds
thereof were applied in accordance with the Basic Documents.
SECTION 11.02. Form of Documents Delivered to Indenture Trustee. In any
------------------------------------------------
case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may certify
or give an opinion with respect to some matters and one or more other such
Persons as to other matters, and any such Person may certify or give an opinion
as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate of an Authorized Officer or Opinion of Counsel
may be based, insofar as it relates to factual matters, upon a certificate or
opinion of, or representations by, an officer or officers of the Master
Servicer, the Seller, the Issuer or the Administrator, stating that the
information with respect to such factual matters is in the possession of the
Master Servicer, the Seller, the Issuer or the Administrator, unless such
counsel knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to such matters are
erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Issuer
shall deliver any document as a condition of the granting of such application,
or as evidence of the Issuer's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application or
at the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the
61
<PAGE>
right of the Issuer to have such application granted or to the sufficiency of
such certificate or report. The foregoing shall not, however, be construed to
affect the Indenture Trustee's right to rely upon the truth and accuracy of any
statement or opinion contained in any such document as provided in Article VI.
SECTION 11.03. Acts of Noteholders. (a) Any request, demand,
-------------------
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Noteholders may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Noteholders in person or by agents duly appointed in writing; and except as
herein otherwise expressly provided such action shall become effective when such
instrument or instruments are delivered to the Indenture Trustee, and, where it
is hereby expressly required, to the Issuer. Such instrument or instruments
(and the action embodied therein and evidenced thereby) are herein sometimes
referred to as the "Act" of the Noteholders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 6.01) conclusive in favor of the Indenture Trustee and
the Issuer, if made in the manner provided in this Section.
(b) The fact and date of the execution by any person of any such instrument
or writing may be proved in any manner that the Indenture Trustee deems
sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent, waiver
or other action by the Noteholder of any Notes shall bind the Noteholder of
every Note issued upon the registration thereof or in exchange therefor or in
lieu thereof, in respect of anything done, omitted or suffered to be done by the
Indenture Trustee or the Issuer in reliance thereon, whether or not notation of
such action is made upon such Note.
SECTION 11.04. Notices to Indenture Trustee, Issuer and Rating Agencies.
--------------------------------------------------------
Any request, demand, authorization, direction, notice, consent, waiver or act of
Noteholders or other documents provided or permitted by this Indenture shall be
in writing and if such request, demand, authorization, direction, notice,
consent, waiver or act of Noteholders is to be made upon, given or furnished to
or filed with:
(a) the Indenture Trustee by any Noteholder or by the Issuer, it shall
be sufficient for every purpose hereunder
62
<PAGE>
if made, given, furnished or filed in writing to or with the Indenture
Trustee at its Corporate Trust Office, or
(b) the Issuer by the Indenture Trustee or by any Noteholder, it shall
be sufficient for every purpose hereunder if in writing and mailed, first-
class, postage prepaid, to the Issuer addressed to: Signet Student Loan
Trust 1996-A, in care of First Chicago Delaware, Inc., Trustee, Wilmington,
Delaware 19801, with a copy to the Depositor at 7 North 8th Street,
Richmond, Virginia 23219, Attention: Treasurer, and the Eligible Lender
Trustee at the Corporate Trust Office of the Eligible Lender Trustee, or at
any other address previously furnished in writing to the Indenture Trustee
by the Issuer. The Issuer shall promptly transmit any notice received by
it from the Noteholders to the Indenture Trustee.
Notices required to be given to the Rating Agencies by the Issuer, the
Indenture Trustee or the Eligible Lender Trustee shall be in writing, personally
delivered or mailed by certified mail, return receipt requested, to the
following address: (i) in the case of [ ], at the following
address: ________ ______________________________, New York, New York ______,
Attention: _________________________________ and (ii) in the case of[ ],
at the following address: ____________________________________, New York, New
York _____, Attention: ______________________________; or as to each of the
foregoing, at such other address as shall be designated by written notice to the
other parties.
SECTION 11.05. Notices to Noteholders; Waiver. Where this Indenture
------------------------------
provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at his address as it appears on the Note Register, not later than the
latest date, and not earlier than the earliest date, prescribed for the giving
of such notice. In any case where notice to Noteholders is given by mail,
neither the failure to mail such notice nor any defect in any notice so mailed
to any particular Noteholder shall affect the sufficiency of such notice with
respect to other Noteholders, and any notice that is mailed in the manner herein
provided shall conclusively be presumed to have been duly given.
Where this Indenture provides for notice in any manner, such notice may be
waived in writing by any Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Noteholders shall be filed with the Indenture Trustee but
such
63
<PAGE>
filing shall not be a condition precedent to the validity of any action taken in
reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a result of
a strike, work stoppage or similar activity, it shall be impractical to mail
notice of any event to Noteholders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a
sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies, failure to
give such notice shall not affect any other rights or obligations created
hereunder, and shall not under any circumstance constitute a Default.
SECTION 11.06. Alternate Payment and Notice Provisions. Notwithstanding
---------------------------------------
any provision of this Indenture or any of the Notes to the contrary, the Issuer
may enter into any agreement with any Noteholder providing for a method of
payment, or notice by the Indenture Trustee or any Paying Agent to such
Noteholder, that is different from the methods provided for in this Indenture
for such payments or notices, provided that such agreement is reasonably
acceptable to the Indenture Trustee. The Issuer will furnish to the Indenture
Trustee a copy of each such agreement and the Indenture Trustee will cause
payments to be made and notices to be given in accordance with such agreements.
SECTION 11.07. Conflict with Trust Indenture Act. If any provision hereof
---------------------------------
limits, qualifies or conflicts with another provision hereof that is required to
be included in this Indenture by any of the provisions of the Trust Indenture
Act, such required provision shall control.
The provisions of TIA (S)(S) 310 through 317 that impose duties on any
Person (including the provisions automatically deemed included herein unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.
SECTION 11.08. Effect of Headings and Table of Contents. The Article and
----------------------------------------
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
SECTION 11.09. Successors and Assigns. All covenants and agreements in
----------------------
this Indenture and the Notes by the Issuer shall bind its successors and
assigns, whether so expressed or not. All agreements of the Indenture Trustee
in this Indenture shall
64
<PAGE>
bind the successors, co-trustees and agents (excluding any legal representatives
or accountants) of the Indenture Trustee.
SECTION 11.10. Separability. In case any provision in this Indenture or
------------
in the Notes shall be invalid, illegal or unenforceable, the validity, legality,
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
SECTION 11.11. Benefits of Indenture. Nothing in this Indenture or in the
---------------------
Notes, express or implied, shall give to any Person, other than the parties
hereto and their successors hereunder, and the Noteholders, and any other party
secured hereunder, and any other Person with an ownership interest in any part
of the Indenture Trust Estate, any benefit or any legal or equitable right,
remedy or claim under this Indenture.
SECTION 11.12. [RESERVED]
SECTION 11.13. Governing Law. This Indenture shall be construed in
-------------
accordance with the laws of the State of New York, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
SECTION 11.14. Counterparts. This Indenture may be executed in any number
------------
of counterparts, each of which so executed shall be deemed to be an original,
but all such counterparts shall together constitute but one and the same
instrument.
SECTION 11.15. Recording of Indenture. If this Indenture is subject to
----------------------
recording in any appropriate public recording offices, such recording is to be
effected by the Issuer and at its expense accompanied by an Opinion of Counsel
(which may be counsel to the Indenture Trustee or any other counsel reasonably
acceptable to the Indenture Trustee) to the effect that such recording is
necessary either for the protection of the Noteholders or any other Person
secured hereunder or for the enforcement of any right or remedy granted to the
Indenture Trustee under this Indenture.
SECTION 11.16. Trust Obligations. No recourse may be taken, directly or
-----------------
indirectly, with respect to the obligations of the Issuer, the Seller, the
Company, the Administrator, the Master Servicer, any Subservicer, the Eligible
Lender Trustee or the Indenture Trustee on the Notes or under this Indenture or
any certificate or other writing delivered in connection herewith or therewith,
against (i) the Seller, the Company, the Administrator, the Master Servicer, any
Subservicer, the Indenture Trustee or the Eligible Lender Trustee in its
65
<PAGE>
individual capacity or (ii) any partner, owner, beneficiary, agent, officer,
director or employee of the Seller, the Company, the Administrator, the Master
Servicer, any Subservicer, the Indenture Trustee or the Eligible Lender Trustee
in its individual capacity, any holder or owner of a beneficial interest in the
Issuer, the Eligible Lender Trustee or the Indenture Trustee or of any successor
or assign of the Seller, the Company, the Administrator, the Master Servicer,
any Subservicer, the Indenture Trustee or the Eligible Lender Trustee in its
individual capacity, except as any such Person may have expressly agreed (it
being understood that the Indenture Trustee and the Eligible Lender Trustee have
no such obligations in their individual capacity) and except that any such
partner, owner or beneficiary shall be fully liable, to the extent provided by
applicable law, for any unpaid consideration for stock, unpaid capital
contribution or failure to pay any installment or call owing to such entity.
For all purposes of this Indenture, in the performance of any duties or
obligations of the Issuer hereunder, the Eligible Lender Trustee shall be
subject to, and entitled to the benefits of, the terms and provisions of
Articles VI, VII and VIII of the Trust Agreement.
SECTION 11.17. No Petition. The Indenture Trustee, by entering into this
-----------
Indenture, and each Noteholder, by accepting a Note, hereby covenant and agree
that they will not at any time institute against the Depositor, the Company or
the Issuer, or join in any institution against the Depositor, the Company or the
Issuer of, any bankruptcy, reorganization, arrangement, insolvency, receivership
or liquidation proceedings, or other proceedings under any United States Federal
or state bankruptcy or similar law in connection with any obligations relating
to the Notes, this Indenture or any of the other Basic Documents.
SECTION 11.18. Inspection. The Issuer agrees that, on reasonable prior
----------
notice, it will permit any representative of the Indenture Trustee, during the
Issuer's normal business hours, to examine all the books of account, records,
reports, and other papers of the Issuer, to make copies and extracts therefrom,
to cause such books to be audited by Independent certified public accountants,
and to discuss the Issuer' affairs, finances and accounts with the Issuer's
officers, employees, and Independent certified public accountants, all at such
reasonable times and as often as may be reasonably requested. The Indenture
Trustee shall and shall cause its representatives to hold in confidence all such
information obtained from such examination or inspection except to the extent
disclosure may be required by law (and all reasonable applications for
confidential treatment are unavailing) and except to the extent that the
Indenture Trustee may reasonably determine that such disclosure is consistent
with its obligations hereunder.
66
<PAGE>
IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have caused this
Indenture to be duly executed by their respective officers, thereunto duly
authorized and duly attested, all as of the day and year first above written.
SIGNET STUDENT LOAN TRUST
1996-A,
by
THE FIRST NATIONAL BANK OF CHICAGO, not in
its individual capacity but solely as
Eligible Lender Trustee,
By: ______________________
Name:
Title:
THE BANK OF NEW YORK, not
in its individual capacity but
solely as Indenture Trustee,
By: ______________________
Name:
Title:
Acknowledged and accepted as
to the Granting Clause as of
the day and year first above
written:
THE FIRST NATIONAL BANK OF CHICAGO,
not in its Individual capacity but
solely as Eligible Lender Trustee,
By: _______________________
Name:
Title:
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared _________________, known to me
to be the person and officer whose name is subscribed to the foregoing
instrument and acknowledged to me that the name was the act of the said SIGNET
STUDENT LOAN TRUST 1996-A, a Delaware trust, and that such person executed the
same as the act of said trust for the purpose and consideration therein
expressed, and in the capacities therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the th day of [ , 1996].
________________________
Notary Public in and for
the State of New York
[Seal]
My commission expires:
______________________
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared ______________, known to me to
be the person and officer whose name is subscribed to the foregoing instrument
and acknowledged to me that the same was the act of the said THE BANK OF NEW
YORK, a New York banking corporation, and that such person executed the same as
the act of said corporation for the purpose and consideration therein expressed,
and in the capacities therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the th day of [ , 1996].
________________________
Notary Public in and for
the State of New York
[Seal]
My commission expires:
______________________
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared [ ], known to me to be
the person and officer whose name is subscribed to the foregoing instrument and
acknowledged to me that the name was the act of the said THE FIRST NATIONAL BANK
OF CHICAGO, a national banking association, and that such person executed the
same as the act of said association for the purpose and consideration therein
expressed, and in the capacities therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the [ ] day of [ , 1996].
________________________
Notary Public in and for
the State of New York
[Seal]
My commission expires:
______________________
<PAGE>
APPENDIX A
<PAGE>
EXHIBIT A
TO THE INDENTURE
[FORM OF CLASS A-1 NOTE]
SEE REVERSE FOR CERTAIN DEFINITIONS
Unless this Note is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Issuer (as
defined below) or its agent for registration of transfer, exchange or payment,
and any Note issued is registered in the name of Cede & Co. or in such other
name as is requested by an authorized representative of DTC (and any payment is
made to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. THIS NOTE IS NOT GUARANTEED OR
INSURED BY ANY GOVERNMENTAL AGENCY.
REGISTERED CUSIP NO. ___________________
$_____________/1/
No. R-
SIGNET STUDENT LOAN TRUST 1996-A
FLOATING RATE CLASS A-1 ASSET BACKED NOTES
Signet Student Loan Trust 1996-A, a trust organized and existing under the
laws of the State of Delaware (herein referred to as the "Issuer"), for value
received, hereby promises to pay to CEDE & CO., or registered assigns, the
principal sum of [ ] DOLLARS payable on each Distribution Date in an amount
equal to the result obtained by multiplying (i) a fraction the numerator of
which is $[INSERT INITIAL PRINCIPAL AMOUNT OF THIS NOTE] and the denominator of
which is $[ ] by (ii) the aggregate amount, if any, payable to Noteholders
on such Distribution Date in respect of principal of the Class A-1 Notes
____________________
/1/ Denominations of $1,000 and integral multiples of $1,000 in excess thereof.
<PAGE>
pursuant to Section 3.01 of the Indenture dated as of [ , 1996], between
the Issuer and The Bank of New York, a New York banking corporation, as
Indenture Trustee (the "Indenture Trustee") (capitalized terms used but not
defined herein are defined in Appendix A to the Administration Agreement, dated
as of [ ], 1996 among the Issuer, Signet Bank, as Administrator, and the
Indenture Trustee, which also contains rules as to usage that shall be
applicable herein); provided, however, that the entire unpaid principal amount
-------- -------
of this Note shall be due and payable on the [ ] 199_ Distribution Date
(the "Class A-1 Final Maturity Date").
The Issuer will pay interest on this Note at the rate per annum equal to
the Class A-1 Rate (as defined on the reverse hereof), on each Interest Payment
Date until the principal of this Note is paid or made available for payment, on
the principal amount of this Note outstanding on the preceding Distribution Date
(after giving effect to all payments of principal made on the preceding
Distribution Date, or in the case of the first three Interest Payment Dates, on
the Closing Date), subject to certain limitations contained in Section 3.01 of
the Indenture. Interest on this Note will accrue for each Interest Payment Date
from the most recent Interest Payment Date on which interest has been paid to
but excluding such Interest Payment Date or, if no interest has yet been paid,
from [ , 1996] (each, an "Interest Period"). Interest will be
computed on the basis of the actual number of days elapsed in a 360-day year.
Such principal of and interest on this Note shall be paid in the manner
specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the Indenture referred to on the reverse
hereof, or be valid or obligatory for any purpose.
2
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed, manually or in facsimile, as of the date set forth below.
SIGNET STUDENT LOAN TRUST 1996-A
by
THE FIRST NATIONAL BANK OF CHICAGO, not in
its individual capacity but solely as
Eligible Lender Trustee under the Trust
Agreement,
by _______________________________________
Authorized Signatory
Date: [ ], 1996
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the within-
mentioned Indenture.
THE BANK OF NEW YORK, not in its individual
capacity but solely as Indenture Trustee,
by ____________________________________
Authorized Signatory
Date: [ ], 1996
3
<PAGE>
[REVERSE OF NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Floating Rate Class A-1 Asset Backed Notes (herein called the
"Class A-1 Notes"), all issued under the Indenture, to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the Noteholders. The Class A-1 Notes are subject to all terms of
the Indenture.
The Class A-1 Notes and the Class A-2 Asset Backed Notes (the "Class A-2
Notes" and, together with the Class A-1 Notes, the "Notes") are and will be
equally and ratably secured by the collateral pledged as security therefor as
provided in the Indenture.
Principal of the Class A-1 Notes will be payable on each Distribution Date
in an amount described on the face hereof. "Distribution Date" means the
twenty-fifth day of each [January, April, July and October,] or, if any such
date is not a Business Day, the next succeeding Business Day, commencing [
25, 199 ].
As described on the face hereof, the entire unpaid principal amount of this
Note shall be due and payable on the Class A-1 Final Maturity Date.
Notwithstanding the foregoing, the entire unpaid principal amount of the Notes
shall be due and payable on the date on which (i) an Event of Default shall have
occurred and be continuing and (ii) the Indenture Trustee or the Noteholders
representing not less than a majority of the Outstanding Amount of the Notes
shall have declared the Notes to be immediately due and payable in the manner
provided in Section 5.02 of the Indenture. All principal payments on the Class
A-1 Notes shall be made pro rata to the Class A-1 Noteholders entitled thereto.
Interest on the Class A-1 Notes will be payable on each Interest Payment
Date, commencing January 27, 1997; on the principal amount outstanding of such
Notes until the principal amount thereof is paid in full, at a rate per annum
equal to the Class A-1 Rate. The "Class A-1 Rate" for each Interest Period
shall be equal to the lesser of (i) LIBOR for the related LIBOR Reset Period
plus [ ]% (the "Class A-1 LIBOR Rate") and (ii) the Student Loan Rate for such
Interest Period. The "Student Loan Rate" for any Interest Period will equal the
product of (a) the quotient obtained by dividing (i) 360 by (ii) the actual
number of days elapsed in such Interest Period and (b) the percentage equivalent
of a fraction, (i) the numerator of which is equal to Expected Interest
Collections for such Interest Period less the
4
<PAGE>
Servicing Fees and the Administration Fee with respect to such Interest Period
and (ii) the denominator of which is the sum of (x) Pool Balance as of the first
day of the Collection Period in which the first day of such Interest Period
occurs and (y) the principal balance on deposit in the Pre-Funding Account as of
the first day of the Collection Period in which the first day of such Interest
Period occurs.
Pursuant to the Administration Agreement, the Administrator shall determine
LIBOR for purposes of calculating the Class A-1 Rate for each given Interest
Period on the second business day prior to the commencement of each LIBOR Reset
Period within such Interest Period (each, a "LIBOR Determination Date"). For
purposes of calculating LIBOR, a business day is any day on which banks in
London and New York City are open for the transaction of international business.
"LIBOR" means, with respect to any LIBOR Reset Period (or, in the case of the
initial Interest Period, the period from [ , 1996] to but excluding the
Initial Interest Payment Date), the London interbank offered rate for deposits
in U.S. dollars having a maturity of one month commencing on the related LIBOR
Determination Date (the "Index Maturity") which appears on Telerate Page 3750 as
of 11:00 a.m., London time, on such LIBOR Determination Date. If such rate does
not appear on Telerate Page 3750, the rate for that day shall be determined on
the basis of the rates at which deposits in U.S. dollars, having the Index
Maturity and in a principal amount of not less than U.S. $1,000,000, are offered
at approximately 11:00 a.m., London time, on such LIBOR Determination Date to
prime banks in the London interbank market by the Reference Banks. The
Administrator shall request the principal London office of each of such
Reference Banks to provide a quotation of its rate. If at least two such
quotations are provided, the rate for that day shall be the arithmetic mean of
the quotations. If fewer than two quotations are provided, the rate for that
day shall be the arithmetic mean of the rates quoted by major banks in New York
City, selected by the Administrator, at approximately 11:00 a.m., New York City
time, on such LIBOR Determination Date for loans in U.S. dollars to leading
European banks having the Index Maturity and in a principal amount equal to an
amount of not less than U.S. $1,000,000; provided that if the banks selected as
aforesaid are not quoting as mentioned in this sentence, LIBOR in effect for the
applicable LIBOR Reset Period shall be LIBOR in effect for the previous LIBOR
Reset Period. "LIBOR Reset Period" means the one-month period commencing on
the twenty-fifth day (or, if any such date is not a Business Day, on the next
succeeding Business Day) of each month and ending on the day immediately
preceding the following LIBOR Reset Period; provided, however, that the initial
-------- -------
LIBOR Reset Period will commence on the Closing Date. "Telerate Page 3750"
means the display page so designated on the Dow Jones Telerate Service (or such
other page as may
5
<PAGE>
replace that page on that service for the purpose of displaying comparable rates
or prices). "Reference Banks" means four major banks in the London interbank
market selected by the Administrator.
Any Noteholders' Interest LIBOR Carryover that may exist on any
Distribution Date attributable to the Class A-1 Notes shall be payable to the
Class A-1 Noteholders on that Distribution Date and any succeeding Distribution
Dates solely out of the funds available and required to be applied thereto
pursuant to the Administration Agreement.
Payments of interest on this Note due and payable on each Interest Payment
Date, and payments of interest together with the installment of principal, if
any, due and payable on each Distribution Date, to the extent not in full
payment of this Note, shall be made by check mailed to the Person whose name
appears as the Registered Holder of this Note (or one or more Predecessor Notes)
on the Note Register on the Record Date, except that with respect to Notes
registered on the Record Date in the name of the nominee of the Clearing Agency,
unless Definitive Notes have been issued (initially, such nominee to be Cede &
Co.), payments will be made by wire transfer in immediately available funds to
the account designated by such nominee. Such checks shall be mailed to the
Person entitled thereto at the address of such Person as it appears on the Note
Register as of the applicable Record Date without requiring that this Note be
submitted for notation of payment, and the mailing of such check shall
constitute payment of the amount thereof regardless of whether such check is
returned undelivered. Any reduction in the principal amount of this Note (or
any one or more Predecessor Notes) effected by any payments made on any
Distribution Date shall be binding upon all future Noteholders of this Note and
of any Note issued upon the registration of transfer hereof or in exchange
hereof or in lieu hereof, whether or not noted hereon. If funds are expected to
be available, as provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Note on a Distribution Date, then the
Indenture Trustee, in the name of and on behalf of the Issuer, will notify the
Person who was the Noteholder hereof as of the Record Date preceding such
Distribution Date by notice mailed no later than five days prior to such
Distribution Date and the amount then due and payable shall be payable only upon
presentation and surrender of this Note at the Indenture Trustee's Corporate
Trust Office or at the office of the Indenture Trustee's agent appointed for
such purposes located in the Borough of Manhattan, The City of New York.
The Issuer shall pay interest on overdue installments of interest at the
Class A-1 Rate to the extent lawful.
6
<PAGE>
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Noteholder hereof or his attorney duly
authorized in writing, with such signature guaranteed by an "eligible guarantor
institution" meeting the requirements of the Note Registrar, which requirements
include membership or participation in Securities Transfer Agent's Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution for, STAMP
(all in accordance with the Exchange Act), and such other documents as the
Indenture Trustee may require, and thereupon one or more new Notes of authorized
denominations and in the same aggregate principal amount will be issued to the
designated transferee or transferees. No service charge will be charged for any
registration of transfer or exchange of this Note, but the transferor may be
required to pay a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any such registration of transfer or
exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in the Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Seller, the Company, the Administrator, the Master Servicer,
any Subservicer, the Eligible Lender Trustee or the Indenture Trustee on the
Notes or under the Indenture or any certificate or other writing delivered in
connection therewith, against (i) the Seller, the Company, the Administrator,
the Master Servicer, any Subservicer, the Indenture Trustee or the Eligible
Lender Trustee in its individual capacity or (ii) any partner, owner,
beneficiary, agent, officer, director or employee of the Seller, the Company,
the Administrator, the Master Servicer, any Subservicer, the Indenture Trustee
or the Eligible Lender Trustee in its individual capacity, any holder or owner
of a beneficial interest in the Issuer, the Eligible Lender Trustee or the
Indenture Trustee or of any successor or assign of the Seller, the Company, the
Administrator, the Master Servicer, any Subservicer, the Indenture Trustee or
the Eligible Lender Trustee in its individual capacity, except as any such
Person may have expressly agreed (it being understood that the Indenture Trustee
and the Eligible Lender Trustee have no such obligations in their individual
capacity) and except that any such partner, owner or beneficiary shall be fully
liable, to the extent provided by applicable law, for any unpaid consideration
for stock, unpaid
7
<PAGE>
capital contribution or failure to pay any installment or call owing to such
entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees that by
accepting the benefits of the Indenture that such Noteholder or Note Owner will
not at any time institute against the Depositor, the Company or the Issuer, or
join in any institution against the Depositor, the Company or the Issuer of, any
bankruptcy, reorganization, arrangement, insolvency, receivership or liquidation
proceedings or other proceedings under any United States Federal or state
bankruptcy or similar law in connection with any obligations relating to the
Notes, the Indenture or the other Basic Documents.
Prior to the due presentment for registration of transfer of this Note, the
Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes whether or not this Note be
overdue, and neither the Issuer, the Indenture Trustee nor any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Noteholders under the Indenture at any time by the
Issuer with the consent of the Noteholders representing a majority of the
Outstanding Amount of all Notes at the time outstanding. The Indenture also
contains provisions permitting the Noteholders representing specified
percentages of the Outstanding Amount of the Notes, on behalf of all the
Noteholders, to waive compliance by the Issuer with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the holder of this Note (or any one or more
Predecessor Notes) shall be conclusive and binding upon such holder and upon all
future holders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent or waiver is made upon this Note. The Indenture also permits
the Indenture Trustee to amend or waive certain terms and conditions set forth
in the Indenture without the consent of holders of the Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the Issuer
under the Indenture.
8
<PAGE>
The Issuer is permitted by the Indenture, under certain circumstances, to
merge or consolidate, subject to the rights of the Indenture Trustee and the
Noteholders under the Indenture.
The Notes are issuable only in registered form in denominations as provided
in the Indenture, subject to certain limitations therein set forth.
This Note shall be construed in accordance with the laws of the State of
New York, without reference to its conflict of law provisions, and the
obligations, rights and remedies of the parties hereunder and thereunder shall
be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place, and rate, and in the coin or currency, herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, neither The Bank of New York in its individual
capacity, The First National Bank of Chicago in its individual capacity, any
owner of a beneficial interest in the Issuer, nor any of their respective
partners, beneficiaries, agents, officers, directors, employees or successors or
assigns shall be personally liable for, nor shall recourse be had to any of them
for, the payment of principal of or interest on, or performance of, or omission
to perform, any of the covenants, obligations or indemnifications contained in
this Note or the Indenture; it being expressly understood that said covenants,
obligations and indemnifications have been made by the Eligible Lender Trustee
for the sole purposes of binding the interests of the Eligible Lender Trustee in
the assets of the Issuer. The Noteholder of this Note by the acceptance hereof
agrees that, except as expressly provided in the Basic Documents, in the case of
an Event of Default under the Indenture, the Noteholder shall have no claim
against any of the foregoing for any deficiency, loss or claim therefrom;
provided, however, that nothing contained herein shall be taken to prevent
- -------- -------
recourse to, and enforcement against, the assets of the Issuer for any and all
liabilities, obligations and undertakings contained in the Indenture or in this
Note.
9
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee
_________________________
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto ___________________________________________________________
__________________________________________________________
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably
constitutes and appoints ______________________, attorney, to transfer said
Note on the books kept for registration thereof, with full power of
substitution in the premises.
Dated: _____________
*/
____________________________
Signature Guaranteed:
*/
____________________________
____________________
*/ NOTICE: The signature to this assignment must correspond with the name of
the registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting
the requirements of the Note Registrar, which requirements include
membership or participation in STAMP or such other "signature guarantee
program" as may be determined by the Note Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange Act
of 1934, as amended.
<PAGE>
EXHIBIT B
TO THE INDENTURE
[FORM OF CLASS A-2 NOTE]
SEE REVERSE FOR CERTAIN DEFINITIONS
Unless this Note is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Issuer (as
defined below) or its agent for registration of transfer, exchange or payment,
and any Note issued is registered in the name of Cede & Co. or in such other
name as is requested by an authorized representative of DTC (and any payment is
made to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. THIS NOTE IS NOT GUARANTEED OR
INSURED BY ANY GOVERNMENTAL AGENCY.
REGISTERED CUSIP NO. ________________
$_____________/1/
No. R-
SIGNET STUDENT LOAN TRUST 1996-A
FLOATING RATE CLASS A-2 ASSET BACKED NOTES
Signet Student Loan Trust 1996-A, a trust organized and existing under the
laws of the State of Delaware (herein referred to as the "Issuer"), for value
received, hereby promises to pay to CEDE & CO., or registered assigns, the
principal sum of [ ] DOLLARS payable on each Distribution Date in an
amount equal to the result obtained by multiplying (i) a fraction the numerator
of which is $[INSERT INITIAL PRINCIPAL AMOUNT OF THIS NOTE] and the denominator
of which is $[ ] by (ii) the aggregate amount, if any, payable to
Noteholders on such
_____________________
/1/ Denominations of $1,000 and integral multiples of $1,000 in excess thereof.
<PAGE>
Distribution Date in respect of principal of the Class A-2 Notes pursuant to
Section 3.01 of the Indenture dated as of [ , 1996], between the Issuer
and The Bank of New York, a New York banking corporation, as Indenture Trustee
(the "Indenture Trustee") (capitalized terms used but not defined herein are
defined in Appendix A to the Administration Agreement, dated as of [ ],
1996, among the Issuer, Signet Bank, as Administrator, and the Indenture
Trustee, which also contains rules as to usage that shall be applicable herein);
provided, however, that the entire unpaid principal amount of this Note shall be
- -------- -------
due and payable on the [ ] 20__ Distribution Date (the "Class A-2 Final
Maturity Date"). Notwithstanding anything to the contrary, no payments of
principal of the Class A-2 Notes shall be made until the principal balance of
the Class A-1 Notes has been paid in its entirety.
The Issuer will pay interest on this Note at the rate per annum equal to
the Class A-2 Rate (as defined on the reverse hereof), on each Interest Payment
Date until the principal of this Note is paid or made available for payment, on
the principal amount of this Note outstanding on the preceding Distribution Date
(after giving effect to all payments of principal made on the preceding
Distribution Date, or in the case of the first three Interest Payment Dates, on
the Closing Date), subject to certain limitations contained in Section 3.01 of
the Indenture. Interest on this Note will accrue for each Interest Payment Date
from the most recent Interest Payment Date on which interest has been paid to
but excluding such Interest Payment Date or, if no interest has yet been paid,
from [ , 1996] (each, an "Interest Period"). Interest will be
computed on the basis of the actual number of days elapsed in a 360-day year.
Such principal of and interest on this Note shall be paid in the manner
specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the Indenture referred to on the reverse
hereof, or be valid or obligatory for any purpose.
2
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed, manually or in facsimile, as of the date set forth below.
SIGNET STUDENT LOAN TRUST 1996-A
by
THE FIRST NATIONAL BANK OF CHICAGO, not in
its individual capacity but solely as
Eligible Lender Trustee under the Trust
Agreement,
by ____________________________________
Authorized Signatory
Date: [ ], 1996
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the within-
mentioned Indenture.
THE BANK OF NEW YORK, not in its individual
capacity but solely as Indenture Trustee,
by _________________________
Authorized Signatory
Date: [ ], 1996
3
<PAGE>
[REVERSE OF NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Floating Rate Class A-2 Asset Backed Notes (herein called the
"Class A-2 Notes"), all issued under the Indenture, to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the Noteholders. The Class A-2 Notes are subject to all terms of
the Indenture.
The Class A-2 Notes and the Class A-1 Asset Backed Notes (the "Class A-1
Notes" and, together with the Class A-2 Notes, the "Notes") are and will be
equally and ratably secured by the collateral pledged as security therefor as
provided in the Indenture.
Principal of the Class A-2 Notes will be payable on each Distribution Date
on or after the date on which the principal balance of the Class A-1 Notes has
been paid in its entirety, in an amount described on the face hereof.
"Distribution Date" means the twenty-fifth day of each [January, April, July and
October,] or, if any such date is not a Business Day, the next succeeding
Business Day, commencing [ , 1996].
As described on the face hereof, the entire unpaid principal amount of this
Note shall be due and payable on the Class A-2 Final Maturity Date.
Notwithstanding the foregoing, the entire unpaid principal amount of the Notes
shall be due and payable on the date on which (i) an Event of Default shall have
occurred and be continuing and (ii) the Indenture Trustee or the Noteholders
representing not less than a majority of the Outstanding Amount of the Notes
shall have declared the Notes to be immediately due and payable in the manner
provided in Section 5.02 of the Indenture. All principal payments on the Class
A-2 Notes shall be made pro rata to the Class A-2 Noteholders entitled thereto.
Interest on the Class A-2 Notes will be payable on each Interest Payment
Date, commencing January 27, 1997, on the principal amount outstanding of such
Notes until the principal amount thereof is paid in full, at a rate per annum
equal to the Class A-2 Rate. The "Class A-2 Rate" for each Interest Period
shall be equal to the lesser of (i) LIBOR for the related LIBOR Reset Period
plus [ ]% (the "Class A-2 LIBOR Rate") and (ii) the Student Loan Rate for such
Interest Period. The "Student Loan Rate" for any Interest Period will equal the
product of (a) the quotient obtained by dividing (i) 360 by (ii) the actual
number of days elapsed in such Interest Period and (b) the percentage equivalent
of a fraction, (i) the numerator of which is equal to
4
<PAGE>
Expected Interest Collections for such Interest Period less the Servicing Fees
and the Administration Fee with respect to such Interest Period and (ii) the
denominator of which is the sum of (x) the Pool Balance as of the first day of
the Collection Period in which the first day of such Interest Period occurs and
(y) the principal balance on deposit in the Pre-Funding Account as of the first
day of the Collection Period in which the first day of such Interest Period
occurs.
Pursuant to the Administration Agreement, the Administrator shall determine
LIBOR for purposes of calculating the Class A-2 Rate for each given Interest
Period on the second business day prior to the commencement of each LIBOR Reset
Period within such Interest Period (each, a "LIBOR Determination Date"). For
purposes of calculating LIBOR, a business day is any day on which banks in
London and New York City are open for the transaction of international business.
"LIBOR" means, with respect to any LIBOR Reset Period (or, in the case of the
initial Interest Period, the period from [ , 1996] to but excluding the
initial Interest Payment Date), the London interbank offered rate for deposits
in U.S. dollars having a maturity of one month commencing on the related LIBOR
Determination Date (the "Index Maturity") which appears on Telerate Page 3750 as
of 11:00 a.m., London time, on such LIBOR Determination Date. If such rate does
not appear on Telerate Page 3750, the rate for that day shall be determined on
the basis of the rates at which deposits in U.S. dollars, having the Index
Maturity and in a principal amount of not less than U.S. $1,000,000, are offered
at approximately 11:00 a.m., London time, on such LIBOR Determination Date to
prime banks in the London interbank market by the Reference Banks. The
Administrator shall request the principal London office of each of such
Reference Banks to provide a quotation of its rate. If at least two such
quotations are provided, the rate for that day shall be the arithmetic mean of
the quotations. If fewer than two quotations are provided, the rate for that
day shall be the arithmetic mean of the rates quoted by major banks in New York
City, selected by the Administrator, at approximately 11:00 a.m., New York City
time, on such LIBOR Determination Date for loans in U.S. dollars to leading
European banks having the Index Maturity and in a principal amount equal to an
amount of not less than U.S. $1,000,000; provided that of the banks selected as
aforesaid are not quoting as mentioned in this sentence, LIBOR in effect for the
applicable LIBOR Reset Period shall be LIBOR in effect for the previous LIBOR
Reset Period. "LIBOR Reset Period" means the one-month period commencing on the
twenty-fifth day (or, if any such date is not a Business Day, on the next
succeeding Business Day) of each month and ending on the day immediately
preceding the following LIBOR Reset Period; provided, however, that the initial
-------- -------
LIBOR Reset Period will commune on the Closing Date. "Telerate Page 3750" means
the display page so designated
5
<PAGE>
on the Dow Jones Telerate Service (or such other page as may replace that page
on that service for the purpose of displaying comparable rates or prices).
"Reference Banks" means four major banks in the London interbank market selected
by the Administrator.
Any Noteholders' Interest LIBOR Carryover that may exist on any
Distribution Date attributable to the Class A-2 Notes shall by payable to the
Class A-2 Noteholders on that Distribution Date and any succeeding Distribution
Dates solely out of the funds available and required to be applied thereto
pursuant to the Administration Agreement.
Payments of interest on this Note due and payable on each Interest Payment
Date, and payments of interest together with the installment of principal, if
any, due and payable on each Distribution Date, to the extent not in full
payment of this Note, shall be made by check mailed to the Person whose name
appears as the Registered Holder of this Note (or one or more Predecessor Notes)
on the Note Register on the Record Date, except that with respect to Notes
registered on the Record Date in the name of the nominee of the Clearing Agency,
unless Definitive Notes have been issued (initially, such nominee to be Cede &
Co.), payments will be made by wire transfer in immediately available funds to
the account designated by such nominee. Such checks shall be mailed to the
Person entitled thereto at the address of such Person as it appears on the Note
Register as of the applicable Record Date without requiring that this Note be
submitted for notation of payment, and the mailing of such check shall
constitute payment of the amount thereof regardless of whether such check is
returned undelivered. Any reduction in the principal amount of this Note (or
any one or more Predecessor Notes) effected by any payments made on any
Distribution Date shall be binding upon all future Noteholders of this Note and
of any Note issued upon the registration of transfer hereof or in exchange
hereof or in lieu hereof, whether or not noted hereon. If funds are expected to
be available, as provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Note on a Distribution Date, then the
Indenture Trustee, in the name of and on behalf of the Issuer, will notify the
Person who was the Noteholder hereof as of the Record Date preceding such
Distribution Date by notice mailed no later than five days prior to such
Distribution Date and the amount then due and payable shall be payable only upon
presentation and surrender of this Note at the Indenture Trustee's Corporate
Trust Office or at the office of the Indenture Trustee's agent appointed for
such purposes located in the Borough of Manhattan, The City of New York.
6
<PAGE>
The Issuer shall pay interest on overdue installments of interest at the
Class A-2 Rate to the extent lawful.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Noteholder hereof or his attorney duly
authorized in writing, with such signature guaranteed by an "eligible guarantor
institution" meeting the requirements of the Note Registrar, which requirements
include membership or participation in Securities Transfer Agent's Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution for, STAMP
(all in accordance with the Exchange Act), and such other documents as the
Indenture Trustee may require, and thereupon one or more new Notes of authorized
denominations and in the same aggregate principal amount will be issued to the
designated transferee or transferees. No service charge will be charged for any
registration of transfer or exchange of this Note, but the transferor may be
required to pay a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any such registration of transfer or
exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in the Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Seller, the Company, the Administrator, the Master Servicer,
any Subservicer, the Eligible Lender Trustee or the Indenture Trustee on the
Notes or under the Indenture or any certificate or other writing delivered in
connection therewith, against (i) the Seller, the Company, the Administrator,
the Master Servicer, any Subservicer, the Indenture Trustee or the Eligible
Lender Trustee in its individual capacity or (ii) any partner, owner,
beneficiary, agent, officer, director or employee of the Seller, the Company,
the Administrator, the Master Servicer, any Subservicer, the Indenture Trustee
or the Eligible Lender Trustee in its individual capacity, any holder or owner
of a beneficial interest in the Issuer, the Eligible Lender Trustee or the
Indenture Trustee or of any successor or assign of the Seller, the Company, the
Administrator, the Master Servicer, any Subservicer, the Indenture Trustee or
the Eligible Lender Trustee in its individual capacity, except as any such
Person may have expressly agreed (it being understood that the Indenture Trustee
and the Eligible Lender Trustee have no such obligations in their individual
capacity) and except that any such partner, owner or
<PAGE>
beneficiary shall be fully liable, to the extent provided by applicable law, for
any unpaid consideration for stock, unpaid capital contribution or failure to
pay any installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees that by
accepting the benefits of the Indenture that such Noteholder or Note Owner will
not at any time institute against the Depositor, the Company or the Issuer, or
join in any institution against the Depositor, the Company or the Issuer of, any
bankruptcy, reorganization, arrangement, insolvency, receivership or liquidation
proceedings or other proceedings under any United States Federal or state
bankruptcy or similar law in connection with any obligations relating to the
Notes, the Indenture or the other Basic Documents.
Prior to the due presentment for registration of transfer of this Note, the
Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes whether or not this Note be
overdue, and neither the Issuer, the Indenture Trustee nor any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Noteholders under the Indenture at any time by the
Issuer with the consent of the Noteholders representing a majority of the
Outstanding Amount of all Notes at the time outstanding. The Indenture also
contains provisions permitting the Noteholders representing specified
percentages of the Outstanding Amount of the Notes, on behalf of all the
Noteholders, to waive compliance by the Issuer with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the holder of this Note (or any one or more
Predecessor Notes) shall be conclusive and binding upon such holder and upon all
future holders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent or waiver is made upon this Note. The Indenture also permits
the Indenture Trustee to amend or waive certain terms and conditions set forth
in the Indenture without the consent of holders of the Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the Issuer
under the Indenture.
8
<PAGE>
The Issuer is permitted by the Indenture, under certain circumstances, to
merge or consolidate, subject to the rights of the Indenture Trustee and the
Noteholders under the Indenture.
The Notes are issuable only in registered form in denominations as provided
in the Indenture, subject to certain limitations therein set forth.
This Note shall be construed in accordance with the laws of the State of
New York, without reference to its conflict of law provisions, and the
obligations, rights and remedies of the parties hereunder and thereunder shall
be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place, and rate, and in the coin or currency, herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, neither The Bank of New York in its individual
capacity, The First National Bank of Chicago in its individual capacity, any
owner of a beneficial interest in the Issuer, nor any of their respective
partners, beneficiaries, agents, officers, directors, employees or successors or
assigns shall be personally liable for, nor shall recourse be had to any of them
for, the payment of principal of or interest on, or performance of, or omission
to perform, any of the covenants, obligations or indemnifications contained in
this Note or the Indenture; it being expressly understood that said covenants,
obligations and indemnifications have been made by the Eligible Lender Trustee
for the sole purposes of binding the interests of the Eligible Lender Trustee in
the assets of the Issuer. The Noteholder of this Note by the acceptance hereof
agrees that, except as expressly provided in the Basic Documents, in the case of
an Event of Default under the Indenture, the Noteholder shall have no claim
against any of the foregoing for any deficiency, loss or claim therefrom;
provided, however, that nothing contained herein shall be taken to prevent
- -------- -------
recourse to, and enforcement against, the assets of the Issuer for any and all
liabilities, obligations and undertakings contained in the Indenture or in this
Note.
9
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee
______________________
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto __________________________________________________________________
_______________________________________________________________________
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably
constitutes and appoints ______________________, attorney, to transfer said
Note on the books kept for registration thereof, with full power of
substitution in the premises.
Dated: ______________
___________________________*/
Signature Guaranteed:
___________________________*/
_____________________________
*/ NOTICE: The signature to this assignment must correspond with the name of
- -
the registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting
the requirements of the Note Registrar, which requirements include
membership or participation in STAMP or such other "signature guarantee
program" as may be determined by the Note Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange Act
of 1934, as amended.
<PAGE>
EXHIBIT C
TO THE INDENTURE
Class A-1 Note Depository Agreement
-----------------------------------
[To come]
<PAGE>
EXHIBIT D
TO THE INDENTURE
Class A-2 Note Depository Agreement
-----------------------------------
[To come]
<PAGE>
CROSS-REFERENCE TABLE/1/
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- ------- -------
<S> <C>
310(a)(1) ................................... 6.11
(a)(2) ................................... 6.11
(a)(3) ................................... 6.10
(a)(4) ................................... N.A./2/
(a)(4) ................................... 6.11
(b) ................................... 6.08;
6.10; 6.11
(c) ................................... N.A.
311(a) ................................... 6.11
(b) ................................... 6.11
(c) ................................... N.A.
312(a) ................................... 7.01;
7.02(a)
(b) ................................... 7.02(b)
(c) ................................... 7.02(c)
313(a) ................................... 6.06
(b) ................................... 6.06
(c) ................................... 11.05
(d) ................................... 6.06
314(a) ................................... 3.09; 7.03
(b) ................................... 3.06
(c) ................................... 2.09; 4.01
11.01
(d) ................................... 2.09;
11.01
(e) ................................... 11.01
(f) ................................... 3.09
315(a) ................................... 6.01
(b) ................................... 6.05
(c) ................................... 6.01
(d) ................................... 6.01
(e) ................................... 5.13
316(a)(1)(A) .................................. 5.11
(a)(1)(B) .................................. 5.12
(a)(2) ................................... N.A.
(b) ................................... 5.07
(c) ................................... 1.01
317(a) ................................... 5.03
(b) ................................... 3.03
318(a) ................................... 11.07
</TABLE>
____________________
/1/ Note: This Cross-Reference Table shall not, for any purpose, be deemed to
be part of the Indenture.
/2/ N.A. means Not Applicable.
<PAGE>
Ex4.2
B&W Draft
12/10/96
================================================================================
TRUST AGREEMENT
among
SIGNET BANK,
as Depositor,
SIGNET STUDENT LOAN CORPORATION
and
THE FIRST NATIONAL BANK OF CHICAGO,
not in its individual capacity but solely
as Eligible Lender Trustee
Dated as of [ ], 1996
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
Definitions and Usage ......................... 1
ARTICLE II
Organization
SECTION 2.01. Name........................................................ 1
SECTION 2.02. Office...................................................... 1
SECTION 2.03. Purposes and Powers......................................... 1
SECTION 2.04. Appointment of Eligible Lender Trustee...................... 2
SECTION 2.05. Initial Capital Contribution of
Trust Estate................................................ 2
SECTION 2.06. Declaration of Trust........................................ 3
SECTION 2.07. Liability of the Company.................................... 3
SECTION 2.08. Title to Trust Property..................................... 4
SECTION 2.09. Representations and Warranties of
the Depositor............................................... 4
SECTION 2.10. Federal Income Tax Allocations.............................. 5
Section 2.11. Maintenance of the Demand Note.............................. 6
ARTICLE III
Trust Certificates and Transfer of Interests
SECTION 3.01. Initial Beneficial Ownership................................ 6
SECTION 3.02. The Trust Certificates...................................... 6
SECTION 3.03. Authentication of Trust Certificates........................ 7
SECTION 3.04. Registration of Transfer and Exchange
of Trust Certificates....................................... 7
SECTION 3.05. Mutilated, Destroyed, Lost or Stolen
Trust Certificates.......................................... 9
SECTION 3.06. Persons Deemed Owners....................................... 9
SECTION 3.07. Access to List of Certificateholders'
Names and Addresses......................................... 10
SECTION 3.08. Maintenance of Office or Agency............................. 10
SECTION 3.09. Appointment of Certificate Paying Agent..................... 10
SECTION 3.10. Disposition by Company...................................... 11
SECTION 3.11. Book-Entry Certificates..................................... 12
SECTION 3.12. Notices to Clearing Agency.................................. 13
SECTION 3.13. Definitive Certificates..................................... 13
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE IV
Actions by Eligible Lender Trustee
SECTION 4.01. Prior Notice to Certificateholders
with Respect to Certain Matters............................. 14
SECTION 4.02. Action by Certificateholders with
Respect to Certain Matters.................................. 15
SECTION 4.03. Action by Certificateholders with
Respect to Bankruptcy....................................... 15
SECTION 4.04. Restrictions on Certificateholders'
Power....................................................... 15
SECTION 4.05. Majority Control............................................ 15
ARTICLE V
Application of Trust Funds; Certain Duties
SECTION 5.01. Application of Trust Funds.................................. 16
SECTION 5.02. Method of Payment........................................... 16
SECTION 5.03. No Segregation of Moneys; No Interest....................... 17
SECTION 5.04. Accounting and Reports to the Noteholders,
Certificateholders, the Internal Revenue
Service and Others ......................................... 17
SECTION 5.05. Signature on Returns;
Tax Matters Partner......................................... 18
SECTION 5.06. Check-The-Box Proposal...................................... 18
ARTICLE VI
Authority and Duties of Eligible Lender Trustee
SECTION 6.01. General Authority........................................... 18
SECTION 6.02. General Duties.............................................. 19
SECTION 6.03. Action upon Instruction..................................... 20
SECTION 6.04. No Duties Except as Specified in this Agreement,
the Loan Sale Agreement, the Master Servicing
Agreement, the Administration Agreement or in
Instructions................................................ 21
SECTION 6.05. No Action Except Under Specified
Documents or Instructions................................... 21
SECTION 6.06. Restrictions................................................ 22
ARTICLE VII
Concerning the Eligible Lender Trustee
SECTION 7.01. Acceptance of Trusts and Duties............................. 22
SECTION 7.02. Furnishing of Documents..................................... 24
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 7.03. Representations and Warranties............................. 24
SECTION 7.04. Reliance; Advice of Counsel................................ 24
SECTION 7.05. Not Acting in Individual Capacity.......................... 25
SECTION 7.06. Eligible Lender Trustee Not Liable
for Trust Certificates or Student Loans.................... 25
SECTION 7.07. Eligible Lender Trustee May Own Trust
Certificates and Notes..................................... 26
ARTICLE VIII
Compensation of Eligible Lender Trustee
SECTION 8.01. Eligible Lender Trustee's Fees
and Expenses............................................... 26
SECTION 8.02. Payments to the Eligible Lender Trustee.................... 27
ARTICLE IX
Termination of Trust Agreement
SECTION 9.01. Termination of Trust Agreement............................. 27
SECTION 9.02. Dissolution upon Bankruptcy of
the Company................................................ 28
ARTICLE X
Successor Eligible Lender Trustees and
Additional Eligible Lender Trustees
SECTION 10.01. Eligibility Requirements for Eligible
Lender Trustee............................................ 29
SECTION 10.02. Resignation or Removal of Eligible
Lender Trustee............................................ 30
SECTION 10.03. Successor Eligible Lender Trustee......................... 31
SECTION 10.04. Merger or Consolidation of Eligible
Lender Trustee............................................ 31
SECTION 10.05. Appointment of Co-Eligible Lender
Trustee or Separate Eligible Lender
Trustee................................................... 32
ARTICLE XI
Miscellaneous
SECTION 11.01. Supplements and Amendments................................ 34
SECTION 11.02. No Legal Title to Trust Estate
in Certificateholders..................................... 35
SECTION 11.03. Limitations on Rights of Others........................... 35
SECTION 11.04. Notices................................................... 36
SECTION 11.05. Severability.............................................. 36
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 11.06. Separate Counterparts......................... 36
SECTION 11.07. Successors and Assigns........................ 37
SECTION 11.08. No Petition................................... 37
SECTION 11.09. No Recourse................................... 37
SECTION 11.10. Headings...................................... 37
SECTION 11.11. Governing Law................................. 37
</TABLE>
EXHIBIT A Form of Trust Certificate
EXHIBIT B Form of Certificate Depository Agreement
EXHIBIT C Form of Certificate of Trust
iv
<PAGE>
TRUST AGREEMENT dated as of [ ], 1996, among SIGNET BANK, a
Virginia banking corporation, as Depositor, SIGNET STUDENT LOAN CORPORATION, a
Virginia corporation (the "Company") and THE FIRST NATIONAL BANK OF CHICAGO, a
national banking association, as Eligible Lender Trustee.
The Depositor, the Company and the Eligible Lender Trustee hereby
agree as follows:
ARTICLE I
Definitions and Usage
---------------------
Capitalized terms used but not defined herein are defined in Appendix
A to the Administration Agreement, dated as of [ ], 1996, among the Signet
Student Loan Trust 1996-A, as Issuer, the Depositor, as Administrator, and The
Bank of New York, as Indenture Trustee, which also contains rules as to
construction and usage that shall be applicable herein.
ARTICLE II
Organization
------------
SECTION 2.01. Name. The Trust created hereby shall be known as
----
"Signet Student Loan Trust 1996-A", in which name the Eligible Lender Trustee
may engage in the transactions contemplated hereby, make and execute contracts
and other instruments on behalf of the Trust and sue and be sued.
SECTION 2.02. Office. The office of the Trust shall be in care of
------
the Eligible Lender Trustee at its Corporate Trust Office or at such other
address as the Eligible Lender Trustee may designate by written notice to the
Certificateholders and the Depositor.
SECTION 2.03. Purposes and Powers. The purpose of the Trust is to
-------------------
engage in the following activities:
(i) to issue the Notes pursuant to the Indenture and the Trust
Certificates pursuant to this Agreement and to sell the Notes and the Trust
Certificates in one or more transactions;
(ii) with the proceeds of the sale of the Notes and the Trust
Certificates, to purchase the Initial Financed Student Loans, to fund the
Pre-Funding Account and the Reserve Account, and to pay the organizational,
start-up and
1
<PAGE>
transactional expenses of the Trust and to pay the balance to the Depositor
pursuant to the Loan Sale Agreement;
(iii) to acquire and hold any Additional Student Loans to be conveyed
to the Trust subsequent to the Closing Date pursuant to the Loan Sale
Agreement;
(iv) to assign, grant, transfer, pledge, mortgage and convey the Trust
Estate pursuant to the Indenture and to hold, manage and distribute to the
Certificateholders pursuant to the terms of the Master Servicing Agreement
any portion of the Trust Estate released from the Lien of, and remitted to
the Trust pursuant to, the Indenture;
(v) to enter into and perform its obligations under the Basic
Documents to which it is to be a party;
(vi) to engage in those activities, including entering into
agreements, that are necessary, suitable or convenient to accomplish the
foregoing or are incidental thereto or connected therewith; and
(vii) subject to compliance with the Basic Documents, to engage in such
other activities as may be required in connection with conservation of the
Trust Estate and the making of distributions to the Certificateholders, the
Noteholders and the others specified in Section 2(d) of the Administration
Agreement.
The Trust shall not engage in any activity other than in connection with the
foregoing or other than as required or authorized by the terms of this Agreement
or the other Basic Documents.
SECTION 2.04. Appointment of Eligible Lender Trustee. The Depositor
--------------------------------------
hereby appoints the Eligible Lender Trustee as trustee of the Trust effective as
of the date hereof, to have all of the rights, powers and duties set forth
herein.
SECTION 2.05. Initial Capital Contribution of Trust Estate. The
--------------------------------------------
Depositor hereby sells, assigns, transfers, conveys and sets over to the
Eligible Lender Trustee, as of the date hereof, the sum of $1.00. The Eligible
Lender Trustee hereby acknowledges receipt in trust from the Depositor, as of
the date hereof, of the foregoing contribution, which shall constitute the
initial Trust Estate and shall be deposited in the Collection Account. The
Depositor shall pay the organizational expenses of the Trust as they may arise
or shall, upon the request of the Eligible Lender Trustee, promptly reimburse
the Eligible Lender
2
<PAGE>
Trustee for any such expenses paid by the Eligible Lender Trustee.
SECTION 2.06. Declaration of Trust. The Eligible Lender Trustee
--------------------
hereby declares that it will hold the Trust Estate in trust upon and subject to
the conditions set forth herein for the use and benefit of the
Certificateholders, subject to the obligations of the Trust under the other
Basic Documents. It is the intention of the parties hereto that the Trust
constitute a trust under the Business Trust Statute and that this Agreement
constitute the governing instrument of such trust. It is the intention of the
parties hereto that, solely for income and franchise tax purposes, the Trust
shall be treated as a partnership, with the assets of the partnership being the
Financed Student Loans and other assets held by the Trust, the partners of the
partnership being the Certificateholders (including the Depositor and the
Company in its capacity as recipient of certain distributions from the Reserve
Account), and the Notes being debt of the partnership. The parties agree that,
unless otherwise required by appropriate tax authorities, the Trust will file or
cause to be filed annual or other necessary returns, if any, reports and other
forms consistent with the characterization of the Trust as a partnership for
such tax purposes. Effective as of the date hereof, the Eligible Lender Trustee
shall have all rights, powers and duties set forth herein and in the Business
Trust Statute with respect to accomplishing the purposes of the Trust. The
Eligible Lender Trustee and the Delaware Trustee shall file the Certificate of
Trust with the Secretary of State of the State of Delaware pursuant to (S) 3801
of the Business Trust Statute on or before the Closing Date.
SECTION 2.07. Liability of the Certificateholders. (a) The Company
-----------------------------------
shall be liable directly to and will indemnify the injured party for all losses,
claims, damages, liabilities and expenses of the Trust (including Expenses, to
the extent not paid out of the Trust Estate) to the extent that the Company
would be liable if the Trust were a partnership under the Delaware Revised
Uniform Limited Partnership Act in which the Company were a general partner;
provided, however, that the Company shall not be liable for any losses incurred
- -------- -------
by a Certificateholder or a Certificate Owner in the capacity of an investor in
the Certificates or a Noteholder or a Note Owner in the capacity of an investor
in the Notes. In addition, any third party creditors of the Trust (other than
in connection with the obligations described in the preceding sentence for which
the Company shall not be liable) shall be deemed third party beneficiaries of
this paragraph. The obligations of the Company under this paragraph shall be
evidenced by the Trust Certificates described in Section 3.10, which shall be
deemed to be a separate class of Trust Certificates from all other Trust
Certificates
3
<PAGE>
issued by the Trust; provided that the rights and obligations evidenced by all
--------
Trust Certificates, regardless of class, except as provided in this Section,
shall be identical.
(b) No Certificateholder, other than to the extent set forth in
paragraph (a), shall have any personal liability for any liability or obligation
of the Trust.
SECTION 2.08. Title to Trust Property. Legal title to the Trust
-----------------------
Estate shall be vested at all times in the Trust as a separate legal entity
except where applicable law in any jurisdiction requires title to any part of
the Trust Estate to be vested in a trustee or trustees, in which case title
shall be deemed to be vested in the Eligible Lender Trustee, a co-trustee and/or
a separate trustee, as the case may be; provided that legal title to the
Financed Student Loans shall be vested at all times in the Eligible Lender
Trustee on behalf of the Trust.
SECTION 2.09. Representations and Warranties of the Depositor. The
-----------------------------------------------
Depositor hereby represents and warrants to the Eligible Lender Trustee that:
(a) The Depositor is duly organized and validly existing as a banking
corporation in good standing under the laws of the Commonwealth of
Virginia, with corporate power and authority to own its properties and to
conduct its business as such properties are currently owned and such
business is presently conducted.
(b) The Depositor is duly qualified to do business as a foreign
corporation in good standing, and has obtained all necessary licenses and
approvals in all jurisdictions in which the ownership or lease of property
or the conduct of its business shall require such qualifications.
(c) The Depositor has the corporate power and authority to execute
and deliver this Agreement and to carry out its terms; the Depositor has
full corporate power and authority to sell and assign the property to be
sold and assigned to and deposited with the Trust (or with the Eligible
Lender Trustee on behalf of the Trust) and the Depositor has duly
authorized such sale and assignment and deposit to the Trust (or to the
Eligible Lender Trustee on behalf of the Trust) by all necessary corporate
action; and the execution, delivery and performance of this Agreement has
been duly authorized by the Depositor by all necessary corporate action.
(d) This Agreement constitutes a legal, valid and binding obligation
of the Depositor enforceable in
4
<PAGE>
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization and similar laws relating to creditors' rights generally or
the rights of creditors of banks the deposit accounts of which are insured
by the FDIC and subject to general principles of equity.
(e) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof do not conflict with,
result in any breach of any of the terms and provisions of, or constitute
(with or without notice or lapse of time or both) a default under, the
articles of incorporation or by-laws of the Depositor, or any material
indenture, agreement or other instrument to which the Depositor is a party
or by which it is bound; nor result in the creation or imposition of any
Lien upon any of its properties pursuant to the terms of any such
indenture, agreement or other instrument (other than pursuant to the Basic
Documents); nor violate any law or, to the best of the Depositor's
knowledge, any order, rule or regulation applicable to the Depositor of any
court or of any Federal or state regulatory body, administrative agency or
other governmental instrumentality having jurisdiction over the Depositor
or its properties.
(f) There are no proceedings or investigations pending or, to the
Depositor's best knowledge, threatened before any court, regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Depositor or its properties: (A) asserting the
invalidity of this Agreement, (B) seeking to prevent the consummation of
any of the transactions contemplated by this Agreement or (C) seeking any
determination or ruling that might materially and adversely affect the
performance by the Depositor of its obligations under, or the validity or
enforceability of, this Agreement.
SECTION 2.10. Federal Income Tax Allocations. Net income of the
------------------------------
Trust for any month as determined for Federal income tax purposes (and each item
of income, gain, loss and deduction entering into the computation thereof) shall
be allocated:
(a) among the Certificateholders as of the close of business on the
last day of such month, in proportion to their ownership of principal
amount of Trust Certificates on such date, an amount of net income up to
the sum of (i) the Certificateholders' Interest Distribution Amount for the
related Interest Payment Date, (ii) the portion of the Certificateholders'
Interest LIBOR Carryover, if any, for the related Distribution Date
allocable to such month, (iii)
5
<PAGE>
interest on the excess, if any, of the Certificateholders' Interest
Distribution Amount for the preceding Interest Payment Date over the amount
in respect of interest that is actually distributed to Certificateholders
on such preceding Interest Payment Date, to the extent permitted by law, at
the Certificate Rate for such month and (iv) the portion of the market
discount on the Financed Student Loans accrued during such month that is
allocable to the excess, if any, of the initial aggregate principal amount
of the Trust Certificates over their initial aggregate issue price; and
(b) to the Depositor and the Company in the proportion of 99% and 1%,
respectively, to the extent of any remaining net income.
If the net income of the Trust for any month is insufficient for the allocations
described in clause (a) above, subsequent net income shall first be allocated to
make up such shortfall before being allocated as provided in clause (b) above.
Net losses of the Trust, if any, for any month as determined for Federal income
tax purposes (and each item of income, gain, loss and deduction entering into
the computation thereof) shall be allocated to the Depositor and the Company in
the proportion of 99% and 1% respectively, to the extent the Depositor and the
Company are reasonably expected to bear the economic burden of such net losses,
and any remaining net losses shall be allocated among the remaining
Certificateholders as of the close of business on the last day of such month in
proportion to their ownership of principal amount of Trust Certificates on such
Record Date. The Depositor and the Company are authorized to modify the
allocations in this paragraph if necessary or appropriate, in their sole
discretion, for the allocations to fairly reflect the economic income, gain or
loss to the Depositor and the Company or to the Certificateholders, or as
otherwise required by the Code.
SECTION 2.11. Maintenance of the Demand Note. To the fullest extent
------------------------------
permitted by applicable law, the Company agrees that it shall not sell, convey,
pledge, transfer or otherwise dispose of the Demand Note.
ARTICLE III
Trust Certificates and Transfer of Interests
--------------------------------------------
SECTION 3.01. Initial Beneficial Ownership. Upon the formation of
----------------------------
the Trust by the contribution by the Depositor pursuant to Section 2.05 and
until the issuance of the Trust Certificates, the Depositor shall be the sole
beneficial owner of the Trust.
6
<PAGE>
SECTION 3.02. The Trust Certificates. The Trust Certificates shall
----------------------
be issued in denominations of $1,000 or in integral multiples of $l,000 in
excess thereof; provided, however, that the Trust Certificates issued to the
-------- -------
Company pursuant to Section 3.10 may be issued in such denomination as to
include any residual amount. The Trust Certificates shall be executed on behalf
of the Trust by manual or facsimile signature of an authorized officer of the
Eligible Lender Trustee. Trust Certificates bearing the manual or facsimile
signatures of individuals who were, at the time when such signatures shall have
been affixed, authorized to sign on behalf of the Trust, shall be validly issued
by the Trust and entitled to the benefits of this Agreement, notwithstanding
that such individuals or any of them shall have ceased to be so authorized prior
to the authentication and delivery of such Trust Certificates or did not hold
such offices at the date of authentication and delivery of such Trust
Certificates.
A Person shall become a Certificateholder, and shall be entitled to
the rights and subject to the obligations of a Certificateholder hereunder, upon
such Person's acceptance of a Trust Certificate duly registered in such Person's
name pursuant to Section 3.04.
SECTION 3.03. Authentication of Trust Certificates. Concurrently
------------------------------------
with the sale of the Initial Financed Student Loans to the Trust pursuant to the
Loan Sale Agreement, the Eligible Lender Trustee shall cause the Trust
Certificates in an aggregate principal amount equal to the Initial Certificate
Balance to be executed on behalf of the Trust, authenticated and delivered to or
upon the written order of the Depositor, signed by its chairman of the board,
its president or any vice president, without further action by the Depositor, in
authorized denominations. No Trust Certificate shall entitle its holder to any
benefit under this Agreement, or shall be valid for any purpose, unless there
shall appear on such Trust Certificate a certificate of authentication
substantially in the form set forth in Exhibit A, executed by the Eligible
Lender Trustee or First Chicago Trust Company of New York, as the Eligible
Lender Trustee's authenticating agent, by manual signature; such authentication
shall constitute conclusive evidence that such Trust Certificate shall have been
duly authenticated and delivered hereunder. All Trust Certificates shall be
dated the date of their authentication. No further Trust Certificates shall be
issued except pursuant to Section 3.04, 3.05 or 3.13 hereunder.
SECTION 3.04. Registration of Transfer and Exchange of Trust
----------------------------------------------
Certificates. The Certificate Registrar shall keep or cause to be kept, at the
- ------------
office or agency maintained pursuant to
7
<PAGE>
Section 3.08, a Certificate Register in which, subject to such reasonable
regulations as it may prescribe, the Eligible Lender Trustee shall provide for
the registration of Trust Certificates and of transfers and exchanges of Trust
Certificates as herein provided. The Eligible Lender Trustee shall be the
initial Certificate Registrar.
Upon surrender for registration of transfer of any Trust Certificate
at the office or agency maintained pursuant to Section 3.08, the Eligible Lender
Trustee shall execute, authenticate and deliver (or shall cause First Chicago
Trust Company of New York as its authenticating agent to authenticate and
deliver), in the name of the designated transferee or transferees, one or more
new Trust Certificates in authorized denominations of a like aggregate amount
dated the date of authentication by the Eligible Lender Trustee or any
authenticating agent. At the option of a Certificateholder, Trust Certificates
may be exchanged for other Trust Certificates of authorized denominations of a
like aggregate amount upon surrender of the Trust Certificates to be exchanged
at the office or agency maintained pursuant to Section 3.08.
Every Trust Certificate presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of transfer in
form satisfactory to the Eligible Lender Trustee and the Certificate Registrar
duly executed by the Certificateholder or his attorney duly authorized in
writing, with such signature guaranteed by an "eligible guarantor institution"
meeting the requirements of the Certificate Registrar, which requirements
include membership or participation in Securities Transfer Agent's Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Certificate Registrar in addition to, or in substitution for,
STAMP, all in accordance with the Exchange Act. Each Trust Certificate
surrendered for registration of transfer or exchange shall be canceled and
subsequently disposed of by the Eligible Lender Trustee in accordance with its
customary practice.
No service charge shall be made for any registration of transfer or
exchange of Trust Certificates, but the Eligible Lender Trustee or the
Certificate Registrar may require payment of a sum sufficient to cover any tax
or governmental charge that may be imposed in connection with any transfer or
exchange of Trust Certificates.
The preceding provisions of this Section 3.04 notwithstanding, the
Eligible Lender Trustee shall not be required to make and the Certificate
Registrar need not register transfers or exchanges of Trust Certificates for a
period of 15
8
<PAGE>
days preceding any Distribution Date with respect to the Trust Certificates.
The Trust Certificates and any beneficial interest in such Trust
Certificates may not be acquired by (a) an employee benefit plan (as defined in
Section 3(3) of ERISA) that is subject to the provisions of Title I of ERISA,
(b) a plan described in Section 4975(e)(1) of the Code or (c) any entity whose
underlying assets include plan assets by reason of a plan's investment in the
entity (each, a "Benefit Plan"). By accepting and holding a Trust Certificate
or an interest therein, the Certificateholder thereof and Certificate Owner
thereof shall be deemed to have represented and warranted that it is not a
Benefit Plan.
SECTION 3.05. Mutilated, Destroyed, Lost or Stolen Trust
------------------------------------------
Certificates. If (a) any mutilated Trust Certificate shall be surrendered to
- ------------
the Certificate Registrar, or if the Certificate Registrar shall receive
evidence to its satisfaction of the destruction, loss or theft of any Trust
Certificate, and (b) there shall be delivered to the Certificate Registrar and
the Eligible Lender Trustee such security or indemnity as may be required by
them to save each of them harmless, then in the absence of notice that such
Trust Certificate shall have been acquired by a bona fide purchaser, the
Eligible Lender Trustee on behalf of the Trust shall execute and the Eligible
Lender Trustee, or First Chicago Trust Company of New York, as the Eligible
Lender Trustee's authenticating agent, shall authenticate and deliver, in
exchange for or in lieu of any such mutilated, destroyed, lost or stolen Trust
Certificate, a new Trust Certificate of like tenor and denomination. In
connection with the issuance of any new Trust Certificate under this Section,
the Eligible Lender Trustee and the Certificate Registrar may require the
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection therewith. Any duplicate Trust Certificate issued
pursuant to this Section shall constitute conclusive evidence of ownership in
the Trust, as if originally issued, whether or not the lost, stolen or destroyed
Trust Certificate shall be found at any time.
SECTION 3.06. Persons Deemed Owners. Prior to due presentation of a
---------------------
Trust Certificate for registration of transfer, the Eligible Lender Trustee, the
Certificate Registrar and any agent of any thereof may treat the Person in whose
name any Trust Certificate shall be registered in the Certificate Register as
the owner of such Trust Certificate for the purpose of receiving distributions
pursuant to Section 5.01 and for all other purposes whatsoever, and neither the
Eligible Lender Trustee, the
9
<PAGE>
Certificate Registrar nor any agent of any thereof shall be bound by any notice
to the contrary.
SECTION 3.07. Access to List of Certificateholders' Names and
-----------------------------------------------
Addresses. The Eligible Lender Trustee shall furnish or cause to be furnished
- ---------
to the Depositor, within 15 days after receipt by the Eligible Lender Trustee of
a request therefor from the Depositor in writing, a list, in such form as the
Depositor may reasonably require, of the names and addresses of the
Certificateholders as of the most recent Record Date. If three or more
Certificateholders or one or more Certificateholders evidencing not less than
25% of the Certificate Balance apply in writing to the Eligible Lender Trustee,
and such application states that the applicants desire to communicate with other
Certificateholders with respect to their rights under this Agreement or under
the Trust Certificates and such application is accompanied by a copy of the
communication that such applicants propose to transmit, then the Eligible Lender
Trustee shall, within five Business Days after the receipt of such application,
afford such applicants access during normal business hours to the current list
of Certificateholders. Upon receipt of any such application, the Eligible
Lender Trustee will promptly notify the Depositor by providing a copy of such
application and a copy of the list of Certificateholders produced in response
thereto. Each Certificateholder, by receiving and holding a Trust Certificate,
shall be deemed to have agreed not to hold any of the Depositor, the Certificate
Registrar or the Eligible Lender Trustee accountable by reason of the disclosure
of its name and address, regardless of the source from which such information
was derived.
SECTION 3.08. Maintenance of Office or Agency. The Eligible Lender
-------------------------------
Trustee shall maintain in the Borough of Manhattan, The City of New York, an
office or offices or agency or agencies where Trust Certificates may be
surrendered for registration of transfer or exchange and where notices and
demands to or upon the Eligible Lender Trustee in respect of the Trust
Certificates and the other Basic Documents may be served. The Eligible Lender
Trustee initially designates One First National Plaza, Suite 0126, Chicago,
Illinois 60610 as its principal Corporate Trust Office. The Eligible Lender
Trustee's New York office and its authenticating agent's office are located at
14 Wall Street, New York, New York 10005, Attention: Corporate Trust
Administration. The Eligible Lender Trustee shall give prompt written notice to
the Depositor and to the Certificateholders of any change in the location of the
Certificate Register or any such office or agency.
SECTION 3.09. Appointment of Certificate Paying Agent. The
----------------------------------------
Certificate Paying Agent shall make distributions to
10
<PAGE>
Certificateholders from the amounts received from the Indenture Trustee out of
the Trust Accounts pursuant to Section 5.01 and shall report the amounts of such
distributions to the Eligible Lender Trustee. Any Certificate Paying Agent
shall have the revocable power to receive such funds from the Indenture Trustee
for the purpose of making the distributions referred to above. With respect to
any Certificate Paying Agent other than Signet Trust Company or the Indenture
Trustee, the Eligible Lender Trustee may revoke such power and remove the
Certificate Paying Agent if the Eligible Lender Trustee determines in its sole
discretion that the Certificate Paying Agent shall have failed to perform its
obligations under this Agreement in any material respect. The Certificate
Paying Agent shall initially be Signet Trust Company, and any co-paying agent
chosen by the Eligible Lender Trustee and acceptable to the Administrator and
any such Certificate Paying Agent shall be permitted to resign as Certificate
Paying Agent upon 30 days' written notice to the Eligible Lender Trustee. In
the event that Signet Trust Company or the Indenture Trustee shall no longer be
the Certificate Paying Agent, the Eligible Lender Trustee shall appoint a
successor to act as Certificate Paying Agent (which shall be a bank or trust
company). The Eligible Lender Trustee shall cause such successor Certificate
Paying Agent or any additional Certificate Paying Agent appointed by the
Eligible Lender Trustee to execute and deliver to the Eligible Lender Trustee an
instrument in which such successor Certificate Paying Agent or additional
Certificate Paying Agent shall agree with the Eligible Lender Trustee that as
Certificate Paying Agent, such successor Certificate Paying Agent or additional
Certificate Paying Agent will hold all sums, if any, held by it for payment to
the Certificateholders in trust for the benefit of the Certificateholders
entitled thereto until such sums shall be paid to such Certificateholders. The
Certificate Paying Agent shall return all unclaimed funds to the Eligible Lender
Trustee and upon removal of a Certificate Paying Agent such Certificate Paying
Agent shall also return all funds in its possession to the Eligible Lender
Trustee. The provisions of Sections 7.01, 7.03, 7.04, 7.05 and 8.01 shall apply
to the Certificate Paying Agent, for so long as Signet Trust Company shall act
as Certificate Paying Agent and, to the extent applicable, to any other paying
agent appointed hereunder. Any reference in this Agreement to the Certificate
Paying Agent shall include any co-paying agent unless the context requires
otherwise.
SECTION 3.10. Disposition by Company. On and after the Closing Date,
----------------------
the Company shall retain beneficial and record ownership of Trust Certificates
representing at least 1% of the Certificate Balance. Any attempted transfer of
any Trust Certificate that would reduce such interest of the Company below 1% of
the Certificate Balance shall be void. The Eligible Lender
11
<PAGE>
Trustee shall cause any Trust Certificate issued to the Company on the Closing
Date (and any Trust Certificate issued in exchange therefor) to contain a legend
stating "THIS TRUST CERTIFICATE IS NONTRANSFERABLE EXCEPT IN ACCORDANCE WITH
SECTION 3.10 OF THE TRUST AGREEMENT".
SECTION 3.11. Book-Entry Certificates. The Trust Certificates will
-----------------------
be issued in the form of a typewritten Trust Certificate or Trust Certificates
representing Book-Entry Certificates, to be delivered to The Depository Trust
Company, the initial Clearing Agency, by, or on behalf of, the Trust; provided,
--------
however, that one Definitive Certificate (as defined below) may be issued to the
- -------
Company pursuant to Section 3.10. Such Book-Entry Certificate or Book-Entry
Certificates shall be registered on the Certificate Register in the name of Cede
& Co., the nominee of the initial Clearing Agency, and no Certificate Owner
(other than the Company) will receive a Definitive Certificate representing such
Certificate Owner's interest in such Trust Certificate, except as provided in
Section 3.13. Unless and until definitive, fully registered Trust Certificates
(the "Definitive Certificates") have been issued to Certificate Owners pursuant
to Section 3.13:
(i) the provisions of this Section shall be in full force and effect;
(ii) the Certificate Registrar and the Eligible Lender Trustee shall
be entitled to deal with the Clearing Agency for all purposes of this
Agreement (including the payment of principal of and interest on the Trust
Certificates and the giving of instructions or directions hereunder) as the
sole Certificateholder and shall have no obligation to the Certificate
Owners;
(iii) to the extent that the provisions of this Section conflict with
any other provisions of this Agreement, the provisions of this Section
shall control;
(iv) the rights of Certificate Owners shall be exercised only through
the Clearing Agency and shall be limited to those established by law and
agreements between such Certificate Owners and the Clearing Agency and/or
the Clearing Agency Participants. Pursuant to the Certificate Depository
Agreement, unless and until Definitive Certificates are issued pursuant to
Section 3.13, the Clearing Agency will make book-entry transfers among the
Clearing Agency Participants and receive and transmit payments of principal
of and interest on the Trust Certificates to such Clearing Agency
Participants; and
12
<PAGE>
(v) whenever this Agreement requires or permits actions to be taken
based upon instructions or directions of Certificateholders of Trust
Certificates evidencing a specified percentage of the Certificate Balance,
the Clearing Agency shall be deemed to represent such percentage only to
the extent that it has received instructions to such effect from
Certificate Owners and/or Clearing Agency Participants owning or
representing, respectively, such required percentage of the beneficial
interest in the Trust Certificates and has delivered such instructions to
the Eligible Lender Trustee.
SECTION 3.12. Notices to Clearing Agency. Whenever a notice or other
--------------------------
communication to the Certificateholders is required under this Agreement at a
time when Book-Entry Certificates have been issued and are outstanding and
unless and until Definitive Certificates shall have been issued to Certificate
Owners pursuant to Section 3.13, the Eligible Lender Trustee shall give all such
notices and communications specified herein to be given to Certificateholders to
the Clearing Agency, and shall have no obligations to the Certificate Owners.
SECTION 3.13. Definitive Certificates. If (i) the Administrator
-----------------------
advises the Eligible Lender Trustee in writing that the Clearing Agency is no
longer willing or able to discharge properly its responsibilities with respect
to the Trust Certificates, and the Administrator is unable to locate a qualified
successor, (ii) the Administrator at its option advises the Eligible Lender
Trustee in writing that it elects to terminate the book-entry system through the
Clearing Agency or (iii) after the occurrence of an Event of Default or a
Servicer Default, Certificate Owners representing beneficial interests
aggregating at least a majority of the Certificate Balance advise the Clearing
Agency (which shall then notify the Eligible Lender Trustee) in writing that the
continuation of a book-entry system through the Clearing Agency is no longer in
the best interest of the Certificate Owners, then the Eligible Lender Trustee
shall cause the Clearing Agency to notify all Certificate Owners of the
occurrence of any such event and of the availability of the Definitive
Certificates to Certificate Owners requesting the same. Upon surrender to the
Eligible Lender Trustee of the typewritten Trust Certificate or Trust
Certificates representing the Book-Entry Certificates by the Clearing Agency,
accompanied by registration instructions, the Eligible Lender Trustee shall
execute and authenticate the Definitive Certificates in accordance with the
instructions of the Clearing Agency. Neither the Certificate Registrar nor the
Eligible Lender Trustee shall be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be protected in relying on,
such instructions. Upon the issuance of Definitive Certificates, the
13
<PAGE>
Eligible Lender Trustee shall recognize the registered holders of the Definitive
Certificates as Certificateholders. The Definitive Certificates shall, at the
expense of the Depositor, be printed, lithographed or engraved or may be
produced in any other manner as is reasonably acceptable to the Eligible Lender
Trustee, as evidenced by its execution thereof.
ARTICLE IV
Actions by Eligible Lender Trustee
----------------------------------
SECTION 4.01. Prior Notice to Certificateholders with Respect to
--------------------------------------------------
Certain Matters. With respect to the following matters, the Eligible Lender
- ---------------
Trustee shall not take action unless at least 30 days before the taking of such
action, the Eligible Lender Trustee shall have notified the Certificateholders
and the Rating Agencies in writing of the proposed action and the
Certificateholders shall not have notified the Eligible Lender Trustee in
writing prior to the 30th day after such notice is given that such
Certificateholders have withheld consent or provided alternative direction:
(a) the initiation of any material claim or lawsuit by the Trust
(except claims or lawsuits brought in connection with the collection of the
Financed Student Loans) and the compromise of any material action, claim or
lawsuit brought by or against the Trust (except with respect to the
aforementioned claims or lawsuits for collection of Financed Student
Loans);
(b) the election by the Trust to file an amendment to the Certificate
of Trust;
(c) the amendment of the Indenture by a supplemental indenture in
circumstances where the consent of any Noteholder is required;
(d) the amendment of the Indenture by a supplemental indenture in
circumstances where the consent of any Noteholder is not required and such
amendment materially adversely affects the interest of the
Certificateholders;
(e) the amendment, change or modification of the Administration
Agreement, except to cure any ambiguity or in connection with a transaction
permitted by Section 25 thereof or to amend or supplement any provision in
a manner or add any provision that would not materially adversely affect
the interests of the Certificateholders; or
14
<PAGE>
(f) the appointment pursuant to the Indenture of a successor Note
Registrar, Paying Agent or Indenture Trustee or pursuant to this Agreement
of a successor Certificate Paying Agent or Certificate Registrar, or the
consent to the assignment by the Note Registrar, Paying Agent or Indenture
Trustee or Certificate Paying Agent or Certificate Registrar of its
obligations under the Indenture or this Agreement, as applicable.
SECTION 4.02. Action by Certificateholders with Respect to Certain
----------------------------------------------------
Matters. The Eligible Lender Trustee shall not have the power, except upon the
- -------
direction of the Certificateholders, to (a) remove the Administrator under the
Administration Agreement pursuant to Section 12 thereof, (b) appoint a successor
Administrator pursuant to Section 12 of the Administration Agreement, (c) remove
the Master Servicer under the Master Servicing Agreement pursuant to Section
6.01 thereof or (d) except as expressly provided in the Basic Documents, sell
the Financed Student Loans after the termination of the Indenture. The Eligible
Lender Trustee shall take the actions referred to in the preceding sentence only
upon written instructions signed by the Certificateholders.
SECTION 4.03. Action by Certificateholders with Respect to
--------------------------------------------
Bankruptcy. The Eligible Lender Trustee shall not have the power to commence a
- ----------
voluntary proceeding in bankruptcy relating to the Trust without the unanimous
prior approval of all Certificateholders and the delivery to the Eligible Lender
Trustee by each such Certificateholder of a certificate certifying that such
Certificateholder reasonably believes that the Trust is insolvent.
SECTION 4.04. Restrictions on Certificateholders' Power. The
-----------------------------------------
Certificateholders shall not direct the Eligible Lender Trustee to take or
refrain from taking any action if such action or inaction would be contrary to
any obligation of the Trust or the Eligible Lender Trustee under this Agreement
or any of the other Basic Documents or would be contrary to Section 2.03 nor
shall the Eligible Lender Trustee be permitted to follow any such direction, if
given.
SECTION 4.05. Majority Control. Except as expressly provided herein,
----------------
any action that may be taken by the Certificateholders under this Agreement may
be taken by the Certificateholders of Trust Certificates evidencing not less
than a majority of the Certificate Balance. Except as expressly provided
herein, any written notice of the Certificateholders delivered pursuant to this
Agreement shall be effective if signed by Certificateholders of Trust
Certificates evidencing not less
15
<PAGE>
than a majority of the Certificate Balance at the time of the delivery of such
notice.
ARTICLE V
Application of Trust Funds; Certain Duties
------------------------------------------
SECTION 5.01. Application of Trust Funds. (a) On each Interest
--------------------------
Payment Date and Distribution Date, the Eligible Lender Trustee will, or will
cause the Certificate Paying Agent to, distribute to Certificateholders, on a
pro rata basis, amounts received from the Indenture Trustee for distribution to
the Certificateholders pursuant to Sections 2(d), 2(e) and 2(f) of the
Administration Agreement on such Interest Payment Date or Distribution Date.
(b) On each Distribution Date, the Eligible Lender Trustee shall send
to each Certificateholder the statement provided to the Eligible Lender Trustee
by the Administrator pursuant to Section 2(g) of the Administration Agreement on
such Distribution Date.
(c) In the event that any withholding tax is imposed on the Trust's
payment (or allocations of income) to a Certificateholder, such tax shall reduce
the amount otherwise distributable to the Certificateholder in accordance with
this Section. The Eligible Lender Trustee is hereby authorized and directed to
retain from amounts otherwise distributable to the Certificateholders sufficient
funds for the payment of any tax that is legally owed by the Trust (and such
authorization shall not prevent the Eligible Lender Trustee from contesting any
such tax in appropriate proceedings, and withholding payment of such tax, if
permitted by law, pending the outcome of such proceedings). The amount of any
withholding tax imposed with respect to a Certificateholder shall be treated as
cash distributed to such Certificateholder at the time it is withheld by the
Trust to be remitted to the appropriate taxing authority. If there is a
possibility that withholding tax is payable with respect to a distribution (such
as a distribution to a non-U.S. Certificateholder), the Eligible Lender Trustee
in its sole discretion may (but unless otherwise required by law shall not be
obligated to) withhold such amounts in accordance with this paragraph (c). In
the event that a Certificateholder wishes to apply for a refund of any such
withholding tax, the Eligible Lender Trustee shall reasonably cooperate with
such Certificateholder in making such claim so long as such Certificateholder
agrees to reimburse the Eligible Lender Trustee for any out-of-pocket expenses
incurred.
16
<PAGE>
SECTION 5.02. Method of Payment. Subject to Section 9.01(c),
-----------------
distributions required to be made to Certificateholders on any Interest Payment
Date or Distribution Date shall be made to each Certificateholder of record on
the preceding Record Date either by wire transfer, in immediately available
funds, to the account of such Certificateholder at a bank or other entity having
appropriate facilities therefor, if such Certificateholder shall have provided
to the Certificate Registrar appropriate written instructions signed by two
authorized officers, if any, at least five Business Days prior to such Interest
Payment Date or Distribution Date and such Certificateholder's Trust
Certificates in the aggregate evidence a denomination of not less than
$1,000,000, or, if not, by check mailed to such Certificateholder at the address
of such Certificateholder appearing in the Certificate Register; provided,
--------
however, that, unless Definitive Certificates have been issued pursuant to
- -------
Section 3.13, with respect to Trust Certificates registered on the Record Date
in the name of the nominee of the Clearing Agency (initially, such nominee to be
Cede & Co.), distributions will be made by wire transfer in immediately
available funds to the account designated by such nominee. Notwithstanding the
foregoing, the final distribution in respect of any Trust Certificate (whether
on the Final Maturity Date or otherwise) will be payable only upon presentation
and surrender of such Trust Certificate at the Corporate Trust Office of the
Eligible Lender Trustee or such other location specified in writing to the
Certificateholder thereof.
SECTION 5.03. No Segregation of Moneys; No Interest. Subject to
-------------------------------------
Section 5.01, moneys received by the Eligible Lender Trustee hereunder need not
be segregated in any manner except to the extent required by law or the Basic
Documents and may be deposited under such general conditions as may be
prescribed by law, and the Eligible Lender Trustee shall not be liable for any
interest thereon.
SECTION 5.04. Accounting and Reports to the Noteholders,
------------------------------------------
Certificateholders, the Internal Revenue Service and Others. The Eligible
- -----------------------------------------------------------
Lender Trustee shall (a) maintain (or cause to be maintained) the books of the
Trust on a calendar year basis on the accrual method of accounting, (b) prepare
and deliver to each Certificateholder (and to each Person who was a
Certificateholder at any time during the applicable calendar year), as may be
required by the Code and applicable Treasury Regulations, such information as
may be required (including Schedule K-1) to enable each such Certificateholder
to prepare its Federal and state income tax returns, (c) prepare and file such
tax returns relating to the Trust (including a partnership information return,
Internal Revenue Service Form 1065), and make such elections as may from time to
time be required or
17
<PAGE>
appropriate under any applicable state or Federal statute or rule or regulation
thereunder so as to maintain the Trust's characterization as a partnership for
Federal income tax purposes, (d) cause such tax returns to be signed in the
manner required by law and (e) collect or cause to be collected any withholding
tax as described in and in accordance with Section 5.01(c) with respect to
income or distributions to Certificateholders. The Eligible Lender Trustee
shall elect under Section 1278 of the Code to include in income currently any
market discount that accrues with respect to the Financed Student Loans. The
Eligible Lender Trustee shall not make the election provided under Section 754
of the Code.
SECTION 5.05. Signature on Returns; Tax Matters Partner. (a) The
-----------------------------------------
Company shall sign on behalf of the Trust the tax returns of the Trust.
(b) The Company shall be designated the "tax matters partner" of the
Trust pursuant to Section 6231(a)(7)(A) of the Code and applicable Treasury
Regulations.
SECTION 5.06. Check-The-Box Proposal. If Treasury Regulations (S)
----------------------
301.7701-1 through (S) 301.7701-3 are amended such that the Trust would not be
classified as an association taxable as a corporation if the requirements of
Sections 2.07(a), 3.10 and 9.02 hereof (collectively, the "Partnership
Qualification Provisions") were no longer applicable and the Trust made any
necessary elections to avoid classification as an association taxable as a
corporation required by such regulations (such an amendment, a "Tax
Characterization Amendment"), the Partnership Qualification Provisions shall no
longer be applicable or part of this Agreement; provided, however, that the
Partnership Qualification Provisions shall no longer be applicable or part of
this Agreement only if the Eligible Lender Trustee first obtains an Opinion of
Counsel stating that (i) a Tax Characterization Amendment has been adopted and
(ii) the deletion of the Partnership Qualification Provisions will not cause the
Trust to be subject to an entity level tax for state or federal income tax
purposes. To the extent the Tax Characterization Amendment requires the Trust
to affirmatively elect to be treated as a partnership, the Depositor, the
Certificateholders and the Eligible Lender Trustee at the discretion and expense
of the Depositor, shall take all actions necessary under such regulations for
the Trust to be treated as a partnership for federal income tax purposes.
ARTICLE VI
Authority and Duties of Eligible Lender Trustee
-----------------------------------------------
18
<PAGE>
SECTION 6.01. General Authority. The Eligible Lender Trustee is
-----------------
authorized and directed to execute and deliver the Basic Documents to which the
Trust is to be a party and each certificate or other document attached as an
exhibit to or contemplated by the Basic Documents to which the Trust is to be a
party, in each case, in such form as the Depositor shall approve as evidenced
conclusively by the Eligible Lender Trustee's execution thereof, and, on behalf
of the Trust, to direct the Indenture Trustee to authenticate and deliver Class
A-1 Notes in the aggregate principal amount of $[ ] and Class A-2 Notes
in the aggregate principal amount of $[ ]. The Eligible Lender Trustee
is also authorized and directed on behalf of the Trust (i) to acquire and hold
legal title to the Financed Student Loans from the Depositor and (ii) to take
all actions required pursuant to Section 3.02(c) of the Master Servicing
Agreement, and otherwise follow the direction of and cooperate with the Master
Servicer in submitting, pursuing and collecting any claims to and with the
Department with respect to any Interest Subsidy Payments and Special Allowance
Payments relating to the Financed Student Loans.
In addition to the foregoing, the Eligible Lender Trustee is
authorized, but shall not be obligated, to take all actions required of the
Trust pursuant to the Basic Documents. The Eligible Lender Trustee is further
authorized from time to time to take such action as the Administrator directs or
instructs with respect to the Basic Documents and is directed to take such
action to the extent that the Administrator is expressly required pursuant to
the Basic Documents to cause the Eligible Lender Trustee to act.
SECTION 6.02. General Duties. It shall be the duty of the Eligible
--------------
Lender Trustee to discharge (or cause to be discharged) all its responsibilities
pursuant to the terms of this Agreement and the other Basic Documents to which
the Trust is a party and to administer the Trust in the interest of the
Certificateholders, subject to and in accordance with the provisions of this
Agreement and the other Basic Documents. Without limiting the foregoing, the
Eligible Lender Trustee shall on behalf of the Trust file and prove any claim or
claims that may exist on behalf of the Trust against the Depositor in connection
with any claims paying procedure as part of an insolvency or a receivership
proceeding involving the Depositor. Notwithstanding the foregoing, the Eligible
Lender Trustee shall be deemed to have discharged its duties and
responsibilities hereunder and under the other Basic Documents to the extent the
Administrator has agreed in the Administration Agreement to perform any act or
to discharge any duty of the Eligible Lender Trustee hereunder or under any
other Basic Document, and the
19
<PAGE>
Eligible Lender Trustee shall not be held liable for the default or failure of
the Administrator to carry out its obligations under the Administration
Agreement. Except as expressly provided in the Basic Documents, the Eligible
Lender Trustee shall have no obligation to administer, service or collect the
Financed Student Loans or to maintain, monitor or otherwise supervise the
administration, servicing or collection of the Financed Student Loans.
SECTION 6.03. Action upon Instruction. (a) Subject to Article IV,
-----------------------
Section 7.01 and in accordance with the terms of the Basic Documents, the
Certificateholders may by written instruction direct the Eligible Lender Trustee
in the management of the Trust. Such direction may be exercised at any time by
written instruction of the Certificateholders pursuant to Article IV.
(b) The Eligible Lender Trustee shall not be required to take any
action hereunder or under any other Basic Document if the Eligible Lender
Trustee shall have reasonably determined, or shall have been advised by counsel,
that such action is likely to result in liability on the part of the Eligible
Lender Trustee or is contrary to the terms hereof or of any other Basic Document
or is otherwise contrary to law.
(c) Whenever the Eligible Lender Trustee is unable to determine the
appropriate course of action between alternative courses of action permitted or
required by the terms of this Agreement or under any other Basic Document, the
Eligible Lender Trustee shall promptly give notice (in such form as shall be
appropriate under the circumstances) to the Certificateholders requesting
instruction as to the course of action to be adopted, and to the extent the
Eligible Lender Trustee acts in good faith in accordance with any written
instruction of the Certificateholders received, the Eligible Lender Trustee
shall not be liable on account of such action to any Person. If the Eligible
Lender Trustee shall not have received appropriate instruction within 10 days of
such notice (or within such shorter period of time as reasonably may be
specified in such notice or may be necessary under the circumstances) it may,
but shall be under no duty to, take or refrain from taking such action, not
inconsistent with this Agreement or the other Basic Documents, as it shall deem
to be in the best interests of the Certificateholders, and shall have no
liability to any Person for such action or inaction.
(d) In the event that the Eligible Lender Trustee is unsure as to the
application of any provision of this Agreement or any other Basic Document or
any such provision is ambiguous as to its application, or is, or appears to be,
in conflict with any other applicable provision, or in the event that this
Agreement
20
<PAGE>
permits any determination by the Eligible Lender Trustee or is silent or is
incomplete as to the course of action that the Eligible Lender Trustee is
required to take with respect to a particular set of facts, the Eligible Lender
Trustee may give notice (in such form as shall be appropriate under the
circumstances) to the Certificateholders requesting instruction and, to the
extent that the Eligible Lender Trustee acts or refrains from acting in good
faith in accordance with any such instruction received, the Eligible Lender
Trustee shall not be liable, on account of such action or inaction, to any
Person. If the Eligible Lender Trustee shall not have received appropriate
instruction within 10 days of such notice (or within such shorter period of time
as reasonably may be specified in such notice or may be necessary under the
circumstances) it may, but shall be under no duty to, take or refrain from
taking such action, not inconsistent with this Agreement or the other Basic
Documents, as it shall deem to be in the best interests of the
Certificateholders, and shall have no liability to any Person for such action or
inaction.
SECTION 6.04. No Duties Except as Specified in this Agreement, the
----------------------------------------------------
Loan Sale Agreement, the Master Servicing Agreement, the Administration
- -----------------------------------------------------------------------
Agreement or in Instructions. The Eligible Lender Trustee shall not have any
- ----------------------------
duty or obligation to manage, make any payment with respect to, register,
record, sell, service, dispose of or otherwise deal with the Trust Estate, or to
otherwise take or refrain from taking any action under, or in connection with,
any document contemplated hereby to which the Eligible Lender Trustee is a
party, except as expressly provided by the terms of this Agreement, the Loan
Sale Agreement, the Master Servicing Agreement, the Administration Agreement or
in any document or written instruction received by the Eligible Lender Trustee
pursuant to Section 6.03; and no implied duties or obligations shall be read
into this Agreement or any other Basic Document against the Eligible Lender
Trustee. The Eligible Lender Trustee shall have no responsibility for filing
any financing or continuation statement in any public office at any time or to
otherwise perfect or maintain the perfection of any security interest or lien
granted to it hereunder or to prepare or file any Commission filing for the
Trust or to record this Agreement or any other Basic Document. The Eligible
Lender Trustee nevertheless agrees that it will, at its own cost and expense,
promptly take all action as may be necessary to discharge any liens on any part
of the Trust Estate that result from actions by, or claims against, The First
National Bank of Chicago in its individual capacity or as the Eligible Lender
Trustee that are not related to the ownership or the administration of the Trust
Estate.
21
<PAGE>
SECTION 6.05. No Action Except Under Specified Documents or
---------------------------------------------
Instructions. The Eligible Lender Trustee shall not manage, control, use, sell,
- ------------
service, dispose of or otherwise deal with any part of the Trust Estate except
(i) in accordance with the powers granted to and the authority conferred upon
the Eligible Lender Trustee pursuant to this Agreement, (ii) in accordance with
the other Basic Documents to which it is a party and (iii) in accordance with
any document or instruction delivered to the Eligible Lender Trustee pursuant to
Section 6.03.
SECTION 6.06. Restrictions. The Eligible Lender Trustee shall not
------------
take any action (a) that is inconsistent with the purposes of the Trust set
forth in Section 2.03 or (b) that, to the actual knowledge of the Eligible
Lender Trustee, would result in the Trust's becoming taxable as a corporation
for Federal income tax purposes. The Certificateholders shall not direct the
Eligible Lender Trustee to take action that would violate the provisions of this
Section.
ARTICLE VII
Concerning the Eligible Lender Trustee
--------------------------------------
SECTION 7.01. Acceptance of Trusts and Duties. The Eligible Lender
-------------------------------
Trustee accepts the trusts hereby created and agrees to perform its duties
hereunder with respect to such trusts but only upon the terms of this Agreement.
The Eligible Lender Trustee also agrees to disburse all moneys actually received
by it constituting part of the Trust Estate upon the terms of this Agreement and
the other Basic Documents. The Eligible Lender Trustee shall not be answerable
or accountable hereunder or under any other Basic Document under any
circumstances, except (i) for its own willful misconduct, bad faith or
negligence or (ii) in the case of the inaccuracy of any representation or
warranty contained in Section 7.03 expressly made by the Eligible Lender
Trustee. In particular, but not by way of limitation (and subject to the
exceptions set forth in the preceding sentence):
(a) the Eligible Lender Trustee shall not be liable for any error of
judgment made by a responsible officer of the Eligible Lender Trustee;
(b) the Eligible Lender Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in accordance with the
direction or instructions of the Administrator or any Certificateholder;
22
<PAGE>
(c) no provision of this Agreement or any other Basic Document shall
require the Eligible Lender Trustee to expend or risk funds or otherwise
incur any financial liability in the performance of any of its rights or
powers hereunder or under any other Basic Document, if the Eligible Lender
Trustee shall have reasonable grounds for believing that repayment of such
funds or adequate indemnity against such risk or liability is not
reasonably assured or provided to it;
(d) under no circumstances shall the Eligible Lender Trustee be
liable for indebtedness evidenced by or arising under any of the Basic
Documents, including the principal of and interest on the Notes;
(e) the Eligible Lender Trustee shall not be responsible for or in
respect of the validity or sufficiency of this Agreement or for the due
execution hereof by the Depositor or for the form, character, genuineness,
sufficiency, value or validity of any of the Trust Estate or for or in
respect of the validity or sufficiency of the Basic Documents, other than
the certificate of authentication on the Trust Certificates, and the
Eligible Lender Trustee shall in no event assume or incur any liability,
duty, or obligation to any Noteholder or to any Certificateholder, other
than as expressly provided for herein and in the other Basic Documents;
(f) the Eligible Lender Trustee shall not be liable for the action or
inaction, default or misconduct of the Administrator, the Seller, the
Depositor, the Indenture Trustee or the Master Servicer under any of the
other Basic Documents or otherwise and the Eligible Lender Trustee shall
have no obligation or liability to perform the obligations of the Trust
under this Agreement or the other Basic Documents that are required to be
performed by the Administrator under the Administration Agreement, the
Indenture Trustee under the Indenture or the Master Servicer under the
Master Servicing Agreement; and
(g) the Eligible Lender Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Agreement, or to
institute, conduct or defend any litigation under this Agreement or
otherwise or in relation to this Agreement or any other Basic Document, at
the request, order or direction of any of the Certificateholders, unless
such Certificateholders have offered to the Eligible Lender Trustee
security or indemnity satisfactory to it against the costs, expenses and
liabilities that may be incurred by the Eligible Lender Trustee therein or
23
<PAGE>
thereby. The right of the Eligible Lender Trustee to perform any
discretionary act enumerated in this Agreement or in any other Basic
Document shall not be construed as a duty, and the Eligible Lender Trustee
shall not be answerable for other than its negligence, bad faith or willful
misconduct in the performance of any such act.
SECTION 7.02. Furnishing of Documents. The Eligible Lender Trustee
-----------------------
shall furnish to the Certificateholders promptly upon receipt of a written
request therefor, duplicates or copies of all reports, notices, requests,
demands, certificates, financial statements and any other instruments furnished
to the Eligible Lender Trustee under the Basic Documents.
SECTION 7.03. Representations and Warranties. The Eligible Lender
------------------------------
Trustee hereby represents and warrants to the Depositor, for the benefit of the
Certificateholders, that:
(a) It is a national banking association duly organized and validly
existing in good standing under the laws of the United States. It has all
requisite corporate power and authority to execute, deliver and perform its
obligations under this Agreement.
(b) It has taken all corporate action necessary to authorize the
execution and delivery by it of this Agreement, and this Agreement will be
executed and delivered by one of its officers who is duly authorized to
execute and deliver this Agreement on its behalf.
(c) Neither the execution nor the delivery by it of this Agreement,
nor the consummation by it of the transactions contemplated hereby nor
compliance by it with any of the terms or provisions hereof will contravene
any Federal or state law, governmental rule or regulation governing the
banking or trust powers of the Eligible Lender Trustee or any judgment or
order binding on it, or constitute any default under its charter documents
or by-laws or any indenture, mortgage, contract, agreement or instrument to
which it is a party or by which any of its properties may be bound.
(d) It is an "eligible lender" as such term is defined in Section
435(d) of the Higher Education Act, for purposes of holding legal title to
the Financed Student Loans as contemplated by this Agreement and the other
Basic Documents, has obtained a lender identification number with respect
to the Trust from the Department and has in effect a Guarantee Agreement
with each of the Guarantors with respect to the Financed Student Loans.
24
<PAGE>
SECTION 7.04. Reliance; Advice of Counsel. (a) The Eligible Lender
---------------------------
Trustee shall incur no liability to anyone in acting upon any signature,
instrument, direction, notice, resolution, request, consent, order, certificate,
report, opinion, bond, or other document or paper believed by it to be genuine
and believed by it to be signed by the proper party or parties. The Eligible
Lender Trustee may accept a certified copy of a resolution of the board of
directors or other governing body of any corporate party as conclusive evidence
that such resolution has been duly adopted by such body and that the same is in
full force and effect. As to any fact or matter the method of the determination
of which is not specifically prescribed herein, the Eligible Lender Trustee may
for all purposes hereof rely on a certificate, signed by the president or any
vice president or by the treasurer or other authorized officers of the relevant
party, as to such fact or matter and such certificate shall constitute full
protection to the Eligible Lender Trustee for any action taken or omitted to be
taken by it in good faith in reliance thereon.
(b) In the exercise or administration of the trusts hereunder and in
the performance of its duties and obligations under this Agreement or the other
Basic Documents, the Eligible Lender Trustee (i) may act directly or through its
agents or attorneys pursuant to agreements entered into with any of them, and
the Eligible Lender Trustee shall not be liable for the conduct or misconduct of
such agents or attorneys if such agents or attorneys shall have been selected by
the Eligible Lender Trustee with reasonable care, and (ii) may consult with
counsel, accountants and other skilled persons to be selected with reasonable
care and employed by it. The Eligible Lender Trustee shall not be liable for
anything done, suffered or omitted in good faith by it in accordance with the
written opinion or advice of any such counsel, accountants or other such persons
and not contrary to this Agreement or any other Basic Document.
SECTION 7.05. Not Acting in Individual Capacity. Except as provided
---------------------------------
in this Article VII, in accepting the trusts hereby created, The First National
Bank of Chicago acts solely as Eligible Lender Trustee hereunder and not in its
individual capacity and all Persons having any claim against the Eligible Lender
Trustee by reason of the transactions contemplated by this Agreement or any
other Basic Document shall look only to the Trust Estate for payment or
satisfaction thereof.
SECTION 7.06. Eligible Lender Trustee Not Liable for Trust
--------------------------------------------
Certificates or Student Loans. The recitals contained herein and in the Trust
- -----------------------------
Certificates (other than the signature and countersignature of the Eligible
Lender Trustee on the Trust Certificates and its representations and warranties
in Section
25
<PAGE>
7.03) shall be taken as the statements of the Depositor, and the Eligible Lender
Trustee assumes no responsibility for the correctness thereof. The Eligible
Lender Trustee makes no representations as to the validity or sufficiency of
this Agreement, the Trust Certificates or any other Basic Document (other than
the signature and countersignature of the Eligible Lender Trustee on the Trust
Certificates) or the Notes, or of any Financed Student Loan or related
documents. The Eligible Lender Trustee shall at no time have any responsibility
(or liability except for willfully, negligently or in bad faith terminating or
allowing to be terminated any of the Guarantee Agreements, in a case where the
Eligible Lender Trustee knows of any facts or circumstances which will or could
reasonably be expected to result in any such termination) for or with respect to
the legality, validity, enforceability and eligibility for Guarantee Payments,
Interest Subsidy Payments or Special Allowance Payments, as applicable, of any
Financed Student Loan, or for or with respect to the sufficiency of the Trust
Estate or its ability to generate the payments to be distributed to
Certificateholders under this Agreement or the Noteholders under the Indenture,
including: the existence and contents of any computer or other record of any
Financed Student Loan; the validity of the assignment of any Financed Student
Loan to the Trust; the completeness of any Financed Student Loan; the
performance or enforcement (except as expressly set forth in any Basic Document)
of any Financed Student Loan; the compliance by the Depositor or the Master
Servicer with any warranty or representation made under any Basic Document or in
any related document or the accuracy of any such warranty or representation or
any action or inaction of the Administrator, the Indenture Trustee or the Master
Servicer or any Subservicer taken in the name of the Eligible Lender Trustee.
SECTION 7.07. Eligible Lender Trustee May Own Trust Certificates and
------------------------------------------------------
Notes. The Eligible Lender Trustee in its individual or any other capacity may
- -----
become the owner or pledgee of Trust Certificates or Notes and may deal with the
Depositor, the Administrator, the Indenture Trustee, the Master Servicer and any
Subservicer in banking transactions with the same rights as it would have if it
were not Eligible Lender Trustee.
26
<PAGE>
ARTICLE VIII
Compensation of Eligible Lender Trustee
---------------------------------------
SECTION 8.01. Eligible Lender Trustee's Fees and Expenses. The
-------------------------------------------
Eligible Lender Trustee shall receive as compensation for its services hereunder
such fees as have been separately agreed upon before the date hereof between the
Depositor and the Eligible Lender Trustee, and the Eligible Lender Trustee shall
be entitled to be reimbursed by the Depositor for its other reasonable expenses
hereunder, including the reasonable compensation, expenses and disbursements of
such agents, representatives, experts and counsel as the Eligible Lender Trustee
may employ in connection with the exercise and performance of its rights and
duties hereunder. The Eligible Lender Trustee shall have no recourse to the
Issuer for its fees and expenses hereunder.
SECTION 8.02. Payments to the Eligible Lender Trustee. Any amounts
---------------------------------------
paid to the Eligible Lender Trustee pursuant to Section 8.01 hereof or pursuant
to Section 4.03 of the Loan Sale Agreement or pursuant to Section 24 of the
Administration Agreement shall be deemed not to be a part of the Trust Estate
immediately after such payment.
ARTICLE IX
Termination of Trust Agreement
------------------------------
SECTION 9.01. Termination of Trust Agreement. (a) This Agreement
------------------------------
(other than Article VIII) shall terminate and be of no further force or effect
and the Trust shall dissolve upon the earlier of (i) the final distribution by
the Eligible Lender Trustee of all moneys or other property or proceeds of the
Trust Estate in accordance with the terms of the Indenture, the Master Servicing
Agreement and Article V, (ii) the expiration of 21 years from the death of the
last survivor of the descendants of Joseph P. Kennedy, the late Ambassador of
the United States to the Court of St. James's, living on the date hereof, and
(iii) the time provided in Section 9.02. The bankruptcy, liquidation,
dissolution, death or incapacity of any Certificateholder, other than the
Company as described in Section 9.02, shall not (x) operate to terminate this
Agreement or the Trust, nor (y) entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
proceeding in any court for a partition or winding up of all or any part of the
Trust or Trust Estate nor (z) otherwise affect the rights, obligations and
liabilities of the parties hereto.
27
<PAGE>
(b) Except as provided in Section 9.01(a), neither the Depositor, the
Company nor any Certificateholder shall be entitled to revoke or terminate the
Trust.
(c) Notice of any termination of the Trust, specifying the
Distribution Date upon which the Certificateholders shall surrender their Trust
Certificates to the Certificate Paying Agent for payment of the final
distribution and cancellation, shall be given promptly by the Eligible Lender
Trustee by letter to Certificateholders mailed within five Business Days of
receipt of notice of such termination from the Administrator given pursuant to
Section 2(b)(vii) of the Administration Agreement, stating (i) the Distribution
Date upon which final payment of the Trust Certificates shall be made upon
presentation and surrender of the Trust Certificates at the office of the
Certificate Paying Agent therein designated, (ii) the amount of any such final
payment and (iii) that the Record Date otherwise applicable to such Distribution
Date is not applicable, payments being made only upon presentation and surrender
of the Trust Certificates at the office of the Certificate Paying Agent therein
specified. The Eligible Lender Trustee shall give such notice to the
Certificate Registrar (if other than the Eligible Lender Trustee) and the
Certificate Paying Agent at the time such notice is given to Certificateholders.
Upon presentation and surrender of the Trust Certificates, the Certificate
Paying Agent shall cause to be distributed to Certificateholders amounts
distributable on such Distribution Date pursuant to Section 5.01.
In the event that all the Certificateholders shall not surrender their
Trust Certificates for cancellation within six months after the date specified
in the above-mentioned written notice, the Eligible Lender Trustee shall give a
second written notice to the remaining Certificateholders to surrender their
Trust Certificates for cancellation and receive the final distribution with
respect thereto. If within one year after the second notice all the Trust
Certificates shall not have been surrendered for cancellation, the Eligible
Lender Trustee may take appropriate steps, or may appoint an agent to take
appropriate steps, to contact the remaining Certificateholders concerning
surrender of their Trust Certificates, and the cost thereof shall be paid out of
the funds and other assets that shall remain subject to this Agreement. Subject
to applicable escheat laws, any funds remaining in the Trust after exhaustion of
such remedies and no later than five years after the first such notice shall be
distributed by the Eligible Lender Trustee to the Depositor. Thereafter,
Certificateholders shall look solely to the Depositor as general unsecured
creditors for payment.
28
<PAGE>
(d) Upon the winding up of the Trust and after satisfaction of all
obligations of the Trust, the Eligible Lender Trustee shall cause the
Certificate of Trust to be canceled by filing a certificate of cancellation with
the Secretary of State of the State of Delaware in accordance with the
provisions of Section 3810 of the Business Trust Statute and the Trust shall
terminate.
SECTION 9.02. Dissolution upon Bankruptcy of the Company. In the
------------------------------------------
event that an Insolvency Event shall occur with respect to the Company, this
Agreement shall be terminated in accordance with Section 9.01 and the Trust
shall dissolve 90 days after the date of such Insolvency Event, unless, before
the end of such 90-day period, the Eligible Lender Trustee shall have received
written instructions from (a) Certificateholders (other than the Company)
representing more than 50% of the Certificate Balance (not including the
principal amount of Trust Certificates held by the Company), (b) Noteholders of
Class A-1 Notes representing more than 50% of the Outstanding Amount of the
Class A-1 Notes and (c) Noteholders of Class A-2 Notes representing more than
50% of the Outstanding Amount of the Class A-2 Notes, to the effect that each
such party disapproves of the liquidation of the Financed Student Loans and
termination of the Trust, in which event the Trust shall continue in accordance
with the Basic Documents. Promptly after the occurrence of any Insolvency Event
with respect to the Company, (i) the Company shall give the Indenture Trustee,
the Eligible Lender Trustee and the Rating Agencies written notice of such
Insolvency Event, (ii) the Eligible Lender Trustee shall, upon the receipt of
such written notice from the Company, give prompt written notice to the
Certificateholders and the Indenture Trustee, of the occurrence of such event
and (iii) the Indenture Trustee shall, upon receipt of written notice of such
Insolvency Event from the Eligible Lender Trustee or the Company, give prompt
written notice to the Noteholders of the occurrence of such event; provided,
--------
however, that any failure to give a notice required by this sentence shall not
- -------
prevent or delay, in any manner, a termination of the Trust pursuant to the
first sentence of this Section 9.02. Upon a termination pursuant to this
Section, the Eligible Lender Trustee shall direct the Indenture Trustee promptly
to sell the assets of the Trust (other than the Trust Accounts) in a
commercially reasonable manner and on commercially reasonable terms. The
proceeds of such a sale of the assets of the Trust shall be treated as
collections under the Master Servicing Agreement and the Administration
Agreement.
29
<PAGE>
ARTICLE X
Successor Eligible Lender Trustees and
--------------------------------------
Additional Eligible Lender Trustees
-----------------------------------
SECTION 10.01. Eligibility Requirements for Eligible Lender Trustee.
----------------------------------------------------
The Eligible Lender Trustee shall at all times be a corporation or association
(i) qualifying as an "eligible lender" as such term is defined in Section 435(d)
of the Higher Education Act for purposes of holding legal title to the Financed
Student Loans, with a valid lender identification number with respect to the
Trust from the Department; (ii) being authorized to exercise corporate trust
powers and hold legal title to the Financed Student Loans; (iii) having in
effect Guarantee Agreements with each of the Guarantors; (iv) having a combined
capital and surplus of at least $50,000,000 and being subject to supervision or
examination by Federal or state authorities; and (v) having (or having a parent
which has) a rating of at least Baa3 by Moody's and BBB- by Fitch, if rated by
Fitch. If the Eligible Lender Trustee shall publish reports of condition at
least annually, pursuant to law or to the requirements of the aforesaid
supervising or examining authority, then for the purpose of this Section, the
combined capital and surplus of the Eligible Lender Trustee shall be deemed to
be its combined capital and surplus as set forth in its most recent report of
condition so published. In case at any time the Eligible Lender Trustee shall
cease to be eligible in accordance with the provisions of this Section, the
Eligible Lender Trustee shall resign immediately in the manner and with the
effect specified in Section 10.02. In addition, at all times the Trustee or a
co-trustee shall be a Person that satisfies the requirements of Section 3807(a)
of the Business Trust Statute (the "Delaware Trustee").
SECTION 10.02. Resignation or Removal of Eligible Lender Trustee.
-------------------------------------------------
The Eligible Lender Trustee may at any time resign and be discharged from the
trusts hereby created by giving written notice thereof to the Administrator.
Upon receiving such notice of resignation, the Administrator shall promptly
appoint a successor Eligible Lender Trustee meeting the eligibility requirements
of Section 10.01 by written instrument, in duplicate, one copy of which
instrument shall be delivered to the resigning Eligible Lender Trustee and one
copy to the successor Eligible Lender Trustee. If no successor Eligible Lender
Trustee shall have been so appointed and have accepted appointment within 30
days after the giving of such notice of resignation, the resigning Eligible
Lender Trustee may petition any court of competent jurisdiction for the
appointment of a successor Eligible Lender Trustee; provided, however, that such
-------- -------
right to appoint or to petition for the appointment of any such successor
30
<PAGE>
shall in no event relieve the resigning Eligible Lender Trustee from any
obligations otherwise imposed on it under the Basic Documents until such
successor has in fact assumed such appointment.
If at any time the Eligible Lender Trustee shall cease to be eligible
in accordance with the provisions of Section 10.01 and shall fail to resign
after written request therefor by the Administrator, or if at any time the
Eligible Lender Trustee shall be legally unable to act, or an Insolvency Event
with respect to the Eligible Lender Trustee shall have occurred and be
continuing, then the Administrator may remove the Eligible Lender Trustee. If
the Administrator shall remove the Eligible Lender Trustee under the authority
of the immediately preceding sentence, the Administrator shall promptly appoint
a successor Eligible Lender Trustee by written instrument, in duplicate, one
copy of which instrument shall be delivered to the outgoing Eligible Lender
Trustee so removed and one copy to the successor Eligible Lender Trustee and
payment of all fees owed to the outgoing Eligible Lender Trustee.
Any resignation or removal of the Eligible Lender Trustee and
appointment of a successor Eligible Lender Trustee pursuant to any of the
provisions of this Section shall not become effective until acceptance of
appointment by the successor Eligible Lender Trustee pursuant to Section 10.03
and payment of all fees and expenses owed to the outgoing Eligible Lender
Trustee. The Administrator shall provide notice of such resignation or removal
of the Eligible Lender Trustee and to each of the Rating Agencies.
SECTION 10.03. Successor Eligible Lender Trustee. Any successor
---------------------------------
Eligible Lender Trustee appointed pursuant to Section 10.02 shall execute,
acknowledge and deliver to the Administrator and to its predecessor Eligible
Lender Trustee an instrument accepting such appointment under this Agreement,
and thereupon the resignation or removal of the predecessor Eligible Lender
Trustee shall become effective and such successor Eligible Lender Trustee,
without any further act, deed or conveyance, shall become fully vested with all
the rights, powers, duties and obligations of its predecessor under this
Agreement, with like effect as if originally named as Eligible Lender Trustee.
The predecessor Eligible Lender Trustee shall upon payment of its fees and
expenses deliver to the successor Eligible Lender Trustee all documents,
statements, moneys and properties held by it under this Agreement and shall
assign, if permissible, to the successor Eligible Lender Trustee the lender
identification number obtained from the Department on behalf of the Trust; and
the Administrator and the predecessor Eligible Lender Trustee shall execute and
deliver such instruments and do such other
31
<PAGE>
things as may reasonably be required for fully and certainly vesting and
confirming in the successor Eligible Lender Trustee all such rights, powers,
duties and obligations.
No successor Eligible Lender Trustee shall accept appointment as
provided in this Section unless at the time of such acceptance such successor
Eligible Lender Trustee shall be eligible pursuant to Section 10.01.
Upon acceptance of appointment by a successor Eligible Lender Trustee
pursuant to this Section, the Administrator shall mail notice of the successor
of such Eligible Lender Trustee to all Certificateholders, the Indenture
Trustee, the Noteholders and the Rating Agencies. If the Administrator shall
fail to mail such notice within 10 days after acceptance of appointment by the
successor Eligible Lender Trustee, the successor Eligible Lender Trustee shall
cause such notice to be mailed at the expense of the Administrator.
SECTION 10.04. Merger or Consolidation of Eligible Lender Trustee.
--------------------------------------------------
Any corporation into which the Eligible Lender Trustee may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Eligible Lender
Trustee shall be a party, or any corporation succeeding to all or substantially
all the corporate trust business of the Eligible Lender Trustee, shall, without
the execution or filing of any instrument or any further act on the part of any
of the parties hereto, anything herein to the contrary notwithstanding, be the
successor of the Eligible Lender Trustee hereunder; provided that such
--------
corporation shall be eligible pursuant to Section 10.01; provided further that
----------------
the Eligible Lender Trustee shall mail notice of such merger or consolidation to
the Rating Agencies not less than 10 Business Days prior to the closing date of
such merger or consolidation.
SECTION 10.05. Appointment of Co-Eligible Lender Trustee or Separate
-----------------------------------------------------
Eligible Lender Trustee. Notwithstanding any other provisions of this
- -----------------------
Agreement, at any time, for the purpose of meeting any legal requirements of any
jurisdiction in which any part of the Trust may at the time be located, the
Administrator and the Eligible Lender Trustee acting jointly shall have the
power and shall execute and deliver all instruments to appoint one or more
Persons approved by the Eligible Lender Trustee, which, except in the case of
any Delaware Trustee, shall meet the eligibility requirements of clauses (i)
through (iii) of Section 10.01, to act as co-trustee, jointly with the Eligible
Lender Trustee, or separate trustee or separate trustees, of all or any part of
the Trust Estate, and to vest in such Person, in such capacity, such title to
the Trust
32
<PAGE>
Estate, or any part thereof, and, subject to the other provisions of this
Section, such powers, duties, obligations, rights and trusts as the
Administrator and the Eligible Lender Trustee may consider necessary or
desirable. If the Administrator shall not have joined in such appointment
within 15 days after the receipt by it of a request so to do, the Eligible
Lender Trustee alone shall have the power to make such appointment. Pursuant to
the Co-Trustee Agreement, dated as of [ ], 1996, between The First
National Bank of Chicago and ____________, the Eligible Lender Trustee shall
appoint _____________ as a co-trustee hereunder for the purpose of his acting as
Delaware Trustee and such agreement is hereby incorporated herein by reference.
The Delaware Trustee is appointed to serve as the trustee of the Trust in the
State of Delaware for the sole purpose of satisfying the requirement of Section
3807 of the Business Trust Statute that the Trust have at least one trustee with
a principal place of business in Delaware. It is understood and agreed by the
parties hereto and the Certificateholders that the Delaware Trustee shall have
none of the duties or liabilities of the Eligible Lender Trustee. The duties of
the Delaware Trustee shall be limited to (a) accepting legal process served on
the Trust in the State of Delaware and (b) the execution of any certificates
required to be filed with the Delaware Secretary of State which the Delaware
Trustee is required to execute under Section 3811 of the Business Trust Statute.
To the extent that, at law or in equity, the Delaware Trustee has duties
(including fiduciary duties) and liabilities relating thereto to the Trust or
the Certificateholders, it is hereby understood and agreed by the other parties
hereto and the Certificateholders that such duties and liabilities are replaced
by the duties and liabilities of the Delaware Trustee expressly set forth in
this Agreement. If the Delaware Trustee shall die, become incapable of acting,
resign or be removed, unless the Eligible Lender Trustee is qualified to act as
Delaware Trustee, a successor co-trustee shall promptly be appointed in the
manner specified in this Section 10.05 to act as Delaware Trustee. No co-
trustee or separate trustee under this Agreement shall be required to meet the
terms of eligibility as a successor trustee pursuant to clauses (iv) and (v) of
Section 10.01 and no notice of the appointment of any co-trustee or separate
trustee shall be required pursuant to Section 10.03.
Each separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties, and obligations conferred or imposed
upon the Eligible Lender Trustee shall be conferred upon and exercised or
performed by the Eligible Lender Trustee and such separate trustee or co-
trustee
33
<PAGE>
jointly (it being understood that such separate trustee or co-trustee is
not authorized to act separately without the Eligible Lender Trustee
joining in such act), except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed, the
Eligible Lender Trustee shall be incompetent or unqualified to perform such
act or acts, in which event such rights, powers, duties, and obligations
(including the holding of title to the Trust or any portion thereof in any
such jurisdiction) shall be exercised and performed singly by such separate
trustee or co-trustee, solely at the direction of the Eligible Lender
Trustee;
(ii) no trustee under this Agreement shall be personally liable by
reason of any act or omission of any other trustee under this Agreement;
and
(iii) the Administrator and the Eligible Lender Trustee acting jointly
may at any time accept the resignation of or remove any separate trustee or
co-trustee.
Any notice, request or other writing given to the Eligible Lender
Trustee shall be deemed to have been given to each of the then separate trustees
and co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article. Each separate trustee and co-trustee, upon its
acceptance of the trusts conferred, shall be vested with the estates or property
specified in its instrument of appointment, either jointly with the Eligible
Lender Trustee or separately, as may be provided therein, subject to all the
provisions of this Agreement, specifically including every provision of this
Agreement relating to the conduct of, affecting the liability of, or affording
protection to, the Eligible Lender Trustee. Each such instrument shall be filed
with the Eligible Lender Trustee and a copy thereof given to the Administrator.
Any separate trustee or co-trustee may at any time appoint the
Eligible Lender Trustee as its agent or attorney-in-fact with full power and
authority, to the extent not prohibited by law, to do any lawful act under or in
respect of this Agreement on its behalf and in its name. If any separate
trustee or co-trustee shall die, become incapable of acting, resign or be
removed, all its estates, properties, rights, remedies and trusts shall vest in
and be exercised by the Eligible Lender Trustee, to the extent permitted by law,
without the appointment of a new or successor trustee, except as otherwise
provided in this Section 10.05 in regard to the Delaware Trustee.
34
<PAGE>
ARTICLE XI
Miscellaneous
-------------
SECTION 11.01. Supplements and Amendments. This Agreement may be
--------------------------
amended by the Depositor, the Company and the Eligible Lender Trustee, with
prior written notice to the Rating Agencies, without the consent of any of the
Noteholders or the Certificateholders, to cure any ambiguity, to correct or
supplement any provisions in this Agreement or for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions in
this Agreement or of modifying in any manner the rights of the Noteholders or
the Certificateholders or in connection with a merger or consolidation of the
Depositor in a transaction permitted under the Basic Documents; provided,
--------
however, that such action shall not, as evidenced by an Opinion of Counsel,
- -------
adversely affect in any material respect the interests of any Noteholder or
Certificateholder.
This Agreement may also be amended from time to time by the Depositor,
the Company and the Eligible Lender Trustee, with prior written notice to the
Rating Agencies, (i) with the consent of the Noteholders of Notes evidencing not
less than a majority of the Outstanding Amount of the Notes and (ii) the
Certificateholders of Certificates evidencing not less than a majority of the
Certificate Balance, for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Agreement or of
modifying in any manner the rights of the Noteholders or the Certificateholders;
provided, however, that no such amendment shall (a) increase or reduce in any
- -------- -------
manner the amount of, or accelerate or delay the timing of, collections of
payments on Financed Student Loans or distributions that shall be required to be
made for the benefit of the Noteholders or the Certificateholders or (b) reduce
the aforesaid percentage of the Outstanding Amount of the Notes and the
Certificate Balance required to consent to any such amendment, without the
consent of all the outstanding Noteholders and Certificateholders.
The Eligible Lender Trustee shall furnish 10 Business Days' prior
written notification of the substance of any such amendment or consent to each
Certificateholder, the Indenture Trustee and each of the Rating Agencies.
It shall not be necessary for the consent of Certificateholders, the
Noteholders or the Indenture Trustee pursuant to this Section to approve the
particular form of any proposed amendment or consent, but it shall be sufficient
if such consent shall approve the substance thereof. The manner of
35
<PAGE>
obtaining such consents (and any other consents of Certificateholders provided
for in this Agreement or in any other Basic Document) and of evidencing the
authorization of the execution thereof by Certificateholders shall be subject to
such reasonable requirements as the Eligible Lender Trustee may prescribe.
Promptly after the execution of any amendment to the Certificate of
Trust, the Eligible Lender Trustee shall cause the filing of such amendment with
the Secretary of State of the State of Delaware. The Eligible Lender Trustee
shall furnish the Rating Agencies with 10 Business Days' prior written notice of
any amendment to the Certificate of Trust.
Prior to the execution of any amendment to this Agreement, the
Eligible Lender Trustee shall be entitled to receive and rely upon an Opinion of
Counsel stating that the execution of such amendment is authorized or permitted
by this Agreement. The Eligible Lender Trustee may, but shall not be obligated
to, enter into any such amendment which affects the Eligible Lender Trustee's
own rights, duties or immunities under this Agreement or otherwise.
SECTION 11.02. No Legal Title to Trust Estate in Certificateholders.
----------------------------------------------------
The Certificateholders shall not have legal title to any part of the Trust
Estate. The Certificateholders shall be entitled to receive distributions with
respect to their undivided beneficial ownership interest therein only in
accordance with Articles V and IX. No transfer, by operation of law or
otherwise, of any right, title, or interest of the Certificateholders to and in
their beneficial ownership interest in the Trust Estate shall operate to
terminate this Agreement or the trusts hereunder or entitle any transferee to an
accounting or to the transfer to it of legal title to any part of the Trust
Estate.
SECTION 11.03. Limitations on Rights of Others. Except for Section
-------------------------------
2.07, the provisions of this Agreement are solely for the benefit of the
Eligible Lender Trustee, the Depositor, the Company, the Certificateholders, the
Administrator and, to the extent expressly provided herein, the Indenture
Trustee and the Noteholders, and nothing in this Agreement (other than Section
2.07), whether express or implied, shall be construed to give to any other
Person any legal or equitable right, remedy or claim in the Trust Estate or
under or in respect of this Agreement or any covenants, conditions or provisions
contained herein.
SECTION 11.04. Notices. (a) Unless otherwise expressly specified or
-------
permitted by the terms hereof, all notices
36
<PAGE>
shall be in writing (or in the form of facsimile notice, followed by written
notice) and shall be deemed given upon receipt by the intended recipient of
three Business Days after mailing if mailed by certified mail, postage prepaid
(except that notice to the Eligible Lender Trustee shall be deemed given only
upon actual receipt by the Eligible Lender Trustee), if to the Eligible Lender
Trustee, addressed to its Corporate Trust Office; if to the Depositor, addressed
to Signet Bank, 7 North 8th Street, Richmond, Virginia 23219, Attention:
Treasurer, telephone: (804) 771-7060; facsimile: (804) 771-7936; if to the
Company, addressed to Signet Student Loan Corporation, 7 North 8th Street,
Richmond, Virginia 23219, Attention: President, telephone: (804) 771-7814,
with a copy to Signet Bank, 7 North 8th Street, Richmond, Virginia 23219 or, as
to each party, at such other address as shall be designated by such party in a
written notice to each other party.
(b) Any notice required or permitted to be given to a
Certificateholder shall be given by first-class mail, postage prepaid, at the
address of such Certificateholder as shown in the Certificate Register. Any
notice so mailed within the time prescribed in this Agreement shall be
conclusively presumed to have been duly given, whether or not the
Certificateholder receives such notice.
SECTION 11.05. Severability. Any provision of this Agreement that is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 11.06. Separate Counterparts. This Agreement may be executed
---------------------
by the parties hereto in separate counterparts, each of which when so executed
and delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 11.07. Successors and Assigns. All covenants and agreements
----------------------
contained herein shall be binding upon, and inure to the benefit of, the
Depositor, the Company, the Eligible Lender Trustee and their respective
successors and each Certificateholder and its successors and permitted assigns,
all as herein provided. Any request, notice, direction, consent, waiver or
other instrument or action by a Certificateholder shall bind the successors and
assigns of such Certificateholder.
SECTION 11.08. No Petition. (a) The Depositor will not at any time
-----------
institute against the Trust or the Company any
37
<PAGE>
bankruptcy proceedings under any United States Federal or state bankruptcy or
similar law in connection with any obligations relating to the Trust
Certificates, the Notes, this Agreement or any of the other Basic Documents.
(b) The Eligible Lender Trustee, by entering into this Agreement,
each Certificateholder, by accepting a Trust Certificate, and the Indenture
Trustee and each Noteholder by accepting the benefits of this Agreement, hereby
covenant and agree that they will not at any time institute against the
Depositor, the Company or the Trust, or join in any institution against the
Depositor, the Company or the Trust of, any bankruptcy, reorganization,
arrangement, insolvency, receivership or liquidation proceedings, or other
proceedings under any United States Federal or state bankruptcy or similar law
in connection with any obligations relating to the Trust Certificates, the
Notes, this Agreement or any of the other Basic Documents.
SECTION 11.09. No Recourse. Each Certificateholder by accepting a
-----------
Trust Certificate acknowledges that such Certificateholder's Trust Certificates
represent beneficial interests in the Trust only and do not represent interests
in or obligations of the Seller, the Master Servicer, any Subservicer, the
Depositor, the Company, the Administrator, the Eligible Lender Trustee, the
Indenture Trustee or any Affiliate thereof or any officer, director or employee
of any thereof and no recourse may be had against such parties or their assets,
except as may be expressly set forth or contemplated in this Agreement, the
Trust Certificates or the other Basic Documents.
SECTION 11.10. Headings. The headings of the various Articles and
--------
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
SECTION 11.11. Governing Law. This Agreement shall be construed in
-------------
accordance with the laws of the State of Delaware, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
38
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed by their respective officers hereunto duly
authorized, as of the day and year first above written.
THE FIRST NATIONAL BANK OF CHICAGO, as Eligible
Lender Trustee,
by
____________________________
Name:
Title:
SIGNET BANK,
Depositor,
by
____________________________
Name:
Title:
SIGNET STUDENT LOAN CORPORATION
by
____________________________
Name:
Title:
39
<PAGE>
EXHIBIT A
TO THE TRUST AGREEMENT
[FORM OF TRUST CERTIFICATE]
SEE REVERSE FOR CERTAIN DEFINITIONS
Unless this Trust Certificate is presented by an authorized representative
of The Depository Trust Company, a New York Corporation ("DTC"), to the Issuer
(as defined below) or its agent for registration of transfer, exchange or
payment, and any certificate issued is registered in the name of Cede & Co. or
in such other name as is requested by an authorized representative of DTC (and
any payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
THIS TRUST CERTIFICATE MAY NOT BE ACQUIRED BY OR FOR THE ACCOUNT OF A
BENEFIT PLAN (AS DEFINED BELOW). THIS TRUST CERTIFICATE IS NOT GUARANTEED OR
INSURED BY ANY GOVERNMENTAL AGENCY.
[THIS TRUST CERTIFICATE IS NONTRANSFERABLE EXCEPT IN ACCORDANCE WITH
SECTION 3.10 OF THE TRUST AGREEMENT.]/1/
NUMBER
R- $_________________________
CUSIP NO.
SIGNET STUDENT LOAN TRUST 1996-A
FLOATING RATE ASSET BACKED CERTIFICATE
evidencing a fractional undivided interest in the Trust, as defined below,
the property of which includes a pool of student loans sold to the Trust by
Signet Bank.
(This Trust Certificate does not represent an interest in or obligation of
Signet Bank, the Company (as defined below), the Master Servicer, the
Eligible Lender Trustee (as defined
_______________________
/1/ To be included only on the Trust Certificates representing the 1% minimum
required to be retained by the Company and any Trust Certificates issued in
exchange therefor.
<PAGE>
below) or any of their respective affiliates, except to the extent
described below.)
THIS CERTIFIES THAT is the registered owner of dollars
non-assessable, fully-paid, fractional undivided interest in the Signet Student
Loan Trust 1996-A (the "Trust"), a trust formed under the laws of the State of
Delaware by Signet Bank, a Virginia banking corporation (the "Depositor"). The
Trust was created pursuant to a Trust Agreement dated as of [ ], 1996 (the
"Trust Agreement"), among the Depositor, Signet Student Loan Corporation, a
Virginia corporation (the "Company"), and The First National Bank of Chicago, a
national banking association, not in its individual capacity but solely as
eligible lender trustee on behalf of the Trust (the "Eligible Lender Trustee"),
a summary of certain of the pertinent provisions of which is set forth below.
To the extent not otherwise defined herein, the capitalized terms used herein
have the meanings assigned to them in Appendix A to the Administration Agreement
(the "Administration Agreement") dated as of [ ], 1996, among the Trust,
Signet Bank, as Administrator and The Bank of New York, as Indenture Trustee;
such Appendix A also contains rules as to usage that shall be applicable herein.
This Certificate is one of the duly authorized Certificates designated
as "Floating Rate Asset Backed Certificates" (herein called the "Trust
Certificates"). Issued under the Indenture dated as of [ ], 1996, between
the Trust and The Bank of New York, a New York banking corporation, as Indenture
Trustee, are two classes of Notes designated as "Floating Rate Class A-1 Asset
Backed Notes" and "Floating Rate Class A-2 Asset Backed Notes" (collectively,
the "Notes"). This Trust Certificate is issued under and is subject to the
terms, provisions and conditions of the Trust Agreement, to which Trust
Agreement the holder of this Trust Certificate by virtue of the acceptance
hereof assents and by which such holder is bound. The property of the Trust
includes a pool of student loans (the "Financed Student Loans"), all moneys
received thereunder on or after the Cutoff Date, certain bank accounts and the
proceeds thereof and certain other rights under the Trust Agreement, the Loan
Sale Agreement and the Master Servicing Agreement and all proceeds of the
foregoing. The rights of the holders of the Trust Certificates to the assets of
the Trust are subordinated to the rights of the holders of the Notes, as set
forth in the Administration Agreement.
Under the Trust Agreement, there will be distributed on the twenty-
fifth day of each month, or if such twenty-fifth day is not a Business Day, the
next succeeding Business Day (each an "Interest Payment Date" and each Interest
Payment Date in each
A-2
<PAGE>
[January, April, July and October] also a "Distribution Date"), commencing on [
], 1996 (the first Distribution Date being [ ], 1997), to the person in
whose name this Trust Certificate is registered at the close of business on the
twenty-fourth day of the calendar month in which such Interest Payment Date or
Distribution Date occurs (the "Record Date") such Certificateholder's fractional
undivided interest in the amount to be distributed to Certificateholders on such
Interest Payment Date or Distribution Date pursuant to the Administration
Agreement.
Each holder of this Trust Certificate acknowledges and agrees that its
rights to receive distributions in respect of this Trust Certificate from
Monthly Available Funds, Available Funds and amounts on deposit in the Reserve
Account are subordinated to the rights of the Noteholders as described in the
Administration Agreement and the Indenture.
It is the intent of the Seller, the Master Servicer, the Depositor,
the Company, the Administrator, the Certificateholders and the Certificate
Owners that, for purposes of Federal income, state and local income and
franchise and any other income taxes, the Trust will be treated as a partnership
and the Certificateholders (including each of the Depositor and the Company in
its capacity as recipient of distributions from the Reserve Account) will be
treated as partners in that partnership. The Company and the other
Certificateholders by acceptance of a Trust Certificate (and the Certificate
Owners by acceptance of a beneficial interest in a Trust Certificate), agree to
treat, and to take no action inconsistent with the treatment of, the Trust
Certificates for such tax purposes as partnership interests in the Trust.
Each Certificateholder or Certificate Owner, by its acceptance of a
Trust Certificate or, in the case of a Certificate Owner, a beneficial interest
in a Trust Certificate, covenants and agrees that such Certificateholder or
Certificate Owner, as the case may be, will not at any time institute against
the Depositor, the Company or the Trust, or join in any institution against the
Depositor, the Company or the Trust of, any bankruptcy, reorganization,
arrangement, insolvency, receivership or liquidation proceedings, or other
proceedings under any United States Federal or state bankruptcy or similar law
in connection with any obligations relating to the Trust Certificates, the
Notes, the Trust Agreement or any of the other Basic Documents.
Distributions on this Trust Certificate will be made as provided in
the Trust Agreement by the Eligible Lender Trustee by wire transfer or by check
mailed to the Certificateholder of
A-3
<PAGE>
record in the Certificate Register without the presentation or surrender of this
Trust Certificate or the making of any notation hereon, except that with respect
to Trust Certificates registered on the Record Date in the name of the nominee
of the Clearing Agency, unless Definitive Certificates have been issued
(initially, such nominee to be Cede & Co.), payments will be made by wire
transfer in immediately available funds to the account designated by such
nominee. Except as otherwise provided in the Trust Agreement and
notwithstanding the above, the final distribution on this Trust Certificate will
be made after due notice by the Eligible Lender Trustee of the pendency of such
distribution and only upon presentation and surrender of this Trust Certificate
at the office or agency maintained for the purpose by the Eligible Lender
Trustee in the Borough of Manhattan, The City of New York.
Reference is hereby made to the further provisions of this Trust
Certificate set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Eligible Lender Trustee or its
authenticating agent, by manual signature, this Trust Certificate shall not
entitle the holder hereof to any benefit under the Trust Agreement, the Loan
Sale Agreement, the Master Servicing Agreement or the Administration Agreement
or be valid for any purpose.
IN WITNESS WHEREOF, the Eligible Lender Trustee on behalf of the Trust
and not in its individual capacity has caused this Trust Certificate to be duly
executed as of the date set forth below.
SIGNET STUDENT LOAN TRUST 1996-A
by
THE FIRST NATIONAL BANK OF CHICAGO, as Eligible
Lender Trustee,
by
________________________________
Authorized Signatory
Date: [ ], ____
A-4
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Trust Certificates referred to in the within-mentioned Trust
Agreement.
THE FIRST NATIONAL BANK OF CHICAGO,
as Eligible Lender Trustee,
by
_______________________________
Authorized Signatory
OR
THE FIRST NATIONAL BANK OF CHICAGO,
as Eligible Lender Trustee,
by
FIRST CHICAGO TRUST COMPANY OF NEW YORK, as
Authenticating Agent,
by
_______________________________
Authorized Signatory
Date: [ ], ____
A-5
<PAGE>
[Reverse of Trust Certificate]
The Trust Certificates do not represent an obligation of, or an
interest in, the Seller, the Master Servicer, the Depositor, the Company, the
Administrator, the Eligible Lender Trustee or any affiliates of any of them, and
no recourse may be had against such parties or their assets, except as may be
expressly set forth or contemplated herein, in the Trust Agreement or in the
other Basic Documents. In addition, this Trust Certificate is not guaranteed by
any governmental agency or instrumentality and is limited in right of payment to
certain collections with respect to the Financed Student Loans (and certain
other amounts), all as more specifically set forth in the Master Servicing
Agreement and the Administration Agreement. A copy of each of the Master
Servicing Agreement, the Administration Agreement, the Loan Sale Agreement and
the Trust Agreement may be examined during normal business hours at the
principal office of the Seller, and at such other places, if any, designated by
the Seller, by any Certificateholder upon request.
The Trust Agreement permits, with certain exceptions therein provided,
the amendment thereof and the modification of the rights and obligations of the
Depositor and the Company and the rights of the Certificateholders under the
Trust Agreement at any time by the Depositor, the Company and the Eligible
Lender Trustee with the consent of the holders of the Notes and the Trust
Certificates each voting as a class evidencing not less than a majority of the
outstanding principal balance of the Notes and the Certificate Balance. Any
such consent by the holder of this Trust Certificate shall be conclusive and
binding on such holder and on all future holders of this Trust Certificate and
of any Trust Certificate issued upon the transfer hereof or in exchange herefor
or in lieu hereof whether or not notation of such consent is made upon this
Trust Certificate. The Trust Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the holders of any of the
Trust Certificates.
As provided in the Trust Agreement and subject to certain limitations
therein set forth, the transfer of this Trust Certificate is registerable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies maintained by The First National Bank of
Chicago in its capacity as Certificate Registrar, or by any successor
Certificate Registrar, in the Borough of Manhattan, The City of New York,
accompanied by a written instrument of transfer in form satisfactory to the
Eligible Lender Trustee and the Certificate Registrar duly executed by the
holder hereof or such holder's attorney duly authorized in writing, and
thereupon one or more new Trust Certificates of authorized denominations
A-6
<PAGE>
evidencing the same aggregate interest in the Trust will be issued to the
designated transferee.
The Trust Certificates are issuable only as registered Trust
Certificates without coupons in denominations of $1,000 or in integral multiples
of $1,000 in excess thereof; provided, however, that the Trust Certificates
-------- -------
issued to the Company may be issued in such denominations as to include any
residual amount of the Certificate Balance. As provided in the Trust Agreement
and subject to certain limitations therein set forth, Trust Certificates are
exchangeable for new Trust Certificates of authorized denominations evidencing
the same aggregate denomination, as requested by the holder surrendering the
same. No service charge will be made for any such registration of transfer or
exchange, but the Eligible Lender Trustee or the Certificate Registrar may
require payment of a sum sufficient to cover any tax or governmental charge
payable in connection therewith.
The Eligible Lender Trustee, the Certificate Registrar and any agent
of the Eligible Lender Trustee or the Certificate Registrar may treat the person
in whose name this Trust Certificate is registered as the owner hereof for all
purposes, and neither the Eligible Lender Trustee nor the Certificate Registrar
or any such agent shall be affected by any notice to the contrary.
The Trust Certificates (including any beneficial interests therein)
may not be acquired by or for the account of (i) an employee benefit plan (as
defined in Section 3(3) of ERISA) that is subject to the provisions of Title I
of ERISA, (ii) a plan described in Section 4975(e)(1) of the Internal Revenue
Code of 1986, as amended, or (iii) any entity whose underlying assets include
plan assets by reason of a plan's investment in the entity (a "Benefit Plan").
By accepting and holding this Trust Certificate, the Holder and Owner hereof
shall be deemed to have represented and warranted that it is not a Benefit Plan.
The obligations and responsibilities created by the Trust Agreement
and the Trust created thereby shall terminate upon the payment to
Certificateholders of all amounts required to be paid to them pursuant to the
Trust Agreement and the Master Servicing Agreement and the disposition of all
property held as part of the Trust. The Seller may at its option purchase the
corpus of the Trust at a price specified in the Loan Sale Agreement, and such
purchase of the Financed Student Loans and other property of the Trust will
effect early retirement of the Trust Certificates; however, such right of
purchase is exercisable only as of any Distribution Date on or after the date
A-7
<PAGE>
on which the Pool Balance is less than or equal to 10% of the sum of the Initial
Pool Balance and the Pre-Funded Amount as of the Closing Date. In addition, the
Financed Student Loans will be subject to auction on or after the [ 200 ]
Distribution Date as and to the extent provided in the Indenture, and the
proceeds of any such auction will be applied to effect early retirement of the
Notes and Trust Certificates. No assurance can be given as to whether the
Indenture Trustee will be successful in selling the Financed Student Loan in an
auction on the [ 200 ] Distribution Date or any subsequent Distribution
Date.
This Trust Certificate shall be construed in accordance with the laws
of the State of Delaware, without reference to its conflict of law provisions,
and the obligations, rights and remedies of the parties hereunder shall be
determined in accordance with such laws.
A-8
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
_______________________________________________________________________________
(Please print or type name and address, including postal zip code, of assignee)
_______________________________________________________________________________
the within Trust Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
______________________________________________________________________ Attorney
to transfer said Trust Certificate on the books of the Certificate Registrar,
with full power of substitution in the premises.
Dated:
______________________________*
Signature Guaranteed:
______________________________*
* NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Trust Certificate in every particular,
without alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member firm of the New York Stock Exchange or a commercial bank
or trust company.
A-9
<PAGE>
EXHIBIT B
TO THE TRUST AGREEMENT
Certificate Depository Agreement
--------------------------------
<PAGE>
EXHIBIT C
TO THE TRUST AGREEMENT
CERTIFICATE OF TRUST OF
SIGNET STUDENT LOAN TRUST 1996-A
--------------------------------
THIS Certificate of Trust of Signet Student Loan Trust 1996-A (the
"Trust"), dated as of [ ], 1996, is being duly executed and filed by The
First National Bank of Chicago, a national banking association, and
____________________, an individual, as trustees, to form a business trust under
the Delaware Business Trust Act (12 Del. Code, (S) 3801 et seq.).
--------- -- ----
1. Name. The name of the business trust formed hereby is SIGNET
----
STUDENT LOAN TRUST 1996-A.
2. Delaware Trustee. The name and business address of the trustee of
----------------
the Trust resident in the State of Delaware is
_____________________________________________________________, Wilmington,
Delaware 19801.
3. This Certificate of Trust will be effective [ ], 1996.
<PAGE>
IN WITNESS WHEREOF, the undersigned, being the sole trustees of the
Trust, have executed this Certificate of Trust as of the date first above
written.
THE FIRST NATIONAL BANK OF CHICAGO, as trustee of
the Trust.
By__________________________________
Name:
Title:
____________________________________
as trustee.
[ ],
as trustee
____________________________________
C-2
<PAGE>
Exhibit 5.1
[Letterhead of McGuire, Woods, Battle & Boothe, L.L.P.]
December 10, 1996
Signet Bank
7 North Eighth Street
Richmond, Virginia 23219
The Signet Student Loan Trusts
Registration Statement on Form S-3 (No. 33-94846)
-------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel for Signet Bank, a Virginia banking
corporation ("Signet"), in connection with the filing by Signet, on behalf of
The Signet Student Loan Trusts, each a Delaware business trust (each, a "Trust"
and, collectively, the "Trusts"), with the Securities and Exchange Commission of
a Registration Statement on Form S-3, as amended (No. 33-94846) (the
"Registration Statement"), registering Asset Backed Notes (the "Notes") and
Asset Backed Certificates (the "Certificates") representing undivided interests
in certain assets of the Trusts. The Notes will be issued by the Trusts pursuant
to Indentures (each, an "Indenture") between the Trust and The Bank of New York,
as indenture trustee (the "Indenture Trustee"). The Certificates will be issued
pursuant to Trust Agreements (each, a "Trust Agreement"), between Signet, a
newly-formed affiliate of Signet to be formed prior to the completion of a sale
of the Certificates (a "Company") and The First National Bank of Chicago, as
eligible lender trustee (the "Eligible Lender Trustee").
In that connection, we have examined originals or copies, certified or
otherwise identified to our satisfaction, of such documents, corporate records
and other instruments as we have deemed necessary or appropriate for the
purposes of this opinion, including but not limited to (a) a prospectus and
prospectus supplement forming a part of the Registration Statement
(collectively, the "Prospectus"), (b) the forms of the following documents filed
as exhibits to the Registration Statement: (i) an Indenture, (ii) a Trust
Agreement, (iii) a Loan Sale Agreement between Signet, as Seller, and the
Eligible Lender Trustee (iv) a Master Servicing Agreement, among Signet, as
Master Servicer, a Trust and the Eligible Lender Trustee and (v) an
Administration Agreement, among Signet, as Administrator, a Trust and the
Indenture Trustee, (c) a specimen of the Notes and (d) a specimen of the
Certificates.
In our examination, we have assumed the genuineness of all signatures,
the legal capacity
<PAGE>
Signet Bank
December 10, 1996
Page 2
of natural persons, the authenticity of all documents submitted to us as
originals, the conformity to original documents of all documents submitted to us
as certified or photostatic copies and the authenticity of the originals of such
copies.
Based upon such examination and subject to the foregoing, we are of the
opinion that:
1. When a Trust Agreement has been duly and validly authorized by all
necessary action on the part of the Seller, a Company and the applicable Trust,
and upon execution and delivery thereof by the Seller, a Company and such Trust,
such Trust Agreement will constitute the legal, valid and binding agreement of
the Seller, the Company and such Trust, enforceable against the Seller, a
Company and such Trust in accordance with its terms.
2. When an Indenture has been duly and validly authorized by all
necessary action on the part of the applicable Trust and the Indenture Trustee,
and upon execution and delivery thereof by such Trust and the Indenture Trustee,
such Indenture will constitute the legal, valid and binding agreement of such
Trust, enforceable against such Trust in accordance with its terms.
3. When a Certificate has been duly and validly authorized by all
necessary action on the part of the applicable Trust (subject to the terms
thereof being otherwise in compliance with applicable law at such time) and when
issued, executed and delivered in accordance with the provisions of the related
Trust Agreement, and when sold as described in the Registration Statement, such
Certificate will be validly issued and outstanding and entitled to the benefits
provided by the related Trust Agreement.
4. When a Note has been duly and validly authorized by all necessary
action on the part of the applicable Trust (subject to the terms thereof being
otherwise in compliance with applicable law at such time) and when issued,
executed and delivered in accordance with the provisions of the Indenture, and
when sold as described in the Registration Statement, such Note will be a
validly issued Note and will constitute a valid and binding obligation of such
Trust.
<PAGE>
Signet Bank
December 10, 1996
Page 3
The opinions set forth above are subject to applicable bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium, receivership,
conservatorship and similar laws of general applicability relating to or
effecting creditors' rights and to general equity principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
No opinion is expressed as to the availability of equitable remedies, including
specific performance or injunctive relief.
Our opinion is limited to the laws of Virginia, and we express no opinion
with respect to the laws of any other jurisdiction. To the extent that the
Trust Agreements, the Indentures, the Notes or the Certificates are governed by
the laws of any State other than Virginia, we have assumed that the laws of such
State are in conformity with the laws of Virginia. No opinion is expressed
herein with respect to the qualification of the Notes or the Certificate under
the securities or blue sky laws of any state or any foreign jurisdiction.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name and the reference to our firm
whenever it appears in such Registration Statement, including the Prospectus
constituting a part thereof, as originally filed or as subsequently amended. In
giving such permission, we do not admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended, or the rules and regulations of the Securities and Exchange
Commission issued thereunder, with respect to any part of the Registration
Statement, including this exhibit.
Very truly yours,
/s/ McGuire, Woods, Battle & Boothe, L.L.P.
<PAGE>
Exhibit 8.1
[Letterhead of McGuire, Woods, Battle & Boothe, L.L.P.]
December 10, 1996
Signet Bank
7 North Eighth Street
Richmond, Virginia 23219
The Signet Student Loan Trusts
Registration Statement on Form S-3 (No. 33-94846)
-------------------------------------------------
Ladies and Gentlemen:
We have acted as Federal and state income tax counsel for Signet Bank,
a Virginia banking corporation ("Signet"), in connection with the filing by
Signet, on behalf of The Signet Student Loan Trusts, each a Delaware business
trust (each, a "Trust" and, collectively, the "Trusts"), with the Securities and
Exchange Commission of a Registration Statement on Form S-3, as amended (No. 33-
94846) (the "Registration Statement"), registering Asset Backed Notes (the
"Notes") and Asset Backed Certificates (the "Certificates") representing
undivided interests in certain assets of the Trusts. The Notes will be issued
by the Trusts pursuant to Indentures (each an "Indenture") between the Trust and
The Bank of New York, as indenture trustee (the "Indenture Trustee"). The
Certificates will be issued pursuant to Trust Agreements (each a "Trust
Agreement"), between Signet, a newly-formed affiliate of Signet to be formed
prior to the completion of a sale of the Certificates and The First National
Bank of Chicago, as eligible lender trustee (the "Eligible Lender Trustee").
In that connection, we have examined originals or copies, certified or
otherwise identified to our satisfaction, of such documents, corporate records
and other instruments as we have deemed necessary or appropriate for the
purposes of this opinion, including but not limited to (a) a prospectus and
prospectus supplement (a "Prospectus Supplement") forming a part of the
Registration Statement (collectively, the "Prospectus"), (b) the forms of the
following documents filed as exhibits to the Registration Statement: (i) an
Indenture, (ii) a Trust Agreement, (iii) a Loan Sale Agreement between Signet,
as Seller, and the Eligible Lender Trustee (iv) a Master Servicing Agreement,
among Signet, as Master Servicer, a Trust and the Eligible Lender Trustee and
(v) an Administration Agreement, among Signet, as Administrator, a Trust and the
Indenture Trustee, (c) a specimen of the Notes and (d) a specimen of the
Certificates.
In our examination, we have assumed the genuineness of all signatures,
the legal capacity of natural persons, the authenticity of all documents
submitted to us as originals, the conformity
<PAGE>
Signet Bank
December 10, 1996
Page 2
to original documents of all documents submitted to us as certified or
photostatic copies and the authenticity of the originals of such copies.
Based upon such examination and subject to the foregoing, we hereby
confirm that the statements in the Prospectus under the headings "Summary of
Terms - Tax Considerations", "Federal Income Tax Consequences" and "State Tax
Consequences", and in the Prospectus Supplement under the headings "Summary of
Terms - Tax Considerations" and "Federal Income Tax and State Tax Consequences",
to the extent they constitute matters of law or legal conclusions with respect
thereto, are correct in all material respects.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name and the reference to our firm
whenever it appears in such Registration Statement, including the Prospectus
constituting a part thereof, as originally filed or as subsequently amended. In
giving such permission, we do not admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended, or the rules and regulations of the Securities and Exchange
Commission issued thereunder, with respect to any part of the Registration
Statement, including this exhibit.
Very truly yours,
/s/ McGuire, Woods, Battle & Boothe, L.L.P.
<PAGE>
Exhibit 25.1
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED PURSUANT TO
RULE 901(d) OF REGULATION S-T
==============================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) [_]
----------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
----------------------
SIGNET BANK
(Formerly known as Signet Bank/Maryland)
(Exact name of obligor as specified in its charter)
Virginia 54-1088621
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
7 North Eighth Street
Richmond, Virginia 23219
(Address of principal executive offices) (Zip code)
______________________
Asset Backed Securities
(Title of the indenture securities)
================================================================================
<PAGE>
1. General information. Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which it
is subject.
- -------------------------------------------------------------------------------
Name Address
- -------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10004
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None. (See Note on page 3.)
16. List of Exhibits.
Exhibits identified in parentheses below, on file with the Commission, are
incorporated herein by reference as an exhibit hereto, pursuant to Rule 7a-
29 under the Trust Indenture Act of 1939 (the "Act") and Rule 24 of the
Commission's Rules of Practice.
1. A copy of the Organization Certificate of The Bank of New York (formerly
Irving Trust Company) as now in effect, which contains the authority to
commence business and a grant of powers to exercise corporate trust
powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with
Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed
with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed
with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.
-2-
<PAGE>
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the Trustee
of all facts on which to base a responsive answer to Item 2, the answer to said
Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an amendment
to this Form T-1.
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York,
a corporation organized and existing under the laws of the State of New York,
has duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in The City of New York, and State
of New York, on the 20th day of November, 1996.
THE BANK OF NEW YORK
By: /s/ PAUL J. SCHMALZEL
--------------------------------
Name: PAUL J. SCHMALZEL
Title: ASSISTANT TREASURER
-4-
<PAGE>
EXHIBIT 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries, a member of the Federal Reserve
System, at the close of business March 31, 1996, published in accordance with a
call made by the Federal Reserve Bank of this District pursuant to the
provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
<S> <C>
Cash and balances due from depository
institutions:
Noninterest-bearing balances and
currency and coin............................ $ 2,461,550
Interest-bearing balances.................... 835,563
Securities:
Held-to-maturity securities.................. 802,064
Available-for-sale securities................ 2,051,263
Federal funds sold in domestic offices
of the bank:
Federal funds sold............................. 3,885,475
Loans and lease financing
receivables:
Loans and leases, net of unearned
income.................................... 27,820,159
LESS: Allowance for loan and
lease losses.............................. 509,817
LESS: Allocated transfer risk
reserve................................... 1,000
Loans and leases, net of unearned
income, allowance, and reserve............ 27,309,342
Assets held in trading accounts................ 837,118
Premises and fixed assets (including
capitalized leases).......................... 614,567
Other real estate owned........................ 51,631
Investments in unconsolidated
subsidiaries and associated
companies.................................... 225,158
Customers' liability to this bank on
acceptances outstanding...................... 800,375
Intangible assets.............................. 436,668
Other assets................................... 1,247,908
-----------
Total assets................................... $41,558,682
===========
LIABILITIES
Deposits:
In domestic offices.......................... $18,851,327
Noninterest-bearing.......................... 7,102,645
Interest-bearing............................. 11,748,682
In foreign offices, Edge and
Agreement subsidiaries, and IBFs............. 10,965,604
Noninterest-bearing.......................... 37,855
Interest-bearing........................... 10,927,749
Federal funds purchased and securities
sold under agreements to repurchase
in domestic offices of the bank
and of its Edge and Agreement
subsidiaries, and in IBFs:
Federal funds purchased...................... 1,224,886
Securities sold under agreements
to repurchase.............................. 29,728
Demand notes issued to the U.S.
Treasury..................................... 118,870
Trading liabilities............................ 673,944
Other borrowed money:
With original maturity of one year
or less.................................... 2,713,248
With original maturity of more than
one year................................... 20,780
Bank's liability on acceptance
executed and outstanding..................... 803,292
Subordinated notes and debentures.............. 1,022,860
Other liabilities.............................. 1,590,564
-----------
Total liabilities.............................. 38,015,103
-----------
EQUITY CAPITAL
Common Stock................................... 942,284
Surplus........................................ 525,666
Undivided profits and capital
reserves..................................... 2,078,197
Net unrealized holding gains
(losses) on available-for-sale
securities................................... 3,197
Cumulative foreign currency translation
adjustments.................................. ( 5,765)
-----------
Total equity capital........................... 3,543,579
-----------
Total liabilities and equity
capital...................................... $41,558,682
===========
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
++
J. Carter Bacot +
Thomas A. Renyi ++ Directors
Alan R. Griffith +
++
<PAGE>
EXH 99.1
B&W Draft
12/10/96
LOAN SALE AGREEMENT
among
SIGNET STUDENT LOAN TRUST 1996-A,
as Issuer,
SIGNET BANK,
as Seller,
and
THE FIRST NATIONAL BANK OF CHICAGO,
not in its individual capacity but solely
as Eligible Lender Trustee
Dated as of [ ], 1996
<PAGE>
LOAN SALE AGREEMENT dated as of [ ], 1996, among
SIGNET STUDENT LOAN TRUST 1996-A, a Delaware trust (the Issuer"),
SIGNET BANK, a Virginia banking corporation, as Seller, and THE
FIRST NATIONAL BANK OF CHICAGO, a national banking association,
solely as eligible lender trustee and not in its individual
capacity (the "Eligible Lender Trustee").
WHEREAS the Issuer desires to purchase from the Seller a portfolio of
federally reinsured student loans originated or acquired in the ordinary course
of business by the Seller;
WHEREAS the Seller is willing to sell such student loans to the
Eligible Lender Trustee on behalf of the Issuer;
WHEREAS the Eligible Lender Trustee is willing to hold legal title to,
and serve as eligible lender trustee with respect to, such student loans on
behalf of the Issuer.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I
Definitions and Usage
---------------------
Capitalized terms used but not defined herein are defined in Appendix
A to the Administration Agreement, dated as of [ ], 1996, among the
Issuer, the Seller, as Administrator, and The Bank of New York, as Indenture
Trustee, which also contains rules as to usage and construction that shall be
applicable herein.
ARTICLE II
Conveyance of Financed Student Loans
------------------------------------
SECTION 2.01. Conveyance of Initial Financed Student Loans. (a) In
--------------------------------------------
consideration of the Issuer's delivery to or upon the order of the Seller on the
Closing Date of the net proceeds from the sale of the Notes and the Certificates
and the other amounts to be distributed from time to time to the Seller in
accordance with the terms of this Agreement, the Seller does hereby, as
evidenced by a duly executed Bill of Sale in the form of Exhibit A hereto, sell,
assign, and otherwise convey to the Issuer (or, in the case of the Initial
Financed Student Loans (as
<PAGE>
defined below), to the Eligible Lender Trustee on behalf of the Issuer) without
recourse (subject to the obligations herein): (i) all right, title and interest
in and to the Initial Financed Student Loans, and all obligations of the
Obligors thereunder, together with all documents relating thereto, including the
related Student Loan Files and all rights and privileges relating thereto, (ii)
all payments on or collections received thereunder on and after the Cutoff Date;
(iii) all of its right, title and interest in all funds on deposit from time to
time in the Trust Accounts, including the Reserve Account Initial Deposit and
all investments and proceeds thereof (including all income thereon); and (iv)
all proceeds of any and all of the foregoing.
(b) In connection with the sale and assignment of Financed Student
Loans to the Eligible Lender Trustee on behalf of the Trust, on the Closing
Date, the Seller shall deposit the Reserve Account Initial Deposit into the
Reserve Account.
(c) On the Closing Date, the Eligible Lender Trustee, on behalf of the
Trust, will deposit into the Pre-Funding Account $[ ] and will deposit
into the Reserve Account $[ ] from the net proceeds of the Sale of the
Notes and the Certificates.
(d) On the Closing Date, the Seller will deposit, or cause to be
deposited, into the Collection Account all amounts or collections received under
the Initial Financed Student Loans after the Cutoff Date through and including
the second Business Day preceding the Closing Date.
SECTION 2.02. Conveyance of Additional Student Loans to the Eligible
------------------------------------------------------
Lender Trustee on Behalf of the Trust. (a) Subject to the conditions set forth
- -------------------------------------
in paragraph (d) below, in consideration of the Issuer's delivery on the related
Transfer Date to or upon the order of the Seller of the Purchase Amount for each
such Additional Student Loan to be delivered to the Seller, the Seller does
hereby sell, transfer, assign, set over and otherwise convey to the Issuer (or,
in the case of the right, title and interest to the Additional Student Loans, to
the Eligible Lender Trustee on behalf of the Issuer), (i) all right, title and
interest of the Seller in and to each Additional Student Loan and all
obligations of the Obligors thereunder, together with all documents, the related
Student Loan Files and all rights and privileges relating thereto, (ii) all
payments on or collections received thereunder on and after the related
Subsequent Cutoff Date and (iii) all proceeds of any and all of the foregoing.
(b) During the Funding Period, upon the tender of any Additional
Student Loans by the Seller on the related Transfer Date and the satisfaction of
the conditions set forth in subsection (d) of this Section 2.02, the Eligible
Lender Trustee
2
<PAGE>
will so inform the Administrator and the Indenture Trustee, and the Purchase
Amounts for such Additional Student Loans will be withdrawn from the Pre-Funding
Account, subject to the provisions of Section 2(f) of the Administration
Agreement, and will be remitted to or upon the order of the Seller.
(c) After the Funding Period, upon the tender of Additional Student
Loans by the Seller on the related Transfer Date and the satisfaction of the
conditions set forth in subsection (d) of this Section 2.02, the Eligible Lender
Trustee will so inform the Administrator and the Indenture Trustee, and the
Purchase Amounts for such Serial Loans will be withdrawn from amounts on deposit
in the Collection Account, as provided in Section 2(d) of the Administration
Agreement, and will be remitted, as provided therein to or upon the order of the
Seller.
(d) The Seller shall transfer to the Issuer the Additional Student
Loans for a given Transfer Date and the other property and rights related
thereto described in paragraph (a) above only upon the satisfaction of each of
the following conditions on or prior to such Transfer Date:
(i) the Seller shall have delivered to the Eligible Lender Trustee
and the Indenture Trustee a duly executed written assignment (including an
acceptance by the Eligible Lender Trustee and the Indenture Trustee) in
substantially the form of Exhibit B hereto (each, a "Transfer Agreement"),
which shall include supplements to Schedule A hereto, listing such
Additional Student Loans;
(ii) the Seller shall have delivered, at least two days prior to
such Transfer Date, notice of such transfer to the Eligible Lender Trustee,
the Indenture Trustee and the Rating Agencies, including a listing of the
type of loan and the aggregate principal balance of such Additional Student
Loans;
(iii) the Seller shall have deposited in the Collection Account
all amounts on or collections received in respect of the Additional Student
Loans on and after each applicable Subsequent Cutoff Date;
(iv) as of the Transfer Date, the Seller was not insolvent nor will
it have been made insolvent by such transfer nor is it aware of any pending
insolvency;
(v) such addition will not result in a material adverse Federal or
State tax consequence to the Issuer, the Noteholders or the
Certificateholders;
(vi) the Seller shall have delivered to the Indenture Trustee and
the Eligible Lender Trustee an Officers'
3
<PAGE>
Certificate confirming the satisfaction of each condition precedent
specified in this paragraph (d);
(vii) the Seller shall have delivered (A) to the Rating Agencies
an Opinion of Counsel with respect to the transfer of the Additional
Student Loans transferred to the Issuer on such Transfer Date,
substantially in the form of the Opinion of Counsel delivered to the Rating
Agencies on the Closing Date, and (B) to the Eligible Lender Trustee and
the Indenture Trustee the Opinion of Counsel as required by Section
6.02(f)(1) hereof; provided that no opinion shall be required under either
--------
subclause (A) or (B) unless the Seller, the Eligible Lender Trustee or the
Indenture Trustee determines that, with regard to the most recent opinion
on the matters described in either such subclause that was delivered with
respect to the Financed Student Loans (whether on the Closing Date or
thereafter under this subsection or under another provision of the Basic
Documents), the conclusion of, or the reasoning underlying, such opinion is
no longer correct in all material respects due to a change in law or
regulations or the ruling of a court, an administrative tribunal or a
regulatory or other governmental authority; upon making any such
determination, whichever of the Seller, the Eligible Lender Trustee and the
Indenture Trustee makes such determination shall notify the others and the
Rating Agencies in writing as to the nature of such changes;
(viii) the Seller shall have taken any action required to maintain
the first perfected ownership interest of the Issuer in the Trust Estate
and the first perfected security interest of the Indenture Trustee in the
Collateral;
(ix) no selection procedures believed by the Seller to be adverse
to the interests of the Certificateholders or the Noteholders shall have
been utilized in selecting the Additional Student Loans;
(x) no Event of Default shall have occurred under the Indenture, no
Servicer Default shall have occurred under the Master Servicing Agreement
and no Administrator Default shall have occurred under the Administration
Agreement; and
(xi) for each Transfer Date occurring after the Funding Period,
after giving effect to the conveyance of any Additional Student Loans on
such Transfer Date, the amount of funds remitted for the purchase of
Additional Student Loans on such Transfer Date, and on each Transfer Date
since the preceding Distribution Date, shall not exceed the Net Principal
Cash Flow Amount (calculated for the Collection Period ending in the
preceding calendar month or, if no Collection Period ended in the preceding
calendar month,
4
<PAGE>
calculated for each preceding calendar month during the current Collection
Period);
provided, however, that the Seller shall not incur any liability as a result of
- -------- -------
transferring Additional Student Loans on any Transfer Date at a time when the
condition set forth in clause (v) was not satisfied, if at the time of such
transfer the Authorized Officers of the Seller, after reasonable inquiry of
counsel to the Seller, were not aware of any fact that would reasonably suggest
that such condition would not be satisfied as of such date.
SECTION 2.03. Treatment as a Security Agreement. The parties intend
---------------------------------
that the conveyance of the Seller's right, title and interest in and to the
Initial Financed Student Loans pursuant to this Agreement and any Additional
Student Loans pursuant to a related Transfer Agreement shall constitute a
purchase and sale and not a loan. If such conveyance is deemed to be a loan and
not a sale, then the parties also intend and agree that the Seller shall be
deemed to have granted, and in such event do hereby grant to the Issuer, a first
priority security interest in all of the Seller's right, title and interest in,
to and under the Initial Financed Student Loans and any Additional Student Loans
and the other items specified in Sections 2.01 and 2.02, and that this Agreement
(with respect to the Initial Financed Student Loans) and any applicable Transfer
Agreement (with respect to the Additional Student Loans conveyed thereby) shall
each constitute a security agreement under applicable law with respect to such
loans. If such conveyance is deemed to be a loan and not a sale, the Issuer
may, to secure the Issuer's own borrowings under the Indenture, repledge all or
any portion of such loans and the other items specified in Sections 2.01 and
2.02 hereof pledged to the Issuer and not released from the security interest of
this Agreement at the time of such pledge. Such a repledge may be made by the
Issuer with or without a repledge by the Issuer of its rights under this
Agreement, and without further notice to or acknowledgement from the Seller.
The Seller waives, to the extent permitted by applicable law, all claims, causes
of action and remedies whether legal or equitable (including any rights of set-
off) against the Issuer or any assignee of the Issuer relating to such action by
the Issuer in connection with the transactions contemplated by this Agreement,
each Transfer Agreement, the Trust Agreement and the Indenture.
SECTION 2.04. Endorsement. The Seller hereby appoints each of the
-----------
Eligible Lender Trustee and the Indenture Trustee as the Seller's true and
lawful attorney-in-fact with full power of substitution to endorse the Seller's
name on any promissory note evidencing the Initial Financed Student Loans and
any Additional Student Loans transferred to the Eligible Lender Trustee on
behalf of the Trust pursuant to Sections 2.01 and
5
<PAGE>
2.02. The Seller acknowledges and agrees that this power of attorney shall be
construed as a power coupled with an interest, shall be irrevocable as long as
the Trust Agreement remains in effect and shall continue in effect until the
Trust Agreement terminates.
ARTICLE III
The Financed Student Loans
--------------------------
SECTION 3.01. Representations and Warranties of Seller with Respect
-----------------------------------------------------
to the Financed Student Loans. The Seller represents and warrants with
- -----------------------------
respect to the Financed Student Loans as set forth in Exhibit C hereto. Such
representations and warranties speak as of the execution and delivery of this
Agreement and as of the Closing Date, in the case of the Initial Financed
Student Loans, and as of the applicable Transfer Date, in the case of the
Additional Student Loans, but shall survive the sale, transfer and assignment of
the Financed Student Loans to the Eligible Lender Trustee on behalf of the
Issuer and the pledge thereof to the Indenture Trustee pursuant to the
Indenture.
SECTION 3.02. Repurchase upon Breach; Reimbursement. Upon discovery
-------------------------------------
by the Seller, the Master Servicer, any Servicer, any Subservicer, the Eligible
Lender Trustee or the Indenture Trustee of any breach of the Seller's
representations and warranties made by the Seller pursuant to Section 3.01 or
Section 4.01, the party discovering the breach shall give prompt written notice
to the others. Unless any such breach shall have been cured within 120 days
after the Seller becomes aware or receives written notice (whichever is earlier)
of such breach, the Seller shall be obligated to repurchase any Financed Student
Loan in which the interests of the Noteholders or the Certificateholders are
materially and adversely affected by any such breach as of the first day
succeeding the end of such 120-day period that is the last day of a Monthly
Collection Period; provided, that, it is understood that any such breach that
does not affect any Guarantor's obligation to guarantee payment of such Financed
Student Loan to the Eligible Lender Trustee will not be considered to have a
material adverse effect for this purpose and it is further understood that any
dispute as to whether a Guarantor's obligation has been so affected will be
resolved by the decision of the Indenture Trustee for so long as Notes are
Outstanding and thereafter by the Eligible Lender Trustee. In consideration of
and simultaneously with the repurchase of a Financed Student Loan, the Seller
shall remit the Purchase Amount therefor, in the manner specified in Section
3.03, and the Issuer shall execute such assignments and other documents
reasonably requested by the Seller in order to effect such transfer. Upon any
such transfer of a Financed Student Loan, legal title to, and
6
<PAGE>
beneficial ownership and control of, the related Student Loan File will
thereafter belong to the Seller. In addition, if any such breach by the Seller
does not trigger such a repurchase obligation but does result in the refusal by
a Guarantor to guarantee all or a portion of the accrued interest, or the loss
(including any obligation of the Issuer to repay the Department) of certain
Interest Subsidy Payments and Special Allowance Payments, then, unless such
breach, if curable, is cured within 120 days, the Seller shall reimburse the
Issuer by remitting an amount equal to all such non-guaranteed interest amounts
and such forfeited Interest Payments and Special Allowance Payments in the
manner specified in Section 3.03. Subject to the provisions of Section 4.03,
the sole remedy of the Issuer, the Eligible Lender Trustee, the Indenture
Trustee, the Noteholders or the Certificateholders with respect to a breach of
representations and warranties pursuant to Section 3.01, and the agreement
contained in this Section, shall be to require the Seller to repurchase Financed
Student Loans or to reimburse the Issuer as provided above pursuant to this
Section, subject to the conditions contained herein.
SECTION 3.03. Repurchase Deposits. The Seller shall deposit or cause
-------------------
to be deposited in the Collection Account the aggregate Purchase Amount with
respect to Purchased Student Loans and all other amounts to be paid by the
Seller under Section 3.02 and Section 5.01 when such amounts are due.
ARTICLE IV
The Seller
----------
SECTION 4.01. Representations of Seller. The Seller represents as
-------------------------
set forth in Exhibit D hereto. Such representations speak as of the execution
and delivery of this Agreement and as of the Closing Date in the case of the
Initial Financed Student Loans, and as of the applicable Transfer Date in the
case of the Additional Student Loans, but shall survive the sale, transfer and
assignment of the Financed Student Loans to the Eligible Lender Trustee on
behalf of the Issuer and the pledge thereof to the Indenture Trustee pursuant to
the Indenture.
SECTION 4.02. Existence. Subject to Section 4.04 hereof, during the
---------
term of this Agreement, the Seller will keep in full force and effect its
existence, rights and franchises as a banking corporation under the laws of the
jurisdiction of its organization and will obtain and preserve its qualification
to do business in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of this Agreement, the
other Basic Documents and each other instrument or agreement necessary or
appropriate to the proper
7
<PAGE>
administration of this Agreement and the transactions contemplated hereby.
SECTION 4.03. Liability of Seller; Indemnities. The Seller shall be
--------------------------------
liable in accordance herewith only to the extent of the obligations specifically
undertaken by the Seller under this Agreement.
(a) The Seller shall indemnify, defend and hold harmless the
Issuer, the Eligible Lender Trustee and the Indenture Trustee and their
officers, directors, employees and agents from and against any taxes that
may at any time be asserted against any such Person with respect to the
transactions contemplated herein and in the other Basic Documents (except
any such income taxes arising out of fees paid to the Eligible Lender
Trustee or the Indenture Trustee), including any sales, gross receipts,
general corporation, tangible personal property, privilege or license taxes
(but, in the case of the Issuer, not including the issuance and original
sale of the Certificates and the Notes, or asserted with respect to
ownership of the Financed Student Loans or Federal or other income taxes
arising out of distributions on the Certificates and the Notes) and costs
and expenses in defending against the same.
(b) The Seller shall indemnify, defend and hold harmless the
Issuer, the Eligible Lender Trustee, the Indenture Trustee, the
Certificateholders and the Noteholders and the officers, directors,
employees and agents of the Issuer, the Eligible Lender Trustee and the
Indenture Trustee from and against any and all reasonable costs and
expenses and any and all losses, claims, damages and liabilities in each
case arising out of, or imposed upon such Person through, (i) the Seller's
willful misfeasance, bad faith or negligence in the performance of its
duties under this Agreement, or by reason of reckless disregard of its
obligations and duties under this Agreement and (ii) the Seller's or the
Issuer's violation of Federal or state securities laws in connection with
the offering and sale of the Notes and the Certificates.
(c) The Seller shall be liable as primary obligor for, and shall
indemnify, defend and hold harmless the Eligible Lender Trustee and its
officers, directors, employees and agents from and against, all reasonable
costs and expenses and all losses, claims, damages, obligations and
liabilities arising out of, incurred in connection with or relating to the
Trust Agreement, the other Basic Documents, the Trust Estate, the
acceptance or performance of the trusts and duties set forth herein and in
the Trust Agreement or the action or the inaction of the Eligible Lender
Trustee hereunder and under the Trust Agreement, except to the
8
<PAGE>
extent that such cost, expense, loss, claim, damage, obligation or
liability: (i) shall be due to the willful misfeasance, bad faith or
negligence (except for errors in judgment) of the Eligible Lender Trustee,
(ii) shall arise from any breach by the Eligible Lender Trustee of its
covenants under any of the Basic Documents; or (iii) shall arise from the
breach by the Eligible Lender Trustee of any of its representations or
warranties set forth in Section 7.03 of the Trust Agreement. In the event
of any claim, action or proceeding for which indemnity will be sought
pursuant to this paragraph, the Eligible Lender Trustee's choice of legal
counsel shall be subject to the approval of the Seller, which approval
shall not be unreasonably withheld.
(d) The Seller shall pay any and all taxes levied or assessed upon
all or any part of the Trust Estate (other than those taxes expressly
excluded from the Seller's responsibilities pursuant to the parentheticals
in paragraph (a) above).
Indemnification under this Section shall survive the resignation or
removal of the Eligible Lender Trustee or the Indenture Trustee and the
termination of this Agreement or the Indenture or the Trust Agreement, as
applicable, and shall include reasonable fees and expenses of counsel and
expenses of litigation. If the Seller shall have made any indemnity payments
pursuant to this Section and the Person to or on behalf of whom such payments
are made thereafter shall collect any of such amounts from others, such Person
shall promptly repay such amounts to the Seller, without interest.
SECTION 4.04. Merger or Consolidation of, or Assumption of the
------------------------------------------------
Obligations of Seller. Any Person (a) into which the Seller may be merged or
- ---------------------
consolidated, (b) which may result from any merger or consolidation to which the
Seller shall be a party, (c) which may succeed to the properties and assets of
the Seller substantially as a whole or (d) to which the student lending business
of the Seller shall otherwise be transferred substantially as a whole, shall be
the successor to the Seller without the execution or filing of any document or
any further act by any of the parties to this Agreement; provided, however, that
-------- -------
the Seller hereby covenants that it will not consummate any of the foregoing
transactions except upon satisfaction of the following: (i) the surviving
entity, if other than the Seller, executes an agreement of assumption to perform
every obligation of the Seller under this Agreement, (ii) immediately after
giving effect to such transaction, no representation or warranty made pursuant
to Section 3.01 or 4.01 shall have been breached and no Servicer Default, Event
of Default or Administrator Default and no event that, after notice or lapse of
time, or both, would become a Servicer Default, Event of Default or
Administrative
9
<PAGE>
Default shall have occurred and be continuing, (iii) the Seller shall have
delivered to the Eligible Lender Trustee and the Indenture Trustee an Officers'
Certificate and an Opinion of Counsel each stating that such consolidation,
merger, succession or transfer and such agreement of assumption comply with this
Section and that all conditions precedent, if any, provided for in this
Agreement relating to such transaction have been complied with, and that the
Rating Agency Condition shall have been satisfied with respect to such
transaction or, in the case of a transfer pursuant to clause (d) to a Person
that is a Non-Code Entity, notice of such transfer and assumption shall have
been delivered to each Rating Agency, (iv) such transaction will not result in a
material adverse Federal or state tax consequence to the Issuer, the Noteholders
or the Certificateholders and (v) unless the Seller is the surviving entity,
the surviving entity shall have delivered to the Eligible Lender Trustee and the
Indenture Trustee an Opinion of Counsel either (A) stating that, in the opinion
of such counsel, all financing statements and continuation statements and
amendments thereto have been executed and filed that are necessary fully to
preserve and protect the interest of the Eligible Lender Trustee and Indenture
Trustee, respectively, in the Financed Student Loans and reciting the details of
such filings, or (B) stating that, in the opinion of such counsel, no such
action shall be necessary to preserve and protect such interests.
SECTION 4.05. Limitation on Liabilities of Seller and Others. The
----------------------------------------------
Seller and any director or officer or employee or agent of the Seller may rely
in good faith on the advice of counsel or on any document of any kind, prima
facie properly executed and submitted by any Person respecting any matters
arising hereunder (provided that such reliance shall not limit in any way the
Seller's obligations under Section 3.02). The Seller shall not be under any
obligation to appear in, prosecute or defend any legal action that is not
incidental to its respective obligations under this Agreement, and that in its
opinion may involve it in any expense or liability.
SECTION 4.06. Seller May Own Certificates or Notes. The Seller and
------------------------------------
any Affiliate of the Seller may in its individual or any other capacity become
the owner or pledgee of Certificates or Notes with the same rights as it would
have if it were not the Seller or an Affiliate of the Seller, except as
expressly provided herein or in any other Basic Document.
10
<PAGE>
ARTICLE V
Termination
-----------
SECTION 5.01. Termination. (a) Optional Purchase of All Financed
----------- ---------------------------------
Student Loans. As of the last day of any Collection Period immediately
- -------------
preceding a Distribution Date as of which the then outstanding Pool Balance is
10% or less of the sum of the Initial Pool Balance and the Pre-Funded Amount as
of the Closing Date, the Seller or its designee shall have the option to
purchase the Trust Estate, other than the Trust Accounts. To exercise such
option, the Seller shall deposit in the Collection Account an amount equal to
the aggregate Purchase Amount for the Financed Student Loans and the related
rights with respect thereto, plus the appraised value of any such other property
held by the Trust other than the Trust Accounts, such value to be determined by
an appraiser mutually agreed upon by the Master Servicer, the Eligible Lender
Trustee and the Indenture Trustee, and shall succeed to all interests in and to
the Trust; provided, however, that the Seller may not effect such purchase if
-------- -------
the aggregate Purchase Amount to be so deposited in the Collection Account does
not equal or exceed the sum of (i) an amount equal to the unpaid principal
Balance of the Notes, plus accrued and unpaid interest thereon at the Note
Interest Rate to the date of exercise[, and the amount of unpaid Noteholders'
Interest LIBOR Carryover] and (ii) an amount equal to the unpaid Certificate
Balance, plus accrued and unpaid interest thereon at the Certificate Rate to the
date of exercise [and the amount of unpaid Certificateholders' Interest LIBOR
Carryover with respect thereto].
(b) Insolvency of Company. Upon any sale of the assets of the Trust
---------------------
pursuant to Section 9.02 of the Trust Agreement, the Seller shall cooperate with
and assist the Administrator consistent with the provisions of the
Administration Agreement with respect to Company insolvency.
ARTICLE VI
Miscellaneous
-------------
SECTION 6.01. Amendment. This Agreement may be amended by the Seller
---------
and the Eligible Lender Trustee, with the consent of the Indenture Trustee, but
without the consent of any of the Noteholders or the Certificateholders, to cure
any ambiguity, to correct or supplement any provisions in this Agreement, for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions in this Agreement or of modifying in any manner the rights
of the Noteholders or the Certificateholders or in connection with a transaction
described in Section 4.04 hereof; provided, however,
-------- -------
11
<PAGE>
that such action shall not, as evidenced by an Opinion of Counsel delivered to
the Eligible Lender Trustee and the Indenture Trustee, adversely affect the
interests of any Noteholder or any Certificateholder.
This Agreement may also be amended from time to time by the Seller and
the Eligible Lender Trustee, with the consent of the Indenture Trustee, the
Noteholders of Notes evidencing not less than a majority of the Outstanding
Amount of the Notes and the Certificateholders of Certificates evidencing not
less than a majority of the Certificate Balance, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or of modifying in any manner the rights of the Noteholders or
the Certificateholders; provided, however, that no such amendment shall (a)
-------- -------
increase or reduce in any manner the amount of, or accelerate or delay the
timing of, collections of payments with respect to Financed Student Loans or
distributions that shall be required to be made for the benefit of the
Noteholders or the Certificateholders or (b) reduce the aforesaid percentage of
the Outstanding Amount of the Notes and the Certificate Balance, the Noteholders
or the Certificateholders of which are required to consent to any such
amendment, without the consent of all outstanding Noteholders and
Certificateholders.
Promptly after the execution of any such amendment or consent (or, in
the case of the Rating Agencies, five Business Days prior thereto), the Eligible
Lender Trustee shall furnish written notification of the substance of such
amendment or consent to the Seller, the Administrator, the Indenture Trustee,
the Master Servicer and each of the Rating Agencies.
It shall not be necessary for the consent of Certificateholders or
Noteholders pursuant to this Section to approve the particular form of any
proposed amendment or consent, but it shall be sufficient if such consent shall
approve the substance thereof.
Prior to the execution of any amendment to this Agreement, the
Eligible Lender Trustee and the Indenture Trustee shall receive upon request and
rely upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement and the Opinion of Counsel referred to
in Section 6.02(f). The Eligible Lender Trustee and the Indenture Trustee may,
but shall not be obligated to, enter into any such amendment which affects the
Eligible Lender Trustee's or the Indenture Trustee's, as applicable, own rights,
duties or immunities under this Agreement or otherwise.
SECTION 6.02. Protection of Interests in Trust. (a) The Seller shall
--------------------------------
execute and file such financing statements and cause to be executed and filed
such continuation statements, all
12
<PAGE>
in such manner and in such places as may be required by law fully to preserve,
maintain, and protect the interest of the Issuer, the Eligible Lender Trustee
and the Indenture Trustee in the Financed Student Loans and in the proceeds
thereof. The Seller shall deliver (or cause to be delivered) to the Eligible
Lender Trustee and the Indenture Trustee file-stamped copies of, or filing
receipts for, any document filed as provided above, on or prior to the date of
transfer of any Financed Student Loans to the Trust.
(b) The Seller shall not change its name, identity or corporate
structure in any manner that would, could, or might make any financing statement
or continuation statement filed in accordance with paragraph (a) above seriously
misleading within the meaning of (S)9-402(7) of the UCC, unless it shall have
given the Eligible Lender Trustee and the Indenture Trustee at least five (5)
days' prior written notice thereof and shall have promptly filed appropriate
amendments to all previously filed financing statements or continuation
statements.
(c) The Seller shall have an obligation to give the Eligible Lender
Trustee, the Indenture Trustee and the Rating Agencies at least five (5) days
prior written notice of any relocation of its principal executive office if, as
a result of such relocation, the applicable provisions of the UCC would require
the filing of any amendment of any previously filed financing or continuation
statement or of any new financing statement and shall promptly file any such
amendment.
(d) If at any time the Seller shall propose to sell, grant a security
interest in, or otherwise transfer any interest in student loans to any
prospective purchaser, lender or other transferee, the Seller shall give to such
prospective purchaser, lender or other transferee computer tapes, records or
printouts (including any restored from backup archives) that, if they shall
refer in any manner whatsoever to any Financed Student Loan, shall indicate
clearly that such Financed Student Loan has been sold and is owned by the Issuer
and has been pledged to the Indenture Trustee.
(e) The Seller shall, to the extent required by applicable law, cause
the Certificates and the Notes to be registered with the Commission pursuant to
Section 12(b) or Section 12(g) of the Exchange Act within the time periods
specified in such sections.
(f) The Seller shall deliver to the Eligible Lender Trustee and the
Indenture Trustee:
(1) promptly after the execution and delivery of this Agreement and
of each amendment thereto and on each Transfer Date, an Opinion of Counsel
either (A) stating that, in the
13
<PAGE>
opinion of such counsel, all financing statements and continuation
statements have been executed and filed that are necessary fully to
preserve and protect the interest of the Eligible Lender Trustee and the
Indenture Trustee in the Financed Student Loans, and reciting the details
of such filings or referring to prior Opinions of Counsel in which such
details are given, or (B) stating that, in the opinion of such counsel, no
such action shall be necessary to preserve and protect such interest; and
(2) within 120 days after the beginning of each calendar year
beginning with the first calendar year beginning more than three months
after the Cutoff Date, an Opinion of Counsel, dated as of a date during
such 120-day period, either (A) stating that, in the opinion of such
counsel, all financing statements and continuation statements have been
executed and filed that are necessary fully to preserve and protect the
interest of the Eligible Lender Trustee and the Indenture Trustee in the
Financed Student Loans, and reciting the details of such filings or
referring to prior Opinions of Counsel in which such details are given, or
(B) stating that, in the opinion of such counsel, no such action shall be
necessary to preserve and protect such interest; provided that a single
--------
Opinion of Counsel may be delivered in satisfaction of the foregoing
requirement and that of Section 3.06(b) of the Indenture.
Each Opinion of Counsel referred to in clause (1) or (2) above shall
specify (as of the date of such opinion and given all applicable laws as in
effect on such date) any action necessary to be taken in the following year to
preserve and protect such interest.
SECTION 6.03. Notices. All demands, notices and communications upon
-------
or to the Seller, the Master Servicer, the Issuer, the Eligible Lender Trustee,
the Indenture Trustee, the Administrator or the Rating Agencies under this
Agreement shall be in writing, personally delivered or mailed by certified mail,
return receipt requested (or in the form of telex or facsimile notice, followed
by written notice delivered as aforesaid), and shall be deemed to have been duly
given upon receipt;
(a) in the case of the Seller, to
Signet Bank
7 North 8th Street
Richmond, Virginia 23219
Attention: Treasurer
Telephone: (804) 771-7060
Telecopy: (804) 771-7936
14
<PAGE>
(b) in the case of the Master Servicer and
Administrator, to
Signet Bank
7 North 8th Street
Richmond, Virginia 23219
Attention: Treasurer
Telephone: (804) 771-7060
Telecopy: (804) 771-7936
(c) in the case of the Issuer, to
Signet Student Loan Trust 1996-A,
c/o First Chicago Delaware Inc., Trustee
300 King Street
Wilmington, Delaware 19801
with a copy to the Eligible Lender Trustee
at the Corporate Trust Office of the
Eligible Lender Trustee
(d) in the case of the Issuer or the Eligible Lender Trustee, at
the Corporate Trust Office of the Eligible Lender Trustee;
(e) in the case of the Indenture Trustee, at its Corporate Trust
Office;
(f) [the Rating Group], to
_______________________
_______________________
_______________________
_______________________
_______________________
Attention: ______________________
Telephone: ______________________
Telecopy : ______________________
or, as to each of the foregoing, at such other address as shall be designated by
written notice to the other parties.
SECTION 6.04. Assignment. Notwithstanding anything to the contrary
----------
contained herein, except as provided in Section 4.04, this Agreement may not be
assigned by the Seller. This Agreement may only be assigned by the Eligible
Lender Trustee to its permitted successor pursuant to the Trust Agreement.
SECTION 6.05. Limitations on Rights of Others. The provisions of
-------------------------------
this Agreement are solely for the benefit of the Seller, the Issuer, and the
Eligible Lender Trustee and for the
15
<PAGE>
benefit of the Certificateholders, the Indenture Trustee and the Noteholders, as
third party beneficiaries, and nothing in this Agreement, whether express or
implied, shall be construed to give to any other Person any legal or equitable
right, remedy or claim in the Trust Estate or under or in respect of this
Agreement or any covenants, conditions or provisions contained herein.
SECTION 6.06. Severability. Any provision of this Agreement that is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 6.07. Separate Counterparts. This Agreement may be executed
---------------------
by the parties hereto in separate counterparts, each of which when so executed
and delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 6.08. Headings. The headings of the various Articles and
--------
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
SECTION 6.09. Governing Law. This Agreement shall be construed in
-------------
accordance with the laws of the Commonwealth of Virginia, without reference to
its conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
SECTION 6.10. Assignment to Indenture Trustee. The Seller hereby
-------------------------------
acknowledges and consents to any mortgage, pledge, assignment and grant by the
Issuer to the Indenture Trustee pursuant to the Indenture for the benefit of the
Noteholders of a security interest in all right, title and interest of the
Issuer in, to and under the Financed Student Loans or the assignment of any or
all of the Issuer's rights and obligations hereunder to the Indenture Trustee.
SECTION 6.11. Non-Petition Covenants. Notwithstanding any prior
----------------------
termination of this Agreement, the Seller shall not, prior to the date which is
one year and one day after the termination of this Agreement with respect to the
Issuer, acquiesce, petition or otherwise invoke or cause the Issuer to invoke
the process of any court or government authority for the purpose of commencing
or sustaining a case against the Issuer under any Federal or state bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Issuer
16
<PAGE>
or any substantial part of its property, or ordering the winding up or
liquidation of the affairs of the Issuer.
SECTION 6.12. Limitation of Liability of Eligible Lender Trustee and
------------------------------------------------------
Indenture Trustee. (a) Notwithstanding anything contained herein to the
- -----------------
contrary, this Agreement has been signed by The First National Bank of Chicago
not in its individual capacity but solely in its capacity as Eligible Lender
Trustee of the Issuer and in no event shall The First National Bank of Chicago
in its individual capacity or, except as expressly provided in the Trust
Agreement, as beneficial owner of the Issuer have any liability for the
representations, warranties, covenants, agreements or other obligations of the
Issuer hereunder or in any of the certificates, notices or agreements delivered
pursuant hereto as to all of which recourse shall be had solely to the assets of
the Issuer.
(b) Notwithstanding anything contained herein to the contrary, this
Agreement has been accepted by The Bank of New York not in its individual
capacity but solely as Indenture Trustee and in no event shall The Bank of New
York have any liability for the representations, warranties, covenants,
agreements or other obligations of the Issuer hereunder or in any of the
certificates, notices or agreements delivered pursuant hereto, as to all of
which recourse shall be had solely to the assets of the Issuer.
SECTION 6.13. Agreement of Seller. The Seller agrees to execute and
-------------------
deliver such instruments and to take such actions as the Eligible Lender
Trustee, the Issuer, or the Indenture Trustee may reasonably request in order to
effectuate the terms and carry out the purposes of this Agreement.
SECTION 6.14. Confidentiality. (a) The Eligible Lender Trustee and
---------------
its agents, representatives or employees shall at all times maintain the
confidentiality of all Confidential Information and shall not, without the prior
written consent of the Seller, disclose to third parties (including Noteholders
or Certificateholders) or use such information, in any manner whatsoever, in
whole or in part, except as expressly permitted under this Agreement or as
required to fulfill an obligation of the Eligible Lender Trustee under this
Agreement, in which case such Confidential Information shall be revealed only to
the extent required for the purpose of fulfilling an obligation of the Eligible
Lender Trustee under this Agreement. Notwithstanding the above, Confidential
Information may be disclosed to the extent required by law or legal process,
provided that the Eligible Lender Trustee gives prompt written notice to the
Seller of the nature and scope of such disclosure.
(b) Notwithstanding anything in this Agreement to the contrary, the
Seller shall not be obligated to disclose to any
17
<PAGE>
Person (i) any information regarding Obligors, the disclosure of which is
prohibited by applicable law, or (ii) any information relating to the strategic
plans or opportunities of its student lending business.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective officers as of the day and year first above
written.
SIGNET STUDENT LOAN TRUST 1996-A,
by
THE FIRST NATIONAL BANK OF CHICAGO, not
in its individual capacity but solely
as Eligible Lender Trustee on behalf of
the Trust,
by
_____________________________________
Name:
Title:
SIGNET BANK
by
________________________________________
Name:
Title:
THE FIRST NATIONAL BANK OF
CHICAGO, not in its individual capacity but
solely as Eligible Lender Trustee,
by
________________________________________
Name:
Title:
18
<PAGE>
Acknowledged and accepted
as of the day and year first
above written:
THE BANK OF NEW YORK, not in
its individual capacity but
solely as Indenture Trustee,
by
________________________
Name:
Title:
19
<PAGE>
SCHEDULE A
TO THE
LOAN SALE AGREEMENT
Schedule of Student Loans
-------------------------
[To be supplied by Signet at Closing.]
20
<PAGE>
EXHIBIT A
TO THE LOAN SALE AGREEMENT
BILL OF SALE
For value received, in accordance with the Loan Sale Agreement (the
"Loan Sale Agreement") dated as of [ ], 1996, among Signet Bank, as
seller (the "Seller"), Signet Student Loan Trust 1996-A (the "Trust"), and The
First National Bank of Chicago, not in its individual capacity but solely as
Eligible Lender Trustee (the "Eligible Lender Trustee"), the Seller does hereby
sell, assign, transfer and otherwise convey unto the Eligible Lender Trustee on
behalf of the Trust, without recourse (subject to the obligations set forth in
the Loan Sale Agreement), all right, title and interest in and to (i) the
Initial Financed Student Loans and all obligations of the Obligors thereunder,
together with all documents, the related Student Loan Files and all rights and
privileges related thereto, (ii) all payments and/or collections received
thereunder on and after the Cutoff Date, (iii) all funds on deposit from time to
time in the Trust Accounts, including the Reserve Account Initial Deposit and
the Pre-Funded Amount, and in all investments and proceeds thereof (including
all income thereon) and (iv) all proceeds of any and all of the foregoing
(including but not limited to proceeds derived from the voluntary or involuntary
conversion of any of the Initial Financed Student Loans into cash or other
liquidated property, such as proceeds from the applicable Guarantee Agreement).
The foregoing sale does not constitute and is not intended to result in any
assumption by the Eligible Lender Trustee or the Trust of any obligation of the
Seller to the borrowers of Initial Financed Student Loans or any other Person in
connection with the Initial Financed Student Loans or any agreement or
instrument relating to any of them.
In addition, the undersigned, by execution of this instrument, hereby
endorses the promissory notes evidencing each Initial Financed Student Loan
described in Schedule A to the Loan Sale Agreement in favor of the Eligible
Lender Trustee on behalf of the Trust, without recourse (subject to the
obligations set forth in the Loan Sale Agreement) against the undersigned. This
endorsement may be effected by attaching a facsimile hereof to each or any of
such promissory notes.
This Bill of Sale is made pursuant to and upon the representations,
warranties and agreements on the part of the undersigned contained in the Loan
Sale Agreement and is to be governed by the Loan Sale Agreement.
Capitalized terms used but not defined herein shall have the meaning
assigned to them in Appendix A to the
A-1
<PAGE>
Administration Agreement, dated as of [ ], 1996, among Signet Student
Loan Trust 1996-A, as Issuer, Signet Bank, as Administrator, and The Bank of New
York, as Indenture Trustee, which also contains rules as to usage that shall be
applicable herein.
IN WITNESS WHEREOF, the undersigned has caused this Bill of Sale to be
duly executed as of [ ], 1996.
SIGNET BANK, as Seller
by
________________________
Name:
Title:
A-2
<PAGE>
EXHIBIT B
TO THE
LOAN SALE AGREEMENT
TRANSFER AGREEMENT
TRANSFER No. _____ Of ADDITIONAL STUDENT LOANS dated as of
______________, _____, among SIGNET STUDENT LOAN TRUST 1996-A, a Delaware trust
(the "Issuer"), SIGNET BANK, as seller (the "Seller") and THE FIRST NATIONAL
BANK OF CHICAGO, a national banking association, as seller, not in its
individual capacity but solely as Eligible Lender Trustee of the Issuer (the
"Eligible Lender Trustee").
W I T N E S S E T H:
WHEREAS the Issuer, the Seller and the Eligible Lender Trustee are
parties to the Loan Sale Agreement dated as of [ ], 1996 (as
amended or supplemented, the "Loan Sale Agreement");
WHEREAS the Seller, as depositor, Signet Student Loan Corporation, as
Company, and the Eligible Lender Trustee are parties to the Trust Agreement
dated as of [ ], 1996 (as amended or supplemented, the "Trust
Agreement");
WHEREAS pursuant to the Loan Sale Agreement, the Seller wishes to
convey the Additional Student Loans referred to in Section 2 (the "Additional
Student Loans") to the Eligible Lender Trustee on behalf of the Issuer; and
WHEREAS, the Eligible Lender Trustee and the Issuer are willing to
accept such conveyance subject to the terms and conditions hereof.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Definitions and Usage. Unless otherwise defined herein,
---------------------
capitalized terms used herein shall have the meanings ascribed to them in
Appendix A to the Loan Sale Agreement, which also contains rules of construction
and usage that shall be applicable herein.
In addition, the following terms have the following meanings:
"Subsequent Cutoff Date" means, with respect to each Additional
----------------------
Student Loan, the date specified as such on Schedule A hereto.
"Transfer Date" means, with respect to the Additional Student Loans,
-------------
________________, _______.
B-1
<PAGE>
2. Schedule of Financed Student Loans. Attached hereto as Schedule
----------------------------------
A is a supplement to Schedule A to the Loan Sale Agreement listing the
Additional Student Loans to be conveyed on the Transfer Date to the Eligible
Lender Trustee on behalf of the Issuer pursuant to this Agreement.
3. Conveyance of Additional Student Loans. In consideration of the
--------------------------------------
Issuer's delivery to or upon the order of the Seller of $___________ (such
amount being the Purchase Amounts of the Additional Student Loans and such
amount to be paid, during the Funding Period, from amounts on deposit in the
Pre-Funding Account subject to the provisions of Section 2.02(b) of the Loan
Sale Agreement and Section 2(f) of the Administration Agreement and after the
Funding Period from amounts on deposit in the Collection Account), the Seller
does hereby sell, assign and otherwise convey, without recourse (except as
expressly provided in the Loan Sale Agreement), to the Eligible Lender Trustee
on behalf of the Issuer:
(a) All right, title and interest in and to the Additional Student
Loans and all obligations of the Obligors thereunder, together with all
documents, the related Student Loan Files and all rights and privileges
relating thereto;
(b) all payments on or collections received thereunder, on and
after the related Subsequent Cutoff Date; and
(c) all proceeds of any and all of the foregoing.
4. Conditions Precedent. The obligation of the Issuer to acquire
--------------------
the Additional Student Loans hereunder is subject to the satisfaction, on or
prior to the Transfer Date, of the following conditions precedent:
(a) Representations and Warranties. Each of the representations
------------------------------
and warranties made by the Seller in Sections 3.01 and 4.01 of the Loan
Sale Agreement shall be true and correct as of the Transfer Date.
(b) Loan Sale Agreement Conditions. Each of the conditions set
------------------------------
forth in Section 2.02(d) of the Loan Sale Agreement shall have been
satisfied.
(c) Delivery of Bill of Sale. The Seller shall have delivered a
------------------------
Bill of Sale substantially in the form of Annex A hereto.
(d) Additional Information. The Seller shall have delivered to the
----------------------
Issuer such information as was reasonably requested by the Issuer to
satisfy itself as to (i) the accuracy of the representations and warranties
set forth in
B-2
<PAGE>
Sections 3.01 and 4.01 of the Loan Sale Agreement and (ii) the satisfaction
of the conditions set forth in this Section 4.
5. Ratification of Agreement. As supplemented by this Agreement,
-------------------------
the Loan Sale Agreement is in all respects ratified and confirmed and the Loan
Sale Agreement as so supplemented by this Agreement shall be read, taken and
construed as one and the same instrument.
6. Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which when so executed and delivered shall be an original,
but all of which together shall constitute but one and the same instrument.
7. Governing Law. This Agreement shall be construed in accordance
-------------
with the laws of the Commonwealth of Virginia, without reference to its conflict
of law provisions, and the obligations, rights and remedies of the parties
hereunder shall be determined in accordance with such laws.
8. Headings. The section headings hereof have been inserted for
--------
convenience of reference only and shall not be construed to affect the meaning,
construction or effect of this Agreement.
B-3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective duly authorized officers as
of the day and the year first above written.
SIGNET STUDENT LOAN TRUST 1996-A,
by
THE FIRST NATIONAL BANK OF CHICAGO, not in
its individual capacity but solely as
Eligible Lender Trustee,
by
_____________________________________
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO, not in its
individual capacity but solely as Eligible Lender
Trustee,
by
___________________________________
Name:
Title:
SIGNET BANK, Seller
by
__________________________________
Name:
Title:
Acknowledged and accepted as
of the date first above written:
THE BANK OF NEW YORK,
not in its individual
capacity but solely as
Indenture Trustee,
by
_______________________
Name:
Title:
B-4
<PAGE>
SCHEDULE A
TO THE
TRANSFER AGREEMENT NO. ___
[List of Additional Student Loans
and their related Subsequent Cutoff Dates]
B-5
<PAGE>
ANNEX A
TO THE TRANSFER AGREEMENT
BILL OF SALE
For value received, in accordance with the Loan Sale Agreement (the
"Loan Sale Agreement") dated as of [ ], 1996, among Signet Bank, as
seller (the "Seller"), Signet Student Loan Trust 1996-A (the "Trust") and The
First National Bank of Chicago, not in its individual capacity but solely as
Eligible Lender Trustee (the "Eligible Lender Trustee") ratified by the Transfer
Agreement No. ____ dated as of ______, ______ (the "Transfer Agreement") among
the Seller, the Trust and the Eligible Lender Trustee, the Seller does hereby
sell, assign, transfer and otherwise convey unto the Eligible Lender Trustee on
behalf of the Trust, without recourse (subject to the obligations set forth in
the Loan Sale Agreement), all right, title and interest in and to (i) the
Additional Student Loans and all obligations of the Obligors thereunder,
together with all documents, the related Student Loan Files and all rights and
privileges related thereto, (ii) all payments and collections received
thereunder, on and after the Subsequent Cutoff Date and (iii) all proceeds of
any and all of the foregoing (including but not limited to proceeds derived from
the voluntary or involuntary conversion of any of the Additional Student Loans
into cash or other liquidated property, such as proceeds from the applicable
Guarantee Agreement). The foregoing sale does not constitute and is not
intended to result in any assumption by the Eligible Lender Trustee or the Trust
of any obligation of the Seller to the borrowers of the Additional Student Loans
or any other person in connection with the Additional Student Loans or any
agreement or instrument relating to any of them.
In addition, the undersigned, by execution of this instrument, hereby
endorses the promissory notes evidencing each Additional Student Loan described
in Schedule A to the Transfer Agreement in favor of the Eligible Lender Trustee
on behalf of the Trust, without recourse (subject to the obligations set forth
in the Loan Sale Agreement) against the undersigned. This endorsement may be
effected by attaching a facsimile hereof to each or any of such promissory
notes.
This Assignment is made pursuant to and upon the representations,
warranties and agreements on the part of the undersigned contained in the Loan
Sale Agreement and the Transfer Agreement and is to be governed by the Loan Sale
Agreement and the Transfer Agreement.
B-6
<PAGE>
Capitalized terms used but not defined herein shall have the meaning
assigned to them in the Transfer Agreement.
IN WITNESS WHEREOF, the undersigned has caused this Bill of Sale to be
duly executed as of ________________, ______.
SIGNET BANK, as Seller
by
___________________________
Name:
Title:
B-7
<PAGE>
EXHIBIT C
TO THE LOAN SALE AGREEMENT
1. Characteristics of Financed Student Loans. Each Financed Student
-----------------------------------------
Loan (A) was originated in the United States of America, its territories,
its possessions or other areas subject to its jurisdiction by an "eligible
lender" under the Higher Education Act in the ordinary course of its
business to an eligible borrower under applicable law and agreements and
was fully and properly executed by the parties thereto, (B) was originated
or acquired by the Seller in the ordinary course of its business, and (C)
provides or, when the payment schedule with respect thereto is determined,
will provide for payments on a periodic basis that fully amortizes the
principal amount of such Financed Student Loan by its maturity, as such
maturity may be modified in accordance with any applicable deferral or
forbearance periods granted in accordance with applicable laws and
restrictions, including those of the Higher Education Act or the applicable
Guarantee Agreement, and yield interest at the rate applicable thereto.
Each Financed Student Loan is guaranteed by an eligible guarantor under the
Higher Education Act and qualifies the holder thereof to receive Interest
Subsidy Payments (other than unsubsidized SLS Loans, unsubsidized Stafford
Loans, and those Consolidation Loans for which the related loan application
was submitted prior to January 1, 1993) and Special Allowance Payments from
the Department and Guarantee Payments from the applicable Guarantor and
qualifies the applicable Guarantor to receive reinsurance payments thereon
from the Department. No Financed Student Loan that is a Consolidation Loan
was originated less than 180 days prior to the Cutoff Date or the
applicable Subsequent Cutoff Date.
2. Schedule of Financed Student Loans. The information set forth in
----------------------------------
Schedule A to this Agreement is true and correct in all material respects
as of the opening of business on the Cutoff Date. With respect to any
Additional Student Loan conveyed to the Issuer after the Closing Date,
information for each category set forth in Schedule A has been provided
with respect to such loan and such information is true and correct in all
material respects, as of the date of the opening of business on the
applicable Subsequent Cutoff Date. No selection procedures believed to be
adverse to the Noteholders or the Certificateholders were utilized in
selecting any Financed Student Loan. The computer tape regarding the
Initial Financed Student Loans made available to the Issuer and its assigns
is true and correct in all material respects as of the Cutoff Date and,
after the Closing Date, any computer tape regarding any Additional Student
Loan made available to the Issuer and its assigns is true and correct in
all
C-1
<PAGE>
material respects as of the applicable Subsequent Cutoff Date.
3. Compliance with Law. Each Financed Student Loan complied at the
-------------------
time of origination and at the time of the execution of this Agreement or
the applicable Transfer Agreement or Assignment, as the case may be, in all
material respects with all applicable requirements of local, state, and
federal laws, rules and regulations which govern the making of such
Financed Student Loan including the requirements of the applicable
Guarantee Agreement.
4. Binding Obligation. The terms and conditions of each Financed
------------------
Student Loan are consistent with the application of the Borrower, all
signatures for the Financed Student Loans are genuine and the Borrower Note
evidencing each Financed Student Loan has been duly executed and delivered
and constitutes the legal, valid, and binding obligation of the Borrower
enforceable in accordance with its terms.
5. No Defenses. No right of rescission, setoff, counterclaim, or
-----------
defense has been asserted or threatened or exists with respect to any
Financed Student Loan.
6. No Default. No Financed Student Loan has a payment that is more
----------
than 180 days overdue as of the Cutoff Date or more than 120 days overdue
as of the applicable Subsequent Cutoff Date, as the case may be, and,
except as permitted in this paragraph, no default, breach, violation or
event permitting acceleration under the terms of any Financed Student Loan
has occurred; and, except for payment defaults continuing for a period of
not more than 180 days or 120 days, as applicable, no continuing condition
that with notice or the lapse of time or both would constitute a default,
breach, violation or event permitting acceleration under the terms of any
Financed Student Loan has arisen; and the Seller has not waived and shall
not waive any of the foregoing other than as permitted by the Basic
Documents.
7. Title. It is the intention of the Seller that the transfer and
-----
assignment herein contemplated constitute a sale of the Financed Student
Loans from the Seller to the Eligible Lender Trustee on behalf of the
Issuer and that the beneficial interest in and title to such Financed
Student Loans not be part of the estate of the Seller in the event of the
appointment of a receiver with respect to the Seller. Immediately prior to
the transfer and sale of each Financed Student Loan to the Trust, each
Borrower Note is owned by the Seller and the Seller has good title to each
Financed Student Loan, free and clear of any lien, charge, encumbrance, or
other interest therein and immediately upon the transfer and sale of such
Financed Student Loan to the Trust, the Eligible Lender Trustee on behalf
of the Issuer
C-2
<PAGE>
will have good title to such Financed Student Loan free and clear of any
lien, charge, encumbrance, or other interest therein except as contemplated
by the Basic Documents. The Seller's computer files relating to the
Financed Student Loans have been marked to indicate that such Financed
Student Loans have been sold to the Trust.
8. All Filings Made. All filings (including UCC filings) necessary
----------------
in any jurisdiction to give the Eligible Lender Trustee on behalf of the
Issuer a first perfected ownership interest in the Financed Student Loans,
and to give the Indenture Trustee a first perfected security interest
therein, have been made.
9. No Bankruptcies. No Borrower of any Financed Student Loan as of
---------------
the Cutoff Date or the applicable Subsequent Cutoff Date (in the case of
Additional Student Loans) was noted in the related Student Loan File as
being currently involved in a bankruptcy proceeding.
10. Lawful Assignment. No Financed Student Loan has been originated
-----------------
in, or is subject to the laws of, any jurisdiction under which the
origination, sale, transfer and assignment of such Financed Student Loan or
any Financed Student Loan under this Agreement, each Transfer Agreement or
the Indenture is unlawful, void or voidable.
11. One Original. There is only one original executed copy of the
------------
promissory note evidencing each Financed Student Loan.
12. Accounts. Each Financed Student Loan may be pledged or
--------
transferred as an "account" as defined in the UCC.
C-3
<PAGE>
EXHIBIT D
TO THE LOAN SALE AGREEMENT
1. Organization and Good Standing. The Seller has been organized
------------------------------
and is existing as a banking corporation in good standing under the laws of
the Commonwealth of Virginia and is authorized to do business in every
state in which it is doing business as well as the state in which it is
organized and incorporated.
2. Power and Authority of the Seller. The Seller has the corporate
---------------------------------
power and authority to execute and deliver this Agreement and to carry out
its terms; the Seller has full corporate power and authority to sell and
assign the property to be sold and assigned to and deposited with the
Issuer (or with the Eligible Lender Trustee on behalf of the Issuer) and
the Seller has duly authorized such sale and assignment to the Issuer (or
to the Eligible Lender Trustee on behalf of the Issuer) by all necessary
corporate action; and the execution, delivery and performance of this
Agreement have been duly authorized by the Seller by all necessary
corporate action.
3. Binding Obligation. This Agreement has been executed and
------------------
delivered by the Seller and, assuming authorization, execution, and
delivery by the other parties thereto, this Agreement constitutes a valid
obligation of the Seller enforceable against it in accordance with the
express terms of this Agreement, except as enforcement thereof may be
limited by the bankruptcy, insolvency, reorganization, moratorium,
liquidation, readjustment of debt, or other federal or state laws or
equitable principles relating to or affecting the enforcement of creditor's
rights or the rights of creditors of banks the deposit accounts of which
are subject to the FDIC.
4. No Violation. The consummation of the transactions contemplated
------------
by this Agreement or the Administration Agreement and the fulfillment of
the terms hereof or thereof do not conflict with, result in any breach of
any of the terms and provisions of, nor constitute (with or without notice
or lapse of time or both) a default under, the articles of incorporation or
by-laws of the Seller, or any material indenture, agreement or other
instrument to which the Seller is a party or by which it shall be bound;
nor result in the creation or imposition of any Lien upon any of its
properties pursuant to the terms of any such indenture, agreement or other
instrument (other than pursuant to the Basic Documents); nor violate any
law or, to the knowledge of the Seller, any order, rule or regulation
applicable to the Seller of any court or of any Federal or state regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the
D-1
<PAGE>
Seller or its properties. The consummation of the transactions
contemplated by this Agreement or by the Administration Agreement and the
fulfillment of the terms hereof and thereof will not result in the loss of
any Guarantee Payments by the Trust or any reinsurance payments with
respect to any Financed Student Loans by the applicable Guarantor.
5. No Proceedings. There is no action, suit, claim, investigation,
--------------
or proceeding, in any such case whether pending or to the knowledge of the
Seller, threatened against the Seller before any court, governmental
agency, or arbitrator (i) asserting the invalidity of this Agreement, the
Indenture or any of the other Basic Documents, the Notes or the
Certificates, (ii) seeking to prevent the issuance of the Notes or the
Certificates or the consummation of any transactions contemplated by this
Agreement, the Indenture or any of the other Basic Documents, (iii) seeking
any determination or ruling that could reasonably be expected to have a
material and adverse effect on the performance by the Seller of its
obligations under, or the validity or enforceability of, this Agreement,
the Indenture, any of the other Basic Documents, the Notes or the
Certificates or (iv) seeking to affect adversely the Federal or state
income tax attributes of the Issuer, the Notes or the Certificates.
6. All Consents. No action, including, without limitation, the
------------
granting or issuing of any consent, permit, license, approval, or
authorization which is required to be made on or prior to the date of this
Agreement in connection with the sale of Financed Student Loans under this
Agreement (with the possible exception of routine filings which, if not
made, will not render the Seller liable to any material penalties or will
not result in the transactions contemplated by this Agreement being subject
to challenge) is required.
D-2
<PAGE>
Exhibit 99.2
B&W Draft
12/10/96
================================================================================
MASTER SERVICING AGREEMENT
among
SIGNET STUDENT LOAN TRUST 1996-A,
as Issuer,
SIGNET BANK,
as Master Servicer,
and
THE FIRST NATIONAL BANK OF CHICAGO,
not in its individual capacity but solely
as Eligible Lender Trustee,
Dated as of [ , 1996]
================================================================================
<PAGE>
MASTER SERVICING AGREEMENT dated as of [ , 1996], among
SIGNET STUDENT LOAN TRUST 1996-A, a Delaware trust (the
"Issuer"), SIGNET BANK, a Virginia banking corporation, as master
servicer (the "Master Servicer"), and THE FIRST NATIONAL BANK OF
CHICAGO, a national banking association, solely as eligible
lender trustee and not in its individual capacity (the "Eligible
Lender Trustee").
WHEREAS the Issuer desires to purchase from the Master Servicer acting
in its capacity as Seller a portfolio of federally reinsured student loans
originated or acquired in the ordinary course of business by the Seller;
WHEREAS the Eligible Lender Trustee is willing to hold legal title to,
and serve as eligible lender trustee with respect to such student loans on
behalf of the Issuer; and
WHEREAS the Master Servicer is willing to service such student loans
and undertake certain administrative functions with respect thereto.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I
Definitions and Usage
---------------------
Capitalized terms used but not defined herein are defined in Appendix
A to the Administration Agreement, dated as of [ ], 1996 (the
"Administration Agreement") among the Issuer, Signet Bank, as Seller and the
Eligible Lender Trustee, which also contains rules as to usage and construction
that shall be applicable herein.
ARTICLE II
Custody of Financed Student Loans
---------------------------------
SECTION 2.01. Custody of Student Loan Files.
-----------------------------
(a) To assure uniform quality in servicing the Financed Student Loans and to
reduce administrative costs, the Issuer hereby revocably appoints the Master
Servicer, and the Master Servicer hereby accepts such appointment, to act for
the benefit of the Issuer and the Indenture Trustee as Custodian of the
following
<PAGE>
documents or instruments which are hereby constructively delivered to the
Indenture Trustee, as pledgee of the Issuer (or will be constructively delivered
to the Indenture Trustee, as pledgee of the Issuer in the case of Additional
Student Loans, as of the applicable Transfer Date) with respect to each Financed
Student Loan:
(i) the original fully executed copy of the note evidencing the
Financed Student Loan (including the original loan application fully
executed by the Borrower); and
(ii) any and all other documents and computerized records that the
Master Servicer or any Subservicer shall keep on file, in accordance with
its customary procedures, relating to such Financed Student Loan or any
Obligor with respect thereto.
(b) To assure uniform quality in servicing the Financed Student Loans
and to reduce administrative costs, the Issuer and the Indenture Trustee
acknowledge that, subject to the provisions of Section 3.12, the Master Servicer
may appoint one or more Subservicers to act as a subcustodian (each, a
"Subcustodian") of the Student Loan Files being subserviced by such Subservicer
(the "Related Student Loan Files") pursuant to the terms of a Subservicing
Agreement which satisfies the criteria specified in Section 3.12.
SECTION 2.02. Duties of Master Servicer as Custodian. (a)
--------------------------------------
Safekeeping. The Master Servicer shall maintain custody, or shall cause one or
- -----------
more Subcustodians to maintain custody, of the Student Loan Files for the
benefit of the Issuer and the Indenture Trustee and maintain, or cause the
Subcustodians to maintain, such accurate and complete accounts, records and
computer systems pertaining to each Student Loan File as shall enable the Issuer
to comply with the Basic Documents. In performing its duties as custodian the
Master Servicer shall act, and shall cause each Subcustodian to act, with
reasonable care, using that degree of skill and attention that is the customary
and usual standard of practice of prudent student loan servicers with respect to
the student loan files relating to all comparable student loans that the Master
Servicer owns or services or that such Subservicer services, as the case may be,
and shall ensure that it complies, and cause each Subcustodian to comply, with
all applicable Federal and State laws, including the Higher Education Act, with
respect thereto. The Master Servicer shall conduct, or cause to be conducted,
periodic audits of the Student Loan Files and of the related accounts, records
and computer systems, in such a manner as shall enable the Issuer or the
Indenture Trustee to verify the accuracy of the Master Servicer's record
keeping. The Master Servicer shall promptly report to the Issuer and the
2
<PAGE>
Indenture Trustee any failure to hold the Student Loan Files and maintain its
accounts, records and computer systems as herein provided and promptly take
appropriate action to remedy any such failure. Nothing herein shall be deemed
to require an initial review or any periodic review by the Issuer, the Eligible
Lender Trustee or the Indenture Trustee of the Student Loan Files.
(b) Maintenance of Records. The Master Servicer shall maintain any
----------------------
Student Loan Files held by it as Custodian at one of the locations specified in
Schedule A to this Agreement, and shall cause each Subcustodian, if any, to
maintain the Related Student Loan Files at the office specified opposite such
Subcustodian's name in Schedule B to this Agreement or at such other office as
shall be specified by written notice to the Issuer and the Indenture Trustee not
later than 90 days after any change in location. Upon reasonable prior notice
of not less than three Business Days, the Master Servicer shall make available
to the Issuer and the Indenture Trustee or their respective duly authorized
representatives, attorneys or auditors a list of locations of the Student Loan
Files and the related accounts, records and computer systems at such times
during normal business hours as the Issuer or Indenture Trustee shall instruct.
(c) Release of Documents. Upon instruction from the Indenture
--------------------
Trustee, the Master Servicer shall, as soon as practicable, release, or shall
cause to be released, any Student Loan File to the Indenture Trustee, the
Indenture Trustee's agent, or the Indenture Trustee's designee, as the case may
be, at such place or places as the Indenture Trustee may designate.
SECTION 2.03. Instructions; Authority To Act. The Master Servicer
------------------------------
shall be deemed to have received proper instructions with respect to the Student
Loan Files upon its receipt of written instructions signed by a Responsible
Officer of the Indenture Trustee.
SECTION 2.04. Custodian's Indemnification. The Master Servicer as
---------------------------
Custodian shall pay for any actual loss, liability or expense, including
reasonable attorneys' fees, that may be imposed on, incurred by or asserted
against the Issuer, the Eligible Lender Trustee or the Indenture Trustee or any
of their officers, directors, employees and agents as a result of any improper
act or omission in any way relating to the maintenance and custody by the Master
Servicer as Custodian of the Student Loan Files or any Subcustodian as required
by this Agreement where the final determination that any such improper act or
omission by the Master Servicer or any Subcustodian resulted in such loss,
liability or expense is established by a court of law, by an arbitrator, or by
way of settlement agreed to by the Master
3
<PAGE>
Servicer; provided, however, that the amount of any liability with respect to
-------- -------
any Financed Student Loan shall not exceed the Purchase Amount thereof, plus any
related Interest Subsidy Payments and Special Allowance Payments not received
with respect to such loan; and provided, further, that the Master Servicer shall
-------- -------
not be liable to the Eligible Lender Trustee for any portion of any such amount
resulting from the willful misfeasance, bad faith or negligence of the Eligible
Lender Trustee and the Master Servicer shall not be liable to the Indenture
Trustee for any portion of any such amount resulting from the willful
misfeasance, bad faith or negligence of the Indenture Trustee. This provision
shall not be construed to limit the Master Servicer's or any other party's
rights, obligations, liabilities, claims or defenses which arise as a matter of
law or pursuant to any other provision of this Agreement.
SECTION 2.05. Effective Period and Termination. (a) The appointment
--------------------------------
of the Master Servicer as Custodian shall become effective as of the Closing
Date and shall continue in full force and effect for so long as the Custodian
shall remain the Master Servicer hereunder. If any Person acting as Master
Servicer shall resign as Master Servicer in accordance with the provisions of
this Agreement or if all the rights and obligations of any Person acting as
Master Servicer shall have been terminated under Section 6.01, the appointment
of such Person as Custodian shall be terminated simultaneously with the
effectiveness of such resignation or termination. As soon as practicable on or
after any resignation or termination of such appointment (and in any event
within (i) 30 Business Days, with respect to the portion of the Student Loan
Files consisting of electronic records and information, and (ii) 90 Business
Days, with respect to the remaining portion of the Student Loan Files, in each
case other than any Student Loan Files held by a Subcustodian), such Person
shall deliver possession of the Student Loan Files to the Indenture Trustee or
the Indenture Trustee's agent at such place or places as the Indenture Trustee
may reasonably designate. The resigning or terminated Master Servicer will
continue to hold the Student Loan Files as agent of the Indenture Trustee until
the Student Loan Files are transferred. The termination of the Master Servicer
as Custodian shall not, absent a breach by a Subcustodian of its Subservicing
Agreement in accordance with the provisions thereof, result in the termination
of any such Subcustodian.
(b) The appointment of a Subcustodian by the Master Servicer shall
become effective as of the date specified in the related Subservicing Agreement
and shall continue in full force and effect with respect to each such
Subcustodian and its Related Student Loan Files for so long as such Subcustodian
is a
4
<PAGE>
Subservicer of the Student Loans related to such Student Loan Files. As soon as
practicable on or after any termination of the appointment of any Subcustodian
(and in any event within (i) 30 Business Days, with respect to that portion of
the Related Student Loan Files consisting of electronic records and information,
and (ii) 90 Business Days, with respect to the remaining portion of the Related
Student Loan Files), the Master Servicer shall cause such terminated
Subcustodian to deliver the Related Student Loan Files to the Master Servicer at
such place or places as the Master Servicer may reasonably designate.
ARTICLE III
Administration and Servicing of Student Loans
---------------------------------------------
SECTION 3.01. Duties of Master Servicer; Appointment of Subservicers.
------------------------------------------------------
The Master Servicer, for the benefit of the Issuer (to the extent provided
herein), shall be responsible for the management, servicing and administration
of the Financed Student Loans and for making collections on the Financed Student
Loans and shall use reasonable care, using that degree of skill and attention
that the Master Servicer exercises with respect to all comparable Student Loans
that it services. The Master Servicer may, at any time, appoint one or more
Subservicers to perform all or a portion of its obligations as Master Servicer
hereunder pursuant to the terms of a Subservicing Agreement which satisfies the
criteria specified in Section 3.12. The Master Servicer shall cause each
Subservicer to manage, service and administer the Financed Student Loans and
make collections on the Financed Student Loans for which such Subservicer is
responsible pursuant to the terms of the applicable Subservicing Agreement
(other than collection of any Interest Subsidy Payments and Special Allowance
Payments, which the Eligible Lender Trustee will perform on behalf of the Trust)
and shall cause each Subservicer to use that degree of skill and attention that
is the customary and usual standard of practice of prudent student loan
servicers with respect to all comparable Student Loans owned or serviced by such
Subservicer. Without limiting the generality of the foregoing or of any other
provision set forth in this Agreement and notwithstanding any other provision to
the contrary set forth herein, the Master Servicer shall be responsible for the
management, servicing, administration and making collections with respect to the
Financed Student Loans (other than collection of any Interest Subsidy Payments
and Special Allowance Payments, which the Eligible Lender Trustee will perform
on behalf of the Trust) in accordance with, and otherwise in compliance with,
all applicable Federal and state laws, including any applicable standards,
guidelines and requirements of the Higher Education Act and any Guarantee
Agreement, the failure to comply with which
5
<PAGE>
would adversely affect the eligibility of one or more of the Financed Student
Loans for Federal reinsurance or Interest Subsidy Payments, Special Allowance
Payments or Guarantee Payments or would have an adverse effect on the
Certificateholders or the Noteholders. The Master Servicer also hereby
acknowledges that its obligation to service the Financed Student Loans includes
those Additional Student Loans conveyed to the Eligible Lender Trustee on behalf
of the Trust pursuant to Section 2.02 of the Loan Sale Agreement and each
related Transfer Agreement, a copy of which shall be delivered to the Master
Servicer by the Seller promptly upon execution thereof; provided that any
--------
failure by the Seller to so deliver a Transfer Agreement shall not affect the
Master Servicer's obligations hereunder to service all the Financed Student
Loans.
The Master Servicer's duties shall include collection and posting of
all payments, responding to inquiries of borrowers on such Financed Student
Loans, monitoring borrowers' status, making required disclosures to borrowers,
investigating delinquencies, sending payment coupons to borrowers and otherwise
establishing repayment terms, reporting tax information to borrowers, if
applicable, accounting for collections and furnishing monthly and annual
statements with respect thereto to the Administrator. The Master Servicer shall
maintain, and shall cause each Subservicer to maintain, its eligibility as a
third-party servicer under the Higher Education Act. Subject to the provisions
of Section 3.02, the Master Servicer shall follow its customary standards,
policies and procedures in performing its duties as Master Servicer. Without
limiting the generality of the foregoing, the Master Servicer is authorized and
empowered to cause the execution and delivery, on behalf of itself, the Issuer,
the Eligible Lender Trustee, the Indenture Trustee, the Certificateholders and
the Noteholders or any of them, instruments of satisfaction or cancellation, or
partial or full release or discharge, and all other comparable instruments, with
respect to such Financed Student Loans; provided, however, that the Master
-------- -------
Servicer agrees that it will not (a) permit any rescission or cancellation of a
Financed Student Loan except as ordered by a court of competent jurisdiction or
governmental authority or as otherwise consented to in writing by the Eligible
Lender Trustee and the Indenture Trustee or (b) reschedule, revise, defer or
otherwise compromise with respect to payments due on any Financed Student Loan
except pursuant to any applicable Deferral or Forbearance periods or otherwise
in accordance with all applicable standards, guidelines and requirements with
respect to the servicing of the Financed Student Loans including Principal
Distribution Adjustments; provided further, however, that the Master Servicer
---------------- -------
shall not permit any decrease of the interest rate on, or the principal amount
payable with respect to, any Financed Student Loan, except
6
<PAGE>
as required by applicable Federal and state laws, including any applicable
standards, guidelines and requirements of the Higher Education Act or pursuant
to Incentive Programs as provided for pursuant to the Administration Agreement.
The Master Servicer, for the benefit of the Issuer and the Indenture
Trustee (to the extent provided herein), shall promptly and routinely furnish,
or shall cause any Subservicer to furnish, the Eligible Lender Trustee and the
Indenture Trustee with copies of all material reports, records, and other
documents and data as required by this Agreement or as may otherwise be required
by the Higher Education Act. All material corres pondence received by the
Master Servicer, or any Subservicer relating to individual Student Loans shall
be maintained in hard copy, microcopy or electronic form or in summary form in
an automated history file established by the Master Servicer. The Master
Servicer shall furnish, or shall cause any Subservicer to furnish, in good
condition all forms and supplies as specified in this Agreement and any
Schedules hereto. The Eligible Lender Trustee and the Indenture Trustee may
transmit Financed Student Loan account data to the Master Servicer on these
forms or by any other mutually acceptable means. In performing its duties
hereunder, the Master Servicer will be guided by and comply with the Higher
Education Act and applicable requirements of any Guarantor. The Master Servicer
agrees to produce, or cause any Subservicer to produce, a clear and precise
audit trail for each Financed Student Loan and to comply, or cause any
Subservicer to comply, with such other reporting, servicing, and operating
standards as are contained in this Agreement.
The Eligible Lender Trustee on behalf of the Issuer hereby grants a
power of attorney and all necessary authorization to the Master Servicer, to
maintain, or cause any Subservicer to maintain, any and all collection
procedures with respect to the Financed Student Loans, including filing,
pursuing and recovering claims against the Guarantors for Guarantee Payments and
taking any steps to enforce such Financed Student Loans such as commencing a
legal proceeding to enforce a Financed Student Loan in the name of the Issuer,
the Eligible Lender Trustee, the Indenture Trustee, the Certificateholders or
the Noteholders. The Eligible Lender Trustee or the Indenture Trustee shall
upon the written request of the Master Servicer or the Administrator furnish the
Master Servicer or the Administrator with (or, upon the written request of the
Master Servicer, furnish a Subservicer with) any other powers of attorney and
other documents reasonably necessary or appropriate to enable the Master
Servicer, the Administrator or such Subservicer to carry out their servicing and
administrative duties.
7
<PAGE>
SECTION 3.02. Collection of Student Loan Payments. (a) The Master
-----------------------------------
Servicer shall make, or shall cause any Subservicer to make, all reasonable
efforts (including all efforts that may be specified under the Higher Education
Act or any Guarantee Agreement) to collect all payments called for under the
terms and provisions of the Financed Student Loans as and when the same shall
become due and shall follow such collection procedures as it follows with
respect to all comparable Student Loans that it services or shall cause any
Subservicer to follow such collection procedures as are consistent with the
customary and usual standard of practice of prudent student loan servicers with
respect to comparable student loans. The Master Servicer shall allocate, or
shall cause any Subservicer to allocate, collections with respect to the
Financed Student Loans between principal and interest in accordance with the
terms of each such loan. The Master Servicer may, or may permit any
Subservicer, in its discretion, to waive any late payment charge or any other
fees that may be collected in the ordinary course of servicing a Financed
Student Loan.
(b) The Master Servicer shall, or shall cause any Subservicer to, (i)
make reasonable efforts to claim, pursue and collect all Guarantee Payments from
the Guarantors pursuant to the Guarantee Agreements with respect to any of the
Financed Student Loans as and when the same shall become due and payable, (ii)
comply with the Higher Education Act and all other applicable laws and
agreements with respect to claiming, pursuing and collecting such payments and
(iii) follow such practices and procedures as it follows with respect to all
comparable guarantee agreements and student loans that it services. In
connection therewith, the Master Servicer is hereby authorized and empowered to
convey, or to permit any Subservicer to convey, to any Guarantor the note and
the related Student Loan File representing any Financed Student Loan in
connection with submitting a claim to such Guarantor for a Guarantee Payment in
accordance with the terms of the applicable Guarantee Agreement.
(c) The Eligible Lender Trustee shall, with the assistance of the
Master Servicer as set forth below and on behalf of the Issuer, make reasonable
efforts to claim, pursue and collect all Interest Subsidy Payments and Special
Allowance Payments from the Department with respect to any of the Financed
Student Loans as and when the same shall become due and payable, shall comply
with all applicable laws and agreements with respect to claiming, pursuing and
collecting such payments and shall follow such practices and procedures as the
Master Servicer follows with respect to Student Loans serviced by it. All
amounts so collected by the Eligible Lender Trustee with respect to Financed
Student Loans shall constitute Monthly Available Funds for the applicable
Monthly Collection Period and Available
8
<PAGE>
Funds for the applicable Collection Period, and shall be deposited into the
Collection Account in accordance with Section 4.01. In connection therewith,
the Master Servicer shall prepare and file, or shall cause any Subservicer to
prepare and file, with the Department on a timely basis all claims forms and
other documents and filings necessary or appropriate in connection with the
claiming of Interest Subsidy Payments and Special Allowance Payments on behalf
of the Eligible Lender Trustee and shall otherwise assist the Eligible Lender
Trustee in pursuing and collecting such Interest Subsidy Payments and Special
Allowance Payments from the Department. The Eligible Lender Trustee shall upon
the written request of the Master Servicer furnish the Master Servicer, or any
Subservicer, with any power of attorney and other documents reasonably necessary
or appropriate to enable the Master Servicer, or such Subservicer, to prepare
and file such claims forms and other documents and filings.
(d) The Eligible Lender Trustee will permit trusts, other than the
Trust, established by the Seller to securitize student loans to use the
Department lender identification number applicable to the Trust. In such event,
the Eligible Lender Trustee may claim and collect Interest Subsidy Payments and
Special Allowance Payments with respect to Financed Student Loans in the Trust
and student loans in such other trusts using such common lender identification
number. Notwithstanding anything herein or in the Basic Documents to the
contrary, any amounts assessed against payments (including, but not limited to,
Interest Subsidy Payments and Special Allowance Payments) due from the
Department to any such other trust using such common lender identification
number as a result of amounts (including, but not limited to, any potential
origination fees) owing to the Department from the Trust will be deemed for all
purposes hereof and of the Basic Documents (including for purposes of
determining amounts paid by the Department with respect to the student loans in
the Trust and such other trust) to have been assessed against the Trust and
shall be deducted by the Eligible Lender Trustee or the Master Servicer and paid
to such other trust from any collections made by them which would otherwise have
been payable to the Collection Account for the Trust. If so specified in the
servicing agreement applicable to any such other trust, any amounts assessed
against payments due from the Department to the Trust as a result of amounts
owing to the Department from such other trust using such common lender
identification number will be deemed to have been assessed against such other
trust and will be deducted by the Eligible Lender Trustee or the Master Servicer
from any collections made by them which would otherwise be payable to the
collection account for such other trust and paid to the Trust.
9
<PAGE>
SECTION 3.03. Realization upon Student Loans. For the benefit of the
------------------------------
Issuer, the Master Servicer shall use, or shall cause any Subservicer to use,
reasonable efforts consistent with the Master Servicer's or such Subservicer's
servicing practices with respect to all comparable Student Loans owned or
serviced by it, including all efforts that may be specified under the Higher
Education Act or any Guarantee Agreement, in the servicing of any delinquent
Financed Student Loans.
SECTION 3.04. No Impairment. The Master Servicer shall not impair,
-------------
nor shall it permit any Subservicer to impair, the rights of the Issuer, the
Eligible Lender Trustee, the Indenture Trustee, the Certificateholders or the
Noteholders in the Financed Student Loans.
SECTION 3.05. Purchase of Student Loans; Reimbursement. Upon the
----------------------------------------
discovery by the Master Servicer, the Eligible Lender Trustee, the Indenture
Trustee or the Seller of any breach pursuant to Sections 3.01, 3.02, 3.03, 3.04
or 3.12(a) hereof the party discovering the breach shall give prompt written
notice to the others. If the breach is not cured within 120 days after the
Master Servicer becomes aware or receives written notice (whichever is earlier)
of such breach, the Master Servicer shall purchase or arrange for the purchase
of any Financed Student Loan in which the interests of the Noteholders, the
Certificateholders, the Issuer, the Indenture Trustee or the Eligible Lender
Trustee are materially and adversely affected by such breach as of the first day
succeeding the end of such 120-day period that is the last day of a Monthly
Collection Period (it being understood that any such breach that does not affect
any Guarantor's obligation to guarantee payment of such Student Loan will not be
considered to have a material adverse effect for this purpose and it being
further understood that any dispute as to whether a Guarantor's obligation has
been so affected so as to create such a material adverse effect, shall be
resolved, for so long as the Notes are Outstanding, by the Indenture Trustee,
whose determination shall be dispositive, and after the Notes are no longer
Outstanding by the Eligible Lender Trustee, whose determination shall then be
dispositive). In consideration of the purchase of any such Student Loan
pursuant to this Section 3.05, the Master Servicer shall remit, in the manner
specified in Section 4.01, the Purchase Amount and the Issuer shall execute such
assignments and other documents reasonably requested by the Master Servicer in
order to effect the transfer of such Student Loan to the Master Servicer or its
designee. In addition, if any such breach by the Master Servicer does not
trigger such a purchase obligation but does result in the refusal by a Guarantor
to guarantee all or a portion of the accrued interest, or the loss (including
any obligation of the Issuer to repay to the Department) of certain Interest
Subsidy
10
<PAGE>
Payments and Special Allowance Payments, with respect to a Financed Student
Loan, then, unless such breach, if curable, is cured within 120 days, the Master
Servicer shall reimburse the Issuer by remitting an amount equal to the sum of
all such nonguaranteed interest amounts and such forfeited Interest Subsidy
Payments and Special Allowance Payments in the manner specified in Section 4.01.
Subject to Section 5.02, the exclusive remedy of the Noteholders, the
Certificateholders, the Issuer, the Indenture Trustee, and the Eligible Lender
Trustee and the entire liability of the Master Servicer for such a breach shall
be limited to requiring the Master Servicer to purchase Financed Student Loans
or to reimburse the Issuer as provided above pursuant to this Section 3.05.
SECTION 3.06. Servicing Fee. The Servicing Fee payable to the Master
-------------
Servicer for each calendar month (the "Servicing Fee") shall be equal to the
product of (i) one-twelfth of ___% and (ii) the Pool Balance as of the close of
business on the last day of the prior calendar month. The Servicing Fee
(together with any portion of the Servicing Fee that remains unpaid from prior
Interest Payment Dates) will be payable on each Interest Payment Date and will
be paid solely out of Monthly Available Funds in the case of each Interest
Payment Date that is not a Distribution Date (and out of Available Funds in the
case of each Distribution Date) and amounts on deposit in the Reserve Account on
such Interest Payment Date (including each Distribution Date) as provided in
Sections 2(d) and 2(e) of the Administration Agreement.
SECTION 3.07. Servicer's Report. On or before the twentieth day of
-----------------
each month (or, if any such day is not a Business Day, on the next succeeding
Business Day), the Master Servicer shall deliver to the Administrator a
servicer's report with respect to the preceding calendar month containing all
information necessary for the Administrator to prepare the Administrator's
Certificate, referred to in Section 2(b)(ii) of the Administration Agreement,
covering such preceding calendar month.
SECTION 3.08. Annual Statement as to Compliance; Notice of Default.
----------------------------------------------------
(a) The Master Servicer shall deliver to the Eligible Lender Trustee and the
Indenture Trustee (with a copy to the Seller), on or before ________ 30 of each
year beginning ________ 30, 1997, an Officers' Certificate of the Master
Servicer, dated as of ___________ 31 of the preceding year, stating that (i) a
review of the activities of the Master Servicer during the preceding 12-month
period (or, in the case of the first such certificate, during the period from
the Closing Date to ________ 31, 1996 and of its performance has been made under
such officers' supervision and (ii) to the best of such
11
<PAGE>
officers' knowledge, based on such review, the Master Servicer has fulfilled all
its obligations under this Agreement in all material respects throughout such
year (or in the case of the first such Officers' Certificate, such shorter
period) or, if there has been a default in the fulfillment of any such
obligation, specifying each such default known to such officers and the nature
and status thereof. The Indenture Trustee shall send a copy of each such
Officers' Certificate and each report referred to in this Section 3.08 to the
Rating Agencies. A copy of each such Officers' Certificate and each report
referred to in this Section 3.08 may be obtained by any Certificateholder,
Certificate Owner, Noteholder or Note Owner by a request in writing to the
Eligible Lender Trustee addressed to its Corporate Trust Office, together with
evidence satisfactory to the Eligible Lender Trustee that such Person is one of
the foregoing parties. Upon the telephone request of the Eligible Lender
Trustee, the Indenture Trustee will promptly furnish the Eligible Lender Trustee
a list of Noteholders as of the date specified by the Eligible Lender Trustee.
(b) The Master Servicer shall deliver to the Eligible Lender Trustee,
the Indenture Trustee, the Seller and the Rating Agencies, promptly after having
obtained knowledge thereof, but in no event later than five Business Days
thereafter, written notice in an Officers' Certificate of the Master Servicer of
any event which with the giving of notice or lapse of time, or both, would
become a Servicer Default under Section 6.01(1) or (2) or would cause the Master
Servicer to fail to meet any Rating Agency Condition.
SECTION 3.09. Annual Independent Certified Public Accountants'
------------------------------------------------
Report. The Master Servicer shall cause a firm of independent certified public
accountants, which may also render other services to the Master Servicer, the
Seller or their Affiliates, to deliver to the Eligible Lender Trustee and the
Indenture Trustee (with a copy to the Seller) within 180 days of the end of the
Master Servicer's regular calendar-year audit period, a report addressed to the
Master Servicer and to the Seller, the Eligible Lender Trustee and the Indenture
Trustee, to the effect that such firm has examined certain documents and records
relating to the servicing of Student Loans (including the Financed Student Loans
under this Agreement) during the preceding year (or, in the case of the first
such report, during the period from the Closing Date to ________ 31, 1997) and
that, on the basis of the accounting and auditing procedures considered
appropriate under the circumstances, such firm is of the opinion that (i) such
Master Servicer is an eligible third party servicer under the Higher Education
Act, and (ii) such servicing was conducted in compliance with the Higher
Education Act and industry standards set forth in such report, except for (x)
such
12
<PAGE>
exceptions as such firm shall believe to be immaterial and (y) such other
exceptions as shall be set forth in such report. The Indenture Trustee shall
send a copy of each such report to the Rating Agencies.
Such report will also indicate that the firm is independent of the
Master Servicer within the meaning of the Code of Professional Ethics of the
American Institute of Certified Public Accountants.
SECTION 3.10. Access to Certain Documentation and Information
-----------------------------------------------
Regarding Financed Student Loans. Upon at least three Business Days' prior
- --------------------------------
notice, the Master Servicer shall provide the Certificateholders and the
Noteholders access to the Student Loan Files in such cases where the
Certificateholders or the Noteholders shall be required by applicable statutes
or regulations to review such documentation, as demonstrated by evidence
satisfactory to the Master Servicer in its reasonable judgment. Access shall be
afforded without charge, but only upon reasonable request and during the normal
business hours at the respective offices of the Master Servicer, or any
Subservicers, as the case may be, where the Student Loan Files are held.
Nothing in this Section shall affect the obligation of the Master Servicer or
any Subservicer to observe any applicable law prohibiting disclosure of
information regarding the Obligors or the right of the Master Servicer not to
disclose any information relating to the strategic plans or opportunities of its
student lending business and the failure of the Master Servicer or any
Subservicer to provide access to information as a result of such obligation or
right shall not constitute a breach of this Section.
SECTION 3.11. Master Servicer Expenses. The Master Servicer shall be
------------------------
required to pay all expenses incurred by it in connection with its activities
hereunder, including fees and disbursements of independent accountants, taxes
imposed on the Master Servicer, and expenses incurred in connection with
distributions and reports to the Administrator, the Certificateholders or the
Noteholders, as the case may be.
SECTION 3.12. Subservicing Agreements. (a) The Master Servicer
-----------------------
hereby represents and warrants that as of the Closing Date it has not entered
into any Subservicing Agreements relating to the servicing of the Financed
Student Loans and the custody of the Related Financed Student Loan Files.
The Master Servicer hereby covenants that (i) each Subservicing
Agreement into which it shall enter shall satisfy the criteria set forth in this
Section 3.12(a); and (ii) as of the date of its execution, each such
Subservicing Agreement will
13
<PAGE>
be enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, moratorium, fraudulent conveyance, reorganization and similar laws
now or hereafter in effect relating to creditors' rights generally and subject
to general principles of equity (whether applied in a proceeding at law or in
equity).
Each Subservicing Agreement shall: (i) provide for custodial and
servicing arrangements for the Related Student Loan Files that do not conflict
in any material respect with the custodial and servicing arrangements
contemplated by this Agreement; (ii) provide that such agreement is enforceable
by the Master Servicer and assignable to and enforceable by any successor Master
Servicer; (iii) permit the termination of the servicing activities of the
Subservicer with respect to any Financed Student Loan being serviced by such
Subservicer and permit the release of the Related Student Loan File from the
custody of such Subservicer in connection with and immediately prior to the sale
of any such Financed Student Loan by or on behalf of the Issuer, the Eligible
Lender Trustee or the Indenture Trustee; (iv) permit the Master Servicer to
terminate the Subservicing Agreement with respect to the custody of the Related
Student Loan Files and the servicing of the Financed Student Loans by a
Subservicer in the event of a breach of such Subservicing Agreement by such
Subservicer; and (v) provide that any compensation payable to any Subcustodian
or Subservicer (including any fees payable in connection with the release of any
Student Loan Files from the custody of such Subservicer or in connection with
the termination of the servicing activities of such Subservicer with respect to
any Financed Student Loans) shall be payable solely by the Master Servicer. The
Master Servicer shall not consent or agree to or permit any amendment or
modification of any Subservicing Agreement which will in any manner materially
adversely affect the rights or security of the Issuer, the Eligible Lender
Trustee, the Indenture Trustee, the Certificateholders or the Noteholders (it
being understood that any amendment or supplement to any such Subservicing
Agreement which would cause such Subservicing Agreement to fail to satisfy the
criteria specified in this Section 3.13(a) will be deemed to have such a
material adverse effect). The Master Servicer shall deliver a copy of each of
the Subservicing Agreements as presently in effect and any amendment or
supplement to any Subservicing Agreement to the Eligible Lender Trustee upon the
execution and delivery of same.
(b) The Master Servicer shall terminate all of the rights and
obligations of a Subservicer with respect to all Financed Student Loans being
serviced by such Subservicer in the event of a breach by such Subservicer of a
Subservicing Agreement if the Master Servicer reasonably considers such
termination to
14
<PAGE>
be in the best interests of the Certificateholders and Noteholders. Upon
termination or expiration of any Subservicing Agreement, the Master Servicer
shall take all appropriate steps to maintain adequate provisions for the
administration, servicing, custody and collection of the Financed Student Loans,
including without limitation, the appointment of any successor Subservicer
pursuant to the terms of a Subservicing Agreement which satisfies the criteria
set forth in Section 3.13(a). The Master Servicer shall notify the Eligible
Lender Trustee, the Indenture Trustee and each Rating Agency if a successor
Subservicer is appointed and shall furnish to the Eligible Lender Trustee a copy
of any additional Subservicing Agreement or any amendment or supplement to any
Subservicing Agreement in connection herewith.
(c) Notwithstanding the provisions of any Subservicing Agreement or
references herein to actions taken or caused to be taken by or through a
Subservicer or otherwise, the Master Servicer shall remain obligated and liable
to the Issuer and the Indenture Trustee for acting as Custodian of the Student
Loan Files and the servicing of the Financed Student Loans in accordance with
this Agreement without diminution of such obligation or liability by virtue of
any such Subservicing Agreement or breach thereof by any Subservicer, the
termination of any such Subservicing Agreement or the inability of the Master
Servicer to cause any such Subservicer to take or refrain from taking any such
action or by virtue of indemnification from the Subservicer, in each case, to
the same extent and under the same terms and conditions as if the Master
Servicer were acting alone as both custodian of the Student Loan Files and
servicer of the Financed Student Loans without the benefit of any Subservicer.
For purposes of this Agreement, the Master Servicer shall be deemed to have
received all amounts received in respect of the Financed Student Loans by any
Subservicer at the time of receipt of such amounts by such Subservicer.
ARTICLE IV
Deposits into the Collection Account
------------------------------------
SECTION 4.01. Deposits into the Collection Account. (a) The Master
------------------------------------
Servicer shall deposit, or cause each Subservicer to deposit, into the
Collection Account (in the case of clauses (i) and (ii) within two Business Days
of receipt of freely available funds therefor):
(i) all identifiable payments received by the Master Servicer or by
any Subservicer on the Financed Student
15
<PAGE>
Loans, including any Guarantee Payments with respect to the Financed
Student Loans;
(ii) all Liquidation Proceeds on the Financed Student Loans;
(iii) the aggregate Purchase Amounts with respect to Purchased Student
Loans, when such amounts are due, and any reimbursement payments required
to be made by the Master Servicer, each as provided in Section 3.05 hereof;
and
(iv) all other amounts required to be deposited into the Collection
Account by the Master Servicer or any Subservicer pursuant to the terms
hereof.
(b) The Eligible Lender Trustee shall deposit into the Collection
Account within two Business Days of the receipt thereof, the aggregate amount of
Interest Subsidy Payments and Special Allowance Payments by it with respect to
the Financed Student Loans.
(c) The Seller shall deposit into the Collection Account the aggregate
Purchase Amount with respect to Purchased Student Loans and all other amounts to
be paid by the Seller under Section 3.02 and 5.01 of the Loan Sale Agreement
when such amounts are due, as provided in Section 3.03 of the Loan Sale
Agreement.
(d) The Indenture Trustee, at the written direction of the
Administrator, shall withdraw from the Pre-Funding Account and deposit into the
Collection Account on each Determination Date during the Funding Period, an
amount equal to the Capitalized Interest Amount for the preceding Collection
Period, as provided in Section 2(f) of the Administration Agreement.
(e) Notwithstanding subsections (a), (b) or (c) of this Section 4.01
any deposits required to be made into the Collection Account pursuant thereto
shall be made directly to the Administrator pursuant to the Administrator's
instructions if the Administrator has delivered an Officers' Certificate to the
Master Servicer and the Eligible Lender Trustee certifying that an Administrator
Deposit Condition has occurred and has not subsequently delivered an Officers'
Certificate reporting the termination of the Administrator Deposit Condition.
16
<PAGE>
ARTICLE V
The Master Servicer
-------------------
SECTION 5.01. Representations of Master Servicer. The Master
----------------------------------
Servicer makes the following representations on which the Issuer is deemed to
have relied in acquiring (through the Eligible Lender Trustee) the Financed
Student Loans and appointing the Master Servicer as master servicer hereunder.
The representations speak as of the execution and delivery of this Agreement and
as of the Closing Date in the case of the Initial Financed Student Loans, and
will be deemed to speak as of the applicable Transfer Date, in the case of the
Additional Student Loans, but shall survive the sale, transfer and assignment of
the Financed Student Loans to the Eligible Lender Trustee on behalf of the
Issuer and the pledge thereof to the Indenture Trustee pursuant to the
Indenture.
(a) Organization and Good Standing. The Master Servicer is duly
------------------------------
organized and validly existing as a banking corporation in good standing
under the laws of the Commonwealth of Virginia, with the power and
authority to own its properties and to conduct its business as such
properties are currently owned and such business is presently conducted,
and has the legal right to service the Financed Student Loans.
(b) Due Qualification. The Master Servicer is duly qualified to do
-----------------
business and has obtained all necessary licenses and approvals in all
jurisdictions in which the ownership or lease of property or the conduct of
its business (including the servicing of the Financed Student Loans as
required by this Agreement) shall require such qualifications.
(c) Power and Authority of the Master Servicer. The Master Servicer
------------------------------------------
has the power and authority to execute and deliver this Agreement and to
carry out its terms, and the execution, delivery and performance of this
Agreement has been duly authorized by the Master Servicer by all necessary
corporate action.
(d) Binding Obligation. This Agreement constitutes a legal, valid and
------------------
binding obligation of the Master Servicer, enforceable in accordance with
its terms, subject to applicable bankruptcy, insolvency, reorganization and
similar laws relating to creditors' rights generally or the rights of
creditors of banks the deposit accounts of which
17
<PAGE>
are insured by the FDIC and subject to general principles of equity.
(e) No Violation. The consummation of the transactions contemplated
------------
by this Agreement and the fulfillment of the terms hereof or thereof do not
conflict with, result in any breach of any of the terms and provisions of,
nor constitute (with or without notice or lapse of time or both) a default
under, the certificate of incorporation or by-laws of the Master Servicer,
or any material indenture, agreement or other instrument to which the
Master Servicer is a party or by which it shall be bound; nor result in the
creation or imposition of any Lien upon any of its properties pursuant to
the terms of any such indenture, agreement or other instrument; nor violate
any law or, to the knowledge of the Master Servicer, any order, rule or
regulation applicable to the Master Servicer of any court or of any Federal
or state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Master Servicer or its
properties. Performance by the Master Servicer of its servicing duties with
respect to the Financed Student Loans, and compliance by the Master
Servicer with the terms of this Agreement, will not result in the loss of
any Guarantee Payments by the Trust or any reinsurance payments with
respect to any Financed Student Loan by the applicable Guarantor.
(f) No Proceedings. There are no proceedings or investigations
--------------
pending against the Master Servicer or, to its best knowledge, threatened
against the Master Servicer, before any court, regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Master Servicer or its properties: (i) asserting the
invalidity of this Agreement or any of the other Basic Documents to which
the Master Servicer is a party, (ii) seeking to prevent the issuance of the
Notes or the Certificates or the consummation of any of the transactions
contemplated by this Agreement, or any of the other Basic Documents, (iii)
seeking any determination or ruling that could reasonably be expected to
have a material and adverse effect on the performance by the Master
Servicer of its obligations under, or the validity or enforceability of,
this Agreement, any of the other Basic Documents, the Notes or the
Certificates or (iv) seeking to affect adversely the Federal or state
income tax attributes of the Issuer, the Notes or Certificates.
(g) All Consents. All authorizations, consents, orders or approvals
------------
of or registrations or declarations with
18
<PAGE>
any court, regulatory body, administrative agency or other government
instrumentality required to be obtained, effected or given by the Master
Servicer in connection with the execution and delivery by the Master
Servicer of this Agreement and the performance by the Master Servicer of
its duties contemplated by this Agreement have in each case been duly
obtained, effected or given and are in full force and effect.
(h) Location of Student Loan Files. The Financed Student Loan Files
------------------------------
are kept in the offices specified in Schedule A, or at such other office
specified in accordance with Section 2.02(b).
SECTION 5.02. Indemnities of Master Servicer. The Master Servicer
------------------------------
shall be liable in accordance herewith only to the extent of the obligations
specifically undertaken by the Master Servicer under this Agreement or which
have been delegated to any Subservicer under any Subservicing Agreement.
The Master Servicer shall pay for any loss, liability or expense,
including reasonable attorney's fees, that may be imposed on, incurred by or
asserted against the Issuer, the Eligible Lender Trustee, the Indenture Trustee,
the Seller, the Administrator, the Certificateholders or the Noteholders or any
of the officers, directors, employees and agents of the Issuer, the Eligible
Lender Trustee, the Indenture Trustee, the Administrator or the Seller to the
extent that such loss, liability or expense arose out of, or was imposed upon
any such Person through, the negligence, willful misfeasance or bad faith of the
Master Servicer in the performance of its obligations and duties under this
Agreement or in the performance of the obligations and duties of any Subservicer
under any Subservicing Agreement or by reason of the reckless disregard of its
obligations and duties under this Agreement or by reason of the reckless
disregard of the obligations of any Subservicer under any Subservicing
Agreement, where the final determination that any such loss, liability or
expense arose out of, or was imposed upon any such Person through, any such
negligence, willful misfeasance, bad faith or recklessness on the part of the
Master Servicer or any Subservicer is established by a court of law, by an
arbitrator or by way of settlement agreed to by the Master Servicer.
Notwithstanding the foregoing, if the Master Servicer is rendered unable, in
whole or in part, by a force outside the control of the parties hereto
(including acts of God, acts of war, fires, earthquakes and other disasters) to
satisfy its obligations under this Agreement, the Master Servicer shall not be
deemed to have breached any such obligation upon delivery of written notice of
such event to the other parties hereto, for so
19
<PAGE>
long as the Master Servicer remains unable to perform such obligation as a
result of such event.
For purposes of this Section, in the event of the termination of the
rights and obligations of Signet as Master Servicer pursuant to Section 6.01, or
a resignation by such Master Servicer pursuant to this Agreement, such Master
Servicer shall be deemed to be the Master Servicer pending appointment of a
successor Master Servicer pursuant to Section 6.02.
The Master Servicer shall pay for any loss, liability or expense,
including reasonable attorney's fees, that may be imposed on, incurred by or
asserted against the Issuer, the Eligible Lender Trustee, the Indenture Trustee,
the Seller, the Administrator, the Certificateholders or the Noteholders or any
of the officers, directors, employees and agents of the Issuer, the Eligible
Lender Trustee, the Indenture Trustee, the Administrator or the Seller to the
extent that such loss, liability or expense arose out of, or was imposed upon
any such Person as a result of any compensation payable to any Subservicer
(including any fees payable in connection with the release of any Student Loan
File from the custody of such Subservicer or in connection with the termination
of the servicing activities of such Subservicer with respect to any Financed
Student Loan) whether pursuant to the terms of any Subservicing Agreement or
otherwise.
Liability of the Master Servicer under this Section shall survive the
resignation or removal of the Eligible Lender Trustee or the Indenture Trustee
or the termination of this Agreement and shall include reasonable fees and
expenses of counsel and expenses of litigation. If the Master Servicer shall
have made any indemnity payments pursuant to this Agreement and the Person to or
on behalf of whom such payments are made thereafter collects any of such amounts
from others, such Person shall promptly repay such amounts to the Master
Servicer, without interest.
SECTION 5.03. Merger or Consolidation of, or Assumption of the
------------------------------------------------
Obligations of, Master Servicer. The Master Servicer hereby agrees that, upon
- -------------------------------
(a) any merger or consolidation of the Master Servicer into another Person, (b)
any merger or consolidation to which the Master Servicer shall be a party
resulting in the creation of another Person, (c) any Person succeeding to the
properties and assets of the Master Servicer substantially as a whole or (d) any
other transfer by the Master Servicer to any Person of the Master Servicer's
student lending business substantially as a whole, the Master Servicer shall (i)
cause such Person (if other than the Master Servicer) to execute an agreement of
assumption to perform every obligation of the
20
<PAGE>
Master Servicer hereunder, (ii) deliver to the Eligible Lender Trustee and
Indenture Trustee an Officers' Certificate and an Opinion of Counsel each
stating that such consolidation, merger, succession or transfer and such
agreement of assumption comply with this Section and that all conditions
precedent provided for in this Agreement relating to such transaction have been
complied with, (iii) cause the Rating Agency Condition to have been satisfied
with respect to such transaction or, in the case of a transfer pursuant to
clause (d) to a Person that is a Non-Code Entity, deliver notice of such
transfer and assumption to each Rating Agency, and (iv) cure any existing
Servicer Default or any continuing event which, after notice or lapse of time or
both, would become a Servicer Default. Upon compliance with the foregoing
requirements, such Person shall be the successor to the Master Servicer under
this Agreement without further act on the part of any of the parties to this
Agreement. Notwithstanding anything herein to the contrary, compliance with
clauses (i), (ii), (iii) and (iv) above shall be conditions to the consummation
of any of the transactions referred to in clause (a), (b), (c) or (d) above.
SECTION 5.04. Limitation on Liability of Master Servicer and Others.
-----------------------------------------------------
Neither the Master Servicer nor any of the directors, officers, employees or
agents of the Master Servicer shall be under any liability to the Issuer, the
Noteholders or the Certificateholders, except as provided under this Agreement,
for any action taken or for refraining from the taking of any action pursuant to
this Agreement or for errors in judgment; provided, however, that this provision
-------- -------
shall not protect the Master Servicer or any such person against any liability
that would otherwise be imposed by reason of willful misfeasance, bad faith or
negligence in the performance of duties or by reason of reckless disregard of
obligations and duties under this Agreement. The Master Servicer and any
director, officer, employee or agent of the Master Servicer may rely in good
faith on any document of any kind prima facie properly executed and submitted by
any person respecting any matters arising under this Agreement.
Except as provided in this Agreement, the Master Servicer shall not be
under any obligation to appear in, prosecute or defend any legal action that
shall not be incidental to its duties to service the Student Loans in accordance
with this Agreement, and that in its opinion may involve it in any expense or
liability; provided, however, that the Master Servicer may undertake any
-------- -------
reasonable action that it may deem necessary or desirable in respect of this
Agreement and the other Basic Documents and the rights and duties of the parties
to this Agreement and the other Basic Documents and the interests of the
21
<PAGE>
Certificateholders under this Agreement and the Noteholders under the Indenture.
SECTION 5.05. Signet Not to Resign as Master Servicer. Subject to
---------------------------------------
the provisions of Section 5.03, Signet shall not resign from the obligations and
duties hereby imposed on it as Master Servicer under this Agreement except upon
determination that the performance of its duties under this Agreement shall no
longer be permissible under applicable law. Notice of any such determination
permitting the resignation of Signet shall be communicated to the Eligible
Lender Trustee, the Indenture Trustee and the Rating Agencies at the earliest
practicable time (and, if such communication is not in writing, shall be
confirmed in writing at the earliest practicable time) and any such
determination shall be evidenced by an Opinion of Counsel to such effect
delivered to the Eligible Lender Trustee and the Indenture Trustee concurrently
with or promptly after such notice. No such resignation shall become effective
until the Indenture Trustee or a Successor Master Servicer shall have assumed
the responsibilities and obligations of Signet in accordance with Section 6.02.
ARTICLE VI
Default
-------
SECTION 6.01. Servicer Default. If any one of the following events
----------------
(a "Servicer Default") shall occur and be continuing:
(a) any failure by the Master Servicer to deliver or cause to be
delivered to the Indenture Trustee for deposit in any of the Trust Accounts
any payment required by the Basic Documents, which failure continues
unremedied for five Business Days after written notice of such failure is
received by the Master Servicer from the Eligible Lender Trustee, the
Indenture Trustee or the Administrator or after discovery of such failure
by an officer of the Master Servicer; or
(b) any failure by the Master Servicer duly to observe or to perform
in any material respect any other covenants or agreements of the Master
Servicer set forth in this Agreement or any other Basic Document, which
failure shall (i) materially and adversely affect the rights of Noteholders
or Certificateholders and (ii) continue unremedied for a period of sixty
(60) days (or for such longer period, not in excess of 120 days, as may be
reasonably necessary to remedy such failure, if the
22
<PAGE>
Indenture Trustee and the Eligible Lender Trustee reasonably believe such
failure is susceptible to cure within such longer period) after the date on
which written notice of such failure, requiring the same to be remedied,
shall have been given (A) to the Master Servicer, by the Indenture Trustee,
the Eligible Lender Trustee or (B) to the Master Servicer, and to the
Indenture Trustee, the Administrator and the Eligible Lender Trustee by
Noteholders or Certificateholders, as applicable, representing not less
than 25% of the Outstanding Amount of the Notes or 25% of the Outstanding
Certificate Balance; or
(c) any limitation, suspension or termination by the Department of the
Master Servicer's eligibility to service Student Loans which materially and
adversely affects its ability to service the Financed Student Loans; or
(d) an Insolvency Event occurs with respect to the Master Servicer;
then, and in each and every case, so long as the Servicer Default shall not have
been remedied, either the Indenture Trustee or the Noteholders of Notes
evidencing not less than 75% of the Outstanding Amount of the Notes by notice
then given in writing to the Master Servicer (and to the Indenture Trustee and
the Eligible Lender Trustee if given by the Noteholders) may terminate all the
rights and obligations (other than the obligations set forth in Section 5.02) of
the Master Servicer under this Agreement. On or after the receipt by the Master
Servicer of such written notice, all authority and power of the Master Servicer
under this Agreement, whether with respect to the Notes, the Certificates or the
Financed Student Loans or otherwise, shall, without further action, pass to and
be vested in the Indenture Trustee or such successor Master Servicer as may be
appointed under Section 6.02; and, without limitation, the Indenture Trustee and
the Eligible Lender Trustee are hereby authorized and empowered to execute and
deliver, for the benefit of the predecessor Master Servicer, as attorney-in-fact
or otherwise, any and all documents and other instruments, and to do or
accomplish all other acts or things necessary or appropriate to effect the
purposes of such notice of termination, whether to complete the transfer and
endorsement of the Financed Student Loans and related documents, or otherwise.
The predecessor Master Servicer shall cooperate with the successor Master
Servicer, the Indenture Trustee and the Eligible Lender Trustee in effecting the
termination of the responsibilities and rights of the predecessor Master
Servicer under this Agreement, including the transfer to the successor Master
Servicer for administration by it of all cash amounts that shall at the time be
held by the predecessor Master Servicer for deposit, or shall
23
<PAGE>
thereafter be received by it with respect to a Financed Student Loan. All
reasonable costs and expenses (including attorneys' fees) incurred in connection
with transferring the Student Loan Files to the successor Master Servicer and
amending this Agreement and any other Basic Documents to reflect such succession
as Master Servicer pursuant to this Section shall be paid by the predecessor
Master Servicer upon presentation of reasonable documentation of such costs and
expenses. Upon receipt of notice of the occurrence of a Servicer Default, the
Eligible Lender Trustee shall give notice thereof to the Rating Agencies.
Notwithstanding the termination of the Master Servicer and the
engagement of a successor Master Servicer, each Subservicer shall continue to
serve in its capacity as Subservicer, unless it is in breach of the related
Subservicing Agreement.
SECTION 6.02. Appointment of Successor. (a) Upon receipt by the
------------------------
Master Servicer of notice of termination pursuant to Section 6.01, or the
resignation by the Master Servicer in accordance with the terms of this
Agreement, the predecessor Master Servicer shall continue to perform its
functions as Master Servicer under this Agreement, in the case of termination,
only until the date specified in such termination notice or, if no such date is
specified in a notice of termination, until receipt of such notice and, in the
case of resignation, until the later of (x) the date 120 days from the delivery
to the Eligible Lender Trustee and the Indenture Trustee of written notice of
such resignation (or written confirmation of such notice) in accordance with the
terms of this Agreement and (y) the date upon which the predecessor Master
Servicer shall become unable to act as Master Servicer as specified in the
notice of resignation and accompanying Opinion of Counsel. In the event of the
termination hereunder of the Master Servicer, the Issuer shall appoint a
successor Master Servicer acceptable to the Indenture Trustee, and the successor
Master Servicer shall accept its appointment by a written assumption in form
acceptable to the Indenture Trustee and the Administrator. In the event that a
successor Master Servicer has not been appointed at the time when the
predecessor Master Servicer has ceased to act as Master Servicer in accordance
with this Section, the Indenture Trustee without further action shall
automatically be appointed the successor Master Servicer and the Indenture
Trustee shall be entitled to the Servicing Fee. Notwithstanding the above, the
Indenture Trustee shall, if it shall be unwilling or legally unable so to act,
appoint or petition a court of competent jurisdiction to appoint, any
established institution whose regular business shall include the servicing of
student loans, as the successor to the Master Servicer under this Agreement;
provided, however, that
- -------- -------
24
<PAGE>
such right to appoint or to petition for the appointment of any such successor
Master Servicer shall in no event relieve the Indenture Trustee from any
obligations otherwise imposed on it under the Basic Documents until such
successor has in fact assumed such appointment.
(b) Upon appointment, the successor Master Servicer (including the
Indenture Trustee acting as successor Master Servicer) shall be the successor in
all respects to the predecessor Master Servicer and shall be subject to all the
responsibilities, duties and liabilities placed on the predecessor Master
Servicer that arise thereafter or are related thereto and shall be entitled to
an amount agreed to by such successor Master Servicer (which shall not exceed
the Servicing Fee, unless such compensation arrangements will not result in a
downgrading of the Notes or the Certificates by any Rating Agency) and all the
rights granted to the predecessor Master Servicer by the terms and provisions of
this Agreement.
(c) The Master Servicer may not resign unless it is prohibited from
serving as such by law as evidenced by an Opinion of Counsel to such effect
delivered to the Indenture Trustee and the Eligible Lender Trustee.
Notwithstanding the foregoing or anything to the contrary herein or in the other
Basic Documents, the Indenture Trustee, to the extent it is acting as successor
Master Servicer pursuant hereto, shall be entitled to resign to the extent a
qualified successor Master Servicer has been appointed and has assumed all the
obligations of the Master Servicer in accordance with the terms of this
Agreement and the other Basic Documents.
SECTION 6.03. Notification to Noteholders and Certificateholders.
--------------------------------------------------
Upon any termination of, or appointment of a successor to, the Master Servicer
pursuant to this Article VI, the Eligible Lender Trustee shall give prompt
written notice thereof to Certificateholders and the Indenture Trustee shall
give prompt written notice thereof to Noteholders, the Administrator and the
Rating Agencies (which, in the case of any such appointment of a successor,
shall consist of prior written notice thereof to the Rating Agencies).
SECTION 6.04. Waiver of Past Defaults. The Noteholders of Notes
-----------------------
evidencing not less than a majority of the Outstanding Amount of the Notes (or
the Certificateholders of Certificates evidencing not less than a majority of
the Certificate Balance, in the case of any default which does not adversely
affect the Indenture Trustee or the Noteholders) may, on behalf of all
Noteholders and Certificateholders, waive in writing any default by the Master
Servicer in the performance of its obligations hereunder, and any consequences
thereof, except a
25
<PAGE>
default in making any required deposits to or payments from any of the Trust
Accounts (or giving instructions regarding the same) in accordance with this
Agreement. Upon any such waiver of a past default, such default shall cease to
exist, and any Servicer Default arising therefrom shall be deemed to have been
remedied for every purpose of this Agreement. No such waiver shall extend to
any subsequent or other default or impair any right consequent thereto.
ARTICLE VII
Miscellaneous
-------------
SECTION 7.01. Amendment. This Agreement may be amended by the Master
---------
Servicer and the Eligible Lender Trustee, with the consent of the Indenture
Trustee, but without the consent of any of the Noteholders or the
Certificateholders, to cure any ambiguity, to correct or supplement any
provisions in this Agreement, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions in this Agreement or
of modifying in any manner the rights of the Noteholders or the
Certificateholders or in connection with a transaction described in Section 5.03
hereof; provided, however, that such action shall not, as evidenced by an
-------- -------
Opinion of Counsel delivered to the Eligible Lender Trustee and the Indenture
Trustee, adversely affect in any material respect the interests of any
Noteholder or Certificateholder.
This Agreement may also be amended from time to time by the Master
Servicer and the Eligible Lender Trustee, with the consent of the Indenture
Trustee, the consent of the Noteholders of Notes evidencing not less than a
majority of the Outstanding Amount of the Notes and the consent of the
Certificateholders of Certificates evidencing not less than a majority of the
Certificate Balance, for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Agreement or of
modifying in any manner the rights of the Noteholders or the Certificateholders;
provided, however, that, without the consent of all outstanding Noteholders and
- -------- -------
Certificateholders, no such amendment shall (a) increase or reduce in any manner
the amount of, or accelerate or delay the timing of, collections of payments
with respect to Financed Student Loans or distributions that shall be required
to be made for the benefit of the Noteholders or the Certificateholders or (b)
reduce the aforesaid percentage of the Outstanding Amount of the Notes and the
Certificate Balance the Noteholders or the Certificateholders of which are
required to consent to any such amendment.
26
<PAGE>
Promptly after the execution of any such amendment or consent (or, in
the case of the Rating Agencies, five Business Days prior thereto), the Eligible
Lender Trustee shall furnish written notification of the substance of such
amendment or consent to each Certificateholder, the Indenture Trustee and each
of the Rating Agencies.
It shall not be necessary for the consent of Certificateholders or
Noteholders pursuant to this Section to approve the particular form of any
proposed amendment or consent, but it shall be sufficient if such consent shall
approve the substance thereof.
Prior to the execution of any amendment to this Agreement, the
Eligible Lender Trustee and the Indenture Trustee shall be entitled to receive
and rely upon an Opinion of Counsel stating that the execution of such amendment
is authorized or permitted by this Agreement and the Opinion of Counsel referred
to in Section 6.02(f) of the Loan Sale Agreement. The Eligible Lender Trustee
and the Indenture Trustee may, but shall not be obligated to, enter into any
such amendment which affects the Eligible Lender Trustee's or the Indenture
Trustee's, as applicable, own rights, duties or immunities under this Agreement
or otherwise.
SECTION 7.02. Protection of Interests in Trust. (a) The Master
--------------------------------
Servicer shall not change its name, identity or corporate structure in any
manner that would, could or might make any financing statement or continuation
statement filed in accordance with Section 6.02(a) of the Loan Sale Agreement
seriously misleading within the meaning of (S)9-402(7) of the UCC, unless it
shall have given the Eligible Lender Trustee, the Indenture Trustee and the
Rating Agencies at least five days' prior written notice thereof and shall have
promptly filed appropriate amendments to all previously filed financing
statements or continuation statements.
(b) The Master Servicer shall have an obligation to give the Eligible
Lender Trustee and the Indenture Trustee at least five (5) days' prior written
notice of any relocation of its principal executive office if, as a result of
such relocation, the applicable provisions of the UCC would require the filing
of any amendment of any previously filed financing or continuation statement or
of any new financing statement and shall promptly file any such amendment. The
Master Servicer shall at all times maintain each office from which it shall
service Financed Student Loans, and its principal executive office, within the
United States of America.
27
<PAGE>
(c) The Master Servicer shall maintain accounts and records of each
Financed Student Loan accurately and in sufficient detail to permit (i) the
reader thereof to know at any time the status of such Financed Student Loan,
including payments and recoveries made and payments owing (and the nature of
each) and (ii) reconciliation between payments or recoveries on (or with respect
to) each Financed Student Loan and the amounts from time to time deposited in
the Collection Account in respect of such Financed Student Loan.
(d) The Master Servicer shall, by use of a distinct identification
code, maintain, and cause each Subservicer to maintain, its computer systems so
that, from and after the time of sale under this Agreement of the Financed
Student Loans, the Master Servicer's, and each Subservicer's master computer
records (including any backup archives) that refer to a Student Loan shall
indicate clearly the interest of the Issuer, the Eligible Lender Trustee and the
Indenture Trustee in such Student Loan and that such Student Loan is owned by
the Eligible Lender Trustee on behalf of the Issuer and has been pledged to the
Indenture Trustee. Indication of the Issuer's, the Eligible Lender Trustee's
and the Indenture Trustee's interest in a Student Loan shall be deleted from or
modified on the Master Servicer's and each Subservicer's computer systems when,
and only when, the related Financed Student Loan shall have been paid in full or
repurchased.
(e) If at any time the Master Servicer shall propose to sell, grant a
security interest in, or otherwise transfer any interest in student loans to any
prospective purchaser, lender or other transferee, the Master Servicer shall
give to such prospective purchaser, lender or other transferee computer tapes,
records or printouts (including any restored from backup archives) that, if they
shall refer in any manner whatsoever to any Financed Student Loan, shall
indicate clearly that such Financed Student Loan has been sold and is owned by
the Eligible Lender Trustee on behalf of the Issuer and has been pledged to the
Indenture Trustee.
(f) The Master Servicer shall permit, and shall cause each Subservicer
to permit, the Indenture Trustee and its agents at any time during normal
business hours to inspect, audit and make copies of and abstracts from the
Master Servicer's, or Subservicer's records regarding any Financed Student Loan;
provided, however, that the Master Servicer or Subservicer is given reasonable
- -------- -------
prior notice of at least five Business Days.
(g) Upon request, at any time the Eligible Lender Trustee or the
Indenture Trustee shall have reasonable grounds to believe that such request
would be necessary in connection with
28
<PAGE>
its performance of its duties under the Basic Documents, the Master Servicer
shall furnish to the Eligible Lender Trustee or to the Indenture Trustee (in
each case, with a copy to the Administrator), within five (5) Business Days, a
list of all Financed Student Loans (by borrower social security number, type of
loan and date of issuance) then held as part of the Trust, and shall cause the
Administrator to furnish to the Eligible Lender Trustee or to the Indenture
Trustee, within 20 Business Days thereafter, a comparison of such list to the
list of Initial Financed Student Loans set forth in Schedule A to the Loan Sale
Agreement as of the Closing Date, and, for each Financed Student Loan that has
been added to or removed from the pool of loans held by the Eligible Lender
Trustee on behalf of the Issuer, information as to the date as of which and
circumstances under which each such Financed Student Loan was so added or
removed.
SECTION 7.03. Notices. All demands, notices and communications upon
-------
or to the Seller, the Master Servicer, the Eligible Lender Trustee, the
Indenture Trustee, the Administrator or the Rating Agencies under this Agreement
shall be in writing, personally delivered or mailed by certified mail, return
receipt requested (or in the form of telex or facsimile notice, followed by
written notice delivered as aforesaid), and shall be deemed to have been duly
given upon receipt;
(a) in the case of the Seller, to
Signet Bank
7 North 8th Street
Richmond, Virginia 23219
Attention: Treasurer
Telephone: (804) 771-7060
Telecopy: (804) 771-7936
(b) in the case of the Master Servicer and the
Administrator, to
Signet Bank
7 North 8th Street
Richmond, Virginia 23219
Attention: Treasurer
Telephone: (804) 771-7060
Telecopy: (804) 771-7936
(c) in the case of the Issuer, to
Signet Student Loan Trust 1996-A
c/o First Chicago Delaware, Inc., Trustee
300 King Street
Wilmington, Delaware 19801
with a copy to the Eligible Lender Trustee
29
<PAGE>
at the Corporate Trust Office of the
Eligible Lender Trustee
(d) in the case of the Eligible Lender Trustee, at the Corporate
Trust Office of the Eligible Lender Trustee;
(e) in the case of the Indenture Trustee, at its Corporate Trust
Office;
(f) in the case of [rating agency]
[___________________]
___________________________
___________________________
Attention: _______________
Telephone: _______________
Facsimile: _______________
(g) in the case of [rating agency]
[_____________________]
___________________________
___________________________
Attention: _______________
Telephone: _______________
or, as to each of the foregoing, at such other address as shall be designated by
written notice to the other parties.
SECTION 7.04. Assignment. Notwithstanding anything to the contrary
----------
contained herein, except as provided in the succeeding sentence, as provided in
Section 5.03 and as provided in the provisions of this Agreement concerning the
resignation of the Master Servicer, this Agreement may not be assigned by the
Master Servicer. This Agreement may only be assigned by the Eligible Lender
Trustee to its permitted successor pursuant to the Trust Agreement.
SECTION 7.05. Limitations on Rights of Others. The provisions of
-------------------------------
this Agreement are solely for the benefit of the Master Servicer, the Issuer and
the Eligible Lender Trustee and for the benefit of the Administrator, the
Certificateholders, the Indenture Trustee and the Noteholders, as third party
beneficiaries, and nothing in this Agreement, whether express or implied, shall
be construed to give to any other Person any legal or equitable right, remedy or
claim in the Trust Estate or under or in respect of this Agreement or any
covenants, conditions or provisions contained herein.
SECTION 7.06. Severability. Any provision of this Agreement that is
------------
prohibited or unenforceable in any jurisdiction
30
<PAGE>
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
SECTION 7.07. Separate Counterparts. This Agreement may be executed
---------------------
by the parties hereto in separate counterparts, each of which when so executed
and delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 7.08. Headings. The headings of the various Articles and
--------
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
SECTION 7.09. Governing Law. This Agreement shall be construed in
-------------
accordance with the laws of the Commonwealth of Virginia, without reference to
its conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
SECTION 7.10. Non-Petition Covenants. Notwithstanding any prior
----------------------
termination of this Agreement, the Master Servicer shall not, prior to the date
which is one year and one day after the termination of this Agreement with
respect to the Issuer or the Company, acquiesce, petition or otherwise invoke or
cause the Issuer to invoke the process of any court or government authority for
the purpose of commencing or sustaining a case against the Issuer under any
Federal or state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Issuer or any substantial part of its property, or ordering the winding
up or liquidation of the affairs of the Issuer.
SECTION 7.11. Limitation of Liability of Eligible Lender Trustee and
------------------------------------------------------
Indenture Trustee. (a) Notwithstanding anything contained herein to the
- -----------------
contrary, this Agreement has been signed by The First National Bank of Chicago
not in its individual capacity but solely in its capacity as Eligible Lender
Trustee of the Issuer and in no event shall The First National Bank of Chicago
in its individual capacity or, except as expressly provided in the Trust
Agreement, as beneficial owner of the Issuer have any liability for the
representations, warranties, covenants, agreements or other obligations of the
Issuer hereunder or in any of the certificates, notices or agreements delivered
pursuant hereto as to all of which recourse shall be had solely to the assets of
the Issuer.
31
<PAGE>
(b) Notwithstanding anything contained herein to the contrary, this
Agreement has been accepted by The Bank of New York not in its individual
capacity but solely as Indenture Trustee and in no event shall The Bank of New
York have any liability for the representations, warranties, covenants,
agreements or other obligations of the Issuer hereunder or in any of the
certificates, notices or agreements delivered pursuant hereto, as to all of
which recourse shall be had solely to the assets of the Issuer.
SECTION 7.12. Confidentiality. (a) The Eligible Lender Trustee and
---------------
its agents, representatives or employees shall at all times maintain the
confidentiality of all Confidential Information and shall not, without the prior
written consent of the Master Servicer, disclose to third parties (including
Noteholders or Certificateholders) or use such information, in any manner
whatsoever, in whole or in part, except as expressly permitted under this
Agreement or as required to fulfill an obligation of the Eligible Lender Trustee
under this Agreement, in which case such Confidential Information shall be
revealed only to the extent required for the purpose of fulfilling an obligation
of the Eligible Lender Trustee under this Agreement. Notwithstanding the above,
Confidential Information may be disclosed to the extent required by law or legal
process, provided that the Eligible Lender Trustee gives prompt written notice
to the Master Servicer of the nature and scope of such disclosure.
(b) Notwithstanding anything in this Agreement to the contrary, the
Master Servicer shall not be obligated to disclose to any Person (i) any
information regarding Obligors, the disclosure of which is prohibited by
applicable law, or (ii) any information relating to the strategic plans or
opportunities of its student lending business.
32
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective officers as of the day and year first above
written.
SIGNET STUDENT LOAN TRUST 1996-A,
by THE FIRST NATIONAL BANK OF CHICAGO not
in its individual capacity but solely
as Eligible Lender Trustee on behalf of
the Trust,
by
______________________________________
Name:
Title:
SIGNET BANK
by
________________________________________
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO, not in
its individual capacity but solely as
Eligible Lender Trustee,
by
_______________________________________
Name:
Title:
Acknowledged and accepted
as of the day and year first
above written:
THE BANK OF NEW YORK, not in
its individual capacity but
solely as Indenture Trustee
by
___________________________
Name:
Title:
33
<PAGE>
SCHEDULE A
The Master Servicer shall maintain each Student Loan File at one of the
locations listed below:
<PAGE>
SCHEDULE B
Locations of Student Loan Files for which the related Financed Student Loans are
serviced by a Subservicer.
<PAGE>
Exhibit 99.3
B&W Draft
12/10/96
ADMINISTRATION AGREEMENT dated as of [ ], 1996, among
SIGNET STUDENT LOAN TRUST 1996-A, a Delaware trust (the
"Issuer"), SIGNET BANK, a Virginia banking corporation, as
administrator (the "Administrator"), and THE BANK OF NEW
YORK, a New York banking corporation, not in its individual
capacity but solely as Indenture Trustee (the "Indenture
Trustee").
W I T N E S S E T H
WHEREAS the Issuer is issuing the Floating Rate Class A-1 Asset Backed
Notes and the Floating Rate Class A-2 Asset Backed Notes (collectively, the
"Notes") pursuant to the Indenture dated as of [ ], 1996 (the
"Indenture"), between the Issuer and the Indenture Trustee and the Floating Rate
Asset Backed Certificates (the "Certificates"), pursuant to the Trust Agreement
dated as of [ ], 1996 (the "Trust Agreement") among the Depositor,
Signet Student Loan Corporation, a Virginia corporation (the "Company") and The
First National Bank of Chicago, a national banking association, as Eligible
Lender Trustee (the "Eligible Lender Trustee") (capitalized terms used herein
and not defined herein shall have the meanings assigned to such terms in
Appendix A hereto, which also contains rules of usage and construction that
shall be applicable herein);
WHEREAS the Issuer has entered into certain agreements in connection
with the issuance of the Notes and the Certificates, including the Loan Sale
Agreement, the Master Servicing Agreement, the Note Depository Agreements, the
Certificate Depository Agreement (the Certificate Depository Agreement and the
Note Depository Agreements being collectively referred to herein as the
"Depository Agreement"), the Guarantee Agreements, the Trust Agreement and the
Indenture (all such agreements being collectively referred to herein as the
"Related Agreements");
WHEREAS, pursuant to the Related Agreements, the Issuer and the
Eligible Lender Trustee are required to perform certain
<PAGE>
duties in connection with (a) the Notes and the Collateral therefor pledged
pursuant to the Indenture and (b) the Certificates;
WHEREAS the Issuer and the Eligible Lender Trustee desire to have the
Administrator perform certain of the duties of the Issuer and the Eligible
Lender Trustee referred to in the preceding clause, and to provide such
additional services consistent with the terms of this Agreement and the Related
Agreements as the Issuer and the Eligible Lender Trustee may from time to time
request;
WHEREAS the Administrator has the capacity to provide the services
required hereby and is willing to perform such services for the Issuer and the
Eligible Lender Trustee on the terms set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties agree as follows:
1. Representations of the Administrator. The Administrator makes
------------------------------------
the following representations on which the Issuer and the Eligible Lender
Trustee are deemed to have relied. The representations speak as of the
execution and delivery of this Agreement and as of the Closing Date, in the case
of the Initial Financed Student Loans, as of the applicable Transfer Date, in
the case of the Additional Student Loans, but shall survive the sale of the
Financed Student Loans to the Eligible Lender Trustee on behalf of the Issuer
and the pledge thereof to the Indenture Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Administrator is duly
------------------------------
organized and validly existing as a Virginia banking corporation, with the
power and authority to own its properties and to conduct its business as
such properties are currently owned and such business is presently
conducted.
(b) Power and Authority of the Administrator. The Administrator has
----------------------------------------
the corporate power and authority to execute and deliver this Agreement and
to carry out its terms, and the execution, delivery and performance of this
Agreement has been duly authorized by the Administrator by all necessary
corporate action.
(c) Binding Obligation. This Agreement constitutes a legal, valid and
------------------
binding obligation of the Administrator, enforceable in accordance with its
terms, subject to
2
<PAGE>
applicable bankruptcy, insolvency, reorganization and similar laws relating
to creditors' rights generally or the rights of creditors of banks the
deposit accounts of which are insured by the FDIC and subject to general
principles of equity.
(d) No Violation. The consummation of the transactions contemplated
------------
by this Agreement and the fulfillment of the terms hereof or thereof do not
conflict with, result in any breach of any of the terms and provisions of,
nor constitute (with or without notice or lapse of time or both) a default
under, the articles of incorporation or by-laws of the Administrator, or
any material indenture, agreement or other instrument to which the
Administrator is a party or by which it shall be bound; nor result in the
creation or imposition of any Lien upon any of its properties pursuant to
the terms of any such indenture, agreement or other instrument; nor violate
any law or, to the knowledge of the Administrator, any order, rule or
regulation applicable to the Administrator of any court or of any Federal
or state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Administrator or its
properties. The consummation by the Administrator of the transactions
contemplated by this Agreement will not result in the loss of any Guarantee
Payments by the Trust or any reinsurance payments with respect to any
Financed Student Loan.
(e) No Proceedings. There are no proceedings or investigations
--------------
pending against the Administrator or, to its best knowledge, threatened
against the Administrator, before any court, regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Administrator or its properties: (i) asserting the
invalidity of this Agreement, the Indenture or any of the other Related
Agreements, the Notes or the Certificates, (ii) seeking to prevent the
issuance of the Notes or the Certificates or the consummation of any of the
transactions contemplated by this Agreement, the Indenture or any of the
other Related Agreements, (iii) seeking any determination or ruling that
could reasonably be expected to have a material and adverse effect on the
performance by the Administrator of its obligations under, or the validity
or enforceability of, this Agreement, the Indenture, any of the other
Related Agreements, the Notes or the Certificates or (iv) seeking to affect
adversely the Federal or state income tax attributes of the Issuer, the
Notes or the Certificates.
3
<PAGE>
(f) All Consents. All authorizations, consents, orders or approvals
------------
of or registrations or declarations with any court, regulatory body,
administrative agency or other government instrumentality required to be
obtained, effected or given by the Administrator in connection with the
execution and delivery by the Administrator of this Agreement and the
performance by the Administrator of the transactions contemplated by this
Agreement have in each case been duly obtained, effected or given and are
in full force and effect.
2. Duties of the Administrator.
---------------------------
(a) Duties with Respect to the Indenture and Depository Agreement.
-------------------------------------------------------------
The Administrator shall perform all its duties as Administrator and the duties
of the Issuer under the Depository Agreement. In addition, the Administrator
shall consult with the Eligible Lender Trustee as the Administrator deems
appropriate regarding the duties of the Issuer under the Indenture and the
Depository Agreement. The Administrator shall monitor the performance of the
Issuer and shall advise the Eligible Lender Trustee when action is necessary to
comply with the Issuer's duties under the Indenture and the Depository
Agreement. The Administrator shall prepare for execution by the Issuer or shall
cause the preparation by other appropriate Persons of all such documents,
reports, filings, instruments, certificates and opinions as it shall be the duty
of the Issuer to prepare, file or deliver pursuant to the Indenture and the
Depository Agreement. In furtherance of the foregoing, the Administrator shall
take all appropriate action that is the duty of the Issuer to take pursuant to
the Indenture, including such of the foregoing as are required with respect to
the following matters (references are to sections of the Indenture):
(i) the duty to cause the Note Registrar to keep the Note Register
and to give the Indenture Trustee prompt notice of any appointment of a new
Note Registrar and the location, or change in location, of the Note
Register (Section 2.04);
(ii) the fixing or causing to be fixed of any specified record date
and the timely notification of the Indenture Trustee and Noteholders with
respect to special payment dates, if any (Section 2.07(c));
(iii) the preparation of or obtaining of the documents and instruments
required for authentication of the Notes and delivery of the same to the
Indenture Trustee (Section 2.02);
4
<PAGE>
(iv) the preparation, obtaining or filing of the instruments, opinions
and certificates and other documents required for the release of collateral
(Section 2.09);
(v) the duty to cause the Note Registrar to maintain on behalf of the
Issuer an office in the Borough of Manhattan, The City of New York, for
registration of transfer or exchange of Notes (Section 3.02);
(vi) the duty to cause newly appointed Paying Agents, if any, to
deliver to the Indenture Trustee the instrument specified in the Indenture
regarding funds held in trust (Section 3.03);
(vii) the direction to the Paying Agent(s) to deposit moneys with the
Indenture Trustee (Section 3.03);
(viii) the obtaining and preservation of the Issuer's qualification to
do business in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of the Indenture, the
Notes, the Collateral and each other instrument and agreement included in
the Indenture Trust Estate (Section 3.04);
(ix) the preparation of all supplements, amendments, financing
statements, continuation statements, instruments of further assurance and
other instruments, in accordance with Section 3.05 of the Indenture,
necessary to protect the Indenture Trust Estate (Section 3.05);
(x) the delivery by the Issuer of the Opinion of Counsel on the
Closing Date and the annual delivery of Opinions of Counsel, in accordance
with Section 3.06 of the Indenture, as to the Indenture Trust Estate, and
the annual delivery of the Officers' Certificate of the Issuer and certain
other statements, in accordance with Section 3.09 of the Indenture, as to
compliance with the Indenture (Sections 3.06 and 3.09);
(xi) the identification to the Indenture Trustee in an Officers'
Certificate of the Issuer of a Person with whom the Issuer has contracted
to perform its duties under the Indenture (Section 3.07(b));
(xii) the notification of the Indenture Trustee and the Rating
Agencies of a Servicer Default pursuant to the Master Servicing Agreement
and, if such Servicer Default arises from the failure of the Master
Servicer to perform any of its duties under the Master Servicing Agreement,
the taking
5
<PAGE>
of all reasonable steps available to remedy such failure (Section 3.07(d));
(xiii) the preparation and obtaining of documents and instruments
required for the release of the Issuer from its obligations under the
Indenture (Section 3.10);
(xiv) the prompt delivery of notice to the Indenture Trustee and the
Rating Agencies of each Event of Default, any Default under Section
5.01(iii) of the Indenture and each default by the Master Servicer under
the Master Servicing Agreement or by the Seller under the Loan Sale
Agreement (Section 3.18);
(xv) the monitoring of the Issuer's obligations as to the satisfaction
and discharge of the Indenture and the preparation of an Officers'
Certificate of the Issuer and the obtaining of the Opinion of Counsel and
the Independent Certificate relating thereto (Section 4.01);
(xvi) the compliance with any written directive of the Indenture
Trustee with respect to the sale of the Indenture Trust Estate in a
commercially reasonable manner if an Event of Default shall have occurred
and be continuing (Section 5.04);
(xvii) the preparation of any written instruments required to confirm
more fully the authority of any co-trustee or separate trustee and any
written instruments necessary in connection with the resignation or removal
of any co-trustee or separate trustee (Sections 6.08 and 6.10);
(xviii) the furnishing of the Indenture Trustee with the names and
addresses of Noteholders during any period when the Indenture Trustee is
not the Note Registrar (Section 7.01);
(xix) the preparation and, after execution by the Issuer, the filing
with the Commission, any applicable State agencies and the Indenture
Trustee of documents required to be filed on a periodic basis with, and
summaries thereof as may be required by rules and regulations prescribed
by, the Commission and any applicable State agencies and the transmission
of such summaries, as necessary, to the Noteholders (Section 7.03);
(xx) the opening of one or more accounts in the Issuer's name, the
preparation of Issuer Orders and Officers' Certificates of the Issuer, the
obtaining of Opinions of Counsel and the taking of all other actions
6
<PAGE>
necessary with respect to investment and reinvestment of funds in the Trust
Accounts (Sections 8.02 and 8.03);
(xxi) the preparation of an Issuer Request and Officers' Certificate
of the Issuer and the obtaining of an Opinion of Counsel and Independent
Certificates, if necessary, for the release of the Indenture Trust Estate
(Sections 8.04 and 8.05);
(xxii) the preparation of Issuer Orders and the obtaining of Opinions
of Counsel with respect to the execution of supplemental indentures and the
mailing to the Noteholders of notices with respect to such supplemental
indentures (Sections 9.01, 9.02 and 9.03);
(xxiii) the preparation of or obtaining of the documents and
instruments required for the execution and authentication of new Notes
conforming to any supplemental indenture and the delivery of the same to
the Eligible Lender Trustee and the Indenture Trustee, respectively
(Section 9.06);
(xxiv) the notification of Noteholders of redemption of the Notes or
the duty to cause the Indenture Trustee to provide such notification
(Section 10.02);
(xxv) the preparation of all Officers' Certificates of the Issuer,
Opinions of Counsel and Independent Certificates with respect to any
requests by the Issuer to the Indenture Trustee to take any action under
the Indenture (Section 11.01(a));
(xxvi) the preparation and delivery of Officers' Certificates of the
Issuer and the obtaining of Independent Certificates, if necessary, for the
release of property from the lien of the Indenture (Section 11.01(b));
(xxvii) the preparation and timely delivery to Noteholders and the
Indenture Trustee of any agreements with respect to alternate payment and
notice provisions (Section 11.06); and
(xxviii) the recording of the Indenture, if applicable (Section
11.15).
(b) Duties with Respect to the Issuer. (i) In addition to the duties
---------------------------------
of the Administrator set forth above and in the other Related Agreements, the
Administrator shall perform such calculations and shall prepare for execution by
the Issuer or the Eligible Lender Trustee or shall cause the preparation by
7
<PAGE>
other appropriate Persons of all such documents, reports, filings, instruments,
certificates and opinions as it shall be the duty of the Issuer or the Eligible
Lender Trustee to prepare, file or deliver pursuant to the Related Agreements,
and at the request of the Eligible Lender Trustee shall take all appropriate
action that it is the duty of the Issuer to take pursuant to the Related
Agreements. In furtherance thereof, the Eligible Lender Trustee shall, on
behalf of itself and of the Issuer, execute and deliver to the Administrator and
to each successor Administrator appointed pursuant to the terms hereof, one or
more powers of attorney substantially in the form of Exhibit A hereto,
appointing the Administrator the attorney-in-fact of the Eligible Lender Trustee
and the Issuer for the purpose of executing on behalf of the Eligible Lender
Trustee and the Issuer all such documents, reports, filings, instruments,
certificates and opinions. Subject to Section 9 of this Agreement, and in
accordance with the directions of the Eligible Lender Trustee, the Administrator
shall administer, perform or supervise the performance of such other activities
in connection with the Collateral (including the Related Agreements) as are not
covered by any of the foregoing provisions and as are expressly requested by the
Eligible Lender Trustee and are reasonably within the capability of the
Administrator.
(ii) Notwithstanding anything in this Agreement or the Related
Agreements to the contrary, the Administrator shall deliver to the Eligible
Lender Trustee, the Indenture Trustee, the Rating Agencies and (if the Seller is
not the Administrator) the Seller, an Officers' Certificate of the Administrator
containing all the information necessary:
(A) to pay the Department any Monthly Rebate Fees due and payable to
the Department, to the extent such Monthly Rebate Fees are not being
deducted by the Department out of Special Allowance Payments or Interest
Subsidy Payments, which Officers' Certificate shall be delivered on the
date that is three Business Days prior to the date such fees are to be
remitted to the Department;
(B) on each Transfer Date to pay the Seller, pursuant to Section 2.02
of the Loan Sale Agreement, the Purchase Amount for Additional Student
Loans purchased by the Eligible Lender Trustee on behalf of the Issuer on
such date, which Officers' Certificate shall be delivered on the Business
Day preceding such Transfer Date;
(C) to pay the Master Servicer the Servicing Fee due on each Interest
Payment Date pursuant to Section 2(d)(iii)(A), 2(d)(iv)(A) and 2(e)(iv)(A),
which Officers'
8
<PAGE>
Certificate shall be delivered on the day that is three Business Days prior
to such Interest Payment Date;
(D) to make all the distributions required by Sections 2(d), 2(e) and
2(f), for the Monthly Collection Period or Collection Period, as the case
may be, preceding the date of such Officer's Certificate, which Officers'
Certificate shall be delivered on each Determination Date.
In addition, prior to each Determination Date, the Administrator shall
determine the Class A-1 Rate, the Class A-2 Rate and the Certificate Rate that
will be applicable to the Interest Payment Date following such Determination
Date, in compliance with its obligation to prepare an Officer's Certificate on
such Determination Date pursuant to this Section. In connection therewith, the
Administrator shall calculate LIBOR in accordance with the definition thereof
and shall also determine the Student Loan Rate with respect to such Interest
Payment Date.
(iii) Notwithstanding anything in this Agreement or the Related
Agreements to the contrary, the Administrator shall be responsible for promptly
notifying the Eligible Lender Trustee in the event that any withholding tax is
imposed on the Issuer's payments (or allocations of income) to an Owner as
contemplated in Section 5.01(c) of the Trust Agreement. Any such notice shall
specify the amount of any withholding tax required to be withheld by the
Eligible Lender Trustee pursuant to such provision.
(iv) Notwithstanding anything in this Agreement or the Related
Agreements to the contrary, the Administrator shall be responsible for
performance of the duties of the Eligible Lender Trustee set forth in Section
5.04(a), (b), (c) and (d) of the Trust Agreement with respect to, among other
things, accounting and reports to Owners; provided, however, that the Eligible
-------- -------
Lender Trustee shall retain responsibility for the preparation and distribution
of the Schedule K-1s necessary to enable each Owner to prepare its Federal and
state income tax returns.
(v) The Administrator shall satisfy its obligations with respect to
clauses (iii) and (iv) above by retaining, at the expense of the Issuer, payable
by the Administrator, a firm of Independent public accountants (the
"Accountants") which shall perform the obligations of the Administrator
thereunder. In connection with paragraph (iii) above, the Accountants will
provide prior to December 31, 1996, a letter in form and substance satisfactory
to the Eligible Lender Trustee as to whether any federal tax withholding is then
required and, if required, the procedures to be followed with respect thereto to
comply with the requirements of the Code. The Accountants shall
9
<PAGE>
be required to update the letter in each instance that any additional tax
withholding is subsequently required or any previously required tax withholding
shall no longer be required.
(vi) The Administrator shall perform the duties of the Administrator
specified in Sections 10.02 and 10.03 of the Trust Agreement required to be
performed in connection with the resignation or removal of the Eligible Lender
Trustee and the appointment of a successor Eligible Lender Trustee, and any
other duties expressly required to be performed by the Administrator under the
Trust Agreement and the other Related Agreements, including those under Sections
6.07 and 6.08 of the Indenture.
(vii) As described in Article IX of the Trust Agreement, notice of
any termination of the Trust shall be given by the Administrator to the Eligible
Lender Trustee and the Indenture Trustee as soon as practicable after the
Administrator has received notice thereof.
(viii) In carrying out the foregoing duties or any of its other
obligations under this Agreement, the Administrator may enter into transactions
with or otherwise deal with any of its Affiliates; provided, however, that the
-------- -------
terms of any such trans actions or dealings shall be in accordance with any
directions received from the Issuer and shall be, in the Administrator's
opinion, no less favorable to the Issuer than would be available from
unaffiliated parties.
(c) Establishment and Maintenance of Trust Accounts.
-----------------------------------------------
(i) The Administrator, for the benefit of the Issuer, shall establish
and maintain in the name of the Indenture Trustee an Eligible Deposit Account
(the "Collection Account"), bearing a designation clearly indicating that the
funds deposited therein are held for the benefit of the Issuer. The Collection
Account will initially be established as a segregated trust account in the name
of the Indenture Trustee with Signet Trust Company.
(ii) The Administrator, for the benefit of the Issuer, shall establish
and maintain in the name of the Indenture Trustee an Eligible Deposit Account
(the "Reserve Account"), bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of the Issuer. The Reserve Account
will initially be established as a segregated trust account in the name of the
Indenture Trustee with Signet Trust Company.
(iii) The Administrator, for the benefit of the Issuer, shall
establish and maintain in the name of the Indenture Trustee an Eligible Deposit
Account (the "Pre-Funding Account"), bearing a designation clearly indicating
that the funds deposited
10
<PAGE>
therein are held for the benefit of the Issuer. The Pre-Funding Account will
initially be established as a segregated trust account in the name of the
Indenture Trustee with the corporate trust department of Signet Trust Company.
(iv) Funds on deposit in the Collection Account, the Reserve Account
and the Pre-Funding Account (collectively, the "Trust Accounts") shall be
invested by the Indenture Trustee (or any custodian or designated agent with
respect to any amounts on deposit in such accounts) in Eligible Investments
pursuant to written instructions by the Administrator; provided, however, it is
-------- -------
understood and agreed that the Indenture Trustee shall not be liable for any
loss arising from such investment in Eligible Investments. All such Eligible
Investments shall be held by (or by any custodian on behalf of) the Indenture
Trustee for the benefit of the Issuer; provided that on the Business Day
preceding each Interest Payment Date all interest and other investment income
(net of losses and investment expenses) on funds on deposit in the Trust
Accounts shall be deposited into the Collection Account (except that any
maturing Eligible Investment that is an obligation of the institution with which
the Collection Account is maintained may mature and be deposited into the
Collection Account on such Interest Payment Date) and shall be deemed to
constitute a portion of the Monthly Available Funds for each Interest Payment
Date that is not a Distribution Date, and a portion of the Available Funds for
each Distribution Date. Other than as permitted by the Rating Agencies, funds
on deposit in the Trust Accounts shall be invested in Eligible Investments that
will mature so that funds sufficient to pay the Servicing Fee, the
Administration Fee, the Noteholders' Interest Distribution Amount and the
Certificateholders' Interest Distribution Amount will be available in the
Collection Account on the Business Day preceding each Interest Payment Date (or
on such Interest Payment Date in the case of maturing Eligible Investments that
are obligations of the institution with which the Collection Account is
maintained), so that funds on deposit in the Pre-Funding Account that are
required, in the judgment and at the discretion of the Administrator, to make
Additional Fundings during the Collection Period will be available for such
purpose, and so that the remaining such funds will be available at the close of
business on the Business Day preceding each Distribution Date (or on such
Distribution Date in the case of maturing Eligible Investments that are
obligations of the institution with which the Collection Account is maintained).
(v) (A) The Indenture Trustee shall possess all right, title and
interest in all funds on deposit from time to time in the Trust Accounts
and in all proceeds thereof (including all income thereon) and all such
funds, investments, proceeds and income shall be part of the Trust
11
<PAGE>
Estate. The Trust Accounts shall be under the sole dominion and control of
the Indenture Trustee for the benefit of the Issuer. If, at any time, any
of the Trust Accounts ceases to be an Eligible Deposit Account, the
Indenture Trustee (or the Administrator on its behalf) agrees, by its
acceptance hereof, that it shall within 10 Business Days (or such longer
period, not to exceed 30 calendar days, as to which each Rating Agency may
consent) establish a new Trust Account as an Eligible Deposit Account and
shall transfer any cash and/or any investments to such new Trust Account.
In connection with the foregoing, the Administrator agrees that, in the
event that any of the Trust Accounts are not accounts with the Indenture
Trustee, the Administrator shall notify the Indenture Trustee in writing
promptly upon any of such Trust Accounts ceasing to be an Eligible Deposit
Account.
(B) With respect to the Trust Account Property, the Indenture
Trustee agrees, by its acceptance hereof, that:
(1) any Trust Account Property that is held in deposit accounts shall
be held solely in Eligible Deposit Accounts, subject to the last sentence
of clause (v)(A) above; and each such Eligible Deposit Account shall be
subject to the exclusive custody and control of the Indenture Trustee, and
the Indenture Trustee shall have sole signature authority with respect
thereto;
(2) any Trust Account Property that constitutes Physical Property
shall be Delivered to the Indenture Trustee in accordance with paragraph
(a) of the definition of "Delivery" and shall be held, pending maturity or
disposition, solely by the Indenture Trustee or a financial intermediary
(as such term is defined in Section 8-313(4) of the UCC) acting solely for
the Indenture Trustee;
(3) any Trust Account Property that is a book-entry security held
through the Federal Reserve System pursuant to Federal book-entry
regulations shall be Delivered in accordance with paragraph (b) of the
definition of "Delivery" and shall be maintained by the Indenture Trustee,
pending maturity or disposition, through continued book-entry registration
of such Trust Account Property as described in such paragraph; and
(4) any Trust Account Property that is an "uncertificated security"
under Article VIII of the UCC and that is not governed by clause (3) above
shall be Delivered to the Indenture Trustee in accordance with paragraph
(c) of
12
<PAGE>
the definition of "Delivery" and shall be maintained by the Indenture
Trustee, pending maturity or disposition, through continued registration of
the Indenture Trustee's (or its nominees) ownership of such security.
(C) The Administrator shall have the power, revocable for cause
or upon the occurrence and during the continuance of an Administrator
Default by the Indenture Trustee or by the Eligible Lender Trustee with the
consent of the Indenture Trustee, to instruct the Indenture Trustee to make
withdrawals and payments from the Trust Accounts for the purpose of
permitting the Master Servicer, any Servicer, any Subservicer or the
Eligible Lender Trustee to carry out its respective duties under the Master
Servicing Agreement or the Trust Agreement or permitting the Indenture
Trustee to carry out its duties under the Indenture.
(vi) On each Determination Date, the Administrator shall calculate all
amounts required to determine the amounts to be deposited in the Collection
Account and the other Trust Accounts and the amounts to be distributed therefrom
on the related Interest Payment Date or other dates from which amounts therein
are to be distributed.
(d) Withdrawals from the Collection Account. The Administrator shall
---------------------------------------
instruct the Indenture Trustee (based, in the case of clauses (iii) and (iv)
below, on the information contained in the Servicer's Report delivered with
respect to the applicable Determination Date pursuant to Section 3.07 of the
Master Servicing Agreement) to make withdrawals from amounts deposited in the
Collection Account at the following times and for the following purposes, and
the Indenture Trustee shall comply with such instructions:
(i) from time to time during each Collection Period to pay the
Department any Monthly Rebate Fees due and payable to the Department, to
the extent such Monthly Rebate Fees are not being deducted by the
Department out of Special Allowance Payments or Interest Subsidy Payments;
(ii) on each Transfer Date after the Funding Period to pay to the
Seller, pursuant to Section 2.02 of the Loan Sale Agreement, the Purchase
Amount for Additional Student Loans purchased by the Eligible Lender
Trustee on behalf of the Issuer on such date; provided, that, the amount
-------- ----
paid to the Seller for the purchase of Additional Student Loans on such
Transfer Date plus the amount of funds remitted for the purchase of
Additional Student Loans on each Transfer Date since the preceding
Distribution Date on any Transfer Date
13
<PAGE>
after the Funding Period shall not exceed the Net Principal Cash Flow
Amount for such Transfer Date;
(iii) on each Interest Payment Date that is not a Distribution Date,
to make the following deposits and distributions to the Persons specified
below by 11:00 a.m. (New York Time), to the extent of Monthly Available
Funds for such Interest Payment Date in the Collection Account, in the
following order of priority:
(A) to the Master Servicer, the Servicing Fee with respect to the
preceding calendar month and all unpaid Servicing Fees from prior
months;
(B) to the Administrator, from the amount of Monthly Available
Funds remaining after the application of clause (A), the
Administration Fee with respect to the preceding calendar month and
all unpaid Administration Fees from prior months;
(C) to the Class A-1 Noteholders and the Class A-2 Noteholders,
on a pro rata basis, from the amount of Monthly Available Funds
remaining after the application of clauses (A) and (B), the
Noteholders' Interest Distribution Amount (based on the ratio of the
portion of the Noteholders' Interest Distribution Amount accrued with
respect to each such Class to the Noteholders' Interest Distribution
Amount); and
(D) to the order of the Eligible Lender Trustee, from the amount
of Monthly Available Funds remaining after the application of clauses
(A) through (C), the Certificateholders' Interest Distribution Amount.
(iv) on each Distribution Date, to make the following deposits and
distributions to the Persons or the account specified below by 11:00 a.m.
(New York Time), to the extent of Available Funds for such Distribution
Date in the Collection Account, in the following order of priority:
(A) to the Master Servicer, the Servicing Fee with respect to the
preceding calendar month and all unpaid Servicing Fees from prior
months;
(B) to the Administrator, from the amount of Available Funds
remaining after the application of clause (A), the Administration Fee
with respect to the preceding calendar month and all unpaid
Administration Fees from prior months;
14
<PAGE>
(C) to the Class A-1 Noteholders and the Class A-2 Noteholders,
on a pro rata basis, from the amount of Available Funds remaining
after the application of clauses (A) and (B), the Noteholders'
Interest Distribution Amount (based on the ratio of the portion of the
Noteholders' Interest Distribution Amount accrued with respect to each
such Class to the Noteholders' Interest Distribution Amount);
(D) to the order of the Eligible Lender Trustee, from the amount
of Available Funds remaining after the application of clauses (A)
through (C), the Certificateholders' Interest Distribution Amount;
(E) to the Class A-1 Noteholders until the Outstanding Amount of
the Class A-1 Notes has been reduced to zero and then to the Class A-2
Noteholders, from the amount of Available Funds remaining after the
application of clauses (A) through (D), the Noteholders' Principal
Distribution Amount;
(F) on each Distribution Date on and after the date on which the
Notes have been paid in full, to the order of the Eligible Lender
Trustee, from the amount of Available Funds remaining after the
application of clauses (A) through (E), the Certificateholders'
Principal Distribution Amount; and
(G) to the Reserve Account, the amount of Available Funds
remaining after the application of clauses (A) through (F).
Except in the case of amounts distributed pursuant to Sections
(iv)(G), amounts properly withdrawn from the Collection Account and distributed
pursuant to this Section 2(d) shall be deemed released from the Trust Estate and
the security interest therein granted to the Indenture Trustee, and the Persons
to whom such amounts are distributed shall in no event be required to refund any
such distributed amounts.
(e) Reserve Account. (i) The Seller shall deposit the Reserve
---------------
Account Initial Deposit into the Reserve Account as required by Section 2.01(b)
of the Loan Sale Agreement.
(ii) On each Distribution Date, the Administrator shall instruct the
Indenture Trustee to withdraw from the Reserve Account the amount of any Reserve
Account Excess and distribute such amount to the Persons specified below by
11:00 a.m. (New York time) in the following order of priority: (A) to the
payment of the unpaid principal amount of the Notes and the
15
<PAGE>
Certificates, in the order of priority set forth in the last sentence of this
Section 2(e)(ii), until (x) the outstanding principal balance of the Notes plus
the Certificate Balance of the Certificates (in each case, after giving effect
to any other distributions in respect of principal occurring on such
Distribution Date) equals (y) the Pool Balance plus the Pre-Funded Amount, if
any, as of the close of business on the last day of the related Collection
Period, (B) to the Noteholders, the aggregate unpaid amount of any Noteholders'
Interest LIBOR Carryover, (C) to the Certificateholders, the aggregate unpaid
amount of any Certificateholders' Interest LIBOR Carryover, (D) if such
Distribution Date is on or subsequent to the [ ] Distribution Date and
the Pool Balance on such Distribution Date is equal to 10% or less of the sum of
the Initial Pool Balance and the Pre-Funded Amount as of the Closing Date, to
the payment of the unpaid principal amount of the Notes and Certificates in the
order of priority set forth in the last sentence of this Section 2(e)(ii), and
(E) to distribute 99% of the remaining amount of such excess to the Seller and
1% of the remaining amount to the Company. Amounts properly distributed
pursuant to clause (D) of this Section 2(e)(ii) shall be deemed released from
the Trust Estate and the security interest therein granted to the Indenture
Trustee, and the Seller and the Company shall in no event thereafter be required
to refund any such distributed amounts. All distributions of principal on the
Notes and the Certificates pursuant to clauses (A) and (D) of this Section
2(e)(ii) shall be allocated (after giving effect to all distributions of the
Noteholders' Principal Distribution Amount and the Certificateholders' Principal
Distribution Amount on such Distribution Date) to the Class A-1 Notes until the
principal balance of the Class A-1 Notes has been reduced to zero, then to the
Class A-2 Notes until the principal balance of the Class A-2 Notes has been
reduced to zero, and then to the Certificates until the Certificate Balance has
been reduced to zero.
(iii) Following the payment in full of the aggregate outstanding
principal balance of the Notes and the Certificate Balance and of all other
amounts owing or to be distributed hereunder or under the Indenture or the Trust
Agreement to Noteholders, Certificateholders, the Master Servicer or the
Administrator and the termination of the Trust (including any Noteholders'
Interest LIBOR Carryover and Certificateholders' Interest LIBOR Carryover), 99%
of any amount remaining on deposit in the Reserve Account shall be distributed
to the Seller and 1% of any remaining amount on deposit in the Reserve Account
shall be distributed to the Company. The Seller and the Company shall in no
event be required to refund any amounts properly distributed pursuant to this
Section 2(e)(iii).
16
<PAGE>
(iv) (A) In the event that the Servicing Fee for any Interest
Payment Date exceeds the amount distributed to the Master Servicer pursuant
to Sections 2(d)(iii)(A) or 2(d)(iv)(A) on such Interest Payment Date, the
Administrator shall instruct the Indenture Trustee to withdraw from the
Reserve Account on each Interest Payment Date an amount equal to such
excess.
(B) In the event that the Administration Fee for any Interest
Payment Date exceeds the amount distributed to the Administrator pursuant
to Sections 2(d)(iii)(B) or 2(d)(iv)(B) on such Interest Payment Date, the
Administrator shall instruct the Indenture Trustee to withdraw from the
Reserve Account on such Interest Payment Date an amount equal to such
excess, to the extent of funds available therein after giving effect to
paragraph (iv)(A) above, and to distribute such amount to the
Administrator.
(C) In the event that the Noteholders' Interest Distribution
Amount for an Interest Payment Date exceeds the amount distributed to
Noteholders pursuant to Section 2(d)(iii)(C) or 2(d)(iv)(C) on such
Interest Payment Date, the Administrator shall instruct the Indenture
Trustee to withdraw from the Reserve Account on such Interest Payment Date
an amount equal to such excess, to the extent of funds available therein
after giving effect to paragraphs (iv)(A) through (iv)(B) above, and to
distribute such amount to the Noteholders entitled thereto, in the same
order and priority as is set forth in Section 2(d)(iii) or Section 2(d)(iv)
on such Interest Payment Date.
(D) In the event that (i) the Certificate-holders' Interest
Distribution Amount for an Interest Payment Date exceeds the amount
distributed to the order of the Eligible Lender Trustee pursuant to Section
2(d)(iii)(D) or 2(d)(iv)(D), the Administrator shall instruct the Indenture
Trustee to withdraw from the Reserve Account on such Interest Payment Date
an amount equal to such excess, to the extent of funds available therein
after giving effect to paragraphs (iv)(A) through (iv)(C) above, and to
distribute such amount to the order of the Eligible Lender Trustee, in the
same order and priority as is set forth in Section 2(d)(iii) or 2(d)(iv) on
such Interest Payment Date.
(E) In the event that the Noteholders' Principal Distribution
Amount for a Distribution Date exceeds the amount distributed to
Noteholders pursuant to Section 2(d)(iv)(E) on such Distribution Date, the
Administrator shall instruct the Indenture Trustee to withdraw from the
Reserve Account on such Distribution Date an amount equal to
17
<PAGE>
such excess, to the extent of funds available therein after giving effect
to paragraphs (iv)(A) through (iv)(D) above, and to distribute such amount
to the Noteholders entitled thereto, in the same order and priority as is
set forth in Section 2(d)(iv)(E) on such Distribution Date.
(F) In the event that the Certificateholders' Principal
Distribution Amount for a Distribution Date exceeds the amount distributed
to the Eligible Lender Trustee pursuant to Section 2(d)(iv)(F) on such
Distribution Date, the Administrator shall instruct the Indenture Trustee
to withdraw from the Reserve Account on such Distribution Date an amount
equal to such excess, to the extent of funds available therein after giving
effect to paragraphs (iv)(A) through (iv)(E) above, and to distribute such
amount to the order of the Eligible Lender Trustee on such Distribution
Date.
(f) Pre-Funding Account. (i) On the Closing Date, the Eligible
-------------------
Lender Trustee will deposit in the Pre-Funding Account $_____________ from the
net proceeds of the sale of the Notes and the Certificates. During the Funding
Period, the Administrator shall instruct the Indenture Trustee to withdraw from
the Pre-Funding Account, in each case to the extent of the funds on deposit
therein (x) on each Transfer Date, an amount equal to 10_% of the principal
balance of, plus, to the extent capitalized or to be capitalized, accrued
interest on, the Additional Student Loans transferred to the Eligible Lender
Trustee on behalf of the Issuer on such Transfer Date and to distribute such
amount to or upon the order of the Seller upon satisfaction of the conditions
set forth in Section 2.02 of the Loan Sale Agreement with respect to such
transfer and (y) on each Determination Date, to deposit into the Collection
Account an amount equal to the Capitalized Interest Amount for the preceding
Student Loan Rate Accrual Period.
(ii) If (x) the Pre-Funded Amount has not been reduced to zero on the
Distribution Date on which the Funding Period ends (or, if the Funding Period
does not end on a Distribution Date, on the first Distribution Date following
the end of the Funding Period) or (y) the Pre-Funded Amount has been reduced to
$100,000 or less on any Distribution Date, in either case after giving effect to
any reductions in the Pre-Funded Amount on such Distribution Date pursuant to
Section 2(f)(i) above, the Administrator shall instruct the Indenture Trustee to
withdraw from the Pre-Funding Account on such Distribution Date an amount equal
to the Pre-Funded Amount and to distribute such amount to Noteholders as a
payment of principal in the same manner as the Noteholders' Principal
Distribution Amount is distributed.
18
<PAGE>
(g) Statements to Certificateholders and Noteholders. On each
------------------------------------------------
Determination Date preceding a Distribution Date, the Administrator shall
provide to the Indenture Trustee (with a copy to the Rating Agencies) for the
Indenture Trustee to forward on such succeeding Distribution Date to each
Noteholder of record and to the Eligible Lender Trustee for the Eligible Lender
Trustee to forward on such succeeding Distribution Date to each
Certificateholder of record a statement substantially in the form of Exhibits B
and C, respectively, setting forth at least the following information as to the
Notes and the Certificates to the extent applicable:
(i) the amount of such distribution allocable to principal of
the Class A-1 Notes;
(ii) the amount of such distribution allocable to principal of
the Class A-2 Notes;
(iii) the amount of the distribution allocable to interest on
such Distribution Date and on each Interest Payment Date following the
immediately preceding Distribution Date of the Class A-1 Notes;
(iv) the amount of the distribution allocable to interest on
such Distribution Date and on each Interest Payment Date following the
immediately preceding Distribution Date of the Class A-2 Notes;
(v) the amount of such distribution allocable to principal of
the Certificates;
(vi) the amount of the distribution allocable to interest on
such Distribution Date and on each Interest Payment Date following the
immediately preceding Distribution Date of the Certificates;
(vii) the amount, if any, of such distribution allocable to any
Noteholders' Interest LIBOR Carryover and any Certificateholders' Interest
LIBOR Carryover, together with any remaining outstanding amount of each
thereof;
(viii) the Pool Balance as of the close of business on the last
day of the preceding Collection Period, after giving effect to payments
allocated to principal reported under clauses (i), (ii) and (v) above;
(ix) the aggregate outstanding principal balance of the Class
A-1 Notes, the Class A-1 Note Pool Factor, the aggregate outstanding
principal balance of the Class A-2 Notes, the Class A-2 Note Pool Factor,
the Certificate
19
<PAGE>
Balance and the Certificate Pool Factor as of such Distribution Date, after
giving effect to payments allocated to principal reported under clauses
(i), (ii) and (v) above;
(x) the Class A-1 Rate, the Class A-2 Rate and the Certificate
Rate applicable with respect to each distribution referred to in clauses
(iii), (iv) and (vi) above, indicating whether such interest rate was
calculated based on the Student Loan Rate or based on LIBOR, and specifying
what each such interest would have been using the alternate basis for such
calculation;
(xi) the amount of the Servicing Fee paid to the Master Servicer
on such Distribution Date and on each Interest Payment Date following the
immediately preceding Distribution Date;
(xii) the amount of the Administration Fee paid to the
Administrator on such Distribution Date and on each Interest Payment Date
following the immediately preceding Distribution Date;
(xiii) the amount of the aggregate Realized Losses, if any, for
such Collection Period and the balance of Financed Student Loans that are
delinquent in each delinquency period as of the end of such Collection
Period;
(xiv) the balance of the Reserve Account on such Distribution
Date, after giving effect to changes therein on such Distribution Date and
indicating whether on such Distribution Date or any Interest Payment Date
since the preceding Distribution Date any withdrawal was made therefrom
pursuant to Section 2(e)(iv), the amount of each such withdrawal and the
purpose(s) pursuant to Section 2(e)(iv) for each such withdrawal;
(xv) for Distribution Dates during the Funding Period, the
remaining Pre-Funded Amount after giving effect to changes therein on such
Distribution Date;
(xvi) for the Distribution Date on or immediately following the
end of the Funding Period, the amount of any remaining Pre-Funded Amount
that has not been used to make Additional Fundings;
(xvii) the principal balance and number of Additional Student
Loans conveyed to the Issuer during the related Collection Period; and
20
<PAGE>
(xviii) the number and principal balance of Financed Student
Loans as of the end of the related Collection Period, that are (A) In-
School, (B) Grace, Repayment, Deferral, or Forbearance and (C)
Consolidation Loans as of the end of the related Collection Period.
Each amount set forth pursuant to clauses (i), (ii), (iii), (iv), (v) and (vi)
above shall be expressed as a dollar amount per $1,000 of original principal
balance of a Certificate or Note, as applicable. A copy of the statements
referred to above may be obtained by any Certificate Owner or Note Owner by a
written request to the Eligible Lender Trustee or the Indenture Trustee,
respectively, addressed to the respective Corporate Trust Office.
(h) Non-Ministerial Matters. With respect to matters that in the
-----------------------
reasonable judgment of the Administrator are non-ministerial, the Administrator
shall not take any action unless within a reasonable time before the taking of
such action, the Administrator shall have notified the Eligible Lender Trustee
of the proposed action and the Eligible Lender Trustee shall have consented to
it. For the purpose of the preceding sentence, "non-ministerial matters" shall
include:
(i) the amendment of or any supplement to the Indenture;
(ii) the initiation of any claim or lawsuit by the Issuer and the
compromise of any action, claim or lawsuit brought by or against the Issuer
(other than in connection with the collection of the Financed Student
Loans);
(iii) the amendment, change or modification of the Related Agreements;
(iv) the appointment of successor Note Registrars, successor Paying
Agents and successor Indenture Trustees pursuant to the Indenture or the
appointment of successor Administrators or Successor Master Servicers, or
the consent to the assignment by the Note Registrar, Paying Agent or
Indenture Trustee of its obligations under the Indenture; and
(v) the removal of the Indenture Trustee.
(i) Incentive Loans and Incentive Deposits. The Master Servicer may
--------------------------------------
establish the terms of, terminate or change the terms of any Incentive Program
with respect to a Financed Student Loan in accordance with the terms of such
program, provided such termination or change is not prohibited by the
21
<PAGE>
Higher Education Act, upon notice to the Eligible Lender Trustee and the
Indenture Trustee. Until the effective date of any termination, the
[Administrator] shall be required to deposit into the Collection Account the
Incentive Deposit with respect to such Incentive Financed Student Loan as
provided below. In the event that the Administrator fails to make such deposit,
the terms of such Incentive Program shall be such that the Borrower shall be
obligated to make such payment and such Incentive Program shall terminate as to
the related loan.
The Administrator shall deposit or cause to be deposited into the
Collection Account no later than the Determination Date succeeding each
Collection Period the aggregate Incentive Deposits with respect to Incentive
Financed Student Loans in the Trust as of the last day of such Collection
Period. Such deposits shall be considered deposits in respect of interest on
such Incentive Financed Student Loans for all purposes of the Basic Documents
and shall be deemed to have been deposited into the Collection Account for all
such purposes as of such last date of such Collection Period.
(j) Administrator Deposit Condition. During each Monthly Collection
-------------------------------
Period during which an Administrator Deposit Condition shall exist,
notwithstanding any other provision of this Agreement or the other Basic
Documents, all amounts required to be deposited into the Collection Account
pursuant to Section 4.01 of the Master Servicing Agreement shall at the time of
such required deposit instead be remitted to the account of the Administrator.
So long as an Administrator Deposit Condition shall exist, the Administrator
shall be required to deposit all amounts so remitted to it during any Monthly
Collection Period into the Collection Account no later than the Business Day
prior to the next succeeding Interest Payment Date and prior to such deposit
such amounts may be invested by the Administrator at its own risk and for its
own benefit (with any losses on such amounts remitted to it to be paid into the
Collection Account by the Administrator out of its own funds) and may be
commingled by the Administrator with its own funds and for all purposes of the
Basic Documents other than the administration of such funds as provided for
above such amounts shall be deemed to be on deposit in the Collection Account at
the time they are so held by the Administrator.
3. Annual Statement as to Compliance. (a) The Administrator
---------------------------------
shall deliver to the Seller, the Eligible Lender Trustee and the Indenture
Trustee, on or before __________ 31 of each year beginning __________ 31, 199_,
an Officers' Certificate of the Administrator dated as of ____________ of such
year, stating that (i) a review of the activities of the Administrator
22
<PAGE>
during the preceding 12-month period (or, in the case of the first such
certificate, during the period from the Closing Date to _______________, 199__)
and of its performance under this Agreement has been made under such officers'
supervision and (ii) to the best of such officers' knowledge, based on such
review, the Administrator has fulfilled all its obligations under this Agreement
throughout such year or, if there has been a default in the fulfillment of any
such obligation, specifying each such default known to such officers and the
nature and status thereof. The Indenture Trustee shall send a copy of each such
Officer's Certificate and each report referred to in Section 4 to the Rating
Agencies. A copy of such Officer's Certificate and each report referred to in
Section 4 may be obtained by any Certificateholder, Certificate Owner,
Noteholder or Note Owner by a request in writing to the Eligible Lender Trustee
addressed to its Corporate Trust Office, together with evidence satisfactory to
the Eligible Lender Trustee that such Person is one of the foregoing parties.
Upon the telephone request of the Eligible Lender Trustee (to be confirmed in
writing), the Indenture Trustee will promptly furnish the Eligible Lender
Trustee a list of Noteholders as of the date specified by the Eligible Lender
Trustee.
(b) The Administrator shall deliver to the Eligible Lender Trustee,
the Indenture Trustee, the Master Servicer, and the Rating Agencies, promptly
after having obtained knowledge thereof, but in no event later than two Business
Days thereafter, written notice in an Officers' Certificate of the Administrator
of any event which with the giving of notice or lapse of time, or both, would
become an Administrator Default under Section 12.
4. Annual Independent Certified Public Accountants' Report. The
-------------------------------------------------------
Administrator shall cause a firm of independent certified public accountants,
which may also render other services to the Administrator, to deliver to the
Seller, the Eligible Lender Trustee and the Indenture Trustee on or before
____________ 31 of each year beginning ___________ 31, 199_, a report addressed
to the Administrator and to the Seller, the Eligible Lender Trustee and the
Indenture Trustee (which report may be combined with other reports required to
be delivered by such accountants to the Administrator, the Eligible Lender
Trustee and the Indenture Trustee under the Related Agreements), to the effect
that such firm has examined certain documents and records relating to the
administration of the Financed Student Loans and of the Trust during the
preceding fiscal year ended ________________ (or, in the case of the first such
report, during the period from the Closing Date to ____________, 199__) and
that, on the basis of the accounting and auditing procedures considered
appropriate under the circumstances, such firm is of the opinion that such
administration was conducted in compliance
23
<PAGE>
with the terms of this Agreement, including the provisions of the Higher
Education Act, except for (i) such exceptions as such firm shall believe to be
immaterial and (ii) such other exceptions as shall be set forth in such report.
The Indenture Trustee shall send a copy of each such report to the Rating
Agencies.
Such report will also indicate that the firm is independent of the
Administrator within the meaning of the Code of Professional Ethics of the
American Institute of Certified Public Accountants.
5. Administrator Expenses. The Administrator shall be required
----------------------
to pay all expenses incurred by it in connection with its activities hereunder,
including fees and disbursements of independent accountants, taxes imposed on
the Administrator and expenses incurred in connection with distributions and
reports to the Certificateholders and the Noteholders, as the case may be.
6. Records. The Administrator shall maintain appropriate books
-------
of account and records relating to services performed hereunder, which books of
account and records shall be accessible for inspection by the Issuer at any time
during normal business hours upon reasonable request.
7. Compensation. As compensation for the performance of the
------------
Administrator's obligations under this Agreement and as reimbursement for its
expenses related thereto, the Administrator shall be entitled to the
Administration Fee payable monthly in arrears on each Interest Payment Date
which shall be solely an obligation of the Issuer and payable solely as provided
herein.
8. Additional Information To Be Furnished to the Issuer.
----------------------------------------------------
Subject to Section 31 hereof, the Administrator shall furnish to the Issuer from
time to time such additional information regarding the Collateral as the Issuer
shall reasonably request.
9. Independence of the Administrator. For all purposes of this
---------------------------------
Agreement, the Administrator shall be an independent contractor and shall not be
subject to the supervision of the Issuer or the Eligible Lender Trustee with
respect to the manner in which it accomplishes the performance of its
obligations hereunder. Unless expressly authorized by the Issuer, the
Administrator shall have no authority to act for or represent the Issuer or the
Eligible Lender Trustee in any way and shall not otherwise be deemed an agent of
the Issuer or the Eligible Lender Trustee.
10. No Joint Venture. Nothing contained in this Agreement (i) shall
----------------
constitute the Administrator and either of
24
<PAGE>
the Issuer or the Eligible Lender Trustee as members of any partnership, joint
venture, association, syndicate, unincorporated business or other separate
entity, (ii) shall be construed to impose any liability as such on any of them
or (iii) shall be deemed to confer on any of them any express, implied or
apparent authority to incur any obligation or liability on behalf of the others.
11. Other Activities of Administrator. Nothing herein shall
---------------------------------
prevent the Administrator or its Affiliates from engaging in other businesses
or, in its sole discretion, from acting in a similar capacity as an
administrator for any other person or entity even though such person or entity
may engage in business activities similar to those of the Issuer, the Eligible
Lender Trustee or the Indenture Trustee.
12. Administrator Default. If any one of the following events (an
---------------------
"Administrator Default") shall occur and be continuing:
(a) any failure by the Administrator to direct the Indenture Trustee
to make any required distributions from any of the Trust Accounts, which
failure continues unremedied for five Business Days after written notice of
such failure is received by the Administrator from the Indenture Trustee or
the Eligible Lender Trustee or after discovery of such failure by an
officer of the Administrator; or
(b) any failure by the Administrator duly to observe or to perform in
any material respect any other covenants or agreements of the Administrator
set forth in this Agreement or any Related Agreements, which failure shall
(i) materially and adversely affect the rights of Noteholders or
Certificateholders and (ii) continues unremedied for a period of 60 days
(or for such longer period, not in excess of 120 days, as may be reasonably
necessary to remedy such failure, if the Indenture Trustee and the Eligible
Lender Trustee reasonably believe such failure is susceptible to cure
within such longer period) after the date on which written notice of such
failure, requiring the same to be remedied, shall have been given (A) to
the Administrator by either the Indenture Trustee or the Eligible Lender
Trustee or (B) to the Administrator and to the Indenture Trustee and the
Eligible Lender Trustee by the Noteholders or Certificateholders, as
applicable, representing not less than 25% of the Outstanding Amount of the
Notes or 25% of the outstanding Certificate Balance; or
25
<PAGE>
(c) an Insolvency Event occurs with respect to the Administrator;
then, and in each and every case, so long as the Administrator Default shall not
have been remedied, either the Indenture Trustee, or the Noteholders evidencing
not less than 75% of the Outstanding Amount of the Notes, by notice then given
in writing to the Administrator (and to the Indenture Trustee and the Eligible
Lender Trustee if given the Noteholders) may terminate all the rights and
obligations (other than the obligations set forth in Section 24 hereof) of the
Administrator under this Agreement. On or after the receipt by the
Administrator of such written notice, all authority and power of the
Administrator under this Agreement, whether with respect to the Notes, the
Certificates or the Financed Student Loans or otherwise, shall, without further
action, pass to and be vested in the Indenture Trustee or such successor
Administrator as may be appointed under Section 13; and, without limitation, the
Indenture Trustee and the Eligible Lender Trustee are hereby authorized and
empowered to execute and deliver, for the benefit of the predecessor
Administrator, as attorney-in-fact or otherwise, any and all documents and other
instruments, and to do or accomplish all other acts or things necessary or
appropriate to effect the purposes of such notice of termination. The
predecessor Administrator shall cooperate with the successor Administrator, the
Indenture Trustee and the Eligible Lender Trustee in effecting the termination
of the responsibilities and rights of the predecessor Administrator under this
Agreement. All reasonable costs and expenses (including attorneys' fees and
expenses) incurred in connection with amending this Agreement to reflect such
succession as Administrator pursuant to this Section shall be paid by the
predecessor Administrator upon presentation of reasonable documentation of such
costs and expenses. Upon receipt of notice of the occurrence of an
Administrator Default, the Eligible Lender Trustee shall give notice thereof to
the Rating Agencies.
13. Appointment of Successor. (a) Upon receipt by the
------------------------
Administrator of notice of termination pursuant to Section 12, or the
resignation by the Administrator in accordance with the terms of this Agreement,
the predecessor Administrator shall continue to perform its functions as
Administrator, in the case of termination, only until the date specified in such
termination notice or, if no such date is specified in a notice of termina tion,
until receipt of such notice and, in the case of resigna tion, until the later
of (x) the date 120 days from the delivery to the Eligible Lender Trustee and
the Indenture Trustee of written notice of such resignation (or written
confirmation of such notice) in accordance with the terms of this Agreement and
(y) the date upon which the predecessor Administrator shall
26
<PAGE>
become unable to act as Administrator as specified in the notice of resignation
and accompanying Opinion of Counsel. In the event of termination hereunder of
the Administrator, the Issuer shall appoint a successor Administrator acceptable
to the Indenture Trustee and the successor Administrator shall accept its
appoint ment by a written assumption in form acceptable to the Indenture
Trustee. In the event that a successor Administrator has not been appointed at
the time when the predecessor Administrator has ceased to act as Administrator
in accordance with this Section, the Indenture Trustee without further action
shall automatically be appointed the successor Administrator and the Indenture
Trustee shall be entitled to the Administration Fee. Notwith standing the
above, the Indenture Trustee shall, if it shall be unwilling or legally unable
so to act, appoint or petition a court of competent jurisdiction to appoint, any
established institution whose regular business shall include the servicing of
student loans, as the successor to the Administrator under this Agreement and
the Administration Agreement.
(b) Upon appointment, the successor Administrator (including the
Indenture Trustee acting as successor Administrator) shall be the successor in
all respects to the predecessor Administrator and shall be subject to all the
responsibilities, duties and liabilities placed on the predecessor Administrator
that arise thereafter or are related thereto and shall be entitled to an amount
agreed to by such successor Administrator (which shall not exceed the Administra
tion Fee unless such compensation arrangements will not result in a downgrading
of the Notes or the Certificates by any Rating Agency) and all the rights
granted to the predecessor Administrator by the terms and provisions of this
Agreement.
(c) The Administrator may not resign unless it is prohibited from
serving as such by law as evidenced by an Opinion of Counsel to such effect
delivered to the Indenture Trustee and the Eligible Lender Trustee.
Notwithstanding the foregoing or anything to the contrary herein or in the
Related Agreements, the Indenture Trustee, to the extent it is acting as
successor Administrator pursuant hereto, shall be entitled to resign to the
extent a qualified successor Administrator has been appointed and has assumed
all the obligations of the Administrator in accordance with the terms of this
Agreement and the Related Agreements.
14. Notification to Noteholders and Certificate holders. Upon any
---------------------------------------------------
termination of, or appointment of a successor to, the Administrator pursuant to
Section 12 or 13, the Eligible Lender Trustee shall give prompt written notice
thereof to Certificateholders and the Indenture Trustee shall give prompt
written notice thereof to Noteholders and the Rating Agencies
27
<PAGE>
(which, in the case of any such appointment of a successor, shall consist of
prior written notice thereof to the Rating Agencies).
15. Waiver of Past Defaults. The Noteholders of Notes evidencing not
-----------------------
less than a majority of the Outstanding Amount of the Notes (or the
Certificateholders of Certificates evidencing not less than a majority of the
outstanding Certificate Balance, in the case of any default which does not
adversely affect the Indenture Trustee or the Noteholders) may, on behalf of all
Noteholders and Certificateholders, waive in writing any default by the
Administrator in the performance of its obligations here under and any
consequences thereof, except a default in making any required deposits to or
payments from any of the Trust Accounts (or giving instructions regarding the
same) in accordance with this Agreement. Upon any such waiver of a past
default, such default shall cease to exist, and any Administrator Default
arising therefrom shall be deemed to have been remedied for every purpose of
this Agreement. No such waiver shall extend to any subsequent or other default
or impair any right consequent thereto.
16. Notices. Any notice, report or other communica tion given
-------
hereunder shall be in writing (or in the form of facsimile notice, followed by
written notice) and addressed as follows:
(a) if to the Issuer, to
Signet Student Loan Trust 1996-A
c/o First Chicago Delaware Inc., Trustee
300 King Street
Wilmington, Delaware 19801
with a copy to the Eligible Lender Trustee
at the Corporate Trust Office of the
Eligible Lender Trustee
(b) if to the Eligible Lender Trustee, to
The First National Bank of Chicago
One First National Plaza
Suite 0126
Chicago, Illinois 60610
Attention: Corporate Trust Administration
Telephone: (312) 407-1892
Facsimile: (312) 407-1708
28
<PAGE>
(c) if to the Administrator, to
Signet Bank
7 North 8th Street
Richmond, Virginia 23219
Attention: Treasurer
Telephone: (804) 771-7060
Telecopy: (804) 771-7936
(d) if to the Indenture Trustee, to
The Bank of New York
_______________________
_______________________
Attention: ___________
Telephone: ___________
Facsimile: ___________
or to such other address as any party shall have provided to the other parties
in writing. Any notice required to be in writing hereunder shall be deemed
given if such notice is mailed by certified mail, postage prepaid, or hand-
delivered to the address of such party as provided above.
17. Amendments. This Agreement may be amended from time to time by a
----------
written amendment duly executed and delivered by the Issuer, the Administrator
and the Indenture Trustee, with the written consent of the Eligible Lender
Trustee, without the consent of the Noteholders and the Certificateholders, for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Agreement or of modifying in any manner the rights
of the Noteholders or Certificateholders or in connection with a transaction
described in Section 25 hereof; provided that such amendment will not, in an
Opinion of Counsel obtained on behalf of the Issuer and satisfactory to the
Indenture Trustee and the Eligible Lender Trustee, materially and adversely
affect the interest of any Noteholder or Certificateholder. This Agreement may
also be amended by the Issuer, the Administrator and the Indenture Trustee with
the written consent of the Eligible Lender Trustee, the Noteholders of at least
a majority in the Outstanding Amount of the Notes and the Certificateholders of
at least a majority of the Certificate Balance for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or of modifying in any manner the rights of Noteholders or the
Certificateholders; provided, however, that no such amendment may (i) increase
-------- -------
or reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments with respect to Student Loans or distributions that are
required to be made for the benefit of the Noteholders or
29
<PAGE>
Certificateholders or (ii) reduce the aforesaid percentage of the Noteholders
and the Certificateholders which are required to consent to any such amendment,
without the consent of all Outstanding Noteholders and Certificateholders.
Prior to the execution of any such amendment, the Administrator shall furnish
written notification of the substance of such amendment to each of the Rating
Agencies.
18. Assignment. Notwithstanding anything to the contrary contained
----------
herein, except as provided in Section 13 or 25 of this Agreement concerning the
resignation of the Administrator, this Agreement may not be assigned by the
Administrator.
19. Governing Law. This Agreement shall be construed in
-------------
accordance with the laws of the Commonwealth of Virginia, without reference to
its conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
20. Headings. The section headings hereof have been inserted for
--------
convenience of reference only and shall not be construed to affect the meaning,
construction or effect of this Agreement.
21. Counterparts. This Agreement may be executed in counterparts,
------------
each of which when so executed shall together constitute but one and the same
agreement.
22. Severability. Any provision of this Agreement that is prohibited
------------
or unenforceable in any jurisdiction shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.
23. Not Applicable to Signet Bank in Other Capacities. Nothing in
-------------------------------------------------
this Agreement shall affect any obligation Signet Bank may have in any other
capacity under the Related Agreements.
24. Liability of Administrator; Indemnities. The Administrator shall
---------------------------------------
be liable in accordance herewith only to the extent of the obligations
specifically undertaken by the Administrator under this Agreement.
The Administrator shall indemnify, defend and hold harmless the
Issuer, the Eligible Lender Trustee, the Indenture Trustee, the Master Servicer,
any Subservicer, the Certificateholders and the Noteholders and any of the
officers,
30
<PAGE>
directors, employees and agents of the Issuer, the Eligible Lender Trustee, the
Indenture Trustee, the Master Servicer and any Subservicer from and against any
and all costs, expenses, losses, claims, damages and liabilities to the extent
that such cost, expense, loss, claim, damage or liability arose out of, or was
imposed upon any such Person through, the negligence, willful misfeasance or bad
faith of the Administrator in the performance of its duties under this Agreement
or by reason of reckless disregard of its obligations and duties hereunder or
thereunder.
The Administrator shall pay reasonable compensation to the Indenture
Trustee and shall reimburse the Indenture Trustee for all reasonable expenses,
disbursements and advances, and indemnify, defend and hold harmless the
Indenture Trustee and its officers, directors, employees and agents from and
against all costs, expenses, losses, claims, damages and liabilities, to the
extent and in the manner provided in, and subject to the limitations of, Section
6.07 of the Indenture.
For purposes of this Section, in the event of the termination of the
rights and obligations of the Administrator (or any successor thereto pursuant
to Section 25) as Administrator pursuant to Section 12 or a resignation by such
Administrator pursuant to this Agreement, such Administrator shall be deemed to
be the Administrator pending appointment of a successor Administrator pursuant
to Section 13.
Indemnification under this Section shall survive the resignation or
removal of the Eligible Lender Trustee or the Indenture Trustee or the
termination of this Agreement and shall include reasonable fees and expenses of
counsel and expenses of litigation. If the Administrator shall have made any
indemnity payments pursuant to this Agreement and the Person to or on behalf of
whom such payments are made thereafter collects any of such amounts from others,
such Person shall promptly repay such amounts to the Administrator, without
interest.
25. Merger or Consolidation of, or Assumption of the Obligations
------------------------------------------------------------
of, Administrator. The Administrator hereby agrees that, upon (a) any merger or
- -----------------
consolidation of the Administrator into another Person, (b) any merger or
consolidation to which the Administrator shall be a party resulting in the
creation of another Person, (c) any Person succeeding to the properties and
assets of the Administrator substantially as a whole or (d) the other transfer
by the Administrator to any Person of the Administrator's student lending
business substantially as a whole, the Administrator shall (i) cause such Person
(if other than the Administrator) to execute an agreement of assumption to
perform every obligation of the Administrator hereunder, (ii) deliver to the
Eligible Lender Trustee and Indenture Trustee an
31
<PAGE>
Officers' Certificate and an Opinion of Counsel each stating that such
consolidation, merger or succession and such agreement of assumption comply with
this Section and that all conditions precedent provided for in this Agreement
relating to such transaction have been complied with, (iii) cause the Rating
Agency Condition to be satisfied or, in the case of a transfer pursuant to
clause (d) to a Person that is a Non-Code Entity, deliver notice of such
transfer and assumption to each Rating Agency, and (iv) cure any existing
Administrator Default or any continuing event which, after notice or lapse of
time or both, would become an Administrator Default. Upon compliance with the
foregoing requirements, such Person shall be the successor to the Administrator
under this Agreement without further act on the part of any of the parties to
this Agreement. Notwithstanding anything herein to the contrary, compliance with
clauses (i), (ii), (iii) and (iv) above shall be conditions to the consummation
of any of the transactions referred to in clause (a), (b) or (c) above.
26. Limitation on Liability of Administrator and Others. Neither the
---------------------------------------------------
Administrator nor any of its directors, officers, employees or agents shall be
under any liability to the Issuer, the Noteholders or the Certificateholders,
the Indenture Trustee or the Eligible Lender Trustee, the Master Servicer or the
Paying Agent(s) except as provided under this Agreement, for any action taken or
for refraining from the taking of any action pursuant to this Agreement or for
errors in judgment; provided, however, that this provision shall not protect the
-------- -------
Administrator or any such person against any liability that would otherwise be
imposed by reason of willful misfeasance, bad faith or negligence in the
performance of its duties or by reason of reckless disregard of obligations and
its duties under this Agreement. The Administrator and any of its directors,
officers, employees or agents may rely in good faith on the advice of counsel or
on any document of any kind prima facie properly executed and submitted by any
Person respecting any matters arising hereunder.
Except as provided in this Agreement, the Administrator shall not be
under any obligation to appear in, prosecute or defend any legal action that
shall not be incidental to its duties to administer the Financed Student Loans
and the Trust in accordance with this Agreement, and that in its opinion may
involve it in any expense or liability; provided, however, that the
-------- -------
Administrator may undertake any reasonable action that it may deem necessary or
desirable in respect of this Agreement and the other Basic Documents and the
rights and duties of the parties to this Agreement and the Related Agreements
and the interests of the Certificateholders under this Agreement and the
Noteholders under the Indenture.
32
<PAGE>
27. Signet Bank Not to Resign as Administrator. Subject to the
------------------------------------------
provisions of Section 25, Signet Bank shall not resign from the obligations and
duties imposed on it as Administrator under this Agreement except upon
determination that the performance of its duties under this Agreement shall no
longer be permissible under applicable law or shall violate any final order of a
court or administrative agency with jurisdiction over Signet Bank or its
properties. Notice of any such determination permitting the resignation of
Signet Bank shall be communicated to the Eligible Lender Trustee and the
Indenture Trustee at the earliest practicable time (and, if such communication
is not in writing, shall be confirmed in writing at the earliest practicable
time) and any such determination shall be evidenced by an Opinion of Counsel to
such effect delivered to the Eligible Lender Trustee and the Indenture Trustee
concurrent ly with or promptly after such notice. No such resignation shall
become effective until the Indenture Trustee or a successor Administrator shall
have assumed the responsibilities and obliga tions of Signet Bank in accordance
with Section 13.
28. Limitation of Liability of Eligible Lender Trustee and
------------------------------------------------------
Indenture Trustee. (a) Notwithstanding anything contained herein to the
- -----------------
contrary, this instrument has been countersigned by The First National Bank of
Chicago not in its individual capacity but solely in its capacity as Eligible
Lender Trustee of the Issuer and in no event shall The First National Bank of
Chicago in its individual capacity or any Owner of the Issuer have any liability
for the representations, warranties, covenants, agree ments or other obligations
of the Issuer hereunder, as to all of which recourse shall be had solely to the
assets of the Issuer. For all purposes of this Agreement, in the performance of
any duties or obligations of the Issuer thereunder, the Eligible Lender Trustee
shall be subject to, and entitled to the benefits of, the terms and provisions
of Articles VI, VII and VIII of the Trust Agreement.
(b) Notwithstanding anything contained herein to the contrary, this
Agreement has been countersigned by The Bank of New York not in its individual
capacity but solely as Indenture Trustee and in no event shall The Bank of New
York have any liability for the representations, warranties, covenants,
agreements or other obligations of the Issuer hereunder or in any of the
certificates, notices or agreements delivered pursuant hereto, as to all of
which recourse shall be had solely to the assets of the Issuer.
29. Insolvency of Company. (a) Upon any sale of the assets of the
---------------------
Trust pursuant to Section 9.02 of the Trust Agree ment, the Indenture Trustee
shall deposit the net proceeds from such sale after all payments and reserves
therefrom (including
33
<PAGE>
the expenses of such sale) have been made (the "Insolvency Proceeds") in the
Collection Account. On the Distribution Date on, or, if such proceeds are not
so deposited on a Distribution Date, on the first Distribution Date following
the date on which the Insolvency Proceeds are deposited in the Collection
Account, the Administrator shall instruct the Indenture Trustee to make the
following distributions (after the application on such Distribution Date of the
amount of Available Funds and amounts on deposit in the Reserve Account pursuant
to Sections 2(d) and 2(e)) from the Insolvency Proceeds and any funds remaining
on deposit in the Reserve Account (including the proceeds of any sale of
investments therein as described in the following sentence):
(i) to the Noteholders, any portion of the Noteholders' Interest
Distribution Amount not otherwise distributed to the Noteholders on such
Distribution Date;
(ii) to the Certificateholders, any portion of the
Certificateholders' Interest Distribution Amount not otherwise distributed
to the Certificateholders on such Distribution Date;
(iii) to the Noteholders, the outstanding principal balance of
the Notes (after giving effect to the reduction in the outstanding
principal balance of the Notes to result from the distributions to
Noteholders on such Distribution Date and on prior Distribution Dates), pro
rata based on such outstanding principal balance;
(iv) to the Certificateholders, the Certificate Balance (after
giving effect to the reduction in the Certificate Balance to result from
the distributions to Certificateholders on such Distribution Date);
(v) to the Noteholders, any unpaid Noteholders' Interest LIBOR
Carryover not otherwise distributed to the Noteholders on such Distribution
Date; and
(vi) to the Certificateholders, any unpaid Certificateholders'
Interest LIBOR Carryover not otherwise distributed to the
Certificateholders on such Distribution Date.
Any investments on deposit in the Reserve Account which will not mature on or
before such Distribution Date shall be sold by the Indenture Trustee at such
time as will result in the Indenture Trustee receiving the proceeds from such
sale not later than the Business Day preceding such Distribution Date. Any
Insolvency
34
<PAGE>
Proceeds remaining after the deposits described above shall be paid 99% to the
Seller and 1% to the Company.
(b) As described in Article IX of the Trust Agreement, notice of any
termination of the Trust shall be given by the Administrator to the Eligible
Lender Trustee and the Indenture Trustee as soon as practicable after the
Administrator has received notice thereof.
30. Third-Party Beneficiaries. The Eligible Lender Trustee is a
-------------------------
third party beneficiary to this Agreement and is entitled to the rights and
benefits hereunder and may enforce the provisions hereof as if it were a party
hereto.
31. Confidentiality. (a) The Indenture Trustee and its agents,
---------------
representatives or employees shall at all times maintain the confidentiality of
all Confidential Information and shall not, without the prior written consent of
the Administrator, disclose to third parties (including Noteholders or
Certificateholders) or use such information, in any manner whatsoever, in whole
or in part, except as expressly permitted under this Agreement or as required to
fulfill an obligation of the Indenture Trustee under this Agreement, in which
case such Confidential Information shall be revealed only to the extent required
for the purpose of fulfilling an obligation of the required for the purpose of
fulfilling an obligation of the Indenture Trustee under this Agreement.
Notwithstanding the above, Confidential Information may be disclosed to the
extent required by law or legal process, provided that the Indenture Trustee
gives prompt written notice to the Administrator of the nature and scope of such
disclosure.
(b) Notwithstanding anything in this Agreement to the contrary, the
Administrator shall not be obligated to disclose to any Person (i) any
information regarding Obligors, the disclosure of which is prohibited by
applicable law, or (ii) any information relating to the strategic plans or
opportunities of its student lending business.
35
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the day and year first above written.
SIGNET STUDENT LOAN TRUST 1996-A,
by THE FIRST NATIONAL BANK OF
CHICAGO, not in its individual
capacity but solely as Eligible
Lender Trustee,
by
______________________________
Name:
Title:
THE BANK OF NEW YORK, not in its
individual capacity but solely as
Indenture Trustee,
by
______________________________
Name:
Title:
SIGNET BANK,
as Administrator,
by
______________________________
Name:
Title:
36
<PAGE>
EXHIBIT A TO THE
ADMINISTRATION AGREEMENT
POWER OF ATTORNEY
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK)
KNOW ALL MEN BY THESE PRESENTS, that The First National Bank of Chicago, a
national bank, not in its individual capacity but solely as eligible lender
trustee ("Eligible Lender Trustee") for the Signet Student Loan Trust 1996-A
(the "Trust"), does hereby make, constitute and appoint Signet Bank, as
Administrator under the Administration Agreement (as defined below), and its
agents and attorneys, as Agents and Attorneys-in-Fact to execute on behalf of
Eligible Lender Trustee or the Trust all such documents, reports, filings,
instruments, certificates and opinions as it should be the duty of Eligible
Lender Trustee or the Trust to prepare, file or deliver pursuant to the Related
Agreements (as defined in the Administration Agreement) or pursuant to Section
5.05(a), (b), (c) or (d) of the Trust Agreement (as defined in the
Administration Agreement), including without limitation, to appear for and
represent Eligible Lender Trustee and the Trust in connection with the
preparation, filing and audit of federal, state and local tax returns pertaining
to the Trust, and with full power to perform any and all acts associated with
such returns and audits that the Eligible Lender Trustee could perform,
including without limitation, the right to distribute and receive confidential
information, defend and assert positions in response to audits, initiate and
defend litigation, and to execute waivers of restriction on assessments of
deficiencies, consents to the extension of any statutory or regulatory time
limit, and settlements. For the purpose of this Power of Attorney, the term
"Administration Agreement" means the Administration Agreement dated as of [
], 1996, among the Trust, Signet Bank, as Administrator, and The Bank of New
York, as Indenture Trustee, as such may be amended from time to time.
All powers of attorney for this purpose heretofore filed or executed by
Eligible Lender Trustee are hereby revoked.
<PAGE>
EXECUTED as of the first day of [ ], 1996.
THE FIRST NATIONAL BANK OF CHICAGO,
not in its individual capacity but
solely as Eligible Lender Trustee
by__________________________
Name:
Title:
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
Before me, the undersigned authority, on this day personally appeared
[ ] known to me to be the person whose name is subscribed to the foregoing
instrument, and acknowledged to me that such person signed the same for the
purposes and considerations therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this [ ] day
of [ ], 1996.
______________________________
Notary Public in and for the
State of New York
______________________________
Printed Name of Notary Public
Commission Expires____________
A-2
<PAGE>
EXHIBIT B
TO THE
ADMINISTRATION AGREEMENT
Form of Noteholders' Statement
pursuant to Section 2(g) of
Administration Agreement
(capitalized terms used herein
are defined in Appendix A thereto)
Distribution Date:
(i) Amount of principal being paid or distributed:
(a) Class A-1 Notes:__________ ($_______ per $1,000
original principal
amount of Class A-1
Notes)
(b) Class A-2 Notes:__________ ($_______ per $1,000
original principal
amount of Class A-2
Notes)
Distribution Date and last two Interest Payment Dates:
(ii) Amount of interest being paid or distributed:
(a) Class A-1 Notes:__________ ($_______ per $1,000
original principal
amount of Class A-1
Notes)
(b) Class A-2 Notes:__________ ($_______ per $1,000
original principal
amount of Class A-2
Notes)
Distribution Date:
(iii) Amount of Noteholders' Interest LIBOR Carryover being paid or
distributed (if any) and amount remaining (if any):
(a) Class A-1 Notes:
(1) Distributed:__________ ($_______ per $1,000
original principal
amount of Class A-1
Notes)
<PAGE>
(2) Balance:______________ ($_______ per $1,000
original) principal
amount of Class A-1
Notes)
(b) Class A-2 Notes:
(1) Distributed:__________ ($_______ per $1,000
original principal
amount of Class A-2
Notes)
(2) Balance:______________ ($_______ per $1,000
original principal
amount of Class A-2
Notes)
(iv) Pool Balance at end of related Collection Period: __________
(v) After giving effect to distributions on this Distribution Date:
(a) (1) outstanding principal amount of Class A-1
Notes:__________
(2) Class A-1 Note Pool Factor:__________
(b) (1) outstanding principal amount of Class A-2
Notes:__________
(2) Class A-2 Note Pool Factor:__________
(c) (1) Certificate Balance:_________________
(2) Certificate Pool Factor:______________
(vi) Applicable Interest Rate:
(a) In general:
(1) LIBOR for each of the Interest Payment Dates since the
previous Distribution Date was _____%, _____% and
_____%; and
(2) the Student Loan Rate was _____%.
(b) Class A-1 Rate:_____% (based on [LIBOR]
[Student Loan Rate])
(c) Class A-2 Rate:_____% (based on [LIBOR]
[Student Loan Rate])
<PAGE>
(vii) Amount of Servicing Fee for related Collection Period: __________
($________ per $1,000 original principal amount of Notes)
(viii) Amount of Administration Fee for related Collection
Period:__________ ($_______ per $1,000 original principal amount
of Notes)
(ix) Aggregate amount of Realized Losses (if any) for the related
Collection Period:__________
(x) Financed Student Loans delinquent at end of related Collection
Period: __________; number of delinquent loans: ________;
aggregate unpaid principal balance of delinquent loans:__________
(xi) Withdrawal from Reserve Account on related Distribution Date:_____
(xii) Withdrawal from Pre-Funding Account during related Collection
Period: __________
(xiii) Amount in the Reserve Account (after giving effect to
(xi)):__________
(xiv) Amount in the Pre-Funding Account (after giving effect to
(xii)):__________
(xv) Additional Student Loans: _______ loans with aggregate principal
balance of $_______ were acquired during the related Collection
Period; withdrawal from Pre-funding Account to fund the purchase
of Additional Student Loans during the related Collection Period:
$________________.
B-3
<PAGE>
EXHIBIT C
TO THE
ADMINISTRATION AGREEMENT
Form of Certificateholders' Statement pursuant to Section 2(xvi) of
Administration Agreement (capitalized terms used herein are defined in Appendix
A thereto)
Distribution Date:__________
(i) Amount of principal being paid or distributed in respect of the
Certificates:__________ ($________ per $1,000
original principal
amount of Certificates)/1/
(ii) Amount of interest being paid or distributed in respect of the
Certificates on this Distribution Date and each of last two
Interest Payment Dates:__________ ($______ per $1,000
original
principal
amount of
Certificates)
(iii) Amount of Certificateholders' Interest LIBOR Carryover being paid
or distributed (if any) and amount remaining (if any):
(1) Distributed:__________ ($_______ per $1,000
original principal
amount of
Certificates)
(2) Balance:__________ ($ ______ per $1,000
original principal
amount of
Certificates)
(iv) Pool Balance at end of related Collection Period: __________
(v) After giving effect to distributions on this Distribution Date:
_________________
/1/ Only after the Notes have been paid in full.
<PAGE>
(a) (1) outstanding principal amount of Class A-1
Notes:__________
(2) Class A-1 Note Pool Factor:__________
(b) (1) outstanding principal amount of Class A-2
Notes:__________
(2) Class A-2 Note Pool Factor:__________
(c) (1) Certificate Balance:__________
(2) Certificate Pool Factor:__________
(vi) Applicable Interest Rate:
(a) In general:
(1) LIBOR for each of the three Interest Payment Dates since
the previous Distribution Date was _____%, _____% and
_____%; and
(2) the Student Loan Rate was _____%.
(b) Certificate Rate:_____% (based on [LIBOR]
[Student Loan Rate])
(vii) Amount of Servicing Fee for related Monthly Collection Period:
__________ ($_______ per $1,000 original principal amount of
Certificates)
(viii) Amount of Administration Fee for related Monthly Collection
Period:__________ ($_______ per $1,000 original principal amount
of Certificates)
(ix) Aggregate amount of Realized Losses (if any) for the related
Collection Period:__________
(x) Financed Student Loans delinquent at end of related Collection
Period: __________; number of delinquent loans: ________;
aggregate unpaid principal balance of delinquent loans:
___________________
(xi) Withdrawal from Reserve Account on related Distribution Date:
_______________
(xii) Withdrawal from Pre-Funding Account during related Monthly
Collection Period: __________
(xiii) Amount in the Reserve Account (after giving effect to
(xi)):__________
(xiv) Additional Student Loans: _______ loans with aggregate principal
balance of $_______ were originated during
C-2
<PAGE>
the related Collection Period; withdrawal from Pre-funding Account
to fund the purchase of Additional Student Loans during the
related Collection Period: $______.
C-3
<PAGE>
B&W Draft
12/10/96
APPENDIX A TO THE
ADMINISTRATION AGREEMENT
DEFINITIONS AND USAGE
Usage
-----
The following rules of construction and usage shall be applicable to
any instrument that is governed by this Appendix:
(a) All terms defined in this Appendix shall have the defined
meanings when used in any instrument governed hereby and in any certificate or
other document made or delivered pursuant thereto unless otherwise defined
therein.
(b) As used herein, in any instrument governed hereby and in any
certificate or other document made or delivered pursuant thereto, accounting
terms not defined in this Appendix or in any such instrument, certificate or
other document, and accounting terms partly defined in this Appendix or in any
such instrument, certificate or other document to the extent not defined, shall
have the respective meanings given to them under generally accepted accounting
principles as in effect on the date of such instrument. To the extent that the
definitions of accounting terms in this Appendix or in any such instrument,
certificate or other document are inconsistent with the meanings of such terms
under generally accepted accounting principles, the definitions contained in
this Appendix or in any such instrument, certificate or other document shall
control.
(c) The words "hereof", "herein", "hereunder" and words of similar
import when used in an instrument refer to such instrument as a whole and not to
any particular provision or subdivision thereof; references in an instrument to
"Article", "Section" or another subdivision or to an attachment are, unless the
context otherwise requires, to an article, section or subdivision of or an
attachment to such instrument; and the term "including" means "including without
limitation".
(d) The definitions contained in this Appendix are equally applicable
to both the singular and plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
(e) Any agreement, instrument, statute, rule, regulation or
interpretation defined or referred to below or in any agreement or instrument
that is governed by this Appendix means such agreement, instrument, statute,
rule, regulation or
<PAGE>
interpretation as from time to time amended, modified or supplemented, including
(in the case of agreements or instruments) by waiver or consent and (in the case
of statutes) by succession of comparable successor statutes and includes (in the
case of agreements or instruments) references to all attachments thereto and
instruments incorporated therein. References to a Person are also to its
permitted successors and assigns.
Definitions
-----------
"Act" has the meaning specified in Section 11.03(a) of the Indenture.
---
"Additional Fundings" means any withdrawals from the Pre-Funding
-------------------
Account for any of the purposes set forth in Section 2(f) of the Administration
Agreement.
"Additional Student Loans" means the Serial Loans originated or
------------------------
acquired by the Seller to a Borrower who has one or more existing loans that are
Financed Student Loans and are transferred or to be transferred to the Eligible
Lender Trustee on behalf of the Issuer pursuant to Section 2.2 of the Loan Sale
Agreement, each of which shall be identified on Schedule A to the related
Transfer Agreement.
"Administration Agreement" means the Administration Agreement dated as
------------------------
of [ ], 1996, among the Issuer, the Administrator and the Indenture
Trustee.
"Administration Fee" means, with respect to each Interest Payment
------------------
Date, an amount equal to one-twelfth of the product of (i) [ ]% and (ii) the sum
of the Pool Balance and the Pre-Funded Amount as of the close of business on the
last day of the calendar month immediately preceding such Interest Payment Date.
"Administrator" means Signet, in its capacity as administrator of the
-------------
Issuer and the Financed Student Loans.
"Administrator Default" shall have the meaning set forth in Section 12
---------------------
of the Administration Agreement.
"Administrator Deposit Condition" means that, with respect to any
-------------------------------
Monthly Collection Period, each of the following conditions shall be satisfied
throughout such period: (i) Signet shall continue to be the Administrator; (ii)
no Administrator Default shall have occurred and be continuing; and (iii) each
Rating Agency shall have previously affirmed in writing that the administering
of collections on the Financed Student Loans as provided in Section 2(j) of the
Administration Agreement shall
2
<PAGE>
not result in the withdrawal or downgrading of any of the initial ratings of the
Notes or Certificates and no Rating Agency shall have given written notice to
the contrary or if any Rating Agency shall have set forth any conditions for so
administering such collections that are not otherwise provided for in the
Administrator's duties such conditions shall have been added to the
Administrator's duties pursuant to an amendment of the Administration Agreement.
"Administrator's Certificate" means an Officers' Certificate of the
---------------------------
Administrator delivered pursuant to Section 2(g) of the Administration
Agreement, substantially in the form of Exhibit B or C thereto.
"Affiliate" means, with respect to any specified Person, any other
---------
Person controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, "control" when used with respect
to any specified Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Authorized Officer" means (i) with respect to the Issuer, any officer
------------------
of the Eligible Lender Trustee who is authorized to act for the Eligible Lender
Trustee in matters relating to the Issuer pursuant to the Basic Documents and
who is identified on the list of Authorized Officers delivered by the Eligible
Lender Trustee to the Indenture Trustee on the Closing Date (as such list may be
modified or supplemented from time to time thereafter) and (ii) with respect to
the Seller, the Master Servicer and the Administrator, any officer of the
Seller, the Master Servicer or the Administrator, respectively, who is
authorized to act for the Seller, the Master Servicer or the Administrator,
respectively, in matters relating to itself or to the Issuer and to be acted
upon by the Seller, the Master Servicer or the Administrator, respectively,
pursuant to the Basic Documents and who is identified on the list of Authorized
Officers delivered by the Seller, the Master Servicer and the Administrator,
respectively, to the Indenture Trustee on the Closing Date (as such list may be
modified or supplemented from time to time thereafter).
"Available Funds" means, with respect to a Distribution Date and the
---------------
related Collection Period, the sum of the amounts specified in clauses (i)-(vii)
of the definition of Monthly Available Funds for each of the three Monthly
Collection Periods included in such Collection Period; provided, however, that
if with respect to any Distribution Date there would not be sufficient funds,
after application of Available Funds (as defined above) and amounts available
from the Reserve Account, to
3
<PAGE>
pay any of the items specified in clauses (iv)(A) through (iv)(F) of Section
2(d) of the Administration Agreement, then Available Funds for such Distribution
Date will include, in addition to the Available Funds (as defined above),
amounts on deposit in the Collection Account on the Determination Date relating
to such Distribution Date which would have constituted Available Funds for the
Distribution Date succeeding such Distribution Date up to the amount necessary
to pay such items, and the Available Funds for such succeeding Distribution Date
will be adjusted accordingly; and provided, further, that Available Funds will
-------- -------
exclude (A) all payments and proceeds (including Liquidation Proceeds) of any
Financed Student Loans the Purchase Amount of which has been included in
Available Funds for a prior Collection Period; (B) except as expressly included
in clause (iv) of the definition of Monthly Available Funds, amounts released
from the Pre-Funding Account; (C) any Monthly Rebate Fees paid during the
related Collection Period by or on behalf of the Trust; (D) after the Funding
Period, any expenditure of the Net Principal Cash Flow Amount used to fund the
purchase by the Issuer of Additional Student Loans; and (E) the Servicing Fee
and all overdue Servicing Fees, the Administration Fee and all overdue
Administration Fees, the Noteholders' Interest Distribution Amount and the
Certificateholders' Interest Distribution Amount paid on each Interest Payment
Date that is not a Distribution Date during the related Collection Period.
"Basic Documents" means the Trust Agreement, the Indenture, the Loan
---------------
Sale Agreement, the Master Servicing Agreement, the Administration Agreement,
the Certificate Depository Agreement, the Note Depository Agreement, the
Guarantee Agreements and other documents and certificates delivered in
connection with any thereof.
"Benefit Plan" has the meaning specified in Section 3.04 of the Trust
------------
Agreement.
"BIF" means the Bank Insurance Fund, as from time to time constituted,
---
created under the Financial Institutions Reform, Recovery and Enhancement Act of
1989, or if at any time after the execution of this instrument the Bank
Insurance Fund is not existing and performing duties now assigned to it, the
body performing such duties on such date.
"Book-Entry Certificate" means a beneficial interest in the
----------------------
Certificates, ownership and transfers of which shall be made through book
entries by a Clearing Agency as described in Section 3.11 of the Trust
Agreement.
"Book-Entry Note" means a beneficial interest in the Notes, ownership
---------------
and transfers of which shall be made through book entries by a Clearing Agency
as described in Section 2.10 of the Indenture.
4
<PAGE>
"Borrower" means an individual who is the maker of a Borrower Note and
--------
who obtains a Student Loan from an "eligible lender" in accordance with the
Higher Education Act and the policies and procedures of the Guarantor.
"Borrower Note" means a promissory note of a Borrower for a Student
-------------
Loan set forth on the appropriate form furnished by the Guarantor which Borrower
Note meets the criteria set forth by the Higher Education Act and the policies
and procedures of the Guarantor.
"Business Day" means any day other than a Saturday, a Sunday or a day
------------
on which banking institutions or trust companies in the States of Illinois, New
York or Maryland or the Commonwealth of Virginia are authorized or obligated by
law, regulation or executive order to remain closed.
"Business Trust Statute" means Chapter 38 of Title 12 of the Delaware
----------------------
Code, 12 Del. Code (S) 3801 et seq., as the same may be amended from time to
--------- -------
time.
"Capitalized Interest Amount" means for any Monthly Collection Period
---------------------------
or other period of determination, the amount of interest that accrued on the
Financed Student Loans during such period but was not then payable and that has
been or will, pursuant to the terms of such Financed Student Loans, be
capitalized and added to the principal balances of such loans.
"Certificate" means a certificate evidencing the beneficial interest
-----------
of a Certificateholder in the Trust, substantially in the form of Exhibit A to
the Trust Agreement.
"Certificate Balance" equals, initially, the Initial Certificate
-------------------
Balance and, thereafter, equals the Initial Certificate Balance reduced by all
amounts previously distributed to Certificateholders in respect of principal
pursuant to Sections 2(d)(iv)(F) and 2(e)(iv)(F) of the Administration
Agreement.
"Certificate of Trust" means the Certificate of Trust in the form of
--------------------
Exhibit C to the Trust Agreement to be filed for the Trust pursuant to Section
3810(a) of the Business Trust Statute.
"Certificate Depository Agreement" means the agreement dated as of the
--------------------------------
Closing Date among the Trust, the Eligible Lender Trustee, the Administrator,
and The Depository Trust Company, as the initial Clearing Agency, substantially
in the form of Exhibit B to the Trust Agreement.
"Certificate Owner" or "Owner" means, with respect to a Book-Entry
----------------- -----
Certificate, the Person who is the beneficial owner of
5
<PAGE>
such Book-Entry Certificate, as reflected on the books of the Clearing Agency,
or on the books of a Person maintaining an account with such Clearing Agency
(directly as a Clearing Agency Participant or as an indirect participant, in
each case in accordance with the rules of such Clearing Agency).
"Certificate Paying Agent" means any paying agent or co-paying agent
------------------------
appointed pursuant to Section 3.09 of the Trust Agreement, which shall initially
be Signet Trust Company.
"Certificate Pool Factor" as of the close of business on a
-----------------------
Distribution Date means a seven-digit decimal figure equal to the Certificate
Balance divided by the Initial Certificate Balance. The Certificate Pool Factor
will be 1.0000000 as of the Closing Date; thereafter, the Certificate Pool
Factor will decline to reflect reductions in the Certificate Balance.
"Certificate Rate" means, with respect to any Interest Period, the
----------------
interest rate per annum (computed on the basis of the actual number of days
elapsed in such Interest Period over a year of 360 days) equal to the lesser of
(i) LIBOR for the related LIBOR Reset Period plus [ ]% and (ii) the Student
Loan Rate for such Interest Period.
"Certificate Register" and "Certificate Registrar" means the register
-------------------- ---------------------
mentioned and the registrar appointed pursuant to Section 3.04 of the Trust
Agreement.
"Certificateholder" or "Holder" means a Person in whose name a
----------------- ------
Certificate is registered in the Certificate Register.
"Certificateholders' Distribution Amount" means, with respect to any
---------------------------------------
Distribution Date, the Certificateholders' Interest Distribution Amount for such
Distribution Date plus, for each Distribution Date on and after which the Notes
have been paid in full, the Certificateholders' Principal Distribution Amount
for such Distribution Date.
"Certificateholders' Interest Carryover Shortfall" means, with respect
------------------------------------------------
to any Interest Payment Date, the excess of (i) the Certificateholders' Interest
Distribution Amount on the preceding Interest Payment Date over (ii) the amount
of interest actually distributed to the Certificateholders on such preceding
Interest Payment Date, plus interest on the amount of such excess, to the extent
permitted by law, at the Certificate Rate from such preceding Interest Payment
Date to the current Interest Payment Date.
"Certificateholders' Interest Distribution Amount" means, with respect
------------------------------------------------
to any Interest Payment Date, the sum of (i) the amount of interest accrued at
the Certificate Rate for the related Interest Period on the outstanding
Certificate
6
<PAGE>
Balance on the immediately preceding Distribution Date, after giving effect to
all distributions of principal to Certificateholders on such Distribution Date
(or, in the case of the first three Interest Payment Dates, on the Closing Date)
and (ii) the Certificateholders' Interest Carryover Shortfall for such Interest
Payment Date; provided, however, that the Certificateholders' Interest
-------- -------
Distribution Amount will not include any Certificateholders' Interest LIBOR
Carryover.
"Certificateholders' Interest LIBOR Carryover" means, with respect to
--------------------------------------------
each Distribution Date, and with respect to each Interest Period, if any, since
the preceding Distribution Date as to which the Certificate Rate for such
Interest Period was based on the Student Loan Rate, the amount equal to the
excess, if any, of (a) the amount of interest on the Certificates that would
have accrued in respect of each related Interest Period had interest been
calculated based on LIBOR over (b) the amount of interest on the Certificates
actually accrued in respect of such Interest Period based on the Student Loan
Rate, together with the unpaid portion of any such excess from prior
Distribution Dates (and interest accrued thereon, to the extent permitted by
law, calculated based on LIBOR); provided, however, that, on the Final Maturity
-------- -------
Date, the Certificateholders' Interest LIBOR Carryover will be equal to the
lesser of (i) the Certificateholders' Interest LIBOR Carryover on such date
determined as described above and (ii) the amount of funds, if any, required and
available to be distributed to Certificateholders on such date pursuant to the
Administration Agreement.
"Certificateholders' Principal Carryover Shortfall" means, as of the
-------------------------------------------------
close of any Distribution Date on or after which the Notes have been paid in
full, the excess of (i) the Certificateholders' Principal Distribution Amount on
such Distribution Date over (ii) the amount of principal actually distributed to
the Certificateholders on such Distribution Date.
"Certificateholders' Principal Distribution Amount" means, on each
-------------------------------------------------
Distribution Date on and after which the principal balance of the Notes has been
paid in full, the sum of (a) the Principal Distribution Amount for such
Distribution Date (or, in the case of the Distribution Date on which the
principal balance of the Notes is paid in full, any remaining Principal
Distribution Amount not otherwise distributed to Noteholders on such
Distribution Date) and (b) the Certificateholders' Principal Carryover Shortfall
as of the close of the preceding Distribution Date; provided, however, that the
-------- -------
Certificateholders' Principal Distribution Amount will in no event exceed the
Certificate Balance. In addition, on the Final Maturity Date, the principal
required to be distributed to the Certificateholders will include the amount
required to reduce the outstanding principal balance of the Certificates to
zero.
7
<PAGE>
"Class A-1 Final Maturity Date" means the [ ] 199_ Distribution
-----------------------------
Date.
"Class A-1 Note" means a Floating Rate Class A-1 Asset Backed Note
--------------
issued pursuant to the Indenture, substantially in the form of Exhibit A
thereto.
"Class A-1 Note Pool Factor" as of the close of business on a
--------------------------
Distribution Date means a seven-digit decimal figure equal to the outstanding
principal balance of the Class A-1 Notes divided by the original outstanding
principal balance of the Class A-1 Notes. The Class A-1 Note Pool Factor will
be 1.0000000 as of the Closing Date; thereafter, the Class A-1 Note Pool Factor
will decline to reflect reductions in the outstanding principal balance of the
Class A-1 Notes.
"Class A-1 Noteholder" means the Person in whose name a Class A-1 Note
--------------------
is registered in the Note Register.
"Class A-1 Rate" means, with respect to any Interest Period, the
--------------
interest rate per annum (computed on the basis of the actual number of days in
such Interest Period over a year of 360 days) equal to the lesser of (i) LIBOR
for the related LIBOR Reset Period plus [ ]% and (ii) the Student Loan Rate for
such Interest Period.
"Class A-2 Final Maturity Date" means the [ ] 20__ Distribution
-----------------------------
Date.
"Class A-2 Note" means a Floating Rate Class A-2 Asset Backed Note
--------------
issued pursuant to the Indenture, substantially in the form of Exhibit B
thereto.
"Class A-2 Note Pool Factor" as of the close of business on a
--------------------------
Distribution Date means a seven-digit decimal figure equal to the outstanding
principal balance of the Class A-2 Notes divided by the original outstanding
principal balance of the Class A-2 Notes. The Class A-2 Note Pool Factor will
be 1.0000000 as of the Closing Date; thereafter the Class A-2 Note Pool Factor
will decline to reflect reductions in the outstanding principal balance of the
Class A-2 Notes.
"Class A-2 Noteholder" means the Person in whose name a Class A-2 Note
--------------------
is registered in the Note Register.
"Class A-2 Rate" means, with respect to any Interest Period, the
--------------
interest rate per annum (computed on the basis of the actual number of days in
such Interest Period over a year of 360 days) equal to the lesser of (i) LIBOR
for the related LIBOR Reset Period plus [ ]% and (ii) the Student Loan Rate for
such Interest Period.
8
<PAGE>
"Clearing Agency" means an organization registered as a "clearing
---------------
agency" pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" means a broker, dealer, bank, other
---------------------------
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
"Closing Date" means [ ,] 1996.
------------
"Code" means the Internal Revenue Code of 1986, as amended from time
----
to time, and Treasury Regulations promulgated thereunder.
"Collateral" has the meaning specified in the Granting Clause of the
----------
Indenture.
"Collection Account" means the account designated as such, established
------------------
and maintained pursuant to Section 2(c) of the Administration Agreement.
"Collection Period" means, with respect to the first Distribution
-----------------
Date, the period beginning on the Cutoff Date and ending on [ ,] 1996,
and with respect to each subsequent Distribution Date, the Collection Period
means the three calendar months immediately following the end of the previous
Collection Period.
"Commission" means the Securities and Exchange Commission.
----------
"Company" means Signet Student Loan Corporation, a Virginia
-------
corporation.
"Confidential Information" means information provided by Signet to the
------------------------
Eligible Lender Trustee or the Indenture Trustee related to the transactions
effected under the Basic Documents and any computer software provided to the
Eligible Lender Trustee or the Indenture Trustee in connection with the
transactions effected under the Basic Documents, in each case whether in the
form of documents, reports, lists, tapes, discs or any other form.
"Consolidation Loan" means a Student Loan made pursuant to the Higher
------------------
Education Act to consolidate the Borrower's obligations under various federally
authorized student loan programs into a single loan.
"Corporate Trust Office" means (i) with respect to the Indenture
-----------------------
Trustee, the principal office of the Indenture Trustee at which at any
particular time its corporate trust business shall be administered, which office
at the Closing Date is
9
<PAGE>
located at ____________________________________________, Attention: Corporate
Trust and Agency Group, Structured Finance Team (telephone: (212) ________;
facsimile: (212) ________); or at such other address as the Indenture Trustee
may designate from time to time by notice to the Noteholders and the Seller, or
the principal corporate trust office of any successor Indenture Trustee (the
address of which the successor Indenture Trustee will notify the Noteholders and
the Seller) and (ii) with respect to the Eligible Lender Trustee, the principal
corporate trust office of the Eligible Lender Trustee located at One First
National Plaza, Suite 0126, Chicago, Illinois 60610, Attention: Corporate Trust
Administration (telephone: (312) 407-1892; facsimile: (312) 407-1708); or at
such other address as the Eligible Lender Trustee may designate by notice to the
Certificateholders and the Seller, or the principal corporate trust office of
any successor Eligible Lender Trustee (the address of which the successor
Eligible Lender Trustee will notify the Certificateholders and the Seller).
"Custodian" means Signet, in its capacity as custodian of the Borrower
---------
Notes or any permitted successor Custodian.
"Cutoff Date" means November 2, 1996.
-----------
"Default" means any occurrence that is, or with notice or the lapse of
-------
time or both would become, an Event of Default.
"Deferral" means the period defined by the Higher Education Act and
--------
the policies of the Guarantor during which a Borrower (in Repayment) is entitled
to postpone making payments upon the submission of appropriate documentation.
"Deferral Loan" means a Student Loan during a period of Deferral.
-------------
"Definitive Certificates" has the meaning specified in Section 3.11 of
-----------------------
the Trust Agreement.
"Definitive Notes" has the meaning specified in Section 2.10 of the
----------------
Indenture.
"Delaware Trustee" has the meaning set forth in Section 10.01 of the
----------------
Trust Agreement.
"Delivery" when used with respect to Trust Account Property means:
--------
(a) with respect to bankers' acceptances, commercial paper,
negotiable certificates of deposit and other obligations that constitute
"instruments" within the meaning of Section 9-105(1)(i) of the UCC and are
susceptible of physical delivery, transfer thereof to the Indenture Trustee
10
<PAGE>
or its nominee or custodian by physical delivery to the Indenture Trustee
or its nominee or custodian endorsed to, or registered in the name of, the
Indenture Trustee or its nominee or custodian or endorsed in blank, and,
with respect to a certificated security (as defined in Section 8-102 of the
UCC) transfer thereof (i) by delivery of such certificated security
endorsed to, or registered in the name of, the Indenture Trustee or its
nominee or custodian or endorsed in blank to a financial intermediary (as
defined in Section 8-313) of the UCC) and the making by such financial
intermediary of entries on its books and records identifying such
certificated securities as belonging to the Indenture Trustee or its
nominee or custodian and the sending by such financial intermediary of a
confirmation of the purchase of such certificated security by the Indenture
Trustee or its nominee or custodian, or (ii) by delivery thereof to a
"clearing corporation" (as defined in Section 8-102(3) of the UCC) and the
making by such clearing corporation of appropriate entries on its books
reducing the appropriate securities account of the transferor and
increasing the appropriate securities account of a financial intermediary
by the amount of such certificated security, the identification by the
clearing corporation of the certificated securities for the sole and
exclusive account of the financial intermediary, the maintenance of such
certificated securities by such clearing corporation or a "custodian bank"
(as defined in Section 8-102(4) of the UCC) or the nominee of either
subject to the clearing corporation's exclusive control, the sending of a
confirmation by the financial intermediary of the purchase by the Indenture
Trustee or its nominee or custodian of such securities and the making by
such financial intermediary of entries on its books and records identifying
such certificated securities as belonging to the Indenture Trustee or its
nominee or custodian (all of the foregoing, "Physical Property"), and, in
any event, any such Physical Property in registered form shall be in the
name of the Indenture Trustee or its nominee or custodian; and such
additional or alternative procedures as may hereafter become appropriate to
effect the complete transfer of ownership of any such Trust Account
Property to the Indenture Trustee or its nominee or custodian, consistent
with changes in applicable law or regulations or the interpretation
thereof;
(b) with respect to any securities issued by the U.S. Treasury, the
Federal Home Loan Mortgage Corporation or by the Federal National Mortgage
Association that is a book-entry security held through the Federal Reserve
System pursuant to Federal book-entry regulations, the following
procedures, all in accordance with applicable law, including applicable
Federal regulations and Articles 8 and 9 of the UCC: book-entry
registration of such Trust Account Property
11
<PAGE>
to an appropriate book-entry account maintained with a Federal Reserve Bank
by a financial intermediary which is also a "depository" pursuant to
applicable Federal regulations and issuance by such financial intermediary
of a deposit advice or other written confirmation of such book-entry
registration to the Indenture Trustee or its nominee or custodian of the
purchase by the Indenture Trustee or its nominee or custodian of such book-
entry securities; the making by such financial intermediary of entries in
its books and records identifying such book-entry security held through the
Federal Reserve System pursuant to Federal book-entry regulations as
belonging to the Indenture Trustee or its nominee or custodian and
indicating that such custodian holds such Trust Account Property solely as
agent for the Indenture Trustee or its nominee or custodian; and such
additional or alternative procedures as may hereafter become appropriate to
effect complete transfer of ownership of any such Trust Account Property to
the Indenture Trustee or its nominee or custodian, consistent with changes
in applicable law or regulations or the interpretation thereof; and
(c) with respect to any item of Trust Account Property that is an
uncertificated security under Article 8 of the UCC and that is not governed
by clause (b) above, registration on the books and records of the issuer
thereof in the name of the financial intermediary, the sending of a
confirmation by the financial intermediary of the purchase by the Indenture
Trustee or its nominee or custodian of such uncertificated security, the
making by such financial intermediary of entries on its books and records
identifying such uncertificated certificates as belonging to the Indenture
Trustee or its nominee or custodian.
"Demand Note" means the Demand Note dated [ ], 1996 from
-----------
[parent of Company] to the Company.
"Department" means the United States Department of Education, an
----------
agency of the Federal government.
"Depositor" means the Seller in its capacity as Depositor under the
---------
Trust Agreement.
"Depository Agreement" means, collectively, the agreements with
--------------------
respect to the Notes attached to the Indenture as Exhibits C and D and the
agreement with respect to the Certificates attached to the Trust Agreement as
Exhibit B.
"Determination Date" means, with respect to any Interest Payment Date
------------------
or Distribution Date, the third Business Day preceding such Interest Payment
Date or Distribution Date.
12
<PAGE>
"Distribution Date" means, with respect to each Collection Period, the
-----------------
twenty-fifth day of each January, April, July, and October, or, if such day is
not a Business Day, the immediately following Business Day, commencing on
January 27, 1997.
"Educational Institution" means any institution of higher education
-----------------------
that participates in the guaranteed loan programs authorized by Title IV of the
Higher Education Act and which is deemed eligible by the Guarantor to
participate in Guarantor's program.
"Eligible Deposit Account" means an account that is: (i) a separately
------------------------
identifiable deposit account established and maintained in the deposit taking
department of a depository institution organized under the laws of the United
States of America or one of the states thereof or incorporated under the laws of
a foreign jurisdiction with a branch or agency located in the United States of
America or one of the states thereof and subject to supervision and examination
by Federal or state banking authorities that at all times has a short-term
certificate of deposit rating of "P-1" by Moody's, "A-1+" by Standard & Poor's
and (if rated by Fitch) "F-1+" by Fitch and a long-term unsecured debt rating of
not less than "AA" by Standard & Poor's, "Aa3" by Moody's and (if rated by
Fitch) "AA" by Fitch and, in the case of any such institution organized under
the laws of the United States of America, whose deposits are insured by the BIF,
(ii) a segregated identifiable trust account established and maintained in the
trust department of a trust institution organized under the laws of the United
States of America or one of the states thereof or incorporated under the laws of
a foreign jurisdiction with a branch or agency located in the United States of
America or one of the states thereof and subject to supervision and examination
by Federal or state banking authorities that at all times is authorized under
such laws to act as a trustee or in any other fiduciary capacity, has not less
than $50,000,000 capital and surplus and has a long-term deposit rating of not
less than "BBB-" by Standard & Poor's, "Baa3" by Moody's and (if rated by Fitch)
"BBB" by Fitch, (iii) so long as Signet Bank or an affiliate of Signet Bank is
Master Servicer and Signet Bank or such affiliate has a long-term deposit rating
or long-term unsecured debt rating, as applicable, of at least "Baa3" by
Moody's, a segregated identifiable trust account established and maintained at
Signet Trust Company or (iv) an account otherwise acceptable to each Rating
Agency, as evidenced by a letter from each Rating Agency to the Indenture
Trustee and the Eligible Lender Trustee, without reduction or withdrawal of the
then current ratings of the Notes or the Certificates.
"Eligible Investments" means one or more of the following (excluding
--------------------
any callable investments purchased at a premium):
13
<PAGE>
(i) direct obligations of, or obligations fully guaranteed as to
timely payment of principal and interest by, the United States of America
or any agency or instrumentality thereof; provided that such obligations
--------
are backed by the full faith and credit of the United States of America;
(ii) repurchase agreements on obligations specified in clause (i)
maturing not more than three months from the date of acquisition thereof;
provided that the short-term unsecured debt obligations of the party
--------
agreeing to repurchase such obligations are at the time rated at least "A-
1" by Standard & Poor's, "P-1" by Moody's and (if rated by Fitch) "F-1" by
Fitch;
(iii) certificates of deposit, time deposits and bankers' acceptances
of any United States depository institution or trust company incorporated
under the laws of the United States or any state thereof and subject to
supervision and examination by Federal and/or state banking authorities;
provided that the unsecured short-term debt obligations of such depository
--------
institution or trust company at the date of acquisition thereof have been
rated at least "A-1" by Standard & Poor's, "P-1" by Moody's and (if rated
by Fitch) "F-1" by Fitch;
(iv) commercial paper (having original maturities of not more than 270
days) of any corporation incorporated under the laws of the United States
of America or any state thereof which on the date of acquisition has been
rated at least "A-1" by Standard & Poor's, "P-1" by Moody's and (if rated
by Fitch) "A-1" by Fitch;
(v) interests in any money market fund which at the date of
acquisition of the interests in such fund and throughout the time such
interests are held in such fund has a rating of "P-1" or "Aaa" by Moody's,
"AAAm" or "AAAm-G" by Standard & Poor's and (if rated by Fitch) "F-1+" or
"AAA" by Fitch or such lower rating as will not result in the
qualification, downgrading or withdrawal of the then-current rating
assigned to the Notes and the Certificates by each Rating Agency; and
(vi) other obligations or securities that are acceptable to each
Rating Agency as an Eligible Investment hereunder and will not result in a
reduction in the then-current rating of the Notes and the Certificates, as
evidenced by a letter to such effect from such Rating Agency, and with
respect to which the Administrator has received confirmation that, for tax
purposes, the investment complies with the provisos to this definition.
14
<PAGE>
"Eligible Lender Trustee" means The First National Bank of Chicago, a
-----------------------
national banking association, not in its individual capacity but solely as
Eligible Lender Trustee under the Trust Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended.
"Event of Default" has the meaning specified in Section 5.01 of the
----------------
Indenture.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"Executive Officer" means, with respect to any corporation, the Chief
-----------------
Executive Officer, Chief Operating Officer, Chief Financial Officer, President,
any Executive Vice President, any Senior Vice President, any Vice President, the
Secretary or the Treasurer of such corporation; and with respect to any
partnership, any general partner thereof.
"Expected Interest Collections" means, with respect to any Interest
-----------------------------
Period, the sum of (i) the amount of interest accrued net of accrued Monthly
Rebate Fees with respect to the Financed Student Loans for the related Student
Loan Rate Accrual Period (whether or not such interest is actually paid and not
taking into account any late fees payable or paid thereon by the Borrowers),
(ii) all Interest Subsidy Payments and Special Allowance Payments estimated to
have accrued for such Student Loan Rate Accrual Period whether or not actually
received (taking into account any expected deduction therefrom of Federal
Origination Fees) and (iii) Investment Earnings for such Student Loan Rate
Accrual Period.
"Expenses" means any and all liabilities, obligations, losses,
--------
damages, taxes, claims, actions and suits, and any and all reasonable costs,
expenses and disbursements (including reasonable legal fees and expenses) of any
kind and nature whatsoever which may at any time be imposed on, incurred by, or
asserted against the Eligible Lender Trustee or any of its officers, directors
or agents in any way relating to or arising out of the Trust Agreement, the
other Basic Documents, the Trust Estate, the administration of the Trust Estate
or the action or inaction of the Eligible Lender Trustee under the Trust
Agreement or the other Basic Documents.
"Federal Origination Fee" means, with respect to each Consolidation
-----------------------
Loan, the origination fee payable to the Department equal to 0.5% of the initial
principal balance of such Consolidation Loan.
15
<PAGE>
"Final Maturity Date" means the [ ] Distribution Date.
-------------------
"Financed Student Loans" means those Student Loans that, as of any
----------------------
date of determination, have been conveyed to the Issuer, consisting of the
Initial Financed Student Loans as of the Closing Date and, thereafter, any
Additional Student Loans conveyed to the Issuer from the Seller.
"Fitch" means Fitch Investors Service, L.P. or any successor thereto.
-----
"Forbearance Loan" means a Student Loan during a period of forbearance
----------------
of loan collections pursuant to the Higher Education Act.
"Funding Period" means the period from the Closing Date until the
--------------
first to occur of (i) the Distribution Date on which the amount on deposit in
the Pre-Funding Account is less than $100,000, (ii) an Event of Default
occurring under the Indenture, a Servicer Default occurring under the Master
Servicing Agreement or an Administrator Default occurring under the
Administration Agreement, (iii) the date on which an Insolvency Event occurs
with respect to the Seller or (iv) the last day of the Collection Period
preceding the January 1999 Distribution Date.
"Grace" means the initial period following reduction by the student
-----
Borrower to less than the minimum course load required by the Higher Education
Act, during which the student Borrower is not required to make payments on the
principal amount of the Borrower Note(s).
"Grace Loan" means a Student Loan during a period of Grace.
----------
"Grant" means mortgage, pledge, bargain, sell, warrant, alienate,
-----
remise, release, convey, assign, transfer, create, and grant a lien upon and a
security interest in and right of set-off against, deposit, set over and confirm
pursuant to the Indenture. A Grant of the Collateral or of any other agreement
or instrument shall include all rights, powers and options (but none of the
obligations) of the Granting party thereunder, including the immediate and
continuing right to claim for, collect, receive and give receipt for principal
and interest payments in respect of the Collateral and all other moneys payable
thereunder, to give and receive notices and other communications, to make
waivers or other agreements, to exercise all rights and options, to bring
Proceedings in the name of the Granting party or otherwise and generally to do
and receive anything that the Granting party is or may be entitled to do or
receive thereunder or with respect thereto.
16
<PAGE>
"Guarantee Agreement" means each agreement to guarantee Student Loans
-------------------
entered into by the Eligible Lender Trustee on behalf of the Trust with a
Guarantor.
"Guarantee Payment" means any payment made by a Guarantor pursuant to
-----------------
a Guarantee Agreement in respect of a Student Loan.
"Guarantor" means Texas Guaranteed Student Loan Corporation, United
---------
Student Aid Funds or Educational Credit Management Corporation.
"Higher Education Act" means the Higher Education Act of 1965, as
--------------------
amended, together with any rules, regulations and interpretations thereunder.
"In-School Loan" means a Student Loan during the period, excluding
--------------
periods of in-school Deferral, during which a student Borrower is enrolled at an
Educational Institution for at least the minimum course load required to
maintain such student Borrower's eligibility to borrow under the education loan
programs administered by a Guarantor.
"Incentive Deposit" means, with respect to each Collection Period and
-----------------
each Incentive Financed Student Loan, the difference, if any, between the amount
of interest or other amounts which would have been payable or any principal
reduction with respect to such Incentive Financed Student Loan during such
Collection Period had no Incentive Program been in effect with respect to such
Incentive Financed Student Loan and the amount of interest and other amounts
which are payable with respect to such Incentive Financed Student Loan during
such Collection Period after giving effect to such Incentive Program and any
principal reductions (whether payable during such Collection Period or not).
"Incentive Financed Student Loan" means a Financed Student Loan which
-------------------------------
is subject to an Incentive Program.
"Incentive Program" means any one or more programs administered from
-----------------
time to time by the [Administrator] for Student Loans held by it in its own
portfolio pursuant to which the Administrator may choose to reduce the interest
rate or offer any other benefit on a Student Loan.
"Indenture" means the Indenture dated as of [ ] 1, 1996, between
---------
the Issuer and the Indenture Trustee.
"Indenture Trust Estate" means all money, instruments, rights and
----------------------
other property that are subject or intended to be subject to the lien and
security interest of the Indenture for the benefit of the Noteholders (including
all property and
17
<PAGE>
interests Granted to the Indenture Trustee), including all proceeds thereof.
"Indenture Trustee" means The Bank of New York, a New York banking
-----------------
corporation, not in its individual capacity but solely as Indenture Trustee
under the Indenture.
"Independent" means, when used with respect to any specified Person,
-----------
that the Person (a) is in fact independent of the Issuer, any other obligor upon
the Notes, the Seller and any Affiliate of any of the foregoing Persons, (b)
does not have any direct financial interest or any material indirect financial
interest in the Issuer, any such other obligor, the Seller or any Affiliate of
any of the foregoing Persons and (c) is not connected with the Issuer, any such
other obligor, the Seller or any Affiliate of any of the foregoing Persons as an
officer, employee, promoter, underwriter, trustee, partner, director or person
performing similar functions.
"Independent Certificate" means a certificate or opinion to be
-----------------------
delivered to the Indenture Trustee under the circumstances described in, and
otherwise complying with, the applicable requirements of Section 11.01 of the
Indenture, made by an Independent appraiser or other expert appointed by an
Issuer Order and approved by the Indenture Trustee in the exercise of reasonable
care, and such opinion or certificate shall state that the signer has read the
definition of "Independent" in the Indenture and that the signer is Independent
within the meaning thereof.
"Initial Certificate Balance" means $[ ].
---------------------------
"Initial Financed Student Loans" means those Financed Student Loans
------------------------------
conveyed to the Issuer on the Closing Date.
"Initial Pool Balance" means $[ ].
--------------------
"Insolvency Event" means, with respect to a specified Person, (a) the
----------------
filing of a decree or order for relief by a court having jurisdiction in the
premises in respect of such Person or any substantial part of its property in an
involuntary case under any applicable Federal or state bankruptcy, insolvency or
other similar law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official for
such Person or for any substantial part of its property, or ordering the
winding-up or liquidation of such Person's affairs, and such decree or order
shall remain unstayed and in effect for a period of sixty consecutive days; or
(b) the commencement by such Person of a voluntary case under any applicable
Federal or state bankruptcy, insolvency or other similar law now or hereafter in
effect, or the consent by such Person to the entry of an order for relief in an
involuntary case
18
<PAGE>
under any such law, or the consent by such Person to the appointment of or
taking possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official for such Person or for any substantial part of
its property, or the making by such Person of any general assignment for the
benefit of creditors, or the failure by such Person generally to pay its debts
as such debts become due, or the taking of action by such Person in furtherance
of any of the foregoing.
"Interest Payment Date" means the twenty-fifth day of each month (or,
---------------------
if any such date is not a Business Day, on the next succeeding Business Day)
commencing January 27, 1997.
"Interest Period" means, with respect to an Interest Payment Date, the
---------------
period from and including the Closing Date or the most recent Interest Payment
Date on which interest on the Notes or the Certificates, as the case may be, has
been distributed to but excluding the current Interest Payment Date.
"Interest Subsidy Payments" means payments, designated as such,
-------------------------
consisting of interest subsidies by the Department in respect of the Financed
Student Loans to the Eligible Lender Trustee on behalf of the Trust in
accordance with the Higher Education Act.
"Investment Earnings" means, with respect to any Distribution Date,
-------------------
the investment earnings (net of losses and investment expenses) on amounts on
deposit in the Trust Accounts to be deposited into the Collection Account on or
prior to such Distribution Date pursuant to Section 2(c)(v) of the
Administration Agreement.
"Issuer" means Signet Student Loan Trust 1996-A until a successor
------
replaces it and, thereafter, means the successor and, for purposes of any
provision contained in the Indenture and required by the TIA, each other obligor
on the Notes.
"Issuer Order" and "Issuer Request" means a written order or request
------------ --------------
signed in the name of the Issuer by any one of its Authorized Officers and
delivered to the Indenture Trustee.
"LIBOR" means, with respect to any LIBOR Reset Period, the London
-----
interbank offered rate for deposits in U.S. dollars having a maturity of one
month commencing on the related LIBOR Determination Date (the "Index Maturity")
which appears on Telerate Page 3750 as of 11:00 a.m., London time, on such LIBOR
Determination Date. If such rate does not appear on Telerate Page 3750, the
rate for that day will be determined on the basis of the rates at which deposits
in U.S. dollars, having the Index Maturity and in a principal amount of not less
than U.S. $1,000,000, are offered at approximately 11:00 a.m., London time, on
such LIBOR Determination Date to prime banks in the London
19
<PAGE>
interbank market by the Reference Banks. The Administrator will request the
principal London office of each of such Reference Banks to provide a quotation
of its rate. If at least two such quotations are provided, the rate for that
day will be the arithmetic mean of the quotations. If fewer than two quotations
are provided, the rate for that day will be the arithmetic mean of the rates
quoted by major banks in New York City, selected by the Administrator, at
approximately 11:00 a.m., New York City time, on such LIBOR Determination Date
for loans in U.S. dollars to leading European banks having the Index Maturity
and in a principal amount equal to an amount of not less than U.S. $1,000,000;
provided that if the banks selected as aforesaid are not quoting as mentioned in
this sentence, LIBOR in effect for the applicable LIBOR Reset Period will be
LIBOR in effect for the previous LIBOR Reset Period.
"LIBOR Determination Date" means, with respect to any LIBOR Reset
------------------------
Period, the day that is the second business day prior to the commencement of
such LIBOR Reset Period. For purposes of this definition, a business day is any
day in which banks in London and New York City are open for the transaction of
international business.
"LIBOR Reset Period" means the one-month period commencing on the
------------------
twenty-fifth day (or, if any such date is not a Business Day, on the next
succeeding business day) of each month and ending on the day immediately
preceding the following LIBOR Reset Period; provided, however, that the initial
LIBOR Reset Period will commence on the Closing Date.
"Lien" means a security interest, lien, charge, pledge, equity or
----
encumbrance of any kind, other than tax liens and any other liens, if any, which
attach to the respective Student Loan by operation of law as a result of any act
or omission by the related Obligor.
"Liquidated Student Loan" means any defaulted Financed Student Loan
-----------------------
liquidated by the Master Servicer or any Subservicer or which the Master
Servicer has, after using all reasonable efforts to realize upon the such
Student Loan, determined to charge off.
"Liquidation Proceeds" means, with respect to any Liquidated Student
--------------------
Loan, the moneys collected in respect thereof from whatever source, other than
Recoveries, net of the sum of any amounts expended by the Master Servicer or any
Subservicer in connection with such liquidation and any amounts required by law
to be remitted to the Obligor on such Liquidated Student Loan.
"Loan Sale Agreement" means the Loan Sale Agreement dated as of [
-------------------
], 1996, among the Issuer, the Seller, and the Eligible Lender Trustee.
20
<PAGE>
"London Banking Day" means any Business Day on which dealings in
------------------
deposits in United States dollars are transacted in the London interbank market.
"Master Servicer" means Signet, in its capacity as master servicer of
---------------
the Financed Student Loans or any permitted Successor Master Servicer.
"Master Servicing Agreement" means the Master Servicing Agreement
--------------------------
dated as of [ ], 1996, among the Issuer, the Master Servicer and the
Eligible Lender Trustee.
"Minimum Purchase Price" means as to any Distribution Date, an amount
----------------------
equal to the greater of (i) the Purchase Amounts of the Financed Student Loans
as of the end of the Collection Period immediately preceding such Distribution
Date or (ii) an amount that would be sufficient to (A) reduce the outstanding
principal amount of each class of Notes then outstanding on such Distribution
Date to zero, (B) pay to the Noteholders the Noteholders' Interest Distribution
Amount payable on such Distribution Date, if any, (C) reduce the Certificate
Balance of the Certificates on such Distribution Date to zero and (D) pay to the
Certificateholders the Certificateholders' Interest Distribution Amount payable
on such Distribution Date.
"Monthly Available Funds" means, with respect to each Interest Payment
-----------------------
Date that is not a Distribution Date, the sum of the following amounts with
respect to the related Monthly Collection Period: (i) all collections received
by the Master Servicer, or any Subservicer on the Financed Student Loans
(including any Guarantee Payments received with respect to the Financed Student
Loans); (ii) any Interest Subsidy Payments and Special Allowance Payments
received by the Eligible Lender Trustee during such Monthly Collection Period
with respect to the Financed Student Loans; (iii) all Liquidation Proceeds from
any Financed Student Loans which became Liquidated Student Loans during such
Monthly Collection Period in accordance with the Master Servicer's customary
servicing procedures, and all Recoveries in respect of Liquidated Student Loans
which were written off in prior Monthly Collection Periods; (iv) that portion of
the amounts released from the Pre-Funding Account with respect to Additional
Fundings relating to those interest costs on the Financed Student Loans which
are or will be capitalized; (v) the aggregate Purchase Amounts received for
those Financed Student Loans repurchased by the Seller or purchased by the
Master Servicer under an obligation which arose during the related Monthly
Collection Period; (vi) Investment Earnings for such Interest Payment Date and
(vii) with respect to each Interest Payment Date other than a Distribution Date
and other than an Interest Payment Date immediately succeeding a Distribution
Date, Monthly Available Funds remaining from the Monthly Collection Period
relating to the preceding Interest
21
<PAGE>
Payment Date, after giving effect to the application of such Monthly Available
Funds on such preceding Interest Payment Date; provided, however, that if with
-------- -------
respect to any Distribution Date there would not be sufficient funds, after
application of Monthly Available Funds (as defined above) and amounts available
from the Reserve Account, to pay any of the items specified in Section 2(d)(iii)
of the Administration Agreement, then Monthly Available Funds for such Interest
Payment Date will include, in addition to the Monthly Available Funds (as
defined above), amounts on deposit in the Collection Account on the
Determination Date relating to such Interest Payment Date which would have
constituted Monthly Available Funds for the Interest Payment Date succeeding
such Interest Payment Date up to the amount necessary to pay such items, and the
Monthly Available Funds for such succeeding Interest Payment Date will be
adjusted accordingly; and provided, further, that Monthly Available Funds will
-------- -------
exclude (A) all payments and proceeds (including Liquidation Proceeds) of any
Financed Student Loans the Purchase Amount of which has been included in Monthly
Available Funds for a prior Monthly Collection Period, (B) except as expressly
included in clause (iv) above, amounts released from the Pre-Funding Account,
(C) any Monthly Rebate Fees paid during the related Monthly Collection period by
or on behalf of the Trust and (D) after the Funding Period, any expenditure of
the Net Principal Cash Flow Amount used to fund the purchase by the Issuer of
any Additional Student Loans during such Monthly Collection Period.
"Monthly Collection Period" means, with respect to any Interest
-------------------------
Payment Date that is not a Distribution Date, the calendar month immediately
preceding the month of such Interest Payment Date (or, with respect to the first
Monthly Collection Period, the period beginning on the Cutoff Date and ending on
[ ,] 1996).
"Monthly Rebate Fee" means, for each calendar month and with respect
------------------
to each Consolidation Loan, the fee payable to the Department equal to the
product of (x) one-twelfth, (y) 1.05% and (z) the outstanding principal balance
of such Consolidation Loan plus accrued interest on such Consolidation Loan as
of the last day of such month.
"Moody's" means Moody's Investors Service, Inc.
-------
"Net Principal Cash Flow Amount" means, as of any date, the Principal
------------------------------
Cash Flow Amount (calculated for the Collection Period ending in the preceding
calendar month or, if no Collection Period ended in the preceding calendar
month, calculated for each preceding calendar month during the current
Collection Period) minus, after the Funding Period, the Capitalized Interest
Amount for such Collection Period or for each such preceding calendar month, as
the case may be.
22
<PAGE>
"Non-Code Entity" means a savings and loan association, a national
---------------
banking association, a bank or other entity that is not subject to Title 11 of
the United States Code.
"Note" means a Class A-1 Note or a Class A-2 Note.
----
"Note Depository Agreements" means the agreement dated as of the
--------------------------
Closing Date relating to the Class A-1 Notes, substantially in the form of
Exhibit C to the Indenture, and the agreement dated as of the Closing Date
relating to the Class A-2 Notes, substantially in the form of Exhibit D to the
Indenture, in each case among the Issuer, the Indenture Trustee, the
Administrator and The Depository Trust Company, as the initial Clearing Agency.
"Note Interest Rate" means the Class A-1 Rate with respect to the
------------------
Class A-1 Notes and the Class A-2 Rate with respect to the Class A-2 Notes.
"Note Owner" means, with respect to a Book-Entry Note, the Person who
----------
is the owner of such Book-Entry Note, as reflected on the books of the Clearing
Agency, or on the books of a Person maintaining an account with such Clearing
Agency (directly as a Clearing Agency Participant or as an indirect participant,
in each case in accordance with the rules of such Clearing Agency).
"Note Register" and "Note Registrar" have the respective meanings
------------- --------------
specified in Section 2.04 of the Indenture.
"Noteholder" means a Class A-1 Noteholder or a Class A-2 Noteholder.
----------
"Noteholders' Distribution Amount" means, with respect to any
--------------------------------
Distribution Date, the sum of the Noteholders' Interest Distribution Amount and
the Noteholders' Principal Distribution Amount for such Distribution Date.
"Noteholders' Interest Carryover Shortfall" means, with respect to any
-----------------------------------------
Interest Payment Date, the excess of (i) the Noteholders' Interest Distribution
Amount on the preceding Interest Payment Date over (ii) the amount of interest
actually distributed to the Noteholders on such preceding Interest Payment Date,
plus interest on the amount of such excess, to the extent permitted by law, at
the weighted average interest rate borne by the Class A-1 Notes and the Class A-
2 Notes from such preceding Interest Payment Date to the current Interest
Payment Date.
"Noteholders' Interest Distribution Amount" means, with respect to any
-----------------------------------------
Interest Payment Date, the sum of (i) the amount of interest accrued at the
respective Note Interest Rate for the related Interest Period on the outstanding
principal balance of each class of Notes on the immediately preceding
Distribution
23
<PAGE>
Date after giving effect to all principal distributions to holders of Notes of
such class on such date (or, in the case of the first three Interest Payment
Dates, on the Closing Date) and (ii) the Noteholders' Interest Carryover
Shortfall for such Interest Payment Date; provided, however, that the
-------- -------
Noteholders' Interest Distribution Amount will not include any Noteholders'
Interest LIBOR Carryover.
"Noteholders' Interest LIBOR Carryover" means, with respect to each
-------------------------------------
Distribution Date, and with respect to each Interest Period, if any, since the
preceding Distribution Date as to which the Class A-1 Rate or the Class A-2 Rate
for such Interest Period was based on the Student Loan Rate, the amount equal to
the excess, if any, of (a) the amount of interest on the Class A-1 Notes or the
Class A-2 Notes, as the case may be, that would have accrued in respect of each
related Interest Period had interest been calculated based on LIBOR over (b) the
amount of interest on the Class A-1 Notes or the Class A-2 Notes, as the case
may be, actually accrued in respect of such Interest Period based on the Student
Loan Rate, together with the unpaid portion of any such excess from prior dates
(and interest accrued thereon, to the extent permitted by law, at the applicable
rate calculated based on LIBOR); provided, however, that, (1) on the Class A-1
-------- -------
Final Maturity Date, the portion of the Noteholders' Interest LIBOR Carryover
allocable to the Class A-1 Notes will be equal to the lesser of (i) the portion
allocable to the Class A-1 Notes of the Noteholders' Interest LIBOR Carryover on
such date determined as described above and (ii) the amount of funds, if any,
required and available to be distributed to Class A-1 Noteholders on such date
pursuant to Sections 2(e)(ii)(B) and 2(e)(iii) of the Administration Agreement
and (2) on the Class A-2 Final Maturity Date, the Noteholders' Interest LIBOR
Carryover will be equal to the lesser of (i) the Noteholders' Interest LIBOR
Carryover on such date determined as described above and (ii) the amount of
funds, if any, required and available to be distributed to Class A-2 Noteholders
on such date pursuant to Sections 2(e)(ii)(B) and 2(e)(iii) of the
Administration Agreement.
"Noteholders' Principal Carryover Shortfall" means, as of the close of
------------------------------------------
business on any Distribution Date, the excess of (i) the Noteholders' Principal
Distribution Amount on such Distribution Date over (ii) the amount of principal
actually distributed to the Noteholders on such Distribution Date.
"Noteholders' Principal Distribution Amount" means, with respect to
------------------------------------------
any Distribution Date, the Principal Distribution Amount for such Distribution
Date plus the Noteholders' Principal Carryover Shortfall as of the close of the
preceding Distribution Date; provided, however, that the Noteholders' Principal
-------- -------
Distribution Amount will not exceed the outstanding principal balance of the
Notes. In addition, (i) on the Class A-1 Final
24
<PAGE>
Maturity Date, the principal required to be distributed to Class A-1 Noteholders
will include the amount required to reduce the outstanding principal balance of
the Class A-1 Notes to zero and (ii) on the Class A-2 Final Maturity Date, the
principal required to be distributed to the Class A-2 Noteholders will include
the amount required to reduce the outstanding principal balance of the Class A-2
Notes to zero.
"Obligor" on a Student Loan means the borrower or co-borrowers of such
-------
Student Loan and any other Person who owes payments in respect of such Student
Loan, including the Guarantor thereof and, with respect to any Interest Subsidy
Payment or Special Allowance Payment, if any, thereon, the Department.
"Officers' Certificate" means (i) in the case of the Issuer, a
---------------------
certificate signed by any two Authorized Officers of the Issuer, under the
circumstances described in, and otherwise complying with, the applicable
requirements of Section 11.01 of the Indenture, and delivered to the Indenture
Trustee and (ii) in the case of the Seller, the Master Servicer, or the
Administrator, a certificate signed by any two Authorized Officers of the
Seller, the Master Servicer, or the Administrator, as appropriate.
"Opinion of Counsel" means (i) with respect to the Issuer, one or more
------------------
written opinions of counsel who may, except as otherwise expressly provided in
the Indenture, be employees of or counsel to the Issuer and who shall be
satisfactory to the Indenture Trustee, and which opinion or opinions shall be
addressed to the Indenture Trustee as Indenture Trustee, shall comply with any
applicable requirements of Section 11.01 of the Indenture, and shall be in form
and substance reasonably satisfactory to the Indenture Trustee and (ii) with
respect to the Seller, the Administrator, or the Master Servicer, one or more
written opinions of counsel who may be an employee of or counsel to the Seller,
the Administrator, or the Master Servicer, which counsel shall be reasonably
acceptable to the Indenture Trustee, the Eligible Lender Trustee or the Rating
Agencies, as applicable.
"Outstanding" means, as of the date of determination, all Notes
-----------
theretofore authenticated and delivered under this Indenture except:
(i) Notes theretofore cancelled by the Note Registrar or
delivered to the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which money in the
necessary amount has been theretofore deposited with the Indenture Trustee
or any Paying Agent in trust for the Noteholders thereof (provided,
--------
however, that
-------
25
<PAGE>
if such Notes are to be redeemed, notice of such redemption has been duly
given pursuant to the Indenture); and
(iii) Notes in exchange for or in lieu of other Notes which have been
authenticated and delivered pursuant to the Indenture unless proof
satisfactory to the Indenture Trustee is presented that any such Notes are
held by a bona fide purchaser;
provided that in determining whether the Noteholders of the requisite
- --------
Outstanding Amount of the Notes have given any request, demand, authorization,
direction, notice, consent or waiver hereunder or under any other Basic
Document, Notes owned by the Issuer, any other obligor upon the Notes, the
Seller or any Affiliate of any of the foregoing Persons shall be disregarded and
deemed not to be Outstanding, except that, in determining whether the Indenture
Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Notes that a
Responsible Officer of the Indenture Trustee either actually knows to be so
owned or has received written notice thereof shall be so disregarded. Notes so
owned that have been pledged in good faith may be regarded as Outstanding if the
pledgee establishes to the satisfaction of the Indenture Trustee the pledgee's
right so to act with respect to such Notes and that the pledgee is not the
Issuer, any other obligor upon the Notes, the Seller or any Affiliate of any of
the foregoing Persons.
"Outstanding Amount" means the aggregate principal amount of all
------------------
Notes, or class of Notes, as applicable, Outstanding at the date of
determination.
"Parity Date" means the first Distribution Date on which the aggregate
-----------
principal balance of the Notes and Certificates, after giving effect to all
distributions on such date, is no longer in excess of the Pool Balance as of the
last day of the related Collection Period.
"Partnership Qualification Provisions" has the meaning specified in
------------------------------------
Section 5.06 of the Trust Agreement.
"Paying Agent" means Signet Trust Company or any other Person that
------------
meets the eligibility standards for the Indenture Trustee specified in Section
6.11 of the Indenture and is authorized by the Issuer to make the payments to
and distributions from the Collection Account and payments of principal of and
interest and any other amounts owing on the Notes on behalf of the Issuer.
"Person" means any individual, corporation, estate, partnership, joint
------
venture, association, joint stock company, trust (including any beneficiary
thereof), unincorporated
26
<PAGE>
organization or government or any agency or political subdivision thereof.
"Physical Property" has the meaning assigned to such term as the
-----------------
definition of "Delivery" above.
"PLUS Loan" means a Student Loan designated as such that is made under
---------
the Parent Loans to Undergraduate Students Program pursuant to the Higher
Education Act.
"Pool Balance" means, as of the close of business on the last day of
------------
any Collection Period, the aggregate principal balance of the Financed Student
Loans as of such day (including accrued interest thereon for the immediately
preceding Collection Period to the extent such interest will be capitalized upon
commencement of repayment, excluding any Purchased Student Loans and Liquidated
Student Loans).
"Predecessor Note" means, with respect to any particular Note, every
----------------
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; and, for the purpose of this definition, any Note
authenticated and delivered under Section 2.05 of the Indenture and in lieu of a
mutilated, lost, destroyed or stolen Note shall be deemed to evidence the same
debt is the mutilated, lost, destroyed or stolen Note.
"Pre-Funded Amount" means, with respect to any Interest Payment Date,
-----------------
Distribution Date or other specified date of determination, the amount on
deposit in the Pre-Funding Account.
"Pre-Funding Account" means the account designated as such,
-------------------
established and maintained pursuant to Section 2(c) of the Administration
Agreement.
"Principal Cash Flow Amount" means, with respect to any Distribution
--------------------------
Date, the sum of the following amounts with respect to the related Collection
Period, or with respect to any other date of determination, the sum of the
following amounts with respect to the period specified: (i) that portion of all
collections received by the Master Servicer or any Subservicer on the Financed
Student Loans that is allocable to principal (including the portion of any
Guarantee Payments received that is allocable to principal of the Financed
Student Loans); (ii) all Liquidation Proceeds attributable to the principal
amount of Financed Student Loans which became Liquidated Student Loans during
such Collection Period, or such other specified period, in accordance with the
Master Servicer's customary servicing procedures, together with all Realized
Losses on such Financed Student Loans; (iii) to the extent attributable to
principal, the Purchase Amount received with respect to each Financed Student
Loan repurchased by the Seller or purchased by the Master
27
<PAGE>
Servicer as a result of a breach of a representation, warranty or covenant which
arose during the related Collection Period or such other specified period; and
(iv) the Principal Distribution Adjustment; provided, however, that the
-------- -------
Principal Distribution Amount will exclude all payments and proceeds (including
Liquidation Proceeds) of any Financed Student Loans the Purchase Amount of which
has been included in Available Funds for a prior Collection Period.
"Principal Distribution Adjustment" means, with respect to any
---------------------------------
Distribution Date, the amount of Available Funds on such Distribution Date to be
used to make additional principal distributions to Noteholders (and, after the
Notes have been paid in full, Certificateholders) to account for (i) the amount
of any insignificant principal balance remaining outstanding as of such
Distribution Date on a Financed Student Loan after receipt of a final payment
from a borrower or Guarantor, when such insignificant principal balances are
waived in the ordinary course of business by the Master Servicer or any
Subservicer at the direction of the Administrator in accordance with the Master
Servicing Agreement or (ii) the amount of principal collections erroneously
treated as interest collections including, without limitation, by reason of the
failure by a borrower to capitalized interest that had been expected to be
capitalized; provided, however, that the Principal Distribution Adjustment for
-------- -------
any Distribution Date shall not exceed the lesser of (x) $100,000 and (y) the
amount on deposit in the Reserve Account in excess of the Specified Reserve
Account Balance after giving effect to all distributions to be made on such
Distribution Date other than distributions to the Seller and the Company out of
such excess.
"Principal Distribution Amount" means, with respect to any
-----------------------------
Distribution Date occurring during the Funding Period, the Principal Cash Flow
Amount and means, with respect to any Distribution Date occurring after the
Funding Period, the Net Principal Cash Flow Amount for such Distribution Date
minus any funds remitted to the Seller and the Company during the preceding
Collection Period for the purchase of any Additional Student Loans.
"Proceeding" means any suit in equity, action at law or other judicial
----------
or administrative proceeding.
"Purchase Amount" means, (i) with respect to a Financed Student Loan
---------------
to be purchased from the Issuer, an amount equal to 10_% (prior to the Parity
Date) and 100% (on and after the Parity Date) of the principal balance of such
Financed Student Loan as of the close of business on the last day of the Monthly
Collection Period preceding the date of such purchase, plus accrued borrower
interest thereon and (ii) with respect to an Additional Student Loan to be
purchased by the Issuer, an amount equal, as of the related Subsequent Cutoff
Date, to 10_% of the
28
<PAGE>
principal balance of such Additional Student Loan plus accrued borrower interest
thereon if and to the extent that such interest is not then payable and will,
pursuant to the terms of such loan, be capitalized and added to the principal
balance of such loan.
"Purchased Student Loan" means a Financed Student Loan purchased as of
----------------------
the close of business on the last day of a Monthly Collection Period by the
Master Servicer pursuant to Section 3.05 of the Master Servicing Agreement or
repurchased by the Seller pursuant to Section 3.02 of the Loan Sale Agreement.
"Rating Agency" means [ ] and [ ]. If no such organization or
-------------
successor is any longer in existence, "Rating Agency" shall be a nationally
recognized statistical rating organization or other comparable Person designated
by the Seller, notice of which designation shall be given to the Indenture
Trustee, the Eligible Lender Trustee and the Master Servicer.
"Rating Agency Condition" means, with respect to any action, that each
-----------------------
Rating Agency shall have been given 10 days' prior notice thereof and that each
of the Rating Agencies shall have notified the Seller, the Master Servicer, any
Subservicer, the Eligible Lender Trustee and the Indenture Trustee in writing
that such action will not result in and of itself in a reduction or withdrawal
of the then current rating of the Notes or the Certificates.
"Realized Losses" means the excess of the aggregate principal balance
---------------
of any Liquidated Student Loan plus accrued but unpaid interest thereon over
Liquidation Proceeds to the extent allocable to principal.
"Record Date" means, with respect to an Interest Payment Date, a
-----------
Distribution Date or a Redemption Date, the close of business on the twenty-
fourth day of the calendar month in which such Interest Payment Date,
Distribution Date or Redemption Date occurs.
"Recoveries" means, with respect to any Liquidated Student Loan,
----------
moneys collected in respect thereof, from whatever source, during any Monthly
Collection Period following the Monthly Collection Period in which such Financed
Student Loan became a Liquidated Student Loan, net of the sum of any amounts
expended by the Master Servicer or any Subservicer for the account of any
Obligor and any amounts required by law to be remitted to the Obligor.
"Redemption Date" means in the case of a payment to Noteholders
---------------
pursuant to Section 10.01 of the Indenture, the Distribution Date specified by
the Administrator or the Issuer pursuant to Section 10.01 of the Indenture.
29
<PAGE>
"Redemption Price" means in the case of a payment made to Noteholders
----------------
pursuant to Section 10.01 of the Indenture, the amount to be so paid pursuant to
such Section 10.01.
"Related Student Loan File" has the meaning specified in Section
-------------------------
2.01(b) of the Master Servicing Agreement.
"Repayment" means the period of time during which a Borrower is
---------
required to make installment payments to repay the aggregate principal amount
plus accrued interest of all amounts borrowed by virtue of the Borrower Note(s)
executed by such Borrower.
"Repayment Loan" means a Student Loan during a period of Repayment.
--------------
"Reserve Account" means the account designated as such, established
---------------
and maintained pursuant to Section 2(c) of the Administration Agreement.
"Reserve Account Excess" means, as of each Distribution Date, the
----------------------
amount, if any, by which the amount on deposit in the Reserve Account (after
giving effect to all deposits thereto and all withdrawals therefrom pursuant to
Section 2(e)(iv) of the Administration Agreement) is greater than the Specified
Reserve Account Balance for such Distribution Date.
"Reserve Account Initial Deposit" means $[ ].
-------------------------------
"Responsible Officer" means, with respect to the Indenture Trustee,
-------------------
any officer within the Corporate Trust Office of the Indenture Trustee,
including any vice president, assistant vice president, assistant treasurer,
assistant secretary, or any other officer of the Indenture Trustee customarily
performing functions similar to those performed by any of the above designated
officers, with direct responsibility for the administration of the Indenture and
the other Basic Documents on behalf of the Indenture Trustee and also, with
respect to a particular matter, any other officer to whom such matter is
referred because of such officer's knowledge of and familiarity with the
particular subject.
"Schedule of Student Loans" means the listing of the Financed Student
--------------------------
Loans set forth in Schedule A to the Loan Sale Agreement and to the Indenture
(which Schedule may be in the form of microfiche) as the same may be amended
from time to time.
"Secretary" means the Secretary of the Department, or any predecessor
---------
or successor to the functions thereof under the Higher Education Act.
30
<PAGE>
"Seller" means Signet, in its capacity as seller of the Financed
------
Student Loans.
"Serial Loan" means a Financed Student Loan which (i) is made by an
-----------
eligible lender under the Higher Education Act to a Borrower who is also a
Borrower under at least one outstanding Initial Financed Student Loan and is
acquired by the Seller, (ii) is made under the same federal loan program as such
Initial Financed Student Loan and (iii) has the same Guarantor as such Initial
Financed Student Loan.
"Servicer Default" means an event specified in Section 6.01 of the
----------------
Master Servicing Agreement.
"Servicing Fee" has the meaning specified in Section 3.06 of the
-------------
Master Servicing Agreement.
"Signet" means Signet Bank, a Virginia banking corporation.
------
"Signet Student Loan Trusts" means the Issuer and any other trust
--------------------------
formed subsequent to the Closing Date that is entitled to the benefits of the
Guarantee Agreement.
"SLS Loan" means a Student Loan designated as such that is made under
--------
the Supplemental Loans for Students Program pursuant to the Higher Education
Act.
"Special Allowance Payments" means payments, designated as such,
--------------------------
consisting of effective interest subsidies by the Department in respect of the
Financed Student Loans to the Eligible Lender Trustee on behalf of the Trust in
accordance with the Higher Education Act.
"Specified Reserve Account Balance" with respect to any Distribution
---------------------------------
Date means the greater of: (a) [ ]% of the sum of the Pool Balance and the Pre-
Funded Amount as of the close of business on the last day of the related
Collection Period and (b) $[ ]; provided, however, that in no event shall
the Specified Reserve Account Balance exceed the sum of the outstanding
principal amount of the Notes and the Certificate Balance.
"Stafford Loan" means a Student Loan designated as such that is made
-------------
under the Robert T. Stafford Student Loan Program in accordance with the Higher
Education Act.
"Standard & Poor's" means Standard & Poor's Rating Services, a
-----------------
division of The McGraw-Hill Companies.
31
<PAGE>
"State" means any one of the 50 States of the United States of
-----
America, the trust territories of the United States, or the District of
Columbia.
"Student Loan" means an agreement to repay a disbursement of money to
------------
or on behalf of an eligible student, evidenced by a Borrower Note and guaranteed
in accordance with the policies and procedures of a Guarantor.
"Student Loan Files" means the documents relating to the Financed
------------------
Student Loans specified in Section 2.01 of the Master Servicing Agreement.
"Student Loan Rate" means, with respect to any Interest Period, the
-----------------
interest rate equal to the product of (a) the quotient obtained by dividing (i)
360 by (ii) the actual number of days elapsed in such Interest Period and (b)
the percentage equivalent of a fraction, the numerator of which is equal to
Expected Interest Collections for the related Interest Period less the Servicing
Fee and the Administration Fee with respect to such Interest Period and (ii) the
denominator of which is the sum of (x) the Pool Balance as of the first day of
such Collection Period in which the first day of such Interest Period occurs and
(y) the principal balance on deposit in the Pre-Funding Account as of the first
day of the Collection Period in which the first day of such Interest Period
occurs.
"Student Loan Rate Accrual Period" means, with respect to any Interest
--------------------------------
Period, the calendar month that precedes the month during which such Interest
Period ends.
"Subcustodian" has the meaning specified in 2.01(b) of the Master
------------
Servicing Agreement.
"Subsequent Cutoff Date" means, for any Additional Student Loan
----------------------
transferred to the Issuer, the date, specified in the related Transfer
Agreement, on and after which all distributions on such loan are property of the
Issuer.
"Subservicer" means, upon satisfaction of the Rating Agency Condition,
-----------
any entity in its capacity as a subservicer pursuant to a Subservicing Agreement
between it and the Master Servicer.
"Subservicing Agreement" means any of the servicing agreements entered
----------------------
into by the Master Servicer and any Subservicer, subject to Section 3.12
relating to the servicing of the Financed Student Loans and the custody of the
Related Financed Student Loan Files.
"Successor Master Servicer" has the meaning specified in Section
--------------------------
3.07(e) of the Indenture.
32
<PAGE>
"Tax Characterization Amendment" has the meaning specified in Section
------------------------------
5.06 of the Trust Agreement.
"Transfer Agreement" has the meaning provided in Section 2.03 of the
------------------
Loan Sale Agreement.
"Transfer Date" means the day fixed for the transfer of any Additional
-------------
Student Loans by the Seller to the Issuer; provided that no Transfer Date shall
occur during the period from a Determination Date to the end of the calendar
month in which such Determination Date occurs.
"Treasury Regulations" means regulations, including proposed or
---------------------
temporary regulations, promulgated under the Code. References in any document
or instrument to specific provisions of proposed or temporary regulations shall
include analogous provisions of final Treasury Regulations or other successor
Treasury Regulations.
"Trust" means the Issuer, established pursuant to the Trust Agreement.
-----
"Trust Account Property" means the Trust Accounts, all amounts and
----------------------
investments held from time to time in any Trust Account (whether in the form of
deposit accounts, Physical Property, book-entry securities, uncertificated
securities or otherwise), including the Reserve Account Initial Deposit and all
proceeds of the foregoing.
"Trust Accounts" has the meaning specified in Section 2(c) of the
--------------
Administration Agreement.
"Trust Agreement" means the Trust Agreement dated as of [ ] 1,
---------------
1996, among the Depositor, the Company and the Eligible Lender Trustee.
"Trust Certificate" means a Certificate.
-----------------
"Trust Estate" means all right, title and interest of the Trust (or
------------
the Eligible Lender Trustee on behalf of the Trust) in and to the property and
rights assigned to the Trust pursuant to Article II of the Loan Sale Agreement
all funds on deposit from time to time in the Trust Accounts and all other
property of the Trust from time to time, including any rights of the Eligible
Lender Trustee and the Trust pursuant to the Loan Sale Agreement and the
Administration Agreement.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939
------------------- ---
as in force on the date hereof, unless otherwise specifically provided.
33
<PAGE>
"UCC" means, unless the context otherwise requires, the Uniform
---
Commercial Code, as in effect in the relevant jurisdiction, as amended from time
to time.
"Underwriting Agreements" means either or both of the Note
-----------------------
Underwriting Agreement or the Certificate Underwriting Agreement each of which
is dated [ ,] 1996 and each of which is between the Seller and CS
First Boston Corporation.
34
