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 )
May 1, 1998
USA GROUP SECONDARY MARKET SERVICES, INC.
(Exact name of registrant as specified in its charter)
Delaware 333-23243 35-1872185
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State or other jurisdiction Commission File Number IRS Employer
of incorporation Identification Number
30 South Meridian Street, Indianapolis, Indiana 46204-3503
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Address of principal executive offices
Registrant's telephone number, including area code (317) 951-5526
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<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 1998-A:
1) Loan Sale Agreement dated as of May 1,1998.
2) Servicing Agreement dated as of May 1,1998.
3) Indenture dated as of May 1,1998.
4) Trust Agreement dated as of May 1,1998.
5) Administration Agreement dated as of May 1,1998.
Item 6. Not Applicable
Item 7. Not Applicable
Item 8. Not Applicable
<PAGE>
SIGNATURES
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 hereunto duly authorized.
USA GROUP SECONDARY MARKET SERVICES, INC.
(Registrant)
By: The First National Bank of Chicago not
in its individual capacity by solely as
Eligible Lender Trustee of
SMS Student Loan Trust 1998-A
By:/s/ Steve Husbands
--------------------------
Steve Husbands
Assistant Vice President
Date: October 22, 1998.
<PAGE>
EXHIBIT INDEX
Exhibit No.
- -----------
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 1998-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 May 1, 1998
<PAGE>
LOAN SALE AGREEMENT dated as of May 1, 1998, among SMS STUDENT LOAN TRUST
1998-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. ("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; and
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 Seller is willing to sell such student loans to the
Eligible Lender Trustee on behalf of the Issuer; and
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 May 1, 1998, 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
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 and, with respect to legal title to
the Initial Financed Student Loans (as defined below), to the Eligible Lender
Trustee on behalf of the Issuer) without recourse except as may be provided
herein, (i) all right, title and interest in and to the Initial Financed Student
Loans, and all obligations of the Obligors thereunder, together with all
documents, 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, including without limitation, Liquidation Proceeds and
Recoveries; (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 and with respect to legal title the New Loans and Serial
Loans, to the Eligible Lender Trustee on behalf of the Issuer, without recourse
except as may
be provided herein, (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
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, the Indenture Trustee and the
Subordinate Note Insurer, 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, the Indenture Trustee and the Subordinate Note
Insurer, 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; provided, however, that the component of the
Loan Purchase Amount represented by the Purchase Premium Amounts shall not be
payable
with respect to Exchanged Serial Loans and, with respect to purchased Serial
Loans, shall be 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 exchange shall be subject to the sole discretion of the Eligible Lender
Trustee; provided, however, 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 balance (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; provided,
however, that no Purchase Premium Amounts shall be payable on Exchanged Serial
Loans.
(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; and the Seller shall have delivered a
copy of such assignment to the Subordinate Note Insurer;
(ii) the Seller shall have delivered, at least two days prior to such
Transfer Date, notice of such transfer to the Eligible Lender Trustee, the
Indenture Trustee, the Subordinate Note Insurer 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, the
Eligible Lender Trustee and the Subordinate Note Insurer an Officers'
Certificate confirming the satisfaction of each condition precedent
specified in this paragraph (d);
(vii)the Seller shall have delivered on each November 1 and May 1,
commencing November 1, 1998 (A) to the Rating Agencies and the Subordinate
Note Insurer 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 and the Subordinate Note Insurer on the Closing Date, and
(B) to the Eligible Lender Trustee, the Indenture Trustee and the
Subordinate Note Insurer the Opinion of Counsel as required by Section
6.02(f)(1) hereof; provided, however, that, notwithstanding the foregoing,
no opinion shall be required under subclause (B) and, if the Revolving
Period has terminated, no opinion shall be required under subclause (A),
unless the Seller, the Eligible Lender Trustee, the Indenture Trustee or
the Subordinate Note Insurer 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, the Indenture Trustee and the
Subordinate Note Insurer makes such determination shall notify the others
and the Rating Agencies; and provided, further, that none of the Eligible
Lender Trustee, the Indenture Trustee or the Subordinate Note Insurer
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 the preceding proviso;
(viiiwith 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 or the Subordinate Note Insurer shall
have been utilized in selecting the New Loans or the Serial Loans or in
selecting Exchanged Student Loans or the Exchanged Serial Loans;
(xi) no Default or 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.
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 and the other Basic Documents.
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.
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, in each case,
upon which representations and warranties the Subordinate Note Insurer relies in
issuing the Subordinate Note Insurance Policy. 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 Subordinate Note
Insurer, the Eligible Lender Trustee or the Indenture Trustee of
any breach of the Seller's representations and warranties made by
the Seller pursuant to Section 3.01 or Section 4.01, the party discovering the
breach shall give prompt written notice to the others. Unless any such breach
shall have been cured within 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 or the Subordinate Note Insurer 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, however, 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 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; provided, however, that the aggregate principal balance of the
Financed Student Loans purchased pursuant to this subsection (b) shall not
exceed, in aggregate, 1% of the Initial Pool Balance.
(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
Indenture Trustee 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 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 and
the Subordinate Note Insurer, 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 and the Subordinate
Note Insurer on the Closing Date, and (B) to the
Eligible Lender Trustee, the Subordinate Note Insurer and the Indenture
Trustee, the Opinion of Counsel required by Section 6.02(f)(1) hereof;
provided, however, that no opinion shall be required under either
subclause (A) or (B) unless the Seller, the Eligible Lender Trustee, the
Indenture Trustee or the Subordinate Note Insurer 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, the Subordinate Note Insurer 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, the Subordinate Note Insurer 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);
(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 or the Subordinate Note Insurer shall
have been utilized in selecting the Qualified Substitute Student Loans;
and
(vii)no Default or 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.
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, in each case, upon which representations the Subordinate Note
Insurer relies in issuing the Subordinate Note Insurance Policy. 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 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 Subordinate Note Insurer, 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 taxes in connection with 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 Subordinate Note Insurer, 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 the
Subordinate Note Insurer and their respective officers, directors,
employees and agents from and against, all costs, expenses, losses,
claims, damages, obligations and liabilities arising out of, incurred in
connection with or relating to the Trust Agreement, the other Basic
Documents, the Trust Estate, the acceptance or performance of the trusts
and duties set forth herein and in the Trust Agreement or the action or
the inaction of the Eligible Lender Trustee hereunder and under the Trust
Agreement, except to the extent that such cost, expense, loss, claim
damage, obligation or liability: (i) shall be due to the willful
misfeasance, bad faith or negligence (except for errors in judgment) of
the Eligible Lender Trustee , (ii) shall arise from any breach by the
Eligible Lender Trustee of its covenants under any of the Basic Documents;
or (iii) shall arise from the breach by the Eligible Lender Trustee of any
of its representations or warranties set forth in Section 7.03 of the
Trust Agreement. In the event of any claim, action or proceeding for which
indemnity will be sought pursuant to this paragraph, the Eligible Lender
Trustee's choice of legal counsel shall be subject to the approval of the
Seller, which approval shall not be unreasonably withheld.
(d) The Seller shall pay any and all taxes levied or assessed upon
all or any part of the Trust Estate (other than those taxes expressly
excluded from the Seller's responsibilities pursuant to 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 have delivered to the Eligible Lender Trustee, the
Subordinate Note Insurer 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, (vi) unless SMS is the
surviving entity, the Seller shall have delivered to the Eligible Lender
Trustee, the Indenture Trustee and the Subordinate Note Insurer 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; and (vii) the Subordinate Note Insurer has received ten Business
Days' prior written notice; and 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, the Indenture Trustee and the Subordinate Note Insurer 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, however, 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 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 (the "Minimum Purchase Price") equal to the greater of (i) the
aggregate Purchase Amounts for the Financed Student Loans as of the Collection
Period immediately preceding such Quarterly Payment Date and (ii) an amount that
would be sufficient to (a) reduce the outstanding principal amount of the Notes
on such Quarterly Payment Date to zero, (b) pay to the Noteholders, the
Noteholders' Interest Distribution Amount payable on such Quarterly Payment
Date, (c) pay to the Subordinate Note Insurer any amounts owed to the
Subordinate Note Insurer under the Basic Documents, (d) pay to the Swap
Counterparty any prior unpaid Net Trust Swap Payment Carryover Shortfalls and
any other amounts owed by the Trust to the Swap Counterparty under the Swap
Agreement and (e) pay to the Administrator and the Servicer all amounts owed to
them under the Basic Documents; 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 Class A-1 Noteholders' Interest Basis
Carryover, Class A-2 Noteholders' Interest Basis Carryover and Subordinate
Noteholders' Interest Basis Carryover.
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 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, the Subordinate
Note Insurer 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,
the Subordinate Note Insurer 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, the Subordinate Note Insurer 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, the Subordinate Note Insurer 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 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, the Subordinate Note
Insurer 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, the Indenture Trustee and the
Subordinate Note Insurer 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, the Subordinate Note Insurer 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, the Subordinate Note Insurer 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, the
Subordinate Note Insurer and the Indenture Trustee:
(1) promptly after the execution and delivery of this Agreement and
of each amendment thereto, on each Transfer Date as set forth in Section
2.02 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, however, 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. Unless otherwise agreed by the recipient, all
demands, notices and communications upon or to the Seller, NBD, the Servicer,
the Issuer, the Eligible Lender Trustee, the Indenture Trustee, the
Administrator, the Rating Agencies or the Subordinate Note Insurer 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 or postage prepaid, first
class mail), 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.
30 South Meridian Street
Indianapolis, Indiana 46204-3503
Attention: President and Chief Executive Officer
Telephone: (317) 951-5640
Telecopy: (317) 951-5764;
with a copy to
Office of the General Counsel
USA Group, Inc.
30 South Meridian Street
Indianapolis, Indiana 46204-3503
Attention: Peter M. Greco
Telephone: (317) 951-5526
Telecopy: (317) 951-5532;
(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.
30 South Meridian Street
Indianapolis, Indiana 46204-3503
Attention: President
Telephone: (317) 849-6510
Telecopy: (317) 951-5297
with a copy to
Office of the General Counsel
USA Group, Inc.
30 South Meridian Street
Indianapolis, Indiana 46204-3503
Attention: Charles T. Gleason
Telephone: (317) 951-5524
Telecopy: (317) 951-5532;
(d) in the case of the Issuer, to
Student Loan Trust 1998-A
c/o First Chicago Delaware, Inc.
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.
30 South Meridian Street
Indianapolis, Indiana 46204-3503
Attention: President and Chief Executive Officer
Telephone: (317) 951-5640
Telecopy: (317) 951-5764;
with a copy to
Office of the General Counsel
USA Group, Inc.
30 South Meridian Street
Indianapolis, Indiana 46204-3503
Attention: Peter M. Greco
Telephone: (317) 951-5526
Telecopy: (317) 951-5532;
(h) in the case of Fitch, to
Fitch IBCA, Inc.
One State Street Plaza
New York, New York 10004
Attention: Asset Backed Monitoring Unit
Telephone: (212) 908-0500
Facsimile: (212) 376-6889; and
(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) 553-0573
Facsimile: (212) 553-4600; and
(j)in the case of the Subordinate Note Insurer, to
MBIA Insurance Corporation
113 King Street
Armonk, New York 10504
Attention: Insured Portfolio Management -
Structured Finance (IPM-SF)
SMS Student Loan Trust 1998-A
$21,350,000 Floating Rate Asset-
Backed Subordinate Notes
Telephone: (914) 765-3812
Facsimile: (914) 765-3163;
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
Subordinate Note Insurer, 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; provided, however, that the right of the Subordinate Note
Insurer to enforce the provisions of this Agreement (except with respect to
subrogation rights) is conditioned upon an Insurer Default not having occurred
and being continuing.
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 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 or the Company, acquiesce, petition or otherwise invoke or
cause the Issuer to invoke the process of any court or government authority for
the purpose of commencing or sustaining a case against the Issuer under any
Federal or state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Issuer or any substantial part of its property, or ordering the winding
up or liquidation of the affairs of the Issuer or the Company.
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 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, the Subordinate Note Insurer or the
Indenture Trustee may reasonably request in order to effectuate the terms and
carry out the purposes of the Agreement.
BWNY03/144438.6/11830/00274/2136 October 12, 1998
<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 1998-A
By: The First National Bank of
Chicago, not in its individual
capacity but solely as
Eligible Lender Trustee on
behalf of the Trust
By:
Name:
Title:
USA GROUP SECONDARY MARKET
SERVICES, INC.
By:
Name: Stephen W. Clinton
Title: President and Chief
Executive Officer
NBD BANK, N.A., AS TRUSTEE FOR USA
GROUP SECONDARY MARKET SERVICES,
INC.
By:
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO, not in its
individual capacity but solely as Eligible Lender
Trustee
By:
Name:
Title:
<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:
Name:
Title:
<PAGE>
EXHIBIT A
TO THE LOAN SALE AGREEMENT
BILL OF SALE
For value received, in accordance with the Loan Sale Agreement (the
"Loan Sale Agreement") dated as of May 1, 1998, among USA Group Secondary Market
Services, Inc., as seller (the "Seller"), SMS Student Loan Trust 1998-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
Issuer and, with respect to legal title, 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 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 May
1, 1998, among SMS Student Loan Trust 1998-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 May 1, 1998.
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-1
<PAGE>
EXHIBIT B
TO THE
LOAN SALE AGREEMENT
TRANSFER AGREEMENT
TRANSFER No. _____ Of [NEW] [SERIAL] LOANS dated as of
______________, _____, among SMS STUDENT LOAN TRUST 1998-A, a Delaware trust
(the "Issuer"), USA GROUP SECONDARY MARKET SERVICES, INC., as seller (the
"Seller"), NBD BANK, N.A. ("NBD"), 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 May 1, 1998 (as amended or
supplemented, the "Loan Sale Agreement"); and
WHEREAS the Seller, as depositor, and the Eligible Lender Trustee are
parties to the Trust Agreement dated as of May 1, 1998 (as amended or
supplemented, the "Trust Agreement"); and
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; and
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 ascribed
to them in Appendix A to the Administration Agreement, dated as of May 1, 1998,
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), except with respect to the
exchange of Student Loans, 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) 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 (such reasonableness to be determined solely by the Seller) 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.
6. Third-Party Beneficiaries. The Indenture Trustee and the
Subordinate Note Insurer are express third-party beneficiaries and may enforce
the provisions of this Agreement as if they were parties hereto; provided,
however, that the right of the Subordinate Note Insurer to enforce the
provisions of this Agreement (except with respect to subrogation rights) is
conditioned upon an Insurer Default not having occurred and being continuing.
7. Counterparts. This Agreement may be executed in separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which together shall constitute but one and the same instrument.
8. 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.
9. Headings. The section headings hereof have been inserted for
convenience of reference only and shall not be construed to affect the meaning,
construction or effect of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective duly authorized officers as
of the day and the year first above written.
SMS STUDENT LOAN TRUST 1998-A
By: THE FIRST NATIONAL BANK OF
CHICAGO, not in its individual
capacity but solely as
Eligible Lender Trustee on
behalf of the Trust
By:
Name:
Title:
- --------
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>
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:
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-2
<PAGE>
SCHEDULE A
TO THE
TRANSFER AGREEMENT NO. ___
[List of Additional Student Loans
and their related Subsequent Cutoff Dates]
B-3
<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 May 1, 1998, 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 1998-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 Issuer
and, with respect to legal title, 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 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-4
<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, (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, and (D) provides that the rights with respect thereto are
assignable by the lender thereunder and its assignees without the consent
of or notice to any person other than as may be required by the Higher
Education Act and such notice has been or will be given. 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, 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.
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; the Seller has not waived and shall not
waive any of the foregoing other than as permitted by the Basic Documents;
and not more than 10% of the Financed Student Loans shall be more than 30
days overdue as of June 20, 1998.
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 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-1
<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
(except where any failure to be so authorized shall not have a material
adverse effect on either the Seller or its obligations hereunder) 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 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-1
<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 May 1, 1998, among USA Group Secondary Market
Services, Inc., as seller (the "Seller"), SMS Student Loan Trust 1998-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 May
1, 1998, among the Trust, as Issuer, the Seller, as Administrator, and Bankers
Trust Company, as Indenture Trustee, which also contains rules as to usage that
shall be applicable herein.
F-1
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IN WITNESS WHEREOF, the undersigned has caused this Agreement 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-2
SERVICING AGREEMENT
among
SMS STUDENT LOAN TRUST 1998-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 May 1, 1998
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SERVICING AGREEMENT dated as of May 1, 1998, among SMS STUDENT LOAN
TRUST 1998-A, a Delaware trust (the "Issuer"), USA GROUP LOAN SERVICES, INC., as
servicer (the "Servicer"), USA GROUP 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 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; and
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 May 1, 1998, 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 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
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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.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 on behalf of the Noteholders, the Subordinate
Note Insurer and the Swap Counterparty 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, the Indenture
Trustee, the Subordinate Note Insurer or the Swap Counterparty to verify the
accuracy of the Servicer's record keeping. The Servicer shall promptly report to
the Issuer, the Indenture Trustee, the Subordinate Note Insurer and the Swap
Counterparty 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 Issuer, the Eligible
Lender Trustee or the Indenture Trustee of the Student Loan Files.
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<PAGE>
(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, the
Indenture Trustee, the Subordinate Note Insurer and the Swap Counterparty 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, the Indenture Trustee, the Subordinate Note Insurer and the Swap
Counterparty 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 negligence of the Indenture Trustee.
This provision shall not be
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<PAGE>
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), the Noteholders, the Subordinate
Note Insurer and the Swap Counterparty, 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, the Subordinate Note
Insurer, the Swap Counterparty or the Company. The Servicer also hereby
acknowledges that its
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<PAGE>
obligation to service the Financed Student Loans includes all Consolidation
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, however, 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; and provided, further, 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 (to the extent
provided herein) and the Indenture Trustee on behalf of the
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<PAGE>
Noteholders and the Subordinate Note Insurer, shall promptly and routinely
furnish the Eligible Lender Trustee and the Indenture Trustee with copies of all
material reports, records, and other documents and data as required by this
Agreement or as may otherwise be required by the Higher Education Act. All
material 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.
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<PAGE>
(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 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
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student loans in such other trusts using such common lender identification
number. Notwithstanding anything herein or in the Basic Documents to the
contrary, any amounts assessed against payments (including, but not limited to,
Interest Subsidy Payments and Special Allowance Payments) due from the
Department to any such other trust using such common lender identification
number as a result of amounts (including, but not limited to, 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, the Noteholders, the Subordinate
Note Insurer or the Swap Counterparty 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, the
Eligible Lender Trustee, the Subordinate Note Insurer or the Swap Counterparty
are materially and adversely
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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 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 (each, 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 principal balances of the Financed Student Loans
outstanding 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 (a) one-twelfth of
1.0% (of 0.50% with respect to any calendar month beginning with July 2008) of
the aggregate principal balances of the Financed Student Loans outstanding as of
the last day of the preceding calendar month and (b) 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
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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 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:
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Average Principal In-School Average Principal e
Balance Percentage Balance GRDF Percentag
- ---------------- --------- ---------------- -------------
$2,501 - $3,000 0.625% $3,001 - $3,400 1.100%
$3,001 - $3,500 0.525% $3,401 - $3,900 0.950%
$3,501 - $4,000 0.450% $3,901 - $4,400 0.830%
$4,001 - $4,750 0.375% $4,401 - $4,800 0.740%
$4,751 - $5,500 0.310% $4,801 - $5,400 0.650%
$5,501 - $6,250 0.260% $5,401 - $6,000 0.575%
$6,251 and above 0.230% $6,001 - $6,600 0.510%
$6,601 - $7,200 0.475%
$7,201 - $10,000 0.450%
$10,001 - $13,000 0.350%
$13,001 and above 0.300%
The Servicing Fee (together with any portion of the Servicing Fee that
remains unpaid from prior Monthly Payment Dates) will be payable on each Monthly
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
(a) 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
(b) of such sentence over the amount described in clause (a) 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)(ii)
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
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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, the Indenture
Trustee, the Subordinate Note Insurer and the Swap Counterparty (with a copy to
the Seller), on or before April 30 of each year beginning April 30, 1998, 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, 1998 or, as specified below, to
September 30, 1998) 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
Officers' Certificate, such shorter period) or, if there has been a default in
the fulfillment of any such obligation, specifying each such default known to
such officers and the nature and status thereof; provided, however, that, at the
option of the Servicer, the Servicer may date the initial such Officers'
Certificate as of September 30, 1998, and, in such case, shall deliver such
Officer's Certificate on or before December 31, 1998 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, the Subordinate Note Insurer, the Swap
Counterparty 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 or would cause the Servicer to fail to meet any Rating Agency
Condition.
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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, the Indenture
Trustee, the Subordinate Note Insurer and the Swap Counterparty (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, 1998 or, as
the case may be, to September 30, 1998). The Indenture Trustee shall send a copy
of each such report to the Rating Agencies and the Subordinate Note Insurer.
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; and provided, further, that
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the Servicer shall remain obligated and be liable to the Issuer, the Eligible
Lender Trustee, the Indenture Trustee, the Subordinate Note Insurer 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, the Subordinate Note Insurer 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
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amounts are due, as provided in Section 3.03 of the Loan Sale
Agreement.
(d) The Indenture Trustee, at the written direction of the
Administrator, shall withdraw from the 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
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business as such properties are currently owned and such business is
currently 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 have 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, or 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; or 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; or 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
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issuance of the Notes or the consummation of any of the transactions
contemplated by this Agreement, or any of the other Basic Documents, (iii)
seeking any determination or ruling that could reasonably be expected to
have a material and adverse effect on the performance by the 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, licenses, 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 attorneys' 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
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rendered unable, in whole or in part, by a force outside the control of the
parties hereto (including acts of God, acts of war, fires, earthquakes and other
disasters) to satisfy its obligations under this Agreement, the 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, the Indenture Trustee, the Subordinate Note Insurer and the Swap
Counterparty 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,
(iv) cure any existing Servicer Default or any
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continuing event which, after notice or lapse of time or both, would become a
Servicer Default and (v) provide the Subordinate Note Insurer and the Swap
Counterparty 10 Business Days' prior written notice. Upon compliance with the
foregoing requirements, such Person shall be 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), (iv) and (v) 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, the Rating Agencies, the
Subordinate Note Insurer and the Swap Counterparty at the earliest practicable
time (and, if such communication is not in writing, shall be confirmed in
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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, the Indenture Trustee, the Subordinate Note Insurer and the Swap
Counterparty concurrently with or promptly after such notice. No such
resignation shall become effective until the Indenture Trustee or a Successor
Servicer acceptable to the Subordinate Note Insurer 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 (each, 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, the
Subordinate Note Insurer or the Swap Counterparty and (ii) continue
unremedied for a period of thirty (30) days after the date of discovery of
such failure by an officer of the Servicer or 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, 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
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(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 (with the prior written consent of
the Subordinate Note Insurer) or the Noteholders of Notes evidencing not less
than 75% of the Outstanding Amount of the Notes (with the prior written consent
of the Subordinate Note Insurer) 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 Section 5.02) of the Servicer under this Agreement;
provided, however, that if the Senior Notes are not Outstanding, then the
Subordinate Note Insurer shall have the exclusive right to terminate the
Servicer after a Servicer Default. 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 (acceptable to the Subordinate Note Insurer)
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, the Eligible Lender Trustee and the Subordinate Note Insurer
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
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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 the successor Servicer acceptable to the
Subordinate Note Insurer shall have accepted and assumed the responsibilities of
the Servicer hereunder 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 and the Subordinate Note Insurer 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 Subordinate Note Insurer, and the successor Servicer
shall accept its appointment by a written assumption in form acceptable to the
Indenture Trustee, the Administrator and the Subordinate Note Insurer. 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 (with the prior written
consent of the Subordinate Note Insurer) or petition a court of competent
jurisdiction to appoint, any established institution (acceptable to the
Subordinate Note Insurer) the regular business of which 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 the
Subordinate Note Insurer shall have given its prior written consent and such
compensation arrangements will not result in a downgrading of the Class A-1
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Notes, the Class A-2 Notes or the Subordinate Notes by any Rating Agency without
regard to the Subordinate Note Insurance Policy) 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 and the Subordinate Note
Insurer. 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 acceptable to the Subordinate Note Insurer 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, the Rating Agencies and the
Subordinate Note Insurer (which, in the case of any such appointment of a
successor, shall consist of prior written notice thereof to the Rating Agencies
and the Subordinate Note Insurer.
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 (with
the prior written consent of the Subordinate Note Insurer) or, if the Senior
Notes are not Outstanding, the Subordinate Note Insurer 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 to the
extent provided in such waiver. 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.
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ARTICLE VII
Miscellaneous
SECTION 7.01. Amendment. This Agreement may be amended by the
Servicer and the Eligible Lender Trustee, with the prior written 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, the Indenture
Trustee and the Subordinate Note Insurer, 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 prior written consent of the Indenture
Trustee, the Noteholders of Notes evidencing not less than a majority of the
Outstanding Amount of the Notes, the Subordinate Note Insurer and the Swap
Counterparty, 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; and provided, further, that the prior written consent of the
Subordinate Note Insurer shall not be required if an Opinion of Counsel is
delivered to the Subordinate Note Insurer stating that the proposed amendment to
this Agreement will not adversely affect, in any material respect interests of
the Noteholders or the Subordinate Note Insurer.
Promptly after the execution of any such amendment or consent (or, in
the case of the Rating Agencies, five Business Days prior thereto), the Eligible
Lender Trustee shall furnish written notification of the substance of such
amendment or consent to the Indenture Trustee, each of the Rating Agencies and
the Subordinate Note Insurer.
It shall not be necessary for the consent of
Noteholders pursuant to this Section to approve the particular
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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, the Indenture Trustee, the Subordinate Note Insurer and
the Swap Counterparty 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, the Subordinate Note
Insurer, the Swap Counterparty 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, the Indenture Trustee, the Subordinate Note Insurer and the Swap
Counterparty 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)
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.
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<PAGE>
(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, the Subordinate
Note Insurer and the Swap Counterparty and their respective 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 three
(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 the
Indenture Trustee or the Subordinate Note Insurer (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 the Indenture Trustee or the
Subordinate Note Insurer, within 20 Business Days thereafter, a comparison of
such list to the list of Initial Financed Student Loans set forth in Schedule A
to the Loan Sale Agreement as of the Closing Date, and, for each Financed
Student Loan that has been added to or removed from the pool of loans held by
the
26
<PAGE>
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. Unless otherwise agreed by the recipient, all
demands, notices and communications upon or to the Seller, NBD, the Servicer,
the Eligible Lender Trustee, the Indenture Trustee, the Administrator, the
Rating Agencies, the Subordinate Note Insurer or the Swap Counterparty 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 or postage prepaid, first
class mail), 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.
30 South Meridian Street
Indianapolis, Indiana 46204-3503
Attention: President and Chief Executive Officer
Telephone: (317) 951-5640
Telecopy: (317) 951-5764
with a copy to:
Office of the General Counsel
USA Group, Inc.
30 South Meridian Street
Indianapolis, Indiana 46204-3503
Attention: Peter M. Greco
Telephone: (317) 951-5526
Telecopy: (317) 951-5532;
(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.
30 South Meridian Street
Indianapolis, Indiana 46204-3503
Attention: President
Telephone: (317) 849-6510
27
<PAGE>
Telecopy: (317) 951-5297
with a copy to
Office of the General Counsel
USA Group, Inc.
30 South Meridian Street
Indianapolis, Indiana 46204-3503
Attention: Charles T. Gleason
Telephone: (317) 951-5524
Telecopy: (317) 951-5532;
(d) in the case of the Issuer, to
Student Loan Trust 1998-A
c/o First Chicago Delaware, Inc.
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.
30 South Meridian Street
Indianapolis, Indiana 46204-3503
Attention: President and Chief Executive Officer
Telephone: (317) 951-5640
Telecopy: (317) 951-5764
with a copy to:
Office of the General Counsel
USA Group, Inc.
30 South Meridian Street
Indianapolis, Indiana 46204-3503
Attention: Peter M. Greco
Telephone: (317) 951-5526
Telecopy: (317) 951-5532;
(h) in the case of Moody's, to
Moody's Investors Service, Inc.
99 Church Street
28
<PAGE>
New York, New York 10007
Attention: ABS Monitoring Department
Telephone: (212) 553-0573
Facsimile: (212) 553-4600;
(i) in the case of Fitch, to
Fitch IBCA, Inc.
One State Street Plaza
New York, New York 10004
Attention: Asset Backed Monitoring Unit
Telephone: (212) 908-0500
Facsimile: (212) 376-6889;
(j) in the case of the Subordinate Note Insurer, to MBIA Insurance
Corporation 113 King Street
Armonk, New York 10504
Attention: Insured Portfolio Management -
Structured Finance (IPM-SF)
SMS Student Loan Trust 1998-A
$21,350,000 Floating Rate Asset-
Backed Subordinate Notes
Facsimile: (914) 765-3163
Telephone confirmation: (914) 765-3812; and
(k) in the case of the Swap Counterparty, to
General Re Financial Products Corporation
Rockefeller Center
630 Fifth Avenue, Suite 450
New York, New York 10111
Attention: Head of Operations
Facsimile: (212) 307-2288
Telephone confirmation: (212) 307-2310;
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, the
29
<PAGE>
Subordinate Note Insurer 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. The Indenture Trustee, the
Subordinate Note Insurer and the Swap Counterparty are express third-party
beneficiaries and may enforce the provisions of this Agreement as if they were
parties hereto; provided, however, that in the case of the Subordinate Note
Insurer such right to enforcement and the right to provide consents or waivers
pursuant to the provisions of this Agreement or to take other actions as
provided herein are conditioned upon there not having occurred and being
continuing an Insurer Default and, in the case of the Swap Counterparty, such
right to enforcement and the right to provide consents or waivers pursuant to
the provisions hereof or to take other actions as provided herein are
conditioned upon its not being in default under the Swap Agreement.
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, 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 or the Company, acquiesce, petition or otherwise invoke or cause the
Issuer or the Company to invoke the process of any court or
30
<PAGE>
government authority for the purpose of commencing or sustaining a case against
the Issuer or the Company 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 1998-A,
By: THE FIRST NATIONAL BANK OF CHICAGO,
not in its individual capacity
but solely as Eligible Lender
Trustee on behalf of the Trust
By:
Name:
Title:
USA GROUP LOAN SERVICES, INC.
By:
Name:
Title:
USA GROUP SECONDARY MARKET
SERVICES, INC.
By:
Name:
Title:
32
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO, not in
its individual capacity but solely as
Eligible Lender Trustee
By:
Name:
Title:
Acknowledged and accepted
as of the day and year first
above written:
BANKERS TRUST COMPANY, not in
its individual capacity but
solely as Indenture Trustee
By:
Name:
Title:
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.
30 South Meridian Street
Indianapolis, IN 46204
(b) USA Group Loan Services, Inc.
11100 USA Parkway
Fishers, IN 46038
(c) USA Group Loan Services, Inc.
c/o Indianapolis Vault Company
8257 Zionsville Road
Indianapolis, IN 46268
(d) USA Group Loan Services, Inc.
c/o Indianapolis Vault Company
5251 West 81st Street
Indianapolis, IN 46268
INDENTURE
between
SMS STUDENT LOAN TRUST 1998-A,
as Issuer
and
BANKERS TRUST COMPANY,
not in its individual capacity but
solely as Indenture Trustee
Dated as of May 1, 1998
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
Definitions and Usage
SECTION 1.01. Definitions and Usage...................... 2
SECTION 1.02. Incorporation by Reference of Trust
Indenture Act.............................. 2
ARTICLE II
The Notes
SECTION 2.01. Form....................................... 3
SECTION 2.02. Execution, Authentication and Delivery..... 3
SECTION 2.03. Temporary Notes............................ 4
SECTION 2.04. Registration; Registration of Transfer
and Exchange............................... 4
SECTION 2.05. Mutilated, Destroyed, Lost or Stolen
Notes...................................... 7
SECTION 2.06. Persons Deemed Owner....................... 8
SECTION 2.07. Payment of Principal and Interest;
Defaulted Interest; Noteholders' Interest
Basis Carryover............................ 8
SECTION 2.08. Cancellation............................... 10
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........................... 12
SECTION 2.13. [Reserved]................................. 12
ARTICLE III
Covenants
SECTION 3.01. Payment to Noteholders..................... 12
SECTION 3.02. Maintenance of Office or Agency............ 13
SECTION 3.03. Money for Payments to Be Held in Trust..... 13
SECTION 3.04. Existence.................................. 15
SECTION 3.05. Protection of Indenture Trust Estate....... 15
SECTION 3.06. Opinions as to Indenture Trust Estate...... 16
SECTION 3.07. Performance of Obligations; Servicing of
Student Loans.............................. 16
SECTION 3.08. Negative Covenants......................... 19
SECTION 3.09. Annual Statement as to Compliance.......... 20
SECTION 3.10. Issuer May Consolidate, etc., Only on
Certain Terms.............................. 20
SECTION 3.11. Successor or Transferee.................... 22
SECTION 3.12. No Other Business.......................... 22
SECTION 3.13. No Borrowing............................... 22
SECTION 3.14. Obligations of Servicer and
Administrator.............................. 23
SECTION 3.15. Guarantees, Loans, Advances and Other
Liabilities................................ 23
SECTION 3.16. Capital Expenditures....................... 23
SECTION 3.17. Restricted Payments........................ 23
SECTION 3.18. Notice of Events of Default................ 23
SECTION 3.19. Further Instruments and Acts............... 24
SECTION 3.20. Removal of Administrator................... 24
ARTICLE IV
Satisfaction and Discharge
SECTION 4.01. Satisfaction and Discharge of Indenture.... 24
SECTION 4.02. Application of Trust Money................. 25
SECTION 4.03. Repayment of Monies Held by Paying
Agent...................................... 26
SECTION 4.04. Auction of Financed Student Loans.......... 26
ARTICLE V
Remedies
SECTION 5.01. Events of Default.......................... 26
SECTION 5.02. Acceleration of Maturity; Rescission and
Annulment.................................. 28
SECTION 5.03. Collection of Indebtedness and Suits for
Enforcement by Indenture Trustee........... 29
SECTION 5.04. Remedies; Priorities....................... 31
SECTION 5.05. Optional Preservation of the Indenture
Trust Estate............................... 34
SECTION 5.06. Limitation of Suits........................ 34
SECTION 5.07. Unconditional Rights of Noteholders to
Receive Principal and Interest............. 35
SECTION 5.08. Restoration of Rights and Remedies......... 35
SECTION 5.09. Rights and Remedies Cumulative............. 36
SECTION 5.10. Delay or Omission Not a Waiver............. 36
SECTION 5.11. Control by Noteholders..................... 36
SECTION 5.12. Waiver of Past Defaults.................... 37
SECTION 5.13. Undertaking for Costs...................... 37
SECTION 5.14. Waiver of Stay or Extension Laws........... 37
SECTION 5.15. Action on Notes............................ 38
SECTION 5.16. Performance and Enforcement of Certain
Obligations................................ 38
ARTICLE VI
The Indenture Trustee
SECTION 6.01. Duties of Indenture Trustee................ 39
SECTION 6.02. Rights of Indenture Trustee................ 40
SECTION 6.03. Individual Rights of Indenture Trustee..... 41
SECTION 6.04. Indenture Trustee's Disclaimer............. 41
SECTION 6.05. Notice of Defaults......................... 41
SECTION 6.06. Reports by Indenture Trustee to
Noteholders................................ 42
SECTION 6.07. Compensation and Indemnity................. 42
SECTION 6.08. Replacement of Indenture Trustee........... 43
SECTION 6.09. Successor Indenture Trustee by Merger...... 44
SECTION 6.Appointment of Co-Trustee or Separate
Trustee.................................... 45
SECTION 6.Eligibility; Disqualification................... 46
SECTION 6.Preferential Collection of Claims Against
Issuer..................................... 46
SECTION 6.Declaration of Default or Termination
Event under the Swap Agreement............. 46
ARTICLE VII
Noteholders' Lists and Reports
SECTION 7.01. Issuer to Furnish Indenture Trustee Names
and Addresses of Noteholders............... 47
SECTION 7.02. Preservation of Information;
Communications to Noteholders.............. 47
SECTION 7.03. Reports by Issuer.......................... 48
ARTICLE VIII
Accounts, Disbursements and Releases
SECTION 8.01. Collection of Money........................ 48
SECTION 8.02. Trust Accounts............................. 49
SECTION 8.03. General Provisions Regarding Accounts...... 53
SECTION 8.04. Release of Indenture Trust Estate.......... 54
SECTION 8.05. Opinion of Counsel......................... 55
ARTICLE IX
Supplemental Indentures
SECTION 9.01. Supplemental Indentures Without Consent
of Noteholders............................. 55
SECTION 9.02. Supplemental Indentures with Consent of
Noteholders................................ 57
SECTION 9.03. Execution of Supplemental Indentures....... 58
SECTION 9.04. Effect of Supplemental Indenture........... 59
SECTION 9.05. Conformity with Trust Indenture Act........ 59
SECTION 9.Reference in Notes to Supplemental
Indentures................................. 59
ARTICLE X
Redemption of Notes
SECTION 10.01. Redemption................................ 59
SECTION 10.02. Form of Redemption Notice................. 60
SECTION 10.03. Notes Payable on Redemption Date.......... 61
ARTICLE XI
Miscellaneous
SECTION 11.01. Compliance Certificates and Opinions...... 61
SECTION 11.02. Form of Documents Delivered to Indenture
Trustee................................... 63
SECTION 11.03. Acts of Noteholders....................... 64
SECTION 11.04. Notices to Indenture Trustee, Issuer,
Subordinate Note Insurer, Swap Counterparty
and Rating Agencies....................... 65
SECTION 11.05. Notices to Noteholders; Waiver............ 66
SECTION 11.06. Alternate Payment and Notice
Provisions................................ 66
SECTION 11.07. Conflict with Trust Indenture Act......... 66
SECTION 11.08. Effect of Headings and Table of
Contents.................................. 67
SECTION 11.09. Successors and Assigns.................... 67
SECTION 11.10. Separability.............................. 67
SECTION 11.11. Benefits of Indenture..................... 67
SECTION 11.12. [Reserved]................................ 67
SECTION 11.13. Governing Law............................. 67
SECTION 11.14. Counterparts.............................. 67
SECTION 11.15. Recording of Indenture.................... 68
SECTION 11.16. Trust Obligations......................... 68
SECTION 11.17. No Petition............................... 68
SECTION 11.18. Inspection................................ 68
SECTION 11.19. Consents.................................. 69
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 - Senior Note Depository
Agreement EXHIBIT C - Form of Transferor Certificate EXHIBIT D - Form of
Investment Letter
<PAGE>
INDENTURE dated as of May 1, 1998, between SMS STUDENT LOAN TRUST 1998-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, the Subordinate Note Insurer and the
Swap Counterparty, all the Issuer's right, title and, interest in and to, but
none of its obligations under, the following:
(a) the Financed Student Loans, and all obligations of the Obligors
thereunder including all monies paid thereunder on and 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;
(e) the Administration Agreement;
(f) the Swap Agreement
(g) 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
(h) 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 under the Swap
Agreement, 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,
the Subordinate Note Insurer and the Swap Counterparty, 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, the
Subordinate Note Insurer and the Swap Counterparty 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
May 1, 1998, 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:
"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.
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
$150,000,000, Class A-2 Notes for original issue in the aggregate principal
amount of $433,650,000 and Subordinate Notes for original issue in an aggregate
principal amount of $21,350,000. 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 Book-Entry 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, certificated Notes in the minimum
denomination of $250,000 and in integral multiples of $1,000 in excess thereof
except for one Note in the amount of $215,000 issued to Secondary Market
Company, Inc.
No Note shall be entitled to any benefit under this Indenture or be valid
or obligatory for any purpose, unless there appears on such Note a certificate
of authentication substantially in the form provided for herein executed by the
Indenture Trustee by the manual signature of one of its authorized signatories,
and such certificate upon any Note shall be conclusive evidence, and the only
evidence, that such Note has been duly authenticated and delivered hereunder.
SECTION 2.03. Temporary Notes. Pending the preparation of Definitive
Notes, the Issuer may execute, and upon receipt of an Issuer Order the Indenture
Trustee shall authenticate and deliver, temporary Notes which are printed,
lithographed, typewritten, mimeographed or otherwise produced, of the tenor of
the Definitive Notes in lieu of which they are issued and with such variations
not inconsistent with the terms of this Indenture as the officers executing such
Notes may determine, as evidenced by their execution of such Notes.
If temporary Notes are issued, the Issuer will cause Definitive Notes to
be prepared without unreasonable delay. After the preparation of Definitive
Notes, the temporary Notes shall be exchangeable for Definitive Notes upon
surrender of the temporary Notes at the office or agency of the Issuer to be
maintained as provided in Section 3.02, without charge to the Noteholder. Upon
surrender for cancellation of any one or more temporary Notes, the Issuer shall
execute and the Indenture Trustee shall authenticate and deliver in exchange
therefor a like principal amount of Definitive Notes of authorized
denominations. Until so exchanged, the temporary Notes shall in all respects be
entitled to the same benefits under this Indenture as Definitive Notes.
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 and the Subordinate
Note Insurer 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 and the Subordinate Note Insurer shall have the right to
inspect the Note Register at all reasonable times and to obtain copies thereof,
and the Indenture Trustee and the Subordinate Note Insurer 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 the
Securities 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 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" as such term is 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 such party is the
transferee from which such opinion is to be obtained) or of the Seller;
provided, however, 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) under the
Securities Act 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, the Subordinate Note Insurer 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.
In addition, no transfer of a Subordinate Note shall be made to any
proposed transferee that is not a United States Person. Notwithstanding anything
to the contrary contained herein, no resale or other transfer of a Subordinate
Note or any interest therein shall be made unless (i) immediately after giving
effect to such resale or other transfer, there would be fewer than 100
Subordinate Noteholders and (ii) if the transferee (or any Person for whom such
transferee is acting as agent or custodian in connection with the acquisition of
such Subordinate Note) is a partnership, grantor trust or S corporation for
federal income tax purposes (a "Flow-Through Entity"), any Subordinate Notes
owned by or on behalf of such Flow-Through Entity will represent less than 50%
of the value of all assets owned by or on behalf of such Flow- Through Entity
and no special allocation of income, gain, loss, deduction or credit from such
Subordinate Notes will be made among the beneficial owners of such Flow-Through
Entity.
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 Subordinate Notes to this Section 2.04
with respect to such restrictions.
At the option of the Noteholder, Notes may be exchanged for other Notes of
the same class 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.
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 or the Subordinate Note
Insurer 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 such 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 and the Subordinate
Note Insurer such security or indemnity as may be required by it to hold the
Issuer, the Indenture Trustee and the Subordinate Note Insurer 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 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, the Indenture Trustee and the Subordinate Note Insurer 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, the Indenture Trustee or the Subordinate Note Insurer 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, the
Subordinate Note Insurer and any agent of the Issuer, the Indenture Trustee or
the Subordinate Note Insurer 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 Basis Carryover), if any, on such Note and for all other purposes
whatsoever, whether or not such Note be overdue, and none of the Issuer, the
Indenture Trustee or the Subordinate Note Insurer or any agent of the Issuer,
the Indenture Trustee or the Subordinate Note Insurer shall be affected by
notice to the contrary.
SECTION 2.07. Payment of Principal and Interest; Defaulted Interest;
Noteholders' Interest Basis 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
payable on each Quarterly Payment Date as specified therein, subject, in each
case, to Section 3.01. Any installment of interest (and any Noteholders'
Interest Basis Carryover) or principal, if any, payable on any Note which is
punctually paid or duly provided for by the Issuer 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 Record Date by wire transfer if such
Person holds Notes in an aggregate original principal amount in excess of
$1,000,000 and provides appropriate written instructions to the Indenture
Trustee no later than such Record Date, and otherwise 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 Senior 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. Notwith standing 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, if the Indenture Trustee (with
the prior written consent of the Subordinate Note Insurer) or the Noteholders of
the Notes representing not less than a majority of the Outstanding Amount of the
Notes (with the prior written consent of the Subordinate Note Insurer) 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
Basis 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.
(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 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 Basis Carryover, the Class A-2
Noteholders' Interest Basis Carryover and the Subordinate Noteholders' Interest
Basis Carryover on each Quarterly Payment Date including all such unpaid
carryover from prior Quarterly Payment Dates and interest accrued thereon at the
Class A-1 Note LIBOR Rate, the Class A-2 Note LIBOR Rate or the Subordinate Note
LIBOR Rate, respectively, for each 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(d)). Any
Noteholders' Interest Basis 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 by wire transfer to the Person in whose name such Note (or one or more
Predecessor Notes) is registered on the applicable Record Date if such Person
holds Notes in an aggregate original principal amount in excess of $1,000,000
and provides appropriate written instructions to the Indenture Trustee no later
than such Record Date, and otherwise 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 Senior 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.
(e) Promptly following the date on which the principal of and interest on
the Subordinate Notes have been paid in full and the Subordinate Notes have been
surrendered to the Indenture Trustee, the Indenture Trustee shall, if the
Subordinate Note Insurer has paid any amount in respect of the Subordinate Notes
under the Subordinate Note Insurance Policy that has not been reimbursed to the
Subordinate Note Insurer, deliver such surrendered Subordinate Notes to the
Subordinate Note Insurer.
SECTION 2.08. Cancellation. All Notes surrendered for payment,
registration of transfer, exchange or redemption shall, if surrendered to any
Person other than the Indenture Trustee, be delivered to the Indenture Trustee
and shall be promptly cancelled by the Indenture Trustee. The Issuer may at any
time deliver to the Indenture Trustee for cancellation any Notes previously
authenticated and delivered hereunder which the Issuer may have acquired in any
manner whatsoever, and all Notes so delivered shall be promptly cancelled by the
Indenture Trustee. No Notes shall be authenticated in lieu of or in exchange for
any Notes cancelled as provided in this Section, except as expressly permitted
by this Indenture. All cancelled Notes may be held or disposed of by the
Indenture Trustee in accordance with its standard retention or disposal policy
as in effect at the time, unless the Issuer shall direct by an Issuer Order that
they be returned to it and so long as such Issuer Order is timely and the Notes
have not been previously disposed of by the Indenture Trustee.
SECTION 2.09. Release of Collateral. Subject to Section 11.01 and the
terms of the Basic Documents, the Indenture Trustee shall release property from
the lien of this Indenture only upon receipt by it, the Subordinate Note Insurer
and the Swap Counterparty 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. The Indenture Trustee shall surrender to the
Subordinate Note Insurer the Subordinate Note Insurance Policy upon satisfaction
of the conditions in Section 4.01.
SECTION 2.10. Book-Entry Notes. The Class A-1 and Class A-2 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 Book-Entry 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 Book-Entry Notes) as the authorized
representative of the Note Owners;
(iii to the extent that the provisions of this Section conflict with
any other provisions of this Indenture, the provisions of this Section
shall control;
(iv the rights of Note Owners shall be exercised only through the
Clearing Agency and shall be limited to those established by law and
agreements between such Note Owners and the Clearing Agency and/or the
Clearing Agency Participants pursuant to the Note Depository 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 Book-Entry 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 of the Senior Notes to the Clearing
Agency.
SECTION 2.12. Definitive Notes. If (i) the Administrator advises the
Indenture Trustee in writing that the Clearing Agency is no longer willing or
able to properly discharge its responsibilities with respect to the Book-Entry
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 Book-Entry 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, the
Indenture Trustee or the Subordinate Note Insurer 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. [Reserved]
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 on Noteholders' Interest Basis Carryover (but only
to the extent provided in Sections 2.07(d) and 8.02(d)) 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(d), the Issuer will cause to be
distributed to the Senior Noteholders and the Subordinate Noteholders in
accordance with the Administration Agreement and Section 8.02 hereof that
portion of the amounts on deposit in the Trust Accounts on a Quarterly Payment
Date which the Noteholders are entitled to receive pursuant to the
Administration Agreement. Amounts properly withheld under the Code by any Person
from a payment to any Noteholder of interest (including any Noteholders'
Interest Basis 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 and the Subordinate Note Insurer 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 and the Subordinate Note Insurer with the
address thereof, such surrenders, notices and demands may be made or served at
the Corporate Trust Office, and the Issuer hereby appoints the Indenture Trustee
as its agent to receive all such surrenders, notices and demands.
SECTION 3.03. Money for Payments to Be Held in Trust. As provided in
Section 8.02, 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 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, the
Subordinate Note Insurer and the Swap Counterparty 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 and the Subordinate Note Insurer
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, the Subordinate Note Insurer and
the Swap Counterparty notice of any default by the Issuer of which it has
actual knowledge (or any other obligor upon the Notes) in the making of
any payment required to be made with respect to the Notes;
(iii at any time during the continuance of any such default, upon
the written request of the Indenture Trustee, forthwith pay to the
Indenture Trustee all sums so held in trust by such Paying Agent;
(iv immediately resign as a Paying Agent and forthwith pay to the
Indenture Trustee all sums held by it in trust for the payment of Notes if
at any time it ceases to meet the standards required to be met by a Paying
Agent at the time of its appointment; and
(v comply with all requirements of the Code with respect to the
withholding from any payments made by it on any Notes of any applicable
withholding taxes imposed thereon and with respect to any applicable
reporting requirements in connection therewith.
The Issuer may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, by Issuer Order direct
any Paying Agent to pay to the Indenture Trustee all sums held in trust by such
Paying Agent, such sums to be held by the Indenture Trustee upon the same trusts
as those upon which the sums were held by such Paying Agent; and upon such
payment by any Paying Agent to the Indenture Trustee, such Paying Agent shall be
released from all further liability with respect to such money.
Subject to applicable laws with respect to escheat of funds, any money
held by the Indenture Trustee or any Paying Agent in trust for the payment of
any amount due with respect to any Note and remaining unclaimed for two years
after such amount has become due and payable shall be discharged from such trust
and be paid to either (i) the Issuer on Issuer Request and with the prior
written consent of the Subordinate Note Insurer or (ii) the Subordinate Note
Insurer if and to the extent such money or any portion thereof was paid by the
Subordinate Note Insurer to the Indenture Trustee for payment of interest on or
principal of the Subordinate Notes; 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 monies 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, subject to the prior written consent of the Subordinate Note
Insurer, it becomes, or any successor Issuer hereunder is or becomes, organized
under the laws of any other State or of the United States of America, in which
case the Issuer will keep in full effect its existence, rights and franchises
under the laws of such other jurisdiction) and will obtain and preserve its
qualification to do business in each jurisdiction in which such qualification is
or shall be necessary to protect the validity and enforceability of this
Indenture, the Notes, the Collateral and each other instrument or agreement
included in the Indenture Trust Estate.
SECTION 3.05. Protection of Indenture Trust Estate. The Issuer will from
time to time execute and deliver all such supplements and amendments hereto and
all such financing statements, continuation statements, instruments of further
assurance and other instruments, and will take such other action necessary or
advisable to:
(i maintain or preserve the lien and security interest (and the
priority thereof) of this Indenture or carry out more effectively the
purposes hereof;
(ii perfect, publish notice of or protect the validity
of any Grant made or to be made by this Indenture;
(iii enforce any of the Collateral; or
(iv preserve and defend title to the Indenture Trust Estate and the
rights of the Indenture Trustee, the Subordinate Note Insurer, the Swap
Counterparty 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, the Subordinate Note Insurer and the Swap Counterparty 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 1999, the
Issuer shall furnish to the Indenture Trustee, the Subordinate Note Insurer and
the Swap Counterparty an Opinion of Counsel either stating that, in the opinion
of such counsel, such action has been taken with respect to the recording,
filing, re-recording and refiling of this Indenture, any indentures supplemental
hereto and any other requisite documents and with respect to the execution and
filing of any financing statements and continuation statements as are 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, the Subordinate Note Insurer and the Swap
Counterparty 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 Outstanding Amount of
the Notes (and, in either such case, the Subordinate Note Insurer and the Swap
Counterparty).
(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 Issuer shall promptly notify the Indenture
Trustee, the Rating Agencies, the Subordinate Note Insurer and the Swap
Counterparty 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 (or if the Senior Notes are not
Outstanding, the Subordinate Note Insurer may) appoint a successor servicer
acceptable to the Subordinate Note Insurer (the "Successor Servicer"), and such
Successor Servicer shall accept its appointment by a written assumption in a
form acceptable to the Indenture Trustee and the Subordinate Note Insurer. 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, the Subordinate Note Insurer
and the Swap Counterparty 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 and the
Subordinate Note Insurer, the Issuer shall (or, if the Senior Notes are not
Outstanding, the Subordinate Note Insurer may) 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) the
regular business includes the servicing or administration of student loans (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, and (iii) be acceptable to the Subordinate Note Insurer. If within 60
days after the delivery of the notice referred to above, neither the Insurer nor
the Subordinate Note Insurer shall 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 Servicer shall in no
event relieve the Indenture Trustee from any obligations otherwise imposed on it
under the Basic Documents until such Successor Servicer 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 Servicer as it,
the Subordinate Note Insurer, the Swap Counterparty and such Successor Servicer
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 or the Indenture Trustee shall enter into an agreement with such
Successor Servicer for the servicing of the Financed Student Loans (such
agreement to be in form and substance satisfactory to the Indenture Trustee and
the Subordinate Note Insurer). 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, with the prior written consent of
the Subordinate Note Insurer, 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
and the Subordinate Note Insurer. As soon as a Successor Servicer is appointed,
the Issuer shall notify the Indenture Trustee and the Subordinate Note Insurer
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 (and, in either such case, the Subordinate Note
Insurer and the Swap Counterparty), 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, the Issuer agrees,
promptly following a request by the Indenture Trustee, the Subordinate Note
Insurer or the Swap Counterparty 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, the Subordinate Note Insurer or the Swap
Counterparty may deem necessary or appropriate in the circumstances.
SECTION 3.08. Negative Covenants. So long as any Notes are
Outstanding, the Issuer shall not:
(i except as expressly permitted by this Indenture or any other
Basic Document, sell, transfer, exchange or otherwise dispose of any of
the properties or assets of the Issuer, including those included in the
Indenture Trust Estate, unless directed to do so by the Indenture Trustee
(which direction the Indenture Trustee shall not give without the prior
written consent of each of the Rating Agencies and the Subordinate Note
Insurer);
(ii claim any credit on, or make any deduction from the principal
or interest (including any Noteholders' Interest Basis 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, the Subordinate Note Insurer and the Swap
Counterparty, within 120 days after the end of each fiscal year of the Issuer
(commencing with the fiscal year 1998), an Officers' Certificate of the Issuer
stating that:
(i a review of the activities of the Issuer during such year and
of performance under this Indenture has been made under such Authorized
Officers' supervision; and
(ii to the best of such Authorized Officers' knowledge, based on
such review, the Issuer has complied with all conditions and covenants
under this Indenture throughout such year, or, if there has been a default
in the compliance of any such condition or covenant, specifying each such
default known to such Authorized Officers and the nature and status
thereof.
SECTION 3.10. Issuer May Consolidate, etc., Only on Certain
Terms. (a) The Issuer shall not consolidate or merge with or into
any other Person, unless:
(i the Person (if other than the Issuer) formed by or surviving
such consolidation or merger shall be a Person organized and existing
under the laws of the United States of America or any State and shall
expressly assume, by an indenture supplemental hereto, executed and
delivered to the Indenture Trustee, the Subordinate Note Insurer and the
Swap Counterparty, in form satisfactory to the Indenture Trustee, the
Subordinate Note Insurer and the Swap Counterparty, the due and punctual
payment of the principal of, interest on and any Noteholders' Interest
Basis 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 Event of 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, the Subordinate
Note Insurer and the Swap Counterparty) 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;
(vi the Issuer shall have delivered to the Indenture Trustee, the
Subordinate Note Insurer and the Swap Counterparty 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); and
(vii the Subordinate Note Insurer shall have given its prior written
consent.
(b) The Issuer shall not convey or transfer all or substantially all its
properties or assets, including those included in the Indenture Trust Estate, to
any Person, unless:
(i the Person that acquires by conveyance or transfer the
properties and assets of the Issuer the conveyance or transfer of which is
hereby restricted shall (A) be a United States citizen or a Person
organized and existing under the laws of the United States of America or
any State, (B) expressly assumes, by an indenture supplemental hereto,
executed and delivered to the Indenture Trustee and the Subordinate Note
Insurer, in form satisfactory to the Indenture Trustee, the Subordinate
Note Insurer and the Swap Counterparty, the due and punctual payment of
the principal of, interest on and Noteholders' Interest Basis 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, the Subordinate Note Insurer and the Swap Counterparty,
(D) unless otherwise provided in such supplemental indenture, expressly
agrees to indemnify, defend and hold harmless the Issuer, the Subordinate
Note Insurer and the Swap Counterparty 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 or Event of 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, the Subordinate
Note Insurer and the Swap Counterparty) 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;
(vi the Issuer shall have delivered to the Indenture Trustee, the
Subordinate Note Insurer and the Swap Counterparty 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); and
(vii each of the Subordinate Note Insurer and the Swap Counterparty
shall have given its prior written consent.
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 1998-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 and the
Subordinate Note Insurer stating that SMS Student Loan Trust 1998-A is to be so
released.
SECTION 3.12. No Other Business. Except as contemplated by this Indenture
or the other Basic Documents, 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. Except as contemplated by this Indenture or
the other Basic Documents, 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 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 Subordinate Note
Insurer, the Seller and the Company as contemplated by, and to the extent funds
are available for such purpose under, this Indenture, 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, the Rating Agencies, the Subordinate Note Insurer and the
Swap Counterparty 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 and the Subordinate Note Insurer, 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, the Subordinate Note Insurer and the Swap
Counterparty 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 Subordinate Note Insurer or the Swap Counterparty, 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 unless the Rating
Agency Condition shall have been satisfied in connection with such removal and
the Subordinate Note Insurer shall have given its prior written consent.
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 Basis
Carryover) thereon, (iv) Sections 3.03, 3.04, 3.05, 3.08, 3.10, 3.12, 3.13,
3.15, 3.16 and 3.17 (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, the Subordinate Note Insurer and the Swap
Counterparty 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
and the Subordinate Note Insurance Policy has been returned to the
Subordinate Note Insurer 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, the 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,
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, the Class A-2 Note Final Maturity Date or
the Subordinate Note Final Maturity Date, as the case may be, and all
amounts due to the Subordinate Note Insurer;
(B) the Issuer has paid or caused to be paid all other sums
payable hereunder and under the Swap Agreement by the Issuer; and
(C) the Issuer has delivered to the Indenture Trustee, the
Subordinate Note Insurer and the Swap Counterparty 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 monies 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 monies have been deposited with the
Indenture Trustee, of all sums due and to become due thereon for principal and
interest (including any Noteholders' Interest Basis Carryover), to the
Subordinate Note Insurer of all amounts due to the Subordinate Note Insurer
under the Basic Documents and to the Swap Counterparty of all amounts due to the
Swap Counterparty under the Swap Agreement; but such monies 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 Monies Held by Paying Agent. In connection with
the satisfaction and discharge of this Indenture with respect to the Notes, all
monies 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 monies.
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 June 2008 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 (one of which is from a Person that
is not the Seller or an Affiliate of the Seller) 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, the Subordinate Note Insurer, the Swap Counterparty 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 by the Issuer of any interest
(including, subject to the limitations of Sections 2.07(d) and 8.02, any
Noteholders' Interest Basis 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 by the Issuer of the
principal of any Note when the same becomes due and payable;
or
(iii default in the observance or performance of any covenant or
agreement of the Issuer made in this Indenture (other than a covenant or
agreement, a default in the observance or performance of which is
elsewhere in this Section specifically dealt with), or any representation
or warranty of the Issuer made in this Indenture or in any certificate or
other writing delivered pursuant hereto or in connection herewith proving
to have been incorrect in any material respect as of the time when the
same shall have been made, and such default shall continue or not be
cured, or the circumstance or condition in respect of which such
misrepresentation or warranty was incorrect shall not have been eliminated
or otherwise cured, for a period of 30 (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 or the Subordinate Note Insurer, 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, however, that, if at the end of such 30-day
period, the Indenture Trustee (with the prior written consent of the
Subordinate Note Insurer) 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.
SECTION 5.02. Acceleration of Maturity; Rescission and Annulment. If an
Event of Default should occur, then and in every such case the Indenture Trustee
(with the prior written consent of the Subordinate Note Insurer) or the
Noteholders of Notes representing not less than a majority of the Outstanding
Amount of the Notes (with the prior written consent of the Subordinate Note
Insurer) may declare all the Notes to be immediately due and payable, by a
notice in writing to the Issuer and the Swap Counterparty (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; provided, however, that if the Senior Notes have been paid in full, the
Subordinate Note Insurer shall have the exclusive right to determine whether or
not to accelerate payment on the Notes.
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,
either (x) the Noteholders of Notes representing a majority of the Outstanding
Amount of the Notes (with the prior written consent of the Subordinate Note
Insurer), by written notice to the Issuer and the Indenture Trustee, or (y) if
the Senior Notes are not Outstanding, the Subordinate Note Insurer 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
plus all amounts owed to the Subordinate Note Insurer and the Swap
Counterparty under the Basic Documents and the reasonable
compensation, expenses, disbursements and advances of the Indenture
Trustee, the Subordinate Note Insurer, the Swap Counterparty and
their respective 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 Basis 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 (with the prior written
consent of the Subordinate Note Insurer or, if the Senior Notes are not
Outstanding, at the written direction of the Subordinate Note Insurer), pay to
it, for the benefit of the Noteholders, the Subordinate Note Insurer and the
Swap Counterparty, the whole amount then due and payable on such Notes for
principal and interest (and any Noteholders' Interest Basis 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 Basis Carryover), at the rate specified in
Section 2.07 and all amounts due under the Swap Agreement 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, the Subordinate Note
Insurer, the Swap Counterparty and their respective 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 (with the prior written consent of the Subordinate Note Insurer)
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 monies 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 (with the
prior written consent of the Subordinate Note Insurer or, if the Senior Notes
are not Outstanding, at the direction of the Subordinate Note Insurer), proceed
to protect and enforce its rights and the rights of the Noteholders and the
Subordinate Note Insurer, 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 Proceeding 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, with the prior written consent of the Subordinate Note
Insurer, and shall, at the written direction of the Subordinate Note Insurer, by
intervention in such proceedings or otherwise:
(i to file and prove a claim or claims for the whole amount of
principal and interest (including any Noteholders' Interest Basis
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 Proceeding;
(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 Proceeding;
(iii to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute all amounts received with
respect to the claims of the Noteholders, the Subordinate Note Insurer,
the Swap Counterparty and 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, the Subordinate Note Insurer, the Swap Counterparty or the
Noteholders allowed in any judicial Proceeding relative to the Issuer, its
creditors and its property;
and any trustee, receiver, liquidator, custodian or other similar official in
any such Proceeding is hereby authorized by each of such Noteholders to make
payments to the Indenture Trustee, and, in the event that the Indenture Trustee
shall consent to the making of payments directly to such Noteholders, to pay to
the Indenture Trustee such amounts as shall be sufficient to cover reasonable
compensation to the Indenture Trustee, each predecessor Indenture Trustee and
their respective agents, attorneys and counsel, and all other expenses and
liabilities incurred, and all advances made, by the Indenture Trustee and each
predecessor Indenture Trustee except as a result of negligence or bad faith.
(e) Nothing herein contained shall be deemed to authorize the Indenture
Trustee to authorize or consent to or vote for or accept or adopt on behalf of
any Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Noteholder thereof or to
authorize the Indenture Trustee to vote in respect of the claim of any
Noteholder in any such proceeding except, as aforesaid, to vote for the election
of a trustee in bankruptcy or similar Person.
(f) All rights of action and of asserting claims under this Indenture, or
under any of the Notes, may be enforced by the Indenture Trustee without the
possession of any of the Notes or the production thereof in any trial or other
Proceeding relative thereto, and any such action or Proceeding 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
benefit of the Noteholders, the Subordinate Note Insurer and the Swap
Counterparty.
(g) In any Proceeding brought by the Indenture Trustee (and also any
Proceeding 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 Proceeding.
SECTION 5.04. Remedies; Priorities. (a) If an Event of Default shall have
occurred, the Indenture Trustee may, with the prior written consent of the
Subordinate Note Insurer or, if the Senior Notes are not Outstanding, at the
written direction of the Subordinate Note Insurer, shall 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 monies 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, the Subordinate Note Insurer, the Swap
Counterparty and the Noteholders; and
(iv sell the Indenture Trust Estate or any portion thereof or
rights or interests 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, the Subordinate Note
Insurer and the Swap Counterparty (but, in the case of the Swap Counterparty,
only to the extent that the Indenture Trustee determines that the Swap
Counterparty would not receive all amounts due under the Swap Agreement) consent
thereto, (B) the proceeds of such sale or liquidation distributable to the
Noteholders are sufficient to discharge in full all amounts then due and unpaid
upon such Notes for principal and interest and under the Swap Agreement 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, the Subordinate
Note Insurer and the Swap Counterparty (but, in the case of the Swap
Counterparty, only to the extent that the Indenture Trustee determines that the
Swap Counterparty would not receive all amounts due under the Swap Agreement).
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 Senior Noteholders for amounts due and unpaid on the
Senior Notes for interest (other than any Senior Noteholders' Interest
Basis Carryover) and to the Swap Counterparty for amounts due under the
Swap Agreement, to the extent that the Trust is the Defaulting Party (as
such term is defined in the Swap Agreement) (provided, however, that this
priority shall apply only with respect to any Trust Swap Payment Amount
(and not the remainder of the Termination Payment) to the extent that the
Trust is the Defaulting Party with respect to an Event of Default
specified in Section 5 (a)(i) of the Swap Agreement), ratably, without
preference or priority of any kind, according to the respective amounts
due and payable on the Senior Notes for interest and to the Swap
Counterparty for the amounts due and payable under the Swap Agreement to
the extent that the Swap Counterparty is not the Defaulting Party
(provided, however, that this priority shall apply only with respect to
any Trust Swap Payment Amount (and not the remainder of the Termination
Payment) to the extent that the Trust is the Defaulting Party with respect
to an Event of Default specified in Section 5 (a)(i) of the Swap
Agreement);
THIRD: to the Subordinate Note Insurer for all due and
unpaid Subordinate Note Insurance Policy Premiums;
FOURTH: to the Subordinate Noteholders for amounts due
and unpaid on the Subordinate Notes for interest (other than
any Subordinate Noteholders' Interest Basis Carryover),
ratably, without preference or priority of any kind, according
to the amounts due and payable on the Subordinate Notes for
interest;
FIFTH: to the 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 the 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 the Subordinate Note Insurer for all due and
unpaid Reimbursement Amounts;
EIGHTH: to the Servicer for due and unpaid Servicing
Fees;
NINTH: to Senior Noteholders for any unpaid Senior
Noteholders' Interest Basis 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 Basis Carryover;
TENTH: to Subordinate Noteholders for any unpaid
Subordinate Noteholders' Interest Basis Carryover;
ELEVENTH: to the Swap Counterparty for all amounts due under the Swap
Agreement, to the extent that the Swap Counterparty is the Defaulting
Party (as such term is defined in the Swap Agreement), the Early
Termination Date (as such term is defined therein) arises from a
Termination Event or the Trust is the Defaulting Party with respect to an
Event of Default specified in Section 5 (a)(i) of the Swap Agreement
(exclusive of any Trust Swap Payment Amount paid pursuant to Clause SECOND
hereof); and
TWELFTH: 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, the Indenture Trustee and
the Subordinate Note Insurer 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 (with the prior written
consent of the Subordinate Note Insurer), but need not, and shall, if the Senior
Notes are not Outstanding and the Subordinate Note Insurer so directs, 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 Basis Carryover) on the Notes, and the Indenture Trustee shall take
such desire into account when determining whether to maintain possession of the
Indenture Trust Estate. In determining whether to maintain possession of the
Indenture Trust Estate, the Indenture Trustee may, but need not, obtain and rely
upon an opinion (which shall be obtained at the expense of the Issuer) of an
Independent investment banking or accounting firm of national reputation as to
the feasibility of such proposed action and as to the sufficiency of the
Indenture Trust Estate for such purpose.
SECTION 5.06. Limitation of Suits. No Noteholder shall have any right to
institute any Proceeding, judicial or otherwise, with respect to this Indenture,
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless:
(i such Noteholder has previously given written
notice to the Indenture Trustee of a continuing Event of
Default;
(ii the Noteholders of not less than 25% of the Outstanding Amount
of the Notes have made written request to the Indenture Trustee to
institute such Proceeding in respect of such Event of Default in its own
name as Indenture Trustee hereunder;
(iii such Noteholder or Noteholders have offered to the Indenture
Trustee reasonable indemnity against the costs, expenses and liabilities
to be incurred in complying with such request;
(iv the Indenture Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute such
Proceeding;
(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 or the
Subordinate Note Insurer; and
(vi the Subordinate Note Insurer shall have given its prior written
consent if such action could adversely affect the interests of the
Subordinate Noteholders or the Subordinate Note Insurer.
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
pursuant to this Section 5.06, 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, the Subordinate Note Insurer 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, the Subordinate Note Insurer or
to such Noteholder, then and in every such case the Issuer, the Indenture
Trustee, the Subordinate Note Insurer 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, the Subordinate Note Insurer 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, the Subordinate Note
Insurer 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 or the Subordinate Note Insurer to exercise
any right or remedy accruing upon any Default or Event of Default shall impair
any such right or remedy or constitute a waiver of any such Default or Event of
Default or an acquiescence therein. Every right and remedy given by this Article
V or by law to the Indenture Trustee, to the Noteholders or to the Subordinate
Note Insurer may be exercised from time to time, and as often as may be deemed
expedient, by the Indenture Trustee, the Noteholders or the Subordinate Note
Insurer, as the case may be.
SECTION 5.11. Control by Noteholders. If the Senior Notes are Outstanding,
the Noteholders of a majority of the Outstanding Amount of the Notes, with the
prior written consent of the Subordinate Note Insurer, 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, however, 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;
and provided, further, that, subject to Section 6.01, the Indenture Trustee need
not take any action that it determines might involve it in liability or might
materially adversely affect the rights of any Noteholders not consenting to such
action.
SECTION 5.12. Waiver of Past Defaults. Prior to the time a judgment or
decree for payment of money due has been obtained as described in Section 5.02,
the Noteholders of not less than a majority of the Outstanding Amount of the
Notes, with the prior written consent of the Subordinate Note Insurer and the
Swap Counterparty, or, if the Senior Notes are not Outstanding, the Subordinate
Note Insurer may waive any past Default or Event of Default and its consequences
except a Default or Event of 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 Basis 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, the Subordinate Note Insurer and the Swap
Counterparty; provided, however, that all Noteholders and the Subordinate Note
Insurer may waive events described in clauses (a) and (b) hereof. In the case of
any such waiver, the Issuer, the Indenture Trustee, the Subordinate Note Insurer
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 Event of 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, and any Event of Default arising
therefrom shall be deemed to be cured and not to have occurred, for every
purpose of this Indenture to the extent specified in such waiver but no such
waiver shall extend to any subsequent or other Default or Event of 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 or the Subordinate Note Insurer, (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 Basis Carryover) on any Note on or after
the respective due dates expressed in such Note and in this Indenture (or, in
the case of redemption, on or after the Redemption Date).
SECTION 5.14. Waiver of Stay or Extension Laws. The Issuer covenants (to
the extent that it may lawfully do so) that it will not at any time insist upon,
or plead or in any manner whatsoever, claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter in
force, that may affect the covenants or the performance of this Indenture; and
the Issuer (to the extent that it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law, and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Indenture
Trustee or the Subordinate Note Insurer, 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, the Subordinate Note Insurer or the Noteholders shall
be impaired by the recovery of any judgment by the Indenture Trustee or the
Subordinate Note Insurer 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 or the Subordinate Note
Insurer 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, the Administrator and
the Swap Counterparty, as applicable, of each of their obligations to the Issuer
under or in connection with the Loan Sale Agreement, the Servicing Agreement,
the Administration Agreement and the Swap 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 or the Subordinate Note Insurer, including the transmission of
notices of default on the part of the Seller, the Servicer, the Administrator or
the Swap Counterparty thereunder and the institution of legal or administrative
actions or proceedings to compel or secure performance by the Seller, the
Servicer, the Administrator or the Swap Counterparty of each of their
obligations under the Loan Sale Agreement, the Servicing Agreement, the
Administration Agreement or the Swap Agreement.
(b) If an Event of Default has occurred, the Indenture Trustee, with the
written consent of the Subordinate Note Insurer, may, and at the direction
(which direction shall be in writing or by telephone (confirmed in writing
promptly thereafter)) of, if the Senior Notes are Outstanding, the Noteholders
of 66-2/3% of the Outstanding Amount of the Notes or, if the Senior Notes are
not Outstanding, of the Subordinate Note Insurer, shall, exercise all rights,
remedies, powers, privileges and claims of the Issuer against the Seller, the
Servicer, the Administrator or the Swap Counterparty under or in connection with
the Loan Sale Agreement, the Servicing Agreement, the Administration Agreement
or the Swap Agreement, including the right or power to take any action to compel
or secure performance or observance by the Seller, the Servicer, the
Administrator or the Swap Counterparty of each of their obligations to the
Issuer thereunder and to give any consent, request, notice, direction, approval,
extension or waiver under the Loan Sale Agreement, the Servicing Agreement, the
Administration Agreement or the Swap 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.
(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.
(k) Notwithstanding any other provision in this Agreement or the other
Basic Documents, nothing in this Agreement or the other Basic Documents shall be
construed to limit the Indenture Trustee's legal responsibility to the U.S.
Secretary of Education or a Guarantor in its capacity as Eligible Lender Trustee
for any violations of statutory or regulatory requirements that may occur with
respect to loans held by the Indenture Trustee, pursuant to 34 CFR 682.203(b) or
any successor provision thereto.
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 from the appropriate party. 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 from the appropriate party.
(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 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 written 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 if it is
actually known by, or written notice of the existence thereof has been delivered
to, a Responsible Officer of the Indenture Trustee, the Indenture Trustee shall
mail notice of the Default to each Noteholder, the Subordinate Note Insurer, the
Swap Counterparty and the Rating Agencies promptly after the Indenture Trustee
obtains such knowledge or receives such notice of the Default. Except in the
case of a Default in payment of principal of or interest (including any
Noteholders' Interest Basis Carryover) on any Note (including payments pursuant
to the mandatory redemption provisions of such Note), the Indenture Trustee may
withhold the notice to the Noteholders 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 (with a copy to the Subordinate Note Insurer) promptly of
any claim for which it may seek indemnity. Failure by the Indenture Trustee to
so notify the Issuer and the Administrator shall not relieve the Issuer or the
Administrator of its obligations hereunder and under the other Basic Documents.
The Issuer shall cause the Administrator to defend the claim and the
Administrator shall not be liable for any additional legal fees and expenses of
the Indenture Trustee after it has assumed such defense; provided, however,
that, in the event that there may be a conflict between the positions of the
Indenture Trustee and the Administrator in conducting the defense of such claim,
the Indenture Trustee shall be entitled to separate counsel the fees and
expenses of which shall be paid by the Administrator on behalf of the Issuer.
Neither the Issuer nor the Administrator need reimburse any expense or indemnify
against any loss, liability or expense incurred by the Indenture Trustee through
the Indenture Trustee's own willful misconduct, negligence or bad faith.
All amounts payable to the Indenture Trustee under this Section 6.07 shall
be payable solely by the Administrator or from amounts otherwise payable to the
Company under Section 2(e)(ii)(b)(vi) of the Administration Agreement. The
Indenture Trustee agrees to continue to perform its obligations under the Basic
Documents notwithstanding any failure of the Administrator to pay any amounts
owed to the Indenture Trustee.
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 Subordinate Note Insurer and
the Swap Counterparty. The Noteholders of a majority in Outstanding Amount of
the Notes may, with the prior written consent of the Subordinate Note Insurer
or, if the Senior Notes are not Outstanding, the Subordinate Note Insurer may,
remove the Indenture Trustee by so notifying the Indenture Trustee and may
appoint a successor Indenture Trustee acceptable to the Subordinate Note
Insurer. 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;
(iv the Indenture Trustee otherwise becomes incapable
of acting; or
(v the Indenture Trustee is in breach of any representation,
warranty, covenant or other material obligations of the Indenture Trustee
under any Basic Document.
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
Subordinate Note Insurer may, and, if it fails to do so, the Issuer shall,
promptly appoint a successor Indenture Trustee acceptable to the Subordinate
Note Insurer. Any successor Indenture Trustee shall be satisfactory to the Swap
Counterparty. A former Indenture Trustee shall not be liable for any acts or
omissions of any successor Indenture Trustee.
A successor Indenture Trustee shall deliver a written acceptance of its
appointment to the retiring Indenture Trustee, the Issuer and the Subordinate
Note Insurer 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, the Subordinate Note Insurer, the Swap Counterparty 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, with the prior written consent of the Subordinate Note Insurer, may
petition any court of competent jurisdiction for the removal of the Indenture
Trustee and the appointment of a successor Indenture Trustee acceptable to the
Subordinate Note Insurer.
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 or
banking association without any further act shall be the successor Indenture
Trustee; provided, however, that such corporation or banking association shall
be acceptable to the Subordinate Note Insurer and otherwise qualified and
eligible under Section 6.11. The Indenture Trustee shall provide the Rating
Agencies and the Subordinate Note Insurer prior written notice of any such
transaction.
In case at the time such successor or successors by merger, conversion or
consolidation to the Indenture Trustee shall succeed to the trusts created by
this Indenture any of the Notes shall have been authenticated but not delivered,
any such successor to the Indenture Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Indenture Trustee may authenticate such
Notes either in the name of any predecessor hereunder or in the name of the
successor to the Indenture Trustee; and in all such cases such certificates
shall have the full force which it is anywhere in the Notes or in this Indenture
provided that the certificate of the Indenture Trustee shall have.
SECTION 6.10. Appointment of Co-Trustee or Separate Trustee. (a)
Notwithstanding any other provisions of this Indenture, at any time, for the
purpose of meeting any legal requirement of any jurisdiction in which any part
of the Indenture Trust Estate may at the time be located, the Indenture Trustee,
with the prior written consent of the Subordinate Note Insurer, 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, the
Subordinate Note Insurer and the Swap Counterparty, 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 or the Subordinate Note Insurer 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
(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.Eligibility; Disqualification. The Indenture Trustee shall at
all times satisfy the requirements of TIA ss. 310(a). The Indenture Trustee
shall be acceptable to the Subordinate Note Insurer and 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.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 that has resigned or been removed
shall be subject to TIA ss. 311(a) to the extent indicated.
SECTION 6.Declaration of Default or Termination Event under the Swap
Agreement. The Indenture Trustee shall not declare the Swap Counterparty to be
in Default or declare a Termination Event under the Swap Agreement without the
prior written consent of the Subordinate Note Insurer.
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, and (b) at such other times as the Indenture
Trustee may request in writing, within ten days after receipt by the Issuer of
any such request, a list of similar form and content as of a date not more than
ten 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. The Indenture Trustee or, if the Indenture Trustee is
not the Note Registrar, the Issuer shall furnish the Subordinate Note Insurer,
in writing on an annual basis and at such other times as the Subordinate Note
Insurer may request, a copy of the list of the Noteholders.
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 and the
Subordinate Note Insurer 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, the
Subordinate Note Insurer and the Swap Counterparty as provided in Section 9.02
of the Trust Agreement, and shall provide notice to the Noteholders and the
Subordinate Note Insurer of any amendment or supplement to the Trust Agreement
as provided in Section 11.01 of the Trust Agreement.
SECTION 7.03. Reports by Issuer. (a) The Issuer shall:
(i file with the Indenture Trustee, within 15 days after the
Issuer is required to file the same with the Commission, copies of the
annual reports and of the information, documents and other reports (or
copies of such portions of any of the foregoing as the Commission may from
time to time by rules and regulations prescribe) which the Issuer may be
required to file with the Commission pursuant to Section 13 or 15(d) of
the Exchange Act;
(ii file with the Indenture Trustee and the Commission in
accordance with rules and regulations prescribed from time to time by the
Commission such additional information, documents and reports with respect
to compliance by the Issuer with the conditions and covenants of this
Indenture as may be required from time to time by such rules and
regulations; and
(iii supply to the Indenture Trustee (and the Indenture Trustee
shall transmit by mail to all Noteholders described in TIA 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 Subordinate Note Insurer, the Swap
Counterparty and 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 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 or Event of Default under this
Indenture and any right to proceed thereafter as provided in Article V.
SECTION 8.02. Trust Accounts. (a) On or prior to the Closing Date, the
Issuer shall cause the Administrator to establish and maintain, in the name of
the Indenture Trustee, for the benefit of the Noteholders and the Subordinate
Note Insurer, 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 Quarterly Payment Date, the Noteholders' Distribution Amount
and the Subordinate Note Insurance Policy Premium 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 and the Subordinate Note Insurer as provided in Sections
2(d)(v)(C) and 2(e)(iv)(C) 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 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 Quarterly Payment Date, the Indenture Trustee (or any other
Paying Agent) shall distribute all amounts received by it from the Collection
Account and the Reserve Account pursuant to the second sentence of paragraph (b)
above to Noteholders and the Subordinate Note Insurer 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 Basis Carryover) and the Subordinate Note
Insurer in the following amounts and in the following order of priority
(provided, however, that amounts received from the Subordinate Note Insurer
under the Subordinate Note Insurance Policy shall only be available to pay
amounts to the Subordinate Noteholders):
(i the Class A-1 Noteholders' Interest Distribution Amount, the
Class A-2 Noteholders' Interest Distribution Amount, the Trust Swap
Payment Amount, if any, and any Termination Payment (to the extent such
Termination Payment is owed to the Swap Counterparty following a default
by the Trust under the Swap Agreement other than an Event of Default by
the Trust specified in Section 5(a)(i) of the Swap Agreement), to the
Class A-1 Noteholders, the Class A-2 Noteholders and the Swap
Counterparty, respectively; provided, however, that if there are not
sufficient funds to pay the Class A-1 Noteholders' Interest Distribution
Amount, the Class A-2 Noteholders' Interest Distribution Amount, the Trust
Swap Payment Amount, if any, and any Termination Payment, the amounts so
received shall be applied to the payment of such Class A-1 Noteholders'
Interest Distribution Amount, the Class A-2 Noteholders' Interest
Distribution Amount, the Trust Swap Payment Amount, if any, and any
Termination Payment, on a pro rata basis based on the ratio of each such
amount to the total of such amounts;
(ii the Subordinate Note Insurance Policy Premium and
all overdue Subordinate Note Insurance Policy Premiums, to the
Subordinate Note Insurer;
(iii the Subordinate Noteholders' Interest Distribution
Amount, to the Subordinate Noteholders;
(iv 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(f))
until the Outstanding Amount of the Senior Notes is reduced to zero; and
(v after the Outstanding principal amount of the Senior Notes is
reduced to zero, the Subordinate Noteholders' Principal Distribution
Amount to the Subordinate Noteholders until the Outstanding principal
amount of the Subordinate Notes is reduced to zero.
(d) 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 the last sentence of
paragraph (b) above in the following amounts and order of priority:
(i to the Subordinate Note Insurer, any Reimbursement
Amounts;
(ii if the Revolving Period has terminated, any remaining such
amounts to Senior Noteholders (such amounts to be allocated among the
Senior Noteholders as provided in Section 8.02(f)) until the Outstanding
principal amount of the Notes is equal to the Pool Balance as of the close
of business on the last day of the related Collection Period and until the
Outstanding principal amount of the Senior Notes is reduced to zero;
(iii if the Revolving Period has terminated, any remaining such
amounts, after the Outstanding principal amount of the Senior Notes is
reduced to zero, to the Subordinate Noteholders until the Outstanding
principal amount of the Subordinate Notes is equal to the Pool Balance as
of the close of business on the last day of the related Collection Period;
(iv the Senior Noteholders' Interest Basis Carryover, if any, to
the Senior Noteholders; provided, however, that if insufficient funds are
received to pay the entire Senior Noteholders' Interest Basis Carryover,
the amounts so received shall be applied to the payment of the Class A-1
Noteholders' Interest Basis Carryover and the Class A-2 Noteholders'
Interest Basis Carryover on a pro rata basis based on the ratio of each
such amount to the total of such amounts;
(v the Subordinate Noteholders' Interest Basis
Carryover, if any, to the Subordinate Noteholders; and
(vi to the Swap Counterparty, all Termination Payments due under
the Swap Agreement, to the extent that the Swap Counterparty is the
Defaulting Party (as such term is defined in the Swap Agreement), the
Early Termination Date (as such term is defined therein) arises from a
Termination Event or the Trust is the Defaulting Party with respect to an
Event of Default specified in Section 5(a)(i) of the Swap Agreement
(exclusive of any Trust Swap Payment Amount paid pursuant to Clause SECOND
of Section 5.04 (b) hereof.
(e) 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 from the
Collateral Reinvestment Account pursuant to the last sentence of Section (b)
above in the following amounts and order of priority:
(i to the Swap Counterparty, an amount equal to any
unpaid Net Trust Swap Payment Carryover Shortfalls;
(ii after any Net Trust Swap Payment Carryover Shortfalls have been
paid to the Swap Counterparty, any remaining such amounts to the Senior
Noteholders (such amount to be allocated among the Senior Noteholders as
provided in Section 8.02(f)) until the Outstanding principal amount of the
Senior Notes is reduced to zero;
(iii after the Outstanding principal amount of the Senior Notes is
reduced to zero, any remaining such amounts to the Subordinate Noteholders
until the Outstanding principal amount of the Subordinate Notes is reduced
to zero.
(f) Amounts payable to Senior Noteholders as provided in Sections
8.02(c)(iv), 8.02(d)(ii) and 8.02(e)(ii) 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 principal amount of the Class A-1 Notes to zero;
(ii after the Outstanding principal amount of the Class A-1 Notes
is reduced to zero, to the Class A-2 Noteholders until the Outstanding
principal amount of the Class A-2 Notes is reduced to zero;
provided, however, 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.
(g) (i) Prior to 12:00 noon, New York City time, on the second
Business Day prior to each Quarterly Payment Date, the Indenture Trustee
shall determine if a Deficiency Amount for such Quarterly Payment Date
exists and, if so, shall complete the Notice and submit such Notice in
accordance with the Subordinate Note Insurance Policy to the Subordinate
Note Insurer no later than 12:00 noon, New York City time, on the second
Business Day immediately preceding such Quarterly Payment Date, as a claim
for an Insured Payment in an amount equal to such Deficiency Amount. If
any time the Indenture Trustee determines that a Preference Amount is
payable under the terms of the Subordinate Note Insurance Policy, the
Indenture Trustee shall take the actions required by the terms of the
Subordinate Note insurance Policy to obtain payment of such Preference
Amount by the Subordinate Note Insurer.
"Notice" under the Subordinate Note Insurance Policy shall be defined
as the telephonic or telegraphic notice, promptly confirmed in writing by
facsimile substantially in the form of Exhibit A attached to the
Subordinate Note Insurance Policy, the original of which is subsequently
delivered by registered or certified mail, from the Indenture Trustee
specifying the Insured Payment which shall be due and owing on the
applicable Quarterly Payment Date.
(ii Upon receipt of an Insured Payment from the Subordinate Note
Insurer on behalf of the Subordinate Noteholders, the Indenture Trustee
shall deposit such Insured Payment in the Collection Account and shall
distribute such amount only to pay the Subordinate Noteholders in
accordance with the terms of the Subordinate Note Insurance Policy, and
such amount may not be applied in any other manner. All such amounts on
deposit in the Collection Account shall remain uninvested. The Indenture
Trustee shall include on each Quarterly Payment Date the Deficiency Amount
for such Quarterly payment Date in the amount distributed to the
applicable Subordinate Noteholders pursuant to Sections 8.02(c)(iii) and
8.02(c)(v) of the Indenture. If on any Quarterly payment Date, the
Indenture Trustee or the Administrator determines that the Subordinate
Note Insurer has paid more under the Subordinate Note Insurance Policy
than is required by the terms thereof, the Indenture Trustee shall
promptly return the excess amount to the Subordinate Note Insurer.
(iii The Indenture Trustee shall keep a complete and accurate record
of the amount of Insured Payments paid into the Collection Account in
respect of the Subordinate Notes from monies received under the
Subordinate Note Insurance Policy. The Subordinate Note Insurer shall have
the right to inspect such records at reasonable times during normal
business hours upon two Business Days' prior notice to the Indenture
Trustee.
(iv The Indenture Trustee shall (i) receive as attorney-in-fact of
each Subordinate Noteholder any Insured Payment from the Subordinate Note
Insurer and (ii) distribute such Insured Payment to such Subordinate
Noteholders as set forth in subsection (ii) above. Insured Payments
disbursed by the Indenture Trustee from proceeds of the Subordinate Note
Insurance Policy shall not be considered payment by the Trust with respect
to the Subordinate Notes, nor shall such disbursement of such Insured
Payments discharge the obligations of the Trust with respect to the
amounts thereof, and the Subordinate Note Insurer shall become owner of
such amounts to the extent covered by such Insured Payments as the deemed
assignee of such Subordinate Noteholders. The Indenture Trustee hereby
agrees on behalf of each Subordinate Noteholder (and each Subordinate
Noteholder, by its acceptance of its Subordinate Note, hereby agrees) for
the benefit of the Subordinate Note Insurer that, to the extent the
Subordinate Note Insurer makes Insured Payments, either directly or
indirectly (as by paying through the Indenture Trustee), to the
Subordinate Noteholders, the Subordinate Note Insurer shall be subrogated
to the rights of the Subordinate Noteholder to the extent of such
payments.
(v All notices, statements, reports, notes or opinions required by
this Indenture or the other Basic Documents to be sent to any other party
hereto or thereto or to the Noteholders at any time shall also be sent to
the Subordinate Note Insurer.
(h) In the event that the Swap Counterparty is replaced by a successor
swap counterparty pursuant to the terms of the Swap Agreement, the Indenture
Trustee shall pay any amounts owing to the Swap Counterparty in accordance with
the terms of the Swap Agreement.
SECTION 8.03. General Provisions Regarding Accounts. (a) So long as no
Default or Event of 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 monies 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, the Subordinate Note
Insurer and the Swap Counterparty an Opinion of Counsel, acceptable to the
Indenture Trustee, the Subordinate Note Insurer and the Swap Counterparty, to
such effect. All Eligible Investments shall mature on the Business Day prior to
the Monthly Payment Date or Quarterly Payment Date, as applicable, and shall not
be sold prior to their maturity.
(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 (or the Administrator pursuant to Section 2.(a)(U)
of the Administration Agreement) 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 or an Event of
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 which mature prior to the next Monthly Payment Date or
Quarterly Payment Date, as applicable, and are not sold prior to their maturity.
SECTION 8.04. Release of Indenture Trust Estate. (a) Subject to the
payment of its fees and expenses pursuant to Section 6.07, the Indenture Trustee
may, and when required by the provisions of this Indenture shall, execute
instruments to release property from the lien of this Indenture, or convey the
Indenture Trustee's interest in the same, in a manner and under circumstances
that are not inconsistent with the provisions of this Indenture. No party
relying upon an instrument executed by the Indenture Trustee as provided in this
Article VIII shall be bound to ascertain the Indenture Trustee's authority,
inquire into the satisfaction of any conditions precedent or see to the
application of any monies.
(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 and all amounts due to the Subordinate Note Insurer and the Swap
Counterparty under the Basic Documents 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 by it, the Subordinate Note Insurer and the Swap
Counterparty 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 and the
Subordinate Note Insurer 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,
the Subordinate Note Insurer and the Swap Counterparty shall also require, as a
condition to such action, an Opinion of Counsel, in form and substance
satisfactory to the Indenture Trustee, the Subordinate Note Insurer and the Swap
Counterparty, 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, with respect to factual matters without independent
investigation thereof, 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 the prior written consent of the
Subordinate Note Insurer and the Swap Counterparty and the prior notice to the
Rating Agencies, the Issuer and the Indenture Trustee, when authorized by an
Issuer Order, at any time and from time to time, may enter into one or more
indentures supplemental hereto (which shall conform to the provisions of the
Trust Indenture Act as in force at the date of the execution thereof), in form
satisfactory to the Indenture Trustee, for any of the following purposes:
(i to correct or amplify the description of any property at any
time subject to the lien of this Indenture, or, better to assure, convey
and confirm unto the Indenture Trustee any property subject or required to
be subjected to the lien of this Indenture, or to subject to the lien of
this Indenture additional property;
(ii to evidence the succession, in compliance with the applicable
provisions hereof, of another Person to the Issuer, and the assumption by
any such successor of the covenants of the Issuer herein and in the Notes
contained;
(iii to add to the covenants of the Issuer, for the benefit of the
Noteholders, the Subordinate Note Insurer and the Swap Counterparty, 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, however, 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.
(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 the
prior written consent of the Subordinate Note Insurer and the Swap Counterparty
and 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 written consent of the
Subordinate Note Insurer, the Swap Counterparty and 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 Basis 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 Basis 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;
(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 Basis Carryover) 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 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. The Indenture Trustee shall provide a fully executed
copy of any supplemental indentures to the Indenture to the Subordinate Note
Insurer, the Swap Counterparty and each Rating Agency.
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, the Noteholders, the Subordinate Note Insurer and
the Swap Counterparty 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 and the Subordinate
Note Insurer as to any matter provided for in such supplemental indenture. If
the Issuer or the Indenture Trustee shall so determine, new Notes so modified as
to conform, in the opinion of the Indenture Trustee and the Issuer, to any such
supplemental indenture may be prepared and executed by the Issuer and
authenticated and delivered by the Indenture Trustee in exchange for Outstanding
Notes.
ARTICLE X
Redemption of Notes
SECTION 10.01. Redemption. (a) In the event that on the 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 and the payment to the Swap Counterparty of any prior unpaid Net
Trust Swap Payment Carryover Shortfalls as provided in Section 8.02(e), one or
more classes of the Notes will be redeemed in part, in the order of priority
specified in Section 8.02(e), in an aggregate principal amount equal to the
amount then on deposit in the Collateral Reinvestment Account after giving
effect to such Additional Fundings and such payment to the Swap Counterparty.
(b) In the event that 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 Basis 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, the Subordinate Note Insurer and the Swap
Counterparty 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 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, the Subordinate Note Insurer and the Swap Counterparty.
(d) No redemption of the Notes pursuant to Section 10.01(b) or 10.01(c)
shall occur until the Trustee shall have first paid to the Subordinate Note
Insurer all Reimbursement Amounts owed to the Subordinate Note Insurer and to
the Swap Counterparty any prior unpaid Net Trust Swap Carryover Shortfalls and
any other amounts owed to the Swap Counterparty under the Swap Agreement.
(e) Any redemption pursuant to this Section 10.01 shall require the
Subordinate Note Insurer's prior written consent if (i) a claim has previously
been made under the Subordinate Note Insurance Policy, (ii) such redemption
would result in a claim on the Subordinate Note Insurance Policy or (iii) such
redemption would result in any amount owing to the Subordinate Note Insurer or
any other Person and remaining unpaid under the Basic Documents.
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 the Subordinate Note Insurer, to the Swap
Counterparty and to each Noteholder, as of the close of business on the Record
Date preceding the applicable Redemption Date, at such Noteholder's address or
facsimile number appearing in the Note Register.
All notices of redemption shall state:
(i the Redemption Date,
(ii the Redemption Price and
(iii the place where such Notes are to be surrendered for payment of
the Redemption Price (which shall be the office or agency of the Issuer to
be maintained as provided in Section 3.02).
Notice of redemption of the Notes shall be given by the Indenture Trustee
in the name and at the expense of the Issuer. Failure to give notice of
redemption, or any defect therein, to any Noteholder of any Note shall not
impair or affect the validity of the redemption of any other Note.
SECTION 10.03. Notes Payable on Redemption Date. The Notes or portions
thereof to be redeemed shall on the Redemption Date become due and payable at
the Redemption Price and (unless the Issuer shall default in the payment of the
Redemption Price) no interest shall accrue on the Redemption Price for any
period after the date to which accrued interest is calculated for purposes of
calculating the Redemption Price.
ARTICLE XI
Miscellaneous
SECTION 11.01. Compliance Certificates and Opinions. (a) Upon any
application or request by the Issuer to the Indenture Trustee to take any action
under any provision of this Indenture, the Issuer shall furnish to the Indenture
Trustee, the Subordinate Note Insurer and the Swap Counterparty (i) an Officers'
Certificate of the Issuer stating that all conditions precedent, if any,
provided for in this Indenture relating to the proposed action have been
complied with, (ii) an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied with and (iii)
(if required by the TIA) an Independent Certificate from a firm of certified
public accountants meeting the applicable requirements of this Section, except
that, in the case of any such application or request as to which the furnishing
of such documents is specifically required by any provision of this Indenture,
no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture shall include:
(i a statement that each signatory of such certificate or opinion
has read or has caused to be read such covenant or condition and the
definitions herein relating thereto;
(ii a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(iii a statement that, in the opinion of each such signatory, such
signatory has made such examination or investigation as is necessary to
enable such signatory to express an informed opinion as to whether 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 and the Subordinate Note Insurer 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 and the Subordinate Note Insurer 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 and the Subordinate Note Insurer an Independent
Certificate as to the same matters, if the fair value to the Issuer of the
securities to be so deposited and of all other such securities made the
basis of any such withdrawal or release since the commencement of the then
current fiscal year of the Issuer, as set forth in the certificates
delivered pursuant to clause (i) above and this clause (ii), is 10% or
more of the Outstanding Amount of the Notes, but such a certificate need
not be furnished with respect to any securities so deposited, if the fair
value thereof to the Issuer as set forth in the related Officers'
Certificate is less than $25,000 or less than one percent of the
Outstanding Amount of the Notes.
(iii Other than any property released as contemplated by clause (v)
below, whenever any property or securities are to be released from the
lien of this Indenture, the Issuer shall also furnish to the Indenture
Trustee and the Subordinate Note Insurer 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 each 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 and the Subordinate Note Insurer 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 and the Subordinate Note Insurer 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,
the Subordinate Note Insurer and the Swap Counterparty every three months,
commencing July 25, 1998, 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, 1998
Officers' Certificate) were in the ordinary course of the Issuer's
business and that the proceeds thereof were applied in accordance with the
Basic Documents.
SECTION 11.02. Form of Documents Delivered to Indenture Trustee. In any
case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may certify
or give an opinion with respect to some matters and one or more other such
Persons as to other matters, and any such Person may certify or give an opinion
as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate of an Authorized Officer or Opinion of Counsel
may be based, insofar as it relates to factual matters, upon a certificate or
opinion of, or representations by, an officer or officers of the 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 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, Subordinate Note
Insurer, Swap Counterparty 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, by the Subordinate Note
Insurer, by the Swap Counterparty 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, by the Subordinate Note
Insurer, by the Swap Counterparty 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 1998-A, in care of First Chicago Delaware, Inc., as 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, 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 Subordinate Note Insurer by the
Issuer, the Indenture Trustee or the Eligible Lender Trustee shall be in
writing, personally delivered or mailed by certified mail, return receipt
requested, to the following address: MBIA Insurance Corporation, 113 King
Street, Armonk, New York 10504, Attention: Insured Portfolio
Management--Structured Finance (IPM-SF), SMS Student Loan Trust 1998-A,
$21,350,000 Floating Rate Asset-Backed Subordinate Notes, or at such other
address as shall be designated by written notice to the other parties.
Notices required to be given to the Swap Counterparty by the Issuer, the
Indenture Trustee or the Eligible Lender Trustee shall be in writing, personally
delivered or mailed by certified mail, return receipt requested, to the
following address: General Re Financial Products Corporation, Rockefeller
Center, 630 Fifth Avenue, Suite 450, New York, New York 10111, Attention: Head
of Operations, or at such other address as shall be designated by written notice
to the other parties.
Notices required to be given to the Rating Agencies by the Issuer, the
Indenture Trustee or the Eligible Lender Trustee shall be in writing, personally
delivered or mailed by certified mail, return receipt requested, to the
following address: (i) in the case of 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 IBCA, Inc., 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 or an Event
of Default.
SECTION 11.06. Alternate Payment and Notice Provisions. Notwithstanding
any provision of this Indenture or any of the Notes to the contrary, the Issuer
may enter into any agreement with any Noteholder providing for a method of
payment, or notice by the Indenture Trustee or any Paying Agent to such
Noteholder, that is different from the methods provided for in this Indenture
for such payments or notices, provided that such agreement is reasonably
acceptable to the Indenture Trustee. The Issuer will furnish to the Indenture
Trustee a copy of each such agreement and the Indenture Trustee will cause
payments to be made and notices to be given in accordance with such agreements.
SECTION 11.07. Conflict with Trust Indenture Act. If any provision hereof
limits, qualifies or conflicts with another provision hereof that is required to
be included in this Indenture by any of the provisions of the Trust Indenture
Act, such required provision shall control.
The provisions of TIA 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, the Subordinate Note Insurer, the Swap
Counterparty 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. The Subordinate Note Insurer, the Swap Counterparty and their
respective successors and assigns shall be express third-party beneficiaries to
this Indenture and shall be entitled to rely upon and directly enforce the
provisions of this Indenture; provided, however, that in the case of the
Subordinate Note Insurer such right to enforcement and the right to provide
consents and waivers pursuant to the provisions hereof or to take any other
actions as provided herein are conditioned upon there not having occurred and
being continuing an Insurer Default and, in the case of the Swap Counterparty,
such right to enforcement and the right to provide consents and waivers pursuant
to the provisions hereof or to take other actions as provided herein are
conditioned upon its not being in default under the Swap Agreement.
SECTION 11.12. [Reserved]
SECTION 11.13. Governing Law. This Indenture shall be construed in
accordance with the laws of the State of New York, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
SECTION 11.14. Counterparts. This Indenture may be executed
in any number of counterparts, each of which so executed shall be deemed to be
an original, but all such counterparts shall together constitute but one and the
same instrument.
SECTION 11.15. Recording of Indenture. If this Indenture is subject to
recording in any appropriate public recording offices, such recording is to be
effected by the Issuer and at its expense and shall be accompanied by an Opinion
of Counsel (which may be counsel to the Indenture Trustee or any other counsel
reasonably acceptable to the Indenture Trustee and the Subordinate Note Insurer)
to the effect that such recording is necessary either for the protection of the
Noteholders, the Swap Counterparty 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 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 proceedings, or other proceedings under any United States Federal or
state bankruptcy or similar law in connection with any obligations relating to
the Notes, this Indenture or any of the other Basic Documents.
SECTION 11.18. Inspection. The Issuer agrees that, on reasonable prior
notice, it will permit any representative of the Indenture Trustee or the
Subordinate Note Insurer, 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.
SECTION 11.19. Consents. With respect to any action to be taken hereunder
that requires the consent of a party hereto or of the Eligible Lender Trustee,
the Subordinate Note Insurer or the Swap Counterparty, such consent shall not be
unreasonably withhold, delayed or conditioned.
BWNY03/143694.8/11830/00274/2136 October 12, 1998
<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
1998-A
By: THE FIRST NATIONAL BANK
OF CHICAGO, not in its
individual capacity but
solely as Eligible
Lender Trustee
By:
Name:
Title:
BANKERS TRUST COMPANY, not in
its individual capacity
but solely as Indenture
Trustee
By:
Name:
Title:
Acknowledged and accepted as to the Granting Clause as of the day and year
first above written:
THE FIRST NATIONAL BANK OF CHICAGO, not in its Individual capacity but
solely as Eligible Lender Trustee
By:
Name:
Title:
BWNY03/143694.8/11830/00274/2136 October 12, 1998
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared ______________________, known
to me to be the person and officer whose name is subscribed to the foregoing
instrument and acknowledged to me that the same was the act of the said SMS
STUDENT LOAN TRUST 1998-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 ____ day of May, 1998.
Notary Public in and for
the State of New York
[Seal]
My commission expires:
BWNY03/143694.8/11830/00274/2136 October 12, 1998
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared ______________________, known
to me to be the person and officer whose name is subscribed to the foregoing
instrument and acknowledged to me that the same was the act of the said Bankers
Trust Company, a New York banking corporation, and that 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 ____ day of May, 1998.
Notary Public in and for
the State of New York
[Seal]
My commission expires:
BWNY03/143694.8/11830/00274/2136 October 12, 1998
<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. 784582 AP 3
$--------
No. R-
SMS STUDENT LOAN TRUST 1998-A
CLASS A-1 FLOATING RATE ASSET-BACKED SENIOR NOTES
SMS Student Loan Trust 1998-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 $150,000,000 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 Indenture dated
as of May 1, 1998 (the "Indenture"), 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 2005 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 (assigned 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 May 26, 1998 (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 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.
BWNY03/143694.8/11830/00274/2136 October 12, 1998
A-1-1
<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 1998-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:
BWNY03/143694.8/11830/00274/2136 October 12, 1998
A-1-2
<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-eighth 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 28, 1998.
As provided in Section 10.01(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 and payments to the Swap
Counterparty of any prior unpaid Net Trust Swap Payment Carryover Shortfalls as
of such 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 principal
amount of the Notes (with the prior written consent of the Subordinate Note
Insurer) shall have declared the Notes to be immediately due and payable in the
manner provided in Section 5.02 of the Indenture. All principal payments 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 28, 1998, 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 LIBOR Reset Period shall be equal to the lesser of
(i) Three-Month LIBOR for the related LIBOR Reset Period plus 0.04% the "Class
A-1 Note LIBOR Rate") and (ii) the adjusted Student Loan Rate for such Quarterly
Interest Period; provided, however, that, notwithstanding the foregoing, the
Class A-1 Note LIBOR Rate for the first Quarterly Interest Period shall be equal
to the Class A-1 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 (i) the numerator of which is equal to the
sum of the Expected Interest Collections and, if the Swap Agreement is still in
effect, the Net Trust Swap Receipt, if any, for such Quarterly Interest Period
less the sum of the Servicing Fee, the Administration Fee, the Subordinate Note
Insurance Policy Premium and, if the Swap Agreement is still in effect, the Net
Trust Swap Payment, if any, with respect to such Quarterly Interest Period and
the denominator of which is the aggregate principal amount of the Notes
outstanding as of the last day of such Quarterly Interest Period.
Pursuant to the Administration Agreement, the Administrator will determine
Three-Month LIBOR for purposes of calculating the Class A-1 Note LIBOR Rate for
each Quarterly Interest Period on the second business day prior to the
commencement of each LIBOR Reset period within such Quarterly Interest Period
(or, in the case of the initial LIBOR Reset Period, on the second business day
prior the Closing Date) (each, a "LIBOR Determination Date"). Fur purposes of
calculating Three-Month LIBOR, a business day is any day on which banks in The
City of New York and the City of London are open for the transaction of
international business. Interest due for any Quarterly Interest Period will be
determined based on the actual number of days in such Quarterly Interest Period
over a 360-day year.
"Three-Month LIBOR" means, with respect to any LIBOR Reset Period, the
London interbank offered rate for deposits in U.S. dollars having a maturity of
three months commencing on the related LIBOR Determination Date (the "Index
Maturity") which appears on Telerate Page 3750 as of 11:00 a.m. London time, on
such LIBOR Determination Date. If such rate does not appear on Telerate Page
3750, the rate for that day will be determined on the basis of the rates at
which deposits in U.S. dollars, having the Index Maturity and in a principal
amount of not less than U.S. $1,000,000, are offered at approximately 11:00 a.m.
London time, on such LIBOR Determination Date to prime banks in the London
interbank market by the Reference Banks. The Administrator will request the
principal London office of each such Reference Bank 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 The City of New York, selected by the Administrator, at
approximately 11:00 a.m. New York time, on such LIBOR Determination Date for
loans in U.S. dollars to leading European banks having the Index Maturity and in
a principal amount equal to an amount of not less than U.S. $1,000,000;
provided, however, that if the banks selected as aforesaid are not quoting as
mentioned in this sentence, Three- Month LIBOR in effect for the applicable
LIBOR Reset Period will be Three-Month LIBOR in effect for the previous LIBOR
Reset Period.
"LIBOR Reset Period" means the three-month period commencing on the 28th
day (or, if any such date is not a business day, on the next succeeding business
day) of each January, April, July and October 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 Class A-1 Noteholders' Interest Carryover that may exist on any
Quarterly Payment Date 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 Quarterly Payment Date, to the extent
not in full payment of this Note, shall be made by wire transfer or 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 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 its 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 its 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
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 Estate. Each Noteholder, by its acceptance of a Note (and
each Note Owner by its 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 Estate.
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 prior written consent of the Subordinate Note Insurer, the Swap
Counterparty and 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, with the
prior written consent of the Subordinate Note Insurer and the Swap Counterparty,
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 with the consent of the Subordinate Note Insurer and the Swap
Counterparty but 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, none of 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, or 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.
BWNY03/143694.8/11830/00274/2136 October 12, 1998
A-1-3
<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.
BWNY03/143694.8/11830/00274/2136 October 12, 1998
<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. 784582 AQ 1
$--------
No. R-
SMS STUDENT LOAN TRUST 1998-A
CLASS A-2 FLOATING RATE ASSET-BACKED SENIOR NOTES
SMS Student Loan Trust 1998-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 $433,650,000 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 May 1, 1998 (the "Indenture"), 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 July 2026 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 (assigned 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 May 26, 1998 (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 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.
BWNY03/143694.8/11830/00274/2136 October 12, 1998
A-2-1
<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 1998-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:
BWNY03/143694.8/11830/00274/2136 October 12, 1998
A-2-2
<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 (i) the end of the Revolving Period and (ii) the outstanding
principal amount of the Class A-1 Notes has been reduced to zero in an amount
described in the Indenture. "Quarterly Payment Date" means the twenty-eighth 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 28, 1998.
As provided in Section 10.01(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 and payments to the Swap
Counterparty of any prior unpaid Net Trust Swap Payment Carryover Shortfalls as
of such 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 principal
amount of the Notes (with the prior written consent of the Subordinate Note
Insurer) shall have declared the
Notes to be immediately due and payable in the manner provided in Section 5.02
of the Indenture. All principal payments 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 Quarterly Payment
Date, commencing July 28, 1998, on the principal amount outstanding of such
Notes until the principal amount thereof is paid in full, at a rate per annum
equal to the Class A-2 Note Rate. The "Class A-2 Note Rate" for each Quarterly
Payment Date and the related LIBOR Reset Period shall be equal to the lesser of
(i) Three-Month LIBOR for the related LIBOR Reset Period plus 0.12% the "Class
A-2 Note LIBOR Rate") and (ii) the Adjusted Student Loan Rate for such Quarterly
Interest Period; provided, however, that, notwithstanding the foregoing, the
Class A-2 Note LIBOR Rate for the first Quarterly Interest Period shall be equal
to the Class A-2 Note Rate for such Quarterly Interest Period. The "Adjusted
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, (i) the numerator of which is equal
to the sum of Expected Interest Collections and, if the Swap Agreement is still
in effect, the Net Trust Swap Receipt, if any, for such Quarterly Interest
Period less the sum of the Servicing Fee, the Administration Fee, the
Subordinate Note Insurance Policy Premium and, if the Swap Agreement is still in
effect, the Net Trust Swap Payment, if any, with respect to such Quarterly
Interest Period and (ii) the denominator of which is the aggregate principal
amount of the Notes outstanding as of the last day of such Quarterly Interest
Period.
Pursuant to the Administration Agreement, the Administrator will determine
Three-Month LIBOR for purposes of calculating the Class A-2 Note LIBOR Rate for
each Quarterly Interest Period on the second business day prior to the
commencement of each LIBOR Reset Period within such Quarterly Interest Period
(or, in the case of the initial LIBOR Reset Period, on the second business day
prior the Closing Date) (each, a "LIBOR Determination Date"). For purposes of
calculating Three-Month LIBOR, a business day is any day on which banks in The
City of New York and the City of London are open for the transaction of
international business. Interest due for any Quarterly Interest Period will be
determined based on the actual number of days in such Quarterly Interest Period
over a 360-day year.
"Three-Month LIBOR" means, with respect to any LIBOR Reset Period, the
London interbank offered rate for deposits in U.S. dollars having a maturity of
three months commencing on the related LIBOR Determination Date (the "Index
Maturity") which appears on Telerate Page 3750 as of 11:00 a.m. London time, on
such LIBOR Determination Date. If such rate does not appear on Telerate Page
3750, the rate for that day will be determined on the basis of the rates at
which deposits in U.S. dollars, having the Index Maturity and in a principal
amount of not less than U.S. $1,000,000, are offered at approximately 11:00 a.m.
London time, on such LIBOR
Determination Date to prime banks in the London interbank market by the
Reference Banks. The Administrator will request the principal
London office of each such Reference Bank 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 The City of New York, selected by the Administrator, at approximately
11:00 a.m. New York time, on such LIBOR Determination Date for loans in U.S.
dollars to leading European banks having the Index Maturity and in a principal
amount equal to an amount of not less than U.S. $1,000,000; provided, however,
that if the banks selected
-------- -------
as aforesaid are not quoting as mentioned in this sentence, Three- Month LIBOR
in effect for the applicable LIBOR Reset Period will be Three-Month LIBOR in
effect for the previous LIBOR Reset Period.
"LIBOR Reset Period" means the three-month period commencing on the 28th
day (or, if any such date is not a business day, on the next succeeding business
day) of each January, April, July and October 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 Class A-2 Noteholders' Interest Basis Carryover that may exist on any
Quarterly Payment Date shall be payable to the Class A-2 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 Quarterly Payment Date, to the extent
not in full payment of this Note, shall be made by wire transfer or 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-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 its 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 its 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
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 Estate. Each Noteholder, by its acceptance of a Note (and
each Note Owner by its 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 Estate.
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 prior written consent of the Subordinate Note Insurer, the Swap
Counterparty and 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, with the
prior written consent of the Subordinate Note Issuer and the Swap Counterparty,
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 with the prior written consent of the Subordinate Note Insurer and
the Swap Counterparty but 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, none of 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, or 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.
BWNY03/143694.8/11830/00274/2136 October 12, 1998
A-2-3
<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.
BWNY03/143694.8/11830/00274/2136 October 12, 1998
<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 THIS 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 WHO 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.
NO RESALE OR OTHER TRANSFER OF THIS SUBORDINATE NOTE MAY BE MADE UNLESS THE
SELLER AND THE INDENTURE TRUSTEE SHALL HAVE RECEIVED A REPRESENTATION LETTER OR
OPINION OF COUNSEL FROM THE TRANSFEREE OF THIS SUBORDINATE NOTE, ACCEPTABLE TO
AND IN FORM AND SUBSTANCE SATISFACTORY TO THE SELLER AND THE INDENTURE TRUSTEE,
TO THE EFFECT THAT IF SUCH TRANSFEREE (OR ANY PERSON OR ENTITY FOR WHOM SUCH
TRANSFEREE IS ACTING AS AGENT OR CUSTODIAN IN CONNECTION WITH THE ACQUISITION OF
THIS SUBORDINATE NOTE) IS A PARTNERSHIP, GRANTOR TRUST OR S CORPORATION FOR
FEDERAL INCOME TAX PURPOSES (A "FLOW- THROUGH ENTITY"), ANY SUBORDINATE NOTES
OWNED BY OR ON BEHALF OF SUCH FLOW-THROUGH ENTITY WILL REPRESENT LESS THAN 50%
OF THE VALUE OF ALL THE ASSETS OWNED BY SUCH FLOW-THROUGH ENTITY AND NO SPECIAL
ALLOCATION OF INCOME, GAIN, LOSS, DEDUCTION OR CREDIT FROM SUCH SUBORDINATE
NOTES WILL BE MADE AMONG THE BENEFICIAL OWNERS OF SUCH FLOW-THROUGH ENTITY.
NO SALE, PLEDGE OR OTHER TRANSFER OF THIS NOTE MAY BE MADE TO ANY PERSON OTHER
THAN A CITIZEN OR RESIDENT OF THE UNITED STATES, A CORPORATION, PARTNERSHIP OR
OTHER ENTITY CREATED OR ORGANIZED IN, OR UNDER THE LAWS OF, THE UNITED STATES OR
ANY POLITICAL SUBDIVISION THEREOF, OR AN ESTATE WHOSE INCOME IS SUBJECT TO
UNITED STATES FEDERAL INCOME TAX REGARDLESS OF ITS SOURCE, OR A TRUST IF A COURT
WITHIN THE UNITED STATES IS ABLE TO EXERCISE PRIMARY SUPERVISION OVER THE
ADMINISTRATION OF THE TRUST AND ONE OR MORE UNITED STATES FIDUCIARIES HAVE THE
AUTHORITY TO CONTROL ALL SUBSTANTIAL DECISIONS OF THE TRUST. BY ITS ACCEPTANCE
OF THIS NOTE THE HOLDER HEREOF IS DEEMED TO REPRESENT TO THE SELLER AND THE
INDENTURE TRUSTEE THAT IT IS A "UNITED STATES PERSON" AS DEFINED IN ss.
7701(A)(30) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED.
SECTION 2.04 OF THE INDENTURE CONTAINS FURTHER RESTRICTIONS ON THE
TRANSFER AND RESALE OF THIS NOTE. EACH TRANSFEREE OF THIS NOTE, BY
ACCEPTANCE HEREOF, IS DEEMED TO HAVE ACCEPTED THIS NOTE SUBJECT TO
THE FOREGOING RESTRICTIONS ON TRANSFERABILITY.
EACH NOTEHOLDER, BY ITS ACCEPTANCE OF A NOTE, COVENANTS AND AGREES THAT BY
ACCEPTING THE BENEFITS OF THE INDENTURE THAT SUCH NOTEHOLDER 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.
BWNY03/143694.8/11830/00274/2136 October 12, 1998
A-3-1
<PAGE>
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.
PAYMENT, ON EACH QUARTERLY PAYMENT DATE, OF THE SUBORDINATE NOTEHOLDERS'
INTEREST DISTRIBUTION AMOUNT AND, ON THE SUBORDINATE NOTE FINAL MATURITY DATE,
OF THE SUBORDINATE NOTEHOLDERS' PRINCIPAL DISTRIBUTION AMOUNT IS UNCONDITIONALLY
AND IRREVOCABLY GUARANTEED PURSUANT TO A SUBORDINATE NOTE INSURANCE POLICY
ISSUED BY MBIA INSURANCE CORPORATION.
REGISTERED CUSIP NO. 784582 AR 9
$---------
No. R-
SMS STUDENT LOAN TRUST 1998-A
FLOATING RATE ASSET-BACKED SUBORDINATE NOTES
SMS Student Loan Trust 1998-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 $21,350,000 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 May 1, 1998 (the "Indenture"), 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 October 2033 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 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 May 26, 1998 (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 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.
BWNY03/143694.8/11830/00274/2136 October 12, 1998
A-3-2
<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 1998-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:
BWNY03/143694.8/11830/00274/2136 October 12, 1998
A-3-3
<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 amount of the Senior Notes has been
paid in its entirety, in an amount described on the face hereof. "Quarterly
Payment Date" means the twenty-eighth 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 28, 1998.
As provided in Section 10.01(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 and payments
to the Swap Counterparty of any prior unpaid Net Trust Swap Payment Carryover
Shortfalls as of such 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 (with the prior written consent of the Subordinate Note Insurer) shall
have declared the Notes to be immediately due and payable in the manner provided
in Section 5.02 of the Indenture. All principal payments 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 Quarterly
Payment Date, commencing July 28, 1998, 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
Quarterly Payment Date and the related Quarterly Interest Period shall be equal
to the lesser of (i) Three-Month LIBOR for the related LIBOR Reset Period plus
0.27% (the "Subordinate Note LIBOR Rate") and (ii) the Adjusted Student Loan
Rate for such Quarterly Interest Period; provided, however, that,
notwithstanding the foregoing, the Subordinate Note Rate for the first Quarterly
Interest Period shall be equal to the Subordinate Note LIBOR Rate for such
Quarterly Interest Period. The "Adjusted Student Loan Rate" for any Quarterly
Interest Period will equal the product of (a) the quotient obtained by dividing
(i) 365 (or 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 (i) the numerator of which is equal to the sum of the Expected Interest
Collections and, if the Swap Agreement is still in effect, the Net Trust Swap
Receipt, if any, for such Quarterly Interest Period less the sum of the
Servicing Fee, the Administration Fee, the Subordinate Note Insurance Policy
Premium and, if the Swap Agreement is still in effect, the Net Trust Swap
Payment, if any, with respect to such Quarterly Interest Period and the
denominator of which is the aggregate principal amount of the Notes outstanding
as of the last day of such Quarterly Interest Period.
Pursuant to the Administration Agreement, the Administrator will determine
Three-Month LIBOR for purposes of calculating the Subordinate Note LIBOR Rate
for each Quarterly Interest Period on the second business day prior to the
commencement of each LIBOR Reset period within such Quarterly Interest Period
(or, in the case of the initial LIBOR Reset Period, on the second business day
prior the Closing Date) (each, a "LIBOR Determination Date"). Fur purposes of
calculating Three-Month LIBOR, a business day is any day on which banks in The
City of New York and the City of London are open for the transaction of
international business. Interest due for any Quarterly Interest Period will be
determined based on the actual number of days in such Quarterly Interest Period
over a 360-day year.
"Three-Month LIBOR" means, with respect to any LIBOR Reset Period, the
London interbank offered rate for deposits in U.S. dollars having a maturity of
three months commencing on the related LIBOR Determination Date (the "Index
Maturity") which appears on Telerate Page 3750 as of 11:00 a.m. London time, on
such LIBOR Determination Date. If such rate does not appear on Telerate Page
3750, the rate for that day will be determined on the basis of the rates at
which deposits in U.S. dollars, having the Index Maturity and in a principal
amount of not less than U.S. $1,000,000, are offered at approximately 11:00 a.m.
London time, on such LIBOR
Determination Date to prime banks in the London interbank market by the
Reference Banks. The Administrator will request the principal London office of
each such Reference Bank 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 few than two quotations are provided, the rate for that
day will be the arithmetic mean of the rates quoted by major banks in The City
of New York, selected by the Administrator, at approximately 11:00 a.m. New York
time, on such LIBOR Determination Date for loans in U.S. dollars to leading
European banks having the Index Maturity and in a principal amount equal to an
amount of not less than U.S. $1,000,000; provided, however, that if the banks
selected as
-------- -------
aforesaid are not quoting as mentioned in this sentence, Three- Month LIBOR in
effect for the applicable LIBOR Reset Period will be Three-Month LIBOR in effect
for the previous LIBOR Reset Period.
"LIBOR Reset Period" means the three-month period commencing on the 28th
day (or, if any such date is not a business day, on the next succeeding business
day) of each January, April, July and October 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 Basis Carryover that may exist on
any Quarterly Payment Date shall be payable to the Subordinate 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 Quarterly Payment Date, to the extent
not in full payment of this Note, shall be made, if the original principal
amount of this Note is $1,000,000 or more, by wire transfer and otherwise 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.
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
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, by its acceptance of a 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, by its acceptance of 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
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 Estate. Each Noteholder, by its acceptance of 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 Estate.
Prior to the due presentment for registration of transfer of this Note,
the Issuer, the Indenture Trustee, the Subordinate Note Insurer 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 none of the Issuer, the Indenture Trustee, the
Subordinate Note Issuer or 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 prior written consent of the Subordinate Note Insurer, the Swap
Counterparty and 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, with the
prior written consent of the Subordinate Note Insurer and the Swap Counterparty,
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 with the prior written consent of the Subordinate Note Insurer and
the Swap Counterparty but 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, none of 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, or 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.
BWNY03/143694.8/11830/00274/2136 October 12, 1998
A-3-4
<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.
BWNY03/143694.8/11830/00274/2136 October 12, 1998
<PAGE>
EXHIBIT B TO THE INDENTURE
Senior Note Depository Agreement
BWNY03/143694.8/11830/00274/2136 October 12, 1998
<PAGE>
EXHIBIT C
TO THE INDENTURE
FORM OF TRANSFEROR CERTIFICATE
[DATE]
USA Group Secondary Market Services, Inc.
30 South Meridian Street
Indianapolis, Indiana 46204-3503
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 1998-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:
BWNY03/143694.8/11830/00274/2136 October 12, 1998
A-3-1
<PAGE>
EXHIBIT D
FORM OF INVESTMENT LETTER
USA Group Secondary Market Services, Inc.
30 South Meridian Street
Indianapolis, Indiana 46204-3503
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 1998-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 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 (a "QIB") 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 QIBs). 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. We are a citizen or resident of the United States, a corporation,
partnership or other entity created or organized in, or under the laws of,
the United States or any political subdivision thereof, or an estate whose
income is subject to United States federal income tax regardless of its
source, or a trust if a court within the United States is able to exercise
primary supervision over the administration of the trust and one or more
Untied States fiduciaries have the authority to control all substantial
decisions of the trust.
4. With respect to any purchaser that is a partnership, grantor trust
or S corporation (a "Flow-Through Entity") for federal income tax
purposes, less than _____% 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.
5. We understand that the Seller, the Issuer, Credit Suisse 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.
6. 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: ______________________
BWNY03/143694.8/11830/00274/2136 October 12, 1998
D-1
<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.
D-2
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 May 1, 1998
BWNY03/143740
<PAGE>
TABLE OF CONTENTS
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. Reserved....................................... 3
SECTION 2.08. Title to Trust Property........................ 3
SECTION 2.09. Representations and Warranties of the
Seller and the Company. .......... 3
SECTION 2.10. Tax Treatment.................................. 5
SECTION 2.11. Liability of Noteholders....................... 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......................... 8
SECTION 4.03. Restrictions on Company's Power................ 9
ARTICLE V
Certain Duties
SECTION 5.01. No Segregation of Monies; No Interest.......... 9
BWNY03/143740
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<PAGE>
SECTION 5.02. Accounting and Reports to the
Noteholders, the Internal Revenue
Service and Others................. 9
SECTION 5.03. Incentive Programs............................. 10
ARTICLE VI
Authority and Duties of Eligible Lender Trustee
SECTION 6.01. General Authority.............................. 10
SECTION 6.02. General Duties................................. 10
SECTION 6.03. Action upon Instruction........................ 11
SECTION 6.04. No Duties Except as Specified in this
Agreement, the Loan Sale Agreement, the
Servicing Agreement, the Administration
Agreement or in Instructions....... 12
SECTION 6.05. No Action Except under Specified
Documents or Instructions.......... 13
SECTION 6.06. Restrictions................................... 13
SECTION 6.07. Origination of Consolidation Loans
during the Revolving Period........ 13
ARTICLE VII
Concerning the Eligible Lender Trustee
SECTION 7.01. Acceptance of Trusts and Duties................ 15
SECTION 7.02. Furnishing of Documents........................ 17
SECTION 7.03. Representations and Warranties................. 17
SECTION 7.04. Reliance; Advice of Counsel.................... 18
SECTION 7.05. Not Acting in Individual Capacity.............. 19
SECTION 7.06. Eligible Lender Trustee Not Liable for
Notes or Student Loans............. 19
SECTION 7.07. Eligible Lender Trustee May Own Trust
Notes.............................. 20
SECTION 7.08. Licenses....................................... 20
ARTICLE VIII
Compensation of Eligible Lender Trustee
SECTION 8.01. Eligible Lender Trustee's Fees and
Expenses........................... 20
SECTION 8.02. Payments to the Eligible Lender Trustee........ 20
ARTICLE IX
Termination of Trust Agreement
SECTION 9.01. Termination of Trust Agreement................. 20
BWNY03/143740
ii
<PAGE>
SECTION 9.02. Reserved....................................... 21
ARTICLE X
Successor Eligible Lender Trustees and
Additional Eligible Lender Trustees
SECTION 10.01. Eligibility Requirements for Eligible
Lender Trustee.................... 21
SECTION 10.02. Resignation or Removal of Eligible
Lender Trustee.................... 22
SECTION 10.03. Successor Eligible Lender Trustee............. 23
SECTION 10.04. Merger or Consolidation of Eligible
Lender Trustee.................... 24
SECTION 10.05. Appointment of Co-Eligible Lender
Trustee or Separate Eligible Lender
Trustee........................... 24
ARTICLE XI
Miscellaneous
SECTION 11.01. Supplements and Amendments.................... 26
SECTION 11.02. No Legal Title to Trust Estate in
Company........................... 27
SECTION 11.03. Limitations on Rights of Others............... 28
SECTION 11.04. Notices....................................... 28
SECTION 11.05. Severability.................................. 29
SECTION 11.06. Separate Counterparts......................... 29
SECTION 11.07. Successors and Assigns........................ 29
SECTION 11.08. No Petition................................... 29
SECTION 11.09. No Recourse................................... 30
SECTION 11.10. Headings...................................... 30
SECTION 11.11. Governing Law................................. 30
SECTION 11.12. Responsibility to Secretary and
Guarantors........................ 30
SECTION 11.13. Third-Party Beneficiaries.................. 30
SECTION 11.14. Consents....................................31
EXHIBIT A Certificate of Trust of SMS Student Loan Trust
1998-A
BWNY03/143740
iii
<PAGE>
TRUST AGREEMENT dated as of May 1, 1998, among USA GROUP
SECONDARY MARKET SERVICES, INC., a Delaware corporation, as depositor (the
"Seller"), 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 "Eligible Lender Trustee").
The Seller, 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 May 1, 1998, among the
SMS Student Loan Trust 1998-A, as Issuer, the Seller, 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 1998-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
Seller.
SECTION 2.03. Purposes and Powers. The purpose of the
Trust is to engage in the following activities:
(i) to issue the Notes pursuant to the Indenture and
to sell the Notes in one or more transactions;
(ii) 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
BWNY03/143740
1
<PAGE>
expenses of the Trust and to pay the balance to the Seller
pursuant to the Loan Sale Agreement;
(iii) to enter into the Swap Agreement;
(iv) to obtain the Subordinate Note Insurance Policy;
(v) 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;
(vi) to assign, grant, transfer, pledge, mortgage and convey
the Trust Estate pursuant to the Indenture;
(vii) to enter into and perform its obligations under the
Basic Documents to which it is to be a party;
(viii) 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
(ix) 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
Seller 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 Seller 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
BWNY03/143740
2
<PAGE>
acknowledges receipt in trust from the Seller, 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 Seller shall pay the
organizational expenses of the Trust as they may arise or shall, upon the
request of the Eligible Lender Trustee, promptly reimburse the Eligible Lender
Trustee for any such expenses paid by the Eligible Lender Trustee.
SECTION 2.06. Declaration of Trust. The Eligible Lender
Trustee hereby declares that it will hold the Trust Estate in trust upon and
subject to the conditions set forth herein for the use and benefit of the
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. [Reserved.]
SECTION 2.08. Title to Trust Property. Subject to the
Indenture, 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, however, 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
Seller and the Company. (a) Each of the Company and the Seller
hereby represents and warrants, as to itself, to the Eligible
Lender Trustee, the Subordinate Note Insurer and the Swap
Counterparty that:
(i) 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 currently conducted (subject, with respect to the
Seller and
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its Student Loans, to the vesting of legal title thereto in NBD or
another eligible lender, as trustee for the Seller).
(ii) 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.
(iii) 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 have been duly authorized by
it by all necessary corporate action; the Seller has full power and
authority to transfer and assign the property to be transferred and
assigned to, and to be deposited with, the Trustee; and the Seller has
duly authorized such transfer and assignment to the Trust by all
necessary corporate action.
(iv) 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.
(v) 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 certificate 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.
(vi) 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 Seller or its properties: (A) asserting the
invalidity of
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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.
SECTION 2.10. Tax Treatment. The Seller 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 Estate. Each of the Seller 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 Estate.
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).
SECTION 2.11. Liability of Noteholders. No Noteholder
shall have any personal liability or obligation to or for the
Trust and the Certificate of Trust shall be fully paid and
nonassessable.
ARTICLE III
Ownership
SECTION 3.01. Beneficial Ownership. Upon the formation of the
Trust by the contribution by the Seller pursuant to Section 2.05, the Seller
shall be the sole beneficial owner of the Trust. Concurrently with the transfer
of the Initial Financed Student Loans to the Trust pursuant to the Loan Sale
Agreement, the Seller 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, the Indenture Trustee, the Subordinate
Note Insurer and the Swap Counterparty an Opinion of Counsel (with a copy to the
Rating
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Agencies) 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 and the Subordinate Note Insurer gives its prior
written consent, (ii) the Company shall have delivered to the Eligible Lender
Trustee, the Indenture Trustee, the Subordinate Note Insurer and the Swap
Counterparty 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.
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, neither the Eligible Lender
Trustee nor the Delaware Trustee shall take any action unless at least 30 days
before the taking of such action, the Eligible Lender Trustee or the Delaware
Trustee shall have notified the Company, the Rating Agencies, the Subordinate
Note Insurer and the Swap Counterparty in writing of the proposed action and
none of the Company, the Subordinate Note Insurer or the Swap Counterparty shall
have notified the Eligible Lender Trustee in writing prior to the 30th day after
such notice is given that the Company, the Subordinate Insurer or the Swap
Counterparty has withheld consent or the Company has provided alternative
direction (and such alternative direction has been consented to in writing by
the Subordinate Note Insurer):
(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
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Noteholder, the Subordinate Note Insurer or the Swap
Counterparty is required;
(d) the amendment of the Indenture by a supplemental indenture
in circumstances where the consent of any Noteholder, the Subordinate
Note Insurer or the Swap Counterparty 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.
(g) the consent to the calling or waiver of any
default under any Basic Document;
(h) the consent to the assignment by the Indenture Trustee or
the Servicer of their respective obligations under any Basic Document;
(i) except as provided in Article IX hereof, dissolve,
terminate or liquidate the Trust in whole or in part;
(j) merge or consolidate the Trust with or into any other
entity, or convey or transfer all or substantially all of the Trust's
assets to any other entity;
(k) cause the Trust to incur, assume or guaranty any
indebtedness other than as set forth in this Agreement or the other
Basic Documents;
(l) do any act that conflicts with any other Basic
Document;
(m) do any act which would make it impossible to carry
on the ordinary business of the Trust as described in
Section 2.03 hereof;
(n) confess a judgment against the Trust;
(o) possess Trust assets, or assign the Trust's right to
property, for other than a Trust purpose;
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(p) cause the Trust to lend any funds to any entity;
or
(q) change the Trust's purpose and powers from those set forth
in this Agreement.
In addition the Trust shall not commingle its assets with those of any
other entity. The Trust shall maintain its financial and accounting books and
records separate from those of any other entity. Except as expressly set forth
herein, the Trust shall pay its indebtedness, operating expenses and liabilities
from its own funds, and the Trust shall not pay the indebtedness, operating
expenses and liabilities of any other entity. The Trust shall maintain
appropriate minutes or other records of all appropriate actions and shall
maintain its office separate from the offices of the Seller, the Company and
Loan Services.
Neither the Eligible Lender Trustee nor the Delaware Trustee shall have
the power, except upon the direction of the Company with the consent of the
Subordinate Note Insurer and the Swap Counterparty, and to the extent otherwise
consistent with the Basic Documents, to (i) remove or replace the Servicer or
the Indenture Trustee, (ii) institute proceedings to have the Trust declared or
adjudicated a bankrupt or insolvent, (iii) consent to the institution of
bankruptcy or insolvency proceedings against the Trust, (iv) file a petition or
consent to a petition seeking reorganization or relief on behalf of the Trust
under any applicable federal or state law relating to bankruptcy, (v) consent to
the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or
any similar official) of the Trust or a substantial portion of the property of
the Trust, (vi) make any assignment for the benefit of the Trust's creditors,
(vii) cause the Trust to admit in writing its inability to pay its debts
generally as they become due, (viii) take any action, or cause the Trust to take
any action, in furtherance of any of the foregoing (any of he above, a
"Bankruptcy Action"). So long as the Indenture and the Insurance Agreement
remain in effect and no Subordinate Note Insurer Default exists, the Company
shall not have the power to take, and shall not take, any Bankruptcy Action with
respect to the Trust or direct the Eligible Lender Trustee to take any
Bankruptcy Action with respect to the Trust.
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 certifying that it reasonably believes that the Trust is insolvent.
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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 Monies; No Interest. Monies
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 and the
Subordinate Note Insurer 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, the Seller or the Subordinate
Note Insurer 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 Seller, as the case may be, in breach of its
obligations under this Agreement.
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SECTION 5.03. Incentive Programs. Subject to compliance by the
Administrator with Section 2(i) of the Administration Agreement, the Trust shall
offer each Incentive Program to all qualified Borrowers except any Incentive
Program which the Administrator terminates pursuant to Section 2(i) of the
Administration Agreement. Upon the effective date specified in the notice of
termination required by Section 2(i) 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 Seller 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 $150,000,000, Class A-2 Notes in
the aggregate principal amount of $433,650,000 and Subordinate Notes in the
aggregate principal amount of $21,350,000. 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 Seller 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
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discharged) all its responsibilities pursuant to the terms of this Agreement and
the other Basic Documents to which the Trust is a party and to administer the
Trust, 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 and the
Subordinate Note Insurer 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 (and consented
to in writing by the Subordinate Note Insurer), 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
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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.
(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, the Subordinate Note Insurer and the
Swap Counterparty requesting instruction from the Company and, to the extent
that the Eligible Lender Trustee acts or refrains from acting in good faith in
accordance with any such instruction received and consented to in writing by the
Subordinate Note Insurer, 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, the Insurance
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
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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.
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, however, 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 past due more than 30 days; and provided, further, that a Consolidation Loan
will not be offered to a Borrower if the aggregate principal balances of all
Consolidation Loans originated pursuant to this Section would thereby exceed the
limitations set forth in Section 6.07(d).
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(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
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
that is to be consolidated through such origination, including any Add-on
Consolidation Loan 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 October 28,
2029 if at the time of such
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origination the aggregate principal balance of all Consolidation Loans held as
part of the Trust Estate that have a scheduled maturity date after October 28,
2029 exceeds, or after giving effect to such origination, would exceed
$15,000,000; 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 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.
(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
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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 monies
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
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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 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 Seller 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 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
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(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, the Subordinate Note Insurer and the Swap
Counterparty promptly upon receipt of a written request therefor, duplicates or
copies of all reports, notices, requests, demands, certificates, financial
statements and any other instruments furnished to the Eligible Lender Trustee
under the Basic Documents.
SECTION 7.03. Representations and Warranties. The Eligible
Lender Trustee hereby represents and warrants to each of the Seller, the
Company, the Subordinate Note Insurer and the Swap Counterparty, 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
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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 the
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 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
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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 Seller, 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 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 Seller 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.
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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 Seller, 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.
SECTION 7.08. Licenses. The Eligible Lender Trustee shall
cause the Trust to use its best efforts to obtain and maintain the effectiveness
of any licenses required in connection with this Agreement and the other Basic
Documents and the transactions contemplated hereby and thereby until such time
as the Trust shall terminate in accordance with the terms hereof. The Eligible
Lender Trustee shall receive from the Administrator the information necessary to
comply with this Section.
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
Seller and the Eligible Lender Trustee, and the Eligible Lender Trustee shall be
entitled to be reimbursed by the Seller for its other reasonable expenses
hereunder, including the reasonable compensation, expenses and disbursements of
such agents, representatives, experts and counsel as the Eligible Lender Trustee
may employ in connection with the exercise and performance of its rights and
duties hereunder. The Eligible Lender Trustee shall have no recourse to the
Issuer for its fees and expenses hereunder.
SECTION 8.02. Payments to the Eligible Lender Trustee. Any
amounts paid to the Eligible Lender Trustee pursuant to Section 8.01 hereof or
pursuant to Section 4.03 of the Loan Sale Agreement or pursuant to Section 24 of
the Administration Agreement shall be deemed not to be a part of the Trust
Estate immediately after such payment.
ARTICLE IX
Termination of Trust Agreement
SECTION 9.01. Termination of Trust Agreement. (a)
This Agreement (other than Article VIII) and the Trust shall
terminate and be of no further force or effect upon the earlier
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of (i) the final distribution by the Eligible Lender Trustee of all monies or
other property or proceeds of the Trust Estate in accordance with the terms of
the Indenture and the Servicing Agreement and the termination of the Indenture
and (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.
(b) Neither the Seller 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 and the Swap
Counterparty 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. [Reserved.]
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 Guarantor 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, "BBB"
by Standard & Poor's and "BBB" by Fitch, if rated by Fitch. If
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the Eligible Lender Trustee shall publish reports of condition at least
annually, pursuant to law or to the requirements of the aforesaid supervising or
examining authority, then for the purpose of this Section, the combined capital
and surplus of the Eligible Lender Trustee shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. In case at any time the Eligible Lender Trustee shall cease to be
eligible in accordance with the provisions of this Section, the Eligible Lender
Trustee shall resign immediately in the manner and with the effect specified in
Section 10.02. In addition, at all times the Trustee or a co-trustee shall be a
Person that satisfies the requirements of Section 3807(a) of the Business Trust
Statute (the "Delaware Trustee").
SECTION 10.02. Resignation or Removal of Eligible Lender
Trustee. The Eligible Lender Trustee may at any time resign and be discharged
from the trusts hereby created by giving written notice thereof to the
Administrator, the Subordinate Note Insurer and the Swap Counterparty. Upon
receiving such notice of resignation, the Administrator shall promptly appoint a
successor Eligible Lender Trustee (acceptable to the Subordinate Note Insurer)
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 or the Subordinate Note
Insurer 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 or the Subordinate Note Insurer may remove
the Eligible Lender Trustee. If the Administrator or the Subordinate Note
Insurer shall remove the Eligible Lender Trustee under the authority of the
immediately preceding sentence, the Administrator (with the written consent of
the Subordinate Note Insurer) or the Subordinate Note Insurer
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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 (whose appointment has been
approved in writing by the Subordinate Note Insurer) 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 to the Subordinate Note Insurer, the Swap
Counterparty and to each of the Rating Agencies.
SECTION 10.03. Successor Eligible Lender Trustee. Any
successor Eligible Lender Trustee appointed pursuant to Section 10.02 shall
execute, acknowledge and deliver to the Administrator, to its predecessor
Eligible Lender Trustee and the Subordinate Note Insurer 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, monies 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
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the Company, the Indenture Trustee, the Noteholders, the Rating Agencies, the
Subordinate Note Insurer and the Swap Counterparty. 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, the Subordinate Note Insurer and the Swap Counterparty not
less than 10 Business Days prior to the closing date of such merger or
consolidation.
SECTION 10.05. Appointment of Co-Eligible Lender Trustee or
Separate Eligible Lender Trustee. Notwithstanding any other provisions of this
Agreement, at any time, for the purpose of meeting any legal requirements of any
jurisdiction in which any part of the Trust may at the time be located, the
Administrator and the Eligible Lender Trustee acting jointly (and with the
written consent of the Subordinate Note Insurer and written notice to the Swap
Counterparty) 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 May 1, 1998
between The First National Bank of Chicago and First Chicago Delaware Inc., the
Eligible Lender Trustee shall appoint
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First Chicago Delaware Inc. as a co-trustee hereunder for the purpose of its
acting as Delaware Trustee and such agreement is hereby incorporated herein by
reference. If the Delaware Trustee shall 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 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
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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, the
Subordinate Note Insurer and the Swap Counterparty.
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.
ARTICLE XI
Miscellaneous
SECTION 11.01. Supplements and Amendments. This Agreement may
be amended by the Seller, the Company and the Eligible Lender Trustee, with the
prior written consent of the Subordinate Note Insurer and the Swap Counterparty
and 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
Seller, the Company and the Eligible Lender Trustee, with prior written consent
of the Subordinate Note Insurer and the Swap Counterparty and 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
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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, each of the Rating Agencies, the Subordinate Note Insurer
and the Swap Counterparty.
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, the Subordinate Note Insurer
and the Swap Counterparty with ten Business Days' prior written notice of any
amendment to the Certificate of Trust.
Prior to the execution of any amendment to this Agreement, the
Eligible Lender Trustee shall be entitled to receive and rely upon an Opinion of
Counsel stating that the execution of such amendment is authorized or permitted
by this Agreement. The Eligible Lender Trustee may, but shall not be obligated
to, enter into any such amendment which affects the Eligible Lender Trustee's
own rights, duties or immunities under this Agreement or otherwise.
SECTION 11.02. No Legal Title to Trust Estate in 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
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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 Company'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 Seller, the Company, the Administrator, the
Subordinate Note Insurer, the Swap Counterparty 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 Seller, addressed to USA
Group Secondary Market Services, Inc., 30 South Meridian Street,
Indianapolis, Indiana 46204-3503, Attention: President and Chief
Executive Officer (telephone: 317-951-5640; facsimile: 317-951-
5764), with a copy to Office of the General Counsel, USA Group,
Inc., 30 South Meridian Street, Indianapolis, Indiana 46204-3503,
Attention: Peter M. Greco (telephone: 317-951-5526; facsimile:
317-951-5532); if to the Company, addressed to Secondary Market
Company, Inc., 30 South Meridian Street, Indianapolis, Indiana
46204-3503, Attention: President (telephone: 317-951-5640;
facsimile: 317-951-5764), with a copy to USA Group Secondary
Market Services, Inc., 30 South Meridian Street, Indianapolis,
Indiana 46204-3503, and a copy to Office of the General Counsel,
USA Group, Inc., 30 South Meridian Street, Indianapolis, Indiana
46204-3503, Attention: Peter M. Greco (telephone: 317-951-5526;
facsimile: 317-951-5532); if to the Subordinate Note Insurer, to
MBIA Insurance Corporation, 113 King Street, Armonk, New York
10504, Attention: Insured Portfolio Management - Structured
Finance (IPM-SF) SMS Student Loan Trust 1998-A, $21,350,000
Floating Rate Asset-Backed Subordinate Notes (facsimile: 914-
765-3810; telephone confirmation: 914-765-3781); and if to the
Swap Counterparty, to General Re Financial Products Corporation,
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Rockefeller Center, 630 Fifth Avenue, Suite 450, New York, New
York 10111, Attention: Head of Operations (telephone: 212-307-
2370; facsimile: 212-307-2288); 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 Seller, the Company, the Eligible Lender Trustee and their respective
successors and permitted assigns, all as herein provided.
SECTION 11.08. No Petition. (a) The Seller 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, the Subordinate Note Insurer and each
Noteholder by accepting the benefits of this Agreement, hereby covenant and
agree that they will not at any time institute against the Seller, the Company
or the Trust, or join in any institution against the Seller, 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 Seller 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.
BWNY03/143740
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<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 Seller, 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.
SECTION 11.12. Responsibility to Secretary and Guarantors.
Notwithstanding any other provision in this Agreement or the other Basic
Documents, nothing in this Agreement or the other Basic Documents shall be
construed to limit the legal responsibility of the Eligible Lender Trustee in
its capacity as Eligible Lender Trustee to the U.S. Secretary of Education or a
Guarantor for any violations of statutory or regulatory requirements that may
occur with respect to loans held in the Trust, pursuant to 34 CFR 682.203(b) or
any successor provision thereto.
SECTION 11.13. Third-Party Beneficiaries. The parties hereto
acknowledge that the Subordinate Note Insurer and the Swap Counterparty are
express third-party beneficiaries hereof entitled to enforce the provisions
hereof as if they were actual parties hereto; provided, however, that in the
case of the Subordinate Note Insurer, such right to enforcement and the right to
provide consents or waivers pursuant to the provisions of this Agreement or to
take other actions as provided herein are conditioned upon there not having
occurred and being continuing an Insurer Default and, in the case of the Swap
Counterparty, such right to enforcement and the right to provide consents or
waivers pursuant to the provisions hereof or to take other actions as provided
herein are conditioned upon its not being in default under the Swap Agreement.
SECTION 11.14. Consents. With respect to any action to
be taken hereunder that requires the consent of a party hereto or
of the Indenture Trustee, Subordinate Note Insurer or the Swap
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Counterparty, such consent shall not be unreasonably withheld, delayed or
conditioned.
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: ___________________________
Name:
Title:
USA GROUP SECONDARY MARKET
SERVICES, INC., as depositor
By: ____________________________
Name: Stephen W. Clinton
Title: President and CEO
SECONDARY MARKET COMPANY, INC.
By: ____________________________
Name:
Title:
<PAGE>
EXHIBIT A
TO THE TRUST AGREEMENT
CERTIFICATE OF TRUST OF
SMS STUDENT LOAN TRUST 1998-A
THIS Certificate of Trust of SMS Student Loan Trust 1998-A (the
"Trust"), dated as of May 1, 1998, is being duly executed and filed by The First
National Bank of Chicago, a national banking association, and First Chicago
Delaware Inc., a Delaware banking corporation, 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 1998-A.
2. Delaware Trustee. The name and business address of the trustee of
the Trust resident in the State of Delaware is First Chicago Delaware Inc., c/o
FCC National Bank, 300 King Street, Wilmington, Delaware 19801.
3. This Certificate of Trust will be effective May __, 1998.
<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:
FIRST CHICAGO DELAWARE INC.,
not in its individual capacity
but solely as trustee
By: ______________________________
Name:
Title:
A-2
<PAGE>
ADMINISTRATION AGREEMENT dated as of May 1, 1998, among SMS
STUDENT LOAN TRUST 1998-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 May 1, 1998 (the "Trust Agreement") among the Seller, as depositor,
Secondary Market Company, Inc., a Delaware corporation (the "Company"), 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"), 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") pursuant to the
Indenture dated as of May 1, 1998 (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); and
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 "Depository Agreement"),
the Guarantee Agreement, the Trust Agreement, the Indenture, the Insurance
Agreement and the Swap Agreement (all such agreements being collectively
referred to herein as the "Related Agreements"); and
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;
and
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; and
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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, the Eligible Lender Trustee, the
Subordinate Note Insurer and the Swap Counterparty 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 the 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 currently 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 have 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
2
<PAGE>
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 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, licenses, 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 Basic Documents. The Administrator
shall perform all its duties as Administrator and the duties of the Issuer under
the Basic Documents. In addition, the Administrator shall consult with the
Eligible Lender Trustee as the Administrator deems appropriate regarding the
duties of the Issuer under the Basic Documents. The Administrator shall monitor
the performance of the Issuer and shall advise the Eligible Lender Trustee when
action is necessary to comply with
3
<PAGE>
the Issuer's duties under the Basic Documents. 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 Basic Documents. 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 below in this
subsection (a) being to sections of the Indenture):
(A) the duty to cause the Note Registrar to keep the Note Register
and to give the Indenture Trustee and the Subordinate Note Insurer 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 the
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 the Notes (Section 3.02);
(G) the duty to cause newly appointed Paying Agents, if any, to
deliver to the Indenture Trustee and the Subordinate Note Insurer 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);
4
<PAGE>
(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' 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 and the Subordinate
Note Insurer 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, the Rating Agencies,
the Subordinate Note Insurer and the Swap Counterparty of any 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, the
Rating Agencies, the Subordinate Note Insurer and the Swap Counterparty 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 and the Subordinate Note Insurer 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
5
<PAGE>
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 and the Subordinate Note
Insurer 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 to the Noteholders and the Subordinate Note Insurer
(Section 7.03);
(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, each Rating Agency, the Subordinate Note
Insurer and the Swap Counterparty 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 authentica tion 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, the Subordinate Note Insurer and
the Swap Counterparty 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
6
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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);
(AC) the recording of the Indenture, if applicable
(Section 11.15);
(AD) the duty to obtain a new servicer as Successor Servicer, if the
Subordinate Note Insurer fails to do so, and to enter into an agreement
with such Successor Servicer (Section 3.07(e));
(AE) the notification of the termination of the
Servicer and the appointment of a Successor Servicer
(Section 3.07(f));
(AF) the duty to cause the Servicer to comply with the
Servicing Agreement (Section 3.14); and
(AG) the delivery of all documents and opinions to be provided by the
Issuer under Part 3 of the Swap Agreement, performing all obligations of
the Issuer under Part 5(b) and 5(i) of the Swap Agreement, and providing
all notices and consents required by the Issuer under the Swap Agreement.
The Administrator shall provide to the Eligible Lender Trustee (i) a
list of jurisdictions in which the Issuer is required to be licensed and (ii)
any other information necessary for the Eligible Lender Trustee to fulfill its
obligations under Section 7.08 of the Trust Agreement.
(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 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,
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<PAGE>
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, the Subordinate Note
Insurer 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 each Determination Date;
(D) to make all the distributions required by Sections 2(d), 2(e) and
2(f), for the Monthly Collection Period or Collection Period, as the case
may be, preceding the date of such Officers' Certificate, which Officers'
Certificate shall be delivered on each Determination Date.
In addition, prior to each Determination Date immediately preceding a
Quarterly Payment Date, the Administrator shall determine, in compliance with
its obligation to prepare an Officers' Certificate on such Determination Date
pursuant to this Section, the Class A-1 Note Rate, the Class A-2 Note Rate and
the Subordinate Note Rate that will be applicable to the Quarterly
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<PAGE>
Payment Date following such Determination Date. In connection therewith, the
Administrator shall calculate Three-Month LIBOR, the Class A-1 Note LIBOR Rate,
the Class A-2 Note LIBOR Rate, the Subordinate Note LIBOR Rate and the Adjusted
Student Loan Rate in accordance with the respective definitions thereof.
(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, the Indenture Trustee, the Subordinate Note Insurer and the Swap
Counterparty as soon as practicable after the Administrator has received notice
thereof.
(viii) In carrying out the foregoing duties or any of its other
obligations under this Agreement, the Administrator may enter into transactions
with or otherwise deal with any of its Affiliates; provided, however, that the
terms of any such trans actions or dealings shall be in accordance with any
directions received from the Issuer and shall be, in the Administrator's
opinion, no less favorable to the Issuer, the Noteholders or the Subordinate
Note Insurer than would be available from unaffiliated parties.
(c) Establishment and Maintenance of Trust Accounts.
(i) The Administrator, for the benefit of the Issuer, shall establish
and maintain in the name of the Indenture Trustee an Eligible Deposit Account
(the "Collection Account"), bearing a designation clearly indicating that the
funds deposited therein are held for the benefit of the Indenture Trustee, on
behalf of the Noteholders, the Subordinate Note Insurer and the Swap
Counterparty. 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.
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(ii) The Administrator 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 Indenture Trustee, on behalf of the Noteholders, the
Subordinate Note Insurer and the Swap Counterparty. 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 Noteholders, the
Subordinate Note Insurer and the Swap Counterparty, 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 Indenture
Trustee, on behalf of the Noteholders, the Subordinate Note Insurer and the Swap
Counterparty. 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) [Reserved]
(v) Funds on deposit in the Collection Account, the Reserve Account
and the Collateral Reinvestment 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, however, 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 in writing by the Rating
Agencies and the Subordinate Note Insurer, 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 and the Administration Fee (and all
other amounts payable on a Quarterly Payment Date) will be available in the
Collection Account on the Business Day preceding 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.
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(vi) (A) The Indenture Trustee, on behalf the Noteholders, the
Subordinate Note Insurer and the Swap Counterparty, 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 Noteholders, the
Subordinate Note Insurer and the Swap Counterparty. 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, the
Subordinate Note Insurer and the Swap Counterparty 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 next 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 securities 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
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that is not governed by clause (3) above shall be Delivered to the
Indenture Trustee in accordance with paragraph (c) of the definition of
"Delivery" and shall be maintained by the Indenture Trustee, pending
maturity or disposition, through continued registration of the Indenture
Trustee's (or its nominee's) ownership of such security.
(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 their
respective duties under the Servicing Agreement and the Trust Agreement,
permitting the Indenture Trustee to carry out its duties under the
Indenture and withdrawing any amounts deposited in error into such
accounts.
(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, Quarterly 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, insofar as the
Administrator may so instruct on any Business Day therein, to deposit into
the Collateral Reinvestment Account all collections in respect of
principal of the Financed Student Loans;
(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;
((A)) on each Add-on Consolidation Loan Funding Date after the
Revolving Period, to prepay in full any Add- on Consolidation Loan
pursuant to Section 6.07 of the Trust Agreement; provided, however, that
the amount paid to prepay any Add-on Consolidation Loan on any date since
the preceding Quarterly Payment Date shall not exceed the Net Principal
Cash Flow Amount for such date minus the aggregate
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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
(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; and provided, further, that any Purchase Premium Amounts for
Serial Loans purchased 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; and
(B) to the Administrator, from the amount of the 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;
(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:
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(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 the 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 pursuant to
Section 8.02(c) of the Indenture, in the following order of priority,
from the amount of the Available Funds remaining after the
application of clauses (A) and (B): (i) the Class A-1 Noteholders'
Interest Distribution Amount, the Class A-2 Noteholders' Interest
Distribution Amount the Trust Swap Payment Amount, if any, and any
Termination Payment to the extent that the Trust is the defaulting
party (other than an Event of Default specified in Section 5(a)(i) of
the Swap Agreement), pro rata, based on the ratio of each such amount
to the total of such amounts; (ii) the Subordinate Note Insurance
Policy Premium and all overdue Subordinate Note Insurance Policy
Premiums; (iii) the Subordinate Noteholders' Interest Distribution
Amount; (iv) if the Revolving Period has terminated, the Senior
Noteholders' Principal Distribution Amount; and (v) if the Revolving
Period has terminated, the Subordinate Noteholders' Principal
Distribution Amount, each with respect to 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 into the Reserve Account
pursuant to clause (d)(v)(D) of this Section 2, amounts properly calculated,
reported and withdrawn from the Collection Account and properly distributed
pursuant to this Section 2(d) in accordance with the terms hereof 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 the Available Funds on such Quarterly
Payment Date) in excess of the Specified Reserve Account Balance
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for such Quarterly Payment Date (the "Reserve Account Excess"), the
Administrator shall instruct the Indenture Trustee to apply such Reserve Account
Excess, first, to pay to the Subordinate Note Insurer any Reimbursement Amounts
and, second, after making any such payment, as follows: (a) during the Revolving
Period, for deposit to the Collateral Reinvestment Account; provided, however,
that if such date is on or after the Parity Date, to the extent that such funds
represent payments of interest or Trust Swap Receipt Amounts 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 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(d) 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 amount of the Notes, after giving
effect to all other distributions in respect of principal of 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(d) of the
Indenture, out of the remaining amount of such excess, an amount equal to the
aggregate unpaid Noteholders' Interest Basis 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; (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; (vi) to the Swap Counterparty, all Termination Payments due
under the Swap Agreement to the extent that the Swap Counterparty is the
Defaulting Party (as such term is defined in the Swap Agreement), the Trust is
the defaulting party under Section 5(a)(i) of the Swap Agreement or a
Termination Event shall have occurred; and (vii) any remaining amount of such
excess, after application of clauses (i) through (vi) 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 calculated, reported and
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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 amount of the Notes and of all other amounts owing or to be
distributed hereunder or under the Indenture to Noteholders, the Subordinate
Note Insurer, the Seller, the Servicer or the Administrator and the termination
of the Trust (including any Reimbursement Amounts, Noteholders' Interest Basis
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 calculated, reported and
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.
(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 Quarterly Payment Date, in the event that the Class
A-1 Noteholders' Interest Distribution Amount, the Class A-2 Noteholders'
Interest Distribution Amount, the Trust Swap Payment Amount, if any, any
Termination Payment to the Swap Counterparty to the extent that the Trust
is the defaulting party (other than an Event of Default specified in
Section 5(a)(i) of the Swap Agreement), the Subordinate Note Insurance
Policy Premium and all overdue Subordinate Note Insurance Policy Premiums,
the Subordinate Noteholders' Interest Distribution Amount, the Senior
Noteholders' Principal Distribution Amount and the Subordinate
Noteholders' Principal Distribution Amount, each for such Quarterly
Payment Date, exceed the sum of the amount distributed to the Indenture
Trustee for distribution to the Noteholders, the Swap Counterparty and the
Subordinate Note Insurer pursuant to Section 2(d)(v)(C) on such Quarterly
Payment Date, the Administrator shall instruct the Indenture Trustee to
withdraw from the Reserve Account on such Quarterly Payment Date an amount
equal to
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such excess, to the extent of funds available therein after giving effect
to paragraphs (iv)(A) and (iv)(B) 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 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 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, (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
the Monthly Available Funds or the 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 pursuant to Section 8.02(e) of the
Indenture.
(g) Statements to Noteholders. (i) On each Determination Date
preceding a Quarterly Payment Date, the Administrator shall provide to the
Indenture Trustee, the Subordinate Note Insurer and the Swap Counterparty (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;
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(B) the amount of the distribution allocable on such Quarterly
Payment Date to interest on the Class A-1 Notes;
(C) the amount of the distribution allocable on such Quarterly
Payment Date to interest on the Class A-2 Notes;
(D) the amount of the distribution allocable on such Quarterly
Payment Date to interest on the Subordinate Notes;
(E) the amount, if any, of such distribution allocable to any
Senior Noteholders' Interest Basis Carryover and any Subordinate
Noteholders' Interest Basis 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 amount 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 LIBOR Note Rate and specifying what each such Note Rate would have
been using the alternate basis for such calculation;
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(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;
(K) the Trust Swap Payment Amount paid to the Swap Counterparty
on such Quarterly Payment Date, the amount of any Net Trust Swap Payment
Carryover Shortfall for such Quarterly Payment Date, the Trust Swap
Receipt Amount paid to the Trust on such Quarterly Payment Date and the
amount of any Net Trust Swap Receipt Carryover Shortfall for such
Quarterly Payment Date;
(L) the Subordinate Note Insurance Policy Premium paid to the
Subordinate Note Insurer on such Quarterly Payment Date and the amount of
any overdue Subordinate Note Insurance Policy Premiums for such Quarterly
Payment Date;
(M) 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;
(N) 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;
(O) the amount of any Insured Payment being made to Noteholders
on such Quarterly Payment Date and the amount of such Insured Payment
allocable on such Quarterly Payment Date to interest on the Subordinate
Notes and to principal of the Subordinate Notes;
(P) for Quarterly Payment Dates during the Revolving Period, the
amount deposited into the Collateral Reinvestment Account during the
related Collection Period
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and on the immediately preceding Quarterly Payment Date, and the amount on
deposit therein after giving effect to changes therein on such Quarterly
Payment Date;
(Q) 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;
(R) (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;
(S) the principal balance and number of Serial Loans conveyed to
the Issuer during the related Collection Period, the aggregate Loan
Purchase Amounts thereof and the portion thereof attributable to Purchase
Premium Amounts;
(T) 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 Amounts thereof
and the portion thereof attributable to Purchase Premium Amounts; and
(U) 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 end 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.
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 amount 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.
(h) Non-Ministerial Matters. With respect to matters that in the
reasonable judgment of the Administrator are non-ministerial, the Administrator
shall not take any action unless within a reasonable time before the taking of
such action,
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the Administrator shall have notified the Eligible Lender, Trustee, the
Subordinate Note Insurer and the Swap Counterparty 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, without limitation:
(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.
(i) 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, the Indenture Trustee and the
Subordinate Note Insurer; and provided, further, that the Administrator shall
not change any term of any Incentive Program with respect to any Financed
Student Loan unless the Subordinate Note Insurer shall have given its prior
written consent. 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 not offer any Incentive Programs to existing
Borrowers or modify any Incentive Program for an existing Borrower unless the
Subordinate Note Insurer shall have given its prior written consent.
(j) Maintenance of Subordinate Note Insurance Policy;
Collections Thereunder. The Indenture Trustee shall make claims
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on the Subordinate Note Insurance Policy as provided in Section 8.02(g) of the
Indenture and in accordance with the terms of the Subordinate Note Insurance
Policy. As provided in Section 8.02(g) of the Indenture, to the extent that the
Subordinate Note Insurer makes a claim under the Subordinate Note Insurance
Policy, the Subordinate Note Insurer shall be subrogated to the rights of the
Subordinate Noteholders to the extent of such payment.
The Administrator shall deposit or cause to be deposited into the
Collection Account no later than the Determination Date succeeding each Monthly
Collection Period and 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 and Collection Period. Such deposits
shall be considered deposits in respect of interest on such Incentive Financed
Student Loans for all purposes of the Basic Documents and shall be deemed to
have been deposited into the Collection Account for all such purposes as of such
last date of such Monthly Collection Period.
3. Annual Statement as to Compliance. (a) The Administrator shall
deliver to the Seller, the Eligible Lender Trustee, the Indenture Trustee, the
Subordinate Note Insurer and the Swap Counterparty, on or before December 31 of
each year beginning December 31, 1998, 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, 1998) and of its performance under this Agreement has been
made under such officers' supervision and (ii) to the best of such officers'
knowledge, based on such review, the 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 Officers' 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, the Rating Agencies, the Subordinate Note
Insurer and the Swap Counterparty, promptly after having obtained knowledge
thereof, but in no event later than two Business Days thereafter, written notice
in an
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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, the Indenture Trustee, the Subordinate Note
Insurer and the Swap Counterparty on or before December 31 of each year
beginning December 31, 1998, a report addressed to the Administrator and to the
Seller, the Eligible Lender Trustee, the Indenture Trustee, the Subordinate Note
Insurer and the Swap Counterparty (which report may be combined with other
reports required to be delivered by such accountants to the Administrator, the
Eligible Lender Trustee, the Indenture Trustee and the Subordinate Note Insurer
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, 1998) 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.
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, the Subordinate Note Insurer and the Swap
Counterparty.
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 and the
Subordinate Note Insurer at any time during normal business hours.
7. Compensation. As compensation for the performance
of the Administrator's obligations under this Agreement and as
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<PAGE>
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, the Subordinate Note Insurer and the
Swap Counterparty from time to time such additional information regarding the
Collateral as the Issuer, the Subordinate Note Insurer or the Swap Counterparty
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 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 even though such Person may engage in business activities similar
to those of the Issuer, the Eligible Lender Trustee or the Indenture Trustee.
12. Administrator Default. If any one of the
following events (an "Administrator Default") shall occur and be
continuing:
(a) any failure by the Administrator to direct the Indenture Trustee
to make any required distributions from any of the Trust Accounts, which
failure continues unremedied for three Business Days after written notice
of such failure is received by the Administrator from the Indenture
Trustee, the Eligible Lender Trustee or the
24
<PAGE>
Subordinate Note Insurer or after discovery of such failure
by an officer of the Administrator; or
(b) any failure by the Administrator duly to observe or to perform in
any material respect any other covenants or agreements of the
Administrator set forth in this Agreement or any Related Agreements, which
failure shall (i) materially and adversely affect the rights of
Noteholders or the Subordinate Note Insurer and (ii) continues unremedied
for a period of 30 days after the date of discovery of such failure by an
officer of the Administrator or 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, the Eligible Lender Trustee or the
Subordinate Note Insurer or (B) to the Administrator and to the Indenture
Trustee, the Eligible Lender Trustee and the Subordinate Note Insurer 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; or
(d) any representation or warranty made by the Administrator
hereunder or under any Related Agreement, or in any certificate furnished
hereunder or under any Related Agreement, shall prove to be untrue or
incomplete in any material respect;
then, and in each and every case, so long as the Administrator Default shall not
have been remedied, either the Indenture Trustee (with the prior written consent
of the Subordinate Note Insurer), or Noteholders evidencing not less than 75% of
the Outstanding Amount of the Notes (with the prior written consent of the
Subordinate Note Insurer), by notice then given in writing to the Administrator
(and to the Indenture Trustee, the Eligible Lender Trustee and the Swap
Counterparty 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; provided, however, that if the Senior Notes
are not Outstanding, the Subordinate Note Insurer shall have the exclusive right
to terminate the Administrator. 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
25
<PAGE>
necessary or appropriate to effect the purposes of such notice of termination.
The predecessor Administrator shall cooperate with the successor Administrator,
the Indenture Trustee, the Eligible Lender Trustee and the Subordinate Note
Insurer 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
such transfer of responsibilities and 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, the Subordinate Note Insurer and the Swap Counterparty.
13. Appointment of Successor. (a) Upon receipt by the Administrator
of notice of termination pursuant to Section 12, or the resignation by the
Administrator in accordance with the terms of this Agreement, the predecessor
Administrator shall continue to perform its functions as Administrator, in the
case of termination, only until the date specified in such termination notice
or, if no such date is specified in a notice of termina tion, until a successor
Administrator (acceptable to the Subordinate Note Insurer) has accepted and
assumed the responsibilities of the Administrator and, in the case of
resignation, until the later of (x) the date 120 days from the delivery to the
Eligible Lender Trustee, the Indenture Trustee and the Subordinate Note Insurer
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 legally 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
Subordinate Note Insurer and the successor Administrator shall accept its
appointment by a written assumption in form acceptable to the Indenture Trustee
and the Subordinate Note Insurer. In the event that a successor Administrator
has not been appointed at the time when the predecessor Administrator has ceased
to act as Administrator in accordance with this Section, the Indenture Trustee
without further action shall automatically be appointed the successor
Administrator and the Indenture Trustee shall be entitled to the Administration
Fee. Notwith standing the above, the Indenture Trustee (with the prior written
consent of the Subordinate Note Insurer and prior written notice to the Swap
Counterparty ) shall, if it shall be unwilling or legally unable so to act,
appoint or petition a court of competent jurisdiction to appoint, as the
successor to the Administrator under this Agreement and the Administration
Agreement, any established institution the regular business of
26
<PAGE>
which shall include the servicing of student loans and which is acceptable to
the Subordinate Note Insurer.
(b) Upon appointment, the successor Administrator (including the
Indenture Trustee acting as successor Administrator) shall be the successor in
all respects to the predecessor Administrator and shall be subject to all the
responsibilities, duties and liabilities placed on the predecessor Administrator
that arise thereafter or are related thereto and shall be entitled to an amount
agreed to by such successor Administrator (which shall not exceed the Administra
tion Fee unless the Subordinate Note Insurer and the Swap Counterparty give
their prior written consent and such compensation arrangements will not result
in a downgrading of the Class A-1 Notes, the Class A-2 Notes or the Subordinate
Notes by any Rating Agency, without regard to the Subordinate Note Insurance
Policy) 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, the Eligible Lender Trustee and the
Subordinate Note Insurer. 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 (acceptable to the Subordinate
Note Insurer) 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,
the Subordinate Note Insurer, the Swap Counterparty 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).
15. Waiver of Past Defaults. The Noteholders of Notes evidencing not
less than a majority of the Outstanding Amount of the Notes (with the prior
written consent of the Subordinate Note Insurer) or, if the Senior Notes are not
Outstanding, the Subordinate Note Insurer, 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
27
<PAGE>
to have been remedied for every purpose of this Agreement to the extent provided
in such waiver. No such waiver shall extend to any subsequent or other default
or impair any right consequent thereto.
16. Notices. Any notice, report or other communica tion given
hereunder shall be in writing (or in the form of facsimile notice, followed by
written notice) and addressed as follows:
(a) if to the Issuer, to
SMS Student Loan Trust 1998-A
c/o First Chicago Delaware Inc.
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
153 West 51st Street, 8th Floor
New York, New York 10019
Attention: Corporate Trust Administration
Telephone: (212) 373-1140
Facsimile: (212) 373-1383
(c) if to the Administrator, to
USA Group Secondary Market Services, Inc.
30 South Meridian Street
Indianapolis, Indiana 46204-3503
Attention: President and Chief Executive Officer
Telephone: (317) 951-5640
Telecopy: (317) 951-5764
with a copy to
Office of the General Counsel
USA Group, Inc.
30 South Meridian Street
Indianapolis, Indiana 46204-3503
Attention: Peter M. Greco
Telephone: (317) 951-5526
Telecopy: (317) 951-5532
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<PAGE>
(d) 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
(e) if to the Subordinate Note Insurer, to
MBIA Insurance Corporation
113 King Street
Armonk, New York 10504
Attention: Insured Portfolio Management -
Structured Finance (IPM-SF)
SMS Student Loan Trust 1998-A
$21,350,000 Floating Rate Asset-
Backed Subordinate Notes
Telecopy: (914) 765-3163
Telephone confi(914) 765-3182
(f) if to the Swap Counterparty, to:
General Re Financial Products Corporation
Rockefeller Center
630 Fifth Avenue, Suite 450
New York, New York 10111
Attention: Head of Operations
Telecopy: (212) 307-2288
Telephone confirmation: (212) 307-2310;
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 prior written consent of the Eligible Lender
Trustee, the Subordinate Note Insurer and the Swap Counterparty, but 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, however,
that such amendment will not, in an Opinion of Counsel obtained on behalf of the
Issuer and satisfactory to the Indenture Trustee, the Eligible Lender Trustee
and the Subordinate Note Insurer, materially and adversely affect the interest
of any Noteholder. This Agreement
29
<PAGE>
may also be amended by the Issuer, the Administrator and the Indenture Trustee
with the prior written consent of the Eligible Lender Trustee, the Subordinate
Note Insurer, the Swap Counterparty 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 the Financed 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.
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.
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<PAGE>
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, the
Subordinate Note Insurer, the Swap Counterparty and the Noteholders and any of
the officers, directors, employees and agents of the Issuer, the Eligible Lender
Trustee, the Indenture Trustee, the Subordinate Note Insurer 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, 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
31
<PAGE>
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, the Indenture Trustee, the Subordinate Note Insurer and the Swap
Counterparty 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, (vi) unless USA Group Secondary
Market Services, Inc. is the surviving entity, the Administrator shall have
delivered to the Eligible Lender Trustee, the Indenture Trustee and the
Subordinate Note Insurer 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, the Indenture
Trustee, the Subordinate Note Insurer and the Swap Counterparty, 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 and (vii) the Administrator shall have
given the Subordinate Note Insurer and the Swap Counterparty 30 days' prior
written notice.
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, the
Eligible Lender Trustee, the Subordinate Note Insurer or the Swap Counterparty,
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
32
<PAGE>
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, the Indenture Trustee, the
Subordinate Note Insurer and the Swap Counterparty 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, the Indenture Trustee, the Subordinate Note Insurer and the Swap
Counterparty 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
33
<PAGE>
liability for the representations, warranties, covenants, agree ments or other
obligations of the Issuer hereunder, as to all of which recourse shall be had
solely to the assets of the Issuer. For all purposes of this Agreement, in the
performance of any duties or obligations of the Issuer thereunder, the Eligible
Lender Trustee shall be subject to, and entitled to the benefits of, the terms
and provisions of Articles VI, VII and VIII of the Trust Agreement.
(b) Notwithstanding anything contained herein to the contrary, this
Agreement has been countersigned by 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. Notice of Termination of Trust. 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, the
Subordinate Note Insurer and the Swap Counterparty are third-party beneficiaries
to this Agreement and are entitled to the rights and benefits hereunder and may
enforce the provisions hereof as if they were parties hereto; provided, however,
that in the case of the Subordinate Note Insurer such right to enforcement and
the right to provide consents or waivers pursuant to the provisions of this
Agreement or to take other actions as provided herein (except with respect to
Section 17 hereof) are conditioned upon there not having occurred and being
continuing an Insurer Default and, in the case of the Swap Counterparty, such
right to enforcement and the right to provide consents or waivers pursuant to
the provisions hereof or to take other actions as provided herein are
conditioned upon its not being in default under the Swap Agreement.
31. Consents. With respect to any action to be taken hereunder that
requires the consent of a party hereto or of the Eligible Lender Trustee, the
Subordinate Note Insurer or the Swap Counterparty, such consent shall not be
unreasonably withheld, delayed or conditioned.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the day and year first above written.
SMS STUDENT LOAN TRUST 1998-A
By: THE FIRST NATIONAL BANK OF
CHICAGO, not in its individual
capacity but solely as
Eligible Lender Trustee
By:
Name:
Title:
BANKERS TRUST COMPANY, not in its
individual capacity but solely as
Indenture Trustee
By:
Name:
Title:
USA GROUP SECONDARY MARKET SERVICES,
INC., as Administrator
By:
Name:
Title:
35
<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 1998-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 May 1, 1998, 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.
<PAGE>
EXECUTED as of the first day of May, 1998.
THE FIRST NATIONAL BANK OF CHICAGO, not in its
individual capacity but solely as Eligible Lender
Trustee
By:
Name:
Title:
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
Before me, the undersigned authority, on this day personally appeared
[ ] known to me to be the person whose name is subscribed to the foregoing
instrument, and acknowledged to me that such person signed the same for the
purposes and considerations therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this [ ] day of May, 1998.
Notary Public in and for the
State of New York
Printed Name of Notary Public
Commission Expires____________
<PAGE>
EXHIBIT B
TO THE
ADMINISTRATION AGREEMENT
Form of Noteholders' Statement pursuant to Section 2(g) of Administration
Agreement. Capitalized terms used herein are defined in Appendix A thereto. It
should be noted, however, that while all the information listed below shall be
included in each Noteholders' Statement, the presentation thereof may vary from
that given below.
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 $1,000
original
principal
amount of
Notes)
- ---------
* Portion of each such amount attributable to Reserve Account
Excess: _________________.
(ii) Amount of interest being paid or distributed:
Class A-1 __________ ($_______ per
$1,000 original
principal
amount of
Notes)
B-1
<PAGE>
Class A-2 __________ ($_______ per
$1,000 original
principal
amount of
Notes)
Subordinate __________ ($_______ per
$1,000 original
principal
amount of Notes
(iii) Amount of Senior Noteholders' Interest Basis Carryover being paid or
distributed (if any) and amount remaining (if any):
(a) Distributed:___($_______ per $1,000
original principal
amount of Senior
Notes)
(b) Balance:_____________($_______ per $1,000
original) principal
amount of Senior
Notes)
(iv) Amount of Subordinate Noteholders' Interest Basis Carryover being
paid or distributed (if any) and amount remaining (if any):
(a) Distributed:___($_______ per $1,000
original principal
amount of Notes)
(b) Balance:_____________($_______ per $1,000
original) principal
amount of Notes)
(v) Pool Balance at end of related Collection Period:
----------
B-2
<PAGE>
(vi) After giving effect to distributions on this Quarterly Payment Date:
(a) (1) outstanding principal amount of Class A-1
Notes:__________
(2) Class A-1 Note Pool Factor:__________
(b) (1) outstanding principal amount of Class A-2
Notes:__________
(2) Class A-2 Note Pool Factor:__________
(c) (1) outstanding principal amount of Subordinate
Notes:__________
(2) Subordinate Note Pool Factor:__________
(vii) Applicable Interest Rate:
In general:
(1) Three-Month LIBOR for the LIBOR Reset Period since the
previous Quarterly Payment Date was _____%; and
(2) the Adjusted Student Loan Rate for such
Quarterly Interest Period was _____%.
Class A-1 Note Rate:_____(based on
[Note LIBOR Rate]
[Adjusted Student
Loan Rate])
Class A-2 Note Rate:_____(based on
[Note LIBOR Rate]
[Adjusted Student
Loan Rate])
Subordinate Note Rate:___(based on
[Note LIBOR Rate]
[Adjusted Student
Loan Rate])
(viii) Amount of Servicing Fee for related Collection Period
including a breakdown of the components of the
Servicing Fee attributable to each of the items
specified in clauses II(i) through (ix) of Section 3.06
of the Servicing Agreement and the amount of any
Servicing Fee Shortfall for such Quarterly Payment Date
and for each Monthly Payment Date following the
immediately preceding Quarterly Payment Date:
B-3
<PAGE>
(ix) Amount of Administration Fee for related Collection Period:__________
($_______ per $1,000 original principal amount of Notes)
(x) the Trust Swap Payment Amount paid to the Swap
Counterparty on such Quarterly Payment Date: ______;
the amount of any Net Trust Swap Payment Carryover
Shortfall for such Quarterly Payment Date:____; the
Trust Swap Receipt Amount paid to the Trust on such
Quarterly Payment Date:____; the Net Trust Swap Receipt
Carryover Shortfall for such Quarterly Payment
Date:______
(xi) the Subordinate Note Insurance Policy Premium paid to the Subordinate
Note Insurer on such Quarterly Payment Date:______; the amount of any
overdue Subordinate Note Insurance Policy Premiums for such Quarterly
Payment
Date:______
(xii) Aggregate amount of Realized Losses (if any) for the
related Collection Period:__________
(xiii) Financed Student Loans delinquent at end of related
Collection Period: __________; number of delinquent
loans: ________; aggregate unpaid principal balance of
delinquent loans: ___________________
(xiv) 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: ___________
(xv) the amount of any Insured Payment being made to the Subordinate
Noteholders on such Quarterly Payment Date:
---------------
(xvi) 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: __________
(xvi) Amount in the Reserve Account (after giving effect to
(xiv)):__________
B-4
<PAGE>
(xvii) Amount in the Collateral Reinvestment Account (after
giving effect to (xvi)):__________
(xviii) Consolidation Loans: ___________ loans with aggregate principal
balances of ________ were originated during related Collection
Period; withdrawal from Collateral Reinvestment Account to fund
origination of Consolidation Loans during related Collection Period:
-------
(xix) Add-on Consolidation Loans: ______ loans with aggregate principal
balances 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: _____
(xx) Serial Loans: _______ loans with aggregate principal
balances of _______ (portion represented by Purchase
Premium Amounts ) were purchased during the
related Collection Period.
(xxi) New Loans: _______ loans with aggregate principal
balances of _______ (portion represented by Purchase
Premium Amounts ) were purchased during the
related Collection Period.
B-5
<PAGE>
(xxii) Financed Student Loans in the following categories as of the end of
the related Collection Period:
Weighted Number of Principal Interest
Average Loans Balance Rate
Status Type:
In-School
Grace
Repayment
Forbearance
Deferment
Delinquencies
Claims Filed Awaiting
Payment
Delinquencies:
30-60 Days
61-90 Days
91-120 Days
More than 120 Days
Delinquent
Claims Filed Awaiting
Payment
Loan Type:
Stafford Loans
SLS Loans
PLUS Loans
Consolidation Loans
School Type:
Traditional
Vocational/Proprietary
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
<PAGE>
governed by this Appendix means such agreement or instrument or statute as from
time to time amended, modified or supplemented, including (in the case of
agreements or instruments) by waiver or consent and (in the case of statutes) by
succession of comparable successor statutes and includes (in the case of
agreements or instruments) references to all attachments thereto and instruments
incorporated therein. References to a Person are also to its permitted
successors and assigns.
Definitions
"Act" has the meaning specified in Section 11.03(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 the
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.
"Adjusted Student Loan Rate" means, with respect to any Quarterly
Interest Period, the interest rate equal to 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 the sum of the Expected
Interest Collections and, if the Swap Agreement is still in effect, the Net
Trust Swap Receipt, if any, for the such Quarterly Interest Period, less the sum
of the Servicing Fee, the Administration Fee, the Subordinate Note Insurance
Policy Premium and, if the Swap Agreement is still in effect, the Net Trust Swap
Payment, if any, with respect to such Quarterly Interest Period and (ii) the
denominator of which is the aggregate principal amount of the Notes as of the
last day of such Quarterly Interest Period.
"Administration Agreement" means the Administration Agreement dated
as of May 1, 1998, 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) 0.05% 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.
"Administrator's Certificate" means an Officers' Certificate of the
Administrator delivered pursuant to Section 2(g) of the Administration
Agreement, substantially in the form of Exhibit B 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 and the Subordinate Note Insurer 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 and
the Subordinate Note Insurer 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)
through (vi) of the definition of Monthly Available Funds for each of the three
Monthly Collection Periods included in such Collection Period plus any Trust
Swap Receipt Amount and any Termination Payment received by the Trust with
respect to such Quarterly Payment Date; provided, however, that if with respect
to any Quarterly Payment Date there would not be sufficient funds, after
application of the 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 the 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 the Available 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 the Available Funds will exclude (A)
all payments and proceeds (including Liquidation Proceeds) of any Financed
Student Loans the Purchase Amounts of which were included in the 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, all overdue Servicing Fees, the Administration Fee
and all overdue Administration Fees 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
Senior Note Depository Agreement, the Guarantee Agreements, the Insurance
Agreement, the Indemnification Agreement, the Swap Agreement and other documents
and certificates delivered in connection with any thereof.
"Book-Entry Note" means a beneficial interest in the Senior 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.
"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 (i) a Saturday or a Sunday,
(ii) a day on which the Subordinate Note Insurer is closed or (iii) a day on
which banking institutions or trust companies in the States of Illinois, New
York or Indiana or in the city in which the corporate trust office of the
Indenture Trustee is located 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-debit 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 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 LIBOR Rate" means, with respect to any Quarterly
Interest Period, Three-Month LIBOR for the related LIBOR Reset Period plus
0.04%.
"Class A-1 Note Final Maturity Date" means the October
2005 Quarterly Payment Date.
"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 amount of the Class A-1 Notes divided by the original
outstanding principal amount 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 amount of the
Class A-1 Notes.
"Class A-1 Note Rate" means, with respect to any Quarterly Interest
Period, the interest rate per annum (computed on the basis of the actual number
of days in such Quarterly Interest Period over a year of 360 days) equal to the
lesser of (i) the Class A-1 Note LIBOR Rate for such Quarterly Interest Period
and (ii) the Adjusted Student Loan Rate for such Quarterly Interest Period;
provided, however, that, notwithstanding the foregoing, the Class A-1 Note Rate
for the first Quarterly Interest Period shall be equal to the Class A-1 Note
LIBOR Rate for such Quarterly Interest Period.
"Class A-1 Noteholder" means the Noteholder of a Class
A-1 Note.
"Class A-1 Noteholders' Interest Basis Carryover" means, with respect
to any Quarterly Payment Date commencing in October 1998, 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 the related Quarterly Interest Period had
interest been calculated based on the Class A-1 Note LIBOR 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 Adjusted 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 Note LIBOR Rate); provided,
however, that, on the Class A-1 Note Final Maturity Date, the Class A-1
Noteholders' Interest Basis Carryover will be equal to the lesser of (i) the
Class A-1 Noteholders' Interest Basis 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) of the Administration Agreement and Section 8.02 of the
Indenture.
"Class A-1 Noteholders' Interest Carryover Shortfall" means, with
respect to any Quarterly Payment Date, the excess of (i) the Class A-1
Noteholders' Interest Distribution Amount 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 then current Class
A-1 Note Rate 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 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;
provided, however, that the Class A-1 Noteholders' Interest Distribution Amount
will not include any Class A-1 Noteholders' Interest Basis Carryover.
"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 July
2026 Quarterly Payment Date.
"Class A-2 Note LIBOR Rate" means, with respect to any Quarterly
Interest Period, Three-Month LIBOR for the related LIBOR Reset Period plus
0.12%.
"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 amount of the Class A-2 Notes divided by the original
outstanding principal amount 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 Quarterly Payment
Date and the related Quarterly Interest Period, the interest rate per annum
(computed on the basis of the actual number of days in such Quarterly Interest
Period over a year of 360 days) equal to the lesser of (i) the Class A-2 Note
LIBOR Rate for such Quarterly Interest Period and (ii) the Adjusted Student Loan
Rate for such Quarterly Interest Period; provided, however, that,
notwithstanding the foregoing, the Class A-2 Note Rate for the first Quarterly
Interest Period shall be equal to the Class A-2 Note LIBOR Rate for such
Quarterly Interest Period.
"Class A-2 Noteholder" means the Noteholder of a Class
A-2 Note.
"Class A-2 Noteholders' Interest Basis Carryover" means, with respect
to any Quarterly Payment Date commencing in October 1998, 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
the related Quarterly Interest Period had interest been calculated based on the
Class A-2 Note LIBOR Rate over (b) the amount of interest on the Class A-2 Notes
actually accrued in respect of such Quarterly Interest Period based on the
Adjusted 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 the
Class A-2 Note LIBOR Rate); provided, however, that, on the Class A-2 Note Final
Maturity Date, the Class A-2 Noteholders' Interest Basis Carryover will be equal
to the lesser of (i) the Class A-2 Noteholders' Interest Basis 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) of the Administration Agreement and
Section 8.02 of the Indenture.
"Class A-2 Noteholders' Interest Carryover Shortfall" means, with
respect to any Quarterly Payment Date, the excess of (i) the Class A-2
Noteholders' Interest Distribution Amount on the preceding Quarterly Payment
Date over (ii) the amount of interest actually distributed to the Class A-2
Noteholders on such preceding Quarterly Payment Date, plus interest on the
amount of such excess, to the extent permitted by law at the then current Class
A-2 Note Rate from such preceding Quarterly Payment Date to the current
Quarterly Payment Date.
"Class A-2 Noteholders' Interest Distribution Amount" means, with
respect to any Quarterly Payment Date, the sum of (i) the amount of interest
accrued at the Class A-2 Note Rate for the related Quarterly Interest Period on
the aggregate principal amount of the Class A-2 Notes outstanding 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 Quarterly Payment Date, on the Closing Date and (ii) the Class
A-2 Noteholders' Interest Carryover Shortfall for such Quarterly Payment Date;
provided, however, that the Class A-2 Noteholders' Interest Distribution Amount
will not include any Class A-2 Noteholders' Interest Basis Carryover.
"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 May 26, 1998.
"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, which shall be an Eligible Deposit Account.
"Collection Account" means the account designated as such,
established and maintained pursuant to Section 2(c) of the Administration
Agreement, which shall be an Eligible Deposit Account.
"Collection Period" means, with respect to the first Quarterly
Payment Date, the period beginning on the Cutoff Date and ending on June 30,
1998, 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.
"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 time to time by notice to the Noteholders,
the Subordinate Note
Insurer 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, the Subordinate Note Insurer 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 and the
Subordinate Note Insurer, or the principal corporate trust office of any
successor Eligible Lender Trustee (the address of which the successor Eligible
Lender Trustee will provide notice of to the Seller and the Subordinate Note
Insurer).
"Custodian" means Loan Services, in its capacity as custodian of the
Borrower Notes or any permitted successor Custodian.
"Cutoff Date" means May 1, 1998.
"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.
"Deficiency Amount" has the meaning specified in the
Subordinate Note Insurance Policy.
"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.
"Delinquency Percentage" means, as of any date of
determination, the percentage equivalent of a fraction the
numerator of which is the aggregate principal balances of the
Financed Student Loans which are Repayment Loans and which either (a) are
delinquent over 120 days or (b) have had claims filed with the Department for
which payment is still awaited, and the denominator of which is the aggregate
principal balances of the Financed Student Loans which are Repayment Loans.
"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 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 securities
intermediary (as defined in Section 8-102(14)) of the UCC) and the making
by such securities 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 securities
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(5) 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 securities 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
securities intermediary, the maintenance of such certificated securities
by such clearing corporation or nominee subject to the clearing
corporation's exclusive control, the sending of a confirmation by the
securities intermediary of the purchase by the Indenture Trustee or its
nominee or custodian of such securities and the making by such securities
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 (as defined herein) 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 securities
intermediary which is also a "depository" pursuant to applicable Federal
regulations and issuance by such securities intermediary of a deposit
advice or other written confirmation of such book-entry registration to
the Indenture Trustee or its nominee or custodian of the purchase by the
Indenture Trustee or its nominee or custodian of such book-entry
securities; the making by such securities 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 securities intermediary, the sending of
a confirmation by the securities intermediary of the purchase by the
Indenture Trustee or its nominee or custodian of such uncertificated
security, the making by such securities 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, the agreement with respect to the
Senior Notes attached to the Indenture as Exhibit B.
"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;
(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 1998, is less than 1%; or
(vii) the arithmetic average of the Delinquency Percentage as of the
end of each of two successive Collection Periods exceeds 20%.
"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, 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" by Fitch or Standard & Poor's or a short-term
senior unsecured debt or certificate of deposit rating of "F-1+" by Fitch or
"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 the Subordinate Note Insurer 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.
"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 and Standard
and Poor's 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 and Standard and Poor's in the highest investment category
granted thereby;
(d) investments in money market funds which are registered under the
Investment Company Act of 1940, as amended, and whose shares are
registered under the Securities Act, and having a rating from each of the
Rating Agencies and Standard and Poor's 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 a term not to exceed 30 days 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 institution or trust company (acting as principal)
described in clause (b) above; provided, however, that the collateral
transferred pursuant to such repurchase obligation must be of the type
described in clause (a) above and must (i) be valued daily at current
market price plus accrued interest, (ii) pursuant to such valuation, be
equal, at all times, to 105% of the cash transferred by the Indenture
Trustee in exchange for such collateral and (iii) be delivered to the
Indenture Trustee or, if the Indenture Trustee is supplying the
collateral, an agent for the Indenture Trustee, in such a manner as to
accomplish perfection of a security interest in the collateral by
possession of certificated securities; and
(g) any other investment permitted by each of the Rating Agencies and
the Subordinate Note Insurer as set forth in a 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 sum of (i) the Expected Interest
Collections for such Quarterly Payment Date and (ii) the Trust Swap Receipt
Amount, if any, for such Quarterly Payment Date 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, (iii) the Senior Noteholders' Interest Distribution
Amount for such Quarterly Payment Date and the Trust Swap Payment Amount, if
any, for such Quarterly Payment Date, (iv) the Subordinate Note Insurance Policy
Premium and all unpaid Subordinate Note Insurance Policy Premiums and (v) the
Subordinate 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 Serial Loan" means a Serial Loan owned by the Seller to be
exchanged into the Trust for an Exchanged Student Loan.
"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 Exchanged Serial Loan to be exchanged into the Trust 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.
"Expected Interest Collections" means, with respect to any Quarterly
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 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 Substitute
Student Loans conveyed to the Issuer as provided in Section 3.02 of the Loan
Sale Agreement.
"Fitch" means Fitch IBCA, Inc. 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 Guarantor and any
Additional Guarantors.
"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.
"Incentive Interest Deposit" means, with respect to each Monthly
Collection Period and 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 or Collection Period, as applicable,
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 or Collection Period, as applicable, 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 only the Seller's Choice Rates(TM) and Choice Repay(TM) Programs, as
such programs may be modified from time to time with respect to any Financed
Student Loans with the prior written consent of the Subordinate Note Insurer, or
such other programs to which the Subordinate Note Insurer has provided its prior
written consent.
"Indemnification Agreement" means that certain Indemnification
Agreement, dated as of May 20, 1998, among the Subordinate Note Insurer, SMS and
Credit Suisse First Boston Corporation, as Representative of the several
Underwriters.
"Indenture" means the Indenture dated as of May 1, 1998, 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 and the Subordinate Note Insurer (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.
"Independent Certificate" means a certificate or opinion to be
delivered to the Indenture Trustee and the Subordinate Note Insurer 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 and the Subordinate Note Insurer 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 and listed on the Schedule of Student
Loans on such date.
"Initial Guarantor" means United Student Aid Funds,
Inc., a Delaware non-profit corporation, and its successors.
"Initial Pool Balance" means $579,395,357.38.
"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.
"Insurance Agreement" means that certain Insurance and Indemnity
Agreement, dated as of May 1, 1998, by and among the Subordinate Note Insurer,
the Seller, the Administrator, the Company, the Issuer, the Eligible Lender
Trustee and the Indenture Trustee pursuant to which the Subordinate Note
Insurance Policy is issued.
"Insured Payment" has the meaning specified in the
Subordinate Note Insurance Policy.
"Insurer Default" means the occurrence, and continuance for a period
of 60 days, of a failure by the Subordinate Note Insurer to make an Insured
Payment.
"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 or Quarterly Payment Date, as applicable,
pursuant to Section 2(c)(v) of the Administration Agreement.
"Issuer" means SMS Student Loan Trust 1998-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 and the Subordinate Note Insurer.
"LIBOR Determination Date" means, with respect to any Quarterly
Interest Period, the day that is the second business day prior to the
commencement of the LIBOR Reset Period within such Quarterly Interest Period
(or, in the case of the initial LIBOR Reset Period, on the second business day
prior to the Closing Date). For purposes of this definition, a business day is
any day in which banks in the City of London and The City of New York are open
for the transaction of international business.
"LIBOR Reset Period" means the three-month period commencing on the
twenty-eighth day (or, if any such day is not a Business Day, on the next
succeeding Business Day) of each January, April, July and October 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, all proceeds of the liquidation thereof collected in respect thereof from
whatever source, other than Recoveries, net of the sum of any reasonable
out-of-pocket expenses incurred 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;
provided, however, that the Loan Purchase Amount for any Exchanged Serial Loan
shall not include any Purchase Premium Amount.
"Loan Sale Agreement" means the Loan Sale Agreement dated as of May
1, 1998, among the Issuer, NBD, the Seller, and the Eligible Lender Trustee.
"Loan Services" means USA Group Loan Services, Inc., a
Delaware non-profit corporation.
"Minimum Purchase Price" means, as to any Quarterly Payment Date, an
amount equal to the greater of (i) the aggregate Purchase Amounts of the
Financed Student Loans as of the end of the Collection Period immediately
preceding such Quarterly Payment Date and (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, (B) pay to the Noteholders
the Noteholders' Interest Distribution Amount payable on such Quarterly Payment
Date, (C) pay to the Subordinate Note Insurer all amounts owed to the
Subordinate Note Insurer under any of the Basic Documents, (D) pay to the Swap
Counterparty all amounts owed by the Trust to the Swap Counterparty under the
Swap Agreement, and (E) pay to the Servicer and the Administrator all amounts
owed to such entities under any of the Basic Documents.
"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, in each case which have been received by
the Servicer and remitted to the Indenture Trustee; (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 by the Indenture Trustee for those 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, the
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 the 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 the 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 the Monthly Available
Funds will exclude (A) all payments and proceeds (including Liquidation
Proceeds) of any Financed Student Loan the Purchase Amount of which has been
included in the 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 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 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 Payment Date" means the twenty-eighth day of each month (or,
if any such date is not a Business Day, on the next succeeding Business Day)
commencing June 29, 1998.
"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.
"Net Trust Swap Payment" means, with respect to any Quarterly Payment
Date, the difference, if negative, between the regularly scheduled amount
(without regard to any carryover amounts or Termination Payments) owed by the
Swap Counterparty to the Trust on a Quarterly Payment Date and the regularly
scheduled amount (without regard to any carryover amounts or Termination
Payments) owed by the Trust to the Swap Counterparty on such Quarterly Payment
Date pursuant to Section 2 of the Swap Agreement.
"Net Trust Swap Payment Carryover Shortfall" means, with respect to
any Quarterly Payment Date with respect to which amounts are still owing to the
Swap Counterparty in respect of the Swap Agreement, the excess of (i) the Trust
Swap Payment Amount on the preceding Quarterly Payment Date over (ii) the amount
actually received by the Swap Counterparty out of the Available Funds or the
Reserve Account on such preceding Quarterly Payment Date plus interest on such
excess from such preceding Quarterly Payment Date to the current Quarterly
Payment Date at the rate of Three-Month LIBOR for the related Quarterly Interest
Period.
"Net Trust Swap Receipt" means, with respect to any Quarterly Payment
Date, the difference, if positive, between the regularly scheduled amount
(without regard to any carryover amounts or Termination Payments) owed by the
Swap Counterparty to the Trust on a Quarterly Payment Date and the regularly
scheduled amount (without regard to any carryover amounts or Termination
Payments) owed by the Trust to the Swap Counterparty on such Quarterly Payment
Date pursuant to Section 2 of the Swap Agreement.
"Net Trust Swap Receipt Carryover Shortfall" means, with respect to
any Quarterly Payment Date with respect to which amounts are still owing to the
Trust in respect of the Swap Agreement, the excess of (i) the Trust Swap Receipt
Amount on the preceding Quarterly Payment Date over (ii) the amount actually
paid by the Swap Counterparty to the Trust on such preceding Quarterly Payment
Date plus interest on such excess from such preceding Quarterly Payment Date to
the current Quarterly Payment Date at the rate of Three-Month LIBOR for the
related Quarterly Interest Period.
"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 13 weeks.
"Note LIBOR Rate" means the Class A-1 Note LIBOR Rate, the Class A-2
Note LIBOR Rate or the Subordinate Note LIBOR Rate, as applicable.
"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 Rate" means any one of the Class A-1 Note Rate, the Class A-2
Note Rate or the Subordinate Note Rate, as the case may be.
"Note Register" and "Note Registrar" have the respective meanings
specified in Section 2.04 of the Indenture.
"Noteholder" means the Person in whose name a Note is
registered in the Note Register.
"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 the Subordinate Note Insurer 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 the Subordinate Note Insurer, and
which opinion or opinions shall be addressed to the Indenture Trustee as
Indenture Trustee and the Subordinate Note Insurer, 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 the Subordinate Note
Insurer 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, and the Subordinate Note Insurer.
"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, however, 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 amount 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 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 balances 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.
"Preference Amount" has the meaning specified in the
Subordinate Note Insurance Policy.
"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 and remitted to the Indenture Trustee 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 and have been received by the
Servicer during such Collection Period and remitted to the Indenture Trustee,
together with all Realized Losses on such Financed Student Loans; (iii) to the
extent attributable to principal, the Purchase Amount received by the Indenture
Trustee with respect to each Financed Student Loan repurchased by the Seller or
purchased by the Servicer as a result of a breach of a representation, warranty
or covenant which arose during the related Collection Period or such other
specified period; and (iv) the Principal Distribution Adjustment; provided,
however, that the Principal Distribution Amount will exclude all payments and
proceeds (including Liquidation Proceeds) of any Financed Student Loans the
Purchase Amount of which has been included in Available Funds for a prior
Collection Period 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 the Available Funds on such Quarterly
Payment Date to be used to make additional principal distributions to the Senior
Noteholders (and, after the Senior Notes have been paid in full, to the
Subordinate 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 capitalize 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 amount of any Reserve Account Excess after giving effect to all
distributions to be made therefrom 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 a Monthly Interest Period or
Quarterly Interest Period, as applicable, 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 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 was 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 (other than an Exchanged Serial Loan) to be purchased by the Issuer,
an additional amount 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 or
Collection Period, as applicable, 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 1998.
"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 or Fitch. If no such organization or
successor is any longer in existence, "Rating Agency" shall be a nationally
recognized statistical rating organization or other comparable Person designated
by the Seller, notice of which designation shall be given to the Indenture
Trustee, the Eligible Lender Trustee, the Servicer and the Subordinate Note
Insurer.
"Rating Agency Condition" means, with respect to any action, that
each Rating Agency shall have been given ten days' prior notice thereof and that
each of the Rating Agencies shall have notified the Seller, the Servicer, the
Subordinate Note Insurer, the Eligible Lender Trustee, the Indenture Trustee and
in writing that such action will not result in and of itself in a reduction or
withdrawal of the then current rating of the Class A-1 Notes, the Class A-2
Notes or the Subordinate Notes without regard to the Subordinate Note Insurance
Policy.
"Realized Losses" means the excess of the aggregate principal balance
of any Liquidated Student Loan plus accrued but unpaid interest thereon over
Liquidation Proceeds to the extent allocable to principal.
"Record Date" means, with respect to a Quarterly Payment Date or a
Redemption Date, the close of business on the twenty-seventh day of the calendar
month in which such 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, all
monies in respect thereof, from whatever source, that have been received by the
Servicer and remitted to
the Indenture Trustee during any Monthly Collection Period or Collection Period,
as applicable, following the Monthly Collection Period or Collection Period, as
applicable, in which such Financed Student Loan became a Liquidated Student
Loan.
"Redemption Date" means in the case of a payment to the 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(c) of the
Indenture.
"Redemption Price" means, in the case of a payment made to the
Noteholders pursuant to Section 10.01(c) of the Indenture, the Outstanding
Amount of the Notes and all accrued and unpaid interest thereon and any
Noteholders' Interest Basis Carryover (but only to the extent provided in
Sections 2.07(d) and 8.02 of the Indenture).
"Reference Banks" means four major banks in the London interbank
market selected by the Administrator.
"Reimbursement Amount" means the sum of (i) any unreimbursed payments
made by the Subordinate Note Insurer under the Subordinate Note Insurance Policy
and (ii) all other amounts owed to the Subordinate Note Insurer under the Basic
Documents, in each case together with interest on such amounts at the Late
Payment Rate (as such term is defined in the Insurance Agreement).
"Repayment" means the period of time during which a Borrower is
required to make installment payments to repay the aggregate principal amount
plus accrued interest of all amounts borrowed by virtue of the Borrower Note(s)
executed by such Borrower.
"Repayment Loan" means a Student Loan during a period
of Repayment.
"Reserve Account" means the account designated as such, established
and maintained pursuant to Section 2(c) of the Administration Agreement, which
shall be an Eligible Account.
"Reserve Account Excess" has the meaning specified in
Section 2(e)(ii) of the Administration Agreement.
"Reserve Account Initial Deposit" means $1,512,500.
"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 July 2000 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.
"Securities Act" means the federal Securities Act of
1933, as amended.
"Seller" means SMS, in its capacity as seller of the
Financed Student Loans.
"Senior Noteholder" means the Noteholder of a Senior
Note.
"Senior Notes" means, collectively, the Class A-1 Notes and the Class
A-2 Notes.
"Senior Noteholders' 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 Senior Noteholders' Principal Distribution Amount for such Quarterly Payment
Date.
"Senior Noteholders' Interest Basis Carryover" means, with respect to
each Quarterly Payment Date, the Class A-1 Noteholders' Interest Basis Carryover
and the Class A-2 Noteholders' Interest Basis Carryover for such Quarterly
Payment Date.
"Senior Noteholders' Interest Distribution Amount"
means, with respect to any Quarterly Payment Date, the sum of
(i) the Class A-1 Noteholders' Interest Distribution Amount and (ii) the Class
A-2 Noteholders' Interest Distribution Amount, each for such Quarterly Payment
Date; provided, however, that the Senior Noteholders' Interest Distribution
Amount will not include any Senior Noteholders' Interest Basis Carryover.
"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.
"Servicing Agreement" means the Servicing Agreement dated as of May
1, 1998, 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) 0.25% of the principal balance of the
Notes after taking into account the effect of distributions on such Quarterly
Payment Date and (b) $756,250; 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 Ratings Service, a
division of the McGraw-Hill Companies, Inc.
"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.
"Student Loan Rate Accrual Period" means, with respect
to any Quarterly Interest Date, the Collection Period preceding
such Quarterly Collateral Date.
"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 Final Maturity Date" means the
October 2033 Quarterly Payment Date.
"Subordinate Note Insurance Policy" means that certain note guaranty
insurance policy dated the Closing Date (policy number 26557) and issued by the
Subordinate Note Insurer.
"Subordinate Note Insurance Policy Premium" means, with respect to
any Quarterly Payment Date, the premium on the Subordinate Note Insurance Policy
payable to the Subordinate Note Insurer on such Quarterly Payment Date as
provided in the
Insurance Agreement.
"Subordinate Note Insurer" means MBIA Insurance Corporation, its
successors and any permitted assigns.
"Subordinate Note LIBOR Rate" means, with respect to any Quarterly
Interest Period, Three-Month LIBOR for the related LIBOR Reset Period plus
0.27%.
"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 Quarterly Payment
Date and the related Quarterly Interest Period, the interest rate per annum
(computed on the basis of the actual number of days in such Quarterly Interest
Period over a year of 360 days) equal to the lesser of (i) the Subordinate Note
LIBOR Rate for such Quarterly Interest Period and (ii) the Adjusted Student Loan
Rate for such Quarterly Interest Period; provided, however, that,
notwithstanding the foregoing, the Subordinate Note Rate for the first Quarterly
Interest Period shall be equal to the Subordinate Note LIBOR Rate for such
Quarterly Interest Period.
"Subordinate Noteholder" means the Noteholder of a
Subordinate Note.
"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 Basis Carryover" means, with
respect to each Quarterly Payment Date commencing in October 1998, 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 the related Quarterly Interest
Period had interest been calculated based on the Subordinate Note LIBOR Rate
over (b) the amount of interest on the Subordinate Notes actually accrued in
respect of such Quarterly Interest Period based on the Adjusted 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, calculated based on the Subordinate Note LIBOR
Rate); provided, however, that, on the Subordinate Note Final Maturity Date, the
Subordinate Noteholders' Interest Basis Carryover will be equal to the lesser of
(i) the Subordinate Noteholders' Interest Basis 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) of the Administration Agreement and Section 8.02 the
Indenture.
"Subordinate Noteholders' Interest Carryover Shortfall" means, with
respect to any Quarterly Payment Date, the excess of (i) the Subordinate
Noteholders' Interest Distribution Amount on the preceding Quarterly Payment
Date over (ii) the amount of interest actually distributed to the Subordinate
Noteholders on such preceding Quarterly Payment Date, plus interest on the
amount of such excess, to the extent permitted by law, at the then current
Subordinate Note Rate from such preceding Quarterly Payment Date to the current
Quarterly Payment Date.
"Subordinate Noteholders' Interest Distribution Amount" means, with
respect to any Quarterly Payment Date, the sum of (i) the amount of interest
accrued at the Subordinate Note Rate for the related Quarterly Interest Period
on the aggregate principal amount of the Subordinate Notes outstanding 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 Quarterly Payment Date, on
the Closing Date, and (ii) the Subordinate Noteholders' Interest Carryover
Shortfall for such Quarterly
Payment Date; provided, however, that the Subordinate Noteholders' Interest
Distribution Amount will not include any Subordinate Noteholders' Interest Basis
Carryover.
"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 actually distributed to the Subordinate Noteholders on such Quarterly
Payment Date.
"Subordinate Noteholders' Principal Distribution Amount" means, with
respect to each Quarterly Payment Date on and after which the aggregate
principal amount 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 the 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 aggregate principal amount of the Subordinate Notes outstanding on such
date. 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 amount of the Subordinate
Notes to zero.
"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.
"Successor Servicer" has the meaning specified in
Section 3.07(e) of the Indenture.
"Swap Agreement" means the Interest Rate Swap Agreement, dated as of
May 26, 1998, entered into by the Trust with the Swap Counterparty documented
according to a 1992 ISDA
Master Agreement (Multicurrency-Cross Border) and any replacement Swap Agreement
acceptable to the Indenture Trustee and the Subordinate Note Insurer.
"Swap Counterparty" means General Re Products Financial Corporation,
an indirect, wholly-owned subsidiary of General Re Corporation which guarantees
the obligations of the Swap Counterparty, and any replacement swap counterparty
appointed in accordance with the terms of the Swap Agreement.
"Tax Characterization Amendment" has the meaning
specified in Section 5.04 of the Trust Agreement.
"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.
"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 any
service for the purpose of displaying comparable rates or prices).
"Termination Event" has the meaning specified in the
Swap Agreement.
"Termination Payment" has the meaning specified in the
Swap Agreement.
"Three-Month LIBOR" means, with respect to any LIBOR Reset Period,
the London interbank offered rate for deposits in U.S. dollars having a maturity
of three months commencing on the related LIBOR Determination Date (the "Index
Maturity") which appears on Telerate Page 3750 as of 11:00 a.m. London time, on
such LIBOR Determination Date. If such rate does not appear on Telerate Page
3750, the rate for that day will be determined on the basis of the rates at
which deposits in U.S. dollars, having the Index Maturity and in a principal
amount of not less than U.S. $1,000,000, are offered at approximately 11:00
a.m., London time, on such LIBOR Determination Date to prime banks in the London
interbank market by the Reference Banks. The
Administrator will request the principal London office of each of such Reference
Banks to provide a quotation of its rate. If at least two such quotations
are provided, the rate for that day will be the arithmetic mean of the
quotations. If fewer than two quotations are provided, the rate for that day
will be the arithmetic mean of the rates quoted by major banks in The City of
New York, selected by the Administrator, at approximately 11:00 a.m., New York
time, on such LIBOR Determination Date, for loans in U.S. dollars to leading
European banks having the Index Maturity and in a principal amount equal to an
amount of not less than U.S. $1,000,000; provided, however, that if the banks
-----------------
selected as aforesaid are not quoting as mentioned in this
sentence, Three-Month LIBOR in effect for the applicable LIBOR
Reset Period will be the Three-Month LIBOR in effect for the
previous LIBOR Reset Period.
"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 close of the
related Monthly Payment Date.
"Treasury Regulations" means regulations, including proposed or
temporary regulations, promulgated under the Code. References in any document or
instrument to specific provisions of proposed or temporary regulations shall
include analogous provisions of final Treasury Regulations or other successor
Treasury Regulations.
"Trust" means the Issuer, established pursuant to the
Trust Agreement.
"Trust Account Property" means the Trust Accounts, all amounts and
investments held from time to time in any Trust Account (whether in the form of
deposit accounts, Physical Property, book-entry securities, uncertificated
securities or otherwise), including the Reserve Account Initial Deposit and all
proceeds of the foregoing.
"Trust Accounts" has the meaning specified in Section
2(c) of the Administration Agreement.
"Trust Agreement" means the Trust Agreement dated as of May 1, 1998,
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. the Servicing
Agreement and the Administration Agreement.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939
as in force on the date hereof, unless otherwise specifically provided.
"Trust Swap Payment Amount" means, with respect to any Quarterly
Payment Date, the sum of (i) if the Swap Agreement is still in effect, the Net
Trust Swap Payment for such Quarterly Payment Date and (ii) the Net Trust Swap
Payment Carryover Shortfall for such Quarterly Payment Date; provided, however,
that Termination Payments (other than in respect of clauses (i) and (ii) above)
shall not be deemed to be part of the Trust Swap Payment Amount.
"Trust Swap Receipt Amount" means, with respect to any Quarterly
Payment Date, the sum of (i) if the Swap Agreement is still in effect, the Net
Trust Swap Receipt for such Quarterly Payment Date and (ii) the Net Trust Swap
Receipt Carryover Shortfall for such Quarterly Payment Date.
"UCC" means, unless the context otherwise requires, the Uniform
Commercial Code, as in effect in the relevant jurisdiction, as amended from time
to time.
"United States Person" means a citizen or resident of the United
States, a corporation, partnership or other entity created or organized in, or
under the laws of, the United States or any political subdivision thereof, or an
estate whose income is subject to United States federal income tax regardless of
its source, or a trust if a court within the United States is able to exercise
primary supervision over the administration of the trust and one or more United
States fiduciaries have the authority to control all substantial decisions of
the trust.
