As filed with the Securities and Exchange Commission on November 14, 1997
Registration No. 333-35825
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM S-3
AMENDMENT NO. 1
to
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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Virginia CRESTAR BANK, as Depositor 53-0116200
(State or other to CRESTAR STUDENT LOAN TRUST 1997-1 (I.R.S. Employer
jurisdiction of (Exact name of registrant as specified in its charter) Identification No.)
incorporation or 919 East Main Street
organization) Richmond, Virginia 23219
(804) 782-5000
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
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W. Clark McGhee Copies to: And to: And to:
Senior Vice President Randolph F. Totten David M. Reicher Paul F. Sefcovic
6802 Paragon Place Hunton & Williams Foley & Lardner Squire, Sanders & Dempsey L.L.P.
Richmond, VA 23230-7172 951 East Byrd Street Firstar Center 41 S. High St., Suite 1300
(804) 287-9501 Richmond, VA 23219-4074 777 E. Wisconsin Ave. Columbus, OH 43215
(804) 287-9428 (telecopy) (804) 788-8281 Milwaukee, WI (614) 365-2738
(Name, address, including zip code and (804) 788-8218 (telecopy) (414) 297-5763 (614) 365-2499 (telecopy)
telephone number, (414) 297-4900 (telecopy)
including area code, of agent for service)
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Approximate date of commencement of proposed sale to the public:
From time to time after the effective date of this Registration Statement.
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If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |X|
CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Maximum Maximum
Title of Securities Amount to be Offering Price Aggregate Amount of
Being Registered Registered(1)(2) Per Unit(1) Offering Price(1) Registration Fee
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<S> <C>
Student Loan
Asset Backed Notes $1,000,000 100% $1,000,000 $303.03(3)
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(1) Estimated solely for calculating the registration fee.
(2) Also registered are secondary market sales of Notes that may be
effected by Crestar Securities Corporation, an affiliate of the Registrant.
(3) Previously paid in connection with the filing of the initial
Registration Statement.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that the Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
SUBJECT TO COMPLETION, DATED NOVEMBER 14, 1997
PROSPECTUS
[$------------]
Crestar Student Loan Trust 1997-1
STUDENT LOAN ASSET BACKED NOTES
------------
Crestar Bank
Transferor
Crestar Student Loan Trust 1997-1, a Delaware business trust (the
"Trust"), will issue [$_________] aggregate principal amount of its Student Loan
Asset Backed Notes in the classes and original principal amounts set forth below
(collectively, the "Notes"). The assets of the Trust will include a pool of
guaranteed or insured education loans to students and parents of students
acquired by Star Bank, National Association, as eligible lender trustee on
behalf of the Trust (the "Eligible Lender Trustee"), from Crestar Bank (the
"Transferor") (the "Financed Student Loans"), collections and other payments
with respect to the Financed Student Loans and monies on deposit in certain
trust accounts to be established (including the Collection Account, the Reserve
Account, the Note Distribution Account, the Expense Account and the Monthly
Advance Account). The Notes will be collateralized by the assets of the Trust.
____________ (Continued on following page)
Prospective investors should consider the material risks set
forth under "Risk Factors" beginning on page 24.
------------
THE NOTES REPRESENT OBLIGATIONS OF THE TRUST ONLY AND DO NOT REPRESENT
INTERESTS IN OR OBLIGATIONS OF THE TRANSFEROR, THE MASTER SERVICER, THE
SERVICERS, THE ELIGIBLE LENDER TRUSTEE, THE INDENTURE TRUSTEE OR ANY OF THEIR
RESPECTIVE AFFILIATES OR SUBSIDIARIES. THE NOTES ARE NOT DEPOSITS OF A BANK.
THE NOTES ARE NOT GUARANTEED OR INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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Class Final
Interest Price to Underwriting Proceeds to Maturity
Rate Public Discount(1) Transferor(2) Date (4)
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[$_________] Senior LIBOR Rate Class A-1 Notes (3) 100% % % [_______, 20__]
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[$_________] Senior LIBOR Rate Class A-2 Notes (3) 100% % % [_______, 20__]
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[$________] Subordinate LIBOR Rate Class B Notes ... (3) 100% % % [_______, 20__]
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Total.............................................. [$___________] $ $
==================================================================================================================================
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(1) The Transferor has agreed to indemnify the Underwriters against certain
liabilities under the Securities Act of 1933, as amended.
(2) Before deducting expenses, estimated to be [$__________].
(3) Following the initial Interest Periods, the Class Interest Rates for
the Class A-1 Notes , the Class A-2 Notes and the Class B Notes will
equal, subject to certain limitations described herein, One-Month LIBOR
plus [____%], [____%] and [____%], respectively.
(4) Payment in full of the Notes could occur earlier than their respective
final maturity dates as described herein.
<PAGE>
------------
The Notes are offered by the Underwriters when, as and if issued by the
Trust, delivered to and accepted by the Underwriters and subject to approval of
certain legal matters by counsel for the Underwriters. The Underwriters reserve
the right to withdraw, cancel or modify such offer and to reject orders in whole
or in part. It is expected that delivery of the Notes will be made in book-entry
form through the Same Day Funds Settlement System of The Depository Trust
Company and also Cedel Bank, societe anonyme or the Euroclear System on or about
[ December __, 1997].
------------
Smith Barney Inc.
Morgan Stanley Dean Witter Crestar Securities Corporation
The date of this Prospectus is [_________, 1997]
<PAGE>
(Cover continued from previous page)
The Notes will be available for purchase in denominations of $50,000
and integral multiples of $1,000 in excess thereof in book-entry form only.
Interest on the Class A Notes will be payable monthly on or about the 25th day
of each month, commencing January 26, 1998 (each, a "Distribution Date").
Principal of the Class A Notes will be payable monthly on each Distribution
Date, commencing February 25, 1998. Interest on and principal of the Class B
Notes will be payable quarterly on the Distribution Date in each January, April,
July and October, commencing April 27, 1998 (each, a "Quarterly Distribution
Date"). No distribution in respect of principal of the Class B Notes will be
payable until each Class of Class A Notes is paid in full. See generally
"Description of the Notes -- The Notes." Interest will accrue on the Class A-1
Notes at the rate of [___%] per annum , on the Class A-2 Notes at the rate of
[___%] per annum and on the Class B Notes at the rate of [___%] per annum
through [________, 1997]. Thereafter, interest on the Notes will accrue, subject
to certain limitations described herein, for each Interest Payment Period at the
per annum rates set forth on the cover page hereof.
Payment in full of the Notes could occur earlier than their respective
final maturity dates from payments on the Financed Student Loans as described
herein. In addition, the Notes will be repaid (i) on any Quarterly Distribution
Date on which the Transferor exercises its option to purchase the Financed
Student Loans, exercisable when the outstanding Pool Balance is reduced to 10%
or less of the Initial Pool Balance, (ii) on or after the Distribution Date
occurring in [October 2006], if the outstanding Pool Balance is reduced to 10%
or less of the Initial Pool Balance and the Financed Student Loans are sold
pursuant to the auction procedures described under "Description of the Transfer
and Servicing Agreements -- Termination," and (iii) under certain circumstances
as described in "Description of the Transfer and Servicing Agreements --
Insolvency Event," upon the insolvency of the Transferor and subsequent
termination of the Trust pursuant to the Trust Agreement (as defined in "Summary
of Terms -- The Trust").
The rights of the Class B Noteholders to receive principal and interest
payments with respect to the Notes and to direct remedies upon default will be
subordinated to such rights of the Class A Noteholders to the extent described
in this Prospectus. See "Risk Factors -- Risk of Loss to Noteholders of Class B
Notes Resulting From Subordination of the Class B Notes," "Description of the
Notes -- The Indenture" and "Description of the Transfer and Servicing
Agreements -- Distributions," "-- Credit Enhancement -Subordination of the Class
B Notes," "-- Master Servicer Default; Administrator Default," "-- Rights Upon
Servicer Default and Administrator Default" and "-- Waiver of Past Defaults."
There is currently no secondary market for the Notes. Smith Barney
Inc., Morgan Stanley & Co., Incorporated and Crestar Securities Corporation
intend to make a secondary market for the Notes, but none of them has any
obligation to do so. There can be no assurance that a secondary market for the
Notes will develop or, if one does develop that it will continue. The Notes will
not be listed on any national securities exchange.
After the initial distribution of the Notes by the Underwriters, the
Prospectus may be used by Crestar Securities Corporation, an affiliate of the
Transferor, in connection with offers and sales relating to market making
transactions in the Notes. Crestar Securities Corporation may act as principal
or agent in such transactions. Such sales will be made at prices related to
prevailing market prices at the time of sale. Certain information in this
Prospectus will be updated from time to time as described in "Incorporation of
Certain Documents by Reference."
The Transferor has not authorized any offer of Notes to the public in
the United Kingdom within the meaning of the Public Offers of Securities
Regulations 1995 (the "U.K. Regulations"). The Notes may not lawfully be offered
or sold to persons in the United Kingdom except in circumstances which do not
result in an offer to the public in the United Kingdom within the meaning of the
U.K. Regulations or otherwise are in compliance with all applicable provisions
of the U.K. Regulations.
<PAGE>
------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES
OFFERED HEREBY INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE
COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES
SEE "UNDERWRITING."
Until 90 days after the date hereof, all dealers effecting transactions
in the Notes, whether or not participating in this distribution, may be required
to deliver a Prospectus. This is in addition to the obligation of dealers to
deliver a Prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
<PAGE>
AVAILABLE INFORMATION
The Transferor, as depositor of the Trust (the "Depositor"), 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 Notes 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, Suite
1300, New York, New York 10048; and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661, and copies of all or any part thereof may be obtained
from the Public Reference Branch of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549 upon the payment of certain fees prescribed by the
Commission. In addition, the Registration Statement may be accessed
electronically through the Commission's Electronic Data Gathering, Analysis and
Retrieval system at the Commission's site on the World Wide Web located at
http:/ /www.sec.gov.
REPORTS TO NOTEHOLDERS
Unless and until Definitive Notes are issued, quarterly and annual
unaudited reports containing information concerning the Financed Student Loans
will be prepared by Crestar Bank, in its capacity as administrator for the Trust
(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 but will not be sent to any beneficial holder of the Notes.
Such reports will not constitute financial statements prepared in accordance
with generally accepted accounting principles. See "Description of the Notes --
Book-Entry Registration" and "-- Reports to Noteholders." The Trust will file
with 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. The Trust intends to suspend the
filing of such reports under the Exchange Act when and if the filing of such
reports is no longer statutorily required.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All reports and other documents filed by the Administrator, on behalf
of the Trust, pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Prospectus and prior to the termination of the
offering of the Notes shall be deemed to be incorporated by reference into this
Prospectus and to be a part hereof. After the initial distribution of the Notes
by the Underwriters and in connection with market making transactions by Crestar
Securities Corporation, this Prospectus will be distributed together with, and
should be read in conjunction with, an accompanying supplement to the
Prospectus. Such supplement will contain the reports described above and
generally will include the information contained in the quarterly statements
furnished to Noteholders. See "Description of the Notes -- Reports to
Noteholders" and "Description of the Transfer and Servicing Agreements --
Statements to Indenture Trustee." 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 or is deemed 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 Administrator will provide without charge to each person 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 by reference,
except the exhibits to such documents (unless such exhibits are specifically
incorporated by reference in such documents). Written requests for such copies
should be directed to Mr. Eugene S. Putnam, Jr., Senior Vice President -
Investor Relations, Crestar Financial Corporation, 919 East Main Street, P.O.
Box 26665, Richmond, VA 23261-6665 or "[email protected]" on the
Internet. Telephone requests for such copies should be directed to (804)
782-7821.
<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 the Related
Documents. Certain capitalized terms used in this Prospectus are defined
elsewhere herein on the pages indicated in the "Index of Principal Terms"
beginning on page 100 of this Prospectus.
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Issuer .....................................Crestar Student Loan Trust 1997-1 (the "Trust") is a statutory business
trust established under the laws of the State of Delaware.
Securities Offered..........................Senior LIBOR Rate Class A-1 Student Loan Asset Backed Notes (the "Class A-1
Notes") in the aggregate principal amount of [$_________], Senior LIBOR Rate
Class A-2 Student Loan Asset Backed Notes (the "Class A-2 Notes", and together
with the Class A-1 Notes, the "Class A Notes") in the aggregate principal amount
of [$_________] and Subordinate LIBOR Rate Class B Student Loan Asset Backed
Notes (the "Class B Notes" and, together with the Class A Notes, the "Notes") in
the aggregate principal amount of [$________]. The original principal amount of
each class (a "Class") of Notes is referred to as its "Original Amount."
The holders of the Class A-1 Notes and the Class A-2 Notes are referred to as
the "Class A-1 Noteholders" and the "Class A-2 Noteholders," respectively, and
collectively as the "Class A Noteholders." The holders of the Class B Notes are
referred to as the "Class B Noteholders."
The Notes will be issued in minimum denominations of $50,000 and integral
multiples of $1,000 in excess thereof. Persons acquiring beneficial ownership
interests in the Notes will hold their interests in the Notes through DTC in the
United States or Cedel Bank, societe anonyme ("Cedel") or the Euroclear System
("Euroclear") in Europe. See "Description of the Notes -- Book-Entry
Registration."
The Trust will issue the Notes pursuant to an Indenture, dated as of November 1,
1997, and a First Terms Supplement, dated as of November 1, 1997, authorizing
the Notes (as amended and supplemented from time to time, the "Terms Supplement"
and, together with the Indenture, as amended and supplemented from time to time,
the "Indenture") between the Trust and the Indenture Trustee.
The Certificates............................The Trust will issue $1,000 aggregate principal amount of Crestar
Student Loan Trust 1997-1 Asset Backed Certificates (the "Certificates") in a
transaction exempt from the registration requirements of the Securities Act. The
Certificates are not being offered hereby. The rights of Certificateholders in
the assets of the Trust to receive payments will be fully subordinated to the
rights of the Noteholders. See "Formation of the Trust."
<PAGE>
Transferor .................................Crestar Bank, a Virginia banking corporation (the "Transferor"), will
contribute the Financed Student Loans to the Trust pursuant to the Transfer and
Servicing Agreement (as amended and supplemented from time to time, the
"Transfer and Servicing Agreement") among the Trust, the Transferor and the
Eligible Lender Trustee.
Master Servicer and Servicers...............The Transferor will act as Master Servicer with respect to the Financed
Student Loans (in such capacity, the "Master Servicer"). The Financed Student
Loans will be serviced by Pennsylvania Higher Education Assistance Agency, an
agency of the Commonwealth of Pennsylvania ("PHEAA"), or such other parties as
may be approved by the Master Servicer. The Transferor, PHEAA, and each other
party who may, from time to time, be servicing the Financed Student Loans are
referred to herein as a "Servicer" and collectively as the "Servicers."
Eligible Lender Trustee ....................Star Bank, National Association, a national banking association, will act
as eligible lender 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 -- Eligible Lender
Trustee."
Indenture Trustee ..........................Bankers Trust Company, a New York banking corporation (the
"Indenture Trustee"), will act as trustee under the Indenture.
Administrator ..............................Crestar Bank will act as Administrator on behalf of the Trust pursuant
to an Administration Agreement (as amended and supplemented from time to time,
the "Administration Agreement"), among the Administrator, the Eligible Lender
Trustee and the Indenture Trustee.
Distribution Dates .........................Interest on the Class A Notes will be payable monthly on the
25th day of each month, or if any such day is not a Business Day, the next
succeeding Business Day, commencing January 26, 1998 (each, a "Distribution
Date"). Principal of the Class A Notes will be payable monthly on each
Distribution Date, commencing February 25, 1998. Interest on and principal of
the Class B Notes will be payable quarterly on the Distribution Date in each
January, April, July and October, commencing April 27, 1998 (each, a "Quarterly
Distribution Date"). See "Description of the Transfer and Servicing Agreements
--Distributions."
Record Date ................................Payments in respect of the Notes will be payable to holders of record
of the Notes ("Noteholders") as of the second Business Day preceding the related
Distribution Date (each a "Record Date").
Collection Period..........................."Collection Period" means, initially, the period beginning [______,
1997] and ending on December 31, 1997, and thereafter, the Collection Period
means the calendar month immediately following the end of the previous
Collection Period.
<PAGE>
Interest ...................................Each Class of Notes will bear interest during each period (an "Interest
Payment Period") beginning on the most recent Distribution Date for such Class
of Notes (or the Closing Date with respect to the initial Interest Payment
Period) through and including the day preceding the following Distribution Date
for such Class of Notes at the rates per annum for such Class (the "Class
Interest Rate") described below. Interest on the Notes will be calculated on the
basis of the actual number of days elapsed in each Interest Period divided by
360. Within each Interest Payment Period, each Class of Notes will bear interest
during each period commencing on a Rate Adjustment Date for such Class (or the
Closing Date with respect to the initial Interest Period) and ending on and
including the day before the next Rate Adjustment Date for such Class (an
"Interest Period"), at a Class Interest Rate determined as follows (a "Formula
Interest Rate"), unless the Net Loan Rate for such Interest Period (which shall
not apply to the initial Interest Period) is a lower interest rate:
(i) In the case of the Class A-1 Notes and the Class A-2 Notes, the
Formula Interest Rate for each Interest Period after the initial
Interest Period will be One-Month LIBOR as of the LIBOR Determination
Date for such Interest Period plus the applicable Margin for each such
Class, but in no event greater than 18% per annum. For the initial
Interest Period (commencing on the Closing Date), the interest rate for
the Class A-1 Notes will be [___%] per annum and for the Class A-2
Notes will be [___%] per annum. "One-Month LIBOR" for any Interest
Period will be determined as described under "Description of the Notes
-- Determination of LIBOR." The "Margin" will be [____%] for the Class
A-1 Notes and [____%] for the Class A-2 Notes. The "Rate Adjustment
Date" for the Class A Notes (which, except for the initial Interest
Period, also will be the first day of an Interest Period for the Class
A Notes) will be the Distribution Date occurring in each month.
(ii) In the case of the Class B Notes, the Formula Interest Rate for
each Interest Period after the initial Interest Period will be
One-Month LIBOR as of the LIBOR Determination Date for such Interest
Period plus the applicable Margin for such Class, but in no event
greater than 18% per annum. For the initial Interest Period (commencing
on the Closing Date), the interest rate for the Class B Notes will be
[___%] per annum. "One-Month LIBOR" for any Interest Period will be
determined as described under "Description of the Notes -Determination
of LIBOR." The "Margin" will be [____%] for the Class B Notes. The
"Rate Adjustment Date" for the Class B Notes (which, except for the
initial Interest Period, also will be the first day of an Interest
Period for the Class B Notes) will be (A) the Distribution Date in each
month while any Class A Notes are outstanding, and (B) thereafter, the
25th day of each month, except that the Rate Adjustment Date occurring
in January, April, July or October will be the Distribution Dates
occurring in such months.
See "Description of the Notes -- The Notes -- Distributions of Interest."
Notwithstanding the foregoing, with respect to each Class of Notes, if the
Formula Interest Rate with respect to such Class for any Interest Period is
greater than the Net Loan Rate (as defined in "-- Net Loan Rate" below)
determined on the LIBOR Determination Date for such Interest Period, then the
Class Interest Rate for such Interest Period will be the Net Loan Rate. See
"Description of the Notes -The Notes -- Distributions of Interest."
If the Class Interest Rate for any Class of Notes for any Interest Payment
Period or portion thereof is based on the Net Loan Rate, the excess of (a) the
amount of interest such Class of Notes would have accrued in respect of the
related Interest Payment Period had interest been calculated based on the
applicable Formula Interest Rate, over (b) the amount of interest such Class of
Notes actually accrued in respect of such Interest Payment Period based on the
Net Loan Rate (such excess, together with the unpaid portion of any such excess
from prior Interest Payment Periods and interest accrued thereon calculated
based on the Formula Interest Rate applicable to such Class of Notes is referred
to as the "Noteholders' Interest Carryover") will be paid on the dates and in
the priority set forth herein under "-- Assets of the Trust -- Collection
Account; Note Distribution Account; Certificate Distribution Account; and
Expense Account." Any amount of Noteholders' Interest Carryover with respect to
a Class of Notes remaining after the earlier of the Distribution Date on which
the outstanding principal amount of such Class of Notes has been reduced to zero
and the distribution of all Available Funds on the Final Maturity Date of such
Class of Notes, will never become due and payable and will be discharged as to
the applicable Class of Notes on such date. The ratings of the Notes do not
address the likelihood of the payment of the amount of any Noteholders' Interest
Carryover. Any reference herein or in the Indenture or the Transfer and
Servicing Agreement to "principal" or "interest" does not include within the
meaning of such words Noteholders' Interest Carryover or any interest accrued
thereon.
Net Loan Rate ..............................For any Interest Period, the "Net Loan Rate" will be the rate of interest per
annum (rounded to the next highest .01%) equal to (i) the weighted average
Effective Interest Rate of the Financed Student Loans as of the last day of the
Collection Period immediately preceding the commencement of such Interest
Period, less (ii) the Program Operating Expense Percentage (or less [_____%] per
annum during the period from the Closing Date through March 31, 1998).
The "Effective Interest Rate" means, with respect to any Financed Student Loan ,
the interest rate per annum borne by such Financed Student Loan after giving
effect to all applicable interest subsidy payments, Special Allowance Payments ,
rebate fees on Consolidation Loans and reductions pursuant to borrower
incentives. For this purpose, the Special Allowance Payment rate shall be
computed based upon the average of the bond equivalent rates of 91-day United
States Treasury Bills auctioned during that portion of the then current calendar
quarter which ends on the date as of which the Effective Interest Rate is
determined.
The "Program Operating Expense Percentage" is the fraction (expressed as a
percentage and calculated as of the end of each calendar quarter by the
Administrator) the numerator of which is the annualized operating expenses of
the Trust for the calendar month then ended, including, without limitation, the
Transaction Fees, and the denominator of which is the Pool Balance as of the
last day of such calendar quarter.
Principal ..................................Principal of the Class A Notes will be payable monthly on each
Distribution Date commencing February 25, 1998, first to the Class A-1 Notes
until paid in full and then to the Class A-2 Notes until paid in full. After all
Class A Notes are paid in full, principal of the Class B Notes will be paid
quarterly on each Quarterly Distribution Date. Consequently, no principal will
be paid on the Class B Notes until the Class A Notes have been paid in full, and
no principal will be paid on the Class A-2 Notes until the Class A-1 Notes have
been paid in full. Notwithstanding the foregoing, upon the occurrence of an
Event of Default with respect to payment of the Notes, principal will be paid to
each Class of Class A Notes pro rata, based upon the outstanding principal
amount of each such Class of Class A Notes. See "Description of the Transfer and
Servicing Agreements --Distributions."
The amount of principal available to be paid on a Distribution Date will be
equal to the Noteholders' Principal Distribution Amount for such Distribution
Date, less any portion thereof being used to pay Transaction Fees, overdue
Transaction Fees, Consolidation Loan Fees, overdue Consolidation Loan Fees and
interest on the Notes on such Distribution Date. See "Description of the
Transfer and Servicing Agreements -- Distributions." The Noteholders' Principal
Distribution Amount generally will be equal to the amount of principal paid with
respect to the Financed Student Loans (plus any Realized Losses thereon),
proceeds realized upon the sale of Financed Student Loans by the Trust and
Adjustment Payments (reduced by the amount of any Issuer Consolidation
Payments). In addition, until the Parity Percentage equals [ 101.50%],
accelerated principal payments will be made in respect of the Notes from
collections of interest and certain amounts available therefor in the Reserve
Account.
As of any date of determination, the "Parity Percentage" will be the fraction
expressed as a percentage, the numerator of which is the sum of (i) the then
Pool Balance, plus accrued interest thereon due from borrowers, and accrued
Interest Subsidy Payments and Special Allowance Payments, if any, as of the end
of the preceding Collection Period, and (ii) all amounts on deposit (including
any accrued interest thereon) in the Collection Account and the Reserve Account
and the denominator of which is the sum of the aggregate outstanding principal
balance of the Notes, accrued and unpaid interest thereon plus accrued and
unpaid Transaction Fees and Consolidation Loan Fees.
Final Maturity Dates........................The Final Maturity Dates with respect to each Class of Notes are as
follows:
Class of Notes Final Maturity Date
Class A-1 Notes [_______, 20__]
Class A-2 Notes [_______, 20__]
Class B Notes [_______, 20__]
The actual maturity of one or more Classes of Notes could occur sooner than such
dates as a result of a variety of factors, including (i) as a result of payments
on the Financed Student Loans; (ii) the exercise by the Transferor of its option
to repurchase the Financed Student Loans when the aggregate principal balance is
reduced to 10% or less of the Initial Pool Balance; (iii) if the Indenture
Trustee is successful in offering any Financed Student Loans remaining in the
Trust for sale on or after [October 2006] if the aggregate principal balance is
reduced to 10% or less of the Initial Pool Balance, as described under
"Description of the Transfer and Servicing Agreements -Termination"; or (iv)
under certain circumstances upon the insolvency of the Transferor and subsequent
termination of the Trust pursuant to the Trust Agreement as described under
"Description of the Transfer and Servicing Agreements -- Insolvency Event." See
"Maturity and Prepayment Considerations."
Servicing Fee ..............................The Master Servicer will receive a quarterly fee (the "Servicing Fee")
with respect to each calendar quarter in an amount equal to (i)
[0.70%] per annum of the average of the Pool Balance as of the last day of the
calendar quarter and the last day of the immediately preceding calendar quarter
(or the Cut-off Date with respect to the calendar quarter ending March 31,
1998), or (ii) such greater amount acceptable to the Rating Agencies, prior
written confirmation of which shall be provided to the Indenture Trustee. The
Servicing Fee will be payable quarterly in advance, out of Available Funds and
amounts on deposit in the Reserve Account, on each Quarterly Distribution Date
(or in the case of the initial Servicing Fee, on the Closing Date) based on the
Administrator's good faith estimate of the Servicing Fee that will accrue during
the calendar quarter in which such Quarterly Distribution Date occurs (or in the
case of the initial Servicing Fee, the period through March 31, 1998) plus (or
minus) the difference (or excess) of the actual Servicing Fee accrued for the
calendar quarter immediately preceding such Quarterly Distribution Date (or in
the case of the initial Servicing Fee, the period through March 31, 1998) and
the amount paid as an estimated Servicing Fee for such calendar quarter or
initial period on the immediately preceding Quarterly Distribution Date (or the
Closing Date with respect to the first Quarterly Distribution Date).
Administration Fee .........................The Administrator will receive a fee (the "Administration Fee"),
payable quarterly in advance on each Quarterly Distribution Date, in an amount
equal to [ 0.02%] per annum of the principal amount of the Notes outstanding on
such Quarterly Distribution Date (following any principal reductions of the
Notes on such Distribution Date).
The Trust ..................................The Trust is a Delaware statutory business trust established by a Trust
Agreement dated as of November 1, 1997 (as amended and supplemented from time to
time, the "Trust Agreement"), between the Transferor, as depositor, the Eligible
Lender Trustee and Delaware Trust Capital Management, Inc., as Delaware trustee
(the "Delaware Trustee"). The activities of the Trust and the Eligible Lender
Trustee are limited by the terms of the Trust Agreement to issuing one or more
classes of its certificates and notes, acquiring, owning, selling and managing
the Financed Student Loans and the other assets of the Trust as described
herein, collecting and 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 education loans to
students and parents of students ("Student Loans") enrolled in accredited
institutions of higher education and will include rights to receive payments
made with respect to such Financed Student Loans and the proceeds thereof. On
[___________, 1997] (the "Closing Date"), the Transferor will transfer and
contribute Student Loans (the "Initial Financed Student Loans") having an
aggregate principal balance plus accrued interest thereon to be capitalized upon
repayment of approximately [$____] million and [$____] million, respectively
(the "Initial Pool Balance"), as of [ November 24, 1997] (the "Cut-off Date") to
the Eligible Lender Trustee on behalf of the Trust, pursuant to the Transfer and
Servicing Agreement. Following the Closing Date and during the Exchange Period
(described below), it is anticipated that, subject to certain conditions
described herein, the Transferor will transfer to the Eligible Lender Trustee on
behalf of the Trust, certain Serial Loans and Consolidation Loans owned by the
Transferor (the "Exchanged Financed Student Loans") in exchange for certain
Financed Student Loans owned by the Trust. See "Description of the Transfer and
Servicing Agreements -- Exchange Period and Exchanged Financed Student Loans."
Certain of the Financed Student Loans have been or will be originated by the
Transferor and the remainder of the Financed Student Loans have been or will be
originated by independent third parties and subsequently sold to the Transferor.
The Financed Student Loans constituting the assets of the Trust include some or
all of the following types of Student Loans: (1) loans made under the federal
government's Federal Family Education Loan Program (the "FFEL Program"),
including (i) Parental Loans for Undergraduate Students ("PLUS Loans"), (ii)
Stafford Loans, (iii) Unsubsidized Stafford Loans, (iv) Supplemental Loans for
Students ("SLS Loans"), and (v) Consolidation Loans (collectively, the "FFELP
Loans"), and (2) loans (the "HEAL Loans") made under the federal government's
Health Education Assistance Loan Program (the "HEAL Program"). FFELP Loans and
HEAL Loans included in the Financed Student Loans are sometimes referred to
herein as "Financed FFELP Loans" and "Financed HEAL Loans," respectively.
Of the Financed Student Loans included in the Initial Pool Balance,
approximately [90.22%] are FFELP Loans. The Financed FFELP Loans are guaranteed
to the extent described herein as to the payment of principal and interest by
various guarantee agencies under the FFEL Program (each such entity, a
"Guarantor" or "Guarantee Agency," and collectively, the "Guarantors" or the
"Guarantee Agencies"), which are in each case reinsured to the extent described
herein by the Secretary of the United States Department of Education (the
"Secretary of Education" or the "Department of Education"). Payment of principal
and interest with respect to the Financed FFELP Loans is guaranteed against
default, death, bankruptcy, disability, school closure or false certification by
the school with respect to the applicable borrower by a Guarantor pursuant to a
guarantee agreement between the applicable Guarantor and the Eligible Lender
Trustee (such agreements, each as amended or supplemented from time to time, the
"Guarantee Agreements"). Of the Financed Student Loans included in the Initial
Pool Balance, approximately [71.81%] are guaranteed by Educational Credit
Management Corporation, a Minnesota non-profit corporation ("ECMC", formerly
known as Transitional Guaranty Agency, Inc.), approximately [15.02%] are
guaranteed by Pennsylvania Higher Education Assistance Agency, an agency of the
Commonwealth of Pennsylvania ("PHEAA"), approximately [9.78%] are HEAL Loans,
and the remaining [3.39%] are guaranteed by one of the following Guarantee
Agencies: United Student Aid Funds, Inc., a Delaware non-profit corporation
("USAF"), the Florida Department of Education, an agency of the State of
Florida, New York Higher Education Services Corporation, an agency of the State
of New York, and Texas Guaranteed Student Loan Program , a Texas nonprofit
corporation. See "Description of the Guarantee Agencies."
Of the Financed FFELP Loans included in the Initial Pool Balance, approximately
[ 52.33%] are guaranteed as to the payment of 100% of principal and interest by
a Guarantee Agency and approximately [ 47.67%] are guaranteed as to the payment
of 98% of principal and interest by a Guarantee Agency. Pursuant to the FFEL
Program, the Guarantee Agencies each have reinsurance contracts with the
Department of Education, pursuant to which the Department of Education
reimburses the Guarantee Agencies for such portions of guarantee claims paid by
the Guarantee Agencies as is provided in the Higher Education Act of 1965, as
amended (such Act, together with all rules and regulations promulgated
thereunder by the Department of Education and/or the Guarantors, the "Higher
Education Act"). In addition, the Department of Education is obligated to make
certain interest and other subsidy payments to the holders of such Financed
FFELP Loans. See "Description of the FFEL Program" for a more complete
description of the provisions of the Higher Education Act that provide for such
programs. The obligations of the Guarantee Agencies to the holders of loans,
such as the Eligible Lender Trustee, are payable from the general funds
available to each such Guarantee Agency, including reserve funds maintained by
the Guarantee Agencies as required by the Higher Education Act. Certain delays
in receiving reimbursement could occur if a Guarantee Agency fails to meet its
obligations. In addition, failure to properly originate or service a FFELP Loan
can cause a FFELP Loan to lose its guarantee and/or its eligibility for federal
interest payments and subsidies. See "Risk Factors -- Risk That Failure to
Comply with Student Loan Origination and Servicing Procedures for Financed
Student Loans May Result in the Department of Education's Refusal to Make
Certain Payments to Guarantors and the Eligible Lender Trustee, the Guarantors'
Refusal to Make Guarantee Payments to the Eligible Lender Trustee and the
Department of HHS's Refusal to Make Insurance Payments to the Eligible Lender
Trustee" and " -- Risk That Financial Status of Guarantors Will Affect Their
Ability to Make Guarantee Payments".
Of the Financed Student Loans included in the Initial Pool Balance,
approximately [9.78%] are HEAL Loans insured as to payment of 100% of principal
and interest by the Secretary of the United States Department of Health and
Human Services (the "Secretary of HHS" or the "Department of HHS") to the extent
described herein. The Department of HHS insures such payment against default,
death, bankruptcy or disability with respect to the applicable borrower pursuant
to a HEAL Insurance Contract between the Department of HHS and the Eligible
Lender Trustee (such HEAL Insurance Contract, as amended or supplemented from
time to time, the "HEAL Insurance Contract"). See "Description of the HEAL
Program."
Certain incentive programs currently or hereafter made available by the
Transferor to borrowers may also be made available by the Master Servicer to
borrowers with Financed FFELP Loans. Of the Financed Student Loans included in
the Initial Pool Balance, less than [1.00%] are currently eligible for an
incentive program. Other than with respect to Exchanged Loans, no other Financed
Student Loans will be eligible for such incentive programs. See "Risk
Factors-Risk Resulting From Changes in Repayment Terms of Financed Student Loans
Pursuant to Incentive Programs" and "The Financed Student Loan Pool -- Incentive
Programs."
During the period (the "Exchange Period") from the Closing Date until December
31, 2002, if a borrower on a Financed Student Loan who is also a borrower under
one or more Student Loans (whether or not all such loans are in the Trust)
elects to consolidate such loans with the proceeds of a Consolidation Loan or a
consolidation loan under the HEAL Program (a "HEAL Consolidation Loan") to be
made by the Transferor, the Eligible Lender Trustee, at the option of the
Transferor and subject to certain conditions, will be obligated to transfer to
the Transferor the Financed Student Loan being consolidated by the Transferor in
exchange for the related Consolidation Loan or HEAL Consolidation Loan to be
made by the Transferor. See "Description of the Transfer and Servicing
Agreements -- Exchange Period and Exchanged Financed Student Loans." In
addition, during the Exchange Period, the Eligible Lender Trustee, at the option
of the Transferor and subject to certain conditions, will be obligated to
purchase from the Transferor Financed Student Loans owned by the Transferor that
are serial to existing Financed Student Loans owned by the Trust, provided that
certain conditions described herein are satisfied. Each such transfer of an
Exchanged Financed Student Loan will be made pursuant to a transfer agreement
(each a "Transfer Agreement") among the Transferor, the Trust and the Eligible
Lender Trustee. See "Description of the Transfer and Servicing Agreements --
Exchange Period and Exchanged Financed Student Loans."
Any Consolidation Loan or HEAL Consolidation Loan made with respect to a
Financed Student Loan after the Closing Date, whether made by the Transferor or
another lender, will result in a prepayment to the Trust of such Financed
Student Loan unless such Consolidation Loan or HEAL Consolidation Loan is
transferred to the Eligible Lender Trustee as an Exchanged Financed Student
Loan, as described above, or unless the proceeds of such Consolidation Loan or
HEAL Consolidation Loan are used as Issuer Consolidation Payments. See
"Description of the Transfer and Servicing Agreements -- Exchange Period and
Exchanged Financed Student Loans."
With respect to certain of the Financed Student Loans, during the period (the
"Deferral Phase") in which the related borrower is in school and for certain
authorized periods under the FFEL Program or the HEAL Program, as the case may
be, the borrower is not required to make payments on his or her Financed Student
Loan. With respect to such Financed FFELP Loans constituting Stafford Loans and
certain Consolidation Loans, the Department will make all interest payments
during the related Deferral Phase. For all other Financed Student Loans (other
than certain PLUS Loans), interest will not be paid during the related Deferral
Phase but, instead, will accrue and be capitalized and added to the principal
balance of such Financed Student Loan. The Trust will consist of Financed
Student Loans that are in the Deferral Phase as well as Financed Student Loans
for which the related borrower is currently required to make payments of
principal and interest (the "Repayment Phase"). See "The Financed Student Loan
Pool -- Distribution of the Initial Financed Student Loans by Borrower Payment
Status as of the Cut-off Date."
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 for such Collection Period to the extent such interest
will be capitalized), after giving effect to the following, without duplication:
(i) all payments in respect of principal received by the Trust during such
Collection Period from or on behalf of borrowers and Guarantors and, with
respect to certain payments on the Financed Student Loans, the Department of
Education and the Department of HHS (collectively, "Obligor"), (ii) the
principal portion of all Purchase Amounts received by the Trust for such
Collection Period from the Transferor or the Master Servicer and (iii) any
Exchanged Financed Student Loans conveyed to the Trust and any Financed Student
Loans conveyed by the Trust in exchange for such Exchanged Financed Student
Loan, during such Collection Period, as described above.
B. Collection Account; Note
Distribution Account;
Certificate Distribution
Account; and Expense
Account ...........................Each Servicer will be required to remit all collections received with
respect to the Financed Student Loans for which it is acting as primary servicer
(other than Financed Student Loans that have been repurchased by the Transferor
pursuant to the Transfer and Servicing Agreement) to an account in the name of
the Indenture Trustee (the "Collection Account"). The Eligible Lender Trustee
will be required to remit Interest Subsidy Payments and Special Allowance
Payments it receives to the Collection Account. See "Description of the Transfer
and Servicing Agreements -- Payments on Financed Student Loans."
On each "Distribution Determination Date" (which is the third Business Day
immediately preceding a Distribution Date), the Administrator will advise the
Indenture Trustee in writing of the applicable Noteholders' Interest
Distribution Amount, the Noteholders' Principal Distribution Amount and all
amounts payable to the holders of the Certificates (the "Certificateholders") on
the related Distribution Date. Further, on each Distribution Determination Date
relating to a Quarterly Distribution Date, the Administrator will advise the
Indenture Trustee in writing of the estimated fees payable to the Master
Servicer, the Administrator, the Indenture Trustee, the Delaware Trustee and the
Eligible Lender Trustee (the "Servicing Fee," the "Administration Fee," the
"Indenture Trustee Fee," the "Delaware Trustee Fee" and the "Eligible Lender
Trustee Fee," respectively, and, collectively, the "Transaction Fees") for the
calendar quarter in which such Quarterly Distribution Date occurs.
On each Distribution Date, the Indenture Trustee will transfer from the
Collection Account, in the following priority and from the Available Funds for
each Collection Period from and including the Collection Period during which the
preceding Quarterly Distribution Date occurred through the Collection Period
immediately preceding the month of such Distribution Date (or with respect to
each Distribution Date through and including the first Quarterly Distribution
Date, from the Closing Date through and including the Collection Period
immediately preceding such Distribution Date), the required amounts from the
Available Funds for such Collection Periods:
(i) to a separate account held with and in the name of the Indenture
Trustee (the "Expense Account"), (A) an amount equal to the
Consolidation Loan Fees with respect to the calendar month most
recently ended and any overdue Consolidation Loan Fees from prior
months, and (B) if such Distribution Date is a Quarterly Distribution
Date, an amount up to the estimated Transaction Fees for the calendar
quarter commencing in the month of such Quarterly Distribution Date and
all overdue Transaction Fees from prior calendar quarters (plus (or
minus) the difference (or excess) of the actual Transaction Fees for
the immediately preceding calendar quarter and the Transaction Fees
deposited into the Expense Account on the preceding Quarterly
Distribution Date),
(ii) to a separate account held with and in the name of the Indenture
Trustee for the benefit of the Noteholders (the "Note Distribution
Account"), an amount up to the Noteholders' Interest Distribution
Amount,
(iii) to the Note Distribution Account, an amount up to the
Noteholders' Principal Distribution Amount,
(iv) to a supplemental account held with and in the name of the
Eligible Lender Trustee for the benefit of the Certificateholders (the
"Certificate Distribution Account"), an amount up to the
Certificateholders' Interest Distribution Amount, and
(v) after the Notes have been paid in full, to the Certificateholders'
Distribution Account, an amount up to the Certificateholders' Principal
Distribution Amount.
On each Quarterly Distribution Date (and with respect to clause (i) below, on
the 25th day of each month or if such day is not a Business Day, the next
succeeding Business Day), following the transfer to the Expense Account
described in the preceding paragraph, the Indenture Trustee will distribute from
the Expense Account (in addition to any amounts transferred from the Reserve
Account as described herein) the following amounts in the following order of
priority:
(i) to the Department of Education, the Consolidation Loan Fees for the
immediately preceding calendar month, together with any overdue
Consolidation Loan Fees for any prior months,
(ii) to the Master Servicer, the estimated Servicing Fee for the
calendar quarter commencing in the month of such Quarterly Distribution
Date and all overdue Servicing Fees,
(iii) to the Administrator, the estimated Administration Fee for the
calendar quarter commencing in the month of such Quarterly Distribution
Date and all overdue Administration Fees,
(iv) to the Indenture Trustee, the estimated Indenture Trustee Fee for
the calendar quarter commencing in the month of such Quarterly
Distribution Date and all overdue Indenture Trustee Fees, and
(v) to the Eligible Lender Trustee and the Delaware Trustee, the
estimated Eligible Lender Trustee Fee and Delaware Trustee Fee,
respectively, for the calendar quarter commencing in the month of such
Quarterly Distribution Date and all overdue Eligible Lender Trustee
Fees and Delaware Trustee Fee.
On each Distribution Date, following the transfer to the Note Distribution
Account, the Indenture Trustee will distribute to the Noteholders as of the
related Record Date the amounts transferred to the Note Distribution Account as
set forth above (in addition to any amounts transferred from the Reserve Account
and the Monthly Advance Account and any Parity Percentage Payments transferred
from the Collection Account, each as described below) in the following order of
priority:
(i) first, to each Class of Class A Noteholders, the Class A
Noteholders' Interest Distribution Amount (pro rata based upon the
portion thereof allocable to each such Class);
(ii) second, if such Distribution Date is a Quarterly Distribution
Date, to the Class B Noteholders, the Class B Noteholders' Interest
Distribution Amount:
(iii) third, to the Class A-1 Noteholders, the Noteholders' Principal
Distribution Amount until the principal balance of the Class A-1 Notes
has been reduced to zero;
(iv) fourth, after the principal balance of the Class A-1 Notes has
been reduced to zero, to the Class A-2 Noteholders, the Noteholders'
Principal Distribution Amount until the principal balance of the Class
A-2 Notes has been reduced to zero; and
(v) fifth, after the principal balance of each Class of Class A Notes
has been reduced to zero, if such Distribution Date is a Quarterly
Distribution Date, to the Class B Noteholders, the Noteholders'
Principal Distribution Amount until the principal balance of the Class
B Notes has been reduced to
zero.
On each Quarterly Distribution Date, after making all required transfers to the
Expense Account and the Note Distribution Account, and, if applicable, the
Certificate Distribution Account, the Indenture Trustee will transfer any
amounts remaining in the Collection Account (other than amounts representing
payments received during such month) in the following order of priority:
(i) to the Reserve Account, the amount, if any, necessary to increase
the balance thereof to the Specified Reserve Account Balance,
(ii) to the Note Distribution Account, the amount, if any, which when
applied as a payment of principal on such Quarterly Distribution Date
to the Class of Notes then receiving payments of principal is necessary
for the Parity Percentage to equal [ 101.50%] on such Quarterly
Distribution Date (the amount so transferred to the Note Distribution
Account is the "Parity Percentage Payment"),
(iii) to the Note Distribution Account, the amount of any outstanding
Noteholders' Interest Carryover, and
(iv) to the Transferor, any amounts remaining in the Collection Account
after such transfers (other than amounts representing payments received
during such current month).
Notwithstanding the foregoing, if (x) on any Distribution Date following all
distributions to be made on such Distribution Date, the principal amount of the
Class A Notes would exceed the sum of the Pool Balance at the end of the
immediately preceding Collection Period plus the aggregate balance on deposit in
the Trust Accounts on such Distribution Date following such distributions, or
(y) an Event of Default has occurred with respect to payment of the Notes, after
paying Transaction Fees, overdue Transaction Fees, Consolidation Loan Fees and
overdue Consolidation Loan Fees, distributions will be made in the following
priority:
(i) first, to each Class of Class A Noteholders, the Noteholders'
Interest Distribution Amount applicable to each such Class, pro rata
based upon the portion thereof allocable to each such Class;
(ii) second, in the case of clause (x) above, to the Class A-1
Noteholders, the Noteholders' Principal Distribution Amount, until the
principal balance of the Class A-1 Notes has been reduced to zero, and
then to the Class A-2 Noteholders, the Noteholders' Principal
Distribution Amount until the principal balance of the Class A-2 Notes
has been reduced to zero, or in the case of clause (y) above, to each
Class of Class A Noteholders, the Noteholders' Principal Distribution
Amount applicable to such Distribution Date, pro rata based upon the
principal balance of each Class of Class A Notes until the principal
balance of each Class of Class A Notes has been paid in full;
(iii) third, if such Distribution Date is a Quarterly Distribution
Date, to the Class B Noteholders, the Noteholders' Interest
Distribution Amount applicable to the Class B Notes;
(iv) fourth, after the principal balance of each of the Class A Notes
has been paid in full, if such Distribution Date is a Quarterly
Distribution Date, to the Class B Noteholders, the Noteholders'
Principal Distribution Amount until the principal balance of the Class
B Notes has been paid in full;
(v) fifth, if such Distribution Date is a Quarterly Distribution Date,
to the Class A-1 Noteholders and the Class A-2 Noteholders, the
Noteholders' Interest Carryover applicable to the respective Class of
Class A Notes, pro rata based upon the portion thereof allocable to
each such Class;
(vi) sixth, if such Distribution Date is a Quarterly Distribution Date,
to the Class B Noteholders, the Noteholders' Interest Carryover
applicable to the Class B Notes; and
(vii) seventh, if such Distribution Date is a Quarterly Distribution
Date, to the Certificateholders, the Certificateholders' Interest
Distribution Amount and then the Certificateholders' Principal
Distribution Amount.
All principal payments of Notes of any Class shall be made pro rata within that
Class. In connection with each principal payment of Notes of any Class, the
Indenture Trustee shall compute the Principal Factor for that Class. The
"Principal Factor" shall be a seven-digit decimal indicating the principal
balance of each Note of a Class as of a Distribution Date (after giving effect
to any payments made on that date) as a fraction of the original principal
amount of such Note. The principal balance of any Note can be determined by
multiplying the original principal amount of such Note by the Principal Factor
applicable to that class of Notes.
C. Reserve Account................Pursuant to the Transfer and Servicing Agreement, an account in the
name of the Indenture Trustee (the "Reserve Account") will be established with
and maintained by the Indenture Trustee and will be an asset of the Trust. On
the Closing Date, the Transferor will make an initial deposit into the Reserve
Account of cash or Eligible Investments (as defined in "Description of the
Transfer and Servicing Agreements -- Accounts") equal to [$________] (the
"Reserve Account Deposit"). The Reserve Account Deposit will be augmented on
each Quarterly Distribution Date by the deposit into the Reserve Account of any
Available Funds remaining after making all prior distributions on such date. See
"Description of the Transfer and Servicing Agreements -- Distributions."
Amounts, if any, on deposit in the Reserve Account will be available on each
Distribution Date to cover any shortfalls in payments of the Transaction Fees,
the Consolidation Loan Fees and the Noteholders' Interest Distribution Amount
for such applicable Distribution Date for which Available Funds are insufficient
to make such payments and distributions. Additionally, on the Final Maturity
Date for a Class of Notes, amounts in the Reserve Account will be available to
reduce the principal balance of such Class of Notes to zero to the extent that
Available Funds are insufficient to make such payment.
Amounts, if any, in the Reserve Account on any Quarterly Distribution Date
(after giving effect to all distributions to be made or allocated on such
Distribution Date) in excess of the then applicable Specified Reserve Account
Balance generally will be distributed to the Transferor. The "Specified Reserve
Account Balance" with respect to any Distribution Date will equal the greater of
(i) [ 1.00%] of the sum of the outstanding principal balance of the Notes on
such Distribution Date, after giving effect to all payments to be made on such
date, or (ii) [ $500,000;] provided, however, that such balance shall not exceed
the sum of the aggregate outstanding principal amount of the Notes. See
"Description of the Transfer and Servicing Agreements -Credit Enhancement --
Reserve Account."
The funding and maintenance of the Reserve Account is intended to enhance the
likelihood of timely payment to the Noteholders of the Noteholders' Distribution
Amount. In certain circumstances, however, the Reserve Account could be depleted
and shortfalls in distributions to the Noteholders could result.
D. Eligible Investments ..........Pursuant to the Transfer and Servicing Agreement, funds on deposit
in the Trust Accounts will be invested in "Eligible Investments." See
"Description of the Transfer and Servicing Agreements -- Accounts."
E. Transfer and Servicing
Agreement ....................Under the Transfer and Servicing Agreement, the Transferor will
contribute the Initial Financed Student Loans to the Trust on the Closing Date,
and may contribute the Exchanged Financed Student Loans to the Trust during the
Exchange Period. The Eligible Lender Trustee will hold legal title to all
Financed Student Loans contributed to the Trust. In addition, the Master
Servicer will be responsible for servicing, managing, maintaining custody of and
making collections on the Financed Student Loans. The obligations of the
Transferor and the Master Servicer under the Transfer and Servicing Agreement
include the following:
The Transferor will be obligated to purchase any Financed Student Loan if the
interests of the Noteholders therein are materially adversely affected by a
breach of any representation or warranty made by the Transferor with respect to
the Financed Student Loans (including the Transferor's representation and
warranty to maintain the guarantees and insurance with respect to the Financed
Student Loans), if the breach has not been cured within 120 days following the
discovery by or notice to the Transferor of the breach (it being understood that
any such breach that does not adversely affect any Guarantor's obligation to
guarantee payment of such Financed FFELP Loan or the Department of HHS's
obligation to insure payment of any Financed HEAL Loan will not be considered to
have a material adverse effect for this purpose); provided, however, that if
such breach may be cured by reinstatement of the Guarantor's obligation to
guarantee payment or the Department of HHS's obligation to insure payment, such
cure period shall be 360 days unless the amount of Financed Student Loans in
cure status exceed amounts specified in the Transfer and Servicing Agreement. In
addition, the Transferor will be obligated to reimburse the Trust for (i) any
accrued interest amounts not insured by the Department of HHS with respect to
Financed HEAL Loans due to, and (ii) any accrued interest amounts not guaranteed
by a Guarantor with respect to Financed FFELP Loans due to, or any lost Interest
Subsidy Payments or Special Allowance Payments as a result of, a breach of the
Transferor's representations and warranties ; provided, however, that such
reimbursements shall not exceed the amount that would have been paid if not for
such breach. The Transferor may delegate its purchase and reimbursement
obligation to the Master Servicer if the insurance or guarantee on a Financed
Student Loan is not maintained. See "Description of the Transfer and Servicing
Agreements -- Conveyance of Initial Financed Student Loans; Representations and
Warranties."
Pursuant to the Transfer and Servicing Agreement, the Master Servicer will be
responsible for, among other things, preparing and filing with the Department of
HHS, the Department of Education and the Guarantors all appropriate claims forms
and other documents and filings on behalf of the Eligible Lender Trustee to
claim (i) the Insurance Payments from the Department of HHS in respect of the
Financed HEAL Loans entitled thereto, and (ii) the Interest Subsidy Payments and
Special Allowance Payments from the Department of Education and the Guarantee
Payments from the Guarantors, in respect of the Financed FFELP Loans entitled
thereto, and preparing and providing periodic and annual statements to the
Eligible Lender Trustee and the Indenture Trustee with respect to distributions
to Noteholders and Certificateholders.
Monthly Advances ..........................If the Master Servicer has applied for an Insurance Payment from the
Department of HHS, a Guarantee Payment from a Guarantor or an Interest Subsidy
Payment or a Special Allowance Payment from the Department, and the Master
Servicer has not received the related payment prior to the end of the Collection
Period immediately preceding the Distribution Date on which such amount would be
required to be distributed as a payment of interest, the Master Servicer may, no
later than the Distribution Determination Date relating to such Distribution
Date, deposit into an account in the name of the Indenture Trustee (the "Monthly
Advance Account") an amount up to the amount of such payments applied for but
not received (such deposits by the Master Servicer are referred to herein as
"Monthly Advances"). Monthly Advances will be distributed to the Noteholders or
Certificateholders on the upcoming Distribution Date. Monthly Advances are
recoverable by the Master Servicer (i) first, from the source for which such
Monthly Advance was made and (ii) second, from collections received generally on
or with respect to the Financed Student Loans. The Master Servicer will have no
obligation, legal or otherwise, to make any Monthly Advance, and the making of
or decision to make a particular Monthly Advance will not create any
obligation on the Master Servicer, legal or otherwise, to make any future
Monthly Advances.
Auction of Trust Assets ....................Any Financed Student Loans remaining in the Trust as of [________,
2006] will be offered for sale by the Indenture Trustee on or prior to the
[October 2006] Distribution Date if the Pool Balance is equal to 10% or less of
the Initial Pool Balance at the time of such offer. The Transferor, its
affiliates and unrelated third parties may offer bids to purchase such Financed
Student Loans on or prior to 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 aggregate 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 the Notes on such Distribution Date to zero and
(ii) pay to Noteholders the Noteholders' 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 to redeem any outstanding Notes 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. 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 [October 2006] Distribution
Date or any subsequent Distribution Date. There will be no continuing liability
on the part of the Trust or the Noteholders to the purchaser of the Financed
Student Loans in connection with such auction sale. See "Description of the
Transfer and Servicing Agreements -- Termination".
Optional Purchase ..........................The Transferor may repurchase all remaining Financed Student Loans,
and thus effect the early retirement of the Notes and the Certificates, on any
Quarterly Distribution Date on or after the Distribution Date on which the Pool
Balance is equal to 10% or less of the Initial Pool Balance, at a price equal
to, for each Financed Student Loan, the outstanding principal balance of such
Financed Student Loan as of the end of the preceding Collection Period, together
with all accrued interest thereon and certain unamortized premiums, if any. See
"Description of the Transfer and Servicing Agreements --Termination." The
"Initial Pool Balance" will equal approximately [$___________].
Federal Income Tax
Consequences The Notes will evidence debt obligations under the Internal Revenue Code of
1986, as amended (the "Code"), and interest paid or accrued thereon will be
taxable to Noteholders. It is not expected that the Notes will be issued with
original issue discount. By acceptance of its Note, each Noteholder will be
deemed to have agreed to treat its Note as a debt instrument for purposes of
federal and state income tax, franchise tax and any other tax measured in whole
or in part by income. See "Federal Income Tax Consequences" for additional
information concerning the application of Federal laws with respect to the Notes
and the Trust.
ERISA Considerations It is expected that the Notes will be treated as debt obligations without
significant equity features for purposes of the regulations of the Department of
Labor set forth in 29 C.F.R. 2510.3-101 (the "Plan Asset Regulations").
Accordingly, employee benefit plans and certain other retirement plans and
arrangements that are subject to ERISA or corresponding provisions of the Code,
including individual retirement accounts and annuities, Keogh plan and
collective investment funds in which such plans, accounts, annuities or
arrangements are invested (any of the foregoing, a "Plan") that acquire a Note
should not be treated as having acquired a direct interest in the assets of the
Trust for purposes of the Plan Asset Regulations. However, there can be no
complete assurance that the Notes will be treated as debt obligations without
significant equity features for purposes of the Plan Asset Regulations.
Furthermore, regardless whether the Notes are treated as debt or equity for
ERISA purposes, the acquisition or holding of the Notes by or on behalf of a
Plan still could be considered to give rise to a prohibited transaction under
certain circumstances. Although certain exceptions from the application of the
prohibited transaction rules and the Plan Asset Regulations exist, there can be
no assurance that any such exception will apply with respect to the acquisition
of a Note. See "ERISA Considerations" herein.
Registration of Notes.......................The Notes will be represented by global certificates registered in the
name of Cede, as nominee of DTC or another nominee. The
Noteholders will not be entitled to receive definitive certificates
representing such Noteholders' interests, except in certain
circumstances. See "Description of the Notes -- Book-Entry Registration."
Rating of the Securities ...................It is a condition to the issuance and sale of each of the Class A Notes
that they be rated "AAA" by Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies ("Standard & Poor's"), and "Aaa" by Moody's Investors
Service, Inc. ("Moody's"), and it is a condition to the issuance and sale of
each of the Class B Notes that they be rated at least "A" by Standard & Poor's
and at least "A2" by Moody's. Each of Standard & Poor's and Moody's is also
referred to herein as a "Rating Agency" and collectively as the "Rating
Agencies." A securities 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. See "Risk Factors -- Risk of Change of Ratings on the
Notes."
The Rating Agencies do not evaluate, and the ratings of the Notes do not
address, the likelihood of prepayments on the Notes or the likelihood of payment
of the Noteholders' Interest Carryover.
</TABLE>
<PAGE>
RISK FACTORS
Prospective purchasers of the Notes should consider carefully the following
discussion of certain risk factors associated with an investment in the Notes.
Risk Resulting From Limited Assets of the Trust
The Trust does not have, nor is it permitted to have, any significant
assets or sources of funds other than the Financed Student Loans (and the
related Guarantee Agreements and HEAL Insurance Contract to the extent assigned
to the Trust by the Transferor ("Assigned Rights")), the Collection Account, the
Note Distribution Account, the Reserve Account and the Monthly Advance Account.
The Notes represent obligations solely of the Trust and its assets, and will not
be insured or guaranteed by the Transferor, the Master Servicer, the Guarantors,
the Eligible Lender Trustee, any of their affiliates, the Department of HHS or
the Department of Education. Consequently, holders of the Notes must rely for
repayment upon proceeds realized upon the sale of, or payments with respect to,
the Financed Student Loans and, if and to the extent available under the
circumstances described herein, amounts on deposit in the Reserve Account.
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. 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. See
"Description of the Transfer and Servicing Agreements -- Distributions" and "--
Credit Enhancement."
Risk of Loss to Noteholders of Class B Notes Resulting From Subordination of the
Class B Notes
The rights of the Class B Noteholders to receive payments of interest and
principal will be subordinated to those of the Class A Noteholders as described
herein. If amounts otherwise allocable to the Class B Notes are used to fund
payments on the Class A Notes, distributions with respect to the Class B Notes
may be delayed or reduced. Notwithstanding the foregoing, distributions to the
Class B Noteholders of amounts representing the Class B Noteholders' Interest
Distribution Amount will not be subordinated to the payment of any Noteholders'
Interest Carryover that may exist from time to time. The Class B Noteholders are
also subordinated to the Class A Noteholders as to granting consents and the
direction of remedies upon defaults under the Transfer and Servicing Agreements
and the Indenture. See "Description of the Notes -- The Indenture" and
"Description of the Transfer and Servicing Agreements -- Distributions," "--
Credit Enhancement -- Subordination of the Class B Notes," "-Master Servicer
Default; Administrator Default," "-- Rights Upon Servicer Default and
Administrator Default" and "-- Waiver of Past Defaults."
Risk That Interest Rate on Financed Student Loans May Be Insufficient to Cover
Interest on the Notes at the Formula Interest Rate Due to Rate-Index Difference
The interest rate for the Notes will be based generally on One-Month LIBOR.
The Financed Student Loans, however, generally bear interest at an effective
rate (taking into account Special Allowance Payments, if any, the "Loan Rates")
equal to the average bond equivalent rates of weekly auctions of 91-day Treasury
bills for each quarter (the "91-day T-Bill Rate") (or, in certain circumstances,
52-week Treasury bills) plus margins specified for such Financed Student Loans
under "Description of the FFEL Program -- Loan Terms - Interest Rates" and
"Description of the HEAL Program -- Interest." As a result of these differences
between the indices used to determine the Loan Rates and the interest rates on
the Notes, there could be periods of time when the Loan Rates are inadequate to
cover the interest on the Notes (calculated on the basis of OneMonth LIBOR) and
Transaction Expenses. If in respect of any Interest Period for a Class of Notes,
there does not exist a positive spread between (a) the Net Loan Rate and (b) the
interest rate on the Notes of such Class (calculated on the basis of One-Month
LIBOR), the interest rate on the Notes of such Class for such Interest Period
will be the Net Loan Rate. See "Description of the Notes -- The Notes --
Distributions of Interest." Any Noteholders' Interest Carryover arising as a
result of the applicable interest rate for any Class of Notes being determined
on the basis of the Net Loan Rate will be paid on the following Quarterly
<PAGE>
Distribution Date or on any succeeding Quarterly Distribution Date to the extent
funds are allocated and available therefor after making any required prior
distributions and deposits with respect to such date. Payment of such amounts,
however, will not be covered by amounts on deposit in the Reserve Account (other
than amounts in excess of the Specified Reserve Account Balance). Any amount of
Noteholders' Interest Carryover, including any accrued and unpaid interest
thereon, with respect to a Class of Notes remaining after the earlier of the
Distribution Date on which the outstanding principal amount of such Class of
Notes has been reduced to zero and the distribution of all Available Funds on
the Final Maturity Date for such Class, will never become due and payable and
will be discharged as to the applicable Class of Notes on such date. See
"Description of Transfer and Servicing Agreements -- Distributions."
Risk That Failure to Comply with Student Loan Origination and Servicing
Procedures for Financed Student Loans May Result in the Department of
Education's Refusal to Make Certain Payments to Guarantors and the Eligible
Lender Trustee, the Guarantors' Refusal to Make Guarantee Payments to the
Eligible Lender Trustee, and the Department of HHS's Refusal to Make Insurance
Payments to the Eligible Lender Trustee
The Higher Education Act, including the implementing regulations
thereunder, requires lenders and their assignees making and servicing FFELP
Loans, and Guarantors guaranteeing FFELP Loans, to follow specified procedures,
including due diligence procedures, to ensure that the FFELP Loans are properly
originated, disbursed and collected. The Public Health Services Act, Title VII,
Sections 701-720, as amended (such Act, together with all rules and regulations
promulgated thereunder by the Department of HHS, the "HEAL Act"), including the
implementing regulations thereunder, requires lenders and their assignees making
and servicing HEAL Loans to follow specified procedures, including due diligence
procedures, to ensure that the HEAL Loans are properly originated, disbursed and
collected. Certain of those procedures, which are specifically set forth in the
Higher Education Act and the HEAL Act, are summarized herein. See "Description
of the FFEL Program," "Description of the HEAL Program" and "Description of the
Transfer and Servicing Agreements -- Servicing Procedures." Generally, those
procedures require that completed loan applications be processed, a
determination of whether an applicant is an eligible borrower attending an
eligible institution under the Higher Education Act or the HEAL Act 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 by the lender in a specified manner. After the
loan is made, the lender must establish repayment terms with the borrower,
properly administer deferments and forbearances and credit the borrower for
payments made. If a borrower becomes delinquent in repaying a loan, a lender
must perform certain collection procedures (primarily telephone calls, demand
letters, skiptracing procedures and requesting assistance from the applicable
Guarantor) which vary depending upon the length of time a loan is delinquent.
The Master Servicer will agree in the Transfer and Servicing Agreement to
perform (or provide for third party servicers to perform) servicing and
collection procedures on behalf of the Trust in compliance with these
procedures. However, the failure by the Transferor or the other originators to
follow or to have followed these procedures relating to the origination of
Financed Student Loans or of the Servicers to follow or to have followed certain
servicing procedures for the Financed Student Loans, as described below, may
result in (i) the Department of Education's refusal to make reinsurance payments
to the Guarantors or to make Interest Subsidy Payments and Special Allowance
Payments to the Eligible Lender Trustee with respect to the Financed FFELP
Loans, (ii) the Guarantors' inability or refusal to honor their obligations to
make payments under the Guarantee Agreements ("Guarantee Payments") with respect
to Financed FFELP Loans, and (iii) the Department of HHS's refusal to honor its
obligations to make payments ("Insurance Payments") under the HEAL Insurance
Contract with respect to Financed HEAL Loans. Loss of any such Guarantee
Payments, Interest Subsidy Payments, Special Allowance Payments or Insurance
Payments with respect to the Financed Student Loans 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. See "Description of the FFEL Program,"
"Description of the HEAL Program" and "Description of the Transfer and Servicing
Agreements -- Servicing Procedures."
<PAGE>
Risk of Inability of Transferor and Master Servicer to Honor their Obligations
to Purchase Financed Student Loans
Under certain circumstances, pursuant to the Transfer and Servicing
Agreement, the Transferor (or the Master Servicer) is obligated to purchase any
Financed Student Loan if a breach of the representations and warranties of the
Transferor with respect to such Financed Student Loan has a material adverse
effect on the interests of the Noteholders therein and such breach is not cured
within any applicable cure period (it being understood that any such breach that
does not affect any Guarantor's obligation to guarantee payment of such Financed
Student Loans or the Department of HHS's obligation to insure payment of any
Financed HEAL Loan will not be considered to have such a material adverse
effect). In addition, under certain circumstances pursuant to the Transfer and
Servicing Agreement, the Transferor (or the Master Servicer) is obligated to
reimburse the Trust for (i) any accrued interest amounts not insured by the
Department of HHS with respect to Financed HEAL Loans due to, and (ii) 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 Transferor's representations and warranties with respect to a Financed
Student Loan. If the Transferor (or the Master Servicer) is obligated to
purchase a Financed Student Loan as a result of the Transferor's, a third
party's or the Master Servicer's failure to originate or service such Financed
Student Loan in compliance with the Higher Education Act and the applicable
Guarantee Agreement, or the HEAL Act and the HEAL Insurance Contract, as the
case may be, it will be obligated to purchase such Financed Student Loans from
the Eligible Lender Trustee at a price equal to the applicable Purchase Amount.
See "Description of the Transfer and Servicing Agreements -- Conveyance of
Financed Student Loans: Representations and Warranties" and "-- Servicer
Covenants." There can be no assurance, however, that the Transferor (or the
Master Servicer) will have the financial resources to do so. The failure of the
Transferor to so purchase (or the Master Servicer) to so purchase a Financed
Student Loan would constitute a breach of the Transfer and Servicing Agreement,
enforceable by the Eligible Lender Trustee on behalf of the Trust or by the
Indenture Trustee on behalf of the Noteholders, but would not constitute an
Event of Default under the Indenture or permit the exercise of remedies
thereunder.
Risk of Offset by Guarantors or the Department of Education Against Federal
Benefit Payments Due to Shared Lender Identification Number
Due to Department of Education policy limiting the granting of new lender
identification numbers, the Trust Agreement will allow the Eligible Lender
Trustee to use the Department of Education lender identification number that it
uses for the Financed Student Loans (under the Trust) for other Student Loans
held by the Eligible Lender Trustee as trustee under other indentures, if any,
securing obligations of the Transferor or obligations of subsidiaries of the
Transferor, or for trusts established by the Transferor or subsidiaries of the
Transferor. In that event, the billings submitted to the Department of Education
for Interest Subsidy Payments and Special Allowance Payments on Financed Student
Loans in the Trust would be consolidated with the billings for such payments for
Student Loans under such other indentures and trusts using the same lender
identification number and payments on such billings would be made by the
Department of Education to the Eligible Lender Trustee in lump sum form. Such
lump sum payments would then be allocated by the Eligible Lender Trustee among
the various indentures and trusts using the same lender identification number.
In addition, such sharing of the lender identification number may result in
the receipt of Guarantee Payments by Guarantors in lump sum form. In that event,
such payments would be allocated by the Eligible Lender Trustee among the trusts
and indentures in a manner similar to the allocation process for Interest
Subsidy Payments and Special Allowance Payments.
The Department of Education regards the Eligible Lender Trustee as the
party primarily responsible to the Department of Education for any liabilities
owed to the Department of Education or Guarantors resulting from the
<PAGE>
Eligible Lender Trustee's activities in the FFEL Program. As a result, if the
Department of Education or a Guarantor were to determine that the Eligible
Lender Trustee owes a liability to the Department of Education or a Guarantor on
any FFELP Loan for which the Eligible Lender Trustee is or was legal
titleholder, including loans held in the Trust or other trusts, the Department
of Education or Guarantor might seek to collect that liability by offset against
payments due the Eligible Lender Trustee under the Trust. If the Department of
Education or a Guarantor determines such a liability exists in connection with a
trust using the shared lender identification number, the Department of Education
or the Guarantor would be likely to collect that liability by offsetting against
amounts due the Eligible Lender Trustee under the shared lender identification
number, including amounts owed in connection with the Trust. Such offsetting of
payments due to the Eligible Lender Trustee with respect to the Trust could
adversely affect the amount of Available Funds for any Collection Period and the
Trust's ability to pay interest and principal on the Notes.
In addition, other trusts or indentures using the shared lender
identification number may in a given quarter incur origination fees that exceed
the Interest Subsidy Payments and Special Allowance Payments payable by the
Department of Education on the loans in such other trusts and indentures,
resulting in the payment from the Department of Education received by the
Eligible Lender Trustee under such shared lender identification number for that
quarter equalling an amount that is less than the amount owed by the Department
of Education on the Financed Student Loans in the Trust for that quarter.
The Trust Agreement for the Trust and the indentures or trust agreements
under which the Trustee may separately hold Student Loans which share the lender
identification number to be used by the Trust (the separate trusts created
thereunder being collectively referred to herein as the "Transferor Trusts") may
require a Transferor Trust (including the Trust) to indemnify the other
Transferor Trusts for a shortfall or an offset by the Department of Education or
a Guarantor arising from the Financed FFELP Loans held by the Eligible Lender
Trustee on such Transferor Trust's behalf. To the extent that the Trust is
required to indemnify other Transferor Trusts with respect to an offset by the
Department of Education or a Guarantor arising from Financed FFELP Loans held by
the Eligible Lender Trustee for the Trust, such indemnification obligation 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. Also, to the extent
that the Trust may be entitled to indemnification with respect to an offset by
the Department of Education or a Guarantor arising from Financed FFELP Loans
held by the Eligible Lender Trustee for a Transferor Trust other than the Trust,
there can be no assurance that the amount of funds available to the Trust with
respect to such right of indemnification may be adequate to compensate the Trust
and Noteholders for any previous reduction in the Available Funds for a
Collection Period.
Although the Department of HHS does not currently limit lender
identification numbers with respect to HEAL Loans, the Trust Agreement will
provide for the sharing of lender identification numbers with respect to the
Financed HEAL Loans in a similar manner to the sharing of lender identification
numbers for the Financed FFELP Loans.
Risk Resulting From Limited Liquidity of the Notes
The Notes will not be listed on any national security exchange. While Smith
Barney Inc., Morgan Stanley & Co., Incorporated and Crestar Securities
Corporation intend to make a secondary market for the Notes, they are not
obligated to do so. There can be no assurance that a secondary market for the
Notes will develop or, if a secondary market does develop, that it will provide
Noteholders with liquidity of investment or that it will continue for the life
of the Notes. As a result, investors must be prepared to bear the risk of
holding the Notes for as long as the Notes are outstanding.
<PAGE>
Risk Resulting from Principal Balance of Notes Exceeding Initial Pool Balance of
the Financed Student Loans
On the Closing Date, the aggregate initial principal amount of the Notes
will be greater than the Initial Pool Balance of the Financed Student Loans as
of the Cut-off Date. As a result, if an Event of Default should occur under the
Indenture or an Insolvency Event should occur and the Financed Student Loans
were liquidated at a time when the outstanding principal amount of the Notes
exceeded the sum of the Pool Balance and the amounts in the other Trust
Accounts, such Financed Student Loans would likely have to be liquidated at a
premium for the Class B Noteholders and, in some circumstances, the Class A
Noteholders, not to suffer a loss. Because the actual rate and timing of any
accelerated payments of principal, if any, will depend on a number of factors
including the rate and timing of the payments on the Financed Student Loans,
there can be no assurance of the actual rate or timing of such accelerated
payments of principal or when the aggregate principal amount of the Notes will
be equal to or less than the sum of the Pool Balance and the amounts in the
other Trust Accounts.
Risk of Reduction in Amounts Paid on the Notes Resulting From Variability of
Actual Cash Flows
Amounts received with respect to the Financed Student Loans for a
particular Collection Period may vary in both timing and amount from the
payments actually due on the Financed 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 deferment 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 Financed Student
Loans. Failures by borrowers to pay timely the principal and interest on the
Financed Student Loans will affect the amount of Available Funds, which may
reduce the amount of principal and interest paid to the Noteholders.
Risk of Inability of Indenture Trustee to Liquidate Financed Student Loans
If an Event of Default occurs under the Indenture, subject to certain
conditions, the Indenture Trustee is authorized, with the consent of the
Noteholders holding 66-2/3% of the outstanding principal balance of the
Directing Notes, to sell the Financed Student Loans (the "Directing Notes" means
the Class A Notes while any such Notes are outstanding, and, when no Class A
Notes remain outstanding, the Class B Notes). There can be no assurance,
however, that the Indenture Trustee will be able to find a purchaser for the
Financed Student Loans in a timely manner or that the market value of such
Financed Student Loans would, at any time, be equal to the aggregate outstanding
principal amount of the Notes and accrued interest thereon. If the net proceeds
of any such sale, together with amounts then on deposit in the Reserve Account,
do not exceed the aggregate outstanding principal amount of Notes and accrued
interest thereon, the Noteholders will suffer a loss. In addition, the amount of
principal required to be distributed to Noteholders under the Indenture is
generally limited to amounts available to be so distributed. Therefore, the
failure to pay principal on the Notes may not result in the occurrence of an
Event of Default until the Final Maturity Date of the Notes. See "Description of
the Transfer and Servicing Agreements -- Credit Enhancement."
Risk That Financial Status of Guarantors Will Affect Their Ability to Make
Guarantee Payments
The Higher Education Act requires all FFELP Loans to be unsecured. As a
result, the only security for payment of the Financed FFELP Loans are the
Guarantee Agreements between the 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 Financed FFELP Loans could result in
a delay in making or a failure to make Guarantee Payments to the Eligible Lender
Trustee. Failures by borrowers of FFELP Loans generally to pay timely the
principal and interest due on such Student Loans could obligate the Guarantors
to make payments thereon, which could adversely affect the solvency of the
Guarantors and their ability to meet their guarantee obligations (including with
respect to the Financed Student Loans). Loss of any such Guarantee Payments
could adversely affect the amount of Available Funds for any Collection Period
and the Trust's ability to pay principal of and interest on the Notes. Moreover,
to the extent that the Department of Education pays reimbursement claims
submitted by a Guarantor for
<PAGE>
any fiscal year exceeding certain specified levels (see "Description of the
Guarantee Agencies -- Effect of Annual Claims Rate"), the Department of
Education's obligation to reimburse the Guarantor for losses will be reduced on
a sliding scale from 100% (98% for loans made on or after October l, 1993) to a
minimum of 80% (78% for loans made on or after October l, 1993), except that
death, disability, bankruptcy, closed school and false certification claims are
reimbursed 100% by the Department of Education.
Pursuant to Section 432(o) of the Higher Education Act, if the Department
of Education has determined that a Guarantor is unable to meet its insurance
obligations, the holders of loans guaranteed by such Guarantor may submit claims
directly to the Department of Education and the Department of Education is
required to pay the full Guarantee Payment due with respect thereto in
accordance with guarantee claim processing standards no more stringent than
those applied by the Guarantor. However, the Department of Education's
obligation to pay guarantee claims directly in this fashion is contingent upon
the Department of Education making the determination referred to above. There
can be no assurance that the Department of Education would ever make such a
determination with respect to a Guarantor or, if such a determination was made,
that such determination or the ultimate payment of such guarantee claims would
be made in a timely manner. See "Description of the FFEL Program" and
"Description of the Guarantee Agencies."
Risk That Changes in Law Relating to the HEAL Program and the FFEL Program Could
Adversely Affect the Noteholders
There can be no assurance that the HEAL Act, the Higher Education 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 herein and the loans made
thereunder, including the Financed Student Loans or the Guarantee Agencies. The
FFEL Program has been the subject of numerous amendments and proposed amendments
to the Higher Education Act, including amendments designed to reduce the federal
budget deficit. Amendments to the Higher Education Act in the past several years
have reduced the portion of loans covered by Guarantee Payments and the portion
of Guarantee Payments covered by reinsurance, reduced certain administrative
expense allowances paid by the Department of Education to Guarantee Agencies,
reduced the premiums and default collections that Guarantee Agencies are
entitled to receive and/or retain, and given the Department of Education broad
powers over Guarantee Agencies and their reserves, including the authority to
require a Guarantee Agency to pay a portion or all reserve funds to the
Department of Education in certain circumstances.
Several proposals have been made by Congress and the Administration to
amend the Higher Education Act, including proposals that would significantly
alter the FFEL Program and the roles of its participants. It is impossible to
predict whether any such proposals will be adopted as legislation or, if so,
what impact such legislation may have on the Eligible Lender Trustee's receipt
of revenues with respect to Financed Student Loans.
The Competing Federal Direct Student Loan Program May Result in Higher Servicer
Costs Because of Reduced Economies of Scale; a Smaller Secondary Market and
Reduced Value for Financed Student Loans; and Higher Prepayments of Financed
Student Loans Through Consolidations
The Higher Education Act provides for a Federal Direct Student Loan
Program. This program, established in academic year 1994-1995, has a statutory
target volume of 60% of student loan demand in academic year 1998- 1999, which
could result in reductions in the volume of loans made under the FFEL Program.
If the Federal Direct Student Loan Program expands, the Master Servicer and the
Servicers may experience increased costs due to reduced economies of scale to
the extent the volume of new loans serviced by them is reduced. Such cost
increases could affect the ability of the Master Servicer and the Servicers to
satisfy their obligations to service the Financed Student Loans. Such volume
reductions could also reduce revenues received by the Guarantee Agencies
available to pay claims on defaulted FFELP Loans. Finally, the level of
competition currently in existence in the secondary market for loans made under
the FFEL Program and HEAL Program could be reduced, resulting in fewer potential
buyers of the FFELP Loans and HEAL Loans and lower prices available in the
secondary market for those loans.
<PAGE>
Further, the Department of Education has implemented a direct consolidation loan
program, which program may further reduce the volume of loans made under the
FFEL Program and the HEAL Program and is expected to result in prepayments of
Financed Student Loans. See "Description of the FFEL Program.".
Reinvestment Risk to Noteholders From Prepayments of the Notes
Financed Student Loans may be prepaid by borrowers at any time without
penalty. (For this purpose the term "prepayments" includes prepayments in full
or in part (including pursuant to Consolidation Loans or HEAL Consolidation
Loans) and liquidations due to default (including receipt of Guarantee Payments
and Insurance Payments).) The rate of prepayments on the Financed Student Loans
may be influenced by a variety of economic, social and other factors affecting
borrowers, including interest rates, the availability of alternative financing
and the general job market for graduates of institutions of higher education. In
addition, under certain circumstances, the Transferor (or the Master Servicer)
will be obligated to purchase Financed Student Loans from the Trust pursuant to
the Transfer and Servicing Agreement as a result of breaches of the Transferor's
representations and warranties . See "Description of the Transfer and Servicing
Agreements -- Conveyance of Financed Student Loans; Representations and
Warranties" and "-- Master Servicer Covenants." Moreover, to the extent
borrowers of Financed Student Loans elect to borrow money through Consolidation
Loans with respect to such Financed Student Loans from the Transferor or from
another lender, the Noteholders will receive as a prepayment of principal the
aggregate principal amount of such Financed Student Loans. The effect of such
prepayments may be mitigated during the Exchange Period if the Transferor makes
such Consolidation Loans and elects to transfer such Consolidation Loans to the
Eligible Lender Trustee on behalf of the Trust or elects to transfer to the
Eligible Lender Trustee on behalf of Trust a Student Loan (each, a "Serial
Loan") to serialize the ownership of such Student Loan with other Financed
Student Loans of the same borrower. See "Description of Transfer and Servicing
Agreements -- Exchange Period and Exchanged Financed Student Loans". There can
be no assurance that borrowers with Financed Student Loans will not seek to
obtain Consolidation Loans with respect to such Financed Student Loans and no
assurance that if such loans are obtained from or retired by, the Transferor,
that the Transferor will elect to exchange them into the Trust as Exchanged
Financed Student Loans or transfer Serial Loans into the Trust during the
Exchange Period. In addition, there is no assurance that the Transferor rather
than another lender will make any particular Consolidation Loan with respect to
borrowers with Financed Student Loans during the Exchange Period. See "Maturity
and Prepayment Considerations," "Description of the FFEL Program - Loan Terms --
Repayment" and "Description of the HEAL Program -- Terms of HEAL Loans."
To the extent such prepayments of the Financed Student Loans result in a
prepayment of the Notes prior to their expected Final Maturity Dates, the
holders of the Notes may not be able to reinvest such funds at the same yield as
the yield on the Notes. The rate of payment on the Financed Student Loans cannot
be predicted, and any reinvestment risks resulting from a faster or slower
incidence of prepayment of Financed Student Loans will be borne entirely by the
holders of the Notes. The effect of such prepayments initially will be to
increase the rate of payment on the Class A-1 Notes and, therefore, increase the
reinvestment risk with respect to the Class A-1 Notes. After the Class A-1 Notes
have been paid in full, the entire amount of such prepayments will be applied to
the payment of the principal balance of the Class A-2 Notes until they are paid
in full, and then to the payment of the principal balance of the Class B Notes.
See "Description of the Transfer and Servicing Agreements -- Distributions". As
a result, the reinvestment risk resulting from such prepayments will be borne
entirely by the holders of the Class A-2 Notes after the principal balance of
the Class A-1 Notes has been paid in full, and by the holders of the Class B
Notes after the principal balance of the Class A-2 Notes has been paid in full.
Risk That Average Life of Notes May Be Lengthened As a Result of Extension of
Payments on the Financed Student Loans
Scheduled payments with respect to, and maturities of, the Financed Student
Loans may be extended, including pursuant to the applicable Deferment Period,
certain other grace periods authorized by the Higher Education Act and the HEAL
Act ("Grace Periods") and, under certain circumstances, periods of forbearance
("Forbearance
<PAGE>
Periods") or as a result of the conveyance of Exchanged Financed Student Loans
to the Eligible Lender Trustee on behalf of the Trust during the Exchange
Period, as described herein, which may lengthen the remaining term of the
Financed Student Loans and the average life of the Notes. See "Maturity and
Prepayment Considerations," "Description of the FFEL Program -- Loan Terms --
Repayment" and "Description of the HEAL Program -- Terms of HEAL Loans." See
also "Description of the Transfer and Servicing Agreements -- Insolvency Event"
regarding the sale of the Financed Student Loans if a Transferor Insolvency
Event occurs and "-- Termination" regarding the Transferor's option to purchase
the Financed Student Loans and the auction of the Financed Student Loans on or
after the [October 2006 ] Distribution Date.
Risk Resulting From Differences between Classes of Notes with Respect to Receipt
of Payments on the Financed Student Loans
The Classes of Notes receiving principal earlier bear relatively greater
risk than each Class receiving principal later of principal repayments with
respect to the Financed Student Loans (whether as a result of voluntary
prepayments, Consolidation Loans not transferred to the Eligible Lender Trustee
as Exchanged Financed Student Loans or liquidations due to default or breach).
Thus, the holders of the Class A-1 Notes bear the greatest risk of such
principal prepayments, with the holders of the Class A-2 Notes and the Class B
Notes bearing the next most significant risk of such principal prepayments. On
the other hand, holders of Notes receiving principal later would bear a greater
risk of loss of principal than do holders of Notes receiving principal earlier
in the event of a shortfall in Available Funds and amounts on deposit in the
Reserve Account.
Insolvency Risk of Transferor
The Transferor intends that the transfer of the Financed Student Loans by
it to the Eligible Lender Trustee on behalf of the Trust under the Transfer and
Servicing Agreement constitutes a valid contribution and assignment of such
Financed Student Loans. However, a court could treat the transfer of the
Financed Student Loans to the Eligible Lender Trustee as an assignment of
collateral as security for the benefit of the Trust. If the transfer of the
Financed Student Loans to the Eligible Lender Trustee is deemed to create a
security interest therein, a tax or government lien on property of the
Transferor arising before the Financed Student Loans came into existence may
have priority over the Eligible Lender Trustee's interest in such Financed
Student Loans and, if the Federal Deposit Insurance Corporation (the "FDIC")
were appointed receiver or conservator of the Transferor, the FDIC's
administrative expenses may also have priority over the Eligible Lender
Trustee's interest in such Financed Student Loans. If the Transferor becomes
insolvent, the Federal Deposit Insurance Act ("FDIA"), as amended by the
Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA")
sets forth certain powers which the FDIC could exercise if it were appointed as
receiver or conservator of the Transferor. Subject to clarification by FDIC
regulations or interpretations, it would appear from the positions taken by the
FDIC that the FDIC, in its capacity as a receiver or conservator for the
Transferor, would not interfere with the timely transfer to the Trust of
collections with respect to the Financed Student Loans.
To the extent that the transfer of the Financed Student Loans is deemed to
create a security interest, and that interest was validly perfected before the
Transferor's insolvency and was not taken in contemplation of insolvency or with
the intent to hinder, delay or defraud the Transferor or its creditors, based
upon opinions and statements of policy issued by the general counsel of the FDIC
addressing the enforceability against the FDIC, as conservator or receiver for a
depository institution, of a security interest in collateral granted by such
depository institution, such security interest should not be subject to
avoidance and payments to the Trust with respect to the Financed Student Loans
should not be subject to recovery by the FDIC as receiver or conservator of the
Transferor. If, however, the FDIC were to assert a contrary position, certain
provisions of the FDIA which, at the request of the FDIC, have been applied in
recent lawsuits to avoid security interests in collateral granted by depository
institutions, would permit the FDIC to avoid such security interest, thereby
resulting in possible delays and reductions in payments on
<PAGE>
the Notes. In addition, if the FDIC were to require the Indenture Trustee or the
Eligible Lender Trustee to establish its right to such payments by submitting to
and completing the administrative claims procedure under the FDIA, as amended by
the FIRREA, delays in payments on the Notes and possible reductions in the
amount of those payments could occur.
Defeat or Lack of Perfected Security Interest in Financed Student Loans
The Transferor intends that the transfer of the Financed Student Loans by
it to the Eligible Lender Trustee on behalf of the Trust will constitute a valid
contribution and assignment of such Financed Student Loans. Notwithstanding the
foregoing, if the transfer of the Financed Student Loans is deemed to be an
assignment of collateral as security for the benefit of the Trust, a security
interest in the FFELP Loans created on behalf of the Eligible Lender Trustee
may, pursuant to the provisions of 20 U.S.C. ss.1087-2(d) (3), be perfected by
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 a
security interest in accounts. A financing statement or statements covering the
Financed Student Loans will be filed under the UCC to protect the interest of
the Eligible Lender Trustee in the event the transfer by the Transferor is
deemed to be subject to the UCC.
If the transfer of the Financed Student Loans is deemed to be an assignment
as security for the benefit of the Trust, there are certain limited
circumstances under the UCC in which prior or subsequent transferees of Financed
Student Loans could have an interest in such Financed Student Loans with
priority over the Eligible Lender Trustee's interest. A tax or other government
lien on property of the Transferor arising prior to the time a Financed Student
Loans came into existence may also have priority over the interest of the
Eligible Lender Trustee in such Financed Student Loan. Under the Transfer and
Servicing Agreement, however, the Transferor will warrant that it has caused the
Financed Student Loans to be transferred to the Eligible Lender Trustee on
behalf of the Trust free and clear of any lien of any third party. In addition,
the Transferor will covenant that it will not sell, pledge, assign, transfer or
grant any lien on any Financed Student Loan (or any interest therein) other than
to the Eligible Lender Trustee on behalf of the Trust.
Pursuant to the Transfer and Servicing Agreement, each Servicer as
custodian on behalf of the Trust (or another designated custodian) will have
custody of the promissory notes evidencing the Financed Student Loans serviced
by it following the conveyance of the Financed Student Loans to the Eligible
Lender Trustee and the pledge thereof to the Indenture Trustee. Although the
accounts of the Transferor will be marked to indicate the conveyance and the
Transferor will cause UCC financing statements to be filed with the appropriate
authorities, the Financed Student Loans will not be physically segregated in the
Servicer's offices. If, through inadvertence or otherwise, any of the Financed
Student Loans were sold to another party, or a security interest therein were
granted to another party, that purchased (or took such security interest in) any
of such Financed Student Loans in the ordinary course of its business and took
possession of such Financed Student Loans, then the purchaser (or secured party)
would acquire an interest in the Financed Student Loans superior to the interest
of the Eligible Lender Trustee and the Indenture Trustee if the purchaser (or
secured party) acquired (or took a security interest in) the Financed Student
Loans for new value and without actual knowledge of the Eligible Lender
Trustee's and the Indenture Trustee's respective interests. See "Description of
the Transfer and Servicing Agreements -- Conveyance of Financed Student Loans;
Representations and Warranties" and "-- Servicer Covenants."
Risk Resulting From Changes in Repayment Terms of Financed Student Loans
Pursuant to Incentive Programs
The Transferor currently makes available and may hereafter make available
certain incentive programs to borrowers. See "The Financed Student Loan Pool --
Incentive Programs". Under these programs, the Transferor 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 assigned to the Trust. It cannot
<PAGE>
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 Financed Student Loans.
Risk of Change of Ratings on the Notes
It is a condition to the issuance and sale of each Class of Notes that such
Classes receive the respective ratings from each of the Rating Agencies
described in "Rating." A rating is not a recommendation to purchase, hold or
sell the Notes, inasmuch as such rating does not comment as to market price or
suitability for a particular investor. The ratings of the Notes address the
likelihood of the ultimate payment of principal of and interest on the Notes
pursuant to their terms. However, the Rating Agencies do not evaluate, and the
ratings of the Notes do not address, the likelihood of prepayments on the Notes
or the likelihood of payment of any Noteholders' Interest 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.
Failure to Comply with 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 state laws are, in large
part, preempted by the Higher Education Act and the HEAL Act. However, the form
of promissory notes required by the Department of Education for FFELP Loans
provides that holders of such promissory notes evidencing certain loans made to
borrowers attending for-profit schools are subject to any defenses that the
borrower may have against the school. For a discussion of the Trust's rights if
the Financed Student Loans were not originated or serviced in compliance in all
material respects with applicable laws, see "Description of the Transfer and
Servicing Agreements -- Conveyance of Financed Student Loans; Representations
and Warranties" and "-- Master Servicer Covenants."
Effect of Book-Entry Registration
The Notes will each be initially represented by one or more certificates
registered in the name of Cede, the nominee for DTC, and will not be registered
in the names of the holders of such Notes or their nominees. Because of this,
unless and until Definitive Notes are issued, holders of the Notes will not be
recognized by the Indenture Trustee or the Eligible Lender Trustee as
"Noteholders" (as such terms are used in the Indenture). Hence, until Definitive
Notes are issued, holders of the Notes will only be able to exercise the rights
of Noteholders indirectly through DTC and its respective participating
organizations. See "Description of the Notes --Book-Entry Registration" and "--
Definitive Notes."
FORMATION OF THE TRUST
The Trust
Crestar Student Loan Trust 1997-1 is a statutory business trust that will
be formed on [_________, 1997], under the laws of the State of Delaware for the
transactions described in this Prospectus. The Trust will not engage in any
activity other than (i) acquiring, holding, selling and managing the Financed
Student Loans and the other assets of the Trust and proceeds therefrom, (ii)
issuing one or more classes of its certificates and notes, (iii) making payments
thereon and (iv) engaging in other activities that are necessary, suitable or
convenient to accomplish the foregoing or are incidental thereto or connected
therewith. For so long as the Transferor is a Certificateholder, the Trust's
activities will be limited to activities that are part of, or incidental to, the
business of banking as well.
<PAGE>
The Trust will be initially capitalized with equity equal to $l,000 on the
date of its formation, representing the initial principal balance of the
Certificates issued on such date. Approximately 4.9% of such Certificates will
be sold to the Transferor and the remaining Certificates were offered for sale
in transactions exempt from the registration requirements of the Securities Act.
The equity of the Trust, together with the proceeds from the sale of the Notes,
will be used by the Eligible Lender Trustee in connection with its acquisition,
on behalf of the Trust, of the Initial Financed Student Loans from the
Transferor pursuant to the Transfer and Servicing Agreement. A portion of the
net proceeds received from the transfer of the Initial Financed Student Loans
will be used by the Transferor to make a Reserve Account Deposit in the amount
of [$_________]. Upon the consummation of such transaction, the property of the
Trust will consist of (a) the pool of Financed 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 after the applicable Cut-off Date or
Subsequent Cut-off Date, and (c) all moneys and investments on deposit in the
Collection Account, the Certificate Distribution Account, the Note Distribution
Account, the Expense Account, the Monthly Advance Account and the Reserve
Account. The Notes will be collateralized by the property of the Trust. The
Collection Account, the Note Distribution Account, the Expense Account, the
Reserve Account and the Monthly Advance Account will be maintained with and in
the name of the Indenture Trustee. To facilitate servicing and to minimize
administrative burden and expense, the related Servicer will be appointed
custodian of the promissory notes representing the Financed Student Loans by the
Eligible Lender Trustee.
The Trust's principal offices are in Cincinnati, Ohio, in care of Star
Bank, National Association, as Eligible Lender Trustee, at the address listed
below.
Eligible Lender Trustee
Star Bank, National Association, the Eligible Lender Trustee for the Trust
under the Trust Agreement, is a national banking association organized under the
laws of the United States with its chief executive office in Cincinnati, Ohio.
The office of the Eligible Lender Trustee for purposes of administering the
Trust is located at 425 Walnut Street, Cincinnati, Ohio 45201. The Eligible
Lender Trustee will acquire on behalf of the Trust legal title to all the
Financed Student Loans acquired pursuant to the Transfer and Servicing
Agreement. The Eligible Lender Trustee on behalf of the Trust will enter into a
Guarantee Agreement with each of the Guarantors with respect to such Financed
FFELP Loans and a HEAL Insurance Contract with the Department of HHS with
respect to such Financed HEAL Loans. The Eligible Lender Trustee qualifies as an
eligible lender and owner of Financed Student Loans for all purposes under the
Higher Education Act and the Guarantee Agreements with respect to such Financed
FFELP Loans and under the HEAL Act and the HEAL Insurance Contract with respect
to such Financed HEAL Loans. Failure of the Financed Student Loans to be owned
by an eligible lender would result in the loss of Guarantee Payments, Interest
Subsidy Payments and Special Allowance Payments with respect to Financed FFELP
Loans and the loss of Insurance Payments with respect to Financed HEAL Loans.
See "Description of the FFEL Program" and "Description of the HEAL Program."
The Transferor or its affiliates may maintain from time to time other
banking relationships with Star Bank, National Association, the Eligible Lender
Trustee, and its affiliates.
USE OF PROCEEDS
The net proceeds from the sale of the Notes will be paid to the Transferor
on the Closing Date as consideration for the Initial Financed Student Loans
being conveyed on such date. The Transferor will use such proceeds to make the
initial Reserve Account Deposit, deposits into certain other Trust Accounts and
for general corporate purposes.
<PAGE>
THE TRANSFEROR
The Transferor is a Virginia banking corporation that offers a broad range
of banking services, including various types of deposit accounts and
instruments, commercial and consumer loans, trust and investment management,
bank credit cards, and international banking to customers throughout Virginia,
Maryland and Washington, D.C. Services are also provided through non-bank
subsidiaries. Securities brokerage and investment banking services are offered
by Crestar Securities Corporation.
The Transferor and its predecessors have been originating and purchasing
FFELP Loans since 1965 and HEAL Loans since 1995. As of [_______, 1997], the
Transferor had Student Loans under its management in an aggregate principal
amount of approximately [$___ million].
The Transferor is a wholly owned indirect subsidiary of Crestar
Financial Corporation, a bank holding company organized under the laws of the
Commonwealth of Virginia and registered under the Bank Holding Company Act of
1956, as amended (the "BHCA"). As of June 30, 1997, Crestar Financial
Corporation had $22.8 billion in total assets, $15.9 billion in total deposits
and $1.9 billion in total shareholders' equity.
Crestar Financial Corporation is supervised and examined by the Board
of Governors of the Federal Reserve System under the BHCA. The BHCA requires
Federal Reserve approval for bank acquisitions and regulates non-banking
activities of bank holding companies. Crestar Bank is regulated by the State
Corporation Commission of Virginia and the Federal Reserve Bank of Richmond.
The principal executive office of the Transferor are located at Crestar
Center, 919 East Main Street, Richmond, Virginia 23219. Its telephone number is
(804) 782-5171.
THE NOTES ARE NEITHER OBLIGATIONS OF NOR GUARANTEED BY CRESTAR FINANCIAL
CORPORATION OR ANY OF CRESTAR FINANCIAL CORPORATION'S SUBSIDIARIES (INCLUDING
THE TRANSFEROR).
THE SERVICERS
General
The Transferor will act as Master Servicer with respect to the Financed
Student Loans. The Financed Student Loans will be serviced by PHEAA, or such
other parties as may be approved by the Master Servicer from time to time
(subject to confirmation of the ratings on the outstanding Notes). Pursuant to
sub-servicing agreements, PHEAA has agreed to service, and perform all other
related tasks with respect to, the Financed Student Loans in compliance with
applicable standards and procedures. The sub-servicing agreements currently
provide that PHEAA will service the Financed HEAL Loans until such loans are
paid off and the Financed FFELP Loans through a term ending [_______, 20__], at
which time the Master Servicer expects to either negotiate an extended term with
PHEAA or contract with a new sub-servicer. See "Description of the Transfer and
Servicing Agreements --Servicing Procedures."
Pennsylvania Higher Education Assistance Agency
PHEAA is a body corporate and politic constituting a public corporation and
government instrumentality created pursuant to an act of the Pennsylvania
Legislature. PHEAA has approximately 2,200 employees. PHEAA's headquarters is
located in Harrisburg, Pennsylvania, with six regional offices located
throughout Pennsylvania and additional offices located in California, Delaware
and West Virginia.
<PAGE>
Under its enabling legislation, PHEAA is authorized to issue bonds or
notes, with the approval of the Governor of the Commonwealth of Pennsylvania,
for the purpose of purchasing, making, or guaranteeing loans to students or
parents, or to lending institutions or post secondary institutions to make
student or parent loans. PHEAA's enabling legislation also authorizes PHEAA to
undertake the origination of loans and the servicing of loans made by PHEAA and
others.
PHEAA has no power to pledge the credit or taxing power of the Commonwealth
of Pennsylvania or to make PHEAA debts payable out of any moneys except those of
PHEAA. Neither the faith and credit nor the taxing power of the Commonwealth of
Pennsylvania is pledged to the payment of any of PHEAA's obligations.
PHEAA's enabling legislation created an educational loan assistance fund
within the Commonwealth of Pennsylvania Treasury (the "Educational Loan
Assistance Fund"). For accounting purposes, PHEAA has divided the Educational
Loan Assistance Fund into a Higher Education Assistance Fund (the "Assistance
Fund") and a Revenue Bond Fund (the "PHEAA Bond Fund"). Appropriations, revenues
and expenditures allocable to all PHEAA's programs, other than assets and
expenditures relating to its revenue bond financings, are allocated to the
Assistance Fund. All assets included in the PHEAA Bond Fund are pledged to
particular bond and note issues of PHEAA and are not available to meet guarantee
or other obligations of PHEAA related to its other programs. Several obligations
of PHEAA under certain bond and note financings, though secured and
collateralized by specified assets in PHEAA's Bond Fund, are obligations not
limited to such assets. Under those financings, certain persons may seek
recourse against the Assistance Fund.
As of June 30, 1997, the Assistance Fund had total assets of approximately
$786 million, total liabilities of approximately $553 million, and retained
earnings of approximately $233 million. PHEAA estimates that the portion of its
retained earnings that would be treated as its Guarantee Fund under the Higher
Education Act would be approximately $196 million. The PHEAA Bond Fund had total
assets of approximately $1.65 billion, total liabilities of approximately $1.55
billion and retained earnings of approximately $52 million as of June 30, 1997.
Substantially all of PHEAA's expenditures relating to the various grant
programs that it administers (other than administrative expenses) are derived
from appropriations from the Commonwealth. In recent years, PHEAA has not
received any appropriations to cover its administrative expenses. To meet
PHEAA's obligations under its servicing and guarantee programs, PHEAA has in the
past relied, and expects in the future to continue to rely, principally on
servicing fee revenues; income on various investments in the Assistance Fund
(including various types of student loans); and revenues generated by its
activity as a guarantee agency under the Higher Education Act, including federal
reimbursement payments, administrative cost allowances, student loan insurance
premiums, and retentions from collections on defaulted loans. The implementation
of the new direct loan program or other modifications to the Higher Education
Act may reduce certain servicing fee revenues or income generated by PHEAA's
activity as a guarantee agency.
PHEAA had outstanding debt and/or credit facilities (under which the entire
aggregate amount of funds available had not been drawn) in the amount of
approximately $2.2 billion as of June 30, 1997 . As of June 30, 1997. PHEAA
owned approximately $1.6 billion outstanding principal amount of student loans
financed with the proceeds of its long-term debt, and had funds available for
acquisition of student loans in the amount of approximately $364 million.
PHEAA has been guaranteeing student loans since 1964. As of June 30, 1997,
PHEAA had guaranteed a total of approximately $19.0 billion principal amount of
student loans under the Higher Education Act. Of that amount, PHEAA estimates
that approximately $13.3 billion original principal amount of such loans was
outstanding. In addition to guaranteeing loans under the Higher Education Act,
PHEAA also operates certain guarantee programs for which its receives no federal
reinsurance. PHEAA has outstanding guarantee obligations of such loans in the
amount of approximately $49 million as of June 30, 1997.
<PAGE>
PHEAA's two principal servicing products are its full servicing operation
(in which it performs all student loan servicing functions on behalf of its
customers) and its remote servicing operation (in which it provides only data
processing services to its customers that have their own servicing operations).
As of June 30,1997, PHEAA was servicing under its full service program
approximately 1.145 million student loan accounts representing approximately
$11.1 billion outstanding principal amount for more than 320 customers and under
its remote servicing operation, approximately 700,000 student loans representing
approximately $3.5 billion outstanding principal amount for four customers.
Servicing revenue generated from PHEAA's servicing of loans that it owns
accounted for approximately 25% of servicing revenues for the 12 months ended
June 30, 1997. For the year then ended, one other customer accounted for
approximately 17% of servicing revenues. PHEAA's management expects gross
servicing revenues to continue to increase.
PHEAA's current servicing agreements have contractual terms at inception
ranging from three years to life of the loan. Under PHEAA's servicing
agreements, PHEAA generally has agreed to reimburse customers for any claims,
losses, liabilities or expenses which arise out of or relate to PHEAA's acts or
omissions with respect to services provided under such agreements where the
final determination of PHEAA's liability is established by an arbitrator, by a
court of law of competent jurisdiction, or by way of settlement. PHEAA must rely
on moneys in the Assistance Fund to cover expenditures necessary to meet its
contractual obligations under the servicing agreements, including any potential
liabilities. PHEAA has developed a new servicing system in consultation with the
consulting firm Deloitte & Touche, IBM and servicing clients. Conversion to the
new system began in the second quarter of 1995 and is ongoing.
Information relating to PHEAA set forth in this Prospectus has been
provided by PHEAA, and neither such information nor information included in the
reports referred to herein has been verified by, or is guaranteed as to accuracy
or completeness by, the Transferor or the Underwriters. Such information should
not be construed as a representation by the Transferor or the Underwriters. No
representation is made by the Transferor or the Underwriters as to the accuracy
or adequacy of such information or the absence of material adverse changes in
such information subsequent to the dates thereof. PHEAA has agreed that it will
provide a copy of its most recent audited financial statements to Noteholders
upon receipt of a written request directed to Mr. Timothy A. Guenther, Senior
Vice President and Chief Financial Officer Financial Management, 1200 North
Seventh Street, Harrisburg, Pennsylvania 17102.
THE FINANCED STUDENT LOAN POOL
The Initial Financed Student Loans were, and the Exchanged Financed Student
Loans will be, selected from the Transferor's portfolio of FFELP Loans and HEAL
Loans by several criteria, including the following: each Financed Student Loan
(i) was or will be originated in the United States or its territories or
possessions under and in accordance with the FFEL Program or the HEAL Program,
as the case may be, to or on behalf of a student who has graduated or is
expected to graduate from an accredited institution of higher education within
the meaning of the Higher Education Act or the HEAL Act, (ii) contains terms in
accordance with those required by the FFEL Program, the Guarantee Agreements,
the HEAL Program, the HEAL Insurance Contract and other applicable requirements,
and (iii) is not more than 90 days past due as of the Cut-off Date or, in the
case of an Exchanged Financed Student Loan, as of the subsequent cut-off date
set forth in the related Transfer Agreement (each, a "Subsequent Cut-Off Date").
As of the Cut-off Date, approximately [$____________] principal amount of the
Initial Financed Student Loans will be delinquent for up to [[59]] days and none
of the Initial Financed Student Loans will be delinquent for more than [[59]]
days. For this purpose, delinquency refers to the number of days for which a
payment is past due.
Each Financed Student Loan is required (i) to be insured by the Department
of HHS as to principal and interest to the extent provided under the HEAL Act,
or (ii) to be guaranteed as to principal and interest by a Guarantor and
reinsured by the Department of Education to the extent provided under the Higher
Education Act and eligible for
<PAGE>
Special Allowance Payments and, with respect to each Financed Student Loan that
is a Stafford Loan, Interest Subsidy Payments paid by the Department of
Education.
Except for the criteria described above and under "Description of the
Transfer and Servicing Agreements -Exchange Period and Exchanged Financed
Student Loans", however, there will be no required characteristics of the
Exchanged Financed Student Loans and no limitations on the amount of Exchanged
Financed Student Loans that may be included in the Trust. Therefore, following
the transfer of Exchanged Financed 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 composition of the Financed Student Loans
and of the borrowers thereof, the distribution by interest rate and the
distribution by principal balance described in the following tables, will vary
from those of the Initial Financed Student Loans as of the Cut-Off Date.
Each of the Financed Student Loans provides for the amortization of the
outstanding principal balance of such Financed Student Loan over a series of
regular payments. 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 outstanding
late fees, if collected, then 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 Deferment
Periods or Forbearance Periods, 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.
Set forth below in the following tables is a description of certain
additional characteristics of the Initial Financed Student Loans as of the
Cut-Off Date. Such characteristics are based on a preliminary pool of Initial
Financed Student Loans with an outstanding principal balance as of the Cut-off
Date of [$___________]. While the statistical distribution of the
characteristics for the final pool of Initial Financed Student Loans will vary
somewhat from the statistical distribution of such characteristics for the
preliminary pool presented below, the Transferor does not believe that the
characteristics of the final pool will differ materially.
Composition of the Initial Financed Student Loans as of the Cut-off Date
<TABLE>
<S> <C>
Aggregate Outstanding Principal Balance................................................
Number of Borrowers....................................................................
Average Outstanding Principal Balance Per Borrower.....................................
Number of Loans........................................................................
Average Outstanding Principal Balance Per Loan.........................................
Weighted Average Annual Borrower Interest Rate.........................................
Weighted Average Remaining Term (months) (does not include the months
remaining for the in-school, grace, deferment or forbearance periods)................
Weighted Average Remaining Term (months) (including the months remaining for
the in-school, grace, deferment or forbearance periods)..............................
</TABLE>
<PAGE>
Distribution of the Initial Financed Student Loans by
Loan Type as of the Cut-Off Date
<TABLE>
<CAPTION>
Percent of
Loans by
Number of Outstanding Outstanding
Loan Type Loans Balance Balance
- ----------------- ----- ------- -------
<S> <C>
Stafford-Subsidized.......................................
Stafford-Unsubsidized.....................................
Consolidation.............................................
PLUS......................................................
SLS.......................................................
HEAL......................................................
Total................................................
</TABLE>
Distribution of the Initial Financed Student Loans by
Borrower Interest Rate as of the Cut-Off Date
<TABLE>
<CAPTION>
Percent of
Loans by
Number of Outstanding Outstanding
Interest Rate (1) Loans Balance Balance
- ----------------- ----- ------- -------
<S> <C>
Less than 7.50%...........................................
7.50% to 7.99%............................................
8.00% to 8.49%............................................
8.50% to 8.99%............................................
9.00% to 9.49%............................................
9.50% or greater..........................................
Total................................................
</TABLE>
- ----------------------
(1) Determined using the interest rates applicable to the Initial Financed
Student Loans as of the Cut-off Date. However, because certain of the
Initial Financed Student Loans bear interest at variable rates 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
Cut-off Date. See "Description of the FFEL Program" and "Description of the
HEAL Program".
Distribution of the Initial Financed Student Loans by Range of
Outstanding Principal Balances as of the Cut-Off Date
<TABLE>
<CAPTION>
Percent of
Loans by
Number of Outstanding Outstanding
Principal Balance Borrowers Balance Balance
- ----------------- ---------- ------- -------
<S> <C>
Less than $1,000.................................................
$1,000-$1,999....................................................
$2,000-$2,999....................................................
$3,000-$3,999....................................................
<PAGE>
$4,000-$4,999....................................................
$5,000-$5,999....................................................
$6,000-$6,999....................................................
$7,000-$7,999....................................................
$8,000-$8,999....................................................
$9,000-$9,999....................................................
$10,000-$10,999..................................................
$11,000-$11,999..................................................
$12,000-$12,999..................................................
$13,000-$13,999..................................................
$14,000-$14,999..................................................
$15,000 or greater...............................................
Total.......................................................
</TABLE>
Distribution of the Initial Financed Student Loans by
Borrower Payment Status as of the Cut-Off Date
<TABLE>
<CAPTION>
Percent of
Loans by
Number of Outstanding Outstanding
Borrower Payment Status Loans Balance Balance
- ----------------- ---------- ------- -------
<S> <C>
In School......................................................
Grace............................................................
Repayment........................................................
Deferment........................................................
Forbearance......................................................
Total.......................................................
</TABLE>
<PAGE>
Distribution of Initial Financed Student Loans in Repayment Status by
Remaining Term as of the Cut-Off Date
<TABLE>
<CAPTION>
Outstanding Percent By
Number Principal Outstanding
Remaining Term Of Loans Balance Balance
- -------------- -------- ----------- -------
<S> <C>
1 to 12 Months $ %
13 to 24 Months
25 to 36 Months
37 to 48 Months
49 to 60 Months
61 to 72 Months
73 to 84 Months
85 to 96 Months
97 to 108 Months
109 to 120 Months
121 to 180 Months
181 to 240 Months
241 to 300 Months
Over 300 Months
Total
</TABLE>
Geographic Distribution of the Initial Financed Student Loans
as of the Cut-Off Date
<TABLE>
<CAPTION>
Percent of
Loans by
Number of Outstanding Outstanding
Location (1) Loans Balance Balance
- ------------ ----- ------- -------
<S> <C>
Virginia...................................................
Florida....................................................
Maryland...................................................
District of Columbia.......................................
Others(2).................................................
TOTAL.................................................
</TABLE>
(1) Based on the current permanent billing addresses of the borrowers of the
Initial Financed Student Loans shown on the Servicer's records.
(2) Consist of locations that include [__] other states, various other U.S.
territories, possessions and commonwealths, foreign countries, overseas
military establishments, and unknown locations, none of the aggregate
principal balance of the Student Loans relating to which exceed 5.00% of
the Initial Pool Balance.
To the extent such states with a greater concentration of loans experience
adverse economic or other conditions to a greater degree than other areas of the
country, the ability of such borrowers to repay their Financed Student
<PAGE>
Loans may be impacted to a larger extent than if such borrowers were dispersed
more geographically. The Transferor is not aware of any material adverse
conditions that are unique to such states.
Distribution of the Initial Financed Student Loans by
Insurance or Guarantee Level as of the Cut-Off Date
<TABLE>
<CAPTION>
Percent of
Loans by
Number of Outstanding Outstanding
Guarantee or Insurance Level Loans Balance Balance
- ---------------------------- ----------- -----------
<S> <C>
FFELP Loan Guaranteed 100%..................................
FFELP Loan Guaranteed 98%...................................
HEAL Loan Insured 100%......................................
Total..................................................
</TABLE>
Distribution of the Initial Financed Student Loans by
Guarantor or by HEAL as of the Cut-Off Date
<TABLE>
<CAPTION>
Percent of
Loans by
Number of Outstanding Outstanding
Guarantors Loans Balance Balance
- ------------ --------- ----------- -----------
<S> <C>
Educational Credit Management Corporation.................
Pennsylvania Higher Education Assistance Agency...........
HEAL Loans................................................
Other Guarantors(1).......................................
Total................................................
</TABLE>
- ----------------------
(1) Aggregating less than 5.00% of the Initial Financed Student Loans as of the
Cut-off Date.
Distribution of the Initial Financed Student Loans by
School Types as of the Cut-Off Date
<TABLE>
<CAPTION>
Outstanding Percent of Loans
Number of Principal by Outstanding
School Type Loans Balance Balance
----------- ----- ------- -------
<S> <C>
Under 4 Year $ %
4 and 5 Year
Proprietary
Consolidation
Other/Unknown
Total
</TABLE>
<PAGE>
Incentive Programs
The Transferor currently makes available and may hereafter make available
certain incentive programs to borrowers, including the Crestar Bank Top
Performer Program (the "TP Program"). The TP Program generally applies to all
Stafford Loans, Unsubsidized Stafford Loans and PLUS Loans with a first
disbursement made by the Transferor on or after November 1, 1996 ("TP Loans").
Under the TP Program, if the borrower makes 36 consecutive monthly payments of a
TP Loan on time, the applicable interest rate on such TP Loan is reduced by
1.00% per annum for Stafford Loans and Unsubsidized Stafford Loans and 0.5% per
annum for PLUS Loans. Although less than 1.00% of the Initial Financed Student
Loans are TP Loans, additional TP Loans may be included in the Exchanged
Financed Student Loans.
Program Descriptions and Summaries
The description and summaries of the Higher Education Act, the FFEL
Program, the Guarantee Agreements, the HEAL Act, the HEAL Program, the HEAL
Insurance Contract, and the other statutes, regulations and documents 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 -- Risk That Changes in Law Relating to the HEAL Program and the
FFEL Program Could Adversely Affect the Noteholders."
MATURITY AND PREPAYMENT CONSIDERATIONS
Maturity and Prepayment Assumptions
The rate of payment of principal of the Notes and the yield on the Notes
will be affected by (i) prepayments of the Financed Student Loans that may occur
as described below, (ii) the sale by the Trust of Financed Student Loans and
(iii) Parity Percentage Payments. All the Financed Student Loans are prepayable
in whole or in part by the borrowers at any time without penalty (including by
means of Consolidation Loans or HEAL Consolidation Loans as discussed below) and
may be prepaid as a result of a borrower default, death, disability or
bankruptcy and subsequent liquidation or collection of Guarantee Payments or
Insurance 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 those 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 many 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 Consolidation Loans or HEAL Consolidation Loans that are not
transferred to the Eligible Lender Trustee as Exchanged Financed Student Loans
or the proceeds of such Consolidation Loans or HEAL Consolidation Loans are not
used to make Issuer Consolidation Payments, such Financed Student Loans will be
prepaid. See "Description of the FFEL Program -- Consolidation Loans" and
"Description of the HEAL Program." In addition, the Transferor (or the Master
Servicer) is obligated to purchase any Financed Student Loan pursuant to the
Transfer and Servicing Agreement as a result of a breach of any of the
Transferor's representations and warranties with respect to such Financed
Student Loan, in each case where such breach materially and adversely affects
the interests of 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 to guarantee payment of such Financed
FFELP Loan or the Department of HHS' obligation to insure payment of any
Financed HEAL Loan will not be considered to have a material adverse effect for
this purpose). See "Description of the Transfer and Servicing Agreements --
Conveyance of Financed Student Loans;
<PAGE>
Representations and Warranties" and "-- Master Servicer Covenants." See also
"Description of the Transfer and Servicing Agreements -- Termination" regarding
the Transferor'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
and "-- Insolvency Event" regarding the sale of Financed Student Loans if a
Transferor Insolvency Event occurs.
Scheduled payments with respect to, and maturities of, the Financed Student
Loans may be extended, including pursuit to Grace Periods, Deferment Periods
and, under certain circumstances, Forbearance Periods. The rate of payment of
principal of the Notes and the yield on the Notes may also be affected by the
rate of defaults resulting in losses on Financed 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 of prepayment on the Financed Student Loans cannot be predicted,
and any reinvestment risks resulting from a faster or slower incidence of
prepayment of Financed Student Loans or a faster or slower incidence of sales by
the Trust will be borne entirely by the Noteholders. Such reinvestment risks may
include the risk that interest rates and the relevant spreads above particular
interest rate bases are lower at the time Noteholders 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.
Weighted Average Life of the Notes
The following information is given solely to illustrate the effect of
prepayments on the Financed Student Loans on the weighted average life of the
Notes under the assumptions stated below and is not a prediction of the
prepayment rate that might actually be experienced by the Financed Student Loans
held in the Trust.
Weighted average life refers to the average amount of time from the date of
issuance of a security until each dollar of principal of such security will be
repaid to the investor. The weighted average life of the Notes will be primarily
a function of the rate at which payments are made on the Financed Student Loans
held in the Trust. Payments on such Financed Student Loans may be in the form of
scheduled amortization of principal or prepayments (including, without
limitation, Guarantee Payments and Insurance Payments).
The Constant Prepayment Rate prepayment model ("CPR") represents an assumed
constant rate of prepayment of Financed Student Loans held in the Trust
outstanding as of the beginning of each quarter expressed as a per annum
percentage. There can be no assurance that such Financed Student Loans will
experience prepayments at a constant prepayment rate or otherwise in the manner
assumed by the prepayment model.
The weighted average lives in the following table were determined assuming
that (i) scheduled payments of principal on the Financed Student Loans are
received in a timely manner and prepayments are made at the percentages of the
prepayment model set forth in the table; (ii) the initial principal balance of
the Financed Student Loans is [$________] and such Financed Student Loans have
the characteristics described under "The Financed Student Loan Pool;" (iii)
payments are made on the Notes on the first day of each month commencing in
[_________] 1998; and (iv) the Notes are issued on [_________,] 1997. No
representation is made that these assumptions will be correct, including the
assumption that the Financed Student Loans held in the Trust will not experience
delinquencies or unanticipated losses.
In making an investment decision with respect to the Notes, investors
should consider a variety of possible prepayment scenarios, including the
limited scenarios described in the table below.
<PAGE>
Weighted Average Life of the Notes at
the Respective CPRs Set Forth Below:
<TABLE>
<CAPTION>
Weighted Average Life (years)
0% CPR 3% CPR 5% CPR 7% CPR 10%CPR
------ ------ ------ ------ ------
<S> <C>
Class A-1 Notes. . .
Class A-2 Notes . . .
Class B Notes . . .
</TABLE>
DESCRIPTION OF THE FFEL PROGRAM
General
The Higher Education Act sets forth provisions establishing the FFEL
Program, pursuant to which state agencies or private nonprofit corporations
administering student loan insurance programs (referred to as "guarantee
agencies") are reimbursed for losses sustained in the operation of their
programs, and holders of certain loans made under such programs are paid
subsidies for owning such loans.
The Higher Education Act currently authorizes certain student loans to be
covered under the FFEL Program if they are contracted for and paid to the
student prior to September 30, 2002, unless a student has received a loan under
the FFEL Program prior to such date, in which case that student may receive a
student loan covered by the FFEL Program until September 30, 2006. Congress has
extended similar authorization dates in prior versions of the Higher Education
Act; however, there can be no assurance that the current authorization dates
will again be extended or that the other provisions of the Higher Education Act
will be continued in their present form.
Various amendments to the Higher Education Act have revised the FFEL
Program from time to time. These amendments include, but are not limited to, the
Balanced Budget Act of 1997 (the "1997 Amendments"), the Higher Education
Technical Amendments Act of 1993 (the "1993 Technical Amendments"), the Omnibus
Budget Reconciliation Act of 1993 (the "1993 Amendments"), the Higher Education
Amendments of 1992 (the "1992 Amendments"), which reauthorized the FFEL Program,
the Omnibus Budget Reconciliation Act of 1990, the Omnibus Budget Reconciliation
Act of 1989 (the "1989 Amendments"), the Omnibus Budget Reconciliation Act of
1987, the Higher Education Technical Amendments Act of 1987 (the "1987
Amendments"), the Higher Education Amendments of 1986 (the "1986 Amendments"),
which reauthorized the FFEL Program, the Consolidated Omnibus Budget
Reconciliation Act of 1985, the Postsecondary Student Assistance Amendments of
1981 (the "1981 Amendments") and the Education Amendments of 1980 (the "1980
Amendments").
There can be no assurance that relevant federal laws, including the Higher
Education Act, will not be changed in a manner that may adversely impact the
receipt of funds by the Guarantee Agencies or by the Transferor or the Eligible
Lender Trustee with respect to Financed FFELP Loans. Proposals have been made by
Congress and the Administration which, if enacted into law, would amend the
Higher Education Act and make various changes to the FFEL Program, including
changes that would reduce various payments to Guarantee Agencies and restructure
guarantee agencies' operations and programs and revise terms of student loans
and payments to Lenders. There is no certainty that any of the proposals will be
enacted into law in their current form or at all, and the Transferor cannot
predict at this time how such legislation, if enacted, would affect the
Servicer's business or operations, or the Transferor.
This is only a summary of certain provisions of the Higher Education Act.
Reference is made to the text of the Higher Education Act for full and complete
statements of its provisions.
<PAGE>
Loan Terms
General
Four types of loans are currently available under the FFEL Program:
Stafford Loans, Unsubsidized Stafford Loans, Plus Loans and Consolidation Loans.
These loan types vary as to eligibility requirements, interest rates, repayment
periods, loan limits and eligibility for interest subsidies and Special
Allowance Payments. Some of these loan types have had other names in the past.
References herein to the various loan types include, where appropriate,
predecessors to such loan types.
The primary loan under the FFEL Program is the Stafford Loan. Students who
are not eligible for Stafford Loans based on their economic circumstances may be
able to obtain Unsubsidized Stafford Loans. Parents of students may be able to
obtain Plus Loans. Consolidation Loans are available to borrowers with existing
loans made under the FFEL Program and certain other federal programs to
consolidate repayment of such existing loans. For periods of enrollment
beginning prior to July 1, 1994, SLS Loans were available to students with costs
of education that were not met by other sources and that exceeded the Stafford
or Unsubsidized Stafford Loan limits.
Eligibility
General. A student is eligible for loans made under the FFEL Program only
if he or she: (i) has been accepted for enrollment or is enrolled in good
standing at an eligible institution of higher education (which term includes
certain vocational schools), (ii) is carrying or planning to carry at least
one-half the normal full-time workload for the course of study the student is
pursuing as determined by the institution (which, in the case of a loan to cover
the cost of a period of enrollment beginning on or after July 1, 1987, must
either lead to a recognized educational credential or be necessary for
enrollment in a course of study that leads to such a credential), (iii) has
agreed to notify promptly the holder of the loan concerning any change of
address, (iv) (if presently enrolled) is maintaining satisfactory progress in
the course of study he or she is pursuing, (v) does not owe a refund on, and is
not (except as specifically permitted under the Higher Education Act) in default
under, any loan or grant made under the Higher Education Act, (vi) has filed
with the eligible institution a statement of educational purpose, (vii) meets
certain citizenship requirements, and (viii) (except in the case of a graduate
or professional student) has received a preliminary determination of eligibility
or ineligibility for a Pell Grant.
Stafford Loans. Stafford Loans generally are made only to student borrowers
who meet certain needs tests. The educational institution must provide the
lender with a statement evidencing a determination of need for a loan, and the
amount of such need, calculated by subtracting from the estimated cost of
attendance the sum of the expected family contribution with respect to the
student plus the estimated financial assistance available to such student. The
amounts of the expected family contribution, estimated available financial
assistance, and estimated costs of attendance are to be computed in accordance
with standards set forth in the Higher Education Act.
Unsubsidized Stafford Loans. A student borrower meeting the requirements
set forth under "General" above is eligible for an Unsubsidized Stafford Loan
without regard to need. Unsubsidized Stafford Loans were not available before
October 1, 1992.
Plus Loans. Plus Loans are made only to borrowers who are parents (and,
under certain circumstances, spouses of remarried parents) of dependent
undergraduate students. For Plus Loans made on or after July 1, 1993, the parent
borrower must not have an adverse credit history (as determined pursuant to
criteria established by the Department of Education). Prior to the 1986
Amendments, the Higher Education Act did not distinguish between Plus Loans and
SLS Loans. Student borrowers were eligible for Plus Loans; however, parents of
graduate and professional students were ineligible.
<PAGE>
SLS Loans. Eligible borrowers for SLS Loans were limited to (a) graduate or
professional students, (b) independent undergraduate students, and (c) under
certain circumstances, dependent undergraduate students, if such students'
parents were unable to obtain a Plus Loan and were also unable to provide such
students' expected family contribution. Prior to the 1987 Amendments, a
dependent undergraduate student was not eligible under any circumstances. Except
as described in clause (c), eligibility was determined without regard to need.
Consolidation Loans. To be eligible for a Consolidation Loan a borrower
must (a) have outstanding indebtedness on student loans made under the FFEL
Program and/or certain other federal student loan programs, and (b) be in
repayment status or in a Grace Period, or be a defaulted borrower who has made
arrangements to repay the defaulted loan(s) satisfactory to the holder of the
defaulted loan(s). A married couple who agree to be jointly liable on a
Consolidation Loan for which the application is received on or after January 1,
1993 may be treated as an individual for purposes of obtaining a Consolidation
Loan. For Consolidation Loans disbursed prior to July 1, 1994 the Borrower was
required to have outstanding student loan indebtedness of at least $7,500. Prior
to the adoption of the 1993 Technical Amendments, Plus Loans could not be
included in the Consolidation Loan. For Consolidation Loans for which the
applications were received prior to January 1, 1993, the minimum student loan
indebtedness was $5,000 and the borrower could not be delinquent more than 90
days in the payment of such indebtedness.
Interest Rates
The Higher Education Act establishes maximum interest rates for each of the
various types of loans. These rates vary not only among loan types, but also
within loan types depending upon when the loan was made or when the borrower
first obtained a loan under the FFEL Program. The Higher Education Act allows
lesser rates of interest to be charged. Many lenders, including the Transferor,
have offered repayment incentives or other programs that involve reduced
interest rates on certain loans made under the FFEL Program.
Stafford Loans. For a Stafford Loan made prior to July 1, 1994, the
applicable interest rate for a borrower who, on the date the promissory note was
signed, did not have an outstanding balance on a previous loan which was made,
insured or guaranteed under the FFEL Program (a "New Borrower"):
(a) is 7% per annum for a loan covering a period of instruction
beginning before January 1, 1981;
(b) is 9% per annum for a loan covering a period of instruction
beginning on or after January 1, 1981, but before September
13, 1983;
(c) is 8% per annum for a loan covering a period of instruction
beginning on or after September 13, 1983, but before July 1,
1988;
(d) for a loan made prior to October 1, 1992, covering a period of
instruction beginning on or after July 1, 1988, is 8% per
annum for the period from the disbursement of the loan to the
date which is four years after the loan enters repayment, and
thereafter shall be adjusted annually, and for any 12-month
period commencing on a July 1 shall be equal to the bond
equivalent rate of 91-day U.S. Treasury bills auctioned at the
final auction prior to the preceding June 1, plus 3.25% per
annum (but not to exceed 10% per annum); or
(e) for a loan made on or after October 1, 1992 shall be adjusted
annually, and for any 12- month period commencing on a July 1
shall be equal to the bond equivalent rate of 91- day U.S.
Treasury bills auctioned at the final auction prior to the
preceding June 1, plus 3.1% per annum (but not to exceed 9%
per annum).
<PAGE>
For a Stafford Loan made prior to July 1, 1994, the applicable interest rate for
a borrower who, on the date the promissory note evidencing the loan was signed,
had an outstanding balance on a previous loan made, insured or guaranteed under
the FFEL Program (a "Repeat Borrower"):
(f) for a loan made prior to July 23, 1992 is the applicable
interest rate on the previous loan or, if such previous loan
is not a Stafford Loan, 8% per annum; or
(g) for a loan made on or after July 23, 1992 shall be adjusted
annually, and for any twelve month period commencing on a July
1 shall be equal to the bond equivalent rate of 91-day U.S.
Treasury bills auctioned at the final auction prior to the
preceding June 1, plus 3.1% per annum but not to exceed:
(i) 7% per annum in the case of a Stafford Loan made to a
borrower who has a loan described in clause (a)
above;
(ii) 8% per annum in the case of (A) a Stafford Loan made
to a borrower who has a loan described in clause (c)
above, (B) a Stafford Loan which has not been in
repayment for four years and which was made to a
borrower who has a loan described in clause (d) above
or (C) a Stafford Loan for which the first
disbursement was made prior to December 20, 1993 to a
borrower whose previous loans do not include a
Stafford Loan or an Unsubsidized Stafford Loan;
(iii) 9% per annum in the case of (A) a Stafford Loan made
to a borrower who has a loan described in clauses (b)
or (e) above or (B) a Stafford Loan for which the
first disbursement was made on or after December 20,
1993 to a borrower whose previous loans do not
include a Stafford Loan or an Unsubsidized Stafford
Loan; and
(iv) 10% per annum in the case of a Stafford Loan which
has been in repayment for four years or more and
which was made to a borrower who has a loan described
in clause (d) above.
The interest rate on all Stafford Loans made on or after July 1, 1994,
regardless of whether the borrower is a New Borrower or a Repeat Borrower, is
the rate described in clause (g) above, except that such rate shall not exceed
8.25% per annum. For any Stafford Loan made on or after July 1, 1995, the
interest rate is further reduced prior to the time the loan enters repayment and
during any Deferment Periods (as such term is defined below under "Repayment").
During such periods, the formula described in clause (g) above is applied,
except that 2.5% is substituted for 3.1%, and the rate shall not exceed 8.25%
per annum.
For loans made on or after July 1, 1998, the applicable rate will
continue to be adjusted annually, but for any 12-month period commencing on a
July 1 will be equal to the bond equivalent rate of securities with a comparable
maturity (as established by the Secretary of Education), plus 1% per annum, but
not to exceed 8.25% per annum. There can be no assurance that the interest rate
provisions for such loans will not be further amended, either before or after
the rate described herein becomes effective.
Unsubsidized Stafford Loans. Unsubsidized Stafford Loans are subject
to the same interest rate provisions as Stafford Loans.
<PAGE>
Plus Loans. The applicable interest rate on a Plus Loan:
(a) made on or after January 1, 1981, but before October 1, 1981
is 9% per annum;
(b) made on or after October 1, 1981, but before November 1, 1982
is 14% per annum;
(c) made on or after November 1, 1982, but before July 1, 1987 is
12% per annum;
(d) made on or after July 1, 1987 and before October 1, 1992 shall
be adjusted annually, and for any 12-month period beginning on
July 1 shall be equal to the bond equivalent rate of 52-week
U.S. Treasury bills auctioned at the final auction prior to
the preceding June 1, plus 3.25% per annum (but not to exceed
12% per annum); or
(e) made on or after October 1, 1992 shall be adjusted annually,
and for any 12-month period beginning on July 1 shall be equal
to the bond equivalent rate of 52-week U.S. Treasury bills
auctioned at the final auction prior to the preceding June 1,
plus 3.1% per annum (but not to exceed 10% per annum).
The applicable interest rate for Plus Loans made on or after July 1,
1994 is the same as that described in clause (e) above, except that such rate
shall not exceed 9% per annum. For Plus Loans made on or after July 1, 1998, the
applicable rate will continue to be adjusted annually, but for any 12-month
period commencing on a July 1 will be equal to the bond equivalent rate of
securities with a comparable maturity (as established by the Secretary of
Education), plus 2.1% per annum, but not to exceed 9% per annum.
If requested by the borrower, an eligible lender may consolidate SLS or
Plus Loans of the same borrower held by the lender under a single repayment
schedule. The repayment period for each included loan shall be based on the
commencement of repayment of the most recent loan. The consolidated loan shall
bear interest at a rate equal to the weighted average of the rates of the
included loans. Such a consolidation shall not be treated as the making of a new
loan. In addition, at the request of the borrower, a lender may refinance an
existing fixed rate SLS or Plus Loan (including an SLS or Plus Loan held by a
different lender who has refused so to refinance such loan) at a variable
interest rate. In such a case, proceeds of the new loan are used to discharge
the original loan.
SLS Loans. The applicable interest rates on SLS Loans made prior to
October 1, 1992 are identical to the applicable interest rates on Plus Loans
made at the same time. For SLS Loans made on or after October 1, 1992, the
applicable interest rate is the same as the applicable interest rate on Plus
Loans, except that the ceiling is 11% per annum instead of 10% per annum.
Consolidation Loans. A Consolidation Loan made prior to July 1, 1994
bears interest at a rate equal to the weighted average of the interest rates on
the loans retired, rounded to the nearest whole percent, but not less than 9%
per annum. A Consolidation Loan made on or after July 1, 1994 bears interest at
a rate equal to the weighted average of the interest rates on the loans retired,
rounded upward to the nearest whole percent, but with no minimum rate. For a
discussion of required payments that reduce the return on Consolidation Loans,
see "Fees - Rebate Fees on Consolidation Loans" below.
Loan Limits
Each type of loan (other than Consolidation Loans, which are limited
only by the amount of eligible loans to be consolidated) is subject to limits as
to the maximum principal amount, both with respect to a given year and in the
aggregate. All of the loans are limited to the difference between the cost of
attendance and the other aid available to the student. Stafford Loans are also
subject to limits based upon the needs analysis as described above under
"Eligibility -- Stafford Loans" above. Additional limits are described below.
<PAGE>
Stafford and Unsubsidized Stafford Loans. Except as described in the
next paragraph, Stafford and Unsubsidized Stafford Loans are generally treated
as one loan type for loan limit purposes. A student who has not successfully
completed the first year of a program of undergraduate education may borrow up
to $2,625 in an academic year. A student who has successfully completed such
first year, but who has not successfully completed the second year may borrow up
to $3,500 per academic year. An undergraduate student who has successfully
completed the first and second year, but who has not successfully completed the
remainder of a program of undergraduate education, may borrow up to $5,500 per
academic year. For students enrolled in programs of less than an academic year
in length, the limits are generally reduced in proportion to the amount by which
such programs are less than one year in length. A graduate or professional
student may borrow up to $8,500 in an academic year. The maximum aggregate
amount of Stafford and Unsubsidized Stafford Loans (including that portion of a
Consolidation Loan used to repay such loans) which an undergraduate student may
have outstanding is $23,000. The maximum aggregate amount for a graduate and
professional student, including loans for undergraduate education, is $65,500.
The Secretary is authorized to increase the limits applicable to graduate and
professional students who are pursuing programs which the Secretary determines
to be exceptionally expensive.
Under the 1993 Amendments, at the same time that SLS Loans were
eliminated, the loan limits for Unsubsidized Stafford Loans to independent
students, or dependent students whose parents cannot borrow a Plus Loan, were
increased by amounts equal to the prior SLS Loan limits (as described below
under "SLS Loans").
Prior to the enactment of the 1992 Amendments, an undergraduate student
who had not successfully completed the first and second year of a program of
undergraduate education could borrow Stafford Loans in amounts up to $2,625 in
an academic year. An undergraduate student who had successfully completed such
first and second year, but who had not successfully completed the remainder of a
program of undergraduate education could borrow up to $4,000 per academic year.
The maximum for graduate and professional students was $7,500 per academic year.
The maximum aggregate amount of Stafford Loans which a borrower could have
outstanding (including that portion of a Consolidation Loan used to repay such
loans) was $17,250. The maximum aggregate amount for a graduate or professional
student, including loans for undergraduate education, was $54,750. Prior to the
enactment of the 1986 Amendments, the annual limits were generally lower.
Plus Loans. For Plus Loans made on or after July 1, 1993, the amounts
of Plus Loans are limited only by the student's unmet need. Prior to that time
Plus Loans were subject to limits similar to those to which SLS Loans were then
subject (see "SLS Loans" below), applied with respect to each student on behalf
of whom the parent borrowed.
SLS Loans. A student who had not successfully completed the first and
second year of a program of undergraduate education could borrow an SLS Loan in
an amount of up to $4,000. A student who had successfully completed such first
and second year, but who had not successfully completed the remainder of a
program of undergraduate education could borrow up to $5,000 per year. Graduate
and professional students could borrow up to $10,000 per year. SLS Loans were
subject to an aggregate maximum of $23,000 ($73,000 for graduate and
professional students). Prior to the 1992 Amendments, SLS Loans were available
in amounts of $4,000 per academic year, up to a $20,000 aggregate maximum. Prior
to the 1986 Amendments, a graduate or professional student could borrow $3,000
of SLS Loans per academic year, up to a $15,000 maximum, and an independent
undergraduate student could borrow $2,500 of SLS Loans per academic year minus
the amount of all other FFEL Program loans to such student for such academic
year, up to a maximum amount of all FFEL Program loans to that student of
$12,500. The 1989 Amendments limited the amount of SLS Loans for students
enrolled in programs of less than an academic year in length (similar to the
limits described above under "Stafford Loans"), and such limits were continued
by the 1992 Amendments.
<PAGE>
Repayment
Loans made under the FFEL Program (other than Consolidation Loans) must
provide for repayment of principal in periodic installments over a period of not
less than five nor more than ten years. A Consolidation Loan must be repaid
during a period agreed to by the borrower and lender, subject to maximum
repayment periods which vary depending upon the principal amount of the
borrower's outstanding student loans (but no longer than 30 years). For
Consolidation Loans for which the application was received prior to January 1,
1993, the repayment period could not exceed 25 years. The repayment period
commences (a) not more than twelve months after the borrower ceases to pursue at
least a half-time course of study with respect to Stafford Loans for which the
applicable rate of interest is 7% per annum, (b) not more than six months after
the borrower ceases to pursue at least a half-time course of study with respect
to other Stafford Loans and Unsubsidized Stafford Loans (the six month or twelve
month periods are the "Grace Periods") and (c) on the date of final disbursement
of the loan in the case of SLS, Plus and Consolidation Loans, except that the
borrower of an SLS Loan who also has a Stafford or Unsubsidized Stafford Loan
may defer repayment of the SLS Loan to coincide with the commencement of
repayment of the Stafford or Unsubsidized Stafford Loan. During periods in which
repayment of principal is required, payments of principal and interest must in
general be made at a rate of not less than the greater of $600 per year or the
interest that accrues during the year, except that a borrower and lender may
agree at any time before or during the repayment period that repayment may be at
a lesser rate. A borrower may agree, with concurrence of the lender, to repay
the loan in less than five years with the right subsequently to extend his
minimum repayment period to five years. Borrowers are entitled to accelerate,
without penalty, the repayment of all or any part of the loan.
In addition, the 1992 Amendments required lenders of Consolidation
Loans to establish graduated or income-sensitive repayment schedules and
required lenders of Stafford and SLS Loans to offer borrowers the option of
repaying in accordance with graduated or income-sensitive repayment schedules.
The Transferor may implement graduated repayment schedules and income-sensitive
repayment schedules. Use of income-sensitive repayment schedules may extend the
ten-year maximum term for up to five years. In addition, if the repayment
schedule on a loan that has been converted to a variable interest rate does not
provide for adjustments to the amount of the monthly installment payments, the
ten-year maximum term may be extended for up to three years.
No principal repayments need be made during certain periods of
deferment prescribed by the Higher Education Act ("Deferment Periods"). For
loans to a borrower who first obtained a loan which was disbursed before July 1,
1993, deferments are available (i) during a period not exceeding three years
while the borrower is a member of the Armed Forces, an officer in the
Commissioned Corps of the Public Health Service or, with respect to a borrower
who first obtained a student loan disbursed on or after July 1, 1987, or a
student loan to cover the cost of instruction for a period of enrollment
beginning on or after July 1, 1987, an active duty member of the National
Oceanic and Atmospheric Administration Corps, (ii) during a period not in excess
of three years while the borrower is a volunteer under the Peace Corps Act,
(iii) during a period not in excess of three years while the borrower is a
full-time volunteer under the Domestic Volunteer Act of 1973, (iv) during a
period not exceeding three years while the borrower is in service, comparable to
the service referred to in clauses (ii) and (iii), as a full-time volunteer for
an organization which is exempt from taxation under Section 501(c)(3) of the
Code, (v) during a period not exceeding two years while the borrower is serving
an internship, the successful completion of which is required to receive
professional recognition required to begin professional practice or service, or
a qualified internship or residency program, (vi) during a period not exceeding
three years while the borrower is temporarily totally disabled, as established
by sworn affidavit of a qualified physician, or while the borrower is unable to
secure employment by reason of the care required by a dependent who is so
disabled, (vii) during a period not to exceed twenty-four months while the
borrower is seeking and unable to find full-time employment, (viii) during any
period that the borrower is pursuing a full-time course of study at an eligible
institution (or, with respect to a borrower who first obtained a student loan
disbursed on or after July 1, 1987, or a student loan to cover the cost of
instruction for a period of enrollment beginning on or after July 1, 1987, is
pursuing at least a half-time course of study for which the borrower has
obtained a loan under the FFEL Program), or is pursuing a course of study
pursuant to a graduate fellowship program or a rehabilitation training program
for disabled individuals approved by the Secretary
<PAGE>
of Education, (ix) during a period, not in excess of 6 months, while the
borrower is on parental leave, and (x) only with respect to a borrower who first
obtained a student loan disbursed on or after July 1, 1987, or a student loan to
cover the cost of instruction for a period of enrollment beginning on or after
July 1, 1987, (A) during a period not in excess of three years while the
borrower is a full-time teacher in a public or nonprofit private elementary or
secondary school in a "teacher shortage area" (as prescribed by the Secretary of
Education), and (B) during a period not in excess of 12 months for mothers, with
preschool age children, who are entering or re-entering the work force and who
are compensated at a rate not exceeding $1 per hour in excess of the federal
minimum wage. For loans to a borrower who first obtains a loan on or after July
1, 1993, deferments are available (a) during any period that the borrower is
pursuing at least a half-time course of study at an eligible institution or a
course of study pursuant to a graduate fellowship program or rehabilitation
training program approved by the Secretary, (b) during a period not exceeding
three years while the borrower is seeking and unable to find full-time
employment, and (c) during a period not in excess of three years for any reason
which the lender determines, in accordance with regulations under the Higher
Education Act, has caused or will cause the borrower economic hardship. Economic
hardship includes working full time and earning an amount not in excess of the
greater of the minimum wage or the poverty line for a family of two. Additional
categories of economic hardship are based on the relationship between a
borrower's educational debt burden and his or her income. Prior to the 1992
Amendments, only the Deferment Periods described above in clauses (vi) and (vii)
(with respect to the parent borrower) and the Deferment Period described in
clause (viii) (with respect to the parent borrower or a student on whose behalf
the parent borrowed) were available to Plus Loan borrowers, and only the
Deferment Periods described above in clauses (vi), (vii) and (viii) were
available to Consolidation Loan borrowers. Prior to the 1986 Amendments, Plus
Loan borrowers were not entitled to Deferment Periods. Deferment Periods extend
the ten year maximum term.
The Higher Education Act also provides for periods of forbearance
during which the borrower, in case of temporary financial hardship, may defer
any payments (a "Forbearance Period"). A borrower is entitled to forbearance for
a period not to exceed three years while the borrower's debt burden under Title
IV of the Higher Education Act (which includes the FFEL Program) equals or
exceeds 20% of the borrower's gross income, and also is entitled to forbearance
while he or she is serving in a qualifying medical or dental internship program
or in a "national service position" under the National and Community Service
Trust Act of 1993. In addition, mandatory administrative forbearances are
provided when exceptional circumstances such as a local or national emergency or
military mobilization exist; or when the geographical area in which the borrower
or endorser resides has been designated a disaster area by the President of the
United States or Mexico, the Prime Minister of Canada, or by the governor of a
state. In other circumstances, forbearance is at the lender's option. Such
forbearance also extends the ten year maximum term.
As described under "Contracts with Guarantee Agencies -- Federal
Interest Subsidy Payments" below, the Secretary of Education makes interest
payments on behalf of the borrower of certain eligible loans while the borrower
is in school and during Grace and Deferment Periods. Interest that accrues
during periods of forbearance and, if the loan is not eligible for Interest
Subsidy Payments, while the borrower is in school and during the Grace and
Deferment Periods, may be paid monthly or quarterly or capitalized (added to the
principal balance) not more frequently than quarterly.
Disbursement
Loans made under the FFEL Program (except Consolidation Loans)
generally must be disbursed in two or more installments, none of which may
exceed 50% of the total principal amount of the loan.
Fees
Guarantee Fee. A Guarantee Agency is authorized to charge a premium, or
guarantee fee, of up to 1% of the principal amount of the loan, which must be
deducted proportionately from each installment payment of the proceeds of the
loan to the borrower. Guarantee fees may not currently be charged to borrowers
of Consolidation
<PAGE>
Loans. However, lenders may be charged an insurance fee to cover the costs of
increased or extended liability with respect to Consolidation Loans. For loans
made prior to July 1, 1994, the maximum guarantee fee was 3% of the principal
amount of the loan, but no such guarantee fee was authorized to be charged with
respect to Unsubsidized Stafford Loans.
Origination Fee. An eligible lender is authorized to charge the
borrower of a Stafford or Plus Loan an origination fee in an amount not to
exceed 3% of the principal amount of the loan, and is required to charge the
borrower of an Unsubsidized Stafford Loan an origination fee in the amount of 3%
of the principal amount of the loan. These fees must be deducted proportionately
from each installment payment of the loan proceeds prior to payment to the
borrower and are not retained by the eligible lender, but must be passed on to
the Secretary of Education. For loans made prior to July 1, 1994, the maximum
authorized fee for Stafford, Plus and SLS Loans was 5%, and the required fee for
Unsubsidized Stafford Loans was 6.5%, of the principal amount of the loan.
Lender Origination Fee. The lender of any loan under the FFEL Program
made on or after October 1, 1993 is required to pay to the Secretary of
Education a fee equal to 0.5% of the principal amount of such loan.
Rebate Fee on Consolidation Loans. The holder of any Consolidation Loan
made on or after October 1, 1993 is required to pay to the Secretary of
Education a monthly fee equal to .0875% (1.05% per annum) of the principal
amount of, and accrued interest on, such Consolidation Loan.
Loan Guarantees
Under the FFEL Program, Guarantee Agencies are required to guarantee
the payment of not less than 100% of the principal amount of loans made prior to
October 1, 1993 and covered by their respective guarantee programs. For a
description of the requirements for loans to be covered by such guarantees, see
"Description of the Guarantee Agencies". The 1993 Amendments reduced the minimum
percentage of the principal amount of loans which a Guarantee Agency must pay to
98%, effective with respect to loans made on or after October 1, 1993. The
Department of Education has taken the position that a Guarantee Agency may not
pay more than 98% of the principal amount of and accrued interest on such a
loan. Under certain circumstances, guarantees may be assumed by the Secretary of
Education or another Guarantee Agency. See "Contracts with Guarantee Agencies"
below.
Contracts with Guarantee Agencies
Under the FFEL Program, the Secretary of Education is authorized to
enter into guaranty and interest subsidy agreements with Guarantee Agencies. The
FFEL Program provides for reimbursements to Guarantee Agencies for default
claims paid by Guarantee Agencies, support payments to Guarantee Agencies for
administrative and other expenses, advances for a Guarantee Agency's reserve
funds, and Interest Subsidy Payments and Special Allowance Payments to the
holders of qualifying student loans made pursuant to the FFEL Program.
The 1992 Amendments gave the Secretary of Education certain oversight
powers over Guarantee Agencies. Guarantee Agencies are required to maintain
their reserves at certain levels based on the amount of outstanding loans that
they have guaranteed. If a Guarantee Agency falls below the required level in
two consecutive years, or its claims rate exceeds 9% in any year, or if the
Secretary determines that the agency's administrative or financial condition
jeopardizes its ability to meet its obligations, the Secretary can require the
Guarantee Agency to submit and implement a plan by which it will correct such
problem(s). If a Guarantee Agency fails to timely submit an acceptable plan or
fails to improve its condition, or if the Secretary determines that the
Guarantee Agency is in danger of financial collapse, the Secretary may terminate
the Guarantee Agency's reimbursement contract. The 1993 Amendments broadened the
circumstances under which the Secretary may terminate such reimbursement
contracts, to include a determination that such action is necessary to protect
the federal fiscal interest or to ensure continued availability of student loans
or a smooth transition to direct lending (See "Direct Loans" below).
<PAGE>
The 1992 Amendments also added provisions authorizing the Secretary of
Education to assume the guarantee obligations of a Guarantee Agency. The Higher
Education Act now provides that, if the Secretary terminates a Guarantee
Agency's agreements under the FFEL Program, the Secretary shall assume
responsibility for all functions of the Guarantee Agency under its program. To
that end, the Secretary is authorized to, among other options, transfer the
guarantees to another Guarantee Agency or assume the guarantees. It also
provides that in the event the Secretary has determined that a Guarantee Agency
is unable to meet its guarantee obligations, holders of loans guaranteed by such
Guarantee Agency may submit claims directly to the Secretary for payment, unless
the Secretary has provided for the assumption of such guarantees by another
Guarantee Agency.
Federal Reimbursement
A Guarantee Agency's right to receive federal reimbursements for
various guarantee claims paid by such Guarantee Agency is governed by the Higher
Education Act and various contracts entered into between Guarantee Agencies and
the Secretary of Education. See "Description of the Guarantee Agencies --
Federal Agreements". Under the Higher Education Act and the Federal
Reimbursement Contracts, the Secretary of Education currently agrees to
reimburse a Guarantee Agency for the amounts expended by the Guarantee Agency in
the discharge of its guarantee obligation (i.e., the unpaid principal balance of
and accrued interest on loans guaranteed by the Guarantee Agency, which loans
are referred to herein as "guaranteed loans") as a result of the default of the
borrower. With respect to loans made prior to October 1, 1993, the Secretary
currently agrees to reimburse the Guarantee Agency for up to 100% of the amounts
so expended. The 1993 Amendments provide for reimbursement of a maximum of 98%
of the amount expended with respect to guaranteed loans made on or after October
1, 1993. Depending on the claims rate experience of a Guarantee Agency, such
100% (or 98%) reimbursement may be reduced as discussed in the formula described
below. The Secretary of Education also agrees to repay 100% of the unpaid
principal plus applicable accrued interest expended by a Guarantee Agency in
discharging its guarantee obligation as a result of the bankruptcy, death, or
total and permanent disability of a borrower (or in the case of a Plus Loan, the
death of the student on behalf of whom the loan was borrowed), or in certain
circumstances, as a result of school closures, which reimbursements are not to
be included in the calculations of the Guarantee Agency's Claims Rate experience
for the purpose of federal reimbursement under the Federal Reimbursement
Contracts.
The formula for computing the percentage of federal reimbursement under
the Federal Reimbursement Contracts is not accumulated over a period of years
but is measured by the amount of federal reimbursement payments in any one
federal fiscal year as a percentage of the original principal amount of loans
under the FFEL Program guaranteed by the Guarantee Agency and in repayment at
the end of the preceding fiscal year. Under the formula, federal reimbursement
payments to a Guarantee Agency in any one fiscal year not exceeding 5% of the
original principal amount of loans in repayment at the end of the preceding
fiscal year are to be paid by the Secretary of Education at 100% (or 98% for
loans made on or after October 1, 1993). Beginning at any time during any fiscal
year that federal reimbursement payments exceed 5%, and until such time as they
may exceed 9%, of the original principal amount of loans in repayment at the end
of the preceding fiscal year, then reimbursement payments on claims submitted
during that period are to be paid at 90% (or 88% for loans made on or after
October 1, 1993). Beginning at any time during any fiscal year that federal
reimbursement payments exceed 9% of the original principal amount of loans in
repayment at the end of the preceding fiscal year, then such payments for the
balance of that fiscal year will be paid at 80% (or 78% for loans made on or
after October 1, 1993). The original principal amount of loans in repayment for
purposes of computing reimbursement payments to a Guarantee Agency means the
original principal amount of all loans guaranteed by such Guarantee Agency less:
(1) guarantee payments on such loans, (2) the original principal amount of such
loans that have been fully repaid, and (3) the original principal amount of such
loans for which the first principal installment payment has not become due or
such first installment need not be paid because of a Deferment Period.
<PAGE>
Under present practice, after the Secretary of Education reimburses a
Guarantee Agency for a default claim paid on guaranteed loan, the Guarantee
Agency continues to seek repayment from the borrower. The Guarantee Agency
returns to the Secretary of Education payments that it receives from a borrower
after deducting and retaining (i) a percentage amount equal to the complement of
the reimbursement percentage in effect at the time the loan was reimbursed, and
(ii) an amount equal to 27% (or 18 1/2% in the case of a payment from the
proceeds of a Consolidation Loan) of such payments for certain administrative
costs. The Secretary of Education may, however, require the assignment to the
Secretary of defaulted guaranteed loans, in which event no further collections
activity need be undertaken by the Guarantee Agency, and no amount of any
recoveries shall be paid to the Guarantee Agency. Prior to the 1993 Amendments,
the percentage of collections which Guarantee Agencies could retain (as
described in clause (ii) above) was 30%.
A Guarantee Agency may enter into an addendum to its Interest Subsidy
Agreement (as hereinafter defined), which addendum provides for the Guarantee
Agency to refer to the Secretary of Education certain defaulted guaranteed
loans. Such loans are then reported to the Internal Revenue Service to "offset"
any tax refunds which may be due any defaulted borrower. To the extent that the
Guarantee Agency has originally received less than 100% reimbursement from the
Secretary of Education with respect to such a referred loan, the Guarantee
Agency will not recover any amounts subsequently collected by the federal
government which are attributable to that portion of the defaulted loan for
which the Guarantee Agency has not been reimbursed.
Rehabilitation of Defaulted Loans
Under Section 428F of the Higher Education Act, the Secretary of
Education is authorized to enter into an agreement with a Guarantee Agency
pursuant to which the Guarantee Agency shall sell defaulted loans that are
eligible for rehabilitation to an eligible lender. The Guarantee Agency shall
repay the Secretary of Education an amount equal to 81.5% of the then current
principal balance of such loan, multiplied by the reimbursement percentage in
effect at the time the loan was reimbursed. The amount of such repayment shall
be deducted from the amount of federal reimbursement payments for the fiscal
year in which such repayment occurs, for purposes of determining the
reimbursement rate for that fiscal year.
For a loan to be eligible for rehabilitation, the Guarantee Agency must
have received consecutive payments for 12 months of amounts owed on such loan.
Upon rehabilitation, a loan is eligible for all the benefits under the Higher
Education Act for which it would have been eligible had no default occurred
(except that a borrower's loan may only be rehabilitated once).
Eligibility for Federal Reimbursement
To be eligible for federal reimbursement payments, guaranteed loans
must be made by an eligible lender under the applicable Guarantee Agency's
Guarantee Program, which must meet requirements prescribed by the rules and
regulations promulgated under the Higher Education Act, including the borrower
eligibility, loan amount, disbursement, interest rate, repayment period and
guarantee fee provisions described herein and the other requirements set forth
in Section 428(b) of the Higher Education Act.
Under the Higher Education Act, a guaranteed loan must be delinquent
for 180 days if it is repayable in monthly installments or 240 days if it is
payable in less frequent installments before a lender may obtain payment on a
guarantee from the Guarantee Agency. The Guarantee Agency must pay the lender
for the defaulted loan prior to submitting a claim to the Secretary of Education
for reimbursement. The Guarantee Agency must submit a reimbursement claim to the
Secretary of Education within 45 days after it has paid the lender's default
claim. As a prerequisite to entitlement to payment on the guarantee by the
Guarantee Agency, and in turn payment of reimbursement by the Secretary of
Education, the lender must have exercised reasonable care and diligence in
making, servicing and collecting the Guaranteed Loan.
<PAGE>
Federal Interest Subsidy Payments
"Interest Subsidy Payments" are interest payments paid with respect to
an eligible loan during the period prior to the time that the loan enters
repayment and during Grace and Deferment Periods. The Secretary of Education and
the Guarantee Agencies entered into the Interest Subsidy Agreements as described
in "Description of the Guarantee Agencies -- Federal Agreements", whereby the
Secretary of Education agrees to pay Interest Subsidy Payments to the holders of
eligible guaranteed loans for the benefit of students meeting certain
requirements, subject to the holders' compliance with all requirements of the
Higher Education Act. Only Stafford Loans, and Consolidation Loans for which the
application was received on or after January 1, 1993, are eligible for Interest
Subsidy Payments. Consolidation Loans made after August 10, 1993 are eligible
for Interest Subsidy Payments only if all loans consolidated thereby are
Stafford Loans. In addition, to be eligible for Interest Subsidy Payments,
guaranteed loans must be made by an eligible lender under the applicable
Guarantee Agency's Guarantee Program, and must meet requirements prescribed by
the rules and regulations promulgated under the Higher Education Act, including
the borrower eligibility, loan amount, disbursement, interest rate, repayment
period and guarantee fee provisions described herein and the other requirements
set forth in Section 428(b) of the Higher Education Act.
The Secretary of Education makes Interest Subsidy Payments quarterly on
behalf of the borrower to the holder of a guaranteed loan in a total amount
equal to the interest which accrues on the unpaid principal amount prior to the
commencement of the repayment period of the loan or during any Deferment Period.
A borrower may elect to forego Interest Subsidy Payments, in which case the
borrower is required to make interest payments.
Federal Administrative Expense Allowances
Prior to the adoption of the 1993 Amendments, each Guarantee Agency was
entitled to receive from the Secretary of Education an administrative cost
allowance equal to 1% of the total principal amount of the loans (other than
Consolidation Loans) guaranteed by the Guarantee Agency in any fiscal year, for
the purposes of administrative costs of pre-claims assistance for default
prevention and collection of defaulted guaranteed loans, administrative costs of
promoting commercial lender participation, administrative costs of monitoring
the enrollment and repayment status of students, and for other such costs
related to the Guarantee Agency's Guarantee Program. The 1993 Amendments
repealed such entitlement, effective October 1, 1993. The 1993 Amendments,
however, authorized payments for transition support (including administrative
costs) to Guarantee Agencies, in connection with the transition to direct
lending. See "Direct Loans" below. Budget legislation adopted since that time
has provided for the payment to Guarantee Agencies of an administrative expense
allowance equal to 0.85% of the agency's annual new guarantee volume. The 1997
Amendments provide for payment of such an administrative expense allowance
through the fiscal year ending September 30, 2002. After the fiscal year ending
September 30, 1997, however, such amounts are subject to decreasing aggregate
limits. There are no assurances as to the level of such payments that can be
made within such aggregate limits, or that Congress will require such payments
or that the Secretary of Education will determine to continue to make any such
payments in future years.
Federal Advances
Pursuant to agreements entered into between the Guarantee Agencies and
the Secretary of Education under Sections 422 and 422(c) of the Higher Education
Act, the Secretary of Education was authorized to advance moneys from time to
time to the Guarantee Agencies for the purpose of establishing and strengthening
the Guarantee Agencies' reserves. Section 422(c) currently authorizes the
Secretary of Education to make advances to Guarantee Agencies in various
circumstances, on terms and conditions satisfactory to the Secretary, including
if the Secretary is seeking to terminate the Guarantee Agency's reimbursement
contract or assume the Guarantee Agency's functions, to assist the Guarantee
Agency in meeting its immediate cash needs or to ensure the uninterrupted
payment of claims.
<PAGE>
Federal Special Allowance Payments
The Higher Education Act provides for the payment by the Secretary of
Education of additional subsidies, called Special Allowance Payments, to holders
of qualifying student loans. The amount of the Special Allowance Payments, which
are made on a quarterly basis, is computed by reference to the average of the
bond equivalent rates of the 91-day Treasury bills auctioned during the
preceding quarter (the "91-day T-Bill Rate"). The quarterly rate for Special
Allowance Payments for Student Loans made on or after October 1, 1981, and
generally before November 16, 1986 is computed by subtracting the applicable
interest rate on such loans from the 91-day T-Bill Rate, adding 3.5% to the
resulting per centum, and dividing the resulting per centum by four. For loans
disbursed on or after November 16, 1986, or loans to cover the costs of
instruction for periods of enrollment beginning on or after November 16, 1986,
the 1986 Amendments and 1987 Amendments substituted 3.25% for 3.5% in the
foregoing formula. For loans disbursed on or after October 1, 1992, the 1992
Amendments substituted 3.1% for 3.5% in such formula. For Stafford and
Unsubsidized Stafford Loans made on or after July 1, 1995, the 1993 Amendments
substitute 2.5% for 3.1% in such formula prior to the time such loans enter
repayment and during any Deferment Periods. For loans made on or after July 1,
1998, the special allowance formula is to be revised similarly to the manner in
which the applicable interest rate formula is revised, as described above under
"Loan Terms -- Interest Rates -- Stafford Loans".
For Plus and SLS Loans which bear interest at rates adjusted annually,
Special Allowance Payments are made only in years during which the interest rate
ceiling on such loans operates to reduce the rate that would otherwise apply
based upon the applicable formula. See "Loan Terms -- Interest Rates -- Plus
Loans" and "-- SLS Loans" above. Under the 1993 Amendments, Special Allowance
Payments are paid with respect to Plus Loans made on or after July 1, 1994 only
if the rate that would otherwise apply exceeds 10% per annum, notwithstanding
that the interest rate ceiling on such loans is 9% per annum.
The Balanced Budget and Deficit Control Act of 1985, as amended (known
as the "Gramm-Rudman Law") requires the President to issue a sequester order for
any federal fiscal year in which the projected budget exceeds the target for
that year. A sequester order for any fiscal year would apply to loans made on or
after October 1 of that fiscal year. The sequester order would change the
formula for calculating Special Allowance Payments for the first four Special
Allowance Payment periods relating to loans originally disbursed during that
fiscal year. The special allowance formula would be reduced to the 91-day T-Bill
Rate plus 3.0% (for loans with a special allowance formula of the 91-day T-Bill
Rate plus 3.1%).
The Higher Education Act provides that if Special Allowance Payments or
Interest Subsidy Payments have not been made within 30 days after the Secretary
of Education receives an accurate, timely and complete request therefor, the
special allowance payable to such holder shall be increased by an amount equal
to the daily interest accruing on the special allowance and Interest Subsidy
Payments due the holder.
Special Allowance Payments and Interest Subsidy Payments are reduced by
the amount which the lender is authorized or required to charge as an
origination fee, as described above under "Loan Terms -- Fees -Origination Fee".
In addition, the amount of the lender origination fee described above under
"Loan Terms -- Fees -- Lender Origination Fees" is collected by offset to
Special Allowance Payments and Interest Subsidy Payments.
Federal Student Loan Insurance Fund
The Higher Education Act authorizes the establishment of a Student Loan
Insurance Fund by the Federal government for making the federal insurance and
the federal reimbursement payments on defaulted student loans to Guarantee
Agencies. If moneys in the fund are insufficient to make the federal payments on
defaults of such loans, the Secretary of Education is authorized, to the extent
provided in advance by appropriation acts, to issue to the Secretary of the
Treasury obligations containing terms and conditions prescribed by the Secretary
of Education and approved by the Secretary of the Treasury, bearing interest at
a rate determined by the Secretary of the
<PAGE>
Treasury. The Secretary of the Treasury is authorized and directed by the Higher
Education Act to purchase such obligations.
Direct Loans
The 1993 Amendments authorized a program of "direct loans", to be
originated by schools with funds provided by the Secretary of Education. Under
the direct loan program, the Secretary of Education is directed to enter into
agreements with schools, or origination agents in lieu of schools, to disburse
loans with funds provided by the Secretary. Participation in the program by
schools is voluntary. The goals set forth in the 1993 Amendments call for the
direct loan program to constitute 5% of the total volume of loans made under the
FFEL Program and the direct loan program for academic year 1994-1995, 40% for
academic year 1995-1996, 50% for academic years 1996-1997 and 1997-1998 and 60%
for academic year 1998-1999. No provision is made for the size of the direct
loan program thereafter. Based upon information released by the General
Accounting Office, participation by schools in the direct loan program has not
been sufficient to meet the goals for the 1995-1996 or 1996-1997 academic years.
The loan terms are generally the same under the direct loan program as
under the FFEL Program, though more flexible repayment provisions are available
under the direct loan program. At the discretion of the Secretary of Education,
students attending schools that participate in the direct loan program (and
their parents) may still be eligible for participation in the FFEL Program,
though no borrower could obtain loans under both programs.
It is difficult to predict the impact of the direct lending program.
There is no way to accurately predict the number of schools that will
participate in future years, or, if the Secretary authorizes students attending
participating schools to continue to be eligible for FFEL Program loans, how
many students will seek loans under the direct loan program instead of the FFEL
Program. In addition, it is impossible to predict whether future legislation
will eliminate, limit or expand the direct loan program or the FFEL Program.
DESCRIPTION OF THE GUARANTEE AGENCIES
General
Of the Financed Student Loans included in the Initial Pool Balance,
approximately [71.81%] are guaranteed by Educational Credit Management
Corporation, a Minnesota non-profit corporation ("ECMC", formerly known as
Transitional Guaranty Agency, Inc.), approximately [15.02%] are guaranteed by
Pennsylvania Higher Education Assistance Agency, an agency of the Commonwealth
of Pennsylvania ("PHEAA"), approximately [9.78%] are HEAL Loans, and the
remaining [3.39%] are guaranteed by one of the following Guarantee Agencies:
United Student Aid Funds, Inc., a Delaware non-profit corporation ("USAF"), the
Florida Department of Education, an agency of the State of Florida, New York
Higher Education Services Corporation, an agency of the State of New York, and
Texas Guaranteed Student Loan Program, a Texas nonprofit corporation.
A Guarantee Agency guarantees loans made to students or parents of
students by lending institutions such as banks, credit unions, savings and loan
associations, certain schools, pension funds and insurance companies. A
Guarantee Agency generally purchases defaulted student loans which it has
guaranteed from its cash and reserves (generally referred to herein as its
"Guarantee Fund"). A lender may submit a default claim to the Guarantee Agency
after the student loan has been delinquent for at least 180 days; however,
lenders are strongly encouraged not to file a claim until a loan is at least 210
days delinquent. The default claim package must include all information and
documentation required under the FFEL Program regulations and the Guarantee
Agency's policies and procedures. Under the Guarantee Agencies' current
procedures, assuming that the default claim package complies with the Guarantee
Agency's loan procedures manual or regulations, the Guarantee Agency pays the
lender for a default claim within 90 days of the lender's filing the claim with
the Guarantee Agency. The
<PAGE>
Guarantee Agency will pay the lender interest accrued on the loan for up to 360
days after delinquency. The Guarantee Agency must file a reimbursement claim
with the Department of Education within 45 days after the Guarantee Agency has
paid the lender for the default claim.
In general, a Guarantee Agency's Guarantee Fund has been funded
principally by administrative cost allowances paid by the Secretary of
Education, guarantee fees paid by lenders (the cost of which may be passed on to
borrowers), investment income on moneys in the Guarantee Fund, and a portion of
the moneys collected from borrowers on Guaranteed Loans that have been
reimbursed by the Secretary of Education to cover the Guarantee Agency's
administrative expenses. ECMC's funding of its Guarantee Fund has differed (and
may continue to differ) from other Guarantors. See "-- Educational Credit
Management Corporation" below.
Various changes to the Higher Education Act have adversely affected the
receipt of revenues by the Guarantee Agencies and their ability to maintain
their Guarantee Funds at previous levels, and may adversely affect their ability
to meet their guarantee obligations. These changes include the reduction in
reinsurance payments from the Secretary of Education because of reduced
reimbursement percentages; the reduction in maximum permitted guarantee fees
from 3% to 1% for loans made on or after July 1, 1994; the reduction and
possible elimination of administrative expense allowances from the Secretary of
Education; the reduction in supplemental preclaims assistance payments from the
Secretary of Education; and the reduction in retention by a Guarantee Agency of
collections on defaulted loans from 30% to 27%. Additionally, the adequacy of a
Guarantee Agency's Guarantee Fund to meet its guarantee obligations with respect
to existing student loans depends, in significant part, on its ability to
collect revenues generated by new loan guarantees. The Federal Direct Student
Loan Program may adversely affect the volume of new loan guarantees. Pending
legislation and future legislation may make additional changes to the Higher
Education Act that would significantly affect the revenues received by Guarantee
Agencies and the structure of the guarantee agency program. For a more complete
description of provisions of the Higher Education Act that relate to payments
described in this paragraph or affect the funding of a Guarantee Fund, see
"Description of the FFEL Program".
The Higher Education Act gives the Secretary of Education various
oversight powers over Guarantee Agencies. These include requiring a Guarantee
Agency to maintain its Guarantee Fund at a certain required level and taking
various actions relating to a Guarantee Agency if its administrative and
financial condition jeopardizes its ability to meet its obligations. These
actions include, among others, providing advances to the Guarantee Agency,
terminating the Guarantee Agency's Federal Reimbursement Contracts, assuming
responsibility for all functions of the Guarantee Agency, and transferring the
Guarantee Agency's guarantees to another guarantee agency or assuming such
guarantees. The Higher Education Act provides that a Guarantee Agency's
Guarantee Fund shall be considered to be the property of the United States to be
used in the operation of the FFEL Program or the Federal Direct Student Loan
Program, and, under certain circumstances, the Secretary of Education may demand
payment of amounts in the Guarantee Fund. The 1997 Amendments direct the
Secretary of Education to demand payment on September 1, 2002 of a total of one
billion dollars from all the Guarantee Agencies participating in the FFEL
Program. The amounts to be demanded of each Guarantee Agency shall be determined
in accordance with formulas included in the Higher Education Act. Each Guarantee
Agency will be required to deposit funds in a restricted account in
installments, beginning in the federal fiscal year ended September 30, 1998, to
provide for such payment. The Secretary of Education has not yet made any
determination of the amounts required to be so transferred by the Guarantee
Agencies. There can be no assurance that relevant federal laws, including the
Higher Education Act, will not be further changed in a manner that may adversely
affect the ability of a Guarantee Agency to meet its guarantee obligations. See
"Description of the FFEL Program".
There are no assurances as to the Secretary of Education's actions if a
Guarantee Agency encounters administrative or financial difficulties or that the
Secretary of Education will not demand that a Guarantee Agency transfer
additional portions or all of its Guarantee Fund to the Secretary of Education.
<PAGE>
Information relating to the particular Guarantee Agencies set forth in
this Prospectus has been provided by the respective Guarantee Agencies, and
neither such information nor information included in the reports referred to
herein has been verified by, or is guaranteed as to accuracy or completeness by,
the Transferor or the Underwriters. Such information should not be construed as
a representation by the Transferor or the Underwriters. No representation is
made by the Transferor or the Underwriters as to the accuracy or adequacy of
such information or the absence of material adverse changes in such information
subsequent to the dates thereof.
Federal Agreements
Each Guarantee Agency and the Secretary of Education have entered into
Federal Reimbursement Contracts pursuant to Section 428(c) of the Higher
Education Act (which include, for older Guarantee Agencies, a supplemental
contract pursuant to former Section 428A of the Higher Education Act), which
provide for the Guarantee Agency to receive 80% to 100% reimbursement of
insurance payments that the Guarantee Agency makes to eligible lenders with
respect to loans guaranteed by the Guarantee Agency prior to the termination of
the Federal Reimbursement Contracts or the expiration of the authority of the
Higher Education Act. The 1993 Amendments reduced the reimbursement percentages
referred to above with respect to claims on most loans made on or after October
1, 1993. See "Effect of Annual Claims Rate" below. The Federal Reimbursement
Contracts provide for termination under certain circumstances and also provide
for certain actions short of termination by the Secretary of Education to
protect the federal interest. See "Description of the FFEL Program -- Contracts
with Guarantee Agencies -- Federal Reimbursement".
In addition to guarantee benefits, qualified Student Loans acquired
under the Program benefit from certain federal subsidies. Each Guarantee Agency
and the Secretary of Education have entered into an interest subsidy agreement
under Section 428(b) of the Higher Education Act (as amended, the "Interest
Subsidy Agreement"), which entitles the holders of eligible loans guaranteed by
the Guarantee Agency to receive Interest Subsidy Payments from the Secretary of
Education on behalf of certain students while the student is in school, during a
six to twelve month Grace Period after the student leaves school, and during
certain Deferment Periods, subject to the holders' compliance with all
requirements of the Higher Education Act. See "Description of the FFEL Program
- -- Contracts with Guarantee Agencies -- Federal Interest Subsidy Payments" for a
more detailed description of the Interest Subsidy Payments.
United States Courts of Appeals have held that the federal government,
through subsequent legislation, has the right unilaterally to amend the
contracts between the Secretary of Education and the Guarantee Agencies
described herein. Amendments to the Higher Education Act in 1986, 1987, 1992 and
1993, respectively (i) abrogated certain rights of guarantee agencies under
contracts with the Secretary of Education relating to the repayment of certain
advances from the Secretary of Education, (ii) authorized the Secretary of
Education to withhold reimbursement payments otherwise due to certain guarantee
agencies until specified amounts of such guarantee agencies' reserves had been
eliminated, (iii) added new reserve level requirements for guarantee agencies
and authorized the Secretary of Education to terminate the Federal Reimbursement
Contracts under circumstances that did not previously warrant such termination,
and (iv) expanded the Secretary of Education's authority to terminate such
contracts and to seize guarantee agencies' reserves. There can be no assurance
that future legislation will not further adversely affect the rights of the
Guarantee Agencies, or holders of loans guaranteed by a Guarantee Agency under
such contracts.
Effect of Annual Claims Rate
A Guarantee Agency's ability to meet its obligation to pay default
claims on Financed Eligible Loans will depend on the adequacy of its Guarantee
Fund and, under the current federal reinsurance arrangement, the default
experience of all lenders under the Guarantee Agency's Guarantee Program. A high
default experience among lenders participating in a Guarantee Agency's Guarantee
Program may cause the Guarantee Agency's Claims Rate
<PAGE>
(as defined below) for its Guarantee Program to exceed the 5% and 9% levels
described below, and result in the Secretary of Education reimbursing the
Guarantee Agency at lower percentages of default claims payments made by the
Guarantee Agency.
Each Guarantee Agency is currently entitled to receive reimbursement
payments under the Federal Reimbursement Contracts in amounts that vary
depending on the Claims Rate experience of the Guarantee Agency. The "Claims
Rate" is computed by dividing total default claims since the previous September
30 by the total original principal amount of the Guarantee Agency's guaranteed
loans in repayment on such September 30. On October 1 of each year the Claims
Rate begins at zero, regardless of the experience in preceding years. For loans
made prior to October 1, 1993, if the Claims Rate remains equal to or below 5%
within a given federal fiscal year (October 1 through September 30), the
Secretary of Education is currently obligated to provide 100% reimbursement; if
and when the Claims Rate exceeds 5% and until such time, if any, as it exceeds
9% during the fiscal year, the reimbursement rate is at 90%; if and when the
Claims Rate exceeds 9% during the fiscal year, the reimbursement rate for the
remainder of the fiscal year is at 80%. For loans made prior to October 1, 1993,
each Guarantee Agency is currently entitled to at least 80% reimbursement from
the Secretary of Education on default claims that it purchases, regardless of
its Claims Rate. The reimbursement percentages for loans made on or after
October 1, 1993 are reduced from 100%, 90% and 80% to 98%, 88% and 78%,
respectively. See "Description of the FFEL Program".
The Claims Rates for PHEAA for each of the last five federal fiscal
years is set forth in the table under "Certain Historical Information for
Guarantee Agencies -- Claims Rate" below.
Educational Credit Management Corporation
ECMC was organized in 1994 under the name Transitional Guaranty Agency,
Inc. On March 17, 1994, ECMC entered into various Guarantee Agency agreements
with the Department of Education (as amended or supplemented, the
"ECMC\Department Agreements"). In accordance with the ECMC\Department
Agreements, the Department of Education has instructed ECMC to perform various
functions. The primary functions in fiscal years 1995 and 1996 were to collect
and monitor payments from borrowers making payments on loans under Chapter 13 of
the Bankruptcy Code. These loans were transferred from the Department of
Education and from other Guarantee Agencies. The Department of Education also
transferred guarantees representing predefault and postdefault inactive accounts
for ECMC to service these accounts if the need should arise.
Pursuant to the Department of Education's request, ECMC developed the
operational capability to issue new guarantees and to service existing active
loan guarantees. On March 15, 1996, the Department of Education designated ECMC
as the Guarantee Agency for the Commonwealth of Virginia, effective July 1,
1996. ECMC replaced the Virginia State Education Assistance Authority ("SEAA")
and assumed responsibility for all outstanding loan guarantees of SEAA.
Pursuant to the ECMC\Department Agreements, ECMC's financial structure
differs in many respects from other Guarantee Agencies. The ECMC\Department
Agreements provide that at the end of each federal fiscal year, ECMC is required
to calculate the amount of its reserve funds and the amount of its expenses
during the fiscal year using a formula prescribed by the Department of
Education. Using that formula, if the amount of reserve funds exceed 60 percent
of expenses (as defined by the Department of Education), ECMC is required to
return the excess to the Department of Education, unless directed otherwise by
the Department of Education.
ECMC has agreed that it will provide a copy of its most recent audited
financial statements to Noteholders upon receipt of a written request directed
to Mr. Robert McGowan, Vice President, Educational Credit Management
Corporation, 101 East Fifth Street, Suite 2400, Saint Paul, Minnesota 55101.
<PAGE>
Pennsylvania Higher Education Assistance Agency
Certain information regarding PHEAA and its operations is included
under "The Servicers -- Pennsylvania Higher Education Assistance Agency."
Certain Historical Information for Guarantee Agencies
Set forth below is certain historical information with respect to PHEAA
and with respect to all guarantors of loans under the Federal Family Education
Loan Program. Information is not provided for ECMC because it only commenced
guaranteeing loans on July 1, 1996. Except as otherwise indicated below, the
information regarding each Guarantee Agency has been obtained from the
Department of Education's Federal Fiscal Year 1993 Loan Programs Data Book and
FY94-FY96 Federal Student Loan Programs Data Book (the "DOE Data Books"). No
independent verification of such information has been or will be made by the
Transferor or the Underwriters.
Guarantee Volume. The following table sets forth the approximate
aggregate principal amount of loans under the FFEL Program that have first
become committed to be guaranteed by PHEAA and by all guarantors of such loans
in each of the five federal fiscal years 1992 through 1996:*
Stafford, Unsubsidized Stafford, SLS,
PLUS and Consolidated Loans
<TABLE>
<CAPTION>
Federal Guaranteed
Fiscal Dollars in Millions All
Year PHEAA Guarantors
---- ----- ----------
<S> <C>
1992 $1,410.4 $16,114.0
1993 1,857.1 19,356.6
1994 2,003.4 25,070.4
1995 2,221.5 24,213.0
1996 2,227.7 23,831.3
</TABLE>
- ----------
* The information set forth in the table above has been obtained from
PHEAA and, as to All Guarantors, the DOE Data Books.
Reserve Ratio. Each Guarantee Agency'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 of Education'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 Guarantee Agency minus (i) the original principal amount of
loans cancelled, claims paid, loans paid in full and loan guarantees transferred
from such Guarantee Agency to other guarantors, plus (ii) the original principal
amount of loan guarantees transferred to such Guarantee Agency from other
guarantors. The following table sets forth PHEAA's cumulative cash reserves and
its corresponding reserve ratios and the national average reserve ratio for all
guarantors for the five federal fiscal years 1992 through 1996.*
<PAGE>
<TABLE>
<CAPTION>
PHEAA National
Federal Cumulative Average
Fiscal Cash Reserve Reserve
Year Reserves** Ratio Ratio
---- ---------- ----- -----
<S> <C>
1992 $ 85.9 1.1% 1.5%
1993 100.9 1.1 1.7
1994 133.6 1.3 1.4
1995 166.3 1.5 1.6
1996 210.6 1.6 1.8
</TABLE>
- ----------
* The information set forth in the table above has been obtained from
PHEAA and, as to the national average, the DOE Data Books (with respect
to fiscal years 1992 through 1995) and from the Department of Education
(with respect to fiscal year 1996). According to the Department of
Education, available cash reserves may not always be an accurate
barometer of a guarantor's financial health.
** Dollars in millions.
Cumulative Recovery Rates. A Guarantee Agency's cumulative recovery
rate is determined by dividing the cumulative aggregate amount recovered from
borrowers by such Guarantee Agency by the cumulative aggregate amount of default
claims paid by such Guarantee Agency as of the end of the applicable federal
fiscal year . The table below sets forth the cumulative recovery rates for PHEAA
and the national average cumulative recovery rates for all guarantors as of the
end of the five federal fiscal years 1992 through 1996.* PHEAA's cumulative
recovery rates have exceeded the national average cumulative recovery rate in
each of the five federal fiscal years shown in the Cumulative Recovery Rate
table below. The Transferor's management does not believe that cumulative
recovery rates provide an accurate indication of a guarantor's financial health.
<TABLE>
<CAPTION>
Federal Cumulative
Fiscal Recovery Rate National
Year PHEAA Average
---- ----- -------
<S> <C>
1992 46.5% 35.1%
1993 48.2 38.0
1994 52.9 39.2
1995 53.3 40.7
1996 55.0 43.1**
- ----------
</TABLE>
* The information set forth in the table above has been obtained from
PHEAA and, as to the national average, the Department of Education.
** 1996 National Average does not include all guarantor data, as all
guarantors have not been processed.
<PAGE>
Loan Loss Reserve. The DOE Data Books do not disclose whether any
guarantor has established a segregated loan loss reserve with respect to its
student loan guarantee obligations. Accordingly, to the extent that a guarantor
has not established such a segregated loan loss reserve, if a guarantor receives
less than full reimbursement of its guarantee obligations from the Department of
Education, the guarantor would be forced to look to its existing assets to
satisfy any such guarantee obligations not so reimbursed.
Claims Rate. The following table sets forth the Claims Rate of PHEAA
and the national average for all guarantors for the last five federal fiscal
years 1992 through 1996:*
Federal
Fiscal Claims Rate National
Year PHEAA Average
------ ------------- ----------
1992 2.84% 4.15%
1993 2.32 3.83
1994 2.18 3.44
1995 1.97 3.21
1996 1.58 3.25
- ----------
* The information set forth in the table above has been obtained from
PHEAA and, as to the national average, the Department of Education.
PHEAA's Claims Rate have been lower than the national average Claims
Rate in each of the five federal fiscal years shown in the Claims Rate table
above. Management of PHEAA has indicated to the Transferor that they are
currently unaware of any trends or conditions which would cause their Claims
Rate to exceed 5% and thereby result in less than maximum reimbursement for
reinsurance claims to the Department of Education. Notwithstanding the above, no
assurance can be made that any such trends will continue or not deteriorate, or
that any Guarantee Agency will receive full reimbursement for reinsurance claims
(or the full 98% maximum reimbursement for loans first disbursed on or after
October 1, 1993).
DESCRIPTION OF THE HEAL PROGRAM
Eligible Borrower
An eligible borrower under the HEAL Program is a student who (i) meets
certain citizen, national or resident requirements, (ii) has been accepted for
enrollment at a school of medicine, osteopathy, dentistry, veterinary medicine,
optometry, podiatry, pharmacy, public health or chiropractic, or a graduate
program in health administration or clinical psychology (an "eligible
institution") or, if attending an eligible institution, is in good standing at
that institution, but, in the case of a medical, dental or osteopathic student,
including only the last four years of an accelerated, integrated program of
study, (iii) is or will be a full-time student at the eligible institution, (iv)
has agreed that all funds received under the loan will be used solely for
tuition and other reasonable educational expenses and the insurance premium
charged on the loan, (v) requires the loan to pursue the course of study at the
institution, and (vi) if a pharmacy student, has satisfactorily completed three
years of training. Certain individuals who meet the same citizen, national or
resident requirements and have previously received a loan insured under the HEAL
Program while a full-time student at an eligible institution may also receive a
loan during the period before principal must be paid on the loan to repay
interest due on the previous loans under the HEAL Program.
<PAGE>
Eligible Lender
An eligible institution may apply to the Secretary of HHS to become a
lender under the HEAL Program. Various types of other organizations may qualify
to be eligible lenders or holders of HEAL loans. Eligible lenders may include an
agency or instrumentality of a state; a bank, savings and loan association,
credit union or insurance company which is subject to examination and
supervision in its capacity as a lender by an agency of the United States or of
the state in which it has its principal place of business; a pension fund
approved by the Secretary of HHS; and certain other entities specified in the
HEAL Act. If the Secretary of HHS approves the lender's application, the
Secretary of HHS and the lender enter into an insurance contract whereby the
Secretary of HHS agrees to insure each eligible HEAL Loan held by the lender
against the borrower's default, death, total and permanent disability, or
bankruptcy.
An approved eligible lender can have either a standard insurance
contract or a comprehensive insurance contract with the Secretary of HHS. A
lender with a standard insurance contract must submit to the Secretary of HHS a
borrower's application for each loan that the lender determines to be eligible
for insurance. The Secretary of HHS notifies the lender whether or not the loan
is insurable, the amount of the insurance and the expiration of the loan
commitment. A lender with a comprehensive insurance contract may disburse a loan
without submitting an individual borrower's application to the Secretary of HHS
for initial approval. All eligible loans made by a lender with a comprehensive
insurance contract before a specified date are automatically insured up to the
aggregate amount stated in the insurance contract. The Secretary of HHS may
limit, suspend or terminate the lender's eligibility under the HEAL Program if
the lender violates any provision of the HEAL Act, or agreements with the
Secretary of HHS concerning the HEAL Program. The Transferor and the Eligible
Lender Trustee are each a currently approved holder of a Comprehensive Insurance
Contract with the Secretary of HHS.
Insurance Benefits
The insurance provided by the Secretary of HHS covers 100% of the
lender's losses on both unpaid principal and interest except to the extent that
a borrower may have a defense on the loan (other than infancy). HEAL insurance
is not unconditional. The Secretary of HHS insures HEAL Loans on the implied
representation of the lender that all the requirements for the initial
insurability have been met. HEAL insurance is further conditioned upon
compliance by all holders of the loan with all laws, regulations and other
requirements. The insurance coverage on a loan under the HEAL Program ceases to
be effective after a 60-day default by the lender in the payment of the
insurance premium charged by the Secretary of HHS.
Authorized Amounts of HEAL Loans
An eligible student borrower may borrow an amount for an academic year
equal to the difference between the student's estimated cost of education for
that period and the amount of other financial aid the student will receive for
that period. An eligible non-student borrower may borrow in an amount that is no
greater than the sum of the HEAL insurance premium plus the interest that is
expected to accrue and must be paid on the borrower's HEAL Loan during the
period for which the new loan is intended. The total amount of HEAL Loans made
to any borrower which may be covered by federal insurance may not exceed $20,000
in any academic year for a student enrolled in a school of, or in the field of,
medicine, osteopathy, dentistry, veterinary medicine, optometry or podiatry, up
to a maximum aggregate of $80,000, and $12,500 in any academic year for a
borrower enrolled in a school of, or in the field, of pharmacy, public health,
or chiropractic, or a graduate program in health administration or clinical
psychology, up to an aggregate maximum of $50,000.
<PAGE>
Terms of HEAL Loans
A loan made under the HEAL Program must be made without security,
except that in certain limited instances an endorsement may be required. The
borrower may prepay the whole or any part of the loan at any time without
penalty.
The principal amount of the HEAL Loan must be repaid in installments
over a period of not less than 10 years or more than 25 years, beginning not
earlier than nine months nor later than twelve months (the "Grace Period") after
the date on which (i) the borrower ceases to be a participant in an accredited
internship or residency program of not more than four years in duration, or the
borrower completes the fourth year of an accredited internship or residency
program of more than four years in duration (for loans made on or after October
22, 1985), or the borrower ceases to carry, at an eligible institution, the
normal full-time academic workload, or (ii) the borrower, who is a graduate
student of an eligible institution, ceases to be a participant in a fellowship
training program not in excess of two years or a participant in a full-time
educational activity not in excess of two years, which is directly related to
the health profession for which the borrower prepared at an eligible
institution, as determined by the Secretary of HHS, and which may be engaged in
by the borrower during such a two-year period which begins within twelve months
after the completion of the borrower's participation in a program described in
clause (i) of this sentence or prior to the completion of the borrower's
participation in such program (for loans made on or after October 22, 1985),
except during periods of deferment (described below). The repayment period of
the loan may not exceed 33 years from the date of execution of the note or
written agreement evidencing it. Principal and interest need not be paid, but
interest accrues, during any period (i) during which the borrower is pursuing a
full-time course of study at an eligible institution (or at an eligible
institution under the FFEL Program), (ii) not in excess of four years during
which the borrower is a participant in an accredited internship or residency
program, (iii) not in excess of three years during which the borrower is a
member of the Armed Forces of the United States, (iv) not in excess of three
years during which the borrower is in service as a volunteer under the Peace
Corps Act (22 USCA ss.2501 et seq.) or is a member of the National Health
Service Corps, (v) not in excess of three years during which the borrower is in
service as a full-time volunteer under Title I of the Domestic Volunteer Service
Act of 1973, (vi) not in excess of three years for a borrower who has completed
an accredited internship or residency raining program in osteopathic general
practice, family medicine, general internal practice, preventive medicine or
general pediatrics and who is practicing primary care, (vii) not in excess of
one year, for borrowers who are graduates of schools of chiropractic, (viii) not
in excess of two years which is described in clause (ii) of the first sentence
of this paragraph, and (ix) in addition to all other deferments for which the
borrower is eligible under clauses (i) through (viii) of this sentence during
which the borrower is a member of the Armed Forces on active duty during the
Persian Gulf conflict. The periods described in (i) through (vii) are "Deferment
Periods." In certain circumstances a Deferment Period may not be included in
determining the 25- and 33-year maximum repayment periods referred to above.
At least 30 and not more than 60 days before the commencement of the
repayment period, the borrower must contact the lender to establish the precise
term of repayment. The note must offer, in accordance with criteria prescribed
by regulation of the Secretary of HHS, a graduated repayment schedule. The
borrower may choose to repay under the graduated repayment schedule or a
repayment schedule which provides for substantially equal installment payments.
The Secretary of HHS has not promulgated regulations which set the criteria for
a graduated repayment schedule.
Unless agreed otherwise, in writing, the total of the payments by a
borrower during any year of the repayment period with respect to all loans of
the borrower under the HEAL Program should be at least equal to the annual
interest on the outstanding principal, except during Deferment Periods.
<PAGE>
Interest
At the lender's option, the interest rate on the HEAL Loan may be
calculated on a fixed rate or on a variable rate basis. Whichever method is
selected, that method must continue over the life of the loan, except where the
loan is consolidated with another HEAL Loan. Interest that is calculated on a
fixed rate basis is determined for the life of the loan during the calendar
quarter in which the loan is disbursed. It may not exceed the maximum rate
determined for that quarter by the Secretary of HHS. Interest that is calculated
on a variable rate basis varies every calendar quarter throughout the life of
the loan as the market price of U.S. Treasury bills changes. For any quarter, it
may not exceed the maximum rate determined by the Secretary of HHS. For each
calendar quarter, the Secretary of HHS determines the general maximum annual
HEAL interest rate by (i) determining the average of the bond equivalent rates
reported for the 91-day U.S. Treasury bills auctioned for the preceding calendar
quarter, (ii) adding 3 percentage points, and (iii) rounding that figure to the
next higher one-eighth of one percent. Pursuant to the insurance agreements
under which the Financed HEAL Loans originally were made, however, the maximum
amount under clause (ii) of the preceding sentence is 2.00 percentage points
during in-school periods, Grace Periods and Deferment Periods, and 2.70
percentage points during the Repayment Phase.
As a general rule, unpaid accrued interest may be compounded
semi-annually and added to principal. However, if a borrower postpones payment
of interest before the beginning of the repayment period or during Deferment
Periods or the lender permits postponement during forbearance, the lender may
refrain from semi-annual compounding of interest and add accrued interest to
principal only at the time repayment of principal begins or resumes. A lender
may do so only if this practice does not result in interest being compounded
more frequently than semi-annually. Interest begins to accrue when a loan is
disbursed. However, a borrower may postpone payment of interest before the
beginning of the repayment period or during the Deferment Periods or a lender
may permit postponement during the forbearance. In these cases, payment of
interest must begin or resume on the date on which repayment of principal begins
or resumes. If payment of interest is postponed, it may be added to the
principal for purposes of calculating a repayment schedule.
Insurance Premium
The Secretary of HHS charges each lender an insurance premium to
provide the insurance on HEAL Loans at the time of disbursement. The HEAL Act
authorizes the Secretary of HHS to charge an insurance premium based on the
default rate of the educational institution and the borrower obtaining a
co-signer on the loan or securing the debt with only the borrower's signature
payable in advance. Presently, the insurance premium varies between 3% and 8%.
The lender may pass along the cost of the insurance premium to the borrower by
billing for it separately or deducting the amount from disbursed loan proceeds.
Premiums are not refundable by the Secretary of HHS and need not be refunded by
the lender to the borrower. Eligible lenders and eligible institutions may also
be assessed additional risk based premiums based on the eligible entities
default rate. The risk-based premium to be assessed shall range from 6 percent
of the principal amount of the loan to 10 percent of the principal amount of the
loan.
Consolidation of HEAL Loans
If a lender or holder holds two or more HEAL Loans made to the same
borrower, the lender or holder and the borrower may agree to consolidate the
loans into a single HEAL Loan obligation evidenced by one promissory note if the
consolidation will not result in terms less favorable to the borrower than if no
consolidation had occurred and certain other requirements are satisfied.
Payments by Secretary of HHS
The Secretary of HHS insures each lender for the losses which the
lender may incur on insured loans in the event that a borrower dies, becomes
permanently and totally disabled, files for bankruptcy or defaults on the loans.
If a borrower dies or becomes disabled, the Secretary of HHS discharges the
borrower's liability on the loan
<PAGE>
by repaying the amount owed. If the borrower defaults after a substantial
collection effort, the Secretary of HHS pays the amount of the loss to the
lender, and the borrower's loan is assigned to the Secretary of HHS.
Due Diligence
A lender must follow certain procedures in making HEAL Loans, and must
exercise due diligence in the collection of a HEAL Loan with respect to both a
borrower and any endorser, in accordance with regulations of the Secretary of
HHS. If these procedures are not followed or such due diligence is not
exercised, the lender's ability to realize the benefits of the insurance
described above may be adversely affected.
Claims
"Default" means the persistent failure of the borrower to make a
payment when due, or to comply with other terms of the note or other written
agreement evidencing a loan under circumstances where the Secretary of HHS finds
it reasonable to conclude that the borrower no longer intends to honor the
obligation to repay. In the case of a loan repayable (or on which interest is
payable) in monthly installments, this failure must have persisted for 120 days.
In the case of a loan repayable (or on which interest is payable) in less
frequent installments, this failure must have persisted for 180 days. Upon the
occurrence of a default, the Secretary of HHS shall require the eligible lender
or holder to commence and prosecute an action for default. If, for a particular
loan, an automatic stay is imposed on collection activities by a Bankruptcy
Court, and the lender receives written notification of the automatic stay prior
to initiating legal proceedings against the borrower, the 120 or 180-day period
does not include any period prior to the end of the automatic stay. Unless a
lender has notified the Secretary of HHS that it has filed suit against a
defaulted borrower, it must file a default claim with the Secretary of HHS
within 30 days after a loan has been determined to be in default. A lender must
file a death claim with the Secretary of HHS within 30 days after the lender
determines that a borrower is dead. A lender must file a disability claim with
the Secretary of HHS within 30 days after it is notified that the Secretary of
HHS had determined a borrower to be totally and permanently disabled. A lender
must file a bankruptcy claim with the Secretary of HHS within 10 days of the
initial date of receipt of court notice or written notice from the borrower's
attorney that the borrower has filed for bankruptcy under chapters 11 or 13 of
the Bankruptcy Code, or has filed a complaint to determine the dischargeability
of the HEAL Loan under chapter 7 of the Bankruptcy Code.
General
The Secretary of HHS may enter into a special contract with a borrower
who has obtained a degree from an eligible institution. Under the contract, the
borrower agrees to serve for a continuous period of (i) not less than 12 months
for each 12-month period the Secretary of HHS assumes such obligations, or (ii)
24 months, whichever is greater in a health manpower shortage area as a member
of the National Health Service Corps or as a private practitioner. In return,
the Secretary of HHS will pay an amount, not to exceed $10,000 per 12-month
period, to the holder of the borrower's HEAL Loan to be applied toward interest
and principal.
Insurance Fund
The federal government has established pursuant to the HEAL Act a
student loan insurance fund which is available without fiscal year limitation to
the Secretary of HHS for making payments in connection with the collection or
default of loans insured under the HEAL Program. If moneys in the fund are
insufficient to make the payments on collection or default of insured loans, the
Secretary of HHS is authorized, to the extent provided in advance by
appropriation acts, to issue through the Secretary of the Treasury obligations
containing terms and conditions prescribed by the Secretary of HHS and approved
by the Secretary of the Treasury, bearing interest at a rate determined by the
Secretary of the Treasury. The Secretary of the Treasury is authorized and
directed to purchase such obligation by the HEAL Act.
<PAGE>
Collection/Litigation
The use of litigation by the lender could affect the cost of collection
on defaulted HEAL Loans.
DESCRIPTION OF THE NOTES
General
The Notes will be issued pursuant to the terms of the Indenture, which
has been filed as an exhibit to the Registration Statement of which this
Prospectus is a part. The following summary describes the material terms of the
Notes and the Indenture. The summary does not purport to be complete and is
qualified in its entirety by reference to the provisions of the Notes, the
Indenture and the Terms Supplement, which provisions are incorporated by
reference herein.
The Notes will initially be represented by one or more Notes 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. The
Notes will be available for purchase in denominations of $50,000 and integral
multiples of $1,000 in excess thereof in book-entry form only. The Trust has
been informed by DTC that DTC's nominee will be Cede. Accordingly, Cede is
expected to be the holder of record of the Notes. Unless and until Definitive
Notes are issued under the limited circumstances described herein, no Noteholder
will be entitled to receive a physical certificate representing a Note. All
references herein 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
Cede, as the registered holder of the Notes, for distribution to Noteholders in
accordance with DTC's procedures with respect thereto. See "-- Book-Entry
Registration" and "-- Definitive Notes."
The Notes
Distributions of Interest. Interest will accrue during each Interest
Period on the principal balance of each Class of Notes at a rate per annum equal
to the related Class Interest Rate (calculated as provided below) and will be
payable (i) monthly on each Distribution Date to the Class A Noteholders as of
the related Record Date, and (ii) quarterly on each Quarterly Distribution Date
to the Class B Noteholders as of the related Record Date. Interest distributions
due on any Class of Notes for any Distribution Date but not distributed on such
Distribution Date will be due on the next Distribution Date for such Class
increased by an amount equal to interest on such amount at the applicable Class
Interest Rate for the period from the Distribution Date for which such interest
was first due until the Distribution Date such interest is paid. Interest
payments on the Notes will generally be funded from Available Funds, Monthly
Advances and amounts, if any, on deposit in the Reserve Account remaining after
the deposit of the Transaction Fees and Consolidation Loan Fees in the Expense
Account. Interest will be paid pro rata to the holders of each such Class of
Notes outstanding. See "Description of the Transfer and Servicing Agreements
- --Distributions" and "-- Credit Enhancement."
Within each Interest Payment Period, each Class of Notes will bear
interest during each Interest Period for such Class at the Formula Interest
Rate, unless the Net Loan Rate for such Interest Period (which shall not apply
to the initial Interest Period) is a lower interest rate. For the initial
Interest Period (commencing on the Closing Date) for each Class of Notes, the
interest rate for each such Class shall be as stated on the inside cover page of
this Prospectus and not subject to Net Loan Rate. The Formula Interest Rate for
each Interest Period after the initial Interest Period for each Class of Notes
will equal One-Month LIBOR as of the LIBOR Determination Date for such Interest
Period plus the applicable Margin for such Class, but in no event greater than
18.0% per annum. Interest on each Class of Notes will be calculated on the basis
of the actual number of days elapsed in each Interest Period divided by 360.
<PAGE>
Notwithstanding the foregoing, with respect to each Class of Notes, if
the Formula Interest Rate with respect to such Class for any Interest Period is
greater than the Net Loan Rate determined on the LIBOR Determination Date for
such Interest Period, then the Class Interest Rate for such Interest Period will
be the Net Loan Rate.
Noteholders' Interest Carryover. If the Class Interest Rate for any
Class of Notes for any Interest Payment Period or portion thereof is based on
the Net Loan Rate, the excess of (a) the amount of interest on such Class of
Notes that would have accrued in respect of the related Interest Payment Period
or portion thereof had interest been calculated based on the applicable Formula
Interest Rate over (b) the amount of interest such Class of Notes actually
accrued in respect of such Interest Payment Period or portion thereof based on
the Net Loan Rate (such excess, together with the unpaid portion of any such
excess from prior Interest Payment Periods (and interest accrued thereon
calculated based on the Formula Interest Rate applicable to such Class of Notes
is referred to as the "Noteholders' Interest Carryover") will be paid on the
dates and in the priority as described herein under "Description of the Transfer
and Servicing Agreements -- Distributions." Any amount of Noteholders' Interest
Carryover with respect to a Class of Notes remaining after the earlier of the
Distribution Date on which the outstanding principal amount of such Class of
Notes has been reduced to zero and the distribution of all Available Funds on
the Final Maturity Date of such Class of Notes, will never become due and
payable and will be discharged as to the applicable Class of Notes on such date.
The ratings of the Notes do not address the likelihood of the payment of the
amount of any Noteholders' Interest Carryover. Any reference herein or in the
Indenture or the Transfer and Servicing Agreement to "principal" or "interest"
does not include within the meaning of such words Noteholders' Interest
Carryover or any interest accrued thereon.
Distributions of Principal. Principal of the Class A Notes will be
payable monthly on each Distribution Date, commencing February 25, 1998, and
principal on the Class B Notes will be payable quarterly, on each Quarterly
Distribution Date, generally in the order of priority described in "The Transfer
and Servicing Agreements -- Distributions." Principal payments on a Class of
Notes will generally be derived from Available Funds remaining after the
Indenture Trustee has deposited in the Expense Account the Transaction Fees, the
Consolidation Loan Fees, overdue Transaction Fees and overdue Consolidation Loan
Fees and deposited in the Note Distribution Account the Noteholders' Interest
Distribution Amount. Additionally, until the Parity Percentage equals [
101.50%], amounts otherwise required to be distributed to the Transferor will be
applied as additional principal payments. See "Description of the Transfer and
Servicing Agreements -- Distributions" and "-Credit Enhancement." 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 and (except with
respect to the Final Maturity Date of a Class of Notes) such shortfall will not
constitute an Event of Default. Additionally, on the Final Maturity Date for a
Class of Notes amounts in the Reserve Account will be available to reduce the
principal balance of such Class of Notes to zero to the extent Available Funds
are insufficient to make such payment. Notwithstanding the foregoing, if an
Event of Default has occurred with respect to payment of the Notes, principal
will be paid to each Class of Class A Notes pro rata, based upon the outstanding
principal amount of each Class of Class A Notes. No distribution in respect of
principal of Class B Notes will be made until each of the Class A Notes has been
paid in full. See "Description of the Transfer and Servicing Agreements
- -Distributions."
The aggregate outstanding principal amount of each Class of Notes will
be payable in full on the Distribution Date identified in the Summary of Terms
under "Final Maturity Date" (the "Final Maturity Date"). The actual date on
which the aggregate outstanding principal of and accrued interest on any Class
of Notes are paid may be earlier than its respective Final Maturity Date, based
on a variety of factors, including those described above under "Risk Factors --
Reinvestment Risk to Noteholders from Prepayments of Notes" and "Maturity and
Prepayment Considerations."
<PAGE>
Determination of LIBOR
Pursuant to the Transfer and Servicing Agreement, for each Interest
Period after the initial Interest Period, the Master Servicer will determine
One-Month LIBOR for purposes of calculating the Formula Interest Rate due on the
Notes and the Noteholders' Interest Carryover for each given Interest Period on
the second Business Day prior to the commencement of each Interest Period (each,
a "LIBOR Determination Date"). For purposes of calculating One-Month LIBOR, a
Business Day is any day on which banks in London and New York City are open for
the transaction of business. The "Rate Adjustment Date" for (i) the Class A
Notes (which, except for the initial Interest Period, also will be the first day
of an Interest Period for the Class A Notes) will be the Distribution Date
occurring in each month, and (ii) the Class B Notes (which, except for the
initial Interest Period, also will be the first day of an Interest Period for
the Class B Notes) will be (A) the Distribution Date in each month while any
Class A Notes are outstanding, and (B) thereafter, the 25th day of each month,
except that the Rate Adjustment Date occurring in January, April, July or
October will be the Distribution Dates occurring in such months. Following the
initial Interest Period, each Interest Period thereafter for each Class of Notes
shall commence on a Rate Adjustment Date for such Class of Notes and shall
continue through and include the day immediately preceding the next Rate
Adjustment Date for such Class of Notes.
"One-Month LIBOR" means the rate of interest per annum equal to 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 Master Servicer 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, One-Month LIBOR for
that day will be the arithmetic mean (rounded upwards, if necessary, to the
nearest .01%) of the quotations. If fewer than two quotations are provided,
OneMonth LIBOR for that day will be the arithmetic mean (rounded upwards, if
necessary, to the nearest .01%) of the rates quoted by three major banks in New
York City, selected by the Master Servicer, or by the Trustee, as applicable, 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, however, that if the banks selected as aforesaid are not quoting as
mentioned in this sentence, One-Month LIBOR in effect for the applicable
Interest Period will be One-Month LIBOR in effect for the previous Interest
Period.
"Telerate Page 3750" means the display page so 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), or if such
rate does not appear thereon, "Telerate Page 3750" shall mean the Reuters Screen
LIBOR Page.
"Reuters Screen LIBOR Page" will be the display designated as
page "LIBOR" on the Reuters Monitor Money Rates Service (or such other page as
may replace the LIBOR page for the purposes of displaying London interbank
offered rates of major banks).
"Reference Banks" means four leading banks, selected by the Master
Servicer, or by the Trustee, as applicable, (i) engaged in transactions in
Eurodollar deposits in the international Eurocurrency market, (ii) not
controlling, controlled by or under common control with the Administrator or the
Transferor and (iii) and having an established place of business in London.
<PAGE>
The Indenture
Modification of the Indenture. With the consent of the holders of a
majority of the aggregate principal amount of Directing Notes then outstanding
(or, with respect to any change affecting only certain Classes of Notes, the
holders of a majority of the aggregate principal amount of Notes of such Class),
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 Noteholders.
Without the consent of the holder of each outstanding Note affected
thereby, however, no supplemental indenture will (i) change the date of payment
of any installment of principal of or interest on any Note or reduce the
principal amount thereof or the interest rate thereon, change the provisions of
the Indenture relating to the application of collections on, or the proceeds of
the sale of, the assets of the Trust to payment of principal of or interest on
the Notes, or change any place of payment where, or the coin or currency in
which, any Note or any interest thereon is payable, (ii) impair the right to
institute suit for the enforcement of certain provisions of the Indenture
regarding payment, (iii) reduce the percentage of the aggregate amount of the
outstanding Notes of any Class 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 Indenture
or certain defaults thereunder and their consequences as provided for in the
Indenture, (iv) modify or alter certain provisions of the Indenture regarding
the determination of Notes that are considered "outstanding" for consent,
waivers and other matters, (v) reduce the percentage of the aggregate
outstanding amount of the Notes the consent of the holders of which is required
to direct the Eligible Lender Trustee on behalf of the Trust to sell or
liquidate the Financed Student Loans, (vi) decrease the percentage of the
aggregate principal amount of the Notes required to amend the sections of the
Indenture which specify the applicable percentage of aggregate principal amount
of the Notes necessary to amend the Indenture or certain other related
agreements, (vii) modify any of the provisions of the Indenture in such manner
as to affect the calculation of the amount of any payment of interest on any
Note or (viii) permit the creation of any lien ranking prior to or on a parity
with the lien of the Indenture with respect to any of the collateral for the
Notes or, except as otherwise permitted or contemplated in the Indenture,
terminate the lien of the Indenture on any such collateral or deprive the holder
of any Note of the security afforded by the lien of the Indenture.
The Trust and the Indenture Trustee may also enter into supplemental
indentures, but without obtaining the consent of Noteholders, for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of the Indenture or modifying in any manner the rights of Noteholders
so long as such action will not, in the opinion of counsel satisfactory to the
Indenture Trustee, materially and adversely affect the interest of any
Noteholder. Any such amendment or supplemental indenture shall be deemed not to
materially and adversely affect any Noteholder if there is delivered to the
Indenture Trustee written notification from each Rating Agency that initially
rated the Notes to the effect that such amendment or supplement will not cause
that Rating Agency to reduce the then current rating assigned to the Notes.
Events of Default; Rights Upon Event of Default. An "Event of Default"
with respect to the Notes is defined in the Indenture as consisting of the
following (except as described in the remaining sentences of this paragraph):
(i) a default for five business days or more in the payment of any Noteholders'
Interest Distribution Amount after the same becomes due and payable; (ii) a
default for five business days in the payment of principal of any Note when the
same becomes due and payable; (iii) a default in the observance or performance
of any covenant or agreement of the Trust made in the Indenture or the Transfer
and Servicing Agreement and the continuation of any such default for a period of
30 days after notice thereof is given to the Trust by the Indenture Trustee or
to the Trust and the Indenture Trustee by the holders of at least 25% in
aggregate principal amount of the Directing Notes then outstanding; (iv) any
representation or warranty made by the Trust in the 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 30 days after notice thereof is given to the Trust by the
Indenture Trustee or
<PAGE>
to the Trust and the Indenture Trustee by the holders of at least 25% in
aggregate principal amount of the Directing Notes then outstanding; or (v)
certain events of bankruptcy, insolvency, receivership or liquidation of the
Trust. However, the amount of principal required to be distributed to
Noteholders on any Distribution Date is limited to the amount of Available Funds
after payment of the Transaction Fees, overdue Transaction Fees, the
Consolidation Loan Fees, overdue Consolidation Loan Fees and the Noteholders'
Interest Distribution Amount. Any such principal shortfalls on any Distribution
Date will be carried over as a Noteholders' Principal Carryover Shortfall to be
paid on succeeding Distribution Dates. Therefore, the failure to pay principal
on any Class of Notes may not result in the occurrence of an Event of Default
until the Final Maturity Date of such Class of Notes. In addition, the failure
to pay the aggregate amount of Noteholders' Interest Carryover as a result of
insufficient Available Funds will not result in the occurrence of an Event of
Default.
If an Event of Default should occur and be continuing with respect to
any Class of Notes, the Indenture Trustee or holders of a majority in aggregate
principal amount of the Directing Notes then outstanding may declare all
outstanding Notes to be immediately due and payable, by notice to the Trust or
notice to the Indenture Trustee if given by the Noteholders. Such declaration
may be rescinded by the holders of a majority in aggregate principal amount of
the Directing Notes then outstanding at any time prior to the entry of judgment
in a court of competent jurisdiction for the payment of such amount if (i) the
Trust has paid to the Indenture Trustee a sum equal to all amounts then due with
respect to the Notes (without giving effect to such acceleration) and due to the
Indenture Trustee and (ii) all Events of Default (other than nonpayment of
amounts due solely as a result of such acceleration) have been cured or waived.
If the Notes have been declared to be due and payable following an
Event of Default with respect thereto, the Indenture Trustee may, in its
discretion, require the Eligible Lender Trustee to sell the Financed Student
Loans or elect to have the Eligible Lender Trustee maintain possession of the
Financed Student Loans and continue to apply collections with respect to such
Financed Student Loans as if there had been no declaration of acceleration. In
addition, the Indenture Trustee is prohibited from directing the Eligible Lender
Trustee to sell the Financed Student Loans following an Event of Default, other
than a default for five days or more in the payment of any principal or a
default for five days or more in the payment of any interest on any Note, unless
(i) the holders of 100% of the aggregate amount of the Directing Notes
outstanding consent to such sale, (ii) the proceeds of such sale are sufficient
to pay in full the principal of and the accrued interest on the Notes
outstanding at the date of such sale or (iii) the Indenture Trustee determines
that the collections on the Financed Student Loans and other assets of the Trust
would not be sufficient on an ongoing basis to make all payments on the Notes as
such payments would have become due if such obligations had not been declared
due and payable, and the Indenture Trustee obtains the consent of the holders of
66-2/3% of the aggregate principal amount of the Directing Notes then
outstanding.
Subject to the provisions of the Indenture relating to the duties of
the Indenture Trustee, if an Event of Default should occur and be continuing
with respect to the Notes, the Indenture Trustee will be under no obligation to
exercise any of the rights or powers under the Indenture at the request or
direction of any of the holders of Notes, if the 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 Indenture, the holders of a majority in aggregate principal amount of the
outstanding Directing Notes will have the right to direct the time, method and
place of conducting any proceeding or any remedy available to the Indenture
Trustee and the holders of a majority in aggregate principal amount of the
Directing 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 Indenture that cannot be
modified without the waiver or consent of all the holders of the outstanding
Directing Notes.
No holder of any Note will have the right to institute any proceeding
with respect to the Indenture, unless (i) such holder previously has given to
the Indenture Trustee written notice of a continuing Event of Default, (ii) the
holders of not less than 25% in principal amount of the outstanding Directing
Notes have requested in writing
<PAGE>
that the Indenture Trustee institute such proceeding in its own name as
Indenture Trustee, (iii) such holder or holders have offered the Indenture
Trustee reasonable indemnity, (iv) the Indenture Trustee has for 60 days after
notice 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 holders of a majority in aggregate principal amount of the
outstanding Directing Notes.
In addition, the Indenture Trustee and the Class B Noteholders will
covenant that they will not, prior to the date which is one year and a day after
the termination of the Indenture, institute against the Trust any bankruptcy,
reorganization or other proceeding under any federal or state bankruptcy or
similar law in connection with any obligations relating to the Notes, the
Indenture or the Related Documents (as defined below).
If an Event of Default should occur, payment of the Notes could occur,
if at all, later than their respective Final Maturity Dates.
Certain Covenants. The 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, or any state, and such
entity expressly assumes the Trust's obligation to make due and punctual
payments upon the Notes and the performance or observance of every agreement and
covenant of the Trust under the Indenture and any supplemental indenture, (ii)
no Event of Default has occurred and is continuing immediately after such merger
or consolidation, (iii) the Trust has received an opinion of counsel to the
effect that such consolidation or merger would have no material adverse federal
or Ohio or Delaware state tax consequence to the Trust or to any
Certificateholder or Noteholder, (iv) any action as is necessary to maintain the
lien and security interest created by the Indenture shall have been taken and
(v) the Trust shall have delivered to the Indenture Trustee an officer's
certificate of the Administrator and an opinion of counsel each stating that
such consolidation or merger and any supplemental indenture relating thereto
comply with the terms of the Indenture and that all conditions precedent
provided for in the Indenture to such transaction have been complied with
(including any Exchange Act filings) in all material respects.
Except as otherwise permitted by the Indenture, the Transfer and
Servicing Agreement and related documents (the "Related Documents"), the Trust
may not convey or transfer all or substantially all its properties or assets,
including the assets securing the Notes, unless the conditions specified in (i)
through (v) above with respect to a permitted merger or consolidation are
substantially met, plus the acquiror must agree (a) that all right, title and
interest in the property and assets so conveyed or transferred are subordinate
to the rights of the Noteholders, (b) to indemnify the Trust (unless otherwise
provided in a supplemental indenture) and (c) to make all filings with the
Commission required by the Exchange Act in connection with the Notes.
The Trust will not, among other things, (i) except as expressly
permitted by the Related Documents, sell, transfer, exchange or otherwise
dispose of any of the assets of the Trust, (ii) claim any credit on or make any
deduction from the principal and interest payable in respect of any Notes (other
than amounts withheld under the Code or applicable state law) or assert any
claim against any present or former holder of Notes because of the payment of
taxes levied or assessed upon the 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 Indenture or any supplemental indenture to be
impaired, or permit the lien of the Indenture and any supplemental indenture to
be amended, hypothecated, subordinated, terminated or discharged, or permit any
person to be released from any covenants or obligations with respect to any
Notes under the Indenture except as may be expressly permitted thereby, (v)
permit any lien, charge, excise, claim, security interest, mortgage or other
encumbrance (other than the lien of the Indenture and any supplemental
indenture) 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 (other than certain tax and other liens arising by operation of law,
except as expressly permitted by the Related Documents) or (vi) permit the lien
of the Indenture and any supplemental indenture not to constitute a valid first
priority (other than with respect to such tax or other lien) security interest
in the assets securing the Notes.
<PAGE>
The Trust may not engage in any activity other than financing,
purchasing, owning, selling, servicing and managing the Financed Student Loans
and activities incidental thereto.
The Trust will not issue, incur, assume or guarantee or otherwise
become liable for any indebtedness other than the Notes or otherwise in
accordance with the Related Documents.
Annual Compliance Statement and Other Notices. The Administrator, on
behalf of the Trust, will be required to file annually, commencing in 1999, with
the Indenture Trustee a written statement as to the fulfillment of the Trust's
obligations under the Indenture. The Trust is required to give the Indenture
Trustee written notice of each Event of Default among other notices. The
Indenture Trustee will notify Noteholders of known defaults under the Indenture
within 90 days after their occurrence.
Satisfaction and Discharge of Indenture. The Indenture will be
discharged with respect to the collateral securing the Notes upon the delivery
to the Indenture Trustee for cancellation of all the Notes or, with certain
limitations, upon deposit with the Indenture Trustee of funds sufficient for the
payment in full of all the Notes.
The Indenture Trustee. Bankers Trust Company, a New York banking
corporation, will be the Indenture Trustee under the Indenture.
Bankers Trust Company, the Indenture Trustee, may serve from time to
time as trustee under indentures or trust agreements with the Transferor or its
affiliates relating to other issues of their securities. In addition, the
Transferor or its affiliates may have other banking relationships with Bankers
Trust Company and its affiliates.
Book-Entry Registration
The description which follows of the procedures and record keeping with
respect to beneficial ownership interests in the Notes, payment of principal of
and interest on the Notes to DTC Participants, Cedel Participants and Euroclear
Participants or to purchasers of the Notes, confirmation and transfer of
beneficial ownership interests in the Notes, and other securities-related
transactions by and between DTC, Cedel, Euroclear, DTC Participants, Cedel
Participants, Euroclear Participants and Note Owners, is based solely on
information furnished by DTC, Cedel and Euroclear and has not been independently
verified by the Transferor or the Underwriters. The inclusion of this
information is not, and should not be construed as, a representation by the
Transferor or the Underwriters as to its accuracy or completeness or otherwise.
Noteholders may hold their certificates through DTC (in the United
States) or Cedel or Euroclear (in Europe) if they are participants of such
systems, or indirectly through organizations that are participants in such
systems.
Cede, as nominee for DTC, will hold the global Notes. Cedel and
Euroclear will hold omnibus positions on behalf of the Cedel Participants and
the Euroclear Participants, respectively, through customers securities accounts
in Cedel's and Euroclear's names on the books of their respective depositories
(collectively, the "Depositories") which in turn will hold such positions in
customers' securities accounts in the Depositories' names on the books of DTC.
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York Banking
Law, a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities for its Participants ("DTC Participants") and facilitates the
clearance and settlement among DTC Participants of securities transactions, such
as transfers and pledges, in deposited securities through electronic book-entry
changes in DTC Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. DTC Participants include
<PAGE>
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations. Indirect access to the DTC system is also
available to others such as securities brokers and dealers, banks, and trust
companies that clear through or maintain a custodial relationship with a DTC
Participant, either directly or indirectly ("Indirect Participants"). The rules
applicable to DTC and its DTC Participants are on file with the Commission.
Transfers between DTC Participants will occur in accordance with DTC
rules. Transfers between Cedel Participants and Euroclear Participants will
occur in the ordinary way in accordance with their applicable rules and
operating procedures.
Cross-market transfers between persons holding 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 Depository; 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 Depository 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 directly to the Depositories.
Because of time-zone differences, credits of securities in Cedel or
Euroclear as a result of a transaction with a DTC Participant will be made
during the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and such credits or any transactions in such
securities settled during such processing will be reported to the relevant Cedel
Participant or Euroclear Participant on such business day. Cash received in
Cedel or Euroclear as a result of sales of securities by or through a Cedel
Participant or a 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.
Day traders that use Cedel or Euroclear and that purchase the globally
offered Notes from DTC Participants for delivery to Cedel Participants or
Euroclear Participants should note that these trades may fail on the sale side
unless affirmative actions are taken. Participants should consult with their
clearing system to confirm that adequate steps have been taken to assure
settlement.
Purchases of Notes under the DTC system must be made by or through DTC
Participants, which will receive a credit for the Notes on DTC's records. The
ownership interest of each actual owner of a Note (a "Note Owner") is in turn to
be recorded on the DTC Participants' and Indirect Participants' records. Note
Owners will not receive written confirmation from DTC of their purchase, but
Note Owners are expected to receive written confirmations providing details of
the transaction, as well as periodic statements of their holdings, from the DTC
Participant or Indirect Participant through which the Note Owner entered into
the transaction. Transfers of ownership interests in the Notes are to be
accomplished by entries made on the books of DTC Participants acting on behalf
of Note Owners. Note Owners will not receive certificates representing their
ownership interest in Notes, except in the event that use of the book-entry
system for the Notes is discontinued.
To facilitate subsequent transfers, all Notes deposited by DTC
Participants with DTC are registered in the name of DTC's nominee, Cede. The
deposit of Notes with DTC and their registration in the name of Cede effects no
change in beneficial ownership. DTC has no knowledge of the actual Note Owners
of the Notes; DTC's records reflect only the identity of the DTC Participants to
whose accounts such Notes are credited, which may or may not be the Note Owners.
The DTC Participants will remain responsible for keeping account of their
holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to DTC
Participants, by DTC Participants to Indirect Participants, and by DTC
Participants and Indirect Participants to Note Owners will be governed by
<PAGE>
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Neither DTC nor Cede will consent or vote with respect to Notes. Under
its usual procedures, DTC mails an omnibus proxy to the issuer as soon as
possible after the record date, which assigns Cede's consenting or voting rights
to those DTC Participants to whose accounts the Notes are credited on the record
date (identified in a listing attached thereto).
Principal and interest payments on the Notes will be made to DTC. DTC's
practice is to credit DTC Participants' accounts on the applicable Distribution
Date in accordance with their respective holdings shown on DTC's records unless
DTC has reason to believe that it will not receive payment on such Distribution
Date. Payments by DTC Participants to Note Owners will be governed by standing
instructions and customary practices, as is the case with securities held for
the accounts of customers in bearer form or registered in "street name" and will
be the responsibility of such DTC Participant and not of DTC, the Indenture
Trustee or the Transferor, subject to any statutory or regulatory requirements
as may be in effect from time to time. Payment of principal and interest to DTC
is the responsibility of the Indenture Trustee, disbursement of such payments to
DTC Participants shall be the responsibility of DTC, and disbursement of such
payments to Note Owners shall be the responsibility of DTC Participants and
Indirect Participants.
DTC may discontinue providing its services as securities depository
with respect to the Notes at any time by giving reasonable notice to the
Transferor or the Indenture Trustee. Under such circumstances, in the event that
a successor securities depository is not obtained, Definitive Notes are required
to be printed and delivered. The Administrator may decide to discontinue use of
the system of book-entry transfers through DTC (or a successor securities
depository). In that event, Definitive Notes will be delivered to Noteholders.
See "-- Definitive Notes."
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. Transactions may be settled in Cedel in any of 32
currencies, including United States dollars. 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 the underwriters of any Series of Notes. 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.
The Euroclear System was created in 1968 to hold securities for
participants of the Euroclear System ("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. Transactions may now be settled in any of 32
currencies, including United States dollars. The Euroclear System includes
various other services, including securities lending and borrowing and
interfaces with domestic markets in 25 countries generally similar to the
arrangements for cross-market transfers with DTC described above. The Euroclear
System is operated by Morgan Guaranty Trust Company of New York, Brussels,
Belgium office (the "Euroclear Operator" or "Euroclear"), under contract with
Euroclear Clearance System, Societe Cooperative, 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 Board establishes policy for the Euroclear System. Euroclear
Participants include banks (including central banks), securities brokers and
dealers and other professional financial intermediaries and may include the
<PAGE>
underwriters of any Series of Notes. Indirect access to the Euroclear System is
also available to other firms that 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 (collectively, the
"Terms and Conditions"). The Terms and Conditions govern transfers of securities
and cash within the Euroclear System, withdrawal of securities and cash from the
Euroclear System, and receipts of payments with respect to securities in the
Euroclear System. All securities in the Euroclear System are held on a fundable
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.
The Euroclear Operator has advised as follows: Under Belgian law,
investors that are credited with securities on the records of the Euroclear
Operator have a co-property right in the fungible pool of interests in
securities on deposit with the Euroclear Operator in an amount equal to the
amount of interests in securities credited to their accounts. In the event of
the insolvency of the Euroclear Operator, Euroclear Participants would have a
right under Belgian law to the return of the amount and type of interests in
securities credited to their accounts with the Euroclear Operator. If the
Euroclear Operator did not have a sufficient amount of interests in securities
on deposit of a particular type to cover the claims of all Euroclear
Participants credited with such interests in securities on the Euroclear
Operator's records, all Euroclear Participants having an amount of interests in
securities of such type credited to their accounts with the Euroclear Operator
would have the right under Belgian law to the return of their pro-rata share of
the amount of interests in securities actually on deposit. Under Belgian law,
the Euroclear Operator is required to pass on the benefits of ownership in any
interests in securities on deposit with it (such as dividends, voting rights and
other entitlements) to any person credited with such interests in securities on
its records.
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 Depository. Such distributions will be subject to tax
reporting in accordance with relevant United States tax laws and regulations.
See "Federal Income Tax Consequences." Cedel or the Euroclear Operator, as the
case may be, will take any other action permitted to be taken by a Noteholder
under the Agreement on behalf of a Cedel Participant or Euroclear Participant
only in accordance with its relevant rules and procedures and subject to its
Depository's ability to effect such actions on its behalf through DTC.
Although DTC, Cedel and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of 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.
Definitive Notes
Notes will be issued in fully registered, certificated form (the
"Definitive Notes") to Note Owners or their nominees rather than to DTC or its
nominee, only if (i) the Administrator advises the Indenture Trustee for such
Series in writing that DTC is no longer willing or able to discharge properly
its responsibilities as Depository with respect to such Series of Notes, and the
Administrator is unable to locate a qualified successor, (ii) the Administrator,
at its option, advises the Trustee in writing that it elects to terminate the
book-entry system through DTC or successor securities depository or (iii) after
the occurrence of an Event of Default, Master Servicer Default or Administrator
Default Noteholders representing not less than 50% of the outstanding principal
balance of the Directing Notes advise the Indenture Trustee and DTC through DTC
Participants in writing that the continuation of a book-entry system through DTC
(or a successor thereto) is no longer in the best interest of the Noteholders.
<PAGE>
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the Indenture Trustee will cause DTC to notify all DTC
Participants of the availability through DTC of Definitive Notes. Upon surrender
by DTC of the definitive certificate representing the Notes and instructions for
registration, the Indenture Trustee will issue the Notes as Definitive Notes,
and thereafter the Indenture Trustee will recognize the holders of such
Definitive Notes as Noteholders under the Indenture.
Distribution of principal and interest on the Notes will be made by the
Indenture Trustee directly to Noteholders of Definitive Notes in accordance with
the procedures set forth herein and in the Agreement. Interest payments and any
principal payments on each Distribution Date will be made to Noteholders in
whose names the Definitive Notes were registered at the close of business on the
related Record Date. The final payment on any Note (whether Definitive Notes or
the Notes registered in the name of Cede representing the Notes), will he made
only upon presentation and surrender of such Note at the office or agency
specified in the notice of final distribution to Noteholders. The Indenture
Trustee will provide such notice to registered Noteholders prior to the
Distribution Date on which it expects such final distributions to occur.
Definitive Notes will be transferable and exchangeable at the offices
of the transfer agent and registrar for the Notes, which shall initially be the
Indenture Trustee. No service charges will be imposed for any registration of
transfer or exchange, but the Transfer Agent and Registrar may require payment
of a sum sufficient to cover any tax or other governmental charge imposed in
connection therewith.
List of Noteholders
A Noteholder may, by written request to the Indenture Trustee, obtain
access to the list of all Noteholders maintained by the Indenture Trustee for
the purpose of communicating with other Noteholders with respect to their rights
under the Indenture or the Notes. The 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.
Reports to Noteholders
On each Distribution Date, the Indenture Trustee will provide to the
applicable Noteholders of record as of the related Record Date, a statement
setting forth substantially the same information as is required to be provided
on the report provided to the Indenture Trustee and the Trust described under
"Description of Transfer and Servicing Agreements -- Statements to Indenture
Trustee."
Within the prescribed period of time for tax reporting purposes after
the end of each calendar year during the term of the Indenture, the Indenture
Trustee will mail to each person who at any time during such calendar year was a
Noteholder and received any payment thereon, a statement containing certain
information for the purposes of such Noteholder'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 the material terms of the Transfer and
Servicing Agreement, pursuant to which the Eligible Lender Trustee on behalf of
the Trust will obtain, the Master Servicer will service and the Administrator
will perform certain administrative functions with respect to the Financed
Students Loans; the Administration Agreement, pursuant to which the
Administrator will undertake certain other administrative duties with respect to
the Trust and the Financed Student Loans; and the Trust Agreement, pursuant to
which the Trust has been created and the Certificates have been issued
(collectively, the "Transfer and Servicing Agreements"). The
<PAGE>
summary does not purport to be complete and is qualified in its entirety by
reference to the provisions of the Transfer and Servicing Agreements. Each of
such Transfer and Servicing Agreements will be substantially in the form filed
as an exhibit to the Registration Statement of which this Prospectus is a part.
Conveyance of Initial Financed Student Loans; Representations and Warranties
On the Closing Date, the Transferor will contribute and assign to the
Eligible Lender Trustee on behalf of the Trust, without recourse, its entire
interest in the Initial Financed Student Loans described in the Transfer and
Servicing Agreement, all collections received and to be received with respect
thereto for the period after the Cut-off Date and all the Assigned Rights
pursuant to the Transfer and Servicing Agreement. Each Financed Student Loan
will be identified in schedules appearing as an exhibit to the Transfer and
Servicing Agreement. The Eligible Lender Trustee will, concurrently with such
contribution and assignment, execute, authenticate and deliver the Notes, which
will be authenticated by the Indenture Trustee.
In the Transfer and Servicing Agreement, the Transferor will make
certain representations and warranties with respect to the Financed Student
Loans to the Trust for the benefit of the Certificateholders and the
Noteholders, including, among other things, that (i) each Financed Student Loan,
at the time of transfer to the Trust, is free and clear of all security
interests, liens, charges and encumbrances and no offsets, defenses or
counterclaims have been asserted or, to the Transferor's knowledge, threatened;
(ii) the information provided with respect to the Financed Student Loans is true
and correct in all material respects as of the Cut-off Date (or in the case of
an Exchanged Financed Student Loan, as of its Subsequent Cut-off Date); (iii)
each Financed Student Loan, at the time it was originated, complied and, at the
Closing Date (or in the case of an Exchanged Financed Student Loan, as of its
Subsequent Cut-off Date), complies in all material respects with applicable
federal and state laws (including, without limitation, the Higher Education Act,
the HEAL Act, consumer credit, truth-in-lending, equal credit opportunity and
disclosure laws) and applicable restrictions imposed by (A) the FFEL Program or
under any Guarantee Agreement with respect to FFELP Loans and (B) the HEAL
Program or under the HEAL Insurance Contract with respect to HEAL Loans; and
(iv) from and after the Closing Date, each (Y) Financed FFELP Loan shall
continue to qualify the holder thereof (assuming such holder is an eligible
lender under the Higher Education Act) to receive Guarantee Payments from the
applicable Guarantor in accordance with the applicable Guarantee Agreement, and
to receive Special Allowance Payments and, in the case of Stafford Loans,
Interest Subsidy Payments from the Department of Education to the extent
applicable, and (Z) Financed HEAL Loan shall continue to qualify the holder
thereof (assuming such holder is an eligible lender under the HEAL Act) to
receive Insurance Payments from the Department of HHS in accordance with the
HEAL Insurance Contract.
Following the discovery by or notice to the Transferor of a breach of
any such representation or warranty with respect to any Financed Student Loan
that materially and adversely affects the interests of the Noteholders in such
Financed Student Loan (it being understood that any such breach that does not
affect any Guarantor's obligation to guarantee payment of such Financed FFELP
Loan or the Department of HHS's obligation to insure payment of any Financed
HEAL Loan will not be considered to have a material adverse effect for this
purpose), the Transferor will, unless such breach is cured within 120 days,
purchase such Financed Student Loan from the 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 applicable Purchase Amount (as
defined below); provided, however, that in the case of any representation or
warranty the breach of which may be cured by reinstatement of the Guarantor's
obligation to guarantee payment or the Department of HHS's obligation to insure
payment, such cure period shall be 360 days (instead of 120 days), in each case
following the earlier of the date on which such breach is discovered by the
Transferor and the date of the Servicer's receipt of the Guarantor or Department
of HHS reject transmittal form with respect to such Financed Student Loan.
Notwithstanding the foregoing, if as of the last day of any Collection Period
the aggregate principal amount of Financed Student Loans with respect
<PAGE>
to which claims have been filed with and rejected by a Guarantor or the
Department of HHS as a result of a breach of a representation or warranty of the
Transferor or with respect to which the Master Servicer determines that claims
cannot be filed pursuant to the Higher Education Act or the HEAL Act, as the
case may be, as a result of such a breach exceeds the lesser of $250,000 or
0.25% of the Pool Balance as of such date, the Transferor shall repurchase
within 120 days of a written request by the Eligible Lender Trustee or the
Indenture Trustee, affected Financed Student Loans in an aggregate principal
amount such that after such repurchases the aggregate principal amount of
affected Financed Student Loans is equal to or less than the lesser of $250,000
or 0.25% of the Pool Balance. The Financed Student Loans to be repurchased by
the Transferor pursuant to the preceding sentence will be based on the date of
claim rejection, with the Financed Student Loans with the earliest such dates to
be repurchased first. In addition, the Transferor will reimburse the Trust (i)
for any accrued interest amounts that the Department of HHS refuses to pay with
respect to Financed HEAL Loans due to, and (ii) 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 of Education with respect to Financed FFELP
Loans, as a result of a breach of any such representation or warranty by the
Transferor. The Transferor has the right, at its option, to delegate to the
Master Servicer, and the Master Servicer is obligated to thereby assume, the
repurchase and reimbursement obligation of the Transferor to the extent such
repurchase or reimbursement obligation arose as a result of the failure to
maintain the insurance or guarantee on a Financed Student Loan. The repurchase
and reimbursement obligations of the Transferor will constitute, together with
the right to receive certain amounts from the Reserve Account, the sole remedy
available to or on behalf of the Trust, the Certificateholders or the
Noteholders for any such uncured breach. The Transferor's repurchase and
reimbursement obligations are contractual obligations pursuant to the Transfer
and Servicing Agreement that may be enforced against the Transferor (or, if
delegated, the Master Servicer), but the breach of which will not constitute an
Event of Default.
"Purchase Amount" means, as to any Financed Student Loan on any date of
determination, the amount required to prepay in full the outstanding principal
balance of such Financed Student Loan as of the last day of the most recently
completed Collection Period, including all accrued but unpaid interest thereon
(including interest to be capitalized) through the last day of the Collection
Period in which such Financed Student Loan is being purchased.
Exchange Period and Exchanged Financed Student Loans
During the period (the "Exchange Period") from the Closing Date until
December 31, 2002, if a borrower on a Financed Student Loan who is also a
borrower under one or more Student Loans (whether or not all such loans are in
the Trust) elects to consolidate such loans with the proceeds of a Consolidation
Loan or a HEAL Consolidation Loan to be made by the Transferor, the Eligible
Lender Trustee, at the option of the Transferor and subject to certain
conditions, will be obligated to transfer to the Transferor the Financed Student
Loans being retired by the consolidation in exchange for the related
Consolidation Loan or HEAL Consolidation Loan to be made by the Transferor (each
an "Exchanged Consolidation Loan" and collectively, the "Exchanged Consolidation
Loans"). In addition, during the Exchange Period, the Eligible Lender Trustee,
at the option of the Transferor and subject to certain conditions, will be
obligated to purchase from the Transferor Serial Loans owned by the Transferor
which are serial (i.e., made to the same borrower under the same loan program
and guaranteed by the same Guarantor or insured by the Department of HHS) to an
existing Financed Student Loan owned by the Trust (each such loan exchanged into
the Trust, an "Exchanged Serial Loan" and together with the Exchanged
Consolidation Loans, the "Exchanged Financed Student Loans") provided that each
Exchanged Serial Loan meets certain criteria including that the Exchanged Serial
Loan was originated under the same loan program as the Financed Student Loan to
which it is serial and entitles the holder thereof to receive interest based on
the same interest rate index as the Financed Student Loan to which it is serial.
In addition, in no event shall the aggregate amount of Exchanged Serial Loans
transferred into the Trust exceed [[$750,000]].
<PAGE>
In addition, if on any date (each, an "Exchange Date") that any
Exchanged Financed Student Loans are being exchanged into the Trust, the
outstanding principal balance as of the related Subsequent Cut-off Date of all
the Exchanged Financed Student Loans being exchanged into the Trust on such
Exchange Date is less than the outstanding principal balance of all the Financed
Student Loans for which they are being exchanged plus any Issuer Consolidation
Payments being made on such Exchange Date, an amount (an "Adjustment Payment")
equal to such difference will be required to be deposited by the Transferor into
the Collection Account on such Exchange Date.
If on any Exchange Date the aggregate outstanding principal balance as
of the related Subsequent Cutoff Date of all the Exchanged Financed Student
Loans that are Consolidation Loans or HEAL Consolidation Loans being exchanged
into the Trust on such Exchange Date is greater than the outstanding principal
balance of all the Financed Student Loans for which they are being exchanged, an
amount up to the amount of such excess (the "Issuer Consolidation Payments")
will be remitted to the Transferor from Consolidation Prepayments on deposit in
the Collection Account. "Consolidation Prepayments" means, for any Exchange
Date, the amount of principal then on deposit in the Collection Account
representing payments received as a result of Financed Student Loans being
repaid with the proceeds of Consolidation Loans or HEAL Consolidation Loans
(provided, however, if an Exchange Date occurs during the month of a
Distribution Date, Consolidation Prepayments will not include amounts received
during the month of such Distribution Date).
An acquisition of Exchanged Financed Student Loans will be prohibited
at any time that an Event of Default under the Indenture, a Master Servicer
Default under the Transfer and Servicing Agreement or an Administrator Default
under the Administration Agreement is continuing.
Accounts
The Indenture Trustee will establish and maintain the Collection
Account, the Note Distribution Account, the Expense Account, the Reserve Account
and the Monthly Advance Account. The Eligible Lender Trustee will establish and
maintain the Certificate Distribution Account and the Certificate Monthly
Advance Account in the name of the Eligible Lender Trustee on behalf of the
Certificateholders. The foregoing accounts are referred to collectively as the
"Trust Accounts" in the name of the Indenture Trustee on behalf of the
Noteholders or the Eligible Lender Trustee on behalf of the Certificateholders.
Funds in the Trust Accounts will be invested as provided in the
Transfer and Servicing Agreement in Eligible Investments. "Eligible Investments"
include the following:
(i) Cash (insured at all times by the Federal Deposit Insurance
Corporation);
(ii) Direct obligations of (including obligations issued or held in
book entry form on the books of) the Department of the
Treasury of the United States of America;
(iii) obligations of any of the following federal agencies which
obligations represent the full faith and credit of the United
States of America, including:
- Export-Import Bank
- Farm Credit System Financial Assistance Corporation
- Farmers Home Administration
- General Services Administration
- U.S. Maritime Administration
- Small Business Administration
- Government National Mortgage Association (GNMA)
- U.S. Department of Housing & Urban Development (PHA's)
- Federal Housing Administration;
<PAGE>
(iv) senior debt obligations rated "AAA" by Standard & Poor's and
"Aaa" by Moody's issued by the Federal National Mortgage
Association or the Federal Home Loan Mortgage Corporation
(v) U.S. dollar denominated deposit accounts, federal funds and
banker's acceptances with domestic commercial banks which have
a rating on their short term certificates of deposit on the
date of purchase of "A-1+" by Standard & Poor's and "P-1" by
Moody's and maturing no more than 360 days after the date of
purchase (ratings on holding companies not being considered
the rating of the bank);
(vi) commercial paper which is rated at the time of purchase in the
single highest classification, "A-1+" by Standard & Poor's and
"P-1" by Moody's and which matures not more than 270 days
after the date of purchase;
(vii) Investments in money market funds (including, but not limited
to, money market mutual funds) rated "AAAm" or "AAAm-G" or
better by Standard & Poor's;
(viii) investment agreements acceptable to the Rating Agencies ,
written confirmation of which shall be furnished to the
Indenture Trustee prior to any such investment; and
(ix) other forms of investments acceptable to the Rating Agencies,
written confirmation of which shall be furnished to the
Indenture Trustee prior to any such investment.
Notwithstanding anything in the Transfer and Servicing Agreement to the
contrary, for so long as the Transferor is a Certificateholder, all investments
of the Trust shall be made in investments permissible for a national bank. If
the amount required to be withdrawn from the Reserve Account to cover shortfalls
in the amount of Available Funds exceeds the amount of cash in the Reserve
Account, a temporary shortfall in the amounts distributed to the Noteholders
could result. This could, in turn, increase the average life of the Notes.
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.
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.
An "Eligible Institution" is generally a depository institution organized under
the federal or any state banking laws whose deposits are insured by the Federal
Deposit Insurance Corporation and whose unsecured long-term debt obligations or
short-term debt ratings are acceptable to Standard & Poor's and Moody's.
Servicing Procedures
Pursuant to the Transfer and Servicing Agreement, the Master Servicer
has agreed to service, and perform all other related tasks with respect to, all
the Financed Student Loans acquired from time to time. The Master Servicer is
required pursuant to the Transfer and Servicing Agreement to perform all
services and duties customary to the servicing of Financed Student Loans
(including all collection practices), and to do so with reasonable care and in
compliance with all standards and procedures provided for in the Higher
Education Act, the Guarantee Agreements, the Heal Act, the HEAL Insurance
Contract and all other applicable federal and state laws.
<PAGE>
Without limiting the foregoing, the duties of the Master Servicer under
the Transfer and Servicing Agreement include, but are not limited to, collecting
and depositing into the Collection Account all payments with respect to the
Financed Student Loans, including claiming and obtaining any Insurance Payments
with respect to Financed HEAL Loans, and, with respect to Financed FFELP Loans,
any Guarantee Payments, Interest Subsidy Payments and Special Allowance
Payments; responding to inquiries from borrowers on the Financed Student Loans;
and investigating delinquencies and sending out statements, payment coupons and
tax reporting information to borrowers. In addition, the Master Servicer will
keep ongoing records with respect to such Financed Student Loans and collections
thereon and will furnish monthly and annual statements to the Administrator with
respect to such information, in accordance with the customary standards and as
otherwise required in the Transfer and Servicing Agreement.
The Master Servicer may enter into sub-servicing agreements with
sub-servicers pursuant to which some or all of the Financed Student Loans may be
serviced on behalf of the Master Servicer. No such sub-servicing arrangement
will relieve the Master Servicer of its duties and obligations under the
Transfer and Servicing Agreement.
Payments on Financed Student Loans
The Master Servicer shall cause each Servicer to deposit in the
Collection Account, no less frequently than [________] all payments on Financed
Student Loans for which such Servicer is acting as primary servicer (from
whatever source) and all proceeds of such Financed Student Loans collected by it
during each Collection Period.
Master Servicer Covenants
In the Transfer and Servicing Agreement, the Master Servicer covenants
that: (a) it will duly satisfy or cause to be duly satisfied all obligations on
its part to be fulfilled under or in connection with the Financed Student Loans,
maintain in effect all qualifications required to service the Financed Student
Loans and comply in all material respects with all requirements of law in
connection with servicing the Financed Student Loans, the failure to comply with
which would have a materially adverse effect on the Noteholders; (b) it will not
permit any rescission or cancellation of a Financed Student Loan except as
ordered by a court of competent jurisdiction or other government authority or as
otherwise consented to by the Eligible Lender Trustee and the Indenture Trustee;
(c) it will do nothing to impair in any material respect the rights of the
Noteholders in the Financed Student Loans; and (d) it will not reschedule,
revise, defer or otherwise compromise with respect to payments due on any
Financed Student Loan except pursuant to any applicable Deferment or Forbearance
Periods or otherwise in accordance with its guidelines with respect to the
servicing of the Financed Student Loans; provided, however, that the Master
Servicer may not agree to any decrease of the interest rate on, or the principal
amount payable with respect to, any Financed Student Loan except as otherwise
permitted by the Higher Education Act or any Guarantee Agreement with respect to
Financed FFELP Loans and by the Heal Act and the HEAL Insurance Contract with
respect to Financed HEAL Loans. Notwithstanding the foregoing, the Master
Servicer may, in its sole discretion, without having to obtain the consent or
approval of any other party, (i) not collect late charges that may be due on
Financed Student Loans, and (ii) waive remaining amounts owing under a Financed
Student Loan up to and including $250.00). Under the terms of the Transfer and
Servicing Agreement, the Master Servicer shall indemnify the Transferor for any
payments made by the Transferor in connection with its repurchase or
reimbursement obligations resulting from any breach of the Master Servicer's
obligations.
Servicing Compensation
The Master Servicer will be entitled to receive a quarterly fee (the
"Servicing Fee") with respect to each calendar quarter in an amount equal to (i)
[0.70%] per annum of the average of the Pool Balance as of the last day of the
calendar quarter and the last day of the immediately preceding calendar quarter
(or the Cut-off Date with respect to the calendar quarter ending March 31,
1998), or (ii) such greater amount
<PAGE>
acceptable to the Rating Agencies, prior written confirmation of which shall be
provided to the Indenture Trustee. The Servicing Fee will be payable quarterly
in advance, out of Available Funds and amounts on deposit in the Reserve
Account, on each Distribution Date (or in the case of the initial Servicing Fee,
on the Closing Date) based on the Administrator's good faith estimate of the
Servicing Fee that will accrue during the Collection Period in which such
Distribution Date occurs (or in the case of the initial Servicing Fee, the
Collection Period immediately succeeding the Closing Date) plus (or minus) the
difference (or excess) of the actual Servicing Fee accrued for the Collection
immediately preceding such Distribution Date and the amount paid as an estimated
Servicing Fee for such Collection Period on the immediately preceding
Distribution Date (or the Closing Date with respect to the first Distribution
Date).
The Servicing Fee will compensate the Master Servicer and each other
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 Financed Student Loans,
investigating delinquencies, pursuing, filing and collecting any Guarantee
Payments and Insurance Payments, including litigation costs, accounting for
collections and furnishing monthly and annual statements to the Administrator.
The Servicing Fee also will reimburse the Master Servicer for certain taxes,
accounting fees, outside auditor fees, data processing costs and other costs
incurred in connection with administering the Financed Student Loans.
Distributions
Deposits to Collection Account. On or before the [__th day] of each
month, commencing January 1998, the Administrator will provide the Indenture
Trustee and the Eligible Lender Trustee a report setting forth by component the
Available Funds for the immediately preceding Collection Period.
For purposes hereof, the term "Available Funds" means the excess of (A)
the sum, without duplication, of the following amounts with respect to the
related Collection Period: (i) all collections received by the Master Servicer
or any Servicer on the Financed Student Loans (including any Guarantee Payments
and Insurance Payments received with respect to the Financed Student Loans
during such Collection Period); (ii) any payments, including without limitation,
Interest Subsidy Payments and Special Allowance Payments received by the
Eligible Lender Trustee during such Collection Period with respect to the
Financed Student Loans; (iii) all proceeds from any sales of Financed Student
Loans by the Trust during such Collection Period; (iv) any payments of or with
respect to interest received by the Master Servicer or a Servicer during such
Collection Period with respect to a Financed Student Loan for which a Realized
Loss was previously allocated; (v) the aggregate Purchase Amounts received for
those Financed Student Loans purchased by the Transferor (or the Master Servicer
, if applicable) during the related Collection Period; (vi) the aggregate
amounts, if any, received from the Transferor (or the Master Servicer, if
applicable) as reimbursement of non-guaranteed or uninsured interest amounts
(which shall not include, with respect to Financed FFELP Loans, the portion of
such interest amounts (i.e., 2%) for which the Guarantor did not have an
obligation to make a Guarantee Payment), or lost Interest Subsidy Payments and
Special Allowance Payments with respect to the Financed Student Loans pursuant
to the Transfer and Servicing Agreement; (vii) all Adjustment Payments, if any,
received from the Transferor during such Collection Period; and (viii)
Investment Earnings for such Collection Period over (B) the Issuer Consolidation
Payments for such Collection Period; provided, however, that Available Funds
will exclude all payments and proceeds of any Financed Student Loans the
Purchase Amount of which has been included in Available Funds for a prior
Collection Period (which payments and proceeds shall be paid to the Transferor),
and amounts used to reimburse the Master Servicer for Monthly Advances pursuant
to the terms of the Transfer and Servicing Agreement.
Distributions from Collection Account. On each Distribution
Determination Date, the Administrator will advise the Indenture Trustee and the
Eligible Lender Trustee in writing of the applicable Noteholders' Interest
Distribution Amount and Certificateholders' Interest Distribution Amount.
Additionally, on each Distribution Determination Date, the Administrator will
advise the Indenture Trustee and the Eligible Lender Trustee in writing of the
applicable Noteholders' Principal Distribution Amount (or, after all the Notes
have been paid in full, the
<PAGE>
Certificateholders' Principal Distribution Amount). Further, on each
Distribution Determination Date relating to a Quarterly Distribution Date, the
Administrator will advise the Indenture Trustee in writing of the estimated
Transaction Fees payable for the calendar quarter in which such Quarterly
Distribution Date occurs.
On each Distribution Date, the Indenture Trustee will transfer from the
Collection Account, in the following priority and from Available Funds for each
Collection Period from and including the Collection Period during which the
preceding Quarterly Distribution Date occurred through the Collection Period
immediately preceding the month of such Distribution Date (or with respect to
each Distribution Date through and including the first Quarterly Distribution
Date, from the Closing Date through and including the Collection Period
immediately preceding such Distribution Date), the required amounts from the
Available Funds for such Collection Periods:
(i) to the Expense Account (A) an amount equal to the Consolidation
Loan Fees with respect to the calendar month most recently ended and
all overdue Consolidation Loan Fees from prior months, and (B) if such
Distribution Date is a Quarterly Distribution Date, an amount up to the
estimated Transaction Fees for the calendar quarter commencing in the
month of such Quarterly Distribution Date and all overdue Transaction
Fees from prior calendar quarters (plus (or minus) the difference (or
excess) of the actual Transaction Fees for the immediately preceding
calendar quarter and the Transaction Fees deposited into the Expense
Account on the preceding Quarterly Distribution Date),
(ii) to the Note Distribution Account, an amount up to the Noteholders'
Interest Distribution Amount,
(iii) to the Note Distribution Account, an amount up to the
Noteholders' Principal Distribution Amount,
(iv) to the Certificate Distribution Account, an amount up to the
Certificateholders' Interest Distribution Amount, and
(v) after the Notes have been paid in full, to the Certificate
Distribution Account, an amount up to the Certificateholders' Principal
Distribution Amount.
On each Quarterly Distribution Date (and with respect to clause (i)
below on each Distribution Date while the Class A Notes are outstanding, and
thereafter, on the 25th day of each month, or if such day is not a Business Day,
the next succeeding Business Day) following the transfer to the Expense Account
described in the preceding paragraph, the Indenture Trustee will distribute from
the Expense Account (in addition to any amounts transferred from the Reserve
Account as described herein) the following amounts in the following order of
priority:
(i) to the Department of Education, the Consolidation Loan Fees for the
immediately preceding calendar month together with any overdue
Consolidation Loan Fees for any prior months,
(ii) to the Master Servicer, the estimated Servicing Fee for the
calendar quarter in which such Quarterly Distribution Date occurs and
all overdue Servicing Fees,
(iii) to the Administrator, the estimated Administration Fee for the
calendar quarter in which such Quarterly Distribution Date occurs and
all overdue Administration Fees,
(iv) to the Indenture Trustee, the estimated Indenture Trustee Fee for
the calendar quarter in which such Quarterly Distribution Date occurs
and all overdue Indenture Trustee Fees, and
(v) to the Eligible Lender Trustee and the Delaware Trustee, the
estimated Eligible Lender Trustee Fee and the Delaware Trustee Fee,
respectively, for the calendar quarter in which such Quarterly
Distribution Date occurs and all overdue Eligible Lender Trustee Fees
and Delaware Trustee Fees.
<PAGE>
On each Distribution Date, following the transfer to the Note
Distribution Account, the Indenture Trustee will distribute to the Noteholders
as of the related Record Date the amounts transferred to the Note Distribution
Account as set forth above (in addition to any amounts transferred from the
Reserve Account and the Monthly Advance Account and any Parity Percentage
Payments transferred from the Collection Account, each as described below) in
the following order of priority:
(i) first, to each Class of Class A Noteholders, the Class A
Noteholders' Interest Distribution Amount (pro rata based upon the
portion thereof allocable to each such Class),
(ii) second, if such Distribution Date is a Quarterly Distribution
Date, to the Class B Noteholders, the Class B Noteholders' Interest
Distribution Amount,
(iii) third, to the Class A-1 Noteholders, the Noteholders' Principal
Distribution Amount until the Outstanding Amount of the Class A-1 Notes
has been paid in full,
(iv) fourth, after the principal balance of the Class A-1 Notes has
been reduced to zero, to the Class A-2 Noteholders, the Noteholders'
Principal Distribution Amount until the Outstanding Amount of the Class
A-2 Notes has been paid in full, and
(v) fifth, after the principal balance of each Class of Class A Notes
has been reduced to zero, if such Distribution Date is a Quarterly
Distribution Date, to the Class B Noteholders, the remaining
Noteholders' Principal Distribution Amount until the principal balance
of the Class B Notes has been reduced to zero.
On each Quarterly Distribution Date, after making all required
transfers to the Expense Account, the Note Distribution Account and, if
applicable, the Certificate Distribution Account, the Indenture Trustee will
transfer any amounts remaining in the Collection Account (other than amounts
representing payments received during such month) in the following order of
priority:
(i) to the Reserve Account, the amount, if any, necessary to increase
the balance thereof to the Specified Reserve Account Balance,
(ii) to the Note Distribution Account, Parity Percentage Payments to
the extent then required, and
(iii) to the Note Distribution Account, the amount of any outstanding
Noteholders' Interest Carryover.
Any amounts remaining in the Collection Account after such transfers on a
Quarterly Distribution Date (other than amounts representing payments received
during such current month) will be distributed to the Transferor.
Notwithstanding the foregoing, if (x) on any Distribution Date
following all distributions to be made on such Distribution Date, the principal
amount of the Class A Notes would exceed the sum of the Pool Balance at the end
of the immediately preceding Collection Period plus the aggregate balance on
deposit in the Trust Accounts on such Distribution Date following such
distributions, or (y) an Event of Default has occurred with respect to payment
of the Notes, after paying Transaction Fees, overdue Transaction Fees,
Consolidation Loan Fees and overdue Consolidation Loan Fees, distributions will
be made in the following priority:
(i) first, to each Class of Class A Noteholders, the Noteholders'
Interest Distribution Amount applicable to each such Class pro rata
based upon the portion thereof allocable to each such Class,
(ii) second, in the case of clause (x) above, to the Class A-1
Noteholders, the Noteholders' Principal Distribution Amount, until the
principal balance of the Class A-1 Notes has been reduced to zero, and
then
<PAGE>
to the Class A-2 Noteholders, the Noteholders' Principal Distribution
Amount until the principal balance of the Class A-2 Notes has been
reduced to zero, or in the case of clause (y) above, to each Class of
Class A Noteholders, the Noteholders' Principal Distribution Amount
applicable to such Distribution Date, pro rata based upon the principal
balance of each Class of Class A Notes until the principal balance of
each Class of Class A Notes has been paid in full,
(iii) third, if such Distribution Date is a Quarterly Distribution
Date, to the Class B Noteholders, the Noteholders' Interest
Distribution Amount applicable to the Class B Notes,
(iv) fourth, after the principal balance of each of the Class A Notes
has been paid in full, if such Distribution Date is a Quarterly
Distribution Date, to the Class B Noteholders, the Noteholders'
Principal Distribution Amount until the principal balance of the Class
B Notes has been paid in full,
(v) fifth, if such Distribution Date is a Quarterly Distribution Date,
to the Class A Noteholders, the Noteholders' Interest Carryover
applicable to the respective Class of Class A Notes, pro rata based
upon the portion thereof allocable to each such Class,
(vi) sixth, if such Distribution Date is a Quarterly Distribution Date,
to the Class B Noteholders, the Noteholders' Interest Carryover
applicable to the Class B Notes, and
(vii) seventh, if such Distribution Date is a Quarterly Distribution
Date, to the Certificateholders, the Certificateholders' Interest
Distribution Amount and then the Certificateholders' Principal
Distribution Amount.
All principal payments of Notes of any Class shall be made pro rata
within that Class. In connection with each principal payment of Notes of any
Class, the Administrator shall compute the Principal Factor for that Class. The
"Principal Factor" shall be a number, carried to a seven-digit decimal,
indicating the principal balance of each Note of a Class as of a Distribution
Date (after giving effect to any payments made on that date) as a fraction of
the original principal amount of such Note. The Principal Factor for each Class
of Notes shall be initially 1.0000000 and will thereafter decline to reflect the
reduction in the principal balance of the Notes of that Class after any payment
of principal. The principal balance of any Note can be determined by multiplying
the original principal amount of such Note by the Principal Factor applicable to
that Class of Notes.
"Certificate Balance" equals the original principal balance of each
Class of Certificates issued reduced by all amounts allocable to principal
previously distributed to Certificateholders.
"Certificateholders' Distribution Amount" means, as to any Class of
Certificates, with respect to any Quarterly Distribution Date, the
Certificateholders' Interest Distribution Amount for such Quarterly Distribution
Date plus, for each Quarterly Distribution Date on and after which the Notes
have been paid in full, the Certificateholders' Principal Distribution Amount
for such Quarterly Distribution Date.
"Certificateholders' Interest Shortfall" means, as to any Class of
Certificates, with respect to any Quarterly Distribution Date, the excess, if
any, of (i) the sum of the related Certificateholders' Interest Distribution
Amount on the preceding Quarterly Distribution Date and any outstanding
Certificateholders' Interest Shortfall on such preceding Quarterly Distribution
Date over (ii) the amount of interest actually distributed to the
Certificateholders of such Class on such preceding Quarterly Distribution Date,
plus interest on the amount of such excess interest due to the
Certificateholders of such Class, to the extent permitted by law, at the related
Certificate Rate from such preceding Quarterly Distribution Date to the current
Quarterly Distribution Date.
"Certificateholders' Interest Distribution Amount" means, as to any
Class of Certificates, with respect to any Quarterly Distribution Date relating
to such Certificates, the sum of (i) the amount of interest accrued at One
<PAGE>
Month LIBOR plus 1.50% per annum for each related Interest Period since the last
Quarterly Distribution Date (or, in the case of the first Quarterly Distribution
Date, the Closing Date) on the outstanding principal amount of such Certificates
on the immediately preceding Quarterly Distribution Date, after giving effect to
all distributions of principal to Certificateholders of such Class on such
Quarterly Distribution Date (or, in the case of the first Quarterly Distribution
Date, on the Closing Date) and (ii) the Certificateholders' Interest Carryover
Shortfall relating to such Certificates for such Quarterly Distribution Date.
"Certificateholders' Principal Carryover Shortfall" means, as of the
close of any Quarterly Distribution Date relating to a Class of Certificates on
or after which the Notes have been paid in full, the excess, if any, of (i) the
sum of the Certificateholders' Principal Distribution Amount on such Quarterly
Distribution Date and any outstanding Certificateholders' Principal Carryover
Shortfall for the preceding Quarterly Distribution Date over (ii) the amount of
principal actually distributed to the Certificateholders on such Quarterly
Distribution Date.
"Certificateholders' Principal Distribution Amount" means, on each
Quarterly Distribution Date occurring after the principal balance of each Class
of Notes has been paid in full, the sum of (i) the Principal Distribution Amount
for the three Collection Periods preceding such Quarterly Distribution Date, and
(ii) the Certificateholders' Principal Carryover Shortfall as of the close of
the preceding Quarterly Distribution Date; provided, however, that the
Certificateholders' Principal Distribution Amount will in no event exceed the
outstanding principal balance of the applicable class of Certificates. Further,
on the first Quarterly Distribution Date occurring on or after the Distribution
Date on which the principal balance of the last outstanding Class of Notes is
paid in full, the Certificateholders' Principal Distribution Amount also will
include the excess, if any, of the amount of principal available to be
distributed on such Distribution Date over the amount of principal paid on the
Notes on such date.
"Consolidation Loan Fees" means, as to any calendar month, an amount
accrued during such month equal to 1.05% per annum of the average outstanding
principal balance of the Consolidation Loans owned by the Trust during such
month.
"Noteholders' Distribution Amount" means, as to any Class of Notes,
with respect to any Distribution Date, the sum of the related Noteholders'
Interest Distribution Amount and the Noteholders' Principal Distribution Amount
for such Distribution Date.
"Noteholders' Interest Shortfall" means, as to any Class of Notes, with
respect to any Distribution Date (which, for the Class B Notes, shall be a
Quarterly Distribution Date), the excess of (i) the sum of the related
Noteholders' Interest Distribution Amount on the preceding Distribution Date for
such Class of Notes and any Noteholders' Interest Shortfall on such preceding
Distribution Date for such Class of Notes over (ii) the amount of interest
actually allocated to such Noteholders on such preceding Distribution Date for
such Class of Notes, plus interest on the amount of such excess interest due to
the Noteholders, to the extent permitted by law, at the related Class Interest
Rate from such preceding Distribution Date for such Class of Notes to the
current Distribution Date for such Class of Notes.
"Noteholders' Interest Distribution Amount" means, as to any Class of
Notes, with respect to any Distribution Date (which, for the Class B Notes,
shall be a Quarterly Distribution Date), the sum of (i) the amount of interest
accrued at the respective Class Interest Rate for each Interest Period since the
last Distribution Date for such Class of Notes (or, in the case of the first
Distribution Date for such Class of Notes, the Closing Date) on the outstanding
principal balance of such Class of Notes on the immediately preceding
Distribution Date for such Class of Notes after giving effect to all principal
distributions to holders of Notes of such Class on such date (or, in the case of
the first Distribution Date for such Class of Notes, on the Closing Date) and
(ii) the Noteholders' Interest Shortfall for such Class of Notes for such
Distribution Date; provided, however, that the Noteholders' Interest
Distribution Amount will not include any Noteholders' Interest Carryover.
<PAGE>
"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 allocated to the Noteholders on such Distribution
Date.
"Noteholders' Principal Distribution Amount" means, (A) as to any
Distribution Date on or after February 25, 1998 and on or before the
Distribution Date on which the Class A Notes are paid in full, the sum of (i)
the Principal Distribution Amount for the Collection Period immediately
preceding the month of such Distribution Date (and, in the case of the February
25, 1998 Distribution Date, all preceding Collection Periods), (ii) any Parity
Percentage Payments to be made on such Distribution Date, (iii) the Noteholders'
Principal Carryover Shortfall as of the close of the preceding Distribution Date
and (iv) the amount, if any, remaining on deposit in the Note Distribution
Account following the preceding Distribution Date, and (B) as to any Quarterly
Distribution Date after the Distribution Date on which the Class A Notes are
paid in full, the sum of (i) the Principal Distribution Amount for the three
Collection Periods immediately preceding the month of such Quarterly
Distribution Date, (ii) any Parity Percentage Payments to be made on such
Quarterly Distribution Date, (iii) the Noteholders' Principal Carryover
Shortfall as of the close of the preceding Quarterly Distribution Date and (iv)
the amount, if any, remaining on deposit in the Note Distribution Account
following the preceding Quarterly Distribution Date; provided, however, that the
Noteholders' Principal Distribution Amount allocable to a Class of Notes will
not exceed the outstanding principal balance of such Class of Notes. In
addition, with respect to each Class of Notes, on the related Final Maturity
Date the Noteholders' Principal Distribution Amount will include the amount
required to reduce the outstanding principal balance of such Notes to zero.
"Principal Distribution Amount" means, with respect to any Collection
Period, the excess of (A) the sum of the following amounts: (i) that portion of
all collections received by the Master Servicer or any Servicer on the Financed
Student Loans that is allocable to principal (including the portion of any
Guarantee Payments or Insurance Payments received that is allocable to principal
of the Financed Student Loans); (ii) the portion of the proceeds allocable to
principal from the sale of Financed Student Loans by the Trust during such
Collection Period; (iii) all Realized Losses incurred during such Collection
Period; (iv) to the extent attributable to principal, the Purchase Amount
received with respect to each Financed Student Loan purchased by the Transferor
or purchased by the Master Servicer during the related Collection Period and (v)
the Adjustment Payments, if any, received from the Transferor during such
Collection Period; over (B) the Issuer Consolidation Payments for such
Collection Period; provided, however, that the Principal Distribution Amount
will exclude all payments and proceeds of any Financed Student Loans, the
Purchase Amount of which has been included in Available Funds for a prior
Collection Period.
With respect to each Financed FFELP Loan submitted to a Guarantor for a
Guarantee Payment, a "Realized Loss" means the excess, if any, of (i) the unpaid
principal balance of such Financed FFELP Loan on the date it was first submitted
to a Guarantor for a Guarantee Payment over (ii) all amounts received on or with
respect to principal on such Financed FFELP Loan up through the earlier to occur
of (A) the date a related Guarantee Payment is made or (B) the last day of the
Collection Period occurring 12 months after the date the claim for such
Guarantee Payment is first denied.
With respect to each Financed HEAL Loan submitted to the Department of
HHS for an Insurance Payment, a "Realized Loss" means the excess, if any, of (i)
the unpaid principal balance of such Financed HEAL Loan on the date it was first
submitted to the Department of HHS for an Insurance Payment over (ii) all
amounts received on or with respect to principal on such Financed HEAL Loan up
through the earlier to occur of (A) the date a related Insurance Payment is made
or (B) the last day of the Collection Period occurring 12 months after the date
the claim for such Insurance Payment is first denied.
<PAGE>
Monthly Advances
If the Master Servicer has applied for an Insurance Payment from the
Department of HHS, a Guarantee Payment from a Guarantor or an Interest Subsidy
Payment or a Special Allowance Payment from the Department of Education, and the
Master Servicer has not received the related payment prior to the end of the
Collection Period immediately preceding the Distribution Date on which such
amount would be required to be distributed as a payment of interest, the Master
Servicer may, no later than the Distribution Determination Date relating to such
Distribution Date, deposit into the Monthly Advance Account an amount up to the
amount of such payments applied for but not received (such deposits by the
Master Servicer are referred to herein as "Monthly Advances"). On each related
Distribution Date, the Indenture Trustee will distribute from the Monthly
Advance Account to the Noteholders the Monthly Advance for such Distribution
Date. Such Monthly Advances are recoverable by the Master Servicer (i) first,
from the source for which such Monthly Advance was made and (ii) second, from
payments received generally on or with respect to the Financed Student Loans.
The Master Servicer will have no obligation, legal or otherwise, to make any
Monthly Advance, and a determination by the Master Servicer to make a Monthly
Advance will not create any obligation of the Master Servicer, legal or
otherwise, to make any future Monthly Advances.
Credit Enhancement
Reserve Account. Pursuant to the Transfer and Servicing Agreement, the
Reserve Account will be created on or prior to the Closing Date and the
Transferor will deposit to the Reserve Account cash or Eligible Investments in
an amount equal to the Reserve Account Deposit. The initial Reserve Account
Deposit is [$___]. The Reserve Account will be augmented on each Quarterly
Distribution Date by deposit therein of the amount, if any, necessary to
reinstate the balance of the Reserve Account to the Specified Reserve Account
Balance from the amount of Available Funds remaining after making all prior
distributions on such date as described above under the heading "--
Distributions -- Distributions from the Collection Account". Also, if amounts
were transferred from the Reserve Account to cover a Realized Loss on a Financed
Student Loan, any subsequent payments of principal received on or with respect
to such Financed Student Loan will be deposited into the Reserve Account. As
described below, subject to certain limitations, amounts on deposit in the
Reserve Account will be released to the Transferor to the extent that the amount
on deposit in the Reserve Account exceeds the Specified Reserve Account Balance.
If the amount, if any, on deposit in the Reserve Account on any
Quarterly Distribution Date (after giving effect to all deposits or withdrawals
therefrom on such Distribution Date) is greater than the Specified Reserve
Account Balance, subject to certain limitations, the Administrator will instruct
the Indenture Trustee to distribute the amount of the excess, after payment of
any unpaid Noteholders' Interest Carryover or to purchase Financed Student Loans
for which there has been an uncured breach of certain representations and
warranties, to the Transferor. Upon any distribution to the Transferor of
amounts from the Reserve Account, the Noteholders will not have any rights in,
or claims to, such amounts.
The Reserve Account is intended to enhance the likelihood of timely
receipt by the Noteholders of the full amount of interest due them, the ultimate
receipt by the Noteholders of the full amount of principal and to decrease the
likelihood that the Noteholders 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 Available Funds exceeds the amount of cash in the Reserve Account, a
temporary shortfall in the amount of principal and interest distributed to the
Noteholders could result. This could, in turn, increase the average life of the
Notes. Moreover, 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 aggregate unpaid Noteholders' Interest Carryover.
Subordination of the Class B Notes. The rights of the holders of the
Class B Notes to receive distributions with respect to interest and principal
will be subordinated to such rights of the holders of the Class A Notes to the
<PAGE>
extent described herein. This subordination is intended to enhance the
likelihood of regular receipt by holders of the Class A Notes of the full amount
of the Noteholders' Interest Distribution Amount and, after distribution of the
Class B Interest Distribution Amount, the Noteholders' Principal Distribution
Amount. See "-- Distributions".
Statements to Indenture Trustee
On each Distribution Determination Date immediately preceding a
Distribution Date, the Master Servicer or the Administrator will provide to the
Indenture Trustee (for the Indenture Trustee to forward on each succeeding
Distribution Date to each Noteholder) a statement which will include the
following information with respect to such Distribution Date or for the
preceding Collection Period or Collection Periods, to the extent applicable:
(i) the Principal Factor for each Class of Notes;
(ii) the amount of the distribution allocable to principal
of each Class of Notes;
(iii) the amount of the distribution allocable to interest on
each Class of Notes, together with the interest rates applicable with
respect thereto (indicating whether such interest rates are based on
Formula Interest Rate or on the Net Loan Rate with respect to each
Class of Notes, and specifying what each such interest rate would have
been if it had been calculated using the alternate basis);
(iv) the amount of the distribution, if any, allocable to any
Noteholders' Interest Carryover together with the outstanding amount,
if any, thereof after giving effect to any such distribution;
(v) the Pool Balance as of the close of business on the
last day of the preceding Collection Period;
(vi) the aggregate outstanding principal balance of each Class
of Notes as of such Distribution Date, after giving effect to payments
allocated to principal reported under clause (ii) above;
(vii) the amount of the Servicing Fee to be allocated to the
Master Servicer, the amount of the Administration Fee to be allocated
to the Administrator, the amount of the Indenture Trustee Fee to be
allocated to the Indenture Trustee, the amount of the Delaware Trustee
Fee to be allocated to the Delaware Trustee and the amount of the
Eligible Lender Trustee Fee to be allocated to the Eligible Lender
Trustee, respectively, with respect to the upcoming Distribution Date;
(viii) the amount of the aggregate Realized Losses, if any,
for the preceding Collection Period and the aggregate amount, if any,
received (stated separately for interest and principal) with respect to
Financed Student Loans for which Realized Losses were allocated
previously;
(ix) the amount of the distribution attributable to amounts in
the Reserve Account, the amount of any other withdrawals from the
Reserve Account for such Distribution Date, the balance of the Reserve
Account on such Distribution Date, after giving effect to changes
therein on such Distribution Date, the then applicable Parity
Percentage and the amount of the distribution, if any, attributable to
Parity Percentage Payments;
(x) the aggregate amount, if any, paid for Financed Student
Loans purchased from the Trust during the preceding Collection Period;
(xi) during the Exchange Period only, the aggregate Issuer
Consolidation Payments and Adjustment Payments, stated separately, for
the preceding Collection Period; and
<PAGE>
(xii) the number and principal amount of Financed Student
Loans, as of the preceding Collection Period, that are (A) 30 to 60
days delinquent, (B) 61 to 90 days delinquent, (C) 91 to 120 days
delinquent, (D) more than 120 days delinquent and (E) for which claims
have been filed with the appropriate Guarantor or the Department of HHS
and which are awaiting payment.
Evidence as to Compliance
The Transfer and Servicing Agreement will provide that a firm of
independent public accountants will furnish to the Eligible Lender Trustee and
the 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 calendar year (or, in the case of the first such
certificate, the period from the Closing Date to December 31, 1998) with certain
provisions of the Transfer and Servicing Agreement relating to the servicing of
the Financed Student Loans.
The Transfer and Servicing Agreement will further provide that a firm
of independent public accountants (which may be the same firm referred to in the
immediately preceding paragraph) will furnish to the Eligible Lender Trustee and
the 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 Administrator
during the preceding calendar year (or, in the case of the first such
certificate, the period from the Closing Date to December 31, 1998) with certain
provisions of the Transfer and Servicing Agreement and the Administration
Agreement relating to the administration of the Trust and the Financed Student
Loans.
The Transfer and Servicing Agreement will also provide for delivery to
the Eligible Lender Trustee and the 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 or the Administrator, as the case
may be, stating that, to his knowledge, the Master Servicer or the
Administrator, as the case may be, has fulfilled in all material respects all
its obligations under the Transfer and Servicing Agreement and the
Administration Agreement, respectively, throughout the preceding calendar year
(or, in the case of the first such certificate, the period from the Closing Date
to December 31, 1998) or, if there has been a default in the fulfillment of any
such obligation, specifying each such default known to such officer and the
nature and status thereof. Each of the Master Servicer and the Administrator has
agreed to give the Indenture Trustee and the Eligible Lender Trustee notice of
certain Servicer Defaults and Administrator Defaults, respectively, under the
Transfer and Servicing Agreement.
Copies of such statements and certificates may be obtained by
Noteholders by a request in writing addressed to the Indenture Trustee at Four
Albany Street, New York, New York, 10006, Attention: Corporate Trust and Agent
Group, Structural Finance; facsimile: (212) 250-6439.
Certain Matters Regarding the Master Servicer
The Transfer and 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 or shall violate any
final order of a court or administrative agency with jurisdiction over the
Master Servicer or its properties. No such resignation will become effective
until the Indenture Trustee or a successor servicer has assumed the Master
Servicer's servicing obligations and duties under the Transfer and Servicing
Agreement.
The Transfer and Servicing Agreement will further provide that neither
the Transferor, the Master Servicer nor any of its directors, officers,
employees or agents will be under any liability to the Trust, the Noteholders,
the Certificateholders, the Indenture Trustee or the Eligible Lender Trustee,
except as provided under the Transfer and Servicing Agreement or the
Administration Agreement for taking any action or for refraining from taking any
action pursuant to the Transfer and Servicing Agreement, or for errors in
judgment; provided however, that neither the Transferor, the Master Servicer nor
any such person will be protected against any liability that would otherwise be
<PAGE>
imposed by reason of willful misfeasance, bad faith or negligence in the
performance of their respective duties thereunder. In addition, the Transfer and
Servicing Agreement will provide that the Transferor and the Master Servicer
shall not be under any obligation to appear in, prosecute, or defend any legal
action that is not incidental to its duties in accordance with the Transfer and
Servicing Agreement and that, in its opinion, may cause it to incur any expense
or liability.
The Transfer and Servicing Agreement will provide that the Master
Servicer will be permitted to perform its services thereunder through any of its
affiliates, provided that the Master Servicer shall continue to be responsible
for all performance of such services.
Under the circumstances and subject to conditions specified in the
Transfer and 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 will be the successor of the Master
Servicer under the Transfer and Servicing Agreement. Successors (other than the
Crestar Financial Corporation or a Crestar Subsidiary (as defined below)) must
execute an agreement expressly assuming the Master Servicer's obligations under
the Transfer and Servicing Agreement.
Nothing in the Transfer and Servicing Agreements prohibits or restricts
the merger of Crestar Bank with the Crestar Financial Corporation or certain
subsidiaries of Crestar Financial Corporation (each a "Crestar Subsidiary"), the
consolidation of Crestar Bank and Crestar Financial Corporation or any Crestar
Subsidiary, or the sale of all or substantially all of the assets of Crestar
Bank to Crestar Financial Corporation or another Crestar Subsidiary. In such
event, no consent of the Noteholders or Certificateholders will be required.
Master Servicer Default; Administrator Default
"Master Servicer Default" under the Transfer and Servicing Agreement
will consist of: (i) any failure by the Master Servicer to deliver to the
Indenture Trustee for deposit in any of the Trust Accounts at the time required
for such deposit any collections, Guarantee Payments, Insurance Payments or
other amounts received by the Master Servicer with respect to the Financed
Student Loans, which failure continues unremedied for three Business Days after
written notice from the Indenture Trustee, the Administrator or the Eligible
Lender Trustee is received by the Master Servicer or after discovery by the
Master Servicer; (ii) any failure by the Master Servicer duly to observe or
perform in any material respect any other covenant or agreement of the Master
Servicer in the Transfer and Servicing Agreement which failure materially and
adversely affects the rights of Noteholders and which continues unremedied for
60 days after the giving of written notice of such failure (A) to the Master
Servicer by the Indenture Trustee, the Eligible Lender Trustee or the
Administrator or (B) to the Master Servicer and to the Indenture Trustee and the
Eligible Lender Trustee by holders of Directing Notes evidencing not less than
25% in principal amount of the outstanding Directing Notes; (iii) certain events
of insolvency, readjustment of debt, marshaling of assets and liabilities, or
similar proceedings with respect to the Master Servicer and certain actions by
the Master Servicer indicating its Insolvency, reorganization pursuant to
bankruptcy proceedings or inability to pay its obligations; and (iv) any
limitation, suspension or termination by the Department of Education or the
Department of HHS of the Master Servicer's eligibility to service Student Loans
which materially and adversely affects the Master Servicer's ability to service
Financed Student Loans.
"Administrator Default" under the Transfer and Servicing Agreement or
the Administration Agreement will consist of (i) any failure by the
Administrator to direct the Indenture Trustee or the Eligible Lender Trustee, as
applicable, to make any required distributions from any of the Trust Accounts,
which failure continues unremedied for three Business Days after written notice
from the Indenture Trustee or the Eligible Lender Trustee is received by the
Administrator or after discovery of such failure by the Administrator; (ii) any
failure by the Administrator duly to observe or perform in any material respect
any other covenant or agreement in the Administration Agreement or the Transfer
and Servicing Agreement which failure materially and adversely affects the
rights of Noteholders, and which continues unremedied for 60 days after the
giving of written notice of such failure (A) to the Administrator by the
Indenture Trustee or the Eligible Lender Trustee or (B) to the Administrator and
to the
<PAGE>
Indenture Trustee and the Eligible Lender Trustee by holders of Directing Notes
evidencing not less than 25% in principal amount of the outstanding Directing
Notes; and (iii) certain events of insolvency, readjustment of debt, marshalling
of assets and liabilities, or similar proceedings with respect to the
Administrator and certain actions by the Administrator indicating its insolvency
or inability to pay its obligations.
Rights Upon Servicer Default and Administrator Default
As long as a Servicer Default under the Transfer and Servicing
Agreement or an Administrator Default under the Transfer and Servicing Agreement
or the Administration Agreement remains unremedied, the Indenture Trustee or
holders of Directing Notes evidencing not less than 25% in principal amount of
then outstanding Directing Notes may terminate all the rights and obligations of
the Master Servicer under the Transfer and Servicing Agreement, or the
Administrator under the Transfer and Servicing Agreement and the Administration
Agreement, as the case may be, whereupon a successor servicer or administrator
appointed by the Indenture Trustee or the Indenture Trustee will succeed to all
the responsibilities, duties and liabilities of the Master Servicer under the
Transfer and Servicing Agreement, or the Administrator under the Transfer and
Servicing Agreement and the Administration Agreement, as the case may be, and
will be entitled to similar compensation arrangements. If a successor Master
Servicer or Administrator, as the case may be, has not been appointed at the
time when the predecessor Master Servicer or Administrator has ceased to act as
Master Servicer or Administrator, then the Indenture Trustee shall automatically
be appointed successor Master Servicer or Administrator. 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 or Administrator, as the
case may be, under this Agreement. If a successor Master Servicer or
Administrator, as the case may be, has not been appointed at the time when the
predecessor Master Servicer or Administrator has ceased to act as Master
Servicer or Administrator, then the Indenture Trustee shall automatically be
appointed as successor Master Servicer or Administrator.
Waiver of Past Defaults
The holders of Directing Notes evidencing at least a majority in
principal amount of the then outstanding Directing Notes may, on behalf of all
Noteholders and Certificateholders, waive any default by the Master Servicer in
the performance of its obligations under the Transfer and Servicing Agreement,
or any default by the Administrator of its obligations under the Transfer and
Servicing Agreement and the Administration Agreement, as the case may be, and
their respective consequences, except a default in making any required payments
from any of the Trust Accounts or giving instructions regarding the same in
accordance with the Transfer and Servicing Agreement. No such waiver will impair
the Noteholders' or the Certificateholders' rights with respect to subsequent
defaults.
Amendment
The Transfer and Servicing Agreements may be amended by the parties
thereto, with the consent of the Indenture Trustee, for the purpose of adding
any provisions to or changing in any manner or eliminating any of the provisions
of the Transfer and Servicing Agreements or of modifying in any manner the
rights of 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 with respect to the Financed
Student Loans or distributions that are required to be made for the benefit of
the Noteholders or the Certificateholders, or (ii) reduce the aforesaid
percentage of the Notes or Certificates which are required to consent to any
such amendment, without the consent of the holders of all the outstanding Notes
and Certificates affected thereby.
Insolvency Event
If any of certain events of insolvency or receivership, readjustment of
debt, marshaling of assets and liabilities, or similar proceedings with respect
to the Transferor or certain actions by the Transferor indicating its
<PAGE>
insolvency or inability to pay its obligations (each, an "Insolvency Event")
occurs, the Financed Student Loans will be liquidated and the Trust will be
terminated. Promptly after the occurrence of any Insolvency Event, notice
thereof is required to be given to 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 are
not sufficient to pay the Notes in full, the amount of principal returned to the
Noteholders will be reduced and the Noteholders will incur a loss.
Payment of Notes
Upon the payment in full of all outstanding Notes and the satisfaction
and discharge of the Indenture, the Eligible Lender Trustee will succeed to all
the rights of the Indenture Trustee, and the Certificateholders will succeed to
all the rights of the Noteholders, under the Transfer and Servicing Agreement,
except as otherwise provided therein.
Termination
The obligations of the Master Servicer, the Transferor, the
Administrator, the Eligible Lender Trustee and the Indenture Trustee pursuant to
the Transfer and Servicing Agreements will terminate upon (i) the maturity or
other liquidation of the last Financed Student Loan and the disposition of any
amount received upon liquidation of any remaining Financed Student Loans and
(ii) the payment to the Noteholders and the Certificateholders of all amounts
required to be paid to them pursuant to the Transfer and Servicing Agreements.
To avoid excessive administrative expense, the Transferor is permitted at its
option to repurchase from the Eligible Lender Trustee, as of the end of any
Collection Period immediately preceding a Quarterly Distribution Date, if the
then outstanding Pool Balance is 10% or less of the Initial Pool Balance, all
remaining Financed 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 Notes and the 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 Transferor.
Any Financed Student Loans remaining in the Trust as of the end of
[_____, 2006] will be offered for sale by the Indenture Trustee on or prior to
the [October 2006] Distribution Date if the then outstanding Pool Balance is 10%
or less of the Initial Pool Balance. The Transferor, its affiliates and
unrelated third parties may offer bids to purchase such Financed Student Loans
on or prior to 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 aggregate 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 the Notes on such Distribution Date to zero and (ii) pay to
the Noteholders the Noteholders' 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 to redeem any outstanding Notes 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
Indenture Trustee will be successful in soliciting acceptable bids to purchase
the Financed Student Loans on either the [October 2006] Distribution Date or any
subsequent Distribution Date.
<PAGE>
Administrator
Crestar Bank, in its capacity as Administrator, has entered into the
Administration Agreement with the Trust and the Indenture Trustee, pursuant to
which the Administrator will agree, to the extent provided therein, (i) to
direct the Indenture Trustee to make the required distributions from the Trust
Accounts on each Distribution Date, (ii) to prepare (based on the reports
received from the Master Servicer) and provide periodic and annual statements to
the Eligible Lender Trustee and the Indenture Trustee with respect to
distributions to Noteholders and Certificateholders and any related Federal
income tax reporting information and (iii) to provide the notices and to perform
other administrative obligations required by the Indenture and the Trust
Agreement. 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 the
Administration Fee. Affiliates of the Administrator may assist it in performing
its obligations under the Administration Agreement.
FEDERAL INCOME TAX CONSEQUENCES
General
The following is a summary of the anticipated material federal income
tax consequences of the purchase, ownership, and disposition of the Notes .
Hunton & Williams, special tax counsel to the Trust ("Special Tax Counsel") has
reviewed this summary and has rendered an opinion that the descriptions of the
law and legal conclusions contained herein are correct in all material respects,
and the discussions hereunder fairly summarize the federal income tax
considerations that are likely to be material to Noteholders. The summary and
the opinion of Special Tax Counsel are based upon the provisions of the Code,
the regulations promulgated thereunder, and the judicial and administrative
rulings and decisions now in effect, all of which are subject to change or
possible differing interpretations. The statutory provisions, regulations, and
interpretations on which this summary is based are subject to change, and such a
change could apply retroactively.
The summary does not purport to deal with all aspects of federal income
taxation that may affect particular investors in light of their individual
circumstances, nor with certain categories of investors subject to special
treatment under the federal income tax laws. This summary focuses primarily on
investors who will hold Notes as "capital assets" (generally held for
investment) within the meaning of Section 1221 of the Code, but much of the
discussion is applicable to other investors as well. The summary does not
purport to address the anticipated state income tax consequences to investors of
owning and disposing of the Notes. Consequently, potential purchasers of Notes
are advised to consult their own tax advisors concerning the federal, state or
local tax consequences to them of the purchase, holding, and disposition of the
Notes.
There are no regulations, published rulings or judicial decisions
involving the characterization for federal income tax purposes of securities
with terms substantially the same as the Notes. However, in Special Tax
Counsel's opinion, based upon the facts as they exist at closing, the Notes will
be treated for federal income tax purposes as indebtedness and not as an
ownership interest in the Financed Student Loans or other assets of the Trust,
or as an equity interest in the Trust or in a separate association taxable as a
corporation. That opinion will be based on existing law, but there can be no
assurance that the law will not change or that contrary positions will not be
taken by the Internal Revenue Service (the "Service").
In addition, if the Service were to make and prevail upon the
contention that the Notes did not constitute indebtedness for federal income tax
purposes, the Notes could be treated as equity interests in the Trust. In that
event, the Trust should be treated as a partnership that is not a publicly
traded partnership taxable as a corporation.
<PAGE>
Interest Income
Payments received by Noteholders on the Notes generally should be
accorded the same tax treatment under the Code as payments received on other
taxable corporate bonds. It is not expected that the Notes will be issued with
original issue discount. Accordingly, Noteholders will include in income
interest paid or accrued on the Notes in accordance with such Noteholder's usual
method of accounting.
Market Discount and Acquisition Premium
A subsequent purchaser of a Note at a discount from its adjusted issue
price will acquire such Note with market discount. The purchaser generally will
be required to recognize the market discount (in addition to original issue
discount, if any, remaining with respect to the Note) as ordinary income. A Note
will not be considered to have market discount if the amount of such market
discount is de minimis, i.e., less than the product of (i) 0.25% of the
remaining principal amount of such Note and (ii) the weighted average maturity
of such Note remaining after the date of purchase. Regardless of whether the
subsequent purchaser of a Note with more than a de minimis amount of market
discount is a cash-basis or accrual-basis taxpayer, market discount generally
will be taken into income as principal payments are received, in an amount equal
to the lesser of (i) the amount of the principal payment received or (ii) the
amount of market discount that has "accrued" (as described below), but that has
not yet been included in income. The purchaser may make an election, which
generally will apply to all market discount instruments held or acquired by the
purchaser in the taxable year of election or thereafter, to recognize market
discount currently on an uncapped accrual basis (as described below). Revenue
Procedure 92-67 sets forth the manner in which such an election may be made.
Until the Treasury promulgates applicable regulations, the purchaser of
a Note with market discount generally may elect to accrue the market discount
either: (i) on the basis of a constant interest rate; or (ii) in the ratio of
original issue discount, if any, accrued for the relevant period to the total
remaining original issue discount at the beginning of such period. The Service
indicated in Revenue Procedure 92-67 the manner in which an election may be made
to accrue market discount on a Note on the basis of a constant interest rate. If
that computation method is elected, the pricing prepayment assumption used in
pricing the Notes must be used to calculate the accrual of market discount.
A holder who acquires a Note with market discount generally will be
required to treat a portion of any gain on the sale or exchange of such Note as
ordinary income to the extent of the market discount accrued to the date of
disposition under one of the foregoing methods, less any accrued market discount
previously reported as ordinary income under one of the methods described above.
Moreover, a holder who acquires a Note with market discount generally must defer
interest deductions attributable to any indebtedness incurred or continued to
purchase or carry such Note to the extent they exceed income on such Note, up to
the amount of any accrued but unrecognized market discount. Any such deferred
interest expense, in general, is allowed as a deduction not later than the year
in which the related market discount income is recognized. If the holder of a
Note makes an election to recognize market discount currently, the interest
deferral rule will not apply.
Treasury regulations implementing the market discount rules have not
yet been issued, and uncertainty exists with respect to many aspects of those
rules. Due to the substantial lack of regulatory guidance with respect to the
market discount rules, it is unclear how those rules will affect any secondary
market that develops for the Notes. Prospective purchasers of Notes should
consult with their own tax advisors regarding the application of the market
discount rules to the Notes.
<PAGE>
Gain or Loss on Disposition
If a Note is sold, the holder thereof will recognize gain or loss equal
to the difference between the amount realized on the sale and his adjusted basis
in such Note. A holder's adjusted basis in a Note generally will equal the cost
to such holder of the Note, increased by any market discount and original issue
discount, if any, previously includable in such holder's gross income with
respect to the Note, and reduced by payments on the Note previously received by
such holder. Except to the extent that the market discount rules apply and
except as provided below, any gain or loss on the sale or other disposition of a
Note generally will be capital gain or loss. Such gain or loss will be long-term
gain or loss if the Note is held as a capital asset for the long-term capital
gain holding period.
If the holder of a Note is a bank, thrift, or similar institution
described in section 582 of the Code, any gain or loss on the sale or exchange
of such Note will be treated as ordinary income or loss. In addition, a portion
of the gain, if any, from the sale of a Note that might otherwise be capital
gain may be treated as ordinary income to the extent that such Note is held as
part of a "conversion transaction" within the meaning of section 1258 of the
Code. A conversion transaction generally is one in which the taxpayer has taken
two or more positions in Notes or similar property that reduce or eliminate
market risk, if substantially all of the taxpayer's return is attributable to
the time value of the taxpayer's net investment in such transaction. The amount
of gain realized in a conversion transaction that is recharacterized as ordinary
income generally will not exceed the amount of interest that would have accrued
on the taxpayer's net investment at 120% of the appropriate "applicable federal
rate" (which rate is computed and published monthly by the Service) at the time
the taxpayer entered into the conversion transaction, subject to appropriate
reduction for prior inclusion of interest and other ordinary income from the
transaction.
The highest marginal individual income tax bracket is 36%, and a 10%
surtax is imposed on taxpayers whose taxable income exceeds $250,000 (resulting
in a 39.6% marginal rate). The alternative minimum tax rate for individuals is
26% with respect to alternative minimum tax income up to $175,000 and 28% with
respect to alternative minimum tax income over $175,000. The recently enacted
Taxpayer Relief Act of 1997 (the "Relief Act") established a three-tier rate
structure with respect to the net capital gain of individuals. Under the Relief
Act, the highest marginal federal tax rate on net capital gains for individuals
with respect to assets held for 18 months or less is 28%, as under prior law.
However, the Relief Act reduces the highest marginal federal tax rate with
respect to net capital gain on assets held by individuals for more than 18
months from 28% to 20%, and, for taxable years beginning after, and for assets
acquired after, December 31, 2000 and with respect to assets held for more than
5 years, to 18%. Accordingly, there can be a significant marginal tax rate
differential between net capital gains and ordinary income for individuals. The
highest marginal corporate tax rate is 35% for corporate taxable income over $10
million, and the marginal tax rate on corporate net capital gains is 35%,
although the distinction between capital gains and ordinary income remains
relevant for other purposes. Investors should note that the deductibility of
capital losses is subject to certain limitations.
Backup Withholding
A Note may, under certain circumstances, be subject to "backup
withholding" at the rate of 31% with respect to "reportable payments," which
include interest payments and principal payments to the extent of accrued OID as
well as to distributions of proceeds from a sale of the Notes. The withholding
generally applies if the holder of a Note (i) fails to furnish the Trustee with
his taxpayer identification number ("TIN"); (ii) furnishes the Trustee an
incorrect TIN; (iii) fails to report properly interest, dividends, or other
"reportable payments" as defined in the Code; or (iv) under certain
circumstances, fails to provide the Trustee or such holder's securities broker
with a certified statement, signed under penalty of perjury, that the TIN is its
correct number and that the holder is not subject to backup withholding. Backup
withholding will not apply, however, with respect to payments made to certain
Noteholders, including certain exempt recipients (such as exempt organizations)
and Nonresidents (as defined below) complying with the requisite certification
procedures. Holders of the Notes should consult their tax advisors as to their
qualification for exemption from backup withholding and the procedure for
obtaining the exemption.
<PAGE>
The Trustee will report to the Noteholders and to the Service each
calendar year the amount of any "reportable payments" during such year and the
amount of tax withheld, if any, with respect to payments on the Notes within a
reasonable time after the end of each calendar year.
Foreign Holders
Under the Code, interest income accrued with respect to Notes held by
holders who are nonresident alien individuals, foreign corporations, foreign
partnerships or certain foreign estates and trusts ("Nonresidents") or holders
holding on behalf of a Nonresident generally will be treated as "portfolio
interest" and therefore will not be subject to any United States tax provided
that (i) such interest income is not effectively connected with a trade or
business in the United States of the holder and (ii) the Trustee (or other
person who would otherwise be required to withhold tax from such payments) is
provided with an appropriate statement that the beneficial owner of a Note is a
Nonresident. If a Nonresident holder of a Note does not provide the Trustee (or
other person who would otherwise be required to withhold tax) with the required
certification of Nonresident status, payments on the Note that are attributable
to accrued interest may be subject to either a 30% withholding tax or 31% backup
withholding. See "--Backup Withholding" above. Any market discount or capital
gain recognized on the redemption or disposition of a Note by a Nonresident
generally will not be subject to withholding tax unless the Nonresident is an
individual who is present in the United States for 183 days or more during the
taxable year in which the Note is redeemed or disposed of.
Interest income accrued on and market discount and capital gains
recognized with respect to Notes held by Nonresidents will be subject to regular
United States income tax if such income is effectively connected with the
conduct of a United States business by the holder. Any such income, however,
will not be subject to withholding tax as long as the holder of the Note has
provided the Issuer (or other person who would otherwise be required to withhold
tax) with a properly completed IRS Form 4224 for the taxable year in which the
withholding otherwise would occur.
Reporting and Tax Administration
Reports will be made by the tax administrator of the Notes, at least
annually to holders of record of the Notes (other than those with respect to
whom reporting is not required) and to the Service as may be required by
statute, regulation, or administrative ruling with respect to (i) interest
income and original issue discount, if any, accrued on such Notes; and (ii)
information necessary to compute the accrual of any market discount on such
Notes.
Certain U.S. Federal Income Tax Documentation Requirements
A Note Owner of Notes holding securities through Cedel or Euroclear (or
through DTC if the holder has an address outside the U.S.) will be subject to
the 30% U.S. withholding tax (or, in certain cases, the 31% backup withholding
tax) that generally applies to payments of interest (including original issue
discount) on registered debt issued by U.S. Persons (as defined below), unless
(i) each clearing system, bank or other financial institution that holds
customer's securities in the ordinary course of its trade or business in the
chain of intermediaries between such Note Owner and the U.S. entity required to
withhold tax complies with applicable certification requirements and (ii) such
Note Owner takes one of the following steps to obtain an exemption or reduced
tax rate:
Exemption for non-U.S. Persons (Form W-8). Note Owners of Notes that
are non-U.S. Persons can obtain a complete exemption from the U.S. withholding
tax and the backup withholding tax by filing a signed Form W-8 (Certificate of
Foreign Status). If the information shown in Form W-8 changes, a new form W-8
must be filed within 30 days of such change.
<PAGE>
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 in effectively connected with its conduct
of a trade or business in the United States, can obtain an exemption from the
U.S. withholding tax and the backup 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 Note Owners of Notes 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) with respect to
U.S. withholding tax and an exemption from the backup withholding tax by filing
Form 1001 (Ownership, Exemption or Reduced Rate Note). If the treaty provides
only for a reduced rate, the U.S. withholding tax will be imposed at that rate
unless the filer alternatively files Form W-8. Form 1001 may be filed by the
Note Owner of the Note or his agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons generally are not
subject to the U.S. withholding and can obtain a complete exemption from the
backup withholding tax by filing Form W-9 (Payer's Request for Taxpayer
Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The Note Owner of a Note
(or in the case of a Form 1001 or a Form 4224 filer, its agent), files by
submitting the appropriate form to the person through whom it 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, (iii) an estate the income
of which is includable in gross income for United States tax purposes,
regardless of its source, or (iv) a trust if a court within the United States is
able to exercise primary jurisdiction over the administration of the trust and
one or more U.S. fiduciaries have the authority to control all substantial
decisions of the trust.
New Withholding Rules in 1999. Effective January 1, 1999, any foreign
investor that seeks the protection of an income tax treaty with respect to the
imposition of United States withholding tax will generally be required to obtain
a taxpayer identification number ("TIN") from the Service in advance and provide
verification that such investor is entitled to the protection of the relevant
income tax treaty. Foreign tax-exempt investors will generally be required to
provide verification of their tax-exempt status. Foreign investors are urged to
consult with their tax advisors with respect to these new withholding rules.
This summary does not deal with all aspects of U.S. federal income tax
withholding that may be relevant to foreign holders of the globally offered
Notes. Investors are advised to consult their own tax advisers for specific tax
advice concerning their holding and disposing of the globally offered Notes.
DUE TO THE COMPLEXITY OF THE FEDERAL INCOME TAX RULES APPLICABLE TO
HOLDERS OF THE NOTES AND THE CONSIDERABLE UNCERTAINTY THAT EXISTS WITH RESPECT
TO MANY ASPECTS OF THOSE RULES, POTENTIAL INVESTORS SHOULD CONSULT THEIR OWN TAX
ADVISORS REGARDING THE TAX TREATMENT OF THE ACQUISITION, OWNERSHIP, AND
DISPOSITION OF THE NOTES.
STATE TAX CONSIDERATIONS
In addition to the federal income tax consequences described under
"Certain Federal Income Tax Consequences" above, potential investors should
consider the state income tax consequences of the acquisition, ownership, and
disposition of the Notes. State income tax law may differ substantially from the
corresponding federal law, and this discussion does not purport to describe any
aspect of the income tax laws of any state.
<PAGE>
Therefore, potential investors should consult their own tax advisors with
respect to the various state tax consequences of an investment in the Notes.
ERISA CONSIDERATIONS
Fiduciaries of employee benefit plans and certain other retirement
plans and arrangements that are subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") or corresponding provisions of the
Code, including individual retirement accounts and annuities, Keogh plans and
collective investment funds in which such plans, accounts, annuities or
arrangements are invested (any of the foregoing, a "Plan"), persons acting on
behalf of a Plan, or persons using the assets of a Plan ("Plan Investors"),
should review carefully with their legal advisors whether the purchase or
holding of the Notes could either give rise to a transaction that is prohibited
under ERISA or the Code or cause the Financed Student Loans or other assets of
the Trust to be treated as plan assets for purposes of regulations of the
Department of Labor set forth in 29 C.F.R. 2510.3-101 (the "Plan Asset
Regulations"). Prospective investors should be aware that, although certain
exceptions from the application of the prohibited transaction rules and the Plan
Asset Regulations exist, there can be no assurance that any such exception will
apply with respect to the acquisition of a Note.
Under the Plan Asset Regulations, if the Notes are treated as having
substantial equity features, the purchaser of a Note could be treated as having
acquired a direct interest in the Financed Student Loans and other Trust assets
securing the Notes. In that event, the purchase, holding, or resale of the Notes
could result in a transaction that is prohibited under ERISA or the Code. It is
expected that the Notes will be treated as debt obligations without significant
equity features for purposes of the Plan Asset Regulations. Accordingly, a Plan
that acquires a Note should not be treated as having acquired a direct interest
in the Trust assets. However, there can be no complete assurance that the Notes
will be treated as debt obligations without significant equity features for
purposes of the Plan Asset Regulations.
Regardless whether the Notes are treated as debt or equity for purposes
of ERISA, the acquisition or holding of the Notes by or on behalf of a Plan
could still be considered to give rise to a prohibited transaction if the
parties to the issuance transaction, or any of their respective affiliates is or
becomes a party in interest or a disqualified person with respect to such Plan.
However, one or more exemptions may be available with respect to certain
prohibited transaction rules of ERISA that might apply in connection with the
initial purchase, holding and resale of the Notes, depending in part upon the
type of Plan fiduciary making the decision to acquire Notes and the
circumstances under which such decision is made. Those exemptions include, but
are not limited to: (i) Prohibited Transaction Class Exemption 95-60, regarding
investments by insurance company pooled accounts; (ii) PTCE 91-38, regarding
investments by bank collective investment funds; (iii) PTCE 90-1, regarding
investments by insurance company pooled separate accounts; or (iv) PTCE 84-14,
regarding transactions negotiated by qualified professional asset managers.
Before purchasing Notes, a Plan subject to the fiduciary responsibility
provisions of ERISA or described in Section 4975(e)(1) (and not exempt under
Section 4975(g)) of the Code should consult with its counsel to determine
whether the conditions of any exemption would be met. A purchaser of a Note
should be aware, however, that even if the conditions specified in one or more
exemptions are met, the scope of the relief provided by an exemption might not
cover all acts that might be construed as prohibited transactions.
UNDERWRITING
Subject to the terms and conditions set forth in an Underwriting
Agreement dated [_________, 1997] (the "Underwriting Agreement"), among the
Transferor, Smith Barney Inc., Morgan Stanley & Co. Incorporated and Crestar
Securities Corporation (the "Underwriters"), the Transferor has agreed to sell
to the Underwriters, and each Underwriter has severally agreed to purchase from
the Transferor, the principal balance of each Class of Notes set forth below its
name on the following chart:
<PAGE>
<TABLE>
<CAPTION>
Principal Balance
Morgan Stanley Crestar Securities
Class of Notes Smith Barney Inc. & Co., Incorporated Corporation Total
- -------------- ----------------- ------------------- ----------- -----
<S> <C>
Class A-1 Notes............
Class A-2 Notes............
Class B Notes..............
Total.............
</TABLE>
In the Underwriting Agreement, the Underwriters have severally agreed,
subject to the terms and conditions set forth therein, to purchase all of the
Notes offered hereby, if any Notes are purchased. In the event of a default by
any Underwriter, the Underwriting Agreement provides that, in certain
circumstances, purchase commitments of the non-defaulting Underwriter may be
increased or purchase commitments of all Underwriters may be terminated. The
Transferor has been advised by the Underwriters that the Underwriters propose
initially to offer the Notes to the public at the public offering price with
respect to each Class set forth on the cover page of this Prospectus. After the
initial public offering, the public offering price may be changed.
The Underwriting Agreement provides that the Transferor 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.
After the initial distribution of the Notes by the Underwriters, the
Prospectus may be used by Crestar Securities Corporation, an affiliate of the
Transferor and the Master Servicer, in connection with offers and sales relating
to market making transactions in the Notes. Crestar Securities Corporation may
act as principal or agent in such transactions. Such sales will be made at
prices related to prevailing market prices at the time of sale.
The Underwriters may engage in over-allotment, stabilizing
transactions, syndicate covering transactions and penalty bids in accordance
with Regulation M under the Exchange Act. Over-allotment involves syndicate
sales in excess of the offering size, which creates a syndicate short position.
Stabilizing transactions permit bids to purchase the underlying security so long
as the stabilizing bids do not exceed a specific maximum. Syndicate covering
transactions involve purchases of the Notes in the open market after the
distribution has been completed in order to cover syndicate short positions.
Penalty bids permit the Underwriters to reclaim a selling concession from a
syndicate member when the Notes originally sold by such syndicate member are
purchased in a syndicate covering transaction to cover syndicate short
positions. Such stabilizing transactions, syndicate covering transactions and
penalty bids may cause the price of the Notes to be higher than it would
otherwise be in the absence of such transactions.
Each Underwriter has represented and agreed that (a) it has not offered
or sold, and 'will not offer or sell Notes to persons in the United Kingdom
except to persons whose ordinary activities involve them in acquiring, holding,
managing or disposing of investments (as principal or agent) for the purposes of
their businesses or otherwise in circumstances which have not resulted, and will
not result in an offer to the public in the United Kingdom within the meaning of
the U.K. Regulations, (b) it has complied and 'will comply with all applicable
provisions of the Financial Services Act of 1986 of Great Britain with respect
to anything done by it in relation to the Notes in, from or otherwise involving
the United Kingdom and (c) it has only issued or passed on and will only issue
or pass on in the United Kingdom any document in connection with the issue of
the Notes to a person who is of a kind described in Article 11(3) of the
Financial Services Act 1986, as amended, (Investment Advertisement) (Exemptions)
Order 1996, as amended, or is a person to whom the document may otherwise
lawfully be issued or passed on.
Crestar Securities Corporation is an affiliate of the Transferor and a
wholly owned indirect subsidiary of the Crestar Financial Corporation.
<PAGE>
Smith Barney Inc. has provided from time to time, and may provide in
the future, investment or commercial banking services to the Transferor and its
affiliates, for which Smith Barney Inc. or its affiliates have received or will
receive customary fees and commissions.
LEGAL MATTERS
Certain legal matters relating to the Transferor, the Master Servicer
and the Administrator will be passed upon by Foley & Lardner and Hunton &
Williams. Certain legal matters relating to the validity of the issuance of the
Notes will be passed upon for the Trust by Hunton & Williams. Foley & Lardner
and Hunton & Williams each has performed legal services for the Transferor and
it is expected that they will continue to perform such services in the future.
Certain federal income tax and other matters will be passed upon for the Trust
by Hunton & Williams. Certain legal matters will be passed upon for the
Underwriters by Squire, Sanders & Dempsey L.L.P.
FINANCIAL INFORMATION
The Transferor has determined that its financial statements are not
material to the offering made hereby. The Trust will engage in no activities
other than as described herein. Accordingly, no financial statements with
respect to the Trust are included in this Prospectus.
RATING
It is a condition to the issuance and sale of each Class of the Class A
Notes that they each be rated "AAA" by Standard & Poor's and "Aaa" by Moody's.
It is a condition to the issuance of the Class B Notes that they be rated at
least "A" by Standard & Poor's and at least "A2" by Moody's. Each of Standard &
Poor's and Moody's is also referred to herein as a "Rating Agency" and
collectively, as the "Rating Agencies." A securities 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 ratings of the Notes
address the likelihood of the ultimate payment of principal of and interest on
the Notes pursuant to their terms. The Rating Agencies do not evaluate, and the
ratings on the Notes do not address, the likelihood of prepayments on the Notes
or the likelihood of payment of the Noteholders' Interest Carryover.
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>
1980 Amendments...................................................................................
1981 Amendments...................................................................................
1986 Amendments...................................................................................
1987 Amendments...................................................................................
1989 Amendments...................................................................................
1992 Amendments...................................................................................
1993 Amendments...................................................................................
1993 Technical Amendments........................................................................
1997 Amendments...................................................................................
<PAGE>
91-day T-Bill Rate................................................................................
Adjustment Payment................................................................................
Administration Agreement..........................................................................
Administration Fee................................................................................
Administrator.....................................................................................
Administrator Default.............................................................................
Assigned Rights...................................................................................
Assistance Fund..................................................................................
Available Funds...................................................................................
BHCA..............................................................................................
Cede............................................................................................
Cedel.............................................................................................
Cedel Participants................................................................................
Certificate Balance...............................................................................
Certificate Distribution Account..................................................................
Certificateholders................................................................................
Certificateholders' Distribution Amount...........................................................
Certificateholders' Principal Carryover Shortfall.................................................
Certificateholders' Principal Distribution Amount................................................
Certificates......................................................................................
Claims Rates.....................................................................................
Class.............................................................................................
Class A Noteholders...............................................................................
Class A Notes.....................................................................................
Class A-1 Noteholders.............................................................................
Class A-1 Notes...................................................................................
Class A-2 Noteholders.............................................................................
Class A-2 Notes...................................................................................
Class B Noteholders...............................................................................
Class B Notes.....................................................................................
Class Interest Rate...............................................................................
Closing Date......................................................................................
Code..............................................................................................
Collection Account................................................................................
Collection Period.................................................................................
Commission........................................................................................
Consolidation Loan Fees..........................................................................
Consolidation Prepayments.........................................................................
Cooperative.......................................................................................
CPR..............................................................................................
Crestar Subsidiary................................................................................
Cut-off Date......................................................................................
Default...........................................................................................
Deferment Periods.................................................................................
Deferral Phase....................................................................................
Definitive Notes..................................................................................
Delaware Trustee..................................................................................
Delaware Trustee Fee.............................................................................
Department of Education...........................................................................
<PAGE>
Department of HHS.................................................................................
Depositor.........................................................................................
Depositories......................................................................................
Depository........................................................................................
Directing Notes...................................................................................
Distribution Date................................................................................
Distribution Determination Date...................................................................
DOE Data Books..................................................................................
DTC...............................................................................................
DTC Participants..................................................................................
ECMC..............................................................................................
ECMC\Department Agreements........................................................................
Educational Loan Assistance Fund..................................................................
Effective Interest Rate...........................................................................
Eligible Deposit Account..........................................................................
Eligible Institution..............................................................................
Eligible Investments..............................................................................
Eligible Lender Trustee...........................................................................
Eligible Lender Trustee Fee.......................................................................
ERISA.............................................................................................
Euroclear.........................................................................................
Euroclear Operator................................................................................
Euroclear Participants............................................................................
Event of Default..................................................................................
Exchange Act......................................................................................
Exchange Date.....................................................................................
Exchange Period..................................................................................
Exchanged Consolidation Loans.....................................................................
Exchanged Financed Student Loans..................................................................
Exchanged Serial Loan.............................................................................
Expense Account...................................................................................
FDIA..............................................................................................
FDIC..............................................................................................
FFEL Program......................................................................................
FFELP Loans.......................................................................................
Final Maturity Date...............................................................................
Financed FFELP Loans..............................................................................
Financed HEAL Loans...............................................................................
Financed Student Loans............................................................................
FIRREA............................................................................................
Forbearance Period..............................................................................
Forbearance Periods...............................................................................
Formula Interest Rate.............................................................................
Grace Period......................................................................................
Grace Periods.....................................................................................
Guarantee Agencies................................................................................
Guarantee Agency..................................................................................
Guarantee Agreements..............................................................................
Guarantee Fund....................................................................................
<PAGE>
Guarantee Payments...............................................................................
Guarantor.........................................................................................
Guarantors........................................................................................
HEAL Act..........................................................................................
HEAL Consolidation Loan...........................................................................
HEAL Insurance Contract...........................................................................
HEAL Loans........................................................................................
HEAL Program......................................................................................
Higher Education Act..............................................................................
Indenture.......................................................................................
Indenture Trustee.................................................................................
Indenture Trustee Fee............................................................................
Index Maturity....................................................................................
Indirect Participants.............................................................................
Initial Financed Student Loans...................................................................
Initial Pool Balance..............................................................................
Insolvency Event..................................................................................
Insurance Payments................................................................................
Interest Payment Period...........................................................................
Interest Period...................................................................................
Interest Subsidy Agreement........................................................................
Interest Subsidy Payments.........................................................................
Investment Earnings..............................................................................
Issuer Consolidation Payments.....................................................................
LIBOR Determination Date..........................................................................
Loan Rates........................................................................................
Margin............................................................................................
Master Servicer...................................................................................
Master Servicer Default...........................................................................
Minimum Purchase Price............................................................................
Monthly Advance Account...........................................................................
Monthly Advances..................................................................................
Moody's...........................................................................................
Net Loan Rate...................................................................................
New Borrower......................................................................................
Nonresidents......................................................................................
Note Distribution Account.........................................................................
Note Owner........................................................................................
Noteholders......................................................................................
Noteholders' Distribution Amount..................................................................
Noteholders' Interest Carryover...................................................................
Noteholders' Interest Distribution Amount.........................................................
Noteholders' Interest Shortfall...................................................................
Noteholders' Principal Carryover Shortfall........................................................
Noteholders' Principal Distribution Amount........................................................
Notes............................................................................................
Obligor...........................................................................................
One-Month LIBOR...................................................................................
Original Amount...................................................................................
<PAGE>
Parity Percentage.................................................................................
Parity Percentage Payment.........................................................................
Participants......................................................................................
PHEAA.............................................................................................
PHEAA Bond Fund...................................................................................
Plan..............................................................................................
Plan Asset Regulations............................................................................
Plan Investors....................................................................................
PLUS Loans........................................................................................
Pool Balance......................................................................................
Principal Distribution Amount.....................................................................
Principal Factor..................................................................................
Program Operating Expense Percentage..............................................................
Purchase Amount...................................................................................
Quarterly Distribution Date.....................................................................
Rate Adjustment Date..............................................................................
Rating Agencies...................................................................................
Rating Agency.....................................................................................
Realized Loss.....................................................................................
Record Date.......................................................................................
Reference Bank....................................................................................
Registration Statement............................................................................
Related Documents.................................................................................
Relief Act........................................................................................
Repayment.........................................................................................
Repayment Phase...................................................................................
Repeat Borrower...................................................................................
Reserve Account...................................................................................
Reserve Account Deposit...........................................................................
Reuters Screen LIBOR Page.........................................................................
Secretary of Education............................................................................
Secretary of HHS..................................................................................
Securities Act....................................................................................
Serial Loan.......................................................................................
Service...........................................................................................
Servicer..........................................................................................
Servicers.........................................................................................
Servicing Fee....................................................................................
SLS Loans.........................................................................................
Special Allowance Payments........................................................................
Special Tax Counsel..............................................................................
Specified Reserve Account Balance.................................................................
Stafford Loans....................................................................................
Standard & Poor's.................................................................................
Student Loans.....................................................................................
Subsequent Cut-off Date...........................................................................
Telerate Page 3750..............................................................................
Terms and Conditions..............................................................................
Terms Supplement..................................................................................
<PAGE>
TIN..............................................................................................
TP Loans..........................................................................................
TP Program........................................................................................
Transaction Fees..................................................................................
Transfer Agreement................................................................................
Transfer and Servicing Agreement.................................................................
Transfer and Servicing Agreements.................................................................
Transferor........................................................................................
Transferor Trusts.................................................................................
Trust.............................................................................................
Trust Accounts....................................................................................
Trust Agreement...................................................................................
U.K. Regulations..................................................................................
U.S. Person.......................................................................................
UCC...............................................................................................
Underwriters.....................................................................................
Underwriting Agreement............................................................................
USAF..............................................................................................
</TABLE>
<PAGE>
No dealer, salesman or other individual has been authorized to give any
information or to make any representations other than those contained in this
Prospectus and, if given or made, such information or representations must not
be relied upon as having been authorized by the Transferor or the Underwriters.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any securities other than the Notes offered hereby nor an offer of
such Notes to any person in any state or other jurisdiction in which such offer
would be unlawful. The delivery of this Prospectus at any time does not imply
that information herein is correct as of any time subsequent to its date.
--------------
TABLE OF CONTENTS
Available Information.......................
Reports to Noteholders......................
Incorporation of Certain Documents by
Reference.................................
Summary of Terms............................
Risk Factors................................
Formation of the Trust......................
Use of Proceeds.............................
The Transferor..............................
The Servicers...............................
The Financed Student Loan Pool..............
Maturity and Prepayment Considerations. ..
Description of the FFEL Program.............
Description of the Guarantee Agencies.......
Description of the HEAL Program.............
Description of the Notes....................
Description of the Transfer and Servicing
Agreements................................
Federal Income Tax Consequences.............
State Tax Considerations ...................
ERISA Considerations........................
Underwriting................................
Legal Matters...............................
Financial Information.......................
Rating......................................
Index of Principal Terms....................
[$---------]
Crestar Student Loan
Trust 1997-1
STUDENT LOAN
ASSET BACKED NOTES
[$---------]
Senior LIBOR Rate Class A-1 Notes
[$---------]
Senior LIBOR Rate Class A-2 Notes
[$--------]
Subordinate LIBOR Rate Class B Notes
----------
PROSPECTUS
----------
Smith Barney Inc.
Morgan Stanley Dean Witter
Crestar Securities Corporation
[_________, 1997]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the estimated expenses in connection with
the offering of $1,000,000 of the Student Loan Asset Backed Notes being
registered under this Registration Statement, other than underwriting discounts
and commission:
SEC Registration......................................$ 303.03
Printing and Engraving.........................................*
Legal Fees and Expenses........................................*
Accounting Fees and Expenses...................................*
Trustee Fees and Expenses......................................*
Blue Sky Fees and Expenses.....................................*
Rating Agency Fees.............................................*
Miscellaneous..................................................*
TOTAL..........................................$
* To be provided by amendment
Item 15. Indemnification of Directors and Officers.
Registrant's Articles of Incorporation implement the provisions of the
Virginia State Corporation Act ("VSCA"), which provide for the indemnification
of Registrant's directors and officers in a variety of circumstances, which may
include indemnification for liabilities under the Securities Act of 1933. Under
Sections 13.1-697 and 13.1-702 of the VSCA, a Virginia corporation generally is
authorized to indemnify its directors and officers in civil and criminal actions
if they acted in good faith and believed their conduct to be in the best
interests of the corporation and, in the case of criminal actions, had no
reasonable cause to believe that the conduct was unlawful. Registrant's Articles
of Incorporation require indemnification of directors and officers with respect
to certain liabilities, expenses and other amounts imposed upon them by reason
of having been a director or officer, except in the case of willful misconduct
or a knowing violation of criminal law. In addition, the VSCA and Registrant's
Articles of Incorporation eliminate the liability of a director or officer in a
stockholder or derivative proceeding. This elimination of liability will not
apply in the event of willful misconduct or a knowing violation of the criminal
law or any federal or state securities law. Sections 13.1-692 and 13.1-696 to
- -704 of the VSCA are incorporated herein by reference.
Reference is made to the Underwriting Agreement filed as an exhibit hereto
for provisions relating to the indemnification of directors, officers and
controlling persons of the Registrant against certain liabilities, including
liabilities under the Securities Act of 1933, as amended.
Crestar Financial Corporation, the parent of the Registrant, carries an
insurance policy providing directors' and officers' liability insurance for any
liability its directors or officers or the directors or officers of any of its
subsidiaries, including the Registrant, may incur in their capacities as such.
II - 1
<PAGE>
Item 16. Exhibits.
All financial statements, schedules and historical financial information
have been omitted as they are not applicable.
1.1 Form of Underwriting Agreement
3.1 Articles of Incorporation of Registrant
3.2 By-Laws of Registrant
3.3 Trust Agreement among the Registrant, Star Bank, National Association and
Delaware Trust Capital Management Inc.
4.1 Form of Indenture between the Trust and the Indenture Trustee
4.2 Form of First Terms Supplement to Indenture between the Trust and the
Indenture Trustee
4.3 Form of Transfer and Servicing Agreement among the Trust, the Master
Servicer and the Eligible Lender Trustee
4.4 Form of Administration Agreement among the Administrator, the Eligible
Lender Trustee and the Indenture Trustee
4.5 Guarantee Agreement with the Educational Credit Management Corporation
4.6 Guarantee Agreement with the Pennsylvania Higher Education Assistance
Agency
4.7 Contract of Insurance with the U.S. Department of Health and Human
Services*
5.1 Opinion of Hunton & Williams
8.1 Opinion of Hunton & Williams with respect to tax matters
23.1 Consent of Hunton & Williams is contained in their opinions filed as
Exhibits 5.1 and 8.1
24.1 Power of Attorney of certain officers and directors of the Registrant+
25.1 T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of
Bankers Trust Company*
- ------------------------------------
+ Previously filed
* To be filed by amendment
Item 17. Undertakings.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, 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;
(ii) To reflect in the Prospectus any facts or events
arising after the effective date of the Registration Statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the Registration Statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
Registration Statement or any material change of such information
in the Registration Statement;
II - 2
<PAGE>
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do
not apply if the information required to be included in the
post-effective amendment by those paragraphs is contained in
periodic reports filed by the Registrant pursuant to Section 13
or Section 15(d) of the Securities Exchange Act of 1934 that are
included by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, 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 fide offering thereof;
(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) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement 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.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, 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, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the 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, the 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.
II - 3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Richmond, Commonwealth of Virginia, on November
14, 1997.
CRESTAR BANK
By: /s/ W. Clark McGhee
________________________
W. Clark McGhee
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated pursuant to a Power of Attorney.
<TABLE>
<CAPTION>
Signature Capacity Date
---------------- ----------------- --------
<S> <C>
/s/ Richard G. Tilghman* Chairman of the Board & Chief November 14, 1997
- ------------------------------------
Richard G. Tilghman Executive Officer and Director
(Principal Executive Officer)
/s/ James M. Wells, III* President, Chief Operating Officer November 14, 1997
- ------------------------------------- and Director
James M. Wells, III
/s/ Richard F. Katchuk* Corporate Executive Vice President November 14, 1997
- -------------------------------------
Richard F. Katchuk and Chief Financial Officer
(Principal Financial Officer)
/s/ James D. Barr* Group Executive Vice President - November 14, 1997
- ------------------------------------- Controller & Treasurer
James D. Barr (Principal Accounting Officer)
Director November 14, 1997
- -------------------------------------
J. Carter Fox
/s/ Bonnie Guiton Hill* Director November 14, 1997
- -------------------------------------
Bonnie Guiton Hill
/s/ Charles R. Longsworth* Director November 14, 1997
- -------------------------------------
Charles R. Longsworth
/s/ Patrick J. Maher* Director November 14, 1997
- -------------------------------------
Patrick J. Maher
II - 4
<PAGE>
<CAPTION>
Signature Capacity Date
---------------- ----------------- --------
<S> <C>
Director November 14, 1997
- -------------------------------------
Frank E. McCarthy
/s/ Paul D. Miller* Director November 14, 1997
- -------------------------------------
Paul D. Miller
/s/ G. Gilmer Minor III* Director November 14, 1997
- -------------------------------------
G. Gilmer Minor III
/s/ Gordon F. Rainey, Jr.* Director November 14, 1997
- -------------------------------------
Gordon F. Rainey, Jr.
Director November 14, 1997
- -------------------------------------
Frank S. Royal
/s/ Alfred H. Smith, Jr.* Director November 14, 1997
- -------------------------------------
Alfred H. Smith, Jr.
/s/ Jeffrey R. Springer* Director November 14, 1997
- -------------------------------------
Jeffrey R. Springer
/s/ Eugene P. Trani* Director November 14, 1997
- -------------------------------------
Eugene P. Trani
Director November 14, 1997
- -------------------------------------
L. Dudley Walker
/s/ Robert C. Wilburn* Director November 14, 1997
- -------------------------------------
Robert C. Wilburn
/s/ Karen Hastie Williams* Director November 14, 1997
- -------------------------------------
Karen Hastie Williams
By: /s/ W. Clark McGhee
______________________________________________ November 14, 1997
W. Clark McGhee
Attorney-in-Fact, pursuant to a
Power of Attorney
</TABLE>
II-5
CRESTAR STUDENT LOAN TRUST 1997-1
$_____________ Student Loan Asset Backed Notes
UNDERWRITING AGREEMENT
____________, 1997
SMITH BARNEY INC.
As Representative of the
several Underwriters named herein
390 Greenwich Street, 4th Floor
New York, New York 10013
Ladies and Gentlemen:
Crestar Bank, a Virginia banking corporation (as transferor of the
Financed Student Loans to the Trust (each as defined below), the "Bank"), has
formed a trust known as Crestar Student Loan Trust 1997-1 (the "Trust") under
the laws of the State of Delaware and the Bank proposes to cause the Trust to
sell to the underwriters named in Schedule I hereto (collectively, the
"Underwriters" and each individually an "Underwriter"), for whom you (the
"Representative") are acting as representative, pursuant to the terms of this
Underwriting Agreement, Student Loan Asset Backed Notes in the following Classes
and initial principal amounts: $_____________ Senior LIBOR Rate Class A-1 Asset
Backed Notes (the "Class A-1 Notes") and $_____________ Senior LIBOR Rate Class
A-2 Asset Backed Notes (the "Class A-2 Notes" and together with the Class A-1
Notes, the "Class A Notes") and $_____________ Subordinate LIBOR Rate Class B
Asset Backed Notes (the "Class B Notes" and together with the Class A Notes, the
"Notes"). Star Bank, National Association, a national banking association, acts
as eligible lender trustee (the "Eligible Lender Trustee") of the Trust. The
Trust has been formed pursuant to a Trust Agreement, dated as ___________, 1997
(the "Trust Agreement") by and among the Bank, Delaware Trust Capital
Management, Inc., as Delaware trustee, and the Eligible Lender Trustee. On the
Closing Date, Financed Student Loans (as defined in the Transfer and Servicing
Agreement defined below) will have been transferred to the Eligible Lender
Trustee on behalf of the Trust by the Bank. The Notes will be issued under an
Indenture dated as of __________________, 1997 (the "Master Indenture") between
the Trust and Bankers Trust Company, as indenture trustee ("Indenture Trustee"),
as supplemented by a related First Terms Supplement (the "First Terms
Supplement" and collectively with the Master Indenture, the "Indenture"). Upon
issuance, the Notes will be secured by, among other things, Financed Student
Loans pledged to the Indenture Trustee and described in the Prospectus (as
defined in Section 3 below). This Agreement, the Transfer and Servicing
<PAGE>
Agreement dated as of ______________, 1997 (the "Transfer and Servicing
Agreement") among the Trust, the Bank and the Eligible Lender Trustee, the
Indenture, the Administration Agreement dated as of __________________, 1997
among the Trust, the Bank and the Indenture Trustee (the "Administration
Agreement") and the Trust Agreement shall collectively hereinafter be referred
to as the "Basic Documents." Capitalized terms used herein without definition
shall have the meanings ascribed to them in the Transfer and Servicing
Agreement.
1. Purchase, Sale and Delivery of the Notes.
(a) On the basis of the representations, warranties and agreements
herein contained, but subject to the terms and conditions herein set forth, the
Bank agrees to cause the Trust to sell to the Underwriters, and the Underwriters
agree, severally and not jointly, to purchase from the Trust: the Class A-1
Notes, at a purchase price of ________% of the principal amount of the Class A-1
Notes; the Class A-2 Notes, at a purchase price of ________% of the principal
amount of the Class A-2 Notes; and the Class B Notes at a purchase price of
________% of the principal amount of the Class B Notes, the respective principal
amounts of each Class of Notes set forth opposite the names of the Underwriters
in Schedule I hereto.
(b) Delivery to the Representative of and payment for the Notes shall
be made at the offices of _________________, at ___:___ A.M., New York City
time, on ___________, 1997 (the "Closing Date"). The place of such closing and
the Closing Date may be varied by agreement between the Representative and the
Bank.
The Notes will be delivered by the Bank to the Representative for the
respective accounts of the Underwriters against payment of the purchase price
therefor to or upon the order of the Bank in Federal Funds, by wire, or such
other form of payment as to which the parties may agree. Each Class of Notes
will be evidenced by a single global security in definitive form and/or by
additional definitive securities, and will be registered, in the case of the
global Classes of Notes, in the name of Cede & Co. as nominee of The Depository
Trust Company ("DTC"), and in the other cases, in such names and in such
denominations as the Representative shall request prior to 1:00 p.m., New York
City time, no later than the business day preceding the Closing Date. The Notes
to be delivered to the Representative shall be made available to the
Representative in New York City for inspection not later than 9:30 a.m., New
York City time, on the business day next preceding the Closing Date.
<PAGE>
2. Offering by the Underwriters.
(a) It is understood that, after the Registration Statement becomes
effective, the Underwriters propose to offer the Notes for sale to the public
(which may include selected dealers) as set forth in the Prospectus. The
Underwriters agree not to offer or sell the Notes in any state or jurisdiction
where registration, qualification or any filing to effect any exemption is
required under such state's or jurisdiction's securities or Blue Sky laws,
except where, with the consent of the Bank (which may be withheld in the Bank's
sole discretion), such registration, qualification or filing has been completed.
The Underwriters agree that all offers and sales of the Notes will be made in
accordance with applicable federal and state securities laws and regulations. To
the extent the Underwriters engage in overallotment, stabilizing transactions,
syndicate covering transactions and penalty bids, the Underwriters agree that
such activities shall be in accordance with Regulation M under the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
(b) Each Underwriter severally represents and agrees that (i) it has
not offered or sold and will not offer or sell any Notes to persons in the
United Kingdom except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal or agent)
for the purpose of their businesses or otherwise in circumstances which have not
resulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995; (ii) it
has complied and will comply with all applicable provisions of the Financial
Services Act of 1986 with respect to anything done by it in relation to the
Notes in, from or otherwise involving the United Kingdom; and (iii) it has only
issued or passed on, and will only issue or pass on, in the United Kingdom any
document received by it in connection with the issue of the Notes to a person
who is of a kind described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1996 or to a person to whom such
document may otherwise lawfully be issued, distributed or passed on.
3. Representations and Warranties of the Bank. The Bank
represents and warrants to and agrees with the Underwriters that:
(a) A registration statement on Form S-3 (No. 333-35825), including a
prospectus and such amendments thereto as may have been required to the date
hereof, relating to the Notes and the offering thereof has been filed with the
Securities and Exchange Commission (the "SEC") and such registration statement,
as amended, has become effective under the Securities Act of 1933, as amended
(the "Act"); such registration statement, as amended, including all information
(if any) deemed to be a part of such registration statement as of the Effective
Time (as defined below) pursuant to Rule 430A under the Act, and including the
<PAGE>
exhibits thereto and any material incorporated by reference therein, and the
prospectus relating to the sale of the Notes offered thereby constituting a part
thereof, as amended or supplemented, are respectively referred to herein as the
"Registration Statement" and the "Prospectus"; and the conditions to the use of
a registration statement on Form S-3 under the Act, as set forth in the General
Instructions to Form S-3, have been satisfied with respect to the Registration
Statement. For purposes of this Agreement, "Effective Time" means (x) if the
Bank has advised the Representative that it does not propose to amend the
Registration Statement, the date and time as of which the Registration
Statement, or the most recent post-effective amendment thereto (if any) filed
prior to the execution and delivery of this Agreement, was declared effective by
the SEC, or (y) if the Bank has advised the Representative that it proposes to
file an amendment or post-effective amendment to the Registration Statement, the
date and time as of which the Registration Statement, as amended by such
amendment or post-effective amendment, as the case may be, is declared effective
by the SEC. "Effective Date" means the date of the Effective Time.
(b) On the Effective Date, the Registration Statement, and at the time
of the filing of the Prospectus pursuant to Rule 424(b), the Registration
Statement and the Prospectus, conformed, in all material respects to the
requirements of the Act, the rules and regulations of the SEC (the "Rules and
Regulations") and the Trust Indenture Act of 1939, as amended, and the rules and
regulations thereunder (the "Trust Indenture Act"), and in the case of the
Registration Statement, did not include any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading and, in the case of the Prospectus,
did not include any 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, and on the date of
this Agreement, the Registration Statement and the Prospectus conforms in all
material respects to the requirements of the Act, the Rules and Regulations and
the Trust Indenture Act, and the Registration Statement does not include any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading;
the Prospectus does not include any untrue statement of material fact or omit to
state any material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading; provided, however,
that the foregoing does not apply to statements in or omissions from the
Registration Statement or the Prospectus based upon written information
furnished to the Bank by any Underwriter specifically for use therein.
(c) The SEC has not issued and, to the best knowledge of the Bank, is
not threatening to issue any order preventing or suspending the use of the
Registration Statement.
<PAGE>
(d) This Agreement has been duly authorized, executed and delivered by
the Bank. 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, the organizational documents or
by-laws of the Bank or any agreement or instrument to which the Bank is a party
or by which the Bank is bound or to which any of the properties of the Bank is
subject which could reasonably be expected to have a material adverse effect on
the transactions contemplated herein.
(e) The Bank 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, except for such power and authority the absence of which
would not have a material adverse effect on the Bank or its ability to
consummate the transactions contemplated hereby.
(f) There are no legal or governmental proceedings pending or, to the
knowledge of the Bank, threatened, against the Bank, or to which the Bank or any
of its properties is subject, of a character required to be disclosed in the
Prospectus that are not disclosed in the Prospectus.
(g) 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 Bank in connection with the execution and delivery by the Bank of
this Agreement and the performance by the Bank of the transactions expressly
contemplated by this Agreement, have been duly obtained, effected or given and
are in full force and effect, except such as may be required by the blue sky
laws of any jurisdiction in connection with the sale and distribution of the
Notes for which no representation is being given.
(h) The Bank has all requisite corporate power and authority to
execute and deliver this Agreement and carry out its terms.
(i) The Bank is not required to register as an "investment company"
under the Investment Company Act of 1940, as amended (the "1940 Act") by reason
of the issuance of the Notes.
(j) The representations and warranties made by the Bank as Transferor
in Section 3.1 and Section 6.1 of the Transfer and Servicing Agreement will be
true and correct in all material respects at the time made and on and as of the
Closing Date.
(k) 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 Bank or any of its subsidiaries any brokerage or finder's fee
or other fee or commission as a result of any of the transactions contemplated
by this Agreement.
<PAGE>
4. Agreements of the Bank. The Bank agrees with the Underwriters
as follows:
(a) If the Effective Time is prior to the execution and delivery of
this Agreement, the Bank will file the Prospectus, properly completed, with the
SEC pursuant to and in accordance with subparagraph (1) (or, if applicable and
if consented to by the Representative, subparagraph (4)) of Rule 424(b) not
later than the earlier of (i) the second business day following the execution
and delivery of this Agreement and (ii) the fifth business day after the
Effective Date. The Bank will advise the Representative promptly of any such
filing pursuant to Rule 424(b). The Bank will advise the Representative promptly
of any proposal to amend or supplement 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; provided, however, except for the Current Report on Form 8-K
described in Section 4(m), no consent of the Representative shall be required in
connection with any filing made pursuant to the Exchange Act and the rules and
regulations promulgated thereunder; the Bank 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 Bank will also advise the Representative promptly of the effectiveness
of the Registration Statement (if the Effective Time is subsequent to the
execution of this Agreement) 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 known threat of any proceeding for that purpose and the Bank
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.
(b) If, at any time when the Prospectus relating to the Notes is
required to be delivered under the Act, any event occurs as a result of which
such Prospectus as then amended or supplemented would include an untrue
statement of a material fact or omit to state a 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 or supplement
the Prospectus to comply with the Act or the Rules and Regulations, the Bank
promptly will prepare and file with the SEC, an amendment or supplement to such
Prospectus that will correct such statement or omission or an amendment that
will effect such compliance.
<PAGE>
(c) The Bank will immediately inform the Representative (i) of the
receipt by the Bank or the Trust of any communication from the SEC or any state
securities authority concerning the offering or sale of the Notes and (ii) of
the commencement of any lawsuit or proceeding to which either the Bank or the
Trust is a party relating to the offering or sale of the Notes; provided,
however, with respect to the Trust, the Trust has so informed the Bank to the
extent the Bank did not receive such communication provided in clause (i) or is
not a party to the lawsuit or proceeding as provided in clause (ii) and did not
receive notice of such lawsuit.
(d) The Bank will furnish to the Underwriters, without charge, copies
of the Registration Statement (including all documents and exhibits thereto or
incorporated by reference therein), the Prospectus, and all amendments and
supplements to such documents relating to the Notes, in each case in such
quantities as the Underwriters may reasonably request.
(e) No amendment or supplement will be made to the Registration
Statement or Prospectus unless the Representative shall have previously been
advised thereof and the Representative shall not have reasonably objected
thereto after being so advised; provided, however, after the Closing Date,
excluded from this provision shall be filings made pursuant to the Exchange Act.
(f) The Bank will cooperate with the Representative and with its
counsel in connection with the qualification of, or procurement of exemptions
with respect to, the Notes for offering and sale by the Underwriters and by
dealers under the securities or Blue Sky laws of such jurisdictions as any
Underwriter may designate and to which the Bank shall consent (which consent may
be withheld in the Bank's sole discretion) and, in such jurisdictions, will file
or cause the Trust to file such consents to service of process or other
documents necessary or appropriate in order to effect such qualification or
exemptions; provided that in no event shall either of the Bank or the Trust be
obligated to qualify to do business in any jurisdiction where it is not now so
qualified or to take any action which would subject it to service of process in
suits, other than those arising out of the offering or sale of the Notes, in any
jurisdiction where it is not now so subject.
(g) Subject to Section 2, the Bank and the Trust consent to the use, in
accordance with the securities or Blue Sky laws of such jurisdictions in which
the Notes are offered by the Underwriters and by dealers, of the Prospectus
furnished by the Bank.
(h) To the extent, if any, that the rating or ratings provided with
respect to the Notes by the rating agency or agencies that initially rate a
series of Notes is conditional upon the furnishing of documents or the taking of
any other actions by the Bank or the Trust, the Bank shall cause to be furnished
such documents and such other reasonable actions to be taken.
<PAGE>
(i) For two years from the Closing Date, the Bank will furnish to the
Representative (i) as soon as available, a copy of each document relating to the
Trust or the Notes required to be filed with the SEC pursuant to the Exchange
Act or any order of the SEC thereunder, and (ii) such other information
concerning the Bank or the Trust as the Representative may reasonably request
from time to time insofar as such information reasonably relates to the
Registration Statement or the transactions contemplated by the Basic Documents.
(j) If this Agreement shall terminate or shall be terminated after
execution and delivery pursuant to any provisions hereof (otherwise than by
notice given by an Underwriter terminating this Agreement pursuant to Section 8
or Section 9 hereof) or if this Agreement shall be terminated by the
Representative because of any failure or refusal on the part of the Bank to
comply with the terms or fulfill any of the conditions of this Agreement, the
Bank agrees to reimburse the Underwriters for all out-of-pocket expenses
(including reasonable fees and expenses of their counsel) reasonably incurred in
connection herewith. In no event shall the Bank or the Trust be liable to the
Underwriters for loss of anticipated profits from the transactions contemplated
by this Agreement.
(k) The net proceeds from the sale of the Notes hereunder will be
applied substantially in accordance with the description set forth in the
Prospectus.
(l) Except as stated in this Agreement and in the Prospectus, the Bank
has not taken, nor will it take, directly or indirectly, any action designed to
or that might reasonably be expected to cause or result in stabilization or
manipulation of the price of the Notes to facilitate the sale or resale of the
Notes; it being understood and agreed that no such action by any Underwriter
shall be deemed an action of the Bank.
(m) Provided that the Bank has received the Computational Materials (as
defined in Section 8 below) within the time frame set forth in Section 8, the
Bank will cause such Computational Materials to be filed with the SEC on a
Current Report on Form 8-K (the "Current Report") not later than the date on
which the Prospectus is available for distribution to investors.
(n) For the period beginning on the date of this Agreement and ending
90 days after the Closing Date, neither the Bank nor any trust originated,
directly or indirectly, by the Bank will, without the prior written consent of
the Representative, offer to sell or sell notes (other than the Notes)
collateralized by, or 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 Bank.
<PAGE>
5. Indemnification and Contribution. (a) The Bank agrees to indemnify
and hold harmless each Underwriter and each person, if any, who controls an
Underwriter within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, from and against any and all losses, claims, damages, liabilities
and expenses (including reasonable costs of investigation) arising out of or
based upon any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement, the Prospectus, or in any amendment or
supplement thereto, or the preliminary prospectus dated _____________, 1997 (the
"Preliminary Prospectus"), or arising out of or based upon any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
such losses, claims, damages, liabilities or expenses arise out of or are based
upon any untrue statement or omission or alleged untrue statement or omission
which has been made therein or omitted therefrom in reliance upon and in
conformity with the information relating to the Underwriter furnished in writing
to the Bank by or on behalf of any Underwriter through the Representative
expressly for use in connection therewith; provided, however, that the foregoing
indemnity with respect to the Prospectus or the Preliminary Prospectus shall not
inure to the benefit of any Underwriter (or any person controlling such
Underwriter) from whom the person asserting any such loss, claim, damage or
liability purchased Notes, if such person did not receive a copy of the
Prospectus (as then amended or supplemented) at or prior to the written
confirmation of the sale of such Notes to such person and if the Prospectus (as
so amended or supplemented) would have cured the defect giving rise to such
loss, claim, damage or liability. The foregoing indemnity agreement shall be in
addition to any liability which the Bank may otherwise have.
(b) If any action, suit or proceeding shall be brought against an
Underwriter or any person controlling an Underwriter in respect of which
indemnity may be sought against the Bank, such Underwriter or such controlling
person shall promptly notify the parties against whom indemnification is being
sought (the "indemnifying parties"), and such indemnifying parties shall assume
the defense thereof, including the employment of counsel and payment of all
reasonable fees and expenses. Such Underwriter or any such controlling person
shall have the right to employ separate counsel in any such action, suit or
proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of the Underwriter or such controlling
person unless (i) the indemnifying parties have agreed in writing to pay such
fees and expenses, (ii) the indemnifying parties have failed to assume the
defense and employ counsel within a reasonable period of time, or (iii) the
named parties to any such action, suit or proceeding (including any impleaded
parties) include both the Underwriter or such controlling person and the
indemnifying parties and the Underwriter or such controlling person shall have
<PAGE>
been advised by its counsel that representation of such indemnified party and
any indemnifying party by the same counsel would be inappropriate under
applicable standards of professional conduct (whether or not such representation
by the same counsel has been proposed) due to actual or potential differing
interests between them (in which case the indemnifying party shall not have the
right to assume the defense of such action, suit or proceeding on behalf of the
Underwriter or such controlling person). It is understood, however, that the
indemnifying parties shall, in connection with any one such action, suit or
proceeding or separate but substantially similar or related actions, suits or
proceedings in the same jurisdiction arising out of the same general allegations
or circumstances, be liable for the reasonable fees and expenses of only one
separate firm of attorneys (in addition to any local counsel) at any time for
the Underwriter and controlling persons not having actual or potential differing
interests with the Underwriter or among themselves, which firm shall be
designated in writing by the Underwriter, and that all such fees and expenses
shall be reimbursed on a monthly basis as provided in paragraph (a) hereof. The
indemnifying parties shall not be liable for any settlement of any such action,
suit or proceeding effected without their written consent, but if settled with
such written consent, or if there be a final judgment for the plaintiff in any
such action, suit or proceeding, the indemnifying parties agree to indemnify and
hold harmless the Underwriter and any such controlling person from and against
any loss, claim, damage, liability or expense by reason of such settlement or
judgment to the extent provided in paragraph (a).
(c) Each Underwriter agrees severally but not jointly to indemnify and
hold harmless the Bank and its respective directors and officers, and any person
who controls the Bank within the meaning of Section 15 of the Act or Section 20
of the Exchange Act to the same extent as the indemnity from the Bank to such
Underwriter set forth in paragraph (a) hereof, but only with respect to
information relating to such Underwriter furnished in writing by or on behalf of
such Underwriter through the Representative expressly for use in the
Registration Statement, the Prospectus, or any amendment or supplement thereto,
or any related preliminary prospectus. If any action, suit or proceeding shall
be brought against the Bank, any of its directors or officers, or any such
controlling person based on the Registration Statement, the Prospectus, or any
amendment or supplement thereto, or any related preliminary prospectus and in
respect of which indemnity may be sought against an Underwriter pursuant to this
paragraph (c), such Underwriter shall have the rights and duties given to the
Bank by paragraph (b) above (except that if the Bank shall have assumed the
defense thereof no Underwriter shall be required to do so, but may employ
separate counsel therein and participate in the defense thereof, but the fees
and expenses of such counsel shall be at such Underwriter's expense, except as
otherwise provided in paragraph (b) above), and the Bank, its respective
directors and officers, and any such controlling person shall have the rights
and duties given to such Underwriter by paragraph (b) above. The foregoing
indemnity agreement shall be in addition to any liability which the Underwriters
may otherwise have.
<PAGE>
(d) If the indemnification provided for in this Section 5 is
unavailable to an indemnified party under paragraphs (a) or (c) hereof in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then an indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Bank on the one hand and the applicable Underwriter on the other hand 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 Bank on the one hand and such Underwriter on the other in
connection with the statements or omissions that resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Bank on the one
hand and such Underwriter on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Notes (before
deducting expenses) received by the Bank bear to the total underwriting
discounts and commissions received by such Underwriter. The relative fault of
the Bank on the one hand and such Underwriter on the other hand 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 Bank on the one hand or
by such Underwriter on the other hand and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
(e) The Bank and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 5 were determined by a pro
rata allocation or by any other method of allocation that does not take account
of the equitable considerations referred to in paragraph (d) above. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, liabilities and expenses referred to in paragraph (d) above shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating any claim or defending any such action, suit or proceeding.
Notwithstanding the provisions of this Section 5, no Underwriter shall be
required to contribute any amount in excess of the underwriting discounts and
commissions applicable to the Notes hereunder. 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.
<PAGE>
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 5 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 5 and the
representations and warranties of the Bank set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of an Underwriter, the Bank or any person
controlling any of them or their respective directors or officers, (ii)
acceptance of any Notes and payment therefor hereunder, and (iii) any
termination of this Agreement. A successor to any Underwriter, the Bank or any
person controlling any of them or their respective directors or officers, shall
be entitled to the benefits of the indemnity, contribution and reimbursement
agreements contained in this Section 5.
6. Conditions of the Underwriters' Obligations. The
obligations of the Underwriters to purchase the Notes hereunder are subject to
the following conditions:
(a) All actions required to be taken and all filings required to be
made by the Bank under the Act prior to the sale of the Notes shall have been
duly taken or made. At and 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 Bank or the Underwriters, shall be threatened by the SEC.
(b) Since the respective dates as of which information is given in the
Registration Statement (or any amendment or supplement thereto), except as may
otherwise be stated therein or contemplated thereby, there shall not have
occurred (i) any change, or any development involving a prospective change, in
or affecting the condition (financial or other), business, properties, net
worth, or results of operations of the Bank not contemplated by the Registration
Statement, which in the opinion of the Representative, would materially
adversely affect the market for the Notes, or (ii) any event or development
which makes any statement made in the Registration Statement or Prospectus
untrue in any material respect or which, in the opinion of the Bank and its
counsel or the Underwriters and their counsel, requires the filing of any
amendment to or change in the Registration Statement or Prospectus in order to
state a material fact required by any law to be stated therein or necessary in
order to make the statements therein not misleading, if amending or
supplementing the Registration Statement or Prospectus to reflect such event or
development would, in the opinion of the Representative, materially adversely
affect the market for the Notes.
<PAGE>
(c) The Representative shall have received on the Closing Date an
opinion of Prickett, Jones, Elliott, Kristol & Schnee, special Delaware counsel
for the Trust, dated the Closing Date and addressed to the Underwriters, in form
and scope reasonably satisfactory to the Representative and its counsel and
substantially in the form of Exhibit A hereto.
(d) The Representative shall have received on the Closing Date opinions
of Foley & Lardner, special counsel for the Bank, dated the Closing Date and
addressed to the Underwriters, in form and scope reasonably satisfactory to the
Representative and its counsel and substantially in the form of Exhibits B-1 and
B-2 hereto.
(e) The Representative shall have received on the Closing Date an
opinion of Hunton & Williams, counsel for the Bank, dated the Closing Date and
addressed to the Underwriters, in form and scope reasonably satisfactory to the
Representative and its counsel and substantially in the form of Exhibit C
hereto.
(f) The Representative shall have received on the Closing Date an
opinion of the Law Department of the Eligible Lender Trustee, dated the Closing
Date and addressed to the Underwriters, in form and scope reasonably
satisfactory to the Representative and its counsel and substantially in the form
of Exhibit D hereto.
(g) The Representative shall have received on the Closing Date an
opinion of White & Case, counsel for the Indenture Trustee, dated the Closing
Date and addressed to the Underwriters, in form and scope satisfactory to the
Representative and its counsel and substantially in the form of Exhibit E
hereto.
(h) The Representative shall have received on the Closing Date the
opinion of Squire, Sanders & Dempsey L.L.P., special counsel for the
Underwriters, dated the Closing Date, and addressed to the Underwriters, in form
and scope satisfactory to the Representative and substantially in the form of
Exhibit F hereto.
(i) The Representative shall have received on the Closing Date the
opinion of Hunton & Williams, counsel for the Bank, dated the Closing Date and
addressed to the Underwriters, in form and scope reasonably satisfactory to the
Representative and its counsel and substantially in the form of Exhibit G.
(j) The Representative shall have received on the Closing Date the
opinion of Foley & Lardner, counsel for the Bank, dated the Closing Date and
addressed to the Underwriters, in form and scope reasonably satisfactory to the
Representative and its counsel and substantially in the form of Exhibit H
hereto.
(k) The Representative shall have received on the Closing Date the
opinion of Hunton & Williams, counsel for the Bank, dated the Closing Date and
addressed to the Underwriters, in form and scope reasonably satisfactory to the
Representative and its counsel and substantially in the form of Exhibit I
hereto.
<PAGE>
(l) The Representative shall have received on the Closing Date the
opinion of Hunton & Williams, counsel for the Bank, dated the Closing Date and
addressed to the Underwriters, in form and scope reasonably satisfactory to the
Representative and its counsel and substantially in the form of Exhibit J
hereto.
(m) The Representative shall have received on the Closing Date the
opinions of Squire, Sanders & Dempsey L.L.P. and [insert name of Pennsylvania
counsel], respectively, dated the Closing Date and addressed to the
Underwriters, in form and scope reasonably satisfactory to the Representative
and its counsel and substantially in the forms of Exhibits K-1 and K-2
respectively, hereto.
(n) The Representative shall have received a letter dated the date of
delivery thereof (which shall be on or prior to the date of this Agreement) from
KPMG Peat Marwick, and in form and substance reasonably satisfactory to the
Representative, to the effect that they have carried out certain specified
procedures, not constituting an audit, with respect to certain information
regarding the Financed Student Loans and setting forth the results of such
specified procedures.
(o) All the representations and warranties of the Bank contained in
this Agreement and the Basic Documents shall be true and correct in all material
respects on and as of the date hereof and on and as of the Closing Date as if
made on and as of the Closing Date and the Representative shall have received a
certificate, dated the Closing Date and signed by an executive officer of the
Bank, to the effect set forth in this Section 6(o) and in Section 6(p) hereof.
(p) The Bank shall not have failed at or prior to the Closing Date to
have performed or complied in any material respect with any of its agreements
herein contained and required to be performed or complied with by it hereunder
at or prior to the Closing Date.
(q) The Representative shall have received by instrument dated the
Closing Date (at the option of the Representative), in lieu of or in addition to
the opinions referred to in clauses (c) through (m) of this Section (6), the
right to rely on opinions provided by such counsel and all other counsel under
the terms of the Basic Documents to Moody's Investors Service, Inc. ("Moody's")
and Standard & Poor's Ratings Services ("Standard & Poor's").
(r) Moody's and Standard & Poor's shall have rated the Class A Notes
"Aaa" and "AAA", respectively, and the Class B Notes at least "A2" and "A",
respectively, and there shall not have been any announcement by Moody's or
Standard & Poor's that (i) it is downgrading any of its ratings assigned to any
Class of Notes or (ii) it is reviewing its ratings assigned to any Class of
Notes with a view to possible downgrading, or with negative implications, or
direction not determined.
<PAGE>
(s) The Bank shall have furnished or caused to be furnished to the
Representative an executed copy of each of the Basic Documents, each Guarantee
Agreement, each Subservicing Agreement and such further certificates and
documents as the Representative shall have reasonably requested.
(t) 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 State Corporation Commission of Virginia
reflecting the transfer of the interest of the Bank in the Financed Student
Loans to the Eligible Lender Trustee on behalf of the Trust and the proceeds
thereof to the Trust and in the offices of the Secretaries of State of the
States of Ohio and Delaware reflecting the grant of the security interest by the
Trust in the Financed Student Loans and the proceeds thereof to the Indenture
Trustee.
All such opinions, certificates, letters and other documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
in form and substance to the Representative and counsel for the Representative.
7. Expenses. The Bank agrees to pay or to otherwise cause the payment
of the following costs and expenses and all other costs and expenses incident to
the performance by it and the Trust of their respective obligations hereunder:
(i) the preparation, printing or reproduction of the Registration Statement,
each Prospectus and each amendment or supplement to any of them, this Agreement
and each other Basic Document; (ii) the printing (or reproduction) and delivery
(including postage, air freight charges and charges for counting and packaging)
of such copies of the Registration Statement, each Prospectus and all amendments
or supplements to any of them as may be reasonably requested for use in
connection with the offering and sale of the Notes; (iii) the preparation,
printing, authentication, issuance and delivery of definitive certificates for
the Notes; (iv) the printing (or reproduction) and delivery of this Agreement,
the Blue Sky Memorandum and all other agreements or documents printed (or
reproduced) and delivered in connection with the offering of the Notes; (v)
qualification of the Indenture under the Trust Indenture Act; (vi) the
qualification of the Notes for offer and sale under the securities or Blue Sky
laws of such states as the Bank and the Representative may agree (including the
reasonable fees, expenses and disbursements of counsel for the Underwriters
relating to the preparation, printing or reproduction, and delivery of any Blue
Sky Memorandum prepared in connection with such qualification); (vii) the fees
and disbursements of (A) the Bank's counsel, (B) the Representative's counsel
<PAGE>
(which fee shall not exceed $____________), (C) the Indenture Trustee and its
counsel, (D) the Eligible Lender Trustee and its counsel, (E) The Depository
Trust Company in connection with the book-entry registration of the Notes, (F)
KPMG Peat Marwick, accountants for the Bank and issuer of the letters described
in Section 6(n), and (G) Prickett, Jones, Elliott, Kristol & Schnee, Special
Delaware Counsel to the Trust in connection with the preparation of the opinion
referred to in Section 6(c); (viii) the fees charged by Moody's and Standard &
Poor's for rating the Notes and (ix) the reasonable travel and other
out-of-pocket expenses incurred by the Representative in connection with the
transactions contemplated hereby.
8. Computational Materials. (a) Not later than 10:30 a.m. New York City
time, on the Business Day before the date on which the Current Report relating
to the Notes is required to be filed by the Bank with the SEC pursuant to
Section 4(m) hereof, each Underwriter shall deliver to the Bank electronically a
complete copy of all materials, if any, provided by such Underwriter to
prospective investors in such Notes which constitute "Computational Materials"
within the meaning of the no-action letter dated May 20, 1994 issued by the
Division of Corporation Finance of the SEC to Kidder, Peabody Acceptance
Corporation I, Kidder, Peabody & Co. Incorporated, and Kidder Structured Asset
Corporation, the no-action letter dated May 27, 1994 issued by the Division of
Corporation Finance of the SEC to the Public Securities Association and the
no-action letter of February 17, 1995 issued by the SEC to the Public Securities
Association (collectively, the "Kidder/PSA Letters") and the filing of which is
a condition of the relief granted in such letters (such materials being the
"Computational Materials").
Each Underwriter severally and not jointly represents and warrants to
and agrees with the Bank, as of the date hereof and as of the Closing Date, that
the Computational Materials furnished to the Bank by such Underwriter pursuant
to Section 8(a) constitute (either in original, aggregated or consolidated form)
all of the materials furnished to prospective investors in the Notes by such
Underwriter prior to the time of delivery thereof to the Bank that are required
to be filed with the SEC with respect to the Notes in accordance with the
Kidder/PSA Letters and such Computational Materials comply with the requirements
of the Kidder/PSA Letters.
Notwithstanding the foregoing, such Underwriter makes no representation
or warranty with respect to statements in any Computational Materials relating
to the Financed Student Loans which were furnished by or on behalf of the Bank
to such Underwriter.
9. Default by One of the Underwriters. If any of the Underwriters shall
fail at the Closing Date to purchase the Notes which it is obligated to purchase
hereunder (the "Defaulted Notes") and the principal amount of the Defaulted
<PAGE>
Notes does not exceed 10% of the total principal amount of the Notes set forth
on the first page hereof, the Representative may make arrangements satisfactory
to the Bank for the purchase of such Defaulted Notes by other persons, including
the remaining Underwriter or Underwriters (the "Non-Defaulting Underwriters"),
but if no such arrangements are made within one (1) Business Day thereafter, the
Non-Defaulting Underwriters shall be obligated severally, in proportion to their
respective total commitments hereunder, to purchase the Notes which such
defaulting Underwriters agreed but failed to purchase. If any Underwriter or
Underwriters so default and the aggregate principal amount of the Notes with
respect to which such default or defaults occur is more than 10% of the total
principal amount of the Notes set forth on the first page hereof and
arrangements satisfactory to the Representative and Bank for the purchase of
such Notes by other persons are not made within two (2) Business Days after such
default, then this Agreement shall terminate without liability on the part of
the Non-Defaulting Underwriters.
No action taken pursuant to this Section 9 shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination
of this Agreement, either the Non-Defaulting Underwriters or the Bank shall have
the right to postpone the Closing Date for a period not exceeding seven days in
order to effect any required changes in the Registration Statement or Prospectus
or in any other documents or arrangements.
10. Effective Date of Agreement. This Agreement shall become
effective upon the execution and delivery hereof by all the parties hereto.
Until such time as this Agreement shall have become effective, it may be
terminated by the Bank, by notifying the Representative, or by the
Representative, by notifying the Bank.
Any notice under this Section 10 may be given by telegram, telecopy or
telephone but shall be subsequently confirmed by letter.
11. Termination of Agreement. This Agreement shall be subject to
termination in the absolute discretion of the Representative, without liability
on the part of any Underwriter, by notice to the Bank, if prior to the Closing
Date, (i) trading in securities generally on the New York Stock Exchange shall
have been suspended or materially limited, (ii) a general moratorium on
commercial banking activities in New York shall have been declared by either
Federal or New York state authorities, (iii) there shall have occurred any
outbreak or escalation of hostilities or other international or domestic
calamity, crisis or change in political, financial or economic conditions, the
effect of which on the financial markets of the United States is such as to make
it, in the reasonable judgment of the Representative, impracticable or
<PAGE>
inadvisable to commence or continue the offering of the Notes on the terms set
forth in the Prospectus, or to enforce contracts for the resale of the Notes by
the Underwriters, (iv) legislation shall be enacted by the Congress of the
United States or a decision by a court of the United States or the Tax Court of
the United States shall be rendered, or an officially published ruling,
regulation, proposed regulation or official statement by or on behalf of the
Treasury Department of the United States, the Internal Revenue Service or any
other governmental agency shall be made, with respect to federal taxation upon
revenues or other income of the general character expected to be pledged under
the Indenture or upon interest received on securities of the general character
of the Notes, or which would have the effect of changing, directly or
indirectly, the federal income tax consequences of interest on securities of the
general character of the Notes in the hands of the holders thereof, which in the
opinion of counsel to the Representative materially affects the market price of
the Notes, or (v) legislation shall be enacted by the States of Delaware or Ohio
or the Commonwealths of Virginia or Pennsylvania, or a decision by a court of
competent jurisdiction of the States of Delaware or Ohio or the Commonwealths of
Virginia or Pennsylvania or any administrative tribunal of the States of
Delaware or Ohio or the Commonwealths of Virginia or Pennsylvania or other
governmental agency or department thereof shall be rendered with respect to
taxation by the States of Delaware or Ohio or the Commonwealths of Virginia or
Pennsylvania or any of their political subdivisions upon revenues or other
income of the general character expected to be pledged under the Indenture, or
upon interest received on securities of the general character of the Notes, or
which would have the effect of changing, directly or indirectly, the tax
consequences under the States of Delaware or Ohio or the Commonwealths of
Virginia or Pennsylvania tax law of interest on securities of the general
character of the Notes in the hands of the holders thereof, which in the opinion
of counsel to the Representative materially affects the market price of the
Notes. Notice of such termination may be given to the Bank, by telegram,
telecopy or telephone and shall be subsequently confirmed by letter.
12. Information Furnished by the Underwriter. The statements set forth
in the first sentence of the fourth paragraph on the second page of the cover
page, the second sentence under the subsection "Risk Resulting from Limited
Liquidity of the Notes" under the heading "Risk Factors" and under the heading
"Underwriting" in the Preliminary Prospectus and the Prospectus constitute the
only information furnished by or on behalf of the Underwriters as such
information is referred to in Sections 3(b) and 5 hereof, and each Underwriter
confirms that such statements relating to such Underwriter are correct.
13. Representation of Underwriters. The Representative shall
act for the several Underwriters in connection with this financing, and any
action under this Agreement taken by the Representative will be binding upon
all the Underwriters.
<PAGE>
14. Miscellaneous. Except as otherwise provided in Sections 4, 10 and
11 hereof, notice given pursuant to any provision of this Agreement shall be in
writing and shall be delivered (i) if to the Bank, to Crestar Bank, 6802 Paragon
Place, Richmond, Virginia 23230-7172, Attention: W. Clark McGhee, Senior Vice
President; facsimile (804) 287-9428 with a copy to the Bank's Legal Department,
at 919 E. Main Street, Richmond, Virginia 23219, Attention: Linda Rigsby, (ii)
if to the Trust, to the Eligible Lender Trustee, at the Corporate Trust Office
of the Eligible Lender Trustee and (iii) if to the Representative, to Smith
Barney Inc., 390 Greenwich Street, 4th Floor, New York, NY 10013, Attention:
Debt Organization Group; facsimile (212) 723-8853.
This Agreement has been and is made solely for the benefit of the
Underwriters, the Trust and the Bank, their respective directors, officers,
trustees and controlling persons referred to in Section 5 hereof and their
respective successors and assigns, to the extent provided herein, and no other
person shall acquire or have any right under or by virtue of this Agreement.
Neither the term "successor" nor the term "successors and assigns" as used in
this Agreement shall include a purchaser from any Underwriter of any of the
Notes in its status as such purchaser.
15. Applicable Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York applicable to contracts
made and to be performed within the State of New York without giving effect to
the choice of laws or conflict of laws principles thereof.
16. Counterparts. This Agreement may be signed in various
counterparts which together constitute one and the same instrument. If
signed in counterparts, this Agreement shall not become effective unless at
least one counterpart hereof or thereof shall have been executed and delivered
on behalf of each party hereto.
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
among the Bank, the Trust and the Underwriters.
Very truly yours,
CRESTAR BANK
By:________________________________
Name:
Title:
CRESTAR STUDENT LOAN TRUST 1997-1
By: STAR BANK, NATIONAL
ASSOCIATION, not in
its individual capacity but
solely as Eligible Lender
Trustee on behalf of the
Trust,
By:________________________________
Name:
Title:
Confirmed as of the date
first above mentioned.
SMITH BARNEY INC.
By:___________________________
Name:
Title:
Acting on behalf of itself
and as Representative of
the several Underwriters named herein.
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Underwriters
Principal Balance
---------------------------------------------------------------------------
Crestar
Morgan Stanley Dean Securities
Class of Notes Smith Barney Inc. Witter Corporation Total
------------------------ ----------------------- ----------------- --------
<S> <C>
Class A-1 Notes................ $ $ $ $
Class A-2 Notes................ $ $ $ $
Class B Notes.................. $ $ $ $
Total.......................... $ $ $ $
======= ======== ======= =======
</TABLE>
<PAGE>
EXHIBIT A
___________, 1997
To Each of the Parties Listed
on Schedule A Hereto
Re: Crestar Student Loan Trust 1997-1
Ladies and Gentlemen:
We have acted as special Delaware counsel to Crestar Student Loan Trust
1997-1, a business trust existing under the laws of the State of Delaware (the
"Trust"), in connection with the transactions contemplated by the Trust
Agreement, dated as of _________, 1997, (the "Trust Agreement"), among Crestar
Bank ("Crestar"), as depositor (the "Depositor"), Star Bank, National
Association, as trustee (the "Eligible Lender Trustee") and Delaware Trust
Capital Management, Inc., as co-trustee (the "Delaware Trustee"; the Eligible
Lender Trustee and the Delaware Trustee being collectively referred to as the
"Trustees"). This opinion is being delivered to you at your request. Capitalized
terms used herein and not otherwise defined are used as defined in the Trust
Agreement, except that references herein to any instrument shall mean such
instrument as in effect on the date hereof.
We have examined originals or copies of the following documents:
(a) The Trust Agreement;
(b) The Transfer and Servicing Agreement, dated as of __________,
1997, among the Trust, Crestar, as Transferor, Master Servicer
and Administrator, and the Eligible Lender Trustee;
(c) The Indenture, dated as of __________, 1997, between the
Trust and Bankers Trust Company, as trustee (the "Indenture
Trustee");
(d) The First Terms Supplement to the Indenture, dated as of
__________, 1997, between the Trust and the Indenture Trustee
(the documents identified in paragraphs (c) and (d) being
collectively referred to as the "Indenture");
(e) The Underwriting Agreement, dated as of __________, 1997,
between the Trust and Smith Barney Inc. as Representative of
the several Underwriters named therein;
<PAGE>
(f) The Administration Agreement, dated as of __________, 1997,
among the Trust, the Administrator and the Indenture Trustee
(the documents identified in items (b) through (e) being
collectively referred to as the "Trust Documents");
(g) The certificate of trust of the Trust (the "Certificate of
Trust") which was filed with the Office of the Secretary of
State of the State of Delaware (the "Secretary of State") on
__________, 1997;
(h) Forms of the Certificates; and
(i) Forms of the Notes being issued on the date hereof pursuant to
the Indenture.
We have not reviewed any documents other than the foregoing documents for
purposes of rendering our opinions as expressed herein, and we have assumed that
there exists no provision of any such other document that bears upon or is
inconsistent with our opinions as expressed herein. We have conducted no
independent factual investigation of our own but have relied solely upon the
foregoing documents, the statements and information set forth therein and the
additional matters recited or assumed herein, all of which we have assumed to be
true, complete and accurate in all material respects.
Based upon the foregoing and upon an examination of such questions of
law as we have considered necessary or appropriate, and subject to the
assumptions, exceptions and qualifications set forth below, we advise you that,
in our opinion:
1. The Trust has been duly formed and is validly existing as a
business trust under the Delaware Business Trust Act, 12 Del. C. ss. 3801,
et seq. (the "Act"), and has the power and authority under the Trust
Agreement and the Act to execute, deliver and perform its obligations under the
Trust Documents, the Certificates and the Notes.
2. Each of the Trust Documents to which the Trust is a party has
been duly authorized by the Trust.
3. The issuance and sale of the Notes has been duly authorized by
the Trust.
4. No consent, approval or other authorization of, registration,
declaration or filing with, any court or governmental agency or commission of
the State of Delaware is required by or with respect to the Trust for the valid
execution and delivery of the Trust Documents, or for the validity or
enforceability thereof, or for the payment of any amounts by the Trust
<PAGE>
thereunder, other than the filing of the Certificate of Trust with the Secretary
of State (which Certificate of Trust has been duly filed).
5. Neither the execution, delivery and performance by the Trust of the
Trust Documents to which the Trust is a party, nor the consummation by the Trust
of any of the transactions contemplated thereby, is in violation of the Trust
Agreement or of any law, rule or regulation of the State of Delaware applicable
to the Trust.
6. To our knowledge, without independent investigation, there are no
pending or threatened actions, suits or proceedings affecting the Trust before
any court or other governmental authority which, if adversely decided, would
materially and adversely affect the ability of the Trust to carry out the
transactions contemplated by the Trust Agreement and the Trust Documents.
7. The Trust Agreement is a legal, valid and binding agreement of the
parties thereto, enforceable against such parties, in accordance with its terms.
8. Under Section 3805(b) of the Act, no creditor of any Certificate
holder shall have any right to obtain possession of, or otherwise exercise legal
or equitable remedies.
9. Under Section 3801(a) of the Act, the Trust has standing at law
as a separate legal entity distinct from the Depositor.
The foregoing opinions are subject to the following assumptions,
exceptions and qualifications:
A. We are admitted to practice law in the State of Delaware and do not
hold ourselves out as being experts on the law of any other jurisdiction. The
foregoing opinions are limited to the laws of the State of Delaware currently in
effect. We express no opinion with respect to (i) federal securities laws,
including, without limitation, the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, the Trust Indenture Act of 1939, as
amended and the Investment Company Act of 1940, as amended, or (ii) state
securities or blue sky laws, and we have not considered and express no opinion
on the laws, rules and regulations of any other jurisdiction.
B. The foregoing opinions regarding enforceability and the opinions in
paragraphs 8 and 9 above are subject to (i) applicable bankruptcy, insolvency,
moratorium, receivership, fraudulent conveyance and similar laws relating to or
affecting the rights and remedies of creditors generally, (ii) principles of
<PAGE>
equity (regardless of whether considered and applied in a proceeding in equity
or at law), and (iii) applicable public policy with respect to rights of
indemnification or contribution.
C. We have assumed (i) except to the extent provided in paragraph 1
above, the valid existence of each party to the documents examined by us under
the laws of the jurisdiction governing its organization, (ii) except to the
extent provided in paragraph 1 above, that each party has the power and
authority to execute and deliver, and to perform its obligations under, the
documents examined by us, (iii) except to the extent provided in paragraphs 2
and 3 above, that each party has duly authorized, executed and delivered the
documents examined by us, (iv) that the Trust Agreement constitutes the entire
agreement among the parties thereto with respect to the subject matter thereof,
including, without limitation, the creation, operation and termination of the
Trust, and (v) that the execution, delivery and performance of the Trust
Agreement by each of the parties thereto (other than the Trust) does not and
will not conflict with, result in a breach of, or constitute a default or
require any consent (other than such consents as have been duly obtained) under,
any agreement, indenture or instrument to which it is a party or by which it is
bound, or violate or conflict with any provision of any judgment, order, writ,
injunction or decree of any court or governmental authority applicable to it or
any of its property.
D. We have assumed that all signatures on documents examined by us are
genuine, that all documents submitted to us as originals are authentic and that
all documents submitted to us as copies or specimens conform with the originals,
which facts we have not independently verified.
E. We express no opinion as to the creation, attachment, perfection or
priority of any mortgage or security interest or as to the nature or validity of
title to any property.
F. We have not participated in the preparation of any offering
materials with respect to the Certificates or the Notes and assume no
responsibility for their contents.
This opinion may be relied upon by you in connection with the matters
set forth herein and, without our prior written consent, may not be furnished or
quoted to, or relied upon by, any other person or entity for any purpose.
Very truly yours,
<PAGE>
SCHEDULE A
Depositor
- ---------
Crestar Bank
Eligible Lender Trustee
- -----------------------
Star Bank, National Association
Delaware Trustee
- -----------------
Delaware Trust Capital Management, Inc.
Administrator
- ------------
Crestar Bank
Indenture Trustee
- ------------------
Bankers Trust Company
Underwriters
- ------------
Smith Barney Inc.,
As Representative of the several Underwriters
<PAGE>
EXHIBIT B-1
__________, 1997
Bankers Trust Company,
individually and as Indenture Trustee
for Crestar Student Loan Trust 1997-1
New York, New York
Attention: Corporate Trust Department
Crestar Bank
Richmond, Virginia
Smith Barney Inc.
New York, New York
Hunton & Williams
Richmond, Virginia
Squire, Sanders & Dempsey L.L.P.
Columbus, Ohio
Star Bank, National Association
Cincinnati, Ohio
Re: CRESTAR STUDENT LOAN TRUST 1997-1
Student Loan Asset Backed Notes
Ladies and Gentlemen:
[FOLEY & LARDNER - TO BE PROVIDED]
<PAGE>
EXHIBIT B-2
__________, 1997
Bankers Trust Company,
individually and as Indenture Trustee
for Crestar Student Loan Trust 1997-1
New York, New York
Attention: Corporate Trust Department
Crestar Bank
Richmond, Virginia
Smith Barney Inc.
New York, New York
Hunton & Williams
Richmond, Virginia
Squire, Sanders & Dempsey L.L.P.
Columbus, Ohio
Star Bank, National Association
Cincinnati, Ohio
Re: CRESTAR STUDENT LOAN TRUST 1997-1
Student Loan Asset Backed Notes
Ladies and Gentlemen:
[FOLEY & LARDNER - TO BE PROVIDED]
<PAGE>
EXHIBIT C
_________, 1997
Smith Barney Inc.
New York, New York
Bankers Trust Company
New York, New York
Star Bank, National Association
Cincinnati, Ohio
Ladies and Gentlemen:
We have acted as special counsel to Crestar Bank, a Virginia banking
corporation (the "Bank"), in connection with the transactions contemplated by
the Transfer and Servicing Agreement dated as of __________, 1997 (the "Transfer
and Servicing Agreement"), among the Bank, as transferor, as master servicer and
as administrator, Crestar Student Loan Trust 1997-1, a Delaware business trust
(the "Trust"), as issuer, and Star Bank, National Association, a national
banking association as eligible lender trustee (the "Eligible Lender Trustee"),
pursuant to which the Bank will transfer to the Eligible Lender Trustee on
behalf of the Trust, without recourse (subject to the obligations set forth
therein), all right, title and interest of the Bank in and to the Financed
Student Loans listed on Schedule A-1 thereto and the proceeds thereof (the
"Specified Assets"). This opinion is being delivered to the Eligible Lender
Trustee and the Indenture Trustee (as defined below) pursuant to Section
[2.1(b)] of the Transfer and Servicing Agreement and to the Underwriters
pursuant to Section 6(e) of the Underwriting Agreement (each as defined below).
Unless otherwise defined herein, capitalized words and terms used herein shall
have the respective meanings assigned to such words and terms in the Transfer
and Servicing Agreement.
In connection with this opinion, we have examined a copy of each of (i)
the Transfer and Servicing Agreement; (ii) the Trust Agreement dated as of
_________, 1997 (the "Trust Agreement"), among the Bank, as depositor, the
Eligible Lender Trustee, and Delaware Trust Capital Management, Inc., as
Delaware trustee; (iii) the Indenture dated as of _________, 1997, (the
"Indenture"), between the Trust and Bankers Trust Company, a New York banking
corporation as indenture trustee (the "Indenture Trustee"); (iv) the First Terms
Supplement to the Indenture dated as of _________, 1997 (the "Terms
Supplement"), between the Trust and the Indenture Trustee; (v) the
Administration Agreement dated as of _________, 1997 (the "Administration
Agreement"), among the Trust, the Bank and the Indenture Trustee; and (vi) the
Underwriting Agreement dated as of _________, 1997 (the "Underwriting
<PAGE>
Agreement"), among the Transferor, the Trust and Smith Barney Inc., as
representative of the several Underwriters named therein (each an "Underwriter")
(hereinafter the Transfer and Servicing Agreement, the Trust Agreement, the
Indenture, the Terms Supplement, the Administration Agreement and the
Underwriting Agreement may sometimes be referred to collectively as the "Basic
Documents"). In addition, we have reviewed the Articles of Incorporation and the
By-laws of the Bank, each as amended to date (the "Articles" and the "By-laws",
respectively), and the resolutions of the [Executive Committee] of the Board of
Directors of the Bank adopted on ________, 1997. We have also reviewed the
Registration Statement on Form S-3, as amended (No. 333-35825) (the
"Registration Statement"), which was declared effective by the Securities and
Exchange Commission (the "SEC") on ________, 1997 (the "Effective Date"), and
the definitive Prospectus dated _________, 1997, arising from said Registration
Statement (the "Prospectus").
For the purposes of the opinions set forth in Paragraphs (6) through
(8) below, we have reviewed the financing statements on Form UCC-1, naming the
Bank as debtor, the Eligible Lender Trustee as secured party and the Indenture
Trustee as assignee, in the form attached hereto as Attachment 1 and filed on
_________, 1997 with the State Corporation Commission of Virginia (the "SCC")
and assigned No.________ [and on _________, 1997 with the Clerk of the Circuit
Court of the City of Richmond, Virginia and assigned No. ____________] (referred
to collectively as the "Financing Statements"), and reviewed and, with your
consent, relied exclusively on and assumed the accuracy of a report (the "Search
Report") of CT Corporation, attached hereto as Attachment 2 and reflecting the
results of Uniform Commercial Code searches in the Offices of the SCC and the
Clerk of the Circuit Court of the City of Richmond, Virginia against the name
"Crestar Bank" (collectively, the "Lien Searches"). We have made no independent
search or review of any liens or other matters of record with respect to the
Bank in any other government office. The "as of" or "effective" date of each
Lien Search (which we have assumed is the date through which such Lien Search is
current) is indicated for each office identified therein. Information in the
Lien Searches does not include any filings filed or terminated on or after the
"as of" or "effective" dates indicated for each of the Lien Searches. We assume
no liability for the accuracy of the Search Report.
In addition to the Basic Documents, the Financing Statements and the
Search Report, we have reviewed such corporate records and other documents
relating to the Bank and certificates of public officials and officers of the
Bank and have satisfied ourselves as to such other matters as we have deemed
necessary under the circumstances as a basis for the opinions hereinafter
expressed. As to various questions of fact material to this opinion, we have
relied upon the representations made in the Basic Documents. We have not
<PAGE>
independently verified any factual matters in connection with or apart from our
review of the documents referred to above and, accordingly, we do not express
any opinion as to matters that might have been brought to our attention by
independent verification.
In making such examination and rendering the opinions set forth below,
we have assumed: (i) the genuineness and authenticity of all signatures on
original documents; (ii) the authenticity of all documents submitted to us as
originals; (iii) the conformity to the originals of all documents submitted to
us as certified, telecopied, photostated or reproduced copies and the
authenticity of all originals of such documents; (iv) the accuracy, completeness
and authenticity of certificates of public officials; and (v) the due
authorization, execution and delivery of all documents (except for the due
authorization, execution and delivery by the Bank of the Basic Documents to
which the Bank is a party), where authorization, execution and delivery are
prerequisites to the effectiveness of such documents. We have also assumed that
each of the parties (other than the Bank) to the Basic Documents has the
requisite power and authority to execute and perform its obligations thereunder
and all such actions have been duly and validly authorized by all necessary
proceedings on its part.
We have also assumed without independent investigation that: (a) the
Eligible Lender Trustee has given "value" (as defined in the Uniform Commercial
Code as enacted in the State of New York (the "NY UCC")) to the Bank, and the
Indenture Trustee has given "value" (as defined in the NY UCC) to the Eligible
Lender Trustee; (b) that the Specified Assets exist and that the Bank and the
Trust have rights therein; and (c) since the "as of" or "effective time" of the
Lien Searches included in the Search Report, no financing statement or other
document, other than the Financing Statements, has been filed in the Office of
the SCC that names the Bank as the debtor and that describes any of the Financed
Student Loans or the Specified Assets.
On the basis of the foregoing and in reliance thereon, having regard
for legal considerations which we deem relevant, and subject to the
qualifications and reservations stated herein, we are of the opinion that:
1. The Bank is organized and validly existing as a Virginia banking
corporation under the laws of the Commonwealth of Virginia, with
requisite corporate power and authority to own its properties and
conduct its business as such properties are currently owned and such
business is presently conducted, except for such power and authority
the absence of which would not have a material adverse effect on the
Bank or its ability to consummate the transactions contemplated by the
Basic Documents.
<PAGE>
2. The Bank has requisite corporate power and authority to execute and
deliver the Basic Documents to which it is a party and consummate the
transactions contemplated by such Basic Documents, and has taken all
corporate action necessary to authorize the execution and delivery of
the Basic Documents to which the Bank is a party and consummation of
the transactions contemplated by such Basic Documents.
3. The Basic Documents to which the Bank is a party have been duly
executed and delivered by the Bank.
4. Neither the consummation of the transactions contemplated by, nor
the fulfillment of the terms of, the Basic Documents to which the Bank
is a party (a) violates any provision of the Articles or the By-laws,
(b) constitutes a violation or breach of or default under any provision
of any material indenture, agreement or instrument known to us to which
the Bank is a party or by which the Bank is bound, (c) results in the
creation or imposition of any Lien upon any of the Bank's properties
pursuant to the terms of any material indenture, agreement or
instrument referred to in clause (b), other than pursuant to the Basic
Documents, or (d) violates any law or any order, rule or regulation
applicable to the Bank known to us of any court or Federal or Virginia
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Bank or its properties,
except for such violations which would not have a material adverse
effect on the Bank or its ability to consummate the transactions
contemplated by the Basic Documents.
5. All authorizations, consents, orders or approvals or registrations
or declarations with any court, regulatory body, administrative agency
or other government instrumentality required to be obtained, effected
or given by the Bank in connection with the execution and delivery by
the Bank of the Basic Agreements to which the Bank is a party and the
performance of the transactions expressly contemplated by such Basic
Documents have been obtained, effected or given and are in full force
and effect, except such as may be required by the blue sky laws of any
jurisdiction as to which no opinion is given.
6. In the event that the transfer of the Specified Assets by the Bank
to the Trust is found not to be a "true sale," the Bank has granted to
the Trust a valid security interest in the Specified Assets under
Article 9 of the NY UCC, and the Eligible Lender Trustee has assigned
that security interest to the Indenture Trustee. In the event that the
transfer of the Specified Assets by the Bank to the Trust is found to
be a "true sale," the Trust has granted to the Indenture Trustee a
valid security interest in the Specified Assets under Article 9 of the
NY UCC.
<PAGE>
7. Under the NY UCC, the perfection and the effect of perfection or
nonperfection of a security interest in "accounts" would be governed by
the law (including the conflict of laws rules) of the jurisdiction
where the debtor is located. Because the Bank's chief executive office
is located within the Commonwealth of Virginia, the Uniform Commercial
Code as in effect in the Commonwealth of Virginia (the "VA UCC") would
govern the perfection of a security interest in "accounts." Under
Section 8.9-302(1)(e) and Section 8.9-401(1)(c) of the VA UCC, a
security interest in "accounts" is perfected by filing a financing
statement in the Office of the SCC and in addition, if the debtor has a
place of business in only one county or city of the Commonwealth, also
in the office of the clerk of the court in which deeds are admitted to
record in such county or city. Because the Bank has a place of business
in more than one county or city of the Commonwealth, the Financing
Statement needs to be filed only in the Office of the SCC. The
Financing Statement to be filed in the Office of the Clerk of the
Circuit Court of the City of Richmond, where the Bank maintains its
principal executive office, is a cautionary filing.
7. Upon the filing and proper indexing of the Financing Statement in
the Office of the SCC, pursuant to 20 USC ss. 1087-2(d)(3), such filing
will perfect a security interest in the Financed Student Loans that
comply with the requirements of the Higher Education Act of 1965, as
amended (the "Higher Education Act"), in favor of the Eligible Lender
Trustee on behalf of the Trust at such time as such Financed Student
Loans are pledged to the Eligible Lender Trustee on behalf of the Trust
and included on the schedule of Financed Student Loans maintained by
the Eligible Lender Trustee. When so perfected, such security interest
will have priority over any other security interest in such Financed
Student Loans if such other security interest, in order to achieve
priority over the Eligible Lender Trustee's security interest was
required by law to have been perfected by the filing of a UCC financing
statement in the Office of the SCC.
In reaching the opinions set forth in Paragraphs 6 and 7, we bring to
your attention the provisions of the Higher Education Act codified at 20 USC ss.
1087-2(d)(3), which provide:
Notwithstanding the provisions of any State law to the contrary,
including the Uniform Commercial Code as in effect in any State, a
security interest in insured student loans created on behalf of . .
. any eligible lender as defined in section 1085(a) of this title may
be perfected . . . by filing notice of such security interest in
such loans in the manner provided by such State law for perfection of
security interest in accounts.
<PAGE>
Based solely on the opinion of Foley & Lardner dated the date hereof
that the Eligible Lender Trustee is an "eligible lender" within the meaning of
the Higher Education Act, we believe that Section 1087-2(d)(3) of the Higher
Education Act governs the perfection of the Eligible Lender Trustee's security
interest in the Financed Student Loans. We note that the definition of "eligible
lender" is contained in Section 1085(d) of the Higher Education Act and not
Section 1085(a). We believe that the reference to Section 1085(a) contained in
Section 10872(d)(3) is an error and the correct reference should be to Section
1085(d), although we have made no independent investigation with respect
thereto.
We note that the opinions set forth in Paragraphs 7 and 8 apply only to
FFELP Loans comprising a portion of the specified Assets, and do not extend to
the perfection or priority of the Eligible Lender Trustee or the Indenture
Trustee in the HEAL Loans, as to which we express no opinions, except as set
forth in Paragraph 6.
With respect to the opinions set forth in Paragraph 8, the scope,
priority and enforceability of the Eligible Lender Trustee's security interests
in the FFELP Loans are subject to the following limitations and qualifications:
(a) bankruptcy, insolvency, moratorium, fraudulent transfer,
preference, equitable subordination and other laws and
equitable principles affecting the scope and enforcement of
creditors' rights generally;
(b) a security interest in proceeds is limited to the extent
set forth in Section 9-306 of the NY and VA UCCs;
(c) as to after-acquired property, the limitations set forth in
Sections 8.9-204 and 8,9312 of the VA UCC;
(d) as to future advances, the limitations set forth in
Sections 8.9-204, 8.9-301 and 8.9-312 of the VA UCC;
(e) priorities accorded other interests and liens that, under the
Virginia UCC or other applicable law, may be perfected by
means other than the filing of financing statements including
without limitation (1) security interests temporarily
perfected under Section 8.9-304 of the VA UCC without the
filing of financing statements, (2) liens, claims or other
interests that arise by operation of law and do not require
<PAGE>
any filing or similar action, and (3) liens, claims or other
interests in favor of the United States or any State or agency
or instrumentality thereof;
(f) as to proceeds, the limitations set forth in Section 8.9-308
of the VA UCC;
(g) the rights of purchasers of and instruments and documents
as set forth in Section 8.9-309 of the VA UCC;
(h) the priorities accorded purchase money security interests
under Section 8.9-312(4) of the VA UCC;
(i) as to subordination by agreement of any person entitled to
priority, Section 8.9-316 of the VA UCC;
(j) the priority of any security interest in collateral
constituting proceeds of collateral subject to a third
party's security interest;
(k) the right, defense, claim of an account debtor to which
the rights of an assignee would be subject under Section
8.9-318 of the VA UCC; and
(l) any rights of offset.
Additionally, with respect to Paragraphs 7 and 8, please be advised
that we express no opinion as to the rights of any Person (other than the
Eligible Lender Trustee on behalf of the Trust and the Indenture Trustee) to
whom the FFELP Loans were assigned (either absolutely or as collateral for an
obligation) by the Bank or the Trust on or prior to the date hereof, which
assignment was (i) excluded by Section 8.9-104 of the VA UCC from the scope of
Article 9 of the VA UCC, or (ii) alone or in conjunction with any other
assignments (of either or both kinds), if any, to the same assignee did not
transfer a significant part of the outstanding "accounts" (as defined in the VA
UCC) of the assignor.
Further, with respect to the opinions expressed in Paragraphs 7 and 8,
we note that the effectiveness of the Financing Statements will terminate (i)
unless appropriate continuation statements are filed within six months prior to
each five-year anniversary of the filing of the related Financing Statement,
(ii) if the Bank changes its name, identity or corporate structure, unless a new
appropriate financing statement or amendment indicating the new name, identity
or corporate structure of the Bank is properly filed before the expiration of
four months after such change in name, identity or corporate structure, (iii)
four months after the Bank changes its chief executive office to a jurisdiction
outside of the Commonwealth of Virginia, unless such security interest is
perfected in such new jurisdiction within such time, (iv) if the mailing address
<PAGE>
of the Bank as shown on the Financing Statements ceases to be a mailing address
of the Bank, unless a new appropriate financing statement or amendment
indicating a new mailing address of the Bank, is properly filed upon the
effectiveness of such change in mailing address, and (v) if the Eligible Lender
Trustee changes its name or its address from which information concerning the
Eligible Lender Trustee's security interest, as applicable, can be obtained,
unless new appropriate financing statements or amendments indicating the new
name or address of the Eligible Lender Trustee from which information concerning
the Eligible Lender Trustee's security interest can be obtained, as the case may
be, are properly filed upon the effectiveness of such change in name or address.
We express no opinion with respect to the laws of any jurisdiction
other than the laws of the Commonwealth of Virginia, the State of New York and
the federal laws of the United States of America. The opinions set forth in this
letter are rendered and effective only as of the date hereof. They are based on
existing laws, ordinances, rules, regulations, court and administrative
decisions as they presently have been interpreted to apply to the transactions
and matters addressed herein, and we can give no assurances that these opinions
would not be different after any change in any of the foregoing occurring after
the date hereof. No expansion of our opinion may be made by implication or
otherwise, and we express no opinion other than as herein expressly set forth.
We do not undertake to advise you of any matter within the scope of this letter
that comes to my attention after the date of this letter, and we disclaim any
responsibility to advise you of future changes in law or fact that may affect
the above opinions.
We consent to reliance on this opinion letter by you and by (i)
Standard & Poor's Rating Services, a division of The McGraw-Hill Companies, and
by Moody's Investors Service, Inc., for the purpose of their opinion letter
given in connection with the transactions contemplated by the Basic Documents.
Very truly yours,
HUNTON & WILLIAMS
<PAGE>
EXHIBIT D
__________, 1997
TO THE PARTIES LISTED ON
SCHEDULE A ATTACHED HERETO
Re: Crestar Student Loan Trust 1997-1
Ladies and Gentlemen:
As counsel to Star Bank, National Association, we have examined or have
had examined each of (i) the Trust Agreement dated as of _________, 1997 (the
"Trust Agreement") between Crestar Bank, as Depositor, Star Bank, National
Association, as Eligible Lender Trustee (the "Eligible Lender Trustee") and
Delaware Capital Management, Inc., as Delaware trustee, creating Crestar Bank
Student Loan Trust 1997-1 (referred to herein as the "Trust" or the "Issuer"),
(ii) the Transfer and Servicing Agreement dated as of _________, 1997 (the
"Transfer and Servicing Agreement") among the Issuer, the Eligible Lender
Trustee and Crestar Bank, as Transferor, Master Servicer and Administrator,
(iii) the Administration Agreement dated as of ____________, 1997 (the
"Administration Agreement") among the Issuer, Crestar Bank, as Administrator,
and Bankers Trust Company, as Indenture Trustee, (iv) the Indenture dated as of
_________, 1997 (the "Original Indenture"), as supplemented by the First Terms
Supplement dated as of _________, 1997 (the First Terms Supplement and, together
with the Original Indenture, the Indenture ) between the Issuer and the
Indenture Trustee, pursuant to which the Trust's Student Loan Asset Backed Notes
(as defined in the First Terms Supplement) are being issued, (v) [Guarantee
Agreement references to be inserted] (the agreements referred to in clauses (v)
through (___) above shall be referred to herein as the "Guarantee Agreements")
(the agreements referred to in clauses (i) through (____) above shall be
referred to herein as the "Program Documents"). We have also examined or have
had examined such other agreements, documents, certificates and papers as we
have deemed necessary as a basis for the opinions expressed below.
We have assumed the due authorization, execution and delivery of each
agreement referenced above by each party thereto (other than the Eligible Lender
Trustee) and that each agreement referenced above is a legal, valid, binding and
enforceable obligation of each party thereto (other than the Eligible Lender
Trustee).
We have examined and are familiar with the Articles of Association and
the By-Laws of Star Bank, National Association, the certificates of authority to
exercise corporate trust powers issued to Star Bank, National Association by the
Federal Reserve Board of the United States (as predecessor in jurisdiction to
the Comptroller of the Currency of the United States), and certain resolutions
<PAGE>
of the Board of Directors of Star Bank, National Association pertaining to the
operation of the Corporate Trust Department of Star Bank, National Association.
Basing our conclusions on such examination and familiarity, we are of the
opinion 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 and the Transfer and Servicing Agreement and, on behalf of
the Issuer, under the Indenture, the Transfer and Servicing Agreement,
the Administration Agreement and the Guarantee Agreements.
(iii) The execution and delivery of the Trust Agreement and the
Transfer and Servicing Agreement by the Eligible Lender Trustee and of
the Indenture, the Transfer and Servicing Agreement, the Administration
Agreement and the Guarantee Agreements by the Eligible Lender Trustee
on behalf of the Issuer, and the performance by the Eligible Lender
Trustee of its obligations under the Trust Agreement and the Transfer
and Servicing Agreement, as well as the performance by the Eligible
Lender Trustee of its obligations on behalf of the Issuer under the
Indenture, the Transfer and Servicing 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 and the Transfer and Servicing 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 Transfer and Servicing Agreement,
the Administration Agreement and the Guarantee Agreements constitute
the valid and binding obligations of the Issuer enforceable against the
Issuer in accordance with their terms, except as the enforceability
thereof may be (a) limited by bankruptcy, insolvency, reorganization,
moratorium, liquidation 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 and the Transfer and Servicing Agreement and by
the Eligible Lender Trustee on behalf of the Trust of the Indenture,
the Transfer and Servicing 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.
<PAGE>
(vi) Each of the Issuer's 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 or the Transfer and
Servicing Agreement, the consummation by the Issuer of the transactions
contemplated in the Indenture, the Transfer and Servicing Agreement,
the Administration Agreement or the Guarantee Agreements nor the
fulfillment of the terms thereof by the Eligible Lender Trustee or the
Issuer, 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 us 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 our 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 Transfer and Servicing
Agreement, the Indenture, the Administration Agreement or the Guarantee
Agreement.
(ix) The execution, delivery and performance by the Eligible Lender
Trustee of the Trust Agreement and the Transfer and Servicing
Agreement, and the execution, delivery and performance by the Eligible
Lender Trustee on behalf of the Trust of the Indenture, the Transfer
and Servicing Agreement, the Administration Agreement or 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.
We are members of the bar of the State of Ohio and do not
express any opinion as to any matters governed by any laws other than
the laws of the State of Ohio and Federal laws of the United States of
America. This opinion is being furnished to you solely for your benefit
<PAGE>
in connection with the transactions contemplated by the Trust
Agreement, the Transfer and Servicing Agreement, the Administration
Agreement, the Indenture and the Guarantee Agreements, and may not be
used, circulated, quoted or otherwise referred to without our prior
written permission.
Respectfully submitted,
The Law Department
Star Bank, National Association
<PAGE>
SCHEDULE A
Smith Barney Inc.
New York, New York
Standard & Poor's Ratings Services Group
New York, New York
Moody's Investors Service, Inc.
New York, New York
Bankers Trust Company
New York, New York
Hunton & Williams
Richmond, Virginia
Foley & Lardner
Milwaukee, Wisconsin
Squire, Sanders & Dempsey L.L.P.
Columbus, Ohio
<PAGE>
EXHIBIT E
____________, 1997
TO THE PERSONS LISTED ON
ATTACHED SCHEDULE I
Re: Crestar Student Loan Trust 1997-1
Dear Ladies and Gentlemen:
We have acted as counsel for Bankers Trust Company (the "Indenture
Trustee") in connection with the Indenture dated as of __________, 1997 by and
between Crestar Student Loan Trust 1997-1, as Issuer (the "Issuer") and the
Indenture Trustee, together with the First Terms Supplement dated __________,
1997 (herein collectively, the "Indenture"), and the Administration Agreement by
and among the Issuer, Crestar Bank, as Administrator (the "Administrator") and
the Indenture Trustee, with respect to the $___________________ aggregate
principal amount of Student Loan Asset Backed Notes (the "Notes").
In this connection, we have examined such certificates of public
officials, such certificates of officers of the Indenture Trustee, and copies
certified to our satisfaction of such corporate documents and records of the
Indenture Trustee, and of such other papers, as we have deemed relevant and
necessary for our opinion hereinafter set forth. We have relied upon such
certificates of public officials and of officers of the Indenture Trustee with
respect to the accuracy of material factual matters contained therein which were
not independently established. In rendering the opinion expressed below, we have
assumed the genuineness of all signatures, the authenticity of all documents
submitted to us as originals and the conformity of authentic original documents
of all documents submitted to us as certified, conformed or photostatic copies.
Based upon the foregoing, it is our opinion that:
1. The Indenture Trustee has been duly incorporated and is validly
existing as a New York banking corporation under the laws of the State of New
York and has the power and authority to enter into, and to take all action
required of it under the Indenture.
2. The Indenture and the Administration Agreement have been duly
authorized, executed and delivered by the Indenture Trustee and constitute a
legal, valid and binding obligation of the Indenture Trustee, enforceable
against the Indenture Trustee in accordance with their terms, except as the
enforceability thereof may be limited by (i) bankruptcy, insolvency,
reorganization, or other similar laws affecting the enforcement of creditors'
<PAGE>
rights generally, as such laws would apply in the event of a bankruptcy,
insolvency or reorganization or similar occurrence affecting the Indenture
Trustee, and (ii) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
3. The execution and delivery of the Indenture and the Administration
Agreement by the Indenture Trustee and the performance by the Indenture Trustee
of their terms does not conflict with or result in a violation of (A) any law or
regulation of the United States of America or the State of New York governing
the banking or trust powers of the Indenture Trustee, or (B) the By-laws of the
Indenture Trustee.
4. The Notes have been duly authenticated and delivered by the
Indenture Trustee.
5. No approval, authorization or other action by, or filing with, any
governmental authority of the United States of America or the State of New York
having jurisdiction over the banking or trust powers of the Indenture Trustee is
required in connection with the execution and delivery by the Indenture Trustee
of the Indenture or the Administration Agreement or the performance by the
Indenture Trustee of the terms of the Indenture and the Administration
Agreement.
We express no opinion as to matters governed by any law other than the
law of the State of New York and the Federal law of the United States.
Very truly yours,
WHITE & CASE
<PAGE>
Schedule I
Bankers Trust Company
New York, New York
Crestar Bank
Richmond, Virginia
Smith Barney Inc.
New York, New York
Hunton & Williams
Richmond, Virginia
Foley & Lardner
Milwaukee, Wisconsin
Squire, Sanders & Dempsey L.L.P.
Columbus, Ohio
<PAGE>
EXHIBIT F
__________________________, 1997
Smith Barney Inc.,
as Representative of the Underwriters
named in the Underwriting Agreement
dated __________, 1997
390 Greenwich Street, 4th Floor
New York, New York 10013
Ladies and Gentlemen:
This opinion is rendered pursuant to the Underwriting Agreement dated
____________, 1997 (the "Underwriting Agreement") among Smith Barney Inc., as
Representative of the Underwriters named therein (the "Underwriters"), Crestar
Student Loan Trust 1997-1, a Delaware business trust (the "Issuer") and Crestar
Bank (the "Bank"), relating to the purchase by the Underwriters of the Issuer's
Student Loan Asset-Backed Notes (the "Notes"). We have acted as counsel to the
Underwriters in connection with the purchase of the Notes pursuant to the
Underwriting Agreement.
As such counsel, we have examined copies of (i) the Underwriting
Agreement, (ii) the Issuer's Registration Statement on Form S-3 (Registration
No. 333-35825), in the form declared effective by the Securities and Exchange
Commission (the "Registration Statement"), (iii) the Prospectus dated _________,
1997 (the "Prospectus"), filed with the Securities and Exchange Commission
pursuant to Rule 424(b) under the Securities Act of 1933, as amended (the
"Securities Act"), (iv) the Indenture dated as of __________, 1997, and the
Second Terms Supplement to the Indenture dated as of _________, 1997
(collectively, the "Indenture") each between the Issuer and Bankers Trust
Company, as indenture trustee (the " Indenture Trustee"), (v) the Trust
Agreement dated as of __________, 1997, among the Issue, Star Bank, National
Association, as Eligible Lender Trustee (the "Eligible Lender Trustee"), and
Delaware Trust Capital Management, Inc., as Delaware Trustee, (vi) the Transfer
and Servicing Agreement dated as of __________, 1997 among the Issuer, the Bank,
as Transferor, Master Servicer and Administrator, and the Eligible Lender
Trustee and (vii) the Administration Agreement dated as of __________, 1997
among the Issuer, the Bank and the Indenture Trustee.
We have also examined such other documents, papers, statutes and
authorities as we have deemed necessary to form the basis of the opinions
hereinafter expressed. In such examination, we have assumed the genuineness of
all signatures, the authenticity of all documents submitted to us as originals
and the conformity to original documents of copies of documents supplied to us.
As to certain matters of fact relevant to the opinions hereinafter expressed, we
have relied solely upon (i) the representations and warranties contained in the
above-referenced documents, and (ii) statements and certificates of officers of
the Bank, the Issuer, the Underwriters and others. We are rendering this opinion
pursuant to Section 6(h) of the Underwriting Agreement.
<PAGE>
Attorneys involved in the preparation of this opinion are admitted to
the Bar of the State of New York and we express no opinion as to any laws other
than the laws of the United States and the State of New York.
Based on the foregoing, we are of the opinion that:
1. The Issuer is not, nor as a result of the offering and initial sale
of the Notes as contemplated in the Prospectus will the Issuer become, an
"investment company" as defined in the Investment Company Act of 1940, as
amended.
2. The Indenture has been duly qualified under the Trust Indenture Act
of 1939, as amended.
3. The Registration Statement has become effective under the Securities
Act and, to the best of our knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceedings
for that purpose have been instituted or are pending or contemplated under the
Securities Act, and the Registration Statement and the Prospectus, and each
amendment or supplement thereto, as of their respective effective or issue dates
(except for any financial statements or other financial data or notes thereto or
any statistical or tabular data contained or incorporated therein as to which we
express no opinion), complied as to form in all material respects with the
requirements of the Securities Act and the Rules and Regulations thereunder.
We have participated in conferences with officers and other
representatives of the Issuer and the Bank, the Indenture Trustee and the
Eligible Lender Trustee, and the legal counsel for each of these parties and
with your representatives. At these conferences, the contents of the
Registration Statement, the Prospectus and related matters were discussed.
Although we are not passing upon and do not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement or the Prospectus, on the basis of the foregoing (relying
as to materiality to a large extent upon the opinions and representations of
officers and other representatives of the Issuer and others), no facts have come
to our attention which would lead us to believe that the Registration Statement
(excluding the Exhibits thereto) at the time it became effective, contained an
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 that the Prospectus on the date thereof or on the date hereof, included an
untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading; provided that in the case of both
<PAGE>
the Registration Statement and the Prospectus, we express no opinion or view as
to the financial, numerical, statistical and quantitative information included
or incorporated therein, the information in the Prospectus under the headings
"The Transferor", "The Servicers", "The Financed Student Loan Pool",
"Description of the FFEL Program", "Description of the Guarantee Agencies",
"Description of the HEAL Program", "Maturity and Prepayment Considerations" and
the other information contained in the Prospectus relating to or describing
provisions of the Higher Education Act of 1965, as amended, the Federal Family
Education Loan Program, the Health Education Assistance Loan Act, as amended, or
the Health Education Assistance Loan Program.
This opinion and advice is being rendered to the Underwriters solely
for their benefit and may not be relied upon by any other person or entity
without our written consent, except that each of the Bank and the Indenture
Trustee may rely on the opinion set forth in paragraph (2) above.
Respectfully submitted,
SQUIRE, SANDERS & DEMPSEY L.L.P.
<PAGE>
EXHIBIT G
_________, 1997
To the Persons Listed
on Schedule A
Ladies and Gentlemen:
[FDIA OPINION - DRAFT TO BE PROVIDED]
<PAGE>
Schedule A
Crestar Bank
Richmond, Virginia
Smith Barney, Inc.
New York, New York
Bankers Trust Company
New York, New York
Star Bank, National Association
Cincinnati, Ohio
Standard & Poor's Ratings Services
New York, New York
Moody's Investors Service, Inc.
New York, New York
Squire, Sanders & Dempsey L.L.P.
Columbus, Ohio
KPMG Peat Marwick
Richmond, Virginia
<PAGE>
EXHIBIT H
_________, 1997
Smith Barney Inc.
As Representative of the Underwriters
390 Greenwich Street, 4th Floor
New York, New York 10013
Re: Crestar Student Loan Trust 1997-1
Ladies and Gentlemen:
We have acted as special counsel for Crestar Bank (the "Bank"), in connection
with the Underwriting Agreement dated __________, 1997 (the "Underwriting
Agreement") among Crestar Student Loan Trust 1997-1, a Delaware business trust
(the "Issuer"), the Bank and Smith Barney Inc., as representative of the
Underwriters named in the Underwriting Agreement. Capitalized terms not
otherwise defined here shall have the meaning set forth in the Underwriting
Agreement. Pursuant to the Underwriting Agreement, the Underwriters are
purchasing on the date hereof, the Issuer's Student Loan Asset Backed Notes,
Series 1997-1.
As such counsel, we have examined copies of (i) the Registration Statement on
Form S-3 (Registration Nos. 333-35825), in the form declared effective by the
Securities and Exchange Commission (the "Registration Statement") and (ii) the
Prospectus dated __________, 1997 (the "Prospectus"), filed with the Securities
and Exchange Commission pursuant to Rule 424(b) under the Securities Act of
1933, as amended.
In such examination, we have assumed the authenticity of all documents submitted
to us as originals and the conformity to original documents of copies of
documents supplied to us. As to certain factual matters, we have relied solely
upon (i) the representations and warranties contained in the Underwriting
Agreement and the other Basic Documents, and (ii) statements and certificates of
officers of the Bank, the Issuer, Smith Barney Inc. and others.
We have participated in conferences with officers and other representatives of
the Issuer and the Bank and with your representatives. At these conferences, the
contents of the Registration Statement, the Prospectus and related matters were
discussed. Although we are not passing upon and do not assume any responsibility
for the accuracy, completeness or fairness of the statements contained in the
Registration Statement or the Prospectus, on the basis of the foregoing (relying
as to materiality to a large extent upon the opinions and representations of
officers and other representatives of the Issuer and others), no facts have come
to our attention which would lead us to believe that the Registration Statement
<PAGE>
(excluding the Exhibits thereto) at the time it became effective, contained an
untrue statement of material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not misleading,
or that the Prospectus on the date thereof and on the date hereof, included an
untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading (in the case of both the Registration
Statement and the Prospectus, other than the financial, numerical, statistical
and quantitative information included or incorporated therein, and the
information in the Prospectus under the headings "The Servicers", "The Financed
Student Loan Pool", "Maturity and Prepayment Considerations" and "Description of
the Guarantee Agencies").
This letter is solely for the benefit of the addressee hereof and may not be
relied upon by any other party without our written consent.
Very truly yours,
FOLEY & LARDNER
<PAGE>
EXHIBIT I
_________, 1997
Smith Barney Inc.
As Representative of the Underwriters
390 Greenwich Street, 4th Floor
New York, New York 10013
Re: Crestar Student Loan Trust 1997-1
Ladies and Gentlemen:
We have acted as special counsel for Crestar Bank (the "Bank"), in connection
with the Underwriting Agreement dated __________, 1997 (the "Underwriting
Agreement") among Crestar Student Loan Trust 1997-1, a Delaware business trust
(the "Issuer"), the Bank and Smith Barney Inc., as representative of the
Underwriters named in the Underwriting Agreement. Capitalized terms not
otherwise defined here shall have the meaning set forth in the Underwriting
Agreement. Pursuant to the Underwriting Agreement, the Underwriters are
purchasing on the date hereof, the Issuer's Student Loan Asset Backed Notes,
Series 1997-1.
As such counsel, we have examined copies of (i) the Registration Statement on
Form S-3 (Registration Nos. 333-35825), in the form declared effective by the
Securities and Exchange Commission (the "Registration Statement") and (ii) the
Prospectus dated __________, 1997 (the "Prospectus"), filed with the Securities
and Exchange Commission pursuant to Rule 424(b) under the Securities Act of
1933, as amended.
In such examination, we have assumed the authenticity of all documents submitted
to us as originals and the conformity to original documents of copies of
documents supplied to us. As to certain factual matters, we have relied solely
upon (i) the representations and warranties contained in the Underwriting
Agreement and the other Basic Documents, and (ii) statements and certificates of
officers of the Bank, the Issuer, Smith Barney Inc. and others.
We have participated in conferences with officers and other representatives of
the Issuer and the Bank and with your representatives. At these conferences, the
contents of the Registration Statement, the Prospectus and related matters were
discussed. Although we are not passing upon and do not assume any responsibility
for the accuracy, completeness or fairness of the statements contained in the
Registration Statement or the Prospectus, on the basis of the foregoing (relying
as to materiality to a large extent upon the opinions and representations of
officers and other representatives of the Issuer and others), no facts have come
to our attention which would lead us to believe that the Registration Statement
<PAGE>
(excluding the Exhibits thereto) at the time it became effective, contained an
untrue statement of material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not misleading,
or that the Prospectus on the date thereof and on the date hereof, included an
untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading (in the case of both the Registration
Statement and the Prospectus, other than the financial, numerical, statistical
and quantitative information included or incorporated therein, the information
in the Prospectus under the headings "The Servicers", "The Financed Student Loan
Pool", "Description of the FFEL Program", "Description of the Guarantee
Agencies" and "Description of the HEAL Program").
This letter is solely for the benefit of the addressee hereof and may not be
relied upon by any other party without our written consent.
Very truly yours,
HUNTON & WILLIAMS
<PAGE>
EXHIBIT J
______________, 1997
Smith Barney Inc.
As Representative of the Underwriters
390 Greenwich Street, 4th Floor
New York, New York 10013
Re: Crestar Student Loan Trust 1997-1
Ladies and Gentlemen:
We have acted as special tax counsel to Crestar Bank, a Virginia
banking corporation (the "Depositor") in connection with the formation of the
Crestar Student Loan Trust 1997-1, a Delaware business trust (the "Trust"), and
the issuance of approximately $__________ in principal amount of Student Loan
Asset Backed Notes (the "Notes"). The Notes are being issued pursuant to an
indenture dated as of _________ 1, 1997, between the Trust and Bankers Trust
Company, as trustee (the "Indenture Trustee"), as supplemented by the First
Terms Supplement dated as of ________, 1997 between the Trust and the Indenture
Trustee (together, the "Indenture"). Any capitalized term used and not defined
herein shall have the meaning assigned to it in the Indenture.
We have reviewed the originals or copies of (i) the Prospectus for the
Notes dated _________, 1997 (the "Prospectus"); (ii) the Trust Agreement dated
as of _________ 1, 1997 by and among the Depositor, Star Bank, National
Association, a national banking association, as eligible lender trustee (the
"Eligible Lender Trustee"), and Delaware Trust Capital Management, Inc., as
Delaware trustee (the "Delaware Trustee"); (iii) the Indenture; and (iv) such
other documents as we have deemed necessary or appropriate as a basis for the
opinions set forth below.
Based on the foregoing and subject to the qualifications stated herein,
we are of the opinion that if (i) the Trust, the Indenture Trustee, and the
other parties to the issuance transaction comply (without waiver) with all of
the provisions of the Indenture and certain other documents to be prepared and
executed in connection with the issuance of the Notes and (ii) the Trust issues
and sells the Notes as described in the Prospectus, the Notes will be treated
for federal income tax purposes as evidences of indebtedness and not as
ownership interests in the collateral securing them or as equity interests in
the trust or in a separate association taxable as a corporation.
There are no existing regulations under section 385 of the Code
defining instruments as equity or indebtedness for income tax purposes.
<PAGE>
Furthermore, there are no controlling regulations, published rulings, or
judicial decisions involving securities with terms substantially the same as the
Notes that discuss, for federal income tax purposes, (i) whether the securities
constitute equity or indebtedness or (ii) whether the collateral relating to the
securities has been pledged or sold to the holders of the securities. Therefore,
our opinion regarding the characterization of the Notes as evidences of
indebtedness is based upon rulings and judicial decisions under the Code
involving situations that we consider to be analogous and an analysis of all of
the facts and circumstances surrounding the issuance and sale of the Notes.
You should be aware that this opinion represents conclusions as to the
application to the Notes of existing law, regulations, administrative rules and
practices, and legislative history. There can be no assurance, however, that
existing law will not change or that contrary positions will not be taken by the
Internal Revenue Service.
No opinion has been sought and none has been given concerning the tax
treatment of the issuance and sale of the Notes under the laws of any state.
The opinions expressed herein are solely for the information and use of
the addressees and may not be relied upon or otherwise used for any purpose by
any other person without our express written consent.
Very truly yours,
HUNTON & WILLIAMS
<PAGE>
EXHIBIT K-1
_________, 1997
Smith Barney Inc.
As Representative of the Underwriters
390 Greenwich Street, 4th Floor
New York, New York 10013
Re: Crestar Student Loan Trust 1997-1
Ladies and Gentlemen:
[Ohio Perfection Opinion of
Squire, Sanders & Dempsey L.L.P.]
<PAGE>
EXHIBIT K-2
_________, 1997
Smith Barney Inc.
As Representative of the Underwriters
390 Greenwich Street, 4th Floor
New York, New York 10013
Re: Crestar Student Loan Trust 1997-1
Ladies and Gentlemen:
[Pennsylvania Perfection Opinion
of Pennsylvania counsel]
Exhibit 3.1
CRESTAR BANK
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
1. The name of the Corporation is Crestar Bank.
2. On the effective date of these Articles of Amendment, the Articles of
Incorporation are restated in the form attached as Exhibit A.
3. The restatement was adopted by the Board of Directors of the Corporation on
October 22, 1993.
4. These Articles of Amendment shall be effective upon the issuance of a
Certificate of Restatement by the State Corporation Commission of Virginia.
Dated: October 27, 1993
CRESTAR BANK
By: /s/ John C. Clark, III
-----------------------------
John C. Clark, III
Senior Vice President
General Counsel & Secretary
<PAGE>
Exhibit A
RESTATED
ARTICLES OF INCORPORATION
OF
CRESTAR BANK
1. The name of the corporation is Crestar Bank.
2. The purpose of the corporation is to conduct the business of a bank and
trust company. The corporation also shall have power to engage in the business
of an insurance agent incidental to such purpose and as otherwise provided under
Title 38.2 of the Virginia Code.
3. The corporation shall have authority to issue 1,500,000 shares of Common
Stock, par value $150 per share.
4. No holder of any share of Common Stock shall have the preemptive right to
subscribe to any additional shares of Common Stock or any securities convertible
into such shares or any warrants, options or rights to purchase such shares.
Exhibit 3.2
Bylaws
And
Administrative Regulations
Of
Crestar Bank
Incorporated Under The Laws
Of The Commonwealth Of Virginia
Adopted December 20, 1979
(And Including Amendments Adopted
Thereto Through April 25, 1997)
<PAGE>
Index
To
Bylaws
And
Administrative Regulations
Of
Crestar Bank
Article I - Meetings Of Stockholders
1.1 - Place of Meetings...............................................1
1.2 - Annual Meetings.................................................1
1.3 - Special Meetings................................................1
1.4 - Notice of Meetings..............................................1
1.5 - Quorum..........................................................1
1.6 - Voting..........................................................1
1.7 - Conduct of Meetings.............................................2
1.8 - Inspector.......................................................2
Article II - Board Of Directors
2.1 - General Powers..................................................2
2.2 - Number of Directors.............................................2
2.3 - Election of Directors...........................................2
2.4 - Term of Office..................................................2
2.5 - Quorum..........................................................2
2.6 - Meetings of the Board...........................................2
2.7 - Compensation....................................................3
2.8 - Eligibility.....................................................3
Article III - Committees
3.1 - Standing Committees.............................................4
3.2 - Executive Committee.............................................5
3.3 - Audit Committee.................................................5
3.4 - Human Resources and Compensation Committee......................6
3.5 - Nominating and Governance Committee.............................6
3.6 - Area Boards.....................................................6
3.7 - Other Committees................................................7
Article IV - Officers
4.1 - Number and Manner of Election or Appointment....................7
4.2 - Term of Office..................................................7
4.3 - Removal.........................................................8
4.4 - Resignations....................................................8
4.5 - Vacancies, New Offices and Promotions...........................8
<PAGE>
4.6 - Chairman of the Board...........................................8
4.7 - President.......................................................8
4.8 - Corporate Secretary.............................................8
4.9 - Treasurer.......................................................9
4.10 - Auditor.........................................................9
4.11 - Powers and Duties of Other Officers.............................9
4.12 - Bonds...........................................................9
Article V - Capital Stock
5.1 - Certificates....................................................9
5.2 - Lost, Destroyed and Mutilated Certificates.....................10
5.3 - Transfer of Stock..............................................10
5.4 - Closing of Transfer Books and Fixing Record Date...............10
Article VI - Miscellaneous Provisions
6.1 - Seal...........................................................10
6.2 - Voting of Stock Held...........................................10
6.3 - Fiscal Year....................................................11
Article VII - Emergency Bylaws...............................................11
Article VIII - Indemnification Of Directors And Officers.....................12
Article IX - Amendments......................................................13
Administrative Regulation I
Sales, Purchase and Pledge or Deposit of Securities Owned by the Bank
1.1 - Sale, Purchase and Pledge or Deposit of Securities.............14
Administrative Regulation II
Exercise of Fiduciary Powers
2.1 - Certification, Authentication, etc. of Securities
and Documents..................................................14
2.2 - Qualification as Fiduciary.....................................15
2.3 - Acceptance of Trusts...........................................15
2.4 - Purchase and Sales of Securities...............................15
2.5 - Deposit of Securities Under Plans Reorganizations, etc.........15
2.6 - Sales, and Leases of Real Estate and Tangible Personal Property:
Foreclosure and Extension of Mortgages.........................15
2.7 - All Acts Done Under the Foregoing Paragraphs...................16
2.8 - Voting Stock and Other Securities..............................16
<PAGE>
Administrative Regulation III
Borrowing Money, Rediscount of Bills and Notes, Buying or Selling Funds
3.1 - Borrowed Money, Security Therefor and Rediscounts.............16
3.2 - Purchase and Sales of Surplus Funds...........................16
Administrative Regulation IV
Release of Encumbrances
4.1 - Sales and Leases of Property..................................17
4.2 - Release Of Encumbrances.......................................17
Administrative Regulation V
Checks, Drafts, Orders, etc.
5.1 - Bank - Except Trust...........................................17
5.2 - Trust Group...................................................17
Administrative Regulation VI
Signature Guarantee, Confirmations, etc.
6.1 - Signature Guarantee...........................................17
6.2 - Confirmations.................................................18
Administrative Regulation VII
Responsibility of Area Boards
7.1 - Responsibilities of Area Boards...............................17
Administrative Regulation VIII
Deposit and Security Accounts
8.1 - Deposit Accounts..............................................18
8.2 - Security Accounts.............................................18
<PAGE>
Crestar Bank
Bylaws
Article I
Meetings Of Stockholders
1.1 Place of Meetings. All meetings of the stockholders shall be held at
such place, either within or without the State of Virginia, as may be designated
by the Board of Directors.
1.2 Annual Meeting. The annual meeting of stockholders, for the election of
Directors and transaction of such other business as may come before the meeting,
shall be held at such time and date as designated by the Board of Directors.
1.3 Special Meetings. Special meetings of the stockholders for any purpose
or purposes may be called at any time by the Chairman of the Board, by the
President, or by a majority of the Board of Directors. No business shall be
transacted and no corporate action shall be taken at a special meeting other
than that stated in the notice of the meeting.
1.4 Notice of Meetings. Unless waived in the manner prescribed by law,
notice of each meeting of stockholders shall be given in writing, not less than
ten nor more than sixty days before the day of the meeting, or such other notice
as is required by law, to each stockholder entitled to vote at such meeting and
shall state the place, date and hour of the meeting and, in the case of a
special meeting, the purpose or purposes for which the meeting is called. If
mailed, such notice shall be deemed to have been given when deposited in the
United States mail, with postage thereon prepaid, directed to the stockholder at
his address as it appears on the stock transfer books of the Bank.
1.5 Quorum. Any number of stockholders together holding a majority of the
outstanding shares of capital stock entitled to vote with respect to the
business to be transacted, who shall be present in person or represented by
proxy at any meeting duly called, shall constitute a quorum for the transaction
of business. If less than a quorum shall be in attendance at the time for which
a meeting shall have been called, the meeting may be adjourned from time to time
by a majority of the stockholders present or represented by proxy without notice
other than by announcement at the meeting until a quorum shall attend.
1.6 Voting. At any meeting of the stockholders, each stockholder of a class
entitled to vote on any matter coming before the meeting shall, as to such
matter, have one vote, in person or by proxy, for each share of capital stock of
such class standing in his name on the stock transfer books of the Bank on the
date, not more than seventy days prior to such meeting, as designated by the
Board of Directors, for the purpose of determining stockholders entitled to
vote, as the date on which the stock transfer books of the Bank are to be closed
or as the record date.
Every proxy shall be in writing and signed by the stockholder entitled to vote
or signed by his duly authorized attorney-in-fact. At a meeting where a quorum
is present, the affirmative vote of the majority of the shares represented at
the meeting and entitled to vote shall be the act of the stockholders.
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1.7 Conduct of Meetings. At each meeting of the stockholders, the Chairman
of the Board or the President shall act as chairman and preside. In their
absence, the Chairman of the Board may designate another officer of the Bank who
need not be a Director to preside. The Corporate Secretary of the Bank or an
Assistant Corporate Secretary, or in their absence, a person whom the chairman
of such meeting shall appoint, shall act as corporate secretary of such meeting.
1.8 Inspectors. An appropriate number of inspectors for any meeting of
stockholders may be appointed by the chairman of such meeting. Inspectors so
appointed will open and close the polls, will receive and take charge of proxies
and ballots, and will decide all questions as to the qualifications of voters,
validity of proxies and ballots, and the number of votes properly cast.
Article II
Board Of Directors
2.1 General Powers. The business and affairs of the Bank shall be managed
by the Board of Directors and, except as otherwise expressly provided by law, in
accordance with the Articles of Incorporation or these Bylaws.
2.2 Number of Directors. The Board of Directors shall consist of not less
than five nor more than twenty-seven Directors, the exact number to be
designated by the Board, and a majority of whom shall be citizens of the
Commonwealth of Virginia.
2.3 Election of Directors. Directors shall be elected at each annual
meeting of the stockholders. Any vacancy occurring in the Board of Directors,
including a vacancy resulting from an increase by not more than two in the
number of authorized Directors, may be filled by the majority vote of the
remaining Directors, though less than a quorum of the Board, unless the vacancy
is sooner filled by the stockholders.
2.4 Term of Office. Each Director (unless he sooner dies, resigns, or is
removed from office) shall hold office until the next annual meeting of
stockholders or until his successor shall have been elected and qualifies.
2.5 Quorum. A majority of the number of Directors pursuant to these Bylaws
at the time of the meeting, shall constitute a quorum for the transaction of
business. The act of a majority of Directors present at a meeting at which a
quorum is present shall be the act of the Board of Directors. Less than a quorum
may adjourn any meeting.
2.6 Meetings of the Board.
(a) Place of Meetings. Meetings of the Board of Directors shall be held at
such place and at such time, either within or without the State of Virginia as
may be designated by the Board, or upon call of the Chairman of the Board or the
President.
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(b) Organizational Meeting. An organizational meeting shall be held as soon
as practicable after the adjournment of the annual meeting of stockholders at
which the Board of Directors is elected, for the purpose of taking the oaths of
the Directors, electing officers, appointing committees for the ensuing year,
and for transacting such other business as may properly come before the meeting.
(c) Regular Meetings. Regular meetings of the Board of Directors shall be
held at such time and place as the Board may designate, or upon call of the
Chairman of the Board, or the President, and no notice thereof need be given.
(d) Special Meetings. Special meetings of the Board of Directors may be
held at any time or place upon the call of the Chairman of the Board or the
President, or any three members of the Board.
Notice of each such meeting shall be given to each Director by mail at his
business or residence address at least forty-eight hours before the meeting, or
by telephoning or telegraphing notice to him at least twenty-four hours before
the meeting. Meetings may be held at any time without notice if all of the
Directors are present, or if those not present waive notice in writing either
before or after the meeting. The notice of meetings of the Board need not state
the purpose of the meeting.
(e) Conduct of Meetings. At each meeting of the Board of Directors, the
Chairman of the Board or the President shall act as chairman and preside. In
their absence, the Chairman of the Board may designate another officer of the
Bank who need not be a Director, to preside. The Corporate Secretary of the Bank
or an Assistant Corporate Secretary, or in their absence, a person whom the
chairman of such meeting shall appoint, shall act as corporate secretary of such
meeting.
Any action required or permitted to be taken by the Board may be taken without a
meeting if all Directors consent in writing to the adoption of a resolution
authorizing the action. The resolution and the written consents of the directors
shall be filed with the minutes of the proceedings of the Board meeting.
2.7 Compensation. Directors, and members of any committee of the Board who
are not officers of the Bank or subsidiaries thereof, shall be paid such
compensation as the Board of Directors from time to time may determine for his
services as Director, or as Chairman or a member of any committee of the Board,
and shall, in addition, be reimbursed for such expenses as shall be incurred by
him in the performance of his duties. Nothing herein shall preclude Directors
and members of any committee of the Board from serving the Bank in other
capacities and receiving compensation therefor.
2.8 Eligibility. No person shall be eligible to serve as a Director unless,
when his term commences, he is not less than twenty-one years of age nor more
than seventy years of age. No Director shall be eligible for reelection after he
has attained the age of 70 or after his separation from the business or
professional organization with which he was primarily associated at the time he
first became a Director, unless elected after becoming associated with another
business or professional organization. Except for the Chief Executive Officer,
no Director who is an officer of the Corporation or any subsidiary shall be
eligible for reelection after he has retired.
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Article III
Committees
3.1 Standing Committees.
(a) Number. There shall be four standing committees of the Board of
Directors. The standing committees are as follows: Executive, Audit, Human
Resources & Compensation, and Nominating & Governance Committee. In order to
broaden the experience of Directors, it shall be the policy of the Bank to seek
rotation among Directors as members of the various committees.
At the first meeting of the Board of Directors after the annual meeting of the
stockholders, the Chairman of the Board shall recommend the membership of each
committee and the Board shall elect the membership of each committee, who shall
serve at the pleasure of the Board.
(b) Quorum. A majority of the number of members of any standing committee
shall constitute a quorum for the transaction of business. The action of a
majority of members present at a committee meeting at which a quorum is present
shall constitute the act of the committee.
(c) Conduct of Meetings. Any action required or permitted to be taken by
the committee may be taken without a meeting if all members of the committee
consent in writing to the adoption of a resolution authorizing the action. The
resolution and written consents of the members shall be filed with the minutes
of the proceedings of the committee.
(d) Meetings and Minutes. Subject to the foregoing, and unless the Board
shall otherwise decide, each committee shall fix its rules of procedure,
determine its action and fix the time and place of its meetings. Special
meetings of a committee may be held at any time upon the call of the Chairman of
the Board, the Chairman of the Committee, or any two members of the committee.
Each committee shall keep minutes of all meetings which shall be at all times
available to Directors. Action taken by a committee shall be reported promptly
to the Board but not less frequently than quarterly.
(e) Term of Office. A member of any standing committee shall hold office
until the next organizational meeting of the Board of Directors or until he is
removed or ceases to be a Director.
(f) Vacancies. Should a vacancy occur on any standing committee resulting
from any cause whatsoever, the Board, by resolution, may fill such vacancy at
any time.
(g) Resignation and Removal. A member of a standing committee may resign at
any time by giving written notice of his intention to do so to the Chairman of
the Board or the Corporate Secretary of the Corporation, and may be removed at
any time by the Board of Directors.
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3.2 Executive Committee.
(a) How Constituted. The Executive Committee shall consist of not less than
five nor more than nine Directors, including the Chairman of the Board, who
shall be Chairman of the Committee, and the President. If the Chairman of the
Board will not be present at a meeting, the President shall preside, and if the
President will not be present, the Chairman may designate another officer of the
Bank, who need not be a member of the Committee or a Director, to preside at the
meeting.
(b) Primary Responsibilities. The primary responsibilities of the Executive
Committee shall consist of: exercise of all powers of the Board of Directors
between meetings of the Board except as to matters exclusively reserved to the
Board under law; annual review of management's financial goals and business
plan; service as the Board's steering committee on capital, liquidity,
asset/liability and credit issues, as well as the Board's advisor on mergers and
acquisition and corporate structure matters; review of loan policy and
procedure, the quarterly classification of loans and the adequacy of the
allowance for loan loss reserves; review and recommendation to the Board of the
annual capital budget and authorization of capital expenditures within a level
established by the Board; supervision over the exercise of fiduciary powers;
oversight over the Bank's contributions policy, approval of the annual
contributions budget, and authorization or recommendation to the Board of larger
individual contributions as specified by the Board; joint consultation with the
Human Resources and Compensation Committee and recommendation to the Board of
any titling changes and management succession involving the top five officers of
the Bank; and evaluation and recommendation to the Board of nominees for
election as Directors.
3.3 Audit Committee
(a) How Constituted. The Audit Committee shall consist of not less than
five nor more than nine Directors, none of whom shall be officers of the Bank or
any subsidiary thereof. The Chairman of the Committee shall be appointed by the
Board of Directors upon recommendation of the Chairman of the Board. If the
Chairman of the Committee will not be present at a meeting, he may designate any
member of the Committee to preside at the meeting.
(b) Primary Responsibilities. The primary responsibilities of the Audit
Committee shall consist of: recommendation of the selection of independent
accountants and auditors; review of the scope of the accountant's examination
and approval of any non-audit services to be performed by the independent
accountants; review of examination reports by the independent accountants and
regulatory agencies; approval of, and review of the results of, the internal
audit plan; review of the procedures for establishing the allowance for loan
losses and monitoring of the credit process review function; review of Crestar's
Community Reinvestment Act policy, plans and performance; review of internal
programs to assure compliance with laws and regulations and the adequacy of
internal controls; review of the adequacy of insurance coverage; and review of
compliance with the Standards of Conduct.
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3.4 Human Resources and Compensation Committee.
(a) How Constituted. The Compensation Committee shall consist of not less
than four nor more than eight Directors, none of whom shall be officers of the
Bank or any subsidiary thereof. The Chairman of the Committee shall be appointed
by the Board of Directors upon recommendation of the Chairman of the Board. If
the Chairman of the Committee will not be present at a meeting, he or she may
designate any member of the Committee to preside at the meeting.
(b) Primary Responsibilities. The primary responsibilities of the Human
Resources and Compensation Committee shall consist of: review and approval of
major compensation policies; determination of appropriate performance targets
under the Bank's benefit plans; recommendation to the Board of salaries, and
approval of other compensation to be paid or awarded to the highest level and
most highly paid officers; recommendation of officers requiring Board approval
and joint consultation with the Executive Committee and recommendation to the
Board of any titling changes and management succession involving the top five
officers of the Bank; review of other matters pertaining to management
structure, succession planning and executive development; approval of election
of Corporate and Group level Executive Vice Presidents requiring Board approval;
review and recommendation for Board approval of new and significant changes to
qualified and non-qualified benefit plans; and recommendation for Board approval
of appropriate changes in Director compensation.
3.5 Nominating and Governance Committee
(a) How Constituted. The Nominating and Governance Committee shall consist
of not less than three nor more than five Directors, none of whom shall have
served as an officer of Crestar Financial Corporation or any subsidiary or
affiliate thereof within the calendar year of appointment or the calendar year
immediately preceding the year of appointment. The Chairman of the Committee
shall be appointed by the Board of Directors upon recommendation of the Chairman
of the Board. If the Chairman of the Committee will not be present at a meeting,
he or she may designate any member of the Committee to preside at the meeting.
(b) Primary Responsibilities. The primary responsibilities of the
Nominating and Governance Committee shall consist of: interpreting the Bylaws
whenever a member's change in circumstance, such as illness, retirement or
modification of primary employment, may impact eligibility for continued Board
service; recommending changes to eligibility requirements as needed to ensure
that the Board consists of highly-qualified persons who can provide constructive
input into the business of the Bank and represent a cross section of Crestar
constituencies; conducting a comprehensive study of board governance practices
of similarly-situated corporations and recommending adoption of Crestar
corporate governance guidelines as appropriate; monitoring effectiveness of such
guidelines and implementing modification as needed; and establishing and
implementing a nomination process to identify and recommend Board nominees as
appropriate.
3.6 Area Boards. The Board of Directors or the Chairman of the Board or his
designee may appoint, from time to time, Area Boards for any one or more of the
Bank's locations, whose members may consist of such persons, including officers
and Directors, as may be deemed proper. Area Boards shall serve at the pleasure
of the Board of Directors or the Chairman of the Board and their duties shall be
those prescribed in the Administrative Regulations as in effect from time to
time.
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3.7 Other Committees. The Board of Directors may, by resolution, establish
such other committees of the Board as it may deem advisable. The members, terms
and authority of such committees shall be as set forth in the resolutions.
The Chairman of the Board may establish such other committees of the Board of
Directors as he deems advisable, and may appoint the members of such committees.
Any such committees shall have the authority to consider, review, advise and
recommend to the Chairman of the Board with respect to such matters as may be
referred to it by the Chairman of the Board, but shall have no authority to act
for the Bank except with the prior approval of the Board of Directors.
Article IV
Officers
4.1 Number and Manner of Election or Appointment. The officers of the Bank
shall be:
(a) The Chairman of the Board, the President, a Corporate Secretary, a
Treasurer, an Auditor, one or more Regional Presidents, and one or more
Corporate Executive Vice Presidents, and one or more Group Executive Vice
Presidents, each of whom shall be elected by the Board;
(b) one or more local Presidents, Executive Vice Presidents, Corporate
Senior Vice Presidents, and Senior Vice Presidents as appointed by the
appropriate Policy Committee member for the Group, and
(c) such other officers as appointed by an approval officer for each Group
as designated by the appropriate Policy Committee member. Officers of
subsidiaries of the Bank shall be elected and have their compensation set in the
same manner as comparable officers of the Bank. One person may hold more than
one office except that the offices of the President and Corporate Secretary may
not be held by the same person.
4.2 Term of Office. The officers designated in Section 4.1(a) shall be
elected annually by the Board at its organizational meeting. Such officers shall
each hold office until the next organizational meeting of the Board and until
their successors are elected.
The officers designated in Section 4.1(b) shall be elected annually by the Human
Resources and Compensation Committee at its first meeting following the Annual
Meeting of Stockholders. Such officers shall each hold office until the next
such meeting of the Committee and until their successors are elected. The
officers designated in Section 4.1(c) may be appointed at any time by the
appropriate Policy Committee member for the Group. The officers designated in
Section 4.1(d) may be appointed at any time by the approval officer designated
by the appropriate Policy Committee member for each Group.
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4.3 Removal. Any officer may be removed from office, with or without cause,
at any time, by the Board of Directors. Any officer elected by the Human
Resources and Compensation Committee may be removed from office by the
Committee, with or without cause, at any time. Any officer appointed by a Policy
Committee member or approval officer for each Group may be removed from office
by him, with or without cause, at any time.
4.4 Resignations. Any officer may resign at any time by giving written
notice to the Board, Human Resources and Compensation Committee, Chairman of the
Board, President, or the Corporate Secretary. Such resignation shall be
effective on the date of receipt of such notice or any later date specified
therein, and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
4.5 Vacancies, New Offices and Promotions. A vacancy for any cause in any
office may be filled at any time for the unexpired portion of the term, in the
manner prescribed in these Bylaws for regular election or appointment to such
office. New offices may be created and filled, and the promotions and changes in
officers' titles may be made at any time in the manner prescribed in these
Bylaws for regular election or appointment to such office.
4.6 Chairman of the Board. The Chairman of the Board shall be the Chief
Executive Officer and shall have general supervision of the policies and
operations of the Bank, subject to the direction and control of the Board. He
shall preside at all meetings of the stockholders, the Board of Directors and
the Executive Committee. He shall be responsible for extending lines of credit
and other loan commitments, for making loans and for discounting acceptable
trade paper. All such extensions of credit shall be based on acceptable credit
risk. Subject to his executive authority and control, the Chairman of the Board
may delegate specific loan authority to officers and employees of the Bank. He
shall have the power to sign checks, orders, contracts, leases, notes, drafts
and other documents and instruments in connection with the business of the Bank,
and have such other powers and perform such other duties as shall be designated
by the Board of Directors or as may be incidental to his office. The Chairman of
the Board shall have the authority to appoint officers of the Bank below the
rank of Executive Vice President.
4.7 President. The President shall participate in the supervision of the
policies and management of the Corporation, and may, if so designated by the
Board of Directors, be the chief administrative officer of the Corporation. He
shall perform all duties incidental to the office of President and shall perform
such other duties as may be assigned to him from time to time by the Board of
Directors or the Chairman of the Board. In the absence of the Chairman of the
Board, he shall preside at meetings of stockholders, the Board of Directors and
the Executive Committee. He shall have the same power to sign for the
Corporation and to appoint officers as prescribed in these Bylaws for the
Chairman of the Board.
4.8 Corporate Secretary. The Corporate Secretary shall: a) keep the
minutes of all meetings of the Stockholders, the Board of Directors, the
Executive Committee, and such other Committees as the Board may designate; b)
see that all notices of such meetings are given in accordance with these Bylaws
or as required by law; c) be custodian of the corporate records and of the seal
of the Corporation and have authority to affix the seal to any documents
requiring such seal and to attest the same; d) sign, with the Chief Executive
Officer, certificates for shares of the Corporation, the issuance of which shall
have been authorized by resolution of the Board of Directors; and e) in general
perform all duties incident to the office of Corporate Secretary and such other
duties as from time to time may be assigned to him by the Board of Directors or
the Chief Executive Officer. In the absence of the Corporate Secretary, an
Assistant Corporate Secretary shall act in his stead.
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<PAGE>
4.9 Treasurer. The Treasurer shall perform such duties with respect to
securities and funds of the Bank as may be prescribed by the Board of Directors
or the Chief Executive Officer, and such other duties as may be incidental to
the office of Treasurer.
4.10 Auditor. The Auditor shall have general supervision over the internal
audit of the Bank and its subsidiaries. He shall be responsible to the Board of
Directors, through the Audit Committee, for independently evaluating the
adequacy, effectiveness, and efficiency of the Bank's systems of internal
control and of employee compliance therewith. He shall have the duty of
reporting his findings and recommendations to the Audit Committee at least
quarterly on any matters concerning the Bank, except those with respect to
credit quality, responsibility for which has been vested in the officer in
charge of credit administration. Should the Auditor deem any matter to be of
special importance or his independence to be in jeopardy, he shall report
immediately to the Chairman of the Audit Committee or, in his absence, any
member of the Committee. The Auditor shall have such other duties and perform
such special audits and examinations as may be prescribed from time to time by
the Audit Committee or the Board of Directors. For administrative purposes, the
Auditor shall be accountable to the Chief Executive Officer.
4.11 Powers and Duties of Other Officers. The powers and duties of all
other officers of the Bank shall be those usually pertaining to their respective
offices, subject to the direction and control of the Board of Directors and as
otherwise provided in these Bylaws, or as prescribed by the Chief Executive
Officer.
4.12 Bonds. Each officer and employee of the Bank shall give bond covering
the honest and faithful performance of his duties. The form and amount of such
bonds, and the name of the company providing the surety, shall be approved
annually by the Board of Directors at its organizational meeting, the premiums
thereon to be paid by the Bank.
Article V
Capital Stock
5.1 Certificates. The shares of capital stock of the Bank shall be
evidenced by certificates in forms prescribed by the Board of Directors and
executed in any manner permitted by law and stating thereon the information
required by law. Transfer agents and/or registrars for one or more classes of
the stock of the Bank may be appointed by the Board of Directors and may be
required to countersign certificates representing stock of such class or
classes. If any officer whose signature or facsimile thereof shall have been
used on a stock certificate shall for any reason cease to be an officer of the
Bank and such certificate shall not then have been delivered by the Bank, the
Board of Directors may nevertheless adopt such certificate and it may then be
issued and delivered as though such person had not ceased to be an officer of
the Bank.
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5.2 Lost, Destroyed and Mutilated Certificates. Holders of the stock of the
Bank shall immediately notify the Bank of any loss, destruction or mutilation of
the certificate therefor, and the Board of Directors or the Executive Committee
may cause one or more new certificates for the same number of shares in the
aggregate to be issued to such stockholder upon the surrender of the mutilated
certificate or upon satisfactory proof of such loss or destruction, and the
deposit of a bond in such form and amount and with such surety as the Board of
Directors may require.
5.3 Transfer of Stock. The stock of the Bank shall be transferable or
assignable only on the Books of the Bank by the holders in person or by attorney
on surrender of the Certificate for such shares duly endorsed and, if sought to
be transferred by attorney, accompanied by a written power of attorney to have
the same transferred on the Books of the Bank. The Bank shall recognize,
however, the exclusive right of the person registered on its books as the owner
of shares to receive dividends and to vote as such owner.
5.4 Closing of Transfer Books and Fixing Record Date. For the purpose of
determining stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or entitled to receive payment of any
dividend, or in order to make a determination of stockholders for any other
proper purpose, the Board of Directors may provide, that the stock transfer
books shall be closed for a stated period but not to exceed in any case, seventy
days.
In lieu of closing the stock transfer books, the Board of Directors may fix in
advance a date as the record date for any such determination of stockholders,
such date in any case to be not more than seventy days prior to the date on
which the particular action, requiring such determination of stockholders, is to
be taken. If the stock transfer books are not closed and no record date is fixed
for the determination of stockholders entitled to notice or to vote at a meeting
of stockholders, or stockholders entitled to receive payment of a dividend, the
date on which notices of the meeting are mailed or the date on which the
resolution of the Board of Directors declaring such dividend is adopted, as the
case may be, shall be the record date for such determination of stockholders.
When a determination of stockholders entitled to vote at any meeting of the
stockholders has been made, as provided in this section, such determination
shall apply to any adjournment thereof.
Article VI
Miscellaneous Provisions
6.1 Seal. The corporate seal of the Bank shall consist of a flat-face
circular die on which there shall be engraved the Crestar logogram and the name
of the Bank. Any officer of the Bank designated in writing by the Chief
Executive Officer or Corporate Secretary shall have authority to affix and
attest the seal. Failure to use the corporate seal shall not affect the validity
of any instrument.
6.2 Voting of Stock Held. Unless otherwise provided by resolution of the
Board of Directors or of the Executive Committee, the Chairman of the Board, the
President, or any Executive or Senior Vice President may from time to time
appoint an attorney or attorneys or agent or agents of this Bank, in the name
and on behalf of this Bank, to cast the vote which this Bank may be entitled to
cast as a stockholder or otherwise in any other corporation, any of whose stock
or securities may be held by this Bank, at meetings of the holders of the stock
or other securities of such other corporation, or to consent in writing to any
action by any such other corporation. Such officer shall instruct the person or
persons so appointed as to the manner of casting such votes or giving such
consent and may execute or cause to be executed on behalf of this Bank such
written proxies, consents, waivers or other instruments as may be necessary or
proper. In lieu of an appointment of an attorney or agent, the officer may
himself attend any meetings of the holders of stock of other securities of any
such other corporation and there vote or exercise any or all power of this Bank
as the holder of such stock or other securities of such other corporation.
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<PAGE>
6.3 Fiscal Year. The fiscal year of the Bank shall be the calendar year.
Article VII
Emergency Bylaws
7.1 The Emergency Bylaws provided in this Article VII shall be operative
during any emergency resulting from an attack of the United States or any
nuclear or atomic disaster, notwithstanding any different provision in the
preceding articles of the Bylaws or in the Articles of Incorporation of the Bank
or in the Virginia Stock Corporation Act (other than those provisions relating
to Emergency Bylaws). To the extent not inconsistent with these Emergency
Bylaws, the Bylaws provided in the preceding articles shall remain in effect
during such emergency and upon the termination of such emergency the Emergency
Bylaws shall cease to be operative unless and until another such emergency shall
occur.
During any such emergency:
(a) Any meeting of the Board of Directors may be called by any officer of
the Bank or by any Director. The notice thereof shall specify the time and place
of the meeting. To the extent feasible, notice shall be given only to such of
the Directors as it may be feasible to reach at the time, by such means as may
be feasible at the time, including publication or radio, and at a time less than
twenty-four hours before the meeting if deemed necessary by the person giving
notice. Notice shall be similarly given, to the extent feasible, to the other
persons referred to in (b) below,
(b) At any meeting of the Board of Directors, a quorum shall consist of a
majority of the number of Directors fixed at the time in accordance with Article
II of the Bylaws. If the Directors present at any particular meeting shall be
fewer than the number required for such quorum, other persons present may be
included in the number necessary to make up such quorum, and shall be deemed
Directors for such particular meeting as determined by the following provisions
and in the following order of priority:
(i) Officers designated in Section 4.1(a) of the Bylaws, Executive Vice
Presidents not already serving as Directors, in the order of their seniority of
first election to such offices, or if two or more shall have been first elected
to such offices on the same day, in the order of their seniority in age,
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<PAGE>
(ii) All other officers of the Bank in the order of their seniority of
first election to such offices, or if two or more shall have been first elected
to such offices on the same day, in the order of their seniority in age; and
(iii) Any other persons that are designated on a list that shall have
been approved by the Board of Directors before the emergency, such persons to be
taken in such order of priority and subject to such conditions as may be
provided in the resolution approving the list.
(c) The Board of Directors, during as well as before any such emergency,
may provide, and from time to time modify, lines of succession in the event that
during such an emergency any or all officers or agents of the Bank shall for any
reason be rendered incapable of discharging their duties.
(d) The Board of Directors, during as well as before any such emergency,
may, effective in the emergency, change the principal office, or designate
several alternative offices, or authorize the officers to do so.
No officer, Director or employee acting in accordance with these Emergency
Bylaws shall be liable except for willful misconduct.
These Emergency Bylaws shall be subject to repeal or change by further action of
the Board of Directors or by action of the stockholders, except that no such
repeal or change shall modify the provisions of the next preceding paragraph
with regard to action or inaction prior to the time of such repeal or change.
Any such amendment of these Emergency Bylaws may make any further or different
provision that may be practical and necessary for the circumstances of the
emergency.
Article VIII
Indemnification Of Directors And Officers
8.1 A. To the full extent that the Virginia Stock Corporation Act, as it
exists on the date hereof or may hereafter be amended, permits the limitation or
elimination of the liability of directors or officers, a Director or officer of
the Bank shall not be liable to the Bank or its stockholders for monetary
damages.
B. To the full extent permitted and in the manner prescribed by the
Virginia Stock Bank Act and any other applicable law, the Bank shall indemnify a
Director or officer of the Bank who is or was a party to any proceeding by
reason of the fact that he is or was such a Director or officer or is or was
serving at the request of the Bank as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise. The Board of Directors is hereby empowered, by majority vote
of a quorum of disinterested Directors, to contract in advance to indemnify any
Director or officer.
C. The Board of Directors is hereby empowered, by majority vote of a quorum
of disinterested Directors, to cause the Bank to indemnify or contract in
advance to indemnify any person not specified in Section B of this Article who
was or is a party to any proceeding, by reason of the fact that he is or was an
employee or agent of the Bank, or is or was serving at the request of the Bank
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, to the same
extent as if such person were specified as one to whom indemnification is
granted in Section B.
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<PAGE>
D. The Bank may purchase and maintain insurance to indemnify it against the
whole or any portion of the liability assumed by it in accordance with this
Article and may also procure insurance, in such amounts as the Board of
Directors may determine, on behalf of any person who is or was a Director,
officer, employee or agent of the Bank, or is or was serving at the request of
the Bank as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
against any liability asserted against or incurred by such person in any such
capacity or arising from his status as such, whether or not the Bank would have
power to indemnify him against such liability under the provisions of this
Article.
E. In the event there has been a change in the composition of a majority of
the Board of Directors after the date of the alleged act or omission with
respect to which indemnification is claimed, any determination as to
indemnification and advancement of expenses with respect to any claim for
indemnification made pursuant to Section A of this Article VIII shall be made by
special legal counsel agreed upon by the Board of Directors and the proposed
indemnitee. If the Board of Directors and the proposed indemnitee are unable to
agree upon such special legal counsel, the Board of Directors and the proposed
indemnitee each shall select a nominee, and the nominees shall select such
special legal counsel.
F. The provisions of this Article VIII shall be applicable to all actions,
claims, suits or proceedings commenced after the adoption hereof, whether
arising from any action taken or failure to act before or after such adoption.
No amendment, modification or repeal of this Article shall diminish the rights
provided hereby or diminish the right to indemnification with respect to any
claim, issue or matter in any then pending or subsequent proceeding that is
based in any material respect on any alleged action or failure to act prior to
such amendment, modification or repeal.
G. Reference herein to Directors, officers, employees or agents shall
include Area Board Directors, former Directors, officers, employees and agents
and their respective heirs, executors and administrators.
Article IX
Amendments
9.1 These Bylaws may be amended, altered, or repealed at any meeting of the
Board of Directors by affirmative vote of a majority of the number of Directors
fixed by resolution of the Board pursuant to these Bylaws. The stockholders
entitled to vote in an election of Directors, however, shall have the power to
rescind, alter, amend or repeal any Bylaws and to enact Bylaws which, if
expressly so provided, may not be amended, altered or repealed by the Board of
Directors.
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<PAGE>
Administrative Regulation I
Sale, Purchase And Pledge Or Deposit Of Securities Owned By The Bank
1.1 Sale, Purchase and Pledge or Deposit of Securities. The President, the
Executive Vice President - Investment Bank, the Managing Director
Asset/Liability Management Division, the Managing Director - Funds Management
Division, or such other officers of the Asset/Liability Management Division or
the Funds Management Division as any of the foregoing may designate in writing
(which designation shall be filed with the Corporate Secretary) are authorized
and empowered in its behalf at any time and from to time:
(a) To sell, assign, loan, sell under agreement to repurchase, transfer,
and deliver any and all securities of any description now or at any time
hereafter belonging to the Bank in its own right, or which the Bank is or shall
be authorized and empowered to sell, assign, or transfer as attorney for the
owners or holders thereof.
(b) To make any pledge or deposit of any of the bonds, notes, obligations
or any other securities belonging to the Bank (including any receipts issued by
any other banking institution evidencing the deposit by the Bank of any of its
securities with any other banking institution as custodian) including without
limitation the pledge or deposit with the Treasurer of the United States, or any
other public official or public authority, national, state or local, for the
purpose of securing (i) borrowings from the Federal Reserve Bank, (ii) deposits
for which security is or may be required or permitted by law at any time to be
given, (iii) sureties on surety bonds furnished to secure such deposits, or (iv)
deposits made, whether time or demand, by the Bank as sole or joint fiduciary of
any character. Any officer authorized hereunder to make such pledges or deposits
shall have power to make any endorsement, transfer or assignment of any such
securities, to make substitutions and withdrawals thereof, and to designate the
person or persons to whom on behalf of the Bank any such securities so withdrawn
may be delivered.
(c) To purchase, borrow, or purchase under agreement to resell for the
account of the Bank in its own right such bonds, stocks or other securities as
may be permitted by law.
(d) To do any act and to execute and acknowledge any document necessary to
the exercise of the powers hereby granted and to appoint attorneys-in-fact to do
such acts and execute such documents.
Administrative Regulation II
Exercise Of Fiduciary Powers
2.1 Certification, Authentication, etc., of Securities and Documents. Any
officer or employee of the Trust Group who may be designated from time to time
in writing (which designation shall be filed with the Corporate Secretary) by
either the President, the Executive Vice President for Trusts, any Senior Vice
President, or Vice President in the Trust Group, to act as Special Corporate
Assistant, shall have the authority to authenticate or certify, on behalf of the
Bank, any bonds, certificates, or other documents necessary or proper for the
Bank to certify in its capacity as Trustee under any mortgage, deed of trust or
other instrument, and to sign or countersign in the name of the Bank (a) as
Transfer Agent or Registrar the certificates for the capital stock or the bonds
or other securities of any corporation for which the Bank may be at any time
Transfer Agent or Co-Transfer Agent, or Registrar or Co-Registrar, respectively,
and (b) as Depositary the receipts for any securities deposited with the Bank
under any agreement under which it may at any time be Depositary; and any of
said officers or employees authenticating, certifying, signing or countersigning
any of such bonds, certificates, stocks, securities, receipts and documents on
behalf of the Bank may do so under the title or style of "Authorized Officer" or
"Authorized Signature."
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2.2 Qualification as Fiduciary. In all cases where the Bank shall be
appointed to act as Trustee, Executor, Administrator (with or without will
annexed), Curator, Guardian, Committee, Receiver, Special Commissioner, or in
any other lawful fiduciary capacity, any one of the following officers, namely:
The President, the Executive Vice President for Trusts, or any officer of the
Trust Group is authorized to take on behalf of the Bank any oath, and to execute
any bond required to be taken or executed, upon the Bank's qualifying to act in
such fiduciary capacity.
2.3 Acceptance of Trusts. The President, the Executive Vice President for
Trusts, or any officer in the Trust Group may accept on behalf of the Bank any
trust and sign his name to any instrument evidencing such acceptance and
acknowledge and deliver the same.
2.4 Purchase and Sales of Securities. Any of the following officers of the
Bank, namely: The President, the Executive Vice President for Trusts, or any
officer in the Trust Group, is authorized in the exercise of powers conferred
upon the Bank as fiduciary or agent, to buy, sell, assign, transfer and deliver
any bonds, stocks and other securities of every description, standing in the
name of this Bank as either sole or joint fiduciary, or in the name of any ward
for whom it is either sole guardian or co-guardian, or of any decedent for whom
it is either the sole personal representative or one of the personal
representatives, or which may be held by it in any fiduciary or representative
capacity whatsoever, either solely or in conjunction with some other person or
persons, whether registered or otherwise (and to exchange registered for bearer
or bearer for registered securities), and any such officer so authorized shall
have authority to appoint one or more attorneys for that purpose and to execute
and deliver on behalf of the Bank all necessary and proper instruments for the
purpose of effectuating the powers hereby conferred.
2.5 Deposit of Securities Under Plans of Reorganizations, etc. Any of the
following officers of the Bank, namely: The President, the Executive Vice
President for Trusts, or any officer in the Trust Group may deposit or authorize
the deposit of the securities referred to in paragraph 2.4 with any Committee or
Depository under any plan of reorganization, consolidation, merger or
readjustment of any individual, corporation, firm or association, and may
approve any such plan, and may execute in the name of the Bank in its
appropriate fiduciary or representative capacity and deliver on its behalf any
protective committee agreement for any of the above mentioned purposes.
2.6 Sales and Leases of Real Estate and Tangible Personal Property:
Foreclosure and Extension of Mortgages. Any of the following officers of the
Bank, namely: The President, the Executive Vice President for Trusts, or any
officer of the Trust Group, in the exercise of powers conferred upon the Bank as
fiduciary or agent are authorized (i) to sell, exchange or lease any real estate
or tangible personal property or any interest therein, which the Bank may hold
in any fiduciary or representative capacity, (ii) to grant options for purchase
thereof, (iii) to cause the foreclosure of any deed of trust or mortgage held by
the Bank in any such fiduciary or representative capacity, or (iv) to consent to
the extension of the maturity of any such deed of trust or mortgage.
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<PAGE>
2.7 All Acts Done Under the Foregoing Paragraphs numbered 2.2, 2.3, 2.4,
2.5 and 2.6 shall be reported to the Trust Administrative Committees, as may be
appropriate, provided that no action then taken by the Committees shall affect
the rights of third parties.
2.8 Voting Stock and Other Securities. The President, the Executive Vice
President for Trusts, or any officer of the Trust Group shall have the power and
authority to attend any meeting of the stockholders or security holders of any
corporation in which this Bank, as fiduciary or agent, is a stockholder or
security holder, and vote on behalf of this Bank any such stock or securities;
and any of them is hereby authorized and empowered to designate, in writing, any
person or persons as proxy, with power of substitution, to attend and vote at
such meeting such stock or securities on behalf of this Bank; provided, however,
that such proxy shall be empowered by such writing to vote only on the matters
and questions in the manner and to the effect therein specified.
Administrative Regulation III
Borrowing Money, Rediscounts Of Bills And Notes, Buying Or Selling Funds
3.1 Borrowed Money, Security Therefor and Rediscounts. Transactions with
the Federal Reserve Bank, or with any other bank in the nature of borrowings,
pledges or rediscounts by the Bank shall be by the President, the Executive Vice
President - Investment Bank, the Managing Director - Asset/Liability Management
Division, the Managing Director - Funds Management Division, or such other
officers of the Asset/Liability Management Division or the Funds Management
Division as any of the foregoing may designate in writing (which designation
shall be filed with the Corporate Secretary), and any of such officers is
severally authorized in the Bank's behalf at any time and from time to time:
(a) To borrow money for any temporary purpose and on such terms and for
such periods as he may deem wise;
(b) To pledge as security for the sums so borrowed, sell under repurchase
agreement, any and all securities, bills or notes, of every description
belonging to the Bank in its own right, including receipts of any other banking
institution evidencing deposit with it of any securities, bills or notes,
belonging to the Bank; or
(c) To rediscount any bills or notes belonging to the Bank in its own
right.
3.2 Purchase and Sale of Surplus Funds. The President, the Executive Vice
President - Investment Bank, the Managing Director - Asset/Liability Management
Division, the Managing Director - Funds Management Division, or such other
officers of the Asset/Liability Management Division or the Funds Management
Division as any of them may designate in writing (which designation shall be
filed with the Corporate Secretary), are authorized to purchase or sell surplus
funds.
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<PAGE>
Administrative Regulation IV
Sales And Leases Of Property
4.1 Sales and Leases of Bank-Owned Real Estate and Associated Personal
Property. The President, any officer at the level of Vice President or above in
the Real Estate Division and in the Collections and Foreclosures Division of
Crestar Mortgage Corporation (and who is also a Vice President or above of the
Bank), any managing officer or Senior Vice President of any Special Assets or
loan workout unit, and any Senior Vice President in the Real Estate Finance
Group, are authorized (i) to sell, exchange or lease any Bank-owned real estate
and any associated personal property or any interest therein, (ii) to grant
options for the purchase thereof, and (iii) to do any act and to execute,
acknowledge and deliver any deed, contract and other document necessary or
desirable in connection therewith.
4.2 Release of Encumbrances. Any release, termination statement, or
satisfaction of judgment required by the Bank shall be executed by any officer
of the Bank or by an attorney-in-fact appointed by an officer of the Bank for
the purpose. Whenever the Bank may be lawfully required to consent to the
release of the lien of any deed of trust, its consent may be evidenced by the
execution of such deed of release or any other document on behalf of the Bank by
any officer of the Bank.
Administrative Regulation V
Checks, Drafts, Orders, Etc.
5.1 Bank - Except Trust. All checks, drafts or orders of the Bank for the
payment of money, whether directed to itself or to others (except those drawn on
trust funds), shall be executed or signed on behalf of the Bank by any officer
or, if authorized to sign by any officer (other than a member of the Trust
Group) who is a Division Head, Senior Vice President or above, by any employee
of the Bank, with a copy of such authorization filed with the Corporate
Controller.
5.2 Trust Group. All checks, drafts or orders of the Trust Group for the
payment of money, whether directed to itself or others, shall be executed or
signed on behalf of the Bank by any officer or employee of the Trust Group who
may be authorized so to sign by any officer of the Trust Group who is Senior
Vice President or above, with a copy of such authorization filed with the
corporate Controller.
Administrative Regulation VI
Signature Guarantee, Confirmations, Etc.
6.1 Signature Guarantee. Any officer of the Bank, or any employee of the
Bank who may be designated in writing (which designation shall be filed with the
Corporate Secretary) by the Chairman of the Board, the President, any Executive
Vice President, any Senior Vice President or Division Head, shall have the
authority to guarantee, on behalf of the Bank, the signature of a bank customer
or other person on any stock certificate, bond, note, or other security,
provided that such officer or employee shall know personally:
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<PAGE>
1. The person signing.
2. That the signature is genuine.
3. That the signer is an appropriate person to endorse or sign.
4. That the signer has legal capacity to sign.
Any such officer or employee guaranteeing any such signature may do so under the
style of "Authorized Officer" or "Authorized Signature".
6.2 Confirmations. The General Auditor or any Vice President Audit is
authorized to certify in the name of, or on behalf of, the Bank in its own right
or in a fiduciary or representative capacity, as to the accuracy and
completeness of any account, schedule of assets, instrument or paper requiring
such certification.
Administrative Regulation VII
Responsibilities Of Area Boards
7.1 Responsibilities of Area Boards. The Area Boards, as provided by
Section 3.7 of the Bylaws, shall, jointly with senior management, assist in the
direction of one or more of the Bank's offices by: 1) selecting and evaluating
the performance of local executive officers, 2) ensuring the adoption of
challenging goals and marketing policies, 3) ensuring a reasonable return on
allocated capital, 4) ensuring a level of profitability that provides for
balanced growth, responsiveness to the credit needs of the community, and high
standards of integrity for all personnel, 5) ensuring an appropriate commitment
of the Bank to a significant role in the local community, 6) ensuring
conformance to applicable statutes & regulations, 7) ensuring a reporting system
that adequately monitors these objectives, 8) promoting the Bank through the
acquisition of business and by personal example and, 9) providing an outside
perspective as a constructive critic and loyal friend.
Administrative Regulation VIII
Deposit And Security Accounts
8.1 Deposit Accounts. The President, the Executive Vice President -
Investment Bank, the Executive Vice President, Controller and Treasurer, the
Managing Director - Asset/Liability Management Division, and the Managing
Director - Funds Management Division are individually authorized and empowered
to open and maintain in the name of the Bank one or more deposit accounts at
other financial institutions. The aforementioned officers shall designate the
personnel authorized to sign for and transact business in such accounts and may
agree to any terms governing such accounts. Any resolutions required of this
Corporation in connection with such accounts may be certified by the Corporate
Secretary as if specifically adopted by the Board of Directors.
8.2 Securities Accounts. The President, the Executive Vice President -
Investment Bank, the Managing Director - Asset/Liability Management Division,
and the Managing Director - Funds Management Division are individually
authorized and empowered to open and maintain in the name of the Bank one or
more securities accounts for the purpose of purchasing, selling, reselling,
borrowing, lending, and otherwise dealing in money market instruments and
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<PAGE>
securities of any and every kind, including agreements or contracts for their
repurchase or future delivery, with banks, brokers, dealers, securities firms,
or other organizations, and to issue written, telephonic, telegraphic, or verbal
orders or instructions for transactions to be carried out in such accounts. The
aforementioned officers shall designate the personnel authorized to sign for and
transact business in such accounts and may agree to any terms governing such
accounts. Any resolutions required of this Bank in connection with such accounts
may be certified by the Corporate Secretary as if specifically adopted by the
Board of Directors.
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Exhibit 3.3
TRUST AGREEMENT
among
CRESTAR BANK,
as Depositor
STAR BANK, NATIONAL ASSOCIATION,
as Eligible Lender Trustee
and
DELAWARE TRUST CAPITAL MANAGEMENT, INC.,
as Delaware Trustee
Dated as of [December] 1, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I Definitions and Usage..................................................................................1
ARTICLE II Organization..........................................................................................1
SECTION 2.1. Name. 1
SECTION 2.2. Office and Situs of the Trust...........................................................1
SECTION 2.3. Purposes and Powers.....................................................................1
SECTION 2.4. Appointment of Eligible Lender Trustee and Delaware Trustee.............................2
SECTION 2.5. Initial Capital Contribution of Trust Estate............................................3
SECTION 2.6. Declaration of Trust....................................................................4
SECTION 2.7. No Liability of the Certificateholders..................................................4
SECTION 2.8. Title to Trust Property.................................................................4
SECTION 2.9. Representations and Warranties of the Depositor.........................................4
SECTION 2.10. Federal Income Tax Provisions............................................................5
ARTICLE III Trust Certificates and Transfer of Interests.........................................................7
SECTION 3.1. Initial Beneficial Ownership............................................................7
SECTION 3.2. The Trust Certificates..................................................................7
SECTION 3.3. Authentication of Trust Certificates....................................................7
SECTION 3.4. Registration of Transfer and Exchange of Trust Certificates.............................8
SECTION 3.5. Restrictions on Transfer................................................................9
SECTION 3.6. Mutilated, Destroyed, Lost or Stolen Trust Certificates................................10
SECTION 3.7. Persons Deemed Owners..................................................................10
SECTION 3.8. Access to List of Certificateholders' Names and Addresses..............................10
SECTION 3.9. Maintenance of Office or Agency........................................................11
SECTION 3.10. Appointment of Certificate Paying Agent.................................................11
ARTICLE IV Actions by Eligible Lender Trustee...................................................................12
SECTION 4.1. Prior Notice to Certificateholders with Respect to Certain Matters.....................12
SECTION 4.2. Action by Certificateholders with Respect to Certain Matters...........................12
SECTION 4.3. Action by Certificateholders with Respect to Bankruptcy................................12
SECTION 4.4. Restrictions on Certificateholders' Power..............................................13
SECTION 4.5. Majority Control.......................................................................13
ARTICLE V Application of Trust Funds; Certain Duties............................................................13
SECTION 5.1. Application of Trust Funds.............................................................13
SECTION 5.2. Method of Payment......................................................................14
SECTION 5.3. Segregation of Moneys; No Interest.....................................................14
SECTION 5.4. Accounting and Reports to the Noteholders, Certificateholders, the Internal
Revenue Service and Others.......................................................14
SECTION 5.5. Signature on Returns; Tax Matters Partner..............................................15
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<PAGE>
ARTICLE VI Authority and Duties of Eligible Lender Trustee......................................................15
SECTION 6.1. General Authority......................................................................15
SECTION 6.2. General Duties.........................................................................15
SECTION 6.3. Action upon Instruction................................................................16
SECTION 6.4. No Duties Except as Specified in this Agreement, the Transfer and Servicing
Agreement, any Supplemental Transfer and Servicing Agreement or in
Instructions.....................................................................16
SECTION 6.5. No Action Except Under Specified Documents or Instructions.............................17
SECTION 6.6. Restrictions...........................................................................17
ARTICLE VII Concerning the Eligible Lender Trustee..............................................................17
SECTION 7.1. Acceptance of Trusts and Duties........................................................17
SECTION 7.2. Furnishing of Documents................................................................18
SECTION 7.3. Representations and Warranties.........................................................19
SECTION 7.4. Reliance; Advice of Counsel............................................................19
SECTION 7.5. Not Acting in Individual Capacity......................................................20
SECTION 7.6. Eligible Lender Trustee Not Liable for Trust Certificates or Financed Student
Loans............................................................................20
SECTION 7.7. Eligible Lender Trustee May Own Trust Certificates and Notes...........................21
SECTION 7.8. Representations and Warrantees of Delaware Trustee.....................................21
ARTICLE VIII Compensation of Trustees...........................................................................21
SECTION 8.1. Eligible Lender Trustee's Fees and Expenses............................................21
SECTION 8.2. Payments to the Eligible Lender Trustee................................................21
SECTION 8.3. Delaware Trustee's Fees and Expenses...................................................22
ARTICLE IX Termination of Trust Agreement.......................................................................22
SECTION 9.1. Termination of Trust Agreement.........................................................22
SECTION 9.2. Dissolution upon Insolvency of Depositor...............................................23
ARTICLE X Successor Eligible Lender Trustees and Additional Eligible Lender Trustees............................23
SECTION 10.1. Eligibility Requirements for Eligible Lender Trustee....................................23
SECTION 10.2. Resignation or Removal of Eligible Lender Trustee.......................................24
SECTION 10.3. Successor Eligible Lender Trustee.......................................................25
SECTION 10.4. Merger or Consolidation of Eligible Lender Trustee......................................25
SECTION 10.5. Appointment of Co-Eligible Lender Trustee or Separate Eligible Lender Trustee..........26
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<PAGE>
ARTICLE XI Miscellaneous........................................................................................27
SECTION 11.1. Supplements and Amendments..............................................................27
SECTION 11.2. No Legal Title to Trust Estate in Certificateholders....................................28
SECTION 11.3. Limitations on Rights of Others.........................................................28
SECTION 11.4. Notices.................................................................................28
SECTION 11.5. Severability............................................................................29
SECTION 11.6. Separate Counterparts...................................................................29
SECTION 11.7. Successors and Assigns..................................................................29
SECTION 11.8. No Petition.............................................................................29
SECTION 11.9. No Recourse.............................................................................29
SECTION 11.10. Headings.................................................................................30
SECTION 11.11. Governing Law............................................................................30
EXHIBIT A -- Form of Trust Certificate
EXHIBIT B -- Form of Purchaser's Representation and Warranty Letter
APPENDIX A -- Definitions
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<PAGE>
TRUST AGREEMENT dated as of [December] __, 1997, between CRESTAR BANK,
as Depositor (the "Depositor"), and STAR BANK, NATIONAL ASSOCIATION, not in its
individual capacity but solely as Eligible Lender Trustee (the "Eligible Lender
Trustee") and DELAWARE TRUST CAPITAL MANAGEMENT, INC., not in its individual
capacity but solely as Delaware Trustee (the "Delaware Trustee").
The Depositor, the Eligible Lender Trustee and the Delaware Trustee
hereby agree as follows:
ARTICLE I
Definitions and Usage
Capitalized terms used but not defined herein are defined in Appendix A
to the Transfer and Servicing Agreement, which Appendix is attached hereto. The
Appendix also contains rules as to construction and usage that are applicable
herein.
ARTICLE II
Organization
SECTION 2.1. Name.
The Trust created hereby shall be known as "Crestar Student Loan Trust
1997-1," in which name the Eligible Lender Trustee may conduct the business of
the Trust, make and execute contracts and other instruments on behalf of the
Trust and sue and be sued.
SECTION 2.2. Office and Situs of the Trust.
The registered office of the Issuer in Delaware shall be the office of
the Delaware Trustee at 900 Market Street, 2nd Floor, Wilmington, Delaware 19801
and the situs of the Trust shall be at the corporate trust office of the
Eligible Lender Trustee located at 425 Walnut Street, Cincinnati, Ohio 45201.
SECTION 2.3. Purposes and Powers.
The purpose of the Trust is to engage in the following activities:
(a) to issue one or more Classes of the Trust Certificates pursuant to
this Agreement and to sell the Trust Certificates in one or more transactions;
(b) to issue one or more Series of Notes pursuant to the Master
Indenture and the applicable Terms Supplement and to sell the Notes in one or
more transactions in accordance with instructions received from the
Administrator;
(c) with the proceeds of the sale of the Notes and the Trust
Certificates, to acquire, from time to time, the Financed Student Loans;
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(d) to assign, grant, transfer, pledge, mortgage and convey the Trust
Estate pursuant to the Indenture and the applicable Terms Supplement and to
hold, manage and distribute to the Certificateholders pursuant to the terms of
the Transfer and Servicing Agreement any portion of the Trust Estate released
from the Lien of, and remitted to the Trust pursuant to, the Indenture and the
applicable Terms Supplement;
(e) from time to time to sell and dispose of the Financed Student Loans
in accordance with the terms of the Basic Documents;
(f) to enter into and perform its obligations under the Basic Documents
to which it is to be a party;
(g) 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
(h) 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 Article V of the
Transfer and Servicing Agreement and or contemplated by the Basic Documents.
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. Notwithstanding anything in this Agreement or the
Basic Documents to the contrary, for so long as the Depositor is a
Certificateholder, the Trust's activities shall be limited to activities that
are part of, or incidental to, the business of banking.
This Section 2.3 shall not be amended without the prior written
[unanimous] consent of the Certificateholders, including the Depositor.
SECTION 2.4. Appointment of Eligible Lender Trustee and Delaware
Trustee.
(a) The Depositor hereby (i) appoints the Eligible Lender Trustee as
trustee of the Trust effective as of the date hereof, to have all the rights,
powers and duties set forth herein, and (ii) ratifies all actions of the
Eligible Lender Trustee taken on behalf of the Trust prior to the execution
hereof.
(b) The Delaware Trustee is hereby 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 Delaware 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 to the Trust, the Certificateholders or any other Person,
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 in
Section 2.4. Except as otherwise expressly required by this Section 2.4, the
Delaware Trustee shall have no duty, obligation or liability with respect to the
Trust and shall incur no liability for any actions taken, or omitted to be
taken, in good faith pursuant to its rights, obligations or responsibilities
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hereunder. By the execution hereof, the Delaware Trustee accepts the trust
created hereby. Except for the representations and warranties set forth in
Section 7.8, in accepting the trust hereby created, the Delaware Trustee acts
solely as Delaware trustee hereunder and not in its individual capacity, and all
Persons having any claim against the Delaware Trustee by reason of the creation
or existence of the Trust, the terms of this Agreement, or the transactions
contemplated by this Agreement or any other Basis Document shall look only to
the Trust Estate for payment or satisfaction thereof. Without limitation to the
foregoing, (A) in no event and under no circumstances shall the Delaware
Trustee, in its individual capacity or as Delaware Trustee, have any liability
for any of the representations, warranties, covenants, agreements or other
obligations of the Trust, (B) the Delaware Trustee shall incur no liability to
anyone in acting upon any signature, instrument, notice, resolution, request,
consent, order, instruction, certificate, report, opinion, bond or other
document or paper reasonably believed by it to be genuine and reasonably
believed by it to be signed or provided by the proper party or parties, and (C)
in the exercise of its rights or responsibilities under this Agreement, the
Delaware Trustee may consult with counsel, accountants and other skilled persons
to be selected with reasonable care and employed by it and it shall not be
liable for anything done, suffered or omitted in good faith by it in accordance
with the opinion or advice of any such counsel, accountants or other skilled
persons.
(c) The Trust and the Depositor shall indemnify, defend and hold
harmless the Delaware Trustee and any of its affiliates, officers, directors,
employees and agents (the "Indemnified Parties") from and against any and all
losses, claims, taxes, damages, reasonable expenses, and liabilities (including
liabilities under state or federal securities laws) of any kind and nature
whatsoever (collectively, "Expenses"), as incurred, to the extent that such
Expenses arise out of or are imposed upon or asserted against such Indemnified
Person with respect to the creation, operation or termination of the Trust, the
execution, delivery or performance of this Agreement or the transactions
contemplated hereby; provided however that the Trust and the Depositor shall not
be required to indemnify any Indemnified Party for any Expenses which are a
result of the willful misconduct, bad faith or gross negligence of such
Indemnified Person. The obligations of the Trust and the Depositor to indemnify
the Indemnified Persons as provided herein shall survive the termination of this
Agreement.
(d) The Delaware Trustee may resign upon thirty days' prior notice to
the Eligible Lender Trustee; provided, however, that a successor Delaware
Trustee that meets the requirements of Section 3807 of the Delaware Business
Trust Statute and satisfactory to the Eligible Lender Trustee and the
Administrator shall have been appointed and agreed to serve. If a successor
Delaware Trustee shall not have been appointed within such thirty day period,
the Delaware Trustee may apply to the Court of Chancery of the State of Delaware
for the appointment of a successor Delaware Trustee. The Eligible Lender Trustee
may remove and replace the Delaware Trustee from time to time in its sole
discretion, provided that the removal shall not be effective until a successor
Delaware Trustee shall have been appointed and agreed to serve.
SECTION 2.5. 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 $10.00. The
Eligible Lender Trustee hereby acknowledges receipt in trust from the Depositor
of the foregoing contribution, which shall constitute the initial Trust Estate
and shall be deposited in the Collection Account.
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SECTION 2.6. 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 business trust under Delaware law and that this Agreement
constitute the governing instrument of such trust. If for any reason it is
determined that the Trust does not qualify as a business trust under Delaware
law, it shall be a trust, nonetheless, under the common law of Delaware. It is
the intention of the parties hereto that, solely for federal, state and local
income, franchise and similar 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 and the Notes being debt of the partnership. The parties
agree that, unless otherwise required by appropriate federal, state or local tax
authorities, they shall treat the Trust as a partnership for federal tax
purposes, and the Trust will file or cause to be filed annual or other necessary
returns, reports and other forms consistent with the characterization of the
Trust as a partnership for federal tax purposes, and Depositor will not make, or
cause to be made, an election under the provisions of Treasury Regulation
Section 301.7701-3 to classify the Trust an association and shall take, or cause
to be taken, necessary and appropriate actions consistent with carrying out the
intent of this Section 2.6. Effective as of the date hereof, the Eligible Lender
Trustee shall have all rights, powers and duties set forth herein with respect
to accomplishing the purposes of the Trust.
SECTION 2.7. No Liability of the Certificateholders.
No Certificateholder shall have any personal liability for any
liability or obligation of the Trust.
SECTION 2.8. Title to Trust Property.
Legal title to all 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 2.9. 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 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 except
for such power and authority the absence of which would not have a material
adverse effect on the Depositor.
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(b) The Depositor has the requisite corporate power and authority to
execute and deliver this Agreement and to carry out its terms; the Depositor has
the requisite 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 on the
Depositor's part; and the execution, delivery and performance of this Agreement
has been duly authorized by the Depositor by all necessary corporate action.
(c) This Agreement has been duly executed and delivered by the
Depositor, and constitutes a legal, valid and binding obligation of the
Depositor enforceable against the Depositor in accordance with its terms,
subject to the effect of applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws relating to or affecting
creditors' rights generally and court decisions with respect thereto and subject
to the application of equitable principles in any proceeding, whether at law or
in equity.
(d) The consummation of the transactions contemplated by this Agreement
and the fulfillment of the terms hereof do not violate, 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, material agreement or other
material 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 material indenture, material agreement or
other material instrument (other than pursuant to the Basic Documents); nor
violate any law or, to 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 except for such violations
which would not have a material adverse effect on the Depositor.
(e) No consent of any federal or state governmental or administrative
authority is required to be obtained by the Depositor prior to its entering into
this Agreement or in connection with its consummation of the transactions
expressly contemplated by the Basic Documents, other than those that have been
obtained, except such as may be required by the blue sky laws of any
jurisdiction in connection with the sale of and distribution of the Notes and
Certificates for which no representation is being made.
SECTION 2.10. Federal Income Tax Provisions.
If the Trust is treated as a partnership (rather than disregarded as a
separate entity) for federal income tax purposes pursuant to Section 2.6, the
following provisions shall apply:
(a) A separate capital account (a "Capital Account") shall be
established and maintained for each Holder in accordance with Treasury
Regulations Section 1.704-1(b)(2)(iv). No Holder shall be entitled to interest
on its Capital Account or any capital contribution made by such Holder to the
Trust.
(b) Upon termination of the Trust pursuant to Article IX, any amounts
available for distribution to Holders shall be distributed to the Holders with
positive Capital Account balances in accordance with such balances. For purposes
of this Section 2.10(b), the Capital Account of each Holder shall be determined
after all adjustments made in accordance with this Section 2.10 resulting from
the Trust's operations and from all sales and dispositions of all or any part of
the assets of the Trust. Any distributions pursuant to this Section 2.10(b)
shall be made by the end of the taxable year in which the termination occurs
(or, if later, within 90 days after the date of the termination).
(c) No Holder shall be required to restore any deficit balance in its
Capital Account. Furthermore, no Holder shall be liable for the return of the
Capital Account of, or of any capital contribution made to the Trust by, another
Holder.
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(d) Interest payments on the Certificates at the Certificate rate
(including interest on amounts previously due on the Certificates but not yet
distributed) shall be treated as "guaranteed payments" under Section 707(c) of
the Code.
(e) Except as provided in Section 2.10(h), profit and loss of the Trust
for each taxable year shall be allocated to the Depositor.
(f) Notwithstanding any provision to the contrary, (i) any expense of
the Trust that is a "nonrecourse deduction" within the meaning of Treasury
Regulations Section 1.704-2(b)(1) shall be allocated to the Depositor, (ii) any
expense of the Trust that is a "partner nonrecourse deduction" within the
meaning of Treasury Regulations Section 1.704-2(i)(2) shall be allocated in
accordance with Treasury Regulations Section 1.704-2(i)(1), (iii) if there is a
net decrease in Trust Minimum Gain within the meaning of Treasury Regulations
Section 1.704-2(f)(1) for any taxable year, items of gain and income shall be
allocated among the Holders in accordance with Treasury Regulations Section
1.704-2(f) and the ordering rules contained in Treasury Regulations Section
1.704-2(j), and (iv) if there is a net decrease in Holder Nonrecourse Debt
Minimum Gain within the meaning of Treasury Regulations Section 1.704-2(i)(4)
for any taxable year, items of gain and income shall be allocated among the
Holders in accordance with Treasury Regulations Section 1.704-2(i)(4) and the
ordering rules contained in Treasury Regulations Section 1.704-2(j). The
Depositor's "interest in partnership profits" for purposes of determining its
share of the nonrecourse liabilities of the Trust within the meaning of Treasury
Regulations Section 1.752-3(a)(3) shall be 100%.
(g) If a Holder receives in any taxable year an adjustment, allocation,
or distribution described in subparagraphs (4), (5), or (6) of Treasury
Regulations Section 1.704-1(b)(2)(ii)(d) that causes or increases a negative
balance in such Holder's Capital Account that exceeds the sum of such Holder's
shares of Trust Minimum Gain and Holder Nonrecourse Debt Minimum Gain, as
determined in accordance with Treasury Regulations Sections 1.704-2(g) and
1.704-2(i), such Holder shall be allocated specially for such taxable year (and,
if necessary, later taxable years) items of income and gain in an amount and
manner sufficient to eliminate such negative Capital Account balance as quickly
as possible as provided in Treasury Regulations Section 1.704-1(b)(2)(ii)(d).
After the occurrence of an allocation of income or gain to a Holder in
accordance with this Section 2.10(g), to the extent permitted by Regulations
Section 1.704-1(b), items of expense or loss shall be allocated to such Holder
in an amount necessary to offset the income or gain previously allocated to such
Holder under this Section 2.10(g).
(h) Loss shall be allocated first to the Depositor, but only to the
extent that such allocation would not cause a deficit in the Depositor's Capital
Account (after reduction to reflect the items described in Treasury Regulations
Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6)) in excess of the sum of the
Depositor's share of Trust Minimum Gain and Holder Nonrecourse Debt Minimum
Gain. Any loss in excess of that limitation shall be allocated to all the
Certificateholders in accordance with their respective Percentage Interests.
After the occurrence of an allocation of loss to a Holder in accordance with
this Section 2.10(h), to the extent permitted by Treasury Regulations Section
1.704-1(b), profit shall be allocated to such Holder in an amount necessary to
offset the loss previously allocated to such Holder under this Section 2.10(h).
(i) If a Holder transfers any part or all of its Holdership Interest
and the transferee is admitted as provided herein (a "Transferee Holder"), the
distributive shares of the various items of profit and loss allocable among the
Holders during such taxable year shall be allocated between the transferor and
the Transferee Holder (at the election of the Holders (including the transferor,
but excluding the Transferee Holder)) either (i) as if the taxable year had
ended on the date of the transfer or (ii) based on the number of days of such
taxable year that each was a Holder without regard to the results of Trust
activities in the respective portions of such taxable year in which the
transferor and Transferee Holder were Holders.
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(j) "Profit" and "loss" and any items of income, gain, expense or loss
referred to in this Section 2.10 shall be determined in accordance with federal
income tax accounting principles as modified by Treasury Regulations Section
1.704-1(b)(2)(iv), except that profits and losses shall not include items of
income, gain, and expense that are specially allocated pursuant to Sections
2.10(f), 2.10(g) or 2.10(h) hereof. All allocations of income, profits, gains,
expenses, and losses (and all items contained therein) for federal income tax
purposes shall be identical to all allocations of such items set forth in this
Section 2.11, except as otherwise required by Section 704(c) of the Code and
Section 1.704-1(b)(4) of the Treasury Regulations.
ARTICLE III
Trust Certificates and Transfer of Interests
SECTION 3.1. Initial Beneficial Ownership.
Upon the formation of the Trust and the contribution by the Depositor
pursuant to Section 2.5 and until the initial issuance of the Trust
Certificates, the Depositor shall be the sole beneficial owner of the Trust.
SECTION 3.2. The Trust Certificates.
The Trust Certificates shall be substantially in the form of Exhibit A.
The Trust Certificates shall be issued in minimum denominations of $10.00 and
integral multiples of $10 in excess thereof. 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 valid and binding obligations of the Trust, 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.
SECTION 3.3. Authentication of Trust Certificates.
(a) On the Closing Date, the Eligible Lender Trustee shall cause the
Trust Certificates in an aggregate principal amount equal to $1,000 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 in exchange for the amount contributed to the Trust
pursuant to Section 2.5 and $990 in cash payable by the initial
Certificateholders on the Closing Date. Such Trust Certificates shall be
designated as the Crestar Student Loan Trust 1997-1 Asset-Backed Certificates.
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 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 3.4 or 3.5
hereunder.
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(b) In connection with the initial issuance of the Trust Certificates
the Depositor hereby makes the following representations and warranties:
(i) It is not (1) an employee benefit plan, retirement arrangement,
individual retirement account or Keogh plan subject to either Title I of
the Employee Retirement Income Security Act of 1974, as amended, or Section
4975 of the Internal Revenue Code of 1986, as amended, or (2) an entity
(including an insurance company general account) whose underlying assets
include plan assets by reason of any such plan's arrangements or account's
investment in any such entity.
(ii) It is a U.S. Person as defined in Section 7701(a)(30) of the
Code.
(iii) It understands that the Trust Certificates will be offered in a
transaction not involving any public offering within the meaning of the
Securities Act, and that, if in the future it decides to resell, pledge or
otherwise transfer any Trust Certificates, such Trust Certificates may be
resold, pledged or transferred only (a) to a person who the seller
reasonably believes is an institutional "accredited investor" as defined in
Rule 501(a)(1) - (3) under the Securities Act that purchases for its own
account or for the account of another institutional accredited investor or
(b) pursuant to an effective registration statement under the Securities
Act.
SECTION 3.4. 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 Section 3.9, 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 transfer
and exchanges of Trust Certificates as provided herein. The Eligible Lender
Trustee shall be the Certificate Registrar.
Upon surrender for registration of transfer of any Trust Certificate at
the office or agency maintained pursuant to Section 3.9, and compliance with the
provisions set forth in Section 3.5, the Eligible Lender Trustee shall execute,
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 3.9.
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 entity acceptable to the Eligible
Lender Trustee. 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.
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The preceding provisions of this Section 3.4 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 days preceding any Distribution Date.
SECTION 3.5. Restrictions on Transfer.
(a) Except for the initial sale of the Trust Certificates, the Trust
Certificates may not be offered or sold except to institutional "accredited
investors" (as defined in Rule 501(a)(1) - (3) under the Securities Act who are
U.S. Persons (as defined in Section 7701(a)(30) of the Code) in reliance on an
exemption from the registration requirements of the Securities Act.
The Trust Certificates have not been registered or qualified under the
Securities Act, or any state securities law. No transfer, sale, pledge or other
disposition of any Trust Certificate shall be made unless such disposition is
made pursuant to an effective registration statement under the Securities Act
and effective registration or qualification under applicable state securities
laws, or is made in a transaction which does not require such registration or
qualification. In the event that a transfer is to be made in reliance upon an
exemption from the Securities Act, the Eligible Lender Trustee may require, in
order to assure compliance with the Securities Act, that the Certificateholder's
prospective transferee certify to the Eligible Lender Trustee in writing the
facts surrounding such disposition. Unless the Eligible Lender Trustee requests
otherwise, such certification shall be substantially in the form of Exhibit B
hereto. In the event that such certification of facts does not on its face
establish the availability of an exemption under the Securities Act, the
Eligible Lender Trustee may require an opinion of counsel satisfactory to it
that such transfer may be made pursuant to an exemption from the Securities Act,
which opinion of counsel shall not be an expense of the Eligible Lender Trustee
or of the Trust.
(b) Each Trust Certificate will bear a legend substantially to the
following effect:
"THIS TRUST CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT") OR ANY STATE SECURITIES LAWS. THE HOLDER HEREOF, BY
PURCHASING THIS TRUST CERTIFICATE, AGREES THAT THIS TRUST CERTIFICATE MAY BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IN ACCORDANCE WITH ANY APPLICABLE
STATE SECURITIES LAWS AND (1) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS
AN INSTITUTIONAL ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501(a)(1) - (3)
UNDER THE ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF AN
INSTITUTIONAL ACCREDITED INVESTOR, OR (2) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT.
THIS TRUST CERTIFICATE MAY NOT BE TRANSFERRED DIRECTLY OR INDIRECTLY TO (1)
EMPLOYEE BENEFIT PLANS, RETIREMENT ARRANGEMENTS, INDIVIDUAL RETIREMENT ACCOUNTS
OR KEOGH PLANS SUBJECT TO EITHER TITLE I OF THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED, OR SECTION 4975 OF THE INTERNAL REVENUE CODE
OF 1986, AS AMENDED, OR (2) ENTITIES (INCLUDING INSURANCE COMPANY GENERAL
ACCOUNTS) WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF ANY SUCH
PLAN'S ARRANGEMENTS OR ACCOUNT'S INVESTMENT IN SUCH ENTITIES. FURTHER, THIS
TRUST CERTIFICATE MAY BE TRANSFERRED ONLY TO A UNITED STATES PERSON WITHIN THE
MEANING OF SECTION 7701(a)(30) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED.
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THIS TRUST CERTIFICATE DOES NOT REPRESENT DEPOSITS OR OBLIGATIONS OF OR ANY
INTEREST IN CRESTAR BANK, STAR BANK, NATIONAL ASSOCIATION OR DELAWARE TRUST
CAPITAL MANAGEMENT, INC.
THIS TRUST CERTIFICATE IS NOT GUARANTEED OR INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY GOVERNMENTAL AGENCY.
SECTION 3.6. 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 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 3.7. Persons Deemed Owners.
Prior to due presentation of a Trust Certificate for registration of
transfer, the Eligible Lender Trustee or 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 5.1 and for all
other purposes whatsoever, and neither the Eligible Lender Trustee or the
Certificate Registrar nor any agent of any thereof shall be bound by any notice
to the contrary.
SECTION 3.8. 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
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of its name and address, regardless of the source from which such information
was derived.
SECTION 3.9. Maintenance of Office or Agency.
The Eligible Lender Trustee shall maintain in [the Borough of
Manhattan, 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 its corporate trust office at Star
Bank, National Association, _______________, Cincinnati, Ohio _____, as such
office. 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 3.10. Appointment of Certificate Paying Agent.
The Certificate Paying Agent shall make distributions to
Certificateholders from the amounts received from the Indenture Trustee out of
the Trust Accounts pursuant to Section 5.1 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. The Eligible Lender
Trustee may revoke such power and remove the Certificate Paying Agent if the
Majority Certificateholder 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 the Eligible Lender Trustee, and any co-paying agent chosen by the Eligible
Lender Trustee acceptable to the Majority Certificateholder, which consent shall
not be unreasonably withheld. The Eligible Lender Trustee shall furnish the
Indenture Trustee and the Majority Certificateholder with a notice identifying
each co-paying agent within two days of any such appointment. The Eligible
Lender Trustee shall be permitted to resign as Certificate Paying Agent upon 30
days written notice to the Eligible Lender Trustee and the Majority
Certificateholder. If the Eligible Lender Trustee shall no longer be the
Certificate Paying Agent, the Eligible Lender Trustee, subject to the prior
written consent of the Majority Certificateholder (which consent shall not be
unreasonably withheld), 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 7.1, 7.3,
7.4, 7.5 and 8.1 shall apply to the Eligible Lender Trustee also in its role as
Certificate Paying Agent, for so long as the Eligible Lender Trustee 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.
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ARTICLE IV
Actions by Eligible Lender Trustee
SECTION 4.1. 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 in
writing of the proposed action and the Majority Certificateholder shall not have
notified the Eligible Lender Trustee in writing prior to the 30th day after such
notice is given that the Majority Certificateholder has withheld consent:
(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 amendment of the Indenture or the Terms Supplement by a
supplemental indenture;
(c) the amendment, change or modification of the Administration
Agreement; or
(d) the appointment pursuant to the Indenture or the Terms Supplement
of a successor Note Registrar or Indenture Trustee or pursuant to this Agreement
of a successor Certificate Registrar or Certificate Paying Agent, or the consent
to the assignment by the Note Registrar, Certificate Paying Agent or Indenture
Trustee or Certificate Registrar of its obligations under the Indenture or this
Agreement, as applicable.
SECTION 4.2. Action by Certificateholders with Respect to Certain
Matters.
The Eligible Lender Trustee shall not have the power, except upon the
direction of the Majority Certificateholders or, with the Majority
Certificateholder's consent, to (a) remove the Master Servicer or the
Administrator under the Transfer and Servicing Agreement pursuant to Section 8.1
thereof or (b) 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 Majority Certificateholder.
SECTION 4.3. 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 4.4. 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 2.3 nor shall the Eligible Lender Trustee be permitted to follow any
such direction, if given.
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SECTION 4.5. Majority Control.
Except as expressly provided herein, any action that may be taken by
the Certificateholders under this Agreement may be taken by the Majority
Certificateholders evidencing not less than 50.1% of the Certificate Balance
without regard to Certificates held by the Depositor. Except as expressly
provided herein, any written notice of the Certificateholders delivered pursuant
to this Agreement shall be effective if signed by the Majority
Certificateholders evidencing not less than 50.1% of the Certificate Balance at
the time of the delivery of such notice.
ARTICLE V
Application of Trust Funds; Certain Duties
SECTION 5.1. Application of Trust Funds.
(a) No later than the close of business on the day it receives funds
distributed by the Indenture Trustee pursuant to Sections 5.5, 5.6 and 5.10 of
the Transfer and Servicing Agreement, the Certificate Paying Agent will
distribute such amounts to Trust Certificateholders on a pro rata basis, based
upon the portion of the Certificate Balance held by such Certificateholder;
provided, however, that if the Eligible Lender Trustee receives funds for
distribution to Certificateholders after 11:00 a.m. on any day it shall use all
reasonable efforts to distribute such funds to the applicable Certificateholders
on such day but shall not be liable for any damages if such funds are
distributed on the following Business Day. Notwithstanding the foregoing, all
amounts received by the Eligible Lender Trustee from the Indenture Trustee
representing amounts in the Reserve Account in excess of the Specified Reserve
Account Balance shall be distributed to the Depositor (but such distributions
shall not reduce the principal amount of the Trust Certificates held by the
Depositor) and no other Certificateholder shall be entitled to have a claim for
such amounts.
(b) No later than the Business Day following its receipt thereof, the
Eligible Lender Trustee shall send to each Trust Certificateholder the statement
provided to the Eligible Lender Trustee by the Administrator pursuant to Section
5.7 of the Transfer and Servicing Agreement relating to such Certificate
Distribution Date.
(c) If 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 to and shall, upon
receipt of written instructions of the Administrator identifying the appropriate
amount, to retain from amounts otherwise distributable to the Certificateholders
sufficient funds for the payment of any tax that is legally owed by the Trust
(but 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 and the
Administrator shall reasonably cooperate with such Certificateholder in making
such claim so long as such Certificateholder agrees to reimburse the Eligible
Lender Trustee and the Administrator for any reasonable out-of-pocket expenses
incurred.
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SECTION 5.2. Method of Payment.
Subject to Section 9.1(c), distributions required to be made to
Certificateholders on any Distribution Date shall be made to each
Certificateholder of record on the applicable 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
therefore, if such Certificateholder shall have provided to the Certificate
Registrar appropriate written instructions (which may be standing instructions)
at least five Business Days prior to such Distribution Date or, if not, by check
mailed to such Certificateholder at the address of such Certificateholder
appearing in the Certificate Register.
SECTION 5.3. Segregation of Moneys; No Interest.
Subject to Section 5.1, moneys received by the Eligible Lender Trustee
hereunder shall be deposited in the Certificate Distribution Account and
invested in Eligible Investments in accordance with instructions received from
the Administrator. The Eligible Lender Trustee shall not be liable for any
interest thereon.
SECTION 5.4. Accounting and Reports to the Noteholders,
Certificateholders, the Internal Revenue Service and Others.
The Administrator, on behalf of 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) 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) 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 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, State and
local 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 5.1(c) with respect to income or
distributions to Certificateholders. The Administrator, on behalf of 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. Neither the Eligible Lender Trustee nor the
Administrator on behalf of the Eligible Lender Trustee shall make the election
provided under Section 754 of the Code.
SECTION 5.5. Signature on Returns; Tax Matters Partner.
(a) The Depositor shall sign on behalf of the Trust the tax returns of
the Trust unless otherwise required by applicable law.
(b) The Depositor shall be designated the "tax matters partner" of the
Trust pursuant to Section 6231(a)(7)(A) of the Code and applicable Treasury
Regulations.
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ARTICLE VI
Authority and Duties of Eligible Lender Trustee
SECTION 6.1. 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 such Notes as may from time to
time be authorized by the Indenture and any related Terms Supplement. 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 and (ii) to
take all actions required pursuant to Section 4.2(c) of the Transfer and
Servicing Agreement, and otherwise follow the direction of and cooperate with
the Administrator in submitting, pursuing and collecting any claims to and with
the Department of HHS and Department of Education and any Guarantor with respect
to any Interest Subsidy Payments, Special Allowance Payments, and any other
payments relating to the Financed Student Loans.
In addition to the foregoing, the Eligible Lender Trustee is authorized
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 or with respect to the administration of the Trust 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 6.2. 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 best interests of the Certificateholders, subject to
and in accordance with the provisions of this Agreement and the other Basic
Documents. 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
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 6.3. Action upon Instruction.
(a) 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.
(b) Whenever the Eligible Lender Trustee is unable to determine the
appropriate course of action between alternative courses of action permitted or
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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 and the
Administrator 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 received from the Administrator, 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 30 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.
(c) If the Eligible Lender Trustee is unsure as to the application of
any provision of this Agreement or any other Basic Document or any agreement
entered into by the Eligible Lender Trustee on behalf of the Trust or any such
provision is ambiguous as to its application, or is, or appears to be, in
conflict with any other applicable provision, or if this Agreement 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 from the Certificateholders, 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 30 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 or such other agreements, 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 6.4. No Duties Except as Specified in this Agreement, the
Transfer and Servicing Agreement, any Supplemental Transfer and Servicing
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 Transfer and Servicing
Agreement, or in any document or written instruction received by the Eligible
Lender Trustee pursuant to Section 6.3; 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, Star Bank, National Association in its individual capacity or as the
Eligible Lender Trustee that are not related to the ownership or the
administration of the Trust Estate.
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SECTION 6.5. 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 or the Trust is a party and (iii) in
accordance with any document or instruction delivered to the Eligible Lender
Trustee pursuant to Section 6.3.
SECTION 6.6. Restrictions.
The Eligible Lender Trustee shall not take any action (a) that is
inconsistent with the purposes of the Trust set forth in Section 2.3 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 any
action that would violate the provisions of this Section.
ARTICLE VII
Concerning the Eligible Lender Trustee
SECTION 7.1. 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 for the benefit of the Certificateholders. The
Eligible Lender Trustee also agrees to disburse all moneys actually received by
it constituting part of the Trust Estate under 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 7.3 expressly made by the Eligible Lender Trustee;
provided, however, that in no event shall the Eligible Lender Trustee be liable
under any theory of tort, contract, strict liability or other legal or equitable
theory for any lost profits or exemplary, punitive, special, incidental,
indirect or consequential damages, each of which is hereby excluded by agreement
of the parties regardless of whether or not the Eligible Lender Trustee has been
advised of the possibility of such damages. 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 in good faith by a responsible officer of the Eligible Lender
Trustee unless it is proved that the Eligible Lender Trustee was negligent in
ascertaining the pertinent facts;
(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, the Depositor or the Certificateholders of
Certificates evidencing the requisite percentage of the Certificate Balance;
(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
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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 or for any amounts owing
under the Trust Certificates;
(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 Depositor, Administrator, the Indenture
Trustee or the Master Servicer under this Agreement or 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 Transfer and Servicing Agreement, the Indenture Trustee under the
Indenture or any Terms Supplement or the Master Servicer under the Transfer and
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 reasonably
satisfactory to it against the costs, expenses and liabilities that may be
incurred by the Eligible Lender Trustee therein or 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 7.2. 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 7.3. 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 has been
executed and delivered by one of its officers who is duly authorized to execute
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and deliver this Agreement on its behalf, and when so executed shall be a legal,
valid and binding obligation of the Eligible Lender Trustee, enforceable against
the Eligible Lender Trustee in accordance with its terms.
(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 and Section ____ of the HEAL 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 (i) Department of
Education and has in effect a Guarantee Agreement with each of the guarantors
with respect to the Financed FFELP Loans and (ii) the Department of HHS and has
in effect the HEAL Insurance Contract with respect to the Financed HEAL Loans.
SECTION 7.4. 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. 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, including the Administrator, 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 or by the Administrator or Depositor, and (ii) may consult with
counsel, accountants and other skilled persons to be selected with reasonable
care and employed by it or selected and employed by the Administrator or
Depositor. The Eligible Lender Trustee shall not be liable for anything done,
suffered or omitted in good faith by it in accordance with the opinion or advice
of any such counsel, accountants or other such persons and not contrary to this
Agreement or any other Basic Document.
SECTION 7.5. Not Acting in Individual Capacity.
Except for the representations and warranties set forth in Section 7.3,
in accepting the trusts hereby created Star Bank, National Association 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.
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SECTION 7.6. Eligible Lender Trustee Not Liable for Trust Certificates
or Financed Student Loans.
The recitals contained in any Trust Supplement and in the Trust
Certificates (other than the signature and countersignature of the Eligible
Lender Trustee on the Trust Certificates) 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. Except as to a Guarantor, the U.S.
Secretary of Education or the U.S. Secretary of the Department of HHS, the
Eligible Lender Trustee shall at no time have any responsibility or liability
(except for willfully or negligently terminating or allowing to be terminated
any of the Guarantee Agreements or the HEAL Insurance Contract) for or with
respect to the legality, validity, enforceability and eligibility for Guarantee
Payments or Insurance Payments 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 without limitation: 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, Administrator, Seller 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 Depositor, Administrator, the Indenture Trustee or
the Master Servicer or any subservicer taken in the name of the Eligible Lender
Trustee; and the failure of the Financed Student Loans to be serviced in
conformity with applicable regulations.
Notwithstanding any provision in this Agreement or the Basic Documents,
nothing in this Agreement or Basic Documents shall be construed to limit the
Eligible Lender Trustee's responsibility to the (i) Secretary of Education or a
Guarantor in its capacity as Eligible Lender Trustee for any violations of
statutory or regulatory requirements that may occur with respect to loans held
in the Trust, pursuant to 34 CFR 682.203(b) or any successor provision thereto;
or (ii) the Department of HHS in its capacity as Eligible Lender Trustee for any
violations of statutory or regulatory requirements that may occur with respect
to loans held in the Trust, pursuant to the HEAL Act.
SECTION 7.7. 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 the Trust Certificates or Notes and may deal with
the Depositor, the Administrator, the Indenture Trustee, the Master Servicer and
the Guarantors in banking or trust transactions with the same rights as it would
have if it were not Eligible Lender Trustee, including serving as a trustee of
other trusts dealing in any student loans, including trusts which purchase
student loans from the Trust.
SECTION 7.8. Representations and Warrantees of Delaware Trustee.
The Delaware Trustee hereby represents and warrants to the Depositor,
for the benefit of the Certificateholders that:
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(a) It is a Delaware banking corporation duly organized and validly
existing in good standing under the laws of Delaware. 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 has been
executed and delivered by one of its officers who is duly authorized to execute
and deliver this Agreement on its behalf, and when so executed shall be a legal,
valid and binding obligation of the Delaware Trustee, enforceable against the
Delaware Trustee in accordance with its terms.
(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 Delaware 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.
ARTICLE VIII
Compensation of Trustees
SECTION 8.1. 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. Such fee shall be
payable as provided in Section 5.5 of the Transfer and Servicing Agreement.
SECTION 8.2. Payments to the Eligible Lender Trustee.
Any amounts paid to the Eligible Lender Trustee pursuant to this
Agreement or the Transfer and Servicing Agreement shall be deemed not to be a
part of the Trust Estate immediately after such payment.
SECTION 8.3. Delaware Trustee's Fees and Expenses.
The Delaware Trustee shall receive as compensation for its services
hereunder such fees and expenses as have been separately agreed upon before the
date hereof between the Depositor and the Eligible Lender Trustee. Such fees
shall be payable as provided in Section 5.5 of the Transfer and Servicing
Agreement.
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ARTICLE IX
Termination of Trust Agreement
SECTION 9.1. Termination of Trust Agreement.
(a) This Trust shall terminate 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, any
related Terms Supplement, the Transfer and Servicing Agreement, Article V hereof
and any Trust Supplement, (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, living on the date hereof, and
(iii) the time provided in Section 9.2. The bankruptcy, liquidation,
dissolution, death or incapacity of any Certificateholder, other than the
Depositor as described in Section 9.2, 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.
(b) Except as provided in Section 9.1(a), neither the Depositor nor any
Certificateholder shall be entitled to revoke or terminate the Trust without the
prior written consent of the Indenture Trustee.
(c) Upon the termination of the Trust under Section 9.1(a), the Trust
shall be wound up by the Eligible Lender Trustee pursuant to Section 3808 of the
Delaware Business Trust Statute. 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 9.1(c) of the Transfer and Servicing 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 5.1. Certificates shall cease to earn interest as of the termination
date of the Trust.
(d) If 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. 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.
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(e) Upon termination of the Trust in accordance with Article IX, the
Eligible Lender Trustee or Delaware Trustee (upon instruction from the Eligible
Lender Trustee) shall cause the Certificate of Trust to be canceled by filing a
Certificate of Cancellation with the Delaware Secretary of State under
applicable law.
SECTION 9.2. Dissolution upon Insolvency of Depositor.
If an Insolvency Event shall occur with respect to the Depositor, the
Trust shall be terminated in accordance with Section 9.1 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 the
Majority Certificateholders to the effect that they disapprove 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 Depositor (i)
the Depositor shall give the Indenture Trustee and the Eligible Lender Trustee
written notice of such Insolvency Event, (ii) the Eligible Lender Trustee shall,
upon the receipt of such written notice from the Depositor 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 Depositor, 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 9.2. Upon a termination pursuant to this
Section 9.2, 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 Transfer and Servicing Agreement.
ARTICLE X
Successor Eligible Lender Trustees and
Additional Eligible Lender Trustees
SECTION 10.1. 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 Federal Loans on behalf of the Trust, with a valid lender identification
number with respect to the Trust from the Department of Education; (ii)
qualifying as an "eligible lender" as such term is defined in Section ___ of ___
for purposes of holding legal title to the HEAL Loans on behalf of the Trust,
with a valid lender identification number with respect to the Trust from the
Secretary of the Department of HHS, (iii) being authorized to exercise corporate
trust powers and hold legal title to the Financed Student Loans; (iv) having in
effect Guarantee Agreements with each of the Guaranty Agencies then guaranteeing
FFELP Loans and an insurance contract with the Department of HHS insuring the
HEAL Loans; (v) 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 (vi), with respect to any successor Eligible Lender Trustees, having (or
having a parent which has) a rating of at least Baa3 by Moody's and at least BBB
by Standard & Poor's. 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 10.1, the combined capital and surplus of the Eligible Lender Trustee
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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 10.1, the Eligible Lender Trustee shall resign immediately in the manner
and with the effect specified in Section 10.2.
SECTION 10.2. 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 and the Administrator may dismiss the Eligible Lender Trustee or
any co-paying agent at any time for its failure to act in accordance with the
terms of this Agreement; provided, however, that prior to any such dismissal,
the Administrator shall have given the Eligible Lender Trustee or the co-paying
agent, as the case may be, notice identifying such failure, and shall have given
the Eligible Lender Trustee or the co-paying agent, as the case may be, two
Business Days to cure such failure, if such failure relates to the distribution
of funds to Certificateholders, and 30 days to cure all other failures. Upon
receiving such notice of resignation or dismissal, the Majority
Certificateholder with notice to the Administrator shall promptly appoint a
successor Eligible Lender Trustee meeting the eligibility requirements of
Section 10.1 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 or dismissal, the resigning or dismissed
Eligible Lender Trustee, as the case may be, 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 shall in no event relieve the resigning or dismissed
Eligible Lender Trustee, as the case may be, 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 10.1 and shall fail to resign after
written request therefor by the Administrator, or if at any time 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,
with the prior approval of the Majority Certificateholder, 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 10.3
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 to the Certificateholders and, if any Notes or
Certificates are then rated by any of the Rating Agencies, the Rating Agencies.
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SECTION 10.3. Successor Eligible Lender Trustee.
Any successor Eligible Lender Trustee appointed pursuant to Section
10.2 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 of
Education and the Department of HHS on behalf of the Trust; and the
Administrator and the predecessor Eligible Lender Trustee shall execute and
deliver such instruments and do such other 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 10.3 unless at the time of such acceptance such
successor Eligible Lender Trustee shall be eligible pursuant to Section 10.1 and
shall have made the representations and warranties set forth in Section 7.3 to
the Depositor, for the benefit of the Certificateholders.
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
and the Noteholders. 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 10.4. 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 10.1; provided further that
the Eligible Lender Trustee shall mail notice of such merger or consolidation to
the Depositor.
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SECTION 10.5. 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, the Majority Certificateholder, and if the Notes or the
Certificates are then rated by any of the Rating Agencies, the Rating Agencies,
meeting the eligibility requirements of clauses (i) through (iii) of Section
10.1, 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 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. 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) , (v) and (vi) of Section 10.1 and no notice of
the appointment of any co-trustee or separate trustee shall be required pursuant
to Section 10.3. The expenses incurred in connection with the retention of any
co-trustee shall be deemed an Expense of the Issuer to be borne by the
Depositor.
Each separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(a) 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
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;
(b) no trustee under this Agreement shall be personally liable by
reason of any act or omission of any other trustee under this Agreement; and
(c) 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.
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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-trustees 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.
ARTICLE XI
Miscellaneous
SECTION 11.1. Supplements and Amendments.
(a) This Agreement, including the Attachments and Annexes hereto, may
be amended by the Depositor and the Eligible Lender Trustee, but without the
consent of any of the Noteholders or the other Certificateholder, 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; 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.
(b) Subject to the last sentence of Section 2.3, this Agreement may
also be amended from time to time by the Depositor and the Eligible Lender
Trustee, with the consent of (i) the Noteholders of Directing Notes evidencing
not less than 50.1% of the Outstanding Amount of the Directing Notes, and (ii)
the Majority 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 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, (b) reduce the aforesaid percentage of the Outstanding
Amount of the Notes and the Certificate Balance of Trust Certificates required
to consent to any such amendment, without the consent of all the outstanding
Noteholders and Certificateholders or (c) modify Section 2.7 (or any other
Sections without an Opinion of Counsel that such amendment will not cause the
Trust to be taxed as a corporation).
Promptly after the execution of any such amendment or consent, the
Eligible Lender Trustee shall furnish written notification of the substance of
such amendment or consent to each Certificateholder and, if the Notes or
Certificates are then rated by any Rating Agency, 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 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.
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(c) 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.
(d) Notwithstanding anything to the contrary contained in this Section
11.1, or elsewhere in this Agreement, the Depositor and the Eligible Lender
Trustee (upon written direction from the Depositor), at any time and from time
to time, may enter into one or more Trust Supplements to set forth the terms of
any Class of Trust Certificates that have not theretofore been authorized by a
Trust Supplement.
(e) Notwithstanding anything to the contrary contained in this Section
11.1 or elsewhere in this Agreement, no amendment, supplement or modification
shall be made or become effective with respect to Section 2.4(b), (c) or (d)
without sixty (60) days written notice to the Delaware Trustee (or the prior
written consent of the Delaware Trustee).
SECTION 11.2. 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 11.3. Limitations on Rights of Others.
The provisions of this Agreement are solely for the benefit of the
Eligible Lender Trustee, the Delaware Trustee, the Depositor, the
Certificateholders, the Administrator and, to the extent expressly provided
herein, the Indenture Trustee and the Noteholders, 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 11.4. Notices.
(a) Unless otherwise expressly specified or permitted by the terms
hereof, all notices shall be in writing and shall be deemed given upon receipt
by the intended recipient or 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, to Star Bank, National Association,
addressed to its Corporate Trust Office at 425 Walnut Street, Cincinnati, Ohio
45201; if to the Depositor, to Crestar Bank, addressed to 6802 Paragon Place,
3rd Floor, Richmond, Virginia 23230-7172; Attention: Clark McGhee; with a copy
to Crestar Bank, 919 East Main Street, Richmond, Virginia 23219; Attention:
Linda Rigsby; Senior Vice President and General Counsel, or, as to each party,
at such other address or facsimile number as shall be designated by such party
in a written notice to each other party.
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(b) Any notice required or permitted to be given to a Certificateholder
shall be given (i) by first-class mail, postage prepaid, at the address of such
Certificateholder as shown in the Certificate Register, or (ii) by facsimile if
the Certificate Register contains a facsimile number for such Certificateholder.
Any notice so mailed or sent by facsimile 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 11.5. 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 11.6. 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 11.7. Successors and Assigns.
All covenants and agreements contained herein shall be binding upon,
and inure to the benefit of, the Depositor and its successors, the Eligible
Lender Trustee and its successors, the Delaware Trustee and its successor, 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 11.8. No Petition.
(a) Prior to the date which is one year and a day after the termination
of the Trust pursuant to Section 9.1, the Depositor will not institute against
the Trust any 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 (not in its individual capacity but
solely as Eligible Lender Trustee), by entering into this Agreement, and each
Certificateholder, by accepting a Trust Certificate hereby covenant and agree
that they will not at any time institute against the Depositor or the Trust, or
join in any institution against the Depositor 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 11.9. 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
Depositor, the Seller, the Master Servicer, the Administrator, the Eligible
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Lender Trustee, the Delaware 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 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. The Trust created by this Agreement shall be a
business trust subject to Delaware law.
30
<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.
STAR BANK, NATIONAL ASSOCIATION,
as Eligible Lender Trustee
By:________________________________
Name:
Title:
DELAWARE TRUST CAPITAL
MANAGEMENT, INC., as Delaware Trustee
By:________________________________
Name:
Title:
CRESTAR BANK, Depositor
By:________________________________
Name:
Title:
31
<PAGE>
STATE OF OHIO )
) SS:
COUNTY OF HAMILTON )
On this, the _____ day of November, 1997, before me, the undersigned
officer, personally appeared ______________, who acknowledged himself to be a[n
Assistant] Vice President of Star Bank, National Association, and that he as
such, being authorized to do so, executed the foregoing for the purpose of
creating Crestar Student Loan Trust 1997-1 with Star Bank, National Association,
as Eligible Lender Trustee, in accordance with the terms of the foregoing
instrument, by signing the name of the corporation by himself as [Assistant]
Vice President.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
----------------------------------
Notary Public
(SEAL)
32
<PAGE>
EXHIBIT A
FORM OF TRUST CERTIFICATE
SEE REVERSE FOR CERTAIN DEFINITIONS
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS. THE HOLDER HEREOF,
BY PURCHASING THIS TRUST CERTIFICATE, AGREES THAT THIS TRUST CERTIFICATE MAY BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IN ACCORDANCE WITH ANY APPLICABLE
STATE SECURITIES LAWS AND (1) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS
AN INSTITUTIONAL ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501(a)(1)-(3)
UNDER THE ACT THAT PURCHASES FOR ITS OWN ACCOUNT, OR (2) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT.
THIS TRUST CERTIFICATE MAY NOT BE TRANSFERRED DIRECTLY OR INDIRECTLY TO
(1) EMPLOYEE BENEFIT PLANS, RETIREMENT ARRANGEMENTS, INDIVIDUAL RETIREMENT
ACCOUNTS OR KEOGH PLANS SUBJECT TO EITHER TITLE I OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED, OR SECTION 4975 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED, OR (2) ENTITIES (INCLUDING INSURANCE COMPANY GENERAL
ACCOUNTS) WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF ANY SUCH
PLAN'S ARRANGEMENTS OR ACCOUNT'S INVESTMENT IN SUCH ENTITIES. FURTHER, THIS
TRUST CERTIFICATE MAY BE TRANSFERRED ONLY TO A UNITED STATES PERSON WITHIN THE
MEANING OF SECTION 7701(a)(30) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED.
THIS TRUST CERTIFICATE DOES NOT REPRESENT DEPOSITS OR OBLIGATIONS OF OR
AN INTEREST IN CRESTAR BANK, STAR BANK, NATIONAL ASSOCIATION OR DELAWARE TRUST
CAPITAL MANAGEMENT, INC.
THIS TRUST CERTIFICATE IS NOT GUARANTEED OR INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY GOVERNMENTAL AGENCY.
Exhibit A-Page 1
<PAGE>
Original Denomination:
Principal Balance:
CRESTAR STUDENT LOAN TRUST 1997-1
ASSET BACKED CERTIFICATES
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 Crestar Bank.
THIS CERTIFIES THAT ________________ is the registered owner of a
_________________________ dollars non-assessable, fully-paid, fractional
undivided interest in the Crestar Student Loan Trust 1997-1 (the "Trust"), a
business trust formed under the laws of Delaware by Crestar Bank, (the
"Depositor"). The Trust was created pursuant to a Trust Agreement dated as of
[December] 1, 1997 (the "Trust Agreement") among the Depositor, Star Bank,
National Association, as eligible lender trustee (the "Eligible Lender
Trustee"), and Delaware Trust Capital Management, Inc., as Delaware 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 Annex A to the Trust Agreement; such Annex A
also contains rules as to usage that shall be applicable herein.
This Certificate is one of the duly authorized Certificates designated
as "Crestar Student Loan Trust 1997-1 Asset Backed Certificates" (herein called
the "Trust Certificates") issued under 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 paid
thereunder after the Cut-off Date, certain bank accounts and the proceeds
thereof and certain other rights under the Trust Agreement and the Transfer and
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 (the "Notes") issued under a Master Indenture
dated as of [December] 1, 1997 between the Trust and Bankers Trust Company, as
Indenture Trustee, as supplemented by a Terms Agreement dated as of [December]
1, 1997.
Under the Trust Agreement, distributions will be made on the Trust
Certificates on each Distribution Date in the manner set forth in the Trust
Agreement and the Transfer and Servicing Agreement.
Each holder of this Trust Certificate acknowledges and agrees that its
rights to receive distributions in respect of this Trust Certificate from
Available Funds and amounts on deposit in the Reserve Account are subordinated
to the rights of the Noteholders as described in the Transfer and Servicing
Agreement and the Indenture.
Each Certificateholder, by its acceptance of a Trust Certificate,
covenants and agrees that such Certificateholder will not at any time institute
against the Depositor or the Trust, or join in any institution against the
Depositor or the Trust, 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.
Exhibit A - Page 2
<PAGE>
Each Certificateholder, by its acceptance of a Trust Certificate, (i)
agrees, for federal, State and local income and franchise tax purposes, to treat
the Trust 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 and the Notes being debt of the
partnership, and (ii) acknowledges that the Trust will file or cause to be filed
annual or other necessary returns, reports and other forms consistent with the
characterization of the Trust as a partnership for federal, State and local and
franchise tax purposes and that the Administrator will not make, or cause to be
made, an election under the provisions of Treasury Regulation Section 301.7701.3
to classify the Trust as an association.
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 record in the Certificate Register without
the presentation or surrender of this Trust Certificate or the making of any
notation hereon.
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 representative 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 or the
Transfer and Servicing Agreement or be valid for any purpose.
Exhibit A - Page 3
<PAGE>
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.
CRESTAR STUDENT LOAN TRUST 1997-1
By: Star Bank, National Association, not in its
individual capacity but solely as Eligible
Lender Trustee,
By: _________________________________
Authorized Signatory
Date:
Exhibit A - Page 4
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Trust Certificates referred to in the
within-mentioned Trust Agreement.
STAR BANK, NATIONAL ASSOCIATION,
not in its individual capacity but
solely as Eligible Lender Trustee,
By:________________________________
Authorized Representative
Date:
Exhibit A - Page 5
<PAGE>
[Reverse of Trust Certificate]
The Trust Certificates do not represent an obligation of, or an
interest in, the Depositor, the Master Servicer, 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
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
respecting the Financed Student Loans, all as more specifically set forth in the
Transfer and Servicing Agreement. A copy of each of the Transfer and Servicing
Agreement and the Trust Agreement may be examined during normal business hours
at the principal office of the Depositor, and at such other places, if any,
designated by the Depositor, 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
Transferor and the rights of the Certificateholders under the Trust Agreement at
any time by the Depositor and the Eligible Lender Trustee with the consent of
the Majority Certificateholders. 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 Star Bank, National
Association in its capacity as Certificate Registrar, or by any successor
Certificate Registrar, 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 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 minimum denominations of $10.00 and integral
multiples thereof. 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 percentage
interest, 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 and the Certificate Registrar may treat the person
in whose name this Trust Certificate is registered as the owner hereof for all
purposes, and none of the Eligible Lender Trustee or the Certificate Registrar
or any such agent shall be affected by any notice to the contrary.
This Trust Certificate may not be transferred directly or indirectly to
(1) employee benefit plans, retirement arrangements, individual retirement
accounts or Keogh plans subject to either Title I of the Employee Retirement
Income Security Act of 1974, as amended, or Section 4975 of the Internal Revenue
Code of 1986, as amended, or (2) entities (including insurance company general
Exhibit A - Page 6
<PAGE>
accounts) whose underlying assets include plan assets by reason of any such
plan's arrangements or account's investment in such entities. By accepting and
holding this Trust Certificate, the Holder hereof shall be deemed to have
represented and warranted that it is not any of the foregoing entities.
This Trust Certificate may not be transferred to any person who is not
a U.S. Person, as such term is defined in Section 7701(a)(30) of the Internal
Revenue Code, as amended.
Each purchaser of the Trust Certificates shall be required, prior to
purchasing a Trust Certificate, to execute the Purchaser's Representation and
Warranty Letter in the form attached to the Trust Agreement as Exhibit B.
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 Transfer and Servicing Agreement and the disposition of all property held as
part of the Trust.
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.
Exhibit A - Page 7
<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 an approved eligible guarantor institution, an institution which
is a participant in a Securities Transfer Association recognized signature
guarantee program.
Exhibit A - Page 8
<PAGE>
EXHIBIT B
TO THE
TRUST AGREEMENT
[Form of Purchaser's Representation and Warranty Letter]
Crestar Bank
919 East Main Street
Richmond, VA 23219
Star Bank, National Association, as
Certificate Registrar
425 Walnut Street
Cincinnati, Ohio 45201
Re: Crestar Student Loan Trust 1997-1 Asset Backed Certificates
Ladies and Gentlemen:
In connection with our proposed purchase of Crestar Student Loan Trust
1997-1 Asset Backed Certificates (the "Certificates") issued under the Trust
Agreement dated as of [December] __, 1997 (the "Agreement"), between Crestar
Bank, as Depositor (the "Depositor"), Star Bank, National Association, as
Eligible Lender Trustee and Delaware Trust Capital Management Inc., as Delaware
trustee, the undersigned (the "Purchaser") represents, warrants and agrees that:
1. It is an institutional "accredited investor" as defined in Rule
501(a)(1)-(3) under the Securities Act or a "qualified institutional buyer as
defined in Rule 144(a)(1) of the Securities Act" and is acquiring the
Certificates for its own institutional account or for the account of an
institutional accredited investor or qualified institutional buyer.
2. It is not (i) an employee benefit plan, retirement arrangement,
individual retirement account or Keogh plan subject to either Title I of the
Employee Retirement Income Security Act of 1974, as amended, or Section 4975 of
the Internal Revenue Code of 1986, as amended, or (ii) an entity (including an
insurance company general account) whose underlying assets include plan assets
by reason of any such plan's arrangements or account's investment in any such
entity.
3. It is a U.S. Person as defined in Section 7701(a)(30) of the Code.
4. It has such knowledge and experience in evaluating business and
financial matters so that it is capable of evaluating the merits and risks of an
investment in the Certificates. It understands the full nature and risks of an
investment in the Certificates and based upon its present and projected net
income and net worthy, it believes that it can bear the economic risk of an
immediate or future loss of its entire investment in the Certificates.
5. It understands that the Certificates will be offered in a
transaction not involving any public offering within the meaning of the
Securities Act, and that, if in the future it decides to resell, pledge or
otherwise transfer any Certificates, such Certificates may be resold, pledged or
transferred only (a) to a person who the seller reasonably believes is an
B-1
<PAGE>
institutional "accredited investor" as defined in Rule 501(a)(1)-(3) under the
Securities Act that purchases for its own account or for the account of another
institutional accredited investor or (b) pursuant to an effective registration
statement under the Securities Act.
6. It understands that each Trust Certificate will bear a legend
substantially to the following effect:
"THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT") OR STATE SECURITIES LAWS. THE HOLDER HEREOF, BY PURCHASING
THIS TRUST CERTIFICATE, AGREES THAT THIS TRUST CERTIFICATE MAY BE RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED ONLY IN ACCORDANCE WITH ANY APPLICABLE STATE
SECURITIES LAWS AND (1) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS AN
INSTITUTIONAL ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501(a)(1)-(3) UNDER
THE ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF AN
INSTITUTIONAL ACCREDITED INVESTOR, OR (2) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT.
THIS CERTIFICATE MAY NOT BE TRANSFERRED DIRECTLY OR INDIRECTLY TO (1) EMPLOYEE
BENEFIT PLANS, RETIREMENT ARRANGEMENTS, INDIVIDUAL RETIREMENT ACCOUNTS OR KEOGH
PLANS SUBJECT TO EITHER TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT
OF 1974, AS AMENDED, OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED, OR (2) ENTITIES (INCLUDING INSURANCE COMPANY GENERAL ACCOUNTS) WHOSE
UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF ANY SUCH PLAN'S ARRANGEMENTS
OR ACCOUNT'S INVESTMENT IN SUCH ENTITIES. FURTHER, THIS TRUST CERTIFICATE MAY BE
TRANSFERRED ONLY TO A UNITED STATES PERSON WITHIN THE MEANING OF SECTION
7701(a)(30) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED.
THE CERTIFICATES DO NOT REPRESENT DEPOSITS OR OBLIGATIONS OF OR ANY INTEREST IN
CRESTAR BANK, STAR BANK, NATIONAL ASSOCIATION OR DELAWARE TRUST CAPITAL
MANAGEMENT INC.
THIS CERTIFICATE IS NOT GUARANTEED OR INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY GOVERNMENTAL AGENCY.
7. It is acquiring the Certificates for its own account and not with a
view to the public offering thereof in violation of the Securities Act (subject,
nevertheless, to the understanding that disposition of its property shall at all
times be and remain within its control).
8. It has been furnished with all information regarding the Trust and
Certificates which it has requested from the Trust and the Depositor.
9. Neither it nor anyone acting on its behalf has offered, transferred,
pledged, sold or otherwise disposed of any Certificate, any interest in any
Certificate or any other similar security to, or solicited any offer to buy or
accept a transfer, pledge or other disposition of any Certificate, any interest
in any Certificate or any other similar security from, or otherwise approached
or negotiated with respect to any Certificate, any interest in any Certificate
B-2
<PAGE>
or any other similar security with, any person in any manner or made any general
solicitation by means of general advertising or in any other manner, which would
constitute a distribution of the Certificates under the Securities Act or which
would require registration pursuant to the Securities Act nor will the it act,
nor has it authorized or will authorize any person to act, in such manner with
respect to any Certificate.
10. It is not an "affiliate" (within the meaning of Rule 144 under the
Securities Act) of the Depositor.
Dated:_____________
Very truly yours,
----------------------------------
NAME OF PURCHASER
By:_______________________________
Name:_____________________________
Title:______________________________
NOTE: To be executed by an executive officer
B-3
</TABLE>
Exhibit 4.1
INDENTURE
between
CRESTAR STUDENT LOAN TRUST 1997-1,
as Issuer
and
BANKERS TRUST COMPANY
not in its individual capacity, but
solely as Indenture Trustee
Dated as of [December] 1, 1997
<PAGE>
CROSS-REFERENCE TABLE(1)
TIA Indenture
Section Section
310 (a)(1) .............................................. 6.11
(a)(2) .............................................. 6.11
(a)(3) .............................................. 6.10
(a)(4) .............................................. N.A.(2)
(a)(5) .............................................. 6.11
(b) .............................................. 6.8;
6.10; 6.11
(c) .............................................. N.A.
311 (a) .............................................. 6.12
(b) .............................................. 6.12
(c) .............................................. N.A.
312 (a) .............................................. 7.1; 7.2(a)
(b) .............................................. 7.2(b)
(c) .............................................. 7.2(c)
313 (a) .............................................. 6.6
(b) .............................................. 6.6
(c) .............................................. 11.5
(d) .............................................. 6.6
314 (a) .............................................. 3.9; 7.3
(b) .............................................. 3.6
(c) .............................................. 2.9; 4.1;
11.1
(d) .............................................. 2.9; 11.1
(e) .............................................. 11.1
(f) .............................................. 3.9
315 (a) .............................................. 6.1
(b) .............................................. 6.5
(c) .............................................. 6.1
(d) .............................................. 6.1
(e) .............................................. 5.13
316 (a)(1)(A) .............................................. 5.11
(a)(1)(B) .............................................. 5.12
(a)(2) .............................................. N.A.
(b) .............................................. 5.7
(c) .............................................. 1.1
-i-
<PAGE>
317 (a) .............................................. 5.3
(b) .............................................. 3.3
318 (a) .............................................. 11.7
- --------
(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.
-ii-
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I DEFINITIONS AND USAGE...................................................................................1
Section 1.1. Definitions and Usage.......................................................................1
Section 1.2. Incorporation by Reference of Trust Indenture Act...........................................1
ARTICLE II THE NOTES..............................................................................................2
Section 2.1. Form. ..............................................................................2
Section 2.2. Execution, Authentication and Delivery......................................................2
Section 2.3. Notes Issuable in Classes; General Provisions with Respect to Principal and
Interest Payments.............................................................3
Section 2.4. Denominations...............................................................................4
Section 2.5. Temporary Notes.............................................................................4
Section 2.6. Registration; Registration of Transfer and Exchange.........................................4
Section 2.7. Mutilated, Destroyed, Lost or Stolen Notes..................................................5
Section 2.8. Persons Deemed Owner........................................................................6
Section 2.9. Payments of Principal and Interest..........................................................6
Section 2.10. Cancellation...............................................................................8
Section 2.11. Authentication and Delivery of Notes.......................................................8
Section 2.12. Release of Collateral.....................................................................11
Section 2.13. Restrictions on Transfer..................................................................11
[Reserved.] 11
Section 2.14. Book-Entry Notes..........................................................................11
Section 2.15. Notices to Clearing Agency................................................................12
Section 2.16. Definitive Notes..........................................................................12
ARTICLE III COVENANTS............................................................................................13
Section 3.1. Payment to Noteholders.....................................................................13
Section 3.2. Maintenance of Office or Agency............................................................13
Section 3.3. Money for Payments To Be Held in Trust.....................................................14
Section 3.4. Existence..................................................................................15
Section 3.5. Protection of Indenture Trust Estate.......................................................15
Section 3.6. Opinions as to Indenture Trust Estate......................................................16
Section 3.7. Performance of Obligations; Servicing of Financed Student Loans............................16
Section 3.8. Negative Covenants.........................................................................17
Section 3.9. Annual Statement as to Compliance..........................................................18
Section 3.10. Issuer May Consolidate, etc., Only on Certain Terms.......................................18
Section 3.11. Successor or Transferee...................................................................20
Section 3.12. No Other Business.........................................................................20
Section 3.13. No Borrowing..............................................................................20
Section 3.14. Obligations of Master Servicer and Administrator..........................................20
-iii-
<PAGE>
Section 3.15. Guarantees, Loans, Advances and Other Liabilities.........................................20
Section 3.16. Capital Expenditures......................................................................20
Section 3.17. Restricted Payments.......................................................................21
Section 3.18. Notice of Events of Default...............................................................21
Section 3.19. Further Instruments and Acts..............................................................21
ARTICLE IV SATISFACTION AND DISCHARGE............................................................................21
Section 4.1. Satisfaction and Discharge of Indenture....................................................21
Section 4.2. Application of Trust Money.................................................................22
Section 4.3. Repayment of Moneys Held by Paying Agent...................................................23
ARTICLE V REMEDIES...............................................................................................23
Section 5.1. Events of Default..........................................................................23
Section 5.2. Acceleration of Maturity; Rescission and Annulment.........................................24
Section 5.3. Collection of Indebtedness and Suits for Enforcement by Indenture Trustee..................25
Section 5.4. Remedies; Priorities.......................................................................27
Section 5.5. Optional Preservation of the Financed Student Loans........................................28
Section 5.6. Limitation of Suits........................................................................29
Section 5.7. Unconditional Rights of Noteholders To Receive Principal and Interest......................29
Section 5.8. Restoration of Rights and Remedies.........................................................30
Section 5.9. Rights and Remedies Cumulative.............................................................30
Section 5.10. Delay or Omission Not a Waiver............................................................30
Section 5.11. Control by Noteholders....................................................................30
Section 5.12. Waiver of Past Defaults...................................................................31
Section 5.13. Undertaking for Costs.....................................................................31
Section 5.14. Waiver of Stay or Extension Laws..........................................................31
Section 5.15. Action on Notes...........................................................................32
Section 5.16. Performance and Enforcement of Certain Obligations........................................32
ARTICLE VI THE INDENTURE TRUSTEE.................................................................................33
Section 6.1. Duties of Indenture Trustee................................................................33
Section 6.2. Rights of Indenture Trustee................................................................34
Section 6.3. Individual Rights of Indenture Trustee.....................................................35
Section 6.4. Indenture Trustee's Disclaimer.............................................................35
Section 6.5. Notice of Defaults.........................................................................35
Section 6.6. Reports by Indenture Trustee to Noteholders................................................35
Section 6.7. Compensation and Indemnity.................................................................36
Section 6.8. Replacement of Indenture Trustee...........................................................37
Section 6.9. Successor Indenture Trustee by Merger......................................................37
Section 6.10. Appointment of Co-Trustee or Separate Trustee.............................................38
Section 6.11. Eligibility; Disqualification.............................................................39
Section 6.12. Preferential Collection of Claims Against Issuer..........................................39
-iv-
<PAGE>
ARTICLE VII NOTEHOLDERS' LISTS AND REPORTS.......................................................................40
Section 7.1. Issuer to Furnish Indenture Trustee Names and Addresses of Noteholders.....................40
Section 7.2. Preservation of Information; Communications to Noteholders.................................40
Section 7.3. Fiscal Year of Issuer......................................................................40
ARTICLE VIII ACCOUNTS, DISBURSEMENTS AND RELEASES................................................................41
Section 8.1. Collection of Money........................................................................41
Section 8.2. Trust Accounts.............................................................................41
Section 8.3. General Provisions Regarding Accounts......................................................41
ARTICLE IX SUPPLEMENTAL INDENTURES...............................................................................42
Section 9.1. Supplemental Indentures Without Consent of Noteholders.....................................42
Section 9.2. Supplemental Indentures with Consent of Noteholders........................................44
Section 9.3. Execution of Supplemental Indentures.......................................................45
Section 9.4. Effect of Supplemental Indenture...........................................................45
Section 9.5. Conformity with Trust Indenture Act........................................................46
Section 9.6. Reference in Notes to Supplemental Indentures..............................................46
ARTICLE X MISCELLANEOUS..........................................................................................46
Section 10.1. Compliance Certificates and Opinions, etc.................................................46
Section 10.2. Form of Documents Delivered to Indenture Trustee..........................................48
Section 10.3. Acts of Noteholders.......................................................................48
Section 10.4. Notices, etc., to Indenture Trustee, Issuer and Rating Agencies...........................49
Section 10.5. Notices to Noteholders; Waiver............................................................49
Section 10.6. Alternate Payment and Notice Provisions...................................................50
Section 10.7. Conflict with Trust Indenture Act.........................................................50
Section 10.8. Effect of Headings and Table of Contents..................................................50
Section 10.9. Successors and Assigns....................................................................51
Section 10.10. Separability.............................................................................51
Section 10.11. Benefits of Indenture....................................................................51
Section 10.12. Legal Holidays...........................................................................51
Section 10.13. Governing Law............................................................................51
Section 10.14. Counterparts.............................................................................51
Section 10.15. Recording of Indenture...................................................................52
Section 10.16. Trust Obligations........................................................................52
Section 10.17. No Petition..............................................................................52
Section 10.18. Inspection...............................................................................53
Section 10.19. Usury....................................................................................53
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Appendix A Definitions
</TABLE>
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INDENTURE dated as of [December] 1, 1997, between CRESTAR STUDENT LOAN
TRUST 1997-1, a Delaware business trust (the "Issuer"), BANKERS TRUST COMPANY,
as trustee and not in its individual capacity (the "Indenture Trustee").
PRELIMINARY STATEMENT
The Issuer has duly authorized the execution and delivery of this
Indenture to provide for the issuance of a series of its notes (the "Notes") as
provided herein. The Notes will be issued only under a separate supplement to
this Indenture duly executed and delivered by the Issuer and the Indenture
Trustee and limited to the amount therein described. All covenants and
agreements made by the Issuer herein are for the benefit and security of the
holders of the Notes. The Issuer is entering into this Indenture and the
Indenture Trustee is accepting the trusts created hereby, for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged.
All things necessary to make this Indenture a valid agreement of the
Issuer in accordance with its terms have been done.
ARTICLE I
DEFINITIONS AND USAGE
Section 1.1. 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 Transfer and Servicing Agreement, a copy of which is attached hereto (as
supplemented to the extent indicated therein, by the provisions of the Terms
Supplement). Appendix A also contains rules as to usage that shall be applicable
herein.
Section 1.2. 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.
"indenture trustee" or "institutional trustee" means the Indenture
Trustee.
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"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 2.1. Form.
The Notes and the Indenture Trustee's certificate of authentication
shall be in substantially the form set forth in an Exhibit to the Terms
Supplement, with such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Indenture or any Terms
Supplement 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 are part of the terms of this Indenture.
Section 2.2. 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 to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
At any time and from time to time after the execution and delivery of
this Indenture, the Issuer may deliver Notes executed by the Issuer to the
Indenture Trustee for authentication; and the Indenture Trustee shall
authenticate and deliver such Notes as provided in this Indenture and not
otherwise.
Each Note shall be dated as of the date specified in the related Terms
Supplement.
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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 2.3. Notes Issuable in Classes; General Provisions with Respect
to Principal and Interest Payments.
The Notes may, as provided herein, be issued in one or more Classes of
Notes, and shall be designated generally as the "Crestar Student Loan Trust
1997-1 Student Loan Asset Backed Notes" of the Issuer, with such further
particular designations added or incorporated in such title for the Notes of any
particular Class as the Issuer may determine.
The principal of each Note shall be payable on the related Final
Maturity Date unless the unpaid principal of such Note becomes due and payable
at an earlier date by declaration of acceleration or otherwise.
Payments of principal of a Class of Notes shall be made pro rata among
all Outstanding Notes of such Class, without preference or priority of any kind.
Unless otherwise provided in the Terms Supplement, all payments made
with respect to any Note shall be applied first to the interest then due and
payable on such Note and then to the principal thereof. Computations of interest
accrued on any Note shall be made as provided in the Terms Supplement.
Interest on the unpaid principal amount of each Outstanding Note of a
Class shall be payable on each Distribution Date for such Class at the Class
Interest Rates applicable to such Note for the related Interest Periods.
Notwithstanding any of the foregoing provisions with respect to
payments of principal of and interest on the Notes, if the Notes have become or
been declared due and payable following an Event of Default and such
acceleration of maturity and its consequences have not been rescinded and
annulled and the provisions of Section 5.5 are not applicable to such Notes,
then payments of principal of and interest on such Notes shall be made in
accordance with Section 5.4.
Each Note shall bear upon the face thereof the designation so selected
for the Class to which it belongs. All Notes of the same Class shall be
identical in all respects except for the denominations and dates thereof. All
Notes of all Classes at any time Outstanding shall be identical except for
differences among the Notes of the different Classes as specified in the
applicable Terms Supplement.
The Notes shall be created by a Terms Supplement authorized by the
Trust Agreement and establishing the terms and provisions thereof, specifying
the Financed Student Loans and any other property to be included in the
Indenture Trust Estate therefor and Granting such Indenture Trust Estate as
security for the Notes created thereby.
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Section 2.4. Denominations.
The Notes shall be issuable only as registered Notes in the
denominations prescribed by the terms of the Terms Supplement creating them.
Section 2.5. 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,
photocopied, 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 3.2, 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 the same Class and 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 of the same Class.
Section 2.6. 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 the "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 Registrar, 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 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 3.2, 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.
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At the option of the Noteholder, Notes may be exchanged for other Notes
of 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, 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.
Restrictions on transfer, if any, of a Class of Notes shall be set
forth herein and in the related Terms Supplement.
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 Indenture Trustee 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 includes membership
or participation in the 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 2.3 or 9.6 not involving any transfer.
Section 2.7. 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, 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 tenor,
aggregate initial principal amount and Class bearing a number not
contemporaneously outstanding; 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, instead of issuing a replacement Note, the Issuer
may pay such destroyed, lost or stolen Note when so due or payable. 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 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.
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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 in
accordance with the provisions of this Indenture and the applicable Terms
Supplement.
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 2.8. 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, 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 2.9. Payments of Principal and Interest.
(a) Any installment of interest or principal payable on any Notes which
is punctually paid or duly provided for by the Issuer on the applicable
Distribution Date shall be paid to the Person in whose name such Note (or one or
more Predecessor Notes) is registered at the close of business on the Record
Date for such Distribution Date by either (i) check mailed to such Person's
address as it appears in the Note Register on such Record Date, or (ii) wire
transfer in immediately available funds to the account of such Noteholders at a
bank or other entity having appropriate facilities therefore, if such Noteholder
shall have provided the Note Registrar appropriate written instructions (which
may be standing instructions) at least five business days prior to such
Distribution Date; provided, however, the final installment of principal payable
with respect to such Note shall be payable as provided in subsection (b) of this
Section 2.9.
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(b) All reductions in the principal amount of a Note (or one or more
Predecessor Notes) effected by payments of installments of principal made on any
Distribution Date shall be binding upon all Holders of such Note and of any Note
issued upon the registration of transfer thereof or in exchange therefor or in
lieu thereof, whether or not such payment is noted in such Note. The final
installment of principal of each Note shall be payable only upon presentation
and surrender thereof on or after the Distribution Date therefor to the
Indenture Trustee.
(c) The principal of each Class of Notes shall be payable in
installments on each Distribution Determination Date as provided in the
applicable Terms Supplement. Notwithstanding the foregoing, the entire unpaid
principal amount of each Class of 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 either the Indenture Trustee or the Noteholders of the
Notes representing not less than a majority of the Outstanding Amount of
Directing Notes have declared the Notes to be immediately due and payable in the
manner provided in Section 5.2. All principal payments on each Class of Notes
shall be made to the Noteholders of such Class entitled thereto as provided in
the applicable Terms Supplement. 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 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.
(d) If the Issuer defaults in a payment of interest on any Class of
Notes, the Issuer shall pay defaulted interest (plus interest on such defaulted
interest to the extent lawful) at the applicable Class Interest Rate in any
lawful manner. The Issuer may pay such defaulted interest to the persons who are
Noteholders of such Class on a subsequent special record date, which date shall
be at least five 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 each
Noteholder of such Class a notice that states the special record date and the
amount of defaulted interest to be paid.
(e) Subject to the foregoing provisions of this Section, each Note
delivered under this Indenture, upon registration of transfer of or in exchange
for or in lieu of any other Note, shall carry the rights to unpaid principal and
interest that were carried by such other Note. Any checks mailed pursuant to
this Section 2.9 and returned undelivered shall be held in accordance with
Section 3.3.
(f) Unless otherwise provided in the relevant Terms Supplement, not
later than each Determination Date relating to each Distribution Date, the
Administrator shall prepare and deliver to the Issuer, the Eligible Lender
Trustee and the Indenture Trustee a statement (a "Distribution Date Statement")
with respect to such Distribution Date setting forth:
(i) the amount of the distribution allocable to interest on each
Class of Notes, together with the interest rates applicable with respect
thereto;
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(ii) the amount of the distribution allocable to principal of
each Class of Notes;
(iii) the Pool Balance as of the close of business on the last
day of the preceding Collection Period;
(iv) the aggregate outstanding principal balance of each Class
of Notes of such Distribution Date, after giving effect to payments allocated to
principal reported under clause (ii) above;
(v) the amount of the Servicing Fee allocated to the Master
Servicer, the amount of the Administration Fee allocated to the Administrator,
the amount of the Indenture Trustee Fee allocated to the Indenture Trustee, and
the amount of the Eligible Lender Trustee Fee allocated to the Eligible Lender
Trustee, respectively, with respect to such Collection Period; and
(vi) the amount of the aggregate Realized Losses, if any, for
such Collection Period.
Section 2.10. Cancellation.
All Notes surrendered for payment, registration of transfer or exchange
shall, if surrendered to any Person other than the Indenture Trustee, be
delivered to the Indenture Trustee and shall be promptly canceled 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 canceled by the Indenture Trustee. No Notes shall be
authenticated in lieu of or in exchange for any Notes canceled as provided in
this Section, except as expressly permitted by this Indenture. All canceled
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.
Section 2.11. Authentication and Delivery of Notes.
Notes may from time to time be executed by the Issuer and delivered to
the Indenture Trustee for authentication, and thereupon the same shall be
authenticated and delivered by the Indenture Trustee, upon Issuer Request and
upon receipt by the Indenture Trustee of the following:
(a) an Issuer Order authorizing the execution, authentication and
delivery of such Notes by the Issuer and specifying the Classes, the Final
Maturity Date of each Class, the principal amount and the Class Interest Rate
and the method of determining such Class Interest Rate, of each Class of such
Notes to be authenticated and delivered;
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(b) Opinions of Counsel addressed to the Indenture Trustee
substantially to the effect that:
(i) the Eligible Lender Trustee is an "eligible lender" under
the terms of the Higher Education Act and HEAL Act, has corporate power to
execute and deliver the Trust Agreement, the Trust Agreement authorizes the
Issuer to execute and deliver the Indenture and Terms Supplement relating to
such Notes and to issue such Notes, and the Issuer has duly taken all necessary
action under the Trust Agreement for those purposes;
(ii) the Issuer is a Delaware business trust;
(iii) assuming due execution and delivery thereof by the
Indenture Trustee, this Indenture and the related Terms Supplement, as executed
and delivered by the Issuer, are the valid, legal and binding obligations of the
Issuer, enforceable in accordance with their terms, subject to the effect of
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and
other similar laws relating to or affecting creditors' rights generally and
court decisions with respect thereto, and such counsel need express no opinion
with respect to the availability of equitable remedies, and the execution of
such Terms Supplement is authorized or permitted by Section 9.1 of this
Indenture;
(iv) the Notes then applied for, when issued, delivered,
authenticated and paid for, will be the valid, legal and binding obligations of
the Issuer, entitled to the benefits of this Indenture and the related Terms
Supplement, subject to the effect of bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and other similar laws relating to or
affecting creditors' rights generally and court decisions with respect thereto,
and such counsel need express no opinion with respect to the availability of
equitable remedies;
(v) the Issuer has Granted to the Indenture Trustee a lien and
first perfected security interest in all of its right, title and interest in
each such Financed Student Loan (with priority being based solely on UCC
searches conducted, as specified in the opinion and only as to priority over
other security interests perfected by UCC filings);
(vi) the Trust Agreement authorizes the Issuer to Grant the
Indenture Trust Estate to the Indenture Trustee as security for the Notes;
(vii) the Terms Supplement delivered to the Indenture Trustee
with such Opinion of Counsel subjects the Financed Student Loans securing such
Notes and all proceeds therefrom and the Pledged Accounts or Funds for such
Notes to the lien and security interest of this Indenture;
(viii) such action has been taken with respect to delivery of
possession of the Indenture Trust Estate and with respect to the recording and
filing of this Indenture, the Terms Supplement for such Notes, any other
indentures supplemental hereto and any other requisite documents and with
respect to the execution and filing of any financing statements as is necessary
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to perfect a first priority security interest in the Indenture Trust Estate for
such Notes, with either the details of such action being recited therein, or the
absence of any such action being necessary to make such lien and security
interest effective being stated therein; and, with any recording, filing,
re-recording and re-filing of this Indenture, the Terms Supplement for such
Notes, any other indentures supplemental hereto and any other requisite
documents and any 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 created by this Indenture and the
related Terms Supplements in the Indenture Trust Estate for such Notes until
April 30 of the year in which the first Opinion of Counsel with respect to such
Notes is required to be delivered under Section 3.6 being described therein;
(ix) this Indenture and the Terms Supplement for such Notes
have been duly qualified under the TIA, or that no qualification of this
Indenture or the related Terms Supplement under the TIA is necessary; the
execution of the Terms Supplement for such Notes requires the requalification of
this Indenture under the TIA, or that no requalification of the Indenture under
the TIA is necessary by virtue of the execution of such Terms Supplement; and
(x) no authorization, approval or consent of any governmental
body having jurisdiction over the Issuer which has not been obtained by the
Issuer is required for the valid issuance and delivery of the Notes, except such
as may be required by the blue sky laws of any jurisdiction in connection with
the sale and distribution of the Notes for which no opinion need be given.
(c) an Officer's Certificate of the Administrator on behalf of the
Issuer stating substantially to the effect that:
(i) all instruments furnished to the Indenture Trustee in
connection with such Notes conform to the requirements of this Indenture and
constitute all the documents required to be delivered hereunder for the
Indenture Trustee to authenticate and deliver the Notes then applied for;
(ii) all conditions precedent provided for in this Indenture
relating to the authentication and delivery of the Notes applied for have been
complied with;
(iii) the Issuer is not in Default under this Indenture and
the issuance of the Notes applied for will not result in any breach of any of
the terms, conditions or provisions of, or constitute a default under, the Trust
Agreement, any indenture, mortgage, deed of trust or other agreement or
instrument to which the Issuer is a party or by which it is bound, or any order
of any court or administrative agency entered in any proceeding to which the
Issuer is a party or by which it may be bound or to which it may be subject; and
(iv) the Issuer is the beneficial owner of each Financed
Student Loan securing such Notes, has not assigned any interest or participation
in any such Financed Student Loan (or, if any such interest or participation has
been assigned, it has been released) and has the right to Grant each such
Financed Student Loan to the Indenture Trustee.
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(d) Unless any of the requirements set forth herein shall be deleted by
the related Terms Supplement, an Officer's Certificate of the Administrator on
behalf of the Issuer stating that all of the Financed Student Loans and any
other assets securing such Notes:
(i) satisfy each of the requirements established for such
Financed Student Loans in the related Terms Supplement; and
(ii) have been endorsed as provided in the Transfer and
Servicing Agreement;
(e) Cash in the amount, if any, required by the terms of the related
Terms Supplement to be deposited in the Collection Account and held by the
Indenture Trustee and applied in accordance with the terms hereof or as
otherwise provided in the related Terms Supplement;
(f) Cash, Eligible Investments or (if permitted by the related Terms
Supplement) a Qualified Letter of Credit or any other assets specified in or
permitted by the related Terms Supplement in the respective amounts, if any,
required by the terms of the related Terms Supplement to be maintained in the
Reserve Account and held by the Indenture Trustee;
(g) An executed counterpart of the Terms Supplement; and
(h) Such other documents, certificates, instruments or opinions as may
be reasonably required by the terms of the Terms Supplement creating such Notes.
Section 2.12. Release of Collateral.
Except as otherwise permitted by Section 10.1 and the terms of the
Basic Documents, the Indenture Trustee shall release property from the lien of
this Indenture and the related Terms Supplement only upon receipt of an Issuer
Request accompanied by an Officer's Certificate of the Issuer, an Opinion of
Counsel and Independent Certificates in accordance with TIA ss.ss. 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 2.13. Restrictions on Transfer.
[Reserved.]
Section 2.14. Book-Entry Notes.
Unless otherwise provided in the related Terms Supplement, 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 2.16. Unless and until definitive,
fully registered Notes (the "Definitive Notes") have been issued to Note Owners
pursuant to Section 2.16:
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(i) the provisions of this Section shall be in full force and
effect;
(ii) 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 2.16, the initial 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 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 2.15. 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 2.16, the Indenture Trustee shall give all
such notices and communications specified herein to be given to Noteholders to
the Clearing Agency.
Section 2.16. Definitive Notes.
Unless the Terms Supplement provides otherwise, and 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, or (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
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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.
ARTICLE III
COVENANTS
Section 3.1. Payment to Noteholders.
The Issuer will pay or cause to be duly and punctually paid, from the
property of the Issuer, the principal of and interest on the Notes in accordance
with the terms of such Notes, this Indenture and the related Terms Supplement
and Transfer and Servicing Agreement. Amounts properly withheld under the Code
by any Person from a payment to any Noteholder of interest and/or principal
shall be considered as having been paid by the Issuer to such Noteholder for all
purposes of this Indenture.
Section 3.2. Maintenance of Office or Agency.
The Issuer will maintain in the Borough of Manhattan, the City of New
York, the State 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.
The Issuer may also from time to time designate one or more other
offices or agencies (in or outside the City of New York) where the Notes may be
presented or surrendered for any or all such purposes and may from time to time
rescind such designations; provided, however, that (i) no such designation or
rescission shall in any manner relieve the Issuer of its obligation to maintain
an office or agency in the Borough of Manhattan, the City of New York, the State
of New York for the purposes set forth in the preceding paragraph, (ii)
presentations or surrenders of Notes for payment may be made only in the City of
New York, the State of New York and (iii) any designation of an office or agency
for payment of Notes shall be subject to Section 3.3. The Issuer will give
prompt written notice to the Indenture Trustee of any such designation or
rescission and of any change in the location of any such other office or agency.
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Section 3.3. Money for Payments To Be Held in Trust.
As provided in Section 8.2(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
8.2(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
for payments of Notes shall be paid over to the Issuer except as provided in
this Section.
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.
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
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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 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 3.4. Existence.
The Issuer will keep in full effect its existence and rights 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 and rights 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 Indenture, the Notes, the Financed Student Loans and each
other instrument or agreement included in the Indenture Trust Estate.
Section 3.5. 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 interests (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 or any Terms Supplement;
(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.
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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 3.6. Opinions as to Indenture Trust Estate.
On or before April 30 in each calendar year, beginning with the first
calendar year commencing more than three months after the Closing Date, the
Administrator, on behalf of 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
re-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 on 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 re-filing 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 April 30 in
the following calendar year.
Section 3.7. Performance of Obligations; Servicing of Financed 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 related Terms Supplement or Transfer
and 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 Officer's 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 in all material
respects 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 and the related Terms Supplement and Transfer and
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.
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(d) Without derogating from the absolute nature of the assignment
Granted to the Indenture Trustee under any Terms Supplement or the rights of the
Indenture Trustee hereunder, the Issuer agrees that it will not, without the
prior written consent of the Noteholders of at least a majority in Outstanding
Amount of the Directing Notes then outstanding, amend, modify, waive,
supplement, terminate or surrender, or agree to any amendment, modification,
supplement, termination, waiver or surrender of, the terms of (i) any portion of
the Trust Estate, or, as applicable, (ii) the Basic Documents, except to the
extent otherwise provided in the related Transfer and Servicing Agreement, or
waive timely performance or observance by the Master Servicer, the
Administrator, the Issuer or the Eligible Lender Trustee under the related
Transfer and Servicing 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
Noteholders or the Counterparties, or (ii) reduce the aforesaid percentage of
the Directing Notes which are required to consent to any such amendment, without
the consent of the Noteholders of all the Outstanding Directing Notes affected
thereby. If any such amendment, modification, supplement or waiver should 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 3.8. 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 Documents, 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;
(ii) claim any credit on, or make any deduction from the
principal of or interest on any 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;
(iii) except as contemplated by the Basic Documents, dissolve
or liquidate in whole or in part; or
(iv) (A) permit the validity or effectiveness of this
Indenture or any Terms Supplement to be impaired, or permit the lien of this
Indenture and any Terms Supplement 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
and any Terms Supplement) 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
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omission of the related Obligor, and other than as expressly permitted by the
Basic Documents) or (C) permit the lien of this Indenture and any Terms
Supplement 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.
Section 3.9. Annual Statement as to Compliance.
The Administrator, on behalf of the Issuer, will deliver to the
Indenture Trustee, on or before April 30 following the first fiscal year of the
Issuer that ends more than three months after the Closing Date, and on or before
April 30 of each fiscal year thereafter, an Officer's 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, in all material respects, with
all conditions and covenants under this Indenture throughout such year,
or, if there has been a default in the compliance in any material respect 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 reasonably satisfactory to the Indenture Trustee, the
due and punctual payment of the principal of and interest on all Notes and the
performance or observance of every agreement and covenant of this Indenture and
any Terms Supplement on the part of the Issuer to be performed or observed, all
as provided herein or therein;
(ii) immediately after giving effect to such transaction, no
Default shall have occurred and be continuing;
(iii) 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 federal or Ohio or
Delaware State income tax consequence to the Issuer, any Noteholder or any
Certificateholder;
(iv) any action as is necessary to maintain the lien and
security interest created by this Indenture shall have been taken; and
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(v) the Issuer shall have delivered to the Indenture Trustee
an Officer's 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) in all material respects.
(b) Except as otherwise permitted by the Basic Documents, the Issuer
shall not consolidate with or merge into any entity or 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 the entity formed by or serving such
consolidation or merger or 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 and interest on 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 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 federal, Ohio or
Delaware State income tax consequence to the Issuer, any Noteholder or any
Certificateholder;
(iv) any action as is necessary to maintain the lien and
security interest created by this Indenture shall have been taken; and
(v) the Issuer shall have delivered to the Indenture Trustee
an Officer's 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).
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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 and any Terms
Supplement 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), Crestar Student Loan Trust 1997-1 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 Crestar Student Loan Trust 1997-1 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, servicing and managing Financed Student Loans 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
and such other obligations as are authorized under the Basic Documents.
Section 3.14. Obligations of Master Servicer and Administrator.
The Issuer shall cause the Master Servicer and the Administrator to
comply with the applicable provisions of the Transfer and Servicing Agreement.
Section 3.15. Guarantees, Loans, Advances and Other Liabilities.
Except as contemplated by the Transfer and Servicing Agreement, this
Indenture or any Terms Supplement, 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).
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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
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 Depositor, the Eligible Lender Trustee, the Indenture
Trustee, the Certificateholders, the Noteholders, and the Administrator as
contemplated by, and to the extent funds are available for such purpose under
the Transfer and Servicing Agreement and the other Basic Documents.
Section 3.18. Notice of Events of Default.
The Issuer shall give the Indenture Trustee written notice of each
Event of Default hereunder and each Default on the part of the Transferor of its
obligations under the Transfer and Servicing Agreement, the Master Servicer of
its obligations under the Transfer and Servicing Agreement or the Administrator
of its obligations under the Transfer and Servicing Agreement or the
Administration Agreement. In addition, the Issuer shall deliver to the Indenture
Trustee, within five days after the foregoing notice of Default, written notice
in the form of an Officer's 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 5.1(iii), its status and what action the Issuer is taking or
proposes to take with respect thereto.
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.
ARTICLE IV
SATISFACTION AND DISCHARGE
Section 4.1. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect with respect to the
Indenture Trust Estate 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
thereon, (iv) Sections 3.3, 3.4, 3.5, 3.8, 3.10, 3.12, 3.13 and 3.15 of this
Agreement, (v) the rights, obligations and immunities of the Indenture Trustee
hereunder (including the rights of the Indenture Trustee under Section 6.7 and
the obligations of the Indenture Trustee under Section 4.2), and (vi) the rights
of Noteholders as beneficiaries hereof with respect to the property so deposited
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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
(i) all Notes theretofore authenticated and delivered (other
than (A) Notes that have been destroyed, lost or stolen and that have been
replaced or paid as provided in Section 2.7 and (B) 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 3.3) have been delivered to the Indenture
Trustee for cancellation; or
(ii) all Notes not theretofore delivered to the Indenture
Trustee for cancellation
(A) have become due and payable, or
(B) will become due and payable within one year,
and the Issuer, in the case of (A) or (B) 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
when due on the applicable Final Maturity Date;
(b) the Issuer has paid or caused to be paid all other sums payable
hereunder by the Issuer with respect to such Notes; and
(c) in the case of (a)(ii) above, the Issuer has delivered to the
Indenture Trustee an Officer's 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
requirement of Section 10.l(a) and, subject to Section 10.2, each stating that
all conditions precedent herein provided for relating to the satisfaction and
discharge of this Indenture with respect to such Notes have been complied with.
Section 4.2. Application of Trust Money.
All moneys deposited with the Indenture Trustee pursuant to Section 4.1
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 of which such moneys have
been deposited with the Indenture Trustee, of all sums due and to become due
thereon for principal and interest; but such moneys need not be segregated from
other funds except to the extent required herein or in the Transfer and
Servicing Agreement or required by law.
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Section 4.3. Repayment of Moneys Held by Paying Agent.
In connection with the satisfaction and discharge of this Indenture
with respect to any 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 3.3 and thereupon such Paying Agent
shall be released from all further liability with respect to such moneys.
ARTICLE V
REMEDIES
Section 5.1. Events of Default.
"Event of Default," wherever used herein, means, with respect to all
Outstanding Notes issued hereunder, 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 Noteholders' Interest
Distribution Amount when the same becomes due and payable, and such Default
shall continue for a period of five Business Days; or
(ii) Default in the payment of the principal of any Note when
the same becomes due and payable, and such Default shall continue for a period
of five Business Days; or
(iii) Default in the observance or performance of any material
covenant or agreement of the Issuer made in this Indenture, or the Transfer and
Servicing Agreement (other than a covenant or agreement, a Default in the
observance or performance of which is specifically dealt with elsewhere in this
Section), 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 30 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 Outstanding Directing 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; or
(iv) the filing of a decree or order for relief by a court
having jurisdiction in the premises in respect of the Issuer or any substantial
part of the Indenture Trust Estate in an involuntary case under any applicable
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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 5.2. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default should occur and be continuing with respect to
any Notes, then and in every such case the Indenture Trustee or Noteholders of
Notes representing no less than a majority of the Outstanding Amount of the
Outstanding Directing Notes may declare all the Outstanding 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 all the Outstanding Notes, together with accrued and
unpaid interest thereon through the date of acceleration, shall become
immediately due and payable.
At any time after such a declaration of acceleration of maturity of the
Outstanding Notes has been made and before a judgment or decree for payment of
the money due has been obtained by the Indenture Trustee as hereinafter provided
in this Article V, the Noteholders of Notes representing a majority of the
Outstanding Amount of the Outstanding Directing 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
Outstanding Notes and all other amounts that would then be due 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 Outstanding Notes that has become due solely by such
acceleration, have been cured or waived as provided in Section 5.12.
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No such rescission shall affect any subsequent default or impair any
right consequent thereto.
Section 5.3. 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 Noteholders' Interest Distribution Amount on any Notes 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 Notes when the same becomes due and payable, and such Default
continues for a period of five days, the Issuer will, upon demand of the
Indenture Trustee, pay to the Indenture Trustee, for the benefit of the
Noteholders, the whole amount then due and payable on the Outstanding Notes for
principal and interest, 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 at the respective Class Interest Rate 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 any Notes and collect
in the manner provided by law out of the property of the Issuer or other obligor
upon any 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 5.4, in its discretion,
proceed to protect and enforce its 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:
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(i) to file and prove a claim or claims for the whole amount
of principal and interest owing and unpaid in respect of such 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, willful misconduct 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 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, willful
misconduct 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 Outstanding 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 Outstanding Notes, may be enforced by the Indenture Trustee
without the possession of any of the Outstanding 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.
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(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.
Section 5.4. Remedies; Priorities.
(a) If an Event of Default shall have occurred and be continuing in
respect of the Outstanding Notes and the Outstanding Notes have been declared
due and payable and such declaration and its consequences have not been
rescinded and annulled, the Indenture Trustee may do one or more of the
following:
(i) institute Proceedings in its own name and as trustee of an
express trust for the collection of all amounts then payable on the Outstanding
Notes or under this Indenture with respect of Notes, whether by declaration or
otherwise, enforce any judgment obtained, and collect from the Issuer and any
other obligor upon such Outstanding 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 securing the Outstanding Notes;
(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 5.1(i) or (ii), unless (A) the
Noteholders of 100% of the Outstanding Amount of the Directing 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 the Outstanding Notes 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 Outstanding 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 Directing Notes. In determining such sufficiency or
insufficiency with respect to clause (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.
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(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:
FIRST: to the Indenture Trustee for amounts due under Section 6.7; and
SECOND: to Senior Noteholders for amounts due and unpaid on the Senior
Notes for the Noteholders' Interest Distribution Amount;
THIRD: to Senior Noteholders for amounts due and unpaid on the Senior
Notes for principal;
FOURTH: to Subordinated Noteholders for amounts due and unpaid on the
Subordinated Notes for interest;
FIFTH: to Subordinated Noteholders for amounts due and unpaid on the
Subordinated Notes for principal;
SIXTH: to Senior noteholders for amounts due and unpaid on the Senior
Notes (and thereafter the Subordinated Notes), for Noteholders' Interest
Carryover;
SEVENTH: to the Eligible Lender Trustee and Delaware Trustee for
amounts due under the Trust Agreement and the Transfer and Servicing Agreement;
EIGHTH: to the Issuer, for distribution in accordance with the terms of
the Transfer and Servicing 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.
Section 5.5. Optional Preservation of the Financed Student Loans.
If the Outstanding Notes have been declared to be due and payable under
Section 5.2 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 on the Notes, and
the Indenture Trustee shall take such desire into account when determining
whether or not 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 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.
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Section 5.6. 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) Noteholders of not less than 25% of the Outstanding
Directing 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 Directing Notes;
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 Outstanding
Directing Notes, the Indenture Trustee in its sole discretion may determine what
action, if any, shall be taken, notwithstanding any other provisions of this
Indenture based upon the larger percentage of Noteholders as of a date certain.
Section 5.7. 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 and to institute
suit for the enforcement of any such payment, and such right shall not be
impaired without the consent of such Noteholder.
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Section 5.8. 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 5.9. 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.
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
Directing 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 5.4, any
direction to the Indenture Trustee to sell or liquidate the Trust Estate shall
be by the Noteholders of not less than 66-2/3% of the Outstanding Amount of
Directing Notes;
(iii) if the conditions set forth in Section 5.5 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 66-2/3% of the Outstanding Amount of Directing Notes to
sell or liquidate the Trust Estate shall be of no force and effect;
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(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 6.1, 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 5.2, the Noteholders of not less than a
majority of the Outstanding Amount of Directing Notes may waive any past Default
hereunder and its consequences except a Default (a) in payment when due of
principal of or interest on any of the Outstanding Notes or (b) in respect 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 but 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, not in their individual capacity
but solely in their capacity as Indenture Trustee or Eligible Lender Trustee, as
applicable, 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 Outstanding Notes or (c) any suit instituted by any
Noteholder for the enforcement of the payment of principal of or interest on any
Note on or after the respective due dates expressed in such Note.
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
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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.
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 and each Terms Supplement 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 5.4(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 Depositor, the Administrator and the Master Servicer, as
applicable, of each of their obligations to the Issuer under or in connection
with the Transfer and Servicing Agreement (and with respect to the Administrator
only, the Administration Agreement) in accordance with the terms thereof, and to
exercise any and all rights, remedies, powers and privileges lawfully available
to the Issuer under or in connection with the Transfer and 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 Depositor, the Administrator or the Servicer thereunder and the
institution of legal or administrative actions or proceedings to compel or
secure performance by the Depositor, the Administrator or the Servicer of each
of their obligations under the Transfer and Servicing Agreement (and 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) of the Noteholders of 66-2/3% of the Outstanding Amount of the
Outstanding Directing Notes shall exercise all rights, remedies, powers,
privileges and claims of the Issuer against the Depositor, the Administrator or
the Master Servicer under or in connection with the Transfer and Servicing
Agreement (and the Administration Agreement), including the right or power to
take any action to compel or secure performance or observance by the Depositor,
the Administrator or the Servicer of each of their obligations to the Issuer
thereunder and to give any consent, request, notice, direction, approval,
extension or waiver under the Transfer and Servicing Agreement (and the
Administration Agreement) and any right of the Issuer to take such action shall
be suspended.
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ARTICLE VI
THE INDENTURE TRUSTEE
Section 6.1. 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 any
Terms Supplement and no implied covenants or obligations shall be read into this
Indenture or any Terms Supplement 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 the
certificates and opinions to determine whether or not 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 bad faith, 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; 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 Section 5.11.
(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.
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(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 Transfer and 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; provided, however, that
the Indenture Trustee shall not refuse or fail to perform any of its duties
hereunder solely as a result of nonpayment of its normal fees and expenses and
further provided that nothing in this Section 6.1(g) shall be construed to limit
the exercise by the Indenture Trustee of any right or remedy permitted under
this Indenture or otherwise in the event of the Issuer's failure to pay the
Indenture Trustee's fees and expenses pursuant to Section 6.7.
(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 provision of this Section and to the provisions of the
TIA.
Section 6.2. Rights of Indenture Trustee.
(a) The Indenture Trustee may conclusively 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, it may
require an Officer's Certificate of the Issuer or an Opinion of Counsel. The
Indenture Trustee shall not be liable for any action it takes or omits to take
in good faith in reliance on such Officer's Certificate or Opinion of Counsel.
(c) The Indenture Trustee may execute any of the trusts or 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 willful 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.
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(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 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.
Section 6.3. 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 6.4. Indenture Trustee's Disclaimer.
Neither the Indenture Trustee nor the Eligible Lender Trustee shall be
responsible for and neither makes any representation as to the validity or
adequacy of this Indenture or the Notes, neither shall be accountable for the
Issuer's use of the proceeds from the sale of the Notes, and neither shall be
responsible for any statement of the Issuer in the Indenture or in any document
issued in connection with the sale of the Notes or in the Notes other than the
Indenture Trustee's certificate of authentication.
Section 6.5. Notice of Defaults.
If a Default occurs and is continuing and 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 the Swap Counterparty within 90 days after it occurs. Except in
the case of a Default in payment of principal of or interest on any 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 6.6. Reports by Indenture Trustee to Noteholders.
The Indenture Trustee 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 requested of it 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 first issuance of any Notes, the Indenture Trustee shall mail to
each Noteholder a brief report as of such December 31 that complies with TIA ss.
313(a) if required by said section. The Indenture Trustee shall also comply with
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TIA ss. 313(b). If the issuance of any Notes has been registered under the
Securities Act of 1933, as amended, a copy of each such report required pursuant
to TIA ss.ss. 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 such Notes are listed, provided that the
Issuer has previously notified the Indenture Trustee of such listing.
Section 6.7. Compensation and Indemnity.
The Issuer shall pay to the Indenture Trustee for its services, a fee
equal to the amount agreed to in writing between the Indenture Trustee and the
Administrator (the "Indenture Trustee Fee") at the times set forth in Section
5.5 of the Transfer and Servicing Agreement and shall or shall cause the
Administrator from its own funds to reimburse the Indenture Trustee for all
reasonable out-of-pocket expenses (including the reasonable fees and expenses of
Trustee's counsel) incurred or made by it in accordance with any provision of
this Indenture or in the performance of its duties hereunder, or in connection
with review of any Terms Supplement, amendment or other documentation. The
Indenture Trustee's compensation shall not be limited by any law on compensation
of a trustee of an express trust. The Issuer shall or shall cause the
Administrator from its own funds to indemnify the Indenture Trustee, its
directors, officers, agents and employees against any and all loss, liability or
expense (including reasonable attorneys' fees and expenses) incurred by it in
connection with the administration of this Trust and the performance of its
duties hereunder and 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 or
shall cause the Administrator to defend the claim and the Administrator shall
not be liable for any separate 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 reasonable fees and expenses of which
shall be paid by the Administrator from its own funds 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 or its
directors, officers, agents and employees to the extent any such loss, liability
or expenditure arises out of or results from the Indenture Trustee's own willful
misconduct, negligence or bad faith or a breach of the representations,
warranties and covenants of the Indenture Trustee.
The Issuer's payment obligations to the Indenture Trustee pursuant to
this Section shall survive the discharge of this Indenture or the resignation or
removal of the Indenture Trustee. When the Indenture Trustee incurs expenses
after the occurrence of a Default specified in Section 5.1(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.
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Section 6.8. 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 6.8. The
Indenture Trustee may resign at any time by so notifying the Issuer. 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
(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 successor Indenture Trustee shall deliver a written acceptance of its
appointment to the retiring Indenture Trustee, and to the Issuer. 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 Directing 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 6.7
shall continue for the benefit of the retiring Indenture Trustee.
Section 6.9. 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.
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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 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 6.8 hereof.
(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 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 a co-trustee.
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(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 ss. 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 or BBB or better by Standard & Poor's Corporation. The Indenture Trustee
shall at all times meet the eligibility criteria for an "eligible lender" under
the terms of the Higher Education Act and HEAL Act. The Indenture Trustee shall
comply with TIA ss. 310(b), including the optional provision permitted by the
second sentence of TIA ss. 310(b)(9); provided, however, that there shall be
excluded from the operation of TIA ss. 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 ss. 310(b)(1) are met.
Section 6.12. Preferential Collection of Claims Against Issuer.
The Indenture Trustee shall comply with TIA ss. 311(a), excluding any
creditor relationship listed in TIA ss. 311(b). An Indenture Trustee who has
resigned or been removed shall be subject to TIA ss. 311(a) to the extent
indicated.
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ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
Section 7.1. 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
for any Notes and (ii) three months after the last Record Date for such Notes, a
list, in such form as the Indenture Trustee may reasonably require, of the names
and addresses of such 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 7.2. 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
7.1 and the name 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 7.1 upon receipt of a new list so
furnished.
(b) Noteholders may communicate pursuant to TIA ss. 312(b) with other
Noteholders with respect to their rights under this Indenture or under the
Notes. Upon receipt by the Indenture Trustee of any request by a Noteholder to
receive a copy of the current list of Noteholders (whether or not made pursuant
to TIA ss. 312(b)), the Indenture Trustee shall promptly notify the
Administrator thereof by providing to the Administrator a copy of such request
and a copy of the list of Noteholders produced in response thereto.
(c) The Issuer, the Indenture Trustee and the Note Registrar shall have
the protection of TIA ss. 312(c).
(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.
Section 7.3. Fiscal Year of Issuer.
Unless the Issuer otherwise determines, the fiscal year of the Issuer
shall end on December 31 of each year.
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ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 8.1. 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 the Noteholders pursuant to the Transfer and
Servicing 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 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 8.2. Trust Accounts.
(a) On or prior to the Closing Date of the Notes, the Indenture Trustee
shall establish and maintain, in the name of and with the Indenture Trustee, for
the benefit of the Noteholders and the Certificateholders, the Trust Accounts as
provided in Section 5.1 of the Transfer and Servicing Agreement, with the
exception of the Certificate Distribution Account and the Certificate Quarterly
Advance Account.
(b) On or before the Business Day preceding each Distribution Date, all
Available Funds for the related Class of Notes with respect to the preceding
Collection Period will be deposited in the Collection Account as provided in
Section 5.2 of the Transfer and Servicing Agreement. On or before each
Distribution Date for each Class of Notes, the appropriate 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 5.5 and 5.6 of the Transfer and Servicing Agreement.
(c) On each Distribution Date, the Indenture Trustee (or any other
Paying Agent) shall distribute all amounts received by it on behalf of
Noteholders of a particular Class pursuant to paragraph (b) above to such
Noteholders in respect of the Notes to the extent of amounts due and unpaid on
the Notes of such Class as provided in the related Terms Supplement.
Section 8.3. 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 5.1(b) of the Transfer and Servicing Agreement. All
income or other gain from investments of moneys deposited in the Trust Accounts
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with the exception of the Certificate Distribution Account and the Certificate
Quarterly Advance Account relating to the Notes 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.
(b) Subject to Section 6.1(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 City 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 5.2, or, (iii) if such Notes shall
have been declared due and payable following an Event of Default, and amounts
collected or receivable from the Indenture Trust Estate are being applied in
accordance with Section 5.5 as if there had not been such a declaration; the
Indenture Trustee shall, to the fullest extent practicable, invest and reinvest
funds in the Trust Accounts (with the exception of the Certificate Distribution
Account and the Certificate Quarterly Advance Account) in one or more Eligible
Investments listed in paragraph (7) of the definition of Eligible Investments.
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.1. Supplemental Indentures Without Consent of Noteholders.
(a) Without the consent of any Noteholders, the Issuer and the
Indenture Trustee, when authorized by an Issuer Order, from time to time, may
enter into one or more indentures supplemental hereto (which shall conform to
the provisions of the Trust Indenture Act, to the extent this Indenture is
qualified under 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 each Terms Supplement, or better to assure,
convey and confirm unto the Indenture Trustee any property subject or required
to be subjected to the lien of the Indenture, or to subject to the lien of the
Indenture additional property;
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(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 of the Notes, 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;
(vii) to add to the conditions, limitations and restrictions
on the authorized amount, terms and purposes of the issuance, authentication and
delivery of any Notes, as herein set forth, additional conditions, limitations
and restrictions thereafter to be observed;
(viii) to modify or eliminate any of the terms of this
Indenture; provided, however, that
(A) such supplemental indenture shall expressly provide
that any such modifications or eliminations shall not be effective with respect
to any Outstanding Note created prior to the execution of such supplemental
indenture; and
(B) the Indenture Trustee may, in its discretion,
decline to enter into any such supplemental indenture which, in its opinion,
would adversely affect its own rights, duties or immunities.
(ix) 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.
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(b) The Issuer and the Indenture Trustee, when authorized by an Issuer
Order, may 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.
(c) An amendment or supplemental indenture shall be deemed not to
materially and adversely affect any Noteholder if there is delivered to the
Indenture Trustee written notification from each Rating Agency that initially
rated the Notes and is then rating the Notes to the effect that such amendment
or supplement will not cause that Rating Agency to reduce the then-current
rating assigned to the Notes.
Section 9.2. Supplemental Indentures with Consent of Noteholders.
The Issuer and the Indenture Trustee, when authorized by an Issuer
Order, also may with the consent of the Noteholders of not less than a majority
of the Outstanding Amount of all the Notes in case Outstanding Notes of all
Classes are to be affected, or with the consent of the Noteholders of not less
than a majority of the Outstanding Amount of the Notes to be affected in case
one or more, but less than all, of the Classes of Outstanding Notes are to be
affected, 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 relating to such Notes or of modifying
in any manner the rights of such Noteholders under this Indenture; provided,
however, that no such supplemental indenture shall, without the consent of the
Noteholders of each Outstanding Note affected thereby:
(i) change the date of payment of any installment of principal
of or interest on any Note, or reduce the principal amount thereof or the
interest rate thereon, 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 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 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;
(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";
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(iv) reduce the percentage of the Outstanding Amount of the
Directing Notes required to direct the Indenture Trustee to direct the Issuer to
sell or liquidate the Indenture Trust Estate pursuant to Section 5.4;
(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 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.
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 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 9.3. 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 be entitled
to receive, and subject to Sections 6.1 and 6.2, 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 9.4. 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
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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 be deemed to be
part of the terms and conditions of this Indenture for any and all purposes.
Section 9.5. 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 to the extent this Indenture is qualified
under the Trust Indenture Act.
Section 9.6. Reference in Notes to Supplemental Indentures.
Notes authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article IX which relates to the affected
Notes 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 which relates to such
Notes may be prepared and executed by the Issuer and authenticated and delivered
by the Indenture Trustee in exchange for Outstanding Notes.
Notwithstanding anything to the contrary contained in this Article IX,
no supplemental indenture may be entered into unless the Rating Agency Condition
has been satisfied with respect to such supplemental indenture.
ARTICLE X
MISCELLANEOUS
Section 10.1. Compliance Certificates and Opinions, etc.
(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, or
the Administrator on behalf of the Issuer, shall furnish to the Indenture
Trustee (i) an Officer's 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 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:
46
<PAGE>
(i) a statement that such 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 or not 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) (i) Other than any property released as contemplated by clause
(iii) below, whenever any property or securities are to be released from the
lien of this Indenture and the related Terms Supplements, the Issuer shall also
furnish to the Indenture Trustee an Officer's 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.
(ii) Whenever the Issuer is required to furnish to the
Indenture Trustee an Officer's 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 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 (iii) below, or securities released from the lien of this Indenture and
the related Terms Supplements since the commencement of the then-current
calendar year, as set forth in the certificates required by clause (i) above and
this clause (ii), 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 Officer's
Certificate is less than $25,000 or less than one percent of the then
Outstanding Amount of the Notes Outstanding.
(iii) Notwithstanding Section 2.12 or any other provisions
of this Section, the Issuer may, without compliance with the requirements of
Section 2.12 or the other provisions of this Section, (A) collect, liquidate,
sell, service, convey, administer, manage or otherwise dispose of Financed
Student Loans as and to the extent permitted or required by the Basic Documents,
(B) make cash payments out of the Trust Accounts as and to the extent permitted
or required by the Basic Documents and (C) convey to the Depositor those
specified Financed Student Loans as and to the extent permitted or required by
and in accordance with Section 2.3 of the Transfer and Servicing Agreement, so
long as the Issuer shall deliver to the Indenture Trustee every six months,
commencing six months after the first issuance of Notes, an Officer's
Certificate of the Issuer stating that all the dispositions of any portion of
the Indenture Trust Estate described in clauses (A), (B) or (C) above that
occurred during the immediately preceding six calendar months were applied in
accordance with the Basic Documents.
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<PAGE>
Section 10.2. 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 Servicer, the Depositor, the Issuer or the Administrator, stating that the
information with respect to such factual matters is in the possession of the
Servicer, the Depositor, 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 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 10.3. 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 6.1) conclusive in
favor of the Indenture Trustee and the Issuer, if made in the manner provided in
this Section.
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<PAGE>
(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 10.4. Notices, etc., to Indenture Trustee, Issuer and Rating
Agencies.
Any request, demand, authorization, direction, notice, consent, filing,
waiver or Act of Noteholders or other documents provided or permitted by this
Indenture or any of the Basic Documents, shall be in writing and if such
request, demand, authorization, direction, notice, consent, filing 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 shall be
sufficient for every purpose hereunder if made, given, furnished or filed in
writing and mailed, first class, postage prepaid or sent by overnight courier or
by facsimile transmission to or with the Indenture Trustee at its Corporate
Trust Office, or
(b) the Issuer by the Indenture Trustee or by any Noteholder shall be
sufficient for every purpose hereunder if in writing and mailed, first-class,
postage prepaid, or via overnight courier to the Issuer addressed to: Crestar
Student Loan Trust 1997-1, Attention: Corporate Trust Department, Star Bank,
National Association, 425 Walnut Street, Cincinnati, Ohio 45201, 513-632-4622
(Tel); 513-632-5511 (Fax); with a copy to the Administrator addressed to:
Crestar Bank, 6802 Paragon Place, 3rd Floor, Richmond, Virginia 23230-7172,
Attention: W. Clark McGhee, 804-287-9501 (Tel); 804-287-9428 (Fax); or at any
other address previously furnished in writing to the Indenture Trustee by the
Issuer or the Administrator. The Issuer shall promptly transmit any notice
received by it from the Noteholders to the Indenture Trustee.
Section 10.5. 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.
49
<PAGE>
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 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 10.6. Alternate Payment and Notice Provisions.
Notwithstanding any provision of this Indenture or any of the Notes to
the contrary, the Issuer and the Indenture Trustee 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. 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 10.7. 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 ss.ss. 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 10.8. 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.
50
<PAGE>
Section 10.9. 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 bind the successors,
co-trustees and agents (excluding any legal representatives or accountants) of
the Indenture Trustee.
Section 10.10. 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 10.11. 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 10.12. Legal Holidays.
In any case where the date on which any payment is due shall not be a
Business Day, then (notwithstanding any other provision of the Notes or this
Indenture) payment need not be made on such date, but may be made on the next
succeeding Business Day with the same force and effect as if made on the date on
which nominally due, and no interest shall accrue for the period from and after
any such nominal date.
Section 10.13. Governing Law.
This Indenture, each Terms Supplement and the Notes 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.
Section 10.14. 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.
51
<PAGE>
Section 10.15. 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 Issuer
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 10.16. Trust Obligations.
No recourse may be taken, directly or indirectly, with respect to the
obligations of the Issuer, 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 Indenture Trustee
or the Eligible Lender Trustee in its individual capacity or (ii) any partner,
owner, beneficiary, custodian, officer, director, employee or agent of 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 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 benefit of, the
terms and provisions of Article VI, VII and VIII of the Trust Agreement. No
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, 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 the Delaware Trustee, in its
individual capacity or as Delaware Trustee, or any officer, director, employee,
agent, owner, or interestholder of the Delaware Trustee or of any successor or
assign of the Delaware Trustee.
Section 10.17. No Petition.
The Indenture Trustee, by entering into this Indenture, and each
Noteholder, by accepting a Note, hereby covenant and agree that prior to the
date which is one year and a day after to the termination of this Indenture,
they will not at any time institute against the Issuer, or join in any
institution against 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.
52
<PAGE>
Section 10.18. 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's
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; provided, however, that the Indenture
Trustee may only cause the books of the Issuer to be audited on an annual basis,
unless there occurs an Event of Default hereunder. The Indenture Trustee shall
and shall cause its representatives to hold in confidence all such information
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 with advice of counsel and
after consultation with the Issuer and Administrator that such disclosure is
consistent with its obligations hereunder.
Notwithstanding anything herein to the contrary, the foregoing shall
not be construed to prohibit (i) disclosure of any and all information that is
or becomes publicly known through no fault of the Indenture Trustee, (ii)
disclosure of any and all information (which makes reference to the Issuer, the
Administrator or the Crestar Student Loan Trust 1997-1 transaction) obtained by
the Indenture Trustee from sources (other than the Issuer, Eligible Lender
Trustee, the Administrator or the Master Servicer) that have not notified the
Indenture Trustee that such information is subject to a confidentiality
obligation with the Issuer, the Eligible Lender Trustee, the Administrator or
the Master Servicer (iii) disclosure of any and all information (A) if required
to do so by any applicable statute, law, rule or regulation, (B) to any
government agency or regulatory body having or claiming authority to regulate or
oversee any aspects of the Indenture Trustee's business or that of its
affiliates, (C) pursuant to any subpoena, civil investigative demand or similar
demand or request of any court, regulatory authority, arbitrator or arbitration
to which the Indenture Trustee or an affiliate or an officer, director or
employee thereof is a party, (D) in any preliminary or final offering circular,
registration statement or contract or other document pertaining to the
transactions contemplated herein approved in advance by the Issuer or (E) to any
affiliate, independent or internal auditor, agent, employee or attorney of the
Indenture Trustee having a need to know the same, provided that the Indenture
Trustee advises such recipient of the confidential nature of the information
being disclosed or (iv) any other disclosure authorized by the Issuer.
Section 10.19. Usury.
The amount of interest payable or paid on any Note under the terms of
this Indenture shall be limited to an amount which shall not exceed the maximum
non usurious rate of interest allowed by the applicable laws of the United
States or the lesser of New York, which could lawfully be contracted for,
53
<PAGE>
charged or received (the "Highest Lawful Rate"). If any payment of interest on
any Note exceeds the Highest Lawful Rate, the Issuer stipulates that such excess
amount will be deemed to have been paid as a result of an error on the part of
both the Indenture Trustee, acting on behalf of the Noteholder of such Note, and
the Issuer, and the Noteholder receiving such excess payment shall promptly,
upon discovery of such error or upon notice thereof from the Issuer or the
Indenture Trustee, refund the amount of such excess and, at the option of the
Indenture Trustee, apply the excess to the payment of principal of such Note, if
any, remaining unpaid.
54
<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.
CRESTAR STUDENT LOAN TRUST 1997-1
By: STAR BANK, NATIONAL
ASSOCIATION
not in its individual capacity
but solely as Eligible Lender
Trustee
By:_______________________________
Name:
Title:
BANKERS TRUST COMPANY,
not in its individual capacity but solely
as Indenture Trustee,
By:_______________________________
Name:
Title:
55
<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
_____________ of STAR BANK, NATIONAL ASSOCIATION, not in its individual capacity
but solely as Eligible Lender Trustee of CRESTAR STUDENT LOAN TRUST 1997-1, a
Delaware trust, and that he 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 _____ day of
___________, 1997.
-----------------------------
Notary Public in and for
the State of New York.
[SEAL]
My commission expires:
- ----------------------
56
<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 BANKERS
TRUST COMPANY, a New York banking corporation, and that she 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 _____ day of
___________, 1997.
-----------------------------
Notary Public in and for
the State of New York.
[SEAL]
My commission expires:
- ----------------------
57
Exhibit 4.2
- --------------------------------------------------------------------------------
FIRST TERMS SUPPLEMENT
TO THE
INDENTURE
DATED AS OF [DECEMBER] 1, 1997
between
CRESTAR STUDENT LOAN TRUST 1997-1
and
BANKERS TRUST COMPANY,
Indenture Trustee
-----------------------------
Dated as of [December] __, 1997
-----------------------------
Securing
$--------------
CRESTAR STUDENT LOAN TRUST 1997-1 STUDENT LOAN ASSET BACKED NOTES
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I DEFINITIONS..............................................................................................2
ARTICLE II AUTHORIZATION, TERMS AND ISSUANCE.......................................................................4
Section 2.1. Authorization of Notes.......................................................................4
Section 2.2. Purposes.....................................................................................5
Section 2.3. Terms of the Notes...........................................................................5
Section 2.4. The Notes....................................................................................5
Section 2.5. Class Interest Rates.........................................................................7
Section 2.6. Additional Provisions Regarding the Class Interest Rates on the Notes........................7
ARTICLE III DISTRIBUTIONS..........................................................................................8
Section 3.1. Distributions of Interest and Principal......................................................8
ARTICLE IV MISCELLANEOUS...........................................................................................8
Section 4.1. Adoption of This First Terms Supplement......................................................8
Section 4.2. Counterparts.................................................................................8
Section 4.3. Indenture Constitutes a Security Agreement...................................................8
Section 4.4. Governing Law................................................................................9
Section 4.5. Ratification of Indenture....................................................................9
</TABLE>
EXHIBIT A Form of Senior LIBOR Rate Note
EXHIBIT B Form of Subordinated LIBOR Rate Note
<PAGE>
FIRST TERMS SUPPLEMENT, dated as of [December] 1, 1997,
between CRESTAR STUDENT LOAN TRUST 1997-1, a Delaware business trust (the
"Issuer") acting through STAR BANK, NATIONAL ASSOCIATION, a national banking
association, not in its individual capacity but solely as eligible lender
trustee (the "Eligible Lender Trustee"), and BANKERS TRUST COMPANY, a New York
banking corporation duly established, existing and authorized to accept and
execute trusts of the character herein set out under and by virtue of the laws
of the State of New York, with its principal corporate trust office in New York,
New York (the "Indenture Trustee"), as Indenture Trustee under an Indenture
dated as of [December] 1, 1997, as may be further amended and supplemented from
time to time (the "Indenture").
PRELIMINARY STATEMENT
Section 2.3 of the Indenture provides, among other things,
that the Issuer, as provided in the Trust Agreement, and the Indenture Trustee
may enter into an indenture supplemental to the Indenture for the purpose of
authorizing a series of Notes and to specify certain terms of such Notes. The
Issuer has duly authorized the creation of Notes in an aggregate principal
amount not to exceed $[_____________] to be known as the Issuer's Student Loan
Asset Backed Notes (the "Notes"), and the Issuer and the Indenture Trustee are
executing and delivering this First Terms Supplement in order to provide for the
Notes. Except as otherwise specified herein, or as the context may require,
capitalized terms used but not defined herein shall have the meanings set forth
in Appendix A to the Transfer and Servicing Agreement dated as of [December] 1,
1997 (the "Transfer and Servicing Agreement") among the Issuer, Crestar Bank as
Transferor, Administrator and Master Servicer (in such capacities, the
"Transferor", the "Administrator" and the "Master Servicer," respectively) and
the Eligible Lender Trustee, which Appendix A also contains rules as to usage
that shall be applicable herein.
GRANTING CLAUSES
The Issuer hereby Grants to the Indenture Trustee, for the
exclusive benefit of the Holders of the Notes, all of the Issuer's right, title
and interest in and to (a) the Financed Student Loans listed in the Schedule of
Financed Student Loans (as such Schedule may be amended or supplemented from
time to time including, but not limited to for purposes of adding any Exchanged
Student Loans acquired by the Trust during the Exchange Period) and all
obligations of the Obligors thereunder including all moneys paid thereunder
(other than Interest Subsidy Payments and Special Allowance Payments payable
through the Cut-off Date (or with respect to the Exchanged Student Loans, the
applicable Subsequent Cut-off Date)), and all written communications received by
the Transferor with respect thereto and still retained by the Transferor in
accordance with its retention policies (including borrower correspondence,
notices of death, disability or bankruptcy and requests for deferrals or
forbearance), after the close of business on the applicable Cutoff Date (or with
respect to the Exchanged Student Loans, after the applicable Subsequent Cut-off
Date), (b) all funds on deposit from time to time in the Trust Accounts (other
than the Certificate Distribution Account and the Certificate Monthly Advance
Account) and in all investments and proceeds thereof (including all income
thereon), (c) all proceeds of the foregoing, including without limitation any
proceeds of the conversion, voluntary or involuntary, of any of the foregoing
into cash or other liquid property. Such Grants are made, however, in trust, to
<PAGE>
secure the Notes, equally and ratably without prejudice, priority or
distinction, between any Note and any other Note by reason of difference in time
of issuance or otherwise; provided, however, that the Class B Notes are
subordinated to all amounts owing on the Class A Notes as described herein, in
the Indenture or any other Basic Document, and to secure (i) the payment of all
amounts due on the Notes, as such amounts become due in accordance with their
terms, (ii) the payment of all other sums payable under the Indenture, this
First Terms Supplement, or any other Basic Document with respect to the Notes
and (iii) compliance with the provisions of the Indenture, this First Terms
Supplement or any other Basic Document with respect to the Notes, all as
provided in the Indenture and this First Terms Supplement.
The Indenture Trustee acknowledges such Grants, accepts the
trusts hereunder in accordance with the provisions hereof and of the Indenture
and agrees to perform the duties herein or therein required.
ARTICLE I
DEFINITIONS
Capitalized terms used herein and not otherwise defined shall
have the meanings set forth in Appendix A to the Transfer and Servicing
Agreement. Additionally, the following terms shall be as defined below.
"Authorized Denominations" means, with respect to each Class
of Notes, $50,000 and integral multiples of $1,000 in excess thereof.
"Book-Entry Form" or "Book-Entry System" means a form or
system under which (i) the beneficial right to principal and interest may be
transferred only through a book-entry, (ii) physical securities in registered
form are issued only to a Securities Depository or its nominee as registered
owner, with the securities "immobilized" to the custody of the Securities
Depository, and (iii) the book-entry is the record that identifies the owners of
beneficial interests in that principal and interest.
"Class A Notes" means the Class A-1 Notes and the Class A-2
Notes.
"Class A-1 Notes" has the meaning set forth in Section 2.1
herein.
"Class A-2 Notes" has the meaning set forth in Section 2.1
herein.
"Class B Notes" has the meaning set forth in Section 2.1
herein.
"Class Initial Rate" means i)" (i) ______% per annum with
respect to the Class A-1 Notes, ii)" (ii) ______% per annum with respect to the
Class A-2 Notes, and iii)" (iii) ______% per annum with respect to the Class B
Notes.
"Class Interest Rate" means with respect to i)" (i) the Class
A Notes, each variable rate of interest per annum borne by the Class A Notes and
determined in accordance with the provisions of Section 2.4 and 2.5 hereof; and
<PAGE>
(ii) the Class B Notes, each variable rate of interest per annum borne by the
Class B Notes during each Interest Period and determined in accordance with the
provisions of Sections 2.4 and 2.5 hereof.
"Effective Interest Rate" means, for any Financed Student Loan
and any Collection Period, the per annum rate at which such Financed Student
Loan accrues interest during such Collection Period after giving effect to all
applicable Interest Subsidy Payments and Special Allowance Payments accrued with
respect to such Financed Student Loan.
"Final Maturity Date" means (i) _____________ with respect to
the Class A-1 Notes, (ii) ________________ with respect to the Class A-2 Notes,
and (iii) ________________ with respect to the Class B Notes.
"First Terms Supplement" means this First Terms Supplement, as
from time to time amended or supplemented.
"Formula Interest Rate" means, as to each Class of Notes,
One-Month LIBOR plus the applicable Margin, as of the LIBOR Determination Date
for each Interest Period, but not more than 18% per annum.
"Interest Payment Period" means, with respect to each Class of
Notes, the period beginning on the most recent Distribution Date for such Class
of Notes (or the Closing Date with respect to the initial Interest Payment
Period) and ending on and including the day before the next Distribution Date
for such Class.
"Interest Period" means, with respect to each Class of Notes,
the period commencing on a Rate Adjustment Date for such Class (or the Closing
Date with respect to the Initial Interest Period) and ending on and including
the day before the next Rate Adjustment Date for such Class.
"Interest Rate" means, with respect to each Class of the
Notes, the rate of interest per annum borne by such Class as of the time
referred to, including, without limitation, the related Class Initial Rate and
the related Class Interest Rate.
"Margin" means, with respect to the Class A-1 Notes, ___% per
annum, with respect to the Class A-2 Notes, ___% per annum, and with respect to
the Class B Notes, ___% per annum.
"Net Loan Rate" means for any Interest Period, the rate of
interest per annum (rounded to the next highest .01%) equal to (i) the weighted
average Effective Interest Rate of the Financed Student Loans as of the last day
of the Collection Period immediately preceding the commencement of such Interest
Period, less (ii) the Program Operating Expense Percentage (or less [_____]% per
annum during the period from the Closing Date through December 31, 1998).
<PAGE>
"Noteholders' Interest Carryover" means, with respect to any
Class of Notes for any interest period or portion thereof for which the Class
Interest Rate for such Interest Period is based on the Net Loan Rate, the amount
equal to the excess, if any, of a)" (a) the amount of interest such Class of
Notes would have accrued in respect of the related Interest Period had interest
been calculated based on the applicable Formula Interest Rate over b)" (b) the
amount of interest such Class of Notes actually accrued in respect of such
Interest Period based on the Net Loan Rate, together with the unpaid portion of
any such excess from prior Interest Periods (and interest accrued thereon, to
the extent permitted by law, calculated based on One-Month LIBOR; provided,
however, that, with respect to any Class of Notes, on the related Final Maturity
Date, the portion of the Noteholders' Interest Carryover allocable to such Class
of Notes will be equal to the lesser of i)" (i) the Noteholders' Interest
Carryover on such date determined as described above and ii)" (ii) the amount of
funds, if any, required and available to be distributed to such Class of Notes
on such date pursuant to Section 5.5 of the Transfer and Servicing Agreement.
"Program Operating Expense Percentage" means a fraction
(expressed as a percentage and calculated as of the end of each calendar quarter
by the Administrator) the numerator of which is the annualized operating
expenses of the Trust for the calendar quarter then ended, including, without
limitation, Transaction Fees, and the denominator of which is the Pool Balance
as of the last day of such calendar quarter.
"Notes" has the meaning set forth in the Preliminary
Statement.
"Rate Adjustment Date" means, (i) with respect to the Class A
Notes, the Distribution Date occurring in each month, and (ii) with respect to
the Class B Notes, the Distribution Date in each month while the Class A Notes
are Outstanding, and thereafter, the 25th day of each month, except that the
Rate Adjustment Date occurring in January, April, July or October will be the
Distribution Dates occurring in such months.
ARTICLE II
AUTHORIZATION, TERMS AND ISSUANCE
Section 2.1. Authorization of Notes.
There is hereby authorized the borrowing of funds, and to
evidence such borrowing there are hereby authorized three Classes of Notes
(collectively, the "Notes"), designated as (i) the "Crestar Student Loan Trust
1997-1, Senior LIBOR Rate Class A-1 Asset Backed Notes" (the "Class A-1 Notes")
in the aggregate principal amount of $__________, (ii) the "Crestar Student Loan
Trust 1997-1, Senior LIBOR Rate Class A-2 Asset Backed Notes" (the "Class A-2
Notes") in the aggregate principal amount of $___________, and (iii) the
"Crestar Student Loan Trust 1997-1, Subordinate LIBOR Rate Class B Asset Backed
Notes" (the "Class B Notes") in the aggregate principal amount of $__________.
<PAGE>
Section 2.2. Purposes.
The Notes are authorized to finance the acquisition by the
Issuer of Financed Student Loans, and to make deposits to the Trust Accounts
required hereby.
Section 2.3. Terms of the Notes.
The Notes shall be issued in fully registered form, in
substantially the forms set forth in Exhibit A hereof (with respect to the Class
A Notes) and Exhibit B (with respect to the Class B Notes), in each case with
such variations, omissions and insertions as may be required by the
circumstances, as may be required or permitted by the Indenture and this First
Terms Supplement, or be consistent with the Indenture and this First Terms
Supplement and necessary or appropriate to conform to the rules and requirements
of any governmental authority or any usage or requirement of law with respect
thereto.
The Notes may be issued only in Authorized Denominations. The
Notes shall be dated as of the Closing Date. Each Class of Notes shall mature on
its Final Maturity Date. The Notes shall be issued to a Securities Depository
for use in a Book-Entry System in accordance with the provisions of Section 2.14
of the Indenture.
Interest on each Note shall accrue on the Outstanding Amount
of such Note until such Note has been paid in full or payment has been duly
provided for, as the case may be, and shall accrue from the later of the Closing
Date or the most recent Distribution Date to which interest has been paid or
duly provided for. Each Note shall bear interest at an interest rate determined
in accordance with the provisions and subject to the limitations set forth
herein, and interest on Notes shall be paid for the related Interest Payment
Period on each Distribution Date (or on each Quarterly Distribution Date in the
case of the Class B Notes).
Principal will be paid on the Notes on each Distribution Date
(or on each Quarterly Distribution Date in the case of the Class B Notes) in an
amount up to the Noteholders' Principal Distribution Amount on such Distribution
Date or Quarterly Distribution Date, as the case may be, in the order and
priorities set forth in the Transfer and Servicing Agreement and the Indenture.
Except as otherwise set forth in the Indenture and the
Transfer and Servicing Agreement, the rights of the Holders of the Class B Notes
to receive distributions with respect to interest shall be subordinated to the
prior rights of the Holders of the Class A Notes to receive all payments of
interest to which they are entitled and, after each Class of Notes has received
the full amount of interest to which it is entitled, the rights of the Holders
of the Class B Notes to receive distributions with respect to principal shall be
subordinated to the prior rights of the Holders of the Class A Notes to receive
all payments of principal to which they are entitled.
Section 2.4. The Notes.
(a) Until the initial Rate Adjustment Date, each Class of Notes
shall bear interest at the Class Initial Rate for such Class. Thereafter, each
Class of Notes shall bear interest during each Interest Period at the lesser of
(i) the Formula Interest Rate or (ii) the Net Loan Rate.
<PAGE>
(b) Interest shall accrue daily on each Class of Notes at the
related Class Interest Rate and shall be computed for the actual number of days
elapsed in such Interest Period on the basis of a year consisting of 360 days.
(c) If for any Interest Period the Formula Interest Rate for a
Class of Notes is greater than the Net Loan Rate, then the Class Interest Rate
applicable to such Class of Notes for that Interest Period will be the Net Loan
Rate. If the Class Interest Rate applicable to such Class of Notes for any
Interest Period is the Net Loan Rate, the Master Servicer shall determine the
Noteholders' Interest Carryover, if any, with respect to such Class of Notes for
such Interest Period. Such Noteholders' Interest Carryover shall bear interest
calculated at One-Month LIBOR (as determined by the Master Servicer from the
Distribution Date for the Interest Period with respect to which such
Noteholders' Interest Carryover was calculated, until paid. For purposes of this
First Terms Supplement, any reference to "principal" or "interest" herein shall
not include within the meaning of such words Noteholders' Interest Carryover or
any interest accrued on any such Noteholders' Interest Carryover. Such
Noteholders' Interest Carryover shall be separately calculated for each Note of
such Class by the Master Servicer during such Interest Period in sufficient time
for the Indenture Trustee to give notice to each Noteholder of such Noteholders'
Interest Carryover as required in the next succeeding sentence. On the
Distribution Date for an Interest Period with respect to which such Noteholders'
Interest Carryover for a Class of Notes has been calculated by the Master
Servicer, the Indenture Trustee shall give written notice to each Noteholder of
the applicable Class of the Noteholders' Interest Carryover applicable to each
Noteholder's Note of such Class, which written notice may be included in any
other written statement sent by the Indenture Trustee to such Noteholders, and
shall be mailed on such Distribution Date by first-class mail, postage prepaid,
to each such Noteholder at such Noteholder's address as it appears on the
registration books maintained by the Note Registrar.
(d) The failure to pay the aggregate amount of Noteholders'
Interest Carryover as a result of insufficient Available Funds will not result
in the occurrence of an Event of Default.
The Noteholders' Interest Carryover for a Class of Notes shall
be paid by the Indenture Trustee on Outstanding Notes of such Class on the first
occurring Distribution Date for such Class if and to the extent funds are
available therefor, in accordance with all priorities set forth in the Transfer
and Servicing Agreement. To the extent that any portion of the Noteholders'
Interest Carryover for a Class of Notes remains unpaid after payment of a
portion thereof, and subject to the next sentence below, such unpaid portion of
the Noteholders' Interest Carryover shall be paid in whole or in part as
required hereunder until fully paid by the Indenture Trustee on the next
occurring Distribution Date or Dates, as necessary, to the extent funds are
available therefor in accordance with all priorities set forth in the Transfer
and Security Agreement. Any Noteholders' Interest Carryover (and any interest
accrued thereon) on any Note which is due and payable on the related Final
Maturity Date for such Class shall be paid to the Noteholder thereof on such
Final Maturity Date to the extent that moneys are available therefor in
accordance with the provisions of this First Terms Supplement and the Transfer
and Servicing Agreement; provided, however, that any Noteholders Interest
Carryover (and any interest accrued thereon) which is not yet due and payable on
the Final Maturity Date for such Class shall be canceled with respect to such
<PAGE>
Notes on such Final Maturity Date. On any Distribution Date on which the
Indenture Trustee pays only a portion of the Noteholders' Interest Carryover on
a Note of such Class, the Indenture Trustee shall give written notice in the
manner set forth in the immediately preceding paragraph to the Noteholders of
such Note receiving such partial payment of the Noteholders' Interest Carryover
remaining unpaid on such Note.
(e) In the event that the Master Servicer no longer determines,
or fails to determine, when required, the Class Interest Rate with respect
to a Class of Notes, or, if for any reason such manner of determination
shall be held to be invalid or unenforceable by a court of competent
jurisdiction, the Class Interest Rate for the next succeeding Interest
Period for such Class of Notes shall be determined by the Indenture Trustee
provided it is notified in writing by the Master Servicer on or prior to the
Rate Determination Date, or, if the Indenture Trustee fails to make such
determinations, such Class Interest Rate shall be the Net Loan Rate for such
next succeeding Interest Period.
Section 2.5. Class Interest Rates.
On each Rate Determination Date, the Master Servicer shall
determine the Formula Interest Rate for each Class of Notes that will be
applicable to the Interest Period immediately following such Rate Determination
Date. In connection therewith, the Master Servicer shall calculate One-Month
LIBOR, and shall notify the Indenture Trustee and the Eligible Lender Trustee in
writing of One-Month LIBOR. The determination by the Master Servicer of
One-Month LIBOR shall (in the absence of manifest error) be final and binding
upon all parties. On each Rate Determination Date, the Master Servicer also
shall determine the Net Loan Rate for the related Interest Period. Based upon
such calculations, the Master Servicer shall determine the Class Interest Rate
applicable to each Class of Notes for the applicable Interest Period.
Section 2.6. Additional Provisions Regarding the Class Interest Rates
on the Notes.
The determination of a Class Interest Rate by the Master
Servicer or the Indenture Trustee or any other Person pursuant to the provisions
of the applicable Section of this Article II shall be conclusive and binding on
the Noteholders of the Class of Notes to which such Class Interest Rate applies,
and the Issuer and the Indenture Trustee may rely thereon for all purposes.
In no event shall the cumulative amount of interest paid or
payable on a Class of Notes (including interest calculated as provided herein,
plus any other amounts that constitute interest on the Notes of such Class under
applicable law, which are contracted for, charged, reserved, taken or received
pursuant to the Notes of such Class or related documents) calculated from the
date of issuance of the Notes of such Class through any subsequent day during
the term of the Notes of such Class or otherwise prior to payment in full of the
Notes of such Class exceed the amount permitted by applicable law. If the
applicable law is ever judicially interpreted so as to render usurious any
amount called for under the Notes of such Class or related documents or
otherwise contracted for, charged, reserved, taken or received in connection
with the Notes of such Class, or if the acceleration of the maturity of the
Notes of such Class results in payment to or receipt by the Noteholder or any
former Noteholder of the Notes of such Class of any interest in excess of that
<PAGE>
permitted by applicable law, then, notwithstanding any provision of the Notes of
such Class or related documents to the contrary, all excess amounts theretofore
paid or received with respect to the Notes of such Class shall be credited on
the principal balance of the Notes of such Class (or, if the Notes of such Class
have been paid or would thereby be paid in full, refunded by the recipient
thereof), and the provisions of the Notes of such Class and related documents
shall automatically and immediately be deemed reformed and the amounts
thereafter collectible hereunder and thereunder reduced, without the necessity
of the execution of any new document, so as to comply with the applicable law,
but so as to permit the recovery of the fullest amount otherwise called for
under the Notes of such Class and under the related documents.
ARTICLE III
DISTRIBUTIONS
Section 3.1. Distributions of Interest and Principal.
The Indenture Trustee shall make distributions from and to the
several Trust Accounts in the manner provided for in Section 5.5 of the Transfer
and Servicing Agreement, as such Section may be amended from time to time. All
principal payments of Notes of any Class shall be made pro rata to the Holders
of Notes of such Class. No later than each Determination Date, the Master
Servicer shall compute the Principal Factor of each Class of Notes for the
upcoming Distribution Date and shall notify the Indenture Trustee in writing of
such Principal Factors.
ARTICLE IV
MISCELLANEOUS
Section 4.1. Adoption of This First Terms Supplement.
This First Terms Supplement is adopted pursuant to the
provisions of the Indenture.
Section 4.2. Counterparts.
This First Terms Supplement may be simultaneously executed in
several counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
Section 4.3. Indenture Constitutes a Security Agreement.
This First Terms Supplement constitutes a security agreement
for the purposes of the Uniform Commercial Code.
<PAGE>
Section 4.4. Governing Law.
This First Terms Supplement shall be governed by and construed
in accordance with the laws of the State of New York.
Section 4.5. Ratification of Indenture.
As supplemented by this First Terms Supplement, the Indenture
is in all respects ratified and confirmed, and the Indenture so supplemented by
this First Terms Supplement shall be read, taken and construed as one and the
same instrument. Each addition to and amendment of the Indenture contained
herein is solely for purposes of the Notes, and shall have no effect on any
other Series of Notes issued pursuant to the Indenture. If any term of this
First Terms Supplement conflicts with any term of the Indenture or any
previously executed Terms Supplement, this First Terms Supplement shall control
for purposes of the Notes.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First
Terms Supplement to be duly executed as of the day and year first above written.
CRESTAR STUDENT LOAN TRUST 1997-1
By: STAR BANK, NATIONAL
ASSOCIATION, not in its
individual capacity but solely
as Eligible Lender Trustee
By:
Name:
Title: Assistant Vice President
BANKERS TRUST COMPANY, not in its
individual capacity but solely as
Indenture Trustee,
By:
Name: [Linda A. Rakolta]
Title: Vice President
<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 [Assistant] Vice President of STAR BANK, NATIONAL ASSOCIATION, not in its
individual capacity but solely as Eligible Lender Trustee of CRESTAR STUDENT
LOAN TRUST 1997-1, a Delaware trust, and that he 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 ____ day of December,
1997.
-------------------
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 BANKERS
TRUST COMPANY, a New York banking corporation, and that she 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 ____ day of December,
1997.
--------------------
Notary Public in and
for the State of New
York.
[SEAL]
My commission expires:
- ------------------------------
<PAGE>
EXHIBIT A-1
[FORM OF SENIOR LIBOR RATE NOTE]
CRESTAR STUDENT LOAN TRUST 1997-1
SENIOR LIBOR RATE CLASS [A-l] [A-2] ASSET BACKED NOTE
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.
THIS NOTE DOES NOT REPRESENT DEPOSITS OR OBLIGATIONS OF OR INTEREST IN
CRESTAR BANK, STAR BANK, NATIONAL ASSOCIATION, DELAWARE TRUST CAPITAL
MANAGEMENT, INC. OR BANKERS TRUST COMPANY.
THIS NOTE IS NOT GUARANTEED OR INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY GOVERNMENTAL AGENCY.
No. A-[1] [2] - _____ $_________
FINAL CLASS
MATURITY DATED INTEREST
Class DATE DATE RATE CUSIP
[A-1] [A-2] One-Month
LIBOR
T-Bill Rate
[-] [+]
___% as
herein
provided
REGISTERED NOTEHOLDER: CEDE & CO.
<PAGE>
CRESTAR BANK STUDENT LOAN TRUST 1997-1, a Delaware business
trust (the "Issuer"), for value received, promises to pay, from the sources
herein described, to the Registered Noteholder identified above, or registered
assigns, upon presentation and surrender hereof at the Corporate Trust Office of
Bankers Trust Company, as Paying Agent, or at the principal office of any
successor or additional Paying Agent, the Principal Amount identified above on
the Final Maturity Date identified above, and to pay to the registered owner
hereof, interest and principal hereon in lawful money of the United States of
America at the Class Interest Rate on the dates as provided herein. Unless
otherwise defined herein, capitalized terms used herein shall have the
respective meanings given to such terms in the Indenture dated as of [December]
1, 1997 (the "Master Indenture") and as supplemented by the First Terms
Supplement dated as of [December] 1, 1997, (the "First Terms Supplement" and,
together with the Master Indenture, the "Indenture") between the Issuer and
Bankers Trust Company, as Indenture Trustee, as further amended and supplemented
from time to time.
This is one of a duly authorized issue of notes of the Issuer
designated as "Crestar Student Loan Trust 1997-1, Senior LIBOR Bill Rate Class
[A-l] [A-2] Asset Backed Notes", in the aggregate principal amount of
$__________(herein referred to as the "Class [A-l] [A-2] Notes" together with
the Crestar Student Loan Trust 1997-1, Senior LIBOR Rate Class [A-1] [A-2] Asset
Backed Notes (the "Class [A-l] [A-2] Notes," and together with the Crestar
Student Loan Trust 1997-1, Subordinate LIBOR Rate Class B Asset Backed Notes
(the "Class B Notes), the "Notes") issued under the Indenture. The Notes are
issued to finance the acquisition of Financed Student Loans by the Trust, and to
make certain deposits into the Pledged Accounts.
The Notes are secured under the Indenture which, together with
certain other documents, assigns to the Indenture Trustee for the benefit of the
Noteholders all the rights and remedies of the Issuer under certain Financed
Student Loans and rights under various contracts providing for the issuance,
guarantee and servicing of such Financed Student Loans. Reference is hereby made
to the Indenture for the provisions, among others, with respect to the custody
and application of the proceeds of the Notes, the nature and the extent of the
liens and security of the Indenture, the collection and disposition of revenues,
the funds charged with and pledged to the payment of the principal of and the
interest on the Notes, the rights, duties and immunities of the Indenture
Trustee, the rights of the registered owners of the Notes, and the rights and
obligations of the Issuer. By the acceptance of this Note, the registered owner
hereof assents to all of the provisions of the Indenture.
Distributions of principal and interest will made on each
Distribution Date to the holders of this Note in the manner described in the
Transfer and Servicing Agreement.
The rate of interest on the [A-1] [A-2] Notes shall be
determined in accordance with the First Terms Supplement.
If an Event of Default as defined in the Indenture occurs, the
principal of and interest on all Notes issued under the Indenture may be
declared due and payable upon the conditions and in the manner and with the
effect provided in the Indenture. The Indenture and the rights and obligations
of the Issuer, the Indenture Trustee and the Noteholder hereof may be modified
or amended in the manner and subject to the conditions set forth in the
Indenture.
<PAGE>
The holder of this Note shall have no right to enforce the
provisions of the Indenture or to institute action to enforce the covenants
therein, or to take any action with respect to any Event of Default under the
Indenture, or to institute, appear in or defend any suit or other proceeding
with respect thereto, except as provided in the Indenture.
The transfer of this Note may be registered only upon
surrender hereof to the Indenture Trustee together with an assignment duly
executed by the registered owner or its attorney or legal representative in such
form as shall be satisfactory to the Indenture Trustee. Upon any such
registration of transfer of this Note and subject to the payment of any fees and
charges as provided by the Indenture, the Issuer shall execute and the Indenture
Trustee shall authenticate and deliver in exchange for this Note a new Note or
Notes registered in the name of the transferee, in any denomination or
denominations authorized by the Indenture, of the same maturity and in an
aggregate principal amount equal to the unredeemed principal amount of this Note
and bearing the same interest as this Note.
In any case where the date fixed for the payment of principal
of or interest on this Note shall not be a Business Day, then payment of such
principal or interest need not be made on such date but may be made on the next
succeeding Business Day with the same force and effect as if made on the date
fixed for the payment thereof.
This Note shall not be valid or become obligatory for any
purpose or be entitled to any security or benefit under the Indenture until the
certificate of authentication hereon shall have been manually signed by the
Indenture Trustee.
IN WITNESS WHEREOF, the Issuer has caused this Note to be
executed in its name by the manual or facsimile signature of an Authorized
Officer and the manual or facsimile signature of an Assistant Secretary, and has
caused its corporate seal or a facsimile thereof to be hereto affixed.
CRESTAR STUDENT LOAN TRUST 1997-1
By: STAR BANK, NATIONAL ASSOCIATION,
not in its individual capacity but
solely as Eligible Lender Trustee
By: ______________________________________
<PAGE>
CERTIFICATE OF AUTHENTICATION
This Note is one of the Class [A-1] [A-2] Notes designated in
and issued under the provisions of the within mentioned-Indenture.
BANKERS TRUST COMPANY
New York, New York, as
Indenture Trustee
By:___________________________
Authorized Representative
Date of Authentication:
- ----------------------------------------
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and
transfers unto ______________________, the within Note and irrevocably appoints
________________________, attorney-in-fact, to transfer the within Note on the
books kept for registration thereof, with full power of substitution in the
premises.
Dated: ____________ _____________________________
NOTICE: The signature to Signature Guaranteed:
this assignment must
correspond with the name as _____________________________
it appears upon the face of
the within Note in every
particular, without any
alteration whatsoever.
Name and Address: ___________________________
Tax Identification Number or
Social Security Number(s): __________________________
<PAGE>
EXHIBIT B
[FORM OF SUBORDINATE LIBOR RATE NOTE]
CRESTAR STUDENT LOAN TRUST 1997-1
SUBORDINATE LIBOR RATE CLASS B ASSET BACKED NOTE
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.
THIS NOTE DOES NOT REPRESENT DEPOSITS OR OBLIGATIONS OF OR INTEREST IN
CRESTAR BANK, STAR BANK, NATIONAL ASSOCIATION, DELAWARE TRUST CAPITAL
MANAGEMENT, INC. OR BANKERS TRUST COMPANY.
THIS NOTE IS NOT GUARANTEED OR INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY GOVERNMENTAL AGENCY.
No. B-_______ $_______
FINAL CLASS
MATURITY DATED INTEREST
Class DATE DATE RATE CUSIP
B One-Month
Libor +_____%
as herein
provided
REGISTERED NOTEHOLDER: CEDE & CO.
<PAGE>
CRESTAR BANK STUDENT LOAN TRUST 1997-1, a Delaware business
trust (the "Issuer"), for value received, promises to pay, from the sources
herein described, to the Registered Noteholder identified above, or registered
assigns, upon presentation and surrender hereof at the Corporate Trust Office of
Bankers Trust Company, as Paying Agent, or at the principal office of any
successor or additional Paying Agent, the Principal Amount identified above on
the Final Maturity Date identified above, and to pay to the registered owner
hereof, interest and principal hereon in lawful money of the United States of
America at the Class Interest Rate on the dates as provided herein. Unless
otherwise defined herein, capitalized terms used herein shall have the
respective meanings given to such terms in the Indenture dated as of [December]
1, 1997 (the "Master Indenture"), as supplemented by the First Terms Supplement
dated as of [December] 1, 1997, (the "First Terms Supplement" and, together with
the Master Indenture, the "Indenture") between the Issuer and Bankers Trust
Company, as Indenture Trustee, as further amended and supplemented from time to
time.
This is one of a duly authorized issue of notes of the Issuer
designated as "Crestar Student Loan Trust 1997-1, Subordinate LIBOR Rate Class B
Asset Backed Notes", in the aggregate principal amount of $__________ (herein
referred to as the "Class B Notes," and together with the Crestar Student Loan
Trust 1997-1, Senior LIBOR Rate Class A-1 and Class A-2 Notes, the "Notes")
issued under the Indenture. The Notes are issued to finance the acquisition of
Financed Student Loans by the Trust, and to make certain deposits into the
Pledged Accounts.
The Notes are secured under the Indenture which, together with
certain other documents, assigns to the Indenture Trustee for the benefit of the
Noteholders all the rights and remedies of the Issuer under certain Financed
Student Loans and rights under various contracts providing for the issuance,
guarantee and servicing of such Financed Student Loans. Reference is hereby made
to the Indenture for the provisions, among others, with respect to the custody
and application of the proceeds of the Notes, the nature and the extent of the
liens and security of the Indenture, the collection and disposition of revenues,
the funds charged with and pledged to the payment of the principal of and the
interest on the Notes, the rights, duties and immunities of the Indenture
Trustee, the rights of the registered owners of the Notes, and the rights and
obligations of the Issuer. By the acceptance of this Note, the registered owner
hereof assents to all of the provisions of the Indenture.
DISTRIBUTIONS OF INTEREST AND PRINCIPAL ON THE CLASS B NOTES
ARE SUBORDINATED IN PRIORITY OF PAYMENT TO DISTRIBUTIONS OF INTEREST AND
PRINCIPAL ON THE CLASS A NOTES AS DESCRIBED IN THE FIRST TERMS SUPPLEMENT AND
THE TRANSFER AND SERVICING AGREEMENT.
Distributions of principal and interest on this Class B Note
will made on each Quarterly Distribution Date to the holders of this Class B
Note in the manner described in the Transfer and Servicing Agreement.
The rate of interest on the Class B Notes shall be determined
in accordance with the First Terms Supplement.
<PAGE>
If an Event of Default as defined in the Indenture occurs, the
principal of and interest on all Notes issued under the Indenture may be
declared due and payable upon the conditions and in the manner and with the
effect provided in the Indenture. The Indenture and the rights and obligations
of the Issuer, the Indenture Trustee and the Noteholder hereof may be modified
or amended in the manner and subject to the conditions set forth in the
Indenture.
The holder of this Note shall have no right to enforce the
provisions of the Indenture or to institute action to enforce the covenants
therein, or to take any action with respect to any Event of Default under the
Indenture, or to institute, appear in or defend any suit or other proceeding
with respect thereto, except as provided in the Indenture.
The transfer of this Note may be registered only upon
surrender hereof to the Indenture Trustee together with an assignment duly
executed by the registered owner or its attorney or legal representative in such
form as shall be satisfactory to the Indenture Trustee. Upon any such
registration of transfer of this Note and subject to the payment of any fees and
charges as provided by the Indenture, the Issuer shall execute and the Indenture
Trustee shall authenticate and deliver in exchange for this Note a new Note or
Notes registered in the name of the transferee, in any denomination or
denominations authorized by the Indenture, of the same maturity and in an
aggregate principal amount equal to the unredeemed principal amount of this Note
and bearing the same interest as Note.
In any case where the date fixed for the payment of principal
of or interest on this Note shall not be a Business Day, then payment of such
principal or interest need not be made on such date but may be made on the next
succeeding Business Day with the same force and effect as if made on the date
fixed for the payment thereof.
It is hereby certified, recited and declared that all acts,
conditions and things required to have happened, to exist and to have been
performed precedent to and in the execution and delivery of the Indenture and
issuance of this Note have happened, do exist and have been performed in due
time, form and manner as required by law.
This Note shall not be valid or become obligatory for any
purpose or be entitled to any security or benefit under the Indenture until the
certificate of authentication hereon shall have been manually signed by the
Indenture Trustee.
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this Note to be
executed in its name by the manual or facsimile signature of an Authorized
Officer and the manual or facsimile signature of an Assistant Secretary, and has
caused its corporate seal or a facsimile thereof to be hereto affixed.
CRESTAR STUDENT LOAN TRUST 1997-1
By: STAR BANK, NATIONAL ASSOCIATION, not
in its individual capacity but
solely as Eligible Lender Trustee
By: _____________________________________
<PAGE>
CERTIFICATE OF AUTHENTICATION
This Note is one of the Class B Notes designated in and issued
under the provisions of the within mentioned Indenture.
BANKERS TRUST COMPANY
New York, New York, as
Indenture Trustee
By: ____________________________
Authorized Representative
Date of Authentication:
- --------------------------------
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and
transfers unto ___________________, the within Note and irrevocably appoints
____________________, attorney-in-fact, to transfer the within Note on the books
kept for registration thereof, with full power of substitution in the premises.
Dated: ____________ _____________________________
NOTICE: The signature to Signature Guaranteed:
this assignment must
correspond with the name as _____________________________
it appears upon the face of
the within Note in every
particular, without any
alteration whatsoever.
Name and Address: ___________________________
Tax Identification Number or
Social Security Number(s): __________________________
EXHIBIT 4.3
TRANSFER AND SERVICING AGREEMENT
among
CRESTAR STUDENT LOAN TRUST 1997-1
as Issuer,
CRESTAR BANK
as Transferor, Master Servicer and Administrator
and
STAR BANK, NATIONAL ASSOCIATION
not in its individual capacity but solely
as Eligible Lender Trustee
Dated as of [_______,] 1997
<PAGE>
TABLE OF CONTENTS
ARTICLE I
Definitions and Usage.................................................. 1
ARTICLE II
Conveyance of Financed Student Loans
------------------------------------
SECTION 2.1 Conveyance of Initial Financed
Student Loans........................................... 1
SECTION 2.2 Conveyance of Exchanged Student Loans...................... 2
SECTION 2.3 Conveyance of Certain Financed Student Loans by the Eligible
Lender Trustee to or upon Order of the Transferor....... 3
SECTION 2.4 Security Agreement......................................... 4
ARTICLE III
The Financed Student Loans
--------------------------
SECTION 3.1 Representations, Warranties and Agreements of Transferor
with Respect to the Financed Student Loans.............. 4
SECTION 3.2 Repurchase upon Breach; Reimbursement...................... 7
SECTION 3.3 Custody of Financed Student Loan Files..................... 8
SECTION 3.4 Duties of Master Servicer as Custodian..................... 8
SECTION 3.5 Instructions; Authority to Act............................. 9
SECTION 3.6 Custodian's Indemnification................................ 9
SECTION 3.7 Effective Period and Termination........................... 10
SECTION 3.8 Appointment of Subcustodian................................ 10
ARTICLE IV
Administration and Servicing of Financed Student Loans
------------------------------------------------------
SECTION 4.1 Duties of Master Servicer................................... 11
SECTION 4.2 Collection of Financed Student Loan Payments................ 12
SECTION 4.3 Realization upon Financed Student Loans..................... 13
SECTION 4.4 No Impairment............................................... 13
SECTION 4.5 Notification of Breach; Indemnification of the Transferor... 13
SECTION 4.6 Servicing Fee............................................... 14
SECTION 4.7 Administrator's Certificate................................. 14
SECTION 4.8 Annual Statement as to Compliance; Notice of Default........ 14
SECTION 4.9 Annual Independent Certified Public Accountants' Report
or Reports............................................... 15
SECTION 4.10 Access to Certain Documentation and Information Regarding
Financed Student Loans................................... 15
SECTION 4.11 Master Servicer and Administrator Expenses.................. 16
SECTION 4.12 Appointment of Servicer..................................... 16
<PAGE>
SECTION 4.13 Subservicing Agreements..................................... 16
SECTION 4.14 Incentive Programs.......................................... 16
ARTICLE V
Distributions; Reserve Account;
-------------------------------
Statements to Certificateholders and Noteholders
------------------------------------------------
SECTION 5.1 Establishment of Trust Accounts............................. 17
SECTION 5.2 Collections................................................. 18
SECTION 5.3 Application of Collections.................................. 19
SECTION 5.4 Additional Deposits......................................... 19
SECTION 5.5 Distributions............................................... 19
SECTION 5.6 Reserve Account............................................. 23
SECTION 5.7 Statements to Certificateholders and Noteholders 24
SECTION 5.8 Expense Account............................................. 25
SECTION 5.9 Note Distribution Account and Certificate Distribution
Account.................................................. 25
SECTION 5.10 Monthly Advances............................................ 25
SECTION 5.11 Certificate Interest........................................ 25
ARTICLE VI
The Transferor and the Master Servicer
--------------------------------------
SECTION 6.1 Representations of Transferor and Master Servicer........... 26
SECTION 6.2 Existence................................................... 27
SECTION 6.3 Liability and Indemnities................................... 27
SECTION 6.4 [Reserved].................................................. 30
SECTION 6.5 Merger or Consolidation of, or Assumption of the Obligations
of, the Transferor, the Administrator or the Master
Servicer................................................. 30
SECTION 6.6 Limitation on Liability of Transferor, Master Servicer
and Others............................................... 31
SECTION 6.7 Transferor May Own Certificates or Notes.................... 31
SECTION 6.8 Master Servicer Not to Resign............................... 31
ARTICLE VII
The Administrator
-----------------
SECTION 7.1 Representations of the Administrator........................ 32
SECTION 7.2 Liability and Indemnities................................... 33
SECTION 7.3 Administrator Not to Resign................................. 34
SECTION 7.4 Additional Services......................................... 35
ARTICLE VIII
Default
-------
SECTION 8.1 Master Servicer Default; Administrator Default.............. 35
SECTION 8.2 Appointment of Successor.................................... 37
<PAGE>
SECTION 8.3 Notification to Noteholders and Certificateholders.......... 38
SECTION 8.4 Waiver of Past Defaults..................................... 38
ARTICLE IX
Termination
-----------
SECTION 9.1 Termination................................................. 38
ARTICLE X
[Reserved]
ARTICLE XI
Miscellaneous
-------------
SECTION 11.1 Amendment.................................................. 41
SECTION 11.2 Protection of Interests in Trust........................... 41
SECTION 11.3 Notices.................................................... 43
SECTION 11.4 Assignment................................................. 43
SECTION 11.5 Limitations on Rights of Others............................ 44
SECTION 11.6 Severability............................................... 44
SECTION 11.7 Separate Counterparts...................................... 44
SECTION 11.8 Headings................................................... 44
SECTION 11.9 Governing ................................................. 44
SECTION 11.10 Assignment to Indenture Trustee............................ 44
SECTION 11.11 Nonpetition Covenants...................................... 44
SECTION 11.12 Limitation of Liability of Eligible Lender Trustee,
Indenture Trustee and Delaware Trustee.................. 44
APPENDIX A Definitions and Usage
SCHEDULE A-1 Schedule of Financed Student Loans
SCHEDULE B Location of Financed Student Loan Files
EXHIBIT A Form of Noteholders' Statement
EXHIBIT B Form of to Certificateholders' Statement
EXHIBIT C Form of Administrator's Certificate
EXHIBIT D Assignment for Financed Student Loans
EXHIBIT E Transfer Agreement
EXHIBIT F Officer's Certificate Required by Section 2.2(b)(viii)
of the Transfer and Servicing Agreement
<PAGE>
TRANSFER AND SERVICING AGREEMENT (the "Agreement") dated as of
[_______,] 1997, among CRESTAR STUDENT LOAN TRUST 1997-1, a Delaware business
trust (the "Issuer"), CRESTAR BANK, a Virginia banking corporation (the
"Transferor," the "Master Servicer" or the "Administrator" in such respective
capacities), and STAR BANK, NATIONAL ASSOCIATION, a national banking
association, solely as eligible lender trustee and not in its individual
capacity (the "Eligible Lender Trustee").
WHEREAS the Issuer desires to acquire student loans originated or
acquired by the Transferor in the ordinary course of business;
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 and the Administrator are willing to
service such student loans and undertake certain administrative functions with
respect thereto; and
WHEREAS the Issuer has authorized the issuance of its Notes; and
WHEREAS the parties hereto are entering into this Transfer and
Servicing Agreement in connection with such Notes.
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree, intending to be legally
bound hereby, as follows:
ARTICLE I
Definitions and Usage
---------------------
Capitalized terms used but not defined herein are defined in Appendix A
hereto, which also contains rules as to usage and construction that shall be
applicable herein.
ARTICLE II
Conveyance of Financed Student Loans
------------------------------------
SECTION 2.1. Conveyance of Initial Financed Student Loans. (a) In
consideration of the Issuer's delivery to or upon the order of the Transferor on
the Closing Date of [$____________], the Transferor agrees to, and the
Transferor does hereby, as evidenced by a duly executed written assignment in
the form of Exhibit D, contribute, transfer, sell, assign, set over and
otherwise convey 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
Financed Student Loans listed on Schedule A- 1 to this
Agreement (the "Initial Financed Student Loans") and all
obligations of the Obligors thereunder, including all moneys
paid thereunder (other than Interest Subsidy Payments and
Special Allowance Payments payable through the Cut-off Date),
and all written communications received by the Transferor with
respect thereto and still retained by Transferor in accordance
with its retention policies (including borrower
correspondence, notices of death, disability or bankruptcy and
requests for deferrals or forbearance), after the Cut-off
Date;
(ii) all right, title and interest in all funds on
deposit from time to time in the Trust Accounts and in all
investments and proceeds thereof (including all income
thereon); and
<PAGE>
(iii) the proceeds of any and all of the foregoing.
(b) On the Closing Date, the Transferor shall have delivered
(A) to the Rating Agencies an Opinion of Counsel with respect to the
transfer of the Initial Financed Student Loans and (B) to the Eligible
Lender Trustee and the Indenture Trustee the Opinion of Counsel
required by Section 11.2(i)(1).
SECTION 2.2. Conveyance of Exchanged Student Loans.
(a) Subject to the conditions set forth in paragraph (b)
below, in consideration of the Eligible Lender Trustee's conveyance of
Financed Student Loans on the related Exchange Date to the Transferor
pursuant to Section 2.3(a), if the Transferor exercises its option
pursuant to Section 2.3 (d), the Transferor shall contribute, transfer,
sell, assign, set over and otherwise convey to the Eligible Lender
Trustee on behalf of the Issuer, without recourse (subject to the
obligations herein), all right, title and interest in and to each
Exchanged Student Loan, and all obligations of the Obligors thereunder,
including all moneys paid thereunder (other than Interest Subsidy
Payments and Special Allowance Payments payable through the related
Subsequent Cut-off Date), and all written communications received by
the Transferor with respect thereto and still retained by the
Transferor in accordance with its retention policies (including
borrower correspondence, notices of death, disability or bankruptcy and
requests for deferrals or forbearances), on and after the related
Subsequent Cut-off Date, and the proceeds of any and all of the
foregoing.
(b) The Transferor shall transfer to the Issuer the Exchanged
Student Loans for a given Exchange 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
Exchange Date:
(i) the Transferor 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 E (each, a "Transfer
Agreement"), which shall include supplements to Schedule A-1,
listing such Exchanged Student Loans;
(ii) the Transferor shall have delivered, at least
two days' prior to such Exchange Date, notice of such transfer
to the Eligible Lender Trustee and the Indenture Trustee, with
a copy to the Rating Agencies, including a listing of the
aggregate principal balance of such Exchanged Student Loans;
(iii) the Transferor shall, to the extent required by
Section 2.3 (d), have deposited in the Collection Account all
collections received in respect of the Exchanged Student Loans
after each applicable Subsequent Cut-off Date and all required
Adjustment Payments;
(iv) as of such Exchange Date, the Transferor was not
insolvent nor will it have been made insolvent by such
exchange nor is it aware of any pending insolvency;
(v) such exchange will not result in a material
adverse federal or State tax consequence to the Issuer
relating to its tax classification or the Noteholders,
considered as a whole, relating to a change in the
characterization of the Notes;
(vi) no Event of Default shall have occurred and be
continuing as of such Exchange Date and no Master Servicer
Default or Administrator Default shall have occurred and be
continuing as of such Exchange Date;
(vii) the Exchange Period shall not have terminated;
-2-
<PAGE>
(viii) the Transferor shall have delivered to the
Indenture Trustee and the Eligible Lender Trustee an Officers'
Certificate in substantially the form of Exhibit F, confirming
the satisfaction of each condition precedent specified in this
paragraph (b);
(ix) the Transferor 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 Financed
Student Loans; and
(x) no selection procedures believed by the
Transferor to be adverse to the interests of the
Certificateholders or the Noteholders shall have been utilized
in selecting the Exchanged Student Loans; PROVIDED, HOWEVER,
that the Transferor shall not incur any liability as a result
of transferring Exchanged Student Loans on any Exchange Date
at a time when the condition set forth in clause (v) was not
satisfied, if at the time of such transfer the Transferor was
not aware of any fact that would reasonably suggest that such
condition would not be satisfied as of such date.
Upon the satisfaction of the conditions set forth in this Section 2.2
(b), the Eligible Lender Trustee shall execute and deliver to the
Transferor an Assignment, substantially in the form of Annex B to the
Transfer Agreement.
SECTION 2.3. Conveyance of Certain Financed Student Loans by the
Eligible Lender Trustee to or upon Order of the Transferor.
(a) Upon receipt of written notice (or telephonic or facsimile
notice promptly followed by written notice) from the Transferor (or
from the Master Servicer on behalf of the Transferor) by the Eligible
Lender Trustee and the Indenture Trustee, the Eligible Lender Trustee
will convey to the Transferor the Financed Student Loans identified in
such notice, which are to be repaid with proceeds of the Consolidation
Loans or HEAL Consolidation Loans to be made by or on behalf of the
Transferor. Simultaneously with each such conveyance by the Eligible
Lender Trustee and the making by the Transferor of each such
Consolidation Loan or HEAL Consolidation Loans, the Transferor shall
deposit into the Collection Account an amount equal to the aggregate
Purchase Amount of such Financed Student Loans, as payment for such
conveyance.
(b) [Reserved]
(c) Upon receipt of written notice (or telephonic or facsimile
notice promptly followed by written notice) from the Master Servicer by
the Eligible Lender Trustee and the Indenture Trustee, the Eligible
Lender Trustee will convey to the Master Servicer (or the Master
Servicer's designee) the Financed Student Loans identified in such
notice, which are to be transferred to a Guarantor or the Department of
HHS in consideration of a related Guarantee Payment or Insurance
Payment. Within [[one Business Day of its receipt]] of the related
Guarantee Payment or Insurance Payment, the Master Servicer shall
deposit, or cause to be deposited, into the Collection Account an
amount equal to such Guarantee Payment or Insurance Payment, as payment
of such conveyance.
(d) (i) Notwithstanding anything else contained in this
Section 2.3 to the contrary, during the Exchange Period, subject
to the conditions set forth in Section 2.2(b), in lieu of depositing
into the Collection Account the Purchase Amount of a Financed Student
Loan pursuant to Section 2.3 (a), the Transferor may, at its option,
transfer to the Eligible Lender Trustee on behalf of the Trust, as an
Exchanged Student Loan, the Consolidation Loan or the HEAL
Consolidation Loan being made by the Transferor relating to the
Financed Student Loan for which it is being exchanged.
-3-
<PAGE>
(ii) Additionally, during the Exchange Period,
subject to the conditions set forth in Section 2.2(b), the
Transferor may, at its option, transfer to the Eligible Lender
Trustee on behalf of the Trust, as an Exchanged Student Loan,
one or more FFELP Loans owned by the Transferor that are
serial to an existing Financed FFELP Loan owned by the Trust;
provided that each such Exchanged Student Loan satisfies the
following criteria: [[insert any criteria]]
(iii) Additionally, during the Exchange Period,
subject to the conditions set forth in Section 2.2(b), the
Transferor may, at its option, transfer to the Eligible Lender
Trustee on behalf of the Trust, as an Exchanged Student Loan,
one or more HEAL Loans owned by the Transferor that are serial
to an existing Financed HEAL Loan owned by the Trust; provided
that each such Exchanged Student Loan satisfies the following
criteria: [[insert any criteria]]
(e) If on any Exchange Date the aggregate outstanding
principal balance as of the related Subsequent Cut-off Date of all the
Exchanged Student Loans being exchanged on such Exchange Date is less
than that of all the Financed Student Loans for which they are being
exchanged plus any Issuer Consolidation Payments being made on such
Exchange Date, an amount equal to such difference (the "Adjustment
Payments") shall be deposited by the Transferor into the Collection
Account on the related Exchange Date.
(f) If on any Exchange Date the aggregate outstanding
principal balance as of the related Subsequent Cut-off Date of all the
Exchanged Student Loans [[that are Consolidation Loans or HEAL
Consolidation Loans]] being exchanged on such Exchange Date is greater
than that of all the Financed Student Loans for which they are being
exchanged, upon written request of the Transferor an amount up to the
amount of such excess (the "Issuer Consolidation Payments") shall be
remitted by the Indenture Trustee to the Transferor from Consolidation
Prepayments on deposit in the Collection Account.
SECTION 2.4. Security Agreement. Although it is the intent of the
parties to this Agreement that the conveyance of the Transferor's right, title
and interest in and to the Financed Student Loans pursuant to this Agreement or
any Transfer Agreement shall constitute a contribution and transfer and not a
loan, if such conveyance is deemed to be a loan, it is the intent of the parties
to this Agreement that the Transferor shall be deemed to have Granted to the
Eligible Lender Trustee, on behalf of the Issuer, a first priority perfected
security interest in all of the Transferor's right, title and interest in, to
and under the Financed Student Loans and the proceeds thereof, and that this
Agreement shall constitute a security agreement under applicable law. It is the
further intent of the parties to this Agreement that if the Trust is disregarded
for whatever reason or purpose, the Transferor's foregoing Grant of a first
priority perfected security interest shall be deemed to be directly to, and for
the direct benefit of, the Indenture Trustee.
ARTICLE III
The Financed Student Loans
--------------------------
SECTION 3.1. Representations, Warranties and Agreements of Transferor
with Respect to the Financed Student Loans. The Transferor hereby makes the
following representations and warranties as to the Financed Student Loans on
which the Issuer is deemed to have relied in acquiring (through the Eligible
Lender Trustee) such Financed Student Loans. Such representations and warranties
speak as of the Closing Date, in the case of the Initial Financed Student Loans,
and as of the applicable Exchange Dates in the case of the Exchanged Student
Loans, but shall survive the contribution, transfer and assignment of such
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.
-4-
<PAGE>
(i) 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 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 Transferor 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 amortize the principal amount of
such Financed Student Loan by its maturity and yields interest
at the rate applicable thereto (except as otherwise provided
in Section 4.14), as such maturity may be modified in
accordance with any applicable deferment or forbearance
periods granted in accordance with applicable laws and
restrictions, including those of the Higher Education Act, the
HEAL Act, the HEAL Insurance Contract or any Guarantee
Agreement. Each Financed Student Loan that is a Stafford Loan
qualifies the holder thereof (assuming such holder is an
eligible lender under the Higher Education Act) to receive
Interest Subsidy Payments and Special Allowance Payments from
the Department of Education. Each Financed Student Loan that
is a Consolidation Loan, a PLUS Loan, a SLS Loan or an
Unsubsidized Stafford Loan qualifies the holder thereof
(assuming such holder is an eligible lender under the Higher
Education Act) to receive Special Allowance Payments from the
Department of Education to the extent applicable. Each
Financed FFELP Loan qualifies the holder thereof (assuming
such holder is an eligible lender under the Higher Education
Act) to receive Guarantee Payments from the applicable
Guarantor in accordance with the applicable Guarantee
Agreement. Each Financed HEAL Loan qualifies the holder
thereof (assuming such holder is an eligible lender under the
HEAL Act) to receive Insurance Payments from the Department of
HHS in accordance with the HEAL Insurance Contract. From and
after the Closing Date, each (Y) Financed FFELP Loan shall
continue to qualify the holder thereof (assuming such holder
is an eligible lender under the Higher Education Act) to
receive Guarantee Payments from the applicable Guarantor in
accordance with the applicable Guarantee Agreement, and to
receive Special Allowance Payments and, in the case of
Stafford Loans, Interest Subsidy Payments from the Department
of Education to the extent applicable, and (Z) Financed HEAL
Loan shall continue to qualify the holder thereof (assuming
such holder is an eligible lender under the HEAL Act) to
receive Insurance Payments from the Department of HHS in
accordance with the HEAL Insurance Contract.
(ii) Schedule of Financed Student Loans. The
information concerning the Financed Student Loans set forth in
Schedule A-1 to this Agreement and Schedule A of the related
Transfer Agreement is true and correct in all material
respects as of the close of business on the Cut-off Date (with
respect to Schedule A-1 to this Agreement) or each applicable
Subsequent Cut-off Date (with respect thereto), as applicable.
The computer tape or electronic data transmission regarding
the Initial Financed Student Loans is true and correct in all
material respects as of the Cut-off Date and each computer
tape or electronic data transmission regarding the Subsequent
Student Loans will be true and correct in all material
respects as of the related Subsequent Cut-off Date.
(iii) Compliance with Law. Except with respect to any
VELA Service Errors that have been waived by the Department of
Education and the applicable Guarantor, at the time each
Financed Student Loan was originated or made and at the
execution of this Agreement or the applicable Transfer
Agreement, as the case may be, each Financed Student Loan
complied or complies, and the Transferor and its agents, with
respect to each such Financed Student Loan, have at all times
complied, in all material respects with all requirements of
applicable federal, State and local laws and regulations
thereunder, including the Higher Education Act with respect to
FFELP Loans, the HEAL Act with respect to HEAL Loans, the
Equal Credit Opportunity Act, the Federal Reserve Board's
Regulation B and other applicable consumer credit laws and
equal credit opportunity laws.
-5-
<PAGE>
(iv) Binding Obligation. Each Financed Student Loan
represents the genuine, legal, valid and binding payment
obligation in writing of the related borrower, enforceable by
or on behalf of the holder thereof against such borrower in
accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance and similar
laws relating to creditors' rights generally and subject to
general principles of equity and no Financed Student Loan has
been satisfied, subordinated or rescinded.
(v) No Defenses. No right of rescission, setoff,
counterclaim or defense has been asserted or, to the
Transferor's knowledge, threatened with respect to any
Financed Student Loan.
(vi) No Default. No Initial Financed Student Loan has
a payment that is more than 90 days overdue as of the Cut-off
Date, and no Exchanged Student Loan will have a payment that
is more than 90 days overdue as of its related Subsequent
Cut-off Date, 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 and other circumstances
creating a delinquency continuing for a period of not more
than 90 days, 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 Transferor has
not waived and shall not waive any of the foregoing other than
as permitted by the Basic Documents.
(vii) Title. It is the intention of the Transferor
that the transfer and assignment herein contemplated
constitutes a contribution of the Financed Student Loans from
the Transferor to the Eligible Lender Trustee on behalf of the
Issuer and the beneficial interest in and title to such
Financed Student Loans shall not be part of the debtor's
estate in the event of the appointment of a receiver with
respect to the Transferor. No Financed Student Loan has been
transferred, assigned or pledged by the Transferor to any
Person other than the Eligible Lender Trustee on behalf of the
Issuer or any such assignment or pledge has been released.
Immediately prior to the transfer and assignment herein
contemplated, the Transferor had good title to each Financed
Student Loan, free and clear of all Liens and, immediately
upon the transfer thereof, the Eligible Lender Trustee on
behalf of the Issuer shall have good title to each such
Financed Student Loan, free and clear of all Liens, and the
transfer to the Indenture Trustee, shall have been perfected
under the UCC. No Financed Student Loan was subject to a third
party's right of first refusal to the transfers from the
Transferor provided for herein, and the transfer of the
Financed Student Loans as contemplated hereby will not violate
in any material respect the terms of any Subservicing
Agreement or any other material agreement or arrangement to
which the Master Servicer is a party.
(viii) Lawful Assignment. No Financed Student Loan
has been originated in, or is subject to the laws of, any
jurisdiction under which the contribution, transfer and
assignment of such Financed Student Loan under this Agreement
or any Transfer Agreement is unlawful, void or voidable.
(ix) All Filings Made. All filings (including UCC
filings) necessary in any jurisdiction to give the Issuer a
first perfected security interest in the Financed Student
Loans (if, despite the express intention of the parties
hereto, the transfer of the Financed Student Loans is deemed a
loan), and to give the Indenture Trustee a first perfected
security interest therein, shall have been made or have been
delivered for filing.
(x) One Original. To the best knowledge of the
Transferor, there is only one original executed copy of each
promissory note evidencing a Financed Student Loan.
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(xi) Principal Balance. The aggregate principal
balance of the Initial Financed Student Loans set forth on
Schedule A-1 as of the Cut-off Date is [$____________].
Additionally, as of the Cut-off Date, the accrued interest on
the Initial Financed Student Loans set forth on Schedule A-1
other than with respect to Interest Subsidy Payments and
Special Allowance Payments is [$____________].
(xii) Interest Rate. Except with respect to TP Loans
(as permitted by Section 4.14 hereof), each Financed FFELP
Loan included in the Initial Financed Student Loans bears
interest at the "applicable interest rate" permitted for such
loan under the Higher Education Act. Each Financed HEAL Loan
included in the Initial Financed Student Loans bears interest
at the rate of [______%].
(xiii) Interest Accruing. Each Financed Student Loan
is accruing interest (whether or not such interest is being
paid currently, by the Obligor or is being capitalized),
except as otherwise expressly permitted by the Basic
Documents.
SECTION 3.2. Repurchase upon Breach; Reimbursement. The Transferor, the
Master Servicer or the Eligible Lender Trustee, as the case may be, shall inform
the other parties to this Agreement and the Indenture Trustee promptly, in
writing, upon the discovery of any breach of the representations and warranties
of the Transferor made pursuant to Sections 3.1 and 6.1 hereof. Unless any such
breach shall have been cured within 120 days following the discovery thereof by
the Transferor or receipt by the Transferor of written notice from the Eligible
Lender Trustee or the Master Servicer of such breach, the Financed Student Loan
in which the interests of the Noteholders or the Certificateholders are
materially and adversely affected by any such breach shall be retransferred,
reassigned, resetover and otherwise reconveyed to the Transferor (a
"repurchase") as of the first day succeeding the end of such 120-day period that
is the last day of a Collection Period; provided that it is understood that any
such breach that does not adversely affect any Guarantor's obligation to
guarantee payment of such Financed FFELP Loan or the Department of HHS's
obligation to insure payment of any Financed HEAL Loan to the Eligible Lender
Trustee will not be considered to have a material adverse effect for this
purpose; and provided further, however, that in the case of any representation
or warranty the breach of which may be cured by reinstatement of the Guarantor's
obligation to guarantee payment or the Department of HHS's obligation to insure
payment, such cure period shall be 360 days (instead of 120 days), in each case
following the earlier of the date on which such breach is discovered by the
Transferor and the date of the Servicer's receipt of the Guarantor or Department
of HHS reject transmittal form with respect to such Financed Student Loan.
Notwithstanding the foregoing, if as of the last day of any Collection Period
the aggregate principal amount of Financed Student Loans with respect to which
claims have been filed with and rejected by a Guarantor or the Department of HHS
as a result of a breach of a representation or warranty of the Transferor in
Sections 3.1 or Section 6.1 hereof or with respect to which the Master Servicer
determines that claims cannot be filed pursuant to the Higher Education Act or
the HEAL Act, as the case may be, as a result of such a breach exceeds the
lesser of $250,000 or 1/4% of the Pool Balance as of such date, the Transferor
shall repurchase within 120 days of a written request by the Eligible Lender
Trustee or the Indenture Trustee, affected Financed Student Loans in an
aggregate principal amount such that after such repurchases the aggregate
principal amount of affected Financed Student Loans is equal to or less than the
lesser of $250,000 or 1/4% of the Pool Balance. The Financed Student Loans to be
repurchased by the Transferor pursuant to the preceding sentence will be based
on the date of claim rejection, with the Financed Student Loans with the
earliest such dates to be repurchased first. In consideration of and
simultaneously with the repurchase of the Financed Student Loan, the Transferor
shall remit the Purchase Amount, in the manner specified in Section 5.4, and the
Issuer shall execute such assignments and other documents reasonably requested
by the Transferor in order to effect such transfer. Upon any such transfer of a
Financed Student Loan, legal title to, and beneficial ownership and control of,
the related Financed Student Loan File and, if applicable, the related
Additional Financed HEAL Loan File will thereafter belong to the Transferor. The
Transferor shall have the right, at its option, to assign to the Master
Servicer, and the Master Servicer hereby agrees to assume, the obligation of the
Transferor to repurchase loans under this Section 3.2 to the extent such
repurchase obligation arose as a result of the breach of the last sentence of
Section 3.1(i).
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In addition, if any such breach does not trigger such a repurchase
obligation but does result in (i) the refusal by the Department of HHS to insure
the applicable portion of the accrued interest with respect to any Financed HEAL
Loan, or (ii) the refusal by a Guarantor to guarantee the applicable portion of
the accrued interest, or the loss of (including any obligation of the Issuer to
repay to the Department of Education) certain Interest Subsidy Payments and
Special Allowance Payments, with respect to a Financed FFELP Loan, then, unless
such breach, if curable, is cured within 120 days following the discovery
thereof by the Transferor or receipt by the Transferor of written notice from
the Eligible Lender Trustee, the Transferor shall, at its option, either
repurchase such Financed Student Loan at the applicable Purchase Amount or
reimburse the Issuer by remitting an amount equal to the sum of all amounts that
would have been payable if not for such breach in the manner specified in
Section 5.4 not later than the last day of the Collection Period in which such
120th day occurs (or, to the extent that all or a portion of such amount is not
otherwise due and payable as of such date, that portion shall be remitted to the
Collection Account on the last day of the Collection Period during which such
amount would otherwise be due and payable). The Transferor shall have the right,
at its option, to assign to the Master Servicer, and the Master Servicer hereby
agrees to assume, the obligation of the Transferor to reimburse amounts under
this paragraph to the extent such reimbursement obligation arose as a result of
the breach of the last sentence of Section 3.1(i).
The sole remedy of the Issuer, the Eligible Lender Trustee, the
Indenture Trustee, the Noteholders or the Certificateholders with respect to a
breach of the representations and warranties of the Transferor pursuant to
Sections 3.1 and 6.1 hereof and the agreement contained in this Section 3.2
shall be to require the Transferor to repurchase Financed Student Loans or to
reimburse the Issuer as provided above pursuant to this Section 3.2, subject to
the conditions contained herein. The Eligible Lender Trustee shall have no duty
to conduct any affirmative investigation as to the occurrence of any condition
requiring the repurchase of any Financed Student Loan or the reimbursement for
any interest penalty pursuant to this Section 3.2.
SECTION 3.3. Custody of Financed Student Loan Files. To assure uniform
quality in servicing the Financed Student Loans and to reduce administrative
costs, the Issuer hereby revocably appoints the Master Servicer as custodian of
the following documents or instruments with respect to each Financed Student
Loan (such documents are referred to collectively as the "Financed Student Loan
File":
(a) the original fully executed copy of the note evidencing
the Financed FFELP Loan (which may be included in the application)
unless such note is in the custody of a Guarantor;
(b) the original loan application fully executed by the
related borrower (which may be included in the note evidencing a
Financed FFELP Loan); and
(c) any and all other documents and computerized records that
any of the Master Servicer, the Administrator or the Transferor shall
keep on file, in accordance with its customary procedures, relating to
such Financed Student Loan or any Obligor with respect thereto.
Notwithstanding the foregoing, each Subcustodian appointed pursuant to
Section 3.8 who enters into a Subservicing Agreement may act as a custodian of
the Related Financed Student Loan Files. The custodian for the original fully
executed copy of the note evidencing a Financed HEAL Loan (which may be included
in the application) and the original loan application for a Financed HEAL Loan
fully executed by the related borrower (if included in the note evidencing a
Financed HEAL Loan) (the "Additional Financed HEAL Loan File") shall be selected
by the Indenture Trustee, however, such custodian shall not be the Master
Servicer and such custodian shall not hold such documents pursuant to this
Transfer and Servicing Agreement.
SECTION 3.4. Duties of Master Servicer as Custodian.
(a) Safekeeping. The Master Servicer, as custodian, shall hold
or cause one or more Subcustodians appointed pursuant to Section 3.8,
to (i) hold the Financed Student Loan Files for the benefit of the
Issuer, and (ii) maintain such accurate and complete accounts, records
and computer systems
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pertaining to each Financed Student Loan File as shall enable the
Issuer to comply with this Agreement and the other Basic Documents. In
performing its duties as custodian, the Master Servicer shall act with
reasonable care and shall ensure that it complies in all material
respects with all applicable federal and State laws, including the
Higher Education Act and the HEAL Act, with respect thereto. The Master
Servicer shall promptly report to the Issuer and the Indenture Trustee
any failure on its part to hold the Financed 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 Financed Student Loan Files.
(b) Maintenance of and Access to Records. The Master Servicer
shall cause each Subcustodian to maintain the Related Financed Student
Loan Files at the office specified opposite such Subcustodian's name in
Schedule B or shall cause the Financed Student Loan Files to be
maintained at such other offices as shall be specified by written
notice to the Issuer and the Indenture Trustee not later than 60 days
after any change in location. Upon reasonable prior notice, the Master
Servicer shall make available, or cause each Subcustodian to make
available, to the Issuer and the Indenture Trustee or their respective
duly authorized representatives, attorneys or auditors (i) a list of
locations of the Financed Student Loan Files and (ii) the related
accounts, records and computer systems at the locations identified in
the list provided pursuant to clause (i) of this Section 3.4(b) and at
such times which are in accordance with the applicable Subservicing
Agreements.
SECTION 3.5. Instructions; Authority to Act. The Master Servicer shall
be deemed to have received proper instructions with respect to the Financed
Student Loan Files upon its receipt of written instructions signed by a
Responsible Officer of the Indenture Trustee.
SECTION 3.6. Custodian's Indemnification.
----------------------------
(a) The Master Servicer shall pay from its own funds for any
Indemnifiable Expense that may be imposed on, incurred by or asserted
against the Issuer, the Eligible Lender Trustee, the Delaware Trustee
or the Indenture Trustee or any of their officers, directors, employees
and agents to the extent such Indemnifiable Expense results from the
Master Servicer's failure to perform its duties as specified in this
Article III where the final determination that any such improper act or
omission by the Master Servicer or any Subcustodian resulted in such
Indemnifiable Expense is established by a court of law, by an
arbitrator or by way of settlement agreed to by the Master Servicer;
PROVIDED, HOWEVER, 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; provided, however, the Master Servicer shall not be
liable for any such Indemnifiable Expense imposed upon such Person to
the extent that they arise out of or result from such Person's
negligence, willful malfeasance or bad faith or a breach of the
representations and warranties of such Person in this Agreement.
Notwithstanding anything to the contrary contained in this Article III,
in no event shall the Master Servicer be liable under any theory of
tort, contract, strict liability or other legal or equitable theory for
any lost profits or exemplary, punitive, special, incidental, indirect
or consequential damages, each of which is hereby excluded by agreement
of the parties regardless of whether or not the Master Servicer has
been advised of the possibility of such damages.
(b) Promptly after receipt by an indemnified party under this
Section 3.6 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 this Section 3.6, notify the
indemnifying party of the commencement
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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 Section 3.6, except to the extent the
indemnifying party is materially prejudiced by such failure. 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
reasonably satisfactory to such indemnified party; provided, however,
that if the defendants in any such action include both the indemnified
party and the indemnifying party, and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be
legal defenses available to it and/or other indemnified parties which
are different from or additional to those available to the indemnifying
party, the indemnifying party or parties shall have the right to select
separate counsel to assert such legal defenses and to otherwise
participate in the defense of such action on behalf of the indemnified
party or parties. After notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under
this Section 3.6 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. 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 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.
The indemnified party will not, without the prior written
consent of the indemnifying 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 which indemnification may be
sought hereunder.
SECTION 3.7. Effective Period and Termination. The Master Servicer's
appointment as custodian of the Financed Student Loan Files shall become
effective as of the Closing Date and shall continue in full force and effect for
so long as the Master Servicer shall remain the Master Servicer hereunder. If
the Master Servicer or any successor Master Servicer shall resign as Master
Servicer in accordance with the provisions of this Agreement or if all the
rights and obligations of the Master Servicer or any such successor Master
Servicer shall have been terminated under Section 8.1 of this Agreement, the
appointment of the Master Servicer or such successor Master Servicer as
custodian shall be terminated simultaneously with the effectiveness of such
termination. As soon as practicable on or after any termination of such
appointment (and in any event within (i) 10 Business Days, with respect to that
portion of the Financed Student Loan Files consisting of electronic records and
information that is reasonably available and deliverable within 10 Business
Days, and (ii) 30 Business Days, with respect to the remaining portion of the
Financed Student Loan Files), the Master Servicer shall deliver, to the extent
in its possession, the Financed 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.
SECTION 3.8. Appointment of Subcustodian.
(a) The Master Servicer may at any time appoint one or more
Servicers to act as a subcustodian (each a "Subcustodian") of the
Financed Student Loan Files of the Financed Student Loans being
serviced by such Servicer (the "Related Financed Student Loan Files")
to perform all or any portion of its obligations as custodian
hereunder; PROVIDED, HOWEVER, that the Master Servicer shall remain
obligated and be liable to the Issuer, the Eligible Lender Trustee, the
Indenture Trustee, the Certificateholders and the Noteholders for the
custodial services with respect to the Financed Student Loan Files in
accordance with the provisions hereof without diminution of such
obligation and liability by virtue of the appointment of
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such Subcustodian and to the same extent and under the same terms and
conditions as if the Master Servicer alone were performing the
custodial services. The fees and expenses of the Subcustodian shall be
as agreed between the Master Servicer and its Subcustodian from time to
time and none of the Issuer, the Eligible Lender Trustee, the Indenture
Trustee, the Delaware Trustee, the Certificateholders or the
Noteholders shall have any responsibility therefor.
(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 Financed Student Loan
Files for so long as such Subcustodian is a Servicer of the Financed
Student Loans relating to such Financed Student Loan Files. As soon as
practicable following the occurrence of an event of default as to which
the Master Servicer is aware or has received notice of that is
continuing under a Subservicing Agreement, the Master Servicer shall
cause each applicable Subcustodian to deliver the Financed Student Loan
Files held by it as directed by the Master Servicer.
ARTICLE IV
Administration and Servicing of Financed Student Loans
SECTION 4.1. Duties of Master Servicer. The Master Servicer, for the
benefit of the Issuer (to the extent provided herein), shall manage, service,
administer and make collections on the Financed Student Loans with reasonable
care. 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 manage, service, administer
and make 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 in all material respects with all applicable federal and State laws,
including all applicable standards, guidelines and requirements of the Higher
Education Act and any Guarantee Agreement with respect to the Financed FFELP
Loans and of the HEAL Act and the HEAL Insurance Contract with respect to the
Financed HEAL Loans, the failure to comply with which would adversely affect the
eligibility of one or more of the Financed FFELP Loans for Interest Subsidy
Payments, Special Allowance Payments or Guarantee Payments or the eligibility of
one or more of the Financed HEAL Loans for Insurance Payments or would have a
material adverse effect on the Certificateholders or the Noteholders.
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 bills or 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. Subject to the provisions
of Section 4.2, the Master Servicer shall follow 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
execute and deliver, 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) except as otherwise provided in Section 4.14,
reschedule, revise, defer or otherwise compromise with respect to payments due
on any Financed Student Loan except pursuant to any applicable deferment or
forbearance periods or otherwise in accordance with all applicable standards,
guidelines and requirements with respect to the servicing of the Financed
Student Loans; PROVIDED FURTHER, HOWEVER, that the Master Servicer shall not
agree to any decrease of the interest rate on, or the principal amount payable
with respect to, any Financed Student Loan except as otherwise permitted in
accordance
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with applicable standards, guidelines and requirements of the Higher Education
Act and any Guarantee Agreement with respect to the Financed FFELP Loans and by
the HEAL Act and the HEAL Insurance Contract with respect to the Financed HEAL
Loans. Notwithstanding the foregoing, the Master Servicer may, in its sole
discretion, without having to obtain the consent or approval of any other party,
(i) not collect late charges that may be due on Financed Student Loans, and (ii)
waive remaining amounts owing under a Financed Student Loan up to and including
$250.00. The Master Servicer also shall be responsible for advising the Eligible
Lender Trustee and the Indenture Trustee of any action required to be taken to
maintain each such Guarantee Agreement and the HEAL Insurance Contract. The
Eligible Lender Trustee on behalf of the Issuer hereby grants a power of
attorney and all necessary authorization to the Master Servicer to sign
endorsements of the notes relating to the Financed Student Loans on behalf of
the Eligible Lender Trustee in connection with conveyances pursuant to Section
2.3 hereof and 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 the Department of HHS for Insurance
Payments and taking any steps to enforce such Financed Student Loan 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 any other
powers of attorney and other documents reasonably necessary or appropriate to
enable the Master Servicer or the Administrator to carry out its servicing and
administrative duties hereunder.
SECTION 4.2. Collection of Financed Student Loan Payments.
(a) The Master Servicer shall make reasonable efforts
(including all efforts that may be specified under the Higher Education
Act or any Guarantee Agreement with respect to Financed FFELP Loans and
under the HEAL Act and the HEAL Insurance Contract with respect to
Financed HEAL Loans) to collect all payments called for under the terms
and provisions of the Financed Student Loans as and when the same shall
become due. The Master Servicer may in its discretion waive any late
payment charge or any other fees in addition to any fee or waiver
permitted under Section 4.1 that may be collected in the ordinary
course of servicing a Financed Student Loan.
(b) The Master Servicer shall make reasonable efforts to
claim, pursue and collect all Guarantee Payments from the Guarantors
pursuant to the Guarantee Agreements and all Insurance Payments from
the Department of HHS pursuant to the HEAL Insurance Contract with
respect to any of the Financed Student Loans as and when the same shall
become due and payable, and shall comply in all material respects with
all applicable laws and agreements with respect to claiming, pursuing
and collecting such payments. In connection therewith, the Master
Servicer is hereby authorized and empowered to convey to any Guarantor
the note and the related Financed Student Loan File representing any
Financed FFELP Loan in connection with submitting a claim to such
Guarantor for a Guarantee Payment in accordance with the terms of the
applicable Guarantee Agreement and to the Department of HHS the note
and the related Financed Student Loan File representing any Financed
HEAL Loan in connection with submitting a claim to the Department of
HHS for an Insurance Payment in accordance with the terms of the HEAL
Insurance Contract whereupon the Lien of the Indenture Trustee relating
to such Financed Student Loan shall be released without any further
action of any kind.
(c) The Eligible Lender Trustee shall, with the assistance of
the Master Servicer 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 of Education with
respect to any of the Financed FFELP Loans as and when the same shall
become due and payable, shall comply in all material respects with all
applicable laws and agreements with respect to claiming, pursuing and
collecting such payments. All amounts so collected by the Eligible
Lender Trustee shall constitute Available Funds for the applicable
Collection Period or Collection Periods and shall be deposited into the
Collection Account in accordance with Section 5.4. In connection
therewith, the Master Servicer shall prepare and file with the
Department of Education on a timely basis all claims, forms and other
documents and filings necessary or appropriate
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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 of Education. The Eligible Lender Trustee
shall, upon the written request of the Master Servicer, furnish the
Master Servicer with any power of attorney and other documents
reasonably necessary or appropriate to enable the Master Servicer to
prepare and file such claims, forms and other documents and filings.
(d) The Eligible Lender Trustee may permit trusts, other than
the Trust, established by the Transferor to securitize student loans to
use the Department of Education and the Department of HHS lender
identification numbers 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 of Education, any Guarantor
or the Department of HHS to any such other trust using such common
lender identification number as a result of amounts (including, but not
limited to, consolidation fees) owing to the Department of Education,
any Guarantor or the Department of HHS 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 of Education,
any Guarantor or the Department of HHS 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 of Education, any Guarantor or the
Department of HHS to the Trust as a result of amounts owing to the
Department of Education, any Guarantor or the Department of HHS to the
Trust 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.
SECTION 4.3. Realization upon Financed Student Loans. For the benefit
of the Issuer, the Master Servicer shall use reasonable efforts consistent with
customary servicing practices and procedures and including all efforts that may
be specified under the Higher Education Act or any Guarantee Agreement with
respect to the Financed FFELP Loans and under the HEAL Act and the HEAL
Insurance Contract with respect to the Financed HEAL Loans in its servicing of
any delinquent Financed Student Loans.
SECTION 4.4. No Impairment. The Master Servicer shall not impair in any
material respect the rights of the Issuer, the Eligible Lender Trustee, the
Indenture Trustee, the Certificateholders or the Noteholders in the Financed
Student Loans, in any Guaranty Agreement or in the HEAL Insurance Contract.
SECTION 4.5. Notification of Breach; Indemnification of the Transferor.
The Master Servicer or the Eligible Lender Trustee, as the case may be, shall
inform the other parties to this Agreement and the Indenture Trustee promptly,
in writing, upon the discovery of any breach of an obligation under Section 4.1,
4.2, 4.3 or 4.4 hereof. The Eligible Lender Trustee shall have no duty to
conduct any affirmative investigation as to the occurrence of any such breach.
The Master Servicer shall indemnify the Transferor for any payments made by the
Transferor in connection with a repurchase or reimbursement pursuant to Section
3.2 hereof resulting from any breach of an obligation under Section 4.1, 4.2,
4.3 or 4.4. hereof. The sole remedy of the Issuer, the Eligible Lender Trustee,
the Indenture Trustee, the Certificateholders (other than the Transferor
pursuant to the preceding sentence) or the Noteholders with respect to a breach
pursuant to Section 4.1, 4.2, 4.3 or 4.4 hereof shall be to require the
Transferor to purchase Financed Student Loans or to reimburse the Issuer to the
extent provided under Section 3.2 hereof, subject to the conditions contained
therein.
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SECTION 4.6. Servicing Fee. For its services hereunder, the Master
Servicer shall be entitled to receive the Servicing Fee in the manner set forth
in Section 5.5.
SECTION 4.7. Administrator's Certificate.
(a) On each Distribution Determination Date, the Administrator
shall deliver to the Indenture Trustee and the Eligible Lender Trustee
in writing the applicable Noteholders' Interest Distribution Amount,
the Noteholders Principal Distribution Amount and all amounts to be
paid to Certificateholders on the related Distribution Date. On each
Distribution Determination Date relating to a Quarterly Distribution
Date, the Administrator also shall deliver to the Indenture Trustee and
the Eligible Lender Trustee in writing the estimated Transaction Fees
(separately and in the aggregate) for the calendar quarter in which
such Quarterly Distribution Date occurs. Two Business Days prior to the
25th day of each month, the Administrator will advise the Indenture
Trustee and the Eligible Lender Trustee in writing of the Consolidation
Loan Fees for the preceding calendar month.
(b) On each Distribution Determination Date, the Administrator
also shall deliver to the Eligible Lender Trustee, the Indenture
Trustee and the Transferor (if the Transferor is not also the
Administrator), an Administrator's Certificate containing all
information necessary to make the distributions pursuant to Sections
5.5 and 5.6, if applicable, for the upcoming Distribution Date.
Financed Student Loans to be repurchased by the Transferor (or
purchased by the Master Servicer) (whether pursuant to Section 2.3 or
3.2), or acquired by any Guarantor or by the Department of HHS shall be
identified by the Administrator by borrower social security number with
respect to such Financed Student Loan (as specified in Schedule A-1).
(c) On or before each Distribution Determination Date [[15th
day of each month]], the Administrator shall deliver to the Eligible
Lender Trustee, the Indenture Trustee and the Transferor (if the
Transferor is not also the Administrator), the Administrator's
Certificate substantially in the form of Exhibit C setting forth by
component the Available Funds for the immediately preceding Collection
Period.
SECTION 4.8. Annual Statement as to Compliance; Notice of Default.
(a) Each of the Master Servicer and the Administrator shall
deliver to the Transferor, the Eligible Lender Trustee and the
Indenture Trustee, on or before April 30 of each year beginning April
30, 1999, an Officer's Certificate of the Master Servicer or the
Administrator, as the case may be, dated as of December 31 of the
preceding year, stating that (i) a review of the activities of the
Master Servicer or the Administrator, as the case may be, during the
preceding 12-month period (or, in the case of the first such
certificate, during the period from the Closing Date to December 31,
1998) 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 Master Servicer or the
Administrator, as the case may be, has fulfilled in all material
respects all its obligations under this Agreement and the
Administration Agreement, respectively, throughout such year or, if
there has been a default in the fulfillment of any such obligation,
specifying each such default known to such officer and the nature and
status thereof. The Eligible Lender Trustee shall send a copy of each
such Officers' Certificate and each report referred to in Section 4.9
to the Rating Agencies. A copy of each such Officers' Certificate and
each report referred to in Section 4.9 may be obtained by any
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 a
Noteholder or Note Owner. Pursuant to the Indenture, 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.
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(b) The Master Servicer shall deliver to the Eligible Lender
Trustee, the Indenture Trustee, the Transferor and the Rating Agencies,
promptly after having obtained knowledge thereof, but in no event later
than five Business Days thereafter, written notice in an Officer's
Certificate of the Master Servicer of any event which with the giving
of notice or lapse of time, or both, would become a Master Servicer
Default under Section 8.1(a).
(c) 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 five Business Days thereafter, written notice in an
Officer's 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 8.1(b) (l), (2) or (3).
SECTION 4.9. Annual Independent Certified Public Accountants' Report or
Reports. Each of the Master Servicer and the Administrator shall cause KPMG Peat
Marwick LLP, or any other nationally recognized firm of independent certified
public accountants, to deliver to the Transferor, which may also render its
services to the Master Servicer and the Administrator, the Eligible Lender
Trustee, the Indenture Trustee and any Servicer on or before April 30 of each
year beginning April 30, 1999 one or more reports addressed to the Master
Servicer and to the Transferor, the Eligible Lender Trustee and the Indenture
Trustee, to the effect that such accountants have relied upon the assertions by
the Master Servicer's and Administrator's management about the Master Servicer's
and Administrator's compliance with Sections 3.3, 3.4, 4.1, 4.2, 4.3, 4.4, 4.6,
4.7, 5.2, 5.5, 5.6, 5.7 and 5.8 of the Transfer and Servicing Agreement and
Sections [[1(B), 1(D), 1(G), 1(U), 2 and 3:]] of the Administration Agreement
during the preceding calendar year (or, in the case of the first such report(s),
during the period from the Closing Date to December 31, 1998) and in any such
accountant's opinion(s), such assertions are fairly stated in all material
respects, except for (i) such exceptions as any such firm shall believe to be
immaterial and (ii) such other exceptions as shall be set forth in such
report(s). If any such firm requires the Indenture Trustee or the Eligible
Lender Trustee to agree to the procedures performed by such firm, the Master
Servicer shall direct the Indenture Trustee in writing to so agree; it being
understood and agreed that the Indenture Trustee or the Eligible Lender Trustee,
as applicable, will deliver such letter of agreement in conclusive reliance upon
the direction of the Master Servicer, and the Indenture Trustee and the Eligible
Lender Trustee make no independent inquiry or investigation as to and shall have
no obligation or liability in respect of, the sufficiency, validity or
correctness of such procedures.
Such report(s) 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 4.10. Access to Certain Documentation and Information Regarding
Financed Student Loans. Upon reasonable prior notice, the Master Servicer shall,
or shall cause each Servicer to, provide access to the Financed Student Loan
Files and the related accounts, records and computer systems maintained by the
Master Servicer or such Servicer, as the case may be, to (i) the Eligible Lender
Trustee and (ii) the Indenture Trustee and their respective duly authorized
representatives, attorneys or auditors; provided, however, that, except as
otherwise agreed to by the Master Servicer or required by law, (A) such Persons
shall maintain the confidentiality of the information in such Financed Student
Loan Files and the related accounts, records and computer systems and not use
any of such information for any purpose except in connection with performing
their obligations as Eligible Lender Trustee or Indenture Trustee, and (B)
access to the computer systems shall be limited to obtaining, and only to the
extent necessary to obtain, information relating to the Financed Student Loans
for purposes of performing their obligations as Eligible Lender Trustee or
Indenture Trustee. Access shall be afforded without charge (except that the
reasonable cost of photocopying shall be borne by the party requesting copies),
but only upon reasonable request and during the normal business hours at the
respective offices of the applicable Servicer. Nothing in this Section shall
affect the obligation of the Master Servicer (or a Servicer) to observe any
applicable law prohibiting disclosure of information regarding the Obligors and
the failure of the Master Servicer to provide (or cause each Servicer to
provide) access to information as a result of such obligation shall not
constitute a breach of this Section.
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SECTION 4.11. Master Servicer and Administrator Expenses. The Master
Servicer and the Administrator shall be severally required to pay all expenses
incurred by them in connection with their respective activities hereunder,
including fees and disbursements of independent accountants, taxes imposed on
the Master Servicer or the Administrator, as the case may be, and expenses
incurred in connection with distributions and reports to the Administrator, the
Noteholders and the Eligible Lender Trustee, as the case may be.
SECTION 4.12. Appointment of Servicer.
(a) The Master Servicer may at any time appoint a Servicer to
perform all or any portion of its obligations as Master Servicer
hereunder; PROVIDED, HOWEVER, that the Rating Agency Condition shall
have been satisfied in connection therewith; PROVIDED FURTHER, that the
Master Servicer shall remain obligated and be liable to the Issuer, the
Eligible Lender Trustee, the Indenture Trustee, the Certificateholders
and the Noteholders for the servicing and administering of the Financed
Student Loans in accordance with the provisions hereof without
diminution of such obligation and liability by virtue of the
appointment of such subservicer and to the same extent and under the
same terms and conditions as if the Master Servicer alone were
servicing and administering the Financed Student Loans. The fees and
expenses of each Servicer shall be as agreed between the Master
Servicer and such Servicer from time to time and none of the Issuer,
the Eligible Lender Trustee, the Delaware Trustee, the Indenture
Trustee, the Certificateholders and the Noteholders shall have any
responsibility therefor. Notwithstanding the foregoing, PHEAA shall be
deemed an approved Servicer for all purposes hereunder.
(b) The Master Servicer may at any time appoint one or more of
its Affiliates to perform all or any portion of its obligations
hereunder; provided, however, that the Master Servicer shall remain
obligated and liable to the Issuer, the Eligible Lender Trustee, the
Indenture Trustee, the Certificateholders and the Noteholders for the
servicing and administering of the Financed Student Loans in accordance
with the provisions hereof without diminution of such obligation and
liability by virtue of the appointment of such Affiliate and to the
same extent and under the same terms and conditions as if the Master
Servicer alone were servicing and administering the Financed Student
Loans. The fees and expenses of each such Affiliate shall be as agreed
between the Master Servicer and such Affiliate from time to time and
none of the Issuer, the Eligible Lender Trustee, the Delaware Trustee,
the Indenture Trustee, the Certificateholders and the Noteholders shall
have any responsibility therefor.
SECTION 4.13. Subservicing Agreements. The Master Servicer hereby
represents and warrants that: (i) as of the Closing Date it has entered into a
Subservicing Agreement with PHEAA (the "Subservicing Agreement"); (ii) the
Subservicing Agreement requires the Servicer thereunder to service the Financed
Student Loans subject thereto in accordance in all material respects with all
applicable federal and State laws, including all applicable standards,
guidelines and requirements of the Higher Education Act with respect to Financed
FFELP Loans and the HEAL Act with respect to Financed HEAL Loans.
SECTION 4.14. Incentive Programs. The Servicer shall be permitted to
reduce the applicable interest rate on a TP Loan by up to (i) 1.00% per anum for
Stafford Loans and Unsubsidized Stafford Loans and 0.5% per annum for PLUS
Loans, if the Obligor related to such TP Loan makes 36 consecutive monthly
payments of such TP Loan on or prior to the applicable due dates of such TP
Loan, or (ii) such greater percentage and upon such other conditions for which a
Rating Agency Condition is satisfied.
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ARTICLE V
Distributions; Reserve Account;
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Statements to Certificateholders and Noteholders
------------------------------------------------
SECTION 5.1. Establishment of Trust Accounts.
(a) The Indenture Trustee, for the benefit of the Noteholders,
shall establish and maintain in the name of the Indenture Trustee each
of the Collection Account, the Note Distribution Account, the Reserve
Account, the Expense Account and the Monthly Advance Account. The
Eligible Lender Trustee, for the benefit of the Certificateholders,
shall establish and maintain in the name of the Eligible Lender Trustee
the Certificate Distribution Account and the Certificate Quarterly
Advance Account. The foregoing accounts are referred to collectively as
the "Trust Accounts." Each such Trust Account shall be an Eligible
Deposit Account and, except for the Certificate Distribution Account
and the Certificate Quarterly Advance Account, shall be entitled as
follows: "[Name of Account] for the benefit of Crestar Student Loan
Trust 1997-1 and Bankers Trust Company, as Indenture Trustee, as their
interests may appear." The Certificate Distribution Account and the
Certificate Quarterly Advance Account shall be entitled as follows:
"Crestar Student Loan Trust 1997-1 Certificate Distribution Account"
and Crestar Student Loan Trust 1997-1 Certificate Quarterly Advance
Account," respectively.
(b) Funds on deposit in the Trust Accounts shall be invested
by the Indenture Trustee and, in the case of the Certificate
Distribution Account and the Certificate Quarterly Advance Account, the
Eligible Lender Trustee in Eligible Investments pursuant to written
instructions from the Administrator, on behalf of the Issuer; PROVIDED,
HOWEVER, it is understood and agreed that the Indenture Trustee and the
Eligible Lender Trustee shall not be liable for any loss arising from
such investment in Eligible Investments. All such Eligible Investments
shall be held by the Indenture Trustee and the Eligible Lender Trustee
for the benefit of the Issuer; provided that on the Business Day
preceding each Distribution Date all interest and other investment
income (net of losses and investment expenses) on funds on deposit
therein shall be deposited into the Collection Account and shall be
deemed to constitute a portion of the Available Funds for the related
Distribution Date. Funds on deposit in the Trust Accounts shall be
invested in Eligible Investments that will mature or otherwise be
available so that such funds will be available at the close of business
on the Business Day preceding the day on which funds in the applicable
Trust Account may be required to be withdrawn; PROVIDED, HOWEVER, that
funds on deposit in such Trust Accounts may be invested in Eligible
Investments of the Indenture Trustee or of the Eligible Lender Trustee
in the case of the Certificate Distribution Account and Certificate
Quarterly Advance Account which may mature so that such funds will be
available on the following Business Day. Funds deposited in a Trust
Account on a Business Day which immediately precedes a Distribution
Date upon the maturity of any Eligible Investments are not required to
be invested overnight unless otherwise directed by telephone or
facsimile and confirmed within 24 hours in writing by the
Administrator.
(c) (i) The Indenture Trustee (or the Eligible Lender Trustee
with respect to the Certificate Distribution Account and the
Certificate Quarterly Advance Account) 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 Estate. Subject to the Administrator's power to give instructions
pursuant to paragraph (b) above and paragraph (c) (iii) below, the
Trust Accounts shall be under the sole dominion and control of the
Indenture Trustee (or the Eligible Lender Trustee with respect to the
Certificate Distribution Account and the Certificate Quarterly Advance
Account) for the benefit of the Noteholders and Certificateholders. If,
at any time, any of the Trust Accounts ceases to be an Eligible Deposit
Account, the Administrator, on behalf of the Issuer, agrees that it
shall within 10 Business Days (or such longer period, not to exceed 30
calendar days, as to which the Rating Agencies 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
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connection with the foregoing, the Administrator, on behalf of the
Issuer, agrees that, if any of the Trust Accounts are not accounts with
the Indenture Trustee (or the Eligible Lender Trustee with respect to
the Certificate Distribution Account and the Certificate Quarterly
Advance Account), the Administrator shall notify the Indenture Trustee
and the Eligible Lender Trustee in writing promptly upon any of such
Trust Accounts ceasing to be an Eligible Deposit Account.
(ii) With respect to the Trust Account Property, the Indenture
Trustee agrees (or, with respect to the Certificate Distribution
Account and the Certificate Quarterly Advance Account, the Eligible
Lender Trustee agrees), by its acceptance thereof, that:
(A) any Trust Account Property that is held in
deposit accounts shall be held solely in Eligible Deposit
Accounts, subject to the last sentence of Section 5.1(c)(i);
and, subject to Section 5.1(b), each such Eligible Deposit
Account shall be subject to the exclusive custody and control
of the Indenture Trustee (or the Eligible Lender Trustee with
respect to the Certificate Distribution Account and the
Certificate Quarterly Advance Account), and the Indenture
Trustee (or the Eligible Lender Trustee with respect to the
Certificate Distribution Account and the Certificate Quarterly
Advance Account) shall have sole signature authority with
respect thereto;
(B) 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 Article 8 of the UCC) acting
solely for the Indenture Trustee;
(C) any Trust Account Property that is a book-entry
security held through the Federal Reserve System pursuant to
federal book-entry regulation 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
(D) any Trust Account Property that is an
"uncertificated security" under Article VIII of the UCC and
that is not governed by clause (C) above shall be Delivered to
the Indenture Trustee in accordance with paragraph (c) of 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
nominee's) ownership of such security.
(iii) 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 (or the Eligible Lender Trustee with respect to the
Certificate Distribution Account and the Certificate Quarterly Advance
Account) for the purpose of permitting the Master Servicer, the
Administrator or the Eligible Lender Trustee to carry out its
respective duties hereunder or under the Trust Agreement or permitting
the Indenture Trustee to carry out its duties under the Indenture.
SECTION 5.2. Collections. The Master Servicer shall remit to the
Collection Account all payments by or on behalf of the Obligors with respect to
the Financed Student Loans for which it, rather than a Servicer, is acting as
Primary Servicer (other than Purchased Student Loans), (i) within [[__]]
Business Days after it has received an aggregate of [[$______]] during any
Collection Period and (ii) on the last Business Day of each Collection Period,
all other collections received during such Collection Period. The Master
Servicer shall cause each other Servicer to remit to the Collection Account, no
less frequently than [[_____,]] all payments by or on
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behalf of the Obligors with respect to the Financed Student Loans for which it
is acting as Primary Servicer. For purposes of this Article V, the phrase
"payments by or on behalf of Obligors" shall mean payments made with respect to
the Financed Student Loans by or on behalf of borrowers thereof, the Guarantors
and the Department of HHS. [[written notice to indenture trustee of wire
transfers; location of Collection Account]
SECTION 5.3. Application of Collections. With respect to each Financed
Student Loan, all collections (including all Guarantee Payments and all
Insurance Payments) with respect thereto shall be applied in accordance with
regulations of the Department of Education and the applicable Guarantor in the
case of Financed FFELP Loans and the Department of HHS in the case of Financed
HEAL Loans.
SECTION 5.4. Additional Deposits. Within two Business Days after
receipt thereof, the Eligible Lender Trustee (or the Master Servicer on its
behalf) shall deposit in the Collection Account the aggregate amount of Interest
Subsidy Payments and Special Allowance Payments received by it with respect to
the Financed Student Loans, and the Transferor shall deposit in the Collection
Account any amount owed pursuant to Section 3.2 no later than the last day of
the Collection Period during which any such amount is owed. The Transferor (or
the Master Servicer, if applicable) 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 Transferor (or the Master
Servicer, if applicable) under Sections 3.2 or 9.1 when such amounts are due.
The Transferor, the Master Servicer and the Administrator also shall deposit in
the Collection Account all amounts required to be deposited therein pursuant to,
and within the time periods provided by, Section 2.3. Notwithstanding the
foregoing, the Master Servicer shall deposit, or cause to be deposited, directly
into the Reserve Account any payments of or with respect to principal relating
to a Financed Student Loan for which any payment on account of a Realized Loss
was previously distributed (but only up to the amount of such Realized Loss),
and shall deposit, or cause to be deposited, directly into the Collection
Account any payments of or with respect to interest relating to a Financed
Student Loan for which any payment on account of a Realized Loss was previously
distributed.
The Master Servicer also shall, in its sole discretion, deposit into
the Monthly Advance Account the amount of any Monthly Advances determined to be
made by the Master Servicer pursuant to Section 5.10 no later than the
Distribution Determination Date relating to the Distribution Date when such
amounts are to be applied as a payment of interest. On each Distribution Date,
the Indenture Trustee will transfer from the Monthly Advance Account to the
Eligible Lender Trustee, by wire transfer no later than 11:00 a.m. New York
time, for deposit into the Certificate Quarterly Advance Account the portion of
the Monthly Advance, if any, for such Distribution Date allocable to the
Certificates. Pursuant to Section 5.10, if after making a Monthly Advance the
Master Servicer receives the Guarantee Payment, the Special Allowance Payment,
the Interest Subsidy Payment or the Insurance Payment for which such Monthly
Advance was made, the Master Servicer shall be reimbursed immediately from such
Guarantee Payment, Special Allowance Payment, Interest Subsidy Payment or
Insurance Payment, as the case may be, on deposit in the Collection Account up
to the amount of the related Monthly Advance or, if such Guarantee Payment,
Special Allowance Payment, Interest Subsidy Payment or Insurance Payment is not
received, the Master Servicer may reimburse itself from any funds on deposit in
the Collection Account up to the amount of the related Monthly Advance.
SECTION 5.5. Distributions.
(a) On each Distribution Date, pursuant to the Administrator's
written instructions, the Indenture Trustee will transfer from the
Collection Account, in the following priority and from Available Funds
for each Collection Period from and including the Collection Period
during which the preceding Quarterly Distribution Date occurred through
the Collection Period immediately preceding the month of such
Distribution Date (or with respect to each Distribution Date through
and including the first Quarterly Distribution Date, from the Closing
Date through the Collection Period immediately preceding such
Distribution Date), the required amounts from the Available Funds for
such Collection Periods:
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(i) first, to the Expense Account, (A) an amount
equal to the Consolidation Loan Fees with respect to the
calendar month most recently ended and all overdue
Consolidation Loan Fees from any prior months and (B) if such
Distribution Date is a Quarterly Distribution Date, an amount
up to the estimated Transaction Fees for the calendar quarter
commencing in the month of such Quarterly Distribution Date
and all overdue Transaction Fees from prior calendar quarters
(plus (or minus) the difference (or excess) of the actual
Transaction Fees for the immediately preceding calendar
quarter and the Transaction Fees deposited into the Expense
Account on the preceding Quarterly Distribution Date);
(ii) second, to the Note Distribution Account, an
amount up to the aggregate Noteholders' Interest Distribution
Amount for such Distribution Date;
(iii) third, to the Note Distribution Account, an
amount up to the Noteholders' Principal Distribution Amount
for such Distribution Date;
(iv) fourth, to the Eligible Lender Trustee, for
deposit into the Certificate Distribution Account, an amount
up to the Certificateholders' Interest Distribution Amount for
such Distribution Date; and
(v) fifth, if the Outstanding Amount of the Notes has
been paid in full, to the Eligible Lender Trustee, for deposit
into the Certificate Distribution Account, an amount up to the
Certificateholders' Principal Distribution Amount for such
Distribution Date.
(b) [Reserved]
(c) On each Quarterly Distribution Date (and in the case of
clause (i) below, on the 25th day of each month (or if such day is not
a Business Day, the next succeeding Business Day)), the Indenture
Trustee, pursuant to information contained in the Administrator's
Certificate delivered in accordance with Section 4.7, will distribute
from the Expense Account (in addition to any amounts transferred from
the Reserve Account pursuant to Section 5.6) the following amounts in
the following order of priority:
(i) to the Department of Education, the Consolidation
Loan Fees for the immediately preceding calendar month and all
overdue Consolidation Loan Fees for any prior months,
(ii) to the Master Servicer, the estimated Servicing
Fee for the calendar quarter in which such Quarterly
Distribution Date occurs and all overdue Servicing Fees,
(iii) to the Administrator, the estimated
Administration Fee for the calendar quarter in which such
Quarterly Distribution Date occurs and all overdue
Administration Fees,
(iv) to the Indenture Trustee, the estimated
Indenture Trustee Fee for the calendar quarter in which such
Quarterly Distribution Date occurs and all overdue Indenture
Trustee Fees, and
(v) to the Eligible Lender Trustee and the Delaware
Trustee, the estimated Eligible Lender Trustee Fee and
Delaware Trustee Fee, respectively, for the calendar quarter
in which such Quarterly Distribution Date occurs and all
overdue Eligible Lender Trustee Fees and Delaware Trustee
Fees.
(d) On each Distribution Date, the Indenture Trustee will
distribute to the Noteholders as of the related Record Date all amounts
transferred to the Note Distribution Account pursuant to Section
5.5(a)(ii) and (iii) (in addition to any amounts transferred from the
Reserve Account, any amounts deposited into the
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Monthly Advance Account pursuant to Section 5.4 and any Parity
Percentage Payments transferred from the Collection Account pursuant to
Section 5.5(e)) in the following order of priority:
(i) first, to each Class of Class A Noteholders, the
Class A Noteholders' Interest Distribution Amount (pro rata
based upon the portion thereof allocable to each such Class);
(ii) second, if such Distribution Date is a Quarterly
Distribution Date, to the Class B Noteholders, the Class B
Noteholders' Interest Distribution Amount;
(iii) third, to the Class A-1 Noteholders, the
Noteholders' Principal Distribution Amount until the
Outstanding Amount of the Class A-1 Notes has been reduced to
zero;
(iv) fourth, after the Outstanding Amount of the
Class A-1 Notes has been reduced to zero, to the Class A-2
Noteholders, the Noteholders' Principal Distribution Amount
until the Outstanding Amount of the Class A-2 Notes has been
reduced to zero, and
(v) fifth, after the Outstanding Amount of the Class
A Notes has been reduced to zero, if such Distribution Date is
a Quarterly Distribution Date, to the Class B Noteholders the
remaining Noteholders' Principal Distribution Amount until the
Outstanding Amount of the Class B Notes shall have been
reduced to zero.
On each Quarterly Distribution Date, the Eligible Lender
Trustee will distribute to the Certificateholders as of the related
Record Date all amounts transferred to the Certificate Distribution
Account pursuant to Section 5.5(a) (in addition to any amounts
transferred from the Reserve Account and any amount deposited into the
Certificate Quarterly Advance Account pursuant to Section 5.4) in the
following order of priority: (i) first, to the Certificateholders, the
Certificateholders' Interest Distribution Amount and (ii) second, to
the Certificateholders, the Certificateholders' Principal Distribution
Amount. The priority of distributions set forth in this Section 5.5(d)
shall be subject to the provisions of Section 5.5(f).
(e) On each Quarterly Distribution Date, after making any and
all required transfers to the Expense Account, the Note Distribution
Account and, if applicable, the Certificate Distribution Account
pursuant to Section 5.5(a), the Indenture Trustee will transfer any
amounts remaining in the Collection Account (other than amounts
representing payments received during the month in which such
Distribution Date occurs) in the following order of priority:
(i) to the Reserve Account, the amount, if any,
necessary to increase the balance thereof to the Specified
Reserve Account Balance,
(ii) to the Note Distribution Account, the Parity
Percentage Payment, if any, for such Distribution Date,
(iii) to the Note Distribution Account, the amount of
any outstanding Noteholders' Interest Carryover, and
(iv) to the Transferor, any amounts remaining on
deposit in the Collection Account other than amounts
representing payments received on or with respect to the
Financed Student Loans during the month of such Quarterly
Distribution Date (amounts transferred to the Transferor
pursuant to this clause (iv) shall be transferred by the
Indenture Trustee to the account specified by the Transferor).
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The Transferor shall have the right, at its option, to transfer and
assign, in whole or in part, its right to receive any amounts required
to be paid to it pursuant to clause (iv).
(f) Notwithstanding the foregoing, if (x) on any Distribution
Date following all distributions to be made on such Distribution Date,
the Outstanding Amount of the Class A Notes would exceed the sum of the
Pool Balance at the end of the immediately preceding Collection Period
plus the aggregate balance on deposit in the Trust Accounts on such
Distribution Date following such distributions, or (y) an Event of
Default has occurred with respect to payment of the Notes,
distributions pursuant to Section 5.5(d) shall be made in the following
priority:
(i) first, to each Class of Class A Noteholders, the
Noteholders' Interest Distribution Amount applicable to each
such Class pro rata based upon the portion thereof allocable
to each such Class;
(ii) second, in the case of
(A) clause (x) above, to the Class A-1
Noteholders, the Noteholders' Principal
Distribution Amount until the Outstanding
Amount of the Class A-1 Notes has been
reduced to zero, and then to the Class A-2
Noteholders, the Noteholders' Principal
Distribution Amount until the Outstanding
Amount of the Class A-2 Notes has been
reduced to zero, and
(B) clause (y) above, to each Class of Class
A Noteholders, the Noteholders' Principal
Distribution Amount applicable to such
Distribution Date, pro rata based upon the
Outstanding Amount of each Class of Class A
Notes until the Outstanding Amount of each
Class of Class A Notes has been paid in
full;
(iii) third, if such Distribution Date is a Quarterly
Distribution Date, to the Class B Noteholders, the
Noteholders' Interest Distribution Amount applicable to the
Class B Notes;
(iv) fourth, after the Outstanding Amount of each of
the Class A Notes has been reduced to zero, if such
Distribution Date is a Quarterly Distribution Date, to the
Class B Noteholders, the Noteholders' Principal Distribution
Amount until the Outstanding Amount of the Class B Notes has
been reduced to zero;
(v) fifth, if such Distribution Date is a Quarterly
Distribution Date, to the Class A Noteholders, the
Noteholders' Interest Carryover applicable to the respective
Class of Class A Notes, pro rata based upon the portion
thereof allocable to each such Class;
(vi) sixth, if such Distribution Date is a Quarterly
Distribution Date, to the Class B Noteholders, the
Noteholders' Interest Carryover applicable to the Class B
Notes;
(vii) seventh, if such Distribution Date is a
Quarterly Distribution Date, to the Certificateholders, the
Certificateholders' Interest Distribution Amount; and
(viii) eighth, if such Distribution Date is a
Quarterly Distribution Date, to the Certificateholders, the
Certificateholders' Principal Distribution Amount.
All distributions made to the Noteholders of a Class or the
Certificateholders on each Distribution Date shall be made on a pro rata basis
among the Noteholders of such Class and Certificateholders of record as of the
related Record Date based upon the Outstanding Amount of such Class (or, with
respect to payments of principal
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on such Class of Notes, the applicable Principal Factor with respect to such
Class) or percentage interest of Certificates so owned.
SECTION 5.6. Reserve Account.
(a) On the Closing Date, the Transferor shall deposit the
Reserve Account Initial Deposit into the Reserve Account.
(b) If the amount on deposit in the Reserve Account on any
Quarterly Distribution Date (after giving effect to all deposits or
withdrawals therefrom on such Quarterly Distribution Date) is greater
than the then applicable Specified Reserve Account Balance, the
Administrator shall instruct the Indenture Trustee in writing to
withdraw such excess from the Reserve Account and
(i) to deposit into the Note Distribution Account, an
amount equal to the lesser of such excess and the amount
described in Section 5.5(e)(iii) for such Distribution Date
(to the extent not otherwise paid to the Note Distribution
Account on such Distribution Date),
(ii) to deposit into the Note Distribution Account
the lesser of such excess (after giving effect to clause (i)
above) and any amounts required to be paid by the Transferor
pursuant to Section 3.2 as a result of breaches of
representations and warranties made in Section 3.1 to the
extent the Transferor (or the Master Servicer, if applicable)
has not made such payments within the required time period,
and
(iii) to distribute the remaining amount of such
excess (after giving effect to clauses (i) and (ii) above) to
the Transferor.
Amounts properly distributed pursuant to this paragraph (b) shall be
deemed released from the Trust Estate and the security interest therein
granted to the Indenture Trustee, and the Transferor shall in no event
thereafter be required to refund any such distributed amounts. The
Transferor shall have the right, at its option, to transfer and assign,
in whole or in part, its right to receive any amounts required to be
paid to it pursuant to clause (iii).
(c) Following the payment in full of the aggregate Outstanding
Amount of the Notes 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, any amount remaining on deposit in the
Reserve Account shall be distributed to the Transferor. The Transferor
shall in no event be required to refund any amounts properly
distributed pursuant to this Section 5.6(c).
(d) (i) If on any Quarterly Distribution Date (and with
respect to Section 5.5(c)(i), the 25th day of each month, or if such
day is not a Business Day the next succeeding Business Day), any
amounts to be distributed as calculated pursuant to Section
5.5(c)(i)-(v) exceed the amount on deposit in the Expense Account
available for such purposes, the Administrator shall instruct the
Indenture Trustee to withdraw from the Reserve Account the lesser of
such excess and the amount on deposit in the Reserve Account (after
giving effect to each withdrawal in the order specified in Section
5.5(c) (i)-(v)) and deposit such withdrawn amount in the Expense
Account for distribution as provided in Section 5.5.
(ii) If the Noteholders' Distribution Amount for a
Distribution Date exceeds the amount in the Note Distribution Account
for such Distribution Date available for such purposes, the
Administrator shall instruct the Indenture Trustee to withdraw from the
Reserve Account an amount equal to the lesser of such excess, and the
amount on deposit in the Reserve Account (after giving effect to
paragraph (d)(i) above),
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and deposit such withdrawn amount into the Note Distribution Account
for distribution as provided in Section 5.5.
(iii) If the Certificateholders' Distribution Amount for a
Quarterly Distribution Date exceeds the amount for such Quarterly
Distribution Date available for such purposes, the Administrator shall
instruct the Indenture Trustee on such Quarterly Distribution Date to
withdraw from the Reserve Account an amount equal to the lesser of such
excess, and the amount on deposit in the Reserve Account (after giving
effect to paragraphs (d)(i) and (d) (ii) above), and to deposit such
withdrawn amount in the Certificate Distribution Account for
distribution as provided in Section 5.5.
SECTION 5.7. Statements to Certificateholders and Noteholders. On each
Distribution Determination Date immediately preceding a Distribution Date, the
Master Servicer or 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 the applicable Class of
record and to the Eligible Lender Trustee for the Eligible Lender Trustee to
forward on such succeeding Distribution Date to each Certificateholder (if such
Certificateholder is not the Transferor) of record, a statement substantially in
the form of Exhibits A and B, respectively, setting forth at least the following
information with respect to such Distribution Date or the preceding Collection
Period or Collection Periods, to the extent applicable:
(i) the Principal Factor for each Class of Notes;
(ii) the amount of the distribution allocable to
principal on each Class of Notes;
(iii) the amount of the distribution allocable to
interest on each Class of Notes and on the Certificates,
together with the interest rates applicable with respect
thereto (indicating, whether such interest rates are based on
the Formula Interest Rate or on the Net Loan Rate with respect
to each Class of the Class A Notes and on the Formula Interest
Rate or on the Net Loan Rate with respect to the Class B
Notes, and specifying what each such interest rate would have
been if it had been calculated using the alternate basis);
(iv) the amount of the distribution, if any,
allocable to any Noteholders' Interest Carryover together with
the outstanding amount, if any, thereof after giving effect to
any such distribution;
(v) the Pool Balance as of the close of business on
the last day of the preceding Collection Period;
(vi) the aggregate outstanding principal amount of
each Class of Notes as of such Distribution Date, after giving
effect to payments allocated to principal reported under
clause (ii) above;
(vii) the amount of the Servicing Fee, the
Administration Fee, the Indenture Trustee Fee, the Delaware
Trustee Fee and the Eligible Lender Trustee Fee to be
allocated on the upcoming Distribution Date;
(viii) the amount of the aggregate Realized Losses,
if any, for the preceding Collection Period and the aggregate
amount, if any, received (stated separately for interest and
principal) during such Collection Period relating to Financed
Student Loans for which a Realized Loss was previously
allocated;
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(ix) the amount of the distribution attributable to
amounts in the Reserve Account, the amount of any other
withdrawals from the Reserve Account for such Distribution
Date, the balance of the Reserve Account on such Distribution
Date, after giving effect to changes therein on such
Distribution Date, the then applicable Parity Percentage and
the amount of the distribution, if any, attributable to Parity
Percentage Payments;
(x) the aggregate amount, if any, paid for Financed
Student Loans purchased from the Trust during the preceding
Collection Period;
(xi) during the Exchange Period only, the aggregate
Issuer Consolidation Payments and Adjustment Payments, stated
separately, for the preceding Collection Period; and
(xii) the number and principal amount of Financed
Student Loans, as of the end of the preceding Collection
Period, that are (A) 30 to 60 days delinquent, (B) 61 to 90
days delinquent, (C) 91 to 120 days delinquent, (D) more than
120 days delinquent and (E) for which claims have been filed
with the appropriate Guarantor or the Department of HHS and
which are awaiting payment.
5.8. Expense Account. The Administrator shall instruct the Indenture
Trustee to deposit funds into, and withdraw funds from, the Expense Account as
set forth in Sections 5.5 and 5.6. Any funds remaining in the Expense Account
upon termination of the Trust shall be distributed to the Master Servicer as
additional servicing compensation.
5.9. Note Distribution Account and Certificate Distribution Account.
The Administrator shall instruct the Indenture Trustee and the Eligible Lender
Trustee to deposit funds into, and withdraw funds from, the Note Distribution
Account and the Certificate Distribution Account, as applicable, as set forth in
Sections 5.5, 5.6 and 5.10.
5.10. Monthly Advances. If the Master Servicer has applied for a
Guarantee Payment from a Guarantor, an Interest Subsidy Payment or a Special
Allowance Payment from the Department of Education or an Insurance Payment from
the Department of HHS, and the Master Servicer has not received the related
payment prior to the end of the Collection Period immediately preceding the
Distribution Date on which such amount would be required to be distributed as a
payment of interest, the Master Servicer may, no later than the Distribution
Determination Date relating to such Distribution Date, in its sole discretion,
deposit into the Monthly Advance Account an amount up to the amount of such
payments applied for but not received (such deposits by the Master Servicer are
referred to herein as "Monthly Advances"). Such Monthly Advances are recoverable
by the Master Servicer (i) first, from the Guarantee Payment, Interest Subsidy
Payment, Special Allowance Payment or Insurance Payment, as the case may be, for
which such Monthly Advance was made and (ii) second, if such amounts have not
been received, from collections received generally on or with respect to the
Financed Student Loans. The Master Servicer shall have no obligation, legal or
otherwise, to make any Monthly Advance, and the making of or decision to make a
particular Monthly Advance shall not create any obligation on the Master
Servicer, legal or otherwise, to make any future Monthly Advances.
5.11. Certificate Interest. During the initial Interest Period, the
Certificates shall bear interest at the Certificate Initial Rate. Thereafter,
the Certificates shall bear interest during each applicable Interest Period at
the Certificate Rate.
During each Interest Period, interest at the Certificate Rate shall
accrue daily and shall be computed for the actual number of days elapsed on the
basis of a year consisting of 360 days.
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The Master Servicer shall calculate One-Month LIBOR on each Rate
Determination Date and shall notify the Eligible Lender Trustee and the
Indenture Trustee of One-Month LIBOR. The determination by the Master Servicer
of One-Month LIBOR shall (in the absence of manifest error) be final and binding
upon all parties.
ARTICLE VI
The Transferor and the Master Servicer
--------------------------------------
SECTION 6.1. Representations of Transferor and Master Servicer. The
Transferor and Master Servicer make the following representations with respect
to the Transferor and the Master Servicer, respectively, on which the Issuer is
deemed to have relied in acquiring (through the Eligible Lender Trustee) the
Financed Student Loans being conveyed pursuant to this Agreement. The
representations speak as of the Closing Date, in the case of the Initial
Financed Student Loans, and as of the applicable Exchange Date, in the case of
the Exchanged Student Loans transferred on such Exchange Date, but shall survive
the contribution, 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. Each of the Transferor and
the Master Servicer 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, except for such power
and authority the absence of which would not have a material adverse
effect on the Master Servicer or Transferor, as the case may be, or
their respective ability to consummate the transactions contemplated by
the Basic Documents, and the Transferor had at all relevant times, and
has, the power, authority and legal right to originate, acquire and own
the Financed Student Loans and the Master Servicer had at all relevant
times, and has the power, authority and 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 and lease of property or the
conduct of its business (including the servicing of the Financed
Student Loans for which it acts as Primary Servicer as required by this
Agreement) shall require such qualifications except for such licenses
and approvals the absence of which would not have a material adverse
effect on the Master Servicer or its ability to consummate the
transactions contemplated by the Basic Documents.
(c) Power and Authority. Each of the Transferor and the Master
Servicer has the requisite corporate power and authority to execute and
deliver this Agreement and to carry out its terms; the Transferor has
requisite corporate power and authority to transfer and assign the
property to be contributed and assigned to and deposited with the
Issuer (or with the Eligible Lender Trustee on behalf of the Issuer)
and the Transferor has duly authorized such transfer and assignment to
the Issuer (or to the Eligible Lender Trustee on behalf of the Issuer)
by all necessary corporate action on Transferor's part; and the
execution, delivery and performance of this Agreement have been duly
authorized by the Transferor and the Master Servicer by all necessary
corporate action on their respective parts.
(d) Binding Obligation. This Agreement constitutes a legal,
valid and binding obligation of the Transferor and the Master Servicer,
enforceable against the Transferor and the Master Servicer in
accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance 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.
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(e) No Violation. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof
do not violate, 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 charter or by-laws of the Transferor or the Master
Servicer, or any material indenture, material agreement or other
material instrument to which the Transferor or the Master Servicer is a
party or by which it shall be bound; or result in the creation or
imposition of any Lien upon any of its properties pursuant to the terms
of any such material indenture, material agreement or other material
instrument (other than pursuant to the Basic Documents); nor violate
any material law or, to the knowledge of either the Transferor or the
Master Servicer, any material order, rule or regulation applicable to
it of any court or of any federal or State regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Transferor or the Master Servicer or its
properties.
(f) No Proceedings. To its best knowledge, there are no
proceedings or investigations pending or threatened against the
Transferor or the Master Servicer, before any court, regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over it or its properties: (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 of the
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 either the Transferor or the Master Servicer 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.
(g) 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 either
the Transferor or the Master Servicer in connection with the execution
and delivery by either the Transferor or the Master Servicer of this
Agreement and the performance by either the Transferor or the Master
Servicer of the transactions expressly contemplated by this Agreement,
have been duly obtained, effected or given and are in full force and
effect, except such as may be required by the blue sky laws of any
jurisdiction in connection with the sale and distribution of the Notes
and the Certificates for which no representation or warranty is being
given.
(h) No Amendment or Waiver. Except as provided in Section
4.14, no provision of a Financed Student Loan has been waived, altered
or modified in any respect, except pursuant to a document, instrument
or writing included in the Financed Student Loan File, and no such
amendment, waiver, alteration or modification causes such Financed
Student Loan not to conform in any material respect to the other
warranties contained in this Section or those of the Transferor
contained in Section 3.1.
(i) Location of Financed Student Loan Files. The Financed
Student Loan Files are kept in accordance with Section 3.4(b).
SECTION 6.2. Existence. Except as permitted by Section 6.5, during the
term of this Agreement, each of the Transferor and the Master Servicer will keep
in full force and effect its existence, rights and franchises as a Virginia
banking corporation under the laws of the jurisdiction of its organization.
SECTION 6.3. Liability and Indemnities.
(a) Each of the Transferor and the Master Servicer shall be
liable in accordance herewith only to the extent of the obligations
specifically undertaken by the Transferor and the Master Servicer, as
the case may be, under this Agreement.
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(b) The Transferor 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 (except (i) taxes
arising out of fees paid to the Eligible Lender Trustee or the
Indenture Trustee, (ii) taxes arising out of the transfer of the
Financed Student Loans to the Eligible Lender Trustee, (iii) taxes
arising out of the issuance and sale of the Certificates and the Notes,
(iv) taxes arising out of the ownership of the Financed Student Loans
(including, without limitation, income taxes), and (v) taxes arising
out of distributions on the Certificates and the Notes) and costs and
expenses in defending against the same).
(c) The Transferor shall indemnify, defend and hold harmless
the Issuer, the Eligible Lender Trustee, the Indenture Trustee, 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 Indemnifiable Expenses arising out of, or imposed
upon such Person through, (i) the Transferor'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 Transferor'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; provided, however,
the Transferor shall not be liable for any such Indemnifiable Expenses
imposed upon such Person to the extent that they arise out of or result
from such Person's negligence, willful malfeasance or bad faith or a
breach of the representations and warranties of such Person in this
Agreement. Notwithstanding anything to the contrary contained in this
Agreement, in no event shall the Transferor be liable under any theory
of tort, contract, strict liability or other legal or equitable theory
for any lost profits or exemplary, punitive, special, incidental,
indirect or consequential damages, each of which is hereby excluded by
agreement of the parties regardless of whether or not the Transferor
has been advised of the possibility of such damages.
(d) The Transferor shall indemnify, defend and hold harmless
the Eligible Lender Trustee, the Delaware Trustee and the officers,
directors, employees and agents of the Eligible Lender Trustee and the
Delaware Trustee from and against, Indemnifiable Expenses 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 such Person hereunder and under the Trust
Agreement, except to the extent that such Indemnifiable Expenses: (i)
shall be due to the willful misfeasance, bad faith or negligence of
such Person, (ii) shall arise from any breach by such Person of its
covenants under any of the Basic Documents; or (iii) shall arise from
the breach by such Person of any of its representations or warranties
set forth in Section [[7.3]] of the Trust Agreement. Notwithstanding
anything to the contrary contained in this Agreement, in no event shall
the Transferor be liable under any theory of tort, contract, strict
liability or other legal or equitable theory for any lost profits or
exemplary, punitive, special, incidental, indirect or consequential
damages, each of which is hereby excluded by agreement of the parties
regardless of whether or not the Transferor has been advised of the
possibility of such damages.
(e) The Transferor 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 Transferor's responsibilities
pursuant to the parenthetical in paragraph (b) above).
(f) Pursuant to Section 6.7 of the Indenture, and subject to
the limitations therein, the Transferor 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
Indemnifiable Expenses, to the extent and in the manner provided in the
Indenture. Notwithstanding anything to the contrary contained in this
Agreement, in no event shall the Transferor be liable under any theory
of tort, contract, strict liability or other legal or equitable theory
for any lost profits or exemplary, punitive,
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special, incidental, indirect or consequential damages, each of which
is hereby excluded by agreement of the parties regardless of whether or
not the Transferor has been advised of the possibility of such damages.
(g) The Master Servicer shall indemnify, defend and hold
harmless the Issuer, the Eligible Lender Trustee, the Delaware Trustee,
the Indenture Trustee, the Certificateholders, and the Noteholders and
the officers, directors, employees and agents of the Issuer, the
Eligible Lender Trustee, the Delaware Trustee and the Indenture Trustee
from and against any and all Indemnifiable Expenses arising out of, or
imposed upon such Person through, the Master Servicer's willful
misfeasance, bad faith or negligence in the performance of its duties
under this 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 or bad faith on the
part of the Master Servicer is established by a court of law, by an
arbitrator or by way of settlement agreed to by the Master Servicer;
provided, however, the Master Servicer shall not be liable for any such
Indemnifiable Expenses imposed upon such Person to the extent that they
arise out of or result from such Person's negligence, willful
malfeasance or bad faith or a breach of the representations and
warranties of such Person in this Agreement. Notwithstanding the
foregoing, if the Master Servicer is rendered unable, in whole or in
part, by a force outside the control of the Master Servicer (including
acts of God, acts of war, severe weather, communications failures or
failures to receive electronic data or labor disputes or strikes,
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 long as the Master Servicer
remains unable to perform such obligation as a result of such event.
Notwithstanding anything to the contrary contained in this Agreement,
in no event shall the Master Servicer be liable under any theory of
tort, contract, strict liability or other legal or equitable theory for
any lost profits or exemplary, punitive, special, incidental, indirect
or consequential damages, each of which is hereby excluded by agreement
of the parties regardless of whether or not the Master Servicer has
been advised of the possibility of such damages.
(h) Indemnification under this Section shall survive the
resignation or removal of the Eligible Lender Trustee, the Delaware
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 Transferor or the Master Servicer, as the case may
be, 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 Transferor or the Master Servicer,
as the case may be without interest.
(i) Promptly after receipt by an indemnified party under this
Section 6.3 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 this Section 6.3, 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 Section
6.3., except to the extent the indemnifying party is materially
prejudiced by such failure. 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 reasonably satisfactory to such indemnified
party; provided, however, that if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those
available to the indemnifying party, the indemnifying party or parties
shall have the right to select separate counsel to assert such legal
defenses and to otherwise participate in the defense of such action on
behalf of the indemnified party or parties. After notice from the
indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable
to such indemnified party under this Section 6.3 for any legal or other
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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. 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 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.
The indemnified party will not, without the prior written
consent of the indemnifying party, settle, compromise or consent to the
entry of any judgment with respect to any pending or threatened claim,
action, suit or proceeding in which indemnification may be sought
hereunder.
SECTION 6.4. [Reserved]
SECTION 6.5. Merger or Consolidation of, or Assumption of the
Obligations of, the Transferor, the Administrator or the Master Servicer. Any
Person (a) into which the Transferor, the Administrator or the Master Servicer,
as the case may be, may be merged or consolidated, (b) which may result from any
merger or consolidation to which the Transferor, the Administrator or the Master
Servicer, as the case may be, shall be a party or (c) which may succeed to the
properties and assets of the Transferor, the Administrator or the Master
Servicer, as the case may be, substantially as a whole, shall be the successor
to the Transferor, the Administrator or the Master Servicer, as the case may be,
without the execution or filing of any document or any further act by any of the
parties to this Agreement or the Administration Agreement; PROVIDED, HOWEVER,
that each of the Transferor, the Administrator and the Master Servicer hereby
covenants that it will not consummate any of the foregoing transactions except
upon satisfaction of the following: (i) the surviving Transferor, Administrator
or Master Servicer, as the case may be, if other than Crestar Bank or a Crestar
Subsidiary or Crestar Financial Corporation, executes an agreement of assumption
to perform every obligation of the Transferor, the Administrator or the Master
Servicer, as the case may be, under this Agreement and the Administration
Agreement, (ii) immediately after giving effect to such transaction, no Master
Servicer Default (in the case of the Master Servicer) or no Administrator
Default (in the case of the Administrator) shall have occurred and be
continuing, (iii) the Transferor, the Administrator or the Master Servicer, as
the case may be, if other than Crestar Bank or a Crestar Subsidiary or Crestar
Financial Corporation shall have delivered to the Eligible Lender Trustee and
the Indenture Trustee an Officer's 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, if any,
provided for in this Agreement relating to such transaction have been complied
with, (iv) such transaction will not result in a material adverse federal or
State tax consequence to the Issuer relating to its tax classification, or to
the Noteholders, considered as a whole, relating to a change in the
characterization of the Notes and (v) unless "Crestar Bank" is the name of the
surviving entity, the Transferor, the Administrator or the Master Servicer, as
the case may be, 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, or (B) stating that, in
the opinion of such counsel, no such action shall be necessary to preserve and
protect such interests. Nothing in this Agreement or any other Basic Document
shall be deemed to restrict or prohibit, and no consent of Noteholders or
Certificateholders, supplemental agreement, Officer's Certificate (except to the
extent provided in clause [[(12)]] below of this Section 6.5) or Opinion of
Counsel (except to the extent provided in clause (v) above of this Section 6.5)
shall be required in the case of, the merger of a Crestar Subsidiary with a
Crestar Subsidiary or Crestar Financial Corporation, the consolidation of a
Crestar Subsidiary and a Crestar Subsidiary or Crestar Financial Corporation, or
the sale or other disposition of all or substantially all of the assets of a
Crestar Subsidiary to another Crestar Subsidiary or Crestar Financial
Corporation, if, in any such case in which the surviving, resulting or
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acquiring entity is not Crestar Financial Corporation, Crestar Financial
Corporation would own, directly or indirectly, at least eighty percent (80%) of
the voting securities of the Crestar Subsidiary surviving such merger, resulting
from such consolidation or acquiring such assets. For the purpose of this
Section 6.5, "Crestar Subsidiary" means each of (l) Crestar Bank, (2) [_______]
[[(__)]] any other banking subsidiaries of Crestar Financial Corporation the
consolidated assets of which constitute twenty percent (20%) or more of the
consolidated assets of Crestar Financial Corporation and its consolidated
subsidiaries, [[(__)]] any other banking subsidiary of Crestar Financial
Corporation designated as a Crestar Subsidiary pursuant to a Board Resolution
and set forth in an Officer's Certificate delivered to the Eligible Lender
Trustee and the Indenture Trustee, and [[(13)]] any subsidiary of Crestar
Financial Corporation that owns, directly or indirectly any voting securities,
or options, warrants or rights to subscribe for or purchase voting securities of
any Crestar Subsidiary under clauses (l) through [[(__)]], and in the case of
each of clauses (1) through [[(__)]] their respected successors (whether by
consolidation, merger, conversion, transfer of substantially all their assets
and business or otherwise) so long as any successor is a banking subsidiary (in
the case of clauses 1 through [[__]])) or a subsidiary (in the case of clause
[[(13)]]) of Crestar Financial Corporation. References to Crestar Financial
Corporation include any name change. "Board Resolution" means a copy of a
resolution certified by the Secretary or any Assistant Secretary of Crestar
Financial Corporation to have been duly adopted by the Board of Directors of
Crestar Financial Corporation, or such committee of the Board of Directors or
officers of Crestar Financial Corporation to which authority to act on behalf of
the Board of Directors has been delegated, and to be in full force and effect on
the date of such certification, and delivered to the Eligible Lender Trustee and
the Indenture Trustee.
SECTION 6.6. Limitation on Liability of Transferor, Master Servicer
and Others.
(a) The Transferor, the Master Servicer and any director or
officer or employee or agent of either 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.
(b) Neither the Transferor, the Master Servicer nor any of its
directors, officers, employees or agents shall be under any liability
to the Issuer, the Noteholders, the Certificateholders, the Indenture
Trustee or the Eligible Lender Trustee except as provided under this
Agreement or the Administration 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 Transferor or 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
their respective duties under this Agreement or the Administration
Agreement.
Except as provided in this Agreement, the Transferor and 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 in accordance with this Agreement, and that in its opinion
may involve it in any expense or liability; PROVIDED, HOWEVER, that the
Transferor or 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 Certificateholders under this Agreement or the Administration
Agreement and the Noteholders under the Indenture.
SECTION 6.7. Transferor May Own Certificate or Notes. The Transferor
and any Affiliate thereof 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 Transferor or an Affiliate thereof, except as expressly
provided herein or in any other Basic Document.
SECTION 6.8. Master Servicer Not to Resign. Subject to the provisions
of Section 6.5, Crestar Bank shall not resign from the obligations and duties
imposed on it as Master Servicer under this Agreement except upon (i)
determination that the performance of its duties under this Agreement shall no
longer be permissible under
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applicable law or shall violate any final order of a court or administrative
agency with jurisdiction over it or its properties, or (ii) satisfaction of a
Rating Agency Condition with respect to such resignation. Notice of any such
determination permitting resignation 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 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
Crestar Bank in accordance with Section 8.2.
ARTICLE VII
The Administrator
-----------------
SECTION 7.1. Representations of the Administrator. The Administrator
makes the following representations on which the Issuer is deemed to have relied
in acquiring (through the Eligible Lender Trustee) the Financed Student Loans
being conveyed pursuant to this Agreement. The representations speak as of the
Closing Date, in the case of the Initial Financed Student Loans, and as of the
applicable Exchange Date, in the case of the Exchanged Student Loans being
transferred on such Exchange Date, but shall survive the contribution, 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 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 except for such power and authority the absence of
which would not have a material adverse effect on the Administrator or
its ability to consummate the transactions contemplated by the Basic
Documents, and had at all relevant times, and has, the power, authority
and legal right, to administer the Financed Student Loans.
(b) Power and Authority of the Administrator. The
Administrator has the requisite corporate power and authority to
execute and deliver this Agreement and the Administration Agreement and
to carry out their respective terms; and the execution, delivery and
performance of this Agreement and the Administration Agreement have
been duly authorized by the Administrator by all necessary corporate
action on its part.
(c) Binding Obligation. This Agreement and the Administration
Agreement each constitutes a legal, valid and binding obligation of the
Administrator, enforceable against the Administrator in accordance with
its terms, subject to applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance 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 or and subject to
general principles of equity.
(d) No Violation. The consummation of the transactions
contemplated by this Agreement and the Administration Agreement and the
fulfillment of the terms hereof or thereof do not violate, result in
any breach of any of the terms and provisions of, nor constitute (with
or without notice of lapse of time or both) a default under, the
charter or by-laws of the Administrator, or any material indenture,
material agreement or other material 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 material indenture, material
agreement or other material instrument (other than pursuant to the
Basic Documents); nor violate any material law or, to the knowledge of
the Administrator, any material order, rule or regulation applicable to
it 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.
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(e) No Proceedings. To its best knowledge, there are no
proceedings or investigations pending or threatened against the
Administrator, before any court, regulatory body, administrative agency
or other governmental instrumentality having jurisdiction over it or
its properties: (i) asserting the invalidity of this Agreement or the
Administration Agreement, (ii) seeking to prevent the consummation of
any of the transactions contemplated by this Agreement or the
Administration Agreement or (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 or the Administration
Agreement.
(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 its capacity as the Administrator in connection with
the execution and delivery by the Administrator of this Agreement or
the Administration Agreement and the performance by the Administrator
in its capacity as the Administrator of the transactions contemplated
by this Agreement or the Administration Agreement, have been duly
obtained, effected or given and are in full force and effect.
SECTION 7.2. Liability and Indemnities.
(a) The Administrator shall be liable in accordance herewith
only to the extent of the obligations specifically undertaken by the
Administrator under this Agreement or the Administration 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.
Except as provided in this Agreement or the Administration
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 the Administration
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 other Basic Documents and the
interests of the Certificateholders under this Agreement and the
Noteholders under the Indenture.
(b) The Administrator shall indemnify, defend and hold
harmless from its funds, the Issuer, the Eligible Lender Trustee, the
Delaware Trustee, the Indenture Trustee, the Master Servicer, the
Noteholders and the Certificateholders and the officers, directors,
employees and agents of the Issuer, the Eligible Lender Trustee, the
Delaware Trustee, the Indenture Trustee, the Noteholders and the
Certificateholders from and against any and all Indemnifiable Expenses
arising out of, or imposed upon such Person through, the
Administrator's willful misfeasance, bad faith or negligence in the
performance of its duties under this Agreement or the Administration
Agreement, or by reason of reckless disregard of its obligations and
duties under this Agreement or the Administration 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 or bad faith on the part of the Administrator is
established by a court of law, by an arbitrator or by way of settlement
agreed to by the Administrator. Notwithstanding the foregoing, if the
Administrator is rendered unable, in whole or in part, by a force
outside the control of the Administrator (including acts of God, acts
of war, severe weather, communications failures or failures to receive
electronic data or labor disputes or strikes, fires, earthquakes and
other disasters) to satisfy its obligations under this Agreement, the
Administrator 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 long as the Administrator remains unable to perform such
obligation as a result of such event; provided, however, the
Administrator shall not be liable for any such Indemnifiable Expenses
imposed upon such Person to the extent that they arise out of or result
from such Person' s negligence, willful malfeasance or bad faith or a
breach of the
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representations and warranties of such Person in this Agreement or the
Administration Agreement. Notwithstanding anything to the contrary
contained in this Agreement or the Administration Agreement, in no
event shall the Administrator be liable under any theory of tort,
contract, strict liability or other legal or equitable theory for any
lost profits or exemplary, punitive, special, incidental, indirect or
consequential damages, each of which is hereby excluded by agreement of
the parties regardless of whether or not the Administrator has been
advised of the possibility of such damages.
(c) Indemnification under this Section shall survive the
resignation or removal of the Eligible Lender Trustee, the Delaware
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 Administrator 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
Administrator without interest.
(d) Promptly after receipt by an indemnified party under this
Section 7.2 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 this Section 7.2, 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 Section
7.2., except to the extent the indemnifying party is materially
prejudiced by such failure. 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 reasonably satisfactory to such indemnified
party; provided, however, that if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those
available to the indemnifying party, the indemnifying party or parties
shall have the right to select separate counsel to assert such legal
defenses and to otherwise participate in the defense of such action on
behalf of the indemnified party or parties. After notice from the
indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable
to such indemnified party under this Section 7.2 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. 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 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.
The indemnified party may not, without the prior written
consent of the indemnifying party, settle, compromise or consent to the
entry of any judgment with respect to any pending or threatened claim,
action, suit or proceeding in which indemnification may be sought
hereunder.
SECTION 7.3. Administrator Not to Resign. Subject to the provisions of
Section 6.5, Crestar Bank shall not resign from the obligations and duties
imposed on it as Administrator under this Agreement except upon (i)
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 it or its properties, or
(ii) satisfaction of a Rating Agency Condition with respect to such resignation.
Notice of any such
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determination permitting resignation 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 concurrently 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 obligations of Crestar
Bank in accordance with Section 8.2.
SECTION 7.4. Additional Services. Notwithstanding anything in the
Administration Agreement to the contrary, the Administrator is authorized and
directed to prepare, execute on behalf of the Trust in its capacity as
Administrator, and file any and all reports required to be filed under the
Exchange Act by the Trust as a result of the registration of the Notes under the
Securities Act. The Trust hereby ratifies and confirms as actions of the Trust
the execution by the Administrator on behalf of the Trust of the Registration
Statement on Form S-3, Registration No. 333-35825-__, and each amendment
thereto, and any related correspondence with Securities and Exchange Commission,
the Current Report on Form 8-K dated as of [________], 1997, and the Letter of
Representations to The Depository Trust Company with respect to the Notes.
ARTICLE VIII
Default
-------
SECTION 8.1. Master Servicer Default; Administrator Default.
-----------------------------------------------
(a) If any one of the following events (a "Master Servicer Default")
shall occur and be continuing:
(1) any failure by the Master Servicer to deliver to
the Indenture Trustee for deposit in any of the Trust Accounts
at the time required for such deposit any collections,
Guarantee Payments, Insurance Payments or other amounts
received by the Master Servicer with respect to the Financed
Student Loans, which failure continues unremedied for three
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
(2) 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 and Certificateholders and (ii) continue
unremedied for a period of 60 days 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 the
Administrator or (B) to the Master Servicer and to the
Indenture Trustee and the Eligible Lender Trustee by the
holders of Directing Notes, representing not less than 25% of
the Outstanding Amount of the Directing Notes or
(3) an Insolvency Event occurs with respect to the
Master Servicer; or
(4) any limitation, suspension or termination by the
Department of Education or the Department of HHS of the Master
Servicer's eligibility to service Student Loans which
materially and adversely affects the Master Servicer's ability
to service the Financed Student Loans;
then, and in each and every case, so long as the Master Servicer
Default shall not have been remedied, the Indenture Trustee or the
holders of Directing Notes evidencing not less than 25% of the
Outstanding Amount of the Directing Notes, by notice then given in
writing to the Master Servicer (and to the Indenture
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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 6.3 hereof) 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 8.2, 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
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 Financed Student Loan Files from a
current Master Servicer 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 Master 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 Servicer shall continue
to serve in its capacity as Servicer or subservicer, unless it is in
breach of the related Servicing or Subservicing Agreement.
(b) Administrator Default. If any one of the following events
(an "Administrator Default") shall occur and be continuing:
(1) any failure by the Administrator to direct the
Indenture Trustee or the Eligible Lender Trustee, as
applicable, to make any required distributions from any of the
Trust Accounts, which failure continues unremedied for three
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
(2) 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,
the Administration Agreement or any other Basic Document,
which failure shall (i) materially and adversely affect the
rights of Noteholders and (ii) continue unremedied for a
period of 60 days 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 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 holders of Directing Notes representing not less than 25%
of the Outstanding Amount of the Directing Notes;
(3) 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, the Indenture Trustee or the holders of Directing Notes
evidencing not less than 25% of the Outstanding Amount of the Directing Notes,
by notice then given in writing to the Administrator (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
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in Sections 6.3 and 7.2 hereof) of the Administrator under this Agreement and
the Administration Agreement. On or after the receipt by the Administrator of
such written notice, all authority and power of the Administrator under this
Agreement and the Administration 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 8.2; 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 and the Administration Agreement. All reasonable costs and expenses
(including attorneys' fees) incurred in connection with amending this Agreement
and the Administration 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.
SECTION 8.2. Appointment of Successor.
(a) Upon receipt by the Master Servicer or the Administrator,
as the case may be, of notice of termination pursuant to Section 8.1,
or the resignation by the Master Servicer or the Administrator, as the
case may be, in accordance with the terms of this Agreement, the
predecessor Master Servicer or the Administrator, as the case may be,
shall continue to perform its functions as Master Servicer or
Administrator, as the case may be, under this Agreement and the
Administration Agreement, as the case may be, 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 or Administrator, as the case may be, shall become unable to
act as Master Servicer or Administrator, as the case may be, as
specified in the notice of resignation and accompanying Opinion of
Counsel. In the event of the termination hereunder of the Master
Servicer or the Administrator, as the case may be, the Issuer shall
appoint a successor Master Servicer or Administrator, as the case may
be, acceptable to the Indenture Trustee, and the successor Master
Servicer or Administrator, as the case may be, shall accept its
appointment by a written assumption in form acceptable to the Indenture
Trustee. If a successor Master Servicer or Administrator, as the case
may be, has not been appointed at the time when the predecessor Master
Servicer or Administrator, as the case may be, has ceased to act as
Master Servicer or Administrator, as the case may be, in accordance
with this Section, the Indenture Trustee without further action shall
automatically be appointed the successor Master Servicer or
Administrator, as the case may be, and the Indenture Trustee shall be
entitled to the Master Servicing Fee or the Administration Fee, as the
case may be in accordance with the provisions of the Basic Documents.
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 or Administrator, as the case may be,
under this Agreement; PROVIDED, HOWEVER, that such right to appoint or
to petition for the appointment of any such successor 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 or
Administrator, as the case may be (including the Indenture Trustee
acting as successor Master Servicer or Administrator as the case may
be), shall be the successor in all respects to the predecessor Master
Servicer or Administrator, as the case may be, and shall be subject to
all the responsibilities, duties and liabilities arising thereafter
relating thereto placed on the predecessor Master Servicer or
Administrator, as the case may be, and shall be entitled to
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an amount agreed to by such successor Master Servicer or Administrator
as the case may be, in accordance with the provisions of the Basic
Documents (which shall not exceed the Master Servicing Fee or
Administration Fee, as the case may be, unless such compensation
arrangements will not result in a downgrading of the Notes by any
Rating Agency) and all the rights granted to the predecessor Master
Servicer or Administrator, as the case may be, by the terms and
provisions of this Agreement.
(c) Neither the Master Servicer nor the Administrator may
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 or Administrator, as the case may be, pursuant hereto shall be
entitled to resign to the extent a qualified successor Master Servicer
or Administrator, as the case may be, has been appointed and has
assumed all the obligations of the Master Servicer or Administrator, as
the case may be, in accordance with the terms of this Agreement and the
other Basic Documents.
(d) Any successor Master Servicer shall assume all the
obligations and responsibilities of the Master Servicer under each
Subservicing Agreement with a Servicer and shall only be able to modify
or terminate such Subservicing Agreements pursuant to the provisions
thereof.
SECTION 8.3. Notification to Noteholders and Certificateholders. Upon
any termination of, or appointment of a successor to, the Master Servicer or
Administrator, as the case may be, pursuant to this Article VIII, 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 (which, in the case of any such appointment
of a successor, shall consist of prior written notice thereof to the Rating
Agencies).
SECTION 8.4. Waiver of Past Defaults. The holders of Directing Notes
evidencing not less than a majority of the Outstanding Amount of the Directing
Notes may, on behalf of all Noteholders and Certificateholders, waive in writing
any default by the Master Servicer or Administrator, as the case may be, in the
performance of its obligations hereunder and any consequences thereof, except a
default in making any required 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
Master Servicer Default or Administrator Default, as the case may be, 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 IX
Termination
-----------
SECTION 9.1. Termination.
(a) Optional Purchase of All Financed Student Loans. As of the
last day of any Collection Period immediately preceding a Quarterly
Distribution Date as of which the then outstanding Pool Balance is 10%
or less of the Initial Pool Balance, the Transferor shall have the
option to purchase the Indenture Trust Estate, other than the Trust
Accounts. To exercise such option, the Transferor shall deposit
pursuant to Section 5.4 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, such value to be determined by
an appraiser mutually agreed upon by the Transferor, the Eligible
Lender Trustee and the Indenture Trustee, and shall succeed to all
interests in and to the Trust; PROVIDED, HOWEVER, that the Transferor
may not effect such purchase if the aggregate Purchase Amount to be so
deposited in the Collection Account does not equal or exceed an amount
equal to the sum of (x) the unpaid principal balance of the Notes plus
accrued and unpaid interest thereon at the related Class
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Interest Rate to the last day of the Collection Period during which
such purchase occurs and (y) the unpaid Transaction Fees, if any.
(b) Auction of Financed Student Loans. Any Financed Student
Loans remaining in the Trust as of the end of [________], 2006 will be
offered for sale by the Indenture Trustee on or prior to the [October
2006] Distribution Date if the then outstanding Pool Balance is 10% or
less of the Initial Pool Balance. The Transferor, its Affiliates and
unrelated third parties may offer bids to purchase such Financed
Student Loans on or prior to 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 aggregate 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 the Notes on such Distribution Date to zero and (ii) pay to the
Noteholders the Noteholders' 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 to
redeem any outstanding Notes on such Distribution Date. The proceeds of
any sale will be applied in the order and priority set forth in 5.4(b)
of the Indenture. 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.
(c) Insolvency of Transferor . Upon any sale of the assets of
the Trust pursuant to Section [[9.2]] of the Trust Agreement, the
Master Servicer shall instruct the Indenture Trustee to deposit the net
proceeds from such sale after all payments and reserves therefrom
(including the expenses of such sale) have been made (the "Insolvency
Proceeds") in the Collection Account. On the applicable Distribution
Date, 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 Master
Servicer 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 5.5 (other than pursuant to Section 5.5(a) (ii))
and 5.6) 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 Department of Education, the Indenture
Trustee, the Delaware Trustee and the Eligible Lender Trustee,
any unpaid Consolidation Loan Fees, Indenture Trustee Fees,
Delaware Trustee Fees and Eligible Lender Trustee Fees,
respectively, and other amounts owed the Indenture Trustee,
the Delaware Trustee or the Eligible Lender Trustee hereunder
or under any other Basic Document and not otherwise paid on
such Distribution Date;
(ii) to each Class of Class A Noteholders, pro rata
based upon the portion thereof allocable to each such Class,
any portion of the Noteholders' Interest Distribution Amount
applicable to the Class A Noteholders not otherwise
distributed to such Class A Noteholders on such Distribution
Date;
(iii) to each Class of Class A Noteholders, pro rata
based upon the Outstanding Amount of such Class (after giving
effect to the reduction in the Outstanding Amount of such
Class resulting from the distributions to such Class on such
Distribution Date and on prior Distribution Dates) until the
Outstanding Amount of each Class of Class A Notes has been
reduced to zero;
(iv) to the Class B Noteholders, any portion of the
Noteholders' Interest Distribution Amount applicable to the
Class B Noteholders not otherwise distributed to the Class B
Noteholders on such Distribution Date;
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(v) after the Outstanding Amount of the Class A Notes
has been reduced to zero, to the Class B Noteholders, the
Outstanding Amount of the Class B Notes (after giving effect
to the reduction in the Outstanding Amount of the Notes
resulting from the distributions to Noteholders on such
Distribution Date and on prior Distribution Dates);
(vi) to the Master Servicer, any unpaid Servicing Fee
and other amounts owed to the Master Servicer hereunder or
under any other Basic Document and not otherwise paid on such
Distribution Date;
(vii) to the Class A-1 Noteholders and the Class A-2
Noteholders, any portion of the Noteholders' Interest
Carryover applicable to any such Class, pro rata based upon
the portion thereof allocable to each such Class not otherwise
distributed to the Class A Noteholders on such Distribution
Date;
(viii) to the Class B Noteholders, any portion of the
Noteholders' Interest Carryover applicable to the Class B
Noteholders not otherwise distributed to the Class B
Noteholders on such Distribution Date;
(ix) to the Certificateholders, any portion of the
Certificateholders' Interest Distribution amount not otherwise
distributed to the Certificateholders on such Distribution
Date; and
(x) 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).
Any investments on deposit in the Reserve Account which will not mature
on or before the Distribution Date when needed 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 Proceeds remaining
after the deposits described above shall be paid to the Transferor.
(d) Notice. Notice of any termination of the Trust shall be
given by the Administrator to the Master Servicer, the Eligible Lender
Trustee, the Indenture Trustee and the Rating Agencies as soon as
practicable after the Administrator has received notice thereof.
(e) Succession. Following the satisfaction and discharge of
the Indenture and the payment in full of the principal of and interest
on the Notes, the Certificateholders will succeed to the rights of the
Noteholders hereunder other than Section 5.6(b) and the Eligible Lender
Trustee will succeed to the rights of, and assume the obligations of,
the Indenture Trustee pursuant to this Agreement and any other Basic
Documents.
ARTICLE X
[Reserved]
----------
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ARTICLE XI
Miscellaneous
-------------
SECTION 11.1. Amendment.
(a) This Agreement may be amended by the Transferor, the
Master Servicer and the Eligible Lender Trustee, with the prior consent
of the Indenture Trustee (which consent shall not be unreasonably
withheld) 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; 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.
(b) This Agreement may also be amended from time to time by
the Transferor, the Master Servicer and the Eligible Lender Trustee,
with the prior consent of the Indenture Trustee and the consent of the
holders of Directing Notes evidencing not less than a majority of the
Outstanding Amount of the Directing Notes, 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 (i) 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 (ii) reduce the aforesaid percentage of the
Outstanding Amount of the Notes and the Certificate Balance, the
Noteholders and the Certificateholders of which are required to consent
to any such amendment, without the consent of all outstanding
Noteholders and Certificateholders affected thereby.
(c) Promptly after the execution of any amendment pursuant to
clause (ii) above, the Eligible Lender Trustee shall furnish written
notification of the substance of such amendment or consent to each
Certificateholder and the Indenture Trustee.
(d) 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.
(e) 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 11.2(i)(l).
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.
Notwithstanding anything to the contrary contained in this Section
11.1, neither this Agreement nor the Indenture may be amended unless such
amendment satisfies the Rating Agency Condition.
SECTION 11.2. Protection of Interests in Trust.
(a) The Transferor shall execute and file such financing
statements and cause to be executed and filed such continuation
statements, all 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 Transferor
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, as soon as available
following such filing.
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(b) Neither the Transferor nor the Master Servicer shall
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 ss. 9-402(7) of the UCC, unless it
shall have given the Eligible Lender Trustee and the Indenture Trustee
at least five days' prior written notice thereof and shall have
promptly filed appropriate amendments to all previously filed financing
statements or continuation statements.
(c) Each of the Transferor and the Master Servicer shall have
an obligation to give the Eligible Lender Trustee and the Indenture
Trustee at least 30 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.
(d) The Master Servicer shall maintain, or cause the Servicers
to maintain, accounts and records as to each Financed Student Loan for
which it is the Primary Servicer (or provide access to such accounts
and records being serviced by a Servicer) 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.
(e) The Master Servicer shall cause each Subcustodian to
maintain its computer systems so that, from and after the time of
transfer under this Agreement of the Financed Student Loans, each
Subcustodian's master computer records (including any backup archives)
that refer to a Financed Student Loan shall indicate clearly the
interest of the Issuer and the Indenture Trustee in such Financed
Student Loan and that such Financed Student Loan has been assigned by
the Transferor to the Issuer and has been pledged to the Indenture
Trustee. Indication of the Issuer's and the Indenture Trustee's
interest in a Financed Student Loan shall be deleted from or modified
on the applicable Subcustodian's computer systems when, and only when,
the related Financed Student Loan shall have been paid in full or
repurchased.
(f) If at any time the Transferor shall propose to contribute,
grant a security interest in, or otherwise transfer any interest in
Financed Student Loans to any prospective purchaser, lender or other
transferee, the Master Servicer shall give notice to such prospective
purchaser, lender or other transferee that such Financed Student Loan
has been assigned to the Issuer and has been pledged to the Indenture
Trustee.
(g) Upon reasonable notice, the Master Servicer shall permit
the Indenture Trustee and its agents once each calendar year (unless
there is a Servicer Default, in which case at any time) during normal
business hours to inspect, audit and make copies of and abstracts from
the Master Servicer's records regarding any Financed Student Loan.
(h) 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 its performance of
its duties under the Basic Documents, the Master Servicer shall furnish
to the Eligible Lender Trustee or to the Indenture Trustee, within
[[twenty Business Days]], a list of all Financed Student Loans (by
borrower social security number and date of issuance) then held as part
of the Trust, and a comparison of such list to the list of the Initial
Financed Student Loans set forth in Schedule A 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
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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.
(i) The Transferor shall deliver to the Eligible Lender
Trustee and the Indenture Trustee:
(l) promptly after the execution and delivery of this
Agreement and of each amendment thereto an Opinion of Counsel
either (A) stating that, in the opinion of such counsel, all
financing statements and continuation statements have been
executed and filed that are necessary to preserve and perfect
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 Closing 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 to preserve and perfect
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 3.6 of the
Indenture.
Each Opinion of Counsel referred to in clause (l) 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.
(j) The Administrator shall file all reports with respect to
the Notes and the Certificates as may be required by the Commission or
state securities authorities.
SECTION 11.3. Notices. All demands, notices and communications upon or
to the Transferor, the Master Servicer, the Administrator, the Eligible Lender
Trustee or the Indenture Trustee under this Agreement shall be in writing,
personally delivered or mailed by certified mail or overnight courier, return
receipt requested or overnight courier (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 Transferor, the
Master Servicer or Administrator, two copies, one to Crestar Bank,
[____________], Richmond, Virginia [____________], Attention: [____________];
facsimile: [____________], with a copy to Crestar Bank, [____________],
Richmond, Virginia [____________], Attention: [____________]; facsimile
[____________] (b) in the case of the Issuer or the Eligible Lender Trustee, at
the Corporate Trust Office of the Eligible Lender Trustee, (c) in the case of
the Indenture Trustee, at its Corporate Trust Office; (d) in the case of
Moody's, to Moody's Investors Service, Inc., 99 Church Street, New York, New
York 10007, Attention: Structured Finance Department / Student Loans (telephone:
(212) 553 0300; facsimile: (212) 553 4792), (e) in the case of Standard &
Poor's, to Standard & Poor's Ratings Service, 25 Broadway (20th Floor), New
York, New York 10004, Attention: Asset Backed Surveillance Department
(telephone: (212) 208 8000; facsimile: (212) 412 0225), or, as to each of the
foregoing, at such other address as shall be designated by written notice to the
other parties.
SECTION 11.4. Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Section 4.12 and in Section 6.5 and as
provided in the provisions of this Agreement concerning the resignation of the
Master Servicer, this Agreement may not be assigned by the Transferor or the
Master Servicer. This Agreement may only be assigned by the Eligible Lender
Trustee to its permitted successor pursuant to the Trust Agreement.
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SECTION 11.5. Limitations on Rights of Others. The provisions of this
Agreement are solely for the benefit of the Transferor, the Master Servicer, the
Issuer and the Eligible Lender Trustee and for the benefit of the
Certificateholders, the Indenture Trustee, the Delaware 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 11.6. 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 11.7. 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 11.8. 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 11.9. Governing Law. This Agreement 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 11.10. Assignment to Indenture Trustee. The Transferor 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 and/or the assignment of any
or all of the Issuer's rights and obligations hereunder to the Indenture
Trustee.
SECTION 11.11. Nonpetition Covenants. Notwithstanding any prior
termination of this Agreement, the Master Servicer, the Administrator and the
Transferor shall not, prior to the date that is one year 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 or any substantial part of its property, or
ordering the winding up or liquidation of the affairs of the Issuer.
SECTION 11.12. Limitation of Liability of Eligible Lender Trustee,
Indenture Trustee and Delaware Trustee.
(a) Notwithstanding anything contained herein to the contrary,
this Agreement has been signed by Star Bank, National Association not
in its individual capacity but solely in its capacity as Eligible
Lender Trustee of the Issuer and in no event shall Star Bank, National
Association in its individual capacity or 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.
Notwithstanding any provision in this Agreement or the Basic
Documents, nothing in such Agreement and Basic Documents shall be
construed to limit the Eligible Lender Trustee's responsibility to (i)
the U.S. Secretary of Education or a Guarantor in its capacity as
Eligible Lender Trustee for any violations of statutory or regulatory
requirements that may occur with respect to loans held in the Trust,
pursuant to 34 CFR 682.203(b) or any successor provision thereto, or
(ii) the Department of HHS in its
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capacity as Eligible Lender Trustee for any violations of statutory or
regulatory requirements that may occur with respect to loans held in
the Trust, pursuant to the HEAL Act.
(b) Notwithstanding anything contained herein to the contrary,
this Agreement has been accepted by Bankers Trust Company not in its
individual capacity but solely as Indenture Trustee and in no event
shall Bankers Trust Company 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.
(c) In no event shall the Delaware Trustee 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.
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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.
CRESTAR STUDENT LOAN TRUST 1997-1
By: STAR BANK, NATIONAL ASSOCIATION, not in
its individual capacity but solely as Eligible
Lender Trustee on behalf of the Trust
By: __________________________________
Name:
Title:
CRESTAR BANK
Transferor, Master Servicer and Administrator
By: ______________________________________________
Name:
Title:
Acknowledged and accepted
as of the day and year
first above written:
BANKERS TRUST COMPANY, not
in its individual capacity
but solely as Indenture Trustee
By: ____________________________________
Name: [________]
Title: Vice President
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APPENDIX A
TO THE
TRANSFER AND SERVICING 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 or statute defined or referred to below
or in any agreement or instrument that is governed by this Appendix means such
agreement or instrument or statute 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 11.3(a) of the Indenture.
"Additional Financed HEAL Loan File" has the meaning set forth in
section 3.3 of the Transfer and Servicing Agreement.
"Adjustment Payments" has the meaning set forth in Section 2.3(e) of
the Transfer and Servicing Agreement.
"Administration Agreement" means the Administration Agreement dated as
of [_______] 1997, among the Issuer, the Indenture Trustee and the
Administrator, as amended from time to time.
<PAGE>
"Administration Fee" has the meaning specified in Section 3 of the
Administration Agreement.
"Administrator" means Crestar Bank, in its capacity as administrator of
the Issuer and the Financed Student Loans, or any successor as Administrator
under the Transfer and Servicing Agreement.
"Administrator Default" has the meaning specified in Section 8.1(b) of
the Transfer and Servicing Agreement.
"Administrator's Certificate" means an Officer's Certificate of the
Administrator delivered pursuant to Section 4.7 of the Transfer and Servicing
Agreement, substantially in the form of Exhibit C thereto and as the
Administrator and the Indenture Trustee may agree.
"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.
"Authenticating Agent" means the Person appointed by the Indenture
Trustee at the request of the Issuer as Authenticating Agent for the Notes
pursuant to Section [[2.3(8)]] of the Indenture, and any successor
Authenticating Agent for the Notes.
"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), (ii) with respect to the
Administrator, any officer of the Administrator who is authorized to act for the
Administrator in matters relating to itself or to the Issuer and to be acted
upon by the Administrator pursuant to the Basic Documents and who is identified
on the list of Authorized Officers delivered by the Administrator to the
Indenture Trustee on the Closing Date (as such list may be modified or
supplemented from time to time thereafter), (iii) with respect to the
Transferor, any officer of the Transferor who is authorized to act for the
Transferor in matters relating to or to be acted upon by the Transferor pursuant
to the Basic Documents and who is identified on the list of Authorized Officers
delivered by the Transferor to the Indenture Trustee on the Closing Date (as
such list may be modified or supplemented from time to time thereafter) and (iv)
with respect to a Servicer, any officer of such Servicer who is authorized to
act for such Servicer in matters relating to or to be acted upon by such
Servicer pursuant to the Basic Documents and who is identified on the list of
Authorized officers delivered by such Servicer to the Indenture Trustee, or the
Closing Date (as such list may be modified or supplemented from time to time
thereafter).
"Available Funds" means, with respect to any Collection Period, the
excess of (A) the sum, without duplication, of the following amounts with
respect to such Collection Period: (i) all collections received by the Master
Servicer or any Servicer on the Financed Student Loans (including any Guarantee
Payments and Insurance Payments received with respect to the Financed Student
Loans) during such Collection Period; (ii) any payments, including without
limitation Interest Subsidy Payments and Special Allowance Payments, received by
the Eligible Lender Trustee during such Collection Period with respect to
Financed Student Loans; (iii) all proceeds from any sales of Financed Student
Loans by the Trust during such Collection Period; (iv) any payments of or with
respect to interest received by the Master Servicer or a Servicer during such
Collection Period with respect to a Financed Student Loan for which a Realized
Loss was previously allocated; (v) the aggregate Purchase Amounts received for
those Financed Students Loans purchased by the Transferor (or the Master
Servicer, if applicable) during the related Collection Period; (vi) the
aggregate amounts, if any, received from the Transferor (or the Master Servicer,
if applicable) as reimbursement of non-guaranteed or uninsured interest amounts
(which shall not include, with respect to Financed FFELP Loans, the portion of
such interest amounts (i.e., 2%) for which the Guarantor did not have an
obligation to make a Guarantee Payment), or lost Interest Subsidy Payments and
Special Allowance Payments,
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with respect to the Financed Student Loans pursuant to Section 3.2 of the
Transfer and Servicing Agreement (vii) all Adjustment Payments, if any, received
from the Transferor during such Collection Period and (viii) Investments
Earnings for such Collection Period over (B) the Issuer Consolidation Payments
for such Collection Period; provided, however, that Available Funds will exclude
all payments and proceeds of any Financed Student Loans the Purchase Amount of
which has been included in Available Funds for a prior Collection Period, which
payments and proceeds shall be paid to the Transferor, and amounts used to
reimburse the Master Servicer for Monthly Advances pursuant to Section 5.4 of
the Transfer and Servicing Agreement.
"Basic Documents" means the Trust Agreement, the Master Indenture, the
Terms Supplement, the Transfer and Servicing Agreement, the Administration
Agreement, the Note Depository Agreement, the Guarantee Agreements, the HEAL
Insurance Contract, the Underwriting Agreement and other documents and
certificates delivered in connection with any thereof and all amendments and
supplements thereto.
"Benefit Plan" means any employee benefit plan, retirement arrangement,
individual retirement account or Keogh Plan subject to either Title I of ERISA
or Section 4975 of the Code, or any entity (including an insurance company
general account) whose underlying assets include plan assets by reason of a
plan's investment in the entity.
"Book-Entry Note" means a beneficial interest in the Notes, ownership
and transfers of which shall be through book entries by a Securities Depository
as described in Section 2.14 of the Indenture.
"Business Day" means any day other than a Saturday, a Sunday or a day
on which national banking associations or banking institutions or trust
companies in New York, Ohio, Pennsylvania or Virginia are authorized or
obligated by law, regulation or executive order to remain closed.
"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 as principal. In
determining whether the Certificateholders which hold Certificates representing
the requisite Certificate Balance have given any request, demand, authorization,
direction, notice, consent or waiver hereunder or under any other Basic
Document, the Certificate Balance shall not include the principal balance of
Certificates owned by the Transferor or any Affiliate of the Transferor.
"Certificate Distribution Account" means the account designated as
such, established and maintained pursuant to Section 5.1 of the Transfer and
Servicing Agreement.
"Certificate Paying Agent" means any paying agent or co-paying agent
appointed pursuant to Section 3.10 of the Trust Agreement, which shall initially
be the Eligible Lender Trustee.
"Certificate Initial Rate" means [_______]% per annum.
"Certificate Quarterly Advance Account" means the account designated as
such, established and maintained pursuant to Section 5.1 of the Transfer and
Servicing Agreement.
"Certificate Rate" means One-Month LIBOR plus 1.50% per annum.
"Certificate Register" and "Certificate Registrar" means the register
mentioned and the registrar appointed pursuant to Section 3.4 of the Trust
Agreement.
"Certificateholder" means a Person in whose name a Certificate is
registered in the Certificate Register.
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"Certificateholders' Distribution Amount" means, as to any Class of
Certificates, with respect to any Quarterly Distribution Date, the
Certificateholders' Interest Distribution Amount for such Quarterly Distribution
Date plus, for each Quarterly Distribution Date on and after which the Notes
have been paid in full, the Certificateholders' Principal Distribution Amount
for such Quarterly Distribution Date.
"Certificateholders' Interest Shortfall" means, as to any Class of
Certificates, with respect to any Quarterly Distribution Date, the excess, if
any, of (i) the sum of the related Certificateholders' Interest Distribution
Amount on the preceding Quarterly Distribution Date and any outstanding
Certificateholders' Interest Shortfall on such preceding Quarterly Distribution
Date over (ii) the amount of interest actually distributed to the
Certificateholders of such Class on such preceding Quarterly Distribution Date,
plus interest on the amount of such excess interest due to the
Certificateholders of such Class, to the extent permitted by law, at the related
Certificate Rate from such preceding Quarterly Distribution Date to the current
Quarterly Distribution Date.
"Certificateholders' Interest Distribution Amount" means, as to any
Class of Certificates, with respect to any Quarterly Distribution Date relating
to such Certificates, the sum of (i) the amount of interest accrued at One Month
LIBOR plus 1.50% per annum for each related Interest Period since the last
Quarterly Distribution Date (or, in the case of the first Quarterly Distribution
Date, the Closing Date) on the outstanding principal amount of such Certificates
on the immediately preceding Quarterly Distribution Date, after giving effect to
all distributions of principal to Certificateholders of such Class on such
Quarterly Distribution Date (or, in the case of the first Quarterly Distribution
Date, on the Closing Date) and (ii) the Certificateholders' Interest Carryover
Shortfall relating to such Certificates for such Quarterly Distribution Date.
"Certificateholders' Principal Carryover Shortfall" means, as of the
close of any Quarterly Distribution Date relating to a Class of Certificates on
or after which the Notes have been paid in full, the excess, if any, of (i) the
sum of the Certificateholders' Principal Distribution Amount on such Quarterly
Distribution Date and any outstanding Certificateholders' Principal Carryover
Shortfall for the preceding Quarterly Distribution Date over (ii) the amount of
principal actually distributed to the Certificateholders on such Quarterly
Distribution Date.
"Certificateholders' Principal Distribution Amount" means, on each
Quarterly Distribution Date occurring after the principal balance of each Class
of Notes has been paid in full, the sum of (i) the Principal Distribution Amount
for the three Collection Periods preceding such Quarterly Distribution Date, and
(ii) the Certificateholders' Principal Carryover Shortfall as of the close of
the preceding Quarterly Distribution Date; provided, however, that the
Certificateholders' Principal Distribution Amount will in no event exceed the
outstanding principal balance of the applicable class of Certificates. Further,
on the first Quarterly Distribution Date occurring on or after the Distribution
Date on which the principal balance of the last outstanding Class of Notes is
paid in full, the Certificateholders' Principal Distribution Amount also will
include the excess, if any, of the amount of principal available to be
distributed on such Distribution Date over the amount of principal paid on the
Notes on such date.
"Class" means any class of Notes.
"Class A Notes" means the Class A-1 Notes and the Class A-2 Notes.
"Class A-1 Notes" means Notes of the Issuer designated as "Crestar
Student Loan Trust 1997-1, Senior LIBOR Rate Class A-1 Student Loan Asset Backed
Notes."
"Class A-1 Noteholder" means any Noteholder of the Class A-1 Notes.
"Class A-2 Notes" means Notes of the Issuer designated as "Crestar
Student Loan Trust 1997-1, Senior LIBOR Rate Class A-2 Student Loan Asset Backed
Notes."
"Class A-2 Noteholder" means any Noteholder of the Class A-2 Notes.
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"Class B Notes" means Notes of the Issuer designated as "Crestar
Student Loan Trust 1997-1, Subordinate LIBOR Rate Class B Student Loan Asset
Backed Notes."
"Class B Noteholder" means any Noteholder of the Class B Notes.
"Class Initial Rate" means, with respect to any Class of Notes, the
rate identified as such in the Terms Supplement.
"Class Interest Rate" means, with respect to any Class of Notes, the
interest rate determined as set forth in the Terms Supplement.
"Closing Date" means [_______,] 1997.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and Treasury Regulations promulgated thereunder.
"Collection Account" means the account designated as such, established
and maintained pursuant to Section 5.1 of the Transfer and Servicing Agreement.
"Collection Period" means, initially, with respect to each of the
Initial Financed Student Loans, the period beginning on the day immediately
succeeding the Cut-off Date and ending on December 31, 1997, inclusive, and
thereafter, the Collection Period means the calendar month immediately following
the end of the previous Collection Period.
"Commission" means the Securities and Exchange Commission.
"Consolidation Loan" means a FFELP Loan designated as such, made by the
Transferor to an eligible borrower that represents the refinancing of student
loans to such borrower and his or her spouse in accordance with the applicable
terms and provisions of the Higher Education Act.
"Consolidation Loan Fees" means, as to any Collection Period, an amount
accrued during such Collection Period equal to 1.05% per annum of the average
outstanding principal balance of the Consolidation Loans owned by the Trust
during such Collection Period.
"Consolidation Prepayments" means, on any Exchange Date, the amount of
principal then on deposit in the Collection Account representing payments
received as a result of Financed Student Loans being repaid with the proceeds of
Consolidation Loans or HEAL Consolidation Loans (provided, however, if an
Exchange Date occurs during the month of a Distribution Date, Consolidation
Prepayments shall not include amounts received during the month of such
Distribution Date).
"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
on the Closing Date is located at Four Albany Street, New York, New York 10006
Attention: Corporate Trust and Agency Group, Structured Finance Group
(telephone: (212) 250- 6652; facsimile: (212) 250-6439) or at such other address
as the Indenture Trustee may designate from time to time by notice to the
Noteholders, the Certificateholder and the Transferor, 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 Transferor)
and (ii) with respect to the Eligible Lender Trustee, the principal corporate
trust office of the Eligible Lender Trustee located at 425 Walnut Street,
Cincinnati, Ohio 45201, Attention: [____________] telephone: [____________];
facsimile [____________]; or at such other address as the Eligible Lender
Trustee may designate by notice to the Certificateholders and the Transferor, 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 Transferor).
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"Crestar Subsidiary" has the meaning specified in Section 6.5 of the
Transfer and Servicing Agreement.
"Cut-off Date" means for the Financed Student Loans set forth on
Schedule A-1 to the Transfer and Servicing Agreement, the close of business on
[_______], 1997.
"Default" means any occurrence that is, or with notice or the lapse of
time or both would become, an Event of Default.
"Deferment Period" means certain deferment periods authorized by the
Higher Education Act and the HEAL Act during which the related borrower's
scheduled payments are deferred.
"Deferral Phase" means the period during which the related borrower is
in school and for certain authorized periods as described in the Higher
Education Act.
"Delaware Trustee" means Delaware Trust Capital Management, Inc., not
in its individual capacity but solely as the Delaware Trustee under the Trust
Agreement, and its successors and assigns in such capacity.
"Delaware Trustee Fee" has the meaning specified in Section [__] of the
Trust Agreement.
"Definitive Notes" has the meaning specified in Section 2.14 of the
Indenture.
"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(l) (i) of
the UCC and are susceptible of physical delivery, transfer thereof to
the Indenture Trustee 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;
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(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 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.
"Department of Education" means the United States Department of
Education.
"Department of HHS" means the United States Department of Health and
Human Services.
"Depositor" means Crestar Bank in its capacity as Depositor under the
Trust Agreement.
"Directing Notes" means the Class A Notes while any such Notes are
Outstanding, and, when no Class A Notes remain Outstanding, the Class B Notes.
"Distribution" means, with respect to any Financed Student Loan, the
amount of the monthly remittance payable to the holder of such Financed Student
Loan in accordance with its terms.
"Distribution Date" means, the 25th day of each month or if such day is
not a Business Day, the next succeeding Business Day, commencing January 26,
1998.
"Distribution Determination Date" means, with respect to any
Distribution Date, the [[_____]] Business Day immediately preceding such
Distribution Date.
"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 (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. An Eligible Deposit Account
may not be evidenced by a certificate of deposit, passbook or other instrument.
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"Eligible Institution" means an entity which is an institution whose
deposits are insured by the FDIC and the unsecured and uncollateralized
long-term debt obligations of which shall be rated "AA-" or better by Standard &
Poor's and A2 or better by Moody's, or the highest short-term rating by Standard
& Poor's and the highest short term rating by Moody's, and which is either (i) a
federal savings association duly organized, validly existing and in good
standing under the federal banking laws, (ii) an institution duly organized,
validly existing and in good standing under the applicable banking laws of any
state, (iii) a national banking association duly organized, validly existing and
in good standing under the federal banking laws, or (iv) a principal subsidiary
of a bank holding company.
"Eligible Investments" As used herein, Eligible Investments shall
include the following:
(1) Cash (insured at all times by the Federal Deposit Insurance
Corporation);
(2) Direct obligations of (including obligations issued or held in
book entry form on the books of) the Department of the
Treasury of the United States of America;
(3) obligations of any of the following federal agencies which
obligations represent the full faith and credit of the United
States of America, including:
- Export-Import Bank
- Farm Credit System Financial Assistance Corporation
- Farmers Home Administration
- General Services Administration
- U.S. Maritime Administration
- Small Business Administration
- Government National Mortgage Association (GNMA)
- U.S. Department of Housing & Urban Development (PHA's)
- Federal Housing Administration;
(4) senior debt obligations rated "AAA" by Standard & Poor's and
"Aaa" by Moody's issued by the Federal National Mortgage
Association or the Federal Home Loan Mortgage Corporation
(5) U.S. dollar denominated deposit accounts, federal funds and
banker's acceptances with domestic commercial banks which have
a rating on their short term certificates of deposit on the
date of purchase of "A-1+" by Standard & Poor's and "P-1" by
Moody's and maturing no more than 360 days after the date of
purchase (ratings on holding companies not being considered
the rating of the bank);
(6) commercial paper which is rated at the time of purchase in the
single highest classification, "A- 1+" by Standard & Poor's
and "P-1" by Moody's and which matures not more than 270 days
after the date of purchase;
(7) Investments in money market funds (including, but not limited
to, money market mutual funds) rated "AAAm" or "AAAm-G" or
better by Standard & Poor's;
(8) investment agreements acceptable to the Rating Agencies,
written confirmation of which shall be furnished to the
Indenture Trustee prior to any such investment; and
(9) other forms of investments acceptable to the Rating Agencies,
written confirmation of which shall be furnished to the
Indenture Trustee prior to any such investment.
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Notwithstanding anything in this Agreement or the Basic Documents to
the contrary, for so long as the Transferor is a Certificateholder, all
investments of the Trust shall be made in investments permissible for a national
bank.
The value of the above investments shall be determined as follows:
a) as to investments the bid and asked prices of which are
published on a regular basis in The Wall Street Journal (or,
if not there, then in The New York Times): the average of the
bid and asked prices for such investments so published on or
most recently prior to such time of determination;
b) as to investments the bid and asked prices of which are not
published on a regular basis in The Wall Street Journal or The
New York Times: the average bid price at such time of
determination for such investments by any two nationally
recognized government securities dealers (selected by the
Indenture Trustee in its absolute discretion) at the time
making a market in such investments or the bid price published
by a nationally recognized pricing service;
c) as to certificates of deposit and bankers acceptances: the
face amount thereof, plus accrued interest; and
d) as to any investment not specified above: the value thereof
established by prior agreement between the Issuer, the
Administrator and the Indenture Trustee.
"Eligible Lender Trustee" means Star Bank, National Association not in
its individual capacity but solely as Eligible Lender Trustee under the Trust
Agreement, and its successors and assigns in such capacity.
"Eligible Lender Trustee Fee" has the meaning specified in Section 8.1
of the Trust Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Event of Default" has the meaning specified in Section 5.1 of the
Indenture.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Date" means, with respect to any Exchanged Student Loans, the
date specified as such in the related Transfer Agreement.
"Exchange Period" means the period commencing on the Closing Date and
ending on December 31, 2002.
"Exchanged Student Loan" means any FFELP Loan or HEAL Loan transferred
to the Eligible Lender Trustee on behalf of the Issuer during the Exchange
Period pursuant to Section 2.2 of the Transfer and Servicing Agreement.
"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, the Controller or the Treasurer of such corporation; and with respect
to any partnership, any general partner thereof.
"Expense Account" means the account designated as such pursuant to
Section 5.1 of the Transfer and Servicing Agreement.
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"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.
"FDIC" means the Federal Deposit Insurance Corporation.
"FFELP Loan" means a student loan which is a PLUS Loan, SLS Loan,
Consolidation Loan, Stafford Loan or Unsubsidized Stafford Loan.
"FHLMC" means Federal Home Loan Mortgage Corporation, a corporate
instrumentality of the United States created and existing under Title III of the
Emergency Home Finance Act of 1970, as amended, or any successor thereto.
"Final Maturity Date" means, with respect to any Note, the date on
which the entire unpaid principal amount of such Note becomes due and payable as
provided in the Terms Supplement.
"Financed FFELP Loan" means a Financed Student Loan that also is a
FFELP Loan.
"Financed HEAL Loan" means a Financed Student Loan that also is a HEAL
Loan.
"Financed Student Loan" means the FFELP Loans and HEAL Loans set forth
in Schedule A-1 to the Transfer and Servicing Agreement and Schedule A to each
Transfer Agreement, as amended or supplemented from time to time by the Master
Servicer to accurately reflect the Financed Student Loans then subject to the
Lien of the Indenture. The Schedule of Financed Student Loans may be in the form
of microfiche or other form of electronic media.
"Financed Student Loan Files" means the documents specified in Section
3.3 of the Transfer and Servicing Agreement.
"FNMA" means Federal National Mortgage Association, a federally
chartered and privately owned corporation organized and existing under the
Federal National Mortgage Association Charter Act, or any successor thereto.
"Formula Interest Rate" means, with respect to any Class of Notes, the
interest rate determined as set forth in the Terms Supplement.
"Grace Period" means certain grace periods authorized by the Higher
Education Act and the HEAL Act during which the related borrower's scheduled
payments are deferred.
"Grant" means mortgage, pledge, hypothecate, 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 Trust Estate 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 Trust Estate 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.
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"Guarantee Agreements" means each agreement entered into between the
Eligible Lender Trustee and a Guarantor pursuant to which such Guarantor
guarantees payments on Financed FFELP Loans.
"Guarantee Payment" means any payment made by a Guaranty Agency
pursuant to a Guarantee Agreement in respect of a Financed FFELP Loan.
"Guarantor" means the Department of Education, Educational Credit
Management Corporation, a Minnesota non-profit corporation (formerly known as
Transitional Guaranty Agency, Inc.), PHEAA, United Student Aid Funds, Inc., a
Delaware non-profit corporation, the Florida Department of Education, an agency
of the State of Florida, New York Higher Education Services Corporation, an
agency of the State of New York, and Texas Guaranteed Student Loan Program, a
Texas nonprofit corporation, and their respective successors and assigns.
"Guaranty Agency" means any agency which has an agreement with the
Department of Education of Education to be a guarantor of FFELP Loans.
"HEAL Act" means Title VII, ss.ss.701-720 of the Public Health Services
Act, as amended, 42 U.S.C. ss.ss. 292-292p, together with any rules and
regulations promulgated thereunder by the Department of HHS.
"HEAL Consolidation Loan" means a HEAL Loan that is designated as such
that is made under the HEAL Act.
"HEAL Insurance Contract" means the HEAL Insurance Contract entered
into between the Eligible Lender Trustee and the Department of HHS pursuant to
which the Department of HHS insures payments on Financed HEAL Loans.
"Higher Education Act" means Title IV, Part B of the Higher Education
Act of 1965, as amended, together with any rules and regulations promulgated
thereunder by the Department of Education or the Guarantors.
"Indemnifiable 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 a Person (or any of its officers, directors, employees
or agents) who is entitled to be indemnified.
"Indenture" means the Master Indenture and the Terms Supplement, each
as amended or supplemented from' time to time.
"Indenture Trust Estate" means all money, instruments, rights and other
property that are, from time to time, 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 interests Granted to the Indenture Trustee),
including all proceeds thereof.
"Indenture Trustee" means Bankers Trust Company, not in its individual
capacity but solely as Indenture Trustee under the Indenture and its successors
and assigns in such capacity.
"Indenture Trustee Fee" has the meaning specified in Section 6.7 of the
Master Indenture, as may be amended pursuant to any amendment to the Terms
Supplement.
"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 Transferor 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 Transferor or any Affiliate
of any of the foregoing Persons and (c) is not connected with the Issuer, any
such other obligor, the Transferor or any Affiliate of any of the foregoing
Persons as an officer, employee, promoter, underwriter, trustee, partner,
director or person performing similar functions.
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"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 [[11.1]] of the
Master 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" and that the signer is Independent within
the meaning thereof.
"Individual Note" means a Note of an initial principal amount equal to
$50,000. A Note of an original principal amount in excess thereof shall be
deemed to be a number of Individual Notes equal to the quotient obtained by
dividing such initial principal amount by $50,000, without regard to fractions.
"Initial Financed Student Loans" has the meaning specified in Section
2.1 of the Transfer and Servicing Agreement.
"Initial Certificate Balance" means $1,000, representing the
Certificate Balance as of the Closing Date.
"Initial Pool Balance" means [$_______] representing the sum of Pool
Balance for the Initial Financed Student Loans set forth on Schedule A-1 as of
the Cut-off Date.
"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 60 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 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.
"Insurance Payment" means any payment made by the Department of HHS
pursuant to the HEAL Insurance Contract in respect of a Financed HEAL Loan.
"Interest Payment Period" has the meaning set forth in the Terms
Supplement.
"Interest Period" has the meaning set forth in the Terms Supplement.
"Interest Subsidy Payments" means payments, designated as such,
consisting of interest subsidies by the Department of Education 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 5.1(b) of the Transfer and
Servicing Agreement.
"Issuer" means Crestar Student Loan Trust 1997-1.
"Issuer Consolidation Payments" has the meaning set forth in Section
2.3(f) of the Transfer and Servicing Agreement.
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"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 Determination Date" means, with respect to any Class of Notes or
the Certificates for which One- Month LIBOR is being determined other than for
the Initial Period, the applicable Rate Determination Date, which must be a
Business Day (in New York and Virginia) and London Banking Day.
"LIBOR Rate" means, with respect to the Notes or the Certificates, the
related Class Interest Rate or Certificate Rate, as the case may be, that
results from a determination based on One-Month LIBOR and is determined as
described in the Terms Supplement, the Transfer and Servicing Agreement or the
Trust Agreement, as the case may be.
"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 Financed Student Loan by operation of law as a result
of any act or omission by the related Obligor or obligations under Subservicing
Agreements in effect as of the Closing Date.
"London Banking Day" means any Business Day on which dealings in
deposits in United States dollars are transacted in the London interbank market.
"Majority Certificateholder" means the holders of more than 50% of the
Certificate Balance of the Certificates without regard to the Certificates held
by the Depositor.
"Margin" has the meaning set forth in the Terms Supplement.
"Master Indenture" means the Indenture dated as of [_______], 1997
between the Issuer and the Indenture Trustee, as amended or supplemented from
time to time.
"Master Servicer" means Crestar Bank, and its permitted successors and
assigns, as Master Servicer of the Financed Student Loans and the Transfer and
Servicing Agreement.
"Master Servicer Default" means an event specified in Section 8.1(a) of
the related Transfer and Servicing Agreement or Supplemental Transfer and
Servicing Agreement.
"Minimum Purchase Price" has the meaning set forth in Section 9.1(b) of
the Transfer and Servicing Agreement.
"Moody's" means Moody's Investors Service, Inc.
"Monthly Advance" means the amount, if any, advanced by the Master
Servicer pursuant to Section 5.10 of the Transfer and Servicing Agreement with
respect to Guarantee Payments or Interest Subsidy Payments applied for but not
received as of the end of the Collection Period immediately preceding the date
such Monthly Advance is made.
"Monthly Advance Account" means the account designated as such,
established and maintained pursuant to Section 5.1 of the Transfer and Servicing
Agreement.
"Net Loan Rate" shall have the meaning set forth in the Terms
Supplement.
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"Notes" means the notes designated as the Issuer's Student Loan
Asset-Backed Notes, issued pursuant to the terms of the Master Indenture and the
Terms Supplement and having an original principal amount equal to
[$_______________].
"Note Depository Agreement" means the agreement dated as of the Closing
Date relating to the Notes among the Issuer, the Indenture Trustee, the
Administrator and the Depository Trust Company, as the initial Securities
Depository.
"Note Distribution Account" means the account designated as such,
established and maintained pursuant to Section 5.1 of the Transfer and Servicing
Agreement.
"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
Securities Depository, or on the books of a Person maintaining an account with
such Securities Depository (directly as Securities Depository Participant or as
an indirect participant, in each case in accordance with the rules of such
Securities Depository).
"Note Register" and "Note Registrar" have the respective meanings
specified in Section [[2.6]] of the Indenture.
"Noteholder" means the Person in whose name a Note is registered in the
Note Register.
"Noteholders' Distribution Amount" means, as to any Class of Notes,
with respect to any Distribution Date, the sum of the related Noteholders'
Interest Distribution Amount and the Noteholders' Principal Distribution Amount
for such Distribution Date.
"Noteholders' Interest Carryover" has the meaning set forth in the
Terms Supplement.
"Noteholders' Interest Shortfall" means, as to any Class of Notes, with
respect to any Distribution Date (which, for the Class B Notes, shall be a
Quarterly Distribution Date), the excess of (i) the sum of the related
Noteholders' Interest Distribution Amount on the preceding Distribution Date for
such Class of Notes and any Noteholders' Interest Shortfall on such preceding
Distribution Date for such Class of Notes over (ii) the amount of interest
actually allocated to such Noteholders on such preceding Distribution Date for
such Class of Notes, plus interest on the amount of such excess interest due to
the Noteholders, to the extent permitted by law, at the related Class Interest
Rate from such preceding Distribution Date for such Class of Notes to the
current Distribution Date for such Class of Notes.
"Noteholders' Interest Distribution Amount" means, as to any Class of
Notes, with respect to any Distribution Date (which, for the Class B Notes,
shall be a Quarterly Distribution Date), the sum of (i) the amount of interest
accrued at the respective Class Interest Rate for each Interest Period since the
last Distribution Date for such Class of Notes (or, in the case of the first
Distribution Date for such Class of Notes, the Closing Date) on the outstanding
principal balance of such Class of Notes on the immediately preceding
Distribution Date for such Class of Notes after giving effect to all principal
distributions to holders of Notes of such Class on such date (or, in the case of
the first Distribution Date for such Class of Notes, on the Closing Date) and
(ii) the Noteholders' Interest Shortfall for such Class of Notes for such
Distribution Date; provided, however, that the Noteholders' Interest
Distribution Amount will not include any Noteholders' Interest 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 allocated to the Noteholders on such Distribution
Date.
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"Noteholders' Principal Distribution Amount" means, (A) as to any
Distribution Date on or after April 27, 1998 and on or before the Distribution
Date on which the Class A Notes are paid in full, the sum of (i) the Principal
Distribution Amount for the Collection Period immediately preceding the month of
such Distribution Date (and, in the case of the April 27, 1998 Distribution
Date, all preceding Collection Periods), (ii) any Parity Percentage Payments to
be made on such Distribution Date, (iii) the Noteholders' Principal Carryover
Shortfall as of the close of the preceding Distribution Date and (iv) the
amount, if any, remaining on deposit in the Note Distribution Account following
the preceding Distribution Date, and (B) as to any Quarterly Distribution Date
after the Distribution Date on which the Class A Notes are paid in full, the sum
of (i) the Principal Distribution Amount for the three Collection Periods
immediately preceding the month of such Quarterly Distribution Date, (ii) any
Parity Percentage Payments to be made on such Quarterly Distribution Date, (iii)
the Noteholders' Principal Carryover Shortfall as of the close of the preceding
Quarterly Distribution Date and (iv) the amount, if any, remaining on deposit in
the Note Distribution Account following the preceding Quarterly Distribution
Date; provided, however, that the Noteholders' Principal Distribution Amount
allocable to a Class of Notes will not exceed the outstanding principal balance
of such Class of Notes. In addition, with respect to each Class of Notes, on the
related Final Maturity Date the Noteholders' Principal Distribution Amount will
include the amount required to reduce the outstanding principal balance of such
Notes to zero.
"Obligor" on a Financed Student Loan means the borrower or co-borrowers
of such Financed Student Loan and any other Person who owes payments in respect
of such Financed Student Loan, including (i) the Guaranty Agency thereof with
respect to a Financed FFELP Loan and the Department of HHS with respect to a
Financed HEAL Loan, and (ii) with respect to any Interest Subsidy Payment or
Special Allowance Payment, if any, thereon, the Department of Education.
"Officer's Certificate" means (i) in the case of the Issuer, a
certificate signed by an Authorized Officer of the Issuer, under the
circumstances described in, and otherwise complying with, the applicable
requirements of Section 11.1 of the Indenture, and delivered to the Indenture
Trustee, (ii) in the case of the Transferor, the Master Servicer or the
Administrator, a certificate signed by an Authorized Officer of the Transferor,
the Master Servicer or the Administrator, as appropriate and (iii) in the case
of the Servicer, a certificate signed by an Authorized Officer of the Servicer.
"One-Month LIBOR" means the rate of interest per annum equal to 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 Master Servicer 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, One-Month LIBOR for
that day will be the arithmetic mean (rounded upwards, if necessary, to the
nearest .01%) of the quotations. If fewer than two quotations are provided,
One-Month LIBOR for that day will be the arithmetic mean (rounded upwards, if
necessary, to the nearest .01%) of the rates quoted by three major banks in New
York City, selected by the Master Servicer, or by the Trustee, as applicable, 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, however, that if the banks selected as aforesaid are not quoting as
mentioned in this sentence, One-Month LIBOR in effect for the applicable
Interest Period will be One-Month LIBOR in effect for the previous Interest
Period.
"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 Master Indenture, be employees of or counsel to the Issuer or Administrator
or any of their Affiliates and who shall be reasonably satisfactory to the
Indenture Trustee, and which opinion or opinions shall be addressed to the
Indenture Trustee as Indenture Trustee, shall comply with any
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applicable requirements of Section 11.1 of the Master Indenture, and shall be in
form and substance reasonably satisfactory to the Indenture Trustee and (ii)
with respect to the Transferor, the Administrator or the Master Servicer, one or
more written opinions of counsel who may be an employee of or counsel to the
Transferor, the Administrator or the Master Servicer, which counsel shall be
reasonably acceptable to the Indenture Trustee and the Eligible Lender Trustee.
"Outstanding" means, as of the date of determination, all Notes
theretofore authenticated and delivered under the Indenture except:
(i) Notes theretofore canceled 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 if such Notes are to be redeemed, notice of
such redemption has been duly given or irrevocably provided for
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
Transferor 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 do 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 Transferor or any Affiliate of any
of the foregoing Persons.
"Outstanding Amount" means the aggregate principal amount of all Notes,
or Class of Notes or Certificates as applicable, Outstanding at the date of
determination.
"Parity Percentage" means, as of any date of determination, the
fraction expressed as a percentage, the numerator of which is the sum of (i) the
then Pool Balance plus accrued interest thereon due from borrowers, and accrued
Interest Subsidy Payments and Special Allowance Payments, if any, as of the end
of the preceding Collection Period, and (ii) all amounts on deposit (including
any accrued interest thereon) in the Collection Account and the Reserve Account
and the denominator of which is the sum of the aggregate Outstanding Amount of
the Notes and the Certificates, accrued and unpaid interest thereon plus accrued
and unpaid Transaction Fees and Consolidation Loan Fees.
"Parity Percentage Payment" means, with respect to any Distribution
Date, the amount, if any, to be transferred from the Collection Account to the
Note Distribution Account pursuant to Section 5.5(e) of the Transfer and
Servicing Agreement, up to the amount necessary for the Parity Percentage to
equal [_______]% after giving effect to all distributions to be made on such
Distribution Date.
"Participant" means a Securities Depository Participant.
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"Paying Agent" means the Indenture Trustee or any other Person that
meets the eligibility standards for the Indenture Trustee specified in Section
6.11 of the Master 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 organization or government or any agency or political
subdivision thereof.
"PHEAA" means Pennsylvania Higher Education Assistance Agency.
"Physical Property" has the meaning assigned to such term in the
definition of "Delivery" above.
"Pledged Account or Fund" means the Collection Account, the Reserve
Account, the Note Distribution Account and the Certificate Distribution Account.
"PLUS Loan" means a FFELP Loan made pursuant to the provisions of the
PLUS program established under Section 428B of the Higher Education Act (or
predecessor provisions).
"Pool Balance" means, at any time, the aggregate principal balance of
the Financed Student Loans at the end of the preceding Collection Period
(including accrued interest thereon for such Collection Period to the extent
such interest will be capitalized as of the end of such Collection Period),
after giving effect to the following, without duplication: (i) all payments in
respect of principal received by the Trust during such Collection Period from or
on behalf of borrowers and Guarantors and, with respect to certain payments on
certain Financed Student Loans, the Department of Education and the Department
of HHS, (ii) the principal portion of all Purchase Amounts received by the Trust
for such Collection Period and (iii) any Exchanged Student Loans acquired
conveyed to the Trust and any Financed Student Loans conveyed by the Trust in
exchange for such Exchanged Financed Student Loan during such Collection Period,
in each case pursuant to Sections 2.2 and 2.3(e) of the Transfer and Servicing
Agreement.
"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 [[2.7]] of the Master Indenture and in
lieu of a mutilated, lost, destroyed or stolen Note shall be deemed to evidence
the same debt as the mutilated, lost, destroyed or stolen Note.
"Primary Servicer" means, with respect to any Financed Student Loan,
the entity responsible for the primary servicing of such Financed Student Loan
on a day to day basis, it being understood that where a subservicer appointed in
accordance with the terms of the Transfer and Servicing Agreement has
responsibility for servicing a Financed Student Loan, such subservicer and not
the Master Servicer shall be the Primary Servicer with respect such Financed
Student Loan.
"Principal Distribution Amount" means, with respect to any Collection
Period, the excess of (A) the sum, without duplication, of the following
amounts: (i) that portion of all collections received by the Master Servicer or
any Servicer on the Financed Student Loans that is allocable to principal
(including the portion of any Guarantee Payments or Insurance Payments received
that is allocable to principal of the Financed Student Loans); (ii) the portion
of the proceeds allocable to principal from the sale of Financed Student Loans
by the Trust during such Collection Period; (iii) all Realized Losses incurred
during such Collection Period; (iv) to the extent attributable to principal, the
Purchase Amount received with respect to each Financed Student Loan repurchased
by the Transferor or purchased by the Master Servicer during the related
Collection Period; and (v) the Adjustment Payments, if any, received from the
Transferor during such Collection Period over (B) the Issuer Consolidation
Payments for such Collection Period; PROVIDED, HOWEVER, that the Principal
Distribution Amount will exclude all payments and proceeds of any Financed
Student Loans the Purchase Amount of which has been included in Available Funds
for a prior Collection Period.
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"Principal Factor" means, as of any Distribution Date for each Class of
Notes, a seven-digit decimal figure equal to the Outstanding Amount of such
Class of Notes (after giving effect to any payments of principal made on such
Distribution Date) divided by the original Outstanding Amount of such Class. The
Principal Factor will be 1.0000000 for each Class of Notes as of the Closing
Date; thereafter, the Principal Factor for each Class of Notes will decline to
reflect reductions in the outstanding principal balance of such Class.
"Proceeding" means any suit in equity, action at law or other judicial
or administrative proceeding.
"Purchase Amount" means, as to any Financed Student Loan on any date of
determination, the amount required to prepay in full the outstanding principal
balance of such Financed Student Loan as of the last day of the most recently
completed Collection Period, including all accrued but unpaid interest thereon
(including interest to be capitalized) through the last day of the Collection
Period in which such Financed Student Loan is being purchased.
"Purchased Student Loan" means a Financed Student Loan purchased or
repurchased pursuant to Section 3.2 of the Transfer and Servicing Agreement.
"Qualified Letter of Credit" means a letter of credit delivered or to
be delivered to the Indenture Trustee in lieu of a deposit of cash or Eligible
Investments in the Reserve Account for such Class, which letter of credit shall
(a) be irrevocable and name the Indenture Trustee, in its capacity as
such, as the sole beneficiary thereof;
(b) be issued by a bank whose credit standing is acceptable to each of
the rating agencies which are rating or have rated the Notes of such
Class;
(c) provide that if at any time the then current credit standing of the
issuing bank is such that the continued reliance on such letter of
credit for the purpose or purposes for which it was originally
delivered to the Indenture Trustee would result in a downgrading of any
rating of the Notes of such Class, the Indenture Trustee may either
draw under such letter of credit any amount up to and including the
entire amount then remaining available for drawing thereunder or
terminate such letter of credit;
(d) be transferable to any successor trustee hereunder with respect to
such Class; and
(e) meet such other standards as may be specified in the Terms
Supplement.
"Qualified Institutional Buyer" has the meaning ascribed to such term
in Rule 144A under the Securities Act.
"Quarterly Distribution Date" means the Distribution Date in each
January, April, July and October, commencing April 27, 1998.
"Rate Adjustment Date" has the meaning set forth in the Terms
Supplement.
"Rate Determination Date" means for the Notes and the Certificates, the
date which is both two Business Days (in New York and Virginia) and two London
Business Days preceding the related Rate Adjustment Date.
"Rating Agency" means Moody's and Standard & Poor's. 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 Transferor, notice of which designation shall be given to the
Indenture Trustee, the Eligible Lender Trustee and the Servicer.
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"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 Transferor, the Master Servicer,
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 ratings of each Class of Notes.
"Realized Loss" means, for each Financed Student Loan submitted to a
Guarantor for a Guarantee Payment or the Department of HHS for an Insurance
Payment, the excess, if any, of (i) the unpaid principal balance of such
Financed Student Loan on the date it was first submitted to a Guarantor for a
Guarantee Payment or the Department of HHS for an Insurance Payment over (ii)
all amounts received on or with respect to principal on such Financed Student
Loan (including amounts received pursuant to Section 3.2 of the Transfer and
Servicing Agreement) up through the earlier to occur of (A) the date a related
Guarantee Payment or Insurance Payment is made or (B) the last day of the
Collection Period occurring 12 months after the date the claim for such
Guarantee Payment or Insurance Payment is first denied.
"Record Date" means, with respect to a Distribution Date, the close of
business on the second Business Day (in New York) preceding such Distribution
Date.
"Reference Banks" means four leading banks, selected by the Master
Servicer, or by the Trustee, as applicable, (i) engaged in transactions in
Eurodollar deposits in the international Eurocurrency market, (ii) not an
Affiliate of the Master Servicer, the Administrator or the Transferor and (iii)
and having an established place of business in London.
"Related Financed Student Loan File" has the meaning specified in
Section 3.8(a) of the Transfer and Servicing Agreement.
"Repayment Phase" means the period during which the related borrower is
required to make payments of principal and interest on the related Financed
Student Loan.
"Requisite Amount" has the meaning set forth in the Terms Supplement.
"Reserve Account" means the account designated as such, established and
maintained pursuant to Section 5.1 of the related Transfer and Servicing
Agreement.
"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 with direct
responsibility for the administration of the Indenture and the other Basic
Documents on behalf of the Indenture Trustee, including any Managing Director,
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 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 Financed Student Loans" means the master listing of the
Financed Student Loans set forth in Schedule A-1 to the Transfer and Servicing
Agreement and Schedule A to each Transfer Agreement, in each case as from time
to time amended or supplemented to reflect the Financed Student Loans then
subject to the Lien of the Indenture. The Schedule of Financed Student Loans may
be in the form of microfiche or in the form of electronic media.
"Securities Act" means the Securities Act of 1933, as amended.
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"Securities Depository" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Exchange Act.
"Securities Depository Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Securities
Depository effects book-entry transfers and pledges of securities deposited with
the Securities Depository.
"Senior Notes" means the Class A Notes.
"Senior Noteholder" means the holder of a Senior Note.
"Serial Loan" means a Student Loan that is owned by a third party that
is serial to a Financed Student Loan.
"Servicer" means PHEAA or, subject to satisfying the Rating Agency
Condition, another entity appointed by the Master Servicer to service the
Financed Student Loans, in its capacity as servicer of the Financed Student
Loans.
"Servicer's Report" means any report of the Master Servicer delivered
pursuant to Section 4.8(a) of the Transfer and Servicing Agreement,
substantially in the form acceptable to the Administrator.
"Servicing Fee" means a quarterly fee in an amount equal to (i)
[_______]% of the average Pool Balance as of the last day of the Collection
Period and the last day of the immediately preceding Collection Period (or the
Cut-off Date with respect to the initial Collection Period), or (ii) such
greater amount for which a Rating Agency Condition is satisfied.
"SLS Loan" means a FFELP 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, by the
Department of Education in respect of the Financed FFELP Loans to the Eligible
Lender Trustee on behalf of the Trust in accordance with the Higher Education
Act.
"Specified Reserve Account Balance" means, with respect to any
Distribution Date, an amount equal to the greater of (i) [_______]% of the sum
of the Outstanding Amount of the Notes and the Certificate Balance on such
Distribution Date, after giving effect to all payments to be made on such date;
or (ii) [$_______]; provided, however, that such balance shall not exceed the
sum of the aggregate Outstanding Amount of the Notes and the Certificate
Balance.
"Stafford Loan" means a student loan designated as such that is made
under ss. 428 of the Higher Education Act (excluding Unsubsidized Stafford
Loans).
"Standard & Poor's" means Standard & Poor's Rating Services, a division
of The McGraw-Hill Companies, Inc., and its successors and assigns.
"State" means any one of the 50 States of the United States of America
or the District of Columbia.
"Subcustodian" has the meaning specified in Section 3.8 of the Transfer
and Servicing Agreement.
"Subordinated Notes" means the Class B Notes.
"Subordinated Noteholder" means any Noteholder of a Subordinated Note.
-20-
<PAGE>
"Subsequent Cut-off Date" means the day as to which principal and
interest accruing with respect to an Exchanged Student Loan are transferred to
the Eligible Lender Trustee on behalf of the Issuer pursuant to Section 2.2 of
the Transfer and Servicing Agreement.
"Subservicing Agreement" has the meaning specified in Section 4.13 of
the Transfer and Servicing Agreement.
"Successor Administrator" has the meaning specified in Section 3.7(e)
of the Indenture.
"Successor Master Servicer" has the meaning specified in Section 3.7(e)
of the Indenture.
"Telerate Page 3750" means the display page so 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). [[Provide
backup services]]
"Terms Supplement" means, the Terms Supplement to the Indenture dated
as of [_______,] 1997 between the Issuer and the Indenture Trustee.
"TP Loans" means all Stafford Loans, Unsubsidized Stafford Loans and
PLUS Loans with a first disbursement made by the Transferor on or after November
1, 1996.
"TP Program" means the Crestar Bank Top Performer Program and any
similar program with respect to which a Rating Agency Condition is satisfied.
"Transaction Fees" means, collectively, the Servicing Fee, the
Administration Fee, the Indenture Trustee Fee, the Delaware Trustee Fee and the
Eligible Lender Trustee Fee.
"Transfer Agreement" has the meaning set forth in Section 2.2(b) of the
Transfer and Servicing Agreement.
"Transfer and Servicing Agreement" means the Transfer and Servicing
Agreement dated as of [_______,] 1997, among the Issuer, the Transferor, the
Administrator, the Eligible Lender Trustee and the Master Servicer, as amended
from time to time.
"Transferor" means Crestar Bank.
"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, if any,
and all proceeds of the foregoing.
"Trust Accounts" has the meaning specified in Section 5.1 of the
Transfer and Servicing Agreement.
"Trust Agreement" means the Trust Agreement dated as of [_______],
1997, among the Depositor, the Eligible Lender Trustee and the Delaware Trustee,
as amended and supplemented from time to time.
"Trust Certificate" means a Certificate.
-21-
<PAGE>
"Trust Certificateholder" means a person in whose name a Trust
Certificate is registered in the Certificate Register.
"Trust Estate" means all right, title and interest of the Trust (or the
Eligible Lender Trustee on behalf of the Trust) in and to (i) the property and
rights assigned to the Trust pursuant to Article II of the Transfer and
Servicing Agreement and each Transfer Agreement, (ii) all funds on deposit from
time to time in the Trust Accounts and (iii) all other property of the Trust
from time to time, including any rights of the Eligible Lender Trustee and the
Trust pursuant to the Transfer and Servicing Agreement, the Administration
Agreement and the other Basic Documents.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939 as
in force on the date hereof, unless otherwise specifically provided.
"UCC" means, unless the context otherwise requires, the Uniform
Commercial Code, as in effect in the relevant jurisdiction, as amended from time
to time.
"Unsubsidized Stafford Loan" means a FFELP Loan designated as such that
is made under ss. 428H of the Higher Education Act.
"VELA Service Errors" has the meaning assigned to such term in the
letter to the Transferor, dated March 7, 1996, from the Department of Education.
-22-
<PAGE>
SCHEDULE A-1
TO THE
TRANSFER AND SERVICING AGREEMENT
Schedule of Financed Student Loans
----------------------------------
Schedule of Financed Student Loans was delivered to Trustee and is not
included herein.
A-1
<PAGE>
SCHEDULE B
TO THE
TRANSFER AND SERVICING AGREEMENT
Location of Financed Student Loan Files
---------------------------------------
Name of subcustodian Location of Related Financed Student Loan Files
- -------------------- -----------------------------------------------
Pennsylvania Higher 1200 N. 7th Street
Education Assistance Harrisburg, PA 17102
Agency
B-1
<PAGE>
EXHIBIT A
TO THE
TRANSFER AND SERVICING AGREEMENT
Form of Noteholders' Statement
pursuant to Section 5.7(a) of
Transfer and Servicing
Agreement (capitalized terms used
herein are defined in Appendix A thereto)
- -----------------------------------------
<TABLE>
<S><C>
Distribution Date:____________________
(i) Principal Factor
(a) Class A-1 Notes: _________________
(b) Class A-2 Notes: _________________
(c) Class B Notes: _________________
(ii) Amount of principal being paid or distributed:
(a) Class A-1 Notes: _________________
(b) Class A-2 Notes: _________________
(c) Class B Notes: _________________
(d) Certificates: _________________
(iii) (a) Amount of interest being paid or distributed:
(1) Class A-1 Notes: $__ (based on [Formula Interest Rate] [Net Loan Rate])
(2) Class A-2 Notes: $___(based on [Formula Interest Rate] [Net Loan Rate])
(3) Class B Notes: $___(based on [Formula Interest Rate] [Net Loan Rate])
(4) Certificates: $____ (based on [One-Month LIBOR] [Net Loan Rate])
(b) Applicable Interest Rate:
(1) Class A-1 Notes: ______%
(2) Class A-2 Notes: ______%
(3) Class B Notes: ______%
(4) Certificates: ______%
(iv) Amount of distribution allocable to any Noteholders' Interest Carryover:
(a) Class A-1 Notes: $____________
(b) Class A-2 Notes: $____________
(c) Class B Notes: $____________
(v) Pool Balance at end of preceding Collection Period: __________
(vii) After giving effect to distributions on this Distribution Date:
(a) outstanding principal amount of Class A-1 Notes: $____________
(b) outstanding principal amount of Class A-2 Notes: $____________
</TABLE>
A-1
<PAGE>
<TABLE>
<S><C>
(c) outstanding principal amount of Class B Notes: $____________
(d) Certificate Balance: $____________
(vii) Amount of Servicing Fee, Administration Fee, Indenture Trustee Fee, Delaware Trustee Fee and
Eligible Lender Trustee Fee to be allocated for the upcoming Distribution Date: ($____________)
(viii) (a) Aggregated amount of Realized Losses (if any) for the Collection Period immediately preceding
the Distribution Date: ____________
(ix) (a) Amount of distribution attributable to amounts in the Reserve Account: $____________
(b) Amount of other withdrawals from the Reserve Account $____________
(c) Reserve Account Balance $____________
(d) Parity percentage _____%
(e) Amount of Parity Percentage Payments $____________
(x) The aggregate Purchase Amount paid for Financed Student Loans
purchased from the trust during the immediately preceding
Collection Period: ____________
(xi) During the Exchange Period only, the aggregate Issuer
Consolidation Payments and Adjustment Payments, stated
separately, for the immediately preceding Collection Period:
$____________
(xii) Amount of Financed Student Loans:
(1) that are 30 to 60 days delinquent: $____________
(2) that are 61 to 90 days delinquent: $____________
(3) that are 91 to 120 days delinquent: $____________
(4) that are 120 days delinquent: $____________
(5) for which claims have been filed with
the appropriate Guarantor or the Department of HHS
and which are awaiting payment $____________
</TABLE>
A-2
<PAGE>
EXHIBIT B
TO THE
TRANSFER AND SERVICING AGREEMENT
Form of Certificateholders' Statement
pursuant to Section 5.7(a) of
Transfer and Servicing
Agreement (capitalized terms used
herein are defined in Appendix A thereto)
- -----------------------------------------
<TABLE>
<S><C>
Distribution Date:____________________
(i) Principal Factor
(a) Class A-1 Notes: _________________
(b) Class A-2 Notes: _________________
(c) Class B Notes: _________________
(ii) Amount of principal being paid or distributed:
(a) Class A-1 Notes: _________________
(b) Class A-2 Notes: _________________
(c) Class B Notes: _________________
(d) Certificates: _________________
(iii) (a) Amount of interest being paid or distributed:
(1) Class A-1 Notes: $__ (based on [Formula Interest Rate] [Net Loan Rate])
(2) Class A-2 Notes: $__ (based on [Formula Interest Rate] [Net Loan Rate])
(3) Class B Notes: $__ (based on [Formula Interest Rate] [Net Loan Rate])
(4) Certificates: $____ (based on [One-Month LIBOR] [Net Loan Rate])
(b) Applicable Interest Rate:
(1) Class A-1 Notes: ______%
(2) Class A-2 Notes: ______%
(3) Class B Notes: ______%
(4) Certificates: ______%
(iv) Amount of distribution allocable to any Noteholders' Interest Carryover:
(a) Class A-1 Notes: $____________
(b) Class A-2 Notes: $____________
(c) Class B Notes: $____________
(v) Pool Balance at end of preceding Collection Period: __________
(vii) After giving effect to distributions on this Distribution Date:
(a) outstanding principal amount of Class A-1 Notes: $____________
(b) outstanding principal amount of Class A-2 Notes: $____________
</TABLE>
B-1
<PAGE>
<TABLE>
<S><C>
(c) outstanding principal amount of Class B Notes: $____________
(d) Certificate Balance: $____________
(vii) Amount of Servicing Fee, Administration Fee, Indenture Trustee Fee, Delaware Trustee Fee and
Eligible Lender Trustee Fee to be allocated for the upcoming Distribution Date: ($____________)
(viii) (a) Aggregated amount of Realized Losses (if any) for the immediately preceding Collection Period:
$____________
(ix) (a) Amount of distribution attributable to amounts in the Reserve Account: $____________
(b) Amount of other withdrawals from the Reserve Account $____________
(c) Reserve Account Balance $____________
(d) Parity percentage _____%
(e) Amount of Parity Percentage Payments $____________
(x) The aggregate Purchase Amount paid for Financed Student Loans purchased from the Trust during the
immediately preceding Collection Period: ____________
(xi) During the Exchange Period only, the aggregate Issuer Consolidation Payments and Adjustment
Payments, stated separately, for the immediately preceding Collection Period: $____________
(xii) Amount of Financed Student Loans:
(1) that are 30 to 60 days delinquent: $____________
(2) that are 61 to 90 days delinquent: $____________
(3) that are 91 to 120 days delinquent: $____________
(4) that are 120 days delinquent: $____________
(5) for which claims have been filed with
the appropriate Guarantor or the Department of HHS
and which are awaiting payment $____________
</TABLE>
B-2
<PAGE>
EXHIBIT C
TO THE
TRANSFER AND SERVICING AGREEMENT
Form of Administrator's Certificate
-----------------------------------
[To be provided by the Administrator pursuant to
Section 4.7 of the Transfer and
Servicing Agreement]
C-1
<PAGE>
EXHIBIT D
TO THE
TRANSFER AND SERVICING AGREEMENT
ASSIGNMENT FOR
FINANCED STUDENT LOANS
For value received, in accordance with the Transfer and Servicing
Agreement (the "Transfer and Servicing Agreement") dated as of [_______,] 1997,
among the undersigned, as transferor (the "Transferor"), as master servicer (the
"Master Servicer") and as administrator (the "Administrator"), Crestar Student
Loan Trust 1997-1 (the "Trust"), and Star Bank, National Association, not in its
individual capacity but solely as Eligible Lender Trustee (the "Eligible Lender
Trustee"), the undersigned does hereby contribute, 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 Transfer and
Servicing Agreement), all right, title and interest of the undersigned in and to
(i) the FFELP Loans and the HEAL Loans set forth on Schedule A-1 to the Transfer
and Servicing Agreement and all obligations of the Obligors thereunder,
including all monies paid or payable thereunder (other than Interest Subsidy
Payments and Special Allowance Payments through the Cut-off Date) after the
Cut-off Date, including the right to enforce such FFELP Loans and HEAL Loans in
the same manner and to the same extent as the Transferor would have the power to
do but for the execution and delivery of the Transfer and Servicing Agreement,
(ii) all funds on deposit from time to time in the Trust Accounts and in all
investments and proceeds thereof (including all income thereon) and (iii) the
proceeds of any and all of the foregoing. The foregoing contribution,
assignment, transfer and conveyance 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 Transferor to the borrowers of Initial Financed Student Loans
or any other person in connection with the Financed Student Loans or any
agreement or instrument relating to any of them, except to the extent required
by the Higher Education Act or the HEAL Act, as the case may be.
This Assignment is made pursuant to and upon the representations,
warranties and agreements on the part of the undersigned contained in the
Transfer and Servicing Agreement and is to be governed by the Transfer and
Servicing Agreement.
Capitalized terms used but not defined herein shall have the meaning
assigned to them in Appendix A to the Transfer and Servicing Agreement, which
also contains rules as to usage that shall be applicable herein.
IN WITNESS WHEREOF, the undersigned has caused this Assignment to be
duly executed as of [_______,] 1997.
CRESTAR BANK,
as Transferor
By:_________________________________________
Name:
Title:
D-1
<PAGE>
EXHIBIT E
TO THE
TRANSFER AND SERVICING AGREEMENT
TRANSFER AGREEMENT
TRANSFER AGREEMENT No. ___dated as of ________, _____, among CRESTAR
STUDENT LOAN TRUST 1997-1, a Delaware business trust (the "Issuer"), CRESTAR
BANK, a Virginia banking corporation, as transferor (the "Transferor"), and
STAR BANK, NATIONAL ASSOCIATION, a national banking association, not in its
individual capacity but solely as Eligible Lender Trustee of the Issuer (the
"Eligible Lender Trustee").
WITNESSETH:
WHEREAS the Issuer, the Transferor, the Eligible Lender Trustee, the
Administrator and the Master Servicer (as defined in the Appendix A to the
Transfer and Servicing Agreement) are parties to the Transfer and Servicing
Agreement dated as of [_______,] 1997 (as amended or supplemented, the "Transfer
and Servicing Agreement");
WHEREAS pursuant to the Transfer and Servicing Agreement, the
Transferor wishes to convey the FFELP Loans [and HEAL Loans] referred to in
Section 2 hereof (the "Exchanged 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, intending to be
legally bound hereby, 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
Transfer and Servicing Agreement, which also contains rules of construction and
usage that shall be applicable herein.
In addition, the following terms have the following meanings:
"Exchange Date" means, with respect to the Exchanged Student Loans,
[_______].
"Subsequent Cut-Off Date" means, with respect to each Exchanged Student
Loan, the date specified as such on Schedule A hereto.
2. Schedule of Exchanged Student Loans. Attached hereto as Schedule A
is a supplement to the Schedule of Financed Student Loans listing the Exchanged
Student Loans to be conveyed on the Exchange Date to the Eligible Lender Trustee
on behalf of the Issuer pursuant to this Agreement. Attached hereto as Schedule
B is a list of Financed Student Loans to be repaid on the Exchange Date from the
proceeds of a Consolidation Loan or a HEAL Consolidation Loan, as the case may
be, and conveyed to the Transferor by the Eligible Lender Trustee on behalf of
the Issuer in exchange for the Exchanged Student Loans, which Schedule B shall
be deemed to modify the Schedule of Financed Student Loans to delete therefrom
such Financed Student Loans being so conveyed to the Transferor.
E-1
<PAGE>
3. Conveyance of Exchanged Student Loans. In consideration of the
Issuer's delivery to or upon the order of the Transferor of the Financed Student
Loans listed on Schedule B attached hereto, the Transferor does hereby
contribute, transfer, assign. set over and otherwise convey, without recourse
(subject to the obligations set forth in the Transfer and Servicing Agreement),
to the Eligible Lender Trustee on behalf of the Issuer:
(a) all right, title and interest in and to each Exchanged
Student Loan, and all obligations of the Obligors thereunder, including
all moneys paid thereunder (other than Interest Subsidy Payments and
Special Allowance Payments payable through the Subsequent Cut-Off
Date), and all written communications received by the Transferor with
respect thereto and still retained by the Transferor in accordance with
its retention policies (including borrower correspondence, notices of
death. disability or bankruptcy and requests for deferments or
forbearances), on and after the Subsequent Cut-Off Date; and
(b) the proceeds of any and all of the foregoing.
4. Representations and Warranties of the Transferor. The Transferor
hereby represents and warrants to the Issuer as of the date of this Agreement
and as of the Exchange Date that:
(a) Organization and Good Standing. The Transferor 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, except for such power and authority the absence of
which would not have a material adverse effect on the Transferor or its
ability to consummate the transactions contemplated by this Agreement
and the Transferor had at all relevant times, and has, the power,
authority and legal right to originate, acquire and own the Exchanged
Student Loans.
(b) Power and Authority. The Transferor has the requisite
corporate power and authority to execute and deliver this Agreement and
to carry out its terms; the Transferor has requisite corporate power
and authority to transfer and assign the property to be contributed and
assigned to and deposited with the Issuer (or with the Eligible Lender
Trustee on behalf of the Issuer) and the Transferor has duly authorized
such transfer and assignment to the Issuer (or to the Eligible Lender
Trustee on behalf of the Issuer) by all necessary corporate action on
the Transferor's part; and the execution, delivery and performance of
this Agreement have been duly authorized by the Transferor by all
necessary corporate action.
(c) Binding Obligation. This Agreement constitutes a legal,
valid and binding obligation of the Transferor enforceable against the
Transferor in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance 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
do not violate, 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 charter or by-laws of the Transferor, or any
material indenture, material agreement or other material instrument to
which the Transferor 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 material indenture,
material agreement or other material instrument (other than pursuant to
the Basic Documents); nor violate any material law or, to the knowledge
of the Transferor, any material order, rule or regulation applicable to
it of any court or of any federal or State regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Transferor or its properties.
E-2
<PAGE>
(e) No Proceedings. To its best knowledge, there are no
proceedings or investigations pending or threatened against the
Transferor, before any court, regulatory body, administrative agency or
other governmental instrumentality having jurisdiction over it or its
properties: (i) asserting the invalidity of this Agreement, (ii)
seeking to prevent the consummation of any of the transactions
contemplated by this Agreement, (iii) seeking any determination or
ruling that could reasonably be expected to have a material and adverse
effect on the performance by the Transferor of its obligations under,
or the validity or enforceability of, this Agreement or (iv) seeking to
affect adversely the federal or State income tax attributes of the
Issuer, the Notes or the Certificates.
(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
Transferor in connection with the execution and delivery by the
Transferor of this Agreement and the performance by the Transferor of
the transactions contemplated by this Agreement have been duly
obtained, effected or given and are in full force and effect.
(g) Principal Balances. (i) The aggregate principal balance of
the Consolidation Loans, the HEAL Consolidation Loans and the Serial
Loans that are Exchanged Student Loans listed on Schedule A attached
hereto and conveyed to the Eligible Lender Trustee on behalf of the
Issuer pursuant to this Agreement as of their respective Subsequent
Cut-Off Dates is $________, $_______ and $________, respectively;
[[(ii) the aggregate principal balance of the Financed Student Loans
listed on Schedule B attached hereto and to be conveyed to the
Transferor pursuant to Section 2.3(d) of the Transfer and Servicing
Agreement is $_______ ;]] (iii) the Consolidation Prepayments on
deposit in the Collection Account is $________; (iv) the Issuer
Consolidation Payments for the Exchange Date is $__________; and (v)
the Exchange Adjustment for the Exchange Date is $________.
5. Conditions Precedent. The obligation of the Issuer to acquire the
Exchanged Student Loans hereunder is subject to the satisfaction, on or prior to
the Exchange Date, of the following conditions precedent:
(a) Representations and Warranties. Each of the
representations and warranties made by the Transferor in Section 4 of
this Agreement and the representations and warranties made with respect
to the Exchanged Student Loans in Section 3.1 of the Transfer and
Servicing Agreement shall be true and correct in all material respects
as of the date of this Agreement and as of the Exchange Date.
(b) Transfer and Servicing Agreement Conditions. Each of the
conditions set forth in Section 2.2(b) of the Transfer and Servicing
Agreement shall have been satisfied.
(c) Delivery of Assignment. The Transferor shall have
delivered an Assignment substantially in the form of Annex A hereto.
Upon the satisfaction of the conditions set forth in this Section 5,
the Eligible Lender Trustee shall have executed and delivered to the Transferor
an Assignment, substantially in the form of Annex B hereto.
6. Ratification of Agreement. As supplemented by this Agreement, the
Transfer and Servicing Agreement is in all respects ratified and confirmed and
the Transfer and Servicing Agreement as so supplemented by this Agreement shall
be read, taken and construed as one and the same instrument.
7. 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.
E-3
<PAGE>
8. Governing Law. This Agreement 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.
9. 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.
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.
CRESTAR STUDENT LOAN TRUST 1997-1
By: STAR BANK, NATIONAL
ASSOCIATION, not in its individual
capacity but solely as Eligible Lender
Trustee
By:_________________________________________
Name:
Title:
STAR BANK, NATIONAL ASSOCIATION,
not in its individual capacity but solely as
Eligible Lender Trustee
By: ________________________________________
Name:
Title:
CRESTAR BANK, as
Transferor
By: ________________________________________
Name:
Title:
E-4
<PAGE>
Acknowledged and accepted as
of the date first above written:
BANKERS TRUST COMPANY,
not in its individual capacity but solely as
Indenture Trustee
By ______________________________________
Name:
Title:
E-5
<PAGE>
ANNEX A
TO THE TRANSFER AGREEMENT
ASSIGNMENT
For value received, in accordance with the Transfer and Servicing
Agreement (the "Transfer and Servicing Agreement") dated as of [_______,] 1997,
among the undersigned, as transferor (the "Transferor"), as master servicer and
as administrator, Crestar Student Loan Trust 1997-1 (the "Trust"), Star Bank,
National Association, not in its individual capacity but solely as Eligible
Lender Trustee (the "Eligible Lender Trustee"), and the Transfer Agreement No.
__ dated as of____, (the "Transfer Agreement") among the Transferor, the Trust
and the Eligible Lender Trustee, the undersigned does hereby contribute, 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 Transfer
and Servicing Agreement), all right, title and interest of the undersigned in
and to (i) the Exchanged Student Loans and all obligations of the Obligors
thereunder, including all moneys paid or payable thereunder (other than Interest
Subsidy Payments and Special Allowance Payments through the related Subsequent
Cut-Off Date) after the related Subsequent Cut-Off Date and (ii) the proceeds of
any and all of the foregoing. The foregoing contribution, assignment, transfer
and conveyance 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
Transferor to the borrowers of such Exchanged Student Loans or any other person
in connection with the Exchanged Student Loans or any agreement or instrument
relating to any of them, except to the extent required by the Higher Education
Act or the HEAL Act, as the case may be.
In addition, the undersigned, by execution of this instrument, hereby
endorses the promissory notes evidencing each Exchanged 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 Transfer and Servicing 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
Transfer and Servicing Agreement and the Transfer Agreement and is to be
governed by the Transfer and Servicing Agreement and the Transfer Agreement.
Capitalized terms used but not defined herein shall have the meaning
assigned to them in the Transfer Agreement or in Appendix A to the Transfer and
Servicing Agreement.
IN WITNESS WHEREOF, the undersigned has caused this Assignment to be
duly executed as of______
CRESTAR BANK,
as Transferor
By: ________________________________________
Name:
Title:
A-1
<PAGE>
ANNEX B
TO THE TRANSFER AGREEMENT
ASSIGNMENT
For value received, in accordance with the Transfer and Servicing
Agreement (the "Transfer and Servicing Agreement") dated as of [_______], 1997,
among the undersigned, (the "Trust"), as Master Servicer and as Administrator
(the "Transferor"), and Star Bank, National Association, not in its individual
capacity but solely as Eligible Lender Trustee (the "Eligible Lender Trustee"),
and the Transfer Agreement No. __ dated as of ____________, ____ (the "Transfer
Agreement") among the Transferor, the Trust and the Eligible Lender Trustee, the
undersigned does hereby contribute, assign, transfer and otherwise convey unto
the Transferor, without recourse (subject to the obligations set forth in the
Transfer and Servicing Agreement), all right, title and interest of the
undersigned in and to (i) the Financed Student Loans set forth on Schedule B to
the Transfer Agreement and all obligations of the Obligors thereunder, including
all moneys paid or payable thereunder (other than Interest Subsidy Payments and
Special Allowance Payments through the related Subsequent Cut-off Date) after
the related Subsequent Cut-off Date and (ii) the proceeds of any and all of the
foregoing. The foregoing contribution, assignment. transfer and conveyance does
not constitute and is not intended to result in any assumption by the Transferor
of any obligation of the Eligible Lender Trustee or the Trust to the borrowers
of such Financed Student Loans or any other person in connection with such
Financed Student Loans or any agreement or instrument relating to any of them,
except to the extent required by the Higher Education Act or the HEAL Act, as
the case may be.
In addition, the undersigned, by execution of this instrument, hereby
endorses the promissory notes evidencing each Financed Student Loan described in
Schedule B to the Transfer Agreement in favor of the Transferor, without
recourse, 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
Transfer and Servicing Agreement and the Transfer Agreement and is to be
governed by the Transfer and Servicing Agreement and the Transfer Agreement.
Capitalized terms used but not defined herein shall have the meaning
assigned to them in the Transfer Agreement or in Appendix A to the Transfer and
Servicing Agreement.
IN WITNESS WHEREOF, the undersigned has caused this Assignment to be
duly executed as of______
CRESTAR STUDENT LOAN TRUST 1997-1
By: STAR BANK, NATIONAL ASSOCIATION,
not in its individual capacity but solely as Eligible
Lender Trustee on behalf of the Trust
By: ________________________________________
Name:
Title:
B-1
<PAGE>
SCHEDULE A
TO THE TRANSFER AGREEMENT NO.____
[List of Exchanged Student Loans and
their related Subsequent Cut-Off Dates]
B-1
<PAGE>
SCHEDULE B
TO THE TRANSFER AGREEMENT NO.___
[List of Financed Student Loans
to be Conveyed to the Transferor]
B-2
<PAGE>
EXHIBIT F
TO THE
TRANSFER AND SERVICING AGREEMENT
OFFICER'S CERTIFICATE
REQUIRED BY SECTION 2.2(b)(viii) OF THE TRANSFER AND SERVICING AGREEMENT
B-3
EXHIBIT 4.4
ADMINISTRATION AGREEMENT dated as of [________], 1997, among
CRESTAR STUDENT LOAN TRUST 1997-1, a Delaware business trust (the "Issuer"),
CRESTAR BANK, a Virginia banking corporation, as administrator (the
"Administrator"), and BANKERS TRUST COMPANY, a New York banking corporation, not
in its individual capacity but solely as Trustee (the "Indenture Trustee").
W I T N E S S E T H
WHEREAS the Issuer was created pursuant to a Trust Agreement
dated as of [________], 1997 (the "Trust Agreement") among the Administrator, as
depositor, Star Bank, National Association, as Eligible Lender Trustee and
Delaware Trust Capital Management, Inc., as Delaware Trustee;
WHEREAS the Issuer may issue Student Loan Asset Backed
Certificates (the "Certificates") pursuant to the Trust Agreement
and, if applicable, a related Trust Supplement;
WHEREAS the Issuer may issue, in one or more Classes, Student
Loan Asset Backed Notes (the "Notes") pursuant to the Indenture dated as of
[________], 1997 (the "Indenture"), between the Issuer and the Indenture Trustee
and a related Terms Supplement (capitalized terms used herein and not defined
herein shall have the meanings assigned to such terms in Appendix A to the
Indenture, which also contains rules of usage and construction that shall be
applicable herein);
WHEREAS the Issuer has entered into or will enter into certain
agreements in connection with the issuance of the Notes and the Certificates,
including the Transfer and Servicing Agreement, the Guarantee Agreements, the
HEAL Insurance Contract, and the Indenture and related Terms Supplement (all
such agreements being collectively referred to herein as the "Related
Agreements");
WHEREAS, pursuant to the Basic Documents Issuer and the
Eligible Lender Trustee are required to perform certain duties in connection
with (a) the Notes and the Trust Estate therefor pledged to the Indenture
Trustee pursuant to the Indenture and the related Terms Supplement and (b) the
Certificates (the registered holders of the Certificates being referred to
herein as the "Owners");
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 or
cause to be provided the services required hereby and is willing to
<PAGE>
perform or cause to be performed 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, intending to be legally
bound hereby, agree as follows:
1. Duties of the Administrator. (a) Duties with Respect to the
Indenture and Trust Agreement. The Administrator shall perform all its duties as
Administrator under the Trust Agreement, the Indenture, the Transfer and
Servicing Agreement and this 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, the Terms Supplement and
the Trust Agreement. The Administrator shall monitor the performance of the
Issuer and shall advise the Eligible Lender Trustee when action by the Issuer or
the Eligible Lender Trustee is necessary to comply with the Issuer's or the
Eligible Lender Trustee's duties under the Indenture, the Terms Supplement, the
Trust Agreement and any of the other Basic Documents. The Administrator shall
prepare for execution, if required, 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, the Terms Supplement, the
Trust Agreement or any of the other Basic Documents. In furtherance of the
foregoing, the Administrator shall take all appropriate action that is the duty
of the Administrator and of the Issuer to take pursuant to the Trust Agreement,
the Indenture and the Terms Supplement, including such of the foregoing as are
required of the Issuer with respect to the following matters (references are to
sections of the Indenture:
(A) the duty to cause the Note Registrar to keep the Note
Register and to give the Indenture Trustee notice of any appointment of
a new Note Registrar and the location, or change in location, of the
Note Registrar (Section 2.6);
(B) the fixing or causing to be fixed of any specified record
date and the notification of the Indenture Trustee and Noteholders with
respect to special payment dates, if any (Section 2.9(d));
(C) 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 2.11);
(D) the preparation, obtaining or filing of the instruments,
opinions and certificates and other documents required for the release
of collateral (Section 2.12);
-2-
<PAGE>
(E) the duty to cause the Note Registrar to maintain on behalf
of the Issuer an office in the Borough of Manhattan, City of New York,
for registration of transfer or exchange of Notes (Section 3.2);
(F) 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 3.3);
(G) the direction to the Paying Agents to deposit moneys with
the Indenture Trustee (Section 3.3);
(H) 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 and each other instrument
and agreement included in the Indenture Trust Estate (Section 3.4);
(I) the preparation of all supplements, amendments, financing
statements, continuation statements, instruments of further assurance
and other instruments, in accordance with Section 3.5 of the Indenture,
necessary to protect the Indenture Trust Estate (Section 3.5);
(J) the identification to the Indenture Trustee in an
Officer's Certificate of the Issuer of a Person with whom the Issuer
has contracted to perform its duties under the Indenture (Section
3.7(b));
(K) the notification of the Indenture Trustee and the Rating
Agencies (if any Notes or Certificates are then rated by the Rating
Agencies) of a Master Servicer Default known to the Administrator
pursuant to the Transfer and Servicing Agreement and, if such Master
Servicer Default arises from the failure of the Master Servicer to
perform any of its duties under the Transfer and Servicing Agreement,
the taking of all reasonable steps available to enforce the Issuer's
rights under the Basic Documents in respect of such failure (Section
3.7(d));
(L) the preparation and obtaining of documents and instruments
required for the release of the Issuer from its obligations under the
Indenture (Section 3.10);
(M) the delivery of notice to the Indenture Trustee and the
Rating Agencies (if any Notes or Certificates are then rated by the
Rating Agencies) of each Event of Default, any Default under Section
5.1 (iii) of the Indenture and each default by the Master Servicer, the
Administrator or the Seller under the Transfer and Servicing Agreement
or any
-3-
<PAGE>
Supplemental Transfer and Servicing Agreement known to the
Administrator (Section 3.18);
(N) 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 4.1);
(O) the compliance with any written directive of the Indenture
Trustee to compel performance by the Master Servicer under the Transfer
and Servicing Agreement (Section 5.16);
(P) the reimbursement to the Indenture Trustee to the extent
provided in Section 6.7 of the Indenture of all reasonable
out-of-pocket expenses (including the fees and expenses of counsel)
incurred or made by it in accordance with any provision of the
Indenture as well as the indemnification, to the extent provided in the
Indenture, of the Indenture Trustee in connection with the
administration of the Trust and the performance of the Indenture
Trustee's duties under the Indenture and the other Basic Documents
(Section 6.7);
(Q) the removal of the Indenture Trustee and appointment of a
successor Indenture Trustee (Section 6.8);
(R) the preparation of any written instruments required to
confirm more fully the authority of any cotrustee or separate trustee
and any written instruments necessary in connection with the
resignation or removal of any co-trustee or separate trustee (Section
6.10);
(S) 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 7.1);
(T) 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 7.3);
(U) the opening of one or more accounts in the Issuer's, the
Indenture Trustee's or the Eligible Lender Trustee's name, the
preparation of Issuer Orders, Officers Certificates of the Issuer and
Opinions of Counsel and all other actions reasonably necessary with
respect to investment and reinvestment of funds in the Trust Accounts
(Sections 8.2 and 8.3);
-4-
<PAGE>
(V) 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 9.1, 9.2 and 9.3);
(W) 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 9.6);
(X) the preparation of all Officers' Certificates of the
Issuer, or obtaining 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 11.1(a));
(Y) 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
11.1(b));
(AA) the preparation and delivery to Noteholders and the
Indenture Trustee of any agreements with respect to alternate payment
and notice provisions (Section 11.6); and
(BB) 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 those provided
in the other Related Agreements and the Trust Agreement which the Administrator
agrees herein to perform, 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 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, the Trust Agreement or any of the other
Basic Documents, 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, the Trust Agreement or any of the other Basic Documents.
Subject to Section 5 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 Trust
Estate (including the Related Agreements and other Basic Documents) as are not
covered by any of the foregoing provisions and as are expressly requested by the
Eligible Lender
-5-
<PAGE>
Trustee and are reasonably within the capability of the Administrator.
(ii) 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 transactions 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) 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 not have withheld consent or provided an alternative
direction. For the purpose of the preceding sentence, "non-ministerial matters"
shall include:
(A) the amendment of or any supplement to the Indenture
or any Terms Supplement;
(B) 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);
(C) the amendment, change or modification of the Related
Agreements or the Trust Agreement;
(D) the appointment of successor Note Registrars, successor
Certificate Paying Agents and successor Indenture Trustees pursuant to
the Indenture or to the appointment of successor Administrators or
successor Master Servicers, or the consent to the assignment by the
Note Registrar, Certificate Paying Agent or Indenture Trustee of its
obligations under the Indenture;
(E) the removal of the Indenture Trustee; and
(F) the buying or selling of assets in the Trust Estate,
including student loans.
(d) Exceptions. Notwithstanding anything to the
contrary in this Agreement, except as expressly provided herein or in the other
Basic Documents, the Administrator shall not be obligated to, and shall not, (l)
make any payments to the Noteholders under the Related Agreements, (2) make any
payments to Certificateholders under the Trust Agreement or the Transfer and
-6-
<PAGE>
Servicing Agreement, (3) sell the Trust Estate pursuant to Section [[5.4]] of
the Indenture, (4) take any other action that the Issuer directs the
Administrator not to take on its behalf, (5) in connection with its duties
hereunder assume any indemnification obligation of any other Person or (6)
service the Financed Student Loans.
2. Records. The Administrator shall maintain appropriate books
of account and records relating to services performed hereunder, which books of
account and records shall be reasonably accessible for inspection by the Issuer
at any time during normal business hours.
3. 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 a fee to be
determined equal to a rate per annum of the outstanding principal amount of the
Notes, calculated monthly and payable on the each Distribution Date (the
"Administration Fee").
4. Additional Information To Be Furnished to the Issuer. The
Administrator shall furnish the Issuer from time to time such additional
information regarding the Trust Estate as the Issuer shall reasonably request.
5. 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 or provided in
the Basic Documents, 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.
6. No Joint Venture; Not Trustee. Nothing contained in this
Agreement (i) shall constitute the Administrator and any of the Issuer, the
Indenture Trustee 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.
Further, nothing contained in this Agreement shall constitute or be deemed to
constitute the Administrator as a trustee or cotrustee of the Trust.
7. 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
-7-
<PAGE>
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.
8. Term of Agreement; Resignation and Removal of
Administrator. (a) This Agreement shall continue in force until the dissolution
of the Issuer, upon which event this Agreement shall automatically terminate.
(b) The provisions of Article VII and Article
VIII of the Transfer and Servicing Agreement relating to the resignation or
removal of the Administrator and the failure of the Administrator to perform its
duties under this Agreement are hereby incorporated by reference herein.
9. Action upon Termination, Resignation or Removal. Promptly
upon the effective date of termination of this Agreement pursuant to pursuant to
Section 8(a) or the resignation or removal of the Administrator pursuant to
Section 8(b) and the Transfer and Servicing Agreement, the Administrator shall
be entitled to be paid all fees and reimbursable expenses accruing to it to the
date of such termination, resignation or removal. The Administrator shall
forthwith upon such termination pursuant to Section 8(a) deliver to the Issuer
all property and documents of or relating to the Collateral then in the custody
of the Administrator. In the event of the resignation or removal of the
Administrator, the Administrator shall cooperate with the Issuer and take all
reasonable steps requested to assist the Issuer in making an orderly transfer of
the duties of the Administrator.
10. Notices. Any notice, report or other communication given
hereunder shall be in writing and addressed as follows:
(a) if to the Issuer or the Eligible Lender
Trustee, to
Star Bank, National Association
Corporate Trust Office
425 Walnut Street
Cincinnati, Ohio 45201
Attention: Corporate Trust Department
Telephone: (___) ___-____
Fax: (___) ___-____
-8-
<PAGE>
(b) if to the Administrator, to
Crestar Bank
[--------]
Richmond, Virginia [________]
Attention: [________]
Telephone: (___) ___-____
Fax: (___) ___-____
with a copy to
Crestar Bank
[--------]
Richmond, Virginia [________]
Attention: [________]
Telephone: (___) ___-____
Fax: (___) ___-____
(c) if to the Indenture Trustee, to
Bankers Trust Company
Four Albany Street
New York, New York 10006
Attention: Corporate Trust and
Agency Group, Structured
Finance Team
Telephone: (212) 250-2500
Fax: (212) 250-6439
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.
11. Amendments.
(a) This Agreement may be amended by the Administrator, the Issuer, and
the Indenture Trustee, with the prior consent of the Eligible Lender Trustee
(which consent shall not be unreasonably withheld) 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; provided, however, that such action shall
not, as evidenced by an Opinion of Counsel delivered to the Indenture Trustee
and the Eligible Lender Trustee, adversely affect in any material respect the
interests of any Noteholder.
(b) This Agreement may also be amended from time to time by the
Administrator, the Issuer, and the Indenture Trustee, with the
-9-
<PAGE>
prior consent of the Eligible Lender Trustee, and the consent of the holders of
Directing Notes evidencing not less than a majority of the Outstanding Amount of
the Directing Notes, 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 (i) 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 (ii) reduce the aforesaid percentage of the Outstanding Amount of the Notes
and the Certificate Balance, the Noteholders and the Certificateholders of which
are required to consent to any such amendment, without the consent of all
outstanding Noteholders and Certificateholders affected thereby.
(c) 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.
(d) 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 (if any Notes or Certificates are then rated by the Rating
Agencies).
12. Successors and Assigns. Notwithstanding anything to the
contrary contained herein, except as provided in Sections 6.5 and 6.8 of the
Transfer and Servicing Agreement, this Agreement may not be assigned by the
Administrator. Subject to the foregoing, this Agreement shall bind any
successors or assigns of the parties hereto.
13. Governing Law. This Agreement 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.
14. 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.
15. Counterparts. This Agreement may be executed in
counterparts, each of which when so executed shall together
constitute but one and the same agreement.
16. Severability. Any provision of this Agreement that
is prohibited or unenforceable in any jurisdiction shall be
-10-
<PAGE>
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.
17. Not Applicable to Crestar Bank in Other Capacities.
Nothing in this Agreement shall affect any obligation Crestar Bank may have in
any other capacity under the Basic Documents.
18. Provisions of Transfer and Servicing Agreement Control.
The provisions of the Transfer and Servicing Agreement and of each Supplemental
Transfer and Servicing Agreement relating to the Administrator and to this
Agreement shall in all events govern and are hereby incorporated herein and, to
the extent any provision herein shall be inconsistent with any such provision of
the Transfer and Servicing Agreement, the Transfer and Servicing Agreement shall
govern.
19. Limitation of Liability of Eligible Lender Trustee and
Indenture Trustee. (a) Notwithstanding anything contained herein to the
contrary, this instrument has been countersigned by Star Bank, National
Association not in its individual capacity but solely in its capacity as
Eligible Lender Trustee of the Issuer and in no event shall the Eligible Lender
Trustee in its individual capacity or the Delaware Trustee in its individual
capacity or as Delaware Trustee or any Owner of the Issuer have any liability
for the representations, warranties, covenants, agreements 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 Bankers Trust Company not
in its individual capacity but solely as Indenture Trustee and in no event shall
Bankers Trust Company 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.
20. Third-Party Beneficiary. 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.
-11-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Administration Agreement to be duly executed and delivered as of the day and
year first above written.
CRESTAR STUDENT LOAN TRUST 1997-1
by STAR BANK, NATIONAL
ASSOCIATION, not in its
individual capacity but solely
as Eligible Lender Trustee,
By: __________________________________
Name:
Title:
BANKERS TRUST COMPANY, not in its
individual capacity but solely as
Indenture Trustee,
By: __________________________________
Name:
Title:
CRESTAR BANK, as Administrator,
By: __________________________________
Name:
Title:
-12-
EXHIBIT 4.5
EDUCATIONAL CREDIT AGREEMENT FOR PAYMENT ON
MANAGEMENT CORPORATION GUARANTEE OF STUDENT LOANS
WITH FEDERAL REINSURANCE
(for loans to students and parents of
students pursuant to the Higher
Education Act of 1965, as amended)
WHEREAS, Star Bank, National Association, as Trustee for Crestar Student Loan
Trust 1997-1
- ------------------------------------------------------------------------------
(Lender Name)
located at 425 Walnut Street Cincinnati Ohio 53201
------------------------------------------------------------------
(Street Address) (City) (State) (Zip Code)
(the "Lender"), solely in its capacity as eligible lender trustee for the
Crestar Student Loan Trust, 1997-1, wishes to be able to acquire and hold
guaranteed loans (the "Loans") made or acquired by Crestar Bank to students
pursuing programs of higher or vocational education at eligible institutions,
and to parents of such students pursuant to the aforementioned federal
legislation (the "Act") and as guaranteed by Educational Credit Management
Corporation ("ECMC"). The parties acknowledge that this Agreement does not
authorize Lender to make new loans guaranteed by ECMC.
WHEREAS, Crestar Bank has an Agreement for Payment on Guarantee of Student Loans
with Federal Reinsurance with ECMC dated July 1, 1996, as amended by the First
Amendment thereto dated as of July 1, 1996, and an Agreement for Payment on
Guarantee of Consolidation Loans with Federal Reinsurance with ECMC dated
_________________________;
WHEREAS, Lender has assumed the role of eligible lender trustee for the Crestar
Student Loan Trust, 1997-1 and such subsequent student loan trusts as may be
agreed upon by Crestar Bank and Lender;
WHEREAS, the Lender represents that it is an "eligible lender" under the
provisions of the Act, the regulations issued under the Act and the Rules and
Regulations and policies of ECMC as such policies may be implemented or amended;
WHEREAS, ECMC guaranteed the Loans, or the guarantee on the Loans or the right
to reinstate a previously issued guarantee of another entity has been
transferred to ECMC by the United States Department of Education or by another
Guaranty Agency under the Act; and
WHEREAS, ECMC, relying upon the Lender's representation that it qualifies as an
eligible lender under the provisions of the Act, the regulations issued under
the Act and the Rules and Regulations and policies of ECMC, wishes to allow the
acquisition and holding of the Loans by the Lender in accordance with the policy
expressed in the Act.
NOW, THEREFORE, it is mutually agreed that:
1. This Agreement shall make applicable to Lender those terms and
conditions of guarantee between Crestar Bank and ECMC as set forth in
the Agreement for Payment on Guarantee of Student Loan with Federal
Reinsurance between Crestar Bank and ECMC dated July 1, 1996, as
amended by the First Amendment thereto dated as of July 1, 1996, and
the Agreement for Payment on Guarantee of Consolidation Loans with
Federal Reinsurance between Crestar Bank and ECMC dated
__________________, copies of which are attached and incorporated by
reference as
<PAGE>
though set forth herein. ECMC and Lender agree that this Agreement
shall in no manner constitute an agreement by ECMC to issue new
guarantees pursuant to the Act at any time for any Loans made by the
Lender, or for any Loans acquired by the Lender which were not so
guaranteed prior to such acquisition.
2. Upon the transfer of guarantees to ECMC, ECMC agrees to honor any
previously issued guarantee of the Loans by another entity or to
reinstate a previously issued guarantee of the Loans by another entity,
to the extent that the Loans are eligible for such guarantee under the
Act, the regulations issued under the Act and the Rules and Regulations
and policies of ECMC, which Act, regulations, Rules and Regulations and
policies, as they may be from time to time amended, are made part of
this Agreement.
3. Further, within the limits of the Act, regulations thereto and
directives of the United States Department of Education, ECMC shall
guarantee that percentage of the Loan which is eligible for such
guarantee under the Act, the regulations issued under the Act and the
Rules and Regulations and policies of ECMC, which Act, regulations,
Rules and Regulations and policies as they may be from time to time
amended, are made part of this Agreement. ECMC shall not change its
Rules, Regulations or policies to reduce the percentage of the Loan
eligible for guarantee for any Loan with an outstanding guarantee which
was guaranteed in accordance with the Act and regulations thereto. ECMC
shall use its best efforts to provide Lender at least 60 days prior
written notice of any amendment to the Rules and Regulations and
policies of ECMC, unless a shorter period is required by the Act,
regulations or written directives of the Secretary for the U.S.
Department of Education.
4. ECMC agrees to purchase eligible Loans of the Lender provided that (a)
the Loans are eligible for claim payment as provided by the Act,
regulations, Rules and Regulations and policies identified above; (b)
the Loans have been made in accordance with the Act, regulations, Rules
and Regulations and policies identified above; (c) with respect to any
Loan, the Lender has not committed any act or omitted to do any act,
the commission or omission of which would cause ECMC to lose its
reinsurance pursuant to the Act with respect to such Loan except where
such act or omission was required or directed by ECMC; and (d) title to
the promissory notes evidencing the Loans has been subrogated to ECMC
by the Lender.
5. For loans that were originally guaranteed by the State Education
Assistance Authority ("SEAA"), a political subdivision of the
Commonwealth of Virginia, ECMC agrees to use SEAA's standards for
evaluating claims on the guarantee filed by lenders, as long as those
standards comply with and are no more strict than the standards in the
Act and the regulations under the Act. Otherwise ECMC shall review
claims in accordance with the Act and regulations thereto.
6. With respect to all Loans previously guaranteed by another entity and
new loans guaranteed by ECMC, ECMC represents that it has entered into
an agreement with the Federal Government with respect to reinsurance
pursuant to the Act and with respect to the maintenance of reserves for
the purchase of Loans eligible for claim payment as provided by the
Act, regulations, and ECMC Rules, Regulations and policies.
7. The Lender agrees to comply with all applicable Federal and State laws
and regulations with respect to any Loan subject to this Agreement.
2
<PAGE>
8. ECMC agrees that in administering its guaranty program it will comply
with the Act and regulations issued thereunder.
9. ECMC and the Lender agree that the guarantee on any Loan subject to
this Agreement shall be effective for the term of the Loan determined
in accordance with the Act, regulations, Rules and Regulations and
policies identified above and beginning on the date of disbursement by
the Lender provided that the guarantee on any loan shall not be
effective if any required guarantee fee is not remitted to ECMC in
accordance with the Act and regulations and the Rules, Regulations and
policies of ECMC. If no guarantee fee is required, the guarantee shall
be effective beginning on the latter of the date of disbursement by the
Lender or on the date of reinstatement of the guarantee by ECMC.
10. The Lender shall maintain for all Loans a system of records and
accounts, shall afford ECMC access thereto during regular business
hours, and shall furnish such periodic and separate reports as may
reasonably be required by the U.S. Secretary of Education and ECMC
under the Act, regulations, Rules and Regulations and policies
identified above. For Loans paid in full or otherwise discharged, the
records shall be retained by the Lender as required by the Act,
regulations, Rules and Regulations, and policies identified above. This
Section 10 shall survive the termination of this Agreement.
11. Lender shall promptly repurchase any Loan where the repurchase of such
Loan is required in accordance with the Act, regulations, and Rules and
Regulations and policies of ECMC. Lender agrees to repurchase the Loans
if ECMC is denied reinsurance on the Loans or if the Loans are
determined by a court of law to be unenforceable in either case as a
result of the acts, errors, or omissions of Lender, Lender's agents or
deemed agents, including but not limited to schools or educational
institutions with which Lender has an origination relationship as
defined by the Act, regulations thereto or as determined by a court of
law which would give rise to borrower defenses against the
enforceability of the Loan. Lender shall indemnify and hold ECMC
harmless from any and all losses including costs and reasonable
attorneys' fees which ECMC may incur based upon Lender's failure to
repurchase the Loans as provided herein. This Section 11 shall survive
the termination of this Agreement.
12. The repurchase of Loans by Lender shall be in accordance with ECMC
Rules, Regulations and policies governing repurchases. For loans
guaranteed or claims received by ECMC on or after the effective date of
this Agreement, ECMC shall return the original promissory note to
Lender when the original promissory note has been delivered to ECMC by
Lender with respect to said Loans. For the purposes of documenting the
receipt of the original promissory note, ECMC records shall control. In
the event that ECMC is unable to return the original promissory note,
ECMC shall return a true and exact certified copy of the promissory
note along with the written assurances of ECMC that the lack of the
original promissory note will not adversely affect Lender or its
successors and assigns upon future resubmission of the Loan for claim
payment. ECMC shall assign all of the right, title, and interest to
such Loans to Lender contemporaneously with ECMC's receipt of the
repurchase payment for said Loans. Lender shall comply with the Act and
regulations thereto, and ECMC Rules, Regulations and policies with
respect to all loans repurchased hereunder. For loans guaranteed by
ECMC or claims received by ECMC on or after the effective date of this
Agreement, ECMC shall indemnify and hold Lender harmless from any and
all losses including reasonable costs and reasonable attorneys' fees
which Lender may incur if it is determined by a court of law that
Lender is unable to obtain a judgment against the
3
<PAGE>
borrower as a result of ECMC's failure to return the original
promissory note to Lender in accordance with this Section 12.
Contemporaneous with any payment by ECMC to Lender as provided herein,
Lender shall assign to ECMC all of its right, title and interest to
said Loans. This Section 12 shall survive the termination of this
Agreement.
13. Termination of this Agreement by ECMC shall be in accordance with
Limitation, Suspension or Termination proceedings as provided for by
ECMC Rules, Regulations and policies and the Act and Regulations
thereto. No action under this section shall affect the guarantee on
Loans previously covered by this Agreement. Lender may terminate this
Agreement upon ten (10) days advance written notice to ECMC.
14. This Agreement may not be assigned by Lender without the express
written consent of ECMC which consent shall not be unreasonably
withheld.
15. The laws of the State of Minnesota and the applicable federal law shall
govern the validity, performance and enforcement of this Agreement.
IN WITNESS WHEREOF, the Lender and ECMC have caused this Agreement to be duly
executed and delivered this ____ day of _______________, 19__.
STAR BANK, NATIONAL ASSOCIATION,
AS TRUSTEE FOR CRESTAR STUDENT LOAN TRUST 1997-1
- -------------------------------------------------------------------------------
LENDER (Lender Name)
By ____________________________________________________________________________
Its
- -------------------------------------------------------------------------------
PRINTED NAME SIGNATURE DATE TITLE
- -------------------------------------------------------------------------------
LENDER'S FEDERAL TAX ID NUMBER ELIGIBLE LENDER NUMBER (TO BE ASSIGNED)
EDUCATIONAL CREDIT MANAGEMENT CORPORATION
By ____________________________________________________________________________
Its
- --------------------------------------------------------------------------------
PRINTED NAME SIGNATURE DATE TITLE
4
<PAGE>
Educational Credit AGREEMENT FOR PAYMENT ON
Management Corporation GUARANTEE OF STUDENT LOANS
WITH FEDERAL REINSURANCE
(for loans to students and parents of
students pursuant to the Higher
Education Act of 1965, as amended)
WHEREAS, Crestar Bank
- --------------------------------------------------------------------------------
(Lender Name)
located at 6802 Paragon Place Richmond, VA 23230
---------------------------------------------------------------------
(Street Address) (City) (State) (Zip Code)
(the "Lender") holds or wishes to acquire and hold certain guaranteed loans (the
"Loans") made to students pursuing programs of higher or vocational education at
eligible institutions, and to parents of such students, pursuant to the
aforementioned federal legislation (the "Act") which were guaranteed by another
entity;
WHEREAS, Lender also wishes to be able to secure new guarantees for loans (the
"Loans") made to students pursuing programs of higher or vocational education at
eligible institutions, and to parents of such students, pursuant to the
aforementioned federal legislation (the "Act"). The parties acknowledge that
this Agreement does not obligate Lender to originate new loans guaranteed by
Educational Credit Management Corporation ("ECMC");
WHEREAS, the previously issued guarantee on the Loans or the right to reinstate
a previously issued guarantee of another entity has been transferred to ECMC by
the United States Department of Education or by another Guaranty Agency under
the Act;
WHEREAS, the Lender represents that it is an "eligible lender" under the
provisions of the Act, the regulations issued under the Act and the Rules and
Regulations and policies of ECMC. As of the date of this Agreement, the Rules,
Regulations and policies of ECMC consist of the written policies of ECMC as
previously provided to Lender and as identified in Exhibit A hereto and the
information contained in The Loan Manual published by the State Education
Assistance Authority ("SEAA") for the Commonwealth of Virginia.
WHEREAS, ECMC, relying upon the Lender's representation that it qualifies as an
eligible lender under the provisions of the Act, the regulations issued under
the Act and the Rules and Regulations and policies of ECMC, wishes to allow the
acquisition and holding of Loans and to encourage the making of such new Loans
by the Lender in accordance with the Act.
NOW, THEREFORE, it is mutually agreed that:
1. Upon the transfer of guarantees to ECMC, ECMC agrees to honor any
previously issued guarantee of the Loans by another entity or to
reinstate a previously issued guarantee of the Loans by another entity,
to the extent that the Loans are eligible for such guarantee under the
Act, the regulations issued under the Act and the Rules and Regulations
and policies of ECMC, which Act, regulations, Rules and Regulations and
policies, as they may be from time to time amended, are made part of
this Agreement.
<PAGE>
2. Further, within the limits of the Act, regulations thereto and
directives of the United States Department of Education, ECMC shall
guarantee that percentage of the Loan made by the Lender which is
eligible for such guarantee under the Act, the regulations issued under
the Act and the Rules and Regulations and policies of ECMC, which Act,
regulations, Rules and Regulations and policies as they may be from
time to time amended, are made part of this Agreement. ECMC shall not
change its Rules, Regulations or policies to reduce the percentage of
the Loan eligible for guarantee for any Loan with an outstanding
guarantee which was guaranteed in accordance with the Act and
regulations thereto. ECMC shall use its best efforts to provide Lender
at least 60 days prior written notice of any amendment to the Rules and
Regulations and policies of ECMC, unless a shorter period is required
by the Act, regulations or written directives of the Secretary for the
U.S. Department of Education.
3. ECMC agrees to purchase eligible Loans of the Lender provided that (a)
the Loans are eligible for claim payment as provided by the Act,
regulations, Rules and Regulations and policies identified above; (b)
the Loans have been made in accordance with the Act, regulations, Rules
and Regulations and policies identified above; (c) with respect to any
Loan, the Lender has not committed any act or omitted to do any act,
the commission or omission of which would cause ECMC to lose its
reinsurance pursuant to the Act with respect to such Loan except where
such act or omission was required or directed by ECMC; and (d) title to
the promissory notes evidencing the Loans has been subrogated to ECMC
by the Lender.
4. For loans that were originally guaranteed by the State Education
Assistance Authority ("SEAA"), a political subdivision of the
Commonwealth of Virginia, ECMC agrees to use SEAA's standards for
evaluating claims on the guarantee filed by lenders, as long as those
standards comply with and are no more strict than the standards in the
Act and the regulations under the Act. Otherwise ECMC shall review
claims in accordance with the Act and regulations thereto.
5. With respect to all Loans previously guaranteed by another entity and
new loans guaranteed by ECMC, ECMC represents that it has entered into
an agreement with the Federal Government with respect to reinsurance
pursuant to the Act and with respect to the maintenance of reserves for
the purchase of Loans eligible for claim payment as provided by the
Act, regulations, and ECMC Rules, Regulations and policies.
6. For new guarantees, the Lender agrees to promptly remit to ECMC any
guarantee fee required by ECMC. ECMC reserves the right to cancel the
guarantee on any Loan where the Lender has failed to remit the
guarantee fee to ECMC as required herein. The Lender further agrees to
pay to ECMC any additional fees or costs that may be authorized by the
Act and the regulations thereto and required by ECMC.
7. The Lender agrees to comply with all applicable Federal and State laws
and regulations with respect to any Loan subject to this Agreement. In
making Loans under the Act, the Lender will undertake to secure such
reductions in borrower's obligations to pay interest on Loans made by
the Lender as they may be eligible to receive under the Act and
regulations.
8. ECMC agrees that in administering its guaranty program it will comply
with the Act and regulations issued thereunder.
-2-
<PAGE>
9. ECMC and the Lender agree that the guarantee on any Loan subject to
this Agreement shall be effective for the term of the Loan determined
in accordance with the Act, regulations, Rules and Regulations and
policies identified above and beginning on the date of disbursement by
the Lender provided that the guarantee on any loan shall not be
effective if any required guarantee fee is not remitted to ECMC in
accordance with the Act and regulations and the Rules, Regulations and
policies of ECMC. If no guarantee fee is required, the guarantee shall
be effective beginning on the latter of the date of disbursement by the
Lender or on the date of reinstatement of the guarantee by ECMC.
10. The Lender shall maintain for all Loans a system of records and
accounts, shall afford ECMC access thereto during regular business
hours, and shall furnish such periodic and separate reports as may
reasonably be required by the U.S. Secretary of Education and ECMC
under the Act, regulations, Rules and Regulations and policies
identified above. For Loans paid in full or otherwise discharged, the
records shall be retained by the Lender as required by the Act,
regulations, Rules and Regulations, and policies identified above. This
Section 10 shall survive the termination of this Agreement.
11. Lender shall promptly repurchase any Loan where the repurchase of such
Loan is required in accordance with the Act, regulations, and Rules and
Regulations and policies of ECMC. Lender agrees to repurchase the Loans
if ECMC is denied reinsurance on the Loans or if the Loans are
determined by a court of law to be unenforceable in either case as a
result of the acts, errors, or omissions of Lender, Lender's agents or
deemed agents, including but not limited to schools or educational
institutions with which Lender has an origination relationship as
defined by the Act, regulations thereto or as determined by a court of
law which would give rise to borrower defenses against the
enforceability of the loan. Lender shall indemnify and hold ECMC
harmless from any and all losses including costs and reasonable
attorneys' fees which ECMC may incur based upon Lender's failure to
repurchase the Loans as provided herein. This Section 11 shall survive
the termination of this Agreement.
12. The repurchase of Loans by Lender shall be in accordance with ECMC
Rules, Regulations and policies governing repurchases. For loans
guaranteed or claims received by ECMC on or after the effective date of
this Agreement, ECMC shall return the original promissory note to
Lender when the original promissory note has been delivered to ECMC by
Lender with respect to said Loans. For the purposes of documenting the
receipt of the original promissory note, ECMC records shall control. In
the event that ECMC is unable to return the original promissory note,
ECMC shall return a true and exact certified copy of the promissory
note along with the written assurances of ECMC that the lack of the
original promissory note will not adversely affect Lender or its
successors and assigns upon future resubmission of the Loan for claim
payment. ECMC shall assign all of the right, title, and interest to
such Loans to Lender contemporaneously with ECMC's receipt of the
repurchase payment for said Loans. Lender shall comply with the Act and
regulations thereto, and ECMC Rules, Regulations and policies with
respect to all loans repurchased hereunder. For loans guaranteed by
ECMC or claims received by ECMC on or after the effective date of this
Agreement, ECMC shall indemnify and hold Lender harmless from any and
all losses including reasonable costs and reasonable attorneys' fees
which Lender may incur if it is determined by a court of law that
Lender is unable to obtain a judgment against the borrower as a result
of ECMC's failure to return the original promissory note to Lender in
accordance with this Section 12. Contemporaneous with any payment by
ECMC to Lender as
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<PAGE>
provided herein, Lender shall assign to ECMC all of its right, title
and interest to said Loans. This Section 12 shall survive the
termination of this Agreement.
13. ECMC shall guarantee Loans without regard to the borrowers race, sex,
color, religion, national origin, age, handicapped status or any other
basis prohibited by applicable law. The Lender will not discriminate in
the making of Loans to eligible borrowers or in the treatment of such
borrowers on any prohibited basis.
14. Termination of this Agreement by ECMC shall be in accordance with
Limitation, Suspension or Termination proceedings as provided for by
ECMC Rules, Regulations and policies and the Act and Regulations
thereto. No action under this section shall affect the guarantee on
Loans previously covered by this Agreement. Lender may terminate this
Agreement upon ten (10) days advance written notice to ECMC.
15. This Agreement may not be assigned by Lender without the express
written consent of ECMC which consent shall not be unreasonably
withheld.
16. The laws of the State of Minnesota and the applicable federal law shall
govern the validity, performance and enforcement of this Agreement.
IN WITNESS WHEREOF, the Lender and ECMC have caused this Agreement to be duly
executed and delivered this 1st day of July, 1996.
Crestar Bank
- --------------------------------------------------------------------------------
Lender (Lender Name)
/s/ W. Clark McGhee
- --------------------------------------------------------------------------------
BY
W. Clark McGhee 7/17/96 Its Vice President
- --------------------------------------------------------------------------------
PRINTED NAME SIGNATURE DATE
54-1109779
- --------------------------------------------------------------------------------
LENDER'S FEDERAL TAX ID NUMBER ELIGIBLE LENDER NUMBER (TO BE ASSIGNED)
- --------------------------------------------------------------------------------
EDUCATIONAL CREDIT MANAGEMENT CORPORATION
/s/ Thomas Tagtmeyer
- --------------------------------------------------------------------------------
BY
Thomas Tagtmeyer 7/19/96 VP
- --------------------------------------------------------------------------------
PRINTED NAME SIGNATURE DATE
-4-
<PAGE>
EXHIBIT A
Educational Credit Management Corporation
(Formerly known as the Transitional Guaranty Agency)
Updates 1-4
ECMC Update 1, Published August 12, 1994
ECMC Update 2, Published January 27, 1995
ECMC Update 3, Published November 8, 1995
ECMC Update 4, Published February 13, 1996
-5-
<PAGE>
FIRST AMENDMENT
to
AGREEMENT FOR PAYMENT ON GUARANTEE OF STUDENT LOANS WITH FEDERAL
REINSURANCE (FOR LOANS TO STUDENTS AND PARENTS OF STUDENTS PURSUANT
TO THE HIGHER EDUCATION ACT OF 1965, AS AMENDED)
This FIRST AMENDMENT, dated as of July 1, 1996, to an
AGREEMENT FOR PAYMENT ON GUARANTEE OF STUDENT LOANS WITH FEDERAL REINSURANCE
(for loans to students and parents of students pursuant to the Higher Education
Act of 1965, as amended), dated as of July 1, 1996, by and between EDUCATIONAL
CREDIT MANAGEMENT CORPORATION ("ECMC") and CRESTAR BANK, formerly UNITED
VIRGINIA BANK, a lending institution (the "Lender"), provides as follows:
RECITALS
WHEREAS, ECMC has been designated by the United States
Department of Education (the "Department") to be the guarantor for the
Commonwealth of Virginia effective July 1, 1996, and on such date ECMC will
assume responsibility of all outstanding guarantees of Virginia State Education
Assistance Authority (the "Authority");
WHEREAS, ECMC and the Lender have entered into an Agreement
for Payment on Guarantee of Student Loans with Federal Reinsurance (for loans to
students and parents of students pursuant to the Higher Education Act of 1965,
as amended), dated as of July 1, 1996 (the "Lender Agreement");
WHEREAS, the Lender and the Authority had entered into the
Participation Agreement, dated as of April 30, 1985 (as amended, the
"Participation Agreement"), under which the Authority had acquired a contingent
interest in certain Student Loans made by the Lender and the Authority agreed to
pay the Lender the amount of its contingent interest in the event of a default
on such Student Loans or the death, total and permanent disability, or
bankruptcy of the borrower of a Student Loan (such payment is referred to herein
as a guaranty insurance payment or the payment of a guaranty insurance claim);
WHEREAS, the Lender and VELA (as hereinafter defined) entered
into the VELA Service Agreements (as hereinafter defined), under which VELA
originated, serviced and collected student loans for the Lender, including
Student Loans which were subject to the Participation Agreement and are subject
to the Lender Agreement;
WHEREAS, the Department has issued a letter, dated March 7,
1996, to the Authority, the Lender and VELA (the "Department's Letter"), a copy
of which is attached hereto as Exhibit A to Appendix A hereto, under which the
Department has agreed to fully protect all VELA Serviced Loans (as hereinafter
defined), from any loss of or ineligibility for any portion of interest,
interest benefits, special allowance payments (as such terms are defined in
<PAGE>
the Department's Letter) or guaranty insurance (as used therein and herein to
include the guarantee and payment of principal and interest on the VELA Serviced
Loans), at any time, caused by any VELA Service Errors (as hereinafter defined);
WHEREAS, the Department's Letter, among other things, directs
the Authority and any other guaranty agency or any successors thereto that
guarantee any VELA Serviced Loans to pay guaranty insurance claims on any VELA
Serviced Loans despite the existence of VELA Service Errors (without any
requirement that such errors be cured), if they otherwise satisfy the
requirements for reinsurance relating to the lender's obligations;
WHEREAS, the Authority and the Lender entered into a Third
Amendment to Participation Agreement, dated as of April 1, 1996 (the "Third
Amendment to Participation Agreement"), a copy of which is attached hereto as
Appendix A, to, among other things, fully protect the VELA Serviced Loans from
loss as described above;
WHEREAS, ECMC has determined that it shall be bound by the
terms and conditions of the Department's Letter and the Third Amendment to
Participation Agreement, and has agreed to enter into this First Amendment to,
among other things, subject it to such terms and conditions and fully protect
the VELA Serviced Loans from loss as described above; and,
WHEREAS, ECMC and the Lender also have determined to
amend certain provisions of the Lender Agreement;
AGREEMENT
NOW, THEREFORE, for and in consideration of the premises, and
for good and valuable consideration, receipt of which is hereby acknowledged,
the parties agree as follows:
1. Definitions. Except as otherwise defined herein (including
in the recitals above), terms defined in the Lender Agreement are used herein as
therein defined. In addition, as used in this First Amendment (including the
recitals above), terms defined in the recitals above shall have the meanings
assigned to such terms in the recitals and the following terms shall have the
following meanings:
"VELA" means the Virginia Education Loan Authority, a
political subdivision of the Commonwealth of Virginia.
"VELA Service Agreements" has the meaning assigned to
such term in the Department's Letter.
"VELA Service Errors" has the meaning assigned to such
term in the Department's Letter.
-2-
<PAGE>
"VELA Serviced Loans" has the meaning assigned to the term
"Student Loans" in the Department's Letter.
2. Acceptance of the Direction in the Department's Letter.
Notwithstanding any provision of the Lender Agreement to the contrary, ECMC
hereby accepts the direction in the Department's Letter to pay, and hereby
agrees to pay, guaranty insurance claims on any VELA Serviced Loans despite the
existence of VELA Service Errors (without any requirement that such errors be
cured), if they otherwise satisfy the requirements for reinsurance relating to
the Lender's obligations.
3. Additional Agreements of ECMC. Notwithstanding any
provision of the Lender Agreement to the contrary, ECMC hereby agrees that:
a. ECMC shall fully protect all VELA Serviced Loans from any loss
of or ineligibility for any portion of guaranty insurance
(including the guarantee and payment of principal and interest
on the VELA Serviced Loans), at any time, caused by any VELA
Service Errors.
b. ECMC shall not, and hereby waives its right to: (1)
refuse to make guaranty insurance payments or require the
repayment of guaranty insurance payments or other
compensation received by the Lender on the VELA Serviced
Loans for which the loans may not be, or may not have
been, eligible as a result of the VELA Service Errors, or
(2) take any other administrative or remedial action or
proceeding against the Lender (or any director, officer,
employee, agent or representative thereof) as a result of
the VELA Service Errors, including, without limitation,
any proceeding for the emergency action, limitation,
suspension or termination of a lender authorized by
section 428(b)(1)(U) of the Higher Education Act of 1965,
as amended.
c. At the direction of the Department, and with no
additional payment of a guaranty insurance premium by the
Lender, ECMC shall accept a transfer of the guarantee for
any VELA Serviced Loan which is guaranteed by another
guaranty agency, if such other guaranty agency refuses to
pay a guaranty insurance claim presented to such agency
by or on behalf of the Lender (together with a copy of
the Department's Letter) as a result of a VELA Service
Error. Upon such transfer, ECMC shall pay the guaranty
insurance claim for such VELA Serviced Loan despite the
existence of any VELA Service Errors.
d. ECMC shall not refuse to pay any guaranty insurance claim for
any VELA Serviced Loan, including, without
-3-
<PAGE>
limitation, a claim presented to it under Section 3.C.
hereof, because of the absence of any evidence of
disbursement.
e. ECMC has been advised by the Lender, and agrees, with respect
to the "Liability Notations Reports" referred to in the
Department's Letter, that the missing files and Critical
Documents (as defined in the Department's Letter) described in
the Department's Letter include the following "liability
code/description" references included in the Liability
Notations Reports:
i. entire files: L0012 MISSING FOLDER
ii. application: L0002 MISSING APPLICATION
iii. promissory note: L0003 MISSING PROMISSORY NOTE
iv. application/promissory note: L0016 MISSING
APPLICATION/PROMISSORY NOTE
v. notice of loan guaranty: L0004 MISSING GUARANTEE
STATEMENT
vi. disclosure statement: L0234 MISSING DISCLOSURE
STATEMENT;
vii. repayment agreement: L0017 MISSING REPAYMENT
DISCLOSURE STATEMENT
viii. deferment forms: L0011 MISSING DEFERMENT FORM
ix. forbearance forms: L0019 MISSING FORBEARANCE FORM
x. school verification: L0015 MISSING SCHOOL
VERIFICATION
xi. out of school date verification: L0027 MISSING
GRADUATION VERIFICATION
f. ECMC agrees, with respect to the "Liability Notations
Reports" referred to in the Department's Letter, that the
notation as missing of categories of documents other than
an entire file or the Critical Documents in the Liability
Notations Reports for a VELA Serviced Loan does not mean
that the failure to identify other documents as missing
for that or other VELA Serviced Loans indicates that such
other documents were delivered by VELA to the Lender's
new servicer, Pennsylvania Higher Education Assistance
Agency ("PHEAA"), because PHEAA did not check for such
other documentation in PHEAA's file by file examination.
ECMC agrees that the absence of such other documentation
-4-
<PAGE>
of any kind which relates to any act or omission that is
considered a VELA Service Error under the Department's Letter,
also shall be considered a VELA Service Error.
4. Additional Amendments. No further alteration or amendment
of the Lender Agreement, as amended by this First Amendment, shall be effective
unless in writing, signed by the parties hereto. Notwithstanding anything in the
Lender Agreement to the contrary, no alteration, amendment or termination
("termination", as used herein and in the Lender Agreement, shall mean the
ending of the Lender Agreement under any circumstances, whether considered a
termination, expiration or other means of ending) of the Lender Agreement, as
amended by this First Amendment, shall in any way affect or impair ECMC's
obligations under the Lender Agreement, as amended by this First Amendment, with
respect to the VELA Serviced Loans. The provisions of this First Amendment shall
survive the termination of the Lender Agreement.
5. Other Terms and Conditions. Except as otherwise provided in
this First Amendment, the terms and conditions set forth in the Lender Agreement
shall remain in full force and effect.
6. No Waivers. No failure or delay by either party in
exercising any right, power or privilege under this First Amendment shall
operate as a waiver thereof, nor shall any waiver of any right, power or
privilege constitute a waiver of any other right, power or privilege. The rights
and remedies herein provided shall be cumulative and not exclusive of any rights
or remedies provided by law.
7. Successors and Assigns. The provisions of this First
Amendment shall be binding on, and shall inure to the benefit of, the parties,
their successors and assigns, including, without limitation, any subsequent
holder or assignee of a VELA Serviced Loan and the Department or any successor
guaranty agency which assumes ECMC's guarantee obligations or through which the
Department will honor Authority or ECMC guarantees.
8. Governing Law. This First Amendment shall be construed in
accordance with and be governed by the laws of the State of Minnesota,except to
the extent federal law shall control.
9. Severability. If any provision of this First Amendment
shall be held invalid, such provision shall be deemed severable and the
remaining provisions hereof shall remain in full force and effect.
10. Entire Agreement; Effect of First Amendment. The Lender
Agreement, as amended and supplemented by this First Amendment, contains the
entire understanding between the parties
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<PAGE>
and supersedes any prior written or oral agreements or understandings between
the parties respecting the subject matter hereof. There are no representations,
agreements, arrangements or understandings, oral or written, between the parties
relating to the subject matter of the Lender Agreement, as amended by this First
Amendment, except as are fully expressed herein. Upon the execution and delivery
of this First Amendment, the Lender Agreement shall be supplemented and amended
in accordance herewith, and this First Amendment shall form a part of the Lender
Agreement and the parties shall be bound hereby.
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<PAGE>
WITNESS the following signatures and seals as of the date
first written above.
CRESTAR BANK
By: /s/ William V. Bunting
---------------------------------
William V. Bunting
Executive Vice President
EDUCATIONAL CREDIT MANAGEMENT
CORPORATION
By: /s/ Robert J. McGowan
---------------------------------
Vice President, Finance
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<PAGE>
APPENDIX A [THIRD AMENDMENT TO PARTICIPATION AGREEMENT, WITH THE DEPARTMENT'S
LETTER ATTACHED AS EXHIBIT A THERETO]
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<PAGE>
APPENDIX A
State Education Assistance Authority
Commonwealth of Virginia
GUARANTEED STUDENT LOAN PROGRAM
THIRD AMENDMENT TO PARTICIPATION
AGREEMENT
This THIRD AMENDMENT, dated as of April 1, 1996, to a
PARTICIPATION AGREEMENT, dated April 30, 1985, by and between the STATE
EDUCATION ASSISTANCE AUTHORITY, a Political Subdivision of the Commonwealth of
Virginia (the "Authority") and CRESTAR BANK, formerly UNITED VIRGINIA BANK, a
lending institution (the "Lender"), provides as follows:
RECITALS
WHEREAS, the Lender and the Authority have entered into the
Participation Agreement, under which the Authority has acquired a contingent
interest in certain Student Loans made by the Lender and the Authority agrees to
pay the Lender the amount of its contingent interest in the event of a default
on such Student Loans or the death, total and permanent disability, or
bankruptcy of the borrower of a Student Loan (such payment is referred to herein
as a guaranty insurance payment or the payment of a guaranty insurance claim);
WHEREAS, the Lender and VELA (as hereinafter defined) entered
into the VELA Service Agreements (as hereinafter defined), under which VELA
originated, serviced and collected student loans for the Lender, including
Student Loans which are subject to the Participation Agreement;
WHEREAS, the United States Department of Education (the
"Department") has issued a letter, dated March 7, 1996, to the Authority, the
Lender and VELA (the "Department's Letter"), a copy of which is attached hereto
as Exhibit A, under which the Department has agreed to fully protect all VELA
Serviced Loans (as hereinafter defined), from any loss of or ineligibility for
any portion of interest, interest benefits, special allowance payments (as such
terms are defined in the Department's Letter) or guaranty insurance (as used
therein and herein to include the guarantee and payment of principal and
interest on the VELA Serviced Loans), at any time, caused by any VELA Service
Errors (as hereinafter defined);
WHEREAS, the Department's Letter, among other things, directs
the Authority and any other guaranty agency or any successors thereto that
guarantee any VELA Serviced Loans to pay guaranty insurance claims on any VELA
Serviced Loans despite the existence of VELA Service Errors (without any
requirement that such
<PAGE>
errors be cured), if they otherwise satisfy the requirements for
reinsurance relating to the lender's obligations;
WHEREAS, the Authority has determined that it is in the best
interests of the Authority and the Commonwealth of Virginia (the "Commonwealth")
to enter into this Third Amendment to, among other things, fully protect the
VELA Serviced Loans from loss as described above;
WHEREAS, in connection with the liquidation of VELA under a
1995 act of the General Assembly of Virginia, Chapter 384, a dispute arose
between the Lender and VELA regarding responsibility for the VELA Service
Errors, which dispute resulted in a currently pending lawsuit styled Crestar v.
Virginia Education Loan Authority et al., No, 3:95cv963; and,
WHEREAS, the Department's Letter and this Third Amendment will
assist in resolving the dispute between the Lender and VELA and ending the
pending litigation between the Lender and VELA, and the Authority has determined
that it is in the best interests of the Authority and the Commonwealth to enter
into this Third Amendment to assist in ending such pending litigation;
AGREEMENT
NOW, THEREFORE, for and in consideration of the premises, and
for good and valuable consideration, receipt of which is hereby acknowledged,
the parties agree as follows:
1. Definitions. Except as otherwise defined herein (including
in the recitals above), terms defined in the Participation Agreement are used
herein as therein defined. In addition, as used in this Third Amendment
(including the recitals above), terms defined in the recitals above shall have
the meanings assigned to such terms in the recitals and the following terms
shall have the following meanings:
"Participation Agreement" means the Participation Agreement,
dated April 30, 1985, as amended, by and between the Lender and the Authority.
"VELA" means the Virginia Education Loan Authority, a
political subdivision of the Commonwealth of Virginia.
"VELA Service Agreements" has the meaning assigned to such
term in the Department's Letter.
"VELA Service Errors" has the meaning assigned to such
term in the Department's Letter.
"VELA Serviced Loans" has the meaning assigned to the term
"Student Loans" in the Department's Letter.
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<PAGE>
2. Amendment of Participation Agreement. Notwithstanding any
provision of Paragraph 11 of the Participation Agreement prohibiting any
alteration or amendment affecting or impairing the Authority's obligations with
respect to previously disbursed Student Loans, this Third Amendment shall apply
to all VELA Serviced Loans.
3. Acceptance of the Direction in the Department's Letter.
Notwithstanding any provision of the Participation Agreement to the contrary,
the Authority hereby accepts the direction in the Department's Letter to pay,
and hereby agrees to pay, guaranty insurance claims on any VELA Serviced Loans
despite the existence of VELA Service Errors (without any requirement that such
errors be cured), if they otherwise satisfy the requirements for reinsurance
relating to the Lender's obligations.
4. Additional Agreements of the Authority. Notwithstanding any
provision of the Participation Agreement to the contrary, the Authority hereby
agrees that:
g. The Authority shall fully protect all VELA Serviced Loans from
any loss of or ineligibility for any portion of guaranty
insurance (including the guarantee and payment of principal
and interest on the VELA Serviced Loans), at any time, caused
by any VELA Service Errors.
h. The Authority shall not, and hereby waives its right to:
(1) refuse to make guaranty insurance payments or require
the repayment of guaranty insurance payments or other
compensation received by the Lender on the VELA Serviced
Loans for which the loans may not be, or may not have
been, eligible as a result of the VELA Service Errors, or
(2) take any other administrative or remedial action or
proceeding against the Lender (or any director, officer,
employee, agent or representative thereof) as a result of
the VELA Service Errors, including, without limitation,
any proceeding for the emergency action, limitation,
suspension or termination of a lender authorized by
section 428(b)(1)(U) of the Higher Education Act of 1965,
as amended.
i. At the direction of the Department, and with no additional
payment of a guaranty insurance premium by the Lender, the
Authority shall accept a transfer of the guarantee for any
VELA Serviced Loan which is guaranteed by another guaranty
agency, if such other guaranty agency refuses to pay the
guaranty insurance claim presented to such agency by or on
behalf of the Lender (together with a copy of the
Department's Letter) as a result of a VELA Service Error.
Upon such transfer, the Authority shall pay the guaranty
insurance claim for such VELA Serviced Loan despite the
existence of VELA Service Errors.
j. The Authority shall not refuse to pay any guaranty insurance
claim for any VELA Serviced Loan, including,
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<PAGE>
without limitation, a claim presented to it under Section
4.C. hereof, because of the absence of any evidence of
disbursement.
k. The Authority has been advised by the Lender, and agrees, with
respect to the "Liability Notations Reports" referred to in
the Department's Letter, that the missing files and Critical
Documents (as defined in the Department's Letter) described in
the Department's Letter include the following "liability
code/description" references included in the Liability
Notations Reports:
i. entire files: L0012 MISSING FOLDER
ii. application: L0002 MISSING APPLICATION
iii. promissory note: LOOO3 MISSING PROMISSORY NOTE
iv. application/promissory note: LOO16 MISSING
APPLICATION/PROMISSORY NOTE
v. notice of loan guaranty: L0004 MISSING GUARANTEE
STATEMENT
vi. disclosure statement: LO234 MISSING DISCLOSURE
STATEMENT;
vii. repayment agreement: L0017 MISSING REPAYMENT
DISCLOSURE STATEMENT
viii. deferment forms: L0011 MISSING DEFERMENT FORM
ix. forbearance forms: L0019 MISSING FORBEARANCE FORM
x. school verification: L0015 MISSING SCHOOL
VERIFICATION
xi. out of school date verification: L0027 MISSING
GRADUATION VERIFICATION
l. The Authority agrees, with respect to the "Liability
Notations Reports" referred to in the Department's Letter,
that the notation as missing of categories of documents
other than an entire file or the Critical Documents for
a VELA Serviced Loan does not mean that the failure to
identify other documents as missing for that or other VELA
Serviced Loans indicates that such other documents were
delivered by VELA to the Lender's new servicer,
Pennsylvania Higher Education Assistance Agency ("PHEAA"),
because PHEAA did not check for such other documentation
in PHEAA's file by file examination. The Authority agrees
that the absence of such other documentation of any kind
which relates to any act or omission that is considered a
VELA Service Error under the Department's Letter, also
shall be considered a VELA Service Error.
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<PAGE>
5. Amendments. Except as provided by Paragraph 11 thereof (as
limited by the next sentence), no further alteration or amendment of the
Participation Agreement as amended by this Third Amendment, shall be effective
unless in writing, signed by the parties hereto. Notwithstanding anything in
Paragraph 11 of the Participation Agreement to the contrary, no alteration,
amendment or termination ("termination", as used herein and in the Participation
Agreement shall mean the ending of the Participation Agreement under any
circumstances, whether considered a termination, expiration or other means of
ending) of the Participation Agreement, as amended by this Third Amendment,
shall in any way affect or impair the Authority's obligations under the
Participation Agreement, as amended by this Third Amendment, with respect to the
VELA Serviced Loans. The provisions of this Third Amendment shall survive the
termination of the Participation Agreement.
6. Other Terms and Conditions. Except as otherwise provided in
this Third Amendment, the terms and conditions set forth in the Participation
Agreement shall remain in full force and effect.
7. No Waivers. No failure or delay by either party in
exercising any right, power or privilege under this Third Amendment shall
operate as a waiver thereof, nor shall any waiver of any right, power or
privilege constitute a waiver of any other right, power or privilege. The rights
and remedies herein provided shall be cumulative and not exclusive of any rights
or remedies provided by law.
8. Successors and Assigns. The provisions of this Third
Amendment shall be binding on, and shall inure to the benefit of, the parties,
their successors and assigns, including, without limitation, any subsequent
holder or assignee of a VELA Serviced Loan and the Department or any successor
guaranty agency which assumes the Authority's guarantee obligations or through
which the Department will honor SEAA guarantees.
9. Virginia Law. This Third Amendment shall be construed in
accordance with and be governed by the laws of the Commonwealth of Virginia,
except to the extent federal law shall control.
10. Severability. In the event any provision of this Third
Amendment shall be held invalid, such provision shall be deemed severable and
the remaining provisions hereof shall remain in full force and effect.
11. Entire Agreement; Effect of Third Amendment. The
Participation Agreement, as amended by this Third Amendment, contains the entire
understanding between the parties and supersedes any prior written or oral
agreements or understandings between the parties respecting the subject matter
hereof. There are no representations, agreements, arrangements or
understandings, oral or written, between the parties relating to the subject
matter of the Participation Agreement, as amended by this Third Amendment,
except as are fully expressed herein. Upon the execution and delivery of
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<PAGE>
this Third Amendment, the Participation Agreement shall be supplemented and
amended in accordance herewith, and this Third Amendment shall form a part of
the Participation Agreement and the parties shall be bound hereby.
WITNESS the following signatures and seals as of the date
first written above.
CRESTAR BANK
By: /s/ William V. Bunting
--------------------------------
William V. Bunting
Executive Vice President
STATE EDUCATION ASSISTANCE AUTHORITY
By: /s/ John H. Huston
--------------------------------
John H. Huston
Acting Executive Director
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<PAGE>
EXHIBIT A [THE DEPARTMENT'S LETTER]
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<PAGE>
EXHIBIT A
UNITED STATES DEPARTMENT OF EDUCATION
WASHINGTON, D.C. 20202-____
John H. Huston, Acting Executive Director
Virginia Student Assistance Authorities
Suite 300, One Franklin Square
411 East Franklin Street
Richmond, Virginia 23219
William V. Bunting
Executive Vice President
Consumer Landing
Crestar Bank
P.O. Box 27172
Richmond, Virginia 23261-7172
Re: (i) Agreement for Servicing and Collection of
Guaranteed Student Loans, between Crestar Bank
("Crestar") and the Virginia Education Loan
Authority, a political subdivision of the
Commonwealth of Virginia ("VELA"), dated March 15,
1989, as amended; (ii) Agreement for Origination,
Servicing and Collection of Guaranteed Student Loans,
between Crestar and VELA, dated January 1, 1990, as
amended; (iii) Agreement for Origination, Servicing
and Collection of Guaranteed Student Loans, between
Crestar and VELA, dated July 1, 1991, as amended;
(iv) Agreement for Origination, Servicing and
Collection of Guaranteed Student Loans, between
Crestar and VELA, dated July 31, 1992, as amended;
and (v) Agreement for Origination, Servicing and
Collection of Federal Family Education Program
student Loans, between Crestar and VELA, dated
October 1, 1993, as amended (collectively, the "VELA
Service Agreements").
Dear Mr. Huston and Mr. Bunting:
This letter will confirm the agreement of the U.S. Department
of Education (the "Department"), pursuant to Title IV, Part B of the Higher
Education Act of 1965, as amended ("HEA"), to fully protect all student loans
owned by Crestar that were serviced under the VELA Service Agreements (the
"Student Loans"), from any loss of or ineligibility for any portion of interest,
interest benefits (as described in ss.428(a) and (b) of the HEA and 34 C.F.R.
ss.682.300), special allowance payments (as described in ss.438 of the HEA and
34 C.F.R. ss.682.302) or guaranty insurance (including the guarantee and payment
of principal and interest on the student Loans), at any time, caused by any act
or omission in connection with the origination, servicing or collection of any
Student Loans under any of the VELA Servicing Agreements (the "VELA Service
Errors"). This letter further expands on my letter to Mr. Huston
<PAGE>
dated February 21, 1996, and is intended to supersede and replace that earlier
letter.
In furtherance of the foregoing, having decided that it is in
the best interest of the united States to do so, the Department hereby waives
its rights to refuse to make reinsurance payments or to require the repayment of
reinsurance payments n the Student Loans, as the result of the VELA Service
Errors. In addition, the Department hereby waives its right to refuse to pay
interest benefits or special allowances or to require Crestar to repay any
interest, interest benefits, special allowance payments or guaranty insurance on
the Student Loans for which the loans may not be or may not have been eligible
as a result of the VELA Service Errors. These waivers are authorized by 34
C.F.R. ss.ss.682.406(b) and 682.413(f) and ss.432(a)(5) and (6) of the HEA. In
light of these waivers, the Department to initiate (and the Department will not
initiate) a debarment/suspension, limitation, suspension, termination or fine
action against Crestar as a result of the VELA Service Errors.
Additionally, the Department hereby directs the State
Education Assistance Authority ("SEAA") and any other guaranty agency or any
successors thereto that guarantee any student Loans to pay guaranty insurance
claims on any Student Loans despite the existence of VELA Service Errors
(without any requirement that such errors be cured), if they otherwise satisfy
the requirements for reinsurance relating to the lender's obligations.
In determining whether certain acts or omissions are VELA
Servicing Errors, the following guidelines shall apply:
A. any act or omission occurring prior to October 1,
1995 shall be considered a VELA Service Error, except as
provided in Paragraph D below for Pre-May 1, 1989 Serviced
Loans;
B. for any Student Loan retained by VELA for servicing and
collection after September 30, 1995 (a "Post-September 30
Serviced Loan"), any Act or omission occurring prior to the
earlier of (i) the full payment to Crestar of Guaranty
insurance on any Student Loan, or (ii) the completed
conversion of any such Student Loan to the servicing system of
Crestar's new servicer, the Pennsylvania Higher Education
Assistance Authority ("PHEAA") shall be considered a VELA
Service Error;
C. for any Student Loan for which the entire file is missing
or for which one or more of the following documents (a
"Critical Document") are missing, the listing of such file or
Critical Document in the "Liability Notations Report" prepared
by PHEAA, dated March 5, 1996, shall mean that the absence of
such file or Critical Document is a VELA Service Error:
application, promissory note, application/promissory note,
notice of loan guaranty, disclosure statement, repayment
agreement,
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<PAGE>
deferment forms, forbearance forms, school verification,
and out of school date verification;
D. for any Student Loan originated by Crestar prior to May 1,
1989, and later serviced under the initial VELA Service
Agreement (a "Pre-May 1, 1989 Serviced Loan"), any act or
omission occurring prior to the commencement of servicing such
Student Loan by VELA shall not be considered a VELA Service
Error except that for any Student Loan for which the entire
file is missing or for which one or more Critical Documents is
missing, the listing of such file or Critical Document in the
"Liability Notations Reports" prepared by PHEAA and referred
to in Paragraphs C, E and F of this letter shall be considered
a VELA Service Error;
E. for any Post-September 30 Serviced Loan received by PHEAA
prior to February 12, 1996, for which the entire file is
missing or for which one or more Critical Documents are
missing, the listing of such file or Critical Document in the
"Liability Notations Reports" prepared by PHEAA, dated as of
various dates and expected to be delivered by PHEAA to Crestar
and VELA by March 12, 1996, shall mean that the absence of
such file or Critical Document is a VELA Service Error;
F. for any Post-September 30 Serviced Loan received by PHEAA
on or after February 12, 1996, for which the entire file is
missing or for which one or more Critical Documents are
missing, the listing of such file or Critical Document in a
"Liability Notations Reports" to be prepared by PHEAA, on or
before the later of March 31, 1996 or 30 days after the
receipt of such Student Loan by PHEAA, shall mean that the
absence of such file or Critical Document is a VELA Service
Error; and
G. any failure by PHEAA to perform a due diligence activity
with respect to a cosigner or endorser from October 1, 1995
through March 5, 1996, shall be considered a VELA Service
Error if such cosigner or endorser was not identified on the
deconversion tape delivered to PHEAA by VELA on October 1,
1995 as a cosigner or endorser on the Student Loan in
question.
The protections provided by this letter also apply to the Student Loans
if owned by a subsequent holder. This Agreement does no excuse any due diligence
violations on the Student Loans other than those caused by VELA Service Error.
Crestar and VELA are each authorized to present this letter to
any guaranty agency that guarantees any Student Loans for their reliance
thereon, and to present this letter to the United States District Court of the
Eastern District of Virginia, Richmond
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<PAGE>
Division, in connection with a currently pending case styled Crestar
v. Virginia Education Loan Authority, et. al., No. 3:95cv963.
If you have any questions, please contact Larry Oxendine of my
staff.
Sincerely,
/s/ Leo Kornfeld
------------------------------
Leo Kornfeld
Senior Advisor to the Secretary
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<PAGE>
EDUCATIONAL CREDIT AGREEMENT FOR PAYMENT ON
MANAGEMENT CORPORATION GUARANTEE OF CONSOLIDATION LOANS
WITH FEDERAL REINSURANCE
(for loans to students and parents of
students pursuant to the Higher
Education Act of 1965, as amended)
WHEREAS, Crestar Bank
- -------------------------------------------------------------------------------=
(Lender Name)
located at 6802 Paragon Place Richmond, VA 23230
---------------------------------------------------------------------
(Street Address) (City) (State) (Zip Code)
(the "Lender") wishes to be able to secure Loan guarantees on "Consolidation
Loans" (as hereinafter defined) made to "Eligible Borrowers" (as hereinafter
defined) for the purpose of discharging amounts owed by those Eligible Borrowers
on "Eligible Loans" (as hereinafter defined), and
WHEREAS, the Lender represents that it is an "eligible lender" of Consolidation
Loans under the provisions of the Act, the regulations issued under the Act and
the Rules and Regulations and policies of the Educational Credit Management
Corporation ("ECMC");
WHEREAS, ECMC, relying upon the Lender's representation that it qualifies as an
eligible lender under the provisions of the Act, the regulations issued under
the Act and the Rules and Regulations and policies of ECMC, wishes to encourage
the making of such Consolidation Loans by the Lender in accordance with the Act.
NOW, THEREFORE, it is mutually agreed that:
1. Within the limits of the Act, regulations thereto and the directives of the
United States Department of Education, ECMC shall guarantee that percentage of
the Consolidation Loans made by the Lender which is eligible for such guarantee
under the Act, the regulations issued under the Act and the Rules and
Regulations and policies of ECMC, which Act, regulations, Rules and Regulations
and policies as they may be from time to time implemented or amended, are made
part of this Agreement. ECMC shall use its best efforts to provide Lender at
least 60 days prior written notice of any addition or amendment to the Rules,
Regulations and policies of ECMC, unless a shorter period is required by the
Act, regulations thereto or written directives of the Secretary for the U.S.
Department of Education. ECMC shall not change its Rules, Regulations, or
policies to reduce the percentage of the Consolidation Loan eligible for
guarantee for any Consolidation Loan with an outstanding guarantee.
2. ECMC agrees to purchase eligible Consolidation Loans made by the Lender
provided that (a) the Consolidation Loans are eligible for claim payment as
provided by the Act, regulations, Rules and Regulations and policies identified
above); (b) the Consolidation Loans have been made in accordance with the Act,
regulations, Rules and Regulations and policies identified above; (c) with
respect to any Loan, the Lender has not committed any act or omitted to do any
act, the commission or omission of which would cause ECMC to lose its
reinsurance pursuant to the Act with respect to such Consolidation Loan except
where such act or omission was required or directed by ECMC; and (d) title to
the promissory notes evidencing the Consolidation Loans has been subrogated to
ECMC by the Lender.
<PAGE>
3. With respect to all Consolidation Loans guaranteed, ECMC represents that it
has entered into an agreement with the Federal Government with respect to
reinsurance pursuant to the Act and with respect to the maintenance of reserves
for the purchase of Consolidation Loans eligible for claim payment as provided
by the Act, regulations, and ECMC Rules, regulations and policies.
4. The Lender agrees to pay to ECMC any fees or charges which may be authorized
by the Act and regulations thereto for Consolidation Loans and required by ECMC.
5. Lender shall make a Consolidation Loan only to discharge Eligible Loans upon
an Eligible Borrower's request. "Eligible Loan" shall mean a loan made, insured
or guaranteed under the Act including Loans on which the borrower has defaulted
but has made satisfactory arrangements to repay the obligation; or, made under
Title IV, Part D of the Higher Education Act of 1965, as amended; or, made under
Subpart II of Part A of Title VII of the Public Health Service Act, as amended;
or made under Subpart II of Part B of Title VIII of the Public Health Service
Act as amended.
6. As required by the Act, Lender shall make a Consolidation Loan only to an
Eligible Borrower who has certified, in a form approved by ECMC, that the
Eligible Borrower has no other application pending for such a Consolidation
Loan. Further, the Lender shall make a Consolidation Loan only if the Lender
holds an outstanding Eligible Loan of the Eligible Borrower, which Eligible Loan
is to be discharged through the Consolidation Loan, unless the Eligible Borrower
certifies to the Lender, in a form approved by ECMC that the Eligible Borrower
has sought and has been unable to obtain a Consolidation Loan from any holder of
any of the Eligible Borrower's Eligible Loans which the Eligible Borrower wishes
to discharge through a Consolidation Loan.
7. With respect to each Consolidation Loan, the Lender shall determine to its
satisfaction, in accordance with reasonable and prudent business practices, that
each Eligible Loan to be discharged:
is a legal, valid and binding obligation of the Eligible Borrower;
was made and serviced in compliance with applicable laws and
regulations; and
if made under the Act, is covered by a guarantee that is in full force
and effect.
Lender shall document in the loan file the basis on which it made these
determinations and retain that documentation. In making such determination,
Lender may rely in good faith on the certifications obtained from the holder of
each loan being consolidated. Lender acknowledges that ECMC has no
responsibility to review such determinations of Lender and that ECMC may rely
upon the determinations of Lender.
8. Unless otherwise required by the Act, and regulations thereto, each
Consolidation Loan shall be made in a principal amount which is equal to the sum
of the unpaid principal and accrued unpaid interest, late charges and eligible
collection costs of the Eligible Loans to be consolidated, shall bear interest
at a rate not to exceed the rate required by the Act and shall be subject to
such terms and conditions as may be required by the Act and regulations thereto.
9. The Lender shall make Consolidation Loans only after the Lender has received
from ECMC a certificate of guarantee with respect to Consolidation Loans and if
that certificate has not expired by its
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<PAGE>
own terms or has not been suspended or terminated by ECMC; provided, however,
that Lender may only make Consolidation Loans under such a certificate in an
aggregate initial Principal Amount up to and not exceeding the amount stated on
such certificate.
10. In making Consolidation Loans under the Act, the Lender will undertake to
secure such reductions in borrower's obligations to pay interest on said loans
made by the Lender as they may be eligible to receive under the Act and
regulations. In making Consolidation Loans, the Lender agrees to comply with all
applicable Federal and State laws and regulations.
11. ECMC and the Lender agree that the guarantee on any Consolidation Loan shall
be effective for the term of the Consolidation Loan determined in accordance
with the Act, regulations, Rules and Regulations and policies identified above
and beginning on the date of disbursement by the Lender of the Consolidation
Loan, provided that the guarantee on any loan shall not be effective if any
required guarantee fee is not remitted to ECMC in accordance with the Act and
regulations and the Rules, Regulations and policies of ECMC.
12. The Lender shall maintain for all Consolidation Loans a system of records
and accounts, shall afford ECMC access thereto during regular business hours,
and shall furnish such periodic and separate reports as may reasonably be
required by the U.S. Secretary of Education and ECMC under the Act, regulations,
Rules and Regulations and policies identified above. For Consolidation Loans
paid in full or otherwise discharged, the records shall be retained by the
Lender as required by the Act, regulations, Rules and Regulations, and policies
identified above. This Section 12 shall survive the termination of this
Agreement.
13. Lender shall promptly repurchase any Consolidation Loan where the repurchase
of such Consolidation Loan is required in accordance with the Act, regulations,
or Rules and Regulations and policies of ECMC. Lender agrees to repurchase the
Consolidation Loans if ECMC is denied reinsurance on the Consolidation Loans or
if the Loans are determined by a court of law to be unenforceable in either case
as a result of the acts, errors, or omissions of Lender, Lender's agents or
deemed agents, including but not limited to schools or educational institutions
with which Lender has an origination relationship as defined by the Act,
regulations thereto or as determined by a court of law which would give rise to
borrower defenses against the enforceability of the loan. Lender shall indemnify
and hold ECMC harmless from any and all losses including costs and reasonable
attorneys' fees which ECMC may incur based upon Lender's failure to repurchase
the Loans as provided herein. This Section 13 shall survive the termination of
this Agreement.
14. The repurchase of Loans by Lender shall be in accordance with ECMC Rules,
Regulations and policies governing repurchases. For loans guaranteed or claims
received by ECMC on or after the effective date of this Agreement ECMC shall
return the original promissory note to Lender when the original promissory note
has been delivered to ECMC by Lender with respect to said Loans. For the
purposes of documenting the receipt of the original promissory note, ECMC
records shall control. In the event that ECMC is unable to return the original
promissory note, ECMC shall return a true and exact certified copy of the
promissory note along with the written assurances of ECMC that the lack of the
original promissory note will not adversely affect Lender or its successors and
assigns upon future resubmission of the Loan for claim payment. ECMC shall
assign all of the right, title, and interest to such Loans to Lender
contemporaneously with ECMC's receipt of the repurchase payment for said Loans.
Lender shall comply with the Act and regulations thereto, and ECMC Rules,
Regulations and
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<PAGE>
policies with respect to all loans repurchased hereunder. For loans guaranteed
by ECMC or claims received by ECMC on or after the effective date of this
Agreement, ECMC shall indemnify and hold Lender harmless from any and all losses
including reasonable costs and reasonable attorneys' fees which Lender may incur
if it is determined by a court of law that Lender is unable to obtain a judgment
against the borrower as a result of ECMC's failure to return the original
promissory note to Lender in accordance with this Section 14. Contemporaneous
with any payment by ECMC to Lender as provided herein, Lender shall assign to
ECMC all of its right, title and interest to said Loans. This Section 14 shall
survive the termination of this Agreement.
15. ECMC shall guarantee Consolidation Loans without regard to the borrowers
race, sex, color, religion, national origin, age, handicapped status or any
other basis prohibited by applicable law. ECMC agrees that in administering its
guaranty program that it will comply with the Act and regulations issued
thereunder.
16. The Lender will not discriminate in the making of Consolidation Loans to
eligible borrowers or in the treatment of such borrowers on any prohibited
basis.
17. This Agreement may be terminated by either party without cause upon sixty
(60) days written notice to the other party. The termination notice shall
specify a termination date which shall not be sooner than sixty-five (65) days
after the mailing of the termination notice. ECMC may, in addition and at its
option, initiate Limitation, Suspension, or Termination proceedings in the
manner provided for by Rules, Regulations, and policies and the Act and
regulations thereto. No action under this section shall affect the guarantee on
Consolidation Loans previously covered by this Agreement.
18. In the event that ECMC negotiates an Agreement for Payment on Guarantee of
Consolidation Loans with any other consolidation Lender that contains a
termination provision different from the termination provision contained in
Section 17 above, ECMC agrees that an identical termination provision will be
offered to Crestar in an amendment to this Agreement, which Crestar, in its sole
discretion, may accept.
19. This Agreement shall terminate on the later of September 30, 1997 or any
other date as specified in the Act on which the authority to make Consolidation
Loans under the Act expires. The termination of this Agreement pursuant to the
expiration of the authority to make Consolidation Loans under the Act shall not
affect the guarantee on Consolidation Loans previously covered by this
Agreement.
20. This Agreement may not be assigned by Lender without the express written
consent of ECMC which consent shall not be unreasonably withheld.
21. Nothing contained in this Agreement is intended to or in any way modifies or
amends any other current Lender Agreements between the Lender and ECMC.
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<PAGE>
22. The laws of the State of Minnesota and applicable federal law shall govern
the validity, performance and enforcement of this Agreement.
23. ECMC shall only guarantee Consolidation Loans for Lender under this
Agreement, if at least one of borrowers' loans to be consolidated was guaranteed
by, or is or was held by ECMC or the State Education Assistance Authority.
IN WITNESS WHEREOF, the Lender and ECMC have caused this Agreement to be duly
executed and delivered this ____ day of _______________, 19__.
- --------------------------------------------------------------------------------
LENDER (Lender Name)
By______________________________________________________________________________
Its
- --------------------------------------------------------------------------------
PRINTED NAME SIGNATURE DATE TITLE
- --------------------------------------------------------------------------------
LENDER'S FEDERAL TAX ID NUMBER ELIGIBLE LENDER NUMBER (TO BE ASSIGNED)
EDUCATIONAL CREDIT MANAGEMENT CORPORATION
By _____________________________________________________________________________
- -------------------------------------------------------------------------------_
PRINTED NAME SIGNATURE DATE
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EXHIBIT 4.6
PENNSYLVANIA HIGHER EDUCATION
ASSISTANCE AGENCY NATIONAL GUARANTY
AGREEMENT
LENDER AGREEMENT FOR GUARANTEE OF
STUDENT LOANS WITH FEDERAL
REINSURANCE (for loans to students and parents of students pursuant to the
Higher Education Act of 1965, as amended)
WHEREAS Star Bank, National Association, as Trustee for Crestar Student Loan
Trust 1997-1
- --------------------------------------------------------------------------------
(Corporate Name)
Located at 425 Walnut Street
---------------------------------------------------------------------
(Street Address)
Cincinnati Ohio 45201
---------------------------------------------------------------------
(City) (State) (Zip Code)
hereinafter referred to as the "Lender," wishes to be able to secure guarantee
of loans made to students pursuing programs of higher or vocational education at
eligible institutions, and to parents of such students pursuant to the Higher
Education Act of 1965, as amended, hereinafter referred to as the "Act;" and
WHEREAS, the Pennsylvania Higher Education Assistance Agency, hereinafter
referred to as the "Agency," was created by the Act of August 7, 1963, P.L. 549
for the purpose of improving higher educational opportunities and to that end
the Agency is empowered to guarantee loans; and
WHEREAS, the Lender wishes to participate in the Agency's Guaranty Program.
NOW THEREFORE, it is mutually agreed that:
1. Within such limits as may be set by it, the Agency shall guarantee
the full amount of all loans made by the Lender which are eligible
for such guarantee under the Act, the regulations issued under the
Act and the Rules and Regulations and policies of the Agency with the
exception of those pertaining to Pennsylvania Residency/Domicile,
which Act, regulations, Rules and Regulations and policies as they
may be from time to time amended are made part of this Agreement.
2. The Agency shall guarantee loans without regard to sex, age, race,
color, religion, handicapped status, income, national origin or any
other basis prohibited by applicable law and the Lender will not
discriminate in the making of loans to eligible borrowers or in the
treatment of such borrowers on any prohibited basis.
3. On all loans guaranteed, the Agency agrees to obtain maximum
reinsurance by means of an agreement with the Federal Government
pursuant to the Act.
4. The Lender authorizes the Agency to act as its representative with
respect to retaining the school's statement of the student's
enrollment and need. This document will be retained for the five-year
period as required of the Lender by federal regulations.
5. The Lender shall maintain for all loans guaranteed a system of
records and accounts, shall afford access thereto, and shall furnish
such periodic and separate reports as may reasonably be required by
the U.S. Secretary of Education and the Agency, under the Act,
regulations, Rules and Regulations and policies identified above. For
loans paid in full or otherwise discharged, the records shall be
retained by the Lender as required by the Act, regulations, Rules and
Regulations, and policies identified above.
6. The Agency agrees to purchase eligible loans made by the Lender
provided that such loans are in default (as defined by the Act,
regulations, Rules and Regulations and policies identified above);
the loan was made in accordance with the Act, regulations, Rules and
Regulations and policies identified above; the Lender has otherwise
exercised due diligence in the making, servicing, and collection of
such loans; and, title to the loan note has been subrogated to the
Agency by the Lender.
-1-
<PAGE>
7. The Lender agrees that the Agency may assign its obligation to
guarantee repayment of a loan made hereunder to another guaranty
agency which holds a 428(b) Agreement with the Secretary of the
Department of Education.
8. Failure of the Lender to comply with the terms hereof with respect to
an individual loan shall not invalidate the guarantee of the Agency
to the Lender with respect to other loans held in compliance with the
terms of this Agreement.
9. Either party may terminate this agreement at any time upon 120 days'
notice in writing to the other party by registered or certified mail.
All rights, duties and obligations hereunder shall immediately cease
upon termination, except the rights and obligations of the parties
which existed as of the date of termination.
10. The lender wishes to participate in the following programs:
(Please check all applicable programs)
X Federal Stafford Loan Programs (includes
--- Subsidized and Unsubsidized)
X Federal PLUS Loan Program (Parent Loan Program)
---
X Federal Consolidation Loan Program
---
IN WITNESS WHEREOF, the Lender and the Agency have caused this Agreement to
be duly executed and delivered this ______ day of ____________________, 19____.
STAR BANK, NATIONAL ASSOCIATION, PENNSYLVANIA HIGHER EDUCATION
AS TRUSTEE FOR CRESTAR STUDENT LOAN ASSISTANCE AGENCY
TRUST 1997-1
Lender Name
- -------------------------------------- ----------------------------------
Authorized Signature
- -------------------------------------- ----------------------------------
Title Title
- --------------------------------------
- --------------------------------------
D.E. Lender Code Number
- --------------------------------------
Federal Tax Identification Number
Approved as to form and legality this Approved as to form and legality this
_____ day of ______________, 199____. _____ day of ______________, 199____.
- -------------------------------------- --------------------------------------
PHEAA Legal Counsel Deputy Attorney General
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<PAGE>
PENNSYLVANIA HIGHER EDUCATION ASSISTANCE AGENCY
ELIGIBLE HOLDER AGREEMENT
THIS AGREEMENT is made this ____ day of _________, 1997, by and
between the PENNSYLVANIA HIGHER EDUCATION ASSISTANCE AGENCY, a public
corporation organized under the laws of the Commonwealth of Pennsylvania with
its principal office at 1200 North Seventh Street, Harrisburg, Pennsylvania
17102-1444 (herein called "Agency") and STAR BANK, NATIONAL ASSOCIATION, AS
TRUSTEE FOR CRESTAR STUDENT LOAN TRUST 1997-1, 425 Walnut Street, Cincinnati,
Ohio 45201.
(herein called the "Holder")
W I T N E S S E T H:
WHEREAS, the Agency was created by the Act of August 7, 1963, P.L.
549 (herein called the "Act") for the purpose of improving higher educational
opportunities and to that end the Agency is empowered to guarantee loans of
money.
WHEREAS, the Holder wishes to become an approved holder of loans
which are guaranteed by the Agency and were transferred, conveyed, sold or
assigned to the Holder by an eligible lender in the Agency's program.
NOW THEREFORE, the parties hereto, in consideration of the mutual
promises hereinafter set forth, do covenant and agree as follows:
1. Within such limits as may be set by it, the Agency shall
guarantee the full amount of all loans held by the Holder
which are eligible for such guarantee under the Act, the
regulations issued under the Act and the Rules and Regulations
and policies of the Agency, which Act, regulations, Rules and
Regulations and policies as they may be from time to time
amended are made part of this Agreement.
2. The Agency agrees to purchase eligible loans held by the
Holder provided such loans are in default (as defined by the
Act, regulations, Rules and Regulations and policies
identified above); the loan was made in accordance with the
Act, regulations, Rules and Regulations and policies
identified above; the Holder has otherwise exercised due
diligence in the servicing and collection of such loans; and,
title to the loan note has been subrogated to the Agency.
3. The Holder shall maintain for all loans guaranteed a system of
records and accounts, shall afford access thereto, and shall
furnish such periodic and separate reports as my reasonably be
required by the U.S. Secretary of Education and the Agency,
under the Act, regulations, Rules and Regulations and policies
identified above. For loans paid in full or otherwise
discharged the records shall be retained by the Holder as
required by the Act, regulations, Rules and Regulations, and
policies identified above.
4. The Holder agrees to comply with all applicable Federal and
State laws.
5. The Agency shall guarantee loans without regard to sex, age,
race, color, religion, handicapped status, income, national
origin or any other basis prohibited by applicable law and the
Holder shall not discriminate in the treatment of any eligible
borrower on any prohibited basis.
6. This Agreement shall apply to any and all loans held by the
Holder which are (i) guaranteed by the Agency and (ii) were
transferred, conveyed, sold or assigned to the Holder by an
eligible lender in the Agency's program.
7. This Agreement may be terminated by the Agency in the manner
provided for by the Agency's Rules and Regulations or by the
Holder upon thirty (30) days written notice to the Agency. The
Agency may suspend or limit this Agreement in the manner
provided for by the Agency's Rules and Regulations.
Termination, limitation or suspension of this Agreement shall
not affect the coverage of loans previously guaranteed.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
and shall be deemed to have executed such on the day, month and year first above
written.
PENNSYLVANIA HIGHER EDUCATION
ASSISTANCE AGENCY
ATTEST:
- --------------------------------- BY: _________________________________
---------------------------------
Title
ATTEST: BY: STAR BANK, NATIONAL ASSOCIATION,
AS TRUSTEE FOR CRESTAR
STUDENT LOAN TRUST 1997-1
- ---------------------------------
Federal Tax ID# _____________________
-------------------------------------
Title
Approved as to form and legality this Approved as to form and legality this
____ day of _________, 199_. ____ day of _________, 199_.
- --------------------------------- ---------------------------------
PHEAA Legal Counsel Deputy Attorney General
-2-
Exhibit 5.1
[Hunton & Williams Letterhead]
November 14, 1997
Crestar Bank, as Depositor to
Crestar Student Loan Trust 1997-1
919 East Main Street
Richmond, Virginia 23219
Ladies and Gentlemen:
We have acted as counsel to Crestar Bank, a Virginia banking
corporation (the "Company"), in connection with the Company's registration, on
behalf of Crestar Student Loan Trust (the "Trust"), of Student Loan Asset Backed
Notes (the "Notes") on Form S-3 (the "Registration Statement") filed with the
Securities and Exchange Commission under the Securities Act of 1933, as amended.
In this capacity, we have examined the Registration Statement, the Company's
Articles of Incorporation and By-laws, the records of corporate proceedings of
the Company, the Trust Agreement of the Trust, the form of indenture and
indenture supplement between the Trust and Bankers Trust Company, as Trustee
(collectively, the "Indenture"), and such other materials as we have deemed
necessary to the issuance of this opinion.
On the basis of the foregoing, we are of the opinion that:
1. The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the Commonwealth
of Virginia.
2. Upon filing by the Trust of a certificate of trust with the
Delaware Secretary of State, the Trust will be duly organized as a
Delaware Business Trust.
3. When the Indenture has been duly authorized, executed and
delivered by the Trust, it will constitute a valid, legal and
binding agreement of the Trust, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of
creditors' rights generally and to general principles of equity,
regardless of whether enforcement is sought in a proceeding in
equity or at law.
<PAGE>
Crestar Bank
November 14, 1997
Page 2
4. When the Notes have been duly authorized for sale by all necessary
action, and when the Notes have been duly issued, executed and
authenticated in accordance with the provisions of the Indenture
and delivered to and paid for by the purchasers thereof, the Notes
will be legally and validly issued and the holders of the Notes
will be entitled to the benefits provided by the Indenture.
We hereby consent to the references to our name in the Prospectus
contained in the Registration Statement and to the filing of this opinion as an
exhibit to the Registration Statement. In giving this consent, we do not admit
that we are within the category of persons whose consent is required by Section
7 of the Securities Act of 1933 or the rules and regulations promulgated
thereunder by the Securities and Exchange Commission.
Very truly yours,
/s/ Hunton & Williams
Exhibit 8.1
[Hunton & Williams Letterhead]
November 14, 1997
Crestar Bank
6802 Paragon Place, 3rd Floor
Richmond, Virginia 23230-9428
Crestar Student Loan Trust 1997-1
Ladies and Gentlemen:
We have acted as special tax counsel to Crestar Bank, a
Virginia banking corporation (the "Depositor"), in connection with the
preparation of a Registration Statement on Form S-3 (No. 333-24351) (the
"Registration Statement"), which was filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Act"), for the
registration under the Act of Student Loan Asset Backed Notes (the "Notes"). The
Notes will be issued pursuant to an indenture dated as of December 1, 1997 (the
"Indenture") between the Crestar Student Loan Trust 1997-1 (the "Trust") and
Bankers Trust Company, as indenture trustee (the "Indenture Trustee").
We have reviewed the Registration Statement and the prospectus
included therein. In addition, we have reviewed forms of (i) the Trust Agreement
dated as of December 1, 1997 (the "Trust Agreement") among the Depositor, Star
Bank, National Association, as trustee (the "Eligible Lender Trustee") and
Delaware Trust Capital Management Inc., as co-trustee (the "Delaware Trustee");
(ii) the Indenture, including the forms of Notes attached as exhibits thereto;
and (iii) such other documents as we have deemed necessary or appropriate as a
basis for the opinion set forth below.
Based on the foregoing, we confirm our opinion with respect
to the legal conclusions contained in the Registration Statement under the
caption "Federal Income Tax Consequences," that such legal conclusions are
correct in all material respects, and the discussion thereunder does not
omit any material provision with respect to the matters covered. You should
be aware that this opinion represents our conclusions as to the
application of existing law to a transaction as described above. There can be no
assurance that contrary positions will
<PAGE>
Crestar Bank
November 14, 1997
Page 2
not be taken by the Internal Revenue Service or that the law will
not change.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement. We also consent to the references to Hunton &
Williams under the caption "Federal Income Tax Consequences" in the Registration
Statement. In giving this consent, we do not admit that we are in the category
of persons whose consent is required by Section 7 of the Act or the rules and
regulations promulgated thereunder by the Securities and Exchange Commission.
No opinion has been sought and none has been given concerning
the tax treatment of the issuance and sale of the Notes under the laws of
Virginia or any other state.
Very truly yours,
/s/ HUNTON & WILLIAMS
