SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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): March 4, 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 of Incorporation) (File Number) Identification No.)
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)
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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-A 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.
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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
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Name: Cheryl E. Watson
Title: Senior Vice President
Date: March 22, 1999
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EXHIBIT INDEX
Exhibit Number Description
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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
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SERVICING AGREEMENT
among
SMS STUDENT LOAN TRUST 1999-A
as Issuer,
USA GROUP LOAN SERVICES, INC.
as Servicer,
USA GROUP SECONDARY MARKET SERVICES, INC.
as Seller,
and
THE FIRST NATIONAL BANK OF CHICAGO,
not in its individual capacity but solely
as Eligible Lender Trustee
Dated as of February 1, 1999
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SERVICING AGREEMENT dated as of February 1, 1999, among SMS STUDENT LOAN
TRUST 1999-A, a Delaware trust (the "Issuer"), USA GROUP LOAN SERVICES, INC., as
servicer (the "Servicer"), USA GROUP SECONDARY MARKET SERVICES, INC., as Seller
(the "Seller"), and THE FIRST NATIONAL BANK OF CHICAGO, a national banking
association, solely as eligible lender trustee and not in its individual
capacity (the "Eligible Lender Trustee").
WHEREAS the Issuer desires to purchase from the Seller (and, with respect
to legal title to the student loans, NBD as trustee on behalf of the Seller) a
portfolio of federally reinsured student loans purchased in the ordinary course
of business by the Seller; and
WHEREAS the Eligible Lender Trustee is willing to hold legal title to, and
serve as eligible lender trustee with respect to, such student loans on behalf
of the Issuer; and
WHEREAS the Servicer is willing to service such student loans and
undertake certain administrative functions with respect thereto.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE I
Definitions and Usage
Capitalized terms used but not defined herein are defined in Appendix A to
the Administration Agreement, dated as of February 1, 1999, among the Issuer,
the Seller, as Administrator, and Bankers Trust Company, as Indenture Trustee,
which also contains rules as to usage and construction that shall be applicable
herein.
ARTICLE II
Custody of Financed Student Loans
SECTION 2.01. Custody of Student Loan Files. To assure uniform quality in
servicing the Financed Student Loans and to reduce administrative costs, the
Issuer hereby revocably appoints the Servicer, and the Servicer hereby accepts
such appointment, to act for the benefit of the Issuer and the Indenture Trustee
as Custodian of the following documents or instruments which are hereby
constructively delivered to the 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:
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(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
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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
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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
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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
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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
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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 April 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
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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
Balance Percentage Balance Percentage
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$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
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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.
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SECTION 3.09. Annual Independent Certified Public Accountants' Report. The
Servicer shall cause a firm of independent certified public accountants, which
may also render other services to the Servicer, the Seller or their Affiliates,
to deliver to the Eligible Lender Trustee, the Indenture Trustee 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.
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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.
ARTICLE V
The Servicer
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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 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.
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(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 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.
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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, 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.
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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 (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
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(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 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
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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.
ARTICLEVII
Miscellaneous
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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.
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
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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; 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
-19-
<PAGE>
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.
One Indiana Square
Suite 7072
Mail Code INI-7081
Indianapolis, Indiana 46266
Attention: Terri Hawkins
-20-
<PAGE>
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-A
c/o First Chicago Delaware, Inc.
FCC National Bank
300 King Street
Wilmington, Delaware 19801,
with a copy to the Eligible Lender Trustee
at the Corporate Trust Office of the
Eligible Lender Trustee;
(e) in the case of the Eligible Lender Trustee, at the Corporate Trust
Office of the Eligible Lender Trustee;
(f) in the case of the Indenture Trustee, at its Corporate Trust Office;
(g) in the case of the Administrator, to
USA Group Secondary Market Services, Inc.
30 South Meridian Street
Indianapolis, Indiana 46204-3503
Attention: President and Chief Executive Officer
Telephone: (317) 951-5640
Telecopy: (317) 951-5764
with a copy to:
Office of the General Counsel
-21-
<PAGE>
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
General Re Financial Products Corporation
Rockefeller Center
630 Fifth Avenue, Suite 450
New York, New York 10111
Attention: Head of Operations
Facsimile: (212) 307-2288
Telephone confirmation: (212) 307-2310;
or, as to each of the foregoing, at such other address as shall be designated by
written notice to the other parties.
SECTION 7.04. Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in the succeeding sentence, as provided in
Section 5.03 and as provided in the provisions of this Agreement concerning the
resignation of the Servicer, this Agreement may not be assigned by the Servicer.
This Agreement may only be assigned by the Eligible Lender Trustee to its
permitted successor pursuant to the Trust Agreement.
SECTION 7.05. Limitations on Rights of Others. The provisions of this
Agreement are solely for the benefit of the Servicer, the Issuer and the
Eligible Lender Trustee and for the benefit of the Administrator, the Indenture
Trustee 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
-22-
<PAGE>
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.
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) 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 of which recourse shall be had
solely to the assets of the Issuer.
-23-
<PAGE>
(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 Bankers Trust
Company not in its individual capacity but solely as Indenture Trustee and in no
event shall Bankers Trust Company have any liability for the representations,
warranties, covenants, agreements or other obligations of the Issuer hereunder
or in any of the certificates, notices or agreements delivered pursuant hereto,
as to all of which recourse shall be had solely to the assets of the Issuer.
(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.
[Signatures Follow on Next Page]
-24-
<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-A,
By: THE FIRST NATIONAL BANK OF CHICAGO, not in its
individual capacity but solely as Eligible Lender
Trustee on behalf of the Trust
By: _______________________________
Name:
Title:
USA GROUP LOAN SERVICES, INC.
By: _______________________________
Name:
Title:
USA GROUP SECONDARY MARKET SERVICES, INC.
By: _______________________________
Name:
Title:
-25-
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO, not in its individual
capacity but solely as Eligible Lender Trustee
By: __________________________
Name:
Title:
Acknowledged and accepted
as of the day and year first
above written:
BANKERS TRUST COMPANY, not in
its individual capacity but
solely as Indenture Trustee
By: ________________________
Name:
Title:
-26-
<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.
Brombles DVS, Inc. d/b/a Indianapolis Vault Company
5251 West 81st Street
Indianapolis, IN 46268
EXHIBIT 4.2
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 February 1, 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........................................5
ARTICLE III
Ownership
SECTION 3.01. Beneficial Ownership............................................5
ARTICLE IV
Actions by Eligible Lender Trustee
SECTION 4.01. Prior Notice to Company with Respect to Certain Matters.........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
SECTION 5.03. Incentive Programs..............................................8
<PAGE>
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........................................10
SECTION 6.04. No Duties Except as Specified in this Agreement, the Loan Sale
Agreement, the Servicing Agreement, the Administration
Agreement or in Instructions.................................11
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.................................15
SECTION 7.04. Reliance; Advice of Counsel....................................15
SECTION 7.05. Not Acting in Individual Capacity..............................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....................17
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.................................18
SECTION 9.02. [Reserved.]....................................................18
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.............19
SECTION 10.03. Successor Eligible Lender Trustee.............................20
<PAGE>
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....................................22
SECTION 11.02. No Legal Title to Trust Estate in Company.....................23
SECTION 11.03. Limitations on Rights of Others...............................23
SECTION 11.04. Notices.......................................................24
SECTION 11.05. Severability..................................................24
SECTION 11.06. Separate Counterparts.........................................24
SECTION 11.07. Successors and Assigns........................................24
SECTION 11.08. No Petition...................................................24
SECTION 11.09. No Recourse...................................................25
SECTION 11.10. Headings......................................................25
SECTION 11.11. Governing Law.................................................25
SECTION 11.12. Responsibility to Secretary and Guarantors....................25
SECTION 11.13. Third-Party Beneficiaries.....................................25
SECTION 11.14. Consents......................................................26
EXHIBIT A Certificate of Trust of SMS Student Loan Trust 1999-A
<PAGE>
TRUST AGREEMENT dated as of February 1, 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 February 1, 1999, among the SMS
Student Loan Trust 1999-A, as Issuer, the Seller, as Administrator, and Bankers
Trust Company, as Indenture Trustee, which also contains rules as to
construction and usage that shall be applicable herein.
ARTICLE II
Organization
SECTION 2.01. Name. The Trust created hereby shall be known as "SMS
Student Loan Trust 1999-A", in which name the Eligible Lender Trustee may
conduct the business of the Trust, make and execute contracts and other
instruments on behalf of the Trust and sue and be sued.
SECTION 2.02. Office. The office of the Trust shall be in care of the
Eligible Lender Trustee at its Corporate Trust Office or at such other address
as the Eligible Lender Trustee may designate by written notice to the Seller.
SECTION 2.03. Purposes and Powers. The purpose of the Trust is to engage
in the following activities:
(i) to issue the Notes pursuant to the Indenture and to sell the
Notes in one or more transactions;
(ii) with the proceeds of the sale of the Notes, to purchase the
Initial Financed Student Loans, to deposit the Reserve Account Initial
Deposit in the Reserve Account, 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);
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(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
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(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.
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ARTICLE V
Certain Duties
SECTION 5.01. No Segregation of Monies; No Interest. Monies received by
the Eligible Lender Trustee hereunder need not be segregated in any manner
except to the extent required by law or the Basic Documents and may be deposited
under such general conditions as may be prescribed by law, and the Eligible
Lender Trustee shall not be liable for any interest thereon.
SECTION 5.02. Accounting and Reports to the Noteholders, the Internal
Revenue Service and Others. No federal income tax return shall be filed on
behalf of the Trust unless either (i) the Eligible Lender Trustee 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.
SECTION 5.03. Incentive Programs. Subject to compliance by the
Administrator with Section 2(i) of the Administration Agreement, the Trust shall
offer each Incentive Program to all qualified Borrowers except any Incentive
Program which the Administrator terminates pursuant to Section 2(i) of the
Administration Agreement. Upon the effective date specified in the notice of
termination required by Section 2(i) of the Administration Agreement, the Trust
shall cease offering the terminated Incentive Program to Borrowers affected by
the termination.
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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 $130,000,000, Class A-2 Notes in the aggregate
principal amount of $506,900,000 and Subordinate Notes in the aggregate
principal amount of $23,100,000. 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 Instruction. (a) Subject to Article IV, Section
7.01 and in accordance with the terms of the Basic Documents, the Company may by
written instruction direct the Eligible Lender Trustee in the management of the
Trust. Such direction may be exercised at any time by written instruction of the
Company pursuant to Article IV.
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(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
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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 6.07. Origination of Consolidation Loans during the Revolving
Period. (a) From time to time during the Revolving Period the Servicer will
identify those Financed Student Loans as to which a Borrower qualifies to
receive a Consolidation Loan under the Federal Consolidation Loan Program from
the Eligible Lender Trustee and will inform the Administrator of the identity of
such loans. The Administrator will determine, in accordance with customary
industry standards, whether a Consolidation Loan should be offered to such
Borrower; provided, however, that a Consolidation Loan will not be offered to a
Borrower if any Student Loan of such Borrower which is not 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
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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
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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;
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(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.
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(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.
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SECTION 7.05. Not Acting in Individual Capacity. Except as provided in
this Article VII, in accepting the trusts hereby created, The First National
Bank of Chicago acts solely as Eligible Lender Trustee hereunder and not in its
individual capacity and all Persons having any claim against the Eligible Lender
Trustee by reason of the transactions contemplated by this Agreement or any
other Basic Document shall look only to the Trust Estate for payment or
satisfaction thereof.
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.
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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
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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
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jurisdiction for the appointment of a successor Eligible Lender Trustee;
provided, however, that such right to appoint or to petition for the appointment
of any such successor shall in no event relieve the resigning Eligible Lender
Trustee from any obligations otherwise imposed on it under the Basic Documents
until such successor has in fact assumed such appointment.
If at any time the Eligible Lender Trustee shall cease to be eligible in
accordance with the provisions of Section 10.01 and shall fail to resign after
written request therefor by the Administrator, or if at any time the Eligible
Lender Trustee shall be legally unable to act, or an Insolvency Event with
respect to the Eligible Lender Trustee shall have occurred and be continuing,
then the Administrator may remove the Eligible Lender Trustee. If the
Administrator shall remove the Eligible Lender Trustee under the authority of
the immediately preceding sentence, the Administrator shall promptly appoint a
successor Eligible Lender Trustee by written instrument, in duplicate, one copy
of which instrument shall be delivered to the outgoing Eligible Lender Trustee
so removed and one copy to the successor Eligible Lender Trustee and payment of
all fees owed to the outgoing Eligible Lender Trustee.
Any resignation or removal of the Eligible Lender Trustee and appointment
of a successor Eligible Lender Trustee pursuant to any of the provisions of this
Section shall not become effective until acceptance of appointment by the
successor Eligible Lender Trustee pursuant to Section 10.03 and payment of all
fees and expenses owed to the outgoing Eligible Lender Trustee. The
Administrator shall provide notice of such resignation or removal of the
Eligible Lender Trustee 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
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Trustee to the Company, the Indenture Trustee, the Noteholders, the Rating
Agencies and the Swap Counterparty. If the Administrator shall fail to mail such
notice within 10 days after acceptance of appointment by the successor Eligible
Lender Trustee, the successor Eligible Lender Trustee shall cause such notice to
be mailed at the expense of the Administrator.
SECTION 10.04. Merger or Consolidation of Eligible Lender Trustee. Any
corporation into which the Eligible Lender Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Eligible Lender Trustee shall be a
party, or any corporation succeeding to all or substantially all the corporate
trust business of the Eligible Lender Trustee, shall, without the execution or
filing of any instrument or any further act on the part of any of the parties
hereto, anything herein to the contrary notwithstanding, be the successor of the
Eligible Lender Trustee hereunder; provided that such corporation shall be
eligible pursuant to Section 10.01; provided further that the Eligible Lender
Trustee shall mail notice of such merger or consolidation to the Rating Agencies
and the Swap Counterparty not less than 10 Business Days prior to the closing
date of such merger or consolidation.
SECTION 10.05. Appointment of Co-Eligible Lender Trustee or Separate
Eligible Lender Trustee. Notwithstanding any other provisions of this Agreement,
at any time, for the purpose of meeting any legal requirements of any
jurisdiction in which any part of the Trust may at the time be located, the
Administrator and the Eligible Lender Trustee acting jointly (and with 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 February 1,
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:
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(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
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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
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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, to General Re Financial Products Corporation, Rockefeller Center,
630 Fifth Avenue, Suite 450, New York, New York 10111, Attention: Head of
Operations (telephone: 212-307-2370; facsimile: 212-307-2288); or, as to each
party, at such other address as shall be designated by such party in a written
notice to each other party.
SECTION 11.05. Severability. Any provision of this Agreement that as
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 11.06. Separate Counterparts. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall
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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. Headings. The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.
SECTION 11.11. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of Delaware, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
SECTION 11.12. Responsibility to Secretary and Guarantors. Notwithstanding
any other provision in this Agreement or the other Basic Documents, nothing in
this Agreement or the other Basic Documents shall be construed to limit the
legal responsibility of the Eligible
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Lender Trustee in its capacity as Eligible Lender Trustee to the U.S. Secretary
of Education or a Guarantor for any violations of statutory or regulatory
requirements that may occur with respect to loans held in the Trust, pursuant to
34 CFR 682.203(b) or any successor provision thereto.
SECTION 11.13. Third-Party Beneficiaries. The parties hereto acknowledge
that the 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]
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<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:
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EXHIBIT A
TO THE TRUST AGREEMENT
CERTIFICATE OF TRUST OF
SMS STUDENT LOAN TRUST 1999-A
THIS Certificate of Trust of SMS Student Loan Trust 1999-A (the "Trust"),
dated as of February 1, 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-A.
2. Delaware Trustee. The name and business address of the trustee of the
Trust resident in the State of Delaware is First Chicago Delaware Inc., c/o FCC
National Bank, 300 King Street, Wilmington, Delaware 19801.
3. This Certificate of Trust will be effective March __, 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
EXHIBIT 4.3
EXECUTION COPY
================================================================================
INDENTURE
between
SMS STUDENT LOAN TRUST 1999-A,
as Issuer
and
BANKERS TRUST COMPANY,
not in its individual capacity but
solely as Indenture Trustee
Dated as of February 1, 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
Definitions and Usage
SECTION 1.01. Definitions and Usage...........................................2
SECTION 1.02. Incorporation by Reference of Trust Indenture Act...............2
ARTICLE II
The Notes
SECTION 2.01. Form............................................................3
SECTION 2.02. Execution, Authentication and Delivery..........................3
SECTION 2.03. Temporary Notes.................................................4
SECTION 2.04. Registration; Registration of Transfer and Exchange.............4
SECTION 2.05. Mutilated, Destroyed, Lost or Stolen Notes......................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.........................11
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.............................................16
SECTION 3.09. Annual Statement as to Compliance..............................17
SECTION 3.10. Issuer May Consolidate, etc., Only on Certain Terms............17
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SECTION 3.11. Successor or Transferee........................................19
SECTION 3.12. No Other Business..............................................19
SECTION 3.13. No Borrowing...................................................19
SECTION 3.14. Obligations of Servicer and Administrator......................19
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....................................20
SECTION 3.19. Further Instruments and Acts...................................20
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.....................................22
SECTION 4.03. Repayment of Monies Held by Paying Agent.......................22
SECTION 4.04. Auction of Financed Student Loans..............................22
ARTICLE V
Remedies
SECTION 5.01. Events of Default..............................................23
SECTION 5.02. Acceleration of Maturity; Rescission and Annulment.............24
SECTION 5.03. Collection of Indebtedness and Suits for
Enforcement by Indenture Trustee...............................25
SECTION 5.04. Remedies; Priorities...........................................27
SECTION 5.05. Optional Preservation of the Indenture Trust Estate............29
SECTION 5.06. Limitation of Suits............................................30
SECTION 5.07. Unconditional Rights of Noteholders to
Receive Principal and Interest.................................30
SECTION 5.08. Restoration of Rights and Remedies.............................30
SECTION 5.09. Rights and Remedies Cumulative.................................31
SECTION 5.10. Delay or Omission Not a Waiver.................................31
SECTION 5.11. Control by Noteholders.........................................31
SECTION 5.12. Waiver of Past Defaults........................................32
SECTION 5.13. Undertaking for Costs..........................................32
SECTION 5.14. Waiver of Stay or Extension Laws...............................32
SECTION 5.15. Action on Notes................................................32
SECTION 5.16. Performance and Enforcement of Certain Obligations.............33
ARTICLE VI
The Indenture Trustee
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SECTION 6.01. Duties of Indenture Trustee....................................33
SECTION 6.02. Rights of Indenture Trustee....................................35
SECTION 6.03. Individual Rights of Indenture Trustee.........................36
SECTION 6.04. Indenture Trustee's Disclaimer.................................36
SECTION 6.05. Notice of Defaults.............................................36
SECTION 6.06. Reports by Indenture Trustee to Noteholders....................36
SECTION 6.07. Compensation and Indemnity.....................................36
SECTION 6.08. Replacement of Indenture Trustee...............................37
SECTION 6.09. Successor Indenture Trustee by Merger..........................38
SECTION 6.10. Appointment of Co-Trustee or Separate Trustee..................39
SECTION 6.11. Eligibility; Disqualification..................................40
SECTION 6.12. Preferential Collection of Claims Against Issuer...............40
ARTICLE VII
Noteholders' Lists and Reports
SECTION 7.01. Issuer to Furnish Indenture Trustee Names
and Addresses of Noteholders...................................40
SECTION 7.02. Preservation of Information; Communications to Noteholders.....41
SECTION 7.03. Reports by Issuer..............................................41
ARTICLE VIII
Accounts, Disbursements and Releases
SECTION 8.01. Collection of Money............................................42
SECTION 8.02. Trust Accounts.................................................42
SECTION 8.03. General Provisions Regarding Accounts.........................46
SECTION 8.04. Release of Indenture Trust Estate..............................47
SECTION 8.05. Opinion of Counsel.............................................47
ARTICLE IX
Supplemental Indentures
SECTION 9.01. Supplemental Indentures Without Consent of Noteholders.........47
SECTION 9.02. Supplemental Indentures with Consent of Noteholders............49
SECTION 9.03. Execution of Supplemental Indentures...........................50
SECTION 9.04. Effect of Supplemental Indenture...............................50
SECTION 9.05. Conformity with Trust Indenture Act............................51
SECTION 9.06. Reference in Notes to Supplemental Indentures..................51
ARTICLE X
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Redemption of Notes
SECTION 10.01. Redemption....................................................51
SECTION 10.02. Form of Redemption Notice.....................................52
SECTION 10.03. Notes Payable on Redemption Date..............................53
ARTICLE XI
Miscellaneous
SECTION 11.01. Compliance Certificates and Opinions..........................53
SECTION 11.02. Form of Documents Delivered to Indenture Trustee..............55
SECTION 11.03. Acts of Noteholders...........................................55
SECTION 11.04. Notices to Indenture Trustee, Issuer,
Swap Counterparty and Rating Agencies.........................56
SECTION 11.05. Notices to Noteholders; Waiver................................57
SECTION 11.06. Alternate Payment and Notice Provisions.......................57
SECTION 11.07. Conflict with Trust Indenture Act.............................58
SECTION 11.08. Effect of Headings and Table of Contents......................58
SECTION 11.09. Successors and Assigns........................................58
SECTION 11.10. Separability..................................................58
SECTION 11.11. Benefits of Indenture.........................................58
SECTION 11.12. [Reserved]....................................................58
SECTION 11.13. Governing Law.................................................58
SECTION 11.14. Counterparts..................................................58
SECTION 11.15. Recording of Indenture........................................58
SECTION 11.16. Trust Obligations.............................................59
SECTION 11.17. No Petition...................................................59
SECTION 11.18. Inspection....................................................59
SECTION 11.19. Consents......................................................60
EXHIBIT A-1 - Form of Class A-1 Note
EXHIBIT A-2 - Form of Class A-2 Note
EXHIBIT A-3 - Form of Subordinate Note
EXHIBIT B - Senior Note Depository Agreement
EXHIBIT C - Form of Transferor Certificate
EXHIBIT D - Form of Investment Letter
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INDENTURE dated as of February 1, 1999, between SMS STUDENT LOAN TRUST
1999-A, a Delaware trust (the "Issuer"), and BANKERS TRUST COMPANY, a New York
banking corporation, as trustee and not in its individual capacity (the
"Indenture Trustee").
Each party agrees as follows for the benefit of the other party and for
the equal and ratable benefit of the holders of the Issuer's Class A-1 Floating
Rate Asset-Backed Senior Notes (the "Class A-1 Notes"), Class A-2 Floating Rate
Asset-Backed Senior Notes (the "Class A-2 Notes" and, together with the Class
A-1 Notes, the "Senior Notes") and Floating Rate Asset-Backed Subordinate Notes
(the "Subordinate Notes" and, together with the Senior Notes, the "Notes"):
GRANTING CLAUSE
The Issuer (and, with respect to the 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
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(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
February 1, 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.
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"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.
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The Indenture Trustee shall upon Issuer Order authenticate and deliver
Class A-1 Notes for original issue in an aggregate principal amount of
$130,000,000, Class A-2 Notes for original issue in the aggregate principal
amount of $506,900,000, and Subordinate Notes for original issue in an aggregate
principal amount of $23,100,000. 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
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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.
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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
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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
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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
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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;
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(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
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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
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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
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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.
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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
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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 Insurer 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
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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);
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(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;
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(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;
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(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-A will be
released from every covenant and agreement of this Indenture to be observed or
performed on the part of the Issuer with respect to the Notes immediately upon
the delivery by the Issuer of written notice to the Indenture Trustee stating
that SMS Student Loan Trust 1999-A is to be so released.
SECTION 3.12. No Other Business. Except as contemplated by this Indenture
or the other Basic Documents, the Issuer shall not engage in any business other
than financing, purchasing, owning, selling and managing the Financed Student
Loans, and originating Consolidation Loans during the Revolving Period, in the
manner contemplated by this Indenture and the other Basic Documents and
activities incidental thereto.
SECTION 3.13. No Borrowing. Except as contemplated by this Indenture or
the other Basic Documents, the Issuer shall not issue, incur, assume, guarantee
or otherwise become liable, directly or indirectly, for any indebtedness except
for the Notes.
SECTION 3.14. Obligations of Servicer and Administrator. The Issuer shall
cause the Servicer to comply with Sections 3.07, 3.08, 3.09 and 3.10 of the
Servicing Agreement and shall cause the Administrator to comply with Section
2(g) of the Administration Agreement.
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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.
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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,
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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 March 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
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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
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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
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(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.
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(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.
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(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
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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: to the Senior Noteholders for amounts due and unpaid on the
Senior Notes for interest (other than any Senior Noteholders' Interest
Basis Carryover) and to the Swap Counterparty for amounts due under the
Swap Agreement, to the extent that the Trust is the Defaulting Party (as
such term is defined in the Swap Agreement) (provided, however, that this
priority shall apply only with respect to any Trust Swap Payment Amount
(and not the remainder of the Termination Payment) to the extent that the
Trust is the Defaulting Party with respect to an Event of Default
specified in Section 5 (a)(i) of the Swap Agreement), ratably, without
preference or priority of any kind, according to the respective amounts
due and payable on the Senior Notes for interest and to the Swap
Counterparty for the amounts due and payable under the Swap Agreement to
the extent that the Swap Counterparty is not the Defaulting Party
(provided, however, that this priority shall apply only with respect to
any Trust Swap Payment Amount (and not the remainder of the Termination
Payment) to the extent that the Trust is the Defaulting Party with respect
to an Event of Default specified in Section 5 (a)(i) of the Swap
Agreement);
THIRD: 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;
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SIXTH: to the Subordinate Noteholders for amounts due and unpaid on
the Subordinate Notes for principal, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Subordinate Notes for principal;
SEVENTH: 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.
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SECTION 5.06. Limitation of Suits. No Noteholder shall have any right
to institute any Proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless:
(i) such Noteholder has previously given written notice to the
Indenture Trustee of a continuing Event of Default;
(ii) the Noteholders of not less than 25% of the Outstanding Amount
of the Notes have made written request to the Indenture Trustee to
institute such Proceeding in respect of such Event of Default in its own
name as Indenture Trustee hereunder;
(iii) such Noteholder or Noteholders have offered to the Indenture
Trustee reasonable indemnity against the costs, expenses and liabilities
to be incurred in complying with such request;
(iv) the Indenture Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute such
Proceeding; 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
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Indenture Trustee and the Noteholders shall, subject to any determination in
such Proceeding, be restored severally and respectively to their former
positions hereunder, and thereafter all rights and remedies of the Indenture
Trustee and the Noteholders shall continue as though no such Proceeding had been
instituted.
SECTION 5.09. Rights and Remedies Cumulative. No right or remedy herein
conferred upon or reserved to the Indenture Trustee 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.
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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 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
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application of any other relief under or with respect to this Indenture. Neither
the lien of this Indenture nor any rights or remedies of the Indenture Trustee
or the Noteholders shall be impaired by the recovery of any judgment by the
Indenture Trustee against the Issuer or by the levy of any execution under such
judgment upon any portion of the Indenture Trust Estate or upon any of the
assets of the Issuer. Any money or property collected by the Indenture Trustee
shall be applied in accordance with Section 5.04(b).
SECTION 5.16. Performance and Enforcement of Certain Obligations. (a)
Promptly following a request from the Indenture Trustee to do so and at the
Administrator's expense, the Issuer shall take all such lawful action as the
Indenture Trustee may request to compel or secure the performance and observance
by the Seller, the Servicer, 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:
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(i) the Indenture Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture against the
Indenture Trustee; and
(ii) in the absence of bad faith on its part, the Indenture Trustee
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Indenture Trustee and conforming to the
requirements of this Indenture; provided, however, that the Indenture
Trustee shall examine such certificates and opinions to determine whether
they conform to the requirements of this Indenture.
(c) The Indenture Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section;
(ii) the Indenture Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer unless it is proved
that the Indenture Trustee was negligent in ascertaining the pertinent
facts; and
(iii) the Indenture Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Sections 5.02, 5.11, 5.12 and 5.16.
(d) Every provision of this Indenture that in any way relates to the
Indenture Trustee is subject to paragraphs (a), (b), (c) and (g) of this
Section.
(e) The Indenture Trustee shall not be liable for interest on any money
received by it except as the Indenture Trustee may agree in writing with the
Issuer.
(f) Money held in trust by the Indenture Trustee need not be segregated
from other funds except to the extent required by law or the terms of this
Indenture or the Servicing Agreement.
(g) No provision of this Indenture shall require the Indenture Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayments
of such funds or adequate indemnity satisfactory to it against any loss,
liability or expense is not reasonably assured to it.
(h) Except as expressly provided in the Basic Documents, the Indenture
Trustee shall have no obligation to administer, service or collect the Financed
Student Loans or to maintain,
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monitor or otherwise supervise the administration, servicing or collection of
the Financed Student Loans.
(i) In the event that the Indenture Trustee is the Paying Agent or the
Note Registrar, the rights and protections afforded to the Indenture Trustee
pursuant to this Indenture shall also be afforded to the Indenture Trustee in
its capacity as Paying Agent or Note Registrar.
(j) Every provision of this Indenture relating to the conduct or affecting
the liability of or affording protection to the Indenture Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
(k) Notwithstanding any other provision in this Agreement or the other
Basic Documents, nothing in this Agreement or the other Basic Documents shall be
construed to limit the Indenture Trustee's legal responsibility to the U.S.
Secretary of Education or a Guarantor 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.
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(f) Subject to clauses (a), (b), (c) and (g) of Section 6.01 hereof, the
Indenture Trustee shall be under no obligation to exercise any of the rights or
powers vested in it by this Indenture at the request or direction of any
Noteholder pursuant to this Indenture, unless such Noteholder shall have offered
to the Indenture Trustee security or indemnity reasonably satisfactory to the
Indenture Trustee against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction.
SECTION 6.03. Individual Rights of Indenture Trustee. The Indenture
Trustee in its individual or any other capacity may become the owner or pledgee
of Notes and may otherwise deal with the Issuer or its Affiliates with the same
rights it would have if it were not Indenture Trustee. Any Paying Agent, Note
Registrar, co-registrar or co-paying agent may do the same with like rights.
However, the Indenture Trustee must comply with Sections 6.11 and 6.12.
SECTION 6.04. Indenture Trustee's Disclaimer. The Indenture Trustee shall
not be responsible for and makes no representation as to the validity or
adequacy of this Indenture or the Notes, it shall not be accountable for the
Issuer's use of the proceeds from the Notes, and it shall not be responsible for
any statement of the Issuer in the Indenture or in any document issued in
connection with the sale of the Notes or in the Notes other than the Indenture
Trustee's certificate of authentication.
SECTION 6.05. Notice of Defaults. If a Default occurs and if it is
actually known by, or written notice of the existence thereof has been delivered
to, a Responsible Officer of the Indenture Trustee, the Indenture Trustee shall
mail notice of the Default to each Noteholder, the 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
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expenses incurred or made by it, including costs of collection, in addition to
the compensation for its services. Such expenses shall include the reasonable
compensation and expenses, disbursements and advances of the Indenture Trustee's
agents, counsel, accountants and experts. The Indenture Trustee's compensation
shall not be limited by any law on compensation of a trustee of an express
trust. The Issuer shall cause the Administrator to indemnify the Indenture
Trustee, its officers, directors, employees and agents against any and all loss,
liability or expense (including attorneys' fees and expenses) incurred by it in
connection with the administration of this trust and the performance of its
duties hereunder and under the other Basic Documents. The Indenture Trustee
shall notify the Issuer and the Administrator promptly of any claim for which it
may seek indemnity. Failure by the Indenture Trustee to so notify the Issuer and
the Administrator shall not relieve the Issuer or the Administrator of its
obligations hereunder and 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
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;
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(iii) a receiver or other public officer takes charge of the
Indenture Trustee or its property;
(iv) the Indenture Trustee otherwise becomes incapable of acting; or
(v) the Indenture Trustee is in breach of any 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.
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In case at the time such successor or successors by merger, conversion or
consolidation to the Indenture Trustee shall succeed to the trusts created by
this Indenture any of the Notes shall have been authenticated but not delivered,
any such successor to the Indenture Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Indenture Trustee may authenticate such
Notes either in the name of any predecessor hereunder or in the name of the
successor to the Indenture Trustee; and in all such cases such certificates
shall have the full force which it is anywhere in the Notes or in this Indenture
provided that the certificate of the Indenture Trustee shall have.
SECTION 6.10. Appointment of Co-Trustee or Separate Trustee. (a)
Notwithstanding any other provisions of this Indenture, at any time, for the
purpose of meeting any legal requirement of any jurisdiction in which any part
of the Indenture Trust Estate may at the time be located, the Indenture Trustee
shall have the power and may execute and deliver all instruments to appoint one
or more Persons to act as 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.
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(c) Any notice, request or other writing given to the Indenture Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Indenture and
the conditions of this Article VI. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Indenture Trustee or separately, as may be provided therein, subject to all the
provisions of this Indenture, specifically including every provision of this
Indenture relating to the conduct of, affecting the liability of, or affording
protection to, the Indenture Trustee. Every such instrument shall be filed with
the Indenture Trustee.
(d) Any separate trustee or co-trustee may at any time constitute the
Indenture Trustee, its agent or attorney-in-fact with full power and authority,
to the extent not prohibited by law, to do any lawful act under or in respect of
this Indenture on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be removed, all its
estates, properties, rights, remedies and trusts shall vest in and be exercised
by the Indenture Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
SECTION 6.11. Eligibility; Disqualification. The Indenture Trustee shall
at all times satisfy the requirements of TIA ss. 310(a). The Indenture Trustee
shall have a combined capital and surplus of at least $50,000,000 as set forth
in its most recent published annual report of condition and it shall have a long
term debt rating of "Baa3" or better by Moody's. 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
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after the earlier of (i) each Record Date and (ii) three months after the last
Record Date, a list, in such form as the Indenture Trustee may reasonably
require, of the names and addresses of the Noteholders as of such Record Date,
and (b) at such other times as the Indenture Trustee may request in writing,
within ten days after receipt by the Issuer of any such request, a list of
similar form and content as of a date not more than ten days prior to the time
such list is furnished; provided, however, that so long as the Indenture Trustee
is the Note Registrar, no such list shall be required to be furnished.
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
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(iii) supply to the Indenture Trustee (and the Indenture Trustee
shall transmit by mail to all Noteholders described in TIA ss. 313(c))
such summaries of any information, documents and reports required to be
filed by the Issuer pursuant to clauses (i) and (ii) of this Section
7.03(a) as may be required by rules and regulations prescribed from time
to time by the Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of the Issuer
shall end on December 31 of each year.
(c) Copies of all reports to be sent to the Indenture Trustee under this
Section 7.03 shall be mailed to the 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
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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 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) 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
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(v) after the Outstanding principal amount of the Senior Notes is
reduced to zero, the Subordinate Noteholders' Principal Distribution
Amount to the Subordinate Noteholders until the Outstanding principal
amount of the Subordinate Notes is reduced to zero.
(d) On each Quarterly Payment Date, the Indenture Trustee (or any Paying
Agent) shall distribute all amounts received by it on behalf of Noteholders in
respect of Reserve Account Excess pursuant to the 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 July 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 July 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
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(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 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:
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(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
(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
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reinvest funds in the Trust Accounts in one or more Eligible Investments
described in clause (d) of the definition thereof.
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
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Issuer Order, at any time and from time to time, may enter into one or more
indentures supplemental hereto (which shall conform to the provisions of the
Trust Indenture Act as in force at the date of the execution thereof), in form
satisfactory to the Indenture Trustee, for any of the following purposes:
(i) to correct or amplify the description of any property at any
time subject to the lien of this Indenture, or, better to assure, convey
and confirm unto the Indenture Trustee any property subject or required to
be subjected to the lien of this Indenture, or to subject to the lien of
this Indenture additional property;
(ii) to evidence the succession, in compliance with the applicable
provisions hereof, of another Person to the Issuer, and the assumption by
any such successor of the covenants of the Issuer herein and in the Notes
contained;
(iii) to add to the covenants of the Issuer, for the benefit of the
Noteholders 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
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eliminating any of the provisions of, this Indenture or of modifying in any
manner the rights of the Noteholders under this Indenture; provided, however,
that such action shall not, as evidenced by an Opinion of Counsel, adversely
affect in any material respect the interests of any Noteholder.
SECTION 9.02. Supplemental Indentures with Consent of Noteholders. The
Issuer and the Indenture Trustee, when authorized by an Issuer Order, also may,
with prior notice to the Rating Agencies and with the written consent of the
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;
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(vi) modify any of the provisions of this Indenture in such manner
as to affect the calculation of the amount of any payment of interest
(including any Noteholders' Interest Basis Carryover) or principal due on
any Note on any Quarterly Payment Date (including the calculation of any
of the individual components of such calculation) or to affect the rights
of the Noteholders to the benefit of any provisions for the mandatory
redemption of the Notes contained herein; or
(vii) permit the creation of any lien ranking prior to or on a
parity with the lien of this Indenture with respect to any part of the
Indenture Trust Estate or, except as otherwise permitted or contemplated
herein, terminate the lien of this Indenture on any property at any time
subject hereto or deprive any Noteholder of any Note of the security
provided by the lien of this Indenture.
The Indenture Trustee may in its discretion determine whether or not any
Notes would be affected by any supplemental indenture and any such determination
shall be conclusive upon the Noteholders of all Notes whether theretofore or
thereafter authenticated and delivered hereunder. The Indenture Trustee shall
not be liable for any such determination made in good faith.
It shall not be necessary for any Act of Noteholders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the Issuer and the Indenture Trustee of
any supplemental indenture pursuant to this Section, the Indenture Trustee shall
mail to the Noteholders of the Notes to which such amendment or supplemental
indenture relates and to the Rating Agencies a notice setting forth in general
terms the substance of such supplemental indenture. Any failure of the Indenture
Trustee to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such supplemental indenture.
SECTION 9.03. Execution of Supplemental Indentures. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modifications thereby of the trusts created
by this Indenture, the Indenture Trustee shall receive, and subject to Sections
6.01 and 6.02, shall be fully protected in relying upon, an Opinion of Counsel
stating that the execution of such supplemental indenture is authorized or
permitted by this Indenture. The Indenture Trustee may, but shall not be
obligated to, enter into any such supplemental indenture that affects the
Indenture Trustee's own rights, duties, liabilities or immunities under this
Indenture or otherwise. The Indenture Trustee shall provide a fully executed
copy of any supplemental indentures to the Indenture to the 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
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thereafter be determined, exercised and enforced hereunder subject in all
respects to such modifications and amendments, and all the terms and conditions
of any such supplemental indenture shall be and are deemed to be part of the
terms and conditions of this Indenture for any and all purposes.
SECTION 9.05. Conformity with Trust Indenture Act. Every amendment of this
Indenture and every supplemental indenture executed pursuant to this Article IX
shall conform to the requirements of the Trust Indenture Act as then in effect
so long as this Indenture shall then be qualified under the Trust Indenture Act.
SECTION 9.06. Reference in Notes to Supplemental Indentures. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Indenture Trustee shall,
bear a notation in form approved by the Indenture Trustee as to any matter
provided for in such supplemental indenture. If the Issuer or the Indenture
Trustee shall so determine, new Notes so modified as to conform, in the opinion
of the Indenture Trustee and the Issuer, to any such supplemental indenture may
be prepared and executed by the Issuer and authenticated and delivered by the
Indenture Trustee in exchange for Outstanding Notes.
ARTICLE X
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.
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(b) In the event that the Financed Student Loans are sold pursuant to
Section 4.04 hereof, that portion of the amounts on deposit in the Trust
Accounts to be distributed to the Noteholders 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).
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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.
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(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
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of the Trust Accounts as and to the extent permitted or required by the
Basic Documents, so long as the Issuer shall deliver to the Indenture
Trustee and the Swap Counterparty every three months, commencing April 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 April 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
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tenor signed by such Noteholders in person or by agents duly appointed in
writing; and except as herein otherwise expressly provided such action shall
become effective when such instrument or instruments are delivered to the
Indenture Trustee, and, where it is hereby expressly required, to the Issuer.
Such instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Noteholders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Indenture and (subject to Section 6.01) conclusive in favor of
the Indenture Trustee and the Issuer, if made in the manner provided in this
Section.
(b) The fact and date of the execution by any person of any such
instrument or writing may be proved in any manner that the Indenture Trustee
deems sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent, waiver
or other action by the Noteholder of any Notes shall bind the Noteholder of
every Note issued upon the registration thereof or in exchange therefor or in
lieu thereof, in respect of anything done, omitted or suffered to be done by the
Indenture Trustee or the Issuer in reliance thereon, whether or not notation of
such action is made upon such Note.
SECTION 11.04. Notices to Indenture Trustee, Issuer, 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-A, in care of First Chicago
Delaware, Inc., as Trustee, FCC National Bank, 300 King Street,
Wilmington, Delaware 19801, with a copy to the Eligible Lender Trustee at
the Corporate Trust Office of the Eligible Lender Trustee, or at any other
address previously furnished in writing to the Indenture Trustee by the
Issuer. The Issuer shall promptly transmit any notice received by it from
the Noteholders to the Indenture Trustee.
Notices required to be given to the Swap Counterparty by the Issuer, the
Indenture Trustee or the Eligible Lender Trustee shall be in writing, personally
delivered or mailed by certified mail, return receipt requested, to the
following address: General Re Financial Products Corporation, Rockefeller
Center, 630 Fifth Avenue, Suite 450, New York, New York 10111, Attention: Head
of Operations, or at such other address as shall be designated by written notice
to the other parties.
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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.
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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 Swap
Counterparty and its respective successors and assigns shall 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.
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
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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 are unavailing) and except to the extent that the
Indenture Trustee may reasonably determine that such disclosure is consistent
with its obligations hereunder.
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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]
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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-A
By:THE FIRST NATIONAL BANK
OF CHICAGO, not in its individual
capacity but solely as Eligible Lender
Trustee
By:_________________________________________
Name:
Title:
BANKERS TRUST COMPANY,
not in its individual capacity but solely
as Indenture Trustee
By:_________________________________________
Name:
Title:
Acknowledged and accepted as to
the Granting Clause as of the
day and year first above written:
THE FIRST NATIONAL BANK OF CHICAGO, not
in its Individual capacity but
solely as Eligible Lender Trustee
By: ___________________________________
Name:
Title:
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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-A, a Delaware trust, and that such person executed the
same as the act of said trust for the purpose and consideration therein
expressed, and in the capacities therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the ____ day of March 1999.
___________________________
Notary Public in and for
the State of New York
[Seal]
My commission expires:
______________________________
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared ______________________, known
to me to be the person and officer whose name is subscribed to the foregoing
instrument and acknowledged to me that the same was the act of the said Bankers
Trust Company, a New York banking corporation, and that 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 March 1999.
________________________
Notary Public in and for
the State of New York
[Seal]
My commission expires:
__________________________
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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-A
CLASS A-1 FLOATING RATE ASSET-BACKED SENIOR NOTES
SMS Student Loan Trust 1999-A, a trust organized and existing under the
laws of the State of Delaware (herein referred to as the "Issuer"), for value
received, hereby promises to pay to ______________________________, or
registered assigns, the principal sum of __________________________________
DOLLARS payable on each Quarterly Payment Date in an amount equal to the result
obtained by multiplying (i) a fraction the numerator of which is $___________
and the denominator of which is $______________ 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 February 1, 1999 (the "Indenture"),
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<PAGE>
between the Issuer and Bankers Trust Company, a New York banking corporation, as
Indenture Trustee (the "Indenture Trustee") (capitalized terms used but not
defined herein shall have the meanings ascribed thereto in the Indenture, which
also references rules as to usage that shall be applicable herein); provided,
however, that no principal shall be payable on this Note until after the end of
the Revolving Period; and provided, further, that the entire unpaid principal
amount of this Note shall be due and payable on the July 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 March 11, 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.
-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-A
By: THE FIRST NATIONAL BANK OF
CHICAGO, not in its individual
capacity but solely as Eligible
Lender Trustee under the Trust
Agreement
By: __________________________________
Authorized Signatory
Date:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
BANKERS TRUST COMPANY, not in its
individual capacity but solely as
Indenture Trustee
By:______________________________
Authorized Signatory
Date:
-5-
<PAGE>
REVERSE OF NOTE
This Note is one of a duly authorized issue of Notes of the Issuer
designated as its Class A-1 Floating Rate Asset-Backed Senior Notes (herein
called the "Class A-1 Notes"), which, together with the Class A-2 Floating Rate
Asset-Backed Senior Notes (the "Class A-2 Notes" and, together with the Class
A-1 Notes, the "Senior Notes") and the Floating Rate Asset-Backed Subordinate
Notes (the "Subordinate Notes" and, together with the Senior Notes, the "Notes")
are issued under the Indenture, to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights and obligations thereunder of the Issuer, the Indenture Trustee and the
Noteholders. The Class A-1 Notes are subject to all terms of the Indenture.
The Class A-1 Notes are and will be equally and ratably secured by the
collateral pledged as security therefor as provided in the Indenture.
Allocations of principal will be made among the Class A-1 Notes, the Class A-2
Notes and the Subordinate Notes as provided in the Indenture. The Senior Notes
collectively are senior in right of payment to the Subordinate Notes, all as and
to the extent provided in the Indenture.
Principal of the Class A-1 Notes will be payable on each Quarterly Payment
Date after the end of the Revolving Period in an amount described in the
Indenture. "Quarterly Payment Date" means the twenty-eighth day of each January,
April, July and October, or, if any such date is not a Business Day, the next
succeeding Business Day, commencing July 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.
-6-
<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 July 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 0.10% (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
each Quarterly Interest Period on the second business day prior to the
commencement of each LIBOR Reset period within such Quarterly Interest Period
(or, in the case of the initial LIBOR Reset Period, on the second business day
prior the Closing Date) (each, a "LIBOR Determination Date"). For purposes of
calculating Three-Month LIBOR, a business day is any day on which banks in The
City of New York and the City of London are open for the transaction of
international business. Interest due for any Quarterly Interest Period will be
determined based on the actual number of days in such Quarterly Interest Period
over a 360-day year.
"Three-Month LIBOR" means, with respect to any LIBOR Reset Period, the
London interbank offered rate for deposits in U.S. dollars having a maturity of
three months commencing on the related LIBOR Determination Date (the "Index
Maturity") which appears on Telerate Page 3750 as of 11:00 a.m. London time, on
such LIBOR Determination Date. If such rate does not appear on Telerate Page
3750, the rate for that day will be determined on the basis of the rates at
which deposits in U.S. dollars, having the Index Maturity and in a principal
amount of not less than U.S. $1,000,000, are offered at approximately 11:00 a.m.
London time, on such LIBOR Determination Date to prime banks in the London
interbank market by the Reference Banks. The Administrator will request the
principal London office of each such Reference Bank to provide a quotation of
its rate. If at least two such quotations are provided, the rate for that day
will be the arithmetic mean of the quotations. If fewer than two quotations are
provided, the rate for that day will be the arithmetic mean of the rates quoted
by major banks in The City of New York, selected by the Administrator, at
approximately 11:00 a.m. New York time, on such LIBOR Determination Date for
loans in U.S. dollars to leading European banks having the Index Maturity and in
a
-7-
<PAGE>
principal amount equal to an amount of not less than U.S. $1,000,000; provided,
however, that if the banks selected as aforesaid are not quoting as mentioned in
this sentence, Three-Month LIBOR in effect for the applicable LIBOR Reset Period
will be Three-Month LIBOR in effect for the previous LIBOR Reset Period.
"LIBOR Reset Period" means the three-month period commencing on the 28th
day (or, if any such date is not a business day, on the next succeeding business
day) of each January, April, July and October and ending on the day immediately
preceding the following LIBOR Reset Period; provided, however, that the initial
LIBOR Reset Period will commence on the Closing Date.
"Telerate Page 3750" means the display page so designated on the Dow Jones
Telerate Service (or such other page as may replace that page on that service
for the purpose of displaying comparable rates or prices).
"Reference Banks" means four major banks in the London interbank market
selected by the Administrator.
Any Class A-1 Noteholders' Interest Carryover that may exist on any
Quarterly Payment Date shall be payable to the Class A-1 Noteholders on that
Quarterly Payment Date and any succeeding Quarterly Payment Dates solely out of
the funds available and required to be applied thereto pursuant to the
Administration Agreement.
Payments of interest on this Note due and payable on each Quarterly
Payment Date, and payments of interest together with the installment of
principal, if any, due and payable on each Quarterly Payment Date, to the extent
not in full payment of this Note, shall be made by wire transfer or check mailed
to the Person whose name appears as the Registered Holder of this Note (or one
or more Predecessor Notes) on the Note Register on the Record Date, except that
with respect to Notes registered on the Record Date in the name of the nominee
of the Clearing Agency, unless Definitive Notes have been issued (initially,
such nominee to be Cede & Co.), payments will be made by wire transfer in
immediately available funds to the account designated by such nominee. Such
checks shall be mailed to the Person entitled thereto at the address of such
Person as it appears on the Note Register as of the applicable Record Date
without requiring that this Note be submitted for notation of payment, and the
mailing of such check shall constitute payment of the amount thereof regardless
of whether such check is returned undelivered. Any reduction in the principal
amount of this Note (or any one or more Predecessor Notes) effected by any
payments made on any Quarterly Payment Date shall be binding upon all future
Noteholders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof, whether or not noted
hereon. If funds are expected to be available, as provided in the Indenture, for
payment in full of the then remaining unpaid principal amount of this Note on a
Quarterly Payment Date, then the Indenture Trustee, in the name of and on behalf
of the Issuer, will notify the Person who was the Noteholder hereof as of the
Record Date preceding such Quarterly Payment Date by notice mailed no later than
five days prior to such Quarterly Payment Date and the amount then due and
payable shall be payable only upon presentation and surrender of this Note at
the Indenture Trustee's Corporate Trust Office or at the office of the Indenture
Trustee's agent appointed for such purposes located in the Borough of Manhattan,
The City of New York.
-8-
<PAGE>
The Issuer shall pay interest on overdue installments of interest at the
Class A-1 Note Rate to the extent lawful.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Noteholder hereof or his attorney duly
authorized in writing, with such signature guaranteed by an "eligible guarantor
institution" meeting the requirements of the Note Registrar, which requirements
include membership or participation in Securities Transfer Agent's Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution for, STAMP
(all in accordance with the Exchange Act), and such other documents as the
Indenture Trustee may require, and thereupon one or more new Notes of authorized
denominations and in the same aggregate principal amount will be issued to the
designated transferee or transferees. No service charge will be charged for any
registration of transfer or exchange of this Note, but the transferor may be
required to pay a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any such registration of transfer or
exchange.
Each Noteholder or Note Owner, by its acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in the Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Seller, the Company, the Administrator, the Servicer, the
Eligible Lender Trustee or the Indenture Trustee on the Notes or under the
Indenture or any certificate or other writing delivered in connection therewith,
against (i) the Seller, the Company, the Administrator, the Servicer, the
Indenture Trustee or the Eligible Lender Trustee in its individual capacity or
(ii) any partner, owner, beneficiary, agent, officer, director or employee of
the Seller, the Company, the Administrator, the Servicer, the Indenture Trustee
or the Eligible Lender Trustee in its individual capacity, any holder or owner
of a beneficial interest in the Issuer, the Eligible Lender Trustee or the
Indenture Trustee or of any successor or assign of the Seller, the Company, the
Administrator, the Servicer, the Indenture Trustee or the Eligible Lender
Trustee in its individual capacity, except as any such Person may have expressly
agreed (it being understood that the Indenture Trustee and the Eligible Lender
Trustee have no such obligations in their individual capacity) and except that
any such partner, owner or beneficiary shall be fully liable, to the extent
provided by applicable law, for any unpaid consideration for stock, unpaid
capital contribution or failure to pay any installment or call owing to such
entity.
Each Noteholder or Note Owner, by its acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees that by
accepting the benefits of the Indenture that such Noteholder or Note Owner will
not at any time institute against the Seller, the Company or the Issuer, or join
in any institution against the Seller, the Company or the Issuer of, any
bankruptcy, reorganization, arrangement, insolvency, receivership or liquidation
proceedings or other proceedings under any United States federal or state
bankruptcy or similar law in connection with any obligations relating to the
Notes, the Indenture or the other Basic Documents.
-9-
<PAGE>
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.
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
-10-
<PAGE>
of and interest on this Note at the times, place, and rate, and in the coin or
currency, herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of Bankers Trust Company in its individual
capacity, The First National Bank of Chicago in its individual capacity, any
owner of a beneficial interest in the Issuer, or any of their respective
partners, beneficiaries, agents, officers, directors, employees or successors or
assigns shall be personally liable for, nor shall recourse be had to any of them
for, the payment of principal of or interest on, or performance of, or omission
to perform, any of the covenants, obligations or indemnifications contained in
this Note or the Indenture; it being expressly understood that said covenants,
obligations and indemnifications have been made by the Eligible Lender Trustee
for the sole purposes of binding the interests of the Eligible Lender Trustee in
the assets of the Issuer. The Noteholder of this Note by the acceptance hereof
agrees that, except as expressly provided in the Basic Documents, in the case of
an Event of Default under the Indenture, the Noteholder shall have no claim
against any of the foregoing for any deficiency, loss or claim therefrom;
provided, however, that nothing contained herein shall be taken to prevent
recourse to, and enforcement against, the assets of the Issuer for any and all
liabilities, obligations and undertakings contained in the Indenture or in this
Note.
-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.
-12-
<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-A
CLASS A-2 FLOATING RATE ASSET-BACKED SENIOR NOTES
SMS Student Loan Trust 1999-A, a trust organized and existing under the
laws of the State of Delaware (herein referred to as the "Issuer"), for value
received, hereby promises to pay to ______________________________, or
registered assigns, the principal sum of __________________________________
DOLLARS payable on each Quarterly Payment Date in an amount equal to the result
obtained by multiplying (i) a fraction the numerator of which is $___________
and the denominator of which is $_____________ 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 February 1, 1999 (the "Indenture"),
-13-
<PAGE>
between the Issuer and Bankers Trust Company, a New York banking corporation, as
Indenture Trustee (the "Indenture Trustee") (capitalized terms used but not
defined herein shall have the meanings ascribed thereto in the Indenture, which
also references rules as to usage that shall be applicable herein); provided,
however, that no principal shall be payable on this Note until after the end of
the Revolving Period; and provided, further, that the entire unpaid principal
amount of this Note shall be due and payable on the October 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 March 11, 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.
-14-
<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-A
By: THE FIRST NATIONAL BANK OF CHICAGO, not in
its individual capacity but solely as
Eligible Lender Trustee under the Trust
Agreement
By: ___________________________________________
Authorized Signatory
Date:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
BANKERS TRUST COMPANY, not in its individual
capacity but solely as Indenture Trustee
By:_____________________________________________
Authorized Signatory
Date:
-15-
<PAGE>
REVERSE OF NOTE
This Note is one of a duly authorized issue of Notes of the Issuer
designated as its Class A-2 Floating Rate Asset-Backed Senior Notes (herein
called the "Class A-2 Notes"), which, together with the Class A-1 Floating Rate
Asset-Backed Senior Notes (the "Class A-1 Notes" and, together with the Class
A-2 Notes, the "Senior Notes") and the Floating Rate Asset-Backed Subordinate
Notes (the "Subordinate Notes" and, together with the Senior Notes, the "Notes")
are issued under the Indenture, to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights and obligations thereunder of the Issuer, the Indenture Trustee and the
Noteholders. The Class A-2 Notes are subject to all terms of the Indenture.
The Class A-2 Notes are and will be equally and ratably secured by the
collateral pledged as security therefor as provided in the Indenture.
Allocations of principal will be made among the Class A-1 Notes, the Class A-2
Notes and the Subordinate Notes as provided in the Indenture. The Senior Notes
collectively are senior in right of payment to the Subordinate Notes, all as and
to the extent provided in the Indenture.
Principal of the Class A-2 Notes will be payable on each Quarterly Payment
Date after (i) the end of the Revolving Period and (ii) the outstanding
principal amount of the Class A-1 Notes has been reduced to zero in an amount
described in the Indenture. "Quarterly Payment Date" means the twenty-eighth day
of each January, April, July and October, or, if any such date is not a Business
Day, the next succeeding Business Day, commencing July 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
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<PAGE>
the Notes to be immediately due and payable in the manner provided in Section
5.02 of the Indenture. All principal payments of the Class A-2 Notes shall be
made pro rata to the Class A-2 Noteholders entitled thereto.
Interest on the Class A-2 Notes will be payable on each Quarterly Payment
Date, commencing July 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 0.25% 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
each Quarterly Interest Period on the second business day prior to the
commencement of each LIBOR Reset Period within such Quarterly Interest Period
(or, in the case of the initial LIBOR Reset Period, on the second business day
prior the Closing Date) (each, a "LIBOR Determination Date"). For purposes of
calculating Three-Month LIBOR, a business day is any day on which banks in The
City of New York and the City of London are open for the transaction of
international business. Interest due for any Quarterly Interest Period will be
determined based on the actual number of days in such Quarterly Interest Period
over a 360-day year.
"Three-Month LIBOR" means, with respect to any LIBOR Reset Period, the
London interbank offered rate for deposits in U.S. dollars having a maturity of
three months commencing on the related LIBOR Determination Date (the "Index
Maturity") which appears on Telerate Page 3750 as of 11:00 a.m. London time, on
such LIBOR Determination Date. If such rate does not appear on Telerate Page
3750, the rate for that day will be determined on the basis of the rates at
which deposits in U.S. dollars, having the Index Maturity and in a principal
amount of not less than U.S. $1,000,000, are offered at approximately 11:00 a.m.
London time, on such LIBOR Determination Date to prime banks in the London
interbank market by the Reference Banks. The Administrator will request the
principal London office of each such Reference Bank to provide a quotation of
its rate. If at least two such quotations are provided, the rate for that day
will be the arithmetic mean of the quotations. If fewer than two quotations are
provided, the rate for that day will be the arithmetic mean of the rates quoted
by major banks in The City of New York, selected by the Administrator, at
approximately 11:00 a.m. New York time, on such LIBOR Determination
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<PAGE>
Date for loans in U.S. dollars to leading European banks having the Index
Maturity and in a principal amount equal to an amount of not less than U.S.
$1,000,000; provided, however, that if the banks selected as aforesaid are not
quoting as mentioned in this sentence, Three-Month LIBOR in effect for the
applicable LIBOR Reset Period will be Three-Month LIBOR in effect for the
previous LIBOR Reset Period.
"LIBOR Reset Period" means the three-month period commencing on the 28th
day (or, if any such date is not a business day, on the next succeeding business
day) of each January, April, July and October and ending on the day immediately
preceding the following LIBOR Reset Period; provided, however, that the initial
LIBOR Reset Period will commence on the Closing Date.
"Telerate Page 3750" means the display page so designated on the Dow Jones
Telerate Service (or such other page as may replace that page on that service
for the purpose of displaying comparable rates or prices).
"Reference Banks" means four major banks in the London interbank market
selected by the Administrator.
Any Class A-2 Noteholders' Interest Basis Carryover that may exist on any
Quarterly Payment Date shall be payable to the Class A-2 Noteholders on that
Quarterly Payment Date and any succeeding Quarterly Payment Dates solely out of
the funds available and required to be applied thereto pursuant to the
Administration Agreement.
Payments of interest on this Note due and payable on each Quarterly
Payment Date, and payments of interest together with the installment of
principal, if any, due and payable on each Quarterly Payment Date, to the extent
not in full payment of this Note, shall be made by wire transfer or check mailed
to the Person whose name appears as the Registered Holder of this Note (or one
or more Predecessor Notes) on the Note Register on the Record Date, except that
with respect to Notes registered on the Record Date in the name of the nominee
of the Clearing Agency, unless Definitive Notes have been issued (initially,
such nominee to be Cede & Co.), payments will be made by wire transfer in
immediately available funds to the account designated by such nominee. Such
checks shall be mailed to the Person entitled thereto at the address of such
Person as it appears on the Note Register as of the applicable Record Date
without requiring that this Note be submitted for notation of payment, and the
mailing of such check shall constitute payment of the amount thereof regardless
of whether such check is returned undelivered. Any reduction in the principal
amount of this Note (or any one or more Predecessor Notes) effected by any
payments made on any Quarterly Payment Date shall be binding upon all future
Noteholders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof, whether or not noted
hereon. If funds are expected to be available, as provided in the Indenture, for
payment in full of the then remaining unpaid principal amount of this Note on a
Quarterly Payment Date, then the Indenture Trustee, in the name of and on behalf
of the Issuer, will notify the Person who was the Noteholder hereof as of the
Record Date preceding such Quarterly Payment Date by notice mailed no later than
five days prior to such Quarterly Payment Date and the amount then due and
payable shall be payable only upon presentation and surrender of this Note at
the Indenture
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<PAGE>
Trustee's Corporate Trust Office or at the office of the Indenture Trustee's
agent appointed for such purposes located in the Borough of Manhattan, The City
of New York.
The Issuer shall pay interest on overdue installments of interest at the
Class A-2 Note Rate to the extent lawful.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Noteholder hereof or his attorney duly
authorized in writing, with such signature guaranteed by an "eligible guarantor
institution" meeting the requirements of the Note Registrar, which requirements
include membership or participation in Securities Transfer Agent's Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution for, STAMP
(all in accordance with the Exchange Act), and such other documents as the
Indenture Trustee may require, and thereupon one or more new Notes of authorized
denominations and in the same aggregate principal amount will be issued to the
designated transferee or transferees. No service charge will be charged for any
registration of transfer or exchange of this Note, but the transferor may be
required to pay a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any such registration of transfer or
exchange.
Each Noteholder or Note Owner, by its acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in the Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Seller, the Company, the Administrator, the Servicer, the
Eligible Lender Trustee or the Indenture Trustee on the Notes or under the
Indenture or any certificate or other writing delivered in connection therewith,
against (i) the Seller, the Company, the Administrator, the Servicer, the
Indenture Trustee or the Eligible Lender Trustee in its individual capacity or
(ii) any partner, owner, beneficiary, agent, officer, director or employee of
the Seller, the Company, the Administrator, the Servicer, the Indenture Trustee
or the Eligible Lender Trustee in its individual capacity, any holder or owner
of a beneficial interest in the Issuer, the Eligible Lender Trustee or the
Indenture Trustee or of any successor or assign of the Seller, the Company, the
Administrator, the Servicer, the Indenture Trustee or the Eligible Lender
Trustee in its individual capacity, except as any such Person may have expressly
agreed (it being understood that the Indenture Trustee and the Eligible Lender
Trustee have no such obligations in their individual capacity) and except that
any such partner, owner or beneficiary shall be fully liable, to the extent
provided by applicable law, for any unpaid consideration for stock, unpaid
capital contribution or failure to pay any installment or call owing to such
entity.
Each Noteholder or Note Owner, by its acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees that by
accepting the benefits of the Indenture that such Noteholder or Note Owner will
not at any time institute against the Seller, the Company or the Issuer, or join
in any institution against the Seller, the Company or the Issuer of, any
bankruptcy, reorganization, arrangement, insolvency, receivership or liquidation
proceedings
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<PAGE>
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.
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.
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<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 Bankers Trust Company in its individual
capacity, The First National Bank of Chicago in its individual capacity, any
owner of a beneficial interest in the Issuer, or any of their respective
partners, beneficiaries, agents, officers, directors, employees or successors or
assigns shall be personally liable for, nor shall recourse be had to any of them
for, the payment of principal of or interest on, or performance of, or omission
to perform, any of the covenants, obligations or indemnifications contained in
this Note or the Indenture; it being expressly understood that said covenants,
obligations and indemnifications have been made by the Eligible Lender Trustee
for the sole purposes of binding the interests of the Eligible Lender Trustee in
the assets of the Issuer. The Noteholder of this Note by the acceptance hereof
agrees that, except as expressly provided in the Basic Documents, in the case of
an Event of Default under the Indenture, the Noteholder shall have no claim
against any of the foregoing for any deficiency, loss or claim therefrom;
provided, however, that nothing contained herein shall be taken to prevent
recourse to, and enforcement against, the assets of the Issuer for any and all
liabilities, obligations and undertakings contained in the Indenture or in this
Note.
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<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.
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<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
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<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.
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<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-A
FLOATING RATE ASSET-BACKED SUBORDINATE NOTES
SMS Student Loan Trust 1999-A, a trust organized and existing under the
laws of the State of Delaware (herein referred to as the "Issuer"), for value
received, hereby promises to pay to ______________________, or registered
assigns, the principal sum of ___________________________________________
DOLLARS payable on each Quarterly Payment Date in an amount equal to the result
obtained by multiplying (i) a fraction the numerator of which is $____________
and the denominator of which is $___________ 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 February 1, 1999 (the "Indenture"), between the Issuer and Bankers
Trust Company, a New York banking corporation, as Indenture Trustee (the
"Indenture Trustee") (capitalized terms used but not defined herein shall have
the meanings ascribed thereto in the Indenture, which also references rules as
to usage that shall be applicable herein); provided, however, that no principal
shall be payable on this Note until the principal balance of the Senior Notes
has been paid in full; and provided, further, that the entire unpaid principal
amount of this Note shall be due and payable on the October 2035 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 March 11, 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.
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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.
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<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-A
By: THE FIRST NATIONAL BANK OF CHICAGO, not in
its individual capacity but solely as
Eligible Lender Trustee under the Trust
Agreement
By:_____________________________________________
Authorized Signatory
Date:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
BANKERS TRUST COMPANY, not in its individual
capacity but solely as Indenture Trustee
By: ____________________________________________
Authorized Signatory
Date:
-27-
<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 July 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
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<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 July 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 0.55%
(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 each Quarterly Interest Period on the second business day prior to the
commencement of each LIBOR Reset period within such Quarterly Interest Period
(or, in the case of the initial LIBOR Reset Period, on the second business day
prior the Closing Date) (each, a "LIBOR Determination Date"). For purposes of
calculating Three-Month LIBOR, a business day is any day on which banks in The
City of New York and the City of London are open for the transaction of
international business. Interest due for any Quarterly Interest Period will be
determined based on the actual number of days in such Quarterly Interest Period
over a 360-day year.
"Three-Month LIBOR" means, with respect to any LIBOR Reset Period, the
London interbank offered rate for deposits in U.S. dollars having a maturity of
three months commencing on the related LIBOR Determination Date (the "Index
Maturity") which appears on Telerate Page 3750 as of 11:00 a.m. London time, on
such LIBOR Determination Date. If such rate does not appear on Telerate Page
3750, the rate for that day will be determined on the basis of the rates at
which deposits in U.S. dollars, having the Index Maturity and in a principal
amount of not less than U.S. $1,000,000, are offered at approximately 11:00 a.m.
London time, on such LIBOR Determination Date to prime banks in the London
interbank market by the Reference Banks. The Administrator will request the
principal London office of each such Reference Bank to provide a quotation of
its rate. If at least two such quotations are provided, the rate for that day
will be the arithmetic mean of the quotations. If fewer than two quotations are
provided, the rate for that day will be the arithmetic mean of the rates quoted
by major banks in The City of New York, selected
-29-
<PAGE>
by the Administrator, at approximately 11:00 a.m. New York time, on such LIBOR
Determination Date for loans in U.S. dollars to leading European banks having
the Index Maturity and in a principal amount equal to an amount of not less than
U.S. $1,000,000; provided, however, that if the banks selected as aforesaid are
not quoting as mentioned in this sentence, Three-Month LIBOR in effect for the
applicable LIBOR Reset Period will be Three-Month LIBOR in effect for the
previous LIBOR Reset Period.
"LIBOR Reset Period" means the three-month period commencing on the 28th
day (or, if any such date is not a business day, on the next succeeding business
day) of each January, April, July and October and ending on the day immediately
preceding the following LIBOR Reset Period; provided, however, that the initial
LIBOR Reset Period will commence on the Closing Date.
"Telerate Page 3750" means the display page so designated on the Dow Jones
Telerate Service (or such other page as may replace that page on that service
for the purpose of displaying comparable rates or prices).
"Reference Banks" means four major banks in the London interbank market
selected by the Administrator.
Any Subordinate Noteholders' Interest Basis Carryover that may exist on
any Quarterly Payment Date shall be payable to the Subordinate Noteholders on
that Quarterly Payment Date and any succeeding Quarterly Payment Dates solely
out of the funds available and required to be applied thereto pursuant to the
Administration Agreement.
Payments of interest on this Note due and payable on each Quarterly
Payment Date, and payments of interest together with the installment of
principal, if any, due and payable on each Quarterly Payment Date, to the extent
not in full payment of this Note, shall be made, if the original principal
amount of this Note is $1,000,000 or more, by wire transfer and otherwise by
check mailed to the Person whose name appears as the Registered Holder of this
Note (or one or more Predecessor Notes) on the Note Register on the Record Date.
Such checks shall be mailed to the Person entitled thereto at the address of
such Person as it appears on the Note Register as of the applicable Record Date
without requiring that this Note be submitted for notation of payment, and the
mailing of such check shall constitute payment of the amount thereof regardless
of whether such check is returned undelivered. Any reduction in the principal
amount of this Note (or any one or more Predecessor Notes) effected by any
payments made on any Quarterly Payment Date shall be binding upon all future
Noteholders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof, whether or not noted
hereon. If funds are expected to be available, as provided in the Indenture, for
payment in full of the then remaining unpaid principal amount of this Note on a
Quarterly Payment Date, then the Indenture Trustee, in the name of and on behalf
of the Issuer, will notify the Person who was the Noteholder hereof as of the
Record Date preceding such Quarterly Payment Date by notice mailed no later than
five days prior to such Quarterly Payment Date and the amount then due and
payable shall be payable only upon presentation and surrender of this Note at
the Indenture Trustee's Corporate Trust Office or at the office of the Indenture
Trustee's agent appointed for such purposes located in the Borough of Manhattan,
The City of New York.
-30-
<PAGE>
The Issuer shall pay interest on overdue installments of interest at the
Subordinate Note Rate to the extent lawful.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Noteholder hereof or his attorney duly
authorized in writing, with such signature guaranteed by an "eligible guarantor
institution" meeting the requirements of the Note Registrar, which requirements
include membership or participation in Securities Transfer Agent's Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution for, STAMP
(all in accordance with the Exchange Act), and such other documents as the
Indenture Trustee may require, and thereupon one or more new Notes of authorized
denominations and in the same aggregate principal amount will be issued to the
designated transferee or transferees. No service charge will be charged for any
registration of transfer or exchange of this Note, but the transferor may be
required to pay a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any such registration of transfer or
exchange.
Each Noteholder, by its acceptance of a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Seller, the Company, the Administrator, the Servicer, the
Eligible Lender Trustee or the Indenture Trustee on the Notes or under the
Indenture or any certificate or other writing delivered in connection therewith,
against (i) the Seller, the Company, the Administrator, the Servicer, the
Indenture Trustee or the Eligible Lender Trustee in its individual capacity or
(ii) any partner, owner, beneficiary, agent, officer, director or employee of
the Seller, the Company, the Administrator, the Servicer, the Indenture Trustee
or the Eligible Lender Trustee in its individual capacity, any holder or owner
of a beneficial interest in the Issuer, the Eligible Lender Trustee or the
Indenture Trustee or of any successor or assign of the Seller, the Company, the
Administrator, the Servicer, the Indenture Trustee or the Eligible Lender
Trustee in its individual capacity, except as any such Person may have expressly
agreed (it being understood that the Indenture Trustee and the Eligible Lender
Trustee have no such obligations in their individual capacity) and except that
any such partner, owner or beneficiary shall be fully liable, to the extent
provided by applicable law, for any unpaid consideration for stock, unpaid
capital contribution or failure to pay any installment or call owing to such
entity.
Each Noteholder, by its acceptance of a Note, covenants and agrees that by
accepting the benefits of the Indenture that such Noteholder or Note Owner will
not at any time institute against the Seller, the Company or the Issuer, or join
in any institution against the Seller, the Company or the Issuer of, any
bankruptcy, reorganization, arrangement, insolvency, receivership or liquidation
proceedings or other proceedings under any United States federal or state
bankruptcy or similar law in connection with any obligations relating to the
Notes, the Indenture or the other Basic Documents.
-31-
<PAGE>
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.
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
-32-
<PAGE>
of and interest on this Note at the times, place, and rate, and in the coin or
currency, herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of Bankers Trust Company in its individual
capacity, The First National Bank of Chicago in its individual capacity, any
owner of a beneficial interest in the Issuer, or any of their respective
partners, beneficiaries, agents, officers, directors, employees or successors or
assigns shall be personally liable for, nor shall recourse be had to any of them
for, the payment of principal of or interest on, or performance of, or omission
to perform, any of the covenants, obligations or indemnifications contained in
this Note or the Indenture; it being expressly understood that said covenants,
obligations and indemnifications have been made by the Eligible Lender Trustee
for the sole purposes of binding the interests of the Eligible Lender Trustee in
the assets of the Issuer. The Noteholder of this Note by the acceptance hereof
agrees that, except as expressly provided in the Basic Documents, in the case of
an Event of Default under the Indenture, the Noteholder shall have no claim
against any of the foregoing for any deficiency, loss or claim therefrom;
provided, however, that nothing contained herein shall be taken to prevent
recourse to, and enforcement against, the assets of the Issuer for any and all
liabilities, obligations and undertakings contained in the Indenture or in this
Note.
-33-
<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.
-34-
<PAGE>
EXHIBIT B TO THE INDENTURE
Senior Note Depository Agreement
-35-
<PAGE>
EXHIBIT C
TO THE INDENTURE
FORM OF TRANSFEROR CERTIFICATE
[DATE]
USA Group Secondary Market Services, Inc.
30 South Meridian Street
Indianapolis, Indiana 46204-3503
The First National Bank of Chicago
One First National Plaza
Chicago, Illinois 60670
Bankers Trust Company
4 Albany Street
New York, New York 10006
Re: SMS Student Loan Trust 1999-A
Floating Rate Asset-Backed Subordinate Notes
Ladies and Gentlemen:
In connection with our disposition of the above-referenced Floating Rate
Asset-Backed Subordinate Notes (the "Notes") we certify that (a) we understand
that the Notes have not been registered under the Securities Act of 1933, as
amended (the "Act"), and are being transferred by us in a transaction that is
exempt from the registration requirements of the Act and (b) we have not offered
or sold any Notes to, or solicited offers to buy any Notes from, any person, or
otherwise approached or negotiated with any person with respect thereto, in a
manner that would be deemed, or taken any other action which would result in, a
violation of Section 5 of the Act.
Very truly yours,
[NAME OF TRANSFEROR]
By: ____________________________________
Name: ____________________________________
Title: ____________________________________
-36-
<PAGE>
EXHIBIT D
FORM OF INVESTMENT LETTER
USA Group Secondary Market Services, Inc.
30 South Meridian Street
Indianapolis, Indiana 46204-3503
The First National Bank of Chicago
One First National Plaza
Chicago, Illinois 60670
Bankers Trust Company
4 Albany Street
New York, New York 10006
Ladies and Gentlemen:
In connection with our proposed purchase of $[____________] aggregate
principal amount of Floating Rate Asset-Backed Subordinate Notes (the
"Securities") of SMS Student Loan Trust 1999-A (the "Issuer"), we confirm that:
1. We understand that the Securities have not been registered under
the Securities Act of 1933, as amended (the "Securities Act"), and may not
be sold except as permitted in the following sentence. We understand and
agree, on our own behalf and on behalf of any accounts for which we are
acting as hereinafter stated, (x) that such Securities are being offered
only in a transaction not involving any public offering within the meaning
of the Securities Act and (y) that such Securities may be resold, pledged
or transferred only (i) to USA Group Secondary Market Services, Inc. (the
"Seller") or (ii) to a person whom the transferor of the Securities
reasonably believes after due inquiry is a QIB acting for its own account
(and not for the account of others) or as a fiduciary or agent for others
(which others also are QIBs) and in reliance on, and to whom notice is
given that the sale, pledge or transfer is being made in reliance on, Rule
144A or on another exemption from registration under the Securities Act;
provided, that, in the event that reliance is made on an exemption from
registration under the Securities Act other than Rule 144A, the
prospective transferee shall have provided a written opinion of counsel
(which will not be at the expense of the Indenture Trustee or the Seller)
satisfactory to each to the effect that such transfer will not violate the
Securities Act. We will notify any purchaser of the Security from us of
the above resale restrictions, if then applicable. We further understand
that in connection with any transfer of the Security by us that the Seller
and the Indenture Trustee may request, and if so requested we will furnish
such certificates and other information as they may reasonably require to
confirm that any such transfer complies with the foregoing restrictions.
-37-
<PAGE>
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.
-38-
<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: ____________________________________
<PAGE>
CROSS-REFERENCE TABLE*
TIA Indenture
Section ection
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.
-40-
EXHIBIT 99.1
Execution Copy
LOAN SALE AGREEMENT
among
SMS STUDENT LOAN TRUST 1999-A,
as Issuer,
USA GROUP SECONDARY MARKET SERVICES, INC.,
as Seller,
NBD BANK, N.A., AS TRUSTEE FOR
USA GROUP SECONDARY MARKET SERVICES, INC.,
and
THE FIRST NATIONAL BANK OF CHICAGO,
not in its individual capacity but solely
as Eligible Lender Trustee
Dated as of February 1, 1999
<PAGE>
LOAN SALE AGREEMENT dated as of February 1, 1999, among
SMS STUDENT LOAN TRUST 1999-A, a Delaware trust (the
"Issuer"), USA GROUP SECONDARY MARKET SERVICES, INC, as seller
(the "Seller"), NBD BANK, N.A., AS TRUSTEE FOR USA GROUP
SECONDARY MARKET SERVICES, INC. ("NBD"), and THE FIRST
NATIONAL BANK OF CHICAGO, a national banking association,
solely as eligible lender trustee and not in its individual
capacity (the "Eligible Lender Trustee").
WHEREAS the Issuer desires to purchase from the Seller a portfolio of
federally reinsured student loans purchased in the ordinary course of business
by the Seller; and
WHEREAS in order to comply with the requirements of the Higher Education
Act, legal title to the Seller's student loan portfolio is vested in NBD, as
trustee on behalf of the Seller as the sole beneficiary; and
WHEREAS the Seller is willing to sell such student loans to the Eligible
Lender Trustee on behalf of the Issuer; and
WHEREAS the Eligible Lender Trustee is willing to hold legal title to, and
serve as eligible lender trustee with respect to, such student loans on behalf
of the Issuer.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE I
Definitions and Usage
Capitalized terms used but not defined herein are defined in Appendix A to
the Administration Agreement, dated as of February 1, 1999, among the Issuer,
the Seller, as Administrator, and Bankers Trust Company, as Indenture Trustee,
which also contains rules as to usage and construction that shall be applicable
herein.
ARTICLE II
Conveyance of Financed Student Loans
SECTION 2.01. Conveyance of Initial Financed Student Loans. (a) In
consideration of the Issuer's delivery to or upon the order of the Seller on the
Closing Date of the net proceeds from the sale of the Notes and the other
amounts to be distributed from time to time to the Seller in accordance with the
terms of this Agreement, the Seller (and, with respect to legal
<PAGE>
title to the Financed Student Loans, NBD as trustee on behalf of the Seller)
does hereby, as evidenced by a duly executed Bill of Sale in the form of Exhibit
A hereto, sell, assign, and otherwise convey to the Issuer and, with respect to
legal title to the Initial Financed Student Loans, 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, 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
<PAGE>
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.
(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
<PAGE>
thereon if and to the extent that such interest is not then payable and will,
pursuant to the term of such loan, be capitalized and added to the principal
balance of such loan), as of the related Subsequent Cutoff Date, of the
Exchanged Student Loan or Loans being remitted on such Transfer Date in
satisfaction of such Purchase Collateral Balance is less than such amount due,
the Issuer shall remit funds to cover such difference from amounts on deposit in
the Collection Account as provided in Section 2(d) of the Administration
Agreement. Any Purchase Premium Amounts for Serial Loans conveyed to the Trust
after the Revolving Period will be payable on Quarterly Payment Dates out of
Reserve Account Excess pursuant to Section 2(e) of the Administration Agreement
and such Purchase Premium Amounts will accrue no interest or yield but will be
paid on each Quarterly Payment Date to the extent such excess is available in
the aggregate amount of such premiums incurred but unpaid up to the end of the
related Collection Period; provided, however, that no Purchase Premium Amounts
shall be payable on Exchanged Serial Loans.
(d) The Seller (and with respect to legal title to the 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);
<PAGE>
(vii) the Seller shall have delivered on each November 1 and May 1,
commencing May 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
<PAGE>
Transfer Date since the preceding Quarterly Payment Date, shall not exceed
the Net Principal Cash Flow Amount for such Transfer Date minus the sum of
(i) all amounts paid to prepay any Add-on Consolidation Loan not held by
the Issuer since the last Quarterly Payment Date pursuant to Section
2(d)(iii)(A) of the Administration Agreement and (ii) all amounts which
the Administrator reasonably estimates will be required to prepay Add-on
Consolidation Loans pursuant to Section 2(d)(iii)(A) of the Administration
Agreement during the remainder of the Collection Period;
provided, however, that the Seller shall not incur any liability as a result of
transferring Serial Loans on any Transfer Date at a time when the condition set
forth in clause (v) was not satisfied, if at the time of such transfer the
Authorized Officers of the Seller, after reasonable inquiry of counsel to the
Seller, were not aware of any fact that would reasonably suggest that such
condition would not be satisfied as of such date.
SECTION 2.03. Treatment as a Security Agreement The parties intend that
the conveyance of the Seller's (and, with respect to legal title to the loans,
NBD's) right, title and interest in and to the Initial Financed Student Loans
pursuant to this Agreement and any 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
<PAGE>
Student Loans, NBD as trustee on behalf of the Seller) acknowledge and agree
that this power of attorney shall be construed as a power coupled with an
interest, shall be irrevocable as long as the Trust Agreement remains in effect
and shall continue in effect until the Trust Agreement terminates.
ARTICLE III
The Financed Student Loans
SECTION 3.01. Representations and Warranties of Seller with Respect to the
Financed Student Loans. The Seller represents and warrants with respect to the
Financed Student Loans as set forth in Exhibit C hereto. 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
<PAGE>
non-guaranteed interest amounts and such forfeited Interest Payments and Special
Allowance Payments in the manner specified in Section 3.03. Subject to the
provisions of Section 4.03, the sole remedy of the Issuer, the Eligible Lender
Trustee, the Indenture Trustee or the Noteholders with respect to a breach of
representations and warranties pursuant to Section 3.01, and the agreement
contained in this Section, shall be to require the Seller to repurchase or
substitute for Financed Student Loans or to reimburse the Issuer as provided
above pursuant to this Section, subject to the conditions contained herein.
(b) The Seller may, at its option, cause a Financed Student Loan to be
repurchased by a Person not affiliated with the Seller as of the last day of a
Monthly Collection Period if there is a dispute with the related Borrower during
such Monthly Collection Period which in the Servicer's reasonable judgment would
call into question whether such Financed Student Loan will be repaid by the
Borrower; provided, however, that the aggregate principal balance of the
Financed Student Loans purchased pursuant to this subsection (b) shall not
exceed, in aggregate, 1% of the Initial Pool Balance.
(c) In consideration of and simultaneously with the repurchase of a
Financed Student Loan, the Seller shall remit the Purchase Amount therefor, in
the manner specified in Section 3.03, and the Issuer shall execute such
assignments and other documents reasonably requested by the Seller in order to
effect such transfer. Upon any such transfer of a Financed Student Loan, legal
title to, and beneficial ownership and control of, the related Student Loan File
will thereafter belong to the Seller or in the case of legal title thereto an
eligible lender under the Higher Education Act designated by the Seller.
With respect to any Qualified Substitute Student Loan or Loans, the Seller
shall deliver to the Eligible Lender Trustee for the benefit of the Indenture
Trustee such documents and agreements together with a duly executed Assignment
in the form of Exhibit F hereto. 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;
<PAGE>
(iii) such addition will not result in a material adverse Federal or
State tax consequence to the Issuer or the Noteholders;
(iv) the Seller shall have delivered (A) to the Rating Agencies, an
Opinion of Counsel with respect to each transfer of Qualified Substitute
Student Loans, substantially in the form of the Opinion of Counsel
delivered to the Rating Agencies on the Closing Date, and (B) to the
Eligible Lender Trustee and the Indenture Trustee, the Opinion of Counsel
required by Section 6.02(f)(1) hereof; provided, 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.
<PAGE>
For any month in which the Seller substitutes one or more Qualified
Substitute Student Loans for one or more Deleted Student Loans, the Servicer
will determine the amount (if any) by which as of the date of the relevant
Assignment the aggregate principal balance of all such Qualified Substitute
Student Loans is less than the aggregate principal balance of all such Deleted
Student Loans. The amount of such shortage (the "Substitution Adjustment
Amount") shall be deposited in the Collection Account by the Seller on or before
the date of the relevant Assignment.
SECTION 3.03. Repurchase Deposits. The Seller shall deposit or cause to be
deposited in the Collection Account the aggregate Purchase Amount with respect
to Purchased Student Loans and all other amounts to be paid by the Seller under
Section 3.02 and Section 5.01 when such amounts are due.
ARTICLE IV
The Seller
SECTION 4.01. Representations of Seller and NBD. The Seller represents as
set forth in Exhibit D hereto and NBD represents as set forth in Exhibit E
hereto. 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
<PAGE>
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 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
<PAGE>
warranties set forth in Section 7.03 of the Trust Agreement. In the event
of any claim, action or proceeding for which indemnity will be sought
pursuant to this paragraph, the Eligible Lender Trustee's choice of legal
counsel shall be subject to the approval of the Seller, which approval
shall not be unreasonably withheld.
(d) The Seller shall pay any and all taxes levied or assessed upon
all or any part of the Trust Estate (other than those taxes expressly
excluded from the Seller's responsibilities pursuant to the parentheticals
in paragraph (a) above).
Indemnification under this Section shall survive the resignation or
removal of the Eligible Lender Trustee or the Indenture Trustee and the
termination of this Agreement or the Indenture or the Trust Agreement, as
applicable, and shall include reasonable fees and expenses of counsel and
expenses of litigation. If the Seller shall have made any indemnity payments
pursuant to this Section and the Person to or on behalf of whom such payments
are made thereafter shall collect any of such amounts from others, such Person
shall promptly repay such amounts to the Seller, without interest.
SECTION 4.04. Merger or Consolidation of, or Assumption of the Obligations
of, Seller or NBD. Any person (a) into which the Seller or NBD may be merged or
consolidated, (b) which may result from any merger or consolidation to which the
Seller or NBD shall be a party or (c) which may succeed to the properties and
assets of the Seller or NBD substantially as a whole, shall be the successor to
the Seller or NBD, respectively, without the execution or filing of any document
or any further act by any of the parties to this Agreement; provided, however,
that the Seller hereby covenants that it will not consummate any of the
foregoing transactions except upon satisfaction of the following: (i) the
surviving Seller, if other than SMS, executes an agreement of assumption to
perform every obligation of the Seller under this Agreement, (ii) immediately
after giving effect to such transaction, no representation or warranty made
pursuant to Section 3.01 or 4.01 shall have been breached and no Servicer
Default, Event of Default or Administrator Default and no event that, after
notice or lapse of time, or both, would become a Servicer Default, Event of
Default or Administrative Default shall have occurred and be continuing, (iii)
the Seller shall have delivered to the Eligible Lender Trustee 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
<PAGE>
NBD is the surviving entity, it will not consummate any of the foregoing
transactions unless NBD shall have delivered to the Eligible Lender Trustee and
the Indenture Trustee an Opinion of Counsel either (A) stating that, in the
opinion of such counsel, all financing statements and continuation statements
and amendments thereto have been executed and filed that are necessary fully to
preserve and protect the interest of the Eligible Lender Trustee and Indenture
Trustee, respectively, in the Financed Student Loans and reciting the details of
such filings, or (B) stating that, in the opinion of such counsel, no such
action shall be necessary to preserve and protect such interests.
SECTION 4.05. Limitation on Liabilities of Seller, NBD and Others. The
Seller, NBD and any director or officer or employee or agent of the Seller or
NBD may rely in good faith on the advice of counsel or on any document of any
kind, prima facie properly executed and submitted by any Person respecting any
matters arising hereunder (provided, 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
<PAGE>
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 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.
<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
<PAGE>
statements have been executed and filed that are necessary fully to
preserve and protect the interest of the Eligible Lender Trustee and the
Indenture Trustee in the Financed Student Loans, and reciting the details
of such filings or referring to prior Opinions of Counsel in which such
details are given, or (B) stating that, in the opinion of such counsel, no
such action shall be necessary to preserve and protect such interest;
provided, however, that a single Opinion of Counsel may be delivered in
satisfaction of the foregoing requirement and that of Section 3.06(b) of
the Indenture.
Each Opinion of Counsel referred to in clause (1) or (2) above shall
specify (as of the date of such opinion and given all applicable laws as in
effect on such date) any action necessary to be taken in the following year to
preserve and protect such interest.
SECTION 6.03. Notices. Unless otherwise agreed by the recipient, all
demands, notices and communications upon or to the Seller, NBD, the Servicer,
the Issuer, the Eligible Lender Trustee, the Indenture Trustee, the
Administrator 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
Suite 7072
Mail Code INI-7081
Indianapolis, Indiana 46266
<PAGE>
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-A
c/o First Chicago Delaware, Inc.
FCC National Bank
300 King Street
Wilmington, Delaware 19801
with a copy to the Eligible Lender Trustee
at the Corporate Trust Office of the
Eligible Lender Trustee;
(e) in the case of the Issuer or the Eligible Lender Trustee, at
the Corporate Trust Office of the Eligible Lender Trustee;
(f) in the case of the Indenture Trustee, at its Corporate Trust
Office;
(g) in the case of the Administrator, to
USA Group Secondary Market Services, Inc.
30 South Meridian Street
Indianapolis, Indiana 46204-3503
Attention: President and Chief Executive Officer
Telephone: (317) 951-5640
Telecopy: (317) 951-5764;
with a copy to
<PAGE>
Office of the General Counsel
USA Group, Inc.
30 South Meridian Street
Indianapolis, Indiana 46204-3503
Attention: Peter M. Greco
Telephone: (317) 951-5526
Telecopy: (317) 951-5532;
(h) in the case of Fitch, to
Fitch IBCA, Inc.
One State Street Plaza
New York, New York 10004
Attention: Asset Backed Monitoring Unit
Telephone: (212) 908-0500
Facsimile: (212) 376-6889; and
(i) 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.
<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
<PAGE>
liability for the representations, warranties, covenants, agreements or other
obligations of the Issuer hereunder or in any of the certificates, notices or
agreements delivered pursuant hereto as to all of which recourse shall be had
solely to the assets of the Issuer.
(c) Notwithstanding anything contained herein to the contrary (other than
as provided in subsection (d)), this Agreement has been accepted by Bankers
Trust Company not in its individual capacity but solely as Indenture Trustee and
in no event shall Bankers Trust Company have any liability for the
representations, warranties, covenants, agreements or other obligations of the
Issuer hereunder or in any of the certificates, notices or agreements delivered
pursuant hereto, as to all of which recourse shall be had solely to the assets
of the Issuer.
(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]
<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-A
By: The First National Bank of Chicago, not in
its individual capacity but solely as Eligible
Lender Trustee on behalf of the Trust
By: ______________________________________________
Name:
Title:
USA GROUP SECONDARY MARKET SERVICES, INC.
By: ______________________________________________
Name:
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:
<PAGE>
Acknowledged and accepted
as of the day and year first
above written:
BANKERS TRUST COMPANY, not in
its individual capacity but
solely as Indenture Trustee
By: _______________________________________
Name:
Title:
<PAGE>
EXHIBIT A
TO THE LOAN SALE AGREEMENT
BILL OF SALE
For $_________ received, in accordance with the Loan Sale Agreement (the
"Loan Sale Agreement") dated as of February 1, 1999, among USA Group Secondary
Market Services, Inc., as seller (the "Seller"), SMS Student Loan Trust 1999-A
(the "Trust"), NBD Bank, N.A., as trustee for the Seller ("NBD") and The First
National Bank of Chicago, not in its individual capacity but solely as Eligible
Lender Trustee (the "Eligible Lender Trustee") the Seller (and, with respect to
legal title to the Initial Financed Student Loans, NBD as trustee on behalf of
the Seller) does hereby sell, assign, transfer and otherwise convey unto the
Issuer and, with respect to legal title, unto the Eligible Lender Trustee on
behalf of the Trust, without recourse (subject to the obligations set forth in
the Loan Sale Agreement), all right, title and interest in and to (i) the
Initial Financed Student Loans and all obligations of the Obligors thereunder,
together with all documents, the related Student Loan Files and all rights and
privileges related thereto, (ii) all payments and/or collections received
thereunder on and after the Cutoff Date 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
February 1, 1999, among SMS Student Loan Trust 1999-A, as Issuer, USA Group
Secondary Market Services, Inc., as
<PAGE>
Administrator, and Bankers Trust Company, as Indenture Trustee, which also
contains rules as to usage that shall be applicable herein.
IN WITNESS WHEREOF, the undersigned has caused this Bill of Sale to be
duly executed as of February 1, 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:
<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-A, a Delaware trust
(the "Issuer"), USA GROUP SECONDARY MARKET SERVICES, INC., as seller (the
"Seller"), NBD BANK, N.A.1 ("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 February 1, 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 February 1, 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 February 1, 1999, among the Issuer, the
Seller, as Administrator, and
- ----------
* 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.
<PAGE>
Bankers Trust Company, as Indenture Trustee, which also contains rules of
construction and usage that shall be applicable herein.
In addition, the following terms have the following meanings:
"Subsequent Cutoff Date" means, with respect to each Additional Student
Loan, the date specified as such on Schedule A hereto.
"Transfer Date" means, with respect to the Additional Student Loans,
________________, _______.
2. Schedule of Financed Student Loans. Attached hereto as Schedule A is a
supplement to Schedule A to the Loan Sale Agreement listing the Additional
Student Loans to be conveyed on the Transfer Date to the Eligible Lender Trustee
on behalf of the Issuer pursuant to this Agreement.
3. Conveyance of Additional Student Loans. In consideration of Issuer's
delivery to or upon the order of the Seller of $__________ (for the Delayed
Delivery Loans, such amount being the Loan Purchase Amounts of the Delayed
Delivery Loans and such amount to be paid from amounts on deposit in the Delayed
Delivery Loan Funding Account subject to the provisions of Section 2.02(b) of
the Loan Sale Agreement and Section 2(j) of the Administration Agreement, for
other Additional Student Loans during the Revolving Period, such amount being
the Loan Purchase Amounts of the Additional Student Loans and such amount to be
paid from amounts on deposit in the Collateral Reinvestment Account subject to
the provisions of Section 2.02(b) of the Loan Sale Agreement and Section 2(f) of
the Administration Agreement and after the Revolving Period such amount being
the sum of (i) the Purchase Collateral Balance ($[ ]) 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.
<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
<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.
<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-A
By: THE FIRST NATIONAL BANK OF CHICAGO, not in its
individual capacity but solely as Eligible
Lender Trustee on behalf of the Trust
By: ______________________________________________
Name:
Title:
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:
<PAGE>
Acknowledged and accepted as
of the date first above written:
BANKERS TRUST COMPANY,
not in its individual
capacity but solely as
Indenture Trustee
By:__________________________________________________
Name:
Title:
<PAGE>
SCHEDULE A
TO THE
TRANSFER AGREEMENT NO. ___
[List of Additional Student Loans
and their related Subsequent Cutoff Dates]
<PAGE>
ANNEX A
TO THE TRANSFER AGREEMENT
BILL OF SALE
For value received, in accordance with the Loan Sale Agreement (the "Loan
Sale Agreement") dated as of February 1, 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-A (the "Trust") and The First
National Bank of Chicago, not in its individual capacity but solely as Eligible
Lender Trustee (the "Eligible Lender Trustee") [and as ratified by [name of
eligible lender if other than NBD with respect to the Additional Student Loans]
pursuant to Section 4.02 of the Loan Sale Agreement] and the Transfer Agreement
No. ____ dated as of ______, ______ (the "Transfer Agreement") among the Seller,
NBD, the Trust and the Eligible Lender Trustee, the Seller (and, with respect to
legal title to the Additional Student Loans, NBD as trustee on behalf of the
Seller) does hereby sell, assign, transfer and otherwise convey unto the Issuer
and, with respect to legal title, unto the Eligible Lender Trustee on behalf of
the Trust, without recourse (subject to the obligations set forth in the Loan
Sale Agreement), all right, title and interest in and to (i) the Additional
Student Loans and all obligations of the Obligors thereunder, together with all
documents, the related Student Loan Files and all rights and privileges related
thereto, (ii) all payments and collections received thereunder, on and after the
Subsequent Cutoff Date and (iii) all proceeds of any and all of the foregoing
(including but not limited to proceeds derived from the voluntary or involuntary
conversion of any of the Additional Student Loans into cash or other liquidated
property, such as proceeds from the applicable Guarantee Agreement). The
foregoing sale does not constitute and is not intended to result in any
assumption by the Eligible Lender Trustee or the Trust of any obligation of the
Seller or NBD to the borrowers of the Additional Student Loans or any other
person in connection with the Additional Student Loans or any agreement or
instrument relating to any of them.
In addition, the undersigned, by execution of this instrument, hereby
endorses the promissory notes evidencing each Additional Student Loan described
in Schedule A to the Transfer Agreement in favor of the Eligible Lender Trustee
on behalf of the Trust, without recourse (subject to the obligations set forth
in the Loan Sale Agreement) against the undersigned. This endorsement may be
effected by attaching a facsimile hereof to each or any of such promissory
notes.
This Assignment is made pursuant to and upon the representations,
warranties and agreements on the part of the undersigned contained in the Loan
Sale Agreement and the Transfer Agreement and is to be governed by the Loan Sale
Agreement and the Transfer Agreement.
Capitalized terms used but not defined herein shall have the meanings
assigned to them in the Transfer Agreement.
<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:
<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
<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
<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 1% of the Financed Student Loans are due from
Persons not having a mailing address in the United States of America.
13. Accounts. Each Financed Student Loan may be pledged or transferred as
an "account" as defined in the UCC.
<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.
<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.
<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.
<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.
<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 February 1, 1999, among USA Group Secondary Market
Services, Inc., as seller (the "Seller"), SMS Student Loan Trust 1999-A (the
"Trust"), NBD Bank, N.A., as trustee for the Seller ("NBD"), and The First
National Bank of Chicago, not in its individual capacity but solely as Eligible
Lender Trustee (the "Eligible Lender Trustee"), the Seller (and, with respect to
legal title to the Initial Financed Student Loans, NBD as trustee on behalf of
the Seller) does hereby sell, assign, transfer and otherwise convey unto the
Eligible Lender Trustee on behalf of the Trust, without recourse (subject to the
obligations set forth in the Loan Sale Agreement), all right, title and interest
in and to (i) the Qualified Substitute Student Loan(s) indicated in Schedule A
hereto (the "Additional Student Loans") and all obligations of the Obligors
thereunder, together with all documents, the related Student Loan Files and all
rights and privileges related thereto, (ii) all payments and/or collections
received thereunder on and after the date hereof and (iii) all proceeds of any
and all of the foregoing (including but not limited to proceeds derived from the
voluntary or involuntary conversion of any of the Additional Student Loans into
cash or other liquidated property, such as proceeds from the applicable
Guarantee Agreement). The foregoing sale does not constitute and is not intended
to result in any assumption by the Eligible Lender Trustee or the Trust of any
obligation of the Seller or NBD to the borrowers of Additional Student Loans or
any other Person in connection with the Additional Student Loans or any
agreement or instrument relating to any of them.
In addition, the undersigned, by execution of this instrument, hereby
endorse the promissory notes evidencing each Additional Student Loan in favor of
the Eligible Lender Trustee on behalf of the Trust, without recourse (subject to
the obligations set forth in the Loan Sale Agreement) against the undersigned.
This endorsement may be effected by attaching a facsimile hereof to each or any
of such promissory notes.
This Assignment is made pursuant to and upon the representations,
warranties and agreements on the part of the undersigned contained in the Loan
Sale Agreement and is to be governed by the Loan Sale Agreement.
Capitalized terms used but not defined herein shall have the meaning
assigned to them in Appendix A to the Administration Agreement, dated as of
February 1, 1999, among the Trust, as Issuer, the Seller, as Administrator, and
Bankers Trust Company, as Indenture Trustee, which also contains rules as to
usage that shall be applicable herein.
<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:
EXHIBIT 99.2
EXECUTION COPY
ADMINISTRATION AGREEMENT dated as
of February 1, 1999, among SMS STUDENT LOAN
TRUST 1999-A, a Delaware trust (the
"Issuer"), USA GROUP SECONDARY MARKET
SERVICES, INC., a Delaware corporation, as
administrator (the "Administrator"), and
BANKERS TRUST COMPANY, a New York banking
corporation, not in its individual capacity
but solely as Indenture Trustee (the
"Indenture Trustee").
W I T N E S S E T H
WHEREAS the Issuer was formed pursuant to the Trust Agreement dated as of
February 1, 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 February 1, 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
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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
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(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
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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.
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(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 Bankers Trust Company.
(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 Bankers Trust Company.
(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 Bankers Trust Company.
(iv) 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 "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 Bankers Trust Company.
(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
to written instructions by the Administrator; provided, however, it is
understood and agreed that
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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;
(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";
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(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 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
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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;
(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;
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(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 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 April 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
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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).
(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
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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 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.
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(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;
(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,
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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 July 1999 Quarterly Payment Date, the principal balance
and number of Delayed Delivery 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;
(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;
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(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:
(i) the amendment of or any supplement to the Indenture;
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(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 Delayed Delivery Loan Funding Account on such
Quarterly Payment Date an amount equal to
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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.
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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 to the Issuer. 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.
9. Independence of the Administrator. For all purposes of this Agreement,
the Administrator shall be an independent contractor and shall not be subject to
the supervision of the Issuer or the Eligible Lender Trustee with respect to the
manner in which it accomplishes the performance of its obligations hereunder.
Unless expressly authorized by the Issuer, the Administrator shall have no
authority to act for or represent the Issuer or the Eligible Lender Trustee in
any way and shall not otherwise be deemed an agent of the Issuer or the Eligible
Lender Trustee.
10. No Joint Venture. Nothing contained in this Agreement (i) shall
constitute the Administrator and either the Issuer or the Eligible Lender
Trustee as members of any partnership, joint venture, association, syndicate,
unincorporated business or other separate entity, (ii) shall be construed to
impose any liability as such on any of them or (iii) shall be deemed to confer
on any of them any express, implied or apparent authority to incur any
obligation or liability on behalf of the others.
11. Other Activities of Administrator. Nothing herein shall prevent the
Administrator or its Affiliates from engaging in other businesses or, in its
sole discretion, from acting in a similar capacity as an administrator for any
other Person even though such Person may engage in business activities similar
to those of the Issuer, the Eligible Lender Trustee or the Indenture Trustee.
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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 Administrator under this Agreement. All reasonable
costs and expenses (including attorneys' fees and expenses) incurred in
connection with such transfer of responsibilities and amending
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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
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.
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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-A
c/o First Chicago Delaware Inc.
FCC National Bank
300 King Street
Wilmington, Delaware 19801,
with a copy to the Eligible Lender Trustee
at the Corporate Trust Office of the
Eligible Lender Trustee
(b) if to the Eligible Lender Trustee, to
The First National Bank of Chicago
153 West 51st Street, 8th Floor
New York, New York 10019
Attention: Corporate Trust Administration
Telephone: (212) 373-1140
Facsimile: (212) 373-1383
(c) if to the Administrator, to
USA Group Secondary Market Services, Inc.
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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
Bankers Trust Company
Four Albany Street
New York, New York 10006
Attention: Corporate Trust and Agency Group,
Structured Finance Team
Telephone: (212) 250-6864
Facsimile: (212) 250-6439
(e) if to the Swap Counterparty, to:
General Re Financial Products Corporation
Rockefeller Center
630 Fifth Avenue, Suite 450
New York, New York 10111
Attention: Head of Operations
Telecopy: (212) 307-2288
Telephone confirmation: (212) 307-2310;
or to such other address as any party shall have provided to the other parties
in writing. Any notice required to be in writing hereunder shall be deemed given
if such notice is mailed by certified mail, postage prepaid, or hand-delivered
to the address of such party as provided above.
17. Amendments. This Agreement may be amended from time to time by a
written amendment duly executed and delivered by the Issuer, the Administrator
and the Indenture Trustee, with the prior written consent of the Eligible Lender
Trustee 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
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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.
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.
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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.
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
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<PAGE>
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 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
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<PAGE>
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
Bankers Trust Company not in its individual capacity but solely as Indenture
Trustee and in no event shall Bankers Trust Company have any liability for the
representations, warranties, covenants, agreements or other obligations of the
Issuer hereunder or in any of the certificates, notices or agreements delivered
pursuant hereto, as to all of which recourse shall be had solely to the assets
of the Issuer.
(c) 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.
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<PAGE>
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]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
SMS STUDENT LOAN TRUST 1999-A
By: THE FIRST NATIONAL BANK OF
CHICAGO, not in its individual
capacity but solely as
Eligible Lender Trustee
By:______________________________________
Name:
Title:
BANKERS TRUST COMPANY, not in its individual
capacity but solely as Indenture Trustee
By:______________________________________
Name:
Title:
USA GROUP SECONDARY MARKET SERVICES, INC., as
Administrator
By:______________________________________
Name:
Title:
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<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-A (the
"Trust"), does hereby make, constitute and appoint USA Group Secondary Market
Services, Inc., as Administrator under the Administration Agreement (as defined
below), and its agents and attorneys, as Agents and Attorneys-in-Fact to execute
on behalf of Eligible Lender Trustee or the Trust all such documents, reports,
filings, instruments, certificates and opinions as it should be the duty of
Eligible Lender Trustee or the Trust to prepare, file or deliver pursuant to the
Related Documents (as defined in the Administration Agreement) or pursuant to
Section 5.02 of the Trust Agreement (as defined in the Administration
Agreement), including without limitation, to appear for and represent Eligible
Lender Trustee and the Trust in connection with the preparation, filing and
audit of any federal, state and local tax returns pertaining to the Trust, and
with full power to perform any and all acts associated with such returns and
audits that the Eligible Lender Trustee could perform, including without
limitation, the right to distribute and receive confidential information, defend
and assert positions in response to audits, initiate and defend litigation, and
to execute waivers of restriction on assessments of deficiencies, consents to
the extension of any statutory or regulatory time limit, and settlements. For
the purpose of this Power of Attorney, the term "Administration Agreement" means
the Administration Agreement dated as of February 1, 1999, among the Trust, USA
Group Secondary Market Services, Inc., as Administrator, and Bankers Trust
Company, as Indenture Trustee, as such may be amended from time to time.
All powers of attorney for this purpose heretofore filed or executed by
Eligible Lender Trustee are hereby revoked.
A-1
<PAGE>
EXECUTED as of the first day of February 1999.
THE FIRST NATIONAL BANK OF CHICAGO,
not in its individual capacity but
solely as Eligible Lender Trustee
By:______________________________________
Name:
Title:
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
Before me, the undersigned authority, on this day personally appeared [ ]
known to me to be the person whose name is subscribed to the foregoing
instrument, and acknowledged to me that such person signed the same for the
purposes and considerations therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this [ ] day of March 1999.
_________________________________________
Notary Public in and for the
State of New York
_________________________________________
Printed Name of Notary Public
_________________________________________
Commission Expires
A-2
<PAGE>
EXHIBIT B
TO THE
ADMINISTRATION AGREEMENT
Form of Noteholders' Statement pursuant to Section 2(g) of Administration
Agreement. Capitalized terms used herein are defined in Appendix A thereto. It
should be noted, however, that while all the information listed below shall be
included in each Noteholders' Statement, the presentation thereof may vary from
that given below.
Quarterly Payment Date:
(i) Amount of principal being paid or distributed:
Class A-1 __________*
($__________
* per $1,000
original
principal amount of Notes)
Class A-2 __________*
($__________
* per $1,000
original principal
amount of Notes)
Subordinate __________*
($__________
* per $1,000
original principal
amount of Notes)
- ---------
* Portion of each such amount attributable to Reserve Account Excess:___________
(ii) Amount of interest being paid or distributed:
Class A-1 __________ ($_______ per
$1,000 original
principal amount of Notes)
B-1
<PAGE>
Class A-2 __________ ($_______ per
$1,000 original
principal amount of Notes)
Subordinate __________ ($_______ per
$1,000 original
principal amount of Notes)
(iii) Amount of Senior Noteholders' Interest Basis Carryover being paid or
distributed (if any) and amount remaining (if any):
(a) Distributed:__________ ($_______ per
$1,000 original principal
amount of Senior Notes)
(b) Balance:______________ ($_______ per
$1,000 original) principal
amount of Senior Notes)
(iv) Amount of Subordinate Noteholders' Interest Basis Carryover being
paid or distributed (if any) and amount remaining (if any):
(a) Distributed:__________ ($_______ per
$1,000 original principal
amount of Notes)
(b) Balance:______________ ($_______ per
$1,000 original principal
amount of Notes)
(v) Pool Balance at end of related Collection Period:
(vi) After giving effect to distributions on this Quarterly Payment Date:
(a) (1) outstanding principal amount of Class A-1 Notes:__________
(2) Class A-1 Note Pool Factor:__________
(b) (1) outstanding principal amount of Class A-2 Notes:__________
(2) Class A-2 Note Pool Factor:__________
B-2
<PAGE>
(c) (1) outstanding principal amount of Subordinate Notes:__________
(2) Subordinate Note Pool Factor:__________
(vii) Applicable Interest Rate:
In general:
(1) Three-Month LIBOR for the LIBOR Reset Period since the
previous Quarterly Payment Date was _____%; and
(2) the Adjusted Student Loan Rate for such Quarterly Interest
Period was _____%.
Class A-1 Note Rate: _____% (based on
[Note LIBOR Rate]
[Adjusted Student Loan Rate])
Class A-2 Note Rate: _____% (based on
[Note LIBOR Rate]
[Adjusted Student Loan Rate])
Subordinate Note Rate: _____% (based on
[Note LIBOR Rate]
[Adjusted Student Loan Rate])
(viii) Amount of Servicing Fee for related Collection Period including a
breakdown of the components of the Servicing Fee attributable to
each of the items specified in clauses II(i) through (ix) of
Section 3.06 of the Servicing Agreement and the amount of any
Servicing Fee Shortfall for such Quarterly Payment Date and for
each Monthly Payment Date following the immediately preceding
Quarterly Payment Date:
(ix) Amount of Administration Fee for related Collection
Period:__________ ($_______ 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
B-6
EXHIBIT 99.3
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
February 1, 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 0.10%.
"Class A-1 Note Final Maturity Date" means the July 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 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
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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 October 2029 Quarterly
Payment Date.
"Class A-2 Note LIBOR Rate" means, with respect to any Quarterly Interest
Period, Three-Month LIBOR for the related LIBOR Reset Period plus 0.25%.
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"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.
"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
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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 March 11, 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 $10,712,271.81.
"Collection Period" means, with respect to the first Quarterly Payment
Date, the period beginning on the Cutoff Date and ending on June 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.
"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
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business shall be administered, which office at the Closing Date is located at
Four Albany Street, New York, New York 10006, Attention: Corporate Trust and
Agency Group, Structured Finance Team (telephone: (212) 250-6864; facsimile:
(212) 250-6439); or at such other address as the Indenture Trustee may designate
from time to time by notice to the Noteholders 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 February 1, 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
$104,582,432.59.
"Delayed Delivery Loans" The pool of Serial Loans to be delivered to the
Trust on March 22, 1999 having as of February 12, 1999 an aggregate outstanding
principal balance of $102,409,084.25.
"Delaware Trustee" has the meaning set forth in Section 10.01 of the Trust
Agreement.
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"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 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
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(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"
(iv) "instrument"
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(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;
(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
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(vi) the Excess Spread, with respect to each of any two successive
Quarterly Payment Dates, commencing with the Quarterly Payment Date in
October 1999, 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 October 1999 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 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
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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 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 as of the
first and the last day of the related Collection Period.
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"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 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.
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"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.
"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.
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"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 February 1, 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 Bankers Trust Company, a New York banking
corporation, not in its individual capacity but solely as Indenture Trustee
under the Indenture.
"Independent" means, when used with respect to any specified Person, that
the Person (a) is in fact independent of the Issuer, any other obligor upon the
Notes, the Seller and any Affiliate of any of the foregoing Persons, (b) does
not have any direct financial interest or any material indirect financial
interest in the Issuer, any such other obligor, the Seller or any Affiliate of
any of the foregoing Persons and (c) is not connected with the Issuer, any such
other obligor, the Seller or any Affiliate of any of the foregoing Persons as an
officer, employee, promoter, underwriter, trustee, partner, director or person
performing similar functions.
"Independent Certificate" means a certificate or opinion to be delivered
to the Indenture Trustee under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.01 of the Indenture,
made by an Independent appraiser or other expert appointed by an Issuer Order
and approved by the Indenture Trustee in the exercise of reasonable care, and
such opinion or certificate shall state that the signer has read the
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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 $529,028,142.79.
"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.
"Issuer" means SMS Student Loan Trust 1999-A until a successor replaces it
and, thereafter, means the successor and, for purposes of any provision
contained in the Indenture and required by the TIA, each other obligor on the
Notes.
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"Issuer Order" and "Issuer Request" means a written order or request
signed in the name of the Issuer by any one of its Authorized Officers and
delivered to the Indenture Trustee.
"LIBOR Determination Date" means, with respect to any Quarterly Interest
Period, the day that is the second business day prior to the commencement of the
LIBOR Reset Period within such Quarterly Interest Period (or, in the case of the
initial LIBOR Reset Period, on the second business day prior to the Closing
Date). For purposes of this definition, a business day is any day in which banks
in the City of London and The City of New York are open for the transaction of
international business.
"LIBOR Reset Period" means the three-month period commencing on the
twenty-eighth day (or, if any such day is not a Business Day, on the next
succeeding Business Day) of each January, April, July and October and ending on
the day immediately preceding the following LIBOR Reset Period; provided,
however, that the initial LIBOR Reset Period will commence on the Closing Date.
"Lien" means a security interest, lien, charge, pledge, equity or
encumbrance of any kind, other than tax liens and any other liens, if any, which
attach to the respective Student Loan by operation of law as a result of any act
or omission by the related Obligor.
"Liquidated Student Loan" means any defaulted Financed Student Loan
liquidated by the Servicer or which the Servicer has, after using all reasonable
efforts to realize upon the such Student Loan, determined to charge off.
"Liquidation Proceeds" means, with respect to any Liquidated Student Loan,
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 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.
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"Loan Sale Agreement" means the Loan Sale Agreement dated as of February
1, 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; 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
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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 March 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.
"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
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no Collection Period ended in the preceding calendar month, calculated for each
preceding calendar month during the current Collection Period) minus, after the
Revolving Period, the Capitalized Interest Amount for such Collection Period or
for each such preceding calendar month, as the case may be.
"Net Trust Swap Payment" means, with respect to any Quarterly Payment
Date, the difference, if negative, between the regularly scheduled amount
(without regard to any carryover amounts or Termination Payments) owed by the
Swap Counterparty to the Trust on a Quarterly Payment Date and the regularly
scheduled amount (without regard to any carryover amounts or Termination
Payments) owed by the Trust to the Swap Counterparty on such Quarterly Payment
Date pursuant to Section 2 of the Swap Agreement.
"Net Trust Swap Payment Carryover Shortfall" means, with respect to any
Quarterly Payment Date with respect to which amounts are still owing to the Swap
Counterparty in respect of the Swap Agreement, the excess of (i) the Trust Swap
Payment Amount on the preceding Quarterly Payment Date over (ii) the amount
actually received by the Swap Counterparty out of the Available Funds or the
Reserve Account on such preceding Quarterly Payment Date plus interest on such
excess from such preceding Quarterly Payment Date to the current Quarterly
Payment Date at the rate of Three-Month LIBOR for the related Quarterly Interest
Period.
"Net Trust Swap Receipt" means, with respect to any Quarterly Payment
Date, the difference, if positive, between the regularly scheduled amount
(without regard to any carryover amounts or Termination Payments) owed by the
Swap Counterparty to the Trust on a Quarterly Payment Date and the regularly
scheduled amount (without regard to any carryover amounts or Termination
Payments) owed by the Trust to the Swap Counterparty on such Quarterly Payment
Date pursuant to Section 2 of the Swap Agreement.
"Net Trust Swap Receipt Carryover Shortfall" means, with respect to any
Quarterly Payment Date with respect to which amounts are still owing to the
Trust in respect of the Swap Agreement, the excess of (i) the Trust Swap Receipt
Amount on the preceding Quarterly Payment Date over (ii) the amount actually
paid by the Swap Counterparty to the Trust on such preceding Quarterly Payment
Date plus interest on such excess from such preceding Quarterly Payment Date to
the current Quarterly Payment Date at the rate of Three-Month LIBOR for the
related Quarterly Interest Period.
"New Loan" means a Financed Student Loan which (i) is made by an eligible
lender under the Higher Education Act to a Borrower who is not a Borrower under
any Initial Financed Student Loan, (ii) is made under a loan program which
existed as of the Closing Date, and (iii) is guaranteed by a Guarantor.
"91-Day Treasury Bills" means direct obligations of the United States with
a maturity of 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.
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"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 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.
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"Outstanding" means, as of the date of determination, all Notes
theretofore authenticated and delivered under this Indenture except:
(i) Notes theretofore cancelled by the Note Registrar or delivered
to the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which money in the
necessary amount has been theretofore deposited with the Indenture Trustee
or any Paying Agent in trust for the Noteholders thereof (provided,
however, that if such Notes are to be redeemed, notice of such redemption
has been duly given pursuant to the Indenture); and
(iii) Notes in exchange for or in lieu of other Notes which have
been authenticated and delivered pursuant to the Indenture unless proof
satisfactory to the Indenture Trustee is presented that any such Notes are
held by a bona fide purchaser;
provided, however, that in determining whether the Noteholders of the requisite
Outstanding amount of the Notes have given any request, demand, authorization,
direction, notice, consent or waiver hereunder or under any other Basic
Document, Notes owned by the Issuer, any other obligor upon the Notes, the
Seller or any Affiliate of any of the foregoing Persons shall be disregarded and
deemed not to be Outstanding, except that, in determining whether the Indenture
Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Notes that a
Responsible Officer of the Indenture Trustee either actually knows to be so
owned or has received written notice thereof shall be so disregarded. Notes so
owned that have been pledged in good faith may be regarded as Outstanding if the
pledgee establishes to the satisfaction of the Indenture Trustee the pledgee's
right so to act with respect to such Notes and that the pledgee is not the
Issuer, any other obligor upon the Notes, the Seller or any Affiliate of any of
the foregoing Persons.
"Outstanding Amount" means the aggregate principal amount of all Notes
Outstanding at the date of determination.
"Parity Date" means the first Quarterly Payment Date on which the
aggregate principal amount of the Notes, after giving effect to all
distributions on such date, is no longer in excess of the Pool Balance as of the
last day of the related Collection Period.
"Paying Agent" means the Indenture Trustee or any other Person that meets
the eligibility standards for the Indenture Trustee specified in Section 6.11 of
the Indenture and is authorized by the Issuer to make the payments to and
distributions from the Collection Account and payments of principal of and
interest and any other amounts owing on the Notes on behalf of the Issuer.
"Person" means any individual, corporation, estate, partnership, joint
venture, limited liability company, limited liability partnership, association,
joint stock company, trust
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(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 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
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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 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.
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"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.
"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 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
27
<PAGE>
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 $1,650,000.
"Responsible Officer" means, with respect to the Indenture Trustee, any
officer within the Corporate Trust Office of the Indenture Trustee, including
any vice president, assistant vice president, assistant treasurer, assistant
secretary, or any other officer of the Indenture Trustee customarily performing
functions similar to those performed by any of the above designated officers,
with direct responsibility for the administration of the Indenture and the other
Basic Documents on behalf of the Indenture Trustee and also, with respect to a
particular matter, any other officer to whom such matter is referred because of
such officer's knowledge of and familiarity with the particular subject.
"Revolving Period" means the period from the Closing Date until the first
to occur of (i) an Early Amortization Event or (ii) the last day of the
Collection Period preceding the April 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.
28
<PAGE>
"Secretary" means the Secretary of the Department, or any predecessor or
successor to the functions thereof under the Higher Education Act.
"Securities Act" means the federal Securities Act of 1933, as amended.
"Seller" means SMS, in its capacity as seller of the Financed Student
Loans.
"Senior Noteholder" means the Noteholder of a Senior Note.
"Senior Notes" means, collectively, the Class A-1 Notes and the Class A-2
Notes.
"Senior Noteholders' Distribution Amount" means, with respect to any
Quarterly Payment Date, the sum of the Class A-1 Noteholders' Interest
Distribution Amount, the Class A-2 Noteholders' Interest Distribution Amount and
the Senior Noteholders' Principal Distribution Amount for such Quarterly Payment
Date.
"Senior Noteholders' Interest Basis Carryover" means, with respect to each
Quarterly Payment Date, the Class A-1 Noteholders' Interest Basis Carryover and
the Class A-2 Noteholders' Interest Basis Carryover for such Quarterly Payment
Date.
"Senior Noteholders' Interest Distribution Amount" means, with respect to
any Quarterly Payment Date, the sum of (i) the Class A-1 Noteholders' Interest
Distribution Amount and (ii) the Class A-2 Noteholders' Interest Distribution
Amount, each for such Quarterly Payment Date; provided, however, that the Senior
Noteholders' Interest Distribution Amount will not include any Senior
Noteholders' Interest Basis Carryover.
"Senior Noteholders' Principal Carryover Shortfall" means, as of the close
of any Quarterly Payment Date, the excess of (i) the Senior Noteholders'
Principal Distribution Amount on such Quarterly Payment Date over (ii) the
amount of principal actually distributed to the Senior Noteholders on such
Quarterly Payment Date.
"Senior Noteholders' Principal Distribution Amount" means, with respect to
any Quarterly Payment Date (if the Revolving Period has terminated on or prior
to the end of the related Collection Period with respect to such Quarterly
Payment Date), the Principal Distribution Amount for such Quarterly Payment Date
plus the Senior Noteholders' Principal Carryover Shortfall as of the close of
the preceding Quarterly Payment Date; provided, however, that the Senior
Noteholders' Principal Distribution Amount will not exceed the outstanding
aggregate principal balance of the Senior Notes. In addition, (i) on the Class
A-1 Note Final Maturity Date, the principal required to be distributed to Class
A-1 Noteholders will include the amount required to reduce the outstanding
principal balance of the Class A-1 Notes to zero and (ii) on the Class A-2 Note
Final Maturity Date, the principal required to be distributed to 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
29
<PAGE>
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 February
1, 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.
"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" means March 22, 1999.
"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) $825,000; provided, however, that in no event shall the Specified
Reserve Account Balance exceed the sum of the outstanding principal balance of
the Notes.
"Stafford Loan" means a Student Loan designated as such that is made under
the Robert T. Stafford Student Loan Program in accordance with the Higher
Education Act.
"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.
30
<PAGE>
"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 2035 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
0.55%.
"Subordinate Note Pool Factor" as of the close of business on a Quarterly
Payment Date means a seven-digit decimal figure equal to the outstanding
principal balance of the Subordinate Notes divided by the original outstanding
principal balance of the Subordinate Notes. The Subordinate Note Pool Factor
will be 1.0000000 as of the Closing Date; thereafter, the Subordinate Note Pool
Factor will decline to reflect reductions in the outstanding principal balance
of the Subordinate Notes.
"Subordinate Note Rate" means, with respect to any Quarterly Payment Date
and the related Quarterly Interest Period, the interest rate per annum (computed
on the basis of the actual number of days in such Quarterly Interest Period over
a year of 360 days) equal to the lesser of (i) the Subordinate Note LIBOR Rate
for such Quarterly Interest Period and (ii) the Adjusted Student Loan Rate for
such Quarterly Interest Period; provided, however, that, notwithstanding the
foregoing, the Subordinate Note Rate for the first Quarterly Interest Period
shall be equal to the Subordinate Note LIBOR Rate for such Quarterly Interest
Period.
"Subordinate Noteholder" means the Noteholder of a Subordinate Note.
"Subordinate Noteholders' Distribution Amount" means, with respect to any
Quarterly Payment Date, the Subordinate Noteholders' Interest Distribution
Amount for such Quarterly Payment Date plus, with respect to any Quarterly
Payment Date on and after which the Senior Notes have been paid in full, the
Subordinate Noteholders' Principal Distribution Amount for such Quarterly
Payment Date.
"Subordinate Noteholders' Interest Basis Carryover" means, with respect to
each Quarterly Payment Date commencing in October 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
31
<PAGE>
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; 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.
32
<PAGE>
"Subsequent Cutoff Date" means for (i) the Delayed Delivery Loans,
February 12, 1999 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 March
2, 1999 (Swap Transaction Ref. No. 35125), 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 General Re Products Financial Corporation, an
indirect, wholly-owned subsidiary of General Re Corporation which guarantees the
obligations of the Swap Counterparty, and any replacement swap counterparty
appointed in accordance with the terms of the Swap Agreement.
"Tax Characterization Amendment" has the meaning specified in Section 5.04
of the Trust Agreement.
"T-Bill Rate" means, on any day, the weighted average per annum discount
rate (expressed on a bond equivalent basis and applied on a daily basis) for
91-day Treasury Bills sold at the most recent 91-day Treasury Bill auction prior
to such date as reported by the U.S. Treasury Department. In the event that the
results of the auctions of 91-day Treasury Bills cease to be published or
reported as provided above, or that no such auction is held in a particular
week, then the "T-Bill Rate" in effect as a result of the last such publication
or report shall remain in effect until such time, if any, as the results of
auctions of 91-day Treasury shall again be so published or reported or such
auction is held, as the case may be. The T-Bill Rate shall be subject to a
Lock-In Period (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
33
<PAGE>
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.
"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 February 1, 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
34
<PAGE>
Article II of the Loan Sale Agreement all funds on deposit from time to time in
the Trust Accounts and all other property of the Trust from time to time,
including any rights of the Eligible Lender Trustee and the Trust pursuant to
the Loan Sale Agreement, the Servicing Agreement and the Administration
Agreement.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939 as in
force on the date hereof, unless otherwise specifically provided.
"Trust Swap Payment Amount" means, with respect to any Quarterly Payment
Date, the sum of (i) if the Swap Agreement is still in effect, the Net Trust
Swap Payment for such Quarterly Payment Date and (ii) the Net Trust Swap Payment
Carryover Shortfall for such Quarterly Payment Date; provided, however, that
Termination Payments (other than in respect of clauses (i) and (ii) above) shall
not be deemed to be part of the Trust Swap Payment Amount.
"Trust Swap Receipt Amount" means, with respect to any Quarterly Payment
Date, the sum of (i) if the Swap Agreement is still in effect, the Net Trust
Swap Receipt for such Quarterly Payment Date and (ii) the Net Trust Swap Receipt
Carryover Shortfall for such Quarterly Payment Date.
"UCC" means, unless the context otherwise requires, the Uniform Commercial
Code, as in effect in the relevant jurisdiction, as amended from time to time.
"United States Person" means a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in, or under the
laws of, the United States or any political subdivision thereof, or an estate
whose income is subject to United States federal income tax regardless of its
source, or a trust if a court within the United States is able to exercise
primary supervision over the administration of the trust and one or more United
States fiduciaries have the authority to control all substantial decisions of
the trust.
35
EXHIBIT 99.4
SCHEDULE
to the Master Agreement
dated as of March 2, 1999
between
General Re Financial Products Corporation
("Party A"),
a Delaware corporation
and
SMS Student Loan Trust 1999-A,
("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 designate an Early Termination Date
for the Sole Transaction (as defined below) under Section 6 of
<PAGE>
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.
(ii) "Breach of Agreement" Applicable. Not Applicable.
(iii) "Credit Support Default" Applicable. Not Applicable.
(iv) "Misrepresentation" Applicable. Not Applicable.
(v) "Default under Specified Not Applicable. Not Applicable.
Transaction"
(vi) "Cross Default" Not Applicable. Not Applicable.
(vii) "Bankruptcy" Applicable. Applicable.
(viii)"Merger Without Assumption" Applicable. Not Applicable.
(ix) "Additional Event of Not Applicable. Applicable
Default" specified in
Part 1(h) (Acceleration
of Notes)
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 of Section 5(a)(vii),
(ii) deleting the period at the end of Section 5(a)(viii) and adding the
clause "; or" at the end thereof and (iii) adding the following language
at the end of Section 5(a):
<PAGE>
"(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-A)."
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 applies to Party A:-
Party A is a corporation organized under the laws of Delaware.
(ii) The following representation applies to Party B:-
Party B is a business trust organized under the laws of Delaware.
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:-
<PAGE>
(a) Tax forms, documents or certificates to be delivered are:
<TABLE>
<CAPTION>
Party required to Form, Document Date by which
deliver document or Certificate to be Delivered
---------------- -------------- ---------------
<S> <C> <C>
Party A Any form or document that may be required or Upon the reasonable request of such other
and reasonably requested by the other party in party.
Party B order to allow such other party or its
Credit Support Provider to make a payment
under this Agreement or any applicable
Credit Support Document without any
deduction or withholding for or on account
of any tax or with such deduction or
withholding at a reduced rate
</TABLE>
(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 Opinions of counsel to Party A and Upon execution of this No
Party A's Credit Support Provider Agreement.
substantially in the form of Exhibit B
and Exhibit C, respectively, to this
Schedule.
Party A An incumbency certificate with respect Upon execution of this Yes
to the signatory of this Agreement and Agreement.
the General Re Guarantee.
Party A A guarantee, dated as of the date Upon execution of this No
hereof, issued by General Re Agreement.
Corporation in favor of Party B
in the form of Exhibit A
hereto (the "General Re Guarantee").
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>
<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
Agreement (and, to the extent not opinions 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 E 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: General Re Financial Products Corporation
Rockefeller Center
630 Fifth Avenue, Suite 450
New York, New York 10111
Attention: Head of Operations
Telephone: 212-307-2310
Facsimile: 212-307-2288
<PAGE>
Telex: 49605673 Answerback: GENRE FP NY
Address for notices or communications to Party B:-
Address: SMS Student Loan Trust 1999-A
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 a copy to:
Address: SMS Student Loan Trust 1999-A
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 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:-
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):
<PAGE>
Party A appoints as its Process Agent: Not Applicable.
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 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: General Re Guarantee.
In the case of Party B: Not Applicable.
(g) Credit Support Provider.
Credit Support Provider means in relation to Party A: General Re
Corporation.
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
<PAGE>
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 the 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 March 2, 1999 and bears reference number 35125, 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 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:
<PAGE>
(A) Party B is the Defaulting Party (provided that this
priority shall apply only with respect to (1) the Trust Swap Payment
Amount (and not the remainder of the Termination Payment), 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) and (2) the Termination Payment, to the extent that
Party B is the Defaulting Party with respect to an Event of Default
specified in Section 5(a)(vii) of the Agreement (Bankruptcy), an
Additional Event of Default specified in Part 1(h) of the Agreement
(Acceleration of Notes) or an Additional Termination Event), 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)(vi), 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.
(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 and its Credit Support
Provider 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:
<PAGE>
"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.
(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:
<PAGE>
(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. The prompt payment of all amounts due and
payable by Party A under this Part 5(i)(3) shall be guaranteed by Party
A's Credit Support Provider or its successor.
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:
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").
<PAGE>
(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 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 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.
<PAGE>
(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 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 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;
<PAGE>
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
February 1, 1999 (the "Administration Agreement") among Party B, USA Group
Secondary Market Services, Inc. ("SMS"), as administrator (the
"Administrator"), and Bankers Trust Company, 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 March 4, 1999, the Prospectus Supplement dated March
4, 1999 and the Private Placement Memorandum dated March 4, 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 February 1, 1999 between Party
B and Bankers Trust Company, 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 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's Credit Support Provider or any successor thereto
is withdrawn or reduced below "A3" or its equivalent by any Swap Rating
Agency then rating Party A's Credit Support Provider.
"Senior Note Underwriting Agreement" means the Senior Note Underwriting
Agreement dated as of March 11, 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 March 11, 1999 between SMS, as seller, and Credit
Suisse First Boston Corporation, as representative of the several
purchasers of the Subordinate Notes.
<PAGE>
"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 March 11, 1999 addressed to Credit
Suisse First Boston Corporation, as representative of the several
underwriters of the Notes.
<PAGE>
The parties executing this Schedule have executed the Master Agreement and
have agreed as to the contents of this Schedule.
GENERAL RE FINANCIAL PRODUCTS
CORPORATION
By: ______________________________________
Name:
Title:
SMS STUDENT LOAN TRUST 1999-A
By: The First National Bank of Chicago,
not in its individual capacity but
solely as Eligible Lender Trustee
By: ______________________________________
Name:
Title:
<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 describe 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, 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
<PAGE>
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.
<PAGE>
Confirmation
Ref. No. 35125
<PAGE>
Exhibit A Form of General Re Guarantee
<PAGE>
Exhibit B Form of Opinion of Party A
<PAGE>
Exhibit C Form of Opinion of Party A's Credit Support Provider
<PAGE>
Exhibit D Certificates of Incumbency
<PAGE>
Exhibit E
SMS Student Loan Trust 1999-A
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 February 1, 1999 among
SMS Student Loan Trust 1999-A, the Corporation and Bankers Trust Company, as
indenture trustee.
<PAGE>
IN WITNESS WHEREOF, each of the above-named authorized officers hereunto
signed his or her name.
Dated: March __, 1999
By: ____________________________
Name:
Title:
By: ____________________________
Name:
Title:
EXHIBIT 99.5
Ref. No. 35125
Swap Documentation March 2, 1999
SMS STUDENT LOAN TRUST 1999-A 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: GENERAL RE FINANCIAL PRODUCTS CORPORATION
Swap Documentation: Jeffrey Struckhoff Phone: (212) 541-2522
Swap Transaction Ref. No. 35125
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") guaranteed by General Re
Corporation, entered into between GENERAL RE FINANCIAL PRODUCTS CORPORATION
("Party A") and SMS STUDENT LOAN TRUST 1999-A ("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 (the
"Definitions") as published by the International Swaps and Derivatives
Association, Inc. ("ISDA") are incorporated herein. In the event that Party A
and the 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 the 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 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.
<PAGE>
Ref. No. 35125
1. The terms of the particular Transaction to which this Confirmation relates
are as follows:
Notional Amount: USD 396,000,000 with respect to the
Initial Calculation Period and, for each
Calculation Period thereafter, the
lesser of (i) the Outstanding Principal
Amount for such Collection 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: 2-Mar-1999
Effective Date: 11-Mar-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-Apr-2009
subject to adjustment in accordance with
the Following Business Day Convention.
Floating Rate Amounts I:
Floating Rate Payer I: Party B
Floating Rate Payer I
Payment Dates: Each 28-Jul, 28-Oct, 28-Jan, and 28-Apr,
commencing 28-Jul-1999, to and including
the Termination Date, subject to
adjustment in accordance with the
Following Business Day Convention.
-2-
<PAGE>
Ref. No. 35125
Floating Rate
Payer I Initial From and including 11-Mar-1999 to but
Calculation Period: excluding 28-Jul-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
therefore the words "US Treasury 3MO
T-Bill Auction Results/Average
Investment Yield".
Floating Rate Payer I
Day Count Fraction: Actual/365I
Floating Rate Payer I
Designated Maturity: 3 Months
Floating Rate Payer I
Spread: Plus 0.810000%
Floating Rate Payer I
Compounding: Not applicable
Method of Averaging: Weighted Average
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.
-3-
<PAGE>
Ref. No. 35125
Floating Rate Amounts II:
Floating Rate Payer II: Party A
Floating Rate Payer II
Payment Dates: Each 28-Jul, 28-Oct, 28-Jan, and 28-Apr,
commencing 28-Jul-1999, to and including
the Termination Date, subject to
adjustment in accordance with the
Following Business Day Convention
Floating Rate Payer II
Initial Calculation From and including 11-Mar-1999 to but
Period: excluding 28-Jul-1999
Floating Rate Payer II
Floating Rate for
Initial Calculation
Period: 5.0000%
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 The first day of each Calculation Period
Reset Dates:
Business Days: New York and London
Floating Rate Payer II
Additional Floating Amount: The Net Trust Swap Receipt Carryover
Shortfall Amount, if any, on the related
Payment Date.
-4-
<PAGE>
Ref. No. 35125
2. Party A and Party B each agrees to provide the following Credit Support
Document:
Party A: Guarantee delivered by General Re Corporation
Party B: Not Applicable
3. Account Details:
Payments to Party A:
CHIPS UID No. 303237
CHASE MANHATTAN BANK - NEW YORK
Favour: GENERAL RE FINANCIAL PRODUCTS CORPORATION
Account No. 910-2-639847
ABA 021000021
Payments to Party B:
The First National Bank of Chicago
Chicago, IL
ABA: 071-000013
Clearing Account: 4811-5377
Credit Trust #: 204590-000
Attn: Steve Husbands, ____, ref: SMS Student Trust 99-A
4. 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.
-5-
<PAGE>
Ref. No. 35125
(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>
Ref. No. 35125
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,
GENERAL RE FINANCIAL
PRODUCTS CORPORATION
By:
_____________________________
Name:
Title:
Confirmed as of the date first written:
SMS STUDENT LOAN TRUST 1999-A
By: The First National Bank of Chicago,
not in its individual capacity but solely
as Eligible Lender Trustee
By: ______________________________
Name:
Title:
<PAGE>
Ref. No. 35125
Exhibit A
================================================================================
Calculation Period
Commencement Date Notional Amount
----------------- ---------------
11-Mar-99 396,000,000
28-Jul-99 396,000,000
28-Oct-99 396,000,000
28-Jan-00 396,000,000
28-Apr-00 396,000,000
28-Jul-00 396,000,000
28-Oct-00 396,000,000
28-Jan-01 396,000,000
28-Apr-01 396,000,000
28-Jul-01 381,804,230
28-Oct-01 367,433,929
28-Jan-02 353,268,198
28-Apr-02 339,479,044
28-Jul-02 326,174,173
28-Oct-02 313,140,811
28-Jan-03 300,308,801
28-Apr-03 287,616,202
28-Jul-03 275,096,020
28-Oct-03 262,817,043
28-Jan-04 250,769,901
28-Apr-04 238,944,984
28-Jul-04 227,369,772
28-Oct-04 216,078,675
28-Jan-05 205,030,101
28-Apr-05 194,218,770
28-Jul-05 183,615,844
28-Oct-05 173,212,512
28-Jan-06 163,019,526
28-Apr-06 153,033,805
28-Jul-06 143,243,392
28-Oct-06 133,657,412
28-Jan-07 124,276,937
28-Apr-07 115,114,982
28-Jul-07 106,173,194
28-Oct-07 97,431,696
28-Jan-08 88,906,829
28-Apr-08 80,607,571
28-Jul-08 72,561,065
28-Oct-08 64,803,646
28-Jan-09 57,624,886
28-Apr-09 -
================================================================================
