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 21, 1999
USA GROUP SECONDARY MARKET SERVICES, INC.
(Exact name of Registrant as Specified in Charter)
Delaware 333-63081 35-1872185
(State or Other (Commission (IRS Employer
(Jurisdiction File Number) Identification No.)
of Incorporation)
30 South Merdian Street, Indianapolis, Indiana 46204-3503
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (317) 951-5640
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Item 5. Other Events.
This Current Report on Form 8-K is being filed to file a copy of the documents
attached hereto as exhibits in connection with the offering of SMS Student Loan
Trust 1999-B Floating Rate Asset Backed Notes, Class A-1 and Class A-2.
Capitalized terms not defined herein have the meanings assigned in the
Indenture.
Item 7. Financial statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits
Exhibit No.
-----------
4.1 Servicing Agreement
4.2 Trust Agreement
4.3 Indenture
99.1 Loan Sale Agreement
99.2 Administration Agreement
99.3 Appendix A to the Administration Agreement
99.4 Schedule to the ISDA Master Agreement
99.5 Confirmation to the ISDA Master Agreement
<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. as originator of
the Trust
(Registrant)
By: /s/ Cheryl E. Watson
-------------------------------
Name: Cheryl E. Watson
Title: Senior Vice President
Date: June 1, 1999
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
- -------------- -----------
4.1 Servicing Agreement
4.2 Trust Agreement
4.3 Indenture
99.1 Loan Sale Agreement
99.2 Administration Agreement
99.3 Appendix A to the Administration Agreement
99.4 Schedule to the ISDA Master Agreement
99.5 Confirmation to the ISDA Master Agreement
Exhibit 4.1
Execution Copy
================================================================================
SERVICING AGREEMENT
among
SMS STUDENT LOAN TRUST 1999-B
as Issuer,
USA GROUP LOAN SERVICES, INC.
as Servicer,
USA GROUP SECONDARY MARKET SERVICES, INC.
as Seller,
and
THE FIRST NATIONAL BANK OF CHICAGO,
not in its individual capacity but solely
as Eligible Lender Trustee
Dated as of April 19, 1999
================================================================================
<PAGE>
SERVICING AGREEMENT dated as of April 19, 1999, among SMS
STUDENT LOAN TRUST 1999-B, 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 April 19, 1999, among
the Issuer, the Seller, as Administrator, and HSBC Bank USA, 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 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 Delayed Delivery Loans, 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:
<PAGE>
(a) the original fully executed copy of the note evidencing
the Financed Student Loan (including the original loan application
fully executed by the Borrower); and
(b) any and all other documents and computerized records that
the Servicer shall keep on file, in accordance with its customary
procedures, relating to such Financed Student Loan or any Obligor with
respect thereto.
SECTION 2.02. Duties of Servicer as Custodian.
(a)Safekeeping. The Servicer shall maintain custody of the
Student Loan Files for the benefit of the Issuer and the Indenture Trustee on
behalf of the Noteholders 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 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 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.
(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 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 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
-2-
<PAGE>
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 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 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
-3-
<PAGE>
Noteholders, the Swap Counterparty or the Company. The Servicer also
hereby acknowledges that its 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 Delayed
Delivery Loans, 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 Noteholders, 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
-4-
<PAGE>
precise audit trail for each Financed Student Loan and to comply with such other
reporting, servicing, and operating standards as are contained in this
Agreement.
The Eligible Lender Trustee on behalf of the Issuer hereby grants a
power of attorney and all necessary authorization to the Servicer to maintain
any and all collection procedures with respect to the Financed Student Loans,
including filing, pursuing and recovering claims against the Guarantors for
Guarantee Payments and taking any steps to enforce such Financed Student Loans
such as commencing a legal proceeding to enforce a Financed Student Loan in the
name of the Issuer, the Eligible Lender Trustee, the Indenture Trustee, the
Company or the Noteholders. The Eligible Lender Trustee or the Indenture Trustee
shall upon the written request of the Servicer or the Administrator furnish the
Servicer or the Administrator with any other powers of attorney and other
documents reasonably necessary or appropriate to enable the Servicer or the
Administrator to carry out their servicing and administrative duties hereunder.
SECTION 3.02. Collection of Student Loan Payments. (a) The
Servicer shall make reasonable efforts (including all efforts that may be
specified under the Higher Education Act or any Guarantee Agreement) to collect
all payments called for under the terms and provisions of the Financed Student
Loans as and when the same shall become due and shall follow such collection
procedures as it follows with respect to all comparable Student Loans that it
services. The Servicer shall allocate collections with respect to the Financed
Student Loans between principal and interest in accordance with the terms of
each such loan. The Servicer may in its discretion waive any late payment charge
or any other fees that may be collected in the ordinary course of servicing a
Financed Student Loan.
(b) The Servicer shall make reasonable efforts to claim,
pursue and collect all Guarantee Payments from the Guarantors pursuant to the
Guarantee Agreements with respect to 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
(net, for the first Collection Period, of interest accrued prior to the Cutoff
Date that is not to be capitalized) 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
-5-
<PAGE>
connection therewith, the Servicer shall prepare and file with the Department on
a timely basis all claims forms and other documents and filings necessary or
appropriate in connection with the claiming of Interest Subsidy Payments and
Special Allowance Payments on behalf of the Eligible Lender Trustee and shall
otherwise assist the Eligible Lender Trustee in pursuing and collecting such
Interest Subsidy Payments and Special Allowance Payments from the Department.
The Eligible Lender Trustee shall upon the written request of the Servicer
furnish the Servicer with any power of attorney and other documents reasonably
necessary or appropriate to enable the Servicer to prepare and file such claims
forms and other documents and filings.
The Eligible Lender Trustee may permit trusts, other than the Trust,
established by the Seller to securitize student loans to use the Department
lender identification number applicable to the Trust. In such event, the
Eligible Lender Trustee may claim and collect Interest Subsidy Payments and
Special Allowance Payments with respect to Financed Student Loans in the Trust
and student loans in such other trusts using such common lender identification
number. Notwithstanding anything herein or in the Basic Documents to the
contrary, any amounts assessed against 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 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
-6-
<PAGE>
the Noteholders, the Issuer, the Indenture Trustee, the Eligible Lender Trustee
or the Swap Counterparty are materially and adversely affected by such breach as
of the first day succeeding the end of such 60-day period that is the last day
of a Monthly Collection Period (it being understood that any such breach that
does not affect the related Guarantor's obligation to guarantee payment of such
Student Loan will not be considered to have a 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.
(d) 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 0.60% or such larger percentage approved by the Rating Agencies,
not to exceed 1.00% (or of 0.50% with respect to any calendar month beginning
with July 2009) 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 Billing Account relating to a Financed Student Loan as of the last day of
the preceding calendar month which was an In-School Loan on such date or, if the
average principal balance of Billing Accounts relating to In-School Loans as of
such date was $2,500 or less, $1.50 per Billing Account, (ii) one-twelfth of the
GRDF Percentage of the principal balance as of the last day of the preceding
calendar month of each Billing Account relating to a 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 Billing Accounts as of such date was
$3,000 or less, $3.00 per Billing Account, (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
-7-
<PAGE>
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 Billing Account processing (that, in
the case of ineligible Billing 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 $0.40 for each
Billing Account 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 Billing Accounts relating to the In-School Loans and
the Billing Accounts relating to the Grace, Repayment, Deferral and Forbearance
Loans, respectively, as of the last day of the preceding calendar month, as
follows:
Average Principal In-School Average Principal GRDF Percentage
Balance Percentage Balance
- -------------------- ------------- ------------------- -------------------
$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
-8-
<PAGE>
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 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 and the Swap Counterparty (with a copy to the Seller), on or
before April 30 of each year beginning April 30, 2000, 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, 1999 or, as specified below, to September 30, 1999)
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, 1999, and, in such case, shall deliver such Officer's Certificate
on or before December 31, 1999 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 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.
-9-
<PAGE>
SECTION 3.09. Annual Independent Certified Public Accountants'
Report. The Servicer shall cause a firm of independent certified public
accountants, which may also render other services to the Servicer, the Seller or
their Affiliates, to deliver to the Eligible Lender Trustee, the Indenture
Trustee 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, 1999 or, as the case may be, to
September 30, 1999). The Indenture Trustee shall send a copy of each such report
to the Rating Agencies.
Such report will also indicate that the firm is independent of
the Servicer within the meaning of the Code of Professional Ethics of the
American Institute of Certified Public Accountants.
SECTION 3.10. Access to Certain Documentation and Information
Regarding Financed Student Loans. Upon at least three Business Days' prior
notice, the Servicer shall provide the Noteholders access to the Student Loan
Files in such cases where the Noteholders shall be required by applicable
statutes or regulations to review such documentation, as demonstrated by
evidence satisfactory to the Servicer in its reasonable judgment. Access shall
be afforded without charge, but only upon reasonable request and during the
normal business hours at the respective offices of the Servicer. Nothing in this
Section shall affect the obligation of the Servicer to observe any applicable
law prohibiting disclosure of information regarding the Obligors and the failure
of the Servicer to provide access to information as a result of such obligation
shall not constitute a breach of this Section.
SECTION 3.11. Servicer Expenses. The Servicer shall be
required to pay all expenses incurred by it in connection with its activities
hereunder, including fees and disbursements of independent accountants, taxes
imposed on the Servicer, and expenses incurred in connection with distributions
and reports to the Administrator or the Noteholders, as the case may be.
SECTION 3.12. Appointment of Subservicer. The Servicer may at
any time appoint a subservicer to perform all or any portion of its obligations
as Servicer hereunder; provided, however, that the Rating Agency Condition shall
have been satisfied in connection therewith; and provided, further, that the
Servicer shall remain obligated and be liable to the Issuer, the Eligible Lender
Trustee, the Indenture Trustee and the Noteholders for the servicing and
administering of the Financed Student Loans in accordance with the provisions
hereof without diminution of such obligation and liability by virtue of the
appointment of such subservicer and to the same extent and under the same terms
and conditions as if the Servicer alone were servicing and administering the
Financed Student Loans. The fees and expenses of the subservicer shall be as
agreed between the Servicer and its subservicer from time to time and none of
the Issuer, the Eligible Lender Trustee, the Indenture Trustee or the
Noteholders shall have any responsibility therefor.
-10-
<PAGE>
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.
(v) 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.
(vi) The Seller shall deposit into the Collection Account, the
aggregate Purchase Amount with respect to Purchased Student Loans and all other
amounts to be paid by the Seller under Section 3.02 and 5.01 of the Loan Sale
Agreement when such amounts are due, as provided in Section 3.03 of the Loan
Sale Agreement.
(vii) 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.
(viii) 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.
-11-
<PAGE>
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 Delayed Delivery Loans, New Loans
and Serial Loans, as of the date of the relevant Assignment in the case of any
Qualified Substitute Student Loan, as of the date of origination in the case of
any Consolidation Loan added to the Trust during the Revolving Period and as of
the applicable Add-on Consolidation Loan Funding Date in the case of any
Consolidation Loan the principal balance of which has been increased by the
principal balance of a related Add-on Consolidation Loan, but shall survive the
sale, transfer and assignment of the Financed Student Loans to the Eligible
Lender Trustee on behalf of the Issuer (and the origination of such
Consolidation Loans) and the pledge thereof to the Indenture Trustee pursuant to
the Indenture.
(a) Organization and Good Standing. The Servicer is duly
organized and validly existing as a corporation in good standing under
the laws of the State of Delaware, with the power and authority to own
its properties and to conduct its business as such properties are
currently owned and such 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
-12-
<PAGE>
with respect to the Financed Student Loans, and compliance by the
Servicer with the terms of this Agreement, will not result in the loss
of any Guarantee Payments by the Trust or any reinsurance payments
with respect to any Financed Student Loan by the applicable Guarantor.
(e) No Proceedings. There are no proceedings or investigations
pending against the Servicer or, to its best knowledge, threatened
against the Servicer, before any court, regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over
the Servicer or its properties: (i) asserting the invalidity of this
Agreement or any of the other Basic Documents to which the Servicer is
a party, (ii) seeking to prevent the issuance of the Notes or the
consummation of any of the 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 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
-13-
<PAGE>
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 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 and (iv) cure
any existing Servicer Default or any continuing event which, after notice or
lapse of time or both, would become a Servicer Default. Upon compliance with the
foregoing requirements, such Person shall be the successor to the Servicer under
this Agreement without further act on the part of any of the parties to this
Agreement. Notwithstanding anything herein to the contrary, compliance with
clauses (i), (ii), (iii) and (iv) above shall be conditions to the consummation
of any of the transactions referred to in clause (a), (b) or (c) above.
SECTION 5.04. Limitation on Liability of Servicer and Others.
Neither the Servicer nor any of the directors, officers, employees or agents of
the Servicer shall be under any liability to the Issuer or the Noteholders,
except as provided under this Agreement, for any action taken or for refraining
from the taking of any action pursuant to this Agreement or for errors in
judgment; provided, however, that this provision shall not protect the Servicer
or any such Person against any liability that would otherwise be imposed by
reason of willful misfeasance,
-14-
<PAGE>
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 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 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 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 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
-15-
<PAGE>
(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
(d) an Insolvency Event occurs with respect to the
Servicer;
then, and in each and every case, so long as the Servicer Default shall not have
been remedied, either the Indenture Trustee or the Noteholders of Notes
evidencing not less than 75% of the Outstanding Amount of the Notes by notice
then given in writing to the Servicer (and to the Indenture Trustee and the
Eligible Lender Trustee if given by the Noteholders) may terminate all the
rights and obligations (other than the obligations set forth in Section 5.02) of
the Servicer under this Agreement. On or after the receipt by the Servicer of
such written notice, all authority and power of the Servicer under this
Agreement, whether with respect to the Notes, the Financed Student Loans or
otherwise, shall, without further action, pass to and be vested in the Indenture
Trustee or such successor Servicer as may be appointed under Section 6.02; and,
without limitation, the Indenture Trustee and the Eligible Lender Trustee are
hereby authorized and empowered to execute and deliver, for the benefit of the
predecessor Servicer, as attorney-in-fact or otherwise, any and all documents
and other instruments, and to do or accomplish all other acts or things
necessary or appropriate to effect the purposes of such notice of termination,
whether to complete the transfer and endorsement of the Financed Student Loans
and related documents, or otherwise. The predecessor Servicer shall cooperate
with the successor Servicer, the Indenture Trustee and the Eligible Lender
Trustee in effecting the termination of the responsibilities and rights of the
predecessor Servicer under this Agreement, including the transfer to the
successor Servicer for administration by it of all cash amounts that shall at
the time be held by the predecessor Servicer for deposit, or shall thereafter be
received by it with respect to a Financed Student Loan. All reasonable costs and
expenses (including attorneys' fees) incurred in connection with transferring
the Student Loan Files to the successor Servicer and amending this Agreement and
any other Basic Documents to reflect such succession as Servicer pursuant to
this Section shall be paid by the predecessor Servicer upon presentation of
reasonable documentation of such costs and expenses. Upon receipt of notice of
the occurrence of a Servicer Default, the Eligible Lender Trustee shall give
notice thereof to the Rating Agencies.
SECTION 6.02. Appointment of Successor. (a) Upon receipt by
the Servicer of notice of termination pursuant to Section 6.01, or the
resignation by the Servicer in accordance with the terms of this Agreement, the
predecessor Servicer shall continue to perform its functions as Servicer under
this Agreement, in the case of termination, only until the date specified in
such termination notice or, if no such date is specified in a notice of
termination, until receipt of such notice and, in the case of resignation, until
the later of (x) the date 120 days from the delivery to the Eligible Lender
Trustee, and the Indenture Trustee of written notice of such resignation (or
written confirmation of such notice) in accordance with the terms of this
Agreement and (y) the date upon which the predecessor Servicer shall become
unable to act as Servicer as specified in the notice of resignation and
accompanying Opinion of Counsel. In the event of the termination
-16-
<PAGE>
hereunder of the Servicer, the Issuer shall appoint a successor Servicer
acceptable to the Indenture Trustee, and the successor Servicer shall accept its
appointment by a written assumption in form acceptable to the Indenture Trustee
and the Administrator. In the event that a successor Servicer has not been
appointed at the time when the predecessor Servicer has ceased to act as
Servicer in accordance with this Section, the Indenture Trustee without further
action shall automatically be appointed the successor Servicer and the Indenture
Trustee shall be entitled to the Servicing Fee. Notwithstanding the above, the
Indenture Trustee shall, if it shall be unwilling or legally unable so to act,
appoint or petition a court of competent jurisdiction to appoint, any
established institution 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 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) and all the rights granted to the predecessor Servicer by the terms and
provisions of this Agreement.
(c) The Servicer may not resign unless it is prohibited from
serving as such by law as evidenced by an Opinion of Counsel to such effect
delivered to the Indenture Trustee and the Eligible Lender Trustee.
Notwithstanding the foregoing or anything to the contrary herein or in the other
Basic Documents, the Indenture Trustee, to the extent it is acting as successor
Servicer pursuant hereto, shall be entitled to resign to the extent a qualified
successor Servicer has been appointed and has assumed all the obligations of the
Servicer in accordance with the terms of this Agreement and the other Basic
Documents.
SECTION 6.03. Notification to Noteholders and the Company.
Upon any termination of, or appointment of a successor to, the Servicer pursuant
to this Article VI, the Indenture Trustee shall give prompt written notice
thereof to Noteholders, the Administrator, the Company, the Eligible Lender
Trustee and the Rating Agencies (which, in the case of any such appointment of a
successor, shall consist of prior written notice thereof to the Rating
Agencies).
SECTION 6.04. Waiver of Past Defaults. The Noteholders of
Notes evidencing not less than a majority of the Outstanding Amount of the Notes
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.
-17-
<PAGE>
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 and the
Indenture Trustee, adversely affect in any material respect the interests of any
Noteholder.
This Agreement may also be amended from time to time by the
Servicer and the Eligible Lender Trustee, with the prior written consent of the
Indenture Trustee, the Noteholders of Notes evidencing not less than a majority
of the Outstanding Amount of the Notes 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; provided further, that the prior written
consent of the Swap Counterparty shall not be required if an Opinion of Counsel
is delivered to the Swap Counterparty stating that the proposed amendment to
this Agreement will not adversely affect in any material respect the interests
of the Noteholders or the Swap Counterparty.
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 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 Indenture Trustee 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.
-18-
<PAGE>
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 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 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.
(d) The Servicer shall, by use of a distinct identification
code, maintain its computer systems so that, from and after the time of sale
under this Agreement of the Financed Student Loans, the Servicer's master
computer records (including any backup archives) that refer to a Student Loan
shall indicate clearly the interest of the Issuer, the Eligible Lender Trustee
and the Indenture Trustee in such Student Loan and that such Student Loan is
owned by the Eligible Lender Trustee on behalf of the Issuer and has been
pledged to the Indenture Trustee. Indication of the Issuer's, the Eligible
Lender Trustee's and the Indenture Trustee's interest in a Student Loan shall be
deleted from or modified on the Servicer's computer systems when, and only when,
the related Financed Student Loan shall have been paid in full or repurchased.
(e) If at any time the Servicer shall propose to sell, grant a
security interest in, or otherwise transfer any interest in student loans to any
prospective purchaser, lender or other transferee, the Servicer shall give to
such prospective purchaser, lender or other transferee computer tapes, records
or printouts (including any restored from backup archives) that, if they shall
refer in any manner whatsoever to any Financed Student Loan, shall indicate
clearly that such Financed Student Loan has been sold and is owned by the
Eligible Lender Trustee on behalf of the Issuer and has been pledged to the
Indenture Trustee.
(f) The Servicer shall permit the Indenture Trustee and 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;
-19-
<PAGE>
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 or
the Indenture Trustee (in each case, with a copy to the Administrator), within
five (5) Business Days, a list of all Financed Student Loans (by borrower social
security number, type of loan and date of issuance) then held as part of the
Trust, and shall cause the Administrator to furnish to the Eligible Lender
Trustee or to the Indenture Trustee, within 20 Business Days thereafter, a
comparison of such list to the list of Initial Financed Student Loans set forth
in Schedule A to the Loan Sale Agreement as of the Closing Date, and, for each
Financed Student Loan that has been added to or removed from the pool of loans
held by the Eligible Lender Trustee on behalf of the Issuer, information as to
the date as of which and circumstances under which each such Financed Student
Loan was so added or removed.
SECTION 7.03. Notices. 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 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.
-20-
<PAGE>
One Indiana Square
Mail Code IN1-7081
Indianapolis, Indiana 46266
Attention: Terri Hawkins
Telephone: (317) 266-6533
Telecopy: (317) 266-6599;
(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 Deputy General Counsel
USA Group, Inc.
30 South Meridian Street
Indianapolis, Indiana 46204-3503
Telephone: (317) 951-5523
Telecopy: (317) 951-5532;
(d) in the case of the Issuer, to
Student Loan Trust 1999-B
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
-21-
<PAGE>
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
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; and
(j) in the case of the Swap Counterparty, to
Merrill Lynch Derivative Products AG
Stauffacherstrasse 5, 1st Floor
8004 Zurich
Switzerland
Attention: Manager
Telephone: 011 411 297 7800
Facsimile: 011 411 297 7859
-22-
<PAGE>
with a copy to:
Merrill Lynch & Co.
Office of General Counsel
250 Vesey Street
New York, New York 10281
Attention: Laurence D. Dobosh
Telephone: (212) 449-4706
Facsimile: (212) 449-6993;
or, as to each of the foregoing, at such other address as shall be designated by
written notice to the other parties.
SECTION 7.04. Assignment. Notwithstanding anything to the
contrary contained herein, except as provided in the succeeding sentence, as
provided in Section 5.03 and as provided in the provisions of this Agreement
concerning the resignation of the Servicer, this Agreement may not be assigned
by the Servicer. This Agreement may only be assigned by the Eligible Lender
Trustee to its permitted successor pursuant to the Trust Agreement.
SECTION 7.05. Limitations on Rights of Others. The provisions
of this Agreement are solely for the benefit of the Servicer, the Issuer and the
Eligible Lender Trustee and for the benefit of the Administrator, the Indenture
Trustee and the Noteholders, as third party beneficiaries, and nothing in this
Agreement, whether express or implied, shall be construed to give to any other
Person any legal or equitable right, remedy or claim in the Trust Estate or
under or in respect of this Agreement or any covenants, conditions or provisions
contained herein. The Indenture Trustee 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 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.
-23-
<PAGE>
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 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) Reserved.
(b) Notwithstanding anything contained herein to the contrary
(other than pursuant to subsection (d)), 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 or which recourse shall be had
solely to the assets of the Issuer.
(c) Notwithstanding anything contained herein to the contrary
(other than pursuant to subsection (d)), this Agreement has been accepted by
HSBC Bank USA not in its individual capacity but solely as Indenture Trustee and
in no event shall HSBC Bank USA have any liability for the representations,
warranties, covenants, agreements or other obligations of the Issuer hereunder
or in any of the certificates, notices or agreements delivered pursuant hereto,
as to all of which recourse shall be had solely to the assets of the Issuer.
(d) Notwithstanding any other provision in this Agreement or
the other Basic Documents, nothing in this Agreement or the other Basic
Documents shall be construed to limit the legal responsibility of the Eligible
Lender Trustee or the Indenture Trustee, to the U.S. Secretary of Education or a
Guarantor for any violations of statutory or regulatory requirements that may
occur with respect to loans held by the Eligible Lender Trustee or the Indenture
Trustee pursuant to, or to otherwise comply with their obligations under, the
Higher Education Act or implementing regulations.
-24-
<PAGE>
[Signatures Follow on Next Page]
-25-
<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 1999-B,
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:
<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:
HSBC BANK USA, not in
its individual capacity but
solely as Indenture Trustee
By: _________________________________
Name:
Title:
<PAGE>
SCHEDULE A
The Servicer shall maintain each Student Loan File at one of the locations
listed below:
(a) USA Group Loan Services, Inc.
11100 USA Parkway
Fishers, IN 46038
(b) USA Group Loan Services, Inc.
Brambles DVS, Inc. d/b/a Indianapolis Vault Company
5251 West 81st Street
Indianapolis, IN 46268
Execution Copy
================================================================================
TRUST AGREEMENT
among
USA GROUP SECONDARY MARKET SERVICES, INC.,
as depositor,
SECONDARY MARKET COMPANY, INC.
and
THE FIRST NATIONAL BANK OF CHICAGO,
not in its individual capacity but solely
as Eligible Lender Trustee
Dated as of April 19, 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
Definitions and Usage
ARTICLE II
Organization
SECTION 2.01. Name...........................................................1
SECTION 2.02. Office.........................................................1
SECTION 2.03. Purposes and Powers............................................1
SECTION 2.04. Appointment of Eligible Lender Trustee.........................2
SECTION 2.05. Initial Capital Contribution of Trust Estate...................2
SECTION 2.06. Declaration of Trust...........................................3
SECTION 2.07. [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..................................................4
SECTION 2.11. Liability of Noteholders.......................................4
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........5
SECTION 4.02. Action by Company with Respect to Bankruptcy...................7
SECTION 4.03. Restrictions on Company's Power................................7
ARTICLE V
Certain Duties
SECTION 5.01. No Segregation of Monies; No Interest..........................8
SECTION 5.02. Accounting and Reports to the Noteholders,
the Internal Revenue Service and Others...............8
<PAGE>
SECTION 5.03. Incentive Programs.............................................8
ARTICLE VI
Authority and Duties of Eligible Lender Trustee
SECTION 6.01. General Authority..............................................9
SECTION 6.02. General Duties.................................................9
SECTION 6.03. Action upon Instruction........................................9
SECTION 6.04. No Duties Except as Specified in this Agreement,
the Loan Sale Agreement, the Servicing Agreement,
the Administration Agreement or in Instructions.............10
SECTION 6.05. No Action Except under Specified Documents or Instructions.....11
SECTION 6.06. Restrictions...................................................11
SECTION 6.07. Origination of Consolidation Loans during the Revolving Period.11
ARTICLE VII
Concerning the Eligible Lender Trustee
SECTION 7.01. Acceptance of Trusts and Duties................................13
SECTION 7.02. Furnishing of Documents........................................14
SECTION 7.03. Representations and Warranties.................................14
SECTION 7.04. Reliance; Advice of Counsel....................................15
SECTION 7.05. Not Acting in Individual Capacity; Responsibility
to Secretary and Guarantors.................................16
SECTION 7.06. Eligible Lender Trustee Not Liable for Notes or Student Loans .16
SECTION 7.07. Eligible Lender Trustee May Own Trust Notes................... 16
SECTION 7.08. Licenses...................................................... 17
ARTICLE VIII
Compensation of Eligible Lender Trustee
SECTION 8.01. Eligible Lender Trustee's Fees and Expenses....................17
SECTION 8.02. Payments to the Eligible Lender Trustee........................17
ARTICLE IX
Termination of Trust Agreement
SECTION 9.01. Termination of Trust Agreement.................................17
SECTION 9.02. [Reserved.]....................................................18
<PAGE>
ARTICLE X
Successor Eligible Lender Trustees and
Additional Eligible Lender Trustees
SECTION 10.01. Eligibility Requirements for Eligible Lender Trustee..........18
SECTION 10.02. Resignation or Removal of Eligible Lender Trustee.............18
SECTION 10.03. Successor Eligible Lender Trustee.............................19
SECTION 10.04. Merger or Consolidation of Eligible Lender Trustee............20
SECTION 10.05. Appointment of Co-Eligible Lender Trustee or Separate
Eligible Lender Trustee....................................20
ARTICLE XI
Miscellaneous
SECTION 11.01. Supplements and Amendments....................................21
SECTION 11.02. No Legal Title to Trust Estate in Company.....................22
SECTION 11.03. Limitations on Rights of Others...............................23
SECTION 11.04. Notices.......................................................23
SECTION 11.05. Severability..................................................23
SECTION 11.06. Separate Counterparts.........................................24
SECTION 11.07. Successors and Assigns........................................24
SECTION 11.08. No Petition...................................................24
SECTION 11.09. No Recourse...................................................24
SECTION 11.10. Headings......................................................24
SECTION 11.11. Governing Law.................................................24
SECTION 11.12. [Reserved]....................................................24
SECTION 11.13. Third-Party Beneficiaries.....................................25
SECTION 11.14. Consents......................................................25
EXHIBIT A Certificate of Trust of SMS Student Loan Trust 1999-B
<PAGE>
TRUST AGREEMENT dated as of April 19, 1999, 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 April 19, 1999, among
the SMS Student Loan Trust 1999-B, as Issuer, the Seller, as Administrator, and
HSBC Bank USA, 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 1999-B", 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, to deposit the Delayed Delivery
Loan Funding Account Closing Date Deposit in the Delayed Delivery Loan
Funding Account, and to pay the organizational, start-up and
transactional expenses of the Trust and to pay the balance to the
Seller pursuant to the Loan Sale Agreement;
<PAGE>
(iii) to enter into the Swap Agreement;
(iv) 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 the Delayed Delivery Loans to
be conveyed to the Trust pursuant to the Loan Sale Agreement, 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;
(v) to assign, grant, transfer, pledge, mortgage and convey
the Trust Estate pursuant to the Indenture;
(vi) to enter into and perform its obligations under the Basic
Documents to which it is to be a party;
(vii) 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
(viii) 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 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.
-2-
<PAGE>
SECTION 2.06. Declaration of Trust. The Eligible Lender
Trustee hereby declares that it will hold the Trust Estate in trust upon and
subject to the conditions set forth herein for the use and benefit of the
Company, subject to the obligations of the Trust under the other Basic
Documents. It is the intention of the parties hereto that the Trust constitute a
trust under the Business Trust Statute and that this Agreement constitute the
governing instrument of such trust. Effective as of the date hereof, the
Eligible Lender Trustee shall have all rights, powers and duties set forth
herein and in the Business Trust Statute with respect to accomplishing the
purposes of the Trust. The Eligible Lender Trustee and the Delaware Trustee
shall file the Certificate of Trust with the Secretary of State of the State of
Delaware pursuant to ss. 3801 of the Business Trust Statute on or before the
Closing Date.
SECTION 2.07. [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 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 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.
-3-
<PAGE>
(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 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.
-4-
<PAGE>
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 Eligible Lender Trustee on behalf
of 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 and the Swap Counterparty an Opinion of Counsel (with a copy
to the Rating 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, (ii) the Company shall
have delivered to the Eligible Lender Trustee, the Indenture Trustee 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 and the Swap
Counterparty in writing of the proposed action and neither the Company nor 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 or the Swap
Counterparty has withheld consent or the Company has provided alternative
direction:
(a) the initiation of any material claim or lawsuit by the
Trust (except claims or lawsuits brought in connection with the
collection of the Financed Student Loans) and the compromise of any
material action, claim or lawsuit brought by or against the Trust
(except with respect to the aforementioned claims or lawsuits for
collection of Financed Student Loans);
-5-
<PAGE>
(b) the election by the Trust to file an amendment to the
Certificate of Trust;
(c) the amendment of the Indenture by a supplemental indenture
in circumstances where the consent of any Noteholder or the Swap
Counterparty is required;
(d) the amendment of the Indenture by a supplemental indenture
in circumstances where the consent of any Noteholder 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;
(p) cause the Trust to lend any funds to any entity; or
-6-
<PAGE>
(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 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 the above, a "Bankruptcy Action"). So long as the
Indenture and the Insurance Agreement remain in effect, 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.
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 obligations of the
Trust or the Eligible Lender Trustee under the Higher Education Act, 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.
-7-
<PAGE>
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 . No federal income tax return shall be filed on
behalf of the Trust unless either (i) the Eligible Lender Trustee shall receive
an Opinion of Counsel that, based on a change in applicable law occurring after
the date hereof, or as a result of a transfer by the Company permitted by
Section 3.01, the Code requires such a filing or (ii) the Internal Revenue
Service shall determine that the Trust is required to file such a return. In the
event that the Trust is required to file tax returns, the Eligible Lender
Trustee shall prepare or shall cause to be prepared any tax returns required to
be filed by the Trust and shall remit such returns to the Company at least five
(5) days before such returns are due to be filed. The Company shall promptly
sign such returns and deliver such returns after signature to the Eligible
Lender Trustee and such returns shall be filed by the Eligible Lender Trustee
with the appropriate tax authorities. In no event shall the Eligible Lender
Trustee, the Company or the Seller 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.
SECTIONS 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.
-8-
<PAGE>
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 $588,225,000 and Subordinate Notes in the
aggregate principal amount of $26,775,000. 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 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 Institution. (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.
-9-
<PAGE>
(b) The Eligible Lender Trustee shall not be required to take
any action hereunder or under any other Basic Document if the Eligible Lender
Trustee shall have reasonably determined, or shall have been advised by counsel,
that such action is likely to result in liability on the part of the Eligible
Lender Trustee or is contrary to the terms hereof or of any other Basic Document
or is otherwise contrary to law.
(c) Whenever the Eligible Lender Trustee is unable to
determine the appropriate course of action between alternative courses of action
permitted or required by the terms of this Agreement or under any other Basic
Document, the Eligible Lender Trustee shall promptly give notice (in such form
as shall be appropriate under the circumstances) to the Company requesting
instruction as to the course of action to be adopted, and to the extent the
Eligible Lender Trustee acts in good faith in accordance with any written
instruction of the Company received, the Eligible Lender Trustee shall not be
liable on account of such action to any Person. If the Eligible Lender Trustee
shall not have received appropriate instruction within 10 days of such notice
(or within such shorter period of time as reasonably may be specified in such
notice or may be necessary under the circumstances) it may, but shall be under
no duty to, take or refrain from taking such action, not inconsistent with this
Agreement or the other Basic Documents, as it shall deem to be in the best
interests of the Company, and shall have no liability to any Person for such
action or inaction.
(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 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, 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.
(e) Upon satisfaction of the Rating Agency Condition, if the
Administrator directs, the Eligible Lender Trustee shall enter into an amendment
to the Swap Agreement with the Swap Counterparty. The sole amendment, other than
to cure any ambiguity, to the Swap Agreement may be to change the notional
amount of the Swap Agreement from instead of the scheduled notional amount
attached to the Swap Agreement to the outstanding principal balance of the
Notes.
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
-10-
<PAGE>
Eligible Lender Trustee shall not have any duty or obligation to manage, make
any payment with respect to, register, record, sell, service, dispose of or
otherwise deal with the Trust Estate, or to otherwise take or refrain from
taking any action under, or in connection with, any document contemplated hereby
to which the Eligible Lender Trustee is a party, except as expressly provided by
the terms of this Agreement, the Loan Sale Agreement, the Servicing Agreement,
the Administration Agreement or in any document or written instruction received
by the Eligible Lender Trustee pursuant to Section 6.03; and no implied duties
or obligations shall be read into this Agreement or any other Basic Document
against the Eligible Lender Trustee. The Eligible Lender Trustee shall have no
responsibility for filing any financing or continuation statement in any public
office at any time or to otherwise perfect or maintain the perfection of any
security interest or lien granted to it hereunder or to prepare or file any
Commission filing for the Trust or to record this Agreement or any other Basic
Document. The Eligible Lender Trustee nevertheless agrees that it will, at its
own cost and expense, promptly take all action as may be necessary to discharge
any liens on any part of the Trust Estate that result from actions by, or claims
against, The First National Bank of Chicago in its individual capacity or as the
Eligible Lender Trustee that are not related to the ownership or the
administration of the Trust Estate.
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 6.05. 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 beneficially 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).
(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
-11-
<PAGE>
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
Trust 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,
2030 if at the time of such origination the aggregate principal balance of all
Consolidation Loans held as part of the Trust Estate that have a scheduled
maturity date after October 28, 2030 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
-12-
<PAGE>
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 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 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;
-13-
<PAGE>
(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
(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 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
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.
-14-
<PAGE>
(c) Neither the execution nor the delivery by it of this
Agreement, nor the consummation by it of the transactions contemplated
hereby nor compliance by it with any of the terms or provisions hereof
will contravene any federal or state law, governmental rule or
regulation governing the banking or trust powers of the Eligible Lender
Trustee or any judgment or order binding on it, or constitute any
default under its charter documents or by-laws or any indenture,
mortgage, contract, agreement or instrument to which it is a party or
by which any of its properties may be bound.
(d) It is an "eligible lender" as such term is defined in
Section 435(d) of the Higher Education Act, for purposes of holding
legal title to the Financed Student Loans and originating Consolidation
Loans as contemplated by this Agreement and the other Basic Documents,
has obtained a lender identification number with respect to the Trust
from the Department, has in effect a Guarantee Agreement with 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 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.
-15-
<PAGE>
SECTION 7.05. Not Acting in Individual Capacity;
Responsibility to Secretary. 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.
Notwithstanding any other provision in this Agreement or the
other Basic Documents, nothing in this Agreement or the other Basic Documents
shall be construed to limit the legal responsibility of the Eligible Lender
Trustee or the Indenture Trustee, to the U.S. Secretary of Education or a
Guarantor for any violations of statutory or regulatory requirements that may
occur with respect to loans held by the Eligible Lender Trustee or the Indenture
Trustee pursuant to, or to otherwise comply with their obligations under, the
Higher Education Act or implementing regulations.
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.
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.
-16-
<PAGE>
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 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
-17-
<PAGE>
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 and
"BBB" by Fitch, if rated by Fitch. If the Eligible Lender Trustee shall publish
reports of condition at least annually, pursuant to law or to the requirements
of the aforesaid supervising or examining authority, then for the purpose of
this Section, the combined capital and surplus of the Eligible Lender Trustee
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. In case at any time the Eligible Lender
Trustee shall cease to be eligible in accordance with the provisions of this
Section, the Eligible Lender Trustee shall resign immediately in the manner and
with the effect specified in Section 10.02. In addition, at all times the
Trustee or a co-trustee shall be a Person that satisfies the requirements of
Section 3807(a) of the Business Trust Statute (the "Delaware Trustee").
SECTION 10.02. Resignation or Removal of Eligible Lender
Trustee. The Eligible Lender Trustee may at any time resign and be discharged
from the trusts hereby created by giving written notice thereof to the
Administrator and the Swap Counterparty. Upon receiving such notice of
resignation, the Administrator shall promptly appoint a successor Eligible
Lender Trustee meeting the eligibility requirements of Section 10.01 by written
instrument, in duplicate, one copy of which instrument shall be delivered to the
resigning Eligible Lender Trustee and one copy to the successor Eligible Lender
Trustee. If no successor Eligible Lender Trustee shall have been so appointed
and have accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Eligible Lender Trustee may petition any court of
competent jurisdiction for the appointment of a successor Eligible Lender
Trustee; provided, however, that
-18-
<PAGE>
such right to appoint or to petition for the appointment of any such successor
shall in no event relieve the resigning Eligible Lender Trustee from any
obligations otherwise imposed on it under the Basic Documents until such
successor has in fact assumed such appointment.
If at any time the Eligible Lender Trustee shall cease to be
eligible in accordance with the provisions of Section 10.01 and shall fail to
resign after written request therefor by the Administrator, or if at any time
the Eligible Lender Trustee shall be legally unable to act, or an Insolvency
Event with respect to the Eligible Lender Trustee shall have occurred and be
continuing, then the Administrator may remove the Eligible Lender Trustee. If
the Administrator shall remove the Eligible Lender Trustee under the authority
of the immediately preceding sentence, the Administrator shall promptly appoint
a successor Eligible Lender Trustee by written instrument, in duplicate, one
copy of which instrument shall be delivered to the outgoing Eligible Lender
Trustee so removed and one copy to the successor Eligible Lender Trustee and
payment of all fees owed to the outgoing Eligible Lender Trustee.
Any resignation or removal of the Eligible Lender Trustee and
appointment of a successor Eligible Lender Trustee pursuant to any of the
provisions of this Section shall not become effective until acceptance of
appointment by the successor Eligible Lender Trustee pursuant to Section 10.03
and payment of all fees and expenses owed to the outgoing Eligible Lender
Trustee. The Administrator shall provide notice of such resignation or removal
of the Eligible Lender Trustee to 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 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 the Company, the Indenture Trustee,
the Noteholders, the Rating Agencies and the
-19-
<PAGE>
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 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. Notwithstanding any other provisions of this Agreement, at any time,
for the purpose of meeting any legal ee 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 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 April 19, 1999
between The First National Bank of Chicago and First Chicago Delaware Inc., the
Eligible Lender Trustee shall appoint 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:
-20-
<PAGE>
(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 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 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
-21-
<PAGE>
consent of 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 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 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 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 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
-22-
<PAGE>
otherwise, of any right, title, or interest of the Company to and in its
beneficial ownership interest in the Trust Estate shall operate to terminate
this Agreement or the trusts hereunder or entitle any transferee to an
accounting or to the transfer to it of legal title to any part of the Trust
Estate. If, contrary to this Section, the Company is deemed to have legal title
to any part of the Trust Estate, the Company shall be deemed to have granted,
and in such event does hereby grant to the Issuer, a first priority security
interest in all of the 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 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); and if to the Swap
Counterparty, addressed to Merrill Lynch Derivative Products AG,
Stauffacherstrasse 5, 1st Floor, 8004 Zurich, Switzerland, Attention: Manager
(telephone: 011 0411 297 7800; facsimile: 011 411 297 7859), with a copy to
Merrill Lynch & Co., Office of General Counsel, 250 Vesey Street, New York, New
York 10281, Attention: Laurence D. Dobosh (telephone: 212-449-4706; facsimile:
212-449-6993); 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.
-23-
<PAGE>
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 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.
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. Hearings. 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. Reserved.
-24-
<PAGE>
SECTION 11.13. Third-Party Beneficiaries. The parties hereto
acknowledge that the Swap Counterparty is an express third-party beneficiary
hereof entitled to enforce the provisions hereof as if it were an actual party
hereto; provided, however, that 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 or the Swap Counterparty, such consent shall not be unreasonably
withheld, delayed or conditioned.
[Signatures Follow on Next Page]
-25-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed by their respective officers hereunto duly
authorized, as of the day and year first above written.
THE FIRST NATIONAL BANK OF CHICAGO,
not in its individual capacity but solely as
Eligible Lender Trustee
By:_______________________________
Name:
Title:
USA GROUP SECONDARY MARKET
SERVICES, INC., as depositor
By:_______________________________
Name:
Title:
SECONDARY MARKET COMPANY, INC.
By:_______________________________
Name:
Title:
-26-
<PAGE>
EXHIBIT A
TO THE TRUST AGREEMENT
CERTIFICATE OF TRUST OF
SMS STUDENT LOAN TRUST 1999-B
THIS Certificate of Trust of SMS Student Loan Trust 1999-B (the
"Trust"), dated as of April 19, 1999, 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 1999-B.
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 __, 1999.
A-1
<PAGE>
IN WITNESS WHEREOF, the undersigned, being the sole trustees of the
Trust, have executed this Certificate of Trust as of the date first above
written.
THE FIRST NATIONAL BANK OF CHICAGO,
not in its individual capacity but solely as
trustee of the Trust
By: ______________________________
Name:
Title:
FIRST CHICAGO DELAWARE INC.,
not in its individual capacity
but solely as trustee of the Trust
By: ______________________________
Name:
Title:
A-2
Execution Copy
================================================================================
INDENTURE
between
SMS STUDENT LOAN TRUST 1999-B,
as Issuer
and
HSBC BANK USA,
not in its individual capacity but
solely as Indenture Trustee
Dated as of April 19, 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
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......................6
SECTION 2.06. Persons Deemed Owner............................................7
SECTION 2.07. Payment of Principal and Interest; Defaulted Interest;
Noteholders' Interest Basis Carryover........................7
SECTION 2.08. Cancellation....................................................9
SECTION 2.09. Release of Collateral...........................................9
SECTION 2.10. Book-Entry Notes................................................9
SECTION 2.11. Notices to Clearing Agency.....................................10
SECTION 2.12. Definitive Notes...............................................10
SECTION 2.13. [Reserved].....................................................11
ARTICLE III
Covenants
SECTION 3.01. Payment to Noteholders.........................................11
SECTION 3.02. Maintenance of Office or Agency................................11
SECTION 3.03. Money for Payments to Be Held in Trust.........................12
SECTION 3.04. Existence......................................................13
SECTION 3.05. Protection of Indenture Trust Estate...........................13
SECTION 3.07. Performance of Obligations; Servicing of Student Loans.........14
SECTION 3.08. Negative Covenants.............................................17
SECTION 3.09. Annual Statement as to Compliance..............................17
SECTION 3.10. Issuer May Consolidate, etc., Only on Certain Terms............18
-i-
<PAGE>
SECTION 3.11. Successor or Transferee........................................19
SECTION 3.12. No Other Business..............................................20
SECTION 3.13. No Borrowing...................................................20
SECTION 3.14. Obligations of Servicer and Administrator......................20
SECTION 3.15. Guarantees, Loans, Advances and Other Liabilities..............20
SECTION 3.16. Capital Expenditures...........................................20
SECTION 3.17. Restricted Payments............................................20
SECTION 3.18. Notice of Events of Default....................................21
SECTION 3.19. Further Instruments and Acts...................................21
SECTION 3.20. Removal of Administrator.......................................21
ARTICLE IV
Satisfaction and Discharge
SECTION 4.01. Satisfaction and Discharge of Indenture........................21
SECTION 4.02. Application of Trust Money.....................................23
SECTION 4.03. Repayment of Monies Held by Paying Agent.......................23
SECTION 4.04. Auction of Financed Student Loans..............................23
ARTICLE V
Remedies
SECTION 5.01. Events of Default..............................................24
SECTION 5.02. Acceleration of Maturity; Rescission and Annulment.............25
SECTION 5.03. Collection of Indebtedness and Suits for Enforcement
by Indenture Trustee........................................25
SECTION 5.04. Remedies; Priorities...........................................28
SECTION 5.05. Optional Preservation of the Indenture Trust Estate............30
SECTION 5.06. Limitation of Suits............................................30
SECTION 5.07. Unconditional Rights of Noteholders to Receive Principal
and Interest................................................31
SECTION 5.08. Restoration of Rights and Remedies.............................31
SECTION 5.09. Rights and Remedies Cumulative.................................31
SECTION 5.10. Delay or Omission Not a Waiver.................................31
SECTION 5.11. Control by Noteholders.........................................32
SECTION 5.12. Waiver of Past Defaults........................................32
SECTION 5.13. Undertaking for Costs..........................................33
SECTION 5.14. Waiver of Stay or Extension Laws...............................33
SECTION 5.15. Action on Notes................................................33
SECTION 5.16. Performance and Enforcement of Certain Obligations.............33
-ii-
<PAGE>
ARTICLE VI
The Indenture Trustee
SECTION 6.01. Duties of Indenture Trustee.....................................34
SECTION 6.02. Rights of Indenture Trustee.....................................36
SECTION 6.03. Individual Rights of Indenture Trustee..........................37
SECTION 6.04. Indenture Trustee's Disclaimer..................................37
SECTION 6.05. Notice of Defaults..............................................37
SECTION 6.06. Reports by Indenture Trustee to Noteholders.....................37
SECTION 6.07. Compensation and Indemnity......................................37
SECTION 6.08. Replacement of Indenture Trustee................................38
SECTION 6.09. Successor Indenture Trustee by Merger...........................39
SECTION 6.10. Appointment of Co-Trustee or Separate Trustee...................40
SECTION 6.11. Eligibility; Disqualification...................................41
SECTION 6.12. Preferential Collection of Claims Against Issuer................41
SECTION 6.13. Declaration of Default or Termination Event under
the Swap Agreement...........................................41
ARTICLE VII
Noteholders' Lists and Reports
SECTION 7.01. Issuer to Furnish Indenture Trustee Names and Addresses
of Noteholders..............................................42
SECTION 7.02. Preservation of Information; Communications to
Noteholders.................................................42
SECTION 7.03. Reports by Issuer..............................................42
ARTICLE VIII
Accounts, Disbursements and Releases
SECTION 8.01. Collection of Money............................................43
SECTION 8.02. Trust Accounts.................................................43
SECTION 8.03. General Provisions Regarding Accounts..........................7
SECTION 8.04. Release of Indenture Trust Estate..............................48
SECTION 8.05. Opinion of Counsel.............................................48
ARTICLE IX
Supplemental Indentures
SECTION 9.01. Supplemental Indentures Without Consent of Noteholders.........49
SECTION 9.02. Supplemental Indentures with Consent of Noteholders............50
SECTION 9.03. Execution of Supplemental Indentures...........................51
SECTION 9.04. Effect of Supplemental Indenture...............................52
-iii-
<PAGE>
SECTION 9.05. Conformity with Trust Indenture Act............................52
SECTION 9.06. Reference in Notes to Supplemental Indentures..................52
ARTICLE X
Redemption of Notes
SECTION 10.01. Redemption....................................................52
SECTION 10.02. Form of Redemption Notice.....................................54
SECTION 10.03. Notes Payable on Redemption Date..............................54
ARTICLE XI
Miscellaneous
SECTION 11.01. Compliance Certificates and Opinions..........................55
SECTION 11.02. Form of Documents Delivered to Indenture Trustee..............56
SECTION 11.03. Acts of Noteholders...........................................57
SECTION 11.04. Notices to Indenture Trustee, Issuer, Swap Counterparty
and Rating Agencies........................................58
SECTION 11.05. Notices to Noteholders; Waiver................................59
SECTION 11.06. Alternate Payment and Notice Provisions.......................59
SECTION 11.07. Conflict with Trust Indenture Act.............................59
SECTION 11.08. Effect of Headings and Table of Contents......................60
SECTION 11.09. Successors and Assigns........................................60
SECTION 11.10. Separability..................................................60
SECTION 11.11. Benefits of Indenture.........................................60
SECTION 11.12. [Reserved]....................................................60
SECTION 11.13. Governing Law.................................................60
SECTION 11.14. Counterparts..................................................60
SECTION 11.15. Recording of Indenture........................................60
SECTION 11.16. Trust Obligations.............................................61
SECTION 11.17. No Petition...................................................61
SECTION 11.18. Inspection....................................................61
SECTION 11.19. Consents......................................................62
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 - Depository Agreement
EXHIBIT C - Form of Transferor Certificate
EXHIBIT D - Form of Investment Letter
-iv-
<PAGE>
INDENTURE dated as of April 19, 1999, between SMS STUDENT LOAN TRUST
1999-B, a Delaware trust (the "Issuer"), and HSBC BANK USA, 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 legal title 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 and
the Swap Counterparty, all the Issuer's and the Eligible Lender Trustee'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 net of interest accrued thereunder prior to the Cutoff
Date that is not to be capitalized (or, in the case of Delayed Delivery
Loans, 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
-1-
<PAGE>
(g) all funds on deposit from time to time in the Trust
Accounts, including the Reserve Account Initial Deposit and the Delayed
Delivery Loan Funding Account Closing Date 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 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 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 April 19, 1999, 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.
-2-
<PAGE>
"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.
-3-
<PAGE>
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 $588,225,000, and Subordinate Notes for original issue in an aggregate
principal amount of $26,775,000. 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 Subordinate 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.
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 prompt written
notice of the appointment of such Note
-4-
<PAGE>
Registrar and of the location, and any change in the location, of the Note
Register, and the Indenture Trustee shall have the right to inspect the Note
Register at all reasonable times and to obtain copies thereof, and the
Indenture Trustee shall have the right to rely upon a certificate executed on
behalf of the Note Registrar by an Executive Officer thereof as to the names
and addresses of the Noteholders and the principal amounts and number of
such Notes.
Subject to the restrictions and limitations set forth below, upon
surrender for registration of transfer of any Note at the office or agency of
the Issuer to be maintained as provided in Section 3.02, if the requirements of
Section 8-401(1) of the UCC are met, the Issuer shall execute, and the Indenture
Trustee shall authenticate and the Noteholder shall obtain from the Indenture
Trustee, in the name of the designated transferee or transferees, one or more
new Notes in any authorized denominations, of a like aggregate principal amount.
The Subordinate Notes have not been and will not be registered under
the Securities Act and will not be listed on any exchange. No transfer of a
Subordinate Note shall be made unless such transfer is made pursuant to an
effective registration statement under the Securities Act and any applicable
state securities laws or is exempt from the registration requirements under 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. 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 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.
Notwithstanding anything to the contrary contained herein, no resale or
other transfer of a Subordinate Note or any interest therein shall be made
unless immediately after giving effect to such resale or other transfer, there
would be fewer than 100 Subordinate Noteholders.
-5-
<PAGE>
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 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 such security or
indemnity as may be required by it to hold the Issuer and the Indenture Trustee
harmless, then, in the absence of notice to the Issuer, the Note Registrar or
the Indenture Trustee that such Note has been acquired by a bona fide purchaser,
and provided that the requirements of Section 8-405 of the UCC are met, the
Issuer shall execute and upon its request the Indenture Trustee shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Note, a replacement Note of the same category;
provided, however, that if any such destroyed, lost or stolen Note, but not a
mutilated Note, shall have become or within 15 days shall be due and
-6-
<PAGE>
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 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 in connection therewith.
Upon the issuance of any replacement Note under this Section, the
Issuer may require the payment by the Noteholder thereof of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other reasonable expenses (including the fees and expenses of
the Indenture Trustee) connected therewith.
Every replacement Note issued pursuant to this Section in replacement
of any mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Issuer, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes.
SECTION 2.06. Persons Deemed Owner. Prior to due presentment for
registration of transfer of any Note, the Issuer, the Indenture Trustee, and any
agent of the Issuer, or the Indenture Trustee may treat the Person in whose name
any Note is registered (as of the day of determination) as the owner of such
Note for the purpose of receiving payments of principal of, interest (and any
Noteholders' Interest 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, or the Indenture Trustee or any agent of the Issuer or the Indenture
Trustee shall be affected by notice to the contrary.
SECTION 2.07. Payment of Principal and Interest; Defaulted Interest;
Noteholders' Interest 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
-7-
<PAGE>
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. Notwithstanding the foregoing, the entire unpaid principal amount
of the Notes shall be due and payable, if not previously paid, on the date on
which an Event of Default shall have occurred, if the Indenture Trustee or the
Noteholders of the Notes representing not less than a majority of the
Outstanding Amount of the Notes have declared the Notes to be immediately due
and payable in the manner provided in Section 5.02. All principal payments on
each class of Notes shall be made pro rata to the Noteholders of such class. The
Indenture Trustee shall notify the Person in whose name a Note is registered at
the close of business on the Record Date preceding the Quarterly Payment Date on
which the Issuer expects that the final installment of principal of and interest
(and any Noteholders' Interest 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)(iv) of the Administration Agreement (and shall be
allocated among the classes of Notes as provided in
-8-
<PAGE>
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.
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 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.
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;
-9-
<PAGE>
(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
written 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 written 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) 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
-10-
<PAGE>
shall authenticate the Definitive Notes in accordance with the instructions of
the Clearing Agency. None of the Issuer, the Note Registrar or the Indenture
Trustee shall be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be fully 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 of the location, and of any
change in the location, of any such office or agency. If at any time the Issuer
shall fail to maintain any such office or agency or shall fail to furnish the
Indenture Trustee with the address thereof, such surrenders, notices and demands
may be made or served at the Corporate Trust Office, and the Issuer hereby
appoints the Indenture Trustee as its agent to receive all such surrenders,
notices and demands.
SECTION 3.03. Money for Payments to Be Held in Trust. As provided in
Section 8.02, 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
-11-
<PAGE>
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 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 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 and the Swap
Counterparty written notice of any default by the Issuer of which it
has actual knowledge (or any other obligor upon the Notes) in the
making of any payment required to be made with respect to the Notes;
(iii) at any time during the continuance of any such
default, upon the written request of the Indenture Trustee, forthwith
pay to the Indenture Trustee all sums so held in trust by such Paying
Agent;
(iv) immediately resign as a Paying Agent and
forthwith pay to the Indenture Trustee all sums held by it in trust for
the payment of Notes if at any time it ceases to meet the standards
required to be met by a Paying Agent at the time of its appointment;
and
(v) comply with all requirements of the Code with
respect to the withholding from any payments made by it on any Notes of
any applicable withholding taxes imposed thereon and with respect to
any applicable reporting requirements in connection therewith.
The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by Issuer
Order direct any Paying Agent to pay to the Indenture Trustee all sums held in
trust by such Paying Agent, such sums to be held by the Indenture Trustee upon
the same trusts as those upon which the sums were held by such Paying Agent; and
upon such payment by any Paying Agent to the Indenture Trustee, such Paying
Agent shall be released from all further liability with respect to such money.
Subject to applicable laws with respect to escheat of funds, any money
held by the Indenture Trustee or any Paying Agent in trust for the payment of
any amount due with respect to any Note and remaining unclaimed for two years
after such amount has become due and payable shall be discharged from such trust
and be paid to the Issuer on Issuer Request; and the Noteholder thereof shall
thereafter, as an unsecured general creditor, look only to the Issuer for
payment thereof (but
-12-
<PAGE>
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 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 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.
-13-
<PAGE>
SECTION 3.06. Opinions as to Indenture Trust Estate. (a) On the Closing
Date, the Issuer shall furnish to the Indenture Trustee 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 2000, the
Issuer shall furnish to the Indenture Trustee 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 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
-14-
<PAGE>
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
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 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 appoint a successor servicer (the
"Successor Servicer"), and such Successor Servicer shall accept its appointment
by a written assumption in a form acceptable to the Indenture Trustee. In the
event that a Successor Servicer has not been appointed and accepted its
appointment at the time when the Servicer ceases to act as Servicer, the
Indenture Trustee without further action shall automatically be appointed the
Successor Servicer. The Indenture Trustee may resign as the Servicer by giving
written notice of such resignation to the Issuer and 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, the Issuer shall obtain a new
servicer as the Successor Servicer under the Servicing Agreement. Any Successor
Servicer other than the Indenture Trustee shall (i) be an established
institution (A) that satisfies any requirements of the Higher Education Act
applicable to servicers, (B) the appointment of which satisfies the Rating
Agency Condition and (C) the regular business includes the servicing or
administration of student loans and (ii) enter into a servicing agreement with
the Issuer having substantially the same provisions as the provisions of the
Servicing Agreement applicable to the Servicer. If within 60 days after the
delivery of the notice referred to above, the Issuer shall not have obtained
such a new servicer, the Indenture Trustee may appoint, or may petition a court
of competent jurisdiction to appoint, a Successor Servicer; provided, however,
that such right to appoint or to petition for the appointment of any such
Successor 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 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 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). 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
-15-
<PAGE>
the Indenture Trustee in its duties as the successor to the Servicer and the
servicing of the Financed Student Loans. In case the Indenture Trustee shall
become successor to the Servicer under the Servicing Agreement, the Indenture
Trustee shall be entitled to appoint as Servicer any one of its affiliates,
provided that such appointment shall not affect or alter in any way the
liability of the Indenture Trustee as a successor for the performance of the
duties and obligations of the Servicer in accordance with the terms hereof.
Notwithstanding anything else herein to the contrary, in no event shall
the Indenture Trustee be liable for any servicing fee or for any differential in
the amount of the servicing fee paid hereunder and the amount necessary to
induce any Successor Servicer to act as Successor Servicer under the Servicing
Agreement and the transactions set forth or provided for therein.
(f) Upon any termination of the Servicer's rights and powers pursuant
to the Servicing Agreement, the Issuer shall promptly notify the Indenture
Trustee. As soon as a Successor Servicer is appointed, the Issuer shall notify
the Indenture Trustee of such appointment, specifying in such notice the name
and address of such Successor Servicer.
(g) Without derogating from the absolute nature of the assignment
granted to the Indenture Trustee under this Indenture or the rights of the
Indenture Trustee hereunder, the Issuer agrees that it will not, without the
prior written consent of the Indenture Trustee or the Noteholders of at least a
majority in Outstanding Amount of the Notes (and, in either such case, 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 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
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);
-16-
<PAGE>
(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 and the Swap Counterparty, within 120 days
after the end of each fiscal year of the Issuer (commencing with the fiscal year
1999), 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 and the Swap
Counterparty, in form satisfactory to the Indenture Trustee 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;
-17-
<PAGE>
(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 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;
and
(vi) the Issuer shall have delivered to the Indenture
Trustee 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).
(b) The Issuer shall not convey or transfer all or substantially all
its properties or assets, including those included in the Indenture Trust
Estate, to any Person, unless:
(i) the Person that acquires by conveyance or
transfer the properties and assets of the Issuer the conveyance or
transfer of which is hereby restricted shall (A) be a United States
citizen or a Person organized and existing under the laws of the United
States of America or any State, (B) expressly assumes, by an indenture
supplemental hereto, executed and delivered to the Indenture Trustee,
in form satisfactory to the Indenture Trustee 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 and the Swap Counterparty, (D) unless
otherwise provided in such supplemental indenture, expressly agrees to
indemnify, defend and hold harmless the Issuer 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;
-18-
<PAGE>
(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 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 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) 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 1999-B will be
released from every covenant and agreement of this Indenture to be observed or
performed on the part of the Issuer with respect to the Notes immediately upon
the delivery by the Issuer of written notice to the Indenture Trustee stating
that SMS Student Loan Trust 1999-B 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.
-19-
<PAGE>
SECTION 3.15. Guarantees, Loans, Advances and Other Liabilities. Except
as contemplated by the Basic Documents or this Indenture, the Issuer shall not
make any loan or advance or credit to, or guarantee (directly or indirectly or
by an instrument having the effect of assuring another's payment or performance
on any obligation or capability of so doing or otherwise), endorse or otherwise
become contingently liable, directly or indirectly, in connection with the
obligations, stocks or dividends of, or own, purchase, repurchase or acquire (or
agree contingently to do so) any stock, obligations, assets or securities of, or
any other interest in, or make any capital contribution to, any other Person.
SECTION 3.16. Capital Expenditures. The Issuer shall not make any
expenditure (by long-term or operating lease or otherwise) for capital assets
(either realty or personalty).
SECTION 3.17. Restricted Payments. The Issuer shall not, directly or
indirectly, (i) pay any dividend or make any distribution (by reduction of
capital or otherwise), whether in cash, property, securities or a combination
thereof, to the Eligible Lender Trustee or any owner of a beneficial interest in
the Issuer or otherwise with respect to any ownership or equity interest or
security in or of the Issuer or to the Servicer or the Administrator, (ii)
redeem, purchase, retire or otherwise acquire for value any such ownership or
equity interest or security or (iii) set aside or otherwise segregate any
amounts for any such purpose; provided, however, that the Issuer may make, or
cause to be made, distributions to the Servicer, the Eligible Lender Trustee,
the Indenture Trustee, the Noteholders, the Administrator, the Seller and the
Company as contemplated by, and to the extent funds are available for such
purpose under, 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 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, 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 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 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.
-20-
<PAGE>
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.
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 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; 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,
-21-
<PAGE>
and the Issuer, in the case of (i), (ii) or (iii)
above, has irrevocably deposited or caused to be irrevocably
deposited with the Indenture Trustee cash or direct
obligations of or obligations guaranteed by the United States
of America (which will mature prior to the date such amounts
are payable), in trust for such purpose, in an amount
sufficient to pay and discharge the entire indebtedness on
such Notes not theretofore delivered to the Indenture Trustee
for cancellation as of such day of discharge or when due on
the Class A-1 Note Final Maturity Date, the Class A-2 Note
Final Maturity Date or the Subordinate Note Final Maturity
Date, as the case may be;
(B) the Issuer has paid or caused to be paid
all other sums payable hereunder and under the Swap Agreement
by the Issuer; and
(C) the Issuer has delivered to the
Indenture Trustee 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) 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 2009 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
-22-
<PAGE>
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. 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 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, a written notice specifying such default or incorrect
representation or warranty and requiring it to be remedied and stating
that such
-23-
<PAGE>
notice is a notice of Default hereunder; provided, however,
that, if at the end of such 30-day period, the Indenture Trustee
determines that a good faith effort to cure or eliminate the Default
has commenced, the Indenture Trustee may extend such 30-day period to
90 days; or
(iv) the filing of a decree or order for relief by a
court having jurisdiction in the premises in respect of the Issuer or
any substantial part of the Indenture Trust Estate in an involuntary
case under any applicable federal or state bankruptcy, insolvency or
other similar law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar
official of the Issuer or for any substantial part of the Indenture
Trust Estate, or ordering the winding-up or liquidation of the Issuer's
affairs, and such decree or order shall remain unstayed and in effect
for a period of 60 consecutive days; or
(v) the commencement by the Issuer of a voluntary
case under any applicable federal or state bankruptcy, insolvency or
other similar law now or hereafter in effect, or the consent by the
Issuer to the entry of an order for relief in an involuntary case under
any such law, or the consent by the Issuer to the appointment or taking
possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Issuer or for any substantial
part of the Indenture Trust Estate, or the making by the Issuer of any
general assignment for the benefit of creditors, or the failure by the
Issuer generally to pay its debts as such debts become due, or the
taking of action by the Issuer in furtherance of any of the foregoing.
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
or the Noteholders of Notes representing not less than a majority of the
Outstanding Amount of the Notes may declare all the Notes to be immediately due
and payable, by a notice in writing to the Issuer and 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.
At any time after such declaration of acceleration of maturity has been
made and before a judgment or decree for payment of the money due has been
obtained by the Indenture Trustee as hereinafter in this Article V provided, the
Noteholders of Notes representing a majority of the Outstanding Amount of the
Notes, by written notice to the Issuer and the Indenture Trustee, may rescind
and annul such declaration and its consequences if:
(i) the Issuer has paid or deposited with the
Indenture Trustee a sum sufficient to pay:
(A) all payments of principal of and
interest on all Notes and all other amounts that would then be
due hereunder or upon such Notes if the Event of Default
giving rise to such acceleration had not occurred; and
-24-
<PAGE>
(B) all sums paid or advanced by the
Indenture Trustee hereunder plus all amounts owed to the Swap
Counterparty under the Basic Documents and the reasonable
compensation, expenses, disbursements and advances of the
Indenture Trustee, 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, pay to it, for the
benefit of the Noteholders 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 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 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,
proceed to protect and enforce its rights and the rights of the Noteholders, by
such appropriate Proceedings as the Indenture Trustee shall deem most effective
to protect and enforce any such rights, whether for the specific enforcement of
any covenant or agreement in this Indenture or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy or legal or
equitable right vested in the Indenture Trustee by this Indenture or by law.
-25-
<PAGE>
(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, 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
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 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.
-26-
<PAGE>
(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 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 or, upon the written request of
Noteholders of at least 51% of the Notes, 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 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 and the Swap
Counterparty (but, in the case of the Swap Counterparty, only to the extent that
the
-27-
<PAGE>
Administrator directs the Indenture Trustee 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 and the Swap Counterparty (but, in the case of
the Swap Counterparty, only to the extent 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) Following an Event of Default and an acceleration of the Notes, the
Indenture Trustee shall pay out the money or property in the following order:
FIRST: to the Indenture Trustee for amounts due under Section
6.07;
SECOND: ratably, without preference or priority of any kind
(a) to the Senior Noteholders for amounts due and unpaid on the Senior
Notes for interest (other than any Senior Noteholders' Interest Basis
Carryover) and (b) if the Trust is the Defaulting Party (as such term
is defined in the Swap Agreement) under the Swap Agreement, to the Swap
Counterparty for all amounts due to the Swap Counterparty under the
Swap Agreement (provided, however, that 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 this priority shall apply only
with respect to the Trust Swap Payment Amount (and not the remainder of
the Termination Payment));
THIRD: Reserved;
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;
-28-
<PAGE>
SEVENTH: Reserved;
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 and the Indenture Trustee
a notice that states the record date, the payment date and the amount to be
paid.
SECTION 5.05. Optional Preservation of the Indenture Trust Estate. If
the Notes have been declared to be due and payable under Section 5.02 following
an Event of Default and such declaration and its consequences have not been
rescinded and annulled, the Indenture Trustee may, but need not, elect to
maintain possession of the Indenture Trust Estate. It is the desire of the
parties hereto and the Noteholders that there be at all times sufficient funds
for the payment of principal of and interest (including any Noteholders'
Interest 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;
-29-
<PAGE>
(ii) the Noteholders of not less than 25% of the
Outstanding Amount of the Notes have made written request to the
Indenture Trustee to institute such Proceeding in respect of such Event
of Default in its own name as Indenture Trustee hereunder;
(iii) such Noteholder or Noteholders have offered to
the Indenture Trustee reasonable indemnity against the costs, expenses
and liabilities to be incurred in complying with such request;
(iv) the Indenture Trustee for 60 days after its
receipt of such notice, request and offer of indemnity has failed to
institute such Proceeding; and
(v) no direction inconsistent with such written
request has been given to the Indenture Trustee during such 60-day
period by the Noteholders of a majority of the Outstanding Amount of
the Notes.
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 or any Noteholder has instituted any Proceeding to enforce any right or
remedy under this Indenture and such Proceeding has been discontinued or
abandoned for any reason or has been determined adversely to the Indenture
Trustee or to such Noteholder, then and in every such case the Issuer, the
Indenture Trustee and the Noteholders shall, subject to any determination in
such Proceeding, be restored severally and respectively to their former
positions hereunder, and thereafter all rights and remedies of the Indenture
Trustee and the Noteholders shall continue as though no such Proceeding had been
instituted.
-30-
<PAGE>
SECTION 5.09. Rights and Remedies Cumulative. No right or remedy herein
conferred upon or reserved to the Indenture Trustee or to the Noteholders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 5.10. Delay or Omission Not a Waiver. No delay or omission of
the Indenture Trustee or any Noteholder to exercise any right or remedy accruing
upon any Default 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 may be exercised from time to time, and as
often as may be deemed expedient, by the Indenture Trustee or the Noteholders,
as the case may be.
SECTION 5.11. Control by Noteholders. The Noteholders of a majority of
the Outstanding Amount of the Notes shall have the right to direct the time,
method and place of conducting any Proceeding for any remedy available to the
Indenture Trustee with respect to the Notes or exercising any trust or power
conferred on the Indenture Trustee; provided, 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 Swap Counterparty, 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
-31-
<PAGE>
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 and the Swap Counterparty; provided, however, that all Noteholders
may waive events described in clauses (a) and (b) hereof. In the case of any
such waiver, the Issuer, the Indenture Trustee and the Noteholders shall be
restored to their former positions and rights hereunder, respectively; but no
such waiver shall extend to any subsequent or other Default or 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, (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, but will suffer and permit the execution of every such
power as though no such law had been enacted.
SECTION 5.15. Action on Notes. The Indenture Trustee's right to seek
and recover judgment on the Notes or under this Indenture shall not be affected
by the seeking, obtaining or application of any other relief under or with
respect to this Indenture. Neither the lien of this Indenture nor any rights or
remedies of the Indenture Trustee or the Noteholders shall be impaired by the
recovery of any judgment by the Indenture Trustee against the Issuer or by the
levy of any execution under such judgment upon any portion of the Indenture
Trust Estate or upon any of the
-32-
<PAGE>
assets of the Issuer. Any money or property collected by the Indenture Trustee
shall be applied in accordance with Section 5.04(b).
SECTION 5.16. Performance and Enforcement of Certain Obligations. (a)
Promptly following a request from the Indenture Trustee to do so and at the
Administrator's expense, the Issuer shall take all such lawful action as the
Indenture Trustee may request to compel or secure the performance and observance
by the Seller, the Servicer, 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,
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 may, and
at the direction (which direction shall be in writing or by telephone (confirmed
in writing promptly thereafter)) of the Noteholders of 66-2/3% of the
Outstanding Amount of the Notes, shall, exercise all rights, remedies, powers,
privileges and claims of the Issuer against the Seller, the Servicer, 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
-33-
<PAGE>
(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.
-34-
<PAGE>
(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 for any violations of statutory or
regulatory requirements that may occur with respect to loans held by the
Indenture Trustee pursuant to, or to otherwise comply with its obligations
under, the Higher Education Act or implementing regulations, it being expressly
understood that the Indenture Trustee has no obligation or duty pursuant to this
Section in the capacity of a successor Servicer except pursuant to Section 6.02
of the Servicing Agreement.
SECTION 6.02. Rights of Indenture Trustee. (a) The Indenture Trustee
may rely on any document believed by it to be genuine and to have been signed
or presented by the proper Person. The Indenture Trustee need not investigate
any fact or matter stated in such document.
(b) Before the Indenture Trustee acts or refrains from acting in
connection with any matter contemplated by this Indenture or other Basic
Documents, it may require an Officers' Certificate of the Issuer or an Opinion
of Counsel. The Indenture Trustee shall not be liable for any action it takes or
omits to take in good faith in reliance on such Officers' Certificate or Opinion
of Counsel.
(c) The Indenture Trustee may exercise any of the trusts and powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys or a custodian or nominee and the Indenture Trustee shall
not be responsible for any misconduct or negligence on the part of any attorney,
agent, custodian or nominee appointed with due care by it hereunder.
(d) The Indenture Trustee shall not be liable for any action it takes
or omits to take in good faith which it believes to be authorized or within its
rights or powers; provided, however, that the Indenture Trustee's conduct does
not constitute willful misconduct, negligence or bad faith.
(e) The Indenture Trustee may consult with counsel, and the advice or
opinion of counsel with respect to legal matters relating to this Indenture and
the other Basic Documents and the Notes shall be full and complete authorization
and protection from liability in respect to any action taken, omitted or
suffered by it hereunder in good faith and in accordance with the advice or
opinion of such counsel.
(f) Subject to clauses (a), (b), (c) and (g) of Section 6.01 hereof,
the Indenture Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any
Noteholder pursuant to this Indenture, unless such Noteholder shall
-35-
<PAGE>
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 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 in writing 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
-36-
<PAGE>
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Issuer shall cause the Administrator to
indemnify the Indenture Trustee, its officers, directors, employees and agents
against any and all loss, liability or expense (including attorneys' fees and
expenses) incurred by it in connection with the administration of this trust and
the performance of its duties hereunder and under the other Basic Documents. The
Indenture Trustee shall notify the Issuer and the Administrator promptly of any
claim for which it may seek indemnity. Failure by the Indenture Trustee to so
notify the Issuer and the Administrator shall not relieve the Issuer or the
Administrator of its obligations hereunder and 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)(viii) 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 and the Swap Counterparty. The
Administrator may remove the Indenture Trustee at any time by so notifying the
Indenture Trustee and may appoint a successor Indenture Trustee; provided that
all fees and expenses of the Indenture Trustee being removed are paid in full.
The Noteholders of a majority in Outstanding Amount of the Notes may remove the
Indenture Trustee by so notifying the Indenture Trustee and may appoint a
successor Indenture Trustee. The Issuer shall remove the Indenture Trustee if:
(i) the Indenture Trustee fails to comply with
Section 6.11;
(ii) an Insolvency Event occurs with respect to
the Indenture Trustee;
(iii) a receiver or other public officer takes charge
of the Indenture Trustee or its property;
-37-
<PAGE>
(iv) the Indenture Trustee otherwise becomes
incapable of acting; or
(v) the Indenture Trustee is in breach of any
material representation, warranty, or 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 Issuer
shall, promptly appoint a successor Indenture Trustee. 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 and the Issuer and shall notify
the Rating Agencies in writing of such acceptance. Thereupon the resignation or
removal of the retiring Indenture Trustee shall become effective, and the
successor Indenture Trustee shall have all the rights, powers and duties of the
Indenture Trustee under this Indenture. The successor Indenture Trustee shall
mail a notice of its succession to Noteholders. The retiring Indenture Trustee
shall promptly transfer all property held by it as Indenture Trustee to the
successor Indenture Trustee.
If a successor Indenture Trustee does not take office within 60 days
after the retiring Indenture Trustee resigns or is removed, the retiring
Indenture Trustee, the Issuer, 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 may petition any court of competent jurisdiction for the removal of
the Indenture Trustee and the appointment of a successor Indenture Trustee.
Notwithstanding the replacement of the Indenture Trustee pursuant to
this Section, the Issuer's and the Administrator's obligations under Section
6.07 shall continue for the benefit of the retiring Indenture Trustee.
SECTION 6.09. Successor Indenture Trustee by Merger. If the Indenture
Trustee consolidates with, merges or converts into, or transfers all or
substantially all its corporate trust business or assets to, another corporation
or banking association, the resulting, surviving or transferee corporation or
banking association without any further act shall be the successor Indenture
Trustee; provided, however, that such corporation or banking association shall
be otherwise qualified and eligible under Section 6.11. The Indenture Trustee
shall provide the Rating Agencies prior written notice of any such transaction.
In case at the time such successor or successors by merger, conversion
or consolidation to the Indenture Trustee shall succeed to the trusts created by
this Indenture any of the Notes shall have been authenticated but not delivered,
any such successor to the Indenture Trustee may adopt
-38-
<PAGE>
the certificate of authentication of any predecessor trustee, and deliver such
Notes so authenticated; and in case at that time any of the Notes shall not have
been authenticated, any successor to the Indenture Trustee may authenticate such
Notes either in the name of any predecessor hereunder or in the name of the
successor to the Indenture Trustee; and in all such cases such certificates
shall have the full force which it is anywhere in the Notes or in this Indenture
provided that the certificate of the Indenture Trustee shall have.
SECTION 6.10. Appointment of Co-Trustee or Separate Trustee. (a)
Notwithstanding any other provisions of this Indenture, at any time, for the
purpose of meeting any legal requirement of any jurisdiction in which any part
of the Indenture Trust Estate may at the time be located, the Indenture Trustee
shall have the power and may execute and deliver all instruments to appoint one
or more Persons to act as a co-trustee or co-trustees, or separate trustee or
separate trustees, of all or any part of the Indenture Trust Estate, and to vest
in such Person or Persons, in such capacity and for the benefit of the
Noteholders 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 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
-39-
<PAGE>
acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Indenture Trustee or separately, as may be provided therein, subject to all the
provisions of this Indenture, specifically including every provision of this
Indenture relating to the conduct of, affecting the liability of, or affording
protection to, the Indenture Trustee. Every such instrument shall be filed with
the Indenture Trustee.
(d) Any separate trustee or co-trustee may at any time constitute the
Indenture Trustee, its agent or attorney-in-fact with full power and authority,
to the extent not prohibited by law, to do any lawful act under or in respect of
this Indenture on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be removed, all its
estates, properties, rights, remedies and trusts shall vest in and be exercised
by the Indenture Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
SECTION 6.11. Eligibility; Disqualification. The Indenture Trustee
shall at all times satisfy the requirements of TIA ss. 310(a). The Indenture
Trustee shall have a combined capital and surplus of at least $50,000,000 as set
forth in its most recent published annual report of condition and it shall have
a long term debt rating of "Baa3" or better by Moody's. The Indenture Trustee
shall comply with TIA ss. 310(b), including the optional provision permitted by
the second sentence of TIA ss. 310(b)(9); provided, however, that there shall be
excluded from the operation of TIA ss. 310(b)(1) any indenture or indentures
under which other securities of the Issuer are outstanding if the requirements
for such exclusion set forth in TIA ss. 310(b)(1) are met.
SECTION 6.12. Preferential Collection of Claims Against Issuer. The
Indenture Trustee shall comply with TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). An Indenture Trustee that has resigned or
been removed shall be subject to TIA ss. 311(a) to the extent indicated.
SECTION 6.13. 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 Administrator.
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
-40-
<PAGE>
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.
SECTION 7.02. Preservation of Information; Communications to
Noteholders. (a) The Indenture Trustee shall preserve, in as current a form as
is reasonably practicable, the names and addresses of the Noteholders contained
in the most recent list furnished to the Indenture Trustee as provided in
Section 7.01 and the names and addresses of Noteholders received by the
Indenture Trustee in its capacity as Note Registrar. The Indenture Trustee may
destroy any list furnished to it as provided in such Section 7.01 upon receipt
of a new list so furnished.
(b) Noteholders may communicate pursuant to TIA ss. 312(b) with other
Noteholders with respect to their rights under this Indenture or under the
Notes.
(c) The Issuer, the Indenture Trustee and the Note Registrar shall have
the protection of TIA ss. 312(c).
(d) The Indenture Trustee shall furnish to the Noteholders promptly
upon receipt of a written request therefor, duplicates or copies of all reports,
notices, requests, demands, certificates, financial statements and any other
instruments furnished to the Indenture Trustee under the Basic Documents.
(e) The Indenture Trustee shall provide notice to the Noteholders and
the Swap Counterparty as provided in Section 9.02 of the Trust Agreement, and
shall provide notice to the Noteholders of any amendment or supplement to the
Trust Agreement as provided in Section 11.01 of the Trust Agreement.
SECTION 7.03. Reports by Issuer. (a) The Issuer shall:
(i) file with the Indenture Trustee, within 15 days
after the Issuer is required to file the same with the Commission,
copies of the annual reports and of the information, documents and
other reports (or copies of such portions of any of the foregoing as
the Commission may from time to time by rules and regulations
prescribe) which the Issuer may be required to file with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act;
(ii) file with the Indenture Trustee and the
Commission in accordance with rules and regulations prescribed from
time to time by the Commission such additional information, documents
and reports with respect to compliance by the Issuer with the
conditions and covenants of this Indenture as may be required from time
to time by such rules and regulations; and
(iii) supply to the Indenture Trustee (and the
Indenture Trustee shall transmit by mail to all Noteholders described
in TIA ss. 313(c)) such summaries of any information, documents and
reports required to be filed by the Issuer pursuant to clauses (i)
-41-
<PAGE>
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 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 Swap
Counterparty, 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
with respect to such Quarterly Payment Date will be distributed from the
Collection Account and from the Reserve Account to the Indenture Trustee (or
other Paying Agent) on behalf of the Noteholders as provided in Sections
2(d)(v)(C) and 2(e)(iv)(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), b(iii) and (b)(iv) of Section
2(e)(ii) of the Administration Agreement (and in the case of clause (b)(iv)
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) (ii) with respect to a redemption pursuant to Section
-42-
<PAGE>
10.01(a) (ii), 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. On the Quarterly Payment Date
referred to in Section 10.01(a)(i), the amount on deposit in the Delayed
Delivery Loan Funding Account will be distributed therefrom to the Indenture
Trustee (or other Paying Agent) on behalf of the Noteholders as provided in
Section 2(j)(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 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 to the Swap Counterparty in the following amounts
and in the following order of priority:
(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 the remainder of any Termination
Payment (to the extent the remainder of such Termination Payment is
owed to the Swap Counterparty following a Redemption Event (as defined
in the Swap Agreement) or a default by the Trust under the Swap
Agreement other than an Event of Default by the Trust specified in (x)
Section 5(a)(i) of the Swap Agreement or (y) 5(a)(ix) of the Swap
Agreement unless an Event of Default has occurred, the Notes have been
accelerated and such acceleration has been waived), 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 the remainder of 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 the remainder of any Termination Payment, on a pro
rata basis based on the ratio of each such amount to the total of such
amounts;
(ii) reserved;
(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
-43-
<PAGE>
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 and to the Swap Counterparty in respect of Reserve Account Excess
pursuant to the third to the last sentence of paragraph (b) above in the
following amounts and order of priority:
(i) reserved;
(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 (only until the Outstanding principal amount of the
Senior Notes is reduced to zero);
(iii) if the Revolving Period has terminated, and 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 equal to the
Pool Balance as of the close of business on the last day of the related
Collection Period;
(iv) commencing on the October 2009 Quarterly Payment
Date, 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 Senior Notes is
reduced to zero;
(v) commencing on the October 2009 Quarterly Payment
Date, 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 reduced to zero;
(vi) 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;
(vii) the Subordinate Noteholders' Interest Basis
Carryover, if any, to the Subordinate Noteholders; and
(viii) 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
-44-
<PAGE>
defined therein) arises from a Termination Event (other than an
Additional Termination Event (as defined in the Swap Agreement)
in respect of a Redemption Event (as defined in the Swap Agreement))
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)(ii)
with respect to redemption pursuant to Section 10.01(a)(ii), the Indenture
Trustee (or any other Paying Agent) shall distribute all amounts received by it
from the Collateral Reinvestment Account pursuant to the second to 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;
and
(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; and
(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) On the Quarterly Payment Date referred to in Section 10.01(a)(i)
with respect to redemption pursuant to Section 10.01(a)(i), the Indenture
Trustee (or any other Paying Agent) upon the written direction of the
Administrator shall distribute all amounts received by it from the Delayed
Delivery Loan Funding Account pursuant to the last sentence of Section (b) above
in the following amounts and order of priority:
(i) if the amount remaining in the Delayed Delivery
Loan Funding Account is less than or equal to $10,000,000, to the Class
A-1 Noteholders; and
-45-
<PAGE>
(ii) if the amount remaining in the Delayed Delivery
Loan Funding Account is greater than $10,000,000, among the
Noteholders, pro rata, based upon the initial principal balance of each class of
Notes.
(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 at the written direction of the Swap
Counterparty.
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 and the Swap
Counterparty an Opinion of Counsel, acceptable to the Indenture Trustee 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 described in clause (d) of the definition thereof.
-46-
<PAGE>
SECTION 8.04. Release of Indenture Trust Estate. (a) Subject to the
payment of its fees and expenses (including, without limitation, legal 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 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 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 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 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 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 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
-47-
<PAGE>
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 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 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
-48-
<PAGE>
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
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'
-49-
<PAGE>
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 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 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
-50-
<PAGE>
indenture shall be and are deemed to be part of the terms and conditions of this
Indenture for any and all purposes.
SECTION 9.05. Conformity with Trust Indenture Act. Every amendment of
this Indenture and every supplemental indenture executed pursuant to this
Article IX shall conform to the requirements of the Trust Indenture Act as then
in effect so long as this Indenture shall then be qualified under the Trust
Indenture Act.
SECTION 9.06. Reference in Notes to Supplemental Indentures. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Indenture Trustee shall,
bear a notation in form approved by the Indenture Trustee as to any matter
provided for in such supplemental indenture. If the Issuer or the Indenture
Trustee shall so determine, new Notes so modified as to conform, in the opinion
of the Indenture Trustee and the Issuer, to any such supplemental indenture may
be prepared and executed by the Issuer and authenticated and delivered by the
Indenture Trustee in exchange for Outstanding Notes.
ARTICLE X
Redemption of Notes
SECTION 10.01. Redemption. (a) (i) In the event that on the Special
Determination Date the amount on deposit in the Delayed Delivery Loan Funding
Account, after giving effect to the purchase of any Delayed Delivery Loans on
such date is greater than $10,000,000, each class of Notes will be redeemed in
part, on a pro rata basis based on outstanding principal balance, in an
aggregate principal amount equal to the amount on deposit in the Delayed
Delivery Loan Funding Account on the following Quarterly Payment Date. In the
event that on the Special Determination Date the amount on deposit in the
Delayed Delivery Loan Funding Account, after giving effect to the purchase of
any Delayed Delivery Loans on such date, is greater than zero but less than or
equal to $10,000,000, the Class A-1 Notes will be redeemed in an amount equal to
such amount on deposit in the Delayed Delivery Loan Funding Account.
(ii) 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
-51-
<PAGE>
Noteholders and the Swap Counterparty, if any, shall be paid, first, to the Swap
Counterparty, (in accordance with the written direction of the Swap
Counterparty) to the extent any amounts remain due and payable to the Swap
Counterparty under the Swap Agreement and, second, to the Noteholders, the
Redemption Price for the Notes. If amounts are to be paid to Noteholders and the
Swap Counterparty, if any, pursuant to this Section 10.01(b), the Administrator
or the Issuer shall furnish notice of such Event to the Indenture Trustee 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 and the Swap
Counterparty 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 and the Swap
Counterparty.
(d) No redemption of the Notes pursuant to Section 10.01(b) or 10.01(c)
shall occur until the Indenture Trustee shall have first paid to the Swap
Counterparty (or simultaneously pays) any prior unpaid Net Trust Swap Payment
Carryover Shortfalls and any other amounts owed to the Swap Counterparty under
the Swap Agreement as directed in writing by the Administrator.
(e) The Indenture Trustee shall provide notice to the Swap Counterparty
immediately upon the Minimum Purchase Price being deposited in the Collection
Account.
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 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 or, in the case of the Swap Counterparty, as provided in the Swap
Agreement.
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).
-52-
<PAGE>
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 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.
-53-
<PAGE>
(b) (i) Prior to the deposit of any Collateral or other property or
securities with the Indenture Trustee that is to be made the basis for
the release of any property or securities subject to the lien of this
Indenture, the Issuer shall, in addition to any obligation imposed in
Section 11.01(a) or elsewhere in this Indenture, furnish to the
Indenture Trustee an Officers' Certificate of the Issuer certifying or
stating the opinion of each person signing such certificate as to the
fair value (within 90 days of such deposit) to the Issuer of the
Collateral or other property or securities to be so deposited.
(ii) Whenever the Issuer is required to furnish to
the Indenture Trustee an Officers' Certificate of the Issuer certifying
or stating the opinion of any signer thereof as to the matters
described in clause (i) above, the Issuer shall also deliver to the
Indenture Trustee an Independent Certificate as to the same matters, if
the fair value to the Issuer of the securities to be so deposited and
of all other such securities made the basis of any such withdrawal or
release since the commencement of the then current fiscal year of the
Issuer, as set forth in the certificates delivered pursuant to clause
(i) above and this clause (ii), is 10% or more of the Outstanding
Amount of the Notes, but such a certificate need not be furnished with
respect to any securities so deposited, if the fair value thereof to
the Issuer as set forth in the related Officers' Certificate is less
than $25,000 or less than one percent of the Outstanding Amount of the
Notes.
(iii) Other than any property released as
contemplated by clause (v) below, whenever any property or securities
are to be released from the lien of this Indenture, the Issuer shall
also furnish to the Indenture Trustee an Officers' Certificate of the
Issuer certifying or stating the opinion of each person signing such
certificate as to the fair value (within 90 days of such release) of
the property or securities proposed to be released and stating that in
the opinion of such person the proposed release will not impair the
security under this Indenture in contravention of the provisions
hereof.
(iv) Whenever the Issuer is required to furnish to
the Indenture Trustee an Officers' Certificate of the Issuer certifying
or stating the opinion of any signer thereof as to the matters
described in clause (iii) above, the Issuer shall also furnish to the
Indenture Trustee an Independent Certificate as to the same matters if
the fair value of the property or Securities and of all other property,
other than property as contemplated by clause (v) below, or securities
released from the lien of this Indenture since the commencement of the
then-current calendar year, as set forth in the certificates required
by clause (iii) above and this clause (iv), equals 10% or more of the
Outstanding Amount of the Notes, but such certificate need not be
furnished in the case of any release of property or securities if the
fair value thereof as set forth in the related Officers' Certificate is
less than $25,000 or less than one percent of the then Outstanding
Amount of the Notes.
(v) Notwithstanding Section 2.09 or any other
provision of this Section, the Issuer may, without compliance with the
requirements of the other provisions of this Section, (A) collect,
liquidate, sell or otherwise dispose of Financed Student Loans as and
to the extent permitted or required by the Basic Documents and (B) make
cash payments out of the Trust Accounts as and to the extent permitted
or required by the Basic Documents, so
-54-
<PAGE>
long as the Issuer shall deliver to the Indenture Trustee and the
Swap Counterparty every three months, commencing July 25, 1999, 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,
1999 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
-55-
<PAGE>
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, 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 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 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 1999-B, 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 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: Merrill Lynch Derivative Products AG, Stauffacherstrasse
5, 1st Floor, 8004 Zurich, Switzerland, Attention: Manager, with a copy to
Merrill Lynch & Co., Office of General Counsel, 250 Vesey Street, New York, NY
10281, Attention: Laurence D. Dobosh or at such other address as shall be
designated by written notice to the other parties.
-56-
<PAGE>
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.
-57-
<PAGE>
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 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
Administrator and the Swap Counterparty and their respective successors and
assigns shall each be an express third-party beneficiary 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 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.
-58-
<PAGE>
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) 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, 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
-59-
<PAGE>
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 or the Swap Counterparty, such consent shall not be unreasonably
withheld, delayed or conditioned.
[Signatures Follow on Next Page]
-60-
<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
1999-B
By: THE FIRST NATIONAL BANK
OF CHICAGO, not in its individual
capacity but solely as Eligible Lender
Trustee
By: _________________________________________
Name:
Title:
HSBC BANK USA,
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:
-61-
<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 1999-B, 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 1999.
-----------------------------
Notary Public in and for
the State of New York
[Seal]
My commission expires:
- --------------------------------------------
-62-
<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 HSBC
Bank USA, 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 1999.
---------------------------------
Notary Public in and for
the State of New York
[Seal]
My commission expires:
- --------------------------------------------
-63-
<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.
$--------
No. R-
SMS STUDENT LOAN TRUST 1999-B
CLASS A-1 FLOATING RATE ASSET-BACKED SENIOR NOTES
SMS Student Loan Trust 1999-B, 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 $______________ 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 April 19, 1999 (the "Indenture"),
A-1-1
<PAGE>
between the Issuer and HSBC Bank USA, 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 2006 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 21, 1999 (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.
A-1-2
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed, manually or in facsimile, as of the date set forth below.
SMS STUDENT LOAN TRUST 1999-B
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.
HSBC BANK USA, not in its individual capacity but solely as
Indenture Trustee
By: ________________________________________________
Authorized Signatory
Date:
<PAGE>
REVERSE OF NOTE
This Note is one of a duly authorized issue of Notes of the Issuer
designated as its 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 October 1999.
As provided in 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 provided in the Indenture, if as of the Special Determination Date,
the amount on deposit in the Delayed Delivery Loan Funding Account is greater
than $10,000,000, such amount will be distributed on the first Quarterly Payment
Date thereafter to redeem each class of Notes, based on the initial principal
balance of each class of Notes; if such amount is $10,000,000 or less, it will
be distributed on such Quarterly Payment Date only to the holders of the Class
A-1 Notes to redeem such Class A-1 Notes.
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 shall have declared the Notes to be immediately due and
payable in the manner provided in Section 5.02 of the Indenture.
A-1-4
<PAGE>
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 October 1999, 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 ____%
(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 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 (a) each Quarterly Interest Period other than the initial 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)
and (b) with respect to the initial Quarterly Interest Period, as determined
pursuant to clause (a) for the period from the Closing Date to but excluding
July 28, 1999 and as determined on the second business day prior to July 28,
1999 for the period from July 28, 1999 to but excluding October 28, 1999 (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
A-1-5
<PAGE>
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
A-1-6
<PAGE>
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,
A-1-7
<PAGE>
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 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
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 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.
A-1-8
<PAGE>
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 HSBC Bank USA 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.
A-1-9
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of
assignee
---------
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto
------------------------------
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably
constitutes and appoints ______________________, attorney, to transfer
said Note on the books kept for registration thereof, with full power
of substitution in the premises.
Dated: _________________
____________________________________________________________*/
Signature Guaranteed:
____________________________________________________________*/
____________________
*/ NOTICE: The signature to this assignment must correspond with the name
of the registered owner as it appears on the face of the within Note in
every particular, without alteration, enlargement or any change
whatever. Such signature must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in STAMP or such other
"signature guarantee program" as may be determined by the Note
Registrar in addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as amended.
A-1-10
<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.
$--------
No. R-
SMS STUDENT LOAN TRUST 1999-B
CLASS A-2 FLOATING RATE ASSET-BACKED SENIOR NOTES
SMS Student Loan Trust 1999-B, 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 $_____________ by (ii) the aggregate amount, if
any, payable to Noteholders on such Quarterly Payment Date in respect of
principal of the Class A-2 Notes pursuant to Section 3.01 of the Indenture dated
as of April 19, 1999 (the "Indenture"),
A-2-1
<PAGE>
between the Issuer and HSBC Bank USA, 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 April 2029 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 21, 1999 (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.
A-2-2
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed, manually or in facsimile, as of the date set forth below.
SMS STUDENT LOAN TRUST 1999-B
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.
HSBC BANK USA, not in its individual capacity but solely as
Indenture Trustee
By: ________________________________________________
Authorized Signatory
Date:
A-2-3
<PAGE>
REVERSE OF NOTE
This Note is one of a duly authorized issue of Notes of the Issuer
designated as its Class A-2 Floating Rate Asset-Backed Senior Notes (herein
called the "Class A-2 Notes"), which, together with the Class A-1 Floating Rate
Asset-Backed Senior Notes (the "Class A-1 Notes" and, together with the Class
A-2 Notes, the "Senior Notes") and the Floating Rate Asset-Backed Subordinate
Notes (the "Subordinate Notes" and, together with the Senior Notes, the "Notes")
are issued under the Indenture, to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights and obligations thereunder of the Issuer, the Indenture Trustee and the
Noteholders. The Class A-2 Notes are subject to all terms of the Indenture.
The Class A-2 Notes are and will be equally and ratably secured by the
collateral pledged as security therefor as provided in the Indenture.
Allocations of principal will be made among the Class A-1 Notes, the Class A-2
Notes and the Subordinate Notes as provided in the Indenture. The Senior Notes
collectively are senior in right of payment to the Subordinate Notes, all as and
to the extent provided in the Indenture.
Principal of the Class A-2 Notes will be payable on each Quarterly
Payment Date after (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 October 1999.
As provided in 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 provided in the Indenture, if as of the Special Determination Date,
the amount on deposit in the Delayed Delivery Loan Funding Account is greater
than $10,000,000, such amount will be distributed on the first Quarterly Payment
Date thereafter to redeem each class of Notes, based on the initial principal
balance of each class of Notes; if such amount is $10,000,000 or less, it will
be distributed on such Quarterly Payment Date only to the holders of the Class
A-1 Notes to redeem such Class A-1 Notes.
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 shall have declared the
A-2-4
<PAGE>
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 October 1999, 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 ____%
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 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 (a) each Quarterly Interest Period other than the initial 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)
and (b) with respect to the initial Quarterly Interest Period, as determined
pursuant to clause (a) for the period from the Closing Date to but excluding
July 28, 1999 and as determined on the second business day prior to July 28,
1999 for the period from July 28, 1999 to but excluding October 28, 1999 (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
A-2-5
<PAGE>
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
A-2-6
<PAGE>
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
A-2-7
<PAGE>
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 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
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 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.
A-2-8
<PAGE>
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 HSBC Bank USA 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.
A-2-9
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee
- ---------------------------
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
------------------------------
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably
constitutes and appoints ______________________, attorney, to transfer
said Note on the books kept for registration thereof, with full power
of substitution in the premises.
Dated:
__________________________________________________________*/
Signature Guaranteed:
__________________________________________________________*/
___________________
*/ NOTICE: The signature to this assignment must correspond with the name
of the registered owner as it appears on the face of the within Note in
every particular, without alteration, enlargement or any change
whatever. Such signature must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in STAMP or such other
"signature guarantee program" as may be determined by the Note
Registrar in addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as amended.
A-2-10
<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.
SECTION 2.04 OF THE INDENTURE CONTAINS FURTHER RESTRICTIONS ON THE TRANSFER AND
RESALE OF THIS NOTE. EACH TRANSFEREE OF THIS NOTE, BY
A-3-1
<PAGE>
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.
A-3-2
<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.
REGISTERED CUSIP NO.
$---------
No. R-
SMS STUDENT LOAN TRUST 1999-B
FLOATING RATE ASSET-BACKED SUBORDINATE NOTES
SMS Student Loan Trust 1999-B, 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 $___________ by (ii) the aggregate amount, if
any, payable to Noteholders on such Quarterly Payment Date in respect of
principal of the Subordinate Notes pursuant to Section 3.01 of the Indenture
dated as of April 19, 1999 (the "Indenture"), between the Issuer and HSBC Bank
USA, 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 2036 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 21, 1999 (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.
A-3-3
<PAGE>
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Note.
Unless the certificate of authentication hereon has been executed by
the Indenture Trustee whose name appears below by manual signature, this Note
shall not be entitled to any benefit under the Indenture referred to on the
reverse hereof, or be valid or obligatory for any purpose.
A-3-4
<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 1999-B
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.
HSBC BANK USA, not in its individual capacity but solely as
Indenture Trustee
By: _____________________________________________
Authorized Signatory
Date:
A-3-5
<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") 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 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 October 1999.
As provided in 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 provided in the Indenture, if as of the Special Determination Date,
the amount on deposit in the Delayed Delivery Loan Funding Account is greater
than $10,000,000, such amount will be distributed on the first Quarterly Payment
Date thereafter to redeem each class of Notes, based on the initial principal
balance of each class of Notes; if such amount is $10,000,000 or less, it will
be distributed on such Quarterly Payment Date only to the holders of the Class
A-1 Notes to redeem such Class A-1 Notes.
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
A-3-6
<PAGE>
representing not less than a majority of the Outstanding principal amount of the
Notes shall have declared the Notes to be immediately due and payable in the
manner provided in Section 5.02 of the Indenture. All principal payments 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 October 1999, 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 LIBOR Reset Period shall be equal to the
lesser of (i) Three-Month LIBOR for the related LIBOR Reset Period plus ____%
(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 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 (a) each Quarterly Interest Period other than the initial
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) and (b) with respect to the initial Quarterly Interest Period, as
determined pursuant to clause (a) for the period from the Closing Date to but
excluding July 28, 1999 and as determined on the second business day prior to
July 28, 1999 for the period from July 28, 1999 to but excluding October 28,
1999 (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
A-3-7
<PAGE>
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 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
A-3-8
<PAGE>
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
A-3-9
<PAGE>
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 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 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 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
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 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.
A-3-10
<PAGE>
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place, and rate, and in the coin or currency, herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of HSBC Bank USA 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.
A-3-11
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of
assignee
-----------------------------------
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto
_________________________________
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably
constitutes and appoints ______________________, attorney, to transfer
said Note on the books kept for registration thereof, with full power
of substitution in the premises.
Dated: _____________________
____________________________________________________________*/
Signature Guaranteed:
____________________________________________________________*/
__________________
*/ NOTICE: The signature to this assignment must correspond with the name
of the registered owner as it appears on the face of the within Note in
every particular, without alteration, enlargement or any change
whatever. Such signature must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in STAMP or such other
"signature guarantee program" as may be determined by the Note
Registrar in addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as amended.
A-3-12
<PAGE>
EXHIBIT B TO THE INDENTURE
Depository Agreement
B-1
<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
HSBC Bank USA
140 Broadway
New York, New York 10005-1180
Attention: Corporate Trust Department
Re: SMS Student Loan Trust 1999-B
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: .......................................
C-1
<PAGE>
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
HSBC Bank USA
140 Broadway
New York, New York 10005-1180
Attention: Corporate Trust Department
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 1999-B (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
D-1
<PAGE>
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 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.
D-2
<PAGE>
4. 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: ......................................
D-3
<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.
-1-
Execution Copy
LOAN SALE AGREEMENT
among
SMS STUDENT LOAN TRUST 1999-B,
as Issuer,
USA GROUP SECONDARY MARKET SERVICES, INC.,
as Seller,
NBD BANK, N.A., AS TRUSTEE FOR
USA GROUP SECONDARY MARKET SERVICES, INC.,
and
THE FIRST NATIONAL BANK OF CHICAGO,
not in its individual capacity but solely
as Eligible Lender Trustee
Dated as of April 19, 1999
<PAGE>
LOAN SALE AGREEMENT dated as of April 19, 1999, among SMS STUDENT LOAN
TRUST 1999-B, 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 April 19, 1999, among the Issuer, the
Seller, as Administrator, and HSBC Bank USA, 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
2
<PAGE>
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 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 net of interest accrued
thereunder prior to the Cutoff Date that is not to be capitalized, 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 the Delayed Delivery
Loan Funding Account Closing Date 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, the Delayed Delivery Loan Funding Account Closing Date Deposit into the
Delayed Delivery Loan Funding Account and the Collection Account Closing Date
Deposit into the Collection 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 net of interest
accrued thereunder prior to the Cutoff Date that is not to be capitalized.
SECTION 2.02. Conveyance of Delayed Delivery Loans, 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 Delayed Delivery Loan, 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 Delayed Delivery Loan, 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
Delayed Delivery Loan, 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) (i) On the Special Determination Date, upon the tender of Delayed
Delivery Loans by the Seller and the satisfaction of the conditions set forth in
subsection (d) of this Section 2.02, the Eligible Lender Trustee will so inform
the Administrator and the Indenture Trustee in writing, and the Loan Purchase
Amounts for such Delayed Delivery Loans will be withdrawn from the Delayed
Delivery Loan Funding Account, subject to the provisions of Section 2(j) of the
Administration Agreement, and will be remitted to or upon the order of the
Seller. The Seller covenants to transfer on the Special Determination Date to
the Eligible Lender Trustee on behalf of the Issuer pursuant to paragraph (a)
above Delayed Delivery Loans with an aggregate principal balance substantially
equal to the Delayed Delivery Loan Funding Account Closing Date Deposit.
3
<PAGE>
(ii) During the Revolving Period, upon the tender of New Loans or Serial
Loans by the Seller on the related Transfer Date and the satisfaction of the
conditions set forth in subsection (d) of this Section 2.02, the Eligible Lender
Trustee will so inform the Administrator and the Indenture Trustee, and the Loan
Purchase Amounts for such New Loans or Serial Loans will be withdrawn from the
Collateral Reinvestment Account, subject to the provisions of Section 2(f) of
the Administration Agreement, and will be remitted to or upon the order of the
Seller. The Seller covenants to transfer during the Revolving Period to the
Eligible Lender Trustee on behalf of the Issuer pursuant to paragraph (a) above
New Loans or Serial Loans with an aggregate principal balance substantially
equal to the amount on deposit in the Collateral Reinvestment Account; provided,
however, that the Seller shall have no liability for a breach of the foregoing
covenant as a result of the Seller not having originated or acquired, or having
caused to be originated or acquired, during the Revolving Period New Loans or
Serial Loans equal to the amount specified above. Such transfers shall be made
at such times during the Revolving Period as the Seller may determine in its
discretion, subject to the requirement that the Seller shall make such transfers
at least as frequently as is necessary to avoid the occurrence of an Early
Amortization Event.
(c) After the Revolving Period, upon the tender of Serial Loans by the
Seller on the related Transfer Date and the satisfaction of the conditions set
forth in subsection (d) of this Section 2.02, the Eligible Lender Trustee will
so inform the Administrator and the Indenture Trustee, and that component of the
Loan Purchase Amount for such Serial Loans represented by the Purchase
Collateral Balance thereof will be withdrawn from amounts on deposit in the
Collection Account, as provided in Section 2(d)of the Administration Agreement,
and will be remitted, as provided therein to or upon the order of the Seller or,
alternatively, at the sole discretion of the Seller, the Seller may determine
that the Purchase Collateral Balance due on the related Transfer Date for any
Serial Loans then to be transferred shall be paid by the Issuer's exchanging
with the Seller one or more Exchanged Student Loans held by the Issuer for such
Serial Loans; 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
4
<PAGE>
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 Delayed Delivery
Loans, New Loans and Serial Loans, NBD as trustee on behalf of the Seller) shall
transfer to the Issuer the Delayed Delivery Loans, 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 transfer
agreement (including executed signature pages by the other parties
thereto) in substantially the form of Exhibit B hereto (each, a "Transfer
Agreement"), which shall include supplements to Schedule A hereto, listing
such Delayed Delivery Loans, New Loans and Serial Loans;
(ii) the Seller shall have delivered, at least two days prior to
such Transfer Date, notice of such transfer to the Eligible Lender
Trustee, the Indenture Trustee and the Rating Agencies, including a
listing of the designation and the aggregate principal balance of such
Delayed Delivery Loans, 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 Delayed Delivery
Loans, New Loans and Serial Loans on and after each applicable Subsequent
Cutoff Date;
(iv) as of the Transfer Date, the Seller was not insolvent nor will
it have been made insolvent by such transfer nor is it aware of any
pending insolvency;
(v) such addition will not result in a material adverse federal or
state tax consequence to the Issuer or the Noteholders;
(vi) the Seller shall have delivered to the Indenture Trustee and
the Eligible Lender Trustee an Officers' Certificate confirming the
satisfaction of each condition precedent specified in this paragraph (d);
5
<PAGE>
(vii) the Seller shall have delivered on each November 1 and May 1,
commencing November 1, 1999 (A) to the Rating Agencies an Opinion of
Counsel with respect to the transfer of the Delayed Delivery Loans, New
Loans and Serial Loans transferred to the Issuer since the later of the
Closing Date or the prior November 1 or May 1, substantially in the form
of the Opinion of Counsel delivered to the Rating Agencies on the Closing
Date, and (B) to the Eligible Lender Trustee and the Indenture Trustee the
Opinion of Counsel as required by Section 6.02(f)(1) hereof; provided,
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 or the Indenture Trustee determines that, with
regard to the most recent opinion on the matters described in either such
subclause that was delivered with respect to the Financed Student Loans
(whether on the Closing Date or thereafter under this subsection or under
another provision of the Basic Documents), the conclusion of, or the
reasoning underlying, such opinion is no longer correct in all material
respects due to a change in law or regulations or the ruling of a court,
an administrative tribunal or a regulatory or other governmental
authority; upon making any such determination, whichever of the Seller,
the Eligible Lender Trustee and the Indenture Trustee makes such
determination shall notify the others and the Rating Agencies; and
provided, further, that neither the Eligible Lender Trustee nor the
Indenture Trustee shall have any obligation to monitor changes in laws or
regulations or the rulings of courts or other governmental agencies for
the purpose of making any determination described in the preceding
proviso;
(viii) with respect to any New Loan which is guaranteed by an
Additional Guarantor, such Additional Guarantor shall have entered into a
Guarantee Agreement with the Eligible Lender Trustee which guarantees such
New Loan in substantially the form of the Guarantee Agreements between the
Initial Guarantors and the Eligible Lender Trustee;
(ix) the Seller shall have taken any action required to maintain the
first perfected ownership interest of the Issuer in the Trust Estate and
the first perfected security interest of the Indenture Trustee in the
Collateral;
(x) no selection procedures believed by the Seller to be adverse to
the interests of the Noteholders shall have been utilized in selecting the
New Loans or the Serial Loans 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
6
<PAGE>
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 Delayed Delivery Loans, 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 Delayed Delivery Loans, 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 Delayed Delivery Loans, 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 Delayed Delivery Loans,
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
7
<PAGE>
attorney shall be construed as a power coupled with an interest, shall be
irrevocable as long as the Trust Agreement remains in effect and shall continue
in effect until the Trust Agreement terminates.
ARTICLE III
The Financed Student Loans
SECTION 3.01. Representations and Warranties of Seller with Respect to the
Financed Student Loans. The Seller represents and warrants with respect to the
Financed Student Loans as set forth in Exhibit C hereto. Such representations
and warranties speak as of the execution and delivery of this Agreement and as
of the Closing Date, in the case of the Initial Financed Student Loans, as of
the applicable Transfer Date, in the case of the Delayed Delivery Loans, New
Loans and Serial Loans, as of the date of the relevant Assignment in the case of
any Qualified Substitute Student Loan, as of the date of origination in the case
of any Consolidation Loan added to the Trust during the Revolving Period and as
of the applicable Add-on Consolidation Loan Funding Date, in the case of any
Consolidation Loan the principal balance of which is increased by the principal
balance of any related Add-on Consolidation Loan, but shall survive the sale,
transfer and assignment of the Financed Student Loans to the Eligible Lender
Trustee on behalf of the Issuer (and both the origination of such Consolidation
Loans and the addition of the principal balance of any Add-on Consolidation
Loan) and the pledge thereof to the Indenture Trustee pursuant to the Indenture.
SECTION 3.02. Repurchase; Reimbursement. (a) Upon discovery by the Seller,
NBD, the Servicer, the Eligible Lender 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 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
8
<PAGE>
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. 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;
9
<PAGE>
(iv) the Seller shall have delivered (A) to the Rating Agencies, an
Opinion of Counsel with respect to each transfer of Qualified Substitute
Student Loans, substantially in the form of the Opinion of Counsel
delivered to the Rating Agencies on the Closing Date, and (B) to the
Eligible Lender Trustee and the Indenture Trustee, the Opinion of Counsel
required by Section 6.02(f)(1) hereof; provided, however, that no opinion
shall be required under either subclause (A) or (B) unless the Seller, the
Eligible Lender Trustee or the Indenture Trustee determines that, with
regard to the most recent opinion on the matters described in either such
subclause that was delivered with respect to the Financed Student Loans
(whether on the Closing Date or thereafter under this subsection or under
another provision of the Basic Documents), the conclusion of, or the
reasoning underlying, such opinion is no longer correct in all material
respects due to a change in law or regulations or the ruling of a court,
an administrative tribunal or a regulatory or other governmental
authority; upon making any such determination, whichever of the Seller,
the Eligible Lender Trustee and the Indenture Trustee makes such
determination shall notify the others and the Rating Agencies; and
provided, further, that neither the Eligible Lender Trustee nor 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 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
10
<PAGE>
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. 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 Delayed Delivery
Loans, 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 Delayed
Delivery Loans, 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
11
<PAGE>
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 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 Eligible Lender Trustee, the Indenture Trustee and the Noteholders and
the officers, directors, employees and agents of the Issuer, the Eligible
Lender Trustee and the Indenture Trustee from and against any and all
costs, expenses, losses, claims, damages and liabilities arising out of,
or imposed upon such Person through, (i) the Seller's willful misfeasance,
bad faith or negligence in the performance of its duties under this
Agreement, or by reason of reckless disregard of its obligations and
duties under this Agreement and (ii) the Seller's or the Issuer's
violation of Federal or state securities laws in connection with the
offering and sale of the Notes.
(c) The Seller shall be liable as primary obligor for, and shall
indemnify, defend and hold harmless the Eligible Lender Trustee and its
officers, directors, employees and agents from and against, all costs,
expenses, losses, claims, damages, obligations and liabilities arising out
of, incurred in connection with or relating to the Trust Agreement, the
other Basic Documents, the Trust Estate, the acceptance or performance of
the trusts and duties set forth herein and in the Trust Agreement or the
action or the inaction of the Eligible Lender Trustee hereunder and under
the Trust Agreement, except to the extent that such cost, 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
12
<PAGE>
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 and the Indenture
Trustee an Officers' Certificate and an Opinion of Counsel each stating that
such consolidation, merger or succession and such agreement of assumption comply
with this Section and that all conditions precedent, if any, provided for in
this Agreement relating to such transaction have been complied with, and that
the Rating Agency Condition shall have been satisfied with respect to such
transaction, (iv) the surviving Seller shall have a consolidated net worth at
least equal to that of the predecessor Seller, (v) such transaction will not
result in a material adverse federal or state tax consequence to the Issuer or
the Noteholders and (vi) unless SMS is the surviving entity, the Seller shall
have delivered to the Eligible Lender Trustee and the Indenture Trustee an
Opinion of Counsel either (A) stating that, in the opinion of such counsel, all
financing statements and continuation statements and amendments thereto have
been executed and filed that are necessary fully to preserve and protect the
interest of the Eligible Lender Trustee and Indenture Trustee, respectively, in
the Financed Student Loans and reciting the details of such filings, or (B)
stating that, in the opinion of such counsel, no such action shall be necessary
to preserve and protect such interests; 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 and the Indenture Trustee an Opinion of
13
<PAGE>
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 equal to the Minimum Purchase Price;
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 Minimum Purchase Price.
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
14
<PAGE>
eliminating any of the provisions in this Agreement or of modifying in any
manner the rights of the Noteholders; provided, however, that such action shall
not, as evidenced by an Opinion of Counsel delivered to the Eligible Lender
Trustee and the Indenture Trustee, adversely affect in any material respect the
interests of any Noteholder.
This Agreement may also be amended from time to time by the Seller and the
Eligible Lender Trustee, with the consent of NBD, the Indenture Trustee and the
Noteholders of Notes evidencing not less than a majority of the Outstanding
Amount of the Notes, for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Agreement or of
modifying in any manner the rights of the Noteholders; provided, however, that
no such amendment shall (a) increase or reduce in any manner the amount of, or
accelerate or delay the timing of, collections of payments with respect to
Financed Student Loans or distributions that shall be required to be made for
the benefit of the Noteholders or the Swap Counterparty 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 the Swap Counterparty.
Promptly after the execution of any such amendment or consent (or, in the
case of the Rating Agencies, five Business Days prior thereto), the Eligible
Lender Trustee shall furnish written notification of the substance of such
amendment or consent to NBD, the Seller, the Administrator, each Noteholder, the
Indenture Trustee, the Servicer and each of the Rating Agencies.
It shall not be necessary for the consent of Noteholders pursuant to this
Section to approve the particular form of any proposed amendment or consent, but
it shall be sufficient if such consent shall approve the substance thereof.
Prior to the execution of any amendment to this Agreement, the Eligible
Lender Trustee and the Indenture Trustee shall receive upon request and rely
upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement and the Opinion of Counsel referred to
in Section 6.02(f). The Eligible Lender Trustee and the Indenture Trustee may,
but shall not be obligated to, enter into any such amendment which affects the
Eligible Lender Trustee's or the Indenture Trustee's, as applicable, own rights,
duties or immunities under this Agreement or otherwise.
SECTION 6.02. Protection of Interests in Trust. (a) Each of the Seller and
NBD shall execute and file such financing statements and cause to be executed
and filed such continuation statements, all in such manner and in such places as
may be required by law fully to preserve, maintain, and protect the interest of
the Issuer, the Eligible Lender Trustee and the Indenture Trustee in the
Financed Student Loans and in the proceeds thereof. Each of the Seller and NBD
shall deliver (or cause to be delivered) to the Eligible Lender Trustee and the
Indenture Trustee file-stamped copies of, or filing receipts for, any document
filed as provided above, as soon as available following such filing.
15
<PAGE>
(b) Neither the Seller nor NBD shall change its name, identity or
corporate structure in any manner that would, could, or might make any financing
statement or continuation statement filed in accordance with paragraph (a) above
seriously misleading within the meaning of ss. 9-402(7) of the UCC, unless it
shall have given the Eligible Lender Trustee and the Indenture Trustee at least
five (5) days' prior written notice thereof and shall have promptly filed
appropriate amendments to all previously filed financing statements or
continuation statements.
(c) Each of the Seller and NBD shall have an obligation to give the
Eligible Lender Trustee, the Indenture Trustee and the Rating Agencies at least
sixty (60) days prior written notice of any relocation of its principal
executive office if, as a result of such relocation, the applicable provisions
of the UCC would require the filing of any amendment of any previously filed
financing or continuation statement or of any new financing statement and shall
promptly file any such amendment.
(d) If at any time the Seller or NBD shall propose to sell, grant a
security interest in, or otherwise transfer any interest in student loans to any
prospective purchaser, lender or other transferee, the Seller or NBD, as the
case may be, shall give to such prospective purchaser, lender or other
transferee computer tapes, records or printouts (including any restored from
backup archives) that, if they shall refer in any manner whatsoever to any
Financed Student Loan, shall indicate clearly that such Financed Student Loan
has been sold and is owned by the Issuer and has been pledged to the Indenture
Trustee.
(e) The Seller shall, to the extent required by applicable law, cause the
Notes to be registered with the Commission pursuant to Section 12(b) or Section
12(g) of the Exchange Act within the time periods specified in such sections.
(f) The Seller shall deliver to the Eligible Lender Trustee and the
Indenture Trustee:
(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
16
<PAGE>
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 or the Rating Agencies under this Agreement shall be in writing,
personally delivered or mailed by certified mail, return receipt requested (or
in the form of telex or facsimile notice, followed by written notice delivered
as aforesaid 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
Mail Code IN1-7081
Indianapolis, Indiana 46266
Attention: Terri Hawkins
Telephone: (317) 266-6533
17
<PAGE>
Telecopy: (317) 266-6599;
(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 Deputy General Counsel
USA Group, Inc.
30 South Meridian Street
Indianapolis, Indiana 46204-3503
Telephone: (317) 951-5523
Telecopy: (317) 951-5532;
(d) in the case of the Issuer, to
Student Loan Trust 1999-B
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.
18
<PAGE>
30 South Meridian Street
Indianapolis, Indiana 46204-3503
Attention: Peter M. Greco
Telephone: (317) 951-5526
Telecopy: (317) 951-5532;
(g) 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
(h) 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.
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
or otherwise in accordance with Section 6.10.
SECTION 6.05. Limitations on Rights of Others. The provisions of this
Agreement are solely for the benefit of the Seller, NBD, the Issuer, and the
Eligible Lender Trustee and for the benefit of the Indenture Trustee, the
Noteholders, the Swap Counterparty (with respect to Section 5.01) and the
Company or its designee, as third party beneficiaries, and nothing in this
Agreement, whether express or implied, shall be construed to give to any other
Person any legal or equitable right, remedy or claim in the Trust Estate or
under or in respect of this Agreement or any covenants, conditions or provisions
contained herein.
SECTION 6.06. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
19
<PAGE>
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
(other than as provided in subsection (d)), 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 (other than
as provided in subsection (d)), 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
20
<PAGE>
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 (other than
as provided in subsection (d)), this Agreement has been accepted by HSBC Bank
USA not in its individual capacity but solely as Indenture Trustee and in no
event shall HSBC Bank USA have any liability for the representations,
warranties, covenants, agreements or other obligations of the Issuer hereunder
or in any of the certificates, notices or agreements delivered pursuant hereto,
as to all of which recourse shall be had solely to the assets of the Issuer.
(d) Notwithstanding any other provision in this Agreement or the other
Basic Documents, nothing in this Agreement or the other Basic Documents shall be
construed to limit the legal responsibility of the Eligible Lender Trustee or
the Indenture Trustee, to the U.S. Secretary of Education or a Guarantor for any
violations of statutory or regulatory requirements that may occur with respect
to loans held by the Eligible Lender Trustee or the Indenture Trustee pursuant
to, or to otherwise comply with their obligations under, the Higher Education
Act or implementing regulations.
SECTION 6.13. Agreement of Seller and NBD. Each of the Seller and NBD
agrees to execute and deliver such instruments and to take such actions as the
Eligible Lender Trustee, the Issuer or the Indenture Trustee may reasonably
request in order to effectuate the terms and carry out the purposes of the
Agreement. Each of the Seller and NBD agrees to execute and deliver such
instruments and to take such actions as the Eligible Lender Trustee, the Issuer
or the Indenture Trustee may reasonably request in order to effectuate the terms
and carry out the purposes of the Agreement.
[Signatures Follow on Next Page]
21
<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 1999-B
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:
Title:
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:
22
<PAGE>
Acknowledged and accepted
as of the day and year first
above written:
HSBC BANK USA, not in
its individual capacity but
solely as Indenture Trustee
By: _______________________________________
Name:
Title:
23
<PAGE>
EXHIBIT A
TO THE LOAN SALE AGREEMENT
BILL OF SALE
For $ received, in accordance with the Loan Sale Agreement (the "Loan
Sale Agreement") dated as of April 19, 1999, among USA Group Secondary Market
Services, Inc., as seller (the "Seller"), SMS Student Loan Trust 1999-B (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 net of interest accrued prior to the
Cutoff Date that is not to be capitalized, (iii) all funds on deposit from time
to time in the Trust Accounts, including the Reserve Account Initial Deposit,
the Collection Account Closing Date Deposit and the Delayed Delivery Loan
Funding Account Closing Date 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
April 19, 1999, among SMS Student Loan Trust 1999-B, as Issuer, USA Group
Secondary Market Services, Inc., as
24
<PAGE>
Administrator, and HSBC Bank USA, as Indenture Trustee, which also contains
rules as to usage that shall be applicable herein.
IN WITNESS WHEREOF, the undersigned has caused this Bill of Sale to be
duly executed as of April 19, 1999.
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:
25
<PAGE>
EXHIBIT B
TO THE
LOAN SALE AGREEMENT
TRANSFER AGREEMENT
TRANSFER No. _____ Of [DELAYED DELIVERY] [NEW] [SERIAL] LOANS
dated as of ______________, _____, among SMS STUDENT LOAN TRUST 1999-B, 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 April 19, 1999 (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 April 19, 1999 (as amended or
supplemented, the "Trust Agreement"); and
WHEREAS pursuant to the Loan Sale Agreement, the Seller wishes to
convey the [Delayed Delivery] [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 April 19, 1999, among the Issuer, the
Seller, as Administrator, and HSBC
- ---------------
* 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.
26
<PAGE>
Bank USA, 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 $__________ (for the Delayed
Delivery Loans, such amount being the Loan Purchase Amounts of the Delayed
Delivery Loans and such amount to be paid from amounts on deposit in the Delayed
Delivery Loan Funding Account subject to the provisions of Section 2.02(b) of
the Loan Sale Agreement and Section 2(j) of the Administration Agreement, for
other Additional Student Loans during the Revolving Period, such amount being
the Loan Purchase Amounts of the Additional Student Loans and such amount to be
paid from amounts on deposit in the Collateral Reinvestment Account subject to
the provisions of Section 2.02(b) of the Loan Sale Agreement and Section 2(f) of
the Administration Agreement and after the Revolving Period such amount being
the sum of (i) the Purchase Collateral Balance ($[ ]) 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.
27
<PAGE>
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 is an express
third-party beneficiary and may enforce the provisions of this Agreement as if
it were a party hereto.
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
28
<PAGE>
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.
29
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered by their respective duly authorized
officers as of the day and the year first above written.
SMS STUDENT LOAN TRUST 1999-B
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:
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:
30
<PAGE>
Acknowledged and accepted as
of the date first above written:
HSBC BANK USA,
not in its individual
capacity but solely as
Indenture Trustee
By:______________________________
Name:
Title:
31
<PAGE>
SCHEDULE A
TO THE
TRANSFER AGREEMENT NO. ___
[List of Additional Student Loans
and their related Subsequent Cutoff Dates]
32
<PAGE>
ANNEX A
TO THE TRANSFER AGREEMENT
BILL OF SALE
For value received, in accordance with the Loan Sale Agreement (the
"Loan Sale Agreement") dated as of April 19, 1999, 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 1999-B (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.
33
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Bill of Sale to be
duly executed as of ___________, ______.
USA GROUP SECONDARY MARKET
SERVICES, INC., as Seller
By:_______________________________________
Name:
Title:
NBD BANK, N.A., as trustee
for USA Group Secondary
Market Services, Inc.
By:_______________________________________
Name:
Title:
34
<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 Delayed Delivery Loan, 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 Delayed Delivery Loan, 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
35
<PAGE>
Cutoff Date in the case of a Delayed Delivery Loan, 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, Delayed Delivery 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 Delayed Delivery
Loan, 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
270 days overdue as of the Cutoff Date or more than 180 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 270 days or
180 days, as applicable, no continuing condition that with notice or the lapse
of time or both would constitute a default, breach, violation
36
<PAGE>
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 20% of the
Financed Student Loans shall be more than 30 days overdue.
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, Delayed Delivery 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 5% 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.
37
<PAGE>
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.
38
<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.
39
<PAGE>
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.
40
<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.
41
<PAGE>
EXHIBIT F
TO THE LOAN SALE AGREEMENT
ASSIGNMENT
For value received, in accordance with the Loan Sale Agreement (the
"Loan Sale Agreement") dated as of April 19, 1999, among USA Group Secondary
Market Services, Inc., as seller (the "Seller"), SMS Student Loan Trust 1999-B
(the "Trust"), NBD Bank, N.A., as trustee for the Seller ("NBD"), and The First
National Bank of Chicago, not in its individual capacity but solely as Eligible
Lender Trustee (the "Eligible Lender Trustee"), the Seller (and, with respect to
legal title to the Initial Financed Student Loans, NBD as trustee on behalf of
the Seller) does hereby sell, assign, transfer and otherwise convey unto the
Eligible Lender Trustee on behalf of the Trust, without recourse (subject to the
obligations set forth in the Loan Sale Agreement), all right, title and interest
in and to (i) the Qualified Substitute Student Loan(s) indicated in Schedule A
hereto (the "Additional Student Loans") and all obligations of the Obligors
thereunder, together with all documents, the related Student Loan Files and all
rights and privileges related thereto, (ii) all payments and/or collections
received thereunder on and after the date hereof and (iii) all proceeds of any
and all of the foregoing (including but not limited to proceeds derived from the
voluntary or involuntary conversion of any of the Additional Student Loans into
cash or other liquidated property, such as proceeds from the applicable
Guarantee Agreement). The foregoing sale does not constitute and is not intended
to result in any assumption by the Eligible Lender Trustee or the Trust of any
obligation of the Seller or NBD to the borrowers of Additional Student Loans or
any other Person in connection with the Additional Student Loans or any
agreement or instrument relating to any of them.
In addition, the undersigned, by execution of this instrument, hereby
endorse the promissory notes evidencing each Additional Student Loan in favor of
the Eligible Lender Trustee on behalf of the Trust, without recourse (subject to
the obligations set forth in the Loan Sale Agreement) against the undersigned.
This endorsement may be effected by attaching a facsimile hereof to each or any
of such promissory notes.
This Assignment is made pursuant to and upon the representations,
warranties and agreements on the part of the undersigned contained in the Loan
Sale Agreement and is to be governed by the Loan Sale Agreement.
Capitalized terms used but not defined herein shall have the meaning
assigned to them in Appendix A to the Administration Agreement, dated as of
April 19, 1999, among the Trust, as Issuer, the Seller, as Administrator, and
HSBC Bank USA, as Indenture Trustee, which also contains rules as to usage that
shall be applicable herein.
42
<PAGE>
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:
Execution Copy
ADMINISTRATION AGREEMENT dated as of April 19, 1999, among
SMS STUDENT LOAN TRUST 1999-B, a Delaware trust (the "Issuer"), USA GROUP
SECONDARY MARKET SERVICES, INC., a Delaware corporation, as administrator (the
"Administrator"), and HSBC BANK USA, a New York banking corporation, not in its
individual capacity but solely as Indenture Trustee (the "Indenture Trustee").
W I T N E S S E T H
WHEREAS the Issuer was formed pursuant to the Trust Agreement
dated as of April 19, 1999 (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-1 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 April 19, 1999 (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 Basic Documents; and
WHEREAS, pursuant to the Basic Documents, 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 Basic
Documents as the Issuer and the Eligible Lender Trustee may from time to time
request; and
<PAGE>
WHEREAS the Administrator has the capacity to provide the
services required hereby and is willing to perform such services for the Issuer
and the Eligible Lender Trustee on the terms set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties agree as follows:
1. Representations of the Administrator. The Administrator
makes the following representations on which the Issuer, the Eligible Lender
Trustee 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 Delayed Delivery Loans, 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
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
2
<PAGE>
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
Basic Documents 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 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 Administrator 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.
(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 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):
3
<PAGE>
(A) the duty to cause the Note Registrar to keep the Note
Register and to give the Indenture Trustee prompt notice of any
appointment of a new Note Registrar and the location, or change in
location, of the Note Register (Section 2.04);
(B) the fixing or causing to be fixed of any specified record
date and the timely notification of the Indenture Trustee and
Noteholders with respect to special payment dates, if any (Section
2.07(c));
(C) the preparation of or obtaining of the documents and
instruments required for authentication of the Notes and delivery of
the same to the Indenture Trustee (Section 2.02);
(D) the preparation, obtaining or filing of the instruments,
opinions and certificates and other documents required for the release
of collateral (Section 2.09);
(E) the preparation, obtaining or filing of the instruments,
opinions and certificates and other documents required for a transfer
of 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 the instrument specified in the
Indenture regarding funds held in trust (Section 3.03);
(H) the direction to the Paying Agents to deposit moneys with
the Indenture Trustee (Section 3.03);
(I) the obtaining and preservation of the Issuer's
qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of the Indenture, the Notes, the Collateral and each
other instrument and agreement included in the Indenture Trust Estate
(Section 3.04);
(J) the preparation of all supplements, amendments, financing
statements, continuation statements, instruments of further assurance
and other instruments, in accordance with Section 3.05 of the
Indenture, necessary to protect the Indenture Trust Estate (Section
3.05);
(K) the delivery by the Issuer of the Opinion of Counsel on
the Closing Date and the annual delivery of Opinions of Counsel, in
accordance with Section 3.06 of the Indenture, as to the Indenture
Trust Estate, and the annual delivery of the Officers' 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);
4
<PAGE>
(L) the identification to the Indenture Trustee in an
Officers' Certificate of the Issuer of a Person with whom the Issuer
has contracted to perform its duties under the Indenture (Section
3.07(b));
(M) the notification of the Indenture Trustee, the Rating
Agencies 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 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 with respect to the sale of the Indenture Trust Estate in a
commercially reasonable manner if an Event of Default shall have
occurred and be continuing (Section 5.04);
(R) the preparation of any written instruments required to
confirm more fully the authority of any co-trustee or separate trustee
and any written instruments necessary in connection with the
resignation or removal of any co-trustee or separate trustee (Sections
6.08 and 6.10);
(S) the furnishing of the Indenture Trustee with the names and
addresses of Noteholders during any period when the Indenture Trustee
is not the Note Registrar (Section 7.01);
(T) the preparation and, after execution by the Issuer, the
filing with the Commission, any applicable State agencies and the
Indenture Trustee of documents required to be filed on a periodic basis
with, and summaries thereof as may be required by rules and regulations
prescribed by, the Commission and any applicable State agencies and the
transmission of such summaries to the Noteholders (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
5
<PAGE>
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 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 authentication of new Notes
conforming to any supplemental indenture and the delivery of the same
to the Eligible Lender Trustee and the Indenture Trustee, respectively
(Section 9.06);
(Y) the notification of Noteholders 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 Certificates, if necessary,
for the release of property from the lien of the Indenture (Section
11.01(b));
(AB) 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
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
6
<PAGE>
(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), 5(i) and Part 5(o) 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 Basic Documents,
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 Basic Documents, and at the request of the Eligible Lender Trustee shall
take all appropriate action that it is the duty of the Issuer to take pursuant
to the Basic Documents. In furtherance thereof, the Eligible Lender Trustee
shall, on behalf of itself and of the Issuer, execute and deliver to the
Administrator and to each successor Administrator appointed pursuant to the
terms hereof, one or more powers of attorney substantially in the form of
Exhibit A hereto, appointing the Administrator the attorney-in-fact of the
Eligible Lender Trustee and the Issuer for the purpose of executing on behalf of
the Eligible Lender Trustee and the Issuer all such documents, reports, filings,
instruments, certificates and opinions. Subject to Section 9 of this Agreement,
and in accordance with the directions of the Eligible Lender Trustee, the
Administrator shall administer, perform or supervise the performance of such
other activities in connection with the Collateral (including the Basic
Documents) 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 Basic
Documents to the contrary, the Administrator shall deliver to the Eligible
Lender Trustee, the Indenture Trustee, the Rating Agencies and (if the Seller is
not the Administrator) the Seller, an Officers' Certificate of the Administrator
containing all the information necessary:
(A) to pay the Department any Consolidation Fees due and
payable to the Department, to the extent such Consolidation Fees are
not being deducted by the Department out of Special Allowance Payments
or Interest Subsidy Payments, which Officers' Certificate shall be
delivered on the date that is three Business Days prior to the date
such fees are to be remitted to the Department;
(B) during the Revolving Period to pay the Seller, pursuant to
Section 2.02 of the Loan Sale Agreement, on each Transfer Date, the
Loan Purchase Amount for Delayed Delivery Loans or the Loan Purchase
Amount (or if the Parity Date has occurred, the Purchase Collateral
Balance) for Delayed Delivery Loans, New Loans or Serial Loans
purchased by the Eligible Lender Trustee on behalf of the Issuer on
such date and, on
7
<PAGE>
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)(v), which Officers'
Certificate shall be delivered on the each Determination Date;
(D) to make all the distributions required by Sections 2(d),
2(e), 2(f) and 2(j), 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 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 Basic
Documents 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 Basic Documents, 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 and the Swap Counterparty as
soon as practicable after the Administrator has received notice thereof.
8
<PAGE>
(viii) In carrying out the foregoing duties or any of its
other obligations under this Agreement, the Administrator may enter into
transactions with or otherwise deal with any of its Affiliates; provided,
however, that the terms of any such transactions or dealings shall be in
accordance with any directions received from the Issuer and shall be, in the
Administrator's opinion, no less favorable to the Issuer or the Noteholders 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 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 HSBC Bank USA.
(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 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 HSBC Bank USA.
(iii) The Administrator, for the benefit of the Noteholders
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 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 HSBC Bank USA.
(iv) The Administrator, for the benefit of the Noteholders and
the Swap Counterparty, if there are funds to be deposited in a delayed delivery
loan funding account, shall establish and maintain in the name of the Indenture
Trustee an Eligible Deposit Account (the "Delayed Delivery Loan Funding
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 and the Swap Counterparty. The Delayed Delivery Loan Funding Account
will initially be established as a segregated trust account in the name of the
Indenture Trustee with the corporate trust department of HSBC Bank USA.
(v) Funds on deposit in the Collection Account, the Reserve
Account, the Delayed Delivery Loan Funding 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
9
<PAGE>
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, 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.
(vi) (A) The Indenture Trustee, on behalf of the Noteholders
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 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 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;
10
<PAGE>
(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";
(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
(4) any Trust Account Property that is an "uncertificated
security" under Article VIII of the UCC and that is not governed by
clause (3) above shall be Delivered to the Indenture Trustee in
accordance with paragraph (c) of the definition of "Delivery".
(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 in writing (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;
(iii) (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
11
<PAGE>
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 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;
(v) on each Quarterly Payment Date, to make the following
deposits and distributions to the Persons or the account specified
below by 11:00 a.m. (New York time), to the extent of Available Funds
for such Quarterly Payment Date in the Collection Account, in the
following order of priority:
(A) to the Servicer, the Servicing Fee with respect
to the preceding calendar month and all unpaid Servicing Fees
from prior months;
12
<PAGE>
(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 the remainder of 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 Noteholders' Interest Distribution Amount;
(iii) if the Revolving Period has terminated, the Senior
Noteholders' Principal Distribution Amount; and (iv) 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. The Administrator may, but is not obligated to,
deposit amounts from time to time into the Reserve Account.
(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 for such
Quarterly Payment Date (the "Reserve Account Excess"), the Administrator shall
instruct the Indenture Trustee to apply such Reserve Account Excess 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)(iv) through
(vii) below, and (b) at and after the termination of the Revolving Period, to
the following (in the
13
<PAGE>
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) if such
Quarterly Payment Date is after the July 2009 Quarterly Payment Date, to pay the
Indenture Trustee for distribution to Noteholders pursuant to Section 8.02(d) of
the Indenture the remaining amount of such excess until the aggregate principal
amount of the Notes has been reduced to zero; (iv) 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; (v) 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; (vi) 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; (vii) 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 (viii) any remaining amount of such
excess, after application of clauses (i) through (vii) above will be released to
the Seller; 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 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 Seller, the
Servicer or the Administrator and the termination of the Trust (including any
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).
14
<PAGE>
(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, the remainder of 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 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 and the Swap
Counterparty 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 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
15
<PAGE>
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 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;
(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;
16
<PAGE>
(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 Adjusted Student
Loan Rate or based on the Class A-1 Note LIBOR Rate, Class A-2 Note
LIBOR Rate or Subordinate Note LIBOR Rate and specifying what each such
Note Rate would have been using the alternate basis for such
calculation;
(I) the amount of the Servicing Fee paid to the
Servicer on such Quarterly Payment Date and on each Monthly Payment
Date following the immediately preceding Quarterly Payment Date
including a breakdown of the components of the Servicing Fee
attributable to each of the items specified in clauses II(i) through
(ix) of Section 3.06 of the Servicing Agreement and the amount of any
Servicing Fee Shortfall for such Quarterly Payment Date and for each
Monthly Payment Date following the immediately preceding Quarterly
Payment Date;
(J) the amount of the Administration Fee paid to the
Administrator on such Quarterly Payment Date and on each Monthly
Payment Date following the immediately preceding Quarterly Payment
Date;
(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) Reserved;
(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) for the October 1999 Quarterly Payment Date, the
principal balance and number of Delayed Delivery Loans, if any,
conveyed to the Issuer during the related Collection Period, the
aggregate Loan Purchase Amounts thereof and the portion thereof
attributable to Purchase Premium Amounts;
17
<PAGE>
(P) for Quarterly Payment Dates during the Revolving
Period, the amount deposited into the Collateral Reinvestment Account
during the related Collection Period 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, the Administrator shall have notified the Eligible
Lender Trustee 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:
18
<PAGE>
(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 Basic
Documents;
(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 and the Indenture Trustee. Until
the effective date of any termination, the Administrator shall be required to
deposit into the Collection Account the Incentive Interest Deposit with respect
to such Incentive Financed Student Loan as provided below. In the event that the
Administrator fails to make such deposit, the terms of such Incentive Program
shall be such that the Borrower shall be obligated to make such payment and such
Incentive Program shall terminate as to the related loan.
The Administrator shall deposit or cause to be deposited into
the Collection Account no later than the Determination Date succeeding each
Monthly Collection Period 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.
(j) Delayed Delivery Loan Funding Account. (i) On the Special
Determination Date, the Administrator shall instruct the Indenture Trustee in
writing to withdraw from the Delayed Delivery Loan Funding Account, to the
extent of the funds on deposit therein, an amount equal to the Loan Purchase
Amount for the Delayed Delivery 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.
(ii) On the Quarterly Payment Date occurring after the Special
Determination Date, the Administrator shall instruct the Indenture Trustee in
writing to withdraw from the
19
<PAGE>
Delayed Delivery Loan Funding 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(g) of the Indenture.
3. Annual Statement as to Compliance. (a) The Administrator
shall deliver to the Seller, the Eligible Lender Trustee, the Indenture Trustee
and the Swap Counterparty, on or before December 31 of each year beginning
December 31, 1999, 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, 1999)
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 and the Swap
Counterparty, promptly after having obtained knowledge thereof, but in no event
later than two Business Days thereafter, written notice in an Officers'
Certificate of the Administrator of any event which with the giving of notice or
lapse of time, or both, would become an Administrator Default under Section 12.
4. Annual Independent Certified Public Accountants' Report.
The Administrator shall cause a firm of independent certified public
accountants, which may also render other services to the Administrator, to
deliver to the Seller, the Eligible Lender Trustee, the Indenture Trustee and
the Swap Counterparty on or before December 31 of each year beginning December
31, 1999, a report addressed to the Administrator and to the Seller, the
Eligible Lender Trustee, the Indenture Trustee 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 and the Indenture
Trustee under the Basic Documents), 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, 1999) and that, on the basis of the accounting and
auditing procedures considered appropriate under the circumstances, such firm is
of the opinion that the administration of the Trust was conducted in compliance
with the terms of this Agreement, except for (i) such exceptions as such firm
shall believe to be immaterial and (ii) such other exceptions as shall be set
forth in such report. The Indenture Trustee shall send a copy of each such
report to the Rating Agencies.
20
<PAGE>
Such report will also indicate that the firm is independent of
the Administrator within the meaning of the Code of Professional Ethics of the
American Institute of Certified Public Accountants.
5. Administrator Expenses. The Administrator shall be required
to pay all expenses incurred by it in connection with its activities hereunder,
including fees and disbursements of independent accountants, taxes imposed on
the Administrator and expenses incurred in connection with distributions and
reports to the Noteholders 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 at any time
during normal business hours.
7. Compensation. As compensation for the performance of the
Administrator's obligations under this Agreement and as reimbursement for its
expenses related thereto, the Administrator shall be entitled to the
Administration Fee payable monthly in arrears on each Monthly Payment Date which
shall be solely an obligation of the Issuer and payable solely as provided
herein.
8. Additional Information to Be Furnished. The Administrator
shall furnish to the Issuer and the Swap Counterparty from time to time such
additional information regarding the Collateral as the Issuer or the Swap
Counterparty shall reasonably request. Following the time, if any, that the Swap
Counterparty's counterparty ratings fall below "Aa3" or its equivalent, upon
request of a Rating Agency, the Administrator shall furnish to such Rating
Agency, cashflow projections for the Trust.
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
21
<PAGE>
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 or the Eligible Lender Trustee
or after discovery of such failure by an officer of the Administrator;
or
(b) any failure by the Administrator duly to observe
or to perform in any material respect any other covenants or agreements
of the Administrator set forth in this Agreement or any Basic
Documents, which failure shall (i) materially and adversely affect the
rights of Noteholders and (ii) continues unremedied for a period of 30
days after the date 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 or the Eligible Lender Trustee or (B) to the
Administrator and to the Indenture Trustee and the Eligible Lender
Trustee by the Noteholders, representing not less than 25% of the
Outstanding Amount of the Notes; or
(c) an Insolvency Event occurs with respect to the
Administrator; or
(d) any representation or warranty made by the
Administrator hereunder or under any Basic Document, or in any
certificate furnished hereunder or under any Basic Document, 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, or the Noteholders evidencing
not less than 75% of the Outstanding Amount of the Notes, by notice then given
in writing to the Administrator (and to the Indenture Trustee, 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. On or after the
receipt by the Administrator of such written notice, all authority and power of
the Administrator under this Agreement, whether with respect to the Notes or the
Financed Student Loans or otherwise, shall, without further action, pass to and
be vested in the Indenture Trustee or such successor Administrator as may be
appointed under Section 13; and, without limitation, the Indenture Trustee and
the Eligible Lender Trustee are hereby authorized and empowered to execute and
deliver, for the benefit of the predecessor Administrator, as attorney-in-fact
or otherwise, any and all documents and other instruments, and to do or
accomplish all other acts or things necessary or appropriate to effect the
purposes of such notice of termination. The predecessor Administrator shall
cooperate with the successor Administrator, the Indenture Trustee and the
Eligible Lender Trustee in effecting the termination of the responsibilities and
rights of the predecessor
22
<PAGE>
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 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 termination,
until a successor Administrator 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 and the Indenture
Trustee of written notice of such resignation (or written confirmation of such
notice) in accordance with the terms of this Agreement and (y) the date upon
which the predecessor Administrator shall become 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 successor Administrator shall accept its appointment by a
written assumption in form acceptable to the Indenture Trustee. In the event
that a successor Administrator has not been appointed at the time when the
predecessor Administrator has ceased to act as Administrator in accordance with
this Section, the Indenture Trustee without further action shall automatically
be appointed the successor Administrator and the Indenture Trustee shall be
entitled to the Administration Fee. Notwithstanding the above, the Indenture
Trustee (with 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 which shall include the servicing of student loans.
(b) Upon appointment, the successor Administrator (including
the Indenture Trustee acting as successor Administrator) shall be the successor
in all respects to the predecessor Administrator and shall be subject to all the
responsibilities, duties and liabilities placed on the predecessor Administrator
that arise thereafter or are related thereto and shall be entitled to an amount
agreed to by such successor Administrator (which shall not exceed the
Administration Fee unless the Swap Counterparty gives its 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,
and all the rights granted to the predecessor Administrator by the terms and
provisions of this Agreement.
(c) The Administrator may not resign unless it is prohibited
from serving as such by law as evidenced by an Opinion of Counsel to such effect
delivered to the Indenture Trustee and the Eligible Lender Trustee.
Notwithstanding the foregoing or anything to the contrary herein or in the Basic
Documents, the Indenture Trustee, to the extent it is acting as successor
Administrator pursuant hereto, shall be entitled to resign to the extent a
qualified successor
23
<PAGE>
Administrator has been appointed and has assumed all the obligations of the
Administrator in accordance with the terms of this Agreement and the Basic
Documents.
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 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 may,
on behalf of all Noteholders, waive in writing any default by the Administrator
in the performance of its obligations hereunder and any consequences thereof,
except a default in making any required deposits to or payments from any of the
Trust Accounts (or giving instructions regarding the same) in accordance with
this Agreement. Upon any such waiver of a past default, such default shall cease
to exist, and any Administrator Default arising therefrom shall be deemed to
have been remedied for every purpose of this Agreement 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 communication given
hereunder shall be in writing (or in the form of facsimile notice, followed by
written notice) and addressed as follows:
(a) if to the Issuer, to
SMS Student Loan Trust 1999-B
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
24
<PAGE>
(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
(d) if to the Indenture Trustee, to
HSBC Bank USA
140 Broadway
12th Floor
New York, NY 10005
Attention: Corporate Trust Department
Telephone: (212) 658-6590
Facsimile: (212) 658-6425
(e) if to the Swap Counterparty, to
Merrill Lynch Derivative Products AG
Stauffacherstrasse 5, 1st Floor
8004 Zurich
Switzerland
Attention: Manager
Telephone: 011 411 297 7800
Facsimile: 011 411 297 7859
25
<PAGE>
with a copy to
Merrill Lynch & Co.
Office of General Counsel
250 Vesey Street
New York, New York 10281
Attention: Laurence D. Dobosh
Telephone: (212) 449-4706
Facsimile: (212) 449-6993;
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 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 and the Eligible Lender Trustee,
materially and adversely affect the interest of any Noteholder. This Agreement
may also be amended by the Issuer, the Administrator and the Indenture Trustee
with the prior written consent of the Eligible Lender Trustee, 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.
26
<PAGE>
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 Basic Documents.
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 Swap Counterparty and the Noteholders and any of the officers, directors,
employees and agents of the Issuer, the Eligible Lender Trustee, the Indenture
Trustee and the Servicer from and against any and all costs, expenses, losses,
claims, damages and liabilities to the extent that such cost, expense, loss,
claim, damage or liability arose out of, or was imposed upon any such Person
through, the negligence, willful misfeasance or bad faith of the Administrator
in the performance of its duties under this Agreement or by reason of reckless
disregard of its obligations and duties hereunder or thereunder.
The Administrator shall pay reasonable compensation to the
Indenture Trustee and shall reimburse the Indenture Trustee for all reasonable
expenses, disbursements and advances, and indemnify, defend and hold harmless
the Indenture Trustee and its officers, directors, employees and agents from and
against all costs, expenses, losses, claims, damages and liabilities, 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.
27
<PAGE>
Indemnification under this Section shall survive the
resignation or removal of the Eligible Lender Trustee or the Indenture Trustee
or the termination of this Agreement and shall include reasonable fees and
expenses of counsel and expenses of litigation. If the Administrator shall have
made any indemnity payments pursuant to this Agreement and the Person to or on
behalf of whom such payments are made thereafter collects any of such amounts
from others, such Person shall promptly repay such amounts to the Administrator,
without interest.
25. Merger or Consolidation of, or Assumption of the
Obligations of, Administrator. Any Person (a) into which the Administrator may
be merged or consolidated, (b) which may result from any merger or consolidation
to which the Administrator shall be a party or (c) which may succeed to the
properties and assets of the Administrator substantially as a whole, shall be
the successor to the Administrator without the execution or filing of any
document or any further act by any of the parties to this Agreement; provided,
however, that the Administrator hereby covenants that it will not consummate any
of the foregoing transactions except upon satisfaction of the following: (i) the
surviving Administrator, if other than USA Group Secondary Market Services,
Inc., executes an agreement of assumption to perform every obligation of the
Administrator under this Agreement, (ii) immediately after giving effect to such
transaction, no representation or warranty made pursuant to Section 1 shall have
been breached and no Administrator Default, and no event that, after notice or
lapse of time or both would become an Administrator Default, shall have occurred
and be continuing, (iii) the Administrator shall have delivered to the Eligible
Lender Trustee, the Indenture Trustee 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 and (vi) unless USA Group Secondary Market Services, Inc. is the
surviving entity, the Administrator shall have delivered to the Eligible Lender
Trustee and the Indenture Trustee an Opinion of Counsel either (A) stating that,
in the opinion of such counsel, all financing statements and continuation
statements and amendments thereto have been executed and filed that are
necessary fully to preserve and protect the interests of the Eligible Lender
Trustee, the Indenture Trustee 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.
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 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 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
28
<PAGE>
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 Basic Documents 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 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 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, except as provided in subsection (c) hereof, this instrument has been
countersigned by The First National Bank of Chicago not in its individual
capacity but solely in its capacity as Eligible Lender Trustee of the Issuer and
in no event shall The First National Bank of Chicago in its individual capacity
or any Owner of the Issuer have any liability for the representations,
warranties, covenants, agreements or other obligations of the Issuer hereunder,
as to all of which recourse shall be had solely to the assets of the Issuer. For
all purposes of this 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,
except as provided in subsection (c) hereof, this Agreement has been
countersigned by HSBC Bank USA not in its individual capacity but solely as
Indenture Trustee and in no event shall HSBC Bank USA have any liability for the
representations, warranties, covenants, agreements or other obligations of the
29
<PAGE>
Issuer hereunder or in any of the certificates, notices or agreements delivered
pursuant hereto, as to all of which recourse shall be had solely to the assets
of the Issuer.
(c) Notwithstanding any other provision in this Agreement or
the other Basic Documents, nothing in this Agreement or the other Basic
Documents shall be construed to limit the legal responsibility of the Eligible
Lender Trustee or the Indenture Trustee, to the U.S. Secretary of Education or a
Guarantor for any violations of statutory or regulatory requirements that may
occur with respect to loans held by the Eligible Lender Trustee or the Indenture
Trustee pursuant to, or to otherwise comply with their obligations under, the
Higher Education Act or implementing regulations.
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 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 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 or
the Swap Counterparty, such consent shall not be unreasonably withheld, delayed
or conditioned.
[Signatures Follow on Next Page]
30
<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 1999-B
By: THE FIRST NATIONAL BANK OF
CHICAGO, not in its individual
capacity but solely as
Eligible Lender Trustee
By:___________________________
Name:
Title:
HSBC BANK USA, not in its individual
capacity but solely as Indenture
Trustee
By:___________________________
Name:
Title:
USA GROUP SECONDARY MARKET SERVICES,
INC., as Administrator
By:___________________________
Name:
Title:
<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 1999-B
(the "Trust"), does hereby make, constitute and appoint USA Group Secondary
Market Services, Inc., as Administrator under the Administration Agreement (as
defined below), and its agents and attorneys, as Agents and Attorneys-in-Fact to
execute on behalf of Eligible Lender Trustee or the Trust all such documents,
reports, filings, instruments, certificates and opinions as it should be the
duty of Eligible Lender Trustee or the Trust to prepare, file or deliver
pursuant to the Related Documents (as defined in the Administration Agreement)
or pursuant to Section 5.02 of the Trust Agreement (as defined in the
Administration Agreement), including without limitation, to appear for and
represent Eligible Lender Trustee and the Trust in connection with the
preparation, filing and audit of any federal, state and local tax returns
pertaining to the Trust, and with full power to perform any and all acts
associated with such returns and audits that the Eligible Lender Trustee could
perform, including without limitation, the right to distribute and receive
confidential information, defend and assert positions in response to audits,
initiate and defend litigation, and to execute waivers of restriction on
assessments of deficiencies, consents to the extension of any statutory or
regulatory time limit, and settlements. For the purpose of this Power of
Attorney, the term "Administration Agreement" means the Administration Agreement
dated as of April 19, 1999, among the Trust, USA Group Secondary Market
Services, Inc., as Administrator, and HSBC Bank USA, 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.
A-1
<PAGE>
EXECUTED as of the 19th day of April 1999.
THE FIRST NATIONAL BANK OF
CHICAGO, not in its
individual capacity but
solely as Eligible Lender
Trustee
By:___________________________________
Name:
Title:
A-2
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
Before me, the undersigned authority, on this day personally appeared
[ ] known to me to be the person whose name is subscribed to the foregoing
instrument, and acknowledged to me that such person signed the same for the
purposes and considerations therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this [ ] day of May
1999.
________________________________________
Notary Public in and for the
State of New York
________________________________________
Printed Name of Notary Public
Commission Expires___________
A-3
<PAGE>
EXHIBIT B
TO THE
ADMINISTRATION AGREEMENT
Form of Noteholders' Statement pursuant to Section 2(g) of Administration
Agreement. Capitalized term s 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
$1,000 original) principal amount
of Notes)
(v) Pool Balance at end of related Collection Period: _____________
(vi) After giving effect to distributions on this Quarterly Payment Date:
___________________
(a) (1) outstanding principal amount of Class A-1 Notes:__________
(2) Class A-1 Note Pool Factor:__________
(b) (1) outstanding principal amount of Class A-2 Notes:__________
(2) Class A-2 Note Pool Factor:__________
B-2
<PAGE>
(c) (1) outstanding principal amount of Subordinate Notes:__________
(2) Subordinate Note Pool Factor:__________
(vii) Applicable Interest Rate:
In general:
(1) Three-Month LIBOR for the LIBOR Reset Period
since the previous Quarterly Payment Date was _____%;
and
(2) the Adjusted Student Loan Rate for such Quarterly
Interest Period was _____%.
Class A-1 Note Rate: _____% (based on
[Note LIBOR Rate]
[Adjusted Student Loan Rate])
Class A-2 Note Rate: _____% (based on
[Note LIBOR Rate]
[Adjusted Student Loan Rate])
Subordinate Note Rate: _____% (based on
[Note LIBOR Rate]
[Adjusted Student Loan Rate])
(viii) Amount of Servicing Fee for related Collection Period including a
breakdown of the components of the Servicing Fee attributable to each
of the items specified in clauses II(i) through (ix) Of section 3.06 Of
the servicing agreement and the amount of any Servicing Fee Shortfall
for such Quarterly Payment Date and for each Monthly Payment Date
following the immediately preceding Quarterly Payment Date:
(ix) Amount of Administration Fee for related Collection Period:__________
($_______ 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:______
B-3
<PAGE>
(xi) Reserved
(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) Reserved
(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: __________
(xvii) Amount in the Reserve Account (after giving effect to (xiv)):__________
(xviii) Amount in the Collateral Reinvestment Account (after giving effect to
(xvi)):__________
(xix) 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: _______
(xx) 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: _____
B-4
<PAGE>
(xxi) Serial Loans: _______ loans with aggregate principal balances of
_______ (portion represented by Purchase Premium Amounts ) were
purchased during the related Collection Period.
(xxii) New Loans: _______ loans with aggregate principal balances of _______
(portion represented by Purchase Premium Amounts ) were purchased
during the related Collection Period.
(xxiii) Withdrawal from the Delayed Delivery Loan Funding Account during the
related Collection Period: ________________.
(xxiv) Amount in the Delayed Delivery Loan Funding Account (after giving
effect to (xxiii)): _______________.
B-5
<PAGE>
(xxv) Financed Student Loans in the following categories as of the end of the
related Collection Period:
Weighted Average Number of Principal
Interest Rate Loans Balance
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
APPENDIX A TO THE
ADMINISTRATION AGREEMENT
DEFINITIONS AND USAGE
Usage
The following rules of construction and usage shall be applicable to
any instrument that is governed by this Appendix:
(a) All terms defined in this Appendix shall have the defined meanings
when used in any instrument governed hereby and in any certificate or other
document made or delivered pursuant thereto unless otherwise defined therein.
(b) As used herein, in any instrument governed hereby and in any
certificate or other document made or delivered pursuant thereto, accounting
terms not defined in this Appendix or in any such instrument, certificate or
other document, and accounting terms partly defined in this Appendix or in any
such instrument, certificate or other document to the extent not defined, shall
have the respective meanings given to them under generally accepted accounting
principles as in effect on the date of such instrument. To the extent that the
definitions of accounting terms in this Appendix or in any such instrument,
certificate or other document are inconsistent with the meanings of such terms
under generally accepted accounting principles, the definitions contained in
this Appendix or in any such instrument, certificate or other document shall
control.
(c) The words "hereof", "herein", "hereunder" and words of similar
import when used in an instrument refer to such instrument as a whole and not to
any particular provision or subdivision thereof; references in an instrument to
"Article", "Section" or another subdivision or to an attachment are, unless the
context otherwise requires, to an article, section or subdivision of or an
attachment to such instrument; and the term "including" means "including without
limitation".
(d) The definitions contained in this Appendix are equally applicable
to both the singular and plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
(e) Any agreement, instrument or statute defined or referred to below
or in any agreement or instrument that is governed by this Appendix means such
agreement or instrument or statute as from time to time amended, modified or
supplemented, including (in the case of agreements or instruments) by waiver or
consent and (in the case of statutes) by succession of comparable successor
statutes and includes (in the case of agreements or instruments) references to
all attachments thereto and instruments incorporated therein. References to a
Person are also to its permitted successors and assigns.
<PAGE>
Definitions
"Act" has the meaning specified in Section 11.03(a) of the Indenture.
"Additional Fundings" means any withdrawals from the Collateral
Reinvestment Account for any of the purposes set forth in Section 2(f) of the
Administration Agreement.
"Additional Guarantor" means a Federal Guarantor (other than an Initial
Guarantor) of a Financed Student Loan (other than an Initial Financed Student
Loan) which has entered into a guarantee agreement with the Eligible Lender
Trustee.
"Add-on Consolidation Loan" means a Student Loan, the principal balance
of which is added to an existing Consolidation Loan within 210 days from the
date that the existing Consolidation Loan was made, as required by the Higher
Education Act.
"Add-on Consolidation Loan Funding Date" means each day, prior to the
end of the Add-on Period, on which the principal balance of an Add-on
Consolidation Loan is added to the principal balance of a Consolidation Loan in
the Trust pursuant to Section 6.07 of the Trust Agreement.
"Add-on Period" means the period starting on the Closing Date and
ending on the date that is 210 days from the date that the last Consolidation
Loan was originated by the Trust during the Revolving Period.
"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 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 April 19, 1999, 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.
2
<PAGE>
"Administrator's Certificate" means an Officers' Certificate of the
Administrator delivered pursuant to Section 2(b)(ii) of the Administration
Agreement.
"Affiliate" means, with respect to any specified Person, any other
Person controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, "control" when used with respect to
any specified Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Assignment" means a duly executed assignment delivered pursuant to
Section 3.02 of the Loan Sale Agreement in the form set forth in Exhibit F to
such Agreement.
"Authorized Officer" means (i) with respect to the Issuer, any officer
of the Eligible Lender Trustee who is authorized to act for the Eligible Lender
Trustee in matters relating to the Issuer pursuant to the Basic Documents and
who is identified on the list of Authorized Officers delivered by the Eligible
Lender Trustee to the Indenture Trustee on the Closing Date (as such list may be
modified or supplemented from time to time thereafter) and (ii) with respect to
the Seller, the Servicer and the Administrator, any officer or other authorized
representative of the Seller, the Servicer or the Administrator, respectively,
who is authorized to act for the Seller, the Servicer or the Administrator,
respectively, in matters relating to itself or to the Issuer and to be acted
upon by the Seller, the Servicer or the Administrator, respectively, pursuant to
the Basic Documents and who is identified on the list of Authorized Officers
delivered by the Seller, the Servicer and the Administrator, respectively, to
the Indenture Trustee on the Closing Date (as such list may be modified or
supplemented from time to time thereafter).
"Available Funds" means, with respect to a Quarterly Payment Date and
the related Collection Period, the sum of the amounts specified in clauses (i)
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 the remainder of 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
3
<PAGE>
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
Depository Agreement, the Guarantee Agreements, the Swap Agreement and other
documents and certificates delivered in connection with any thereof.
"Billing Account" means those combined loans of a Borrower with the
same lender and branch, which loans are in the same status, and are the same
loan type, and are guaranteed by the same Guarantor 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 Billing Account.
"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 Incentive Programs" means the incentive program of the
Administrator which provides that Borrowers of Federal Consolidation Loans whose
applications were received during the period from October 1, 1998 through
January 31, 1999 and make their first 48 payments on time may receive a 1% per
annum interest rate reduction for the remaining term of their Consolidation Loan
and if such Borrowers use the USA Group Loan Services AutoCheck (R) auto-debit
system to remit payments directly from their bank accounts, such Borrowers may
receive a 0.25% per annum interest rate reduction on their Student Loans, as
such program may be modified from time to time.
"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, or
(ii) 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.
4
<PAGE>
"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 (with notice to the Rating Agencies)
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
0.12%; provided that for the October 1999 Quarterly Payment Date, the Class A-1
Note LIBOR Rate shall equal (i) the weighted average of (x) Three-Month LIBOR
for the LIBOR Reset Period commencing on the Closing Date and (y) Three-Month
LIBOR for the LIBOR Reset Period commencing on July 28, 1999 plus (ii) 0.12%.
"Class A-1 Note Final Maturity Date" means the October 2006 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
5
<PAGE>
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 1999, 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)(iv) 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 April 2029 Quarterly
Payment Date.
6
<PAGE>
"Class A-2 Note LIBOR Rate" means, with respect to any Quarterly
Interest Period, Three-Month LIBOR for the related LIBOR Reset Period plus
0.24%; provided that for the October 1999 Quarterly Payment Date, the Class A-2
Note LIBOR Rate shall equal (i) the weighted average of (x) Three-Month LIBOR
for the LIBOR Reset Period commencing on the Closing Date and (y) Three-Month
LIBOR for the LIBOR Reset Period commencing on July 28, 1999 plus (ii) 0.24%.
"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 1999, 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)(iv) 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.
7
<PAGE>
"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 21, 1999.
"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 Account Closing Date Deposit" means $13,251,936.27.
"Collection Period" means, with respect to the first Quarterly Payment
Date, the period beginning on the Cutoff Date and ending on September 30, 1999,
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.
8
<PAGE>
"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 140 Broadway, 12th Floor, New York, New York
10005, Attention: Corporate Trust Department (telephone: (212) 658-6590
facsimile: (212) 658-6425); or at such other address as the Indenture Trustee
may designate from time to time by notice to the Noteholders and the Seller, or
the principal corporate trust office of any successor Indenture Trustee (the
address of which the successor Indenture Trustee will notify the Noteholders and
the Seller) and (ii) with respect to the Eligible Lender Trustee, the principal
corporate trust office of the Eligible Lender Trustee located at One First
National Plaza, Suite 0126, Chicago, Illinois 60670, Attention: Corporate Trust
Administration (telephone: (312) 407-1892; facsimile: (312) 407-1708); or at
such other address as the Eligible Lender Trustee may designate by notice to the
Seller or the principal corporate trust office of any successor Eligible Lender
Trustee (the address of which the successor Eligible Lender Trustee will notify
the Seller.
"Custodian" means Loan Services, in its capacity as custodian of the
Borrower Notes or any permitted successor Custodian.
"Cutoff Date" means April 19, 1999.
"Default" means any occurrence that is, or with notice or the lapse of
time or both would become, an Event of Default.
"Deferral" means the period defined by the Higher Education Act and the
policies of the related Guarantor during which a Borrower (in Repayment) is
entitled to postpone making payments upon the submission of appropriate
documentation.
"Deferral Loan" means a Student Loan during a period of Deferral.
"Definitive Notes" has the meaning specified in Section 2.10 of the
Indenture.
"Delaware Trust" has the meaning specified in Section 10.01 of the
Trust Agreement.
"Delayed Delivery Loan Funding 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.
"Delayed Delivery Loan Funding Account Closing Date Deposit" means $0.
"Delayed Delivery Loans" None.
9
<PAGE>
"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 over 210 days delinquent or (b) have had claims filed with
the Department for which payment is still awaited, and the denominator of which
is the aggregate principal balance 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 and
are susceptible of physical delivery ("Physical Property"):
(i) transfer of possession thereof to the Indenture Trustee,
endorsed to, or registered in the name of, the Indenture Trustee or its
nominee or endorsed in blank;
(b) with respect to a certificated security:
(i) delivery thereof in bearer form to the Indenture Trustee;
or
(ii) delivery thereof in registered form to the Indenture
Trustee and
(A) the certificate is endorsed to the Indenture
Trustee or in blank by effective endorsement; or
(B) the certificate is registered in the name of the
Indenture Trustee, upon original issue or registration of
transfer by the issuer;
(c) with respect to an uncertificated security:
(i) the delivery of the uncertificated security to the
Indenture Trustee; or
(ii) the issuer has agreed that it will comply with
instructions originated by the Indenture Trustee without further
consent by the registered owner;
(d) with respect to any security issued by the U.S. Treasury, the
Federal Home Loan Mortgage Corporation or by the Federal National Mortgage
Association that is a book-entry security held through the Federal Reserve
System pursuant to Federal book-entry regulations:
(i) a Federal Reserve Bank by book entry credits the
book-entry security to
10
<PAGE>
the securities account (as defined in 31 CFR Part 357) of a participant
(as defined in 31 CFR Part 357) which is also a securities
intermediary; and
(ii) the participant indicates by book entry that the
book-entry security has been credited to the Indenture Trustee's
securities account;
(e) with respect to a security entitlement:
(i) the Indenture Trustee becomes the entitlement holder; or
(ii) the securities intermediary has agreed that it will
comply with entitlement orders originated by the Indenture Trustee
(f) without further consent by the entitlement holder; for the purpose
of clauses (b) and (c) hereof "delivery" means:
(i) with respect to a certificated security:
(A) the Indenture Trustee acquires possession
thereof;
(B) another person (other than a securities
intermediary) either acquires possession thereof on behalf of
the Indenture Trustee or, having previously acquired
possession thereof, acknowledges that it holds for the
Indenture Trustee; or
(C) a securities intermediary acting on behalf of the
Indenture Trustee acquires possession of thereof, only if the
certificate is in registered form and has been specially
endorsed to the Indenture Trustee by an effective endorsement;
(ii) with respect to an uncertificated security:
(A) the issuer registers the Indenture Trustee as the
registered owner, upon original issue or registration of
transfer; or
(B) another person (other than a securities
intermediary) either becomes the registered owner thereof on
behalf of the Indenture Trustee or, having previously become
the registered owner, acknowledges that it holds for the
Indenture Trustee;
(g) for purposes of this definition, except as otherwise indicated, the
following terms shall have the meaning assigned to each such term in the UCC:
(i) "certificated security"
(ii) "effective endorsement"
(iii) "entitlement holder"
11
<PAGE>
(iv) "instrument"
(v) "securities account"
(vi) "securities entitlement"
(vii) "securities intermediary"
(viii) "uncertificated security"
(h) in each case of Delivery contemplated herein, the Indenture Trustee
shall make appropriate notations on its records, and shall cause same to be made
of the records of its nominees, indicating that securities are held in trust
pursuant to and as provided in this Agreement.
"Department" means the United States Department of Education, an agency
of the Federal government.
"Depositor" means the Seller in its capacity as Depositor under the
Trust Agreement.
"Depository 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 30.00% of the Pool Balance;
12
<PAGE>
(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 exceed 50.00% 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 January 2000, is less than 0.50%; or
(vii) the arithmetic average of the Delinquency Percentage as
of the end of each of two successive Collection Periods commencing with
the Quarterly Payment Date in January 2000 exceeds 20.00%.
"Educational Institution" means any institution of higher education
that participates in the guaranteed loan programs authorized by Title IV of the
Higher Education Act and which is deemed eligible by a Guarantor to participate
in such Guarantor's program.
"Eligible Deposit Account" means either (a) a segregated account with
an Eligible Institution or (b) a segregated trust account with the corporate
trust department of a depository institution organized under the laws of the
United States of America or any one of the States (or any domestic branch of a
foreign bank), having corporate trust powers and acting as trustee for funds
deposited in such account, so long as any of the securities of such depository
institution have a credit rating from each Rating Agency in one of its generic
rating categories which signifies investment grade.
"Eligible Institution" means a depository institution organized under
the laws of the United States of America or any one of the States (or any
domestic branch of a foreign bank), which (i) has (A) either a long-term senior
unsecured debt rating of "AAA" 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 (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
13
<PAGE>
the benefit of the holders of such depository receipts); provided,
however, that at the time of the investment or contractual commitment
to invest therein (which shall be deemed to be made again each time
funds are reinvested following each Quarterly Payment Date), the
commercial paper or other short-term senior unsecured debt obligations
(other than such obligations the rating of which is based on the credit
of a Person other than such depository institution or trust company)
thereof shall have a credit rating from each of the Rating Agencies in
the highest investment category granted thereby;
(c) commercial paper having, at the time of the investment or
contractual commitment to invest therein, a rating from each of the
Rating Agencies in the highest investment category granted thereby;
(d) investments in money market funds having a rating from
each of the Rating Agencies in the highest investment category granted
thereby (including funds for which the Indenture Trustee, the Servicer
or the Eligible Lender Trustee or any of their respective Affiliates is
investment manager or advisor);
(e) bankers' acceptances issued by any depository institution
or trust company referred to in clause (b) above;
(f) repurchase obligations with respect to any security that
is a direct obligation of, or fully guaranteed by, the United States of
America or any agency or instrumentality thereof the obligations of
which are backed by the full faith and credit of the United States of
America, in either case entered into with a depository institution or
trust company (acting as principal) described in clause (b) above;
(g) any other investment permitted by each of the Rating
Agencies 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
14
<PAGE>
Quarterly Payment Date and the Trust Swap Payment Amount, if any, for such
Quarterly Payment Date, and (iv) 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 calculated 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 Serial Loan for which it is to be exchanged (an "Exchanged Serial
Loan") and (ii) will not, at any level of such interest rate index, have an
interest rate that is greater than that of the Exchanged Serial Loan.
"Executive Officer" means, with respect to any corporation, the Chief
Executive Officer, Chief Operating Officer, Chief Financial Officer, President,
any Executive Vice President, any Senior Vice President, any Vice President, the
Secretary or the Treasurer of such corporation; and with respect to any
partnership, any general partner thereof.
"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 (x) 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 but prior to October 1, 1998 any (y) 75%
to 95% of the
15
<PAGE>
amount of default claims paid to by such Federal Guarantor for a given federal
fiscal year for loans disbursed on or after October 1, 1998 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 Delayed
Delivery Loans, 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.
16
<PAGE>
"Guarantee Payment" means any payment made by a Guarantor pursuant to a
Guarantee Agreement in respect of a Student Loan.
"Guarantor" means the Initial Guarantors and any Additional Guarantors.
"Higher Education Act" means the Higher Education Act of 1965, as
amended, together with any rules, regulations and interpretations thereunder.
"Incentive Financed Student Loan" means a Financed Student Loan which
is subject to an Incentive Program other than the Seller's Choice Repay(TM)
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 the Seller's Choice Rates(TM) and Choice Repay(TM) Programs and the
Borrower Incentive Program, as such program may be modified from time to time.
"Indenture" means the Indenture dated as of April 19, 1999, between the
Issuer and the Indenture Trustee.
"Indenture Trust Estate" means all money, instruments, rights and other
property that are subject or intended to be subject to the lien and security
interest of the Indenture for the benefit of the Noteholders (including all
property and interests Granted to the Indenture Trustee), including all proceeds
thereof.
"Indenture Trustee" means HSBC Bank USA, a New York banking
corporation, not in its individual capacity but solely as Indenture Trustee
under the Indenture.
"Independent" means, when used with respect to any specified Person,
that the Person (a) is in fact independent of the Issuer, any other obligor upon
the Notes, the Seller and any Affiliate of any of the foregoing Persons, (b)
does not have any direct financial interest or any material indirect financial
interest in the Issuer, any such other obligor, the Seller or any Affiliate of
any of the foregoing Persons and (c) is not connected with the Issuer, any such
other obligor, the Seller or any Affiliate of any of the foregoing Persons as an
officer, employee, promoter, underwriter, trustee, partner, director or person
performing similar functions.
"Independent Certificate" means a certificate or opinion to be
delivered to the Indenture Trustee under the circumstances described in, and
otherwise complying with, the
17
<PAGE>
applicable requirements of Section 11.01 of the Indenture, made by an
Independent appraiser or other expert appointed by an Issuer Order and approved
by the Indenture Trustee in the exercise of reasonable care, and such opinion or
certificate shall state that the signer has read the definition of "Independent"
in the Indenture and that the signer is Independent within the meaning thereof.
"Initial Financed Student Loans" means those Financed Student Loans
conveyed to the Issuer on the Closing Date and listed on the Schedule of Student
Loans on such date.
"Initial Guarantors" means United Student Aid Funds, Inc., a Delaware
non-profit corporation, and its successors and certain other Federal Guarantors.
"Initial Pool Balance" means $731,889,541.31.
"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.
"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.
18
<PAGE>
"Issuer" means SMS Student Loan Trust 1999-B until a successor replaces
it and, thereafter, means the successor and, for purposes of any provision
contained in the Indenture and required by the TIA, each other obligor on the
Notes.
"Issuer Order" and "Issuer Request" means a written order or request
signed in the name of the Issuer by any one of its Authorized Officers and
delivered to the Indenture Trustee.
"LIBOR Determination Date" means, (a) with respect to any Quarterly
Interest Period other than the initial 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) and (b) with
respect to the initial Quarterly Interest Period, as determined pursuant to
clause (a) for the period from the Closing Date to but excluding July 28, 1999
and as determined on the second business day prior to July 28, 1999 for the
period from July 28, 1999 to but excluding October 28, 1999. 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, the moneys 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 Delayed Delivery Loan, 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 in accordance with Section
2.02(c) of the Loan Sale Agreement; and provided, further, that if the Parity
Date occurs before the end of the Revolving
19
<PAGE>
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 in accordance with
Section 2(e) of the Administration Agreement; 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 April
19, 1999, 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 plus any Class A-1 Noteholders' Interest Basis Carryover, Class A-2
Noteholders' Interest Basis Carryover and any Subordinate Noteholders' Interest
Basis Carryover, (C) pay to the Swap Counterparty all amounts owed by the Trust
to the Swap Counterparty under the Swap Agreement, and (D) 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 during such Collection Period
(net, for the first Collection Period, of interest accrued prior to the Cutoff
Date that is not to be capitalized) and remitted to the Indenture Trustee
(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;
20
<PAGE>
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 May 1999.
"Monthly Rebate Fee" means, for each calendar month and with respect to
each Consolidation Loan that was originated on or after October 1, 1993 (except
for Consolidation Loans referred to in clause (B) below), the fee payable to the
Department equal to the product of (x) one-twelfth, (y) (A) with respect to all
of the Consolidation Loans (other than those, the applications of which have
been received during the period from October 1, 1998 through January 31, 1999),
1.05% or (B) with respect to Consolidation Loans, the applications of which have
been received during the period from October 1, 1998 through January 31, 1999,
0.62% 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.
21
<PAGE>
"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
22
<PAGE>
Financed Student Loan, (ii) is made under a loan program which existed as of the
Closing Date, and (iii) is guaranteed by a Guarantor.
"91-Day Treasury Bills" means direct obligations of the United States
with a maturity of thirteen weeks.
"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 Basis Carryover" means the Class A-1
Noteholders' Interest Basis Carryover, the Class A-2 Noteholders' Interest Basis
Carryover and the Subordinate Noteholders' Interest Basis Carryover.
"Noteholders' Interest Distribution Amount" means, with respect to any
Quarterly Payment Date, the sum of the Class A-1 Noteholders' Interest
Distribution Amount, the Class A-2 Noteholders' Interest Distribution Amount and
the Subordinate Noteholders' Interest Distribution Amount.
"Obligor" on a Student Loan means the borrower or co-borrowers of such
Student Loan and any other Person who owes payments in respect of such Student
Loan, including the Guarantor thereof and, with respect to any Interest Subsidy
Payment or Special Allowance Payment, if any, thereon, the Department.
"Officers' Certificate" means (i) in the case of the Issuer, a
certificate signed by any two Authorized Officers of the Issuer, under the
circumstances described in, and otherwise complying with, the applicable
requirements of Section 11.01 of the Indenture, and delivered to the Indenture
Trustee and (ii) in the case of the Seller, the Servicer or the Administrator, a
certificate signed by any two Authorized Officers of the Seller, the Servicer or
the Administrator, as appropriate.
"Opinion of Counsel" means (i) with respect to the Issuer, one or more
written opinions of counsel who may, except as otherwise expressly provided in
the Indenture, be
23
<PAGE>
employees of or counsel to the Issuer and who shall be satisfactory to the
Indenture Trustee, and which opinion or opinions shall be addressed to the
Indenture Trustee as Indenture Trustee, shall comply with any applicable
requirements of Section 11.01 of the Indenture, and shall be in form and
substance satisfactory to the Indenture Trustee and (ii) with respect to the
Seller, the Administrator, the Servicer or a Federal Guarantor, one or more
written opinions of counsel who may be an employee of or counsel to the Seller,
the Administrator, the Servicer or such Federal Guarantor, which counsel shall
be acceptable to the Indenture Trustee, the Eligible Lender Trustee or the
Rating Agencies, as applicable.
"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.
24
<PAGE>
"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, limited liability company, limited liability partnership, 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.
"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
25
<PAGE>
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
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 Delayed Delivery
Loan, 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
26
<PAGE>
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 Delayed Delivery
Loan, a New Loan or a Serial Loan (other than an Exchanged Serial Loan) to be
purchased by the Issuer, an additional amount to the Purchase Collateral Balance
equal to the sum of (i) an amount not to exceed 1.5% of the related Purchase
Collateral Balance and (ii) accrued borrower interest on the principal balance
owed by the applicable Borrower thereon to the extent that such interest will
not be capitalized.
"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 1999.
"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. In the case of the initial Quarterly Interest Period, interest will accrue
for the period from the Closing Date to but excluding July 28, 1999 (computed on
the basis of the actual number of days elapsed in such Quarterly Interest Period
over a year of 360 days) based on Three-Month LIBOR as determined on the initial
LIBOR Determination Date and interest will accrue for the period from July 28,
1999 to but excluding October 28, 1999 (computed on the basis of the actual
number of days elapsed in such Quarterly Interest Period over a year of 360
days) based on Three-Month LIBOR as determined on the LIBOR Determination Date
in July 1999.
"Rating Agency" means Moody's and Fitch. If no such organization or
successor is any longer in existence, "Rating Agency" shall be a nationally
recognized statistical rating organization or other comparable Person designated
by the Seller, notice of which designation shall be given to the Indenture
Trustee, the Eligible Lender Trustee and the Servicer.
"Rating Agency Condition" means, with respect to any action, that each
Rating Agency shall have been given ten days' prior notice thereof and that each
of the Rating Agencies shall have notified the Seller, the Servicer, the
Eligible Lender Trustee and the Indenture Trustee
27
<PAGE>
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.
"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, net of the sum of all reasonable amounts
expended by the Servicer for the account of any Obligor to the extent not
previously reimbursed from Liquidation Proceeds or otherwise and any amounts
required by law to be remitted to the Obligor.
"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 (b) or (c) of the
Indenture.
"Redemption Price" means, in the case of a payment made to the
Noteholders pursuant to Section 10.01 (b) or (c) of the Indenture, the
Outstanding Amount of the Notes and all accrued and unpaid interest thereon
including any Noteholders' Interest Basis Carryover.
"Reference Banks" means four major banks in the London interbank market
selected by the Administrator.
"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 Deposit Account.
"Reserve Account Excess" has the meaning specified in Section 2(e)(ii)
of the Administration Agreement.
"Reserve Account Initial Deposit" means $1,912,500.
28
<PAGE>
"Responsible Officer" means, with respect to the Indenture Trustee, any
officer within the Corporate Trust Office of the Indenture Trustee, including
any vice president, assistant vice president, assistant treasurer, assistant
secretary, or any other officer of the Indenture Trustee customarily performing
functions similar to those performed by any of the above designated officers,
with direct responsibility for the administration of the Indenture and the other
Basic Documents on behalf of the Indenture Trustee and also, with respect to a
particular matter, any other officer to whom such matter is referred because of
such officer's knowledge of and familiarity with the particular subject.
"Revolving Period" means the period from the Closing Date until the
first to occur of (i) an Early Amortization Event or (ii) the last day of the
Collection Period preceding the April 2001 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.
29
<PAGE>
"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 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 Financed Student Loan and is acquired by
the Seller, (ii) is made under the same federal loan program as such Financed
Student Loan and (iii) has the same Guarantor as such 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 April
19, 1999, 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.
30
<PAGE>
"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.
"Special Determination Date" None.
"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) $956,250; 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.
"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 Payment Date.
"Subordinate Note" means a Subordinate Floating Rate Asset-Backed Note
issued pursuant to the Indenture, substantially in the form of Exhibit A-4
thereto.
"Subordinate Note Final Maturity Date" means the October 2036 Quarterly
Payment Date.
"Subordinate Note LIBOR Rate" means, with respect to any Quarterly
Interest Period, Three-Month LIBOR for the related LIBOR Reset Period plus
0.48%; provided that for the October 1999 Quarterly Payment Date, the
Subordinate Note LIBOR Rate shall equal (i) the weighted average of (x)
Three-Month LIBOR for the LIBOR Reset Period commencing on the Closing Date and
(y) Three-Month LIBOR for the LIBOR Reset Period commencing on July 28, 1999
plus (ii) 0.48%.
"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.
31
<PAGE>
"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 1999, 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)(iv) 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;
32
<PAGE>
provided, however, that the Subordinate Noteholders' Interest Distribution
Amount will not include any Subordinate Noteholders' Interest Basis Carryover.
"Subordinate Noteholders' Principal Carryover Shortfall" 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 (i) for the Delayed Delivery Loans, none
and (ii) for New Loans or Serial Loans, 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 12, 1999 (Swap Transaction Ref. No. 99 DP0018), 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.
"Swap Counterparty" means Merrill Lynch Derivative Products AG, a
subsidiary of Merrill Lynch & Co., 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
33
<PAGE>
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 (as defined in the Swap
Agreement) 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,
Serial Loans or Delayed Delivery Loans by the Seller to the Issuer pursuant to
Section 2.02(a) of the Loan Sale Agreement.
34
<PAGE>
"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, the
Delayed Delivery Loan Funding Account Closing Date Deposit and the Collection
Account Closing Date 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 April 19, 1999,
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
35
<PAGE>
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.
36
SCHEDULE
to the Master Agreement
dated as of May 21, 1999
between
Merrill Lynch Derivative Products AG
("Party A"),
a corporation organized under the laws
of Switzerland
and
SMS Student Loan Trust 1999-B,
("Party B")
a Delaware business trust.
Part 1. Termination Provisions
In this Agreement:-
(a) "Specified Entity" means in relation to Party A for the purpose of:-
Section 5(a)(v) Not Applicable.
Section 5(a)(vi) Not Applicable.
Section 5(a)(vii) Not Applicable.
Section 5(b)(iv) Not Applicable.
and in relation to Party B for the purpose of:-
Section 5(a)(v) Not Applicable.
Section 5(a)(vi) Not Applicable.
Section 5(a)(vii) Not Applicable.
Section 5(b)(iv) Not Applicable.
(b) "Specified Transaction" will have the meaning specified in Section 14 of
this Agreement.
(c) "Additional Termination Event" will not apply to Party A and will apply,
with respect to Redemption Event only, to Party B. The occurrence of a
Redemption Event will constitute an Additional Termination Event in
respect of which Party B will be the sole Affected Party.
(d) The provisions of Section 5(a) and Section 5(b) will apply to Party A and
to Party B as follows:-
The designation below of an Event of Default as being "Applicable" to a
specific party means that upon the occurrence and continuation of such an
Event of Default with respect to such party, the other party shall have
the right of a Non-defaulting Party to
<PAGE>
designate an Early Termination Date for the Sole Transaction (as defined
below) under Section 6 of this Agreement, and conversely, the designation
of an Event of Default as being "Not Applicable" to a party means that
upon the occurrence and continuation of such an Event of Default with
respect to such party, the other party shall not have the right to
designate an Early Termination Date for the Sole Transaction with respect
to such event under Section 6 of this Agreement.
Section 5(a) Party A Party B
(i) "Failure to Pay or Deliver" Applicable.
"Failure to Pay or Deliver" is Applicable to Party B; provided
that Party B has funds available to make payments in
accordance with the terms of the Indenture and the Trustee has
failed to make any such payments in violation of the terms of
the Indenture.
(ii) "Breach of Agreement" Applicable. Not Applicable.
(iii) "Credit Support Default" Applicable. Not Applicable.
(iv) "Misrepresentation" Applicable. Not Applicable.
(v) "Default under Specified
Transaction" Not Applicable. Not Applicable.
(vi) "Cross Default" Not Applicable. Not Applicable.
(vii) "Bankruptcy" Applicable. Applicable.
(viii) "Merger Without Assumption" Applicable. Not Applicable.
(ix) "Additional Event of Default" Not Applicable. Applicable
specified 1(h) (Acceleration
of Notes) in Part Not Applicable.
Section 5(b)
Neither party shall be entitled to designate an Early Termination Date as
a result of the occurrence and continuation of an event described in
Section 5(b)(iii) (Tax Event Upon Merger).
(e) Payments on Early Termination. For the purpose of Section 6(e):-
(i) Except as provided in Appendix I (Redemption of Notes) Market
Quotation will apply.
(ii) The Second Method will apply.
(f) "Termination Currency" means United States Dollars ("USD").
(g) The "Automatic Early Termination" provisions of Section 6(a) will not
apply to Party A or Party B.
(h) Additional Event of Default. Section 5(a) of the Agreement is hereby
amended by: (i) deleting the word "or" at the end
2
<PAGE>
of Section 5(a)(vii), (ii) deleting the period at the end of Section
5(a)(viii) and adding "; or" at the end thereof and (iii) adding the
following language at the end of Section 5(a):
"(ix) Additional Event of Default. The principal of any class of Notes
shall have been declared or become immediately due and payable in
accordance with the terms of the Indenture (an "Acceleration of
Notes") following an "event of default" thereunder (it being
understood that such event will constitute an Event of Default
solely with respect to SMS Student Loan Trust 1999-B)."
Part 2. Tax Representations.
(a) Payer Tax Representations. For the purpose of Section 3(e) of this
Agreement, Party A and Party B will each make the following representation:
It is not required by any applicable law, as modified by the practice of
any relevant governmental revenue authority, of any Relevant Jurisdiction
to make any deduction or withholding for or on account of any Tax from any
payment (other than interest under Section 2(e), 6(d)(ii) or 6(e) of this
Agreement) to be made by it to the other party under this Agreement. In
making this representation, it may rely on (i) the accuracy of any
representations made by the other party pursuant to Section 3(f) of this
Agreement, (ii) the satisfaction of the agreement contained in Section
4(a)(i) or 4(a)(iii) of this Agreement, and the accuracy and effectiveness
of any document provided by the other party pursuant to Section 4(a)(i) or
4(a)(iii) of this Agreement and (iii) the satisfaction of the agreement of
the other party contained in Section 4(d) of this Agreement, provided that
it shall not be a breach of this representation where reliance is placed
on clause (ii) and the other party does not deliver a form or document
under Section 4(a)(iii) by reason of material prejudice to its legal or
commercial position.
(b) Payee Tax Representations. For the purpose of Section 3(f) of this
Agreement, Party A and Party B make the following representation:-
(i) The following representation will apply to Party A:-
Each payment received or to be received by it in connection with this
Agreement will be effectively connected with its conduct of a trade or
business in the Specified Jurisdiction.
"Specified Jurisdiction" means the United States of America.
(ii) The following representation will apply to Party B:-
It is a business trust organized under the laws of the State of Delaware.
3
<PAGE>
Part 3. Agreement to Deliver Documents.
For the purpose of Section 4(a)(i) and Section 4(a)(ii) of this Agreement, Party
A and Party B each agree to deliver the following documents, as applicable:-
(a) Tax forms, documents or certificates to be delivered are:
Party required to Form, Document Date by which
deliver document or Certificate to be Delivered
- ---------------- -------------- ---------------
Party A An executed U.S. Internal (i) Before the first Payment
Revenue Service 4224 Date under Form this
(or any successor thereto) Agreement, (ii) promptly upon
reasonable demand by Party B,
and (iii) promptly upon
learning that any such Form
previously provided by Party A
has become obsolete or
incorrect.
Party B An executed U.S. Internal (i) Before the first Payment
Revenue Service Form W-9 Date under this Agreement,
(or any successor thereto), (ii) promptly upon demand by
including appropriate Party A, and (iii) reasonable
attachments promptly upon learning that
any such form previously
provided by Party B has become
obsolete or incorrect.
(b) Other documents to be delivered are:
<TABLE>
<CAPTION>
Party required to Form, Document Date by which Covered by
deliver document or Certificate to be Delivered Section 3(d)
---------------- -------------- --------------- ------------
<S> <C> <C> <C>
Party A An opinion of counsel to Party A Upon execution of this No
substantially in the form of Exhibit A Agreement.
to this Schedule.
Party A An incumbency certificate with respect Upon execution of this Yes
to the signatory of this Agreement. Agreement.
Party B Opinions of counsel rendered in Upon execution of this No
connection with the issuance of the Agreement.
Notes reasonably satisfactory in form
and substance to Party A.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Party required to Form, Document Date by which Covered by
deliver document or Certificate to be Delivered Section 3(d)
---------------- -------------- --------------- ------------
<S> <C> <C> <C>
Party B An incumbency certificate with respect Upon execution of this Yes
to the signatory of this Agreement. Agreement.
Party B Executed copies of all Basic Documents Upon execution of this Yes, with respect to
and all opinions required by the Agreement. certificates and other
Senior Note Underwriting Agreement or factual statements;
the Subordinate Note Purchase No, with respect to opinions
Agreement (and, to the extent not and agreements.
otherwise covered, an ERISA Opinion
and a Tax Opinion) each such opinion
and agreement reasonably satisfactory
in form and substance to Party A and
each opinion naming Party A as
addressee or, in the case of the
Underwriter's Opinion, a reliance
party with respect to all opinions
therein except the 10b-5 opinion.
Party B An executed original of the Officer's Upon execution of this Yes.
Certificate of SMS, substantially in Agreement.
the form of Exhibit C and reasonably
satisfactory in form and substance to
Party A.
</TABLE>
Part 4. Miscellaneous.
(a) Addresses for Notices. For the purpose of Section 12(a):
Address for notices or communications to Party A:
Address: Merrill Lynch Derivative Products AG
Stauffacherstrasse 5, 1st Floor
8004 Zurich
Switzerland
Attention: Manager
Telephone: 011 411 297 7800
5
<PAGE>
Facsimile: 011 411 297 7859
With a copy to:
Address: Merrill Lynch & Co.
Office of General Counsel
250 Vesey Street
New York, New York 10281
Attention: Laurence D. Dobosh
Address for notices or communications to Party B:-
Address: SMS Student Loan Trust 1999-B
c/o First Chicago Delaware, Inc., as Trustee
FCC National Bank
300 King Street
Wilmington, Delaware 19801
Attention: Corporate Trust Administration
Telephone: (212) 373-1140
Facsimile: (212) 373-1383
with copies to:
Address: SMS Student Loan Trust 1999-B
c/o The First National Bank of Chicago, as Trustee
One First National Plaza, Suite 0126
Chicago, Illinois 60670
Attention: Corporate Trust Administration
Telephone: (312) 407-1892
Facsimile: (312) 407-1708
Address: USA Group Secondary Market Services, Inc.
30 South Meridian Street
Indianapolis
IN 46204-3503
Address for notices or communications to Moody's:
Address: 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
Address for notices or communications to Fitch:-
6
<PAGE>
Address: 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
Notices under this Agreement and the Transaction shall be sent to
Moody's and S&P only to the extent specifically required in the
transaction confirmation.
(b) Process Agent. For the purpose of Section 13(c):
Party A appoints as its Process Agent:
Merrill Lynch & Co., Inc.
Office of General Counsel
World Financial Center
250 Vesey Street
New York, New York 10281
Attention: Laurence D. Dobosh
Party B appoints as its Process Agent:
The First National Bank of Chicago
153 West 51st Street, 8th Floor
New York, NY 10019
Attention: Corporate Trust Services Division
Telephone: (212) 373-1191
Facsimile: (212) 373-1383
(c) Offices. The provisions of Section 10(a) will not apply to Party A and
will not apply to Party B.
(d) Multibranch Party. For the purpose of Section 10(c) of this Agreement:--
Party A is not a Multibranch Party.
Party B is not a Multibranch Party.
(e) Calculation Agent. The Calculation Agent shall be Party A. In the case of
a dispute involving any calculation made by the Calculation Agent under
this Agreement (each, a "Disputed Calculation"), Party A and Party B will
appoint a mutually acceptable Reference Bank or Reference Dealer, as
applicable, who will (i) with respect to any calculation relating to a
Terminated Transaction, determine the Disputed Calculation by reference to
the methodology set forth in the definition of Market Quotation and (ii)
with respect to any other calculation, determine the Disputed Calculation
by reference to a mutually acceptable methodology. If such Reference Bank
or Reference Dealer
7
<PAGE>
determines that no quotations are available for a particular Disputed
Calculation, then the Calculation Agent's original calculations will be
used for that Disputed Calculation. All calculations made by the
Calculation Agent in accordance with this Part 4(e) shall be binding
absent manifest error.
(f) Credit Support Document. Details of any Credit Support Document:-
In the case of Party A: Not Applicable.
In the case of Party B: Not Applicable.
(g) Credit Support Provider.
Credit Support Provider means in relation to Party A: Not Applicable.
Credit Support Provider means in relation to Party B: Not Applicable.
(h) "Affiliate" will have the meaning specified in Section 14 of this
Agreement.
(i) GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY, CONSTRUED AND ENFORCED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO
CHOICE OF LAW DOCTRINE).
(j) Netting of Payments. Section 2(c)(ii) will not apply.
(k) Account Detail:
Payments to Party A: The Account described in the related Confirmation
Payments to Party B: The Account described in the related Confirmation
Part 5. Other Provisions.
(a) Confirmation. Each Confirmation supplements, forms part of, and will be
read and construed as one with this Agreement. The parties hereby agree
and acknowledge that only one Transaction (the "Sole Transaction") will be
governed by this Agreement, the Confirmation of the Sole Transaction is
dated May 12, 1999 and bears reference number 99 DP0018, and the parties
will not enter into any additional Transactions governed by this Agreement
or otherwise.
(b) Early Termination.
(1) Section 6(b)(ii) is hereby amended by adding at the end of the first
paragraph the following:
", provided that the party seeking to make the transfer to avoid a
Termination Event shall deliver to Party B (in the case of transfers
by Party A) or to Party A (in the case of transfers by Party B)
written confirmation from each Rating
8
<PAGE>
Agency then rating any class of Notes that such transfer will not
result in its then-current rating of each class of Notes being
withdrawn or lowered."
(2) Notwithstanding anything to the contrary in this Agreement, if the
Early Termination Date of the Sole Transaction occurs or is
effectively designated, Party A and Party B agree as follows:
(i) The Calculation Agent shall calculate an amount that would be
payable to or by Party B under this Agreement in respect of such
Early Termination Date (such amount, including any Trust Swap
Payment Amount or Trust Swap Receipt Amount constituting any portion
thereof, the "Termination Payment").
(ii) To the extent that Party A is required to pay the Termination
Payment to Party B, Party A shall pay such amount in accordance with
the terms of this Agreement.
(iii) To the extent that Party B is required to pay the Termination
Payment to Party A where:
(A) Party B is the Defaulting Party (provided, however, that
to the extent that Party B is the Defaulting Party with respect to
an Event of Default specified in Section 5(a)(i) of the Agreement
(Failure to Pay or Deliver) this priority shall apply only with
respect to the Trust Swap Payment Amount (and not the remainder of
the Termination Payment)), Party B shall pay such amount in
accordance with Section 8.02(c)(i), Section 8.02(e)(i) (to the
extent of any Net Trust Swap Payment Carryover Shortfalls included
in such Termination Payment), Section 10.01 or Section 5.04(b),
priority "SECOND," of the Indenture or Section 2(e)(iv)(C) of the
Administration Agreement, as applicable.
(B) Party A is the Defaulting Party, the Early Termination
Date arises from a Termination Event (other than an Additional
Termination Event) or Party B is the Defaulting Party with respect
to an Event of Default specified in Section 5(a)(i) (exclusive of
any Trust Swap Payment Amount paid pursuant to Clause (A)), Party B
shall pay such Termination Payment in accordance with Section
8.02(d)(viii), Section 8.02(e)(i) (to the extent of any Net Trust
Swap Payment Carryover Shortfalls included in such Termination
Payment), Section 10.01 or Section 5.04(b), priority "ELEVENTH," of
the Indenture.
(C) Party B replaces Party A with a successor to Party A,
Party B and Party A agree to cause the successor to Party A to pay
the Termination Payment (or such lesser amount actually paid by such
successor) to Party A. Any amounts actually received by Party A
under this clause (C) shall reduce the amounts payable pursuant to
clauses (A) and (B); Party A shall pay to Party B any excess of
amounts actually received by Party A under this clause (C) over the
Termination Payment.
9
<PAGE>
(c) No Bankruptcy Petition. Prior to the date that is one year and one day
after the date upon which the final payment is made in respect of the
Notes in accordance with the terms thereof, Party A shall not institute
against, or join any other person in instituting against, Party B, any
bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings under any federal or state bankruptcy or
similar law.
(d) Transfer. Section 7 is hereby amended by:
(1) (i) adding the words "(and notice of the transferee to)" after the
word "of" on the third line thereof, and (ii) adding the words
"(subject to providing three Business Days prior written notice of
the transferee to the other party and to each Rating Agency)" after
the word "transfer" on the fourth and seventh line thereof.
(2) adding at the end thereof:
"Any party making any such transfer shall deliver to the other party
written confirmation from each Rating Agency then rating any class
of Notes that such transfer will not result in its then-current
rating of each class of Notes being withdrawn or lowered."
(e) Swap Exemption.
(1) The parties agree that this Agreement and the Sole Transaction are
intended to constitute a "swap agreement" within the meaning of
Commodity Futures Trading Commission ("CFTC") Regulations Section
35.1(b)(1) and Section 101(53)(B) of the U.S. Bankruptcy Code;
(2) Each party represents to the other that it is an "eligible swap
participant" within the meaning of CFTC Regulations Section
35.1(b)(2);
(3) The parties agree that neither this Agreement nor the Sole
Transaction is one of a fungible class of agreements that are
standardized as to their material economic terms, within the meaning
of CFTC Regulations Section 35.2(b); and
(4) Each party represents to the other that the creditworthiness of the
other party was or will be a material consideration in entering into
or determining the terms of this Agreement and the Sole Transaction,
including pricing, cost or credit enhancement terms of this
Agreement or the Sole Transaction, within the meaning of CFTC
Regulations Section 35.2(c).
(f) WAIVER OF RIGHT TO TRIAL BY JURY. EACH OF THE PARTIES HEREBY IRREVOCABLY
WAIVES ANY AND ALL RIGHT TO A TRIAL BY JURY WITH RESPECT TO ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
TRANSACTION.
10
<PAGE>
(g) Amendments. Section 9(b) of this Agreement is hereby amended by adding the
following after the word "system" in the last line thereof:
", provided however, that all such amendments, modifications or waivers
shall require the written affirmation of each Rating Agency then rating
any class of Notes that such amendment, modification or waiver shall not
adversely affect its then-current rating of each class of Notes."
(h) ISDA Definitions. Reference is hereby made to the 1991 ISDA Definitions
(the "Definitions"), published by the International Swaps and Derivatives
Association, Inc., which is hereby incorporated by reference herein
without regard to any revision or subsequent edition thereof or as
otherwise provided in any Confirmation.
(i) Rating Agency Downgrade. Anything to the contrary in Section 7
notwithstanding, no later than the 30th day following a Rating Agency
Downgrade, Party A shall, at its expense:
(1) transfer Party A's rights and duties hereunder to (or otherwise
procure a replacement transaction with terms substantially similar to this
Sole Transaction with) a successor to Party A having, or guaranteed by a
Credit Support Provider having, a long-term unsecured and unguaranteed
debt rating of at least "A3" or its equivalent by each Swap Rating Agency;
(2) enter into arrangements, including collateral arrangements,
guarantees, letters of credit or other Credit Support Documents which
will, after review by each Swap Rating Agency, reverse the effect of any
reduction or withdrawal of ratings in connection with such Rating Agency
Downgrade on the Noteholders and the Subordinate Note Insurer; or
(3) pledge Eligible Collateral pursuant to an ISDA Credit Support Annex
equal to the Replacement Cost of the Sole Transaction contemplated by this
Agreement (or otherwise receive written confirmation from each Rating
Agency that each class of Notes will continue to be rated at least the
ratings of such class of Notes prior to such Rating Agency Downgrade) such
that the rating of each class of Notes by each Rating Agency will not be
withdrawn or reduced below the ratings of each such class of Notes prior
to the Rating Agency Downgrade.
Party B shall cooperate with Party to effect the purposes of the
foregoing.
Eligible Collateral. The following items will qualify as "Eligible
Collateral" for the purpose of Part 5(i)(3) of this Agreement:
11
<PAGE>
Eligible Collateral Valuation Percentage
------------------- --------------------
(A) Cash 100%
(B) negotiable debt obligations issued by the 100%
U.S. Treasury Department
Replacement Cost. For the purpose of Part 5(i)(3) of this Agreement,
"Replacement Cost" means, with respect to the close of business (the
"Valuation Time") on the date of any Rating Agency Downgrade, and weekly
thereafter, the amount, if any, that would be payable to Party B by Party
A (expressed as a positive number) pursuant to Section 6(e)(ii)(2)(A) of
this Agreement as if all Transactions (or Swap Transactions) were being
terminated as of the relevant Valuation Time; provided that Market
Quotation will be determined by the Calculation Agent using its estimates
at mid-market of the amounts that would be paid for Replacement
Transactions (as that term is defined in the definition of "Market
Quotation").
(j) Additional Representations. Section 3 is hereby amended by adding the
following subsections (g), (h) and (i) at the end of such Section:
(g) Non-Reliance. In connection with the negotiation of, the
entering into, and the confirming of the execution of, this
Agreement, any Credit Support Document, the Sole Transaction and any
other documentation relating to this Agreement to which it is a
party or that it is required by this Agreement to deliver: (1) the
other party hereto or thereto is not acting as a fiduciary or
financial or investment advisor for it; (2) it is not relying (for
purposes of making any investment decision or otherwise) upon any
advice, counsel or representations (whether written or oral) of the
other party hereto or thereto other than the representations
expressly set forth in this Agreement, in such Credit Support
Document and in any Confirmation; (3) the other party hereto or
thereto has not given to it (directly or indirectly through any
other person) any assurance, guaranty or representation whatsoever
as to the expected or projected success, profitability, return,
performance, result, effect, consequence, or benefit (either legal,
regulatory, tax, financial, accounting or otherwise) of this
Agreement, such Credit Support Document, such Sole Transaction or
such other documentation; (4) it has consulted with its own legal,
regulatory, tax, business, investment, financial and accounting
advisors to the extent it has deemed necessary, and it has made its
own investment, hedging and trading decisions (including decisions
regarding the suitability of any Transaction pursuant to this
Agreement) based upon its own judgment and upon any advice from such
advisors as it has deemed necessary and not upon any view expressed
by the other party hereto or thereto; (5) it has determined that the
rates, prices or amounts and other terms of the Sole Transaction and
the indicative quotations (if any) provided by the other party
hereto or thereto reflect those in the relevant market for similar
transactions, and all trading decisions have been the result of
12
<PAGE>
arm's length negotiations between the parties; (6) it is entering
into this Agreement with a full understanding of all the terms,
conditions and risks hereof and thereof (economic and otherwise) and
it is capable of assuming and willing to assume (financially and
otherwise) those risks; and (7) it is a sophisticated institutional
investor.
(h) Line of Business. It has entered into this Agreement (including
the Sole Transaction evidenced hereby) in conjunction with its line
of business (including financial intermediation services) or the
financing of its business.
(i) No Agency. It is entering into this Agreement, any Credit
Support Document to which it is a party, the Sole Transaction and
any other documentation relating to this Agreement or the Sole
Transaction as principal (and not as agent or in any other capacity,
fiduciary or otherwise).
(k) Notices to Party A. Party B agrees that it shall cause to be delivered to
Party A any notices generated or received by Party B in connection with
the Basic Documents.
(l) Limited Recourse to Party B. Notwithstanding anything to the contrary
contained herein, all obligations of Party B shall be payable by Party B
only on each Quarterly Payment Date, first, to the extent funds are
available therefor, under Section 8.02 of the Indenture, second, to the
extent funds are available therefor, under Section 2(e)(iv)(C) of the
Administration Agreement, third, to the extent funds are available
therefor, under Section 10.01 of the Indenture, fourth, to the extent of
funds available therefor, under Section 5.04 of the Indenture and, to the
extent such funds are not available or are insufficient for the payment
thereof, shall not constitute a claim against the Trust to the extent of
such unavailability or insufficiency until such time as the Trust has
assets sufficient to pay such prior deficiency. This paragraph shall
survive the termination of this Agreement but in all cases shall expire
concurrently with the restriction specified in Part 5(c).
(m) No Suspension of Payments. Notwithstanding Section 2(a)(iii) of this
Agreement, Party A shall not suspend any payments due under Section
2(a)(iii) unless:
(1) the principal of any class of Notes shall have been accelerated in
accordance with the terms of the Indenture following an Event of Default
thereunder; or
(2) an Early Termination Date for the Sole Transaction has occurred or
effectively been designated.
(n) Default Interest. Section 2(e) of this Agreement is hereby deleted in its
entirety.
(o) Redemption Event.
(i) A "Redemption Event" will occur upon the delivery by Party B (or its
designee) to Party A of a "Party B Response" (as defined in Appendix I)
accepting Party A's
13
<PAGE>
offer to terminate the Sole Transaction as provided in Appendix I hereto.
Such Party B Response shall be delivered on or before the related
Redemption Date (as defined in the Indenture) and shall certify that the
Minimum Purchase Price (as defined in the Indenture) has been deposited
into the appropriate Trust Account (as defined in the Indenture). The
parties hereto acknowledge and agree that the Indenture Trustee (as
defined in the Indenture) may deliver such Party B Response on behalf of
Party B. Party A hereby agrees that upon receipt of such Party B Response
from the Indenture Trustee certifying that the Minimum Purchase Price has
been deposited in the Collection Account, Party A shall immediately
designate the Redemption Date as an Early Termination Date.
Notwithstanding Section 6(d)(ii), the Payment Date in respect of a
Redemption Event shall be the Early Termination Date so designated. For
avoidance of doubt, no Redemption Event shall occur and no Early
Termination Date shall be effectively designated in respect thereof unless
the Minimum Purchase Price shall have been deposited into the applicable
Trust Account(s) pursuant to Article X of the Indenture.
(ii) The parties hereto acknowledge and agree that USA Group Secondary
Market Services, Inc., as Administrator under the Administration
Agreement, may deliver on behalf of Party B any "Party B Notices" required
or permitted by Appendix I hereto; provided, that in no event shall a
Redemption Event occur upon delivery of any such Party B Notice from the
Administrator.
(p) Statement to Noteholders. Party B will provide to Party A statements
required by Section 2(g) of the Administration Agreement dated as of April
19, 1999 (the "Administration Agreement") among Party B, USA Group
Secondary Market Services, Inc. ("SMS"), as administrator (the
"Administrator"), and HSBC Bank USA, as indenture trustee (the "Indenture
Trustee").
(q) Additional Definitions. Capitalized terms used in this Schedule shall have
the meaning set forth in the Confirmation, the Indenture or, if not
therein, Appendix A to the Administration Agreement, without regard to any
amendment or supplement thereto with respect to which Party A has not
given its written consent.
"ERISA Opinion" means an opinion of counsel to SMS to the effect that the
statements contained under the heading "ERISA Considerations" in each of
the Prospectus dated May 11, 1999, the Prospectus Supplement dated May 17,
1999 and the Private Placement Memorandum dated May 17, 1999, each
relating to the issuance of certain of the Notes, to the extent that such
statements describe legal matters, present fair summaries of such legal
matters.
"Indenture" means the Indenture dated as of April 19, 1999 between Party B
and HSBC Bank USA, as indenture trustee, without regard to any amendment
or supplement thereto with respect to which Party A has not given its
written consent.
"Net Trust Swap Payment Carryover Shortfall" means, with respect to any
Quarterly Payment Date with respect to which Party B owes any amounts to
Party A in respect of
14
<PAGE>
this Agreement, the excess of (i) the Trust Swap Payment Amount on the
preceding Quarterly Payment Date over (ii) the amount actually received by
Party A out of Available Funds 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.
"Rating Agency Downgrade" means that, prior to the earlier of the
Termination Date or the Early Termination Date of the Sole Transaction,
the rating of Party A or any successor thereto is withdrawn or reduced
below "A3" or its equivalent by any Swap Rating Agency then rating Party
A.
"Senior Note Underwriting Agreement" means the Senior Note Underwriting
Agreement dated as of May 17, 1999 between SMS, as seller, and Credit
Suisse First Boston Corporation, as representative of the several
underwriters of the Senior Notes.
"Subordinate Note Purchase Agreement" means the Subordinate Note Purchase
Agreement dated as of May 17, 1999 between SMS, as seller, and Credit
Suisse First Boston Corporation, as representative of the several
purchasers of the Subordinate Notes.
"Swap Rating Agency" means Moody's Investors Service, Inc. and Standard &
Poor's Ratings Service, a division of the McGraw-Hill Companies, Inc.
"Tax Opinion" means an opinion of counsel to SMS to the effect that the
Senior Notes and the Subordinate Notes will be treated as indebtedness for
federal income tax purposes.
"Underwriter's Opinion" means the opinion (or, collectively, the opinions)
of Stroock & Stroock & Lavan LLP dated May 21, 1999 addressed to Credit
Suisse First Boston Corporation, as representative of the several
underwriters of the Notes.
15
<PAGE>
The parties executing this Schedule have executed the Master Agreement and
have agreed as to the contents of this Schedule.
MERRILL LYNCH DERIVATIVE PRODUCTS AG
By: ____________________________
Name:
Title:
SMS STUDENT LOAN TRUST 1999-B
By: The First National Bank of Chicago,
not in its individual capacity but
solely as Eligible Lender Trustee
By: _____________________________________
Name:
Title:
16
<PAGE>
Appendix I
Redemption of Notes.
1. As promptly as practicable, but in any event not later than two
Business Days after delivery by Party B (or Party B's designee) to Party A of a
notice of proposed redemption (the "Redemption") and request for a quotation of
Termination Payment (the "Party B Notice"), Party A will give notice by
telephone to Party B (which notice will be promptly confirmed in writing to
Party B with a copy of such notice to SMS) (the "Party A Response"):--
(i) offering to terminate the Sole Transaction upon such Redemption; and
(ii) stating in good faith and in reasonable detail the Termination
Payment (the "Redemption Payment") that will be payable by Party B to Party A or
by Party A to Party B on the proposed Redemption Date (as defined in the
Indenture) if the offer is accepted at the time of such offer (or through such
later time, if any, as may be expressed in the offer in the discretion of Party
A) and the Redemption is effected on the Redemption Date; provided, however,
that, if such offer is not accepted at such time, Party A will, promptly after
requests therefor by Party B, make new offers to effect the termination of the
Sole Transaction and will make such new offers in accordance with reasonable
market practice until 11:00 a.m. New York City time on the Business Day two
Business Days prior to the Redemption Date (the "Deadline"). Any such new offer
will contain the statements required by the preceding clauses (i) and (ii) and
will also be a Party A Response, except that:--
(x) only the Party A Response will determine the period during which new
offers are required to be accepted; and
(y) in the case of the Final Offer (as defined below), "Market Quotation"
will be substituted for "Loss" for purposes of determining the Redemption
Payment.
The last such new offer is referred to herein as the "Final Offer." The
Final Offer will be identified as such in the relevant Party A Response. The
Final Offer will not be delivered earlier than the Business Day on which the
Deadline occurs. The Final Offer will be communicated by telephone to Party B
(which Final Offer will be promptly confirmed in writing to Party B with a copy
of such Final Offer to SMS).
2. Each Party A Response will describe the Redemption Payment, even if the
Redemption Payment remains the same and, except as described above with respect
to the Final Offer, each Redemption Payment will be determined using "Loss" and
"Second Method" and based on Party B as the sole Affected Party.
3. As promptly as practicable, but in any event not later than the end of
the period during which an offer may be accepted pursuant to the relevant Party
A Response, Party B, acting in good faith and in accordance with reasonable
derivatives market practice,
17
<PAGE>
will accept the offer expressed therein by notice (the "Party B Response") to
Party A. Such notice will be by telephone, will be promptly confirmed in writing
and will thereupon be effective, all in accordance with usual derivatives
markets transactions. A copy of each such Party B Response will be delivered by
Party B to SMS. If the offer is accepted as aforesaid, the Redemption will be
effective on the Redemption Date on the terms expressed in the last relevant
Party A Response as accepted by the Party B Response (subject to the conditions
set forth in Part 5(o) of this Agreement). The Redemption Payment will be the
amount described in the Party A Response accepted by Party B.
4. Party B (or its designee) will have the right to make reasonable
request of Party A for indications of Redemption Payments based on proposed
Redemptions as contemplated by Paragraphs 1 through 3 above, and Party A will
supply such indications promptly and in good faith following any such request.
Except as provided in Paragraphs 1 through 3 above and Part 5(o) of the
Agreement, neither Party B nor its designee will be obligated to effect any such
Redemption.
18
<PAGE>
Confirmation
Ref. No. 99 DP0018
<PAGE>
Exhibit A Form of Opinion of Party A
<PAGE>
Exhibit B Certificates of Incumbency
<PAGE>
Exhibit C
SMS Student Loan Trust 1999-B
Officer's Certificate
__________________, ______________________ of USA Group Secondary Market
Services, Inc., a Delaware corporation (the "Corporation") and
__________________, ______________________ of the Corporation, each hereby
certify that, to the best of his or her knowledge, after reasonable
investigation:
(i) the representations and warranties of the Seller or the Servicer, as
the case may be, contained in the Trust Agreement, the Loan Sale Agreement, the
Administration Agreement, the Servicing Agreement and the Swap Agreement, as
applicable, are true and correct in all material respects, that each of the
Seller and the Servicer has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied under such agreements at or
prior to the Closing Date, and
(ii) since [December 31, 1998], except as may be disclosed in the
Prospectus or the Private Placement Memorandum, no material adverse change, or
any development involving a prospective material adverse change, in or affecting
particularly the business or properties of the Trust, the Company, the Seller or
the Servicer, as applicable, has occurred.
Capitalized terms used but not defined herein have the meanings specified
in Appendix A to the Administration Agreement dated as of April 19, 1999 among
SMS Student Loan Trust 1999-B, the Corporation and HSBC Bank USA, as indenture
trustee.
<PAGE>
IN WITNESS WHEREOF, each of the above-named authorized officers hereunto
signed his or her name.
Dated: May __, 1999
By: ____________________________
Name:
Title:
By: ____________________________
Name:
Title:
C-2
May 12, 1999
SMS STUDENT LOAN TRUST 1999-B Pages: 7
c/o The First National Bank of Chicago
One First National Plaza
Suite 0126
Chicago, Ill, 60670
Fax: (312) 407-1708
cc: (212) 373-1382
Attention: Corporate Trust Services
From: MERRILL LYNCH DERIVATIVE PRODUCTS AG
Attention: Jacqui Cassidy Phone: (411) 297 7842
Swap Transaction Ref. No. 99 DP0018
The purpose of this communication is to set forth the terms and conditions
of the Swap Transaction or the Transaction (Swap Transaction and Transaction are
collectively referred to herein as "Transaction"), entered into between MERRILL
LYNCH DERIVATIVE PRODUCTS AG ("Party A") and SMS STUDENT LOAN TRUST 1999-B
("Party B") on the Trade Date specified below. This communication will
constitute, as applicable, a "Confirmation" as referred to in either the ISDA
Master Agreement or the master agreement entered into by the parties hereto
prior to or on the date hereof (the "Agreement").
The definitions and provisions contained in the 1991 ISDA Definitions, as
supplemented by the 1998 Supplement, (the "Definitions") as published by the
International Swaps and Derivatives Association, Inc. ("ISDA") are incorporated
herein. In the event that Party A and Party B have entered into an Agreement
effective on or prior to the date hereof, this Confirmation supplements, forms
part of and is subject to such Agreement. In the event that Party A and Party B
have not entered into an Agreement, this Transaction and all other Transactions
between the parties hereto are subject to the 1992 Master Agreement
(Multicurrency--Cross Border) as published by ISDA (the "ISDA Master Agreement")
and the parties hereto agree to negotiate in good faith and enter into an
agreement in the form of the ISDA Master Agreement with such modifications as
set forth below and as the parties shall in good faith agree. Upon execution and
delivery of such an Agreement or an Interest Rate and Currency Exchange
Agreement (the "Exchange Agreement") (the Exchange Agreement and the Agreement
are collectively referred to as the "ISDA Executed Master Agreement") the terms
and conditions of the ISDA Master Agreement will be superseded thereby and this
Confirmation will supplement, form a part of and be subject to the terms and
conditions of the ISDA Executed Master Agreement.
All provisions contained in either the ISDA Master Agreement or the
Agreement or the ISDA Executed Master Agreement (as the case may be), will
govern this Confirmation except as
<PAGE>
expressly modified below. In the event of any inconsistency among or between the
ISDA Master Agreement, the Agreement or the ISDA Executed Master Agreement (as
the case may be), the Definitions and this Confirmation, this Confirmation will
govern.
1. The terms of the particular Transaction to which this Confirmation relates
are as follows:
Notional Amount: USD 459,000,000 with respect to the
Initial Calculation Period and, for each
Calculation Period thereafter, the
lesser of (i) the Outstanding Principal
Amount for such Calculation Period and
(ii) the Notional Amount specified for
the first day of such Calculation Period
in Exhibit A.
Where "Outstanding Principal Amount" for
any Calculation Period means the
aggregate principal amount of the Notes
as of the Payment Date on which such
Calculation Period commences (after
giving effect to the distribution on
such date).
Trade Date: 12-May-1999.
Effective Date: 21-May-1999.
Termination Date: The earlier of (i) the date on which the
outstanding principal amount of the
Notes is reduced to zero (other than in
connection with a Redemption Event) and
(ii) 28-July-2009 subject to adjustment
in accordance with the Following
Business Day Convention.
Floating Rate Amounts I:
Floating Rate Payer I: Party B.
-2-
<PAGE>
Floating Rate
Payer I Payment Dates: Each 28-July, 28-October, 28-January,
and 28-April, commencing
28-October-1999, to and including the
Termination Date, subject to adjustment
in accordance with the Following
Business Day Convention.
Floating Rate Payer I
Initial Calculation
Period: From and including 21-May-1999 to but
excluding 28-October-1999.
Floating Rate Payer I
Floating Rate for Initial
Calculation Period: To Be Determined.
Floating Rate Payer I
Floating Rate Option: USD -TBILL - H.15; provided that the
Definitions shall be amended (a) by
substituting Telerate Page 56 for all
references to H.15(519) and (b) by
striking the words "U.S. Government
Securities/Treasury Bills/Auction
Average (Investment)" and substituting
therefor the words "US Treasury 3MO
T-Bill Auction Results/Average
Investment Yield".
Floating Rate Payer I
Day Count Fraction: Actual/365.
Floating Rate Payer I
Designated Maturity: 3 Months.
Floating Rate Payer I
Spread: Plus 0.79750%.
Floating Rate Payer I
Compounding: Not applicable.
Method of Averaging: Weighted Average.
-3-
<PAGE>
Rate Cut-Off Days: 6 New York Banking Days prior to the
Floating Rate Payer I Payment Date.
Floating Rate Payer I
Reset Dates: Each New York Business Day.
Business Days: New York.
Floating Rate Payer I
Additional
Floating Amount: The Net Trust Swap Payment Carryover
Shortfall Amount, if any, on the related
Payment Date.
Floating Rate Amounts II:
Floating Rate Payer II: Party A.
Floating Rate Payer II
Payment Dates: Each 28-July, 28-October, 28-January,
and 28-April, commencing
28-October-1999, to and including the
Termination Date, subject to adjustment
in accordance with the Following
Business Day Convention.
On the 28-October-1999 Floating Rate
Payer II Payment Date, the Party A
Payment Amount shall be an amount equal
to the sum of the Floating Rate Amounts
II for (i) the Floating Rate Payer II
Initial Calculation Period and (ii) the
Floating Rate Payer II Calculation
Period ending on 28-October-1999.
Floating Rate Payer II
Initial Calculation
Period: From and including 21-May-1999 to but
excluding 28-July-1999.
Floating Rate Payer II
Floating Rate for Initial
Calculation Period: 5.05%.
-4-
<PAGE>
Period End Dates: 28-July-1999 and each Floating Rate
Payer II Payment Date.
Floating Rate Payer II
Floating Rate Option: USD - LIBOR - BBA; provided that the
Floating Rate shall be determined on the
day that is two New York and London
Banking Days prior to each Reset Date.
Floating Rate Payer II
Day Count Fraction: Actual/360.
Floating Rate Payer II
Designated Maturity: 3 Months.
Floating Rate Payer II
Spread: None.
Floating Rate Payer II
Compounding: Not Applicable.
Floating Rate Payer II
Reset Dates: The first day of each Calculation
Period.
Business Days: New York.
Floating Rate Payer II
Additional Floating
Amount: The Net Trust Swap Receipt Carryover
Shortfall Amount, if any, on the related
Payment Date.
2. Account Details:
Payments to Party A:
Bank of America NT & SA, New York
ABA: 026009593
FAO: Merrill Lynch Derivative Products AG
Account No.: 309254
Payments to Party B:
The First National Bank of Chicago
-5-
<PAGE>
Chicago, IL
ABA: 071-000013
Clearing Account: 4811-5377
Credit Trust #: 204655
Attn: Steve Husbands, ref: SMS Student Trust 99-B
3. Other Terms:
(a) Each capitalized term used in this Confirmation and not
defined in this Confirmation or the Definitions shall have the
meaning assigned in the Agreement.
(b) In the event this Transaction terminates prior to the payment
of the entire Net Trust Swap Payment Carryover Shortfall or
Net Trust Swap Receipt Carryover Shortfall, such amount will
remain due and payable and shall be paid in accordance with
the terms of the Indenture.
(c) Each party acknowledges and agrees that, except as provided
herein, the scheduled Notional Amount may not be adjusted
without the prior written consent of the other party. Party B
represents, warrants and covenants that so long as no Early
Termination Date has occurred or been effectively designated
or any amounts remain due and payable to Party A in respect of
this Transaction, Party B will not enter into any swap
transaction (other than this Transaction) without the prior
written consent of Party A.
(d) If either party proposes to amend this Transaction pursuant to
Section 6.03(e) of the Trust Agreement among USA Group
Secondary Market Services, Inc., as depositor, Secondary
Market Company, Inc. and The First National Bank of Chicago,
as eligible lender trustee, then the parties will negotiate in
good faith and reasonably regarding the terms, conditions and
documentation relating to an appropriate amendment to this
Transaction and an appropriate amendment payment relating
thereto. The effectiveness of such amendment will be subject
to the conditions that (i) the amendment payment, if any, is
made by or to Party B on the proposed effective date of such
amendment and (ii) no Event of Default or Termination Event
has occurred and is continuing on such proposed effective
date. For avoidance of doubt, the parties acknowledge and
agree that the amendment payment, if any, will be a payment
pursuant to Section 2 of this Transaction for purposes of
determining Net Trust Swap Payment or Net Trust Swap Receipt,
as applicable.
-6-
<PAGE>
Please promptly confirm that the preceding correctly sets forth the terms of our
agreement by executing the copy of this Confirmation enclosed for that purpose
and returning it to us.
Yours sincerely,
MERRILL LYNCH DERIVATIVE
PRODUCTS AG
By:____________________________
Name:
Title:
Confirmed as of the date first written:
SMS STUDENT LOAN TRUST 1999-B
By: The First National Bank of Chicago,
not in its individual capacity but solely
as Eligible Lender Trustee
By: ________________________________
Name:
Title:
<PAGE>
Exhibit A
================================================================================
Calculation Period
Commencement Date Notional Amount
----------------- ---------------
21-May-99 459,000,000
28-July-99 459,000,000
28-October-99 459,000,000
28-January-00 459,000,000
28-April-00 459,000,000
28-July-00 459,000,000
28-October-00 459,000,000
28-January-01 459,000,000
28-April-01 459,000,000
28-July-01 445,435,962
28-October-01 431,877,380
28-January-02 418,423,558
28-April-02 404,311,517
28-July-02 390,339,252
28-October-02 376,556,280
28-January-03 362,964,889
28-April-03 348,909,891
28-July-03 335,031,594
28-October-03 321,366,027
28-January-04 307,916,760
28-April-04 294,581,261
28-July-04 281,456,217
28-October-04 268,570,748
28-January-05 255,918,978
28-April-05 243,451,240
28-July-05 231,200,473
28-October-05 219,189,357
28-January-06 207,393,906
28-April-06 195,806,622
28-July-06 184,433,430
28-October-06 173,274,248
28-January-07 162,366,205
28-April-07 151,709,256
28-July-07 141,481,446
28-October-07 131,547,607
28-January-08 121,957,848
28-April-08 112,673,762
28-July-08 103,955,024
28-October-08 95,867,115
28-January-09 88,539,999
28-April-09 81,573,583
================================================================================
<PAGE>
================================================================================
28-July-09 -
================================================================================
