REGISTRATION STATEMENT NO. 333-86639
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 13, 2000
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------------------------------------
MELLON STUDENT LOAN TRUSTS
(Issuer of the Notes and the Certificates)
----------------------------------------------------
MELLON BANK, N.A.
(Originator of the Trust described herein)
(Exact name of Registrant as specified in its charter)
UNITED STATES 25-0659306
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification Number)
ONE MELLON CENTER
500 GRANT STREET
PITTSBURGH, PENNSYLVANIA 15258
(412) 234-7142
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
------------------------------------------------
STEPHEN COBAIN
FIRST VICE PRESIDENT
MELLON BANK, N.A.
ONE MELLON CENTER
500 GRANT STREET
PITTSBURGH, PENNSYLVANIA 15258
(412) 234-7142
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
------------------------------------------------
COPIES TO:
ROBERT T. MORRIS, ESQ. REED D. AUERBACH, ESQ.
REED SMITH SHAW & MCCLAY STROOCK & STROOCK & LAVAN LLP
435 SIXTH STREET 180 MAIDEN LANE
PITTSBURGH, PENNSYLVANIA 15219 NEW YORK, NEW YORK 10038
-----------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
From time to time after this Registration Statement becomes
effective. If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans, please check the
following box. |_| If any of the securities being registered on this Form are to
be offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. x/ If this
Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / / ____________
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / ____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / / ____________
------------------------------------------------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=============================================================================================================================
PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE PROPOSED MAXIMUM OFFERING AGGREGATE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED (1)(2) PRICE PER UNIT (2) PRICE FEE(3)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Asset Backed Notes and Asset Backed $500,000,000 100% $500,000,000 $132,000
Certificates
- ------------------------------------------------------------------------------------------------------------------------------
(1) This Registration Statement also registers an undeterminable amount of
securities to be sold by Mellon Financial Markets, LLC in market-making
transactions where required.
(2) Estimated solely for the purpose of calculating the registration fee.
(3) A fee of $278 has previously been paid.
</TABLE>
<PAGE>
THIS REGISTRATION STATEMENT IS ALSO BEING USED TO REGISTER SECURITIES THAT MAY
BE SOLD IN MARKET-MAKING TRANSACTIONS BY AN AFFILIATE OF THE REGISTRANT. THE
REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS
MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
EXPLANATORY NOTE
This Registration Statement contains (i) a form of Prospectus relating to
the offering of a series of Asset Backed Notes and/or Asset Backed Certificates
(collectively, the "Securities") by various Mellon Student Loan Trusts (the
"Trust") created from time to time by Mellon Bank, N.A. and (ii) two forms of
Prospectus Supplement relating to the offering by Mellon Student Loan Trusts of
the particular series of Asset Back Certificates or of Asset Backed Notes and
Asset Backed Certificates described therein. Each form of Prospectus Supplement
relates only to the securities described therein and is a form which, among
others, may be used by Mellon Bank, N.A. to offer Asset Backed Notes and/or
Asset Backed Certificates under this Registration Statement.
In addition, if and to the extent required by applicable law, each
Prospectus and the related Prospectus Supplement will also be used after the
completion of the related offering in connection with certain offers and sales
related to market-making transactions in the offered securities. In order to
register under Rule 415 those securities which may be offered and sold in
market-making transactions, the appropriate box on the cover page of the
Registration Statement has been checked and the undertakings required by Item
512(a) of Regulation S-X have been included in Item 17 of Part 17.
Information contained in this prospectus 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 State.
<PAGE>
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED _________, __________
[SUBJECT TO COMPLETION DATED MARCH 13, 2000]
$________________
MELLON STUDENT LOAN TRUST _____-__
MELLON BANK, N.A.
Seller and Master Servicer
FLOATING RATE ASSET-BACKED NOTES
FLOATING RATE ASSET-BACKED CERTIFICATES
________________
SECURITIES OFFERED
o classes of notes and certificates You should carefully consider
listed in the table below the risk factors beginning on
page S-7 of this prospectus
ASSETS supplement and page 6 of the
o student loans guaranteed by federal prospectus.
guarantors
The securities are obligations
CREDIT ENHANCEMENT only of the trust and are payable
o notes solely from the student loans and
o subordination of certificates other assets of the trust. The
o reserve account securities are not guaranteed
o certificates by any person.
o reserve account
The securities are not bank
deposits.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus supplement or the prospectus to which it relates is truthful or
complete. Any representation to the contrary is a criminal offense.
<TABLE>
<CAPTION>
ORIGINAL FINAL
PRINCIPAL INTEREST RATE MATURITY PRICE TO UNDERWRITING PROCEEDS TO THE
AMOUNT (PER ANNUM) DATE PUBLIC (1) DISCOUNT SELLER(1)(2)
------------ -------------- --------- ---------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Class ___ Notes $ % % %
Class ___ Notes $ % % %
Certificates $ % % %
Total.......... $ $ $ $
</TABLE>
(1) Plus accrued interest, if any, from ___________.
(2) Before deducting expenses, estimated to be $_______________.
Delivery of the securities will be made on or about ____________, 20__, against
payment in immediately available funds.
[NAMES OF UNDERWRITERS]
Prospectus Supplement dated _____________, _________
We provide information to you about the securities in two separate
documents that progressively provide more detail: (1) the accompanying
prospectus, which provides general information, some of which may not apply to
your securities and (2) this prospectus supplement, which describes the specific
terms of your securities.
TABLE OF CONTENTS
Prospectus Supplement
SUMMARY OF TERMS...........................................................S-3
RISK FACTORS...............................................................S-7
FORMATION OF THE TRUST.....................................................S-13
USE OF PROCEEDS............................................................S-15
THE MASTER SERVICER AND THE SUB-SERVICERS..................................S-15
THE FINANCED STUDENT LOAN POOL.............................................S-16
DESCRIPTION OF THE SECURITIES..............................................S-39
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS.......................S-47
INCOME TAX CONSEQUENCES....................................................S-68
ERISA CONSIDERATIONS.......................................................S-68
UNDERWRITING...............................................................S-70
LEGAL MATTERS..............................................................S-71
PROSPECTUS
RISK FACTORS..................................................................6
INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE..............................................................12
FORMATION OF THE TRUSTS......................................................13
USE OF PROCEEDS..............................................................14
THE SELLER, THE ADMINISTRATOR, THE MASTER SERVICER AND THE
SUB-SERVICERS.............................................................14
THE STUDENT LOAN POOLS.......................................................15
THE STUDENT LOAN FINANCING BUSINESS..........................................17
CERTAIN LEGAL ASPECTS
WEIGHTED AVERAGE LIVES OF THE SECURITIES.....................................36
POOL FACTORS AND TRADING INFORMATION.........................................38
DESCRIPTION OF THE NOTES.....................................................39
DESCRIPTION OF THE CERTIFICATES..............................................47
CERTAIN INFORMATION REGARDING THE SECURITIES.................................49
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS.........................57
CERTAIN LEGAL ASPECTS OF THE STUDENT LOANS...................................74
FEDERAL INCOME TAX CONSEQUENCES..............................................81
FEDERAL TAX CONSEQUENCES FOR TRUSTS FOR WHICH A PARTNERSHIP ELECTION
IS MADE...................................................................82
FEDERAL TAX CONSEQUENCES FOR TRUSTS IN WHICH ALL RESIDUAL INTERESTS
ARE RETAINED BY THE SELLER OR AN AFFILIATE OF THE SELLER..................92
STATE AND LOCAL TAX CONSEQUENCES.............................................93
ERISA CONSIDERATIONS.........................................................94
METHOD OF DISTRIBUTION.......................................................96
LEGAL MATTERS................................................................97
INDEX OF PRINCIPAL TERMS.....................................................98
<PAGE>
SUMMARY OF TERMS
This summary highlights selected information from this prospectus
supplement and does not contain all of the information that you need to consider
in making your investment decision. To understand all of the terms of the
offering of the securities, we recommend that you carefully read this entire
prospectus supplement and the accompanying prospectus.
PRINCIPAL PARTIES
THE TRUST
o Mellon Student Loan Trust ____-___
THE SELLER, MASTER SERVICER AND ADMINISTRATOR
o Mellon Bank, N.A.
THE SUB-SERVICERS
THE ELIGIBLE LENDER TRUSTEE
THE INDENTURE TRUSTEE
THE GUARANTORS
DATES
DISTRIBUTION DATES The 27th day of each ______, _______, ________, and _______
or if the 27th is not a business day, the next business day. The first
distribution date is _________ 2[7]th, _____.
CUTOFF DATE
- ------- ----------.
STATISTICAL CUTOFF DATE
___________, ___________. The statistical cutoff date is the date as of which
certain information with respect to student loans is presented in this
prospectus supplement.
CLOSING DATE
On or about __________.
DESCRIPTION OF THE SECURITIES
OFFERED SECURITIES
o [Two] classes of notes and [one] class of certificates
o Original principal amounts and interest rates are on the cover page of this
prospectus supplement
o Securities issued in book-entry form through the Depository Trust Company,
Cedelbank and the Euroclear System
o Minimum denominations of $1,000
TREASURY BILL INDEXED SECURITIES
o -----------------------------
LIBOR INDEXED SECURITIES
o -----------------------------
INTEREST PAYMENTS
o Each interest rate is subject to an interest rate cap described in this
prospectus supplement under the caption "Description of the Securities."
o Interest calculations
o actual/360 for the ________
o actual/365 or 366 as applicable for the _________
o Interest not paid on a distribution date due to the interest rate cap
may be paid on future distribution dates as described in this prospectus
supplement under the caption "Description of the Securities."
PRINCIPAL PAYMENTS
Principal payments on the securities will be made on each distribution date in
an amount described in this prospectus supplement under the caption "Description
of the Securities."
PRIORITY OF PAYMENTS
On each distribution date, the indenture trustee will make the following
distributions and deposits to the extent of available funds in the order
indicated:
1. to the master servicer certain fees;
2. to the administrator, certain fees;
3. to the holders of the notes, interest on a pro rata basis;
4. to the holders of the certificates, interest;
5. to the reserve account, an amount, if any, necessary to reinstate the balance
of the reserve account to a specified amount;
6. to the holders of the notes, principal as follows:
(a) first to the Class ___ Notes until paid in full; and then
(b) to the Class ___ Notes until paid in full;
7. following the date on which the notes have been paid in full, to the holders
of the certificates, principal;
8. to the master servicer certain fees;
9. to the holders of the notes, interest due in excess of the interest rate cap,
if any, on a pro rata basis;
10.to the holders of the certificates, interest due in excess of the interest
rate cap, if any; and
11.to the seller, any remaining amounts.
FINAL MATURITY DATES
The unpaid principal amount of each class of securities will be payable in full
on the applicable final maturity date listed on the cover page of this
prospectus supplement.
AUCTION SALE
Any student loans remaining in the trust as of the end of the collection period
immediately preceding the __________ distribution date will be offered for sale.
The proceeds of any sale will be used to redeem your securities. The auction
price must at least equal the unpaid principal amount of the securities, plus
accrued and unpaid interest.
OPTIONAL PURCHASE
The seller may repurchase all remaining student loans when the principal balance
of the pool of student loans is equal to [5%] [10%] or less of the initial
principal balance of the pool of student loans.
TRUST PROPERTY
THE INITIAL STUDENT LOANS
The initial student loans consist of certain guaranteed education loans to
students and parents made under the Federal Family Education Loan Program. The
initial student loans have the following characteristics as of --------, -----:
o Aggregate principal
amount: $______________
o Weighted average annual
percentage rate: _____%
o Weighted average original
term: _________ mths
o Weighted average remaining
term: _________ mths
o Percent guaranteed by the _____%
o Percent guaranteed by _____%
__________
o Percent of graduate school loans _____%
o Percent of undergraduate school
loans _____%
PRE-FUNDING ACCOUNT
There will be a pre-funding account of approximately $________. The trust
expects to use those amounts to purchase prior to _____ __, ____, consolidation
loans and serial loans, to pay capitalized interest on the pool of student loans
and to pay advances for certain fees related to the student loans.
OTHER STUDENT LOANS
Following ________, _______ and prior to ________, ________, the trust expects
to purchase other consolidation loans and serial loans made to borrowers with
student loans previously purchased by the trust. The trust expects to purchase
these other student loans with certain collections on the pool of existing
student loans that are not required to be distributed to you or paid to the
trustee, the master servicer or the administrator.
THE RESERVE ACCOUNT
There will be a reserve account, initially $_____, to cover servicing fees,
administration fees, interest on the notes and, except as described under
"Description of the Transfer and Servicing Agreements -Credit Enhancement"
herein, interest on the certificates. Amounts on deposit in the reserve account
also will be available, if necessary, to reduce the principal balance of each
class of securities to zero on its respective final maturity date.
TAX STATUS
Stroock & Stroock & Lavan LLP, as federal tax counsel to the trust, is of the
opinion that (1) the trust will not be treated as an association or a publicly
traded partnership taxable as a corporation and (ii) the notes will be
characterized as indebtedness for federal income tax purposes. Each noteholder,
by accepting a note, will agree to treat the notes as indebtedness.
________________________, as Pennsylvania tax counsel to the trust, is of the
opinion that the same characterizations of the notes and the trust would apply
for Pennsylvania state income tax purposes as for federal income tax purposes.
ERISA CONSIDERATIONS
Subject to the considerations discussed under "ERISA Considerations" in this
prospectus supplement, the notes are eligible for purchase by employee benefit
plans.
The certificates may not be acquired by employee benefit plans or other
retirement arrangements subject to the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), and/or Section 4975 of the Internal Revenue Code
of 1986, as amended or by any other entity that is deemed to hold assets of such
plan or arrangement.
RATINGS
At least two nationally recognized rating agencies must each rate the notes in
the highest investment rating category and must rate the certificates in one of
the four highest investment rating categories.
RISK FACTORS
We recommend that you consider the following risk factors together with all
the information contained in this prospectus supplement and the related
prospectus before deciding whether to purchase any of the securities.
YOU MAY HAVE DIFFICULTY
SELLING YOUR SECURITIES The securities will not be listed on any
securities exchange. As a result, if you want
to sell your securities you must locate a
purchaser that is willing to purchase those
securities. The underwriters intend to make a
secondary market for the securities. The
underwriters will do so by offering to buy the
securities from investors that wish to sell.
However, the underwriters will not be
obligated to make offers to buy the securities
and may stop making offers at any time. In
addition, the prices offered, if any, may not
reflect prices that other potential purchasers
would be willing to pay, were they to be given
the opportunity. There have been times in the
past where there have been very few buyers of
asset backed securities, and there may be such
times in the future. As a result, you may not
be able to sell your securities when you want
to do so or you may not be able to obtain the
price that you wish to receive.
IF THE TRUST ASSETS ARE
INSUFFICIENT TO MAKE
PAYMENTS ON THE SECURITIES,
YOU MAY INCUR A LOSS The trust is not permitted to have any
significant assets or sources of funds other
than the student loans, the guarantee
agreements, the reserve account, the escrow
account and the pre-funding account. The notes
and the certificates will not be insured or
guaranteed by any entity. Consequently, you
must rely for repayment upon payments only
from the trust's assets. If the pre-funding
account and the reserve account are exhausted,
the trust will depend solely on payments with
respect to the student loans to make payments
on the securities and you could suffer a loss.
You will have no claim to any amounts properly
distributed to Mellon Bank, N.A., in its
capacities as seller, administrator or master
servicer, or to any of the sub-servicers, from
time to time.
THE TRUST'S PURCHASE OF
STUDENT LOANS AT A
PREMIUM MAY RESULT IN LOSSES The original principal amount of the
securities will be equal to approximately
________% of the sum of the outstanding
principal balance of the student loans as of
the cutoff date and the amount deposited in
the pre-funding account, the reserve account
and the collection account on the closing
date. We cannot assure you as to when the
aggregate principal amount of the securities
will be equal to or less than the sum of the
principal amount of the pool of student loans
and the amounts on deposit in the reserve
account. If the student loans were liquidated
at a time when the outstanding principal
amount of the securities exceeded the sum of
the principal amount of the student loans, the
amount on deposit in the pre-funding account
and the amounts on deposit in the reserve
account, you may suffer a loss.
THE CERTIFICATES WILL ABSORB
CASH SHORTFALLS AND LOSSES
BEFORE THE NOTES The rights of the holders of certificates to
receive payments of interest are subordinated
to the rights of the holders of notes to
receive payments of interest. The holders of
certificates will not receive any payments of
principal until the notes are paid in full.
Consequently, amounts available to cover cash
shortfalls will be applied to the payment of
interest on the notes before payment of
interest on the certificates. In addition, if
the pool of student loans is liquidated
because of an event of default under the
indenture or the insolvency of Mellon Bank,
N.A., all amounts due on the notes will be
payable before any amounts are payable on the
certificates. Additionally, if the outstanding
principal balance of the notes is in excess of
a specified amount, described under
"Description of the Transfer and Servicing
Agreements - Credit Enhancement" in this
prospectus supplement, principal will be
payable to the holders of the notes in the
amount of such excess to the extent of funds
available before any amounts are payable to
the holders of the certificates. If amounts
otherwise allocable to the certificates are
used to fund payments of interest or principal
on the notes, distributions on the
certificates may be delayed or reduced.
THE CHARACTERISTICS OF THE
STUDENT LOANS MAY CHANGE Certain characteristics of the student loans
will vary from the characteristics of the
initial student loans due to the trust's
purchase of consolidation loans and serial
loans. The distribution by weighted average
interest rates may vary as a result of
variations in the effective rates of interest
applicable to the student loans after each
transfer of additional student loans to the
trust and the remaining term of the deferral
and forbearance periods.
The seller currently makes available and may
in the future make available certain incentive
programs to borrowers. The effect of these
incentive programs may be to reduce the yield
on the initial pool of student loans. If any
incentive program reduces the yield on the
affected student loan and is not required by
the Higher Education Act of 1965, that program
will be applicable to student loans in the
trust only if the trust receives payment from
the seller in an amount sufficient to offset
the related yield reduction.
YOUR YIELD TO MATURITY MAY BE
REDUCED BY PREPAYMENTS,
DELINQUENCIES AND
DEFAULTS The pre-tax return on your investment is
uncertain and will depend on a number of
factors including the following:
o THE RATE OF RETURN OF PRINCIPAL IS
UNCERTAIN. The amount of distributions of
principal on the securities and the time when
you receive those distributions depends on the
amount and the times at which borrowers make
principal payments on the student loans. Those
principal payments may be regularly scheduled
payments or unscheduled payments resulting
from prepayments, defaults or consolidations
of the student loans.
o YOU MAY RECEIVE A PREPAYMENT OF PRINCIPAL AT
END OF FUNDING PERIOD. If the amount in the
pre-funding account is not fully used to
purchase student loans that are consolidation
loans or serial loans by the end of the
funding period, you may receive a principal
prepayment. If the amount remaining is
$________ or less, the indenture trustee will
distribute the amount on each class of
securities, pro rata, based on the initial
principal balance of the securities.
o YOU MAY NOT BE ABLE TO REINVEST
DISTRIBUTIONS IN COMPARABLE INVESTMENTS. Asset
backed securities, like the securities offered
by this prospectus supplement, usually produce
more returns of principal to investors when
market interest rates fall below the interest
rates on the student loans and produce less
returns of principal when market interest
rates are above the interest rates on the
student loans. As a result, you are likely to
receive more money to reinvest at a time when
other investments generally are producing a
lower yield than that on the securities, and
are likely to receive less money to reinvest
when other investments generally are producing
a higher yield than that on the securities.
You will bear the risk that the timing and
amount of distributions on your securities
will prevent you from attaining your desired
yield.
o AN EARLY TERMINATION WILL SHORTEN THE LIFE
OF YOUR INVESTMENT WHICH MAY REDUCE YOUR YIELD
TO MATURITY. Your investment in the securities
may end before you desire if (1) the indenture
trustee successfully conducts an auction sale
or (2) the seller exercises its option to
purchase all of the assets of the trust.
Because your securities will no longer be
outstanding, you will not receive the
additional interest payments that you would
have received had the securities remained
outstanding. In addition, you may not be able
to reinvest the principal you receive at a
rate comparable to that on your securities.
YOU MAY NOT RECEIVE CURRENT
PAYMENTS AT THE APPLICABLE
INTEREST RATE You may not be paid interest at the related
note rate or certificate rate as a result of
an interest rate cap. The interest rate cap
may be triggered for a number of reasons,
including:
o The applicable index used to calculate
interest on the securities may become
greater than the indices used to calculate
interest on the student loans.
o The principal balance of the student loans
initially will be less than the aggregate
principal amount of the securities.
Consequently, the aggregate principal
balances of the student loans on which
interest will be collected will be less than
the principal amount of the securities.
o The interest rate cap will be reduced as a
result of the trust's obligation to pay
certain amounts to the Department of
Education or to repay certain amounts to
borrowers.
Although you may receive interest not paid
because of the interest rate cap on subsequent
distribution dates, we cannot assure you that
there will be sufficient funds available for
that purpose. If the note rate or certificate
rate is limited by the interest rate cap, the
market value and liquidity of your securities
may decline.
[MELLON BANK, N.A. LACKS
EXPERIENCE IN SERVICING
STUDENT LOANS The master servicer does not have any
experience directly servicing any student
loans. Although the master servicer is
obligated to cause the student loans to be
serviced in accordance with the terms of the
transaction agreements, the timing of payments
will be directly affected by the ability of
the sub-servicers to adequately service the
student loans. In addition, you will be
relying on each of the sub-servicers'
compliance with applicable federal program
regulations to ensure that the guarantors are
obligated to maintain guaranteed payments and
that any reinsurance by the Department of
Education is maintained. If a sub-servicer
defaults on its obligations and is terminated,
you will be relying on the ability of the
master servicer to find an alternative
sub-servicer to service the student loans and
you may suffer a delay in the timing of
payments until any transfer of servicing is
completed or effective.]
COMPUTER PROBLEMS IN THE
YEAR 2000 MAY RESULT IN
LOSSES Many computers and computer chips were not
programmed to recognize more than two digits
in a year of a date. As a result, in the year
2000, those computers will not know whether
the '00 refers to the year 1900 or the year
2000. To the extent that the systems of the
master servicer, any sub-servicer, the
administrator, any of the guarantors, the
eligible lender trustee or the indenture
trustee have such problems in the year 2000
and later, the amount and timing of
distributions to noteholders and
certificateholders could be adversely
affected.
[The Department of Education has undertaken a
year 2000 compliance project to address year
2000 issues. Information regarding the
Department of Education's year 2000 efforts
can be obtained at the Department of
Education's site on the World Wide Web at
http://www.ed.gov. Officials at the Department
of Education have made statements to the
public acknowledging that the Department of
Education has been placed on the Office of
Management and Budget's "watch list" for not
meeting certain milestones toward year 2000
compliance. Any failure by the Department of
Education to resolve any year 2000 issues or
any adverse effect on the Department of
Education caused by a party on which the
Department of Education relies as a result of
year 2000 issues may have a material adverse
effect on the Federal Family Education Loan
Program, the federal guarantors and you.]
WITHDRAWAL OR DOWNGRADING
OF INITIAL RATINGS
WILL ADVERSELY AFFECT THE
PRICES FOR THE SECURITIES A security rating is not a recommendation to
buy, sell or hold securities. Similar ratings
on different types of securities do not
necessarily mean the same thing. We recommend
that you analyze the significance of each
rating independently from any other rating.
Any rating agency may change its rating of the
securities after the securities are issued if
that rating agency believes that circumstances
have changed. Any subsequent withdrawal or
downgrading of a rating will likely reduce the
price that a subsequent purchaser will be
willing to pay for the applicable securities.
The ratings do not address the likelihood of
the ultimate payment to you of any interest
not paid as a result of the interest rate cap.
THE SECURITIES ARE NOT
SUITABLE INVESTMENTS
FOR ALL INVESTORS The securities are not a suitable investment
if you require a regular or predictable
schedule of payments or payment on any
specific date. The securities are complex
investments that should be considered only by
investors who, either alone or with their
financial, tax and legal advisors, have the
expertise to analyze the prepayment,
reinvestment, default and market risk, the tax
consequences of an investment, and the
interaction of these factors.
FORMATION OF THE TRUST
THE TRUST
Mellon Student Loan Trust _____- (the "Trust") is a trust formed under the
laws of the State of pursuant to the Amended and Restated Trust Agreement dated
as of ________, ____ (as amended and supplemented from time to time, the "Trust
Agreement") between Mellon Bank, N.A. (the "Seller") and as trustee (the
"Eligible Lender Trustee") for the transactions described in this prospectus
supplement. The assets of the Trust will include the education loans to students
and parents of students ("Student Loans") delivered on the Closing Date (the
"Initial Financed Student Loans") and additional Student Loans acquired by the
Trust after the Closing Date (the "Other Student Loans," and collectively with
the Initial Financed Student Loans, the "Financed Student Loans"). All of the
Financed Student Loans will be reinsured by the United States Department of
Education (the "Department").
The Trust will not engage in any activity other than
o acquiring, holding and managing the Financed Student Loans and the
other assets of the Trust and proceeds therefrom
o issuing the Certificates and the Notes
o making payments thereon and
o engaging in other activities that are related to the activities listed
above.
The Trust will be initially capitalized with equity of $____________
excluding amounts deposited in the Reserve Account in the name of the Indenture
Trustee by the Seller on the Closing Date, representing the initial principal
balance of the Floating Rate Asset Backed Certificates (the "Certificates").
Certificates with an original principal balance of approximately $___________
will be sold to and retained by the Seller and the remaining Certificates will
be sold to third-party investors that are expected to be unaffiliated with the
Seller, the Master Servicer, the Sub-Servicers, the Guarantors, the Trust or the
Department. The equity of the Trust, together with the proceeds from the sale of
the Notes, will be used by the Eligible Lender Trustee to purchase on behalf of
the Trust the Initial Financed Student Loans from the Seller pursuant to the
Sale and Servicing Agreement dated as of ______ __, ____ among the Trust, the
Seller, the Administrator, the Master Servicer, and the Eligible Lender Trustee
(the "Sale and Servicing Agreement") and to fund the deposit of $___________
(the "Pre-Funded Amount") into an account to be maintained by the Indenture
Trustee (the "Pre-Funding Account"). The Seller will use a portion of the net
proceeds it receives from the sale of the Initial Financed Student Loans to make
a deposit of $__________ on the Closing Date into the Reserve Account (the
"Reserve Account Initial Deposit").
Upon the consummation of such transactions, the property of the Trust will
consist of
(a) a 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 on or after _______ __, ____,
(c) all Guarantee Agreements, and
(d) all moneys and investments on deposit in an account in the name of the
Indenture Trustee (the "Collection Account"), the Pre-Funding Account,
an account in the name of the Indenture Trustee (the "Escrow Account")
and the Reserve Account.
To facilitate servicing and to minimize administrative burden and expense, the
Sub-Servicers will be appointed by the Eligible Lender Trustee and the Master
Servicer the custodians of the promissory notes representing the Financed
Student Loans that each services on behalf of the Trust.
"Initial Financed Student Loans" means the Student Loans transferred by the
Seller to the Trust as of the Closing Date having an aggregate principal balance
of approximately $______________ as of ______ __, ____ (the "Statistical Cutoff
Date").
ELIGIBLE LENDER TRUSTEE
____________ is the Eligible Lender Trustee for the Trust under the Trust
Agreement pursuant to which the Eligible Lender Trustee acts as holder of legal
title to the Financed Student Loans on behalf of the Trust. principal offices
are located at __________ and its New York offices are located at
__________________ New York, New York .
The Eligible Lender Trustee will acquire on behalf of the Trust legal title
to all the Financed Student Loans acquired from time to time pursuant to the
Sale and Servicing Agreement. The Eligible Lender Trustee on behalf of the Trust
will enter into a guarantee agreement or comparable arrangement with each of the
Guarantors with respect to the Financed Student Loans (each a "Guarantee
Agreement" and collectively, the "Guarantee Agreements"). The Eligible Lender
Trustee qualifies as an eligible lender and owner of all Student Loans that are
reinsured by the Department, for all purposes under the Higher Education Act of
1965 (the "Higher Education Act") and the Guarantee Agreements. Failure of the
Financed Student Loans to be owned by an eligible lender would result in the
loss of any Guarantee Payments (as defined in the Prospectus) from any of [ ]
(collectively, the "Guarantors") and any Federal Assistance (as defined in the
Prospectus) with respect to such Financed Student Loans. See "The Financed
Student Loan Pool--Insurance of Student Loans; Guarantors of Student Loans" in
this prospectus supplement.
The Eligible Lender Trustee's liability in connection with the issuance and
sale of the [Floating Rate Class ___ Asset Backed Notes (the "Class ___ Notes")
and Floating Rate Class ___ Asset Backed Notes (the "Class ___ Notes" and
together with the Class ___ Notes, the "Notes")] and the Certificates is limited
solely to the express obligations of the Eligible Lender Trustee set forth in
the Trust Agreement and the Sale and Servicing Agreement. See "Description of
the Securities" and "Description of the Transfer and Servicing Agreements"
herein. The Seller plans to maintain normal commercial banking relations with
the Eligible Lender Trustee.
In consideration for its performance of its obligations under the Sale and
Servicing Agreement, the Eligible Lender Trustee will be entitled to receive an
annual fee of $________.
USE OF PROCEEDS
After making the deposit of the Pre-Funded Amount to the Pre-Funding
Account, the balance of the net proceeds from the sale of the Certificates and
the Notes will be paid by the Trust to the Seller in consideration for the
purchase by the Trust of the Initial Financed Student Loans on the Closing Date.
The Seller will use such proceeds paid to it (x) to make the Reserve Account
Initial Deposit and an initial deposit into the Collection Account and (y) for
general corporate purposes.
THE MASTER SERVICER AND THE SUB-SERVICERS
MELLON BANK, N.A.
Mellon Bank, N.A., in its capacity as Master Servicer under the Sale and
Servicing Agreement (the "Master Servicer"), will be responsible for master
servicing the Financed Student Loans. The Master Servicer will arrange for and
oversee the performance by _____ and ______ (collectively the "Sub-Servicers"
and each a "Sub-Servicer") of their respective servicing obligations with
respect to the Financed Student Loans pursuant to separate sub-servicing
agreements (each, a "Sub-Servicing Agreement") with each Sub-Servicer. The
Master Servicer will be entitled to receive the Master Servicing Fee, but will
in turn be solely responsible for all compensation due to the Sub-Servicers for
the performance of their respective obligations pursuant to the related
Sub-Servicing Agreements.
[DESCRIPTION OF SUB-SERVICERS]
SERVICES AND FEES OF MASTER SERVICER AND THE SUB-SERVICERS
In accordance with the Sub-Servicing Agreements, each Sub-Servicer will
service and perform all related tasks with respect to the Financed Student Loans
on behalf of the Master Servicer and the Trust. The Trust will be an intended
third-party beneficiary of each Sub-Servicing Agreement. _______ will be
Sub-Servicer with respect to approximately _____% of the outstanding principal
balance of the Initial Financed Student Loans and _______ will be the Sub-
Servicer with respect to approximately _____% of the outstanding principal
balance of the Initial Financed Student Loans. With respect to the Financed
Student Loans it is servicing for the Trust, each Sub-Servicer is required to
perform the services and duties customary to the servicing of Student Loans it
is required to service with reasonable care and to do so in the same manner as
such Sub-Servicer has serviced Student Loans on behalf of the Seller or the
Master Servicer, as applicable, and otherwise in compliance with all applicable
standards and procedures. In addition, each Sub-Servicer is required to maintain
its eligibility as a third-party servicer under the Higher Education Act. See
"Description of the Transfer and Servicing Agreements--Servicing Procedures" in
this prospectus supplement.
In consideration for performing its obligations under the Sale and
Servicing Agreement, the Master Servicer will receive a monthly fee payable by
the Trust on or about the twenty-seventh day of each month (the "Monthly
Servicing Payment Date") generally equal to _____% (the "Master Servicing Fee
Percentage") of the principal balance of the Financed Student Loans and certain
one-time fixed fees for each Financed Student Loan for which a forbearance
period was granted or renewed or for which a guarantee claim was filed, in each
case subject to certain adjustments, together with other administrative fees and
similar charges. In consideration for the Master Servicing Fee, the Master
Servicer will be solely responsible for the fees due to the Sub-Servicers
pursuant to the terms of the related Sub-Servicing Agreements. See "Description
of Transfer and Servicing Agreements--Master Servicing Compensation" in this
prospectus supplement.
THE FINANCED STUDENT LOAN POOL
GENERAL
The pool of Financed Student Loans will include the Initial Financed
Student Loans purchased by the Eligible Lender Trustee on behalf of the Trust as
of the Statistical Cutoff Date and any Additional Student Loans purchased by the
Eligible Lender Trustee on behalf of the Trust from the Seller as of the
applicable Subsequent Cutoff Dates.
The Financed Student Loans will be selected from the Seller's portfolio of
Student Loans by several criteria, including, as of the Statistical Cutoff Date
or the applicable Subsequent Cutoff Date, as the case may be, the following:
1. Each Financed Student Loan
(a) was originated in the United States or its territories or
possessions under and in accordance with the Programs (as defined
in the Prospectus) (including, a financial need analysis) to a
borrower who (or with respect to PLUS Loans to a parent of a
student who), (i) has graduated or otherwise left an
undergraduate institution or is expected to graduate or otherwise
leave an undergraduate institution by _____________, ____, and
(ii) has graduated or otherwise left graduate school or is
expected to graduate or otherwise leave graduate school by
_____________, ____,
(b) contains terms in accordance with those required by the Programs,
the applicable Guarantee Agreements and other applicable
requirements, and
(c) with respect to the Initial Financed Student Loans is not more
than 180 days past due as of the Statistical Cutoff Date or, with
respect to the Other Subsequent Students Loans or the Other
Student Loans not more than 90 days past due as of the applicable
Subsequent Cutoff Date, as the case may be.
2. As of the Statistical Cutoff Date, no Initial Financed Student Loan
had a borrower who was noted in the related records of the Master
Servicer or a Sub-Servicer as being currently involved in a bankruptcy
proceeding or deceased since the date the Trust was created.
3. No Initial Financed Student Loan as of the Statistical Cutoff Date
consists of a Student Loan that was subject to the Seller's prior
obligation to sell such loan to a third party.
4. No selection procedures believed by the Seller to be adverse to the
Securityholders were used or will be used in selecting the Financed
Student Loans.
5. The Financed Student Loans will not include any non-prime or sub-prime
Student Loans. Non-prime or sub-prime Student Loans are Student Loans
originated to individuals who have previously defaulted on their
Student Loans.
6. As of the Statistical Cutoff Date, none of the Initial Financed
Student Loans are non-performing Student Loans. Non-performing Student
Loans are Student Loans which are in default and the Seller expects to
write-off as a loss.
Each of the Financed Student Loans provides or will provide for the
amortization of the outstanding principal balance of such Financed Student Loan
over a series of regular payments. Each regular payment consists of an
installment of interest which is calculated on the basis of the outstanding
principal balance of such Financed Student Loan multiplied by the applicable
interest rate and further multiplied by the period elapsed (as a fraction of a
calendar year) since the preceding payment of interest was made. As payments are
received in respect of such Financed Student Loan, the amount received is
applied first to interest accrued to the date of payment and the balance is
applied to reduce the unpaid principal balance. Accordingly, if a borrower pays
a regular installment before its scheduled due date, the portion of the payment
allocable to interest for the period since the preceding payment was made will
be less than it would have been had the payment been made as scheduled, and the
portion of the payment applied to reduce the unpaid principal balance will be
correspondingly greater. Conversely, if a borrower pays a monthly installment
after its scheduled due date, the portion of the payment allocable to interest
for the period since the preceding payment was made will be greater than it
would have been had the payment been made as scheduled, and the portion of the
payment applied to reduce the unpaid principal balance will be correspondingly
less. In either case, subject to any applicable Deferral Periods (as defined in
the Prospectus) or Forbearance Periods (as defined in the Prospectus), 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 and any accrued but
unpaid interest on such Financed Student Loan.
The Additional Student Loans to be conveyed to the Eligible Lender Trustee
on behalf of the Trust during the Funding Period are required to consist of
Other Subsequent Student Loans originated by the Seller in accordance with the
Programs and other applicable requirements. The Other Subsequent Student Loans
must be made to a borrower who has, immediately prior to the date of any such
conveyance, outstanding Student Loans that are part of the pool of Financed
Student Loans. Each such Additional Student Loan is otherwise required to comply
with the criteria set forth above. See "Description of the Transfer and
Servicing Agreements--Additional Fundings" herein.
Except for the criteria described in the preceding paragraphs, there will
be no required characteristics of the Additional Student Loans. Therefore,
following the transfer of the Additional Student Loans to the Eligible Lender
Trustee on behalf of the Trust, the aggregate characteristics of the entire pool
of Financed Student Loans, including the composition of the Financed Student
Loans, the distribution by weighted average interest rate and the distribution
by principal amount described in the following tables, may vary significantly
from those of the Initial Financed Student Loans as of the Statistical Cutoff
Date. In addition, the distribution by weighted average interest rate applicable
to the Financed Student Loans on any date following the Statistical Cutoff Date
may vary significantly from that set forth in the following tables as a result
of variations in the effective rates of interest applicable to the Financed
Student Loans. Moreover, the remaining term to maturity of the Initial Financed
Student Loans as of the Statistical Cutoff Date may vary significantly from the
actual term to maturity of any of the Financed Student Loans as a result of the
granting of Deferral Periods and Forbearance Periods with respect thereto.
THE FINANCED STUDENT LOANS
Set forth below in the following tables is a description of certain
additional characteristics of the Initial Financed Student Loans as of the
Statistical Cutoff Date.
COMPOSITION AS OF THE STATISTICAL CUTOFF DATE
MELLON STUDENT LOAN TRUST ____ TOTAL
Aggregate Outstanding
Balance(1)
Number of Borrowers
Average Outstanding
Balance Per Borrower
Number of Loans
Average Outstanding
Balance Per Loan
Weighted Average
Remaining Term
to Maturity(2)
Weighted Average Annual
Borrower Interest Rate(3)
(1) Includes in each case net principal balance due from borrowers, plus
accrued interest thereon to be capitalized upon commencement of repayment,
estimated to be $______________ as of the Statistical Cutoff Date.
(2) Determined from the date of origination or the Statistical Cutoff Date, as
the case may be, to the stated maturity date of the applicable Initial
Financed Student Loans, assuming repayment commences promptly upon
expiration of the typical grace period following the expected graduation
date and without giving effect to any Deferral Periods or Forbearance
Periods that may be granted in the future. See "The Student Loan Financing
Business" in the Prospectus.
(3) Determined using the borrower interest rates exclusive of Special Allowance
Payments applicable to the Initial Financed Student Loans as of the
Statistical Cutoff Date. However, because all the Initial Financed Student
Loans effectively bear interest at a variable rate per annum, there can be
no assurance that the foregoing rate will remain applicable to the Initial
Financed Student Loans at any time after the Statistical Cutoff Date. See
"The Student Loan Financing Business" in the Prospectus. The weighted
average spread, including Special Allowance Payments, to the 91-day
Treasury Bill Rate or 52-week Treasury Bill Rate, as applicable, was ____%
as of the Statistical Cutoff Date and would have been ____% if all of the
Financed Student Loans were in repayment as of the Statistical Cutoff Date.
DISTRIBUTION BY LOAN TYPE AS OF THE STATISTICAL CUTOFF DATE
<TABLE>
<CAPTION>
Aggregate
Outstanding Percent of
Number Principal Initial Pool
LOAN TYPE OF LOANS BALANCE(1) BALANCE
<S> <C> <C> <C> <C>
Stafford Subsidized Loans
Stafford Unsubsidized Loans
Consolidation Loans
SLS Loans
PLUS Loans
Total
(1) Includes net principal balance due from borrowers, plus accrued interest
thereon to be capitalized upon commencement of repayment, estimated to be
$________________ as of the Statistical Cutoff Date.
</TABLE>
DISTRIBUTION BY BORROWER INTEREST RATE AS OF THE STATISTICAL CUTOFF DATE
<TABLE>
<CAPTION>
Aggregate
Outstanding Percent of
Interest Number Principal Initial Pool
RATE OF LOANS BALANCE(2) BALANCE
------ -------- ---------- -------
<S> <C> <C> <C>
Less than 7.50%(1)
7.50% to 7.99%
8.00% to 8.49%
8.50% to 8.99%
9.00% and above
Total
(1) Determined using the interest rates applicable to the Initial Financed
Student Loans as of the Statistical Cutoff Date. However, because all the
Initial Financed Student Loans effectively bear interest at a variable rate
per annum, there can be no assurance that the foregoing information will
remain applicable to the Initial Financed Student Loans at any time after
the Statistical Cutoff Date. See "The Student Loan Financing Business" in
the Prospectus.
(2) Includes net principal balance due from borrowers, plus accrued interest
thereon to be capitalized upon commencement of repayment, estimated to be
$________________as of the Statistical Cutoff Date.
</TABLE>
DISTRIBUTION BY OUTSTANDING PRINCIPAL BALANCE AS OF THE STATISTICAL CUTOFF DATE
<TABLE>
<CAPTION>
Outstanding
Principal Number of Aggregate Outstanding Percent of Initial Pool
BALANCE LOANS(1) PRINCIPAL BALANCE(2) BALANCE
<S> <C> <C> <C>
Less than $1,000
$1,000 to $1,999
$2,000 to $2,999
$3,000 to $3,999
$4,000 to $4,999
$5,000 to $5,999
$6,000 to $6,999
$7,000 to $7,999
$8,000 to $8,999
$9,000 to $9,999
$10,000 to $10,999
$11,000 to $11,999
$12,000 to $12,999
$13,000 to $13,999
$14,000 to $14,999
$15,000 to $15,999
$16,000 to $16,999
$17,000 to $17,999
$18,000 to $18,999
$19,000 to $19,999
$20,000 to $20,999
$21,000 to $21,999
$22,000 to $22,999
$23,000 to $23,999
$24,000 to $24,999
$25,000 to $25,999
$26,000 to $26,999
$27,000 to $27,999
$28,000 to $28,999
$29,000 to $29,999
$30,000 and above
Total
(1) Borrowers generally have more than one outstanding loan. The average
aggregate outstanding principal balance of loans per borrower is $_____,
with respect to the Initial Financed Student Loans as of the Statistical
Cutoff Date.
(2) Includes net principal balance due from borrowers, plus accrued interest
thereon to be capitalized upon commencement of repayment, estimated to be
$________ as of the Statistical Cutoff Date.
</TABLE>
DISTRIBUTION BY REMAINING TERM TO SCHEDULED MATURITY
AS OF THE STATISTICAL CUTOFF DATE
MONTHS TO Aggregate Percent of
SCHEDULED Number of Outstanding Initial Pool
MATURITY Loans Principal(2) Balance
12 and below(1)
13 to 24
25 to 48
49 to 60
61 to 72
73 to 84
85 to 96
97 to 108
109 to 120
121 to 180
181 to 240
241 and above
Total
(1) Determined from the Statistical Cutoff Date to the stated maturity date of
the applicable Initial Financed Student Loan, assuming repayment commences
promptly upon expiration of the typical grace period following the expected
graduation date and without giving effect to any deferral or forbearance
periods that may be granted in the future. See "The Student Loan Financing
Business" in the Prospectus.
(2) Includes net principal balance due from borrowers, plus accrued interest
thereon to be capitalized upon commencement of repayment, estimated to be
$________________as of the Statistical Cutoff Date.
DISTRIBUTION BY BORROWER PAYMENT STATUS AS OF THE STATISTICAL CUTOFF DATE
Aggregate
Outstanding Percent of
Number Principal Initial Pool
PAYMENT STATUS OF LOANS BALANCE(2) BALANCE
In School(1)
Grace
Deferral
Forbearance
Repayment
First year in repayment
Second year in repayment
More than two years
in repayment
Total
(1) Refers to the status of the borrower of each Initial Financed Student Loan,
as of the Statistical Cutoff Date: such borrower may still be attending an
undergraduate institution or graduate school ("In-School"), may be in a
grace period prior to repayment commencing ("Grace"), may be repaying such
loan ("Repayment") or may have temporarily ceased repaying such loan
through a deferral ("Deferral") or a forbearance ("Forbearance") period.
See "The Student Loan Financing Business" in the Prospectus.
(2) Includes net principal balance due from borrowers, plus accrued interest
thereon to be capitalized upon commencement of repayment, estimated to be
$________________ as of the Statistical Cutoff Date.
SCHEDULED WEIGHTED AVERAGE MONTHS REMAINING IN STATUS
BY CURRENT BORROWER PAYMENT STATUS AS OF THE
STATISTICAL CUTOFF DATE(1)
PAYMENT STATUS IN-SCHOOL GRACE DEFERRAL FORBEARANCE REPAYMENT
In-School
Grace
Deferral
Forbearance
Repayment
Total
(1) Determined without giving effect to any Deferral Periods or Forbearance
Periods that may be granted in the future.
GEOGRAPHIC DISTRIBUTION OF STATES REPRESENTING MORE THAN 4%
OF THE AGGREGATE POOL BALANCE AS OF THE STATISTICAL CUTOFF DATE(1)
Aggregate
Outstanding
Percent of
NUMBER Principal Initial
OF LOANS BALANCE(2) POOL BALANCE
[States]
All Other
States(3)
Total
(1) Based on the permanent billing addresses of the borrowers of the Initial
Financed Student Loans shown on the Master Servicer's or a Sub-Servicer's
records as of the Statistical Cutoff Date.
(2) Includes net principal balance due from borrowers, plus accrued interest
thereon of $_______ as of the Statistical Cut-Off Date to be capitalized
upon commencement of repayment.
(3) Includes all other states, none of which exceeds __% of the Initial Pool
Balance.
DISTRIBUTION BY LOAN REPAYMENT TERM AS OF THE STATISTICAL CUTOFF DATE
Aggregate
Outstanding Percent of
Loan NUMBER Principal Initial
REPAYMENT TERMS OF LOANS BALANCE(1) POOL BALANCE
Level Payment
Interest Only(2)
Graduated Payment(3)
Other (4)
Total
(1) Includes net principal balance due from borrowers, plus accrued interest
thereon to be capitalized upon commencement of repayment, estimated to be
$________________ as of the Statistical Cutoff Date.
(2) Student Loans with interest only repayment terms require borrowers to make
payments of interest only for the first two years after entering repayment
and thereafter to make level payments (made up of both principal and
interest) which will amortize the then outstanding principal balance of the
loan over the then remaining term.
(3) Student Loans with graduated repayment terms require borrowers to make
payments of interest only for the first two years after entering repayment
which increase over the next three years to a level payment amount which
will amortize the then outstanding principal balance of the loan over the
then remaining term.
(4) Loan still not in repayment status.
DISTRIBUTION OF FINANCED FEDERAL LOANS BY DATE OF DISBURSEMENT
AS OF THE STATISTICAL CUTOFF DATE
Aggregate
Outstanding Percent of
DATE OF NUMBER Principal Initial
DISBURSEMENT(1) OF LOANS BALANCE(2) POOL BALANCE
Pre October 1, 1993
October 1, 1993 to
Present
Total
(1) Student Loans disbursed prior to October 1, 1993 are 100% guaranteed by the
applicable Guarantor, and reinsured against default by the Department up to
100% of the Guarantee Payments. Student Loans disbursed on or after October
1, 1993 (but before October 1, 1998) are 98% guaranteed by the applicable
Guarantor, and reinsured against default by the Department up to a maximum
of 98% of the Guarantee Payments. Student Loans first disbursed on or after
October 1, 1998 are 98% guaranteed by the applicable Guarantor, and
reinsured against default by the Department up to 95% of the Guarantee
Payments. See "The Student Loan Financing Business--Description of Student
Loans Under the Programs" and "--Insurance of Student Loans; Guarantors of
Student Loans" in the Prospectus.
(2) Includes net principal balance due from borrowers, plus accrued interest
thereon to be capitalized upon commencement of repayment, estimated to be
$________________ as of the Statistical Cutoff Date.
DISTRIBUTION OF FINANCED STUDENT LOANS BY
NUMBER OF DAYS OF DELINQUENCY AS OF THE STATISTICAL CUTOFF DATE
Aggregate
Outstanding Percent of
NUMBER Principal Initial
DAYS DELINQUENT OF LOANS BALANCE(1) POOL BALANCE
0-30
31-60
61-90
90-120
120-150
150-180
Total
(1) Includes net principal balance due from borrowers, plus accrued interest
thereon to be capitalized upon commencement of repayment, estimated to be
$________________ as of the Statistical Cutoff Date.
MATURITY AND PREPAYMENT ASSUMPTIONS
The rate of payment of principal of the Notes and the Certificates and the
yield on the Notes and the Certificates will be affected by prepayments of the
Financed Student Loans that may occur as described below. All the Financed
Student Loans are prepayable in whole or in part by the borrowers at any time
(including by means of Consolidation Loans (as defined in the Prospectus) or as
a result of a borrower's default, death, disability or bankruptcy and subsequent
liquidation or collection of Guarantee Payments with respect thereto. The rate
of such prepayments cannot be predicted and may be influenced by a variety of
economic, social and other factors, including 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 with respect to such Financed Student Loans from the Seller
(x) after the Loan Purchase Termination Date or (y) from another lender at any
time, Noteholders (as defined in the Prospectus ) (and after the Notes have been
paid in full, Certificateholders (as defined in the Prospectus )) will
collectively receive as a prepayment of principal the aggregate principal amount
of such Financed Student Loans; provided, that if the Seller makes any such
Consolidation Loan during the Funding Period or prior to the Loan Purchase
Termination Date (in which event the Seller will then sell that Consolidation
Loan to the Eligible Lender Trustee, to the extent that funds are available in
the Escrow Account and during the Funding Period, the Pre-Funding Account or
following the Funding Period but prior to the Loan Purchase Termination Date,
the Collection Account from amounts which constitute Available Loan Purchase
Funds, for the purchase thereof), the aggregate outstanding principal balance of
Financed Student Loans (after giving effect to the addition of such
Consolidation Loans) will be at least equal to and in most cases greater than
such balance prior to such prepayment, although the portion of the loan
guaranteed will be 98% with respect to any Consolidation Loan disbursed on or
after October 1, 1993 even if the Underlying Student Loans (as defined in the
Prospectus) were 100% guaranteed. See "The Student Loan Financing
Business--Description of Student Loans Under the Programs--Consolidation Loans"
in the Prospectus. 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 on or after the Loan Purchase Termination Date or by
another lender at any time.
In addition, the Seller is obligated to repurchase any Financed Student
Loan pursuant to the Sale and Servicing Agreement as a result of a breach of any
of its representations and warranties, and the Master Servicer is obligated to
purchase any Financed Student Loan pursuant to the Sale and Servicing Agreement
as a result of a breach of certain covenants with respect to such Financed
Student Loan, in each case where such breach materially adversely affects the
interests of the Certificateholders or the Noteholders in that Financed Student
Loan and is not cured within the applicable cure period (it being understood
that any such breach that does not affect any Guarantor's obligation to
guarantee payment of such Financed Student Loan will not be considered to have a
material adverse effect for this purpose). See "Description of the Transfer and
Servicing Agreements--Sale of Student Loans; Representations and Warranties" and
"-- Servicer Covenants" in the Prospectus. See also "Description of the Transfer
and Servicing Agreements--Additional Fundings" herein and in the Prospectus
regarding the prepayment of principal to Noteholders as a result of excess funds
remaining on deposit in the Pre-Funding Account at the end of the Funding
Period. See also, "--Insolvency Event" in the Prospectus regarding the sale of
the Financed Student Loans if a Seller Insolvency Event (as defined in the
Prospectus) occurs and "--Termination" herein and in the Prospectus regarding
the Seller's option to purchase the Financed Student Loans when the aggregate
Pool Balance is less than or equal to [5%] [10%] of the Initial Pool Balance and
the auction of the Financed Student Loans occurs on or after the ____ 200__
Distribution Date. Any reinvestment risk from such accelerated payment of
principal will be borne by the holders of Notes and Certificates receiving such
prepayment.
Scheduled payments with respect to, and maturities of, the Financed Student
Loans may be extended, including pursuant to Grace Periods (as defined in the
Prospectus, each a "Grace Period"), Deferral Periods and, under certain
circumstances, Forbearance Periods or as a result of the conveyance of Serial
Loans to the Eligible Lender Trustee on behalf of the Trust prior to the Loan
Purchase Termination Date or of refinancings through Consolidation Loans to the
extent such Consolidation Loans are sold to the Eligible Lender Trustee on
behalf of the Trust as described above. In that event, the fact that such
Consolidation Loans will likely have longer maturities than the Financed Student
Loans they are replacing may lengthen the remaining term of the Financed Student
Loans and the average life of the Notes and the Certificates. The rate of
payment of principal of the Notes and the Certificates and the yield on the
Notes and the Certificates may also be affected by the rate of defaults
resulting in losses on defaulted Student Loans which have been liquidated, by
the severity of those losses and by the timing of those losses, which may affect
the ability of the Guarantors to make Guarantee Payments with respect thereto.
In addition, the maturity of many of the Financed Student Loans will extend well
beyond the Final Maturity Dates of the Notes and the Certificates.
The rate of prepayment on the Financed Student Loans cannot be predicted.
You will bear any reinvestment risks resulting from a faster or slower incidence
of prepayment of Financed Student Loans. Reinvestment risks may include the risk
that interest rates and the relevant spreads above particular interest rate
bases are lower at the time you receive payments from the Trust than the
interest rates and the spreads that would otherwise have been had prepayments
not been made or had prepayments been made at a different time.
"Available Loan Purchase Funds" means with respect to any Collection Period
and any Transfer Date after the Funding Period, the excess of Available Funds
(with certain exceptions) for the Collection Period relating to the Distribution
Date next succeeding such Transfer Date that are on deposit in the Collection
Account on such Transfer Date (before giving effect to any application thereof)
over the accrued expected expense payment for such Distribution Date as
specified in the Sale and Servicing Agreement.
The "Initial Pool Balance" will equal $_____________.
"Loan Purchase Termination Date" means ____________, ___________.
INSURANCE OF STUDENT LOANS; GUARANTORS OF STUDENT LOANS
Each Financed Student Loan will be required to be guaranteed by one of the
Guarantors and reinsured by the Department under the Higher Education Act and
must be eligible for Special Allowance Payments (as defined in the Prospectus)
and, with respect to each Financed Student Loan that is a Stafford Loan
(excluding any Unsubsidized Stafford Loan (as defined in the Prospectus, each an
"Unsubsidized Stafford Loan" )) or Consolidation Loan where none of the
Underlying Student Loans were Unsubsidized Stafford Loans, must be eligible for
Interest Subsidy Payments (as defined in the Prospectus) paid by the Department.
The following tables provide information with respect to the portion of the
Financed Student Loans guaranteed by each Guarantor:
DISTRIBUTION BY GUARANTORS AS OF THE STATISTICAL CUTOFF DATE
Aggregate Percent of
Outstanding Initial
NUMBER Principal Pool
OF LOANS BALANCE(1) BALANCE(_)
-------- ---------- ----------
Total
(1) Includes net principal balance due from borrowers, plus accrued interest
thereon to be capitalized upon commencement of repayment, estimated to be
$________________ as of the Statistical Cutoff Date.
FEDERAL REINSURANCE. Under the Higher Education Act, each Guarantor is
reimbursed by the Department pursuant to certain agreements between the
Department and such Guarantor for amounts paid under its Guarantee Agreement.
The amount of such reimbursement is subject to reduction. See "The Student Loan
Financing Business--Insurance of Student Loans; Guarantors of Student Loans" in
the Prospectus for a description of the federal reinsurance program and factors
affecting the Guarantors.
GUARANTORS FOR THE FINANCED STUDENT LOANS. The Higher Education Act
requires every state to designate a guarantee agency, either by establishing its
own or by designating another guarantee agency. A Guarantor who has been
designated by a particular state is obligated to guarantee loans for students
who reside or attend school in such state and must agree to provide loans to any
such students who are otherwise unable to obtain a loan from any other lender.
Guarantee agencies may guarantee a loan made to any eligible borrower and are
not limited to guaranteeing loans for students attending institutions in their
particular state or region or for their residents attending schools in another
state or region.
The Eligible Lender Trustee has entered into a Guarantee Agreement with
each of [ ].
Pursuant to its respective Guarantee Agreement, each of _____, ___, ____,
______, and ____ guarantees payment of 100% of the principal (including any
interest capitalized from time to time) and accrued interest for each Financed
Student Loan guaranteed by it as to which any one of the following events has
occurred:
(a) failure by the borrower thereof to make monthly principal or
interest payments on such Financed Student Loan when due, provided such
failure continues for a period of 180 days (or 270 days with respect to
Financed Student Loans originated on or after _______, _____) (except that
such guarantee against such failures will be 98% of principal and accrued
interest for loans first disbursed on or after October 1, 1993);
(b) any filing by or against the borrower thereof of a petition in
bankruptcy pursuant to any chapter of the Bankruptcy Code (as defined in
the Prospectus);
(c) the closure of, or false certification of borrower eligibility by,
the school;
(d) the death of the borrower thereof;
(e) the total and permanent disability of the borrower thereof to work
and earn money or attend school, as certified by a qualified physician; or
(f) the failure of the borrower's school to pay a refund owed to the
borrower, to the extent of the amount of the refund that is allocable to
the loan.
When these conditions are satisfied, the Higher Education Act requires the
Guarantor generally to pay the claim within 90 days of its submission by the
lender. The obligations of each Guarantor pursuant to its respective Guarantee
Agreements are obligations solely of that Guarantor, and are not supported by
the full faith and credit of any state government.
Each of the Guarantors' guarantee obligations with respect to any Financed
Student Loan are conditioned upon the satisfaction of all the conditions set
forth in the applicable Guarantee Agreement. These conditions include, but are
not limited to, the following:
o the origination and servicing of such Financed Student Loan being
performed in accordance with the Programs, the Higher Education Act
and other applicable requirements,
o the timely payment to the applicable Guarantor, of the guarantee fee
payable with respect to such Financed Student Loan,
o the timely submission to the applicable Guarantor of all required
pre-claim delinquency status notifications and of the claim with
respect to such Financed Student Loan, and
o the transfer and endorsement of the promissory note evidencing such
Financed Student Loan to the applicable Guarantor, upon and in
connection with making a claim to receive Guarantee Payments thereon.
Failure to comply with any of the applicable conditions, including the
foregoing, may result in the refusal of the applicable Guarantor to honor its
Guarantee Agreement with respect to such Financed Student Loan, in the denial of
guarantee coverage with respect to certain accrued interest amounts with respect
thereto or in the loss of certain Interest Subsidy Payments and Special
Allowance Payments with respect thereto. Under the Sale and Servicing Agreement,
such failure to comply would constitute a breach of the Master Servicer's
covenants or the Seller's representations and warranties, as the case may be,
and would create an obligation of the Seller or the applicable Master Servicer,
as the case may be, to repurchase or purchase such Financed Student Loan or to
reimburse the Trust for such non-guaranteed interest amounts or such lost
Interest Subsidy Payments and Special Allowance Payments with respect thereto.
See "Description of the Transfer and Servicing Agreements--Sale of Financed
Student Loans; Representations and Warranties" and "-- Master Servicer
Covenants" herein.
Set forth below is certain current and historical information with respect
to each of the Guarantors in its capacity as a Guarantor of all education loans
guaranteed by each of them.
GUARANTY VOLUME. The following table sets forth the approximate aggregate
principal amount of federally reinsured education loans (including loans under
the Parent Loans for Undergraduate Students program but excluding Consolidation
Loans) that have first become guaranteed by each Guarantor and by all federal
guarantors in each of the last five federal fiscal years:*
STAFFORD, SLS AND PLUS LOANS GUARANTEED
(DOLLARS IN MILLIONS)
Federal Fiscal
YEAR All Guarantors
1994 $23,053
1995 20,951
1996 19,728
1997 --
1998 --
* The information set forth in the table above for all guarantors has been
obtained from the Department of Education's Federal Student Loan Programs
Data Books (each, a "DOE Data Book"). Information for __________,
_________, and ________ was obtained from, ___________ and __________,
respectively.
RESERVE RATIO. Each Guarantor's reserve ratio is determined by dividing its
cumulative cash reserves by the original principal amount of the outstanding
loans it has agreed to guarantee. The term "cumulative cash reserves" refers to
cash reserves plus (a) sources of funds (including insurance premiums, state
appropriations, federal advances, federal reinsurance payments, administrative
cost allowances, collections on claims paid and investment earnings) minus (b)
uses of funds (including claims paid to lenders, operating expenses, lender
fees, the Department's share of collections on claims paid, returned advances
and reinsurance fees). The "original principal amount of outstanding loans"
consists of the original principal amount of loans guaranteed by such Guarantor
minus (x) the original principal amount of loans canceled, claims paid, loans
paid in full and loan guarantees transferred from such Guarantor to other
guarantors, plus (y) the original principal amount of loan guarantees
transferred to such Guarantor from other guarantors. The following tables set
forth for each of _______, _________ and _______, their respective cumulative
cash reserves and corresponding reserve ratios and the national average reserve
ratio for all federal guarantors for the last five federal fiscal years:*
<TABLE>
<CAPTION>
[GUARANTOR] [Guarantor] [Guarantor]
Cumulative Cumulative Cumulative
FEDERAL Cash Reserve Cash Reserve Cash Reserve National
FISCAL YEAR RESERVES RATIO RESERVES RATIO RESERVES RATIO Average
----------- -------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN MILLIONS)
1994 1.4
1995 1.6
1996 --
1997 --
1998 --
* The information set forth in the tables above with respect to _______,
______, and ________ has been obtained from _______, _______, and
___________, respectively, and the information with respect to the national
average has been obtained from the DOE Data Books.
</TABLE>
RECOVERY RATES. A Guarantor's recovery rate, which provides a measure of
the effectiveness of the collection efforts against defaulting borrowers after
the guarantee claim has been satisfied, is determined by dividing the amount
recovered from borrowers by the Guarantor by the aggregate amount of default
claims paid by the Guarantor during the applicable federal fiscal year with
respect to borrowers. The table below sets forth the recovery rates for each of
________, ________, and _________ for the last five federal fiscal years:*
FEDERAL
FISCAL Recovery Rate
Year
1994
1995
1996
1997
1998
* Information for ________, _______, and _________ was provided by each
entity, respectively.
LOAN LOSS RESERVE. In the event that a Guarantor receives less than full
reimbursement of its guarantee obligations from the Department (see "--FEDERAL
REINSURANCE" above), such Guarantor would be forced to look to its existing
assets to satisfy any such guarantee obligations not so reimbursed. Because
Guarantors are no longer reinsured by the Department at 100% (98% for loans
disbursed between October 1, 1993 and October 1, 1998 and 95% for loans
disbursed on and after October 1, 1998), many Guarantors have begun to maintain
reserves for the 2% to 5% "risk-sharing" associated with these guarantees. In
general, the Guarantors use historical default and recovery rates to attempt to
predict the reserves that should be maintained for this purpose.
CLAIMS RATE. For the past five federal fiscal years, none of _________'s,
_________'s, or _________'s claims rate has exceeded 5%, and as a result, all
claims of _________, _________, and _________ have been reimbursed by the
Department at the maximum reinsurance rate permitted by the Higher Education
Act. See "--Federal Reinsurance" above. Nevertheless, there can be no assurance
that any Guarantor will continue to receive such maximum reimbursement for such
claims. The following table sets forth the claims rates of each Guarantor for
each of the last five federal fiscal years:*
FEDERAL
FISCAL Claims Rate
Year
1994
1995
1996
1997
1998
* Information for _________, _________, and _________was provided by each
entity, respectively.
DESCRIPTION OF THE SECURITIES
Terms used in this section and not previously defined and not defined
herein are defined under "Description of the Transfer and Servicing Agreements
- --Distributions" herein.
GENERAL
The Notes will be issued pursuant to the terms of the Indenture, dated
_____ ___, ____ between the Trust and the Indenture Trustee (the "Indenture").
The Certificates will be issued pursuant to the terms of the Trust Agreement.
The following information supplements the summary of the material terms of the
Notes, the Certificates, the Indenture and the Trust Agreement set forth in the
Prospectus. The summary does not purport to be complete and is qualified in its
entirety by reference to the provisions of the Notes, the Certificates, the
Indenture and the Trust Agreement.
Each class of Securities will initially be represented by one or more Notes
and Certificates, respectively, in each case registered in the name of the
nominee of the Depository Trust Company ("DTC") (together with any successor
depository selected by the Administrator, the "Depository"), except as set forth
below. The Securities will be available for purchase in denominations of $1,000
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 & Co. ("Cede").
Accordingly, Cede is expected to be the holder of record of the Securities.
Unless and until Definitive Notes or Definitive Certificates are issued under
the limited circumstances described herein, no Noteholder or Certificateholder
will be entitled to receive a physical certificate representing a Note or
Certificate. All references herein to actions by Noteholders or
Certificateholders 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 or
Certificateholders refer to distributions, notices, reports and statements to
DTC or Cede, as the registered holder of the Notes or the Certificates, as the
case may be, for distribution to Noteholders or Certificateholders in accordance
with DTC's procedures with respect thereto. See "Certain Information Regarding
the Securities--Book-Entry Registration" and "--Definitive Securities" in the
Prospectus.
THE NOTES
DISTRIBUTIONS OF INTEREST. Interest will accrue on the principal balance of
each class of Notes at a rate per annum equal to the lesser of the Formula Rate
for such Notes and the Student Loan Rate (each such interest rate being a "Note
Interest Rate"). Interest will accrue from and including the Closing Date or
from the most recent Distribution Date on which interest has been paid to but
excluding the current Distribution Date (each, an "Interest Period") and will be
payable to the Noteholders on each Distribution Date. Interest accrued as of any
Distribution Date but not paid on such Distribution Date will be due on the next
Distribution Date together with an amount equal to interest on such amount at
the applicable Note Interest Rate. Interest payments on the Notes for any
Distribution Date will generally be funded from Available Funds and amounts on
deposit in the Reserve Account and, under certain limited circumstances, the
Pre-Funding Account remaining after the distribution of the Master Servicing Fee
for each of the two immediately preceding Monthly Servicing Payment Dates and of
the Master Servicing Fee, and the Administration Fee for each Distribution Date.
See "Description of the Transfer and Servicing Agreements -- Distributions" and
"--Credit Enhancement" herein. If such sources are insufficient to pay the
Noteholders' Interest Distribution Amount for such Distribution Date, such
shortfall will be allocated pro rata to the Noteholders (based upon the total
amount of interest then due on each class of Notes).
"Collection Period" means each period of three calendar months from and
including the date following the end of the preceding Collection Period (or,
with respect to the first Collection Period, the period beginning on the
Statistical Cutoff Date and ending on _______ __, ____).
"Formula Rate" means for any class of Securities, the applicable Investor
Index plus the applicable Margin.
"Investor Index" means (x) in the case of the Treasury Bill Indexed
Securities, the daily weighted average of the 91-day Treasury Bill Rates within
such Interest Period (determined as described under "--Determination of the
91-day Treasury Bill Rate" below) or (y) in the case of the LIBOR Indexed
Securities, Three Month LIBOR (determined as described under "--Determination of
LIBOR" below).
In the case of any LIBOR Indexed Securities and the initial Interest
Period, interest will accrue for the period from the Closing Date to but
excluding ______ __, ____ based on Three Month LIBOR as determined on the
initial LIBOR Determination Date and for the period from ______ ___, ____ to but
excluding ______ __, ____ based on Three Month LIBOR as determined on the LIBOR
Determination Date in _______ ____. See "--Determination of LIBOR" below.
The "Margin" for each class of Securities is ___% for the Class ___ Notes,
___% for the Class ___ Notes and ___% for the Certificates.
The "Student Loan Rate" for any class of Securities for any Interest Period
will equal the product of (a) the quotient obtained by dividing (x) 365 (or 366
in a leap year) by (y) the actual number of days elapsed in such Interest Period
and (b) the percentage equivalent of a fraction, the numerator of which is equal
to Expected Interest Collections for the Collection Period relating to such
Interest Period less the Master Servicing Fees and the Administration Fee and
payable on the related Distribution Date and any Master Servicing Fees paid on
the two preceding Monthly Servicing Payment Dates during the related Collection
Period and the denominator of which is the outstanding principal balance of the
Securities as of the first day of such Interest Period.
"Expected Interest Collections" means, with respect to any Collection
Period, the sum of
o the amount of interest accrued, net of amounts required by the Higher
Education Act to be paid to the Department or to be repaid to
borrowers, with respect to the Financed Student Loans for such
Collection Period (whether or not such interest is actually paid),
o all Interest Subsidy Payments and Special Allowance Payments expected
to be received by the Eligible Lender Trustee for such Collection
Period (whether or not actually received) with respect to the Financed
Federal Loans and
o Investment Earnings for such Collection Period.
To the extent that for any Interest Period the rate for the Notes
calculated on the basis of the Formula Rate exceeds the Student Loan Rate, the
amount of the excess ("Noteholders' Interest Index Carryover") (together with
the unpaid portion of any such Noteholders' Interest Index Carryover from prior
Distribution Dates and interest accrued thereon at the Formula Rate for the
Notes) will be paid on such Distribution Date or any subsequent Distribution
Date on a subordinated basis to the extent funds are allocated and available
therefor after making all required prior allocations and distributions on such
Distribution Date, as described under "Description of the Transfer and Servicing
Agreements--Distributions" herein. Any Noteholders' Interest Index Carryover
due on the Notes that may exist on any Distribution Date will be payable to
holders of the Notes on that Distribution Date on a pro rata basis, based on the
amount of the Noteholders' Interest Index Carryover then owing on the Notes, and
on any succeeding Distribution Dates, solely out of the amount of Available
Funds remaining in the Collection Account on any such Distribution Date after
distribution of the amounts set forth in "Description of the Transfer and
Servicing Agreements--Distributions" herein. No amounts on deposit in the
Reserve Account or the Pre-Funding Account will be available to pay any
Noteholders' Interest Index Carryover. Any amount of Noteholders' Interest Index
Carryover due on the Notes remaining after distribution of all Available Funds
on the applicable Final Maturity Date will never become due and payable and will
be discharged on such date.
DISTRIBUTIONS OF PRINCIPAL. Principal payments will be made to the holders
of the Notes on each Distribution Date in an amount generally equal to the
Principal Distribution Amount for such Distribution Date, until the principal
balance of the Notes is reduced to zero. Principal payments on the Notes will
generally be derived from Available Funds remaining after the distribution of
the amounts set forth in "Description of the Transfer and Servicing
Agreements--Distributions" herein, provided, that, on any Distribution Date that
the principal balance of the Notes exceeds the Note Collateralization Amount, an
amount equal to the Noteholders' Priority Principal Distribution Amount will be
distributed to Noteholders prior to any payments to Certificateholders. If the
remaining amount of Available Funds is insufficient to pay the Noteholders'
Priority Principal Distribution Amount, for any Distribution Date, the remaining
shortfall will be distributable to the Noteholders on subsequent Distribution
Dates and (except with respect to the Final Maturity Date for such classes of
Notes), the remaining shortfall will not constitute an Event of Default (as
defined in the Prospectus). In addition, in the event the Financed Student Loans
are not sold pursuant to the auction process described under "Description of the
Transfer and Servicing Agreements--Termination," with respect to any
Distribution Date occurring on or after the ______ _____ Distribution Date, the
Specified Collateral Balance will be reduced to zero and all amounts on deposit
in the Collection Account (after distribution of the Master Servicing Fee for
each of the two immediately preceding Monthly Servicing Payment Dates and the
Master Servicing Fee, the Administration Fee, the Noteholders' Interest
Distribution Amount, any Noteholders' Priority Principal Distribution Amount,
the Certificateholders' Interest Distribution Amount and any amounts necessary
to reinstate the balance of the Reserve Account to the Specified Reserve Account
Balance on such Distribution Date) will be distributed to the Noteholders and
then to the Certificateholders as principal until the outstanding principal
balance of the Notes and Certificates has been reduced to zero. See "Description
of the Transfer and Servicing Agreements--Termination" herein.
Principal payments on the Notes will be applied on each Distribution Date,
first, to the principal balance of the Class ___ Notes until the principal
balance is reduced to zero and then to the principal balance of the Class ___
Notes until the principal balance is reduced to zero. The aggregate outstanding
principal amount of each class of Notes will be payable in full on the Final
Maturity Date for that class of Notes. The dates on which the Final Maturity
Dates occur for each class of Notes are set forth on the cover page. On the
Final Maturity Date for each class of Notes, amounts on deposit in the Reserve
Account, if any, will be available, if necessary, to be applied to reduce the
principal balance of the Notes to zero. Although the maturity of many of the
Financed Student Loans will extend well beyond the Final Maturity Dates, the
actual date on which the aggregate outstanding principal and accrued interest of
any class of Notes are paid may be earlier than the Final Maturity Date for the
related class of Notes, based on a variety of factors. See "The Financed Student
Loan Pool--Maturity and Prepayment Assumptions" herein.
THE INDENTURE TRUSTEE. _______________, a ___________ banking corporation,
will be the Indenture Trustee under the Indenture. The Seller maintains normal
commercial banking relations with the Indenture Trustee.
THE CERTIFICATES
DISTRIBUTIONS OF INTEREST. Interest will accrue on the Certificate Balance
at a rate per annum equal to the lesser of the Formula Rate for the Certificates
and the Student Loan Rate (such interest rate being the "Certificate Rate").
Interest on the Certificates will be distributable quarterly on each
Distribution Date. Interest distributions due for any Distribution Date but not
distributed on such Distribution Date will be due on the next Distribution Date,
increased by an amount equal to interest on such amount at the Certificate Rate.
Interest distributions with respect to the Certificates for any Distribution
Date will generally be funded from the portion of the Available Funds and the
amounts on deposit in the Reserve Account and, under certain limited
circumstances, the Pre-Funding Account remaining after distribution of the
amounts set forth in "Description of the Transfer and Servicing
Agreements--Distributions" herein for such Distribution Date. See "Description
of the Transfer and Servicing Agreements--Distributions," "--Credit
Enhancement--Reserve Account" and "--Additional Fundings" herein.
To the extent that for any Interest Period the rate for the Certificates
calculated on the basis of the Formula Rate exceeds the Student Loan Rate, the
amount of such excess (together with the unpaid portion of any such excess from
prior Distribution Dates and interest accrued thereon at the Formula Rate for
the Certificates) will be paid on such Distribution Date or any subsequent
Distribution Date on a subordinated basis to the extent funds are allocated and
available therefor after making all required prior allocations and distributions
on such Distribution Dates, as described under "Description of the Transfer and
Servicing Agreements -- Distributions" herein. The payment of such amounts due
to Certificateholders on any Distribution Date (such amount, the
"Certificateholders' Interest Index Carryover") is further subordinated to the
payment of Noteholders' Interest Index Carryover. To the extent funds are
available therefor, the Certificateholders' Interest Index Carryover may be paid
prior to the time that the Notes are paid in full. Any Certificateholders'
Interest Index Carryover due on the Certificates that may exist on any
Distribution Date will be payable on that Distribution Date on a pro rata basis
and any succeeding Distribution Dates solely out of the amount of Available
Funds remaining in the Collection Account on any such Distribution Date after
distribution of the amounts set forth in "Description of the Transfer and
Servicing Agreements--Distributions" herein. No amounts on deposit in the
Reserve Account or Pre-Funding Account will be available to pay any
Certificateholders' Interest Index Carryover. Any amount of Certificateholders'
Interest Index Carryover due on the Certificates remaining after distribution of
all Available Funds on the Final Maturity Date for the Certificates will never
become due and payable and will be discharged on such date.
DISTRIBUTIONS OF PRINCIPAL. The Certificates will be entitled to
distributions on each Distribution Date on and after which the Notes are paid in
full in an amount generally equal to the Principal Distribution Amount for such
Distribution Date. Distributions with respect to principal payments on the
Certificates for such Distribution Date will generally be funded from the
portion of Available Funds remaining after distribution of the amounts set forth
in "Description of the Transfer and Servicing Agreements--Distributions" herein.
See "Description of the Transfer and Servicing Agreements--Distributions" and
"--Credit Enhancement--Reserve Account" herein.
The outstanding Certificate Balance will be payable in full on the Final
Maturity Date for the Certificates. The Final Maturity Date for the Certificates
is set forth on the cover page. On the Final Maturity Date for the Certificates,
amounts on deposit in the Reserve Account, if any, will be available, if
necessary, to be applied to reduce the Certificate Balance to zero. The actual
date on which the aggregate outstanding Certificate Balance and accrued interest
of the Certificates will be paid may be earlier than the Final Maturity Date for
the Certificates, however, based on a variety of factors. See "The Financed
Student Loan Pool--Maturity and Prepayment Assumptions" herein.
SUBORDINATION OF THE CERTIFICATES. The rights of the holders of the
Certificates to receive payments of interest are subordinated to the rights of
the holders of the Notes to receive payments of interest (and in certain
circumstances, principal) and the rights of the holders of the Certificates to
receive payments of principal are subordinated to the rights of the holders of
the Notes to receive payments of interest and principal. Consequently, amounts
on deposit in the Collection Account and to the extent necessary, the Reserve
Account and, during the Funding Period, the Other Additional Pre-Funding
Subaccount, will be applied to the payment of interest on the Notes before
payment of interest on the Certificates. Moreover, the holders of the
Certificates will not be entitled to any payments of principal until the Notes
are paid in full. In addition, if an Event of Default occurs and is continuing
under the Indenture or a Seller Insolvency Event occurs and the Financed Student
Loans are liquidated, all amounts due on the Notes will be payable before any
amounts are payable on the Certificates. Additionally, if on any Distribution
Date the outstanding principal balance of the Notes (prior to giving effect to
distributions on such Distribution Date) is in excess of the Note
Collateralization Amount, principal will be payable to the holders of the Notes
in the amount of such excess to the extent of funds available before any amounts
are payable to the holders of the Certificates. If amounts otherwise allocable
to the Certificates are used to fund payments of interest or principal on the
Notes, distributions with respect to the Certificates may be delayed or reduced.
DETERMINATION OF THE TREASURY BILL RATE
"91-day Treasury Bill Rate" means, on any day, the weighted average per
annum discount rate (expressed on a bond equivalent basis and applied on a daily
basis) for 91-day Treasury Bills sold at the most recent 91-day Treasury Bill
auction prior to such date, as reported by the U.S. Department of the Treasury.
In the event that the results of the auctions of 91-day Treasury Bills cease to
be reported as provided above, or that no such auction is held in a particular
week, then the 91-day Treasury Bill Rate in effect as a result of the last such
publication or report will remain in effect until such time, if any, as the
results of auctions of 91-day Treasury Bills shall again be reported or such an
auction is held, as the case may be. The 91-day Treasury Bill Rate will be
subject to a Lock-In Period of six business days.
"Lock-In Period" means the number of days preceding any Distribution Date
during which the Note Interest Rate or Certificate Rate, as applicable, in
effect on the first day of such period will remain in effect until the end of
the accrual period related to such Distribution Date.
Accrued interest on any class of Notes (and the Certificates) which are
Treasury Bill Indexed Securities from and including the Closing Date or the
preceding Distribution Date, as applicable, to but excluding the current
Distribution Date is calculated by multiplying the principal amount of the Notes
(or the Certificate Balance) by an "accrued interest factor." This factor is
calculated by adding the interest rates applicable to each day on which each
Note has been outstanding since the Closing Date or the preceding Distribution
Date, as applicable, and dividing the sum by 365 (or by 366 in the case of
accrued interest which is payable on a Distribution Date in a leap year) and
rounding the resulting number to nine decimal places.
The following table sets forth the accrued interest factors that would have
been applicable to any Notes which are Treasury Bill Indexed Securities bearing
interest at the indicated rates, assuming a 365-day year:
ASSUMED INTEREST
Settlement Days Rate on Interest
DATE OUTSTANDING THE NOTES FACTOR
---- ----------- --------- ------
1st
2nd 1
3rd 2
4th 3
5th* 4
6th 5
7th 6
8th 7
9th 8
10th 9
* First interest rate adjustment (91-day Treasury Bills are generally auctioned
weekly).
The numbers in this table are examples given for information purposes only
and are in no way a prediction of interest rates on any Notes which are Treasury
Bill Indexed Securities. A similar factor calculated in the same manner is
applicable to the return on Certificates which are Treasury Bill Indexed
Securities.
The Administrator makes information concerning the current 91-day Treasury
Bill Rate and the accrued interest factor available through Bloomberg L.P.
DETERMINATION OF LIBOR
Pursuant to the Sale and Servicing Agreement, the Administrator will
determine Three-Month LIBOR for purposes of calculating the interest due on the
Notes and Certificates which are LIBOR Indexed Securities and the Noteholders'
Interest Index Carryover and the Certificateholders' Interest Index Carryover,
in each case, for each given Interest Period on (x) the second business day
prior to the commencement of each Interest Period and (y) with respect to the
initial Interest Period, as determined pursuant to clause (x) for the period
from the Closing Date to but excluding ______ __, ____ and as determined on the
second business day prior to _______ __, ____ for the period from ________ __,
____ to but excluding _____ __, ____ (each, a "LIBOR Determination Date"). For
purposes of calculating Three-Month LIBOR, a business day is any day on which
banks in London and New York City are open for the transaction of business.
Interest due for any Interest Period will be determined based on the actual
number of days in such Interest Period over a 360-day year.
"Three-Month LIBOR" means the London interbank offered rate ("LIBOR") for
deposits in U.S. dollars having a maturity of three months commencing on the
related LIBOR Determination Date (the "Index Maturity") which appears on
Telerate Page 3750 as of 11:00 a.m., London time, on such LIBOR Determination
Date. If such rate does not appear on Telerate Page 3750, the rate for that day
will be determined on the basis of the rates at which deposits in U.S. dollars,
having the Index Maturity and in a principal amount of not less than U.S.
$1,000,000, are offered at approximately 11:00 a.m., London time, on such LIBOR
Determination Date to prime banks in the London interbank market by the
Reference Banks. The Administrator will request the principal London office of
each of such Reference Banks to provide a quotation of its rate. If at least two
such quotations are provided, the rate for that day will be the arithmetic mean
of the quotations. If fewer than two quotations are provided, the rate for that
day will be the arithmetic mean of the rates quoted by major banks in New York
City, selected by the Administrator, at approximately 11:00 a.m., New York City
time, on such LIBOR Determination Date for loans in U.S. dollars to leading
European banks having the Index Maturity and in a principal amount equal to an
amount of not less than U.S. $1,000,000; provided that if the banks selected as
aforesaid are not quoting as mentioned in this sentence, Three-Month LIBOR in
effect for the applicable reset period will be Three-Month LIBOR in effect for
the previous reset period.
"Telerate Page 3750" means the display page so designated on the Bridge
Telerate Service (or such other page as may replace that page on that service
for the purpose of displaying comparable rates or prices).
"Reference Bank" means a leading bank (a) engaged in transactions in
Eurodollar deposits in the international Eurocurrency market, (b) not
controlling, controlled by or under common control with the Administrator and
(c) having an established place of business in London.
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
GENERAL
The following information supplements the summary set forth in the
Prospectus of the material terms of the following (collectively, the "Transfer
and Servicing Agreements"):
O Sale and Servicing Agreement, pursuant to which the Eligible Lender
Trustee on behalf of the Trust will purchase, the Master Servicer will
service (or will cause the Sub-Servicers to service) and the
Administrator will perform certain administrative functions with
respect to the Financed Student Loans;
O the Administration Agreement, dated _____ __, ____ among the
Administrator, the Trust and the Indenture Trustee (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
O the Trust Agreement, pursuant to which the Trust will be created and
the Certificates will be issued.
The summary does not purport to be complete and is qualified in its entirety by
reference to the provisions of such Transfer and Servicing Agreements.
SALE OF FINANCED STUDENT LOANS; REPRESENTATIONS AND WARRANTIES
On or prior to the Closing Date, the Seller will sell and assign to the
Eligible Lender Trustee on behalf of the Trust, without recourse, its entire
interest in the Initial Financed Student Loans, all collections received and to
be received with respect thereto for the period on and after _______ __, ____
and all the Assigned Rights pursuant to the Sale and Servicing Agreement. Each
Initial Financed Student Loan will be identified in schedules appearing as an
exhibit to the Sale and Servicing Agreement. The Eligible Lender Trustee will,
concurrently with such sale and assignment, execute, authenticate and deliver
the Notes. The net proceeds received from the sale of the Notes and the
Certificates will be applied to the purchase of the Financed Student Loans and
the Assigned Rights and to the deposit of the Pre-Funded Amount in the
Pre-Funding Account and the Reserve Account Initial Deposit to the Reserve
Account. See "--Additional Fundings" below for a description of the application
of funds on deposit in the Pre-Funding Account during the Funding Period.
In the Sale and Servicing Agreement, the Seller 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 and will
have certain cure, repurchase and reimbursement obligations with respect to any
breaches. See "Description of the Transfer and Servicing Agreements" in the
Prospectus.
The "Purchase Price" of any Financed Student Loan will be (1) in the case
of Initial Financed Student Loans, an amount equal to _______ of the aggregate
principal balance of such Initial Financed student Loan as of the Statistical
Cutoff Date, and (2) in the case of Other Subsequent Student Loans, an amount
equal to ________ of the aggregate principal balance thereof as of its
Subsequent Cutoff Date. For purposes of the foregoing calculations, the
aggregate principal balance of each Financed Student Loan includes accrued
interest thereon from the date of origination to, with respect to each Initial
Financed Student Loan, the Statistical Cutoff Date, and to, with respect to each
Additional Student Loan, the related Subsequent Cutoff Date, in each case
expected to be capitalized upon entry into repayment.
To assure uniform quality in servicing and to reduce administrative costs,
each Sub-Servicer will be appointed custodian of the promissory notes
representing the Financed Student Loans which such Sub-Servicer is servicing by
the Master Servicer and the Eligible Lender Trustee on behalf of the Trust. The
Seller's, the Master Servicer's and the each Sub-Servicers' accounting and other
records will reflect the sale and assignment of the Financed Student Loans to
the Eligible Lender Trustee on behalf of the Trust, and Uniform Commercial Code
financing statements reflecting such sale and assignment will be filed.
ACCOUNTS
The Administrator will establish and maintain four separate segregated
accounts as follows: the "Collection Account", the "Pre-Funding Account", the
"Escrow Account" and the "Reserve Account." Each such account will be
established in the name of the Indenture Trustee on behalf of the Noteholders
and the Certificateholders.
Funds in the Collection Account, the Pre-Funding Account, the Escrow
Account and the Reserve Account (collectively, the "Trust Accounts") will be
invested as provided in the Sale and Servicing Agreement in Eligible
Investments. "Eligible Investments" are generally limited to short-term U.S.
government backed securities, certain highly rated commercial paper and money
market funds and other investments acceptable to the Rating Agencies as being
consistent with the rating of the Notes. Subject to certain conditions, Eligible
Investments may include securities or other obligations issued by the Seller or
its affiliates, or trusts originated by the Seller or its affiliates, or shares
of investment companies for which the Seller or its affiliates may serve as the
investment advisor. Eligible Investments are limited to obligations or
securities that mature not later than the business day immediately preceding the
next Distribution Date. Investment earnings on funds deposited in the Trust
Accounts, net of losses and investment expenses (collectively, "Investment
Earnings"), will be deposited in the Collection Account on each Distribution
Date and will be treated as collections of interest on the Financed Student
Loans.
The Trust Accounts will be maintained as Eligible Deposit Accounts.
"Eligible Deposit Account" means either (a) a segregated account with an
Eligible Institution or (b) a segregated trust account with the corporate trust
department of a depository institution organized under the laws of the United
States of America or any one of the states thereof or the District of Columbia
(or any domestic branch of a foreign bank), having corporate trust powers and
acting as trustee for funds deposited in such account, so long as any of the
securities of such depository institution have a credit rating from each Rating
Agency in one of its generic rating categories which signifies investment grade.
Any such accounts may be maintained with the Seller or any of its affiliates, if
such accounts meet the requirements described in clause (a) of the preceding
sentence. "Eligible Institution" means a depository institution (which may be,
without limitation, the Seller or an affiliate thereof, the Eligible Lender
Trustee, or an affiliate thereof, or the Indenture Trustee or an affiliate
thereof) 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) which has a long-term unsecured debt rating and/or a short-term
unsecured debt rating acceptable to the two nationally recognized rating
agencies rating the Securities and the deposits of which are insured by the
Federal Deposit Insurance Corporation ("FDIC").
ADDITIONAL FUNDINGS
The Trust may make expenditures (each, an "Additional Funding") from the
Pre-Funding Account and the Escrow Account on Transfer Dates during the Funding
Period and from the Escrow Account and Available Loan Purchase Funds on Transfer
Dates during the period which begins on the day following the end of the Funding
Period and ends on the Loan Purchase Termination Date, in each case consisting
of amounts paid to the Seller to acquire Additional Student Loans as of the
applicable Subsequent Cutoff Dates, to pay capitalized interest on the Financed
Student Loans and to pay Fee Advances as provided in the Sale and Servicing
Agreement.
On the Closing Date, the Seller will deposit $__________ (the "Initial
Pre-Funded Amount") into the Pre-Funding Account from the proceeds of the sale
of the Securities. Pursuant to the Sale and Servicing Agreement, the Seller is
obligated to sell, and the Eligible Lender Trustee on behalf of the Trust is
obligated to purchase during the Funding Period, Other Subsequent Student Loans
having an aggregate principal balance (net of the aggregate principal balance of
the Financed Student Loans repaid by any Other Subsequent Student Loans that are
Consolidation Loans) of not less than $__________ (less the amount thereof, if
any, used by the Trust to fund shortfalls in the payment of interest on the
Securities as described herein) to the extent that such Other Subsequent Student
Loans are available. Funds on deposit in the Pre-Funding Account will be used
from time to time during the Funding Period, subject to certain limitations
described below, together with any amounts on deposit in the Escrow Account, to
purchase from the Seller, for an amount equal to ___% of the aggregate principal
balance thereof plus accrued interest (to the extent capitalized or to be
capitalized), Other Subsequent Student Loans made by the Seller to those
eligible borrowers who have Student Loans that are part of the pool of Initial
Financed Student Loans as of the Statistical Cutoff Date and to pay capitalized
interest on any Financed Student Loan. See "The Student Loan Financing
Business--Description of Student Loans Under the Programs--Consolidation Loans"
in the Prospectus.
The Seller expects that the total amount of Additional Fundings from the
Pre-Funding Account will approximate 100% of the Initial Pre-Funded Amount by
the last day of the Collection Period preceding the _______ ____ Distribution
Date; however, there can be no assurance that a sufficient amount of Additional
Fundings will be made during such time. If the Pre-Funded Amount has not been
reduced to zero by the end of the Funding Period, any amounts remaining in the
Pre-Funding Account will be deposited into the Collection Account for
distribution on the immediately following Distribution Date. Such reduction in
the Pre-Funded Amount will result in a corresponding increase in the amount of
principal distributable to the Securities on such Distribution Date.
The Pre-Funded Amount will also be available on each Monthly Servicing
Payment Date to cover any shortfalls in payments of the Master Servicing Fee and
on each Distribution Date to cover any shortfalls in payments of the Master
Servicing Fee, the Administration Fee, interest amounts payable in respect of
the Notes and the Certificates (other than the Noteholders' Interest Index
Carryover and the Certificateholders' Interest Index Carryover) for such
Distribution Date for which funds otherwise available therefor on such
Distribution Date are insufficient to make such distributions and after giving
effect to the application of funds on deposit in the Reserve Account to cover
such shortfalls; provided, however, that the Pre-Funded Amount will only be
available to cover shortfalls in interest payments on the Certificates to the
extent that the Note Collateralization Amount (after giving effect to such
reductions in the Pre-Funded Amount) would not be less than the outstanding
principal balance of the Notes. Amounts withdrawn from the Pre-Funding Account
for the purposes described in this paragraph will not be replenished with future
available funds.
In addition to the conditions set forth under "The Financed Student Loan
Pool--General" herein, the obligation to purchase any Additional Student Loan by
the Eligible Lender Trustee on behalf of the Trust is subject to the following
conditions, among others:
(a) such Additional Student Loan must satisfy all applicable origination
requirements and all other requirements specified in the Sale and
Servicing Agreement or related agreements;
(b) the Seller will not select such Additional Student Loan in a manner
that it believes is adverse to the interests of the Securityholders;
and
(c) the Seller will deliver certain opinions of counsel to the Indenture
Trustee and the Rating Agencies with respect to the validity of the
conveyance of such Additional Student Loan.
In addition, (a) no Consolidation Loan will be transferred to the Trust
unless at least one Underlying Student Loan was held by the Eligible Lender
Trustee on behalf of the Trust at the time of consolidation and (b) no Serial
Loan will be transferred to the Trust unless the borrower of such loan is the
borrower for one or more Financed Student Loans already owned by the Trust.
On the fifteenth day (or, if such day is not a business day, the next
succeeding business day) of each month or on certain other dates designated by
the Seller during the Funding Period and during the period which begins
following the end of the Funding Period and ends on the Loan Purchase
Termination Date (each, a "Transfer Date"), the Seller will sell and assign,
without recourse, to the Eligible Lender Trustee on behalf of the Trust, its
entire interest in the Other Subsequent Student Loans or Other Student Loans, as
applicable, made during the period preceding the applicable Transfer Date, in
each case as of the date specified in the applicable Transfer Agreement to be
delivered on such Transfer Date (each, a "Subsequent Cutoff Date"). Subject to
the satisfaction of the foregoing conditions, the Seller will convey the
Additional Student Loans to the Eligible Lender Trustee on behalf of the Trust
on each such Transfer Date pursuant to the Sale and Servicing Agreement and the
applicable Transfer Agreement (a "Transfer Agreement") executed by the Seller,
the applicable Servicer, the Eligible Lender Trustee and the Administrator on
such Transfer Date. Each such Transfer Agreement will include as an exhibit a
schedule identifying each Additional Student Loan transferred on such Transfer
Date. Upon such conveyance of Additional Student Loans to the Eligible Lender
Trustee on behalf of the Trust, the Pool Balance will increase in an amount
equal to the aggregate principal balances of such Additional Student Loans (less
any existing Financed Student Loans being repaid pursuant to any Consolidation
Loans included within such Additional Student Loans) and an amount equal to the
Purchase Price of such Additional Student Loans will be withdrawn first from the
Escrow Account to the extent amounts are available therein and then (x) with
respect to Other Subsequent Student Loans, during the Funding Period, from the
Pre-Funding Account and (y) with respect to Other Student Loans, during the
period following the end of the Funding Period until the Loan Purchase
Termination Date, from Available Loan Purchase Funds on deposit in the
Collection Account, in each case on such date and transferred to the Seller. The
Trust will not purchase an aggregate amount of Other Subsequent Student Loans
and Other Student Loans which exceeds 25% of the Initial Pool Balance.
With respect to any Consolidation Loan to be made by the Seller to a given
borrower, the Eligible Lender Trustee on behalf of the Trust will convey to the
Seller all Underlying Student Loans held by it with respect to that borrower, as
specified in a notice delivered by or on behalf of the Seller. In exchange for
and simultaneously with such conveyance, the Seller will deposit into the Escrow
Account an amount of cash equal to the principal balances of all such Underlying
Student Loans, plus accrued interest thereon to the date of such conveyance.
Each purchase of a Serial Loan will be funded by means of a transfer from (a)
during the Funding Period, the Pre-Funding Account and (b) after the end of the
Funding Period until the Loan Purchase Termination Date, from Available Loan
Purchase Funds on deposit in the Collection Account, in each case, of an amount
equal to the Purchase Price of such Serial Loan.
Amounts on deposit in the Escrow Account will be invested in Eligible
Investments (see "-- Accounts" above) and will be used on the succeeding
Transfer Date, as described above, to purchase Additional Student Loans from the
Seller. Any of such amounts remaining in the Escrow Account on the Transfer Date
after giving effect to the conveyance of all such Additional Student Loans on
such Transfer Date will be deposited into the Collection Account and distributed
as Available Funds on the Distribution Date immediately following such Transfer
Date.
For purposes of the foregoing, the following terms have the respective
meanings set forth below:
"Additional Student Loans" means collectively the Other Subsequent
Student Loans and the Other Student Loans.
The "Funding Period" means the period from the Closing Date until the
first to occur of:
(1) an Event of Default occurring under the Indenture, a Master
Servicer Default (as defined in the Prospectus) occurring under the
Sale and Servicing Agreement or an Administrator Default occurring
under the Sale and Servicing Agreement or the Administration
Agreement, or a Sub-Servicer Default (as defined in the Prospectus )
occurring under a Sub-Servicing Agreement;
(2) certain events of insolvency with respect to the Seller;
(3) the date on which the amounts on deposit in the Pre-Funding
Account would be reduced to zero after giving effect to purchases of
Other Subsequent Student Loans on such date; or
(4) the last day of the Collection Period preceding the ______
____ Distribution Date.
"Loan Purchase Termination Date" means __________, ____________.
"Other Student Loans" means Serial Loans and Consolidation Loans made
to a borrower who is also a borrower under at least one outstanding
Financed Student Loan which the Trust is obligated to purchase from the
Seller during the period which begins following the end of the Funding
Period and ends on the Loan Purchase Termination Date, from amounts on
deposit in the Escrow Account and Available Loan Purchase Funds (as defined
below) to the extent permitted by the Sale and Servicing Agreement.
"Other Subsequent Student Loans" means Consolidation Loans and Serial
Loans made to a borrower which is also a borrower under at least one
outstanding Financed Student Loan which the Trust is obligated to purchase
from the Seller during the Funding Period with funds on deposit in the
Escrow Account and funds on deposit in the Pre-Funding Account.
"Serial Loans" constitute Student Loans which are made to a borrower
who is also a borrower under at least one outstanding Initial Financed
Student Loan but do not include Stafford Loans made after July 1, 1998
without each of the rating agencies confirming the then current rating of
the Securities.
SERVICING PROCEDURES
Pursuant to the Sale and Servicing Agreement, the Master Servicer has
agreed to service and perform all other related tasks (or to cause the
Sub-Servicers to service and perform all other related tasks) with respect to
the Financed Student Loans acquired from time to time. So long as no claim is
being made against a Guarantor for any Financed Student Loan, the Master
Servicer (or a Sub-Servicer on its behalf) will hold, as custodian on behalf of
the Trust, the notes evidencing, and other documents relating to, that Financed
Student Loan. The Master Servicer is required pursuant to the Sale and Servicing
Agreement (or shall cause a Sub-Servicer) to perform all services and duties
customary to the servicing of Student Loans (including all collection practices)
with reasonable care, and in compliance with all standards and procedures
provided for in the Higher Education Act, the Guarantee Agreements and all other
applicable federal and state laws.
Without limiting the foregoing, the responsibilities of the Master Servicer
under the Sale and Servicing Agreement (or of a Sub-Servicer pursuant to a
Sub-Servicing Agreement) include, but are not limited to, the following:
collecting and depositing into the Collection Account (or, in the event that
daily deposits into the Collection Account are not required, paying to the
Administrator) all payments with respect to the Financed Student Loans such
Servicer is servicing, including claiming and obtaining any Guarantee Payments
with respect thereto but excluding such tasks with respect to Interest Subsidy
Payments and Special Allowance Payments (as to which the Administrator and the
Eligible Lender Trustee have agreed to perform, see "--Administrator" below),
responding to inquiries from borrowers on such Financed Student Loans,
investigating delinquencies and sending out statements, payment coupons and tax
reporting information to borrowers. In addition, the Master Servicer will (or
will cause each Sub-Servicer to) keep ongoing records with respect to such
Financed Student Loans and collections thereon and will furnish quarterly and
annual statements to the Administrator with respect to such information, in
accordance with the Master Servicer's (or such Sub-Servicer's) customary
practices with respect to the Seller and as otherwise required in the Sale and
Servicing Agreement. Without being released from its obligations under the Sale
and the Servicing Agreement, the Master Servicer may cause the Sub-Servicers to
perform some or all of its duties listed above on its behalf pursuant to the
Sub-Servicing Agreements, and in the event that any such duties require
consents, approvals or licenses under the Higher Education Act or otherwise, the
Master Servicer shall appoint one or more Sub-Servicer that possesses such
consents, approvals and licenses to act on its behalf; provided, however, that
the Master Servicer shall remain responsible for the failure of any Sub-Servicer
to perform these activities.
PAYMENTS ON FINANCED STUDENT LOANS
Except as provided below, Master Servicer or a Sub-Servicer, as applicable,
will deposit all payments on Financed Student Loans (from whatever source), and
all proceeds of Financed Student Loans collected by it during each Collection
Period into the Collection Account within two business days of receipt thereof.
Except as provided below, the Eligible Lender Trustee will deposit all Interest
Subsidy Payments and all Special Allowance Payments with respect to the Financed
Student Loans received by it during each Collection Period into the Collection
Account within two business days of receipt thereof.
However, in the event that Mellon Bank, N.A. satisfies certain requirements
for quarterly remittances and the rating agencies affirm their ratings of the
Notes and the Certificates at the initial level, then so long as Mellon Bank,
N.A. is the Administrator and provided that (x) there exists no Administrator
Default (as described below) and (y) each other condition to making quarterly
deposits as may be specified by the rating agencies is satisfied, the Master
Servicer, each Sub-Servicer and the Eligible Lender Trustee will pay all the
amounts referred to in the preceding paragraph that would otherwise be deposited
into the Collection Account to the Administrator, and the Administrator will not
be required to deposit such amounts into the Collection Account until on or
before the business day immediately preceding each Monthly Servicing Payment
Date (to the extent of the Master Servicing Fee payable on such date) and on or
before the business day immediately preceding each Distribution Date (to the
extent of the remainder of such amounts). In such event, the Administrator will
deposit the aggregate Purchase Amount of Financed Student Loans repurchased by
the Seller and purchased by the Master Servicer into the Collection Account on
or before the business day preceding each Distribution Date. Pending deposit
into the Collection Account, collections may be invested by the Administrator at
its own risk and for its own benefit, and will not be segregated from funds of
the Administrator.
MASTER SERVICER COVENANTS
In the Sale and Servicing Agreement, the Master Servicer covenants that:
(a) it will or will cause each Sub-Servicer to duly satisfy all
obligations on its part to be fulfilled under or in connection with the
Financed Student Loans the Master Servicer or a Sub-Servicer is servicing,
maintain in effect all qualifications required in order to service such
Financed Student Loans and comply in all material respects with all
requirements of law in connection with servicing such Financed Student
Loans, the failure to comply with which would have a materially adverse
effect on the Certificateholders or the Noteholders;
(b) it will not permit nor permit a Sub-Servicer to any rescission or
cancellation of a Financed Student Loan such Sub-Servicer is servicing
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 nor permit a Sub-Servicer to impair the rights
of the Certificateholders and the Noteholders in such Financed Student
Loans; and
(d) it will not nor permit a Sub-Servicer to reschedule, revise, defer
or otherwise compromise with respect to payments due on any such Financed
Student Loan except pursuant to any applicable deferral or forbearance
periods or otherwise in accordance with its guidelines for servicing
student loans in general and those of the Seller in particular and any
applicable Program requirements.
Certain incentive programs currently or hereafter made available by the
Seller to borrowers may also be made available by the Master Servicer or a
Sub-Servicer to borrowers with Financed Student Loans. Any such incentive
program that effectively reduces borrower payments on Financed Student Loans and
is not required by the Higher Education Act will be applicable to the Financed
Student Loans only if and to the extent that the Master Servicer or a
Sub-Servicer receives payment from the Seller in an amount sufficient to offset
such effective yield reductions.
Under the terms of the Sale and Servicing Agreement, if the Seller or the
Master Servicer (or a Sub-Servicer) discovers, or receives written notice, that
any covenant of the Master Servicer (or covenants made by the Master Servicer
relating to either of the Sub-Servicers), set forth above has not been complied
with by the Master Servicer (or a Sub-Servicer) in all material respects and
such noncompliance has not been cured within 60 days thereafter and has a
materially adverse effect on the interest of the Certificateholders or the
Noteholders in any Financed Student Loan (it being understood that any such
breach that does not affect any Guarantor's obligation to guarantee or insure
payment of such Financed Student Loan will not be considered to have such a
material adverse effect), unless such breach is cured, the Master Servicer will
purchase such Financed Student Loan as of the first day following the end of
such 60-day period that is the last day of a Collection Period. In that event,
the Master Servicer will be obligated to deposit into the Collection Account an
amount equal to the Purchase Amount of such Financed Student Loan and the
Trust's interest in any such purchased Financed Student Loan will be
automatically assigned to the Master Servicer. In addition, the Master Servicer
will reimburse the Trust with respect to any Financed Student Loan for any
accrued interest amounts that a Guarantor refuses to pay pursuant to its
Guarantee Agreement due to, or for any Interest Subsidy Payments and Special
Allowance Payments that are lost or that must be repaid to the Department as a
result of, a breach of any such covenant of the Master Servicer (or a
Sub-Servicer).
SERVICING COMPENSATION
The Master Servicer will be entitled to receive, subject to the limitations
set forth in the following paragraph, the Master Servicing Fee monthly in an
amount equal to the Master Servicing Fee Percentage of the Pool Balance as of
the last day of the immediately preceding calendar month and certain one-time
fixed fees for each Financed Student Loan for which a forbearance period was
granted or renewed or for which a guarantee claim was filed, in each case
subject to adjustment, together with other administrative fees and similar
charges, as compensation for performing the functions as master servicer for the
Trust described above. The Master Servicing Fee Percentage may be subject to
reasonable increase agreed to by the Administrator, the Eligible Lender Trustee
and the Master Servicer to the extent that a demonstrable and significant
increase occurs in the costs incurred by the Master Servicer in providing the
services to be provided under the Sale and Servicing Agreement, whether due to
changes in applicable governmental regulations, guarantor program requirements
or regulations, United States Postal Service postal rates or some other
identifiable cost increasing event. The Master Servicing Fee (together with any
portion of the Master Servicing Fee that remains unpaid from prior Distribution
Dates) will be payable on each Monthly Servicing Payment Date and will be paid
solely out of Available Funds and amounts on deposit in the Reserve Account on
such Monthly Servicing Payment Date. In return for receiving the Master
Servicing Fee, the Sub-Servicers will be paid solely by the Master Servicer,
pursuant to the Sub-Servicing Agreements.
Notwithstanding the foregoing, in the event that the aggregate fees payable
to the Master Servicer as defined above for any Monthly Servicing Payment Date
would exceed 0.50% per annum of the Pool Balance as of the last day of the
preceding calendar month (other than any deconversion fees) (the "Capped
Amount"), then the "Master Servicing Fee" for such Monthly Servicing Payment
Date will instead be the Capped Amount for such date plus any deconversion fees
referred to below. The remaining amount in excess of such Master Servicing Fee,
together with any such excess amounts from prior Monthly Servicing Payment Dates
that remain unpaid (the aggregate amounts being the "Excess Master Servicing
Fee"), will be payable to the Master Servicer on each succeeding Distribution
Date out of Available Funds after payment on such Distribution Date of the
amounts set forth in "Description of the Transfer and Servicing
Agreements--Distributions" herein. The Master Servicer will only be entitled to
receive the Excess Master Servicing Fee if and to the extent that Available
Funds exist to make such payments after making all prior distributions and
deposits.
The Master Servicing Fee and the Excess Master Servicing Fee will
compensate the Master Servicer for performing (or for arranging the performance
by the Sub-Servicers of) the functions of third party servicers of student loans
as agents 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, accounting for collections and furnishing monthly and annual
statements to the Administrator. The Master Servicing Fee and the Excess Master
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.
In the event of (x) any sale of the Financed Student Loans on behalf of the
Trust to any person (other than the Seller, the Administrator, the Master
Servicer, or a Sub-Servicer) in which the purchaser elects to deconvert the
Financed Student Loans and not retain the applicable Sub-Servicer as the
servicer of such Financed Student Loans or (y) any termination by the Master
Servicer, at the direction of or with the consent of Eligible Lender Trustee, of
a Sub-Servicer, except for any termination for cause or as a result of any
Sub-Servicer Default by the applicable Sub-Servicer, the Trust shall pay to the
Master Servicer, but only in the event that the Master Servicer is also
obligated to pay to the applicable Sub-Servicer, as a part of the Master
Servicing Fee (not subject to the Capped Amount) the following deconversion fee,
per loan, based on the status of the loan at the time of deconversion: (a) $115
for each in-school Stafford Loan or in-school deferred SLS Loan and (b) $62.50
for each loan of any other status or loan type.
DISTRIBUTIONS
DEPOSITS TO COLLECTION ACCOUNT. On or about the third business day prior to
each Distribution Date (the "Determination Date"), the Administrator will
provide the Indenture Trustee with certain information with respect to the
distributions to be made on such Distribution Date.
On or before the business day preceding each Monthly Servicing Payment Date
that is not a Distribution Date, the Administrator will cause (or will cause the
Master Servicer and the Eligible Lender Trustee to cause) a portion of the
amount of the Available Funds equal to the Master Servicing Fee, payable on such
date to be deposited into the Collection Account for payment to the Master
Servicer. On or before the business day prior to each Distribution Date, the
Administrator will cause (or will cause the Master Servicer and the Eligible
Lender Trustee to cause) the amount of Available Funds to be deposited into the
Collection Account.
For purposes hereof, the term "Available Funds" means, with respect to a
Distribution Date or any Monthly Servicing Payment Date, the sum of the
following amounts received with respect to the related Collection Period (or, in
the case of a Monthly Servicing Payment Date, the applicable portion thereof) to
the extent not previously distributed:
(1) all collections received by Master Servicer (or the Sub-Servicers)
on the Financed Student Loans (including any Guarantee Payments received
with respect to such Financed Student Loans) but net of (x) any Federal
Origination Fee (as defined in the Prospectus) and Consolidation Loan
Rebate (as defined in the Prospectus) payable to the Department on
Consolidation Loans disbursed after October 1, 1993, and (y) any
collections in respect of principal on the Financed Student Loans applied
by the Trust to repurchase guaranteed loans from the Guarantors in
accordance with the Guarantee Agreements;
(2) any Interest Subsidy Payments and Special Allowance Payments
received by the Eligible Lender Trustee during the then elapsed portion of
such Collection Period with respect to the Financed Student Loans;
(3) all proceeds of the Financed Student Loans which were liquidated
("Liquidated Student Loans") during the then elapsed portion of such
Collection Period in accordance with the Master Servicer's (or the
Sub-Servicers') respective customary servicing procedures, net of expenses
incurred by the Master Servicer (or the Sub-Servicers) in connection with
such liquidation and any amounts required by law to be remitted to the
borrower on such Liquidated Student Loans ("Liquidation Proceeds"), and all
recoveries in respect of Liquidated Student Loans which were written off in
prior Collection Periods or prior months of such Collection Period;
(4) the aggregate Purchase Amounts received for those Financed Student
Loans repurchased by the Seller or purchased by the Master Servicer or a
Sub-Servicer under an obligation which arose during the elapsed portion of
such Collection Period;
(5) the aggregate amounts, if any, received from the Seller or the
Master Servicer (or a Sub-Servicer), as the case may be, as reimbursement
of non-guaranteed interest amounts, or lost Interest Subsidy Payments and
Special Allowance Payments;
(6) amounts deposited by the Seller into the Collection Account in
connection with the making of Consolidation Loans;
(7) with respect to the first Distribution Date, the initial deposit
into the Collection Account;
(8) Investment Earnings for such Distribution Date;
(9) amounts withdrawn from the Reserve Account in excess of the
Specified Reserve Account Balance and deposited into the Collection
Account;
(10) amounts withdrawn from the Escrow Account and deposited into the
Collection Account; and
(11) with respect to the Distribution Date on or immediately after the
end of the Funding Period, the amount transferred from the Pre-Funding
Account to the Collection Account;
Available Funds will exclude (A) all payments and proceeds (including
Liquidation Proceeds) of any Financed Student Loans, the Purchase Amount of
which has been included in Available Funds for a prior Distribution Date and (B)
following the end of the Funding Period and prior to the Loan Purchase
Termination Date, amounts withdrawn from the Collection Account to purchase
Other Student Loans during the period following the preceding Distribution Date
and ending on or prior to such Distribution Date. If on any Distribution Date
there would not be sufficient funds, after application of Available Funds
amounts available from the Reserve Account and the Pre-Funding Account (x) to
pay any of the items specified in clauses (1) through (3), respectively, under
"--Distributions from the Collection Account" below, for such Distribution Date
and (y) if the principal balance of the Notes (after giving effect to any
distributions thereon on such Distribution Date) is less than or equal to the
Note Collateralization Amount, to pay the Certificateholders' Interest
Distribution Amount for such Distribution Date, then Available Funds for such
Distribution Date will include, in addition to the Available Funds on deposit in
the Collection Account on the Determination Date relating to such Distribution
Date which would have constituted Available Funds for the Distribution Date
succeeding such Distribution Date up to the amount necessary to pay, in the case
of clause (x) above such items specified in clauses (1) through (3) respectively
and in the case of clause (y) above the Certificateholders' Interest
Distribution Amount and the Available Funds for such succeeding Distribution
Date will be adjusted accordingly.
DISTRIBUTIONS FROM THE COLLECTION ACCOUNT. On each Monthly Servicing
Payment Date that is not a Distribution Date, the Administrator will instruct
the Indenture Trustee to pay to the Master Servicer, the Master Servicing Fee
due with respect to the period from and including the preceding Monthly
Servicing Payment Date from amounts on deposit in the Collection Account.
On each Distribution Date, the Administrator will instruct the Indenture
Trustee to make the following deposits and distributions, in the amounts and in
the order of priority specified below, to the extent of Available Funds for the
related Collection Period:
(1) to the Master Servicer, the Master Servicing Fee due on such
Distribution Date and all prior unpaid Master Servicing Fees;
(2) to the Administrator, the Administration Fee and all unpaid
Administration Fees from prior Collection Periods;
(3) to the holders of the Notes, the Noteholders' Interest
Distribution Amount;
(4) to the holders of the Certificates, the Certificateholders'
Interest Distribution Amount;
(5) to the Reserve Account, an amount, up to the amount, if any,
necessary to reinstate the balance of the Reserve Account to the Specified
Reserve Account Balance;
(6) to the holders of the Notes, the Noteholders' Principal
Distribution Amount;
(7) on each Distribution Date on and after which the Notes have been
paid in full, to the holders of the Certificates, the Certificateholders'
Principal Distribution Amount;
(8) to the Master Servicer, the aggregate unpaid amount, if any, of
the Excess Master Servicing Fee;
(9) to the holders of the Notes on a pro rata basis, based on the
amount of the Noteholders' Interest Index Carryover owing on each class of
Notes, the aggregate unpaid amount of the Noteholders' Interest Index
Carryover, if any;
(10) to the holders of the Certificates, the aggregate unpaid amount
of the Certificateholders' Interest Index Carryover, if any; and
(11) to the Seller, any remaining amounts after application of clauses
(1) through (10).
Additionally, if on any Distribution Date the outstanding principal balance
of the Notes (after giving effect to distributions on such Distribution Date) is
in excess of the Note Collateralization Amount, the principal will be payable to
the Noteholders in the amount of the Noteholders' Priority Principal
Distribution Amount to the extent of funds available before any amounts are
payable to the holders of the Certificates.
Upon any distribution to the Seller of any amounts included as Available
Funds, neither the Noteholders nor the Certificateholders will have any rights
in, or claims to, such amounts.
For purposes hereof, the following terms have the following meanings:
"Certificate Balance" equals $__________ as of the Closing Date and
thereafter, equals the initial Certificate Balance, reduced by all amounts
allocable to principal subsequently distributed to the Certificateholders.
"Certificateholders' Distribution Amount" means, with respect to any
Distribution Date, the Certificateholders' Interest Distribution Amount for such
Distribution Date plus, for each Distribution Date on and after which the Notes
have been paid in full, the Certificateholders' Principal Distribution Amount
for such Distribution Date.
"Certificateholders' Interest Carryover Shortfall" means with respect to
any Distribution Date, the excess of (x) the sum of the Certificateholders'
Interest Distribution Amount on the preceding Distribution Date over (y) the
amount of interest actually distributed to the holders of the Certificates on
such preceding Distribution Date, plus interest on the amount of such excess
interest due to the holders of the Certificates, to the extent permitted by law,
at the Certificate Rate from such preceding Distribution Date to the current
Distribution Date.
"Certificateholders' Interest Distribution Amount" means with respect to
any Distribution Date, the sum of (a) the amount of interest accrued at the
Certificate Rate for the related Interest Period on the outstanding Certificate
Balance on the immediately preceding Distribution Date, after giving effect to
all distributions of principal to holders of the Certificates on such
Distribution Date (or, in the case of the first Distribution Date, on the
Closing Date) and (b) the Certificateholders' Interest Carryover Shortfall for
such Distribution Date; provided, that the Certificateholders' Interest
Distribution Amount will not include any Certificateholders' Interest Index
Carryover.
"Certificateholders' Principal Distribution Amount" means on each
Distribution Date on and after which the principal balance of the Notes has been
paid in full, the Principal Distribution Amount for such Distribution Date (or,
in the case of the Distribution Date on which the principal balance of the Notes
is paid in full, any remaining Principal Distribution Amount not otherwise
distributed to the holders of the Notes on such Distribution Date); provided
that the Certificateholders' Principal Distribution Amount will in no event
exceed the Certificate Balance. In addition, on the Final Maturity Date for the
Certificates, the principal required to be distributed to the holders of the
Certificates will include the amount required to reduce the outstanding
Certificate Balance to zero.
"Monthly Servicing Payment Date" means the 27th day of each month.
"Net Government Receivable" means, with respect to any Distribution Date,
the sum of the amount of Interest Subsidy Payments and Special Allowance
Payments due from the Department less the amount owed to the Department for
Federal Origination Fee and Consolidation Loan Rebate as of the end of the
related Collection Period.
"Note Collateralization Amount" means, with respect to any Distribution
Date, the sum of
(a) the Pool Balance as of the end of the related Collection Period;
(b) the Pre-Funded Amount, as of the end of the related Collection Period;
(c) the amount on deposit in the Reserve Account after giving effect to
distributions on such Distribution Date; and
(d) the Net Government Receivable.
"Noteholders' Distribution Amount" means, with respect to any Distribution
Date, the sum of the Noteholders' Interest Distribution Amount and the
Noteholders' Principal Distribution Amount for such Distribution Date.
"Noteholders' Interest Carryover Shortfall" means, with respect to any
Distribution Date, the excess of (x) the sum of the Noteholders' Interest
Distribution Amount on the preceding Distribution Date over (y) the amount of
interest actually distributed to the holders of the Notes on such preceding
Distribution Date, plus interest on the amount of such excess interest due to
the holders of the Notes, to the extent permitted by law, at the weighted
average of the Note Interest Rates from such preceding Distribution Date to the
current Distribution Date.
"Noteholders' Interest Distribution Amount" means, with respect to any
Distribution Date, the sum of (a) the aggregate amount of interest accrued at
the respective Note Interest Rate for the related Interest Period on the
outstanding principal balance of each class of the Notes on the immediately
preceding Distribution Date after giving effect to all principal distributions
to Noteholders on such date (or, in the case of the first Distribution Date, on
the Closing Date) and (b) the Noteholders' Interest Carryover Shortfall for such
Distribution Date; provided, that the Noteholders' Interest Distribution Amount
will not include any Noteholders' Interest Index Carryover.
"Noteholders' Principal Distribution Amount" means, with respect to any
Distribution Date, the Principal Distribution Amount for such Distribution Date;
provided, however, that the Noteholders' Principal Distribution Amount will not
exceed the outstanding principal balance of the Notes. In addition, (a) on the
Final Maturity Date for each class of Notes, the principal required to be
distributed to the class of Notes will include the amount required to reduce the
outstanding principal balance of such class of Notes to zero, and (b) on the
related Distribution Date following a sale of the Financed Student Loans in the
manner described under "--Termination" below, the principal required to be
distributed to the holders of Class ___ Notes will include the amount required
to reduce the outstanding principal balance of such Class ___ Notes to zero. In
the event that the outstanding balance of the Notes is in excess of the Note
Collateralization Amount, the Noteholders' Principal Distribution Amount for the
Notes will be reduced by the amount of any Noteholders' Priority Principal
Distribution Amount.
"Noteholders' Priority Principal Distribution Amount" means, with respect
to any Distribution Date, the excess of (x) the aggregate outstanding principal
balance of such Notes (after giving effect to any distributions on such
Distribution Date) over (y) the Note Collateralization Amount.
"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 upon commencement of repayment), after giving effect to the
following without duplication:
O all payments received by the Trust related to the Financed
Student Loans during such Collection Period from or on behalf of
borrowers, Guarantors and the Department (collectively,
"Obligors"),
O all Purchase Amounts received by the Trust related to the
Financed Student Loans for such Collection Period from the
Seller, the Master Servicer or the Sub-Servicers,
O all Additional Fundings made from the Escrow Account and the
Pre-Funding Account or the Available Loan Purchase Funds with
respect to such Collection Period, and
O all losses realized on Financed Student Loans liquidated during
such Collection Period.
"Principal Distribution Amount" means, with respect to any Distribution
Date, the amount by which the sum of the outstanding principal balance of the
Notes and the Certificate Balance exceeds the Specified Collateral Balance for
such Distribution Date.
"Specified Collateral Balance" means, with respect to any Distribution
Date, the sum of (a) the Pool Balance as of the last day of the related
Collection Period plus (b) the Pre-Funded Amount as of the last day of the
related Collection Period for such Distribution Date. In the event that the
Financed Student Loans are not sold pursuant to the auction process described
under "-- Termination" below, with respect to any Distribution Date occurring on
or after the _________ ______ Distribution Date, the Specified Collateral
Balance will be zero.
CREDIT ENHANCEMENT
RESERVE ACCOUNT. Pursuant to the Sale and Servicing Agreement, the Reserve
Account will be created with an initial deposit by the Seller on the Closing
Date of cash or Eligible Investments in an amount equal to $__________ (the
"Reserve Account Initial Deposit"). On the Closing Date, the Reserve Account
Initial Deposit will equal the Specified Reserve Account Balance as of the
Closing Date. The amounts on deposit in the Reserve Account to the extent used
will be replenished up to the Specified Reserve Account Balance on each
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 payment of the prior
amounts set forth under "--Distributions" above, all for such Distribution Date.
"Specified Reserve Account Balance" means, with respect to any Distribution
Date will be equal to the greater of (x) ____% of the aggregate outstanding
principal amount of the Notes and the Certificate Balance on such Distribution
Date before giving effect to any distribution on such Distribution Date, and (y)
$________; provided, however, that in no event will such balance exceed the sum
of the outstanding principal amount of the Notes and the outstanding principal
balance of the Certificates.
Funds will be withdrawn from the Reserve Account to the extent that the
amount of Available Funds is insufficient to pay the Master Servicing Fee on any
Monthly Servicing Payment Date and any of the items specified in clauses (1)
through (4) under "--Distributions--Distributions from Collection Account" above
on any Distribution Date; provided that amounts on deposit in the Reserve
Account shall only be available to cover shortfalls in interest payments on the
Certificates to the extent that the Note Collateralization Amount (after giving
effect to such withdrawals from the Reserve Account) is not less than the
outstanding principal balance of the Notes. Such funds will be paid from the
Reserve Account to the Master Servicer on a Monthly Servicing Payment Date, and
to the persons and in the order of priority specified for distributions out of
the Collection Account in such clauses (1) through (4) on a Distribution Date.
In addition, on the Final Maturity Dates for the Securities, amounts on deposit
in the Reserve Account, if any, will be available, if necessary, to be applied
to reduce the principal balance of the Securities to zero. Amounts on deposit in
the Reserve Account will not be available to cover any reimbursement for unpaid
Excess Master Servicing Fees, Noteholders' Interest Index Carryover or
Certificateholders' Interest Index Carryover.
If the amount on deposit in the Reserve Account on any Distribution Date
(after giving effect to all deposits or withdrawals therefrom on such
Distribution Date) is greater than the Specified Reserve Account Balance for
such Distribution Date, subject to certain limitations, the Administrator will
instruct the Indenture Trustee to deposit the amount of the excess into the
Collection Account for distribution as Available Funds on such Distribution
Date. Upon any distribution to the Seller of any amounts included as Available
Funds, neither the Noteholders nor the Certificateholders will have any rights
in, or claims to, such amounts. Subject to the limitation described in the
preceding sentence, amounts held from time to time in the Reserve Account will
continue to be held for the benefit of the Trust.
The Reserve Account is intended to enhance the likelihood of timely receipt
by the holders of Notes and the holders of Certificates of the full amount of
interest due them and to decrease the likelihood that such holders will
experience losses. In certain circumstances, however, the Reserve Account could
be depleted.
SUBORDINATION OF THE CERTIFICATES. The rights of the holders of
Certificates to receive payments of interest are subordinated to the rights of
the holders of Notes to receive payments of interest (and, in certain
circumstances, principal) and the rights of the holders of Certificates to
receive payments of principal are subordinated to the rights of the holders of
Notes to receive payments of interest and principal. Consequently, amounts on
deposit in the Collection Account, the Reserve Account and the Pre-Funding
Account will be applied to the payment of interest on the Notes before payment
of interest on the Certificates and will be applied to the payment of principal
on the Notes before payment of principal on the Certificates. In addition if (x)
an Event of Default should occur and be continuing under the Indenture or (y) an
Insolvency Event should occur and the Financed Student Loans were liquidated,
all amounts due on the Notes will be payable before any amounts are payable on
the Certificates. Also if the outstanding principal balance of the Notes is in
excess of the Note Collateralization Amount, principal will be payable to
holders of Notes in the amount of such excess to the extent of funds available
before any amounts are payable to holders of Certificates. See "Description of
the Securities--The Certificates--Subordination of the Certificates" herein.
STATEMENTS TO INDENTURE TRUSTEE AND TRUST
Prior to each Distribution Date, the Administrator (based on the quarterly
statements and other information provided to it by the Master Servicer or the
Sub-Servicers) will provide to the Indenture Trustee and the Trust, as of the
close of business on the last day of the preceding Collection Period, a
statement which will include the following information with respect to such
Distribution Date or the preceding Collection Period as to the Notes and the
Certificates, to the extent applicable:
(1) the amount of the distribution allocable to principal of each
class of Securities;
(2) the amount of the distribution allocable to interest on each class
of Securities, together with the interest rates applicable with respect
thereto (indicating whether such interest rates are based on the Formula
Rate or on the Student Loan Rate and specifying what each such interest
rate would have been if it had been calculated using the alternate basis;
provided that no such calculation of the Student Loan Rate will be required
to be made unless the Investor Index for such Interest Period is 100 basis
points greater than the Investor Index of the preceding Determination Date
or, with respect to Treasury Bill Indexed Securities only, the 52-week
Treasury Bill Rate is 100 basis points less than the 91-day Treasury Bill
Rate as of such Determination Date);
(3) the amount of the distribution, if any, allocable to any
Noteholders' Interest Index Carryover and any Certificateholders' Interest
Index Carryover, together with the outstanding amount, if any, of each
thereof after giving effect to any such distribution;
(4) the Pool Balance as of the close of business on the last day of
the preceding Collection Period, after giving effect to payments allocated
to principal reported as described in clause (1) above;
(5) the aggregate outstanding principal balance of each Class of
Notes, the Certificate Balance and each Pool Factor as of such Distribution
Date, after giving effect to payments allocated to principal reported under
clause (1) above;
(6) the amount of the Master Servicing Fee and any Excess Master
Servicing Fee paid to the Master Servicer and the amount of the
Administration Fee paid to the Administrator with respect to such
Collection Period, and the amount, if any, of the Excess Master Servicing
Fee remaining unpaid after giving effect to any such payment;
(7) the amount of the aggregate Realized Losses, if any, for such
Collection Period and the balance of Financed Student Loans that are
delinquent in each delinquency period as of the end of such Collection
Period;
(8) the balance of the Reserve Account on such Distribution Date,
after giving effect to changes therein on such Distribution Date;
(9) for Distribution Dates during the Funding Period, the remaining
Pre-Funded Amount on such Distribution Date, after giving effect to changes
therein during the related Collection Period; and
(10) for the first Distribution Date on or following the end of the
Funding Period, the amount of any remaining Pre-Funded Amount that has not
been used to make Additional Fundings and is being paid out to the
Noteholders.
"Realized Losses" means, the excess of the principal balance of the
Liquidated Student Loans over the Liquidation Proceeds to the extent allocable
to principal.
"52-week Treasury Bill Rate" means, on any date of determination, the bond
equivalent rate of 52-week Treasury Bills auctioned at the final auction held
prior to the preceding June 1.
TERMINATION
The obligations of the Master Servicer, the Seller, the Administrator, the
Eligible Lender Trustee and the Indenture Trustee pursuant to the Transfer and
Servicing Agreements will terminate upon (a) 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 (b) the payment to
the holders of Notes and the holders of Certificates of all amounts required to
be paid to them pursuant to the Transfer and Servicing Agreements. In order to
avoid excessive administrative expense, the Seller is permitted at its option to
repurchase from the Eligible Lender Trustee, as of the end of any Collection
Period immediately preceding a Distribution Date, if the then outstanding Pool
Balance is [5%] [10%] or less than the Initial Pool Balance, all remaining
Financed Student Loans at a price sufficient to retire 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 holders of Notes and holders of
Certificates therefrom, will be conveyed and transferred to the Seller.
Any Financed Student Loans remaining in the Trust as of the end of the
Collection Period immediately preceding the _______ _____ Distribution Date will
be offered for sale by the Indenture Trustee. [Mellon Holding Company], its
affiliates (other than the Seller and the Master Servicer), __________,
___________ and unrelated third parties may offer bids to purchase such Financed
Student Loans on such Distribution Date. If at least two bids are received, the
Indenture Trustee will solicit and resolicit bids from all participating bidders
until only one bid remains or the remaining bidders decline to resubmit bids.
The Indenture Trustee will accept the highest of such remaining bids if it is
equal to or in excess of an amount (the "Minimum Purchase Amount") equal to the
greatest of
(1) the Auction Purchase Amount;
(2) the fair market value of such Financed Student Loans as of the end of
the Collection Period immediately preceding such Distribution Date; and
(3) the aggregate unpaid principal amount of the Notes and principal
balance of the Certificates plus, in each case, accrued and unpaid
interest thereon payable on such Distribution Date (other than any
Noteholders' Interest Index Carryover and Certificateholders' Interest
Index Carryover).
If at least two bids are not received or the highest bid after the
resolicitation process is completed is not equal to or in excess of the Minimum
Purchase Amount, the Indenture Trustee will not consummate such sale. In
connection with the determination of the Minimum Purchase Amount, the Indenture
Trustee may consult and, at the direction of the Seller, shall consult, with a
financial advisor, including the Underwriters or the Administrator, to determine
if the fair market value of the Financed Student Loans has been offered. The net
proceeds of any such sale will be used to redeem any outstanding Notes and to
retire any outstanding Certificates on such Distribution Date. If the sale is
not consummated in accordance with the foregoing, the Indenture Trustee may, but
shall not be under any obligation to, solicit bids to purchase the Financed
Student Loans on future Distribution Dates upon terms similar to those described
above.
No assurance can be given as to whether the Indenture Trustee will be
successful in soliciting acceptable bids to purchase the Financed Student Loans
on either the ______ _____ Distribution Date or any subsequent Distribution
Date. In the event the Financed Student Loans are not sold in accordance with
the foregoing, on each Distribution Date on and after the _____ ____
Distribution Date the Specified Collateral Balance shall be reduced to zero and
all Available Funds remaining after applying such amounts to pay the Master
Servicing Fee, the Administration Fee, the Noteholders' Interest Distribution
Amount, the Noteholders' Priority Principal Distribution Amount, if any, and the
Certificateholders' Interest Distribution Amount will be paid as principal to
the holders of Notes and then to the holders of Certificates until the
outstanding principal balance of the Notes and the Certificates has been reduced
to zero.
"Auction Purchase Amount" with respect to the Financed Student Loans means
the aggregate unpaid principal balance owed by the applicable borrowers thereon
plus accrued interest thereon to the date of purchase less the amount on deposit
in the Reserve Account as for such date.
ADMINISTRATOR
The Seller, in its capacity as Administrator, will enter into the
Administration Agreement with the Trust and the Indenture Trustee, and the Sale
and Servicing Agreement with the Trust, the Seller, the Master Servicer and the
Eligible Lender Trustee. For a description of the Administrator's duties, see
"Description of the Transfer and Servicing Agreements - Administrator" in the
Prospectus.
As compensation for the performance of the Administrator's obligations
under the Administration Agreement and the Sale and Servicing Agreement and as
reimbursement for its expenses related thereto, the Administrator will be
entitled to an administration fee in an amount equal to $______ per quarter (the
"Administration Fee").
INCOME TAX CONSEQUENCES
Stroock & Stroock & Lavan LLP, Federal tax counsel ("Federal Tax Counsel")
is of the opinion that the Trust will not be classified as an association (or
publicly traded partnership) taxable as a corporation for federal income tax
purposes and that the Notes will be characterized as debt for federal income tax
purposes.
___________ , Pennsylvania tax counsel ("Pennsylvania Tax Counsel") is of
the opinion that the same characterizations of the Notes and the Trust would
apply for Pennsylvania state income tax purposes as for federal income tax
purposes.
The Seller and the Master Servicer will agree, and the Certificateholders
will agree by their purchase of Certificates, to treat the Trust as a
partnership for purposes of federal, state and local income and franchise tax
purposes, with the assets of the partnership being the assets held by the Trust,
the partners of the partnership being the Certificateholders (including the
Seller in its capacity as recipient of distributions from the Reserve Account),
and the Notes being debt of the partnership.
If the Trust were held to be an association (or publicly traded
partnership) taxable as a corporation for federal income tax purposes, rather
than a partnership, the Trust would be subject to a corporate level income tax.
Any such corporate income tax could materially reduce or eliminate cash that
would otherwise be distributable with respect to the Notes and the Certificates
(and Certificateholders could be liable for any such tax that is unpaid by the
Trust).
We recommend that investors carefully review the information under the
caption "Income Tax Consequences" in the Prospectus.
ERISA CONSIDERATIONS
Section 406 of ERISA, and/or Section 4975 of the Internal Revenue Code of
1986, as amended (the "Code"), prohibit a pension, profit-sharing or other
employee benefit plan, as well as individual retirement accounts, and certain
types of Keogh Plans, and other plans subject to Section 4975 of the Code (each
a "Benefit Plan") from engaging in certain transactions with persons that are
"parties in interest" under ERISA or "disqualified persons" under the Code with
respect to such Benefit Plan. A violation of these "prohibited transaction"
rules may result in an excise tax or other penalties and liabilities under ERISA
and the Code for such persons. Title I of ERISA also requires that fiduciaries
of a Benefit Plan subject to ERISA make investments that are prudent,
diversified (except if prudent not to do so) and in accordance with governing
plan documents.
Certain transactions involving the purchase, holding or transfer of the
Notes might be deemed to constitute prohibited transactions under ERISA and the
Code if assets of the Trust were deemed to be assets of a Benefit Plan. Under a
regulation issued by the United States Department of Labor (the "Plan Assets
Regulation"), the assets of the Trust would be treated as plan assets of a
Benefit Plan for the purposes of ERISA and the Code only if the Benefit Plan
acquires an "Equity Interest" in the Trust and none of the exceptions contained
in the Plan Assets Regulation is applicable. An equity interest is defined under
the Plan Assets Regulation as an interest other than an instrument which is
treated as indebtedness under applicable local law and which has no substantial
equity features. The Notes should be treated as indebtedness without substantial
equity features for purposes of the Plan Assets Regulation. However, without
regard to whether the Notes are treated as an Equity Interest for such purposes,
the acquisition or holding of Notes by or on behalf of a Benefit Plan could be
considered to give rise to a prohibited transaction if the Trust, the Trustee or
the Indenture Trustee, the Seller, the owner of collateral, or any of their
respective affiliates is or becomes a party in interest or a disqualified person
with respect to such Benefit Plan. In such case, certain exemptions from the
prohibited transaction rules could be applicable depending on the type and
circumstances of the plan fiduciary making the decision to acquire a Note.
Included among these exemptions are:
O Prohibited Transaction Class Exemption ("PTCE") 90-1, regarding
investments by insurance company pooled separate accounts;
O PTCE 95-60, regarding investments by insurance company general
accounts;
O PTCE 91-38, regarding investments by bank collective investment funds;
O PTCE 96-23, regarding transactions effected by in-house asset
managers; and
O PTCE 84-14, regarding transactions effected by "qualified professional
asset managers."
Employee benefit plans that are governmental plans (as defined in Section
3(32) of ERISA) and certain church plans (as defined in Section 3(33) of ERISA)
are not subject to ERISA requirements.
A plan fiduciary considering the purchase of Notes should consult its tax
and/or legal advisors regarding whether the assets of the Trust would be
considered plan assets, the possibility of exemptive relief from the prohibited
transaction rules and other issues and their potential consequences.
No Certificates may be purchased for, or on behalf of, any Benefit Plan or
any entity whose underlying assets are deemed to be plan assets of such Benefit
Plan.
The purchaser of a Certificate is deemed to have represented that it is not
acquiring the Certificates directly or indirectly for, or on behalf of, a
Benefit Plan or any entity whose underlying assets are deemed to be plan assets
of such Benefit Plan. The purchaser of Notes is deemed to have represented that
either: (A) the purchaser is not acquiring the Notes directly or indirectly for,
or on behalf of, a Benefit Plan or any entity whose underlying assets are deemed
to be plan assets of such Benefit Plan, or (B) the acquisition and holding of
the Notes by the purchaser qualifies for prohibited transaction exemptive relief
under PTCE 95-60, PTCE 96-23, PTCE 91-38, PTCE 90-1, PTCE 84-14 or some other
applicable exemption.
UNDERWRITING
Subject to the terms and conditions set forth in the respective
Underwriting Agreements relating to the Notes and the Certificates (the
"Underwriting Agreements"), the Seller has agreed to cause the Trust to sell to
the underwriters named below (the "Underwriters"), and each of the Underwriters
has severally agreed to purchase, the principal amount of Class ____ Notes,
Class ____ Notes and Certificates set forth opposite its name:
Principal Principal
Amount of Amount of Principal
Class ___ Class ___ Amount of
UNDERWRITER NOTES NOTES ERTIFICATES TOTAL
Total
In the respective Underwriting Agreements, the Underwriters have agreed,
subject to the terms and conditions set forth therein, to purchase (x) all the
Notes offered hereby if any of the Notes are purchased and (y) all the
Certificates offered hereby if any of the Certificates are purchased. The Seller
has been advised by the Underwriters that the Underwriters propose initially to
offer the Securities to the public at the respective public offering prices set
forth on the cover page of this prospectus supplement, and to certain dealers at
such prices less a concession not in excess of _____% per Class ___ Note, _____%
per Class ___ Note and _____% per Certificate. The Underwriters may allow and
such dealers may reallow to other dealers a discount not in excess of _____% per
Class ___ Note, _____% per Class ___ Note and _____% per Certificate. After the
initial public offering, such public offering prices, concessions and
reallowances may be changed.
The representative, on behalf of the underwriters, may engage in
over-allotment, stabilizing transactions, syndicate covering transactions and
penalty bides in accordance with Regulation M under the Securities Exchange Act
of 1934, as amended (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 specified maximum. Syndicate covering
transactions involve purchases of the Securities in the open market after the
distribution has been completed in order to cover syndicate short positions.
Penalty bids permit the representative to reclaim a selling concession from a
syndicate member when the Securities 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 Securities to be higher than it would
otherwise be in the absence of such transactions. These transactions, if
commenced, may be discontinued at any time.
The Seller does not intend to apply for listing of the Securities on a
national securities exchange, but has been advised by ____________________ that
it intends to, and by ___________ that it may, make a market in the Securities.
The Underwriters are not obligated, however, to make a market in the Securities
and may discontinue market-making at any time without notice. No assurance can
be given as to the liquidity of the trading market for the Securities.
The Underwriting Agreements provide that the Seller will indemnify the
Underwriters against certain liabilities, including liabilities under applicable
securities laws, or contribute to payments the Underwriters may be required to
make in respect thereof.
The Trust may, from time to time, invest the funds in the Trust Accounts in
Eligible Investments acquired from the Underwriters.
The closing of the sale of the Certificates is conditioned on the
closing of the sale of the Notes and the closing of the sale of the Notes is
conditioned on the closing of the sale of the Certificates.
LEGAL MATTERS
Certain legal matters with respect to the Securities will be passed upon
for the Seller by Carl Krasik, Esq., Associate General Counsel of Mellon Bank
Corporation (the "Corporation"). Mr. Krasik is also a shareholder of the
Corporation and one of its subsidiaries and holds options to purchase additional
shares of the Corporation's Common Stock. Certain legal matters with respect to
the Securities will be passed upon for the Underwriters by Stroock & Stroock &
Lavan LLP, New York, New York. Stroock & Stroock & Lavan LLP also will pass upon
the material federal income tax consequences related to the Securities.
INDEX OF PRINCIPAL TERMS
Set forth below is a list of the defined terms used in this Prospectus
Supplement and the pages on which the definitions of such terms may be found
herein.
PAGE
52-week Treasury Bill Rate.............................................S-65
91-day Treasury Bill Rate..............................................S-44
Additional Funding.....................................................S-49
Additional Student Loans...............................................S-51
Administration Agreement...............................................S-47
Administration Fee.....................................................S-67
Auction Purchase Amount................................................S-66
Available Funds........................................................S-56
Available Loan Purchase Funds..........................................S-32
Bankruptcy Code........................................................S-35
Benefit Plan...........................................................S-67
Capped Amount..........................................................S-55
Cede...................................................................S-39
Certificate Balance....................................................S-59
Certificate Rate.......................................................S-43
Certificateholders.....................................................S-31
Certificateholders' Distribution Amount................................S-59
Certificateholders' Interest Carryover Shortfall.......................S-60
Certificateholders' Interest Distribution Amount.......................S-60
Certificateholders' Interest Index Carryover...........................S-43
Certificateholders' Principal Distribution Amount......................S-60
Certificates...........................................................S-13
Class ___ Notes........................................................S-14, 15
Code...................................................................S-67
Collection Account.....................................................S-14
Collection Period......................................................S-40
Deferral...............................................................S-25
Deferral Period........................................................S-18
Department.............................................................S-13
Depository.............................................................S-39
Determination Date.....................................................S-56
Distribution Dates.....................................................S-3
DOE Data Book..........................................................S-37
DTC....................................................................S-39
Eligible Deposit Account...............................................S-48
Eligible Institution...................................................S-48
Eligible Investments...................................................S-48
Eligible Lender Trustee.................................................S-13
Equity Interest.........................................................S-68
ERISA...................................................................S-5
Escrow Account..........................................................S-14
Event of Default........................................................S-42
Excess Master Servicing Fee.............................................S-55
Exchange Act............................................................S-69
Expected Interest Collections...........................................S-41
FDIC....................................................................S-49
Federal Assistance......................................................S-14
Federal Consolidation Loan..............................................S-31
Federal Consolidation Loan Rebate.......................................S-57
Federal Guarantors......................................................S-14
Federal Origination Fee.................................................S-57
Federal Tax Counsel.....................................................S-67
Final Maturity Dates....................................................S-4
Forbearance.............................................................S-25
Forbearance Periods.....................................................S-18
Formula Rate............................................................S-40
Funding Period..........................................................S-51
Grace...................................................................S-25
Grace Period............................................................S-32
Guarantee Agreement.....................................................S-14
Guarantee Payments......................................................S-14
Guarantors..............................................................S-3
Higher Education Act....................................................S-14
Indenture...............................................................S-39
Indenture Trustee.......................................................S-3
Index Maturity..........................................................S-46
Initial Financed Student Loans..........................................S-14
Initial Pool Balance....................................................S-33
Initial Pre-Funded Amount...............................................S-49
In-School...............................................................S-25
Interest Period.........................................................S-40
Interest Subsidy Payments...............................................S-33
Investment Earnings.....................................................S-48
Investor Index..........................................................S-40
LIBOR...................................................................S-46
LIBOR Determination Date................................................S-46
LIBOR Indexed Securities................................................S-3
Liquidated Student Loans................................................S-57
Liquidation Proceeds....................................................S-57
Loan Purchase Termination Date..........................................S-33
Lock-In Period..........................................................S-44
Margin..................................................................S-41
Master Servicer.........................................................S-15
Master Servicer Default.................................................S-51
Master Servicing Fee....................................................S-55
Master Servicing Fee Percentage.........................................S-16
Minimum Purchase Amount.................................................S-66
Monthly Servicing Payment Date..........................................S-16
Net Government Receivable...............................................S-60
Note Collateralization Amount...........................................S-60
Note Interest Rate......................................................S-40
Noteholders.............................................................S-31
Noteholders' Distribution Amount........................................S-61
Noteholders' Interest Carryover Shortfall...............................S-61
Noteholders' Interest Distribution Amount...............................S-61
Noteholders' Interest Index Carryover...................................S-41
Noteholders' Principal Distribution Amount..............................S-61
Noteholders' Priority Principal Distribution Amount.....................S-61
Notes...................................................................S-15
Obligors................................................................S-62
Other Student Loans.....................................................S-52
Other Subsequent Student Loans..........................................S-52
Participants............................................................S-39
Pennsylvania Tax Counsel................................................S-67
Plan Assets Regulation..................................................S-68
Pool Balance............................................................S-61
Pre-Funded Amount.......................................................S-13
Pre-Funding Account.....................................................S-13
Principal Distribution Amount...........................................S-62
Programs................................................................S-16
Prospectus..............................................................S-7
Prospectus Supplement...................................................S-7
PTCE....................................................................S-68
Purchase Price..........................................................S-47
Realized Losses.........................................................S-65
Reference Bank..........................................................S-46
Repayment...............................................................S-25
Reserve Account.........................................................S-5
Reserve Account Initial Deposit.........................................S-13
Sale and Servicing Agreement............................................S-13
Seller..................................................................S-13
Seller Insolvency Event.................................................S-32
Serial Loans............................................................S-52
Special Allowance Payments..............................................S-33
Specified Collateral Balance............................................S-62
Specified Reserve Account Balance.......................................S-62
Statistical Cutoff Date.................................................S-14
Student Loan Rate.......................................................S-41
Subsequent Cutoff Date..................................................S-50
Sub-Servicer............................................................S-15
Sub-Servicer Default....................................................S-52
Sub-Servicers...........................................................S-15
Telerate Page 3750......................................................S-46
Three-Month LIBOR.......................................................S-46
Transfer Agreement......................................................S-50
Transfer Date...........................................................S-50
Treasury Bill Indexed Securities........................................S-40
Trust...................................................................S-13
Trust Accounts..........................................................S-48
Trust Agreement.........................................................S-13
Underlying Student Loans................................................S-31
Underwriters............................................................S-69
Underwriting Agreements.................................................S-69
Unsubsidized Stafford Loan..............................................S-33
[Alternate Page]
Prospectus supplement to prospectus dated _________, _____
$--------------
MELLON STUDENT LOAN TRUST _____-__
MELLON BANK, N.A.
Seller
FLOATING RATE ASSET-BACKED NOTES
FLOATING RATE ASSET-BACKED CERTIFICATES
--------------
<TABLE>
<CAPTION>
<S> <C>
SECURITIES OFFERED
o classes of notes and certificates You should carefully consider
listed in the table below the risk factors beginning on
page S-_ of this prospectus
ASSETS supplement and page 6 of the
O student loans guaranteed by federal guarantors prospectus.
CREDIT ENHANCEMENT The securities are obligations
O notes only of the trust and are payable
O subordination of certificates solely from the student loans and
O reserve account other assets of the trust. The
O certificates securities are not guaranteed
O reserve account by any person.
The securities are not
bank deposits.
</TABLE>
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus supplement or the prospectus to which it relates is truthful or
complete. Any representation to the contrary is a criminal offense.
<TABLE>
<CAPTION>
ORIGINAL FINAL
PRINCIPAL INTEREST RATE MATURITY PRICE TO UNDERWRITING PROCEEDS TO THE
AMOUNT (PER ANNUM) DATE PUBLIC (1) DISCOUNT SELLER(1)(2)
<S> <C> <C> <C> <C> <C> <C>
Class ___ Note $ % % %
Class ___ Notes $ % % %
Certificates $ % % %
Total.......... $ $ $ $
(1) Plus accrued interest, if any, from ___________.
(2) Before deducting expenses, estimated to be $_______________.
</TABLE>
Delivery of the securities will be made on or about ____________, 20__, against
payment in immediately available funds.
This prospectus supplement and the prospectus to which it relates are to be used
by Mellon Financial Markets, LLC, an affiliate of the Seller, in connection with
offers and sales related to market-making transactions in the securities in
which it acts as principal and/or agent. Sales will be made at prices related to
the prevailing prices at the time of sale.
[NAMES OF UNDERWRITERS]
Prospectus supplement dated _____________, _________
[ALTERNATE PAGE]
PLAN OF DISTRIBUTION
This Prospectus Supplement and the Prospectus to which it relates are to be
used by Mellon Financial Markets, LLC an affiliate of the Seller ("MFM"), in
connection with offers and sales related to market-making transactions in the
Securities in which MFM acts as principal. MFM may also act as agent in such
transactions. Sales will be made at prices related to prevailing prices at the
time of sale. Any obligations of MFM are the sole obligations of MFM and do not
create any obligations on the part of any affiliate of MFM.
<PAGE>
Prospectus
[SUBJECT TO COMPLETION
DATED MARCH 13, 2000]
MELLON STUDENT LOAN TRUSTS
Issuer
MELLON BANK, N.A.
Seller and Master Servicer
Asset Backed Notes
Asset Backed Certificates
<TABLE>
<CAPTION>
SECURITIES OFFERED
<S> <C>
o asset backed notes and asset backed You should carefully consider the risk
certificates factors beginning on page 6.
o rated in one of four highest rating
categories by at least one nationally The securities are not bank deposits
recognized rating organization and are not insured by the Federal
o not listed on any trading exchange Deposit Insurance Corporation.
o obligations only of the related trust
This prospectus must be accompanied
ASSETS by a prospectus supplement for the
o student loans particular series.
o may include one or more forms of
enhancement
</TABLE>
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS ACCURATE OR COMPLETE. MAKING ANY CONTRARY REPRESENTATION IS A
CRIMINAL OFFENSE.
The seller may offer securities through underwriters or by other methods
described under the caption "Plan of Distribution."
The date of this Prospectus is ______, ____
TABLE OF CONTENTS
RISK FACTORS.................................................................6
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.............................12
FORMATION OF THE TRUSTS.....................................................13
The Trusts .................................................................13
Eligible Lender Trustee.....................................................13
USE OF PROCEEDS.............................................................14
THE SELLER, THE ADMINISTRATOR, THE MASTER SERVICER AND THE SUB-
SERVICERS...................................................................14
The Seller, Administrator and Master Servicer...............................14
General.....................................................................14
Services and Fees of Administrator..........................................14
Master Servicer.............................................................15
The Sub-Servicers...........................................................15
THE STUDENT LOAN POOLS......................................................15
General.....................................................................15
Claims and Recovery Rates...................................................17
THE STUDENT LOAN FINANCING BUSINESS.........................................17
Programs Offered by the Seller..............................................17
Description of Student Federal Loans Under the Programs.....................18
General.....................................................................18
Stafford Loan Program.......................................................18
(1) Eligibility Requirements...............................................19
(2) Loan Limits.............................................................20
(3) Interest...............................................................21
(4) Repayment...............................................................22
(5) Grace Periods, Deferral Periods, Forbearance Periods....................22
(6) Interest Subsidy Payments...............................................23
(7) Special Allowance Payments.............................................23
SLS Loan Program............................................................24
PLUS Loan Program...........................................................26
Student Consolidation Loan Program..........................................27
Undergraduate Student Loans.................................................29
Graduate Student Loans......................................................30
Insurance of Student Loans; Guarantors of Student Loans.....................31
Guarantors..................................................................31
Federal Insurance and Reinsurance of Guarantors.............................32
Origination Process.........................................................35
Servicing and Collections Process...........................................36
Incentive Programs..........................................................36
WEIGHTED AVERAGE LIVES OF THE SECURITIES....................................37
POOL FACTORS AND TRADING INFORMATION........................................39
DESCRIPTION OF THE NOTES....................................................40
General.....................................................................40
Principal of and Interest on the Notes......................................40
The Indenture...............................................................41
Modification of Indenture...................................................41
Events of Default; Rights upon Event of Default.............................43
Certain Covenants...........................................................46
Annual Compliance Statement.................................................48
Indenture Trustee's Annual Report...........................................48
Satisfaction and Discharge of Indenture.....................................48
The Indenture Trustee.......................................................48
DESCRIPTION OF THE CERTIFICATES.............................................48
General.....................................................................48
Principal and Interest in Respect of the Certificates.......................49
CERTAIN INFORMATION REGARDING THE SECURITIES................................50
Fixed Rate Securities.......................................................50
Floating Rate Securities....................................................50
Book-Entry Registration.....................................................51
Definitive Securities.......................................................56
List of Securityholders.....................................................57
Reports to Securityholders..................................................57
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS........................58
General.....................................................................58
Sale of Student Loans; Representations and Warranties.......................58
Additional Fundings.........................................................60
Accounts....................................................................60
Servicing Procedures........................................................61
Payments on Student Loans...................................................62
Master Servicer Covenants...................................................63
Master Servicing Compensation...............................................64
Distributions...............................................................65
Credit and Cash Flow Enhancement............................................65
General.....................................................................65
Reserve Account.............................................................66
Statements to Indenture Trustee and Trust...................................66
Evidence as to Compliance...................................................68
Certain Matters Regarding the Master Servicer and the Sub-
Servicers........................................................68
Master Servicer Default; Sub-Servicer Default;
Administrator Default............................................70
Rights Upon Master Servicer Default; Sub-Servicer Default
and Administrator Default........................................71
Waiver of Past Defaults.....................................................72
Insolvency Event............................................................72
Amendment...................................................................73
Payment of Notes............................................................74
Seller Liability............................................................74
Termination.................................................................74
Administrator...............................................................75
CERTAIN LEGAL ASPECTS OF THE STUDENT LOANS..................................76
Transfer of Student Loans...................................................76
Certain Matters Relating to Receivership....................................78
Consumer Protection Laws....................................................78
Loan Origination and Servicing Procedures Applicable to
Student Loans....................................................79
Failure to Comply with Third-Party Servicer Regulations
May Adversely Affect Loan Servicing..............................80
Student Loans Generally Not Subject to Discharge in
Bankruptcy.......................................................80
Recent Developments.........................................................81
Emergency Student Loan Consolidation Act of 1997............................81
FY 1998 Budget..............................................................81
1998 Amendment..............................................................81
1998 Reauthorization Bill...................................................82
FEDERAL INCOME TAX CONSEQUENCES.............................................83
FEDERAL TAX CONSEQUENCES FOR TRUSTS FOR WHICH A PARTNERSHIP
ELECTION IS MADE............................................................84
Tax Characterization of the Trust...........................................84
Tax Consequences to Holders of the Notes....................................84
Treatment of the Notes as Indebtedness......................................84
Original Issue Discount.....................................................85
Interest Income on the Notes................................................85
Sale or Other Disposition...................................................86
Foreign Holders.............................................................86
Backup Withholding..........................................................88
Recent Legislation..........................................................88
Tax Consequences to Holders of the Certificates.............................88
Classification as a Partnership.............................................88
Treatment of the Trust as a Partnership.....................................89
Partnership Taxation........................................................89
Computation of Income.......................................................90
Determining the Basis of Trust Assets.......................................91
Discount and Premium........................................................91
Disposition of Certificates.................................................92
Allocations Between Transferors and Transferees.............................92
Section 754 Election........................................................92
Administrative Matters......................................................93
Tax Consequences to Foreign Certificateholders..............................94
Backup Withholding..........................................................95
FEDERAL TAX CONSEQUENCES FOR TRUSTS IN WHICH ALL RESIDUAL
INTERESTS ARE RETAINED BY THE SELLER OR AN AFFILIATE OF THE SELLER..........95
Tax Characterization of the Trust...........................................95
Tax Consequences to Holders of the Notes....................................95
Treatment of the Notes as Indebtedness......................................95
Possible Alternative Treatments of the Notes................................95
STATE AND LOCAL TAX CONSEQUENCES............................................96
ERISA CONSIDERATIONS........................................................96
The Notes .................................................................97
The Certificates............................................................98
METHOD OF DISTRIBUTION......................................................98
LEGAL MATTERS...............................................................99
INDEX OF PRINCIPAL TERMS...................................................100
RISK FACTORS
We recommend that you consider the following factors and the additional
factors described under "Risk Factors" in the related prospectus supplement
before purchasing the securities.
CREDIT ENHANCEMENT
MAY NOT PROTECT YOU
FROM ALL LOSSES Although every trust will include some form
of credit enhancement, that credit enhancement
may not cover every class of securities issued
by a trust. In addition, every form of credit
enhancement will have certain limitations on,
and exclusions from coverage. As a result,
there is always a risk that you may not
recover the full amount of your investment.
GUARANTEES OF STUDENT
LOANS MAY NOT PREVENT
LOSSES The student loans in a trust will be
guaranteed by a federal guarantor. However,
those guarantees may not protect you against
all losses for several reasons, including:
o federal guarantees are generally limited to
98% of the principal amount of the student
loan; and
o if Mellon Bank, N.A. fails to follow
prescribed origination procedures or if the
master servicer or any sub-servicers fail to
follow required servicing procedures, the
applicable guarantors may refuse to make
guarantee payments to the applicable trust
and the Department of Education may refuse
to make interest subsidy or special
allowance payments to the trust.
THE FINANCIAL CONDITION OF
FEDERAL GUARANTORS MAY BE
ADVERSELY AFFECTED BY SEVERAL
FACTORS The financial condition of the federal
guarantors may be adversely affected by a
number of factors including:
o the amount of claims made against that
federal guarantor as a result of borrower
defaults;
o the amount of claims reimbursed to that
federal guarantor from the Department of
Education;
o changes in legislation that may reduce
expenditures from the Department of
Education that support federal guarantors or
that may require federal guarantors to pay
more of their reserves to the Department of
Education;
o loss of reinsurance benefits due to the
master servicer's or a sub-servicer's
failure to follow required servicing
procedures; and
o expansion of the federal direct student loan
program.
If the financial status of the federal
guarantors deteriorates, the federal
guarantors may fail to make guarantee payments
to the trustee. In such event, you may suffer
delays in the payment of principal and
interest on your securities.
REINSURANCE OF FEDERAL
GUARANTORS MAY NOT
PREVENT DELAYS OR LOSSES If a federal guarantor fails to make
guarantee payments, the applicable trust may
submit claims directly to the Department of
Education. However, the Department of
Education may determine that the federal
guarantor is able to meet its obligations, and
the Department of Education will not make
those payments. Even if the Department of
Education determines to make those payments,
there may be delays in making the necessary
determination. Loss or delay of any such
guarantee payments, interest subsidy payments
or special allowance payments could adversely
affect the related trust's ability to pay
timely interest and principal. In such event,
you may suffer a loss on your investment.
THE TRUST IS DEPENDENT UPON
THE PERFORMANCE BY VARIOUS
PARTIES OF THEIR OBLIGATIONS The trust is relying, and the performance of
the securities depends, on the performance of
the seller, the master servicer and the
sub-servicers of their respective obligations.
Any failure to perform could have material
adverse consequences as follows:
o FAILURE TO HONOR PURCHASE OBLIGATIONS MAY
CAUSE LOSSES. Mellon Bank, N.A., as seller
and master servicer, or the applicable
sub-servicer, will be obligated to purchase
student loans from a trust with respect to
which it materially breaches
representations, warranties or covenants.
You can not be assured, however, that Mellon
Bank, N.A., or the applicable sub-servicer,
will have the financial resources to
purchase such student loans. The failure to
so purchase a student loan would not
constitute an event of default under the
related indenture or permit the exercise of
remedies thereunder. However, the breach of
such representations, warranties or
covenants may cause you to suffer a loss on
your investment.
o FAILURE TO COMPLY WITH THIRD-PARTY SERVICER
REGULATIONS MAY ADVERSELY AFFECT LOAN
SERVICING. The Department of Education
regulates each servicer of federal student
loans. Under certain of these regulations, a
third-party servicer, such as one of the
sub-servicers, is jointly and severally
liable with its client lenders for
liabilities to the Department of Education
arising from the sub-servicer's violation of
applicable requirements. In addition, if a
sub-servicer fails to meet standards of
financial responsibility or administrative
capability included in the regulations, or
violates other requirements, the Department
of Education may fine the sub-servicer
and/or limit, suspend, or terminate that
sub-servicer's eligibility to contract to
service federal student loans. If a sub-
servicer were so fined or held liable, or
its eligibility were limited, suspended, or
terminated, its ability to properly service
the federal loans and to satisfy its
obligation to purchase federal loans with
respect to which it breaches its
representations, warranties or covenants
could be adversely affected. Moreover, if
the Department of Education terminates a
sub-servicer's eligibility, a servicing
transfer will take place and there will be
delays in collections and temporary
disruptions in servicing. Any servicing
transfer will at least temporarily adversely
affect payments to you.
o THE TRUST'S INTEREST IN ITS STUDENT LOANS
COULD BE DEFEATED BY ACTIONS OF THE
SUB-SERVICERS AS CUSTODIANS. The applicable
sub-servicer, as custodian on behalf of each
trust, will have custody of the promissory
notes evidencing the student loans it
services. Although the accounts of the
seller will be marked to indicate the sale
and although the seller will cause Uniform
Commercial Code financing statements to be
filed with the appropriate authorities, the
student loans will not be physically
segregated, stamped or otherwise marked to
indicate that such student loans have been
sold to the eligible lender trustee. If,
through inadvertence or otherwise, any of
the student loans were sold to another
party, or a security interest therein were
granted to another party that purchased or
took a security interest in any of such
student loans in the ordinary course of its
business and took possession of such student
loans, then the purchaser or secured party,
as applicable, would acquire an interest in
the student loans superior to the interest
of the eligible lender trustee, if the
purchaser or secured party, as applicable,
acquired such student loans without
knowledge of the eligible lender trustee's
interest.
o INSOLVENCY OF THE MASTER SERVICER, A
SUB-SERVICER OR THE ADMINISTRATOR MAY CAUSE
LOSSES. In the event of default by the
master servicer, a sub-servicer or the
administrator resulting solely from certain
events of insolvency or bankruptcy, a court,
conservator, receiver or liquidator may have
the power to prevent either the indenture
trustee or the noteholders from appointing a
successor master servicer, sub-servicer or
administrator, as the case may be, and
delays in collections in respect of the
student loans may occur. Any delay in the
collections of student loans, may delay or
reduce payments to you.
CHANGES IN LEGISLATION MAY
ADVERSELY AFFECT STUDENT
LOANS AND FEDERAL GUARANTORS You can not be certain that the Higher
Education Act or other relevant federal or
state laws, rules and regulations will not be
amended or modified in the future in a manner
that will adversely affect the federal student
loan programs described in this prospectus,
the student loans made thereunder or the
financial condition of the federal guarantors.
In addition, if the direct student loan
program expands, the sub-servicers may
experience increased costs due to reduced
economies of scale or other adverse effects on
their business to the extent the volume of
loans serviced by the sub-servicers is
reduced. Such cost increases could reduce the
ability of the sub-servicers to satisfy their
obligations to service the student loans or to
purchase student loans in the event of certain
breaches of its covenants.
CERTAIN POLICIES OF THE
DEPARTMENT OF EDUCATION
MAY REDUCE AMOUNTS
AVAILABLE FOR PAYMENTS
ON YOUR SECURITIES Each trust will be obligated to pay to the
Department of Education a monthly rebate at an
annualized rate of generally 1.05% of the
outstanding principal balance on each federal
consolidation loan which is a part of the
related trust. This rebate will be payable
prior to distributions made to you. In
addition, the trust must pay to the Department
of Education a 0.50% origination fee on the
initial principal balance of each student loan
which is originated on its behalf by the
eligible lender trustee after the applicable
closing date. This fee will be deducted by the
Department of Education out of interest
subsidy payments and special allowance
payments otherwise payable to the trust(s). In
such event the amount available to be
distributed to you will be reduced. Under
certain circumstances, the related trust is
obligated to pay any portion of the unpaid fee
from other assets of that trust prior to
making distributions to you. As a result, the
payment of the rebate fee and origination fee
to the Department of Education will affect the
rate and timing of payments to you. Moreover,
if the origination fee is deducted from
interest subsidy payments and special
allowance payments the interest rate payable
on your securities may be capped at a lower
rate. In such event, the value of your
investment may be impaired.
Due to a Department of Education policy
limiting the granting of new lender
identification numbers, all of the trusts
established by the seller to securitize
federal student loans may use a common
Department of Education lender identification
number. 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 federal guarantors
resulting from the eligible lender trustee's
activities in the federal student loan
program. If the Department of Education or a
federal guarantor determines such a liability
exists in connection with a trust using the
shared lender identification number, the
Department of Education or such federal
guarantor may collect that liability or offset
such liability from amounts due the eligible
lender trustee under the shared lender
identification number.
Because the trust agreements for the trusts
established by the seller, which share a
lender identification number, will require
each such trust to indemnify the other trusts
for a shortfall or an offset by the Department
of Education or a federal guarantor, if the
amount available for indemnification by one
trust to another trust is insufficient, you
may suffer a loss on your investment as a
result of the performance of another trust.
NOTEHOLDERS' RIGHT TO CONTROL
UPON CERTAIN DEFAULTS
MAY ADVERSELY AFFECT
CERTIFICATEHOLDERS In the event of a default by the master
servicer, a sub-servicer or the
administrator, the indenture trustee or the
noteholders, may remove the master servicer, a
sub-servicer or the administrator, as the case
may be, without the consent of the eligible
lender trustee or any of the
certificateholders. In addition, the
noteholders have the ability, with certain
specified exceptions, to waive defaults by the
master servicer, a sub-servicer or the
administrator, including defaults that could
materially adversely affect the
certificateholders.
CONSUMER PROTECTION LAWS
MAY AFFECT ENFORCEABILITY OF
STUDENT LOANS Numerous federal and state consumer
protection laws and related regulations impose
substantial requirements upon lenders and
servicers involved in consumer finance. Also,
some state laws impose finance charge ceilings
and other restrictions on certain consumer
transactions and require contract disclosures
in addition to those required under federal
law. These requirements impose specific
statutory liability that could affect an
assignee's ability to enforce consumer finance
contracts such as the student loans. In
addition, the remedies available to the
indenture trustee or the noteholders upon an
event of default under the indenture may not
be readily available or may be limited by
applicable state and federal laws.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Mellon Bank, N.A., as originator of each trust, has filed with the
Securities and Exchange Commission (the "Commission") a Registration Statement
(together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the securities offered pursuant to this prospectus. The
Registration Statement, contains information which is not contained in this
prospectus. Prospective investors may read the Registration Statement and make
copies of it at the public reference facilities maintained by the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549; and at the Commission's regional
offices at Seven World Trade Center, New York, New York 10048, and 500 West
Madison Street, 14th Floor, Chicago, Illinois 60661. Copies of the Registration
Statement may be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Commission maintains a Web site at http://www.sec.gov containing registration
statements and other information regarding registrants, including Mellon Bank,
N.A., that file electronically with the Commission.
All documents filed by Mellon Bank, N.A., as originator of any trust,
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), subsequent to the date of this prospectus
and prior to the termination of the offering of the securities shall be deemed
to be incorporated by reference in this prospectus. Any statement contained
herein or in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
prospectus to the extent that a statement contained herein or in any
subsequently filed document which also is to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this prospectus.
Mellon Bank, N.A., will provide without charge to each person, including
any beneficial owner of securities, to whom a copy of this prospectus is
delivered, on the written or oral request of any such person, a copy of any or
all of the documents incorporated herein or in any related prospectus supplement
by reference, except the exhibits to such documents (unless such exhibits are
specifically incorporated by reference in such documents). Requests for such
copies should be directed to Mellon Bank, N.A., at One Mellon Bank Center, 4th
Floor, Pittsburgh, Pennsylvania 15258 Attention: Asset Backed Finance. Telephone
requests for such copies should be directed to Mellon Bank, N.A. at (412)
236-6559.
FORMATION OF THE TRUSTS
THE TRUSTS
With respect to each series of asset-backed notes and/or asset-backed
certificates (collectively,"Securities"), the Seller will establish a separate
trust (each a "Trust") pursuant to the respective trust agreement (each a "Trust
Agreement"), for the transactions described herein and in the related Prospectus
Supplement. The property of each Trust will consist of
(a) a pool of undergraduate loans and/or graduate school student loans
(the "Student Loans"), legal title to which is held by the related
eligible lender trustee (the "Eligible Lender Trustee") on behalf of
each Trust,
(b) all funds collected or to be collected in respect thereof (including
any Guarantee Payments with respect thereto) on or after the
applicable date specified in the related Prospectus Supplement (the
"Cutoff Date"), and
(c) all moneys and investments on deposit in any Collection Account, any
Pre-Funding Account, any Escrow Account, any Negative Carry Account,
any Reserve Account and any other trust accounts or any other form of
credit or cash flow enhancement that may be obtained for the benefit
of holders of one or more classes of such Securities.
To the extent provided in the applicable Prospectus Supplement, the Notes
will be collateralized by the property of the related Trust. To facilitate
servicing and to minimize administrative burden and expense, the Sub-Servicers
will be appointed by the Master Servicer and the Eligible Lender Trustee as the
custodians of the promissory notes representing the Student Loans that each
services.
The principal offices of each Trust and the related Eligible Lender Trustee
will be specified in the applicable Prospectus Supplement.
ELIGIBLE LENDER TRUSTEE
The Eligible Lender Trustee for each Trust will be such entity as is
specified in the related Prospectus Supplement. The Eligible Lender Trustee on
behalf of the related Trust will acquire legal title to all the related Student
Loans acquired pursuant to the related Sale and Servicing Agreement and will
enter into a Guarantee Agreement or comparable arrangement, if applicable, with
each of the Guarantors with respect to the Student Loans. Each Eligible Lender
Trustee will qualify as an eligible lender and owner of all Student Loans for
all purposes under the Higher Education Act and the Guarantee Agreements.
Failure of the Student Loans to be owned by an eligible lender would result in
the loss of any Guarantee Payments from any Guarantor and any Federal Assistance
with respect to such Student Loans. See "The Student Loan Financing
Business--Description of Student Loans Under the Programs." An Eligible Lender
Trustee's liability in connection with the issuance and sale of the Notes and
the Certificates is limited solely to the express obligations of the Eligible
Lender Trustee as set forth in the related Trust Agreement and the related Sale
and Servicing Agreement. See "Description of the Transfer and Servicing
Agreements." The Seller plans to maintain normal commercial banking relations
with the Eligible Lender Trustee.
USE OF PROCEEDS
The net proceeds from the sale of Securities of a given series will be used
by the applicable Trust to purchase the related Student Loans on the Closing
Date from the Seller and to make the initial deposit into the Reserve Account,
Pre-Funding Account or Negative Carry Account, if any. The Seller will use such
net proceeds paid to it with respect to any such Trust for general corporate
purposes.
THE SELLER, THE ADMINISTRATOR, THE MASTER SERVICER
AND THE SUB-SERVICERS
THE SELLER, ADMINISTRATOR AND MASTER SERVICER
GENERAL. Mellon Bank, N.A., will act as seller (the "Seller") and as master
servicer (the "Master Servicer"), pursuant to the related Sale and Servicing
Agreement, and as administrator (the "Administrator") pursuant to the related
Administration Agreement.
As of March 31, 1999, Mellon Bank, N.A. had total assets of approximately
$_________ billion, total liabilities of approximately $__________ billion and
approximately $_________ billion in stockholder's equity. As of such date, the
Seller had an aggregate principal amount of student loans outstanding of
approximately $_____ billion, of which approximately $_____ billion aggregate
principal amount consists of Student Loans originated under various graduate
student loan programs. The principal executive offices of Mellon Bank, N.A. are
located at One Mellon Bank Center, Fourth Floor, Pittsburgh, Pennsylvania and
its telephone number is (412) 236-6554.
SERVICES AND FEES OF ADMINISTRATOR. Pursuant to the related Administration
Agreement, the Administrator will be responsible for preparing and filing claim
forms on behalf of the Eligible Lender Trustee for Interest Subsidy Payments and
Special Allowance Payments from the United States Department of Education (the
"Department") and is required to provide notices and reports and to perform
other administrative obligations required by the related Indenture, the Trust
Agreement and the Sale and Servicing Agreement. See "Description of the Transfer
and Servicing Agreements--Administrator."
MASTER SERVICER. Mellon Bank, N.A., in its capacity as Master Servicer will
be responsible for master servicing the Student Loans. The Master Servicer will
arrange for and oversee the performance each Sub-Servicer of its respective
servicing obligations with respect to the Student Loans. [Mellon to review] [In
consideration for performing its obligations under the applicable Sale and
Servicing Agreement, the Master Servicer will receive in the aggregate, subject
to certain limitations described herein, a monthly fee payable by each Trust as
specified in the related Prospectus Supplement and certain one-time fixed fees
for each Student Loan for which a forbearance period was granted or renewed or
for which a guarantee claim was filed, in each case subject to certain
adjustments, together with other administrative fees and similar charges. The
Master Servicer will in turn be solely responsible for all compensation due to
the Sub-Servicers for the performance of their respective obligations pursuant
to the related Sub-Servicing Agreements.] See "Description of Transfer and
Servicing Agreements--Servicing Compensation."
THE SUB-SERVICERS
The sub-servicers (the "Sub-Servicers") under each Sale and Servicing
Agreement will be the entity or entities specified in the related Prospectus
Supplement.
With respect to the Student Loans it is servicing for each Trust, each
Sub-Servicer will be required by the related sub-servicing agreement between
such Sub-Servicer and the Master Servicer (each a "Sub-Servicing Agreement") to
perform the services and duties customary to the servicing of Student Loans it
is required to service and to do so in the same manner as such Sub-Servicer has
serviced Student Loans on behalf of the Seller and/or the Master Servicer and
otherwise in compliance with all applicable standards and procedures. In
addition, each Sub-Servicer is required to maintain its eligibility as a
third-party servicer under the Higher Education Act. See "Description of the
Transfer and Servicing Agreements--Servicing Procedures." Each Sub-Servicer will
be paid directly by the Master Servicer for its services rendered under each
Sub-Servicing Agreement. The Trust will be an intended third-party beneficiary
of each Sub-Servicing Agreement and will have certain rights in the event of a
default by the related Sub-Servicer. See "Description of the Transfer and
Servicing Agreements--Master Servicer Default; Sub-Servicer Default;
Administrator Default."
THE STUDENT LOAN POOLS
GENERAL
The Student Loans to be sold by the Seller to the Eligible Lender Trustee
on behalf of a Trust pursuant to the related Sale and Servicing Agreement will
be selected from the Seller's portfolio of Student Loans by several criteria,
including that each Student Loan:
o was originated in the United States or its territories or possessions
under and in accordance with the Programs (including, a financial need
analysis);
o contains terms in accordance with those required by the Programs, the
Guarantee Agreements and other applicable requirements;
o no selection procedures believed by the Seller to be adverse to the
Securityholders of any series will be used in selecting the related
Student Loans; and
o satisfies the other criteria, if any, set forth in the related
Prospectus Supplement.
The Student Loans that comprise assets of each Trust will be held by the
related Eligible Lender Trustee, as trustee on behalf of such Trust. The
Eligible Lender Trustee will also enter into, on behalf of such Trust, Guarantee
Agreements with the Guarantors pursuant to which each of such Student Loans will
be guaranteed by one of such Guarantors. See "Formation of the Trusts--Eligible
Lender Trustee."
Information with respect to each pool of Student Loans for a given Trust
will be set forth in the related Prospectus Supplement, including, to the extent
appropriate, the composition, the distribution by loan type, loan payment
status, and states of borrowers' residence and the portion of such Student Loans
guaranteed by the specified Guarantors.
In the case of each series for which the related Trust may acquire Student
Loans originated by the Seller in accordance with the Programs after the related
Cutoff Date ("Additional Fundings"), information with respect to the Student
Loans eligible to be acquired by the related Trust will be set forth in the
related Prospectus Supplement as will information regarding the duration and
conditions of any related funding period (a "Funding Period") or revolving
period (a "Revolving Period"), the circumstances under which Additional Fundings
will be made during such period, and, if Additional Fundings may continue to be
made after such period, the circumstances under which such Additional Fundings
will be made.
Each of the Student Loans provides or will provide for the amortization of
the outstanding principal balance of such 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 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 Student Loan, the
amount received is applied first to interest accrued to the date of payment and
the balance is applied to reduce the unpaid principal balance. Accordingly, if a
borrower pays a regular installment before its scheduled due date, the portion
of the payment allocable to interest for the period since the preceding payment
was made will be less than it would have been had the payment been made as
scheduled, and the portion of the payment applied to reduce the unpaid principal
balance will be correspondingly greater. Conversely, if a borrower pays a
monthly installment after its scheduled due date, the portion of the payment
allocable to interest for the period since the preceding payment was made will
be greater than it would have been had the payment been made as scheduled, and
the portion of the payment applied to reduce the unpaid principal balance will
be correspondingly less. In either case, subject to any applicable Deferral
Periods or Forbearance Periods, 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 and any accrued but unpaid interest on such Student Loan.
CLAIMS AND RECOVERY RATES
Certain historical information concerning guarantee claims and recovery
rates of the Guarantors for the Student Loans held by the related Trust as of
the applicable Closing Date with respect to each series of Securities will be
set forth in each Prospectus Supplement. There can be no assurance that the
claim and recovery experience on any pool of Student Loans with respect to a
given Trust will be comparable to prior experience or to any such information.
THE STUDENT LOAN FINANCING BUSINESS
PROGRAMS OFFERED BY THE SELLER
The Student Loans to be sold by the Seller to an Eligible Lender Trustee on
behalf of a Trust pursuant to the related Sale and Servicing Agreement will be
selected from Student Loans originated or acquired by the Seller under various
loan programs (the "Programs"). The proceeds of the loans are used to finance a
portion of the costs of
(1) undergraduate education ("Undergraduate Loans") or
(2) graduate education ("Graduate Loans").
Undergraduate Loans and Graduate Loans will have been originated through
the Federal Family Education Loan Program ("FFELP"). As described herein and in
the related Prospectus Supplement, substantially all payments of principal and
interest with respect to loans originated through FFELP will be guaranteed
against default, death, bankruptcy or disability of the applicable borrower by
certain federal guarantors pursuant to a guarantee agreement to be entered into
between such federal guarantors specified in the related Prospectus Supplement
(each a "Guarantor" and collectively, the "Guarantors") and the applicable
Eligible Lender Trustee (such agreements, each as amended or supplemented from
time to time, the "Guarantee Agreements"). Each of the Guarantors is entitled,
subject to certain conditions, to be reimbursed by the Department of Education
(the "Department") for all or substantially all Guarantee Payments it makes
pursuant to a program of federal reinsurance under the Higher Education Act of
1965, as amended (such act, together with all rules and regulations promulgated
thereunder by the Department and/or the Guarantors, the "Higher Education Act").
In addition, each Eligible Lender Trustee, as a holder of the Student Loans on
behalf of the related Trust, is entitled to receive from the Department certain
Interest Subsidy Payments and Special Allowance Payments with respect to certain
of such Student Loans as described herein. See "--Description of Student Loans
Under the Programs" below.
DESCRIPTION OF STUDENT LOANS UNDER THE PROGRAMS
GENERAL. The following descriptions of Federal Stafford Loan Program (the
"Stafford Loan Program"), Federal Supplemental Loans for Students Program (the
"SLS Loan Program"), the Federal Parental Loans For Undergraduate Students Loan
Program (the "PLUS Loan Program"), and Federal Consolidation Loan Program (the
"Federal Consolidation Loan Program") (such programs being collectively referred
to herein as the "Programs") as authorized under the Higher Education Act are
qualified in their entirety by reference to the Higher Education Act. Since its
original enactment in 1965, the Higher Education Act has been amended and
reauthorized several times, including by the Higher Education Amendments of 1992
(the "1992 Amendments") and the Higher Education Amendments of 1998 (the "1998
Amendments"). The 1992 Amendments extended the principal provisions of the
Student Programs to September 30, 1998 (or, in the case of borrowers who have
received Student Loans prior to that date, September 30, 2002), and the 1998
Amendments further extended the principal provisions of the Programs through
June 30, 2003.
There can be no assurance that 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 in this Prospectus, the related
Prospectus Supplement and the student loans made thereunder, including the
Student Loans, or the Guarantors. In addition, future measures to reduce any
future federal budget deficit or for other purposes may adversely affect the
amount and nature of federal financial assistance available with respect to
these programs. In recent years, federal legislation has provided for the
recovery of certain funds held by guarantee agencies in order to achieve
reductions in federal spending. There can be no assurance that future federal
legislation or administrative actions will not adversely affect expenditures by
the Department or the financial condition of the Guarantors. For a discussion of
each Guarantor's claims-paying ability, see the related Prospectus Supplement.
STAFFORD LOAN PROGRAM. "Stafford Loans" are loans made by eligible lenders
in accordance with the Higher Education Act to Eligible Students, based on
financial need, to finance a portion of the costs of attending an eligible
institution of higher education or a vocational school. The Higher Education Act
limits the amount of Stafford Loans that may be made to a student in any given
academic year, the amount a student may have outstanding in the aggregate and
specifies certain payment terms, including the interest rates that may be
charged on Stafford Loans. Holders of Stafford Loans complying with these
limitations and the other conditions specified in the Higher Education Act will
be entitled to the benefits of:
1. a guarantee of the payment of principal and interest with respect
to such Stafford Loans by a guarantee agency, which guarantee will be
supported by federal reinsurance of all or most of such guaranteed amounts
as described herein;
2. federal interest subsidy payments equal to the interest payable on
such Stafford Loans prior to the time the borrower begins repayment of such
Stafford Loans and during any applicable Deferral Periods, together with
interest on any such amounts not paid by the Department when due ("Interest
Subsidy Payments"); and
3. federal special allowance payments, in varying amounts, during the
term of such Stafford Loans to ensure that interest payable on such
Stafford Loans approximates current market interest rates, together with
interest on any such amounts not paid by the Department when due ("Special
Allowance Payments"), (such federal reinsurance obligations, together with
those obligations referred to in clauses (2) and (3) above, being
collectively referred to herein as "Federal Assistance").
Certain Stafford Loans do not qualify for Interest Subsidy Payments but
otherwise qualify for all other forms of Federal Assistance ("Unsubsidized
Stafford Loans"). These loans are identical to Stafford Loans in all material
respects, except that interest accruing thereon during periods when the borrower
is in school or in a Deferral Period or Grace Period is either paid periodically
by the borrower during such periods or added periodically to the principal
balance of the loan by the holder thereof. A borrower qualifies for an
Unsubsidized Stafford Loan if, and to the extent that, the borrower's need for a
Stafford Loan, as calculated pursuant to the Higher Education Act, is more than
the maximum subsidized Stafford Loan authorized by statute.
(1) ELIGIBILITY REQUIREMENTS. Subject to the annual and aggregate limits on
the amount of Stafford Loans that a student can borrow discussed below, Stafford
Loans are available to Eligible Students in amounts not exceeding their unmet
need for financing as determined in accordance with the provisions of the Higher
Education Act. "Eligible Students" are students that are:
1. enrolled in, or admitted for enrollment in, an approved or accredited
undergraduate or graduate school;
2. enrolled in, or admitted for enrollment in, an acceptable degree
program;
3. attending at least half-time;
4. making satisfactory progress toward the completion of that program
according to the standards of the school;
5. U.S. citizens, U.S. nationals or eligible non-citizens;
6. not borrowers under Student Loans, including the requested loan, that
exceed the applicable annual and aggregate limits; and
7. not in default on any education loan or not required to refund an
educational grant.
Each Stafford Loan:
o must be unsecured;
o must provide for deferral of the obligation of the borrower to make
(x) interest payments for as long as the Department makes Interest
Subsidy Payments and (y) principal payments so long as the borrower
remains an Eligible Student and thereafter during any applicable Grace
Periods, Deferral Periods or Forbearance Periods; and
o must provide for repayment over a period not to exceed 10 years
(excluding any Deferral Periods or Forbearance Periods) from the date
repayment commences.
(2) LOAN LIMITS. In order to qualify for assistance under the Stafford Loan
Program, the Higher Education Act imposes an annual limit on the amount of
Stafford Loans and other Student Loans that may be made to any single student
and an aggregate limit on the amount of such Federal Loans such student may have
outstanding.
The following chart sets forth the current and historic loan limits.
<TABLE>
<CAPTION>
ALL STUDENTS (1) INDEPENDENT STUDENTS(1)
BASE AMOUNT ADDITIONAL
SUBSIDIZED AND UNSUBSIDIZED MAXIMUM
SUBSIDIZED SUBSIDIZED UNSUBSIDIZED ON ONLY ON OR AGGREGATE
ON OR AFTER ON OR AFTER OR AFTER AFTER TOTAL
1/1/87 1/1/87 10/1/93(2) 7/1/94(3) AMOUNT IN
<S> <C> <C> <C> <C> <C>
Undergraduate (per year)
1st year $ 2,500 $ 2,625 $ 2,625 $ 4,000 $ 6,625
2nd year $ 2,500 $ 2,625 $ 3,500 $ 4,000 $ 7,500
3rd year and above $ 2,500 $ 4,000 $ 5,500 $ 5,000 $10,500
Graduate (per year) $ 5,000 $ 7,500 $ 8,500 $10,000 $18,500
Aggregate Limit;
Undergraduate $12,500 $17,250 $23,000 $23,000 $46,000
Graduate (including
undergraduate) $25,000 $54,750 $65,500 $73,000 $138,500
- -----------------
(1) The loan limits are inclusive of both Stafford Loans and Student Loans.
(2) These amounts represent the combined maximum loan amount per year for
Stafford Loans and unsubsidized Stafford Loans. Accordingly, the maximum
amount that a student may borrow under an Unsubsidized Stafford Loan is the
difference between the combined maximum loan amount and the amount the
student received in the form of a Stafford Loan.
(3) Independent undergraduate students, graduate students or professional
students may borrow these additional amounts. In addition, dependent
undergraduate students may also receive these additional loan amounts if
the parents of such students are unable to provide the family contribution
amount and it is unlikely that the student's parents will qualify for a
PLUS Loan.
</TABLE>
The annual loan limits are reduced in some instances where the student is
enrolled in a program that is less than one academic year or has less than a
full academic year remaining in his or her program. The Department has
discretion to raise these limits to accommodate highly specialized or
exceptionally expensive course of study.
(3) INTEREST. The borrower's interest rate on a Stafford Loan may be fixed
or variable. Stafford Loan interest rates are summarized in the chart below.
<TABLE>
<CAPTION>
TRIGGER DATE(1) BORROWER RATE(2) MAXIMUM RATE INTEREST RATE MARGIN
<S> <C> <C> <C>
Prior to 01/01/81 7% 7% N/A
01/01/81-09/12/83 9% 9% N/A
09/13/83-06/30/88 8% 8% N/A
07/01/88-09/30/92 8% for 48 months; thereafter, 8% for 48 months, 3.25%
91-Day Treasury + Interest then 10%
Rate Margin
10/01/92-06/30/94 91-Day Treasury + Interest 9% 3.10%
Rate Margin
07/01/94-06/30/95 91-Day Treasury + Interest 8.25% 3.10%
Rate Margin
07/01/95-06/30/98 91-Day Treasury + Interest 8.25% 2.50% (In-School, Grace or
Rate Margin Deferment); 3.10% (in repayment)
On or after 07/01/98 91-Day Treasury + Interest 8.25% 1.70% (In-School, Grace or
Rate Margin Deferment); 2.30% (in repayment)
- ---------------------
(1) The Trigger Date for Stafford Loans made before October 1, 1992 is the
first day of enrollment period for which a borrower's first Stafford Loan
in made and for Stafford Loans made on October 1, 1992 and after the
Trigger Date is the date of the disbursement of a borrower's first Stafford
Loan.
(2) The rate for variable rate Stafford Loans applicable for any 12-month
period beginning on July 1 and ending on June 30, is determined on the
preceding June 1 and is equal to the lesser of (a) the applicable Maximum
Rate or (b) the sum of (i) the bond equivalent rate of 91-day Treasury
Bills auctioned at the final auction held prior to such June 1 and (ii) the
applicable Interest Rate Margin.
</TABLE>
The 1992 Amendments provide that, for fixed rate loans made on or after
July 23, 1992 and for certain loans made to new borrowers on or after July 1,
1988, the lender must have converted by January 1, 1995 the interest rate on
such loans to an annual interest rate adjusted each July 1 equal to (a) for
certain loans made between July 1, 1988 and July 23, 1992, the 91-day Treasury
Bill rate at the final auction prior to the preceding June 1 plus 3.25%, (b) for
loans made on or after July 23, 1992 and prior to July 1, 1998, the 91-day
Treasury Bill rate at the final auction prior to the preceding June 1 plus
3.10%, and (c) for loans made on or after July 1, 1998, the 91-day Treasury Bill
rate at the final auction prior to the preceding June 1 plus 2.2%
(during-school, grace or deferment) or 2.8% (in repayment) in each case capped
at the applicable interest rate for such loan existing prior to the conversion.
The variable interest rate does not apply to loans made prior to July 23, 1992
during the first 48 months of repayment.
Interest is payable on each Stafford Loan monthly in arrears until the
principal amount thereof is paid in full. However, prior to the date the
borrower begins repaying the principal of such Stafford Loan and during any
applicable Deferral Period, the borrower has no obligation to make interest
payments. Instead, the Department makes quarterly Interest Subsidy Payments to
the holder of the Subsidized Stafford Loans on behalf of the borrower during
such periods, in amounts equal to the accrued and unpaid interest for the
previous quarter with respect to such Stafford Loan. During a Forbearance
Period, the Department will not make any Interest Subsidy Payments; instead, at
the borrower's option, interest on each Stafford Loan may be paid currently or
capitalized and added to the outstanding principal balance of such Stafford Loan
at the end of such Forbearance Period. See "--(6) Interest Subsidy Payments"
below.
"91-day Treasury Bill Rate" means, on any date of determination, the
weighted average per annum discount rate (expressed on a bond equivalent basis
and applied on a daily basis) for 91-day Treasury Bills at the most recent
91-day Treasury Bills auction prior to such date as published by the Board of
Governors of the Federal Reserve System or as reported by the U.S. Treasury
Department.
(4) REPAYMENT. No principal and/or interest payments with respect to a
Stafford Loan are required to be made during the time a borrower remains an
Eligible Student and during the existence of an applicable Grace Period,
Deferral Period or Forbearance Period. In general, a borrower must repay each
Stafford Loan in monthly installments over a period of not more than 10 years
(excluding any Deferral Period or Forbearance Period) after commencement of
repayment. New borrowers on or after October 7, 1998 who accumulate outstanding
loans under the Student Assistance General Provisions and FFELP totaling more
than $30,000, are entitled to extended repayment schedules of up to 25 years
subject to certain minimum repayment amounts. Any borrower may voluntarily
prepay without premium or penalty any Federal Loan and in connection therewith
may waive any Grace Period or Deferral Period. The Higher Education Act
presently requires a minimum annual principal and interest payment with respect
to a Stafford Loan of $600 in the aggregate (but in no event less than accrued
interest), unless the borrower and the lender agree to a lesser amount. For
Stafford Loans and SLS Loans first disbursed on or after July 1, 1993 to a
borrower who has no outstanding Federal Loans on the date such loan is made, the
borrower must be offered the opportunity to repay the loan according to a
graduated or income-sensitive repayment schedule established in accordance with
Department regulations. For Stafford Loans entering repayment on or after
October 1, 1995, borrowers may choose among several repayment options, including
the option to make interest only payments for limited periods.
(5) GRACE PERIODS, DEFERRAL PERIODS, FORBEARANCE PERIODS. Borrowers of
Stafford Loans must generally commence repaying the loans following a period of
(a) not less than 9 months nor more than 12 months (with respect to loans for
which the applicable interest rate is 7% per annum) and (b) not more than 6
months (with respect to loans for which the applicable interest rate is other
than 7% per annum) (a "Grace Period") after the borrower ceases to be an
Eligible Student. However, subject to certain conditions, no principal
repayments need be made with respect to Stafford Loans during periods when the
borrower has returned to an eligible educational institution on at least a
half-time basis or is pursuing studies pursuant to an approved graduate
fellowship program, during certain other periods (varying from six months to
three years) when the borrower has joined the military or certain volunteer
organizations (for all loans made prior to July 1, 1993, or loans made after
such date to borrowers with loans already outstanding on such date), for periods
when the borrower is unable to secure employment (up to three years) or for
periods during which the borrower is experiencing economic hardship (for loans
made after July 1, 1993, to borrowers with no outstanding loans on such date)
(each, a "Deferral Period"). In addition, the lender may, and in some
circumstances must, allow, in accordance with standards and guidelines approved
by the applicable Guarantor and the Department, periods of forbearance during
which the borrower may defer principal and/or interest payments because of
temporary financial hardship (a "Forbearance Period").
(6) INTEREST SUBSIDY PAYMENTS. Interest Subsidy Payments are payments made
quarterly to the holder of a subsidized Stafford Loan by the Department with
respect to those Stafford Loans as to which the applicable conditions of the
Higher Education Act have been satisfied, in an amount equal to the accrued and
unpaid interest on the outstanding principal amount of each Stafford Loan for
such quarter, commencing from the date such Stafford Loan is made until the end
of the applicable Grace Period after the borrower ceases to be an Eligible
Student and during any applicable Deferral Period. The Department will not make
Interest Subsidy Payments during any Forbearance Period. The Higher Education
Act provides that the holder of such a qualifying Stafford Loan has a
contractual right against the United States, to receive Interest Subsidy
Payments from the Department (including the right to receive interest on any
Interest Subsidy Payments not timely paid). Receipt of Interest Subsidy Payments
is conditioned on compliance with the requirements of the Higher Education Act,
including satisfaction of certain need-based criteria (and the delivery of
sufficient information by the borrower and the lender to the Department to
confirm the foregoing) and continued eligibility of the Stafford Loan for
federal reinsurance. Such eligibility may be lost, however, if the loans are not
originated and serviced, or are not held by an eligible lender, in accordance
with the requirements of the Higher Education Act and the applicable guarantee
agreements. See "--(1) Eligibility Requirements"; "Formation of the
Trusts--Eligible Lender Trustee" and "Description of the Transfer and Servicing
Agreements--Servicing Procedures." The Seller expects that each of the
subsidized Stafford Loans that are part of a pool of Student Loans will be
eligible to receive Interest Subsidy Payments.
(7) SPECIAL ALLOWANCE PAYMENTS. The Higher Education Act requires, subject
to certain conditions, the Department to make quarterly Special Allowance
Payments to holders of qualifying Student Loans (including Stafford Loans), in
an amount equal to a specified percentage of the average outstanding principal
amount of each such Student Loan during each quarter.
The percentage or rate used to determine the Special Allowance Payments for
a particular loan varies based on a number of factors, including when the loan
was disbursed and the period of enrollment with respect to which it was made.
Generally, the Special Allowance Payment with respect to a Student Loan for a
quarter will be equal to the excess, if any, of (1) the amount of interest that
would be payable on such loan at a rate per annum equal to the average bond
equivalent rates of (x) 91-day Treasury Bills auctioned for such quarter plus
3.25% (3.10% for loans first disbursed on or after October 1, 1992) or (y) for
loans first disbursed on or after July 1, 1998, 91-day Treasury Bills auctioned
for such quarter plus 2.2% while borrowers are in-school, grace or deferment
status, or 2.8% while borrowers are in the repayment period, over (2) the stated
amount of interest payable on such loan.
The Higher Education Act provides that a holder of a qualifying loan who is
entitled to receive Special Allowance Payments has a contractual right against
the United States to receive those Special Allowance Payments (including the
right to receive interest on any Special Allowance Payments not timely paid).
Receipt of Special Allowance Payments, however, is conditioned on compliance
with the requirements of the Higher Education Act, including satisfaction of
certain need-based criteria (and the delivery of sufficient information by the
borrower and the lender to the Department to confirm the foregoing) and
continued eligibility for federal reinsurance. Such eligibility may be lost,
however, if the loans are not originated and serviced, or are not held by an
eligible lender, in accordance with the requirements of the Higher Education Act
and the applicable guarantee agreement. See "--(1) Eligibility Requirements;"
"Formation of the Trusts--Eligible Lender Trustee" and "Description of the
Transfer and Servicing Agreements--Servicing Procedures." The Seller expects
that each of the Stafford Loans that are part of a pool of Student Loans will be
eligible to receive Special Allowance Payments, if any are payable from time to
time.
Interest Subsidy Payments and Special Allowance Payments are generally
received within 45 to 60 days after submission to the Department of the
applicable claims forms for any given calendar quarter, although there can be no
assurance that such payments will in fact be received from the Department within
that period. For each Trust, the related Administrator will agree to prepare and
file with the Department all such claims forms and any other required documents
or filings on behalf of the applicable Eligible Lender Trustee as owner of the
related Federal Loans on behalf of such Trust. The Administrator will also agree
to assist the Eligible Lender Trustee in monitoring, pursuing and obtaining such
Interest Subsidy Payments and Special Allowance Payments, if any, with respect
to such Federal Loans. Except under certain conditions described herein, each
Eligible Lender Trustee will be required to remit Interest Subsidy Payments and
Special Allowance Payments it receives with respect to the Student Loans within
two business days of receipt thereof to the related Collection Account.
SLS LOAN PROGRAM. In addition to the Stafford Loan Program, the Higher
Education Act provides a separate program to facilitate additional loans to
graduate and professional students and independent undergraduate students. This
program is referred to as the "Supplemental Loans for Students Program" (the
"SLS Program"). The basic framework and principal provisions of the Stafford
Loan Program as described above are similar in many respects to those that are
applicable to loans under the SLS Program ("SLS Loans"). In particular, SLS
Loans are subject to similar eligibility requirements and, provided that such
requirements are satisfied, are entitled to the same guarantee and federal
reinsurance arrangements. SLS Loans differ significantly from Stafford Loans,
however, in the context of the Interest Subsidy Payments and Special Allowance
Payments discussed above.
The annual and aggregate limitations that are applicable to SLS Loans in
the case of those constituting Student Loans are as follows: SLS Loans to a
single borrower cannot exceed $4,000 per academic year (or $10,000 for loans
first disbursed on or after July 1, 1993) and $20,000 in aggregate principal
amount (or $73,000 for loans first disbursed on or after July 1, 1993)
(exclusive of any capitalized interest) at any one time outstanding. SLS Loans
are also limited, generally, to the cost of attendance minus other financial aid
for which the borrower is eligible. A determination of a borrower's eligibility
for the Stafford Loan Program, among other programs, is a condition to the
making of an SLS Loan.
As specified by the Higher Education Act, the applicable interest rate for
an SLS Loan depends upon the date of issuance of the loan and the period of
enrollment for which the loan is made. The interest rate per annum for SLS Loans
made and disbursed on or after July 1, 1987 is fixed each July 1 for each
succeeding 12-month period at a rate equal to the sum of
(1) the bond equivalent rate of 52-week Treasury Bills auctioned at the
final auction held prior to the preceding June 1; and
(2) 3.25% (3.10% for loans first disbursed on and after October 1, 1992),
with a maximum rate of 12% per annum (11% for loans first disbursed on
or after October 1, 1992).
Although holders of SLS Loans are not entitled to receive Interest Subsidy
Payments, interest on such SLS Loans accrues from the date each such SLS Loan is
made and may either be paid currently by a borrower or may be capitalized and
added to the outstanding principal amount of such SLS Loan at the time the
borrower begins repayment. SLS Loans are eligible for Special Allowance Payments
only if and to the extent that the interest rate for such SLS Loans calculated
based on the 52-week Treasury Bill rate referred to above would exceed the
applicable maximum borrower interest rate. Because the basis for determining the
amount, if any, of Special Allowance Payments due to lenders is based on the
91-day Treasury Bill Rate while the interest rate for SLS Loans is based on the
52-week Treasury Bill rate (which may differ from the 91-day Treasury Bill
Rate), there can be no assurance that any Special Allowance Payments will be due
and payable with respect to SLS Loans even though such SLS Loans are deemed to
be eligible therefor. See "--(7) Special Allowance Payments" above.
A borrower of an SLS Loan is required to begin repayment of the principal
of such SLS Loan within 60 days after the date the last installment of such SLS
Loan is advanced, subject to deferral so long as such borrower remains an
Eligible Student or as a result of any applicable Deferral Period or Forbearance
Period. In addition, any borrower of an SLS Loan made and advanced after July
23, 1992, who also has Stafford Loans outstanding may defer commencing repayment
of such SLS Loan for the Grace Period applicable to such Stafford Loans. For SLS
Loans entering repayment on or after October 1, 1995, borrowers may choose among
several repayment options, including the option to make interest only payments
for limited periods.
As of July 1, 1994, the SLS Program was discontinued and SLS Loans are no
longer made.
PLUS LOAN PROGRAM. The Higher Education Act authorizes Federal Parental
Loans For Undergraduate Students Loans ("PLUS Loans") to be made to parents of
eligible dependent students. After July 1, 1993, only parents who do not have an
adverse credit history or who can secure an endorser without an adverse credit
history are eligible for PLUS Loans. The basic provisions applicable to Federal
PLUS are similar to those of Stafford Loans with respect to the federal
insurance and reinsurance on the loans. However, PLUS Loans differ from Stafford
Loans, particularly because Interest Subsidy Payments are not available under
the PLUS Program and in some instances Special Allowance Payments are more
restricted.
PLUS Loans disbursed prior to July 1, 1993 are limited to $4,000 per
academic year with a maximum aggregate amount of $20,000. The only limit on the
annual and aggregate amounts of PLUS Loans first disbursed on or after July 1,
1993 is the cost of the student's education less other financial aid received,
including scholarship, grants and other student loans.
The interest rate determination for a PLUS Loan is dependent on when the
PLUS Loan was originally made and disbursed and the period of enrollment. The
interest rates for PLUS Loans are summarized in the following chart.
<TABLE>
<CAPTION>
INTEREST
TRIGGER DATE BORROWER RATE(1) MAXIMUM RATE(2) RATE MARGIN
<S> <C> <C> <C>
Prior to 10/01/81............. 9% 9% N/A
10/01/81-10/30/82............. 14% 14% N/A
11/01/82-06/30/87............. 12% 12% N/A
07/01/87-09/30/92............. 52-Week Treasury + Interest Rate Margin 12% 3.25%
10/01/92-06/30/94............. 52-Week Treasury + Interest Rate Margin 10% 3.10%
07/01/94-06/30/98............. 52-Week Treasury + Interest Rate Margin 9% 3.10%
After 6/30/98................. 91-Day Treasury + Interest Rate Margin 9% 3.10%
- ---------------------
(1) The Trigger Date for PLUS Loans made before October 1, 1992 is the first
day of enrollment period for which the PLUS Loan is made, and for PLUS
Loans made on October 1, 1992 and after the Trigger Date is the date of the
disbursement of the PLUS Loan, respectively.
(2) For PLUS Loans that carry a variable rate, the rate is set annually for
12-month periods beginning on July 1 and ending on June 30 on the preceding
June 1 and is equal to the lesser of (a) the applicable maximum rate and
(b) the sum of (i) the bond equivalent rate of 52-week Treasury Bills
auctioned at the final auction held prior to such June 1 and (ii) the
applicable Interest Rate Margin.
</TABLE>
A holder of a PLUS Loan is eligible to receive Special Allowance Payments
during any quarter if (a) the sum of (i) the average of the bond equivalent
rates of 91-day Treasury Bills auctioned during such quarter and (ii) the
Interest Rate Margin exceeds (b) the Maximum Rate.
Repayment of principal of PLUS Loans is required to commence no later than
60 days after the date of disbursement of such loan, subject to certain deferral
and forbearance provisions. The deferral provisions which apply are more limited
than those which apply to Stafford Loans. Repayment of interest, however, may be
deferred and capitalized during certain periods of educational enrollments and
periods of unemployment or hardship as specified under the Higher Education Act.
Further, whereas Interest Subsidy Payments are not available for such
deferments, interest may be capitalized during such periods upon agreement of
the lender and borrower. Maximum loan repayment periods and minimum payment
amounts are the same as for Stafford Loans.
A borrower may refinance all outstanding PLUS Loans under a single
repayment schedule for principal and interest, with the new repayment period
calculated from the date of repayment of the most recent included loan. The
interest rate of such refinanced loan shall be the weighed average of the rates
of all PLUS Loans being refinanced. A second type of refinancing enables an
eligible lender to reissue a PLUS Loan which was initially originated at a fixed
rate prior to July 1, 1987 in order to permit the borrower to obtain the
variable interest rate available on PLUS Loans on and after July 1, 1987. If a
lender is unwilling to refinance the original PLUS Loan, the borrower may obtain
a loan from another lender for the purpose of discharging the loan and obtaining
a variable interest rate.
STUDENT CONSOLIDATION LOAN PROGRAM. The Higher Education Act established a
program to facilitate the ability of eligible borrowers of Stafford Loans or SLS
Loans (each, an "Underlying Student Loan") to consolidate such Underlying
Student Loans, together with such borrowers' other education loans that are made
or guaranteed by the federal government, into a single loan (a "Consolidation
Loan"). Subject to the satisfaction of certain conditions set forth in the
Higher Education Act, including limitations on the timing and payment of
principal and interest with respect to Consolidation Loans and a requirement
that the proceeds of Consolidation Loans are to be used to repay the respective
Underlying Student Loans (and any other loans consolidated thereunder) of any
borrower, each holder of a Consolidation Loan will be entitled to substantially
the same guarantee and federal reinsurance arrangements as are available on
Stafford Loans and SLS Loans. Consolidation Loans, like Stafford Loans, are also
eligible for Interest Subsidy Payments and Special Allowance Payments. Under
this program, an eligible borrower of Consolidation Loans means a borrower (i)
with outstanding Underlying Student Loans and (ii) who has begun repaying, who
is in a grace period preceding repayment of, or who is a delinquent or defaulted
borrower who will, through such loan consolidation, recommence repayment of,
such Underlying Student Loans. A married couple, each of whom has outstanding
Underlying Student Loans, may apply for and obtain a single Consolidation Loan
so long as both individuals agree to be held jointly and severally liable on
such Consolidation Loan.
Under this program, a lender may make a Consolidation Loan to an eligible
borrower at the request of the borrower if the lender holds an outstanding
Underlying Student Loan of the borrower or the borrower certifies that he or she
has been unable to obtain a Consolidation Loan from any of the holders of the
outstanding Underlying Federal Loans of the borrower. The lender making any
Consolidation Loan will pay the amount thereof to the various lenders of the
respective Underlying Student Loans and other loans being consolidated thereby.
The 1998 Amendments allows lenders to make Consolidation Loans to borrowers with
multiple holders even if the lender does not own an Underlying Student Loan.
The Direct Consolidation Loan Program (the "Direct Consolidation Loan
Program") provides borrowers with the opportunity to consolidate outstanding
student loans at interest rates below, and income-contingent repayment terms
that some borrowers may find preferable to, those that would be available from
the Seller on a loan originated by the Seller under the Consolidation Loan
Program. The lower rate applies only to borrowers who applied before February 1,
1999. The availability of such lower-rate, income-contingent loans may decrease
the likelihood that the Seller would be the originator of a Consolidation Loan,
as well as increase the likelihood that a Student Loan in a Trust will be
prepaid through the issuance of a Direct Consolidation Loan (a "Direct
Consolidation Loan").
In accordance with the Higher Education Act, Consolidation Loans may bear
interest, as negotiated between the individual borrower and lender, at a rate
per annum up to the weighted average of the interest rates on the Underlying
Federal Loans (rounded up to the nearest whole percent) or, for loans made
before July 1, 1994, 9%, whichever is greater. However, Consolidation Loans made
on or after November 13, 1997 through September 30, 1998 will bear interest at
the annual variable rate applicable to Stafford Loans capped at 8.25%.
Consolidation Loans for which the application is received on or after October 1,
1998 bear interest at a rate equal to the weighted average interest rate of the
loans consolidated, rounded up to the nearest one-eighth percent and capped at
8.25%. Interest on Consolidation Loans accrues and, for applications received
prior to January 1, 1993, is to be paid without Interest Subsidy Payments by the
Department. For Consolidation Loans received on or after January 1, 1993, all
interest of the borrower is paid during all Deferral Periods. However,
Consolidation Loan applications received on or after August 10, 1993 will only
be subsidized if all of the underlying loans being consolidated were subsidized
Stafford Loans; provided that, in the case of Consolidation Loans made on or
after November 13, 1997, that portion of the Consolidation Loan that is
comprised of subsidized Stafford Loans will retain its subsidy benefits during
Deferral Periods. In general, a borrower must repay each Consolidation Loan in
scheduled monthly installments over a period of not more than 10 to 30 years
(excluding any Deferral Period and any Forbearance Period), depending on the
original principal amount of such Consolidation Loan. Borrowers may voluntarily
prepay all or a portion of any Consolidation Loan without premium or penalty.
Repayment of a Consolidation Loan must commence within 60 days after all holders
of Underlying Student Loans have discharged the liability of the borrower
thereon; provided, however, that such repayment obligation is deferred for as
long as the borrower remains an Eligible Student and during any applicable
Deferral Period and Forbearance Period. For Consolidation Loans entering
repayment on or after October 1, 1995, borrowers may choose among several
repayment options, including the option to make interest only payments for
limited periods. Special Allowance Payments are made on Consolidation Loans
whenever the rate charged the borrower is limited by the applicable fixed
percentage rate cap. However, for applications received on or after October 1,
1998, Special Allowance Payments are paid in order to afford the lender a yield
equal to the 91-day Treasury Bill Rate plus 3.1% whenever that formula exceeds
the borrower's interest rate.
The 1993 Act made a number of changes to the Consolidation Loan Program,
including (i) requiring holders of Consolidation Loans made on or after October
1, 1993, to pay to the Department a monthly fee equal to 1.05% per annum on the
outstanding balance of such loans (the "Consolidation Loan Rebate"), (ii)
requiring lenders of Consolidation Loans made on or after July 1, 1994, to offer
borrowers income-sensitive repayment schedules, (iii) repealing the $7,500
minimum indebtedness requirement, and (iv) removing the 9% interest rate floor
for Consolidation Loans made on or after July 1, 1994. In addition, with respect
to any Student Loan (including Consolidation Loans) made on or after October 1,
1993, the lender must pay to the Department an origination fee equal to 0.50% on
the initial principal balance of such loan (the "Origination Fee"). With respect
to any Consolidation Loan originated by the Seller and purchased by the Eligible
Lender Trustee on behalf of the related Trust, the related Trust must pay to the
Department the Origination Fee, which fee will be deducted by the Department out
of Interest Subsidy Payments and Special Allowance Payments. If sufficient
Interest Subsidy Payments and Special Allowance Payments are not due to the
applicable Trust to cover the amount of the Origination Fee, the balance of such
Origination Fee may be deferred by the Department until sufficient Interest
Subsidy Payments and Special Allowance Payments accrue to cover such fee. If
such amounts never accrue, the applicable Trust would be obligated to pay any
remaining fee from other assets of that Trust prior to making distributions to
Noteholders or Certificateholders.
The 1998 Amendments and the 1998 Reauthorization Bill made additional
changes with regard to Consolidation Loans. These changes include, among other
things, a reduction in the 1.05% per annum Consolidation Loan Rebate to .62% per
annum on Student Loans for which applications are received between October 1,
1998 and January 31, 1999.
UNDERGRADUATE STUDENT LOANS. The Seller originates or acquires Stafford
Loans and Consolidation Loans for students attending eligible schools.
Eligible schools include institutions of higher education and proprietary
institutions. Institutions of higher education must meet certain standards,
which generally provide that the institution
o only admits persons who have a high school diploma or its equivalent,
o is legally authorized to operate within a state,
o provides not less than a two-year program with credit acceptable
toward a bachelor's degree,
o is a public or non-profit institution and
o is credited by a nationally recognized accrediting agency or is
determined by the Department to meet the standards of an accredited
institution.
Eligible proprietary institutions of higher education include business,
trade and vocational schools meeting standards which provide that the
institution
o only admits persons who have a high school diploma or its equivalent,
or persons who are beyond the age of compulsory school attendance and
have the ability to benefit from the training offered (as defined in
the 1993 Act),
o is authorized by a state to provide a program of vocational education
designed to fit individuals for useful employment in recognized
occupations,
o has been in existence for at least two years,
o provides at least a six-month training program to prepare students for
gainful employment in a recognized occupation and
o is accredited by a nationally recognized accrediting agency or is
specially accredited by the Department.
With specified exceptions, institutions are excluded from consideration as
educational institutions if the institution
o offers more than 50 percent of its courses by correspondence,
o enrolls 50 percent or more of its students in correspondence courses,
o has a student enrollment in which more than 25 percent of the students
are incarcerated or
o has a student enrollment in which more than 50 percent of the students
are admitted without a high school diploma or its equivalent on the
basis of their ability to benefit from the education provided (as
defined by statute and regulation).
Further, schools are specifically excluded from participation if
o the educational institution has filed for bankruptcy,
o the owner, or its chief executive officer, has been convicted or
pleaded "NOLO CONTENDERE" or "guilty" to a crime involving the
acquisition, use or expenditure of federal student aid funds, or has
been judicially determined to have committed fraud involving funds
under the student aid program or
o the educational institution has a cohort default rate in excess of the
rate prescribed by the Higher Education Act. In order to participate
in the program, the eligibility of a school must be approved by the
Department under standards established by regulation.
[GRADUATE STUDENT LOANS. The Seller originates or acquires Student Loans
under loan programs (the "Student Graduate Programs") to provide educational
financing to graduate and professional students enrolled in or recently
graduated from approved or accredited law schools, medical schools, dental
schools, graduate business schools and other graduate schools. The Graduate
Programs originally targeted law school students but have been expanded over the
years to include virtually all graduate level fields of study. The Seller (or
its predecessors) has been originating loans under the Graduate Programs since
____.]
The following table sets forth the approved or accredited schools and the
acceptable degree programs for each graduate field of study:
<TABLE>
<CAPTION>
FIELD OF STUDY APPROVED/ACCREDITED SCHOOLS ACCEPTABLE DEGREE
PROGRAMS
<S> <C> <C>
Law American Bar Association approved law schools that are Juris Doctor of Law or other
members of LSAC joint degree program
Medical Liaison Committee on Medical Education or American Medical Doctor or Doctor of
Osteopathic Association accredited graduate medical Osteopathy
schools
Dental American Dental Association accredited dental schools Graduate dental program
Business American Assembly of Collegiate Schools of Business Graduate business program
("AACSB") accredited graduate business schools; or
AACSB candidate schools accredited by the New England
Association of Schools and Colleges, the Middle States
Association of Colleges and Schools, the North Central
Association of Colleges and Schools, the Southern
Association of Colleges and Schools, the Western
Association of Schools and Colleges, or the North West
Association of Schools and Colleges
Graduate Schools accredited by the New England Association of Graduate level certificate or
Schools and Colleges, the Middle States Association of degree program
Colleges and Schools, The North Central Association of
Colleges and Schools, the Southern Association of
Colleges and Schools, the Western Association of Schools
and Colleges, or the North West Association of Schools
and Colleges
</TABLE>
INSURANCE OF STUDENT LOANS; GUARANTORS OF STUDENT LOANS
GUARANTORS. The Higher Education Act authorizes Guarantors to support
education financing and credit needs of students at post-secondary schools. The
Higher Education Act encourages every state either to establish its own agency
or to designate another Guarantor in cooperation with the Secretary. Under
various programs throughout the United States of America, Guarantors insure and
sometimes service guaranteed student loans. The Guarantors are reinsured by the
federal government for from 80% to 100% of each default claim paid, depending on
their claims experience, for loans disbursed prior to October 1, 1993 and from
78% to 98% of each default claim paid for loans disbursed on or after October 1,
1993. Guarantors are reinsured by the federal government for 100% of death,
disability, bankruptcy, closed school and false certification claims paid. Loans
guaranteed under the lender of last resort provisions of the Higher Education
Act are also 100% guaranteed and reinsured. See"--Federal Insurance and
Reinsurance of Guarantors" below.
Guarantors collect a one-time insurance premium ranging from 0% to 3% of
the principal amount of each guaranteed loan, depending on the Guarantor.
Guarantors are prohibited from charging insurance premiums on loans made under
the Unsubsidized Stafford Loan Program (the "Unsubsidized Stafford Loan
Program") prior to July 1, 1994. On such loans made prior to July 1, 1994, the
Higher Education Act requires that a 6.5% combined loan origination fee and
insurance premium be paid by the borrower on Unsubsidized Stafford Loans. This
fee is passed through to the Department by the originating lender. Effective
July 1, 1994, the maximum insurance premium and origination fee for Stafford
Loans and Unsubsidized Stafford Loans are 1% and 3%, respectively.
Each Student Loan to be sold to an Eligible Lender Trustee on behalf of a
Trust will be guaranteed as to principal and interest by a Guarantor pursuant to
a Guarantee Agreement between such Guarantor and the applicable Eligible Lender
Trustee. The applicable Prospectus Supplement for each Trust will identify each
related Guarantor for the Student Loans held by such Trust as of the applicable
Closing Date and the amount of such Student Loans it is guaranteeing for such
Trust.
FEDERAL INSURANCE AND REINSURANCE OF GUARANTORS. A Student Loan is
considered to be in default for purposes of the Higher Education Act when the
borrower fails to make an installment payment when due or to comply with other
terms of the loan, and if the failure persists for 180 days in the case of a
loan repayable in monthly installments or for 240 days in the case of a loan
repayable in less frequent installments. Under certain circumstances a loan
deemed ineligible for federal reinsurance may be restored to eligibility.
Procedures for such restoration of eligibility are discussed below.
If the loan in default is covered by federal loan insurance in accordance
with the provisions of the Higher Education Act, the Department is to pay the
applicable Guarantor, as insurance beneficiary, the amount of the loss sustained
thereby, upon notice and determination of such amount, within 90 days of such
notification, subject to reduction as described below.
If the loan is guaranteed by a Guarantor, the eligible lender is reimbursed
by the Guarantor for 100% (or not less than 98% for loans disbursed on or after
October 1, 1993) of the unpaid principal balance of the defaulted loan plus
accrued and unpaid interest thereon so long as the eligible lender has properly
originated and serviced such loan. Under the Higher Education Act, the
Department enters into a guarantee agreement with each Guarantor, which provides
for federal reinsurance for amounts paid to eligible lenders by the Guarantor
with respect to defaulted loans.
Pursuant to such agreements, the Department also agrees to reimburse a
Guarantor for 100% of the amounts expended in connection with a claim resulting
from the death, bankruptcy, total and permanent disability of a borrower, the
death of a student whose parent is the borrower of a PLUS Loan or claims by
borrowers who received loans on or after January 1, 1986 and who are unable to
complete the programs in which they are enrolled due to school closure or
borrowers whose borrowing eligibility was falsely certified by the eligible
institution; such claims are not included in calculating a Guarantor's claims
rate experience for federal reinsurance purposes. The Department also agrees to
reimburse a Guarantor for 100% of the amounts expended in connection with claims
on loans made under the lender of last resort provisions. The Department is also
required to repay the unpaid balance of any loan if the borrower files for
relief under Chapter 12 or 13 of the Bankruptcy Code or files for relief under
Chapter 7 or 11 of the Bankruptcy Code and has been in repayment for more than 7
years or commences an action for a determination of dischargeability under
Section 523(a)(8)(b) of the Bankruptcy Code, and is authorized to acquire the
loans of borrowers who are at high risk of default and who request an
alternative repayment option from the Department.
The amount of such reinsurance payment to the Guarantor for default claims
is subject to reduction based upon the annual default claims rate of the
Guarantor, calculated to equal the amount of federal reinsurance claims paid by
the Department to the Guarantor during any fiscal year as a percentage of the
original principal amount of guaranteed loans in repayment at the end of the
prior federal fiscal year. The formula is summarized as follows:
<TABLE>
<CAPTION>
CLAIMS RATE OF GUARANTORS REIMBURSEMENT BY THE DEPARTMENT OF EDUCATION (1)
<S> <C>
0% to and including 5% 98%
Greater than 5% to and including 9% 98% of claims to and including 5%; 88% of claims greater
than 5%
Greater than 9% 98% of claims to and including 5%; 88% of claims greater
than 5% to and including 9%; and 78% of claims greater
than 9%
- -------------------
(1) Each of the reimbursement percentages listed above is increased by two
percentage points for a loan made prior to October 1, 1993 and decreased by
three percentage points for a loan made on or after October 1, 1998.
</TABLE>
The claims experience for any Guarantor is not accumulated from year to
year for purposes of this test but is determined solely on the basis of claims
filed in any one federal fiscal year. The Higher Education Act provides that,
subject to compliance with the Higher Education Act, Guarantors are deemed to
have a contractual right against the United States to receive reinsurance in
accordance with its provisions.
On August 10, 1993 President Clinton signed the Omnibus Budget
Reconciliation Act of 1993 (the "1993 Act"), which made a number of changes that
may adversely affect the financial condition of the Federal Guarantors,
including reducing to 98% the maximum percentage of Guarantee Payments the
Department will reimburse for loans first disbursed on or after October 1, 1993,
reducing substantially the premiums and default collections that Guarantors are
entitled to receive and/or retain and giving the Department broad powers over
Guarantors and their reserves. These powers include the authority to require a
Guarantor to return all reserve funds to the Department if the Department
determines such action is necessary to serve the best interests of the student
loan programs or to ensure the proper maintenance of such Guarantor's funds or
assets. The Department is also now authorized to direct a Guarantor to return a
portion of its reserve funds which the Department determines is unnecessary to
pay the program expenses and contingent liabilities of the Guarantor and/or to
cease any activities involving the use of the Guarantor's reserve funds or
assets which the Department determines is a misapplication or otherwise
improper. The Department may also terminate a Guarantor's reinsurance agreement
if the Department determines that such action is necessary to protect the
federal fiscal interest. These various changes create a risk that the resources
available to the Guarantors to meet their guarantee obligations will be
significantly reduced. Such changes could result in a reduction of a Trust's
ability to pay principal and interest on the related Notes and Certificates, as
a result of a reduction in the ability of the Guarantors to make Guarantee
Payments to the Eligible Lender Trustee with respect to the related Student
Loans. In addition, this legislation sought to greatly expand the loan volume
under the direct lending program (the "Direct Student Loan Program") to a target
of approximately 60% of student loan demand in academic year 1998-1999, although
only about 35% of such loan demand is currently being met by the direct lending
program. The expansion of this program in the future could result in increasing
reductions in the volume of Student Loans made by the Seller. Such changes could
have an adverse effect on the financial condition of the Guarantors and on the
ability of a Guarantor to satisfy its obligations under its Guarantee Agreement
with respect to the Student Loans. See "Risk Factors--Changes in Legislation May
Adversely Affect Student Loans and Guarantors." The 1998 Reauthorization Bill
created additional risks that the resources available to the Guarantors to meet
their guarantee obligations will be further reduced in the future, by mandating
additional recall of guarantor reserves and reducing reinsurance to guarantors
from 98% to 95%.
Pursuant to the 1992 Amendments and additional changes made in 1997 and
1998, each Guarantor is required to maintain a current minimum reserve level of
at least .25% of the aggregate principal amount of all outstanding Student Loans
guaranteed by such Guarantor. Annually, the Department will collect information
from each Guarantor to determine the amount of such Guarantor's reserves and
other information regarding its solvency. If a Guarantor's current reserve level
falls below the required minimum for any two consecutive years, that Guarantor's
annual claims rate exceeds 5% or the Department determines that a Guarantor's
administrative or financial condition jeopardizes that Guarantor's continued
ability to perform its responsibilities, then that Guarantor must submit and
implement a management plan acceptable to the Department. The 1992 Amendments
also provide that under certain circumstances the Department is authorized, on
terms and conditions satisfactory to the Department, but is not obligated, to
terminate its reimbursement agreement with any Guarantor. In that event,
however, the Department is required to assume the functions of such Guarantor
and in connection therewith is authorized to do one or more of the following: to
assume the guarantee obligations of, to assign to other guarantors the guarantee
obligations of, or to make advances to, a Guarantor in order to assist such
Guarantor in meeting its immediate cash needs and to ensure uninterrupted
payment of default claims to lenders or to take any other action the Department
deems necessary to ensure the continued availability of student loans and the
full honoring of guarantee claims thereunder. In addition, the 1992 Amendments
provide that if the Department determines that a Guarantor is unable to meet its
guarantee obligations, holders of Student Loans covered thereby may submit
guarantee claims directly to the Department until such time as such guarantee
obligations are transferred to a new guarantor capable of meeting such
obligations or until a successor guarantor assumes such obligations. There can
be no assurance that the Department would under any given circumstances assume
such obligation to ensure satisfaction of a guarantee obligation by exercising
its right to terminate a reimbursement agreement with a Guarantor or by making a
determination that such Guarantor is unable to meet its guarantee obligations.
ORIGINATION PROCESS
The Higher Education Act specifies rules regarding loan origination
practices, which lenders must comply with in order for their Student Loans to be
guaranteed and to be eligible to receive Federal Assistance. Lenders are
prohibited from offering points, premiums, payments or other inducements,
directly or indirectly, to any educational institution, guarantee agency or
individual in order to secure loan applications, and no lender may conduct
unsolicited mailings of student loan applications to students who have not
previously received student loans from that lender.
[With respect to all Student Loans (other than Consolidation Loans), the
Seller forwards each application for such Student Loans (which should include an
executed promissory note) to either a marketing agent or the Seller's
origination department. On behalf of the Seller, either the marketing agent or
the origination department reviews each application to confirm its completeness,
to confirm that the applicant is an Eligible Student and that such loan complies
with certain other conditions of the applicable Program.
The marketing agent or origination department forwards a copy of each
application that satisfies the foregoing reviews to the respective Guarantor,
which reviews the application to determine that such application satisfies all
applicable conditions, including the foregoing, for the loan to be eligible to
receive Guarantee Payments, subject to compliance with the terms of the
respective Guarantee Agreements, including the proper servicing of the loan.
Upon approval of an application by either the marketing agent or the origination
department and the respective Guarantor, and receipt of evidence from such
Guarantor that the applicable loan is guaranteed, the Seller causes the proceeds
of such loan to be disbursed in one or more installments. For each loan that is
made, the marketing agent or the origination department forwards the completed
loan application and executed promissory note to the designated Sub-Servicer,
which serves as custodian for such materials.]
Any borrower inquiries concerning Consolidation Loans received by the
marketing agent or the Seller are forwarded to the appropriate Sub-Servicer, who
contacts the borrower, prepares and sends to the borrower an application (which
includes a promissory note) for a Consolidation Loan for the borrower's review
and signature. Although the borrower is permitted to choose any lender to make a
Consolidation Loan, borrowers typically express no preference as to the identity
of the lender. In that event, each Sub-Servicer generally will choose the lender
that has the highest balance of the loans to be consolidated or, if there is no
such lender, the lender that has made the most recent loan to the borrower to be
consolidated. Each Sub-Servicer is required to obtain certifications from the
lenders of the loans to be consolidated and to review the loan application and
the certifications to confirm that the borrower is eligible for a Consolidation
Loan. Upon approval of an application for a Consolidation Loan, the applicable
lender causes the proceeds of such Consolidation Loan to be disbursed to each
lender of the loans being consolidated in amounts sufficient to retire each of
such loans. For each Consolidation Loan that is made by the Seller, a
Sub-Servicer retains the completed loan application and executed promissory note
as custodian.
SERVICING AND COLLECTIONS PROCESS
The Higher Education Act and the applicable Guarantee Agreements require
the holder of Student Loans to cause specified procedures, including due
diligence procedures and the taking of specific steps at specific intervals, to
be performed with respect to the servicing of the Student Loans that are
designed to ensure that such Student Loans are repaid on a timely basis by or on
behalf of borrowers. Each Sub-Servicer performs such procedures on behalf of the
Seller and the Master Servicer and will agree, pursuant to the related
Sub-Servicing Agreement, to perform specified and detailed servicing and
collection procedures with respect to the Student Loans on behalf of the related
Trust. Such procedures generally include periodic attempts to contact any
delinquent borrower by telephone and by mail, commencing with a written notice
at the tenth day of delinquency and including multiple written notices and
telephone calls to the borrower thereafter at specified times during any such
delinquency. All telephone calls and letters are automatically registered, and a
synopsis of each call or the mailing of each letter is noted in each
Sub-Servicer's loan file for the borrower. Each Sub-Servicer also will be
required to perform skip tracing procedures on delinquent borrowers whose
current location is unknown, including contacting such borrowers' schools and
references. Failure to comply with the established procedures could adversely
affect the ability of the applicable Eligible Lender Trustee, as holder of legal
title to the applicable Student Loans on behalf of the related Trust, to realize
the benefits of any Guarantee Agreement or to receive the benefits of Federal
Assistance from the Department with respect thereto. Failure to comply with
certain of the established procedures with respect to a Student Loan may also
result in the denial of coverage under a Guarantee Agreement for certain accrued
interest amounts, in circumstances where such failure has not caused the loss of
the guarantee of the principal of such Student Loan.
At prescribed times prior to submitting a claim for payment under a
Guarantee Agreement for a delinquent Student Loan, each Sub-Servicer is required
to notify the applicable Guarantor of the existence of such delinquency. These
requests notify the Guarantors of seriously delinquent accounts and allow the
Guarantors to make additional attempts to collect on such loans prior to the
filing of claims. If a loan is delinquent for 180 days (in the case of Student
Loans made prior to the enactment date of the 1998 Reauthorization Bill) or 240
days (in the case of Student Loans made on or after October 7, 1998), each
Sub-Servicer may file a default claim with the respective Guarantor. Failure to
file a claim within 270 days (in the case of Student Loans made prior to the
enactment date of the 1998 Reauthorization Bill) or 330 days (in the case of
Student Loans made on or after October 7, 1998), of delinquency may result in
denial of the guarantee claim with respect to such loan. Each Sub-Servicer's
failure to file a guarantee claim in a timely fashion would constitute a breach
of its covenants and create an obligation of such Sub-Servicer to purchase the
applicable Student Loan. See "Description of the Transfer and Servicing
Agreements--Master Servicer Covenants."
INCENTIVE PROGRAMS
[The Seller has offered, and may continue to offer, incentive programs to
certain Student Loan borrowers. Two such programs are currently made available
by the Seller and may apply to Student Loans owned by a Trust. These incentive
programs currently or hereafter made available by the Seller may also be made
available by each Sub-Servicer to borrowers with Student Loans. Any such
incentive program that effectively reduces borrower payments on Student Loans
and is not required by the Higher Education Act will be applicable to the
Student Loans only if and to the extent that the applicable Trust receives
payment from the Seller (or the Seller deposits or causes a deposit to be made
into the related Collection Account) in an amount sufficient to offset such
effective yield reductions.]
WEIGHTED AVERAGE LIVES OF THE SECURITIES
The rate of payment of principal of the Notes and the Certificates of any
series and the yield on the Notes and the Certificates of any series will be
affected by prepayments of the Student Loans that may occur as described below.
All the Student Loans are prepayable in whole or in part by the borrowers at any
time (including by means of Consolidation Loans or consolidation loans made
under the Direct Student Loan Program as discussed below) or as a result of a
borrower's default, death, disability or bankruptcy and subsequent liquidation
or collection of Guarantee Payments with respect thereto. The rate of such
prepayments cannot be predicted and may be influenced by a variety of economic,
social and other factors, including 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 Student Loans. However, because many of the
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
Student Loans.
To the extent borrowers of Student Loans elect to borrow Consolidation
Loans with respect to such Student Loans from the Seller:
(1) after the Funding Period but not beyond the end of the Revolving
Period, and collections on the Student Loans are not available to
purchase such Consolidation Loans,
(2) after the end of the Revolving Period, or
(3) from another lender at any time,
Noteholders of a series (and after the Notes have been paid in full,
Certificateholders of such series) will collectively receive as a prepayment of
principal the aggregate principal amount of such Student Loans; provided, that
if the Seller makes any such Consolidation Loan during a Funding Period or prior
to the end of the Revolving Period (in which event the Seller will then sell
that Consolidation Loan to the applicable Eligible Lender Trustee, to the extent
that funds are available in the applicable Escrow Account and during the Funding
Period, the Pre-Funding Account or following the Funding Period but prior to the
end of the Revolving Period, the applicable Collection Account from amounts
which constitute available loan purchase funds, for the purchase thereof), the
aggregate outstanding principal balance of Student Loans (after giving effect to
the addition of such Consolidation Loans) will be at least equal to and in most
cases greater than such balance prior to such prepayment, although the portion
of the loan guaranteed will be 98% with respect to any Consolidation Loan made
on or after October 1, 1993, even if the Underlying Student Loans were 100%
guaranteed. There can be no assurance that borrowers with Student Loans will not
seek to obtain Consolidation Loans with respect to such Student Loans or, if
they do so, that such Consolidation Loans will not be made by the Seller after
the end of a Funding Period when collections on the Student Loans are not
available to purchase such Consolidation Loans, on or after the end of the
Revolving Period or by another lender at any time.
The Direct Consolidation Loan Program provides borrowers with the
opportunity to consolidate outstanding student loans at interest rates below,
and income-contingent repayment terms that some borrowers may find preferable
to, those that would be available from the Seller on a loan originated by the
Seller under the Consolidation Loan Program. The lower rate applies only to
borrowers who applied for Student Loans before February 1, 1999. The
availability of such lower-rate, income-contingent loans may decrease the
likelihood that the Seller would be the originator of a Consolidation Loan with
respect to borrowers with federal loans, as well as increase the likelihood that
a federal loan in the trust will be prepaid through the issuance of a Direct
Consolidation Loan. Any such prepayments will result in a more rapid
amortization of the Securities of a series then would otherwise be the case. The
volume of existing loans that may be repaid in this fashion is not determinable
at this time.
In addition, the Seller will be obligated to repurchase any Student Loan
pursuant to the applicable Sale and Servicing Agreement as a result of a breach
of any of its representations and warranties, and the Master Servicer will be
obligated to purchase any Student Loan pursuant to the Sale and Servicing
Agreement as a result of a breach of certain covenants with respect to such
Student Loan, in each case where such breach materially adversely affects the
interests of the Certificateholders or the Noteholders of a series in that
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 Student Loan will not be considered to have a
material adverse effect for this purpose). See "Description of the Transfer and
Servicing Agreements--Sale of Student Loans; Representations and Warranties" and
"--Servicer Covenants." See also "Description of the Transfer and Servicing
Agreements---Additional Fundings" regarding the prepayment of principal to
Noteholders and Certificateholders of a series if as of the date specified in
the applicable Prospectus Supplement the amount on deposit in the related
Pre-Funding Account has not been reduced to zero and the prepayment of principal
to Noteholders of a series as a result of excess funds remaining on deposit in
the Pre-Funding Account at the end of the Funding Period, "--Insolvency Event"
regarding the sale of the Student Loans if a Seller Insolvency Event occurs and
"--Termination" regarding the Seller's option to purchase the Student Loans when
the aggregate Pool Balance is less than or equal to 5% of the initial Pool
Balance of a series and the auction of the Student Loans occurs on or after the
date specified in the related Prospectus Supplement.
On the other hand, scheduled payments with respect to, and maturities of,
the Student Loans may be extended, including pursuant to Grace Periods, Deferral
Periods and, under certain circumstances, Forbearance Periods prior to the end
of the Revolving Period or of refinancings through Consolidation Loans to the
extent such Consolidation Loans are sold to an Eligible Lender Trustee on behalf
of a Trust as described above. In that event, the fact that such Consolidation
Loans will likely have longer maturities than the Student Loans they are
replacing may lengthen the remaining term of the Student Loans and the average
life of the Notes and the Certificates of a series. The rate of payment of
principal of the Notes and the Certificates of a series and the yield on the
Notes and the Certificates of a series may also be affected by the rate of
defaults resulting in losses on defaulted Student Loans which have been
liquidated, by the severity of those losses and by the timing of those losses,
which may affect the ability of the Guarantors to make Guarantee Payments with
respect thereto. In addition, the maturity of many of the Student Loans will
extend well beyond the final scheduled Distribution Dates of the Notes and the
Certificates of a series.
The rate of prepayment on the Student Loans cannot be predicted, and any
reinvestment risks resulting from a faster or slower incidence of prepayment of
Student Loans will be borne entirely by the Securityholders of a series. Such
reinvestment risks may include the risk that interest rates and the relevant
spreads above particular interest rate bases are lower at the time
Securityholders of a series receive payments from the related 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.
POOL FACTORS AND TRADING INFORMATION
Each of the "Note Pool Factor" for each class of Notes and the "Certificate
Pool Factor" for each class of Certificates (each, a "Pool Factor") will be a
seven-digit decimal which the Administrator will compute for each Distribution
Date indicating the remaining outstanding principal amount of such class of
Notes or the remaining principal balance for such class of Certificates (the
"Certificate Balance"), respectively, as of that Distribution Date (after giving
effect to distributions to be made on such Distribution Date), as a fraction of
the initial outstanding principal amount of such class of the Notes or the
initial Certificate Balance for such class of Certificates, respectively. Each
Pool Factor will be 1.0000000 as of the Closing Date, and thereafter will
decline to reflect reductions in the outstanding principal amount of the
applicable class of Notes or reductions of the Certificate Balance of the
applicable class of Certificates, as applicable. A Securityholder's portion of
the aggregate outstanding principal amount of the related class of Notes or of
the aggregate outstanding Certificate Balance for the related class of
Certificates, as applicable, is the product of (x) the original denomination of
that Securityholder's Note or Certificate and (y) the applicable Pool Factor.
Pursuant to the related Indenture and the related Trust Agreement, the
Securityholders will receive reports on or about each Distribution Date
concerning the payments received on the Student Loans, the Pool Balance (as such
term is defined in the related Prospectus Supplement, the "Pool Balance"), the
applicable Pool Factor and various other items of information. Securityholders
of record during any calendar year will be furnished information for tax
reporting purposes not later than the latest date permitted by law. See "Certain
Information Regarding the Securities--Reports to Securityholders."
DESCRIPTION OF THE NOTES
GENERAL
With respect to each Trust, one or more classes of notes (the "Notes") of a
given series will be issued pursuant to the terms of an indenture (an
"Indenture") between the Trust and the trustee under such Indenture (the
"Indenture Trustee"), a form of which has been filed as an exhibit to the
Registration Statement of which this Prospectus (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 all the provisions of the Notes and the Indenture.
Each class of Notes is expected to be initially represented by one or more
Notes, in each case registered in the name of the nominee of The Depository
Trust Company ("DTC") (together with any successor depository selected by the
Administrator, the "Depository") except as set forth below. The Notes are
expected to be available for purchase in book-entry form only. The Trust has
been informed by DTC that DTC's nominee will be Cede & Co. ("Cede"), unless
another nominee is specified in the related Prospectus Supplement. Accordingly,
such nominee is expected to be the holder of record of the Notes of each class.
Unless and until Definitive Notes are issued under the limited circumstances
described in this Prospectus, no Noteholder will be entitled to receive a
physical certificate representing a Note. All references in this Prospectus and
in the related Prospectus Supplement to actions by Noteholders of Notes held in
book-entry form refer to actions taken by DTC upon instructions from its
participating organizations (the "Participants") and all references in this
Prospectus to distributions, notices, reports and statements to Noteholders
refer to distributions, notices, reports and statements to DTC or its nominee,
as the case may be, as the registered holder of the Notes for distribution to
Noteholders in accordance with DTC's procedures with respect thereto. See
"Certain Information Regarding the Securities--Book-Entry Registration"
and"--Definitive Securities."
PRINCIPAL OF AND INTEREST ON THE NOTES
The timing and priority of payment, seniority, allocations of losses,
interest as a per annum interest rate (the "Interest Rate") and amount of or
method of determining payments of principal and interest on each class of Notes
of a given series will be described in the related Prospectus Supplement. The
right of holders of any class of Notes to receive payments of principal and
interest may be senior or subordinate to the rights of holders of any other
class or classes of Notes of such series, as described in the related Prospectus
Supplement. Payments of interest on the Notes of such series will be made prior
to payments of principal thereon. Each class of Notes may have a different
Interest Rate, which may be a fixed, variable or adjustable Interest Rate or any
combination of the foregoing. The related Prospectus Supplement will specify the
Interest Rate for each class of Notes of a given series or the method for
determining such Interest Rate See also "Certain Information Regarding the
Securities--Fixed Rate Securities" and "--Floating Rate Securities". One or more
classes of the Notes of a series may be redeemable in whole or in part under the
circumstances specified in the related Prospectus Supplement, including as a
result of the exercise by the Seller, or such other party as may be named in the
related Prospectus Supplement, of its option to purchase the related Student
Loans.
Noteholders of all classes within a series are expected to have the same
priority with respect to payments of interest. Under certain circumstances, the
amount available for such payments could be less than the amount of interest
payable on the Notes on any of the dates specified for payments in the related
Prospectus Supplement (each, a "Distribution Date"), in which case each class of
Noteholders will receive its ratable share (based upon the aggregate amount of
interest due to such class of Noteholders) of the aggregate amount available to
be distributed in respect of interest on the Notes of such series. See
"Description of the Transfer and Servicing Agreements--Distributions" and
"--Credit and Cash Flow Enhancement."
In the case of a series of Notes which includes two or more classes of
Notes, the sequential order and priority of payment in respect of principal and
interest, and any schedule or formula or other provisions applicable to the
determination thereof, of each such class will be set forth in the related
Prospectus Supplement. Payments in respect of principal and interest of any
class of Notes will be made on a pro rata basis among all the Noteholders of
such class.
In the case of a series of Notes relating to a Trust having a Pre-Funding
Account or Escrow Account, the Notes of such series will be redeemed in part on
the Distribution Date on or immediately following the last day of the related
Funding Period or Revolving Period, respectively, in the event that any amount
remains on deposit in the applicable account after giving effect to all
Additional Fundings on or prior to such date, in an aggregate principal amount
described in the related Prospectus Supplement.
See "Description of the Transfer and Servicing Agreements--Credit and Cash
Flow Enhancement--RESERVE ACCOUNT" for a description of the Reserve Account and
the distribution of amounts in excess of the Specified Reserve Account Balance
(as defined in the related Prospectus Supplement, the "Specified Reserve Account
Balance").
THE INDENTURE
MODIFICATION OF INDENTURE. With respect to each Trust, with the consent of
the holders of a majority of the outstanding Notes of the related series, the
Indenture Trustee and the Trust may execute a supplemental indenture to add
provisions to, or change in any manner or eliminate any provisions of, the
Indenture with respect to the Notes, or to modify (except as provided below) in
any manner the rights of the related Noteholders.
Without the consent of the holder of each outstanding Note of a series
affected thereby, no supplemental indenture will:
(1) change the due date of any installment of principal of or interest on
any such Note or reduce the principal amount thereof, the interest
rate specified thereon or the redemption price with respect thereto or
change any place of payment where or the coin or currency in which any
such Note or any interest thereon is payable,
(2) impair the right to institute suit for the enforcement of certain
provisions of the related Indenture regarding payment,
(3) reduce the percentage of the aggregate amount of the outstanding Notes
of such series, the consent of the holders of which is required for
any such supplemental indenture or the consent of the holders of which
is required for any waiver of compliance with certain provisions of
the related Indenture or of certain defaults thereunder and their
consequences as provided for in such Indenture,
(4) modify or alter the provisions of the related Indenture regarding the
voting of Notes held by the applicable Trust, the Seller, an affiliate
of either of them or any obligor on such Notes,
(5) reduce the percentage of the aggregate outstanding amount of such
Notes, the consent of the holders of which is required to direct the
related Eligible Lender Trustee on behalf of the applicable Trust to
sell or liquidate the Student Loans if the proceeds of such sale would
be insufficient to pay the principal amount and accrued but unpaid
interest on the outstanding Notes of such series,
(6) decrease the percentage of the aggregate principal amount of such
Notes required to amend the sections of the related Indenture which
specify the applicable percentage of aggregate principal amount of
such Notes necessary to amend the related Indenture or certain other
related agreements, or
(7) permit the creation of any lien ranking prior to or on a parity with
the lien of the related Indenture with respect to any of the
collateral for the Notes of such series or, except as otherwise
permitted or contemplated in such Indenture, terminate the lien of
such Indenture on any such collateral or deprive the holder of any
Note of the security afforded by the lien of such Indenture.
The applicable Trust and the related Indenture Trustee may also enter into
supplemental indentures without obtaining the consent of Noteholders of such
series, for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of the related Indenture or of modifying in
any manner the rights of Noteholders of such series so long as such action will
not, in the opinion of counsel satisfactory to the applicable Indenture Trustee,
materially and adversely affect the interest of any Noteholder of such series.
EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT. With respect to the Notes
of a given series, an "Event of Default" under the related Indenture will
include the following:
(a) a default for five days or more in the payment of any interest on any
such Note after the same becomes due and payable;
(b) a default in the payment of the principal of or any installment of the
principal of any such Note when the same becomes due and payable;
(c) a default in the observance or performance of any covenant or
agreement of the applicable Trust made in the related Indenture and
the continuation of any such default for a period of 30 days after
notice thereof is given to the applicable Trust by the applicable
Indenture Trustee or to the applicable Trust and the applicable
Indenture Trustee by the holders of at least 25% in principal amount
of such Notes then outstanding;
(d) any representation or warranty made by the applicable Trust in the
related Indenture or in any certificate delivered pursuant thereto or
in connection therewith having been incorrect in a material respect as
of the time made, and such breach is not cured within 30 days after
notice thereof is given to such Trust by the applicable Indenture
Trustee or to such Trust and the applicable Indenture Trustee by the
holders of at least 25% in principal amount of the Notes of such
series then outstanding; or
(e) certain events of bankruptcy, insolvency, receivership or liquidation
of such Trust.
However, the amount of principal required to be distributed to Noteholders
of such series under the related Indenture on any Distribution Date will
generally be limited to amounts available after payment of all prior obligations
of such Trust. Therefore, the failure to pay principal on a class of Notes
generally will not result in the occurrence of an Event of Default until the
final scheduled Distribution Date for such class of Notes.
If, with respect to any series of Notes, interest is paid at a variable
rate based on an index, the related Prospectus Supplement may provide that, in
the event that, for any Distribution Date, the Interest Rate as calculated based
on the index is less than an alternate rate calculated for such Distribution
Date based on interest collections on the Student Loans (the amount of such
difference, the "Index Shortfall Carryover"), the Interest Rate for such
Distribution Date will be such alternate rate and the Index Shortfall Carryover
shall be payable as described in such Prospectus Supplement. Payment of the
Index Shortfall Carryover generally will be lower in priority than payment of
interest on the Notes at the Interest Rate (whether the Interest Rate is based
on the index or such alternate rate) and, accordingly, the nonpayment of the
Index Shortfall Carryover on any Distribution Date will not generally constitute
a default in the payment of interest on such Notes.
If an Event of Default should occur and be continuing with respect to the
Notes of any series, the related Indenture Trustee or holders of a majority in
principal amount of such Notes then outstanding may declare the principal of
such Notes to be immediately due and payable. Unless otherwise specified in the
related Prospectus Supplement, such declaration may be rescinded by the holders
of a majority in principal amount of such Notes then outstanding if (x) the
related Trust has paid or deposited with the Indenture Trustee a sum equal to
all amounts then due with respect to the Notes (without giving effect to such
acceleration) and (y) all Events of Default, other than the nonpayment of the
principal of the Notes that has become due solely by such acceleration, have
been cured or, under the circumstances described below, waived.
If the Notes of any series have been declared to be due and payable
following an Event of Default with respect thereto, the related Indenture
Trustee may, in its discretion, exercise remedies as a secured party, require
the related Eligible Lender Trustee to sell the Student Loans or elect to have
the related Eligible Lender Trustee maintain possession of the Student Loans and
continue to apply collections with respect to such Student Loans as if there had
been no declaration of acceleration. Unless otherwise specified in the related
Prospectus Supplement, however, the related Indenture Trustee is prohibited from
directing the related Eligible Lender Trustee to sell the Student Loans
following an Event of Default, other than a default in the payment of any
principal or a default for five days or more in the payment of any interest on
any Note with respect to any series, unless:
(1) the holders of all such outstanding Notes consent to such sale;
(2) the proceeds of such sale are sufficient to pay in full the principal
of and the accrued interest on such outstanding Notes at the date of
such sale; or
(3) the related Indenture Trustee determines that the collections on the
Student Loans would not be sufficient on an ongoing basis to make all
payments on such Notes as such payments would have become due if such
obligations had not been declared due and payable, and the related
Indenture Trustee obtains the consent of the holders of 66 2/3% of the
aggregate principal amount of such Notes then outstanding;
PROVIDED, that the Indenture Trustee may not sell or otherwise liquidate the
Student Loans following an Event of Default, other than a default in the payment
of any principal on the final scheduled Distribution Date for a class of Notes
or a default of five days or more on the payment of any interest on any Note,
unless:
(a) the proceeds of the sale or liquidation of the Student Loans
distributable to the Certificateholders are sufficient to pay to the
Certificateholders the outstanding Certificate Balance plus accrued
and unpaid interest thereon; or
(b) after receipt of notice from the Eligible Lender Trustee that the
proceeds of such sale or liquidation distributable to the
Certificateholders would not be sufficient to pay to the
Certificateholders the outstanding Certificate Balance plus accrued
and unpaid interest thereon, the Certificateholders of at least a
majority of the outstanding Certificate Balance consent thereto;
PROVIDED, FURTHER that the Indenture Trustee may not sell or otherwise liquidate
the Student Loans following an Event of Default, other than a default in the
payment of any principal on the final scheduled Distribution Date for a class of
Notes or a default of five days or more on the payment of any interest on any
Note unless:
(x) proceeds of the sale or liquidation of the Student Loans distributable
from such sale are sufficient (1) to pay to Noteholders, the
outstanding principal balance of the Notes (other than the
Noteholders' Index Shortfall Carryover) and (2) to pay to
Certificateholders, the outstanding Certificate Balance plus accrued
and unpaid interest thereon (other than the Certificateholders' Index
Shortfall Carryover); or
(y) after receipt of notice from the Eligible Lender Trustee that the
proceeds of such sale or liquidation would not be sufficient (1) to
pay to Noteholders, the outstanding principal balance of the Notes
(other than the Noteholders' Index Shortfall Carryover) and (2) to pay
to Certificateholders the outstanding Certificate Balance plus accrued
and unpaid interest thereon (other than the Certificateholders' Index
Shortfall Carryover).
If the proceeds of any such sale are insufficient to pay the then outstanding
principal amount of the Notes and any accrued interest, such proceeds shall be
distributed to the holders of Notes on a pro rata basis, based on the amount
then owing on each class of Notes.
Subject to the provisions of the applicable Indenture relating to the
duties of the related Indenture Trustee, if an Event of Default should occur and
be continuing with respect to a series of Notes, the related Indenture Trustee
will be under no obligation to exercise any of the rights or powers under the
applicable Indenture at the request or direction of any of the holders of such
Notes, if such Indenture Trustee reasonably believes it will not be adequately
indemnified against the costs, expenses and liabilities which might be incurred
by it in complying with such request. Subject to such provisions for
indemnification and certain limitations contained in the related Indenture, the
holders of a majority in principal amount of the outstanding Notes of a given
series will have the right to direct the time, method and place of conducting
any proceeding or any remedy available to such Indenture Trustee and the holders
of a majority in principal amount of such Notes then outstanding may, in certain
cases, waive any default with respect thereto, except a default in the payment
of principal or interest or a default in respect of a covenant or provision of
the applicable Indenture that cannot be modified without the waiver or consent
of all the holders of such outstanding Notes.
No holder of Notes of any series will have the right to institute any
proceeding with respect to the related Indenture, unless:
(a) such holder previously has given to the applicable Indenture Trustee
written notice of a continuing Event of Default,
(b) the holders of not less than 25% in principal amount of such
outstanding Notes have requested in writing that such Indenture
Trustee institute such proceeding in its own name as Indenture
Trustee,
(c) such holder or holders have offered such Indenture Trustee reasonable
indemnity,
(d) such Indenture Trustee has for 60 days failed to institute such
proceeding, and
(e) no direction inconsistent with such written request has been given to
such Indenture Trustee during such 60-day period by the holders of a
majority in principal amount of such outstanding Notes.
In addition, each Indenture Trustee and the related Noteholders will
covenant that they will not at any time institute against the applicable Trust
any bankruptcy, reorganization or other proceeding under any federal or state
bankruptcy or similar law.
With respect to any Trust, none of the related Indenture Trustee, the
Seller, the Administrator, the Master Servicers, the Sub-Servicers or the
Eligible Lender Trustee in its individual capacity, or any holder of a
Certificate representing an ownership interest in the applicable Trust, or any
of their respective owners, beneficiaries, agents, officers, directors,
employees, successors or assigns will, in the absence of an express agreement to
the contrary, be personally liable for the payment of the principal of or
interest on the Notes or for the agreements of the Trust contained in the
Indenture.
CERTAIN COVENANTS. Each Indenture will provide that the related Trust may
not consolidate with or merge into any other entity, unless:
(a) the entity formed by or surviving such consolidation or merger is
organized under the laws of the United States of America, any state
thereof or the District of Columbia,
(b) such entity expressly assumes such Trust's obligation to make due and
punctual payments upon the Notes of the related series and the
performance or observance of every agreement and covenant of such
Trust under the related Indenture,
(c) no Event of Default shall have occurred and be continuing immediately
after such merger or consolidation,
(d) such Trust has been advised that the ratings of the Notes and the
Certificates of the related series would not be reduced or withdrawn
by the Rating Agencies (as such term is defined in the related
Prospectus Supplement, each a "Rating Agency" and collectively, the
"Rating Agencies") as a result of such merger or consolidation, and
(e) such Trust has received an opinion of counsel to the effect that such
consolidation or merger would have no material adverse federal or
Pennsylvania state tax consequence to such Trust or to any
Certificateholder or Noteholder of the related series.
Each Trust will not, among other things:
o except as expressly permitted by the applicable Indenture, the
applicable Transfer and Servicing Agreements or certain related
documents (collectively, the "Related Documents"), sell, transfer,
exchange or otherwise dispose of any of the assets of such Trust,
o claim any credit on or make any deduction from the principal and
interest payable in respect of the Notes of the related series (other
than amounts withheld under the Internal Revenue Code of 1986, as
amended or applicable state law) or assert any claim against any
present or former holder of such Notes because of the payment of taxes
levied or assessed upon such Trust,
o except as contemplated by the Related Documents, dissolve or liquidate
in whole or in part,
o permit the validity or effectiveness of the applicable Indenture to be
impaired or permit any person to be released from any covenants or
obligations with respect to such Notes under the applicable Indenture
except as may be expressly permitted thereby, or
o permit any lien, charge, excise, claim, security interest, mortgage or
other encumbrance to be created on or extend to or otherwise arise
upon or burden the assets of the Trust or any part thereof, or any
interest therein or the proceeds thereof, except as expressly
permitted by the Related Documents.
No Trust may engage in any activity other than financing, purchasing,
owning, selling and managing Student Loans and the other assets of the Trust and
making Additional Fundings, in each case in the manner contemplated by the
Related Documents and activities incidental thereto. No Trust will incur, assume
or guarantee any indebtedness other than indebtedness incurred pursuant to the
Notes of the related series and the applicable Indenture or otherwise in
accordance with the Related Documents.
ANNUAL COMPLIANCE STATEMENT. Each Trust will be required to file annually
with the applicable Indenture Trustee a written statement as to the fulfillment
of its obligations under the related Indenture.
INDENTURE TRUSTEE'S ANNUAL REPORT. Each Indenture Trustee will be required
to mail each year to all related Noteholders a brief report relating to, among
other things, its eligibility and qualification to continue as such Indenture
Trustee under the applicable Indenture, any amounts advanced by it under the
Indenture, the amount, interest rate and maturity date of certain indebtedness
owing by such Trust to the applicable Indenture Trustee in its individual
capacity, the property and funds physically held by the applicable Indenture
Trustee as such and any action taken by it that materially affects the related
Notes and that has not been previously reported.
SATISFACTION AND DISCHARGE OF INDENTURE. An Indenture will be discharged
with respect to the collateral securing the related Notes upon the delivery to
the related Indenture Trustee for cancellation of all such Notes or, with
certain limitations, upon deposit with such Indenture Trustee of funds
sufficient for the payment in full of all such Notes.
THE INDENTURE TRUSTEE. The Indenture Trustee for a series of Notes will be
specified in the related Prospectus Supplement. The Indenture Trustee for any
series may resign at any time, in which event the Trust will be obligated to
appoint a successor trustee for such series. The Trust may also remove any such
Indenture Trustee if such Indenture Trustee ceases to be eligible to continue as
such under the related Indenture or if such Indenture Trustee becomes insolvent.
In such circumstances, the Trust will be obligated to appoint a successor
trustee for the applicable series of Notes. Any resignation or removal of the
Indenture Trustee and appointment of a successor trustee for any series of Notes
does not become effective until acceptance of the appointment by the successor
trustee for such series.
DESCRIPTION OF THE CERTIFICATES
GENERAL
With respect to each Trust, one or more classes of certificates
("Certificates") of a given series will, unless otherwise specified in the
related Prospectus Supplement, be issued pursuant to the terms of a Trust
Agreement, a form of which has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part. The following summary describes
the material terms of the Certificates and the Trust Agreement. The summary does
not purport to be complete and is qualified in its entirety by reference to all
the provisions of the Certificates and the Trust Agreement.
Each class of Certificates is expected to be initially represented by a
single Certificate registered in the name of DTC, except as set forth below.
Except for the Certificates of a given series purchased by the Seller or an
affiliate of the Seller specified in the related Prospectus Supplement, the
Certificates are expected to be available for purchase in book-entry form only.
The Seller has been informed by DTC that DTC's nominee will be Cede, unless
another nominee is specified in the related Prospectus Supplement. Accordingly,
such nominee is expected to be the holder of record of the Certificates of any
series that are not purchased by the Seller or an affiliate of the Seller.
Unless and until Definitive Certificates are issued under the limited
circumstances described in this Prospectus or in the related Prospectus
Supplement, no Certificateholder (other than the Seller or an affiliate of the
Seller) will be entitled to receive a physical certificate representing a
Certificate. All references in this Prospectus and in the related Prospectus
Supplement to actions by Certificateholders (other than the Seller or an
affiliate of the Seller) refer to actions taken by DTC upon instructions from
the Participants and all references in this Prospectus and in the related
Prospectus Supplement to distributions, notices, reports and statements to
Certificateholders (other than the Seller or an affiliate of the Seller) refer
to distributions, notices, reports and statements to DTC or its nominee, as the
case may be, as the registered holder of the Certificates, for distribution to
Certificateholders in accordance with DTC's procedures with respect thereto. See
"Certain Information Regarding the Securities--Book-Entry Registration" and
"--Definitive Securities." Unless otherwise specified in the related Prospectus
Supplement, Certificates of a given series owned by the Seller or its affiliates
will be entitled to equal and proportionate benefits under the applicable Trust
Agreement, except that, assuming that all Certificates of a given series are not
all owned by the Seller and its affiliates, the Certificates owned by the Seller
and its affiliates will be deemed not to be outstanding for the purpose of
determining whether the requisite percentage of Certificateholders has given any
request, demand, authorization, direction, notice, consent or other action under
the Related Documents (other than the commencement by the related Trust of a
voluntary proceeding in bankruptcy as described under "Description of the
Transfer and Servicing Agreements--Insolvency Event").
PRINCIPAL AND INTEREST IN RESPECT OF THE CERTIFICATES
The timing and priority of distributions, seniority, allocations of losses,
interest at a per annum interest rate (the "Pass-Through Rate") and amount of or
method of determining distributions with respect to principal and interest of
each class of Certificates of a given series will be described in the related
Prospectus Supplement. Distributions of interest on such Certificates will be
made on each Distribution Date and will be made prior to distributions with
respect to principal of such Certificates. Each class of Certificates may have a
different Pass-Through Rate, which may be a fixed, variable or adjustable
Pass-Through Rate or any combination of the foregoing. The related Prospectus
Supplement will specify the Pass-Through Rate for each class of Certificates of
a given series or the method for determining such Pass-Through Rate. See also
"Certain Information Regarding the Securities--Fixed Rate Securities" and
"--Floating Rate Securities." Distributions in respect of the Certificates of a
given series may be subordinate to payments in respect of the Notes of such
series as more fully described in the related Prospectus Supplement.
Distributions in respect of interest on and principal of any class of
Certificates will be made on a pro rata basis among all the Certificateholders
of such class.
In the case of a series of Certificates which includes two or more classes
of Certificates, the timing, sequential order, priority of payment or amount of
distributions in respect of interest and principal, and any schedule or formula
or other provisions applicable to the determination thereof, of each such class
shall be as set forth in the related Prospectus Supplement.
See "Description of the Transfer and Servicing Agreements--Credit and Cash
Flow Enhancement--RESERVE ACCOUNT" for a description of the Reserve Account and
the distribution of amounts in excess of the Specified Reserve Account Balance.
CERTAIN INFORMATION REGARDING THE SECURITIES
FIXED RATE SECURITIES
Each class of Securities may bear interest at a fixed rate per annum
("Fixed Rate Securities") or at a variable or adjustable rate per annum
("Floating Rate Securities"), as more fully described below and in the
applicable Prospectus Supplement. Each class of Fixed Rate Securities will bear
interest at the applicable per annum Interest Rate or Pass-Through Rate, as the
case may be, specified in the applicable Prospectus Supplement. Interest on each
class of Fixed Rate Securities will be computed on the basis of a 360-day year
of twelve 30-day months. See "Description of the Notes--Principal of and
Interest on the Notes" and "Description of the Certificates--Principal and
Interest in Respect of the Certificates."
FLOATING RATE SECURITIES
Each class of Floating Rate Securities will bear interest for each
applicable Interest Reset Period (as such term is defined in the related
Prospectus Supplement with respect to a class of Floating Rate Securities,
"Interest Reset Period") at a rate per annum determined by reference to an
interest rate basis (the "Base Rate"), plus or minus the Spread, if any, or
multiplied by the Spread Multiplier, if any, in each case as specified in the
related Prospectus Supplement. The "Spread" is the number of basis points (one
basis point equals one one-hundredth of a percentage point) that may be
specified in the applicable Prospectus Supplement as being applicable to such
class, and the "Spread Multiplier" is the percentage that may be specified in
the applicable Prospectus Supplement as being applicable to such class.
The applicable Prospectus Supplement will designate a Base Rate for a given
Floating Rate Security based on the London interbank offered rate ("LIBOR"),
commercial paper rates, Federal funds rates, U.S. Government treasury securities
rates, negotiable certificates of deposit rates or another rate or rates as set
forth in such Prospectus Supplement.
As specified in the applicable Prospectus Supplement, Floating Rate
Securities of a given class may also have either or both of the following (in
each case expressed as a rate per annum): (a) a maximum limitation, or ceiling,
on the rate at which interest may accrue during any interest period and (b) a
minimum limitation, or floor, on the rate at which interest may accrue during
any interest period. In addition to any maximum interest rate that may be
applicable to any class of Floating Rate Securities, the interest rate
applicable to any class of Floating Rate Securities will in no event be higher
than the maximum rate permitted by applicable law, as the same may be modified
by United States law of general application.
Each Trust with respect to which a class of Floating Rate Securities will
be issued will appoint, and enter into agreements with, a calculation agent
(each, a "Calculation Agent") to calculate interest rates on each such class of
Floating Rate Securities issued with respect thereto. The applicable Prospectus
Supplement will set forth the identity of the Calculation Agent for each such
class of Floating Rate Securities of a given series, which may be the
Administrator, the Eligible Lender Trustee or the Indenture Trustee with respect
to such series. All determinations of interest by the Calculation Agent shall,
in the absence of manifest error, be conclusive for all purposes and binding on
the holders of Floating Rate Securities of a given class. Unless otherwise
specified in the applicable Prospectus Supplement, all percentages resulting
from any calculation of the rate of interest on a Floating Rate Security will be
rounded, if necessary, to the nearest 1/100,000 of 1% (.0000001), with five
one-millionths of a percentage point rounded upward.
BOOK-ENTRY REGISTRATION
Persons acquiring beneficial ownership interests in the Notes may hold
their interests through DTC in the United States or Cedelbank ("Cedel") or The
Euroclear System ("Euroclear") in Europe and persons acquiring beneficial
ownership interests in the Certificates may hold their interests through DTC.
Securities will be registered in the name of Cede as nominee for DTC. Cedel and
Euroclear will hold omnibus positions with respect to the Notes on behalf of
Cedel Participants and the Euroclear Participants, respectively, through
customers' securities accounts in Cedel's and Euroclear's name on the books of
their respective depositaries (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 laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the UCC and a "clearing agency" registered
pursuant to Section 17A of the Exchange Act. DTC was created to hold securities
for its Participants and to facilitate the clearance and settlement of
securities transactions between Participants through electronic book-entries,
thereby eliminating the need for physical movement of certificates. Participants
include securities brokers and dealers, banks, trust companies and clearing
corporations. Indirect access to the DTC system also is available to others such
as banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly
("Indirect Participants").
Noteholders and Certificateholders (collectively, "Securityholders") that
are not Participants or Indirect Participants but desire to purchase, sell or
otherwise transfer ownership of, or other interests in, Securities held through
DTC may do so only through Participants and Indirect Participants. In addition,
Securityholders will receive all distributions of principal and interest from
the related Indenture Trustee or the related Eligible Lender Trustee, as
applicable (the "Applicable Trustee"), through Participants and Indirect
Participants. Under a book-entry format, Securityholders may experience some
delay in their receipt of payments, since such payments will be forwarded by the
Applicable Trustee to DTC's nominee. DTC will forward such payments to its
Participants, which thereafter will forward them to Indirect Participants or
Securityholders. Except for the Seller or an affiliate of the Seller with
respect to any series of Securities, it is anticipated that the only
"Securityholder," "Certificateholder" and "Noteholder" will be DTC's nominee.
Securityholders will not be recognized by the Applicable Trustee as Noteholders
or Certificateholders, as such terms are used in each Indenture and each Trust
Agreement, respectively, and Securityholders will be permitted to exercise the
rights of Securityholders only indirectly through DTC and its Participants.
Transfers between DTC participants will occur in the ordinary way 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.
Because of time-zone differences, credits of securities received in Cedel
or Euroclear as a result of a transaction with a DTC Participant will be made
during subsequent securities settlement processing and dated the business day
following the DTC settlement date. Such credits or any transactions in such
securities settled during such processing will be reported to the relevant
Euroclear Participants or Cedel Participants on such business day. Cash received
in Cedel or Euroclear as a result of sales of securities by or through a Cedel
Participant or a Euroclear Participant to a 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.
Cross-market transfers between persons holding Notes directly or indirectly
through DTC, on the one hand, and directly or indirectly through Cedel
Participants or Euroclear Participants, on the other, will be effected in DTC in
accordance with DTC Rules on behalf of the relevant European international
clearing system by its 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 Depositary to take action
to effect final settlement on its behalf by delivering or receiving securities
in DTC, and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. Cedel Participants and Euroclear
Participants may not deliver instructions directly to the Depositaries.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
Securities among Participants on whose behalf it acts with respect to the
Securities and to receive and transmit distributions of principal of, and
interest on, the Securities. Participants and Indirect Participants with which
Securityholders have accounts with respect to the Securities similarly are
required to make book-entry transfers and receive and transmit such payments on
behalf of their respective Securityholders. Accordingly, although
Securityholders will not possess Securities, the Rules provide a mechanism by
which Participants will receive payments and will be able to transfer their
interests.
Because DTC can only act on behalf of Participants, which in turn act on
behalf of Indirect Participants and certain banks, the ability of a
Securityholder to pledge Securities to persons or entities that do not
participate in the DTC system, or to otherwise act with respect to such
Securities, may be limited due to the lack of a physical certificate for such
Securities.
Management of DTC is aware that some computer applications, systems and the
like for processing data ("Systems") that are dependent upon calendar dates,
including dates before, on, and after January 1, 2000, may encounter "Year 2000
problems" DTC has informed Direct and Indirect Participants and other members of
the financial community (the "Industry") that it has developed and is
implementing a program so that its Systems, as the same relate to the timely
payment of distributions (including principal and interest payments) to
securityholders, book-entry deliveries, and settlement of trades within DTC
("Depository Services"), continue to function appropriately. This program
includes a technical assessment and a remediation plan, each of which is
complete. Additionally, DTC's plan includes a testing phase, which is expected
to be completed within appropriate time frames.
However, DTC's ability to perform properly its services is also dependent
upon other parties, including, but not limited to, issuers and their agents, as
well as DTC's Direct and Indirect Participants, third party vendors from whom
DTC licenses software and hardware, and third party vendors on whom DTC relies
for information or the provision of services, including telecommunication and
electrical utility service providers, among others. DTC has informed the
Industry that it is contacting (and will continue to contact) third party
vendors from whom DTC acquires services to: (i) impress upon them the importance
of such services being Year 2000 compliant; and (ii) determine the extent of
their efforts for Year 2000 remediation (and, as appropriate, testing) of their
services. In addition, DTC is in the process of developing such contingency
plans as it deems appropriate.
Appropriate to DTC, the information in the preceding two paragraphs with
respect to DTC has been provided to the Industry for informational purposes only
and is not intended to serve as a representation, warranty, or contract
modification of any kind.
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 any underwriters, agents or dealers with respect
to the Notes offered hereby. Indirect access to Cedel is also available to
others, such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a Cedel Participant, either directly
or indirectly.
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 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 several 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"), under contract with Euroclear
Clearance Systems, S.C., a Belgian cooperative corporation (the "Cooperative").
All operations are conducted by the Euroclear Operator, and all Euroclear
securities clearance accounts and Euroclear cash accounts are accounts with the
Euroclear Operator, not the Cooperative. The Cooperative establishes policy for
the Euroclear System on behalf of Euroclear Participants. Euroclear Participants
include banks (including central banks), securities brokers and dealers and
other professional financial intermediaries and may include any underwriters,
agents or dealers with respect to the Notes offered hereby. Indirect access to
the Euroclear System is also available to other firms that clear through or
maintain a custodial relationship with a Euroclear Participant, either directly
or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within the Euroclear System, withdrawals of
securities and cash from the Euroclear System and receipts of payments with
respect to securities in the Euroclear System. All securities in the Euroclear
System are held on a fungible basis without attribution of specific certificates
to specific securities clearance accounts. The Euroclear Operator acts under the
Terms and Conditions only on behalf of Euroclear Participants and has no record
of or relationship with persons holding through Euroclear Participants.
Distributions with respect to Notes held through Cedel or Euroclear will be
credited to the cash accounts of Cedel Participants or Euroclear Participants in
accordance with the relevant system's rules and procedures, to the extent
received by its Depository. Such distributions will be subject to tax reporting
in accordance with relevant United States tax laws and regulations. Cedel or the
Euroclear Operator, as the case may be, will take any other action permitted to
be taken by a beneficial holder of Notes under the Indenture on behalf of a
Cedel Participant or Euroclear Participant only in accordance with its relevant
rules and procedures and subject to its Depository's ability to effect such
actions on its behalf through DTC.
DTC has advised the Administrator that it will take any action permitted to
be taken by a Securityholder under the related Indenture or the related Trust
Agreement, as the case may be, only at the direction of one or more Participants
to whose accounts with DTC the Securities are credited. DTC may take conflicting
actions with respect to other undivided interests to the extent that such
actions are taken on behalf of Participants whose holdings include such
undivided interests.
Although DTC, Cedel and Euroclear have agreed to the foregoing procedures
in order to facilitate transfers of interests in the Notes among Participants of
DTC, Cedel and Euroclear, they are under no obligation to perform or continue to
perform such procedures and such procedures may be discontinued at any time.
NONE OF THE TRUST, THE SELLER, THE MASTER SERVICER, ANY SUB-SERVICERS, THE
ADMINISTRATOR, THE ELIGIBLE LENDER TRUSTEE, THE INDENTURE TRUSTEE NOR THE
UNDERWRITERS WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO ANY PARTICIPANTS,
CEDEL PARTICIPANTS OR EUROCLEAR PARTICIPANTS OR THE PERSONS FOR WHOM THEY ACT AS
NOMINEES WITH RESPECT TO (1) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC,
CEDEL OR EUROCLEAR OR ANY PARTICIPANT, (2) THE PAYMENT BY DTC, CEDEL OR
EUROCLEAR OR ANY PARTICIPANT OF ANY AMOUNT DUE TO ANY BENEFICIAL OWNER IN
RESPECT OF THE PRINCIPAL AMOUNT OF OR INTEREST ON THE SECURITIES, (3) THE
DELIVERY BY ANY PARTICIPANT, CEDEL PARTICIPANT OR EUROCLEAR PARTICIPANT OF ANY
NOTICE TO ANY BENEFICIAL OWNER WHICH IS REQUIRED OR PERMITTED UNDER THE TERMS OF
THE INDENTURE OR THE TRUST AGREEMENT TO BE GIVEN TO SECURITYHOLDERS OR (4) ANY
OTHER ACTION TAKEN BY DTC AS THE SECURITYHOLDER.
DEFINITIVE SECURITIES
Except with respect to the Certificates of a given series that may be
purchased by the Seller or an affiliate of the Seller, the Notes and the
Certificates of a given series will be issued in fully registered, certificated
form ("Definitive Notes" and "Definitive Certificates", respectively, and
collectively referred to herein as "Definitive Securities") to Noteholders or
Certificateholders or their respective nominees, rather than to DTC or its
nominee, only if:
(a) the related Administrator advises the Applicable Trustee in writing
that DTC is no longer willing or able to discharge properly its
responsibilities as depository with respect to the Securities and the
Administrator is unable to locate a qualified successor,
(b) the Administrator, at its option, elects to terminate the book-entry
system through DTC, or
(c) after the occurrence of an Event of Default, a Master Servicer Default
or a Sub-Servicer Default, Securityholders representing at least a
majority of the outstanding principal amount of the Notes or the
Certificates, as the case may be, of such series advise the Applicable
Trustee through DTC in writing that the continuation of a book-entry
system through DTC (or a successor thereto) with respect to such Notes
or Certificates is no longer in the best interest of the holders of
such Securities.
Upon the occurrence of any event described in the immediately preceding
paragraph, the Applicable Trustee will be required to notify all applicable
Securityholders of a given series through Participants of the availability of
Definitive Securities. Upon surrender by DTC of the Definitive Securities
representing the corresponding Securities and receipt of instructions for re-
registration, the Applicable Trustee will reissue such Securities as Definitive
Securities to such Securityholders.
Distributions of principal of, and interest on, such Definitive Securities
will thereafter be made by the Applicable Trustee in accordance with the
procedures set forth in the related Indenture or the related Trust Agreement, as
the case may be, directly to holders of Definitive Securities in whose names the
Definitive Securities were registered at the close of business on the applicable
Record Date which will be the business day preceding each Distribution Date,
unless otherwise specified in the related Prospectus Supplement (the "Record
Date") specified for such Securities in the related Prospectus Supplement. Such
distributions will be made by check mailed to the address of such holder as it
appears on the register maintained by the Applicable Trustee. The final payment
on any such Definitive Security, however, will be made only upon presentation
and surrender of such Definitive Security at the office or agency specified in
the notice of final distribution to applicable Securityholders.
Definitive Securities will be transferable and exchangeable at the offices
of the Applicable Trustee or of a registrar named in a notice delivered to
holders of Definitive Securities. No service charge will be imposed for any
registration of transfer or exchange, but the Applicable Trustee may require
payment of a sum sufficient to cover any tax or other governmental charge
imposed in connection therewith.
LIST OF SECURITYHOLDERS
Three or more holders of Notes or one or more holders of Notes evidencing
not less than 25% of the aggregate outstanding principal balance of such Notes
may, by written request to the related Indenture Trustee, obtain access to the
list of all Noteholders maintained by such Indenture Trustee for the purpose of
communicating with other Noteholders with respect to their rights under the
related Indenture or such Notes. Such Indenture Trustee may elect not to afford
the requesting Noteholders access to the list of Noteholders if it agrees to
mail the desired communication or proxy, on behalf and at the expense of the
requesting Noteholders, to all Noteholders of such series.
Three or more Certificateholders of such series or one or more holders of
such Certificates evidencing not less than 25% of the Certificate Balance of
such Certificates may, by written request to the related Eligible Lender
Trustee, obtain access to the list of all Certificateholders for the purpose of
communicating with other Certificateholders with respect to their rights under
the related Trust Agreement or under such Certificates.
REPORTS TO SECURITYHOLDERS
With respect to each series of Securities, on each Distribution Date, the
Applicable Trustee will provide to Securityholders of record as of the related
Record Date a statement setting forth substantially the same information as is
required to be provided on the periodic report provided to the related Indenture
Trustee and the related Trust described under "Description of the Transfer and
Servicing Agreements--Statements to Indenture Trustee and Trust". Such
statements will be filed with the Commission during the period required by Rule
15d-1 under the Exchange Act and will not be filed with the Commission
thereafter. The statements provided to Securityholders will not constitute
financial statements prepared in accordance with generally accepted accounting
principles.
Unless and until Definitive Notes or Definitive Certificates are issued,
quarterly and annual unaudited reports containing information concerning the
Student Loans will be prepared by [the Master Servicer] and sent on behalf of
the related Trust only to Cede, as nominee of DTC and registered holder of the
Notes and the Certificates, but will not be sent to any beneficial holder of the
Securities.
Within the prescribed period of time for tax reporting purposes after the
end of each calendar year during the term of each Trust, the Applicable Trustee
will mail to each person who at any time during such calendar year was a
Securityholder with respect to such Trust and received any payment thereon, a
statement containing certain information for the purposes of such
Securityholder's preparation of federal income tax returns. See "Income Tax
Consequences."
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
GENERAL
The following is a summary of the material terms of each of the following:
o Sale and Servicing Agreement (each a "Sale and Servicing Agreement"),
pursuant to which the related Eligible Lender Trustee on behalf of a
Trust will purchase Student Loans from the Seller and the Master
Servicer will (or will cause the related Sub-Servicers to) service
the same;
o Administration Agreement, pursuant to which the Administrator will
undertake certain administrative duties with respect to a Trust and
the Student Loans; and
o Trust Agreement, pursuant to which a Trust will be created and the
related Certificates will be issued (collectively, the "Transfer and
Servicing Agreements").
Forms of each of the Transfer and Servicing Agreements have been filed as
exhibits to the Registration Statement of which this Prospectus is a part.
However, this summary does not purport to be complete and is qualified in its
entirety by reference to all of the provisions of the Transfer and Servicing
Agreements.
In addition, and if so provided in the related Prospectus Supplement, the
Master Servicer may directly assume servicing responsibilities for some or all
of a pool of Student Loans without a sub-servicer, or the related Trust may
contract directly with one or more Sub-Servicers, pursuant to the related Sale
and Servicing Agreement, to perform all of the requisite servicing
responsibilities with respect to the related pool of Student Loans without the
appointment of a master servicer, on the terms and conditions set forth herein
and therein.
SALE OF STUDENT LOANS; REPRESENTATIONS AND WARRANTIES
On or prior to the Closing Date specified with respect to any given Trust
in the related Prospectus Supplement (the "Closing Date"), the Seller will sell
and assign to the related Eligible Lender Trustee on behalf of such Trust,
without recourse, except as provided in the Sale and Servicing Agreement, its
entire interest in the Student Loans, all collections received and to be
received with respect thereto for the period on and after the Cutoff Date and
all the Assigned Rights pursuant to the Sale and Servicing Agreement. Each
Student Loan will be identified in a schedule appearing as an exhibit to such
Sale and Servicing Agreement. Each Eligible Lender Trustee will, concurrently
with such sale and assignment, execute, authenticate and deliver the related
Certificates and Notes.
In each Sale and Servicing Agreement, the Seller will make certain
representations and warranties with respect to the Student Loans to a Trust for
the benefit of the Certificateholders and the Noteholders of a given series,
including, among other things, that:
o each Student Loan, on the date on which it is transferred to such
Trust, is free and clear of all security interests, liens, charges and
encumbrances and no offsets, defenses or counterclaims with respect
thereto have been asserted or threatened;
o the information provided with respect to the Student Loans is true and
correct as of the Cutoff Date; and
o each Student Loan, at the time it was originated, complied and, at the
Closing Date, complies in all material respects with applicable
federal and state laws (including, without limitation, the Higher
Education Act) and applicable restrictions imposed by the Programs or
any Guarantee Agreement.
Following the discovery by or notice to the Seller of a breach of any
representation or warranty with respect to any Student Loan that materially and
adversely affects the interests of the related Certificateholders or the
Noteholders in such Student Loan (it being understood that any such breach that
does not affect any Guarantor's obligation to guarantee payment of such Student
Loan will not be considered to have such a material adverse effect), the Seller
will, unless such breach is cured within 60 days, repurchase such Student Loan
from the related Eligible Lender Trustee, as of the first day following the end
of such 60-day period that is the last day of a Collection Period (as such term
is defined in the related Prospectus Supplement, the "Collection Period") at a
price equal to the unpaid principal balance owed by the applicable borrower plus
accrued interest thereon to the day of repurchase (the "Purchase Amount"). In
addition, the Seller will reimburse the related Trust with respect to a Student
Loan for any accrued interest amounts that a Guarantor refuses to pay pursuant
to its Guarantee Agreement due to, or for any Interest Subsidy Payments and
Special Allowance Payments that are lost or that must be repaid to the
Department as a result of, a breach of any such representation or warranty by
the Seller. The repurchase and reimbursement obligations of the Seller will
constitute the sole remedy available to or on behalf of the related Trust, the
Certificateholders or the Noteholders for any such uncured breach. The Seller's
repurchase and reimbursement obligations are contractual obligations pursuant to
the Sale and Servicing Agreement that may be enforced against the Seller, but
the breach of which will not constitute an Event of Default.
To assure uniform quality in servicing and to reduce administrative costs,
each Sub-Servicer will be appointed custodian of the promissory notes
representing the Student Loans which such Sub-Servicer is servicing and any
other related documents by the Master Servicer and the related Eligible Lender
Trustee on behalf of each Trust. The Seller's, the Master Servicer's and the
Sub-Servicers' records and computer systems will reflect the sale and assignment
by the Seller of the Student Loans to the related Eligible Lender Trustee on
behalf of the related Trust, and UCC financing statements reflecting such sale
and assignment will be filed.
ADDITIONAL FUNDINGS
In the case of a Trust having a Pre-Funding Account or an Escrow Account,
such Trust will use funds on deposit in such account from time to time during
the related Funding Period or Revolving Period, respectively, (x) to make
interest payments to Noteholders and Certificateholders in lieu of collections
of interest on certain of the Student Loans to the extent such interest is not
paid currently but is capitalized and added to the principal balance of such
Student Loans and (y) to fund the addition of Student Loans to the Trust under
the circumstances and having the characteristics described in the related
Prospectus Supplement ("Additional Fundings"). Such additional Student Loans may
be purchased by the Trust from the Seller or may be originated by the Trust, if
and to the extent specified in the related Prospectus Supplement.
There can be no assurance that substantially all of the amounts on deposit
in any Pre-Funding Account or Escrow Account will be expended during the
related Funding Period or Revolving Period, respectively. If the amount
initially deposited into a Pre-Funding Account or an Escrow Account for a series
has not been reduced to zero by the end of the related Funding Period or
Revolving Period, respectively, the amounts remaining on deposit therein will be
distributed to the related Securityholders in the amounts described in the
related Prospectus Supplement.
If and to the extent specified in the related Prospectus Supplement, the
related Trust may use distributions on the Student Loans, or may exchange
Student Loans with the Seller, in order to pay for Additional Fundings after any
Funding Period or Revolving Period.
ACCOUNTS
With respect to each Trust, the Administrator will establish and maintain
one or more accounts entitled the "Collection Account", the "Pre-Funding
Account", the "Escrow Account", the "Negative Carry Account" and the "Reserve
Account" (collectively, the "Trust Accounts"), in the name of the Indenture
Trustee on behalf of the Noteholders and the Certificateholders.
For any series of Securities funds in the Trust Accounts will be invested
as provided in the related Sale and Servicing Agreement in Eligible Investments.
"Eligible Investments" are generally limited to short-term U.S. government
backed securities, certain highly rated commercial paper and money market funds
and other investments acceptable to the Rating Agencies as being consistent with
the rating of the Securities. Subject to certain conditions, Eligible
Investments may include securities or other obligations issued by the Seller or
its affiliates, or trusts originated by the Seller or its affiliates, or shares
of investment companies for which the Seller or its affiliates may serve as the
investment advisor. Eligible Investments are limited to obligations or
securities that mature not later than the business day immediately preceding the
next Distribution Date. Investment earnings on funds deposited in the Trust
Accounts, net of losses and investment expenses (collectively, "Investment
Earnings"), will be deposited in the Collection Account on each Distribution
Date and will be treated as collections of interest on the related Student
Loans.
The Trust Accounts will be maintained as Eligible Deposit Accounts.
"Eligible Deposit Account" means either (a) a segregated account with an
Eligible Institution or (b) a segregated trust account with the corporate trust
department of a depository institution organized under the laws of the United
States of America or any one of the states thereof or the District of Columbia
(or any domestic branch of a foreign bank), having corporate trust powers and
acting as trustee for funds deposited in such account, so long as any of the
securities of such depository institution have a credit rating from each Rating
Agency in one of its generic rating categories which signifies investment grade.
Any such accounts may be maintained with the Seller or any of its affiliates, if
such accounts meet the requirements described in clause (a) of the preceding
sentence. "Eligible Institution" means a depository institution (which may be,
without limitation, the Seller or an affiliate thereof, or the Indenture Trustee
or an affiliate thereof) 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), which has a long-term unsecured debt rating
acceptable and/or a short-term unsecured debt rating or certificate of deposit
rating acceptable to the Rating Agencies, and the deposits of which are insured
by the Federal Deposit Insurance Corporation (the "FDIC").
SERVICING PROCEDURES
Pursuant to each Sale and Servicing Agreement, the Master Servicer will
agree to service, and perform all other related tasks with respect to, all the
Student Loans acquired from time to time on behalf of each Trust. So long as no
claim is being made against a Guarantor for any Student Loan, the Master
Servicer will designate the related Sub-Servicer to hold as custodian on its
behalf and on behalf of the Trust, the notes evidencing, and other documents
relating to, that Student Loan. Pursuant to the related Sale and Servicing
Agreement, the Master Servicer is responsible for performing all services and
duties customary to the servicing of Student Loans (including all collection
practices), and to do so (or to cause the Sub-Servicers to do so) with
reasonable care and in compliance with, and to otherwise comply with, all
standards and procedures provided for in the Higher Education Act, the Guarantee
Agreements and all other applicable federal and state laws. Notwithstanding the
foregoing, the Master Servicer may designate one or more Sub-Servicers to
perform some or all of the requisite duties listed above; provided, however,
that irrespective of the performance or non-performance by a Sub-Servicer, the
Master Servicer shall not be relieved of its responsibilities and obligations
under the Sale and Servicing Agreement.
Without limiting the foregoing, the duties of the Master Servicer (any or
all of which may be delegated by the Master Servicer to a Sub-Servicer) with
respect to each Trust under the related Sale and Servicing Agreement will
include, but not be limited to, the following: collecting and depositing into
the Collection Account (or in the event that daily deposits are not required,
paying to the Administrator) all payments, including claiming and obtaining any
Guarantee Payments, but excluding such tasks with respect to any Interest
Subsidy Payments and Special Allowance Payments with respect to the Student
Loans (as to which the Administrator and the Eligible Lender Trustee will
perform, see "--Administrator" below), responding to inquiries from borrowers
under the Student Loans, investigating delinquencies and sending out statements,
payment coupons and tax reporting information to borrowers. Notwithstanding the
foregoing, if any of the foregoing activities requires any consents, approvals
or licenses under the Higher Education Act or otherwise, the Master Servicer
shall designate one or more Sub-Servicers that possess such required consents,
approvals and licenses to perform some or all of the requisite duties listed
above; provided, however, that irrespective of the performance or non-
performance by such Sub-Servicer, the Master Servicer shall be responsible for
any failure of a Sub-Servicer to perform such activities. In addition, the
Master Servicer will (or will cause each Sub-Servicer to) keep ongoing records
with respect to such Student Loans and collections thereon and will furnish
quarterly and annual statements with respect to such information to the
Administrator, in accordance with the Master Servicer's or such Sub-Servicer's
customary servicing practices, as applicable, with respect to Student Loans and
as otherwise required in the related Sale and Servicing Agreement.
PAYMENTS ON STUDENT LOANS
With respect to each Trust, except as provided below, the Master Servicer
will (or will cause each Sub-Servicer to) deposit all payments on Student Loans
(from whatever source), and all proceeds of Student Loans collected by it during
each Collection Period into the Collection Account within two business days of
receipt thereof. Except as provided below, the Eligible Lender Trustee will
deposit all Interest Subsidy Payments and all Special Allowance Payments with
respect to the Student Loans received by it during each Collection Period into
the Collection Account within two business days of receipt thereof.
However, in the event that Mellon Bank, N.A. satisfies certain requirements
for monthly remittances and the Rating Agencies affirm their ratings of the
Notes and the Certificates of each series at the initial level, then so long as
Mellon Bank, N.A. is the Administrator and provided that (x) there exists no
Administrator Default and (y) each other condition to making monthly deposits as
may be specified by the Rating Agencies is satisfied, the Eligible Lender
Trustee and the Master Servicer will (and the Master Servicer will cause each
Sub-Servicer) to pay all the amounts referred to in the preceding paragraph that
would otherwise be deposited into the Collection Account to the Administrator,
and the Administrator will not be required to deposit such amounts into the
Collection Account until on or before the business day immediately preceding
each Monthly Servicing Payment Date (as such term is defined in the related
Prospectus Supplement, the "Monthly Servicing Payment Date") (to the extent of
the Master Servicing Fee payable on such date) and on or before the business day
immediately preceding each Distribution Date (to the extent of the remainder of
such amounts). In such event, the Administrator will deposit the aggregate
Purchase Amount of each Student Loans repurchased by the Seller and purchased by
the Master Servicer (or a Sub-Servicer) into the Collection Account on or before
the business day preceding each Distribution Date. Pending deposit into the
Collection Account, collections may be invested by the Administrator at its own
risk and for its own benefit, and will not be segregated from funds of the
Administrator.
MASTER SERVICER COVENANTS
With respect to each Trust, the Master Servicer will covenant in the
related Sale and Servicing Agreement that:
(a) it will (or will cause each Sub-Servicer to) duly satisfy all
obligations on its part to be fulfilled under or in connection with
the Student Loans, maintain in effect all qualifications required in
order to service the Student Loans and comply in all material respects
with all requirements of law in connection with servicing the Student
Loans, the failure to comply with which would have a materially
adverse effect on the related Certificateholders or Noteholders;
(b) it will not permit (nor will it allow any Sub-Servicer to permit) any
rescission or cancellation of a Student Loan except as ordered by a
court of competent jurisdiction or other government authority or as
otherwise consented to by the related Eligible Lender Trustee and the
related Indenture Trustee;
(c) it will do nothing to (nor will it permit any Sub-Servicer to) impair
the rights of the related Certificateholders and the related
Noteholders in the Student Loans; and
(d) it will not (nor will it permit any Sub-Servicer to) reschedule,
revise, defer or otherwise compromise with respect to payments due on
any Student Loan except pursuant to any applicable deferral or
forbearance periods or otherwise in accordance with its guidelines for
servicing student loans in general and those of the Seller in
particular and any applicable Program requirements.
Certain incentive programs currently or hereafter made available by the
Seller to borrowers may also be made available by the Master Servicer (or a
Sub-Servicer) to borrowers with Student Loans. Any such incentive program that
effectively reduces borrower payments on Student Loans and is not required by
the Higher Education Act will be applicable to the Student Loans only if and to
the extent that the Master Servicer (or a Sub-Servicer) receives payment from
the Seller in an amount sufficient to offset such effective yield reductions.
Under the terms of the related Sale and Servicing Agreement, unless
otherwise specified in the related Prospectus Supplement, if the Seller or the
Master Servicer (or a Sub-Servicer) discovers, or receives written notice, that
any covenant of Master Servicer (or a Sub-Servicer) set forth above has not been
complied with by the Master Servicer (or any Sub-Servicer) in all material
respects and such noncompliance has not been cured within 60 days thereafter and
has a materially adverse effect on the interest of the related
Certificateholders or Noteholders in any Student Loan (it being understood that
any such breach that does not affect any Guarantor's obligation to guarantee
payment of such Student Loan will not be considered to have such a material
adverse effect), unless such breach is cured, the Master Servicer will purchase
such Student Loan as of the first day following the end of such 60-day period
that is the last day of a Collection Period. In that event, the Master Servicer
will be obligated to deposit into the Collection Account an amount equal to the
Purchase Amount of such Student Loan and the related Trust's interest in any
such purchased Student Loan will be automatically assigned to the Master
Servicer. In addition, the Master Servicer will reimburse the related Trust with
respect to any Student Loan for any accrued interest amounts that a Guarantor
refuses to pay pursuant to its Guarantee Agreement due to, or for any Interest
Subsidy Payments and Special Allowance Payments that are lost or that must be
repaid to the Department as a result of, a breach of any such covenant of the
Master Servicer (or such Sub-Servicer).
MASTER SERVICING COMPENSATION
With respect to any Trust, the Master Servicer will be entitled to receive,
a servicing fee monthly in an amount in the aggregate equal to a specified
amount per annum of the Pool Balance as of the last day of the preceding
calendar month as set forth in the related Prospectus Supplement and certain
one-time fixed fees for each Student Loan for which a forbearance period was
granted or renewed or for which a guarantee claim was filed, in each case
subject to adjustment, together with other administrative fees and similar
charges specified in the related Prospectus Supplement as compensation for
performing the functions as servicers for the related Trust described above (the
"Master Servicing Fee"). The Master Servicing Fee (together with any portion of
the Master Servicing Fee that remains unpaid from prior Distribution Dates) will
be paid as specified in the applicable Prospectus Supplement.
The Master Servicing Fee will compensate the Master Servicer for performing
the functions of third party servicers of student loans as agents for their
beneficial owner, including collecting and posting all payments, responding to
inquiries of borrowers on the Student Loans, investigating delinquencies,
pursuing, filing and collecting any Guarantee Payments, accounting for
collections and furnishing monthly and annual statements to the Administrator.
The Master 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 Student Loans. The monthly
fees of the Sub-Servicers will be paid solely by the Master Servicer pursuant to
the terms of the applicable Sub-Servicing Agreement.
In the event of (x) any sale of the Student Loans on behalf of the Trust to
any person (other than the Seller, the Master Servicer, the Administrator, or
the Sub-Servicers) in which the purchaser elects to deconvert the Student Loans
and not retain the applicable Sub-Servicer as the servicer of such Student
Loans, or (y) any termination by the Trust of the applicable Sub-Servicer of the
Student Loans, except for any termination for cause or as a result of any
Sub-Servicer Default by the applicable Sub-Servicer, the Trust shall pay to the
Master Servicer, as a part of the Master Servicing Fee, a deconversion fee per
loan based on the status of the loan at the time of deconversion, in the amount
set forth in the related Prospectus Supplement, but only to the extent that the
Master Servicer is so obligated to the applicable Sub-Servicer.
DISTRIBUTIONS
With respect to each series of Securities, beginning on the Distribution
Date specified in the related Prospectus Supplement, distributions of principal
and interest on each class of such Securities entitled thereto will be made by
the applicable Trustee to the Noteholders and the Certificateholders of such
series. The timing, calculation, allocation, order, source, priorities of and
requirements for all payments to each class of Noteholders and all distributions
to each class of Certificateholders of such series will be set forth in the
related Prospectus Supplement.
With respect to each Trust, collections on the related Student Loans will
be distributed from the Collection Account on each Distribution Date to
Noteholders and Certificateholders to the extent provided in the related
Prospectus Supplement. Credit and cash flow enhancement, such as a Reserve
Account, will be available to cover any shortfalls in the amount available for
distribution on such date to the extent specified in the related Prospectus
Supplement. As more fully described in the related Prospectus Supplement, and
unless otherwise specified therein, distributions in respect of principal and/or
interest of a class of Securities of a given series will be subordinate to
distributions in respect of interest on one or more other classes of such
series, and distributions in respect of the Certificates of such series may be
subordinate to payments in respect of the Notes of such series.
CREDIT AND CASH FLOW ENHANCEMENT
GENERAL. The amounts and types of credit enhancement arrangements and the
provider thereof, if applicable, with respect to each class of Securities of a
given series, if any, will be set forth in the related Prospectus Supplement. If
and to the extent provided in the related Prospectus Supplement, credit
enhancement may be in the form of subordination of one or more classes of
Securities, Reserve Accounts, over-collateralization, letters of credit, credit
or liquidity facilities, surety bonds, guaranteed investment contracts,
repurchase obligations, interest rate swaps, interest rate caps, interest rate
floors, currency swaps, other agreements with respect to third party payments or
other support, cash deposits or such other arrangements as may be described in
the related Prospectus Supplement or any combination of two or more of the
foregoing. If specified in the applicable Prospectus Supplement, credit
enhancement for a class of Securities may cover one or more other classes of
Securities of the same series, and credit enhancement for a series of Securities
may cover one or more other series of Securities.
The presence of a Reserve Account and other forms of credit enhancement for
the benefit of any class or series of Securities is intended to enhance the
likelihood of receipt by the Securityholders of such class or series of the full
amount of principal and interest due thereon and to decrease the likelihood that
such Securityholders will experience losses. The credit enhancement for a class
or series of Securities generally will not provide protection against all risks
of loss and will not guarantee repayment of the entire principal balance and
interest thereon. If losses occur which exceed the amount covered by any credit
enhancement or which are not covered by any credit enhancement, Securityholders
of any class or series will bear their allocable share of deficiencies, as
described in the related Prospectus Supplement. In addition, if a form of credit
enhancement covers more than one series of Securities, Securityholders of any
such series will be subject to the risk that such credit enhancement will be
exhausted by the claims of Securityholders of other series.
RESERVE ACCOUNT. If so provided in the related Prospectus Supplement,
pursuant to the related Sale and Servicing Agreement, the Seller will establish
for a series or class of Securities a Reserve Account, as specified in the
related Prospectus Supplement, which will be maintained in the name of the
applicable Indenture Trustee. The Reserve Account will be funded by an initial
deposit, if any, by the Seller on the Closing Date in the amount set forth in
the related Prospectus Supplement. As further described in the related
Prospectus Supplement, the amount on deposit in the Reserve Account will be
increased on each Distribution Date thereafter up to the Specified Reserve
Account Balance by the deposit therein of the amount of collections on the
related Student Loans remaining on each such Distribution Date after the payment
of all other required payments and distributions on such date. Amounts in the
Reserve Account will be available to cover shortfalls in amounts due to the
holders of those classes of Securities specified in the related Prospectus
Supplement in the manner and under the circumstances specified therein. The
related Prospectus Supplement will also specify to whom and the manner and
circumstances under which amounts on deposit in the Reserve Account (after
giving effect to all other required distributions to be made by the applicable
Trust) in excess of the Specified Reserve Account Balance will be distributed.
The Reserve Account is intended to enhance the likelihood of timely receipt
by the holders of Notes and the holders of Certificates of the full amount of
interest due them and to decrease the likelihood that such holders will
experience losses. In certain circumstances, however, the Reserve Account could
be depleted.
STATEMENTS TO INDENTURE TRUSTEE AND TRUST
Prior to each Distribution Date with respect to each series of Securities,
the Administrator (based on the statements and other information provided to it
by the Master Servicer or the Sub-Servicers) will provide to the Indenture
Trustee and the Trust, as of the close of business on the last day of the
preceding Collection Period, a statement which will include the following
information (and any other information so specified in the related Prospectus
Supplement) with respect to such Distribution Date or the preceding Collection
Period as to the Notes and the Certificates of such series, to the extent
applicable:
1. the amount of the distribution allocable to principal of each class
of Securities;
2. the amount of the distribution allocable to interest on each class
of Securities, together with the interest rates applicable with respect
thereto;
3. the amount of the distribution, if any, allocable to any Index
Shortfall Carryover together with the outstanding amount, if any, thereof
after giving effect to any such distribution;
4. the Pool Balance as of the close of business on the last day of the
preceding Collection Period, after giving effect to payments allocated to
principal reported as described in clause (1.) above;
5. the aggregate outstanding principal balance of each class of Notes,
the Certificate Balance and each Pool Factor as of such Distribution Date,
after giving effect to payments allocated to principal reported under
clause (1.) above;
6. the amount of the Master Servicing Fee paid to the Master Servicer
and the amount of the Administration Fee paid to the Administrator with
respect to such Collection Period;
7. the Interest Rate or Pass-Through Rate for the next period for any
class of Notes or Certificates of such series with variable or adjustable
rates;
8. the amount of the aggregate realized losses, if any, for such
Collection Period and the balance of Student Loans that are delinquent in
each delinquency period as of the end of such Collection Period;
9. the Certificateholders' Index Carryover Shortfall, the Noteholders'
Index Carryover Shortfall, the Noteholders' Interest Carryover Shortfall,
the Noteholders' Principal Carryover Shortfall, the Certificateholders'
Interest Carryover Shortfall and the Certificateholders' Principal
Carryover Shortfall (each as defined in the related Prospectus Supplement),
if any, in each case as applicable to each class of Securities, and the
change in such amounts from the preceding statement;
10. the aggregate Purchase Amounts for Student Loans, if any, that
were purchased in such Collection Period;
11. the balance of the Reserve Account, if any, on such Distribution
Date, after giving effect to changes therein on such Distribution Date;
12. for Distribution Dates during the Funding Period, if any, the
remaining Pre-Funded Amount (as such term is defined in the related
Prospectus Supplement, the "Pre-Funded Amount") on such Distribution Date,
after giving effect to changes therein during the related Collection Period
or for each Distribution date during the Revolving Period, if any, the
amount on deposit in the Escrow Account; and
13. the aggregate amount of claim payments deposited into the
Collection Account expressed as a percentage of the Initial Pool Balance.
Each amount set forth pursuant to subclauses (1), (2) (5) and (6) with respect
to the Notes or the Certificates of any series will be expressed as a dollar
amount per $1,000 of the initial principal amount of such Notes or the initial
Certificate Balance of such Certificates, as applicable.
EVIDENCE AS TO COMPLIANCE
Each Sale and Servicing Agreement will provide that a firm of independent
public accountants will furnish to the Trust and the Indenture Trustee annually
a statement (based on a limited 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 and the Sub-Servicers
during the preceding calendar year (or, in the case of the first such
certificate, the period from the applicable Closing Date) with certain standards
under the related Sale and Servicing Agreement relating to the servicing of the
Student Loans.
Each Sale 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 Trust 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 applicable Closing Date) with all applicable standards under the
related Sale and Servicing Agreement and the Administration Agreement relating
to the administration of the Trust and the Student Loans.
Each Sale and Servicing Agreement will also provide for delivery to the
Trust 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 its obligations under the Sale and Servicing Agreement throughout
the preceding calendar year (or, in the case of the first such certificate, the
period from the applicable Closing Date) or, if there has been a default in the
fulfillment of any such obligation, describing each such default. Each of the
Master Servicer, the Administrator and the Sub-Servicers will agree to give the
Indenture Trustee and the Eligible Lender Trustee notice of certain Master
Servicer Defaults and Administrator Defaults under the Sale and Servicing
Agreement, and Sub-Servicer Defaults under the Sub-Servicing Agreements, as the
case may be.
Copies of such statements and certificates may be obtained by
Securityholders by a request in writing addressed to the Applicable Trustee.
CERTAIN MATTERS REGARDING THE MASTER SERVICER AND THE SUB-SERVICERS
Each Sale 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. No such resignation will become
effective until the related Indenture Trustee or a successor servicer has
assumed such Master Servicer's servicing obligations and duties under the Sale
and Servicing Agreement.
Each Sub-Servicing Agreement will provide that the Sub-Servicer may not
resign from its obligations and duties as Sub-Servicer thereunder, except upon
determination that a Sub-Servicer's performance of such duties is no longer
permissible under applicable law. No such resignation will become effective
until the Master Servicer, related Indenture Trustee or a successor servicer has
assumed such Sub-Servicer's servicing obligations and duties under the
Sub-Servicing Agreement.
Each Sale and Servicing Agreement will further provide that neither the
Master Servicer nor any of its directors, officers, employees or agents will be
under any liability to the related Trust or the related Noteholders or
Certificateholders for taking any action or for refraining from taking any
action pursuant to the related Sale and Servicing Agreement, or for errors in
judgment; PROVIDED, HOWEVER, that, unless otherwise limited in the related
Prospectus Supplement, neither the Master Servicer nor any such person will be
protected against any liability that would otherwise be imposed by reason of
willful misfeasance, bad faith or negligence in the performance of the Master
Servicer's duties thereunder or by reason of reckless disregard of its
obligations and duties thereunder. In addition, each Sale and Servicing
Agreement will provide that the Master Servicer is under no obligation to appear
in, prosecute, or defend any legal action that is not incidental to its
servicing responsibilities under such Sale and Servicing Agreement and that, in
its opinion, may cause it to incur any expense or liability.
Under the circumstances specified in each Sale and Servicing Agreement, any
entity into which a Master Servicer may be merged or consolidated, or any entity
resulting from any merger or consolidation to which the Master Servicer is a
party, or any entity succeeding to the business of the Master Servicer, which
corporation or other entity in each of the foregoing cases assumes the
obligations of the Master Servicer, will be the successor of the Master Servicer
under such Sale and Servicing Agreement; and under the circumstances specified
in each Sub-Servicing Agreement, any entity into which a Sub-Servicer may be
merged or consolidated, or any entity resulting from any merger or consolidation
to which the Sub-Servicer is a party, or any entity succeeding to the business
of the Sub-Servicer, which corporation or other entity in each of the foregoing
cases assumes the obligations of the Sub-Servicer, will be the successor of the
Sub-Servicer under such Sub-Servicing Agreement.
MASTER SERVICER DEFAULT; SUB-SERVICER DEFAULT; ADMINISTRATOR DEFAULT
A "Master Servicer Default" under each Sale and Servicing Agreement and a
"Sub-Servicer Default" under each Sub-Servicing Agreement will generally include
the following:
(1) any failure by the Master Servicer or a Sub-Servicer, as applicable,
to deliver to the Indenture Trustee for deposit in any of the Trust
Accounts (or, in the event that daily deposits into the Collection
Account are not required, to the Administrator) any collections,
Guarantee Payments or other amounts received with respect to the
Student Loans, which failure continues unremedied for three business
days after written notice from the Indenture Trustee or the Eligible
Lender Trustee is received by the Master Servicer or a Sub-Servicer,
as applicable, or after discovery by the Master Servicer or a
Sub-Servicer, as applicable;
(2) any failure by the Master Servicer or a Sub-Servicer, as applicable,
to duly observe or perform in any material respect any other covenant
or agreement in the related Sale and Servicing Agreement or
Sub-Servicing Agreement, as applicable, which failure materially and
adversely affects the rights of Noteholders or Certificateholders and
which continues unremedied for 60 days after the giving of written
notice of such failure (x) to the Master Servicer or a Sub-Servicer,
as applicable, by the Indenture Trustee, the Eligible Lender Trustee,
the Master Servicer or the Administrator or (y) to the Master Servicer
or a Sub-Servicer, as applicable, and to the Indenture Trustee and the
Eligible Lender Trustee by holders of Notes or Certificates, as
applicable, evidencing not less than 25% in principal amount of the
outstanding Notes or Certificates;
(3) certain events of insolvency, readjustment of debt, marshaling of
assets and liabilities, or similar proceedings with respect to the
Master Servicer or a Sub-Servicer, as applicable, and certain actions
by the Master Servicer or a Sub-Servicer, as applicable, indicating
its insolvency, reorganization pursuant to bankruptcy proceedings or
inability to pay its obligations; and
(4) failure by the Master Servicer or a Sub-Servicer, as applicable, to
comply with any requirements under the Higher Education Act resulting
in a loss of its eligibility as a third-party servicer.
An "Administrator Default" under each Sale and Servicing Agreement or
each Administration Agreement will generally include the following:
(1) (A) in the event that daily deposits into the Collection Account are
not required, any failure by the Administrator to deliver to the
Indenture Trustee for deposit in any of the Trust Accounts any
required payment on or before the business day prior to any monthly
servicing payment date or Distribution Date, as applicable, or (B) any
failure by the Administrator to direct the Indenture Trustee to make
any required distributions from any of the Trust Accounts on any
monthly servicing payment date or any Distribution Date, which failure
in case of either clause (A) or (B) 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 by the Administrator;
(2) any failure by the Administrator duly to observe or perform in any
material respect any other covenant or agreement in each
Administration Agreement or each Sale and Servicing Agreement which
failure materially and adversely affects the rights of Noteholders or
Certificateholders and which continues unremedied for 60 days after
the giving of written notice of such failure (x) to the Administrator
by the Indenture Trustee or the Eligible Lender Trustee or (y) to the
Administrator, the Master Servicer and to the Indenture Trustee and
the Eligible Lender Trustee by holders of Notes or Certificates, as
applicable, evidencing not less than 25% in principal amount of the
outstanding Notes or Certificates; and
(3) certain events of insolvency, readjustment of debt, marshaling 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 MASTER SERVICER DEFAULT; SUB-SERVICER DEFAULT AND ADMINISTRATOR
DEFAULT
As long as a Master Servicer Default under a Sale and Servicing Agreement,
a Sub-Servicer Default under a Sub-Servicing Agreement, or an Administrator
Default under a Sale and Servicing Agreement or an Administration Agreement, as
the case may be, remains unremedied, the Indenture Trustee or holders of Notes
evidencing not less than 25% in principal amount of then outstanding Notes may
terminate all the rights and obligations of the Master Servicer under such Sale
and Servicing Agreement and/or the Administrator under such Sale and Servicing
Agreement or such Administration Agreement, as the case may be, whereupon a
successor servicer or administrator appointed by the related Indenture Trustee,
or such Indenture Trustee, will succeed to all of the responsibilities, duties
and liabilities of the applicable Master Servicer under such Sale and Servicing
Agreement or the Administrator under such Sale and Servicing Agreement and such
Administration Agreement, as the case may be, and will be entitled to similar
compensation arrangements. In the event of a Sub-Servicer Default under a
Sub-Servicing Agreement, the Master Servicer may or, upon the directions of the
Indenture Trustee or holders of Notes evidencing not less than 25% in principal
amount of then outstanding Notes, shall terminate all the rights and obligations
of the related Sub-Servicer under such Sub-Servicing Agreement and appoint a
successor sub-servicer. If, however, a bankruptcy trustee or similar official
has been appointed for the Master Servicer, a Sub-Servicer or the Administrator,
as applicable, and no Master Servicer Default, Sub-Servicer Default, or
Administrator Default, as the case may be, other than such appointment has
occurred, such trustee or official may have the power to prevent the Indenture
Trustee or the Noteholders from effecting such a transfer.
In the event that such Indenture Trustee is unwilling or unable to so act,
it may appoint, or petition a court of competent jurisdiction for the
appointment of, a successor servicer whose regular business includes the
servicing of student loans or a successor administrator whose regular business
includes administering trusts containing pools of loans or receivables. The
Indenture Trustee may make such arrangements for compensation to be paid, which
in no event may be greater than the compensation to the Master Servicer under
such Sale and Servicing Agreement or the Administrator under such Sale and
Servicing Agreement and such Administration Agreement, as the case may be,
unless such compensation arrangements will result in a downgrading of such Notes
and Certificates by any Rating Agency. In the event a Master Servicer Default,
Sub-Servicer Default, or an Administrator Default, as the case may be, occurs
and is continuing, such Indenture Trustee or the holders of Notes, as described
above, may cause the removal of the Master Servicer, a Sub-Servicer or the
Administrator, as the case may be, without the consent of the related Eligible
Lender Trustee or any of the holders of Certificates. Moreover, only the
Indenture Trustee or the holders of Notes, and not the Eligible Lender Trustee
or the holders of Certificates, have the ability to remove the Master Servicer
or the Administrator, as the case may be, if a Master Servicer Default or an
Administrator Default, as the case may be, occurs and is continuing.
WAIVER OF PAST DEFAULTS
With respect to each Trust, the holders of Notes evidencing at least a
majority in principal amount of the then outstanding Notes (or the holders of
Certificates evidencing not less than a majority of the outstanding Certificate
Balance, in the case of any Master Servicer Default, which does not adversely
affect the Indenture Trustee or the Noteholders of the related series) may, on
behalf of all Noteholders and Certificateholders, waive any default by the
Master Servicer, in the performance of its obligations under the related Sale
and Servicing Agreement, or any default by the Administrator of its obligations
under the related Sale and Servicing Agreement and the related Administration
Agreement, as the case may be, and their respective consequences, except a
default in making any required deposits to or payments from any of the Trust
Accounts or giving instructions regarding the same in accordance with such Sale
and Servicing Agreement. Therefore, the Noteholders have the ability, except as
noted above, to waive defaults by the Master Servicer or the Administrator, as
the case may be, which could materially adversely affect the Certificateholders.
No such waiver will impair the Noteholders' or the Certificateholders' rights
with respect to subsequent defaults.
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 Seller or certain actions by the Seller indicating its insolvency or
inability to pay its obligations (each, a "Seller Insolvency Event") occurs, the
Student Loans will be liquidated and the related Trust will be terminated 90
days after the date of such Seller Insolvency Event, unless, before the end of
such 90-day period, the Eligible Lender Trustee shall have received written
instructions from the holders of the Certificates (other than the Seller)
representing more than 50% of the aggregate unpaid principal amount of the
Certificates (not including the principal amount of Certificates held by the
Seller) to the effect that such group disapproves of the liquidation of the
Student Loans and termination of the related Trust. Promptly after the
occurrence of any Seller Insolvency Event, notice thereof is required to be
given to Noteholders and Certificateholders; provided that any failure to give
such required notice will not prevent or delay termination of the related Trust.
Upon termination of the related Trust, the Eligible Lender Trustee will direct
the Indenture Trustee promptly to sell the assets of the related Trust (other
than the Trust Accounts) in a commercially reasonable manner and on commercially
reasonable terms. Each of the Guarantors and certain other unrelated third
parties will be given the opportunity, upon 30 days' prior notice of any such
proposed sale, to bid to purchase the Student Loans and, if any such entity is
the highest bidder, the Student Loans must be sold to that entity. The proceeds
from any such sale, disposition or liquidation of the Student Loans will be
treated as collections thereon and deposited in the Collection Account. If the
proceeds from the liquidation of the Student Loans and any amounts on deposit in
the Reserve Account, if any, are not sufficient to pay the Notes in full, the
amount of principal returned to the holders of Notes will be delayed and the
holders of Notes will incur a loss. If such amounts are not sufficient to pay
the Notes and the Certificates in full, the amount of principal returned to the
holders of Certificates will be delayed and the holders of Certificates will
incur a loss.
Each Trust Agreement will provide that the Eligible Lender Trustee does not
have the power to commence a voluntary proceeding in bankruptcy relating to the
Trust without the unanimous prior approval of all holders of Certificates and
the delivery to the Eligible Lender Trustee by each holder of Certificates of a
certificate certifying that such holder reasonably believes that the related
Trust is insolvent.
AMENDMENT
Each of the Transfer and Servicing Agreements may be amended by the parties
thereto, without the consent of the related Noteholders or the
Certificateholders, for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of such Transfer and Servicing
Agreements or of modifying in any manner the rights of such Noteholders or
Certificateholders; provided that such action will not, in the opinion of
counsel satisfactory to the related Indenture Trustee and the related Eligible
Lender Trustee, materially and adversely affect the interest of any such
Noteholder or Certificateholder. Each of the Transfer and Servicing Agreements
may also be amended by the Seller, the Administrator, the Master Servicer, the
related Eligible Lender Trustee and the related Indenture Trustee, as
applicable, with the consent of the holders of Notes of the related series
evidencing at least a majority in principal amount of the then outstanding Notes
and the holders of Certificates of the related series evidencing at least a
majority of the Certificate Balance for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of such Transfer
and Servicing Agreements or of modifying in any manner the rights of the holders
of Notes or the holders of Certificates; provided, that no such amendment may
(x) increase or reduce in any manner the amount of, or accelerate or delay the
timing of, collections of payments (including any Guarantee Payments) with
respect to the Student Loans or distributions that are required to be made for
the benefit of the holders of Notes or the holders of Certificates or (y) 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.
PAYMENT OF NOTES
Upon the payment in full of all outstanding Notes of a given series and the
satisfaction and discharge of the related Indenture, the Eligible Lender Trustee
will succeed to all the rights of the Indenture Trustee, and the
Certificateholders of such series will succeed to all the rights of the
Noteholders of such series, under the related Sale and Servicing Agreement,
except as otherwise provided therein.
SELLER LIABILITY
Under each Trust Agreement, the Seller will agree to be liable directly to
an injured party for the entire amount of any losses, claims, damages or
liabilities (other than those incurred by a holder of notes or a holder of
Certificates in the capacity of an investor) arising out of or based on the
arrangement created by the Trust Agreement as though such arrangement created a
partnership under the Delaware Revised Uniform Limited Partnership Act in which
the Seller was a general partner.
TERMINATION
With respect to each Trust, the obligations of the Seller, the Master
Servicer, the Administrator, the related Eligible Lender Trustee and the related
Indenture Trustee pursuant to the related Transfer and Servicing Agreements will
terminate upon (x) the maturity or other liquidation of the last related Student
Loan and the disposition of any amount received upon liquidation of any such
remaining Student Loans and (y) the payment to the Noteholders and the
Certificateholders of the related series of all amounts required to be paid to
them pursuant to such Transfer and Servicing Agreements.
If so specified in the related Prospectus Supplement, in order to avoid
excessive administrative expense, the Seller or another party will be permitted
at its option to purchase from the related Eligible Lender Trustee, as of the
end of any Collection Period immediately preceding a Distribution Date, if the
then outstanding Pool Balance is less than the percentage specified in the
related Prospectus Supplement of the Initial Pool Balance (as defined in the
related Prospectus Supplement, the "Initial Pool Balance"), all remaining
related Student Loans at a price equal to the aggregate Purchase Amounts thereof
as of the end of such Collection Period, which amounts will be used to retire
the related Notes and Certificates concurrently therewith. Upon termination of a
Trust, as more fully described in the related Prospectus Supplement, all right,
title and interest in the Student Loans and other funds of such Trust, after
giving effect to any final distributions to Noteholders and Certificateholders
of the related series therefrom, will be conveyed and transferred to the Seller
or such other party.
If so provided in the related Prospectus Supplement, any Student Loans
remaining in the related Trust as of the end of the Collection Period
immediately preceding the Distribution Date which occurs immediately after the
10th anniversary of the Closing Date (the "Auction Date") will be offered for
sale by the related Indenture Trustee. Affiliates of the Seller, the Master
Servicer, the related Sub-Servicers and unrelated third parties may offer bids
to purchase such Student Loans on such Distribution Date. If at least two bids
are received, the Indenture Trustee will solicit and resolicit bids from all
participating bidders until only one bid remains or the remaining bidders
decline to resubmit bids. The Indenture Trustee will accept the highest of such
remaining bids if it is equal to or in excess of an amount (the "Minimum
Purchase Amount") equal to the greatest of:
o the Auction Purchase Amount (as such term is defined in the related
Prospectus Supplement, the "Auction Purchase Amount"),
o the fair market value of such Student Loans as of the end of the
Collection Period immediately preceding such Distribution Date, and
o the aggregate unpaid principal amount of the related Notes and
principal balance of the related Certificates plus, in each case,
accrued and unpaid interest thereon payable on such Distribution Date
(other than any Index Shortfall Carryover).
If at least two bids are not received or the highest bid after the
resolicitation process is completed is not equal to or in excess of the Minimum
Purchase Amount, the Indenture Trustee will not consummate such sale. In
connection with the determination of the Minimum Purchase Amount, the Indenture
Trustee may consult and, at the direction of the Seller, shall consult, with a
financial advisor, including the Underwriters or the Administrator, to determine
if the fair market value of the Student Loans has been offered. The net proceeds
of any such sale will be used to redeem any outstanding Notes and to retire any
outstanding Certificates on such Distribution Date. If the sale is not
consummated in accordance with the foregoing, the Indenture Trustee may, but
shall not be under any obligation to, solicit bids to purchase the 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 Student Loans on either the Auction
Date or any subsequent Distribution Date. The related Prospectus Supplement will
specify what will happen in the event the Student Loans are not sold in
accordance with the foregoing.
ADMINISTRATOR
The Administrator will enter into an agreement (as amended and
supplemented from time to time, an "Administration Agreement") with each Trust
and the related Indenture Trustee and an Sale and Servicing Agreement with the
related Trust, the Seller, the Master Servicer and the Eligible Lender Trustee,
pursuant to which the Administrator will agree, to the extent provided therein,
(a) in the event that daily deposits into the Collection Account are not
required, to deliver to the Indenture Trustee for deposit in any of
the Trust Accounts any required payment on or before the business day
prior to any monthly servicing payment date or any Distribution Date,
as applicable,
(b) to direct the Indenture Trustee to make the required distributions
from the Trust Accounts on each monthly servicing payment date and
each Distribution Date,
(c) to prepare and file with the Department all appropriate claim forms
and other documents and filings on behalf of the Eligible Lender
Trustee in order to claim any Interest Subsidy Payments and Special
Allowance Payments that may be payable in respect of each Collection
Period with respect to the Federal Loans,
(d) to prepare (based on the quarterly and annual reports received from
the Master Servicer or the Sub-Servicers) and provide monthly,
quarterly 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
(e) to provide the notices and to perform other administrative obligations
required by the Indenture, the Trust Agreement and the Sale and
Servicing Agreement. As compensation for the performance of the
Administrator's obligations under the Administration Agreement and the
Sale and Servicing Agreement and as reimbursement for its expenses
related thereto, the Administrator will be entitled to an
administration fee in an amount set forth in the related Prospectus
Supplement (the "Administration Fee").
CERTAIN LEGAL ASPECTS OF THE STUDENT LOANS
TRANSFER OF STUDENT LOANS
The Seller intends that the transfer of the Student Loans by it to the
related Eligible Lender Trustee on behalf of each Trust will constitute a valid
sale and assignment of such Student Loans. In addition, the Seller has taken and
will take all actions that are required under applicable state law to perfect
the Eligible Lender Trustee's ownership interest in the Student Loans and the
collection with respect thereto. Notwithstanding the foregoing, if the transfer
of the Student Loans is deemed to be an assignment of collateral as security for
the benefit of a Trust, a security interest in the Student Loans may, pursuant
to the provisions of 20 U.S.C. ss. 1087-2(d)(3), be perfected either through the
taking of possession of such loans or by the filing of notice of such security
interest in the manner provided by the applicable Uniform Commercial Code
("UCC") for perfection of security interests in accounts. A financing statement
or statements covering the Student Loans will be filed under the UCC to protect
the interest of the Eligible Lender Trustee in the event the transfer by the
Seller is deemed to be an assignment of collateral as security for the benefit
of the Trust.
If the transfer of the Student Loans is deemed to be an assignment as
security for the benefit of a Trust, there are certain limited circumstances
under the UCC in which prior or subsequent transferees of Student Loans coming
into existence after the Closing Date could have an interest in such Student
Loans with priority over the related Eligible Lender Trustee's interest. A tax
or other government lien on property of the Seller arising prior to the time a
Student Loan comes into existence may also have priority over the interest of
the related Eligible Lender Trustee in such Student Loan. Furthermore, if the
FDIC were appointed as a receiver or conservator of the Seller, the FDIC's
administrative expenses may also have priority over the interest of the Eligible
Lender Trustee in such Student Loans. Under the related Sale and Servicing
Agreement, however, the Seller will warrant that it has caused the Student Loans
to be transferred to the related Eligible Lender Trustee on behalf of a Trust
free and clear of the lien of any third party. In addition, the Seller will
covenant that it will not sell, pledge, assign, transfer or grant any lien on
any Student Loan held by a Trust (or any interest therein) other than to the
related Eligible Lender Trustee on behalf of a Trust, except as provided below.
Pursuant to each Sale and Servicing Agreement, the Sub-Servicer as
custodian on behalf the related Trust will have custody of the promissory notes
evidencing the Student Loans following the sale of the Student Loans to the
related Eligible Lender Trustee. Although the accounts and computer records of
the Seller and, the Master Servicer and the related Sub-Servicer will be marked
to indicate the sale and although the Seller will cause UCC financing statements
to be filed with the appropriate authorities, the Student Loans will not be
physically segregated, stamped or otherwise marked to indicate that such Student
Loans have been sold to such Eligible Lender Trustee. If, through inadvertence
or otherwise, any of the Student Loans were sold to another party, or a security
interest therein were granted to another party, that purchased (or took such
security interest in) any of such Student Loans in the ordinary course of its
business and took possession of such Student Loans, then the purchaser (or
secured party) might acquire an interest in the Student Loans superior to the
interest of the Eligible Lender Trustee if the purchaser (or secured party)
acquired (or took a security interest in) the Student Loans for new value and
without actual knowledge of the related Eligible Lender Trustee's interest. See
"Description of the Transfer and Servicing Agreements--Sale of Student Loans;
Representations and Warranties."
With respect to each Trust, in the event of a Master Servicer Default or a
Sub-Servicer Default, as the case may be, resulting solely from certain events
of insolvency or bankruptcy that may occur with respect to the Seller, the
Master Servicer or a Sub-Servicer, as applicable, a court,
trustee-in-bankruptcy, conservator, receiver or liquidator may have the power to
prevent either the related Indenture Trustee or Noteholders of the related
series from appointing a successor Master Servicer or Sub-Servicer, as
applicable. See "Description of the Transfer and Servicing Agreements--Rights
Upon Master Servicer Default; Sub-Servicer Default; Administrator Default."
CERTAIN MATTERS RELATING TO RECEIVERSHIP
The Federal Deposit Insurance Act ("FDIA"), as amended by the Financial
Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA"), sets forth
certain powers that the FDIC could exercise if it were appointed as receiver or
conservator of the Seller.
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 Seller, would not interfere with the timely
transfer to the Trust of collections with respect to the Student Loans. To the
extent that the transfer of the Student Loans is deemed to create a security
interest, and that interest was validly perfected before the Seller's insolvency
and was not taken in contemplation of insolvency or with the intent to hinder,
delay or defraud the Seller 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 Student Loans should not be subject to
recovery by the FDIC as receiver or conservator of the Seller. 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 the Notes and the Certificates. 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
FIRREA, delays in payments on the Notes and the Certificates and possible
reductions in the amount of those payments could occur.
In the event of a Master Servicer Default or Sub-Servicer Default or an
Administrator Default, as the case may be, resulting solely from certain events
of insolvency or bankruptcy that may occur with respect to the Master Servicer,
a Sub-Servicer or the Administrator, as applicable, a court, conservator,
receiver or liquidator may have the power to prevent either the Indenture
Trustee or Noteholders from appointing a successor Master Servicer, Sub-Servicer
or Administrator, as the case may be. See "Description of the Transfer and
Servicing Agreements--Rights Upon Master Servicer Default; Sub-Servicer Default;
Administrator Default."
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related regulations
impose substantial requirements upon lenders and servicers involved in consumer
finance. Also, some state laws impose finance charge ceilings and other
restrictions on certain consumer transactions and require contract disclosures
in addition to those required under federal law. These requirements impose
specific statutory liabilities upon lenders who fail to comply with their
provisions. These requirements are generally inapplicable to Student Loans, but
in certain circumstances, a Trust may be liable for certain violations of
consumer protection laws that may apply to the Student Loans, either as assignee
or as the party directly responsible for obligations arising after the transfer.
For a discussion of a Trust's rights if the Student Loans were not originated or
serviced in compliance in all material respects with applicable laws, see
"Description of the Transfer and Servicing Agreements--Sale of Student Loans;
Representations and Warranties" and "--Master Servicer Covenants."
LOAN ORIGINATION AND SERVICING PROCEDURES APPLICABLE TO STUDENT LOANS
The Higher Education Act, including the implementing regulations
thereunder, imposes specified requirements, guidelines and procedures with
respect to originating and servicing student loans such as the Student Loans.
Generally, those procedures require that completed loan applications be
processed, a determination of whether an applicant is an eligible borrower under
applicable standards (including a review of a financial need analysis) be made,
the borrower's responsibilities under the loan be explained to him or her, the
promissory note evidencing the loan be executed by the borrower and then that
the loan proceeds be disbursed in a specified manner by the lender. After the
loan is made, the lender must establish repayment terms with the borrower,
properly administer deferrals and forbearances and credit the borrower for
payments made thereon. If a borrower becomes delinquent in repaying a loan, a
lender or a servicing agent must perform certain collection procedures
(primarily telephone calls and demand letters) which vary depending upon the
length of time a loan is delinquent. The Master Servicer has agreed pursuant to
the related Sale and Servicing Agreement to perform (or to cause a Sub-Servicer
to perform) collection and servicing procedures on behalf of the related Trust.
However, failure to follow these procedures or failure of the originator of the
loan to follow procedures relating to the origination of any Student Loans could
result in adverse consequences. Any such failure could result in the
Department'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 such Student Loans or in the Guarantors' refusal to
honor their Guarantee Agreements with the Eligible Lender Trustee with respect
to such Student Loans. Failure of the Guarantors to receive reinsurance payments
from the Department could adversely affect the Guarantors' ability or legal
obligation to make Guarantee Payments to the related Eligible Lender Trustee
with respect to such Student Loans.
Loss of any such Guarantee Payments, Interest Subsidy Payments or Special
Allowance Payments could adversely affect the amount of Available Funds (as such
term is defined in the related Prospectus Supplement, the "Available Funds") on
any Distribution Date and the related Trust's ability to pay principal and
interest on the Notes of the related series and to make distributions in respect
of the Certificates of the related series. Under certain circumstances, unless
otherwise specified in the related Prospectus Supplement, the related Trust has
the right, pursuant to the related Sale and Servicing Agreement, to cause the
Seller to repurchase any Student Loan, or to cause the Master Servicer to
arrange for the purchase of any Student Loan, if a breach of the
representations, warranties or covenants of the Seller or the Master Servicer,
as the case may be, with respect to such Student Loan has a material adverse
effect on the interest of the Trust therein and such breach is not cured within
any applicable cure period. See "Description of the Transfer and Servicing
Agreements--Sale of Student Loans; Representations and Warranties" and
"--Servicer Covenants." The failure of the Seller to so purchase, or of the
Master Servicer to arrange for the purchase of, a Student Loan, if so required,
would constitute a breach of the related Sale and Servicing Agreement,
enforceable by the related Eligible Lender Trustee on behalf of the related
Trust or by the related Indenture Trustee on behalf of the Noteholders of the
related series, but would not constitute an Event of Default under the
Indenture.
FAILURE TO COMPLY WITH THIRD-PARTY SERVICER REGULATIONS MAY ADVERSELY AFFECT
LOAN SERVICING
On November 29, 1994, the Secretary of the Department of Education (the
"Secretary") published final regulations amending FFELP. These regulations,
among other things, establish requirements governing contracts between holders
of federal loans and third-party servicers, establish standards of
administrative and financial responsibility for third-party servicers that
administer any aspect of a guarantee agency's or lender's participation in the
FFELP and establish sanctions for third-party servicers.
Under these regulations, a third-party servicer (such as one of the
Sub-Servicers) is jointly and severally liable with its client lenders for
liabilities to the Department arising from the servicer's violation of
applicable requirements. In addition, if the servicer fails to meet standards of
financial responsibility or administrative capability included in the
regulations, or violates other FFELP requirements, the regulations authorize the
Department to fine the servicer and/or limit, suspend, or terminate the
servicer's eligibility to contract to service FFELP loans. The effect of such a
limitation or termination on the servicer's eligibility to service loans already
on its system, or to accept new loans for servicing under existing contracts, is
unclear. There can be no assurance that a Sub-Servicer will not be fined or held
liable by the Department liabilities arising out of its FFELP activities for the
Trust or other client lenders, or that its eligibility will not be limited,
suspended, or terminated in the future. If a Sub-Servicer were so fined or held
liable, or its eligibility were limited, suspended, or terminated, its ability
to properly service the federal loans and to satisfy its obligation to purchase
federal loans with respect to which it breaches its representations, warranties
or covenants under the Sale and Servicing Agreement could be adversely affected.
However, in the event of a termination of eligibility, each Sale and Servicing
Agreement will provide for the removal of the applicable Sub-Servicer and the
appointment of a successor sub-servicer.
STUDENT LOANS GENERALLY NOT SUBJECT TO DISCHARGE IN BANKRUPTCY
Effective for bankruptcy actions commencing on or after October 8, 1998,
Student Loans are generally not dischargeable by a borrower in bankruptcy
pursuant to the United States Bankruptcy Code, as amended, as codified in 11
U.S.C. ss.ss.101-1330 (the "Bankruptcy Code") unless excepting such debt from
discharge will impose an undue hardship on the debtor and the debtor's
dependents.
RECENT DEVELOPMENTS
EMERGENCY STUDENT LOAN CONSOLIDATION ACT OF 1997. On November 13, 1997,
President Clinton signed into law the Emergency Student Loan Consolidation Act
of 1997, which made significant changes to the Consolidation Loan Program. These
changes include:
(1) providing that federal direct student loans are eligible to be
included in a Consolidation Loan;
(2) changing the borrower interest rate on new Consolidation Loans
(previously a fixed rate based on the weighted average of the loans
consolidated, rounded up to the nearest whole percent) to the annually
variable rate applicable to Stafford Loans (i.e., the bond equivalent
rate at the last auction in May of 91-day Treasury Bills plus 3.10%,
not to exceed 8.25% per annum);
(3) providing that the portion of a Consolidated Loan that is comprised of
subsidized Stafford Loans retains its subsidy benefits during periods
of deferment; and
(4) establishing prohibitions against various forms of discrimination in
the making of Consolidation Loans.
Except for the last of the above changes, all such provisions expired on
September 30, 1998. The combination of the change to a variable rate and the
8.25% interest cap reduced the lender's yield in most cases below the rate that
would have been applicable under the previous weighted average formula.
FY 1998 BUDGET. In the 1997 Budget Reconciliation Act (P.L. 105-33),
several changes were made to the Higher Education Act that impact the FFELP.
These provisions include, among other things, requiring federal guarantors to
return $1 billion of their reserves to the U.S. Treasury by September 1, 2002
(to be paid in annual installments), greater restrictions on use of reserves by
federal guarantors and a continuation of the administrative cost allowance
payable to federal guarantors (which is a fee paid to federal guarantors equal
to 0.85% of new loans guaranteed).
1998 AMENDMENTS. On May 22, 1998, Congress passed, and on June 9, 1998, the
President signed into law, a temporary measure relating to the Higher Education
Act and FFELP loans as part of the Intermodal Surface Transportation Efficiency
Act of 1998 that revised interest rate changes under the FFELP that were
scheduled to become effective on July 1, 1998. For loans made during the period
July 1, 1998 through September 30, 1998, the borrower interest rate for Stafford
Loans and Unsubsidized Stafford Loans is reduced to a rate of 91-day Treasury
Bill Rate plus 2.30% (1.70% during school, grace and deferment), subject to a
maximum rate of 8.25%. As described below, the formula for Special Allowance
Payments on Stafford Loans and Unsubsidized Stafford Loans is calculated to
produce a yield to the loan holder of 91-day Treasury Bill Rate plus 2.80%
(2.20% during school, grace and deferment).
1998 REAUTHORIZATION BILL. On October 7, 1998, President Clinton signed
into law the Higher Education Amendments of 1998 (the "1998 Reauthorization
Bill"), which enacted significant reforms in FFELP. The major provisions of the
1998 Reauthorization Bill include the following:
o All references to a "transition" to full implementation of the Direct
Student Loan Program were deleted from the FFELP statute.
o Guarantor reserve funds were restructured so that federal guarantors
are provided with additional flexibility in choosing how to spend
certain funds they receive.
o Additional recall of reserve funds by the Secretary was mandated,
amounting to $85 million in fiscal year 2002, $82.5 million in fiscal
year 2006, and $82.5 million in fiscal year 2007. However, certain
minimum reserve levels are protected from recall.
o The administrative cost allowance was replaced by two (2) new
payments, a Student Loan processing and issuance fee equal to 65 basis
points (40 basis points for loans made on or after October 1, 1993)
paid at the time a loan is guaranteed, and an account maintenance fee
of 12 basis points (10 basis points for fiscal years 2001-2003) paid
annually on outstanding guaranteed Student Loans.
o The percentage of collections on defaulted Student Loans a federal
guarantor is permitted to retain is reduced from 27% to 24% (23%
beginning on October 1, 2003) plus the complement of the reinsurance
percentage applicable at the time a claim was paid to the lender on
the Student Loan.
o Federal reinsurance provided to federal guarantors is reduced from 98%
to 95% for Student Loans first disbursed on or after October 1, 1998.
o The delinquency period required for a loan to be declared in default
is increased from 180 days to 240 days for loans on which the first
day of delinquency occurs on or after the date of enactment of the
1998 Reauthorization Bill.
o Interest rates charged to borrowers on Stafford Loans, and the yield
for Stafford Loan holders established by the 1998 Amendments, were
made permanent.
o Consolidation Loan interest rates were revised to equal the weighted
average of the loans consolidated rounded up to the nearest one-eighth
of 1%, capped at 8.25%. When the 91-day Treasury Bill Rate plus 3.1%
exceeds the borrower's interest rate, Special Allowance Payments are
made to make up the difference.
o The lender-paid offset fee on Consolidation Loans of 1.05% is reduced
to .62% for loans made pursuant to applications received on or after
October 1, 1998 and on or before January 31, 1999.
o The Consolidation Loan interest rate calculation was revised to
reflect the rate for Consolidation Loans, and will be effective for
loans on which applications are received on or after February 1, 1999.
o Lenders are required to offer extended repayment schedules to new
borrowers after the enactment of the 1998 Reauthorization Bill who
accumulate after such date outstanding loans under FFELP totaling more
than $30,000. Under these extended schedules, the repayment period may
extend up to 25 years subject to certain minimum repayment amounts.
o The Secretary is authorized to enter into six (6) voluntary flexible
agreements with federal guarantors under which various statutory and
regulatory provisions can be waived.
o Consolidation Loan lending restrictions are revised to allow lenders
who do not hold one of the borrower's Underlying Student Loans to
issue a Consolidation Loan to a borrower whose Underlying Student
Loans are held by multiple holders.
o Inducement restrictions were revised to permit federal guarantors and
lenders to provide assistance to schools comparable to that provided
to schools by the Secretary under the Direct Student Loan Program.
o The Secretary is now required to pay off Student Loan amounts owed by
borrowers due to failure of the borrower's school to make a tuition
refund allocable to the Student Loan.
o Discharge of FFELP and certain other Student Loans in bankruptcy is
now limited to cases of undue hardship regardless of whether the
Student Loan has been due for more than seven (7) years prior to the
bankruptcy filing.
FEDERAL INCOME TAX CONSEQUENCES
Set forth below is a general summary of material federal income tax
consequences of the purchase, ownership and disposition of the Notes and the
Certificates. Stroock & Stroock & Lavan LLP ("Federal Tax Counsel") has reviewed
this summary with respect to federal income tax matters and is of the 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 and Certificateholders. The summary is intended as an explanatory
discussion of the possible effects of certain federal income tax consequences to
holders generally, but does not purport to furnish information in the level of
detail or with the attention to a holder's specific tax circumstances that would
be provided by a holder's own tax advisor. For example, it does not discuss the
tax treatment of Noteholders or Certificateholders that are insurance companies,
regulated investment companies or dealers in securities. In addition, any
discussion regarding the Notes is limited to the federal income tax consequences
of the initial Noteholders and not a purchaser in the secondary market.
Moreover, there are no cases or Internal Revenue Service ("IRS") rulings on
similar transactions involving both debt and equity interests issued by a trust
with terms similar to those of the Notes and the Certificates. As a result, the
IRS may disagree with all or a part of the discussion below.
With respect to federal tax matters, the following summary is based upon
current provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), the Treasury regulations promulgated thereunder and judicial or ruling
authority, all of which are subject to change, which change may be retroactive.
Each Trust will be provided with an opinion of Federal Tax Counsel regarding
certain federal income tax matters discussed below, which opinions will be filed
with the Commission on a Form 8-K prior to the sale of the securities issued by
such Trust. An opinion of Federal Tax Counsel, however, is not binding on the
IRS or the courts. No ruling on any of the issues discussed below will be sought
from the IRS. For purposes of the following summary, references to the Trust,
the Notes, the Certificates and related terms, parties and documents shall be
deemed to refer, unless otherwise specified herein, to each Trust and the Notes,
Certificates and related terms, parties and documents applicable to such Trust.
WE ENCOURAGE EACH PROSPECTIVE INVESTOR TO CONSULT WITH ITS TAX ADVISOR AS TO THE
FEDERAL, STATE, LOCAL, FOREIGN AND ANY OTHER TAX CONSEQUENCES OF THE PURCHASE,
OWNERSHIP AND DISPOSITION OF SECURITIES SPECIFIC TO SUCH PROSPECTIVE INVESTOR.
FEDERAL TAX CONSEQUENCES FOR TRUSTS
FOR WHICH A PARTNERSHIP ELECTION IS MADE
TAX CHARACTERIZATION OF THE TRUST
Federal Tax Counsel will deliver its opinion that the Trust will not be an
association (or publicly traded partnership) taxable as a corporation for
federal income tax purposes. This opinion will be based on the assumption that
the terms of the Trust Agreement and related documents will be complied with and
on counsel's conclusions that the nature of the income of the Trust will exempt
it from the rule that certain publicly traded partnerships are taxable as
corporations.
TAX CONSEQUENCES TO HOLDERS OF THE NOTES
TREATMENT OF THE NOTES AS INDEBTEDNESS. The Seller will agree, and the
Noteholders will agree by their purchase of Notes, to treat the Notes as debt
for federal income tax purposes. Federal Tax Counsel will, except as otherwise
provided in the related Prospectus Supplement, deliver an opinion to the Trust
that the Notes will be classified as debt for federal income tax purposes. The
discussion below assumes this characterization of the Notes is correct.
ORIGINAL ISSUE DISCOUNT. The discussion below assumes that all payments on
the Notes are denominated in U.S. dollars, that the interest formula for the
Notes meets the requirements for "qualified stated interest" ("Qualified Stated
Interest") under Treasury regulations (the "OID Regulations") relating to
original issue discount ("OID"), and that any OID on the Notes (I.E., any excess
of the stated redemption price at maturity of the Notes, generally the principal
amount of the Notes, over their issue price) is less than a DE MINIMIS amount
(I.E., 0.25% of their principal amount multiplied by the weighted number of full
years included in their term), all within the meaning of the OID Regulations. If
these conditions are not satisfied with respect to any given series of Notes,
additional tax considerations with respect to such Notes will be disclosed in
the related Prospectus Supplement. The OID Regulations do not address their
application to debt instruments such as the Notes that are subject to prepayment
based on the prepayment of other debt instruments. The legislative history of
the OID provisions of the Code provides, however, that the calculation and
accrual of OID should be based on the prepayment assumption used by the parties
in pricing the transaction. In the event that any of the notes are issued with
OID, the prepayment assumption will be set forth in the related Prospectus
Supplement. Furthermore, although premium amortization and accrued market
discount on debt instruments such as the Notes, which are subject to prepayment
based on the payments on other debt instruments, are to be determined under
regulations yet to be issued, the legislative history of these Code provisions
provides that the same prepayment assumption used to calculate OID, whether or
not the debt instrument is issued with OID, should be used.
INTEREST INCOME ON THE NOTES. Based on the above assumptions, except as
discussed in the following paragraph, the Notes will not be considered issued
with OID. The stated interest thereon will be taxable to a Noteholder as
ordinary interest income when received or accrued in accordance with such
Noteholder's method of tax accounting. Under the OID Regulations, a holder of a
Note that was issued with a DE MINIMIS amount of OID must include such OID in
income, on a pro rata basis, as principal payments are made on the Note.
Alternatively, a Noteholder may elect to accrue all interest, discount
(including DE MINIMIS market discount or OID) and premium in income as interest,
based on a constant yield method. If such an election were made with respect to
a Note with market discount, the Noteholder would be deemed to have made an
election to include in income currently market discount with respect to all debt
instruments having market discount that such Noteholder acquires during the year
of the election and thereafter. Similarly, a Noteholder that makes this election
for a Note that is acquired at a premium will be deemed to have made an election
to amortize bond premium with respect to all debt instruments having amortizable
bond premium that such Noteholder owns at the beginning of the first taxable
year to which the election applies or acquires thereafter. The election to
accrue interest, discount and premium under a constant yield method with respect
to a Note is irrevocable. A purchaser who buys a Note for more or less than its
principal amount will generally be subject, respectively, to the premium
amortization or market discount rules of the Code.
Qualified Stated Interest, which is taxable in accordance with the holder's
method of accounting, is interest that is unconditionally payable (I.E.,
payments cam be compelled or the debt instrument provides terms and conditions
that make the likelihood of late payment or nonpayment remote) at least annually
at a single fixed rate (or certain variable rates). The Seller intends to treat
the interest paid on the Notes as Qualified Stated Interest.
A holder of a Note that has a fixed maturity date of not more than one year
from the issue date of such Note (each, a "Short-Term Note") may be subject to
special rules. An accrual basis holder of a Short-Term Note (and certain cash
method holders, including regulated investment companies, banks and securities
dealers, as set forth in Section 1281 of the Code) generally will be required to
report interest income as interest accrues on a ratable basis over the term of
each interest period or, at the election of the holder, on a constant yield
basis. Cash basis holders of a Short-Term Note will, in general, be required to
report interest income as interest is paid (or, if earlier, upon the taxable
disposition of the Short-Term Note). However, a cash basis holder of a
Short-Term Note reporting interest income as it is paid may be required to defer
a portion of any interest expense otherwise deductible on indebtedness incurred
to purchase or carry the Short-Term Note until the taxable disposition of the
Short-Term Note. A cash basis taxpayer may elect under Section 1282 of the Code
to accrue interest income on all nongovernment debt obligations with a term of
one year or less, in which case the taxpayer would include interest on the
Short-Term Note in income as it accrues, and would not be subject to the
interest expense deferral rule referred to in the preceding sentence. Certain
special rules apply if a Short-Term Note is purchased for more or less than its
principal amount.
SALE OR OTHER DISPOSITION. If a Noteholder sells a Note, the holder will
recognize gain or loss in an amount equal to the difference between the amount
realized on the sale and the holder's adjusted tax basis in the Note. The
adjusted tax basis of a Note to a particular Noteholder will equal the holder's
cost for the Note, increased by any market discount, acquisition discount, OID
and gain previously included by such Noteholder in income with respect to the
Note and decreased by the amount of bond premium (if any) previously amortized
and by the amount of principal payments previously received by such Noteholder
with respect to such Note. Any such gain or loss will be capital gain or loss if
the Note was held as a capital asset, except for gain representing accrued
interest and accrued market discount not previously included in income. Any such
gain or loss would be long-term capital gain or loss if the Noteholder's holding
period exceeded one year. Capital losses generally may be used only to offset
capital gains.
FOREIGN HOLDERS. Interest paid (or accrued) to a Noteholder who is a
nonresident alien, foreign corporation or other person that is not a United
States person as such term is defined in the Code and the Treasury regulations
thereunder (a "foreign person") generally will be considered "portfolio
interest", and generally will not be subject to United States federal income tax
and withholding tax, provided, that
(a) the interest is not effectively connected with the conduct of a trade
or business within the United States by the foreign person
(b) the foreign person is not actually or constructively a "10 percent
shareholder" of the Trust, the Seller or the Seller (including a
holder of 10% of the outstanding Certificates) or a "controlled
foreign corporation" with respect to which the Trust, the Seller or
the Seller is a "related person" within the meaning of the Code, and
(c) the foreign person provides the Trustee or other person who is
otherwise required to withhold U.S. tax with respect to the Notes with
an appropriate statement (on Form W-8 or a similar form), signed under
penalty of perjury, certifying that the beneficial owner of the Note
is a foreign person and providing the foreign person's name and
address.
If a Note is held through a securities clearing organization or certain other
financial institutions, the organization or institution may provide the relevant
signed statement to the withholding agent; in that case, however, the signed
statement must be accompanied by a Form W-8 or substitute form provided by the
foreign person that owns the Note. If such interest is not portfolio interest,
then it will be subject to United States federal income and withholding tax at a
rate of 30%, unless reduced or eliminated pursuant to an applicable tax treaty.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a Note by a foreign person generally will be exempt from
United States federal income and withholding tax, provided that (x) such gain is
not effectively connected with the conduct of a trade or business in the United
States by the foreign person and (y) in the case of an individual foreign
person, the foreign person is not present in the United States for 183 days or
more in the taxable year.
If the interest, gain or income on a Note held by a foreign person is
effectively connected with the conduct of a trade or business in the United
States by the foreign person (although exempt from the withholding tax
previously discussed if the holder provides an appropriate statement), the
holder generally will be subject to United States federal income tax on the
interest, gain or income at regular federal income tax rates. In addition, if
the foreign person is a foreign corporation, it may be subject to a branch
profits tax equal to 30% of its "effectively connected earnings and profits"
within the meaning of the Code for the taxable year, as adjusted for certain
items, unless it qualifies for a lower rate under an applicable tax treaty (as
modified by the branch profits tax rules).
Final regulations dealing with backup withholding and information reporting
on income paid to foreign persons and related matters (the "New Withholding
Regulations") were published in the Federal Register on October 14, 1997. In
general, the New Withholding Regulations do not significantly alter the
substantive withholding and information reporting requirements, but do unify
current certification procedures and forms and clarify reliance standards. As
set forth in Notice 98-16, 1998-15 I.R.B. 1, the New Withholding Regulations
generally will be effective for payments made after December 31, 1999, subject
to certain transition rules. THE DISCUSSION SET FORTH ABOVE DOES NOT TAKE THE
NEW WITHHOLDING REGULATIONS INTO ACCOUNT. PROSPECTIVE NOTEHOLDERS WHO ARE
FOREIGN PERSONS ARE STRONGLY URGED TO CONSULT THEIR OWN TAX ADVISORS WITH
RESPECT TO THE NEW WITHHOLDING REGULATIONS.
BACKUP WITHHOLDING. Each holder of a Note (other than an exempt holder such
as a corporation, tax-exempt organization, qualified pension and profit-sharing
trust, individual retirement account or nonresident alien who provides
certification as to status as a nonresident) will be required to provide, under
penalty of perjury, a certificate setting forth the holder's name, address,
correct federal taxpayer identification number and a statement that the holder
is not subject to backup withholding. Should a nonexempt Noteholder fail to
provide the required certification, the related Trust will be required to
withhold 31% of the amount otherwise payable to the holder and remit the
withheld amount to the IRS as a credit against the holder's federal income tax
liability. As previously mentioned, the New Withholding Regulations generally
will be effective for payments made after December 31, 1999, subject to certain
transition rules.
RECENT LEGISLATION
Sections 860H through 860L to the Code (the "FASIT Provisions") provide for
a new type of entity for federal income tax purposes known as a "financial asset
securitization investment trust" (a "FASIT"). The legislation providing for the
new FASIT entity, however, did not become effective until September 1, 1997, and
many technical issues are to be addressed in Treasury regulations yet to be
drafted. In general, the FASIT legislation enables trusts such as the Trust to
elect to be treated as a pass-through entity not subject to federal entity-level
income tax (except with respect to certain prohibited transactions) and to issue
securities that would be treated as debt for federal income tax purposes. If a
Trust is intended to qualify as a FASIT for federal income tax purposes, the
Prospectus Supplement will so indicate.
TAX CONSEQUENCES TO HOLDERS OF THE CERTIFICATES
The following discussion only applies to a Trust which issues one or more
classes of Certificates and assumes that all payments on the Certificates are
denominated in U.S. dollars, that a series of Securities includes a single class
of Certificates and that any such Certificates are sold to persons other than
the Seller. If these conditions are not satisfied with respect to any given
series of Certificates, any additional tax considerations with respect to such
Certificates will be disclosed in the applicable Prospectus Supplement.
CLASSIFICATION AS A PARTNERSHIP
TREATMENT OF THE TRUST AS A PARTNERSHIP. The Seller and the Master Servicer
will agree, and the Certificateholders will agree by their purchase of
Certificates, to treat the Trust as a partnership for purposes of federal and
state income tax, franchise tax and any other tax measured in whole or in part
by income, with the assets of the partnership being the assets held by the
Trust, the partners of the partnership being the Certificateholders (including
the Seller in its capacity as recipient of distributions from the Reserve
Account, if any), and the Notes being debt of the partnership. However, the
proper characterization of the arrangement involving the Trust, the
Certificateholders, the Noteholders, the Seller and the Master Servicer is not
clear because there is no authority on transactions comparable to that
contemplated herein.
Under the provisions of Subchapter K, a partnership is not considered a
separate taxable entity. Instead, partnership income is taxed directly to the
partners and each partner generally is viewed as owning a direct undivided
interest in each partnership asset. The partnership is generally treated as an
entity, however, for computing partnership income, determining the tax
consequences of transactions between a partner and the partnership, and
characterizing the gain on the sale or exchange of a partnership interest. The
following discussion is a summary of some of the material federal income tax
consequences of classifying the Trust as a partnership. WE ENCOURAGE PROSPECTIVE
OWNERS OF CERTIFICATES TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE MATERIAL
INCOME TAX CONSEQUENCES DISCUSSED BELOW, AS WELL AS ANY OTHER MATERIAL INCOME
TAX CONSEQUENCES THAT MAY RESULT FROM APPLYING THE PROVISIONS OF SUBCHAPTER K TO
THE OWNERSHIP AND TRANSFER OF A CERTIFICATE.
PARTNERSHIP TAXATION. As a partnership, the Trust will not be subject to
federal income tax. Rather, each Certificateholder will be required to
separately take into account such holder's allocated share of income, gains,
losses, deductions and credits of the Trust. The Trust's income will consist
primarily of interest and finance charges earned on the Student Loans (including
appropriate adjustments for market discount, OID and bond premium), investment
income from investments of amounts on deposit in any related Trust Accounts and
any gain upon collection or disposition of Student Loans. The Trust's deductions
will consist primarily of interest accruing with respect to the Notes, servicing
and other fees, and losses or deductions upon collection or disposition of
Student Loans.
The tax items of a partnership are allocable to the partners in accordance
with the Code, Treasury regulations and the partnership agreement (here, the
Trust Agreement and related documents). The Trust Agreement will provide, in
general, that the Certificateholders will be allocated taxable income of the
Trust for each Interest Period (as defined in the applicable Prospectus
Supplement, an "Interest Period") equal to the sum of
(a) the interest that accrues on the Certificates in accordance with their
terms for such Interest Period, including interest accruing at the
Pass-Through Rate for such Interest Period and interest on amounts
previously due on the Certificates but not yet distributed;
(b) any Trust income attributable to discount on the Student Loans that
corresponds to any excess of the principal amount of the Certificates
over their initial issue price; and
(c) all other amounts of income payable to the Certificateholders for such
Interest Period.
All remaining taxable income of the Trust will be allocated to the Seller.
Losses will generally be allocated in the manner in which they are borne. Based
on the economic arrangement of the parties, this approach for allocating Trust
income should be permissible under applicable Treasury regulations, although no
assurance can be given that the IRS would not require a greater amount of income
to be allocated to Certificateholders. Moreover, even under the foregoing method
of allocation, Certificateholders may be allocated income equal to the entire
amount of interest accruing on the Certificates for an Interest Period, based on
the Pass-Through Rate plus the other items described above, even though the
Trust might not make (or have sufficient cash to make) current cash
distributions of such amount. Thus, cash basis holders will in effect be
required to report income from the Certificates on the accrual basis and
Certificateholders may become liable for taxes on Trust income even if they have
not received cash from the Trust to pay such taxes. In addition, because tax
allocations and tax reporting will be done on a uniform basis for all
Certificateholders but Certificateholders may be purchasing Certificates at
different times and at different prices, Certificateholders may be required to
report on their tax returns taxable income that is greater or less than the
amount reported to them by the Trust.
An individual taxpayer's share of expenses of the Trust (including fees to
the Master Servicer but not interest expenses) are miscellaneous itemized
deductions which are deductible only to the extent they exceed two percent of
the individual's adjusted gross income (and not at all for alternative minimum
tax purposes). Accordingly, such deductions might be disallowed to the
individual in whole or in part and might result in such holder being taxed on an
amount of income that exceeds the amount of cash actually distributed to such
holder over the life of the Trust. Such deductions may also be subject to
reduction under Section 68 of the Code if an individual taxpayers adjusted gross
income exceeds certain limits.
The Trust intends to make all tax calculations relating to income and
allocations to Certificateholders on an aggregate basis. If the IRS were to
require that such calculations be made separately for each of the Student Loans,
the Trust might be required to incur additional expense but it is believed that
there would not be a material adverse effect on Certificateholders.
COMPUTATION OF INCOME. Taxable income of the Trust will be computed at the
Trust level and the portion allocated to the Certificateholders will be
allocated to them PRO RATA. Consequently, the method of accounting for taxable
income will be chosen by, and any elections (such as those described above with
respect to the market discount rules) will be made by, the Trust rather than the
Certificateholders. The Trust intends, to the extent possible, to (x) have the
taxable income of the Trust computed under the accrual method of accounting and
(y) adopt a calendar-year taxable year for computing the taxable income of the
Trust. The tax year of the Trust, however, is generally determined by reference
to the tax years of the Certificateholders. An owner of a Certificate is
required to include its pro rata share of Trust income for a taxable year as
determined by the Trust in such Certificateholder's gross income for its taxable
year in which the taxable year of the Trust ends.
DETERMINING THE BASIS OF TRUST ASSETS. The will become a partnership on the
first date when Certificates are held by more than one person. On that date,
each of the Certificateholders should be treated as having purchased a share of
the assets of the Trust (subject to the liability for the Notes) followed
immediately by a deemed contribution of such assets to the newly formed
partnership. The partnership's basis in the Trust's assets would therefore equal
the sum of the Certificateholders' bases in their respective interests in the
Trust's assets immediately prior to the deemed contribution to the partnership.
To the extent that the fair market value of the assets deemed contributed to the
partnership varied from the bases of such assets to the partnership, the
allocation of taxable income to the Certificateholders would be adjusted in
accordance with Section 704(c) of the Code to account for such variations.
Under Section 708 of the Code, if 50% or more of the outstanding interests
in a partnership are sold or exchanged within any 12-month period, such
partnership will be deemed to terminate and then be reconstituted for federal
income tax purposes. If such a termination occurs, the assets of the terminated
partnership are deemed to be constructively contributed to a reconstituted
partnership in exchange for interests in such reconstituted partnership. Such
interests would be deemed distributed to the partners of the terminated
partnership in liquidation thereof, which distribution would not constitute a
sale or exchange. Accordingly, if the sale of the Certificates terminates the
partnership under Section 708 of the Code, a Certificateholder's basis in its
ownership interest would not change. The Trust's taxable year would also
terminate as a result of a constructive termination and, if the
Certificateholder's taxable year is different from the Trust's, the termination
could result in the "bunching" of more than 12 months' income or loss of the
Trust in such Certificateholder's income tax return for the year in which the
Trust was deemed to terminate. A redemption of interests is not considered a
sale or exchange of interests for purposes of applying this constructive
termination rule.
DISCOUNT AND PREMIUM. To the extent that OID, if any, on the Student Loans
exceeds a DE MINIMIS amount, the Trust would have OID income. As indicated
above, a portion of such OID income may be allocated to the Certificateholders.
Moreover, the purchase price paid by the Trust for the Student Loans may be
greater or less than the remaining aggregate principal balances of the Student
Loans at the time of purchase. If so, the Student Loans will have been acquired
at a premium or discount, as the case may be. (As indicated above, the Trust
will make this calculation on an aggregate basis, but might be required to
recompute it on a loan by loan basis.)
If the Trust acquires the Student Loans at a market discount or premium,
the Trust will elect to include any such discount in income currently as it
accrues over the life of the Student Loans or to offset any such premium against
interest income on the Student Loans. As indicated above, a portion of such
market discount income or premium deduction may be allocated to
Certificateholders.
DISPOSITION OF CERTIFICATES. Generally, capital gain or loss will be
recognized on a sale of Certificates in an amount equal to the difference
between the amount realized and the seller's tax basis in the Certificates sold.
Any such gain or loss would be long-term capital gain or loss if the
Certificateholder's holding period exceeded one year. A Certificateholder's tax
basis in a Certificate will generally equal the holder's cost increased by the
holder's share of Trust income (includible in gross income) and decreased by any
distributions received or losses allocated with respect to such Certificate. In
addition, both the tax basis in the Certificate and the amount realized on a
sale of a Certificate would include the holder's share of the Notes and other
liabilities of the Trust. A holder acquiring Certificates at different prices
may be required to maintain a single aggregate adjusted tax basis in such
Certificates and, upon sale or other disposition of some of the Certificates,
allocate a PRO RATA portion of such aggregate tax basis to the Certificates sold
(rather than maintaining a separate tax basis in each Certificate for purposes
of computing gain or loss on a sale of that Certificate).
Any gain on the sale of a Certificate attributable to the holder's share of
unrecognized accrued market discount on the Student Loans would generally be
treated as ordinary income to the holder.
If a Certificateholder is required to recognize an aggregate amount of
income (not including income attributable to disallowed itemized deductions
described above) over the life of the Certificates that exceeds the aggregate
cash distributions with respect thereto, such excess will generally give rise to
a capital loss upon the retirement of the Certificates.
ALLOCATIONS BETWEEN TRANSFERORS AND TRANSFEREES. In general, the Trust's
taxable income and losses will be determined monthly and the tax items for a
particular calendar month will be apportioned among the Certificateholders in
proportion to the principal amount of Certificates owned by them as of the close
of the last day of such month. As a result, a holder purchasing Certificates may
be allocated tax items (which will affect the tax liability and tax basis of the
holder) attributable to periods before the actual transaction.
The use of such a monthly convention may not be permitted by existing laws
and regulations. If a monthly convention is not allowed (or only applies to
transfers of less than all of the partner's interest), taxable income or losses
of the Trust might be reallocated among the Certificateholders. The Seller is
authorized to revise the Trust's method of allocation between transferors and
transferees to conform to a method permitted by future laws, regulations or
other IRS guidance.
SECTION 754 ELECTION. In the event that a Certificateholder sells a
Certificate at a profit (or loss), the purchasing Certificateholder will have a
higher (or lower) basis in the Certificate than the selling Certificateholder
had. The tax basis of the Trust's assets will not be adjusted to reflect that
higher (or lower) basis unless the Trust were to file an election under Section
754 of the Code. In order to avoid the administrative complexities that would be
involved in keeping accurate accounting records, as well as potentially onerous
information reporting requirements, the Trust will not make such election. As a
result, Certificateholders might be allocated a greater or lesser amount of
Trust income than would be appropriate based on their own purchase price for
Certificates.
ADMINISTRATIVE MATTERS. The Eligible Lender Trustee is required to keep or
cause to be kept complete and accurate books of the Trust. The Eligible Lender
Trustee will file a partnership information return (IRS Form 1065) with the IRS
for each taxable year of the Trust and will report each Certificateholder's
allocable share of items of Trust income and expense to holders and the IRS on
Schedule K-1. The Trust will provide the Schedule K-1 information to nominees
that fail to provide the Trust with the information statement described below
and such nominees will be required to forward such information to the beneficial
owners of the Certificates. Generally, holders must file tax returns that are
consistent with the information returns filed by the Trust or be subject to
penalties unless the holder timely notifies the IRS of all such inconsistencies.
Under Section 6031 of the Code, any person that holds Certificates as a
nominee at any time during a calendar year is required to furnish the Trust with
a statement containing certain information on the nominee, the beneficial owners
and the Certificates so held. Such information includes (a) the name, address
and taxpayer identification number of the nominee and (b) as to each beneficial
owner
(x) the name, address and identification number of such person,
(y) whether such person is a United States person, a tax-exempt entity or a
foreign government, an international organization, or any wholly owned agency or
instrumentality of either of the foregoing, and
(z) certain information on Certificates that were held, bought or sold on
behalf of such person throughout the year.
In addition, brokers and financial institutions that hold Certificates
through a nominee are required to furnish directly to the Trust information as
to themselves and their ownership of Certificates. A clearing agency registered
under Section 17A of the Exchange Act that holds Certificates as a nominee is
not required to furnish any such information statement to the Trust. The
information referred to above for any calendar year must be furnished to the
Trust on or before the following January 31. Nominees, brokers and financial
institutions that fail to provide the Trust with the information described above
may be subject to penalties.
The Seller will be designated as "tax matters partner" in the related Trust
Agreement and, as such, will be responsible for representing the
Certificateholders in certain disputes with the IRS. The Code provides for
administrative examination of a partnership as if the partnership were a
separate and distinct taxpayer. Generally, the statute of limitations for
partnership items does not expire before the later of three years after the date
on which the partnership information return is filed or the last day for filing
such return for such year (determined without regard to extensions). Any adverse
determination following an audit of the return of the Trust by the appropriate
taxing authorities could result in an adjustment of the returns of the
Certificateholders, and, under certain circumstances, a Certificateholder may be
precluded from separately litigating a proposed adjustment to the items of the
Trust. An adjustment could also result in an audit of a Certificateholder's
returns and adjustments of items not related to the income and losses of the
Trust.
TAX CONSEQUENCES TO FOREIGN CERTIFICATEHOLDERS. It is not clear whether the
Trust would be considered to be engaged in a trade or business in the United
States for purposes of federal withholding taxes with respect to non-U.S.
persons because there is no clear authority dealing with that issue under facts
substantially similar to those described herein. Although it is not expected
that the Trust would be engaged in a trade or business in the United States for
such purposes, the Trust will withhold as if it were so engaged in order to
protect the Trust from possible adverse consequences of a failure to withhold.
The Trust expects to withhold on the portion of its taxable income that is
allocable to foreign Certificateholders pursuant to Section 1446 of the Code, as
if such income were effectively connected to a U.S. trade or business, at a rate
of 35% for foreign holders that are taxable as corporations and 39.6% for all
other foreign holders. Subsequent adoption of Treasury regulations or the
issuance of other administrative pronouncements may require the Trust to change
its withholding procedures. In determining a holder's withholding status, the
Trust may rely on IRS Form W-8, IRS Form W-9 or the holder's certification of
nonforeign status signed under penalty of perjury. As previously mentioned, the
New Withholding Regulations generally will be effective for payments made after
December 31, 1999, subject to certain transition rules. THE DISCUSSION SET FORTH
ABOVE DOES NOT TAKE INTO ACCOUNT THE NEW WITHHOLDING REGULATIONS. WE ENCOURAGE
PROSPECTIVE CERTIFICATEHOLDERS WHO ARE FOREIGN PERSONS TO CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THE NEW WITHHOLDING REGULATIONS.
Each foreign holder may be required to file a U.S. individual or corporate
income tax return (including in the case of a corporation, the branch profits
tax) on its share of the Trust's income. Each foreign holder must obtain a
taxpayer identification number from the IRS and submit that number to the Trust
in order to assure appropriate crediting of the taxes withheld. A foreign holder
generally would be entitled to file with the IRS a claim for refund with respect
to taxes withheld by the Trust, taking the position that no taxes were due
because the Trust was not engaged in a U.S. trade or business. However, interest
payments made (or accrued) to a Certificateholder who is a foreign person may be
considered "guaranteed payments" (to the extent such payments are determined
without regard to the income of the Trust). If these interest payments are
properly characterized as guaranteed payments, then the interest will not be
considered "portfolio interest." As a result, Certificateholders will be subject
to United States federal income tax and withholding tax at a rate of 30 percent
on the Trust's gross income, unless reduced or eliminated pursuant to an
applicable treaty. In such case, a foreign holder would only be entitled to
claim a refund for that portion of the taxes, if any, in excess of the taxes
that should be withheld with respect to the guaranteed payments. AS A RESULT, WE
ENCOURAGE EACH POTENTIAL FOREIGN CERTIFICATEHOLDER TO CONSULT ITS TAX ADVISOR AS
TO WHETHER THE TAX CONSEQUENCES OF HOLDING A CERTIFICATE MAKE IT AN UNSUITABLE
INVESTMENT.
BACKUP WITHHOLDING. Distributions made on the Certificates and proceeds
from the sale of the Certificates will be subject to a "backup" withholding tax
of 31% if, in general, the Certificateholder fails to comply with certain
identification procedures, unless the holder is an exempt recipient under
applicable provisions of the Code. As previously mentioned, the New Withholding
Regulations generally will be effective for payments made after December 31,
1999, subject to certain transition rules.
FEDERAL TAX CONSEQUENCES FOR TRUSTS IN WHICH ALL
RESIDUAL INTERESTS ARE RETAINED BY THE SELLER OR
AN AFFILIATE OF THE SELLER
TAX CHARACTERIZATION OF THE TRUST
Federal Tax Counsel will deliver its opinion that a Trust which issues one
or more classes of Notes to investors and all the Residual Interests of which
are retained by the Seller or an affiliate thereof will be treated as a division
of its owner and as such will be disregarded as an entity separate from its
owner for federal income tax purposes, assuming no election will be made to
treat the Trust as a corporation for federal income tax purposes.
TAX CONSEQUENCES TO HOLDERS OF THE NOTES
TREATMENT OF THE NOTES AS INDEBTEDNESS. As discussed above, the Seller will
agree, and the Noteholders will agree by their purchase of Notes, to treat the
Notes as debt for federal income tax purposes. Federal Tax Counsel will, except
as otherwise provided in the related Prospectus Supplement, advise the Trust
that the Notes will be classified as debt for federal income tax purposes.
Assuming such characterization of the Notes is correct, the federal income tax
consequences to Noteholders described above under "Federal Tax Consequences For
Trusts For Which a Partnership Election is Made--Tax Consequences to Holders of
the Notes" would apply to the Noteholders.
POSSIBLE ALTERNATIVE TREATMENTS OF THE NOTES. If, contrary to the opinion
of Federal Tax Counsel, the IRS successfully asserted that one or more classes
of Notes did not represent debt for federal income tax purposes, such class or
classes of Notes might be treated as equity interests in the Trust. If so
treated, the Trust could, in the view of Federal Tax Counsel, be treated as a
publicly traded partnership that would be taxable as a corporation In such case,
the entity would be subject to federal income taxes at corporate tax rates on
its taxable income generated by Student Loans. Such an entity-level tax could
result in reduced distribution to Noteholders and Noteholders could be liable
for a share of such tax.
Furthermore, even if the Trust were not taxable as a corporate, the
treatment of Notes as equity interests in such a partnership could have adverse
tax consequences to certain holders of such Notes. For example, income from
certain classes of Notes to certain tax-exempt entities (including pension
funds) might be "unrelated business taxable income", income to foreign holders
may be subject to U.S. withholding tax and U.S. tax return filing requirements,
and individual holders might be subject to certain limitations on their ability
to deduct their share of Trust expenses. In the event one or more classes of
Notes were treated as interests in a partnership, the consequences governing the
Certificates as equity interests in a partnership described above under "Federal
Tax Consequences For Trusts For Which a Partnership Election is Made--Tax
Consequences to Holders of the Certificates" would apply to the holders of such
Notes.
STATE AND LOCAL TAX CONSEQUENCES
The discussion above does not address the tax consequences of purchase,
ownership or disposition of the Securities under any state or local tax law. We
recommend that investors consult their own tax advisors regarding state and
local tax consequences.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and the Code impose certain requirements on employee benefit plans and on
certain other retirement plans and arrangements, including individual retirement
accounts and annuities, Keogh plans and collective investment funds and separate
accounts (and, as applicable, insurance company general accounts) in which such
plans, accounts or arrangements are invested that are subject to the fiduciary
responsibility provisions of ERISA and Section 4975 of the Code ("Plans") and on
persons who are fiduciaries with respect to such Plans in connection with the
investment of Plan assets. Certain employee benefit plans, such as governmental
plans (as defined in ERISA Section 3(32)), and, if no election has been made
under Section 410(d) of the Code, church plans (as defined in Section 3(33) of
ERISA) are not subject to ERISA requirements. Accordingly, assets of such plans
may be invested in Notes without regard to the ERISA considerations described
below, subject to the provisions of other applicable federal and state law. Any
such plan which is qualified and exempt from taxation under Sections 401(a) and
501(a) of the Code, however, is subject to the prohibited transaction rules set
forth in Section 503 of the Code.
ERISA generally imposes on Plan fiduciaries certain general fiduciary
requirements, including those of investment prudence and diversification and the
requirement that a Plan's investments be made in accordance with the documents
governing the Plan. In addition, Section 406 of ERISA and Section 4975 of the
Code prohibit a broad range of transactions involving assets of Plan and persons
(parties in interest under ERISA and disqualified persons under the Code,
collectively, "Parties in Interest") who have certain specified relationships to
the Plan unless a statutory, regulatory or administrative exemption is
available. Certain Parties in Interest that participate in a prohibited
transaction may be subject to an excise tax imposed pursuant to Section 4975 of
the Code or a penalty imposed pursuant to Section 502(i) of ERISA, unless a
statutory or administrative exemption is available. These prohibited
transactions generally are set forth in Section 406 of ERISA and Section 4975 of
the Code.
THE NOTES
Unless otherwise specified in the related Prospectus Supplement, the Notes
of each series may be purchased by a Plan. The Trust, any underwriter, the
Eligible Lender Trustee, the Indenture Trustee, the Master Servicer, the
Administrator, any provider of credit support or any of their affiliates may be
considered to be or may become Parties in Interest with respect to certain
Plans. Prohibited transactions under Section 406 of ERISA and Section 4975 of
the Code may arise if a Note is acquired by a Plan with respect to which such
persons are Parties in Interest unless such transactions are subject to one or
more statutory or administrative exemptions, such as:
o Prohibited Transaction Class Exemption ("PTCE") 96-23, which exempts
certain transactions effected on behalf of a Plan by an "in-house
asset manager";
o PTCE 90-1, which exempts certain transactions between insurance
company separate accounts and Parties in Interest;
o PTCE 91-38, which exempts certain transactions between bank collective
investment funds and Parties in Interest;
o PTCE 95-60, which exempts certain transactions between insurance
company general accounts and Parties in Interest; or
o PTCE 84-14, which exempts certain transactions effected on behalf of a
Plan by a "qualified professional asset manager".
There can be no assurance that any of these class exemptions will apply with
respect to any particular Plan investment in Notes or, even if it were deemed to
apply, that any exemption would apply to all prohibited transactions that may
occur in connection with such investment. Accordingly, prior to making an
investment in the Notes, investing Plans should determine whether the Trust, any
underwriter, the Eligible Lender Trustee, the Indenture Trustee, the Master
Servicer, the Administrator, or any provider of credit support or any of their
affiliates is a Party in Interest with respect to such Plan and, if so, whether
such transaction is subject to one or more statutory, regulatory or
administrative exemptions.
Any Plan fiduciary considering whether to invest in Notes on behalf of a
Plan should consult with its counsel regarding the applicability of the
fiduciary responsibility and prohibited transaction provisions of ERISA and the
Code to such investment. Each Plan fiduciary also should determine whether,
under the general fiduciary standards of investment prudence and
diversification, an investment in the Notes is appropriate for the Plan,
considering the overall investment policy of the Plan and the composition of the
Plan's investment portfolio, as well as whether such investment is permitted
under the governing Plan instruments.
THE CERTIFICATES
Unless otherwise specified in the Prospectus Supplement, the Certificates
of each series may not be purchased by a Plan or by any entity whose underlying
assets include plan assets by reason of a plan's investment in the entity (each,
a "Benefit Plan"). Such purchase of an equity interest in the Trust will result
in the assets of the Trust being deemed assets of a Benefit Plan for the
purposes of ERISA and the Code and certain transactions involving the Trust may
then be deemed to constitute prohibited transactions under Section 406 of ERISA
and Section 4975 of the Code. A violation of the "prohibited transaction" rules
may result in an excise tax or other penalties and liabilities under ERISA and
the Code for such persons.
By its acceptance of a Certificate, each Certificateholder will be deemed
to have represented and warranted that it is not a Benefit Plan.
If a given series of Certificates may be acquired by a Benefit Plan because
of the application of an exception contained in a regulation or administrative
exemption issued by the United States Department of Labor, such exception will
be discussed in the related Prospectus Supplement.
* * *
WE ENCOURAGE A PLAN FIDUCIARY CONSIDERING THE PURCHASE OF SECURITIES OF A
GIVEN SERIES TO CONSULT ITS TAX AND/OR LEGAL ADVISORS REGARDING WHETHER THE
ASSETS OF THE RELATED TRUST WOULD BE CONSIDERED PLAN ASSETS, THE POSSIBILITY OF
EXEMPTIVE RELIEF FROM THE PROHIBITED TRANSACTION RULES AND OTHER ISSUES AND
THEIR POTENTIAL CONSEQUENCES.
METHOD OF DISTRIBUTION
Securities are being offered hereby in series from time to time through any
of the following methods:
1. By negotiated firm commitment underwriting and public reoffering by
underwriters;
2. By agency placements through one or more placement agents primarily
with institutional investors and dealers; and
3. By placement directly by the Seller with institutional investors.
A Prospectus Supplement will be prepared for each series which will
describe the method of offering being used for that series and will set forth
the identity of any underwriters thereof and either the price at which such
series is being offered, the nature and amount of any underwriting discounts or
additional compensation to such underwriters and the proceeds of the offering to
the Seller, or the method by which the price at which the underwriters will sell
the Notes and/or the Certificates will be determined. Each Prospectus Supplement
for an underwritten offering will also contain information regarding the nature
of the underwriters' obligations, any material relationship between the Seller
and any underwriter and, where appropriate, information regarding any discounts
or concessions to be allowed or reallowed to dealers or others and any
arrangements to stabilize the market for the Securities so offered. In firm
commitment underwritten offerings, the underwriters will be obligated to
purchase all of the Notes and/or Certificates of such series, as applicable, if
any such Notes and/or Certificates are purchased. Securities may be acquired by
the underwriters for their own accounts and may be resold from time to time in
one or more transactions including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale.
Mellon Financial Services, Inc., an affiliate of the Seller, may from time
to time act as agent or underwriter in connection with the sale of the
Securities. This Prospectus and the related Prospectus Supplement may be used by
Mellon Financial Services, Inc. in connection with offers and sales related to
secondary market transactions in any series of Securities. Mellon Financial
Services, Inc. may act as principal or agent in such transactions. Such sales
will be made at prices related to the prevailing prices at the time of sale.
Underwriters and agents may be entitled under agreements entered into with
the Seller to indemnification by the Seller against certain civil liabilities,
including liabilities under the Securities Act of 1933, as amended, or to
contribution with respect to payments which such underwriters or agents may be
required to make in respect thereof.
If a series is offered other than through underwriters, the Prospectus
Supplement relating thereto will contain information regarding the nature of
such offering and any agreements to be entered into between the Seller and
purchasers of Securities of such series.
LEGAL MATTERS
Certain legal matters relating to the Securities of any series will be
passed upon for the Seller by Stroock & Stroock & Lavan LLP, New York, New York.
Certain federal income tax and other matters will be passed upon for the Trust
by Stroock & Stroock & Lavan LLP.
INDEX OF PRINCIPAL TERMS
Page
10 percent shareholder..................................................84
1992 Amendments.........................................................18
1993 Act................................................................33
1998 Amendments.........................................................18
1998 Reauthorization Bill...............................................80
91-day Treasury Bill Rate...............................................21
AACSB...................................................................30
Additional Fundings.....................................................16
Administration Agreement................................................74
Administration Fee......................................................74
Administrator...........................................................14
Administrator Default...................................................69
Applicable Trustee......................................................51
Auction Date............................................................73
Auction Purchase Amount.................................................73
Available Funds.........................................................77
Bankruptcy Code.........................................................78
Base Rate...............................................................49
Benefit Plan............................................................95
bunching................................................................89
Calculation Agent.......................................................50
Cede....................................................................39
Cedel...................................................................50
Cedel Participants......................................................52
Certificate Balance.....................................................39
Certificate Pool Factor.................................................38
Certificateholder.......................................................51
Certificates............................................................47
Closing Date............................................................57
Code....................................................................82
Collection Account......................................................59
Collection Period.......................................................58
Commission..............................................................12
Consolidation Loan......................................................26
Consolidation Loan Rebate...............................................28
controlled foreign corporation..........................................84
Cooperative.............................................................53
Cutoff Date.............................................................13
Deferral Period.........................................................22
Definitive Certificates.................................................54
Definitive Notes........................................................54
Definitive Securities...................................................54
Department..............................................................14, 17
Depositories............................................................50
Depository..............................................................39
Depository Services.....................................................52
Direct Consolidation Loan Program.......................................27
Direct Student Loan Program.............................................33
Distribution Date.......................................................40
DTC.....................................................................39
effectively connected earnings and profits..............................85
Eligible Deposit Account................................................59
Eligible Institution....................................................60
Eligible Investments....................................................59
Eligible Lender Trustee.................................................13
Eligible Students.......................................................19
ERISA...................................................................94
Escrow Account..........................................................59
Euroclear...............................................................50
Euroclear Operator......................................................53
Euroclear Participants..................................................53
Event of Default........................................................42
Exchange Act............................................................12
FASIT...................................................................86
FASIT Provisions........................................................86
FDIA....................................................................76
FDIC....................................................................60
Federal Assistance......................................................19
Federal Consolidation Loan Program......................................18
Federal Direct Consolidation Loan.......................................27
Federal Graduate Programs...............................................30
Federal Tax Counsel.....................................................81
FFELP...................................................................22
FIRREA..................................................................76
Fixed Rate Securities...................................................49
Floating Rate Securities................................................49
Forbearance Period......................................................22
foreign person..........................................................84
Funding Period..........................................................16
Grace Period............................................................22
Graduate Loans..........................................................17
Guarantee Agreements....................................................17
guaranteed payments.....................................................92
Guarantors..............................................................17
Higher Education Act....................................................17
Indenture...............................................................39
Indenture Trustee...........................................................39
Index Shortfall Carryover...................................................43
Indirect Participants.......................................................50
Industry....................................................................52
in-house asset manager......................................................94
Initial Pool Balance........................................................73
Interest Period.............................................................87
Interest Rate...............................................................40
Interest Reset Period.......................................................49
Interest Subsidy Payments...................................................18
Investment Earnings.........................................................59
IRS.........................................................................82
LIBOR.......................................................................49
Master Servicer.............................................................14
Master Servicer Default.....................................................68
Master Servicing Fee........................................................63
Minimum Purchase Amount.....................................................73
Monthly Servicing Payment Date..............................................61
Negative Carry Account......................................................59
New Withholding Regulations.................................................85
Note Pool Factor............................................................38
Noteholder..................................................................51
Notes.......................................................................39
OID.........................................................................83
OID Regulations.............................................................83
Origination Fee.............................................................28
Participants................................................................39
Parties in Interest.........................................................94
Pass-Through Rate...........................................................48
Plans.......................................................................94
PLUS Loan...................................................................32
PLUS Loan Program...........................................................18
PLUS Loans..................................................................25
Pool Balance................................................................39
Pool Factor.................................................................38
portfolio interest..........................................................84
Pre-Funded Amount...........................................................66
Pre-Funding Account.........................................................59
Programs................................................................17, 18
Prospectus..................................................................39
PTCE........................................................................94
Purchase Amount.............................................................58
qualified professional asset manager........................................95
Qualified Stated Interest...................................................83
Rating Agency...............................................................46
Record Date.................................................................55
Registration Statement......................................................12
Related Documents...........................................................46
related person..............................................................84
Reserve Account.............................................................59
Revolving Period............................................................16
Rules.......................................................................51
Sale and Servicing Agreement................................................57
Secretary...................................................................78
Securityholders.............................................................51
Seller......................................................................14
Seller Insolvency Event.....................................................71
Short-Term Note.............................................................84
SLS Loan Program............................................................17
SLS Loans...................................................................24
SLS Program.................................................................24
Special Allowance Payments..................................................19
Specified Reserve Account Balance...........................................41
Spread......................................................................49
Spread Multiplier...........................................................49
Stafford Loan Program.......................................................17
Stafford Loans..............................................................18
Student Loans...............................................................13
Sub-Servicers...............................................................15
Sub-Servicing Agreement.....................................................15
Systems.....................................................................52
tax matters partner.........................................................91
Terms and Conditions........................................................53
Transfer and Servicing Agreements...........................................57
Trust.......................................................................13
Trust Accounts..............................................................59
Trust Agreement.............................................................13
UCC.........................................................................75
Undergraduate Loans.........................................................17
Underlying Student Loan.....................................................26
unrelated business taxable income...........................................93
Unsubsidized Stafford Loan Program..........................................31
Unsubsidized Stafford Loans.................................................19
Year 2000 problems..........................................................52
<PAGE>
MELLON STUDENT LOAN TRUST _____-1
$--------------
--------------
PROSPECTUS SUPPLEMENT
--------------
[Underwriters]
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We have
not authorized anyone to provide you with different information.
We are not offering the securities in any state where the offer is not
permitted.
Dealers will deliver a prospectus supplement and prospectus when acting as
underwriters of the securities, and with respect to their unsold allotments or
subscriptions. In addition, all dealers selling the securities will be required
to deliver a prospectus supplement and prospectus until ________, ____.
----------, ----
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is an itemized list of the estimated expenses to be incurred
in connection with the offering of the Securities being offered hereunder other
than underwriting discounts and commissions:
SEC registration fee............................$ 66,000
Legal fees and expenses.........................$ 59,000
Accounting fees and expenses....................$ 35,000
Rating agency fees..............................$173,000
Trustee's fees and expenses.....................$ 27,000
Printing and engraving..........................$ 35,000
Blue Sky fees and expenses......................$ 25,000
Miscellaneous...................................$ 30,000
Total...................$450,000
- -----------------
* All amounts are estimates of expenses incurred or to be incurred in
connection with the issuance and distribution of a Series of Securities in
an aggregate principal amount assumed for these purposes to be one-half
of the principal amount of Securities registered hereby. Accordingly, only
one-half of the SEC Registration Fee paid upon the filing of this
Registration Statement is included in the table above.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section I of Article Eight of the Articles of Association of the Registrant
(the "Association") provides as follows:
Except as prohibited by federal or state law, rule or regulation, every
Director and officer of the Association shall be entitled as of right to be
indemnified by the Association against expenses and any liability paid or
incurred by such person in connection with any actual or threatened claim,
action, suit or proceeding, civil, criminal, administrative, investigative
or other, whether brought by or in the right of the Association or
otherwise, in which he or she may be involved, as a party or otherwise, by
reason of such person being or having been a Director or officer of the
Association or by reason of the fact that such person is or was serving at
the request of the Association as a director, officer, employee, fiduciary
or other representative of another corporation, partnership, joint venture,
trust, employee benefit plan or other entity (such claim, action, suit or
proceeding hereinafter being referred to as "Action"); provided, that no
such right of indemnification shall exist with respect to an Action brought
by an indemnitee (as hereinafter defined) against the Association except as
provided in the last sentence of this Section I. Persons who are not
directors or officers of the Association may be similarly indemnified in
respect of service to the Association or to another such entity at the
request of the Association to the extent the Board of Directors at any time
denominates any of such persons as entitled to the benefits of this Article
to the extent not prohibited by federal or state law, rule or regulation.
As used in this Article, "indemnitee" shall include each Director and
officer of the Association and each other person denominated by the Board
of Directors as entitled to the benefits of this Article, "expenses" shall
include fees and expenses of counsel selected by any such indemnitee and
"liability" shall include amounts of judgments, excise taxes, fines,
penalties and amounts paid in settlement. An indemnitee shall be entitled
to be indemnified pursuant to this Section I for expenses incurred in
connection with any Action brought by an indemnitee against the Association
only if (i) the Action is a claim for indemnity or expenses under Section
III of this Article or otherwise, (ii) the indemnitee is successful in
whole or in part in the Action for which expenses are claimed or (iii) the
indemnification for expenses is included in a settlement of the Action or
is awarded by a court.
Reference is made to Section 145 of the Delaware General Corporation Law
relating to indemnification of officers, directors, employees and agents of a
Delaware corporation. For the full text of Article Eight of the Registrant's
Articles of Association, reference is hereby made to Exhibit 3.1.
The Registrant also maintains insurance on behalf of each director and
certain officers against any loss arising from any claim asserted against him in
any such capacity, subject to certain exclusions.
ITEM 16. EXHIBITS.
1.1. Form of Note Underwriting Agreement **
1.2 Form of Certificate Underwriting Agreement**
3.1. Articles of Association of Mellon Bank, N.A.*
3.2. By-Laws Mellon Bank, N.A.*
4.1. Form of Indenture (including as an exhibit thereto a form of Asset
Backed Note) **
4.2. Form of Trust Agreement (including as an exhibit thereto a form of
Asset Backed Certificate)**
5.1. Opinion of Stroock & Stroock & Lavan LLP with respect to legality**
8.1. Opinion of Stroock & Stroock & Lavan LLP with respect to federal tax
matters (included as part of Exhibit 5.1)**
10.1. Form of Sale and Servicing Agreement**
10.2. Form of Administration Agreement**
23.1 Consent of Stroock & Stroock & Lavan LLP (included as part of
Exhibit 5.1)**
24.1. Power of Attorney*
25.1. Statement of Eligibility under the Trust Indenture Act of 1939 of
the Indenture Trustee (Form T-1)***
- ---------------
* Filed previously.
** Filed herewith.
*** To be filed by Post-Effective Amendment.
ITEM 17. UNDERTAKINGS.
ITEM 17. UNDERTAKINGS
(a) Undertakings pursuant to Rule 415.
The undersigned Registrant hereby undertakes:
(1) To file, during any period 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. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective 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 to such information in the registration statement;
(2) 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 the 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) Undertaking as to documents subsequently filed that are
incorporated by reference.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, 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) Undertaking as to equity offerings of nonreporting registrants.
The undersigned registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreements, certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
(d) Undertaking as to request for acceleration of effective date.
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.
(e) Undertaking as to registration statement permitted by Rule 430A under
the Securities Act of 1933.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial BONA FIDE offering thereof.
(f) Undertaking as to trust indentures under the Trust Indenture Act of
1939 for delayed offerings.
The undersigned registrant hereby undertakes to file an application for the
purpose of determining the eligibility of the trustee to act under subsection
(a) of Section 310 of the Trust Indenture Act in accordance with the rules and
regulations prescribed by the Commission under Section 305(b)(2) of the Act.
<PAGE>
SIGNATURES
MELLON BANK, N.A.
Pursuant to the requirements of the Securities Act of 1933, Mellon Bank,
N.A. certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3, it believes that the securities rating
requirement for use of Form S-3 will be met by the time of sale of the
securities and it has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Pittsburgh, Commonwealth of Pennsylvania, on the 13 day of March, 2000.
MELLON BANK, N.A.
By: /s/ Martin G. McGuinn
-------------------------
Name: Martin G. McGuinn
Title: Chairman and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
indicated on the __ day of February, 2000.
By:/s/ Steven G. Elliott By: /s/ Michael K. Hughey
--------------------------- ----------------------------
Steven G. Elliott Michael K. Hughey
Principal Financial Officer Principal Accounting Officer
MARTIN G. MCGUINN, Director, CHRISTOPHER M. CONDRON, Director, DWIGHT L.
ALLISON, JR., Director, BURTON C. BORGELT, Director, CAROL R. BROWN, Director,
FRANK V. CAHOUET, Director, JARED L. COHON, Director, CHARLES A. CORRY,
Director, IRA J. GUMBERG, Director, GEORGE W. JOHNSTONE, Director, ROTAN E. LEE,
Director, EDWARD J. MCANIFF, Director, ROBERT MEHRABIAN, Director, SEWARD
PROSSER MELLON, Director, MARK A. NORDENBERG, Director, DAVID S. SHAPIRA,
Director, JOAB L. THOMAS, Director, WESLEY W. VON SCHACK, Director
By: /s/ Carl Krasik
-------------------------
Carl Krasik
Attorney-in-fact
<PAGE>
EXHIBIT INDEX
Exhibit
NO. DESCRIPTION OF EXHIBIT
1.1. Form of Note Underwriting Agreement **
1.2 Form of Certificate Underwriting Agreement**
3.1. Articles of Association of Mellon Bank, N.A.*
3.2. By-Laws Mellon Bank, N.A.*
4.1. Form of Indenture (including as an exhibit thereto a form of Asset
Backed Note) **
4.2. Form of Trust Agreement (including as an exhibit thereto a form of
Asset Backed Certificate)**
5.1. Opinion of Stroock & Stroock & Lavan LLP with respect to legality**
8.1. Opinion of Stroock & Stroock & Lavan LLP with respect to federal tax
matters (included as part of Exhibit 5.1)**
10.1. Form of Sale and Servicing Agreement**
10.2. Form of Administration Agreement**
23.1 Consent of Stroock & Stroock & Lavan LLP (included as part of
Exhibit 5.1)***
24.1. Power of Attorney*
25.1. Statement of Eligibility under the Trust Indenture Act of 1939 of
the Indenture Trustee (Form T-1)***
- ---------------
* Filed previously.
** Filed herewith.
*** To be filed by Post-Effective Amendment.
EXHIBIT 1.1
[FORM OF]
MELLON STUDENT LOAN TRUST ____-_
$---------------
FLOATING RATE CLASS ____ ASSET BACKED NOTES
$---------------
FLOATING RATE CLASS ____ ASSET BACKED NOTES
MELLON BANK, N.A.
(SELLER)
NOTE UNDERWRITING AGREEMENT
----------------, ----
<PAGE>
- ---------------------,
as Representative of the
several Underwriters
- ---------------------
- ---------------------
Dear Sirs:
1. INTRODUCTORY. Mellon Bank, N.A., a national banking association
("Mellon"), proposes to cause Mellon Student Loan Trust ____-_ the "Trust") to
issue and sell $____________ principal amount of its Floating Rate Class ___
Asset Backed Notes (the "Class ___ Notes"), and $_________ principal amount of
its Floating Rate Class __ Asset Backed Notes (the "Class __ Notes" and together
with the Class ___ Notes, (the "Notes"), to the underwriters named in Schedule I
hereto (the "Underwriters"), for whom you (the "Representative") are acting as
representative. The Trust was formed pursuant to the Trust Agreement, dated as
of __________, ____, as amended and restated by the Amended and Restated Trust
Agreement, dated as of __________, ____ (as further amended and supplemented
from time to time, collectively, the "Trust Agreement") between Mellon, as
depositor and ________________, as Eligible Lender Trustee (the "Eligible Lender
Trustee"). The assets of the Trust include, among other things, two pools of
graduate and undergraduate student loans (collectively, the "Initial Financed
Student Loans") and certain monies due thereunder on and after __________, ____,
with respect to certain of the Initial Financed Student Loans, and __________,
____, with respect to certain other Initial Financed Student Loans
(collectively, the "Cutoff Date"). Such Initial Financed Student Loans were sold
to the Eligible Lender Trustee on behalf of the Trust by the Seller pursuant to
the Sale and Servicing Agreement, dated as of __________, ____, (as amended and
supplemented from time to time, the "Sale and Servicing Agreement"), among, the
Trust, the Eligible Lender Trustee, Mellon, as master servicer (in such
capacity, the "Master Servicer"), Mellon, as seller (in such capacity, the
"Seller"), and Mellon, as administrator (in such capacity, the "Administrator").
The Master Servicer has also entered into two certain sub-servicing agreements
to have the Financed Student Loans sub-serviced with each of __________________
______________________ ("_____" and, in its capacity as a sub-servicer, a
"Sub-Servicer") and ________________________________________ ("_____" or a
"Sub-Servicer"). The Notes will be issued pursuant to the Indenture to be dated
as of __________, ____ (as amended and supplemented from time to time, the
"Indenture"), between the Trust and ________________, a ____________ banking
corporation (the "Indenture Trustee"). After the Closing Date (as defined
below), the Eligible Lender Trustee, acting on behalf of the Trust, will acquire
certain additional student loans, identified in the Sale and Servicing Agreement
on or prior to __________, ____ (the "Subsequent Pool Student Loans") and on or
prior to the end of the Funding Period (the "Other Subsequent Student Loans";
and together with the Subsequent Pool Student Loans and Initial Financed Student
Loans, the "Financed Student Loans") using amounts in certain accounts owned by
the Trust which have been set aside for such purpose. In addition, the
Administrator will perform certain administrative duties on behalf of the Trust
pursuant to the Administration Agreement, dated as of __________, ____ (as
amended and supplemented from time to time, the "Administration Agreement"),
among the Indenture Trustee, the Trust and the Administrator. The Sale and
Servicing Agreement, the Indenture, the Trust Agreement and, the Administration
Agreement are referred to herein as the "Basic Documents."
Simultaneously with the issuance and sale of the Notes as contemplated
herein, and pursuant to the Trust Agreement, the Trust will issue $_____________
principal amount of its Floating Rate Asset Backed Certificates (the
"Certificates"), representing a fractional undivided ownership interest in the
Trust, which will be sold pursuant to an underwriting agreement dated the date
hereof (the "Certificate Underwriting Agreement") between the Seller and the
Representative.
Capitalized terms used and not otherwise defined herein shall have the
meanings given them in Appendix A attached hereto.
2. REPRESENTATIONS AND WARRANTIES OF THE SELLER. (a) The Seller
represents and warrants to and agrees with the several Underwriters that:
(i) A registration statement on Form S-3 (Registration No. 333-______)
has been filed with the Securities and Exchange Commission (the
"Commission"), including a related preliminary base prospectus and a
preliminary prospectus supplement, for the registration under the Act of
the offering and sale of the Notes and the Certificates. The Seller may
have filed one or more amendments thereto, each of which amendments has
previously been furnished to the Representative. The Seller will next file
with the Commission (i) after effectiveness of such registration statement,
a final base prospectus and a final prospectus supplement relating to the
Notes in accordance with Rules 430A and 424(b)(1) or (4) under the
Securities Act of 1933, as amended (the "Act"), or (ii) a final base
prospectus and a final prospectus supplement relating to the Notes in
accordance with Rules 415 and 424(b)(2) or (5).
The Seller has included in such registration statement, as amended at
the Effective Date, all information (other than Rule 430A Information)
required by the Act and the rules thereunder to be included in the
Prospectus with respect to the Notes and the offering thereof. As filed
such final prospectus supplement shall include all Rule 430A Information,
together with all other such required information, with respect to the
Notes and the offering thereof and, except to the extent that the
Representative shall agree in writing to a modification, shall be in all
substantive respects in the form furnished to the Representative prior to
the Execution Time or, to the extent not completed at the Execution Time,
shall contain only such specific additional information and other changes
(beyond that contained in the latest preliminary base prospectus and
preliminary prospectus supplement, if any, that have previously been
furnished to the Representative) as the Seller has advised the
Representative, prior to the Execution Time, will be included or made
therein. If the Registration Statement contains the undertaking specified
by Regulation S-K Item 512(a), the Registration Statement, at the Execution
Time, meets the requirements set forth in Rule 415(a)(1)(x).
For purposes of this Note Underwriting Agreement (this "Agreement"),
"Effective Time" means the date and time as of which such registration
statement, or the most recent post-effective amendment thereto, if any, was
declared effective by the Commission, and "Effective Date" means the date
of the Effective Time. "Execution Time" shall mean the date and time that
this Agreement is executed and delivered by the parties hereto. Such
registration statement, as amended at the Effective Time, including all
information deemed to be a part of such registration statement as of the
Effective Time pursuant to Rule 430A(b) under the Act, and including the
exhibits thereto and any material incorporated by reference therein, is
hereinafter referred to as the "Registration Statement." "Base Prospectus"
shall mean any prospectus referred to above contained in the Registration
Statement at the Effective Date, including any Preliminary Prospectus
Supplement. "Preliminary Prospectus Supplement" shall mean the preliminary
prospectus supplement to the Base Prospectus which describes the Notes and
the offering thereof and is used prior to filing of the Prospectus.
"Prospectus" shall mean the prospectus supplement relating to the Notes
that is first filed pursuant to Rule 424(b) after the Execution Time,
together with the Base Prospectus or, if no filing pursuant to Rule 424(b)
is required, shall mean the prospectus supplement relating to the Notes,
including the Base Prospectus, included in the Registration Statement at
the Effective Date. "Rule 430A Information" means information with respect
to the Notes and the offering of the Notes permitted to be omitted from the
Registration Statement when it becomes effective pursuant to Rule 430A.
"Rule 415," "Rule 424," "Rule 430A" and "Regulation S-K" refer to such
rules or regulations under the Act. Any reference herein to the
Registration Statement, a Preliminary Prospectus Supplement or the
Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein, if any, pursuant to Item 12 of Form S-3
which were filed under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), on or before the Effective Date of the Registration
Statement or the issue date of the Base Prospectus, such Preliminary
Prospectus Supplement or the Prospectus, as the case may be; and any
reference herein to the terms "amend," "amendment" or "supplement" with
respect to the Registration Statement, the Base Prospectus, any Preliminary
Prospectus Supplement or the Prospectus shall be deemed to refer to and
include the filing of any document under the Exchange Act after the
Effective Date of the Registration Statement, or the issue date of the Base
Prospectus, to any Preliminary Prospectus Supplement or the Prospectus, as
the case may be, deemed to be incorporated therein by reference.
(ii) As of the Closing Date (as defined below), Mellon's
representations and warranties in the Basic Documents to which it is a
party will be true and correct in all material respects.
(iii) This Agreement has been duly authorized, executed and delivered
by the Seller. The execution, delivery and performance of this Agreement
and the issuance and sale of the Notes and compliance with the terms and
provisions hereof will not result in a breach or violation of any of the
terms and provisions of, or constitute a default under, any agreement or
instrument to which the Seller is a party or by which the Seller is bound
or to which any of the properties of the Seller is subject which could
reasonably be expected to have a material adverse effect on the
transactions contemplated herein. The Seller has full corporate power and
authority to cause the Trust to authorize, issue and sell the Notes, all as
contemplated by this Agreement.
(iv) Other than as contemplated by this Agreement or as disclosed in
the Prospectus, there is no broker, finder or other party that is entitled
to receive from the Seller or any of its subsidiaries any brokerage or
finder's fee or other fee or commission as a result of any of the
transactions contemplated by this Agreement.
(v) All legal or governmental proceedings, contracts or documents of a
character required to be described in the Registration Statement or the
Prospectus or to be filed as an exhibit to the Registration Statement have
been so described or filed as required.
(vi) The Seller's assignment and delivery of the Financed Student
Loans to the Eligible Lender Trustee on behalf of the Trust as of the
Closing Date will vest in the Eligible Lender Trustee on behalf of the
Trust all the Seller's right, title and interest therein, or will result in
a first priority perfected security interest therein, in either case
subject to no prior lien, mortgage, security interest, pledge, adverse
claim, charge or other encumbrance.
(vii) The Trust's assignment of the Financed Student Loans to the
Indenture Trustee pursuant to the Indenture will vest in the Indenture
Trustee, for the benefit of the holders of the Notes, a first priority
perfected security interest therein, subject to no prior lien, mortgage,
security interest, pledge, adverse claim, charge or other encumbrance.
(viii) The Seller is not, and after giving effect to the offering and
sale of the Notes, will not be an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in the
United States Investment Company Act of 1940, as amended (the "Investment
Company Act");
(b) The Seller hereby agrees with the Underwriters that, for all
purposes of this Agreement, the only information furnished to the Seller by the
Underwriters through the Representative specifically for use in the Registration
Statement, the Prospectus, or any amendment or supplement thereto, or any
related preliminary prospectus, are the statements relating to stabilization on
the inside cover page of, and the statements under the caption "Underwriting"
in, the preliminary prospectus and the Prospectus.
3. PURCHASE, SALE AND DELIVERY OF THE NOTES. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Seller agrees to cause the Trust to
sell to the Underwriters, and the Underwriters agree, severally and not jointly,
to purchase from the Trust, at a purchase price of ____% of the principal amount
of the Class ____ Notes, at a purchase price of ____% of the principal amount of
the Class ____ Notes the respective principal amounts of each class of Notes set
forth opposite the names of the Underwriters in Schedule I hereto. In addition,
the Seller agrees to cause the Underwriters to be paid an aggregate structuring
fee in connection with the structuring of the Notes and the Certificates of
$_____________.
The Seller will deliver the Notes to the Representative for the
respective accounts of the Underwriters, against payment of the purchase price
to or upon the order of the Seller by wire transfer or check in Federal (same
day) Funds, at the office of _______________________ _________________________,
on ______________, ________, or at such other time not later than seven full
business days thereafter as the Representative and the Seller determine, such
time being herein referred to as the "Closing Date." The Notes to be so
delivered will be initially represented by one or more Notes of each class
registered in the name of Cede & Co., the nominee of The Depository Trust
Company ("DTC"). The interests of beneficial owners of the Notes will be
represented by book entries on the records of DTC and participating members
thereof. Definitive Notes will be available only under the limited circumstances
specified in the Indenture.
4. OFFERING BY THE UNDERWRITERS. It is understood that, after the
Registration Statement becomes effective, the several Underwriters propose to
offer the Notes for sale to the public (which may include selected dealers) as
set forth in the Prospectus.
5. COVENANTS OF THE SELLER. The Seller covenants and agrees with the
several Underwriters that:
(a) Prior to the termination of the offering of the Notes, the Seller
will not file any amendment of the Registration Statement or supplement to the
Prospectus unless the Seller has furnished the Representative a copy for its
review prior to filing and will not file any such proposed amendment or
supplement to which the Representative reasonably objects. Subject to the
foregoing sentence, if the Registration Statement has become or becomes
effective pursuant to Rule 430A, or filing of the Prospectus is otherwise
required under Rule 424(b), the Seller will file the Prospectus, properly
completed, and any supplement thereto, with the Commission pursuant to and in
accordance with the applicable paragraph of Rule 424(b) within the time period
prescribed and will provide evidence satisfactory to the Representative of such
timely filing.
(b) The Seller will advise the Representative promptly of any proposal
to amend or supplement the registration statement as filed or the related
prospectus or the Registration Statement or the Prospectus and will not effect
such amendment or supplementation without the consent of the Representative
prior to the Closing Date, and thereafter will not effect any such amendment or
supplementation to which the Representative reasonably objects; the Seller will
also advise the Representative promptly of any request by the Commission for any
amendment of or supplement to the Registration Statement or the Prospectus or
for any additional information; and the Seller will also advise the
Representative promptly of the effectiveness of the Registration Statement (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 threat of any proceeding for
that purpose and the Seller will use its best efforts to prevent the issuance of
any such stop order and to obtain as soon as possible the lifting of any issued
stop order.
(c) If, at any time when a prospectus relating to the Notes is
required to be delivered under the Act, any event occurs as a result of which
the Prospectus as then amended or supplemented would contain an untrue statement
of a material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it is necessary at any time to amend or supplement
the Prospectus to comply with the Act or the Exchange Act, the Seller promptly
will prepare and file, or cause to be prepared and filed, with the Commission an
amendment or supplement which will correct such statement or omission, or an
amendment or supplement which will effect such compliance. Neither the consent
of the Representative to, nor the delivery of the several Underwriters of, any
such amendment or supplement shall constitute a waiver of any of the conditions
set forth in Section 6 hereof.
(d) As soon as practicable, but not later than the Availability Date
(as defined below), the Seller will cause the Trust to make generally available
to the holders of the Notes an earnings statement of the Trust covering a period
of at least twelve months beginning after the Effective Date which will satisfy
the provisions of Section 11(a) of the Act and Rule 158 of the applicable Rules
and Regulations thereunder. For the purpose of the preceding sentence,
"Availability Date" means the 45th day after the end of the fourth fiscal
quarter following the fiscal quarter that includes the Effective Date, except
that, if such fourth fiscal quarter is the last quarter of the Trust's fiscal
year, "Availability Date" means the 90th day after the end of such fourth fiscal
quarter.
(e) The Seller will furnish to the Representative copies of the
Registration Statement (two of which will be signed and will include all
exhibits), each related preliminary prospectus, the Prospectus and all
amendments and supplements to such documents, in each case as soon as available
and in such quantities as the Representative reasonably requests.
(f) The Seller will arrange for the qualification of the Notes for
sale under the laws of the States of _____________, ______________, and
__________, and will continue such qualifications in effect so long as required
for the distribution.
(g) For a period from the date of this Agreement until the retirement
of the Notes, or until such time as the several Underwriters shall cease to
maintain a secondary market in the Notes, whichever occurs first, the Seller
will deliver to the Representative the annual statements of compliance and the
annual independent certified public accountants' reports furnished to the
Indenture Trustee or the Eligible Lender Trustee pursuant to the Sale and
Servicing Agreement, as soon as such statements and reports are furnished to the
Indenture Trustee or the Eligible Lender Trustee.
(h) So long as any of the Notes is outstanding, the Seller will
furnish to the Representative (i) as soon as practicable after the end of the
fiscal year all documents required to be distributed to the holders of the Notes
or filed with the Commission on behalf of the Trust pursuant to the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or any order of the
Commission thereunder and (ii) from time to time, any other information
concerning the Seller as the Representative may reasonably request only insofar
as such information reasonably relates to the Registration Statement or the
transactions contemplated by the Basic Documents.
(i) On or before the Closing Date, the Seller shall mark its
accounting and other records, if any, relating to the Initial Financed Student
Loans and shall instruct the Master Servicer (which shall cause each
Sub-Servicer) to mark the computer records of the Master Servicer (or such
Sub-Servicer) relating to the Financed Student Loans to show the absolute
ownership by the Eligible Lender Trustee on behalf of the Trust of the Financed
Student Loans, and from and after the Closing Date the Seller shall not and
shall require that the Master Servicer (which shall ensure that any
Sub-Servicer) shall not take any action inconsistent with the ownership by the
Eligible Lender Trustee on behalf of the Trust of such Initial Financed Student
Loans, other than as permitted by the Sale and Servicing Agreement.
(j) To the extent, if any, that the rating provided with respect to
the Notes by the rating agency or agencies that initially rate the Notes is
conditional at the time of issuance of the Notes upon the furnishing of
documents or the taking of any other actions by the Seller agreed upon on or
prior to the Closing Date, the Seller shall furnish such documents and take any
such other actions. A copy of any such document shall be provided to the
Representative at the time it is delivered to the rating agencies.
(k) For the period beginning on the date of this Agreement and ending
90 days after the Closing Date, neither the Seller nor any trust originated,
directly or indirectly, by the Seller will, without the prior written consent of
the Representative, offer to sell or sell notes (other than the Notes)
collateralized by, or certificates (other than the Certificates) evidencing an
ownership interest in, student loans; PROVIDED, HOWEVER, that this shall not be
construed to prevent the sale of student loans by the Seller.
(l) The Seller will apply the net proceeds of the offering and the
sale of the Notes and the Certificates that it receives in the manner set forth
in the Prospectus under the caption "Use of Proceeds."
(m) The Seller will pay all expenses incident to the performance of
its obligations under this Agreement, including (i) the printing and filing of
the documents (including the Registration Statement and Prospectus) (ii) the
preparation, issuance and delivery of the Notes to the Representative, (iii) the
fees and disbursements of the Seller's counsel and accountants, (iv) the
qualification of the Notes under securities laws in accordance with the
provisions of Section 5(f), including filing fees and the fees and disbursements
of counsel for the Representative in connection therewith and in connection with
the preparation of any blue sky or legal investment survey, if any is requested,
(v) the printing and delivery to the Representative of copies of the
Registration Statement as originally filed and of each amendment thereto, (vi)
the printing and delivery to the Representative of copies of any blue sky or
legal investment survey prepared in connection with the Notes, (vii) any fees
charged by rating agencies for the rating of the Notes, (viii) the fees and
expenses, if any, incurred with respect to any filing with the National
Association of Securities Dealers, Inc. and (ix) the fees and expenses of
________________, in its role as counsel to the Trust incurred as a result of
providing the opinions required by Section 6(h) hereof.
6. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS. The obligations
of the several Underwriters to purchase and pay for the Notes will be subject to
the accuracy of the representations and warranties on the part of the Seller
herein, to the accuracy of the written statements of officers of the Seller made
pursuant to the provisions of this Section, to the performance by the Seller of
its obligations hereunder and to the following additional conditions precedent:
(a) If the Effective Time is not prior to the execution and delivery
of this Agreement, the Effective Time shall have occurred not later than 6:00
p.m., New York City time, on the date of this Agreement or such later time or
date as shall have been consented to by the Representative.
(b) If the Effective Time is prior to the execution and delivery of
this Agreement, the Prospectus and any supplements thereto shall have been filed
with the Commission in accordance with the Rules and Regulations and Section
5(a) hereof. Prior to the Closing Date, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or, to the knowledge of
the Seller or the Representative, shall be contemplated by the Commission.
(c) The Representative shall have received a letter, dated on or prior
to the Closing Date of ______________________ on behalf of the Seller confirming
that such accountants are independent public accountants within the meaning of
the Act and the applicable published Rules and Regulations thereunder, and
substantially in the form of the drafts to which the Representative has
previously agreed and otherwise in form and substance reasonably satisfactory to
the Representative and its counsel.
(d) Subsequent to the execution and delivery of this Agreement, there
shall not have occurred (i) any change, or any development involving a
prospective change, in or affecting particularly the business or properties of
the Trust, Mellon which, in the judgment of the Representative, materially
impairs the investment quality of the Notes or makes it impractical or
inadvisable to market the Notes; (ii) any downgrading in the rating of any debt
securities of Mellon by any "nationally recognized statistical rating
organization" (as defined for purposes of Rule 436(g) under the Act), or any
public announcement that any such organization has under surveillance or review
its rating of any debt securities of Mellon (other than an announcement with
positive implications of a possible upgrading, and no implication of a possible
downgrading, of such rating); (iii) any suspension or limitation of trading in
securities generally on the New York Stock Exchange, or any setting of minimum
prices for trading on such exchange; (iv) any suspension of trading of any
securities of Mellon on any exchange or in the over-the-counter market; (v) any
banking moratorium declared by Federal or New York authorities; or (vi) any
outbreak or escalation of hostilities involving the United States or the
declaration by the United States of a national emergency or war, if the effect
of any such event specified in this clause (vi) in the judgment of the
Representative makes it impracticable or inadvisable to proceed with the public
offering or the delivery of the Notes on the terms and in the manner
contemplated in the Prospectus.
(e) The Representative shall have received an opinion of
________________, Esq., General Counsel of Mellon, as counsel for Mellon, as the
Seller, the Master Servicer, and the Administrator, dated the Closing Date, in
the form attached hereto as Exhibit A, or as is otherwise satisfactory in form
and substance to the Representative and its counsel.
(f) The Representative shall have received an opinion of
______________, counsel to the Seller, dated the Closing Date, in the form
attached hereto as Exhibit B, or as is otherwise satisfactory in form and
substance to the Representative and its counsel.
(g) [Reserved]
(h) The Representative shall have received an opinion addressed to the
several Underwriters of ________________, in its capacity as Federal tax and
ERISA counsel for the Trust, to the effect that the statements in the Prospectus
under the headings "Summary of Terms--Tax Consequences" and "Federal Tax
Consequences for Trusts for which a Partnership Election is Made--Tax
Consequences to Holders of the Notes" accurately describe the material Federal
income tax consequences to holders of the Notes, and the statements in the
Prospectus under the headings "Summary of Terms--ERISA Considerations" and
"ERISA Considerations" to the extent that they constitute statements of matters
of law or legal conclusions with respect thereto, have been prepared or reviewed
by such counsel and accurately describe the material consequences to holders of
the Notes under ERISA. ________________, in its capacity as special counsel to
the Trust, shall have delivered an opinion with respect to the characterization
of the transfer of the Initial Financed Student Loans.
(i) The Representative shall have received an opinion addressed to the
several Underwriters of ________________, in its capacity as special counsel to
the several Underwriters, dated the Closing Date, with respect to the validity
of the Notes and the Certificates and such other related matters as the
Representative shall reasonably require and the Seller shall have furnished or
caused to be furnished to such counsel such documents as they may reasonably
request for the purpose of enabling them to pass upon such matters.
(j) The Representative shall have received an opinion of
________________, special student loan counsel to the Representative and, in the
case of clause (iii) below, special student loan counsel to the Eligible Lender
Trustee, dated the Closing Date, satisfactory in form and substance to the
Representative, to the effect that:
(i) the agreements implementing the Program, (including the
Coordination Agreements) and the Relevant Documents (as defined in such
opinion), and the transactions contemplated by the Relevant Documents,
conform in all material respects to the applicable requirements of the
Higher Education Act, and that, upon the due authorization, execution and
delivery of the Relevant Documents and the consummation of such
transactions, the Financed Federal Loans, legal title to which will be held
by the Eligible Lender Trustee on behalf of the Trust, will qualify,
subject to compliance with all applicable origination and servicing
requirements, for all applicable federal assistance payments, including
federal reinsurance and federal interest subsidies and special allowance
payments;
(ii) such counsel has examined the Prospectus, and nothing has come to
such counsel's attention that would lead such counsel to believe that,
solely with respect to the Higher Education Act and the student loan
business, the Prospectus or any amendment or supplement thereto as of the
respective dates thereof or on the Closing Date contains an untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements therein not misleading; and
(iii) the Eligible Lender Trustee is an "eligible lender" as such term
is defined in Section 435(d) of the Higher Education Act for purposes of
holding legal title to the Financed Federal Loans.
(k) The Representative shall have received an opinion of counsel to
________________, dated the Closing Date and satisfactory in form and substance
to the Representative and its counsel, to the effect that:
(i) ________________ has been duly organized and is validly existing
as an agency of ________________ in good standing under the laws thereof
with full power and authority (corporate and other) to own its properties
and conduct its business, as presently conducted by it, and to enter into
and perform its obligations under the ________________ Sub-Servicing
Agreement and the Guarantee Agreement (and the agreements with the
Department under Section 428 of the Higher Education Act to the extent
relevant to ________________'s obligations under such Guarantee Agreement)
to which it is a party, and had at all relevant times, and now has, the
power, authority and legal right to service the Financed Student Loans it
is servicing, to guarantee the Financed Federal Loans covered by such
Guarantee Agreement and to receive, subject to compliance with all
applicable conditions, restrictions and limitations of the Higher Education
Act, reinsurance payments from the Department with respect to claims paid
by it on such Financed Federal Loans.
(ii) _____ is duly qualified to do business and is in good standing,
and has obtained all necessary licenses and approvals in each jurisdiction
in which failure to qualify or to obtain such license or approval would
render any Financed Student Loan or _____'s obligation under its Guarantee
Agreement unenforceable by or on behalf of the Trust.
(iii) Each of the _____ Sub-Servicing Agreement and the Guarantee
Agreement to which it is a party (and the agreements with the Department
under Section 428 of the Higher Education Act to the extent relevant to
_____'s obligations under such Guarantee Agreement) to which _____ is a
party has been duly authorized, executed and delivered by _____ and is the
legal, valid and binding obligation of _____ enforceable against _____ in
accordance with its terms, notwithstanding the existence of any doctrine of
sovereign immunity except (x) the enforceability thereof may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights and (y) the remedy
of specific performance and injunctive and other forms of equitable relief
may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
(iv) Neither the execution and delivery by _____ of the _____
Sub-Servicing Agreement or the Guarantee Agreement to which it is a party,
nor the consummation by _____ of the transactions contemplated therein nor
the fulfillment of the terms thereof by _____ will conflict with, result in
a breach, violation or acceleration of, or constitute a default under, any
term or provision of the certificate of incorporation or by-laws of _____
or of any indenture or other agreement or instrument to which _____ is a
party or by which _____ is bound, or result in a violation of or contravene
the terms of any statute, order or regulation applicable to _____ of any
court, regulatory body, administrative agency or governmental body having
jurisdiction over _____.
(v) There are no actions, proceedings or investigations pending or, to
the best of such counsel's knowledge after due inquiry, threatened against
_____ before or by any governmental authority that might materially and
adversely affect the performance by _____ of its obligations under, or the
validity or enforceability of, the _____ Sub-Servicing Agreement or the
Guarantee Agreement (or the agreements with the Department under Section
428 of the Higher Education Act to the extent relevant to _____'s
obligations under such Guarantee Agreement) to which it is a party.
(vi) Nothing has come to such counsel's attention that would lead such
counsel to believe that the representations and warranties of _____
contained in the _____ Sub-Servicing Agreement are other than as stated
therein.
(l) The Representative shall have received an opinion of counsel to
________________, dated the Closing Date and satisfactory in form and substance
to the Representative and its counsel, to the effect that:
(i) ________________ has been duly organized and is validly existing
as a ______________ corporation in good standing under the laws thereof
with full power and authority (corporate and other) to own its properties
and conduct its business, as presently conducted by it, and to enter into
and perform its obligations under the _____ Sub-Servicing Agreement, and
had at all relevant times, and now has, the power, authority and legal
right to service the Financed Student Loans it is servicing.
(ii) The _____ Sub-Servicing Agreement has been duly authorized,
executed and delivered by _____ and is the legal, valid and binding
obligation of _____ enforceable against _____ in accordance with its terms,
except (x) the enforceability thereof may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights and (y) the remedy of
specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
(iii) Neither the execution and delivery by _____ of the _____
Sub-Servicing Agreement, nor the consummation by _____ of the transactions
contemplated therein nor the fulfillment of the terms thereof by _____ will
conflict with, result in a breach, violation or acceleration of, or
constitute a default under, any term or provision of the certificate of
incorporation or by-laws of _____ or of any indenture or other agreement or
instrument to which _____ is a party or by which _____ is bound, or result
in a violation of or contravene the terms of any statute, order or
regulation applicable to _____ of any court, regulatory body,
administrative agency or governmental body having jurisdiction over _____.
(iv) There are no actions, proceedings or investigations pending or,
to the best of such counsel's knowledge after due inquiry, threatened
against _____ before or by any governmental authority that might materially
and adversely affect the performance by _____ of its obligations under, or
the validity or enforceability of, the _____ Sub-Servicing Agreement.
(v) Nothing has come to such counsel's attention that would lead such
counsel to believe that the representations and warranties of _____
contained in the _____ Sub-Servicing Agreement are other than as stated
therein.
(m) The Representative shall have received an opinion of counsel to
the Massachusetts Higher Education Assistance Corporation, now doing business as
_____________________, a _____________ corporation ("______"), dated the Closing
Date and satisfactory in form and substance to the Representative and its
counsel, to the effect that:
(i) _____ has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the Commonwealth of
________________ with full power and authority (corporate and other) to own
its properties and conduct its business, as presently conducted by it, and
to enter into and perform its obligations under the Guarantee Agreement
(and the agreements with the Department under Section 428 of the Higher
Education Act to the extent relevant to _____'s obligations under such
Guarantee Agreement) to which it is a party, and had at all relevant times,
and now has, the power, authority and legal right to guarantee the Financed
Federal Loans covered by such Guarantee Agreement and to receive, subject
to compliance with all applicable conditions, restrictions and limitations
of the Higher Education Act, reinsurance payments from the Department with
respect to claims paid by it on such Financed Federal Loans.
(ii) _____ is duly qualified to do business and is in good standing,
and has obtained all necessary licenses and approvals in each jurisdiction
in which failure to qualify or to obtain such license or approval would
render _____'s obligation under its Guarantee Agreement to guarantee the
Financed Federal Loans covered thereby unenforceable by or on behalf of the
Trust.
(iii) The Guarantee Agreement (and the agreements with the Department
under Section 428 of the Higher Education Act to the extent relevant to
_____'s obligations under such Guarantee Agreement) to which _____ is a
party has been duly authorized, executed and delivered by _____ and is the
legal, valid and binding obligation of _____ enforceable against _____ in
accordance with its terms, except (x) the enforceability thereof may be
subject to bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights and
(y) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.
(iv) Neither the execution and delivery by _____ of the Guarantee
Agreement to which it is a party, nor the consummation by _____ of the
transactions contemplated therein nor the fulfillment of the terms thereof
by _____ will conflict with, result in a breach, violation or acceleration
of, or constitute a default under, any term or provision of the certificate
of incorporation or by-laws of _____ or of any indenture or other agreement
or instrument to which _____ is a party or by which _____ is bound, or
result in a violation of or contravene the terms of any statute, order or
regulation applicable to _____ of any court, regulatory body,
administrative agency or governmental body having jurisdiction over _____.
(v) There are no actions, proceedings or investigations pending or, to
the best of such counsel's knowledge after due inquiry, threatened against
_____ before or by any governmental authority that might materially and
adversely affect the performance by _____ of its obligations under, or the
validity or enforceability of, the Guarantee Agreement (or the agreements
with the Department under Section 428 of the Higher Education Act to the
extent relevant to _____'s obligations under such Guarantee Agreement) to
which it is a party.
(n) The Representative shall have received an opinion of counsel to
the ______________________ ("_____"), dated the Closing Date and satisfactory
in form and substance to the Representative and its counsel, to the effect that:
(i) _____ has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of _________ with
full power and authority (corporate and other) to own its properties and
conduct its business, as presently conducted by it, and to enter into and
perform its obligations under the Guarantee Agreement (and the agreements
with the Department under Section 428 of the Higher Education Act to the
extent relevant to _____'s obligations under such Guarantee Agreement) to
which it is a party, and had at all relevant times, and now has, the power,
authority and legal right to guarantee the Financed Federal Loans covered
by such Guarantee Agreement and to receive, subject to compliance with all
applicable conditions, restrictions and limitations of the Higher Education
Act, reinsurance payments from the Department with respect to claims paid
by it on such Financed Federal Loans.
(ii) _____ is duly qualified to do business and is in good standing,
and has obtained all necessary licenses and approvals in each jurisdiction
in which failure to qualify or to obtain such license or approval would
render _____'s obligation under its Guarantee Agreement to guarantee the
Financed Federal Loans covered thereby unenforceable by or on behalf of the
Trust.
(iii) The Guarantee Agreement (and the agreements with the Department
under Section 428 of the Higher Education Act to the extent relevant to
_____'s obligations under such Guarantee Agreement) to which _____ is a
party has been duly authorized, executed and delivered by _____ and is the
legal, valid and binding obligation of _____ enforceable against _____ in
accordance with its terms, except (x) the enforceability thereof may be
subject to bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights and
(y) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.
(iv) Neither the execution and delivery by _____ of the Guarantee
Agreement to which it is a party, nor the consummation by _____ of the
transactions contemplated therein nor the fulfillment of the terms thereof
by _____ will conflict with, result in a breach, violation or acceleration
of, or constitute a default under, any term or provision of the certificate
of incorporation or by-laws of _____ or of any indenture or other agreement
or instrument to which _____ is a party or by which _____ is bound, or
result in a violation of or contravene the terms of any statute, order or
regulation applicable to _____ of any court, regulatory body,
administrative agency or governmental body having jurisdiction over -----.
(v) There are no actions, proceedings or investigations pending or, to
the best of such counsel's knowledge after due inquiry, threatened against
_____ before or by any governmental authority that might materially and
adversely affect the performance by _____ of its obligations under, or the
validity or enforceability of, the Guarantee Agreement (or the agreements
with the Department under Section 428 of the Higher Education Act to the
extent relevant to _____'s obligations under such Guarantee Agreement) to
which it is a party.
(o) [RESERVED]
(p) [RESERVED]
(q) [RESERVED]
(r) [RESERVED]
(s) [RESERVED]
(t) [RESERVED]
(u) The Representative shall have received an opinion of ___________,
counsel to the Indenture Trustee, dated the Closing Date and satisfactory in
form and substance to the Representative and its counsel, to the effect that:
(i) The Indenture Trustee is a ___________ banking corporation duly
incorporated or organized under the laws of ___________.
(ii) The Indenture Trustee has the full corporate trust power to
accept the office of indenture trustee under the Indenture, the Sale and
Servicing Agreement and the Administration Agreement.
(iii) The execution and delivery of the Indenture, its acceptance of
the Sale and Servicing Agreement and the performance by the Indenture
Trustee of its obligations under the Indenture, the Sale and Servicing
Agreement and the Administration Agreement have been duly authorized by all
necessary action of the Indenture Trustee and each has been duly executed
and delivered by the Indenture Trustee.
(iv) The Indenture, the Sale and Servicing Agreement and the
Administration Agreement constitute valid and binding obligations of the
Indenture Trustee enforceable against the Indenture Trustee in accordance
with their terms under the laws of the State of New York and the Federal
law of the United States.
(v) The execution and delivery by the Indenture Trustee of the
Indenture and the Administration Agreement and the acceptance of the Sale
and Servicing Agreement do not require any consent, approval or
authorization of, or any registration or filing with, any New York or
United States Federal governmental authority, other than the qualification
of the Indenture Trustee under the Trust Indenture Act.
(vi) Each of the Notes has been duly authenticated by the Indenture
Trustee.
(vii) Neither the consummation by the Indenture Trustee of the
transactions contemplated in the Sale and Servicing Agreement, the
Indenture or the Administration Agreement nor the fulfillment of the terms
thereof by the Indenture Trustee will conflict with, result in the breach
or violation of, or constitute a default under any law or the charter,
by-laws or other organizational documents of the Indenture Trustee or the
terms of any indenture or other agreement or instrument known to such
counsel and to which the Indenture Trustee or any of its subsidiaries is a
party or is bound or any judgment, order or decree known to such counsel to
be applicable to the Indenture Trustee or any of its subsidiaries of any
court, regulatory body, administrative agency, governmental body or
arbitrator having jurisdiction over the Indenture Trustee or any of its
subsidiaries.
(viii) There are no actions, suits or proceedings pending or, to the
best of such counsel's knowledge after due inquiry, threatened against the
Indenture Trustee (as indenture trustee under the Indenture or in its
individual capacity) before or by any governmental authority that might
materially and adversely affect the performance by the Indenture Trustee of
its obligations under, or the validity or enforceability of, the Indenture,
the Sale and Servicing Agreement or the Administration Agreement.
(ix) The execution, delivery and performance by the Indenture Trustee
of the Indenture and the Administration Agreement, and the acceptance of
the Sale and Servicing Agreement, will not subject any of the property or
assets of the Trust or any portion thereof, to any lien created by or
arising under the Indenture Trustee that are unrelated to the transactions
contemplated in such agreements.
(v) The Representative shall have received an opinion of counsel to
the Eligible Lender Trustee, dated the Closing Date and satisfactory in form and
substance to the Representative and its counsel, to the effect that:
(i) The Eligible Lender Trustee is a ___________ banking association
duly incorporated or organized and validly existing under the laws of the
________________.
(ii) The Eligible Lender Trustee has the full corporate trust power to
accept the office of eligible lender trustee under the Trust Agreement and
to enter into and perform its obligations under the Trust Agreement, the
Sale and Servicing Agreement and, on behalf of the Trust, under the
Indenture, the Sale and Servicing Agreement, the Administration Agreement
and the Guarantee Agreements.
(iii) The execution and delivery of the Trust Agreement and the Sale
and Servicing Agreement and, on behalf of the Trust, of the Indenture, the
Sale and Servicing Agreement, the Administration Agreement and the
Guarantee Agreements, and the performance by the Eligible Lender Trustee of
its obligations under the Trust Agreement, the Indenture, the Sale 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, the Sale and Servicing Agreement and the
Administration Agreement constitute valid and binding obligations of the
Eligible Lender Trustee enforceable against the Eligible Lender Trustee in
accordance with their terms.
(v) The execution and delivery by the Eligible Lender Trustee of the
Trust Agreement and the Sale and Servicing Agreement and, on behalf of the
Trust, of the Indenture, the Sale 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.
(vi) Each of the Certificates has been duly executed and delivered by
the Eligible Lender Trustee, as eligible lender trustee and authenticating
agent. Each of the Notes has been duly executed and delivered by the
Eligible Lender Trustee, on behalf of the Trust.
(vii) Neither the consummation by the Eligible Lender Trustee of the
transactions contemplated in the Sale and Servicing Agreement, the
Indenture, the Trust Agreement or the Administration Agreement nor the
fulfillment of the terms thereof by the Eligible Lender Trustee will
conflict with, result in a breach or violation of, or constitute a default
under any law or the charter, by-laws or other organizational documents of
the Eligible Lender Trustee or the terms of any indenture or other
agreement or instrument known to such counsel and to which the Eligible
Lender Trustee or any of its subsidiaries is a party or is bound or any
judgment, order or decree known to such counsel to be applicable to the
Eligible Lender Trustee or any of its subsidiaries of any court, regulatory
body, administrative agency, governmental body or arbitrator having
jurisdiction over the Eligible Lender Trustee or any of its subsidiaries.
(viii) There are no actions, suits or proceedings pending or, to the
best of such counsel's knowledge after due inquiry, threatened against the
Eligible Lender Trustee (as eligible lender trustee under the 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 or the Sale and Servicing Agreement.
(ix) The execution, delivery and performance by the Eligible Lender
Trustee of the Sale and Servicing Agreement, the Indenture, the Trust
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 lien created by or arising under the Eligible Lender Trustee that
are unrelated to the transactions contemplated in such agreements.
(w) The Representative shall have received an opinion of ___________,
Delaware counsel to the Trust, dated the Closing Date, in form and substance
satisfactory to the Representative and its counsel.
(x) The Representative shall have received an opinion of ___________,
counsel to ___________ in its capacity as Delaware Trustee under the Trust
Agreement, dated the Closing Date, in form and substance satisfactory to the
Representative and its counsel.
(y) The Representative shall have received certificates dated the
Closing Date of any two of the Chairman of the Board, the President, any
Executive Vice President, Senior Vice President or Vice President, the
Secretary, any Assistant Secretary, the Treasurer, any Assistant Treasurer, the
principal financial officer or the principal accounting officer of Mellon in
which such officers shall state that, to the best of their knowledge after
reasonable investigation, (i) the representations and warranties of Mellon,
contained in each Basic Document to which it is a party, are true and correct in
all material respects, that Mellon has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied under such
agreements, in whatever capacity it is a party to such agreements, at or prior
to the Closing Date, and that no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose have
been instituted or are contemplated by the Commission, and (ii) since
___________, ____, except as may be disclosed in the Prospectus or in such
certificate, no material adverse change, or any development involving a
prospective material adverse change, in or affecting particularly the business
or properties of the Trust or Mellon, as applicable, has occurred.
(z) The Representative shall have received certificates dated the
Closing Date of any two of the Chairman of the Board, the President, any
Executive Vice President, Senior Vice President or Vice President, the
Secretary, any Assistant Secretary, the Treasurer, any Assistant Treasurer, the
principal financial officer or the principal accounting officer of each of the
Sub-Servicers in which such officers shall state that, to the best of their
knowledge after reasonable investigation, (i) the representations and warranties
of such Sub-Servicer contained in the related Subservicing Agreement are true
and correct in all material respects, and that such Sub-Servicer has complied
with all agreements and satisfied all conditions on its part to be performed or
satisfied under such agreements at or prior to the Closing Date, and (ii) since
______________, ____ except as may be disclosed in the Prospectus or in such
certificate, no material adverse change, or any development involving a
prospective material adverse change, in or affecting particularly the business
or properties of such Sub-Servicer.
(aa) The Representative shall have received evidence satisfactory to
it that, on or before the Closing Date, UCC-1 financing statements have been or
are being filed in the office of the Secretary of State of the States of
___________, ____________ and ________, as applicable, reflecting the transfer
of the interest of the Seller in the Financed Student Loans to the Eligible
Lender Trustee on behalf of the Trust and the proceeds thereof to the Trust and
the grant of the security interest by the Trust in the Financed Student Loans
and the proceeds thereof to the Indenture Trustee.
(bb) Each Class of Notes has been given at least the following ratings
from [Fitch IBCA, Inc. ("Fitch"), Moody's Investors Service, Inc. ("Moody's"),
and Standard & Poor's, a division of the McGraw-Hill Companies, Inc. ("S&P" and
each a "Rating Agency"),] and no Rating Agency shall have placed any class of
Notes under surveillance or review with possible negative implications:
CLASS OF NOTES FITCH Moody's S&P
-------------- ----- ---
Class ___ [AAA] [Aaa] [AAA]
Class ___ [AAA] [Aaa] [AAA]
(cc) The issuance of the Notes and the Certificates shall not have
resulted in a reduction or withdrawal by any Rating Agency of the current rating
of any outstanding securities issued or originated by the Seller or any of its
affiliates.
(dd) On the Closing Date, $______________ principal amount of the
Asset Backed Certificates shall have been issued and sold.
(ee) [RESERVED]
(ff) _____ shall have furnished to the Representative a certificate of
_____, signed by the President or any Senior Vice President, dated the Closing
Date, to the effect that the signer of such certificate has carefully examined
the Prospectus (excluding any documents incorporated by reference therein) and
this Agreement and that, to the best of his knowledge any information with
respect to _____ in the Prospectus, as of its date, did not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading.
(gg) _____ shall have furnished to the Representative a certificate of
_____, signed by the President or any Senior Vice President, dated the Closing
Date, to the effect that the signer of such certificate has carefully examined
the Prospectus (excluding any documents incorporated by reference therein) and
this Agreement and that, to the best of his knowledge any information with
respect to _____ in the Prospectus, as of its date, did not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading.
(hh) _____ shall have furnished to the Representative a certificate of
_____, signed by the President or any Executive Vice President, dated the
Closing Date, to the effect that the signer of such certificate has carefully
examined the Prospectus (excluding any documents incorporated by reference
therein) and this Agreement and that, to the best of his knowledge any
information with respect to _____ in the Prospectus, as of its date, did not
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(ii) _____ shall have furnished to the Representative a certificate of
_____, signed by the President or any Senior Vice President, dated the Closing
Date, to the effect that the signer of such certificate has carefully examined
the Prospectus (excluding any documents incorporated by reference therein) and
this Agreement and that, to the best of his knowledge any information with
respect to _____ in the Prospectus, as of its date, did not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading.
(jj) [RESERVED]
(kk) [RESERVED]
(ll) [RESERVED]
(mm) [RESERVED]
(nn) [RESERVED]
(oo) Each of the Basic Documents shall have been executed and
delivered by the parties thereto. Each of the Sub-Servicers shall have executed
and delivered the related Sub-Servicing Agreement. Each of the Guarantors shall
have executed and delivered the related Guarantee Agreement.
The Seller will provide or cause to be provided to the Representative
such conformed copies of such of the foregoing opinions, certificates, letters
and documents as the Representative reasonably requests.
7. INDEMNIFICATION AND CONTRIBUTION. (a) The Seller will indemnify and
hold each Underwriter harmless against any losses, claims, damages or
liabilities, joint or several, to which such Underwriter may become subject
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
(x) the Registration Statement, the Preliminary Prospectus Supplement, the
Prospectus or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and (y) the Prospectus or any amendment or supplement thereto or any related
Preliminary Prospectus Supplement, or arise out of or are based upon the
omission or alleged omission to state therein a material fact necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading and will reimburse each Underwriter for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such loss, claim, damage, liability or action as
such expenses are incurred; PROVIDED, HOWEVER, that the Seller will not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement in or omission or alleged omission from any of such documents in
reliance upon and in conformity with written information furnished to the Seller
by any Underwriter through the Representative specifically for use therein.
(b) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Seller against any losses, claims, damages or liabilities
to which the Seller may become subject, under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in (x) the Registration Statement, the
Preliminary Prospectus Supplement, the Prospectus or any amendment or supplement
thereto, or arise out of or are based upon the omission or the alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and (y) the Prospectus or any
amendment or supplement thereto or any related Preliminary Prospectus
Supplement, or arise out of or are based upon the omission or alleged omission
to state therein a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading and in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with written information relating to
such Underwriter furnished to the Seller by such Underwriter through the
Representative specifically for use therein, and will reimburse any legal or
other expenses reasonably incurred by the Seller in connection with
investigating or defending any such loss, claim, damage, liability or action as
such expenses are incurred.
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under
subsection (a) or (b) above, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
under subsection (a) or (b) above. In case any such action is brought against
any indemnified party and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party (who shall not, except with the consent of the indemnified
party, be counsel to the indemnifying party), and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof and approval by the indemnified party of the counsel appointed
by the indemnifying party, the indemnifying party will not be liable to such
indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation. In no event shall the
indemnifying party be liable for fees and expenses for more than one counsel
separate from their own counsel for all indemnified parties in connection with
any one action or related actions in the same jurisdiction arising out of the
same general allegations or circumstances unless any such indemnified party
shall have been advised by such counsel that there may be one or more legal
defenses available to it which are different from or additional to or in
conflict with those available to the other indemnified parties and in the
judgment of such counsel it is advisable for such indemnified party to employ
separate counsel. An indemnifying party will not, without the prior written
consent of the indemnified party, settle or compromise or consent to the entry
of any judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
(i) includes an unconditional release of each indemnified party from all
liability arising out of such action or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act, by or
on behalf of any indemnified party.
(d) If the indemnification provided for in this Section is unavailable
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnifying party as a result of the losses, claims, damages or
liabilities referred to in subsection (a) or (b) above (i) in such proportion as
is appropriate to reflect the relative benefits received by the Seller on the
one hand and the Underwriters on the other from the offering of the Notes or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Seller on the one hand and the Underwriters on the other in connection with
the statements or omissions which resulted in such losses, claims, damages or
liabilities as well as any other relevant equitable considerations. The relative
benefits received by the Seller on the one hand and the Underwriters on the
other shall be deemed to be in the same proportion as the total net proceeds
from the offering (before deducting expenses) received by the Seller bear to the
total underwriting discounts and commissions received by the Underwriters. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Seller or by the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such untrue
statement or omission. The Company and the Underwriters agree that it would not
be just and equitable if contribution pursuant to this subsection (d) were
determined by PRO RATa allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this
subsection (d). The amount paid or payable by an indemnified party as a result
of the losses, claims, damages or liabilities referred to in the first sentence
of this subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any action or claim which is the subject of this subsection (d).
Notwithstanding the provisions of this subsection (d), no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Notes underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such Underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission, except as may be provided in any
agreement among the Underwriters relating to the offering of the Notes. 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. The obligations of the Underwriters
in this subsection (d) to contribute are several in proportion their respective
underwriting obligations and not joint.
(e) The obligations of the Seller under this Section shall be in
addition to any liability which the Seller may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls any
Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section shall be in addition to any liability which the
respective Underwriters may otherwise have and shall extend, upon the same terms
and conditions, to each director of the Seller, to each officer of the Seller
who has signed the Registration Statement and to each person, if any, who
controls the Seller within the meaning of the Act.
8. SURVIVAL OF REPRESENTATIONS AND OBLIGATIONS. The respective
indemnities, agreements, representations, warranties and other statements of the
Seller or its officers and of the several Underwriters set forth in or made
pursuant to this Agreement or contained in certificates of officers of the
Seller submitted pursuant hereto shall remain operative and in full force and
effect, regardless of any investigation or statement as to the results thereof,
made by or on behalf of any Underwriter, the Seller or any of their respective
representatives, officers or directors or any controlling person, and will
survive delivery of and payment for the Notes. If for any reason the purchase of
the Notes by the Underwriters is not consummated, the Seller shall remain
responsible for the expenses to be paid or reimbursed by the Seller pursuant to
Section 5 and the respective obligations of the Seller and the Underwriters
pursuant to Section 7 shall remain in effect. If for any reason the purchase of
the Notes by the Underwriters is not consummated (other than pursuant to Section
9), the Seller will reimburse the Underwriters for all out-of-pocket expenses
(including fees and disbursements of counsel) reasonably incurred by them in
connection with the offering of the Notes.
9. FAILURE TO PURCHASE THE NOTES. If any Underwriter or Underwriters
default in their obligations to purchase its portion of the Notes hereunder and
the aggregate principal amount of the Notes that such defaulting Underwriter or
Underwriters agreed but failed to purchase does not exceed 10% of the total
principal amount of the Notes, the Representative may make arrangements
satisfactory to the Seller for the purchase of such Notes by other persons,
including any of the Underwriters, but if no such arrangements are made by the
Closing Date, the non-defaulting Underwriters shall be obligated severally, in
proportion to their respective commitments hereunder, to purchase the Notes that
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 such default or defaults exceeds 10% of the total principal amount of
the Notes and arrangements satisfactory to the Representative and the Seller for
the purchase of such Notes by other persons are not made within 36 hours after
such default, this Agreement will terminate without liability on the part of any
non-defaulting Underwriter or the Seller, except as provided in Section 7. As
used in this Agreement, the term "Underwriter" includes any person substituted
for an Underwriter under this Section. Nothing herein will relieve a defaulting
Underwriter or Underwriters from liability for its default.
10. NOTICES. All communications hereunder will be in writing and, if
sent to the Underwriters, will be mailed, delivered or telegraphed and
confirmed to the Representative at ______________________________, Attention:
______________; if sent to the Seller, will be mailed, delivered or telegraphed
and confirmed to it at Mellon Bank, N.A., One Mellon Center, 500 Grant Street,
Pittsburgh, Pennsylvania 15258, Attention: ________________; PROVIDED, --------
HOWEVER, that any notice to an Underwriter pursuant to Section 7 will be mailed,
delivered or telegraphed and confirmed to such Underwriter. Any such
notice will take effect at the time of receipt.
11. SUCCESSORS. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 7, and no other
person will have any right or obligations hereunder.
12. 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.
13. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
14. APPLICABLE LAW. This Agreement will be governed by, and construed
in accordance with, the laws of the State of New York.
If the foregoing is in accordance with the understanding of the
Representative of our agreement, kindly sign and return to us one of the
counterparts hereof, whereupon it will become a binding agreement between the
Seller and the several Underwriters in accordance with its terms.
Very truly yours,
MELLON BANK, N.A.
By:
Name:
Title:
The foregoing Note Underwriting
Agreement is hereby confirmed and
accepted as of the date first
written above.
------------------------------------
By:
Name:
Title:
Acting on behalf of itself and
as Representative of the
several Underwriters.
<PAGE>
SCHEDULE I
CLASS ____ Class ____
- --------------------........... $------------- $-------------
- --------------------........... $------------- $-------------
- --------------------........... $------------- $-------------
Total.......................... $_____________ $_____________
<PAGE>
APPENDIX A
[See Appendix A to Sale and Servicing Agreement]
<PAGE>
EXHIBIT A
[Mellon Bank, N.A. opinion]
<PAGE>
EXHIBIT B
[_______________________ opinions]
EXHIBIT 1.2
[FORM OF]
MELLON STUDENT LOAN TRUST _______-___
$-----------
FLOATING RATE ASSET BACKED CERTIFICATES
MELLON BANK, N.A.
(SELLER)
CERTIFICATE UNDERWRITING AGREEMENT
-------------------------
<PAGE>
- -------------------------
As Representative of the
several Underwriters
- -------------------------
- -------------------------
Dear Sirs:
1. INTRODUCTORY. Mellon Bank, N.A., National Association, a national
banking association ("Mellon"), proposes to cause Mellon Student Loan Trust
_____-__ (the "Trust") to issue and sell $_________ principal amount of its
Floating Rate Asset Backed Certificates (the "Certificates") to the underwriters
named in Schedule I hereto (the "Underwriters"), for whom you (the
"Representative") are acting as representative. The Trust was formed, and the
Certificates issued, pursuant to the Trust Agreement, dated as of
____________________, as amended and restated by the Amended and Restated Trust
Agreement, dated as of ___________________ (as further amended and supplemented
from time to time, collectively, the "Trust Agreement") between Mellon, as
depositor and ____________________, as Eligible Lender Trustee (the "Eligible
Lender Trustee"). The assets of the Trust include, among other things, two pools
of graduate and undergraduate student loans (collectively, the "Initial Financed
Student Loans") and certain monies due thereunder on and after _________________
with respect to certain of the Initial Financed Student Loans, and
______________________, with respect to certain other Initial Financed Student
Loans (collectively, the "Cutoff Date"). Such Initial Financed Student Loans
were sold to the Eligible Lender Trustee on behalf of the Trust by the Seller
pursuant to the Sale and Servicing Agreement, dated as of ___________________
(as amended and supplemented from time to time, the "Sale and Servicing
Agreement"), among, the Trust, the Eligible Lender Trustee, Mellon, as master
servicer (in such capacity, the "Master Servicer"), Mellon, as seller (in such
capacity, the "Seller"), and Mellon as administrator (in such capacity, the
"Administrator"). The Master Servicer has also entered into two certain
sub-servicing agreements to have the Financed Student Loans sub-serviced with
each of __________________________________, ______________________________
("________" and, in its capacity as a sub-servicer, "Sub-Servicer") and
_________________________________, ________________________ ("________" or a
"Sub-Servicer"). After the Closing Date (as defined below), the Eligible Lender
Trustee, acting on behalf of the Trust, will acquire certain additional student
loans identified in the Sale and Servicing Agreement on or prior to
______________ (the "Subsequent Pool Student Loans") and on or prior to the end
of the Funding Period (the "Other Subsequent Student Loans"; and together with
the Subsequent Pool Student Loans and Initial Financed Student Loans, the
"Financed Student Loans") using amounts in certain accounts owned by the Trust
which have been set aside for such purpose. In addition, the Administrator will
perform certain administrative duties on behalf of the Trust pursuant to the
Administration Agreement, dated as of ______________ (as amended and
supplemented from time to time, the "Administration Agreement"), among the
Indenture Trustee, the Trust and the Administrator. The Trust will also be a
party to that certain cap agreement (the "Cap Agreement") between the Trust and
Mellon, as cap provider (in such capacity, the "Cap Provider"), whereunder the
Certificateholders will be entitled, subject to the limitations of the Cap
Agreement, to receive payments from the Cap Provider in the amount of any
Certificateholders' Interest Index Carryover for the Certificates and the Cap
Provider will receive reimbursement for such payments on subsequent Distribution
Dates, but only to the extent funds are available therefor on a subordinated
basis. The Sale and Servicing Agreement, the Indenture (as defined below), the
Trust Agreement, the Administration Agreement and the Cap Agreement are referred
to herein as the "Basic Documents."
Simultaneously with the issuance and sale of the Certificates as
contemplated herein, pursuant to the Indenture (the "Indenture"), dated as of
________________, between the Trust and _________________, as indenture trustee
(the "Indenture Trustee"), the Trust will issue $______________ principal amount
of its Floating Rate Class ___ Asset Backed Notes (the "Class ___ Notes"),
$_____________ principal amount of its Floating Rate Class ___ Asset Backed
Notes (the "Class ___ Notes" and together with the Class ___ Notes, the "Class
__ Notes"), and $_____________ principal amount of its Floating Rate Class __
Asset Backed Notes (the "___________" and, with the Class __ Notes, the
"Notes"). The Notes will be sold pursuant to an underwriting agreement dated the
date hereof (the "Note Underwriting Agreement") between the Seller and the
Representative.
Capitalized terms used and not otherwise defined herein shall have the
meanings given them in Appendix A attached hereto.
2. REPRESENTATIONS AND WARRANTIES OF THE SELLER. (a) The Seller
represents and warrants to and agrees with the several Underwriters that:
(i) A registration statement on Form S-3 (Registration No. 333-______)
has been filed with the Securities and Exchange Commission (the
"Commission"), including a related preliminary base prospectus and a
preliminary prospectus supplement, for the registration under the Act of
the offering and sale of the Notes and the Certificates. The Seller may
have filed one or more amendments thereto, each of which amendments has
previously been furnished to the Representative. The Seller will next file
with the Commission (i) after effectiveness of such registration statement,
a final base prospectus and a final prospectus supplement relating to the
Certificates in accordance with Rules 430A and 424(b)(1) or (4) under the
Securities Act of 1933, as amended (the "Act"), or (ii) a final base
prospectus and a final prospectus supplement relating to the Certificates
in accordance with Rules 415 and 424(b)(2) or (5).
The Seller has included in such registration statement, as amended at
the Effective Date, all information (other than Rule 430A Information)
required by the Act and the rules thereunder to be included in the
Prospectus with respect to the Certificates and the offering thereof. As
filed such final prospectus supplement shall include all Rule 430A
Information, together with all other such required information, with
respect to the Certificates and the offering thereof and, except to the
extent that the Representative shall agree in writing to a modification,
shall be in all substantive respects in the form furnished to the
Representative prior to the Execution Time or, to the extent not completed
at the Execution Time, shall contain only such specific additional
information and other changes (beyond that contained in the latest
preliminary base prospectus and preliminary prospectus supplement, if any,
that have previously been furnished to the Representative) as the Seller
has advised the Representative, prior to the Execution Time, will be
included or made therein. If the Registration Statement contains the
undertaking specified by Regulation S-K Item 512(a), the Registration
Statement, at the Execution Time, meets the requirements set forth in Rule
415(a)(1)(x).
For purposes of this Note Underwriting Agreement (this "Agreement"),
"Effective Time" means the date and time as of which such registration
statement, or the most recent post-effective amendment, thereto, if any,
was declared effective by the Commission, and "Effective Date" means the
date of the Effective Time. "Execution Time" shall mean the date and time
that this Agreement is executed and delivered by the parties hereto. Such
registration statement, as amended at the Effective Time, including all
information deemed to be a part of such registration statement as of the
Effective Time pursuant to Rule 430A(b) under the Act, and including the
exhibits thereto and any material incorporated by reference therein, is
hereinafter referred to as the "Registration Statement." "Base Prospectus"
shall mean any prospectus referred to above contained in the Registration
Statement at the Effective Date, including any Preliminary Prospectus
Supplement. "Preliminary Prospectus Supplement" shall mean the preliminary
prospectus supplement to the Base Prospectus which describes the
Certificates and the offering thereof and is used prior to filing of the
Prospectus. "Prospectus" shall mean the prospectus supplement relating to
the Certificates that is first filed pursuant to Rule 424(b) after the
Execution Time, together with the Base Prospectus or, if no filing pursuant
to Rule 424(b) is required, shall mean the prospectus supplement relating
to the Certificates, including the Base Prospectus, included in the
Registration Statement at the Effective Date. "Rule 430A Information" means
information with respect to the Certificates and the offering of the
Certificates permitted to be omitted from the Registration Statement when
it becomes effective pursuant to Rule 430A. "Rule 415," "Rule 424," "Rule
430A" and "Regulation S-K" refer to such rules or regulations under the
Act. Any reference herein to the Registration Statement, a Preliminary
Prospectus Supplement or the Prospectus shall be deemed to refer to and
include the documents incorporated by reference therein, if any, pursuant
to Item 12 of Form S-3 which were filed under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), on or before the Effective Date
of the Registration Statement or the issue date of the Base Prospectus,
such Preliminary Prospectus Supplement or the Prospectus, as the case may
be; and any reference herein to the terms "amend," "amendment" or
"supplement" with respect to the Registration Statement, the Base
Prospectus, any Preliminary Prospectus Supplement or the Prospectus shall
be deemed to refer to and include the filing of any document under the
Exchange Act after the Effective Date of the Registration Statement, or the
issue date of the Base Prospectus, to any Preliminary Prospectus Supplement
or the Prospectus, as the case may be, deemed to be incorporated therein by
reference.
(ii) As of the Closing Date (as defined below), Mellon's
representations and warranties in the Basic Documents to which it is a
party and in the Guarantee Agreement to which _______ is a party will be
true and correct in all material respects.
(iii) This Agreement has been duly authorized, executed and delivered
by the Seller. The execution, delivery and performance of this Agreement
and the issuance and sale of the Certificates and compliance with the terms
and provisions hereof will not result in a breach or violation of any of
the terms and provisions of, or constitute a default under, any agreement
or instrument to which the Seller is a party or by which the Seller is
bound or to which any of the properties of the Seller is subject which
could reasonably be expected to have a material adverse effect on the
transactions contemplated herein. The Seller has full corporate power and
authority to cause the Trust to authorize, issue and sell the Certificates,
all as contemplated by this Agreement.
(iv) Other than as contemplated by this Agreement or as disclosed in
the Prospectus, there is no broker, finder or other party that is entitled
to receive from the Seller or any of its subsidiaries any brokerage or
finder's fee or other fee or commission as a result of any of the
transactions contemplated by this Agreement.
(v) All legal or governmental proceedings, contracts or documents of a
character required to be described in the Registration Statement or the
Prospectus or to be filed as an exhibit to the Registration Statement have
been so described or filed as required.
(vi) The Seller's assignment and delivery of the Financed Student
Loans to the Eligible Lender Trustee on behalf of the Trust as of the
Closing Date will vest in the Eligible Lender Trustee on behalf of the
Trust all the Seller's right, title and interest therein, or will result in
a first priority perfected security interest therein, in either case
subject to no prior lien, mortgage, security interest, pledge, adverse
claim, charge or other encumbrance.
(vii) The Trust's assignment of the Financed Student Loans to the
Indenture Trustee pursuant to the Indenture will vest in the Indenture
Trustee, for the benefit of the holders of the Notes, a first priority
perfected security interest therein, subject to no prior lien, mortgage,
security interest, pledge, adverse claim, charge or other encumbrance.
(viii) The Seller is not, and after giving effect to the offering and
sale of the Certificates, will not be an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in the
United States Investment Company Act of 1940, as amended (the "Investment
Company Act");
(b) The Seller hereby agrees with the Underwriters that, for all
purposes of this Agreement, the only information furnished to the Seller by the
Underwriters through the Representative specifically for use in the Registration
Statement, the Prospectus, or any amendment or supplement thereto, or any
related preliminary prospectus, are the statements relating to stabilization on
the inside cover page of, and the statements under the caption "Underwriting"
in, the preliminary prospectus and the Prospectus.
3. PURCHASE, SALE AND DELIVERY OF THE CERTIFICATES. On the basis of
the representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Seller agrees to cause the Trust
to sell to the Underwriters, and the Underwriters agree, severally and not
jointly, to purchase from the Trust, at a purchase price of 100% of the
principal amount of the Certificates the respective principal amounts of
Certificates set forth opposite the names of the Underwriters in Schedule I
hereto. In addition, the Seller agrees to cause the Underwriters to be paid an
aggregate structuring fee in connection with the structuring of the Notes and
the Certificates of $_____________.
The Seller will deliver the Certificates to the Representative for the
respective accounts of the Underwriters, against payment of the purchase price
to or upon the order of the Seller by wire transfer or check in Federal (same
day) Funds, at the office of ________________________, _______________,
___________, _________, on ____________________, or at such other time not later
than seven full business days thereafter as the Representative and the Seller
determine, such time being herein referred to as the "Closing Date." The
Certificates to be so delivered will be initially represented by one or more
Certificates registered in the name of Cede & Co., the nominee of The Depository
Trust Company ("DTC"). The interests of beneficial owners of the Certificates
will be represented by book entries on the records of DTC and participating
members thereof. Definitive Certificates will be available only under the
limited circumstances specified in the Trust Agreement.
4. OFFERING BY THE UNDERWRITERS. It is understood that, after the
Registration Statement becomes effective, the several Underwriters propose to
offer the Certificates for sale to the public (which may include selected
dealers) as set forth in the Prospectus.
5. COVENANTS OF THE SELLER. The Seller covenants and agrees with the
several Underwriters that:
(a) Prior to the termination of the offering of the Certificates, the
Seller will not file any amendment of the Registration Statement or supplement
to the Prospectus unless the Seller has furnished the Representative a copy for
its review prior to filing and will not file any such proposed amendment or
supplement to which the Representative reasonably objects. Subject to the
foregoing sentence, if the Registration Statement has become or becomes
effective pursuant to Rule 430A, or filing of the Prospectus is otherwise
required under Rule 424(b), the Seller will file the Prospectus, properly
completed, and any supplement thereto, with the Commission pursuant to and in
accordance with the applicable paragraph of Rule 424(b) within the time period
prescribed and will provide evidence satisfactory to the Representative of such
timely filing.
(b) The Seller will advise the Representative promptly of any proposal
to amend or supplement the registration statement as filed or the related
prospectus or the Registration Statement or the Prospectus and will not effect
such amendment or supplementation without the consent of the Representative
prior to the Closing Date, and thereafter will not effect any such amendment or
supplementation to which the Representative reasonably objects; the Seller will
also advise the Representative promptly of any request by the Commission for any
amendment of or supplement to the Registration Statement or the Prospectus or
for any additional information; and the Seller will also advise the
Representative promptly of the effectiveness of the Registration Statement (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 threat of any proceeding for
that purpose and the Seller will use its best efforts to prevent the issuance of
any such stop order and to obtain as soon as possible the lifting of any issued
stop order.
(c) If, at any time when a prospectus relating to the Certificates is
required to be delivered under the Act, any event occurs as a result of which
the Prospectus as then amended or supplemented would contain an untrue statement
of a material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it is necessary at any time to amend or supplement
the Prospectus to comply with the Act or the Exchange Act, the Seller promptly
will prepare and file, or cause to be prepared and filed, with the Commission an
amendment or supplement which will correct such statement or omission, or an
amendment or supplement which will effect such compliance. Neither the consent
of the Representative to, nor the delivery of the several Underwriters of, any
such amendment or supplement shall constitute a waiver of any of the conditions
set forth in Section 6 hereof.
(d) As soon as practicable, but not later than the Availability Date
(as defined below), the Seller will cause the Trust to make generally available
to the holders of the Certificates an earnings statement of the Trust covering a
period of at least twelve months beginning after the Effective Date which will
satisfy the provisions of Section 11(a) of the Act and Rule 158 of the
applicable Rules and Regulations thereunder. For the purpose of the preceding
sentence, "Availability Date" means the 45th day after the end of the fourth
fiscal quarter following the fiscal quarter that includes the Effective Date,
except that, if such fourth fiscal quarter is the last quarter of the Trust's
fiscal year, "Availability Date" means the 90th day after the end of such fourth
fiscal quarter.
(e) The Seller will furnish to the Representative copies of the
Registration Statement (two of which will be signed and will include all
exhibits), each related preliminary prospectus, the Prospectus and all
amendments and supplements to such documents, in each case as soon as available
and in such quantities as the Representative reasonably requests.
(f) The Seller will arrange for the qualification of the Certificates
for sale under the laws of the States of _________, __________, __________,
__________, and _________________________ and will continue such qualifications
in effect so long as required for the distribution.
(g) For a period from the date of this Agreement until the retirement
of the Certificates, or until such time as the several Underwriters shall cease
to maintain a secondary market in the Certificates, whichever occurs first, the
Seller will deliver to the Representative the annual statements of compliance
and the annual independent certified public accountants' reports furnished to
the Indenture Trustee or the Eligible Lender Trustee pursuant to the Sale and
Servicing Agreement, as soon as such statements and reports are furnished to the
Indenture Trustee or the Eligible Lender Trustee.
(h) So long as any of the Certificates is outstanding, the Seller will
furnish to the Representative (i) as soon as practicable after the end of the
fiscal year all documents required to be distributed to the holders of the
Certificates or filed with the Commission on behalf of the Trust pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any order
of the Commission thereunder and (ii) from time to time, any other information
concerning the Seller as the Representative may reasonably request only insofar
as such information reasonably relates to the Registration Statement or the
transactions contemplated by the Basic Documents.
(i) On or before the Closing Date, the Seller shall mark its
accounting and other records, if any, relating to the Initial Financed Student
Loans and shall instruct the Master Servicer (which shall cause each
Sub-Servicer) to mark the computer records of the Master Servicer (or such
Sub-Servicer) relating to the Financed Student Loans to show the absolute
ownership by the Eligible Lender Trustee on behalf of the Trust of the Financed
Student Loans, and from and after the Closing Date the Seller shall not and
shall require that the Master Servicer (which shall ensure that any
Sub-Servicer) shall not take any action inconsistent with the ownership by the
Eligible Lender Trustee on behalf of the Trust of such Initial Financed Student
Loans, other than as permitted by the Sale and Servicing Agreement.
(j) To the extent, if any, that the rating provided with respect to
the Certificates by the rating agency or agencies that initially rate the
Certificates is conditional at the time of the issuance of the Certificates upon
the furnishing of documents or the taking of any other actions by the Seller
agreed upon on or prior to the Closing Date, the Seller shall furnish such
documents and take any such other actions. A copy of any such document shall be
provided to the Representative at the time it is delivered to the rating
agencies.
(k) For the period beginning on the date of this Agreement and ending
90 days after the Closing Date, neither the Seller nor any trust originated,
directly or indirectly, by the Seller will, without the prior written consent of
the Representative, offer to sell or sell notes (other than the Notes)
collateralized by, or certificates (other than the Certificates) evidencing an
ownership interest in, student loans; PROVIDED, HOWEVER, that this shall not be
construed to prevent the sale of student loans by the Seller.
(l) The Seller will apply the net proceeds of the offering and the
sale of the Certificates and the Notes that it receives in the manner set forth
in the Prospectus under the caption "Use of Proceeds."
(m) The Seller will pay all expenses incident to the performance of
its obligations under this Agreement, including (i) the printing and filing of
the documents (including the Registration Statement and Prospectus) (ii) the
preparation, issuance and delivery of the Certificates to the Representative,
(iii) the fees and disbursements of the Seller's counsel and accountants, (iv)
the qualification of the Certificates under securities laws in accordance with
the provisions of Section 5(f), including filing fees and the fees and
disbursements of counsel for the Representative in connection therewith and in
connection with the preparation of any blue sky or legal investment survey, if
any is requested, (v) the printing and delivery to the Representative of copies
of the Registration Statement as originally filed and of each amendment thereto,
(vi) the printing and delivery to the Representative of copies of any blue sky
or legal investment survey prepared in connection with the Certificates, (vii)
any fees charged by rating agencies for the rating of the Certificates, (viii)
the fees and expenses, if any, incurred with respect to any filing with the
National Association of Securities Dealers, Inc. and (ix) the fees and expenses
of ________________________ in its role as counsel to the Trust incurred as a
result of providing the opinions required by Section 6(h) hereof.
6. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS. The obligations
of the several Underwriters to purchase and pay for the Certificates will be
subject to the accuracy of the representations and warranties on the part of the
Seller herein, to the accuracy of the written statements of officers of the
Seller made pursuant to the provisions of this Section, to the performance by
the Seller of its obligations hereunder and to the following additional
conditions precedent:
(a) If the Effective Time is not prior to the execution and delivery
of this Agreement, the Effective Time shall have occurred not later than 6:00
p.m., New York City time, on the date of this Agreement or such later time or
date as shall have been consented to by the Representative.
(b) If the Effective Time is prior to the execution and delivery of
this Agreement, the Prospectus and any supplements thereto shall have been filed
with the Commission in accordance with the Rules and Regulations and Section
5(a) hereof. Prior to the Closing Date, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or, to the knowledge of
the Seller or the Representative, shall be contemplated by the Commission.
(c) The Representative shall have received a letter, dated on or prior
to the Closing Date of ___________________ on behalf of the Seller confirming
that such accountants are independent public accountants within the meaning of
the Act and the applicable published Rules and Regulations thereunder, and
substantially in the form of the drafts to which the Representative has
previously agreed and otherwise in form and substance reasonably satisfactory to
the Representative and its counsel.
(d) Subsequent to the execution and delivery of this Agreement, there
shall not have occurred (i) any change, or any development involving a
prospective change, in or affecting particularly the business or properties of
the Trust or Mellon which, in the judgment of the Representative, materially
impairs the investment quality of the Certificates or makes it impractical or
inadvisable to market the Certificates; (ii) any downgrading in the rating of
any debt securities of Mellon by any "nationally recognized statistical rating
organization" (as defined for purposes of Rule 436(g) under the Act), or any
public announcement that any such organization has under surveillance or review
its rating of any debt securities of Mellon (other than an announcement with
positive implications of a possible upgrading, and no implication of a possible
downgrading, of such rating); (iii) any suspension or limitation of trading in
securities generally on the New York Stock Exchange, or any setting of minimum
prices for trading on such exchange; (iv) any suspension of trading of any
securities of Mellon on any exchange or in the over-the-counter market; (v) any
banking moratorium declared by Federal or New York authorities; or (vi) any
outbreak or escalation of hostilities involving the United States or the
declaration by the United States of a national emergency or war, if the effect
of any such event specified in this clause (vi) in the judgment of the
Representative makes it impracticable or inadvisable to proceed with the public
offering or the delivery of the Certificates on the terms and in the manner
contemplated in the Prospectus.
(e) The Representative shall have received an opinion of
__________________, General Counsel of Mellon, as counsel for Mellon, as the
Seller, the Master Servicer and the Administrator, dated the Closing Date, in
the form attached hereto as Exhibit A, or as is otherwise satisfactory in form
and substance to the Representative and its counsel.
(f) The Representative shall have received an opinion of
_____________________, counsel to the Seller, dated the Closing Date, in the
form attached hereto as Exhibit B, or as is otherwise satisfactory in form and
substance to the Representative and its counsel.
(g) [Reserved].
(h) The Representative shall have received an opinion addressed to the
several Underwriters of __________________________, in its capacity as Federal
tax and ERISA counsel for the Trust, to the effect that the statements in the
Prospectus under the headings "Summary of Terms--Tax Consequences" and "Federal
Tax Consequences for Trusts for which a Partnership Election is Made--Tax
Consequences to Holders of the Certificates" accurately describe the material
Federal income tax consequences to holders of the Certificates, and the
statements in the Prospectus under the headings "Summary of Terms--ERISA
Considerations" and "ERISA Considerations" to the extent that they constitute
statements of matters of law or legal conclusions with respect thereto, have
been prepared or reviewed by such counsel and accurately describe the material
consequences to holders of the Certificates under ERISA. Thompson Hine & Flory
LLP, in its capacity as special counsel to the Trust, shall have delivered an
opinion with respect to the characterization of the transfer of the Initial
Financed Student Loans.
(i) The Representative shall have received an opinion addressed to the
several Underwriters of ___________________________, in its capacity as special
counsel to the several Underwriters, dated the Closing Date, with respect to the
validity of the Certificates and the Notes and such other related matters as the
Representative shall reasonably require and the Seller shall have furnished or
caused to be furnished to such counsel such documents as they may reasonably
request for the purpose of enabling them to pass upon such matters.
(j) The Representative shall have received an opinion of
_______________________________, special student loan counsel to the
Representative and, in the case of clause (iii) below, special student loan
counsel to the Eligible Lender Trustee, dated the Closing Date, satisfactory in
form and substance to the Representative, to the effect that:
(i) the agreements implementing the Program, (including the
Coordination Agreements) and the Relevant Documents (as defined in the
opinion), and the transactions contemplated by the Relevant Documents,
conform in all material respects to the applicable requirements of the
Higher Education Act, and that, upon the due authorization, execution and
delivery of the Relevant Documents and the consummation of such
transactions, the Financed Federal Loans, legal title to which will be held
by the Eligible Lender Trustee on behalf of the Trust, will qualify,
subject to compliance with all applicable origination and servicing
requirements, for all applicable federal assistance payments, including
federal reinsurance and federal interest subsidies and special allowance
payments;
(ii) such counsel has examined the Registration Statement and the
Prospectus, and nothing has come to such counsel's attention that would
lead such counsel to believe that, solely with respect to the Higher
Education Act and the student loan business, the Registration Statement or
the Prospectus or any amendment or supplement thereto as of the respective
dates thereof or on the Closing Date contains an untrue statement of a
material fact or omits to state a material fact necessary in order to make
the statements therein not misleading; and
(iii) the Eligible Lender Trustee is an "eligible lender" as such term
is defined in Section 435(d) of the Higher Education Act for purposes of
holding legal title to the Financed Federal Loans.
(k) The Representative shall have received an opinion of counsel to
______, dated the Closing Date and satisfactory in form and substance to the
Representative and its counsel, to the effect that:
(i) ________ has been duly organized and is validly existing as an
agency of the ____________________________ in good standing under the laws
thereof with full power and authority (corporate and other) to own its
properties and conduct its business, as presently conducted by it, and to
enter into and perform its obligations under the _____ Sub-Servicing
Agreement and the Guarantee Agreement (and the agreements with the
Department under Section 428 of the Higher Education Act to the extent
relevant to ________'s obligations under such Guarantee Agreement) to which
it is a party, and had at all relevant times, and now has, the power,
authority and legal right to service the Financed Student Loans it is
servicing, to guarantee the Financed Federal Loans covered by such
Guarantee Agreement and to receive, subject to compliance with all
applicable conditions, restrictions and limitations of the Higher Education
Act, reinsurance payments from the Department with respect to claims paid
by it on such Financed Federal Loans.
(ii) ________ is duly qualified to do business and is in good
standing, and has obtained all necessary licenses and approvals in each
jurisdiction in which failure to qualify or to obtain such license or
approval would render any Financed Student Loan or _________'s obligation
under its Guarantee Agreement unenforceable by or on behalf of the Trust.
(iii) Each of the ______ Sub-Servicing Agreement and the Guarantee
Agreement to which it is a party (and the agreements with the Department
under Section 428 of the Higher Education Act to the extent relevant to
_______'s obligations under such Guarantee Agreement) to which ______ is a
party has been duly authorized, executed and delivered by ______ and is the
legal, valid and binding obligation of _____ enforceable against ______ in
accordance with its terms, notwithstanding the existence of any doctrine of
sovereign immunity except (x) the enforceability thereof may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights and (y) the remedy
of specific performance and injunctive and other forms of equitable relief
may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
(iv) Neither the execution and delivery by _______ of the _______ Sub-
Servicing Agreement or the Guarantee Agreement to which it is a party, nor
the consummation by _______ of the transactions contemplated therein nor
the fulfillment of the terms thereof by _______ will conflict with, result
in a breach, violation or acceleration of, or constitute a default under,
any term or provision of the certificate of incorporation or by-laws of
_______ or of any indenture or other agreement or instrument to which
_______ is a party or by which _______ is bound, or result in a violation
of or contravene the terms of any statute, order or regulation applicable
to _______ of any court, regulatory body, administrative agency or
governmental body having jurisdiction over _______.
(v) There are no actions, proceedings or investigations pending or, to
the best of such counsel's knowledge after due inquiry, threatened against
_______ before or by any governmental authority that might materially and
adversely affect the performance by _______ of its obligations under, or
the validity or enforceability of, the _______ Sub-Servicing Agreement or
the Guarantee Agreement (or the agreements with the Department under
Section 428 of the Higher Education Act to the extent relevant to _______'s
obligations under such Guarantee Agreement) to which it is a party.
(vi) Nothing has come to such counsel's attention that would lead such
counsel to believe that the representations and warranties of _______
contained in the _______ Sub-Servicing Agreement are other than as stated
therein.
(l) The Representative shall have received an opinion of counsel to
__________, dated the Closing Date and satisfactory in form and substance to the
Representative and its counsel, to the effect that:
(i) _______ has been duly organized and is validly existing as a
____________ corporation in good standing under the laws thereof with full
power and authority (corporate and other) to own its properties and conduct
its business, as presently conducted by it, and to enter into and perform
its obligations under the _______ Sub-Servicing Agreement, and had at all
relevant times, and now has, the power, authority and legal right to
service the Financed Student Loans it is servicing.
(ii) The _______ Sub-Servicing Agreement has been duly authorized,
executed and delivered by _______ and is the legal, valid and binding
obligation of _______ enforceable against _______ in accordance with its
terms, except (x) the enforceability thereof may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights and (y) the remedy of
specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
(iii) Neither the execution and delivery by _______ of the _______
Sub-Servicing Agreement, nor the consummation by _______ of the
transactions contemplated therein nor the fulfillment of the terms thereof
by _______ will conflict with, result in a breach, violation or
acceleration of, or constitute a default under, any term or provision of
the certificate of incorporation or by-laws of _______ or of any indenture
or other agreement or instrument to which _______ is a party or by which
_______ is bound, or result in a violation of or contravene the terms of
any statute, order or regulation applicable to _______ of any court,
regulatory body, administrative agency or governmental body having
jurisdiction over _______.
(iv) There are no actions, proceedings or investigations pending or,
to the best of such counsel's knowledge after due inquiry, threatened
against _______ before or by any governmental authority that might
materially and adversely affect the performance by _______ of its
obligations under, or the validity or enforceability of, the _______ Sub-
Servicing Agreement.
(v) Nothing has come to such counsel's attention that would lead such
counsel to believe that the representations and warranties of _______
contained in the _______ Sub-Servicing Agreement are other than as stated
therein.
(m) The Representative shall have received an opinion of counsel to
the ______________________________________________________________________ a
_____________________ corporation ("___"), dated the Closing Date and
satisfactory in form and substance to the Representative and its counsel, to the
effect that:
(i) ___ has been duly incorporated and is validly existing as a
_________ corporation in good standing under the laws of the Commonwealth
of ______________ with full power and authority (corporate and other) to
own its properties and conduct its business, as presently conducted by it,
and to enter into and perform its obligations under the Guarantee Agreement
(and the agreements with the Department under Section 428 of the Higher
Education Act to the extent relevant to ____'s obligations under such
Guarantee Agreement) to which it is a party, and had at all relevant times,
and now has, the power, authority and legal right to guarantee the Financed
Federal Loans covered by such Guarantee Agreement and to receive, subject
to compliance with all applicable conditions, restrictions and limitations
of the Higher Education Act, reinsurance payments from the Department with
respect to claims paid by it on such Financed Federal Loans.
(ii) ____ is duly qualified to do business and is in good standing,
and has obtained all necessary licenses and approvals in each jurisdiction
in which failure to qualify or to obtain such license or approval would
render ____'s obligation under its Guarantee Agreement to guarantee the
Financed Federal Loans covered thereby unenforceable by or on behalf of the
Trust.
(iii) The Guarantee Agreement (and the agreements with the Department
under Section 428 of the Higher Education Act to the extent relevant to
____'s obligations under such Guarantee Agreement) to which ____ is a party
has been duly authorized, executed and delivered by ____ and is the legal,
valid and binding obligation of ____ enforceable against ____ in accordance
with its terms, except (x) the enforceability thereof may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights and (y) the remedy
of specific performance and injunctive and other forms of equitable relief
may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
(iv) Neither the execution and delivery by ____ of the Guarantee
Agreement to which it is a party, nor the consummation by ____ of the
transactions contemplated therein nor the fulfillment of the terms thereof
by ____ will conflict with, result in a breach, violation or acceleration
of, or constitute a default under, any term or provision of the certificate
of incorporation or by-laws of ____ or of any indenture or other agreement
or instrument to which ____ is a party or by which ____ is bound, or result
in a violation of or contravene the terms of any statute, order or
regulation applicable to ____ of any court, regulatory body, administrative
agency or governmental body having jurisdiction over ____.
(v) There are no actions, proceedings or investigations pending or, to
the best of such counsel's knowledge after due inquiry, threatened against
____ before or by any governmental authority that might materially and
adversely affect the performance by ____ of its obligations under, or the
validity or enforceability of, the Guarantee Agreement (or the agreements
with the Department under Section 428 of the Higher Education Act to the
extent relevant to ____'s obligations under such Guarantee Agreement) to
which it is a party.
(n) The Representative shall have received an opinion of counsel to
__________ ("_____"), dated the Closing Date and satisfactory in form and
substance to the Representative and its counsel, to the effect that:
(i) _____ has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of __________ with
full power and authority (corporate and other) to own its properties and
conduct its business, as presently conducted by it, and to enter into and
perform its obligations under the Guarantee Agreement (and the agreements
with the Department under Section 428 of the Higher Education Act to the
extent relevant to _____'s obligations under such Guarantee Agreement) to
which it is a party, and had at all relevant times, and now has, the power,
authority and legal right to guarantee the Financed Federal Loans covered
by such Guarantee Agreement and to receive, subject to compliance with all
applicable conditions, restrictions and limitations of the Higher Education
Act, reinsurance payments from the Department with respect to claims paid
by it on such Financed Federal Loans.
(ii) _____ is duly qualified to do business and is in good standing,
and has obtained all necessary licenses and approvals in each jurisdiction
in which failure to qualify or to obtain such license or approval would
render _____'s obligation under its Guarantee Agreement to guarantee the
Financed Federal Loans covered thereby unenforceable by or on behalf of the
Trust.
(iii) The Guarantee Agreement (and the agreements with the Department
under Section 428 of the Higher Education Act to the extent relevant to
_____'s obligations under such Guarantee Agreement) to which _____ is a
party has been duly authorized, executed and delivered by _____ and is the
legal, valid and binding obligation of _____ enforceable against _____ in
accordance with its terms, except (x) the enforceability thereof may be
subject to bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights and
(y) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.
(iv) Neither the execution and delivery by _____ of the Guarantee
Agreement to which it is a party, nor the consummation by _____ of the
transactions contemplated therein nor the fulfillment of the terms thereof
by _____ will conflict with, result in a breach, violation or acceleration
of, or constitute a default under, any term or provision of the certificate
of incorporation or by-laws of _____ or of any indenture or other agreement
or instrument to which _____ is a party or by which _____ is bound, or
result in a violation of or contravene the terms of any statute, order or
regulation applicable to _____ of any court, regulatory body,
administrative agency or governmental body having jurisdiction over -----.
(v) There are no actions, proceedings or investigations pending or, to
the best of such counsel's knowledge after due inquiry, threatened against
_____ before or by any governmental authority that might materially and
adversely affect the performance by _____ of its obligations under, or the
validity or enforceability of, the Guarantee Agreement (or the agreements
with the Department under Section 428 of the Higher Education Act to the
extent relevant to _____'s obligations under such Guarantee Agreement) to
which it is a party.
(o) [Reserved]
(p) [Reserved]
(q) [Reserved]
(r) [Reserved]
(s) [Reserved]
(t) [Reserved]
(u) The Representative shall have received an opinion of counsel to
the Eligible Lender Trustee, dated the Closing Date and satisfactory in form and
substance to the Representative and its counsel, to the effect that:
(i) The Eligible Lender Trustee is a national banking association duly
incorporated or organized and validly existing under the laws of the United
States.
(ii) The Eligible Lender Trustee has the full corporate trust power to
accept the office of eligible lender trustee under the Trust Agreement and
to enter into and perform its obligations under the Trust Agreement, the
Sale and Servicing Agreement and, on behalf of the Trust, under the
Indenture, the Sale and Servicing Agreement, the Administration Agreement
and the Guarantee Agreements.
(iii) The execution and delivery of the Trust Agreement and the Sale
and Servicing Agreement and, on behalf of the Trust, of the Indenture, the
Sale and Servicing Agreement, the Administration Agreement and the
Guarantee Agreements, and the performance by the Eligible Lender Trustee of
its obligations under the Trust Agreement, the Indenture, the Sale 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, the Sale and Servicing Agreement and the
Administration Agreement constitute valid and binding obligations of the
Eligible Lender Trustee enforceable against the Eligible Lender Trustee in
accordance with their terms.
(v) The execution and delivery by the Eligible Lender Trustee of the
Trust Agreement and the Sale and Servicing Agreement and, on behalf of the
Trust, of the Indenture, the Sale 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.
(vi) Each of the Certificates has been duly executed and delivered by
the Eligible Lender Trustee, as eligible lender trustee and authenticating
agent. Each of the Notes has been duly executed and delivered by the
Eligible Lender Trustee, on behalf of the Trust.
(vii) Neither the consummation by the Eligible Lender Trustee of the
transactions contemplated in the Sale and Servicing Agreement, the
Indenture, the Trust Agreement or the Administration Agreement nor the
fulfillment of the terms thereof by the Eligible Lender Trustee will
conflict with, result in a breach or violation of, or constitute a default
under any law or the charter, by-laws or other organizational documents of
the Eligible Lender Trustee or the terms of any indenture or other
agreement or instrument known to such counsel and to which the Eligible
Lender Trustee or any of its subsidiaries is a party or is bound or any
judgment, order or decree known to such counsel to be applicable to the
Eligible Lender Trustee or any of its subsidiaries of any court, regulatory
body, administrative agency, governmental body or arbitrator having
jurisdiction over the Eligible Lender Trustee or any of its subsidiaries.
(viii) There are no actions, suits or proceedings pending or, to the
best of such counsel's knowledge after due inquiry, threatened against the
Eligible Lender Trustee (as eligible lender trustee under the 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 or the Sale and Servicing Agreement.
(ix) The execution, delivery and performance by the Eligible Lender
Trustee of the Sale and Servicing Agreement, the Indenture, the Trust
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 lien created by or arising under the Eligible Lender Trustee that
are unrelated to the transactions contemplated in such agreements.
(v) The Representative shall have received an opinion of __________,
Delaware counsel to the Trust, dated the Closing Date, in form and substance
satisfactory to the Representative and its counsel.
(w) The Representative shall have received an opinion of __________,
counsel to __________ in its capacity as Delaware Trustee under the Trust
Agreement, dated the Closing Date, in form and substance satisfactory to the
Representative and its counsel.
(x) The Representative shall have received certificates dated the
Closing Date of any two of the Chairman of the Board, the President, any
Executive Vice President, Senior Vice President or Vice President, the
Secretary, any Assistant Secretary, the Treasurer, any Assistant Treasurer, the
principal financial officer or the principal accounting officer of Mellon in
which such officers shall state that, to the best of their knowledge after
reasonable investigation, (i) the representations and warranties of Mellon,
contained in each Basic Document to which it is a party, are true and correct in
all material respects, that Mellon has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied under such
agreements, in whatever capacity it is a party to such agreements, at or prior
to the Closing Date, and that no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose have
been instituted or are contemplated by the Commission, and (ii) since
__________, except as may be disclosed in the Prospectus or in such certificate,
no material adverse change, or any development involving a prospective material
adverse change, in or affecting particularly the business or properties of the
Trust, or Mellon, as applicable, has occurred.
(y) The Representative shall have received certificates dated the
Closing Date of any two of the Chairman of the Board, the President, any
Executive Vice President, Senior Vice President or Vice President, the
Secretary, any Assistant Secretary, the Treasurer, any Assistant Treasurer, the
principal financial officer or the principal accounting officer of each of the
Sub-Servicers in which such officers shall state that, to the best of their
knowledge after reasonable investigation, (i) the representations and warranties
of such Sub-Servicer contained in the related Subservicing Agreement are true
and correct in all material respects, and that such Sub-Servicer has complied
with all agreements and satisfied all conditions on its part to be performed or
satisfied under such agreements at or prior to the Closing Date, and (ii) since
__________, except as may be disclosed in the Prospectus or in such certificate,
no material adverse change, or any development involving a prospective material
adverse change, in or affecting particularly the business or properties of such
Sub-Servicer.
(z) The Representative shall have received evidence satisfactory to it
that, on or before the Closing Date, UCC-1 financing statements have been or are
being filed in the office of the Secretary of State of the States of __________,
__________, __________, __________, __________ and __________, as applicable,
reflecting the transfer of the interest of the Seller in the Financed Student
Loans to the Eligible Lender Trustee on behalf of the Trust and the proceeds
thereof to the Trust and the grant of the security interest by the Trust in the
Financed Student Loans and the proceeds thereof to the Indenture Trustee.
(aa) The Certificates shall be rated "A3" by Moody's Investors
Service, Inc. ("Moody's"), "A" Fitch IBCA, Inc. ("Fitch"), and "A" Standard and
Poor's, a division of the McGraw-Hill Companies, Inc. ("S&P") and each a "Rating
Agency"), and no Rating Agency shall have placed any Certificate under
surveillance or review with possible negative implications.
(bb) The issuance of the Notes and the Certificates shall not have
resulted in a reduction or withdrawal by any Rating Agency of the current rating
of any outstanding securities issued or originated by the Seller or any of its
affiliates.
(cc) On the Closing Date, $__________ aggregate principal amount of
the Class ___ Notes, $__________ aggregate principal amount of the Class ___
Notes, and $__________ aggregate principal amount of the Class ___ Notes shall
have been issued and sold.
(dd) _____ shall have furnished to the Representative a certificate of
_____, signed by the President or any Senior Vice President, dated the Closing
Date, to the effect that the signer of such certificate has carefully examined
the Prospectus (excluding any documents incorporated by reference therein) and
this Agreement and that, to the best of his knowledge any information with
respect to _____ in the Prospectus, as of its date, did not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading.
(ee) _____ shall have furnished to the Representative a certificate of
_____, signed by the President or any Senior Vice President, dated the Closing
Date, to the effect that the signer of such certificate has carefully examined
the Prospectus (excluding any documents incorporated by reference therein) and
this Agreement and that, to the best of his knowledge any information with
respect to _____ in the Prospectus, as of its date, did not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading.
(ff) ____ shall have furnished to the Representative a certificate of
____, signed by the President or any Senior Vice President, dated the Closing
Date, to the effect that the signer of such certificate has carefully examined
the Prospectus (excluding any documents incorporated by reference therein) and
this Agreement and that, to the best of his knowledge any information with
respect to ____ in the Prospectus, as of its date, did not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading.
(gg) _____ shall have furnished to the Representative a certificate of
_____, signed by the President or any Senior Vice President, dated the Closing
Date, to the effect that the signer of such certificate has carefully examined
the Prospectus (excluding any documents incorporated by reference therein) and
this Agreement and that, to the best of his knowledge any information with
respect to _____ in the Prospectus, as of its date, did not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading.
(hh) [Reserved]
(ii) [Reserved]
(jj) [Reserved]
(kk) [Reserved]
(ll) [Reserved]
(mm) Each of the Basic Documents shall have been executed and
delivered by the parties thereto. Each of the Sub-Servicers shall have executed
and delivered the related Sub-Servicing Agreement. Each of the Guarantors shall
have executed and delivered the related Guarantee Agreement.
The Seller will provide or cause to be provided to the Representative
such conformed copies of such of the foregoing opinions, certificates, letters
and documents as the Representative reasonably requests.
7. INDEMNIFICATION AND CONTRIBUTION. (a) The Seller will indemnify and
hold each Underwriter harmless against any losses, claims, damages or
liabilities, joint or several, to which such Underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
(x) the Registration Statement, the Preliminary Prospectus Supplement, the
Prospectus or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and (y) the Prospectus or any amendment or supplement thereto or any related
Preliminary Prospectus Supplement, or arise out of or are based upon the
omission or alleged omission to state therein a material fact necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading and will reimburse each Underwriter for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such loss, claim, damage, liability or action as
such expenses are incurred; PROVIDED, HOWEVER, that the Seller will not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement in or omission or alleged omission from any of such documents in
reliance upon and in conformity with written information furnished to the Seller
by any Underwriter through the Representative specifically for use therein.
(b) Each Underwriter agrees, severally and not jointly; to indemnify
and hold harmless the Seller against any losses, claims, damages or liabilities
to which the Seller may become subject, under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in (x) the Registration Statement, the
Preliminary Prospectus Supplement, the Prospectus or any amendment or supplement
thereto, or arise out of or are based upon the omission or the alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and (y) the Prospectus or any
amendment or supplement thereto or any related Preliminary Prospectus
Supplement, or arise out of or are based upon the omission or alleged omission
to state therein a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading and in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with written information relating to
such Underwriter furnished to the Seller by such Underwriter through the
Representative specifically for use therein, and will reimburse any legal or
other expenses reasonably incurred by the Seller in connection with
investigating or defending any such loss, claim, damage, liability or action as
such expenses are incurred.
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under
subsection (a) or (b) above, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
under subsection (a) or (b) above. In case any such action is brought against
any indemnified party and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party (who shall not, except with the consent of the indemnified
party, be counsel to the indemnifying party), and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof and approval by the indemnified party of the counsel appointed
by the indemnifying party, the indemnifying party will not be liable to such
indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation. In no event shall the
indemnifying party be liable for fees and expenses for more than one counsel
separate from their own counsel for all indemnified parties in connection with
any one action or related actions in the same jurisdiction arising out of the
same general allegations or circumstances unless any such indemnified party
shall have been advised by such counsel that there may be one or more legal
defenses available to it which are different from or additional to or in
conflict with those available to the other indemnified parties and in the
judgment of such counsel it is advisable for such indemnified party to employ
separate counsel. An indemnifying party will not, without the prior written
consent of the indemnified party, settle or compromise or consent to the entry
of any judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
(i) includes an unconditional release of each indemnified party from all
liability arising out of such action or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act, by or
on behalf of any indemnified party.
(d) If the indemnification provided for in this Section is unavailable
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnifying party as a result of the losses, claims, damages or
liabilities referred to in subsection (a) or (b) above (i) in such proportion as
is appropriate to reflect the relative benefits received by the Seller on the
one hand and the Underwriters on the other from the offering of the Certificates
or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Seller on the one hand and the Underwriters on the other in connection with
the statements or omissions which resulted in such losses, claims, damages or
liabilities as well as any other relevant equitable considerations. The relative
benefits received by the Seller on the one hand and the Underwriters on the
other shall be deemed to be in the same proportion as the total net proceeds
from the offering (before deducting expenses) received by the Seller bear to the
total underwriting discounts and commissions received by the Underwriters. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Seller or by the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such untrue
statement or omission. The Company and the Underwriters agree that it would not
be just and equitable if contribution pursuant to this subsection (d) were
determined by PRO RATA allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this
subsection (d). The amount paid or payable by an indemnified party as a result
of the losses, claims, damages or liabilities referred to in the first sentence
of this subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any action or claim which is the subject of this subsection (d).
Notwithstanding the provisions of this subsection (d), no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Certificates underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission, except as may be
provided in any agreement among the Underwriters relating to the offering of the
Certificates. 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. The obligations
of the Underwriters in this subsection (d) to contribute are several in
proportion their respective underwriting obligations and not joint.
(e) The obligations of the Seller under this Section shall be in
addition to any liability which the Seller may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls any
Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section shall be in addition to any liability which the
respective Underwriters may otherwise have and shall extend, upon the same terms
and conditions, to each director of the Seller, to each officer of the Seller
who has signed the Registration Statement and to each person, if any, who
controls the Seller within the meaning of the Act.
8. SURVIVAL OF REPRESENTATIONS AND OBLIGATIONS. The respective
indemnities, agreements, representations, warranties and other statements of the
Seller or its officers and of the several Underwriters set forth in or made
pursuant to this Agreement or contained in certificates of officers of the
Seller submitted pursuant hereto shall remain operative and in full force and
effect, regardless of any investigation or statement as to the results thereof,
made by or on behalf of any Underwriter, the Seller or any of their respective
representatives, officers or directors or any controlling person, and will
survive delivery of and payment for the Certificates. If for any reason the
purchase of the Certificates by the Underwriters is not consummated, the Seller
shall remain responsible for the expenses to be paid or reimbursed by the Seller
pursuant to Section 5 and the respective obligations of the Seller and the
Underwriters pursuant to Section 7 shall remain in effect. If for any reason the
purchase of the Certificates by the Underwriters is not consummated (other than
pursuant to Section 9), the Seller will reimburse the Underwriters for all
out-of-pocket expenses (including fees and disbursements of counsel) reasonably
incurred by them in connection with the offering of the Certificates.
9. FAILURE TO PURCHASE THE CERTIFICATES. If any Underwriter or
Underwriters default in their obligations to purchase its portion of the
Certificates hereunder and the aggregate principal amount of the Certificates
that such defaulting Underwriter or Underwriters agreed but failed to purchase
does not exceed 10% of the total principal amount of the Certificates, the
Representative may make arrangements satisfactory to the Seller for the purchase
of such Certificates by other persons, including any of the Underwriters, but if
no such arrangements are made by the Closing Date, the non-defaulting
Underwriters shall be obligated severally, in proportion to their respective
commitments hereunder, to purchase the Certificates that such defaulting
Underwriters agreed but failed to purchase. If any Underwriter or Underwriters
so default and the aggregate principal amount of the Certificates with respect
to such default or defaults exceeds 10% of the total principal amount of the
Certificates and arrangements satisfactory to the Representative and the Seller
for the purchase of such Certificates by other persons are not made within 36
hours after such default, this Agreement will terminate without liability on the
part of any non-defaulting Underwriter or the Seller, except as provided in
Section 7. As used in this Agreement, the term "Underwriter" includes any person
substituted for an Underwriter under this Section. Nothing herein will relieve a
defaulting Underwriter or Underwriters from liability for its default.
10. NOTICES. All communications hereunder will be in writing and, if
sent to the Underwriters, will be mailed, delivered or telegraphed and confirmed
to the Representative at __________, __________, __ _____, Attention:
__________; if sent to the Seller, will be mailed, delivered or telegraphed and
confirmed to it at Mellon Bank, N.A., One Mellon Center, 500 Grant Street,
Pittsburgh, Pennsylvania 15258, Attention: _______________; PROVIDED, --------
HOWEVER, that any notice to an Underwriter pursuant to Section 7 will be mailed,
delivered or telegraphed and confirmed to such Underwriter. Any such notice will
take effect at the time of receipt.
11. SUCCESSORS. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 7, and no other
person will have any right or obligations hereunder.
12. 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.
13. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
14. APPLICABLE LAW. This Agreement will be governed by, and construed
in accordance with, the laws of the State of New York.
If the foregoing is in accordance with the understanding of the
Representative of our agreement, kindly sign and return to us one of the
counterparts hereof, whereupon it will become a binding agreement between the
Seller and the several Underwriters in accordance with its terms.
Very truly yours,
MELLON BANK, N.A.
By:
Name:
Title:
The foregoing Certificate Underwriting
Agreement is hereby confirmed and
accepted as of the date first
written above.
------------------------------------
By:
Name:
Title:
Acting on behalf of itself and
as Representative of the
several Underwriters.
<PAGE>
SCHEDULE I
UNDERWRITER Certificates
................................ $
Total....................................................... $
<PAGE>
APPENDIX A
[See Appendix A to Sale and Servicing Agreement]
<PAGE>
EXHIBIT A
[Mellon Bank, N.A. opinion]
<PAGE>
EXHIBIT B
[ opinions]
EXHIBIT 4.1
FORM OF
INDENTURE
between
MELLON STUDENT LOAN TRUST ____-__,
as Issuer
and
--------------------,
not in its individual capacity but
solely as Indenture Trustee
Dated as of ___________, ____
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND USAGE
SECTION 1.01. Definitions and Usage...........................................2
SECTION 1.02. Incorporation by Reference of Trust Indenture Act...............2
ARTICLE II
THE NOTES
SECTION 2.01. Form............................................................3
SECTION 2.02. Execution, Authentication and Delivery..........................3
SECTION 2.03. Temporary Notes.................................................4
SECTION 2.04. Registration; Registration of Transfer and Exchange.............4
SECTION 2.05. Mutilated, Destroyed, Lost or Stolen Notes......................5
SECTION 2.06. Persons Deemed Owner............................................6
SECTION 2.07. Payment of Principal and Interest; Defaulted Interest;
Noteholders' Interest Index Carryover...........................6
SECTION 2.08. Cancellation....................................................8
SECTION 2.09. Release of Collateral...........................................8
SECTION 2.10. Book-Entry Notes................................................8
SECTION 2.11. Notices to Clearing Agency......................................9
SECTION 2.12. Definitive Notes................................................9
ARTICLE III
COVENANTS
SECTION 3.01. Payment to Noteholders.........................................10
SECTION 3.02. Maintenance of Office or Agency................................10
SECTION 3.03. Money for Payments To Be Held in Trust.........................10
SECTION 3.04. Existence......................................................12
SECTION 3.05. Protection of Indenture Trust Estate...........................12
SECTION 3.06. Opinions as to Indenture Trust Estate..........................13
SECTION 3.07. Performance of Obligations; Master Servicing of Financed
Student Loans..................................................13
SECTION 3.08. Negative Covenants.............................................16
SECTION 3.09. Annual Statement as to Compliance..............................16
SECTION 3.10. Issuer May Consolidate, etc., Only on Certain Terms............17
SECTION 3.11. Successor or Transferee........................................18
SECTION 3.12. No Other Business..............................................19
SECTION 3.13. No Borrowing...................................................19
SECTION 3.14. Obligations of Master Servicer and Administrator...............19
SECTION 3.15. Guarantees, Loans, Advances and Other Liabilities..............19
SECTION 3.16. Capital Expenditures...........................................19
SECTION 3.17. Restricted Payments............................................19
SECTION 3.18. Notice of Events of Default....................................20
SECTION 3.19. Further Instruments and Acts...................................20
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.01. Satisfaction and Discharge of Indenture........................20
SECTION 4.02. Application of Trust Money.....................................21
SECTION 4.03. Repayment of Moneys Held by Paying Agent.......................21
SECTION 4.04. Auction of Financed Student Loans..............................22
ARTICLE V
REMEDIES
SECTION 5.01. Events of Default..............................................22
SECTION 5.02. Acceleration of Maturity; Rescission and Annulment.............23
SECTION 5.03. Collection of Indebtedness and Suits for Enforcement by
Indenture Trustee..............................................24
SECTION 5.04. Remedies; Priorities...........................................26
SECTION 5.05. Optional Preservation of the Financed Student Loans............28
SECTION 5.06. Limitation of Suits............................................28
SECTION 5.07. Unconditional Rights of Noteholders To Receive Principal
and Interest...................................................29
SECTION 5.08. Restoration of Rights and Remedies.............................29
SECTION 5.09. 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................................................31
SECTION 5.16. Performance and Enforcement of Certain Obligations.............32
ARTICLE VI
THE INDENTURE TRUSTEE
SECTION 6.01. Duties of Indenture Trustee....................................32
SECTION 6.02. Rights of Indenture Trustee....................................34
SECTION 6.03. Individual Rights of Indenture Trustee.........................35
SECTION 6.04. Indenture Trustee's Disclaimer.................................35
SECTION 6.05. Notice of Defaults.............................................35
SECTION 6.06. Reports by Indenture Trustee to Noteholders....................35
SECTION 6.07. Compensation and Indemnity.....................................36
SECTION 6.08. Replacement of Indenture Trustee...............................36
SECTION 6.09. 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
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
SECTION 7.01. Issuer To Furnish Indenture Trustee Names and Addresses
of Noteholders.................................................39
SECTION 7.02. Preservation of Information; Communications to
Noteholders....................................................39
SECTION 7.03. Reports by Issuer..............................................40
ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
SECTION 8.01. Collection of Money............................................41
SECTION 8.02. Trust Accounts.................................................41
SECTION 8.03. General Provisions Regarding Accounts..........................42
SECTION 8.04. Release of Indenture Trust Estate..............................42
SECTION 8.05. Opinion of Counsel.............................................43
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.01. Supplemental Indentures Without Consent of Noteholders.........44
SECTION 9.02. Supplemental Indentures with Consent of Noteholders............45
SECTION 9.03. Execution of Supplemental Indentures...........................46
SECTION 9.04. Effect of Supplemental Indenture...............................46
SECTION 9.05. Conformity with Trust Indenture Act............................47
SECTION 9.06. Reference in Notes to Supplemental Indentures..................47
ARTICLE X
REDEMPTION OF NOTES
SECTION 10.01. Redemption.....................................................47
SECTION 10.02. Form of Redemption Notice......................................48
SECTION 10.03. Notes Payable on Redemption Date...............................48
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Compliance Certificates and Opinions, etc......................49
SECTION 11.02. Form of Documents Delivered to Indenture Trustee...............51
SECTION 11.03. Acts of Noteholders............................................51
SECTION 11.04. Notices, etc., to Indenture Trustee, Issuer and Rating
Agencies.......................................................52
SECTION 11.05. Notices to Noteholders; Waiver.................................53
SECTION 11.06. Alternate Payment and Notice Provisions........................53
SECTION 11.07. Conflict with Trust Indenture Act..............................53
SECTION 11.08. Effect of Headings and Table of Contents.......................54
SECTION 11.09. Successors and Assigns.........................................54
SECTION 11.10. Separability...................................................54
SECTION 11.11. Benefits of Indenture..........................................54
SECTION 11.12. Legal Holidays.................................................54
SECTION 11.13. Governing Law..................................................54
SECTION 11.14. Counterparts...................................................54
SECTION 11.15. Recording of Indenture.........................................54
SECTION 11.16. Trust Obligations..............................................55
SECTION 11.17. No Petition....................................................55
SECTION 11.18. Inspection.....................................................55
APPENDIX A Definitions and Usage
SCHEDULE A Schedule of Initial Financed Student Loans
SCHEDULE B Schedule of Additional Student Loans
SCHEDULE C Location of Financed Student Loan Files
EXHIBIT A-1 Form of Class ____ Note
EXHIBIT A-2 Form of Class ____ Note
<PAGE>
INDENTURE dated as of ____________, _____,
between MELLON STUDENT LOAN TRUST ____-__, a
Delaware business trust (the "Issuer"), and
_______________, a _________ banking corporation,
as trustee and not in its individual capacity (the
"Indenture Trustee").
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the holders of the Issuer's Floating Rate
Class ____ Asset Backed Notes (the "Class ____ Notes"), the Issuer's Class ____
Asset Backed Notes (the "Class ____ Notes", and together with the Class ____
Notes, the "Notes"):
GRANTING CLAUSE
The Issuer (and, with respect to the Financed Student Loans, the
Eligible Lender Trustee) hereby Grants to the Indenture Trustee at the Closing
Date, as trustee for the benefit of the holders of the Notes, all the Issuer's
right, title and interest in and to the following:
(a) the Financed Student Loans, and all obligations of the Obligors
thereunder including all moneys paid thereunder on or after the Cutoff Date
(or, in the case of Additional Student Loans, on or after the related
Subsequent Cutoff Date);
(b) the Sale and Servicing Agreement, including the right of the
Issuer to cause the Seller to repurchase or the Master Servicer to
purchase, Financed Student Loans from the Issuer under circumstances
described therein and including the Assigned Rights;
(c) each Guarantee Agreement, including the right of the Issuer to
cause the related Guarantor to make Guarantee Payments in respect of the
Financed Student Loans;
(d) all funds on deposit from time to time in the Trust Accounts,
including the Reserve Account Initial Deposit and the Pre-Funded Amount;
and
(e) all present and future claims, demands, causes and choses in
action in respect of any or all of the foregoing and all payments on or
under and all proceeds of every kind and nature whatsoever in respect of
any or all of the foregoing, including all proceeds of the conversion,
voluntary or involuntary, into cash or other liquid property, all cash
proceeds, accounts, accounts receivable, notes, drafts, acceptances,
chattel paper, checks, deposit accounts, insurance proceeds, condemnation
awards, rights to payment of any and every kind and other forms of
obligations and receivables, instruments and other property which at any
time constitute all or part of or are included in the proceeds of any of
the foregoing (collectively, the "Collateral").
The foregoing Grant is made in trust to secure the payment of
principal of and interest on, and any other amounts owing in respect of, the
Notes, equally and ratably without prejudice, priority or distinction, and to
secure compliance with the provisions of this Indenture, all as provided in this
Indenture.
The Indenture Trustee, as Indenture Trustee on behalf of the holders
of the Notes, acknowledges such Grant, accepts the trusts under this Indenture
in accordance with the provisions of this Indenture and agrees to perform its
duties required in this Indenture to the best of its ability to the end that the
interests of the holders of the Notes may be adequately and effectively
protected.
ARTICLE I
DEFINITIONS AND USAGE
SECTION 1.01. DEFINITIONS AND USAGE. Except as otherwise specified
herein or as the context may otherwise require, capitalized terms used but not
defined herein are defined in Appendix A hereto, which also contains rules as to
usage that shall be applicable herein.
SECTION 1.02. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Notes.
"indenture security holder" means a holder of the Notes.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Indenture
Trustee.
"obligor" on the indenture securities means the Issuer and any other
obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by Commission rule
have the meaning assigned to them by such definitions.
ARTICLE II
THE NOTES
SECTION 2.01. FORM. The Class ____ Notes and the Class ____ Notes,
together with the Indenture Trustee's certificate of authentication, shall be in
substantially the forms set forth in Exhibits A-1 and A-2, respectively, with
such appropriate insertions, omissions, substitutions and other variations as
are required or permitted by this Indenture and may have such letters, numbers
or other marks of identification and such legends or endorsements placed thereon
as may, consistently herewith, be determined by the officers executing the
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 Class ____ Notes and the Class ____ Notes set forth in Exhibits A-1 and A-2
are part of the terms of this Indenture.
SECTION 2.02. EXECUTION, AUTHENTICATION AND DELIVERY. The Notes shall
be executed on behalf of the Issuer by any of its Authorized Officers. The
signature of any such Authorized Officer on the Notes may be manual or
facsimile.
Notes bearing the manual or facsimile signature of individuals who
were at any time Authorized Officers of the Issuer shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
The Indenture Trustee shall upon Issuer Order authenticate and deliver
Notes for original issue in an aggregate principal amount of $__________, with
respect to the Class ____ Notes and $___________ with respect to the Class ____
Notes, except as provided in Section 2.05.
Each Note shall be dated the date of its authentication. The Notes
shall be issuable as registered Notes in the minimum denomination of $1,000 and
in integral multiples of $1,000 in excess thereof.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by the Indenture Trustee by the manual signature of one of its
authorized signatories, and such certificate upon any Note shall be conclusive
evidence, and the only evidence, that such Note has been duly authenticated and
delivered hereunder.
SECTION 2.03. TEMPORARY NOTES. Pending the preparation of Definitive
Notes, the Issuer may execute, and upon receipt of an Issuer Order the Indenture
Trustee shall authenticate and deliver, temporary Notes which are printed,
lithographed, typewritten, mimeographed or otherwise produced, of the tenor of
the Definitive Notes in lieu of which they are issued and with such variations
not inconsistent with the terms of this Indenture as the officers executing such
Notes may determine, as evidenced by their execution of such Notes.
If temporary Notes are issued, the Issuer will cause Definitive Notes
to be prepared without unreasonable delay. After the preparation of Definitive
Notes, the temporary Notes shall be exchangeable for Definitive Notes upon
surrender of the temporary Notes at the office or agency of the Issuer to be
maintained as provided in Section 3.02, without charge to the holder of the
Notes. Upon surrender for cancellation of any one or more temporary Notes, the
Issuer shall execute and the Indenture Trustee shall authenticate and deliver in
exchange therefor a like principal amount of Definitive Notes of authorized
denominations. Until so exchanged, the temporary Notes shall in all respects be
entitled to the same benefits under this Indenture as Definitive Notes.
SECTION 2.04. REGISTRATION; REGISTRATION OF TRANSFER AND EXCHANGE. The
Issuer shall cause to be kept a register (the "Note Register") in which, subject
to such reasonable regulations as it may prescribe, the Issuer shall provide for
the registration of Notes and the registration of transfers of Notes. The
Indenture Trustee shall be "Note Registrar" for the purpose of registering Notes
and transfers of Notes as herein provided. Upon any resignation of any Note
Registrar, the Issuer shall promptly appoint a successor or, if it elects not to
make such an appointment, assume the duties of Note Registrar.
If a Person other than the Indenture Trustee is appointed by the
Issuer as Note Registrar, the Issuer will give the Indenture Trustee prompt
written notice of the appointment of such Note Registrar and of the location,
and any change in the location, of the Note Register, and the Indenture Trustee
shall have the right to inspect the Note Register at all reasonable times and to
obtain copies thereof, and the Indenture Trustee shall have the right to rely
upon a certificate executed on behalf of the Note Registrar by an Executive
Officer thereof as to the names and addresses of the holders of the Notes and
the principal amounts and number of such Notes.
Upon surrender for registration of transfer of any Note at the office
or agency of the Issuer to be maintained as provided in Section 3.02, if the
requirements of Section 8-401(1) of the UCC are met, the Issuer shall execute,
and the Indenture Trustee shall authenticate and the holder of the Notes shall
obtain from the Indenture Trustee, in the name of the designated transferee or
transferees, one or more new Notes in any authorized denominations and a like
aggregate principal amount.
At the option of the holder of the Notes, Notes may be exchanged for
other Notes in any authorized denominations, a like class and a like aggregate
principal amount, upon surrender of the Notes to be exchanged at such office or
agency. Whenever any Notes are so surrendered for exchange, if the requirements
of Section 8-401(1) of the UCC are met, the Issuer shall execute, and the
Indenture Trustee shall authenticate and the holder of the Notes shall obtain
from the Indenture Trustee, the Notes which the holder of the Notes 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.
The Issuer initially appoints The Depository Trust Company ("DTC") to
act as depositary (the "Depositary") with respect to the Note(s).
The Issuer initially appoints the Indenture Trustee to act as
custodian with respect to the Notes.
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
holder of the Notes thereof or such holder's attorney duly authorized in
writing, with such signature guaranteed by an "eligible guarantor institution"
meeting the requirements of the Note Registrar, which requirements include
membership or participation in Securities Transfer Agent's Medallion Program
("STAMP") or such other "signature guarantee program" as may be determined by
the Note Registrar in addition to, or in substitution for, STAMP, all in
accordance with the Exchange Act.
No service charge shall be made to a holder of the Notes for any
registration of transfer or exchange of Notes, but the Indenture Trustee may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of Notes, other than exchanges pursuant to Section 2.03 or 9.06 not
involving any transfer.
The preceding provisions of this Section notwithstanding, the Issuer
shall not be required to make and the Note Registrar need not register transfers
or exchanges of Notes selected for redemption or of any Note for a period of 15
days preceding the due date for any payment with respect to the Note.
SECTION 2.05. MUTILATED, DESTROYED, LOST OR STOLEN NOTES. If (i) any
mutilated Note is surrendered to the Indenture Trustee, or the Indenture Trustee
receives evidence to its satisfaction of the destruction, loss or theft of any
Note, and (ii) there is delivered to the Indenture Trustee such security or
indemnity as may be required by it to hold the Issuer and the Indenture Trustee
harmless, then, in the absence of notice to the Issuer, the Note Registrar or
the Indenture Trustee that such Note has been acquired by a bona fide purchaser,
and provided that the requirements of Section 8-405 of the UCC are met, the
Issuer shall execute and upon its request the Indenture Trustee shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Note, a replacement Note; PROVIDED, HOWEVER, that if
any such destroyed, lost or stolen Note, but not a mutilated Note, shall have
become or within 15 days shall be due and payable, or shall have been called for
redemption, instead of issuing a replacement Note, the Issuer may pay such
destroyed, lost or stolen Note when so due or payable or upon the Redemption
Date without surrender thereof. If, after the delivery of such replacement Note
or payment of a destroyed, lost or stolen Note pursuant to the proviso to the
preceding sentence, a bona fide purchaser of the original Note in lieu of which
such replacement Note was issued presents for payment such original Note, the
Issuer and the Indenture Trustee shall be entitled to recover such replacement
Note (or such payment) from the Person to whom it was delivered or any Person
taking such replacement Note from such Person to whom such replacement Note was
delivered or any assignee of such Person, except a bona fide purchaser, and
shall be entitled to recover upon the security or indemnity provided therefor to
the extent of any loss, damage, cost or expense incurred by the Issuer or the
Indenture Trustee in connection therewith.
Upon the issuance of any replacement Note under this Section, the
Issuer may require the payment by the holder of the Notes thereof of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto and any other reasonable expenses (including the fees and
expenses of the Indenture Trustee) connected therewith.
Every replacement Note issued pursuant to this Section in replacement
of any mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Issuer, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Notes.
SECTION 2.06. PERSONS DEEMED OWNER. Prior to due presentment for
registration of transfer of any Note, the Issuer, the Indenture Trustee and any
agent of the Issuer or the Indenture Trustee may treat the Person in whose name
any Note is registered (as of the day of determination) as the owner of such
Note for the purpose of receiving payments of principal of, interest (and any
Noteholders' Interest Index Carryover), if any, on such Note and for all other
purposes whatsoever, whether or not such Note be overdue, and neither the
Issuer, the Indenture Trustee nor any agent of the Issuer or the Indenture
Trustee shall be affected by notice to the contrary.
SECTION 2.07. PAYMENT OF PRINCIPAL AND INTEREST; DEFAULTED INTEREST;
NOTEHOLDERS' INTEREST INDEX CARRYOVER. (a) The Class ____ Notes and the Class
____ Notes shall accrue interest as provided in the forms of the Class ____ Note
and the Class ____ Note set forth in Exhibits A-1 and A-2 respectively, and such
interest shall be payable on each Distribution Date as specified therein,
subject to Section 3.01. Any installment of interest (and any Noteholders'
Interest Index Carryover) or principal, if any, payable on any Note 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 on the Record Date by check mailed
first-class, postage prepaid to such Person's address as it appears on the Note
Register on such Record Date, except that, unless Definitive Notes have been
issued pursuant to Section 2.12, with respect to Notes registered on the Record
Date in the name of the nominee of the Clearing Agency (initially, such nominee
to be Cede & Co.), payment will be made by wire transfer in immediately
available funds to the account designated by such nominee and except for the
final installment of principal payable with respect to such Note on a
Distribution Date or on the applicable Note Final Maturity Date which shall be
payable as provided below. The funds represented by any such checks returned
undelivered shall be held in accordance with Section 3.03.
(b) The principal of each Note shall be payable in installments on
each Distribution Date as provided in the form of the Class ____ Note and the
Class ____ Note set forth in Exhibits A-1 and A-2, respectively. Notwithstanding
the foregoing, the entire unpaid principal amount of the Notes shall be due and
payable, if not previously paid, on the date on which an Event of Default shall
have occurred and be continuing, if the Indenture Trustee or the holders of the
Notes representing not less than a majority of the Outstanding Amount of the
Notes have declared the Notes to be immediately due and payable in the manner
provided in Section 5.02. All principal payments on each class of Notes shall be
made pro rata to the holders of the Notes entitled thereto. The Indenture
Trustee shall notify the Person in whose name a Note is registered at the close
of business on the Record Date preceding the Distribution Date on which the
Issuer expects that the final installment of principal of and interest (and any
Noteholders' Interest Index Carryover for such Notes) on such Note will be paid.
Such notice shall be mailed or transmitted by facsimile prior to such final
Distribution Date and shall specify that such final installment will be payable
only upon presentation and surrender of such Note and shall specify the place
where such Note may be presented and surrendered for payment of such
installment. Notices in connection with redemptions of Notes shall be mailed to
the holders of the Notes as provided in Section 10.02.
(c) If the Issuer defaults in a payment of interest on the Notes, the
Issuer shall pay defaulted interest (plus interest on such defaulted interest to
the extent lawful) at the applicable Note Interest Rate in any lawful manner.
The Issuer may pay such defaulted interest to the persons who are holders of the
Notes 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 holder of the
Notes a notice that states the special record date, the payment date and the
amount of defaulted interest to be paid.
(d) The Noteholders' Interest Index Carryover for each Distribution
Date (including all unpaid Noteholders' Interest Index Carryover for such Notes
for prior Distribution Dates and interest accrued thereon at the applicable Note
Interest Rate for each applicable Interest Period) shall be payable to each
class of such Notes, pro rata based on the amount of Noteholders' Interest Index
Carryover then owing on each class of such Notes, on each Distribution Date
solely to the extent of funds required and available to be distributed to the
holders of the Notes by the Indenture Trustee pursuant to Section 5.05(c)(ix) or
5.06(e) of the Sale and Servicing Agreement. Any Noteholders' Interest Index
Carryover payable on any Distribution Date shall be paid to the Person in whose
name such Note (or one or more Predecessor Notes) is registered on the
applicable Record Date by check mailed first-class postage prepaid to such
Person's address as it appears on the Note Register on such Record Date, except
that, unless Definitive Notes have been issued pursuant to Section 2.12, with
respect to the Notes registered on the Record Date in the name of the nominee of
the Clearing Agency (initially, such nominee to be Cede & Co.), payment will be
made by wire transfer in immediately available funds to the account designated
by such nominee. The funds represented by any such checks returned undelivered
shall be held in accordance with Section 3.03.
SECTION 2.08. CANCELLATION. All Notes surrendered for payment,
registration of transfer, exchange or redemption shall, if surrendered to any
Person other than the Indenture Trustee, be delivered to the Indenture Trustee
and shall be promptly cancelled by the Indenture Trustee. The Issuer may at any
time deliver to the Indenture Trustee for cancellation any Notes previously
authenticated and delivered hereunder which the Issuer may have acquired in any
manner whatsoever, and all Notes so delivered shall be promptly cancelled by the
Indenture Trustee. No Notes shall be authenticated in lieu of or in exchange for
any Notes cancelled as provided in this Section, except as expressly permitted
by this Indenture. All cancelled Notes may be held or disposed of by the
Indenture Trustee in accordance with its standard retention or disposal policy
as in effect at the time, unless the Issuer shall direct by an Issuer Order that
they be returned to it and so long as such Issuer Order is timely and the Notes
have not been previously disposed of by the Indenture Trustee.
SECTION 2.09. RELEASE OF COLLATERAL. Subject to Section 11.01 and the
terms of the Basic Documents, the Indenture Trustee shall release property from
the lien of this Indenture only upon receipt of an Issuer Request accompanied by
an Officers' Certificate of the Issuer, an Opinion of Counsel and Independent
Certificates in accordance with TIA " 314(c) and 314(d)(l) or an Opinion of
Counsel in lieu of such Independent Certificates to the effect that the TIA does
not require any such Independent Certificates.
SECTION 2.10. BOOK-ENTRY NOTES. The Notes, upon original issuance,
will be issued in the form of typewritten Notes representing the Book-Entry
Notes, to be delivered to The Depository Trust Company, the initial Clearing
Agency, by, or on behalf of, the Issuer. Such Notes shall initially be
registered on the Note Register in the name of Cede & Co., the nominee of the
initial Clearing Agency, and no Note Owner will receive a Definitive Note (as
defined below) representing such Note Owner's interest in such Note, except as
provided in Section 2.12. Unless and until definitive, fully registered Notes
(the "Definitive Notes") have been issued to Note Owners pursuant to Section
2.12:
(i) the provisions of this Section shall be in full force and effect;
(ii) the Note Registrar and the Indenture Trustee may deal with the
Clearing Agency for all purposes (including the payment of principal of and
interest and other amounts on the Notes) as the authorized representative
of the Note Owners;
(iii) to the extent that the provisions of this Section conflict with
any other provisions of this Indenture, the provisions of this Section
shall control;
(iv) the rights of Note Owners shall be exercised only through the
Clearing Agency and shall be limited to those established by law and
agreements between such Note Owners and the Clearing Agency and/or the
Clearing Agency Participants pursuant to the Note Depository Agreements.
Unless and until Definitive Notes are issued pursuant to Section 2.12, the
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 the holders of the Notes
evidencing a specified percentage of the Outstanding Amount of the Notes,
the Clearing Agency shall be deemed to represent such percentage only to
the extent that it has received instructions to such effect from Note
Owners and/or Clearing Agency Participants owning or representing,
respectively, such required percentage of the beneficial interest in the
Notes and has delivered such instructions to the Indenture Trustee.
SECTION 2.11. NOTICES TO CLEARING AGENCY. Whenever a notice or other
communication to the holders of the Notes is required under this Indenture,
unless and until Definitive Notes shall have been issued to Note Owners pursuant
to Section 2.12, the Indenture Trustee shall give all such notices and
communications specified herein to be given to the holders of the Notes to the
Clearing Agency.
SECTION 2.12. DEFINITIVE NOTES. If (i) the Administrator advises the
Indenture Trustee in writing that the Clearing Agency is no longer willing or
able to properly discharge its responsibilities with respect to the Notes, and
the Administrator is unable to locate a qualified successor, (ii) the
Administrator at its option advises the Indenture Trustee in writing that it
elects to terminate the book-entry system through the Clearing Agency or (iii)
after the occurrence of an Event of Default, a Master Servicer Default or an
Administrator Default, Note Owners representing beneficial interests aggregating
at least a majority of the Outstanding Amount of the Notes advise the Clearing
Agency (which shall then notify the Indenture Trustee) in writing that the
continuation of a book-entry system through the Clearing Agency is no longer in
the best interests of the Note Owners, then the Indenture Trustee will cause the
Clearing Agency to notify all Note Owners, through the Clearing Agency, of the
occurrence of any such event and of the availability of Definitive Notes to Note
Owners requesting the same. Upon surrender to the Indenture Trustee of the
typewritten Notes representing the Book-Entry Notes by the Clearing Agency,
accompanied by registration instructions, the Issuer shall execute and the
Indenture Trustee shall authenticate the Definitive Notes in accordance with the
instructions of the Clearing Agency. None of the Issuer, the Note Registrar or
the Indenture Trustee shall be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be protected in relying on,
such instructions. Upon the issuance of Definitive Notes, the Indenture Trustee
shall recognize the holders of the Definitive Notes as the holders of the Notes.
ARTICLE III
COVENANTS
SECTION 3.01. PAYMENT TO NOTEHOLDERS. The Issuer will duly and
punctually pay the principal of (subject to the parenthetical in the following
sentence), interest, if any, on and any Noteholders' Interest Index Carryover
(but only to the extent provided in Sections 2.07(d) and 8.02(c)) with respect
to each class of Notes in accordance with the terms of such Notes and this
Indenture. Without limiting the foregoing, subject to Section 8.02(c), the
Issuer will cause to be distributed to the holders of the Class ____ Notes and
to the holders of the Class ____ Notes that portion of the amounts on deposit in
the Trust Accounts on a Distribution Date (other than any Eligible Investments
deposited therein that will mature on the Business Day preceding a subsequent
Distribution Date), to which the holders of the Notes are entitled to receive
pursuant to the Sale and Servicing Agreement. Amounts properly withheld under
the Code by any Person from a payment to any holder of the Notes of interest
(including any Noteholders' Interest Index Carryover) and/or principal shall be
considered as having been paid by the Issuer to such holder of the Notes for all
purposes of this Indenture.
SECTION 3.02. MAINTENANCE OF OFFICE OR AGENCY. The Issuer will
maintain in the Borough of Manhattan, The City of New York, an office or agency
where Notes may be surrendered for registration of transfer or exchange. 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 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 in respect of the Notes.
SECTION 3.03. MONEY FOR PAYMENTS TO BE HELD IN TRUST. As provided in
Section 8.02(a) and (b), all payments of amounts due and payable with respect to
any Notes that are to be made from amounts distributed from the Collection
Account or any other Trust Account pursuant to Section 8.02(c) shall be made on
behalf of the Issuer by the Indenture Trustee or by another Paying Agent, and no
amounts so distributed from the Collection Account for payments of Notes shall
be paid over to the Issuer except as provided in this Section.
On or before the Business Day next preceding each Distribution Date
and Redemption Date, the Issuer shall distribute or cause to be distributed to
the Indenture Trustee (or any other Paying Agent) an aggregate sum sufficient to
pay the amounts then becoming due under the Notes and/or Certificates, such sum
to be held in trust for the benefit of the Persons entitled thereto and (unless
the Paying Agent is the Indenture Trustee) shall promptly notify the Indenture
Trustee of its action or failure so to act.
The Issuer will cause each Paying Agent other than the Indenture
Trustee to execute and deliver to the Indenture Trustee an instrument in which
such Paying Agent shall agree with the Indenture Trustee (and if the Indenture
Trustee acts as Paying Agent, it hereby so agrees), subject to the provisions of
this Section, that such Paying Agent will:
(i) hold all sums held by it for the payment of amounts due with
respect to the Notes in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise disposed
of as herein provided and pay such sums to such Persons as herein provided;
(ii) give the Indenture Trustee notice of any default by the Issuer of
which it has actual knowledge (or any other obligor upon the Notes) in the
making of any payment required to be made with respect to the Notes;
(iii) at any time during the continuance of any such default, upon the
written request of the Indenture Trustee, forthwith pay to the Indenture
Trustee all sums so held in trust by such Paying Agent;
(iv) immediately resign as a Paying Agent and forthwith pay to the
Indenture Trustee all sums held by it in trust for the payment of Notes if
at any time it ceases to meet the standards required to be met by a Paying
Agent at the time of its appointment; and
(v) comply with all requirements of the Code with respect to the
withholding from any payments made by it on any Notes of any applicable
withholding taxes imposed thereon and with respect to any applicable
reporting requirements in connection therewith.
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 holder of the Notes thereof
shall thereafter, as an unsecured general creditor, look only to the Issuer for
payment thereof (but only to the extent of the amounts so paid to the Issuer),
and all liability of the Indenture Trustee or such Paying Agent with respect to
such trust money shall thereupon cease; PROVIDED, HOWEVER, that the Indenture
Trustee or such Paying Agent, before being required to make any such repayment,
shall at the expense and direction of the Issuer cause to be published once, in
a newspaper published in the English language, customarily published on each
Business Day and of general circulation in The City of New York, notice that
such money remains unclaimed and that, after a date specified therein, which
shall not be less than 30 days from the date of such publication, any unclaimed
balance of such money then remaining will be repaid to the Issuer. The Indenture
Trustee shall also adopt and employ, at the expense of the Issuer, any other
reasonable means of notification of such repayment (including mailing notice of
such repayment to the holders of the Notes whose Notes have been called but have
not been surrendered for redemption or whose right to or interest in moneys due
and payable but not claimed is determinable from the records of the Indenture
Trustee or of any Paying Agent, at the last address of record for each such
holder of the Notes).
SECTION 3.04. EXISTENCE. The Issuer will keep in full effect its
existence, rights and franchises as a trust under the laws of the State of New
York (unless it becomes, or any successor Issuer hereunder is or becomes,
organized under the laws of any other State or of the United States of America,
in which case the Issuer will keep in full effect its existence, rights and
franchises under the laws of such other jurisdiction) and will obtain and
preserve its qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Indenture, the Notes, the Collateral and each other
instrument or agreement included in the Indenture Trust Estate.
SECTION 3.05. PROTECTION OF INDENTURE TRUST ESTATE. The Issuer will
from time to time execute and deliver all such supplements and amendments hereto
and all such financing statements, continuation statements, instruments of
further assurance and other instruments, and will take such other action
necessary or advisable to:
(i) maintain or preserve the lien and security interest (and the
priority thereof) of this Indenture or carry out more effectively the
purposes hereof;
(ii) perfect, publish notice of or protect the validity of any Grant
made or to be made by this Indenture;
(iii) enforce any of the Collateral; or
(iv) preserve and defend title to the Indenture Trust Estate and the
rights of the Indenture Trustee and the holders of the Notes in such
Indenture Trust Estate against the claims of all persons and parties.
The Issuer hereby designates the Indenture Trustee its agent and
attorney-in-fact to execute any financing statement, continuation statement or
other instrument required to be executed pursuant to this Section.
SECTION 3.06. OPINIONS AS TO INDENTURE TRUST ESTATE. (a) On the
Closing Date, the Issuer shall furnish to the Indenture Trustee an Opinion of
Counsel either stating that, in the opinion of such counsel, such action has
been taken with respect to the recording and filing of this Indenture, any
indentures supplemental hereto, and any other requisite documents, and with
respect to the execution and filing of any financing statements and continuation
statements, as are necessary to perfect and make effective the lien and security
interest of this Indenture and reciting the details of such action, or stating
that, in the opinion of such counsel, no such action is necessary to make such
lien and security interest effective.
(b) On or before April 30 in each calendar year, beginning in
________, the Issuer shall furnish to the Indenture Trustee an Opinion of
Counsel either stating that, in the opinion of such counsel, such action has
been taken with respect to the recording, filing, re-recording and refiling of
this Indenture, any indentures supplemental hereto and any other requisite
documents and with respect to the execution and filing of any financing
statements and continuation statements as is necessary to maintain the lien and
security interest created by this Indenture and reciting the details of such
action or stating that in the opinion of such counsel no such action is
necessary to maintain such lien and security interest. Such Opinion of Counsel
shall also describe the recording, filing, re-recording and refiling of this
Indenture, any indentures supplemental hereto and any other requisite documents
and the execution and filing of any financing statements and continuation
statements that will, in the opinion of such counsel, be required to maintain
the lien and security interest of this Indenture until April 30 in the following
calendar year.
SECTION 3.07. PERFORMANCE OF OBLIGATIONS; MASTER 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 Sale 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 Officers' Certificate of
the Issuer shall be deemed to be action taken by the Issuer. Initially, the
Issuer has contracted with the Master Servicer and the Administrator to assist
the Issuer in performing its duties under this Indenture.
(c) The Issuer will punctually perform and observe all its obligations
and agreements contained in this Indenture, the other Basic Documents and in the
instruments and agreements included in the Indenture Trust Estate, including
filing or causing to be filed all UCC financing statements and continuation
statements required to be filed by the terms of this Indenture and the Sale 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 or the
holders of at least a majority of the Outstanding Amount of the Notes.
(d) If the Issuer shall have knowledge of the occurrence of a Master
Servicer Default or an Administrator Default under the Sale and Servicing
Agreement, the Issuer shall promptly notify the Indenture Trustee and the Rating
Agencies thereof, and shall specify in such notice the action, if any, the
Issuer is taking with respect to such default. If a Master Servicer Default
shall arise from the failure of the Master Servicer to perform any of its duties
or obligations under the Sale and Servicing Agreement, or an Administrator
Default shall arise from the failure of the Administrator to perform any of its
duties or obligations under the Sale and Servicing Agreement or the
Administration Agreement, as the case may be, with respect to the Financed
Student Loans, the Issuer shall take all reasonable steps available to it to
enforce its rights under the Basic Documents in respect of such failure.
(e) As promptly as possible after the giving of notice of termination
to the Master Servicer of the Master Servicer's rights and powers, or to the
Administrator of the Administrator's rights and powers, pursuant to Section 8.01
of the Sale and Servicing Agreement, the Issuer shall appoint a successor master
servicer (the "Successor Master Servicer"), or a successor administrator (the
"Successor Administrator"), and such Successor Master Servicer or Administrator,
as the case may be, shall accept its appointment by a written assumption in a
form acceptable to the Indenture Trustee. In the event that a Successor Master
Servicer or Administrator has not been appointed and accepted its appointment at
the time when the Master Servicer or Administrator, as the case may be, ceases
to act as Master Servicer or Administrator, as the case may be, the Indenture
Trustee without further action shall automatically be appointed a Successor
Master Servicer or Administrator, as the case may be. The Indenture Trustee may
resign as the Master Servicer or the Administrator by giving written notice of
such resignation to the Issuer and in such event will be released from such
duties and obligations, such release not to be effective until the date a new
master servicer or a new administrator enters into an agreement with the Issuer
as provided below; PROVIDED, HOWEVER, that nothing herein shall require or
permit the Indenture Trustee to act as Master Servicer, or otherwise master
service Financed Student Loans, in violation of the Higher Education Act. Upon
delivery of any such notice to the Issuer, the Issuer shall obtain a new master
servicer or a new administrator as a Successor Master Servicer or Administrator
under the Sale and Servicing Agreement. Any Successor Master Servicer or
Administrator, as the case may be, other than the Indenture Trustee shall (i) be
an established institution (A) that satisfies any requirements of the Higher
Education Act applicable to servicers and (B) whose regular business includes
the servicing or administration of student loans and (ii) enter into a master
servicing agreement or an administration agreement with the Issuer having
substantially the same provisions as the provisions of the Sale and Servicing
Agreement applicable to the predecessor Master Servicer or the provisions of the
Sale and Servicing Agreement and the Administration Agreement applicable to the
Administrator. If within 30 days after the delivery of the notice referred to
above, the Issuer shall not have obtained such a new master servicer or
administrator, as the case may be, the Indenture Trustee may appoint, or may
petition a court of competent jurisdiction to appoint, a Successor Master
Servicer or Administrator; PROVIDED, HOWEVER, that such right to appoint or to
petition for the appointment of any such successor 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. In
connection with any such appointment, the Indenture Trustee may make such
arrangements for the compensation of such successor as it and such successor
shall agree, subject to the limitations set forth below and in the Sale and
Servicing Agreement, and in accordance with Section 8.02 of the Sale and
Servicing Agreement, the Issuer shall enter into an agreement with such
successor for the servicing or administration of the Financed Student Loans
(such agreement to be in form and substance satisfactory to the Indenture
Trustee). If the Indenture Trustee shall succeed as provided herein to the
Master Servicer's duties with respect to Financed Student Loans or the
Administrator's duties with respect to the Issuer and the Financed Student
Loans, as the case may be, it shall do so in its individual capacity and not in
its capacity as Indenture Trustee and, accordingly, the provisions of Article VI
hereof shall be inapplicable to the Indenture Trustee in its duties as the
successor to the Master Servicer or the Administrator, as the case may be, and
the servicing or administration of the Financed Student Loans. In case the
Indenture Trustee shall become successor to the Master Servicer or the
Administrator, as the case may be, under the Sale and Servicing Agreement, the
Indenture Trustee shall be entitled to appoint as Master Servicer or as
Administrator, as the case may be, any one of its affiliates or agents, provided
that such appointment shall not affect or alter in any way the liability of the
Indenture Trustee as a successor for the performance of the duties and
obligations of the Master Servicer or the Administrator in accordance with the
terms hereof.
(f) Upon any termination of the Master Servicer's rights and powers
pursuant to the Sale and Servicing Agreement, or any termination of the
Administrator's rights and powers pursuant to the Sale and Servicing Agreement,
as the case may be, the Issuer shall promptly notify the Indenture Trustee. As
soon as a Successor Master Servicer or a Successor Administrator is appointed,
the Issuer shall notify the Indenture Trustee of such appointment, specifying in
such notice the name and address of such Successor Master Servicer or such
Successor Administrator.
(g) Without derogating from the absolute nature of the assignment
granted to the Indenture Trustee under this Indenture or the rights of the
Indenture Trustee hereunder, the Issuer agrees that it will not, without the
prior written consent of the Indenture Trustee or the holders of at least a
majority in Outstanding Amount of the Notes, amend, modify, waive, supplement,
terminate or surrender, or agree to any amendment, modification, supplement,
termination, waiver or surrender of, the terms of any Collateral or the Basic
Documents, except to the extent otherwise provided therein, or waive timely
performance or observance by the Master Servicer, the Administrator, the Seller,
the Issuer or the Eligible Lender Trustee under the Sale 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 holders of the
Notes, or (ii) reduce the aforesaid percentage of the Notes which are required
to consent to any such amendment, without the consent of the holders of all the
Outstanding Notes. If any such amendment, modification, supplement or waiver
shall be so consented to by the Indenture Trustee or such holders of the Notes,
the Issuer agrees, promptly following a request by the Indenture Trustee to do
so, to execute and deliver, in its own name and at its own expense, such
agreements, instruments, consents and other documents as the Indenture Trustee
may deem necessary or appropriate in the circumstances.
SECTION 3.08. NEGATIVE COVENANTS. So long as any Notes are
Outstanding, the Issuer shall not:
(i) except as expressly permitted by this Indenture or any other Basic
Document, sell, transfer, exchange or otherwise dispose of any of the
properties or assets of the Issuer, including those included in the
Indenture Trust Estate, unless directed to do so by the Indenture Trustee;
(ii) claim any credit on, or make any deduction from the principal or
interest (including any Noteholders' Interest Index Carryover) payable in
respect of, the Notes (other than amounts properly withheld from such
payments under the Code or applicable state law) or assert any claim
against any present or former holder of the Notes by reason of the payment
of the taxes levied or assessed upon any part of the Indenture Trust
Estate; or
(iii) (A) permit the validity or effectiveness of this Indenture to be
impaired, or permit the lien of this Indenture to be amended, hypothecated,
subordinated, terminated or discharged, or permit any Person to be released
from any covenants or obligations with respect to the Notes under this
Indenture except as may be expressly permitted hereby, (B) permit any lien,
charge, excise, claim, security interest, mortgage or other encumbrance
(other than the lien of this Indenture) to be created on or extend to or
otherwise arise upon or burden the Indenture Trust Estate or any part
thereof or any interest therein or the proceeds thereof (other than tax
liens and other liens that arise by operation of law, in each case arising
solely as a result of an action or omission of the related Obligor, and
other than as expressly permitted by the Basic Documents) or (C) permit the
lien of this Indenture not to constitute a valid first priority (other than
with respect to any such tax or other lien) security interest in the
Indenture Trust Estate.
SECTION 3.09. ANNUAL STATEMENT AS TO COMPLIANCE. The Issuer will
deliver to the Indenture Trustee, within 120 days after the end of each fiscal
year of the Issuer (commencing with the fiscal year ________), an Officers'
Certificate of the Issuer stating that:
(i) a review of the activities of the Issuer during such year and of
performance under this Indenture has been made under such Authorized
Officers' supervision; and
(ii) to the best of such Authorized Officers' knowledge, based on such
review, the Issuer has complied with all conditions and covenants under
this Indenture throughout such year, or, if there has been a default in the
compliance of any such condition or covenant, specifying each such default
known to such Authorized Officers and the nature and status thereof.
SECTION 3.10. ISSUER MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS. (a)
The Issuer shall not consolidate or merge with or into any other Person, unless:
(i) the Person (if other than the Issuer) formed by or surviving such
consolidation or merger shall be a Person organized and existing under the
laws of the United States of America or any State and shall expressly
assume, by an indenture supplemental hereto, executed and delivered to the
Indenture Trustee, in form satisfactory to the Indenture Trustee, the due
and punctual payment of the principal of, interest on and any Noteholders'
Interest Index Carryover, if any, with respect to all Notes and the
performance or observance of every agreement and covenant of this Indenture
on the part of the Issuer to be performed or observed, all as provided
herein;
(ii) immediately after giving effect to such transaction, no Default
shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel (and shall
have delivered copies thereof to the Indenture Trustee) to the effect that
such transaction will not have any material adverse Federal or Pennsylvania
state tax consequence to the Issuer, any holder of the Notes or any holder
of the Certificates;
(v) any action as is necessary to maintain the lien and security
interest created by this Indenture shall have been taken; and
(vi) the Issuer shall have delivered to the Indenture Trustee an
Officers' Certificate of the Issuer and an Opinion of Counsel each stating
that such consolidation or merger and such supplemental indenture comply
with this Article III and that all conditions precedent herein provided for
relating to such transaction have been complied with (including any filing
required by the Exchange Act).
(b) The Issuer shall not convey or transfer all or
substantially all its properties or assets, including those included in the
Indenture Trust Estate, to any Person, unless:
(i) the Person that acquires by conveyance or transfer the properties
and assets of the Issuer the conveyance or transfer of which is hereby
restricted shall (A) be a United States citizen or a Person organized and
existing under the laws of the United States of America or any State, (B)
expressly assumes, by an indenture supplemental hereto, executed and
delivered to the Indenture Trustee, in form satisfactory to the Indenture
Trustee, the due and punctual payment of the principal of, interest on and
Noteholders' Interest Index Carryover, if any, with respect to all Notes
and the performance or observance of every agreement and covenant of this
Indenture on the part of the Issuer to be performed or observed, all as
provided herein, (C) expressly agrees by means of such supplemental
indenture that all right, title and interest so conveyed or transferred
shall be subject and subordinate to the rights of holders of the Notes, (D)
unless otherwise provided in such supplemental indenture, expressly agrees
to indemnify, defend and hold harmless the Issuer against and from any
loss, liability or expense arising under or related to this Indenture and
the Notes and (E) expressly agrees by means of such supplemental indenture
that such Person (or if a group of Persons, then one specified Person)
shall make all filings with the Commission (and any other appropriate
Person) required by the Exchange Act in connection with the Notes;
(ii) immediately after giving effect to such transaction, no Default
shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel (and shall
have delivered copies thereof to the Indenture Trustee) to the effect that
such transaction will not have any material adverse Federal or Pennsylvania
state tax consequence to the Issuer, any holder of the Notes or any holder
of the Certificates;
(v) any action as is necessary to maintain the lien and security
interest created by this Indenture shall have been taken; and
(vi) the Issuer shall have delivered to the Indenture Trustee an
Officers' Certificate of the Issuer and an Opinion of Counsel each stating
that such conveyance or transfer and such supplemental indenture comply
with this Article III and that all conditions precedent herein provided for
relating to such transaction have been complied with (including any filing
required by the Exchange Act).
SECTION 3.11. SUCCESSOR OR TRANSFEREE. (a) Upon any consolidation or
merger of the Issuer in accordance with Section 3.10(a), the Person formed by or
surviving such consolidation or merger (if other than the Issuer) shall succeed
to, and be substituted for, and may exercise every right and power of, the
Issuer under this Indenture with the same effect as if such Person had been
named as the Issuer herein.
(b) Upon a conveyance or transfer of all the assets and properties of
the Issuer pursuant to Section 3.10(b), Mellon Student Loan Trust ____-__ 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 Mellon Student Loan Trust ____-__ is to be so released.
SECTION 3.12. NO OTHER BUSINESS. The Issuer shall not engage in any
business other than financing, purchasing, owning, selling and managing the
Financed Student Loans and making Additional Fundings in the manner contemplated
by this Indenture and the other Basic Documents and activities incidental
thereto.
SECTION 3.13. NO BORROWING. The Issuer shall not issue, incur, assume,
guarantee or otherwise become liable, directly or indirectly, for any
indebtedness except for the Notes.
SECTION 3.14. OBLIGATIONS OF MASTER SERVICER AND ADMINISTRATOR. The
Issuer shall cause the Master Servicer to comply with Sections 4.08(a), 4.09,
4.10 and 4.11 of the Sale and Servicing Agreement and the Administrator to
comply with Sections 4.08(b) and (c), 4.09, 4.10 and 5.07 thereof.
SECTION 3.15. GUARANTEES, LOANS, ADVANCES AND OTHER LIABILITIES.
Except as contemplated by the Sale and Servicing Agreement or this Indenture,
the Issuer shall not make any loan or advance or credit to, or guarantee
(directly or indirectly or by an instrument having the effect of assuring
another's payment or performance on any obligation or capability of so doing or
otherwise), endorse or otherwise become contingently liable, directly or
indirectly, in connection with the obligations, stocks or dividends of, or own,
purchase, repurchase or acquire (or agree contingently to do so) any stock,
obligations, assets or securities of, or any other interest in, or make any
capital contribution to, any other Person.
SECTION 3.16. CAPITAL EXPENDITURES. The Issuer shall not make any
expenditure (by long-term or operating lease or otherwise) for capital assets
(either realty or personalty).
SECTION 3.17. RESTRICTED PAYMENTS. The Issuer shall not, directly or
indirectly, (i) pay any dividend or make any distribution (by reduction of
capital or otherwise), whether in cash, property, securities or a combination
thereof, to the Eligible Lender Trustee or any owner of a beneficial interest in
the Issuer or otherwise with respect to any ownership or equity interest or
security in or of the Issuer or to the Master Servicer or the Administrator,
(ii) redeem, purchase, retire or otherwise acquire for value any such ownership
or equity interest or security or (iii) set aside or otherwise segregate any
amounts for any such purpose; PROVIDED, HOWEVER, that the Issuer may make, or
cause to be made, distributions to the Master Servicer, the Eligible Lender
Trustee, the Indenture Trustee, the holders of the Certificates, the holders of
the Notes, the Administrator and the Seller as contemplated by, and to the
extent funds are available for such purpose under, the Sale and Servicing
Agreement. The Issuer will not, directly or indirectly, make payments to or
distributions from the Collection Account except in accordance with this
Indenture and the other Basic Documents.
SECTION 3.18. NOTICE OF EVENTS OF DEFAULT. The Issuer shall give the
Indenture Trustee and the Rating Agencies prompt written notice of each Event of
Default hereunder and each default on the part of the Seller of its obligations
under the Sale and Servicing Agreement, or the Master Servicer of its
obligations under the Sale and Servicing Agreement or the Administrator of its
obligations under the Sale and Servicing Agreement or the Administration
Agreement. In addition, the Issuer shall deliver to the Indenture Trustee,
within five days after the occurrence thereof, written notice in the form of an
Officers' Certificate of the Issuer of any event which with the giving of notice
and the lapse of time would become an Event of Default under Section 5.01(iii),
its status and what action the Issuer is taking or proposes to take with 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 4.01. SATISFACTION AND DISCHARGE OF INDENTURE. This Indenture
shall cease to be of further effect with respect to the Notes except as to (i)
rights of registration of transfer and exchange, (ii) substitution of mutilated,
destroyed, lost or stolen Notes, (iii) rights of holders of the Notes to receive
payments of principal thereof and interest (including any Noteholders' Interest
Index Carryover) thereon, (iv) Sections 3.03, 3.04, 3.05, 3.08, 3.10, 3.12 and
3.13, (v) the rights, obligations and immunities of the Indenture Trustee
hereunder (including the rights of the Indenture Trustee under Section 6.07 and
the obligations of the Indenture Trustee under Section 4.02) and (vi) the rights
of holders of the Notes as beneficiaries hereof with respect to the property so
deposited with the Indenture Trustee payable to all or any of them, and the
Indenture Trustee, on demand of and at the expense of the Issuer, shall execute
proper instruments acknowledging satisfaction and discharge of this Indenture
with respect to the Notes, when:
(A) either
(1) all Notes theretofore authenticated and delivered (other than
(i) Notes that have been destroyed, lost or stolen and that have been
replaced or paid as provided in Section 2.05 and (ii) Notes for whose
payment money has theretofore been deposited in trust or segregated
and held in trust by the Issuer and thereafter repaid to the Issuer or
discharged from such trust, as provided in Section 3.03) have been
delivered to the Indenture Trustee for cancellation; or
(2) all Notes not theretofore delivered to the Indenture Trustee
for cancellation
(i) have become due and payable,
(ii) will become due and payable at the Class ____ Final
Maturity or the Class ____ Final Maturity Date, as the case may
be, within one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Indenture Trustee for the giving
of notice of redemption by the Indenture Trustee in the name, and
at the expense, of the Issuer,
and the Issuer, in the case of (i), (ii) or (iii) above, has
irrevocably deposited or caused to be irrevocably deposited with the
Indenture Trustee cash or direct obligations of or obligations
guaranteed by the United States of America (which will mature prior to
the date such amounts are payable), in trust for such purpose, in an
amount sufficient to pay and discharge the entire indebtedness on such
Notes not theretofore delivered to the Indenture Trustee for
cancellation when due to the Class ____ Final Maturity Date or the
Class ____ Final Maturity Date, as the case may be;
(B) the Issuer has paid or caused to be paid all other sums payable
hereunder by the Issuer; and
(C) the Issuer has delivered to the Indenture Trustee an Officers'
Certificate of the Issuer, an Opinion of Counsel and (if required by the
TIA or the Indenture Trustee) an Independent Certificate from a firm of
certified public accountants, each meeting the applicable requirements of
Section 11.01(a) and, subject to Section 11.02, each stating that all
conditions precedent herein provided for relating to the satisfaction and
discharge of this Indenture have been complied with.
SECTION 4.02. APPLICATION OF TRUST MONEY. All moneys deposited with
the Indenture Trustee pursuant to Section 4.01 hereof shall be held in trust and
applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Paying Agent, as the
Indenture Trustee may determine, to the holders of the particular Notes for the
payment or redemption of which such moneys have been deposited with the
Indenture Trustee, of all sums due and to become due thereon for principal and
interest (including any Noteholders' Interest Index Carryover); but such moneys
need not be segregated from other funds except to the extent required herein or
in the Sale and Servicing Agreement or required by law.
SECTION 4.03. REPAYMENT OF MONEYS HELD BY PAYING AGENT. In connection
with the satisfaction and discharge of this Indenture with respect to the Notes,
all moneys then held by any Paying Agent other than the Indenture Trustee under
the provisions of this Indenture with respect to such Notes shall, upon demand
of the Issuer, be paid to the Indenture Trustee to be held and applied according
to Section 3.03 and thereupon such Paying Agent shall be released from all
further liability with respect to such moneys.
SECTION 4.04. AUCTION OF FINANCED STUDENT LOANS. Any Financed Student
Loans remaining in the Trust as of the end of the Collection Period immediately
preceding the ___________, ____ Distribution Date will be offered for sale by
the Indenture Trustee. Mellon Bank, N.A., its affiliates and unrelated third
parties may offer bids to purchase such Financed Student Loans on such
Distribution Date; provided, however, that Mellon Bank, N.A., and its affiliates
may not bid more than an amount determined by Mellon Bank, N.A., in good faith
to be equal to the fair market value of such Financed Student Loans as of the
end of the Collection Period immediately preceding such Distribution Date. If at
least two bids are received, the Indenture Trustee will solicit and resolicit
new bids from all participating bidders until only one bid remains or the
remaining bidders decline to resubmit bids. The Indenture Trustee shall accept
the highest of such remaining bids if it is equal to or in excess of the Minimum
Purchase Amount as of the end of the Collection Period immediately preceding
such Distribution Date. If at least two bids are not received or the highest bid
after the resolicitation process is completed is not equal to or in excess of
the Minimum Purchase Amount, the Indenture Trustee will not consummate such
sale. In connection with the determination of the Minimum Purchase Amount, the
Indenture Trustee may consult, and, at the direction of the Seller, shall
consult, with a financial advisor (which may be the Administrator) to determine
if the fair market value of the Financed Student Loans has been offered. The
proceeds of any such sale will be applied in the order of priority set forth in
Section 5.04(b). 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. In addition, notwithstanding
anything herein to the contrary, the Indenture Trustee's rights hereunder to
sell the Financed Student Loans shall be subject to the provisions of Section
10.06 of the Sale and Servicing Agreement.
ARTICLE V
REMEDIES
SECTION 5.01. EVENTS OF DEFAULT. "Event of Default", wherever used
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(i) default in the payment of any interest (including, subject to the
limitations of Sections 2.07(d) and 8.02(c), any Noteholders' Interest
Index Carryover) on any Note when the same becomes due and payable, and
such default shall continue for a period of five days; or
(ii) default in the payment of the principal of any Note when the same
becomes due and payable; or
(iii) default in the observance or performance of any covenant or
agreement of the Issuer made in this Indenture (other than a covenant or
agreement, a default in the observance or performance of which is elsewhere
in this Section specifically dealt with), or any representation or warranty
of the Issuer made in this Indenture or in any certificate or other writing
delivered pursuant hereto or in connection herewith proving to have been
incorrect in any material respect as of the time when the same shall have
been made, and such default shall continue or not be cured, or the
circumstance or condition in respect of which such misrepresentation or
warranty was incorrect shall not have been eliminated or otherwise cured,
for a period of 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 holders of at least 25% of the Outstanding
Amount of the Notes, a written notice specifying such default or incorrect
representation or warranty and requiring it to be remedied and stating that
such notice is a notice of Default hereunder; 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 Federal or state bankruptcy, insolvency or other similar law now
or hereafter in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Issuer or for
any substantial part of the Indenture Trust Estate, or ordering the
winding-up or liquidation of the Issuer's affairs, and such decree or order
shall remain unstayed and in effect for a period of 60 consecutive days; or
(v) the commencement by the Issuer of a voluntary case under any
applicable Federal or state bankruptcy, insolvency or other similar law now
or hereafter in effect, or the consent by the Issuer to the entry of an
order for relief in an involuntary case under any such law, or the consent
by the Issuer to the appointment or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official
of the Issuer or for any substantial part of the Indenture Trust Estate, or
the making by the Issuer of any general assignment for the benefit of
creditors, or the failure by the Issuer generally to pay its debts as such
debts become due, or the taking of action by the Issuer in furtherance of
any of the foregoing.
SECTION 5.02. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT. If
an Event of Default should occur and be continuing, then and in every such case
the Indenture Trustee or the holders of the Notes representing not less than a
majority of the Outstanding Amount of the Notes may declare all the Notes to be
immediately due and payable, by a notice in writing to the Issuer (and to the
Indenture Trustee if given by holders of the Notes), and upon any such
declaration the unpaid principal amount of such Notes, together with accrued and
unpaid interest thereon through the date of acceleration, shall become
immediately due and payable.
At any time after such declaration of acceleration of maturity has
been made and before a judgment or decree for payment of the money due has been
obtained by the Indenture Trustee as hereinafter in this Article V provided, the
holders of the Notes representing a majority of the Outstanding Amount of the
Notes, by written notice to the Issuer and the Indenture Trustee, may rescind
and annul such declaration and its consequences if:
(i) the Issuer has paid or deposited with the Indenture Trustee a sum
sufficient to pay:
(A) all payments of principal of and interest on all Notes and
all other amounts that would then be due hereunder or upon such Notes
if the Event of Default giving rise to such acceleration had not
occurred; and
(B) all sums paid or advanced by the Indenture Trustee hereunder
and the reasonable compensation, expenses, disbursements and advances
of the Indenture Trustee and its agents and counsel; and
(ii) all Events of Default, other than the nonpayment of the principal
of the Notes that has become due solely by such acceleration, have been
cured or waived as provided in Section 5.12.
No such rescission shall affect any subsequent default or impair any
right consequent thereto.
SECTION 5.03. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
INDENTURE TRUSTEE. (a) The Issuer covenants that if (i) default is made in the
payment of any interest (including, subject to the limitations of Sections
2.07(d) and 8.02(c), any Noteholders' Interest Index Carryover) on any Note when
the same becomes due and payable, and such default continues for a period of
five days, or (ii) default is made in the payment of the principal of or any
installment of the principal of any Note when the same becomes due and payable,
the Issuer will, upon demand of the Indenture Trustee, pay to it, for the
benefit of the holders of the Notes, the whole amount then due and payable on
such Notes for principal and interest (and any Noteholders' Interest Index
Carryover), with interest upon the overdue principal, and, to the extent payment
at such rate of interest shall be legally enforceable, upon overdue installments
of interest (and any Noteholders' Interest Index Carryover), at the rate
specified in Section 2.07 and in addition thereto such further amount as shall
be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Indenture
Trustee and its agents and counsel.
(b) In case the Issuer shall fail forthwith to pay such amounts upon
such demand, the Indenture Trustee, in its own name and as trustee of an express
trust, may institute a Proceeding for the collection of the sums so due and
unpaid, and may prosecute such Proceeding to judgment or final decree, and may
enforce the same against the Issuer or other obligor upon such Notes and collect
in the manner provided by law out of the property of the Issuer or other obligor
upon such Notes, wherever situated, the moneys adjudged or decreed to be
payable.
(c) If an Event of Default occurs and is continuing, the Indenture
Trustee may, as more particularly provided in Section 5.04, in its discretion,
proceed to protect and enforce its rights and the rights of the holders of the
Notes, by such appropriate Proceedings as the Indenture Trustee shall deem most
effective to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy or
legal or equitable right vested in the Indenture Trustee by this Indenture or by
law.
(d) In case there shall be pending, relative to the Issuer or any
other obligor upon the Notes or any Person having or claiming an ownership
interest in the Indenture Trust Estate, Proceedings under Title 11 of the United
States Code or any other applicable Federal or state bankruptcy, insolvency or
other similar law, or in case a receiver, assignee or trustee in bankruptcy or
reorganization, liquidator, sequestrator or similar official shall have been
appointed for or taken possession of the Issuer or its property or such other
obligor or Person, or in case of any other comparable judicial Proceedings
relative to the Issuer or other obligor upon the Notes, or to the creditors or
property of the Issuer or such other obligor, the Indenture Trustee,
irrespective of whether the principal of any Notes shall then be due and payable
as therein expressed or by declaration or otherwise and irrespective of whether
the Indenture Trustee shall have made any demand pursuant to the provisions of
this Section, shall be entitled and empowered, by intervention in such
proceedings or otherwise:
(i) to file and prove a claim or claims for the whole amount of
principal and interest (including any Noteholders' Interest Index
Carryover) owing and unpaid in respect of the Notes and to file such other
papers or documents as may be necessary or advisable in order to have the
claims of the Indenture Trustee (including any claim for reasonable
compensation to the Indenture Trustee and each predecessor Indenture
Trustee, and their respective agents, attorneys and counsel, and for
reimbursement of all expenses and liabilities incurred, and all advances
made, by the Indenture Trustee and each predecessor Indenture Trustee,
except as a result of negligence or bad faith) and of the holders of the
Notes allowed in such Proceedings;
(ii) unless prohibited by applicable law and regulations, to vote on
behalf of the holders of the Notes 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 holders of the Notes 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 holders of the Notes 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 holders of the Notes 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 holders of the
Notes, to pay to the Indenture Trustee such amounts as shall be sufficient to
cover reasonable compensation to the Indenture Trustee, each predecessor
Indenture Trustee and their respective agents, attorneys and counsel, and all
other expenses and liabilities incurred, and all advances made, by the Indenture
Trustee and each predecessor Indenture Trustee except as a result of negligence
or bad faith.
(e) Nothing herein contained shall be deemed to authorize the
Indenture Trustee to authorize or consent to or vote for or accept or adopt on
behalf of any holder of the Notes any plan of reorganization, arrangement,
adjustment or composition affecting the Notes or the rights of any holder of the
Notes thereof or to authorize the Indenture Trustee to vote in respect of the
claim of any holder of the Notes in any such proceeding except, as aforesaid, to
vote for the election of a trustee in bankruptcy or similar Person.
(f) All rights of action and of asserting claims under this Indenture,
or under any of the Notes, may be enforced by the Indenture Trustee without the
possession of any of the Notes or the production thereof in any trial or other
Proceedings relative thereto, and any such action or Proceedings instituted by
the Indenture Trustee shall be brought in its own name as trustee of an express
trust, and any recovery of judgment, subject to the payment of the expenses,
disbursements and compensation of the Indenture Trustee, each predecessor
Indenture Trustee and their respective agents and attorneys, shall be for the
ratable benefit of the holders of the Notes.
(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 holders of the Notes, and it shall not be necessary to
make any holder of the Notes a party to any such Proceedings.
SECTION 5.04. REMEDIES; PRIORITIES. (a) If an Event of Default shall
have occurred and be continuing, the Indenture Trustee may do one or more of the
following (subject to Section 5.05):
(i) institute Proceedings in its own name and as trustee of an express
trust for the collection of all amounts then payable on the Notes or under
this Indenture with respect thereto, whether by declaration or otherwise,
enforce any judgment obtained, and collect from the Issuer and any other
obligor upon such Notes moneys adjudged due;
(ii) institute Proceedings from time to time for the complete or
partial foreclosure of this Indenture with respect to the Indenture Trust
Estate;
(iii) exercise any remedies of a secured party under the UCC and take
any other appropriate action to protect and enforce the rights and remedies
of the Indenture Trustee and the holders of the Notes; and
(iv) sell the Indenture Trust Estate or any portion thereof or rights
or interest therein, at one or more public or private sales called and
conducted in any manner permitted by law;
PROVIDED, HOWEVER, that the Indenture Trustee may not sell or otherwise
liquidate the Indenture Trust Estate following an Event of Default, other than
an Event of Default described in Section 5.01(i) or (ii), unless (i) the holders
of all outstanding Notes consent to such sale, (ii) the proceeds of such sale
are sufficient to pay in full the principal of and the accrued interest on the
outstanding Notes at the date of such sale or (iii) the Indenture Trustee
determines that the collections on the Financed Student Loans 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 Notes then outstanding; provided,
further, that the Indenture Trustee may not sell or otherwise liquidate the
Trust Estate following an Event of Default, other than an Event of Default
described in Section 5.01(i) or (ii) unless (i) the proceeds of the sale or
liquidation of the Trust Estate distributable to the holders of the Certificates
are sufficient to pay to the holders of the Certificates the outstanding
principal balance of the Certificates plus accrued and unpaid return thereon or
(ii) after receipt of notice from the Eligible Lender Trustee that the proceeds
of such sale or liquidation distributable to the holders of the Certificates
would not be sufficient to pay to the holders of the Certificates the
outstanding principal balance of the Certificates plus accrued and unpaid return
thereon, the holders of the Certificates of at least a majority of the
outstanding principal balance of the Certificates consent thereto. In addition,
notwithstanding anything herein to the contrary, the Indenture Trustee's rights
hereunder to sell the Financed Student Loans shall be subject to the provisions
of Section 10.06 of the Sale and Servicing Agreement.
(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 6.07;
SECOND: to the Master Servicer for due and unpaid Master Servicing
Fees;
THIRD: to the holders of the Notes for amounts due and unpaid on the
Notes for interest, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes for interest;
FOURTH: to the holders of the Notes for amounts due and unpaid on the
Notes for principal, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes for principal;
FIFTH: to the Issuer for distribution of principal and interest due
and unpaid to the holders of the Certificates;
SIXTH: [Reserved];
SEVENTH: to the Master Servicer, for any unpaid Excess Servicing Fees;
EIGHTH: to the holders of the Notes for any unpaid Noteholders'
Interest Index Carryover, ratably, without preference or priority of any
kind, according to the amount of Noteholders' Interest Index Carryover
attributable to each Note;
NINTH: to the Issuer for distribution to the holders of the
Certificates for any unpaid Certificateholders' Interest Index Carryover;
and
TENTH: to the Issuer, for distribution in accordance with the terms of
the Sale and Servicing Agreement.
The Indenture Trustee may fix a record date and payment date for any
payment to the holders of the Notes pursuant to this Section. At least 15 days
before such record date, the Issuer shall mail to each holder of the Notes and
the Indenture Trustee a notice that states the record date, the payment date and
the amount to be paid.
SECTION 5.05. OPTIONAL PRESERVATION OF THE FINANCED STUDENT LOANS. If
the Notes have been declared to be due and payable under Section 5.02 following
an Event of Default and such declaration and its consequences have not been
rescinded and annulled, the Indenture Trustee may, but need not, elect to
maintain possession of the Indenture Trust Estate. It is the desire of the
parties hereto and the holders of the Notes that there be at all times
sufficient funds for the payment of principal of and interest (including any
Noteholders' Interest Index Carryover) 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.
SECTION 5.06. LIMITATION OF SUITS. No holder of the Notes 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 holder of the Notes has previously given written notice to
the Indenture Trustee of a continuing Event of Default;
(ii) the holders of not less than 25% of the Outstanding Amount of the
Notes have made written request to the Indenture Trustee to institute such
Proceeding in respect of such Event of Default in its own name as Indenture
Trustee hereunder;
(iii) such holder of the Notes 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 holders of a
majority of the Outstanding Amount of the Notes;
it being understood and intended that no one or more holders of the Notes 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 holders of the Notes or to obtain or to seek to obtain priority or
preference over any other holders of the Notes 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 holders of the
Notes, each representing less than a majority of the Outstanding Amount of the
Notes, the Indenture Trustee in its sole discretion may determine what action,
if any, shall be taken, notwithstanding any other provisions of this Indenture.
SECTION 5.07. UNCONDITIONAL RIGHTS OF NOTEHOLDERS TO RECEIVE PRINCIPAL
AND INTEREST. Notwithstanding any other provisions in this Indenture, any holder
of the Notes shall have the right, which is absolute and unconditional, to
receive payment of the principal of and interest, if any, on such Note on or
after the respective due dates thereof expressed in such Note or in this
Indenture (or, in the case of redemption, on or after the Redemption Date) and
to institute suit for the enforcement of any such payment, and such right shall
not be impaired without the consent of such holder of the Notes.
SECTION 5.08. RESTORATION OF RIGHTS AND REMEDIES. If the Indenture
Trustee or any holder of the Notes 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 holder of the Notes, then and in every such case the Issuer,
the Indenture Trustee and the holders of the Notes 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 holders of the Notes shall continue as though no such
Proceeding had been instituted.
SECTION 5.09. RIGHTS AND REMEDIES CUMULATIVE. No right or remedy
herein conferred upon or reserved to the Indenture Trustee or to the holders of
the Notes 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 holder of the Notes 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 holders of
the Notes may be exercised from time to time, and as often as may be deemed
expedient, by the Indenture Trustee or by the holders of the Notes, as the case
may be.
SECTION 5.11. CONTROL BY NOTEHOLDERS. The holders of a majority of the
Outstanding Amount of the Notes shall have the right to direct the time, method
and place of conducting any Proceeding for any remedy available to the Indenture
Trustee with respect to the Notes or exercising any trust or power conferred on
the Indenture Trustee; PROVIDED that
(i) such direction shall not be in conflict with any rule of law or
with this Indenture;
(ii) subject to the express terms of Section 5.04, any direction to
the Indenture Trustee to sell or liquidate the Indenture Trust Estate shall
be by the holders of not less than 100% of the Outstanding Amount of the
Notes;
(iii) if the conditions set forth in Section 5.05 have been satisfied
and the Indenture Trustee elects to retain the Indenture Trust Estate
pursuant to such Section, then any direction to the Indenture Trustee by
holders of less than 100% of the Outstanding Amount of the Notes to sell or
liquidate the Indenture Trust Estate shall be of no force and effect; and
(iv) the Indenture Trustee may take any other action deemed proper by
the Indenture Trustee that is not inconsistent with such direction;
PROVIDED, HOWEVER, that, subject to Section 6.01, the Indenture Trustee need not
take any action that it determines might involve it in liability or might
materially adversely affect the rights of (i) any holders of the Notes not
consenting to such action.
SECTION 5.12. WAIVER OF PAST DEFAULTS. Prior to the time a judgment or
decree for payment of money due has been obtained as described in Section 5.02,
the holders of not less than a majority of the Outstanding Amount of the Notes
may waive any past Default and its consequences except a Default (a) in payment
when due of principal of or interest (including, subject to the limitations of
Sections 2.07(d) and 8.02(c), any Noteholders' Interest Index Carryover) on any
of the Notes or (b) in respect of a covenant or provision hereof which cannot be
modified or amended without the consent of each holder of the Notes. In the case
of any such waiver, the Issuer, the Indenture Trustee and the holders of the
Notes shall be restored to their former positions and rights hereunder,
respectively; but no such waiver shall extend to any subsequent or other Default
or impair any right consequent thereto.
Upon any such waiver, such Default shall cease to exist and be deemed
to have been cured and not to have occurred for every purpose of this Indenture;
but no such waiver shall extend to any subsequent or other Default or impair any
right consequent thereto.
SECTION 5.13. UNDERTAKING FOR COSTS. All parties to this Indenture
agree, and each holder of the Notes 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 holder of the Notes, or group
of holders of the Notes, in each case holding in the aggregate more than 10% of
the Outstanding Amount of the Notes or (c) any suit instituted by any holder of
the Notes for the enforcement of the payment of principal of or interest
(including any Noteholders' Interest Index Carryover) on any Note on or after
the respective due dates expressed in such Note and in this Indenture (or, in
the case of redemption, on or after the Redemption Date).
SECTION 5.14. WAIVER OF STAY OR EXTENSION LAWS. The Issuer covenants
(to the extent that it may lawfully do so) that it will not at any time insist
upon, or plead or in any manner whatsoever, claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, that may affect the covenants or the performance of this
Indenture; and the Issuer (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Indenture Trustee, but will suffer and permit the execution of every such
power as though no such law had been enacted.
SECTION 5.15. ACTION ON NOTES. The Indenture Trustee's right to seek
and recover judgment on the Notes or under this Indenture shall not be affected
by the seeking, obtaining or application of any other relief under or with
respect to this Indenture. Neither the lien of this Indenture nor any rights or
remedies of the Indenture Trustee or the holders of the Notes shall be impaired
by the recovery of any judgment by the Indenture Trustee against the Issuer or
by the levy of any execution under such judgment upon any portion of the
Indenture Trust Estate or upon any of the assets of the Issuer. Any money or
property collected by the Indenture Trustee shall be applied in accordance with
Section 5.04(b).
SECTION 5.16. PERFORMANCE AND ENFORCEMENT OF CERTAIN OBLIGATIONS. (a)
Promptly following a request from the Indenture Trustee to do so and at the
Administrator's expense, the Issuer shall take all such lawful action as the
Indenture Trustee may request to compel or secure the performance and observance
by the Seller, the Administrator and the Master Servicer, as applicable, of each
of their obligations to the Issuer under or in connection with the Sale 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 Sale 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 Seller, the Administrator or the Master Servicer thereunder and the
institution of legal or administrative actions or proceedings to compel or
secure performance by the Seller, the Administrator or the Master Servicer of
each of their obligations under the Sale 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
or by telephone (confirmed in writing promptly thereafter)) of the holders of
66-2/3% of the Outstanding Amount of the Notes shall, exercise all rights,
remedies, powers, privileges and claims of the Issuer against the Seller, the
Administrator or the Master Servicer under or in connection with the Sale 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
Seller, the Administrator or the Master Servicer of each of their obligations to
the Issuer thereunder and to give any consent, request, notice, direction,
approval, extension or waiver under the Sale and Servicing Agreement (and the
Administration Agreement) and any right of the Issuer to take such action shall
be suspended.
ARTICLE VI
THE INDENTURE TRUSTEE
SECTION 6.01. DUTIES OF INDENTURE TRUSTEE. (a) If an Event of Default
has occurred and is continuing, the Indenture Trustee shall exercise the rights
and powers vested in it by this Indenture and use the same degree of care and
skill in their exercise as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Indenture Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture against the
Indenture Trustee; and
(ii) in the absence of bad faith on its part, the Indenture Trustee
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Indenture Trustee and conforming to the
requirements of this Indenture; PROVIDED, HOWEVER, that the Indenture
Trustee shall examine 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 negligent failure to act or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of this
Section;
(ii) the Indenture Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer unless it is proved
that the Indenture Trustee was negligent in ascertaining the pertinent
facts; and
(iii) the Indenture Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to 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
6.01.
(e) The Indenture Trustee shall not be liable for interest on any
money received by it except as the Indenture Trustee may agree in writing with
the Issuer.
(f) Money held in trust by the Indenture Trustee need not be
segregated from other funds except to the extent required by law or the terms of
this Indenture or the Sale 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.
(h) Except as expressly provided in the Basic Documents, the Indenture
Trustee shall have no obligation to administer, service or collect the Financed
Student Loans or to maintain, monitor or otherwise supervise the administration,
servicing or collection of the Financed Student Loans.
(i) In the event that the Indenture Trustee is the Paying Agent or the
Note Registrar, the rights and protections afforded to the Indenture Trustee
pursuant to this Indenture shall also be afforded to the Indenture Trustee in
its capacity as Paying Agent or Note Registrar.
(j) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Indenture Trustee
shall be subject to the provisions of this Section 6.01.
(k) Notwithstanding any other provision in this Indenture or the other
Basic Documents, nothing in this Indenture or the other Basic Documents shall be
construed to limit the legal responsibility of the Indenture Trustee to the U.S.
Secretary of Education or a Guarantor for any violations of statutory or
regulatory requirements that may occur with respect to loans held by the
Indenture Trustee pursuant to, or to otherwise comply with their obligations
under, the Higher Education Act or implementing regulations, it being expressly
understood that the Indenture Trustee has no obligation or duty pursuant to this
Section except in the event of Foreclosure or pursuant to Section 8.02 of the
Sale and Servicing Agreement as a successor Master Servicer.
SECTION 6.02. RIGHTS OF INDENTURE TRUSTEE. (a) The Indenture Trustee
may rely on any document believed by it to be genuine and to have been signed or
presented by the proper Person. The Indenture Trustee need not investigate any
fact or matter stated in such document.
(b) Before the Indenture Trustee acts or refrains from acting, it may
require an Officers' Certificate of the Issuer or an Opinion of Counsel. The
Indenture Trustee shall not be liable for any action it takes or omits to take
in good faith in reliance on such Officers' 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 misconduct or negligence on the part of, or for the
supervision of, any such agent, attorney, custodian or nominee appointed with
due care by it hereunder.
(d) The Indenture Trustee shall not be liable for any action it takes
or omits to take in good faith which it believes to be authorized or within its
rights or powers; PROVIDED, HOWEVER, that the Indenture Trustee's conduct does
not constitute willful misconduct, negligence or bad faith.
(e) The Indenture Trustee may consult with counsel, and the advice or
opinion of counsel with respect to legal matters relating to this Indenture and
the Notes shall be full and complete authorization and protection from liability
in respect to any action taken, omitted or suffered by it hereunder in good
faith and in accordance with the advice or opinion of such counsel.
(f) In the event that the Person acting as Indenture Trustee is also
acting as securities intermediary all the rights, powers, immunities and
indemnities afforded to the Indenture Trustee under the Basic Documents shall
also be afforded to the securities intermediary.
SECTION 6.03. INDIVIDUAL RIGHTS OF INDENTURE TRUSTEE. The Indenture
Trustee in its individual or any other capacity may become the owner or pledgee
of Notes and may otherwise deal with the Issuer or its Affiliates with the same
rights it would have if it were not Indenture Trustee. Any Paying Agent, Note
Registrar, co-registrar or co-paying agent may do the same with like rights.
However, the Indenture Trustee must comply with Sections 6.11 and 6.12.
SECTION 6.04. INDENTURE TRUSTEE'S DISCLAIMER. The Indenture Trustee
shall not be responsible for and makes no representation as to the validity or
adequacy of this Indenture or the Notes, it shall not be accountable for the
Issuer's use of the proceeds from the Notes, and it shall not be responsible for
any statement of the Issuer in the Indenture or in any document issued in
connection with the sale of the Notes or in the Notes other than the Indenture
Trustee's certificate of authentication.
SECTION 6.05. NOTICE OF DEFAULTS. If a Default occurs and is
continuing and if it is either actually known or written notice of the existence
thereof has been delivered to a Responsible Officer of the Indenture Trustee,
the Indenture Trustee shall mail to each holder of the Notes notice of the
Default within 90 days after it occurs. Except in the case of a Default in
payment of principal of or interest (including any Noteholders' Interest Index
Carryover) on any Note (including payments pursuant to the mandatory redemption
provisions of such Note), the Indenture Trustee may withhold the notice if and
so long as a committee of its Responsible Officers in good faith determines that
withholding the notice is in the interests of holders of the Notes.
SECTION 6.06. REPORTS BY INDENTURE TRUSTEE TO NOTEHOLDERS. The
Indenture Trustee shall deliver to each holder of the Notes (and to each Person
who was a holder of the Notes at any time during the applicable calendar year)
such information as may be required to enable such holder to prepare its Federal
and state income tax returns. Within 60 days after each December 31 beginning
with the December 31 following the date of this Indenture, the Indenture Trustee
shall mail to each holder of the Notes a brief report as of such December 31
that complies with TIA ' 313(a) if required by said section. The Indenture
Trustee shall also comply with TIA ' 313(b). A copy of each such report required
pursuant to TIA " 313(a) or (b) shall, at the time of such transmission to
holders of the Notes, be filed by the Indenture Trustee with the Commission and
with each securities exchange, if any, upon which the Notes are listed, provided
that the Issuer has previously notified the Indenture Trustee of such listing.
SECTION 6.07. COMPENSATION AND INDEMNITY. The Issuer shall cause the
Administrator to pay to the Indenture Trustee reasonable compensation for its
services in accordance with a separate agreement between the Administrator and
the Indenture Trustee and shall cause the Administrator to reimburse the
Indenture Trustee for all reasonable out-of-pocket expenses incurred or made by
it as provided in such separate agreement. The Indenture Trustee's compensation
shall not be limited by any law on compensation of a trustee of an express
trust. The Issuer shall cause the Administrator to indemnify the Indenture
Trustee against any and all loss, liability or expense (including attorneys'
fees) incurred by it in connection with the administration of this trust and the
performance of its duties hereunder and under the other Basic Documents. The
Indenture Trustee shall notify the Issuer and the Administrator promptly of any
claim for which it may seek indemnity. Failure by the Indenture Trustee to so
notify the Issuer and the Administrator shall not relieve the Issuer or the
Administrator of its obligations hereunder and under the other Basic Documents.
The Issuer shall cause the Administrator to defend the claim and the
Administrator shall not be liable for the legal fees and expenses of the
Indenture Trustee after it has assumed such defense; PROVIDED, HOWEVER, that, in
the event that there may be a conflict between the positions of the Indenture
Trustee and the Administrator in conducting the defense of such claim, the
Indenture Trustee shall be entitled to separate counsel the fees and expenses of
which shall be paid by the Administrator on behalf of the Issuer. Neither the
Issuer nor the Administrator need reimburse any expense or indemnify against any
loss, liability or expense incurred by the Indenture Trustee through the
Indenture Trustee's own willful misconduct, negligence or bad faith.
The Issuer's payment obligations to the Indenture Trustee pursuant to
this Section shall survive the discharge of this Indenture or the earlier
resignation or removal of the Indenture Trustee. When the Indenture Trustee
incurs expenses after the occurrence of a Default specified in Section 5.01(iv)
or (v) with respect to the Issuer, the expenses are intended to constitute
expenses of administration under Title 11 of the United States Code or any other
applicable Federal or state bankruptcy, insolvency or similar law.
SECTION 6.08. REPLACEMENT OF INDENTURE TRUSTEE. No resignation or
removal of the Indenture Trustee and no appointment of a successor Indenture
Trustee shall become effective until the acceptance of appointment by the
successor Indenture Trustee pursuant to this Section 6.08. The Indenture Trustee
may resign at any time by so notifying the Issuer. The holders of a majority in
Outstanding Amount of the Notes may remove the Indenture Trustee by so notifying
the Indenture Trustee and may appoint a successor Indenture Trustee. The Issuer
shall remove the Indenture Trustee if:
(i) the Indenture Trustee fails to comply with Section 6.11;
(ii) an Insolvency Event occurs with respect to the Indenture Trustee;
(iii) a receiver or other public officer takes charge of the Indenture
Trustee or its property; or
(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 the holders of the
Notes. The retiring Indenture Trustee shall promptly transfer all property held
by it as Indenture Trustee to the successor Indenture Trustee upon payment of
all monies due and owing to the retiring 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 holders of a majority in Outstanding Amount
of the Notes may petition any court of competent jurisdiction for the
appointment of a successor Indenture Trustee.
If the Indenture Trustee fails to comply with Section 6.11, any holder
of the Notes may petition any court of competent jurisdiction for the removal of
the Indenture Trustee and the appointment of a successor Indenture Trustee.
Notwithstanding the replacement of the Indenture Trustee pursuant to
this Section, the Issuer's and the Administrator's obligations under Section
6.07 shall continue for the benefit of the retiring Indenture Trustee.
SECTION 6.09. SUCCESSOR INDENTURE TRUSTEE BY MERGER. If the Indenture
Trustee consolidates with, merges or converts into, or transfers all or
substantially all its corporate trust business or assets to, another corporation
or banking association, the resulting, surviving or transferee corporation
without any further act shall be the successor Indenture Trustee; provided that
such corporation or banking association shall be otherwise qualified and
eligible under Section 6.11. The Indenture Trustee shall provide the Rating
Agencies prior written notice of any such transaction.
In case at the time such successor or successors by merger, conversion
or consolidation to the Indenture Trustee shall succeed to the trusts created by
this Indenture any of the Notes shall have been authenticated but not delivered,
any such successor to the Indenture Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Indenture Trustee may authenticate such
Notes either in the name of any predecessor hereunder or in the name of the
successor to the Indenture Trustee; and in all such cases such certificates
shall have the full force which it is anywhere in the Notes or in this Indenture
provided that the certificate of the Indenture Trustee shall have.
SECTION 6.10. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE. (a)
Notwithstanding any other provisions of this Indenture, at any time, for the
purpose of meeting any legal requirement of any jurisdiction in which any part
of the Indenture Trust Estate may at the time be located, the Indenture Trustee
shall have the power and may execute and deliver all instruments to appoint one
or more Persons to act as a co-trustee or co-trustees, or separate trustee or
separate trustees, of all or any part of the Indenture Trust Estate, and to vest
in such Person or Persons, in such capacity and for the benefit of the holders
of the Notes, 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 holders of the Notes of the appointment of any co-trustee or separate
trustee shall be required under Section 6.08 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
or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Indenture
Trustee shall be deemed to have been given to each of the then separate trustees
and co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Indenture and
the conditions of this Article VI. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Indenture Trustee or separately, as may be provided therein, subject to all the
provisions of this Indenture, specifically including every provision of this
Indenture relating to the conduct of, affecting the liability of, or affording
protection to, the Indenture Trustee. Every such instrument shall be filed with
the Indenture Trustee.
(d) Any separate trustee or co-trustee may at any time constitute the
Indenture Trustee, its agent or attorney-in-fact with full power and authority,
to the extent not prohibited by law, to do any lawful act under or in respect of
this Indenture on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be removed, all its
estates, properties, rights, remedies and trusts shall vest in and be exercised
by the Indenture Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
SECTION 6.11. ELIGIBILITY; DISQUALIFICATION. The Indenture Trustee
shall at all times satisfy the requirements of TIA ' 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 [at least Baa3 or better by Moody's and at least BBB
by S&P]. The Indenture Trustee shall comply with TIA ' 310(b), including the
optional provision permitted by the second sentence of TIA ' 310(b)(9);
PROVIDED, HOWEVER, that there shall be excluded from the operation of TIA '
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 '
310(b)(1) are met.
SECTION 6.12. PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUER. The
Indenture Trustee shall comply with TIA ' 311(a), excluding any creditor
relationship listed in TIA ' 311(b). An Indenture Trustee who has resigned or
been removed shall be subject to TIA ' 311(a) to the extent indicated.
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
SECTION 7.01. ISSUER TO FURNISH INDENTURE TRUSTEE NAMES AND ADDRESSES
OF NOTEHOLDERS. The Issuer will furnish or cause to be furnished to the
Indenture Trustee (a) not more than five days after the earlier of (i) each
Record Date and (ii) three months after the last Record Date, a list, in such
form as the Indenture Trustee may reasonably require, of the names and addresses
of the holders of the Notes as of such Record Date, (b) at such other times as
the Indenture Trustee may request in writing, within 30 days after receipt by
the Issuer of any such request, a list of similar form and content as of a date
not more than 10 days prior to the time such list is furnished; PROVIDED,
HOWEVER, that so long as the Indenture Trustee is the Note Registrar, no such
list shall be required to be furnished.
SECTION 7.02. PRESERVATION OF INFORMATION; COMMUNICATIONS TO
NOTEHOLDERS. (a) The Indenture Trustee shall preserve, in as current a form as
is reasonably practicable, the names and addresses of the holders of the Notes
contained in the most recent list furnished to the Indenture Trustee as provided
in Section 7.01 and the names and addresses of the holders of the Notes received
by the Indenture Trustee in its capacity as Note Registrar. The Indenture
Trustee may destroy any list furnished to it as provided in such Section 7.01
upon receipt of a new list so furnished.
(b) Holders of the Notes may communicate pursuant to TIA ' 312(b) with
other holders of the Notes with respect to their rights under this Indenture or
under the Notes. Upon receipt by the Indenture Trustee of any request by a
holder of the Notes to receive a copy of the current list of holders of the
Notes (whether or not made pursuant to TIA ' 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 holders of the
Notes produced in response thereto.
(c) The Issuer, the Indenture Trustee and the Note Registrar shall
have the protection of TIA ' 312(c).
(d) The Indenture Trustee shall furnish to the holders of the Notes
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 7.03. REPORTS BY ISSUER. (a) The Issuer shall:
(i) file with the Indenture Trustee, within 15 days after the Issuer
is required to file the same with the Commission, copies of the annual
reports and of the information, documents and other reports (or copies of
such portions of any of the foregoing as the Commission may from time to
time by rules and regulations prescribe) which the Issuer may be required
to file with the Commission pursuant to Section 13 or 15(d) of the Exchange
Act;
(ii) file with the Indenture Trustee and the Commission in accordance
with rules and regulations prescribed from time to time by the Commission
such additional information, documents and reports with respect to
compliance by the Issuer with the conditions and covenants of this
Indenture as may be required from time to time by such rules and
regulations; and
(iii) supply to the Indenture Trustee (and the Indenture Trustee shall
transmit by mail to all holders of the Notes described in TIA ' 313(c))
such summaries of any information, documents and reports required to be
filed by the Issuer pursuant to clauses (i) and (ii) of this Section
7.03(a) as may be required by rules and regulations prescribed from time to
time by the Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of the
Issuer shall end on December 31 of each year.
ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
SECTION 8.01. COLLECTION OF MONEY. Except as otherwise expressly
provided herein, the Indenture Trustee may demand payment or delivery of, and
shall receive and collect, directly and without intervention or assistance of
any fiscal agent or other intermediary, all money and other property payable to
or receivable by the Indenture Trustee pursuant to this Indenture. The Indenture
Trustee shall apply all such money received by it on behalf of the holders of
the Notes pursuant to the Sale 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 Indenture Trust Estate, the Indenture Trustee
may take such action as may be appropriate to enforce such payment or
performance, including the institution and prosecution of appropriate
Proceedings. Any such action shall be without prejudice to any right to claim a
Default under this Indenture and any right to proceed thereafter as provided in
Article V.
SECTION 8.02. TRUST ACCOUNTS. (a) On or prior to the Closing Date, the
Issuer shall cause the Administrator to establish and maintain, in the name of
the Indenture Trustee, for the benefit of the holders of the Notes and the
holders of the Certificates, the Trust Accounts as provided in Section 5.01 of
the Sale and Servicing Agreement.
(b) On or before the Business Day preceding each Distribution Date,
all Available Funds with respect to the preceding Collection Period will be
deposited in the Collection Account as provided in Section 5.02 of the Sale and
Servicing Agreement. On or before each Distribution Date, the Noteholders'
Distribution Amount and any Noteholders' Interest Index Carryover, if any, 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 holders of the Notes as provided in
Sections 5.05 and 5.06 of the Sale and Servicing Agreement.
(c) On each Distribution Date and Redemption Date, the Indenture
Trustee (or any other Paying Agent) shall distribute all amounts received by it
on behalf of the holders of the Notes pursuant to paragraph (b) above to the
holders of the Notes to the extent of amounts due and unpaid on the Notes for
principal, interest and any Noteholders' Interest Index Carryover in the
following amounts and in the following order of priority (except as otherwise
provided in Section 5.04(b)):
(i) the Noteholders' Interest Distribution Amount, to the holders of
the Class ___ Notes and the holders of the Class ___ Notes in an amount
equal to the accrued and unpaid interest on the Notes; provided that if
there are not sufficient funds received to pay the entire amount of accrued
and unpaid interest then due on the Notes, the amounts so received shall be
applied to the payment of such interest on the Notes on a pro rata basis;
(ii) the Noteholders' Principal Distribution Amount, to the holders of
the Class ___ Notes until the Outstanding Amount of the Class ___ Notes is
reduced to zero, and then to the holders of the Class ___ Notes until the
Outstanding Amount of the Class ___ Notes is reduced to zero; and
(iii) the Noteholders' Interest Index Carryover, if any, to the
holders of the Class ___ Notes and the holders of the Class ___ Notes;
provided that if insufficient funds are received to pay the entire
Noteholders' Interest Index Carryover then outstanding, the amounts so
received shall be applied to the payment of such Noteholders' Interest
Index Carryover on a pro rata basis.
SECTION 8.03. GENERAL PROVISIONS REGARDING ACCOUNTS. (a) So long as no
Default shall have occurred and be continuing, all or a portion of the funds in
the Trust Accounts shall be invested in Eligible Investments and reinvested by
the Indenture Trustee upon Issuer Order, subject to the provisions of Section
5.01(b) of the Sale and Servicing Agreement. All income or other gain from
investments of moneys deposited in the Trust Accounts shall be deposited by the
Indenture Trustee in the Collection Account, and any loss resulting from such
investments shall be charged to such Trust Account. The Issuer will not direct
the Indenture Trustee to make any investment of any funds or to sell any
investment held in any of the Trust Accounts unless the security interest
granted and perfected in such account will continue to be perfected in such
investment or the proceeds of such sale, in either case without any further
action by any Person, and, in connection with any direction to the Indenture
Trustee to make any such investment or sale, if requested by the Indenture
Trustee, the Issuer shall deliver to the Indenture Trustee an Opinion of
Counsel, acceptable to the Indenture Trustee, to such effect.
(b) Subject to Section 6.01(c), the Indenture Trustee shall not in any
way be held liable by reason of any insufficiency in any of the Trust Accounts
resulting from any loss on any Eligible Investment included therein except for
losses attributable to the Indenture Trustee's failure to make payments on such
Eligible Investments issued by the Indenture Trustee, in its commercial capacity
as principal obligor and not as trustee, in accordance with their terms.
(c) If (i) the Issuer shall have failed to give investment directions
for any funds on deposit in the Trust Accounts to the Indenture Trustee by 10:00
a.m. Eastern Time (or such other time as may be agreed by the Issuer and
Indenture Trustee) on any Business Day; or (ii) a Default shall have occurred
and be continuing with respect to the Notes but the Notes shall not have been
declared due and payable pursuant to Section 5.02, or, if such Notes shall have
been declared due and payable following an Event of Default, amounts collected
or receivable from the Indenture Trust Estate are being applied in accordance
with Section 5.05 as if there had not been such a declaration; then the
Indenture Trustee shall, to the fullest extent practicable, invest and reinvest
funds in the Trust Accounts in one or more Eligible Investments.
SECTION 8.04. RELEASE OF INDENTURE TRUST ESTATE. (a) Subject to the
payment of its fees and expenses pursuant to Section 6.07, the Indenture Trustee
may, and when required by the provisions of this Indenture shall, execute
instruments to release property from the lien of this Indenture, or convey the
Indenture Trustee's interest in the same, in a manner and under circumstances
that are not inconsistent with the provisions of this Indenture. No party
relying upon an instrument executed by the Indenture Trustee as provided in this
Article VIII shall be bound to ascertain the Indenture Trustee's authority,
inquire into the satisfaction of any conditions precedent or see to the
application of any moneys.
(b) The Indenture Trustee shall, at such time as there are no Notes
Outstanding and all sums due the Indenture Trustee pursuant to Section 6.07 have
been paid, release any remaining portion of the Indenture Trust Estate that
secured the Notes from the lien of this Indenture and release to the Issuer or
any other Person entitled thereto any funds then on deposit in the Trust
Accounts. The Indenture Trustee shall release property from the lien of this
Indenture pursuant to this Section 8.04(b) only upon receipt of an Issuer
Request accompanied by an Officers' Certificate of the Issuer, an Opinion of
Counsel and (if required by TIA) Independent Certificates in accordance with TIA
" 314(c) and 314(d)(1) and meeting the applicable requirements of Section 11.01.
(c) Each holder of the Notes, by the acceptance of a Note,
acknowledges that from time to time during the Funding Period the Indenture
Trustee shall release the lien of this Indenture on those Financed Federal Loans
to be sold to the Seller and as to which the Seller will simultaneously deposit
the aggregate Purchase Amounts thereof into the Escrow Account in accordance
with, and subject to the terms and conditions of, Section 2.03 of the Sale and
Servicing Agreement, and each holder of the Notes consents to such release.
SECTION 8.05. OPINION OF COUNSEL. The Indenture Trustee shall receive
at least seven days' notice when requested by the Issuer to take any action
pursuant to Section 8.04(a), accompanied by copies of any instruments involved,
and the Indenture Trustee shall also require, except in connection with any
action contemplated by Section 8.04(c), as a condition to such action, an
Opinion of Counsel, in form and substance satisfactory to the Indenture Trustee,
stating the legal effect of any such action, outlining the steps required to
complete the same, and concluding that all conditions precedent to the taking of
such action have been complied with and such action will not materially and
adversely impair the security for the Notes or the rights of the holders of the
Notes in contravention of the provisions of this Indenture; PROVIDED, HOWEVER,
that such Opinion of Counsel shall not be required to express an opinion as to
the fair value of the Indenture Trust Estate. Counsel rendering any such opinion
may rely, without independent investigation, on the accuracy and validity of any
certificate or other instrument delivered to the Indenture Trustee in connection
with any such action.
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.01. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF NOTEHOLDERS.
(a) Without the consent of any holders of the Notes but with prior notice to the
Rating Agencies, the Issuer and the Indenture Trustee, when authorized by an
Issuer Order, at any time and from time to time, may enter into one or more
indentures supplemental hereto (which shall conform to the provisions of the
Trust Indenture Act as in force at the date of the execution thereof), in form
satisfactory to the Indenture Trustee, for any of the following purposes:
(i) to correct or amplify the description of any property at any time
subject to the lien of this Indenture, or better to assure, convey and
confirm unto the Indenture Trustee any property subject or required to be
subjected to the lien of this Indenture, or to subject to the lien of this
Indenture additional property;
(ii) to evidence the succession, in compliance with the applicable
provisions hereof, of another person to the Issuer, and the assumption by
any such successor of the covenants of the Issuer herein and in the Notes
contained;
(iii) to add to the covenants of the Issuer, for the benefit of the
holders 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 holders of the Notes;
(vi) to evidence and provide for the acceptance of the appointment
hereunder by a successor trustee with respect to the Notes and to add to or
change any of the provisions of this Indenture as shall be necessary to
facilitate the administration of the trusts hereunder by more than one
trustee, pursuant to the requirements of Article VI; or
(vii) to modify, eliminate or add to the provisions of this Indenture
to such extent as shall be necessary to effect the qualification of this
Indenture under the TIA or under any similar Federal statute hereafter
enacted and to add to this Indenture such other provisions as may be
expressly required by the TIA.
The Indenture Trustee is hereby authorized to join in the execution of
any such supplemental indenture and to make any further appropriate agreements
and stipulations that may be therein contained.
(b) The Issuer and the Indenture Trustee, when authorized by an Issuer
Order, may, also without the consent of any of the holders of the Notes but with
prior notice to the Rating Agencies, enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to, or changing in
any manner or eliminating any of the provisions of, this Indenture or of
modifying in any manner the rights of the holders of the Notes 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 holder of the Notes.
SECTION 9.02. SUPPLEMENTAL INDENTURES WITH CONSENT OF NOTEHOLDERS. The
Issuer and the Indenture Trustee, when authorized by an Issuer Order, also may,
with prior notice to the Rating Agencies and with the consent of the holders of
not less than a majority of the Outstanding Amount of the Notes, by Act of such
holders of the Notes delivered to the Issuer and the Indenture Trustee, enter
into an indenture or indentures supplemental hereto for the purpose of adding
any provisions to, or changing in any manner or eliminating any of the
provisions of, this Indenture or of modifying in any manner the rights of the
holders of the Notes under this Indenture; PROVIDED, HOWEVER, that no such
supplemental indenture shall, without the consent of the holder of each
Outstanding Note affected thereby:
(i) change the date of payment of any installment of principal of or
interest (including any Noteholders' Interest Index Carryover) on any Note,
or reduce the principal amount thereof, the interest rate thereon or the
Redemption Price with respect thereto, change the provisions of this
Indenture relating to the application of collections on, or the proceeds of
the sale of, the Indenture Trust Estate to payment of principal of or
interest (including any Noteholders' Interest Index Carryover) on the
Notes, or change any place of payment where, or the coin or currency in
which, any Note or the interest thereon is payable, or impair the right to
institute suit for the enforcement of the provisions of this Indenture
requiring the application of funds available therefor, as provided in
Article V, to the payment of any such amount due on the Notes on or after
the respective due dates thereof (or, in the case of redemption, on or
after the Redemption Date);
(ii) reduce the percentage of the Outstanding Amount of the Notes, the
consent of the holders of the Notes of which is required for any such
supplemental indenture, or the consent of the holders of the Notes of which
is required for any waiver of compliance with certain provisions of this
Indenture or certain defaults hereunder and their consequences provided for
in this Indenture;
(iii) modify or alter the provisions of the proviso to the definition
of the term "Outstanding";
(iv) reduce the percentage of the Outstanding Amount of the Notes
required to direct the Indenture Trustee to direct the Issuer to sell or
liquidate the Indenture Trust Estate pursuant to Section 5.04;
(v) modify any provision of this Section except to increase any
percentage specified herein or to provide that certain additional
provisions of this Indenture or the other Basic Documents cannot be
modified or waived without the consent of the holder of each Outstanding
Note affected thereby;
(vi) modify any of the provisions of this Indenture in such manner as
to affect the calculation of the amount of any payment of interest
(including any Noteholders' Interest Index Carryover) or principal due on
any Note on any Distribution Date (including the calculation of any of the
individual components of such calculation) or to affect the rights of the
holders of the Notes to the benefit of any provisions for the mandatory
redemption of the Notes contained herein; or
(vii) permit the creation of any lien ranking prior to or on a parity
with the lien of this Indenture with respect to any part of the Indenture
Trust Estate or, except as otherwise permitted or contemplated herein,
terminate the lien of this Indenture on any property at any time subject
hereto or deprive any holder of any Note of the security provided by the
lien of this Indenture.
It shall not be necessary for any Act of holders of the Notes 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 holders of the Notes to which such amendment or supplemental
indenture relates a notice prepared by the Issuer setting forth in general terms
the substance of such supplemental indenture. Any failure of the Indenture
Trustee to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such supplemental indenture.
SECTION 9.03. EXECUTION OF SUPPLEMENTAL INDENTURES. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modifications thereby of the trusts created
by this Indenture, the Indenture Trustee shall be entitled to receive, and
subject to Sections 6.01 and 6.02, shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Indenture Trustee may, but shall
not be obligated to, enter into any such supplemental indenture that affects the
Indenture Trustee's own rights, duties, liabilities or immunities under this
Indenture or otherwise.
SECTION 9.04. EFFECT OF SUPPLEMENTAL INDENTURE. Upon the execution of
any supplemental indenture pursuant to the provisions hereof, this Indenture
shall be and be deemed to be modified and amended in accordance therewith with
respect to the Notes affected thereby, and the respective rights, limitations of
rights, obligations, duties, liabilities and immunities under this Indenture of
the Indenture Trustee, the Issuer and the holders of the Notes 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 9.05. CONFORMITY WITH TRUST INDENTURE ACT. Every amendment of
this Indenture and every supplemental indenture executed pursuant to this
Article IX shall conform to the requirements of the Trust Indenture Act as then
in effect so long as this Indenture shall then be qualified under the Trust
Indenture Act.
SECTION 9.06. REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURES. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Indenture Trustee shall,
bear a notation in form approved by the Indenture Trustee as to any matter
provided for in such supplemental indenture. If the Issuer or the Indenture
Trustee shall so determine, new Notes so modified as to conform, in the opinion
of the Indenture Trustee and the Issuer, to any such supplemental indenture may
be prepared and executed by the Issuer and authenticated and delivered by the
Indenture Trustee in exchange for Outstanding Notes.
ARTICLE X
REDEMPTION OF NOTES
SECTION 10.01. REDEMPTION. (a) (i) In the event that on the Special
Determination Date the Subsequent Pool Pre-Funded Amount, after giving effect to
the purchase of any Subsequent Pool Student Loans on such date is greater than
$10,000,000, each class of Notes will be redeemed in part, on a pro rata basis,
in an aggregate principal amount equal to the Noteholders' Percentage of such
Subsequent Pool Pre-Funded Amount on the following Distribution Date. In the
event that on the Special Determination Date the Subsequent Pool Pre-Funded
Amount, after giving effect to the purchase of any Subsequent Pool Student Loans
on such date, is greater than zero but less than or equal to $10,000,000, the
Class ____ Notes will be redeemed in an amount equal to such Subsequent Pool
Pre-Funded Amount.
(ii) In the event that on the Distribution Date on which the Funding
Period ends (or on the Distribution Date immediately following the last day of
the Funding Period, if the Funding Period does not end on a Distribution Date)
any amount remains on deposit in the Pre-Funding Account after giving effect to
the making of all Additional Fundings during the Funding Period, including any
such Additional Fundings on such Redemption Date, the Class ____ Notes will be
redeemed until the principal amount thereof is reduced to zero, and then the
Class ____ Notes will be redeemed in part to the extent of any remaining funds,
in each case on a pro rata basis, in an aggregate principal amount equal to the
amount then on deposit in the Pre-Funding Account.
(b) In the event that the assets of the Trust are sold pursuant to
Section 9.02 of the Trust Agreement, that portion of the amounts on deposit in
the Trust Accounts to be distributed to the holders of the Notes shall be paid
to the holders of the Notes up to the Outstanding Amount of the Notes and all
accrued and unpaid interest thereon and any accrued Noteholders' Interest Index
Carryover with respect thereto (but only to the extent provided by Sections
2.07(d) and 8.02(c)). If amounts are to be paid to holders of the Notes pursuant
to this Section 10.01(b), the Master Servicer, the Administrator or the Issuer
shall, to the extent practicable, furnish notice of such event to the Indenture
Trustee not later than 25 days prior to the Redemption Date whereupon all such
amounts shall be payable on the Redemption Date.
SECTION 10.02. FORM OF REDEMPTION NOTICE. Notice of redemption under
Section 10.01 shall be given by the Indenture Trustee by first-class mail,
postage prepaid, or by facsimile, mailed or transmitted on or prior to the
applicable Redemption Date to each holder of the Notes, as of the close of
business on the Record Date preceding the applicable Redemption Date, at such
Noteholder's address or facsimile number appearing in the Note Register.
All notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price; and
(iii) the place where such Notes are to be surrendered for payment of
the Redemption Price (which shall be the office or agency of the Issuer to
be maintained as provided in Section 3.02).
Notice of redemption of the Notes shall be given by the Indenture
Trustee in the name and at the expense of the Issuer. Failure to give notice of
redemption, or any defect therein, to any holder of any Note shall not impair or
affect the validity of the redemption of any other Note.
SECTION 10.03. NOTES PAYABLE ON REDEMPTION DATE. The Notes or portions
thereof to be redeemed shall on the Redemption Date become due and payable at
the Redemption Price and (unless the Issuer shall default in the payment of the
Redemption Price) no interest shall accrue on the Redemption Price for any
period after the date to which accrued interest is calculated for purposes of
calculating the Redemption Price.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. COMPLIANCE CERTIFICATES AND OPINIONS, 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 shall furnish to the Indenture
Trustee (i) an Officers' Certificate of the Issuer stating that all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with, (ii) an Opinion of Counsel stating that in the
opinion of such counsel all such conditions precedent, if any, have been
complied with and (iii) (if required by the TIA) an Independent Certificate from
a firm of certified public accountants meeting the applicable requirements of
this Section, except that, in the case of any such application or request as to
which the furnishing of such documents is specifically required by any provision
of this Indenture, no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(i) a statement that each signatory of such certificate or opinion has
read or has caused to be read such covenant or condition and the
definitions herein relating thereto;
(ii) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(iii) a statement that, in the opinion of each such signatory, such
signatory has made such examination or investigation as is necessary to
enable such signatory to express an informed opinion as to whether 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) Prior to the deposit of any Collateral or other property or
securities with the Indenture Trustee that is to be made the basis for the
release of any property or securities subject to the lien of this
Indenture, the Issuer shall, in addition to any obligation imposed in
Section 11.01(a) or elsewhere in this Indenture, furnish to the Indenture
Trustee an Officers' Certificate of the Issuer certifying or stating the
opinion of each person signing such certificate as to the fair value
(within 90 days of such deposit) to the Issuer of the Collateral or other
property or securities to be so deposited.
(ii) Whenever the Issuer is required to furnish to the Indenture
Trustee an Officers' Certificate of the Issuer certifying or stating the
opinion of any signer thereof as to the matters described in clause (i)
above, the Issuer shall also deliver to the Indenture Trustee an
Independent Certificate as to the same matters, if the fair value to the
Issuer of the securities to be so deposited and of all other such
securities made the basis of any such withdrawal or release since the
commencement of the then-current fiscal year of the Issuer, as set forth in
the certificates delivered pursuant to clause (i) above and this clause
(ii), is 10% or more of the Outstanding Amount of the Notes, but such a
certificate need not be furnished with respect to any securities so
deposited, if the fair value thereof to the Issuer as set forth in the
related Officers' Certificate is less than $25,000 or less than one percent
of the Outstanding Amount of the Notes.
(iii) Other than any property released as contemplated by clause (v)
below, whenever any property or securities are to be released from the lien
of this Indenture, the Issuer shall also furnish to the Indenture Trustee
an Officers' Certificate of the Issuer certifying or stating the opinion of
each person signing such certificate as to the fair value (within 90 days
of such release) of the property or securities proposed to be released and
stating that in the opinion of such person the proposed release will not
impair the security under this Indenture in contravention of the provisions
hereof.
(iv) Whenever the Issuer is required to furnish to the Indenture
Trustee an Officers' Certificate of the Issuer certifying or stating the
opinion of any signer thereof as to the matters described in clause (iii)
above, the Issuer shall also furnish to the Indenture Trustee an
Independent Certificate as to the same matters if the fair value of the
property or securities and of all other property, other than property as
contemplated by clause (v) below, or securities released from the lien of
this Indenture since the commencement of the then-current calendar year, as
set forth in the certificates required by clause (iii) above and this
clause (iv), equals 10% or more of the Outstanding Amount of the Notes, but
such certificate need not be furnished in the case of any release of
property or securities if the fair value thereof as set forth in the
related Officers' Certificate is less than $25,000 or less than one percent
of the then Outstanding Amount of the Notes.
(v) Notwithstanding Section 2.09 or any other provision of this
Section, the Issuer may, without compliance with the requirements of the
other provisions of this Section, (A) collect, liquidate, sell or otherwise
dispose of Financed Student Loans as and to the extent permitted or
required by the Basic Documents, (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 Seller, in order to allow the Seller to make
Consolidation Loans, those specified Financed Student Loans as and to the
extent permitted or required by and in accordance with Section 8.04(c)
hereof and Section 2.03 of the Sale and Servicing Agreement, so long as the
Issuer shall deliver to the Indenture Trustee every six months, commencing
_______________ ___, an Officers' Certificate of the Issuer stating that
all the dispositions of Collateral described in clauses (A), (B) or (C)
above that occurred during the immediately preceding six calendar months
were in the ordinary course of the Issuer's business and that the proceeds
thereof were applied in accordance with the Basic Documents.
SECTION 11.02. FORM OF DOCUMENTS DELIVERED TO INDENTURE TRUSTEE. In
any case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may certify
or give an opinion with respect to some matters and one or more other such
Persons as to other matters, and any such Person may certify or give an opinion
as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer may
be based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such certificate of an Authorized Officer or
Opinion of Counsel may be based, insofar as it relates to factual matters, upon
a certificate or opinion of, or representations by, an officer or officers of
the Master Servicer, the Seller, the Issuer or the Administrator, stating that
the information with respect to such factual matters is in the possession of the
Master Servicer, the Seller, the Issuer or the Administrator, unless such
counsel knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to such matters are
erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Issuer
shall deliver any document as a condition of the granting of such application,
or as evidence of the Issuer's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application or
at the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Indenture Trustee's right to rely upon the truth and
accuracy of any statement or opinion contained in any such document as provided
in Article VI.
SECTION 11.03. ACTS OF NOTEHOLDERS. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by holders of the Notes may be embodied in
and evidenced by one or more instruments of substantially similar tenor signed
by such holders of the Notes 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 holders of the
Notes signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Indenture and (subject to Section 6.01) conclusive in favor of
the Indenture Trustee and the Issuer, if made in the manner provided in this
Section.
(b) The fact and date of the execution by any person of any such
instrument or writing may be proved in any manner that the Indenture Trustee
deems sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the holder of any Notes shall bind the holder of every
Note issued upon the registration thereof or in exchange therefor or in lieu
thereof, in respect of anything done, omitted or suffered to be done by the
Indenture Trustee or the Issuer in reliance thereon, whether or not notation of
such action is made upon such Note.
SECTION 11.04. NOTICES, ETC., TO INDENTURE TRUSTEE, ISSUER AND RATING
AGENCIES. Any request, demand, authorization, direction, notice, consent, waiver
or Act of holders of the Notes or other documents provided or permitted by this
Indenture shall be in writing and if such request, demand, authorization,
direction, notice, consent, waiver or act of holders of the Notes is to be made
upon, given or furnished to or filed with:
(a) the Indenture Trustee by any holder of the Notes or by the Issuer
shall be sufficient for every purpose hereunder if made, given, furnished
or filed in writing to or with the Indenture Trustee at its Corporate Trust
Office, or
(b) the Issuer by the Indenture Trustee or by any holder of the Notes
shall be sufficient for every purpose hereunder if in writing and mailed,
first-class, postage prepaid, to the Issuer addressed to: Mellon Student
Loan Trust ____-_, in care of _____________________________________,
Attention: _____________________; with a copy to the Administrator, One
Mellon Center, 500 Grant Street, Pittsburgh, Pennsylvania 15258, Attention:
____________________, Mellon Student Loan Trust ____-_, 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 holders of the Notes to the Indenture Trustee.
Notices required to be given to the Rating Agencies by the Issuer, the
Indenture Trustee or the Eligible Lender Trustee shall be in writing, personally
delivered or mailed by certified mail, return receipt requested, to [(i) in the
case of Moody's, at the following address: Moody's Investors Service, Inc., ABS
Monitoring Department, 99 Church Street, New York, New York 10007; (ii) in the
case of Standard & Poor's, at the following address: Standard & Poor's Rating
Services, 55 Water Street, New York, New York 10041, Attention of Asset Backed
Surveillance Department; and (iii) Fitch IBCA, Inc., Municipal Structured
Finance Group, One State Street Plaza, New York, New York, 10004;] or as to each
of the foregoing, at such other address as shall be designated by written notice
to the other parties.
SECTION 11.05. NOTICES TO NOTEHOLDERS; WAIVER. Where this Indenture
provides for notice to holders of the Notes 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 holder of the Notes 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 holders of the Notes is given
by mail, neither the failure to mail such notice nor any defect in any notice so
mailed to any particular holder of the Notes shall affect the sufficiency of
such notice with respect to other holders of the Notes, and any notice that is
mailed in the manner herein provided shall conclusively be presumed to have been
duly given.
Where this Indenture provides for notice in any manner, such notice
may be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by holders of the Notes 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 holders of the Notes when such notice is required
to be given pursuant to any provision of this Indenture, then any manner of
giving such notice as shall be satisfactory to the Indenture Trustee shall be
deemed to be a sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies,
failure to give such notice shall not affect any other rights or obligations
created hereunder, and shall not under any circumstance constitute a Default.
SECTION 11.06. ALTERNATE PAYMENT AND NOTICE PROVISIONS.
Notwithstanding any provision of this Indenture or any of the Notes to the
contrary, the Issuer may enter into any agreement with any holder of the Notes
providing for a method of payment, or notice by the Indenture Trustee or any
Paying Agent to such holder of the Notes, 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 11.07. CONFLICT WITH TRUST INDENTURE ACT. If any provision
hereof limits, qualifies or conflicts with another provision hereof that is
required to be included in this Indenture by any of the provisions of the Trust
Indenture Act, such required provision shall control.
The provisions of TIA " 310 through 317 that impose duties on any
Person (including the provisions automatically deemed included herein unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.
SECTION 11.08. EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article
and Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof.
SECTION 11.09. SUCCESSORS AND ASSIGNS. All covenants and agreements in
this Indenture and the Notes by the Issuer shall bind its successors and
assigns, whether so expressed or not. All agreements of the Indenture Trustee in
this Indenture shall bind the successors, co-trustees and agents (excluding any
legal representatives or accountants) of the Indenture Trustee.
SECTION 11.10. SEPARABILITY. In case any provision in this Indenture
or in the Notes shall be invalid, illegal or unenforceable, the validity,
legality, and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
SECTION 11.11. BENEFITS OF INDENTURE. Nothing in this Indenture or in
the Notes, express or implied, shall give to any Person, other than the parties
hereto and their successors hereunder, and the holders of the Notes, and any
other party secured hereunder, and any other Person with an ownership interest
in any part of the Indenture Trust Estate, any benefit or any legal or equitable
right, remedy or claim under this Indenture.
SECTION 11.12. 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 11.13. GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.14. COUNTERPARTS. This Indenture may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
SECTION 11.15. RECORDING OF INDENTURE. If this Indenture is subject to
recording in any appropriate public recording offices, such recording is to be
effected by the Issuer and at its expense accompanied by an Opinion of Counsel
(which may be counsel to the Indenture Trustee or any other counsel reasonably
acceptable to the Indenture Trustee) to the effect that such recording is
necessary either for the protection of the holders of the Notes or any other
Person secured hereunder or for the enforcement of any right or remedy granted
to the Indenture Trustee under this Indenture.
SECTION 11.16. TRUST OBLIGATIONS. No recourse may be taken, directly
or indirectly, with respect to the obligations of the Issuer, the Seller, the
Administrator, the Master Servicer, the Eligible Lender Trustee or the Indenture
Trustee on the Notes or under this Indenture or any certificate or other writing
delivered in connection herewith or therewith, against (i) the Seller, the
Administrator, the Master Servicer, the Indenture Trustee or the Eligible Lender
Trustee in its individual capacity or (ii) any partner, owner, beneficiary,
agent, officer, director, employee or agent of the Seller, the Administrator,
the Master Servicer, the Indenture Trustee or the Eligible Lender Trustee in its
individual capacity, any holder or owner of a beneficial interest in the Issuer,
the Eligible Lender Trustee or the Indenture Trustee or of any successor or
assign of the Seller, the Administrator, the Master Servicer, the Indenture
Trustee or the Eligible Lender Trustee in its individual capacity, except as any
such Person may have expressly agreed (it being understood that the Indenture
Trustee and the Eligible Lender Trustee have no such obligations in their
individual capacity) and except that any such partner, owner or beneficiary
shall be fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity. For all purposes of this Indenture, in
the performance of any duties or obligations of the Issuer hereunder, the
Eligible Lender Trustee shall be subject to, and entitled to the benefits of,
the terms and provisions of Article VI, VII and VIII of the Trust Agreement.
SECTION 11.17. NO PETITION. The Indenture Trustee, by entering into
this Indenture, and each holder of the Notes, by accepting a Note, hereby
covenant and agree that they will not at any time institute against the Seller
or the Issuer, or join in any institution against the Seller or the Issuer of,
any bankruptcy, reorganization, arrangement, insolvency, receivership or
liquidation proceedings, or other proceedings under any United States Federal or
state bankruptcy or similar law in connection with any obligations relating to
the Notes, this Indenture or any of the other Basic Documents.
SECTION 11.18. INSPECTION. The Issuer agrees that, on reasonable prior
notice, it will permit any representative of the Indenture Trustee, during the
Issuer's normal business hours, to examine all the books of account, records,
reports, and other papers of the Issuer, to make copies and extracts therefrom,
to cause such books to be audited by Independent certified public accountants,
and to discuss the Issuer'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. The Indenture
Trustee shall and shall cause its representatives to hold in confidence all such
information obtained from such examination or inspection except to the extent
disclosure may be required by law (and all reasonable applications for
confidential treatment are unavailing) and except to the extent that the
Indenture Trustee may reasonably determine that such disclosure is consistent
with its obligations hereunder.
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.
MELLON STUDENT LOAN TRUST ____-_,
By: ______________________________, not
in its individual capacity but
solely as Eligible Lender Trustee,
By: ______________________________
Name:
Title:
____________________________, not in its
individual capacity but solely as
Indenture Trustee,
By: ______________________________
Name:
Title:
Acknowledged and accepted as to
the Granting Clause as of the
day and year first above written:
_____________________________,
not in its individual
capacity but solely as
Eligible Lender Trustee,
By: ______________________________
Name:
Title:
<PAGE>
STATE OF NEW YORK, )
) ss.:
COUNTY OF NEW YORK, )
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared ________________, known to me
to be the person and officer whose name is subscribed to the foregoing
instrument and acknowledged to me that the same was the act of the said MELLON,
STUDENT LOAN TRUST ____-_, a Delaware business trust, and that such person
executed the same as the act of said trust for the purpose and consideration
therein expressed, and in the capacities therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this ___th day of
_____________, ____.
______________________________
Notary Public in and for
the State of New York.
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
___________________________, a ___________ banking corporation, and that such
person executed the same as the act of said corporation for the purpose and
consideration therein expressed, and in the capacities therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this ___th day of
_____________, ____.
______________________________
Notary Public in and for
the State of New York.
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
_________________________, a ____________ banking association, and that such
person executed the same as the act of said association for the purpose and
consideration therein expressed, and in the capacities therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this ___th day of
_____________, ____.
______________________________
Notary Public in and for
the State of New York.
My commission expires:
<PAGE>
APPENDIX A
----------
[SEE APPENDIX A TO THE SALE AND SERVICING AGREEMENT]
<PAGE>
SCHEDULE A
TO THE INDENTURE
Schedule of Initial Financed Student Loans
- ------------------------------------------
Delivered to Indenture Trustee.
<PAGE>
SCHEDULE B
TO THE INDENTURE
Schedule of Additional Student Loans
- ------------------------------------
Delivered to Indenture Trustee.
<PAGE>
SCHEDULE C
TO THE INDENTURE
Location of Financed Student Loan Files
- ---------------------------------------
<PAGE>
EXHIBIT A-1
TO THE INDENTURE
[FORM OF CLASS ___ NOTE]
SEE REVERSE FOR CERTAIN DEFINITIONS
Unless this Note is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Issuer (as
defined below) or its agent for registration of transfer, exchange or payment,
and any Note issued is registered in the name of Cede & Co. or in such other
name as is requested by an authorized representative of DTC (and any payment is
made to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
THE PRINCIPAL OF THIS NOTE IS PAYABLE AS SET FORTH IN THE INDENTURE
AND THE SALE AND SERVICING AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL
AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE
HEREOF. THIS NOTE IS NOT GUARANTEED OR INSURED BY ANY GOVERNMENTAL AGENCY.
REGISTERED CUSIP NO.
$__________ 1/
No.
MELLON STUDENT LOAN TRUST ____-_
FLOATING RATE CLASS ___ ASSET BACKED NOTES
Mellon Student Loan Trust ____-_, a business trust organized and
existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received, hereby promises to pay to CEDE & CO., or
registered assigns, the principal sum of DOLLARS no later than on the
_____________, ____ Distribution Date (the "Final Maturity Date").
_________________________
1/ Denominations of $1,000 and integral multiples of $1,000 in excess thereof.
<PAGE>
The Issuer will pay interest on this Note at the rate per annum equal
to the Note Interest Rate (as defined on the reverse hereof) for the Class ___
Notes, on each Distribution Date until the principal of this Note is paid or
made available for payment, on the principal amount of this Note outstanding on
the preceding Distribution Date (after giving effect to all payments of
principal made on the preceding Distribution Date), subject to certain
limitations contained in Section 3.01 of the Indenture. Interest on this Note
will accrue for each Distribution Date from the most recent Distribution Date on
which interest has been paid to but excluding such Distribution Date or, if no
interest has yet been paid, from the Closing Date). Such principal of and
interest on this Note shall be paid in the manner specified on the reverse
hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Note.
Unless the certificate of authentication hereon has been executed by
the Indenture Trustee whose name appears below by manual signature, this Note
shall not be entitled to any benefit under the Indenture referred to on the
reverse hereof, or be valid or obligatory for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed, manually or in facsimile, as of the date set forth below.
MELLON STUDENT LOAN TRUST ____-_
By: ________________________________,
not in its individual capacity but
solely as Eligible Lender Trustee
under the Trust Agreement,
By: _____________________________
Authorized Signatory
Date: _______________, ____
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
___________________________, not in its
individual capacity but solely as
Indenture Trustee,
By: ________________________________
Authorized Signatory
Date: _______________, ____
<PAGE>
[REVERSE OF NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Floating Rate Class ___ Asset Backed Notes (herein called the
"Class ___ Notes"), all issued under the Indenture, to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the holders of the Notes. The Class ___ Notes are subject to all
terms of the Indenture. Capitalized but undefined terms shall have the meanings
set forth in the Indenture dated as of ______________, ____ between Mellon
Student Loan Trust ____-_ and ____________________ as Trustee including Appendix
A to the Indenture.
The Class ___ Notes and the Issuer's Floating Rate Class ___ Asset
Backed Notes (the "Class ___ Notes" and, with the Class ___ Notes, the "Notes")
are and will be equally and ratably secured by the collateral pledged as
security therefor as provided in the Indenture.
Principal of the Notes will be payable on each Distribution Date to
the extent set forth in the Sale and Servicing Agreement and the Indenture.
"Distribution Date" means the twenty-fifth day of each __________, __________,
__________, and __________, or, if any such date is not a Business Day, the next
succeeding Business Day, commencing ______________, ____.
As described on the face hereof, the entire unpaid principal amount of
this Note shall be due and payable on its Final Maturity Date. Notwithstanding
the foregoing, the entire unpaid principal amount of the Notes shall be due and
payable on the date on which (i) an Event of Default shall have occurred and be
continuing and (ii) the Indenture Trustee or the holders of the Notes
representing not less than a majority of the Outstanding Amount of the Notes
shall have declared the Notes to be immediately due and payable in the manner
provided in Section 5.02 of the Indenture. All principal payments on the Notes
of the same class shall be made pro rata to the holders of such Notes entitled
thereto.
Interest on the Notes will be payable on each Distribution Date on the
principal amount outstanding of each class of Notes until the principal amount
thereof is paid in full, at a rate per annum equal to the Note Interest Rate for
such class of Notes.
The "Note Interest Rate" means, with respect to any Interest Period,
(x) in the case of the Class ___ Notes, the interest rate per annum (computed on
the basis of the actual number of days elapsed in the related Interest Period
divided by 360) equal to the lesser of (i) Three-Month LIBOR plus _____% and
(ii) the Student Loan Rate for such Interest Period, (y) in the case of the
Class ___ Notes, the interest rate per annum (computed on the basis of the
actual number of days elapsed in the related Interest Period divided by 360)
equal to the lesser of (i) Three-Month LIBOR plus ____% and (ii) the Student
Loan Rate for such Interest Period.
The "Student Loan Rate" means for any class of Securities for any
Interest Period will equal the product of (a) the quotient obtained by dividing
(i) 365 (or 366 in a leap year) by (ii) the actual number of days elapsed in
such Interest Period and (b) the percentage equivalent of a fraction, (i) the
numerator of which is equal to Expected Interest Collections for the Collection
Period relating to such Interest Period less the Master Servicing Fees and the
Administration Fee payable on the related Distribution Date and any Master
Servicing Fees paid on the two preceding Monthly Servicing Payment Dates during
the related Collection Period and (ii) the denominator of which is the
outstanding principal balance of the Securities as of the first day of such
Interest Period.
Pursuant to the Sale and Servicing Agreement, the Administrator shall
determine the Three-Month LIBOR for purposes of calculating the Note Interest
Rates for each given Interest Period. "Three-Month LIBOR" means the London
interbank offered rate for deposits in U.S. dollars having a maturity of three
months commencing on the related LIBOR Determination Date (the "Index Maturity")
which appears on Telerate Page 3750 as of 11:00 a.m., London time, on such LIBOR
Determination Date. If such rate does not appear on Telerate Page 3750, the rate
for that day will be determined on the basis of the rates at which deposits in
U.S. dollars, having the Index Maturity and in a principal amount of not less
than U.S. $1,000,000, are offered at approximately 11:00 a.m., London time, on
such LIBOR Determination Date to prime banks in the London interbank market by
the Reference Banks. The Administrator will request the principal London office
of each of such Reference Banks to provide a quotation of its rate. If at least
two such quotations are provided, the rate for that day will be the arithmetic
mean of the quotations. If fewer than two quotations are provided, the rate for
that day will be the arithmetic mean of the rates quoted by major banks in New
York City, selected by the Administrator, at approximately 11:00 a.m., New York
City time, on such LIBOR Determination Date for loans in the U.S. dollars to
leading European banks having the Index Maturity and in a principal amount equal
to an amount of not less than U.S. $1,000,000; provided that if the banks
selected as aforesaid are not quoting as mentioned in this sentence, Three-Month
LIBOR in effect for the applicable Interest Period will be Three-Month LIBOR in
effect for the previous Interest Period. For purposes of calculating Three-Month
LIBOR, a Business Day is any day on which banks in London and New York City are
open for the transaction of business. Interest due for any Interest Period will
be determined based on the actual number of days in such Interest Period over a
360 day year.
"Reference Bank" means a leading bank (i) engaged in transactions in
Eurodollar deposits in the international Eurocurrency market, (ii) not
controlling, controlled by or under common control with the Administrator and
(iii) having an established place of business in London.
"LIBOR" Determination Date" means (x) with respect to each Interest
Period other than the initial Interest Period, the second Business Day prior to
the commencement of such Interest Period and (y) with respect to the initial
Interest Period, as determined pursuant to clause (x) for the period from the
Closing Date to but excluding ______________, ____ and as determined on the
second Business Day prior to ______________, ____ for the period from
______________, ____ to but excluding ______________, ____. For purposes of this
definition, a "Business Day" is any day on which banks in London and New York
City are open for the transaction of business.
Any Noteholders' Interest Index Carryover that may exist on any
Distribution Date attributable to each class of Notes shall be payable to the
holders of such classes of Notes on a pro rata basis, based on the amount of
Noteholders' Interest Index Carryover then owing on each class of Notes, on that
Distribution Date and any succeeding Distribution Dates solely out of the funds
available and required to be applied thereto pursuant to the Sale and Servicing
Agreement.
Payments of interest on this Note due and payable on each Distribution
Date, together with the installment of principal, if any, to the extent not in
full payment of this Note, shall be made by check mailed to the Person whose
name appears as the Registered Holder of this Note (or one or more Predecessor
Notes) on the Note Register on the Record Date, except that with respect to
Notes registered on the Record Date in the name of the nominee of the Clearing
Agency, unless Definitive Notes have been issued (initially, such nominee to be
Cede & Co.), payments will be made by wire transfer in immediately available
funds to the account designated by such nominee. Such checks shall be mailed to
the Person entitled thereto at the address of such Person as it appears on the
Note Register as of the applicable Record Date without requiring that this Note
be submitted for notation of payment, and the mailing of such check shall
constitute payment of the amount thereof regardless of whether such check is
returned undelivered. Any reduction in the principal amount of this Note (or any
one or more Predecessor Notes) effected by any payments made on any Distribution
Date shall be binding upon all future Noteholders of this Note and of any Note
issued upon the registration of transfer hereof or in exchange hereof or in lieu
hereof, whether or not noted hereon. If funds are expected to be available, as
provided in the Indenture, for payment in full of the then remaining unpaid
principal amount of this Note on a Distribution Date, then the Indenture
Trustee, in the name of and on behalf of the Issuer, will notify the Person who
was the Noteholder hereof as of the Record Date preceding such Distribution Date
by notice mailed no later than five days prior to such Distribution Date and the
amount then due and payable shall be payable only upon presentation and
surrender of this Note at the Indenture Trustee's Corporate Trust Office or at
the office of the Indenture Trustee's agent appointed for such purposes located
in the Borough of Manhattan, The City of New York.
The Issuer shall pay interest on overdue installments of interest at
the Note Interest Rate for this Note to the extent lawful.
As provided in the Indenture, the Class ___ Notes may be redeemed in
part, on a pro rata basis among all the holders of such Notes, on the
Distribution Date on which the Funding Period ends (or on the Distribution Date
immediately following the last day of the Funding Period, if the Funding Period
does not end on a Distribution Date) in the event that any amounts remain on
deposit in the Pre-Funding Account after giving effect to all Additional
Fundings, including any occurring on such Distribution Date.
As provided in the Indenture, if as of the Special Determination Date,
the Subsequent Pool Pre-Funded Amount is greater than $10,000,000, such amount
will be distributed on the first Distribution Date thereafter to redeem each
class of Notes and prepay the Certificates on a pro rata basis, based on the
initial principal balance of each class of Notes and the Initial Certificate
Balance; if such amount is $10,000,000 or less, it will be distributed on such
Distribution Date only to the holders of the Class ___ Notes to redeem such
Class ___ Notes.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Noteholder hereof or his attorney duly
authorized in writing, with such signature guaranteed by an "eligible guarantor
institution" meeting the requirements of the Note Registrar, which requirements
include membership or participation in Securities Transfer Agent's Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution for, STAMP
(all in accordance with the Exchange Act), and such other documents as the
Indenture Trustee may require, and thereupon one or more new Notes of authorized
denominations and in the same aggregate principal amount will be issued to the
designated transferee or transferees. No service charge will be charged for any
registration of transfer or exchange of this Note, but the transferor may be
required to pay a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any such registration of transfer or
exchange.
Each holder of the Notes or Note Owner, by acceptance of a Note or, in
the case of a Note Owner, a beneficial interest in the Note, covenants and
agrees that no recourse may be taken, directly or indirectly, with respect to
the obligations of the Issuer, the Indenture Trustee on the Notes or under the
Indenture or any certificate or other writing delivered in connection therewith,
against (i) the Indenture Trustee or the Eligible Lender Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Issuer or
(iii) any partner, owner, beneficiary, agent, officer, director or employee of
the Indenture Trustee or the Eligible Lender Trustee in its individual capacity,
any holder of a beneficial interest in the Issuer, the Eligible Lender Trustee
or the Indenture Trustee, except as any such Person may have expressly agreed
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.
It is the intent of the Issuer, the Indenture Trustee, the Seller, the
Administrator, the Master Servicer, the Noteholders and the Note Owners that,
for purposes of Federal and State income tax and any other tax measured in whole
or in part by income, this Note will qualify as indebtedness of the Issuer. The
Noteholders and the Note Owners, by acceptance of this Note, agree to treat, and
to take no action inconsistent with the treatment of, this Note for such tax
purposes as indebtedness of the Issuer.
Each holder of the Notes or Note Owner, by acceptance of a Note or, in
the case of a Note Owner, a beneficial interest in a Note, covenants and agrees
that by accepting the benefits of the Indenture that such holder of the Notes or
Note Owner will not at any time institute against the Seller or the Issuer, or
join in any institution against the Seller or the Issuer of, any bankruptcy,
reorganization, arrangement, insolvency, receivership or liquidation proceedings
or other proceedings under any United States Federal or state bankruptcy or
similar law in connection with any obligations relating to the Notes, the
Indenture or the other Basic Documents.
Prior to the due presentment for registration of transfer of this
Note, the Issuer, the Indenture Trustee and any agent of the Issuer or the
Indenture Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes whether or not this Note be
overdue, and neither the Issuer, the Indenture Trustee nor any such agent shall
be affected by notice to the contrary.
The term "Issuer" as used in this Note includes any successor
to the Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances,
to merge or consolidate, subject to the rights of the Indenture Trustee and the
holders of the Notes under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER AND THEREUNDER SHALL
BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place, and rate, and in the coin or currency, herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, neither ____________________, in its individual
capacity, ____________________, in its individual capacity, any owner of a
beneficial interest in the Issuer, nor any of their respective partners,
beneficiaries, agents, officers, directors, employees or successors or assigns
shall be personally liable for, nor shall recourse be had to any of them for,
the payment of principal of or interest on, or performance of, or omission to
perform, any of the covenants, obligations or indemnifications contained in this
Note or the Indenture; it being expressly understood that said covenants,
obligations and indemnifications have been made by the Eligible Lender Trustee
for the sole purposes of binding the interests of the Eligible Lender Trustee in
the assets of the Issuer. The holder of the Notes by the acceptance hereof
agrees that, except as expressly provided in the Basic Documents, in the case of
an Event of Default under the Indenture, the holder of the Notes shall have no
claim against any of the foregoing for any deficiency, loss or claim therefrom;
PROVIDED, HOWEVER, that nothing contained herein shall be taken to prevent
recourse to, and enforcement against, the assets of the Issuer for any and all
liabilities, obligations and undertakings contained in the Indenture or in this
Note.
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee
_________________________
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto _______________________________
___________________________________________________________
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints ______________________, attorney, to transfer said Note on the
books kept for registration thereof, with full power of substitution in the
premises.
Dated: _____________
________________________________ */
Signature Guaranteed:
________________________________ */
_______________
*/ NOTICE: The signature to this assignment must correspond with the name of
the registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting
the requirements of the Note Registrar, which requirements include
membership or participation in STAMP or such other "signature guarantee
program" as may be determined by the Note Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange Act
of 1934, as amended.
<PAGE>
EXHIBIT A-2
TO THE INDENTURE
[FORM OF CLASS ___ NOTE]
SEE REVERSE FOR CERTAIN DEFINITIONS
Unless this Note is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Issuer (as
defined below) or its agent for registration of transfer, exchange or payment,
and any Note issued is registered in the name of Cede & Co. or in such other
name as is requested by an authorized representative of DTC (and any payment is
made to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
THE PRINCIPAL OF THIS NOTE IS PAYABLE AS SET FORTH IN THE INDENTURE
AND THE SALE AND SERVICING AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL
AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE
HEREOF. THIS NOTE IS NOT GUARANTEED OR INSURED BY ANY GOVERNMENTAL AGENCY.
REGISTERED CUSIP NO.
$__________ 1/
No.
MELLON STUDENT LOAN TRUST ____-_
FLOATING RATE CLASS ___ ASSET BACKED NOTES
Mellon Student Loan Trust ____-_, a business trust organized and
existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received, hereby promises to pay to CEDE & CO., or
registered assigns, the principal sum of DOLLARS no later than on the
_______________, ____ Distribution Date (the "Final Maturity Date").
_______________
1/ Denominations of $1,000 and integral multiples of $1,000 in excess thereof.
<PAGE>
The Issuer will pay interest on this Note at the rate per annum equal
to the Note Interest Rate (as defined on the reverse hereof) for the Class ___
Notes, on each Distribution Date until the principal of this Note is paid or
made available for payment, on the principal amount of this Note outstanding on
the preceding Distribution Date (after giving effect to all payments of
principal made on the preceding Distribution Date), subject to certain
limitations contained in Section 3.01 of the Indenture. Interest on this Note
will accrue for each Distribution Date from the most recent Distribution Date on
which interest has been paid to but excluding such Distribution Date or, if no
interest has yet been paid, from the Closing Date. Such principal of and
interest on this Note shall be paid in the manner specified on the reverse
hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set
forth on the reverse hereof, which shall have the same effect as though fully
set forth on the face of this Note.
Unless the certificate of authentication hereon has been executed by
the Indenture Trustee whose name appears below by manual signature, this Note
shall not be entitled to any benefit under the Indenture referred to on the
reverse hereof, or be valid or obligatory for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed, manually or in facsimile, as of the date set forth below.
MELLON STUDENT LOAN TRUST ____-_
By: _______________________________,
not in its individual capacity but
solely as Eligible Lender Trustee
under the Trust Agreement,
By: ________________________________
Authorized Signatory
Date: _______________, ____
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
______________________, not in its
individual capacity but solely as
Indenture Trustee,
By: ________________________________
Authorized Signatory
Date: _______________, ____
<PAGE>
[REVERSE OF NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Floating Rate Class ___ Asset Backed Notes (herein called the
"Class ___ Notes"), all issued under the Indenture, to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the holders of the Notes. The Class ___ Notes are subject to all
terms of the Indenture. Capitalized but undefined terms shall have the meanings
set forth in the Indenture dated as of ______________, ____ between Mellon
Student Loan Trust ____-_ and _____________________, as Trustee including
Appendix A to the Indenture.
The Class ___ Notes and the Issuer's Floating Rate Class ___ Asset
Backed Notes (the "Class ___ Notes" and, with the Class ___ Notes, the "Notes")
are and will be equally and ratably secured by the collateral pledged as
security therefor as provided in the Indenture.
Principal of the Notes will be payable on each Distribution Date to
the extent set forth in the Sale and Servicing Agreement and the Indenture.
"Distribution Date" means the twenty-fifth day of each ________, _______, ______
and ________, or, if any such date is not a Business Day, the next succeeding
Business Day, commencing --------------, ----.
As described on the face hereof, the entire unpaid principal amount of
this Note shall be due and payable on its Final Maturity Date. Notwithstanding
the foregoing, the entire unpaid principal amount of the Notes shall be due and
payable on the date on which (i) an Event of Default shall have occurred and be
continuing and (ii) the Indenture Trustee or the holders of the Notes
representing not less than a majority of the Outstanding Amount of the Notes
shall have declared the Notes to be immediately due and payable in the manner
provided in Section 5.02 of the Indenture. All principal payments on the Notes
of the same class shall be made pro rata to the holders of such Notes entitled
thereto.
Interest on the Notes will be payable on each Distribution Date on the
principal amount outstanding of each class of Notes until the principal amount
thereof is paid in full, at a rate per annum equal to the Note Interest Rate for
such class of Notes.
The "Note Interest Rate" means, with respect to any Interest Period,
(x) in the case of the Class ___ Notes, the interest rate per annum (computed on
the basis of the actual number of days elapsed in the related Interest Period
divided by 360) equal to the lesser of (i) Three-Month LIBOR plus ____% and (ii)
the Student Loan Rate for such Interest Period, (y) in the case of the Class ___
Notes, the interest rate per annum (computed on the basis of the actual number
of days elapsed in the related Interest Period divided by 360) equal to the
lesser of (i) Three Monthly LIBOR plus _____% and (ii) the Student Loan Rate for
such Interest Period.
The "Student Loan Rate" means for any class of Securities for any
Interest Period will equal the product of (a) the quotient obtained by dividing
(i) 365 (or 366 in a leap year) by (ii) the actual number of days elapsed in
such Interest Period and (b) the percentage equivalent of a fraction, (i) the
numerator of which is equal to Expected Interest Collections for the Collection
Period relating to such Interest Period less the Master Servicing Fees and the
Administration Fee payable on the related Distribution Date and any Master
Servicing Fees paid on the two preceding Monthly Servicing Payment Dates during
the related Collection Period and (ii) the denominator of which is the
outstanding principal balance of the Securities as of the first day of such
Interest Period.
Pursuant to the Sale and Servicing Agreement, the Administrator shall
determine the Three-Month LIBOR for purposes of calculating the Note Interest
Rates for each given Interest Period. "Three-Month LIBOR" means the London
interbank offered rate for deposits in U.S. dollars having a maturity of three
months commencing on the related LIBOR Determination Date (the "Index Maturity")
which appears on Telerate Page 3750 as of 11:00 a.m., London time, on such LIBOR
Determination Date. If such rate does not appear on Telerate Page 3750, the rate
for that day will be determined on the basis of the rates at which deposits in
U.S. dollars, having the Index Maturity and in a principal amount of not less
than U.S. $1,000,000, are offered at approximately 11:00 a.m., London time, on
such LIBOR Determination Date to prime banks in the London interbank market by
the Reference Banks. The Administrator will request the principal London office
of each of such Reference Banks to provide a quotation of its rate. If at least
two such quotations are provided, the rate for that day will be the arithmetic
mean of the quotations. If fewer than two quotations are provided, the rate for
that day will be the arithmetic mean of the rates quoted by major banks in New
York City, selected by the Administrator, at approximately 11:00 a.m., New York
City time, on such LIBOR Determination Date for loans in the U.S. dollars to
leading European banks having the Index Maturity and in a principal amount equal
to an amount of not less than U.S. $1,000,000; provided that if the banks
selected as aforesaid are not quoting as mentioned in this sentence, Three-Month
LIBOR in effect for the applicable Interest Period will be Three-Month LIBOR in
effect for the previous Interest Period.
"Reference Bank" means a leading bank (i) engaged in transactions in
Eurodollar deposits in the international Eurocurrency market, (ii) not
controlling, controlled by or under common control with the Administrator and
(iii) having an established place of business in London.
"LIBOR" Determination Date" means (x) with respect to each Interest
Period other than the initial Interest Period, the second Business Day prior to
the commencement of such Interest Period and (y) with respect to the initial
Interest Period, as determined pursuant to clause (x) for the period from the
Closing Date to but excluding ______________, ____ and as determined on the
second Business Day prior to ______________, ____ for the period from
______________, ____ to but excluding ______________, ____. For purposes of this
definition, a "Business Day" is any day on which Banks in London and New York
City are open for the transaction of business.
Any Noteholders' Interest Index Carryover that may exist on any
Distribution Date attributable to each class of Notes shall be payable to the
holders of such classes of Notes on a pro rata basis, based on the amount of
Noteholders' Interest Index Carryover then owing on each class of Notes, on that
Distribution Date and any succeeding Distribution Dates solely out of the funds
available and required to be applied thereto pursuant to the Sale and Servicing
Agreement.
Payments of interest on this Note due and payable on each Distribution
Date, together with the installment of principal, if any, to the extent not in
full payment of this Note, shall be made by check mailed to the Person whose
name appears as the Registered Holder of this Note (or one or more Predecessor
Notes) on the Note Register on the Record Date, except that with respect to
Notes registered on the Record Date in the name of the nominee of the Clearing
Agency, unless Definitive Notes have been issued (initially, such nominee to be
Cede & Co.), payments will be made by wire transfer in immediately available
funds to the account designated by such nominee. Such checks shall be mailed to
the Person entitled thereto at the address of such Person as it appears on the
Note Register as of the applicable Record Date without requiring that this Note
be submitted for notation of payment, and the mailing of such check shall
constitute payment of the amount thereof regardless of whether such check is
returned undelivered. Any reduction in the principal amount of this Note (or any
one or more Predecessor Notes) effected by any payments made on any Distribution
Date shall be binding upon all future Noteholders of this Note and of any Note
issued upon the registration of transfer hereof or in exchange hereof or in lieu
hereof, whether or not noted hereon. If funds are expected to be available, as
provided in the Indenture, for payment in full of the then remaining unpaid
principal amount of this Note on a Distribution Date, then the Indenture
Trustee, in the name of and on behalf of the Issuer, will notify the Person who
was the Noteholder hereof as of the Record Date preceding such Distribution Date
by notice mailed no later than five days prior to such Distribution Date and the
amount then due and payable shall be payable only upon presentation and
surrender of this Note at the Indenture Trustee's Corporate Trust Office or at
the office of the Indenture Trustee's agent appointed for such purposes located
in the Borough of Manhattan, The City of New York.
The Issuer shall pay interest on overdue installments of interest at
the Note Interest Rate for this Note to the extent lawful.
As provided in the Indenture, if as of the Special Determination Date,
the Subsequent Pool Pre-Funded Amount is greater than $10,000,000, such amount
will be distributed on the first Distribution Date thereafter to redeem each
class of Notes and prepay the Certificates on a pro rata basis, based on the
initial principal balance of each class of Notes and the Initial Certificate
Balance; if such amount is $10,000,000 or less, it will be distributed on such
Distribution Date only to the holders of the Class ___ Notes to redeem such
Class ___ Notes.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Noteholder hereof or his attorney duly
authorized in writing, with such signature guaranteed by an "eligible guarantor
institution" meeting the requirements of the Note Registrar, which requirements
include membership or participation in Securities Transfer Agent's Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution for, STAMP
(all in accordance with the Exchange Act), and such other documents as the
Indenture Trustee may require, and thereupon one or more new Notes of authorized
denominations and in the same aggregate principal amount will be issued to the
designated transferee or transferees. No service charge will be charged for any
registration of transfer or exchange of this Note, but the transferor may be
required to pay a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any such registration of transfer or
exchange.
Each holder of the Notes or Note Owner, by acceptance of a Note or, in
the case of a Note Owner, a beneficial interest in the Note, covenants and
agrees that no recourse may be taken, directly or indirectly, with respect to
the obligations of the Issuer, the Indenture Trustee on the Notes or under the
Indenture or any certificate or other writing delivered in connection therewith,
against (i) the Indenture Trustee or the Eligible Lender Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Issuer or
(iii) any partner, owner, beneficiary, agent, officer, director or employee of
the Indenture Trustee or the Eligible Lender Trustee in its individual capacity,
any holder of a beneficial interest in the Issuer, the Eligible Lender Trustee
or the Indenture Trustee, except as any such Person may have expressly agreed
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.
It is the intent of the Issuer, the Indenture Trustee, the Seller, the
Administrator, the Master Servicer, the Noteholders and the Note Owners that,
for purposes of Federal and State income tax and any other tax measured in whole
or in part by income, this Note will qualify as indebtedness of the Issuer. The
Noteholders and the Note Owners, by acceptance of this Note, agree to treat, and
to take no action inconsistent with the treatment of, this Note for such tax
purposes as indebtedness of the Issuer.
Each holder of the Notes or Note Owner, by acceptance of a Note or, in
the case of a Note Owner, a beneficial interest in a Note, covenants and agrees
that by accepting the benefits of the Indenture that such holder of the Notes or
Note Owner will not at any time institute against the Seller or the Issuer, or
join in any institution against the Seller or the Issuer of, any bankruptcy,
reorganization, arrangement, insolvency, receivership or liquidation proceedings
or other proceedings under any United States Federal or state bankruptcy or
similar law in connection with any obligations relating to the Notes, the
Indenture or the other Basic Documents.
Prior to the due presentment for registration of transfer of this
Note, the Issuer, the Indenture Trustee and any agent of the Issuer or the
Indenture Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes whether or not this Note be
overdue, and neither the Issuer, the Indenture Trustee nor any such agent shall
be affected by notice to the contrary.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances,
to merge or consolidate, subject to the rights of the Indenture Trustee and the
holders of the Notes under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER AND THEREUNDER SHALL
BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place, and rate, and in the coin or currency, herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, neither ____________________, in its individual
capacity, ____________________, in its individual capacity, any owner of a
beneficial interest in the Issuer, nor any of their respective partners,
beneficiaries, agents, officers, directors, employees or successors or assigns
shall be personally liable for, nor shall recourse be had to any of them for,
the payment of principal of or interest on, or performance of, or omission to
perform, any of the covenants, obligations or indemnifications contained in this
Note or the Indenture; it being expressly understood that said covenants,
obligations and indemnifications have been made by the Eligible Lender Trustee
for the sole purposes of binding the interests of the Eligible Lender Trustee in
the assets of the Issuer. The holder of the Notes by the acceptance hereof
agrees that, except as expressly provided in the Basic Documents, in the case of
an Event of Default under the Indenture, the holder of the Notes shall have no
claim against any of the foregoing for any deficiency, loss or claim therefrom;
PROVIDED, HOWEVER, that nothing contained herein shall be taken to prevent
recourse to, and enforcement against, the assets of the Issuer for any and all
liabilities, obligations and undertakings contained in the Indenture or in this
Note.
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee
_________________________
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto _______________________________
___________________________________________________________
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints ______________________, attorney, to transfer said Note on the
books kept for registration thereof, with full power of substitution in the
premises.
Dated: _____________
________________________________ */
Signature Guaranteed:
________________________________ */
_______________
*/ NOTICE: The signature to this assignment must correspond with the name of
the registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting
the requirements of the Note Registrar, which requirements include
membership or participation in STAMP or such other "signature guarantee
program" as may be determined by the Note Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange Act
of 1934, as amended.
EXHIBIT 4.2
FORM OF
AMENDED AND RESTATED
TRUST AGREEMENT
between
MELLON BANK, N.A.,
as Depositor
and
-------------------------,
not in its individual capacity but solely
as Eligible Lender Trustee
Dated as of __________, ____
<PAGE>
TABLE OF CONTENTS
ARTICLE I
Definitions and Usage
ARTICLE II
Organization
SECTION 2.01. Name............................................................1
SECTION 2.02. Office..........................................................2
SECTION 2.03. Purposes and Powers.............................................2
SECTION 2.04. Appointment of Eligible Lender Trustee..........................2
SECTION 2.05. Initial Capital Contribution of Trust Estate....................3
SECTION 2.06. Declaration of Trust............................................3
SECTION 2.07. Liability of the Certificateholders.............................3
SECTION 2.08. Title to Trust Property.........................................4
SECTION 2.09. Representations and Warranties of the Depositor.................4
SECTION 2.10. Federal Income Tax Allocations..................................5
ARTICLE III
Trust Certificates and Transfer of Interests
SECTION 3.01. Initial Beneficial Ownership....................................6
SECTION 3.02. The Trust Certificates..........................................6
SECTION 3.03. Authentication of Trust Certificates............................6
SECTION 3.04. Registration of Transfer and Exchange of Trust Certificates.....6
SECTION 3.05. Mutilated, Destroyed, Lost or Stolen Trust Certificates.........7
SECTION 3.06. Persons Deemed Owners...........................................8
SECTION 3.07. Access to List of Certificateholders' Names and Addresses.......8
SECTION 3.08. Maintenance of Office or Agency.................................8
SECTION 3.09. Appointment of Certificate Paying Agent.........................8
SECTION 3.10. Disposition by Depositor........................................9
SECTION 3.11. Book-Entry Certificates.........................................9
SECTION 3.12. Notices to Clearing Agency.....................................10
SECTION 3.13. Definitive Certificates........................................10
ARTICLE IV
Actions by Eligible Lender Trustee
SECTION 4.01. Prior Notice to Certificateholders with Respect to
Certain Matters................................................11
SECTION 4.02. Action by Certificateholders with Respect to
Certain Matters................................................11
SECTION 4.03. Action by Certificateholders with Respect to Bankruptcy........12
SECTION 4.04. Restrictions on Certificateholders' Power......................12
SECTION 4.05. Majority Control...............................................12
ARTICLE V
Application of Trust Funds; Certain Duties
SECTION 5.01. Application of Trust Funds.....................................12
SECTION 5.02. Method of Payment..............................................13
SECTION 5.03. No Segregation of Moneys; No Interest..........................13
SECTION 5.04. Accounting and Reports to the Noteholders, Certificateholders,
the Internal Revenue Service and Others........................13
SECTION 5.05. Signature on Returns; Tax Matters Partner......................14
ARTICLE VI
Authority and Duties of Eligible Lender Trustee
SECTION 6.01. General Authority..............................................14
SECTION 6.02. General Duties.................................................15
SECTION 6.03. Action Upon Instruction........................................15
SECTION 6.04. No Duties Except as Specified in this Trust Agreement,
the Sale and Servicing Agreement, or in Instructions...........16
SECTION 6.05. No Action Except Under Specified Documents
or Instructions................................................16
SECTION 6.06. Restrictions. ................................................17
ARTICLE VII
Concerning the Eligible Lender Trustee
SECTION 7.01. Acceptance of Trusts and Duties................................17
SECTION 7.02. Furnishing of Documents........................................18
SECTION 7.03. Representations and Warranties.................................18
SECTION 7.04. Reliance; Advice of Counsel....................................19
SECTION 7.05. Not Acting in Individual Capacity..............................19
SECTION 7.06. Eligible Lender Trustee Not Liable for Trust Certificates
or Financed Student Loans......................................20
SECTION 7.07. Eligible Lender Trustee May Own Trust Certificates and
Notes..........................................................20
ARTICLE VIII
Compensation of Eligible Lender Trustee
SECTION 8.01. Eligible Lender Trustee's Fees and Expenses....................21
SECTION 8.02. Payments to the Eligible Lender Trustee........................21
ARTICLE IX
Termination of Trust Agreement
SECTION 9.01. Termination of Trust Agreement.................................21
SECTION 9.02. Dissolution upon Insolvency of the Depositor...................22
ARTICLE X
Successor Eligible Lender Trustees and
Additional Eligible Lender Trustees
SECTION 10.01. Eligibility Requirements for Eligible Lender Trustee..........23
SECTION 10.02. Resignation or Removal of Eligible Lender Trustee.............23
SECTION 10.03. Successor Eligible Lender Trustee.............................24
SECTION 10.04. Merger or Consolidation of Eligible Lender Trustee............25
SECTION 10.05. Appointment of Co-Eligible Lender Trustee or Separate
Eligible Lender Trustee.......................................25
ARTICLE XI
Miscellaneous
SECTION 11.01. Supplements and Amendments....................................27
SECTION 11.02. No Legal Title to Trust Estate in Certificateholders..........28
SECTION 11.03. Limitations on Rights of Others...............................28
SECTION 11.04. Notices.......................................................28
SECTION 11.05. Severability. ................................................28
SECTION 11.06. Separate Counterparts.........................................28
SECTION 11.07. Successors and Assigns........................................29
SECTION 11.08. No Petition...................................................29
SECTION 11.09. No Recourse...................................................29
SECTION 11.10. Headings......................................................29
SECTION 11.11. Governing Law.................................................29
EXHIBIT A Form of Certificate
<PAGE>
[FORM OF] AMENDED AND RESTATED TRUST AGREEMENT (the "Trust Agreement")
dated as of ___________, ____, between MELLON BANK, N.A., a national banking
association, as Depositor, and ______________________________________, a
national banking association, not in its individual capacity but solely as
Eligible Lender Trustee, amending and restating that certain trust agreement
(the "Original Trust Agreement") dated as of ___________, ____, between the
parties hereto.
WHEREAS the Original Trust Agreement was entered into as of
___________, ____;
WHEREAS the Original Trust Agreement is hereby amended and restated in
its entirety as of ___________, ____, in order to make such changes and
modifications as are set forth herein; and
WHEREAS, in connection therewith, the Depositor and the Eligible
Lender Trustee agree that the terms and provisions of the Original Trust
Agreement shall no longer have any force and effect with respect to any date on
or after the date as of which this Amended and Restated Trust Agreement is being
entered into (other than Section 4 thereof to the extent applicable to the
allocation of collections, Interest Subsidy Payments and Special Allowance
Payments accruing during any period prior to the Cutoff Date).
NOW, THEREFORE, the Depositor and the Eligible Lender Trustee hereby
agree as follows:
ARTICLE I
Definitions and Usage
Capitalized terms used but not defined herein are defined in Appendix
A to the Sale and Servicing Agreement, which also contains rules as to
construction and usage that shall be applicable herein.
ARTICLE II
Organization
SECTION 2.01. Name. The Trust created under the Original Trust
Agreement shall be known as "Mellon Student Loan Trust ____-_" 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. The
Trust shall constitute a business trust under Chapter 38 of Title 12 of the
Delaware Code, 12 Del. C.ss.ss.3801 et seq.(the "Business Trust Act")
SECTION 2.02. Office. The office of the Trust shall be in care of the
Eligible Lender Trustee at its Corporate Trust Office or at such other address
as the Eligible Lender Trustee may designate by written notice to the holders of
the Trust Certificates and the Depositor.
SECTION 2.03. Purposes and Powers. The purpose of the Trust is to
engage in the following activities:
(i) to issue the Notes pursuant to the Indenture and the Trust
Certificates pursuant to this Trust Agreement and to sell the Notes and the
Trust Certificates in one or more transactions;
(ii) with the proceeds of the sale of the Notes and the Trust
Certificates, to purchase the Financed Student Loans and to fund the
Pre-Funding Account pursuant to the Sale and Servicing Agreement;
(iii) to assign, grant, transfer, pledge, mortgage and convey the
Trust Estate pursuant to the Indenture and to hold, manage and distribute
to the holders of the Trust Certificates pursuant to the terms of the Sale
and Servicing Agreement any portion of the Trust Estate released from the
Lien of, and remitted to the Trust pursuant to, the Indenture;
(iv) to enter into and perform its obligations under the Basic
Documents to which it is to be a party;
(v) 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
(vi) subject to compliance with the Basic Documents, to engage in such
other activities as may be required in connection with conservation of the
Trust Estate and the making of distributions to the holders of the Trust
Certificates, the holders of the Notes and the others specified in Section
5.05 of the Sale and Servicing Agreement.
The Trust shall not engage in any activity other than in connection with the
foregoing or other than as required or authorized by the terms of this Trust
Agreement or the other Basic Documents.
SECTION 2.04. Appointment of Eligible Lender Trustee. The Depositor
hereby appoints the Eligible Lender Trustee as trustee of the Trust effective as
of the date hereof, to have all the rights, powers and duties set forth herein.
___________________________ is appointed the initial Delaware Trustee.
The Delaware Trustee shall not have any of the powers or duties of the Eligible
Lender Trustee or of a trustee generally set forth herein, except as required
under the Delaware Business Trust Act. The Delaware Trustee shall be a trustee
hereunder for the sole and limited purpose of fulfilling the requirements of
Section 3807(a) of the Delaware Business Trust Act.
SECTION 2.05. Initial Capital Contribution of Trust Estate. Pursuant
to the Original Trust Agreement, the Depositor has sold, assigned, transferred,
conveyed and set over to the Eligible Lender Trustee, as of the date thereof,
the sum of $10.00. The Eligible Lender Trustee hereby acknowledges receipt in
trust from the Depositor, as of the date thereof, of the foregoing contribution,
which shall constitute the initial Trust Estate and shall be deposited in the
Collection Account. The Depositor shall pay the organizational expenses of the
Trust as they may arise or shall, upon the request of the Eligible Lender
Trustee, promptly reimburse the Eligible Lender Trustee for any such expenses
paid by the Eligible Lender Trustee.
SECTION 2.06. Declaration of Trust. The Eligible Lender Trustee hereby
declares that it will hold the Trust Estate in trust upon and subject to the
conditions set forth herein for the use and benefit of the holders of the Trust
Certificates, 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 the Business Trust Act and that this Trust Agreement
constitute the governing instrument of such trust. It is the intention of the
parties hereto that, solely for income and franchise tax purposes, the Trust
shall be treated as a partnership, with the assets of the partnership being the
Financed Student Loans and other assets held by the Trust, the partners of the
partnership being the holders of the Trust Certificates (including the Depositor
in its capacity as recipient of distributions from the Reserve Account), and the
Notes being debt of the partnership. The parties agree that, unless otherwise
required by appropriate tax authorities, the Trust will file or cause to be
filed annual or other necessary returns, reports and other forms consistent with
the characterization of the Trust as a partnership for such tax purposes.
Effective as of the date hereof, the Eligible Lender Trustee shall have all
rights, powers and duties set forth herein with respect to accomplishing the
purposes of the Trust.
SECTION 2.07. Liability of the Certificateholders. (a) The Depositor
shall be liable directly to and will indemnify the injured party for all losses,
claims, damages, liabilities and expenses of the Trust (including Expenses, to
the extent not paid out of the Trust Estate) to the extent that the Depositor
would be liable if the Trust were a partnership under the Delaware Revised
Uniform Limited Partnership Act in which the Depositor were a general partner;
provided, however, that the Depositor shall not be liable for any losses
incurred by a holder of the Trust Certificates or a Certificate Owner in the
capacity of an investor in the Trust Certificates or a holder of the Notes or a
Note Owner in the capacity of an investor in the Notes. In addition, any third
party creditors of the Trust (other than in connection with the obligations
described in the preceding sentence for which the Depositor shall not be liable)
shall be deemed third party beneficiaries of this paragraph. The obligations of
the Depositor under this paragraph shall be evidenced by the Trust Certificates
described in Section 3.10, which shall be deemed to be separate classes of Trust
Certificates from all other Trust Certificates issued by the Trust; provided
that the rights and obligations evidenced by all Trust Certificates, regardless
of class, except as provided in this Section, shall be identical.
(b) No holder of a Trust Certificate, other than to the extent set
forth in paragraph (a) with respect to the Depositor, shall have any personal
liability for any liability or obligation of the Trust.
SECTION 2.08. 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 2.09. Representations and Warranties of the Depositor. The
Depositor hereby represents and warrants to the Eligible Lender Trustee that:
(a) The Depositor is duly organized and validly existing as a national
banking association in good standing under the laws of the United States of
America, with power and authority to own its properties and to conduct its
business as such properties are currently owned and such business is
presently conducted.
(b) The Depositor has the corporate power and authority to execute and
deliver this Trust Agreement and to carry out its terms; the Depositor has
full corporate power and authority to sell and assign the property to be
sold and assigned to and deposited with the Trust (or with the Eligible
Lender Trustee on behalf of the Trust) and the Depositor has duly
authorized such sale and assignment and deposit to the Trust (or to the
Eligible Lender Trustee on behalf of the Trust) by all necessary corporate
action; and the execution, delivery and performance of this Trust Agreement
has been duly authorized by the Depositor by all necessary corporate
action.
(c) This Trust Agreement constitutes a legal, valid and binding
obligation of the Depositor enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization and similar
laws relating to creditors' rights generally or the rights of creditors of
banks the deposit accounts of which are insured by the FDIC and subject to
general principles of equity.
(d) The consummation of the transactions contemplated by this Trust
Agreement and the fulfillment of the terms hereof do not conflict with,
result in any breach of any of the terms and provisions of, or constitute
(with or without notice or lapse of time or both) a default under, the
articles of association or by-laws of the Depositor, or any indenture,
agreement or other instrument to which the Depositor is a party or by which
it is bound; nor result in the creation or imposition of any Lien upon any
of its properties pursuant to the terms of any such indenture, agreement or
other instrument (other than pursuant to the Basic Documents); nor violate
any law or, to the 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.
SECTION 2.10. FEDERAL INCOME TAX ALLOCATIONS. Net income of the Trust
with respect to any Loan Group for any Collection Period as determined for
Federal income tax purposes (and each item of income, gain, loss and deduction
entering into the computation thereof) shall be allocated:
(a) among the holders of the Trust Certificates as of the close of
business on the last day of such Collection Period, in proportion to their
ownership of principal amount of Trust Certificates on such date, an amount
of net income up to the sum of (i) the portion of the Certificateholders'
Interest Distribution Amount and the Certificateholders' Interest Index
Carryover if any, for the related Distribution Date allocable to such
Collection Period, (ii) interest on the excess, if any, of the
Certificateholders' Interest Distribution Amount for the preceding
Distribution Date over the amount in respect of interest that is actually
distributed to such holders of the Trust Certificates on such preceding
Distribution Date, to the extent permitted by law, at the Certificate Rate
for such Collection Period and (iii) the portion of the market discount on
the Financed Student Loans accrued during such quarter that is allocable to
the excess, if any, of the initial aggregate principal amount of the Trust
Certificates over their initial aggregate issue price; and
(b) to the Depositor, to the extent of any remaining net income.
If the net income of the Trust for any month is insufficient for the allocations
described in clause (a) above, subsequent net income shall first be allocated to
make up such shortfall before being allocated as provided in the preceding
sentence. Net losses of the Trust if any, for any month as determined for
Federal income tax purposes (and each item of income, gain, loss and deduction
entering into the computation thereof) shall be allocated to the Depositor to
the extent the Depositor is reasonably expected to bear the economic burden of
such net losses, and any remaining net losses shall be allocated among the
remaining holders of the Trust Certificates as of the close of business on the
last day of such month in proportion to their ownership of principal amount of
Trust Certificates on such Record Date. The Depositor is authorized to modify
the allocations in this paragraph if necessary or appropriate, in its sole
discretion, for the allocations to fairly reflect the economic income, gain or
loss to the Depositor or to the holders of the Trust Certificates, or as
otherwise required by the Code.
ARTICLE III
Trust Certificates and Transfer of Interests
SECTION 3.01. Initial Beneficial Ownership. Upon the formation of the
Trust by the contribution by the Depositor pursuant to Section 2.05 and until
the issuance of the Trust Certificates, the Depositor shall be the sole
beneficial owner of the Trust.
SECTION 3.02. The Trust Certificates. The Trust Certificates shall be
issued in denominations of $1,000 or in integral multiples of $1,000 in excess
thereof; provided, however, that the Trust Certificates issued to the Depositor
pursuant to Section 3.10 may be issued in such denomination as to include any
residual amount. The Trust Certificates shall be in the form of Exhibit A hereto
and 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 3.03. Authentication of Trust Certificates. Concurrently with
the initial sale of the Financed Student Loans to the Trust pursuant to the Sale
and Servicing Agreement, the Eligible Lender Trustee shall cause the Trust
Certificates in an aggregate principal amount equal to the Initial Certificate
Balance to be executed on behalf of the Trust, authenticated and delivered to or
upon the written order of the Depositor, signed by its chairman of the board,
its president or any vice president, without further action by the Depositor, in
authorized denominations. No Trust Certificate shall entitle its holder to any
benefit under this Trust Agreement, or shall be valid for any purpose, unless
there shall appear on such Trust Certificate a certificate of authentication
substantially in the form set forth in Exhibit A, executed by the Eligible
Lender Trustee or ___________________________________, as the Eligible Lender
Trustee's authenticating agent, by manual signature; such authentication shall
constitute conclusive evidence that such Trust Certificate shall have been duly
authenticated and delivered hereunder. All Trust Certificates shall be dated the
date of their authentication. No further Trust Certificates shall be issued
except pursuant to Section 3.04, 3.05 or 3.13 hereunder.
SECTION 3.04. Registration of Transfer and Exchange of Trust
Certificates. The Certificate Registrar shall keep or cause to be kept, at the
office or agency maintained pursuant to Section 3.08, a Certificate Register in
which, subject to such reasonable regulations as it may prescribe, the Eligible
Lender Trustee shall provide for the registration of Trust Certificates and of
transfers and exchanges of Trust Certificates as herein provided. The Eligible
Lender Trustee shall be the initial Certificate Registrar.
Upon surrender for registration of transfer of any Trust Certificate
at the office or agency maintained pursuant to Section 3.08, the Eligible Lender
Trustee shall execute, authenticate and deliver (or shall cause
___________________________________, as its authenticating agent to authenticate
and deliver), in the name of the designated transferee or transferees, one or
more new Trust Certificates in authorized denominations of a like aggregate
amount dated the date of authentication by the Eligible Lender Trustee or any
authenticating agent. At the option of a holder of the Trust Certificates, Trust
Certificates may be exchanged for other Trust Certificates of authorized
denominations of a like aggregate amount upon surrender of the Trust
Certificates to be exchanged at the office or agency maintained pursuant to
Section 3.08.
Every Trust Certificate presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of transfer in
form satisfactory to the Eligible Lender Trustee and the Certificate Registrar
duly executed by the holder of the Trust Certificates or his attorney duly
authorized in writing, with such signature guaranteed by an "eligible guarantor
institution" meeting the requirements of the Certificate Registrar, which
requirements include membership or participation in Security Transfer Agent's
Medallion Program ("STAMP") or such other "signature guarantee program" as may
be determined by the Certificate Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Exchange Act. Each Trust Certificate
surrendered for registration of transfer or exchange shall be cancelled and
subsequently disposed of by the Eligible Lender Trustee in accordance with its
customary practice.
No service charge shall be made for any registration of transfer or
exchange of Trust Certificates, but the Eligible Lender Trustee or the
Certificate Registrar may require payment of a sum sufficient to cover any tax
or governmental charge that may be imposed in connection with any transfer or
exchange of Trust Certificates.
The preceding provisions of this Section 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 with respect to the Trust Certificates.
The Trust Certificates and any beneficial interest in such Trust
Certificates may not be acquired by (a) an employee benefit plan (as defined in
Section 3(3) of ERISA) that is subject to the provisions of Title I of ERISA,
(b) an individual retirement account described in Section 408(a) of the Code or
(c) any entity whose underlying assets include plan assets by reason of a plan's
investment in the entity (each, a "Benefit Plan"). By accepting and holding a
Trust Certificate or an interest therein, the holder of the Trust Certificates
thereof or Certificate Owner thereof shall be deemed to have represented and
warranted that it is not a Benefit Plan.
SECTION 3.05. Mutilated, Destroyed, Lost or Stolen Trust Certificates.
If (a) any mutilated Trust Certificate shall be surrendered to the Certificate
Registrar, or if the Certificate Registrar shall receive evidence to its
satisfaction of the destruction, loss or theft of any Trust Certificate, and (b)
there shall be delivered to the Certificate Registrar and the Eligible Lender
Trustee such security or indemnity as may be required by them to save each of
them harmless, then in the absence of notice that such Trust Certificate shall
have been acquired by a bona fide purchaser, the Eligible Lender Trustee on
behalf of the Trust shall execute and the Eligible Lender Trustee 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 the same
class in authorized denominations of like aggregate amount. In connection with
the issuance of any new Trust Certificate under this Section, the Eligible
Lender Trustee and the Certificate Registrar may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection therewith. Any duplicate Trust Certificate issued pursuant to this
Section shall constitute conclusive evidence of ownership in the Trust, as if
originally issued, whether or not the lost, stolen or destroyed Trust
Certificate shall be found at any time.
SECTION 3.06. Persons Deemed Owners. Prior to due presentation of a
Trust Certificate for registration of transfer, the Eligible Lender Trustee 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 5.01 and for all other purposes whatsoever,
and neither the Eligible Lender Trustee, the Certificate Registrar nor any agent
of any thereof shall be bound by any notice to the contrary.
SECTION 3.07. Access to List of Certificateholders' Names and
Addresses. The Eligible Lender Trustee shall furnish or cause to be furnished to
the Depositor, within 15 days after receipt by the Eligible Lender Trustee of a
request therefor from the Depositor in writing, a list, in such form as the
Depositor may reasonably require, of the names and addresses of the holders of
the Trust Certificates as of the most recent Record Date. If three or more
holders of the Trust Certificates or one or more holders of the Trust
Certificates 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 holders of the Trust Certificates
with respect to their rights under this Trust 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 the
holders of the Trust Certificates. 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 the holders of the Trust
Certificates produced in response thereto. Each holder of the Trust
Certificates, by receiving and holding a Trust Certificate, shall be deemed to
have agreed not to hold any of the Depositor, the Certificate Registrar or the
Eligible Lender Trustee accountable by reason of the disclosure of its name and
address, regardless of the source from which such information was derived.
SECTION 3.08. Maintenance of Office or Agency. The Eligible Lender
Trustee shall maintain in the Borough of Manhattan, The City of New York, an
office or offices or agency or agencies where Trust Certificates may be
surrendered for registration of transfer or exchange and where notices and
demands to or upon the Eligible Lender Trustee in respect of the Trust
Certificates and the other Basic Documents may be served. The Eligible Lender
Trustee initially designates _________________________________________________,
as its principal Corporate Trust Office. The Eligible Lender Trustee hereby
designates ___________________, as the initial authenticating agent (the
"Authenticating Agent") to act on its behalf. The Eligible Lender Trustee's New
York office and the Authenticating Agent's office are located at
_______________________________________, Attention: ________________. The
Eligible Lender Trustee shall give prompt written notice to the Depositor and to
the holders of the Trust Certificates of any change in the location of the
Certificate Register or any such office or agency.
SECTION 3.09. Appointment of Certificate Paying Agent. The Certificate
Paying Agent shall make distributions to the holders of the Trust Certificates
from the amounts received from the Indenture Trustee out of the Trust Accounts
pursuant to Section 5.01 and shall report the amounts of such distributions to
the Eligible Lender Trustee. Any Certificate Paying Agent shall have the
revocable power to receive such funds from the Indenture Trustee for the purpose
of making the distributions referred to above. The Eligible Lender Trustee may
revoke such power and remove the Certificate Paying Agent if the Eligible Lender
Trustee determines in its sole discretion that the Certificate Paying Agent
shall have failed to perform its obligations under this Trust 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,
and acceptable to the Administrator (which consent shall not be unreasonably
withheld). The Eligible Lender Trustee shall be permitted to resign as
Certificate Paying Agent upon 30 days' written notice to the Administrator. In
the event that the Eligible Lender Trustee shall no longer be the Certificate
Paying Agent, the Eligible Lender Trustee, shall appoint a successor to act as
Certificate Paying Agent (which shall be a bank or trust company). The Eligible
Lender Trustee shall cause such successor Certificate Paying Agent or any
additional Certificate Paying Agent appointed by the Eligible Lender Trustee to
execute and deliver to the Eligible Lender Trustee an instrument in which such
successor Certificate Paying Agent or additional Certificate Paying Agent shall
agree with the Eligible Lender Trustee that as Certificate Paying Agent, such
successor Certificate Paying Agent or additional Certificate Paying Agent will
hold all sums, if any, held by it for payment to the holders of the Trust
Certificates in trust for the benefit of the holders of the Trust Certificates
entitled thereto until such sums shall be paid to such holders of the Trust
Certificates. The Certificate Paying Agent shall return all unclaimed funds to
the Eligible Lender Trustee and upon removal of a Certificate Paying Agent such
Certificate Paying Agent shall also return all funds in its possession to the
Eligible Lender Trustee. The provisions of Sections 7.01, 7.03, 7.04, 7.05 and
8.01 shall apply to the 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 Trust Agreement to the
Certificate Paying Agent shall include any co-paying agent unless the context
requires otherwise.
SECTION 3.10. Disposition by Depositor. On and after the Closing Date,
the Depositor shall retain beneficial and record ownership of Trust Certificates
representing at least 1% of the Certificate Balance. Any attempted transfer of
any Trust Certificate that would reduce such interest of the Depositor below 1%
of the Certificate Balance shall be void. The Eligible Lender Trustee shall
cause any Trust Certificate issued to the Depositor on the Closing Date (and any
Trust Certificate issued in exchange therefor) to contain a legend stating "THIS
CERTIFICATE IS NONTRANSFERABLE".
SECTION 3.11. Book-Entry Certificates. The Trust Certificates, upon
original issuance, will be issued in the form of a typewritten Trust Certificate
or Trust Certificates representing Book-Entry Certificates, to be delivered to
The Depository Trust Company, the initial Clearing Agency, by, or on behalf of,
the Trust; provided, however, that one Definitive Certificate (as defined below)
may be issued to the Depositor pursuant to Section 3.10. Such Book-Entry
Certificate or Book-Entry Certificates shall initially be registered on the
Certificate Register in the name of Cede & Co., the nominee of the initial
Clearing Agency, and no Certificate Owner (other than the Depositor) will
receive a Definitive Certificate representing such Certificate Owner's interest
in such Trust Certificate, except as provided in Section 3.13. Unless and until
definitive, fully registered Trust Certificates (the "Definitive Certificates")
have been issued to Certificate Owners pursuant to Section 3.13:
(i) the provisions of this Section shall be in full force and effect;
(ii) the Certificate Registrar and the Eligible Lender Trustee shall
be entitled to deal with the Clearing Agency for all purposes of this Trust
Agreement (including the payment of principal of and interest on the Trust
Certificates and the giving of instructions or directions hereunder) as the
sole holder of the Trust Certificates and shall have no obligation to the
Certificate Owners;
(iii) to the extent that the provisions of this Section conflict with
any other provisions of this Trust Agreement, the provisions of this
Section shall control;
(iv) the rights of Certificate Owners shall be exercised only through
the Clearing Agency and shall be limited to those established by law and
agreements between such Certificate Owners and the Clearing Agency and/or
the Clearing Agency Participants. Pursuant to the Certificate Depository
Agreement, unless and until Definitive Certificates are issued pursuant to
Section 3.13, the initial Clearing Agency will make book-entry transfers
among the Clearing Agency Participants and receive and transmit payments of
principal of and interest on the Trust Certificates to such Clearing Agency
Participants; and
(v) whenever this Trust Agreement requires or permits actions to be
taken based upon instructions or directions of the holders of the Trust
Certificates evidencing a specified percentage of the Certificate Balance,
the Clearing Agency shall be deemed to represent such percentage only to
the extent that it has received instructions to such effect from
Certificate Owners and/or Clearing Agency Participants owning or
representing, respectively, such required percentage of the beneficial
interest in the Trust Certificates and has delivered such instructions to
the Eligible Lender Trustee.
SECTION 3.12. Notices to Clearing Agency. Whenever a notice or other
communication to the holders of the Trust Certificates is required under this
Trust Agreement, unless and until Definitive Certificates shall have been issued
to Certificate Owners pursuant to Section 3.13, the Eligible Lender Trustee
shall give all such notices and communications specified herein to be given to
the holders of the Trust Certificates to the Clearing Agency, and shall have no
obligations to the Certificate Owners.
SECTION 3.13. Definitive Certificates. If (i) the Administrator
advises the Eligible Lender Trustee in writing that the Clearing Agency is no
longer willing or able to discharge properly its responsibilities with respect
to the Trust Certificates, and the Administrator is unable to locate a qualified
successor, (ii) the Administrator at its option advises the Eligible Lender
Trustee in writing that it elects to terminate the book-entry system through the
Clearing Agency or (iii) after the occurrence of an Event of Default, a Master
Servicer Default or an Administrator Default, Certificate Owners representing
beneficial interests aggregating at least a majority of the Certificate Balance
advise the Clearing Agency (which shall then notify the Eligible Lender Trustee)
in writing that the continuation of a book-entry system through the Clearing
Agency is no longer in the best interest of the Certificate Owners, then the
Eligible Lender Trustee shall cause the Clearing Agency to notify all
Certificate Owners of the occurrence of any such event and of the availability
of the Definitive Certificates to Certificate Owners requesting the same. Upon
surrender to the Eligible Lender Trustee of the typewritten Trust Certificate or
Trust Certificates representing the Book-Entry Certificates by the Clearing
Agency, accompanied by registration instructions, the Eligible Lender Trustee
shall execute and authenticate the Definitive Certificates in accordance with
the instructions of the Clearing Agency. Neither the Certificate Registrar nor
the Eligible Lender Trustee shall be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be protected in relying on,
such instructions. Upon the issuance of Definitive Certificates, the Eligible
Lender Trustee shall recognize the registered holders of the Definitive
Certificates as the holders of the Trust Certificates. The Definitive
Certificates shall, at the expense of the Depositor, be printed, lithographed or
engraved or may be produced in any other manner as is reasonably acceptable to
the Eligible Lender Trustee, as evidenced by its execution thereof.
ARTICLE IV
Actions by Eligible Lender Trustee
SECTION 4.01. Prior Notice to Certificateholders with Respect to
Certain Matters. With respect to the following matters, the Eligible Lender
Trustee shall not take action unless at least 30 days before the taking of such
action, the Eligible Lender Trustee shall have notified the holders of the Trust
Certificates in writing of the proposed action and the holders of the Trust
Certificates shall not have notified the Eligible Lender Trustee in writing
prior to the 30th day after such notice is given that such holders of the Trust
Certificates have withheld consent or provided alternative direction:
(a) the initiation of any material claim or lawsuit by the Trust
(except claims or lawsuits brought in connection with the collection of the
Financed Student Loans) and the compromise of any material action, claim or
lawsuit brought by or against the Trust (except with respect to the
aforementioned claims or lawsuits for collection of Financed Student
Loans);
(b) the amendment of the Indenture by a supplemental indenture in
circumstances where the consent of any holder of the Notes is required;
(c) the amendment of the Indenture by a supplemental indenture in
circumstances where the consent of any holder of the Notes is not required
and such amendment materially adversely affects the interest of the holders
of the Trust Certificates;
(d) the amendment, change or modification of the Administration
Agreement, except to cure any ambiguity or to amend or supplement any
provision in a manner or add any provision that would not materially
adversely affect the interests of the holders of the Trust Certificates; or
(e) the appointment pursuant to the Indenture of a successor Note
Registrar, Certificate Paying Agent or Indenture Trustee or pursuant to
this Trust Agreement of a successor Certificate Registrar, 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 Trust Agreement, as applicable.
SECTION 4.02. Action by Certificateholders with Respect to Certain
Matters. The Eligible Lender Trustee shall not have the power, except upon the
direction of the holders of the Trust Certificates, to (a) remove the Master
Servicer or the Administrator under the Sale and Servicing Agreement pursuant to
Section 8.01 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 holders of the Trust
Certificates.
SECTION 4.03. Action by Certificateholders with Respect to Bankruptcy.
The Eligible Lender Trustee shall not have the power to commence a voluntary
proceeding in bankruptcy relating to the Trust without the unanimous prior
approval of all holders of the Trust Certificates and the delivery to the
Eligible Lender Trustee by each such holder of the Trust Certificates of a
certificate certifying that such holder of the Trust Certificates reasonably
believes that the Trust is insolvent.
SECTION 4.04. Restrictions on Certificateholders' Power. The holders
of the Trust Certificates 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 obligations of the Trust or the Eligible Lender Trustee under the Higher
Education Act or this Trust Agreement or any of the other Basic Documents or
would be contrary to Section 2.03 nor shall the Eligible Lender Trustee be
permitted to follow any such direction, if given.
SECTION 4.05. Majority Control. Except as expressly provided herein,
any action that may be taken by the holders of the Trust Certificates under this
Trust Agreement may be taken by the holders of Trust Certificates evidencing not
less than a majority of the sum of the Certificate Balances. Except as expressly
provided herein, any written notice of the holders of the Trust Certificates
delivered pursuant to this Trust Agreement shall be effective if signed by
holders of the Trust Certificates evidencing not less than a majority of the
Certificate Balance at the time of the delivery of such notice.
ARTICLE V
Application of Trust Funds; Certain Duties
SECTION 5.01. Application of Trust Funds. (a) On each Distribution
Date, the Eligible Lender Trustee will distribute to holders of the
Certificates, on a pro rata basis, amounts received from the Indenture Trustee
pursuant to Sections 5.05 and 5.06 of the Sale and Servicing Agreement on such
Distribution Date.
(b) On each Distribution Date, the Eligible Lender Trustee shall send
to each holder of the Trust Certificates the statement provided to the
Eligible Lender Trustee by the Administrator pursuant to Section 5.07 of
the Sale and Servicing Agreement on such Distribution Date.
(c) In the event that any withholding tax is imposed on the Trust's
payment (or allocations of income) to a holder of the Trust Certificates,
such tax shall reduce the amount otherwise distributable to such holder in
accordance with this Section. The Eligible Lender Trustee is hereby
authorized and directed to retain from amounts otherwise distributable to
the holders of the Trust Certificates 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 holder of the Trust Certificates
shall be treated as cash distributed to such holder of the Trust
Certificates 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. holder of the Trust Certificates), the Eligible Lender Trustee in
its sole discretion may (but unless otherwise required by law shall be
obligated to) withhold such amounts in accordance with this paragraph (c).
In the event that a holder of the Trust Certificates wishes to apply for a
refund of any such withholding tax, the Eligible Lender Trustee shall
reasonably cooperate with such holder in making such claim so long as such
holder of the Trust Certificates agrees to reimburse the Eligible Lender
Trustee for any out-of-pocket expenses incurred.
SECTION 5.02. Method of Payment. Subject to Section 9.01(c),
distributions required to be made to the holders of the Trust Certificates on
any Distribution Date shall be made to each such holder of record on the
preceding Record Date either by wire transfer, in immediately available funds,
to the account of such holder at a bank or other entity having appropriate
facilities therefor, if such holder shall have provided to the Certificate
Registrar appropriate written instructions signed by two authorized officers, if
any, at least five Business Days prior to such Distribution Date and such
holder's Trust Certificates in the aggregate evidence a denomination of not less
than $1,000,000, or, if not, by check mailed to such holder at the address of
such holder appearing in the Certificate Register; provided, however, that,
unless Definitive Certificates have been issued pursuant to Section 3.13, with
respect to Trust Certificates registered on the Record Date in the name of the
nominee of the Clearing Agency (initially, such nominee to be Cede & Co.),
distributions will be made by wire transfer in immediately available funds to
the account designated by such nominee. Notwithstanding the foregoing, the final
distribution in respect of any Trust Certificate (whether on its Final Maturity
Date or otherwise) will be payable only upon presentation and surrender of such
Trust Certificate at the Corporate Trust Office of the Eligible Lender Trustee
or such other location specified in writing to the holder thereof.
SECTION 5.03. No Segregation of Moneys; No Interest. Subject to
Section 5.01, moneys received by the Eligible Lender Trustee hereunder need not
be segregated in any manner, except to the extent required by law or the Sale
and Servicing Agreement and may be deposited under such general conditions as
may be prescribed by law, and the Eligible Lender Trustee shall not be liable
for any interest thereon.
SECTION 5.04. Accounting and Reports to the Noteholders,
Certificateholders, the Internal Revenue Service and Others. The Eligible Lender
Trustee shall (a) maintain (or cause to be maintained) the books of the Trust on
a calendar year basis on the accrual method of accounting, (b) deliver to each
holder of the Trust Certificates (and to each Person who was a holder of the
Trust Certificates 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 holder of the Trust
Certificates 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 income tax purposes, (d) cause such tax returns to be
signed in the manner required by law and (e) collect or cause to be collected
any withholding tax as described in and in accordance with Section 5.01(c) with
respect to income or distributions to the holders of the Trust Certificates. The
Eligible Lender Trustee shall elect under Section 1278 of the Code to include in
income currently any market discount that accrues with respect to the Financed
Student Loans. The Eligible Lender Trustee shall not make the election provided
under Section 754 of the Code.
SECTION 5.05. Signature on Returns; Tax Matters Partner. (a) The
Eligible Lender Trustee shall sign on behalf of the Trust the tax returns of the
Trust, unless applicable law requires a holder of the Trust Certificates to sign
such documents, in which case such documents shall be signed by the Depositor.
(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.
ARTICLE VI
Authority and Duties of Eligible Lender Trustee
SECTION 6.01. General Authority. The Eligible Lender Trustee is
authorized and directed to execute and deliver the Basic Documents to which the
Trust is to be a party and each certificate or other document attached as an
exhibit to or contemplated by the Basic Documents to which the Trust is to be a
party, in each case, in such form as the Depositor shall approve as evidenced
conclusively by the Eligible Lender Trustee's execution thereof, and, on behalf
of the Trust, to direct the Indenture Trustee to authenticate and deliver Notes
in the aggregate principal amount of $____________________. The Eligible Lender
Trustee is also authorized and directed on behalf of the Trust (i) to acquire
and hold legal title to the Financed Student Loans from the Depositor and (ii)
to take all actions required pursuant to Section 4.02(c) of the Sale 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 with respect to any Interest Subsidy Payments and Special
Allowance Payments relating to the Financed Federal Loans.
In addition to the foregoing, the Eligible Lender Trustee is
authorized, but shall not be obligated, to take all actions required of the
Trust pursuant to the Basic Documents. The Eligible Lender Trustee is further
authorized from time to time to take such action as the Administrator directs or
instructs with respect to the Basic Documents and is directed to take such
action to the extent that the Administrator is expressly required pursuant to
the Basic Documents to cause the Eligible Lender Trustee to act.
SECTION 6.02. General Duties. It shall be the duty of the Eligible
Lender Trustee to discharge (or cause to be discharged) all its responsibilities
pursuant to the terms of this Trust Agreement and the other Basic Documents to
which the Trust is a party and to administer the Trust in the interest of the
holders of the Trust Certificates, subject to and in accordance with the
provisions of this Trust Agreement and the other Basic Documents. Without
limiting the foregoing, the Eligible Lender Trustee shall on behalf of the Trust
file and prove any claim or claims that may exist on behalf of the Trust against
the Depositor in connection with any claims paying procedure as part of an
insolvency or a receivership proceeding involving the Depositor. Notwithstanding
the foregoing, the Eligible Lender Trustee shall be deemed to have discharged
its duties and responsibilities hereunder and under the other Basic Documents to
the extent the Administrator has agreed in the Administration Agreement to
perform any act or to discharge any duty of the Eligible Lender Trustee
hereunder or under any other Basic Document, and the Eligible Lender Trustee
shall not be held liable for the default or failure of the Administrator to
carry out its obligations under the Administration Agreement. Except as
expressly provided in the Basic Documents, the Eligible Lender Trustee shall
have no obligation to administer, service or collect the Financed Student Loans
or to maintain, monitor or otherwise supervise the administration, servicing or
collection of the Financed Student Loans.
SECTION 6.03. Action Upon Instruction. (a) Subject to Article IV,
Section 7.01 and in accordance with the terms of the Basic Documents, the
holders of the Trust Certificates may by written instruction direct the Eligible
Lender Trustee in the management of the Trust. Such direction may be exercised
at any time by written instruction of the holders of the Trust Certificates
pursuant to Article IV.
(b) The Eligible Lender Trustee shall not be required to take any
action hereunder or under any other Basic Document if the Eligible Lender
Trustee shall have reasonably determined, or shall have been advised by
counsel, that such action is likely to result in liability on the part of
the Eligible Lender Trustee or is contrary to the terms hereof or of any
other Basic Document or is otherwise contrary to law.
(c) Whenever the Eligible Lender Trustee is unable to determine the
appropriate course of action between alternative courses of action
permitted or required by the terms of this Trust 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 holders of the Trust Certificates requesting instruction as to the
course of action to be adopted, and to the extent the Eligible Lender
Trustee acts in good faith in accordance with any written instruction of
the holders of the Trust Certificates received, the Eligible Lender Trustee
shall not be liable on account of such action to any Person. If the
Eligible Lender Trustee shall not have received appropriate instruction
within 10 days of such notice (or within such shorter period of time as
reasonably may be specified in such notice or may be necessary under the
circumstances) it may, but shall be under no duty to, take or refrain from
taking such action, not inconsistent with this Trust Agreement or the other
Basic Documents, as it shall deem to be in the best interests of the
holders of the Trust Certificates, and shall have no liability to any
Person for such action or inaction.
(d) In the event that the Eligible Lender Trustee is unsure as to the
application of any provision of this Trust Agreement or any other Basic
Document or any such provision is ambiguous as to its application, or is,
or appears to be, in conflict with any other applicable provision, or in
the event that this Trust 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 holders
of the Trust Certificates requesting instruction and, to the extent that
the Eligible Lender Trustee acts or refrains from acting in good faith in
accordance with any such instruction received, the Eligible Lender Trustee
shall not be liable, on account of such action or inaction, to any Person.
If the Eligible Lender Trustee shall not have received appropriate
instruction within 10 days of such notice (or within such shorter period of
time as reasonably may be specified in such notice or may be necessary
under the circumstances) it may, but shall be under no duty to, take or
refrain from taking such action, not inconsistent with this Trust Agreement
or the other Basic Documents, as it shall deem to be in the best interests
of the holders of the Trust Certificates, and shall have no liability to
any Person for such action or inaction.
SECTION 6.04. No Duties Except as Specified in this Trust Agreement,
the Sale 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
Trust Agreement, the Sale and Servicing Agreement, or in any document or written
instruction received by the Eligible Lender Trustee pursuant to Section 6.03;
and no implied duties or obligations shall be read into this Trust 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 Trust Agreement or any other Basic Document. The Eligible Lender Trustee
and the Delaware Trustee each severally and not jointly, 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, ___________________, in its individual
capacity or as the Eligible Lender Trustee or against _________________, in its
individual capacity or as Delaware Trustee, as applicable, that are not related
to the ownership or the administration of the Trust Estate.
SECTION 6.05. No Action Except Under Specified Documents or
Instructions. The Eligible Lender Trustee shall not manage, control, use, sell,
service, dispose of or otherwise deal with any part of the Trust Estate except
(i) in accordance with the powers granted to and the authority conferred upon
the Eligible Lender Trustee pursuant to this Trust Agreement, (ii) in accordance
with the other Basic Documents to which it is a party and (iii) in accordance
with any document or instruction delivered to the Eligible Lender Trustee
pursuant to Section 6.03.
SECTION 6.06. Restrictions. The Eligible Lender Trustee and the
Delaware Trustee shall not take any action (a) that is inconsistent with the
purposes of the Trust set forth in Section 2.03 or (b) that, to the actual
knowledge of the Eligible Lender Trustee or the Delaware Trustee, would result
in the Trust's becoming taxable as a corporation for Federal income tax
purposes. The holders of the Trust Certificates shall not direct the Eligible
Lender Trustee or the Delaware Trustee to take action that would violate the
provisions of this Section.
ARTICLE VII
Concerning the Eligible Lender Trustee
SECTION 7.01. Acceptance of Trusts and Duties. The Eligible Lender
Trustee accepts the trusts hereby created and agrees to perform its duties
hereunder with respect to such trusts but only upon the terms of this Trust
Agreement. The Eligible Lender Trustee also agrees to disburse all moneys
actually received by it constituting part of the Trust Estate upon the terms of
this Trust 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 or
negligence or (ii) in the case of the inaccuracy of any representation or
warranty contained in Section 7.03 expressly made by the Eligible Lender
Trustee. In particular, but not by way of limitation (and subject to the
exceptions set forth in the preceding sentence):
(a) the Eligible Lender Trustee shall not be liable for any error of
judgment made by a responsible officer of the Eligible Lender Trustee;
(b) the Eligible Lender Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in accordance with the
direction or instructions of the Administrator or any holder of the Trust
Certificates;
(c) subject to Section 7.07 hereof, no provision of this Trust
Agreement or any other Basic Document shall require the Eligible Lender
Trustee to expend or risk funds or otherwise incur any financial liability
in the performance of any of its rights or powers hereunder or under any
other Basic Document, if the Eligible Lender Trustee shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity
against such risk or liability is not reasonably assured or provided to it;
(d) under no circumstances shall the Eligible Lender Trustee be liable
for indebtedness evidenced by or arising under any of the Basic Documents,
including the principal of and interest on the Notes;
(e) the Eligible Lender Trustee shall not be responsible for or in
respect of the validity or sufficiency of this Trust 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 holder of the Notes or to any holder
of the Trust Certificates, other than as expressly provided for herein and
in the other Basic Documents;
(f) subject to Section 7.07 hereof, the Eligible Lender Trustee shall
not be liable for the action or inaction, default or misconduct of the
Administrator, the Seller, the Indenture Trustee or the Master Servicer
under any of the other Basic Documents or otherwise and the Eligible Lender
Trustee shall have no obligation or liability to perform the obligations of
the Trust under this Trust Agreement, or the other Basic Documents that are
required to be performed by the Administrator under the Sale and Servicing
Agreement, or the Administration Agreement, the Indenture Trustee under the
Indenture or the Master Servicer under the Sale 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 Trust Agreement,
or to institute, conduct or defend any litigation under this Trust
Agreement or otherwise or in relation to this Trust Agreement or any other
Basic Document, at the request, order or direction of any of the holders of
the Trust Certificates, unless such holders have offered to the Eligible
Lender Trustee security or indemnity satisfactory to it against the costs,
expenses and liabilities that may be incurred by the Eligible Lender
Trustee therein or thereby. The right of the Eligible Lender Trustee to
perform any discretionary act enumerated in this Trust 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 or
willful misconduct in the performance of any such act.
SECTION 7.02. Furnishing of Documents. The Eligible Lender Trustee
shall furnish to the holders of the Trust Certificates promptly upon receipt of
a written request therefor, duplicates or copies of all reports, notices,
requests, demands, certificates, financial statements and any other instruments
furnished to the Eligible Lender Trustee under the Basic Documents.
SECTION 7.03. Representations and Warranties. The Eligible Lender
Trustee hereby represents and warrants to the Depositor, for the benefit of the
holders of the Trust Certificates, that:
(a) It is a ________________ banking association duly organized and
validly existing in good standing under the laws of ______________ and
having an office located within the State of New York. It has all requisite
corporate power and authority to execute, deliver and perform its
obligations under this Trust Agreement.
(b) It has taken all corporate action necessary to authorize the
execution and delivery by it of this Trust Agreement, and this Trust
Agreement will be executed and delivered by one of its officers who is duly
authorized to execute and deliver this Trust Agreement on its behalf.
(c) Neither the execution nor the delivery by it of this Trust
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 Delaware state law, governmental rule or
regulation governing the banking or trust powers of the Eligible Lender
Trustee or any judgment or order binding on it, or constitute any default
under its charter documents or by-laws or any indenture, mortgage,
contract, agreement or instrument to which it is a party or by which any of
its properties may be bound.
(d) It is an "eligible lender" as such term is defined in Section
435(d) of the Higher Education Act, for purposes of holding legal title to
the Financed Student Loans as contemplated by this Trust Agreement and the
other Basic Documents, has obtained a lender identification number with
respect to the Trust from the Department and has in effect a Guarantee
Agreement with each of the Guarantors with respect to the Financed Student
Loans.
SECTION 7.04. Reliance; Advice of Counsel (a) The Eligible Lender
Trustee shall incur no liability to anyone in acting upon any signature,
instrument, direction, notice, resolution, request, consent, order, certificate,
report, opinion, bond, or other document or paper believed by it to be genuine
and believed by it to be signed by the proper party or parties. The Eligible
Lender Trustee may accept a certified copy of a resolution of the board of
directors or other governing body of any corporate party as conclusive evidence
that such resolution has been duly adopted by such body and that the same is in
full force and effect. As to any fact or matter the method of the determination
of which is not specifically prescribed herein, the Eligible Lender Trustee may
for all purposes hereof rely on a certificate, signed by the president or any
vice president or by the treasurer or other authorized officers of the relevant
party, as to such fact or matter and such certificate shall constitute full
protection to the Eligible Lender Trustee for any action taken or omitted to be
taken by it in good faith in reliance thereon.
(b) In the exercise or administration of the trusts hereunder and in
the performance of its duties and obligations under this Trust Agreement or
the other Basic Documents, the Eligible Lender Trustee (i) may act directly
or through its agents or attorneys pursuant to agreements entered into with
any of them, and the Eligible Lender Trustee shall not be liable for the
conduct or misconduct of such agents or attorneys if such agents or
attorneys shall have been selected by the Eligible Lender Trustee with
reasonable care, and (ii) may consult with counsel, accountants and other
skilled persons to be selected with reasonable care and employed by it. The
Eligible Lender Trustee shall not be liable for anything done, suffered or
omitted in good faith by it in accordance with the written opinion or
advice of any such counsel, accountants or other such persons and not
contrary to this Trust Agreement or any other Basic Document.
SECTION 7.05. Not Acting in Individual Capacity. Except as provided in
this Article VII, in accepting the trusts hereby created
______________________________, 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 Trust
Agreement or any other Basic Document shall look only to the Trust Estate for
payment or satisfaction thereof.
Notwithstanding any other provision in this Trust Agreement or the
other Basic Documents, nothing in this Trust Agreement or the other Basic
Documents shall be construed to limit the legal responsibility of the Eligible
Lender Trustee or the Indenture Trustee to the U.S. Secretary of Education or a
Guarantor for any violations of statutory or regulatory requirements that may
occur with respect to loans held by the Eligible Lender Trustee or the Indenture
Trustee, pursuant to or to otherwise comply with their obligations under the
Higher Education Act or implementing regulations.
SECTION 7.06. Eligible Lender Trustee Not Liable for Trust
Certificates or Financed Student Loans. The recitals contained herein and in the
Trust Certificates (other than the signature and countersignature of the
Eligible Lender Trustee on the Trust Certificates) 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 Trust 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. Subject to
Section 7.07 hereof, 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, in a case where the
Eligible Lender Trustee knows of any facts or circumstances which will or could
reasonably be expected to result in any such termination) for or with respect to
the legality, validity, enforceability and eligibility for Guarantee Payments,
federal reinsurance, Interest Subsidy Payments or Special Allowance Payments, as
applicable, of any Financed Student Loan, or for or with respect to the
sufficiency of the Trust Estate or its ability to generate the payments to be
distributed to holders of the Trust Certificates under this Trust Agreement or
the holders of the Notes under the Indenture, including: the existence and
contents of any computer or other record of any Financed Student Loan; the
validity of the assignment of any Financed Student Loan to the Eligible Lender
Trustee on behalf of the Trust; the completeness of any Financed Student Loan;
the performance or enforcement (except as expressly set forth in any Basic
Document) of any Financed Student Loan; the compliance by the Depositor or the
Master Servicer with any warranty or representation made under any Basic
Document or in any related document or the accuracy of any such warranty or
representation or any action or inaction of the Administrator, the Indenture
Trustee or the Master Servicer or any Sub-Servicer taken in the name of the
Eligible Lender Trustee.
SECTION 7.07. Eligible Lender Trustee May Own Trust Certificates and
Notes The Eligible Lender Trustee in its individual or any other capacity may
become the owner or pledgee of Trust Certificates or Notes and may deal with the
Depositor, the Administrator, the Indenture Trustee and the Master Servicer in
banking transactions with the same rights as it would have if it were not
Eligible Lender Trustee.
ARTICLE VIII
Compensation of Eligible Lender Trustee
SECTION 8.01. Eligible Lender Trustee's Fees and Expenses. The
Eligible Lender Trustee shall receive as compensation for its services hereunder
such fees as have been separately agreed upon before the date hereof between the
Depositor and the Eligible Lender Trustee, and the Eligible Lender Trustee shall
be entitled to be reimbursed by the Depositor, to the extent provided in such
separate agreement, for its other reasonable expenses hereunder.
SECTION 8.02. Payments to the Eligible Lender Trustee. Any amounts
paid to the Eligible Lender Trustee pursuant to Section 8.01 hereof or pursuant
to Section 6.03 or 6.04 of the Sale and Servicing Agreement shall be deemed not
to be a part of the Trust Estate immediately after such payment.
ARTICLE IX
Termination of Trust Agreement
SECTION 9.01. Termination of Trust Agreement. (a) This Trust Agreement
(other than Article VIII) and the Trust shall terminate and be of no further
force or effect upon the earlier of (i) the final distribution by the Eligible
Lender Trustee of all moneys or other property or proceeds of the Trust Estate
in accordance with the terms of the Indenture, the Sale and Servicing Agreement
and Article V, and (ii) the time provided in Section 9.02. The bankruptcy,
liquidation, dissolution, death or incapacity of any holder of the Trust
Certificates, other than the Depositor as described in Section 9.02, shall not
(x) operate to terminate this Trust Agreement or the Trust, nor (y) entitle such
holder'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 9.01(a), neither the Depositor nor
any holder of the Trust Certificates shall be entitled to revoke or
terminate the Trust.
(c) Notice of any termination of the Trust, specifying the
Distribution Date upon which the holders of the Trust Certificates 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 the holders of the Trust
Certificates mailed within five Business Days of receipt of notice of such
termination from the Administrator given pursuant to Section 9.01(d) of the
Sale 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 the
holders of the Trust Certificates. Upon presentation and surrender of the
Trust Certificates, the Certificate Paying Agent shall cause to be
distributed to the holders of the Trust Certificates amounts distributable
to such holders on such Distribution Date pursuant to Section 5.01.
In the event that all the holders of the Trust Certificates 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 holders of the Trust
Certificates 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 holders of
the Trust Certificates 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 Trust 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.
SECTION 9.02. DISSOLUTION UPON INSOLVENCY OF THE DEPOSITOR.. In the
event that an Insolvency Event shall occur with respect to the Depositor, this
Agreement shall be terminated in accordance with Section 9.01 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
holders of the Trust Certificates (other than the Depositor) representing more
than 50% of the Certificate Balance (not including the principal amount of Trust
Certificates held by the Depositor), to the effect that each such party
disapproves of the liquidation of the Financed Student Loans and termination of
the Trust, in which event the Trust shall continue in accordance with the Basic
Documents. Promptly after the occurrence of any Insolvency Event with respect to
the 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 holders of the Trust Certificates
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 holders of the Notes of the occurrence of such event; PROVIDED, HOWEVER,
that any failure to give a notice required by this sentence shall not prevent or
delay, in any manner, a termination of the Trust pursuant to the first sentence
of this Section 9.02. Upon a termination pursuant to this Section, the Eligible
Lender Trustee shall direct the Indenture Trustee promptly to sell the assets of
the Trust (other than the Trust Accounts) in a commercially reasonable manner
and on commercially reasonable terms.
ARTICLE X
Successor Eligible Lender Trustees and
Additional Eligible Lender Trustees
SECTION 10.01. Eligibility Requirements for Eligible Lender Trustee.
The Eligible Lender Trustee shall at all times be a corporation or association
(i) qualifying as an "eligible lender" as such term is defined in Section 435(d)
of the Higher Education Act for purposes of holding legal title to the Financed
Student Loans on behalf of the Trust, with a valid lender identification number
with respect to the Trust from the Department; (ii) being authorized to exercise
corporate trust powers and hold legal title to the Financed Student Loans; (iii)
having in effect Guarantee Agreements with each of the Guarantors; (iv) having a
combined capital and surplus of at least $50,000,000 and being subject to
supervision or examination by Federal or state authorities; (v) incorporated or
authorized to do business in the State of New York or which is a national bank
having an office located within the State of New York; and (vi) having (or
having a parent which has) a rating of [at least Baa3 by Moody's and at least
BBB by S&P]. If the Eligible Lender Trustee shall publish reports of condition
at least annually, pursuant to law or to the requirements of the aforesaid
supervising or examining authority, then for the purpose of this Section, the
combined capital and surplus of the Eligible Lender Trustee shall be deemed to
be its combined capital and surplus as set forth in its most recent report of
condition so published. In case at any time the Eligible Lender Trustee or the
Delaware Trustee, as the case may be, shall cease to be eligible in accordance
with the provisions of this Section, in the case of the Eligible Lender Trustee,
or Section 3807(a) of the Delaware Business Trust Act, in the case of the
Delaware Trustee, the Eligible Lender Trustee or the Delaware Trustee, as the
case may be, shall resign immediately in the manner and with the effect
specified in Section 10.02.
SECTION 10.02. Resignation or Removal of Eligible Lender Trustee. The
Eligible Lender Trustee and the Delaware Trustee may at any time resign and be
discharged from the trusts hereby created by giving written notice thereof to
the Administrator. Upon receiving such notice of resignation, the Administrator
shall promptly appoint a successor Eligible Lender Trustee or Delaware Trustee,
as the case may be, meeting the eligibility requirements of Section 10.01 (or in
the case of the Delaware Trustee, meeting the requirements of Section 3807(a) of
the Delaware Business Trust Act) by written instrument, in duplicate, one copy
of which instrument shall be delivered to the resigning Eligible Lender Trustee
or the Delaware Trustee, as the case may be, and one copy to the successor
Eligible Lender Trustee or the Delaware Trustee, as the case may be. If no
successor Eligible Lender Trustee or Delaware Trustee, as the case may be, shall
have been so appointed and have accepted appointment within 30 days after the
giving of such notice of resignation, the resigning Eligible Lender Trustee or
Delaware Trustee, as the case may be, may petition any court of competent
jurisdiction for the appointment of a successor Eligible Lender Trustee or
Delaware Trustee, as the case may be; provided, however, that such right to
appoint or to petition for the appointment of any such successor shall in no
event relieve the resigning Eligible Lender Trustee or Delaware 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 or the Delaware Trustee, as
the case may be, shall cease to be eligible in accordance with the provisions of
Section 10.01 (or the Delaware Trustee shall cease to satisfy the requirements
of Section 3807(a) of the Delaware Business Trust Act) 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 or the Delaware
Trustee, as the case may be, shall have occurred and be continuing, then the
Administrator may remove the Eligible Lender Trustee or the Delaware Trustee, as
the case may be. If the Administrator shall remove the Eligible Lender Trustee
or the Delaware Trustee, as the case may be, under the authority of the
immediately preceding sentence, the Administrator shall promptly appoint a
successor Eligible Lender Trustee or Delaware Trustee, as the case may be, by
written instrument, in duplicate, one copy of which instrument shall be
delivered to the outgoing Eligible Lender Trustee or Delaware Trustee, as the
case may be, so removed and one copy to the successor Eligible Lender Trustee or
Delaware Trustee, as the case may be, and payment of all fees owed to the
outgoing Eligible Lender Trustee or Delaware Trustee, as the case may be.
Any resignation or removal of the Eligible Lender Trustee or the
Delaware Trustee, as the case may be, and appointment of a successor Eligible
Lender Trustee or Delaware Trustee, as the case may be, pursuant to any of the
provisions of this Section shall not become effective until acceptance of
appointment by the successor Eligible Lender Trustee or Delaware Trustee, as the
case may be, pursuant to Section 10.03 and payment of all fees and expenses owed
to the outgoing Eligible Lender Trustee or Delaware Trustee, as the case may be.
The Administrator shall provide notice of such resignation or removal of the
Eligible Lender Trustee or Delaware Trustee, as the case may be, to each of the
Rating Agencies.
SECTION 10.03. Successor Eligible Lender Trustee. Any successor
Eligible Lender Trustee or Delaware Trustee, appointed pursuant to Section 10.02
shall execute, acknowledge and deliver to the Administrator and to its
predecessor Eligible Lender Trustee or Delaware Trustee, as the case may be, an
instrument accepting such appointment under this Trust Agreement, and thereupon
the resignation or removal of the predecessor Eligible Lender Trustee or
Delaware Trustee, as the case may be, shall become effective and such successor
Eligible Lender Trustee or Delaware Trustee, as the case may be, without any
further act, deed or conveyance, shall become fully vested with all the rights,
powers, duties and obligations of its predecessor under this Trust Agreement,
with like effect as if originally named as Eligible Lender Trustee or Delaware
Trustee, as the case may be. The predecessor Eligible Lender Trustee or Delaware
Trustee, as the case may be, shall upon payment of its fees and expenses deliver
to the successor Eligible Lender Trustee or Delaware Trustee, as the case may
be, all documents, statements, moneys and properties held by it under this Trust
Agreement and shall assign, if permissible, to the successor Eligible Lender
Trustee or Delaware Trustee, as the case may be, the lender identification
number obtained from the Department on behalf of the Trust; and the
Administrator and the predecessor Eligible Lender Trustee or Delaware Trustee,
as the case may be, 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 or Delaware Trustee, as the
case may be, all such rights, powers, duties and obligations.
No successor Eligible Lender Trustee or Delaware Trustee, as the case
may be, shall accept appointment as provided in this Section unless at the time
of such acceptance such successor Eligible Lender Trustee or Delaware Trustee,
as the case may be, shall be eligible pursuant to Section 10.01 (or in the case
of the Delaware Trustee, satisfy the requirements of Section 3807(a) of the
Delaware Business Trust Act).
Upon acceptance of appointment by a successor Eligible Lender Trustee
or Delaware Trustee, as the case may be, pursuant to this Section, the
Administrator shall mail notice of the successor of such Eligible Lender Trustee
or Delaware Trustee, as the case may be, to all holders of the Trust
Certificates, the Indenture Trustee, all holders of the Notes and the Rating
Agencies. If the Administrator shall fail to mail such notice within 10 days
after acceptance of appointment by the successor Eligible Lender Trustee or
Delaware Trustee, as the case may be, the successor Eligible Lender Trustee or
Delaware Trustee, as the case may be, shall cause such notice to be mailed at
the expense of the Administrator.
SECTION 10.04. Merger or Consolidation of Eligible Lender Trustee. Any
corporation into which the Eligible Lender Trustee or Delaware Trustee, as the
case may be, 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 or Delaware Trustee, as the case may be, shall be a
party, or any corporation succeeding to all or substantially all the corporate
trust business of the Eligible Lender Trustee or Delaware Trustee, as the case
may be, 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 or Delaware
Trustee, as the case may be, hereunder; provided that such corporation shall be
eligible pursuant to Section 10.01 (or in the case of the Delaware Trustee,
satisfy the requirements of Section 3807(a) of the Delaware Business Trust Act);
provided further that the Eligible Lender Trustee or Delaware Trustee, as the
case may be, shall mail notice of such merger or consolidation to the Rating
Agencies.
SECTION 10.05. Appointment of Co-Eligible Lender Trustee or Separate
Eligible Lender Trustee Notwithstanding any other provisions of this Trust
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, meeting the eligibility
requirements of clauses (i) through (iii) of Section 10.01, to act as
co-trustee, jointly with the Eligible Lender Trustee, or separate trustee or
separate trustees, of all or any part of the Trust Estate, and to vest in such
Person, in such capacity, such title to the Trust 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 Trust Agreement shall
be required to meet the terms of eligibility as a successor trustee pursuant to
clauses (iv) and (v) of Section 10.01 and no notice of the appointment of any
co-trustee or separate trustee shall be required pursuant to Section 10.03.
Each separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties, and obligations conferred or imposed
upon the Eligible Lender Trustee shall be conferred upon and exercised or
performed by the Eligible Lender Trustee and such separate trustee or
co-trustee jointly (it being understood that such separate trustee or
co-trustee is not authorized to act separately without the Eligible Lender
Trustee joining in such act), except to the extent that under any law of
any jurisdiction in which any particular act or acts are to be performed,
the Eligible Lender Trustee shall be incompetent or unqualified to perform
such act or acts, in which event such rights, powers, duties, and
obligations (including the holding of title to the Trust or any portion
thereof in any such jurisdiction) shall be exercised and performed singly
by such separate trustee or co-trustee, solely at the direction of the
Eligible Lender Trustee;
(ii) no trustee under this Trust Agreement shall be personally liable
by reason of any act or omission of any other trustee under this Trust
Agreement; and
(iii) the Administrator and the Eligible Lender Trustee acting jointly
may at any time accept the resignation of or remove any separate trustee or
co-trustee.
Any notice, request or other writing given to the Eligible Lender
Trustee shall be deemed to have been given to each of the then separate trustees
and co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Trust
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 Trust Agreement, specifically including
every provision of this Trust Agreement relating to the conduct of, affecting
the liability of, or affording protection to, the Eligible Lender Trustee. Each
such instrument shall be filed with the Eligible Lender Trustee and a copy
thereof given to the Administrator.
Any separate trustee or co-trustee may at any time appoint the
Eligible Lender Trustee as its agent or attorney-in-fact with full power and
authority, to the extent not prohibited by law, to do any lawful act under or in
respect of this Trust Agreement on its behalf and in its name. If any separate
trustee or co-trustee shall die, become incapable of acting, resign or be
removed, all its estates, properties, rights, remedies and trusts shall vest in
and be exercised by the Eligible Lender Trustee, to the extent permitted by law,
without the appointment of a new or successor trustee.
ARTICLE XI
Miscellaneous
SECTION 11.01. Supplements and Amendments. This Trust Agreement may be
amended by the Depositor and the Eligible Lender Trustee, with prior written
notice to the Rating Agencies, without the consent of any of the holders of the
Notes or the holders of the Trust Certificates, to cure any ambiguity, to
correct or supplement any provisions in this Trust Agreement or for the purpose
of adding any provisions to or changing in any manner or eliminating any of the
provisions in this Trust Agreement or of modifying in any manner the rights of
the holders of the Notes or the holders of the Trust Certificates; provided,
however, that such action shall not, as evidenced by an Opinion of Counsel,
adversely affect in any material respect the interests of any holder of any
Class of Notes or holder of the Trust Certificates.
This Trust Agreement may also be amended from time to time by the
Depositor and the Eligible Lender Trustee, with prior written notice to the
Rating Agencies, (i) with the consent of the Controlling Noteholders evidencing
not less than a majority of the Outstanding Amount of the Controlling Notes and
(ii) with the consent of the holders of the Trust Certificates evidencing not
less than a majority of the Certificate Balance for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Trust Agreement or of modifying in any manner the rights of the holders of
any Class of Notes or the holders of the Trust Certificates; 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 holders of any Class of Notes or the holders of any class of Trust
Certificates or (b) reduce the aforesaid percentage of the Outstanding Amount of
the Controlling Notes and the Certificate Balances required to consent to any
such amendment, without the consent of all the outstanding Controlling
Noteholders and holders of the Trust Certificates.
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 holder of the Trust Certificates, the
Indenture Trustee and each of the Rating Agencies.
It shall not be necessary for the consent of the holders of the Trust
Certificates, the holders of any class of Notes 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 the holders of the Trust Certificates provided for in this Trust
Agreement or in any other Basic Document) and of evidencing the authorization of
the execution thereof by holders of the Trust Certificates shall be subject to
such reasonable requirements as the Eligible Lender Trustee may prescribe.
Prior to the execution of any amendment to this Trust 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 Trust 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 Trust Agreement or
otherwise.
SECTION 11.02. No Legal Title to Trust Estate in Certificateholders.
The holders of the Trust Certificates shall not have legal title to any part of
the Trust Estate. The holders of the Trust Certificates 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 holders
of the Trust Certificates to and in their beneficial ownership interest in the
Trust Estate shall operate to terminate this Trust Agreement or the trusts
hereunder or entitle any transferee to an accounting or to the transfer to it of
legal title to any part of the Trust Estate.
SECTION 11.03. Limitations on Rights of Others. Except for Section
2.07, the provisions of this Trust Agreement are solely for the benefit of the
Eligible Lender Trustee, the Depositor, the holders of the Trust Certificates,
the Administrator and, to the extent expressly provided herein, the Indenture
Trustee and the holders of the Notes, and nothing in this Trust Agreement (other
than Section 2.07), whether express or implied, shall be construed to give to
any other Person any legal or equitable right, remedy or claim in the Trust
Estate or under or in respect of this Trust Agreement or any covenants,
conditions or provisions contained herein.
SECTION 11.04. Notices. (a) Unless otherwise expressly specified or
permitted by the terms hereof, all notices 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, addressed to its
Corporate Trust Office; if to the Depositor, addressed to
________________________________ _______________________, Attention:
____________________________________________, or, as to each party, at such
other address as shall be designated by such party in a written notice to each
other party.
(b) Any notice required or permitted to be given to a holder of the
Trust Certificates shall be given by first-class mail, postage prepaid, at
the address of such holder as shown in the Certificate Register. Any notice
so mailed within the time prescribed in this Trust Agreement shall be
conclusively presumed to have been duly given, whether or not such holder
receives such notice.
SECTION 11.05. Severability. Any provision of this Trust Agreement
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
SECTION 11.06. Separate Counterparts. This Trust Agreement may be
executed by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument.
SECTION 11.07. Successors and Assigns. All covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, the
Depositor and its successors, the Eligible Lender Trustee and its successors,
each holder of the Trust Certificates and its successors and permitted assigns,
all as herein provided. Any request, notice, direction, consent, waiver or other
instrument or action by a holder of the Trust Certificates shall bind the
successors and assigns of such holder.
SECTION 11.08. No Petition. (a) The Depositor will not at any time
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 Trust 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 Trust Agreement,
each holder of the Trust Certificates, by accepting a Trust Certificate,
and the Indenture Trustee and each holder of the Notes by accepting the
benefits of this Trust Agreement, 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 Trust Agreement or any of the other
Basic Documents.
SECTION 11.09. No Recourse. Each holder of the Trust Certificates by
accepting a Trust Certificate acknowledges that such holder's Trust Certificates
represent beneficial interests in the Trust only and do not represent interests
in or obligations of the Seller, the Master Servicer, the Administrator, the
Eligible Lender Trustee, the Indenture Trustee or any Affiliate thereof or any
officer, director or employee of any thereof and no recourse may be had against
such parties or their assets, except as may be expressly set forth or
contemplated in this Trust 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.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Trust Agreement to be duly executed by their respective officers
hereunto duly authorized, as of the day and year first above written.
_____________________________________,
not in its individual capacity but
solely as Eligible Lender Trustee,
By:
Name:
Title:
MELLON BANK, N.A.,
Depositor,
By:
Name:
Title:
Acknowledged and accepted as of the day
and year first above written:
_________________________________,
as Delaware Trustee
By: ______________________________
Name:
Title:
<PAGE>
EXHIBIT A
TO THE TRUST AGREEMENT
[FORM OF TRUST CERTIFICATE]
SEE REVERSE FOR CERTAIN DEFINITIONS
Unless this Trust Certificate is presented by an authorized
representative of The Depository Trust Company, a New York Corporation ("DTC"),
to the Issuer (as defined below) or its agent for registration of transfer,
exchange or payment, and any certificate issued is registered in the name of
Cede & Co. or in such other name as is requested by an authorized representative
of DTC (and any payment is made to Cede & Co. or to such other entity as is
requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as
the registered owner hereof, Cede & Co., has an interest herein.
THIS TRUST CERTIFICATE MAY NOT BE ACQUIRED BY OR FOR THE ACCOUNT OF A
BENEFIT PLAN (AS DEFINED BELOW). THIS CERTIFICATE IS NOT GUARANTEED OR INSURED
BY ANY GOVERNMENTAL AGENCY.
[THIS TRUST CERTIFICATE IS NONTRANSFERABLE.](1)
_______________
(1) To be included only on the Certificates issued to the Depositor and any
Certificates issued in exchange therefor.
NUMBER:
$___________
CUSIP NO.
MELLON STUDENT LOAN TRUST ____-_
FLOATING RATE ASSET BACKED CERTIFICATE
evidencing a fractional undivided interest in the Trust, as defined
below, the property of which includes a pool of law school, medical
school, dental school, graduate business school and other graduate
school student loans sold to the Trust by Mellon Bank, N.A.
(This Trust Certificate does not represent an interest in or
obligation of Mellon Bank, N.A., the Eligible Lender Trustee (as
defined below), the Delaware Trustee (as defined below) or any of
their respective affiliates, except to the extent described below.)
<PAGE>
THIS CERTIFIES THAT ____________________________________ is the
registered owner of _______________ dollars nonassessable, fully-paid,
fractional undivided interest in the Mellon Student Loan Trust ____-_ (the
"Trust"), a statutory business trust formed under the laws of the State of
Delaware by Mellon Bank, N.A., a national banking association (the "Seller").
The Trust was created pursuant to a Trust Agreement dated as of _______________,
____, as amended and restated as of _______________, ____ (the "Trust
Agreement"), between the Seller and ___________________________, a national
banking association, not in its individual capacity but solely as eligible
lender trustee on behalf of the Trust (the "Eligible Lender Trustee") and
pursuant to which ___________________ serves as Delaware Trustee (the "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 Appendix A to the Sale and
Servicing Agreement (the "Sale and Servicing Agreement") dated as of
_______________, ____, among the Trust, the Eligible Lender Trustee, the Seller,
Mellon Bank, N.A., as master servicer (the "Master Servicer"), and Mellon Bank,
N.A., as administrator (the "Administrator"); such Appendix A also contains
rules as to usage that shall be applicable herein.
This Certificate is one of the duly authorized Certificates designated
as "Floating Rate Asset Backed Certificates" (herein called the "Trust
Certificates"). Issued under the Indenture dated as of _______________, ____,
between the Trust and ___________________, as Indenture Trustee, are Notes
designated as "Floating Rate Asset Backed Notes" (the "Notes"). This Trust
Certificate is issued under and is subject to the terms, provisions and
conditions of the Trust Agreement, to which Trust Agreement the holder of this
Trust Certificate by virtue of the acceptance hereof assents and by which such
holder is bound. The property of the Trust includes a pool of undergraduate and
graduate school student loans (the "Financed Student Loans"), all moneys paid
thereunder on or after _______________, ____ (or, in the case of Financed
Student Loans that constitute Additional Student Loans, on or after the
respective Subsequent Cutoff Dates), certain bank accounts and the proceeds
thereof and certain other rights under the Trust Agreement and the Sale 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, as set forth in the Sale and Servicing
Agreement.
Under the Trust Agreement, to the extent of funds available therefor,
interest on the Certificate Balance of this Trust Certificate at the Certificate
Rate for this Trust Certificate, and principal and certain other amounts will be
distributed on the twenty-fifth day of each _____, _____, _____ and _____ (or,
if such twenty-fifth day is not a Business Day, the next succeeding Business
Day) (each a "Distribution Date"), commencing on _________, ___ to the person in
whose name this Trust Certificate is registered at the close of business on the
twenty-sixth day of the calendar month in which such Distribution Date occurs
(the "Record Date"), in each case to the extent of such holder's fractional
undivided interest in the amount or amounts to be distributed to the holders of
the Trust Certificates on such Distribution Date pursuant to the Sale and
Servicing Agreement.
The Trust Certificates may be paid in part, in certain circumstances
on a pro rata basis among all holders of Securities, on _______________, ____,
to the extent the Subsequent Pool Pre-Funded Amount is greater than $10,000,000
as of the Special Determination Date after giving effect to the purchase of any
Subsequent Pool Student Loans on such date.
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 holders of the Notes as described in the Sale and Servicing
Agreement and the Indenture.
It is the intent of the Seller, the Master Servicer, the
Administrator, the holders of the Trust Certificates and the Certificate Owners
that, for purposes of Federal income, state and local income and franchise and
any other income taxes, the Trust will be treated as a partnership and the
holders of the Trust Certificates (including the Depositor in its capacity as
recipient of distributions from the Reserve Account) will be treated as partners
in that partnership. The Depositor and the other holders of the Trust
Certificates by acceptance of a Trust Certificate (and the Certificate Owners by
acceptance of a beneficial interest in a Trust Certificate), agree to treat, and
to take no action inconsistent with the treatment of, the Trust Certificates for
such tax purposes as partnership interests in the Trust.
Each holder of a Trust Certificate or Certificate Owner, by its
acceptance of a Trust Certificate or, in the case of a Certificate Owner, a
beneficial interest in a Trust Certificate, covenants and agrees that such
holder or Certificate Owner, as the case may be, will not at any time institute
against the Seller or the Trust, or join in any institution against the Seller
or the Trust of, any bankruptcy, reorganization, arrangement, insolvency,
receivership or liquidation proceedings, or other proceedings under any United
States Federal or state bankruptcy or similar law in connection with any
obligations relating to the Trust Certificates, the Notes, the Trust Agreement
or any of the other Basic Documents.
The Trust Certificates do not represent an obligation of, or an
interest in, the Seller, 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 or
contemplated herein, in the Trust Agreement or in the other Basic Documents. In
addition, this Trust Certificate is not guaranteed by any governmental agency or
instrumentality and is limited in right of payment to certain collections with
respect to the Financed Student Loans, all as more specifically set forth in the
Sale and Servicing Agreement. A copy of each of the Sale and Servicing Agreement
and the Trust Agreement may be examined during normal business hours at the
principal office of the Seller, and at such other places, if any, designated by
the Seller, by any holder of the Trust Certificates upon request.
The Trust Certificates (including any beneficial interests therein)
may not be acquired by or for the account of (i) an employee benefit plan (as
defined in Section 3(3) of ERISA) that is subject to the provisions of Title I
of ERISA, (ii) an individual retirement account described in Section 408(a) of
the Internal Revenue Code of 1986, as amended, or (iii) any entity whose
underlying assets include plan assets by reason of a plan's investment in the
entity (each, a "Benefit Plan"). By accepting and holding this Trust
Certificate, the Holder hereof shall be deemed to have represented and warranted
that it is not a Benefit Plan.
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.
Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Eligible Lender Trustee or its
authenticating agent, by manual signature, this Trust Certificate shall not
entitle the holder hereof to any benefit under the Trust Agreement or the Sale
and Servicing Agreement or be valid for any purpose.
IN WITNESS WHEREOF, the Eligible Lender Trustee on behalf of the Trust
and not in its individual capacity has caused this Trust Certificate to be duly
executed as of the date set forth below.
MELLON STUDENT LOAN TRUST ____-_
By: _________________________________,
not in its individual capacity but
solely as Eligible Lender Trustee,
By: _________________________________
Authorized Signatory
Date: _______________, ____
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Trust Certificates referred to in the within-mentioned Trust
Agreement.
_________________________________, not
in its individual capacity but solely as
Eligible Lender Trustee,
By: ___________________________________
Authorized Signatory
[OR
_________________________________, not
in its individual capacity but solely as
Eligible Lender Trustee,
By: _________________________________,
as Authenticating Agent,
By: ___________________________________
Authorized Signatory
Date: _______________, ____
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
(Please print or type name and address, including postal zip code, of assignee)
the within Trust Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
Attorney to transfer said Trust Certificate on the books
of the Certificate Registrar, with full power of substitution in the premises.
Dated:
*
Signature Guaranteed:
*
* NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Trust Certificate in every particular,
without alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member firm of the New York Stock Exchange or a commercial bank
or trust company.
EXHIBIT 5.1
STROOCK & STROOCK & LAVAN LLP
180 Maiden Lane
New York, New York 10038-4982
March 13, 2000
Mellon Bank, N.A.
One Mellon Bank Center
500 Grant Street
Pittsburgh, Pennsylvania 15258
Ladies and Gentlemen:
We have acted as counsel to Mellon Bank, N.A., a national banking association
(the "Bank"), in connection with the preparation of the registration statement
on Form S-3 (No. 333-86639) (the "Registration Statement"), relating to the
proposed offering from time to time in one or more series (each, a "Series") by
one or more trusts to be formed by the Bank of asset backed notes (the "Notes")
and asset backed certificates (the "Certificates," and, together with the Notes,
the "Securities"). The Registration Statement has been filed with the Securities
and Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Act"). As set forth in the Registration Statement, each Series of
Securities is to be issued under and pursuant to the terms of a separate pooling
and servicing agreement, or sale and servicing agreement, trust agreement and
indenture (each, an "Agreement") among the Bank, as seller and master servicer,
and one or more independent trustees (each, a "Trustee") to be identified in the
prospectus supplement for such Series of Securities.
As such counsel, we have examined copies of the Articles of Association and
By-Laws of the Bank, the Registration Statement, the base Prospectus and form of
Prospectus Supplement included therein, the form of each Agreement, and
originals or copies of such other corporate minutes, records, agreements and
other instruments of the Bank, certificates of public officials and other
documents and have made such examinations of law, as we have deemed necessary to
form the basis for the opinions hereinafter expressed. In our examination of
such materials, 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 all copies submitted to us. As to various questions of
fact material to such opinion, we have relied, to the extent we deemed
appropriate, upon representations, statements and certificates of officers and
representatives of the Bank and others.
<PAGE>
Mellon Bank, N.A.
March 13, 2000
Page 2
Attorneys involved in the preparation of this opinion are admitted to practice
law in the State of New York and we do not express any opinion herein concerning
any law other than the federal laws of the United States of America and the laws
of the States of New York and Delaware.
Based upon and subject to the foregoing, we are of the opinion that:
1. When the issuance, execution and delivery of each Series of Notes have
been authorized by all necessary corporate action of the Bank in accordance with
the provisions of the related Agreement or Agreements, and when such Notes have
been duly executed and delivered, authenticated by the related Trustee and sold
as described in the Registration Statement, such Notes will be legally issued,
fully paid and non-assessable and constitute valid and binding obligations of
the issuer thereof in accordance with their terms and the terms of such
Agreement or Agreements. This opinion is subject to the effect of bankruptcy,
insolvency, moratorium, fraudulent conveyance and similar laws relating to or
affecting creditors' rights generally and court decisions with respect thereto
and we express no opinion with respect to the application of equitable
principles or remedies in any proceeding, whether at law or in equity.
2. When the issuance, execution and delivery of each Series of Certificates
have been authorized by all necessary corporate action of the Bank in accordance
with the provisions of the related Agreement or Agreements, and when such
Certificates have been duly executed and delivered, authenticated by the related
Trustee and sold as described in the Registration Statement, such Certificates
will be legally issued, fully paid and non-assessable.
3. We hereby confirm and adopt the opinions set forth in the Prospectus
under the heading "Federal Income Tax Consequences."
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to this firm under the captions
"Federal Income Tax Consequences" and "Legal Matters" in the Prospectus which
forms a part of the Registration Statement. In giving such consent, we do not
admit hereby that we come within the category of persons whose consent is
required under Section 7 of the Act or the Rules and Regulations of the
Commission thereunder.
Very truly yours,
/s/ Stroock & Stroock & Lavan LLP
STROOCK & STROOCK & LAVAN LLP
EXHIBIT 10.1
FORM OF
SALE AND SERVICING AGREEMENT
among
MELLON STUDENT LOAN TRUST ___-____
as Issuer,
MELLON BANK, N.A.,
as Seller,
MELLON BANK, N.A.,
as Master Servicer,
----------------------------------------,
not in its individual capacity but solely
as Eligible Lender Trustee,
and
MELLON BANK, N.A.,
as Administrator
Dated as of __________, ____
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I Definitions and Usage...........................................1
ARTICLE II Conveyance of Financed Student Loans............................2
SECTION 2.01. Conveyance of Initial Financed Student Loans...............2
SECTION 2.02. Conveyance of Subsequent Pool Student Loans and
Other Subsequent Student Loans.............................2
SECTION 2.03. Conveyance of Financed Student Loans by the Eligible
Lender Trustee to the Seller in Connection with
Consolidation Loans........................................4
SECTION 2.04. Endorsement................................................4
ARTICLE III The Financed Student Loans......................................5
SECTION 3.01. Representations and Warranties of Seller with Respect
to the Financed Student Loans..............................5
SECTION 3.02. Repurchase upon Breach; Reimbursement......................8
SECTION 3.03. Custody of Financed Student Loan Files.....................8
SECTION 3.04. Duties of Master Servicer as Custodian.....................9
SECTION 3.05. Instructions; Authority To Act............................10
SECTION 3.06. Custodian's Indemnification...............................10
SECTION 3.07. Effective Period and Termination..........................10
SECTION 3.08. Schedule of Financed Student Loans........................11
ARTICLE IV Administration and Servicing of Financed Student Loans.........11
SECTION 4.01. Duties of Master Servicer.................................11
SECTION 4.02. Collection of Financed Student Loan Payments..............13
SECTION 4.03. Realization upon Financed Student Loans...................14
SECTION 4.04. Computation of Note Interest Rate and Certificate Rate....14
SECTION 4.05. No Impairment.............................................15
SECTION 4.06. Purchase of Financed Student Loans; Reimbursement.........15
SECTION 4.07. Master Servicing Fee; Excess Servicing Fee................16
SECTION 4.08. Administrator's Certificate; Servicer's Report............16
SECTION 4.09. Annual Statement as to Compliance; Notice of Default......17
SECTION 4.10. Annual Independent Certified Public Accountants'
Report....................................................18
SECTION 4.11. Access to Certain Documentation and Information
Regarding Financed Student Loans..........................19
SECTION 4.12. Master Servicer and Administrator Expenses................19
SECTION 4.13. Appointment of Sub-Servicers..............................19
SECTION 4.14. Special Programs..........................................20
ARTICLE V Distributions; Accounts; Statements to Certificateholders
and Noteholders................................................20
SECTION 5.01. Establishment of Trust Accounts...........................20
SECTION 5.02. Collections...............................................22
SECTION 5.03. Application of Collections................................23
SECTION 5.04. Additional Deposits.......................................23
SECTION 5.05. Distributions.............................................23
SECTION 5.06. Reserve Account...........................................25
SECTION 5.07. Statements to Certificateholders and Noteholders..........27
SECTION 5.08. Pre-Funding Account.......................................29
SECTION 5.09. Seller Optional Deposit...................................31
ARTICLE VI The Seller and the Administrator...............................32
SECTION 6.01. Representations of Seller and Administrator...............32
SECTION 6.02. Existence.................................................33
SECTION 6.03. Liability of Seller; Indemnities..........................34
SECTION 6.04. Liability of Administrator; Indemnities...................35
SECTION 6.05. Merger or Consolidation of, or Assumption of the
Obligations of, Seller or Administrator...................36
SECTION 6.06. Limitation on Liability of Seller, Administrator and
Others....................................................37
SECTION 6.07. Seller May Own Certificates or Notes......................37
SECTION 6.08. Mellon Bank, N.A., Not To Resign as Administrator.........37
ARTICLE VII The Master Servicer............................................38
SECTION 7.01. Representations of Master Servicer........................38
SECTION 7.02. Indemnities of Master Servicer............................39
SECTION 7.03. Merger or Consolidation of, or Assumption of the
Obligations of, Master Servicer...........................40
SECTION 7.04. Limitation on Liability of Master Servicer and Others.....41
SECTION 7.05. Mellon Bank, N.A. Not To Resign...........................42
ARTICLE VIII Default........................................................42
SECTION 8.01. Master Servicer Default; Administrator Default............42
SECTION 8.02. Appointment of Successor..................................45
SECTION 8.03. Notification to Noteholders and Certificateholders........46
SECTION 8.04. Waiver of Past Defaults...................................46
ARTICLE IX Termination....................................................46
SECTION 9.01. Termination...............................................46
ARTICLE X Additional Provisions Regarding Financed Student Loans.........49
SECTION 10.01. Periodic Reports..........................................49
SECTION 10.02. Cooperation...............................................49
SECTION 10.03. Confidentiality...........................................50
SECTION 10.04. Future Purchases..........................................50
SECTION 10.05. [Reserved]................................................51
SECTION 10.06. Bids/First Refusal Rights.................................51
SECTION 10.07. Consolidation Loans.......................................51
ARTICLE XI Miscellaneous..................................................52
SECTION 11.01. Amendment.................................................52
SECTION 11.02. Protection of Interests in Trust..........................53
SECTION 11.03. Notices...................................................55
SECTION 11.04. Assignment................................................55
SECTION 11.05. Limitations on Rights of Others...........................56
SECTION 11.06. Severability..............................................56
SECTION 11.07. Separate Counterparts.....................................56
SECTION 11.08. Headings..................................................56
SECTION 11.09. Governing Law.............................................56
SECTION 11.10. Assignment to Indenture Trustee...........................56
SECTION 11.11 Nonpetition Covenants.....................................56
SECTION 11.12. Limitation of Liability of Eligible Lender Trustee and
Indenture Trustee.........................................57
APPENDIX A Definitions and Usage
SCHEDULE A Schedule of Initial Financed Student Loans
SCHEDULE B Schedule of Additional Student Loans
SCHEDULE C Location of Financed Student Loan Files
SCHEDULE D Provisions to be Audited Regarding
Master Servicer (Sub-Servicers) and Administrator
SCHEDULE E Servicing Fees Schedule
EXHIBIT A Form of Report to Noteholders
EXHIBIT B Form of Report to Certificateholders
EXHIBIT C [RESERVED]
EXHIBIT D Form of Assignment on Closing Date
EXHIBIT E Form of Transfer Agreement
<PAGE>
[FORM OF] SALE AND SERVICING AGREEMENT dated as of __________, ____,
among MELLON STUDENT LOAN TRUST ____-____, a Delaware business trust (the
"Issuer"), MELLON BANK, N.A., a national banking association (the "Seller"),
MELLON BANK, N.A., a national banking association, as master servicer (the
"Master Servicer"), ____________________, a national banking association, solely
as eligible lender trustee on behalf of the Issuer and not in its individual
capacity (the "Eligible Lender Trustee"), and MELLON BANK, N.A., a national
banking association, as administrator (the "Administrator").
WHEREAS, on __________, ____, the Seller assigned to the Issuer its
rights in a portfolio of undergraduate and graduate school student loans
originated in the ordinary course of business by the Seller or its predecessors,
subject to revocation by the Seller;
WHEREAS, the Seller intends to assign to the Issuer during a limited
period additional student loans it currently owns and student loans it may
originate or acquire in the future;
WHEREAS, the Issuer desires to purchase, and the Seller is willing to
sell to the Issuer, such student loans;
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;
WHEREAS, the Master Servicer is willing to master service such student
loans; and
WHEREAS, the Administrator is willing undertake certain administrative
functions with respect to such student loans.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND USAGE
Capitalized terms used but not defined herein are defined in Appendix
A hereto, which also contains rules as to usage and construction that shall be
applicable herein.
ARTICLE II
CONVEYANCE OF FINANCED STUDENT LOANS
SECTION 2.01. CONVEYANCE OF INITIAL FINANCED STUDENT LOANS. In
consideration of the Issuer's delivery to or upon the order of the Seller on the
Closing Date of the net proceeds from the sale of the Notes and the Certificates
and the other amounts to be distributed from time to time to the Seller in
accordance with the terms of this Agreement, the Seller does hereby, as
evidenced by a duly executed written assignment in the form of Exhibit D, sell,
transfer, assign, set over and otherwise convey to the Issuer (or, in the case
of the Initial Financed Student Loans, to the Eligible Lender Trustee on behalf
of the Issuer), without recourse (subject to the obligations herein):
(i) all right, title and interest of the Seller in and to the Initial
Financed Student Loans and all obligations of the Obligors thereunder,
including all moneys paid thereunder, and all written communications
received by the Seller with respect thereto (including borrower
correspondence, notices of death, disability or bankruptcy and requests for
deferrals or forbearances), on or after the Cutoff Date;
(ii) [Reserved];
(iii) all right, title and interest of the Seller in and to all funds
on deposit from time to time in the Trust Accounts, including, but not
limited to, the Reserve Account Initial Deposit and the Pre-Funded Amount
(including all income thereon); and
(iv) the proceeds of any and all of the foregoing.
SECTION 2.02. CONVEYANCE OF SUBSEQUENT POOL STUDENT LOANS AND OTHER
SUBSEQUENT STUDENT LOANS. (a) Subject to the conditions set forth in paragraph
(b) below, in consideration of the Issuer's delivery on the related Transfer
Date to or upon the order of the Seller of the amount described in Section
5.08(a) to be delivered to the Seller, the Seller does hereby sell, transfer,
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 of the Seller in and to each Subsequent Pool Student Loan and
each Other Subsequent Student Loan, and all obligations of the Obligors
thereunder including all moneys paid thereunder, and all written communications
received by the Seller with respect thereto (including borrower correspondence,
notices of death, disability or bankruptcy and requests for deferrals or
forbearances), on and after the related Subsequent Cutoff Date, made from time
to time during the Funding Period.
(b) The Seller shall transfer to the Eligible Lender Trustee on behalf
of the Issuer the Subsequent Pool Student Loans and/or the Other Subsequent
Student Loans for a given Transfer Date and the other property and rights
related thereto described in paragraph (a) above only upon the satisfaction of
each of the following conditions on or prior to such Transfer Date:
(i) the Seller shall have delivered to the Eligible Lender Trustee and
the Indenture Trustee a duly executed written assignment (including an
acceptance by the Eligible Lender Trustee and the Indenture Trustee) in
substantially the form of Exhibit E (each, a "Transfer Agreement"), which
shall include supplements to Schedule B listing such Subsequent Pool
Student Loans and/or the Other Subsequent Student Loans, as applicable;
(ii) except any of the Additional Student Loans transferred on the
Closing Date or the day immediately following, the Seller shall have
delivered, at least two days prior to such Transfer Date, notice of such
transfer to the Eligible Lender Trustee, the Indenture Trustee and the
Rating Agencies, including a listing of the designation and the aggregate
principal balance of such Subsequent Pool Student Loans or Other Subsequent
Student Loans, as the case may be;
(iii) the Seller shall, to the extent required by Section 5.02, have
deposited in the Collection Account all collections in respect of the
Subsequent Pool Student Loans and/or Other Subsequent Student Loans on and
after each applicable Subsequent Cutoff Date;
(iv) as of each Transfer Date, the Seller was not insolvent nor will
it have been made insolvent by such transfer nor is it aware of any pending
insolvency;
(v) such addition will not result in a material adverse Federal or
State tax consequence to the Issuer, the holders of Notes or the holders of
Certificates;
(vi) the Funding Period shall not have terminated and, with respect to
Subsequent Pool Student Loans, the Transfer Date is on or prior to the
Special Determination Date;
(vii) the Seller shall have delivered to the Indenture Trustee and the
Eligible Lender Trustee an Officers' Certificate confirming the
satisfaction of each condition precedent specified in this paragraph (b);
(viii) the Seller shall have delivered (A) to the Rating Agencies an
Opinion of Counsel with respect to the transfer of the Subsequent Pool
Student Loans and/or Other Subsequent Student Loans transferred on such
Transfer Date, substantially in the form of the Opinion of Counsel
delivered to the Rating Agencies on the Closing Date, and (B) to the
Eligible Lender Trustee and the Indenture Trustee the Opinion of Counsel
required by Section 11.02(i)(1);
(ix) the Seller shall have taken any action required to maintain the
first perfected ownership interest of the Issuer in the Trust Estate and
the first perfected security interest of the Indenture Trustee in the
Collateral;
(x) no selection procedures believed by the Seller to be adverse to
the interests of the holders of Certificates or the holders of Notes shall
have been utilized in selecting the Subsequent Pool Student Loans or the
Other Subsequent Student Loans; and
(xi) no Consolidation Loan will be transferred to the Issuer unless at
least one underlying student loan to be consolidated is a Financed Student
Loan already held by the Eligible Lender Trustee on behalf of the Issuer;
PROVIDED, HOWEVER, that the Seller shall not incur any liability as a result of
transferring Subsequent Pool Student Loans or Other Subsequent Student Loans on
any Transfer Date at a time when the condition set forth in clause (v) was not
satisfied, if at the time of such transfer the Authorized Officers of the
Seller, after reasonable inquiry of in-house counsel to the Seller, were not
aware of any fact that would reasonably suggest that such condition would not be
satisfied as of such date.
(c) The Seller covenants to transfer during the Funding Period to the
Eligible Lender Trustee on behalf of the Issuer pursuant to paragraph (a) above
Other Subsequent Student Loans with an aggregate principal balance of not less
than $__________ (less the Pre-Funded Amount thereof, if any, used by the Trust
to fund shortfalls in the payment of interest on the Notes and the
Certificates); PROVIDED, HOWEVER, that the Seller shall have no liability for a
breach of the foregoing covenant as a result of the Seller not having made or
owned prior to the date hereof Other Subsequent Student Loans equal to the
amount specified above during the Funding Period, the Seller not being able to
transfer Other Subsequent Student Loans because of Section 2.02(b)(xii) or there
being insufficient funds available in the Escrow Account and the Pre-Funding
Account for the Eligible Lender Trustee to consummate such acquisitions.
SECTION 2.03. CONVEYANCE OF FINANCED STUDENT LOANS BY THE ELIGIBLE
LENDER TRUSTEE TO THE SELLER IN CONNECTION WITH CONSOLIDATION LOANS. On any
date, upon receipt of written notice (or telephonic or facsimile notice followed
by written notice) from the Seller (or from the Master Servicer (or a
Sub-Servicer) on behalf of the Seller) by the Eligible Lender Trustee and the
Indenture Trustee, the Eligible Lender Trustee will convey to the Seller the
Financed Student Loans identified in such notice, which are to be repaid
pursuant to the Consolidation Loans to be made by the Seller.
SECTION 2.04. ENDORSEMENT. The Seller hereby appoints each of the
Eligible Lender Trustee and the Indenture Trustee as the Seller's true and
lawful attorney-in-fact with full power of substitution to endorse the Seller's
name on any promissory note evidencing the Initial Financed Student Loans and
any Additional Student Loans transferred to the Eligible Lender Trustee on
behalf of the Trust pursuant to Sections 2.01 and 2.02. The Seller acknowledges
and agrees that this power of attorney shall be construed as a power coupled
with an interest, shall be irrevocable as long as the Trust Agreement remains in
effect and shall continue in effect until the Trust Agreement terminates.
ARTICLE III
THE FINANCED STUDENT LOANS
SECTION 3.01. REPRESENTATIONS AND WARRANTIES OF SELLER WITH RESPECT TO
THE FINANCED STUDENT LOANS. The Seller 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) the Financed
Student Loans. Such representations and warranties speak as of the execution and
delivery of this Agreement and as of the Closing Date, in the case of the
Initial Financed Student Loans and the Subsequent Pool Student Loans, and as of
the applicable Transfer Date, in the case of the Other Subsequent Student Loans,
but shall survive the sale, transfer and assignment of the Financed Student
Loans to the Eligible Lender Trustee on behalf of the Issuer and the pledge
thereof to the Indenture Trustee pursuant to the Indenture.
(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 by the Seller in
the ordinary course of its business to an eligible borrower under
applicable law and agreements and was fully and properly executed by the
parties thereto and (B) 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 yield interest at the rate applicable thereto, as such
maturity may be modified in accordance with any applicable deferral or
forbearance periods granted in accordance with applicable laws and
restrictions, including those of the Higher Education Act, any Guarantee
Agreement or the Programs. Each Financed Student Loan that is a Financed
Federal Loan qualifies the holder thereof to receive Interest Subsidy
Payments (other than SLS Loans, unsubsidized Stafford Loans and certain
Consolidation Loans) and Special Allowance Payments from the Department and
Guarantee Payments from the applicable Guarantor and qualifies the
applicable Guarantor to receive reinsurance payments thereon from the
Department.
(ii) SCHEDULES OF FINANCED STUDENT LOANS. The information set forth in
Schedules A and B to this Agreement and Schedule A to the related Transfer
Agreement is true and correct in all material respects as of the opening of
business on the Cutoff Date (with respect to Schedules A and B to this
Agreement) or each applicable Subsequent Cutoff Date, as applicable, and no
selection procedures believed to be adverse to the holders of Notes or the
holders of Certificates were utilized in selecting the Initial Financed
Student Loans or the applicable Additional Student Loans, as applicable.
The computer tape regarding the Initial Financed Student Loans and the
Subsequent Pool Student Loans made available to the Issuer and its assigns
is true and correct in all respects as of the Cutoff Date.
(iii) COMPLIANCE WITH LAW. Each Financed Student Loan complied at the
time it was originated or made and at the execution of this Agreement or
the applicable Transfer Agreement, as the case may be, complies, and the
Seller 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, usury law, the Federal Truth-in-Lending
Act, the Equal Credit Opportunity Act, the Federal Reserve Board's
Regulation B and other consumer credit laws and equal credit opportunity
and disclosure laws and all applicable requirements of any Guarantee
Agreements.
(iv) BINDING OBLIGATION. Each Financed Student Loan represents the
genuine, legal, valid and binding payment obligation in writing of the
borrower thereof, enforceable by or on behalf of the holder thereof in
accordance with its terms, and no Financed Student Loan has been satisfied,
subordinated or rescinded, subject to clause (xiii) below.
(v) NO DEFENSES. No right of rescission, setoff, counterclaim or
defense has been asserted or threatened or exists with respect to any
Financed Student Loan.
(vi) NO DEFAULT. No Initial Financed Student Loan or Subsequent Pool
Student Loan has a payment that is more than 180 days overdue as of the
Cutoff Date or, with respect to the Other Subsequent Student Loans, more
than 90 days overdue as of the applicable Subsequent Cutoff Date, as the
case may be, and, except as permitted in this paragraph, no default,
breach, violation or event permitting acceleration under the terms of any
Financed Student Loan has occurred; and, except for payment defaults
continuing for a period of not more than 150 days or 90 days, as
applicable, no continuing condition that with notice or the lapse of time
or both would constitute a default, breach, violation or event permitting
acceleration under the terms of any Financed Student Loan has arisen; and
the Seller has not waived and shall not waive any of the foregoing other
than as permitted by the Basic Documents.
(vii) TITLE. It is the intention of the Seller that the transfer and
assignment herein contemplated constitute a sale of the Financed Student
Loans from the Seller to the Eligible Lender Trustee on behalf of the
Issuer and that the beneficial interest in and title to such Financed
Student Loans not be part of the debtor's estate in the event of the
appointment of a receiver with respect to the Seller. No Financed Student
Loan has been sold, transferred, assigned or pledged by the Seller to any
Person other than the Eligible Lender Trustee on behalf of the Issuer.
Immediately prior to the transfer and assignment herein contemplated, the
Seller 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 or the transfer shall have been
perfected under the UCC.
(viii) LAWFUL ASSIGNMENT. No Financed Student Loan has been originated
in, or is subject to the laws of, any jurisdiction under which the sale,
transfer and assignment of such Financed Student Loan or any Financed
Student Loan under this Agreement, each Transfer Agreement or the Indenture
is unlawful, void or voidable.
(ix) SECURITY INTEREST PERFECTED. All filings (including UCC filings)
and/or delivery requirements necessary in any jurisdiction to give the
Eligible Lender Trustee on behalf of the Issuer a first perfected ownership
interest in the Financed Student Loans, and to give the Indenture Trustee a
first perfected security interest therein, have been made or satisfied, as
the case may be.
(x) ONE ORIGINAL. There is only one original executed copy of the
promissory note evidencing each Financed Student Loan.
(xi) PRINCIPAL BALANCE. The aggregate principal balance of the Initial
Financed Student Loans, plus accrued interest to be capitalized with
respect thereto, as of __________, ____, is $________________, and the
aggregate principal balance of the Subsequent Pool Student Loans, plus
accrued interest to be capitalized with respect thereto, as of __________,
____ is $________________.
(xii) NO CLAIMS. As of the Cutoff Date, no claim for payment with
respect to an Initial Financed Student Loan has been made to a Guarantor,
and as of the related Subsequent Cutoff Date no claim for payment with
respect to an Additional Student Loan will have been made.
(xiii) NO BANKRUPTCIES OR DEATHS. No borrower of any Financed Student
Loan as of __________, ____ (in the case of the Initial Financed Student
Loans), or the applicable Subsequent Cutoff Date (in the case of Additional
Student Loans) was noted in the related Financed Student Loan File as being
currently involved in a bankruptcy proceeding or as having died.
(xiv) [Reserved]
(xv) INTEREST ACCRUING. Each Financed Student Loan is accruing
interest (whether or not such interest is being paid currently, by the
borrower or by the Department, or is being capitalized), except as
otherwise expressly permitted by the Basic Documents.
(xvi) SELLER'S REPRESENTATIONS. The representations and warranties of
the Seller contained in Section 6.01 are true and correct.
SECTION 3.02. REPURCHASE UPON BREACH; REIMBURSEMENT. The Seller, 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 Seller's representations and
warranties made pursuant to Section 3.01 or Section 6.01. Unless any such breach
shall have been cured within 60 days following the discovery thereof by the
Eligible Lender Trustee or receipt by the Eligible Lender Trustee of written
notice from the Seller or the Master Servicer of such breach, the Seller shall
be obligated to repurchase any Financed Student Loan in which the interests of
the holders of Notes or the holders of Certificates are materially and adversely
affected by any such breach as of the first day succeeding the end of such
60-day period that is the last day of a Collection Period; provided that it is
understood that any such breach that does not affect any Guarantor's obligation
to guarantee payment of each Financed Student Loan that is a Financed Guaranteed
Loan to the Eligible Lender Trustee in accordance with the related Guarantee
Agreements will not be considered to have a material adverse effect for this
purpose. In consideration of and simultaneously with the repurchase of the
Financed Student Loan, the Seller shall remit the Purchase Amount, in the manner
specified in Section 5.04, and the Issuer shall execute such assignments and
other documents reasonably requested by the Seller in order to effect such
transfer. Upon any such transfer of a Financed Student Loan, legal title to, and
beneficial ownership and control of, the related Financed Student Loan File will
thereafter belong to the Seller. In addition, if any such breach by the Seller
does not trigger such a repurchase obligation but does result in the refusal by
a Federal Guarantor to guarantee all or a portion of the accrued interest, or
the loss (including any obligation of the Issuer to repay to the Department) of
certain Interest Subsidy Payments and Special Allowance Payments, with respect
to a Financed Federal Loan, then, unless such breach, if curable, is cured
within 60 days, the Seller shall reimburse the Issuer by remitting an amount
equal to the sum of all such non-guaranteed interest amounts and such forfeited
Interest Subsidy Payments and Special Allowance Payments in the manner specified
in Section 5.04. Subject to the provisions of Section 6.03, the sole remedy of
the Issuer, the Eligible Lender Trustee, the Indenture Trustee, the holders of
Notes or the holders of Certificates with respect to a breach of representations
and warranties pursuant to Section 3.01 and the agreement contained in this
Section shall be to require the Seller to repurchase Financed Student Loans or
to reimburse the Issuer as provided above pursuant to this Section, subject to
the conditions contained herein.
SECTION 3.03. CUSTODY OF FINANCED STUDENT LOAN FILES. To assure
uniform quality in servicing the Financed Student Loans and to reduce
administrative costs, the Issuer hereby appoints the Master Servicer, and the
Master Servicer hereby accepts such appointment, to act for the benefit of the
Issuer and the Indenture Trustee as custodian of the following documents or
instruments related to the Financed Student Loans (as set forth in Schedules A
and B hereto), which are hereby constructively delivered to the Indenture
Trustee, as pledgee of the Issuer (or, in the case of the Additional Student
Loans, will as of the applicable Transfer Date be constructively delivered to
the Indenture Trustee, as pledgee of the Issuer) with respect to each Financed
Student Loan:
(a) the original fully executed copy of the note evidencing the
Financed Student Loan;
(b) the original loan application fully executed by the borrower; and
(c) any and all other documents and computerized records that any of
the Master Servicer (or a Sub-Servicer on behalf of the Master Servicer), the
Administrator or the Seller 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, and without releasing the Master
Servicer from its duties and obligations hereunder, the Master Servicer may
appoint one or more Sub-Servicers to act as "custodian" on its behalf with
respect to the Financed Student Loans such Sub-Servicer is servicing, in each
case consistent with the terms of this Article III, and all references to the
Master Servicer shall be read to apply to such Sub-Servicer acting on behalf of
the Master Servicer.
SECTION 3.04. DUTIES OF MASTER SERVICER AS CUSTODIAN. (a) SAFEKEEPING.
The Master Servicer, as custodian, shall (or shall cause the applicable
Sub-Servicers to) hold the Financed Student Loan Files for the benefit of the
Issuer and the Indenture Trustee and maintain such accurate and complete
accounts, records and computer systems pertaining to each Financed Student Loan
File as shall enable the Issuer to comply with this Agreement. In performing its
duties as custodian the Master Servicer shall (or shall cause the applicable
Sub-Servicers to) act with reasonable care, using that degree of skill and
attention that the Master Servicer (or such Sub-Servicer) exercises with respect
to the student loan files relating to all comparable student loans that the
Master Servicer (or such Sub-Servicer) services and shall ensure that it
complies fully and completely with all applicable Federal and State laws,
including the Higher Education Act, with respect thereto. The Master Servicer
shall (or shall cause the applicable Sub-Servicers to) conduct, or cause to be
conducted, periodic audits of the Financed Student Loan Files held by it under
this Agreement and of the related accounts, records and computer systems, in
such a manner as shall enable the Issuer or the Indenture Trustee to verify the
accuracy of the Master Servicer's (or such Sub-Servicer's) record keeping. The
Master Servicer shall (or shall cause the applicable Sub-Servicers to) promptly
report to the Issuer and the Indenture Trustee any failure on its part (or on
the part of Sub-Servicer) 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, as
custodian, shall (or shall cause the applicable Sub-Servicers to) maintain each
Financed Student Loan File at one of its offices (or the offices of the
applicable Sub-Servicer) specified in Schedule C to this Agreement or at such
other office as shall be specified by written notice to the Issuer and the
Indenture Trustee not later than 90 days after any change in location. Upon
reasonable prior notice, the Master Servicer shall (or shall cause the
applicable Sub-Servicers to) make available to the Issuer and the Indenture
Trustee or their respective duly authorized representatives, attorneys or
auditors a list of locations of the Financed Student Loan Files and the related
accounts, records and computer systems maintained by the Master Servicer (or
such Sub-Servicer) at such times during normal business hours as the Issuer or
the Indenture Trustee shall instruct.
(c) RELEASE OF DOCUMENTS. Upon instruction from the Indenture Trustee,
the Master Servicer, as custodian, shall (or shall cause the applicable
Sub-Servicers to) release any Financed Student Loan File to the Indenture
Trustee, the Indenture Trustee's agent, or the Indenture Trustee's designee, as
the case may be, at such place or places as the Indenture Trustee may designate,
as soon as practicable.
SECTION 3.05. INSTRUCTIONS; AUTHORITY TO ACT. The Master Servicer, as
custodian, 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 3.06. CUSTODIAN'S INDEMNIFICATION. The Master Servicer as
custodian shall pay for any loss, liability or expense, including reasonable
attorney's fees, that may be imposed on, incurred by or asserted against the
Issuer, the Eligible Lender Trustee or the Indenture Trustee or any of their
officers, directors, employees and agents as the result of any improper act or
omission in any way relating to the maintenance and custody by the Master
Servicer (or any Sub-Servicer) as custodian of the Financed Student Loan Files
where the final determination that any such improper act or omission by the
Master Servicer resulted in such loss, liability or expense is established by a
court of law, by an arbitrator or by way of settlement agreed to by the Master
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.
SECTION 3.07. EFFECTIVE PERIOD AND TERMINATION. The appointment of the
Master Servicer as custodian shall become effective as of the Closing Date and
shall continue in full force and effect for so long as the 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 8.01, 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 it holds consisting of electronic
records and information, and (ii) 40 Business Days, with respect to the
remaining portion of the Financed Student Loan Files it holds), the Master
Servicer shall (or shall cause the applicable Sub-Servicers to) deliver the
Financed Student Loan Files it holds to the Indenture Trustee or the Indenture
Trustee's agent at such place or places as the Indenture Trustee may reasonably
designate.
SECTION 3.08. SCHEDULE OF FINANCED STUDENT LOANS. Schedules A and B
hereto shall indicate by name any Sub-Servicer who has been appointed by the
Master Servicer to service, on behalf of the Master Servicer, each Financed
Student Loan. Such indication may be amended by the Master Servicer, from time
to time, to replace the name of the applicable Sub-Servicer, in accordance with
the provisions of this Agreement relating to the servicing of the Financed
Student Loans.
ARTICLE IV
ADMINISTRATION AND SERVICING OF FINANCED STUDENT LOANS
SECTION 4.01. DUTIES OF MASTER SERVICER. The Master Servicer, for the
benefit of the Issuer (to the extent provided herein), shall (or shall cause the
applicable Sub-Servicer to) manage, service, administer and make collections on
the Financed Student Loans with reasonable care, using that degree of skill and
attention that the Master Servicer (or such Sub-Servicer) exercises with respect
to all comparable student loans that it services. 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 (or shall cause the applicable Sub-Servicer
to) 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 with, and otherwise comply with, all
applicable Federal and state laws, including all applicable standards,
guidelines and requirements of the Higher Education Act (in the case of the
Financed Federal Loans) and any Guarantee Agreement (in the case of the Financed
Guaranteed Loans), the failure to comply with which would adversely affect the
eligibility of one or more of the Financed Federal Loans for federal reinsurance
or Interest Subsidy Payments or Special Allowance Payments or one or more of the
Financed Guaranteed Loans for receipt of Guarantee Payments or would have an
adverse effect on the holders of Certificates or the holders of Notes. The
Master Servicer also hereby acknowledges that its obligation to service (or to
cause the applicable Sub-Servicer to sub-service on its behalf) the Financed
Student Loans includes those Additional Student Loans conveyed by the Seller to
the Eligible Lender Trustee on behalf of the Trust pursuant to Section 2.02 and
the related Transfer Agreement, a copy of which shall be delivered to the Master
Servicer by the Seller promptly upon execution thereof; PROVIDED that any
failure by the Seller to so deliver a Transfer Agreement shall not affect the
Master Servicer's obligations hereunder to service (or to cause the applicable
Sub-Servicer to sub-service on its behalf) all the Financed Student Loans.
The Master Servicer's duties (or the duties of the applicable
Sub-Servicers on behalf of the Master Servicer) shall include collection and
posting of all payments, responding to inquiries of borrowers on such Financed
Student Loans, monitoring borrowers' status, making required disclosures to
borrowers, investigating delinquencies, sending payment coupons to borrowers and
otherwise establishing repayment terms, reporting tax information to borrowers,
if applicable, accounting for collections and furnishing monthly and annual
statements with respect thereto to the Administrator. Subject to the provisions
of Section 4.02, the Master Servicer shall (or shall cause the applicable
Sub-Servicer to) follow its customary standards, policies and procedures in
performing its duties as Master Servicer (or Sub-Servicer, as the case may be).
Without limiting the generality of the foregoing, the Master Servicer is
authorized and empowered to execute and deliver (and may cause the applicable
Sub-Servicer to execute and deliver), on behalf of itself, the Issuer, the
Eligible Lender Trustee, the Indenture Trustee, the holders of Certificates and
the holders of Notes 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 (nor will it permit a
Sub-Servicer to) (a) permit any rescission or cancellation of a Financed Student
Loan except as ordered by a court of competent jurisdiction or governmental
authority or as otherwise consented to in writing by the Eligible Lender Trustee
and the Indenture Trustee or (b) reschedule, revise, defer or otherwise
compromise with respect to payments due on any Financed Student Loan except
pursuant to any applicable deferral or forbearance periods or otherwise in
accordance with all applicable standards, guidelines and requirements of the
Higher Education Act, any Guarantee Agreement or the Programs with respect to
the servicing of the Financed Student Loans and except as otherwise permitted in
accordance with Section 4.14; PROVIDED FURTHER, HOWEVER, that the Master
Servicer shall not agree (nor shall it permit any Sub-Servicer to agree) to any
decrease of the interest rate on, or the principal amount payable with respect
to, any Financed Student Loan except in accordance with the applicable
standards, guidelines and requirements of the Higher Education Act, any
Guarantee Agreement or the Programs and as otherwise permitted in accordance
with Section 4.14. The Eligible Lender Trustee on behalf of the Issuer hereby
grants a power of attorney and all necessary authorization to the Master
Servicer to (or to cause the applicable Sub-Servicer to) maintain any and all
collection procedures with respect to the Financed Student Loans it services (or
sub-services), including filing, pursuing and recovering claims against the
Guarantors for Guarantee 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 holders of Certificates or the holders of Notes. 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 (or at the direction of the Master Servicer or the Administrator,
the related Sub-Servicer) with any other powers of attorney and other documents
reasonably necessary or appropriate to enable the Master Servicer or the
Administrator (or related Sub-Servicer) to carry out their servicing and
administrative duties hereunder (or under the related Sub-Servicing Agreement).
Notwithstanding the foregoing, and without releasing the Master
Servicer from its duties and obligations hereunder, the Master Servicer may
appoint one or more of the Sub-Servicers to act as "sub-servicer" on its behalf
with respect to the Financed Student Loans such Sub-Servicer is sub-servicing,
in each case consistent with the terms of this Article IV and any other
provision of this Agreement, and all references to the Master Servicer shall be
read to apply to such Sub-Servicer acting on behalf of the Master Servicer.
SECTION 4.02. COLLECTION OF FINANCED STUDENT LOAN PAYMENTS. (a) The
Master Servicer shall (or shall cause the applicable Sub-Servicer to) make
reasonable efforts (including all efforts that may be specified under the Higher
Education Act or any Guarantee Agreement) to collect all payments called for
under the terms and provisions of the Financed Student Loans as and when the
same shall become due and shall follow such collection procedures as it follows
with respect to all comparable student loans that it services. The Master
Servicer shall (or shall cause the applicable Sub-Servicer to) allocate
collections with respect to the Financed Student Loans between principal and
interest in accordance with Section 5.03. With the written consent of the
Administrator, the Master Servicer (or at the direction of the Master Servicer,
the related Sub-Servicer) may in its discretion waive any late payment charge or
any other fees that may be collected in the ordinary course of servicing a
Financed Student Loan.
(b) The Master Servicer shall (or shall cause the applicable
Sub-Servicer to) make reasonable efforts to claim, pursue and collect all
Guarantee Payments from the Guarantors pursuant to the Guarantee Agreements with
respect to any of the Financed Guaranteed Loans as and when the same shall
become due and payable, shall comply with all applicable laws and agreements
with respect to claiming, pursuing and collecting such payments and shall follow
such practices and procedures as it follows with respect to all comparable
guarantee agreements and student loans that it services. In connection
therewith, the Master Servicer is hereby authorized and empowered (or at the
direction of the Master Servicer, the related Sub-Servicer is authorized and
empowered) to convey to any Guarantor the note and the related Financed Student
Loan File representing any Financed Guaranteed Loan in connection with
submitting a claim to such Guarantor for a Guarantee Payment in accordance with
the terms of the applicable Guarantee Agreement.
(c) The Eligible Lender Trustee shall, with the assistance of the
Administrator as set forth below and on behalf of the Issuer, make reasonable
efforts to claim, pursue and collect all Interest Subsidy Payments and Special
Allowance Payments from the Department with respect to any of the Financed
Federal Loans as and when the same shall become due and payable, shall comply
with all applicable laws and agreements with respect to claiming, pursuing and
collecting such payments and shall follow such practices and procedures as the
Administrator follows with respect to its own student loans. All amounts so
collected by the Eligible Lender Trustee shall constitute Available Funds for
the applicable Collection Period and shall be deposited into the Collection
Account in accordance with Section 5.02. In connection therewith, the
Administrator shall prepare and file with the Department on a timely basis all
claims forms and other documents and filings necessary or appropriate in
connection with the claiming of Interest Subsidy Payments and Special Allowance
Payments on behalf of the Eligible Lender Trustee and shall otherwise assist the
Eligible Lender Trustee in pursuing and collecting such Interest Subsidy
Payments and Special Allowance Payments from the Department. The Eligible Lender
Trustee shall upon the written request of the Administrator furnish the
Administrator with any power of attorney and other documents reasonably
necessary or appropriate to enable the Administrator to prepare and file such
claims forms and other documents and filings.
The Eligible Lender Trustee may permit trusts, other than the Trust,
established by the Seller to securitize student loans to use the Department
lender identification number applicable to the Trust. In such event, the
Eligible Lender Trustee may claim and collect Interest Subsidy Payments and
Special Allowance Payments with respect to Financed Student Loans in the Trust
and student loans in such other trusts using such common lender identification
number. Notwithstanding anything herein or in the Basic Documents to the
contrary, any amounts assessed against payments (including, but not limited to,
Interest Subsidy Payments and Special Allowance Payments) due from the
Department or any Federal Guarantor to any such other trust using such common
lender identification number as a result of amounts (including, but not limited
to, the Federal Consolidation Loan Rebate) owing to the Department or any
Federal Guarantor 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 or any Federal Guarantor 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 or any Federal Guarantor to the Trust
as a result of amounts owing to the Department or any Federal Guarantor 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 4.03. REALIZATION UPON FINANCED STUDENT LOANS. For the benefit
of the Issuer, the Master Servicer shall (or shall cause the applicable
Sub-Servicer to) use reasonable efforts consistent with its customary servicing
practices and procedures and including all efforts that may be specified under
the Higher Education Act or any applicable Guarantee Agreement in its servicing
(or sub-servicing) of any delinquent Financed Student Loans.
SECTION 4.04. COMPUTATION OF NOTE INTEREST RATE AND CERTIFICATE RATE.
Prior to each Determination Date, the Administrator shall determine each Note
Interest Rate and the Certificate Rate that will be applicable to the
Distribution Date following such Determination Date, in compliance with its
obligation to prepare and deliver an Administrator's Certificate on such
Determination Date pursuant to Section 4.08. In connection therewith, the
Administrator shall calculate the T-Bill Rate in accordance with the definition
thereof calculate Three-Month LIBOR in accordance with the definition thereof
and shall also determine the Student Loan Rate with respect to such Distribution
Date; provided, however, that no such calculation of the Student Loan Rate shall
be required to be made unless the T-Bill Rate or Three-Month LIBOR for such
Interest Period is 100 basis points greater than the T-Bill Rate of the
preceding Determination Date or Three-Month LIBOR of the preceding Determination
Date, respectively, or with respect to T-Bill Indexed Securities only, the 52
Week Treasury Bill Rate is 100 basis points less than the T-Bill Rate as of such
Determination Date.
SECTION 4.05. NO IMPAIRMENT. The Master Servicer shall not (nor shall
it permit the applicable Sub-Servicer to) impair the rights of the Issuer, the
Eligible Lender Trustee, the Indenture Trustee, the holders of Certificates or
the holders of Notes in such Financed Student Loans.
SECTION 4.06. PURCHASE OF FINANCED STUDENT LOANS; REIMBURSEMENT. The
Eligible Lender Trustee or the Master Servicer (or the applicable Sub-Servicer
on its behalf) shall inform the other party as well as the Indenture Trustee and
the Seller promptly, in writing, upon the discovery of any breach pursuant to
Section 4.01, 4.02, 4.03 or 4.05. Unless the breach shall have been cured within
60 days following such discovery (or, at the Master Servicer's election, the
last day of the first month following such discovery), the Master Servicer shall
purchase any Financed Student Loan in which the interests of the holders of
Notes or the holders of Certificates are materially and adversely affected by
such breach as of the first day succeeding the end of such 60-day period that is
the last day of a Collection Period (it being understood that any such breach
that does not affect any Guarantor's obligation to guarantee payment of such
Financed Student Loan in accordance with Guarantee Agreements will not be
considered to have a material adverse effect for this purpose). If the Master
Servicer takes any action or fails to take any action (including, without
limitation, all actions taken or not taken by a Sub-Servicer on its behalf)
during any Collection Period pursuant to the sections referred to above that
impairs the rights of the Issuer, the Indenture Trustee, the Eligible Lender
Trustee, the holders of Certificates or the holders of Notes in any Financed
Student Loan or otherwise than as provided in such sections, the Master Servicer
shall purchase such Financed Student Loan as of the last day of such Collection
Period. In consideration of the purchase of any such Financed Student Loan
pursuant to either of the two preceding sentences, the Master Servicer shall
remit the Purchase Amount in the manner specified in Section 5.04. In addition,
if any such breach by the Master Servicer (or a Sub-Servicer acting on its
behalf) does not trigger such a purchase obligation but does result in the
refusal by a Federal Guarantor to guarantee all or a portion of the accrued
interest, or the loss (including any obligation of the Issuer to repay to the
Department) of certain Interest Subsidy Payments and Special Allowance Payments,
with respect to a Financed Federal Loan, then, unless such breach, if curable,
is cured within 60 days, the Master Servicer shall reimburse the Issuer by
remitting an amount equal to the sum of all such non-guaranteed interest amounts
and such forfeited Interest Subsidy Payments and Special Allowance Payments in
the manner specified in Section 5.04. Subject to Section 7.02, the sole remedy
of the Issuer, the Eligible Lender Trustee, the Indenture Trustee, the holders
of Certificates and the holders of Notes with respect to a breach pursuant to
Section 4.01, 4.02, 4.03 or 4.05 shall be to require the Master Servicer to
purchase Financed Student Loans or to reimburse the Issuer as provided above
pursuant to this Section. The Eligible Lender Trustee shall have no duty to
conduct any affirmative investigation as to the occurrence of any condition
requiring the purchase of any Financed Student Loan or the reimbursement for any
interest penalty pursuant to this Section 4.06. Notwithstanding the foregoing,
the Master Servicer, at its option, may permit or cause a Sub-Servicer to
purchase a Financed Student Loan from the Trust in its stead, in the manner and
for the reasons set forth above.
SECTION 4.07. MASTER SERVICING FEE; EXCESS SERVICING FEE. The Master
Servicing Fee for each calendar month payable on each Monthly Servicing Payment
Date and the amount of any Excess Servicing Fee payable on any Distribution Date
shall be equal to the amounts determined by reference to the schedule of fees as
set forth in the Servicing Fee Schedule, attached hereto as Schedule E.
Notwithstanding anything to the contrary contained herein or in any other Basic
Document, the Master Servicer shall only be entitled to receive any Excess
Servicing Fee on any Distribution Date if and to the extent that sufficient
funds are available pursuant to Section 5.05(c)(ix).
SECTION 4.08. ADMINISTRATOR'S CERTIFICATE; SERVICER'S REPORT. (a) On
or before (i) the seventh day of each month (or, if any such day is not a
Business Day, on the next succeeding Business Day), the Master Servicer shall
(or shall cause each Sub-Servicer to) deliver to the Seller a Servicer's Report
with respect to the preceding calendar month containing all information
necessary for the preparation of the applicable Transfer Agreement (including
Schedule A), and (ii) the Closing Date or the fifteenth day of each month (or,
if any such day is not a Business Day, on the next succeeding Business Day) or
any other Transfer Date, the Master Servicer shall (or shall cause each
Sub-Servicer to) deliver to the Administrator a Servicer's Report with respect
to the preceding calendar month containing all information necessary for the
Administrator's preparation of the Administrator's Officer's Certificate and the
Administrator's Certificate covering such calendar month referred to in
paragraphs (b) and (c) below.
(b) On each Determination Date prior to a Monthly Servicing Payment
Date that is not a Distribution Date, the Administrator shall deliver to the
Eligible Lender Trustee, the Indenture Trustee and (if the Seller is not the
Administrator) the Seller, an Officer's Certificate of the Administrator
containing all information necessary to pay the Master Servicer the Master
Servicing Fee due on such Monthly Servicing Payment Date pursuant to Sections
5.05(b) and 5.06. In addition, on the Business Day preceding each Transfer Date
during the Funding Period, the Administrator shall deliver to the Eligible
Lender Trustee, the Indenture Trustee, and (if the Seller is not the
Administrator) the Seller, an Officer's Certificate of the Administrator
containing all information necessary to make the transfers from the Escrow
Account and the Pre-Funding Account on such Transfer Date pursuant to Section
5.08.
(c) On each Determination Date prior to a Distribution Date, the
Administrator shall deliver to the Eligible Lender Trustee, the Indenture
Trustee and (if the Seller is not the Administrator) the Seller, with a copy to
the Rating Agencies, an Administrator's Certificate containing all information
necessary to make the distributions pursuant to Sections 5.05, 5.06 and
5.08(c)(i) and (ii), if applicable, for the Collection Period preceding the date
of such Administrator's Certificate. Financed Student Loans to be repurchased by
the Seller (whether pursuant to Section 2.03 or 3.02), purchased by the Master
Servicer (or a Sub-Servicer on its behalf) or acquired by any Guarantor shall be
identified by the Administrator by type of loan and borrower social security
number with respect to such Financed Student Loan (as specified in Schedule A).
SECTION 4.09. ANNUAL STATEMENT AS TO COMPLIANCE; NOTICE OF DEFAULT.
(a) Each of the Administrator and the Master Servicer shall (and the Master
Servicer shall cause each Sub-Servicer to) deliver to the Seller, the Eligible
Lender Trustee and the Indenture Trustee, on or before __________ of each year
beginning __________, ____, an Officers' Certificate of the Administrator or
Master Servicer (and each Sub-Servicer) as the case may be, dated as of December
31 of the preceding year, stating that (i) a review of the activities of the
Administrator or the Master Servicer (and each Sub-Servicer on its behalf), 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,
____) and of its performance under this Agreement (or the related Sub-Servicing
Agreement, as applicable) has been made under such officers' supervision and
(ii) to the best of such officers' knowledge, based on such review, the
Administrator or the Master Servicer (or such Sub-Servicer), as the case may be,
has fulfilled all its obligations under this Agreement and the Administration
Agreement (or the related Sub-Servicing Agreement), as applicable, throughout
such year or, if there has been a default in the fulfillment of any such
obligation, specifying each such default known to such officers and the nature
and status thereof. The Indenture Trustee shall send a copy of each such
Officers' Certificate and each report referred to in Section 4.10 to the Rating
Agencies. A copy of each such Officers' Certificate and each report referred to
in Section 4.10 may be obtained by any holder of Certificates, Certificate
Owner, holder of Notes or Note Owner by a request in writing to the Eligible
Lender Trustee addressed to its Corporate Trust Office, together with evidence
satisfactory to the Eligible Lender Trustee that such Person is one of the
foregoing parties. Upon the telephone request of the Eligible Lender Trustee,
the Indenture Trustee will promptly furnish the Eligible Lender Trustee a list
of holders of Notes as of the date specified by the Eligible Lender Trustee.
(b) The Master Servicer shall deliver to the Eligible Lender Trustee,
the Indenture Trustee, the Seller, and the Rating Agencies, promptly after
having obtained knowledge thereof, but in no event later than five Business Days
thereafter, written notice in an Officers' Certificate of the Master Servicer of
any event which with the giving of notice or lapse of time, or both, would
become a Master Servicer Default under Section 8.01(a)(1) or (2) or would cause
Mellon Bank, N.A., to fail to meet any Rating Agency Condition pursuant to
Section 5.02(iii).
(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 Officers' Certificate of the
Administrator of any event which with the giving of notice or lapse of time, or
both, would become an Administrator Default under Section 8.01(b)(1) or (2) or
would cause Mellon Bank, N.A., to fail to meet any Rating Agency Condition
pursuant to Section 5.02(iii).
SECTION 4.10. ANNUAL INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' REPORT.
Each of the Administrator and the Master Servicer shall (or the Master Servicer
shall cause each Sub-Servicer to) cause a firm of independent certified public
accountants, which may also render other services to the Administrator or the
Master Servicer (or such Sub-Servicer), as the case may be, to deliver to the
Seller, the Eligible Lender Trustee and the Indenture Trustee on or before
__________ of each year beginning __________, ____, (a) a report expressing a
summary of findings based upon a comparison of the mathematical calculations of
certain amounts set forth in the Servicer's Reports during the preceding
calendar year (or, in the case of the first such report, the period from the
Closing Date to December 31, ____) with the Master Servicer's (or such
Sub-Servicer's) computer reports that were the source of such amounts and a
report with regard to the assertions by the Master Servicer's (or such
Sub-Servicer's) management about the Master Servicer's (or such Sub-Servicer's)
compliance with the provisions of this Agreement set forth on Schedule D hereto
during the preceding calendar year (or, in the case of the first such report,
the period from the Closing Date to December 31, ____) and (b) a report
addressed to the Master Servicer (and the related Sub-Servicer), the Seller, the
Eligible Lender Trustee, the Indenture Trustee and each Rating Agency to the
effect that (i) such accountants have relied upon the assertions by the Master
Servicer's (or such Sub-Servicer's) management about the Master Servicer's (or
such Sub-Servicer's) compliance with this Agreement (or the related
Sub-Servicing Agreement) during the preceding calendar year (or, in the case of
the first such report, during the period from the Closing Date to December 31,
____) and (ii) in such accountants' opinion, such assertions are fairly stated
in all material respects, except for such exceptions as such firm shall believe
to be immaterial and such other exceptions as shall be set forth in such report.
In the event such firm requires the Indenture Trustee and 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 and the Eligible Lender Trustee 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 will also indicate that the firm is independent of the
Administrator or the Master Servicer (or such Sub-Servicer), as the case may be,
within the meaning of the Code of Professional Ethics of the American Institute
of Certified Public Accountants.
SECTION 4.11. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION
REGARDING FINANCED STUDENT LOANS. Upon reasonable prior notice, the Master
Servicer shall (or shall cause the Sub-Servicers to) provide to the holders of
Certificates and the holders of Notes access to the Financed Student Loan Files
in such cases where the holders of Certificates or the holders of Notes shall be
required by applicable statutes or regulations to review such documentation, as
demonstrated by evidence satisfactory to the Master Servicer (and the applicable
Sub-Servicer under the related Sub-Servicing Agreement) in its (or their)
reasonable judgment. Access shall be afforded without charge, but only upon
reasonable request and during the normal business hours at the respective
offices of the Master Servicer (or the applicable Sub-Servicer). Nothing in this
Section shall affect the obligation of the Master Servicer (or the applicable
Sub-Servicer on its behalf) to observe any applicable law prohibiting disclosure
of information regarding the Obligors and the failure of the Master Servicer (or
the applicable Sub-Servicer) to provide access to information as a result of
such obligation shall not constitute a breach of this Section.
SECTION 4.12. MASTER SERVICER AND ADMINISTRATOR EXPENSES. The Master
Servicer and the Administrator shall be severally required to pay or cause to be
paid all expenses incurred by it (or its agents acting on its behalf) in
connection with its 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 or to the holders of Certificates
and the holders of Notes, as the case may be.
SECTION 4.13. APPOINTMENT OF SUB-SERVICERS. The Master Servicer may at
any time, (i) upon the written consent of the Administrator, appoint one or more
Sub-Servicers (other than __________ and __________) to perform all or any
portion of its obligations as Master Servicer hereunder, provided, that the
Rating Agency Condition shall have been satisfied in connection therewith, and
(ii) without notice or consent, delegate specific duties to sub-contractors who
are in the business of performing such duties; PROVIDED, HOWEVER, that the
Master Servicer shall remain obligated and be liable to the Issuer, the Eligible
Lender Trustee, the Indenture Trustee, the holders of Certificates and the
holders of Notes 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 Sub-Servicer or
other delegation of such duties 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 Sub-Servicer (and any
such sub-contractors) shall be as agreed between the Master Servicer and the
applicable Sub-Servicer or a sub-contractor from time to time and none of the
Issuer, the Eligible Lender Trustee, the Indenture Trustee, the holders of
Certificates or the holders of Notes shall have any responsibility therefor. The
parties hereto hereby acknowledge and consent to the appointment of __________
and __________ as the initial Sub-Servicers pursuant to the related
Sub-Servicing Agreement.
SECTION 4.14. SPECIAL PROGRAMS. The Master Servicer may at its option,
but is under no obligation to, offer (and may permit the Sub-Servicers to offer)
borrowers of the Financed Student Loans certain special incentive programs,
whether or not in existence as of the date of this Agreement, generally offered
to the obligors of comparable loans owned by the Seller; PROVIDED, HOWEVER, that
to the extent such programs are: (a) not in existence as of the date of this
Agreement and are not required by the Higher Education Act (in the case of the
Financed Federal Loans), or (b) not part of the special incentive programs
designated as _______________ by the Seller, and have the effect of reducing the
yield on the Financed Student Loans (either by reducing borrower payments or
reducing principal balance), such special programs shall be applied to borrowers
of Financed Student Loans only if and to the extent the Issuer receives payment
from the Seller in an amount sufficient to offset such reduction of yield netted
against any payments owed by the Trust to the Seller pursuant to this Agreement.
ARTICLE V
DISTRIBUTIONS; ACCOUNTS;
STATEMENTS TO CERTIFICATEHOLDERS AND NOTEHOLDERS
SECTION 5.01. ESTABLISHMENT OF TRUST ACCOUNTS. (a) (i) The
Administrator, for the benefit of the Issuer, shall establish and maintain
in the name of the Indenture Trustee an Eligible Deposit Account (the
"Collection Account"), bearing a designation clearly indicating that the
funds deposited therein are held for the benefit of the Issuer. The
Collection Account will initially be established as a segregated trust
account at Mellon Bank, N.A. in the name of the Indenture Trustee. The
Seller will make an initial deposit into the Collection Account on the
Closing Date of cash or certain Eligible Investments equal to
$___________________.
(ii) The Administrator, for the benefit of the Issuer, shall establish
and maintain in the name of the Indenture Trustee an Eligible Deposit
Account (the "Reserve Account"), bearing a designation clearly indicating
that the funds deposited therein are held for the benefit of the Issuer.
The Reserve Account will initially be established as a segregated trust
account at Mellon Bank, N.A. in the name of the Indenture Trustee.
(iii) The Administrator, for the benefit of the Issuer, shall
establish and maintain in the name of the Indenture Trustee an Eligible
Deposit Account (the "Pre-Funding Account"), bearing a designation clearly
indicating that the funds deposited therein are held for the benefit of the
Issuer. The Pre-Funding Account will initially be established as a
segregated trust account at Mellon Bank, N.A. in the name of the Indenture
Trustee.
(iv) The Administrator, for the benefit of the Issuer, shall establish
and maintain in the name of the Indenture Trustee an Eligible Deposit
Account (the "Escrow Account"), bearing a designation clearly indicating
that the funds deposited therein are held for the benefit of the Issuer.
The Escrow Account will initially be established as a segregated trust
account at Mellon Bank, N.A. in the name of the Indenture Trustee.
(b) Funds on deposit in the Collection Account, the Reserve Account,
the Pre-Funding Account and the Escrow Account (collectively, the "Trust
Accounts") shall be invested by the Indenture Trustee (or any custodian or
designated agent with respect to any amounts on deposit in such accounts) in
Eligible Investments pursuant to written instructions by the Administrator;
PROVIDED, HOWEVER, it is understood and agreed that neither the Administrator
nor the Indenture Trustee shall be liable for any loss arising from such
investment in Eligible Investments. All such Eligible Investments shall be held
by (or by any custodian on behalf of) the Indenture Trustee for the benefit of
the Issuer; provided that on the Business Day preceding each 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 such
Distribution Date. Other than as described in the following proviso or as
otherwise permitted by the Rating Agencies, funds on deposit in the Trust
Accounts shall be invested in Eligible Investments that will mature so that such
funds will be available at the close of business on the Business Day preceding
the following Distribution Date; PROVIDED, HOWEVER, that funds on deposit in
Trust Accounts may be invested in Eligible Investments of the Indenture Trustee
which may mature so that such funds will be available on such Distribution Date.
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.
(c) (i) The Indenture Trustee shall possess all right, title and
interest in all funds on deposit from time to time in the Trust Accounts
and in all proceeds thereof (including all income thereon) and all such
funds, investments, proceeds and income shall be part of the Trust Estate.
Subject to the Administrator's power to instruct the Indenture Trustee
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 for the benefit of the Issuer. If, at any time, any of the Trust
Accounts ceases to be an Eligible Deposit Account, the Indenture Trustee
(or the Administrator on its behalf) agrees, by its acceptance hereto, that
it shall within 10 Business Days (or such longer period, not to exceed 30
calendar days, as to which each Rating Agency may consent) establish a new
Trust Account as an Eligible Deposit Account and shall transfer any cash
and/or any investments to such new Trust Account. In connection with the
foregoing, the Administrator agrees that, in the event that any of the
Trust Accounts are not accounts with the Indenture Trustee, the
Administrator shall notify the Indenture Trustee in writing promptly upon
any of such Trust Accounts ceasing to be an Eligible Deposit Account.
(ii) With respect to the Trust Account Property, the Indenture Trustee
agrees, by its acceptance hereof, 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 5.01(c)(i); and, subject to Section 5.01(b), each such Eligible Deposit
Account shall be subject to the exclusive custody and control of the Indenture
Trustee, and the Indenture Trustee shall have sole signature authority with
respect thereto;
(B) any Trust Account Property shall be Delivered to the Indenture
Trustee in accordance with the definition of "Delivery" and shall be held,
pending maturity or disposition, solely by the Indenture Trustee or such other
Person acting solely for the Indenture Trustee as required for Delivery;
(C) In the event that the Indenture Trustee, in its capacity as
securities intermediary has or subsequently obtains by agreement, operation of
law or otherwise a security interest in the Trust Accounts or any security
entitlement credited thereto, the Indenture Trustee, in its capacity as
securities intermediary hereby agrees that such security interest shall be
subordinate to the security interest of the Indenture Trustee. The financial
assets and other items deposited to the Trust Accounts will not be subject to
deduction, set-off, banker's lien, or any other right in favor of any person
other than the Indenture Trustee (except that the Indenture Trustee, in its
capacity as securities intermediary may set off (i) all amounts due to it in
respect of its customary fees and expenses for the routine maintenance and
operation of the Trust Accounts, and (ii) the face amount of any checks which
have been credited to the Trust Accounts but are subsequently returned unpaid
because of uncollected or insufficient funds).
(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 for the purpose of
permitting the Master Servicer, the Administrator or the Eligible Lender
Trustee to carry out its respective duties hereunder or permitting the
Indenture Trustee to carry out its duties under the Indenture.
SECTION 5.02. COLLECTIONS. The Master Servicer shall (or shall cause
the applicable Sub-Servicers to) remit within two Business Days of receipt
thereof to the Collection Account all payments by or on behalf of the Obligors
with respect to the Financed Student Loans (other than Purchased Student Loans),
and all Liquidation Proceeds, as collected during the Collection Period.
Notwithstanding the foregoing, for so long as (i) Mellon Bank, N.A. remains the
Administrator, (ii) no Administrator Default shall have occurred and be
continuing and (iii) prior to ceasing daily remittances to the Collection
Account, the Rating Agency Condition shall have been satisfied (and any
conditions or limitations imposed by the Rating Agencies in connection therewith
are complied with), the Master Servicer shall (or shall cause the applicable
Sub-Servicers to) remit such collections within two Business Days of receipt
thereof to the Administrator, and the Administrator need not deposit such
collections into the Collection Account until one Business Day immediately prior
to the next following Distribution Date; PROVIDED, HOWEVER, that,
notwithstanding the foregoing, on or before the Business Day preceding each
Monthly Servicing Payment Date that is not a Distribution Date, the
Administrator shall deposit into the Collection Account that portion of such
amounts received by it that is equal to the Master Servicing Fee payable on such
date. In the event that any of the foregoing conditions for ceasing daily
remittances shall no longer be satisfied, then the Administrator shall deposit
all collections held by it into the Collection Account within five Business Days
thereof. 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 and the Guarantors (but excluding the
Department).
SECTION 5.03. APPLICATION OF COLLECTIONS. (a) With respect to each
Financed Student Loan, all collections (including all Guarantee Payments) with
respect thereto for the Collection Period shall be applied to interest and
principal on such Financed Student Loan by the Master Servicer (or the
applicable Sub-Servicer on its behalf) in accordance with its customary practice
by allocating to interest the portion of such collection equal to the product of
(A) the applicable interest rate on such Financed Student Loan, (B) the unpaid
principal balance of such Financed Student Loan and (C) the period of time
elapsed since the preceding payment of interest on such Financed Student Loan
was made (over the actual number of days in a year) ("Interest Collections") and
by allocating the remainder of such collection to principal.
(b) All Liquidation Proceeds shall be applied to the related Financed
Student Loan.
SECTION 5.04. ADDITIONAL DEPOSITS. (a) Within two Business Days after
receipt thereof, the Eligible Lender Trustee 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 Federal Loans. The Master
Servicer shall (or shall cause the applicable Sub-Servicers to) deposit in the
Collection Account the aggregate Purchase Amount with respect to Purchased
Student Loans and all other amounts to be paid by the Master Servicer under
Section 4.06 when such amounts are due, and the Seller shall deposit or cause to
be deposited therein the aggregate Purchase Amount with respect to Purchased
Student Loans and all other amounts to be paid by the Seller under Sections 3.02
and 9.01 when such amounts are due.
(b) Notwithstanding anything to the contrary set forth in paragraph
(a) above, if daily deposits to the Collection Account are not required pursuant
to Section 5.02, the Eligible Lender Trustee, the Seller and the Master Servicer
(or the Sub-Servicers on its behalf) shall pay the amounts referred to in
paragraph (a) above that would otherwise be deposited into the Collection
Account to the Administrator. The Administrator shall not be required to deposit
such amounts into the Collection Account until the Business Day preceding each
Distribution Date.
SECTION 5.05. DISTRIBUTIONS. (a) On each Determination Date, the
Administrator shall calculate all amounts required to determine the amounts to
be deposited in the Collection Account from the other Trust Accounts and the
amounts to be distributed therefrom on the related Monthly Servicing Payment
Date or Distribution Date.
(b) On each Monthly Servicing Payment Date that is not a Distribution
Date, the Administrator shall instruct the Indenture Trustee (based on the
information contained in the Administrator's Officer's Certificate and each
related Servicer's Report delivered pursuant to Section 4.08(a) and (b)) to
distribute to the Master Servicer by 11:00 a.m. (New York time), from and to the
extent of the Available Funds on deposit in the Collection Account the Master
Servicing Fee due with respect to the preceding calendar month and all unpaid
Master Servicing Fees from prior months, and the Indenture Trustee shall comply
with such instructions.
(c) On each Distribution Date, the Administrator shall instruct the
Indenture Trustee (based on the information contained in the Administrator's
Certificate and each related Servicer's Report delivered pursuant to Section
4.08(a) and (c)) to make the following deposits and distributions to the Persons
or to the account specified below by 11:00 a.m. (New York time), to the extent
of the amount of Available Funds in the Collection Account, in the following
order of priority and the Indenture Trustee shall comply with such instructions:
(i) [Reserved];
(ii) to the Master Servicer, the Master Servicing Fee due with respect
to the preceding calendar month and all unpaid Master Servicing Fees from
prior months;
(iii) to the Administrator, from the amount of Available Funds
remaining after the application of clauses (i) and (ii), the Administration
Fee and all unpaid Administration Fees from prior Collection Periods;
(iv) to the holders of the Notes, from the amount of Available Funds
remaining after the application of clauses (i), (ii) and (iii), the
Noteholders' Interest Distribution Amount pursuant to Section 8.02(c)(i) of
the Indenture;
(v) to the Eligible Lender Trustee on behalf of the holders of the
Certificates, from the amount of Available Funds remaining after the
application of clauses (i), (ii), (iii) and (iv), the Certificateholders'
Interest Distribution Amount;
(vi) to the Reserve Account from the amount of Available Funds
remaining after the application of clauses (i) through (v), an amount, up
to the amount, if any, necessary to reinstate the balance of the Reserve
Account up to the Specified Reserve Account Balance;
(vii) to the holders of the Notes, from the amount of Available Funds
remaining after the application of clauses (i) through (vi), the
Noteholders' Principal Distribution Amount to be allocated pursuant to
Section 8.02(c)(ii) of the Indenture;
(viii) on each Distribution Date on and after the date on which the
Notes have been paid in full, to the Eligible Lender Trustee on behalf of
the holders of the related Certificates, from the amount of Available Funds
remaining after the application of clauses (i) through (vii), the
Certificateholders' Principal Distribution Amount;
(ix) to the Master Servicer, from the amount of Available Funds
remaining after the application of clauses (i) through (viii), the
aggregate unpaid amount, if any, of the Excess Servicing Fee;
(x) to the holders of the Notes on a pro rata basis, based on the
amount of Noteholders' Interest Index Carryover owing on each class of
Notes, from the amount of Available Funds remaining after the application
of clauses (i) through (ix), the aggregate unpaid amount of Noteholders'
Interest Index Carryover, if any;
(xi) to the Eligible Lender Trustee on behalf of the holders of the
Certificates, from the amount of Available Funds remaining after the
application of clauses (i) through (x), the aggregate unpaid amount of the
Certificateholders' Interest Index Carryover, if any;
(xii) to or upon the order of the Seller, the amount of Available
Funds remaining after the application of clauses (i) through (xi).
Notwithstanding anything to the contrary contained in this Section
5.05(c), if the outstanding principal balance of the Notes (after giving
effect to any amounts to be distributed to the holders of the Notes
pursuant to Section 5.05(c) (vii) above) is in excess of the Note
Collateralization Amount, the holders of the Notes shall receive the
Noteholders' Priority Principal Distribution Amount prior to any payment to
the holders of the Certificates of the Certificateholders' Interest
Distribution Amount pursuant to Section 5.05(c) (v) above.
SECTION 5.06. RESERVE ACCOUNT. (a) On the Closing Date, the Seller
shall deposit the Reserve Account Initial Deposit into the Reserve Account. On
the Closing Date, the Reserve Account Initial Deposit will equal the Specified
Reserve Account Balance as of the Closing Date.
(b) (i) In the event that the Master Servicing Fee for any Monthly
Servicing Payment Date or Distribution Date exceeds the amount distributed to
the Master Servicer pursuant to Sections 5.05(b)(ii) and 5.05(c)(ii) on such
Monthly Servicing Payment Date or Distribution Date, the Administrator shall
instruct the Indenture Trustee to withdraw from the Reserve Account on such
Monthly Servicing Payment Date or Distribution Date an amount equal to such
excess, to the extent of funds available therein, and to distribute such amount
to the Master Servicer; PROVIDED, HOWEVER, that, amounts on deposit in the
Reserve Account will not be available to cover any unpaid Excess Servicing Fees
to the Master Servicer.
(ii) In the event that the Administration Fee for any Distribution
Date exceeds the amount distributed to the Administrator pursuant to
Section 5.05(c)(iii) on such Distribution Date, the Administrator shall
instruct the Indenture Trustee to withdraw from the Reserve Account on each
Distribution Date an amount equal to such excess, to the extent of funds
available therein after giving effect to paragraph (b)(i) above, and to
distribute such amount to the Administrator.
(iii) [Reserved]
(iv) [Reserved]
(v) In the event that the Noteholders' Interest Distribution Amount
for a Distribution Date exceeds the amount distributed to the holders of
Notes pursuant to Section 5.05(c)(iv) on such Distribution Date, the
Administrator shall instruct the Indenture Trustee to withdraw from the
Reserve Account on such Distribution Date an amount equal to such excess,
to the extent of funds available therein after giving effect to paragraph
(b)(i) and (b)(ii) above, and to distribute such amount to the holders of
Notes entitled thereto, in the same order and priority as is set forth in
Section 5.05(c)(iv); PROVIDED, HOWEVER, that, amounts on deposit in the
Reserve Account will not be available to cover any unpaid Noteholders'
Interest Index Carryover.
(vi) In the event that (A) the Certificateholders' Interest
Distribution Amount for a Distribution Date exceeds the amount distributed
to holders of Certificates pursuant to Section 5.05(c)(v) on such
Distribution Date and (B) the Note Collateralization Amount is equal to or
greater than the outstanding principal balance of the Notes (after giving
effect to distributions on the Notes on such Distribution Date), the
Administrator shall instruct the Indenture Trustee on such Distribution
Date to withdraw from the Reserve Account on such Distribution Date an
amount equal to the excess described in clause (A) above, to the extent of
funds available therein after giving effect to paragraphs (b)(i), (b)(ii)
and (b)(v) above, and to distribute such amount to the holders of
Certificates entitled thereto, in the same order and priority as is set
forth in Section 5.05(c)(v); PROVIDED, HOWEVER, that amounts on deposit in
the Reserve Account will not be available to cover any unpaid
Certificateholders' Interest Index Carryover.
(vii) In the event that on any Distribution Date, the Specified
Collateral Balance plus all amounts on deposit in the Pre-Funding Account
and the Reserve Account is less than the sum of the outstanding principal
balances of the Notes and the Certificates before giving effect to any
distributions of principal on such date pursuant to Section 5.05(c)(vii),
the Administrator shall instruct the Indenture Trustee on such date to
withdraw from the Reserve Account on such date an amount equal to such
deficiency, to the extent of funds available therein, after giving effect
to paragraphs (b)(i), (b)(ii), (b)(v) and (b)(vi) above, and to distribute
such amount to the holders of the Notes, in the same order and priority as
set forth in Section 5.05 (c)(vii).
(viii) In the event that on the Final Maturity Date for the Class ___
Notes, the outstanding principal balance of the Class ___ Notes (prior to
giving effect to any distribution of principal thereon on such date)
exceeds the amount of principal distributed to the holders of the Class
____ Notes on such date pursuant to Section 5.05(c)(vii), the Administrator
shall instruct the Indenture Trustee on such date to withdraw from the
Reserve Account on such date an amount equal to such excess, to the extent
of funds available therein, after giving effect to paragraphs (b)(i),
(b)(ii), (b)(v), (b)(vi) and (b)(vii) above and to distribute such amount
to the holders of the Class ___ Notes, in the same order and priority as is
set forth in Section 5.05(c)(vii).
(ix) In the event that on the Final Maturity Date for the Class ___
Notes the outstanding principal balance of the Class ___ Notes (prior to
giving effect to any distribution of principal thereon on such date),
exceeds the amount of principal distributed to the holders of the Class ___
Notes on such date pursuant to Section 5.05(c)(vii), the Administrator
shall instruct the Indenture Trustee on such date to withdraw from the
Reserve Account on such date an amount equal to such excess, to the extent
of funds available therein, after giving effect to paragraphs (b)(i),
(b)(ii), (b)(v), (b)(vi), (b)(vii) and (b)(viii) above, and to distribute
such amount to the holders of the Class ___ Notes, in the same order and
priority as set forth in Section 5.05 (c)(vii).
(x) In the event that on the Final Maturity Date for the Certificates
the Certificateholders' Principal Distribution Amount exceeds the amount
distributed to the holders of the Certificates pursuant to Section
5.05(c)(viii), the Administrator shall instruct the Indenture Trustee on
such date to withdraw from the Reserve Account on such date an amount equal
to such excess, to the extent of funds available therein after giving
effect to paragraphs (b)(i), (b)(ii), (b)(v), (b)(vi), (b)(vii), (b)(viii)
and (b)(ix) above, and to distribute such amount to the holders of
Certificates entitled thereto, in the same order and priority as is set
forth in Section 5.05 (c)(viii).
(c) [Reserved]
(d) If the amount on deposit in the Reserve Account on any
Distribution Date (without giving effect to all deposits or withdrawals
therefrom on such Distribution Date) is greater than the Specified Reserve
Account Balance for such Distribution Date, the Administrator shall instruct the
Indenture Trustee to deposit the amount of such excess into the Collection
Account for distribution on such Distribution Date.
(e) Following the payment in full of the aggregate outstanding
principal balance of the Notes and the Certificate Balance and of all other
amounts owing or to be distributed hereunder or under the Indenture or the Trust
Agreement to holders of Notes and Certificates, the Master Servicer or the
Administrator (including any Excess Servicing Fees, Noteholders' Interest Index
Carryover and Certificateholders' Interest Index Carryover) and the termination
of the Trust, any amount remaining on deposit in the Reserve Account shall be
distributed to the Seller. The Seller shall in no event be required to refund
any amounts properly distributed pursuant to this Section 5.06(e).
SECTION 5.07. STATEMENTS TO CERTIFICATEHOLDERS AND NOTEHOLDERS. On
each Determination Date preceding a Distribution Date, the Administrator shall
provide to the Indenture Trustee (with a copy to the Rating Agencies) for the
Indenture Trustee to forward on such succeeding Distribution Date to each holder
of record of the Notes and to the Eligible Lender Trustee for the Eligible
Lender Trustee to forward on such succeeding Distribution Date to each holder of
record of the Certificates a statement substantially in the form of Exhibits A
and B, respectively, setting forth at least the following information as to the
Notes and the Certificates, to the extent applicable:
(i) the amount of the distribution allocable to principal of each of
the Class ___ Notes, the Class ___ Notes and the Certificates;
(ii) the amount of the distribution allocable to interest on each of
the Class ___ Notes, the Class ___ Notes and the Certificates together with
the interest rates applicable with respect thereto (indicating whether such
interest rates are based on (x) the T-Bill Rate, in the case of T-Bill
Indexed Securities or Three-Month LIBOR in the case of LIBOR Indexed
Securities or (y) the Student Loan Rate and specifying what each such
interest rate would have been if it had been calculated using the alternate
basis; provided that no such calculation of the Student Loan Rate will be
required to be made unless the T-Bill Rate or Three-Month LIBOR for such
Interest Period is 100 basis points greater than the T-Bill Rate of the
preceding Determination Date or Three-Month LIBOR, of the preceding
Determination Date, respectively, or with respect to T-Bill Indexed
Securities only, the 52 Week Treasury Bill Rate is 100 basis points less
than the T-Bill Rate as of such Determination Date);
(iii) the amount of the distribution, if any, allocable to any
Noteholders' Interest Index Carryover and any Certificateholders' Interest
Index Carryover together with the outstanding amount, if any, of each
thereof after giving effect to any such distribution;
(iv) the Pool Balance as of the close of business on the last day of
the preceding Collection Period, after giving effect to payments allocated
to principal reported as described in clause (i) above;
(v) the aggregate outstanding principal balance of each class of
Notes, the Certificate Balance and each Pool Factor as of such Distribution
Date, after giving effect to payments allocated to principal reported under
clause (i) above;
(vi) the amount of the Master Servicing Fee and any Excess Servicing
Fee paid to the Master Servicer and the amount of the Administration Fee
paid to the Administrator, respectively, with respect to such Collection
Period, and the amount, if any, of the Excess Servicing Fee remaining
unpaid after giving effect to any such payment;
(vii) the amount of the aggregate Realized Losses, if any, for such
Collection Period and the balance of Financed Student Loans that are
delinquent in each delinquency period as of the end of such Collection
Period;
(viii) the balance of the Reserve Account on such Distribution Date,
after giving effect to changes therein on such Distribution Date;
(ix) for Distribution Dates during the Funding Period, the remaining
Pre-Funded Amount on such Distribution Date, after giving effect to changes
therein during the related Collection Period;
(x) for the first Distribution Date, the Subsequent Pool Pre-Funded
Amount, if any, remaining in the Subsequent Pool Pre-Funding Subaccount
that has not been used to acquire Subsequent Pool Student Loans and is
being paid out to the holders of the Notes and holders of the Certificates;
and
(xi) for the first Distribution Date on or following the end of the
Funding Period, the amount of any remaining Pre-Funded Amount that has not
been used to make Additional Fundings and is being paid out to the holders
of the Notes.
Each amount set forth pursuant to clauses (i), (ii), (iii), (v) and (vi) above
shall be expressed as a dollar amount per $1,000 of original principal balance
of a Certificate or Note, as applicable. A copy of the statements referred to
above may be obtained by any Certificate Owner or Note Owner by a written
request to the Eligible Lender Trustee or the Indenture Trustee, respectively,
addressed to the respective Corporate Trust Office.
SECTION 5.08. PRE-FUNDING ACCOUNT. (a) On the Closing Date, the Seller
will deposit in the Pre-Funding Account $______________ from the net proceeds of
the sale of the Notes and the Certificates. A portion of the amount on deposit
in the Pre-Funding Account equal to $_________________ (the "Subsequent Pool
Pre-Funded Amount") will be credited on the Closing Date to a designated
subaccount maintained by the Indenture Trustee within the Pre-Funding Account
(the "Subsequent Pool Pre-Funding Subaccount"). The remainder of the amount on
deposit in the Pre-Funding Account equal to $_________ will be credited on the
Closing Date to a designated subaccount maintained by the Indenture Trustee
within the Pre-Funding Account (the "Other Additional Pre-Funding Subaccount").
No funds in the Other Additional Pre-Funding Subaccount may be used to purchase
Subsequent Pool Student Loans until the Subsequent Pool Pre-Funded Amount has
been reduced to zero. On each Transfer Date during the Funding Period on which
Subsequent Pool Student Loans are to be conveyed to the Eligible Lender Trustee
on behalf of the Issuer, the Administrator shall instruct the Indenture Trustee
to withdraw an amount equal to ______% of the sum of (x) the principal balance
of, plus (y) to the extent capitalized or to be capitalized, accrued interest
on, such Subsequent Pool Student Loans, first from the Subsequent Pool
Pre-Funding Subaccount until the Subsequent Pool Pre-Funded Amount has been
reduced to zero and then any remainder from the Other Additional Pre-Funding
Subaccount. On each Transfer Date during the Funding Period on which Other
Subsequent Student Loans are to be conveyed to the Eligible Lender Trustee on
behalf of the Issuer, the Administrator shall instruct the Indenture Trustee to
withdraw an amount equal to ______% of the sum of (x) the principal balance of,
plus (y) to the extent capitalized or to be capitalized, accrued interest on,
such Other Subsequent Student Loans (each sum of clauses (x) and (y) set forth
in this sentence and the previous sentence being, a "Transferred Balance"),
first from the Escrow Account until all amounts deposited therein during the
calendar month immediately preceding the Transfer Date have been reduced to zero
and then any remainder from the Other Additional Pre-Funding Subaccount. The
Administrator shall instruct the Indenture Trustee to distribute any Transferred
Balance to or upon the order of the Seller upon satisfaction of the conditions
set forth in Section 2.02(b) with respect to such transfer. On each Transfer
Date on which Subsequent Pool Student Loans are to be conveyed to the Eligible
Lender Trustee on behalf of the Issuer, the Administrator shall instruct the
Indenture Trustee to withdraw an amount equal to _____% of the Transferred
Balance of such Subsequent Pool Student Loans, first from the Subsequent
Pre-Funding Subaccount until the Subsequent Pool Pre-Funded Amount has been
reduced to zero and then any remainder from the Other Additional Pre-Funding
Subaccount and to deposit such amount into the Reserve Account upon satisfaction
of the conditions set forth in Section 2.02(b) with respect to such transfer.
(b) In the event that any funds deposited in the Escrow Account during
the calendar month immediately preceding any Transfer Date remain on deposit
therein on such Transfer Date, after giving effect to all Additional Fundings to
be made with respect to such Transfer Date pursuant to paragraph (a) above or
Section 5.05(d), as applicable, the Indenture Trustee shall transfer such
remaining funds from the Escrow Account to the Collection Account and such funds
shall be considered collections with respect to the Financed Student Loans.
(c) (i) If as of the Special Determination Date (after giving effect
to all Additional Fundings on such date) the Subsequent Pool Pre-Funded Amount
has not been reduced to zero, the Administrator shall instruct the Indenture
Trustee pursuant to Section 4.08(c) to withdraw from the Subsequent Pool
Pre-Funding Subaccount on the first Distribution Date the remaining Subsequent
Pool Pre-Funded Amount on deposit in such subaccount and, (x) if such amount is
greater than $10,000,000, distribute the applicable Noteholders' Percentage of
such amount to the holders of Class ___ Notes and Class ___ Notes on a pro rata
basis, based on the initial principal amount of the Class ___ Notes and the
Class ___ Notes, as a payment of principal in the same manner as the
Noteholders' Principal Distribution Amount is distributed, and distribute the
Certificateholders' Percentage of such amount to the holders of Certificates as
a payment of principal in the same manner as the Certificateholders' Principal
Distribution Amount is distributed, and (y) if such amount is $10,000,000 or
less, distribute such amount to the holders of Class ___ Notes as a payment of
principal in the same manner as the Noteholders' Principal Distribution Amount
is distributed.
(ii) If (x) the Pre-Funded Amount has not been reduced to zero on the
Distribution Date on which the Funding Period ends (or, if the Funding
Period does not end on a Distribution Date, on the first Distribution Date
following the end of the Funding Period) after giving effect to any
reductions in the Pre-Funded Amount on such Distribution Date pursuant to
paragraph (a) above, the Administrator shall instruct the Indenture Trustee
pursuant to Section 4.08(c) to withdraw from the Pre-Funding Account on
such Distribution Date an amount equal to the Pre-Funded Amount and shall
transfer such remaining funds from the Pre-Funding Account to the
Collection Account and such funds shall be considered collections with
respect to the Financed Student Loans.
(d) (i) In the event that the Master Servicing Fee for any Monthly
Servicing Payment Date or Distribution Date during the Funding Period
exceeds the amount distributed to the Master Servicer pursuant to Sections
5.05(b)(ii), 5.05(c)(ii) and 5.06(b)(i) on such Monthly Servicing Payment
Date or Distribution Date, the Administrator shall instruct the Indenture
Trustee to withdraw from the Other Additional Pre-Funding Subaccount on
such Monthly Servicing Payment Date or Distribution Date an amount equal to
such excess, to the extent of funds available therein, and to distribute
such amount to the Master Servicer; PROVIDED, HOWEVER, that, amounts on
deposit in the Other Additional Pre-Funding Subaccount will not be
available to cover any unpaid Excess Servicing Fees to the Master Servicer.
(ii) In the event that the Administration Fee for any Distribution
Date during the Funding Period exceeds the amount distributed to the
Administrator pursuant to Sections 5.05(c)(iii) and 5.06(b)(ii) on such
Distribution Date, the Administrator shall instruct the Indenture Trustee
to withdraw from the Other Additional Pre-Funding Subaccount on each
Distribution Date an amount equal to such excess, to the extent of funds
available therein after giving effect to paragraph (d)(i) above, and to
distribute such amount to the Administrator.
(iii) In the event that the Noteholders' Interest Distribution Amount
for a Distribution Date during the Funding Period exceeds the amount
distributed to the holders of Notes pursuant to Sections 5.05(c)(iv) and
5.06(b)(v) on such Distribution Date, the Administrator shall instruct the
Indenture Trustee to withdraw from the Other Additional Pre-Funding
Subaccount on such Distribution Date an amount equal to such excess, to the
extent of funds available therein after giving effect to paragraph (d)(i)
and (d)(ii) above, and to distribute such amount to the holders of Notes
entitled thereto, in the same order and priority as is set forth in Section
5.05(c)(iv).
(iv) In the event that (x) the Certificateholders' Interest
Distribution Amount for a Distribution Date exceeds the amount distributed
to the holders of Certificates pursuant to Sections 5.05(c)(v) and
5.06(b)(vi) on such Distribution Date and (y) the Note Collateralization
Amount is equal to or greater than the outstanding principal balance of the
Notes (after giving effect to distributions on the Notes, on such
Distribution Date), the Administrator shall instruct the Indenture Trustee
on such Distribution Date to withdraw from the Other Additional Pre-Funding
Subaccount on such Distribution Date an amount equal to the excess
described in clause (x) above, to the extent of funds available therein
after giving effect to paragraphs (d)(i), (d)(ii) and (d)(iii) above, and
to distribute such amount to the holders of Certificates entitled thereto,
in the same order and priority as is set forth in Section 5.05(c)(v).
SECTION 5.09. SELLER OPTIONAL DEPOSIT. On or prior to any Distribution
Date, the Seller may, but shall not be obligated to, make an optional deposit
(each, a "Seller Optional Deposit") to the Reserve Account from funds to be
released to the Seller pursuant to Section 5.05(c)(xii) on such Distribution
Date or otherwise. Any Seller Optional Deposit shall be applied on the related
Distribution Date in the same manner as other funds on deposit in the Reserve
Account on the related Distribution Date in accordance with Section 5.06.
ARTICLE VI
THE SELLER AND THE ADMINISTRATOR
SECTION 6.01. REPRESENTATIONS OF SELLER AND ADMINISTRATOR. Mellon
Bank, N.A., as Seller and Administrator, makes the following representations on
which the Issuer is deemed to have relied in acquiring the Financed Student
Loans. The representations speak as of the execution and delivery of this
Agreement and the Administration Agreement and as of the Closing Date, in the
case of the Initial Financed Student Loans, and as of the applicable Transfer
Date, in the case of the Additional Student Loans, and shall survive the sale of
the Financed Student Loans to the Eligible Lender Trustee on behalf of the
Issuer and the pledge thereof to the Indenture Trustee pursuant to the
Indenture. As used below, references to Mellon Bank, N.A. shall mean Mellon
Bank, N.A. in its capacity as both the Seller and the Administrator.
(a) ORGANIZATION AND GOOD STANDING. Mellon Bank, N.A. is duly
organized and validly existing as a national banking association in good
standing under the laws of the United States of America, with the power and
authority to own its properties and to conduct its business as such properties
are currently owned and such business is presently conducted, and had at all
relevant times, and has, the power, authority and legal right to acquire and own
the Financed Student Loans.
(b) POWER AND AUTHORITY OF THE SELLER. The Seller has the corporate
power and authority to execute and deliver this Agreement and to carry out its
terms; the Seller has full corporate power and authority to sell and assign the
property to be sold and assigned to and deposited with the Issuer (or with the
Eligible Lender Trustee on behalf of the Issuer) and the Seller has duly
authorized such sale and assignment to the Issuer (or to the Eligible Lender
Trustee on behalf of the Issuer) by all necessary corporate action; and the
execution, delivery and performance of this Agreement have been duly authorized
by the Seller by all necessary corporate action.
(c) POWER AND AUTHORITY OF THE ADMINISTRATOR. The Administrator has
the corporate power and authority to execute and deliver this Agreement and the
Administration Agreement and to carry out their 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.
(d) BINDING OBLIGATION. This Agreement constitutes a legal, valid and
binding obligation of Mellon Bank, N.A. and the Administration Agreement
constitutes a legal, valid and binding obligation of the Administrator, in each
case enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization and similar laws relating to creditors' rights
generally or the rights of creditors of banks the deposit accounts of which are
insured by the FDIC and subject to general principles of equity.
(e) NO VIOLATION. The consummation of the transactions contemplated by
this Agreement or the Administration Agreement and the fulfillment of the terms
hereof or thereof do not conflict with, result in any breach of any of the terms
and provisions of, nor constitute (with or without notice or lapse of time or
both) a default under, the articles of association or by-laws of Mellon Bank,
N.A., or any indenture, agreement or other instrument to which Mellon Bank, N.A.
is a party or by which it shall be bound, which breach or default would
reasonably be expected to have a material adverse effect on the condition of
Mellon Bank, N.A., financial or otherwise, or adversely affect the transactions
contemplated by this Agreement or the Administration Agreement; nor result in
the creation or imposition of any Lien upon any of its properties pursuant to
the terms of any such indenture, agreement or other instrument (other than
pursuant to the Basic Documents); nor violate any law or, to the knowledge of
Mellon Bank, N.A., any order, rule or regulation applicable to Mellon Bank, N.A.
of any court or of any Federal or state regulatory body, administrative agency
or other governmental instrumentality having jurisdiction over Mellon Bank, N.A.
or its properties.
(f) NO PROCEEDINGS. There are no proceedings or, to its best
knowledge, investigations pending against Mellon Bank, N.A. or, to its best
knowledge, threatened against Mellon Bank, N.A. before any court, regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over Mellon Bank, N.A. 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 Mellon Bank, N.A. 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 Mellon Bank, N.A. in connection with the execution and delivery by
Mellon Bank, N.A. of this Agreement and the performance by Mellon Bank, N.A. of
the transactions contemplated by this Agreement, and in connection with the
execution and delivery by the Administrator of the Administration Agreement and
the performance by the Administrator of its duties thereunder, have in each case
been duly obtained, effected or given and are in full force and effect.
SECTION 6.02. EXISTENCE. During the term of this Agreement, the Seller
will keep in full force and effect its existence, rights and franchises as a
national banking association under the laws of the jurisdiction of its
organization, subject, however, to Section 6.05 hereof.
SECTION 6.03. LIABILITY OF SELLER; INDEMNITIES. The Seller shall be
liable in accordance herewith only to the extent of the obligations specifically
undertaken by the Seller under this Agreement.
(a) The Seller shall indemnify, defend and hold harmless the Issuer,
the Eligible Lender Trustee and the Indenture Trustee and their officers,
directors, employees and agents from and against any taxes that may at any time
be asserted against any such Person with respect to the transactions
contemplated herein and in the other Basic Documents (except any such income
taxes arising out of fees paid to the Eligible Lender Trustee or the Indenture
Trustee), including any sales, gross receipts, general corporation, tangible
personal property, privilege or license taxes (but, in the case of the Issuer,
not including any taxes asserted with respect to, and as of the date of, the
sale of the Financed Student Loans to the Eligible Lender Trustee on behalf of
the Issuer or the issuance and original sale of the Certificates and the Notes,
or asserted with respect to ownership of the Financed Student Loans or Federal
or other income taxes arising out of distributions on the Certificates and the
Notes) and costs and expenses in defending against the same.
(b) The Seller shall indemnify, defend and hold harmless the Issuer,
the Eligible Lender Trustee, the Indenture Trustee, the Master Servicer, the
holders of Certificates and the holders of Notes and the officers, directors,
employees and agents of the Issuer, the Eligible Lender Trustee, the Indenture
Trustee and the Master Servicer from and against any and all costs, expenses,
losses, claims, damages and liabilities arising out of, or imposed upon such
Person through, (i) the Seller's willful misfeasance, bad faith or negligence in
the performance of its duties under this Agreement, or by reason of reckless
disregard of its obligations and duties under this Agreement and (ii) the
Seller's or the Issuer's violation of Federal or state securities laws in
connection with the offering and sale of the Notes and the Certificates.
(c) The Seller shall be liable as primary obligor for, and shall
indemnify, defend and hold harmless the Eligible Lender Trustee and its
officers, directors, employees and agents from and against, all costs, expenses,
losses, claims, damages, obligations and liabilities arising out of, incurred in
connection with or relating to the Trust Agreement, the other Basic Documents,
the Trust Estate, the acceptance or performance of the trusts and duties set
forth herein and in the Trust Agreement or the action or the inaction of the
Eligible Lender Trustee hereunder and under the Trust Agreement, except to the
extent that such cost, expense, loss, claim, damage, obligation or liability:
(i) shall be due to the willful misfeasance, bad faith or negligence (except for
errors in judgment) of the Eligible Lender Trustee, (ii) shall arise from any
breach by the Eligible Lender Trustee of its covenants under any of the Basic
Documents; or (iii) shall arise from the breach by the Eligible Lender Trustee
of any of its representations or warranties set forth in Section 7.03 of the
Trust Agreement. In the event of any claim, action or proceeding for which
indemnity will be sought pursuant to this paragraph, the Eligible Lender
Trustee's choice of legal counsel shall be subject to the approval of the
Seller, which approval shall not be unreasonably withheld.
(d) The Seller shall pay any and all taxes levied or assessed upon all
or any part of the Trust Estate (other than those taxes expressly excluded from
the Seller's responsibilities pursuant to Section 6.03(a) above).
Indemnification under this Section shall survive the resignation or
removal of the Eligible Lender Trustee or the Indenture Trustee and the
termination of this Agreement or the Indenture or the Trust Agreement, as
applicable, and shall include reasonable fees and expenses of counsel and
expenses of litigation. If the Seller shall have made any indemnity payments
pursuant to this Section and the Person to or on behalf of whom such payments
are made thereafter shall collect any of such amounts from others, such Person
shall promptly repay such amounts to the Seller, without interest.
SECTION 6.04. LIABILITY OF ADMINISTRATOR; INDEMNITIES. The
Administrator shall be liable in accordance herewith only to the extent of the
obligations specifically undertaken by the Administrator under this Agreement or
the Administration Agreement.
The Administrator shall indemnify, defend and hold harmless the
Issuer, the Eligible Lender Trustee, the Indenture Trustee, the Master Servicer,
the holders of Certificates and the holders of Notes and any of the officers,
directors, employees and agents of the Issuer, the Eligible Lender Trustee, the
Indenture Trustee and the Master Servicer from and against any and all costs,
expenses, losses, claims, damages and liabilities to the extent that such cost,
expense, loss, claim, damage or liability arose out of, or was imposed upon any
such Person through, the negligence, willful misfeasance or bad faith of the
Administrator in the performance of its duties under this Agreement or the
Administration Agreement or by reason of reckless disregard of its obligations
and duties hereunder or thereunder.
The Administrator shall pay reasonable compensation to the Indenture
Trustee and shall reimburse the Indenture Trustee for all reasonable expenses,
disbursements and advances, and indemnify, defend and hold harmless the
Indenture Trustee and its officers, directors, employees and agents from and
against all costs, expenses, losses, claims, damages and liabilities, to the
extent and in the manner provided in, and subject to the limitations of, Section
6.07 of the Indenture.
For purposes of this Section, in the event of the termination of the
rights and obligations of the Administrator (or any successor thereto pursuant
to Section 6.05) as Administrator pursuant to Section 8.01(b), or a resignation
by such Administrator pursuant to this Agreement, such Administrator shall be
deemed to be the Administrator pending appointment of a successor Administrator
pursuant to Section 8.02.
Indemnification under this Section shall survive the resignation or
removal of the Eligible Lender Trustee or the Indenture Trustee or the
termination of this Agreement and the Administration Agreement and shall include
reasonable fees and expenses of counsel and expenses of litigation. If the
Administrator shall have made any indemnity payments pursuant to this Section
and the Person to or on behalf of whom such payments are made thereafter
collects any of such amounts from others, such Person shall promptly repay such
amounts to the Administrator, without interest.
SECTION 6.05. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, SELLER OR ADMINISTRATOR. Any Person (a) into which the Seller or
the Administrator, as the case may be, may be merged or consolidated, (b) which
may result from any merger or consolidation to which the Seller or the
Administrator, as the case may be, shall be a party or (c) which may succeed to
the properties and assets of the Seller or the Administrator, as the case may
be, substantially as a whole, shall be the successor to the Seller or the
Administrator, 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 to the
Administration Agreement; PROVIDED, HOWEVER, that each of the Seller and the
Administrator hereby covenant that it will not consummate any of the foregoing
transactions except upon satisfaction of the following: (i) the surviving Seller
or Administrator, as the case may be, if other than Mellon Bank, N.A. (or
affiliate thereof), executes an agreement of assumption to perform every
obligation of the Seller under this Agreement or the Administrator under this
Agreement and the Administration Agreement, as the case may be, (ii) immediately
after giving effect to such transaction, no representation or warranty made
pursuant to Section 3.01 or 6.01 shall have been breached and no Administrator
Default, and no event that, after notice or lapse of time, or both, would become
an Administrator Default shall have occurred and be continuing, (iii) the
surviving Seller or Administrator, as the case may be, if other than Mellon
Bank, N.A. (or affiliate thereof), shall have delivered to the Eligible Lender
Trustee and the Indenture Trustee an Officers' Certificate and an Opinion of
Counsel each stating that such consolidation, merger 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, and that the Rating Agency Condition shall have been
satisfied with respect to such transaction, (iv) the surviving Seller or
Administrator, as the case may be, shall have a consolidated net worth at least
equal to that of the predecessor Seller or Administrator, as the case may be,
(v) unless Mellon Bank, N.A. (or affiliate thereof) is the surviving entity,
such transaction will not result in a material adverse Federal or state tax
consequence to the Issuer, the holders of Notes or the holders of Certificates
and (vi) unless Mellon Bank, N.A. (or affiliate thereof) is the surviving
entity, the Seller or the Administrator, 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 and reciting the details of such filings, or (B) stating that, in
the opinion of such counsel, no such action shall be necessary to preserve and
protect such interests.
SECTION 6.06. LIMITATION ON LIABILITY OF SELLER, ADMINISTRATOR AND
OTHERS. (a) The Seller and any director or officer or employee or agent of the
Seller may rely in good faith on the advice of counsel or on any document of any
kind, prima facie properly executed and submitted by any Person respecting any
matters arising hereunder (provided that such reliance shall not limit in any
way the Seller's obligations under Section 3.02). The Seller shall not be under
any obligation to appear in, prosecute or defend any legal action that shall not
be incidental to its obligations under this Agreement, and that in its opinion
may involve it in any expense or liability.
(b) Neither the Administrator nor any of its directors, officers,
employees or agents shall be under any liability to the Issuer, the holders of
Notes or the holders of Certificates, 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 the Administration Agreement or for errors in
judgment; PROVIDED, HOWEVER, that this provision shall not protect the
Administrator or any such person against any liability that would otherwise be
imposed by reason of willful misfeasance, bad faith or negligence in the
performance of duties or by reason of reckless disregard of obligations and
duties under this Agreement or under 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 respecting any matters
arising hereunder or under the Administration Agreement.
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 holders
of Certificates under this Agreement and the holders of Notes under the
Indenture.
SECTION 6.07. SELLER MAY OWN CERTIFICATES OR NOTES. The Seller 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 Seller or an Affiliate thereof, except as expressly provided herein
or in any other Basic Document.
SECTION 6.08. MELLON BANK, N.A. NOT TO RESIGN AS ADMINISTRATOR.
Subject to the provisions of Section 6.05, Mellon Bank, N.A. shall not resign
from the obligations and duties imposed on it as Administrator under this
Agreement and under the Administration Agreement except upon determination that
the performance of its duties under this Agreement and under the Administration
Agreement shall no longer be permissible under applicable law or shall violate
any final order of a court or administrative agency with jurisdiction over
Mellon Bank, N.A. or its properties. Notice of any such determination permitting
the resignation of Mellon Bank, N.A. 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 Mellon
Bank, N.A. in accordance with Section 8.02.
ARTICLE VII
THE MASTER SERVICER
SECTION 7.01. REPRESENTATIONS OF MASTER SERVICER. The Master Servicer
makes the following representations on which the Issuer is deemed to have relied
in acquiring (through the Eligible Lender Trustee) the Financed Student Loans
and appointing the Master Servicer as master servicer hereunder. The
representations speak as of the execution and delivery of this Agreement and as
of the Closing Date, in the case of the Initial Financed Student Loans, and as
of the applicable Transfer Date, in the case of the Additional Student Loans,
but shall survive the sale, transfer and assignment of the Financed Student
Loans to the Eligible Lender Trustee on behalf of the Issuer and the pledge
thereof to the Indenture Trustee pursuant to the Indenture.
(a) ORGANIZATION AND GOOD STANDING. The Master Servicer is duly
organized and validly existing as a national banking association in good
standing under the laws of the United States of America, with the power and
authority to own its properties and to conduct its business as such properties
are currently owned and such business is presently conducted, and had at all
relevant times, and has, the power, authority and legal right to master service
the Financed Student Loans and to hold the Financed Student Loan Files as
custodian.
(b) DUE QUALIFICATION. The Master Servicer is duly qualified to do
business and has obtained all necessary licenses and approvals in all
jurisdictions in which the ownership or lease of property or the conduct of its
business (including the master servicing of the Financed Student Loans as
required by this Agreement) shall require such qualifications.
(c) POWER AND AUTHORITY. The Master Servicer has the corporate power
and authority to execute and deliver this Agreement and to carry out its terms;
and the execution, delivery and performance of this Agreement have been duly
authorized by the Master Servicer by all necessary action.
(d) BINDING OBLIGATION. This Agreement constitutes a legal, valid and
binding obligation of the Master Servicer enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization and similar
laws relating to creditors' rights generally or the rights of creditors of banks
the deposit accounts of which are insured by the FDIC and subject to general
principles of equity.
(e) NO VIOLATION. The consummation of the transactions contemplated by
this Agreement and the fulfillment of the terms hereof shall not conflict with,
result in any breach of any of the terms and provisions of, nor constitute (with
or without notice or lapse of time or both) a default under the articles of
association or by-laws of the Master Servicer, or any indenture, agreement or
other instrument to which the Master Servicer is a party or by which it shall be
bound nor result in the creation or imposition of any Lien upon any of its
properties pursuant to the terms of any such indenture, agreement or other
instrument (other than this Agreement); which breach or default would reasonably
be expected to have a material adverse effect on the condition of the Master
Servicer, financial or otherwise, or adversely affect the transactions
contemplated by this Agreement; nor violate any law or, to the knowledge of the
Master Servicer, any order, rule or regulation applicable to the Master Servicer
of any court or of any Federal or state regulatory body, administrative agency
or other governmental instrumentality having jurisdiction over the Master
Servicer or its properties.
(f) NO PROCEEDINGS. There are no proceedings, or, to the Master
Servicer's best knowledge, investigations pending, or, to the Master Servicer's
best knowledge, threatened, before any court, regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over the Master
Servicer or its properties: (i) asserting the invalidity of this Agreement, the
Indenture, 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 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) relating to the
Master Servicer and which might adversely affect the Federal or state income tax
attributes of the Notes or the Certificates.
(g) NO AMENDMENT OR WAIVER. 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 to the other warranties contained in this Section or
those of the Seller contained in Section 3.01.
(h) LOCATION OF FINANCED STUDENT LOAN FILES. The Financed Student Loan
Files are kept in the offices of the Master Servicer (or applicable Sub-Servicer
on its behalf) specified in Schedule C hereto, or at such other office specified
in accordance with Section 3.04(b).
SECTION 7.02. INDEMNITIES OF MASTER SERVICER. The Master Servicer
shall be liable in accordance herewith only to the extent of the obligations
specifically undertaken by the Master Servicer under this Agreement.
The Master Servicer shall pay for any loss, liability or expense,
including reasonable attorney's fees, that may be imposed on, incurred by or
asserted against the Issuer, the Eligible Lender Trustee, the Indenture Trustee,
the Seller, the Administrator, the holders of Certificates or the holders of
Notes or any of the officers, directors, employees and agents of the Issuer, the
Eligible Lender Trustee, the Indenture Trustee, the Administrator or the Seller
to the extent that such loss, liability or expense arose out of, or was imposed
upon any such Person through, the negligence, willful misfeasance or bad faith
of the Master Servicer (or any Sub-Servicer acting on its behalf) in the
performance of its obligations and duties under this Agreement or by reason of
the reckless disregard of its obligations and duties (of those of any
Sub-Servicer acting on its behalf) 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,
bad faith or recklessness on the part of the Master Servicer (or such
Sub-Servicer acting on its behalf) is established by a court of law, by an
arbitrator or by way of settlement agreed to by the Master Servicer.
Notwithstanding the foregoing, if the Master Servicer is rendered unable, in
whole or in part, by a force outside the control of the parties hereto
(including acts of God, acts of war, fires, earthquakes and other disasters) to
satisfy its obligations under this Agreement, the Master Servicer shall not be
deemed to have breached any such obligation upon delivery of written notice of
such event to the other parties hereto, for so long as the Master Servicer
remains unable to perform such obligation as a result of such event.
For purposes of this Section, in the event of the termination of the
rights and obligations of the Master Servicer (or any successor thereto pursuant
to Section 7.03) as Master Servicer pursuant to Section 8.01(a), or a
resignation by such Master Servicer pursuant to this Agreement, the Master
Servicer shall be deemed to be the Master Servicer pending appointment of a
successor Master Servicer pursuant to Section 8.02.
Liability of the Master Servicer under this Section shall survive the
resignation or removal of the Eligible Lender Trustee or the Indenture Trustee
or the termination of this Agreement. If the Master Servicer shall have made any
payments pursuant to this Section and the Person to or on behalf of whom such
payments are made thereafter collects any of such amounts from others, such
Person shall promptly repay such amounts to the Master Servicer, without
interest.
SECTION 7.03. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, MASTER SERVICER. Any Person (a) into which the Master Servicer
may be merged or consolidated, (b) which may result from any merger or
consolidation to which the Master Servicer shall be a party or (c) which may
succeed to the properties and assets of the Master Servicer substantially as a
whole, shall be the successor to the Master Servicer without the execution or
filing of any document or any further act by any of the parties to this
Agreement; PROVIDED, HOWEVER, that the Master Servicer hereby covenants that it
will not consummate any of the foregoing transactions except upon satisfaction
of the following: (i) the surviving Master Servicer, if other than Mellon Bank,
N.A. (or affiliate thereof), executes an agreement of assumption to perform
every obligation of the Master Servicer under this Agreement, (ii) immediately
after giving effect to such transaction, no representation or warranty made
pursuant to Section 7.01 shall have been breached and no event that, after
notice or lapse of time, or both, would become a Master Servicer Default shall
have occurred and be continuing, (iii) the surviving Master Servicer, if other
than Mellon Bank, N.A. (or affiliate thereof), shall have delivered to the
Eligible Lender Trustee and the Indenture Trustee an Officers' Certificate and
an Opinion of Counsel each stating that such consolidation, merger 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, and that the Rating Agency Condition shall
have been satisfied with respect to such transaction, (iv) the surviving Master
Servicer shall have a consolidated net worth at least equal to that of the
predecessor Master Servicer, (v) unless Mellon Bank, N.A. (or affiliate thereof)
is the surviving entity, such transaction will not result in a material adverse
Federal or state tax consequence to the Issuer, the holders of Notes or the
holders of Certificates and (vi) unless Mellon Bank, N.A. (or affiliate thereof)
is the surviving entity, the Master Servicer shall have delivered to the
Eligible Lender Trustee and the Indenture Trustee an Opinion of Counsel either
(A) stating that, in the opinion of such counsel, all financing statements and
continuation statements and amendments thereto have been executed and filed that
are necessary fully to preserve and protect the interest of the Eligible Lender
Trustee and Indenture Trustee, respectively, in the Financed Student Loans and
reciting the details of such filings, or (B) stating that, in the opinion of
such counsel, no such action shall be necessary to preserve and protect such
interests.
SECTION 7.04. LIMITATION ON LIABILITY OF MASTER SERVICER AND OTHERS.
Neither the Master Servicer nor any of the directors, officers, employees or
agents of the Master Servicer shall be under any liability to the Issuer, the
holders of Notes or the holders of Certificates, except as provided under this
Agreement, for any action taken or for refraining from the taking of any action
pursuant to this Agreement or for errors in judgment; PROVIDED, HOWEVER, that
this provision shall not protect the Master Servicer or any such person against
any liability that would otherwise be imposed by reason of willful misfeasance,
bad faith or negligence in the performance of duties or by reason of reckless
disregard of obligations and duties under this Agreement. The Master Servicer
and any director, officer, employee or agent of the Master Servicer may rely in
good faith on the advice of counsel or on any document of any kind prima facie
properly executed and submitted by any person respecting any matters arising
under this Agreement.
Except as provided in this Agreement, the Master Servicer shall not be
under any obligation to appear in, prosecute or defend any legal action that
shall not be incidental to its duties to service the Financed Student Loans in
accordance with this Agreement, and that in its opinion may involve it in any
expense or liability; PROVIDED, HOWEVER, that the Master Servicer may undertake
any reasonable action that it may deem necessary or desirable in respect of this
Agreement and the other Basic Documents and the rights and duties of the parties
to this Agreement and the other Basic Documents and the interests of the holders
of Certificates under this Agreement and the holders of Notes under the
Indenture.
SECTION 7.05. MELLON BANK, N.A. NOT TO RESIGN . Subject to the
provisions of Section 7.03, Mellon Bank, N.A., shall not resign from the
obligations and duties hereby imposed on it as Master Servicer under this
Agreement except upon determination that the performance of its duties under
this Agreement shall no longer be permissible under applicable law. Notice of
any such determination permitting the resignation of Mellon Bank, N.A., 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 Mellon Bank, N.A., as Master Servicer in
accordance with Section 8.02.
ARTICLE VIII
DEFAULT
SECTION 8.01. MASTER SERVICER DEFAULT; ADMINISTRATOR DEFAULT. (a)
MASTER SERVICER DEFAULT. If any one of the following events (a "Master Servicer
Default") shall occur and be continuing:
(1) any failure by the Master Servicer (i) to deliver (or cause to be
delivered) to the Indenture Trustee for deposit in any of the Trust Accounts any
payment required by the Basic Documents or (ii) in the event that daily deposits
into the Collection Account are not required, to deliver (or cause to be
delivered) to the Administrator any payment required by the Basic Documents,
which failure in case of either clause (i) or (ii) 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
(or to cause to be observed or performed) 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 the holders of Notes or the holders of Certificates and
(ii) continues 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 Notes or the
holders of Certificates, as applicable, representing not less than 25% of the
Outstanding Amount of the Notes or 25% of the outstanding Certificate Balance;
(3) an Insolvency Event occurs with respect to the Master Servicer; or
(4) any failure by the Master Servicer to comply with any applicable
requirements under the Higher Education Act resulting in a loss of its
eligibility, if applicable, as a third-party servicer (or the failure of the
Master Servicer to replace promptly any Sub-Servicer that has lost its
eligibility as a third-party servicer);
then, and in each and every case, so long as the Master Servicer Default shall
not have been remedied, either the Indenture Trustee, or the holders of Notes
evidencing not less than 25% of the Outstanding Amount of the Notes, by notice
then given in writing to the Master Servicer (and to the Indenture Trustee and
the Eligible Lender Trustee if given by the holders of Notes) may terminate all
the rights and obligations (other than the obligations set forth in Section 7.02
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 8.02; and, without limitation, the
Indenture Trustee and the Eligible Lender Trustee are hereby authorized and
empowered to execute and deliver, for the benefit of the predecessor Master
Servicer, as attorney-in-fact or otherwise, any and all documents and other
instruments, and to do or accomplish all other acts or things necessary or
appropriate to effect the purposes of such notice of termination, whether to
complete the transfer and endorsement of the Financed Student Loans and related
documents, or otherwise. The predecessor Master Servicer shall cooperate with
the successor Master Servicer, the Indenture Trustee and the Eligible Lender
Trustee in effecting the termination of the responsibilities and rights of the
predecessor Master Servicer under this Agreement and all Sub-Servicing
Agreements, including the transfer to the successor Master Servicer of its
rights under all existing Sub-Servicing Agreements and 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
to the successor Master Servicer and amending this Agreement, the Sub-Servicing
Agreements 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 foregoing, the successor Master Servicer shall have the
option to assume the rights of the predecessor Master Servicer under each
Sub-Servicing Agreement, or to enter into new Sub-Servicing Agreements with the
existing or other replacement Sub-Servicers; PROVIDED, HOWEVER, that unless the
existing Sub-Servicer is in breach of its Sub-Servicing Agreement, any and all
contractual damages, costs and expenses owed to any Sub-Servicer under the
existing Sub-Servicing Agreements by reason of such cancellation, shall be borne
by the successor Master Servicer.
(b) ADMINISTRATOR DEFAULT. If any one of the following events (an
"Administrator Default") shall occur and be continuing:
(1) (i) in the event that daily deposits into the Collection Account
are not required, any failure by the Administrator to deliver to the Indenture
Trustee for deposit in any of the Trust Accounts any Available Funds required to
be paid on or before the Business Day immediately preceding any Monthly
Servicing Payment Date or Distribution Date, as applicable, or (ii) any failure
by the Administrator to direct the Indenture Trustee to make any required
distributions from any of the Trust Accounts, which failure in case of either
clause (i) or (ii) 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
the holders of Notes or the holders of Certificates and (ii) continues
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 Notes or the holders of Certificates, as applicable,
representing not less than 25% of the Outstanding Amount of the Notes or 25% of
the outstanding Certificate Balance; or
(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, either the Indenture Trustee, or the holders of Notes
evidencing not less than 25% of the Outstanding Amount of the Notes, by notice
then given in writing to the Administrator (and to the Indenture Trustee and the
Eligible Lender Trustee if given by the holders of Notes) may terminate all the
rights and obligations (other than the obligations set forth in Section 6.04
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 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 8.02; and, without limitation, the Indenture Trustee and
the Eligible Lender Trustee are hereby authorized and empowered to execute and
deliver, for the benefit of the predecessor 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 a Administrator Default, the Eligible Lender Trustee shall
give notice thereof to the Rating Agencies.
SECTION 8.02. 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 8.01, 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 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 or 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 a 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. In the event
that 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 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 applicable portion of the Master Servicing Fee and the applicable portion
of any Excess Servicing Fees, or the Administration Fee, as the case may be.
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 a Master Servicer
under this Agreement or to the Administrator under this Agreement and the
Administration Agreement; PROVIDED, HOWEVER, that such right to appoint or to
petition for the appointment of any such successor Master Servicer shall in no
event relieve the Indenture Trustee from any obligations otherwise imposed on it
under the Basic Documents until such successor has in fact assumed such
appointment.
(b) Upon appointment, the successor Master Servicer 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
placed on the predecessor Master Servicer or Administrator, as the case may be,
that arise thereafter or are related thereto and shall be entitled to an amount
agreed to by such successor Master Servicer or Administrator (which shall not
exceed the applicable portion of the Master Servicing Fee and the applicable
portion of any Excess Servicing Fees, or the Administration Fee, as the case may
be, unless such compensation arrangements will not result in a downgrading of
Notes or the Certificates 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 pursuant hereto and
thereto, shall be entitled to resign to the extent a qualified successor Master
Servicer or Administrator has been appointed and has assumed all the obligations
of the Master Servicer or the Administrator, as the case may be, in accordance
with the terms of this Agreement and the other Basic Documents.
SECTION 8.03. NOTIFICATION TO NOTEHOLDERS AND CERTIFICATEHOLDERS. Upon
any termination of, or appointment of a successor to, the Master Servicer or the
Administrator, as the case may be, pursuant to this Article VIII, the Eligible
Lender Trustee shall give prompt written notice thereof to the holders of
Certificates and the Indenture Trustee shall give prompt written notice thereof
to holders of Notes 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 8.04. WAIVER OF PAST DEFAULTS. The holders of Notes evidencing
not less than a majority of the Outstanding Amount of the Notes (or the holders
of Certificates evidencing not less than a majority of the outstanding
Certificate Balance, in the case of any default which does not adversely affect
the Indenture Trustee or the holders of Notes) may, on behalf of all the holders
of Notes and the holders of Certificates, waive in writing any default by the
Master Servicer in the performance of its obligations hereunder, and any default
by the Administrator in the performance of its obligations hereunder and under
the Administration Agreement, and any consequences thereof, except a default in
making any required deposits to or payments from any of the Trust Accounts (or
giving instructions regarding the same) in accordance with this Agreement. Upon
any such waiver of a past default, such default shall cease to exist, and any
Master Servicer Default or Administrator Default arising therefrom shall be
deemed to have been remedied for every purpose of this Agreement and the
Administration Agreement. No such waiver shall extend to any subsequent or other
default or impair any right consequent thereto.
ARTICLE IX
TERMINATION
SECTION 9.01. TERMINATION. (a) OPTIONAL PURCHASE OF ALL FINANCED
STUDENT LOANS. As of the last day of any Collection Period immediately preceding
a Distribution Date as of which the sum of the then outstanding Pool Balance is
___% or less of the Initial Pool Balance, the Seller shall have the option to
purchase the Trust Estate, other than the Trust Accounts; PROVIDED, HOWEVER,
that, unless Moody's agrees otherwise, the Seller may not effect any such
purchase so long as the rating on its long-term debt obligations is less than
[Baa3 by Moody's and BBB by S&P,] unless the Eligible Lender Trustee and the
Indenture Trustee shall have given notice to each of the Rating Agencies and
shall have received an Opinion of Counsel to the effect that such purchase would
not constitute a fraudulent conveyance. To exercise such option, the Seller
shall deposit pursuant to Section 5.04 in the Collection Account an amount equal
to the aggregate Purchase Amount for the Financed Student Loans and the related
rights with respect thereto, plus the appraised value of any such other property
held by the Trust other than the Trust Accounts, such value to be determined by
an appraiser mutually agreed upon by the Seller and the Eligible Lender Trustee,
and shall succeed to all interests in and to the Trust; PROVIDED, HOWEVER, that
the Seller may not effect such purchase if the aggregate Purchase Amount to be
so deposited in the Collection Account does not equal or exceed an amount equal
to the sum of (i) the unpaid principal amount of the Notes then outstanding plus
accrued and unpaid interest thereon at the applicable Note Interest Rates to the
date of exercise and the amount of unpaid Noteholders' Interest Index Carryover
with respect thereto and (ii) the unpaid Certificate Balance, plus accrued and
unpaid interest thereon at the Certificate Rate to the date of exercise and the
amount of unpaid Certificateholders' Interest Index Carryover with respect
thereto.
(b) INSOLVENCY OF THE SELLER. Upon any sale of the assets of the Trust
pursuant to Section 9.02 of the Trust Agreement, the Administrator 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
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 Administrator shall
instruct the Indenture Trustee to make the following distributions (after the
application on such Distribution Date of the amount of Available Funds and
amounts on deposit in the Reserve Account pursuant to Sections 5.05 and 5.06)
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 holders of the Notes, any unpaid Noteholders' Interest
Distribution Amount for such Distribution Date;
(ii) to the holders of the Notes, the outstanding principal balance of
the Notes;
(iii) to the holders of the Certificates, any unpaid
Certificateholders' Interest Distribution Amount for such Distribution
Date;
(iv) to the holders of the Certificates, the Certificate Balance;
(v) to the Master Servicer, any unpaid Excess Servicing Fees;
(vi) to the holders of the Notes, any unpaid Noteholders' Interest
Index Carryover; and
(vii) to the holders of the Certificates, any unpaid
Certificateholders' Interest Index Carryover.
Any investments on deposit in the Reserve Account which will not mature on or
before such Distribution Date shall be sold by the Indenture Trustee at such
time as will result in the Indenture Trustee receiving the proceeds from such
sale not later than the Business Day preceding such Distribution Date. Any
Insolvency Proceeds related to Financial Student Loans remaining after the
deposits described above shall be paid to the Seller.
(c) AUCTION OF FINANCED STUDENT LOANS. Any Financed Student Loans
remaining in the Trust as of the end of the Collection Period immediately
preceding the ______ ____ Distribution Date will be offered for sale by the
Indenture Trustee. Mellon Bank, N.A., its affiliates and unrelated third parties
may offer bids to purchase such Financed Student Loans on such Distribution
Date; provided, however, that Mellon Bank, N.A., and its affiliates may not bid
more than an amount determined by Mellon Bank, N.A., in good faith to be equal
to the fair market value of such Financed Student Loans as of the end of the
Collection Period immediately preceding such Distribution Date. If at least two
bids are received, the Indenture Trustee will solicit and resolicit bids from
all participating bidders until only one bid remains or the remaining bidders
decline to resubmit bids. The Indenture Trustee shall accept the highest of such
remaining bids if it is equal to or in excess of the Minimum Purchase Amount. If
at least two bids are not received or the highest bid after the resolicitation
process is completed is not equal to or in excess of the Minimum Purchase
Amount, the Indenture Trustee will not consummate such sale. In connection with
the determination of the Minimum Purchase Amount, the Indenture Trustee may
consult, and, at the direction of the Seller, shall consult, with a financial
advisor (which may be the Administrator) to determine if the fair market value
of the Financed Student Loans has been offered. The proceeds of any such sale
will be applied in the order of priority set forth in Section 5.04(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.
(d) NOTICE. As described in Article IX of the Trust Agreement, notice
of any termination of the Trust shall be given by the Administrator to the
Eligible Lender Trustee and the Indenture Trustee as soon as practicable after
the Administrator has received notice thereof.
(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 holders of Certificates will succeed to the rights of the holders of Notes
hereunder other than Section 5.06(b) and the Eligible Lender Trustee will
succeed to the rights of (except for the rights of the Indenture Trustee which
have accrued prior to the satisfaction and discharge of the Indenture and the
payment in full of the principal of and interest on the Notes), and assume the
obligations of, the Indenture Trustee pursuant to this Agreement and any other
Basic Documents.
ARTICLE X
ADDITIONAL PROVISIONS REGARDING FINANCED STUDENT LOANS
SECTION 10.01. PERIODIC REPORTS. No later than the fifteenth day of
each month, and for so long as the Eligible Lender Trustee on behalf of the
Trust shall own the Financed Student Loans, the Trust shall furnish to LAI or
cause to be furnished in an electronic form suitable to LAI, a record of all
Financed Student Loans which are Access Loans (the "Record"), as of the last day
of the preceding month. The Master Servicer shall (or shall cause the applicable
Sub-Servicers to) furnish the Record to LAI on behalf of the Trust (or on behalf
of the Indenture Trustee in the event that the Indenture Trustee becomes the
owner of the Financed Student Loans) as required by this Section 10.01. The
Master Servicer, acting on behalf of the Trust, shall honor LAI's reasonable
request for additional Records, at LAI's expense. The Master Servicer
acknowledges and agrees that the costs and expenses to produce and distribute
(or to cause the applicable Sub-Servicers to produce and distribute) the Record
are part of the data transfer fee payable to it pursuant to the Servicing Fee
Schedule, attached as Schedule E to this Agreement and agrees that no additional
fees will be payable by the Trust or the Administrator to produce and deliver
the Record.
In addition to the foregoing Record, the parties hereto acknowledge
and agree that LAI may obtain from the Master Servicer (or the applicable
Sub-Servicers) at the sole cost and expense of LAI such additional information
as LAI may reasonably request concerning the Financed Student Loans which are
Access Loans, including, but not limited to, information on defaults, average
principal balance, and complaints. Any such request shall be made in writing to
the Administrator, with a copy to the Eligible Lender Trustee and the Master
Servicer. The Trust shall not be obligated to incur or pay any costs or expenses
associated with the production or delivery of such additional information,
except that, if the additional information requested by LAI is contained in any
monthly or other periodic report produced by the Master Servicer (or a
Sub-Servicer acting on its behalf) and delivered to the Trust (or to the
Administrator on behalf of the Trust) pursuant to this Agreement, the Trust
shall provide a copy of such report, or excerpts therefrom, to LAI and the
Administrator shall bear all photocopying and postage charges for producing and
mailing such copy.
The Indenture Trustee agrees to assume and perform the obligations of
the Trust under this Section 10.01 in the event that the Indenture Trustee
forecloses upon its security interest in and becomes the owner of the Financed
Student Loans.
SECTION 10.02. COOPERATION. With regard to the Financed Student Loans
which are Access Loans, the Trust, the Indenture Trustee, the Eligible Lender
Trustee, the Master Servicer and the Administrator each agree to cooperate with
each other, with each applicable Sub-Servicer and LAI, and with each of their
internal or external auditors, or governmental examiners, at the expense of the
party requesting such cooperation, and to provide any information regarding
origination, disbursement, servicing, and data collection relating to such loans
as reasonably requested by the other parties, their auditors, or governmental
examiners as necessary or desirable for the performance of an audit or
examination. In that regard, each party shall make available any necessary
supporting records to each other party and shall resolve any discrepancy claimed
to exist in such records to the reasonable satisfaction of the other party
within 30 days of the date that the other party has claimed that a discrepancy
exists. Notwithstanding the foregoing, the parties acknowledge that audit
reviews conducted during heavy processing periods may disrupt such operations.
Accordingly, unless a party has reason to believe that another party is in
material breach of the performance of its obligations under this Agreement, the
Administration Agreement, the Trust Agreement or the Indenture, reviews by
internal or external auditors shall only be scheduled during the months of
January, February, April, May, June, September, October, November or December.
SECTION 10.03. CONFIDENTIALITY. Each party to this Agreement and the
Indenture Trustee agrees to maintain the confidentiality of all data, materials
and information relating to The Access GroupSM Loan Program and the Financed
Student Loans entrusted to it by another party hereto or any party to any of the
Coordination Agreements. Each party also agrees not to use such data, materials
and information for any purpose other than the limited purpose of performing its
obligations under this Agreement, the Administration Agreement, the Indenture,
the Trust Agreement or the Coordination Agreements. This section shall not be
deemed to preclude the disclosure of (i) information relating to the historical
performance of the Financed Student Loans (including, but not limited to,
statistical information relating to defaults, prepayments, consolidations,
deferrals and forbearances) by the Seller or the Administrator or, with the
consent of the Administrator, by the Eligible Lender Trustee or Indenture
Trustee, (ii) such information as in any of the Master Servicer's (or any
Sub-Servicer's acting on behalf of the Master Servicer), Administrator's,
Eligible Lender Trustee's or Indenture Trustee's discretion may be required
under any of this Agreement, the Trust Agreement, the Indenture or the
Administration Agreement to be disclosed to holders of the Notes or
Certificates, (iii) such information as may be required to be disclosed under
applicable laws, rules, regulations or governmental orders, (iv) information
obtained by the Indenture Trustee in the performance of its obligations as
Indenture Trustee, provided that the Indenture Trustee shall maintain the
confidentiality of all account level and borrower level information, including
without limitation, the borrower's name, address and social security number and
the account balance and account history or (v) disclosure by LAI of information
in the Record or other information received by LAI pursuant to Section 10.01 of
this Agreement.
SECTION 10.04. FUTURE PURCHASES. The Trust, the Eligible Lender
Trustee and the Indenture Trustee each hereby agree that, in the event of any
sale or other transfer of any Financed Student Loans that are Access Loans to
any third party, the Trust, the Eligible Lender Trustee or the Indenture
Trustee, as the case may be, as seller (i) shall use reasonable efforts to
obtain from the purchaser or transferee of such Access Loans an agreement in
form and substance satisfactory to LAI pursuant to which such purchaser or
transferee agrees to observe and comply with the obligations of the parties to
this Agreement under Sections 10.02 and 10.03 hereof and the obligations of the
Trust, the Eligible Lender Trustee or the Indenture Trustee, as the case may be,
as seller under this clause (i) of Section 10.04 hereof and (ii) shall obtain
from any such purchaser or transferee an agreement to provide LAI with prior
notice of any future sale of such Access Loans, or portion thereof, acquired by
such purchaser or transferee and an agreement to comply with the obligations of
the Trust under Section 10.01 and the obligations of the seller under this
clause (ii) of Section 10.04 and under the last sentence of Section 10.06(a) of
this Agreement (provided, however, that if the purchaser or transferee does not
retain the Master Servicer (or the related Sub-Servicer) as servicer, the
obligation to deliver "Reports" shall be construed as an obligation to deliver
reports containing information substantially similar to the information
contained in Reports).
SECTION 10.05. [Reserved].
SECTION 10.06. BIDS/FIRST REFUSAL RIGHTS. (a) In connection with any
contemplated sale of any Financed Student Loans that are also Access Loans by
the Eligible Lender Trustee on behalf of the Trust or by the Indenture Trustee,
such selling party (being the Eligible Lender Trustee or Indenture Trustee, as
applicable) (the "Selling Party") shall notify LAI and each other entity
required to be notified of any proposed solicitation of bids or offers to
purchase such Financed Student Loans offered for sale, such notice to be
delivered not less than thirty (30) days prior to the date upon which bids or
offers are to be received by such Selling Party. Each of LAI and each other
entity required to be notified shall be given an opportunity to submit a bid or
offer to purchase all such Financed Student Loans being offered for sale within
such thirty (30) day period and if no other bid exceeds such entity's bid and if
such entity's bid is equal to or in excess of the Minimum Purchase Amount such
Selling Party shall convey the Financed Student Loans offered for sale to
whichever of such entity submitted the highest bid. If no bids that are received
pursuant to any solicitation process are equal to or in excess of the Minimum
Purchase Amount, the Indenture Trustee will not consummate a sale of such
Financed Student Loans. The Selling Party shall require any purchaser or
transferee who acquires Financed Student Loans that are Access Loans to acquire
all Financed Student Loans of a borrower owned by the Trust and not in default.
(b) The provisions of this Section 10.06 shall not apply to any sale
or other transfer of any Financed Student Loans to the Seller as may be required
or permitted under this Agreement or any Guarantor in connection with the
enforcement of any applicable Guarantee Agreement. The Seller acknowledges that
if any Financed Student Loan that is an Access Loan is reacquired by it, such
Financed Student Loan shall from the time of such reacquisition become subject
to the restrictions and requirements on sale or transfer of loans by the Seller
under the applicable Coordination Agreement.
SECTION 10.07. CONSOLIDATION LOANS. The parties to this Agreement, to
the extent applicable, hereby acknowledge and agree that, solely for purposes of
allocating consolidation loans that relate to Access Loans among lenders, the
Seller shall be deemed to be the owner of, and lender on, all Financed Student
Loans.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. AMENDMENT. This Agreement may be amended by the Seller,
the Master Servicer, the Administrator and the Eligible Lender Trustee, with the
consent of the Indenture Trustee, but without the consent of any of the holders
of Notes or the holders of Certificates (which 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 holders of Notes or the holders of Certificates;
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 holder of Notes or
holder of Certificates.
This Agreement may also be amended from time to time by the Seller,
the Master Servicer, the Administrator and the Eligible Lender Trustee, with the
consent of the Indenture Trustee, the consent of the holders of Notes evidencing
not less than a majority of the Outstanding Amount of the Notes, the consent of
the holders of Certificates evidencing not less than a majority of the
Certificate Balance for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Agreement or of
modifying in any manner the rights of the holders of Notes or the holders of
Certificates; PROVIDED, HOWEVER, that no such amendment shall (a) increase or
reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments with respect to Financed Student Loans or distributions
that shall be required to be made for the benefit of the holders of Notes or the
holders of Certificates or (b) reduce the aforesaid percentage of the
Outstanding Amount of the Notes and the Certificate Balance, holders of Notes or
the holders of Certificates of which are required to consent to any such
amendment, without the consent of all outstanding holders of Notes and holders
of Certificates.
Promptly after the execution of any such amendment or consent (or, in
the case of the Rating Agencies, five Business Days prior thereto), the Eligible
Lender Trustee shall furnish written notification of the substance of such
amendment or consent to each holder of Certificates, the Indenture Trustee and
each of the Rating Agencies.
It shall not be necessary for the consent of holders of Certificates
or holders of Notes pursuant to this Section to approve the particular form of
any proposed amendment or consent, but it shall be sufficient if such consent
shall approve the substance thereof.
Prior to the execution of any amendment to this Agreement, the
Eligible Lender Trustee and the Indenture Trustee shall be entitled to receive
and rely upon an Opinion of Counsel stating that the execution of such amendment
is authorized or permitted by this Agreement and the Opinion of Counsel referred
to in Section 11.02(i)(1). The Eligible Lender Trustee and the Indenture Trustee
may, but shall not be obligated to, enter into any such amendment which affects
the Eligible Lender Trustee's or the Indenture Trustee's, as applicable, own
rights, duties or immunities under this Agreement or otherwise.
SECTION 11.02. PROTECTION OF INTERESTS IN TRUST. (a) The Seller shall
execute and file such financing statements and cause to be executed and filed
such continuation statements, all in such manner and in such places as may be
required by law fully to preserve, maintain, and protect the interest of the
Issuer, the Eligible Lender Trustee and the Indenture Trustee in the Financed
Student Loans and in the proceeds thereof. The Seller shall deliver (or cause to
be delivered) to the Eligible Lender Trustee and the Indenture Trustee
file-stamped copies of, or filing receipts for, any document filed as provided
above, as soon as available following such filing.
(b) Neither the Seller nor the Master Servicer shall (nor shall the
Master Servicer permit a Sub-Servicer to) 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 Section 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 (or cause to be
filed) appropriate amendments to all previously filed financing statements or
continuation statements.
(c) The Seller and the Master Servicer shall have an obligation (and
the Master Servicer shall cause each Sub-Servicer) to give the Eligible Lender
Trustee and the Indenture Trustee at least 60 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 (or cause to be filed) any such
amendment. The Master Servicer shall (and shall cause each Sub-Servicer to) 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 (and shall cause the applicable
Sub-Servicer to) maintain accounts and records as to each Financed Student Loan
accurately and in sufficient detail to permit (i) the reader thereof to know at
any time the status of such Financed Student Loan, including payments and
recoveries made and payments owing (and the nature of each) and (ii)
reconciliation between payments or recoveries on (or with respect to) each
Financed Student Loan and the amounts from time to time deposited in the
Collection Account in respect of such Financed Student Loan.
(e) The Master Servicer shall (and shall cause the applicable
Sub-Servicer to) maintain its computer systems so that, from and after the time
of sale under this Agreement of the Financed Student Loans, the Master
Servicer's (or the related Sub-Servicer's) master computer records (including
any backup archives) that refer to a Financed Student Loan shall indicate
clearly the interest of the Issuer, the Eligible Lender Trustee and the
Indenture Trustee in such Financed Student Loan and that such Financed Student
Loan is owned by the Eligible Lender Trustee on behalf of the Issuer and has
been pledged to the Indenture Trustee. Indication of the Issuer's, the Eligible
Lender Trustee's and the Indenture Trustee's interest in a Financed Student Loan
shall be deleted from or modified on the Master Servicer's (or the related Sub-
Servicer'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 Seller or the Administrator shall propose to
sell, grant a security interest in, or otherwise transfer any interest in
student loans to any prospective purchaser, lender or other transferee, the
Master Servicer shall (or shall cause the applicable Sub-Servicer to) give to
such prospective purchaser, lender or other transferee computer tapes, records
or printouts (including any restored from backup archives) that, if they shall
refer in any manner whatsoever to any Financed Student Loan, shall indicate
clearly that such Financed Student Loan has been sold and is owned by the
Eligible Lender Trustee on behalf of the Issuer and has been pledged to the
Indenture Trustee.
(g) Upon reasonable notice, the Master Servicer shall (and shall cause
the applicable Sub-Servicer to) permit the Indenture Trustee and its agents at
any time during normal business hours to inspect, audit (subject to Section
10.02 with respect to Financed Student Loans that are Access Loans) and make
copies of and abstracts from the Master Servicer's (or the related
Sub-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 (or shall cause the applicable
Sub-Servicer to) furnish to the Eligible Lender Trustee or to the Indenture
Trustee (in each case, with a copy to the Administrator), within five Business
Days, a list of all Financed Student Loans (by borrower social security number,
type of loan and date of issuance) then held as part of the Trust, and the
Administrator shall furnish to the Eligible Lender Trustee or to the Indenture
Trustee, within 20 Business Days thereafter, a comparison of such list to the
list of Initial Financed Student Loans set forth in Schedule A as of the Closing
Date, and, for each Financed Student Loan that has been added to or removed from
the pool of loans held by the Eligible Lender Trustee on behalf of the Issuer,
information as to the date as of which and circumstances under which each such
Financed Student Loan was so added or removed.
(i) The Seller shall deliver to the Eligible Lender Trustee and the
Indenture Trustee:
(1) promptly after the execution and delivery of this Agreement and of
each amendment thereto and on each Transfer Date, an Opinion of Counsel either
(A) stating that, in the opinion of such counsel, all financing statements and
continuation statements have been executed and filed that are necessary fully to
preserve and protect the interest of the Eligible Lender Trustee and the
Indenture Trustee in the Financed Student Loans, and reciting the details of
such filings or referring to prior Opinions of Counsel in which such details are
given, or (B) stating that, in the opinion of such counsel, no such action shall
be necessary to preserve and protect such interest; and
(2) within 120 days after the beginning of each calendar year
commencing April 30, _____, an Opinion of Counsel, dated as of a date during
such 120-day period, either (A) stating that, in the opinion of such counsel,
all financing statements and continuation statements have been executed and
filed that are necessary fully to preserve and protect the interest of the
Eligible Lender Trustee and the Indenture Trustee in the Financed Student Loans,
and reciting the details of such filings or referring to prior Opinions of
Counsel in which such details are given, or (B) stating that, in the opinion of
such counsel, no such action shall be necessary to preserve and protect such
interest; PROVIDED that a single Opinion of Counsel may be delivered in
satisfaction of the foregoing requirement and that of Section 3.06(b) of the
Indenture.
Each Opinion of Counsel referred to in clause (1) or (2) above shall
specify (as of the date of such opinion and given all applicable laws as in
effect on such date) any action necessary to be taken in the following year to
preserve and protect such interest.
(j) The Seller shall, to the extent required by applicable law, cause
the Certificates and the Notes to be registered with the Commission pursuant to
Section 12(b) or Section 12(g) of the Exchange Act within the time periods
specified in such sections.
SECTION 11.03. NOTICES. All demands, notices, instructions, directions
and communications upon or to the Seller, the Administrator, the Master
Servicer, the Eligible Lender Trustee, the Indenture Trustee or the Rating
Agencies under this Agreement shall be in writing, personally delivered or
mailed by certified mail, return receipt requested, (or in the form of telex or
facsimile notice, followed by written notice delivered as aforesaid) and shall
be deemed to have been duly given upon receipt (a) in the case of the Seller,
the Master Servicer or the Administrator, to Mellon Bank, N.A., One Mellon Bank,
500 Grant Street, Pittsburgh, Pennsylvania 15258, Attention: _______________,
Mellon Student Loan Trust ___-___ (telephone: __________; facsimile: __________,
(b) in the case of the Issuer or the Eligible Lender Trustee, at the Corporate
Trust Office of the Eligible Lender Trustee, (d) 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:
ABS Monitoring Department (telephone: (212) 553-4948; facsimile: (212)
553-4600), (e) in the case of Fitch, to Fitch IBCA, Inc., One State Street
Plaza, New York, New York 10004, (telephone: (212) 908-0500; facsimile: (212)
480-4435) and (f) in the case of S&P to Standard & Poor's, 55 Water Street, New
York, New York 10041 (telephone (212) ___-____; facsimile (212) ___- ____, as to
each of the foregoing, at such other address as shall be designated by written
notice to the other parties.
SECTION 11.04. ASSIGNMENT. Notwithstanding anything to the contrary
contained herein, except as provided in Sections 6.05 and 7.03 and as provided
in the provisions of this Agreement concerning the resignation of the Master
Servicer or the Administrator, this Agreement may not be assigned by the Seller,
the Administrator or the Master Servicer. This Agreement may only be assigned by
the Eligible Lender Trustee to its permitted successor pursuant to the Trust
Agreement.
SECTION 11.05. LIMITATIONS ON RIGHTS OF OTHERS. The provisions of this
Agreement are solely for the benefit of the Seller, the Master Servicer, the
Issuer and the Eligible Lender Trustee and for the benefit of the holders of
Certificates, the Indenture Trustee and the holders of Notes, 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 11.06. SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 11.07. SEPARATE COUNTERPARTS. This Agreement may be executed
by the parties hereto in separate counterparts, each of which when so executed
and delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 11.08. HEADINGS. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
SECTION 11.09. 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 Seller hereby
acknowledges and consents to any mortgage, pledge, assignment and grant by the
Issuer to the Indenture Trustee pursuant to the Indenture for the benefit of the
holders of the Notes 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. (a) Notwithstanding any prior
termination of this Agreement, the Master Servicer, the Administrator and the
Seller shall not, prior to the date which is one year and one day after the
termination of this Agreement with respect to the Issuer, acquiesce, petition or
otherwise invoke or cause the Issuer to invoke the process of any court or
government authority for the purpose of commencing or sustaining a case against
the Issuer under any Federal or state bankruptcy, insolvency or similar law or
appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or
other similar official of the Issuer or any substantial part of its property, or
ordering the winding up or liquidation of the affairs of the Issuer.
(b) Notwithstanding any prior termination of this Agreement, the
Master Servicer or any successor Master Servicer shall not, prior to the date
which is one year and one day after the termination of this Agreement with
respect to the Seller, acquiesce, petition or otherwise invoke or cause the
Seller to invoke the process of any court or government authority for the
purpose of commencing or sustaining a case against the Seller under any
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Seller or any
substantial part of its property, or ordering the winding up or liquidation of
the affairs of the Seller.
SECTION 11.12. LIMITATION OF LIABILITY OF ELIGIBLE LENDER TRUSTEE AND
INDENTURE TRUSTEE. (a) Notwithstanding anything contained herein to the
contrary, this Agreement has been signed by _______________ not in its
individual capacity but solely in its capacity as Eligible Lender Trustee of the
Issuer and, subject to the succeeding paragraph, in no event shall
_______________ in its individual capacity or, except as expressly provided in
the Trust Agreement, as beneficial owner of the Issuer have any liability for
the representations, warranties, covenants, agreements or other obligations of
the Issuer hereunder or in any of the certificates, notices or agreements
delivered pursuant hereto as to all of which recourse shall be had solely to the
assets of the Issuer.
(b) Except as provided in subsection (d) of this section,
notwithstanding anything contained herein to the contrary, this Agreement has
been signed by _______________ not in its individual capacity but solely in its
capacity as Eligible Lender Trustee of the Issuer and in no event shall
_______________ in its individual capacity or, except as expressly provided in
the Trust Agreement, as beneficial owner of the Issuer have any liability for
the representations, warranties, covenants, agreements or other obligations of
the Issuer hereunder or in any of the certificates, notices or agreements
delivered pursuant hereto as to all of which recourse shall be had solely to the
assets of the Issuer.
(c) Notwithstanding anything contained herein to the contrary, this
Agreement has been accepted by _______________ not in its individual capacity
but solely as Indenture Trustee and in no event shall _______________ 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.
(d) Notwithstanding any other provision in this Agreement or the other
Basic Documents, nothing in this Agreement or the other Basic Documents shall be
construed to limit the legal responsibility of the Eligible Lender Trustee or
the Indenture Trustee to the U.S. Secretary of Education or a Guarantor for any
violations of statutory or regulatory requirements that may occur with respect
to loans held by the Eligible Lender Trustee or the Indenture Trustee, pursuant
to or to otherwise comply with their obligations under the Higher Education Act
or implementing regulations, it being expressly understood that the Indenture
Trustee has no obligation or duty pursuant to this Section except in the event
of Foreclosure or pursuant to Section 8.01 as a successor Master Servicer.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective officers as of the day and year first above
written.
MELLON STUDENT LOAN TRUST ___-___,
By: ________________________________,
not in its individual capacity but
solely as Eligible Lender Trustee
on behalf of the Trust,
By: _________________________
Name:
Title:
MELLON BANK, N.A.,
as Seller,
By: __________________________
Name:
Title:
MELLON BANK, N.A.,
as Master Servicer,
By: __________________________
Name:
Title:
MELLON BANK, N.A.,
as Administrator,
By: __________________________
Name:
Title:
___________________________________,
not in its individual capacity but
solely as Eligible Lender Trustee,
By: __________________________
Name:
Title:
Acknowledged, accepted, and with
respect to Article X, agreed to,
as of the day and year
first above written:
_____________________________,
not in its individual capacity
but solely as Indenture Trustee,
By: ________________________
Name:
Title:
Acknowledged and accepted
as of the day and year
first above written:
_____________________________,
not in its individual capacity
but solely in its capacity as
securities intermediary
under Section 5.01,
By: ________________________
Name:
Title:
<PAGE>
APPENDIX A
DEFINITIONS AND USAGE
<PAGE>
APPENDIX A
[FORM OF] 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
"ACCESS LOANS" means those Financed Student Loans that were originated
under The Law Access(R) Program or The Access GroupSM Loan Program as
administered by LSAS or LAI.
"ACT" has the meaning specified in Section 11.03(a) of the Indenture.
"ADDITIONAL STUDENT LOANS" means the Subsequent Pool Student Loans,
the Other Subsequent Student Loans, and the fundings of accrued interest to be
capitalized.
"ADMINISTRATION AGREEMENT" means the Administration Agreement dated as
of ___________, ____, among the Issuer, the Indenture Trustee and the
Administrator.
"ADMINISTRATION FEE" has the meaning specified in Section 3 of the
Administration Agreement.
"ADMINISTRATOR" means Mellon Bank, N.A., a national banking
association, in its capacity as administrator of the Issuer and the Financed
Student Loans.
"ADMINISTRATOR DEFAULT" has the meaning specified in Section 8.01(b)
of the Sale and Servicing Agreement.
"ADMINISTRATOR'S CERTIFICATE" means an Officers' Certificate of the
Administrator delivered pursuant to Section 4.08(c) of the Sale and Servicing
Agreement and containing the information required by Section 4.08(c).
"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.
"APPLICABLE NOTE MARGIN" means with respect to the Class ___ Notes,
____% and with respect to the Class ___ Notes, ____%.
"ASSIGNED RIGHTS" has the meaning specified in Section 2.01 of the
Sale and Servicing Agreement.
"AUCTION PURCHASE AMOUNT" with respect to the Financed Student Loans
means the aggregate unpaid principal balance owed by the applicable borrowers
thereon plus accrued interest thereon to the date of purchase less the amount on
deposit in the Reserve Account as of such date.
"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 or any of its Affiliates 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 Seller, any officer of the Seller or any of its Affiliates who is authorized
to act for the Seller in matters relating to or to be acted upon by the Seller
pursuant to the Basic Documents and who is identified on the list of Authorized
Officers delivered by the Seller to the Indenture Trustee on the Closing Date
(as such list may be modified or supplemented from time to time thereafter),
(iv) with respect to the Master Servicer, any officer of the Master Servicer or
any of its Affiliates who is authorized to act for the Master Servicer in
matters relating to or to be acted upon by the Master Servicer pursuant to the
Basic Documents and who is identified on the list of Authorized Officers
delivered by the Master Servicer to the Indenture Trustee on the Closing Date
(as such list may be modified or supplemented from time to time thereafter), and
(v) with respect to any Sub-Servicer, any officer of the Sub-Servicer or any of
its Affiliates who is authorized to act for such Sub-Servicer in matters
relating to or to be acted upon by the Sub-Servicer, pursuant to the applicable
Sub-Servicing Agreement, and who is identified on the list of Authorized
Officers delivered by such Sub-Servicer to the Master Servicer on the Closing
Date (as such list may be modified or supplemented from time to time
thereafter).
"AVAILABLE FUNDS" means, with respect to a Distribution Date or any
Monthly Servicing Payment Date, the sum of the following amounts received with
respect to the then elapsed portion of the related Collection Period to the
extent not previously distributed:
(i) all collections received by the Master Servicer (or any
Sub-Servicer acting on its behalf) on the Financed Student Loans (including
any Guarantee Payments received with respect to such Financed Student
Loans), but net of (x), any Federal Origination Fee and Federal
Consolidation Loan Rebate payable to the Department on Federal
Consolidation Loans disbursed after October 1, 1993, (y) any applicable
administrative fees, late fees or similar fees received from a borrower,
and (z) any collections in respect of principal on the Financed Student
Loans applied by the Trust to repurchase guaranteed loans from the
Guarantors in accordance with the Guarantee Agreements;
(ii) any Interest Subsidy Payments and Special Allowance Payments
received by the Eligible Lender Trustee during the then elapsed portion of
such Collection Period with respect to the Financed Federal Loans;
(iii) all Liquidation Proceeds and all recoveries in respect of
Liquidated Student Loans which were written off in prior Collection Periods
or prior months of such Collection Period;
(iv) the aggregate Purchase Amounts received for those Financed
Student Loans repurchased by the Seller or purchased by the Master Servicer
(or any Sub-Servicer acting on its behalf) under an obligation which arose
during the elapsed portion of such Collection Period;
(v) the aggregate amounts, if any, received from the Seller or the
Master Servicer (or any Sub-Servicer acting on its behalf), as the case may
be, as reimbursement of non-guaranteed interest amounts, or, lost Interest
Subsidy Payments and Special Allowance Payments, with respect to the
Financed Federal Student Loans pursuant to Section 3.02 or 4.06,
respectively of the Sale and Servicing Agreement;
(vi) amounts deposited by the Seller into the Collection Account in
connection with the making of Consolidation Loans pursuant to Section 2.03
of the Sale and Servicing Agreement;
(vii) with respect to the initial Distribution Date, the amount
deposited in the Collection Account on the Closing Date pursuant to Section
5.01(a)(i) of the Sale and Servicing Agreement;
(viii) Investment Earnings for such Distribution Date;
(ix) amounts withdrawn from the Reserve Account in excess of the
Specified Reserve Account Balance and deposited into the Collection
Account;
(x) amounts withdrawn from the Escrow Account and deposited into the
Collection Account; and
(xi) with respect to the Distribution Date on or immediately after the
end of the Funding Period, the amount transferred from the Pre-Funding
Account to the Collection Account.
PROVIDED, HOWEVER, that Available Funds will exclude all payments and
proceeds (including Liquidation Proceeds) of any Financed Student Loans,
the Purchase Amount of which has been included in Available Funds for a
prior Distribution Date; provided, further, that if on any Distribution
Date there would not be sufficient funds, after application of Available
Funds and amounts available from the Reserve Account and the Pre-Funding
Account (1) to pay any of the items specified in clauses (i) through (iii)
of Section 5.05(c) of the Sale and Servicing Agreement for such
Distribution Date and (2) if the principal balance of the Notes (after
giving effect to any distributions thereon on such Distribution Date) is
less than or equal to the Note Collateralization Amount, to pay the
Certificateholders' Interest Distribution Amount for such Distribution
Date, then Available Funds for such Distribution Date will include, in
addition to the Available Funds amounts on deposit in the Collection
Account on the Determination Date relating to such Distribution Date which
would have constituted Available Funds for the Distribution Date succeeding
such Distribution Date up to the amount necessary to pay, in the case of
clause (1) above such items and in the case of clause (2) above such
Certificateholders' Interest Distribution Amount, and the Available Funds
for such succeeding Distribution Date will be adjusted accordingly.
"BASIC DOCUMENTS" means the Trust Agreement, the Indenture, the Sale
and Servicing Agreement, the Administration Agreement, the Certificate
Depository Agreement, the Note Depository Agreement, the Guarantee Agreements
and other documents and certificates delivered in connection with any thereof.
"BAR EXAM LOAN" means a Bar Examination Loan made by the Seller to an
eligible borrower pursuant to the Programs.
"BENEFIT PLAN" has the meaning specified in Section 3.04 of the Trust
Agreement.
"BOOK-ENTRY CERTIFICATE" means a beneficial interest in the
Certificates, ownership and transfers of which shall be made through book
entries by a Clearing Agency as described in Section 3.11 of the Trust
Agreement.
"BOOK-ENTRY NOTE" means a beneficial interest in the Notes, ownership
and transfers of which shall be made through book entries by a Clearing Agency
as described in Section 2.10 of the Indenture.
"BUSINESS DAY" means any day other than a Saturday, a Sunday or a day
on which banking institutions or trust companies in New York, New York,
Pittsburgh, Pennsylvania or __________, _________, are authorized or obligated
by law, regulation or executive order to remain closed.
"CERTIFICATE" means a Floating Rate Asset Backed Certificate issued
pursuant to the Trust Agreement, substantially in the Form of Exhibit A thereto.
"CERTIFICATE BALANCE" means as of the Closing Date the Initial
Certificate Balance for the Certificates and, thereafter, the Initial
Certificate Balance for the Certificates, reduced by all amounts allocable to
principal previously distributed to the holders of the Certificates.
"CERTIFICATE DEPOSITORY AGREEMENT" means the agreement dated as of the
Closing Date among the Trust, the Eligible Lender Trustee, the Administrator and
The Depository Trust Company, as the initial Clearing Agency.
"CERTIFICATE OWNER" means, with respect to a Book-Entry Certificate,
the Person who is the beneficial owner of such Book-Entry Certificate, as
reflected on the books of the Clearing Agency, or on the books of a Person
maintaining an account with such Clearing Agency (directly as a Clearing Agency
Participant or as an indirect participant, in each case in accordance with the
rules of such Clearing Agency).
"CERTIFICATE PAYING AGENT" means any paying agent or co-paying agent
appointed pursuant to Section 3.09 of the Trust Agreement, which shall initially
be the Eligible Lender Trustee.
"CERTIFICATE RATE" means, with respect to any Interest Period, the
interest rate per annum equal to the lesser of (i) the sum of (x) in the case of
any Certificates that are T-Bill Indexed Securities, the weighted average of the
T-Bill Rates within such Interest Period and in the case of any Certificates
that are LIBOR Indexed Securities, Three-Month LIBOR for such Interest Period
plus (y) ____% and (ii) the Student Loan Rate for such Interest Period. The
interest rate per annum for any Certificates that are T-Bill Indexed Securities
will be computed on the basis of the actual number of days elapsed in such
Interest Period over a period of 365 days (or 366 in a leap year) and in the
case of any Certificates that are LIBOR Indexed Securities will be computed on
the basis of the actual number of days elapsed in the related Interest Period
divided by 360.
"CERTIFICATE REGISTER" and "CERTIFICATE REGISTRAR" means the register
mentioned and the registrar appointed pursuant to Section 3.04 of the Trust
Agreement.
"CERTIFICATE UNDERWRITING AGREEMENT" means the Certificate
Underwriting Agreement dated as of ____________ , ____, between the Seller and
the Underwriters.
"CERTIFICATEHOLDER" means a Person in whose name a Certificate is
registered in the Certificate Register.
"CERTIFICATEHOLDERS' AVAILABLE INTEREST DISTRIBUTION AMOUNT" means for
the Certificates on any Distribution Date, an amount equal to (x) the sum of (1)
Available Funds for such Distribution Date, (2) the amount, if any, withdrawn
from the Pre-Funding Account pursuant to Section 5.08(d) of the Sale and
Servicing Agreement on such Distribution Date, and (3) the amounts withdrawn
from the Reserve Account pursuant to Section 5.06(b)(vi) of the Sale and
Servicing Agreement on such Distribution Date minus (y) the amount required to
be distributed pursuant to clauses (i) through (iii) of Section 5.05(c) of the
Sale and Servicing Agreement, including any Noteholders' Priority Principal
Distribution Amount actually distributed.
"CERTIFICATEHOLDERS' AVAILABLE PRINCIPAL DISTRIBUTION AMOUNT" means on
the Final Maturity Date for the Certificates, an amount equal to (x) the sum of
(1) the Available Funds for such Distribution Date, and (2) the amounts
withdrawn from the Reserve Account pursuant to Section 5.06(b)(ix) of the Sale
and Servicing Agreement minus (y) the amounts required to be distributed
pursuant to clauses (i) through (vii) of Section 5.05(c) of the Sale and
Servicing Agreement.
"CERTIFICATEHOLDERS' DISTRIBUTION AMOUNT" means, with respect to any
Distribution Date, the Certificateholders' Interest Distribution Amount for such
Distribution Date plus, for each Distribution Date on and after which the Notes
have been paid in full, the Certificateholders' Principal Distribution Amount
for such Distribution Date.
"CERTIFICATEHOLDERS' INTEREST CARRYOVER SHORTFALL" means, with respect
to any Distribution Date, the excess of (i) the Certificateholders' Interest
Distribution Amount on the preceding Distribution Date over (ii) the amount of
interest actually distributed to the holders of the Certificates on such
preceding Distribution Date, plus interest on the amount of such excess interest
due to the holders of the Certificates, to the extent permitted by law, at the
Certificate Rate from such preceding Distribution Date to the current
Distribution Date.
"CERTIFICATEHOLDERS' INTEREST DISTRIBUTION AMOUNT" means, with respect
to any Distribution Date, the sum of (i) the amount of interest accrued at the
Certificate Rate for the related Interest Period on the outstanding Certificate
Balance on the immediately preceding Distribution Date, after giving effect to
all distributions of principal to holders of the Certificates on such
Distribution Date (or, in the case of the first Distribution Date, on the
Closing Date) and (ii) the Certificateholders' Interest Carryover Shortfall for
such Distribution Date; PROVIDED, HOWEVER, that the Certificateholders' Interest
Distribution Amount will not include any Certificateholders' Interest Index
Carryover.
"CERTIFICATEHOLDERS' INTEREST INDEX CARRYOVER" means, with respect to
any Distribution Date as to which the Certificate Rate for such Distribution
Date is based on the Student Loan Rate, the amount equal to the excess, if any,
of (a) the amount of interest on the Certificates that would have accrued in
respect of the related Interest Period had interest been calculated based on the
T-Bill Rate, if such Certificates are T-Bill Indexed Securities and/or
Three-Month LIBOR if such Certificates are LIBOR Indexed Securities over (b) the
amount of interest on such Certificates actually accrued in respect of such
Interest Period based on the Student Loan Rate, together with the unpaid portion
of any such excess from prior Distribution Dates (and interest accrued thereon,
to the extent permitted by law, calculated based on the T-Bill Rate in the case
of T-Bill Indexed Securities or Three-Month LIBOR, in the case of LIBOR Indexed
Securities); PROVIDED, HOWEVER, that, on the Final Maturity Date, the
Certificateholders' Interest Index Carryover will be equal to the lesser of (i)
the Certificateholders' Interest Index Carryover on such date determined as
described above and (ii) the amount of funds, if any, required and available to
be distributed to the holders of the Certificates on such date pursuant to
Sections 5.05(c)(x) of the Sale and Servicing Agreement.
"CERTIFICATEHOLDERS' PERCENTAGE" means, a fraction, expressed as a
percentage, the numerator of which is the principal balance of the Certificates
issued on the Closing Date and the denominator of which is the sum of the
principal amount of the Notes issued on the Closing Date and the principal
balance of the Certificates issued on the Closing Date.
"CERTIFICATEHOLDERS' PRINCIPAL DISTRIBUTION AMOUNT" means, on each
Distribution Date on and after which the principal balance of the Notes has been
paid in full, the Principal Distribution Amount for such Distribution Date (or,
in the case of the Distribution Date on which the principal balance of the Notes
is paid in full, any remaining Principal Distribution Amount not otherwise
distributed to the holders of such Notes on such Distribution Date); PROVIDED,
HOWEVER, that the Certificateholders' Principal Distribution Amount for the
Certificates will in no event exceed the Certificate Balance for the
Certificates. In addition, on the Final Maturity Date for the Certificates, the
principal required to be distributed to the holders of the Certificates will
include the amount required to reduce the outstanding principal balance of the
Certificates to zero.
"CLASS ___ NOTE" means a Floating Rate Class ___Asset Backed Note
issued pursuant to the Indenture, substantially in the form of Exhibit A-1
thereto.
"CLASS ___ NOTE" means a Floating Rate Class ___ Asset Backed Note
issued pursuant to the Indenture, substantially in the form of Exhibit A-2
thereto.
"CLEARING AGENCY" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Exchange Act.
"CLEARING AGENCY PARTICIPANT" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
"CLOSING DATE" means ____________, ____.
"CODE" means the Internal Revenue Code of 1986, as amended from time
to time, and Treasury Regulations promulgated thereunder.
"COLLATERAL" has the meaning specified in the Granting Clause of the
Indenture.
"COLLECTION ACCOUNT" means the account designated as such, established
and maintained pursuant to Section 5.01 of the Sale and Servicing Agreement.
"COLLECTION PERIOD" means, with respect to the first Distribution
Date, the period beginning on the Cutoff Date and ending on ____________, ____
and with respect to each subsequent Distribution Date, the Collection Period
means the three calendar months immediately following the end of the previous
Collection Period.
"COMMISSION" means the Securities and Exchange Commission.
"CONSOLIDATION LOANS" means Federal Consolidation.
"COORDINATION AGREEMENTS" means the following agreements, as the same
may be amended and restated from time to time, _______________.
"CORPORATE TRUST OFFICE" means (i) with respect to the Indenture
Trustee, the principal office of the Indenture Trustee at which at any
particular time its corporate trust business shall be administered, which office
at the Closing Date is located at __________ __________________, Attention:
____________________________________ (telephone: (___) ___-____; facsimile:
(___) ___-____) or at such other address as the Indenture Trustee may designate
from time to time by notice to the Noteholders and the Seller, or the principal
corporate trust office of any successor Indenture Trustee (the address of which
the successor Indenture Trustee will notify the Noteholders and the Seller) and
(ii) with respect to the Eligible Lender Trustee, the principal corporate trust
office of the Eligible Lender Trustee located at _______________________,
Attention: ____________________ (telephone: (___) ___-____ ; facsimile: (___)
___-____ ) or at such other address as the Eligible Lender Trustee may designate
by notice to the Certificateholders and the Seller, or the principal corporate
trust office of any successor Eligible Lender Trustee (the address of which the
successor Eligible Lender Trustee will notify the Certificateholders and the
Seller).
"CUTOFF DATE" means (i) with respect to the Initial Financed Student
Loans, ____________, ____, and (ii) with respect to the Subsequent Pool Student
Loans, ____________, ____.
"DEFAULT" means any occurrence that is, or with notice or the lapse of
time or both would become, an Event of Default.
"DEFINITIVE CERTIFICATES" has the meaning specified in Section 3.11 of
the Trust Agreement.
"DEFINITIVE NOTES" has the meaning specified in Section 2.10 of the
Indenture.
"DELIVERY" or "DELIVER" when used with respect to Trust Account
Property means the following and such additional or alternative procedures as
may hereafter become appropriate to effect the complete transfer of ownership of
any such Collateral to the Indenture Trustee, free and clear of any adverse
claims, consistent with changes in applicable law or regulations or the
interpretation thereof:
(a) with respect to bankers' acceptances, commercial paper, negotiable
certificates of deposit and other obligations that constitute instruments and
are susceptible of physical delivery ("Physical Property"):
(i) transfer of possession thereof to the Indenture Trustee endorsed
to, or registered in the name of, the Indenture Trustee, or its nominee or
endorsed in blank;
(b) with respect to a certificated security:
(i) delivery thereof in bearer form to the Indenture Trustee; or
(ii) delivery thereof in registered form to the Indenture Trustee and
(A) the certificate is endorsed to the Indenture Trustee or in
blank by effective endorsement; or
(B) the certificate is registered in the name of the Indenture
Trustee, upon original issue or registration of transfer by the issuer;
(c) with respect to an uncertificated security:
(i) the delivery of the uncertificated security to the Indenture
Trustee; or
(ii) the issuer has agreed that it will comply with instructions
originated by the Indenture Trustee, without further consent by the
registered owner;
(d) with respect to any security 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:
(i) a Federal Reserve Bank by book entry credits the book-entry
security to the securities account (as defined in 31 CFR Part 357) of a
participant (as defined in 31 CFR Part 357) which is also a securities
intermediary; and
(ii) the participant indicates by book entry that the book-entry
security has been credited to the Indenture Trustee's securities account,
as applicable;
(e) with respect to a security entitlement:
(i) the Indenture Trustee, becomes the entitlement holder; or
(ii) the securities intermediary has agreed that it will comply with
entitlement orders originated by the Indenture Trustee;
(f) without further consent by the entitlement holder for the purpose of
clauses (b) and (c) hereof "delivery" means:
(i) with respect to a certificated security:
(A) the Indenture Trustee, acquires possession thereof;
(B) another person (other than a securities intermediary) either
acquires possession thereof on behalf of the Indenture Trustee or,
having previously acquired possession thereof, acknowledges that it
holds for the Indenture Trustee; or
(C) a securities intermediary acting on behalf of the Indenture
Trustee acquires possession of thereof, only if the certificate is in
registered form and has been specially endorsed to the Indenture
Trustee by an effective endorsement;
(ii) with respect to an uncertificated security:
(A) the issuer registers the Indenture Trustee as the registered
owner, upon original issue or registration of transfer; or
(B) another person (other than a securities intermediary) either
becomes the registered owner thereof on behalf of the Indenture
Trustee, or, having previously become the registered owner,
acknowledges that it holds for the Indenture Trustee;
(g) for purposes of this definition, except as otherwise indicated, the
following terms shall have the meaning assigned to each such term in the UCC:
(i) "certificated security"
(ii) "effective endorsement"
(iii) "entitlement holder"
(iv) "instrument"
(v) "securities account"
(vi) "securities entitlement"
(vii) "securities intermediary"
(viii) "uncertificated security"
(h) in each case of Delivery contemplated herein, the Indenture Trustee
shall make appropriate notations on its records, and shall cause same to be made
of the records of its nominees, indicating that securities are held in trust
pursuant to and as provided in this Agreement.
"DEPARTMENT" means the United States Department of Education, an
agency of the Federal government.
"DEPOSITOR" means the Seller in its capacity as Depositor under the
Trust Agreement.
"DEPOSITORY" has the meaning specified in Section 2.04 of the
Indenture.
"DETERMINATION DATE" means, with respect to any Monthly Servicing
Payment Date or Distribution Date, as the case may be, the third Business Day
preceding such Monthly Servicing Payment Date or Distribution Date.
"DISTRIBUTION DATE" means, with respect to each Collection Period, the
twenty-fifth day of each February, May, August and November or, if such day is
not a Business Day, the immediately following Business Day, commencing on
__________, ____.
"DTC" means the Depository Trust Company, a New York Corporation.
"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 at least two nationally recognized Rating
Agencies in one of their respective generic rating categories which signifies
investment grade.
"ELIGIBLE INSTITUTION" means a depository institution (which may be
the Seller (or any Affiliate of the Seller), the Eligible Lender Trustee (or any
Affiliate of the Eligible Lender Trustee) or the Indenture Trustee) organized
under the laws of the United States of America or any one of the States (or any
domestic branch of a foreign bank), (a) which has (i) a short-term senior
unsecured debt rating of P-1 or better by Moody's, or any other long-term,
short-term or certificate of deposit rating acceptable to the Rating Agencies
and (ii) if rated by Fitch (A) a long term senior unsecured debt rating of AAA
by Fitch and (B) short-term senior of F-1+ by Fitch and (b) whose deposits are
insured by the FDIC. If so qualified, the Seller, any Affiliate of the Seller,
the Eligible Lender Trustee, or any Affiliate of the Eligible Lender Trustee or
Indenture Trustee may be considered an Eligible Institution.
"ELIGIBLE INVESTMENTS" mean book-entry securities, negotiable
instruments or securities represented by instruments in bearer or registered
form which evidence:
(a) direct obligations of, and obligations fully guaranteed as to
timely payment by, the United States of America;
(b) demand deposits, time deposits or certificates of deposit of any
depository institution or trust company incorporated under the laws of the
United States of America or any State (or any domestic branch of a foreign
bank) and subject to supervision and examination by Federal or state
banking or depository institution authorities (including depository
receipts issued by any such institution or trust company as custodian with
respect to any obligation referred to in clause (a) above or portion of
such obligation for the benefit of the holders of such depository
receipts); PROVIDED, HOWEVER, that at the time of the investment or
contractual commitment to invest therein (which shall be deemed to be made
again each time funds are reinvested following each Distribution Date, as
the case may be), the commercial paper or other short-term senior unsecured
debt obligations (other than such obligations the rating of which is based
on the credit of a Person other than such depository institution or trust
company) thereof shall have a credit rating from Moody's in the highest
investment category granted thereby and, if rated by Fitch, in the highest
investment category granted by Fitch;
(c) commercial paper having, at the time of the investment or
contractual commitment to invest therein, a rating from Moody's in the
highest investment category granted thereby and, if rated by Fitch, in the
highest investment category granted by Fitch;
(d) investments in money market funds (including funds for which the
Indenture Trustee or the Eligible Lender Trustee or any of their respective
Affiliates or any of Seller's Affiliates is an investment manager or
advisor) having a rating from Moody's of Aaa and if rated by Fitch from
Fitch of AAA;
(e) bankers' acceptances issued by any depository institution or trust
company referred to in clause (b) above;
(f) repurchase obligations with respect to any security that is a
direct obligation of, or fully guaranteed by, the United States of America
or any agency or instrumentality thereof the obligations of which are
backed by the full faith and credit of the United States of America, in
either case entered into with (i) a depository institution or trust company
(acting as principal) described in clause (b) above; and
(g) any other investment permitted by each of the Rating Agencies as
set forth in writing delivered to the Indenture Trustee.
"ELIGIBLE LENDER TRUSTEE" means __________________, a _________
banking association, not in its individual capacity but solely as eligible
lender trustee under the Trust Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ESCROW ACCOUNT" means the account designated as such, established and
maintained pursuant to Section 5.01 of the Sale and Servicing Agreement.
"EVENT OF DEFAULT" has the meaning specified in Section 5.01 of the
Indenture.
"EXCESS SERVICING FEE" has the meaning specified in the Servicing Fee
Schedule attached to the Sale and Servicing Agreement as Schedule E.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXECUTIVE OFFICER" means, with respect to any corporation, the Chief
Executive Officer, Chief Operating Officer, Chief Financial Officer, President,
any Executive Vice President, any Senior Vice President, any Vice President, the
Secretary or the Treasurer of such corporation; and with respect to any
partnership, any general partner thereof.
"EXPECTED INTEREST COLLECTIONS" means, with respect to any Collection
Period, the sum of (i) the amount of interest accrued, net of amounts required
by the Higher Education Act to be paid to the Department or to be repaid to
borrowers, with respect to the Financed Student Loans for such Collection Period
(whether or not such interest is actually paid), (ii) all Interest Subsidy
Payments and Special Allowance Payments expected to be received by the Eligible
Lender Trustee for such Collection Period (whether or not actually received)
with respect to the Financed Student Loans and (iii) Investment Earnings for
such Collection Period.
"EXPENSES" means any and all liabilities, obligations, losses,
damages, taxes, claims, actions and suits, and any and all reasonable costs,
expenses and disbursements (including reasonable legal fees and expenses) of any
kind and nature whatsoever which may at any time be imposed on, incurred by, or
asserted against the Eligible Lender Trustee or any of its officers, directors
or agents in any way relating to or arising out of the Trust Agreement, the
other Basic Documents, the Trust Estate, the administration of the Trust Estate
or the action or inaction of the Eligible Lender Trustee under the Trust
Agreement or the other Basic Documents.
"FDIC" means the Federal Deposit Insurance Corporation.
"FEDERAL CONSOLIDATION LOAN" means a loan made by the Seller to an
eligible borrower that represents the refinancing of Financed Federal Loans of
such borrower in accordance with the applicable terms and conditions of the
Program and the Higher Education Act.
"FEDERAL CONSOLIDATION LOAN REBATE" means the monthly fee payable to
the Department by the holder of Federal Consolidation Loans made (x) on or after
October 1, 1993, equal to 1.05% per annum, but (y) with respect to Federal
Consolidation Loans for which applications were received on or after October 1,
1998 but before February 1, 1999, equal to 0.62% per annum, in each case on the
outstanding balance of such Federal Consolidation Loan.
"FEDERAL GUARANTOR" means, collectively, __________, __________ and
__________.
"FEDERAL ORIGINATION FEE" means the origination fee payable to the
Department by the lender with respect to any Financed Federal Loan (including
Federal Consolidation Loans) made on or after October 1, 1993, equal to 0.50% of
the initial principal balance of such loan.
"52 WEEK T-BILL RATE" means, on any date of determination, the bond
equivalent rate of 52-week Treasury bills auctioned at the final auction held
prior to the preceding June 1.
"FINAL MATURITY DATE" means (i) for the Class ___ Notes, the _________
20__ Distribution Date, (ii) for the Class ___ Notes the ___________ 20__
Distribution Date and (iii) for the Certificates, the _________ 20__
Distribution Date.
"FINAL SUBSEQUENT TRANSFER DATE" means the last Transfer Date on which
Subsequent Pool Student Loans are transferred to the Trust but no later than the
Special Determination Date.
"FINANCED FEDERAL LOANS" means those Financed Student Loans that are
guaranteed as to the payment of principal and interest by __________, __________
or __________ and are reinsured by the Department.
"FINANCED GUARANTEED LOANS" means the reference to the Financed
Federal Loans.
"FINANCED STUDENT LOAN" means the collective reference to the Initial
Financed Student Loans and the Additional Student Loans.
"FINANCED STUDENT LOAN FILES" means the documents specified in Section
3.03 of the Sale and Servicing Agreement.
"FITCH" means Fitch IBCA, Inc.
"FUNDING PERIOD" means the period beginning on the Closing Date and
ending on the first to occur of (a) the date on which an Event of Default, a
Master Servicer Default or an Administrator Default occurs, (b) the date on
which an Insolvency Event occurs with respect to the Seller, (c) the first date
on which the amounts on deposit in each Pre-Funding Account is zero, and (d) the
close of business on the last day of the Collection Period preceding the
__________, ____ Distribution Date.
"GRADUATE LOAN PROGRAMS" means the loan programs, under which the
Seller made student loans to students enrolled in or recently graduated from
approved or accredited law schools, medical schools, dental schools, graduate
business schools or other graduate level certificate or degree programs.
"GRANT" means mortgage, pledge, bargain, sell, warrant, alienate,
remise, release, convey, assign, transfer, create, and grant a lien upon and a
security interest in and right of set-off against, deposit, set over and confirm
pursuant to the Indenture. A Grant of the Collateral or of any other agreement
or instrument shall include all rights, powers and options (but none of the
obligations) of the Granting party thereunder, including the immediate and
continuing right to claim for, collect, receive and give receipt for principal
and interest payments in respect of the Collateral and all other moneys payable
thereunder, to give and receive notices and other communications, to make
waivers or other agreements, to exercise all rights and options, to bring
Proceedings in the name of the Granting party or otherwise and generally to do
and receive anything that the Granting party is or may be entitled to do or
receive thereunder or with respect thereto.
"GUARANTEE AGREEMENTS" means, collectively, _______________.
"GUARANTEE PAYMENT" means any payment made by a Guarantor pursuant to
a Guarantee Agreement in respect of a Financed Student Loan.
"GUARANTORS" means, collectively, __________, __________ and
__________.
"HIGHER EDUCATION ACT" means the Higher Education Act of 1965, as
amended, together with any rules, regulations and interpretations thereunder.
"INDENTURE" means the Indenture dated as of ____________, ____,
between the Issuer and the Indenture Trustee.
"INDENTURE TRUSTEE" means _______________, a __________ banking
corporation, not in its individual capacity but solely as Indenture Trustee
under the Indenture.
"INDENTURE TRUST ESTATE" means all money, instruments, rights and
other property that are subject or intended to be subject to the lien and
security interest of the Indenture for the benefit of the Noteholders (including
all property and interests granted to the Indenture Trustee), including all
proceeds thereof.
"INDEPENDENT" means, when used with respect to any specified Person,
that the Person (a) is in fact independent of the Issuer, any other obligor upon
the Notes, the Seller and any Affiliate of any of the foregoing Persons, (b)
does not have any direct financial interest or any material indirect financial
interest in the Issuer, any such other obligor, the Seller or any Affiliate of
any of the foregoing Persons and (c) is not connected with the Issuer, any such
other obligor, the Seller or any Affiliate of any of the foregoing Persons as an
officer, employee, promoter, underwriter, trustee, partner, director or person
performing similar functions.
"INDEPENDENT CERTIFICATE" means a certificate or opinion to be
delivered to the Indenture Trustee under the circumstances described in, and
otherwise complying with, the applicable requirements of Section 11.01 of the
Indenture, made by an Independent appraiser or other expert appointed by an
Issuer Order and approved by the Indenture Trustee in the exercise of reasonable
care, and such opinion or certificate shall state that the signer has read the
definition of "Independent" in the Indenture and that the signer is Independent
within the meaning thereof.
"INDEX MATURITY" shall have the meaning set forth in the definition of
"Three-Month LIBOR".
"INITIAL CERTIFICATE BALANCE" means $____________.
"INITIAL FINANCED STUDENT LOANS" means any graduate or undergraduate
student loans listed on the Schedule of Initial Financed Student Loans on the
Closing Date as set forth in Schedule A to the Sale and Servicing Agreement
(which Schedule may be in the form of microfiche or computer tape).
"INITIAL POOL BALANCE" means, the sum of the Pool Balance as of the
Cutoff Date, which is $____________, plus as of each Subsequent Cutoff Date the
principal balance of each Subsequent Pool Student Loan sold to the Eligible
Lender Trustee on behalf of the Issuer on each Transfer Date during the Funding
Period (but no later than the Special Determination 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.
"INTEREST COLLECTIONS" shall have the meaning specified in Section
5.03 of the Sale and Servicing Agreement.
"INTEREST PERIOD" means, with respect to a Distribution Date, the
period from and including the Closing Date or the most recent Distribution Date
on which interest on the Notes or the Certificates, as the case may be, has been
distributed to but excluding the current Distribution Date. In the case of any
LIBOR Indexed Securities and the initial Interest Period, interest will accrue
for the period from the Closing Date to but excluding ____________, ____
(computed on the basis of the actual number of days elapsed in a year of 360
days) based on Three Month LIBOR as determined on the initial LIBOR
Determination Date, and interest will accrue for the period from ____________,
____ to but excluding ____________, ____ (computed on the basis of the actual
number of days elapsed in a year of 360 days) based on Three Month LIBOR as
determined on the initial LIBOR Determination Date.
"INTEREST SUBSIDY PAYMENTS" means payments, designated as such,
consisting of interest subsidies by the Department in respect of the Financed
Federal 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 5.01(b) of the Sale and
Servicing Agreement.
"ISSUER" means Mellon Student Loan Trust ____-_ until a successor
replaces it and, thereafter, means the successor.
"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.
"LAI" means Law Access, Inc., a non-stock corporation organized under
the laws of the State of Delaware, and the successor in interest to LSAS.
"LAW LOAN" means a Law School Loan made by the Seller to an eligible
borrower pursuant to the Programs.
"LIBOR DETERMINATION DATE" means (x) with respect to each Interest
Period other than the initial Interest Period, the second Business Day prior to
the commencement of each Interest Period and (y) with respect to the initial
Interest Period, as determined pursuant to clause (x) for the period from the
Closing Date to but excluding ____________, _____, and as determined on the
second Business Day prior to _______________, ____ for the period from
____________, ____ to but excluding ____________, ____. For purposes of this
definition a "Business Day" is any day on which banks in London and New York
City are open for the transaction of business.
"LIBOR INDEXED SECURITIES" means [the Class ___ Notes, the Class___
Notes and the Certificates.]
"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.
"LIQUIDATED STUDENT LOAN" means any defaulted Financed Student Loan
liquidated by the Master Servicer (or any Sub-Servicer acting on its behalf)
(which shall not include any Financed Student Loan on which Guarantee Payments
are received) or which the Master Servicer (or any Sub-Servicer acting on its
behalf) has, after using all reasonable efforts to realize upon such Financed
Student Loan, determined to charge off.
"LIQUIDATION PROCEEDS" means, with respect to any Liquidated Student
Loan, the moneys collected in respect thereof from whatever source, other than
Recoveries, net of the sum of any amounts expended by the Master Servicer (or
any Sub-Servicer acting on its behalf) in connection with such liquidation and
any amounts required by law to be remitted to the borrower on such Liquidated
Student Loan.
"LOCK-IN PERIOD" means the period of days preceding any Distribution
Date during which the Note Interest Rates or Certificate Rates, as applicable,
in effect on the first day of such period shall remain in effect until the end
of the Interest Period related to such Distribution Date.
"LSAS" means the Law School Admission Services, Inc.
"MASTER SERVICER" means Mellon Bank, N.A., a national banking
association.
"MASTER SERVICER DEFAULT" means an event specified in Section 8.01(a)
of the Sale and Servicing Agreement.
"MASTER SERVICING FEE" has the meaning specified in the Servicing Fee
Schedule attached to the Sale and Servicing Agreement as Schedule E.
"MINIMUM PURCHASE AMOUNT" means the greatest of (i) the Auction
Purchase Amount, (ii) the fair market value of the Financed Student Loans as of
the end of the Collection Period immediately preceding such Distribution Date,
and (iii) the aggregate unpaid principal amount of the Notes and unpaid
principal balance of the Certificates plus, in each case, accrued and unpaid
interest thereon on the related Distribution Date and any amount to be paid
pursuant to Section 5.04(b) FIRST and SECOND of the Indenture.
"MONTHLY SERVICING PAYMENT DATE" means the twenty-fifth day of each
calendar month, or, if such day is not a Business Day, the immediately following
Business Day, commencing on ____________, ____.
"MOODY'S" means Moody's Investors Service, Inc.
"91-DAY TREASURY BILLS" means direct obligations of the United States
with a maturity of thirteen weeks.
"NET GOVERNMENT RECEIVABLE" means, with respect to any Distribution
Date, the sum of the amount of Interest Subsidy Payments and Special Allowance
Payments due from the Department less the amount owed to the Department for
Federal Origination Fee and Federal Consolidation Loan Rebate as of the end of
the related Collection Period.
"NOTE COLLATERALIZATION AMOUNT" means, with respect to any
Distribution Date, the sum of (i) the Pool Balance as of the end of the related
Collection Period, (ii) the Pre-Funded Amount as of the end of the related
Collection Period, (iii) the amount on deposit in the Reserve Account after
giving effect to distributions on such Distribution Date, and (iv) the Net
Government Receivable.
"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 Clearing Agency.
"NOTE INTEREST RATE" means, with respect to any Interest Period, (w)
in the case of any Class of Notes, the interest rate per annum equal to the
lesser of (i) the sum of (x) in the case of any class of Notes that are T-Bill
Indexed Securities, the weighted average of the T-Bill Rates within such
Interest Period and in the case of any class of Notes that are LIBOR Indexed
Securities, Three-Month LIBOR plus (y) the Applicable Note Margin and (ii) the
Student Loan Rate for such Interest Period. The interest rate per annum for any
class of Notes that are T-Bill Indexed Securities will be computed on the basis
of the actual number of days elapsed in such Interest Period over a period of
365 days (or 366 in a leap year) and in the case of any class of Notes that are
LIBOR Indexed Securities, will be computed on the basis of the actual number of
days elapsed in the related Interest Period divided by 360. In the case of any
LIBOR Indexed Securities and the initial Interest Period, the Note Interest Rate
will equal the interest rate per annum equal to the lesser of (i) the weighted
average of (x) Three-Month LIBOR for the period from the Closing Date to but
excluding ____________, ____ (computed on the basis of the actual number of days
elapsed in such period divided by 360) as determined on the initial LIBOR
Determination Date and (y) Three-Month LIBOR for the period from ____________,
____ to but excluding ____________, ____ (computed on the basis of the actual
number of days elapsed in such period divided by 360) as determined on the LIBOR
Determination Date in ____________ ____, in each case plus the Applicable Note
Margin and (ii) the Student Loan Rate for the initial Interest Period.
"NOTE OWNER" means, with respect to a Book-Entry Note, the Person who
is the owner of such Book-Entry Note, as reflected on the books of the Clearing
Agency, or on the books of a Person maintaining an account with such Clearing
Agency (directly as a Clearing Agency Participant or as an indirect participant,
in each case in accordance with the rules of such Clearing Agency).
"NOTE REGISTER" and "NOTE REGISTRAR" have the respective meanings
specified in Section 2.04 of the Indenture.
"NOTE UNDERWRITING AGREEMENT" means the Note Underwriting Agreement
dated as of ____________, ____ between the Seller and the Underwriters.
"NOTEHOLDER" means the Person in whose name a Note is registered in
the Note Register.
"NOTEHOLDERS' AVAILABLE INTEREST DISTRIBUTION AMOUNT" means on any
Distribution Date, an amount equal to (x) the sum of (1) Available Funds for
such Distribution Date, (2) the amounts withdrawn from the Pre-Funding Account
pursuant to Section 5.08(d) of the Sale and Servicing Agreement on such
Distribution Date, and (3) the amounts withdrawn from the Reserve Account
pursuant to Section 5.06(b)(v) of the Sale and Servicing Agreement on such
Distribution Date minus (y) the amount required to be distributed pursuant to
clauses (i) and (ii) of Section 5.05(c) of the Sale and Servicing Agreement,
including any Noteholders' Priority Principal Distribution Amount actually
distributed.
"NOTEHOLDERS' AVAILABLE PRINCIPAL DISTRIBUTION AMOUNT" means on the
Final Maturity Date for each class of Notes, an amount equal to (x) the sum of
(1) the Available Funds for such Distribution Date and (2) the amount, if any,
withdrawn from the Reserve Account pursuant to Sections 5.06(b)(vii) or (viii)
of the Sale and Servicing Agreement minus (y) the amounts required to be
distributed pursuant to clauses (i) through (v) of Section 5.05(c) of the Sale
and Servicing Agreement, including the Noteholders' Priority Principal
Distribution Amount for such class of Notes actually distributed.
"NOTEHOLDERS' DISTRIBUTION AMOUNT" means, with respect to any
Distribution Date, the sum of the Noteholders' Interest Distribution Amount and
the Noteholders' Principal Distribution Amount for such Distribution Date.
"NOTEHOLDERS' INTEREST CARRYOVER SHORTFALL" means, with respect to any
Distribution Date, the excess of (i) the sum of the Noteholders' Interest
Distribution Amount on the preceding Distribution Date over (ii) the amount of
interest actually distributed to the holders of the Notes on such preceding
Distribution Date, plus interest on the amount of such excess interest due to
the holders of the Notes, to the extent permitted by law, at the weighted
average of the Note Interest Rates for the Notes from such preceding
Distribution Date to the current Distribution Date.
"NOTEHOLDERS' INTEREST DISTRIBUTION AMOUNT" means, with respect to any
Distribution Date, the sum of (i) the aggregate amount of interest accrued at
the applicable Note Interest Rate for the related Interest Period on the
outstanding principal balance of each class of Notes on the immediately
preceding Distribution Date after giving effect to all principal distributions
to Noteholders of such class on such date (or, in the case of the first
Distribution Date, on the Closing Date) and (ii) the Noteholders' Interest
Carryover Shortfall for such Distribution Date; provided, that the Noteholders'
Interest Distribution Amount will not include any Noteholders' Interest Index
Carryover.
"NOTEHOLDERS' INTEREST INDEX CARRYOVER" means, with respect to any
Distribution Date as to which the Note Interest Rate for the Notes for such
Distribution Date is based on the Student Loan Rate, the amount equal to the
excess, if any, of (a) the amount of interest on such Notes that would have
accrued in respect of the related Interest Period had interest been calculated
based on the T-Bill Rate, if such Notes are T-Bill Indexed Securities or
Three-Month LIBOR if such Notes are LIBOR Indexed Securities, over (b) the
amount of interest on such Notes actually accrued in respect of such Interest
Period based on the Student Loan Rate, together with the unpaid portion of any
such excess from prior Distribution Dates (and interest accrued thereon, to the
extent permitted by law, at the applicable rate calculated based on the T-Bill
Rate, in the case of T-Bill Indexed Securities or Three-Month LIBOR, in the case
of LIBOR Indexed Securities); PROVIDED, HOWEVER, that on the Final Maturity Date
for such Notes, the Noteholders' Interest Index Carryover for such Notes will be
equal to the lesser of (i) the Noteholders' Interest Index Carryover on such
date determined as described above and (ii) the amount of funds, if any,
required and available to be distributed to the holders for such Notes on such
date pursuant to Sections 5.05(c)(x) and 5.06(e) of the Sale and Servicing
Agreement.
"NOTEHOLDERS' PERCENTAGE" means a fraction, expressed as a percentage,
the numerator of which is the principal amount of the Notes issued on the
Closing Date and the denominator of which is the sum of the principal amount of
the Notes issued on the Closing Date and the principal balance of the
Certificates issued on the Closing Date.
"NOTEHOLDERS' PRINCIPAL DISTRIBUTION AMOUNT" means, with respect to
any Distribution Date, the Principal Distribution Amount for such Notes for such
Distribution Date; PROVIDED, HOWEVER, that the Noteholders' Principal
Distribution Amount for the Notes will not exceed the outstanding principal
balance of the Notes. In addition, (i) on the Final Maturity Date for each
related class of Notes, the principal required to be distributed to such class
of Notes will include the amount required to reduce the outstanding principal
balance of such class of Notes to zero, and (ii) on the related Distribution
Date following a sale of the Financed Student Loans pursuant to Section 9.01(a)
or (c) of the Sale and Servicing Agreement, the principal required to be
distributed to the holders of Class ___ Notes will include the amount required
to reduce the outstanding principal balance of the Class ___ Notes to zero. In
the event that the outstanding balance of the Notes is in excess of the Note
Collateralization Amount, the Noteholders' Principal Distribution Amount will be
reduced by the amount of any Noteholders' Priority Principal Distribution
Amount.
"NOTEHOLDERS' PRIORITY PRINCIPAL DISTRIBUTION AMOUNT" means, with
respect to any Distribution Date, the excess of (i) the aggregate outstanding
principal balance of the Notes (after giving effect to any distributions on such
Distribution Date) over (ii) the Note Collateralization Amount.
"NOTES" means the Class ___ Notes and Class ___ Notes.
"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 the Guarantor
thereof and, with respect to any Interest Subsidy Payment or Special Allowance
Payment, if any, thereon, the Department.
"OFFICERS' CERTIFICATE" means (i) in the case of the Issuer, a
certificate signed by any two Authorized Officers of the Eligible Lender
Trustee, under the circumstances described in, and otherwise complying with, the
applicable requirements of Section 11.01 of the Indenture, and delivered to the
Indenture Trustee, (ii) in the case of the Seller or the Administrator, a
certificate signed by any two Authorized Officers of the Seller or the
Administrator, as appropriate, (iii) in the case of the Master Servicer, a
certificate signed by any two Authorized Officers of the Master Servicer and
(iv) in the case of any Sub-Servicer, a certificate signed by any two Authorized
Officers of such Sub-Servicer.
"OPINION OF COUNSEL" means (i) with respect to the Issuer, one or more
written opinions of counsel who may, except as otherwise expressly provided in
the Indenture, be employees of or counsel to the Issuer and who shall be
acceptable to the Indenture Trustee, and which opinion or opinions shall be
addressed to the Indenture Trustee as Indenture Trustee, shall comply with any
applicable requirements of Section 11.01 of the Indenture, and shall be in form
and substance satisfactory to the Indenture Trustee, (ii) with respect to the
Seller, the Administrator or the Master Servicer, one or more written opinions
of counsel who may be an employee of or counsel to the Seller, the Administrator
or the Master Servicer, which counsel shall be acceptable to the Indenture
Trustee, the Eligible Lender Trustee or the Rating Agencies, as applicable, and
(iii) with respect to the a Sub-Servicer, one or more written opinions of
counsel who may be an employee of or counsel to Sub-Servicer, which counsel
shall be acceptable to the Master Servicer.
"OTHER ADDITIONAL PRE-FUNDED AMOUNT" means, with respect to any
Distribution Date, the amount on deposit in the Other Additional Pre-Funding
Subaccount.
"OTHER ADDITIONAL PRE-FUNDING SUBACCOUNT" has the meaning set forth in
Section 5.08 of the Sale and Servicing Agreement.
"OTHER SUBSEQUENT STUDENT LOANS" means (x) Serial Loans (including
Consolidation Loans but not including Subsequent Pool Student Loans), Guarantee
Fees Advances and the funding of accrued interest to be capitalized made by the
Seller to an eligible borrower who has one or more existing loans under the
Programs that are Financed Student Loans and are transferred or to be
transferred to the Eligible Lender Trustee on behalf of the Issuer during the
Funding Period, pursuant to Section 2.02 of the Sale and Servicing Agreement,
and (y) Financed Student Loans that the Trust shall purchase from the Seller
until 90 days after the Closing Date with funds on deposit in the Pre-Funding
Account and allocated to the Other Additional Pre-Funding Subaccount, pursuant
to Section 2.02 of the Sale and Servicing Agreement; each such Other Subsequent
Student Loan shall be identified on Schedule A to the related Transfer Agreement
(which may be in the form of microfiche or computer tape) and each such Schedule
A shall also be deemed to be a supplement to Schedule B to the Sale and
Servicing Agreement.
"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 pursuant to the Indenture); and
(iii) Notes in exchange for or in lieu of other Notes which have been
authenticated and delivered pursuant to the Indenture unless proof
satisfactory to the Indenture Trustee is presented that any such Notes are
held by a bona fide purchaser;
PROVIDED that in determining whether the Noteholders of the requisite
Outstanding Amount of the Notes have given any request, demand, authorization,
direction, notice, consent or waiver hereunder or under any other Basic
Document, Notes owned by the Issuer, any other obligor upon the Notes, the
Seller or any Affiliate of any of the foregoing Persons shall be disregarded and
deemed not to be Outstanding, except that, in determining whether the Indenture
Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Notes that a
Responsible Officer of the Indenture Trustee either actually knows to be so
owned or has received written notice thereof shall be so disregarded. Notes so
owned that have been pledged in good faith may be regarded as Outstanding if the
pledgee establishes to the satisfaction of the Indenture Trustee the pledgee's
right so to act with respect to such Notes and that the pledgee is not the
Issuer, any other obligor upon the Notes, the Seller or any Affiliate of any of
the foregoing Persons.
"OUTSTANDING AMOUNT" means the aggregate principal amount of all Notes
Outstanding at the date of determination.
"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 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.
"PHYSICAL PROPERTY" has the meaning assigned to such term in the
definition of "Delivery" above.
"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 upon commencement of repayment), after giving
effect to the following without duplication: (i) all payments received by the
Trust related to the Financed Student Loans during such Collection Period from
or on behalf of borrowers, Guarantors and the Department, (ii) all Purchase
Amounts received by the Trust related to the Financed Student Loans for such
Collection Period from the Seller or the Master Servicer (or any Sub-Servicer
acting on its behalf), (iii) all Additional Fundings made from the Escrow
Account and the Pre-Funding Account with respect to such Collection Period and
(iv) all losses realized on Financed Student Loans liquidated during such
Collection Period.
"POOL FACTOR" means as of the close of business on a Distribution Date
(i) for the Class ___ Notes, a seven-digit decimal figure equal to the
outstanding principal balance of the Class ___ Notes divided by the original
outstanding principal balance of the Class ___ Notes, (ii) for the Class ___
Notes, a seven-digit decimal figure equal to the outstanding principal balance
of the Class ___ Notes divided by the original outstanding principal balance of
the Class ___ Notes and (iii) for the Certificates, a seven-digit decimal figure
equal to the Certificate Balance of the Certificates divided by the Initial
Certificate Balance of the Certificates. The Pool Factor for each class of
Securities will be 1.0000000 as of the Closing Date; thereafter, the Pool Factor
for each class of Securities will decrease to reflect reductions in the
outstanding principal balance of such classes of Securities.
"PREDECESSOR NOTE" means, with respect to any particular Note, every
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; and, for the purpose of this definition, any Note
authenticated and delivered under Section 2.05 of the Indenture and in lieu of a
mutilated, lost, destroyed or stolen Note shall be deemed to evidence the same
debt as the mutilated, lost, destroyed or stolen Note.
"PRE-FUNDED AMOUNT" means, with respect to any Distribution Date, the
amount on deposit in the Pre-Funding Account.
"PRE-FUNDING ACCOUNT" means the account designated as such,
established and maintained pursuant to Section 5.01 of the Sale and Servicing
Agreement (including, unless otherwise expressly stated, the Subsequent Pool
Pre-Funding Subaccount and the Other Additional Pre-Funding Subaccount).
"PRINCIPAL DISTRIBUTION AMOUNT" means, with respect to any
Distribution Date, the amount by which the sum of the outstanding principal
balance of the Notes and the Certificates exceeds the Specified Collateral
Balance for such Distribution Date.
"PROCEEDING" means any suit in equity, action at law or other judicial
or administrative proceeding.
"PROGRAMS" means the Graduate Loan Programs and Undergraduate Loan
Programs, as in effect from time to time.
"PURCHASE AMOUNT" means, as of the close of business on the last day
of a Collection Period, _______% of the amount required to prepay in full the
respective Financed Student Loan, if it is an Initial Financed Student Loan,
_________% of the amount required to prepay in full the respective Financed
Student Loan, if it is a Subsequent Pool Student Loan and 100% of the amount
required to prepay in full the respective Financed Student Loan if it is an
Other Subsequent Student Loan, in each case under the terms thereof including
all accrued interest thereon and any lost Interest Subsidy Payments and Special
Allowance Payments with respect thereto.
"PURCHASED STUDENT LOAN" means a Financed Student Loan purchased as of
the close of business on the last day of a Collection Period by the Master
Servicer (or any Sub-Servicer acting on its behalf) pursuant to Section 4.06 of
the Sale and Servicing Agreement or repurchased by the Seller pursuant to
Section 3.02 of the Sale and Servicing Agreement.
"RATING AGENCY" means each of [S&P, Moody's and Fitch]. If any such
organization or successor is no longer in existence, "Rating Agency" shall be a
nationally recognized statistical rating organization or other comparable Person
designated by the Seller, notice of which designation shall be given to the
Indenture Trustee, the Eligible Lender Trustee, the Master Servicer and each
Sub-Servicer.
"RATING AGENCY CONDITION" means, with respect to any action, that each
Rating Agency shall have been given 10 days' prior notice thereof (or such
shorter period as shall be acceptable to the Rating Agencies) and that none of
the Rating Agencies shall have notified the Seller, the Master Servicer, the
Eligible Lender Trustee and the Indenture Trustee in writing that such action
will in and of itself result in a reduction or withdrawal of the then current
rating of the Notes or the Certificates.
"REALIZED LOSSES" means the excess of the aggregate principal balance
of any Liquidated Student Loan plus accrued but unpaid interest thereon over
Liquidation Proceeds to the extent allocable to principal.
"RECORD DATE" means, with respect to a Distribution Date or Redemption
Date, the close of business on the twenty-fourth day of the calendar month in
which such Distribution Date or Redemption Date occurs.
"RECOVERIES" means, with respect to any Liquidated Student Loan,
moneys collected in respect thereof, from whatever source, during any Collection
Period following the Collection Period in which such Financed Student Loan
became a Liquidated Student Loan, net of the sum of any amounts expended by the
Master Servicer (or any Sub-Servicer acting on its behalf) for the account of
any Obligor and any amounts required by law to be remitted to the Obligor.
"REDEMPTION DATE" means (a) in the case of a redemption of Notes
pursuant to Section 10.01(a) of the Indenture, the Distribution Date on which
the Funding Period ends (or the Distribution Date on or immediately following
the last day of the Funding Period, if the Funding Period does not end on a
Distribution Date) or (b) in the case of a payment to Noteholders pursuant to
Section 10.01(b) of the Indenture, the Distribution Date specified by the
Administrator or the Issuer pursuant to Section 10.01(b) of the Indenture.
"REDEMPTION PRICE" means (a) in the case of a redemption of the Notes
pursuant to Section 10.01(a) of the Indenture, an amount equal to the unpaid
principal amount of the Notes, plus accrued and unpaid interest thereon at the
applicable Note Interest Rate to but excluding the Redemption Date and the
amount of the Noteholders' Interest Index Carryover with respect thereto, or (b)
in the case of a payment made to Noteholders pursuant to Section 10.01(b) of the
Indenture, the amount to be so paid, but not in excess of the amount specified
in clause (a) above.
"REFERENCE BANK" means a leading bank (i) engaged in transactions in
Eurodollar deposits in the international Eurocurrency market, (ii) not
controlling, controlled by or under common control with the Administrator and
(iii) having an established place of business in London.
"RESERVE ACCOUNT" means the account designated as such, established
and maintained pursuant to Section 5.01 of the Sale 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,
including any Vice President, Assistant Vice President, Secretary, Assistant
Secretary, or any other officer of the Indenture Trustee customarily performing
functions similar to those performed by any of the above designated officers,
with direct responsibility for the administration of the Indenture and the other
Basic Documents on behalf of the Indenture Trustee and also, with respect to a
particular matter, any other officer to whom such matter is referred because of
such officer's knowledge of and familiarity with the particular subject.
"S&P" means Standard and Poor's, a division of The McGraw-Hill
Companies, Inc.
"SALE AND SERVICING AGREEMENT" means the Sale and Servicing Agreement
dated as of ____________, ____ among the Issuer, the Seller, the Administrator,
the Eligible Lender Trustee and the Master Servicer.
"SCHEDULES OF FINANCED STUDENT LOANS" means the listing of the
Financed Student Loans set forth in Schedules A and B to the Sale and Servicing
Agreement and to the Indenture (which Schedules may be in the form of microfiche
or computer tape), as amended or supplemented on each Transfer Date to reflect
the sale to the Eligible Lender Trustee on behalf of the Trust of the Additional
Student Loans.
"SECURITIES" means the Class ___ Notes, Class ___ Notes and the
Certificates.
"SELLER" means Mellon Bank, N.A., a national banking association.
"SELLER OPTIONAL DEPOSIT" has the meaning specified in Section 5.09 of
the Sale and Servicing Agreement.
"SERIAL LOANS" means additional student loans, including Consolidation
Loans, which are made under the Programs to a borrower who is also a borrower
under at least one Financed Student Loan.
"SERVICER'S REPORT" means any report of the Master Servicer (or any
Sub-Servicer acting at the direction of the Master Servicer) delivered pursuant
to Section 4.08(a) or (b) of the Sale and Servicing Agreement, substantially in
the form acceptable to the Administrator.
"SLS LOAN" means a Financed Federal Loan designated as such that is
made under the Federal Supplemental Loans for Students Program pursuant to the
Higher Education Act.
"SPECIAL ALLOWANCE PAYMENTS" means payments, designated as such,
consisting of effective interest subsidies by the Department in respect of the
Financed Federal Loans to the Eligible Lender Trustee on behalf of the Trust in
accordance with the Higher Education Act.
"SPECIAL DETERMINATION DATE" means ____________, ____.
"SPECIFIED COLLATERAL BALANCE" means, with respect to any Distribution
Date, the sum of (a) the Pool Balance as of the last day of the related
Collection Period plus (b) the Pre-Funded Amount, as of the last day of the
related Collection Period for such Distribution Date. In the event that the
Financed Student Loans are not sold pursuant to Section 9.01(c) of the Sale and
Servicing Agreement with respect to any Distribution Date occurring on or after
the __________, ____ Distribution Date, the Specified Collateral Balance will be
zero.
"SPECIFIED RESERVE ACCOUNT BALANCE" means with respect to any
Distribution Date an amount equal to the greater of (i) ____% of the aggregate
outstanding principal balance of the Financed Guaranteed Loans as of the end of
the related Collection Period, and (ii) $_____________; provided, however, that
in no event will such balance exceed the sum of the outstanding principal amount
of the Notes and the outstanding principal balance of the Certificates.
"STAFFORD LOAN" means a Financed Federal Loan designated as such that
is made under the Federal Stafford Loan Program in accordance with the Higher
Education Act.
"STATE" means any one of the 50 States of the United States of America
or the District of Columbia.
"STATISTICAL CUTOFF DATE" means ____________, ____.
"STUDENT LOAN RATE" means for any class of Securities for any Interest
Period a rate equal to the product of (a) the quotient obtained by dividing (i)
365 (or 366 in a leap year) by (ii) the actual number of days elapsed in such
Interest Period and (b) the percentage equivalent of a fraction, (i) the
numerator of which is equal to Expected Interest Collections for the Collection
Period relating to such Interest Period less the Master Servicing Fees and the
Administration Fee payable on the related Distribution Date and any Master
Servicing Fees paid on the two preceding Monthly Servicing Payment Dates during
the related Collection Period and (ii) the denominator of which is the
outstanding principal balance of the Securities as of the first day of such
Interest Period.
"SUBSEQUENT CUTOFF DATE" means the day specified in the related
Transfer Agreement as of which principal and interest accruing with respect to
an Additional Student Loan is to be transferred to the Eligible Lender Trustee
on behalf of the Issuer pursuant to Section 2.02 of the Sale and Servicing
Agreement.
"SUBSEQUENT POOL PRE-FUNDED AMOUNT" means, with respect to any
Distribution Date, the amount on deposit in the Subsequent Pool Pre-Funding
Subaccount.
"SUBSEQUENT POOL PRE-FUNDING SUBACCOUNT" has the meaning set forth in
Section 5.08 of the Sale and Servicing Agreement.
"SUBSEQUENT POOL STUDENT LOANS" means any graduate or undergraduate
student loans listed on the Schedule of Subsequent Pool Student Loans on the
Closing Date as set forth in Schedule B to the Sale and Servicing Agreement
(which Schedule may be in the form of microfiche or computer tape), as such
Schedule may be amended or supplemented, which student loans the Seller intends
to transfer to the Eligible Lender Trustee on behalf of the Issuer pursuant to
Section 2.02 of the Sale and Servicing Agreement, each of which shall be
identified on Schedule A to the related Transfer Agreement.
"SUB-SERVICER" initially means each of __________, in its capacity as
sub-servicer of the Financed Student Loans it services on behalf of the Master
Servicer pursuant to the __________ Sub-Servicing Agreement, and ____________,
as sub-servicer of the Financed Student Loans it services on behalf of the
Master Servicer pursuant to the __________ Sub-Servicing Agreement, as
applicable, and such other Sub-Servicers as may, from time to time, be appointed
by the Master Servicer as Sub-Servicers in accordance with the provisions of
Section 4.13 of the Sale and Servicing Agreement.
"SUB-SERVICING AGREEMENT" means each of the __________ Sub-Servicing
Agreement and the __________ Sub-Servicing Agreement.
"SUCCESSOR ADMINISTRATOR" has the meaning specified in Section 3.07(e)
of the Indenture.
"SUCCESSOR MASTER SERVICER" has the meaning specified in Section
3.07(e) of the Indenture.
"T-BILL INDEXED SECURITIES" means [none].
"T-BILL RATE" means, on any day, the weighted average per annum
discount rate (expressed on a bond equivalent basis and applied on a daily
basis) for 91-day Treasury Bills sold at the most recent 91-day Treasury Bill
auction prior to such date as reported by the U.S. Treasury Department. In the
event that the results of the auctions of 91-day Treasury Bills cease to be
published or reported as provided above, or that no such auction is held in a
particular week, then the "T-Bill Rate" in effect as a result of the last such
publication or report shall remain in effect until such time, if any, as the
results of auctions of 91-day Treasury Bills shall again be so published or
reported or such an auction is held, as the case may be. The T-Bill Rate shall
be subject to a Lock-In Period of six Business Days.
"TELERATE PAGE 3750" means the display page so designated on the
Bridge Telerate Service (or such other page as may replace that page on that
service for the purpose of displaying comparable rates or prices) or such
comparable page on a comparable service.
"THREE-MONTH LIBOR" means the London interbank offered rate for
deposits in U.S. dollars having a maturity of three months commencing on the
related LIBOR Determination Date (the "Index Maturity") which appears on
Telerate Page 3750 as of 11:00 a.m., London time, on such LIBOR Determination
Date. If such rate does not appear on Telerate Page 3750, the rate for that day
will be determined on the basis of the rates at which deposits in U.S. dollars,
having the Index Maturity and in a principal amount of not less than U.S.
$1,000,000, are offered at approximately 11:00 a.m., London time, on such LIBOR
Determination Date to prime banks in the London interbank market by the
Reference Banks. The Administrator will request the principal London office of
each of such Reference Banks to provide a quotation of its rate. If at least two
such quotations are provided, the rate for that day will be the arithmetic mean
of the quotations. If fewer than two quotations are provided, the rate for that
day will be the arithmetic mean of the rates quoted by major banks in New York
City, selected by the Administrator, at approximately 11:00 a.m., New York City
time, on such LIBOR Determination Date for loans in U.S. dollars to leading
European banks having the Index Maturity and in a principal amount equal to an
amount of not less than U.S. $1,000,000; provided that if the banks selected as
aforesaid are not quoting as mentioned in this sentence, Three-Month LIBOR in
effect for the applicable Interest Period will be Three-Month LIBOR in effect
for the previous Interest Period.
"TIA" means the Trust Indenture Act of 1939, as amended.
"TRANSFER AGREEMENT" has the meaning specified in Section 2.02(b) of
the Sale and Servicing Agreement.
"TRANSFER DATE" means the Closing Date, the fifteenth day (or, if such
day is not a Business Day, the next succeeding Business Day) of any month or any
other date designated by the Seller as a date on which Additional Student Loans
will be conveyed to the Eligible Lender Trustee on behalf of the Trust pursuant
to Section 2.02 of the Sale and Servicing Agreement.
"TRANSFERRED BALANCE" has the meaning assigned to such term in
Sections 5.05(d) and 5.08 of the Sale and Servicing Agreement.
"TREASURY REGULATIONS" means regulations, including proposed or
temporary regulations, promulgated under the Code. References in any document or
instrument to specific provisions of proposed or temporary regulations shall
include analogous provisions of final Treasury Regulations or other successor
Treasury Regulations.
"TRUST" means the Issuer, established pursuant to the Trust Agreement.
"TRUST ACCOUNT PROPERTY" means the Trust Accounts, all amounts and
investments held from time to time in any Trust Account (whether in the form of
deposit accounts, Physical Property, book-entry securities, uncertificated
securities or otherwise), including the Reserve Account Initial Deposit and the
Pre-Funded Amount and all proceeds of the foregoing.
"TRUST ACCOUNTS" has the meaning specified in Section 5.01 of the Sale
and Servicing Agreement.
"TRUST AGREEMENT" means the Trust Agreement dated as of _________,
____ as amended and restated by the Amended and Restated Trust Agreement dated
as of _________, ____, each between the Depositor and the Eligible Lender
Trustee.
"TRUST CERTIFICATE" means a Certificate.
"TRUST ESTATE" means all right, title and interest of the Trust (or
the Eligible Lender Trustee on behalf of the Trust) in and to the property and
rights assigned to the Trust pursuant to Article II of the Sale and Servicing
Agreement, all funds on deposit from time to time in the Trust Accounts and all
other property of the Trust from time to time, including any rights of the
Eligible Lender Trustee and the Trust pursuant to the Sale and Servicing
Agreement and the Administration Agreement.
"TRUST INDENTURE ACT" or "TIA" means the Trust Indenture Act of 1939
as in force on the date hereof, unless otherwise specifically provided.
"UCC" means, unless the context otherwise requires, the Uniform
Commercial Code, as in effect in the relevant jurisdiction, as amended from time
to time.
"UNDERGRADUATE LOAN PROGRAMS" means the loan programs, under which the
Seller made student loans to students enrolled in approved or accredited
undergraduate institutions.
"UNDERWRITERS" shall mean ____________, ____________ and ____________.
"UNDERWRITING AGREEMENT" shall mean the Note Underwriting Agreement or
the Certificate Underwriting Agreement, as applicable.
<PAGE>
SCHEDULE A
TO THE
SALE AND SERVICING AGREEMENT
Schedule of Initial Financed Student Loans
- ------------------------------------------
Delivered to Indenture Trustee.
<PAGE>
SCHEDULE B
TO THE
SALE AND SERVICING AGREEMENT
Schedule of Additional Student Loans
- ------------------------------------
Delivered to Indenture Trustee
<PAGE>
SCHEDULE C
TO THE
SALE AND SERVICING AGREEMENT
Location of Financed Student Loan Files -
- -----------------------------------------
<PAGE>
SCHEDULE D
TO THE
SALE AND SERVICING AGREEMENT
Master Servicing Provisions to be Audited Pursuant to Section 4.10
- ------------------------------------------------------------------
Sections 3.03, 3.04, 4.01, 4.02, 4.03, 4.06, 4.08, 5.02 and 5.03 of the Sale and
Servicing Agreement (but only to the extent that the Master Servicer has
performed such duties) [otherwise to be included as part of the applicable
Sub-Servicer's audit report to be provided pursuant to Section 4.10 of this
Agreement and the related Sub-Servicing Agreement].
Administrative Provisions to be Audited Pursuant to Section 4.10
- ----------------------------------------------------------------
Sections 4.04, 4.08, 5.05, 5.06, 5.07 and 5.08 of the Sale and Servicing
Agreement.
Sections 1(a)(xx), 1(b)(iii), 2 and 3 of the Administration Agreement.
<PAGE>
SCHEDULE E
TO THE
SALE AND SERVICING AGREEMENT
<PAGE>
EXHIBIT A
TO THE
SALE AND SERVICING AGREEMENT
Form of Noteholders' Statement
pursuant to Section 5.07(b) of Sale
and Servicing Agreement (capitalized
terms used herein are defined in
Appendix A thereto)
- ------------------------------------
Distribution Date:___________________
(i) Amount of principal being paid or distributed in respect of the
Class ___ Notes:___________ ($_______ per $1,000 original principal amount of
Class ___ Notes)
(ii) Amount of principal being paid or distributed in respect of the
Class ___ Notes:___________ ($_______ per $1,000 original principal amount of
Class ___ Notes)
(iii) Amount of interest being paid or distributed in respect of the
Class ___ Notes:___________ ($_______ per $1,000 original principal amount of
Class ___ Notes)
(iv) Amount of interest being paid or distributed in respect of the
Class ___ Notes:___________ ($_______ per $1,000 original principal amount of
Class ___ Notes)
(v) Amount of Noteholders' Interest Index Carryover being paid or
distributed (if any) and amount remaining (if any):
(1) Distributed to Class ___ Noteholders: _______($_______ per
$1,000 original principal amount of Class ___ Notes)
(2) Distributed to Class ___ Noteholders: _______($_______ per
$1,000 original principal amount of Class ___ Notes)
(3) Balance on Class ___ Notes:__________ ($_______ per $1,000
original principal amount of Class ___ Notes)
(4) Balance on Class ___ Notes:__________ ($_______ per $1,000
original principal amount of Class ___ Notes)
(vi) Pool Balance at the end of the related Collection Period:________
(vii) After giving effect to distributions on this Distribution Date:
(a) (1) outstanding principal amount of Class ___
Notes:____________
(2) Pool Factor for the Class ___ Notes:____________
(b) (1) outstanding principal amount of Class ___
Notes:____________
(2) Pool Factor for the Class ___ Notes:____________
(c) (1) Certificate Balance:________________
(2) Pool Factor for the Certificates:____________
(viii) Note Interest Rate for the Class ___ Notes:
(a) In general:
[(1) T-Bill Rate for the period from the previous
Distribution Date to this Distribution Date was _____%;][1]
or
[(1) Three-Month LIBOR for the period from the previous
Distribution Date to this Distribution Date was ___% [in the case
of the initial Interest Period Three-Month LIBOR was _____% for
the period from the Closing Date to but excluding __________,
____ and _____% for the period from and including __________,
____ to but excluding __________, ____] and] [2]
[(2)] the Student Loan Rate was _____%.[1][2]
(b) Note Interest Rate for the Class ___ Notes: ______% (based on
[T-Bill Rate][Three-Month LIBOR][Student Loan Rate])
______________
[1 This Calculation not required unless the T-Bill Rate for such Interest
Period is 100 basis points greater than the T-Bill Rate of the preceding
Determination Date or the 52 Week Treasury Bill Rate is 100 basis points
less than the T-Bill Rate as of such Determination Date.]
[2 This Calculation not required unless Three-Month LIBOR for such Interest
Period is 100 basis points greater than Three-Month LIBOR of the preceding
Determination Date.]
(c) Note Interest Rate for the Class ___ Notes __% (based on [T-bill
Rate] [Three-Month LIBOR][Student Loan Rate]
(ix) (a) Amount of Master Servicing Fee for related Collection Period:
____________ ($_______ per $1,000 original principal amount of Class ___ Notes,
and $_________ per $1,000 original principal balance of Class ___ Notes;
(b) Amount of Excess Servicing Fee being distributed and remaining
balance (if any):
(1) Distributed: $____________ ($_______ per $1,000 original
principal amount of Class ___ Notes, and $_________ per $1,000
original principal balance of Class ___ Notes;
(2) Balance owed to the holders of Notes: $__________ ($_____ per
$1,000 original principal amount of Class ___ Notes, and
$_____________ per $1,000 original principal balance of Class ___
Notes)
(x) Amount of Administration Fee for related Collection Period:____________
($_______ per $1,000 original principal amount of Class ___ Notes, and
$_________ per $1,000 original principal balance of Class ___ Notes;
(xi) (a) Aggregate amount of Realized Losses (if any) for the related
Collection Period:
(b) Balance of Financed Student Loans that are delinquent in each
delinquency period as of the end of the related Collection Period:
[(xii) Amount in the Pre-Funding Account:_________]3
[(xiii) (a) Amount remaining in the Subsequent Pool Pre-Funding Subaccount
not used to acquire Subsequent Pool Student Loans: ______;
(b) Amount of (a) to be paid to the holders of the Class ___ Notes:
__________]4
(c) Amount of (a) to be paid to the holders of the Class ___ Notes:
________; and
[(xiv) Amount in the Pre-Funding Account at the end of the Funding
Period to be distributed as a payment of principal in respect of the
Notes:__________]5
_______________
3 To be included for each Distribution Date during the Funding Period.
4 To be included for First Distribution Date only.
5 To be included for the Distribution Date on or immediately following the
end of the Funding Period.
<PAGE>
EXHIBIT B
TO THE
SALE AND SERVICING AGREEMENT
Form of Certificateholders' Statement
pursuant to Section 5.07(b) of Sale
and Servicing Agreement (capitalized
terms used herein are defined in
Appendix a thereto)
- -------------------------------------
Distribution Date:___________________
(i) Amount of principal being paid or distributed in respect of the
Certificates:___________ ($_______ per $1,000 original principal amount of the
Certificates)6
(ii) Amount of interest being paid or distributed in respect of the
Certificates:______________ ($_______ per $1,000 original principal amount of
Certificates)
(iii) Amount of Certificateholders' Interest Index Carryover being paid or
distributed (if any) and amount remaining (if any):
(1) Distributed: ______________ ($_______ per $1,000 original
principal amount of Certificates)
(2) Balance: ______________ ($_______ per $1,000 original principal
amount of Certificates)
(iv) Pool Balance at the end of related Collection Period:
(v) After giving effect to distributions on this Distribution Date:
(a) (1) outstanding principal amount of Class ___ Notes:____________
(2) Pool Factor for Class ___ Notes:____________
(b) (1) outstanding principal amount of Class ___ Notes:____________
(2) Pool Factor for Class ____ Notes:____________
________________
6 Only after the Notes have been paid in full.
(c) (1) Certificate Balance:______________
(2) Certificate Pool Factor:____________
(vi) Certificate Rate:
(a) In general:
[(1) T-Bill Rate for the period from the previous Distribution
Date to this Distribution Date was _____%;][7]
[(2) Three-Month LIBOR for the period from the previous
Distribution Date to this Distribution Date was __% [in the case of
the initial Interest Period Three-Month LIBOR was _____% for the
period from the Closing Date to but excluding __________, ____ and
_____% for the period from and including __________, ____ to but
excluding __________, ____] and][8] . (3) the Student Loan Rate was
_____%.[2][3]
(b) Certificate Rate: ______% (based on [T-Bill Rate] [Three-Month
LIBOR][Student Loan Rate])
(vii) (a) Amount of Master Servicing Fee for the related Collection Period:
____________ ($_______ per $1,000 original principal amount of
Certificates):___________
(b) Amount of Excess Servicing Fee being distributed and remaining
balance (if any):
(1) Distributed: $______________ ($_______ per $1,000 original
principal amount of Certificates).
(2) Balance: $______________ ($_______ per $1,000 original
principal amount of Certificates).
(viii) Amount of Administration Fee for the related Collection Period:
____________ ($_______ per $1,000 original principal amount of Certificates)
_______________
[7 This Calculation not required unless the T-Bill Rate for such Interest
Period is 100 basis points greater than the T-Bill Rate of the preceding
Determination Date or the 52 Week Treasury Bill Rate is 100 basis points
less than the T-Bill Rate as of such Determination Date.]
[8 This Calculation not required unless Three-Month LIBOR for such Interest
Period is 100 basis points greater than Three-Month LIBOR of the preceding
Determination Date.]
(ix) (a) Aggregate amount of Realized Losses (if any) for the related
Collection Period:
(b) Balance of Financed Student Loans that are delinquent in each
delinquency period as of the end of the related Collection Period:__________
(x) Amount in the Reserve Account:____________
(xi) Amount in the Pre-Funding Account:_________9
(xii) (a) Amount remaining in the Subsequent Pool Pre-Funding Subaccount
not used to acquire Subsequent Pool Student Loans: ______;
(b) Amount of (a) to be paid to Certificateholders: ________10
_______________
9/ To be included for each Distribution Date during the Funding Period.
10/ To be included for First Distribution Date only.
<PAGE>
EXHIBIT C
TO THE
SALE AND SERVICING AGREEMENT
[RESERVED]
<PAGE>
EXHIBIT D
TO THE
SALE AND SERVICING AGREEMENT
ASSIGNMENT
For value received, in accordance with the Sale and Servicing
Agreement (the "Sale and Servicing Agreement") dated as of __________, ____,
among the undersigned, as seller (the "Seller"), as master servicer (the "Master
Servicer") and as administrator (the "Administrator"), Mellon Student Loan Trust
___-___ (the "Trust"), and _______________, not in its individual capacity but
solely as Eligible Lender Trustee (the "Eligible Lender Trustee"), the
undersigned does hereby sell, assign, transfer and otherwise convey unto the
Eligible Lender Trustee on behalf of the Trust, without recourse (subject to the
obligations set forth in the Sale and Servicing Agreement), all right, title and
interest of the undersigned in and to (i) the Initial Financed Student Loans and
all obligations of the Obligors thereunder including all moneys paid thereunder
on or after the Cutoff Date, (ii) the Assigned Rights, (iii) all funds on
deposit from time to time in the Trust Accounts, including the Reserve Account
Initial Deposit and the Pre-Funded Amount and in all investments and proceeds
thereof (including all income thereon) and (iv) the proceeds of any and all of
the foregoing (including proceeds derived from the voluntary or involuntary
conversion of any of the Initial Financed Student Loans into cash or other
liquidated property, such as proceeds from the applicable Guarantee Agreement.
The foregoing sale does not constitute and is not intended to result in any
assumption by the Eligible Lender Trustee or the Trust of any obligation of the
Seller to the Obligors with respect to Initial Financed Student Loans or any
other person in connection with the Initial Financed Student Loans or any
agreement or instrument relating to any of them.
In addition, the undersigned, by execution of this instrument, hereby
endorses the promissory notes evidencing each Initial Financed Student Loan
described in Schedule A to the Sale and Servicing Agreement in favor of the
Eligible Lender Trustee on behalf of the Trust, without recourse (subject to the
obligations set forth in the Sale 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 Sale
and Servicing Agreement and is to be governed by the Sale and Servicing
Agreement.
Capitalized terms used but not defined herein shall have the meaning
assigned to them in Appendix A to the Sale and Servicing Agreement, which also
contains rules as to usage that shall be applicable herein.
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Assignment to be
duly executed as of _____________ __, ____.
MELLON BANK, N.A.,
as Seller
By: ___________________________________
Name:
Title:
<PAGE>
EXHIBIT E
TO THE
SALE AND SERVICING AGREEMENT
TRANSFER AGREEMENT
TRANSFER No. ____ OF ADDITIONAL STUDENT LOANS dated as of _________,
______, among MELLON STUDENT LOAN TRUST ___-___, a Delaware business trust (the
"Issuer"), MELLON BANK, N.A., a national banking association, as seller (the
"Seller"), _______________, a national banking association, not in its
individual capacity but solely as Eligible Lender Trustee of the Issuer (the
"Eligible Lender Trustee"), MELLON BANK, N.A., a national banking association,
as master servicer (the "Master Servicer"), and MELLON BANK, N.A., a national
banking association, as administrator (the "Administrator").
W I T N E S S E T H:
WHEREAS the Issuer, the Seller, the Eligible Lender Trustee, the
Master Servicer and the Administrator are parties to the Sale and Servicing
Agreement dated as of __________, ____ (as amended or supplemented, the "Sale
and Servicing Agreement");
WHEREAS the Seller, as depositor, and the Eligible Lender Trustee are
parties to the Amended and Restated Trust Agreement dated as of __________, ____
(as amended or supplemented, the "Trust Agreement");
WHEREAS pursuant to the Sale and Servicing Agreement, the Seller
wishes to convey the Additional Student Loans referred to in Section 2 of this
Agreement (the "Additional Student Loans") to the Eligible Lender Trustee on
behalf of the Issuer; and
WHEREAS, the Eligible Lender Trustee and the Issuer are willing to
accept such conveyance subject to the terms and conditions hereof.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. DEFINITIONS AND USAGE. Unless otherwise defined herein, capitalized
terms used herein shall have the meanings ascribed to them in Appendix A to the
Sale 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:
"SUBSEQUENT CUTOFF DATE" means, with respect to each Additional
Student Loan, the date specified as such on Schedule A hereto.
"TRANSFER DATE" means, with respect to the Additional Student Loans,
______________, ____.
2. SCHEDULES OF FINANCED STUDENT LOANS. Attached hereto as Schedule A
is a supplement to Schedule B to the Sale and Servicing Agreement listing the
Additional Student Loans to be conveyed on the Transfer Date to the Eligible
Lender Trustee on behalf of the Issuer pursuant to this Agreement.
3. CONVEYANCE OF ADDITIONAL STUDENT LOANS. In consideration of the
Issuer's delivery to or upon the order of the Seller of $__________, the Seller
does hereby sell, transfer, assign, set over and otherwise convey, without
recourse (except as expressly provided in the Sale and Servicing Agreement), to
the Eligible Lender Trustee on behalf of the Issuer:
(a) all right, title and interest of the Seller in and to each
Additional Student Loan, and all moneys received thereon, on and after the
related Subsequent Cutoff Date; and
(b) the proceeds of any and all of the foregoing.
4. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller hereby
represents and warrants to the Issuer as of the date of this Agreement and as of
the Transfer Date that:
(a) ORGANIZATION AND GOOD STANDING. The Seller is duly organized and
validly existing as a national banking association in good standing under
the laws of the United States of America, with the power and authority to
own its properties and to conduct its business as such properties are
currently owned and such business is presently conducted, and had at all
relevant times, and has, the power, authority and legal right to acquire
and own the Additional Student Loans.
(b) POWER AND AUTHORITY. The Seller has the corporate power and
authority to execute and deliver this Agreement and to carry out its terms;
the Seller has full corporate power and corporate authority to sell and
assign the property to be sold and assigned to and deposited with the
Issuer (or with the Eligible Lender Trustee on behalf of the Issuer) and
the Seller has duly authorized such sale and assignment to the Issuer (or
to the Eligible Lender Trustee on behalf of the Issuer) by all necessary
corporate action; and the execution, delivery and performance of this
Agreement have been duly authorized by the Seller by all necessary
corporate action.
(c) BINDING OBLIGATION. This Agreement constitutes a legal, valid and
binding obligation of the Seller enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization and similar
laws relating to creditors' rights generally or the rights of creditors of
banks the deposit accounts of which 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 conflict
with, result in any breach of any of the terms and provisions of, nor
constitute (with or without notice or lapse of time or both) a default
under, the articles of association or by-laws of the Seller, or any
indenture, agreement or other instrument to which the Seller is a party or
by which it shall be bound which breach or default would reasonably be
expected to have a material adverse effect on the condition of Mellon Bank,
N.A., financial or otherwise, or adversely affect the transactions
contemplated by this Agreement or any other Basic Document; nor result in
the creation or imposition of any Lien upon any of its properties pursuant
to the terms of any such indenture, agreement or other instrument (other
than pursuant to the Basic Documents); nor violate any law or, to the
knowledge of the Seller, any order, rule or regulation applicable to the
Seller of any court or of any Federal or State regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Seller or its properties.
(e) NO PROCEEDINGS. There are no proceedings or to its best knowledge
investigations pending against the Seller or, to its best knowledge,
threatened against the Seller, before any court, regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Seller 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 the Seller of its obligations under, or the validity or
enforceability of, this Agreement, the Indenture, any of the other Basic
Documents, the Notes or the Certificates or (iv) seeking to affect
adversely the Federal or State income tax attributes of the Issuer, the
Notes or the Certificates.
(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 Seller in connection with the execution
and delivery by the Seller of this Agreement and the performance by the
Seller of the transactions contemplated by this Agreement have been duly
obtained, effected or given and are in full force and effect.
(g) PRINCIPAL BALANCE. The aggregate principal balance of the
Additional 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 Cutoff Dates is $___________.
5. CONDITIONS PRECEDENT. The obligation of the Issuer to acquire the
Additional Student Loans hereunder is subject to the satisfaction, on or prior
to the Transfer Date, of the following conditions precedent:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties made by the Seller in Section 4 of this Agreement and in Section
3.01 of the Sale and Servicing Agreement shall be true and correct as of
the date of this Agreement and as of the Transfer Date.
(b) SALE AND SERVICING AGREEMENT CONDITIONS. Each of the conditions
set forth in Section 2.02(b) of the Sale and Servicing Agreement shall have
been satisfied.
(c) DELIVERY OF ASSIGNMENT. The Seller shall have delivered an
Assignment substantially in the form of Annex A hereto.
(d) ADDITIONAL INFORMATION. The Seller shall have delivered to the
Issuer such information as was reasonably requested by the Issuer to
satisfy itself as to (i) the accuracy of the representations and warranties
set forth in Section 4 of this Agreement and in Section 3.01 of the Sale
and Servicing Agreement and (ii) the satisfaction of the conditions set
forth in this Section 5.
6. AGREEMENT TO MASTER SERVICE. The Master Servicer hereby agrees to
master service the Additional Student Loans being transferred to the Issuer
hereby pursuant to the terms and conditions of the Sale and Servicing Agreement.
7. RATIFICATION OF AGREEMENT. As supplemented by this Agreement, the
Sale and Servicing Agreement is in all respects ratified and confirmed and the
Sale and Servicing Agreement as so supplemented by this Agreement shall be read,
taken and construed as one and the same instrument.
8. 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.
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.
10. 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.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective duly authorized officers as
of the day and the year first above written.
MELLON STUDENT LOAN TRUST ___-___,
By: _____________________________,
not in its individual capacity but
solely as Eligible Lender Trustee,
By: ______________________
Name:
Title:
MELLON BANK, N.A.,
Seller,
By: ______________________
Name:
Title:
MELLON BANK, N.A.,
Administrator,
By: ______________________
Name:
Title:
MELLON BANK, N.A.,
Master Servicer,
By: ______________________
Name:
Title:
__________________________________, not
in its individual capacity but solely as
Eligible Lender Trustee,
By: ______________________
Name:
Title:
Acknowledged and accepted as
of the date first above written:
_______________________,
not in its individual
capacity but solely as
Indenture Trustee,
By: ______________________
Name:
Title:
<PAGE>
SCHEDULE A
TO THE
TRANSFER AGREEMENT NO. ___
[List of Additional Student Loans and their related Subsequent Cutoff Dates]
<PAGE>
ANNEX A
TO THE TRANSFER AGREEMENT
ASSIGNMENT
For value received, in accordance with the Sale and Servicing
Agreement (the "Sale and Servicing Agreement") dated as of __________, ____,
among the undersigned, as seller (the "Seller"), as master servicer (the "Master
Servicer") and as administrator (the "Administrator"), Mellon Student Loan Trust
___-___ (the "Trust"), and _______________, 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
Seller, the Master Servicer, the Administrator, the Trust and the Eligible
Lender Trustee, the undersigned does hereby sell, assign, transfer and otherwise
convey unto the Eligible Lender Trustee on behalf of the Trust, without recourse
(subject to the obligations set forth in the Sale and Servicing Agreement), all
right, title and interest of the undersigned in and to (i) the Additional
Student Loans (as such term is defined in the Transfer Agreement) and all moneys
received thereon, on and after each applicable Subsequent Cutoff Date (as such
term is defined in the Transfer Agreement) and (ii) the proceeds of any and all
of the foregoing (including but not limited to proceeds derived from the
voluntary or involuntary conversion of any of the Additional Student Loans into
cash or other liquidated property, such as proceeds from the applicable
Guarantee Agreement (as such term is defined in the Transfer Agreement)). The
foregoing sale does not constitute and is not intended to result in any
assumption by the Eligible Lender Trustee or the Trust of any obligation of the
Seller to the borrowers of such Additional Student Loans or any other person in
connection with the Additional Student Loans or any agreement or instrument
relating to any of them.
In addition, the undersigned, by execution of this instrument, hereby
endorses the promissory notes evidencing each Additional Student Loan described
in Schedule A to the Transfer Agreement in favor of the Eligible Lender Trustee
on behalf of the Trust, without recourse (subject to the obligations set forth
in the Sale 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 Sale
and Servicing Agreement and the Transfer Agreement and is to be governed by the
Sale 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.
IN WITNESS WHEREOF, the undersigned has caused this Assignment to be
duly executed as of _____________, ____.
MELLON BANK, N.A.,
as Seller
By: ______________________
Name:
Title:
EXHIBIT 10.2
[FORM OF] ADMINISTRATION AGREEMENT dated as of __________, ____, among
MELLON STUDENT LOAN TRUST ___-___, a Delaware business trust (the "Issuer"),
MELLON BANK, N.A., a national banking association, as administrator (the
"Administrator"), and _______________, a __________ banking corporation, not in
its individual capacity but solely as Indenture Trustee (the "Indenture
Trustee").
W I T N E S S E T H
WHEREAS the Issuer is issuing [two] classes of Floating Rate Asset
Backed Notes (the "Notes") pursuant to the Indenture dated as of __________,
____ (the "Indenture"), between the Issuer and the Indenture Trustee
(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 certain agreements in connection
with the issuance of the Notes and the Certificates, including the Sale and
Servicing Agreement, the Note Depository Agreement, the Certificate Depository
Agreement (the Certificate Depository Agreement and the Note Depository
Agreement being collectively referred to herein as the "Depository Agreement"),
the Guarantee Agreements and the Indenture (all such agreements being
collectively referred to herein as the "Related Agreements");
WHEREAS, pursuant to the Related Agreements, the Issuer and the
Eligible Lender Trustee are required to perform certain duties in connection
with (a) the Notes and the Collateral therefor pledged pursuant to the Indenture
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 the services
required hereby and is willing to perform such services for the Issuer and the
Eligible Lender Trustee on the terms set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties agree as follows:
1. DUTIES OF THE ADMINISTRATOR.
(a) DUTIES WITH RESPECT TO THE INDENTURE AND DEPOSITORY AGREEMENT. The
Administrator shall perform all its duties as Administrator and the duties of
the Issuer under the Depository Agreement. In addition, the Administrator shall
consult with the Eligible Lender Trustee as the Administrator deems appropriate
regarding the duties of the Issuer under the Indenture and the Depository
Agreement. The Administrator shall monitor the performance of the Issuer and
shall advise the Eligible Lender Trustee when action is necessary to comply with
the Issuer's duties under the Indenture and the Depository Agreement. The
Administrator shall prepare for execution by the Issuer or shall cause the
preparation by other appropriate Persons of all such documents, reports,
filings, instruments, certificates and opinions as it shall be the duty of the
Issuer to prepare, file or deliver pursuant to the Indenture and the Depository
Agreement. In furtherance of the foregoing, the Administrator shall take all
appropriate action that is the duty of the Issuer to take pursuant to the
Indenture, including such of the foregoing as are required with respect to the
following matters (references are to sections of the Indenture):
(i) the duty to cause the Note Registrar to keep the Note Register and
to give the Indenture Trustee notice of any appointment of a new Note
Registrar and the location, or change in location, of the Note Register
(Section 2.04);
(ii) the fixing or causing to be fixed of any specified record date
and the notification of the Indenture Trustee and the holders of the Notes
with respect to special payment dates, if any (Section 2.07(c));
(iii) the preparation of or obtaining of the documents and instruments
required for authentication of the Notes and delivery of the same to the
Indenture Trustee (Section 2.02);
(iv) the preparation, obtaining or filing of the instruments, opinions
and certificates and other documents required for the release of collateral
(Section 2.09);
(v) the duty to cause the Note Registrar to maintain on behalf of the
Issuer an office in the Borough of Manhattan, City of New York, for
registration of transfer or exchange of Notes (Section 3.02);
(vi) the duty to cause newly appointed Paying Agents, if any, to
deliver to the Indenture Trustee the instrument specified in the Indenture
regarding funds held in trust (Section 3.03);
(vii) the direction to the Paying Agents to deposit moneys with the
Indenture Trustee (Section 3.03);
(viii) the obtaining and preservation of the Issuer's qualification to
do business in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of the Indenture, the
Notes, the Collateral and each other instrument and agreement included in
the Indenture Trust Estate (Section 3.04);
(ix) the preparation of all supplements, amendments, financing
statements, continuation statements, instruments of further assurance and
other instruments, in accordance with Section 3.05 of the Indenture,
necessary to protect the Indenture Trust Estate (Section 3.05);
(x) the delivery by the Issuer of the Opinion of Counsel on the
Closing Date and the annual delivery of Opinions of Counsel, in accordance
with Section 3.06 of the Indenture, as to the Indenture Trust Estate, and
the annual delivery of the Officers' Certificate of the Issuer and certain
other statements, in accordance with Section 3.09 of the Indenture, as to
compliance with the Indenture (Sections 3.06 and 3.09);
(xi) the identification to the Indenture Trustee in an Officers'
Certificate of the Issuer of a Person with whom the Issuer has contracted
to perform its duties under the Indenture (Section 3.07(b));
(xii) the notification of the Indenture Trustee and the Rating
Agencies of a Master Servicer Default known to the Administrator pursuant
to the Sale 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 Sale and Servicing Agreement or the Supplemental Sale 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 3.07(d));
(xiii) the preparation and obtaining of documents and instruments
required for the release of the Issuer from its obligations under the
Indenture (Section 3.10);
(xiv) the delivery of notice to the Indenture Trustee of each Event of
Default, any Default under Section 5.01(iii) of the Indenture and each
default by the Master Servicer, the Administrator or the Seller under the
Sale and Servicing Agreement known to the Administrator (Section 3.18);
(xv) the monitoring of the Issuer's obligations as to the satisfaction
and discharge of the Indenture and the preparation of an Officers'
Certificate of the Issuer and the obtaining of the Opinion of Counsel and
the Independent Certificate relating thereto (Section 4.01);
(xvi) the compliance with any written directive of the Indenture
Trustee with respect to the sale of the Indenture Trust Estate in a
commercially reasonable manner if an Event of Default shall have occurred
and be continuing (Section 5.04);
(xvii) the preparation of any written instruments required to confirm
more fully the authority of any co-trustee or separate trustee and any
written instruments necessary in connection with the resignation or removal
of any co-trustee or separate trustee (Sections 6.08 and 6.10);
(xviii) the furnishing of the Indenture Trustee with the names and
addresses of the holders of the Notes during any period when the Indenture
Trustee is not the Note Registrar (Section 7.01);
(xix) the preparation and, after execution by the Issuer, the filing
with the Commission, any applicable State agencies and the Indenture
Trustee of documents required to be filed on a periodic basis with, and
summaries thereof as may be required by rules and regulations prescribed
by, the Commission and any applicable State agencies and the transmission
of such summaries, as necessary, to the holders of the Notes (Section
7.03);
(xx) the opening of one or more accounts in the Issuer's name, the
preparation of Issuer Orders, Officers' Certificates of the Issuer and
Opinions of Counsel and all other actions necessary with respect to
investment and reinvestment of funds in the Trust Accounts (Sections 8.02
and 8.03);
(xxi) the preparation of an Issuer Request and Officers' Certificate
of the Issuer and the obtaining of an Opinion of Counsel and Independent
Certificates, if necessary, for the release of the Indenture Trust Estate
(Sections 8.04 and 8.05);
(xxii) the preparation of Issuer Orders and the obtaining of Opinions
of Counsel with respect to the execution of supplemental indentures and the
mailing to the holders of the Notes of notices with respect to such
supplemental indentures (Sections 9.01, 9.02 and 9.03);
(xxiii) the preparation of or obtaining of the documents and
instruments required for the execution and authentication of new Notes
conforming to any supplemental indenture and the delivery of the same to
the Eligible Lender Trustee and the Indenture Trustee, respectively
(Section 9.06);
(xxiv) the notification of the holders of the Notes of redemption of
the Notes or the duty to cause the Indenture Trustee to provide such
notification (Section 10.02);
(xxv) the preparation of all Officers' Certificates of the Issuer,
Opinions of Counsel and Independent Certificates with respect to any
requests by the Issuer to the Indenture Trustee to take any action under
the Indenture (Section 11.01(a));
(xxvi) the preparation and delivery of Officers' Certificates of the
Issuer and the obtaining of Independent Certificates, if necessary, for the
release of property from the lien of the Indenture (Section 11.01(b));
(xxvii) the preparation and delivery to the holders of the Notes and
the Indenture Trustee of any agreements with respect to alternate payment
and notice provisions (Section 11.06);
(xxviii) the recording of the Indenture, if applicable (Section
11.15); and
(xxix) conducting on behalf of the Indenture Trustee any auction of
the Financed Student Loans (Section 4.04).
(b) DUTIES WITH RESPECT TO THE ISSUER. (i) In addition to the duties
of the Administrator set forth above and in the other Related Agreements, the
Administrator shall perform such calculations and shall prepare for execution by
the Issuer or the Eligible Lender Trustee or shall cause the preparation by
other appropriate Persons of all such documents, reports, filings, instruments,
certificates and opinions as it shall be the duty of the Issuer or the Eligible
Lender Trustee to prepare, file or deliver pursuant to the Related Agreements,
and at the request of the Eligible Lender Trustee shall take all appropriate
action that it is the duty of the Issuer to take pursuant to the Related
Agreements. 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 Collateral (including the Related Agreements) as are not covered by any of
the foregoing provisions and as are expressly requested by the Eligible Lender
Trustee and are reasonably within the capability of the Administrator.
(ii) Notwithstanding anything in this Agreement or the Related
Agreements to the contrary, the Administrator shall be responsible for promptly
notifying the Eligible Lender Trustee in the event that any withholding tax is
imposed on the Issuer's payments (or allocations of income) to an Owner as
contemplated in Section 5.01(c) of the Trust Agreement. Any such notice shall
specify the amount of any withholding tax required to be withheld by the
Eligible Lender Trustee pursuant to such provision.
(iii) Notwithstanding anything in this Agreement or the Related
Agreements to the contrary, the Administrator shall be responsible for
performance of the duties of the Eligible Lender Trustee set forth in Section
5.04(a), (b), (c) and (d) of the Trust Agreement with respect to, among other
things, accounting and reports to Owners; PROVIDED, HOWEVER, that the Eligible
Lender Trustee shall retain responsibility for the distribution of the Schedule
K-1s necessary to enable each Owner to prepare its Federal and state income tax
returns.
(iv) The Administrator shall perform the duties of the Administrator
specified in Section 10.02 of the Trust Agreement required to be performed in
connection with the resignation or removal of the Eligible Lender Trustee, and
any other duties expressly required to be performed by the Administrator under
the Trust Agreement, the Sale and Servicing Agreement and the other Related
Agreements.
(v) 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:
(i) the amendment of or any supplement to the Indenture;
(ii) the initiation of any claim or lawsuit by the Issuer and the
compromise of any action, claim or lawsuit brought by or against the Issuer
(other than in connection with the collection of the Financed Student
Loans);
(iii) the amendment, change or modification of the Related Agreements;
(iv) the appointment of successor Note Registrars, successor Paying
Agents and successor Indenture Trustees pursuant to the Indenture or the
appointment of Successor Administrators or Successor Master Servicers, or
the consent to the assignment by the Note Registrar, Paying Agent or
Indenture Trustee of its obligations under the Indenture; and
(v) the removal of the Indenture Trustee.
(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, (i) make any
payments to the holders of the Notes under the Related Agreements, (ii) sell the
Indenture Trust Estate pursuant to Section 5.04 of the Indenture, (iii) take any
other action that the Issuer directs the Administrator not to take on its
behalf, (iv) in connection with its duties hereunder assume any indemnification
obligation of any other Person or (v) 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 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 $________ per
quarter payable in arrears on each Distribution Date which shall be solely an
obligation of the Issuer.
4. ADDITIONAL INFORMATION TO BE FURNISHED TO THE ISSUER. The
Administrator shall furnish to the Issuer from time to time such additional
information regarding the Collateral 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, 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. Nothing contained in this Agreement (i) shall
constitute the Administrator and either of the Issuer or the Eligible Lender
Trustee as members of any partnership, joint venture, association, syndicate,
unincorporated business or other separate entity, (ii) shall be construed to
impose any liability as such on any of them or (iii) shall be deemed to confer
on any of them any express, implied or apparent authority to incur any
obligation or liability on behalf of the others.
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 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 VI and Article VIII of the Sale 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 Section 8(a) or the
resignation or removal of the Administrator pursuant to Section 8(b) and the
Sale 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
Mellon Student Loan Trust ___-___
_________________________________
_________________________________
Attention: ______________________
(b) if to the Administrator, to
Mellon Bank, N.A.
One Mellon Center
500 Grant Street
Pittsburgh, Pennsylvania 15258
Attention: ______________________
Mellon Student Loan Trust ___-___
(c) if to the Indenture Trustee, to
_________________________________
_________________________________
Attention: ______________________
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. This Agreement may be amended from time to time by a
written amendment duly executed and delivered by the Issuer, the Administrator
and the Indenture Trustee, with the written consent of the Eligible Lender
Trustee, without the consent of the holders of the Notes and the holders of the
Certificates, 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 holders of the Notes or the holders of the
Certificates; provided that such amendment will not, in an Opinion of Counsel
obtained on behalf of the Issuer and satisfactory to the Indenture Trustee and
the Eligible Lender Trustee, materially and adversely affect the interest of any
holder of the Notes or holder of the Certificates. This Agreement may also be
amended by the Issuer, the Administrator and the Indenture Trustee with the
written consent of the Eligible Lender Trustee, the holders of the Notes of at
least a majority in the Outstanding Amount of the Notes and the holders of the
Certificates of at least a majority of the sum of the Certificate Balances 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 holders of the Notes or the holders of the Certificates; 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 Financed Student Loans or distributions that are required to be made
for the benefit of the holders of the Notes or the holders of the Certificates
or (ii) reduce the aforesaid percentage of the holders of the Notes and the
holders of the Certificates which are required to consent to any such amendment,
without the consent of all Outstanding holders of the Notes and holders of the
Certificates. Notwithstanding the foregoing, the Administrator may not amend
this Agreement without the permission of the Depositor, which permission shall
not be unreasonably withheld. 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.
12. SUCCESSORS AND ASSIGNS. Notwithstanding anything to the contrary
contained herein, except as provided in Sections 6.05 and 6.08 of the Sale 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.
l3. 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 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 MELLON BANK, N.A. IN OTHER CAPACITIES. Nothing
in this Agreement shall affect any obligation Mellon Bank, N.A. may have in any
other capacity under the Basic Documents.
18. PROVISIONS OF SALE AND SERVICING AGREEMENT CONTROL. The provisions
of the Sale 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 Sale and Servicing Agreement, the Sale and Servicing Agreement shall govern.
19. LIMITATION OF LIABILITY OF ELIGIBLE LENDER TRUSTEE AND INDENTURE
TRUSTEE. (a) Notwithstanding anything contained herein to the contrary, except
as provided in subsection (c) of this section, this instrument has been
countersigned by _______________ not in its individual capacity but solely in
its capacity as Eligible Lender Trustee of the Issuer and subject to the
succeeding paragraph, in no event shall _______________ in its individual
capacity, _______________ 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 hereunder, the Eligible Lender Trustee shall
be subject to, and entitled to the benefits of, the terms and provisions of
Articles VI, VII and VIII of the Trust Agreement.
(b) Notwithstanding anything contained herein to the contrary, this
Agreement has been countersigned by _______________ not in its individual
capacity but solely as Indenture Trustee and in no event shall _______________
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) Notwithstanding any other provision in this Agreement or the other
Basic Documents, nothing in this Agreement or the other Basic Documents shall be
construed to limit the Eligible Lender Trustee's or the Indenture Trustee's
legal responsibility to the U.S. Secretary of Education or a Guarantor for any
violations of statutory or regulatory requirements that may occur with respect
to loans held by the Eligible Lender Trustee or the Indenture Trustee pursuant
to or to otherwise comply with their obligations under the Higher Education Act
or implementing regulations.
20. THIRD-PARTY BENEFICIARIES. The Eligible Lender Trustee is a
third-party beneficiary to this Agreement and is entitled to the rights and
benefits hereunder and may enforce the provisions hereof as if it were a party
hereto.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the day and year first above written.
MELLON STUDENT LOAN TRUST
___-___
By: _______________, not in its
individual capacity but solely as
Eligible Lender Trustee,
By: _______________________
Name:
Title:
_______________________, not in its
individual capacity but solely as
Indenture Trustee,
By: _______________________
Name:
Title:
MELLON BANK, N.A., as Administrator,
By: _______________________
Name:
Title:
