SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) April 29, 1996
----------------
USA GROUP SECONDARY MARKET SERVICES, INC.
- - - ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 333-2440 35-1872185
- - - ------------------------------------------------------------------------------
(State or other (Commission (IRS Employer
jurisdiction File Number) Identification No.
of incorporation)
8350 Craig Street, Indianapolis, Indiana 46250
- - - ------------------------------------------------------------------------------
(Address of principal
executive offices) (Zip Code)
Registrant's telephone number, including area code (317) 594-1981
--------------
- - - ------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
Item 1. Not Applicable
Item 2. Not Applicable
Item 3. Not Applicable
Item 4. Not Applicable
Item 5. The Registrant hereby submits executed copies of the following
documents in relation to the SMS Student Loan Trust 1996-A:
1) Loan Sale Agreement dated as of April 1, 1996
2) Servicing Agreement dated as of April 1, 1996
3) Indenture dated as of April 1, 1996
4) Trust Agreement dated as of April 1, 1996
5) Administration Agreement dated as of April 1, 1996
Item 6. Not Applicable
Item 7. Not Applicable
Item 8. Not Applicable
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Secondary Market Services, Inc.
BY The First National Bank of Chicago
not in its individual capacity but
soley as Eligible Lender Trustee of
the SMS Student Loan Trust 1996-A
/s/ Jeffrey L. Kinney, Trust Officer
DATE July 29, 1996
<PAGE>
EXHIBIT INDEX
Exhibit No. Page
- - - ----------- ----
4.1. Loan Sale Agreement
4.2. Servicing Agreement
4.3. Indenture
4.4. Trust Agreement
4.5. Administration Agreement
LOAN SALE AGREEMENT
among
SMS STUDENT LOAN TRUST 1996-A
as Issuer,
USA GROUP SECONDARY MARKET SERVICES, INC.,
as Seller,
NBD BANK, N.A., AS TRUSTEE FOR
USA GROUP SECONDARY MARKET SERVICES, INC.,
and
THE FIRST NATIONAL BANK OF CHICAGO,
not in its individual capacity but solely
as Eligible Lender Trustee
Dated as of April 1, 1996
1
<PAGE>
LOAN SALE AGREEMENT dated as of April 1,
1996, among SMS STUDENT LOAN TRUST 1996-A, a Delaware
trust (the Issuer"), USA GROUP SECONDARY MARKET
SERVICES, INC, as Seller, NBD BANK, N.A., AS TRUSTEE
FOR USA GROUP SECONDARY MARKET SERVICES, INC.
("NBD"), and THE FIRST NATIONAL BANK OF CHICAGO, a
national banking association, solely as eligible
lender trustee and not in its individual capacity
(the "Eligible Lender Trustee").
WHEREAS the Issuer desires to purchase from the Seller a
portfolio of federally reinsured student loans purchased in the ordinary course
of business by the Seller;
WHEREAS in order to comply with the requirements of the Higher
Education Act, legal title to the Seller's student loan portfolio is vested in
NBD, as trustee on behalf of the Seller as the sole beneficiary;
WHEREAS the Seller is willing to sell such student loans to
the Eligible Lender Trustee on behalf of the Issuer;
WHEREAS the Eligible Lender Trustee is willing to hold legal
title to, and serve as eligible lender trustee with respect to, such student
loans on behalf of the Issuer.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties hereto agree as follows:
ARTICLE I
Definitions and Usage
Capitalized terms used but not defined herein are defined in
Appendix A to the Administration Agreement, dated as of April 1, 1996, among the
Issuer, the Seller, as Administrator, and Bankers Trust Company, as Indenture
Trustee, which also contains rules as to usage and construction that shall be
applicable herein.
1
<PAGE>
ARTICLE II
Conveyance of Financed Student Loans
SECTION 2.01. Conveyance of Initial Financed Student Loans.
(a) In consideration of the Issuer's delivery to or upon the order of the Seller
on the Closing Date of the net proceeds from the sale of the Notes and the other
amounts to be distributed from time to time to the Seller in accordance with the
terms of this Agreement, the Seller (and, with respect to legal title to the
Financed Student Loans, NBD as trustee on behalf of the Seller) does hereby, as
evidenced by a duly executed Bill of Sale in the form of Exhibit A hereto, sell,
assign, and otherwise convey to the Issuer (or, in the case of the Initial
Financed Student Loans (as defined below), to the Eligible Lender Trustee on
behalf of the Issuer) (i) all right, title and interest in and to the Initial
Financed Student Loans, and all obligations of the Obligors thereunder, together
with all documents, the related Student Loan Files and all rights and privileges
relating thereto, (ii) all payments on or collections received thereunder on and
after the Cutoff Date; (iii) all of its right, title and interest in all funds
on deposit from time to time in the Trust Accounts, including the Reserve
Account Initial Deposit, and in all investments and proceeds thereof (including
all income thereon); and (iv) all proceeds of any and all of the foregoing.
(b) In connection with the sale and assignment of
Financed Student Loans to the Eligible Lender Trustee on behalf of the Trust, on
the Closing Date, the Seller shall deposit the Reserve Account Initial Deposit
into the Reserve Account.
(c) On the Closing Date, the Seller will deposit, or
cause to be deposited, into the Collection Account all amounts or collections
received under the Initial Financed Student Loans on and after the Cutoff Date.
SECTION 2.02. Conveyance of New Loans and Serial Loans to the
Eligible Lender Trustee on Behalf of the Trust. (a) Subject to the conditions
set forth in paragraph (d) below, in consideration of the Issuer's delivery on
the related Transfer Date to or upon the order of the Seller of the Loan
Purchase Amount for each such New Loan or Serial Loan to be delivered to the
Seller, the Seller does hereby sell, transfer, assign, set over and otherwise
convey to the Issuer (or, in the case of the New Loans and Serial Loans to the
Eligible Lender Trustee on behalf of the Issuer), (i) all right, title and
interest of the Seller in and to each New Loan and Serial Loan and all
obligations of the Obligors thereunder, together with all documents, the related
Student Loan Files and all rights and
<PAGE>
privileges relating thereto, (ii) all payments on or collections received
thereunder on and after the related Subsequent Cutoff Date and (iii) all
proceeds of any and all of the foregoing.
(b) During the Revolving Period, upon the tender of
New Loans or Serial Loans by the Seller on the related Transfer Date and the
satisfaction of the conditions set forth in subsection (d) of this Section 2.02,
the Eligible Lender Trustee will so inform the Administrator and the Indenture
Trustee, and the Loan Purchase Amounts for such New Loans or Serial Loans will
be withdrawn from the Collateral Reinvestment Account, subject to the provisions
of Section 2(f) of the Administration Agreement, and will be remitted to or upon
the order of the Seller. The Seller covenants to transfer during the Revolving
Period to the Eligible Lender Trustee on behalf of the Issuer pursuant to
paragraph (a) above New Loans or Serial Loans with an aggregate principal
balance substantially equal to the amount on deposit in the Collateral
Reinvestment Account; provided, however, that the Seller shall have no liability
for a breach of the foregoing covenant as a result of the Seller not having
originated or acquired, or having caused to be originated or acquired, during
the Revolving Period New Loans or Serial Loans equal to the amount specified
above. Such transfers shall be made at such times during the Revolving Period as
the Seller may determine in its discretion, subject to the requirement that the
Seller shall make such transfers at least as frequently as is necessary to avoid
the occurrence of an Early Amortization Event.
(c) After the Revolving Period, upon the tender of
Serial Loans by the Seller on the related Transfer Date and the satisfaction of
the conditions set forth in subsection (d) of this Section 2.02, the Eligible
Lender Trustee will so inform the Administrator and the Indenture Trustee, and
that component of the Loan Purchase Amount for such Serial Loans represented by
the Purchase Collateral Balance thereof will be withdrawn from amounts on
deposit in the Collection Account, as provided in Section 2(d)of the
Administration Agreement, and will be remitted, as provided therein to or upon
the order of the Seller or, alternatively, at the sole discretion of the Seller,
the Seller may determine that the Purchase Collateral Balance due on the related
Transfer Date for any Serial Loans then to be transferred shall be paid by the
Issuer's exchanging with the Seller one or more Exchanged Student Loans held by
the Issuer for such Serial Loans (with, in any event, the component of the Loan
Purchase Amount represented by the Purchase Premium Amounts being payable on a
deferred basis pursuant to the final sentence of this paragraph). In the event
Exchanged Student Loans are to be so used (i) the decision by the Issuer as to
which of those Financed Student Loans then held by the Issuer that meet the
criteria for Exchanged Student Loans are to be selected for such
<PAGE>
exchange shall be subject to the sole discretion of the Eligible Lender Trustee,
provided that the Eligible Lender Trustee shall not select for such purpose any
Financed Student Loan that has the same Borrower as any other Financed Student
Loan unless all of the Financed Student Loans of such Borrower are to be
exchanged, (ii) with respect to any Serial Loan to be delivered on a Transfer
Date, only a Financed Student Loan that is an Exchanged Student Loan with
respect to such Serial Loan shall be counted toward the Purchase Collateral
Balance for such Serial Loan and (iii) in the event that, with respect to any
Purchase Collateral Balance due on the related Transfer Date, the aggregate
principal amount (plus accrued borrower interest thereon if and to the extent
that such interest is not then payable and will, pursuant to the term of such
loan, be capitalized and added to the principal balance of such loan), as of the
related Subsequent Cutoff Date, of the Exchanged Student Loan or Loans being
remitted on such Transfer Date in satisfaction of such Purchase Collateral
Balance is less than such amount due, the Issuer shall remit funds to cover such
difference from amounts on deposit in the Collection Account as provided in
Section 2(d) of the Administration Agreement. Any Purchase Premium Amounts for
Serial Loans conveyed to the Trust after the Revolving Period will be payable on
Quarterly Payment Dates out of Reserve Account Excess pursuant to Section 2(e)
of the Administration Agreement and such Purchase Premium Amounts will accrue no
interest or yield but will be paid on each Quarterly Payment Date to the extent
such excess is available in the aggregate amount of such premiums incurred but
unpaid up to the end of the related Collection Period.
(d) The Seller (and with respect to legal title to the
New Loans and Serial Loans, NBD as trustee on behalf of the Seller) shall
transfer to the Issuer the New Loans and Serial 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 (and with respect to legal title to the
Serial Loans, NBD as trustee on behalf of the Seller) shall have
delivered to the Eligible Lender Trustee and the Indenture Trustee a
duly executed written assignment (including an acceptance by the
Eligible Lender Trustee and the Indenture Trustee) in substantially the
form of Exhibit B hereto (each, a "Transfer Agreement"), which shall
include supplements to Schedule A hereto, listing such New Loans and
Serial Loans;
(ii) the Seller shall have delivered, at least two days
prior to such Transfer Date, notice of such transfer to the
<PAGE>
Eligible Lender Trustee, the Indenture Trustee and the Rating Agencies,
including a listing of the designation and the aggregate principal balance of
such New Loans and Serial Loans;
(iii) the Seller shall have deposited in the Collection
Account all amounts on or collections received in respect of the New
Loans and Serial Loans on and after each applicable Subsequent Cutoff
Date;
(iv) as of the Transfer Date, the Seller was not insolvent
nor will it have been made insolvent by such transfer nor is it aware
of any pending insolvency;
(v) such addition will not result in a material
adverse Federal or State tax consequence to the Issuer or
the Noteholders;
(vi) 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 (d);
(vii) the Seller shall have delivered on each preceding
November 1 and May 1, commencing November 1, 1996 (A) to the Rating
Agencies an Opinion of Counsel with respect to the transfer of the New
Loans and Serial Loans transferred to the Issuer on such Transfer Date,
substantially in the form of the Opinion of Counsel delivered to the
Rating Agencies on the Closing Date, and (B) to the Eligible Lender
Trustee and the Indenture Trustee the Opinion of Counsel as required by
Section 6.02(f)(1) hereof; provided that, notwithstanding the
foregoing, if the Revolving Period has terminated, no opinion shall be
required under either subclause (A) or (B) unless the Seller, the
Eligible Lender Trustee or the Indenture Trustee determines that, with
regard to the most recent opinion on the matters described in either
such subclause that was delivered with respect to the Financed Student
Loans (whether on the Closing Date or thereafter under this subsection
or under another provision of the Basic Documents), the conclusion of,
or the reasoning underlying, such opinion is no longer correct in all
material respects due to a change in law or regulations or the ruling
of a court, an administrative tribunal or a regulatory or other
governmental authority; upon making any such determination, whichever
of the Seller, the Eligible Lender Trustee and the Indenture Trustee
makes such determination shall notify the others and the Rating
Agencies; and provided, further, that neither the Eligible Lender
Trustee nor the Indenture Trustee shall have any obligation to monitor
changes in laws or regulations or the
<PAGE>
rulings of courts or other governmental agencies for the purpose
of making any determination described in the preceding proviso;
(viii) with respect to any New Loan which is guaranteed by an
Additional Guarantor, such Additional Guarantor shall have entered into
a Guarantee Agreement with the Eligible Lender Trustee which guarantees
such New Loan in substantially the form of the Guarantee Agreements
between the Initial Guarantors and the Eligible Lender Trustee;
(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 Noteholders shall have been utilized in
selecting the New Loans or the Serial Loans;
(xi) no Event of Default shall have occurred under the
Indenture, no Servicer Default shall have occurred under the Servicing
Agreement and no Administrator Default shall have occurred under the
Administration Agreement; and
(xii) for each Transfer Date occurring after the Revolving
Period, after giving effect to the conveyance of Serial Loans on such
Transfer Date, the amount of funds remitted for the purchase of Serial
Loans on such Transfer Date, and on each Transfer Date since the
preceding Quarterly Payment Date, shall not exceed the Net Principal
Cash Flow Amount for such Transfer Date minus the sum of (i) all
amounts paid to prepay any Add-on Consolidation Loan not held by the
Issuer since the last Quarterly Payment Date pursuant to Section
2(d)(iii)(A) of the Administration Agreement and (ii) all amounts which
the Administrator reasonably estimates will be required to prepay
Add-on Consolidation Loans pursuant to Section 2(d)(iii)(A) of the
Administration Agreement during the remainder of the Collection Period.
provided, however, that the Seller shall not incur any liability as a result of
transferring Serial Loans on any Transfer Date at a time when the condition set
forth in clause (v) was not satisfied, if at the time of such transfer the
Authorized Officers of the Seller, after reasonable inquiry of counsel to the
Seller, were not aware of any fact that would reasonably suggest that such
condition would not be satisfied as of such date.
<PAGE>
SECTION 2.03. Treatment as a Security Agreement. The
---------------------------------
parties intend that the conveyance of the Seller's (and, with
respect to legal title to the loans, NBD's) right, title and
interest in and to the Initial Financed Student Loans pursuant to
this Agreement and any New Loans and Serial Loans pursuant to a
related Transfer Agreement shall constitute a valid purchase and
sale and not a loan. If such conveyance is deemed to be a loan
and not a sale, then the parties also intend and agree that the
Seller (and, with respect to legal title to loans, NBD) shall be
deemed to have granted, and in such event do hereby grant to the
Issuer, a first priority security interest in all of the Seller's
and NBD's right, title and interest in, to and under the Initial
Financed Student Loans and any New Loans or Serial Loans and the
other items specified in Sections 2.01 and 2.02, and that this
Agreement (with respect to the Initial Financed Student Loans)
and any applicable Transfer Agreement (with respect to the New
Loans or Serial Loans conveyed thereby) shall each constitute a
security agreement under applicable law with respect to such
loans. If such conveyance is deemed to be a loan and not a sale,
the Issuer may, to secure the Issuer's own borrowings under the
Indenture, repledge all or any portion of such loans and the
other items specified in Sections 2.01 and 2.02 hereof pledged to
the Issuer and not released from the security interest of this
Agreement at the time of such pledge. Such a repledge may be
made by the Issuer with or without a repledge by the Issuer of
its rights under this Agreement, and without further notice to or
acknowledgement from the Seller or NBD. Each of the Seller and
NBD waives, to the extent permitted by applicable law, all
claims, causes of action and remedies whether legal or equitable
(including any rights of set-off) against the Issuer or any
assignee of the Issuer relating to such action by the Issuer in
connection with the transactions contemplated by this Agreement,
each Transfer Agreement, the Trust Agreement and the Indenture.
SECTION 2.04. Endorsement. The Seller (and, with respect to
legal title to the Financed Student Loans, NBD as trustee on behalf of the
Seller) hereby appoint each of the Eligible Lender Trustee and the Indenture
Trustee as the Seller's (and NBD's) true and lawful attorney-in-fact with full
power of substitution to endorse the Seller's (and NBD's) name on any promissory
note evidencing the Initial Financed Student Loans and any New Loans or Serial
Loans transferred to the Eligible Lender Trustee on behalf of the Trust pursuant
to Sections 2.01 and 2.02. The Seller (and, with respect to legal title to the
Financed Student Loans, NBD as trustee on behalf of the Seller) acknowledge and
agree 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.
<PAGE>
ARTICLE III
The Financed Student Loans
SECTION 3.01. Representations and Warranties of Seller with
Respect to the Financed Student Loans. The Seller represents and warrants with
respect to the Financed Student Loans as set forth in Exhibit C hereto. Such
representations and warranties speak as of the execution and delivery of this
Agreement and as of the Closing Date, in the case of the Initial Financed
Student Loans, as of the applicable Transfer Date, in the case of the New Loans
and Serial Loans, as of the date of the relevant Assignment in the case of any
Qualified Substitute Student Loan, as of the date of origination in the case of
any Consolidation Loan added to the Trust during the Revolving Period and as of
the applicable Add-on Consolidation Loan Funding Date, in the case of any
Consolidation Loan the principal balance of which is increased by the principal
balance of any related Add-on Consolidation Loan, but shall survive the sale,
transfer and assignment of the Financed Student Loans to the Eligible Lender
Trustee on behalf of the Issuer (and both the origination of such Consolidation
Loans and the addition of the principal balance of any Add-on Consolidation
Loan) and the pledge thereof to the Indenture Trustee pursuant to the Indenture.
SECTION 3.02. Repurchase; Reimbursement. (a) Upon discovery by
the Seller, NBD, the Servicer, the Eligible Lender or the Indenture Trustee of
any breach of the Seller's representations and warranties made by the Seller
pursuant to Section 3.01 or Section 4.01, the party discovering the breach shall
give prompt written notice to the others. Unless any such breach shall have been
cured within sixty (60) days after the Seller becomes aware or receives written
notice (whichever is earlier) of such breach, the Seller shall be obligated to
either (i) repurchase any Financed Student Loan in which the interests of the
Noteholders 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
Monthly Collection Period or (ii) substitute a Qualified Substitute Student Loan
in the manner specified in this Section; provided that it is understood that any
such breach that does not affect the Guarantor's obligation to guarantee payment
of such Financed Student Loan to the Eligible Lender Trustee will not be
considered to have a material adverse effect for this purpose and it is further
understood that any dispute as to whether the Guarantor's obligation has been so
affected will be resolved by the decision of the Indenture Trustee for so long
as Notes are Outstanding and thereafter by the Eligible Lender Trustee. In
addition, if any such breach by the Seller does not trigger such a repurchase
obligation but does result in the refusal by the Guarantor to guarantee all or a
<PAGE>
portion of the accrued interest, or the loss (including any obligation of the
Issuer to repay the Department) of certain Interest Subsidy Payments and Special
Allowance Payments, then, unless such breach, if curable, is cured within sixty
(60) days, the Seller shall reimburse the Issuer by remitting an amount equal to
all such non-guaranteed interest amounts and such forfeited Interest Payments
and Special Allowance Payments in the manner specified in Section 3.03. Subject
to the provisions of Section 4.03, the sole remedy of the Issuer, the Eligible
Lender Trustee, the Indenture Trustee or the Noteholders 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 or substitute for Financed Student Loans or to reimburse the Issuer
as provided above pursuant to this Section, subject to the conditions contained
herein.
(b) The Seller may, at its option, cause a Financed Student Loan to be
repurchased by a Person not affiliated with the Seller as of the last day of a
Monthly Collection Period if there is a dispute with the related Borrower during
such Monthly Collection Period which in the Servicer's reasonable judgment would
call into question whether such Financed Student Loan will be repaid by the
Borrower.
(c) In consideration of and simultaneously with the repurchase of a
Financed Student Loan, the Seller shall remit the Purchase Amount therefor, in
the manner specified in Section 3.03, and the Issuer shall execute such
assignments and other documents reasonably requested by the Seller in order to
effect such transfer. Upon any such transfer of a Financed Student Loan, legal
title to, and beneficial ownership and control of, the related Student Loan File
will thereafter belong to the Seller or in the case of legal title thereto an
eligible lender under the Higher Education Act designated by the Seller.
With respect to any Qualified Substitute Student Loan or
Loans, the Seller shall deliver to the Eligible Lender Trustee for the benefit
of the Noteholders such documents and agreements together with a duly executed
Assignment in the form of Exhibit F hereto. No substitution is permitted to be
made during the period beginning on the day after each Determination Date and
ending on the last day of the calendar month of such Determination Date.
Payments due with respect to Qualified Substitute Student Loans shall be part of
the Trust Estate on and after the date of such Assignment. Upon such
substitution, the Qualified Substitute Student Loan or Loans shall be subject to
the terms of this Agreement in all respects, and the Seller shall be deemed to
have made with respect to such Qualified Substitute Student Loan or Loans, as of
the date of substitution, the
<PAGE>
representations and warranties made pursuant to Section 3.01 with respect to any
such Student Loan. In addition, any such substitution shall occur only upon
satisfaction of each of the following conditions on or prior to the date of the
related Assignment:
(i) the Seller shall have deposited in the Collection
Account all collections in respect of the Qualified Substitute Student
Loans on and after each applicable date of Assignment;
(ii) as of the date of the related Assignment, the Seller
shall not have been insolvent nor will it have been made insolvent by
such transfer nor is it aware of any pending insolvency;
(iii) such addition will not result in a material
adverse Federal or State tax consequence to the Issuer or
the Noteholders;
(iv) the Seller shall have delivered (A) to the Rating
Agencies, an Opinion of Counsel with respect to each transfer of
Qualified Substitute Student Loans, 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 6.02(f)(1) hereof; provided
that no opinion shall be required under either subclause (A) or (B)
unless the Seller, the Eligible Lender Trustee or the Indenture Trustee
determines that, with regard to the most recent opinion on the matters
described in either such subclause that was delivered with respect to
the Financed Student Loans (whether on the Closing Date or thereafter
under this subsection or under another provision of the Basic
Documents), the conclusion of, or the reasoning underlying, such
opinion is no longer correct in all material respects due to a change
in law or regulations or the ruling of a court, an administrative
tribunal or a regulatory or other governmental authority; upon making
any such determination, whichever of the Seller, the Eligible Lender
Trustee and the Indenture Trustee makes such determination shall notify
the others and the Rating Agencies; and provided, further, that none of
the Eligible Lender Trustee or the Indenture Trustee shall have any
obligation to monitor changes in laws or regulations or the rulings of
courts or other governmental agencies for the purpose of making any
determination described in this clause (iv);
<PAGE>
(v) 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;
(vi) no selection procedures believed by the Seller to be
adverse to the interests of the Noteholders shall have been utilized in
selecting the Qualified Substitute Student Loans; and
(vii) no Event of Default shall have occurred under the
Indenture, no Servicer Default shall have occurred under the Servicing
Agreement and no Administrator Default shall have occurred under the
Administration Agreement.
Upon any such substitution and the deposit to the Collection
Account of the amount required to be deposited therein in connection with such
substitution as described in the following paragraph, the Eligible Lender
Trustee shall release any documentation held with respect to the Financed
Student Loan being substituted for (the "Deleted Student Loan") to the Seller
and shall execute and deliver at the Seller's direction such instruments of
transfer or assignment prepared by the Seller, in each case without recourse, as
shall be necessary to vest in the Seller, or (in the case of legal title thereto
an eligible lender under the Higher Education Act designated by the Seller), the
Eligible Lender Trustee's interest in any Deleted Student Loan substituted for
pursuant to this Section 3.02.
For any month in which the Seller substitutes one or more
Qualified Substitute Student Loans for one or more Deleted Student Loans, the
Servicer will determine the amount (if any) by which as of the date of the
relevant Assignment the aggregate principal balance of all such Qualified
Substitute Student Loans is less than the aggregate principal balance of all
such Deleted Student Loans. The amount of such shortage (the "Substitution
Adjustment Amount") shall be deposited in the Collection Account by the Seller
on or before the date of the relevant Assignment.
SECTION 3.03. Repurchase Deposits. The Seller shall deposit or
cause to be deposited in the Collection Account the aggregate Purchase Amount
with respect to Purchased Student Loans and all other amounts to be paid by the
Seller under Section 3.02 and Section 5.01 when such amounts are due.
<PAGE>
ARTICLE IV
The Seller
SECTION 4.01. Representations of Seller and NBD. The
---------------------------------
Seller represents as set forth in Exhibit D hereto and NBD
represents as set forth in Exhibit E hereto. Such
representations speak as of the execution and delivery of this
Agreement and as of the Closing Date in the case of the Initial
Financed Student Loans, as of the applicable Transfer Date in the
case of the New Loans and the Serial Loans, as of the date of the
relevant Assignment in the case of any Qualified Substitute
Student Loan, and, in the case of the Seller, as of the date of
origination in the case of any Consolidation Loan added to the
Trust during the Revolving Period and as of the applicable Add-on
Consolidation Loan Funding Date, in the case of a Consolidation
Loan the principal balance of which is increased by the principal
balance of any related Add-on Consolidation Loan, but shall
survive the sale, transfer and assignment of the Financed Student
Loans to the Eligible Lender Trustee on behalf of the Issuer (and
both the origination of such Consolidation Loans and the addition
of the principal balance of any Add-on Consolidation Loan) and
the pledge thereof to the Indenture Trustee pursuant to the
Indenture.
SECTION 4.02. Existence. During the term of this Agreement,
the Seller will keep in full force and effect its existence, rights and
franchises as a corporation under the laws of the jurisdiction of its
incorporation and will obtain and preserve its qualification to do business in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Agreement, the other Basic
Documents and each other instrument or agreement necessary or appropriate to the
proper administration of this Agreement and the transactions contemplated
hereby. In addition, all transactions between the Seller and its Affiliates will
be conducted on an arm's-length basis. For so long, during the term of this
Agreement, as the Seller shall not be an eligible lender under the Higher
Education Act with respect to federal Student Loans, the Seller agrees to keep
in full force and effect an agreement with NBD or another eligible lender under
the Higher Education Act providing for such eligible lender meeting the
requirements set forth in the following sentence to hold title to the Seller's
Student Loans in trust for and on behalf of the Seller. The Seller shall not
convey any New Loan, Serial Loan or Qualified Substitute Student Loan if the
eligible lender holding legal title to such loan is other than NBD unless, prior
to such conveyance, such other eligible lender shall agree in writing to be
bound, in the conveyance of each such loan for which it acts as eligible lender,
by the provisions of this Agreement that are
<PAGE>
applicable to NBD, to the same extent as if it were named separately from NBD in
each of such provisions.
SECTION 4.03. Liability of Seller; Indemnities. The Seller
shall be liable in accordance herewith only to the extent of the obligations
specifically undertaken by the Seller under this Agreement.
(a) The Seller shall indemnify, defend and hold harmless
the Issuer, the Eligible Lender Trustee and the Indenture Trustee and
their officers, directors, employees and agents from and against any
taxes that may at any time be asserted against any such Person with
respect to the transactions contemplated herein and in the other Basic
Documents (except any such income taxes arising out of fees paid to the
Eligible Lender Trustee or the Indenture Trustee), including any sales,
gross receipts, general corporation, tangible personal property,
privilege or license taxes (but, in the case of the Issuer, not
including the issuance and original sale of the Notes, or asserted with
respect to ownership of the Financed Student Loans or Federal or other
income taxes arising out of payments on 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 and the
Noteholders and the officers, directors, employees and agents of the
Issuer, the Eligible Lender Trustee and the Indenture Trustee from and
against any and all 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.
(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,
<PAGE>
expense, loss, claim damage, obligation or liability: (i) shall be due to the
willful misfeasance, bad faith or negligence (except for errors in judgment) of
the Eligible Lender Trustee , (ii) shall arise from any breach by the Eligible
Lender Trustee of its covenants under any of the Basic Documents; or (iii) shall
arise from the breach by the Eligible Lender Trustee of any of its
representations or warranties set forth in Section 7.03 of the Trust Agreement.
In the event of any claim, action or proceeding for which indemnity will be
sought pursuant to this paragraph, the Eligible Lender Trustee's choice of legal
counsel shall be subject to the approval of the Seller, which approval shall not
be unreasonably withheld.
(d) The Seller shall pay any and all taxes levied or
assessed upon all or any part of the Trust Estate (other than those
taxes expressly excluded from the Seller's responsibilities pursuant to
the parentheticals in paragraph (a) above).
Indemnification under this Section shall survive the
resignation or removal of the Eligible Lender Trustee or the Indenture Trustee
and the termination of this Agreement or the Indenture or the Trust Agreement,
as applicable, and shall include reasonable fees and expenses of counsel and
expenses of litigation. If the Seller shall have made any indemnity payments
pursuant to this Section and the Person to or on behalf of whom such payments
are made thereafter shall collect any of such amounts from others, such Person
shall promptly repay such amounts to the Seller, without interest.
SECTION 4.04. Merger or Consolidation of, or Assumption of the
Obligations of, Seller or NBD. Any person (a) into which the Seller or NBD may
be merged or consolidated, (b) which may result from any merger or consolidation
to which the Seller or NBD shall be a party or (c) which may succeed to the
properties and assets of the Seller or NBD substantially as a whole, shall be
the successor to the Seller or NBD, respectively, without the execution or
filing of any document or any further act by any of the parties to this
Agreement; provided, however, that the Seller hereby covenants that it will not
consummate any of the foregoing transactions except upon satisfaction of the
following: (i) the surviving Seller, if other than SMS, executes an agreement of
assumption to perform every obligation of the Seller under this Agreement, (ii)
immediately after giving effect to such transaction, no representation or
warranty made pursuant to Section 3.01 or 4.01 shall have been breached and no
Servicer Default, Event of Default or Administrator Default and no event that,
after notice or lapse of time, or both, would become a Servicer Default, Event
of Default or Administrative Default shall have occurred and be continuing,
(iii) the Seller shall
<PAGE>
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 shall have a consolidated net worth at
least equal to that of the predecessor Seller, (v) such transaction will not
result in a material adverse Federal or state tax consequence to the Issuer or
the Noteholders and (vi) unless SMS is the surviving entity, the Seller 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; provided, further, that NBD hereby
covenants that, unless NBD is the surviving entity, it will not consummate any
of the foregoing transactions unless NBD shall have delivered to the Eligible
Lender Trustee and the Indenture Trustee an Opinion of Counsel either (A)
stating that, in the opinion of such counsel, all financing statements and
continuation statements and amendments thereto have been executed and filed that
are necessary fully to preserve and protect the interest of the Eligible Lender
Trustee and Indenture Trustee, respectively, in the Financed Student Loans and
reciting the details of such filings, or (B) stating that, in the opinion of
such counsel, no such action shall be necessary to preserve and protect such
interests.
SECTION 4.05. Limitation on Liabilities of Seller, NBD and
Others. The Seller, NBD and any director or officer or employee or agent of the
Seller or NBD 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). Neither the
Seller nor NBD shall be under any obligation to appear in, prosecute or defend
any legal action that shall not be incidental to its respective obligations
under this Agreement, and that in its opinion may involve it in any expense or
liability.
SECTION 4.06. Seller and NBD May Own Notes. The
Seller, NBD and any Affiliate of either may in its individual or
<PAGE>
any other capacity become the owner or pledgee of Notes with the same rights as
it would have if it were not the Seller or NBD, as the case may be or an
Affiliate of either, except as expressly provided herein or in any other Basic
Document.
ARTICLE V
Termination
SECTION 5.01. Termination. (a) Optional Purchase of All
Financed Student Loans. As of the last day of any Collection Period immediately
preceding a Quarterly Payment Date as of which the then outstanding Pool Balance
is 20% or less of the initial aggregate principal balance of the Notes, the
Company or its designee shall have the option to purchase the Trust Estate,
other than the Trust Accounts. To exercise such option, the Company or its
designee shall deposit in the Collection Account an amount equal to the
aggregate Purchase Amount for the Financed Student Loans and the related rights
with respect thereto, plus the appraised value of any such other property held
by the Trust other than the Trust Accounts, such value to be determined by an
appraiser mutually agreed upon by the Servicer, the Eligible Lender Trustee and
the Indenture Trustee, and shall succeed to all interests in and to the Trust;
provided, however, that the Company or its designee 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 unpaid principal balance of the
Notes, plus accrued and unpaid interest thereon at the applicable Note Interest
Rate to the date of exercise, and the amount of unpaid Senior Noteholders'
Interest Carryover and Subordinate Noteholders' Interest LIBOR Carryover.
(b) Insolvency of Company. Upon any sale of the
assets of the Trust pursuant to Section 9.02 of the Trust Agreement, the Seller
shall cooperate with and assist the Administrator consistent with the provisions
of the Administration Agreement with respect to a Company insolvency.
ARTICLE VI
Miscellaneous
SECTION 6.01. Amendment. This Agreement may be amended by the
Seller, NBD and the Eligible Lender Trustee, with the consent of the Indenture
Trustee, but without the consent of any of the Noteholders, 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
<PAGE>
any of the provisions in this Agreement or of modifying in any manner the rights
of the Noteholders; provided, however, that such action shall not, as evidenced
by an Opinion of Counsel delivered to the Eligible Lender Trustee and the
Indenture Trustee, adversely affect in any material respect the interests of any
Noteholder.
This Agreement may also be amended from time to time by the
Seller and the Eligible Lender Trustee, with the consent of NBD, the Indenture
Trustee and the Noteholders of Notes evidencing not less than a majority of the
Outstanding Amount of the Notes, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement or
of modifying in any manner the rights of the Noteholders; provided, however,
that no such amendment shall (a) increase or reduce in any manner the amount of,
or accelerate or delay the timing of, collections of payments with respect to
Financed Student Loans or distributions that shall be required to be made for
the benefit of the Noteholders or (b) reduce the aforesaid percentage of the
Outstanding Amount of the Notes, the Noteholders of which are required to
consent to any such amendment, without the consent of all outstanding
Noteholders.
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 NBD, the Seller, the Administrator, each
Noteholder, the Indenture Trustee, the Servicer and each of the Rating Agencies.
It shall not be necessary for the consent of Noteholders
pursuant to this Section to approve the particular form of any proposed
amendment or consent, but it shall be sufficient if such consent shall approve
the substance thereof.
Prior to the execution of any amendment to this Agreement, the
Eligible Lender Trustee and the Indenture Trustee shall receive upon request and
rely upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement and the Opinion of Counsel referred to
in Section 6.02(f). The Eligible Lender Trustee and the Indenture Trustee may,
but shall not be obligated to, enter into any such amendment which affects the
Eligible Lender Trustee's or the Indenture Trustee's, as applicable, own rights,
duties or immunities under this Agreement or otherwise.
SECTION 6.02. Protection of Interests in Trust. (a)
Each of the Seller and NBD shall execute and file such financing
statements and cause to be executed and filed such continuation
<PAGE>
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. Each of the Seller and NBD 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 NBD shall change its name,
identity or corporate structure in any manner that would, could, or might make
any financing statement or continuation statement filed in accordance with
paragraph (a) above seriously misleading within the meaning of ss.9-402(7) of
the UCC, unless it shall have given the Eligible Lender Trustee and the
Indenture Trustee at least five (5) days' prior written notice thereof and shall
have promptly filed appropriate amendments to all previously filed financing
statements or continuation statements.
(c) Each of the Seller and NBD shall have an
obligation to give the Eligible Lender Trustee, the Indenture Trustee and the
Rating Agencies at least sixty (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 any such amendment.
(d) If at any time the Seller or NBD shall propose to
sell, grant a security interest in, or otherwise transfer any interest in
student loans to any prospective purchaser, lender or other transferee, the
Seller or NBD, as the case may be, shall give to such prospective purchaser,
lender or other transferee computer tapes, records or printouts (including any
restored from backup archives) that, if they shall refer in any manner
whatsoever to any Financed Student Loan, shall indicate clearly that such
Financed Student Loan has been sold and is owned by the Issuer and has been
pledged to the Indenture Trustee.
(e) The Seller shall, to the extent required by
applicable law, cause the Notes to be registered with the Commission pursuant to
Section 12(b) or Section 12(g) of the Exchange Act within the time periods
specified in such sections.
(f) The Seller shall deliver to the Eligible Lender
Trustee and the Indenture Trustee:
<PAGE>
(1) promptly after the execution and delivery of this
Agreement and of each amendment thereto, on each Transfer Date and on
the date of each Assignment as set forth in Section 3.02, 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 beginning with the first calendar year beginning more than three
months after the Cutoff Date, an Opinion of Counsel, dated as of a date
during such 120-day period, either (A) stating that, in the opinion of
such counsel, all financing statements and continuation statements have
been executed and filed that are necessary fully to preserve and
protect the interest of the Eligible Lender Trustee and the Indenture
Trustee in the Financed Student Loans, and reciting the details of such
filings or referring to prior Opinions of Counsel in which such details
are given, or (B) stating that, in the opinion of such counsel, no such
action shall be necessary to preserve and protect such interest;
provided that a single Opinion of Counsel may be delivered in
satisfaction of the foregoing requirement and that of Section 3.06(b)
of the Indenture.
Each Opinion of Counsel referred to in clause (1) or (2) above
shall specify (as of the date of such opinion and given all applicable laws as
in effect on such date) any action necessary to be taken in the following year
to preserve and protect such interest.
SECTION 6.03. Notices. All demands, notices and communications
upon or to the Seller, NBD, the Servicer, the Issuer, the Eligible Lender
Trustee, the Indenture Trustee, the Administrator or the Rating Agencies under
this Agreement shall be in writing, personally delivered or mailed by certified
mail,
<PAGE>
return receipt requested (or in the form of telex or facsimile notice, followed
by written notice delivered as aforesaid), and shall be deemed to have been duly
given upon receipt;
(a) in the case of the Seller, to
USA Group Secondary Market Services, Inc.
8350 Craig Street
Indianapolis, Indiana 46250
Attention: President and Chief Executive Officer
Telephone: (317) 594-1981
Telecopy: (317) 594-1979;
with a copy to
Office of the General Counsel
USA Group, Inc.
11100 USA Parkway
Fishers, Indiana 46038
Attention: Glenn M. Sermersheim
Telephone: (317) 578-6988
Telecopy: (317) 578-6185;
(b) in the case of NBD, to
NBD Bank, N.A., as
trustee for USA Group Secondary
Market Services, Inc.
One Indiana Square
Suite 631
Indianapolis, Indiana 46266
Attention: Robert H. Everitt
Telephone: (317) 266-6247
Telecopy: (317) 266-5931;
(c) in the case of the Servicer, to
USA Group Loan Services, Inc.
7999 Knue Road
Indianapolis, Indiana 46250
Attention: President
Telephone: (317) 841-6628
Telecopy: (317) 841-1784
with a copy to
Office of the General Counsel
USA Group, Inc.
11100 USA Parkway
Fishers, Indiana 46038
Attention: Charles T. Gleason
Telephone: (317) 578-6511
Telecopy: (317) 578-6185;
<PAGE>
(d) in the case of the Issuer, to
Student Loan Trust 1996-A
c/o Mr. Michael Majchrzak, Trustee
FCC National Bank
300 King Street
Wilmington, Delaware 19801
with a copy to the Eligible Lender Trustee
at the Corporate Trust Office of the
Eligible Lender Trustee;
(e) in the case of the Issuer or the Eligible Lender
Trustee, at the Corporate Trust Office of the
Eligible Lender Trustee;
(f) in the case of the Indenture Trustee, at its
Corporate Trust Office;
(g) in the case of the Administrator, to
USA Group Secondary Market Services, Inc.
8350 Craig Street
Indianapolis, Indiana 46250
Attention: President and Chief Executive Officer
Telephone: (317) 594-1981
Telecopy: (317) 594-1979;
with a copy to
Office of the General Counsel
USA Group, Inc.
11100 USA Parkway
Fishers, Indiana 46038
Attention: Glenn M. Sermersheim
Telephone: (317) 578-6988
Telecopy: (317) 578-6185;
(h) in the case of Fitch, to
Fitch Investors Service, L.P.
One State Street Plaza
New York, New York 10004
Attention: Asset Backed Monitoring Unit
Telephone: (212) 908-0500
Facsimile: (212) 480-4435; and
<PAGE>
(i) 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) 553-0300
Facsimile: (212) 553-0881;
or, as to each of the foregoing, at such other address as shall be designated by
written notice to the other parties.
SECTION 6.04. Assignment. Notwithstanding anything to the
contrary contained herein, except as provided in Section 4.04, this Agreement
may not be assigned by the Seller or NBD. This Agreement may be assigned by the
Eligible Lender Trustee only to its permitted successor pursuant to the Trust
Agreement.
SECTION 6.05. Limitations on Rights of Others. The
-------------------------------
provisions of this Agreement are solely for the benefit of the
Seller, NBD, the Issuer, and the Eligible Lender Trustee and for
the benefit of the Indenture Trustee, the Noteholders and (with
respect to Section 5.01), the Company or its designee, as third
party beneficiaries, and nothing in this Agreement, whether
express or implied, shall be construed to give to any other
Person any legal or equitable right, remedy or claim in the Trust
Estate or under or in respect of this Agreement or any covenants,
conditions or provisions contained herein.
SECTION 6.06. Severability. Any provision of this Agreement
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
SECTION 6.07. Separate Counterparts. This Agreement may be
executed by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument.
SECTION 6.08. Headings. The headings of the various
Articles and Sections herein are for convenience of reference
only and shall not define or limit any of the terms or provisions
hereof.
SECTION 6.09. Governing Law. This Agreement shall be
construed in accordance with the laws of the State of Indiana,
without reference to its conflict of law provisions, and the
<PAGE>
obligations, rights and remedies of the parties hereunder shall be determined in
accordance with such laws.
SECTION 6.10. Assignment to Indenture Trustee. The
-------------------------------
Seller hereby acknowledges and consents to any mortgage, pledge,
assignment and grant by the Issuer to the Indenture Trustee
pursuant to the Indenture for the benefit of the Noteholders of a
security interest in all right, title and interest of the Issuer
in, to and under the Financed Student Loans or the assignment of
any or all of the Issuer's rights and obligations hereunder to
the Indenture Trustee.
SECTION 6.11. Non-Petition Covenants. Notwithstanding any
prior termination of this Agreement, neither the Seller nor NBD shall, 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.
SECTION 6.12. Limitation of Liability of NBD, Eligible Lender
Trustee and Indenture Trustee. (a) Notwithstanding anything contained herein to
the contrary, this Agreement has been signed by NBD not in its individual
capacity but solely in its capacity as trustee for the Seller and in no event
shall NBD in its individual capacity or, except as expressly provided herein or
in the trust agreement between Seller and NBD dated February 24, 1993, as legal
owner of the Financed Student Loans, have any liability for representations,
warranties, covenants, agreements or other obligations of the Seller hereunder
or in any of the certificates, notices or agreements delivered by the Seller
pursuant hereto as to all of which recourse shall be had solely against the
Seller.
(b) Notwithstanding anything contained herein to the
contrary, this Agreement has been signed by The First National Bank of Chicago
not in its individual capacity but solely in its capacity as Eligible Lender
Trustee of the Issuer and in no event shall The First National Bank of Chicago
in its individual capacity or, except as expressly provided in the Trust
Agreement, as beneficial owner of the Issuer have any liability for the
representations, warranties, covenants, agreements or other obligations of the
Issuer hereunder or in any of the certificates, notices or agreements delivered
pursuant hereto as
<PAGE>
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 Bankers Trust Company not in its
individual capacity but solely as Indenture Trustee and in no event shall
Bankers Trust Company have any liability for the representations, warranties,
covenants, agreements or other obligations of the Issuer hereunder or in any of
the certificates, notices or agreements delivered pursuant hereto, as to all of
which recourse shall be had solely to the assets of the Issuer.
SECTION 6.13. Agreement of Seller and NBD. Each of the Seller
and NBD agrees to execute and deliver such instruments and to take such actions
as the Eligible Lender Trustee, the Issuer, or the Indenture Trustee may
reasonably request in order to effectuate the terms and carry out the purposes
of the Agreement.
<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.
SMS STUDENT LOAN TRUST 1996-A,
by The First National Bank
of Chicago, not in its
individual capacity but
solely as Eligible Lender
Trustee on behalf of the
Trust,
by /s/ Jeffrey L. Kinney
Name: Jeffrey L. Kinney
Title: Assistant Vice President
USA GROUP SECONDARY MARKET
SERVICES, INC.
by /s/ Stephen W. Clinton
Name: Stephen W. Clinton
Title: President and
Chief Executive Officer
NBD BANK, N.A., AS TRUSTEE
FOR USA GROUP SECONDARY MARKET SERVICES, INC.
by /s/ Robert H. Everitt
Name: Robert H. Everitt
Title: First Vice President
and Trust Counsel
THE FIRST NATIONAL BANK OF CHICAGO,
not in its individual capacity but
solely as Trustee,
by /s/ Jeffrey L. Kinney
Name: Jeffrey L. Kinney
Title: Assistant Vice President
<PAGE>
Acknowledged and accepted
as of the day and year first
above written:
BANKERS TRUST COMPANY, not in
its individual capacity but
solely as Indenture Trustee,
by /s/ John Wallace
Name: John Wallace
Title: Asst. Vice President
<PAGE>
EXHIBIT A
LOAN SALE AGREEMENT
BILL OF SALE
For value received, in accordance with the Loan Sale Agreement
(the "Loan Sale Agreement") dated as of April 1, 1996, among USA Group Secondary
Market Services, Inc., as seller (the "Seller"), SMS Student Loan Trust 1996-A
(the "Trust"), NBD Bank, N.A., as trustee for the Seller ("NBD") and The First
National Bank of Chicago, not in its individual capacity but solely as Eligible
Lender Trustee (the "Eligible Lender Trustee") the Seller (and, with respect to
legal title to the Initial Financed Student Loans, NBD as trustee on behalf of
the Seller) does hereby sell, assign, transfer and otherwise convey unto the
Eligible Lender Trustee on behalf of the Trust, without recourse (subject to the
obligations set forth in the Loan Sale Agreement), all right, title and interest
in and to (i) the Initial Financed Student Loans and all obligations of the
Obligors thereunder, together with all documents, the related Student Loan Files
and all rights and privileges related thereto, (ii) all payments and/or
collections received thereunder on and after the Cutoff Date, (iii) all funds on
deposit from time to time in the Trust Accounts, including the Reserve Account
Initial Deposit, and in all investments and proceeds thereof (including all
income thereon) and (iv) all proceeds of any and all of the foregoing (including
but not limited to proceeds derived from the voluntary or involuntary conversion
of any of the Initial Financed Student Loans into cash or other liquidated
property, such as proceeds from the applicable Guarantee Agreement). The
foregoing sale does not constitute and is not intended to result in any
assumption by the Eligible Lender Trustee or the Trust of any obligation of the
Seller or NBD to the borrowers of Initial Financed Student Loans or any other
Person in connection with the Initial Financed Student Loans or any agreement or
instrument relating to any of them.
In addition, the undersigned, by execution of this instrument,
hereby endorses the promissory notes evidencing each Initial Financed Student
Loan described in Schedule A to the Loan Sale Agreement in favor of the Eligible
Lender Trustee on behalf of the Trust, without recourse (subject to the
obligations set forth in the Loan Sale Agreement) against the undersigned. This
endorsement may be effected by attaching a facsimile hereof to each or any of
such promissory notes.
This Bill of Sale is made pursuant to and upon the
representations, warranties and agreements on the part of the
A-1
<PAGE>
undersigned contained in the Loan Sale Agreement and is to be
governed by the Loan Sale Agreement.
Capitalized terms used but not defined herein shall have the
meaning assigned to them in Appendix A to the Administration Agreement, dated as
of April 1, 1996, among SMS Student Loan Trust 1996-A, as Issuer, USA Group
Secondary Market Services, Inc., as Administrator, and Bankers Trust Company, as
Indenture Trustee, which also contains rules as to usage that shall be
applicable herein.
IN WITNESS WHEREOF, the undersigned has caused this Bill of
Sale to be duly executed as of April 1, 1996.
USA GROUP SECONDARY MARKET
SERVICES, INC.,
as Seller
by
Name:
Title:
NBD BANK, N.A., as trustee
for USA Group Secondary
Market Services, Inc.
by
Name:
Title:
A-2
<PAGE>
EXHIBIT B
TO THE LOAN SALE AGREEMENT
TRANSFER AGREEMENT
TRANSFER No. _____ Of [NEW] [SERIAL] LOANS dated as of
______________, _____, among SMS STUDENT LOAN TRUST 1996-A, a Delaware trust
(the "Issuer"), USA GROUP SECONDARY MARKET SERVICES, INC., as seller (the
"Seller"), NBD BANK, N.A.*, as trustee for USA Group Secondary Market Services,
Inc. and THE FIRST NATIONAL BANK OF CHICAGO, a national banking association, as
seller, not in its individual capacity but solely as Eligible Lender Trustee of
the Issuer (the "Eligible Lender Trustee").
W I T N E S S E T H:
WHEREAS the Issuer, the Seller, NBD and the Eligible Lender
Trustee are parties to the Loan Sale Agreement dated as of April 1, 1996 (as
amended or supplemented, the "Loan Sale Agreement");
WHEREAS the Seller, as depositor, and the Eligible Lender
Trustee are parties to the Trust Agreement dated as of April 1, 1996 (as amended
or supplemented, the "Trust Agreement");
WHEREAS pursuant to the Loan Sale Agreement, the Seller wishes
to convey the [New] [Serial] Loans referred to in Section 2 (the "Additional
Student Loans") to the Eligible Lender Trustee
on behalf of the Issuer;
WHEREAS in order to comply with the requirements of the Higher
Education Act, legal title to the Seller's student loan portfolio is vested in
NBD, as trustee on behalf of the Seller as the sole beneficiary; 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
- - - --------
* NBD shall be replaced as a party to any Transfer Agreement by any other
eligible lender under the Higher Education Act that is acting as trustee for the
Seller with respect to the loans being conveyed pursuant to such Transfer
Agreement.
B-1
<PAGE>
ascribed to them in Appendix A to the Administration Agreement, dated as of
April 1, 1996, among the Issuer, the Seller, as Administrator, and Bankers Trust
Company, as Indenture Trustee, 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. Schedule of Financed Student Loans. Attached hereto as
Schedule A is a supplement to Schedule A to the Loan Sale Agreement listing the
Additional Student Loans to be conveyed on the Transfer Date to the Eligible
Lender Trustee on behalf of the Issuer pursuant to this Agreement.
3. Conveyance of Additional Student Loans. In
--------------------------------------
consideration of Issuer's delivery to or upon the order of the
Seller of $___________ (during the Revolving Period, such amount
being the Loan Purchase Amounts of the Additional Student Loans
and such amount to be paid from amounts on deposit in the
Collateral Reinvestment Account subject to the provisions of
Section 2.02(b) of the Loan Sale Agreement and Section 2(f) of
the Administration Agreement and after the Revolving Period such
amount being the sum of (i) the Purchase Collateral Balance
($[ ]) to be paid from any combination of amounts on deposit
in the Collection Account and of Exchange Student Loans as shall
be designated by the Seller subject to Section 2.02(c) of the
Loan Sale Agreement and Section 2(d) of the Administration
Agreement) and (ii) the Purchase Premium Amount ($[ ]) to be
paid on the immediately subsequent Quarterly Payment Date from
amounts on deposit in the Reserve Fund in excess of the Specified
Reserve Account Balance subject to Section 2.02(c) of the Loan
Sale Agreement and Section 2(e) of the Administration Agreement,
the Seller (and, with respect to legal title to the Additional
Student Loans, NBD as trustee on behalf of the Seller) does
hereby sell, assign and otherwise convey, without recourse
(except as expressly provided in the Loan Sale Agreement), to the
Eligible Lender Trustee on behalf of the Issuer:
(a) All right, title and interest in and to the Additional
Student Loans and all obligations of the Obligors thereunder, together
with all documents, the related Student Loan Files and all rights and
privileges relating thereto;
B-2
<PAGE>
(b) all payments on or collections received
thereunder, on and after the related Subsequent Cutoff Date;
(c) all proceeds of any and all of the foregoing.
4. Conditions Precedent. The obligation of the
Issuer to acquire the Additional Student Loans hereunder is
subject to the satisfaction, on or prior to the Transfer Date, of
the following conditions precedent:
(a) Representations and Warranties. Each of the
representations and warranties made by the Seller in Sections 3.01 and
4.01 of the Loan Sale Agreement and by NBD in Section 4.01 of the Loan
Sale Agreement shall be true and correct as of the Transfer Date.
(b) Loan Sale Agreement Conditions. Each of the conditions
set forth in Section 2.02(d) (and, if Exchange Student Loans are to be
applied to the Purchase Collateral Balance of the Additional Student
Loans, Section 2.02(c) and, if the trustee for the Seller with respect
to the Additional Student Loans is other than NBD, in Section 4.02) of
the Loan Sale Agreement shall have been satisfied.
(c) Delivery of Bill of Sale. The Seller and NBD shall have
delivered a Bill of Sale substantially in the form of Annex A hereto.
(d) Additional Information. The Seller and NBD 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 Sections 3.01 and 4.01 of
the Loan Sale Agreement and (ii) the satisfaction of the conditions set
forth in this Section 4.
(e) Delivery of Assignment with respect to Exchange Student
Loans. With respect to any Exchange Student Loans that are to be
applied to the Purchase Amount of the Additional Student Loans, the
Eligible Lender Trustee shall have delivered an Assignment
substantially in the form of
Annex B hereto.
5. Ratification of Agreement. As supplemented by
this Agreement, the Loan Sale Agreement is in all respects
ratified and confirmed and the Loan Sale Agreement as so
supplemented by this Agreement shall be read, taken and construed
as one and the same instrument.
B-3
<PAGE>
6. Counterparts. This Agreement may be executed in
separate counterparts, each of which when so executed and
delivered shall be an original, but all of which together shall
constitute but one and the same instrument.
7. Governing Law. This Agreement shall be construed
in accordance with the laws of the State of Indiana, without
reference to its conflict of law provisions, and the obligations,
rights and remedies of the parties hereunder shall be determined
in accordance with such laws.
8. Headings. The section headings hereof have been
inserted for convenience of reference only and shall not be
construed to affect the meaning, construction or effect of this
Agreement.
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.
SMS STUDENT LOAN TRUST 1996-A,
by THE FIRST NATIONAL BANK OF
CHICAGO, not in its individual
capacity but solely as
Eligible Lender Trustee,
by
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO, not in its individual capacity but solely as
Eligible Lender Trustee,
by
Name:
Title:
USA GROUP SECONDARY MARKET
SERVICES, INC., Seller
by
B-4
<PAGE>
Name:
Title:
NBD BANK, N.A., as trustee for USA Group Secondary Market Services, Inc.
by
Name:
Title:
Acknowledged and accepted as of the date first above written:
BANKERS TRUST COMPANY,
not in its individual
capacity but solely as
Indenture Trustee,
by
Name:
Title:
B-5
<PAGE>
SCHEDULE A
TO THE TRANSFER AGREEMENT NO. ___
[List of Additional Student Loans
and their related Subsequent Cutoff Dates]
B-6
<PAGE>
ANNEX A
TO THE TRANSFER AGREEMENT
BILL OF SALE
For value received, in accordance with the Loan Sale Agreement
(the "Loan Sale Agreement") dated as of April 1, 1996, among USA Group Secondary
Market Services, Inc., as seller (the "Seller"), NBD Bank, N.A., as trustee for
the Seller ("NBD"), SMS Student Loan Trust 1996-A (the "Trust") and The First
National Bank of Chicago, not in its individual capacity but solely as Eligible
Lender Trustee (the "Eligible Lender Trustee") [and as ratified by [name of
eligible lender if other than NBD with respect to the Additional Student Loans]
pursuant to Section 4.02 of the Loan Sale Agreement] and the Transfer Agreement
No. ____ dated as of ______, ______ (the "Transfer Agreement") among the Seller,
NBD, the Trust and the Eligible Lender Trustee, the Seller (and, with respect to
legal title to the Additional Student Loans, NBD as trustee on behalf of the
Seller) does hereby sell, assign, transfer and otherwise convey unto the
Eligible Lender Trustee on behalf of the Trust, without recourse (subject to the
obligations set forth in the Loan Sale Agreement), all right, title and interest
in and to (i) the Additional Student Loans and all obligations of the Obligors
thereunder, together with all documents, the related Student Loan Files and all
rights and privileges related thereto, (ii) all payments and collections
received thereunder, on and after the Subsequent Cutoff Date and (iii) all
proceeds of any and all of the foregoing (including but not limited to proceeds
derived from the voluntary or involuntary conversion of any of the Additional
Student Loans into cash or other liquidated property, such as proceeds from the
applicable Guarantee Agreement). The foregoing sale does not constitute and is
not intended to result in any assumption by the Eligible Lender Trustee or the
Trust of any obligation of the Seller or NBD to the borrowers of the Additional
Student Loans or any other person in connection with the Additional Student
Loans or any agreement or instrument relating to any of them.
In addition, the undersigned, by execution of this instrument,
hereby endorses the promissory notes evidencing each Additional Student Loan
described in Schedule A to the Transfer Agreement in favor of the Eligible
Lender Trustee on behalf of the Trust, without recourse (subject to the
obligations set forth in the Loan Sale Agreement) against the undersigned. This
endorsement may be effected by attaching a facsimile hereof to each or any of
such promissory notes.
This Assignment is made pursuant to and upon the
representations, warranties and agreements on the part of the undersigned
contained in the Loan Sale Agreement and the Transfer
B-7
<PAGE>
Agreement and is to be governed by the Loan Sale Agreement and the Transfer
Agreement.
Capitalized terms used but not defined herein shall have the
meanings assigned to them in the Transfer Agreement.
IN WITNESS WHEREOF, the undersigned has caused this Bill of
Sale to be duly executed as of ________________, ______.
USA GROUP SECONDARY MARKET
SERVICES, INC.,
as Seller
by
Name:
Title:
NBD BANK, N.A., as trustee
for USA Group Secondary
Market Services, Inc.
by
Name:
Title:
B-8
<PAGE>
EXHIBIT C
TO THE LOAN SALE AGREEMENT
1. Characteristics of Financed Student Loans. Each Financed
Student Loan (A) was originated in the United States of America, its
territories, its possessions or other areas subject to its jurisdiction
by an "eligible lender" under the Higher Education Act in the ordinary
course of its business to an eligible borrower under applicable law and
agreements and was fully and properly executed by the parties thereto,
(B) was acquired or originated by the Seller in the ordinary course of
its business, and (C) provides or, when the payment schedule with
respect thereto is determined, will provide for payments on a periodic
basis that fully amortizes the principal amount of such Financed
Student Loan by its maturity, as such maturity may be modified in
accordance with any applicable deferral or forbearance periods granted
in accordance with applicable laws and restrictions, including those of
the Higher Education Act or the applicable Guarantee Agreement, and
yield interest at the rate applicable thereto. Each Financed Student
Loan is guaranteed by an eligible guarantor under the Higher Education
Act and qualifies the holder thereof to receive Interest Subsidy
Payments (other than SLS Loans, unsubsidized Stafford Loans, and those
Consolidation Loans for which the related loan application was
submitted prior to January 1, 1993) and Special Allowance Payments from
the Department and Guarantee Payments from the Guarantor and qualifies
the Guarantor to receive reinsurance payments thereon from the
Department. If such Financed Student Loan is a New Loan or a Qualified
Substitute Loan and is, in either case, guaranteed by an Additional
Guarantor, the aggregate principal balance of all Financed Student
Loans guaranteed by such Additional Guarantor (measured as of the
Subsequent Cutoff Date for such Financed Student Loan) following the
addition of such Financed Student Loan to the Trust, did not exceed 5%
of the principal balance of all Financed Student Loans as of such date,
and the aggregate principal balance of all Financed Student Loans
guaranteed by all Additional Guarantors measured as of such date,
following such addition, did not exceed 20% of the principal balance of
all Financed Student Loans as of such date. The principal balance of
each Financed Student Loan is not subject to change by reason of
adjustments to the related Borrower's account after the Cutoff Date
relating to matters or events occurring prior to the Cutoff Date.
2. Schedule of Financed Student Loans. The
information set forth in Schedule A to this Agreement is
true and correct in all material respects as of the opening
of business on the Cutoff Date. With respect to any
Consolidation Loan originated by the Issuer or any New Loan,
C-1
<PAGE>
Serial Loan or Qualified Substitute Student Loan conveyed to the Issuer after
the Closing Date, information for each category set forth in Schedule A has been
provided with respect to such loan and such information is true and correct in
all material respects, as of the date of origination, in the case of such
Consolidation Loan, and as of the opening of business on the applicable
Subsequent Cutoff Date in the case of a New Loan, Serial Loan or Qualified
Substitute Student Loan. With respect to any Consolidation Loan, the principal
balance of which has been increased by the principal balance of any related
Add-on Consolidation Loan, information for each category set forth in Schedule A
has been provided with respect to such Add-on Consolidation Loan and such
information is true and correct in all material respects as of the related
Add-on Consolidation Loan Funding Date. No selection procedures believed to be
adverse to the Noteholders were utilized in selecting any Financed Student Loan.
The computer tape regarding the Initial Financed Student Loans made available to
the Issuer and its assigns is true and correct in all respects as of the Cutoff
Date, and, after the Closing Date, any computer tape regarding any Consolidation
Loan, New Loan, Serial Loan or Qualified Substitute Student Loan made available
to the Issuer and its assigns is true and correct in all respects as of the date
of origination, in the case of a Consolidation Loan originated by the Trust, as
of the applicable Add-on Consolidation Loan Funding Date, in the case of a
Consolidation Loan the principal balance of which is increased by the principal
balance of any related Add-on Consolidation Loan, and as of the applicable
Subsequent Cutoff Date, in the case of a New Loan, Serial Loan or a Qualified
Substitute Student Loan.
3. Compliance with Law. Each Financed Student Loan complied at
the time of origination and at the time of the execution of this
Agreement or the applicable Transfer Agreement or Assignment, as the
case may be, at the time of origination in the case of a Consolidation
Loan originated by the Issuer and as of the applicable Add-on
Consolidation Loan Funding Date in the case of a Consolidation Loan the
principal balance of which is increased by the principal balance of any
Add-on Consolidation Loan, in all material respects with all applicable
requirements of local, state, and federal laws, rules and regulations
which govern the making of such Financed Student Loan including the
requirements of the applicable Guarantee Agreement.
4. Binding Obligation. The terms and conditions of each
Financed Student Loan are consistent with the application of the
Borrower, all signatures for the Financed Student Loans are genuine and
the Borrower Note evidencing each Financed Student Loan has been duly
executed and delivered and constitutes the legal, valid, and binding
obligation of the Borrower enforceable in accordance with its terms.
C-2
<PAGE>
5. No Defenses. No right of rescission, setoff,
counterclaim, or defense has been asserted or threatened or
exists with respect to any Financed Student Loan.
6. No Default. No Financed Student Loan has a payment that is
more than 180 days overdue as of the Cutoff Date or more than 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 180 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.
7. Title. It is the intention of the Seller that the transfer
and assignment herein contemplated constitute a sale of the Financed
Student Loans from the Seller to the Eligible Lender Trustee on behalf
of the Issuer and that the beneficial interest in and title to such
Financed Student Loans not be part of the estate of the Seller in the
event of the appointment of a receiver with respect to the Seller.
Except in the case of Consolidation Loans originated by the Issuer,
immediately prior to the transfer and sale of each Financed Student
Loan to the Trust, each Borrower Note is owned by the Seller and the
Seller has good title to each Financed Student Loan, free and clear of
any lien, charge, encumbrance, or other interest therein and
immediately upon the transfer and sale of such Financed Student Loan to
the Trust, the Eligible Lender Trustee on behalf of the Issuer will
have good title to such Financed Student Loan free and clear of any
lien, charge, encumbrance, or other interest therein except as
contemplated by the Basic Documents.
8. All Filings Made. All filings (including UCC filings)
necessary in any jurisdiction to give the Eligible Lender Trustee on
behalf of the Issuer a first perfected ownership interest in the
Financed Student Loans, and to give the Indenture Trustee a first
perfected security interest therein, have been made.
9. No Bankruptcies. No Borrower of any Financed Student Loan
as of the Cutoff Date or the applicable Subsequent Cutoff Date (in the
case of Qualified Substitute Student Loans, New Loans or Serial Loans),
as of the date of origination (in the case of a Consolidation Loan
originated by the Issuer) or as of the applicable Add-on Consolidation
Loan Funding Date (in the case of a Consolidation Loan the principal
balance of which is increased by the principal balance of any related
Add-on Consolidation Loan) was noted
C-3
<PAGE>
in the related Student Loan File as being currently involved
in a bankruptcy proceeding.
10. Lawful Assignment. No Financed Student Loan has been
originated in, or is subject to the laws of, any jurisdiction under
which the origination, sale, transfer and assignment of such Financed
Student Loan or any Financed Student Loan under this Agreement, each
Transfer Agreement or the Indenture is unlawful, void or voidable.
11. One Original. There is only one original executed
copy of the promissory note evidencing each Financed Student
Loan.
12. U.S. Obligors. Less than 1% of the Financed
Student Loans are due from Persons not having a mailing
address in the United States of America.
13. Accounts. Each Financed Student Loan may be
pledged or transferred as an "account" as defined in the
UCC.
14. 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) at the maximum
interest rate permitted by the Higher Education Act and qualifies for
Special Allowance Payments, except as expressly permitted by the Basic
Documents.
15. Seller's Representations. The representations and
warranties of the Seller contained in Section 4.01 are true
and correct.
C-4
<PAGE>
EXHIBIT D
TO THE LOAN SALE AGREEMENT
1. Organization and Good Standing. The Seller has
been organized and is existing under the General Corporation
Law of the State of Delaware and is authorized to do
business in every state in which it is doing business as
well as the state in which it is organized and incorporated.
2. Power and Authority of the Seller. The Seller has the
corporate power and authority to execute and deliver this Agreement and
to carry out its terms; the Seller has full corporate power and
authority to sell (with NBD conveying legal title as trustee on behalf
of the Seller) and assign the property to be sold and assigned to and
deposited with the Issuer (or with the Eligible Lender Trustee on
behalf of the Issuer) and the Seller has duly authorized such sale and
assignment to the Issuer (or to the Eligible Lender Trustee on behalf
of the Issuer) by all necessary corporate action; and the execution,
delivery and performance of this Agreement have been duly authorized by
the Seller by all necessary corporate action.
3. Binding Obligation. This Agreement has been executed and
delivered by the Seller and, assuming authorization, execution, and
delivery by the other parties thereto, this Agreement constitutes a
valid obligation of the Seller enforceable against it in accordance
with the express terms of this Agreement, except as enforcement thereof
may be limited by the bankruptcy, insolvency, reorganization,
moratorium, liquidation, readjustment of debt, or other federal or
state laws or equitable principles relating to or affecting the
enforcement of creditor's rights.
4. No Violation. The consummation of the
transactions contemplated by this Agreement or the
Administration Agreement and the fulfillment of the terms
hereof or thereof do not conflict with, result in any breach
of any of the terms and provisions of, nor constitute (with
or without notice or lapse of time or both) a default under,
the certificate of incorporation 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; 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. The consummation of the transactions
D-1
<PAGE>
contemplated by this Agreement or by the Administration Agreement and the
fulfillment of the terms hereof and thereof will not result in the loss of any
Guarantee Payments by the Trust or any reinsurance payments with respect to any
Financed Student Loans by the Guarantor.
5. No Proceedings. There is no action, suit, claim,
investigation, or proceeding, in any such case whether pending or to
the knowledge of the Seller, threatened against the Seller before any
court, governmental agency, or arbitrator (i) asserting the invalidity
of this Agreement, the Indenture or any of the other Basic Documents or
the Notes, (ii) seeking to prevent the issuance of the Notes or the
consummation of any transactions contemplated by this Agreement, the
Indenture or any of the other Basic Documents, (iii) seeking any
determination or ruling that could reasonably be expected to have a
material and adverse effect on the performance by the Seller of its
obligations under, or the validity or enforceability of, this
Agreement, the Indenture, any of the other Basic Documents or the Notes
or (iv) seeking to affect adversely the Federal or state income tax
attributes of the Issuer or the Notes.
6. All Consents. No action, including, without limitation, the
granting or issuing of any consent, permit, license, approval, or
authorization which is required to be made on or prior to the date of
this Agreement in connection with the sale of Financed Student Loans
under this Agreement (with the possible exception of routine filings
which, if not made, will not render the Seller liable to any material
penalties or will not result in the transactions contemplated by this
Agreement being subject to challenge) is required.
D-2
<PAGE>
EXHIBIT E
TO THE LOAN SALE AGREEMENT
1. Organization and Good Standing. NBD is a national
banking association duly organized, validly existing and in
good standing under the laws of the United States and is an
"eligible lender" for purposes of the Higher Education Act.
2. Power and Authority of the NBD. NBD has authorized the
execution and delivery of this Agreement and has full legal power and
authority to consummate all transactions contemplated by this Agreement
and any and all other agreements relating hereto.
3. Binding Obligation. This Agreement has been executed and
delivered by NBD and, assuming authorization, execution, and delivery
by the other parties thereto, this Agreement constitutes a valid
obligation of NBD enforceable against it in accordance with the express
terms of this Agreement, except as enforcement thereof may be limited
by the bankruptcy, insolvency, reorganization, moratorium, liquidation,
readjustment of debt, or other federal or state laws or equitable
principles relating to or affecting the enforcement of creditor's
rights.
4. No Violation. Compliance by NBD with this Agreement does
not in any material respect violate any law or regulation by which NBD
or its assets are bound, or any writ, order, judgment, or decree of any
court or government instrumentality or arbitrator in which NBD is
named, or the charter or by-laws of NBD or any indenture, contract, or
agreement to which NBD is a party or by which it is or its properties
are bound or affected.
5. No Proceedings. There is no action, suit, claim,
investigation, or proceeding, in any case pending or, to the knowledge
of NBD, threatened against NBD before any court, governmental agency,
or arbitrator which, if decided adversely to NBD, is likely to have a
material adverse effect upon the validity or enforceability of this
Agreement.
6. All Consents. No action, including, without limitation, the
granting or issuing of any consent, permit, license, approval, or
authorization which is required to be made on or prior to the date of
this Agreement in connection with the sale of Financed Student Loans
under this Agreement (with the possible exception of routine filings
which, if not made, will not render NBD liable to any material
penalties or will not result in the transactions contemplated by this
Agreement being subject to challenge) is required.
E-1
<PAGE>
EXHIBIT F
TO THE LOAN SALE AGREEMENT
ASSIGNMENT
For value received, in accordance with the Loan Sale Agreement
(the "Loan Sale Agreement") dated as of April 1, 1996, among USA Group Secondary
Market Services, Inc., as seller (the "Seller"), SMS Student Loan Trust 1996-A
(the "Trust"), NBD Bank, N.A., as trustee for the Seller ("NBD") and The First
National Bank of Chicago, not in its individual capacity but solely as Eligible
Lender Trustee (the "Eligible Lender Trustee") the Seller (and, with respect to
legal title to the Initial Financed Student Loans, NBD as trustee on behalf of
the Seller) does hereby sell, assign, transfer and otherwise convey unto the
Eligible Lender Trustee on behalf of the Trust, without recourse (subject to the
obligations set forth in the Loan Sale Agreement), all right, title and interest
in and to (i) the Qualified Substitute Student Loan(s) indicated in Schedule A
hereto (the "Additional Student Loans") and all obligations of the Obligors
thereunder, together with all documents, the related Student Loan Files and all
rights and privileges related thereto, (ii) all payments and/or collections
received thereunder on and after the date hereof and (iii) all proceeds of any
and all of the foregoing (including but not limited to proceeds derived from the
voluntary or involuntary conversion of any of the Additional Student Loans into
cash or other liquidated property, such as proceeds from the applicable
Guarantee Agreement). The foregoing sale does not constitute and is not intended
to result in any assumption by the Eligible Lender Trustee or the Trust of any
obligation of the Seller or NBD to the borrowers of 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 endorse the promissory notes evidencing each Additional Student Loan in
favor of the Eligible Lender Trustee on behalf of the Trust, without recourse
(subject to the obligations set forth in the Loan Sale Agreement) against the
undersigned. This endorsement may be effected by attaching a facsimile hereof to
each or any of such promissory notes.
This Assignment is made pursuant to and upon the
representations, warranties and agreements on the part of the undersigned
contained in the Loan Sale Agreement and is to be governed by the Loan Sale
Agreement.
Capitalized terms used but not defined herein shall have the
meaning assigned to them in Appendix A to the Administration Agreement, dated as
of April 1, 1996, among the Trust, as Issuer, the Seller, as Administrator, and
Bankers Trust
F-1
<PAGE>
Company, as Indenture Trustee, which also contains rules as to usage that shall
be applicable herein.
F-2
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Bill of
Sale to be duly executed as of ___________.
USA GROUP SECONDARY MARKET
SERVICES, INC.,
as Seller
by
Name:
Title:
NBD BANK, N.A., as trustee
for USA Group Secondary
Market Services, Inc.
by
Name:
Title:
F-3
SERVICING AGREEMENT
among
SMS STUDENT LOAN TRUST 1996-A
as Issuer,
USA GROUP LOAN SERVICES, INC.
as Servicer,
USA GROUP SECONDARY MARKET SERVICES, INC.
as Seller,
and
THE FIRST NATIONAL BANK OF CHICAGO,
not in its individual capacity but solely
as Eligible Lender Trustee,
Dated as of April 1, 1996
1
<PAGE>
SERVICING AGREEMENT dated as of April 1,
1996, among SMS STUDENT LOAN TRUST 1996-A, a
Delaware trust (the "Issuer"), USA GROUP LOAN
SERVICES, INC. (formerly known as Education Loan
Servicing Center, Inc.),as servicer (the
"Servicer"), USA GROUP SECONDARY MARKET SERVICES,
INC. (formerly known as Secondary Market Services,
Inc.) as Seller (the "Seller") and THE FIRST
NATIONAL BANK OF CHICAGO, a national banking
association, solely as eligible lender trustee and
not in its individual capacity (the "Eligible
Lender Trustee").
WHEREAS the Issuer desires to purchase from USA Group
Secondary Market Services, Inc. (the "Seller") (and, with respect to legal title
to the student loans, NBD as trustee on behalf of the Seller) a portfolio of
federally reinsured student loans purchased in the ordinary course of business
by the Seller;
WHEREAS the Eligible Lender Trustee is willing to hold legal
title to, and serve as eligible lender trustee with respect to, such student
loans on behalf of the Issuer; and
WHEREAS the Servicer is willing to service such student loans
and undertake certain administrative functions with respect thereto.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties hereto agree as follows:
ARTICLE I
Definitions and Usage
Capitalized terms used but not defined herein are defined in
Appendix A to the Administration Agreement, dated as of April 1, 1996, among the
Issuer, the Seller, as Administrator, and Bankers Trust Company, as Indenture
Trustee, which also contains rules as to usage and construction that shall be
applicable herein.
ARTICLE II
Custody of Financed Student Loans
SECTION 2.01. Custody of Student Loan Files. To
assure uniform quality in servicing the Financed Student Loans
2
<PAGE>
and to reduce administrative costs, the Issuer hereby revocably appoints the
Servicer, and the 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 which are hereby constructively delivered to the
Indenture Trustee, as pledgee of the Issuer (or will be constructively delivered
to the Indenture Trustee, as pledgee of the Issuer, in the case of New Loans and
Serial Loans, as of the applicable Transfer Date, in the case of Qualified
Substitute Student Loans, as of the date of the relevant Assignment to the
Issuer, in the case of Consolidation Loans originated during the Revolving
Period by the Eligible Lender Trustee on behalf of the Issuer, as of the
applicable date of origination or in the case of Consolidation Loans the
principal balances of which are increased by the principal balances of any
related Add-on Consolidation Loans, as of the applicable Add-on Consolidation
Loan Funding Date) with respect to each Financed Student Loan:
(a) the original fully executed copy of the note evidencing
the Financed Student Loan (including the original loan application
fully executed by the Borrower); and
(b) any and all other documents and computerized records that
the Servicer shall keep on file, in accordance with its customary
procedures, relating to such Financed Student Loan or any Obligor with
respect thereto.
SECTION 2.02. Duties of Servicer as Custodian. (a)
Safekeeping. The Servicer shall maintain custody of the 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 Student
Loan File as shall enable the Issuer to comply with the Basic Documents. In
performing its duties as custodian the Servicer shall act with reasonable care,
using that degree of skill and attention that the Servicer exercises with
respect to the student loan files relating to all comparable Student Loans that
the Servicer services and shall ensure that it complies with all applicable
Federal and State laws, including the Higher Education Act, with respect
thereto. The Servicer shall conduct, or cause to be conducted, periodic audits
of the 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 Servicer's record
keeping. The Servicer shall promptly report to the Issuer and the Indenture
Trustee any failure on its part to hold the Student Loan Files and maintain its
accounts, records and computer systems as herein provided and promptly take
appropriate action to remedy any such failure. Nothing herein shall be deemed to
require an initial review or any periodic review by the
3
<PAGE>
Issuer, the Eligible Lender Trustee or the Indenture Trustee of
the Student Loan Files.
(b) Maintenance of Records. The Servicer shall maintain each
Student Loan File at one of the locations specified in Schedule A to this
Agreement or at such other office as shall be specified by written notice to the
Issuer and the Indenture Trustee not later than 90 days after any change in
location. Upon reasonable prior notice of not less than three Business Days, the
Servicer shall make available to the Issuer and the Indenture Trustee or their
respective duly authorized representatives, attorneys or auditors a list of
locations of the Student Loan Files and the related accounts, records and
computer systems maintained by the Servicer.
(c) Release of Documents. Upon instruction from the Indenture
Trustee, the Servicer shall, as soon as practicable, release any Student Loan
File to the Indenture Trustee, the Indenture Trustee's agent, or the Indenture
Trustee's designee, as the case may be, at such place or places as the Indenture
Trustee may designate.
SECTION 2.03. Instructions; Authority To Act. The Servicer
shall be deemed to have received proper instructions with respect to the Student
Loan Files upon its receipt of written instructions signed by a Responsible
Officer of the Indenture Trustee.
SECTION 2.04. Custodian's Indemnification. The Servicer as
Custodian shall pay for any actual loss, liability or expense, including
reasonable attorneys' fees, that may be imposed on, incurred by or asserted
against the Issuer, the Eligible Lender Trustee or the Indenture Trustee or any
of their officers, directors, employees and agents as a result of any improper
act or omission in any way relating to the maintenance and custody by the
Servicer as Custodian of the Student Loan Files as required by this Agreement
where the final determination that any such improper act or omission by the
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 Servicer;
provided, however, that the amount of any liability with respect to any Financed
Student Loan shall not exceed the amount that would have been paid if such
Student Loan had been accepted and paid by the related Guarantor as a claim, and
provided, further, that the 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
Servicer shall not be liable to the Indenture Trustee for any portion of any
such amount resulting from the willful misfeasance, bad faith or
4
<PAGE>
negligence of the Indenture Trustee. This provision shall not be construed to
limit the Servicer's or any other party's rights, obligations, liabilities,
claims or defenses which arise as a matter of law or pursuant to any other
provision of this Agreement.
SECTION 2.05. Effective Period and Termination. The
--------------------------------
appointment of Loan Services as Custodian shall become effective
as of the Closing Date and shall continue in full force and
effect for so long as Loan Services shall remain the Servicer
hereunder. If all the rights and obligations of Loan Services
shall have been terminated under Section 6.01, the appointment of
Loan Services 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 ninety (90) days, Loan Services shall deliver
possession of the Student Loan Files to the Indenture Trustee or
the Indenture Trustee's agent at such place or places as the
Indenture Trustee may reasonably designate. Loan Services will
continue to hold the Student Loan Files as agent of the Indenture
Trustee until the Student Loan Files are transferred.
ARTICLE III
Administration and Servicing of Student Loans
SECTION 3.01. Duties of Servicer. The Servicer, for the
benefit of the Issuer (to the extent provided herein), shall manage, service,
administer and make collections on the Financed Student Loans with reasonable
care, using that degree of skill and attention that the 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 Servicer shall manage, service, administer and make collections with
respect to the Financed Student Loans (other than collection of any Interest
Subsidy Payments and Special Allowance Payments, which the Eligible Lender
Trustee will perform on behalf of the Trust) in accordance with, and otherwise
comply with, all applicable Federal and state laws, including any applicable
standards, guidelines and requirements of the Higher Education Act and the
applicable Guarantee Agreement, the failure to comply with which would adversely
affect the eligibility of one or more of the Financed Student Loans for Federal
reinsurance or Interest Subsidy Payments, Special Allowance Payments or
Guarantee Payments or would have an adverse effect on the Noteholders or the
Company. The Servicer also hereby acknowledges that its obligation to service
the Financed Student Loans includes all Consolidation
5
<PAGE>
Loans originated by the Issuer during the Revolving Period, any Consolidation
Loan supplemented from time to time during and after the Revolving Period by the
addition of the principal balance of any related Add-on Consolidation Loan, any
Qualified Substitute Student Loans conveyed to the Issuer pursuant to Section
3.02 of the Loan Sale Agreement and those New Loans and Serial Loans conveyed to
the Eligible Lender Trustee on behalf of the Trust pursuant to Section 2.02 of
the Loan Sale Agreement and the related Transfer Agreement, a copy of which
shall be delivered to the 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 Servicer's obligations hereunder to service all
the Financed Student Loans.
The Servicer's duties shall include collection and posting of all
payments, responding to inquiries of borrowers on such Financed Student Loans,
monitoring borrowers' status, making required disclosures to borrowers,
investigating delinquencies, sending payment coupons to borrowers and otherwise
establishing repayment terms, reporting tax information to borrowers, if
applicable, accounting for collections and furnishing monthly and annual
statements with respect thereto to the Administrator. Subject to the provisions
of Section 3.02, the Servicer shall follow its customary standards, policies and
procedures in performing its duties as Servicer. Without limiting the generality
of the foregoing, the Servicer is authorized and empowered to execute and
deliver, on behalf of itself, the Issuer, the Eligible Lender Trustee, the
Indenture Trustee, the Company and the Noteholders or any of them, instruments
of satisfaction or cancellation, or partial or full release or discharge, and
all other comparable instruments, with respect to such Financed Student Loans;
provided, however, that the Servicer agrees that it will not (a) permit any
rescission or cancellation of a Financed Student Loan except as ordered by a
court of competent jurisdiction or governmental authority or as otherwise
consented to in writing by the Eligible Lender Trustee and the Indenture Trustee
or (b) reschedule, revise, defer or otherwise compromise with respect to
payments due on any Financed Student Loan except pursuant to any applicable
Deferral or Forbearance periods or otherwise in accordance with all applicable
standards, guidelines and requirements with respect to the servicing of the
Financed Student Loans; provided further, however, that the Servicer shall not
agree to any decrease of the interest rate on, or the principal amount payable
with respect to, any Financed Student Loan.
The Servicer, for the benefit of the Issuer and the Indenture Trustee
(to the extent provided herein), shall promptly and routinely furnish the
Eligible Lender Trustee and the Indenture Trustee with copies of all material
reports, records,
6
<PAGE>
and other documents and data as required by this Agreement or as may otherwise
be required by the Higher Education Act. All material correspondence received by
the Servicer relating to individual Student Loans shall be maintained in
microcopy form or in summary form in an automated history file established by
the Servicer. The Servicer shall furnish in good condition all forms and
supplies as specified in this Agreement and any Schedules hereto. The Eligible
Lender Trustee and the Indenture Trustee may transmit Financed Student Loan
account data to the Servicer on these forms or by any other mutually acceptable
means. In performing its duties hereunder, the Servicer will be guided by and
comply with the Higher Education Act and applicable requirements of the related
Guarantor. The Servicer agrees to produce a clear and precise audit trail for
each Financed Student Loan and to comply with such other reporting, servicing,
and operating standards as are contained in this Agreement.
The Eligible Lender Trustee on behalf of the Issuer hereby grants a
power of attorney and all necessary authorization to the Servicer to maintain
any and all collection procedures with respect to the Financed Student Loans,
including filing, pursuing and recovering claims against the Guarantors for
Guarantee Payments and taking any steps to enforce such Financed Student Loans
such as commencing a legal proceeding to enforce a Financed Student Loan in the
name of the Issuer, the Eligible Lender Trustee, the Indenture Trustee, the
Company or the Noteholders. The Eligible Lender Trustee or the Indenture Trustee
shall upon the written request of the Servicer or the Administrator furnish the
Servicer or the Administrator with any other powers of attorney and other
documents reasonably necessary or appropriate to enable the Servicer or the
Administrator to carry out their servicing and administrative duties hereunder.
SECTION 3.02. Collection of Student Loan Payments. (a) The
Servicer shall 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 Servicer shall allocate collections with respect to the Financed
Student Loans between principal and interest in accordance with the terms of
each such loan. The 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 Servicer shall make reasonable efforts to claim,
pursue and collect all Guarantee Payments from the Guarantors pursuant to the
Guarantee Agreements with respect to
7
<PAGE>
any of the Financed Student Loans as and when the same shall become due and
payable, shall comply with the Higher Education Act and all other 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 Servicer is hereby authorized and
empowered to convey to the related Guarantor the note and the related Student
Loan File representing any Financed Student Loan in connection with submitting a
claim to the applicable 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 Servicer as set forth below and on behalf of the Issuer, make reasonable
efforts to claim, pursue and collect all Interest Subsidy Payments and Special
Allowance Payments from the Department with respect to any of the Financed
Student Loans as and when the same shall become due and payable, shall comply
with all applicable laws and agreements with respect to claiming, pursuing and
collecting such payments and shall follow such practices and procedures as the
Servicer follows with respect to Student Loans serviced by it. All amounts so
collected by the Eligible Lender Trustee with respect to Financed Student Loans
shall constitute Monthly Available Funds for the applicable Monthly Collection
Period and Available Funds for the applicable Collection Period, and shall be
deposited into the Collection Account in accordance with Section 4.01. In
connection therewith, the Servicer 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 Servicer
furnish the Servicer with any power of attorney and other documents reasonably
necessary or appropriate to enable the Servicer 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
8
<PAGE>
payments (including, but not limited to, Interest Subsidy Payments and Special
Allowance Payments) due from the Department to any such other trust using such
common lender identification number as a result of amounts (including, but not
limited to, Consolidation Fees) owing to the Department from the Trust will be
deemed for all purposes hereof and of the Basic Documents (including for
purposes of determining amounts paid by the Department with respect to the
student loans in the Trust and such other trust) to have been assessed against
the Trust and shall be deducted by the Eligible Lender Trustee or the Servicer
and paid to such other trust from any collections made by them which would
otherwise have been payable to the Collection Account for the Trust. If so
specified in the servicing agreement applicable to any such other trust, any
amounts assessed against payments due from the Department to the Trust as a
result of amounts owing to the Department from such other trust using such
common lender identification number will be deemed to have been assessed against
such other trust and will be deducted by the Eligible Lender Trustee or the
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 3.03. Realization upon Student Loans. For the benefit
of the Issuer, the Servicer shall 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 the applicable Guarantee
Agreement in its servicing of any delinquent Financed Student Loans.
SECTION 3.04. No Impairment. The Servicer shall not
impair the rights of the Issuer, the Eligible Lender Trustee, the
Indenture Trustee, the Company or the Noteholders in the Financed
Student Loans.
SECTION 3.05. Purchase of Student Loans;
Reimbursement. (a) Upon the discovery by the Servicer, the Eligible Lender
Trustee, the Indenture Trustee or the Seller of any breach pursuant to Sections
3.01, 3.02, 3.03 or 3.04 hereof the party discovering the breach shall give
prompt written notice to the others. If the breach is not cured within sixty
(60) days after the Servicer becomes aware or receives written notice (whichever
is earlier) of such breach, the Servicer shall purchase or arrange for the
purchase of any Student Loan in which the interests of the Noteholders, the
Issuer, the Indenture Trustee or the Eligible Lender Trustee are materially and
adversely affected by such breach as of the first day succeeding the end of such
60-day period that is the last day of a Monthly Collection Period (it being
understood that any such breach that does not affect the related Guarantor's
obligation to guarantee payment of such Student Loan will not be considered to
have a
9
<PAGE>
material adverse effect for this purpose and it being further understood that
any dispute as to whether such Guarantor's obligation has been so affected so as
to create such a material adverse effect, shall be resolved, for so long as the
Notes are Outstanding, by the Indenture Trustee, whose determination shall be
dispositive, and after the Notes are no longer Outstanding, by the Eligible
Lender Trustee, whose determination shall then be dispositive); provided,
however, that during each 12-month period following the Cutoff Date or an
anniversary of the Cutoff Date (a "Servicer Liability Period"), the Servicer
will be obligated to purchase Student Loans only to the extent its total
liability incurred during the then current Servicer Liability Period for such
purchases and any other liabilities under this Agreement exceeds an amount (the
"Servicer Liability Limit") equal to 0.15% of the outstanding principal balance
of the Financed Student Loans as of the Cutoff Date or, after the first
anniversary of the Cutoff Date, as of the preceding July 31.
(b) In consideration of the purchase of any such Student Loan
pursuant to this Section 3.05, the Servicer shall remit, in the manner specified
in Section 4.01, the Purchase Amount and the Issuer shall execute such
assignments and other documents reasonably requested by the Servicer in order to
effect the transfer of such Student Loan to the Servicer or its designee;
provided, however, that the Servicer's total liability for losses for rejected
claims by the Guarantors for any Financed Student Loan based on any breach
pursuant to Sections 3.01, 3.02, 3.03, or 3.04 hereof will not exceed that
amount which the related Guarantor would have been obligated to pay with respect
to such loan had its obligation to guarantee payment thereof not been affected
by the Servicer's breach. Subject to Section 5.02, the exclusive remedy of the
Noteholders, the Issuer, the Indenture Trustee, and the Eligible Lender Trustee
and the entire liability of Servicer for such a breach shall be limited to
requiring the Servicer to purchase Financed Student Loans pursuant to this
Section 3.05.
SECTION 3.06. Servicing Fee. The Servicing Fee for each
calendar month (the "Servicing Fee") shall be equal to the lesser of (I) one
twelfth of 1.0% of the aggregate principal balance of the Financed Student Loans
as of the last day of the preceding calendar month and (II) the sum of (i)
one-twelfth of the In-School Percentage of the principal balance of each
Financed Student Loan as of the last day of the preceding calendar month which
was an In-School Loan on such date or, if the average principal balance of the
In-School Loans as of such date was $2,500 or less, $1.50 per Borrower Account
for each such loan, (ii) one-twelfth of the GRDF Percentage of the principal
balance as of the last day of the preceding calendar month of each Financed
Student Loan which was a Grace, Repayment, Deferral
10
<PAGE>
or Forbearance Student Loan as of such date or, if the average principal balance
of such loans as of such date was $3,000 or less, $3.00 per Borrower Account for
each such loan, (iii) a fee of $1.00 for each notification sent by the Servicer
during the preceding calendar month on behalf of the Trust to a borrower
providing information to such borrower with respect to Federal Consolidation
Loan programs, (iv) a one-time fee of $75.00 for each Federal Consolidation Loan
originated by the Eligible Lender Trustee on behalf of the Trust during the
preceding calendar month, (v) a fee of $25.00 for each Financed Student Loan for
which, during the preceding calendar month, claim documentation was completed
and provided to the Guarantor or for which the Servicer performed bankruptcy or
ineligible Borrower Account processing (that, in the case of ineligible Borrower
Account processing, resulted in a demand letter being sent to the borrower), in
each case as required by the claims processing requirements of the Guarantor,
(vi) a fee of $.05 per Financed Student Loan for storing and warehousing the
applicable loan documentation for each such loan during the preceding calendar
month, (vii) a one-time fee of $2.00 for each Serial Loan transferred by the
Seller to the Trust during the preceding calendar month, (viii) a fee equal to
one-twelfth of the product of (a) the aggregate outstanding principal balance of
the Financed Student Loans as of the last day of the preceding calendar month
and (b) .05%, which fee will be payable so long as 34 C.F.R. ss. 682.413 or any
successor section remains in effect and (ix) a fee of $70.00 per hour for system
development requests made by the Eligible Lender Trustee on behalf of the Trust
and provided by the Servicer during the preceding calendar month. For purposes
of making the determinations set forth in clauses (i) and (ii) of the preceding
sentence, the "In-School Percentage" and "GRDF Percentage" shall each be
determined based on the average principal balance of the In-School Loans and the
Grace, Repayment, Deferral and Forbearance Loans, respectively, as of the last
day of the preceding calendar month, as follows:
11
<PAGE>
<TABLE>
<CAPTION>
Average Principal In-School Average Principal
Balance Percentage Balance GRDF Percentage
- - - --------------------------- ----------------- --------------------------- -----------------------
<C> <C> <C> <C>
$2,501 - $3,000 .625% $3,001 - $3,400 1.100%
$3,001 - $3,500 .525% $3,401 - $3,900 .950%
$3,501 - $4,000 .450% $3,901 - $4,400 .830%
$4,001 - $4,750 .375% $4,401 - $4,800 .740%
$4,751 - $5,500 .310% $4,801 - $5,400 .650%
$5,501 - $6,250 .260% $5,401 - $6,000 .575%
$6,251 and above .230% $6,001 - $6,600 .510%
$6,601 - $7,200 .475%
$7,201 - $10,000 .450%
$10,001 - $13,000 .350%
$13,001 and above .300%
</TABLE>
The Servicing Fee (together with any portion of the Servicing Fee that
remains unpaid from prior Monthly Payment Dates) will be payable on each
Interest Payment Date and will be paid solely out of Monthly Available Funds in
the case of each Monthly Payment Date that is not a Quarterly Payment Date (and
out of Available Funds in the case of each Quarterly Payment Date) and amounts
on deposit in the Reserve Account on such Monthly Payment Date (including each
Quarterly Payment Date) as provided in Sections 2(d)(iv)(A), 2(d)(v)(A) and
2(e)(iv)(A) of the Administration Agreement. To the extent that, for any Monthly
Payment Date, the Servicing Fee is the amount calculated as described in clause
(I) of the first sentence of the preceding paragraph, then an amount (the
"Servicing Fee Shortfall") equal to the excess of the amount described in clause
(II) of such sentence over the amount described in clause (I) of such sentence
shall be payable on the next succeeding Quarterly Payment Date (or if such
Monthly Payment Date is also a Quarterly Payment Date, on such Quarterly Payment
Date) from any remaining Reserve Account Excess as provided in Section 2(e)(i)
of the Administration Agreement. To the extent such remaining Available Funds
are insufficient to pay the Servicing Fee Shortfall on any Distribution Date,
the Seller shall be required to pay any unpaid Servicing Fee Shortfall directly
to the Servicer out of its own funds. The Servicer will be obligated to perform
its servicing obligations whether or not it receives any amounts in respect of
Servicing Fee Shortfalls.
SECTION 3.07. Servicer's Report. On or before the fifteenth
day of each month (or, if any such day is not a Business Day, on the next
succeeding Business Day), the Servicer shall deliver to the Administrator a
servicer's report with respect to the preceding calendar month containing all
information necessary for the Administrator to prepare the Administrator's
Certificate, referred to in Section 2(b)(ii) of
12
<PAGE>
the Administration Agreement, covering such preceding calendar
month.
SECTION 3.08. Annual Statement as to Compliance; Notice of
Default. (a) The Servicer shall deliver to the Eligible Lender Trustee and the
Indenture Trustee (with a copy to the Seller), on or before April 30 of each
year beginning April 30, 1997, an Officers' Certificate of the Servicer, dated
as of December 31 of the preceding year, stating that (i) a review of the
activities of the Servicer 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, 1996 or, as specified below, to September 30, 1996) and of its
performance has been made under such officers' supervision and (ii) to the best
of such officers' knowledge, based on such review, the Servicer has fulfilled
all its obligations under this Agreement in all material respects throughout
such year (or in the case of the first such Officer's Certificate, such shorter
period) or, if there has been a default in the fulfillment of any such
obligation, specifying each such default known to such officers and the nature
and status thereof; provided that, at the option of the Servicer, the Servicer
may date the initial such Officer's Certificate as of September 30, 1996, and,
in such case, shall deliver such Officer's Certificate on or before December 31,
1996 and thereafter shall deliver such Officer's Certificate, dated as of
September 30 of each succeeding year, on or before December 31 of such year. The
Indenture Trustee shall send a copy of each such Officers' Certificate and each
report referred to in this Section 3.08 to the Rating Agencies. A copy of each
such Officers' Certificate and each report referred to in this Section 3.08 may
be obtained by any Noteholder or Note Owner by a request in writing to the
Eligible Lender Trustee addressed to its Corporate Trust Office, together with
evidence satisfactory to the Eligible Lender Trustee that such Person is one of
the foregoing parties. Upon the telephone request of the Eligible Lender
Trustee, the Indenture Trustee will promptly furnish the Eligible Lender Trustee
a list of Noteholders as of the date specified by the Eligible Lender Trustee.
(b) The 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 Servicer of any
event which with the giving of notice or lapse of time, or both, would become a
Servicer Default under Section 6.01(1) or (2) or would cause the Servicer to
fail to meet any Rating Agency Condition.
13
<PAGE>
SECTION 3.09. Annual Independent Certified Public Accountants'
Report. The Servicer shall cause a firm of independent certified public
accountants, which may also render other services to the Servicer, the Seller or
their Affiliates, to deliver to the Eligible Lender Trustee and the Indenture
Trustee (with a copy to the Seller) within 180 days of the end of the Servicer's
regular fiscal-year ended September 30 or calendar-year audit period, an audit
report that encompasses the Servicer's portion of the annual Lender Audit (as
defined in the Higher Education Act), or any successor thereto, as required of a
lender under the Higher Education Act, for the preceding year (or, in the case
of the first such report, during the period from the Closing Date to December
31, 1996 or, as the case may be, to September 30, 1996). The Indenture Trustee
shall send a copy of each such report to the Rating Agencies.
Such report will also indicate that the firm is independent of
the Servicer within the meaning of the Code of Professional Ethics of the
American Institute of Certified Public
Accountants.
SECTION 3.10. Access to Certain Documentation and Information
Regarding Financed Student Loans. Upon at least three Business Days' prior
notice, the Servicer shall provide the Noteholders access to the Student Loan
Files in such cases where the Noteholders shall be required by applicable
statutes or regulations to review such documentation, as demonstrated by
evidence satisfactory to the Servicer in its reasonable judgment. Access shall
be afforded without charge, but only upon reasonable request and during the
normal business hours at the respective offices of the Servicer. Nothing in this
Section shall affect the obligation of the Servicer to observe any applicable
law prohibiting disclosure of information regarding the Obligors and the failure
of the Servicer to provide access to information as a result of such obligation
shall not constitute a breach of this Section.
SECTION 3.11. Servicer Expenses. The Servicer shall be
required to pay all expenses incurred by it in connection with its activities
hereunder, including fees and disbursements of independent accountants, taxes
imposed on the Servicer, and expenses incurred in connection with distributions
and reports to the Administrator or the Noteholders, as the case may be.
SECTION 3.12. Appointment of Subservicer. The Servicer may at
any time appoint a subservicer to perform all or any portion of its obligations
as Servicer hereunder; provided, however, that the Rating Agency Condition shall
have been satisfied in connection therewith; provided further that the Servicer
shall remain obligated and be liable to the Issuer, the
14
<PAGE>
Eligible Lender Trustee, the Indenture Trustee and the Noteholders for the
servicing and administering of the Financed Student Loans in accordance with the
provisions hereof without diminution of such obligation and liability by virtue
of the appointment of such subservicer and to the same extent and under the same
terms and conditions as if the Servicer alone were servicing and administering
the Financed Student Loans. The fees and expenses of the subservicer shall be as
agreed between the Servicer and its subservicer from time to time and none of
the Issuer, the Eligible Lender Trustee, the Indenture Trustee or the
Noteholders shall have any responsibility therefor.
ARTICLE IV
Deposits into the Collection Account
SECTION 4.01. Deposits into the Collection Account. (a) The
Servicer shall deposit into the Collection Account (in the case of clauses (i)
and (ii) within two Business Days of receipt of freely available funds
therefor):
(i) all identifiable payments received by the Servicer by or
on behalf of Obligors on the Financed Student Loans, including any
Guarantee Payments with respect to the Financed Student Loans;
(ii) all Liquidation Proceeds on the Financed Student
Loans;
(iii) with respect to Purchased Student Loans, the aggregate
Purchase Amounts, when such amounts are due, as provided in Section
3.05 hereof; and
(iv) all other amounts required to be deposited into
the Collection Account by the Servicer pursuant to the terms
hereof.
(b) The Eligible Lender Trustee shall deposit into the
Collection Account within two Business Days of the receipt thereof, the
aggregate amount of Interest Subsidy Payments and Special Allowance Payments
received by it with respect to the Financed Student Loans.
(c) The Seller shall deposit into the Collection Account, the
aggregate Purchase Amount with respect to Purchased Student Loans and all other
amounts to be paid by the Seller under Section 3.02 and 5.01 of the Loan Sale
Agreement when such amounts are due, as provided in Section 3.03 of the Loan
Sale Agreement.
15
<PAGE>
(d) The Indenture Trustee, at the written direction of the
Administrator, shall withdraw from the Collateral Reinvestment Account and
deposit into the Collection Account on each Determination Date during the
Revolving Period, an amount equal to the Capitalized Interest Amount for the
preceding Collection Period, as provided in Section 2(f) of the Administration
Agreement.
(e) The Indenture Trustee, at the written direction of the
Administrator, shall withdraw from the Collateral Reinvestment Account and
deposit into the Collection Account on any date during the Revolving Period
specified by the Administrator, such amounts as the Administrator may determine
are needed to make required distributions from Monthly Available Funds or
Available Funds, as the case may be, on Monthly Payment Dates.
ARTICLE V
The Servicer
SECTION 5.01. Representations of Servicer. The
---------------------------
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
Servicer as servicer hereunder. The representations speak as of
the execution and delivery of this Agreement and as of the
Closing Date in the case of the Initial Financed Student Loans,
and will be deemed to speak as of the applicable Transfer Date,
in the case of New Loans and Serial Loans, as of the date of the
relevant Assignment in the case of any Qualified Substitute
Student Loan, as of the date of origination in the case of any
Consolidation Loan added to the Trust during the Revolving Period
and as of the applicable Add-on Consolidation Loan Funding Date
in the case of any Consolidation Loan the principal balance of
which has been increased by the principal balance of a related
Add-on Consolidation Loan, 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 origination of
such Consolidation Loans) and the pledge thereof to the Indenture
Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Servicer is
duly organized and validly existing as a corporation in good
standing under the laws of the State of Delaware, with the
power and authority to own its properties and to conduct its
business as such properties are currently owned and such
16
<PAGE>
business is presently conducted, and has the legal right to
service the Financed Student Loans.
(b) Power and Authority of the Servicer. The 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 has been duly authorized by the Servicer by all
necessary corporate action.
(c) Binding Obligation. This Agreement constitutes a legal,
valid and binding obligation of the Servicer, enforceable in accordance
with its terms, subject to applicable bankruptcy, insolvency,
reorganization and similar laws relating to creditors' rights generally
and subject to general principles of equity.
(d) No Violation. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof
or thereof do not conflict with, result in any breach of any of the
terms and provisions of, nor constitute (with or without notice or
lapse of time or both) a default under, the certificate of
incorporation or by-laws of the Servicer, or any indenture, agreement
or other instrument to which the Servicer is a party or by which it
shall be bound; nor result in the creation or imposition of any Lien
upon any of its properties pursuant to the terms of any such indenture,
agreement or other instrument; nor violate any law or, to the knowledge
of the Servicer, any order, rule or regulation applicable to the
Servicer of any court or of any Federal or state regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Servicer or its properties. Performance by the
Servicer of its servicing duties with respect to the Financed Student
Loans, and compliance by the Servicer with the terms of this Agreement,
will not result in the loss of any Guarantee Payments by the Trust or
any reinsurance payments with respect to any Financed Student Loan by
the applicable Guarantor.
(e) No Proceedings. There are no proceedings or investigations
pending against the Servicer or, to its best knowledge, threatened
against the Servicer, before any court, regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over
the Servicer or its properties: (i) asserting the invalidity of this
Agreement or any of the other Basic Documents to which the Servicer is
a party, (ii) seeking to prevent the issuance of the Notes or the
consummation of any of the
17
<PAGE>
transactions contemplated by this Agreement, or any of the other Basic
Documents, (iii) seeking any determination or ruling that could reasonably be
expected to have a material and adverse effect on the performance by the
Servicer of its obligations under, or the validity or enforceability of, this
Agreement, any of the other Basic Documents or the Notes or (iv) seeking to
affect adversely the Federal or state income tax attributes of the Issuer or the
Notes.
(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
Servicer in connection with the execution and delivery by the Servicer
of this Agreement and the performance by the Servicer of its duties
contemplated by this Agreement have in each case been duly obtained,
effected or given and are in full force and effect.
SECTION 5.02. Indemnities of Servicer.
(a) The Servicer shall be liable in accordance herewith only to
the extent of the obligations specifically undertaken by the
Servicer under this Agreement.
The 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, or the Noteholders or any of the officers,
directors, employees and agents of the Issuer, the Eligible Lender Trustee, the
Indenture Trustee, the Administrator or the Seller to the extent that such loss,
liability or expense arose out of, or was imposed upon any such Person through,
the negligence, willful misfeasance or bad faith of the Servicer in the
performance of its obligations and duties under this Agreement or by reason of
the reckless disregard of its obligations and duties under this Agreement, where
the final determination that any such loss, liability or expense arose out of,
or was imposed upon any such Person through, any such negligence, willful
misfeasance, bad faith or recklessness on the part of the Servicer is
established by a court of law, by an arbitrator or by way of settlement agreed
to by the Servicer; provided, however, that the Servicer's obligation arising
under this Section 5.02 shall apply only to the extent that the sum of such
obligation and any other liabilities of the Servicer under this Agreement
exceeds the Servicer Liability Limit for any Servicer Liability Period (as such
terms are defined in Section 3.05). Notwithstanding the foregoing, if the
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
18
<PAGE>
war, fires, earthquakes and other disasters) to satisfy its obligations under
this Agreement, the 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 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 Loan Services as Servicer pursuant to Section
6.01, or a resignation by such Servicer pursuant to this Agreement, such
Servicer shall be deemed to be the Servicer pending appointment of a successor
Servicer pursuant to Section 6.02.
Liability of the Servicer under this Section shall survive the
resignation or removal of the Eligible Lender Trustee or the Indenture Trustee
or the termination of this Agreement and shall include reasonable fees and
expenses of counsel and expenses of litigation. If the Servicer shall have made
any indemnity payments pursuant to this Agreement and the Person to or on behalf
of whom such payments are made thereafter collects any of such amounts from
others, such person shall promptly repay such amounts to the Servicer, without
interest.
(b) Except with respect to liabilities relating to rejected
claims by the Guarantors, the Seller agrees to indemnify and hold harmless the
Servicer from any liability incurred by the Servicer under subsection (a) above
as a result of the Servicer's ordinary negligence.
SECTION 5.03. Merger or Consolidation of, or Assumption of the
Obligations of, Servicer. The Servicer hereby agrees that, upon (a) any merger
or consolidation of the Servicer into another Person, (b) any merger or
consolidation to which the Servicer shall be a party resulting in the creation
of another Person or (c) any Person succeeding to the properties and assets of
the Servicer substantially as a whole, the Servicer shall (i) cause such Person
(if other than the Servicer) to execute an agreement of assumption to perform
every obligation of the Servicer hereunder, (ii) deliver to the Eligible Lender
Trustee and Indenture Trustee an Officers' Certificate and an Opinion of Counsel
each stating that such consolidation, merger or succession and such agreement of
assumption comply with this Section and that all conditions precedent provided
for in this Agreement relating to such transaction have been complied with,
(iii) cause the Rating Agency Condition to have been satisfied with respect to
such transaction and (iv) cure any existing Servicer Default or any continuing
event which, after notice or lapse of time or both, would become a Servicer
Default. Upon compliance with the foregoing requirements, such Person shall be
19
<PAGE>
the successor to the Servicer under this Agreement without further act on the
part of any of the parties to this Agreement. Notwithstanding anything herein to
the contrary, compliance with clauses (i), (ii), (iii) and (iv) above shall be
conditions to the consummation of any of the transactions referred to in clause
(a), (b) or (c) above.
SECTION 5.04. Limitation on Liability of Servicer and Others.
Neither the Servicer nor any of the directors, officers, employees or agents of
the Servicer shall be under any liability to the Issuer or the Noteholders,
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 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 Servicer and any director, officer, employee or agent of the
Servicer may rely in good faith on any document of any kind prima facie properly
executed and submitted by any person respecting any matters arising under this
Agreement.
Except as provided in this Agreement, the Servicer shall not
be under any obligation to appear in, prosecute or defend any legal action that
shall not be incidental to its duties to service the Student Loans in accordance
with this Agreement, and that in its opinion may involve it in any expense or
liability; provided, however, that the 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 Noteholders
under the Indenture.
SECTION 5.05. Loan Services Not to Resign as Servicer. Subject
to the provisions of Section 5.03, Loan Services shall not resign from the
obligations and duties hereby imposed on it as 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 Loan Services shall be
communicated to the Eligible Lender Trustee, the Indenture Trustee and the
Rating Agencies at the earliest practicable time (and, if such communication is
not in writing, shall be confirmed in writing at the earliest practicable time)
and any such determination shall be evidenced by an Opinion of Counsel to such
effect delivered to the Eligible Lender Trustee and the Indenture Trustee
concurrently with or promptly after such notice. No such resignation shall
become effective until the Indenture Trustee or
20
<PAGE>
a Successor Servicer shall have assumed the responsibilities and obligations of
Loan Services in accordance with Section 6.02.
ARTICLE VI
Default
SECTION 6.01. Servicer Default. If any one of the
following events (a "Servicer Default") shall occur and be
continuing:
(a) any failure by the Servicer to deliver to the Indenture
Trustee for deposit in any of the Trust Accounts any payment required
by the Basic Documents, which failure continues unremedied for three
Business Days after written notice of such failure is received by the
Servicer from the Eligible Lender Trustee, the Indenture Trustee or the
Administrator or after discovery of such failure by an officer of the
Servicer; or
(b) any failure by the Servicer duly to observe or to perform
in any material respect any other covenants or agreements of the
Servicer set forth in this Agreement or any other Basic Document, which
failure shall (i) materially and adversely affect the rights of
Noteholders and (ii) continue unremedied for a period of thirty (30)
days after the date on which written notice of such failure, requiring
the same to be remedied, shall have been given (A) to the Servicer, by
the Indenture Trustee, the Eligible Lender Trustee or (B) to the
Servicer, and to the Indenture Trustee, the Administrator and the
Eligible Lender Trustee by Noteholders representing not less than 25%
of the Outstanding Amount of the Notes; or
(c) any limitation, suspension or termination by the
Department of the Servicer's eligibility to service Student Loans which
materially and adversely affects its ability to service the Financed
Student Loans; or
(d) an Insolvency Event occurs with respect to the
Servicer;
then, and in each and every case, so long as the Servicer Default shall not have
been remedied, either the Indenture Trustee or the Noteholders of Notes
evidencing not less than 75% of the Outstanding Amount of the Notes by notice
then given in writing to the Servicer (and to the Indenture Trustee and the
Eligible Lender Trustee if given by the Noteholders) may terminate all the
rights and obligations (other than the obligations set forth in
21
<PAGE>
Section 5.02) of the Servicer under this Agreement. On or after the receipt by
the Servicer of such written notice, all authority and power of the Servicer
under this Agreement, whether with respect to the Notes, the Financed Student
Loans or otherwise, shall, without further action, pass to and be vested in the
Indenture Trustee or such successor Servicer as may be appointed under Section
6.02; and, without limitation, the Indenture Trustee and the Eligible Lender
Trustee are hereby authorized and empowered to execute and deliver, for the
benefit of the predecessor 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 Servicer
shall cooperate with the successor Servicer, the Indenture Trustee and the
Eligible Lender Trustee in effecting the termination of the responsibilities and
rights of the predecessor Servicer under this Agreement, including the transfer
to the successor Servicer for administration by it of all cash amounts that
shall at the time be held by the predecessor 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 Student Loan Files to the successor Servicer and amending
this Agreement and any other Basic Documents to reflect such succession as
Servicer pursuant to this Section shall be paid by the predecessor Servicer upon
presentation of reasonable documentation of such costs and expenses. Upon
receipt of notice of the occurrence of a Servicer Default, the Eligible Lender
Trustee shall give notice thereof to the Rating Agencies.
SECTION 6.02. Appointment of Successor. (a) Upon receipt by
the Servicer of notice of termination pursuant to Section 6.01, or the
resignation by the Servicer in accordance with the terms of this Agreement, the
predecessor Servicer shall continue to perform its functions as Servicer under
this Agreement, in the case of termination, only until the date specified in
such termination notice or, if no such date is specified in a notice of
termination, until receipt of such notice and, in the case of resignation, until
the later of (x) the date 120 days from the delivery to the Eligible Lender
Trustee and the Indenture Trustee of written notice of such resignation (or
written confirmation of such notice) in accordance with the terms of this
Agreement and (y) the date upon which the predecessor Servicer shall become
unable to act as Servicer as specified in the notice of resignation and
accompanying Opinion of Counsel. In the event of the termination hereunder of
the Servicer, the Issuer shall appoint a successor Servicer acceptable to the
Indenture Trustee, and the successor
22
<PAGE>
Servicer shall accept its appointment by a written assumption in form acceptable
to the Indenture Trustee and the Administrator. In the event that a successor
Servicer has not been appointed at the time when the predecessor Servicer has
ceased to act as Servicer in accordance with this Section, the Indenture Trustee
without further action shall automatically be appointed the successor Servicer
and the Indenture Trustee shall be entitled to the Servicing Fee.
Notwithstanding the above, the Indenture Trustee shall, if it shall be unwilling
or legally unable so to act, appoint or petition a court of competent
jurisdiction to appoint, any established institution whose regular business
shall include the servicing of student loans, as the successor to the Servicer
under this Agreement; provided, however, that such right to appoint or to
petition for the appointment of any such successor Servicer shall in no event
relieve the Indenture Trustee from any obligations otherwise imposed on it under
the Basic Documents until such successor has in fact assumed such appointment.
(b) Upon appointment, the successor Servicer (including the
Indenture Trustee acting as successor Servicer) shall be the successor in all
respects to the predecessor Servicer and shall be subject to all the
responsibilities, duties and liabilities placed on the predecessor Servicer that
arise thereafter or are related thereto and shall be entitled to an amount
agreed to by such successor Servicer (which shall not exceed the Servicing Fee,
unless such compensation arrangements will not result in a downgrading of the
Notes by any Rating Agency) and all the rights granted to the predecessor
Servicer by the terms and provisions of this Agreement.
(c) The Servicer may not resign unless it is prohibited from
serving as such by law as evidenced by an Opinion of Counsel to such effect
delivered to the Indenture Trustee and the Eligible Lender Trustee.
Notwithstanding the foregoing or anything to the contrary herein or in the other
Basic Documents, the Indenture Trustee, to the extent it is acting as successor
Servicer pursuant hereto, shall be entitled to resign to the extent a qualified
successor Servicer has been appointed and has assumed all the obligations of the
Servicer in accordance with the terms of this Agreement and the other Basic
Documents.
SECTION 6.03. Notification to Noteholders and the Company.
Upon any termination of, or appointment of a successor to, the Servicer pursuant
to this Article VI, the Indenture Trustee shall give prompt written notice
thereof to Noteholders, the Administrator, the Company 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).
23
<PAGE>
SECTION 6.04. Waiver of Past Defaults. The Note holders of
Notes evidencing not less than a majority of the Outstanding Amount of the Notes
may, on behalf of all Noteholders, waive in writing any default by the Servicer
in the performance of its obligations hereunder, 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 Servicer Default arising therefrom shall be deemed to have
been remedied for every purpose of this Agreement. No such waiver shall extend
to any subsequent or other default or impair any right consequent thereto.
ARTICLE VII
Miscellaneous
SECTION 7.01. Amendment. This Agreement may be amended by the
Servicer and the Eligible Lender Trustee, with the consent of the Indenture
Trustee, but without the consent of any of the Noteholders, to cure any
ambiguity, to correct or supplement any provisions in this Agreement or for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions in this Agreement or of modifying in any manner the rights of
the Noteholders; provided, however, that such action shall not, as evidenced by
an Opinion of Counsel delivered to the Eligible Lender Trustee and the Indenture
Trustee, adversely affect in any material respect the interests of any
Noteholder.
This Agreement may also be amended from time to time by the
Servicer and the Eligible Lender Trustee, with the consent of the Indenture
Trustee, the consent of the Noteholders of Notes evidencing not less than a
majority of the Outstanding Amount of the Notes, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or of modifying in any manner the rights of the Noteholders;
provided, however, that no such amendment shall (a) increase or reduce in any
manner the amount of, or accelerate or delay the timing of, collections of
payments with respect to Financed Student Loans or distributions that shall be
required to be made for the benefit of the Noteholders or (b) reduce the
aforesaid percentage of the Outstanding Amount of the Notes, the Noteholders of
which are required to consent to any such amendment, without the consent of all
outstanding Noteholders.
Promptly after the execution of any such amendment or consent
(or, in the case of the Rating Agencies, five Business
24
<PAGE>
Days prior thereto), the Eligible Lender Trustee shall furnish written
notification of the substance of such amendment or consent to the Indenture
Trustee and each of the Rating Agencies.
It shall not be necessary for the consent of Noteholders
pursuant to this Section to approve the particular form of any proposed
amendment or consent, but it shall be sufficient if such consent shall approve
the substance thereof.
Prior to the execution of any amendment to this Agreement, the
Eligible Lender Trustee and the Indenture Trustee shall be entitled to receive
and rely upon an Opinion of Counsel stating that the execution of such amendment
is authorized or permitted by this Agreement and the Opinion of Counsel referred
to in Section 6.02(f) of the Loan Sale Agreement. The Eligible Lender Trustee
and the Indenture Trustee may, but shall not be obligated to, enter into any
such amendment which affects the Eligible Lender Trustee's or the Indenture
Trustee's, as applicable, own rights, duties or immunities under this Agreement
or otherwise.
SECTION 7.02. Protection of Interests in Trust. (a) The
Servicer shall not change its name, identity or corporate structure in any
manner that would, could or might make any financing statement or continuation
statement filed in accordance with Section 6.02(a) of the Loan Sale Agreement
seriously misleading within the meaning of ss.9-402(7) of the UCC, unless it
shall have given the Eligible Lender Trustee, the Indenture Trustee and the
Rating Agencies at least five days' prior written notice thereof and shall have
promptly filed appropriate amendments to all previously filed financing
statements or continuation statements.
(b) The Servicer shall have an obligation to give the Eligible
Lender Trustee and the Indenture Trustee at least sixty (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 any such amendment. The
Servicer shall at all times maintain each office from which it shall service
Financed Student Loans, and its principal executive office, within the United
States of America.
(c) The Servicer shall maintain accounts and records of each
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)
25
<PAGE>
reconciliation between payments or recoveries on (or with respect to) each
Financed Student Loan and the amounts from time to time deposited in the
Collection Account in respect of such Financed Student Loan.
(d) The Servicer shall, by use of a distinct identification
code, maintain its computer systems so that, from and after the time of sale
under this Agreement of the Financed Student Loans, the Servicer's master
computer records (including any backup archives) that refer to a Student Loan
shall indicate clearly the interest of the Issuer, the Eligible Lender Trustee
and the Indenture Trustee in such Student Loan and that such Student Loan is
owned by the Eligible Lender Trustee on behalf of the Issuer and has been
pledged to the Indenture Trustee. Indication of the Issuer's, the Eligible
Lender Trustee's and the Indenture Trustee's interest in a Student Loan shall be
deleted from or modified on the Servicer's computer systems when, and only when,
the related Financed Student Loan shall have been paid in full or repurchased.
(e) If at any time the Servicer shall propose to sell, grant a
security interest in, or otherwise transfer any interest in student loans to any
prospective purchaser, lender or other transferee, the Servicer shall give to
such prospective purchaser, lender or other transferee computer tapes, records
or printouts (including any restored from backup archives) that, if they shall
refer in any manner whatsoever to any Financed Student Loan, shall indicate
clearly that such Financed Student Loan has been sold and is owned by the
Eligible Lender Trustee on behalf of the Issuer and has been pledged to the
Indenture Trustee.
(f) The Servicer shall permit the Indenture Trustee and its
agents at any time during normal business hours to inspect, audit and make
copies of and abstracts from the Servicer's records regarding any Financed
Student Loan; provided, however, that the Servicer is given reasonable prior
notice of at least 3 Business Days.
(g) Upon request, at any time the Eligible Lender Trustee or
the Indenture Trustee shall have reasonable grounds to believe that such request
would be necessary in connection with its performance of its duties under the
Basic Documents, the Servicer shall furnish to the Eligible Lender Trustee or to
the Indenture Trustee (in each case, with a copy to the Administrator), within
five (5) Business Days, a list of all Financed Student Loans (by borrower social
security number, type of loan and date of issuance) then held as part of the
Trust, and shall cause the Administrator to furnish to the Eligible Lender
Trustee or to the Indenture Trustee, within 20 Business Days thereafter, a
comparison of such list to the list of Initial
26
<PAGE>
Financed Student Loans set forth in Schedule A to the Loan Sale Agreement as of
the Closing Date, and, for each Financed Student Loan that has been added to or
removed from the pool of loans held by the Eligible Lender Trustee on behalf of
the Issuer, information as to the date as of which and circumstances under which
each such Financed Student Loan was so added or removed.
SECTION 7.03. Notices. All demands, notices and communications
upon or to the Seller, NBD, the Servicer, the Eligible Lender Trustee, the
Indenture Trustee, the Administrator or the Rating Agencies under this Agreement
shall be in writing, personally delivered or mailed by certified mail, return
receipt requested (or in the form of telex or facsimile notice, followed by
written notice delivered as aforesaid), and shall be deemed to have been duly
given upon receipt;
(a) in the case of the Seller, to
USA Group Secondary Market Services, Inc.
8350 Craig Street
Indianapolis, Indiana 46250
Attention: President and Chief Executive Officer
Telephone: (317) 594-1981
Telecopy: (317) 594-1979
with a copy to:
Office of the General Counsel
USA Group, Inc.
11100 USA Parkway
Fishers, Indiana 46038
Attention: Glenn M. Sermersheim
Telephone: (317) 578-6988
Telecopy: (317) 578-6185
(b) in the case of NBD, to
NBD Bank, N.A., as
trustee for USA Group
Secondary Market Services, Inc.
One Indiana Square
Suite 631
Indianapolis, Indiana 46266
Attention: Robert H. Everitt
Telephone: (317) 266-6247
Telecopy: (317) 266-5931
(c) in the case of the Servicer, to
USA Group Loan Services, Inc.
7999 Knue Road
Indianapolis, Indiana 46250
27
<PAGE>
Attention: Fredric W. Gilbert
Telephone: (317) 841-6628
Telecopy: (317) 841-1784
with a copy to
Office of the General Counsel
USA Group, Inc.
11100 USA Parkway
Fishers, Indiana 46038
Attention: Charles T. Gleason
Telephone: (317) 578-6511
Telecopy: (317) 578-6185
(d) in the case of the Issuer, to
Student Loan Trust 1996-A
c/o Mr. Michael Majchrzak, Trustee
FCC National Bank
300 King Street
Wilmington, Delaware 19801,
with a copy to the Eligible Lender Trustee
at the Corporate Trust Office of the
Eligible Lender Trustee
(e) in the case of the Eligible Lender Trustee, at the
Corporate Trust Office of the Eligible Lender
Trustee;
(f) in the case of the Indenture Trustee, at its
Corporate Trust Office;
(g) in the case of the Administrator, to
USA Group Secondary Market Services, Inc.
8350 Craig Street
Indianapolis, Indiana 46250
Attention: President and Chief Executive Officer
Telephone: (317) 594-1981
Telecopy: (317) 594-1979
with a copy to:
Office of the General Counsel
USA Group, Inc.
11100 USA Parkway
Fishers, Indiana 46038
Attention: Glenn M. Sermersheim
Telephone: (317) 578-6988
Telecopy: (317) 578-6185
(h) in the case of Moody's, to
28
<PAGE>
Moody's Investors Service, Inc.
99 Church Street
New York, New York 10007
Attention: ABS Monitoring Department
Telephone: (212) 553-0300
Facsimile: (212) 553-4600
29
<PAGE>
(i) Fitch Investors Service, L.P.
One State Street Plaza
New York, New York 10004
Attention: Asset Back Monitoring Unit
Telephone: (212) 908-0500
Facsimile: (212) 480-4435
or, as to each of the foregoing, at such other address as shall be designated by
written notice to the other parties.
SECTION 7.04. Assignment. Notwithstanding anything to the
contrary contained herein, except as provided in the succeeding sentence, as
provided in Section 5.03 and as provided in the provisions of this Agreement
concerning the resignation of the Servicer, this Agreement may not be assigned
by the Servicer. This Agreement may only be assigned by the Eligible Lender
Trustee to its permitted successor pursuant to the Trust Agreement.
SECTION 7.05. Limitations on Rights of Others. The
-------------------------------
provisions of this Agreement are solely for the benefit of the
Servicer, the Issuer and the Eligible Lender Trustee and for the
benefit of the Administrator, the Indenture Trustee and the
Noteholders, as third party beneficiaries, and nothing in this
Agreement, whether express or implied, shall be construed to give
to any other Person any legal or equitable right, remedy or claim
in the Trust Estate or under or in respect of this Agreement or
any covenants, conditions or provisions contained herein.
SECTION 7.06. Severability. Any provision of this Agreement
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
SECTION 7.07. Separate Counterparts. This Agreement may be
executed by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument.
SECTION 7.08. Headings. The headings of the various
Articles and Sections herein are for convenience of reference
only and shall not define or limit any of the terms or provisions
hereof.
SECTION 7.09. Governing Law. This Agreement shall be
construed in accordance with the laws of the State of Indiana,
30
<PAGE>
without reference to its conflict of law provisions, and the obligations, rights
and remedies of the parties hereunder shall be determined in accordance with
such laws.
SECTION 7.10. Non-Petition Covenants. Notwithstanding any
prior termination of this Agreement, the Servicer shall not, prior to the date
which is one year and one day after the termination of this Agreement with
respect to the Issuer, acquiesce, petition or otherwise invoke or cause the
Issuer to invoke the process of any court or government authority for the
purpose of commencing or sustaining a case against the Issuer under any Federal
or state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Issuer or any substantial part of its property, or ordering the winding
up or liquidation of the affairs of the Issuer.
SECTION 7.11. Limitation of Liability of Eligible Lender
Trustee and Indenture Trustee. (a) Notwithstanding anything contained herein to
the contrary, this Agreement has been signed by The First National Bank of
Chicago not in its individual capacity but solely in its capacity as Eligible
Lender Trustee of the Issuer and in no event shall The First National Bank of
Chicago in its individual capacity or, except as expressly provided in the Trust
Agreement, as beneficial owner of the Issuer have any liability for the
representations, warranties, covenants, agreements or other obligations of the
Issuer hereunder or in any of the certificates, notices or agreements delivered
pursuant hereto as to all of which recourse shall be had solely to the assets of
the Issuer.
(b) Notwithstanding anything contained herein to the contrary,
this Agreement has been accepted by Bankers Trust Company not in its individual
capacity but solely as Indenture Trustee and in no event shall Bankers Trust
Company have any liability for the representations, warranties, covenants,
agreements or other obligations of the Issuer hereunder or in any of the
certificates, notices or agreements delivered pursuant hereto, as to all of
which recourse shall be had solely to the assets of the Issuer.
31
<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.
SMS STUDENT LOAN TRUST 1996-A,
by THE FIRST NATIONAL BANK
OF CHICAGO, not in its
individual capacity but
solely as Eligible Lender
Trustee on behalf of the
Trust,
by /s/ Jeffrey L. Kinney
Name: Jeffrey L. Kinney
Title: Assistant Vice President
USA GROUP LOAN SERVICES, INC.,
by /s/ Laura S. Blackburn
Name: Laura S. Blackburn
Title: Vice President
USA GROUP SECONDARY MARKET
SERVICES, INC.
by /s/ Cheryl E. Watson
Name: Cheryl E. Watson
Title: Vice President
32
<PAGE>
THE FIRST NATIONAL
BANK OF CHICAGO,
not in its
individual capacity but
solely as Eligible Lender
Trustee,
by /s/ Jeffrey L. Kinney
Name: Jeffrey L. Kinney
Title: Assistant Vice President
Acknowledged and accepted
as of the day and year first
above written:
BANKERS TRUST COMPANY, not in
its individual capacity but
solely as Indenture Trustee
by /s/ John Wallace
Name: John Wallace
Title: Asst. Vice President
33
<PAGE>
SCHEDULE A
The Servicer shall maintain each Student Loan File at one of the locations
listed below:
(a) USA Group Loan Services, Inc.
7999 Knue Road
Indianapolis, IN 46250
(b) USA Group Loan Services, Inc.
11100 USA Parkway
Fishers, IN 46038
(c) USA Group Loan Services, Inc.
c/o Records Management Services, Inc.
1165 S. Girls School Road
Indianapolis, IN 46231
34
INDENTURE
between
SMS STUDENT LOAN TRUST 1996-A,
as Issuer
and
BANKERS TRUST COMPANY,
not in its individual capacity but
solely as Indenture Trustee
Dated as of April 1, 1996
<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.......................................... 3
ARTICLE II
The Notes
SECTION 2.01. Form............................................. 3
SECTION 2.02. Execution, Authentication and Delivery........... 4
SECTION 2.03. Temporary Notes.................................. 4
SECTION 2.04. Registration; Registration of Transfer
and Exchange............................................ 5
SECTION 2.05. Mutilated, Destroyed, Lost or Stolen
Notes................................................... 7
SECTION 2.06. Persons Deemed Owner.............................. 9
SECTION 2.07. Payment of Principal and Interest;
Defaulted Interest; Noteholders' Interest
Rate Index Carryover................................... 9
SECTION 2.08. Cancellation..................................... 11
SECTION 2.09. Release of Collateral............................ 11
SECTION 2.10. Book-Entry Notes................................. 11
SECTION 2.11. Notices to Clearing Agency....................... 12
SECTION 2.12. Definitive Notes................................. 13
SECTION 2.13. Disposition of Company Note...................... 13
ARTICLE III
Covenants
SECTION 3.01. Payment to Noteholders........................... 13
SECTION 3.02. Maintenance of Office or Agency.................. 14
SECTION 3.03. Money for Payments To Be Held in Trust........... 14
SECTION 3.04. Existence........................................ 16
SECTION 3.05. Protection of Indenture Trust Estate............. 16
SECTION 3.06. Opinions as to Indenture Trust Estate............ 17
SECTION 3.07. Performance of Obligations; Servicing of
Student Loans........................ 18
SECTION 3.08. Negative Covenants............................... 20
SECTION 3.09. Annual Statement as to Compliance................ 21
SECTION 3.10. Issuer May Consolidate, etc., Only on
Certain Terms.......................................... 22
SECTION 3.11. Successor or Transferee.......................... 23
SECTION 3.12. No Other Business................................ 24
SECTION 3.13. No Borrowing..................................... 24
SECTION 3.14. Obligations of Servicer and
Administrator.......................................... 24
<PAGE>
SECTION 3.15. Guarantees, Loans, Advances and Other
Liabilities............................................ 24
SECTION 3.16. Capital Expenditures............................. 24
SECTION 3.17. Restricted Payments.............................. 24
SECTION 3.18. Notice of Events of Default...................... 25
SECTION 3.19. Further Instruments and Acts..................... 25
SECTION 3.20. Removal of Administrator......................... 25
ARTICLE IV
Satisfaction and Discharge
SECTION 4.01. Satisfaction and Discharge of Indenture.......... 26
SECTION 4.02. Application of Trust Money....................... 27
SECTION 4.03. Repayment of Moneys Held by Paying Agent
...................................................... 27
SECTION 4.04. Auction of Financed Student Loans................ 28
ARTICLE V
Remedies
SECTION 5.01. Events of Default................................ 28
SECTION 5.02. Acceleration of Maturity; Rescission and
Annulment............................ 30
SECTION 5.03. Collection of Indebtedness and Suits for
Enforcement by Indenture Trustee..... 30
SECTION 5.04. Remedies; Priorities............................. 33
SECTION 5.05. Optional Preservation of the Indenture
Trust Estate........................................... 35
SECTION 5.06. Limitation of Suits.............................. 36
SECTION 5.07. Unconditional Rights of Noteholders To
Receive Principal and Interest......................... 36
SECTION 5.08. Restoration of Rights and Remedies............... 37
SECTION 5.09. Rights and Remedies Cumulative................... 37
SECTION 5.10. Delay or Omission Not a Waiver................... 37
SECTION 5.11. Control by Noteholders........................... 37
SECTION 5.12. Waiver of Past Defaults.......................... 38
SECTION 5.13. Undertaking for Costs............................ 38
SECTION 5.14. Waiver of Stay or Extension Laws................. 39
SECTION 5.15. Action on Notes.................................. 39
SECTION 5.16. Performance and Enforcement of Certain
Obligations............................................ 39
ARTICLE VI
The Indenture Trustee
<PAGE>
SECTION 6.01. Duties of Indenture Trustee.......................40
SECTION 6.02. Rights of Indenture Trustee...................... 42
SECTION 6.03. Individual Rights of Indenture Trustee........... 43
SECTION 6.04. Indenture Trustee's Disclaimer................... 43
SECTION 6.05. Notice of Defaults............................... 43
SECTION 6.06. Reports by Indenture Trustee to
Noteholders............................................ 43
SECTION 6.07. Compensation and Indemnity....................... 44
SECTION 6.08. Replacement of Indenture Trustee................. 45
SECTION 6.09. Successor Indenture Trustee by Merger............ 46
SECTION 6.10. Appointment of Co-Trustee or Separate
Trustee................................................ 46
SECTION 6.11. Eligibility; Disqualification.................... 48
SECTION 6.12. Preferential Collection of Claims
Against Issuer......................................... 48
ARTICLE VII
Noteholders' Lists and Reports
SECTION 7.01. Issuer To Furnish Indenture Trustee
Names and Addresses of Noteholders..................... 48
SECTION 7.02. Preservation of Information;
Communications to Noteholders.......................... 49
SECTION 7.03. Reports by Issuer................................ 49
ARTICLE VIII
Accounts, Disbursements and Releases
SECTION 8.01. Collection of Money.............................. 50
SECTION 8.02. Trust Accounts................................... 50
SECTION 8.03. General Provisions Regarding Accounts............ 54
SECTION 8.04. Release of Indenture Trust Estate................ 55
SECTION 8.05. Opinion of Counsel............................... 56
ARTICLE IX
Supplemental Indentures
SECTION 9.01. Supplemental Indentures Without Consent
of Noteholders....................... 56
SECTION 9.02. Supplemental Indentures with Consent of
Noteholders.......................... 58
SECTION 9.03. Execution of Supplemental Indentures............. 60
SECTION 9.04. Effect of Supplemental Indenture................. 60
SECTION 9.05. Conformity with Trust Indenture Act.............. 60
SECTION 9.06. Reference in Notes to Supplemental
Indentures............................................. 60
ARTICLE X
Redemption of Notes
<PAGE>
SECTION 10.01. Redemption...................................... 61
SECTION 10.02. Form of Redemption Notice....................... 62
SECTION 10.03. Notes Payable on Redemption Date................ 62
ARTICLE XI
Miscellaneous
SECTION 11.01. Compliance Certificates and Opinions............ 62
SECTION 11.02. Form of Documents Delivered to
Indenture Trustee...................................... 65
SECTION 11.03. Acts of Noteholders............................. 66
SECTION 11.04. Notices to Indenture Trustee, Issuer
and Rating Agencies.................................... 66
SECTION 11.05. Notices to Noteholders; Waiver.................. 67
SECTION 11.06. Alternate Payment and Notice
Provisions............................................. 68
SECTION 11.07. Conflict with Trust Indenture Act............... 68
SECTION 11.08. Effect of Headings and Table of
Contents............................................... 68
SECTION 11.09. Successors and Assigns.......................... 68
SECTION 11.10. Separability.................................... 69
SECTION 11.11. Benefits of Indenture........................... 69
SECTION 11.12. [RESERVED]...................................... 69
SECTION 11.13. Governing Law................................... 69
SECTION 11.14. Counterparts.................................... 69
SECTION 11.15. Recording of Indenture.......................... 69
SECTION 11.16. Trust Obligations............................... 69
SECTION 11.17. No Petition..................................... 70
SECTION 11.18. Inspection...................................... 70
SCHEDULE I - Class A-1 Planned Principal Balances
EXHIBIT A-1 - Form of Class A-1 Note
EXHIBIT A-2 - Form of Class A-2 Note
EXHIBIT A-3 - Form of Subordinate Note
EXHIBIT B-1 - Class A-1 Depository Agreement
EXHIBIT B-2 - Class A-2 Depository Agreement
EXHIBIT B-3 - Subordinate Note Depository Agreement
EXHIBIT C - Form of Transferor Certificate
EXHIBIT D - Form of Investment Letter
<PAGE>
INDENTURE dated as of April 1, 1996, between SMS STUDENT LOAN TRUST
1996-A, a Delaware trust (the "Issuer"), and BANKERS TRUST COMPANY, a New York
banking corporation, as trustee and not in its individual capacity (the
"Indenture Trustee").
Each party agrees as follows for the benefit of the other party and for
the equal and ratable benefit of the holders of the Issuer's Class A-1 Floating
Rate Asset Backed Senior Notes (the "Class A-1 Notes"), Class A-2 Floating Rate
Asset Backed Senior Notes (the "Class A-2 Notes" and, together with the Class
A-1 Notes, the "Senior Notes") and Floating Rate Asset Backed Subordinate Notes
(the "Subordinate Notes" and, together with the Senior Notes, the "Notes"):
GRANTING CLAUSE
The Issuer (and, with respect to the Financed Student Loans, the
Eligible Lender Trustee) hereby Grants to the Indenture Trustee at the Closing
Date, as trustee for the benefit of the Noteholders, all the Issuer's right,
title and interest in and to the following:
(a) the Financed Student Loans, and all obligations of the
Obligors thereunder including all moneys paid thereunder on or after
the Cutoff Date (or, in the case of New Loans or Serial Loans, on and
after the related Subsequent Cutoff Date, in the case of Consolidation
Loans, on and after the related date of origination, in the case of
Consolidation Loans the principal balances of which have been increased
by the principal balances of any related Add-on Consolidation Loans, on
and after the related Add-on Consolidation Loan Funding Date, and in
the case of Qualified Substitute Student Loans, on and after the date
of assignment thereof to the Issuer);
(b) the Loan Sale Agreement, including the right of the Issuer
to cause the Seller to repurchase or substitute for, Financed Student
Loans from the Issuer under circumstances described therein;
(c) the Servicing Agreement, including the right of the Issuer
to cause the Servicer to purchase Financed Student Loans from the
Issuer under the circumstances described therein;
(d) each Guarantee Agreement, including the right of
the Issuer to cause the related Guarantor to make Guarantee
Payments in respect of the Financed Student Loans;
<PAGE>
(e) all funds on deposit from time to time in the Trust
Accounts, including the Reserve Account Initial Deposit, and in all
investments and proceeds thereof (including all income thereon); and
(f) all present and future claims, demands, causes and choses
in action in respect of any or all of the foregoing and all payments on
or under and all proceeds of every kind and nature whatsoever in
respect of any or all of the foregoing, including all proceeds of the
conversion, voluntary or involuntary, into cash or other liquid
property, all cash proceeds, accounts, accounts receivable, notes,
drafts, acceptances, chattel paper, checks, deposit accounts, insurance
proceeds, condemnation awards, rights to payment of any and every kind
and other forms of obligations and receivables, instruments and other
property which at any time constitute all or part of or are included in
the proceeds of any of the foregoing (collectively, the "Collateral").
The foregoing Grant is made in trust to secure the payment of principal
of and interest on, and any other amounts owing in respect of, the Notes,
equally and ratably without prejudice, priority or distinction, and to secure
compliance with the provisions of this Indenture, all as provided in this
Indenture.
The Indenture Trustee, as Indenture Trustee on behalf of the
Noteholders, acknowledges such Grant, accepts the trusts under this Indenture in
accordance with the provisions of this Indenture and agrees to perform its
duties required in this Indenture to the best of its ability to the end that the
interests of the Noteholders may be adequately and effectively protected.
ARTICLE I
Definitions and Usage
SECTION 1.01. Definitions and Usage. Except as otherwise specified
herein or as the context may otherwise require, capitalized terms used but not
defined herein are defined in Appendix A to the Administration Agreement, dated
as of April 1, 1996, among the Issuer, USA Group Secondary Market Services,
Inc., as Administrator, and the Indenture Trustee, which also contains rules as
to usage that shall be applicable herein.
SECTION 1.02. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
2
<PAGE>
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Notes.
"indenture security holder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Indenture Trustee.
"obligor" on the indenture securities means the Issuer and
any other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rule have
the meaning assigned to them by such definitions.
ARTICLE II
The Notes
SECTION 2.01. Form. The Class A-1 Notes, the Class A-2 Notes and the
Subordinate Notes, together with the Indenture Trustee's certificate of
authentication, shall be in substantially the form set forth in Exhibits A-1,
A-2 and A-3, respectively, with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture and may have such letters, numbers or other marks of identification
and such legends or endorsements placed thereon as may, consistently herewith,
be determined by the officers executing such Notes, as evidenced by their
execution of the Notes. Any portion of the text of any Note may be set forth on
the reverse thereof, with an appropriate reference thereto on the face of the
Note.
The Definitive Notes shall be typewritten, printed, lithographed or
engraved or produced by any combination of these methods (with or without steel
engraved borders), all as determined by the officers executing such Notes, as
evidenced by their execution of such Notes.
Each Note shall be dated the date of its authentication. The terms of
the Notes set forth in Exhibits A-1, A-2 and A-3 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.
3
<PAGE>
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
Class A-1 Notes for original issue in an aggregate principal amount of
$194,576,000, Class A-2 Notes for original issue in the aggregate principal
amount of 79,098,000 and Subordinate Notes for original issue in an aggregate
principal amount of $9,926,000. The aggregate principal amount of Class A- 1
Notes, Class A-2 Notes and Subordinate Notes outstanding at any time may not
exceed such respective amounts except as provided in Section 2.05.
Each Note shall be dated the date of its authentication. The Senior
Notes shall be issuable as registered Notes in the minimum denomination of
$1,000 and in integral multiples of $1,000 in excess thereof. The Subordinated
Notes shall be issuable as registered Notes in the minimum denomination of
$250,000 and in integral multiples of $1,000 in excess thereof except for the
Company Note.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by the Indenture Trustee by the manual signature of one of its
authorized signatories, and such certificate upon any Note shall be conclusive
evidence, and the only evidence, that such Note has been duly authenticated and
delivered hereunder.
SECTION 2.03. Temporary Notes. Pending the preparation of Definitive
Notes, the Issuer may execute, and upon receipt of an Issuer Order the Indenture
Trustee shall authenticate and deliver, temporary Notes which are printed,
lithographed, typewritten, mimeographed or otherwise produced, of the tenor of
the Definitive Notes in lieu of which they are issued and with such variations
not inconsistent with the terms of this Indenture as the officers executing such
Notes may determine, as evidenced by their execution of such Notes.
If temporary Notes are issued, the Issuer will cause Definitive Notes
to be prepared without unreasonable delay. After the preparation of Definitive
Notes, the temporary Notes shall be exchangeable for Definitive Notes upon
surrender of the temporary Notes at the office or agency of the Issuer to be
maintained as provided in Section 3.02, without charge to the Noteholder. Upon
surrender for cancellation of any one or more temporary Notes, the Issuer shall
execute and the Indenture
4
<PAGE>
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 and the restrictions on
transfers of the Subordinate Notes set forth herein, the Issuer shall provide
for the registration of Notes and the registration of transfers of Notes. The
Indenture Trustee shall be "Note Registrar" for the purpose of registering Notes
and transfers of Notes as herein provided. Upon any resignation of any Note
Registrar, the Issuer shall promptly appoint a successor or, if it elects not to
make such an appointment, assume the duties of Note Registrar.
If a Person other than the Indenture Trustee is appointed by the Issuer
as Note Registrar, the Issuer will give the Indenture Trustee prompt written
notice of the appointment of such Note Registrar and of the location, and any
change in the location, of the Note Register, and the Indenture Trustee shall
have the right to inspect the Note Register at all reasonable times and to
obtain copies thereof, and the Indenture Trustee shall have the right to rely
upon a certificate executed on behalf of the Note Registrar by an Executive
Officer thereof as to the names and addresses of the Noteholders and the
principal amounts and number of such Notes.
Subject to the restrictions and limitations set forth below, upon
surrender for registration of transfer of any Note at the office or agency of
the Issuer to be maintained as provided in Section 3.02, if the requirements of
Section 8-401(1) of the UCC are met, the Issuer shall execute, and the Indenture
Trustee shall authenticate and the Noteholder shall obtain from the Indenture
Trustee, in the name of the designated transferee or transferees, one or more
new Notes in any authorized denominations, of a like aggregate principal amount.
The Subordinate Notes have not been and will not be registered under
the Securities Act and will not be listed on any exchange. No transfer of a
Subordinate Note shall be made unless such transfer is made pursuant to an
effective registration statement under the Securities Act and any applicable
state securities laws or is exempt from the registration requirements under said
Act and such state securities laws. In the event that a transfer of a
Subordinate Note is to be made in reliance upon an exemption from the Securities
Act and state securities laws, in order to assure compliance with the Securities
Act and such laws, the Noteholder desiring to effect such transfer and such
Noteholder's prospective transferee shall each certify to the
5
<PAGE>
Indenture Trustee and the Issuer in writing the facts surrounding the transfer
in substantially the forms set forth in Exhibit C (the "Transferor Certificate")
and Exhibit D (the "Investment Letter"). No transfer of a Subordinate Note shall
be made unless the proposed transferee has confirmed that it is a "qualified
institutional buyer" defined in Rule 144A under the Securities Act. In the event
of a transfer of a Subordinate Note to a "qualified institutional buyer" that is
not made in reliance on Rule 144A, there shall also be delivered to the
Indenture Trustee an Opinion of Counsel that such transfer may be made pursuant
to an exemption from the Securities Act and state securities laws, which Opinion
of Counsel shall not be an expense of the Issuer, the Eligible Lender Trustee or
the Indenture Trustee (unless it is the transferee from whom such opinion is to
be obtained) or of the Seller; provided that such opinion of counsel in respect
of the applicable state securities laws may be a memorandum of law rather than
an opinion if such counsel is not licensed in the applicable jurisdiction. The
Seller shall cause the Administrator to provide to any Noteholder and any
prospective transferee of a Subordinate Note designated by any such Noteholder
information necessary to satisfy the condition to eligibility set forth in Rule
144A(d)(4) for transfer of any such Subordinate Note without registration
thereof under the Securities Act pursuant to the registration exemption provided
by Rule 144A. Each Noteholder desiring to effect such a transfer of a
Subordinate Note shall, and does hereby agree to, indemnify the Issuer, the
Eligible Lender Trustee, the Indenture Trustee and the Seller against any
liability that may result if the transfer is not so exempt or is not made in
accordance with federal and state securities laws.
Neither the Indenture Trustee nor the Note Registrar shall have any
responsibility to monitor or restrict the transfer of beneficial ownership in
any Subordinate Note an interest in which is transferable through the facilities
of the Clearing Agency.
The Issuer shall cause each Subordinate Note to contain a legend
stating that transfer of the Subordinate Notes is subject to certain
restrictions and referring prospective purchasers of the Notes to this Section
2.04 with respect to such restrictions.
At the option of the Noteholder, Notes may be exchanged for other Notes
in any authorized denominations, of a like aggregate principal amount, upon
surrender of the Notes to be exchanged at such office or agency. Whenever any
Notes are so surrendered for exchange, if the requirements of Section 8-401(1)
of the UCC are met, the Issuer shall execute, and the Indenture Trustee shall
authenticate and, the Noteholder shall obtain from the Indenture Trustee, the
Notes which the Noteholder making the exchange is entitled to receive.
6
<PAGE>
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.
Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed by, or be accompanied by a written instrument of
transfer in form satisfactory to the Note Registrar duly executed by the
Noteholder thereof or such Noteholder's attorney duly authorized in writing,
with such signature guaranteed by an "eligible guarantor institution" meeting
the requirements of the Note Registrar, which requirements include membership or
participation in Securities Transfer Agent's Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Note Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Exchange Act.
No service charge shall be made to a Noteholder for any registration of
transfer or exchange of Notes, but the Indenture Trustee may require payment of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of Notes,
other than exchanges pursuant to Section 2.03 or 9.06 not involving any
transfer.
The preceding provisions of this Section notwithstanding, the Issuer
shall not be required to make and the Note Registrar need not register transfers
or exchanges of Notes selected for redemption or of any Note for a period of 15
days preceding the due date for any payment with respect to the Note.
SECTION 2.05. Mutilated, Destroyed, Lost or Stolen Notes. If (i) any
mutilated Note is surrendered to the Indenture Trustee, or the Indenture Trustee
receives evidence to its satisfaction of the destruction, loss or theft of any
Note, and (ii) there is delivered to the Indenture Trustee such security or
indemnity as may be required by it to hold the Issuer and the Indenture Trustee
harmless, then, in the absence of notice to the Issuer, the Note Registrar or
the Indenture Trustee that such Note has been acquired by a bona fide purchaser,
and provided that the requirements of Section 8-405 of the UCC are met, the
Issuer shall execute and upon its request the Indenture Trustee shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Note, a replacement Note of the same category;
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
7
<PAGE>
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 Noteholder thereof of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other reasonable expenses (including the fees and expenses of
the Indenture Trustee) connected therewith.
Every replacement Note issued pursuant to this Section in replacement
of any mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Issuer, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes.
SECTION 2.06. Persons Deemed Owner. Prior to due presentment for
registration of transfer of any Note, the Issuer, the Indenture Trustee and any
agent of the Issuer or the Indenture Trustee may treat the Person in whose name
any Note is registered (as of the day of determination) as the owner of such
Note for the purpose of receiving payments of principal of, interest (and any
Noteholders' Interest Rate 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 Rate Index Carryover. (a) The Notes shall accrue interest
as provided in the forms of Class A-1 Note, Class A-2 Note and Subordinate Note
set forth in Exhibits A-1, A-2 and A-3, respectively, and such interest shall be
8
<PAGE>
payable (i) in the case of the LIBOR Based Notes, on each Monthly Payment Date
as specified therein and (ii) in the case of the Class A-1 Notes, on each
Quarterly Payment Date as specified therein, subject, in each case, to Section
3.01. Any installment of interest (and any Noteholders' Interest Rate Index
Carryover) or principal, if any, payable on any Note which is punctually paid or
duly provided for by the Issuer on the applicable Monthly Payment Date or
Quarterly 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 Quarterly
Payment Date or on the Class A-1 Note Final Maturity Date, the Class A-2 Note
Final Maturity Date or the Subordinate Note Final Maturity Date, as the case may
be, which shall be payable as provided below. The funds represented by any such
checks returned undelivered shall be held in accordance with Section 3.03.
(b) The principal of each Note shall be payable in installments on each
Quarterly Payment Date as provided in the forms of the Class A-1 Notes, Class
A-2 Notes and Subordinate Note set forth in Exhibits A-1, A-2 and A-3,
respectively. Notwithstanding the foregoing, the entire unpaid principal amount
of the Notes shall be due and payable, if not previously paid, on the date on
which an Event of Default shall have occurred and be continuing, if the
Indenture Trustee or the Noteholders of the Notes representing not less than a
majority of the Outstanding Amount of the Notes have declared the Notes to be
immediately due and payable in the manner provided in Section 5.02. All
principal payments on each class of Notes shall be made pro rata to the
Noteholders of such class. 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 Quarterly Payment Date on which the Issuer expects that the final
installment of principal of and interest (and any Noteholders' Interest Rate
Index Carryover) on such Note will be paid. Such notice shall be mailed or
transmitted by facsimile prior to such final Quarterly Payment Date and shall
specify that such final installment will be payable only upon presentation and
surrender of such Note and shall specify the place where such Note may be
presented and surrendered for payment of such installment. Notices in connection
with redemptions of Notes shall be mailed to Noteholders as provided in Section
10.02.
9
<PAGE>
(c) If the Issuer defaults in a payment of interest on the Notes, the
Issuer shall pay defaulted interest (plus interest on such defaulted interest to
the extent lawful) at the applicable Note Interest Rate in any lawful manner.
The Issuer may pay such defaulted interest to the persons who are Noteholders on
a subsequent special record date, which date shall be at least five Business
Days prior to the payment date. The Issuer shall fix or cause to be fixed any
such special record date and payment date, and, at least 15 days before any such
special record date, the Issuer shall mail to the Indenture Trustee a notice
which the Indenture Trustee will, as soon as practicable, distribute to each
Noteholder that states the special record date, the payment date and the amount
of defaulted interest to be paid.
(d) The Class A-1 Noteholders' Interest T-Bill Carryover on each
Quarterly Payment Date and the Class A-2 Noteholders' Interest LIBOR Carryover
and the Subordinate Noteholders' Interest LIBOR Carryover on each Monthly
Payment Date including, in the case of the Class A-1 Noteholders' Interest
T-Bill Carryover all such unpaid carryover for prior Quarterly Payment Dates and
interest accrued thereon at the Class A-1 T-Bill Note Rate for each applicable
Quarterly Interest Period and including, in the case of the Class A-2
Noteholders' Interest LIBOR Carryover and Subordinate Noteholders' Interest
LIBOR Carryover, all such unpaid carryover from prior Monthly Payment Dates and
interest accrued therein at the Class A-2 Note LIBOR Rate and Subordinate Note
LIBOR Rate, as applicable, for the applicable LIBOR Reset Period, shall be
payable on each Quarterly Payment Date solely to the extent of funds required
and available to be distributed to Noteholders by the Indenture Trustee pursuant
to Section 2(e)(ii)(b) (iii) of the Administration Agreement (and shall be
allocated among the classes of Notes as provided in Section 8.02(f)). Any
Noteholders' Interest Rate Index Carryover for a class of Notes, if any, payable
with respect to such class of Notes on the applicable Quarterly Payment 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
10
<PAGE>
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 ss.ss. 314(c) and 314(d)(1) or an Opinion of
Counsel in lieu of such Independent Certificates to the effect that the TIA does
not require any such Independent Certificates.
SECTION 2.10. 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
11
<PAGE>
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 Agreement. 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 Noteholders of
Notes evidencing a specified percentage of the Outstanding Amount of
the Notes, the Clearing Agency shall be deemed to represent such
percentage only to the extent that it has received instructions to such
effect from Note Owners and/or Clearing Agency Participants owning or
representing, respectively, such required percentage of the beneficial
interest in the Notes and has delivered such instructions to the
Indenture Trustee.
SECTION 2.11. Notices to Clearing Agency. Whenever a notice or other
communication to the Noteholders is required under this Indenture, unless and
until Definitive Notes shall have been issued to Note Owners pursuant to Section
2.12, the Indenture Trustee shall give all such notices and communications
specified herein to be given to Noteholders to the Clearing Agency.
SECTION 2.12. Definitive Notes. If (i) the Administrator advises the
Indenture Trustee in writing that the Clearing Agency is no longer willing or
able to properly discharge its responsibilities with respect to the Notes, and
the Administrator is unable to locate a qualified successor, (ii) the
Administrator at its option advises the Indenture Trustee in writing that it
elects to terminate the book-entry system through the Clearing Agency or (iii)
after the occurrence of an Event of Default, a Servicer Default or an
Administrator Default, Note Owners representing beneficial interests aggregating
at least a majority of the Outstanding Amount of the Notes advise the Clearing
Agency (which shall then notify the Indenture Trustee) in writing that the
continuation of a book-entry system through the Clearing Agency is no longer in
the best interests of the Note Owners, then the Indenture Trustee will cause the
Clearing Agency to notify all Note Owners, through the Clearing Agency, of the
occurrence of any such event and of the availability of Definitive Notes to Note
Owners requesting the same. Upon surrender to the Indenture Trustee of the
typewritten Notes representing the Book-Entry Notes by the Clearing Agency,
accompanied by registration instructions, the Issuer shall execute and the
Indenture Trustee shall authenticate the Definitive Notes in accordance with the
instructions of the Clearing Agency. None of the Issuer, the Note Registrar or
the
12
<PAGE>
Indenture Trustee shall be liable for any delay in delivery of such instructions
and may conclusively rely on, and shall be protected in relying on, such
instructions. Upon the issuance of Definitive Notes, the Indenture Trustee shall
recognize the holders of the Definitive Notes as Noteholders.
SECTION 2.13. Disposition of Company Note. On and after the Closing
Date, the Company shall retain the Company Note. Any attempt by the Company to
transfer the Company Note shall be void. The Company Note (and any Note issued
in exchange therefore) shall contain a legend stating "THIS NOTE IS
NONTRANSFERABLE."
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 Rate Index
Carryover (but only to the extent provided in Sections 2.07(d) and 8.02(f)) with
respect to the Notes in accordance with the terms of the Notes and this
Indenture. Without limiting the foregoing, subject to Section 8.02(f), the
Issuer will cause to be distributed that portion of the amounts on deposit in
the Trust Accounts on a Monthly Payment Date and a Quarterly Payment Date (other
than any Eligible Investments deposited therein that will mature on the Business
Day preceding a subsequent Monthly Payment Date) which the Noteholders are
entitled to receive pursuant to the Administration Agreement to Senior
Noteholders and Subordinate Noteholders in accordance with the Administration
Agreement and Section 8.02 hereof. Amounts properly withheld under the Code by
any Person from a payment to any Noteholder of interest (including any
Noteholders' Interest Rate Index Carryover) and/or principal shall be considered
as having been paid by the Issuer to such Noteholder for all purposes of this
Indenture.
SECTION 3.02. Maintenance of Office or Agency. The Issuer will maintain
in the Borough of Manhattan, The City of New York, an office or agency where
Notes may be surrendered for registration of transfer or exchange, and where
notices and demands to or upon the Issuer in respect of the Notes and this
Indenture may be served. The Issuer hereby initially appoints the Indenture
Trustee to serve as its agent for the foregoing purposes. The Issuer will give
prompt written notice to the Indenture Trustee of the location, and of any
change in the location, of any such office or agency. If at any time the Issuer
shall fail to maintain any such office or agency or shall fail to furnish the
Indenture Trustee with the address thereof, such surrenders, notices and demands
may be made or served at the
13
<PAGE>
Corporate Trust Office, and the Issuer hereby appoints the Indenture Trustee as
its agent to receive all such surrenders, notices and demands.
SECTION 3.03. Money for Payments To Be Held in Trust. As provided in
Section 8.02, 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 shall be made on behalf of the Issuer by the Indenture
Trustee or by another Paying Agent, and no amounts so distributed 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 Monthly Payment Date
or Quarterly Payment Date and Redemption Date, the Issuer shall distribute or
cause to be distributed to the Indenture Trustee (or any other Paying Agent) an
aggregate sum sufficient to pay the amounts then becoming due under the Notes,
such sum to be held in trust for the benefit of the Persons entitled thereto and
(unless the Paying Agent is the Indenture Trustee) shall promptly notify the
Indenture Trustee of its action or failure so to act.
The Issuer will cause each Paying Agent other than the Indenture
Trustee to execute and deliver to the Indenture Trustee an instrument in which
such Paying Agent shall agree with the Indenture Trustee (and if the Indenture
Trustee acts as Paying Agent, it hereby so agrees), subject to the provisions of
this Section, that such Paying Agent will:
(i hold all sums held by it for the payment of amounts
due with respect to the Notes in trust for the benefit of the Persons
entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and pay such sums to such
Persons as herein provided;
(ii give the Indenture Trustee notice of any default by
the Issuer of which it has actual knowledge (or any other obligor upon
the Notes) in the making of any payment required to be made with
respect to the Notes;
(iii at any time during the continuance of any such
default, upon the written request of the Indenture Trustee, forthwith
pay to the Indenture Trustee all sums so held in trust by such Paying
Agent;
(iv immediately resign as a Paying Agent and forthwith
pay to the Indenture Trustee all sums held by it in trust for the
payment of Notes if at any time it ceases to meet the standards
required to be met by a Paying Agent at the time of its appointment;
and
14
<PAGE>
(v comply with all requirements of the Code with
respect to the withholding from any payments made by it on any Notes of
any applicable withholding taxes imposed thereon and with respect to
any applicable reporting requirements in connection therewith.
The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by Issuer
Order direct any Paying Agent to pay to the Indenture Trustee all sums held in
trust by such Paying Agent, such sums to be held by the Indenture Trustee upon
the same trusts as those upon which the sums were held by such Paying Agent; and
upon such payment by any Paying Agent to the Indenture Trustee, such Paying
Agent shall be released from all further liability with respect to such money.
Subject to applicable laws with respect to escheat of funds, any money
held by the Indenture Trustee or any Paying Agent in trust for the payment of
any amount due with respect to any Note and remaining unclaimed for two years
after such amount has become due and payable shall be discharged from such trust
and be paid to the Issuer on Issuer Request; and the Noteholder thereof shall
thereafter, as an unsecured general creditor, look only to the Issuer for
payment thereof (but only to the extent of the amounts so paid to the Issuer),
and all liability of the Indenture Trustee or such Paying Agent with respect to
such trust money shall thereupon cease; provided, however, that the Indenture
Trustee or such Paying Agent, before being required to make any such repayment,
shall at the expense and direction of the Issuer cause to be published once, in
a newspaper published in the English language, customarily published on each
Business Day and of general circulation in The City of New York, notice that
such money remains unclaimed and that, after a date specified therein, which
shall not be less than 30 days from the date of such publication, any unclaimed
balance of such money then remaining will be repaid to the Issuer. The Indenture
Trustee shall also adopt and employ, at the expense of the Issuer, any other
reasonable means of notification of such repayment (including mailing notice of
such repayment to Noteholders whose Notes have been called but have not been
surrendered for redemption or whose right to or interest in moneys due and
payable but not claimed is determinable from the records of the Indenture
Trustee or of any Paying Agent, at the last address of record for each such
Noteholder).
SECTION 3.04. Existence. The Issuer will keep in full effect its
existence, rights and franchises as a trust under the laws of the State of
Delaware (unless it becomes, or any successor Issuer hereunder is or becomes,
organized under the laws of any other State or of the United States of America,
in which case the Issuer will keep in full effect its existence, rights and
franchises under the laws of such other jurisdiction)
15
<PAGE>
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 Noteholders in
such Indenture Trust Estate against the claims of all persons and
parties. It shall be the responsibility of the Issuer to prepare such
instruments.
The Issuer hereby designates the Indenture Trustee its agent and
attorney-in-fact to execute any financing statement, continuation statement or
other instrument required to be executed pursuant to this Section.
SECTION 3.06. Opinions as to Indenture Trust Estate. (a) On the Closing
Date, the Issuer shall furnish to the Indenture Trustee an Opinion of Counsel
either stating that, in the opinion of such counsel, such action has been taken
with respect to the recording and filing of this Indenture, any indentures
supplemental hereto, and any other requisite documents, and with respect to the
execution and filing of any financing statements and continuation statements, as
are necessary to perfect and make effective the lien and security interest of
this Indenture and reciting the details of such action, or stating that, in the
opinion of such counsel, no such action is necessary to make such lien and
security interest effective.
(b) On or before April 30 in each calendar year, beginning in 1997, the
Issuer shall furnish to the Indenture Trustee an Opinion of Counsel either
stating that, in the opinion of such counsel, such action has been taken with
respect to the recording, filing, re-recording and refiling of this Indenture,
16
<PAGE>
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; Servicing of Student Loans.
(a) The Issuer will not take any action and will use its best efforts not to
permit any action to be taken by others that would release any Person from any
of such Person's material covenants or obligations under any instrument or
agreement included in the Indenture Trust Estate or that would result in the
amendment, hypothecation, subordination, termination or discharge of, or impair
the validity or effectiveness of, any such instrument or agreement, except as
expressly provided in this Indenture, the Loan Sale Agreement, the 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 Servicer and the Administrator to assist the
Issuer in performing its duties under this Indenture.
(c) The Issuer will punctually perform and observe all its obligations
and agreements contained in this Indenture, the other Basic Documents and in the
instruments and agreements included in the Indenture Trust Estate, including
filing or causing to be filed all UCC financing statements and continuation
statements required to be filed by the terms of this Indenture, the Loan Sale
Agreement and the Servicing Agreement in accordance with and within the time
periods provided for herein and therein. Except as otherwise expressly provided
therein, the Issuer shall not waive, amend, modify, supplement or terminate any
Basic Document or any provision thereof without the consent of the Indenture
Trustee or the Noteholders of at least a majority of the Out standing Amount of
the Notes.
(d) If the Issuer shall have knowledge of the occurrence of
a Servicer Default under the Servicing Agreement, or an
Administrator Default under the Administration Agreement, the
17
<PAGE>
Issuer shall promptly notify the Indenture Trustee and the Rating Agencies
thereof, and shall specify in such notice the action, if any, the Issuer is
taking with respect to such default. If a Servicer Default shall arise from the
failure of the Servicer to perform any of its duties or obligations under the
Servicing Agreement with respect to the Financed Student Loans, the Issuer shall
take all reasonable steps available to it to enforce its rights under the Basic
Documents in respect of such failure.
(e) As promptly as possible after the giving of notice of termination
to the Servicer of the Servicer's rights and powers pursuant to Section 6.01 of
the Servicing Agreement, the Issuer shall appoint a successor servicer (the
"Successor Servicer"), and such Successor Servicer shall accept its appointment
by a written assumption in a form acceptable to the Indenture Trustee. In the
event that a Successor Servicer has not been appointed and accepted its
appointment at the time when the Servicer ceases to act as Servicer, the
Indenture Trustee without further action shall automatically be appointed the
Successor Servicer. The Indenture Trustee may resign as the Servicer by giving
written notice of such resignation to the Issuer and in such event will be
released from such duties and obligations, such release not to be effective
until the date a new servicer enters into an agreement with the Issuer as
provided below; provided, however, that nothing herein shall require or permit
the Indenture Trustee to act as Servicer, or otherwise service the Financed
Student Loans, in violation of the Higher Education Act. Upon delivery of any
such notice to the Issuer, the Issuer shall obtain a new servicer as the
Successor Servicer under the Servicing Agreement. Any Successor Servicer other
than the Indenture Trustee shall (i) be an established institution (A) that
satisfies any requirements of the Higher Education Act applicable to servicers,
(B) the appointment of which satisfies the Rating Agency Condition and (C) whose
regular business includes the servicing or administration of student loans and
(ii) enter into a servicing agreement with the Issuer having substantially the
same provisions as the provisions of the Servicing Agreement applicable to the
Servicer. If within 30 days after the delivery of the notice referred to above,
the Issuer shall not have obtained such a new servicer, the Indenture Trustee
may appoint or may petition a court of competent jurisdiction to appoint, a
Successor Servicer; 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 Servicing
Agreement, and in accordance with Section 6.02 of the Servicing Agreement, the
Issuer shall enter into an agreement with such successor for the servicing of
the
18
<PAGE>
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 Servicer's duties as servicer with respect to the Financed Student
Loans, it shall do so in its individual capacity and not in its capacity as
Indenture Trustee and, accordingly, the provisions of Article VI hereof shall be
inapplicable to the Indenture Trustee in its duties as the successor to the
Servicer and the servicing of the Financed Student Loans. In case the Indenture
Trustee shall become successor to the Servicer under the Servicing Agreement,
the Indenture Trustee shall be entitled to appoint as Servicer any one of its
affiliates, provided that such appointment shall not affect or alter in any way
the liability of the Indenture Trustee as a successor for the performance of the
duties and obligations of the Servicer in accordance with the terms hereof.
(f) Upon any termination of the Servicer's rights and powers pursuant
to the Servicing Agreement, the Issuer shall promptly notify the Indenture
Trustee. As soon as a Successor Servicer is appointed, the Issuer shall notify
the Indenture Trustee of such appointment, specifying in such notice the name
and address of such Successor Servicer.
(g) Without derogating from the absolute nature of the assignment
granted to the Indenture Trustee under this Indenture or the rights of the
Indenture Trustee hereunder, the Issuer agrees that it will not, without the
prior written consent of the Indenture Trustee or the Noteholders of at least a
majority in Outstanding Amount of the Notes, amend, modify, waive, supplement,
terminate or surrender, or agree to any amendment, modification, supplement,
termination, waiver or surrender of, the terms of any Collateral or the Basic
Documents, except to the extent otherwise provided in the Servicing Agreement,
or waive timely performance or observance by the Servicer, the Seller, the
Issuer, the Administrator or the Eligible Lender Trustee under the Loan Sale
Agreement, the Servicing Agreement or the Administration Agreement; provided,
however, that no such amendment shall (i) increase or reduce in any manner the
amount of, or accelerate or delay the timing of, distributions that are required
to be made for the benefit of the Noteholders, or (ii) reduce the aforesaid
percentage of the Notes which are required to consent to any such amendment,
without the consent of the Noteholders of all the Outstanding Notes. If any such
amendment, modification, supplement or waiver shall be so consented to by the
Indenture Trustee or such Noteholders, the Issuer agrees, promptly following a
request by the Indenture Trustee to do so, to execute and deliver, in its own
name and at its own expense, such agreements, instruments, consents and other
documents as the Indenture Trustee may deem necessary or appropriate in the
circumstances.
19
<PAGE>
SECTION 3.08. Negative Covenants. So long as any Notes are
Outstanding, the Issuer shall not:
(i except as expressly permitted by this Indenture or
any other Basic Document, sell, transfer, exchange or otherwise dispose
of any of the properties or assets of the Issuer, including those
included in the Indenture Trust Estate, unless directed to do so by the
Indenture Trustee (which direction the Indenture Trustee shall not give
without the consent of each of the Rating Agencies);
(ii claim any credit on, or make any deduction from the
principal or interest (including any Noteholders' Interest Rate 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 Noteholder by
reason of the payment of the taxes levied or assessed upon any part of
the Indenture Trust Estate; or
(iii (A) permit the validity or effectiveness of this
Indenture to be impaired, or permit the lien of this Indenture to be
amended, hypothecated, subordinated, terminated or discharged, or
permit any Person to be released from any covenants or obligations with
respect to the Notes under this Indenture except as may be expressly
permitted hereby, (B) permit any lien, charge, excise, claim, security
interest, mortgage or other encumbrance (other than the lien of this
Indenture) to be created on or extend to or otherwise arise upon or
burden the Indenture Trust Estate or any part thereof or any interest
therein or the proceeds thereof (other than tax liens and other liens
that arise by operation of law, in each case arising solely as a result
of an action or omission of the related Obligor, and other than as
expressly permitted by the Basic Documents) or (C) permit the lien of
this Indenture not to constitute a valid first priority (other than
with respect to any such tax or other lien) security interest in the
Indenture Trust Estate.
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 1996), 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
20
<PAGE>
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 Rate 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 tax
consequence to the Issuer or any Noteholder;
(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:
21
<PAGE>
(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 Rate
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 Noteholders, (D) unless otherwise
provided in such supplemental indenture, expressly agrees to indemnify,
defend and hold harmless the Issuer against and from any loss,
liability or expense arising under or related to this Indenture and the
Notes and (E) expressly agrees by means of such supplemental indenture
that such Person (or if a group of Persons, then one specified Person)
shall make all filings with the Commission (and any other appropriate
Person) required by the Exchange Act in connection with the Notes;
(ii immediately after giving effect to such
transaction, no Default shall have occurred and be
continuing;
(iii the Rating Agency Condition shall have been
satisfied with respect to such transaction;
(iv the Issuer shall have received an Opinion of Counsel
(and shall have delivered copies thereof to the Indenture Trustee) to
the effect that such transaction will not have any material adverse tax
consequence to the Issuer or any Noteholder;
(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).
22
<PAGE>
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), SMS Student Loan Trust 1996-A will be
released from every covenant and agreement of this Indenture to be observed or
performed on the part of the Issuer with respect to the Notes immediately upon
the delivery by the Issuer of written notice to the Indenture Trustee stating
that SMS Student Loan Trust 1996-A is to be so released.
SECTION 3.12. No Other Business. The Issuer shall not engage in any
business other than financing, purchasing, owning, selling and managing the
Financed Student Loans, and originating Consolidation Loans during the Revolving
Period, 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 Servicer and Administrator. The Issuer
shall cause the Servicer to comply with Sections 3.07, 3.08, 3.09 and 3.10 of
the Servicing Agreement and shall cause the Administrator to comply with Section
2(g) of the Administration Agreement.
SECTION 3.15. Guarantees, Loans, Advances and Other Liabilities. Except
as contemplated by the Basic Documents or this Indenture, the Issuer shall not
make any loan or advance or credit to, or guarantee (directly or indirectly or
by an instrument having the effect of assuring another's payment or performance
on any obligation or capability of so doing or otherwise), endorse or otherwise
become contingently liable, directly or indirectly, in connection with the
obligations, stocks or dividends of, or own, purchase, repurchase or acquire (or
agree contingently to do so) any stock, obligations, assets or securities of, or
any other interest in, or make any capital contribution to, any other Person.
SECTION 3.16. Capital Expenditures. The Issuer shall not
make any expenditure (by long-term or operating lease or
otherwise) for capital assets (either realty or personalty).
SECTION 3.17. Restricted Payments. The Issuer shall not,
directly or indirectly, (i) pay any dividend or make any
23
<PAGE>
distribution (by reduction of capital or otherwise), whether in cash, property,
securities or a combination thereof, to the Eligible Lender Trustee or any owner
of a beneficial interest in the Issuer or otherwise with respect to any
ownership or equity interest or security in or of the Issuer or to the Servicer
or the Administrator, (ii) redeem, purchase, retire or otherwise acquire for
value any such ownership or equity interest or security or (iii) set aside or
otherwise segregate any amounts for any such purpose; provided, however, that
the Issuer may make, or cause to be made, distributions to the Servicer, the
Eligible Lender Trustee, the Indenture Trustee, the Noteholders, the
Administrator, the Seller and the Company as contemplated by, and to the extent
funds are available for such purpose under, the Loan Sale Agreement, the
Servicing Agreement or the Administration Agreement. The Issuer will not,
directly or indirectly, make payments to or distributions from the Collection
Account or the Collateral Reinvestment Account except in accordance with this
Indenture and the other Basic Documents.
SECTION 3.18. Notice of Events of Default. The Issuer shall give the
Indenture Trustee and the Rating Agencies prompt written notice of each Event of
Default hereunder and each default on the part of the Seller, the Servicer or
the Administrator of its obligations under the Loan Sale Agreement, the
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. The Indenture Trustee shall
provide notice to the Noteholders of each default or other event of which it
receives notice pursuant to this Section 3.18, promptly after receipt of such
Notice.
SECTION 3.19. Further Instruments and Acts. Upon request of the
Indenture Trustee, the Issuer will execute and deliver such further instruments
and do such further acts as may be reasonably necessary or proper to carry out
more effectively the purpose of this Indenture.
SECTION 3.20. Removal of Administrator. So long as any Notes are
Outstanding, the Issuer shall not remove the Administrator without cause unless
the Rating Agency Condition shall have been satisfied in connection with such
removal.
24
<PAGE>
ARTICLE IV
Satisfaction and Discharge
SECTION 4.01. Satisfaction and Discharge of Indenture. This Indenture
shall cease to be of further effect with respect to the Notes except as to (i)
rights of registration of transfer and exchange, (ii) substitution of mutilated,
destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments
of principal thereof and interest (including any Noteholders' Interest Rate
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 Noteholders as beneficiaries hereof with respect to the property so deposited
with the Indenture Trustee payable to all or any of them, and the Indenture
Trustee, on demand of and at the expense of the Issuer, shall execute proper
instruments acknowledging satisfaction and discharge of this Indenture with
respect to the Notes, when:
(A) either
(1) all Notes theretofore authenticated and delivered
(other than (i) Notes that have been destroyed, lost or stolen
and that have been replaced or paid as provided in Section
2.05 and (ii) Notes for whose payment money has theretofore
been deposited in trust or segregated and held in trust by the
Issuer and thereafter repaid to the Issuer or discharged from
such trust, as provided in Section 3.03) have been delivered
to the Indenture Trustee for cancellation; or
(2) all Notes not theretofore delivered to the
Indenture Trustee for cancellation
(i have become due and payable,
(ii will become due and payable at the
Class A-1 Note Final Maturity Date, Class A-2 Note
Final Maturity Date or the Subordinate Note 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,
25
<PAGE>
and the Issuer, in the case of (i), (ii) or (iii) above, has
irrevocably deposited or caused to be irrevocably deposited
with the Indenture Trustee cash or direct obligations of or
obligations guaranteed by the United States of America (which
will mature prior to the date such amounts are payable), in
trust for such purpose, in an amount sufficient to pay and
discharge the entire indebtedness on such Notes not
theretofore delivered to the Indenture Trustee for
cancellation as of such day of discharge or when due on the
Class A-1 Note Final Maturity Date, Class A-2 Note Final
Maturity Date or the Subordinate Note Final Maturity Date, as
the case may be;
(B) the Issuer has paid or caused to be paid all
other sums payable hereunder by the Issuer; and
(C) the Issuer has delivered to the Indenture Trustee
an Officers' Certificate of the Issuer, an Opinion of Counsel
and (if required by the TIA or the Indenture Trustee) an
Independent Certificate from a firm of certified public
accountants, each meeting the applicable requirements of
Section 11.01(a) and, subject to Section 11.02, each stating
that all conditions precedent herein provided for relating to
the satisfaction and discharge of this Indenture have been
complied with.
SECTION 4.02. Application of Trust Money. All moneys deposited with the
Indenture Trustee pursuant to Section 4.01 hereof shall be held in trust and
applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Paying Agent, as the
Indenture Trustee may determine, to the Noteholders of the particular Notes for
the payment or redemption of which such 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 Rate Index Carryover); but such
moneys need not be segregated from other funds except to the extent required
herein, in the Servicing Agreement or the Administration Agreement or required
by law.
SECTION 4.03. Repayment of Moneys Held by Paying Agent. In
----------------------------------------
connection with the satisfaction and discharge of this Indenture
with respect to the Notes, all moneys then held by any Paying
Agent other than the Indenture Trustee under the provisions of
this Indenture with respect to such Notes shall, upon demand of
the Issuer, be paid to the Indenture Trustee to be held and
applied according to Section 3.03 and thereupon such Paying Agent
shall be released from all further liability with respect to such
moneys.
26
<PAGE>
SECTION 4.04. Auction of Financed Student Loans. The Indenture Trustee
shall offer the Financed Student Loans for sale as of the last day of the
Collection Period that ends in March 2006 and shall accept bids on behalf of the
Issuer for such purpose. If with respect to the last date of such Collection
Period, the Indenture Trustee receives no bid to purchase the Financed Student
Loans, or no bid that it may, as specified below, accept, the Indenture Trustee
may at its discretion, but shall not be obligated to, offer the Financed Student
Loans for sale as of the last day of each, or any, of the succeeding Collection
Periods until a bid is received that may, as specified below, be accepted by the
Indenture Trustee. With respect to any attempt to arrange for the purchase of
the Financed Student Loans, the Indenture Trustee shall accept the highest bid
submitted so long as (i) at least two bids to purchase the Financed Student
Loans as of the last day of the applicable Collection Period are received and
(ii) the highest such bid is at least equal to the Minimum Purchase Price as of
the last day of the applicable Collection Period. Any attempt to arrange for the
purchase of the Financed Student Loans and the consummation of any such sale
shall be conducted by the Indenture Trustee in a commercially reasonable manner.
The Indenture Trustee shall provide notice of any such attempt at least 60 days
prior to the last day of the related Collection Period to the Seller, the
Company, the Servicer, the Eligible Lender Trustee, the Rating Agencies, and
each Noteholder, and any such Person or their respective Affiliates or any other
Person may submit a timely bid for the purchase of the Financed Student Loans.
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, any
Noteholders' Interest Rate 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
27
<PAGE>
(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 (or, in the circumstances provided below, 90) days after
there shall have been given, by registered or certified mail, to the
Issuer by the Indenture Trustee or to the Issuer and the Indenture
Trustee by the Noteholders of at least 25% of the Outstanding Amount of
the Notes, a written notice specifying such default or incorrect
representation or warranty and requiring it to be remedied and stating
that such notice is a notice of Default hereunder; provided, that, if
at the end of such thirty day period, the Indenture Trustee determines
that a good faith effort to cure or eliminate the Default has
commenced, the Indenture Trustee may extend such 30-day period to 90
days; 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.
28
<PAGE>
SECTION 5.02. Acceleration of Maturity; Rescission and Annulment. If an
Event of Default should occur and be continuing, then and in every such case the
Indenture Trustee or the Noteholders of Notes representing not less than 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 Noteholders), and upon any such declaration the
unpaid principal amount of such Notes, together with accrued and unpaid interest
thereon through the date of acceleration, shall become immediately due and
payable.
At any time after such declaration of acceleration of maturity has been
made and before a judgment or decree for payment of the money due has been
obtained by the Indenture Trustee as hereinafter in this Article V provided, the
Noteholders of Notes representing a majority of the Outstanding Amount of the
Notes, by written notice to the Issuer and the Indenture Trustee, may rescind
and annul such declaration and its consequences if:
(i the Issuer has paid or deposited with the
Indenture Trustee a sum sufficient to pay:
(A) all payments of principal of and interest on all
Notes and all other amounts that would then be due 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, any Noteholders' Interest Rate 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
29
<PAGE>
the Noteholders, the whole amount then due and payable on such Notes for
principal and interest (and any Noteholders' Interest Rate 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 Rate 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 Noteholders, by
such appropriate Proceedings as the Indenture Trustee shall deem most effective
to protect and enforce any such rights, whether for the specific enforcement of
any covenant or agreement in this Indenture or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy or legal or
equitable right vested in the Indenture Trustee by this Indenture or by law.
(d) In case there shall be pending, relative to the Issuer or any other
obligor upon the Notes or any Person having or claiming an ownership interest in
the Indenture Trust Estate, Proceedings under Title 11 of the United States Code
or any other applicable Federal or state bankruptcy, insolvency or other similar
law, or in case a receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Issuer or its property or such other obligor or Person,
or in case of any other comparable judicial Proceedings relative to the Issuer
or other obligor upon the Notes, or to the creditors or property of the Issuer
or such other obligor, the Indenture Trustee, irrespective of whether the
principal of any Notes shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Indenture Trustee shall
have made any demand pursuant to the provisions of this Section, shall be
entitled and empowered, by intervention in such proceedings or otherwise:
30
<PAGE>
(i to file and prove a claim or claims for the whole
amount of principal and interest (including any Noteholders' Interest
Rate 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 Noteholders allowed in such Proceedings;
(ii unless prohibited by applicable law and regulations,
to vote on behalf of the Noteholders in any election of a trustee, a
standby trustee or Person performing similar functions in any such
Proceedings;
(iii to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute all amounts
received with respect to the claims of the Noteholders and of the
Indenture Trustee on their behalf; and
(iv to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims
of the Indenture Trustee or the Noteholders allowed in any judicial
proceedings relative to the Issuer, its creditors and its property;
and any trustee, receiver, liquidator, custodian or other similar official in
any such Proceeding is hereby authorized by each of such Noteholders to make
payments to the Indenture Trustee, and, in the event that the Indenture Trustee
shall consent to the making of payments directly to such Noteholders, to pay to
the Indenture Trustee such amounts as shall be sufficient to cover reasonable
compensation to the Indenture Trustee, each predecessor Indenture Trustee and
their respective agents, attorneys and counsel, and all other expenses and
liabilities incurred, and all advances made, by the Indenture Trustee and each
predecessor Indenture Trustee except as a result of negligence or bad faith.
(e) Nothing herein contained shall be deemed to authorize the Indenture
Trustee to authorize or consent to or vote for or accept or adopt on behalf of
any Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Noteholder thereof or to
authorize the Indenture Trustee to vote in respect of the claim of any
Noteholder in any such proceeding except, as aforesaid, to vote for the election
of a trustee in bankruptcy or similar Person.
31
<PAGE>
(f) All rights of action and of asserting claims under this Indenture,
or under any of the Notes, may be enforced by the Indenture Trustee without the
possession of any of the Notes or the production thereof in any trial or other
Proceedings relative thereto, and any such action or Proceedings instituted by
the Indenture Trustee shall be brought in its own name as trustee of an express
trust, and any recovery of judgment, subject to the payment of the expenses,
disbursements and compensation of the Indenture Trustee, each predecessor
Indenture Trustee and their respective agents and attorneys, shall be for the
ratable benefit of the Noteholders.
(g) In any Proceedings brought by the Indenture Trustee (and also any
Proceedings involving the interpretation of any provision of this Indenture to
which the Indenture Trustee shall be a party), the Indenture Trustee shall be
held to represent all the Noteholders, and it shall not be necessary to make any
Noteholder a party to any such Proceedings.
SECTION 5.04. Remedies; Priorities. (a) If an Event of
Default shall have occurred and be continuing, the Indenture
Trustee may do one or more of the following (subject to Section
5.05):
(i institute Proceedings in its own name and as trustee
of an express trust for the collection of all amounts then payable on
the Notes or under this Indenture with respect thereto, whether by
declaration or otherwise, enforce any judgment obtained, and collect
from the Issuer and any other obligor upon such Notes moneys adjudged
due;
(ii institute Proceedings from time to time for the
complete or partial foreclosure of this Indenture with respect to the
Indenture Trust Estate;
(iii exercise any remedies of a secured party under the
UCC and take any other appropriate action to protect and enforce the
rights and remedies of the Indenture Trustee and the Noteholders; and
(iv sell the Indenture Trust Estate or any portion
thereof or rights or interest therein, at one or more public or private
sales called and conducted in any manner permitted by law;
provided, however, that the Indenture Trustee may not sell or otherwise
liquidate the Indenture Trust Estate following an Event of Default, other than
an Event of Default described in Section 5.01(i) or (ii), unless (A) the
Noteholders of 100% of the Outstanding Amount of the Notes consent thereto, (B)
the proceeds of such sale or liquidation distributable to the Noteholders are
sufficient to discharge in full all amounts then due and unpaid
32
<PAGE>
upon such Notes for principal and interest or (C) the Indenture Trustee
determines that the Indenture Trust Estate will not continue to provide
sufficient funds for the payment of principal of and interest on the Notes as
they would have become due if the Notes had not been declared due and payable,
and the Indenture Trustee obtains the consent of Noteholders of 66-2/3% of the
Outstanding Amount of the Notes. In determining such sufficiency or
insufficiency with respect to clauses (B) and (C), the Indenture Trustee may,
but need not, obtain and rely upon an opinion of an Independent investment
banking or accounting firm of national reputation as to the feasibility of such
proposed action and as to the sufficiency of the Indenture Trust Estate for such
purpose.
(b) If the Indenture Trustee collects any money or property pursuant to
this Article V, it shall pay out the money or property in the following order:
FIRST: to the Indenture Trustee for amounts due under
Section 6.07;
SECOND: to the Servicer for due and unpaid Servicing
Fees;
THIRD: to Senior Noteholders for amounts due and
unpaid on the Senior Notes for interest, ratably, without
preference or priority of any kind, according to the amounts
due and payable on the Senior Notes for interest;
FOURTH: to Subordinate Noteholders for amounts due and
unpaid on the Subordinate Notes for interest, ratably,
without preference or priority of any kind, according to the
amounts due and payable on the Subordinate Notes for
interest;
FIFTH: to Senior Noteholders for amounts due and
unpaid on the Senior Notes for principal, ratably, without
preference or priority of any kind, according to the amounts
due and payable on the Senior Notes for principal;
SIXTH: to Subordinate Noteholders for amounts due and
unpaid on the Subordinate Notes for principal, ratably,
without preference or priority of any kind, according to the
amounts due and payable on the Subordinate Notes for
principal;
SEVENTH: to Senior Noteholders for any unpaid Senior
Noteholders' Interest Rate Index Carryover, ratably, without
preference or priority of any kind, according to the amounts
due and payable on the Senior Notes for such Senior
Noteholders' Interest Rate Index Carryover;
33
<PAGE>
EIGHTH: to Subordinate Noteholders for any unpaid
Subordinate Noteholders' Interest LIBOR Carryover; and
NINTH: to the Issuer, for distribution in accordance
with the terms of the Administration Agreement.
The Indenture Trustee may fix a record date and payment date for any
payment to Noteholders pursuant to this Section. At least 15 days before such
record date, the Issuer shall mail to each Noteholder and the Indenture Trustee
a notice that states the record date, the payment date and the amount to be
paid.
SECTION 5.05. Optional Preservation of the Indenture Trust Estate. If
the Notes have been declared to be due and payable under Section 5.02 following
an Event of Default and such declaration and its consequences have not been
rescinded and annulled, the Indenture Trustee may, but need not, elect to
maintain possession of the Indenture Trust Estate. It is the desire of the
parties hereto and the Noteholders that there be at all times sufficient funds
for the payment of principal of and interest (including any Noteholders'
Interest Rate Index Carryover) on the Notes, and the Indenture Trustee shall
take such desire into account when determining whether to maintain possession of
the Indenture Trust Estate. In determining whether to maintain possession of the
Indenture Trust Estate, the Indenture Trustee may, but need not, obtain and rely
upon an opinion (which shall be obtained at the expense of the Issuer) of an
Independent investment banking or accounting firm of national reputation as to
the feasibility of such proposed action and as to the sufficiency of the
Indenture Trust Estate for such purpose.
SECTION 5.06. Limitation of Suits. No Noteholder shall have any right
to institute any Proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless:
(i such Noteholder has previously given written
notice to the Indenture Trustee of a continuing Event of
Default;
(ii the Noteholders of not less than 25% of the
Outstanding Amount of the Notes have made written request to the
Indenture Trustee to institute such Proceeding in respect of such Event
of Default in its own name as Indenture Trustee hereunder;
(iii such Noteholder or Noteholders have offered to
the Indenture Trustee reasonable indemnity against the
34
<PAGE>
costs, expenses and liabilities to be incurred in complying
with such request;
(iv the Indenture Trustee for 60 days after its receipt
of such notice, request and offer of indemnity has failed to institute
such Proceeding; and
(v no direction inconsistent with such written request
has been given to the Indenture Trustee during such 60-day period by
the Noteholders of a majority of the Outstanding Amount of the Notes;
it being understood and intended that no one or more Noteholders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other
Noteholders or to obtain or to seek to obtain priority or preference over any
other Noteholders or to enforce any right under this Indenture, except in the
manner herein provided.
In the event the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Noteholders, each
representing less than a majority of the Outstanding Amount of the Notes, the
Indenture Trustee in its sole discretion may determine what action, if any,
shall be taken, notwithstanding any other provisions of this Indenture.
SECTION 5.07. Unconditional Rights of Noteholders To Receive Principal
and Interest. Notwithstanding any other provisions in this Indenture, any
Noteholder shall have the right, which is absolute and unconditional, to receive
payment of the principal of and interest, if any, on such Note on or after the
respective due dates thereof expressed in such Note or in this Indenture (or, in
the case of redemption, on or after the Redemption Date) and to institute suit
for the enforcement of any such payment, and such right shall not be impaired
without the consent of such Noteholder.
SECTION 5.08. Restoration of Rights and Remedies. If the Indenture
Trustee or any Noteholder has instituted any Proceeding to enforce any right or
remedy under this Indenture and such Proceeding has been discontinued or
abandoned for any reason or has been determined adversely to the Indenture
Trustee or to such Noteholder, then and in every such case the Issuer, the
Indenture Trustee and the Noteholders shall, subject to any determination in
such Proceeding, be restored severally and respectively to their former
positions hereunder, and thereafter all rights and remedies of the Indenture
Trustee and the Noteholders shall continue as though no such Proceeding had been
instituted.
SECTION 5.09. Rights and Remedies Cumulative. No right or
remedy herein conferred upon or reserved to the Indenture Trustee
35
<PAGE>
or to the Noteholders is intended to be exclusive of any other right or remedy,
and every right and remedy shall, to the extent permitted by law, be cumulative
and in addition to every other right and remedy given hereunder or now or
hereafter existing at law or in equity or otherwise. The assertion or employment
of any right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 5.10. Delay or Omission Not a Waiver. No delay or omission of
the Indenture Trustee or any Noteholder to exercise any right or remedy accruing
upon any Default shall impair any such right or remedy or constitute a waiver of
any such Default or an acquiescence therein. Every right and remedy given by
this Article V or by law to the Indenture Trustee or to the Noteholders may be
exercised from time to time, and as often as may be deemed expedient, by the
Indenture Trustee or by the Noteholders, as the case may be.
SECTION 5.11. Control by Noteholders. The Noteholders of a majority of
the Outstanding Amount of the Notes shall have the right to direct the time,
method and place of conducting any Proceeding for any remedy available to the
Indenture Trustee with respect to the Notes or exercising any trust or power
conferred on the Indenture Trustee; provided that
(i such direction shall not be in conflict with any
rule of law or with this Indenture;
(ii subject to the express terms of Section 5.04, any
direction to the Indenture Trustee to sell or liquidate the Indenture
Trust Estate shall be by the Noteholders of 100% of the Outstanding
Amount of the Notes;
(iii if the conditions set forth in Section 5.05 have
been satisfied and the Indenture Trustee elects to retain the Indenture
Trust Estate pursuant to such Section, then any direction to the
Indenture Trustee by Noteholders of less than 100% of the Outstanding
Amount of the Notes to sell or liquidate the Indenture Trust Estate
shall be of no force and effect; and
(iv the Indenture Trustee may take any other action
deemed proper by the Indenture Trustee that is not inconsistent with
such direction;
provided, however, that, subject to Section 6.01, the Indenture Trustee need not
take any action that it determines might involve it in liability or might
materially adversely affect the rights of any Noteholders not consenting to such
action.
36
<PAGE>
SECTION 5.12. Waiver of Past Defaults. Prior to the time a judgment or
decree for payment of money due has been obtained as described in Section 5.02,
the Noteholders of not less than a majority of the Outstanding Amount of the
Notes may waive any past Default and its consequences except a Default (a) in
payment when due of principal of or interest (including, subject to the
limitations of Sections 2.07(d) and 8.02, any Noteholders' Interest Rate 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
Noteholder. In the case of any such waiver, the Issuer, the Indenture Trustee
and the Noteholders shall be restored to their former positions and rights
hereunder, respectively; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereto.
Upon any such waiver, such Default shall cease to exist and be deemed
to have been cured and not to have occurred for every purpose of this Indenture;
but no such waiver shall extend to any subsequent or other Default or impair any
right consequent thereto.
SECTION 5.13. Undertaking for Costs. All parties to this Indenture
agree, and each Noteholder by such Noteholder's acceptance of any Note shall be
deemed to have agreed, that any court may in its discretion require, in any suit
for the enforcement of any right or remedy under this Indenture, or in any suit
against the Indenture Trustee for any action taken, suffered or omitted by it as
Indenture Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to (a) any suit instituted by the
Indenture Trustee, (b) any suit instituted by any Noteholder, or group of
Noteholders, in each case holding in the aggregate more than 10% of the
Outstanding Amount of the Notes or (c) any suit instituted by any Noteholder for
the enforcement of the payment of principal of or interest (including any
Noteholders' Interest Rate 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
37
<PAGE>
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 Noteholders shall be impaired by the
recovery of any judgment by the Indenture Trustee against the Issuer or by the
levy of any execution under such judgment upon any portion of the Indenture
Trust Estate or upon any of the assets of the Issuer. Any money or property
collected by the Indenture Trustee shall be applied in accordance with Section
5.04(b).
SECTION 5.16. Performance and Enforcement of Certain Obligations. (a)
Promptly following a request from the Indenture Trustee to do so and at the
Administrator's expense, the Issuer shall take all such lawful action as the
Indenture Trustee may request to compel or secure the performance and observance
by the Seller, the Servicer and the Administrator, as applicable, of each of
their obligations to the Issuer under or in connection with the Loan Sale
Agreement, the Servicing Agreement and the Administration Agreement and to
exercise any and all rights, remedies, powers and privileges lawfully available
to the Issuer under or in connection with the Loan Sale Agreement, the 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 Servicer or the Administrator thereunder
and the institution of legal or administrative actions or proceedings to compel
or secure performance by the Seller, the Servicer or the Administrator of each
of their obligations under the Loan Sale Agreement, the Servicing Agreement or
the Administration Agreement.
(b) If an Event of Default has occurred and is continuing, the
Indenture Trustee may, and at the direction (which direction shall be in writing
or by telephone (confirmed in writing promptly thereafter)) of the Noteholders
of 66-2/3% of the Outstanding Amount of the Notes shall, exercise all rights,
remedies, powers, privileges and claims of the Issuer against the Seller, the
Servicer or the Administrator under or in connection with the Loan Sale
Agreement, the Servicing Agreement or the Administration Agreement, including
the right or power to take any action to compel or secure performance or
observance by the Seller, the Servicer or the Administrator of each of their
obligations to the Issuer thereunder and to give any consent,
38
<PAGE>
request, notice, direction, approval, extension or waiver under the Loan Sale
Agreement, the Servicing Agreement or the Administration Agreement and any right
of the Issuer to take such action shall be suspended.
ARTICLE VI
The Indenture Trustee
SECTION 6.01. Duties of Indenture Trustee. (a) If an Event of Default
has occurred and is continuing, the Indenture Trustee shall exercise the rights
and powers vested in it by this Indenture and use the same degree of care and
skill in their exercise as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs.
(b) Except during the continuance of an Event of Default:
(i the Indenture Trustee undertakes to perform such
duties and only such duties as are specifically set forth in this
Indenture and no implied covenants or obligations shall be read into
this Indenture against the Indenture Trustee; and
(ii in the absence of bad faith on its part, the
Indenture Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Indenture Trustee and
conforming to the requirements of this Indenture; provided, however,
that the Indenture Trustee shall examine such certificates and opinions
to determine whether they conform to the requirements of this
Indenture.
(c) The Indenture Trustee may not be relieved from liability for its
own negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i this paragraph does not limit the effect of
paragraph (b) of this Section;
(ii the Indenture Trustee shall not be liable for any
error of judgment made in good faith by a Responsible Officer unless it
is proved that the Indenture Trustee was negligent in ascertaining the
pertinent facts; and
(iii the Indenture Trustee shall not be liable with
respect to any action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to Sections 5.02,
5.11, 5.12 and 5.16.
39
<PAGE>
(d) Every provision of this Indenture that in any way
relates to the Indenture Trustee is subject to paragraphs (a),
(b), (c) and (g) of this Section.
(e) The Indenture Trustee shall not be liable for interest
on any money received by it except as the Indenture Trustee may
agree in writing with the Issuer.
(f) Money held in trust by the Indenture Trustee need not be segregated
from other funds except to the extent required by law or the terms of this
Indenture or the Servicing Agreement.
(g) No provision of this Indenture shall require the Indenture Trustee
to expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayments
of such funds or adequate indemnity satisfactory to it against any loss,
liability or expense is not reasonably assured to it.
(h) Except as expressly provided in the Basic Documents, the Indenture
Trustee shall have no obligation to administer, service or collect the Financed
Student Loans or to maintain, monitor or otherwise supervise the administration,
servicing or collection of the Financed Student Loans.
(i) In the event that the Indenture Trustee is the Paying Agent or the
Note Registrar, the rights and protections afforded to the Indenture Trustee
pursuant to this Indenture shall also be afforded to the Indenture Trustee in
its capacity as Paying Agent or Note Registrar.
(j) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Indenture Trustee
shall be subject to the provisions of this Section and to the provisions of the
TIA.
SECTION 6.02. Rights of Indenture Trustee. (a) The
Indenture Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper
Person. The Indenture Trustee need not investigate any fact or
matter stated in such document.
(b) Before the Indenture Trustee acts or refrains from acting in
connection with any matter contemplated by this Indenture or other Basic
Documents, it may require an Officers' Certificate of the Issuer or an Opinion
of Counsel. The Indenture Trustee shall not be liable for any action it takes or
omits to take in good faith in reliance on such Officers' Certificate or Opinion
of Counsel.
40
<PAGE>
(c) The Indenture Trustee may exercise any of the trusts and powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys or a custodian or nominee, and the Indenture Trustee shall
not be responsible for any misconduct or negligence on the part of, or for the
supervision of, any such agent, attorney, custodian or nominee appointed with
due care by it hereunder.
(d) The Indenture Trustee shall not be liable for any action it takes
or omits to take in good faith which it believes to be authorized or within its
rights or powers; provided, however, that the Indenture Trustee's conduct does
not constitute willful misconduct, negligence or bad faith.
(e) The Indenture Trustee may consult with counsel, and the advice or
opinion of counsel with respect to legal matters relating to this Indenture and
the other Basic Documents and the Notes shall be full and complete authorization
and protection from liability in respect to any action taken, omitted or
suffered by it hereunder in good faith and in accordance with the advice or
opinion of such counsel.
(f) Subject to clauses (a), (b), (c) and (g) of Section 6.01 hereof,
the Indenture Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any
Noteholder pursuant to this Indenture, unless such Noteholder shall have offered
to the Indenture Trustee security or indemnity reasonably satisfactory to the
Indenture Trustee against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction.
SECTION 6.03. Individual Rights of Indenture Trustee. The Indenture
Trustee in its individual or any other capacity may become the owner or pledgee
of Notes and may otherwise deal with the Issuer or its Affiliates with the same
rights it would have if it were not Indenture Trustee. Any Paying Agent, Note
Registrar, co-registrar or co-paying agent may do the same with like rights.
However, the Indenture Trustee must comply with Sections 6.11 and 6.12.
SECTION 6.04. Indenture Trustee's Disclaimer. The Indenture Trustee
shall not be responsible for and makes no representation as to the validity or
adequacy of this Indenture or the Notes, it shall not be accountable for the
Issuer's use of the proceeds from the Notes, and it shall not be responsible for
any statement of the Issuer in the Indenture or in any document 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
41
<PAGE>
notice of the existence thereof has been delivered to a Responsible Officer of
the Indenture Trustee, the Indenture Trustee shall mail notice of the Default to
each Noteholder and to the Rating Agencies promptly after the Indenture Trustee
obtains such knowledge or receives such notice of the Default within 90 days
after it occurs. Except in the case of a Default in payment of principal of or
interest (including any Noteholders' Interest Rate 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 Noteholders.
SECTION 6.06. Reports by Indenture Trustee to Noteholders. The Paying
Agent shall deliver to each Noteholder (and to each Person who was a Noteholder
at any time during the applicable calendar year) such information as may be
required to enable such holder to prepare its Federal and state income tax
returns. Within 60 days after each December 31 beginning with the December 31
following the date of this Indenture, the Indenture Trustee shall mail to each
Noteholder a brief report as of such December 31 that complies with TIA ss.
313(a) if required by said section. The Indenture Trustee shall also comply with
TIA ss. 313(b). A copy of each such report required pursuant to TIA ss. 313(a)
or (b) shall, at the time of such transmission to Noteholders, be filed by the
Indenture Trustee with the Commission and with each securities exchange, if any,
upon which the Notes are listed, provided that the Issuer has previously
notified the Indenture Trustee of such listing.
SECTION 6.07. Compensation and Indemnity. The Issuer shall cause the
Administrator to pay to the Indenture Trustee from time to time reasonable
compensation for its services and shall cause the Administrator to reimburse the
Indenture Trustee for all reasonable out-of-pocket expenses incurred or made by
it, including costs of collection, in addition to the compensation for its
services. Such expenses shall include the reasonable compensation and expenses,
disbursements and advances of the Indenture Trustee's agents, counsel,
accountants and experts. The Indenture Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express trust. The Issuer
shall cause the Administrator to indemnify the Indenture Trustee, its officers,
directors, employees and agents against any and all loss, liability or expense
(including attorneys' fees and expenses) incurred by it in connection with the
administration of this trust and the performance of its duties hereunder and
under the other Basic Documents. The Indenture Trustee shall notify the Issuer
and the Administrator promptly of any claim for which it may seek indemnity.
Failure by the Indenture Trustee to so notify the Issuer and the Administrator
shall not relieve the Issuer or the Administrator of its obligations hereunder
and
42
<PAGE>
under the other Basic Documents. The Issuer shall cause the Administrator to
defend the claim and the Administrator shall not be liable for any additional
legal fees and expenses of the Indenture Trustee after it has assumed such
defense; provided, however, that, in the event that there may be a conflict
between the positions of the Indenture Trustee and the Administrator in
conducting the defense of such claim, the Indenture Trustee shall be entitled to
separate counsel the fees and expenses of which shall be paid by the
Administrator on behalf of the Issuer. Neither the Issuer nor the Administrator
need reimburse any expense or indemnify against any loss, liability or expense
incurred by the Indenture Trustee through the Indenture Trustee's own willful
misconduct, negligence or bad faith.
The Issuer's and Administrator's payment obligations to the Indenture
Trustee pursuant to this Section shall survive the discharge of this Indenture.
When the Indenture Trustee incurs expenses after the occurrence of a Default
specified in Section 5.01(iv) or (v) with respect to the Issuer, the expenses
are intended to constitute expenses of administration under Title 11 of the
United States Code or any other applicable Federal or state bankruptcy,
insolvency or similar law.
SECTION 6.08. Replacement of Indenture Trustee. No resignation or
removal of the Indenture Trustee and no appointment of a successor Indenture
Trustee shall become effective until the acceptance of appointment by the
successor Indenture Trustee pursuant to this Section 6.08. The Indenture Trustee
may resign at any time by so notifying the Issuer. The Noteholders of a majority
in Outstanding Amount of the Notes may remove the Indenture Trustee by so
notifying the Indenture Trustee and may appoint a successor Indenture Trustee.
The Issuer shall remove the Indenture Trustee if:
(i the Indenture Trustee fails to comply with
Section 6.11;
(ii an Insolvency Event occurs with respect to the
Indenture Trustee;
(iii a receiver or other public officer takes charge
of the Indenture Trustee or its property; or
(iv the Indenture Trustee otherwise becomes
incapable of acting.
If the Indenture Trustee resigns or is removed or if a vacancy exists
in the office of Indenture Trustee for any reason (the Indenture Trustee in such
event being referred to herein as the retiring Indenture Trustee), the Issuer
shall promptly appoint a successor Indenture Trustee. A former Indenture
43
<PAGE>
Trustee shall not be liable for any acts or omissions of any successor Indenture
Trustee.
A successor Indenture Trustee shall deliver a written acceptance of its
appointment to the retiring Indenture Trustee and to the Issuer and shall notify
the Rating Agencies in writing of such acceptance. Thereupon the resignation or
removal of the retiring Indenture Trustee shall become effective, and the
successor Indenture Trustee shall have all the rights, powers and duties of the
Indenture Trustee under this Indenture. The successor Indenture Trustee shall
mail a notice of its succession to Noteholders. The retiring Indenture Trustee
shall promptly transfer all property held by it as Indenture Trustee to the
successor Indenture Trustee.
If a successor Indenture Trustee does not take office within 60 days
after the retiring Indenture Trustee resigns or is removed, the retiring
Indenture Trustee, the Issuer or the Noteholders of a majority in Outstanding
Amount of the Notes may petition any court of competent jurisdiction for the
appointment of a successor Indenture Trustee.
If the Indenture Trustee fails to comply with Section 6.11, any
Noteholder may petition any court of competent jurisdiction for the removal of
the Indenture Trustee and the appointment of a successor Indenture Trustee.
Notwithstanding the replacement of the Indenture Trustee pursuant to
this Section, the Issuer's and the Administrator's obligations under Section
6.07 shall continue for the benefit of the retiring Indenture Trustee.
SECTION 6.09. Successor Indenture Trustee by Merger. If the Indenture
Trustee consolidates with, merges or converts into, or transfers all or
substantially all its corporate trust business or assets to, another corporation
or banking association, the resulting, surviving or transferee corporation
without any further act shall be the successor Indenture Trustee; provided that
such corporation or banking association shall be otherwise qualified and
eligible under Section 6.11. The Indenture Trustee shall provide Rating Agencies
prior written notice of any such transaction.
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
44
<PAGE>
predecessor hereunder or in the name of the successor to the Indenture Trustee;
and in all such cases such certificates shall have the full force which it is
anywhere in the Notes or in this Indenture provided that the certificate of the
Indenture Trustee shall have.
SECTION 6.10. Appointment of Co-Trustee or Separate Trustee. (a)
Notwithstanding any other provisions of this Indenture, at any time, for the
purpose of meeting any legal requirement of any jurisdiction in which any part
of the Indenture Trust Estate may at the time be located, the Indenture Trustee
shall have the power and may execute and deliver all instruments to appoint one
or more Persons to act as a co-trustee or co-trustees, or separate trustee or
separate trustees, of all or any part of the Indenture Trust Estate, and to vest
in such Person or Persons, in such capacity and for the benefit of the
Noteholders, such title to the Indenture Trust Estate, or any part hereof, and,
subject to the other provisions of this Section, such powers, duties,
obligations, rights and trusts as the Indenture Trustee may consider necessary
or desirable. No co-trustee or separate trustee hereunder shall be required to
meet the terms of eligibility as a successor trustee under Section 6.11 and no
notice to Noteholders of the appointment of any co-trustee or separate trustee
shall be required under Section 6.08 hereof. The Indenture Trustee shall notify
the Rating Agencies of any appointment of a co-trustee or separate trustee
hereunder.
(b) Every separate trustee and co-trustee shall, to the
extent permitted by law, be appointed and act subject to the
following provisions and conditions:
(i all rights, powers, duties and obligations conferred
or imposed upon the Indenture Trustee shall be conferred or imposed
upon and exercised or performed by the Indenture Trustee and such
separate trustee or co-trustee jointly (it being understood that such
separate trustee or co-trustee is not authorized to act separately
without the Indenture Trustee joining in such act), except to the
extent that under any law of any jurisdiction in which any particular
act or acts are to be performed the Indenture 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
45
<PAGE>
(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 ss. 310(a). The Indenture
Trustee shall have a combined capital and surplus of at least $50,000,000 as set
forth in its most recent published annual report of condition and it shall have
a long term debt rating of Baa3 or better by Moody's. The Indenture Trustee
shall comply with TIA ss. 310(b), including the optional provision permitted by
the second sentence of TIA ss. 310(b)(9); provided, however, that there shall be
excluded from the operation of TIA ss. 310(b)(1) any indenture or indentures
under which other securities of the Issuer are outstanding if the requirements
for such exclusion set forth in TIA ss. 310(b)(1) are met.
SECTION 6.12. Preferential Collection of Claims Against Issuer. The
Indenture Trustee shall comply with TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). An Indenture Trustee who has resigned or
been removed shall be subject to TIA ss. 311(a) to the extent indicated.
46
<PAGE>
ARTICLE VII
Noteholders' Lists and Reports
SECTION 7.01. Issuer To Furnish Indenture Trustee Names and Addresses
of Noteholders. The Issuer will furnish or cause to be furnished to the
Indenture Trustee (a) not more than five days after the earlier of (i) each
Record Date and (ii) three months after the last Record Date, a list, in such
form as the Indenture Trustee may reasonably require, of the names and addresses
of the Noteholders as of such Record Date, (b) at such other times as the
Indenture Trustee may request in writing, within 30 days after receipt by the
Issuer of any such request, a list of similar form and content as of a date not
more than 10 days prior to the time such list is furnished; provided, however,
that so long as the Indenture Trustee is the Note Registrar, no such list shall
be required to be furnished.
SECTION 7.02. Preservation of Information; Communications to
Noteholders. (a) The Indenture Trustee shall preserve, in as current a form as
is reasonably practicable, the names and addresses of the Noteholders contained
in the most recent list furnished to the Indenture Trustee as provided in
Section 7.01 and the names and addresses of Noteholders received by the
Indenture Trustee in its capacity as Note Registrar. The Indenture Trustee may
destroy any list furnished to it as provided in such Section 7.01 upon receipt
of a new list so furnished.
(b) Noteholders may communicate pursuant to TIA ss. 312(b) with other
Noteholders with respect to their rights under this Indenture or under the
Notes.
(c) The Issuer, the Indenture Trustee and the Note
Registrar shall have the protection of TIA ss.312(c).
(d) The Indenture Trustee shall furnish to the Noteholders promptly
upon receipt of a written request therefor, duplicates or copies of all reports,
notices, requests, demands, certificates, financial statements and any other
instruments furnished to the Indenture Trustee under the Basic Documents.
(e) The Indenture Trustee shall provide notice to the Noteholders as
provided in Section 9.02 of the Trust Agreement, and shall provide notice to
Noteholders of any amendment or supplement to the Trust Agreement as provided in
Section 11.01 of the Trust Agreement.
47
<PAGE>
SECTION 7.03. Reports by Issuer. (a) The Issuer shall:
(i file with the Indenture Trustee, within 15 days
after the Issuer is required to file the same with the Commission,
copies of the annual reports and of the information, documents and
other reports (or copies of such portions of any of the foregoing as
the Commission may from time to time by rules and regulations
prescribe) which the Issuer may be required to file with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act;
(ii file with the Indenture Trustee and the Commission
in accordance with rules and regulations prescribed from time to time
by the Commission such additional information, documents and reports
with respect to compliance by the Issuer with the conditions and
covenants of this Indenture as may be required from time to time by
such rules and regulations; and
(iii supply to the Indenture Trustee (and the Indenture
Trustee shall transmit by mail to all Noteholders described in TIA ss.
313(c)) such summaries of any information, documents and reports
required to be filed by the Issuer pursuant to clauses (i) and (ii) of
this Section 7.03(a) as may be required by rules and regulations
prescribed from time to time by the Commission.
(b) Unless the Issuer otherwise determines, the fiscal year
of the Issuer shall end on December 31 of each year.
(c) Copies of all reports to be sent to the Indenture Trustee under
this Section 7.03 shall be mailed to the Rating Agencies by the Issuer at the
same time.
ARTICLE VIII
Accounts, Disbursements and Releases
SECTION 8.01. Collection of Money. Except as otherwise expressly
provided herein, the Indenture Trustee may demand payment or delivery of, and
shall receive and collect, directly and without intervention or assistance of
any fiscal agent or other intermediary, all money and other property payable to
or receivable by the Indenture Trustee pursuant to this Indenture. The Indenture
Trustee shall apply all such money received by it on behalf of itself and the
Noteholders pursuant to the Loan Sale Agreement, the Servicing Agreement or the
Administration Agreement as provided in this Indenture. Except as otherwise
expressly provided in this Indenture, if any default occurs in the making of any
payment or performance under any agreement or instrument that is part of the
Indenture Trust Estate, the
48
<PAGE>
Indenture Trustee may take such action as may be appropriate to enforce such
payment or performance, including the institution and prosecution of appropriate
Proceedings. Any such action shall be without prejudice to any right to claim a
Default under this Indenture and any right to proceed thereafter as provided in
Article V.
SECTION 8.02. Trust Accounts. (a) On or prior to the
Closing Date, the Issuer shall cause the Administrator to
establish and maintain, in the name of the Indenture Trustee, for
the benefit of the Noteholders, the Trust Accounts as provided in
Section 2(c) of the Administration Agreement.
(b) On or before the Business Day preceding each Monthly Payment Date
and Quarterly Payment Date, all Monthly Available Funds with respect to the
preceding Monthly Collection Period (or in the case of a Quarterly Payment Date,
Available Funds with respect to the preceding Collection Period) will be
deposited in the Collection Account as provided in Section 4.01 of the Servicing
Agreement. On each Monthly Payment Date that is not a Quarterly Payment Date,
the Class A-2 Noteholders' Interest Distribution Amount with respect to such
Monthly Payment Date, and the Subordinated Noteholders' Interest Distribution
Amount for such Monthly Payment Date, will be distributed from the Collection
Account and from the Reserve Account to the Indenture Trustee (or any other
Paying Agent) on behalf of the Noteholders as provided in Sections 2(d)(iv)(C)
and (D) and 2(e)(iv)(C) and (D) of the Administration Agreement. On each
Quarterly Payment Date, the Noteholders' Distribution Amount (less the component
thereof represented by funds distributed to the Indenture Trustee from the Class
A-1 Interest Account as described in the fourth sentence of this Section
8.02(b)), with respect to such Quarterly Payment Date will be distributed from
the Collection Account and from the Reserve Account to the Indenture Trustee (or
other Paying Agent) on behalf of the Noteholders as provided in Sections
2(d)(v)(C) and 2(e)(iv)(E) of the Administration Agreement. On each Quarterly
Payment Date, the amount on deposit in the Class A-1 Interest Account on such
Quarterly Payment Date will be distributed therefrom to the Indenture Trustee
(or other Paying Agent) on behalf of the Class A-1 Noteholders as provided in
Section 2(g) of the Administration Agreement. On each Quarterly Payment Date,
the Reserve Account Excess for such Quarterly Payment Date will be distributed
to the Indenture Trustee (or other Paying Agent) on behalf of the Noteholders as
provided in clauses (b)(ii) and (b)(iii) of Section 2(e)(ii) of the
Administration Agreement (and in the case of clause (b)(iii) whether allocated
thereto pursuant to the proviso to Section 2(e)(ii)(a) or pursuant to Section
2(e)(ii)(b)). On the Quarterly Payment Date referred to in Section 10.01(a) with
respect to a redemption pursuant to Section 10.01(a), the amount on deposit in
the Collateral Reinvestment Account on such Quarterly Payment Date will be
distributed
49
<PAGE>
therefrom to the Indenture Trustee (or other Paying Agent) on behalf of the
Noteholders as provided in Section 2(f)(ii) of the Administration Agreement.
(c) On each Monthly Payment Date that is not a Quarterly Payment Date
or Redemption Date, the Indenture Trustee (or any other Paying Agent) shall
distribute all amounts received by it on behalf of Noteholders from the
Collection Account and the Reserve Account pursuant to the second sentence of
paragraph (b) above to Noteholders in respect of the Class A-2 Noteholders'
Interest Distribution Amount and the Subordinated Noteholders' Interest
Distribution Amount (but not for any Noteholders' Interest Rate Index Carryover)
in the following amounts and in the following order of priority:
(i the Class A-2 Noteholders' Interest Distribution
Amount, to the Class A-2 Noteholders; provided that if there are not
sufficient funds received to pay the entire amount of accrued and
unpaid interest then due on the Class A-2 Notes, the amounts so
received shall be applied to the payment of such interest on the Class
A-2 Notes on a pro rata basis; and
(ii the Subordinate Noteholders' Interest Distribution
Amount, to the Subordinate Noteholders; provided that if there are not
sufficient funds received to pay the entire amount of accrued and
unpaid interest then due on the Subordinate Notes, the amounts received
shall be applied to the payment of such interest on the Subordinate
Notes on a pro rata basis.
(d) On each Quarterly Payment Date, the Indenture Trustee (or any other
Paying Agent) shall distribute all amounts received by it on behalf of
Noteholders from the Collection Account and the Reserve Account pursuant to the
third sentence of paragraph (b) above to Noteholders in respect of the Notes to
the extent of amounts due and unpaid on the Notes for principal and interest
(but not for any Noteholders' Interest Rate Index Carryover) in the following
amounts and in the following order of priority:
(i the sum of the Class A-1 Noteholders' Interest
Distribution Amount and the Class A-2 Noteholders' Interest
Distribution Amount, to the Senior Noteholders, in an amount equal to
the accrued and unpaid interest on the Senior Notes; provided that if
there are not sufficient funds received to pay the entire amount then
due on the Senior Notes, the amounts so received shall be applied to
the payment of such interest on the Class A-1 Notes and the Class A-2
Notes on a pro rata basis based on the ratios of each such amount to
the total of such amounts;
50
<PAGE>
(ii the Subordinate Noteholders' Interest Distribution
Amount, to the Subordinate Noteholders; provided that if there are not
sufficient funds received to pay the entire amount of accrued and
unpaid interest then due on the Subordinate Notes, the amounts received
shall be applied to the payment of such interest on the Subordinate
Notes on a pro rata basis;
(iii if the Revolving Period has terminated, the Senior
Noteholders' Principal Distribution Amount, to the Senior Noteholders
(such amount to be allocated among the Senior Noteholders as provided
in Section 8.02(h)) until the Outstanding Amount of the Senior Notes is
reduced to zero; and
(iv) after the Outstanding Principal Amount of the
Senior Notes is reduced to zero, the Subordinate
Noteholders' Principal Distribution Amount to the
Subordinate Noteholders.
(e) On each Quarterly Payment Date, the Indenture Trustee (or any
Paying Agent) shall distribute all amounts received by it on behalf of the Class
A-1 Noteholders from the Class A-1 Interest Account pursuant to the fourth
sentence of paragraph (b) above to the Class A-1 Noteholders in respect of the
Class A-1 Notes to the extent of amounts due and unpaid on the Notes for
interest (but not for any Class A-1 Noteholders' Interest T-Bill Carryover).
(f) On each Quarterly Payment Date, the Indenture Trustee (or any
Paying Agent) shall distribute all amounts received by it on behalf of
Noteholders in respect of Reserve Account Excess pursuant to the second to last
sentence of paragraph (b) above to the Noteholders in the following amounts and
order of priority:
(i if the Revolving Period has terminated, all of such
amounts to Senior Noteholders (such amounts to be allocated among the
Senior Noteholders as provided in Section 8.02(h)) until the
Outstanding Amount of the Notes are equal to the Pool Balance as of the
close of business on the last day of the related Collection Period;
(ii if the Revolving Period has terminated, any
remaining such amounts, after the Outstanding Amount of the Senior
Notes is reduced to zero, to the Subordinate Noteholders until the
Outstanding Amount of the Subordinate Notes are equal to the Pool
Balance as of the close of business on the last day of the related
Collection Period;
(iii the Senior Noteholders' Interest Carryover, if any,
to the Senior Noteholders; provided that if insufficient funds are
received to pay the entire Senior
51
<PAGE>
Noteholders' Interest Carryover, the amounts so received shall be applied to the
payment of the Class A-1 Noteholders' Interest T- Bill Carryover and the Class
A-2 Noteholders' Interest LIBOR Carryover on a pro rata basis based on the
ratios of each such amount to the totals of such amount; and
(iv the Subordinate Noteholders' Interest LIBOR
Carryover, if any, to the Subordinate Noteholders; provided that if
insufficient funds are received to pay the entire Subordinate
Noteholders' Interest LIBOR Carryover, the amounts so received shall be
applied to the payment of such Subordinate Noteholders' Interest LIBOR
Carryover on a pro rata basis.
(g) On the Quarterly Payment Date referred to in Section 10.01(a) with
respect to redemption pursuant to Section 10.01(a), the Indenture Trustee (or
any other Paying Agent) shall distribute all amounts received by it on or behalf
of Noteholders from the Collateral Reinvestment Account pursuant to the last
sentence of Section (b) above to Noteholders in the following amounts and order
of priority:
(i all of such amount to the Senior Noteholders (such
amount to be allocated among the Senior Noteholders as provided in
Section 8.02(h)) until the Outstanding Amount of the Senior Notes is
reduced to zero;
(i after the Outstanding Amount of the Notes is reduced
to zero to the Subordinate Noteholders until the Outstanding Amount of
the Subordinate Notes is reduced to zero.
(h) Amounts payable to Senior Noteholders as provided in
Sections 8.02(d)(iii), 8.02(f)(i) and 8.02(g)(i) shall be payable
in the following amounts and order of priority:
(i to the Class A-1 Noteholders in an amount necessary
to reduce the Outstanding Amount of the Class A-1 Notes to the Class
A-1 Planned Principal Balance for such Quarterly Payment Date;
(ii to the Class A-2 Noteholders until the
Outstanding Amount of the Class A-2 Notes is reduced to
zero; and
(iii to the Class A-1 Noteholders until the
Outstanding Amount of the Class A-1 Notes is reduced to
zero;
provided that from and after any acceleration of the Notes following an Event of
Default, such amounts shall be payable to the Class A-1 Noteholders and the
Class A-2 Noteholders pro rata.
52
<PAGE>
SECTION 8.03. General Provisions Regarding Accounts. (a) So long as no
Default shall have occurred and be continuing, all or a portion of the funds in
the Trust Accounts shall be invested in Eligible Investments and reinvested by
the Indenture Trustee upon Issuer Order, subject to the provisions of Section
2(c) of the Administration Agreement. All income or other gain from investments
of moneys deposited in the Trust Accounts shall be deposited by the Indenture
Trustee in the Collection Account, and any loss resulting from such investments
shall be charged to such Trust Account. The Issuer will not direct the Indenture
Trustee to make any investment of any funds or to sell any investment held in
any of the Trust Accounts unless the security interest granted and perfected in
such account will continue to be perfected in such investment or the proceeds of
such sale, in either case without any further action by any Person, and, in
connection with any direction to the Indenture Trustee to make any such
investment or sale, if requested by the Indenture Trustee, the Issuer shall
deliver to the Indenture Trustee an Opinion of Counsel, acceptable to the
Indenture Trustee, to such effect.
(b) Subject to Section 6.01(c), the Indenture Trustee shall not in any
way be held liable by reason of any insufficiency in any of the Trust Accounts
resulting from any loss on any Eligible Investment included therein except for
losses attributable to the Indenture Trustee's failure to make payments on such
Eligible Investments issued by the Indenture Trustee, in its commercial capacity
as principal obligor and not as trustee, in accordance with their terms.
(c) If (i) the Issuer shall have failed to give investment directions
for any funds on deposit in the Trust Accounts to the Indenture Trustee by 10:00
a.m. New York time (or such other time as may be agreed by the Issuer and
Indenture Trustee) on any Business Day; or (ii) a Default shall have occurred
and be continuing with respect to the Notes but the Notes shall not have been
declared due and payable pursuant to Section 5.02, or, if such Notes shall have
been declared due and payable following an Event of Default, amounts collected
or receivable from the Indenture Trust Estate are being applied in accordance
with Section 5.05 as if there had not been such a declaration; then the
Indenture Trustee shall, to the fullest extent practicable, invest and reinvest
funds in the Trust Accounts in one or more Eligible Investments.
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
53
<PAGE>
this Indenture. No party relying upon an instrument executed by the Indenture
Trustee as provided in this Article VIII shall be bound to ascertain the
Indenture Trustee's authority, inquire into the satisfaction of any conditions
precedent or see to the application of any moneys.
(b) The Indenture Trustee shall, at such time as there are no Notes
Outstanding and all sums due the Indenture Trustee pursuant to Section 6.07 have
been paid, release any remaining portion of the Indenture Trust Estate that
secured the Notes from the lien of this Indenture and release to the Issuer or
any other Person entitled thereto any funds then on deposit in the Trust
Accounts. The Indenture Trustee shall release property from the lien of this
Indenture pursuant to this Section 8.04(b) only upon receipt of an Issuer
Request accompanied by an Officers' Certificate of the Issuer, an Opinion of
Counsel and (if required by the TIA) Independent Certificates in accordance with
TIA ss.ss. 314(c) and 314(d)(1) meeting the applicable requirements of Section
11.01.
SECTION 8.05. Opinion of Counsel. The Indenture Trustee shall receive
at least seven days' notice when requested by the Issuer to take any action
pursuant to Section 8.04(a), accompanied by copies of any instruments involved,
and the Indenture Trustee shall also require, as a condition to such action, an
Opinion of Counsel, in form and substance satisfactory to the Indenture Trustee,
stating the legal effect of any such action, outlining the steps required to
complete the same, and concluding that all conditions precedent to the taking of
such action have been complied with and such action will not materially and
adversely impair the security for the Notes or the rights of the Noteholders in
contravention of the provisions of this Indenture; provided, however, that such
Opinion of Counsel shall not be required to express an opinion as to the fair
value of the Indenture Trust Estate. Counsel rendering any such opinion may
rely, without independent investigation, on the accuracy and validity of any
certificate or other instrument delivered to the Indenture Trustee in connection
with any such action.
ARTICLE IX
Supplemental Indentures
SECTION 9.01. Supplemental Indentures Without Consent of Noteholders.
(a) Without the consent of any Noteholders but with prior notice to the Rating
Agencies, the Issuer and the Indenture Trustee, when authorized by an Issuer
Order, at any time and from time to time, may enter into one or more indentures
supplemental hereto (which shall conform to the provisions of the Trust
Indenture Act as in force at the date of the execution
54
<PAGE>
thereof), in form satisfactory to the Indenture Trustee, for any
of the following purposes:
(i to correct or amplify the description of any
property at any time subject to the lien of this Indenture, or, better
to assure, convey and confirm unto the Indenture Trustee any property
subject or required to be subjected to the lien of this Indenture, or
to subject to the lien of this Indenture additional property;
(ii to evidence the succession, in compliance with the
applicable provisions hereof, of another person to the Issuer, and the
assumption by any such successor of the covenants of the Issuer herein
and in the Notes contained;
(iii to add to the covenants of the Issuer, for the
benefit of the Noteholders, or to surrender any right or
power herein conferred upon the Issuer;
(iv to convey, transfer, assign, mortgage or pledge
any property to or with the Indenture Trustee;
(v to cure any ambiguity, to correct or supplement any
provision herein or in any supplemental indenture which may be
inconsistent with any other provision herein or in any supplemental
indenture or to make any other provisions with respect to matters or
questions arising under this Indenture or in any supplemental
indenture; provided that such action shall not materially adversely
affect the interests of the Noteholders;
(vi to evidence and provide for the acceptance of the
appointment hereunder by a successor trustee with respect to the Notes
and to add to or change any of the provisions of this Indenture as
shall be necessary to facilitate the administration of the trusts
hereunder by more than one trustee, pursuant to the requirements of
Article VI; or
(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.
55
<PAGE>
(b) The Issuer and the Indenture Trustee, when authorized by an Issuer
Order, may, also without the consent of any of the Noteholders but with prior
notice to the Rating Agencies, enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to, or changing in
any manner or eliminating any of the provisions of, this Indenture or of
modifying in any manner the rights of the Noteholders under this Indenture;
provided, however, that such action shall not, as evidenced by an Opinion of
Counsel, adversely affect in any material respect the interests of any
Noteholder.
SECTION 9.02. Supplemental Indentures with Consent of Noteholders. The
Issuer and the Indenture Trustee, when authorized by an Issuer Order, also may,
with prior notice to the Rating Agencies and with the consent of the Noteholders
of not less than a majority of the Outstanding Amount of the Notes, by Act of
such Noteholders delivered to the Issuer and the Indenture Trustee, enter into
an indenture or indentures supplemental hereto for the purpose of adding any
provisions to, or changing in any manner or eliminating any of the provisions
of, this Indenture or of modifying in any manner the rights of the Noteholders
under this Indenture; provided, however, that no such supplemental indenture
shall, without the consent of the Noteholder of each Outstanding Note affected
thereby:
(i change the date of payment of any installment of
principal of or interest (including any Noteholders' Interest Rate
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 Rate 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 Noteholders of which is required for any
such supplemental indenture, or the consent of the Noteholders of which
is required for any waiver of compliance with certain provisions of
this Indenture or certain defaults hereunder and their consequences
provided for in this Indenture;
56
<PAGE>
(iii modify or alter the provisions of the proviso to
the definition of the term "Outstanding";
(iv reduce the percentage of the Outstanding Amount of
the Notes required to direct the Indenture Trustee to direct the Issuer
to sell or liquidate the Indenture Trust Estate pursuant to Section
5.04;
(v modify any provision of this Section except to
increase any percentage specified herein or to provide that certain
additional provisions of this Indenture or the other Basic Documents
cannot be modified or waived without the consent of the Noteholder of
each Outstanding Note affected thereby;
(vi modify any of the provisions of this Indenture in
such manner as to affect the calculation of the amount of any payment
of interest (including any Noteholders' Interest Rate Index Carryover)
due on any Note on any Monthly Payment Date or principal due on any
Note on any Quarterly Payment Date (including the calculation of any of
the individual components of such calculation) or to affect the rights
of the Noteholders to the benefit of any provisions for the mandatory
redemption of the Notes contained herein; or
(vii permit the creation of any lien ranking prior to or
on a parity with the lien of this Indenture with respect to any part of
the Indenture Trust Estate or, except as otherwise permitted or
contemplated herein, terminate the lien of this Indenture on any
property at any time subject hereto or deprive any Noteholder of any
Note of the security provided by the lien of this Indenture.
The Indenture Trustee may in its discretion determine whether or not
any Notes would be affected by any supplemental indenture and any such
determination shall be conclusive upon the Noteholders of all Notes, whether
theretofore or thereafter authenticated and delivered hereunder. The Indenture
Trustee shall not be liable for any such determination made in good faith.
It shall not be necessary for any Act of Noteholders under this Section
to approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the Issuer and the Indenture Trustee of
any supplemental indenture pursuant to this Section, the Indenture Trustee shall
mail to the Noteholders of the Notes to which such amendment or supplemental
indenture relates and to the Rating Agencies a notice setting forth in general
terms the substance of such supplemental indenture. Any failure of the
57
<PAGE>
Indenture Trustee to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such supplemental
indenture.
SECTION 9.03. Execution of Supplemental Indentures. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modifications thereby of the trusts created
by this Indenture, the Indenture Trustee shall receive, and subject to Sections
6.01 and 6.02, shall be fully protected in relying upon, an Opinion of Counsel
stating that the execution of such supplemental indenture is authorized or
permitted by this Indenture. The Indenture Trustee may, but shall not be
obligated to, enter into any such supplemental indenture that affects the
Indenture Trustee's own rights, duties, liabilities or immunities under this
Indenture or otherwise.
SECTION 9.04. Effect of Supplemental Indenture. Upon the execution of
any supplemental indenture pursuant to the provisions hereof, this Indenture
shall be and be deemed to be modified and amended in accordance therewith with
respect to the Notes affected thereby, and the respective rights, limitations of
rights, obligations, duties, liabilities and immunities under this Indenture of
the Indenture Trustee, the Issuer and the Noteholders shall thereafter be
determined, exercised and enforced hereunder subject in all respects to such
modifications and amendments, and all the terms and conditions of any such
supplemental indenture shall be and are deemed to be part of the terms and
conditions of this Indenture for any and all purposes.
SECTION 9.05. Conformity with Trust Indenture Act. Every amendment of
this Indenture and every supplemental indenture executed pursuant to this
Article IX shall conform to the requirements of the Trust Indenture Act as then
in effect so long 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
58
<PAGE>
Redemption of Notes
SECTION 10.01. Redemption. (a) In the event that on the Quarterly
Payment Date on which the Revolving Period ends (or on the Quarterly Payment
Date on or immediately following the last day of the Revolving Period, if the
Revolving Period does not end on a Quarterly Payment Date) any amount remains on
deposit in the Collateral Reinvestment Account after giving effect to the making
of all Additional Fundings, including any such Additional Fundings on such
Quarterly Payment Date, one or more classes of the Notes will be redeemed in
part, in the order of priority specified in Section 8.02(g), in an aggregate
principal amount equal to the amount then on deposit in the Collateral
Reinvestment Account.
(b) In the event that the assets of the Trust are sold pursuant to
Section 9.02 of the Trust Agreement or the Financed Student Loans are sold
pursuant to Section 4.04 hereof, that portion of the amounts on deposit in the
Trust Accounts to be distributed to the Noteholders shall be paid to the
Noteholders up to the Outstanding Amount of the Notes and all accrued and unpaid
interest thereon and any accrued Noteholders' Interest Rate Index Carryover with
respect thereto (but only to the extent provided by Sections 2.07(d) and 8.02
hereof). If amounts are to be paid to Noteholders pursuant to this Section
10.01(b), 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.
(c) The Notes are subject to redemption in whole, but not in part, on
any Quarterly Payment Date on which the Company exercises its option to purchase
the Trust Estate pursuant to Section 5.01 of the Loan Sale Agreement. If the
Notes are to be redeemed pursuant to this Section 10.01(c), the Company shall
furnish notice of such election to the Indenture Trustee not later than 20 days
prior to the Redemption Date and the Issuer shall deposit by 10:00 A.M. New York
City time on the Redemption Date with the Indenture Trustee in the Collection
Account the Redemption Price for the Notes, whereupon the Notes shall be due and
payable on the Redemption Date upon furnishing a notice complying with Section
10.02 to each Noteholder.
SECTION 10.02. Form of Redemption Notice. Notice of redemption under
Section 10.01 shall be given by the Indenture Trustee by first-class mail,
postage prepaid, or by facsimile, mailed or transmitted on or prior to the
applicable Redemption Date to each Noteholder, as of the close of business on
the Record Date preceding the applicable Redemption Date, at such Noteholder's
address or facsimile number appearing in the Note Register.
59
<PAGE>
All notices of redemption shall state:
(i the Redemption Date;
(ii the Redemption Price; and
(iii the place where such Notes are to be surrendered for
payment of the Redemption Price (which shall be the office or agency of
the Issuer to be maintained as provided in Section 3.02).
Notice of redemption of the Notes shall be given by the Indenture
Trustee in the name and at the expense of the Issuer. Failure to give notice of
redemption, or any defect therein, to any Noteholder of any Note shall not
impair or affect the validity of the redemption of any other Note.
SECTION 10.03. Notes Payable on Redemption Date. The Notes or portions
thereof to be redeemed shall on the Redemption Date become due and payable at
the Redemption Price and (unless the Issuer shall default in the payment of the
Redemption Price) no interest shall accrue on the Redemption Price for any
period after the date to which accrued interest is calculated for purposes of
calculating the Redemption Price.
ARTICLE XI
Miscellaneous
SECTION 11.01. Compliance Certificates and Opinions. (a) Upon any
application or request by the Issuer to the Indenture Trustee to take any action
under any provision of this Indenture, the Issuer shall furnish to the Indenture
Trustee (i) an Officers' Certificate of the Issuer stating that all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with, (ii) an Opinion of Counsel stating that in the
opinion of such counsel all such conditions precedent, if any, have been
complied with and (iii) (if required by the TIA) an Independent Certificate from
a firm of certified public accountants meeting the 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:
60
<PAGE>
(i a statement that each signatory of such certificate
or opinion has read or has caused to be read such covenant or condition
and the definitions herein relating thereto;
(ii a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(iii a statement that, in the opinion of each such
signatory, such signatory has made such examination or investigation as
is necessary to enable such signatory to express an informed opinion as
to whether such covenant or condition has been complied with; and
(iv a statement as to whether, in the opinion of each
such signatory, such condition or covenant has been complied with.
(b)(i) Prior to the deposit of any Collateral or other property or
securities with the Indenture Trustee that is to be made the basis for the
release of any property or securities subject to the lien of this Indenture, the
Issuer shall, in addition to any obligation imposed in Section 11.01(a) or
elsewhere in this Indenture, furnish to the Indenture Trustee an Officers'
Certificate of the Issuer certifying or stating the opinion of each person
signing such certificate as to the fair value (within 90 days of such deposit)
to the Issuer of the Collateral or other property or securities to be so
deposited.
(ii Whenever the Issuer is required to furnish to the
Indenture Trustee an Officers' Certificate of the Issuer certifying or
stating the opinion of any signer thereof as to the matters described
in clause (i) above, the Issuer shall also deliver to the Indenture
Trustee an Independent Certificate as to the same matters, if the fair
value to the Issuer of the securities to be so deposited and of all
other such securities made the basis of any such withdrawal or release
since the commencement of the then current fiscal 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
61
<PAGE>
shall also furnish to the Indenture Trustee an Officers' Certificate of
the Issuer certifying or stating the opinion of each person signing
such certificate as to the fair value (within 90 days of such release)
of the property or securities proposed to be released and stating that
in the opinion of such person the proposed release will not impair the
security under this Indenture in contravention of the provisions
hereof.
(iv Whenever the Issuer is required to furnish to the
Indenture Trustee an Officers' Certificate of the Issuer certifying or
stating the opinion of any signer thereof as to the matters described
in clause (iii) above, the Issuer shall also furnish to the Indenture
Trustee an Independent Certificate as to the same matters if the fair
value of the property or Securities and of all other property, other
than property as contemplated by clause (v) below, or securities
released from the lien of this Indenture since the commencement of the
then-current calendar year, as set forth in the certificates required
by clause (iii) above and this clause (iv), equals 10% or more of the
Outstanding Amount of the Notes, but such certificate need not be
furnished in the case of any release of property or securities if the
fair value thereof as set forth in the related Officers' Certificate is
less than $25,000 or less than one percent of the then Outstanding
Amount of the Notes.
(v Notwithstanding Section 2.09 or any other provision
of this Section, the Issuer may, without compliance with the
requirements of the other provisions of this Section, (A) collect,
liquidate, sell or otherwise dispose of Financed Student Loans as and
to the extent permitted or required by the Basic Documents and (B) make
cash payments out of the Trust Accounts as and to the extent permitted
or required by the Basic Documents, so long as the Issuer shall deliver
to the Indenture Trustee every three months, commencing July 25, 1996,
an Officers' Certificate of the Issuer stating that all the
dispositions of Collateral described in clauses (A) and (B) above that
occurred during the immediately preceding three calendar months (or the
period from the Closing Date in the case of the July 25, 1996 Officer's
Certificate) were in the ordinary course of the Issuer's business and
that the proceeds thereof were applied in accordance with the Basic
Documents.
SECTION 11.02. Form of Documents Delivered to Indenture Trustee. In any
case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person
62
<PAGE>
may certify or give an opinion with respect to some matters and one or more
other such Persons as to other matters, and any such Person may certify or give
an opinion as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer may
be based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such certificate of an Authorized Officer or
Opinion of Counsel may be based, insofar as it relates to factual matters, upon
a certificate or opinion of, or representations by, an officer or officers of
the Servicer, the Seller, the Issuer or the Administrator, stating that the
information with respect to such factual matters is in the possession of the
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 Noteholders may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Noteholders in person or by agents duly appointed in writing; and except as
herein otherwise expressly provided such action shall become effective when such
instrument or instruments are delivered to the Indenture Trustee, and, where it
is hereby expressly required, to the Issuer. Such instrument or
63
<PAGE>
instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Noteholders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 6.01) conclusive in favor of the Indenture Trustee and
the Issuer, if made in the manner provided in this Section.
(b) The fact and date of the execution by any person of any
such instrument or writing may be proved in any manner that the
Indenture Trustee deems sufficient.
(c) The ownership of Notes shall be proved by the Note
Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Noteholder of any Notes shall bind the Noteholder
of every Note issued upon the registration thereof or in exchange therefor or in
lieu thereof, in respect of anything done, omitted or suffered to be done by the
Indenture Trustee or the Issuer in reliance thereon, whether or not notation of
such action is made upon such Note.
SECTION 11.04. Notices to Indenture Trustee, Issuer and Rating
Agencies. Any request, demand, authorization, direction, notice, consent, waiver
or act of Noteholders or other documents provided or permitted by this Indenture
shall be in writing and if such request, demand, authorization, direction,
notice, consent, waiver or act of Noteholders is to be made upon, given or
furnished to or filed with:
(a) the Indenture Trustee by any Noteholder or by the Issuer,
it shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with the Indenture Trustee at its
Corporate Trust Office, or
(b) the Issuer by the Indenture Trustee or by any Noteholder,
it shall be sufficient for every purpose hereunder if in writing and
mailed, first-class, postage prepaid, to the Issuer addressed to: SMS
Student Loan Trust 1996-A, in care of Mr. Michael Majchrzak, Trustee,
FCC National Bank, Wilmington, Delaware 19801, with a copy to the
Eligible Lender Trustee at the Corporate Trust Office of the Eligible
Lender Trustee, or at any other address previously furnished in writing
to the Indenture Trustee by the Issuer. The Issuer shall promptly
transmit any notice received by it from the Noteholders to the
Indenture Trustee.
Notices required to be given to the Rating Agencies by the
Issuer, the Indenture Trustee or the Eligible Lender Trustee
64
<PAGE>
shall be in writing, personally delivered or mailed by certified mail, return
receipt requested, to the following address: (i) in the case of Moody's
Investors Service Inc., at the following address: 99 Church Street, New York,
New York 10007, Attention of ABS Monitoring Department and (ii) in the case of
Fitch Investors Service, L.P., at the following address: One State Street Plaza,
New York, New York 10004, Attention of Asset Backed Monitoring Unit; or as to
each of the foregoing, at such other address as shall be designated by written
notice to the other parties.
SECTION 11.05. Notices to Noteholders; Waiver. Where this Indenture
provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at his address as it appears on the Note Register, not later than the
latest date, and not earlier than the earliest date, prescribed for the giving
of such notice. In any case where notice to Noteholders is given by mail,
neither the failure to mail such notice nor any defect in any notice so mailed
to any particular Noteholder shall affect the sufficiency of such notice with
respect to other Noteholders, and any notice that is mailed in the manner herein
provided shall conclusively be presumed to have been duly given.
Where this Indenture provides for notice in any manner, such notice may
be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Noteholders shall be filed with the Indenture
Trustee but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a
result of a strike, work stoppage or similar activity, it shall be impractical
to mail notice of any event to Noteholders when such notice is required to be
given pursuant to any provision of this Indenture, then any manner of giving
such notice as shall be satisfactory to the Indenture Trustee shall be deemed to
be a sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies,
failure to give such notice shall not affect any other rights or obligations
created hereunder, and shall not under any circumstance constitute a Default.
SECTION 11.06. Alternate Payment and Notice Provisions. Notwithstanding
any provision of this Indenture or any of the Notes to the contrary, the Issuer
may enter into any agreement with any Noteholder providing for a method of
payment, or notice by the Indenture Trustee or any Paying Agent to such
Noteholder,
65
<PAGE>
that is different from the methods provided for in this Indenture for such
payments or notices, provided that such agreement is reasonably acceptable to
the Indenture Trustee. The Issuer will furnish to the Indenture Trustee a copy
of each such agreement and the Indenture Trustee will cause payments to be made
and notices to be given in accordance with such agreements.
SECTION 11.07. Conflict with Trust Indenture Act. If any provision
hereof limits, qualifies or conflicts with another provision hereof that is
required to be included in this Indenture by any of the provisions of the Trust
Indenture Act, such required provision shall control.
The provisions of TIA ss.ss. 310 through 317 that impose duties on any
Person (including the provisions automatically deemed included herein unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.
SECTION 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 Noteholders, and any other party
secured hereunder, and any other Person with an ownership interest in any part
of the Indenture Trust Estate, any benefit or any legal or equitable right,
remedy or claim under this Indenture.
SECTION 11.12. [RESERVED]
SECTION 11.13. Governing Law. This Indenture shall be construed in
accordance with the laws of the State of New York, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
66
<PAGE>
SECTION 11.14. Counterparts. This Indenture may be
executed in any number of counterparts, each of which so executed
shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
SECTION 11.15. Recording of Indenture. If this Indenture is subject to
recording in any appropriate public recording offices, such recording is to be
effected by the Issuer and at its expense accompanied by an Opinion of Counsel
(which may be counsel to the Indenture Trustee or any other counsel reasonably
acceptable to the Indenture Trustee) to the effect that such recording is
necessary either for the protection of the Noteholders or any other Person
secured hereunder or for the enforcement of any right or remedy granted to the
Indenture Trustee under this Indenture.
SECTION 11.16. Trust Obligations. No recourse may be taken, directly or
indirectly, with respect to the obligations of the Issuer, the Seller, the
Company, the Administrator, the 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 Company, the Administrator, the Servicer, the Indenture Trustee or
the Eligible Lender Trustee in its individual capacity or (ii) any partner,
owner, beneficiary, agent, officer, director or employee of the Seller, the
Company, the Administrator, the 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 Company, Administrator, the
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 Articles VI, VII and VIII of the Trust
Agreement.
SECTION 11.17. No Petition. The Indenture Trustee, by entering into
this Indenture, and each Noteholder, by accepting a Note, hereby covenant and
agree that they will not at any time institute against the Depositor, the
Company or the Issuer, or join in any institution against the Depositor, the
Company or the Issuer of, any bankruptcy, reorganization, arrangement,
insolvency, receivership or liquidation proceedings, or other
67
<PAGE>
proceedings under any United States Federal or state bankruptcy or similar law
in connection with any obligations relating to the Notes, this Indenture or any
of the other Basic Documents.
SECTION 11.18. Inspection. The Issuer agrees that, on reasonable prior
notice, it will permit any representative of the Indenture Trustee, during the
Issuer's normal business hours, to examine all the books of account, records,
reports, and other papers of the Issuer, to make copies and extracts therefrom,
to cause such books to be audited by Independent certified public accountants,
and to discuss the Issuer' affairs, finances and accounts with the Issuer's
officers, employees, and Independent certified public accountants, all at such
reasonable times and as often as may be reasonably requested. The Indenture
Trustee shall and shall cause its representatives to hold in confidence all such
information obtained from such examination or inspection except to the extent
disclosure may be required by law (and all reasonable applications for
confidential treatment are unavailing) and except to the extent that the
Indenture Trustee may reasonably determine that such disclosure is consistent
with its obligations hereunder.
68
<PAGE>
IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have caused
this Indenture to be duly executed by their respective officers, thereunto duly
authorized and duly attested, all as of the day and year first above written.
SMS STUDENT LOAN TRUST 1996-A,
by THE FIRST NATIONAL BANK OF
CHICAGO,
not in its individual capacity
but solely as Eligible Lender
Trustee,
By: /s/ Jeffrey L. Kinney
Name: Jeffrey L. Kinney
Title: Assitant Vice President
BANKERS TRUST COMPANY, not
in its individual capacity but
solely as Indenture Trustee,
By: /s/ John Wallace
Name: John Wallace
Title: Asst. Vice President
Acknowledged and accepted as to the Granting Clause as of the day and
year first above written:
THE FIRST NATIONAL BANK OF CHICAGO, not in its Individual capacity but
solely as Eligible Lender Trustee,
By: /s/ Jeffrey L. Kinney
Name: Jeffrey L. Kinney
Title: Assistant Vice President
69
<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 _Jeffrey L. Kinney__, 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 SMS
STUDENT LOAN TRUST 1996-A, a Delaware trust, and that such person executed the
same as the act of said trust for the purpose and consideration therein
expressed, and in the capacities therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the 29th day of April,
1996.
/s/ Roxanne Burrowes
Notary Public in and for
the State of New York
[Seal] stamp Roxanne Burrowes
Notary Public,State of New York
My commission expires: No.24-4882340
Qualified in Kings County
Commission Expires January 5, 1997
<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 _John Wallace_________, known
to me to be the person and officer whose name is subscribed to the foregoing
instrument and acknowledged to me that the same was the act of the said Bankers
Trust Company, a New York banking corporation, and that such person executed the
same as the act of said corporation for the purpose and consideration therein
expressed, and in the capacities therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the 29th day of April,
1996.
/s/ Roxanne Burrowes
Notary Public in and for
the State of New York
[Seal] stamp Roxanne Burrowes
Notary Public,State of New York
My commission expires: No.24-4882340
Qualified in Kings County
Commission Expires January 5, 1997
<PAGE>
SCHEDULE I
Class A-1
Quarterly Payment Date Planned Balance
July 1996.................................................. $194,576,000
October 1996............................................... 194,576,000
January 1997............................................... 194,576,000
April 1997................................................. 194,576,000
July 1997.................................................. 194,576,000
October 1997............................................... 194,576,000
January 1998............................................... 194,576,000
April 1998................................................. 194,576,000
July 1998.................................................. 194,576,000
October 1998............................................... 194,576,000
January 1999............................................... 194,576,000
April 1999................................................. 194,576,000
July 1999.................................................. 186,141,000
October 1999............................................... 177,746,000
January 2000............................................... 169,320,000
April 2000................................................. 160,786,000
July 2000.................................................. 152,281,000
October 2000............................................... 143,805,000
January 2001............................................... 135,387,000
April 2001................................................. 127,051,000
July 2001.................................................. 118,734,000
October 2001............................................... 110,466,000
January 2002............................................... 102,275,000
April 2002................................................. 94,250,000
July 2002.................................................. 86,315,000
October 2002............................................... 78,395,000
January 2003............................................... 70,488,000
April 2003................................................. 62,757,000
July 2003.................................................. 55,380,000
October 2003............................................... 48,344,000
January 2004............................................... 41,637,000
April 2004................................................. 35,306,000
July 2004.................................................. 29,396,000
October 2004............................................... 23,857,000
January 2005............................................... 18,675,000
April 2005................................................. 14,145,000
July 2005.................................................. 10,197,000
October 2005............................................... 6,477,000
January 2006............................................... 3,080,000
April 2006 and thereafter.................................. 0
BWNY2/373108.1/16000/00671/1901 August 6, 1996
1
<PAGE>
EXHIBIT A-1
TO THE INDENTURE
[FORM OF CLASS A-1 NOTE]
CLASS A-1 NOTE
SEE REVERSE FOR CERTAIN DEFINITIONS
Unless this Note is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Issuer (as
defined below) or its agent for registration of transfer, exchange or payment,
and any Note issued is registered in the name of Cede & Co. or in such other
name as is requested by an authorized representative of DTC (and any payment is
made to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH
HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME
MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. THIS NOTE IS NOT
GUARANTEED OR INSURED BY ANY GOVERNMENTAL AGENCY.
REGISTERED CUSIP NO. 784582AJ7
$--------
No. R-
SMS STUDENT LOAN TRUST 1996-A
CLASS A-1 FLOATING RATE ASSET BACKED SENIOR NOTES
SMS Student Loan Trust 1996-A, a trust organized and existing under the
laws of the State of Delaware (herein referred to as the "Issuer"), for value
received, hereby promises to pay to ______________________________, or
registered assigns, the principal sum of __________________________________
DOLLARS payable on each Quarterly Payment Date in an amount equal to the result
obtained by multiplying (i) a fraction the numerator of which is $___________
and the denominator of which is $194,576,000 by (ii) the aggregate amount, if
any, payable to Noteholders on such Quarterly Payment Date in respect of
principal of the Class A-1 Notes pursuant to Section 3.01 of the
A-1-1
<PAGE>
Indenture dated as of April 1, 1996, between the Issuer and Bankers Trust
Company, a New York banking corporation, as Indenture Trustee (the "Indenture
Trustee") (capitalized terms used but not defined herein shall have the meanings
ascribed thereto in the Indenture, which also references rules as to usage that
shall be applicable herein); provided, however, that no principal shall be
payable on this Note until after the end of the Revolving Period and, provided,
further, that the entire unpaid principal amount of this Note shall be due and
payable on the October 2023 Quarterly Payment Date (the "Class A-1 Note Final
Maturity Date") and the Redemption Date, if any, pursuant to Section 10.01(b) or
10.01(c) of the Indenture.
The Issuer will pay interest on this Note at the rate per annum equal
to the Class A-1 Note Rate (as defined on the reverse hereof), on each Quarterly
Payment Date until the principal of this Note is paid or made available for
payment, on the principal amount of this Note outstanding on the preceding
Quarterly Payment Date, after giving effect to all payments of principal made on
the preceding Quarterly Payment Date (or, in the case of the first Quarterly
Payment Date, on the Closing Date), subject to certain limitations contained in
Section 3.01 of the Indenture. Interest on this Note will accrue for each
Quarterly Payment Date from the most recent Quarterly Payment Date on which
interest has been paid to but excluding such Quarterly Payment Date or, if no
interest has yet been paid, from April 29, 1996 (each, a "Quarterly Interest
Period"). Interest on this Note will be computed on the basis of the actual
number of days elapsed in each Quarterly Interest Period and a 365-day year (or
366-day year in the case of a leap year). Such principal of and interest on this
Note shall be paid in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Note.
Unless the certificate of authentication hereon has been executed by
the Indenture Trustee whose name appears below by manual signature, this Note
shall not be entitled to any benefit under the Indenture referred to on the
reverse hereof, or be valid or obligatory for any purpose.
A-1-2
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed, manually or in facsimile, as of the date set forth below.
SMS STUDENT LOAN TRUST 1996-A
by THE FIRST NATIONAL BANK OF
CHICAGO
not in its individual capacity
but solely as Eligible Lender
Trustee under the Trust
Agreement,
by
Authorized Signatory
Date:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
BANKERS TRUST COMPANY, not in
its individual capacity but
solely as Indenture Trustee,
by
Authorized Signatory
Date:
A-1-3
<PAGE>
REVERSE OF NOTE
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-1 Floating Rate Asset Backed Senior Notes (herein
called the "Class A-1 Notes"), which, together with the Class A-2 Floating Rate
Asset Backed Senior Notes (the "Class A-2 Notes" and, together with the Class
A-1 Notes, the "Senior Notes") and the Floating Rate Asset Backed Subordinate
Notes (the "Subordinate Notes" and, together with the Senior Notes, the "Notes")
are issued under the Indenture, to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights and obligations thereunder of the Issuer, the Indenture Trustee and the
Noteholders. The Class A-1 Notes are subject to all terms of the Indenture.
The Class A-1 Notes are and will be equally and ratably secured by the
collateral pledged as security therefor as provided in the Indenture.
Allocations of principal will be made among the Class A-1 Notes, the Class A-2
Notes and the Subordinate Notes as provided in the Indenture. The Senior Notes
collectively are senior in right of payment to the Subordinate Notes, all as and
to the extent provided in the Indenture.
Principal of the Class A-1 Notes will be payable on each Quarterly
Payment Date after the end of the Revolving Period in an amount described in the
Indenture. "Quarterly Payment Date" means the twenty-seventh day of each
January, April, July and October, or, if any such date is not a Business Day,
the next succeeding Business Day, commencing July 29, 1996.
As provided in Section 10.10(a) of the Indenture, the Class A-1 Notes
may be redeemed in part on the Quarterly Payment Date on which the Revolving
Period ends (or on the Quarterly Payment Date on or immediately following the
last day of the Revolving Period, if the Revolving Period does not end on a
Quarterly Payment Date) in the event that any amount remains on deposit in the
Collateral Reinvestment Account after giving effect to all Additional Fundings,
including any Additional Fundings, on such Quarterly Payment Date.
As described on the face hereof, the entire unpaid principal amount of
this Note shall be due and payable on the Class A-1 Note Final Maturity Date and
the Redemption Date, if any, pursuant to Section 10.01(b) or 10.01(c) of the
Indenture. Notwithstanding the foregoing, the entire unpaid principal amount of
the Notes shall be due and payable on the date on which (i) an Event of Default
shall have occurred and be continuing and (ii) the Indenture Trustee or the
Noteholders representing not less than a majority of the Outstanding Amount of
the Notes shall have declared the Notes to be immediately due and payable in the
A-1-4
<PAGE>
manner provided in Section 5.02 of the Indenture. All principal payments of the
Class A-1 Notes shall be made pro rata to the Class A-1 Noteholders entitled
thereto.
Interest on the Class A-1 Notes will be payable on each Quarterly
Payment Date, commencing July 29, 1996, on the principal amount outstanding of
such Notes until the principal amount thereof is paid in full, at a rate per
annum equal to the Class A-1 Note Rate. The "Class A-1 Note Rate" for each
Quarterly Payment Date and the related Quarterly Interest Period shall be equal
to the lesser of (i) the weighted average of the T-Bill Rates for the related
Quarterly Interest Period plus 0.70% (the "Class A-1 T-Bill Note Rate") and (ii)
the Student Loan Rate for such Quarterly Interest Period; provided, that,
notwithstanding the foregoing, the Class A-1 Note Rate for the first Quarterly
Interest Period shall be equal to the Class A-1 T-Bill Note Rate for such
Quarterly Interest Period. The "Student Loan Rate" for any Quarterly Interest
Period will equal the product of (a) the quotient obtained by dividing (i) 365
(366 in the case of a leap year) by (ii) the actual number of days elapsed in
such Quarterly Interest Period and (b) the percentage equivalent of a fraction,
the numerator of which is equal to Expected Interest Collections for such
Quarterly Interest Period less the Servicing Fee and the Administration Fee with
respect to such Quarterly Interest Period and the denominator of which is the
aggregate principal balance of the Notes as of the last day of such Quarterly
Interest Period.
"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.
Any Senior Noteholders' Interest Carryover that may exist on any
Quarterly Payment Date attributable to the Class A-1 Notes shall be payable to
the Class A-1 Noteholders on that Quarterly Payment Date and any succeeding
Quarterly Payment Dates solely out of the funds available and required to be
applied thereto pursuant to the Administration Agreement.
Payments of interest on this Note due and payable on each Quarterly
Payment Date, and payments of interest together with the installment of
principal, if any, due and payable on each
A-1-5
<PAGE>
Quarterly Payment Date, to the extent not in full payment of this Note, shall be
made by check mailed to the Person whose name appears as the Registered Holder
of this Note (or one or more Predecessor Notes) on the Note Register on the
Record Date, except that with respect to Notes registered on the Record Date in
the name of the nominee of the Clearing Agency, unless Definitive Notes have
been issued (initially, such nominee to be Cede & Co.), payments will be made by
wire transfer in immediately available funds to the account designated by such
nominee. Such checks shall be mailed to the Person entitled thereto at the
address of such Person as it appears on the Note Register as of the applicable
Record Date without requiring that this Note be submitted for notation of
payment, and the mailing of such check shall constitute payment of the amount
thereof regardless of whether such check is returned undelivered. Any reduction
in the principal amount of this Note (or any one or more Predecessor Notes)
effected by any payments made on any Quarterly Payment 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 Quarterly Payment 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 Quarterly Payment Date by notice
mailed no later than five days prior to such Quarterly Payment Date and the
amount then due and payable shall be payable only upon presentation and
surrender of this Note at the Indenture Trustee's Corporate Trust Office or at
the office of the Indenture Trustee's agent appointed for such purposes located
in the Borough of Manhattan, The City of New York.
The Issuer shall pay interest on overdue installments of interest at
the Class A-1 Note Rate to the extent lawful.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Noteholder hereof or his attorney duly
authorized in writing, with such signature guaranteed by an "eligible guarantor
institution" meeting the requirements of the Note Registrar, which requirements
include membership or participation in Securities Transfer Agent's Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution for, STAMP
(all in accordance with the Exchange Act), and such other documents as
A-1-6
<PAGE>
the Indenture Trustee may require, and thereupon one or more new Notes of
authorized denominations and in the same aggregate principal amount will be
issued to the designated transferee or transferees. No service charge will be
charged for any registration of transfer or exchange of this Note, but the
transferor may be required to pay a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any such registration
of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in the Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Seller, the Company, the Administrator, the Servicer, the
Eligible Lender Trustee or the Indenture Trustee on the Notes or under the
Indenture or any certificate or other writing delivered in connection therewith,
against (i) the Seller, the Company, the Administrator, the Servicer, the
Indenture Trustee or the Eligible Lender Trustee in its individual capacity or
(ii) any partner, owner, beneficiary, agent, officer, director or employee of
the Seller, the Company, the Administrator, the 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 Company, the
Administrator, the 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.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees that by
accepting the benefits of the Indenture that such Noteholder or Note Owner will
not at any time institute against the Depositor, the Company or the Issuer, or
join in any institution against the Depositor, the Company or the Issuer of, any
bankruptcy, reorganization, arrangement, insolvency, receivership or liquidation
proceedings or other proceedings under any United States Federal or state
bankruptcy or similar law in connection with any obligations relating to the
Notes, the Indenture or the other Basic Documents.
The Issuer has entered into this Indenture and this Note is issued with
the intention that, for federal, state, foreign, and local income and franchise
tax and usury purposes, this Note will be treated as indebtedness of the Company
secured by the Trust Assets. Each Noteholder, by acceptance of a Note (and each
Note
A-1-7
<PAGE>
Owner by acceptance of a beneficial interest in a Note) agrees to treat this
Note for federal, state, foreign and local income and franchise tax and usury
purposes as indebtedness of the Company secured by the Trust Assets.
Prior to the due presentment for registration of transfer of this Note,
the Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes whether or not this Note be
overdue, and neither the Issuer, the Indenture Trustee nor any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Noteholders under the Indenture at any time by the
Issuer with the consent of the Noteholders representing a majority of the
Outstanding Amount of all Notes at the time outstanding. The Indenture also
contains provisions permitting the Noteholders representing specified
percentages of the Outstanding Amount of the Notes, on behalf of all the
Noteholders, to waive compliance by the Issuer with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the holder of this Note (or any one or more
Predecessor Notes) shall be conclusive and binding upon such holder and upon all
future holders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent or waiver is made upon this Note. The Indenture also permits the
Indenture Trustee to amend or waive certain terms and conditions set forth in
the Indenture without the consent of holders of the Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances,
to merge or consolidate, subject to the rights of the Indenture Trustee and the
Noteholders under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note shall be construed in accordance with the laws of the State
of New York, without reference to its conflict of law provisions, and the
obligations, rights and remedies of the parties hereunder and thereunder shall
be determined in accordance with such laws.
A-1-8
<PAGE>
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 Bankers Trust Company in its individual
capacity, The First National Bank of Chicago in its individual capacity, any
owner of a beneficial interest in the Issuer, nor any of their respective
partners, beneficiaries, agents, officers, directors, employees or successors or
assigns shall be personally liable for, nor shall recourse be had to any of them
for, the payment of principal of or interest on, or performance of, or omission
to perform, any of the covenants, obligations or indemnifications contained in
this Note or the Indenture; it being expressly understood that said covenants,
obligations and indemnifications have been made by the Eligible Lender Trustee
for the sole purposes of binding the interests of the Eligible Lender Trustee in
the assets of the Issuer. The Noteholder of this Note by the acceptance hereof
agrees that, except as expressly provided in the Basic Documents, in the case of
an Event of Default under the Indenture, the Noteholder shall have no claim
against any of the foregoing for any deficiency, loss or claim therefrom;
provided, however, that nothing contained herein shall be taken to prevent
recourse to, and enforcement against, the assets of the Issuer for any and all
liabilities, obligations and undertakings contained in the Indenture or in this
Note.
A-1-9
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number
of assignee
FOR VALUE RECEIVED, the undersigned hereby sells,
assigns and transfers unto
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably
constitutes and appoints ______________________, attorney, to transfer
said Note on the books kept for registration thereof, with full power
of substitution in the premises.
Dated:
*/
Signature Guaranteed:
*/
*/ NOTICE: The signature to this assignment must correspond
with the name of the registered owner as it appears on the
face of the within Note in every particular, without
alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the Note Registrar,
which requirements include membership or participation in
STAMP or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in
substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
<PAGE>
EXHIBIT A-2
TO THE INDENTURE
[FORM OF CLASS A-2 NOTE]
CLASS A-2 NOTE
SEE REVERSE FOR CERTAIN DEFINITIONS
Unless this Note is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Issuer (as
defined below) or its agent for registration of transfer, exchange or payment,
and any Note issued is registered in the name of Cede & Co. or in such other
name as is requested by an authorized representative of DTC (and any payment is
made to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH
HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME
MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. THIS NOTE IS NOT
GUARANTEED OR INSURED BY ANY GOVERNMENTAL AGENCY.
REGISTERED CUSIP NO. 784582AK4
$---------
No. R-
SMS STUDENT LOAN TRUST 1996-A
CLASS A-2 FLOATING RATE ASSET BACKED SENIOR NOTES
SMS Student Loan Trust 1996-A, a trust organized and existing under the
laws of the State of Delaware (herein referred to as the "Issuer"), for value
received, hereby promises to pay to ___________, or registered assigns, the
principal sum of ____________________________________ DOLLARS payable on each
Quarterly Payment Date in an amount equal to the result obtained by multiplying
(i) a fraction the numerator of which is $___________ and the denominator of
which is $79,098,000 by (ii) the aggregate amount, if any, payable to
Noteholders on such Quarterly Payment Date in respect of principal of the Class
A-2 Notes pursuant to Section 3.01 of the Indenture dated as of April 1, 1996,
between the Issuer and Bankers Trust Company, a New York banking corporation, as
Indenture Trustee (the "Indenture Trustee") (capitalized terms used but not
defined herein shall
A-2-1
<PAGE>
have the meanings ascribed thereto in the Indenture, which also references rules
as to usage that shall be applicable herein); provided, however, that no
principal shall be payable on this Note until after the end of the Revolving
Period and, provided, further, that the entire unpaid principal amount of this
Note shall be due and payable on the October 2023 Quarterly Payment Date (the
"Class A-2 Note Final Maturity Date") and the Redemption Date, if any, pursuant
to Section 10.01(b) or 10.01(c) of the Indenture.
The Issuer will pay interest on this Note at the rate per annum equal
to the Class A-2 Note Rate (as defined on the reverse hereof), on each Monthly
Payment Date until the principal of this Note is paid or made available for
payment, on the principal amount of this Note outstanding on the preceding
Quarterly Payment Date, after giving effect to all payments of principal made on
the preceding Quarterly Payment Date (or, in the case of the first two Monthly
Payment Dates and the first Quarterly Payment Date, on the Closing Date),
subject to certain limitations contained in Section 3.01 of the Indenture.
Interest on this Note will accrue for each Monthly Payment Date from the most
recent Monthly Payment Date on which interest has been paid to but excluding
such Monthly Payment Date or, if no interest has yet been paid, from April 29,
1996 (each, a "Monthly Interest Period"). Interest on this Note will be computed
on the basis of the actual number of days elapsed in each Monthly Interest
Period and a 360-day year. Such principal of and interest on this Note shall be
paid in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Note.
Unless the certificate of authentication hereon has been executed by
the Indenture Trustee whose name appears below by manual signature, this Note
shall not be entitled to any benefit under the Indenture referred to on the
reverse hereof, or be valid or obligatory for any purpose.
A-2-2
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed, manually or in facsimile, as of the date set forth below.
SMS STUDENT LOAN TRUST 1996-A
by THE FIRST NATIONAL BANK OF
CHICAGO
not in its individual capacity
but solely as Eligible Lender
Trustee under the Trust
Agreement,
by
Authorized Signatory
Date:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
BANKERS TRUST COMPANY, not in
its individual capacity but
solely as Indenture Trustee,
by
Authorized Signatory
Date:
A-2-3
<PAGE>
REVERSE OF NOTE
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-2 Floating Rate Asset Backed Senior Notes (herein
called the "Class A-2 Notes"), which, together with the Class A-1 Floating Rate
Asset Backed Senior Notes (the "Class A-1 Notes" and, together with the Class
A-2 Notes, the "Senior Notes") and the Floating Rate Asset Backed Subordinate
Notes (the "Subordinate Notes" and, together with the Senior Notes, the "Notes")
are issued under the Indenture, to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights and obligations thereunder of the Issuer, the Indenture Trustee and the
Noteholders. The Class A-2 Notes are subject to all terms of the Indenture.
The Class A-2 Notes are and will be equally and ratably secured by the
collateral pledged as security therefor as provided in the Indenture.
Allocations of principal will be made among the Class A-1 Notes, the Class A-2
Notes and the Subordinate Notes as provided in the Indenture. The Senior Notes
collectively are senior in right of payment to the Subordinate Notes, all as and
to the extent provided in the Indenture.
Principal of the Class A-2 Notes will be payable on each Quarterly
Payment Date after the end of the Revolving Period in an amount described in the
Indenture. "Quarterly Payment Date" means the twenty-seventh day of each
January, April, July and October, or, if any such date is not a Business Day,
the next succeeding Business Day, commencing July 29, 1996.
As provided in Section 10.10(a) of the Indenture, the Class A-2 Notes
may be redeemed in part on the Quarterly Payment Date on which the Revolving
Period ends (or on the Quarterly Payment Date on or immediately following the
last day of the Revolving Period, if the Revolving Period does not end on a
Quarterly Payment Date) in the event that any amount remains on deposit in the
Collateral Reinvestment Account after giving effect to all Additional Fundings,
including any Additional Fundings, on such Quarterly Payment Date.
As described on the face hereof, the entire unpaid principal amount of
this Note shall be due and payable on the Class A-2 Note Final Maturity Date and
the Redemption Date, if any, pursuant to Section 10.01(b) or 10.01(c) of the
Indenture. Notwithstanding the foregoing, the entire unpaid principal amount of
the Notes shall be due and payable on the date on which (i) an Event of Default
shall have occurred and be continuing and (ii) the Indenture Trustee or the
Noteholders representing not less than a majority of the Outstanding Amount of
the Notes shall have declared the Notes to be immediately due and payable in the
A-2-4
<PAGE>
manner provided in Section 5.02 of the Indenture. All principal payments of the
Class A-2 Notes shall be made pro rata to the Class A-2 Noteholders entitled
thereto.
Interest on the Class A-2 Notes will be payable on each Monthly Payment
Date, commencing May 28, 1996, on the principal amount outstanding of such Notes
until the principal amount thereof is paid in full, at a rate per annum equal to
the Senior Note Rate. The "Class A-2 Note Rate" for each Monthly Payment Date
and the related Monthly Interest Period shall be equal to the lesser of (i)
LIBOR for the related LIBOR Reset Period plus 0.24% (the "Class A-2 Note LIBOR
Rate") and (ii) the Student Loan Rate for such Monthly Interest Period provided,
that, notwithstanding the foregoing, the Class A-2 Note Rate for each of the
first three Monthly Interest Periods shall be equal to the Class A-2 Note LIBOR
Rate for such Monthly Interest Period. The "Student Loan Rate" for any Monthly
Interest Period will equal the product of (a) the quotient obtained by dividing
(i) 360 by (ii) the actual number of days elapsed in such Monthly Interest
Period and (b) the percentage equivalent of a fraction, the numerator of which
is equal to Expected Interest Collections for such Monthly Interest Period less
the Servicing Fees and the Administration Fee with respect to such Monthly
Interest Period and the denominator of which is the aggregate principal balance
of the Notes as of the last day of such Monthly Interest Period.
Pursuant to the Administration Agreement, the Administrator shall
determine LIBOR for purposes of calculating the Class A-2 Note Rate for each
given Monthly Interest Period on the second business day prior to the
commencement of each LIBOR Reset Period within such Monthly Interest Period
(each, a "LIBOR Determination Date"). For purposes of calculating LIBOR, a
business day is any day on which banks in London and New York City are open for
the transaction of international business. "LIBOR" means, with respect to any
LIBOR Reset Period, the London interbank offered rate for deposits in U.S.
dollars, having a maturity of one month commencing on the related LIBOR
Determination Date (the "Index Maturity") which appears on Telerate Page 3750 as
of 11:00 a.m., London time, on such LIBOR Determination Date. If such rate does
not appear on Telerate Page 3750, the rate for that day shall be determined on
the basis of the rates at which deposits in U.S. dollars, having the Index
Maturity and in a principal amount of not less than U.S. $1,000,000, are offered
at approximately 11:00 a.m., London time, on such LIBOR Determination Date to
prime banks in the London interbank market by the Reference Banks. The
Administrator shall request the principal London office of each of such
Reference Banks to provide a quotation of its rate. If at least two such
quotations are provided, the rate for that day shall be the arithmetic mean of
the quotations. If fewer than two quotations are provided, the rate for that day
shall be the arithmetic mean of the rates quoted by major banks in New York
City, selected by the Administrator, at approximately 11:00 a.m.,
A-2-5
<PAGE>
New York City time, on such LIBOR Determination Date for loans in U.S. dollars
to leading European banks having the Index Maturity and in a principal amount
equal to an amount of not less than U.S. $1,000,000; provided that if the banks
selected as aforesaid are not quoting as mentioned in this sentence, LIBOR in
effect for the applicable LIBOR Reset Period shall be LIBOR in effect for the
previous LIBOR Reset Period. "LIBOR Reset Period" means the one-month period
commencing on the twenty-seventh day (or, if any such date is not a business
day, on the next succeeding business day) of each month and ending on the day
immediately preceding the following LIBOR Reset Period; provided, however, that
the initial LIBOR Reset Period will commence on the Closing Date. "Telerate Page
3750" means the display page so designated on the Dow Jones Telerate Service (or
such other page as may replace that page on that service for the purpose of
displaying comparable rates or prices). "Reference Banks" means four major banks
in the London interbank market selected by the Administrator.
Any Senior Noteholders' Interest Carryover that may exist on any
Monthly Payment Date attributable to the Class A-2 Notes shall be payable to the
Senior Noteholders on the Quarterly Payment Date immediately following such
Monthly Payment Date (or, if such Monthly Payment Date is a Quarterly Payment
Date, on such date) and any succeeding Quarterly Payment Dates solely out of the
funds available and required to be applied thereto pursuant to the
Administration Agreement.
Payments of interest on this Note due and payable on each Monthly
Payment Date, and payments of interest together with the installment of
principal, if any, due and payable on each Quarterly Payment Date, to the extent
not in full payment of this Note, shall be made by check mailed to the Person
whose name appears as the Registered Holder of this Note (or one or more
Predecessor Notes) on the Note Register on the Record Date, except that with
respect to Notes registered on the Record Date in the name of the nominee of the
Clearing Agency, unless Definitive Notes have been issued (initially, such
nominee to be Cede & Co.), payments will be made by wire transfer in immediately
available funds to the account designated by such nominee. Such checks shall be
mailed to the Person entitled thereto at the address of such Person as it
appears on the Note Register as of the applicable Record Date without requiring
that this Note be submitted for notation of payment, and the mailing of such
check shall constitute payment of the amount thereof regardless of whether such
check is returned undelivered. Any reduction in the principal amount of this
Note (or any one or more Predecessor Notes) effected by any payments made on any
Quarterly Payment 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
A-2-6
<PAGE>
available, as provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Note on a Quarterly Payment 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
Quarterly Payment Date by notice mailed no later than five days prior to such
Quarterly Payment Date and the amount then due and payable shall be payable only
upon presentation and surrender of this Note at the Indenture Trustee's
Corporate Trust Office or at the office of the Indenture Trustee's agent
appointed for such purposes located in the Borough of Manhattan, The City of New
York.
The Issuer shall pay interest on overdue installments of interest at
the Class A-2 Note Rate to the extent lawful.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Noteholder hereof or his attorney duly
authorized in writing, with such signature guaranteed by an "eligible guarantor
institution" meeting the requirements of the Note Registrar, which requirements
include membership or participation in Securities Transfer Agent's Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution for, STAMP
(all in accordance with the Exchange Act), and such other documents as the
Indenture Trustee may require, and thereupon one or more new Notes of authorized
denominations and in the same aggregate principal amount will be issued to the
designated transferee or transferees. No service charge will be charged for any
registration of transfer or exchange of this Note, but the transferor may be
required to pay a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any such registration of transfer or
exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in the Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Seller, the Company, the Administrator, the Servicer, the
Eligible Lender Trustee or the Indenture Trustee on the Notes or under the
Indenture or any certificate or other writing delivered in connection therewith,
against (i) the Seller, the Company, the Administrator, the Servicer, the
Indenture Trustee or the Eligible Lender Trustee in its individual capacity or
(ii) any partner, owner, beneficiary, agent, officer, director or employee of
the Seller, the Company, the Administrator, the Servicer, the
A-2-7
<PAGE>
Indenture Trustee or the Eligible Lender Trustee in its individual capacity, any
holder or owner of a beneficial interest in the Issuer, the Eligible Lender
Trustee or the Indenture Trustee or of any successor or assign of the Seller,
the Company, the Administrator, the 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.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees that by
accepting the benefits of the Indenture that such Noteholder or Note Owner will
not at any time institute against the Depositor, the Company or the Issuer, or
join in any institution against the Depositor, the Company or the Issuer of, any
bankruptcy, reorganization, arrangement, insolvency, receivership or liquidation
proceedings or other proceedings under any United States Federal or state
bankruptcy or similar law in connection with any obligations relating to the
Notes, the Indenture or the other Basic Documents.
The Issuer has entered into this Indenture and this Note is issued with
the intention that, for federal, state, foreign, and local income and franchise
tax and usury purposes, this Note will be treated as indebtedness of the Company
secured by the Trust Assets. Each Noteholder, by acceptance of a Note (and each
Note Owner by acceptance of a beneficial interest in a Note) agrees to treat
this Note for federal, state, foreign and local income and franchise tax and
usury purposes as indebtedness of the Company secured by the Trust Assets.
Prior to the due presentment for registration of transfer of this Note,
the Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes whether or not this Note be
overdue, and neither the Issuer, the Indenture Trustee nor any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Noteholders under the Indenture at any time by the
Issuer with the consent of the Noteholders representing a majority of the
Outstanding Amount of all Notes at the time outstanding. The Indenture also
contains provisions permitting the Noteholders
A-2-8
<PAGE>
representing specified percentages of the Outstanding Amount of the Notes, on
behalf of all the Noteholders, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the holder of this Note (or
any one or more Predecessor Notes) shall be conclusive and binding upon such
holder and upon all future holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances,
to merge or consolidate, subject to the rights of the Indenture Trustee and the
Noteholders under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note shall be construed in accordance with the laws of the State
of New York, without reference to its conflict of law provisions, and the
obligations, rights and remedies of the parties hereunder and thereunder shall
be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place, and rate, and in the coin or currency, herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, neither Bankers Trust Company in its individual
capacity, The First National Bank of Chicago in its individual capacity, any
owner of a beneficial interest in the Issuer, nor any of their respective
partners, beneficiaries, agents, officers, directors, employees or successors or
assigns shall be personally liable for, nor shall recourse be had to any of them
for, the payment of principal of or interest on, or performance of, or omission
to perform, any of the covenants, obligations or indemnifications contained in
this Note or the Indenture; it being expressly understood that said covenants,
obligations and indemnifications have been made by the Eligible Lender Trustee
for the sole purposes of binding the interests of the Eligible Lender Trustee in
the assets of the Issuer. The Noteholder of this Note by the acceptance hereof
A-2-9
<PAGE>
agrees that, except as expressly provided in the Basic Documents, in the case of
an Event of Default under the Indenture, the Noteholder shall have no claim
against any of the foregoing for any deficiency, loss or claim therefrom;
provided, however, that nothing contained herein shall be taken to prevent
recourse to, and enforcement against, the assets of the Issuer for any and all
liabilities, obligations and undertakings contained in the Indenture or in this
Note.
A-2-10
<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-3
TO THE INDENTURE
[FORM OF SUBORDINATE NOTE]
SUBORDINATE NOTE
SEE REVERSE FOR CERTAIN DEFINITIONS
THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER THE SECURITIES OR BLUE SKY
LAWS OF ANY STATE IN THE UNITED STATES OR ANY FOREIGN SECURITIES LAWS. *[BY ITS
ACCEPTANCE OF THIS NOTE THE HOLDER HEREOF IS DEEMED TO REPRESENT TO THE SELLER
AND THE INDENTURE TRUSTEE THAT IT IS A "QUALIFIED INSTITUTIONAL BUYER" AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT ("QIB") AND IS ACQUIRING SUCH NOTE
FOR ITS OWN ACCOUNT (AND NOT FOR THE ACCOUNT OF OTHERS) OR AS A FIDUCIARY OR
AGENT FOR OTHERS (WHICH OTHERS ALSO ARE QIBS).
NO SALE, PLEDGE OR OTHER TRANSFER OF ANY SUBORDINATE NOTES MAY BE MADE BY ANY
PERSON UNLESS EITHER SUCH SALE, PLEDGE OR OTHER TRANSFER IS MADE (i) TO THE
SELLER OR (ii) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES AFTER DUE INQUIRY
IS A QIB ACTING FOR ITS OWN ACCOUNT (AND NOT FOR THE ACCOUNT OF OTHERS) OR AS A
FIDUCIARY OR AGENT FOR OTHERS (WHICH OTHERS ALSO ARE QIBS) IN RELIANCE ON, AND
TO WHOM NOTICE IS GIVEN THAT THE SALE, PLEDGE OR TRANSFER IS BEING MADE IN
RELIANCE ON, RULE 144A OR ON ANOTHER EXEMPTION WITH RESPECT TO WHICH, IN THE
CASE OF SUCH RELIANCE ON SUCH OTHER EXEMPTION, BOTH THE PROSPECTIVE TRANSFEROR
AND THE PROSPECTIVE TRANSFEREE CERTIFY TO THE INDENTURE TRUSTEE AND THE SELLER
IN WRITING THE FACTS SURROUNDING SUCH TRANSFER, WHICH CERTIFICATION WILL BE IN
FORM AND SUBSTANCE SATISFACTORY TO THE INDENTURE TRUSTEE AND THE SELLER, AND
PROVIDE A WRITTEN OPINION OF COUNSEL (WHICH WILL NOT BE AT THE EXPENSE OF THE
INDENTURE TRUSTEE OR THE SELLER) SATISFACTORY TO EACH TO THE EFFECT THAT SUCH
TRANSFER WILL NOT VIOLATE THE SECURITIES ACT. NO SALE, PLEDGE OR OTHER TRANSFER
MAY BE MADE TO ANY ONE PERSON FOR SUBORDINATE NOTES WITH A FACE AMOUNT OF LESS
THAN $250,000 AND, IN THE CASE OF ANY PERSON ACTING ON BEHALF OF ONE OR MORE
THIRD PARTIES (OTHER THAN A BANK (AS DEFINED IN SECTION 3(A)(2) OF THE
SECURITIES ACT) ACTING IN ITS FIDUCIARY CAPACITY), FOR SUBORDINATE NOTES WITH A
FACE AMOUNT OF LESS THAN $250,000 FOR EACH SUCH THIRD PARTY.
SECTION 2.04 OF THE INDENTURE CONTAINS FURTHER RESTRICTIONS ON
THE TRANSFER AND RESALE OF THIS NOTE. EACH TRANSFEREE OF THIS
- - - --------
* Insert in all Subordinate Notes other than the Company Note.
A-3-1
<PAGE>
NOTE, BY ACCEPTANCE HEREOF, IS DEEMED TO HAVE ACCEPTED THIS NOTE SUBJECT TO THE
FOREGOING RESTRICTIONS ON TRANSFERABILITY.
EACH NOTEHOLDER OR NOTE OWNER, BY ACCEPTANCE OF A NOTE OR, IN THE CASE OF A NOTE
OWNER, A BENEFICIAL INTEREST IN A NOTE, COVENANTS AND AGREES THAT BY ACCEPTING
THE BENEFITS OF THE INDENTURE THAT SUCH NOTEHOLDER OR NOTE OWNER WILL NOT AT ANY
TIME INSTITUTE AGAINST THE SELLER, THE COMPANY OR THE ISSUER, OR JOIN IN ANY
INSTITUTION AGAINST THE SELLER, THE COMPANY OR THE ISSUER OF, ANY BANKRUPTCY,
REORGANIZATION, ARRANGEMENT, INSOLVENCY, RECEIVERSHIP OR LIQUIDATION PROCEEDING
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.
Unless this Note is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Issuer (as
defined below) or its agent for registration of transfer, exchange or payment,
and any Note issued is registered in the name of Cede & Co. or in such other
name as is requested by an authorized representative of DTC (and any payment is
made to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.]
**[THIS NOTE IS NOT TRANSFERABLE.
SECONDARY MARKET COMPANY, INC., BY ACCEPTANCE HEREOF, IS
DEEMED TO HAVE ACCEPTED THIS NOTE SUBJECT TO THE FOREGOING
RESTRICTIONS ON TRANSFERABILITY.]
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH
HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME
MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. THIS NOTE IS NOT
GUARANTEED OR INSURED BY ANY GOVERNMENTAL AGENCY.
REGISTERED CUSIP NO. 784582AL2
$---------
No. R-
SMS STUDENT LOAN TRUST 1996-A
FLOATING RATE ASSET BACKED SUBORDINATE NOTES
- - - --------
** To be inserted only in the Company Note.
A-3-2
<PAGE>
SMS Student Loan Trust 1996-A, a trust organized and existing under the
laws of the State of Delaware (herein referred to as the "Issuer"), for value
received, hereby promises to pay to ______________________, or registered
assigns, the principal sum of ___________________________________________DOLLARS
payable on each Quarterly Payment Date in an amount equal to the result obtained
by multiplying (i) a fraction the numerator of which is $9,826,000 and the
denominator of which is $9,926,000 by (ii) the aggregate amount, if any, payable
to Noteholders on such Quarterly Payment Date in respect of principal of the
Subordinate Notes pursuant to Section 3.01 of the Indenture dated as of April 1,
1996, between the Issuer and Bankers Trust Company, a New York banking
corporation, as Indenture Trustee (the "Indenture Trustee") (capitalized terms
used but not defined herein shall have the meanings ascribed thereto in the
Indenture, which also references rules as to usage that shall be applicable
herein); provided, however, that no principal shall be payable on this Note
until the principal balance of the Senior Notes has been paid in full and,
provided, further, that the entire unpaid principal amount of this Note shall be
due and payable on the April 2026 Quarterly Payment Date (the "Subordinate Note
Final Maturity Date") and the Redemption Date, if any, pursuant to Section
10.01(b) or 10.01(c) of the Indenture.
The Issuer will pay interest on this Note at the rate per annum equal
to the Subordinate Note Rate (as defined on the reverse hereof), on each Monthly
Payment Date until the principal of this Note is paid or made available for
payment, on the principal amount of this Note outstanding on the preceding
Quarterly Payment Date, after giving effect to all payments of principal made on
the preceding Quarterly Payment Date (or, in the case of the first two Monthly
Payment Dates and the first Quarterly Payment Date, on the Closing Date),
subject to certain limitations contained in Section 3.01 of the Indenture.
Interest on this Note will accrue for each Monthly Payment Date from the most
recent Monthly Payment Date on which interest has been paid to but excluding
such Monthly Payment Date or, if no interest has yet been paid, from April 29,
1996 (each, a "Monthly Interest Period"). Interest on this Note will be computed
on the basis of the actual number of days elapsed in each Monthly Interest
Period of a 360-day year. Such principal of and interest on this Note shall be
paid in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
A-3-3
<PAGE>
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.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed, manually or in facsimile, as of the date set forth below.
SMS STUDENT LOAN TRUST 1996-A
by THE FIRST NATIONAL BANK OF
CHICAGO not in its individual
capacity but solely as
Eligible Lender Trustee under
the Trust Agreement,
by
Authorized Signatory
Date:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
BANKERS TRUST COMPANY, not in
its individual capacity but
solely as Indenture Trustee,
by
Authorized Signatory
Date:
A-3-4
<PAGE>
REVERSE OF NOTE
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Floating Rate Asset Backed Subordinate Notes (herein called
the "Subordinate Notes"), which, together with the Class A-1 Notes Floating Rate
Asset Backed Senior Notes (the "Class A-1 Notes") and the Class A-2 Floating
Rate Asset Backed Senior Notes (the "Class A-2 Notes" and, together with the
Class A-1 Notes, the "Senior Notes"; the Senior Notes and the Subordinate Notes,
collectively, the "Notes") issued under the Indenture, to which Indenture and
all indentures supplemental thereto reference is hereby made for a statement of
the respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the Noteholders. The Subordinate Notes are subject to all terms of
the Indenture.
The Subordinate Notes are and will be equally and ratably secured by
the collateral pledged as security therefor as provided in the Indenture.
Allocations of principal will be made among the Class A-1 Notes, the Class A-2
Notes and the Subordinate Notes as provided in the Indenture. The Senior Notes
collectively are senior in right of payment to the Subordinate Notes, all as and
to the extent provided in the Indenture.
Principal of the Subordinate Notes will be payable on each Quarterly
Date on or after the date on which the principal balance of the Senior Notes has
been paid in its entirety, in an amount described on the face hereof. "Quarterly
Payment Date" means the twenty-seventh day of each January, April, July and
October, or, if any such date is not a Business Day, the next succeeding
Business Day, commencing July 29, 1996.
As provided in Section 10.10(a) of the Indenture, the Subordinate Notes
may be redeemed in part on the Quarterly Payment Date on which the Revolving
Period ends (or on the Quarterly Payment Date on or immediately following the
last day of the Revolving Period, if the Revolving Period does not end on a
Quarterly Payment Date) in the event that any amount remains on deposit in the
Collateral Reinvestment Account after giving effect to all Additional Fundings,
including any Additional Fundings, on such Quarterly Payment Date.
As described on the face hereof, the entire unpaid principal amount of
this Note shall be due and payable on the Subordinate Note Final Maturity Date
and the Redemption Date, if any, pursuant to Section 10.01(b) or 10.01(c) of the
Indenture. Notwithstanding the foregoing, the entire unpaid principal amount of
the Notes shall be due and payable on the date on which (i) an Event of Default
shall have occurred and be continuing and (ii) the Indenture Trustee or the
Noteholders representing not less than a majority of the Outstanding Amount of
the Notes shall have
A-3-5
<PAGE>
declared the Notes to be immediately due and payable in the manner provided in
Section 5.02 of the Indenture. All principal payments of the Subordinate Notes
shall be made pro rata to the Subordinate Noteholders entitled thereto.
Interest on the Subordinate Notes will be payable on each Monthly
Payment Date, commencing May 28, 1996, on the principal amount outstanding of
such Notes until the principal amount thereof is paid in full, at a rate per
annum equal to the Subordinate Note Rate. The "Subordinate Note Rate" for each
Monthly Payment Date and the related Monthly Interest Period shall be equal to
the lesser of (i) LIBOR for the related LIBOR Reset Period plus 0.60% (the
"Subordinate Note LIBOR Rate") and (ii) the Student Loan Rate for such Monthly
Interest Period provided, that, notwithstanding the foregoing, the Subordinate
Note Rate for each of the first three Monthly Interest Periods shall be equal to
the Subordinate Note LIBOR Rate for such Monthly Interest Period. The "Student
Loan Rate" for any Monthly Interest Period will equal the product of (a) the
quotient obtained by dividing (i) 360 by (ii) the actual number of days elapsed
in such Monthly Interest Period and (b) the percentage equivalent of a fraction,
the numerator of which is equal to Expected Interest Collections for such
Monthly Interest Period less the Servicing Fee and the Administration Fee with
respect to such Monthly Interest Period and the denominator of which is the
aggregate principal balance of the Notes as of the last day of such Monthly
Interest Period.
Pursuant to the Administration Agreement, the Administrator shall
determine LIBOR for purposes of calculating the Subordinate Note Rate for each
given Monthly Interest Period on the second business day prior to the
commencement of each LIBOR Reset Period within such Monthly Interest Period
(each, a "LIBOR Determination Date"). For purposes of calculating LIBOR, a
business day is any day on which banks in London and New York City are open for
the transaction of international business. "LIBOR" means, with respect to any
LIBOR Reset Period, the London interbank offered rate for deposits in U.S.
dollars having a maturity of one month commencing on the related LIBOR
Determination Date (the "Index Maturity") which appears on Telerate Page 3750 as
of 11:00 a.m., London time, on such LIBOR Determination Date. If such rate does
not appear on Telerate Page 3750, the rate for that day shall be determined on
the basis of the rates at which deposits in U.S. dollars, having the Index
Maturity and in a principal amount of not less than U.S. $1,000,000, are offered
at approximately 11:00 a.m., London time, on such LIBOR Determination Date to
prime banks in the London interbank market by the Reference Banks. The
Administrator shall request the principal London office of each of such
Reference Banks to provide a quotation of its rate. If at least two such
quotations are provided, the rate for that day shall be the arithmetic mean of
the quotations. If fewer than two quotations are provided, the rate for that day
shall be the
A-3-6
<PAGE>
arithmetic mean of the rates quoted by major banks in New York City, selected by
the Administrator, at approximately 11:00 a.m., New York City time, on such
LIBOR Determination Date for loans in U.S. dollars to leading European banks
having the Index Maturity and in a principal amount equal to an amount of not
less than U.S. $1,000,000; provided that if the banks selected as aforesaid are
not quoting as mentioned in this sentence, LIBOR in effect for the applicable
LIBOR Reset Period shall be LIBOR in effect for the previous LIBOR Reset Period.
"LIBOR Reset Period" means the one-month period commencing on the twenty-seventh
day (or, if any such date is not a business day, on the next succeeding business
day) of each month and ending on the day immediately preceding the following
LIBOR Reset Period; provided, however, that the initial LIBOR Reset Period will
commence on the Closing Date. "Telerate Page 3750" means the display page so
designated on the Dow Jones Telerate Service (or such other page as may replace
that page on that service for the purpose of displaying comparable rates or
prices). "Reference Banks" means four major banks in the London interbank market
selected by the Administrator.
Any Subordinate Noteholders' Interest Carryover that may exist on any
Monthly Payment Date shall be payable to the Subordinate Noteholders on the
Quarterly Payment Date immediately following such Monthly Payment Date (or, if
such Monthly Payment Date is a Quarterly Payment Date, on such date) and any
succeeding Quarterly Payment Dates solely out of the funds available and
required to be applied thereto pursuant to the Administration Agreement.
Payments of interest on this Note due and payable on each Monthly
Payment Date, and payments of interest together with the installment of
principal, if any, due and payable on each Quarterly Payment Date, to the extent
not in full payment of this Note, shall be made by check mailed to the Person
whose name appears as the Registered Holder of this Note (or one or more
Predecessor Notes) on the Note Register on the Record Date, except that with
respect to Notes registered on the Record Date in the name of the nominee of the
Clearing Agency, unless Definitive Notes have been issued (initially, such
nominee to be Cede & Co.), payments will be made by wire transfer in immediately
available funds to the account designated by such nominee. Such checks shall be
mailed to the Person entitled thereto at the address of such Person as it
appears on the Note Register as of the applicable Record Date without requiring
that this Note be submitted for notation of payment, and the mailing of such
check shall constitute payment of the amount thereof regardless of whether such
check is returned undelivered. Any reduction in the principal amount of this
Note (or any one or more Predecessor Notes) effected by any payments made on any
Quarterly Payment Date shall be binding upon all future Noteholders of this Note
and of any Note issued upon the
A-3-7
<PAGE>
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 Quarterly Payment 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 Quarterly Payment Date by notice
mailed no later than five days prior to such Quarterly Payment 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 Subordinate Note Rate to the extent lawful.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Noteholder hereof or his attorney duly
authorized in writing, with such signature guaranteed by an "eligible guarantor
institution" meeting the requirements of the Note Registrar, which requirements
include membership or participation in Securities Transfer Agent's Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution for, STAMP
(all in accordance with the Exchange Act), and such other documents as the
Indenture Trustee may require, and thereupon one or more new Notes of authorized
denominations and in the same aggregate principal amount will be issued to the
designated transferee or transferees. No service charge will be charged for any
registration of transfer or exchange of this Note, but the transferor may be
required to pay a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any such registration of transfer or
exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in the Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Seller, the Company, the Administrator, the Servicer, the
Eligible Lender Trustee or the Indenture Trustee on the Notes or under the
Indenture or any certificate or other writing delivered in connection therewith,
against (i) the Seller, the Company, the Administrator, the Servicer, the
Indenture Trustee or the Eligible Lender Trustee in its individual capacity or
(ii) any
A-3-8
<PAGE>
partner, owner, beneficiary, agent, officer, director or employee of the Seller,
the Company, the Administrator, the 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 Company, the
Administrator, the 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.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees that by
accepting the benefits of the Indenture that such Noteholder or Note Owner will
not at any time institute against the Depositor, the Company or the Issuer, or
join in any institution against the Depositor, the Company or the Issuer of, any
bankruptcy, reorganization, arrangement, insolvency, receivership or liquidation
proceedings or other proceedings under any United States Federal or state
bankruptcy or similar law in connection with any obligations relating to the
Notes, the Indenture or the other Basic Documents.
The Issuer has entered into this Indenture and this Note is issued with
the intention that, for federal, state, foreign, and local income and franchise
tax and usury purposes, this Note will be treated as indebtedness of the Company
secured by the Trust Assets. Each Noteholder, by acceptance of a Note (and each
Note Owner by acceptance of a beneficial interest in a Note) agrees to treat
this Note for federal, state, foreign and local income and franchise tax and
usury purposes as indebtedness of the Company secured by the Trust Assets.
Prior to the due presentment for registration of transfer of this Note,
the Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes whether or not this Note be
overdue, and neither the Issuer, the Indenture Trustee nor any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Noteholders under the Indenture at any time by the
Issuer with the consent of the Noteholders representing a majority of the
A-3-9
<PAGE>
Outstanding Amount of all Notes at the time outstanding. The Indenture also
contains provisions permitting the Noteholders representing specified
percentages of the Outstanding Amount of the Notes, on behalf of all the
Noteholders, to waive compliance by the Issuer with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the holder of this Note (or any one or more
Predecessor Notes) shall be conclusive and binding upon such holder and upon all
future holders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent or waiver is made upon this Note. The Indenture also permits the
Indenture Trustee to amend or waive certain terms and conditions set forth in
the Indenture without the consent of holders of the Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances,
to merge or consolidate, subject to the rights of the Indenture Trustee and the
Noteholders under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note shall be construed in accordance with the laws of the State
of New York, without reference to its conflict of law provisions, and the
obligations, rights and remedies of the parties hereunder and thereunder shall
be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place, and rate, and in the coin or currency, herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, neither Bankers Trust Company in its individual
capacity, The First National Bank of Chicago in its individual capacity, any
owner of a beneficial interest in the Issuer, nor any of their respective
partners, beneficiaries, agents, officers, directors, employees or successors or
assigns shall be personally liable for, nor shall recourse be had to any of them
for, the payment of principal of or interest on, or performance of, or omission
to perform, any of the covenants, obligations or indemnifications contained in
this Note or the Indenture; it being expressly understood that said covenants,
obligations and indemnifications have been made by the Eligible Lender Trustee
for the sole purposes of binding the
A-3-10
<PAGE>
interests of the Eligible Lender Trustee in the assets of the Issuer. The
Noteholder of this Note by the acceptance hereof agrees that, except as
expressly provided in the Basic Documents, in the case of an Event of Default
under the Indenture, the Noteholder shall have no claim against any of the
foregoing for any deficiency, loss or claim therefrom; provided, however, that
nothing contained herein shall be taken to prevent recourse to, and enforcement
against, the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
A-3-11
<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.
BWNY2/324918.5/11830/00274/1946
<PAGE>
EXHIBIT B-1
BOOK-ENTRY-ONLY COLLATERALIZED MORTGAGE OBLIGATIONS (CMOs)
(WITHOUT OWNER OPTION TO REDEEM)/
OTHER ASSET-BACKED SECURITIES/AND PASS-THROUGH CERTIFICATES
Letter of Representations
[To be Completed by Issuer and Trustee]
SMS STUDENT LOAN TRUST 1996-A
[Name of Issuer]
BANKERS TRUST COMPANY
[Name of Trustee]
April 29, 1996
(Date)
Attention: General Counsel's Office
The Depository Trust Company
55 Water Street; 49th Floor
New York, NY 10041-0099
Re: $194,576,000 Class A-1 Floating Rate Asset Backed
Senior Notes
(Issue Description)
Ladies and Gentlemen:
This letter sets forth our understanding with respect to certain
matters relating to the above-referenced issue (the "Securities"). Trustee will
act as trustee with respect to the Securities pursuant to a trust indenture
dated as of April 1, 1996 (the "Document") between SMS Student Loan Trust 1996-A
(the "Issuer" or the "Trust") and Bankers Trust Company, as indenture trustee
(the "Trustee"). The Issuer has entered into certain agreements in connection
with the issuance of the Class A-1 Floating Rate Asset Backed Senior Notes (the
"Notes"), including a Loan Sale Agreement dated as of April 1, 1996 (the "Loan
Sale Agreement"), among the Issuer, USA Group Secondary Market Services, Inc.,
as seller (the "Seller"), NBD BANK, N.A., as trustee for the Seller, and the
First National Bank of Chicago, as eligible lender trustee (the "Eligible Lender
Trustee"); the Servicing Agreement dated as of April 1, 1996, (the "Servicing
Agreement"), among the Issuer, USA Group Loan Services, Inc., as
BWNY2/373294.1/11830/00274/3721 August 6, 1996
1
<PAGE>
servicer (the "Servicer"), the Seller and the Eligible Lender Trustee; and the
Administration Agreement dated as of April 1, 1996 (the "Administration
Agreement"), among the Issuer, the Trustee and the Seller, as administrator (the
"Administrator"). The term "Securities", as used herein, means the Notes.
Capitalized terms used and not otherwise defined herein have the meanings
ascribed to them in the Loan Sale Agreement. CS First Boston Corporation is
distributing the Securities through The Depository Trust Company ("DTC").
To induce DTC to accept the Securities as eligible for deposit at DTC,
and to act in accordance with its Rules with respect to the Securities, Issuer
and Trustee make the following representations to DTC:
1. Prior to closing on the Securities on April 29, 1996, there shall be
deposited with DTC one Security certificate registered in the name of DTC's
nominee, Cede & Co., for each stated maturity of the Securities in the face
<PAGE>
amounts set forth on Schedule A hereto, the total of which represents 100% of
the principal amount of such Securities. If, however, the aggregate principal
amount of any maturity exceeds $150 million, one certificate will be issued with
respect to each $150 million of principal amount and an additional certificate
will be issued with respect to any remaining principal amount. Each $150 million
certificate shall bear the following legend:
Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation
("DTC"), to issuer 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.
2. In the event of any solicitation of consents from or voting by
holders of the Securities, Issuer or Trustee shall establish a record date for
such purposes (with no provision for revocation of consents or votes by
subsequent holders) and shall, to the extent reasonably possible, send notice of
such record date to DTC not less than 15 calendar days in advance of such record
date. Notices to DTC pursuant to this Paragraph by telecopy shall be sent to
DTC's Reorganization Department at (212) 709-6896 or (212) 709-6897, and receipt
of such notices shall be confirmed by telephoning (212) 709-6870. Notices to DTC
pursuant to this Paragraph by mail or by any other means shall be sent to DTC's
Reorganization Department as indicated in Paragraph 4.
3. In the event of a full or partial redemption other than as a result
of quarterly amortization, Issuer, Administrator or Trustee shall send a notice
to DTC specifying: (a) the amount of the redemption or refunding; (b) in the
case of a refunding, the maturity date(s) established under the refunding; and
(c) the date such notice is to be mailed to Security holders or published (the
"Publication Date"). Such notice shall be sent to DTC by a secure means (e.g.,
legible telecopy, registered or certified mail, overnight delivery) in a timely
manner designed to assure that such notice is in DTC's possession no later than
the close of business on the business day before or, if possible, two business
days before the Publication Date. Issuer or Trustee shall forward such notice
either in a separate secure transmission for each CUSIP number or in a secure
transmission for multiple CUSIP numbers (if applicable) which includes a
manifest or list of each CUSIP number submitted in that transmission. (The party
sending such notice shall have a method to verify subsequently the use of such
means and the timeliness of such notice.) The Publication Date shall be not less
than 20 days nor more than 60 days prior to the redemption date or, in the case
of an advance refunding, the date that the proceeds are deposited in escrow.
Notices to DTC pursuant to this Paragraph by telecopy shall be sent to DTC's
Call Notification Department at (516) 227-4039 or (516) 227-4190. If the party
sending the notice does not receive a telecopy receipt from DTC confirming that
the notice has been received, such party shall telephone (516) 227-4070. Notices
to DTC pursuant to this Paragraph by mail or by any other means shall be sent
to:
Manager; Call Notification Department
The Depository Trust Company
711 Stewart Avenue
Garden City, NY 11530-4719
4. In the event of an invitation to tender the Securities, notice by
Issuer or Trustee to Security holders specifying the terms of the tender and the
Publication Date of such notice shall be sent to DTC by a secure means in the
manner set forth in the preceding Paragraph. Notices to DTC pursuant to this
Paragraph and notices of other corporate actions (including mandatory tenders,
exchanges, and capital changes) by telecopy shall be sent to DTC's
Reorganization Department at (212) 709-1093
<PAGE>
or (212) 709-1094, and receipt of
such notices shall be confirmed by telephoning (212) 709-6884. Notices to DTC
pursuant to the above by mail or by any other means shall be sent to:
Manager; Reorganization Department
Reorganization Window
The Depository Trust Company
7 Hanover Square; 23rd Floor
New York, NY 10004-2695
5. All notices and payment advices sent to DTC shall
contain the CUSIP number of the Securities.
6. Trustee shall send DTC written notice with respect to the dollar
amount per $1000 original face value (or other minimum authorized denomination
if less than $1000 face value) payable on each payment date allocated as to the
interest and principal portions thereof preferably 5, but not less than 2,
business days prior to such payment date. Such notices which shall also contain
the current pool factor and Trustee contact's name and telephone number shall be
sent by telecopy to DTC's Dividend Department at (212) 709-1723, or if by mail
or by any other means to:
Manager; Announcements
Dividend Department
The Depository Trust Company
7 Hanover Square; 22nd Floor
New York, NY 10004-2695
7. [Note: Issuer must represent one of the following, and
cross out the other:] [The interest accrual period is record
date to record date.] [The interest accrual period is payment
date to payment date.]
8. Interest payments and principal payments that are part of periodic
principal-and-interest payments shall be received by Cede & Co., as nominee of
DTC, or its registered assigns in same-day funds on each payment date (or the
equivalent in accordance with existing arrangements between Issuer or Trustee
and DTC). Such payments shall be made payable to the order of Cede & Co. Absent
any other existing arrangements, such payments shall be addressed as follows:
Manager; Cash Receipts
Dividend Department
The Depository Trust Company
7 Hanover Square; 24th Floor
New York, NY 10004-2695
9. [Note: Issuer must represent one of the following, and
cross out the other:]
Securities Eligible for DTC's Same-Day Funds Settlement
("SDFS") System.
Other principal payments (redemption payments) shall be made in
same-day funds by Trustee in the manner set forth in the SDFS Paying Agent
Operating Procedures, a copy of which previously has been furnished to Trustee.
<PAGE>
10. DTC may direct Issuer or Trustee in writing to use any other number
or address as the number or address to which notices or payments of interest or
principal may be sent.
11. In the event of a redemption, acceleration, or any other similar
transaction (e.g., tender made and accepted in response to Issuer's or Trustee's
invitation) necessitating a reduction in the aggregate principal amount of
Securities outstanding or an advance refunding of part of the Securities
outstanding other than as a result of quarterly amortization DTC, in its
discretion: (a) may request the Trust to issue and the Trustee shall
authenticate a new Security certificate; or (b) may make an appropriate notation
on the Security certificate indicating the date and amount of such reduction in
principal except in the case of final maturity; in which case the certificate
will be presented to Trustee prior to payment, if required.
12. In the event that beneficial owners of Securities shall be able to
obtain certificated Securities, Issuer or Trustee shall notify DTC of the
availability of certificates. In such event the Trust shall issue and the
Trustee shall transfer, and exchange certificates in appropriate amounts, as
required by DTC and others.
13. DTC may discontinue providing its services as securities depository
with respect to the Securities at any time by giving reasonable notice to
Trustee (at which time DTC will confirm with Trustee the aggregate principal
amount of Securities outstanding). Under such circumstances, at DTC's request
Trustee shall cooperate fully with DTC by taking appropriate action to make
available one or more separate certificates evidencing Securities to any DTC
Participant having Securities credited to its DTC accounts.
14. Issuer: (a) understands that DTC has no obligation to, and will
not, communicate to its Participants or to any person having an interest in the
Securities any information contained in the Security certificate(s); and (b)
acknowledges that neither DTC's Participants nor any person having an interest
in the Securities shall be deemed to have notice of the provisions of the
Security certificates by virtue of submission of such certificate(s) to DTC.
15. Nothing herein shall be deemed to require Trustee to
advance funds on behalf of Issuer.
16. If (a) the Administrator advises the Trustee in writing that DTC is
no longer willing or able to properly discharge its responsibilities as
depository with respect to the Notes and the Administrator is unable to locate a
qualified successor, (b) the Administrator, at its option, advises the Trustee
in writing that it elects to terminate the book-entry system with respect to the
Notes through DTC or a successor thereto or (c) after the occurrence of an Event
of Default, the Note Owners advise DTC in writing that the continuation of a
book-entry system through DTC (or a successor thereto) is no longer in the best
interests of the Note Owners, then the Clearing Agency shall notify the
Participants that have an interest in the Notes and the Trustee, of the
occurrence of any such event and of the availability of the Note representing
the Notes ("Definitive Notes").
In the event of (a), (b) or (c) above and upon surrender by DTC of the
typewritten Notes representing the Book-Entry Notes, accompanied by registration
instructions, the Issuer shall execute and, upon Issuer order, the Trustee shall
authenticate the Definitive Notes in accordance with the instructions of DTC (or
a successor thereto). None of the Issuer, the Note Registrar, DTC or the 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 the Definitive Notes, the Trustee shall recognize the
holders of record of the Definitive Notes as Noteholders.
BWNY2/373294.1/11830/00274/3721 August 6, 1996
2
<PAGE>
17. This Letter of Representations shall be binding upon and inure to
the benefit of the parties hereto and their respective personal representatives,
successors and assigns, except that, without the prior written consent of the
Trustee, the Issuer or the Administrator may not assign or delegate any of their
respective rights or obligations hereunder.
18. This Letter of Representations may be executed in two or more
counterparts (and by different parties in separate counterparts), each of which
shall be an original but all of which together shall constitute one and the same
agreement.
<TABLE>
<S> <C>
Notes: Very truly yours, SMS STUDENT LOAN TRUST 1996-A
A. If there is a Trustee (as defined in this Letter of By: The First National Bank of Chicago, not in
Representations) Trustee as well as Issuer must sign its individual capacity but solely as Eligible
this Letter. If there is no Trustee, in signing this Lender Trustee under the Trust Agreement
Letter Issuer itself undertakes to perform all of the
obligations set forth herein.
B. Schedule B contains statements that DTC believes By: /s/ Jeffrey L. Kinney
accurately describe DTC, the method of effecting book- (Authorized Officer's Signature)
entry transfers of securities distributed through DTC, Bankers Trust Company, not in its individual
and certain related matters. capacity but solely as Trustee
(Trustee)
By: /s/ John Wallace
(Authorized Officer's Signature)
Received and Accepted:
THE DEPOSITORY TRUST COMPANY SECONDARY MARKET SERVICES, INC.
as Administrator
By: /s/ Richard B. Nessen
By: /s/ Cheryl E. Watson
cc: Underwriter CS First Boston Corporation
Underwriter's Counsel Brown & Wood
</TABLE>
BWNY2/373294.1/11830/00274/3721 August 6, 1996
3
<PAGE>
SCHEDULE A
Class A-1 Notes
CUSIP Principal Amount Maturity Date Interest Rate
784582AJ7 $194,576,000 October 27, 2023 Floating based
on 91-day
Treasury bills
BWNY2/373294.1/11830/00274/3721 August 6, 1996
4
<PAGE>
Principal and Income Payments Rider
1. This Rider supersedes any contradictory language set forth in the
Letter of Representations to which it is appended.
2. With respect to principal and income payments in the Securities:
A. DTC shall receive all dividend and interest payments on payable
date in same-day funds by 2:30 p.m. ET (Eastern Time).
B. Issuer agrees that it or Agent shall provide dividend and
interest payment information to a standard announcement
service subscribed to by DTC. In the unlikely event that no
such service exists, Issuer agrees that it or Agent shall
provide this information directly to DTC in advance of the
dividend or interest record date as soon as the information is
available.
This information should be conveyed directly to DTC
electronically. If electronic transmission is not possible,
such information should be conveyed by telephone or facsimile
transmission to:
The Depository Trust Company
Manager, Announcements
Dividend Department
7 Hanover Square, 22nd Floor
New York, NY 10004
Phone: (212) 709-1270
Fax: (212) 709-1723, 1686
C. Issuer agrees that for dividend and interest payments, it or
Agent shall provide automated notification of CUSIP-level
detail to the depository no later than noon ET on the payment
date.
D. DTC shall receive maturity and redemption payments and CUSIP-
level detail on the payable date in same-day funds by 2:30 p.m.
ET. Absent any other arrangements between Agent and DTC, such
payments shall be wired according to the following instructions:
<PAGE>
Chemical Bank
ABA 021000128
For credit to A/C Depository Trust Company
Redemption Account 066-027306
in accordance with existing SDFS payment procedures in the
manner set forth in DTC's SDFS Paying Agent Operating
Procedures a copy of which has previously been furnished to
Agent.
E. DTC shall receive all other payments and CUSIP-level detail
resulting from corporate actions (such as tender offers or
mergers) on the first payable date in same-day funds by 2:30 p.m.
ET. Absent any other arrangements between the Agent and DTC,
such payments shall be wired to the following address:
Chemical Bank
ABA 021000128
For credit to A/C Depository Trust Company
Reorganization Account 066-027608
BWNY2/373294.1/11830/00274/3721 August 6, 1996
5
<PAGE>
EXHIBIT B-2
BOOK-ENTRY-ONLY COLLATERALIZED MORTGAGE OBLIGATIONS (CMOs)
(WITHOUT OWNER OPTION TO REDEEM)/
OTHER ASSET-BACKED SECURITIES/AND PASS-THROUGH CERTIFICATES
Letter of Representations
[To be Completed by Issuer and Trustee]
SMS STUDENT LOAN TRUST 1996-A
[Name of Issuer|
BANKERS TRUST COMPANY
[Name of Trustee|
April 29, 1996
(Date)
Attention: General Counsel's Office
The Depository Trust Company
55 Water Street; 49th Floor
New York, NY 10041-0099
Re: $79,098,000 Class A-2 Floating Rate Asset Backed
Senior Notes
(Issue Description)
Ladies and Gentlemen:
This letter sets forth our understanding with respect to certain
matters relating to the above-referenced issue (the "Securities"). Trustee will
act as trustee with respect to the Securities pursuant to a trust indenture
dated as of April 1, 1996 (the "Document") between SMS Student Loan Trust 1996-A
(the "Issuer") or (the "Trust") and Bankers Trust Company, as indenture trustee
(the "Trustee"). The Issuer has entered into certain agreements in connection
with the issuance of the Class
BWNY2/373285.1/11830/00274/3721 August 6, 1996
1
<PAGE>
A-2 Floating Rate Asset-Backed Senior Notes (the "Notes"), including a Loan Sale
Agreement dated as of April 1, 1996 (the "Loan Sale Agreement"), among the
Issuer, USA Group Secondary Market Services, Inc., as seller (the "Seller"), NBD
BANK, N.A., as trustee for the Seller, and the First National Bank of Chicago,
as eligible lender trustee (the "Eligible Lender Trustee"); the Servicing
Agreement dated as of April 1, 1996, (the "Servicing Agreement"), among the
Issuer, USA Group Loan Services, Inc., as servicer (the "Servicer"), the Seller
and the Eligible Lender Trustee; and the Administration Agreement dated as of
April 1, 1996 (the "Administration Agreement"), among the Issuer, the Trustee
and the Seller, as administrator (the "Administrator"). The term "Securities",
as used herein, means the Notes. Capitalized terms used and not otherwise
defined herein have the meanings ascribed to them in the Loan Sale Agreement. CS
First Boston Corporation is distributing the Securities through The Depository
Trust Company ("DTC").
To induce DTC to accept the Securities as eligible for deposit at DTC,
and to act in accordance with its Rules with respect to the Securities, Issuer
and Trustee make the following representations to DTC:
1. Prior to closing on the Securities on April 29, 1996,there shall be
deposited with DTC one Security certificate registered in the name of DTC's
nominee, Cede &. Co., for each stated maturity of the Securities in the face
amounts set forth on Schedule A hereto, the total of which represents 100% of
the principal amount of such Securities. If, however, the aggregate principal
amount of any maturity exceeds $150 million, one certificate will be issued with
respect to each $150 million of
principal amount and an additional certificate will be issued with respect to
any remaining principal amount. Each $150 million certificate shall bear the
following legend:
Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation
("DTC"), to issuer 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.
2. In the event of any solicitation of consents from or voting by
holders of the Securities, Issuer or Trustee shall establish a record date for
such purposes (with no provision for revocation of consents or votes by
subsequent holders) and shall, to the extent reasonably possible, send notice of
such record date to DTC not less than 15 calendar days in advance of such record
date. Notices to DTC pursuant to this Paragraph by telecopy shall be sent to
DTC's Reorganization Department at (212) 709 6896 or (212) 709-6897, and receipt
of such notices shall be confirmed by telephoning (212) 709-6870. Notices to DTC
pursuant to this Paragraph by mail or by any other means shall be sent to DTC's
Reorganization Department as indicated in Paragraph 4.
3. In the event of a full or partial redemption other than as a result
of quarterly amortization, Issuer, Administrator or Trustee shall send a notice
to DTC specifying: (a) the amount of the redemption or refunding; (b) in the
case of a refunding, the maturity date(s) established under the refunding; and
(c) the date such notice is to be mailed to Security holders or published (the
"Publication Date"). Such notice shall be sent to DTC by a secure means (e.g.,
legible telecopy, registered or certified mail, overnight delivery) in a timely
manner designed to assure that such notice is in DTC's possession no later than
the close of business on the business day before or, if possible, two business
days before the Publication Date. Issuer or Trustee shall forward such notice
either in a separate secure transmission for each CUSIP number or in a secure
transmission for multiple CUSIP numbers (if applicable) which includes a
manifest or list of each CUSIP number submitted in that transmission. (The party
sending such notice shall have a method to verify subsequently the use of such
means and the timeliness of such notice.) The Publication Date shall be not less
than 20 days nor more than 60 days prior to the redemption date or, in
the case of an advance refunding, the date that the proceeds are deposited in
escrow. Notices to DTC pursuant to this Paragraph
by telecopy shall be sent to DTC's Call Notification Department
at (516) 227-4039 or (516) 227-4190. If the party sending the
notice does not receive a telecopy receipt from DTC confirming
that the notice has been received, such party shall telephone
(516) 227-4070. Notices to DTC pursuant to this Paragraph by
mail or by any other means shall be sent to:
Manager; Call Notification Department
The Depository Trust Company
711 Stewart Avenue
Garden City, NY 11530-4719
4. In the event of an invitation to tender the Securities, notice by
Issuer or Trustee to Security holders specifying the terms of the tender and the
Publication Date of such notice shall be sent to DTC by a secure means in the
manner set forth in the preceding Paragraph. Notices to DTC pursuant to this
Paragraph and notices of other corporate actions (including mandatory tenders,
exchanges, and capital changes) by telecopy shall be sent to DTC's
Reorganization Department at (212) 709-1093 or (212) 709-1094, and receipt of
such notices shall be confirmed by telephoning (212) 709-6884. Notices to DTC
pursuant to the above by mail or by any other means shall be sent to:
Manager; Reorganization Department
Reorganization Window
The Depository Trust Company
7 Hanover Square; 23rd Floor
New York, NY 10004-2695
<PAGE>
5. All notices and payment advices sent to DTC shall
contain the CUSIP number of the Securities.
6. Trustee shall send DTC written notice with respect to the dollar
amount per $1000 original face value (or other minimum authorized denomination
if less than $1000 face value) payable on each payment date allocated as to the
interest and principal portions thereof preferably 5 but not less than 2
business days prior to such payment date. Such notices which shall also contain
the current pool factor and Trustee contacts name and telephone number shall be
sent by telecopy to DTC's Dividend Department at (212) 709-1723 or if by mail or
by any other means to:
Manager; Announcements
Dividend Department
The Depository Trust Company
7 Hanover Square; 22nd Floor
New York, NY 10004-2695
7. [Note: Issuer must represent one of the following, and
cross out the other:] [The interest accrual period is record
date to record date.] [The interest accrual period is payment
date to payment date.]
8. Interest payments and principal payments that are part of periodic
principal-and-interest payments shall be received by Cede & Co. as nominee of
DTC or its registered assigns in same-day funds on each payment date (or the
equivalent in accordance with existing arrangements between Issuer or Trustee
and DTC). Such payments shall be made payable to the order of Cede & Co. Absent
any other existing arrangements such payments shall be addressed as follows:
Manager; Cash Receipts
Dividend Department
The Depository Trust Company
7 Hanover Square; 24th Floor
New York NY 10004-2695
9. [Note: Issuer must represent one of the following, and
cross out the other:]
Securities Eligible for DTC's Same-Day Funds Settlement
("SDFS") System.
Other principal payments (redemption payments) shall be made in same
day funds by trustee in the manner set forth in the SDFS Paying Agent Operating
Procedures a copy of which previously has been furnished to Trustee.
<PAGE>
10. DTC may direct Issuer or Trustee in writing to use any other number
or address as the number or address to which notices or payments of interest or
principal may be sent.
11. In the event of a redemption, acceleration, or any other similar
transaction (e.g., tender made and accepted in response to Issuer's or Trustee's
invitation) necessitating a reduction in the aggregate principal amount of
Securities outstanding or an advance refunding of part of the Securities
outstanding other than as a result of quarterly amortization DTC, in its
discretion: (a) may request the Trust to issue and the Trustee shall
authenticate a new Security certificate; or (b) may make an appropriate notation
on the Security the Trustee certificate indicating the date and amount of such
reduction in principal except in the case of final maturity, in which case the
certificate will be presented to Trustee prior to payment, if required.
12. In the event that beneficial owners of Securities shall
be able to obtain certificated Securities, Issuer or Trustee shall notify DTC of
the availability of certificates. In such event the Trust, shall issue and the
Trustee shall transfer, and exchange certificates in appropriate amounts, as
required by DTC and others.
13. DTC may discontinue providing its services as securities depository
with respect to the Securities at any time by giving reasonable notice to
Trustee (at which time DTC will confirm with Trustee the aggregate principal
amount of Securities outstanding). Under such circumstances, at DTC's request
Trustee shall cooperate fully with DTC by taking appropriate action to make
available one or more separate certificates evidencing Securities to any DTC
Participant having Securities credited to its DTC accounts.
14. Issuer: (a) understands that DTC has no obligation to, and will
not, communicate to its Participants or to any person having an interest in the
Securities any information contained in the Security certificate(s); and (b)
acknowledges that neither DTC's Participants nor any person having an interest
in the Securities shall be deemed to have notice of the provisions of the
Security certificate by virtue of submission of such certificate(s) to DTC.
15. Nothing herein shall be deemed to require Trustee to
advance funds on behalf of Issuer.
16. If (a) the Administrator advises the Trustee in writing that DTC is
no longer willing or able to properly discharge its responsibilities as
depository with respect to the Notes and the Administrator is unable to locate a
qualified successor, (b) the Administrator, at its option, advises the Trustee
in writing that it elects to terminate the book-entry system with respect to the
Notes through DTC or a successor thereto or (c) after the occurrence of an Event
of Default, the Note Owners advise DTC in writing that the continuation of a
book-entry system through DTC (or a successor thereto) is no longer in the best
interests of the Note Owners, then the Clearing Agency shall notify the
Participants that have an interest in the Notes and the Trustee, of the
occurrence of any such event and of the availability of the Note representing
the Notes ("Definitive Notes").
In the event of (a), (b) or (c) above and upon surrender by DTC of the
typewritten Notes representing the Book-Entry Notes, accompanied by registration
instructions, the Issuer shall execute and, upon Issuer order, the Trustee shall
authenticate the Definitive Notes in accordance with the instructions of DTC (or
a successor thereto). None of the Issuer, the Note Registrar, DTC or the 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 the Definitive
Notes, the Trustee shall recognize the holders of record of the Definitive Notes
as Noteholders.
17. This Letter of Representations shall be binding upon and inure to
the benefit of the parties hereto and their respective personal representatives,
successors and assigns, except that, without the prior written consent of the
Trustee, the Issuer or the Administrator may not assign or delegate any of their
respective rights or obligations hereunder.
18. This Letter of Representations may be executed in two or more
counterparts (and by different parties in separate counterparts), each of which
shall be an original but all of which together shall constitute one and the same
agreement.
<TABLE>
<S> <C>
Notes: Very truly yours, SMS STUDENT LOAN TRUST 1996-A
A. If there is a Trustee (as defined in this Letter of By: The First National Bank of Chicago, not in
Representations) Trustee as well as Issuer must sign its individual capacity but solely as Eligible
this Letter. If there is no Trustee, in signing this Lender Trustee under the Trust Agreement
Letter Issuer itself undertakes or perform all of the (Issuer)
obligations set forth herein.
B. Schedule B contains statements that DTC believes By: /s/ Jeffrey L. Kinney
accurately describe DTD, the method of effecting book- (Authorized Officer's Signature)
entry transfers of securities distributed through DTC, Bankers Company, not in its individual
and certain related matters. capacity but solely as Trustee
(Trustee)
By: /s/ John Wallace
(Authorized Officer's Signature)
Received and Accepted:
THE DEPOSITORY TRUST COMPANY SECONDARY MARKET SERVICES, INC.
as Administrator
By: /s/ Richard B. Nessen
By: /s/ Cheryl E. Watson
cc: Underwriter CS First Boston Corporation
Underwriter Counsel Brown & Wood
</TABLE>
BWNY2/373285.1/11830/00274/3721 August 6, 1996
2
<PAGE>
Principal and Income Payments Rider
1. This Rider supersedes any contradictory language set forth
in the Letter of Representations to which it is appended.
2. With respect to principal and income payments in the
Securities:
A. DTC shall receive all dividend and interest payments
on payable date in same-day funds by 2:30 p.m. ET
(Eastern Time).
B. Issuer agrees that it or Agent shall provide dividend
and interest payment information to a standard
announcement service subscribed to by DTC. In the
unlikely event that no such service exists, Issuer
agrees that it or Agent shall provide this
information directly to DTC in advance of the
dividend or interest record date as soon as the
information is available.
This information should be conveyed directly to DTC
electronically. If electronic transmission is not
possible, such information should be conveyed by
telephone or facsimile transmission to:
The Depository Trust Company
Manager, Announcements
Dividend Department
7 Hanover Square, 22nd Floor
New York, NY 10004
Phone: (212) 709-1270
Fax: (212) 709-1723, 1686
C. Issuer agrees that for dividend and interest payments,
it or Agent shall provide automated notification of
CUSIP-level detail to the depository no later than
noon ET on the payment date.
D. DTC shall receive maturity and redemption payments and
CUSIP level detail on the payable date in same-day
funds by 2:30 p.m. ET. Absent any other arrangements
between Agent and DTC, such payments shall be wired
according to the following instructions:
<PAGE>
Chemical Bank
ABA 021000128
For credit to A/C Depository Trust Company Redemption
Account 066-027306 in accordance with existing SDFS
payment procedures in the manner set forth in DTC's
SDFS Paying Agent Operating Procedures a copy of
which has previously been furnished to Agent.
E. DTC shall receive all other payments and CUSIP-level
detail resulting from corporate actions (such as
tender offers or mergers) on the first payable date in
same-day funds by 2:30 p.m. ET. Absent any other
arrangements between the Agent and DTC, such payments
shall be wired to the following address:
Chemical Bank
ABA 021000128
For credit to A/C Depository Trust Company
Reorganization Account 066-027608
BWNY2/373285.1/11830/00274/3721 August 6, 1996
3
<PAGE>
SCHEDULE A
Class A-2 Notes
CUSIP Principal Amount Maturity Date Interest Rate
784582 AK4 $79,098,000 October 27, 2023 Floating based
on one-month
LIBOR
BWNY2/373285.1/11830/00274/3721 August 6, 1996
4
<PAGE>
EXHIBIT B-3
BOOK-ENTRY-ONLY COLLATERALIZED MORTGAGE OBLIGATIONS (CMOs)
(WITHOUT OWNER OPTION TO REDEEM)/
OTHER ASSET-BACKED SECURITIES/AND PASS-THROUGH CERTIFICATES
Letter of Representations
[To be Completed by Issuer and Trustee]
USA GROUP SECONDARY MARKET SERVICES, INC.
[Name of Issuer]
BANKERS TRUST COMPANY
[Name of Trustee]
April 29, 1996
(Date)
Attention: General Counsel's Office
The Depository Trust Company
55 Water Street; 49th Floor
New York, NY 10041-0099
Re: $9,826,000 Floating Rate Asset Backed Subordinate
Notes
(Issue Description)
Ladies and Gentlemen:
This letter sets forth our understanding with respect to certain
matters relating to the above-referenced issue (the "Securities"). Trustee will
act as trustee with respect to the Securities pursuant to a trust indenture
dated as of April 1, 1996 (the "Document") between SMS Student Loan Trust 1996-A
(the "Issuer" or the "Trust") and Bankers Trust Company, as indenture trustee
(the "Trustee"). The Issuer has entered into certain agreements in connection
with the issuance of the Subordinate
BWNY2/373297.1/11830/00274/3721 August 6, 1996
1
<PAGE>
Floating Rate Asset Backed Notes (the "Notes"), including a Loan Sale Agreement
dated as of April 1, 1996 (the "Loan Sale Agreement"), among the Issuer, USA
Group Secondary Market Services, Inc., as seller (the "Seller"), NBD BANK, N.A.,
as trustee for the Seller, and the First National Bank of Chicago, as eligible
lender trustee (the "Eligible Lender Trustee"); the Servicing Agreement dated as
of April 1, 1996, (the "Servicing Agreement"), among the Issuer, USA Group Loan
Services, Inc., as servicer (the "Servicer"), the Seller and the Eligible Lender
Trustee; and the Administration Agreement dated as of April 1, 1996 (the
"Administration Agreement"), among the Issuer, the Trustee and the Seller, as
administrator (the "Administrator"). The term "Securities", as used herein,
means the Notes. Capitalized terms used and not otherwise defined herein have
the meanings ascribed to them in the Loan Sale Agreement. CS First Boston
Corporation is distributing the Securities through The Depository Trust Company
("DTC").
To induce DTC to accept the Securities as eligible for deposit at DTC,
and to act in accordance with its Rules with respect to the Securities, Issuer
and Trustee make the following representations to DTC:
<PAGE>
1. Prior to closing on the Securities on April 29, 1996, there shall be
deposited with DTC one Security certificate registered in the name of DTC's
nominee, Cede & Co., for each stated maturity of the Securities in the face
amounts set forth on Schedule A hereto, the total of which represents 100% of
the principal amount of such Securities. If, however, the aggregate principal
amount of any maturity exceeds $150 million, one
certificate will be issued with respect to each $150 million of principal amount
and an additional certificate will be issued with respect to any remaining
principal amount. Each $150 million certificate shall bear the following legend:
Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation
("DTC"), to issuer 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.
2. In the event of any solicitation of consents from or voting by
holders of the Securities, Issuer or Trustee shall establish a record date for
such purposes (with no provision for revocation of consents or votes by
subsequent holders) and shall, to the extent reasonably possible, send notice of
such record date to DTC not less than 15 calendar days in advance of such record
date. Notices to DTC pursuant to this Paragraph by telecopy shall be sent to
DTC's Reorganization Department at (212) 709-6896 or (212) 709-6897, and receipt
of such notices shall be confirmed by telephoning (212) 709-6870. Notices to DTC
pursuant to this Paragraph by mail or by any other means shall be sent to DTC's
Reorganization Department as indicated in Paragraph 4.
3. In the event of a full or partial redemption other than as a result
of quarterly amortization, Issuer, Administrator Trustee shall send a notice to
DTC specifying: (a) the amount of the redemption or refunding; (b) in the case
of a refunding, the maturity date(s) established under the refunding; and (c)
the date such notice is to be mailed to Security holders or published (the
"Publication Date"). Such notice shall be sent to DTC by a secure means (e.g.,
legible telecopy, registered or certified mail, overnight delivery) in a timely
manner designed to assure that such notice is in DTC's possession no later than
the close of business on the business day before or, if possible, two business
days before the Publication Date. Issuer or Trustee shall forward such notice
either in a separate secure transmission for each CUSIP number or in a secure
transmission for multiple CUSIP numbers (if applicable) which includes a
manifest or list of each CUSIP number submitted in that transmission. (The party
sending such notice shall have a method to verify subsequently the use of such
means and the timeliness
of such notice.) The Publication Date shall be not less than 20 days nor more
than 60 days prior to the redemption date or, in the case of an advance
refunding, the date that the proceeds are deposited in escrow. Notices to DTC
pursuant to this Paragraph by telecopy shall be sent to DTC's Call Notification
Department at (516) 227-4039 or (516) 227-4190. If the party sending the notice
does not receive a telecopy receipt from DTC confirming that the notice has been
received, such party shall telephone (516) 227-4070. Notices to DTC pursuant to
this Paragraph by mail or by any other means shall be sent to:
Manager; Call Notification Department
The Depository Trust Company
711 Stewart Avenue
Garden City, NY 11530-4719
<PAGE>
4. In the event of an invitation to tender the Securities, notice by
Issuer or Trustee to Security holders specifying the terms of the tender and the
Publication Date of such notice shall be sent to DTC by a secure means in the
manner set forth in the preceding Paragraph. Notices to DTC pursuant to this
Paragraph and notices of other corporate actions (including mandatory tenders,
exchanges, and capital changes) by telecopy shall be sent to DTC's
Reorganization Department at (212) 709-1093 or (212) 709-1094, and receipt of
such notices shall be confirmed by telephoning (212) 709-6884. Notices to DTC
pursuant to the above by mail or by any other means shall be sent to:
Manager; Reorganization Department
Reorganization Window
The Depository Trust Company
7 Hanover Square; 23rd Floor
New York, NY 10004-2695
5. All notices and payment advices sent to DTC shall
contain the CUSIP number of the Securities.
6. Trustee shall send DTC written notice with respect to the dollar
amount per $1,000 original face value (or other minimum authorized denomination
if less than $1,000 face value) payable on each payment date allocated as to the
interest and principal portions thereof preferably 5 but not less than 2
business days prior to such payment date. Such notices, which shall also contain
the current pool factor and Trustee contact's name and telephone number shall be
sent by telecopy to DTC's Dividend Department at (212) 709-1723 or if by mail or
by any other means to:
Manager; Announcements
Dividend Department
The Depository Trust Company
7 Hanover Square; 22nd Floor
New York, NY 10004-2695
7. [Note: Issuer must represent one of the following, and
cross out the other:] [The interest accrual period is record
date to record date.] [The interest accrual period is payment
date to payment date.]
8. Interest payments, and principal payments that are part of periodic
principal-and-interest payments shall be received by Cede & Co., as nominee of
DTC or its registered assigns in same-day funds on each payment date (or the
equivalent in accordance with existing arrangements between Issuer or Trustee
and DTC). Such payments shall be made payable to the order of Cede & Co. Absent
any other existing arrangements, such payments shall be addressed as follows:
Manager; Cash Receipts
Dividend Department
The Depository Trust Company
7 Hanover Square; 24th Floor
New York, NY 10004-2695
9. [Note: Issuer must represent one of the following, and
cross out the other:]
Securities Eligible for DTC's Same-Day Funds Settlement
("SDFS") System.
Other principal payments (redemption payments) shall be made in
same-day funds by trustee in the manner set forth in the SDFS Paying Agent
Operating Procedures, a copy of which previously has been furnished to Trustee.
<PAGE>
10. DTC may direct Issuer or Trustee in writing to use any other number
or address as the number or address to which notices or payments of interest or
principal may be sent.
11. In the event of a redemption, acceleration, or any other similar
transaction (e.g., tender made and accepted in response to Issuer's or Trustee's
invitation) necessitating a reduction in the aggregate principal amount of
Securities outstanding or an advance refunding of part of the Securities
outstanding other than as a result of quarterly amortization DTC, in its
discretion: (a) may request the Trust to issue and the Trustee shall
authenticate a new Security certificate; or (b) may make an appropriate notation
on the Security the Trustee
certificate indicating the date and amount of such reduction in principal except
in the case of final maturity; in which case the certificate will be presented
to Trustee prior to payment, if required.
12. In the event that beneficial owners of Securities shall be able to
obtain certificate Securities, Issuer or Trustee shall notify DTC of the
availability of certificates. In such event, the Trust shall issue and the
Trustee shall transfer, and exchange certificates in appropriate amounts, as
required by DTC and others.
13. DTC may discontinue providing its services as securities depository
with respect to the Securities at any time by giving reasonable notice to
Trustee (at which time DTC will confirm with Trustee the aggregate principal
amount of Securities outstanding). Under such circumstances, at DTC's request
Trustee shall cooperate fully with DTC by taking appropriate action to make
available one or more separate certificates evidencing Securities to any DTC
Participant having Securities credited to its DTC accounts.
14. Issuer: (a) understands that DTC has no obligation to,
and will not, communicate to its Participants or to any person
having an interest in the Securities any information contained in
the Security certificate(s); and (b) acknowledges that neither
DTC's Participants nor any person having an interest in the
Securities shall be deemed to have notice of the provisions of the Security
certificates by virtue of submission of such certificate(s) to DTC.
15. Nothing herein shall be deemed to require Trustee to
advance funds on behalf of Issuer.
16. If (a) the Administrator advises the Trustee in writing that DTC is
no longer willing or able to properly discharge its responsibilities as
depository with respect to the Notes and the Administrator is unable to locate a
qualified successor, (b) the Administrator, at its option, advises the Trustee
in writing that it elects to terminate the book-entry system with respect to the
Notes through DTC or a successor thereto or (c) after the occurrence of an Event
of Default, the Note Owners advise DTC in writing that the continuation of a
book-entry system through DTC (or a successor thereto) is no longer in the best
interests of the Note Owners, then the Clearing Agency shall notify the
Participants that have an interest in the Notes and the Trustee, of the
occurrence of any such event and of the availability of the Note representing
the Notes ("Definitive Notes").
In the event of (a), (b) or (c) above and upon surrender by
DTC of the typewritten Notes representing the Book-Entry Notes, accompanied by
registration instructions, the Issuer shall execute and, upon Issuer order, the
Trustee shall authenticate the Definitive Notes in accordance with the
instructions of DTC (or a successor thereto). None of the Issuer, the Note
Registrar, DTC or the 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 the Definitive Notes, the Trustee shall
recognize the holders of record of the Definitive Notes as Noteholders.
BWNY2/373297.1/11830/00274/3721 August 6, 1996
2
<PAGE>
17. This Letter of Representations shall be binding upon and inure to
the benefit of the parties hereto and their respective personal representatives,
successors and assigns, except that, without the prior written consent of the
Trustee, the Issuer or the Administrator may not assign or delegate any of their
respective rights or obligations hereunder.
18. This Letter of Representations may be executed in two or more
counterparts (and by different parties in separate counterparts), each of which
shall be an original but all of which together shall constitute one and the same
agreement.
<TABLE>
<S> <C>
Notes: Very truly yours, SMS STUDENT LOAN TRUST 1996-A
A. If there is a Trustee (as defined in this Letter of By: The First National Bank of Chicago, not in
Representations Trustee as well as Issuer must sign its individual capacity but solely as Eligible
this Letter. If there is no Trustee, in signing this Lender Trustee under the Trust Agreement
Letter Issuer itself undertakes to perform all of the
obligations set forth herein.
B. Schedule B contains statements that DTC believes By: /s/ Jeffrey L. Kinney
accurately describe DTC, the method of effecting book- (Issuer)
entry transfers of securities distributed through DTC, Bankers Trust Company, not in its individual
and certain related matters. capacity but solely as Trustee
(Trustee)
By: /s/ John Wallace
(Authorized Officer's Signature)
Received and Accepted:
THE DEPOSITORY TRUST COMPANY SECONDARY MARKET SERVICES, INC.
as Administrator
By: /s/ Richard B. Nessen
By: /s/ Cheryl E. Watson
cc: Underwriter CS First Boston Corporation
Underwriter Counsel Brown & Wood LLP
</TABLE>
BWNY2/373297.1/11830/00274/3721 August 6, 1996
3
<PAGE>
SCHEDULE A
Subordinate Notes
CUSIP Principal Amount Maturity Date Interest Rate
784582 AL2 $9,826,000 April 27, 2026 Floating based
on one-month
LIBOR
BWNY2/373297.1/11830/00274/3721 August 6, 1996
4
<PAGE>
Principal and Income Payments Rider
1. This Rider supersedes any contradictory language set forth
in the Letter of Representations to which it is appended.
2. With respect to principal and income payments in the
Securities:
A. DTC shall receive all dividend and interest payments
on payable date in same-day funds by 2:30 p.m. ET
(Eastern Time).
B. Issuer agrees that it or Agent shall provide dividend
and interest payment information to a standard
announcement service subscribed to by DTC. In the
unlikely event that no such service exists, Issuer
agrees that it or Agent shall provide this
information directly to DTC in advance of the
dividend or interest record date as soon as the
information is available.
This information should be conveyed directly to DTC
electronically. If electronic transmission is not
possible, such information should be conveyed by
telephone or facsimile transmission to:
The Depository Trust Company
Manager, Announcements
Dividend Department
7 Hanover Square, 22nd Floor
New York, NY 10004
Phone: (212) 709-1270
Fax: (212) 709-1723, 1686
C. Issuer agrees that for dividend and interest payments,
it or Agent shall provide automated notification of
CUSIP-level detail to the depository no later than
noon ET on the payment date.
<PAGE>
D. DTC shall receive maturity and redemption payments and
CUSIP-level detail on the payable date in same-day
funds by 2:30 p.m. ET. Absent any other arrangements
between Agent and DTC, such payments shall be wired
according to the following instructions:
Chemical Bank
ABA 021000128
For credit to A/C Depository Trust Company Redemption
Account 066-027306 in accordance with existing SDFS
payment procedures in the manner set forth in DTC's
SDFS Paying Agent Operating Procedures a copy of
which has previously been furnished to Agent.
E. DTC shall receive all other payments and CUSIP-level
detail resulting from corporate actions (such as
tender offers or mergers) on the first payable date in
same-day funds by 2:30 p.m. ET. Absent any other
arrangements between the Agent and DTC, such payments
shall be wired to the following address:
Chemical Bank
ABA 021000128
For credit to A/C Depository Trust Company
Reorganization Account 066-027608
BWNY2/373297.1/11830/00274/3721 August 6, 1996
5
<PAGE>
REPRESENTATIONS FOR DEPOSIT/WITHDRAWAL AT CUSTODIAN ("DWAC") --
to be included in DTC Letter of Representations
The Security certificate(s) shall remain in Trustee's custody as a
"Balance Certificate" subject to the provisions of the Balance Certificate
Agreement between Trustee and DTC currently in effect.
On each day on which Trustee is open for business and on which it
receives an instruction originated by a Participant through DTC's Deposit/
Withdrawal at Custodian ("DWAC") system to increase the Participant's account by
a specified number of shares, units or obligations (a "Deposit Instruction"),
Trustee shall, before 6:30 p.m. (Eastern Time) that day, either approve or
cancel the Deposit Instruction through the DWAC system.
On each day on which "Trustee" is open for business and on which it
receives an instruction originated by a Participant through the DWAC system to
decrease the Participant's account by a specified number of shares, units, or
obligations (a "Withdrawal Instruction"), Trustee shall, before 6:30 p.m.
(Eastern Time) that day, either approve or cancel the Withdrawal Instruction
through the DWAC system.
Trustee agrees that its approval of a Deposit or Withdrawal Instruction
shall be deemed to be the receipt by DTC of a new, reissued or reregistered
certificated security on registration of transfer to the name of Cede & Co. for
the quantity of Securities evidenced by the Balance Certificate after the
Deposit or Withdrawal Instruction is effected.
BWNY2/373297.1/11830/00274/3721 August 6, 1996
6
<PAGE>
SMS Student Loan Trust 1996-A
$9,926,000 Floating Rate Asset Backed Subordinated Notes
The Bankers Trust Company, as Trustee with respect to the Securities
described herein, is an approved participant in DTC's "FAST" system (FAST No.
0933). Accordingly, Bankers Trust Company will take physical delivery of one
definitive note, registered in the name of the DTC's nominee, Cede & Co., for
each stated maturity of such Securities in the face amounts set forth on
Schedule A hereto.
BWNY2/373297.1/11830/00274/3721 August 6, 1996
7
<PAGE>
REPRESENTATIONS FOR RULE 144A SECURITIES --
to be included in DTC Letter of Representations
1. Issuer represents that at the time of initial registration in the
name of DTC's nominee, Cede & Co., the Securities were Legally or Contractually
Restricted Securities eligible for transfer under Rule 144A under the Securities
Act of 1933, as amended (the "Securities Act"), and identified by a CUSIP or
CINS identification number that was different from any CUSIP or CINS number
assigned to any securities of the same class that were not Legally or
Contractually Restricted Securities. Issuer shall ensure that a CUSIP or CINS
identification number is obtained for all unrestricted securities of the same
class that is different from any CUSIP or CINS identification number assigned to
a Legally or Contractually Restricted Security of such class, and shall notify
DTC promptly in the event that it is unable to do so. Issuer represents that it
has agreed to comply with all applicable information requirements of Rule 144A.
2. Issuer represents that the Securities are [Note: Issuer
must represent one of the following, and may cross out the other]
[an issue of nonconvertible debt securities or nonconvertible preferred stock
which is rated in one of the top four categories by a nationally recognized
statistical rating organization ("Investment-Grade Securities").]
3. If the Securities are not Investment-Grade Securities,
Issuer and Trustee acknowledge that if such Securities cease to be
included in an SRO Rule 144A System during any period in which such
Securities are Legally or Contractually Restricted Securities, such Securities
shall no longer be eligible for DTC's services. Furthermore, DTC may discontinue
providing its services as securities depository with respect to the Securities
at any time by giving reasonable notice to Issuer or Trustee. Under any of the
aforementioned circumstances, at DTC's request, Issuer and Trustee shall
cooperate fully with DTC by taking appropriate action to make available one or
more separate certificates evidencing Securities to any Participant having
Securities credited to its DTC accounts.
4. Issuer and Trustee acknowledge that so long as Cede & Co.
is a record owner of the Securities, Cede & Co. shall be entitled
to all applicable voting rights and to receive the full amount of
all distributions payable with respect thereto. Issuer and Trustee
acknowledge that DTC shall treat any DTC Participant ("Participant") having
Securities credited to its DTC accounts as entitled to the full benefits of
ownership of such Securities. Without limiting the generality of the preceding
sentence, Issuer and Trustee acknowledge that DTC shall treat any Participant
having Securities credited to its DTC accounts as entitled to receive
distributions (and voting rights, if any) in respect of Securities, and to
receive from DTC certificates evidencing Securities. Issuer and Trustee
recognize that DTC does not in any way undertake to, and shall not have any
responsibility to, monitor or ascertain the compliance of any transactions in
the Securities with any of the provisions: (a) of Rule 144A; (b) of other
exemptions from registration under the Securities Act or of any other state or
federal securities laws; or (c) of the offering documents.
- - - --------
A "Legally Restricted Security" is a security that is a restricted
security, as defined in Rule 144(a)(3). A "Contractually Restricted Security" is
a security that upon issuance and continually thereafter can only be sold
pursuant to Regulation S under the Securities Act, Rule 144A, Rule 144, or in a
transaction exempt from the registration requirements of the Securities Act
pursuant to Section 4 of the Securities Act and not involving any public
offering; provided, however, that once the security is sold pursuant to the
provisions of Rule 144, including Rule 144(k), it will thereby cease to be a
"Contractually Restricted Security." For purposes of this definition, in order
for a depositary receipt to be considered a "Legally or Contractually Restricted
Security," the underlying security must also be a "Legally or Contractually
Restricted Security."
BWNY2/373297.1/11830/00274/3721 August 6, 1996
8
<PAGE>
EXHIBIT C
TO THE INDENTURE
FORM OF TRANSFEROR CERTIFICATE
[DATE]
USA Group Secondary Market Services, Inc.
11100 USA Parkway
Fishers, Indiana 46038
The First National Bank of Chicago
One First National Plaza
Chicago, Illinois 60670
Bankers Trust Company
4 Albany Street
New York, New York 10006
Re: SMS Student Loan Trust 1996-A
Floating Rate Asset Backed Subordinate Notes
Ladies and Gentlemen:
In connection with our disposition of the above-referenced Floating
Rate Asset Backed Subordinate Notes (the "Notes") we certify that (a) we
understand that the Notes have not been registered under the Securities Act of
1933, as amended (the "Act"), and are being transferred by us in a transaction
that is exempt from the registration requirements of the Act and (b) we have not
offered or sold any Notes to, or solicited offers to buy any Notes from, any
person, or otherwise approached or negotiated with any person with respect
thereto, in a manner that would be deemed, or taken any other action which would
result in, a violation of Section 5 of the Act.
Very truly yours,
[NAME OF TRANSFEROR]
By:
Name:
Title:
<PAGE>
EXHIBIT D
FORM OF INVESTMENT LETTER
BWNY2/324918.5/11830/00274/1946
D-1
<PAGE>
USA Group Secondary Market Services, Inc.
11100 USA Parkway
Fishers, Indiana 46038
The First National Bank of Chicago
One First National Plaza
Chicago, Illinois 60670
Bankers Trust Company
4 Albany Street
New York, New York 10006
Ladies and Gentlemen:
In connection with our proposed purchase of $ aggregate principal
amount of Floating Rate Asset Backed Subordinate Notes (the "Securities") of SMS
Student Loan Trust 1996-A (the "Issuer"), we confirm that:
1. We understand that the Securities have not been registered
under the Securities Act of 1933, as amended (the "Securities Act"),
and may not be sold except as permitted in the following sentence. We
understand and agree, on our own behalf and on behalf of any accounts
for which we are acting as hereinafter stated, (x) that such Securities
are being offered only in a transaction not involving any public
offering within the meaning of the Securities Act and (y) that such
Securities may be resold, pledged or transferred only (i) to USA Group
Secondary Market Services, Inc. (the "Seller") or (ii) to a person whom
the transferor of the Securities reasonably believes after due inquiry
is a QIB acting for its own account (and not for the account of others)
or as a fiduciary or agent for others (which others also are QIBs) and
in reliance on, and to whom notice is given that the sale, pledge or
transfer is being made in reliance on, Rule 144A or on another
exemption from registration under the Securities Act; provided, that,
in the event that reliance is made on an exemption from registration
under the Securities Act other than Rule 144A, the prospective
transferee shall have provided a written opinion of counsel (which will
not be at the expense of the Indenture Trustee or the Seller)
satisfactory to each to the effect that such transfer will not violate
the Securities Act. We will notify any purchaser of the Security from
us of the above resale restrictions, if then applicable. We further
understand that in connection with any transfer of the Security by us
that the Seller and the Indenture Trustee may request, and if so
requested we will furnish such certificates and other information as
they may reasonably require to confirm that any such transfer complies
with the
BWNY2/324918.5/11830/00274/1946
D-2
<PAGE>
foregoing restrictions. We understand that no sale, pledge or other transfer may
be made to any one person of Securities with a face amount of less than $250,000
and, in the case of any person acting on behalf of one or more third parties
(other than a bank (as defined in Section 3(a)((2) of the Securities Act) acting
in its fiduciary capacity), of Securities with a face amount of less than
$250,000 for each such third party.
2. We are a "qualified institutional buyer" as defined under
Rule 144A under the Securities Act and are acquiring the Security for
our own account (and not for the account of others) or as a fiduciary
or agent for others (which others also are "qualified institutional
buyers"). We are familiar with Rule 144A under the Securities Act and
are aware that the seller of the Security and other parties intend to
rely on the statements made herein and the exemption from the
registration requirements of the Securities Act provided by Rule 144A
or (if, as set forth above, appropriate certifications are made and an
opinion of counsel given) another exemption from registration under the
Securities Act.
3. With respect to any purchaser that is a partnership,
grantor trust or S corporation ("Flow-Through Entity") for federal
income tax purposes, less than 50% of the value of the Flow-Through
Entity is attributable to the Securities and such Flow-Through Entity
makes no special allocation of any item of income, gain, loss, or
credit attributable to the Securities to one or more of beneficial
owners of such Flow-Through Entity.
4. We understand that the Seller, the Issuer, CS First Boston
Corporation ("First Boston") and others will rely upon the truth and
accuracy of the foregoing acknowledgments, representations and
agreements, and we agree that if any of the acknowledgments,
representations and warranties deemed to have been made by us by our
purchase of the Securities, for our own account or for one or more
accounts as to each of which we exercise sole investment discretion,
are no longer accurate, we shall promptly notify the Seller and First
Boston.
BWNY2/324918.5/11830/00274/1946
D-3
<PAGE>
5. You are entitled to rely upon this letter and you are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceeding or official
inquiry with respect to the matters covered hereby.
Very truly yours,
[NAME OF PURCHASER]
By: ______________________
Name: ______________________
Title: ______________________
Date: ______________________
BWNY2/324918.5/11830/00274/1946
D-4
<PAGE>
CROSS-REFERENCE TABLE*
TIA Indenture
Section Section
310(a)(1)............................................. 6.11
(a)(2)........................................... 6.11
(a)(3)........................................... 6.10
(a)(4)........................................... N.A.**
(a)(4)........................................... 6.11
(b) ...................................... 6.08;
6.10; 6.11
(c) ...................................... N.A.
311(a) ...................................... 6.11
(b) ...................................... 6.11
(c) ...................................... N.A.
312(a) ...................................... 7.01;
7.02(a)
(b) ...................................... 7.02(b)
(c) ...................................... 7.02(c)
313(a) ...................................... 6.06
(b) ...................................... 6.06
(c) ...................................... 11.05
(d) ...................................... 6.06
314(a) ...................................... 3.09; 7.03
(b) ...................................... 3.06
(c) ...................................... 2.09; 4.01
11.01
(d) ...................................... 2.09;
11.01
(e) ...................................... 11.01
(f) ...................................... 3.09
315(a) ...................................... 6.01
(b) ...................................... 6.05
(c) ...................................... 6.01
(d) ...................................... 6.01
(e) ...................................... 5.13
316(a)(1)(A).......................................... 5.11
(a)(1)(B)........................................ 5.12
(a)(2)........................................... N.A.
(b) ...................................... 5.07
(c) ...................................... 1.01
317(a) ...................................... 5.03
(b) ...................................... 3.03
318(a) ...................................... 11.07
- - - --------
* Note: This Cross-Reference Table shall not, for any
purpose, be deemed to be part of the Indenture.
** N.A. means Not Applicable.
BWNY2/324918.5/11830/00274/1946
D-5
TRUST AGREEMENT
among
USA GROUP SECONDARY MARKET SERVICES, INC.,
as Depositor,
SECONDARY MARKET COMPANY, INC.
and
THE FIRST NATIONAL BANK OF CHICAGO,
not in its individual capacity but solely
as Eligible Lender Trustee
Dated as of April 1, 1996
1
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
Definitions and Usage
ARTICLE II
Organization
SECTION 2.01. Name.............................................. 1
SECTION 2.02. Office............................................ 1
SECTION 2.03. Purposes and Powers............................... 1
SECTION 2.04. Appointment of Eligible Lender Trustee............ 2
SECTION 2.05. Initial Capital Contribution of Trust
Estate.................................................. 2
SECTION 2.06. Declaration of Trust.............................. 3
SECTION 2.07. Liability of the Company.......................... 3
SECTION 2.08. Title to Trust Property........................... 3
SECTION 2.09. Representations and Warranties of the
Depositor and the Company. ............................ 3
SECTION 2.10. .................................................. 5
ARTICLE III
Ownership
SECTION 3.01. Beneficial Ownership.............................. 5
ARTICLE IV
Actions by Eligible Lender Trustee
SECTION 4.01. Prior Notice to Company with Respect to
Certain Matters....................... 6
SECTION 4.02. Action by Company with Respect to
Bankruptcy.............................................. 7
SECTION 4.03. Restrictions on Company's Power................... 7
ARTICLE V
Certain Duties
SECTION 5.01. No Segregation of Moneys; No Interest............. 7
SECTION 5.02. Accounting and Reports to the
Noteholders, the Internal Revenue Service
and Others.............................................. 7
SECTION 5.03. Incentive Programs................................ 8
i
<PAGE>
ARTICLE VI
Authority and Duties of Eligible Lender Trustee
SECTION 6.01. General Authority................................. 8
SECTION 6.02. General Duties.................................... 9
SECTION 6.03. Action upon Instruction........................... 9
SECTION 6.04. No Duties Except as Specified in this
Agreement, the Loan Sale Agreement, the
Servicing Agreement, the Administration
Agreement or in Instructions............................ 10
SECTION 6.05. No Action Except Under Specified
Documents or Instructions............................... 11
SECTION 6.06. Restrictions...................................... 11
SECTION 6.07. Origination of Consolidation Loans
during the Revolving Period............................. 11
ARTICLE VII
Concerning the Eligible Lender Trustee
SECTION 7.01. Acceptance of Trusts and Duties................... 13
SECTION 7.02. Furnishing of Documents........................... 15
SECTION 7.03. Representations and Warranties.................... 15
SECTION 7.04. Reliance; Advice of Counsel....................... 16
SECTION 7.05. Not Acting in Individual Capacity................. 17
SECTION 7.06. Eligible Lender Trustee Not Liable for
Notes or Student Loans.................................. 17
SECTION 7.07. Eligible Lender Trustee May Own Trust
Notes................................................... 18
ARTICLE VIII
Compensation of Eligible Lender Trustee
SECTION 8.01. Eligible Lender Trustee's Fees and
Expenses................................................ 18
SECTION 8.02. Payments to the Eligible Lender Trustee........... 18
ARTICLE IX
Termination of Trust Agreement
SECTION 9.01. Termination of Trust Agreement.................... 18
SECTION 9.02. Dissolution upon Bankruptcy of the
Company................................................. 19
ii
<PAGE>
ARTICLE X
Successor Eligible Lender Trustees and
Additional Eligible Lender Trustees
SECTION 10.01. Eligibility Requirements for Eligible
Lender Trustee...........................................20
SECTION 10.02. Resignation or Removal of Eligible
Lender Trustee...........................................20
SECTION 10.03. Successor Eligible Lender Trustee.................21
SECTION 10.04. Merger or Consolidation of Eligible
Lender Trustee...........................................22
SECTION 10.05. Appointment of Co-Eligible Lender
Trustee or Separate Eligible Lender
Trustee..................................................22
ARTICLE XI
Miscellaneous
SECTION 11.01. Supplements and Amendments........................24
SECTION 11.02. No Legal Title to Trust Estate in
Company..................................................26
SECTION 11.03. Limitations on Rights of Others...................26
SECTION 11.04. Notices...........................................26
SECTION 11.05. Severability......................................27
SECTION 11.06. Separate Counterparts.............................27
SECTION 11.07. Successors and Assigns............................27
SECTION 11.08. No Petition.......................................27
SECTION 11.09. No Recourse.......................................28
SECTION 11.10. Headings..........................................28
SECTION 11.11. Governing Law.....................................28
EXHIBIT A Certificate of Trust of SMS Student Loan Trust
1996-A
iii
<PAGE>
TRUST AGREEMENT dated as of April 1, 1996, among USA GROUP
SECONDARY MARKET SERVICES, INC., a Delaware corporation, as Depositor, SECONDARY
MARKET COMPANY, INC., a Delaware corporation (the "Company") and THE FIRST
NATIONAL BANK OF CHICAGO, a national banking association, not in its individual
capacity but solely as Eligible Lender Trustee.
The Depositor, the Company and the Eligible Lender Trustee
hereby agree as follows:
ARTICLE I
Definitions and Usage
Capitalized terms used but not defined herein are defined in
Appendix A to the Administration Agreement, dated as of April 1, 1996, among the
SMS Student Loan Trust 1996-A, as Issuer, the Depositor, as Administrator, and
Bankers Trust Company, as Indenture Trustee, which also contains rules as to
construction and usage that shall be applicable herein.
ARTICLE II
Organization
SECTION 2.01. Name. The Trust created hereby shall be known as
"SMS Student Loan Trust 1996-A", in which name the Eligible Lender Trustee may
conduct the business of the Trust, make and execute contracts and other
instruments on behalf of the Trust and sue and be sued.
SECTION 2.02. 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
Depositor.
SECTION 2.03. Purposes and Powers. The purpose of the
Trust is to engage in the following activities:
1. to issue the Notes pursuant to the Indenture and to
sell the Notes in one or more transactions;
2. with the proceeds of the sale of the Notes, to purchase the
Initial Financed Student Loans, to deposit the Reserve Account Initial
Deposit in the Reserve Account, and to pay the organizational, start-up
and transactional expenses of the Trust and to pay the balance to the
Depositor pursuant to the Loan Sale Agreement;
1
<PAGE>
3. to originate Consolidation Loans during the Revolving
Period pursuant to Section 6.07 hereof, to increase the principal
balance of Consolidation Loans by adding the principal balances of any
related Add-on Consolidation Loans to the principal balances of such
Consolidation Loans, to acquire and hold any New Loans to be conveyed
to the Trust during the Revolving Period pursuant to the Loan Sale
Agreement and to acquire and hold any Serial Loans or other Student
Loans to be conveyed to the Trust subsequent to the Closing Date
pursuant to the Loan Sale Agreement;
4. to assign, grant, transfer, pledge, mortgage and
convey the Trust Estate pursuant to the Indenture;
5. to enter into and perform its obligations under the
Basic Documents to which it is to be a party;
6. 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
7. 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
Noteholders and the others specified in Section 2(d) of the
Administration Agreement.
The Trust shall not engage in any activity other than in connection with the
foregoing or other than as required or authorized by the terms of this Agreement
or the other Basic Documents.
SECTION 2.04. Appointment of Eligible Lender Trustee. The
Depositor hereby appoints the Eligible Lender Trustee as trustee of the Trust
effective as of the date hereof, to have all of the rights, powers and duties
set forth herein.
SECTION 2.05. Initial Capital Contribution of Trust Estate.
The Depositor hereby sells, assigns, transfers, conveys and sets over to the
Eligible Lender Trustee, as of the date hereof, the sum of $1.00. The Eligible
Lender Trustee hereby acknowledges receipt in trust from the Depositor, as of
the date hereof, of the foregoing contribution, which shall constitute the
initial Trust Estate and shall be deposited in the Collection Account. The
Depositor shall pay the organizational expenses of the Trust as they may arise
or shall, upon the request of the Eligible Lender Trustee, promptly reimburse
the Eligible Lender Trustee for any such expenses paid by the Eligible Lender
Trustee.
2
<PAGE>
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
Company, subject to the obligations of the Trust under the other Basic
Documents. It is the intention of the parties hereto that the Trust constitute a
trust under the Business Trust Statute and that this Agreement constitute the
governing instrument of such trust. Effective as of the date hereof, the
Eligible Lender Trustee shall have all rights, powers and duties set forth
herein and in the Business Trust Statute with respect to accomplishing the
purposes of the Trust. The Eligible Lender Trustee and the Delaware Trustee
shall file the Certificate of Trust with the Secretary of State of the State of
Delaware pursuant to ss. 3801 of the Business Trust Statute on or before the
Closing Date.
SECTION 2.07. Liability of the Company. The Company shall be
liable directly to and will indemnify the injured party for all losses, claims,
damages, liabilities and expenses of the Trust (including Expenses, to the
extent not paid out of the Trust Estate) to the extent that the Company would be
liable if the Trust were a partnership under the Delaware Revised Uniform
Limited Partnership Act in which the Company were a general partner; provided,
however, that the Company shall not be liable for any losses incurred by a
Noteholder or a Note Owner in the capacity of an investor in the Notes. In
addition, any third party creditors of the Trust (other than in connection with
the obligations described in the preceding sentence for which the Company shall
not be liable) shall be deemed third party beneficiaries of this paragraph.
SECTION 2.08. Title to Trust Property. Legal title to the
Trust Estate shall be vested at all times in the Trust as a separate legal
entity except where applicable law in any jurisdiction requires title to any
part of the Trust Estate to be vested in a trustee or trustees, in which case
title shall be deemed to be vested in the Eligible Lender Trustee, a co-trustee
and/or a separate trustee, as the case may be; provided that legal title to the
Financed Student Loans shall be vested at all times in the Eligible Lender
Trustee on behalf of the Trust.
SECTION 2.09. Representations and Warranties of the
Depositor and the Company. (a) Each of the Company and the
Depositor hereby represents and warrants, as to itself, to the
Eligible Lender Trustee that:
1. It is duly organized and validly existing as a corporation
in good standing under the laws of the jurisdiction of its
incorporation, with corporate power and authority to own its properties
and to conduct its business as such properties are currently owned and
such business is presently conducted (subject with respect to the
Depositor
3
<PAGE>
and its Student Loans, to the vesting of legal title thereto in NBD or another
eligible lender, as trustee for the Depositor).
2. It is duly qualified to do business as a foreign
corporation in good standing, and has obtained all necessary licenses
and approvals in all jurisdictions in which the ownership or lease of
property or the conduct of its business shall require such
qualifications except where failure to do so (both singly and in the
aggregate) will not have a material adverse effect on the conduct of
its business, operations or financial condition.
3. It has the corporate power and authority to execute and
deliver this Agreement and to carry out its terms; and the execution,
delivery and performance of this Agreement has been duly authorized by
it by all necessary corporate action.
4. This Agreement constitutes its legal, valid and binding
obligation enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization and similar laws
relating to creditors' rights generally and subject to general
principles of equity.
5. The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof do not conflict with,
result in any breach of any of the terms and provisions of, or
constitute (with or without notice or lapse of time or both) a default
under, its articles of incorporation or by-laws, or any indenture,
agreement or other instrument to which it is a party or by which it is
bound; nor result in the creation or imposition of any Lien upon any of
its properties pursuant to the terms of any such indenture, agreement
or other instrument (other than pursuant to the Basic Documents); nor
violate any law or, to the best of its knowledge, any order, rule or
regulation applicable to it of any court or of any Federal or state
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over it or its properties.
6. There are no proceedings or investigations pending or, to
its best knowledge, threatened before any court, regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Depositor or its properties: (A) asserting the
invalidity of this Agreement, (B) seeking to prevent the consummation
of any of the transactions contemplated by this Agreement or (C)
seeking any determination or ruling that might materially and adversely
affect the performance by it of its obligations under, or the validity
or enforceability of, this Agreement.
4
<PAGE>
SECTION 2.10. Tax Treatment. The Depositor and the Company
have entered into this Agreement, and the Notes will be issued to and acquired
by the Noteholders, with the intention that, for federal, state, foreign and
local income and franchise tax and usury law purposes, the Notes will be
indebtedness of the Company secured by the Trust Assets. Each of the Depositor
and the Company, by entering into this Agreement, and each Noteholder, by the
acceptance of its Note, agrees to treat the Notes for purposes of federal, state
and local income and franchise taxes and for any other tax imposed on or
measured by income and usury law purposes as indebtedness of the Company secured
by the Trust Assets. In accordance with the foregoing, the Eligible Lender
Trustee hereby agrees to treat the Trust as a security device only, and shall
not file tax returns or obtain an employer identification number on behalf of
the Trust (except as may be required as a result of changes in law or as may
otherwise be required in the Opinion of Counsel for the Company).
ARTICLE III
Ownership
SECTION 3.01. Beneficial Ownership. Upon the formation of the
Trust by the contribution by the Depositor pursuant to Section 2.05, the
Depositor shall be the sole beneficial owner of the Trust. Concurrently with the
transfer and sale of the Initial Financed Student Loans to the Trust pursuant to
the Loan Sale Agreement, the Depositor does hereby irrevocably assign to the
Company all of its right, title and interest in and to the Trust, and thereupon
(subject to the Company's right to transfer pursuant to the next succeeding
sentence) the Company shall be the sole beneficial owner of the Trust. For so
long as any Notes remain Outstanding, the Company shall not Transfer its
ownership interest in the Trust, in whole or in part, unless (i) either (A) the
Company shall have delivered to the Eligible Lender Trustee and the Indenture
Trustee an Opinion of Counsel (with a copy to Moody's) that neither the Trust
nor the Company would be consolidated with the purchaser of such ownership
interest in the event of an Insolvency Event with respect to such purchaser or
(B) the Rating Agency Condition is satisfied with respect to such Transfer, (ii)
the Company shall have delivered to the Eligible Lender Trustee and the
Indenture Trustee an Opinion of Counsel that such transaction will not result in
a material adverse Federal or Indiana or Delaware state tax consequence to the
Issuer or the Noteholders, and (iii) there is delivered to the Eligible Lender
Trustee and the Indenture Trustee an Opinion of Counsel, in form and substance
satisfactory to them, that such Transfer may be made pursuant to an exemption,
describing the applicable exemption and the basis therefor, from the Securities
Act and under applicable state securities laws.
5
<PAGE>
ARTICLE IV
Actions by Eligible Lender Trustee
SECTION 4.01. Prior Notice to Company 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 Company and the Rating
Agencies in writing of the proposed action and the Company shall not have
notified the Eligible Lender Trustee in writing prior to the 30th day after such
notice is given that the Company has withheld consent or provided alternative
direction:
(a) the initiation of any material claim or lawsuit by the
Trust (except claims or lawsuits brought in connection with the
collection of the Financed Student Loans) and the compromise of any
material action, claim or lawsuit brought by or against the Trust
(except with respect to the aforementioned claims or lawsuits for
collection of Financed Student Loans);
(b) the election by the Trust to file an amendment to
the Certificate of Trust;
(c) the amendment of the Indenture by a supplemental
indenture in circumstances where the consent of any
Noteholder is required;
(d) the amendment of the Indenture by a supplemental indenture
in circumstances where the consent of any Noteholder is not required
and such amendment materially adversely affects the interests of the
Company;
(e) 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 Company; or
(f) the appointment pursuant to the Indenture of a successor
Note Registrar or Indenture Trustee, or the consent to the assignment
by the Note Registrar or Indenture Trustee of its obligations under the
Indenture.
SECTION 4.02. Action by Company 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 prior approval of the
Company and the delivery to the Eligible Lender Trustee by the Company of a
certificate
6
<PAGE>
certifying that it reasonably believes that the Trust is
insolvent.
SECTION 4.03. Restrictions on Company's Power. The
-------------------------------
Company shall not direct the Eligible Lender Trustee to take or
refrain from taking any action if such action or inaction would
be contrary to any obligation of the Trust or the Eligible Lender
Trustee under this Agreement or any of the other Basic Documents
or would be contrary to Section 2.03 nor shall the Eligible
Lender Trustee be permitted to follow any such direction, if
given.
ARTICLE V
Certain Duties
SECTION 5.01. No Segregation of Moneys; No Interest. Moneys
received by the Eligible Lender Trustee hereunder need not be segregated in any
manner except to the extent required by law or the Basic Documents and may be
deposited under such general conditions as may be prescribed by law, and the
Eligible Lender Trustee shall not be liable for any interest thereon.
SECTION 5.02. Accounting and Reports to the Noteholders, the
Internal Revenue Service and Others. No federal income tax return shall be filed
on behalf of the Trust unless either (i) the Eligible Lender Trustee shall
receive an Opinion of Counsel that, based on a change in applicable law
occurring after the date hereof, or as a result of a transfer by the Company
permitted by Section 3.01, the Code requires such a filing or (ii) the Internal
Revenue Service shall determine that the Trust is required to file such a
return. In the event that the Trust is required to file tax returns, the
Eligible Lender Trustee shall prepare or shall cause to be prepared any tax
returns required to be filed by the Trust and shall remit such returns to the
Company at least five (5) days before such returns are due to be filed. The
Company shall promptly sign such returns and deliver such returns after
signature to the Eligible Lender Trustee and such returns shall be filed by the
Eligible Lender Trustee with the appropriate tax authorities. In no event shall
the Eligible Lender Trustee, the Company or the Depositor be liable for any
liabilities, costs or expenses of the Trust or the Noteholders arising out of
the application of any tax law, including federal, state, foreign or local
income or excise taxes or any other tax imposed on or measured by income (or any
interest, penalty or addition with respect thereto or arising from a failure to
comply therewith) except for any such liability, cost or expense attributable to
any act or omission by the Eligible Lender Trustee, the Company or the
Depositor, as the case may be, in breach of its obligations under this
Agreement.
7
<PAGE>
SECTION 5.03. Incentive Programs. Subject to compliance by the
Administrator with Section 2(j) of the Administration Agreement, the Trust shall
offer each Incentive Program to all qualified Borrowers except any Incentive
Program with respect to which the Administrator terminates pursuant to Section
2(j) of the Administration Agreement. Upon the effective date specified in the
notice of termination required by Section 2(j) of the Administration Agreement,
the Trust shall cease offering the terminated Incentive Program to Borrowers
affected by the termination.
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 Class
A-1 Notes in the aggregate principal amount of $194,576,000, Class A-2 Notes in
the aggregate principal amount of $79,098,000 and Subordinate Notes in the
aggregate principal amount of $9,926,000. The Eligible Lender Trustee is also
authorized and directed on behalf of the Trust (i) to acquire and hold legal
title to the Financed Student Loans from the Depositor and (ii) to take all
actions required pursuant to Section 3.02(c) of the Servicing Agreement, and
otherwise follow the direction of and cooperate with the Servicer in submitting,
pursuing and collecting any claims to and with the Department with respect to
any Interest Subsidy Payments and Special Allowance Payments relating to the
Financed Student Loans.
In addition to the foregoing, the Eligible Lender Trustee is
authorized, but shall not be obligated, to take all actions required of the
Trust pursuant to the Basic Documents. The Eligible Lender Trustee is further
authorized from time to time to take such action as the Administrator directs or
instructs with respect to the Basic Documents and is directed to take such
action to the extent that the Administrator is expressly required pursuant to
the Basic Documents to cause the Eligible Lender Trustee to act.
SECTION 6.02. General Duties. It shall be the duty of
the Eligible Lender Trustee to discharge (or cause to be
discharged) all its responsibilities pursuant to the terms of
this Agreement and the other Basic Documents to which the Trust
8
<PAGE>
is a party and to administer the Trust, subject to and in accordance with the
provisions of this Agreement and the other Basic Documents. Notwithstanding the
foregoing, the Eligible Lender Trustee shall be deemed to have discharged its
duties and responsibilities hereunder and under the other Basic Documents to the
extent the Administrator has agreed in the Administration Agreement to perform
any act or to discharge any duty of the Eligible Lender Trustee hereunder or
under any other Basic Document, and the Eligible Lender Trustee shall not be
held liable for the default or failure of the Administrator to carry out its
obligations under the Administration Agreement. Except as expressly provided in
the Basic Documents, the Eligible Lender Trustee shall have no obligation to
administer, service or collect the Financed Student Loans or to maintain,
monitor or otherwise supervise the administration, servicing or collection of
the Financed Student Loans.
SECTION 6.03. Action upon Instruction. (a) Subject to Article
IV, Section 7.01 and in accordance with the terms of the Basic Documents, the
Company 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 Company pursuant to Article IV.
(b) The Eligible Lender Trustee shall not be required to take
any action hereunder or under any other Basic Document if the Eligible Lender
Trustee shall have reasonably determined, or shall have been advised by counsel,
that such action is likely to result in liability on the part of the Eligible
Lender Trustee or is contrary to the terms hereof or of any other Basic Document
or is otherwise contrary to law.
(c) Whenever the Eligible Lender Trustee is unable to
determine the appropriate course of action between alternative courses of action
permitted or required by the terms of this Agreement or under any other Basic
Document, the Eligible Lender Trustee shall promptly give notice (in such form
as shall be appropriate under the circumstances) to the Company 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 Company received, the Eligible Lender Trustee shall not be
liable on account of such action to any Person. If the Eligible Lender Trustee
shall not have received appropriate instruction within 10 days of such notice
(or within such shorter period of time as reasonably may be specified in such
notice or may be necessary under the circumstances) it may, but shall be under
no duty to, take or refrain from taking such action, not inconsistent with this
Agreement or the other Basic Documents, as it shall deem to be in the best
interests of the Company, and shall have no liability to any Person for such
action or inaction.
9
<PAGE>
(d) In the event that the Eligible Lender Trustee is unsure as
to the application of any provision of this Agreement or any other Basic
Document or any such provision is ambiguous as to its application, or is, or
appears to be, in conflict with any other applicable provision, or in the event
that this Agreement 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 Company requesting instruction and, to the
extent that the Eligible Lender Trustee acts or refrains from acting in good
faith in accordance with any such instruction received, the Eligible Lender
Trustee shall not be liable, on account of such action or inaction, to any
Person. If the Eligible Lender Trustee shall not have received appropriate
instruction within 10 days of such notice (or within such shorter period of time
as reasonably may be specified in such notice or may be necessary under the
circumstances) it may, but shall be under no duty to, take or refrain from
taking such action, not inconsistent with this Agreement or the other Basic
Documents, as it shall deem to be in the best interests of the Company and shall
have no liability to any Person for such action or inaction.
SECTION 6.04. No Duties Except as Specified in this Agreement,
the Loan Sale Agreement, the Servicing Agreement, the Administration Agreement
or in Instructions. The Eligible Lender Trustee shall not have any duty or
obligation to manage, make any payment with respect to, register, record, sell,
service, dispose of or otherwise deal with the Trust Estate, or to otherwise
take or refrain from taking any action under, or in connection with, any
document contemplated hereby to which the Eligible Lender Trustee is a party,
except as expressly provided by the terms of this Agreement, the Loan Sale
Agreement, the Servicing Agreement, the Administration Agreement or in any
document or written instruction received by the Eligible Lender Trustee pursuant
to Section 6.03; and no implied duties or obligations shall be read into this
Agreement or any other Basic Document against the Eligible Lender Trustee. The
Eligible Lender Trustee shall have no responsibility for filing any financing or
continuation statement in any public office at any time or to otherwise perfect
or maintain the perfection of any security interest or lien granted to it
hereunder or to prepare or file any Commission filing for the Trust or to record
this Agreement or any other Basic Document. The Eligible Lender Trustee
nevertheless agrees that it will, at its own cost and expense, promptly take all
action as may be necessary to discharge any liens on any part of the Trust
Estate that result from actions by, or claims against, The First National Bank
of Chicago in its individual capacity or as the Eligible Lender Trustee that are
not related to the ownership or the administration of the Trust Estate.
10
<PAGE>
SECTION 6.05. No Action Except Under Specified Documents or
Instructions. The Eligible Lender Trustee shall not manage, control, use, sell,
service, dispose of or otherwise deal with any part of the Trust Estate except
(i) in accordance with the powers granted to and the authority conferred upon
the Eligible Lender Trustee pursuant to this Agreement, (ii) in accordance with
the other Basic Documents to which it is a party and (iii) in accordance with
any document or instruction delivered to the Eligible Lender Trustee pursuant to
Section 6.03.
SECTION 6.06. Restrictions. The Eligible Lender Trustee shall
not take any action (a) that is inconsistent with the purposes of the Trust set
forth in Section 2.03 or (b) that, to the actual knowledge of the Eligible
Lender Trustee, would result in the Trust's becoming taxable as a corporation
for Federal income tax purposes. The Company shall not direct the Eligible
Lender Trustee to take action that would violate the provisions of this Section.
SECTION 6.07. Origination of Consolidation Loans during the
Revolving Period. (a) From time to time during the Revolving Period the Servicer
will identify those Financed Student Loans as to which a Borrower qualifies to
receive a Consolidation Loan under the Federal Consolidation Loan Program from
the Eligible Lender Trustee and will inform the Administrator of the identity of
such loans. The Administrator will determine, in accordance with customary
industry standards, whether a Consolidation Loan should be offered to such
Borrower; provided that, a Consolidation Loan will not be offered to a Borrower
if any Student Loan of such Borrower which is not owned by the Issuer and which
is proposed to be discharged by the making of such Consolidation Loan is more
than 30 days past due; and provided further that a Consolidation Loan will not
be offered to a borrower if the aggregate principal amount of all Consolidation
Loans originated pursuant to this Section would thereby exceed the limitations
set forth in Section 6.07(d).
(b) If the Administrator determines that it is appropriate to
offer a Consolidation Loan to a Borrower in accordance with this Section, it
will so inform the Servicer who will send the necessary documentation to such
Borrower and will process such documentation on behalf of the Eligible Lender
Trustee, all in accordance with industry standards, the Higher Education Act and
the related Guarantee Agreement. The Servicer will inform the Eligible Lender
Trustee of the completion of the loan underwriting process and the necessary
documentation, whereupon the Eligible Lender Trustee, on behalf of the Trust and
upon the direction of the Administrator, will execute any documents required to
be executed by it to complete the origination of such loan and to subject such
loan to the related Guarantee Agreement. The Servicer will not permit any
11
<PAGE>
Consolidation Loan to be originated which would violate the representations and
warranties of Section 3.01 of the Loan Sale Agreement. Any Consolidation Loan
which is determined to violate any of such representations and warranties will
be subject to repurchase by the Seller as provided in Section 3.02 of the Loan
Sale Agreement.
(c) Each Consolidation Loan originated pursuant to this
Section 6.07 shall be owned by the Issuer and be part of the Trust Estate and
the Collateral from and after the time of such origination. Upon origination of
such loan and such loan becoming part of the Trust Estate and the Collateral,
the Administrator will instruct the Indenture Trustee, pursuant to Section 2(f)
of the Administration Agreement, to authorize the transfer from the Collateral
Reinvestment Account of an amount sufficient to prepay in full any Student Loan
not held by the Issuer that is to be consolidated through such origination,
including any Add-on Consolidation Loan not held as part of the Trust Estate
that is prepaid in full as a result of the principal balance of such Add-on
Consolidation Loan being added to the principal balance of a related
Consolidation Loan held as part of the Trust Estate. The Administrator will
cause to be taken all actions, and the Eligible Lender Trustee will cooperate
with the Administrator in the execution of any instruments or documents,
required to establish and maintain the ownership interest of the Issuer and the
first perfected security interest of the Indenture Trustee in each Consolidation
Loan originated pursuant to this Section.
(d) In no event shall the Issuer or the Eligible Lender
Trustee on behalf of the Issuer originate Consolidation Loans in excess of
$35,000,000 (including the addition of the principal balances of any Add-on
Consolidation Loans) in the aggregate during the Revolving Period; additionally,
no Consolidation Loan may be originated by the Issuer or the Eligible Lender
Trustee on behalf of the Issuer having a scheduled maturity after 2026 if at the
time of such origination the aggregate principal balance of all Consolidation
Loans held as part of the Trust Estate that have a scheduled maturity date after
2026 exceeds, or after giving effect to such origination, would exceed
$10,000,000; provided, however, that the Eligible Lender Trustee will be
permitted to fund the addition of the principal balance of any Add-on
Consolidation Loan in excess of such amounts, if the Eligible Lender Trustee is
required to do so by the Higher Education Act. In addition, in no event shall
the Issuer or the Eligible Lender Trustee on behalf of the Issuer make
Consolidation Loans after the Revolving Period; provided, however, that the
Eligible Lender Trustee may increase the principal balance of any Consolidation
Loan by the principal balance of any related Add-on Consolidation Loan during
the Add- on Period if the Eligible Lender Trustee is required to do so by the
Higher Education Act. After the Revolving Period, upon the
12
<PAGE>
addition of the principal balance of such Add-on Consolidation Loan, and such
amounts becoming part of the Trust Estate and the Collateral, the Administrator
will instruct the Indenture Trustee, pursuant to Section 2(d)(iii)(A) of the
Administration Agreement, to authorize the transfer from the Collection Account
of an amount sufficient to prepay in full such Add-on Consolidation Loan if it
is not held by the Issuer.
(e) All Consolidation Fees payable with respect to
Consolidation Loans originated and the principal balances of any Add-on
Consolidation Loans added to the Trust pursuant to this Section will be payable
by the Issuer as provided in Section 2(d)(ii) of the Administration Agreement.
All other costs or fees incurred in originating Consolidation Loans (or in
adding the principal balances of any Add-on Consolidation Loans) shall be
payable by the Administrator.
ARTICLE VII
Concerning the Eligible Lender Trustee
SECTION 7.01. Acceptance of Trusts and Duties. The
-------------------------------
Eligible Lender Trustee accepts the trusts hereby created and
agrees to perform its duties hereunder with respect to such
trusts but only upon the terms of this Agreement. The Eligible
Lender Trustee also agrees to disburse all moneys actually
received by it constituting part of the Trust Estate upon the
terms of this Agreement and the other Basic Documents. The
Eligible Lender Trustee shall not be answerable or accountable
hereunder or under any other Basic Document under any
circumstances, except (i) for its own willful misconduct 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 the Company;
(c) no provision of this Agreement or any other Basic Document
shall require the Eligible Lender Trustee to expend or risk funds or
otherwise incur any financial liability in the performance of any of
its rights or powers hereunder or under any other Basic Document, if
the Eligible Lender
BWNY2/249677.1/11830/00274/1901 July 26, 1996
13
<PAGE>
Trustee shall have reasonable grounds for believing that repayment of such funds
or adequate indemnity against such risk or liability is not reasonably assured
or provided to it;
(d) under no circumstances shall the Eligible Lender Trustee
be liable for indebtedness evidenced by or arising under any of the
Basic Documents, including the principal of and interest on the Notes;
(e) the Eligible Lender Trustee shall not be responsible for
or in respect of the validity or sufficiency of this Agreement or for
the due execution hereof by the Depositor or for the form, character,
genuineness, sufficiency, value or validity of any of the Trust Estate
or for or in respect of the validity or sufficiency of the Basic
Documents, and the Eligible Lender Trustee shall in no event assume or
incur any liability, duty, or obligation to any Noteholder or to the
Company, other than as expressly provided for herein and in the other
Basic Documents;
(f) the Eligible Lender Trustee shall not be liable for the
action or inaction, default or misconduct of the Administrator, the
Seller, the Depositor, the Indenture Trustee or the Servicer under any
of the other Basic Documents or otherwise and the Eligible Lender
Trustee shall have no obligation or liability to perform the
obligations of the Trust under this Agreement or the other Basic
Documents that are required to be performed by the Administrator under
the Administration Agreement, the Indenture Trustee under the Indenture
or the Servicer under the Servicing Agreement; and
(g) the Eligible Lender Trustee shall be under no obligation
to exercise any of the rights or powers vested in it by this Agreement,
or to institute, conduct or defend any litigation under this Agreement
or otherwise or in relation to this Agreement or any other Basic
Document, at the request, order or direction of the Company, unless the
Company has 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 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 Company promptly upon receipt
of a written request therefor, duplicates or copies of all
reports, notices, requests, demands, certificates, financial
BWNY2/249677.1/11830/00274/1901 July 26, 1996
14
<PAGE>
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 each of
the Depositor and the Company, that:
(a) It is a national banking association duly organized and
validly existing in good standing under the laws of the United States.
It has all requisite corporate power and authority to execute, deliver
and perform its obligations under this Agreement.
(b) It has taken all corporate action necessary to authorize
the execution and delivery by it of this Agreement, and this Agreement
will be executed and delivered by one of its officers who is duly
authorized to execute and deliver this Agreement on its behalf.
(c) Neither the execution nor the delivery by it of this
Agreement, nor the consummation by it of the transactions contemplated
hereby nor compliance by it with any of the terms or provisions hereof
will contravene any Federal or state law, governmental rule or
regulation governing the banking or trust powers of the Eligible Lender
Trustee or any judgment or order binding on it, or constitute any
default under its charter documents or by-laws or any indenture,
mortgage, contract, agreement or instrument to which it is a party or
by which any of its properties may be bound.
(d) It is an "eligible lender" as such term is defined in
Section 435(d) of the Higher Education Act, for purposes of holding
legal title to the Financed Student Loans and originating Consolidation
Loans as contemplated by this Agreement and the other Basic Documents,
has obtained a lender identification number with respect to the Trust
from the Department, has in effect a Guarantee Agreement with each
Initial Guarantor with respect to the Initial Financed Student Loans
and will have the requisite power and authority to enter into Guarantee
Agreements with Additional Guarantors, if any.
(e) In originating each Consolidation Loan on behalf of the
Trust, as provided in Section 6.07, it shall comply with all applicable
provisions of the Higher Education Act, and it will not create or cause
to be created any lien, charge or encumbrance on any such Consolidation
Loan or in any way cause the Trust to not have good title thereto.
SECTION 7.04. Reliance; Advice of Counsel. (a) The
Eligible Lender Trustee shall incur no liability to anyone in
BWNY2/249677.1/11830/00274/1901 July 26, 1996
15
<PAGE>
acting upon any signature, instrument, direction, notice, resolution, request,
consent, order, certificate, report, opinion, bond, or other document or paper
believed by it to be genuine and believed by it to be signed by the proper party
or parties. The Eligible Lender Trustee may accept a certified copy of a
resolution of the board of directors or other governing body of any corporate
party as conclusive evidence that such resolution has been duly adopted by such
body and that the same is in full force and effect. As to any fact or matter the
method of the determination of which is not specifically prescribed herein, the
Eligible Lender Trustee may for all purposes hereof rely on a certificate,
signed by the president or any vice president or by the treasurer or other
authorized officers of the relevant party, as to such fact or matter and such
certificate shall constitute full protection to the Eligible Lender Trustee for
any action taken or omitted to be taken by it in good faith in reliance thereon.
(b) In the exercise or administration of the trusts hereunder
and in the performance of its duties and obligations under this Agreement or the
other Basic Documents, the Eligible Lender Trustee (i) may act directly or
through its agents or attorneys pursuant to agreements entered into with any of
them, and the Eligible Lender Trustee shall not be liable for the conduct or
misconduct of such agents or attorneys if such agents or attorneys shall have
been selected by the Eligible Lender Trustee with reasonable care, and (ii) may
consult with counsel, accountants and other skilled persons to be selected with
reasonable care and employed by it. The Eligible Lender Trustee shall not be
liable for anything done, suffered or omitted in good faith by it in accordance
with the written opinion or advice of any such counsel, accountants or other
such persons and not contrary to this Agreement or any other Basic Document.
SECTION 7.05. Not Acting in Individual Capacity. Except as
provided in this Article VII, in accepting the trusts hereby created, The First
National Bank of Chicago acts solely as Eligible Lender Trustee hereunder and
not in its individual capacity and all Persons having any claim against the
Eligible Lender Trustee by reason of the transactions contemplated by this
Agreement or any other Basic Document shall look only to the Trust Estate for
payment or satisfaction thereof.
SECTION 7.06. Eligible Lender Trustee Not Liable for Notes or
Student Loans. The recitals contained herein (other than the representations and
warranties in Section 7.03) shall be taken as the statements of the Depositor,
and the Eligible Lender Trustee assumes no responsibility for the correctness
thereof. The Eligible Lender Trustee makes no representations as to the validity
or sufficiency of this Agreement or any other Basic Document or the Notes, or of
any Financed Student Loan or related documents. The Eligible Lender Trustee
shall at no time have any
BWNY2/249677.1/11830/00274/1901 July 26, 1996
16
<PAGE>
responsibility (or liability except for willfully or negligently terminating or
allowing to be terminated either of the Guarantee Agreements, in a case where
the Eligible Lender Trustee knows of any facts or circumstances which will or
could reasonably be expected to result in any such termination) for or with
respect to the legality, validity, enforceability and eligibility for Guarantee
Payments, Interest Subsidy Payments or Special Allowance Payments, as
applicable, of any Financed Student Loan, or for or with respect to the
sufficiency of the Trust Estate or its ability to generate the payments to be
distributed to the Noteholders under the Indenture, including: the existence and
contents of any computer or other record of any Financed Student Loan; the
validity of the assignment of any Financed Student Loan to the Trust; the
completeness of any Financed Student Loan; the performance or enforcement
(except as expressly set forth in any Basic Document) of any Financed Student
Loan; the compliance by the Depositor or the 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 Servicer or any subservicer taken in
the name of the Eligible Lender Trustee.
SECTION 7.07. Eligible Lender Trustee May Own Trust Notes. The
Eligible Lender Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may deal with the Depositor, the Administrator,
the Indenture Trustee and the Servicer in banking transactions with the same
rights as it would have if it were not the 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 for its other reasonable expenses
hereunder, including the reasonable compensation, expenses and disbursements of
such agents, representatives, experts and counsel as the Eligible Lender Trustee
may employ in connection with the exercise and performance of its rights and
duties hereunder. The Eligible Lender Trustee shall have no recourse to the
Issuer for its fees and expenses hereunder.
SECTION 8.02. Payments to the Eligible Lender Trustee.
Any amounts paid to the Eligible Lender Trustee pursuant to
Section 8.01 hereof or pursuant to Section 4.03 of the Loan Sale
BWNY2/249677.1/11830/00274/1901 July 26, 1996
17
<PAGE>
Agreement or pursuant to Section 24 of the Administration Agreement shall be
deemed not to be a part of the Trust Estate immediately after such payment.
ARTICLE IX
Termination of Trust Agreement
SECTION 9.01. Termination of Trust Agreement. (a) This
Agreement (other than Article VIII) 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 and the Servicing
Agreement, (ii) the expiration of 21 years from the death of the last survivor
of the descendants of Joseph P. Kennedy, the late Ambassador of the United
States to the Court of St. James's, living on the date hereof, and (iii) the
time provided in Section 9.02.
(b) Except as provided in Section 9.01(a), neither the
Depositor nor the Company shall be entitled to revoke or terminate the Trust.
(c) Notice of any termination of the Trust, shall be given
promptly by the Eligible Lender Trustee by letter to the Company mailed within
five Business Days of receipt of notice of such termination from the
Administrator given pursuant to Section 2(b)(vii) of the Administration
Agreement.
(d) Upon the winding up of the Trust and its termination, the
Eligible Lender Trustee shall cause the Certificate of Trust to be canceled by
filing a certificate of cancellation with the Secretary of State of the State of
Delaware in accordance with the provisions of Section 3810 of the Business Trust
Statute.
SECTION 9.02. Dissolution upon Bankruptcy of the Company. In
the event that an Insolvency Event shall occur with respect to the Company, this
Agreement shall be terminated in accordance with Section 9.01 90 days after the
date of such Insolvency Event unless, before the end of such 90-day period, the
Eligible Lender Trustee shall have received written instructions from (a)
Subordinate Noteholders (other than the Company) representing more than 50% of
the aggregate outstanding principal amount (not including the principal amount
of the Company Note) of the Subordinate Notes and (b) Senior Noteholders
representing more than 50% of the aggregate outstanding principal amount of the
Senior Notes, to the effect that each such party disapproves of the liquidation
of the Financed Student Loans and termination of the Trust, in which event the
Trust shall continue
BWNY2/249677.1/11830/00274/1901 July 26, 1996
18
<PAGE>
in accordance with the Basic Documents. Promptly after the occurrence of any
Insolvency Event with respect to the Company, (i) the Company shall give the
Indenture Trustee, the Eligible Lender Trustee and the Rating Agencies written
notice of such Insolvency Event, (ii) the Eligible Lender Trustee shall, upon
the receipt of such written notice from the Company, give prompt written notice
to the Indenture Trustee, of the occurrence of such event and (iii) the
Indenture Trustee shall, upon receipt of written notice of such Insolvency Event
from the Eligible Lender Trustee or the Company, give prompt written notice to
the Noteholders of the occurrence of such event; provided, however, that any
failure to give a notice required by this sentence shall not prevent or delay,
in any manner, a termination of the Trust pursuant to the first sentence of this
Section 9.02. Upon a termination pursuant to this Section, the Eligible Lender
Trustee shall direct the Indenture Trustee promptly to sell the assets of the
Trust (other than the Trust Accounts) in a commercially reasonable manner and on
commercially reasonable terms. The proceeds of such a sale of the assets of the
Trust shall be treated as collections under the Servicing Agreement and the
Administration Agreement.
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 and originating Consolidation 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 the Initial Guarantors and any Additional Guarantors;
(iv) having a combined capital and surplus of at least $50,000,000 and being
subject to supervision or examination by Federal or state authorities; and (v)
having (or having a parent which has) a rating of at least Baa3 by Moody's and
BBB- by Fitch, if rated by Fitch. If the Eligible Lender Trustee shall publish
reports of condition at least annually, pursuant to law or to the requirements
of the aforesaid supervising or examining authority, then for the purpose of
this Section, the combined capital and surplus of the Eligible Lender Trustee
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. In case at any time the Eligible Lender
Trustee shall cease to be eligible in accordance with the provisions of this
Section, the Eligible
BWNY2/249677.1/11830/00274/1901 July 26, 1996
19
<PAGE>
Lender Trustee shall resign immediately in the manner and with the effect
specified in Section 10.02. In addition, at all times the Trustee or a
co-trustee shall be a Person that satisfies the requirements of Section 3807(a)
of the Business Trust Statute (the "Delaware Trustee").
SECTION 10.02. Resignation or Removal of Eligible Lender
Trustee. The Eligible Lender Trustee may at any time resign and be discharged
from the trusts hereby created by giving written notice thereof to the
Administrator. Upon receiving such notice of resignation, the Administrator
shall promptly appoint a successor Eligible Lender Trustee meeting the
eligibility requirements of Section 10.01 by written instrument, in duplicate,
one copy of which instrument shall be delivered to the resigning Eligible Lender
Trustee and one copy to the successor Eligible Lender Trustee. If no successor
Eligible Lender Trustee shall have been so appointed and have accepted
appointment within 30 days after the giving of such notice of resignation, the
resigning Eligible Lender Trustee may petition any court of competent
jurisdiction for the appointment of a successor Eligible Lender Trustee;
provided, however, that such right to appoint or to petition for the appointment
of any such successor shall in no event relieve the resigning Eligible Lender
Trustee from any obligations otherwise imposed on it under the Basic Documents
until such successor has in fact assumed such appointment.
If at any time the Eligible Lender Trustee shall cease to be
eligible in accordance with the provisions of Section 10.01 and shall fail to
resign after written request therefor by the Administrator, or if at any time
the Eligible Lender Trustee shall be legally unable to act, or an Insolvency
Event with respect to the Eligible Lender Trustee shall have occurred and be
continuing, then the Administrator may remove the Eligible Lender Trustee. If
the Administrator shall remove the Eligible Lender Trustee under the authority
of the immediately preceding sentence, the Administrator shall promptly appoint
a successor Eligible Lender Trustee by written instrument, in duplicate, one
copy of which instrument shall be delivered to the outgoing Eligible Lender
Trustee so removed and one copy to the successor Eligible Lender Trustee and
payment of all fees owed to the outgoing Eligible Lender Trustee.
Any resignation or removal of the Eligible Lender Trustee and
appointment of a successor Eligible Lender Trustee pursuant to any of the
provisions of this Section shall not become effective until acceptance of
appointment by the successor Eligible Lender Trustee pursuant to Section 10.03
and payment of all fees and expenses owed to the outgoing Eligible Lender
Trustee. The Administrator shall provide notice of such resignation or removal
of the Eligible Lender Trustee and to each of the Rating Agencies.
BWNY2/249677.1/11830/00274/1901 July 26, 1996
20
<PAGE>
SECTION 10.03. Successor Eligible Lender Trustee. Any
---------------------------------
successor Eligible Lender Trustee appointed pursuant to Section
10.02 shall execute, acknowledge and deliver to the Administrator
and to its predecessor Eligible Lender Trustee an instrument
accepting such appointment under this Agreement, and thereupon
the resignation or removal of the predecessor Eligible Lender
Trustee shall become effective and such successor Eligible Lender
Trustee, without any further act, deed or conveyance, shall
become fully vested with all the rights, powers, duties and
obligations of its predecessor under this Agreement, with like
effect as if originally named as Eligible Lender Trustee. The
predecessor Eligible Lender Trustee shall upon payment of its
fees and expenses deliver to the successor Eligible Lender
Trustee all documents, statements, moneys and properties held by
it under this Agreement and shall assign, if permissible, to the
successor Eligible Lender Trustee the lender identification
number obtained from the Department on behalf of the Trust; and
the Administrator and the predecessor Eligible Lender Trustee
shall execute and deliver such instruments and do such other
things as may reasonably be required for fully and certainly
vesting and confirming in the successor Eligible Lender Trustee
all such rights, powers, duties and obligations.
No successor Eligible Lender Trustee shall accept appointment
as provided in this Section unless at the time of such acceptance such successor
Eligible Lender Trustee shall be eligible pursuant to Section 10.01.
Upon acceptance of appointment by a successor Eligible Lender
Trustee pursuant to this Section, the Administrator shall mail notice of the
successor of such Eligible Lender Trustee to the Company, the Indenture Trustee,
the Noteholders and the Rating Agencies. If the Administrator shall fail to mail
such notice within 10 days after acceptance of appointment by the successor
Eligible Lender Trustee, the successor Eligible Lender Trustee shall cause such
notice to be mailed at the expense of the Administrator.
SECTION 10.04. Merger or Consolidation of Eligible Lender
Trustee. Any corporation into which the Eligible Lender Trustee may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Eligible Lender
Trustee shall be a party, or any corporation succeeding to all or substantially
all the corporate trust business of the Eligible Lender Trustee, shall, without
the execution or filing of any instrument or any further act on the part of any
of the parties hereto, anything herein to the contrary notwithstanding, be the
successor of the Eligible Lender Trustee hereunder; provided that such
corporation shall be eligible pursuant to Section 10.01; provided further that
the Eligible Lender Trustee shall mail notice of such merger or consolidation to
the Rating Agencies not
BWNY2/249677.1/11830/00274/1901 July 26, 1996
21
<PAGE>
less than 10 Business Days prior to the closing date of such merger or
consolidation.
SECTION 10.05. Appointment of Co-Eligible Lender Trustee or
Separate Eligible Lender Trustee. Notwithstanding any other provisions of this
Agreement, at any time, for the purpose of meeting any legal requirements of any
jurisdiction in which any part of the Trust may at the time be located, the
Administrator and the Eligible Lender Trustee acting jointly shall have the
power and shall execute and deliver all instruments to appoint one or more
Persons approved by the Eligible Lender Trustee, which, except in the case of
any Delaware Trustee, shall meet the eligibility requirements of clauses (i)
through (iii) of Section 10.01, to act as co-trustee, jointly with the Eligible
Lender Trustee, or separate trustee or separate trustees, of all or any part of
the Trust Estate, and to vest in such Person, in such capacity, such title to
the Trust Estate, or any part thereof, and, subject to the other provisions of
this Section, such powers, duties, obligations, rights and trusts as the
Administrator and the Eligible Lender Trustee may consider necessary or
desirable. If the Administrator shall not have joined in such appointment within
15 days after the receipt by it of a request so to do, the Eligible Lender
Trustee alone shall have the power to make such appointment. Pursuant to the
Co-Trustee Agreement, dated as of April 1, 1996 between The First National Bank
of Chicago and Michael J. Majchrzak, the Eligible Lender Trustee shall appoint
Mr. Majchrzak as a co-trustee hereunder for the purpose of his acting as
Delaware Trustee and such agreement is hereby incorporated herein by reference.
If the Delaware Trustee shall die, become incapable of acting, resign or be
removed, unless the Trustee is qualified to act as Delaware Trustee, a successor
co-trustee shall promptly be appointed in the manner specified in this Section
10.05 to act as Delaware Trustee. No co-trustee or separate trustee under this
Agreement shall be required to meet the terms of eligibility as a successor
trustee pursuant to clauses (iv) and (v) of Section 10.01 and no notice of the
appointment of any co-trustee or separate trustee shall be required pursuant to
Section 10.03.
Each separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties, and obligations conferred or
imposed upon the Eligible Lender Trustee shall be conferred upon and
exercised or performed by the Eligible Lender Trustee and such separate
trustee or co-trustee 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
BWNY2/249677.1/11830/00274/1901 July 26, 1996
22
<PAGE>
Lender Trustee shall be incompetent or unqualified to perform such act
or acts, in which event such rights, powers, duties, and obligations
(including the holding of title to the Trust or any portion thereof in
any such jurisdiction) shall be exercised and performed singly by such
separate trustee or co-trustee, solely at the direction of the Eligible
Lender Trustee;
(ii) no trustee under this Agreement shall be personally liable by
reason of any act or omission of any other trustee under this
Agreement; and
(iii) the Administrator and the Eligible Lender Trustee acting
jointly may at any time accept the resignation of or remove any
separate trustee or co-trustee.
Any notice, request or other writing given to the Eligible
Lender Trustee shall be deemed to have been given to each of the then separate
trustees and co-trustees, as effectively as if given to each of them. Every
instrument appointing any separate trustee or co-trustee shall refer to this
Agreement and the conditions of this Article. Each separate trustee and
co-trustee, upon its acceptance of the trusts conferred, shall be vested with
the estates or property specified in its instrument of appointment, either
jointly with the Eligible Lender Trustee or separately, as may be provided
therein, subject to all the provisions of this Agreement, specifically including
every provision of this Agreement relating to the conduct of, affecting the
liability of, or affording protection to, the Eligible Lender Trustee. Each such
instrument shall be filed with the Eligible Lender Trustee and a copy thereof
given to the Administrator.
Any separate trustee or co-trustee may at any time appoint the
Eligible Lender Trustee as its agent or attorney-in-fact with full power and
authority, to the extent not prohibited by law, to do any lawful act under or in
respect of this Agreement on its behalf and in its name. If any separate trustee
or co-trustee shall die, become incapable of acting, resign or be removed, all
its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Eligible Lender Trustee, to the extent permitted by law,
without the appointment of a new or successor trustee, except as otherwise
provided in this Section 10.05 in regard to the Delaware Trustee.
BWNY2/249677.1/11830/00274/1901 July 26, 1996
23
<PAGE>
ARTICLE XI
Miscellaneous
SECTION 11.01. Supplements and Amendments. This Agreement may
be amended by the Depositor, the Company and the Eligible Lender Trustee, with
prior written notice to the Rating Agencies, without the consent of any of the
Noteholders, to cure any ambiguity, to correct or supplement any provisions in
this Agreement or for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions in this Agreement or of modifying in
any manner the rights of the Noteholders; provided, however, that such action
shall not, as evidenced by an Opinion of Counsel, adversely affect in any
material respect the interests of any Noteholder.
This Agreement may also be amended from time to time by the
Depositor, the Company and the Eligible Lender Trustee, with prior written
notice to the Rating Agencies, with the consent of the Noteholders of Notes
evidencing not less than a majority of the Outstanding Amount of the Notes, for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Agreement or of modifying in any manner the rights
of the Noteholders; provided, however, that no such amendment shall (a) increase
or reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments on Financed Student Loans or distributions that shall be
required to be made for the benefit of the Noteholders or (b) reduce the
aforesaid percentage of the Outstanding Amount of the Notes and required to
consent to any such amendment, without the consent of all the outstanding
Noteholders.
The Eligible Lender Trustee shall furnish 10 Business Days'
prior written notification of the substance of any such amendment or consent to
the Indenture Trustee and each of the Rating Agencies.
It shall not be necessary for the consent of the Noteholders
or the Indenture Trustee pursuant to this Section to approve the particular form
of any proposed amendment or consent, but it shall be sufficient if such consent
shall approve the substance thereof. The manner of obtaining such consents shall
be subject to such reasonable requirements as the Eligible Lender Trustee may
prescribe.
Promptly after the execution of any amendment to the
Certificate of Trust, the Eligible Lender Trustee shall cause the filing of such
amendment with the Secretary of State of the State of Delaware. The Eligible
Lender Trustee shall furnish the Rating Agencies with 10 Business Days' prior
written notice of any amendment to the Certificate of Trust.
BWNY2/249677.1/11830/00274/1901 July 26, 1996
24
<PAGE>
Prior to the execution of any amendment to this Agreement, the
Eligible Lender Trustee shall be entitled to receive and rely upon an Opinion of
Counsel stating that the execution of such amendment is authorized or permitted
by this Agreement. The Eligible Lender Trustee may, but shall not be obligated
to, enter into any such amendment which affects the Eligible Lender Trustee's
own rights, duties or immunities under this Agreement or otherwise.
SECTION 11.02. No Legal Title to Trust Estate in Company. The
Company shall not have legal title to any part of the Trust Estate. The Company
shall be entitled to receive distributions with respect to its ownership
interest therein only in accordance with the Indenture, the Administration
Agreement and the Servicing Agreement. No transfer, by operation of law or
otherwise, of any right, title, or interest of the Company to and in its
beneficial ownership interest in the Trust Estate shall operate to terminate
this Agreement or the trusts hereunder or entitle any transferee to an
accounting or to the transfer to it of legal title to any part of the Trust
Estate. If, contrary to this Section, the Company is deemed to have legal title
to any part of the Trust Estate, the Company shall be deemed to have granted,
and in such event does hereby grant to the Issuer, a first priority security
interest in all of the Seller's right, title and interest in the Trust Estate,
other than in the distributions referred to in the second sentence of this
Section 11.02, and this Agreement shall be deemed to constitute a security
agreement under applicable law with respect to the Trust Estate.
SECTION 11.03. Limitations on Rights of Others. Except for
Section 2.07, the provisions of this Agreement are solely for the benefit of the
Eligible Lender Trustee, the Depositor, the Company, the Administrator and, to
the extent expressly provided herein, the Indenture Trustee and the Noteholders,
and nothing in this Agreement (other than Section 2.07), whether express or
implied, shall be construed to give to any other Person any legal or equitable
right, remedy or claim in the Trust Estate or under or in respect of this
Agreement or any covenants, conditions or provisions contained herein.
SECTION 11.04. Notices. Unless otherwise expressly
specified or permitted by the terms hereof, all notices shall be
in writing (or in the form of facsimile notice, followed by
written notice) and shall be deemed given upon receipt by the
intended recipient, if to the Eligible Lender Trustee, addressed
to its Corporate Trust Office; if to the Depositor, addressed to
USA Group Secondary Market Services, Inc., 8350 Craig Street,
Indianapolis, Indiana 46250, Attention: President and Chief
Executive Officer (telephone: 317-594-1981; facsimile: 317-594-
1979); if to the Company, addressed to Secondary Market Company,
Inc., c/o Prentice Hall Corporation System, 32 Loockerman Square,
BWNY2/249677.1/11830/00274/1901 July 26, 1996
25
<PAGE>
Dover, Delaware, Attention: President (telephone: 302-674- 1221), with a copy to
Secondary Market Services, Inc., 8350 Craig Street, Indianapolis, Indiana 46250;
or, as to each party, at such other address as shall be designated by such party
in a written notice to each other party.
SECTION 11.05. Severability. Any provision of this Agreement
that as prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
SECTION 11.06. Separate Counterparts. This Agreement may be
executed by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument.
SECTION 11.07. Successors and Assigns. All covenants and
agreements contained herein shall be binding upon, and inure to the benefit of,
the Depositor, the Company, the Eligible Lender Trustee and their respective
successors and permitted assigns, all as herein provided.
SECTION 11.08. No Petition. (a) The Depositor will not at any
time institute against the Trust or the Company any bankruptcy proceedings under
any United States Federal or state bankruptcy or similar law in connection with
any obligations relating to the Notes, this Agreement or any of the other Basic
Documents.
(b) The Eligible Lender Trustee, by entering into this
Agreement, and the Indenture Trustee and each Noteholder by accepting the
benefits of this Agreement, hereby covenant and agree that they will not at any
time institute against the Depositor, the Company or the Trust, or join in any
institution against the Depositor, the Company or the Trust of, any bankruptcy,
reorganization, arrangement, insolvency, receivership or liquidation
proceedings, or other proceedings under any United States Federal or state
bankruptcy or similar law in connection with any obligations relating to the
Notes, this Agreement or any of the other Basic Documents.
(c) The Company will not at any time institute against the
Trust or the Depositor any bankruptcy proceedings under any United States
Federal or state bankruptcy or similar law in connection with any obligations
relating to the Notes, the Agreement or any of the other Basic Documents.
BWNY2/249677.1/11830/00274/1901 July 26, 1996
26
<PAGE>
SECTION 11.09. No Recourse. The Company acknowledges that its
ownership interest in the Trust represents a beneficial interest in the Trust
only and does not represent an interest in or obligation of the Seller, the
Servicer, the Depositor, the Administrator, the Eligible Lender Trustee, the
Indenture Trustee or any Affiliate thereof or any officer, director or employee
of any thereof and no recourse may be had against such parties or their assets,
except as may be expressly set forth or contemplated in this Agreement 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.
BWNY2/249677.1/11830/00274/1901 July 26, 1996
27
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed by their respective officers hereunto duly
authorized, as of the day and year first above written.
THE FIRST NATIONAL BANK OF
CHICAGO, not in its
individual capacity but
solely as Eligible Lender
Trustee,
by /s/ Jeffrey L. Kinney
----------------------------
Name: Jeffrey l. Kinney
Title: Assistant Vice President
USA GROUP SECONDARY MARKET
SERVICES, INC., Depositor,
by /s/ Stephen W. Clinton
----------------------------
Name: Stephen W. Clinton
Title: President and CEO
USA GROUP SECONDARY MARKET
COMPANY, INC.
by /s/ Cheryl E. Watson
----------------------------
Name: Cheryl E. Watson
Title: Vice President
BWNY2/249677.1/11830/00274/1901 July 26, 1996
28
<PAGE>
EXHIBIT A
TO THE TRUST AGREEMENT
CERTIFICATE OF TRUST OF
SMS STUDENT LOAN TRUST 1996-A
THIS Certificate of Trust of SMS Student Loan Trust 1996-A (the
"Trust"), dated as of April 1, 1996, is being duly executed and filed by The
First National Bank of Chicago, a national banking association, and
____________________, an individual, as trustees, to form a business trust under
the Delaware Business Trust Act (12 Del. Code, ss. 3801 et seq.).
1. Name. The name of the business trust formed hereby is
SMS Student Loan Trust 1996-A.
2. Delaware Trustee. The name and business address of the
trustee of the Trust resident in the State of Delaware is
- - - ---------------------------------------------------------.
3. This Certificate of Trust will be effective April 29,
1996.
BWNY2/249677.1/11830/00274/1901 July 26, 1996
A-1
<PAGE>
IN WITNESS WHEREOF, the undersigned, being the sole trustees of the
Trust, have executed this Certificate of Trust as of the date first above
written.
THE FIRST NATIONAL BANK OF
CHICAGO, not in its
individual capacity but
solely as trustee of the
Trust.
By: ______________________________
Name:
Title:
---------------------,
not in his individual capacity
but solely as trustee
---------------------------------
A-2
ADMINISTRATION AGREEMENT dated as of April 1, 1996,
among SMS STUDENT LOAN TRUST 1996-A, a Delaware trust (the
"Issuer"), USA GROUP SECONDARY MARKET SERVICES, INC., a
Delaware corporation, as administrator (the "Administrator"),
and BANKERS TRUST COMPANY, a New York banking corporation, not
in its individual capacity but solely as Indenture Trustee
(the "Indenture Trustee").
W I T N E S S E T H
WHEREAS the Issuer was formed pursuant to the Trust Agreement
dated as of April 1, 1996 (the "Trust Agreement") among the Depositor, Secondary
Market Company, Inc. a Delaware corporation, and The First National Bank of
Chicago, as Eligible Lender Trustee (the "Eligible Lender Trustee") and is
issuing the Class A-1 Floating Rate Asset Backed Senior Notes (the "Class A-
Notes"), Class A-2 Floating Rate Asset Backed Senior Notes (the "Class A-2
Notes," and together with the Class A-1 Notes, the "Senior Notes") and the
Floating Rate Asset Backed Subordinate Notes (the "Subordinate Notes," and
together with the Senior Notes, the "Notes") pursuant to the Indenture dated as
of April 1, 1996 (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 hereto, which also contains rules
of usage and construction that shall be applicable herein);
WHEREAS the Issuer has entered into certain agreements in
connection with the issuance of the Notes, including the Loan Sale Agreement,
the Servicing Agreement, the Senior Note Depository Agreement, the Subordinate
Note Depository Agreement (the Subordinate Note Depository Agreement and the
Senior Note Depository Agreements being collectively referred to herein as the
"Depository Agreement"), the Guarantee Agreements, the Trust Agreement and the
Indenture (all such agreements being collectively referred to herein as the
"Related Agreements");
WHEREAS, pursuant to the Related Agreements, the Issuer and
the Eligible Lender Trustee are required to perform certain duties in connection
with the Notes and the Collateral therefor pledged pursuant to the Indenture;
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;
1
<PAGE>
WHEREAS the Administrator has the capacity to provide the
services required hereby and is willing to perform such services for the Issuer
and the Eligible Lender Trustee on the terms set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties agree as follows:
1. Representations of the Administrator. The Administrator
makes the following representations on which the Issuer and the Eligible Lender
Trustee are deemed to have relied. The representations speak as of the execution
and delivery of this Agreement and as of the Closing Date, in the case of the
Initial Financed Student Loans, as of the applicable Transfer Date, in the case
of the Serial Loans and New Loans, as of the relevant date of assignment, in the
case of any Qualified Substitute Student Loan, as of the date of origination, in
the case of any Consolidation Loan originated by the Trust during the Revolving
Period, and as of the applicable Add-on Consolidation Loan Funding Date, in the
case of any Consolidation Loan the principal balance of which is increased by
the principal balance of any related Add-on Consolidation Loan, but shall
survive the sale of the Financed Student Loans to the Eligible Lender Trustee on
behalf of the Issuer and the pledge thereof to the Indenture Trustee pursuant to
the Indenture.
(a) Organization and Good Standing. The Administrator is duly
organized and validly existing as a corporation in good standing under
the laws of the State of Delaware, with the power and authority to own
its properties and to conduct its business as such properties are
currently owned and such business is presently conducted.
(b) Power and Authority of the Administrator. The
Administrator has the corporate power and authority to execute and
deliver this Agreement and to carry out its terms, and the execution,
delivery and performance of this Agreement has been duly authorized by
the Administrator by all necessary corporate action.
(c) Binding Obligation. This Agreement constitutes a legal,
valid and binding obligation of the Administrator, enforceable in
accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization and similar laws relating to creditors'
rights generally and subject to general principles of equity.
(d) No Violation. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof
or thereof do not conflict with, result in any breach of any of the
terms and provisions of, nor constitute (with or without notice or
lapse of time or both) a default under, the certificate of
incorporation or by-laws of the Administrator, or any indenture,
agreement or other instrument to which the Administrator is a party or
by which it shall be bound; nor result in the creation or imposition of
any Lien upon any of its properties pursuant to the terms of any such
indenture, agreement or other instrument; nor violate any law or, to
the knowledge of the Administrator, any order, rule or regulation
applicable to the Administrator of any court or
2
<PAGE>
of any Federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Administrator or its
properties. The consummation by the Administrator of the transactions
contemplated by this Agreement will not result in the loss of any Guarantee
Payments by the Trust or any reinsurance payments with respect to any Financed
Student Loan.
(e) No Proceedings. There are no proceedings or investigations
pending against the Administrator or, to its best knowledge, threatened
against the Administrator, before any court, regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Administrator or its properties: (i) asserting
the invalidity of this Agreement, the Indenture or any of the other
Related Agreements or the Notes, (ii) seeking to prevent the issuance
of the Notes or the consummation of any of the transactions
contemplated by this Agreement, the Indenture or any of the other
Related Agreements, (iii) seeking any determination or ruling that
could reasonably be expected to have a material and adverse effect on
the performance by the Administrator of its obligations under, or the
validity or enforceability of, this Agreement, the Indenture, any of
the other Related Agreements or the Notes or (iv) seeking to affect
adversely the Federal or state income tax attributes of the Issuer or
the Notes.
(f) All Consents. All authorizations, consents, orders or
approvals of or registrations or declarations with any court,
regulatory body, administrative agency or other government
instrumentality required to be obtained, effected or given by the
Administrator in connection with the execution and delivery by the
Administrator of this Agreement and the performance by the
Administrator of the transactions contemplated by this Agreement have
in each case been duly obtained, effected or given and are in full
force and effect.
2. Duties of the Administrator.
(a) Duties with Respect to the Indenture and Depository
Agreement. The Administrator shall perform all its duties as Administrator and
the duties of the Issuer under the Depository Agreement. In addition, the
Administrator shall consult with the Eligible Lender Trustee as the
Administrator deems appropriate regarding the duties of the Issuer under the
Indenture and the Depository Agreement. The Administrator shall monitor the
performance of the Issuer and shall advise the Eligible Lender Trustee when
action is necessary to comply with the Issuer's duties under the Indenture and
the Depository Agreement. The Administrator shall prepare for execution by the
Issuer or shall cause the preparation by other appropriate Persons of all such
documents, reports, filings, instruments, certificates and opinions as it shall
be the duty of the Issuer to prepare, file or deliver pursuant to the Indenture
and the Depository Agreement. In furtherance of the foregoing, the Administrator
shall take all appropriate action that is the duty of the Issuer to take
pursuant to the Indenture, including such of the foregoing as are required with
respect to the following matters (references are to sections of the Indenture):
3
<PAGE>
(A) the duty to cause the Note Registrar to keep the Note
Register and to give the Indenture Trustee prompt notice of any
appointment of a new Note Registrar and the location, or change in
location, of the Note Register (Section 2.04);
(B) the fixing or causing to be fixed of any specified record
date and the timely notification of the Indenture Trustee and
Noteholders with respect to special payment dates, if any (Section
2.07(c));
(C) the preparation of or obtaining of the documents and
instruments required for authentication of the Notes and delivery of
the same to the Indenture Trustee (Section 2.02);
(D) the preparation, obtaining or filing of the instruments,
opinions and certificates and other documents required for the release
of collateral (Section 2.09);
(E) the preparation, obtaining or filing of the instruments,
opinions and certificates and other documents required for a transfer
of Subordinate Notes (Section 2.04);
(F) the duty to cause the Note Registrar to maintain on behalf
of the Issuer an office in the Borough of Manhattan, The City of New
York, for registration of transfer or exchange of Notes (Section 3.02);
(G) 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);
(H) the direction to the Paying Agents to deposit moneys
with the Indenture Trustee (Section 3.03);
(I) 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);
(J) 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);
(K) 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'
4
<PAGE>
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);
(L) 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));
(M) the notification of the Indenture Trustee and the Rating
Agencies of a Servicer Default pursuant to the Servicing Agreement and,
if such Servicer Default arises from the failure of the Servicer to
perform any of its duties under the Servicing Agreement, the taking of
all reasonable steps available to remedy such failure (Section
3.07(d));
(N) the preparation and obtaining of documents and
instruments required for the release of the Issuer from its
obligations under the Indenture (Section 3.10);
(O) the prompt delivery of notice to the Indenture Trustee and
the Rating Agencies of each Event of Default, any Default under Section
5.01(iii) of the Indenture and each default by the Servicer under the
Servicing Agreement or by the Seller under the Loan Sale Agreement
(Section 3.18);
(P) 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);
(Q) 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);
(R) 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);
(S) the furnishing of the Indenture Trustee with the names and
addresses of Noteholders during any period when the Indenture Trustee
is not the Note Registrar (Section 7.01);
(T) the preparation and, after execution by the Issuer, the
filing with the Commission, any applicable State agencies and the
Indenture Trustee of documents required to be filed on a periodic basis
with, and summaries thereof as may be required by rules and regulations
prescribed by, the Commission and any applicable State agencies and the
transmission of such summaries, as necessary, to the Noteholders
(Section 7.03);
5
<PAGE>
(U) 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);
(V) 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);
(W) the preparation of Issuer Orders and the obtaining of
Opinions of Counsel with respect to the execution of supplemental
indentures and the mailing to the Noteholders of notices with respect
to such supplemental indentures (Sections 9.01, 9.02 and 9.03);
(X) 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);
(Y) the notification of Noteholders of redemption of the
Notes or the duty to cause the Indenture Trustee to provide such
notification (Section 10.02);
(Z) 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));
(AA) 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));
(BB) the preparation and timely delivery to Noteholders and
the Indenture Trustee of any agreements with respect to alternate
payment and notice provisions (Section 11.06); and
(BB)the recording of the Indenture, if applicable
(Section 11.15).
(b) Duties with Respect to the Issuer. (i) In addition to the
duties of the Administrator set forth above and 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. In furtherance thereof, the Eligible Lender
6
<PAGE>
Trustee shall, on behalf of itself and of the Issuer, execute and deliver to the
Administrator and to each successor Administrator appointed pursuant to the
terms hereof, one or more powers of attorney substantially in the form of
Exhibit A hereto, appointing the Administrator the attorney-in-fact of the
Eligible Lender Trustee and the Issuer for the purpose of executing on behalf of
the Eligible Lender Trustee and the Issuer all such documents, reports, filings,
instruments, certificates and opinions. Subject to Section 9 of this Agreement,
and in accordance with the directions of the Eligible Lender Trustee, the
Administrator shall administer, perform or supervise the performance of such
other activities in connection with the Collateral (including the Related
Agreements) as are not covered by any of the foregoing provisions and as are
expressly requested by the Eligible Lender Trustee and are reasonably within the
capability of the Administrator.
(ii) Notwithstanding anything in this Agreement or the Related
Agreements to the contrary, the Administrator shall deliver to the Eligible
Lender Trustee, the Indenture Trustee, the Rating Agencies and (if the Seller is
not the Administrator) the Seller, an Officers' Certificate of the Administrator
containing all the information necessary:
(A) to pay the Department any Consolidation Fees due and
payable to the Department, to the extent such Consolidation Fees are
not being deducted by the Department out of Special Allowance Payments
or Interest Subsidy Payments, which Officers' Certificate shall be
delivered on the date that is three Business Days prior to the date
such fees are to be remitted to the Department;
(B) during the Revolving Period to pay the Seller, pursuant to
Section 2.02 of the Loan Sale Agreement, on each Transfer Date, the
Loan Purchase Amount (or if the Parity Date has occurred the Purchase
Collateral Balance) for New Loans or Serial Loans purchased by the
Eligible Lender Trustee on behalf of the Issuer on such date and on
each Transfer Date after the end of the Revolving Period, the Purchase
Collateral Balance for Serial Loans so purchased on such date (but,
only to the extent the Purchase Collateral Balance has not been
satisfied by the exchange of Serial Loans for Exchanged Student Loans),
which Officers' Certificate, in each case, shall be delivered on the
Business Day preceding such Transfer Date;
(C) to pay the Servicer the Servicing Fee due on each Monthly
Payment Date pursuant to Section 2(d)(iv)(A), 2(d)(v)(A) and
2(e)(iv)(A) and any Servicing Fee Shortfall due on each Quarterly
Payment Date pursuant to Section 2(e)(ii)(b)(iv), which Officers'
Certificate shall be delivered on the day that is three Business Days
prior to such Monthly Payment Date;
(D) to make all the distributions required by Sections 2(d),
2(e), 2(f) and 2(g), for the Monthly Collection Period or Collection
Period, as the case may be, preceding the date of such Officer's
Certificate, which Officers' Certificate shall be delivered on each
Determination Date.
7
<PAGE>
In addition, prior to each Determination Date, the Administrator shall
determine, in compliance with its obligation to prepare an Officer's Certificate
on such Determination Date pursuant to this Section, (i) the Class A-2 Note Rate
that will be applicable to the Monthly Payment Date following such Determination
Date, (ii) the Subordinate Note Rate that will be applicable to the Monthly
Payment Date following such Determination Date, (iii) if the Monthly Payment
Date following such Determination Date is not a Quarterly Payment Date, the
Class A-1 Calculation Rate that will be applicable to such Monthly Payment Date
and (iv) if the Monthly Payment Date following such Determination Date is a
Quarterly Payment Date, the Class A-1 Note Rate that will be applicable to such
Monthly Payment Date. In connection therewith, the Administrator shall calculate
the T-Bill Rate and the Student Loan Rate in accordance with the respective
definitions thereof (i) for the related Class A-1 Calculation Period if the
Monthly Payment Date following such Determination Date is not a Quarterly
Payment Date and (ii) for the related Quarterly Interest Period if the Monthly
Payment Date following such Determination Date is a Quarterly Payment Date.
Also, in connection therewith, the Administrator shall calculate LIBOR and the
Student Loan Rate in accordance with the respective definitions thereof for the
Monthly Interest Period with respect to such Monthly Payment Date.
(iii) [Reserved.]
(iv) Notwithstanding anything in this Agreement or the Related
Agreements to the contrary, the Administrator shall be responsible for
performance of the duties of the Eligible Lender Trustee set forth in Section
5.02 of the Trust Agreement with respect to, among other things, any tax
information or accounting report required to be distributed to Note Owners.
(v) [Reserved.]
(vi) The Administrator shall perform the duties of the
Administrator specified in Sections 10.02 and 10.03 of the Trust Agreement
required to be performed in connection with the resignation or removal of the
Eligible Lender Trustee and the appointment of a successor Eligible Lender
Trustee, and any other duties expressly required to be performed by the
Administrator under the Trust Agreement and the other Related Agreements,
including those under Sections 6.07 and 6.08 of the Indenture and those under
Section 6.07 of the Trust Agreement.
(vii) As described in Article IX of the Trust Agreement,
notice of any termination of the Trust shall be given by the Administrator to
the Eligible Lender Trustee and the Indenture Trustee as soon as practicable
after the Administrator has received notice thereof.
(viii) In carrying out the foregoing duties or any of its
other obligations under this Agreement, the Administrator may enter into
transactions with or otherwise deal with any of its Affiliates; provided,
however, that the terms of any such transactions or dealings shall be in
accordance with any directions received from the Issuer and shall be, in the
Administrators opinion, no less favorable to the Issuer than would be available
from unaffiliated parties.
(c) Establishment and Maintenance of Trust Accounts.
8
<PAGE>
(i) The Administrator, for the benefit of the Issuer, shall
establish and maintain in the name of the Indenture Trustee an Eligible Deposit
Account (the "Collection Account"), bearing a designation clearly indicating
that the funds deposited therein are held for the benefit of the Issuer. The
Collection Account will initially be established as a segregated trust account
in the name of the Indenture Trustee with the corporate trust department of
Bankers Trust Company.
(ii) The Administrator, for the benefit of the Issuer, shall
establish and maintain in the name of the Indenture Trustee an Eligible Deposit
Account (the "Reserve Account"), bearing a designation clearly indicating that
the funds deposited therein are held for the benefit of the Issuer. The Reserve
Account will initially be established as a segregated trust account in the name
of the Indenture Trustee with the corporate trust department of Bankers Trust
Company.
(iii) The Administrator, for the benefit of the Issuer, shall
establish and maintain in the name of the Indenture Trustee an Eligible Deposit
Account (the "Collateral Reinvestment Account"), bearing a designation clearly
indicating that the funds deposited therein are held for the benefit of the
Issuer. The Collateral Reinvestment Account will initially be established as a
segregated trust account in the name of the Indenture Trustee with the corporate
trust department of Bankers Trust Company.
(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 "Class A-1 Interest Account"), bearing a designation clearly
indicating that the funds deposited therein are held for the benefit of the
Issuer. The Class A-1 Interest Account will initially be established as a
segregated trust account in the name of the Indenture Trustee with the corporate
trust department of Bankers Trust Company.
(v) Funds on deposit in the Collection Account, the Reserve
Account, the Collateral Reinvestment Account and the Class A-1 Interest Account
(collectively, the "Trust Accounts") shall be invested by the Indenture Trustee
(or any custodian or designated agent with respect to any amounts on deposit in
such accounts) in Eligible Investments pursuant to written instructions by the
Administrator; provided, however, it is understood and agreed that the Indenture
Trustee shall not be liable for any loss arising from such investment in
Eligible Investments. All such Eligible Investments shall be held by (or by any
custodian on behalf of) the Indenture Trustee for the benefit of the Issuer;
provided that on the Business Day preceding each Monthly Payment 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 Monthly Available Funds for each
Monthly Payment Date that is not a Quarterly Payment Date, and a portion of the
Available Funds for each Quarterly Payment Date. Other than as permitted by the
Rating Agencies, funds on deposit in the Trust Accounts shall be invested in
Eligible Investments that will mature so that funds sufficient to pay the
Servicing Fee, the Administration Fee, the Class A-1 Interest Required Deposit
Amount, the Class A-2 Noteholders' Interest Distribution Amount and the
Subordinate Noteholders' Interest Distribution Amount will be available in the
Collection Account on the Business Day preceding
9
<PAGE>
each Monthly Payment Date that is not a Quarterly Payment Date, so that funds on
deposit in the Collateral Reinvestment Account that are required, in the
judgment and at the discretion of the Administrator, to make Additional Fundings
during the Revolving Period will be available for such purpose and so that the
remaining such funds will be available at the close of business on the Business
Day preceding each Quarterly Payment Date.
(vi) (A) The Indenture Trustee shall possess all right, title
and interest in all funds on deposit from time to time in the Trust
Accounts and in all proceeds thereof (including all income thereon) and
all such funds, investments, proceeds and income shall be part of the
Trust Estate. The Trust Accounts shall be under the sole dominion and
control of the Indenture Trustee for the benefit of the Issuer. If, at
any time, any of the Trust Accounts ceases to be an Eligible Deposit
Account, the Indenture Trustee (or the Administrator on its behalf)
agrees, by its acceptance 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.
(B) With respect to the Trust Account Property, the
Indenture Trustee agrees, by its acceptance hereof, that:
(1) any Trust Account Property that is held in deposit
accounts shall be held solely in Eligible Deposit Accounts, subject to
the last sentence of clause (vi)(A) above; and each such Eligible
Deposit Account shall be subject to the exclusive custody and control
of the Indenture Trustee, and the Indenture Trustee shall have sole
signature authority with respect thereto;
(2) any Trust Account Property that constitutes Physical
Property shall be Delivered to the Indenture Trustee in accordance with
paragraph (a) of the definition of "Delivery" and shall be held,
pending maturity or disposition, solely by the Indenture Trustee or a
financial intermediary (as such term is defined in Section 8-313(4) of
the UCC) acting solely for the Indenture Trustee;
(3) any Trust Account Property that is a book-entry security
held through the Federal Reserve System pursuant to Federal book-entry
regulations shall be Delivered in accordance with paragraph (b) of the
definition of "Delivery" and shall be maintained by the Indenture
Trustee, pending maturity or disposition, through continued book-entry
registration of such Trust Account Property as described in such
paragraph; and
(4) any Trust Account Property that is an "uncertificated
security" under Article VIII of the UCC and that is not governed by
clause (3) above shall be Delivered to
10
<PAGE>
the Indenture Trustee in accordance with paragraph (c) of the definition of
"Delivery" and shall be maintained by the Indenture Trustee, pending maturity or
disposition, through continued registration of the Indenture Trustee's (or its
nominees) ownership of such security.
(C The Administrator shall have the power, revocable
for cause or upon the occurrence and during the continuance of an
Administrator Default by the Indenture Trustee or by the Eligible
Lender Trustee with the consent of the Indenture Trustee, to instruct
the Indenture Trustee to make withdrawals and payments from the Trust
Accounts for the purpose of permitting the Servicer or the Eligible
Lender Trustee to carry out its respective duties under the Servicing
Agreement or the Trust Agreement or permitting the Indenture Trustee to
carry out its duties under the Indenture.
(vii) On each Determination Date, the Administrator shall
calculate all amounts required to determine the amounts to be deposited in the
Collection Account and the other Trust Accounts and the amounts to be
distributed therefrom on the related Monthly Payment Date or other dates from
which amounts therein are to be distributed.
(d) Withdrawals from the Collection Account. The Administrator
shall instruct the Indenture Trustee (based, in the case of clauses (iv) and (v)
below, on the information contained in the Servicer's Report delivered with
respect to the applicable Determination Date pursuant to Section 3.07 of the
Servicing Agreement) to make withdrawals from amounts deposited in the
Collection Account at the following times and for the following purposes, and
the Indenture Trustee shall comply with such instructions:
(i) from time to time during the Revolving Period, in so far
as the Administrator may so instruct on any Business Day therein, to
deposit all collections in respect to principal on the Financed Student
Loans into the Collateral Reinvestment Account;
(ii) from time to time during each Collection Period to pay
the Department any Consolidation Fees due and payable to the
Department, to the extent such Consolidation Fees are not being
deducted by the Department out of Special Allowance Payments or
Interest Subsidy Payments;
(iii)(A) on each Add-on Consolidation Loan Funding Date after the
Revolving Period, to prepay in full any Add-on Consolidation Loan not
held by the Issuer pursuant to Section 6.07 of the Trust Agreement;
provided that the amount paid to prepay any Add- on Consolidation Loan
not held by the Issuer on any date since the preceding Quarterly
Payment Date shall not exceed the Net Principal Cash Flow Amount for
such date minus the aggregate Purchase Collateral Balance remitted for
the purchase of Serial Loans on each Transfer Date since the preceding
Quarterly Payment Date after the Revolving Period pursuant to Section
2(d)(iii)(B); and
11
<PAGE>
(B) on each Transfer Date after the Revolving Period
to pay to the Seller, pursuant to Section 2.02 of the Loan Sale
Agreement, the aggregate Purchase Collateral Balance for Serial Loans
purchased by the Eligible Lender Trustee on behalf of the Issuer on
such date (but only to the extent such aggregate Purchase Collateral
Balance has not been satisfied by the exchange of Serial Loans for
Exchanged Student Loans); provided that the amount paid to the Seller
for the purchase of Serial Loans on such Transfer Date plus the amount
of funds remitted for the purchase of Serial Loans on each Transfer
Date since the preceding Quarterly Payment Date on any Transfer Date
after the Revolving Period shall not exceed the Net Principal Cash Flow
Amount for such Transfer Date minus the sum of (i) all amounts paid
since the last Quarterly Payment Date pursuant to Section 2(d)(iii)(A)
to prepay any Add-on Consolidation Loan not held by the Issuer and (ii)
all amounts which the Administrator reasonably estimates will be
required to prepay Add-on Consolidation Loans pursuant to Section
2(d)(iii)(A) during the remainder of the Collection Period; provided,
further, that, any Purchase Premium Amounts for Serial Loans purchased
(including pursuant to the exchange thereof) after the Revolving Period
shall be paid only out of Reserve Account Excess as set forth in
Section 2(e)(ii).
(iv) on each Monthly Payment Date that is not a Quarterly
Payment Date, to make the following deposits and distributions to the
Persons specified below by 11:00 a.m. (New York Time), to the extent of
Monthly Available Funds for such Monthly Payment Date in the Collection
Account, in the following order of priority:
(A) to the Servicer, the Servicing Fee with
respect to the preceding calendar month and all unpaid
Servicing Fees from prior months;
(B) to the Administrator, from the amount of Monthly
Available Funds remaining after the application of clause (A),
the Administration Fee with respect to the preceding calendar
month and all unpaid Administration Fees from prior months;
(C) from the amount of Monthly Available Funds
remaining after the application of clauses (A) and (B), to the
Indenture Trustee for distribution to the Class A-2
Noteholders pursuant to Section 8.02(c) of the Indenture, the
Class A-2 Noteholders' Interest Distribution Amount and for
deposit to the Class A-1 Interest Account, the Class A-1
Interest Required Deposit Amount with respect to such Monthly
Payment Date, pro rata based on the ratio of each such amount
to the total of such amounts; and
(D) to the Indenture Trustee for distribution to the
Subordinate Noteholders pursuant to Section 8.02(c) of the
Indenture from the amount of Monthly Available Funds remaining
after the application of clauses (A) through (C), the
Subordinate Noteholders' Interest Distribution Amount.
12
<PAGE>
(v) on each Quarterly Payment Date, to make the following deposits
and distributions to the Persons or the account specified below by
11:00 a.m. (New York Time), to the extent of Available Funds for such
Quarterly Payment Date in the Collection Account, in the following
order of priority:
(A) to the Servicer, the Servicing Fee with respect
to the preceding calendar month and all unpaid Servicing Fees
from prior months;
(B) to the Administrator, from the amount of
Available Funds remaining after the application of clause (A),
the Administration Fee with respect to the preceding calendar
month and all unpaid Administration Fees from prior months;
(C) to the Indenture Trustee for distribution to the
Noteholders pursuant to Section 8.02(d) of the Indenture, from
the amount of Available Funds remaining after the application
of clauses (A) and (B), the Noteholders' Distribution Amount
with respect to such Quarterly Payment Date (less the
component thereof represented by funds distributed to the
Indenture Trustee from the Class A-1 Interest Account on such
Quarterly Payment Date); and
(D) to the Reserve Account, the amount of Available
Funds remaining after the application of clauses (A) through
(C).
Except in the case of amounts deposited pursuant to clauses
(iv)(C) and (v)(D) into the Class A-1 Interest Account and the Reserve Account,
respectively, amounts properly withdrawn from the Collection Account and
distributed pursuant to this Section 2(d), shall be deemed released from the
Trust Estate and the security interest therein granted to the Indenture Trustee,
and the Persons to whom such amounts are distributed shall in no event be
required to refund any such distributed amounts.
(e) Reserve Account. (i) The Seller shall deposit the
Reserve Account Initial Deposit into the Reserve Account as required by
Section 2.01(b) of the Loan Sale Agreement.
(ii) With respect to any amount in the Reserve Account on any
Quarterly Payment Date (after giving effect to all deposits thereto on such
Quarterly Payment Date and to all withdrawals therefrom necessary to make the
distributions required to be made from Available Funds on such Quarterly Payment
Date) in excess of the Specified Reserve Account Balance for such Quarterly
Payment Date (the "Reserve Account Excess"), the Administrator shall instruct
the Indenture Trustee to pay such Reserve Account Excess (a) during the
Revolving Period, for deposit to the Collateral Reinvestment Account; provided,
however, if such date is on or after the Parity Date, to the extent that such
funds represent payments of interest with respect to the Financed Student Loans,
such funds shall be applied in the amounts and the order of priority set forth
in clauses (b)(iii) through (vi) below, and (b) at and after the termination of
the Revolving Period, to the following (in the priority indicated): (i) to pay
to the Seller, any unpaid Purchase
13
<PAGE>
Premium Amounts for any Serial Loans purchased by the Issuer after the end of
the Revolving Period but prior to the end of the related Collection Period; (ii)
if such Quarterly Payment Date is on or prior to the Parity Date, to pay to the
Indenture Trustee for distribution to Noteholders pursuant to Section 8.02(f) of
the Indenture an amount equal to the lesser of (x) the remaining amount of such
excess and (y) the amount by which the aggregate principal balance of the Notes,
after giving effect to all other distributions in respect of principal on the
Notes on such Quarterly Payment Date, exceeds the Pool Balance as of the close
of business on the last day of the related Collection Period; (iii) to pay to
the Indenture Trustee for distribution to Noteholders pursuant to Section
8.02(f) of the Indenture, out of the remaining amount of such excess, an amount
equal to the aggregate unpaid Noteholders' Interest Rate Index Carryover; (iv)
to pay to the Servicer, out of the remaining amount of such excess, the
Servicing Fee Shortfall and all prior unpaid Servicing Fee Shortfalls, if any,
to the Servicer; (v) to pay to the Seller, out of the remaining amount of such
excess, any unpaid Purchase Premium Amounts for any Serial Loans or New Loans
purchased during the Revolving Period but after the Parity Date (or at any time
during the Collection Period during which the Parity Date occurs) and prior to
the end of the related Collection Period; and (vi) any remaining amount of such
excess, after application of clauses (i) through (v) above will be released to
the Company; provided, however, that if and to the extent that (A) the amount of
the Servicer's unpaid repurchase obligation pursuant to Section 3.05 of the
Servicing Agreement exceeds $500,000 as of the last day of the preceding
Collection Period (and such Servicer has not been replaced by a Successor
Servicer), or (B) the Department fails by the last day of such preceding
Collection Period to satisfy its obligations to reimburse or replace a Federal
Guarantor pursuant to the Higher Education Act, then any Reserve Fund Excess
remaining on such Quarterly Payment Date for distribution to the Company
pursuant to the clause (vi) above shall not be so distributed and shall be
retained in the Reserve Account for application in accordance with this
Agreement. Amounts properly distributed pursuant to this Section 2(e)(ii) shall
be deemed released from the Trust Estate and the security interest therein
granted to the Indenture Trustee, and the Seller and the Company shall in no
event thereafter be required to refund any such distributed amounts.
(iii) Following the payment in full of the aggregate outstanding
principal balance of the Notes and of all other amounts owing or to be
distributed hereunder or under the Indenture to Noteholders, the Seller, the
Servicer or the Administrator and the termination of the Trust (including any
Noteholders' Interest Rate Index Carryover, any Servicing Fee Shortfall and any
unpaid Servicing Fee Shortfalls and unpaid Purchase Premium Amounts), any amount
remaining on deposit in the Reserve Account shall be distributed to the Company.
The Company shall in no event be required to refund any amounts properly
distributed pursuant to this Section 2(e)(iii).
(iv) (A) In the event that the Servicing Fee for any Monthly Payment
Date exceeds the amount distributed to the Servicer pursuant to
Sections 2(d)(iv)(A) or 2(d)(v)(A) on such Monthly Payment Date, the
Administrator shall instruct the Indenture Trustee to withdraw from the
Reserve Account on each Monthly Payment Date an amount equal to such
excess and to distribute such amount to the Servicer.
14
<PAGE>
(B) In the event that the Administration Fee for any
Monthly Payment Date exceeds the amount distributed to the
Administrator pursuant to Sections 2(d)(iv)(B) or 2(d)(v)(B) on such
Monthly Payment Date, the Administrator shall instruct the Indenture
Trustee to withdraw from the Reserve Account on such Monthly Payment
Date an amount equal to such excess, to the extent of funds available
therein after giving effect to paragraph (iv)(A) above, and to
distribute such amount to the Administrator.
(C) For any Monthly Payment Date that is not a
Quarterly Payment Date, in the event that the sum of the Class A-1
Interest Required Deposit Amount and the Class A-2 Noteholders'
Interest Distribution Amount for such Monthly Payment Date exceeds the
sum of the amount deposited into the Class A-1 Interest Account and the
amount distributed to the Indenture Trustee for distribution to the
Class A-2 Noteholders pursuant to Section 2(d)(iv)(C) on such Monthly
Payment Date, the Administrator shall instruct the Indenture Trustee to
withdraw from the Reserve Account on such Monthly Payment Date an
amount equal to such excess, to the extent of funds available therein
after giving effect to paragraphs (iv)(A) through (iv)(B) above, and to
distribute such amount as required by and, in the same priority as is
set forth in, Section 2(d)(iv)(C) on such Monthly Payment Date.
(D) For any Monthly Payment Date that is not a
Quarterly Payment Date, in the event that the Subordinate Noteholders'
Interest Distribution Amount for such Monthly Payment Date exceeds the
sum of the amount distributed to the Indenture Trustee for distribution
to the Subordinate Noteholders pursuant to Section 2(d)(iv)(D) on such
Monthly Payment Date, the Administrator shall instruct the Indenture
Trustee to withdraw from the Reserve Account on such Monthly Payment
Date an amount equal to such excess, to the extent of funds available
therein after giving effect to paragraphs (iv)(A) through (iv)(C)
above, and to distribute such amount as required by Section 2(d)(iv)(D)
on such Monthly Payment Date.
(E) For any Quarterly Payment Date, in the event that
the Noteholders' Distribution Amount (less the component thereof
represented by funds distributed to the Indenture Trustee from the
Class A-1 Interest Account on such Quarterly Payment Date pursuant to
Section 2(g)) for such Quarterly Payment Date exceeds the sum of the
amount distributed to the Indenture Trustee for distribution to the
Noteholders pursuant to Section 2(d)(v)(C) on such Monthly Payment
Date, the Administrator shall instruct the Indenture Trustee to
withdraw from the Reserve Account on such Quarterly Payment Date an
amount equal to such excess, to the extent of funds available therein
after giving effect to paragraphs (iv)(A) through (iv)(D) above, and to
distribute such amount as required by Section 2(d)(v)(C) on such
Quarterly Payment Date.
(f) Collateral Reinvestment Account. (i) During the Revolving
Period, the Administrator shall instruct the Indenture Trustee in writing to
withdraw from the Collateral Reinvestment Account, in each case to the extent of
the funds on deposit therein (A) on each Transfer Date, an amount equal to the
Loan Purchase Amount for the Serial Loans and New
15
<PAGE>
Loans transferred to the Eligible Lender Trustee on behalf of the Issuer on such
Transfer Date and to distribute such amount to or upon the order of the Seller
upon satisfaction of the conditions set forth in Section 2.02 of the Loan Sale
Agreement with respect to such transfer, (B) when and as requested by the
Eligible Lender Trustee, in order to facilitate its origination of Consolidation
Loans, to transfer to the order of the Eligible Lender Trustee an amount
sufficient to prepay in full any Student Loan not held by the Issuer that is to
be consolidated through such origination with one or more Financed Student
Loans, (C) when and as requested by the Eligible Lender Trustee, in order to
facilitate its funding of the addition of the principal balance of any Add-on
Consolidation Loan to the principal balance of a Consolidation Loan an amount
sufficient to prepay in full such Add-on Consolidation Loan not held by the
Issuer, (D) on each Determination Date, to deposit into the Collection Account
an amount equal to the Capitalized Interest Amount for the Student Loan Rate
Accrual Period with respect to the related Monthly Payment Date and (E) on any
Determination Date and in such amounts as the Administrator may direct, for
deposit to the Collection Account for the purposes of increasing Monthly
Available Funds or Available Funds, as the case may be.
(ii) On the Quarterly Payment Date on or next occurring after
the termination of the Revolving Period, the Administrator shall instruct the
Indenture Trustee to withdraw from the Collateral Reinvestment Account on such
Quarterly Payment Date an amount equal to the entire remaining amount on deposit
in such account and to distribute such amount to Noteholders pursuant to Section
8.02(g) of the Indenture.
(g) Class A-1 Interest Account. (i) On each Monthly Payment
Date that is not a Quarterly Payment Date, the Administrator shall instruct the
Indenture Trustee in writing to deposit the Class A-1 Interest Required Deposit
Amount in the Class A-1 Interest Account to the extent of funds available
therefor pursuant to Sections 2(d)(iv)(C) and 2(e)(iv)(C) and on each Quarterly
Payment Date shall instruct the Indenture Trust to withdraw from the Class A-1
Interest Account the sum of the Class A-1 Interest Required Deposit Amounts from
the two preceding Monthly Payment Dates for distribution to the Class A-1
Noteholders pursuant to Section 8.02(e) of the Indenture.
(h) Statements to Noteholders. (i) On each Determination Date
preceding a Quarterly Payment 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 Quarterly Payment Date to each Noteholder of
record a statement substantially in the form of Exhibit B setting forth at least
the following information as to the Notes:
(A) the amount of such distribution allocable to
principal of the Notes, the amount thereof distributable as principal
of the Class A-1 Notes, the Class A-2 Notes and the Subordinate Notes,
and the amount thereof attributable to the Principal Distribution
Amount and the amount thereof attributable to Reserve Account Excess;
16
<PAGE>
(B) the amount of the distribution allocable on such
Quarterly Payment Date and on each Monthly Payment Date following the
immediately preceding Quarterly Payment Date to interest on the Class
A-1 Notes;
(C) the amount of the distribution allocable on such
Quarterly Payment Date and on each Monthly Payment Date following the
immediately preceding Quarterly Payment Date to interest on the Class
A-2 Notes;
(D) the amount of the distribution allocable on such
Quarterly Payment Date and on each Monthly Payment Date following the
immediately preceding Quarterly Payment Date to interest on the
Subordinate Notes;
(E) the amount, if any, of such distribution
allocable to any Class A-1 Noteholders' Interest T-Bill Carryover,
Class A-2 Noteholders' Interest LIBOR Carryover, and any Subordinate
Noteholders' Interest LIBOR Carryover, together with any remaining
outstanding amount of each thereof;
(F) the Pool Balance as of the close of business on
the last day of the preceding Collection Period, after giving effect to
payments allocated to principal reported under clause (A) above;
(G) the aggregate outstanding principal balance of
the Class A-1 Notes, the Class A-2 Notes, the Subordinate Notes, the
Class A-1 Note Pool Factor, the Class A- 2 Note Pool Factor, and the
Subordinate Note Pool Factor as of such Quarterly Payment Date, after
giving effect to payments allocated to principal reported under clause
(A) above;
(H) the Note Rate applicable with respect to each
distribution referred to in clauses (B), (C) and (D) above, indicating
whether such interest rate was calculated based on the Student Loan
Rate or based on the T-Bill Rate or LIBOR, as the case may be, and
specifying what each such interest would have been using the alternate
basis for such calculation;
(I) the amount of the Servicing Fee paid to the
Servicer on such Quarterly Payment Date and on each Monthly Payment
Date following the immediately preceding Quarterly Payment Date
including a breakdown of the components of the Servicing Fee
attributable to each of the items specified in clauses II(i) through
(ix) of Section 3.06 of the Servicing Agreement and the amount of any
Servicing Fee Shortfall for such Quarterly Payment Date and for each
Monthly Payment Date following the immediately preceding Quarterly
Payment Date;
(J) the amount of the Administration Fee paid to the
Administrator on such Quarterly Payment Date and on each Monthly
Payment Date following the immediately preceding Quarterly Payment
Date;
17
<PAGE>
(K) 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;
(L) the balance of the Reserve Account on such
Quarterly Payment Date, after giving effect to changes therein on such
Quarterly Payment Date and indicating whether on such Quarterly Payment
Date or any Monthly Payment Date since the preceding Quarterly Payment
Date any withdrawal was made therefrom pursuant to Section 2(e)(iv),
the amount of each such withdrawal and the purpose(s) pursuant to
Section 2(e)(iv) for each such withdrawal;
(M) for Quarterly Payment Dates during the Revolving
Period, the amount deposited into the Collateral Reinvestment Account
during such Collection Period and in the immediately preceding
Quarterly Payment Date, and the amount on deposit therein after giving
effect to changes therein on such Quarterly Payment Date;
(N) for the Quarterly Payment Date on or immediately
following the end of the Revolving Period, the amount remaining on
deposit in the Collateral Reinvestment Account that has not been used
to make Additional Fundings;
(O) (i) the principal balance and number of
Consolidation Loans originated on behalf of the Issuer during the
related Collection Period, (ii) the principal balance and number of
Add-on Consolidation Loans the principal balances of which have been
added to the Trust during the related Collection Period and (iii) the
amount withdrawn from the Collateral Reinvestment Account to prepay
Student Loans not held by the Issuer that were consolidated through
such origination (or addition, in the case of Add-on Consolidation
Loans) with one or more Financed Student Loans during such Collection
Period;
(P) the principal balance and number of Serial Loans
conveyed to the Issuer during the related Collection Period, the
aggregate Loan Purchase Amount thereof and the portion thereof
attributable to Purchase Premium Amounts;
(Q) for Quarterly Payment Dates during the Revolving
Period, the principal balance and number of New Loans conveyed to the
Issuer during the related Collection Period, the aggregate Loan
Purchase Amount thereof and the portion thereof attributable to
Purchase Premium Amounts; and
(R) the number and principal balance of Financed
Student Loans as of the end of the related Collection Period, that are
In-School, Grace, Repayment, Deferral, Forbearance or Consolidation
Loans as of the of the related Collection Period, and a breakdown by
number and principal balance of Financed Student Loans, by school type,
interest rate and loan program.
18
<PAGE>
Each amount set forth pursuant to clauses (A), (B), (C), (D) and (E) above shall
be expressed as a dollar amount per $1,000 of original principal balance of a
Note. A copy of the statements referred to above may be obtained by any Note
Owner by a written request to the Indenture Trustee addressed to the Corporate
Trust Office.
(i) Non-Ministerial Matters. With respect to matters that in
the reasonable judgment of the Administrator are non-ministerial, the
Administrator shall not take any action unless within a reasonable time before
the taking of such action, the Administrator shall have notified the Eligible
Lender Trustee of the proposed action and the Eligible Lender Trustee shall have
consented to it. For the purpose of the preceding sentence, "non-ministerial
matters" shall include:
(i) the amendment of or any supplement to the Indenture;
(ii) the initiation of any claim or lawsuit by the Issuer and
the compromise of any action, claim or lawsuit brought by or against
the Issuer (other than in connection with the collection of the
Financed Student Loans);
(iii) the amendment, change or modification of the Related
Agreements;
(iv) the appointment of successor Note Registrars, successor
Paying Agents and successor Indenture Trustees pursuant to the
Indenture or the appointment of successor Administrators or Successor
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.
(j) Incentive Loans and Incentive Interest Deposits. The
Administrator may terminate or change the terms of any Incentive Program with
respect to a Financed Student Loan in accordance with the terms of such program,
provided such termination or change is not prohibited by the Higher Education
Act, upon notice to the Eligible Lender Trustee and the Indenture Trustee. Until
the effective date of any termination, the Administrator shall be required to
deposit into the Collection Account the Incentive Interest Deposit with respect
to such Incentive Financed Student Loan as provided below. In the event that the
Administrator fails to make such deposit, the terms of such Incentive Program
shall be such that the Borrower shall be obligated to make such payment and such
Incentive Program shall terminate as to the related loan.
The Administrator shall deposit or cause to be deposited into
the Collection Account no later than the Determination Date succeeding each
Monthly Collection Period the aggregate Incentive Interest Deposits with respect
to Incentive Financed Student Loans in the Trust as of the last day of such
Monthly Collection Period. Such deposits shall be considered deposits in respect
of interest on such Incentive Financed Student Loans for all purposes of the
19
<PAGE>
Basic Documents and shall be deemed to have been deposited into the Collection
Account for all such purposes as of such last date of such Monthly Collection
Period.
3. Annual Statement as to Compliance. (a) The Administrator
shall deliver to the Seller, the Eligible Lender Trustee and the Indenture
Trustee, on or before December 31 of each year beginning December 31, 1996, an
Officers' Certificate of the Administrator dated as of September 30 of such
year, stating that (i) a review of the activities of the Administrator during
the preceding 12-month period (or, in the case of the first such certificate,
during the period from the Closing Date to September 30, 1996) and of its
performance under this Agreement has been made under such officers' supervision
and (ii) to the best of such officers' knowledge, based on such review, the
Administrator has fulfilled all its obligations under this Agreement throughout
such year or, if there has been a default in the fulfillment of any such
obligation, specifying each such default known to such officers and the nature
and status thereof. The Indenture Trustee shall send a copy of each such
Officer's Certificate and each report referred to in Section 4 to the Rating
Agencies. A copy of such Officer's Certificate and each report referred to in
Section 4 may be obtained by any Noteholder or Note Owner by a request in
writing to the Indenture Trustee addressed to its Corporate Trust Office,
together with evidence satisfactory to the Indenture Trustee that such Person is
one of the foregoing parties.
(b) The Administrator shall deliver to the Eligible Lender
Trustee, the Indenture Trustee, the Servicer, and the Rating Agencies, promptly
after having obtained knowledge thereof, but in no event later than two Business
Days thereafter, written notice in an Officers' Certificate of the Administrator
of any event which with the giving of notice or lapse of time, or both, would
become an Administrator Default under Section 12.
4. Annual Independent Certified Public Accountants' Report.
The Administrator shall cause a firm of independent certified public
accountants, which may also render other services to the Administrator, to
deliver to the Seller, the Eligible Lender Trustee and the Indenture Trustee on
or before December 31 of each year beginning December 31, 1996, a report
addressed to the Administrator and to the Seller, the Eligible Lender Trustee
and the Indenture Trustee (which report may be combined with other reports
required to be delivered by such accountants to the Administrator, the Eligible
Lender Trustee and the Indenture Trustee under the Related Agreements), to the
effect that such firm has examined certain documents and records relating to the
administration of the Financed Student Loans and of the Trust during the
preceding fiscal year ended September 30 (or, in the case of the first such
report, during the period from the Closing Date to September 30, 1996) and that,
on the basis of the accounting and auditing procedures considered appropriate
under the circumstances, such firm is of the opinion that the administration of
the Trust was conducted in compliance with the terms of this Agreement, except
for (i) such exceptions as such firm shall believe to be immaterial and (ii)
such other exceptions as shall be set forth in such report. The Indenture
Trustee shall send a copy of each such report to the Rating Agencies.
20
<PAGE>
Such report will also indicate that the firm is independent of
the Administrator within the meaning of the Code of Professional Ethics of the
American Institute of Certified Public Accountants.
5. Administrator Expenses. The Administrator shall be
required to pay all expenses incurred by it in connection with its activities
hereunder, including fees and disbursements of independent accountants, taxes
imposed on the Administrator and expenses incurred in connection with
distributions and reports to the Noteholders.
6. Records. The Administrator shall maintain appropriate
books of account and records relating to services performed hereunder, which
books of account and records shall be accessible for inspection by the Issuer at
any time during normal business hours.
7. Compensation. As compensation for the performance of the
Administrator's obligations under this Agreement and as reimbursement for its
expenses related thereto, the Administrator shall be entitled to the
Administration Fee payable monthly in arrears on each Monthly Payment Date which
shall be solely an obligation of the Issuer and payable solely as provided
herein.
8. Additional Information To Be Furnished to the Issuer. The
Administrator shall furnish to the Issuer from time to time such additional
information regarding the Collateral as the Issuer shall reasonably request.
9. Independence of the Administrator. For all purposes of this
Agreement, the Administrator shall be an independent contractor and shall not be
subject to the supervision of the Issuer or the Eligible Lender Trustee with
respect to the manner in which it accomplishes the performance of its
obligations hereunder. Unless expressly authorized by the Issuer, the
Administrator shall have no authority to act for or represent the Issuer or the
Eligible Lender Trustee in any way and shall not otherwise be deemed an agent of
the Issuer or the Eligible Lender Trustee.
10. No Joint Venture. Nothing contained in this Agreement (i)
shall constitute the Administrator and either of the Issuer or the Eligible
Lender Trustee as members of any partnership, joint venture, association,
syndicate, unincorporated business or other separate entity, (ii) shall be
construed to impose any liability as such on any of them or (iii) shall be
deemed to confer on any of them any express, implied or apparent authority to
incur any obligation or liability on behalf of the others.
11. Other Activities of Administrator. Nothing herein shall
prevent the Administrator or its Affiliates from engaging in other businesses
or, in its sole discretion, from acting in a similar capacity as an
administrator for any other person or entity even though such person or entity
may engage in business activities similar to those of the Issuer, the Eligible
Lender Trustee or the Indenture Trustee.
21
<PAGE>
12. Administrator Default. If any one of the following events
(an "Administrator Default") shall occur and be continuing:
(a) any failure by the Administrator to direct the Indenture
Trustee to make any required distributions from any of the Trust
Accounts, which failure continues unremedied for 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
(b) any failure by the Administrator duly to observe or to
perform in any material respect any other covenants or agreements of
the Administrator set forth in this Agreement or any Related
Agreements, which failure shall (i) materially and adversely affect the
rights of Noteholders and (ii) continues unremedied for a period of 30
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 Noteholders, representing not less than 25% of the
Outstanding Amount of the Notes; or
(c) an Insolvency Event occurs with respect to the
Administrator;
then, and in each and every case, so long as the Administrator Default shall not
have been remedied, either the Indenture Trustee, or the Noteholders evidencing
not less than 75% of the Outstanding Amount of the Notes, by notice then given
in writing to the Administrator (and to the Indenture Trustee and the Eligible
Lender Trustee if given by the Noteholders) may terminate all the rights and
obligations (other than the obligations set forth in Section 24 hereof) of the
Administrator under this Agreement. On or after the receipt by the Administrator
of such written notice, all authority and power of the Administrator under this
Agreement, whether with respect to the Notes or the Financed Student Loans or
otherwise, shall, without further action, pass to and be vested in the Indenture
Trustee or such successor Administrator as may be appointed under Section 13;
and, without limitation, the Indenture Trustee and the Eligible Lender Trustee
are hereby authorized and empowered to execute and deliver, for the benefit of
the predecessor Administrator, as attorney-in-fact or otherwise, any and all
documents and other instruments, and to do or accomplish all other acts or
things necessary or appropriate to effect the purposes of such notice of
termination. The predecessor Administrator shall cooperate with the successor
Administrator, the Indenture Trustee and the Eligible Lender Trustee in
effecting the termination of the responsibilities and rights of the predecessor
Administrator under this Agreement. All reasonable costs and expenses (including
attorneys' fees and expenses) incurred in connection with amending this
Agreement to reflect such succession as Administrator pursuant to this Section
shall be paid by the predecessor Administrator upon presentation of reasonable
documentation of such costs and expenses. Upon receipt of notice of the
occurrence of an Administrator Default, the Eligible Lender Trustee shall give
notice thereof to the Rating Agencies.
22
<PAGE>
13. Appointment of Successor. (a) Upon receipt by the
Administrator of notice of termination pursuant to Section 12, or the
resignation by the Administrator in accordance with the terms of this Agreement,
the predecessor Administrator shall continue to perform its functions as
Administrator, in the case of termination, only until the date specified in such
termination notice or, if no such date is specified in a notice of 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 Administrator shall become unable to act as
Administrator as specified in the notice of resignation and accompanying Opinion
of Counsel. In the event of termination hereunder of the Administrator the
Issuer shall appoint a successor Administrator acceptable to the Indenture
Trustee and the successor Administrator shall accept its appointment by a
written assumption in form acceptable to the Indenture Trustee. In the event
that a successor Administrator has not been appointed at the time when the
predecessor Administrator has ceased to act as Administrator in accordance with
this Section, the Indenture Trustee without further action shall automatically
be appointed the successor Administrator and the Indenture Trustee shall be
entitled to the Administration Fee. Notwithstanding the above, the Indenture
Trustee shall, if it shall be unwilling or legally unable so to act, appoint or
petition a court of competent jurisdiction to appoint, any established
institution whose regular business shall include the servicing of student loans,
as the successor to the Administrator under this Agreement and the
Administration Agreement.
(b) Upon appointment, the successor Administrator (including
the Indenture Trustee acting as successor Administrator) shall be the successor
in all respects to the predecessor Administrator and shall be subject to all the
responsibilities, duties and liabilities placed on the predecessor Administrator
that arise thereafter or are related thereto and shall be entitled to an amount
agreed to by such successor Administrator (which shall not exceed the
Administration Fee unless such compensation arrangements will not result in a
downgrading of the Senior Notes or the Subordinate Notes by any Rating Agency)
and all the rights granted to the predecessor Administrator by the terms and
provisions of this Agreement.
(c) The Administrator may not resign unless it is prohibited
from serving as such by law as evidenced by an Opinion of Counsel to such effect
delivered to the Indenture Trustee and the Eligible Lender Trustee.
Notwithstanding the foregoing or anything to the contrary herein or in the
Related Agreements, the Indenture Trustee, to the extent it is acting as
successor Administrator pursuant hereto, shall be entitled to resign to the
extent a qualified successor Administrator has been appointed and has assumed
all the obligations of the Administrator in accordance with the terms of this
Agreement and the Related Agreements.
14. Notification to Noteholders. Upon any termination of, or
appointment of a successor to, the Administrator pursuant to Section 12 or 13,
the Indenture Trustee shall give prompt written notice thereof to Noteholders
and the Rating Agencies (which, in the case of any such appointment of a
successor, shall consist of prior written notice thereof to the Rating
Agencies).
23
<PAGE>
15. Waiver of Past Defaults. The Noteholders of Notes
evidencing not less than a majority of the Outstanding Amount of the Notes may,
on behalf of all Noteholders, waive in writing any default by the Administrator
in the performance of its obligations hereunder and any consequences thereof,
except a default in making any required deposits to or payments from any of the
Trust Accounts (or giving instructions regarding the same) in accordance with
this Agreement. Upon any such waiver of a past default, such default shall cease
to exist, and any Administrator Default arising therefrom shall be deemed to
have been remedied for every purpose of this Agreement. No such waiver shall
extend to any subsequent or other default or impair any right consequent
thereto.
16. Notices. Any notice, report or other communication given
hereunder shall be in writing (or in the form of facsimile notice, followed by
written notice) and addressed as follows:
(a) if to the Issuer, to
SMS Student Loan Trust 1996-A
c/o Mr. Michael Majchrzak, Trustee
FCC National Bank
300 King Street
Wilmington, Delaware 19801,
with a copy to the Eligible Lender Trustee
at the Corporate Trust Office of the
Eligible Lender Trustee
(b) if to the Eligible Lender Trustee, to
The First National Bank of Chicago
One First National Plaza
Suite 0126
Chicago, Illinois 60670
Attention: Corporate Trust Administration
Telephone: (312) 407-4110
Facsimile: (312) 407-1708
(b) if to the Administrator, to
USA Group Secondary Market Services, Inc.
8350 Craig Street
Indianapolis, Indiana 46250
Attention: President and Chief Executive Officer
Telephone: (317) 594-1981
Telecopy: (317) 594-1979
24
<PAGE>
with a copy to
Office of the General Counsel
USA Group, Inc.
11100 USA Parkway
Fishers, Indiana 46038
Attention: Glenn M. Sermersheim
Telephone: (317) 578-6988
Telecopy: (317) 578-6185
(c) if to the Indenture Trustee, to
Bankers Trust Company
Four Albany Street
New York, New York 10006
Attention: Corporate Trust and Agency Group,
Structured Finance Team
Telephone: (212) 250-6864
Facsimile: (212) 250-6439
or to such other address as any party shall have provided to the other parties
in writing. Any notice required to be in writing hereunder shall be deemed given
if such notice is mailed by certified mail, postage prepaid, or hand-delivered
to the address of such party as provided above.
17. Amendments. This Agreement may be amended from time to
time by a written amendment duly executed and delivered by the Issuer, the
Administrator and the Indenture Trustee, with the written consent of the
Eligible Lender Trustee, without the consent of the Noteholders, for the purpose
of adding any provisions to or changing in any manner or eliminating any of the
provisions of this Agreement or of modifying in any manner the rights of the
Noteholders; provided that such amendment will not, in an Opinion of Counsel
obtained on behalf of the Issuer and satisfactory to the Indenture Trustee and
the Eligible Lender Trustee, materially and adversely affect the interest of any
Noteholder. This Agreement may also be amended by the Issuer, the Administrator
and the Indenture Trustee with the written consent of the Eligible Lender
Trustee and the Noteholders of at least a majority in the Outstanding Amount of
the Notes for the purpose of adding any provisions to or changing in any manner
or eliminating any of the provisions of this Agreement or of modifying in any
manner the rights of Noteholders; provided, however, that no such amendment may
(i) increase or reduce in any manner the amount of, or accelerate or delay the
timing of, collections of payments with respect to Student Loans or
distributions that are required to be made for the benefit of the Noteholders or
(ii) reduce the aforesaid percentage of the Noteholders which are required to
consent to any such amendment, without the consent of all Outstanding
Noteholders. 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.
25
<PAGE>
18. Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Section 13 or 25 of this Agreement
concerning the resignation of the Administrator, this Agreement may not be
assigned by the Administrator.
19. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of Indiana, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
20. Headings. The section headings hereof have been inserted
for convenience of reference only and shall not be construed to affect the
meaning, construction or effect of this Agreement.
21. Counterparts. This Agreement may be executed in
counterparts, each of which when so executed shall together constitute but one
and the same agreement.
22. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
23. Not Applicable to USA Group Secondary Market Services,
Inc. in Other Capacities. Nothing in this Agreement shall affect any obligation
USA Group Secondary Market Services, Inc. may have in any other capacity under
the Related Agreements.
24. Liability of Administrator; Indemnities. The
Administrator shall be liable in accordance herewith only to the extent of the
obligations specifically undertaken by the Administrator under this Agreement.
The Administrator shall indemnify, defend and hold harmless
the Issuer, the Eligible Lender Trustee, the Indenture Trustee, the Servicer and
the Noteholders and any of the officers, directors, employees and agents of the
Issuer, the Eligible Lender Trustee, the Indenture Trustee and the 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 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,
26
<PAGE>
to the extent and in the manner provided in, and subject to the limitations of,
Section 6.07 of the Indenture.
For purposes of this Section, in the event of the termination
of the rights and obligations of the Administrator (or any successor thereto
pursuant to Section 25) as Administrator pursuant to Section 12 or a resignation
by such Administrator pursuant to this Agreement, such Administrator shall be
deemed to be the Administrator pending appointment of a successor Administrator
pursuant to Section 13.
Indemnification under this Section shall survive the
resignation or removal of the Eligible Lender Trustee or the Indenture Trustee
or the termination of this Agreement and shall include reasonable fees and
expenses of counsel and expenses of litigation. If the Administrator shall have
made any indemnity payments pursuant to this Agreement and the Person to or on
behalf of whom such payments are made thereafter collects any of such amounts
from others, such Person shall promptly repay such amounts to the Administrator,
without interest.
25. Merger or Consolidation of, or Assumption of the
Obligations of, Administrator. Any Person (a) into which the Administrator may
be merged or consolidated, (b) which may result from any merger or consolidation
to which the Administrator shall be a party or (c) which may succeed to the
properties and assets of the Administrator substantially as a whole, shall be
the successor to the Administrator without the execution or filing of any
document or any further act by any of the parties to this Agreement; provided,
however, that the Administrator hereby covenants that it will not consummate any
of the foregoing transactions except upon satisfaction of the following: (i) the
surviving Administrator, if other than USA Group Secondary Market Services,
Inc., executes an agreement of assumption to perform every obligation of the
Administrator under this Agreement, (ii) immediately after giving effect to such
transaction, no representation or warranty made pursuant to Section 1 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 Administrator 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
Administrator shall have a consolidated net worth at least equal to that of the
predecessor Administrator, (v) such transaction will not result in a material
adverse Federal or state tax consequence to the Issuer or the Noteholders and
(vi) unless USA Group Secondary Market Services, Inc. is the surviving entity,
the Administrator 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.
27
<PAGE>
26. Limitation on Liability of Administrator and Others.
Neither the Administrator nor any of its directors, officers, employees or
agents shall be under any liability to the Issuer, the Noteholders, the
Indenture Trustee or the Eligible Lender Trustee except as provided under this
Agreement, for any action taken or for refraining from the taking of any action
pursuant to this Agreement or for errors in judgment; provided, however, that
this provision shall not protect the Administrator or any such person against
any liability that would otherwise be imposed by reason of willful misfeasance,
bad faith or negligence in the performance of its duties or by reason of
reckless disregard of obligations and its duties under this Agreement. The
Administrator and any of its directors, officers, employees or agents may rely
in good faith on the advice of counsel or on any document of any kind prima
facie properly executed and submitted by any Person respecting any matters
arising hereunder.
Except as provided in this Agreement, the Administrator shall
not be under any obligation to appear in, prosecute or defend any legal action
that shall not be incidental to its duties to administer the Financed Student
Loans and the Trust in accordance with this Agreement, and that in its opinion
may involve it in any expense or liability; provided, however, that the
Administrator may undertake any reasonable action that it may deem necessary or
desirable in respect of this Agreement and the other Basic Documents and the
rights and duties of the parties to this Agreement and the Related Agreements
and the interests of the Noteholders under the Indenture.
27. USA Group Secondary Market Services, Inc. Not to Resign as
Administrator. Subject to the provisions of Section 25, USA Group Secondary
Market Services, Inc. shall not resign from the obligations and duties imposed
on it as Administrator under this Agreement except upon determination that the
performance of its duties under this Agreement shall no longer be permissible
under applicable law or shall violate any final order of a court or
administrative agency with jurisdiction over USA Group Secondary Market
Services, Inc. or its properties. Notice of any such determination permitting
the resignation of USA Group Secondary Market Services, Inc. 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 USA Group Secondary Market Services, Inc. in
accordance with Section 13.
28. Limitation of Liability of Eligible Lender Trustee and
Indenture Trustee. (a) Notwithstanding anything contained herein to the
contrary, this instrument has been countersigned by The First National Bank of
Chicago not in its individual capacity but solely in its capacity as Eligible
Lender Trustee of the Issuer and in no event shall The First National Bank of
Chicago in its individual capacity or any Owner of the Issuer have any liability
for the representations, warranties, covenants, 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
28
<PAGE>
Agreement, in the performance of any duties or obligations of the Issuer
thereunder, the Eligible Lender Trustee shall be subject to, and entitled to the
benefits of, the terms and provisions of Articles VI, VII and VIII of the Trust
Agreement.
(b) Notwithstanding anything contained herein to the contrary,
this Agreement has been countersigned by Bankers Trust Company not in its
individual capacity but solely as Indenture Trustee and in no event shall
Bankers Trust Company have any liability for the representations, warranties,
covenants, agreements or other obligations of the Issuer hereunder or in any of
the certificates, notices or agreements delivered pursuant hereto, as to all of
which recourse shall be had solely to the assets of the Issuer.
29. Insolvency of Company. (a) Upon any sale of the assets of
the Trust pursuant to Section 9.02 of the Trust Agreement, the Indenture Trustee
shall 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 Quarterly Payment Date on, or, if
such proceeds are not so deposited on a Quarterly Payment Date, on the first
Quarterly Payment 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 Quarterly Payment Date of the amount of Available Funds and amounts on
deposit in the Reserve Account pursuant to Sections 2(d) and 2(e)) from the
Insolvency Proceeds and any funds remaining on deposit in the Reserve Account
(including the proceeds of any sale of investments therein as described in the
following sentence):
(i to the Senior Noteholders, any portion of the Senior
Noteholders' Interest Distribution Amount not otherwise distributed to
the Senior Noteholders on such Quarterly Payment Date;
(ii to the Subordinate Noteholders, any portion of the
Subordinate Noteholders' Interest Distribution Amount not otherwise
distributed to the Subordinate Noteholders on such Quarterly Payment
Date;
(iii to the Senior Noteholders, the outstanding principal
balance of the Senior Notes (after giving effect to the reduction in
the outstanding principal balance of the Senior Notes to result from
the distributions to Senior Noteholders on such Quarterly Payment Date
and on prior Quarterly Payment Dates);
(iv to the Subordinate Noteholders, the outstanding
principal balance of the Subordinate Notes (after giving effect to the
reduction in the outstanding principal balance of the Subordinate Notes
to result from the distributions to Subordinate Noteholders on such
Quarterly Payment Date and on prior Quarterly Payment Dates);
(v to the Senior Noteholders, any unpaid Senior
Noteholders' Interest Carryover not otherwise distributed to the Senior
Noteholders on such Quarterly Payment Date; and
29
<PAGE>
(vi to the Subordinate Noteholders, any unpaid
Subordinate Noteholders' Interest LIBOR Carryover not otherwise
distributed to the Subordinate Noteholders on such Quarterly Payment
Date.
Any investments on deposit in the Reserve Account which will not mature on or
before such Quarterly Payment 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 Quarterly Payment Date.
Any Insolvency Proceeds remaining after the deposits described above shall be
paid to the Company.
(b) As described in Article IX of the Trust Agreement, notice
of any termination of the Trust shall be given by the Administrator to the
Eligible Lender Trustee and the Indenture Trustee as soon as practicable after
the Administrator has received notice thereof.
30. Third-Party Beneficiaries. The Eligible Lender Trustee
is a third party beneficiary to this Agreement and is entitled to the rights
and benefits hereunder and may enforce the provisions hereof as if it were a
party hereto.
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.
SMS STUDENT LOAN TRUST 1996-A,
by THE FIRST NATIONAL BANK OF
CHICAGO, not in its individual
capacity but solely as
Eligible Lender Trustee,
by /s/ Jeffrey L. Kinney
Name: Jeffrey L. Kinney
Title: Assistant Vice President
BANKERS TRUST COMPANY, not in its individual
capacity but solely as Indenture Trustee,
by /s/ John Wallace
Name: John Wallace
Title: Asst. Vice President
USA GROUP SECONDARY MARKET SERVICES, INC.,
as Administrator,
by /s/ Cheryl E. Watson
Name: Cheryl E. Watson
Title: Vice President
31
<PAGE>
EXHIBIT A TO THE
ADMINISTRATION AGREEMENT
POWER OF ATTORNEY
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK)
KNOW ALL MEN BY THESE PRESENTS, that THE FIRST NATIONAL BANK OF
CHICAGO, a national bank, not in its individual capacity but solely as eligible
lender trustee ("Eligible Lender Trustee") for the SMS Student Loan Trust 1996-A
(the "Trust"), does hereby make, constitute and appoint USA Group Secondary
Market Services, Inc., as Administrator under the Administration Agreement (as
defined below), and its agents and attorneys, as Agents and Attorneys-in-Fact to
execute on behalf of Eligible Lender Trustee or the Trust all such documents,
reports, filings, instruments, certificates and opinions as it should be the
duty of Eligible Lender Trustee or the Trust to prepare, file or deliver
pursuant to the Related Documents (as defined in the Administration Agreement)
or pursuant to Section 5.02 of the Trust Agreement (as defined in the
Administration Agreement), including without limitation, to appear for and
represent Eligible Lender Trustee and the Trust in connection with the
preparation, filing and audit of any federal, state and local tax returns
pertaining to the Trust, and with full power to perform any and all acts
associated with such returns and audits that the Eligible Lender Trustee could
perform, including without limitation, the right to distribute and receive
confidential information, defend and assert positions in response to audits,
initiate and defend litigation, and to execute waivers of restriction on
assessments of deficiencies, consents to the extension of any statutory or
regulatory time limit, and settlements. For the purpose of this Power of
Attorney, the term "Administration Agreement" means the Administration Agreement
dated as of April 1, 1995, among the Trust, USA Group Secondary Market Services,
Inc., as Administrator, and Bankers Trust Company, as Indenture Trustee, as such
may be amended from time to time.
All powers of attorney for this purpose heretofore filed or executed by
Eligible Lender Trustee are hereby revoked.
EXECUTED as of the first day of April, 1996.
THE FIRST NATIONAL BANK OF
CHICAGO, not in its
individual capacity but
solely as Eligible Lender
Trustee
by
Name:
Title:
A-1
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
Before me, the undersigned authority, on this day personally
appeared [ ] known to me to be the person whose name is
subscribed to the foregoing
instrument, and acknowledged to me that such person signed the same for the
purposes and considerations therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this [ ] day
of [ ], 1996.
Notary Public in and for the
State of New York
Printed Name of Notary Public
Commission Expires____________
A-2
<PAGE>
EXHIBIT B
TO THE ADMINISTRATION AGREEMENT
Form of Noteholders' Statement pursuant to Section 2(h) of Administration
Agreement (capitalized terms used herein are defined in Appendix A thereto)
Quarterly Payment Date:
(i) Amount of principal being paid or distributed:
Class A-1 __________* ($_______* per $1,000
original principal amount of
Notes)
Class A-2 __________* ($_______* per $1,000
original principal amount of
Notes)
Subordinate __________* ($_______* per $1,000
original principal amount of
Notes)
- - - ---------
* Portion of each such amount attributable to Reserve Account
Excess: _________________.
Quarterly Payment Date and last two Monthly Payment Dates:
(ii) Amount of interest being paid or distributed:
Class A-1 __________ ($_______ per $1,000
original principal amount of
Notes)
Class A-2 __________ ($_______ per $1,000
original principal amount of
Notes)
B-1
<PAGE>
Subordinate __________ ($_______ per $1,000
original principal amount of
Notes)
Quarterly Payment Date:
(iii) Amount of Class A-1 Noteholders' Interest T-Bill Carryover
being paid or distributed (if any) and amount remaining (if
any):
(a) Distributed:__________ ($_______ per $1,000
original principal
amount of Notes)
(b) Balance:______________ ($_______ per $1,000
original principal
amount of Notes)
(iv) Amount of Class A-2 Noteholders' Interest LIBOR Carryover
being paid or distributed (if any) and amount remaining (if
any):
(a) Distributed:__________ ($_______ per $1,000
original principal
amount of Notes)
(b) Balance:______________ ($_______ per $1,000
original) principal
amount of Notes)
(v) Amount of Subordinate Noteholders' Interest LIBOR Carryover
being paid or distributed (if any) and amount remaining (if
any):
(a) Distributed:__________ ($_______ per $1,000
original) principal
amount of Notes)
(b) Balance:______________ ($_______ per $1,000
original) principal
amount of Notes)
(vi) Pool Balance at end of related Collection Period: __________
B-2
<PAGE>
(vii) After giving effect to distributions on this Quarterly Payment
Date:
(a) (1) outstanding principal amount of Class A-1
Notes:__________
(2) Class A-1 Note Pool Factor:__________
(b) (1) outstanding principal amount of Class A-2
Notes:__________
(2) Class A-2 Note Pool Factor:__________
(c) (1) outstanding principal amount of Subordinate
Notes:__________
(2) Subordinate Note Pool Factor:__________
(viii) Applicable Interest Rate:
In general:
(1) LIBOR for each of the LIBOR Reset Periods
and related Monthly Interest Periods since
the previous Quarterly Payment Date was
_____%, _____% and _____%; and
(2) the Student Loan Rate for each such Monthly
Interest Period was _____%, _____%, and
_____%, respectively.
(b) (1) T-Bill Rate for Quarterly Interest Period commencing
on the previous Quarterly Payment Date was _____%.
(2) the Student Loan Rate was _____%.
(c) (1) T-Bill Rates for each Class A-1
Calculation Period since the previous
Quarterly Payment Date were _____% and _____%.
(2) the Student Loan Rates for each such period were
_____% and _____%, respectively.
Class A-1 Note Rate:_____% (based on [T-Bill Rate]
[Student Loan Rate])
Class A-2 Note Rate:_____% (based on [LIBOR] [Student Loan
Rate])
Subordinate Note Rate:_____% (based on [LIBOR][Student Loan
Rate])
B-3
<PAGE>
(ix) Amount of Servicing Fee for related Collection Period
including a breakdown of the components of the Servicing Fee
attributable to each of the items specified in clauses II(i)
through (ix) of Section 3.06 of the Servicing Agreement and
the amount of any Servicing Fee Shortfall for such Quarterly
Payment Date and for each Monthly Payment Date following the
immediately preceding Quarterly Payment Date:
(x) Amount of Administration Fee for related Collection
Period:__________ ($_______ per $1,000 original principal
amount of Notes)
Aggregate amount of Realized Losses (if any) for the related
Collection Period:__________
(xi) Financed Student Loans delinquent at end of related
Collection Period: __________; number of delinquent loans:
________; aggregate unpaid principal balance of delinquent
loans: ___________________
(xii) Withdrawal from Reserve Account on related Quarterly Payment
Date (other than Reserve Account Excess) and on any
Monthly Payment Date since the preceding Quarterly Payment
Date (list each withdrawal separately): _______________
[purpose of each withdrawal]
Reserve Account Excess on related Quarterly Payment Date
$--------
Principal balance of Notes to be paid to reach Parity Date:
$-----------
(xiii) Deposits to Collateral Reinvestment Account during related
Collection Period: $__________; amount to be deposited on
related Quarterly Payment Date $-----------.
Withdrawal from Collateral Reinvestment Account during related
Collection Period: $__________
(xiv) Amount in the Reserve Account (after giving effect to
(xii)):__________
(xv) Amount in the Collateral Reinvestment Account (after giving
effect to(xiii)):__________
(xvi) Consolidation loans: ___________ loans with aggregate principal
balance of $________ were originated during related Collection
Period; withdrawal from
B-4
<PAGE>
Collateral Reinvestment Account to fund origination of Consolidation Loans
during related Collection Period: $_______
(xvii) Add-on Consolidation Loans: ______ loans with aggregate principal
balance of $________ were added to the principal balance of a
Consolidation Loan; withdrawal from Collateral Reinvestment Account
to fund the addition of the principal balances of Add-on
Consolidation Loans during the related Collection Period: $_____
(xviii) Serial Loans: _______ loans with aggregate principal balance of
$_______ (portion represented by Purchase Premium Amounts) were
purchased during the related Collection Period.
(xix) New Loans: _______ loans with aggregate principal balance of
$_______ (portion represented by Purchase Premium Amounts) were
purchased during the related Collection Period.
B-5
<PAGE>
(xx) the number, principal balance school type, interest rate and
loan program of Financed Student Loans in the following
categories as of the end of the related Collection Period:
Number Principal School Interest Loan
of Loans Balance Type Rate Program
In-School
Grace Repayment
Deferral
Forebearance
Consolidation Loans
B-6
<PAGE>
APPENDIX A TO THE
ADMINISTRATION AGREEMENT
DEFINITIONS AND USAGE
Usage
The following rules of construction and usage shall be
applicable to any instrument that is governed by this Appendix:
(a) All terms defined in this Appendix shall have the defined
meanings when used in any instrument governed hereby and in any certificate or
other document made or delivered pursuant thereto unless otherwise defined
therein.
(b) As used herein, in any instrument governed hereby and in
any certificate or other document made or delivered pursuant thereto, accounting
terms not defined in this Appendix or in any such instrument, certificate or
other document, and accounting terms partly defined in this Appendix or in any
such instrument, certificate or other document to the extent not defined, shall
have the respective meanings given to them under generally accepted accounting
principles as in effect on the date of such instrument. To the extent that the
definitions of accounting terms in this Appendix or in any such instrument,
certificate or other document are inconsistent with the meanings of such terms
under generally accepted accounting principles, the definitions contained in
this Appendix or in any such instrument, certificate or other document shall
control.
(c) The words "hereof", "herein", "hereunder" and words of
similar import when used in an instrument refer to such instrument as a whole
and not to any particular provision or subdivision thereof; references in an
instrument to "Article", "Section" or another subdivision or to an attachment
are, unless the context otherwise requires, to an article, section or
subdivision of or an attachment to such instrument; and the term "including"
means "including without limitation".
(d) The definitions contained in this Appendix are equally
applicable to both the singular and plural forms of such terms and to the
masculine as well as to the feminine and neuter genders of such terms.
(e) Any agreement, instrument 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
1
<PAGE>
instruments incorporated therein. References to a Person are
also to its permitted successors and assigns.
Definitions
"Act" has the meaning specified in Section 11.03(a) of
the Indenture.
"Additional Fundings" means any withdrawals from the
Collateral Reinvestment Account for any of the purposes set forth in Section
2(f) of the Administration Agreement.
"Additional Guarantor" means a Federal Guarantor (other than
an Initial Guarantor) of a Financed Student Loan (other than an Initial Financed
Student Loan) which has entered into a guarantee agreement with the Eligible
Lender Trustee.
"Add-on Consolidation Loan" means a Student Loan, the
principal balance of which is added to an existing Consolidation Loan within 210
days from the date that the existing Consolidation Loan was made, as required by
the Higher Education Act.
"Add-on Consolidation Loan Funding Date" means each day, prior
to the end of the Add-on Period, on which the principal balance of an Add-on
Consolidation Loan is added to the principal balance of a Consolidation Loan in
the Trust pursuant to Section 6.07 of the Trust Agreement.
"Add-on Period" means the period starting on the closing Date
and ending on the date that is 210 days from the date that the last
Consolidation Loan was originated by the Trust during the Revolving Period.
"Administration Agreement" means the Administration Agreement
dated as of April 1, 1996, among the Issuer, the Administrator and the Indenture
Trustee.
"Administration Fee" means, with respect to each Monthly
Payment Date, an amount equal to one-twelfth of the product of (i) 0.04% and
(ii) the Pool Balance as of the close of business on the last day of the
calendar month immediately preceding such Monthly Payment Date.
"Administrator" means USA Group Secondary Market Services,
Inc., a Delaware corporation, in its capacity as administrator of the Issuer and
the Financed Student Loans.
"Administrator Default" shall have the meaning set forth in
Section 12 of the Administration Agreement.
2
<PAGE>
"Administrator's Certificate" means an Officers' Certificate
of the Administrator delivered pursuant to Section 2(h) of the Administration
Agreement, substantially in the form of Exhibit B thereto.
"Affiliate" means, with respect to any specified Person, any
other Person controlling or controlled by or under common control with such
specified Person. For the purposes of this definition, "control" when used with
respect to any specified Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Assignment" means a duly executed assignment delivered
pursuant to Section 3.02 of the Loan Sale Agreement in the form set forth in
Exhibit F to such Agreement.
"Authorized Officer" means (i) with respect to the Issuer, any
officer of the Eligible Lender Trustee who is authorized to act for the Eligible
Lender Trustee in matters relating to the Issuer pursuant to the Basic Documents
and who is identified on the list of Authorized Officers delivered by the
Eligible Lender Trustee to the Indenture Trustee on the Closing Date (as such
list may be modified or supplemented from time to time thereafter) and (ii) with
respect to the Seller, the Servicer and the Administrator, any officer of the
Seller, the Servicer or the Administrator, respectively, who is authorized to
act for the Seller, the Servicer or the Administrator, respectively, in matters
relating to itself or to the Issuer and to be acted upon by the Seller, the
Servicer or the Administrator, respectively, pursuant to the Basic Documents and
who is identified on the list of Authorized Officers delivered by the Seller,
the Servicer and the Administrator, respectively, to the Indenture Trustee on
the Closing Date (as such list may be modified or supplemented from time to time
thereafter).
"Available Funds" means, with respect to a Quarterly Payment
Date and the related Collection Period, the sum of the amounts specified in
clauses (i)-(vi) of the definition of Monthly Available Funds for each of the
three Monthly Collection Periods included in such Collection Period; provided,
however, that if with respect to any Quarterly Payment Date there would not be
sufficient funds, after application of Available Funds (as defined above) and
amounts available from the Reserve Account, to pay any of the items specified in
clauses (v)(A) through (v)(C) of Section 2(d) of the Administration Agreement,
then Available Funds for such Quarterly Payment Date will include, in addition
to the Available Funds (as defined above), amounts on deposit in the Collection
Account on the Determination Date relating to such Quarterly Payment Date which
would have constituted Available
3
<PAGE>
Funds for the Quarterly Payment Date succeeding such Quarterly Payment Date up
to the amount necessary to pay such items, and the Available Funds for such
succeeding Quarterly Payment Date will be adjusted accordingly; and provided,
further, that Available Funds will exclude (A) all payments and proceeds
(including Liquidation Proceeds) of any Financed Student Loans the Purchase
Amount of which has been included in Available Funds for a prior Collection
Period; (B) except as expressly included in clause (iv) of the definition of
Monthly Available Funds, amounts released from the Collateral Reinvestment
Account; (C) any Monthly Rebate Fees paid during the related Collection Period
by or on behalf of the Trust; (D) any collections in respect of principal on the
Financed Student Loans applied by the Eligible Lender Trustee on behalf of the
Trust prior to the end of the Revolving Period to make deposits to the
Collateral Reinvestment Account pursuant to Section 2(d)(i) of the
Administration Agreement, and after the end of the Revolving Period, any
expenditure of the Net Principal Cash Flow Amount used to fund the addition of
any Add-on Consolidation Loans, to purchase Serial Loans or to fund the
acquisition of Exchanged Serial Loans during the related Collection Period; and
(E) the Servicing Fee and all overdue Servicing Fees, the Administration Fee and
all overdue Administration Fees, the Class A-2 Noteholders' Interest
Distribution Amount, Class A-1 Interest Required Deposit Amount and the
Subordinate Noteholders' Interest Distribution Amount paid on each Monthly
Payment Date that is not a Quarterly Payment Date during the related Collection
Period.
"Basic Documents" means the Trust Agreement, the
Indenture, the Loan Sale Agreement, the Servicing Agreement, the
Administration Agreement, the Note Depository Agreement, the
Guarantee Agreements and other documents and certificates
delivered in connection with any thereof.
"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.
"Borrower" means an individual who is the maker of a Borrower
Note and who obtains a Student Loan from an "eligible lender" in accordance with
the Higher Education Act and the policies and procedures of a Guarantor.
"Borrower Account" means those combined loans of a Borrower
with the same lender and branch, which loans are in the same status, are the
same loan type and which require the same processing and billing requirements.
Stafford Loans which are already in repayment and being serviced by the Servicer
will not be merged with new Stafford Loans for the same Borrower, and each such
Stafford Loan will be treated as a separate Borrower Account.
4
<PAGE>
"Borrower Note" means a promissory note of a Borrower for a
Student Loan set forth on the appropriate form furnished by the Guarantor which
Borrower Note meets the criteria set forth by the Higher Education Act and the
policies and procedures of the Guarantor.
"Business Day" means any day other than a Saturday, a Sunday
or a day on which banking institutions or trust companies in the State of
Illinois, New York or Indiana are authorized or obligated by law, regulation or
executive order to remain closed.
"Business Trust Statute" means Chapter 38 of Title 12 of the
Delaware Code, 12 Del. Code ss. 3801 et seq., as the same may be amended from
time to time.
"Capitalized Interest Amount" means for any Monthly Collection
Period or other period of determination, the amount of interest that accrued on
the Financed Student Loans during such period but was not then payable and that
has been or will, pursuant to the terms of such Financed Student Loans, be
capitalized and added to the principal balances of such loans.
"Certificate of Trust" means the Certificate of Trust in the
form of Exhibit A to the Trust Agreement to be filed for the Trust pursuant to
Section 3810(a) of the Business Trust Statute.
"Choice Rates(TM) Program" means the Incentive Program of the
Administrator which provides that Borrowers of Stafford Loans whose loans were
disbursed on or after January 1, 1996 and who make their first 48 payments on
time receive a 2% per annum interest rate reduction for the remaining term of
their Student Loan, as such program may be modified from time to time.
"Choice Repay(TM) Program" means the Incentive Program of the
Administrator which provides for Borrowers of Stafford Loans whose loans were
disbursed on or after January 1, 1996 and who use the USA Group Loan Services
AutoCheck(R) auto-debt system to remit payments directly from their bank
accounts to receive a 0.25% per annum interest rate reduction on their Student
Loans, as such program may be modified after the Cutoff Date, other than as it
may be modified to increase such interest rate reduction.
"Class A-1 Calculation Period" means, with respect to any
Monthly Payment Date that is not a Quarterly Payment Date, the period from and
including the Quarterly Payment Date immediately preceding such Monthly Payment
Date (or in the case of the first two Monthly Payment Dates, the Closing Date)
to but excluding such Monthly Payment Date.
"Class A-1 Calculation Rate" means, with respect to any
Monthly Payment Date that is not a Quarterly Payment Date and the
5
<PAGE>
related Class A-1 Calculation Period, the interest rate per annum (computed on
the basis of the actual number of days in such Class A-1 Calculation Period over
a year of 365 days (366 in the case of a leap year)) equal to the lesser of (i)
the weighted average of the T-Bill Rates within the related Class A-1
Calculation Period plus 0.70% (the "Class A-1 T-Bill Calculation Rate") and (ii)
the Student Loan Rate for such Class A-1 Calculation Period; provided, that,
notwithstanding the foregoing, the Class A-1 Calculation Rate for each of the
first two Class A-1 Calculation Periods shall be equal to the Class A-1 T-Bill
Calculation Rate for such Class A-1 Calculation Period.
"Class A-1 Depository Agreement" means the agreement with
respect to the Class A-1 Notes attached to the Indenture as Exhibit B-1.
"Class A-1 Interest Account" means the account designated as
such, established and maintained pursuant to Section 2(c) of the Administration
Agreement.
"Class A-1 Interest Required Deposit Amount" means, with
respect to any Monthly Payment Date that is not a Quarterly Payment Date, (a)
the amount of interest accrued at the Class A-1 Calculation Rate for the related
Class A-1 Calculation Period on the outstanding principal balance of the Class
A-1 Notes on the immediately preceding Quarterly Payment Date after giving
effect to all principal distributions to holders of Class A-1 Notes on such date
(or in the case of the first Quarterly Payment Date, on the Closing Date) minus
(b), if such Monthly Payment Date is the Monthly Payment Date immediately
preceding a Quarterly Payment Date, the amount deposited into the Class A-1
Interest Account on the immediately preceding Monthly Payment Date; provided,
however, that the Class A-1 Interest Required Deposit Amount will not include
any Class A-1 Noteholders' Interest T-Bill Carryover.
"Class A-1 Note" means a Class A-1 Floating Rate Asset
Backed Senior Note issued pursuant to the Indenture,
substantially in the form of Exhibit A-1 thereto.
"Class A-1 Note Final Maturity Date" means the October
2023 Quarterly Payment Date.
"Class A-1 Noteholders' Interest Carryover Shortfall" means,
with respect to any Quarterly Payment Date, the excess of (i) the sum of the
Class A-1 Noteholders' Interest Distribution Amount and the amount distributed
to the Class A-1 Noteholders out of the Class A-1 Interest Account on the
preceding Quarterly Payment Date over (ii) the amount of interest actually
distributed to the Class A-1 Noteholders on such preceding Quarterly Payment
Date, plus interest on the amount of such excess, to the extent permitted by
law, at the interest rate
6
<PAGE>
borne by the Class A-1 Notes from such preceding Quarterly Payment Date to the
current Quarterly Payment Date.
"Class A-1 Noteholders' Interest Distribution Amount" means,
with respect to any Quarterly Payment Date, the difference between (a) the sum
of (i) the amount of interest accrued at the Class A-1 Note Rate for the related
Quarterly Interest Period on the outstanding principal balance of the Class A-1
Notes on the immediately preceding Quarterly Payment Date after giving effect to
all principal distributions to holders of Class A-1 Notes on such date (or, in
the case of first Quarterly Payment Date, on the Closing Date) and (ii) the
Class A-1 Noteholders' Interest Carryover Shortfall for such Quarterly Payment
Date and (b) the amount on deposit in the Class A-1 Interest Account on such
Quarterly Payment Date and distributed to the Class A-1 Noteholders on such
date; provided, however, that the Class A-1 Noteholders' Interest Distribution
Amount will not include any Class A-1 Noteholders' Interest T-Bill Carryover.
"Class A-1 Noteholders' Interest T-Bill Carryover" means, with
respect to each Quarterly Payment Date commencing in October 1996, the amount
equal to the excess, if any, of (a) the amount of interest on the Class A-1
Notes that would have accrued in respect of each related Quarterly Interest
Period had interest been calculated based on the T-Bill Rate over (b) the amount
of interest on the Class A-1 Notes actually accrued in respect of such Quarterly
Interest Period based on the Student Loan Rate for such Quarterly Interest
Period, together with the unpaid portion of any such excess from prior Quarterly
Payment Dates (and interest accrued thereon, to the extent permitted by law, at
the applicable Class A-1 T-Bill Note Rate; provided, however, that, on the Class
A-1 Note Final Maturity Date, the Class A-1 Noteholders' Interest T-Bill
Carryover will be equal to the lesser of (i) the Class A-1 Noteholders' Interest
T-Bill Carryover on such date determined as described above and (ii) the amount
of funds, if any, required and available to be distributed to the Class A-1
Noteholders on such date pursuant to Sections 2(e)(ii)(b)(iii) and 2(e)(iii) of
the Administration Agreement and Section 8.02 of the Indenture.
"Class A-1 Note Pool Factor" as of the close of business on a
Quarterly Payment Date means a seven-digit decimal figure equal to the
outstanding principal balance of the Class A- 1 Notes divided by the original
outstanding principal balance of the Class A-1 Notes. The Class A-1 Note Pool
Factor will be 1.0000000 as of the Closing Date; thereafter, the Class A-1 Note
Pool Factor will decline to reflect reductions in the outstanding principal
balance of the Class A-1 Notes.
"Class A-1 Note Rate" means, with respect to any Quarterly
Payment Date and the related Quarterly Interest Period, the interest rate per
annum (computed on the basis of the actual
7
<PAGE>
number of days in such Quarterly Interest Period over a year of 365 days (366 in
the case of a leap year)) equal to the lesser of (i) the weighted average of the
T-Bill Rates within the related Quarterly Interest Period plus 0.70% (the "Class
A-1 T-Bill Note Rate") and (ii) the Student Loan Rate for such Quarterly
Interest Period; provided, that, notwithstanding the foregoing, the Class A-1
Note Rate for the first Quarterly Interest Period shall be equal to the Class
A-1 T-Bill Note Rate for such Quarterly Interest Period.
"Class A-1 Planned Principal Balance" means with respect to
any Quarterly Payment Date and the Class A-1 Notes, the dollar amount listed in
Schedule I to the Indenture opposite such Quarterly Payment Date.
"Class A-2 Depository Agreement" means the agreement with
respect to the Class A-2 Notes attached to the Indenture as Exhibit B-2.
"Class A-2 Note" means a Class A-2 Floating Rate Asset
Backed Senior Note issued pursuant to the Indenture,
substantially in the form of Exhibit A-2 thereto.
"Class A-2 Note Final Maturity Date" means the October
2023 Quarterly Payment Date.
"Class A-2 Noteholders' Interest Carryover Shortfall" means,
with respect to any Monthly Payment Date, the excess of (i) the Class A-2
Noteholders' Interest Distribution Amount on the preceding Monthly Payment Date
over (ii) the amount of interest actually distributed to the Class A-2
Noteholders on such preceding Monthly Payment Date, plus interest on the amount
of such excess, to the extent permitted by law at the Class A-2 Note Rate from
such preceding Monthly Payment Date to the current Monthly Payment Date.
"Class A-2 Noteholders' Interest Distribution Amount" means,
with respect to any Monthly Payment Date, the sum of (i) the amount of interest
accrued at the Class A-2 Note Rate for the related Monthly Interest Period on
the outstanding principal balance of the Class A-2 Notes on the immediately
preceding Quarterly Payment Date after giving effect to all principal
distributions to holders of Class A-2 Notes on such date (or, in the case of the
first three Monthly Payment Dates, on the Closing Date) and (ii) the Class A-2
Noteholders' Interest Carryover Shortfall for such Monthly Payment Date;
provided, however, that the Class A-2 Noteholders' Interest Distribution Amount
will not include any Class A-2 Noteholders' Interest LIBOR Carryover.
"Class A-2 Noteholders' Interest LIBOR Carryover" means, with
respect to each Quarterly Payment Date commencing in October 1996, and with
respect to each Monthly Interest Period,
8
<PAGE>
if any, since the preceding Quarterly Payment Date as to which the Class A-2
Note Rate for such Monthly Interest Period was based on the Student Loan Rate
for the related Monthly Interest Period, the amount equal to the excess, if any,
of (a) the amount of interest on the Class A-2 Notes that would have accrued in
respect of each related Monthly Interest Period had interest been calculated
based on LIBOR over (b) the amount of interest on the Class A-2 Notes actually
accrued in respect of such Monthly Interest Period based on the Student Loan
Rate for such Monthly Interest Period, together with the unpaid portion of any
such excess from prior Monthly Payment Dates (and interest accrued thereon, to
the extent permitted by law, at the applicable rate calculated based on LIBOR);
provided, however, that, on the Class A-2 Note Final Maturity Date, the Class
A-2 Noteholders' Interest LIBOR Carryover will be equal to the lesser of (i) the
Class A-2 Noteholders' Interest LIBOR Carryover on such date determined as
described above and (ii) the amount of funds, if any, required and available to
be distributed to the Noteholders on such date pursuant to Sections
2(e)(ii)(b)(iii) and 2(e)(iii) of the Administration Agreement and Section 8.02
of the Indenture.
"Class A-2 Note Pool Factor" as of the close of business on a
Quarterly Payment Date means a seven-digit decimal figure equal to the
outstanding principal balance of the Class A- 2 Notes divided by the original
outstanding principal balance of the Class A-2 Notes. The Class A-2 Note Pool
Factor will be 1.0000000 as of the Closing Date; thereafter, the Class A-2 Note
Pool Factor will decline to reflect reductions in the outstanding principal
balance of the Class A-2 Notes.
"Class A-2 Note Rate" means, with respect to any Monthly
Payment Date and the related Monthly Interest Period, the interest rate per
annum (computed on the basis of the actual number of days in such Monthly
Interest Period over a year of 360 days) equal to the lesser of (i) LIBOR for
the related LIBOR Reset Period plus 0.24% (the "Class A-2 Note LIBOR Rate") and
(ii) the Student Loan Rate for such Monthly Interest Period; provided, that,
notwithstanding the foregoing, the Class A-2 Note Rate for each of the first
three Monthly Interest Periods shall be equal to the Class A-2 Note LIBOR Rate
for such Monthly Interest Period.
"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 April 29, 1996.
9
<PAGE>
"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.
"Collateral Reinvestment Account" means the account designated
as such, established and maintained pursuant to Section 2(c) of the
Administration Agreement.
"Collection Account" means the account designated as such,
established and maintained pursuant to Section 2(c) of the Administration
Agreement.
"Collection Period" means, with respect to the first Quarterly
Payment Date, the period beginning on the Cutoff Date and ending on June 30,
1996, and with respect to each subsequent Quarterly Payment Date, the Collection
Period means the three calendar months immediately following the end of the
previous Collection Period.
"Commission" means the Securities and Exchange
Commission.
"Company" means Secondary Market Company, Inc., a
Delaware corporation.
"Company Note" means the Subordinated Note in a principal
amount of $100,000 which is required to be retained by the Company pursuant to
Section 2.13 of the Indenture and which is nontransferable.
"Consolidation Fee" means any Federal Origination Fee, Monthly
Rebate Fee or similar fee payable to the Department relating to the origination
or ownership of Consolidation Loans.
"Consolidation Loan" means a Student Loan made pursuant to the
Higher Education Act to consolidate the Borrower's obligations under various
federally authorized student loan programs into a single loan, as supplemented
by the addition of any related Add-on Consolidation Loans.
"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 Four Albany Street, New York, New York 10006,
Attention: Corporate Trust and Agency Group, Structured Finance Team (telephone:
(212) 250-6864; facsimile: (212) 250-6439); or at such other address as the
Indenture Trustee may designate from
10
<PAGE>
time to time by notice to the Noteholders and the Seller, or the principal
corporate trust office of any successor Indenture Trustee (the address of which
the successor Indenture Trustee will notify the Noteholders and the Seller) and
(ii) with respect to the Eligible Lender Trustee, the principal corporate trust
office of the Eligible Lender Trustee located at One First National Plaza, Suite
0126, Chicago, Illinois 60670, Attention: Corporate Trust Administration
(telephone: (312) 407-1892; facsimile: (312) 407-1708); or at such other address
as the Eligible Lender Trustee may designate by notice to the 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 Seller).
"Custodian" means Loan Services, in its capacity as custodian
of the Borrower Notes or any permitted successor Custodian.
"Cutoff Date" means April 1, 1996.
"Default" means any occurrence that is, or with notice or the
lapse of time or both would become, an Event of Default.
"Deferral" means the period defined by the Higher Education
Act and the policies of the related Guarantor during which a Borrower (in
Repayment) is entitled to postpone making payments upon the submission of
appropriate documentation.
"Deferral Loan" means a Student Loan during a period of
Deferral.
"Definitive Notes" has the meaning specified in Section
2.10 of the Indenture.
"Delaware Trust" has the meaning specified in Section
10.01 of the Trust Agreement.
"Delaware Trustee" has the meaning set forth in Section
10.01 of the Trust Agreement.
"Deleted Student Loan" has the meaning specified in Section
3.02 of the Loan Sale Agreement.
"Delivery" when used with respect to Trust Account
Property means:
(a) with respect to bankers' acceptances, commercial paper,
negotiable certificates of deposit and other obligations that
constitute "instruments" within the meaning of Section 9-105(1)(i) of
the UCC and are susceptible of physical delivery, transfer thereof to
the Indenture Trustee or its nominee or custodian by physical delivery
to the
11
<PAGE>
Indenture Trustee or its nominee or custodian endorsed to, or registered in the
name of, the Indenture Trustee or its nominee or custodian or endorsed in blank,
and, with respect to a certificated security (as defined in Section 8-102 of the
UCC) transfer thereof (i) by delivery of such certificated security endorsed to,
or registered in the name of, the Indenture Trustee or its nominee or custodian
or endorsed in blank to a financial intermediary (as defined in Section 8-313)
of the UCC) and the making by such financial intermediary of entries on its
books and records identifying such certificated securities as belonging to the
Indenture Trustee or its nominee or custodian and the sending by such financial
intermediary of a confirmation of the purchase of such certificated security by
the Indenture Trustee or its nominee or custodian, or (ii) by delivery thereof
to a "clearing corporation" (as defined in Section 8-102(3) of the UCC) and the
making by such clearing corporation of appropriate entries on its books reducing
the appropriate securities account of the transferor and increasing the
appropriate securities account of a financial intermediary by the amount of such
certificated security, the identification by the clearing corporation of the
certificated securities for the sole and exclusive account of the financial
intermediary, the maintenance of such certificated securities by such clearing
corporation or a "custodian bank" (as defined in Section 8-102(4) of the UCC) or
the nominee of either subject to the clearing corporation's exclusive control,
the sending of a confirmation by the financial intermediary of the purchase by
the Indenture Trustee or its nominee or custodian of such securities and the
making by such financial intermediary of entries on its books and records
identifying such certificated securities as belonging to the Indenture Trustee
or its nominee or custodian (all of the foregoing, "Physical Property"), and, in
any event, any such Physical Property in registered form shall be in the name of
the Indenture Trustee or its nominee or custodian; and such additional or
alternative procedures as may hereafter become appropriate to effect the
complete transfer of ownership of any such Trust Account Property to the
Indenture Trustee or its nominee or custodian, consistent with changes in
applicable law or regulations or the interpretation thereof;
(b) with respect to any securities issued by the U.S.
Treasury, the Federal Home Loan Mortgage Corporation or by the Federal
National Mortgage Association that is a book-entry security held
through the Federal Reserve System pursuant to Federal book-entry
regulations, the following procedures, all in accordance with
applicable law, including applicable Federal regulations and Articles 8
and 9 of the UCC: book-entry registration of such Trust Account
Property to an appropriate book-entry account maintained with a Federal
Reserve Bank by a financial intermediary which is also a "depository"
pursuant to applicable Federal regulations and issuance by such
financial intermediary of a deposit advice or other written
confirmation of such
12
<PAGE>
book-entry registration to the Indenture Trustee or its nominee or custodian of
the purchase by the Indenture Trustee or its nominee or custodian of such
book-entry securities; the making by such financial intermediary of entries in
its books and records identifying such book-entry security held through the
Federal Reserve System pursuant to Federal book-entry regulations as belonging
to the Indenture Trustee or its nominee or custodian and indicating that such
custodian holds such Trust Account Property solely as agent for the Indenture
Trustee or its nominee or custodian; and such additional or alternative
procedures as may hereafter become appropriate to effect complete transfer of
ownership of any such Trust Account Property to the Indenture Trustee or its
nominee or custodian, consistent with changes in applicable law or regulations
or the interpretation thereof; and
(c) with respect to any item of Trust Account Property that is
an uncertificated security under Article 8 of the UCC and that is not
governed by clause (b) above, registration on the books and records of
the issuer thereof in the name of the financial intermediary, the
sending of a confirmation by the financial intermediary of the purchase
by the Indenture Trustee or its nominee or custodian of such
uncertificated security, the making by such financial intermediary of
entries on its books and records identifying such uncertificated
certificates as belonging to the Indenture Trustee or its nominee or
custodian.
"Department" means the United States Department of
Education, an agency of the Federal government.
"Depositor" means the Seller in its capacity as
Depositor under the Trust Agreement.
"Depository Agreement" means, collectively, the Class
A-1 Depository Agreement, the Class A-2 Depository Agreement and
the Subordinate Note Depository Agreement.
"Determination Date" means, with respect to any Monthly
Payment Date, the third Business Day preceding such Monthly Payment Date.
"Early Amortization Event" means any of the following
events:
(i) an Event of Default occurring under the Indenture, a
Servicer Default occurring under the Servicing Agreement or an
Administrator Default occurring under the Administration Agreement;
(ii) an Insolvency Event occurring with respect to the
Seller;
13
<PAGE>
(iii) the Issuer becoming subject to registration as an
investment company under the Investment Company Act of 1940,
as amended;
(iv) as of the end of any Collection Period, the percentage by
principal balance of Financed Student Loans the Borrowers of which use
such loans to attend schools identified by the related Guarantor as
proprietary or vocational exceeds 30% of the Pool Balance;
(v) as of the end of any Collection Period, the percentage by
principal balance of Financed Student Loans which are not in repayment
and are not eligible for Interest Subsidy Payments exceeds 40% of the
Pool Balance; or
(vi) the Excess Spread, with respect to each of any two successive
Quarterly Payment Dates, commencing with the Quarterly Payment Date in
October 1996, is less than 1%.
"Educational Institution" means any institution of higher
education that participates in the guaranteed loan programs authorized by Title
IV of the Higher Education Act and which is deemed eligible by a Guarantor to
participate in such Guarantor's program.
"Eligible Deposit Account" means either (a) a segregated
account with an Eligible Institution or (b) a segregated trust account with the
corporate trust department of a depository institution organized under the laws
of the United States of America or any one of the States (or any domestic branch
of a foreign bank), having corporate trust powers and acting as trustee for
funds deposited in such account, so long as any of the securities of such
depository institution have a credit rating from each Rating Agency in one of
its generic rating categories which signifies investment grade.
"Eligible Institution" means 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), which (i) has (A) either a
long-term senior unsecured debt rating of AAA or a short-term senior unsecured
debt or certificate of deposit rating of A-1+ by Standard & Poor's and (B)(1) a
long-term senior unsecured debt rating of A1 or better and (2) a short-term
senior unsecured debt rating of P-1 by Moody's, or any other long-term,
short-term or certificate of deposit rating acceptable to the Rating Agencies
and (C) unsecured debt rating of AAA (if rated by Fitch) or a short-term senior
unsecured debt or certificate of deposit rating of F-1+ (if rated by Fitch) by
Fitch and (ii) whose deposits are insured by the FDIC. If so qualified, the
Eligible Lender Trustee or the Indenture Trustee may be considered an Eligible
Institution.
14
<PAGE>
"Eligible Investments" means 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 Quarterly Payment Date), 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 each of the Rating Agencies in the highest
investment category granted thereby;
(c) commercial paper having, at the time of the investment or
contractual commitment to invest therein, a rating from each of the
Rating Agencies in the highest investment category granted thereby;
(d) investments in money market funds having a rating from
each of the Rating Agencies in the highest investment category granted
thereby (including funds for which the Indenture Trustee, the Servicer
or the Eligible Lender Trustee or any of their respective Affiliates is
investment manager or advisor);
(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 a depository
15
<PAGE>
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.
Fitch shall be considered to be a "Rating Agency" for the
purpose of assessing the eligibility hereunder of any investment pursuant to
clause (b), (c), (d), (e), and (f) only if Fitch is providing a rating which can
be used, pursuant to the terms of the applicable clause, to assess such
investment.
"Eligible Lender Trustee" means The First National Bank of
Chicago, a national banking association, not in its individual capacity but
solely as Eligible Lender Trustee under the Trust Agreement.
"Event of Default" has the meaning specified in Section
5.01 of the Indenture.
"Excess Spread" means, with respect to any Quarterly Payment
Date, the percentage equivalent of a fraction the numerator of which is the
product of (a) four and (b) the difference between (x) the amount of Available
Funds for such Quarterly Payment Date allocable to interest and (y) the sum of
(i) the Servicing Fee for such Quarterly Payment Date and all prior unpaid
Servicing Fees, (ii) the Administration Fee for such Quarterly Payment Date and
all prior unpaid Administration Fees, and (iii) the Noteholders' Interest
Distribution Amount for such Quarterly Payment Date, and the denominator of
which is the average of the amount of the Pool Balance as of the first and the
last day of the related Collection Period.
"Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Exchanged Student Loan" means a Financed Student Loan that
(i) was originated under the same loan program and is guaranteed by a Guarantor
and entitles the holder thereof to receive interest based on the same interest
rate index as the Serial Loan for which it is to be exchanged (the "Exchanged
Serial Loan") and (ii) will not, at any level of such interest rate index, have
an interest rate that is greater than that of the Exchanged Serial Loan.
"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.
16
<PAGE>
"Expected Interest Collections" means, with respect to any
Quarterly Interest Period, Class A-1 Calculation Period or Monthly Interest
Period, the sum of (i) the amount of interest accrued, net of accrued Monthly
Rebate Fees and other amounts required by the Higher Education Act to be paid to
the Department, with respect to the Financed Student Loans for the related
Student Loan Rate Accrual Period (whether or not such interest is actually
paid), (ii) all Interest Subsidy Payments and Special Allowance Payments
estimated to have accrued for such Student Loan Rate Accrual Period whether or
not actually received (taking into account any expected deduction therefrom of
Federal Origination Fees) and (iii) Investment Earnings for such Student Loan
Rate Accrual Period.
"Expenses" means any and all liabilities, obligations, losses,
damages, taxes, claims, actions and suits, and any and all reasonable costs,
expenses and disbursements (including reasonable legal fees and expenses) of any
kind and nature whatsoever which may at any time be imposed on, incurred by, or
asserted against the Eligible Lender Trustee or any of its officers, directors
or agents in any way relating to or arising out of the Trust Agreement, the
other Basic Documents, the Trust Estate, the administration of the Trust Estate
or the action or inaction of the Eligible Lender Trustee under the Trust
Agreement or the other Basic Documents.
"FDIC" means the Federal Deposit Insurance Corporation.
"Federal Guarantor" means a state or private non-profit
guarantor that guarantees the payment of principal of and interest on any of the
Financed Student Loans, which agency is reinsured by the Department under the
Higher Education Act for between 80% and 100% of the amount of default claims
paid by such Federal Guarantor for a given federal fiscal year for loans
disbursed prior to October 1, 1993, for 78% to 98% of default claims paid for
loans disbursed on or after October 1, 1993 and for 100% of death, disability,
bankruptcy, closed school and false certification claims paid.
"Federal Origination Fee" means, with respect to each
Consolidation Loan that is originated by the Eligible Lender Trustee on behalf
of the Issuer and each Add-on Consolidation Loan that is added to the principal
balance of a Consolidation Loan, the origination fee payable to the Department
equal to 0.5% of the initial principal balance of such Consolidation Loan or
Add-on Consolidation Loan.
"Financed Student Loans" means those Student Loans that, as of
any date of determination, have been conveyed to the Issuer, consisting of the
Initial Financed Student Loans as of the Closing Date and, thereafter, any
Serial Loans or New Loans conveyed to the Issuer from the Seller, any
Consolidation Loans
17
<PAGE>
originated by the Trust as provided in Section 6.07 of the Trust Agreement, any
Consolidation Loans the principal balance of which is increased by the principal
balance of any related Add-on Consolidation Loan as provided in Section 6.07 of
the Trust Agreement and any Qualified Substitution Student Loans conveyed to the
Issuer as provided in Section 3.02 of the Loan Sale Agreement.
"Fitch" means Fitch Investors Service, L.P. or any
successor thereto.
"Forbearance Loan" means a Student Loan during a period of
forbearance of loan collections pursuant to the Higher Education Act.
"Grace" means the initial period following reduction by the
student Borrower to less than the minimum course load required by the Higher
Education Act, during which the student Borrower is not required to make
payments on the principal amount of the Borrower Note(s).
"Grace Loan" means a Student Loan during a period of
Grace.
"Grant" means mortgage, pledge, bargain, sell, warrant,
alienate, remise, release, convey, assign, transfer, create, and grant a lien
upon and a security interest in and right of set-off against, deposit, set over
and confirm pursuant to the Indenture. A Grant of the Collateral or of any other
agreement or instrument shall include all rights, powers and options (but none
of the obligations) of the Granting party thereunder, including the immediate
and continuing right to claim for, collect, receive and give receipt for
principal and interest payments in respect of the Collateral and all other
moneys payable thereunder, to give and receive notices and other communications,
to make waivers or other agreements, to exercise all rights and options, to
bring Proceedings in the name of the Granting party or otherwise and generally
to do and receive anything that the Granting party is or may be entitled to do
or receive thereunder or with respect thereto.
"Guarantee Agreement" means each agreement to guarantee
Student Loans entered into by the Eligible Lender Trustee on behalf of the Trust
with a Guarantor.
"Guarantee Payment" means any payment made by a Guarantor
pursuant to a Guarantee Agreement in respect of a Student Loan.
"Guarantor" means the Initial Guarantors and any
Additional Guarantors.
18
<PAGE>
"Higher Education Act" means the Higher Education Act of 1965,
as amended, together with any rules, regulations and interpretations thereunder.
"Incentive Financed Student Loan" means a Financed Student
Loan which is subject to an Incentive Program other than the Administrator's
Choice Repay Program.
"Incentive Interest Deposit" means, with respect to each
Monthly Collection Period and each Incentive Financed Student Loan, the
difference, if any, between the amount of interest or other amounts which would
have been payable with respect to such Incentive Financed Student Loan during
such Monthly Collection Period had no Incentive Program been in effect with
respect to such Incentive Financed Student Loan and the amount of interest and
other amounts which were payable with respect to such Incentive Financed Student
Loan during such Monthly Collection Period after giving effect to such Incentive
Program.
"Incentive Program" means any program terminable at will by
the Administrator pursuant to which the Administrator may choose to reduce the
interest rate or offer any other benefit on a Student Loan, and shall initially
include the Seller's Choice Rates(TM) and Choice Repay(TM) Programs, as such
program may be modified from time to time.
"Indenture" means the Indenture dated as of April 1, 1996,
between the Issuer and the Indenture Trustee.
"Indenture Trust Estate" means all money, instruments, rights
and other property that are subject or intended to be subject to the lien and
security interest of the Indenture for the benefit of the Noteholders (including
all property and interests Granted to the Indenture Trustee), including all
proceeds thereof.
"Indenture Trustee" means Bankers Trust Company, a New York
banking corporation, not in its individual capacity but solely as Indenture
Trustee under the Indenture.
"Independent" means, when used with respect to any specified
Person, that the Person (a) is in fact independent of the Issuer, any other
obligor upon the Notes, the Seller and any Affiliate of any of the foregoing
Persons, (b) does not have any direct financial interest or any material
indirect financial interest in the Issuer, any such other obligor, the Seller or
any Affiliate of any of the foregoing Persons and (c) is not connected with the
Issuer, any such other obligor, the Seller or any Affiliate of any of the
foregoing Persons as an officer, employee, promoter, underwriter, trustee,
partner, director or person performing similar functions.
19
<PAGE>
"Independent Certificate" means a certificate or opinion to be
delivered to the Indenture Trustee under the circumstances described in, and
otherwise complying with, the applicable requirements of Section 11.01 of the
Indenture, made by an Independent appraiser or other expert appointed by an
Issuer Order and approved by the Indenture Trustee in the exercise of reasonable
care, and such opinion or certificate shall state that the signer has read the
definition of "Independent" in the Indenture and that the signer is Independent
within the meaning thereof.
"Initial Financed Student Loans" means those Financed
Student Loans conveyed to the Issuer on the Closing Date.
"Initial Guarantors" means United Student Aid Funds, Inc., a
Delaware non-profit corporation, and Iowa College Student Aid Commission, an
Iowa state agency and their respective successors.
"Initial Pool Balance" means $271,730,159.84.
"In-School Loan" means a Student Loan during the period,
excluding periods of in-school Deferral, during which a student Borrower is
enrolled at an Educational Institution for at least the minimum course load
required to maintain such student Borrower's eligibility to borrow under the
education loan programs administered by the Guarantor.
"Insolvency Event" means, with respect to a specified Person,
(a) the filing of a decree or order for relief by a court having jurisdiction in
the premises in respect of such Person or any substantial part of its property
in an involuntary case under any applicable Federal or state bankruptcy,
insolvency or other similar law now or hereafter in effect, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official for such Person or for any substantial part of its property, or
ordering the winding-up or liquidation of such Person's affairs, and such decree
or order shall remain unstayed and in effect for a period of sixty consecutive
days; or (b) the commencement by such Person of a voluntary case under any
applicable Federal or state bankruptcy, insolvency or other similar law now or
hereafter in effect, or the consent by such Person to the entry of an order for
relief in an involuntary case 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.
20
<PAGE>
"Interest Subsidy Payments" means payments, designated as
such, consisting of interest subsidies by the Department in respect of the
Financed Student Loans to the Eligible Lender Trustee on behalf of the Trust in
accordance with the Higher Education Act.
"Investment Earnings" means, with respect to any Monthly
Payment 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 Monthly Payment Date pursuant to Section 2(c)(v) of
the Administration Agreement.
"Issuer" means SMS Student Loan Trust 1996-A until a successor
replaces it and, thereafter, means the successor and, for purposes of any
provision contained in the Indenture and required by the TIA, each other obligor
on the Notes.
"Issuer Order" and "Issuer Request" means a written order or
request signed in the name of the Issuer by any one of its Authorized Officers
and delivered to the Indenture Trustee.
"LIBOR" means, with respect to any LIBOR Reset Period, the
London interbank offered rate for deposits in U.S. dollars having a maturity of
one month commencing on the related LIBOR Determination Date (the "Index
Maturity") which appears on Telerate Page 3750 as of 11:00 a.m., London time, on
such LIBOR Determination Date. If such rate does not appear on Telerate Page
3750, the rate for that day will be determined on the basis of the rates at
which deposits in U.S. dollars, having the Index Maturity and in a principal
amount of not less than U.S. $1,000,000, are offered at approximately 11:00
a.m., London time, on such LIBOR Determination Date to prime banks in the London
interbank market by the Reference Banks. The Administrator will request the
principal London office of each of such Reference Banks to provide a quotation
of its rate. If at least two such quotations are provided, the rate for that day
will be the arithmetic mean of the quotations. If fewer than two quotations are
provided, the rate for that day will be the arithmetic mean of the rates quoted
by major banks in New York City, selected by the Administrator, at approximately
11:00 a.m., New York City time, on such LIBOR Determination Date for loans in
U.S. dollars to leading European banks having the Index Maturity and in a
principal amount equal to an amount of not less than U.S. $1,000,000; provided
that if the banks selected as aforesaid are not quoting as mentioned in this
sentence, LIBOR in effect for the applicable LIBOR Reset Period will be LIBOR in
effect for the previous LIBOR Reset Period.
"LIBOR Based Notes" means, collectively, the Class A-2 Notes
and the Subordinate Notes.
21
<PAGE>
"LIBOR Determination Date" means, with respect to any Monthly
Interest Period, the day that is the second business day prior to the
commencement of such Monthly Interest Period (or, in the case of the initial
Interest Period, April 25, 1996). For purposes of this definition, a business
day is any day in which banks in London and New York City are open for the
transaction of international business.
"LIBOR Reset Period" means the one-month period commencing on
the twenty-seventh day (or, if any such date is not a Business Day, on the next
succeeding business day) of each month and ending on the day immediately
preceding the following LIBOR Reset Period; provided, however, that the initial
LIBOR Reset Period will commence on the Closing Date.
"Lien" means a security interest, lien, charge, pledge, equity
or encumbrance of any kind, other than tax liens and any other liens, if any,
which attach to the respective Student Loan by operation of law as a result of
any act or omission by the related Obligor.
"Liquidated Student Loan" means any defaulted Financed Student
Loan liquidated by the Servicer or which the Servicer has, after using all
reasonable efforts to realize upon the such Student Loan, determined to charge
off.
"Liquidation Proceeds" means, with respect to any Liquidated
Student Loan, the moneys collected in respect thereof from whatever source,
other than Recoveries, net of the sum of any amounts expended by the Servicer in
connection with such liquidation and any amounts required by law to be remitted
to the Borrower on such Liquidated Student Loan.
"Loan Purchase Amount" means with respect to a New Loan or a
Serial Loan to be purchased from the Seller by the Issuer, an amount equal to
the sum of (i) the Purchase Collateral Balance and (ii) the Purchase Premium
Amount; provided, however, that after the Revolving Period, the Purchase Premium
Amount payable in respect of the purchase of a Serial Loan will be payable on
the next succeeding Quarterly Payment Date from Reserve Account Excess, if any,
for such Quarterly Payment Date and; provided, further, that if the Parity Date
occurs before the end of the Revolving Period, then, from the Parity Date to the
end of the Revolving Period, the Purchase Premium Amount payable in respect of
the purchase of a Serial Loan or a New Loan will be payable on the next
succeeding Quarterly Payment Date from Reserve Account Excess, if any, for such
Quarterly Payment Date that is available after all distributions from such
excess having a higher priority than payment of such Purchase Premium Amounts
have been made.
22
<PAGE>
"Loan Sale Agreement" means the Loan Sale Agreement dated as
of April 1, 1996, among the Issuer, the Seller, and the Eligible Lender Trustee.
"Loan Services" means USA Group Loan Services, Inc., a
Delaware non-profit corporation.
"Lock-in Period" means the period of days preceding any
Monthly Payment during which the T-Bill Rate in effect on the first day of such
period shall remain in effect until the end of, in the case of, the calculation
of the Class A-1 T-Bill Note Rate with respect to a Monthly Payment Date that is
also a Quarterly Payment Date, the related Quarterly Interest Period, and in the
case of the calculation of the Class A-1 T-Bill Calculation Rate with respect to
a Monthly Payment Date that is not a Quarterly Payment Date, the related Monthly
Interest Period.
"London Banking Day" means any Business Day on which dealings
in deposits in United States dollars are transacted in the London interbank
market.
"Minimum Purchase Price" means as to any Quarterly Payment
Date, an amount equal to the greater of (i) the Purchase Amounts of the Financed
Student Loans as of the end of the Collection Period immediately preceding such
Quarterly Payment Date or (ii) an amount that would be sufficient to (A) reduce
the outstanding principal amount of the Notes then outstanding on such Quarterly
Payment Date to zero and (B) pay to the Noteholders the Noteholders' Interest
Distribution Amount payable on such Quarterly Payment Date.
"Monthly Available Funds" means, with respect to each Monthly
Payment Date that is not a Quarterly Payment Date, the sum of the following
amounts with respect to the related Monthly Collection Period: (i) all
collections received by the Servicer on the Financed Student Loans (including
any Guarantee Payments received with respect to the Financed Student Loans);
(ii) any Interest Subsidy Payments and Special Allowance Payments received by
the Eligible Lender Trustee during such Monthly Collection Period with respect
to the Financed Student Loans; (iii) all Liquidation Proceeds from any Financed
Student Loans which became Liquidated Student Loans during such Monthly
Collection Period in accordance with the Servicer's customary servicing
procedures, and all recoveries in respect of Liquidated Student Loans which were
written off in prior Monthly Collection Periods; (iv) that portion of the
amounts released from the Collateral Reinvestment Account with respect to
Additional Fundings relating to those interest costs on the Financed Student
Loans which are or will be capitalized and any amounts transferred on a
Determination Date from the Collateral Reinvestment Account to the Collection
Account pursuant to Section 2(f)(i)(E) of the Administration Agreement; (v) the
aggregate Purchase Amounts received for those
23
<PAGE>
Financed Student Loans repurchased by the Seller or purchased by the Servicer
under an obligation which arose during the related Monthly Collection Period;
(vi) Investment Earnings for such Monthly Payment Date and (vii) with respect to
each Monthly Payment Date other than a Quarterly Payment Date and other than an
Monthly Payment Date immediately succeeding a Quarterly Payment Date, Monthly
Available Funds remaining from the Monthly Collection Period relating to the
preceding Monthly Payment Date, after giving effect to the application of such
Monthly Available Funds on such preceding Monthly Payment Date; provided,
however, that if with respect to any Monthly Payment Date there would not be
sufficient funds, after application of Monthly Available Funds (as defined
above) and amounts available from the Reserve Account, to pay any of the items
specified in Section 2(d)(iv) of the Administration Agreement, then Monthly
Available Funds for such Monthly Payment Date will include, in addition to the
Monthly Available Funds (as defined above), amounts on deposit in the Collection
Account on the Determination Date relating to such Monthly Payment Date which
would have constituted Monthly Available Funds for the Monthly Payment Date
succeeding such Monthly Payment Date up to the amount necessary to pay such
items, and the Monthly Available Funds for such succeeding Monthly Payment Date
will be adjusted accordingly; and provided, further, that Monthly Available
Funds will exclude (A) all payments and proceeds (including Liquidation
Proceeds) of any Financed Student Loans the Purchase Amount of which has been
included in Monthly Available Funds for a prior Monthly Collection Period, (B)
except as expressly included in clause (iv) above, amounts released from the
Collateral Reinvestment Account, (C) any Monthly Rebate Fees paid during the
related Monthly Collection Period by or on behalf of the Trust and (D) any
collections in respect of principal on the Financed Student Loans applied during
the related Monthly Collection Period by the Eligible Lender Trustee on behalf
of the Trust prior to the end of the Revolving Period to make deposits to the
Collateral Reinvestment Account pursuant to Section 2(d)(i) of the
Administration Agreement and after the Revolving Period, any expenditure of the
Net Principal Cash Flow Amount used to fund the addition of any Add-on
Consolidation Loans, to purchase Serial Loans or to fund the acquisition of
Exchanged Serial Loans during such Monthly Collection Period.
"Monthly Collection Period" means, with respect to any Monthly
Payment Date that is not a Quarterly Payment Date, the calendar month
immediately preceding the month of such Monthly Payment Date.
"Monthly Interest Period" means, with respect to any Monthly
Payment Date, the period from and including the Monthly Payment Date immediately
preceding such Monthly Payment Date (or in the case of the first Monthly Payment
Date, the Closing Date) to but excluding such Monthly Payment Date.
24
<PAGE>
"Monthly Payment Date" means the twenty-seventh day of each
month (or, if any such date is not a Business Day, on the next succeeding
Business Day) commencing May 28, 1996.
"Monthly Rebate Fee" means, for each calendar month and with
respect to each Consolidation Loan that is originated by the Eligible Lender
Trustee on behalf of the Issuer, the fee payable to the Department equal to the
product of (x) one-twelfth, (y) 1.05% and (z) the outstanding principal balance
of such Consolidation Loan (including any increases in the principal balance of
a Consolidation Loan due to the addition of the principal balance of a related
Add-on Consolidation Loan) plus accrued interest on such Consolidation Loan as
of the last day of such month.
"Moody's" means Moody's Investors Service, Inc.
"NBD" means NBD Bank, N.A., or any successor thereto and shall
also be deemed to include any eligible lender under the Higher Education Act
that agrees to be bound by the provisions of the Loan Sale Agreement pursuant to
Section 4.02 thereof.
"Net Principal Cash Flow Amount" means, as of any date, the
Principal Cash Flow Amount (calculated for the Collection Period ending in the
preceding calendar month or, if no Collection Period ended in the preceding
calendar month, calculated for each preceding calendar month during the current
Collection Period) minus, after the Revolving Period, the Capitalized Interest
Amount for such Collection Period or for each such preceding calendar month, as
the case may be.
"New Loan" means a Financed Student Loan which (i) is made by
an eligible lender under the Higher Education Act to a Borrower who is not a
Borrower under any Initial Financed Student Loan, (ii) is made under a loan
program which existed as of the Closing Date, and (iii) is guaranteed by a
Guarantor.
"91-Day Treasury Bills" means direct obligations of the United
States with a maturity of thirteen weeks.
"Noteholder" means the Person in whose name a Note is
registered in the Note Register.
"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.
25
<PAGE>
"Note Interest Rate" means any one of the Class A-1
Note Rate, the Class A-2 Note Rate or the Subordinate Note Rate.
"Noteholders' Distribution Amount" means, with respect
to any Quarterly Payment Date, the sum of the Senior Noteholders'
Distribution Amount and the Subordinate Noteholders' Distribution
Amount for such Quarterly Payment Date.
"Noteholders' Interest Rate Index Carryover" means,
collectively the with respect to each Quarterly Payment Date, the
Senior Noteholders' Interest Carryover and the Subordinate
Noteholders' Interest LIBOR Carryover.
"Noteholders' Interest Distribution Amount" means, with
respect to any Quarterly Payment Date, the sum of the Class A-1 Noteholders'
Interest Distribution Amount, the Class A-2 Noteholders' Interest Distribution
Amount and the Subordinate Noteholders' Interest Distribution Amount.
"Obligor" on a Student Loan means the borrower or co-borrowers
of such Student Loan and any other Person who owes payments in respect of such
Student Loan, including the Guarantor thereof and, with respect to any Interest
Subsidy Payment or Special Allowance Payment, if any, thereon, the Department.
"Officers' Certificate" means (i) in the case of the Issuer, a
certificate signed by any two Authorized Officers of the Issuer, under the
circumstances described in, and otherwise complying with, the applicable
requirements of Section 11.01 of the Indenture, and delivered to the Indenture
Trustee and (ii) in the case of the Seller, the Servicer, or the Administrator,
a certificate signed by any two Authorized Officers of the Seller, the Servicer,
or the Administrator, as appropriate.
"Opinion of Counsel" means (i) with respect to the Issuer, one
or more written opinions of counsel who may, except as otherwise expressly
provided in the Indenture, be employees of or counsel to the Issuer and who
shall be satisfactory to the Indenture Trustee, and which opinion or opinions
shall be addressed to the Indenture Trustee as Indenture Trustee, shall comply
with any applicable requirements of Section 11.01 of the Indenture, and shall be
in form and substance satisfactory to the Indenture Trustee and (ii) with
respect to the Seller, the Administrator, the Servicer or a Federal Guarantor,
one or more written opinions of counsel who may be an employee of or counsel to
the Seller, the Administrator, the Servicer or such Federal Guarantor, which
counsel shall be acceptable to the Indenture Trustee, the Eligible Lender
Trustee or the Rating Agencies, as applicable.
26
<PAGE>
"Outstanding" means, as of the date of determination, all
Notes theretofore authenticated and delivered under this Indenture except:
(i) Notes theretofore cancelled by the Note
Registrar or delivered to the Note Registrar for
cancellation;
(ii) Notes or portions thereof the payment for which
money in the necessary amount has been theretofore deposited with the
Indenture Trustee or any Paying Agent in trust for the Noteholders
thereof (provided, however, that 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.
"Parity Date" means the first Quarterly Payment Date on which
the aggregate principal balance of the Notes, after giving effect to all
distributions on such date, is no longer in excess of the Pool Balance as of the
last day of the related Collection Period.
"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
27
<PAGE>
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 as the definition of "Delivery" above.
"PLUS Loan" means a Student Loan designated as such that is
made under the Parent Loans to Undergraduate Students Program pursuant to the
Higher Education Act.
"Pool Balance" means, as of the close of business on the last
day of any Collection Period, the aggregate principal balance of the Financed
Student Loans as of such day (including accrued interest thereon for the
immediately preceding Collection Period to the extent such interest will be
capitalized upon commencement of repayment, excluding any Purchased Student
Loans and Liquidated Student Loans).
"Predecessor Note" means, with respect to any particular Note,
every previous Note evidencing all or a portion of the same debt as that
evidenced by such particular Note; and, for the purpose of this definition, any
Note authenticated and delivered under Section 2.05 of the Indenture and in lieu
of a mutilated, lost, destroyed or stolen Note shall be deemed to evidence the
same debt is the mutilated, lost, destroyed or stolen Note.
"Principal Cash Flow Amount" means, with respect to any
Quarterly Payment Date, the sum of the following amounts with respect to the
related Collection Period, or with respect to any other date of determination,
the sum of the following amounts with respect to the period specified: (i) that
portion of all collections received by the Servicer on the Financed Student
Loans that is allocable to principal (including the portion of any Guarantee
Payments received that is allocable to principal of the Financed Student Loans);
(ii) all Liquidation Proceeds attributable to the principal amount of Financed
Student Loans which became Liquidated Student Loans during such Collection
Period, or such other specified period, in accordance with the Servicer's
customary servicing procedures, together with all Realized Losses on such
Financed Student Loans; (iii) to the extent attributable to principal, the
Purchase Amount received with respect to each Financed Student Loan repurchased
by the Seller or purchased by the Servicer as a result of a breach of a
28
<PAGE>
representation, warranty or covenant which arose during the related Collection
Period or such other specified period; and (iv) the Principal Distribution
Adjustment provided, however, that the Principal Distribution Amount will
exclude all payments and proceeds (including Liquidation Proceeds) of any
Financed Student Loans the Purchase Amount of which has been included in
Available Funds for a prior Collection Period and during the Revolving Period
will exclude the amount of collections in respect of principal on the Financed
Student Loans during such Collection Period that were deposited in the
Collateral Reinvestment Account during such Collection Period.
"Principal Distribution Adjustment" means, with respect to any
Quarterly Payment Date, the amount of Available Funds on such Quarterly Payment
Date to be used to make additional principal distributions to Noteholders to
account for (i) the amount of any insignificant balance remaining outstanding as
of such Quarterly Payment Date on a Financed Student Loan after receipt of a
final payment from a Borrower or a Guarantor, when such insignificant balances
are waived in the ordinary course of business by the Servicer at the direction
of the Administrator in accordance with the Servicing Agreement or (ii) the
amount of principal collections erroneously treated as interest collections
including, without limitation, by reason of the failure by a borrower to
capitalized interest that had been expected to be capitalized; provided,
however, that the Principal Distribution Adjustment for any Quarterly Payment
Date shall not exceed the lesser of (x) $100,000 and (y) the Reserve Account
Excess after giving effect to all distributions to be made on such Quarterly
Payment Date other than distributions to the Company out of such excess.
"Principal Distribution Amount" means, with respect to any
Quarterly Payment Date occurring after the Revolving Period, the Net Principal
Cash Flow Amount for such Quarterly Payment Date minus the sum of (i) any funds
remitted to the Seller during the preceding Collection Period for the Purchase
Collateral Balance of Serial Loans and (ii) any funds which are applied during
the preceding Collection Period to fund the addition of the principal balance of
any Add-on Consolidation Loan to the principal balance of a related
Consolidation Loan.
"Proceeding" means any suit in equity, action at law or
other judicial or administrative proceeding.
"Purchase Amount" means, with respect to a Financed Student
Loan other than a Serial Loan to be purchased from the Issuer, the amount
required, as of the close of business on the last day of an Interest Period to
prepay in full the respective Student Loan under the terms thereof including all
accrued borrower interest thereon; provided, however, that the Purchase Amount
for a Financed Student Loan, which is being repurchased by
29
<PAGE>
the Seller as a result of a breach of the representation and warranty provided
for in the last sentence of the first paragraph of Exhibit C to the Loan Sale
Agreement, will be calculated without regard to any amount which the Seller has
advanced with respect to such loan and which was not reflected by the principal
balance of such loan as of the Cutoff Date (or the applicable Subsequent Cutoff
Date, as the case may be) after the Loan has been sold into the Trust.
"Purchase Collateral Balance" means with respect to a New Loan
or a Serial Loan to be purchased by the Issuer, an amount equal, as of the
related Subsequent Cut-off Date, to the principal balance of such loan plus
accrued borrower interest thereon if and to the extent that such interest is not
then payable and will, pursuant to the terms of such loan, be capitalized and
added to the principal balance of such loan.
"Purchase Premium Amount" means with respect to a New Loan or
a Serial Loan to be purchased by the Issuer, an additional amount to the
Purchase Collateral Balance not to exceed 2.5% of the principal balance owed by
the applicable borrower thereon.
"Purchased Student Loan" means a Financed Student Loan
purchased as of the close of business on the last day of a Monthly Collection
Period by the Servicer pursuant to Section 3.05 of the Servicing Agreement or
repurchased by the Seller pursuant to Section 3.02 of the Loan Sale Agreement.
"Qualified Substitute Student Loan" means a Student Loan that
(i) was originated under the same loan program and is guaranteed by a Guarantor
and entitles the holder thereof to receive interest based on the same interest
rate index as the related Deleted Student Loan for which it is to be
substituted, and (ii) will not, at any level of such interest rate index, have
an interest rate that is less than that of such Deleted Student Loan.
"Quarterly Payment Date" means the Monthly Payment Date
occurring in each January, April, July and October, commencing with the Monthly
Payment Date occurring in July 1996.
"Quarterly Interest Period" means, with respect to a Quarterly
Payment Date, the period from and including the Quarterly Payment Date
immediately preceding such Quarterly Payment Date (or in the case of the first
Quarterly Payment Date, the Closing Date) to but excluding the such Quarterly
Payment
Date.
"Rating Agency" means Moody's and Fitch. If no such
organization or successor is any longer in existence, "Rating
Agency" shall be a nationally recognized statistical rating
30
<PAGE>
organization or other comparable Person designated by the Seller, notice of
which designation shall be given to the Indenture Trustee, the Eligible Lender
Trustee and the Servicer.
"Rating Agency Condition" means, with respect to any action,
that each Rating Agency shall have been given 10 days' prior notice thereof and
that each of the Rating Agencies shall have notified the Seller, the Servicer,
the Eligible Lender Trustee and the Indenture Trustee in writing that such
action will not result in and of itself in a reduction or withdrawal of the then
current rating of the Senior Notes or the Subordinate Notes.
"Realized Losses" means the excess of the aggregate principal
balance of any Liquidated Student Loan plus accrued but unpaid interest thereon
over Liquidation Proceeds to the extent allocable to principal.
"Record Date" means, with respect to an Monthly Payment Date,
a Quarterly Payment Date or a Redemption Date, the close of business on the
twenty-sixth day of the calendar month in which such Monthly Payment Date,
Quarterly Payment Date or Redemption Date occurs (whether or not such date is a
Business Day).
"Recoveries" means, with respect to any Liquidated Student
Loan, moneys collected in respect thereof, from whatever source, during any
Monthly Collection Period following the Monthly Collection Period in which such
Financed Student Loan became a Liquidated Student Loan, net of the sum of any
amounts expended by the Servicer for the account of any Obligor and any amounts
required by law to be remitted to the Obligor.
"Redemption Date" means in the case of a payment to
Noteholders pursuant to Section 10.01 of the Indenture, the Quarterly Payment
Date specified by the Administrator or the Issuer pursuant to Section 10.01 of
the Indenture.
"Redemption Price" means in the case of a payment made to
Noteholders pursuant to Section 10.01 of the Indenture, the amount to be so paid
pursuant to such Section 10.01.
"Repayment" means the period of time during which a Borrower
is required to make installment payments to repay the aggregate principal amount
plus accrued interest of all amounts borrowed by virtue of the Borrower Note(s)
executed by such Borrower.
"Repayment Loan" means a Student Loan during a period
of Repayment.
31
<PAGE>
"Reserve Account" means the account designated as such,
established and maintained pursuant to Section 2(c) of the Administration
Agreement.
"Reserve Account Excess" has the meaning specified in
Section 2(e)(ii) of the Administration Agreement.
"Reserve Account Initial Deposit" means $4,254,000.
"Responsible Officer" means, with respect to the Indenture
Trustee, any officer within the Corporate Trust Office of the Indenture Trustee,
including any vice president, assistant vice president, assistant treasurer,
assistant secretary, or any other officer of the Indenture Trustee customarily
performing functions similar to those performed by any of the above designated
officers, with direct responsibility for the administration of the Indenture and
the other Basic Documents on behalf of the Indenture Trustee and also, with
respect to a particular matter, any other officer to whom such matter is
referred because of such officer's knowledge of and familiarity with the
particular subject.
"Revolving Period" means the period from the Closing Date
until the first to occur of (i) an Early Amortization Event or (ii) the last day
of the Collection Period preceding the April 1999 Quarterly Payment Date.
"Schedule of Student Loans" means the listing of the Financed
Student Loans set forth in Schedule A to the Loan Sale Agreement and to the
Indenture (which Schedule may be in the form of microfiche) as the same may be
amended from time to time.
"Secretary" means the Secretary of the Department, or any
predecessor or successor to the functions thereof under the Higher Education
Act.
"Seller" means SMS, in its capacity as seller of the
Financed Student Loans.
"Senior Notes" means, collectively, the Class A-1 Notes and
the Class A-2 Notes.
"Senior Noteholders' Interest Carryover" means, collectively
the with respect to each Quarterly Payment Date, the Class A-1 Noteholders'
Interest T-Bill Carryover and the Class A- 2 Noteholders' Interest LIBOR
Carryover for such Quarterly Payment Date.
"Senior Noteholders' Distribution Amount" means, with respect
to any Quarterly Payment Date, the sum of the Class A-1 Noteholders' Interest
Distribution Amount, the amount distributed to the Class A-1 Noteholders out of
the Class A-1 Interest
32
<PAGE>
Account, the Class A-2 Noteholders' Interest Distribution Amount
and the Senior Noteholders' Principal Distribution Amount for
such Quarterly Payment Date.
"Senior Noteholders' Principal Carryover Shortfall" means, as
of the close of any Quarterly Payment Date, the excess of (i) the Senior
Noteholders' Principal Distribution Amount on such Quarterly Payment Date over
(ii) the amount of principal actually distributed to the Senior Noteholders on
such Quarterly
Payment Date.
"Senior Noteholders' Principal Distribution Amount" means,
with respect to any Quarterly Payment Date (if the Revolving Period has
terminated on or prior to the end of the related Collection Period with respect
to such Quarterly Payment Date), the Principal Distribution Amount for such
Quarterly Payment Date plus the Senior Noteholders' Principal Carryover
Shortfall as of the close of the preceding Quarterly Payment Date; provided,
however, that the Senior Noteholders' Principal Distribution Amount will not
exceed the outstanding aggregate principal balance of the Senior Notes. In
addition, (i) on the Class A-1 Note Final Maturity Date, the principal required
to be distributed to Class A-1 Noteholders will include the amount required to
reduce the outstanding principal balance of the Class A-1 Notes to zero and (ii)
on the Class A-2 Note Final Maturity Date, the principal required to be
distributed to the Class A-2 Noteholders will include the amount required to
reduce the outstanding principal balance of the Class A-2 Notes to zero.
"Serial Loan" means a Financed Student Loan which (i) is made
by an eligible lender under the Higher Education Act to a Borrower who is also a
Borrower under at least one outstanding Initial Financed Student Loan and is
acquired by the Seller, (ii) is made under the same federal loan program as such
Initial Financed Student Loan and (iii) has the same Guarantor as such Initial
Financed Student Loan.
"Servicer" means Loan Services, in its capacity as servicer of
the Financed Student Loans or any permitted Successor Servicer.
"Servicer Default" means an event specified in Section
6.01 of the Servicing Agreement.
"Servicer Liability Limit" has the meaning specified in
Section 3.05(a) of the Servicing Agreement.
"Servicer Liability Period" has the meaning specified
in Section 3.05(a) of the Servicing Agreement.
33
<PAGE>
"Servicing Agreement" means the Servicing Agreement dated as
of April 1, 1996, among the Issuer, the Servicer, the Seller and the Eligible
Lender Trustee.
"Servicing Fee" has the meaning specified in Section
3.06 of the Servicing Agreement.
"Servicing Fee Shortfall" has the meaning specified in
Section 3.06 of the Servicing Agreement.
"SLS Loan" means a Student Loan designated as such that is
made under the Supplemental Loans for Students Program pursuant to the Higher
Education Act.
"SMS" means USA Group Secondary Market Services, Inc.,
a Delaware corporation.
"Special Allowance Payments" means payments, designated as
such, consisting of effective interest subsidies by the Department in respect of
the Financed Student Loans to the Eligible Lender Trustee on behalf of the Trust
in accordance with the Higher Education Act.
"Specified Reserve Account Balance" with respect to any
Quarterly Payment Date means the greater of: (a) 1.5% of the principal balance
of the Notes after taking into account the effect of distributions on such
Quarterly Payment Date and (b) $2,836,000; provided, however, that in no event
shall the Specified Reserve Account Balance exceed the sum of the outstanding
principal balance of the Notes.
"Stafford Loan" means a Student Loan designated as such
that is made under the Robert T. Stafford Student Loan Program in
accordance with the Higher Education Act.
"Standard & Poor's" means Standard & Poor's
Corporation.
"State" means any one of the 50 States of the United States of
America, the trust territories of the United States, or the District of
Columbia.
"Student Loan" means an agreement to repay a disbursement of
money to or on behalf of an eligible student, evidenced by a Borrower Note and
guaranteed in accordance with the policies and procedures of the Guarantor.
"Student Loan Files" means the documents relating to the
Financed Student Loans specified in Section 2.01 of the Servicing Agreement.
34
<PAGE>
"Student Loan Rate" means, with respect to any Quarterly
Interest Period, Class A-1 Calculation Period or Monthly Interest Period, the
interest rate equal to the product of (a) the quotient obtained by dividing (i)
360 if such calculation is with respect to a Class A-2 Note or Subordinate Note
and a Monthly Interest Period, or 365 (366 in the case of a leap year) if such
calculation is with respect to a Class A-1 Note and a Quarterly Interest Period
or Class A-1 Calculation Period by (ii) the actual number of days elapsed in
such Quarterly Interest Period, Class A-1 Calculation Period or Monthly Interest
Period, and (b) the percentage equivalent of a fraction, the numerator of which
is equal to Expected Interest Collections for the related Quarterly Interest
Period, Class A-1 Calculation Period or Monthly Interest Period less the
Servicing Fee and the Administration Fee with respect to such period and (ii)
the denominator of which is the aggregate principal balance of the Notes as of
the last day of such Quarterly Interest Period, Class A-1 Calculation Period or
Monthly Interest Period, as the case may be.
"Student Loan Rate Accrual Period" means (i) with respect to
any Quarterly Interest Period, the related Collection Period, (ii) with respect
to any Class A-1 Calculation Period, the portion of the ongoing Collection
Period that ends on the last day of the calendar month that precedes the month
during which such Class A-1 Calculation Period ends, and (iii) with respect to
any Monthly Interest Period, the calendar month that precedes the month during
which such Monthly Interest Period ends.
"Subordinate Note" means a Subordinate Floating Rate
Asset Backed Note issued pursuant to the Indenture, substantially
in the form of Exhibit A-3 thereto.
"Subordinate Note Depository Agreement" means the agreement
with respect to the Subordinated Notes attached to the Indenture as Exhibit B-3.
"Subordinate Note Final Maturity Date" means the April
2026 Quarterly Payment Date.
"Subordinate Noteholders' Distribution Amount" means, with
respect to any Quarterly Payment Date, the Subordinate Noteholders' Interest
Distribution Amount for such Quarterly Payment Date plus with respect to any
Quarterly Payment Date on and after which the Senior Notes have been paid in
full, the Subordinate Noteholders' Principal Distribution Amount for such
Quarterly Payment Date.
"Subordinate Noteholders' Interest Carryover Shortfall"
means, with respect to any Monthly Payment Date, the excess of
(i) the Subordinate Noteholders' Interest Distribution Amount on
35
<PAGE>
the preceding Monthly Payment Date over (ii) the amount of interest actually
distributed to the Subordinate Noteholders on such preceding Monthly Payment
Date, plus interest on the amount of such excess, to the extent permitted by
law, at the rate borne by the Subordinate Notes from such preceding Monthly
Payment Date to the current Monthly Payment Date.
"Subordinate Noteholders' Interest Distribution Amount" means,
with respect to any Monthly Payment Date, the sum of (i) the amount of interest
accrued at the Subordinate Note Rate for the related Monthly Interest Period on
the outstanding principal balance of the Subordinate Notes on the immediately
preceding Quarterly Payment Date, after giving effect to all principal
distributions to Subordinate Noteholders on such Quarterly Payment Date (or, in
the case of the first two Monthly Payment Dates and the first Quarterly Payment
Date, on the Closing Date) and (ii) the Subordinate Noteholders' Interest
Carryover Shortfall for such Monthly Payment Date; provided, however, that the
Subordinate Noteholders' Interest Distribution Amount will not include any
Subordinate Noteholders' Interest LIBOR Carryover.
"Subordinate Noteholders' Interest LIBOR Carryover" means,
with respect to each Quarterly Payment Date commencing in October 1996, and with
respect to each Monthly Interest Period, if any, since the preceding Quarterly
Payment Date as to which the Subordinate Note Rate for such Monthly Interest
Period was based on the Student Loan Rate for the related Monthly Interest
Period, the amount equal to the excess, if any, of (a) the amount of interest on
the Subordinate Notes that would have accrued in respect of each related Monthly
Interest Period had interest been calculated based on LIBOR over (b) the amount
of interest on the Subordinate Notes actually accrued in respect of such Monthly
Interest Period based on the Student Loan Rate for such Monthly Interest Period,
together with the unpaid portion of any such excess from prior Monthly Payment
Dates (and interest accrued thereon, to the extent permitted by law, calculated
based on LIBOR); provided, however, that, on the Subordinate Note Final Maturity
Date, the Subordinate Noteholders' Interest LIBOR Carryover will be equal to the
lesser of (i) the Subordinate Noteholders' Interest LIBOR Carryover on such date
determined as described above and (ii) the amount of funds, if any, required and
available to be distributed to Subordinate Noteholders on such date pursuant to
Sections 2(e)(ii)(b)(iii) and 2(e)(iii) of the Administration Agreement and
Section 8.02 the Indenture.
"Subordinate Noteholders' Principal Carryover Short fall"
means, as of the close of any Quarterly Payment Date on or after which the
Senior Notes have been paid in full, the excess of (i) the Subordinate
Noteholders' Principal Distribution Amount on such Quarterly Payment Date over
(ii) the amount of principal
36
<PAGE>
actually distributed to the Subordinate Noteholders on such
Quarterly Payment Date.
"Subordinate Noteholders' Principal Distribution Amount"
means, on each Quarterly Payment Date on and after which the aggregate principal
balance of the Senior Notes has been paid in full, the sum of (a) the Principal
Distribution Amount for such Quarterly Payment Date (or, in the case of the
Quarterly Payment Date on which the aggregate principal balance of the Senior
Notes is paid in full, any remaining Principal Distribution Amount not otherwise
distributed to Senior Noteholders on such Quarterly Payment Date) and (b) the
Subordinate Noteholders' Principal Carryover Shortfall as of the close of the
preceding Quarterly Payment Date; provided, however, that the Subordinate
Noteholders' Principal Distribution Amount will in no event exceed the
outstanding principal balance of the Subordinate Notes. In addition, on the
Subordinate Note Final Maturity Date, the principal required to be distributed
to the Subordinate Noteholders will include the amount required to reduce the
outstanding principal balance of the Subordinate Notes to zero.
"Subordinate Note Pool Factor" as of the close of business on
a Quarterly Payment Date means a seven-digit decimal figure equal to the
outstanding principal balance of the Subordinate Notes divided by the original
outstanding principal balance of the Subordinate Notes. The Subordinate Note
Pool Factor will be 1.0000000 as of the Closing Date; thereafter, the
Subordinate Note Pool Factor will decline to reflect reductions in the
outstanding principal balance of the Subordinate Notes.
"Subordinate Note Rate" means, with respect to any Monthly
Payment Date and the related Monthly Interest Period, the interest rate per
annum (computed on the basis of the actual number of days in such Monthly
Interest Period over a year of 360 days) equal to the lesser of (i) LIBOR for
the related LIBOR Reset Period plus 0.60% (the "Subordinate Note LIBOR Rate")
and (ii) the Student Loan Rate for such Monthly Interest Period; provided, that,
notwithstanding the foregoing, the Subordinate Note Rate for each of the first
three Monthly Interest Periods shall be equal to the Subordinate Note LIBOR Rate
for such Monthly Interest Period.
"Subsequent Cutoff Date" means the date as of which any New
Loan or Serial Loan is transferred to the Issuer and the date on and after which
all distributions on such loan are property of the Issuer or the date of the
related Assignment in the case of any Qualified Substitute Student Loan.
"Substitution Adjustment Amount" has the meaning specified in
Section 3.02 of the Loan Sale Agreement.
37
<PAGE>
"Successor Servicer" has the meaning specified in
Section 3.07(e) of the Indenture.
"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 shall again be so published or reported
or such auction is held, as the case may be. The T-Bill Rate shall be subject to
a Lock-In Period of six Business Days.
"Transfer" means any direct or indirect transfer, sale,
pledge, hypothecation or other form of assignment of any ownership interest in a
Note or, with respect Section 3.01 of the Trust Agreement, in the Trust.
"Transfer Agreement" has the meaning provided in
Section 2.03 of the Loan Sale Agreement.
"Transfer Date" means the day fixed for the transfer of any
New Loans or Serial Loans by the Seller to the Issuer; provided that no Transfer
Date shall occur during the period from a Determination Date to the end of the
calendar month in which such Determination Date occurs.
"Treasury Regulations" means regulations, including proposed
or temporary regulations, promulgated under the Code. References in any document
or instrument to specific provisions of proposed or temporary regulations shall
include analogous provisions of final Treasury Regulations or other successor
Treasury Regulations.
"Trust" means the Issuer, established pursuant to the
Trust Agreement.
"Trust Account Property" means the Trust Accounts, all amounts
and investments held from time to time in any Trust Account (whether in the form
of deposit accounts, Physical Property, book-entry securities, uncertificated
securities or otherwise), including the Reserve Account Initial Deposit and all
proceeds of the foregoing.
"Trust Accounts" has the meaning specified in Section
2(c) of the Administration Agreement.
38
<PAGE>
"Trust Agreement" means the Trust Agreement dated as of April
1, 1996, among the Depositor, the Company and the Eligible Lender Trustee.
"Trust Estate" means all right, title and interest of the
Trust (or the Eligible Lender Trustee on behalf of the Trust) in and to the
property and rights assigned to the Trust pursuant to Article II of the Loan
Sale Agreement all funds on deposit from time to time in the Trust Accounts and
all other property of the Trust from time to time, including any rights of the
Eligible Lender Trustee and the Trust pursuant to the Loan Sale Agreement and
the Administration Agreement.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act
of 1939 as in force on the date hereof, unless otherwise specifically provided.
"UCC" means, unless the context otherwise requires, the
Uniform Commercial Code, as in effect in the relevant jurisdiction, as amended
from time to time.
39
