SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported) MARCH 21, 1997
Trans-World Insurance Company d/b/a Educaid and ClassNotes Inc.(as
Sellers) on behalf of ClassNotes Trust 1997-I.
ClassNotes Inc., as Seller
Trans-World Insurance Company d/b/a Educaid, as Seller
(Exact name of registrant as specified in its charter)
Delaware 22-3400682
Arizona 333-18877 86-0255348
(State or other (Commission (IRS Employer
jurisdiction of incorporation) File Number) ID Number)
3301 C STREET, SUITE 100-M, SACRAMENTO, CALIFORNIA 95816
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number,
including area code: (916) 446-5000
N/A
(Former name or former address, if changed since last report)
<PAGE>
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) EXHIBITS
EXHIBIT NO.
1.1 Underwriting Agreement, dated March 19,
1997, between ClassNotes Trust 1997-I,
Trans-World Insurance Company,
ClassNotes Inc., The Money Store and
Smith Barney Inc.
1.2 Terms Agreement, dated March 19, 1997,
between ClassNotes Trust 1997-I, Trans-
World Insurance Company, ClassNotes
Inc., The Money Store and Smith Barney
Inc.
4.1 Indenture, dated as of March 21, 1997,
between The York Bank and Trust
Company, as Eligible Lender Trustee,
and Bankers Trust Company, as
Indenture Trustee.
4.2 First Terms Supplement, dated as of
March 21, 1997, between The York Bank
and Trust Company, as Eligible Lender
Trustee, and Bankers Trust Company, as
Indenture Trustee.
4.3 Trust Agreement, dated as of March 21,
1997, between Trans-World Insurance
Company d/b/a Educaid, ClassNotes Inc.
and The York Bank and Trust Company,
as Eligible Lender Trustee.
99.1 Sale and Servicing Agreement, dated as
of February 28, 1997, among The York
Bank and Trust Company, as Eligible
Lender Trustee, Trans-World Insurance
Company d/b/a Educaid, as Seller,
Master Servicer and Administrator,
ClassNotes Inc., as Seller and Master
Servicer, and The Money Store Inc.
<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 thereunto duly authorized.
CLASSNOTES TRUST 1997-I
By:
TRANS-WORLD INSURANCE COMPANY, Seller
CLASSNOTES INC., Seller
By: /S/ MORTON DEAR
Name: Morton Dear
Title: Executive Vice President
of Trans-World Insurance Company
d/b/a Educaid and ClassNotes Inc.
Dated: April 2, 1997
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION OF EXHIBIT PAGE NO.
1.1 Underwriting Agreement, dated March 19,
1997, between ClassNotes Trust 1997-I,
Trans-World Insurance Company,
ClassNotes Inc., The Money Store and
Smith Barney Inc.....................................
1.2 Terms Agreement, dated March 19, 1997,
between ClassNotes Trust 1997-I, Trans-
World Insurance Company, ClassNotes Inc.,
The Money Store and Smith Barney Inc.................
4.1 Indenture, dated as of March 21, 1997,
between The York Bank and Trust Company,
as Eligible Lender Trustee, and Bankers
Trust Company, as Indenture Trustee..................
4.2 First Terms Supplement, dated as of
March 21, 1997, between The York Bank
and Trust Company, as Eligible Lender
Trustee, and Bankers Trust Company, as
Indenture Trustee....................................
4.3 Trust Agreement, dated as of March 21,
1997, between Trans-World Insurance
Company d/b/a Educaid, ClassNotes Inc.
and The York Bank and Trust Company,
as Eligible Lender Trustee...........................
99.1 Sale and Servicing Agreement, dated as
of February 28, 1997, among The York Bank
and Trust Company, as Eligible Lender
Trustee, Trans-World Insurance Company
d/b/a Educaid, as Seller, Master Servicer
and Administrator, ClassNotes Inc., as
Seller and Master Servicer, and The Money
Store Inc............................................
Exhibit 1.1
EXECUTION COPY
CLASSNOTES TRUST 1997-I
$281,000,000 ASSET BACKED NOTES
SERIES 1997-1
UNDERWRITING AGREEMENT
March 19, 1997
SMITH BARNEY INC.
390 Greenwich Street
New York, New York 10013
Dear Sirs:
Trans-World Insurance Company, an Arizona corporation doing business as
Educaid ("TWIC") and ClassNotes, Inc. ("ClassNotes" and, together with TWIC, the
"Companies"), each a wholly owned subsidiary of The Money Store Inc., a New
Jersey corporation ("The Money Store"), have formed a trust known as ClassNotes
Trust 1997-I (the "Trust") under the laws of the Commonwealth of Pennsylvania
and the Companies propose to cause the Trust to sell to Smith Barney Inc. (the
"Underwriter"), pursuant to the terms of this Underwriting Agreement,
$281,000,000 of Asset Backed Notes, Series 1997-1, Class A-1, Class A-2 and
Class A-3 (the "Notes"). The York Bank and Trust Company, a Pennsylvania bank
and trust company, will act as eligible lender trustee (the "Eligible Lender
Trustee") of the Trust. The Notes will be issued under an indenture (the "Master
Indenture") between the Trust and Bankers Trust Company, as indenture trustee
("Indenture Trustee"), as supplemented by a related First Terms Supplement (the
"First Terms Supplement" and collectively with the Master Indenture, the
"Indenture"). Upon issuance, the Notes will be secured by, among other things,
Financed Student Loans (as defined in the Sale and Servicing Agreement referred
to below) pledged to the Indenture Trustee and described in the Prospectus (as
defined in Section 3 below). This Agreement, the Sale and Servicing Agreement,
the Indenture and the Indemnification Agreement dated March 21, 1997, among
AMBAC Indemnity Corporation, The Money Store and the Underwriter shall
collectively hereinafter be referred to as the "Basic Documents." Capitalized
terms used herein without definition shall have the meanings ascribed to them in
the Sale and Servicing Agreement dated as of February 28, 1997, the ("Sale and
Servicing Agreement") among the Trust, the Companies, the Eligible Lender
Trustee and The Money Store or the Prospectus.
The Companies propose, upon the terms and conditions set forth herein, to
cause the Trust to enter into an agreement (the "Terms Agreement") providing for
the sale of the Notes to the Underwriter. The Terms Agreement shall specify,
among other matters, the principal amount of the Notes to be sold, the class
designations, the interest rate for each such class and, if variable, the
initial interest rate and the interest rate adjustment dates, any terms not
otherwise specified in the Master Indenture, the price at which the Notes are to
be purchased by the Underwriter or the method by which the price at which the
Notes are to be purchased will be determined. The Terms Agreement, which shall
be substantially in the form of Exhibit A hereto, may take the form of an
exchange of any standard form of written telecommunication among the
Underwriter, the Companies, the Trust and The Money Store.
The Companies, the Trust and The Money Store wish to confirm as follows
this agreement with the Underwriter in connection with the purchase and resale
of the Notes.
1. Agreements to Sell, Purchase and Resell. (a) The Trust hereby agrees,
subject to all the terms and conditions set forth herein and in the Terms
Agreement, to sell to the Underwriter and, upon the basis of the
representations, warranties and agreements of the Companies and The Money Store
herein contained and subject to all the terms and conditions set forth herein
and in the Terms Agreement, the Underwriter agrees to purchase from the Trust
all of the Notes at such respective purchase prices as may be described in the
Terms Agreement executed by the Companies, the Trust, The Money Store and the
Underwriter pursuant to the terms hereof.
(b) It is understood that the Underwriter proposes to offer the Notes for
sale to the public (which may include selected dealers) as set forth in the
Prospectus.
2. Delivery of the Notes and Payment Therefor. Delivery to the Underwriter
of and payment for the Notes to be sold pursuant to the Terms Agreement shall be
made at the office of Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York,
New York, NY 10038, at 10:00 A.M., New York City time, on March 21, 1997 (the
"Closing Date"). The place of such closing and the Closing Date may be varied by
agreement among the Underwriter, the Trust and the Companies.
The Notes will be delivered to the Underwriter against payment of the
purchase price therefor to the Trust in Federal Funds, by wire, or such other
form of payment as to which the parties may agree. Each Class of Notes will be
evidenced by a single global security in definitive form and/or by additional
definitive securities, and will be registered, in the case of the global Classes
of Notes, in the name of Cede & Co. as nominee of The Depository Trust Company
("DTC"), and in the other cases, in such names and in such denominations as the
Underwriter shall request prior to 1:00 p.m., New York City time, no later than
the business day preceding the Closing Date. The Notes to be delivered to the
Underwriter shall be made available to the Underwriter in New York City for
inspection and packaging not later than 9:30 a.m., New York City time, on the
business day next preceding the Closing Date.
3. Representations and Warranties of the Companies and The Money Store. The
Companies and The Money Store represent and warrant to the Underwriter that:
(a) A registration statement on Form S-3 (No. 333- 18877), including a
prospectus and such amendments thereto as may have been required to the date
hereof, relating to the Notes and the offering thereof in accordance with Rule
415 under the Securities Act of 1933, as amended (the "Act"), has been filed
with the Securities and Exchange Commission (the "SEC") and such registration
statement, as amended, has become effective; such registration statement, as
amended, and the prospectus relating to the sale of the Notes offered thereby
constituting a part thereof, as amended or supplemented (including the base
prospectus and any prospectus supplement filed with the Commission pursuant to
Rule 424(b) under the Act) are respectively referred to herein as the
"Registration Statement" and the "Prospectus"; and the conditions to the use of
a registration statement on Form S-3 under the Act, as set forth in the General
Instructions to Form S-3, and the conditions of Rule 415 under the Act, have
been satisfied with respect to the Registration Statement;
(b) On the effective date of the Registration Statement, the Registration
Statement and the Prospectus conformed in all respects to the requirements of
the Act, the rules and regulations of the SEC (the "Rules and Regulations") and
the Trust Indenture Act of 1939, as amended, and the rules and regulations
thereunder (the "Trust Indenture Act"), and did not include any untrue statement
of a material fact or, in the case of the Registration Statement, omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading and, in the case of the Prospectus, omit to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, and on the date
of this Agreement and the Terms Agreement, the Registration Statement and the
Prospectus will conform in all respects to the requirements of the Act, the
Rules and Regulations and the Trust Indenture Act, and neither of such documents
included or will include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that the foregoing does
not apply to statements in or omissions from the Registration Statement or the
Prospectus based upon written information furnished to the Company by the
Underwriter specifically for use therein.
(c) The Commission has not issued and, to the best knowledge of the
Companies, is not threatening to issue any order preventing or suspending the
use of the Registration Statement.
(d) As of each Closing Date, each consent, approval, authorization or order
of, or filing with, any court or governmental agency or body which is required
to be obtained or made by the Companies or their affiliates for the consummation
of the transactions contemplated by this Agreement and the Terms Agreement shall
have been obtained, except as otherwise provided in the Basic Documents.
(e) The Master Indenture and the First Terms Supplement relating to the
Notes to be sold on the Closing Date (the "First Terms Supplement") have been
duly and validly authorized by the Trust and, upon their execution and delivery
by the Trust and assuming due authorization, execution and delivery by the
Trustee, will be valid and binding agreements of the Trust, enforceable in
accordance with their terms, except as enforcement thereof may be limited by
bankruptcy, insolvency or other similar laws affecting creditors' rights
generally and conform in all material respects to the description thereof in the
Prospectus.
(f) The Notes have been duly authorized by the Trust and on the Closing
Date, when executed by the Trust and authenticated by the Trustee in accordance
with the Indenture, and delivered to the Underwriter against payment therefor in
accordance with the terms hereof, will have been validly issued and delivered,
and will constitute valid and binding obligations of the Trust entitled to the
benefits of the Indenture and enforceable in accordance with their terms, except
as enforcement thereof may be limited by bankruptcy, insolvency, moratorium,
fraudulent conveyance or other similar laws relating to or affecting creditors'
rights generally and court decisions with respect thereto, and the Notes will
conform in all material respects to the description thereof in the Prospectus.
(g) Each of TWIC, ClassNotes and The Money Store is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Arizona, the State of Delaware and the State of New Jersey, respectively, with
full corporate power and authority to own, lease and operate its properties and
to conduct its business as conducted on the date hereof, and is duly registered
and qualified to conduct its business and is in good standing in each
jurisdiction or place where the nature of its properties or the conduct of its
business requires such registration or qualification, except where the failure
so to register or qualify does not have a material adverse effect on the
condition (financial or other), business, prospects, properties, net worth or
results of operations of TWIC, ClassNotes or The Money Store, respectively. (h)
The Trust is a business trust duly formed and validly existing under the laws of
the Commonwealth of Pennsylvania with full power and authority to own and pledge
its assets and to issue the Notes as described in the Prospectus.
(i) There are no legal or governmental proceedings pending or, to the
knowledge of the Companies or The Money Store, threatened, against the
Companies, The Money Store or the Trust, or to which the Companies, The Money
Store, the Trust or any of their respective properties is subject, that are not
disclosed in the Prospectus or that will not be disclosed in any subsequent
amendment or supplement to the Prospectus and which, if adversely decided, are
reasonably likely to materially affect the issuance of the Notes or the
consummation of the transactions contemplated hereby or by the Basic Documents.
(j) Neither the offer, sale or delivery of the Notes by the Trust nor the
execution, delivery or performance of this Agreement and the Terms Agreement by
the Companies, the Trust and The Money Store nor the consummation by the
Companies, the Trust and The Money Store of the transactions contemplated hereby
or thereby (i) requires or will require any consent, approval, authorization or
other order of, or registration or filing with, any court, regulatory body,
administrative agency or other governmental body, agency or official (except for
compliance with the securities or Blue Sky laws of various jurisdictions, the
qualification of the Indenture under the Trust Indenture Act and such other
consents, approvals or authorizations as shall have been obtained prior to the
Closing Date) or conflicts or will conflict with or constitutes or will
constitute a breach of, or a default under, the organizational documents or
bylaws of the Companies, the Trust or The Money Store or (ii) conflicts or will
conflict with or constitutes or will constitute a breach of, or a default under,
in any material respect, any material agreement, indenture, lease or other
instrument to which the Companies, the Trust or The Money Store is a party or by
which the Companies, the Trust or The Money Store or any of their respective
properties may be bound, or violates or will violate in any material respect any
statute, law, regulation or filing or judgment, injunction, order or decree
applicable to the Companies, the Trust or The Money Store or any of their
respective properties, or will result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Companies, the Trust or
The Money Store pursuant to the terms of any agreement or instrument to which
any is a party or by which any may be bound or to which any of their respective
properties is subject other than as contemplated by the Basic Documents.
(k) The Companies, the Trust and The Money Store each have all requisite
power and authority to execute, deliver and perform its obligations under this
Agreement and the Terms Agreement; the execution and delivery of, and the
performance by each of the Companies, the Trust and The Money Store of its
respective obligations under, this Agreement have been duly and validly
authorized by the Companies, the Trust and The Money Store, respectively, (and
the execution, delivery of, and the performance by each of the Companies, the
Trust and The Money Store of its respective obligations under, the Terms
Agreement will be duly and validly authorized by the Companies, the Trust and
The Money Store, respectively) and this Agreement has been and the Terms
Agreement will be, duly executed and delivered by each of them and constitutes
or in the case of the Terms Agreement, will constitute, the valid and legally
binding agreement of each of them, enforceable against each of them in
accordance with its terms, except as the enforcement hereof may be limited by
bankruptcy, insolvency, moratorium, fraudulent conveyance or other similar laws
relating to or affecting creditors' rights generally and court decisions with
respect thereto and subject to the applicability of general principles of
equity, and except as rights to indemnity and contribution hereunder may be
limited by Federal or state securities laws or principles of public policy.
(l) Each of the Companies has, and has no reason to believe that any facts
exist which would result in the revocation or termination of, such permits,
licenses, agreements, and other approvals or authorizations of governmental or
regulatory authorities ("Permits") as are necessary under applicable law to
originate hold and otherwise deal in Financed Student Loans, except to the
extent that the failure to have such Permits would not have a material adverse
effect on the ability of such Company to provide Financed Student Loans to the
Trust.
(m) Neither the Trust nor the Company is subject to registration as an
"investment company" under the Investment Company Act of 1940, as amended (the
"1940 Act").
(n) The representations and warranties made by (i) the Trust in the
Indenture and made in any officer's certificate of the Eligible Lender Trustee
delivered pursuant to the Indenture and (ii) the Companies and The Money Store
in the Sale and Servicing Agreement and made in any Officer's Certificate of the
Companies or The Money Store will be true and correct at the time made and on
and as of the Closing Date.
4. Agreements of the Companies and The Money Store. The Companies and The
Money Store agree with the Underwriter as follows:
(a) In connection with the execution of the Terms Agreement, the Companies
will prepare a supplement to the Prospectus setting forth the amount of the
Notes covered thereby and the terms thereof not otherwise specified in the
Prospectus, the price at which the Notes are to be purchased by the Underwriter,
either the initial public offering price or the method by which the price at
which the Notes are to be sold will be determined, the selling concessions and
reallowances, if any, and such other information as the Underwriter and the
Companies deem appropriate in connection with the offering of the Notes, and the
Companies will timely file such supplement to the prospectus with the SEC
pursuant to Rule 424(b) under the Act, but the Companies will not file any
amendments to the Registration Statement as in effect with respect to the Notes
or any amendments or supplements to the Prospectus, unless it shall first have
delivered copies of such amendments or supplements to the Underwriter, or if the
Underwriter shall have reasonably objected thereto promptly after receipt
thereof; the Companies will immediately advise the Underwriter or the
Underwriter's counsel (i) when notice is received from the SEC that any post-
effective amendment to the Registration Statement has become or will become
effective and (ii) of any order or communication suspending or preventing, or
threatening to suspend or prevent, the offer and sale of the Notes or of any
proceedings or examinations that may lead to such an order or communication,
whether by or of the SEC or any authority administering any state securities or
Blue Sky Law, as soon as the Companies are advised thereof, and will use their
best efforts to prevent the issuance of any such order or communication and to
obtain as soon as possible its lifting, if issued.
(b) If, at any time when the Prospectus relating to the Notes is required
to be delivered under the Act, any event occurs as a result of which such
Prospectus as then amended or supplemented would include an untrue statement of
a material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it is necessary at any time to amend or supplement
the Prospectus to comply with the Act or the Rules and Regulations, the
Companies promptly will prepare and file with the SEC, an amendment or
supplement to such Prospectus that will correct such statement or omission or an
amendment that will effect such compliance.
(c) The Companies will immediately inform the Underwriter (i) of the
receipt by the Companies or the Trust of any communication from the SEC or any
state securities authority concerning the offering or sale of the Notes and (ii)
of the commencement of any lawsuit or proceeding to which either the Companies
or the Trust is a party relating to the offering or sale of the Notes.
(d) The Companies will furnish to the Underwriter, without charge, copies
of the Registration Statement (including all documents and exhibits thereto or
incorporated by reference therein), the Prospectus, and all amendments and
supplements to such documents relating to the Notes, in each case in such
quantities as the Underwriter may reasonably request.
(e) No amendment or supplement will be made to the Registration Statement
or Prospectus which the Underwriter shall not previously have been advised or to
which it shall reasonably object after being so advised.
(f) The Companies will cooperate with the Underwriter and with its counsel
in connection with the qualification of, or procurement of exemptions with
respect to, the Notes for offering and sale by the Underwriter and by dealers
under the securities or Blue Sky laws of such jurisdictions as the Underwriter
may designate and will file or cause the Trust to file such consents to service
of process or other documents necessary or appropriate in order to effect such
qualification or exemptions; provided that in no event shall either of the
Companies or the Trust be obligated to qualify to do business in any
jurisdiction where it is not now so qualified or to take any action which would
subject it to service of process in suits, other than those arising out of the
offering or sale of the Notes, in any jurisdiction where it is not now so
subject.
(g) The Companies and the Trust consent to the use, in accordance with the
securities or Blue Sky laws of such jurisdictions in which the Notes are offered
by the Underwriter and by dealers, of the Prospectus furnished by the Company.
(h) To the extent, if any, that the rating or ratings provided with respect
to a series of Notes by the rating agency or agencies that initially rate a
series of Notes is conditional upon the furnishing of documents or the taking of
any other actions by the Companies or the Trust, the Companies shall cause to be
furnished such documents and such other actions to be taken.
(i) So long as any of the Notes are outstanding, the Companies or the Trust
will furnish to the Underwriter (i) as soon as available, a copy of each
document relating to the Trust or the Notes required to be filed with the SEC
pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or any order of the SEC thereunder, and (ii) such other information
concerning the Companies, The Money Store or the Trust as the Underwriter may
request from time to time.
(j) If this Agreement shall terminate or shall be terminated after
execution and delivery pursuant to any provisions hereof (otherwise than by
notice given by the Underwriter terminating this Agreement pursuant to Section 8
or Section 9 hereof) or if this Agreement shall be terminated by the Underwriter
because of any failure or refusal on the part of the Companies, the Trust or The
Money Store to comply with the terms or fulfill any of the conditions of this
Agreement, the Companies and The Money Store agree jointly and severally to
reimburse the Underwriter for all out-of-pocket expenses (including fees and
expenses of its counsel) reasonably incurred in connection herewith, but without
any further obligation on the part of the Companies or The Money Store for loss
of profits or otherwise.
(k) The net proceeds from the sale of the Notes hereunder will be applied
substantially in accordance with the description set forth in the Prospectus.
(l) Except as stated in this Agreement and in the Prospectus, neither the
Companies, the Trust nor The Money Store has taken, nor will any of them take,
directly or indirectly, any action designed to or that might reasonably be
expected to cause or result in stabilization or manipulation of the price of the
Notes to facilitate the sale or resale of the Notes.
5. Indemnification and Contribution. (a) The Companies and The Money Store
jointly and severally agree to indemnify and hold harmless the Underwriter and
each person, if any, who controls the Underwriter within the meaning of Section
15 of the Act or Section 20 of the Exchange Act, from and against any and all
losses, claims, damages, liabilities and expenses (including reasonable costs of
investigation) arising out of or based upon any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement, the
Prospectus, or in any amendment or supplement thereto, or any preliminary
prospectus, or arising out of or based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or expenses arise out of or are based upon any untrue
statement or omission or alleged untrue statement or omission which has been
made therein or omitted therefrom in reliance upon and in conformity with the
information relating to the Underwriter furnished in writing to the Companies by
or on behalf of the Underwriter expressly for use in connection therewith;
PROVIDED, HOWEVER, that the indemnification contained in this paragraph (a) with
respect to any preliminary prospectus shall not inure to the benefit of the
Underwriter (or to the benefit of any person controlling the Underwriter) on
account of any such loss, claim, damage, liability or expense arising from the
sale of the Notes covered thereby by the Underwriter to any person if the untrue
statement or alleged untrue statement or omission or alleged omission of a
material fact contained in such preliminary prospectus was corrected in the
final Prospectus relating to such series of Notes and the Underwriter sold Notes
to that person without sending or giving at or prior to the written confirmation
of such sale, a copy of the final Prospectus (as then amended or supplemented)
if the Companies have previously furnished sufficient copies thereof to the
Underwriter. The foregoing indemnity agreement shall be in addition to any
liability which the Companies or The Money Store may otherwise have.
(b) If any action, suit or proceeding shall be brought against the
Underwriter or any person controlling the Underwriter in respect of which
indemnity may be sought against the Companies or The Money Store, the
Underwriter or such controlling person shall promptly notify the parties against
whom indemnification is being sought (the "indemnifying parties"), and such
indemnifying parties shall assume the defense thereof, including the employment
of counsel and payment of all fees and expenses. The Underwriter or any such
controlling person shall have the right to employ separate counsel in any such
action, suit or proceeding and to participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of the Underwriter or
such controlling person unless (i) the indemnifying parties have agreed in
writing to pay such fees and expenses, (ii) the indemnifying parties have failed
to assume the defense and employ counsel, or (iii) the named parties to any such
action, suit or proceeding (including any impleaded parties) include both the
Underwriter or such controlling person and the indemnifying parties and the
Underwriter or such controlling person shall have been advised by its counsel
that representation of such indemnified party and any indemnifying party by the
same counsel would be inappropriate under applicable standards of professional
conduct (whether or not such representation by the same counsel has been
proposed) due to actual or potential differing interests between them (in which
case the indemnifying party shall not have the right to assume the defense of
such action, suit or proceeding on behalf of the Underwriter or such controlling
person). It is understood, however, that the indemnifying parties shall, in
connection with any one such action, suit or proceeding or separate but
substantially similar or related actions, suits or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of only one separate firm of
attorneys (in addition to any local counsel) at any time for the Underwriter and
controlling persons not having actual or potential differing interests with the
Underwriter or among themselves, which firm shall be designated in writing by
the Underwriter, and that all such fees and expenses shall be reimbursed on a
monthly basis as provided in paragraph (a) hereof. The indemnifying parties
shall not be liable for any settlement of any such action, suit or proceeding
effected without their written consent, but if settled with such written
consent, or if there be a final judgment for the plaintiff in any such action,
suit or proceeding, the indemnifying parties agree to indemnify and hold
harmless the Underwriter, to the extent provided in paragraph (a), and any such
controlling person from and against any loss, claim, damage, liability or
expense by reason of such settlement or judgment.
(c) The Underwriter agrees to indemnify and hold harmless the Companies,
The Money Store and their respective directors and officers, and any person who
controls the Companies or The Money Store within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act to the same extent as the indemnity
from the Companies and The Money Store to the Underwriter set forth in paragraph
(a) hereof, but only with respect to information relating to the Underwriter
furnished in writing by or on behalf of the Underwriter expressly for use in the
Registration Statement, the Prospectus, or any amendment or supplement thereto,
or any related preliminary prospectus. If any action, suit or proceeding shall
be brought against the Companies or The Money Store, any of their respective
directors or officers, or any such controlling person based on the Registration
Statement, the Prospectus, or any amendment or supplement thereto, or any
related preliminary prospectus and in respect of which indemnity may be sought
against the Underwriter pursuant to this paragraph (c), the Underwriter shall
have the rights and duties given to the Companies and The Money Store by
paragraph (b) above (except that if the Companies or The Money Store shall have
assumed the defense thereof the Underwriter shall not be required to do so, but
may employ separate counsel therein and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the Underwriter's expense),
and the Companies and The Money Store, their respective directors and officers,
and any such controlling person shall have the rights and duties given to the
Underwriter by paragraph (b) above. The foregoing indemnity agreement shall be
in addition to any liability which the Underwriter may otherwise have.
(d) If the indemnification provided for in this Section 5 is unavailable to
an indemnified party under paragraphs (a) or (c) hereof in respect of any
losses, claims, damages, liabilities or expenses referred to therein, then an
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or expenses (i) in such proportion
as is appropriate to reflect the relative benefits received by the Companies and
The Money Store on the one hand and the Underwriter on the other hand from the
offering of the Notes, or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Companies and The Money Store on the one hand and the
Underwriter on the other in connection with the statements or omissions that
resulted in such losses, claims, damages, liabilities or expenses, as well as
any other relevant equitable considerations. The relative benefits received by
the Companies and The Money Store on the one hand and the Underwriter on the
other shall be deemed to be in the same proportion as the total net proceeds
from the offering of the Notes (before deducting expenses) received by the
Companies bear to the total underwriting discounts and commissions received by
the Underwriter. The relative fault of the Companies and The Money Store on the
one hand and the Underwriter on the other hand shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Companies or The Money Store on the one
hand or by the Underwriter on the other hand and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
(e) The Companies and the Underwriter agree that it would not be just and
equitable if contribution pursuant to this Section 5 were determined by a pro
rata allocation or by any other method of allocation that does not take account
of the equitable considerations referred to in paragraph (d) above. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, liabilities and expenses referred to in paragraph (d) above shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating any claim or defending any such action, suit or proceeding.
Notwithstanding the provisions of this Section 5, the Underwriter shall not be
required to contribute any amount in excess of the amount received by the
Underwriter over the price paid by the Underwriter for the Notes purchased by it
and distributed to the public less the amount of any damages which the
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 5 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 5 and the
representations and warranties of the Companies, The Money Store and the
Underwriter set forth in this Agreement shall remain operative and in full force
and effect, regardless of (i) any investigation made by or on behalf of the
Underwriter, the Companies or The Money Store or any person controlling any of
them or their respective directors or officers, (ii) acceptance of any Notes and
payment therefor hereunder, and (iii) any termination of this Agreement. A
successor to the Underwriter, the Companies or The Money Store or any person
controlling any of them or their respective directors or officers, shall be
entitled to the benefits of the indemnity, contribution and reimbursement
agreements contained in this Section 5.
6. Conditions of the Underwriter's Obligations. The obligations of the
Underwriter to purchase the Notes hereunder are subject to the following
conditions:
(a) All actions required to be taken and all filings required to be made by
the Companies under the Act prior to the sale of the Notes shall have been duly
taken or made. At and prior to the Closing Date, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or, to the knowledge of
the Companies or the Underwriter, shall be contemplated by the Commission.
(b) Subsequent to the effective date of this Agreement, there shall not
have occurred (i) any change, or any development involving a prospective change,
in or affecting the condition (financial or other), business, properties, net
worth, or results of operations of the Companies, The Money Store or the Surety
Provider not contemplated by the Registration Statement, which in the opinion of
the Underwriter, would materially adversely affect the market for the Notes, or
(ii) any event or development which makes any statement made in the Registration
Statement or Prospectus untrue or which, in the opinion of the Companies and
their counsel or the Underwriter and its counsel, requires the filing of any
amendment to or change in the Registration Statement or Prospectus in order to
state a material fact required by any law to be stated therein or necessary in
order to make the statements therein not misleading, if amending or
supplementing the Registration Statement or Prospectus to reflect such event or
development would, in the opinion of the Underwriter, materially adversely
affect the market for the Notes.
(c) The Underwriter shall have received on the Closing Date opinions of
Squire, Sanders & Dempsey L.L.P., special Arizona counsel for the Companies, and
Dean Blakey & Moskowitz, special counsel for the Companies, dated the Closing
Date and addressed to the Underwriter in form and scope satisfactory to the
Underwriter and its counsel.
(d) The Underwriter shall have received on the Closing Date an opinion of
Eric R. Elwin, Esq., General Counsel of the Companies and The Money Store, dated
the Closing Date and addressed to the Underwriter in form and scope satisfactory
to the Underwriter and its counsel.
(e) The Underwriter shall have received on the Closing Date an opinion of
Rhoads & Sinon LLP, counsel for the Eligible Lender Trustee, dated the Closing
Date and addressed to the Underwriter in form and scope satisfactory to the
Underwriter and its counsel.
(f) The Underwriter shall have received on the Closing Date an opinion of
counsel for AMBAC Indemnity Corporation (the "Surety Provider"), dated the
Closing Date and addressed to the Underwriter in form and scope satisfactory to
the Underwriter and its counsel.
(g) The Underwriter shall have received on the Closing Date an opinion of
White & Case, Esqs., counsel for the Indenture Trustee, dated the Closing Date
and addressed to the Underwriter in form and scope satisfactory to the
Underwriter and its counsel.
(h) The Underwriter shall have received on the Closing Date an opinion or
opinions of Stroock & Stroock & Lavan LLP, counsel for the Underwriter, dated
the Closing Date, and addressed to the Underwriter, in form and scope
satisfactory to the Underwriter.
(i) The Underwriter shall have received on the Closing Date from KPMG Peat
Marwick LLP a letter dated the Closing Date, and in form and substance
satisfactory to the Underwriter, to the effect that they have carried out
certain specified procedures, not constituting an audit, with respect to certain
information regarding the Financed Student Loans and setting forth the results
of such specified procedures.
(j) (i) There shall not have been, since the respective dates as of which
information is given in the Registration Statement (or any amendment or
supplement thereto), except as may otherwise be stated therein, any material
adverse change in the condition (financial or other), business, prospects,
properties, net worth or results of operations of the Companies or of The Money
Store, and (ii) all the representations and warranties of the Companies and The
Money Store contained in this Agreement and the Basic Documents shall be true
and correct in all material respects on and as of the date hereof and on and as
of the Closing Date as if made on and as of the Closing Date and the Underwriter
shall have received a certificate, dated the Closing Date and signed by an
executive officer of the Companies and The Money Store, to the effect set forth
in this Section 6(j) and in Section 6(k) hereof.
(k) Neither of the Companies nor The Money Store shall have failed at or
prior to the Closing Date to have performed or complied with any of its
respective agreements herein contained and required to be performed or complied
with by it hereunder at or prior to the Closing Date.
(l) The Underwriter shall have received by instrument dated the Closing
Date (at the option of the Underwriter), in lieu of or in addition to the
opinions referred to in clauses (c) through (h) of this Section (6), the right
to rely on opinions provided by such counsel and all other counsel under the
terms of the Basic Documents or to Moody's Investors Service, Inc. ("Moody's")
and Standard & Poor's Corporation ("Standard & Poor's").
(m) Moody's and Standard & Poor's shall have rated each class of Notes
"Aaa" and "AAA", respectively, and there shall not have been any announcement by
Moody's or Standard & Poor's that (i) it is downgrading any of its ratings
assigned to any class of Notes or (ii) it is reviewing its ratings assigned to
any class of Notes with a view to possible downgrading, or with negative
implications, or direction not determined.
(n) The Surety Provider shall have provided (i) a Note Surety Bond relating
to the Notes, (ii) a certificate dated the Closing Date and signed by an
executive officer of the Surety Provider with respect to the accuracy of the
information relating to the Surety Provider contained in the Prospectus and
(iii) a letter addressed to the Underwriter and dated the date hereof from KPMG
Peat Marwick LLP, independent certified public accountants, consenting to the
inclusion of its report on the financial statements of the Surety Provider in
the Prospectus.
(o) Deposits required by the Sale and Servicing Agreement into the
Pre-Funding Account, Capitalized Pre-Funding
Account and Capitalized Interest Account shall have been made.
(p) The Companies shall have furnished or caused to be furnished to the
Underwriter an executed copy of each of the Basic Documents and such further
certificates and documents as the Underwriter shall have requested.
All such opinions, certificates, letters and other documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
in form and substance to the Underwriter and counsel for the Underwriter.
Any certificate or document signed by any officer of the Companies or The
Money Store and delivered to the Underwriter, or to counsel for the Underwriter,
shall be deemed a representation and warranty by the Companies or The Money
Store, respectively, to the Underwriter as to the statements made therein.
7. Expenses. The Companies and The Money Store agree to pay or to otherwise
cause the payment of the following costs and expenses and all other costs and
expenses incident to the performance by them and the Trust of their respective
obligations hereunder: (i) the preparation, printing or reproduction of the
Registration Statement, each Prospectus and each amendment or supplement to any
of them, this Agreement, the Terms Agreement and each other Basic Document; (ii)
the printing (or reproduction) and delivery (including postage, air freight
charges and charges for counting and packaging) of such copies of the
Registration Statement, each Prospectus and all amendments or supplements to any
of them as may be reasonably requested for use in connection with the offering
and sale of the Notes; (iii) the preparation, printing, authentication, issuance
and delivery of definitive certificates for the Notes; (iv) the printing (or
reproduction) and delivery of this Agreement, the preliminary and supplemental
Blue Sky Memoranda and all other agreements or documents printed (or reproduced)
and delivered in connection with the offering of the Notes; (v) qualification of
the Indenture under the Trust Indenture Act; (vi) the qualification of the Notes
for offer and sale under the securities or Blue Sky laws of the several states
as provided in Section 3(h) hereof (including the reasonable fees, expenses and
disbursements of counsel for the Underwriter relating to the preparation,
printing or reproduction, and delivery of the preliminary and supplemental Blue
Sky Memoranda and such qualification); (vii) the fees and disbursements of (A)
the Company's counsel, (B) the Underwriter' counsel (provided, however, that the
Underwriter shall be responsible for 50% of such fees and disbursements), (C)
the Indenture Trustee and its counsel, (D) the Surety Provider and its counsel
and accountants, (E) the Eligible Lender Trustee and its counsel, (F) the
Depository Trust Company in connection with the book- entry registration of the
Notes and (G) KPMG Peat Marwick LLP, accountants for the Company and issuer of
the Comfort Letter; and (viii) the fees charged by Moody's and Standard & Poor's
for rating the Notes.
8. Effective Date of Agreement. This Agreement shall become effective upon
the execution and delivery hereof by all the parties hereto. Until such time as
this Agreement shall have become effective, it may be terminated by the
Companies or The Money Store, by notifying the Underwriter, or by the
Underwriter, by notifying the Companies.
Any notice under this Section 8 may be given by telegram, telecopy or
telephone but shall be subsequently confirmed by letter.
9. Termination of Agreement. This Agreement shall be subject to termination
in the absolute discretion of the Underwriter, without liability on the part of
the Underwriter to the Companies, the Trust or The Money Store, by notice to the
Company, the Trust and The Money Store, if prior to the Closing Date, (i)
trading in securities generally on the New York Stock Exchange, American Stock
Exchange or the Nasdaq National Market shall have been suspended or materially
limited, (ii) a general moratorium on commercial banking activities in New York
shall have been declared by either Federal or state authorities, (iii) there
shall have occurred any outbreak or escalation of hostilities or other
international or domestic calamity, crisis or change in political, financial or
economic conditions, the effect of which on the financial markets of the United
States is such as to make it, in the judgment of the Underwriter, impracticable
or inadvisable to commence or continue the offering of the Notes on the terms
set forth in the Prospectus, as applicable, or to enforce contracts for the
resale of the Notes by the Underwriter, (iv) legislation shall be enacted by the
Congress of the United States or a decision by a court of the United States or
the Tax Court of the United States shall be rendered, or an officially published
ruling, regulation, proposed regulation or official statement by or on behalf of
the Treasury Department of the United States, the Internal Revenue Service or
any other governmental agency shall be made, with respect to federal taxation
upon revenues or other income of the general character expected to be pledged
under the Indenture or upon interest received on securities of the general
character of the Notes, or which would have the effect of changing, directly or
indirectly, the federal income tax consequences of interest on securities of the
general character of the Notes in the hands of the holders thereof, which in the
opinion of counsel to the Underwriter materially affects the market price of the
Notes, or (v) legislation shall be enacted by the Commonwealth of Pennsylvania,
or a decision by a court of competent jurisdiction of the Commonwealth of
Pennsylvania or any administrative tribunal of the Commonwealth of Pennsylvania
or other governmental agency or department thereof shall be rendered with
respect to taxation by the Commonwealth of Pennsylvania or any of its political
subdivisions upon revenues or other income of the general character expected to
be pledged under the Indenture or upon interest received on securities of the
general character of the Notes, or which would have the effect of changing,
directly or indirectly, the tax consequences under Commonwealth of Pennsylvania
tax law of interest on securities of the general character of the Notes in the
hands of the holders thereof, which in the opinion of counsel to the Underwriter
materially affects the market price of the Notes. Notice of such termination may
be given to the Company, the Trust and The Money Store, by telegram, telecopy or
telephone and shall be subsequently confirmed by letter.
10. Information Furnished by the Underwriter. The statements set forth
under the heading "Plan of Distribution" in the Prospectus constitute the only
information furnished by or on behalf of the Underwriter as such information is
referred to in Sections 3(b) and 5 hereof. Additional such information may be
provided in connection with the purchase of additional series of Notes by the
Underwriter for inclusion in any Prospectus Supplement and, if so, will be
identified in the Terms Agreement.
11. Miscellaneous. Except as otherwise provided in Sections 4, 8 and 9
hereof, notice given pursuant to any provision of this Agreement shall be in
writing and shall be delivered (i) if to the Companies or The Money Store, at
3301 C Street, Suite 700-A, Sacramento, California 95816, Attention: President
and at 2840 Morris Avenue, Union, New Jersey 07083, Attention: Chief Financial
Officer, (ii) if to the Trust, to the Eligible Lender Trustee, c/o Dauphin
Deposit Bank and Trust Company, 213 Market Street, Harrisburg, Pennsylvania
17101, Attention: Corporate Trust Office and (iii) if to the Underwriter, to
Smith Barney Inc., 390 Greenwich Street, New York, NY 10013, Attention: Asset
Finance Group.
This Agreement has been and is made solely for the benefit of the
Underwriter, the Companies, the Trust, The Money Store, their respective
directors, officers, trustees and controlling persons referred to in Section 5
hereof and their respective successors and assigns, to the extent provided
herein, and no other person shall acquire or have any right under or by virtue
of this Agreement. Neither the term "successor" nor the term "successors and
assigns" as used in this Agreement shall include a purchaser from any
Underwriter of any of the Notes in his status as such purchaser.
12. Applicable Law; Counterparts. This Agreement, and the Terms Agreement,
shall be governed by and construed in accordance with the laws of the State of
New York applicable to contracts made and to be performed within the State of
New York without giving effect to the choice of laws or conflict of laws
principles thereof.
This Agreement, and the Terms Agreement, may be signed in various
counterparts which together constitute one and the same instrument. If signed in
counterparts, this Agreement and the Terms Agreement shall not become effective
unless at least one counterpart hereof or thereof shall have been executed and
delivered on behalf of each party hereto.
Please confirm that the foregoing correctly sets forth the agreement among
the Companies, the Trust, The Money Store and the Underwriter.
Very truly yours,
CLASSNOTES TRUST 1997-I
By: THE YORK BANK AND TRUST
COMPANY, as Eligible Lender
Trustee
By: ____________________________
Name:
Title:
TRANS-WORLD INSURANCE COMPANY
By: ___________________________
Name: Morton Dear
Title: Executive Vice President
CLASSNOTES, INC.
By: _____________________________
Name: Morton Dear
Title: Executive Vice President
THE MONEY STORE INC.
By: _____________________________
Name: Morton Dear
Title: Executive Vice President
Confirmed as of the date first above mentioned.
SMITH BARNEY INC.
By
Name:
Title:
<PAGE>
Exhibit A
TRANS-WORLD INSURANCE COMPANY
CLASSNOTES, INC.
Auction Rate Asset Backed Notes
TERMS AGREEMENT
Dated ______, 199_
To: TRANS-WORLD INSURANCE COMPANY
CLASSNOTES, INC.
Re: Underwriting Agreement dated March __, 1997
Issuer: ClassNotes Trust 1997-I
Series Designation: Series 1997-1
TERMS OF THE NOTES:
Final Original
Maturity Principal Interest Price to
CLASS Date Amount Rate Underwriter(1)
- ---------
(1) Plus accrued interest, if any, at the applicable rate
from _______________.
COLLATERAL: The Student Loans to be included in the
Collateral are as described in Schedule A to
the [Supplemental] Sale and Servicing
Agreement.
CREDIT SUPPORT: Note Surety Bond issued by AMBAC Indemnity Corporation.
INITIAL NOTE DISTRIBUTION DATES:
NOTE RATING: "AAA" by Standard and Poor's Corporation and
"Aaa" by Moody's Investors Service, Inc.
FORM OF NOTES: [Book entry] [definitive]
<PAGE>
CLOSING DATE: March 21, 1997
Information Provided by the Underwriter in the
Prospectus Supplement: "Underwriting"
Additional Terms, if any, Not in Master Indenture:
SMITH BARNEY INC.
By:_____________________________
Name:
Title:
TRANS-WORLD INSURANCE COMPANY
By:_____________________________
Name: Morton Dear
Title: Executive Vice President
CLASSNOTES, INC.
By:_____________________________
Name: Morton Dear
Title: Executive Vice President
CLASSNOTES TRUST 1997-I
By: The York Bank and Trust
Company, as Eligible Lender Trustee
By:_____________________________
Name:
Title:
THE MONEY STORE INC.
By:_____________________________
Name:
Title:
TRANS-WORLD INSURANCE COMPANY
CLASSNOTES, INC.
Auction Rate Asset Backed Notes
TERMS AGREEMENT
Dated: March 19, 1997
To: TRANS-WORLD INSURANCE COMPANY
CLASSNOTES, INC.
Re: Underwriting Agreement dated March 19, 1997
Issuer: ClassNotes Trust 1997-I
Series Designation: Series 1997-1
TERMS OF THE NOTES:
Final Original
Maturity Principal Interest Price to
Class Date Amount Rate Underwriter
A-1 April 1, $93,000,000 5.40% 99.75%
2016
A-2 April 1, $93,000,000 5.40% 99.75%
2017
A-3 April 1, $95,000,000 5.50% 99.75%
2018
- ---------
COLLATERAL: The Student Loans to be included in the Collateral
are as described in Schedule A to the Sale and
Servicing Agreement.
CREDIT SUPPORT: Note Surety Bond issued by AMBAC Indemnity
Corporation.
INITIAL NOTE DISTRIBUTION DATES: March 27, 1997 for the Class A-1 Notes
March 27, 1997 for the Class A-2 Notes
April 2, 1997 for the Class A-3 Notes
NOTE RATING: "AAA" by Standard and Poor's Corporation and "Aaa"
by Moody's Investors Service, Inc.
FORM OF NOTES: Book entry
<PAGE>
CLOSING DATE: March 21, 1997
Information Provided by the Underwriter in the
Prospectus Supplement: The statements set forth under the heading
"Plan of Distribution."
Additional Terms, if any, Not in Master Indenture:
SMITH BARNEY INC.
By:_____________________________
Name:
Title:
TRANS-WORLD INSURANCE COMPANY
By:_____________________________
Name: Morton Dear
Title: Executive Vice President
CLASSNOTES, INC.
By:_____________________________
Name: Morton Dear
Title: Executive Vice President
CLASSNOTES TRUST 1997-I
By: The York Bank and Trust
Company, as Eligible Lender Trustee
By:_____________________________
Name:
Title:
THE MONEY STORE INC.
By:_____________________________
Name:
Title:
Exhibit 4.1
[EXECUTION COPY]
INDENTURE
between
CLASSNOTES TRUST 1997-I,
as Issuer
and
BANKERS TRUST COMPANY
not in its individual capacity, but
solely as Indenture Trustee
Dated as of March 21, 1997
<PAGE>
CROSS-REFERENCE TABLE1
TIA Indenture
SECTION SECTION
310(a)(1) .............................. 6.11
(a)(2) ......................... 6.11
(a)(3) ......................... 6.10
(a)(4) ........................ N.A.2
(a)(4) ......................... 6.11
(b) ......................... 6.8;
6.10; 6.11
(c) ........................... N.A.
311(a) .......................... 6.11
(b) ........................... 6.11
(c) ........................... N.A.
312(a) ........................... 7.1;
7.2(a)
(b) ........................... 7.2(b)
(c) .............................. 7.2(c)
313(a) ................................ 6.6
(b) .............................. 6.6
(c) .............................. 11.5
(d) .............................. 6.6
314(a) .............................. 3.9; 7.3
(b) .............................. 3.6
(c) .............................. 2.9;
4.1
11.1
(d) ............................... 2.9;
11.1
(e) ................................. 11.1
(f) ................................. 3.9
315(a) ................................. 6.1
(b) ................................. 6.5
(c) ................................. 6.1
(d) ................................. 6.1
(e) ................................. 5.13
316(a)(1)(A) ................................. 5.11
(a)(1)(B) ................................. 5.12
(a)(2) ................................. N.A.
(b) ................................. 5.7
(c) ................................. 1.1
317(a) .................................. 5.3
(b) .................................. 3.3
318(a) .................................. 11.7
- --------
1 Note: This Cross-Reference Table shall not, for any
purpose, be deemed to be part of the Indenture.
2 N.A. means Not Applicable.
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS AND USAGE........................................ 1
SECTION 1.1. Definitions and Usage. ................................. 1
SECTION 1.2. Incorporation by Reference of Trust Indenture Act....... 1
ARTICLE II THE NOTES................................................... 2
SECTION 2.1. Form. .................................................. 2
SECTION 2.2. Execution, Authentication and Delivery.................. 2
SECTION 2.3. Notes Issuable in Series and Classes; General
Provisions with Respect to Principal and
Interest Payments. ........................ 3
SECTION 2.4. Denominations............................................ 6
SECTION 2.5. Temporary Notes. ........................................ 6
SECTION 2.6. Registration; Registration of Transfer and
Exchange.................................... 7
SECTION 2.7. Mutilated, Destroyed, Lost or Stolen Notes. ............. 8
SECTION 2.8. Persons Deemed Owner. ................................... 9
SECTION 2.9. Payments of Principal and Interest. ..................... 9
SECTION 2.10. Cancellation............................................ 13
SECTION 2.11. Authentication and Delivery of Notes. .................. 13
SECTION 2.12. Release of Collateral................................... 18
SECTION 2.13. Book-Entry Notes........................................ 18
SECTION 2.14. Notices to Clearing Agency.............................. 19
SECTION 2.15. Definitive Notes........................................ 19
SECTION 2.16. Restrictions on Transfer.....................20
ARTICLE III COVENANTS................................................. 21
SECTION 3.1. Payment to Noteholders.................................. 21
SECTION 3.2. Maintenance of Office or Agency......................... 21
SECTION 3.3. Money for Payments To Be Held in Trust.................. 22
SECTION 3.4. Existence............................................... 23
SECTION 3.5. Protection of Indenture Trust Estate.................... 24
SECTION 3.6. Opinions as to Indenture Trust Estate................... 24
SECTION 3.7. Performance of Obligations; Servicing
of Financed Student Loans................... 24
SECTION 3.8. Negative Covenants...................................... 28
SECTION 3.9. Annual Statement as to Compliance....................... 29
SECTION 3.10. Issuer May Consolidate, etc.,
Only on Certain Terms...................... 29
SECTION 3.11. Successor or Transferee................................. 31
SECTION 3.12. No Other Business....................................... 31
SECTION 3.13. No Borrowing............................................ 32
SECTION 3.14. Obligations of Servicer and Administrator............... 32
SECTION 3.15. Guarantees, Loans, Advances and Other
Liabilities................................ 32
SECTION 3.16. Capital Expenditures.................................... 32
SECTION 3.17. Restricted Payments..................................... 32
SECTION 3.18. Notice of Events of Default............................. 32
SECTION 3.19. Further Instruments and Acts............................ 33
ARTICLE IV SATISFACTION AND DISCHARGE.................................. 33
SECTION 4.1. Satisfaction and Discharge of Indenture................. 33
SECTION 4.2. Application of Trust Money.............................. 34
SECTION 4.3. Repayment of Moneys Held by Paying Agent................ 35
ARTICLE V REMEDIES.................................................... 35
SECTION 5.1. Events of Default....................................... 35
SECTION 5.2. Acceleration of Maturity; Rescission and
Annulment.................................. 36
SECTION 5.3. Collection of Indebtedness and Suits for
Enforcement by Indenture Trustee........... 37
SECTION 5.4. Remedies; Priorities.................................... 40
SECTION 5.5. Optional Preservation of the Financed
Student Loans.............................. 42
SECTION 5.6. Limitation of Suits..................................... 42
SECTION 5.7. Unconditional Rights of Noteholders To
Receive Principal and Interest............. 43
SECTION 5.8. Restoration of Rights and Remedies...................... 43
SECTION 5.9. Rights and Remedies Cumulative.......................... 43
SECTION 5.10. Delay or Omission Not a Waiver.......................... 43
SECTION 5.11. Control by Noteholders.................................. 44
SECTION 5.12. Waiver of Past Defaults................................. 44
SECTION 5.13. Undertaking for Costs................................... 45
SECTION 5.14. Waiver of Stay or Extension Laws........................ 45
SECTION 5.15. Action on Notes......................................... 45
SECTION 5.16. Performance and Enforcement of Certain
Obligations................................ 46
SECTION 5.17 Subrogation..................................46
ARTICLE VI THE INDENTURE TRUSTEE....................................... 47
SECTION 6.1. Duties of Indenture Trustee............................. 47
SECTION 6.2. Rights of Indenture Trustee............................. 49
SECTION 6.3. Individual Rights of Indenture Trustee.................. 49
SECTION 6.4. Indenture Trustee's Disclaimer.......................... 49
SECTION 6.5. Notice of Defaults...................................... 50
SECTION 6.6. Reports by Indenture Trustee to Noteholders............. 50
SECTION 6.7. Compensation and Indemnity.............................. 50
SECTION 6.8. Replacement of Indenture Trustee........................ 51
SECTION 6.9. Successor Indenture Trustee by Merger................... 52
SECTION 6.10. Appointment of Co-Trustee or Separate
Trustee.................................... 53
SECTION 6.11. Eligibility; Disqualification........................... 54
SECTION 6.12. Preferential Collection of Claims Against
Issuer..................................... 55
ARTICLE VII NOTEHOLDERS' LISTS AND REPORTS............................. 55
SECTION 7.1. Issuer to Furnish Indenture Trustee
Names and Addresses of Noteholders......... 55
SECTION 7.2. Preservation of Information; Communications
to Noteholders............................. 55
SECTION 7.3. Reports by Issuer....................................... 56
ARTICLE VIII ACCOUNTS, DISBURSEMENTS AND RELEASES...................... 57
SECTION 8.1. Collection of Money..................................... 57
SECTION 8.2. Trust Accounts.......................................... 57
SECTION 8.3. General Provisions Regarding Accounts................... 57
SECTION 8.4. Substitution and Release of Indenture Trust
Estate..................................... 58
SECTION 8.5. Opinion of Counsel...................................... 59
ARTICLE IX SUPPLEMENTAL INDENTURES..................................... 59
SECTION 9.1. Supplemental Indentures Without Consent of
Noteholders................................. 59
SECTION 9.2. Supplemental Indentures with Consent of
Noteholders................................ 62
SECTION 9.3. Execution of Supplemental Indentures.................... 64
SECTION 9.4. Effect of Supplemental Indenture........................ 64
SECTION 9.5. Conformity with Trust Indenture Act..................... 64
SECTION 9.6. Reference in Notes to Supplemental
Indentures................................. 64
ARTICLE X [INTENTIONALLY OMITTED]...................................... 65
ARTICLE XI MISCELLANEOUS............................................... 65
SECTION 11.1. Compliance Certificates and Opinions, etc............... 65
SECTION 11.2. Form of Documents Delivered to Indenture
Trustee.................................... 67
SECTION 11.3. Acts of Noteholders..................................... 67
SECTION 11.4. Notices, etc............................................ 68
SECTION 11.5. Notices to Noteholders; Waiver.......................... 69
SECTION 11.6. Alternate Payment and Notice Provisions................. 70
SECTION 11.7. Conflict with Trust Indenture Act....................... 70
SECTION 11.8. Effect of Headings and Table of Contents................ 70
SECTION 11.9. Successors and Assigns.................................. 70
SECTION 11.10. Separability............................................ 70
SECTION 11.11. Benefits of Indenture................................... 70
SECTION 11.12. Legal Holidays.......................................... 71
SECTION 11.13. Governing Law........................................... 71
SECTION 11.14. Counterparts............................................ 71
SECTION 11.15. Recording of Indenture.................................. 71
SECTION 11.16. Trust Obligations....................................... 71
SECTION 11.17. No Petition............................................. 72
SECTION 11.18. Inspection.............................................. 72
SECTION 11.19. Usury................................................... 72
SECTION 11.20. Rights of Surety Provider....................73
APPENDIX A Definitions and Usage
EXHIBIT A Form of Series 199_-_ Notes
<PAGE>
INDENTURE dated as of March 21, 1997, between CLASSNOTES TRUST 1997-I, a
Pennsylvania trust (the "Issuer"), and BANKERS TRUST COMPANY, a New York banking
corporation, as trustee and not in its individual capacity (the "Indenture
Trustee").
PRELIMINARY STATEMENT
The Issuer has duly authorized the execution and delivery of this Indenture
to provide for one or more series (each a "Series") of its Notes (the "Notes"),
issuable as provided in this Indenture. Each Series of such Notes will be issued
only under a separate supplement to this Indenture duly executed and delivered
by the Issuer and the Indenture Trustee and limited to the amount therein
described. All covenants and agreements made by the Issuer herein are for the
benefit and security of the holders of the Notes. The Issuer is entering into
this Indenture and the Trustee is accepting the trusts created hereby, for good
and valuable consideration; the receipt and sufficiency of which are hereby
acknowledged.
All things necessary to make this Indenture a valid agreement of the Issuer
in accordance with its terms have been done.
ARTICLE I
DEFINITIONS AND USAGE
SECTION 1.1. DEFINITIONS AND USAGE. Except as otherwise specified herein or
as the context may otherwise require, capitalized terms used but not defined
herein are defined in Appendix A hereto (as supplemented to the extent indicated
therein, by the provisions of the Terms Supplement for a particular Series),
which Appendix A also contains rules as to usage that shall be applicable
herein.
SECTION 1.2. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. Whenever
this Indenture refers to a provision of the TIA, the provision is incorporated
by reference in and made a part of this Indenture. The following TIA terms used
in this Indenture have the following meanings:
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Notes.
"indenture security holder" means a Noteholder.
"indenture to be qualified" means, if requested in writing by the
Administrator, 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 2.1. FORM. The Notes and the Indenture Trustee's certificate of
authentication shall be in substantially the form set forth in Exhibit A, with
such appropriate insertions, omissions, substitutions and other variations as
are required or permitted by this Indenture or any Terms Supplement 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 Exhibit A are part of the terms of this Indenture.
SECTION 2.2. 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.
At any time and from time to time after the execution and delivery of this
Indenture, the Issuer may deliver Notes executed by the Issuer to the Trustee
for authentication; and the Trustee shall authenticate and deliver such Notes as
provided in this Indenture and not otherwise.
Each Note shall be dated as of the date specified in the related Terms
Supplement.
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 2.3. NOTES ISSUABLE IN SERIES AND CLASSES; GENERAL PROVISIONS WITH
RESPECT TO PRINCIPAL AND INTEREST PAYMENTS. The Notes may, as provided herein,
be issued in one or more Series, each of which Series may consist of only one
Class of Notes or may be divided into two or more Classes, and shall be
designated generally as the "Asset Backed Notes" of the Issuer, with such
further particular designations added or incorporated in such title for the
Notes of any particular Series or Class as the Issuer may determine.
If a Series of Notes includes more than one Class, the Classes of Notes of
such Series shall mature sequentially unless otherwise provided in the related
Terms Supplement and their final installments of principal shall be due on such
Final Maturity Dates as shall be specified in the related Terms Supplement. The
principal of each Note shall be payable on the related Final Maturity Date
unless the unpaid principal of such Note becomes due and payable at an earlier
date by declaration of acceleration or otherwise.
Unless otherwise provided in the related Terms Supplement, no payments of
principal of any Class of Notes of a Series shall be made until payment of the
entire principal amount of all Outstanding Notes, if any, with an earlier Final
Maturity Date has been made. Payments of principal of a Class of Notes of a
Series shall be made pro rata among all Outstanding Notes of such Class, without
preference or priority of any kind.
Unless otherwise provided in the Terms Supplement, all payments made with
respect to any Note shall be applied first to the interest then due and payable
on such Note and then to the principal thereof. Unless otherwise provided in the
related Terms Supplement, all computations of interest accrued on any Note shall
be made on the basis of the actual number of days elapsed in each applicable
Interest Period divided by 360.
Interest on the unpaid principal amount of each Outstanding Note of a Class
shall be payable on each Note Distribution Date for such Class at the Class
Interest Rates applicable to such Note for the related Interest Periods.
Notwithstanding any of the foregoing provisions with respect to payments of
principal of and interest on the Notes, if the Notes of a Series have become or
been declared due and payable following an Event of Default and such
acceleration of maturity and its consequences have not been rescinded and
annulled and the provisions of Section 5.5 are not applicable to such Series,
then payments of principal of and interest on such Notes shall be made in
accordance with Section 5.4.
Each Note shall bear upon the face thereof the designation so selected for
the Series and Class to which it belongs. All Notes of the same Series and Class
shall be identical in all respects except for the denominations and dates
thereof. All Notes of all Classes within any one Series at any time Outstanding
shall be identical except for differences among the Notes of the different
Classes within such Series as specified in the applicable Terms Supplement. All
Notes of a particular Series issued under this Indenture shall be in all
respects equally and ratably entitled to the benefits hereof without preference,
priority or distinction on account of the actual time or times of authentication
and delivery, all in accordance with the terms and provisions of this Indenture.
Each Series of Notes shall be created by a Terms Supplement authorized by
the Trust Agreement and establishing the terms and provisions of such Series,
specifying the Financed Student Loans and any other property to be included in
the Indenture Trust Estate therefor and Granting such Indenture Trust Estate as
security for all previously issued and Outstanding Series of Notes and the
Series of Notes created thereby. The several Series may differ in respect of any
of the following matters:
(1) designation of the Series;
(2) dating of the Notes of the Series and
Interest Period;
(3) the number of Classes and the maximum
aggregate principal amount of Notes of each
such Class which may be issued;
(4) Class Interest Rate for each Class and the
method for determining such Class Interest
Rate, including the applicable Interest
Period;
(5) Final Maturity Date on which the final
installment of principal of each Class is
to be paid;
(6) place or places for the payment of the
final installment of principal or the
manner in which Noteholders will be
informed of such place or places;
(7) denominations;
(8) whether the Notes of such Series may be
authenticated by an Authenticating Agent,
and, if so, the Person appointed as
Authenticating Agent for such Series;
(9) Record Dates and Note Distribution Dates
for each Class;
(10) the amount, if any, to be deposited at the
Closing Date in each of the Collection
Account, the Pre-Funding Account, the
Capitalized Interest Account, the Expense
Account, the Reserve Account and the
Capitalized Pre-Funding Account;
(11) the amount, if any, to be deposited in the
Reserve Account, the Requisite Amount of
the Specified Reserve Account Requirement
for such Series, the circumstances under
which withdrawals from such Reserve
Account are permitted or required to be
made and whether a Qualified Letter of
Credit may be delivered to the Indenture
Trustee in lieu of a cash deposit in such
Reserve Account, and, if so, the standards
applicable to such Qualified Letter of
Credit;
(12) whether any surplus funds in the Collection
Account for such Series are required to be
used to restore amounts on deposit in the
Reserve Account to the minimum amount, if
any, required to be on deposit therein;
(13) any items required to be delivered to the
Indenture Trustee on the Closing Date for
such Series pursuant to Section 2.11;
(14) whether or the extent to which Eligible
Substitute Financed Student Loans may be
substituted for Financed Student Loans and
the conditions relating thereto including
what constitutes an Eligible Substitute
Financed Student Loan;
(15) provisions with respect to terms defined in
Appendix A for which the definitions set
forth therein require or permit further
specification in the related Terms
Supplement;
(16) restrictions, if any, on the
transferability of the Notes of such
Series; and
(17) any other provisions expressing or referring
to the terms and conditions upon which the
Notes of that Series are to be issued under
this Indenture which are not in conflict
with the provisions of this Indenture.
In authorizing the issuance of any Series, the Issuer, by Issuer Order,
shall determine and specify all matters in respect of the Notes of such Series
set forth in clauses (1) to (17), inclusive, to the extent applicable, and shall
also determine and specify the forms of Notes of such Series, in compliance with
the terms of this Article II.
Each Series of Notes shall be covered by a Note Surety Bond issued by the
Surety Provider and shall not have the benefits of any other form of third-party
credit enhancement, including, without limitation, a Qualified Letter of Credit
or a Note Surety Bond issued by a surety provider other than AMBAC Indemnity
Corporation, unless the Surety Provider gives its prior written consent.
SECTION 2.4. DENOMINATIONS. The Notes shall be issuable only as registered
Notes in the denominations prescribed by the terms of the Terms Supplement
creating the particular Series.
SECTION 2.5. 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, photocopied, 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 3.2, 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 the same Series and Class and 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 of the same Series and Class.
SECTION 2.6. REGISTRATION; REGISTRATION OF TRANSFER AND EXCHANGE. The
Issuer shall cause to be kept a register (the "Note Register") in which, subject
to such reasonable regulations as it may prescribe, the Issuer shall provide for
the registration of Notes and the registration of transfers of Notes. The
Indenture Trustee shall be "Note Registrar" for the purpose of registering Notes
and transfers of Notes as herein provided. Upon any resignation of any Note
Registrar, the Issuer shall promptly appoint a successor or, if it elects not to
make such an appointment, assume the duties of Note Registrar.
If a Person other than the Indenture Trustee is appointed by the Issuer as
Note Registrar, the Issuer will give the Indenture Trustee prompt written notice
of the appointment of such Note Registrar and of the location, and any change in
the location, of the Note Registrar, 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 officer thereof as to
the names and addresses of the Noteholders and the principal amounts and number
of such Notes.
Upon surrender for registration of transfer of any Note at the office or
agency of the Issuer to be maintained as provided in Section 3.2, 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 the same class and a like aggregate principal amount.
At the option of the Noteholder, Notes may be exchanged for other Notes of
any authorized denominations, of the same Series and Class and a like aggregate
principal amount, upon surrender of the Notes to be exchanged at such office or
agency. Whenever any Notes are so surrendered for exchange, 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.
Restrictions on transfer, if any, of a Series or Class of Notes shall be
set forth herein and in the related Terms Supplement.
Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed by, or be accompanied by a written instrument of
transfer in form satisfactory to the Indenture Trustee duly executed by the
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 includes membership
or participation in the 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 2.3 or 9.6 not involving any transfer.
SECTION 2.7. MUTILATED, DESTROYED, LOST OR STOLEN NOTES. If (i) any
mutilated Note is surrendered to the Indenture Trustee, or the Indenture Trustee
receives evidence to its satisfaction of the destruction, loss or theft of any
Note, and (ii) there is delivered to the Indenture Trustee and the Surety
Provider 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, 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 Series, tenor, aggregate initial principal amount and Class bearing a
number not contemporaneously outstanding; PROVIDED, HOWEVER, that if any such
destroyed, lost or stolen Note, but not a mutilated Note, shall have become or
within 15 days shall be due and payable, instead of issuing a replacement Note,
the Issuer may pay such destroyed, lost or stolen Note when so due or payable.
If, after the delivery of such replacement Note or payment of a destroyed, lost
or stolen Note pursuant to the proviso to the preceding sentence, a bona fide
purchaser of the original Note in lieu of which such replacement Note was issued
presents for payment such original Note, the Issuer and the Indenture Trustee
shall be entitled to recover such replacement Note (or such payment) from the
Person to whom it was delivered or any Person taking such replacement Note from
such Person to whom such replacement Note was delivered or any assignee of such
Person, except a bona fide purchaser, and shall be entitled to recover upon the
security or indemnity provided therefor to the extent of any loss, damage, cost
or expense incurred by the Issuer or the Indenture Trustee in connection
therewith.
Upon the issuance of any replacement Note under this Section, the Issuer
may require the payment by the Noteholder thereof of a sum sufficient to cover
any tax or other governmental charge that may be imposed in relation thereto and
any other reasonable expenses (including the fees and expenses of the Indenture
Trustee) connected therewith.
Every replacement Note issued pursuant to this Section in replacement of
any mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Issuer, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes.
SECTION 2.8. 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, if any, on
such Note and for all other purposes whatsoever, whether or not such Note be
overdue, and neither the Issuer, the Indenture Trustee nor any agent of the
Issuer or the Indenture Trustee shall be affected by notice to the contrary.
SECTION 2.9. PAYMENTS OF PRINCIPAL AND INTEREST. (a) Any installment of
interest or principal payable on any Notes of any Series which is punctually
paid or duly provided for by the Issuer on the applicable Note Distribution Date
shall be paid to the Person in whose name such Note (or one or more Predecessor
Notes) is registered at the close of business on the Record Date for such Note
Distribution Date (i) by check mailed to such Person's address as it appears in
the Note Register on such Record Date, or (ii) except that, unless Definitive
Notes have been issued pursuant to Section 2.13, with respect to Notes
registered on the Note Record Date in the name of the nominee of the Securities
Depository (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; provided, however, the final installment of principal payable with
respect to such Note shall be payable as provided in subsection (b) of this
Section 2.9.
(b) All reductions in the principal amount of a Note (or one or more
Predecessor Notes) effected by payments of installments of principal made on any
Note Distribution Date shall be binding upon all Holders of such Note and of any
Note issued upon the registration of transfer thereof or in exchange therefor or
in lieu thereof, whether or not such payment is noted on such Note. The final
installment of principal of each Note shall be payable only upon presentation
and surrender thereof on or after the Note Distribution Date or therefor at the
office or agency of the Issuer maintained by it for such purpose in the Borough
of Manhattan, the City of New York, State of New York, pursuant to Section 3.2.
(c) The principal of each Class of Notes shall be payable in installments
on each Note Distribution Date as provided in the applicable Terms Supplement.
Notwithstanding the foregoing, the entire unpaid principal amount of each Class
of Notes shall be due and payable, if not previously paid, on the date on which
an Event of Default shall have occurred and be continuing, if the Surety
Provider or, with the consent of the Surety Provider, either 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 5.2. All principal payments on
each Class of Notes shall be made to the Noteholders of such Class entitled
thereto as provided in the applicable Terms Supplement. 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 Note Distribution Date on which the
Issuer expects that the final installment of principal of and interest on such
Note will be paid. Such notice shall be mailed or transmitted by facsimile prior
to such final Note Distribution Date and shall specify that such final
installment will be payable only upon presentation and surrender of such Note
and shall specify the place where such Note may be presented and surrendered for
payment of such installment.
(d) If the Issuer defaults in a payment of interest on any Class of Notes,
the Issuer shall pay defaulted interest (plus interest on such defaulted
interest to the extent lawful) at the applicable Class Interest Rate in any
lawful manner. The Issuer may pay such defaulted interest to the persons who are
Noteholders of such Class on a subsequent special record date, which date shall
be at least five Business Days prior to the payment date. The Issuer shall fix
or cause to be fixed any such special record date and payment date, and, at
least 15 days before any such special record date, the Issuer shall mail to each
Noteholder of such Class a notice that states the special record date and the
amount of defaulted interest to be paid.
(e) Subject to the foregoing provisions of this Section, each Note
delivered under this Indenture, upon registration of transfer of or in exchange
for or in lieu of any other Note, shall carry the rights to unpaid principal and
interest that were carried by such other Note. Any checks mailed pursuant to
this Section 2.9 and returned undelivered shall be held in accordance with
Section 3.3.
(f) Not later than each Determination Date relating to each Note
Distribution Date for a Series of Notes, the Administrator shall prepare and
deliver to the Issuer, the Eligible Lender Trustee, the Indenture Trustee and
the Surety Provider a statement (a "Distribution Date Statement") with respect
to the following Note Distribution Date setting forth:
(i) the amount of the distribution allocable
to principal of each Class of Notes or the
Certificates, as the case may be;
(ii) the amount of the distribution allocable to interest
on each Class of Notes and the Certificates (or, with respect
to a Class of Accrual Notes, the amount of interest accrued
thereon), together with the interest rates applicable with
respect thereto (indicating whether such interest rates are
based on the applicable Auction Rate or LIBOR Rate, as the
case may be, or on the Net Loan Rate, with respect to each
Class of Notes and the Certificates, and specifying what each
such interest rate would have been if it had been calculated
using the alternate basis);
(iii) the amount of the distribution or accrual,
if any, allocable to any Noteholders' Auction Rate
Interest Carryover, any Noteholders' LIBOR Rate Interest
Carryover and any Certificateholders' Auction Rate Interest
Carryover, together with the outstanding amount, if any, of
each thereof after giving effect to any such distribution or
accrual;
(iv) the Pool Balance as of the close of
business on the last day of the preceding Collection
Period;
(v) the aggregate outstanding principal balance of each
Class of Notes and the Certificate Balance as of such Note
Distribution Date or Certificate Distribution Date, after
giving effect to payments allocated to principal reported
under clause (i) above (and, with respect to a Class of
Accrual Notes, after giving effect to any interest accrued
thereon reported under clause (ii) above);
(vi) the amount of the Servicing Fee and any Servicing
Fee Carryover allocated to the Master Servicer, the amount of
the Administration Fee allocated to the Administrator, the
amount of the Auction Agent Fee allocated to the Auction
Agent, the amount of the Indenture Trustee Fee allocated to
the Indenture Trustee, the amount of the Eligible Lender
Trustee Fee allocated to the Eligible Lender Trustee and the
amount of the Surety Provider Fee allocated to the Surety
Provider, respectively, with respect to such
Collection Period, and the amount, if any, of the Servicing
Fee Carryover remaining unpaid after giving effect to any such
payment;
(vii) the amount of the distribution, if any,
payable to the Surety Provider as reimbursement for
any unpaid Surety Bond Payments;
(viii) the amount of the aggregate Realized
Losses, if any, for such Collection Period;
(ix) the balance of the Reserve Account,
Capitalized Interest Account and Capitalized Pre-
Funding Account on such Note Distribution Date or
Certificate Distribution Date, after giving effect to
changes therein on such Note Distribution Date or
Certificate Distribution Date and the then applicable
Parity Percentage;
(x) for Note Distribution Dates during each Funding
Period, the remaining Pre-Funded Amount on such Note
Distribution Date, after giving effect to changes therein
during the related Collection Period; and
(xi) for the first Note Distribution Date on or
following the end of each Funding Period, the amount
of any remaining Pre-Funded Amount that has not been used to
make Additional Fundings and is being paid out to Noteholders.
SECTION 2.10. CANCELLATION. All Notes surrendered for payment, registration
of transfer or exchange 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 2.11. AUTHENTICATION AND DELIVERY OF NOTES. Notes of any one or
more Series may from time to time be executed by the Issuer and delivered to the
Indenture Trustee for authentication, and thereupon the same shall be
authenticated and delivered by the Indenture Trustee, upon Issuer Request and
upon receipt by the Indenture Trustee of the following:
(a) an Issuer Order authorizing the execution,
authentication and delivery of such Notes by the Issuer and
specifying the Series, the Classes within such Series, the
Final Maturity Date of each Class, the principal amount and
the Class Interest Rate and the method of determining such
Class Interest Rate, of each Class of such Notes to be
authenticated and delivered;
(b) in case the Notes to be authenticated and
delivered are of any Series not theretofore created, an
appropriate Terms Supplement, accompanied by (i) the written
consent of the Surety Provider as to the
issuance of such Series and the form of such Terms
Supplement, and (ii) an Issuer Order authorizing such
Terms Supplement (and, in the case of the first Series to be
authenticated and delivered hereunder, authorizing this
Indenture), designating the new Series to be created and
prescribing, consistent with the applicable provisions of this
Indenture, the terms and provisions relating to the Notes of
such Series;
(c) Opinions of Counsel addressed to the
Indenture Trustee and the Surety Provider, and to the
effect that:
(i) all instruments furnished to the
Indenture Trustee in connection with such Notes
conform to the requirements of this Indenture and
constitute all the documents required to be
delivered hereunder for the Indenture Trustee
to authenticate and deliver the Notes then
applied for;
(ii) all conditions precedent provided for in
this Indenture relating to the authentication and
delivery of the Notes applied for have been complied
with;
(iii) the Eligible Lender Trustee is an "eligible
lender" under the terms of the Higher Education Act,
has corporate power to execute and deliver the Trust
Agreement, the Trust Agreement authorizes the Issuer
to execute and deliver the Terms Supplement relating
to such Notes (and, in the case of the first Series
to be authenticated and delivered hereunder, this
Indenture), and to issue such Notes, and the Issuer
has duly taken all necessary action under the Trust
Agreement for those purposes;
(iv) the Issuer is a Pennsylvania business
trust and the issuance of the Notes then applied
for is in conformity with the terms of and duly
authorized by the Trust Agreement;
(v) assuming due execution and delivery
thereof by the Indenture Trustee, this Indenture
and the related Terms Supplement, as executed and
delivered by the Issuer, are the valid, legal and
binding obligations of the Issuer, enforceable in
accordance with their terms, subject to the effect of
bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance and other similar laws relating
to or affecting creditors' rights generally and court
decisions with respect thereto, and such counsel need
express no opinion with respect to the availability
of equitable remedies, and the execution of such
Terms Supplement is authorized or permitted by
Section 9.1 of this Indenture;
(vi) the Notes then applied for, when issued,
delivered, authenticated and paid for, will be the
valid, legal and binding obligations of the Issuer,
entitled to the benefits of this Indenture and the
related Terms Supplement, equally and ratably with
all other Notes of such Series, if any, theretofore
issued, authenticated, delivered and paid for and
then Outstanding hereunder, and enforceable in
accordance with their terms, subject to the effect of
bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance and other similar laws relating
to or affecting creditors' rights generally and court
decisions with respect thereto, and such counsel need
express no opinion with respect to the availability
of equitable remedies;
(vii) the Issuer has Granted to the Indenture
Trustee a lien and first perfected security
interest in all of its right, title and interest
in each such Financed Student Loan;
(viii) the Trust Agreement authorizes the Issuer to
Grant the Indenture Trust Estate to the Indenture
Trustee as security for the Notes of such Series and
all previously issued and Outstanding Series and the
Issuer has taken all necessary action under the Trust
Agreement to Grant the Indenture Trust Estate to the
Indenture Trustee;
(ix) the Terms Supplement delivered to the
Indenture Trustee with such Opinion of Counsel
subjects the Financed Student Loans securing such
Series and all previously issued and Outstanding
Series and all proceeds therefrom and the Pledged
Accounts or Funds for such Series and all previously
issued and Outstanding Series to the lien and
security interest of this Indenture;
(x) such action has been taken with respect
to delivery of possession of the Indenture Trust
Estate and with respect to the recording and filing
of this Indenture, the Terms Supplement for such
Series, any other indentures supplemental hereto and
any other requisite documents and with respect to the
execution and filing of any financing statements as
is necessary to perfect a first priority security
interest in the Indenture Trust Estate for such
Series and all previously issued and Outstanding
Series, with either the details of such action being
recited therein, or the absence of any such action
being necessary to make such lien and security
interest effective being
stated therein; and, with any recording, filing,
re-recording and re-filing of this Indenture, the
Terms Supplement for such Series, any other
indentures supplemental hereto and any other
requisite documents and any 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
created by this Indenture and the related Terms
Supplements in the Indenture Trust Estate for such
Series and all previously issued and Outstanding
Series until March 15 of the year in which the first
Opinion of Counsel with respect to such Series is
required to be delivered under Section 3.6 being
described therein;
(xi) this Indenture and the Terms Supplement for
such Series have been duly qualified under the TIA,
or that no qualification of such Terms Supplement
under the TIA is necessary; the execution of the
Terms Supplement for such Series requires the
requalification of this Indenture under the TIA, or
that no requalification of the Indenture under the
TIA is necessary by virtue of the execution of such
Terms Supplement; and
(xii) no authorization, approval or consent of any
governmental body having jurisdiction over the Issuer
which has not been obtained by the Issuer is required
for the valid issuance and delivery of the Notes.
(d) an Officer's Certificate of the
Administrator on behalf of the Issuer stating that:
(i) the Issuer is not in Default under this
Indenture or the Insurance Agreement and the issuance
of the Notes applied for will not result in any
breach of any of the terms, conditions or provisions
of, or constitute a default under, the Trust
Agreement, the Insurance Agreement, any indenture,
mortgage, deed of trust or other agreement or
instrument to which the Issuer is a party or by which
it is bound, or any order of any court or
administrative agency entered in any proceeding to
which the Issuer is a party or by which it may be
bound or to which it may be subject, and that all
conditions precedent provided in this Indenture
relating to the authentication and delivery of the
Notes applied for have been complied with;
(ii) the Issuer is the owner of each Financed
Student Loan securing such Series and any previously
issued Series, has not assigned any interest or
participation in any such Financed Student Loan (or,
if any such interest or participation has been
assigned, it has been released) and has the right to
Grant each such Financed Student Loan to the
Indenture Trustee;
(iii) the Issuer has Granted to the Indenture
Trustee a lien and first perfected security interest
in all of its right, title, and interest in each such
Financed Student Loan;
(iv) attached thereto are true and correct
copies of letters signed by each Rating Agency
confirming that the Notes of such new Series have
been rated in the highest rating categories by such
Rating Agency.
(e) Unless any of the requirements set forth herein
shall be deleted by the related Terms Supplement, an Officer's
Certificate of the Administrator on behalf of the Issuer
stating that all of the Financed Student Loans and any other
assets securing such Series and all previously issued and
Outstanding Series:
(i) satisfy each of the requirements
established for such Financed Student Loans in
the related Terms Supplement and the Insurance
Agreement; and
(ii) have been endorsed as provided in the
Sale and Servicing Agreement;
(f) Cash in the amount, if any, required by the
terms of the related Terms Supplement to be deposited
in the Collection Account and held by the Indenture Trustee
and applied in accordance with the terms hereof or as
otherwise provided in the related Series Supplement;
(g) Cash, Eligible Investments or (if permitted
by the related Terms Supplement) a Qualified Letter
of Credit or any other assets specified in or permitted by the
related Terms Supplement in the respective amounts, if any,
required by the terms of the related Terms Supplement to be
maintained in the Reserve Account and held by the Indenture
Trustee;
(h) If such Series is directly insured,
guaranteed or otherwise backed, the Note Surety Bond
for such Series;
(i) An executed counterpart of the Terms
Supplement; and
(j) Such other documents, certificates, instruments
or opinions as may be required by the terms of the Terms
Supplement creating such Series of Notes.
SECTION 2.12. RELEASE OF COLLATERAL. Except as otherwise permitted by
Section 11.1 and the terms of the Basic Documents, the Indenture Trustee shall
release property from the lien of this Indenture and the related Terms
Supplement only upon receipt of an Issuer Request accompanied by an Officer's
Certificate of the Issuer, an Opinion of Counsel and Independent Certificates in
accordance with TIA " 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 2.13. BOOK-ENTRY NOTES. Unless otherwise provided in the related
Terms Supplement, the Notes, upon original issuance, will be issued in the form
of typewritten Notes representing the Book-Entry Notes, to be delivered to The
Depository Trust Company, the initial Clearing Agency, by, or on behalf of, the
Issuer. Such Notes shall initially be registered on the Note Register in the
name of Cede & Co., the nominee of the initial Clearing Agency, and no Note
Owner will receive a Definitive Note (as defined below) representing such Note
Owner's interest in such Note, except as provided in Section 2.15. Unless and
until definitive, fully registered Notes (the "Definitive Notes") have been
issued to Note Owners pursuant to Section 2.15:
(i) the provisions of this Section shall be in
full force and effect;
(ii) the Note Registrar and the Indenture Trustee may deal
with the Clearing Agency for all purposes (including the
payment of principal of and interest and other amounts on the
Notes) as the authorized representative of the Note Owners;
(iii) to the extent that the provisions of this Section
conflict with any other provisions of this Indenture, the
provisions of this Section shall control;
(iv) the rights of Note Owners shall be exercised only
through the Clearing Agency and shall be limited to those
established by law and agreements between such Note Owners and
the Clearing Agency and/or the Clearing Agency Participants
pursuant to the Note Depository Agreements. Unless and until
Definitive Notes are issued pursuant to Section 2.15, the
initial Clearing Agency will make book-entry transfers among
the Clearing Agency participants and receive and transmit
payments of principal of and interest and other amounts on the
Notes to such Clearing Agency Participants; and
(v) whenever this Indenture requires or permits
actions to be taken based upon instructions or
directions of Noteholders of Notes evidencing a
specified percentage of the Outstanding Amount of the
Notes, the Clearing Agency shall be deemed to represent such
percentage only to the extent that it has received
instructions to such effect from Note Owners and/or Clearing
Agency Participants owning or representing, respectively, such
required percentage of the beneficial interest in the Notes
and has delivered such instructions to the Indenture Trustee.
SECTION 2.14. 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
2.15, the Indenture Trustee shall give all such notices and communications
specified herein to be given to Noteholders to the Clearing Agency.
SECTION 2.15. DEFINITIVE NOTES. If (i) the Administrator advises the
Indenture Trustee in writing that the Clearing Agency is no longer willing or
able to properly discharge its responsibilities with respect to the Notes, and
the Administrator is unable to locate a qualified successor, or (ii) the
Administrator at its option advises the Indenture Trustee in writing that it
elects to terminate the book-entry system through the Clearing Agency or (iii)
after the occurrence of an Event of Default, a Servicer Default or an
Administrator Default, Note Owners representing beneficial interests aggregating
at least a majority of the Outstanding Amount of the Notes advise the Clearing
Agency (which shall then notify the Indenture Trustee) in writing that the
continuation of a book- entry system through the Clearing Agency is no longer in
the best interests of the Note Owners, then the Indenture Trustee will cause the
Clearing Agency to notify all Note Owners, through the Clearing Agency, of the
occurrence of any such event and of the availability of Definitive Notes to Note
Owners requesting the same. Upon surrender to the Indenture Trustee of the
typewritten Notes representing the Book-Entry Notes by the Clearing Agency,
accompanied by registration instructions, the Issuer shall execute and the
Indenture Trustee shall authenticate the Definitive Notes in accordance with the
instructions of the Clearing Agency. None of the Issuer, the Note Registrar or
the Indenture Trustee shall be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be protected in relying on,
such instructions. Upon the issuance of Definitive Notes, the Indenture Trustee
shall recognize the holders of the Definitive Notes as Noteholders.
SECTION 2.16. RESTRICTIONS ON TRANSFER. THE PROVISIONS OF THIS SECTION
SHALL APPLY ONLY TO A CLASS OF NOTES ISSUED IN A TRANSACTION NOT REGISTERED
UNDER THE SECURITIES ACT (the "Non-Registered Notes"). Except as otherwise set
forth in a Terms Supplement, the Non-Registered Notes may not be offered or
sold, after their initial issuance, except to Qualified Institutional Buyers in
reliance on the exemption from the registration requirements of the Securities
Act provided by Rule 144A thereunder.
Except as otherwise set forth in a Terms Supplement, each purchaser of any
Class of Non-Registered Notes will be deemed to have represented and agreed as
follows:
(i) It is a Qualified Institutional Buyer as
defined in Rule 144A promulgated under the Securities
Act and is acquiring the Notes for its own institutional
account or for the account of a Qualified Institutional Buyer.
(ii) It understands that the Non-Registered Notes
will be offered in a transaction not involving any public
offering within the meaning of the Securities Act, and that,
if in the future it decides to resell, pledge or otherwise
transfer any Non-Registered Notes, such Non-Registered Notes
may be resold, pledged or transferred only (a) to a person who
the seller reasonably believes is a Qualified Institutional
Buyer that purchases for its own account or for the account of
a Qualified Institutional Buyer to whom notice is given that
the resale, pledge or transfer is being made in reliance on
Rule 144A or (b) pursuant to an effective registration
statement under the Securities Act.
(iii) It understands that each Non-Registered Note
will bear a legend substantially to the following effect:
"UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER (AS
DEFINED BELOW) OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT") OR ANY STATE SECURITIES LAWS. THE HOLDER HEREOF, BY
PURCHASING THIS NOTE, AGREES THAT THIS NOTE MAY BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY IN ACCORDANCE WITH ANY APPLICABLE STATE SECURITIES LAWS AND (1)
TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER WHICH PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, OR (2) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT.
THIS NOTE IS NOT GUARANTEED OR INSURED BY ANY GOVERNMENTAL AGENCY."
ARTICLE III
COVENANTS
SECTION 3.1. PAYMENT TO NOTEHOLDERS. The Issuer will pay or cause to be
duly and punctually paid, from the property of the Issuer, the principal of and
interest on the Notes of each Series in accordance with the terms of such Notes,
this Indenture and the related Terms Supplement and Sale and Servicing
Agreement. Amounts properly withheld under the Code by any Person from a payment
to any Noteholder of interest (including any Noteholders' Auction Rate Interest
Carryover) and/or principal shall be considered as having been paid by the
Issuer to such Noteholder for all purposes of this Indenture.
SECTION 3.2. MAINTENANCE OF OFFICE OR AGENCY. The Issuer will maintain in
the Borough of Manhattan, the City of New York, the State of New York, an office
or agency where Notes may be surrendered for registration of transfer or
exchange, and where notices and demands to or upon the Issuer in respect of the
Notes and this Indenture may be served. The Issuer hereby initially appoints the
Indenture Trustee to serve as its agent for the foregoing purposes. The Issuer
will give prompt written notice to the Indenture Trustee and the Surety Provider
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.
The Issuer may also from time to time designate one or more other offices
or agencies (in or outside the City of New York) where the Notes may be
presented or surrendered for any or all such purposes and may from time to time
rescind such designations; provided, however, that (i) no such designation or
rescission shall in any manner relieve the Issuer of its obligation to maintain
an office or agency in the Borough of Manhattan, the City of New York, the State
of New York for the purposes set forth in the preceding paragraph, (ii)
presentations or surrenders of Notes for payment may be made only in the City of
New York, the State of New York and (iii) any designation of an office or agency
for payment of Notes shall be subject to Section 3.3. The Issuer will give
prompt written notice to the Indenture Trustee and the Surety Provider of any
such designation or rescission and of any change in the location of any such
other office or agency.
SECTION 3.3. MONEY FOR PAYMENTS TO BE HELD IN Trust. As provided in Section
8.2(a) and (b), all payments of amounts due and payable with respect to any
Notes that are to be made from amounts distributed from the Collection Account
or any other Trust Account pursuant to Section 8.2(c) shall be made on behalf of
the Issuer by the Indenture Trustee or by another Paying Agent, and no amounts
so distributed from the Collection Account for payments of Notes shall be paid
over to the Issuer except as provided in this Section.
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 Surety
Provider 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 its 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, and, at the direction of the Surety Provider,
shall, 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 Surety Provider to the extent of any unreimbursed claims of the
Surety Provider, including interest thereon from the date any such claim was
first made, and if all such claims of the Surety Provider have been satisfied,
to the Issuer on Issuer Request; and the Noteholder thereof shall thereafter, as
an unsecured general creditor, look only to the Issuer for payment thereof (but
only to the extent of the amounts so paid to the Issuer), and all liability of
the Indenture Trustee or such Paying Agent with respect to such trust money
shall thereupon cease; PROVIDED, HOWEVER, that the Indenture Trustee or such
Paying Agent, before being required to make any such repayment, shall at the
expense and direction of the Issuer cause to be published once, in a newspaper
published in the English language, customarily published on each Business Day
and of general circulation in The City of New York, notice that such money
remains unclaimed and that, after a date specified therein, which shall not be
less than 30 days from the date of such publication, any unclaimed balance of
such money then remaining will be repaid to the Issuer. The Indenture Trustee
shall also adopt and employ, at the expense of the Issuer, any other reasonable
means of notification of such repayment (including mailing notice of such
repayment to Noteholders whose right to or interest in moneys due and payable
but not claimed is determinable from the records of the Indenture Trustee or of
any Paying Agent, at the last address of record for each such Noteholder).
SECTION 3.4. EXISTENCE. The Issuer will keep in full effect its existence
and rights as a trust under the laws of the Commonwealth of Pennsylvania (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 and rights 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 3.5. 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
interests (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 or any Terms Supplement;
(iii) enforce any of the Collateral; or
(iv) preserve and defend title to the Indenture Trust
Estate and the rights of the Indenture Trustee and the
Noteholders in such Indenture Trust Estate against the claims
of all persons and parties.
The Issuer hereby designates the Indenture Trustee its agent and
attorney-in-fact to execute any financing statement, continuation statement or
other instrument required to be executed pursuant to this Section.
SECTION 3.6. OPINIONS AS TO INDENTURE TRUST ESTATE. On or before April 30
in each calendar year, beginning with the first calendar year commencing more
than three months after the Closing Date for a Series, the Administrator, on
behalf of the Issuer, shall furnish to the Indenture Trustee and the Surety
Provider an Opinion of Counsel either stating that, in the opinion of such
counsel, such action has been taken with respect to the recording, filing,
re-recording and refiling of this Indenture, any indentures supplemental hereto
and any other requisite documents and with respect to the execution and filing
of any financing statements and continuation statements as is necessary to
maintain the lien and security interest created by this Indenture and reciting
the details of such action or stating that in the opinion of such counsel no
such action is necessary to maintain such lien and security interest. Such
Opinion of Counsel shall also describe the recording, filing, re-recording and
refiling of this Indenture, any indentures supplemental hereto and any other
requisite documents and the execution and filing of any financing statements and
continuation statements that will, in the opinion of such counsel, be required
to maintain the lien and security interest of this Indenture until April 30 in
the following calendar year.
SECTION 3.7. PERFORMANCE OF OBLIGATIONS; SERVICING OF FINANCED STUDENT
LOANS. (a) The Issuer will not take any action and will use its best efforts not
to permit any action to be taken by others that would release any Person from
any of such Person's material covenants or obligations under any instrument or
agreement included in the Indenture Trust Estate or that would result in the
amendment, hypothecation, subordination, termination or discharge of, or impair
the validity or effectiveness of, any such instrument or agreement, except as
expressly provided in this Indenture, the related Terms Supplement or Sale and
Servicing Agreement, the Supplemental Sale and Servicing Agreement or such other
instrument or agreement.
(b) With the written consent of the Surety Provider, the Issuer may
contract with other Persons to assist it in performing its duties under this
Indenture, and any performance of such duties by a Person identified to the
Indenture Trustee in an Officer's Certificate of the Issuer shall be deemed to
be action taken by the Issuer. Initially, the Issuer has contracted with the
Master Servicers and the Administrator to assist the Issuer in performing its
duties under this Indenture.
(c) The Issuer will punctually perform and observe all its obligations and
agreements contained in this Indenture, the other Basic Documents and in the
instruments and agreements included in the Indenture Trust Estate, including
filing or causing to be filed all UCC financing statements and continuation
statements required to be filed by the terms of this Indenture and the related
Terms Supplement and Sale and Servicing Agreement in accordance with and within
the time periods provided for herein and therein. Except as otherwise expressly
provided therein, the Issuer shall not waive, amend, modify, supplement or
terminate any Basic Document or any provision thereof without the consent of the
Surety Provider and either the Indenture Trustee or the Noteholders of at least
a majority of the Outstanding Amount of the Notes of each Series then
Outstanding.
(d) If the Issuer shall have knowledge of the occurrence of a Servicer
Default or an Administrator Default under the Sale and Servicing Agreement, the
Issuer shall promptly notify in writing the Indenture Trustee, the Surety
Provider and the Rating Agencies thereof, and shall specify in such notice the
action, if any, the Issuer is taking with respect to such default. If a Servicer
Default shall arise from the failure of the Master Servicer to perform any of
its duties or obligations under the Sale and Servicing Agreement or any
Supplemental Sale and Servicing Agreement, or an Administrator Default shall
arise from the failure of the Administrator to perform any of its duties or
obligations under the Sale and Servicing Agreement, any Supplemental Sale and
Servicing Agreement or the Administration Agreement, as the case may be, with
respect to the Financed Student Loans, the Issuer shall take all reasonable
steps available to it to enforce its rights under the Basic Documents in respect
of such failure and shall act in accordance with all directions of the Surety
Provider.
(e) As promptly as possible after the giving of notice of termination to
the Master Servicer of the Master Servicer's rights and powers, or to the
Administrator of the Administrator's rights and powers, pursuant to Section 8.1
of the related Sale and Servicing Agreement, the Issuer shall appoint a
successor Master Servicer (the "Successor Master Servicer"), or a successor
Administrator (the "Successor Administrator"), and such Successor Master
Servicer or Administrator, as the case may be, shall accept its appointment by a
written assumption in a form acceptable to the Indenture Trustee; PROVIDED,
HOWEVER, that the Issuer shall not appoint a Successor Master Servicer or
Successor Administrator without obtaining the prior written consent of the
Surety Provider. In the event that a Successor Master Servicer or Administrator
has not been appointed and accepted its appointment at the time when the Master
Servicer or Administrator, as the case may be, ceases to act as Master Servicer
or Administrator, as the case may be, the Indenture Trustee without further
action shall automatically be appointed the Successor Master Servicer or
Successor Administrator, as the case may be. The Indenture Trustee may resign as
the Master Servicer or the Administrator by giving written notice of such
resignation to the Issuer and the Surety Provider and in such event will be
released from such duties and obligations, such release not to be effective
until the date a new servicer or a new administrator enters into an agreement
with the Issuer as provided below. Upon delivery of any such notice to the
Issuer, the Issuer shall, with the written consent of the Surety Provider,
obtain a new servicer or a new administrator as the Successor Master Servicer or
Administrator under the Sale and Servicing Agreement. Any Successor Master
Servicer or Administrator, as the case may be, other than the Indenture Trustee
shall (i) be an established institution whose regular business includes the
servicing or administration of student loans and (ii) enter into a servicing
agreement or an administration agreement with the Issuer having substantially
the same provisions as the provisions of the Sale and Servicing Agreement and
any Supplemental Sale and Servicing Agreement applicable to the Master Servicer
or the provisions of the Sale and Servicing Agreement, any Supplemental Sale and
Servicing Agreement and the Administration Agreement applicable to the
Administrator. If within 30 days after the delivery of the notice referred to
above, the Issuer shall not have obtained such a new servicer or administrator,
as the case may be, the Indenture Trustee may appoint, or may petition a court
of competent jurisdiction to appoint, a Successor Master Servicer or Successor
Administrator; PROVIDED, HOWEVER, that such right to appoint or to petition for
the appointment of any such successor shall in no event relieve the Indenture
Trustee from any obligations otherwise imposed on it under the Basic Documents
until such successor has in fact assumed such appointment. In connection with
any such appointment, the Indenture Trustee may make such arrangements for the
compensation of such successor as it and such successor shall agree, subject to
the limitations set forth below and in the Sale and Servicing Agreement, and in
accordance with Section 8.2 of the Sale and Servicing Agreement, the Issuer
shall enter into an agreement with such successor for the servicing or
administration of the Financed Student Loans (such Agreement to be in form and
substance satisfactory to the Indenture Trustee and the Surety Provider). If the
Indenture Trustee shall succeed as provided herein to the Master Servicer's
duties as servicer with respect to the Financed Student Loans, or the
Administrator's duties with respect to the Issuer and the Financed Student
Loans, as the case may be, it shall do so in its individual capacity and not in
its capacity as Indenture Trustee and, accordingly, the provisions of Article VI
hereof shall be inapplicable to the Indenture Trustee in its duties as the
successor to the Master Servicer or the Administrator, as the case may be, and
the servicing or administration of the Financed Student Loans. In case the
Indenture Trustee shall become successor to the Master Servicer or the
Administrator, as the case may be, under the related Sale and Servicing
Agreement, the Indenture Trustee shall be entitled to appoint as Master Servicer
or as Administrator, as the case may be, any one of its affiliates or an agent,
provided that it shall be fully liable for the actions and omissions of such
affiliate or agent in such capacity as Successor Master Servicer or Successor
Administrator.
(f) Upon any termination of the Master Servicer's rights and powers
pursuant to the related Sale and Servicing Agreement, or any termination of the
Administrator's rights and powers pursuant to the related Sale and Servicing
Agreement, as the case may be, the Issuer shall promptly notify the Indenture
Trustee and the Surety Provider. As soon as a Successor Master Servicer or a
Successor Administrator is appointed, the Issuer shall notify the Indenture
Trustee and the Surety Provider of such appointment, specifying in such notice
the name and address of such Successor Master Servicer or such Successor
Administrator.
(g) Without derogating from the absolute nature of the assignment Granted
to the Indenture Trustee under any Terms Supplement or the rights of the
Indenture Trustee hereunder, the Issuer agrees that it will not, without the
prior written consent of the Surety Provider and either the Indenture Trustee or
the Noteholders of at least a majority in Outstanding Amount of the Notes of
each Series then outstanding, amend, modify, waive, supplement, terminate or
surrender, or agree to any amendment, modification, supplement, termination,
waiver or surrender of, the terms of (i) any portion of the Trust Estate, or, as
applicable, (ii) the Basic Documents, except to the extent otherwise provided in
the related Sale and Servicing Agreement, or waive timely performance or
observance by the Master Servicer, the Administrator, the Seller, the Issuer or
the Eligible Lender Trustee under the related Sale and Servicing Agreement and
the Supplemental Sale and Servicing Agreement; PROVIDED, HOWEVER, that no such
amendment shall (i) increase or reduce in any manner the amount of, or
accelerate or delay the timing of, distributions that are required to be made
for the benefit of the 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 should be so consented to by the Indenture
Trustee or such Noteholders, the Issuer agrees, promptly following a request by
the Indenture Trustee to do so, to execute and deliver, in its own name and at
its own expense, such agreements, instruments, consents and other documents as
the Indenture Trustee may deem necessary or appropriate in the circumstances.
SECTION 3.8. 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 Documents, 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 and
the Surety Provider has approved of such action;
(ii) claim any credit on, or make any deduction
from the principal of or interest on (including any
Noteholders' Auction Rate Interest Carryover) any 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;
(iii) except as contemplated by the Basic
Documents, dissolve or liquidate in whole or in part;
or
(iv) (A) permit the validity or effectiveness of this
Indenture or any Terms Supplement to be impaired, or permit
the lien of this Indenture and any Terms Supplement 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 and
any Terms Supplement) 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 and any Terms Supplement 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 3.9. ANNUAL STATEMENT AS TO COMPLIANCE. The Administrator, on
behalf of the Issuer, will deliver to the Indenture Trustee and the Surety
Provider, within 120 days after the first fiscal year of the Issuer that ends
more than three months after the Closing Date for a Series, and each fiscal year
thereafter, an Officer's Certificate of the Issuer stating that:
(i) a review of the activities of the Issuer during
such year and of performance under this Indenture has been
made under such Authorized Officers' supervision; and
(ii) to the best of such Authorized Officers' knowledge,
based on such review, the Issuer has complied with all
conditions and covenants under this
Indenture throughout such year, or, if there has been a
default in the compliance of any such condition or covenant,
specifying each such default known to such Authorized Officers
and the nature and status thereof.
SECTION 3.10. ISSUER MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS. (a) The
Issuer shall not consolidate or merge with or into any other Person, unless:
(i) the Person (if other than the Issuer) formed by
or surviving such consolidation or merger shall be a Person
organized and existing under the laws of the United States of
America or any State and shall expressly assume, by an
indenture supplemental hereto, executed and delivered to the
Indenture Trustee, in form satisfactory to the Indenture
Trustee, the due and punctual payment of the principal of and
interest on and any Noteholders' Auction Rate Interest
Carryover, if any, with respect to all Notes and the
performance or observance of every agreement and covenant of
this Indenture and any Terms Supplement on the part of
the Issuer to be performed or observed, all as
provided herein or therein;
(ii) immediately after giving effect to such
transaction, no Default shall have occurred and be
continuing;
(iii) the Rating Agency Condition shall have been
satisfied with respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel
(and shall have delivered copies thereof to the Indenture
Trustee) to the effect that such transaction will not have any
material adverse Federal or Pennsylvania state tax consequence
to the Issuer, any Noteholder or any Certificateholder;
(v) any action as is necessary to maintain the
lien and security interest created by this Indenture
shall have been taken;
(vi) the Surety Provider shall have furnished
its written consent to such transaction; and
(vii) the Issuer shall have delivered to the Indenture
Trustee an Officer's 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) Except as otherwise permitted by the Basic Documents, the
Issuer shall not convey or transfer all or substantially all its properties or
assets, including those included in the Indenture Trust Estate, to any Person,
unless:
(i) the Person that acquires by conveyance or
transfer the properties and assets of the Issuer the
conveyance or transfer of which is hereby restricted shall (A)
be a United States citizen or a Person organized and existing
under the laws of the United States of America or any State,
(B) expressly assumes, by an indenture supplemental hereto,
executed and delivered to the Indenture Trustee, in form
satisfactory to the Indenture Trustee, the due and punctual
payment of the principal of and interest on and Noteholders'
Auction Rate Interest Carryover, if any, with respect to all
Notes and the performance or observance of every agreement and
covenant of this Indenture on the part of the Issuer to be
performed or observed, all as provided herein, (C) expressly
agrees by means of such supplemental indenture that all right,
title and interest so conveyed or transferred shall be subject
and subordinate to the rights of Noteholders, (D) unless
otherwise provided in such supplemental indenture, expressly
agrees to indemnify, defend and hold harmless the Issuer
against and from any loss, liability or expense arising under
or related to this Indenture and the Notes and (E) expressly
agrees by means of such supplemental indenture that such
Person (or if a group of Persons, then one specified Person)
shall make all filings with the Commission (and any other
appropriate Person) required by the Exchange Act in connection
with the Notes;
(ii) immediately after giving effect to such
transaction, no Default shall have occurred and be
continuing;
(iii) the Rating Agency Condition shall have been
satisfied with respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel
(and shall have delivered copies thereof to the Indenture
Trustee) to the effect that such transaction will not have any
material adverse Federal or Pennsylvania state tax consequence
to the Issuer, any Noteholder or any Certificateholder;
(v) any action as is necessary to maintain the
lien and security interest created by this Indenture
shall have been taken;
(vi) the Surety Provider shall have furnished
its written consent to such transaction; and
(vii) the Issuer shall have delivered to the Indenture
Trustee an Officer's Certificate of the Issuer and an Opinion
of Counsel each stating that such conveyance or transfer and
such supplemental indenture comply with this Article III and
that all conditions precedent herein provided for relating to
such transaction have been complied with (including any filing
required by the Exchange Act).
SECTION 3.11. SUCCESSOR OR TRANSFEREE. (a) Upon any consolidation or merger
of the Issuer in accordance with Section 3.10(a), the Person formed by or
surviving such consolidation or merger (if other than the Issuer) shall succeed
to, and be substituted for, and may exercise every right and power of, the
Issuer under this Indenture and any Terms Supplement 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), ClassNotes Trust 1997-I 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
ClassNotes Trust 1997-I is to be so released.
SECTION 3.12. NO OTHER BUSINESS. The Issuer shall not engage in any
business other than financing, purchasing, owning, selling, servicing and
managing Financed Student Loans and making Additional Fundings in the manner
contemplated by this Indenture and the other Basic Documents and activities
incidental thereto. After each Funding Period, the Issuer shall not fund the
purchase of any Additional Student Loans or make any other Additional Fundings
with respect to the related Series of Notes.
SECTION 3.13. NO BORROWING. The Issuer shall not issue, incur, assume,
guarantee or otherwise become liable, directly or indirectly, for any
indebtedness except for the Notes and such other obligations as are authorized
under the Basic Documents.
SECTION 3.14. OBLIGATIONS OF MASTER SERVICER AND ADMINISTRATOR. The Issuer
shall cause the Master Servicer to comply with Sections 4.8(a) and (b), 4.9,
4.10, 4.11, 5.5 and 5.6 of the Sale and Servicing Agreement and the
Administrator to comply with Sections 4.7, 4.8(a), 4.8(c), 4.9, 5.6 and 5.7
thereof.
SECTION 3.15. GUARANTEES, LOANS, ADVANCES AND OTHER LIABILITIES. Except as
contemplated by the Sale and Servicing Agreement, any Supplemental Sale and
Servicing Agreement this Indenture or any Terms Supplement, 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 Master Servicer, the Eligible Lender
Trustee, the Indenture Trustee, the Certificateholders, the Noteholders, the
Surety Provider, the Administrator, the Auction Agent and the Seller as
contemplated by, and to the extent funds are available for such purpose under,
the Sale and Servicing Agreement and the other Basic Documents.
SECTION 3.18. NOTICE OF EVENTS OF DEFAULT. The Issuer shall give the
Indenture Trustee, the Surety Provider and the Rating Agencies prompt written
notice of each Event of Default hereunder and each default on the part of the
Seller of its obligations under the Sale and Servicing Agreement or any
Supplemental Sale and Servicing Agreement, the Servicer of its obligations under
the Sale and Servicing Agreement or any Supplemental Sale and Servicing
Agreement or the Administrator of its obligations under the Sale and Servicing
agreement, any Supplemental Sale and Servicing Agreement or the Administration
Agreement. In addition, the Issuer shall deliver to the Indenture Trustee and
the Surety Provider, within five days after the occurrence thereof, written
notice in the form of an Officer's 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 5.1(iii), its status and what action the Issuer is taking or
proposes to take with respect thereto.
SECTION 3.19. FURTHER INSTRUMENTS AND ACTS. Upon request of the Indenture
Trustee, the Issuer will execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.1. SATISFACTION AND DISCHARGE OF Indenture. This Indenture shall
cease to be of further effect with respect to a Series of Notes except as to (i)
rights of registration of transfer and exchange, (ii) substitution of mutilated,
destroyed, lost or stolen Notes of such Series, (iii) rights of Noteholders to
receive payments of principal thereof and interest (including Noteholders'
Auction Rate Interest Carryover) thereon, (iv) Sections 3.3, 3.4, 3.5, 3.8,
3.10, 3.12, 3.13 and 3.15 of this Agreement, (v) the rights, obligations and
immunities of the Indenture Trustee hereunder (including the rights of the
Indenture Trustee under Section 6.7 and the obligations of the Indenture Trustee
under Section 4.2), and (vi) the rights of Noteholders as beneficiaries hereof
with respect to the property so deposited with the Indenture Trustee payable to
all or any of them, and the Indenture Trustee, on demand of and at the expense
of the Issuer, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture with respect to the Notes, when:
(A) either
(1) all Notes of such Series 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 2.7 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 3.3) have been delivered to the Indenture
Trustee for cancellation; or
(2) all Notes of such Series not theretofore
delivered to the Indenture Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable within one
year,
and the Issuer, in the case of (i) or (ii) 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 Series of Notes not theretofore delivered to the
Indenture Trustee for cancellation when due to the applicable
Final Maturity Date;
(B) the Issuer has paid or caused to be paid all
other sums payable hereunder by the Issuer with respect to
such Series;
(C) the Surety Provider has received all premiums due
under the Insurance Agreement and has been reimbursed for all
claims paid and interest thereon since the date any such claim
was made pursuant to the Sale and Servicing Agreement; and
(D) the Issuer has delivered to the Indenture Trustee
and the Surety Provider an Officer's Certificate of the
Issuer, an Opinion of Counsel and (if required by the TIA or
either the Indenture Trustee or the Surety Provider) an
Independent Certificate from a firm of certified public
accountants, each meeting the applicable requirements of
Section 11.1(a) and, subject to Section 11.2, each stating
that all conditions precedent herein provided for relating to
the satisfaction and discharge of this Indenture with respect
to such Series have been complied with.
SECTION 4.2. APPLICATION OF TRUST MONEY. All moneys deposited with the
Indenture Trustee pursuant to Section 4.1 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 of which such moneys have been deposited with the Indenture Trustee,
of all sums due and to become due thereon for principal and interest (including
Noteholders' Auction Rate Interest Carryover); but such moneys need not be
segregated from other funds except to the extent required herein or in the Sale
and Servicing Agreement or required by law.
SECTION 4.3. REPAYMENT OF MONEYS HELD BY PAYING Agent. In connection with
the satisfaction and discharge of this Indenture with respect to a Series of
Notes, all moneys then held by any Paying Agent other than the Indenture Trustee
under the provisions of this Indenture with respect to such Series of Notes
shall, upon demand of the Issuer, be paid to the Indenture Trustee to be held
and applied according to Section 3.3 and thereupon such Paying Agent shall be
released from all further liability with respect to such moneys.
ARTICLE V
REMEDIES
SECTION 5.1. EVENTS OF DEFAULT. "Event of Default," wherever used herein,
means, with respect to all Outstanding Notes issued hereunder, any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(i) default in the payment of any interest on any
Note of any Series (other than Noteholders' Auction Rate
Interest Carryover) when the same becomes due and payable, and
such default shall continue for a period of two Business Days;
or
(ii) default in the payment of the principal of any Note
of any Series when the same becomes due and payable, and such
default shall continue for a period
of two Business Days; or
(iii) default in the observance or performance of
any covenant or agreement of the Issuer made in this
Indenture, the Insurance Agreement or the Sale and
Servicing Agreement (other than a covenant or
agreement, a default in the observance or performance
of which is specifically dealt with elsewhere in this
Section), or any representation or warranty of the Issuer made
in this Indenture or in any certificate or other writing
delivered pursuant hereto or in connection herewith proving to
have been incorrect in any material respect as of the time
when the same shall have been made, and such default shall
continue or not be cured, or the circumstance or condition in
respect of which such misrepresentation or warranty was
incorrect shall not have been eliminated or otherwise cured,
for a period of 30 days after there shall have been given, by
registered or certified mail, to the Issuer by the Indenture
Trustee or the Surety Provider or to the Issuer, the Indenture
Trustee and the Surety Provider by the Noteholders of at least
25% of the Outstanding Amount of the Outstanding Notes, a
written notice specifying such default or incorrect
representation or warranty and requiring it to be
remedied and stating that such notice is a notice of
Default hereunder; or
(iv) the filing of a decree or order for relief by a court
having jurisdiction in the premises in respect of the Issuer
or any substantial part of the Indenture Trust Estate in an
involuntary case under any applicable Federal or state
bankruptcy, insolvency or other similar law now or hereafter
in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the
Issuer or for any substantial part of the Indenture Trust
Estate, or ordering the winding-up or liquidation of the
Issuer's affairs, and such decree or order shall remain
unstayed and in effect for a period of 60 consecutive days; or
(v) the commencement by the Issuer of a voluntary
case under any applicable Federal or state bankruptcy,
insolvency or other similar law now or hereafter in effect, or
the consent by the Issuer to the entry of an order for relief
in an involuntary case under any such law, or the consent by
the Issuer to the appointment or taking possession by a
receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Issuer or for any
substantial part of the Indenture Trust Estate, or the making
by the Issuer of any general assignment for the benefit of
creditors, or the failure by the Issuer generally to pay its
debts as such debts become due, or the taking of action by the
Issuer in furtherance of any of the foregoing.
SECTION 5.2. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT. If an
Event of Default should occur and be continuing with respect to any Series of
Notes, then and in every such case the Surety Provider may, or the Indenture
Trustee or Noteholders of Notes representing no less than a majority of the
Outstanding Amount of the Outstanding Notes may, after obtaining the written
consent of the Surety Provider, declare all the Outstanding Notes to be
immediately due and payable, by a notice in writing to the Issuer (and to the
Indenture Trustee and the Surety Provider if given by Noteholders), and upon any
such declaration the unpaid principal amount of all the Outstanding Notes,
together with accrued and unpaid interest thereon and any outstanding
Noteholders' Auction Rate Interest Carryover through the date of acceleration,
shall become immediately due and payable.
At any time after such a declaration of acceleration of maturity of the
Outstanding Notes 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 Surety Provider or, after obtaining the written consent
of the Surety Provider, the Noteholders of Notes representing a majority of the
Outstanding Amount of the Outstanding 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 Outstanding Notes and all other
amounts that would then be due hereunder or upon
such Notes if the Event of Default giving rise
to such acceleration had not occurred; and
(B) all sums paid or advanced by the
Indenture Trustee hereunder and the reasonable
compensation, expenses, disbursements and advances of
the Indenture Trustee and its agents and counsel; and
(ii) all Events of Default, other than the nonpayment of
the principal of the Outstanding 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 5.3. 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 on any Series of Notes (other than Noteholders' Auction
Rate Interest Carryover) 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 Series of Notes when
the same becomes due and payable, and such default continues for a period of
five days the Issuer will, upon demand of the Surety Provider or, if the Surety
Provider consents, the Indenture Trustee, pay to the Indenture Trustee, for the
benefit of the Noteholders, the whole amount then due and payable on the
Outstanding Notes for principal and interest (and any Noteholders' Auction Rate
Interest 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' Auction Rate Interest
Carryover), at the respective Note Interest Rate and in addition thereto such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Indenture Trustee and its agents and counsel.
(b) In case the Issuer shall fail forthwith to pay such amounts upon such
demand, the Indenture Trustee, in its own name and as trustee of an express
trust, may institute a Proceeding for the collection of the sums so due and
unpaid, and may prosecute such Proceeding to judgment or final decree, and may
enforce the same against the Issuer or other obligor upon any Series of Notes
and collect in the manner provided by law out of the property of the Issuer or
other obligor upon any Series of Notes, wherever situated, the moneys adjudged
or decreed to be payable.
(c) If an Event of Default occurs and is continuing, the Indenture Trustee
may, as more particularly provided in Section 5.4, in its discretion, proceed to
protect and enforce its rights and the rights of the Noteholders, by such
appropriate Proceedings as the Indenture Trustee shall deem most effective to
protect and enforce any such rights, whether for the specific enforcement of any
covenant or agreement in this Indenture or in aid of the exercise of any power
granted herein, or to enforce any other proper remedy or legal or equitable
right vested in the Indenture Trustee by this Indenture or by law.
(d) In case there shall be pending, relative to the Issuer or any other
obligor upon the Notes or any Person having or claiming an ownership interest in
the Indenture Trust Estate, Proceedings under Title 11 of the United States Code
or any other applicable Federal or State bankruptcy, insolvency or other similar
law, or in case a receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Issuer or its property or such other obligor or Person,
or in case of any other comparable judicial Proceedings relative to the Issuer
or other obligor upon the Notes, or to the creditors or property of the Issuer
or such other obligor, the Indenture Trustee, irrespective of whether the
principal of any Notes shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Indenture Trustee shall
have made any demand pursuant to the provisions of this Section, shall be
entitled and empowered, by intervention in such proceedings or otherwise:
(i) to file and prove a claim or claims for the
whole amount of principal and interest (including
any Noteholders' Auction Rate Interest Carryover) owing and
unpaid in respect of such Series of Notes and to file such
other papers or documents as may be necessary or advisable in
order to have the claims of the Indenture Trustee (including
any claim for reasonable compensation to the Indenture Trustee
and each predecessor Indenture Trustee, and their respective
agents, attorneys and counsel, and for reimbursement of all
expenses and liabilities incurred, and all advances made, by
the Indenture Trustee and each predecessor Indenture Trustee,
except as a result of negligence or bad faith) and of the
Noteholders allowed in such Proceedings;
(ii) unless prohibited by applicable law and
regulations, to vote on behalf of the Noteholders in
any election of a trustee, a standby trustee or
Person performing similar functions in any such
Proceedings;
(iii) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute
all amounts received with respect to the claims of the
Noteholders and of the Indenture Trustee on their behalf; and
(iv) to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have
the claims of the Indenture Trustee or the Noteholders allowed
in any judicial proceedings relative to the Issuer, its
creditors and its property;
and any trustee, receiver, liquidator, custodian or other similar official
in any such Proceeding is hereby authorized by each of such Noteholders to make
payments to the Indenture Trustee, and, in the event that the Indenture Trustee
shall consent to the making of payments directly to such Noteholders, to pay to
the Indenture Trustee such amounts as shall be sufficient to cover reasonable
compensation to the Indenture Trustee, each predecessor Indenture Trustee and
their respective agents, attorneys and counsel, and all other expenses and
liabilities incurred, and all advances made, by the Indenture Trustee and each
predecessor Indenture Trustee except as a result of negligence or bad faith.
(e) Nothing herein contained shall be deemed to authorize the Indenture
Trustee to authorize or consent to or vote for or accept or adopt on behalf of
any Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting the Outstanding 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 Outstanding Notes, may be enforced by the Indenture Trustee
without the possession of any of the Outstanding Notes or the production thereof
in any trial or other Proceedings relative thereto, and any such action or
Proceedings instituted by the Indenture Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment, subject to the
payment of the expenses, disbursements and compensation of the Indenture
Trustee, each predecessor Indenture Trustee and their respective agents and
attorneys, shall be for the ratable benefit of the Noteholders.
(g) In any Proceedings brought by the Indenture Trustee (and also any
Proceedings involving the interpretation of any provision of this Indenture to
which the Indenture Trustee shall be a party), the Indenture Trustee shall be
held to represent all the Noteholders, and it shall not be necessary to make any
Noteholder a party to any such Proceedings.
SECTION 5.4. REMEDIES; PRIORITIES. (a) If an Event of Default shall have
occurred and be continuing in respect of the Outstanding Notes and the
Outstanding Notes have been declared due and payable and such declaration and
its consequences have not been rescinded and annulled, the Indenture Trustee may
do one or more of the following (subject to Section 5.5):
(i) institute Proceedings in its own name and as
trustee of an express trust for the collection of all amounts
then payable on the Outstanding Notes or under this Indenture
with respect of Notes, whether by declaration or otherwise,
enforce any judgment obtained, and collect from the Issuer and
any other obligor upon such Outstanding Notes moneys adjudged
due;
(ii) institute Proceedings from time to time for
the complete or partial foreclosure of this
Indenture with respect to the Indenture Trust Estate
securing the Outstanding Notes;
(iii) exercise any remedies of a secured party under the
UCC and take any other appropriate action to protect and
enforce the rights and remedies of the Indenture Trustee and
the Noteholders; and
(iv) sell the Indenture Trust Estate or any
portion thereof or rights or interest therein, at one
or more public or private sales called and conducted
in any manner permitted by law;
PROVIDED, HOWEVER, that the Indenture Trustee may not sell or otherwise
liquidate the Indenture Trust Estate following an Event of Default, other than
an Event of Default described in Section 5.1(i) or (ii), unless the Surety
Provider has given its written consent and (A) the Noteholders of 100% of the
Outstanding Amount of the Notes of such Series 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 the Outstanding Notes for
principal and interest or (C) the Indenture Trustee determines that the
Indenture Trust Estate will not continue to provide sufficient funds for the
payment of principal of and interest on the Notes as they would have become due
if the Outstanding 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 all the Outstanding Notes. In determining such sufficiency
or insufficiency with respect to clause (B) and (C), the Indenture Trustee may,
but need not, obtain and rely upon an opinion of an Independent investment
banking or accounting firm of national reputation as to the feasibility of such
proposed action and as to the sufficiency of the Indenture Trust Estate for such
purpose.
(b) If the Indenture Trustee collects any money or property pursuant to
this Article V, it shall pay out the money or property in the following order:
FIRST: to the Indenture Trustee for amounts due under Section 6.7;
SECOND: to the Eligible Lender Trustee for amounts due under the Trust
Agreement and the Sale and Servicing Agreement;
THIRD: to Noteholders for amounts due and unpaid on each Series of Notes
for interest, ratably, without preference or priority of any kind, according to
the amounts due and payable on each Series of Notes for interest;
FOURTH: to Noteholders for amounts due and unpaid on the Notes of each
Series for principal, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes of each Series for
principal;
FIFTH: to the Issuer for distribution of principal and interest due and
unpaid to the Certificateholders;
SIXTH: to the Surety Provider for amounts due for unreimbursed Note and
Certificate Surety Bond Payments previously made or any unpaid premiums;
SEVENTH: to the Servicer, for any unpaid Servicing Fee Carryovers; and
EIGHTH: to the Issuer, for distribution in accordance with the terms of the
Sale and Servicing Agreement, and any related Supplemental Sale and Servicing
Agreements.
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 5.5. OPTIONAL PRESERVATION OF THE FINANCED STUDENT LOANS. If the
Outstanding Notes have been declared to be due and payable under Section 5.2
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' Auction
Rate Interest Carryover) on the Notes, and the Indenture Trustee shall take such
desire into account when determining whether or not to maintain possession of
the Indenture Trust Estate. In determining whether to maintain possession of the
Indenture Trust Estate, the Indenture Trustee may, but need not, obtain and rely
upon an opinion of an Independent investment banking or accounting firm of
national reputation as to the feasibility of such proposed action and as to the
sufficiency of the Indenture Trust Estate for such purpose.
SECTION 5.6. LIMITATION OF SUITS. No Noteholder of any Series 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 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 of such Series;
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 and for the equal and ratable benefit of all Noteholders.
In the event the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Noteholders, each
representing less than a majority of the Outstanding Amount of the Outstanding
Notes, the Indenture Trustee in its sole discretion may determine what action,
if any, shall be taken, notwithstanding any other provisions of this Indenture
based upon the larger percentage of Noteholders as of a date certain.
SECTION 5.7. 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 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 5.8. RESTORATION OF RIGHTS AND REMEDIES. If the Indenture Trustee
or any Noteholder has instituted any Proceeding to enforce any right or remedy
under this Indenture and such Proceeding has been discontinued or abandoned for
any reason or has been determined adversely to the Indenture Trustee or to such
Noteholder, then and in every such case the Issuer, the Indenture Trustee and
the Noteholders shall, subject to any determination in such Proceeding, be
restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Indenture Trustee and the Noteholders
shall continue as though no such Proceeding had been instituted.
SECTION 5.9. 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 shall impair any such right or remedy or constitute a waiver of
any such Default or an acquiescence therein. Every right and remedy given by
this Article V or by law to the Indenture Trustee or to the Noteholders may be
exercised from time to time, and as often as may be deemed expedient, by the
Indenture Trustee or by the Noteholders, as the case may be.
SECTION 5.11. CONTROL BY NOTEHOLDERS. The Noteholders of a majority of the
Outstanding Amount of the Notes shall have the right to direct the time, method
and place of conducting any Proceeding for any remedy available to the Indenture
Trustee with respect to the Notes or exercising any trust or power conferred on
the Indenture Trustee; provided that
(i) such direction shall not be in conflict
with any rule of law or with this Indenture;
(ii) subject to the express terms of Section 5.4, any
direction to the Indenture Trustee to sell or liquidate the
Indenture Trust Estate shall be by the Noteholders of not less
than 100% of the Outstanding Amount of the Notes of each
Series;
(iii) if the conditions set forth in Section 5.5 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 of each Series to
sell or liquidate the Indenture Trust Estate shall be of no
force and effect;
(iv) the Surety Provider has given its consent
thereto; and
(v) the Indenture Trustee may take any other
action deemed proper by the Indenture Trustee that is
not inconsistent with such direction;
PROVIDED, HOWEVER, that, subject to Section 6.1, the Indenture Trustee need not
take any action that it determines might involve it in liability or might
materially adversely affect the rights of any Noteholders not consenting to such
action.
SECTION 5.12. WAIVER OF PAST DEFAULTS. Prior to the time a judgment or
decree for payment of money due has been obtained as described in Section 5.2,
the Noteholders of not less than a majority of the Outstanding Amount of the
Notes of a Series may, after obtaining the written consent of the Surety
Provider, waive any past Default hereunder and its consequences except a Default
(a) in payment when due of principal of or interest on any of the Outstanding
Notes or (b) in respect of a covenant or provision hereof which cannot be
modified or amended without the consent of each Noteholder. In the case of any
such waiver, the Issuer, the Indenture Trustee and the Noteholders shall be
restored to their former positions and rights hereunder, respectively; but no
such waiver shall extend to any subsequent or other Default or impair any right
consequent thereto.
Upon any such waiver, such Default shall cease but to exist and be deemed
to have been cured and not to have occurred for every purpose of this Indenture;
but no such waiver shall extend to any subsequent or other Default or impair any
right consequent thereto.
SECTION 5.13. UNDERTAKING FOR COSTS. All parties to this Indenture agree,
not in their individual capacity but solely in their capacity as Indenture
Trustee or Eligible Lender Trustee, as applicable, 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 Outstanding Notes or (c) any suit
instituted by any Noteholder for the enforcement of the payment of principal of
or interest (including any Noteholders' Auction Rate Interest Carryover) on any
Note on or after the respective due dates expressed in such Note.
SECTION 5.14. WAIVER OF STAY OR EXTENSION LAWS. The Issuer covenants (to
the extent that it may lawfully do so) that it will not at any time insist upon,
or plead or in any manner whatsoever, claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter in
force, that may affect the covenants or the performance of this Indenture; and
the Issuer (to the extent that it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law, and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Indenture
Trustee, but will suffer and permit the execution of every such power as though
no such law had been enacted.
SECTION 5.15. ACTION ON NOTES. The Indenture Trustee's right to seek and
recover judgment on the Notes or under this Indenture shall not be affected by
the seeking, obtaining or application of any other relief under or with respect
to this Indenture. Neither the lien of this Indenture and each Terms Supplement
nor any rights or remedies of the Indenture Trustee or the Noteholders of any
Series 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 5.4(b).
SECTION 5.16. PERFORMANCE AND ENFORCEMENT OF CERTAIN OBLIGATIONS. (a)
Promptly following a request from the Indenture Trustee to do so and at the
Administrator's expense, the Issuer shall take all such lawful action as the
Indenture Trustee may request to compel or secure the performance and observance
by the Seller, the Administrator and the Servicer, as applicable, of each of
their obligations to the Issuer under or in connection with the Sale and
Servicing Agreement and Supplemental Sale and Servicing Agreement (and with
respect to the Administrator only, the Administration Agreement) in accordance
with the terms thereof, and to exercise any and all rights, remedies, powers and
privileges lawfully available to the Issuer under or in connection with the Sale
and Servicing Agreement and any Supplemental Sale and Servicing Agreement (and
the Administration Agreement) to the extent and in the manner directed by the
Indenture Trustee, including the transmission of notices of default on the part
of the Seller, the Administrator or the Servicer thereunder and the institution
of legal or administrative actions or proceedings to compel or secure
performance by the Seller, the Administrator or the Servicer of each of their
obligations under the Sale and Servicing Agreement and any Supplemental Sale and
Servicing Agreement (and the Administration Agreement).
(b) If an Event of Default has occurred and is continuing, the Indenture
Trustee may, and at the direction (which direction shall be in writing) of
either the Surety Provider or, upon receipt of the Surety Provider's written
consent, the Noteholders of 66-2/3% of the Outstanding Amount of the Outstanding
Notes shall, exercise all rights, remedies, powers, privileges and claims of the
Issuer against the Seller, the Administrator or the Servicer under or in
connection with the Sale and Servicing Agreement and any Supplemental Sale and
Servicing Agreement (and the Administration Agreement), including the right or
power to take any action to compel or secure performance or observance by the
Seller, the Administrator or the Servicer of each of their obligations to the
Issuer thereunder and to give any consent, request, notice, direction, approval,
extension or waiver under the related Sale and Servicing Agreement and any
Supplemental Sale and Servicing Agreement (and the Administration Agreement) and
any right of the Issuer to take such action shall be suspended.
SECTION 5.17. SUBROGATION. Subject only to the priority of payment
provisions of this Indenture and any Terms Supplement, each of the Issuer and
the Indenture Trustee acknowledges that to the extent of any payment made by the
Surety Provider pursuant to any Note Surety Bond, the Surety Provider is to be
fully subrogated to the extent of such payment and any additional interest due
on any late payment to the rights of the Holders of the Notes to any moneys paid
or payable in respect of the Notes under this Indenture, any Terms Supplement,
the Sale and Servicing Agreement or otherwise. Each of the Issuer and the
Indenture Trustee agrees to such subrogation and, further, agrees to execute
such instruments and to take such actions as, in the sole judgment of the Surety
Provider, are necessary to evidence such subrogation and, subject to the
priority of payment provision of this Indenture, any Terms Supplement and the
Sale and Servicing Agreement, to perfect the rights of the Noteholders to
receive any moneys paid or payable in respect of the Notes under this Indenture,
any Terms Supplement, the Sale and Servicing Agreement or otherwise.
ARTICLE VI
THE INDENTURE TRUSTEE
SECTION 6.1. DUTIES OF INDENTURE TRUSTEE. (a) If an Event of Default has
occurred and is continuing, the Indenture Trustee shall exercise the rights and
powers vested in it by this Indenture and use the same degree of care and skill
in their exercise as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs.
(b) Except during the continuance of an Event of
Default:
(i) the Indenture Trustee undertakes to perform such
duties and only such duties as are specifically set forth in
this Indenture and any Terms Supplement and no implied
covenants or obligations shall be
read into this Indenture or any Terms Supplement
against the Indenture Trustee; and
(ii) in the absence of bad faith on its part, the
Indenture Trustee may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed
therein, upon certificates or
opinions furnished to the Indenture Trustee and conforming to
the requirements of this Indenture; PROVIDED, HOWEVER, that
the Indenture Trustee shall examine the certificates and
opinions to determine whether or not they conform to the
requirements of this Indenture.
(c) The Indenture Trustee may not be relieved from liability
for its own negligent action, its own negligent failure to act or its own
willful misconduct, except that:
(i) this paragraph does not limit the effect of
paragraph (b) of this Section;
(ii) the Indenture Trustee shall not be liable for any
error of judgment made in good faith by a Responsible Officer
unless it is proved that the Indenture Trustee was negligent
in ascertaining the pertinent facts; and
(iii) the Indenture Trustee shall not be liable with
respect to any action it takes or omits to take in good faith
in accordance with a direction received by it pursuant to
Section 5.11.
(d) Every provision of this Indenture that in any way relates to the
Indenture Trustee is subject to paragraphs (a), (b), (c) and (g) of this
Section.
(e) The Indenture Trustee shall not be liable for interest on any money
received by it except as the Indenture Trustee may agree in writing with the
Issuer.
(f) Money held in trust by the Indenture Trustee need not be segregated
from other funds except to the extent required by law or the terms of this
Indenture or the Sale and Servicing Agreement.
(g) No provision of this Indenture shall require the Indenture Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayments
of such funds or adequate indemnity satisfactory to it against any loss,
liability or expense is not reasonably assured to it; provided, however, that
the Indenture Trustee shall not refuse or fail to perform any of its duties
hereunder solely as a result of nonpayment of its normal fees and expenses and
further provided that nothing in this Section 6.1(g) shall be construed to limit
the exercise by the Indenture Trustee of any right or remedy permitted under
this Indenture or otherwise in the event of the Issuer's failure to pay the
Indenture Trustee's fees and expenses pursuant to Section 6.7.
(h) Except as expressly provided in the Basic Documents, the Indenture
Trustee shall have no obligation to administer, service or collect the Financed
Student Loans or to maintain, monitor or otherwise supervise the administration,
servicing or collection of the Financed Student Loans.
(i) In the event that the Indenture Trustee is the Paying Agent or the Note
Registrar, the rights and protections afforded to the Indenture Trustee pursuant
to this Indenture shall also be afforded to the Indenture Trustee in its
capacity as Paying Agent or Note Registrar.
(j) Every provision of this Indenture relating to the conduct or affecting
the liability of or affording protection to the Indenture Trustee shall be
subject to the provision of this Section and to the provisions of the TIA.
SECTION 6.2. RIGHTS OF INDENTURE TRUSTEE. (a) The Indenture Trustee may
rely on any document believed by it to be genuine and to have been signed or
presented by the proper Person. The Indenture Trustee need not investigate any
fact or matter stated in such document.
(b) Before the Indenture Trustee acts or refrains from acting, it may
require an Officer's 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 Officer's Certificate or Opinion of Counsel.
(c) The Indenture Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through agents or
attorneys or a custodian or nominee, and the Indenture Trustee shall not be
responsible for any misconduct or negligence on the part of, or for the
supervision of, any such agent, attorney, custodian or nominee appointed with
due care by it hereunder.
(d) The Indenture Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers; PROVIDED, HOWEVER, that the Indenture Trustee's conduct does
not constitute willful misconduct, negligence or bad faith.
(e) The Indenture Trustee may consult with counsel, and the advice or
opinion of counsel with respect to legal matters relating to this Indenture and
the Notes shall be full and complete authorization and protection from liability
in respect to any action taken, omitted or suffered by it hereunder in good
faith and in accordance with the advice or opinion of such counsel.
SECTION 6.3. 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 6.4. INDENTURE TRUSTEE'S DISCLAIMER. Neither the Indenture Trustee
nor the Eligible Lender Trustee shall be responsible for and neither makes any
representation as to the validity or adequacy of this Indenture or the Notes,
neither shall be accountable for the Issuer's use of the proceeds from the sale
of the Notes, and neither shall 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 6.5. NOTICE OF DEFAULTS. If a Default occurs and is continuing and
if it is either actually known or written notice of the existence thereof has
been delivered to a Responsible Officer of the Indenture Trustee, the Indenture
Trustee shall mail notice of the Default to the Surety Provider within two days
and to each Noteholder within 90 days after it occurs. Except in the case of a
Default in payment of principal of or interest on any Note, the Indenture
Trustee may withhold the notice to the Noteholders, but not to the Surety
Provider 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 of
such Series.
SECTION 6.6. REPORTS BY INDENTURE TRUSTEE TO NOTEHOLDERS. The Indenture
Trustee 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 requested of it 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 first issuance of a Series of Notes, the Indenture
Trustee shall mail to each Noteholder a brief report as of such December 31 that
complies with TIA ' 313(a) if required by said section. The Indenture Trustee
shall also comply with TIA ' 313(b). If the issuance of any Series of Notes has
been registered under the Securities Act of 1933, as amended, a copy of each
such report required pursuant to TIA " 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 of
such Series are listed, provided that the Issuer has previously notified the
Indenture Trustee of such listing.
SECTION 6.7. COMPENSATION AND INDEMNITY. The Issuer shall pay to the
Indenture Trustee for its services, a fee equal to the amount agreed to in
writing between the Indenture Trustee and the Administrator (the "Indenture
Trustee Fee") at the times set forth in Section 5.5 of the Sale and Servicing
Agreement and shall or shall cause the Administrator from its own funds to
reimburse the Indenture Trustee for all reasonable out-of-pocket expenses
incurred or made by it in accordance with any provision of this Indenture. The
Indenture Trustee's compensation shall not be limited by any law on compensation
of a trustee of an express trust. The Issuer shall or shall cause the
Administrator from its own funds to indemnify the Indenture Trustee against any
and all loss, liability or expense (including attorneys' fees) incurred by it in
connection with the administration of this trust and the performance of its
duties hereunder and 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 or
shall cause the Administrator to defend the claim and the Administrator shall
not be liable for any separate 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 from its own funds on behalf of the Issuer. Neither
the Issuer nor the Administrator need reimburse any expense or indemnify against
any loss, liability or expense incurred by the Indenture Trustee through the
Indenture Trustee's own willful misconduct, negligence or bad faith.
The Issuer's payment obligations to the Indenture Trustee pursuant to this
Section shall survive the discharge of this Indenture. When the Indenture
Trustee incurs expenses after the occurrence of a Default specified in Section
5.1(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 6.8. 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 6.8. The Indenture Trustee may resign at any
time by so notifying the Issuer and the Surety Provider. The Noteholders of a
majority in Outstanding Amount of the Notes may, after receiving the written
consent of the Surety Provider, remove the Indenture Trustee by so notifying the
Indenture Trustee and may, after receiving the written consent of the Surety
Provider, appoint a successor Indenture Trustee. The Issuer shall remove the
Indenture Trustee if:
(i) the Indenture Trustee fails to comply with
Section 6.11;
(ii) an Insolvency Event occurs with respect to
the Indenture Trustee;
(iii) a receiver or other public officer takes
charge of the Indenture Trustee or its property; or
(iv) the Indenture Trustee otherwise becomes
incapable of acting.
If the Indenture Trustee resigns or is removed or if a vacancy
exists in the office of Indenture Trustee for any reason (the Indenture Trustee
in such event being referred to herein as the retiring Indenture Trustee), the
Issuer shall, with the written consent of the Surety Provider, promptly appoint
a successor Indenture Trustee.
A successor Indenture Trustee shall deliver a written acceptance of its
appointment to the retiring Indenture Trustee, the Surety Provider and to the
Issuer. Thereupon the resignation or removal of the retiring Indenture Trustee
shall become effective, and the successor Indenture Trustee shall have all the
rights, powers and duties of the Indenture Trustee under this Indenture. The
successor Indenture Trustee shall mail a notice of its succession to
Noteholders. The retiring Indenture Trustee shall promptly transfer all property
held by it as Indenture Trustee to the successor Indenture Trustee.
If a successor Indenture Trustee does not take office within 60 days after
the retiring Indenture Trustee resigns or is removed, the retiring Indenture
Trustee, the Issuer or the Noteholders of a majority in Outstanding Amount of
the Notes may petition any court of competent jurisdiction for the appointment
of a successor Indenture Trustee.
If the Indenture Trustee fails to comply with Section 6.11, any Noteholder
may petition any court of competent jurisdiction for the removal of the
Indenture Trustee and the appointment of a successor Indenture Trustee.
Notwithstanding the replacement of the Indenture Trustee pursuant to this
Section, the Issuer's and the Administrator's obligations under Section 6.7
shall continue for the benefit of the retiring Indenture Trustee.
SECTION 6.9. SUCCESSOR INDENTURE TRUSTEE BY MERGER. If the Indenture
Trustee consolidates with, merges or converts into, or transfers all or
substantially all its corporate trust business or assets to, another corporation
or banking association, the resulting, surviving or transferee corporation
without any further act shall be the successor Indenture Trustee; provided that
such corporation or banking association shall be otherwise qualified and
eligible under Section 6.11. The Indenture Trustee shall provide the Rating
Agencies and the Surety Provider prior written notice of any such transaction.
In case at the time such successor or successors by merger, conversion or
consolidation to the Indenture Trustee shall succeed to the trusts created by
this Indenture any of the Notes shall have been authenticated but not delivered,
any such successor to the Indenture Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Indenture Trustee may authenticate such
Notes either in the name of any predecessor hereunder or in the name of the
successor to the Indenture Trustee; and in all such cases such certificates
shall have the full force which it is anywhere in the Notes or in this Indenture
provided that the certificate of the Indenture Trustee shall have.
SECTION 6.10. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE. (a)
Notwithstanding any other provisions of this Indenture, at any time, for the
purpose of meeting any legal requirement of any jurisdiction in which any part
of the Indenture Trust Estate may at the time be located, the Indenture Trustee
shall have the power and may execute and deliver all instruments to appoint one
or more Persons to act as co-trustee or co-trustees, or separate trustee or
separate trustees, of all or any part of the Indenture Trust Estate, and to vest
in such Person or Persons, in such capacity and for the benefit of the
Noteholders, such title to the Indenture Trust Estate, or any part hereof, and,
subject to the other provisions of this Section, such powers, duties,
obligations, rights and trusts as the Indenture Trustee may consider necessary
or desirable. No co-trustee or separate trustee hereunder shall be required to
meet the terms of eligibility as a successor trustee under Section 6.11 and no
notice to Noteholders of the appointment of any co-trustee or separate trustee
shall be required under Section 6.8 hereof; provided, however, that no
co-trustee or separate trustee shall be appointed without having obtained the
prior written consent of the Surety Provider, and any such appointment of a
co-trustee or separate trustee shall be terminated for cause by the Indenture
Trustee at the direction of the Surety Provider.
(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, at its election or the election of the
Surety Provider, remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Indenture Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Indenture and
the conditions of this Article VI. Each separate trustee and co- trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Indenture Trustee or separately, as may be provided therein, subject to all the
provisions of this Indenture, specifically including every provision of this
Indenture relating to the conduct of, affecting the liability of, or affording
protection to, the Indenture Trustee. Every such instrument shall be filed with
the Indenture Trustee.
(d) Any separate trustee or co-trustee may at any time constitute the
Indenture Trustee, its agent or attorney-in-fact with full power and authority,
to the extent not prohibited by law, to do any lawful act under or in respect of
this Indenture on its behalf and in its name. If any separate trustee or co-
trustee shall die, become incapable of acting, resign or be removed, all its
estates, properties, rights, remedies and trusts shall vest in and be exercised
by the Indenture Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
SECTION 6.11. ELIGIBILITY; DISQUALIFICATION. The Indenture Trustee shall at
all times satisfy the requirements of TIA ' 310(a). The Indenture Trustee shall
have a combined capital and surplus of at least $50,000,000 as set forth in its
most recent published annual report of condition and it shall have a long term
debt rating of Baa3 or better by Moody's and BBB or better by Standard & Poor's
Corporation. The Indenture Trustee shall at all times meet the eligibility
criteria for an "eligible lender" under the terms of the Higher Education Act.
The Indenture Trustee shall comply with TIA ' 310(b), including the optional
provision permitted by the second sentence of TIA ' 310(b)(9); PROVIDED,
HOWEVER, that there shall be excluded from the operation of TIA ' 310(b)(1) any
indenture or indentures under which other securities of the Issuer are
outstanding if the requirements for such exclusion set forth in TIA ' 310(b)(1)
are met.
SECTION 6.12. PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUER. The
Indenture Trustee shall comply with TIA ' 311(a), excluding any creditor
relationship listed in TIA ' 311(b). An Indenture Trustee who has resigned or
been removed shall be subject to TIA ' 311(a) to the extent indicated.
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
SECTION 7.1. ISSUER TO FURNISH INDENTURE TRUSTEE NAMES AND ADDRESSES OF
NOTEHOLDERS. The Issuer will furnish or cause to be furnished to the Indenture
Trustee (a) not more than five days after the earlier of (i) each Record Date
for a Series and (ii) three months after the last Record Date for such Series, a
list, in such form as the Indenture Trustee may reasonably require, of the names
and addresses of the Noteholders of such Series as of such Record Date, (b) at
such other times as the Indenture Trustee may request in writing, within 30 days
after receipt by the Issuer of any such request, a list of similar form and
content as of a date not more than 10 days prior to the time such list is
furnished; PROVIDED, HOWEVER, that so long as the Indenture Trustee is the Note
Registrar, no such list shall be required to be furnished.
SECTION 7.2. 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 7.1 and
the name 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 7.1 upon receipt of a new list so furnished.
(b) Noteholders may communicate pursuant to TIA ' 312(b) with other
Noteholders with respect to their rights under this Indenture or under the
Notes. Upon receipt by the Indenture Trustee of any request by a Noteholder to
receive a copy of the current list of Noteholders (whether or not made pursuant
to TIA ' 312(b)), the Indenture Trustee shall promptly notify the Administrator
thereof by providing to the Administrator a copy of such request and a copy of
the list of Noteholders produced in response thereto.
(c) The Issuer, the Indenture Trustee and the Note Registrar shall have the
protection of TIA ' 312(c).
(d) The Indenture Trustee shall furnish to the 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.
SECTION 7.3. REPORTS BY ISSUER. (a) If the issuance of any Series of Notes
has been registered under the Securities Act of 1933, as amended, the Issuer
shall:
(i) file with the Indenture Trustee and the Surety
Provider, 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, the Surety Provider
and the Commission in accordance with rules and regulations
prescribed from time to time by the
Commission such additional information, documents and
reports with respect to compliance by the Issuer
with the conditions and covenants of this Indenture
as may be required from time to time by such rules
and regulations; and
(iii) supply to the Indenture Trustee and the Surety
Provider (and the Indenture Trustee shall transmit by mail to
all Noteholders of the related Series described in TIA '
313(c)) such summaries of any information, documents and
reports required to be filed by the Issuer pursuant to clauses
(i) and (ii) of this Section 7.3(a) as may be required by
rules and regulations prescribed from time to time by the
Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of the Issuer
shall end on December 31 of each year.
ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
SECTION 8.1. COLLECTION OF MONEY. Except as otherwise expressly provided
herein, the Indenture Trustee may demand payment or delivery of, and shall
receive and collect, directly and without intervention or assistance of any
fiscal agent or other intermediary, all money and other property payable to or
receivable by the Indenture Trustee pursuant to this Indenture. The Indenture
Trustee shall apply all such money received by it on behalf of the Noteholders
and the Surety Provider pursuant to the Sale and Servicing Agreement and each
Supplemental Sale and Servicing Agreement as provided in this Indenture. Except
as otherwise expressly provided in this Indenture, if any default occurs in the
making of any payment or performance under any agreement or instrument that is
part of the Indenture Trust Estate, the Indenture Trustee may take such action
as may be appropriate to enforce such payment or performance, including the
institution and prosecution of appropriate Proceedings. Any such action shall be
without prejudice to any right to claim a Default under this Indenture and any
right to proceed thereafter as provided in Article V.
SECTION 8.2. TRUST ACCOUNTS. (a) On or prior to the Closing Date of the
first Series, the Indenture Trustee shall establish and maintain, in the name of
and with the Indenture Trustee, for the benefit of the Noteholders, the
Certificateholders and the Surety Provider, the Trust Accounts as provided in
Section 5.1 of the Sale and Servicing Agreement.
(b) On or before the Business Day preceding each Note Distribution Date,
all Available Funds for the related Class of Notes with respect to the preceding
Collection Period will be deposited in the Collection Account as provided in
Section 5.2 of the Sale and Servicing Agreement. On or before each Note
Distribution Date for each Class of Notes, the appropriate Noteholders'
Distribution Amount and any Noteholders' Auction Rate Interest Carryover, if
any, with respect to the preceding Collection Period will be distributed from
the Collection Account and any other Trust Account to the Indenture Trustee (or
any other Paying Agent) on behalf of the Noteholders as provided in Sections 5.5
and 5.6 of the Sale and Servicing Agreement.
(c) On each Note Distribution Date, the Indenture Trustee (or any other
Paying Agent) shall distribute all amounts received by it on behalf of
Noteholders of a particular Class pursuant to paragraph (b) above to such
Noteholders in respect of the Notes to the extent of amounts due and unpaid on
the Notes of such Class as provided in the related Terms Supplement.
SECTION 8.3. GENERAL PROVISIONS REGARDING ACCOUNTS. (a) So long as no
Default shall have occurred and be continuing, all or a portion of the funds in
the Trust Accounts shall be invested in Eligible Investments and reinvested by
the Indenture Trustee upon Issuer Order, subject to the provisions of Section
5.1(b) of the Sale and Servicing Agreement. All income or other gain from
investments of moneys deposited in the Trust Accounts relating to a particular
Series 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.
(b) Subject to Section 6.1(c), the Indenture Trustee shall not in any way
be held liable by reason of any insufficiency in any of the Trust Accounts
resulting from any loss on any Eligible Investment included therein except for
losses attributable to the Indenture Trustee's failure to make payments on such
Eligible Investments issued by the Indenture Trustee in its commercial capacity
as principal obligor and not as trustee, in accordance with their terms.
(c) If (i) the Issuer shall have failed to give investment directions for
any funds on deposit in the Trust Accounts to the Indenture Trustee by 10:00
a.m. New York City time (or such other time as may be agreed by the Issuer and
Indenture Trustee) on any Business Day; or (ii) a Default shall have occurred
and be continuing with respect to the Notes but the Notes shall not have been
declared due and payable pursuant to Section 5.2, 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 5.4 as if there had not been such a declaration; the Indenture
Trustee shall, to the fullest extent practicable, invest and reinvest funds in
the Trust Accounts in one or more Eligible Investments listed in paragraph (7)
of the definition of Eligible Investments.
SECTION 8.4. SUBSTITUTION AND RELEASE OF INDENTURE TRUST ESTATE. (a) To the
extent so provided in the Basic Documents, the Issuer shall have the right to
Grant an Eligible Substitute Financed Student Loan for any Financed Student Loan
securing Notes, any such substitution to take place only upon compliance with
all conditions precedent thereto set forth in the related Terms Supplement.
(b) Upon any Grant of Eligible Substitute Financed Student Loans pursuant
to this Section 8.4 and the related Basic Documents, the Indenture Trustee shall
transfer and assign the Financed Student Loans that were the subject of such
substitution to the Issuer, whereupon they shall be released from, and no longer
be subject to, the lien of this Indenture.
(c) In connection with any release of Financed Student Loans to which the
Issuer is entitled pursuant to this Section 8.4 and the related Basic Documents,
the Issuer shall prepare and the Indenture Trustee shall execute appropriate
instruments to release such Financed Student Loans from the lien of this
Indenture, or convey the Indenture Trustee's interest in the same. No party
relying upon an instrument so executed by the Indenture Trustee shall be bound
to ascertain the Indenture Trustee's authority, inquire into the satisfaction of
any conditions precedent or see to the application of any moneys.
(d) The Indenture Trustee shall, at such time as there are no Notes
Outstanding and all sums due the Indenture Trustee pursuant to Section 6.7 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.
(e) The Indenture Trustee shall release property from the lien of each
Terms Supplement pursuant to this Section 8.4 only upon receipt of an Issuer
Request accompanied by an Officer's Certificate of the Issuer, an Opinion of
Counsel (if required by the TIA) and (if required by the TIA) Independent
Certificates in accordance with TIA " 314(c) and 314(d)(1) meeting the
applicable requirements of Section 11.1.
SECTION 8.5. OPINION OF COUNSEL. The Indenture Trustee shall receive at
least five days' notice when requested by the Issuer to take any action pursuant
to Section 8.4(a), accompanied by copies of any instruments involved, and the
Indenture Trustee shall also require, as a condition to such action, an Opinion
of Counsel (if required by the TIA), in form and substance satisfactory to the
Indenture Trustee, stating the legal effect of any such action, outlining the
steps required to complete the same, and concluding that all conditions
precedent to the taking of such action have been complied with and such action
will not materially and adversely impair the security for the Notes or the
rights of the Noteholders in contravention of the provisions of this Indenture;
PROVIDED, HOWEVER, that such Opinion of Counsel shall not be required to express
an opinion as to the fair value of the Indenture Trust Estate. Counsel rendering
any such opinion may rely, without independent investigation, on the accuracy
and validity of any certificate or other instrument delivered to the Indenture
Trustee in connection with any such action.
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.1. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF NOTEHOLDERS. (a)
Without the consent of any Noteholders but with prior notice to the Rating
Agencies and the prior written consent of the Surety Provider, the Issuer and
the Indenture Trustee, when authorized by an Issuer Order, at any time and from
time to time, may enter into one or more indentures supplemental hereto (which
shall conform to the provisions of the Trust Indenture Act as in force at the
date of the execution thereof), in form satisfactory to the Indenture Trustee,
for any of the following purposes:
(i) to correct or amplify the description of any
property at any time subject to the lien of each Terms
Supplement, or better to assure, convey and confirm unto the
Indenture Trustee any property subject or required to be
subjected to the lien of each Terms Supplement, or to subject
to the lien of each Terms Supplement 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 of all Notes or of the
Notes of any Series, or to surrender any right or
power herein conferred upon the Issuer;
(iv) to convey, transfer, assign, mortgage or
pledge any property to or with the Indenture Trustee;
(v) to cure any ambiguity, to correct or supplement
any provision herein or in any supplemental indenture which
may be inconsistent with any other provision herein or in any
supplemental indenture or to make any other provisions with
respect to matters or questions arising under this Indenture
or in any supplemental indenture; provided that such action
shall not materially adversely affect the interests of the
Noteholders of any Series;
(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;
(vii) to add to the conditions, limitations and
restrictions on the authorized amount, terms and
purposes of the issuance, authentication and delivery
of any Series of Notes, as herein set forth,
additional conditions, limitations and restrictions
thereafter to be observed;
(viii) to set forth the terms of, and security
for, any Series that has not theretofore been
authorized by a Terms Supplement;
(ix) to modify or eliminate any of the terms of
this Indenture; provided, however, that
(A) such supplemental indenture shall
expressly provide that any such modifications or
eliminations shall not be effective with respect to
any Outstanding Note of any Series created prior to
the execution of such supplemental indenture; and
(B) the Indenture Trustee may, in its
discretion, decline to enter into any such
supplemental indenture which, in its opinion, would
adversely affect its own rights, duties or
immunities;
(x) to provide for the issuance of Notes of any
Series (including Notes of a Series theretofore
authorized and than Outstanding) or any Class within such
Series in bearer form with coupons ("Bearer Notes") and for
the exchangeability of Bearer Notes and Notes of the same
Series and Class issued in registered form ("Registered
Notes"); any such supplemental indenture may provide for
payments on Bearer Notes only outside the United States and
for appointment of a foreign Paying Agent that is acceptable
to the Rating Agencies that rated the initial Series of the
Notes and may also contain any provisions as may in the
Issuer's judgment be necessary, appropriate or convenient (a)
to permit the Notes to be issued and sold to or held in bearer
form by non-United States Persons, (b) to establish
entitlement to an exemption from United States withholding tax
or reporting requirements with respect to payments on the
Notes, (c) to comply, or facilitate compliance, with other
applicable laws or regulations, (d) to provide for usual and
customary provisions for communication (by notice,
publication,
maintenance of lists of holders of Bearer Notes who have
provided names and addresses for such purpose, or otherwise)
with holders of Bearer Notes, or (e) to otherwise effectuate
provisions of the issuance of Bearer Notes and their
exchangeability with Registered Notes; or
(xi) 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 prior
notice to the Rating Agencies and prior written consent of the Surety Provider,
enter into an indenture or indentures supplemental hereto for the purpose of
adding any provisions to, or changing in any manner or eliminating any of the
provisions of, this Indenture or of modifying in any manner the rights of the
Noteholders under this Indenture; PROVIDED, HOWEVER, that such action shall not,
as evidenced by an Opinion of Counsel, adversely affect in any material respect
the interests of any Noteholder.
SECTION 9.2. SUPPLEMENTAL INDENTURES WITH CONSENT OF NOTEHOLDERS. The
Issuer and the Indenture Trustee, when authorized by an Issuer Order, also may,
with prior notice to the Rating Agencies and with the consent of the Surety
Provider and the Noteholders of not less than a majority of the Outstanding
Amount of all the Notes in case Outstanding Notes of all Series are to be
affected or with the consent of the Noteholders of not less than a majority of
the Outstanding Amount of the Notes to be affected in case one or more, but less
than all, of the Series of Outstanding Notes are to be affected, 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 relating to such Series or of modifying in any manner the
rights of the Noteholders of such Series under this Indenture; PROVIDED,
HOWEVER, that no such supplemental indenture shall, without the consent of the
Noteholders of each Outstanding Note affected thereby:
(i) change the date of payment of any installment of
principal of or interest (including any Noteholders' Auction
Rate Interest Carryover) on any Note, or reduce the principal
amount thereof or the interest rate thereon, 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' Auction Rate Interest 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;
(ii) reduce the percentage of the Outstanding
Amount of the Notes of any Series, 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 of any Series required to direct the Indenture
Trustee to direct the Issuer to sell or
liquidate the Indenture Trust Estate pursuant to
Section 5.4;
(v) modify any provision of this Section except
to increase any percentage specified herein or to
provide that certain additional provisions of this Indenture
or the other Basic Documents cannot be modified or waived
without the consent of the Noteholder of each Outstanding Note
affected thereby;
(vi) modify any of the provisions of this
Indenture in such manner as to affect the calculation
of the amount of any payment of interest (including
any Noteholders' Auction Rate Interest Carryover) or
principal due on any Note on any Note Distribution
Date (including the calculation of any of the
individual components of such calculation); 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 of any particular Series 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 of each Series to which such amendment or
supplemental indenture relates and to the Surety Provider 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 9.3. EXECUTION OF SUPPLEMENTAL INDENTURES. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modifications thereby of the trusts created
by this Indenture, the Indenture Trustee shall be entitled to receive, and
subject to Sections 6.1 and 6.2, shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Indenture Trustee may, but shall
not be obligated to, enter into any such supplemental indenture that affects the
Indenture Trustee's own rights, duties, liabilities or immunities under this
Indenture or otherwise.
SECTION 9.4. 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 of each Series affected thereby, and the respective rights,
limitations of rights, obligations, duties, liabilities and immunities under
this Indenture of the Indenture Trustee, the Issuer and the Noteholders shall
thereafter be determined, exercised and enforced hereunder subject in all
respects to such modifications and amendments, and all the terms and conditions
of any such supplemental indenture shall be and be deemed to be part of the
terms and conditions of this Indenture for any and all purposes.
SECTION 9.5. 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 9.6. REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURES. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX which relates to the Series of which such Notes are
a part 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 which relates to the
Series of which such Notes are a part may be prepared and executed by the Issuer
and authenticated and delivered by the Indenture Trustee in exchange for
Outstanding Notes of such Series.
ARTICLE X
[Intentionally Omitted]
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. COMPLIANCE CERTIFICATES AND OPINIONS, ETC. (a) Upon any
application or request by the Issuer to the Indenture Trustee to take any action
under any provision of this Indenture, the Issuer, or the Administrator on
behalf of the Issuer, shall furnish to the Indenture Trustee and the Surety
Provider (i) an Officer's 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 such signatory of such
certificate or opinion has read or has caused to be read such
covenant or condition and the definitions herein relating
thereto;
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or
opinions contained in such certificate or opinion are based;
(iii) a statement that, in the opinion of each such
signatory, such signatory has made such examination or
investigation as is necessary to enable such signatory to
express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(iv) a statement as to whether, in the opinion of each
such signatory, such condition or covenant has been complied
with.
(b) (i) Other than any property released as
contemplated by clause (iii) below, whenever any property or
securities are to be released from the lien of this Indenture
and the related Terms Supplements, the Issuer shall also
furnish to the Indenture Trustee and the Surety Provider an
Officer's 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.
(ii) Whenever the Issuer is required to furnish to
the Indenture Trustee and the Surety Provider an Officer's
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 furnish to the Indenture Trustee
and the Surety Provider 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 (iii) below, or securities released from the lien of
this Indenture and the related Terms Supplements since the
commencement of the then-current calendar year, as set forth
in the certificates required by clause (i) above and this
clause (ii), 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 Officer's Certificate is less than $25,000 or less
than one percent of the then Outstanding Amount of the Notes
Outstanding.
(iii) Notwithstanding Section 2.12 or any other
provisions of this Section, the Issuer may, without compliance
with the requirements of Section 2.12 or the other provisions
of this Section, (A) collect, liquidate, sell, service,
convey, administer, manage or otherwise dispose of Financed
Student Loans as and to the extent permitted or required by
the Basic Documents, (B) make cash payments out of the Trust
Accounts as and to the extent permitted or required by the
Basic Documents, so long as the Issuer shall deliver to the
Indenture Trustee and the Surety Provider every six months,
commencing six months after the first issuance of a Series of
Notes, an Officer's Certificate of the Issuer stating that all
the dispositions of any portion of the Indenture Trust Estate
described in clauses (A) or (B) above that occurred during the
immediately preceding six calendar months were applied in
accordance with the Basic Documents.
SECTION 11.2. 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 or the Surety Provider, 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 11.3. ACTS OF NOTEHOLDERS. (a) Any request, demand, authorization,
direction, notice, consent, waiver or other action provided by this Indenture to
be given or taken by Noteholders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Noteholders in person
or by agents duly appointed in writing; and except as herein otherwise expressly
provided such action shall become effective when such instrument or instruments
are delivered to the Indenture Trustee, and, where it is hereby expressly
required, to the Issuer. Such instrument or instruments (and the action embodied
therein and evidenced thereby) are herein sometimes referred to as the "Act" of
the Noteholders signing such instrument or instruments. Proof of execution of
any such instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Indenture and (subject to Section 6.1)
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 11.4. NOTICES, ETC., TO INDENTURE TRUSTEE, ISSUER AND RATING
AGENCIES. Any request, demand, authorization, direction, notice, consent, waiver
or Act of Noteholders or other documents provided or permitted by this Indenture
shall be in writing and if such request, demand, authorization, direction,
notice, consent, waiver or Act of Noteholders is to be made upon, given or
furnished to or filed with:
(a) the Indenture Trustee by any Noteholder or by the
Issuer shall be sufficient for every purpose hereunder if
made, given, furnished or filed in writing and mailed, first
class, postage prepaid or sent by overnight courier or by
facsimile transmission to or with the Indenture Trustee at its
Corporate Trust Office, or
(b) the Issuer by the Indenture Trustee or by
any Noteholder shall be sufficient for every purpose
hereunder if in writing and mailed, first-class, postage
prepaid, or via overnight courier to the Issuer addressed to:
ClassNotes Trust 1997-I, in care of Dauphin Deposit Bank and
Trust Company, as agent for The York Bank and Trust Company,
213 Market Street, Harrisburg, Pennsylvania 17101, Attention:
Corporate Trust Services; with two copies to the
Administrator, one addressed to The Money Store Inc., 2840
Morris Ave, Union, New Jersey 07083, Attention: Chief
Financial Officer; and the other addressed to: The Money Store
Inc., Educaid Division, 3301 C Street, Suite 100A, Sacramento,
California 95816, Attention: President; or at any other
address previously furnished in writing to the Indenture
Trustee by the Issuer or the Administrator. The Issuer shall
promptly transmit any notice received by it from the
Noteholders to the Indenture Trustee.
Notices required to be given to the Rating Agencies and/or the Surety
Provider by the Issuer, the Indenture Trustee or the Eligible Lender Trustee
shall be in writing, personally delivered or mailed by certified mail, return
receipt requested, to (i) in the case of Moody's, at the following address:
Moody's Investors Service, Inc., ABS Monitoring Department, 99 Church Street,
New York, New York 10007; (ii) in the case of Standard & Poor's, at the
following address: Standard & Poor's Corporation, 25 Broadway (20th Floor), New
York, New York 10004, Attention of Asset Backed Surveillance Department; or
(iii) in the case of AMBAC Indemnity Corporation, at the following address: One
State Street Plaza, New York, New York 10004, Attention: Structured Finance
Department/Student Loans; or as to each of the foregoing, at such other address
as shall be designated by written notice to the other parties.
SECTION 11.5. NOTICES TO NOTEHOLDERS; WAIVER. Where this Indenture provides
for notice to Noteholders of any event, such notice shall be sufficiently given
(unless otherwise herein expressly provided) if in writing and mailed,
first-class, postage prepaid to each Noteholder affected by such event, at his
address as it appears on the Note Register, not later than the latest date, and
not earlier than the earliest date, prescribed for the giving of such notice. In
any case where notice to Noteholders is given by mail, neither the failure to
mail such notice nor any defect in any notice so mailed to any particular
Noteholder shall affect the sufficiency of such notice with respect to other
Noteholders, and any notice that is mailed in the manner herein provided shall
conclusively be presumed to have been duly given.
Where this Indenture provides for notice in any manner, such notice may be
waived in writing by any Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Noteholders shall be filed with the Indenture Trustee but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a result of
a strike, work stoppage or similar activity, it shall be impractical to mail
notice of any event to Noteholders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a
sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies, failure to
give such notice shall not affect any other rights or obligations created
hereunder, and shall not under any circumstance constitute a Default.
SECTION 11.6. ALTERNATE PAYMENT AND NOTICE Provisions. Notwithstanding any
provision of this Indenture or any of the Notes to the contrary, the Issuer and
the Indenture Trustee 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. The Issuer will furnish to the Indenture
Trustee a copy of each such agreement and the Indenture Trustee will cause
payments to be made and notices to be given in accordance with such agreements.
SECTION 11.7. CONFLICT WITH TRUST INDENTURE ACT. If any provision hereof
limits, qualifies or conflicts with another provision hereof that is required to
be included in this Indenture by any of the provisions of the Trust Indenture
Act, such required provision shall control.
The provisions of TIA " 310 through 317 that impose duties on any Person
(including the provisions automatically deemed included herein unless expressly
excluded by this Indenture) are a part of and govern this Indenture, whether or
not physically contained herein.
SECTION 11.8. 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 11.9. SUCCESSORS AND ASSIGNS. All covenants and agreements in this
Indenture and the Notes by the Issuer shall bind its successors and assigns,
whether so expressed or not. All agreements of the Indenture Trustee in this
Indenture shall bind the successors, co-trustees and agents (excluding any legal
representatives or accountants) of the Indenture Trustee.
SECTION 11.10. SEPARABILITY. In case any provision in this Indenture or in
the Notes shall be invalid, illegal or unenforceable, the validity, legality,
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
SECTION 11.11. BENEFITS OF INDENTURE. Nothing in this Indenture or in the
Notes, express or implied, shall give to any Person, other than the parties
hereto and their successors hereunder, and the Noteholders, and any other party
secured hereunder, and any other Person with an ownership interest in any part
of the Indenture Trust Estate, any benefit or any legal or equitable right,
remedy or claim under this Indenture.
SECTION 11.12. LEGAL HOLIDAYS. In any case where the date on which any
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the date on which nominally due, and no interest shall
accrue for the period from and after any such nominal date.
SECTION 11.13. GOVERNING LAW. This Indenture, each Terms Supplement and the
Notes 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.
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 expenses accompanied by an Opinion of Counsel
(which may be counsel to the Issuer or any other counsel reasonably acceptable
to the Indenture Trustee) to the effect that such recording is necessary either
for the protection of the Noteholders or any other Person secured hereunder or
for the enforcement of any right or remedy granted to the Indenture Trustee
under this Indenture.
SECTION 11.16. TRUST OBLIGATIONS. No recourse may be taken, directly or
indirectly, with respect to the obligations of the Issuer, the 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 Indenture Trustee or the Eligible Lender Trustee in its
individual capacity or (ii) any partner, owner, beneficiary, custodian, officer,
director, employee or agent of 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 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 benefit of, the terms and provisions of Article VI, VII and VIII
of the Trust Agreement.
SECTION 11.17. NO PETITION. The Indenture Trustee, by entering into this
Indenture, and each Noteholder, by accepting a Note, hereby covenant and agree
that they will not at any time institute against the Seller or the Issuer, or
join in any institution against the Seller or the Issuer of, any bankruptcy,
reorganization, arrangement, insolvency, receivership or liquidation
proceedings, or other proceedings under any United States Federal or State
bankruptcy or similar law in connection with any obligations relating to the
Notes, this Indenture or any of the other Basic Documents.
SECTION 11.18. INSPECTION. The Issuer agrees that, on reasonable prior
notice, it will permit any representative of the Indenture Trustee, during the
Issuer's normal business hours, to examine all the books of account, records,
reports, and other papers of the Issuer, to make copies and extracts therefrom,
to cause such books to be audited by Independent certified public accountants,
and to discuss the Issuer's affairs, finances and accounts with the Issuer's
officers, employees and Independent certified public accountants, all at such
reasonable times and as often as may be reasonably requested. The Indenture
Trustee shall and shall cause its representatives to hold in confidence all such
information except to the extent disclosure may be required by law (and all
reasonable applications for confidential treatment are unavailing) and except to
the extent that the Indenture Trustee may reasonably determine that such
disclosure is consistent with its obligations hereunder.
SECTION 11.19. USURY. The amount of interest payable or paid on any Note
under the terms of this Indenture shall be limited to an amount which shall not
exceed the maximum non usurious rate of interest allowed by the applicable laws
of the United States or the lesser of New York or Pennsylvania (whichever shall
permit the higher rate), which could lawfully be contracted for, charged or
received (the "Highest Lawful Rate"). If any payment of interest on any Note
exceeds the Highest Lawful Rate, the Issuer stipulates that such excess amount
will be deemed to have been paid as a result of an error on the part of both the
Indenture Trustee, acting on behalf of the Noteholder of such Note, and the
Issuer, and the Noteholder receiving such excess payment shall promptly, upon
discovery of such error or upon notice thereof from the Issuer or the Indenture
Trustee, refund the amount of such excess and, at the option of the Indenture
Trustee, apply the excess to the payment of principal of such Note, if any,
remaining unpaid.
SECTION 11.20. RIGHTS OF SURETY PROVIDER. The Surety Provider is a
third-party beneficiary of this Indenture and any Terms Supplement. Any right
conferred to the Surety Provider shall be suspended during any period in which
the Surety Provider is in default in its payment obligations under the Insurance
Agreement. During any period of suspension the Surety Provider's rights
hereunder shall vest in the Noteholders and shall be exercisable by the Holders
of a majority of the aggregate principal amount of Notes then Outstanding. At
such time as the Notes are no longer Outstanding hereunder and the Surety
Provider has been reimbursed for all Required Surety Payments to which it is
entitled under the Basic Documents and has been paid all Premium Amounts due and
owing in respect of the Surety Bonds, the Surety Provider's rights hereunder
shall terminate.
<PAGE>
IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have caused this
Indenture to be duly executed by their respective officers, thereunto duly
authorized and duly attested, all as of the day and year first above written.
CLASSNOTES TRUST 1997-I,
by THE YORK BANK
AND TRUST COMPANY,
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:
<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 _____________ of The York Bank and Trust Company, not in its individual
capacity but solely as Eligible Lender Trustee of CLASSNOTES TRUST 1997-I, a
Pennsylvania trust, and that he 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, 1997.
-----------------------------
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 she
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
_____________, 1997.
-----------------------------
Notary Public in and for
the State of New York.
[SEAL]
My commission expires:
- ----------------------
<PAGE>
APPENDIX A
TO THE INDENTURE
DEFINITIONS AND USAGE
[See Appendix A to the Sale and Servicing Agreement]
<PAGE>
EXHIBIT A-1
[FORM OF AUCTION RATE SERIES 199_-_ NOTES]
CLASSNOTES TRUST 1997-I
AUCTION RATE ASSET BACKED NOTES
SERIES 199_-_
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER (AS
DEFINED BELOW) OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
[THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT") OR ANY STATE SECURITIES LAWS. THE HOLDER HEREOF, BY
PURCHASING THIS NOTE, AGREES THAT THIS NOTE MAY BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY IN ACCORDANCE WITH ANY APPLICABLE STATE SECURITIES LAWS AND (1)
TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER WHICH PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, OR (2) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT.]
THIS NOTE IS NOT GUARANTEED OR INSURED BY ANY GOVERNMENTAL AGENCY.
No. A-_-_ $______
FINAL
MATURITY DATED INTEREST
CLASS DATE DATE RATE CUSIP
- ----- ---- ---- ---- -----
auction rate
as herein
provided
REGISTERED NOTEHOLDER:
PRINCIPAL AMOUNT: __________________________________
<PAGE>
CLASSNOTES TRUST 1997-I, a Pennsylvania business trust (the "Issuer"), for
value received, promises to pay, from the sources herein described, to the
Registered Noteholder identified above, or registered assigns, upon presentation
and surrender hereof at the Corporate Trust Office of Bankers Trust Company, as
Paying Agent, or at the principal office of any successor or additional Paying
Agent, the Principal Amount identified above, as reduced from time to time as
described herein, on the Final Maturity Date identified above, and to pay to the
registered owner hereof, interest and principal hereon in lawful money of the
United States of America at the Class Interest Rate on the dates as provided
herein. Unless otherwise defined in this Series 199_-_ Note, capitalized terms
used in this Series 199_-_ Note shall have the respective meanings given to such
terms in the Master Indenture dated as of ______ __, 1995, as supplemented by
the _____ Terms Supplement dated as of _______, 199_, (the "_____ Terms
Supplement" and, together, the "Indenture") between the Issuer and Bankers Trust
Company, as Indenture Trustee.
This Series 199_-_ Note is one of a duly authorized issue of notes of the
Issuer designated as "ClassNotes Trust 1997-I Asset-Backed Notes, Series 199_-_"
(herein referred to by specific Class as the "Series 199_-_, Class A-_ Notes"
and collectively as the "Series 199_-_ Notes"), in the aggregate principal
amount of $__________ issued under the Indenture. The Series 199_-_ Notes are
issued to finance the acquisition and consolidation of Financed Student Loans,
and to make certain deposits to the Pledged Accounts.
The Master Indenture provides for the issuance, from time to time, under
the conditions, limitations and restrictions set forth therein, of additional
notes on a parity with all Series of obligations issued or to be issued under
the Indenture, for the purpose of providing additional funds for the acquisition
and consolidation of Financed Student Loans (said additional notes, together
with Series 199_-_ Notes, being collectively referred to herein as the "Notes").
The Notes are secured under the Indenture which, together with certain
other documents, assigns to the Indenture Trustee for the benefit of the
Noteholders all the rights and remedies of the Issuer under certain Financed
Student Loans and rights under various contracts providing for the issuance,
guarantee and servicing of such Financed Student Loans. Reference is hereby made
to the Indenture for the provisions, among others, with respect to the custody
and application of the proceeds of the Notes, definitions of certain capitalized
terms used in this Series 199_-_ Note, the nature and the extent of the liens
and security of the Indenture, the collection and disposition of revenues, the
funds charged with and pledged to the payment of the principal of and the
interest on the Notes, the terms and conditions under which additional Notes may
be issued, the rights, duties and immunities of the Indenture Trustee, the
rights of the registered owners of the Notes, and the rights and obligations of
the Issuer. By the acceptance of this Series 199_-_ Note, the registered owner
hereof assents to all of the provisions of the Indenture.
The unpaid principal amount hereof from time to time outstanding shall bear
interest at a Class Interest Rate, as described below, payable on each
applicable Note Distribution Date to the extent of interest accrued on the
principal then outstanding, such interest to accrue from the later of the date
hereof or the date through which interest has been paid or duly provided for.
Interest at a Class Interest Rate established pursuant to the _____ Terms
Supplement shall be computed for the actual number of days elapsed on the basis
of a year consisting of 360 days.
During the Class Initial Period, this Series 199_- _ Note shall bear
interest at the Class Initial Rate for the Series 199_-_ Notes of this Class.
Thereafter until an Auction Period Adjustment, if any, this Series 199_-_ Note
shall bear interest at a Class Interest Rate based on an Auction Period that
shall, until adjusted pursuant to the _____ Terms Supplement, generally consist
of __ days, all as determined in the _____ Terms Supplement.
The Class Interest Rate to be borne by this Series 199_-_ Note after the
Class Initial Period for each Auction Period, if any, or an Auction Period
Adjustment, if any, shall be the lesser of (i) the Net Loan Rate in effect for
such Auction Period and (ii) the Auction Rate determined in accordance with the
applicable provisions of the _____ Terms Supplement.
In no event shall the Class Interest Rate on this Series 199_-_ Note exceed
___% per annum.
The Class Interest Period, including, without limitation, an Auction
Period, the applicable Class Interest Rate, the method of determining the
applicable Class Interest Rate on each of the Series 199_-_ Notes and the
Auction Procedures related thereto, including, without limitation, required
notices thereof to the Noteholders or Existing Noteholders of the Series 199_-_
Notes, an Auction Period Adjustment, a change in the Auction Date and the Note
Distribution Dates will be determined in accordance with the terms, conditions
and provisions of the _____ Terms Supplement and the Auction Agent Agreement, to
which terms, conditions and provisions specific reference is hereby made, and
all of which terms, conditions and provisions are hereby specifically
incorporated herein by reference.
If the Auction Rate for the Series 199_-_ Notes is greater than the Net
Loan Rate, then the Class Interest Rate applicable to the Series 199_-_ Notes
for that Class Interest Period will be the Net Loan Rate. If the Class Interest
Rate applicable to the Series 199_-_ Notes for any Class Interest Period is the
Net Loan Rate, the Indenture Trustee shall determine the Noteholders' Auction
Rate Interest Carryover, if any, with respect to the Series 199_-_ Notes for
such Class Interest Period. Such Noteholders' Auction Rate Interest Carryover
shall bear interest calculated at a rate equal to One- Month LIBOR from the Note
Distribution Date for each Class Interest Period with respect to which such
Noteholders' Auction Rate Interest Carryover was calculated until paid. For
purposes of this Series 199_-_ Note, any reference to "principal" or "interest"
herein shall not include within the meaning of such words Noteholders' Auction
Rate Interest Carryover or any interest accrued on any such Noteholders' Auction
Rate Interest Carryover. Such Noteholders' Auction Rate Interest Carryover shall
be separately calculated for each Series 199_-_ Note by the Indenture Trustee
during such Class Interest Period in sufficient time for the Indenture Trustee
to give notice to each Noteholder of such Noteholders' Auction Rate Interest
Carryover as required in the next succeeding sentence. On the Note Distribution
Date for a Class Interest Period with respect to which such Noteholders' Auction
Rate Interest Carryover has been calculated by the Indenture Trustee, the
Indenture Trustee shall give written notice to each Noteholder of the
Noteholders' Auction Rate Interest Carryover applicable to each Noteholder's
Series 199_-_ Note, which written notice may accompany the payment of interest
by check made to each such Noteholder on such Note Distribution Date or
otherwise shall be mailed on such Note Distribution Date by first class mall,
postage prepaid, to each such Noteholder at such Noteholder's address as it
appears on the registration books maintained by the Registrar. Such notice shall
state, in addition to such Noteholders' Auction Rate Interest Carryover, that,
unless and until a Series 199_-_ Note has been paid in full or has been deemed
no longer Outstanding under the _____ Terms Supplement (after which no
Noteholders' Auction Rate Interest Carryover (and all accrued interest thereon)
shall be paid with respect to a Series 199_-_ Note), (i) the Noteholders'
Auction Rate Interest Carryover (and interest accrued thereon calculated on the
basis of One-Month LIBOR) shall be paid by the Indenture Trustee on a Series
199_-_ Note on the first occurring Note Distribution Date for a subsequent Class
Interest Period if and to the extent that (1) during such Class Interest Period
no additional Noteholders' Auction Rate Interest Carryover is accruing on the
Series 199_-_ Notes and (2) moneys are available on such Note Distribution Date
pursuant to the terms of the _____ Terms Supplement in an amount sufficient to
pay all or a portion of such Noteholders' Auction Rate Interest Carryover and
(ii) interest shall accrue on the Noteholders' Auction Rate Interest Carryover
at a rate equal to One-Month LIBOR until such Noteholders' Auction Rate Interest
Carryover is paid in full or is cancelled.
The Noteholders' Auction Rate Interest Carryover for the Series 199_-_
Notes shall be paid by the Indenture Trustee on Outstanding Series 199_-_ Notes
on the first occurring Note Distribution Date for a subsequent Class Interest
Period if and to the extent that (i) during such Class Interest Period, no
additional Noteholders' Auction Rate Interest Carryover is accruing on the
Series 199_-_ Notes and (ii) on such Note Distribution Date there are sufficient
moneys available pursuant to the terms of the _____ Terms Supplement to pay all
or a portion of the Noteholders' Auction Rate Interest Carryover due on the
Series 199_-_ Notes on such Note Distribution Date. Any Noteholders' Auction
Rate Interest Carryover (and any interest accrued thereon) on any Series 199_-_
Note which is due and payable on any Note Distribution Date, which Series 199_-_
Note is deemed no longer Outstanding under the Indenture on said Note
Distribution Date, shall be paid to the Noteholder thereof on the next Note
Distribution Date to the extent that moneys are available therefor in accordance
with the _____ Terms Supplement; provided, however, that any Noteholders'
Auction Rate Interest Carryover (and any interest accrued thereon) which is not
yet due and payable on said Note Distribution Date shall be cancelled with
respect to said Series 199_-_ Note that is to be deemed no longer Outstanding
under the Indenture on said Note Distribution Date and shall not be paid on any
succeeding Note Distribution Date. To the extent that any portion of the
Noteholders' Auction Rate Interest Carryover remains unpaid after payment of a
portion thereof, such unpaid portion of the Noteholders' Auction Rate Interest
Carryover shall be paid in whole or in part until fully paid by the Indenture
Trustee on the next occurring Note Distribution Date or Dates, as necessary, for
a subsequent Class Interest Period or Periods, if and to the extent that the
conditions in the immediately preceding sentence are satisfied.
The Note Distribution Date in such subsequent Class Interest Period on
which such Noteholders' Auction Rate Interest Carryover for the Series 199_-_
Notes shall be paid shall be determined by the Indenture Trustee in accordance
with the provisions of the immediately preceding paragraph, and the Indenture
Trustee shall make payment of the Noteholders' Auction Rate Interest Carryover
in the same manner as, and from the same account from which, it pays interest on
the Series 199_-_ Notes on an Note Distribution Date.
The principal of and interest on the Series 199_-_ Notes and Noteholders'
Auction Rate Interest Carryover on the Series 199_-_ Notes (and interest accrued
thereon), if any, are special limited obligations of the Issuer, payable solely
from certain revenues derived by the Issuer from certain assets of the Issuer,
including certain notes evidencing Financed Student Loans. The Series 199_-_
Notes are not an indebtedness, a debt or a liability of Trans-World Insurance
Company or The Money Store Inc.
Distributions of principal will made on each Note Distribution Date to the
Class of Notes with the earliest Final Maturity Date in the manner described in
the Sale and Servicing Agreement. With respect to the Class of Notes entitled to
receive payments of principal, the actual Notes of such Class that will receive
payments of principal on each applicable Note Distribution Date will be selected
no later than 15 days prior to the related Note Distribution Date by the
Indenture Trustee by lot in such manner as the Indenture Trustee in its
discretion may determine and which may provide for the selection for payment of
principal in minimum denominations of $50,000, and integral multiples in excess
thereof.
If an Event of Default as defined in the
Indenture occurs, the principal of and interest on all Notes issued under the
Indenture may be declared due and payable upon the conditions and in the manner
and with the effect provided in the Indenture. The Indenture and the rights and
obligations of the Issuer, the Indenture Trustee and the Noteholder hereof may
be modified or amended in the manner and subject to the conditions set forth in
the Indenture.
The Noteholder of this Series 199_-_ Note shall
have no right to enforce the provisions of the Indenture or to institute action
to enforce the covenants therein, or to take any action with respect to any
Event of Default under the Indenture, or to institute, appear in or defend any
suit or other proceeding with respect thereto, except as provided in the
Indenture.
The transfer of this Series 199_-_ Note may be registered only upon
surrender hereof to the Indenture Trustee together with an assignment duly
executed by the registered owner or its attorney or legal representative in such
form as shall be satisfactory to the Indenture Trustee. Upon any such
registration of transfer of this Series 199_-_ Note and subject to the payment
of any fees and charges as provided by the Indenture, the Issuer shall execute
and the Indenture Trustee shall authenticate and deliver in exchange for this
Series 199_-_ Note a new Series 199_-_ Note or Notes registered in the name of
the transferee, in any denomination or denominations authorized by the
Indenture, of the same maturity and in an aggregate principal amount equal to
the unredeemed principal amount of this Series 199_-_ Note and bearing the same
interest as this Series 199_-_ Note.
In any case where the date fixed for the payment of principal of or
interest on this Series 199_-_ Note shall not be a Business Day, then payment of
such principal or interest need not be made on such date but may be made on the
next succeeding Business Day with the same force and effect as if made on the
date fixed for the payment thereof.
It is hereby certified, recited and declared that all acts, conditions and
things required to have happened, to exist and to have been performed precedent
to and in the execution and delivery of the Indenture and issuance of this
Series 199_-_ Note have happened, do exist and have been performed in due time,
form and manner as required by law.
This Series 199_-_ Note shall not be valid or become obligatory for any
purpose or be entitled to any security or benefit under the Indenture until the
certificate of authentication hereon shall have been manually signed by the
Indenture Trustee.
IN WITNESS WHEREOF, the Issuer has caused this Series 199_-_ Note to be
executed in its name by the manual or facsimile signature of an Authorized
Officer.
CLASSNOTES TRUST 1997-I
By: THE YORK BANK AND DEPOSIT COMPANY,
not in its individual capacity but
solely as Eligible Lender Trustee
By:
<PAGE>
CERTIFICATE OF AUTHENTICATION
This Note is one of the Series 199_-_ Notes designated in and issued under
the provisions of the within mentioned Indenture.
BANKERS TRUST COMPANY
New York, New York, as
Indenture Trustee
By:
----------------------------
Authorized Representative
Date of Authentication:
- -------------------------------
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto
, the within Note and irrevocably appoints , attorney-in-fact, to transfer the
within Note on the books kept for registration thereof, with full power of
substitution in the premises.
Dated:
----------------------------- -----------------------------
NOTICE: The signature to Signature Guaranteed:
this assignment must
correspond with the name as
it appears upon the face of -----------------------------
the within Note in every par-
ticular, without any alter-
ation whatsoever.
Name and Address:
-----------------------------
Tax Identification Number or
Social Security Number(s):
-------------------------------
(END OF FORM OF SERIES 199_-_ NOTE)
<PAGE>
EXHIBIT A-2
[FORM OF LIBOR RATE SERIES 199_-_ NOTES]
CLASSNOTES TRUST 1997-I
ASSET BACKED NOTES
SERIES 199_-_
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER (AS DEFINED BELOW)
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
[THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT") OR ANY STATE SECURITIES LAWS. THE
HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES THAT THIS NOTE MAY BE RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED ONLY IN ACCORDANCE WITH ANY APPLICABLE STATE
SECURITIES LAWS AND (1) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER WHICH PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, OR (2)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT.]
THIS NOTE IS NOT GUARANTEED OR INSURED BY ANY GOVERNMENTAL
AGENCY.
No. A-_-_ $__________
FINAL CLASS
MATURITY DATED INTEREST
CLASS DATE DATE RATE CUSIP
LIBOR + ____%
as herein
provided
REGISTERED NOTEHOLDER: CEDE &
CO.
PRINCIPAL AMOUNT:
<PAGE>
CLASSNOTES TRUST 1997-I, a Pennsylvania business trust (the "Issuer"), for
value received, promises to pay, from the sources herein described, to the
Registered Noteholder identified above, or registered assigns, upon presentation
and surrender hereof at the Corporate Trust Office of Bankers Trust Company, as
Paying Agent, or at the principal office of any successor or additional Paying
Agent, the Principal Amount identified above, as reduced from time to time as
described herein, on the Final Maturity Date identified above, and to pay to the
registered owner hereof, interest and principal hereon in lawful money of the
United States of America at the Class Interest Rate on the dates as provided
herein. Unless otherwise defined in this Series 199_-_ Note, capitalized terms
used in this Series 199_-_ Note shall have the respective meanings given to such
terms in the Master Indenture dated as of _______ __, 1995 (the "Master
Indenture"), as supplemented by the ______ Terms Supplement dated as of _______
__, 199_, (the "______ Terms Supplement" and, together with the Master
Indenture, the "Indenture") between the Issuer and Bankers Trust Company, as
Indenture Trustee.
This Series 199_-_ Note is one of a duly authorized issue of notes of the
Issuer designated as "ClassNotes Trust Asset-Backed Notes, Series 199_-_"
(herein referred to by specific Class as the "Series 199_-_, Class A-_ Notes"
and collectively as the "Series 199_-_ Notes"), in the aggregate principal
amount of $_________ issued under the Indenture. The Series 199_-_ Notes are
issued to finance the acquisition and consolidation of Financed Student Loans,
and to make certain deposits to the Pledged Accounts.
The Master Indenture provides for the issuance, from time to time, under
the conditions, limitations and restrictions set forth therein, of additional
notes on a parity with all Series of obligations issued or to be issued under
the Indenture, for the purpose of providing additional funds for the acquisition
and consolidation of Financed Student Loans (said additional notes, together
with Series 199_-_ Notes, being collectively referred to herein as the "Notes").
The Notes are secured under the Indenture which, together with certain
other documents, assigns to the Indenture Trustee for the benefit of the
Noteholders all the rights and remedies of the Issuer under certain Financed
Student Loans and rights under various contracts providing for the issuance,
guarantee and servicing of such Financed Student Loans. Reference is hereby made
to the Indenture for the provisions, among others, with respect to the custody
and application of the proceeds of the Notes, definitions of certain capitalized
terms used in this Series 199_-_ Note, the nature and the extent of the liens
and security of the Indenture, the collection and disposition of revenues, the
funds charged with and pledged to the payment of the principal of and the
interest on the Notes, the terms and conditions under which additional Notes may
be issued, the rights, duties and immunities of the Indenture Trustee, the
rights of the registered owners of the Notes, and the rights and obligations of
the Issuer. By the acceptance of this Series 199_-_ Note, the registered owner
hereof assents to all of the provisions of the Indenture.
The unpaid principal amount hereof from time to time outstanding shall bear
interest at a Class Interest Rate, as described below, payable on each
applicable Note Distribution Date to the extent of interest accrued on the
principal then outstanding, such interest to accrue from the later of the date
hereof or the date through which interest has been paid or duly provided for.
Interest at a Class Interest Rate established pursuant to the _______ Terms
Supplement shall be computed for the actual number of days elapsed on the basis
of a year consisting of 360 days.
During the Initial Period, this Series 199_-_ Note shall bear interest at
the Class Initial Rate equal to the rate set forth in the _______ Terms
Supplement. Thereafter, this Series 199_-_ Note generally shall bear interest at
a Class Interest Rate equal to LIBOR plus the margin set forth in the _______
Terms Supplement.
[In no event shall the Class Interest Rate on this Series 199_-_ Note
exceed ____% per annum.]
[If the LIBOR Rate for the Series 199_-_ Notes is greater than the Net Loan
Rate, then the Class Interest Rate applicable to the Series 199_-_ Notes for
that Interest Period will be the Net Loan Rate. If the Class Interest Rate
applicable to the Series 199_-_ Notes for any Interest Period is the Net Loan
Rate, the Indenture Trustee shall determine the Noteholders' LIBOR Rate Interest
Carryover, if any, with respect to the Series 199_-_ Notes for such Interest
Period. Such Noteholders' LIBOR Rate Interest Carryover shall bear interest
calculated at a rate equal to One-Month LIBOR from the Note Distribution Date
for each Interest Period with respect to which such Noteholders' LIBOR Rate
Interest Carryover was calculated until paid. For purposes of this Series 199_-_
Note, any reference to "principal" or "interest" herein shall not include within
the meaning of such words Noteholders' LIBOR Rate Interest Carryover or any
interest accrued on any such Noteholders' LIBOR Rate Interest Carryover. Such
Noteholders' LIBOR Rate Interest Carryover shall be calculated by the Indenture
Trustee during such Interest Period in sufficient time for the Indenture Trustee
to give notice to each Noteholder of such Noteholders' LIBOR Rate Interest
Carryover as required in the next succeeding sentence. On the Note Distribution
Date for an Interest Period with respect to which such Noteholders' LIBOR Rate
Interest Carryover has been calculated by the Indenture Trustee, the Indenture
Trustee shall give written notice to each Noteholder of the Noteholders' LIBOR
Rate Interest Carryover applicable to each Noteholder's Series 199_-_ Notes,
which written notice may accompany the payment of interest by check made to each
such Noteholder on such Note Distribution Date or otherwise shall be mailed on
such Note Distribution Date by first class mall, postage prepaid, to each such
Noteholder at such Noteholder's address as it appears on the registration books
maintained by the Registrar. Such notice shall state, in addition to such
Noteholders' LIBOR Rate Interest Carryover, that, unless and until a Series
199_-_ Note has been paid in full or has been deemed no longer Outstanding under
the _______ Terms Supplement (after which no Noteholders' LIBOR Rate Interest
Carryover (and all accrued interest thereon) shall be paid with respect to a
Series 199_-_ Note), (i) the Noteholders' LIBOR Rate Interest Carryover (and
interest accrued thereon calculated on the basis of One-Month LIBOR) shall be
paid by the Indenture Trustee on a Series 199_-_ Note on the first occurring
Note Distribution Date for a subsequent Interest Period if and to the extent
that (1) during such Interest Period no additional Noteholders' LIBOR Rate
Interest Carryover is accruing on the Series 199_-_ Notes and (2) moneys are
available on such Note Distribution Date pursuant to the terms of the _______
Terms Supplement in an amount sufficient to pay all or a portion of such
Noteholders' LIBOR Rate Interest Carryover and (ii) interest shall accrue on the
Noteholders' LIBOR Rate Interest Carryover at a rate equal to One-Month LIBOR
until such Noteholders' LIBOR Rate Interest Carryover is paid in full or is
cancelled.]
[The Noteholders' LIBOR Rate Interest Carryover for the Series 199_-_ Notes
shall be paid by the Indenture Trustee on Outstanding Series 199_-_ Notes on the
first occurring Note Distribution Date for a subsequent Interest Period if and
to the extent that (i) during such Interest Period, no additional Noteholders'
LIBOR Rate Interest Carryover is accruing on the Series 199_-_ Notes and (ii) on
such Note Distribution Date there are sufficient moneys available pursuant to
the terms of the _______ Terms Supplement to pay all or a portion of the
Noteholders' LIBOR Rate Interest Carryover due on the Series 199_-_ Notes on
such Note Distribution Date. Any Noteholders' LIBOR Rate Interest Carryover (and
any interest accrued thereon) on any Series 199_-_ Note which is due and payable
on any Note Distribution Date, which Series 199_-_ Note is deemed no longer
Outstanding under the Indenture on said Note Distribution Date, shall be paid to
the Noteholder thereof on the next Note Distribution Date to the extent that
moneys are available therefor in accordance with the _______ Terms Supplement;
provided, however, that any Noteholders' LIBOR Rate Interest Carryover (and any
interest accrued thereon) which is not yet due and payable on said Note
Distribution Date shall be cancelled with respect to said Series 199_-_ Note
that is to be deemed no longer Outstanding under the Indenture on said Note
Distribution Date and shall not be paid on any succeeding Note Distribution
Date. To the extent that any portion of the Noteholders' LIBOR Rate Interest
Carryover remains unpaid after payment of a portion thereof, such unpaid portion
of the Noteholders' LIBOR Rate Interest Carryover shall be paid in whole or in
part until fully paid by the Indenture Trustee on the next occurring Note
Distribution Date or Dates, as necessary, for a subsequent Interest Period or
Periods, if and to the extent that the conditions in the immediately preceding
sentence are satisfied.]
[The Note Distribution Date in such subsequent Interest Period on which
such Noteholders' LIBOR Rate Interest Carryover for the Series 199_-_ Notes
shall be paid shall be determined by the Indenture Trustee in accordance with
the provisions of the immediately preceding paragraph, and the Indenture Trustee
shall make payment of the Noteholders' LIBOR Rate Interest Carryover in the same
manner as, and from the same account from which, it pays interest on the Series
199_-_ Notes on an Note Distribution Date.]
Distributions of principal will made on each Note Distribution Date to the
Class of Notes with the earliest Final Maturity Date in the manner described in
the Sale and Servicing Agreement. With respect to the Class of Notes entitled to
receive payments of principal, the actual Notes of such Class that will receive
payments of principal on each applicable Note Distribution Date will be selected
no later than 15 days prior to the related Note Distribution Date by the
Indenture Trustee by lot in such manner as the Indenture Trustee in its
discretion may determine and which may provide for the selection for payment of
principal in minimum denominations of $50,000, and integral multiples in excess
thereof.
If an Event of Default as defined in the Indenture occurs, the principal of
and interest on all Notes issued under the Indenture may be declared due and
payable upon the conditions and in the manner and with the effect provided in
the Indenture. The Indenture and the rights and obligations of the Issuer, the
Indenture Trustee and the Noteholder hereof may be modified or amended in the
manner and subject to the conditions set forth in the Indenture.
The Noteholder of this Series 199_-_ Note shall have no right to enforce
the provisions of the Indenture or to institute action to enforce the covenants
therein, or to take any action with respect to any Event of Default under the
Indenture, or to institute, appear in or defend any suit or other proceeding
with respect thereto, except as provided in the Indenture.
The transfer of this Series 199_-_ Note may be registered only upon
surrender hereof to the Indenture Trustee together with an assignment duly
executed by the registered owner or its attorney or legal representative in such
form as shall be satisfactory to the Indenture Trustee. Upon any such
registration of transfer of this Series 199_-_ Note and subject to the payment
of any fees and charges as provided by the Indenture, the Issuer shall execute
and the Indenture Trustee shall authenticate and deliver in exchange for this
Series 199_-_ Note a new Series 199_-_ Note or Notes registered in the name of
the transferee, in any denomination or denominations authorized by the
Indenture, of the same maturity and in an aggregate principal amount equal to
the unredeemed principal amount of this Series 199_-_ Note and bearing the same
interest as this Series 199_-_ Note.
In any case where the date fixed for the payment of principal of or
interest on this Series 199_-_ Note shall not be a Business Day, then payment of
such principal or interest need not be made on such date but may be made on the
next succeeding Business Day with the same force and effect as if made on the
date fixed for the payment thereof.
It is hereby certified, recited and declared that all acts, conditions and
things required to have happened, to exist and to have been performed precedent
to and in the execution and delivery of the Indenture and issuance of this
Series 199_-_ Note have happened, do exist and have been performed in due time,
form and manner as required by law.
This Series 199_-_ Note shall not be valid or become obligatory for any
purpose or be entitled to any security or benefit under the Indenture until the
certificate of authentication hereon shall have been manually signed by the
Indenture Trustee.
IN WITNESS WHEREOF, the Issuer has caused this Series 199_-_ Note to be
executed in its name by the manual or facsimile signature of an Authorized
Officer.
CLASSNOTES TRUST 1997-I
By: THE YORK BANK AND DEPOSIT
COMPANY,
not in its individual capacity but
solely as Eligible Lender Trustee
By:
<PAGE>
CERTIFICATE OF AUTHENTICATION
This Note is one of the Series 199_-_ Notes designated in and issued under
the provisions of the within mentioned Indenture.
BANKERS TRUST COMPANY
New York, New York, as
Indenture Trustee
By:
--------------------------
Authorized Representative
Date of Authentication:
- -------------------------------
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto
, the within Note and irrevocably appoints , attorney-in-fact, to transfer the
within Note on the books kept for registration thereof, with full power of
substitution in the premises.
Dated:
-------------------------- ----------------------------
NOTICE: The signature to Signature Guaranteed:
this assignment must
correspond with the name as
it appears upon the face of -----------------------------
the within Note in every par-
ticular, without any alter-
ation whatsoever.
Name and Address:
Tax Identification Number or
Social Security Number(s):
[END OF FORM OF Series 199_-_ Note]
[EXECUTION COPY]
--------------------------------------------------------------------------
FIRST TERMS SUPPLEMENT
TO THE
INDENTURE
DATED AS OF MARCH 21, 1997
between
CLASSNOTES TRUST 1997-I
and
BANKERS TRUST COMPANY
Indenture Trustee
Dated as of March 21, 1997
Securing
$281,000,000
ASSET-BACKED NOTES
SERIES 1997-1
------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions....................................................2
ARTICLE II
AUTHORIZATION, TERMS AND ISSUANCE
SECTION 2.1. Authorization of Series 1997-1 Notes...........................13
SECTION 2.2. Purposes.......................................................13
SECTION 2.3. Terms of Series 1997-1 Notes Generally.........................13
SECTION 2.4. Series 1997-1 Notes............................................14
SECTION 2.5. Class Interest Rate............................................19
SECTION 2.6. Additional Provisions Regarding the Interest
Rates on the Series 1997-1 Notes...............................36
SECTION 2.7. Qualifications of Market Agent.................................37
ARTICLE III
DISTRIBUTIONS
SECTION 3.1. Distribution of Interest and Principal.........................38
SECTION 3.2. Selection of Notes to Receive Payments
of Principal...................................................38
ARTICLE IV
MISCELLANEOUS
SECTION 4.1. Issuer for This First Terms Supplement.........................39
SECTION 4.2. Counterparts...................................................39
SECTION 4.3. Indenture Constitutes a Security Agreement.....................39
SECTION 4.4. Governing Law..................................................39
SECTION 4.5. Ratification of Master Indenture...............................39
EXHIBIT A Form of Series 1997-1 Notes
EXHIBIT B Form of Notice of Payment Default
EXHIBIT C Form of Notice of Cure of Payment Default
EXHIBIT D Notice of Proposed Auction Period Adjustment
EXHIBIT E Notice Establishing Auction Period Adjustment
EXHIBIT F Notice of Change in Auction Date
<PAGE>
FIRST TERMS SUPPLEMENT, dated as of March 21, 1997, between CLASSNOTES
TRUST 1997-I, a Pennsylvania business trust, (the "Issuer") acting through THE
YORK BANK AND TRUST COMPANY, a Pennsylvania bank and trust company, not in its
individual capacity but solely as eligible lender trustee (the "Eligible Lender
Trustee"), and BANKERS TRUST COMPANY, a New York banking corporation duly
established, existing and authorized to accept and execute trusts of the
character herein set out under and by virtue of the laws of the State of New
York, with its principal corporate trust office in New York, New York, (the
"Indenture Trustee"), as Indenture Trustee under a Master Indenture dated as of
March 21, 1997 (the "Master Indenture").
PRELIMINARY STATEMENT
Section 2.3 of the Master Indenture provides, among other things, that the
Issuer, as provided in the Trust Agreement, and the Indenture Trustee may enter
into an indenture supplemental to the Master Indenture for the purpose of
authorizing a Series of Notes and to specify certain terms of such Series of
Notes. The Issuer has duly authorized the creation of a Series of Notes in an
aggregate principal amount not to exceed $281,000,000 to be known as the
Issuer's Asset Backed Notes, Series 1997-1 (the "Series 1997-1 Notes"), and the
Issuer and the Indenture Trustee are executing and delivering this First Terms
Supplement in order to provide for the Series 1997-1 Notes. Except as otherwise
specified herein, or as the context may require, capitalized terms used but not
defined herein are defined in Appendix A to the Sale and Servicing Agreement
dated as of February 28, 1997 (the "Sale and Servicing Agreement") among the
Issuer, Trans- World Insurance Company (the "Administrator"), ClassNotes, Inc.,
the Eligible Lender Trustee and The Money Store Inc. ("TMSI"), which Appendix A
also contains rules as to usage that shall be applicable herein.
GRANTING CLAUSES
The Issuer hereby Grants to the Indenture Trustee, for the exclusive
benefit of the Holders of the Series 1997-1 Notes, and (other than with respect
to clause (d) below) any Series of Notes issued previously and any Series of
Notes that may be issued hereafter, all of the Issuer's right, title and
interest in and to (a) the Financed Student Loans listed in Schedule A to the
Sale and Servicing Agreement (as such Schedule may be amended from time to time
including, but not limited to, by the purchase by the Trust during the Funding
Period of any Additional Financed Student Loans) and all obligations of the
Obligors thereunder, and all written communications received by the Seller with
respect thereto (including borrower correspondence, notices of death, disability
or bankruptcy and requests for deferrals or forbearance), on and after February
28, 1997 (the "Cut-Off Date") (or, with respect to the Additional Financed
Student Loans, the applicable Subsequent Cut-Off Date), (b) all funds on deposit
from time to time in the Trust Accounts (other than the Certificate Distribution
Account) and in all investments and proceeds thereof (including all income
thereon), (c) all proceeds of the foregoing, including without limitation,
proceeds of the conversion, voluntary or involuntary, of any of the foregoing
into cash or other liquid property and (d) the Note Surety Bond relating to the
Series 1997-1 Notes. Such Grants are made, however, in trust, to secure the
Series 1997-1 Notes, any Series of Notes issued previously and any Series of
Notes issued hereafter, equally and ratably without prejudice, priority or
distinction, between any Note and any other Note by reason of difference in time
of issuance or otherwise except to the extent otherwise described herein, and to
secure (i) the payment of all amounts due on the Series 1997-1 Notes, any Series
of Notes issued previously and any Series of Notes issued hereafter, as such
amounts become due in accordance with their terms, (ii) the payment of all other
sums payable under the Master Indenture or this First Terms Supplement with
respect to the Series 1997-1 Notes, any Series of Notes issued previously and
any Series of Notes issued hereafter, and (iii) compliance with the provisions
of the Master Indenture and this First Terms Supplement with respect to the
Series 1997-1 Notes, any Series of Notes issued previously and any Series of
Notes issued hereafter, all as provided in the Master Indenture and this First
Terms Supplement.
The Indenture Trustee acknowledges such Grants, accepts the trusts
hereunder in accordance with the provisions hereof and
of the Master Indenture and agrees to perform the duties herein or therein
required to the best of its ability to the end that the interests of the Holders
of the Series 1997-1 Notes, any Series of Notes issued previously by the Issuer
and any Series of Notes issued by the Issuer hereafter may be adequately and
effectively protected.
ARTICLE I.
DEFINITIONS
"ADMINISTRATOR" means Trans-World Insurance Company d/b/a Educaid, an
Arizona insurance company, and its successors and assigns.
"ALL HOLD RATE" means ninety percent (90%) of One-Month LIBOR.
"AUCTION" means the implementation of the Auction Procedures on an Auction
Date.
"AUCTION AGENT" means the Initial Auction Agent under the Initial Auction
Agent Agreement unless and until a Substitute Auction Agent Agreement becomes
effective, after which "Auction Agent" shall mean the Substitute Auction Agent.
"AUCTION AGENT AGREEMENT" means the Initial Auction Agent Agreement unless
and until a Substitute Auction Agent Agreement is entered into, after which
"Auction Agent Agreement" shall mean such Substitute Auction Agent Agreement.
"AUCTION AGENT FEE" has the meaning set forth in the Auction Agent
Agreement.
"AUCTION AGENT FEE RATE" has the meaning set forth in the Auction Agent
Agreement.
"AUCTION DATE" means, initially, with respect to the Class A-1 Notes, March
26, 1997 for the initial Auction Period and April 4, 1997 for the second Auction
Period; with respect to the Class A-2 Notes, March 26, 1997 for the initial
Auction Period and April 22 for the second Auction Period; with respect to the
Class A-3 Notes, April 1, 1997; and thereafter, the Business Day immediately
preceding the first day of each Auction Period for each respective Class, other
than:
(a) each Auction Period commencing after the
ownership of such Class of Series 1997-1
Notes is no longer maintained in Book-Entry
Form by the Securities Depository;
(b) each Auction Period commencing after and
during the continuance of an Event of
Default; or
(c) each Auction Period commencing less than two
Business Days after the cure or waiver of
an Event of Default.
Notwithstanding the foregoing, the Auction Date for one or more Auction
Periods may be changed pursuant to Section 2.5.8 of this Terms Supplement.
"AUCTION PERIOD" means, with respect to each Class of Series 1997-1 Notes,
the Interest Period applicable to such Class of Notes during which time the
related Class Interest Rate is determined pursuant to Section 2.5.1 hereof,
which Auction Period (after the Initial Period for such Class) initially shall
consist generally of 7 days with respect to the Class A-1 Notes and 28 days with
respect to the Class A-2 and Class A-3 Notes, as the same may be adjusted
pursuant to Section 2.5.7 hereof.
"AUCTION PERIOD ADJUSTMENT" means an adjustment to the Auction Period as
provided in Section 2.5.7 hereof.
"AUCTION PROCEDURES" means the procedures set forth in Section 2.5.1 hereof
by which the Auction Rate is determined.
"AUCTION RATE" means the rate of interest per annum that results from
implementation of the Auction Procedures and is determined as described in
Section 2.5.1(c)(ii) hereof.
"AUTHORIZED DENOMINATIONS" means, with respect to any Class of Notes,
$50,000 and integral multiples of $50,000 in excess thereof.
"AVAILABLE SERIES 1997-1 NOTES" has the meaning set forth in Section
2.5.1(c)(i)(A) hereof.
"BID" has the meaning set forth in Section 2.5.1(a)(i) hereof.
"BID AUCTION RATE" has the meaning set forth in Section 2.5.1(c)(i) hereof.
"BIDDER" has the meaning set forth in Section 2.5.1(a)(i) hereof.
"BOND EQUIVALENT YIELD - 91-DAY T-BILL" means, in respect of any security
with a maturity of six months or less the rate for which is quoted in THE WALL
STREET JOURNAL (Eastern Edition) on a bank discount basis, a yield (expressed as
a percentage) calculated in accordance with the following formula and rounded up
to the nearest one one-hundredth of one percent:
Bond Equivalent Yield = Q X N x 100
---------------
360 - (91 x Q)
where "Q" refers to the per annum rate for the security quoted on a bank
discount basis and expressed as a decimal, and "N" refers to 365 or 366 (days),
as the case may be.
"BOOK-ENTRY FORM" or "BOOK-ENTRY SYSTEM" means a form or system under which
(i) the beneficial right to principal and interest may be transferred only
through a book entry, (ii) physical securities in registered form are issued
only to a Securities Depository or its nominee as registered owner, with the
securities "immobilized" to the custody of the Securities Depository, and (iii)
the book entry is the record that identifies the owners of beneficial interests
in that principal and interest.
"BROKER-DEALER" means Smith Barney Inc. or any other broker or dealer (each
as defined in the Securities Exchange Act of 1934, as amended), commercial bank
or other entity permitted by law to perform the functions required of a
Broker-Dealer set forth in the Auction Procedures that (a) is a Participant (or
an affiliate of a Participant), (b) has been appointed as such by the Trust
pursuant to Section 2.5.6 hereof or the Administrator on behalf of the Eligible
Lender Trustee pursuant to the Trust Agreement and (c) has entered into a
Broker-Dealer Agreement that is in effect on the date of reference.
"BROKER-DEALER AGREEMENT" means each agreement between the Auction Agent
and a Broker-Dealer, and approved by the Administrator on behalf of the Issuer,
pursuant to which the Broker-Dealer agrees to participate in Auctions as set
forth in the Auction Procedures, as from time to time amended or supplemented.
Each Broker-Dealer Agreement shall be in substantially the form of the
Broker-Dealer Agreement dated as of March 21, 1997 between Bankers Trust
Company, as Auction Agent, and Smith Barney Inc., as Broker-Dealer.
"BROKER-DEALER FEE" has the meaning set forth in the Auction Agent
Agreement.
"BROKER-DEALER FEE RATE" has the meaning set forth in the Auction Agent
Agreement.
"BUSINESS DAY" means any day on which the New York Stock Exchange is open
for trading and any day other than a Saturday, a Sunday or a day on which
banking institutions or trust companies in New York, California, New Jersey or
Pennsylvania are authorized or obligated by law, regulation or executive order
to remain closed.
"CLASS A-1 NOTES", "CLASS A-2 NOTES" and "CLASS A-3 NOTES" have the
meanings set forth in Section 2.1 herein.
"CLASS INITIAL PERIOD" means, as to a Class of the Series 1997-1 Notes, the
period commencing on the Closing Date and continuing through the day immediately
preceding the Class Initial Rate Adjustment Date for such Class.
"CLASS INITIAL RATE" means 5.40% per annum for the Class A-1 Notes, 5.40%
per annum for the Class A-2 Notes, and 5.50% per annum for the Class A-3 Notes.
"CLASS INITIAL RATE ADJUSTMENT DATE" means (i) with respect to the Class
A-1 Notes, March 27, 1997, (ii) with respect to the Class A-2 Notes, March 27,
1997, and (iii) with respect to the Class A-3 Notes, April 2, 1997.
"CLASS INTEREST PERIOD" means, with respect to a Class of Series 1997-1
Notes, the applicable Class Initial Period and each period commencing on a Class
Rate Adjustment Date for such Class and ending on the day before (i) the next
Class Rate Adjustment Date for such Class or (ii) the Final Maturity Date of
such Class, as applicable.
"CLASS INTEREST RATE" means each variable rate of interest per annum borne
by a Class of the Series 1997-1 Notes for each Class Interest Period and
determined in accordance with the provisions of Sections 2.4 and 2.5 hereof;
provided, however, that in the event of an Event of Default, the Class Interest
Rate shall equal the Non-Payment Rate; provided, further, however that such
Class Interest Rate shall in no event exceed the Class Interest Rate Limitation.
"CLASS INTEREST RATE LIMITATION" means, with respect to each Class of
Series 1997-1 Notes, a rate equal to 16.0% per annum.
"CLASS RATE ADJUSTMENT DATE" means the date on which an Interest Rate is
effective, and means the date of commencement of each related Auction Period.
"CLASS RATE DETERMINATION DATE" means, with respect to any Class of Series
1997-1 Notes, the related Auction Date, or if no Auction Date is applicable to
such Series 1997-1 Notes, the Business Day immediately preceding the date of
commencement of the related Auction Period.
"CLOSING DATE" means with respect to the Series 1997-1 Notes, March 21,
1997, the date of initial issuance and delivery of the Series 1997-1 Notes
hereunder.
"CUT-OFF DATE" means, with respect to the Series 1997-1 Notes, February 28,
1997.
"EFFECTIVE INTEREST RATE" means, for any Financed Student Loan and any
Collection Period, the per annum rate at which such Financed Student Loan
accrues interest during such Collection Period, and in the case of a Federal
Loan, after giving effect to all applicable Interest Subsidy Payments and
Special Allowance Payments due with respect to such Federal Loan.
"EVENT OF DEFAULT" means, with respect to the Series 1997-1 Notes, (i) a
default in the due and punctual payment of any installment of interest or
principal on any Class of Series 1997-1 Notes, or (ii) a default in the due and
punctual payment of any interest on and principal of any Class of Series 1997-1
Notes at their respective Final Maturity Date.
"EXISTING NOTEHOLDER" means (i) with respect to and for the purpose of
dealing with the Auction Agent in connection with an Auction, a Person who is a
Broker-Dealer listed in the Existing Noteholder Registry at the close of
business on the Business Day immediately preceding such Auction and (ii) with
respect to and for the purpose of dealing with the Broker-Dealer in connection
with an Auction, a Person who is a beneficial owner of any Class of Series
1997-1 Notes.
"EXISTING NOTEHOLDER REGISTRY" means the registry of Persons who are owners
of the Series 1997-1 Notes, maintained by the Auction Agent as provided in the
Auction Agent Agreement.
"FEDERAL FUNDS RATE" means, for any date of determination, the Federal
funds (effective) rate as published on page 118 of 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) on the immediately preceding
Business Day. If no such rate is published on such page on such day, "Federal
Funds Rate" shall mean for any date of determination, the Federal funds
(effective) rate as published by the Federal Reserve Board in the most recent
edition of Federal Reserve Statistical Release No. H.15 (519) that is available
on the Business Day immediately preceding such date.
"FINAL MATURITY DATE" means April 1, 2016 with respect to the Class A-1
Notes; April 1, 2017 with respect to the Class A-2 Notes; and April 1, 2018 with
respect to the Class A-3 Notes.
"FIRST TERMS SUPPLEMENT" means this First Terms Supplement, as from time to
time amended or supplemented.
"FUNDING PERIOD" means, with respect to the Series 1997-1 Notes, the period
beginning on the Closing Date and ending on the first to occur of (a) the Note
Distribution Date on which the amount on deposit in the Pre-Funding Account
(after giving effect to any transfers therefrom in connection with any
Additional Fundings on or prior to such Note Distribution Date) is less than
$200,000, (b) the date on which an Event of Default, a Master Servicer Default
or an Administrator Default occurs, (c) the date on which an Insolvency Event
occurs with respect to any Seller and (d) the close of business on September 30,
1997.
"HOLD ORDER" has the meaning set forth in Section 2.5.1(a)(i) hereof.
"INITIAL AUCTION AGENT" means Bankers Trust Company, a New York banking
corporation, its successors and assigns.
"INITIAL AUCTION AGENT AGREEMENT" means the Auction Agent Agreement dated
as of March 21, 1997, by and among the Issuer, the Indenture Trustee and the
Initial Auction Agent, including any amendment thereof or supplement thereto.
"INTEREST PERIOD" means, with respect to any Class of Series 1997-1 Notes,
the respective Class Interest Period.
"INTEREST RATE" means, with respect to a Class of the Series 1997-1 Notes,
the rate of interest per annum borne by such Class as of the time referred to,
including, without limitation, the related Class Initial Rate and the related
Class Interest Rate.
"LIBOR DETERMINATION DATE" means, with respect to a Class of the Series
1997-1 Notes, the date which is both a Business Day and a London Banking Day
prior to the commencement of each related Interest Period.
"LONDON BANKING DAY" means any Business Day on which dealings in deposits
in United States dollars are transacted in the London interbank market.
"MARKET AGENT" means Smith Barney Inc., New York, New York, in such
capacity hereunder, or any successor to it in such capacity hereunder.
"MASTER INDENTURE" means the Master Indenture dated as of March 21, 1997,
as amended from time to time, between the Issuer and the Indenture Trustee.
"MAXIMUM AUCTION RATE" means, with respect to the Series 1997-1 Notes, (i)
for Auction Periods of 34 days or less, either (A) the greater of (1) One-Month
LIBOR plus 0.60% or (2) the Federal Funds Rate plus 0.60% (if both ratings
assigned by the Rating Agencies to the Series 1997-1 Notes or the Certificates,
as applicable, are "Aa3" or "AA-" or better) or (B) One-Month LIBOR plus 1.50%
(if any one of the ratings assigned by the Rating Agencies to the Series 1997-1
Notes or the Certificates, as applicable, is less than "Aa3" or "AA-") or (ii)
for Auction Periods of greater than or equal to 35 days, either (A) the greater
of One-Month LIBOR or Three-Month LIBOR, plus in either case, 0.60% (if both of
the ratings assigned by the Rating Agencies to the Series 1997-1 Notes or the
Certificates, as applicable, are "Aa3" or "AA-" or better) or (B) the greater of
One-Month LIBOR or Three-Month LIBOR, plus in either case, 1.50% (if any one of
the ratings assigned by the Rating Agencies to the Series 1997-1 Notes or the
Certificates, as applicable, is less than "Aa3" or "AA-"). For purposes of the
Auction Agent and the Auction Procedures, the ratings referred to in this
definition shall be the last ratings of which the Auction Agent has been given
notice pursuant to the Auction Agent Agreement.
"NET LOAN RATE" means, for any Interest Period, the weighted average
Effective Interest Rate for the Collection Period immediately preceding such
Interest Period less 1.60%.
"NINETY-ONE DAY UNITED STATES TREASURY BILL RATE" means that rate of
interest per annum equal to the Bond Equivalent Yield - 91-Day T-Bill on the
91-Day United States Treasury Bills sold at the last auction thereof that
immediately precedes the Class Rate Adjustment Date for the Class of Series
1997-1 Notes to which the Net Loan Rate applies.
"NON-PAYMENT RATE" means One-Month LIBOR plus 1.50%.
"NOTEHOLDERS' AUCTION RATE INTEREST CARRYOVER" means, as to any Class of
Series 1997-1 Notes, with respect to any Interest Period for which the Class
Interest Rate for such Interest Period is based on the Net Loan Rate, the amount
equal to the excess, if any, of (a) the amount of interest on such Class of
Notes that would have accrued in respect of the related Interest Period had
interest been calculated based on the applicable Auction Rate over (b) the
amount of interest on such Class of Notes actually accrued in respect of such
Interest Period based on the Net Loan Rate, together with the unpaid portion of
any such excess from prior Interest Periods (and interest accrued thereon, to
the extent permitted by law, at the applicable rate calculated based on
One-Month LIBOR); PROVIDED, HOWEVER, that, with respect to any Class of Series
1997-1 Notes, on the related Final Maturity Date, the portion of the
Noteholders' Auction Rate Interest Carryover allocable to such Class of Notes
will be equal to the lesser of (i) the portion allocable to such Class of Notes
of the Noteholders' Auction Rate Interest Carryover on such date determined as
described above and (ii) the amount of funds, if any, required and available to
be distributed to such Class of Notes on such date pursuant to Sections
5.5(e)(iv) and 5.6(b)(B) of the Sale and Servicing Agreement.
"NOTEHOLDERS' INTEREST CARRYOVER" means, as to any Class of Series 1997-1
Notes, the related Noteholders' Auction Rate Interest Carryover.
"NOTE DISTRIBUTION DATE" means, with respect to each Class of Series 1997-1
Notes, (A) with respect to distributions of interest, the first Business Day
following the expiration of each Interest Period for such Class of Series 1997-1
Notes, commencing (i) March 27, 1997, with respect to the Class A-1 Notes, (ii)
March 27, 1997, with respect to the Class A-2 Notes and (iii) April 2, 1997,
with respect to the Class A-3 Notes and (B) with respect to distributions of
principal, the first Business Day following the expiration of the first Interest
Period for such Class of Series 1997-1 Notes ending in each month, commencing
April 1997.
"NOTE SURETY BOND" means each surety bond issued by the Surety Provider in
favor of the Eligible Lender Trustee for the benefit of the holders of the
related Class of Series 1997-1 Notes.
"NOTICE OF FEE RATE CHANGE" means a notice of a change in the Auction Agent
Fee Rate or the Broker-Dealer Fee Rate substantially in the form of Exhibit E to
the Auction Agent Agreement.
"ONE-MONTH LIBOR" means the London interbank offered rate for deposits in
U.S. dollars having a maturity of one month commencing on the related LIBOR
Determination Date (the "Index Maturity") which appears on Telerate Page 3750 as
of 11:00 a.m., London time, on such LIBOR Determination Date. If such rate does
not appear on Telerate Page 3750, the rate for that day will be determined on
the basis of the rates at which deposits in U.S. dollars, having the Index
Maturity and in a principal amount of not less than U.S. $1,000,000, are offered
at approximately 11:00 a.m., London time, on such LIBOR Determination Date to
prime banks in the London interbank market by the Reference Banks. The Auction
Agent will request the principal London office of each of such Reference Banks
to provide a quotation of its rate. If at least two such quotations are
provided, the rate for that day will be the arithmetic mean of the quotations.
If fewer than two quotations are provided, the rate for that day will be the
arithmetic mean of the rates quoted by major banks in New York City, selected by
the Auction Agent, at approximately 11:00 a.m., New York City time, on such
LIBOR Determination Date for loans in U.S. dollars to leading European banks
having the Index Maturity and in a principal amount equal to an amount of not
less than U.S. $1,000,000; provided that if the banks selected as aforesaid are
not quoting as mentioned in this sentence, One-Month LIBOR in effect for the
applicable Interest Period will be One-Month LIBOR in effect for the previous
Interest Period.
"ORDER" has the meaning set forth in Section 2.5.1(a)(i) hereof.
"PAYMENT DEFAULT" means, with respect to any Class of Series 1997-1 Notes,
a default in the due and punctual payment of any Noteholders' Interest
Distribution Amount or Noteholders' Principal Distribution Amount on the related
Note Distribution Date or Final Maturity Date, as applicable.
"POTENTIAL NOTEHOLDER" means any Person (including an Existing Noteholder
that is (i) a Broker-Dealer when dealing with the Auction Agent and (ii) a
potential beneficial owner when dealing with a Broker-Dealer) who may be
interested in acquiring Series 1997-1 Notes (or, in the case of an Existing
Noteholder thereof, an additional principal amount of Series 1997-1 Notes).
"RECORD DATE" means, with respect to a Class of the Series 1997-1 Notes,
the close of business on the second Business Day immediately preceding the
related Note Distribution Date.
"REMARKETING AGENT" means a remarketing agent designated under a
Remarketing Agreement.
"REMARKETING AGREEMENT" means any remarketing agreement hereafter entered
into by the Issuer and a remarketing agent with respect to the Series 1997-1
Notes, as originally executed and as from time to time amended or supplemented
in accordance with the terms thereof.
"SELL ORDER" has the meaning set forth in Section 2.5.1(a)(i) hereof.
"SUBMISSION DEADLINE" means 12:30 p.m., eastern time, on any Auction Date
or such other time on any Auction Date by which Broker-Dealers are required to
submit Orders to the Auction Agent as specified by the Auction Agent from time
to time.
"SUBMITTED BID" has the meaning set forth in Section 2.5.1(c)(i) hereof.
"SUBMITTED HOLD ORDER" has the meaning set forth in Section 2.5.1(c)(i)
hereof.
"SUBMITTED ORDER" has the meaning set forth in Section 2.5.1(c)(i) hereof.
"SUBMITTED SELL ORDER" has the meaning set forth in Section 2.5.1(c)(i)
hereof.
"SUBSTITUTE AUCTION AGENT" means the Person with whom the Indenture Trustee
enters into a Substitute Auction Agent Agreement.
"SUBSTITUTE AUCTION AGENT AGREEMENT" means an auction agent agreement
containing terms substantially similar to the terms of the Initial Auction Agent
Agreement, whereby a Person having the qualifications required by Section 2.5.5
of this First Terms Supplement agrees with the Indenture Trustee and the Issuer
to perform the duties of the Auction Agent under this First Terms Supplement.
"SUFFICIENT BIDS" has the meaning set forth in Section 2.5.1(c)(i) hereof.
"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).
"THREE-MONTH LIBOR" means the London interbank offered rate for deposits in
U.S. dollars having a maturity of three months commencing on the related LIBOR
Determination Date (the "Three-Month 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 Three Month 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 Auction Agent will request the principal London office of
each of such Reference Banks to provide a quotation of its rate. If at least two
such quotations are provided, the rate for that day will be the arithmetic mean
of the quotations. If fewer than two quotations are provided, the rate for that
day will be the arithmetic mean of the rates quoted by major banks in New York
City, selected by the Auction Agent, at approximately 11:00 a.m., New York City
time, on such LIBOR Determination Date for loans in U.S. dollars to leading
European banks having the Three Month Index Maturity and in a principal amount
equal to an amount of not less than U.S. $1,000,000; provided that if the banks
selected as aforesaid are not quoting as mentioned in this sentence, Three-Month
LIBOR in effect for the applicable Interest Period will be Three-Month LIBOR in
effect for the previous Interest Period.
ARTICLE II.
AUTHORIZATION, TERMS AND ISSUANCE
SECTION 2.1. AUTHORIZATION OF SERIES 1997-1 NOTES. There is hereby
authorized the borrowing of funds, and to evidence such borrowing there are
hereby authorized three Classes of Series 1997-1 Notes (collectively, the
"Series 1997-1 Notes"), designated (i) the "ClassNotes Trust 1997-I Asset-Backed
Notes, Series 1997-1, Class A-1" (the "Class A-1 Notes") in the aggregate
principal amount of $93,000,000, (ii) the "ClassNotes Trust 1997-I Asset-Backed
Notes, Series 1997-1, Class A-2" (the "Class A-2 Notes") in the aggregate
principal amount of $93,000,000, and (iii) the "ClassNotes Trust 1997-I
Asset-Backed Notes, Series 1997-1, Class A-3" (the "Class A-3 Notes") in the
aggregate principal amount of $95,000,000.
SECTION 2.2. PURPOSES. The Series 1997-1 Notes are authorized to finance
the acquisition by the Issuer of Financed Student Loans, and to make deposits to
the Trust Accounts required hereby.
SECTION 2.3. TERMS OF SERIES 1997-1 NOTES GENERALLY. The Series 1997-1
Notes shall be issued in fully registered form, in substantially the form set
forth in Exhibit A hereof, in each case with such variations, omissions and
insertions as may be required by the circumstances, as may be required or
permitted by the Master Indenture and this First Terms Supplement, or be
consistent with the Master Indenture and this First Terms Supplement and
necessary or appropriate to conform to the rules and requirements of any
governmental authority or any usage or requirement of law with respect thereto.
The Series 1997-1 Notes may be issued only in Authorized Denominations. The
Series 1997-1 Notes shall be dated as of the Closing Date. Each Class of Notes
shall mature on its Final Maturity Date. Each Class of Series 1997-1 Notes shall
be numbered consecutively from 1 upwards with the prefix A-[Class Designation]-
preceding each number. The Series 1997-1 Notes shall be issued to a Securities
Depository for use in a Book- Entry System in accordance with the provisions of
Section 2.13 of the Indenture.
Interest on each Series 1997-1 Note shall accrue on the Outstanding Amount
of such Series 1997-1 Note until such Series 1997-1 Note has been paid in full
or payment has been duly provided for, as the case may be, and shall accrue from
the later of the initial date thereof or the most recent Note Distribution Date
to which interest has been paid or duly provided for. Each Series 1997-1 Note
shall bear interest at an interest rate determined in accordance with the
provisions and subject to the limitations set forth herein, and interest on a
Class of the Series 1997-1 Notes shall be paid for the related Class Initial
Period and each Class Interest Period for such Class thereafter on each Note
Distribution Date for such Class and on each date of payment of principal
thereof to the extent of interest accrued on the principal then being paid.
Principal will be paid to the then Outstanding Class of Series 1997-1 Notes
with the earliest Final Maturity Date on the first Note Distribution Date
occurring in each month, beginning April 1997, for such Class in an amount equal
to the Noteholder's Principal Distribution Amount on such Note Distribution
Date; provided, however, that if any Class of a Series of Notes issued hereafter
has an earlier Final Maturity Date than any Class of Series 1997-1 Notes,
principal will be paid to each such Class of subsequently issued Notes with an
earlier Final Maturity Date prior to the Class or Classes of Series 1997-1 Notes
with a later Final Maturity Date.
SECTION 2.4. SERIES 1997-1 NOTES. The Initial Rate Adjustment Date for each
Class of Notes shall be the Class Initial Rate Adjustment Date.
During the related Class Initial Period, each Class of Series 1997-1 Notes
shall bear interest at the Class Initial Rate for such Class. Thereafter, (i)
except with respect to an Auction Period Adjustment, the Class A-1 Notes shall
bear interest at a Class Interest Rate based on a 7-day Auction Period, as
determined pursuant to this Section 2.4 and Section 2.5 hereof, and (i) except
with respect to an Auction Period Adjustment, the Class A-2 and Class A-3 Notes
shall bear interest at a Class Interest Rate based on a 28-day Auction Period,
as determined pursuant to this Section 2.4 and Section 2.5 hereof.
For each Class of the Series 1997-1 Notes during the Class Initial Period
for such Class and each Interest Period thereafter, interest at the Class
Interest Rate shall accrue daily and shall be computed for the actual number of
days elapsed on the basis of a year consisting of 360 days.
The Class Interest Rate to be borne by each Class of Series 1997-1 Notes
after such Class Initial Period for each Auction Period until an Auction Period
Adjustment, if any, shall be determined as herein described. Each such Auction
Period shall commence on and include the first Business Day following the
expiration of the immediately preceding Auction Period and terminate on and
include (i) with respect to the Class A-1 Notes, the Tuesday of the following
week, subject to adjustment as described below in the event that any such
Tuesday is not a Business Day, (ii) with respect to the Class A-2 Notes, the
second Business Day of the fourth following week, and (iii) with respect to the
Class A-3 Notes, the second Business Day of the fourth following week; provided,
however, that in the case of the Auction Period that immediately follows the
Class Initial Period for a Class of Series 1997-1 Notes, such Auction Period
shall commence on the Class Initial Rate Adjustment Date for such Class. The
Class Interest Rate on each Class of Series 1997-1 Notes for each Auction Period
shall be the lesser of the (i) Net Loan Rate in effect for such Auction Period
and (ii) the Auction Rate in effect for such Auction Period as determined in
accordance with Section 2.5.1 hereof; provided that if, on any Class Rate
Determination Date relating to a Class of Series 1997- 1 Notes, an Auction is
not held for any reason, then the Class Interest Rate on such Class of Series
1997-1 Notes for the next succeeding Auction Period shall be the Net Loan Rate.
Notwithstanding the foregoing:
(a) if the ownership of a Class of Series 1997-1 Notes is no longer
maintained in Book-Entry Form, the Class Interest Rate on such Class of Series
1997-1 Notes for any Class Interest Period commencing after the delivery of
certificates representing the Notes of such Class pursuant to Section 2.15 of
the Master Indenture shall equal the lesser of (i) the Maximum Auction Rate and
(ii) the Net Loan Rate on the Business Day immediately preceding the first day
of such subsequent Class Interest Period; or
(b) if an Event of Default shall have occurred, the Class Interest Rate on
each Class of the Series 1997-1 Notes for the Class Interest Period for such
Class commencing on or immediately after such Event of Default, and for each
Class Interest Period thereafter, to and including the Class Interest Period, if
any, during which, or commencing less than two Business Days after, such Event
of Default is cured in accordance with this First Terms Supplement, shall equal
the Non-Payment Rate on the first day of each such Class Interest Period.
In accordance with Section 2.5.1(c)(ii) hereof, the Auction Agent shall
promptly give written notice to the Indenture Trustee, the Eligible Lender
Trustee and the Surety Provider of each Class Interest Rate (unless the Class
Interest Rate is the Non-Payment Rate) and either the Auction Rate or the Net
Loan Rate, as the case may be, when such rate is not the Class Interest Rate,
applicable to each Class of Series 1997-1 Notes. The Indenture Trustee shall
notify the related Noteholders of the Class Interest Rate applicable to such
Class of Notes for each Auction Period on the second Business Day of such
Auction Period.
In the event that the day on which an Auction Period for a Class of Series
1997-1 Notes would otherwise be scheduled to expire is not a Business Day, the
expiration date and Note Distribution Date for such Auction Period then in
effect, if applicable, and the Class Rate Determination Date and commencement
date for the immediately following Class Interest Period for such Class of
Series 1997-1 Notes shall be the next succeeding Business Day.
Notwithstanding any other provision of the Series 1997- 1 Notes or this
First Terms Supplement and except for the occurrence of an Event of Default,
interest payable on each Class of Series 1997-1 Notes for an Auction Period
shall never exceed for such Auction Period the amount of interest payable at the
Net Loan Rate (subject to the Class Interest Rate Limitation) in effect for such
Auction Period.
If the Auction Rate for a Class of Series 1997-1 Notes is greater than the
Net Loan Rate, then the Class Interest Rate applicable to such Class of Series
1997-1 Notes for that Class Interest Period will be the Net Loan Rate. If the
Class Interest Rate applicable to such Class of Series 1997-1 Notes for any
Class Interest Period is the Net Loan Rate, the Indenture Trustee shall
determine the Noteholders' Interest Carryover, if any, with respect to such
Class of Series 1997-1 Notes for such Class Interest Period. Such determination
of the Noteholders' Interest Carryover shall be made separately for each Class
of Series 1997- 1 Notes. Such Noteholders' Interest Carryover shall bear
interest calculated at a rate equal to One-Month LIBOR (as determined by the
Auction Agent, provided the Indenture Trustee has received notice of One-Month
LIBOR from the Auction Agent, and if the Indenture Trustee shall not have
received such notice from the Auction Agent, then as determined by the Indenture
Trustee) from the Note Distribution Date for the Class Interest Period with
respect to which such Noteholders' Interest Carryover was calculated, until
paid. For purposes of this First Terms Supplement, any reference to "principal"
or "interest" herein shall not include within the meaning of such words
Noteholders' Interest Carryover or any interest accrued on any such Noteholders'
Interest Carryover. Such Noteholders' Interest Carryover shall be separately
calculated for each Series 1997-1 Note of such Class by the Indenture Trustee
during such Class Interest Period in sufficient time for the Indenture Trustee
to give notice to each Noteholder of such Noteholders' Interest Carryover as
required in the next succeeding sentence. On the Note Distribution Date for a
Class Interest Period with respect to which such Noteholders' Interest Carryover
for a Class of Series 1997-1 Notes has been calculated by the Indenture Trustee,
the Indenture Trustee shall give written notice to each Noteholder of the
applicable Class of the Noteholders' Interest Carryover applicable to each
Noteholder's Series 1997-1 Note of such Class, which written notice may be
included in any other written statement sent by the Indenture Trustee to such
Noteholders, and shall be mailed on such Note Distribution Date by first-class
mail, postage prepaid, to each such Noteholder at such Noteholder's address as
it appears on the registration books maintained by the Note Registrar. Such
notice shall state, in addition to such Noteholders' Interest Carryover, that,
unless and until the Final Maturity Date for such Class of Series 1997-1 Note
has occurred (after which all accrued Noteholders Interest Carryover (and all
accrued interest thereon) that remains unpaid shall be cancelled and no
Noteholders' Interest Carryover (and interest accrued thereon) shall be paid
with respect to a Series 1997-1 Note of such Class), (i) the Noteholders'
Interest Carryover (and interest accrued thereon calculated at a rate equal to
One-Month LIBOR) shall be paid by the Indenture Trustee on a Series 1997-1 Note
of such Class on the first occurring Note Distribution Date for such Class for a
subsequent Class Interest Period if and to the extent that (1) during such Class
Interest Period no additional Noteholders' Interest Carryover is accruing on
such Class of Series 1997-1 Notes and (2) moneys are available pursuant to the
terms of this First Terms Supplement in an amount sufficient to pay all or a
portion of such Noteholders' Interest Carryover and (ii) interest shall accrue
on the Noteholders' Interest Carryover at a rate equal to One-Month LIBOR until
such Noteholders' Interest Carryover is paid in full or the related Final
Maturity Date occurs.
The Noteholders' Interest Carryover for a Class of Series 1997-1 Notes
shall be paid by the Indenture Trustee on Outstanding Series 1997-1 Notes of
such Class on the Note Distribution Date for such Class following the first
occurring Note Distribution Date for a subsequent Class Interest Period if and
to the extent that (i) during such Class Interest Period no additional
Noteholders' Interest Carryover is accruing on such Class of Series 1997-1 Notes
and (ii) moneys are available pursuant to the terms of this First Terms
Supplement in an amount sufficient to pay all or a portion of such Noteholders'
Interest Carryover. Any Noteholders' Interest Carryover (and any interest
accrued thereon) on any Series 1997-1 Note which is due and payable on the
related Final Maturity Date shall be paid to the Noteholder thereof on said
Final Maturity Date to the extent that moneys are available therefor in
accordance with the provisions of this First Terms Supplement; provided,
however, that any Noteholders' Interest Carryover (and any interest accrued
thereon) which is not yet due and payable on said Final Maturity Date shall be
cancelled with respect to said Series 1997-1 Note on said Final Maturity Date.
To the extent that any portion of the Noteholders' Interest Carryover for a
Class of Series 1997-1 Notes remains unpaid after payment of a portion thereof,
such unpaid portion of the Noteholders' Interest Carryover shall be paid in
whole or in part as required hereunder until fully paid by the Indenture Trustee
on the next occurring Note Distribution Date or Dates, as necessary, for a
subsequent Class Interest Period or Periods for such Class, if and to the extent
that the conditions in the second preceding sentence are satisfied. On any Note
Distribution Date on which the Indenture Trustee pays only a portion of the
Noteholders' Interest Carryover on a Series 1997-1 Note of such Class, the
Indenture Trustee shall give written notice in the manner set forth in the
immediately preceding paragraph to the Noteholder of such Series 1997-1 Note
receiving such partial payment of the Noteholders' Interest Carryover remaining
unpaid on such Series 1997-1 Note.
The Note Distribution Date in such subsequent Class Interest Period on
which such Noteholders' Interest Carryover for a Class of Series 1997-1 Notes
shall be paid shall be determined by the Indenture Trustee in accordance with
the provisions of the immediately preceding paragraph, and the Indenture Trustee
shall make payment of the Noteholders' Interest Carryover in the same manner as,
and from the same Account from which, it pays interest on the Series 1997-1
Notes on a Note Distribution Date.
In the event that the Auction Agent no longer determines, or fails to
determine, when required, the Class Interest Rate with respect to a Class of
Series 1997-1 Notes, or, if for any reason such manner of determination shall be
held to be invalid or unenforceable by a court of competent jurisdiction, the
Class Interest Rate for the next succeeding Class Interest Period for such Class
of Series 1997-1 Notes shall be the Net Loan Rate as determined by the
Administrator (which is responsible for notifying the Auction Agent of such Net
Loan Rate), for such next succeeding Interest Period.
SECTION 2.5. CLASS INTEREST RATE.
SECTION 2.5.1. DETERMINING THE CLASS INTEREST RATE FOR SERIES 1997-1 NOTES.
By purchasing Series 1997-1 Notes, whether in an Auction or otherwise, each
purchaser of the Series 1997-1 Notes, or its Broker-Dealer, must agree and shall
be deemed by such purchase to have agreed (i) to participate in Auctions on the
terms described herein, (ii) to have its beneficial ownership of the Series
1997-1 Notes maintained at all times in Book-Entry Form for the account of its
Participant, which in turn will maintain records of such beneficial ownership
and (iii) to authorize such Participant to disclose to the Auction Agent such
information with respect to such beneficial ownership as the Auction Agent may
request.
So long as the ownership of a Class of Series 1997-1 Notes is maintained in
Book-Entry Form, an Existing Noteholder may sell, transfer or otherwise dispose
of Series 1997-1 Notes only pursuant to a Bid or Sell Order placed in an Auction
or otherwise sell, transfer or dispose of Series 1997-1 Notes through a
Broker-Dealer, provided that, in the case of all transfers other than pursuant
to Auctions, such Existing Noteholder, its Broker-Dealer or its Participant
advises the Auction Agent of such transfer. Auctions shall be conducted on each
Auction Date, if there is an Auction Agent on such Auction Date, in the
following manner:
(a) (i) Prior to the Submission Deadline on each Auction Date relating to a
Class of the Series 1997-1 Notes:
(A) each Existing Noteholder of the applicable Class of Series 1997-1 Notes
may submit to a Broker-Dealer by telephone or otherwise any information as to:
(1) the principal amount of Outstanding Series 1997-1 Notes of such Class,
if any, owned by such Existing Noteholder which such Existing Noteholder desires
to continue to own without regard to the Class Interest Rate for the next
succeeding Auction Period;
(2) the principal amount of Outstanding Series 1997-1 Notes of such Class,
if any, which such Existing Noteholder offers to sell if the Class Interest Rate
for the next succeeding Auction Period shall be less than the rate per annum
specified by such Existing Noteholder; and/or
(3) the principal amount of Outstanding Series 1997-1 Notes of such Class,
if any, owned by such Existing Noteholder which such Existing Noteholder offers
to sell without regard to the Class Interest Rate for the next succeeding
Auction Period;
and
(B) one or more Broker-Dealers may contact Potential Noteholders to
determine the principal amount of Series 1997-1 Notes of such Class which each
Potential Noteholder offers to purchase, if the Class Interest Rate for the next
succeeding Auction Period shall not be less than the rate per annum specified by
such Potential Noteholder.
The statement of an Existing Noteholder or a Potential Noteholder referred
to in (A) or (B) of this paragraph (i) is herein referred to as an "Order," and
each Existing Noteholder and each Potential Noteholder placing an Order is
herein referred to as a "Bidder"; an Order described in clause (A)(1) is herein
referred to as a "Hold Order"; an Order described in clauses (A)(2) and (B) is
herein referred to as a "Bid"; and an Order described in clause (A)(3) is herein
referred to as a "Sell Order."
(ii) (A) Subject to the provisions of Section 2.5.1(b) hereof, a Bid by an
Existing Noteholder shall constitute an irrevocable offer to sell:
(1) the principal amount of Outstanding Series 1997-1 Notes specified in
such Bid if the Class Interest Rate determined as provided in this Section 2.5.1
shall be less than the rate specified therein; or
(2) such principal amount, or a lesser principal amount of Outstanding
Series 1997-1 Notes to be determined as set forth in Section 2.5. 1(d)(i)(D)
hereof, if the Class Interest Rate determined as provided in this Section 2.5.1
shall be equal to the rate specified therein; or
(3) such principal amount, or a lesser principal amount of Outstanding
Series 1997-1 Notes to be determined as set forth in Section 2.5.1(d)(ii)(C)
hereof, if the rate specified therein shall be higher than the Class Interest
Rate and Sufficient Bids have not been made.
(B) Subject to the provisions of Section 2.5.1(b) hereof, a Sell Order by
an Existing Noteholder shall constitute an irrevocable offer to sell:
(1) the principal amount of Outstanding Series 1997-1 Notes specified in
such Sell Order; or
(2) such principal amount, or a lesser principal amount of Outstanding
Series 1997-1 Notes set forth in Section 2.5.1(d)(ii)(C) hereof, if Sufficient
Bids have not been made.
(C) Subject to the provisions of Section 2.5.1(b) hereof, a Bid by a
Potential Noteholder shall constitute an irrevocable offer to purchase:
(1) the principal amount of Outstanding Series 1997-1 Notes specified in
such Bid if the Class Interest Rate determined as provided in this Section 2.5.1
shall be higher than the rate specified in such Bid; or
(2) such principal amount, or a lesser principal amount of Outstanding
Series 1997-1 Notes set forth in Section 2.5.1(d)(i)(E) hereof, if the Class
Interest Rate determined as provided in this Section 2.5.1 shall be equal to the
rate specified in such Bid.
(b) (i) Each Broker-Dealer shall submit in writing to the Auction Agent
prior to the Submission Deadline on each Auction Date all Orders obtained by
such Broker-Dealer and shall specify with respect to each such Order:
(A) the name of the Bidder placing such Order;
(B) the aggregate principal amount and Class of Series 1997-1 Notes that
are the subject of such Order;
(C) to the extent that such Bidder is an Existing Noteholder:
(1) the principal amount and Class of Series 1997-1 Notes, if any, subject
to any Hold Order placed by such Existing Noteholder;
(2) the principal amount and Class of Series 1997-1 Notes, if any, subject
to any Bid placed by such Existing Noteholder and the rate specified in such
Bid; and
(3) the principal amount and Class of Series 1997-1 Notes, if any, subject
to any Sell Order placed by such Existing Noteholder; and
(D) to the extent such Bidder is a Potential Noteholder, the rate specified
in such Potential Noteholder's Bid.
(ii) If any rate specified in any Bid contains more than three figures to
the right of the decimal point, the Auction Agent shall round such rate up to
the next higher one thousandth (.001) of one percent.
(iii) If an Order or Orders covering all Outstanding Series 1997-1 Notes of
the applicable Class owned by an Existing Noteholder is not submitted to the
Auction Agent prior to the Submission Deadline, the Auction Agent shall deem a
Hold Order to have been submitted on behalf of such Existing Noteholder covering
the principal amount of Outstanding Series 1997-1 Notes of such Class owned by
such Existing Noteholder and not subject to an Order submitted to the Auction
Agent.
(iv) Neither the Issuer, the Indenture Trustee nor the Auction Agent shall
be responsible for any failure of a Broker-Dealer to submit an Order to the
Auction Agent on behalf of any Existing Noteholder or Potential Noteholder.
(v) If any Existing Noteholder submits through a Broker-Dealer to the
Auction Agent one or more Orders covering in the aggregate more than the
principal amount of the Class of Outstanding Series 1997-1 Notes owned by such
Existing Noteholder, such Orders shall be considered valid as follows and in the
following order of priority:
(A) All Hold Orders shall be considered valid, but only up to the aggregate
principal amount of the Class of Outstanding Series 1997-1 Notes owned by such
Existing Noteholder, and if the aggregate principal amount of the Class of
Series 1997-1 Notes subject to such Hold Orders exceeds the aggregate principal
amount of the Class of Series 1997-1 Notes owned by such Existing Noteholder,
the aggregate principal amount of the Class of Series 1997-1 Notes subject to
each such Hold Order shall be reduced pro rata so that the aggregate principal
amount of the Class of Series 1997-1 Notes subject to such Hold Order equals the
aggregate principal amount of the Class of Outstanding Series 1997-1 Notes owned
by such Existing Noteholder.
(B) (1) any Bid shall be considered valid up to an amount equal to the
excess of the principal amount of the Class of Outstanding Series 1997-1 Notes
owned by such Existing Noteholder over the aggregate principal amount of the
Class of Series 1997-1 Notes subject to any Hold Order referred to in clause (A)
of this paragraph (v);
(2) subject to subclause (1) of this clause (B), if more than one Bid with
the same rate is submitted on behalf of such Existing Noteholder and the
aggregate principal amount of the Class of Outstanding Series 1997-1 Notes
subject to such Bids is greater than such excess, such Bids shall be considered
valid up to an amount equal to such excess;
(3) subject to subclauses (1) and (2) of this clause (B), if more than one
Bid with different rates are submitted on behalf of such Existing Noteholder,
such Bids shall be considered valid first in the ascending order of their
respective rates until the highest rate is reached at which such excess exists
and then at such rate up to the amount of such excess; and
(4) in any such event, the amount of the Class of Outstanding Series 1997-1
Notes, if any, subject to Bids not valid under this clause (B) shall be treated
as the subject of a Bid by a Potential Noteholder at the rate therein specified;
and
(C) All Sell Orders shall be considered valid up to an amount equal to the
excess of the principal amount of the Class of Outstanding Series 1997-1 Notes
owned by such Existing Noteholder over the aggregate principal amount of the
Class of Series 1997-1 Notes subject to Hold Orders referred to in clause (A) of
this paragraph (v) and valid Bids referred to in clause (B) of this paragraph
(v).
(vi) If more than one Bid for a Class of Series 1997-1 Notes is submitted
on behalf of any Potential Noteholder, each Bid submitted shall be a separate
Bid with the rate and principal amount therein specified.
(vii) An Existing Noteholder of a Class of Series 1997-1 Notes that offers
to purchase additional Series 1997-1 Notes is, for purposes of such offer,
treated as a Potential Noteholder.
(viii) Any Bid or Sell Order submitted by an Existing Noteholder covering
an aggregate principal amount of a Class of Series 1997-1 Notes not equal to an
Authorized Denomination shall be rejected and shall be deemed a Hold Order. Any
Bid submitted by a Potential Noteholder covering an aggregate principal amount
of a Class of Series 1997-1 Notes not equal to an Authorized Denomination shall
be rejected.
(ix) Any Bid specifying a rate higher than the Maximum Auction Rate will
(a) be treated as a Sell Order if submitted by an Existing Noteholder and (b)
not be accepted if submitted by a Potential Noteholder.
(x) Any Order submitted in an Auction by a Broker-Dealer to the Auction
Agent at the Submission Deadline on any Auction Date shall be irrevocable.
(c) (i) Not earlier than the Submission Deadline on each Auction Date, the
Auction Agent shall assemble all valid Orders submitted or deemed submitted to
it by the Broker-Dealers (each such Order as submitted or deemed submitted by a
Broker-Dealer being herein referred to individually as a "Submitted Hold Order,"
a "Submitted Bid" or a "Submitted Sell Order," as the case may be, or as a
"Submitted Order," and collectively as "Submitted Hold Orders," "Submitted Bids"
or "Submitted Sell Orders," as the case may be, or as "Submitted Orders") and
shall determine for the applicable Class of Series 1997-1 Notes:
(A) the excess of the total principal amount of Outstanding Series 1997-1
Notes of such Class over the sum of the aggregate principal amount of
Outstanding Series 1997-1 Notes of such Class subject to Submitted Hold Orders
(such excess being herein referred to as the "Available Series 1997-1 Notes" of
such Class), and
(B) from the Submitted Orders whether: (1) the aggregate principal amount
of Outstanding Series 1997-1 Notes of such Class subject to Submitted Bids by
Potential Noteholders specifying one or more rates equal to or lower than the
Maximum Auction Rate; exceeds or is equal to the sum of:
(2) the aggregate principal amount of Outstanding Series 1997-1 Notes of
such Class subject to Submitted Bids by Existing Noteholders specifying one or
more rates higher than the Maximum Auction Rate; and
(3) the aggregate principal amount of Outstanding Series 1997-1 Notes of
such Class subject to submitted Sell Orders; (in the event such excess or such
equality exists, other than because all of the Outstanding Series 1997-1 Notes
of such Class are subject to Submitted Hold Orders, such Submitted Bids
described in subclause (1) above shall be referred to collectively as
"Sufficient Bids"); and
(C) if Sufficient Bids exist, the "Bid Auction Rate", which shall be the
lowest rate specified in such Submitted Bids such that if:
(1) (x) each Submitted Bid from
Existing Noteholders specifying such lowest
rate and (y) all other Submitted Bids from
Existing Noteholders specifying lower rates
were rejected, thus entitling such Existing
Noteholders to continue to own the principal
amount of Series 1997-1 Notes of such Class
subject to such Submitted Bids; and
(2) (x) each such Submitted Bid from
Potential Noteholders specifying such lowest
rate and (y) all other Submitted Bids from
Potential Noteholders specifying lower rates
were accepted;
the result would be that such Existing Noteholders described in subclause
(1) above would continue to own an aggregate principal amount of Outstanding
Series 1997-1 Notes of the applicable Class which, when added to the aggregate
principal amount of Outstanding Series 1997-1 Notes of such Class to be
purchased by such Potential Noteholders described in subclause (2) above, would
equal not less than the Available Series 1997-1 Notes of such Class.
(ii) Promptly after the Auction Agent has made the determinations pursuant
to Section 2.5.1(c)(i) hereof, the Auction Agent shall advise the Indenture
Trustee of the Net Loan Rate, the Maximum Auction Rate and the All Hold Rate and
the components thereof on the Auction Date and, based on such determinations,
the Auction Rate for the next succeeding Class Interest Period for such Class of
Series 1997-1 Notes as follows:
(A) if Sufficient Bids exist, that the Auction Rate for the next succeeding
Class Interest Period for such Class shall be equal to the Bid Auction Rate so
determined;
(B) if Sufficient Bids do not exist (other than because all of the
Outstanding Series 1997-1 Notes of such Class are subject to Submitted Hold
Orders), that the Auction Rate for the next succeeding Class Interest Period
shall be equal to the Maximum Auction Rate; or
(C) if all Outstanding Series 1997-1 Notes of such Class are subject to
Submitted Hold Orders, that the Auction Rate for the next succeeding Class
Interest Period shall be equal to the All Hold Rate.
(iii) Promptly after the Auction Agent has determined the Auction Rate, the
Auction Agent shall determine and advise the Indenture Trustee of the applicable
Class Interest Rate, which rate shall be the lesser of (a) the Auction Rate and
(b) the Net Loan Rate; provided, however, that in no event shall the Class
Interest Rate exceed the Class Interest Rate Limitation.
(d) Existing Noteholders shall continue to own the principal amount of
Series 1997-1 Notes of such Class that are subject to Submitted Hold Orders. If
the Net Loan Rate is equal to or greater than the Bid Auction Rate and if
Sufficient Bids have been received by the Auction Agent, the Bid Auction Rate
will be the Class Interest Rate, and Submitted Bids and Submitted Sell Orders
will be accepted or rejected and the Auction Agent will take such other action
as described below in subparagraph (i).
If the Net Loan Rate is less than the Auction Rate, the Net Loan Rate will
be the Class Interest Rate. If the Auction Rate and the Net Loan Rate are both
greater than the Class Interest Rate Limitation, the Class Interest Rate shall
be equal to the Class Interest Rate Limitation. If the Auction Agent has not
received Sufficient Bids (other than because all of the Outstanding Series
1997-1 Notes of such Class are subject to Submitted Hold Orders), the Class
Interest Rate will be the lesser of the Maximum Auction Rate and the Net Loan
Rate. In any of the cases described above, Submitted Orders will be accepted or
rejected and the Auction Agent will take such other action as described below in
subparagraph (ii).
(i) if Sufficient Bids have been made and the Net Loan Rate is equal to or
greater than the Bid Auction Rate (in which case the Class Interest Rate shall
be the Bid Auction Rate), all Submitted Sell Orders shall be accepted and,
subject to the provisions of paragraphs (iv) and (v) of this Section 2.5.1(d),
Submitted Bids shall be accepted or rejected as follows in the following order
of priority, and all other Submitted Bids shall be rejected:
(A) Existing Noteholders' Submitted Bids specifying any rate that is higher
than the Class Interest Rate shall be accepted, thus requiring each such
Existing Noteholder to sell the aggregate principal amount of Series 1997-1
Notes subject to such Submitted Bids;
(B) Existing Noteholders' Submitted Bids specifying any rate that is lower
than the Class Interest Rate shall be rejected, thus entitling each such
Existing Noteholder to continue to own the aggregate principal amount of Series
1997-1 Notes subject to such Submitted Bids;
(C) Potential Noteholders' Submitted Bids specifying any rate that is lower
than the Class Interest Rate shall be accepted;
(D) Each Existing Noteholders' Submitted Bid specifying a rate that is
equal to the Class Interest Rate shall be rejected, thus entitling such Existing
Noteholder to continue to own the aggregate principal amount of Series 1997-1
Notes subject to such Submitted Bid, unless the aggregate principal amount of
Outstanding Series 1997-1 Notes subject to all such Submitted Bids shall be
greater than the principal amount of Series 1997-1 Notes of the applicable Class
(the "remaining principal amount") equal to the excess of the Available Series
1997-1 Notes of such Class over the aggregate principal amount of Series 1997-1
Notes of such Class subject to Submitted Bids described in clauses (B) and (C)
of this Section 2.5.1(d)(i), in which event such Submitted Bid of such Existing
Noteholder shall be rejected in part, and such Existing Noteholder shall be
entitled to continue to own the principal amount of such Class of Series 1997-1
Notes subject to such Submitted Bid, but only in an amount equal to the
aggregate principal amount of Series 1997-1 Notes of such Class obtained by
multiplying the remaining principal amount by a fraction, the numerator of which
shall be the principal amount of Outstanding Series 1997-1 Notes of such Class
owned by such Existing Noteholder subject to such Submitted Bid and the
denominator of which shall be the sum of the principal amount of Outstanding
Series 1997-1 Notes of such Class subject to such Submitted Bids made by all
such Existing Noteholders that specified a rate equal to the Class Interest
Rate; and
(E) Each Potential Noteholder's Submitted Bid specifying a rate that is
equal to the Class Interest Rate shall be accepted, but only in an amount equal
to the principal amount of Series 1997-1 Notes of the applicable Class obtained
by multiplying the excess of the aggregate principal amount of Available Series
1997-1 Notes of such Class over the aggregate principal amount of Series 1997-1
Notes of such Class subject to Submitted Bids described in clauses (B), (C) and
(D) of this Section 2.5.1(d)(i) by a fraction the numerator of which shall be
the aggregate principal amount of Outstanding Series 1997-1 Notes of such Class
subject to such Submitted Bid and the denominator of which shall be the sum of
the principal amount of Outstanding Series 1997-1 Notes of such Class subject to
Submitted Bids made by all such Potential Noteholders that specified a rate
equal to the Class Interest Rate.
(ii) If Sufficient Bids have not been made (other than because all of the
Outstanding Series 1997-1 Notes of the applicable Class are subject to submitted
Hold Orders), or if the Net Loan Rate is less than the Bid Auction Rate (in
which case the Class Interest Rate shall be the Net Loan Rate), or if the Class
Interest Rate Limitation applies, subject to the provisions of Section
2.5.1(d)(iv) hereof, Submitted Orders shall be accepted or rejected as follows
in the following order of priority and all other Submitted Bids shall be
rejected:
(A) Existing Noteholders' Submitted Bids specifying any rate that is equal
to or lower than the Class Interest Rate shall be rejected, thus entitling such
Existing Noteholders to continue to own the aggregate principal amount of Series
1997-1 Notes subject to such Submitted Bids;
(B) Potential Noteholders' Submitted Bids specifying (1) any rate that is
equal to or lower than the Class Interest Rate shall be accepted and (2) any
rate that is higher than the Class Interest Rate shall be rejected; and
(C) each Existing Noteholder's Submitted Bid specifying any rate that is
higher than the Class Interest Rate and the Submitted Sell Order of each
Existing Noteholder shall be accepted, thus entitling each Existing Noteholder
that submitted any such Submitted Bid or Submitted Sell Order to sell the Series
1997-1 Notes subject to such Submitted Bid or Submitted Sell Order, but in both
cases only in an amount equal to the aggregate principal amount of Series 1997-1
Notes of the applicable Class obtained by multiplying the aggregate principal
amount of Series 1997-1 Notes subject to Submitted Bids described in clause (B)
of this Section 2.5.1(d)(ii) by a fraction the numerator of which shall be the
aggregate principal amount of Outstanding Series 1997-1 Notes of such Class
owned by such Existing Noteholder subject to such submitted Bid or Submitted
Sell Order and the denominator of which shall be the aggregate principal amount
of Outstanding Series 1997-1 Notes of such Class subject to all such Submitted
Bids and Submitted Sell Orders.
(iii) If all Outstanding Series 1997-1 Notes of such Class are subject to
Submitted Hold Orders, all Submitted Bids shall be rejected.
(iv) If, as a result of the procedures described in paragraph (i) or (ii)
of this Section 2.5.1(d), any Existing Noteholder would be entitled or required
to sell, or any Potential Noteholder would be entitled or required to purchase,
a principal amount of Series 1997-1 Notes of the applicable Class that is not
equal to an Authorized Denomination, the Auction Agent shall, in such manner as
in its sole discretion it shall determine, round up or down the principal amount
of Series 1997-1 Notes to be purchased or sold by any Existing Noteholder or
Potential Noteholder so that the principal amount of Series 1997-1 Notes
purchased or sold by each Existing Noteholder or Potential Noteholder shall be
equal to an Authorized Denomination or an integral multiple of $50,000 in excess
thereof.
(v) If, as a result of the procedures described in paragraph (ii) of this
Section 2.5.1(d), any Potential Noteholder would be entitled or required to
purchase less than an Authorized Denomination of Series 1997-1 Notes of the
applicable Class, the Auction Agent shall, in such manner as in its sole
discretion it shall determine, allocate Series 1997-1 Notes of such Class for
purchase among Potential Noteholders so that only Series 1997-1 Notes of such
Class in Authorized Denominations or integral multiples of $50,000 in excess
thereof are purchased by any Potential Noteholder, even if such allocation
results in one or more of such Potential Noteholders not purchasing any Series
1997-1 Notes of such Class.
(e) Based on the result of each Auction, the Auction Agent shall determine
the aggregate principal amount of Series 1997-1 Notes of the applicable Class to
be purchased and the aggregate principal amount of Series 1997-1 Notes of the
applicable Class to be sold by Potential Noteholders and Existing Noteholders on
whose behalf each Broker-Dealer submitted Bids or Sell Orders and, with respect
to each Broker-Dealer, to the extent that such aggregate principal amount of
Series 1997-1 Notes of the applicable Class to be sold differs from such
aggregate principal amount of Series 1997-1 Notes of the applicable Class to be
purchased, determine to which other Broker-Dealer or Broker-Dealers acting for
one or more purchasers such Broker-Dealer shall deliver, or from which other
Broker-Dealer or Broker-Dealers acting for one or more sellers such
Broker-Dealer shall receive, as the case may be, Series 1997-1 Notes of the
applicable Class.
(f) On each Class Rate Determination Date relating to the LIBOR Rate Notes,
the Indenture Trustee (or the Auction Agent on its behalf) shall determine
One-Month LIBOR and the applicable Class Interest Rate and shall promptly give
written notice thereof to the Issuer.
(g) Any calculation by the Auction Agent, the Master Servicer or the
Indenture Trustee, as applicable, of the Class Interest Rate, One-Month LIBOR,
Three-Month LIBOR, the Maximum Auction Rate, the All Hold Rate, the Net Loan
Rate and the Non-Payment Rate shall, in the absence of manifest error, be
binding on all other parties.
SECTION 2.5.2. PAYMENT DEFAULTS; AUCTION AGENT FEES AND EXPENSES.
(a) The Indenture Trustee shall determine not later than 2:00 p.m., eastern
time, on the Business Day next succeeding a Note Distribution Date, whether a
Payment Default has occurred. If a Payment Default has occurred, the Indenture
Trustee shall, not later than 2:15 p.m., eastern time, on such Business Day,
send a notice thereof in substantially the form of Exhibit B attached hereto to
the Auction Agent, the Eligible Lender Trustee and the Surety Provider by
telecopy or similar means and, if such Payment Default is cured, the Indenture
Trustee shall immediately send a notice in substantially the form of Exhibit C
attached hereto to the Auction Agent, the Eligible Lender Trustee and the Surety
Provider by telecopy or similar means.
(b) Not later than 2:00 p.m., eastern time, on the first Note Distribution
Date for any Class of Notes occurring in each month, the Indenture Trustee shall
pay to the Auction Agent, in immediately available funds out of amounts in the
Expense Account an amount equal to the Auction Agent Fee (which shall include
the Broker-Dealer Fee) as calculated in the Auction Agent Agreement. TMSI shall
from time to time at the request of the Auction Agent reimburse the Auction
Agent for its reasonable expenses as provided in the Auction Agent Agreement.
SECTION 2.5.3. CALCULATION OF MAXIMUM AUCTION RATE, ALL HOLD RATE, NET LOAN
RATE, ONE-MONTH LIBOR, THREE-MONTH LIBOR AND NON-PAYMENT RATE. The Administrator
shall calculate the Net Loan Rate and inform the Auction Agent thereof in
writing no later than the Business Day preceding each Auction Date. The Auction
Agent shall calculate the Maximum Auction Rate, the All Hold Rate and One-Month
LIBOR or Three-Month LIBOR, as the case may be, on each Auction Date and shall
notify the Indenture Trustee, the Eligible Lender Trustee and the Broker-Dealers
of the Net Loan Rate, the Maximum Auction Rate, the All Hold Rate and One-Month
LIBOR or Three-Month LIBOR, as the case may be, as provided in the Auction Agent
Agreement. If the ownership of the Series 1997-1 Notes is no longer maintained
in Book-Entry Form by the Securities Depository, the Indenture Trustee shall
calculate the Maximum Auction Rate, and the Administrator will report to the
Indenture Trustee in writing the Net Loan Rate, on the Business Day immediately
preceding the first day of each Class Interest period commencing after the
delivery of certificates representing the Series 1997-1 Notes pursuant to
Section 2.15 of the Master Indenture. If a Payment Default shall have occurred,
the Indenture Trustee shall calculate the Non-Payment Rate on the Class Rate
Determination Date for (i) each Class Interest Period commencing after the
occurrence and during the continuance of such Payment Default and (ii) any Class
Interest Period commencing less than two Business Days after the cure of any
Payment Default. The Auction Agent shall determine One-Month LIBOR or
Three-Month LIBOR, as applicable, for each Class Interest Period other than the
first Class Interest Period; provided, that if the ownership of the Series
1997-1 Notes is no longer maintained in Book-Entry Form, or if a Payment Default
has occurred, then the Indenture Trustee shall determine One-Month LIBOR or
Three-Month LIBOR, as applicable, for each such Class Interest Period. The
determination by the Indenture Trustee or the Auction Agent, as the case may be,
of One-Month LIBOR or Three-Month LIBOR, as applicable, shall (in the absence of
manifest error) be final and binding upon all parties. If calculated or
determined by the Auction Agent, the Auction Agent shall promptly advise the
Indenture Trustee and the Eligible Lender Trustee of One-Month LIBOR or
Three-Month LIBOR, as applicable.
SECTION 2.5.4. NOTIFICATION OF RATES, AMOUNTS AND NOTE DISTRIBUTION DATES.
(a) [Reserved]
(b) Promptly after the Closing Date and after the beginning of each
subsequent Class Interest Period relating to each Class of Series 1997-1 Notes,
and in any event at least 10 days prior to any Note Distribution Date relating
to a Class of Series 1997-1 Notes, the Indenture Trustee shall confirm with the
Auction Agent, so long as no Payment Default has occurred and is continuing and
the ownership of the Series 1997-1 Notes is maintained in Book-Entry Form by the
Securities Depository, (1) the date of such next Note Distribution Date relating
to a Class of Series 1997-1 Notes and (2) the amount payable to the Auction
Agent on the Auction Date pursuant to Section 2.5.2(b) hereof.
If any day scheduled to be a Note Distribution Date shall be changed after
the Indenture Trustee shall have given the notice or confirmation referred to in
the preceding sentence, the Indenture Trustee shall, not later than 9:15 a.m.,
eastern time, on the Business Day next preceding the earlier of the new Note
Distribution Date or the old Note Distribution Date, by such means as the
Indenture Trustee deems practicable, give notice of such change to the Auction
Agent, so long as no Payment Default has occurred and is continuing and the
ownership of the Series 1997-1 Notes is maintained in Book-Entry Form by the
Securities Depository.
SECTION 2.5.5. AUCTION AGENT.
(a) Bankers Trust Company is hereby appointed as Initial Auction Agent to
serve as agent for the Issuer in connection with Auctions. The Indenture Trustee
and the Issuer will, and the Indenture Trustee is hereby directed to, enter into
the Initial Auction Agent Agreement with Bankers Trust Company, as the Initial
Auction Agent. Any Substitute Auction Agent shall be (i) a bank, national
banking association or trust company duly organized under the laws of the United
States of America or any state or territory thereof having its principal place
of business in the Borough of Manhattan, New York, or such other location as
approved by the Indenture Trustee and the Market Agent in writing and having a
combined capital stock or surplus of at least $50,000,000, or (ii) a member of
the National Association of Securities Dealers, Inc., having a capitalization of
at least $50,000,000, and, in either case, authorized by law to perform all the
duties imposed upon it hereunder and under the Auction Agent Agreement. The
Auction Agent may at any time resign and be discharged of the duties and
obligations created by this First Terms Supplement by giving at least 90 days'
notice to the Indenture Trustee, the Issuer, the Surety Provider and the Market
Agent. The Auction Agent may be removed at any time by the Indenture Trustee
upon the written direction of the Surety Provider, or with the consent of the
Surety Provider, the Noteholders of 66-2/3% of the aggregate principal amount of
the Series 1997-1 Notes then Outstanding, and if by such Noteholders, by an
instrument signed by the Surety Provider or such Noteholders or their attorneys
and filed with the Auction Agent, the Issuer, the Market Agent and the Indenture
Trustee upon at least 90 days' notice. Neither resignation nor removal of the
Auction Agent pursuant to the preceding two sentences shall be effective until
and unless a Substitute Auction Agent has been appointed and has accepted such
appointment. If required by the Issuer or the Market Agent, with the Trust's
consent, a Substitute Auction Agent Agreement shall be entered into with a
Substitute Auction Agent. Notwithstanding the foregoing, the Auction Agent may
terminate the Auction Agent Agreement if, within 25 days after notifying the
Indenture Trustee, the Issuer, the Surety Provider and the Market Agent in
writing that it has not received payment of any Auction Agent Fee due it in
accordance with the terms of the Auction Agent Agreement, the Auction Agent does
not receive such payment.
(b) If the Auction Agent shall resign or be removed or be dissolved, or if
the property or affairs of the Auction Agent shall be taken under the control of
any state or federal court or administrative body because of bankruptcy or
insolvency, or for any other reason, the Indenture Trustee, at the direction of
the Trust (after receipt of a certificate from the Market Agent confirming that
any proposed Substitute Auction Agent meets the requirements described in the
immediately preceding paragraph), shall use its best efforts to appoint a
Substitute Auction Agent.
(d) In the event of a change in the Auction Agent Fee Rate pursuant to
Section 6.4(b) of the Auction Agent Agreement, the Auction Agent shall give a
Notice of Fee Rate Change to the Indenture Trustee, the Surety Provider and the
Eligible Lender Trustee in accordance with the Auction Agent Agreement.
SECTION 2.5.6. BROKER-DEALERS.
(a) The Auction Agent will enter into a Broker-Dealer Agreement with Smith
Barney Inc., as the initial Broker-Dealer. An Authorized Officer of the
Administrator may, from time to time, approve one or more additional persons to
serve as Broker-Dealers under Broker-Dealer Agreements and shall be responsible
for providing such Broker-Dealer Agreements to the Indenture Trustee, the Surety
Provider and the Auction Agent, provided, however that while Smith Barney Inc.
is serving as a Broker-Dealer, Smith Barney Inc. shall have the right to consent
to the approval of any additional Broker-Dealers, which consent will not be
unreasonably withheld. The Auction Agent shall have entered into a Broker-Dealer
Agreement with each Broker-Dealer prior to the participation of any such
Broker-Dealer in any Auction.
(b) Any Broker-Dealer may be removed at any time, at the request of an
Authorized Officer of the Administrator, but there shall, at all times, be at
least one Broker-Dealer appointed and acting as such.
SECTION 2.5.7. CHANGES IN AUCTION PERIOD OR PERIODS.
(a) While any of the Series 1997-1 Notes are Outstanding, the Issuer may,
from time to time, convert the length of one or more Auction Periods (an
"Auction Period Adjustment"), in order to conform with then current market
practice with respect to similar securities or to accommodate economic and
financial factors that may affect or be relevant to the length of the Auction
Period and the Class Interest Rate borne by the Series 1997-1 Notes. The Issuer
shall not initiate an Auction Period Adjustment unless the Issuer shall have
received the written consent of the Market Agent and the Surety Provider, which
consents shall not be unreasonably withheld, not less than three days nor more
than 20 days prior to the effective date of an Auction Period Adjustment. The
Issuer shall initiate the Auction Period Adjustment by giving written notice by
Issuer Order to the Indenture Trustee, the Auction Agent, the Market Agent, the
Surety Provider, the Rating Agencies and the Securities Depository in
substantially the form of, or containing substantially the information contained
in, Exhibit D to this First Terms Supplement at least 5 days prior to the
Auction Date for such Auction Period.
(b) Any such adjusted Auction Period shall not be less than 7 days nor more
than 91 days. If any such adjusted Auction Period will be less than the number
of days in the then current Auction Period, the notice described above will be
effective only if it is accompanied by a written statement of the Indenture
Trustee, the Eligible Lender Trustee, the Auction Agent and the Securities
Depository to the effect that they are capable of performing their duties, if
any, under this First Terms Supplement, the Auction Agent Agreement and any
Broker-Dealer Agreement with respect to such changed Auction Period.
(c) An Auction Period Adjustment shall take effect only if (A) the
Indenture Trustee and the Auction Agent receive, by 11:00 a.m., Eastern time, on
the Business Day before the Auction Date for the first such Auction Period, an
Issuer Certificate in substantially the form attached as, or containing
substantially the same information contained in, Exhibit E to this First Terms
Supplement, authorizing the Auction Period Adjustment specified in such
certificate along with a copy of the certificate of the Market Agent described
above in subparagraph (a) above and, if applicable, the written statement of the
Indenture Trustee, the Eligible Lender Trustee, the Auction Agent and the
Securities Depository described in subparagraph (b) above and (B) Sufficient
Bids exist as of the Auction on the Auction Date for such first Auction Period.
If the condition referred to in (A) above is not met, the Class Interest Rate
for the applicable Class of Series 1997-1 Notes for the next Auction Period
shall be determined pursuant to the above provisions of this Section 2.5 and the
Auction Period shall be the Auction Period determined without reference to the
proposed change. If the condition referred to in (A) is met but the condition
referred to in (B) above is not met, the Class Interest Rate for the applicable
Class of Series 1997-1 Notes for the next Auction Period shall be the lesser of
the Maximum Auction Rate and the Net Loan Rate and the Auction Period shall be
the Auction Period determined without reference to the proposed change.
In connection with any Auction Period Adjustment, the Auction Agent shall
provide such further notice to such parties as is specified in Section 2.5 of
the Auction Agent Agreement.
SECTION 2.5.8. CHANGES IN THE AUCTION DATE. The Market Agent, with the
written consent of an Authorized Officer of the Administrator, may specify an
earlier or later Auction Date (but in no event more than five Business Days
earlier or later) than the Auction Date that would otherwise be determined in
accordance with the definition of "Auction Date" in Section 1.1 of this First
Terms Supplement with respect to one or more specified Auction Periods in order
to conform with then current market practice with respect to similar securities
or to accommodate economic and financial factors that may affect or be relevant
to the day of the week constituting an Auction Date and the Class Interest Rate
borne on a Class of Series 1997-1 Notes. The Market Agent shall deliver a
written request for consent to such change in the length of the Auction Date to
the Issuer not less than three days nor more than 20 days prior to the effective
date of such change together with a certificate demonstrating the need for
change in reliance on such factors. Notwithstanding any adjustments to Auction
Periods that have been initiated or effected pursuant to Section 2.5.7 hereof,
the Market Agent shall specify Auction Periods such that a Note Distribution
Date for each Class of Series 1997-1 Notes shall occur in the months of January,
April, July and October, commencing July 1997. The Market Agent shall provide
notice of its determination to specify an earlier Auction Date for one or more
Auction Periods by means of a written notice delivered at least 10 days prior to
the proposed changed Auction Date to the Indenture Trustee, the Auction Agent,
the Issuer, the Rating Agencies and the Securities Depository. Such notice shall
be substantially in the form of, or contain substantially the information
contained in, Exhibit F to this First Terms Supplement.
In connection with any change described in this Section 2.5.8, the Auction
Agent shall provide such further notice to such parties as is specified in
Section 2.5 of the Auction Agent Agreement.
SECTION 2.6. ADDITIONAL PROVISIONS REGARDING THE CLASS INTEREST RATES ON
THE SERIES 1997-1 NOTES. The determination of a Class Interest Rate by the
Auction Agent, the Indenture Trustee or any other Person pursuant to the
provisions of the applicable Section of this Article II shall be conclusive and
binding on the Noteholders of the Class of Series 1997-1 Notes to which such
Class Interest Rate applies, and the Issuer and the Indenture Trustee may rely
thereon for all purposes.
In no event shall the cumulative amount of interest paid or payable on a
Class of Series 1997-1 Notes (including interest calculated as provided herein,
plus any other amounts that constitute interest on the Series 1997-1 Notes of
such Class under applicable law, which are contracted for, charged, reserved,
taken or received pursuant to the Series 1997- 1 Notes of such Class or related
documents) calculated from the date of issuance of the Series 1997-1 Notes of
such Class through any subsequent day during the term of the Series 1997-1 Notes
of such Class or otherwise prior to payment in full of the Series 1997-1 Notes
of such Class exceed the amount permitted by applicable law. If the applicable
law is ever judicially interpreted so as to render usurious any amount called
for under the Series 1997-1 Notes of such Class or related documents or
otherwise contracted for, charged, reserved, taken or received in connection
with the Series 1997-1 Notes of such Class, or if the acceleration of the
maturity of the Series 1997-1 Notes of such Class results in payment to or
receipt by the Noteholder or any former Noteholder of the Series 1997-1 Notes of
such Class of any interest in excess of that permitted by applicable law, then,
notwithstanding any provision of the Series 1997-1 Notes of such Class or
related documents to the contrary, all excess amounts theretofore paid or
received with respect to the Series 1997-1 Notes of such Class shall be credited
on the principal balance of the Series 1997-1 Notes of such Class (or, if the
Series 1997-1 Notes of such Class have been paid or would thereby be paid in
full, refunded by the recipient thereof), and the provisions of the Series
1997-1 Notes of such Class and related documents shall automatically and
immediately be deemed reformed and the amounts thereafter collectible hereunder
and thereunder reduced, without the necessity of the execution of any new
document, so as to comply with the applicable law, but so as to permit the
recovery of the fullest amount otherwise called for under the Series 1997- 1
Notes of such Class and under the related documents.
SECTION 2.7. QUALIFICATIONS OF MARKET AGENT. The Market Agent shall be a
member of the National Association of Securities Dealers, Inc., have a
capitalization of at least $50,000,000 and be authorized by law to perform all
the duties imposed upon it by this First Terms Supplement. The Market Agent may
resign and be discharged of the duties and obligations created by this First
Terms Supplement by giving at least 30 days' notice to the Issuer and the
Indenture Trustee, provided that such resignation shall not be effective until
the appointment of a successor market agent by the Issuer and the acceptance of
such appointment by such successor market agent. The Market Agent may be
replaced at the direction of the Issuer, by an instrument signed by an
Authorized Officer, filed with the Market Agent and the Indenture Trustee at
least 30 days before the effective date of such replacement, provided that such
replacement shall not be effective until the appointment of a successor market
agent by the Issuer and the acceptance of such appointment by such successor
market agent.
In the event that the Market Agent shall be removed or be dissolved, or if
the property or affairs of the Market Agent shall be taken under the control of
any state or federal court or administrative body because of bankruptcy or
insolvency, or for any other reason, and there is no Market Agent and the Issuer
shall not have appointed its successor as Market Agent, the Indenture Trustee,
notwithstanding the provisions of the first paragraph of this Section, shall be
deemed to be the Market Agent for all purposes of this First Terms Supplement
until the appointment by the Issuer of the successor Market Agent. Nothing in
this Section shall be construed as conferring on the Indenture Trustee
additional duties other than as set forth herein.
ARTICLE III
DISTRIBUTIONS
Section 3.1 DISTRIBUTIONS OF INTEREST AND PRINCIPAL. The Indenture Trustee
shall make distributions from and to the several Trust Accounts in the manner
provided for in Section 5.5 of the Sale and Servicing Agreement, as such Section
may be amended from time to time.
Section 3.2 SELECTION OF NOTES TO RECEIVE PAYMENTS OF PRINCIPAL. With
respect to the Class of Notes entitled to receive payments of principal the
actual Notes of such Class that will receive payments of principal on each
applicable Note Distribution Date will be selected no later than 15 days prior
to the related Note Distribution Date by the Securities Depository, pursuant to
the Note Depository Agreement entered into with respect to the Series 1997-1
Notes, by lot in such manner as the Securities Depository in its discretion may
determine and which may provide for the selection for payment of principal in
minimum denominations of $50,000, and integral multiples in excess thereof.
Notice of the specific Notes to receive payments of principal is to be
given by the Indenture Trustee by first-class mail, postage prepaid, mailed not
less than 15 days but no more than 30 days before the applicable Note
Distribution Date at the address of the applicable Noteholder appearing on the
registration books. Any defect in or failure to give such mailed notice shall
not affect the validity of proceedings for the payment of any other Notes not
affected by such failure or defect. All notices of payment are to state: (i) the
applicable Note Distribution Date; (ii) the amount of principal to be paid, and
(iii) the Class of the Notes to be paid.
The Indenture Trustee shall notify in writing, substantially in the form of
Exhibit D to the Auction Agent Agreement, the Auction Agent when any notice of
principal payment of Notes is sent to the Securities Depository not later than
11:00 a.m., on the date such notice is sent.
ARTICLE IV
MISCELLANEOUS
SECTION 4.1. ISSUER FOR THIS FIRST TERMS SUPPLEMENT. This First Terms
Supplement is adopted pursuant to the provisions of the Master Indenture.
SECTION 4.2. COUNTERPARTS. This First Terms Supplement may be
simultaneously executed in several counterparts, each of which shall be an
original and all of which shall constitute but one and the same instrument.
SECTION 4.3. INDENTURE CONSTITUTES A SECURITY AGREEMENT. This First Terms
Supplement constitutes a security agreement for the purposes of the Uniform
Commercial Code.
SECTION 4.4. GOVERNING LAW. This First Terms Supplement shall be governed
by and construed in accordance with the laws of the State of New York.
SECTION 4.5. RATIFICATION OF MASTER INDENTURE. As supplemented by this
First Terms Supplement and each previously executed Terms Supplement, the Master
Indenture is in all respects ratified and confirmed, and the Master Indenture as
so supplemented by this First Terms Supplement and each previously executed
Terms Supplement shall be read, taken and construed as one and the same
instrument. Each addition to and amendment of the Master Indenture contained
herein is solely for purposes of the Series 1997-1 Notes, and shall have no
effect on any other Series of Notes issued pursuant to the Master Indenture. If
any term of this First Terms Supplement conflicts with any term of the Master
Indenture or any previously executed Terms Supplement, this First Terms
Supplement shall control for purposes of the Series 1997-1 Notes.
IN WITNESS WHEREOF, the parties hereto have caused this First Terms
Supplement to be duly executed as of the day and year first above written.
CLASSNOTES TRUST 1997-I
By: THE YORK BANK AND TRUST
COMPANY, not in its
individual capacity but
solely as Eligible Lender
Trustee
BY: -------------------------------
Name: Richard Bass
Title: Vice President
BANKERS TRUST COMPANY, not in its
individual capacity but solely as
Indenture Trustee,
BY: ------------------------------
Name:
Title:
<PAGE>
STATE OF NEW YORK, )
) ss.:
COUNTY OF NEW YORK, )
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared Richard Bass, 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 Vice President of
The York Bank and Trust Company, not in its individual capacity but solely as
Eligible Lender Trustee of CLASSNOTES TRUST 1997-I, a Pennsylvania trust, and
that he 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 ,
1997.
-----------------------------
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 she 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
, 1997.
-----------------------------
Notary Public in and for
the State of New York.
[SEAL]
My commission expires:
- ----------------------
<PAGE>
EXHIBIT A
[FORM OF SERIES 1997-1 NOTES]
CLASSNOTES TRUST 1997-I
AUCTION RATE ASSET BACKED NOTES
SERIES 1997-1
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER (AS
DEFINED BELOW) OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS NOTE IS NOT GUARANTEED OR INSURED BY ANY GOVERNMENTAL
AGENCY.
No. A-_-_ $______
FINAL
MATURITY DATED INTEREST
CLASS DATE DATE RATE CUSIP
auction rate
as
herein
provided
REGISTERED NOTEHOLDER:
PRINCIPAL AMOUNT: -----------------------------------
<PAGE>
CLASSNOTES TRUST 1997-I, a Pennsylvania business trust (the "Issuer"), for
value received, promises to pay, from the sources herein described, to the
Registered Noteholder identified above, or registered assigns, upon presentation
and surrender hereof at the Corporate Trust Office of Bankers Trust Company, as
Paying Agent, or at the principal office of any successor or additional Paying
Agent, the Principal Amount identified above on the Final Maturity Date
identified above, and to pay to the registered owner hereof, interest and
principal hereon in lawful money of the United States of America at the Class
Interest Rate on the dates as provided herein. Unless otherwise defined in this
Series 1997-1 Note, capitalized terms used in this Series 1997-1 Note shall have
the respective meanings given to such terms in the Master Indenture dated as of
March 21, 1997 (the "Master Indenture"), as supplemented by the First Terms
Supplement dated as of March 21, 1997 (the "First Terms Supplement" and,
together with the Master Indenture, the "Indenture"), between the Issuer and
Bankers Trust Company, as Indenture Trustee.
This Series 1997-1 Note is one of a duly authorized issue of notes of the
Issuer designated as "Classnotes Trust 1997-I Asset-Backed Notes, Series 1997-1"
(herein referred to by specific Class as the "Series 1997-1, Class A-_ Notes"
and collectively as the "Series 1997-1 Notes"), in the aggregate principal
amount of $281,000,000 issued under the Indenture. The Series 1997-1 Notes are
issued to finance the acquisition and consolidation of Financed Student Loans,
and to make certain deposits to the Pledged Accounts.
The Master Indenture provides for the issuance, from time to time, under
the conditions, limitations and restrictions set forth therein, of additional
notes on a parity with all Series of obligations issued or to be issued under
the Indenture, for the purpose of providing additional funds for the acquisition
and consolidation of Financed Student Loans (said additional notes, together
with Series 1997-1 Notes, being collectively referred to herein as the "Notes").
The Notes are secured under the Indenture which, together with certain
other documents, assigns to the Indenture Trustee for the benefit of the
Noteholders all the rights and remedies of the Issuer under certain Financed
Student Loans and rights under various contracts providing for the issuance,
guarantee and servicing of such Financed Student Loans. Reference is hereby made
to the Indenture for the provisions, among others, with respect to the custody
and application of the proceeds of the Notes, definitions of certain capitalized
terms used in this Series 1997-1 Note, the nature and the extent of the liens
and security of the Indenture, the collection and disposition of revenues, the
funds charged with and pledged to the payment of the principal of and the
interest on the Notes, the terms and conditions under which additional Notes may
be issued, the rights, duties and immunities of the Indenture Trustee, the
rights of the registered owners of the Notes, and the rights and obligations of
the Issuer. By the acceptance of this Series 1997-1 Note, the registered owner
hereof assents to all of the provisions of the Indenture.
The unpaid principal amount hereof from time to time outstanding shall bear
interest at a Class Interest Rate, as described below, payable on each
applicable Note Distribution Date to the extent of interest accrued on the
principal then outstanding, such interest to accrue from the later of the date
hereof or the date through which interest has been paid or duly provided for.
Interest at a Class Interest Rate established pursuant to the First Terms
Supplement shall be computed for the actual number of days elapsed on the basis
of a year consisting of 360 days.
During the Class Initial Period, this Series 1997-1 Note shall bear
interest at the Class Initial Rate for the Series 1997-1 Notes of this Class.
Thereafter until an Auction Period Adjustment, if any, this Series 1997-1 Note
shall bear interest at a Class Interest Rate based on an Auction Period that
shall, until adjusted pursuant to the First Terms Supplement, generally consist
of __ days, all as determined in the First Terms Supplement.
The Class Interest Rate to be borne by this Series 1997-1 Note after the
Class Initial Period for each Auction Period, if any, or an Auction Period
Adjustment, if any, shall be the lesser of (i) the Net Loan Rate in effect for
such Auction Period and (ii) the Auction Rate determined in accordance with the
applicable provisions of the First Terms Supplement.
In no event shall the Class Interest Rate on this Series 1997-1 Note exceed
16.0% per annum.
The Class Interest Period, including, without limitation, an Auction
Period, the applicable Class Interest Rate, the method of determining the
applicable Class Interest Rate on each of the Series 1997-1 Notes and the
Auction Procedures related thereto, including, without limitation, required
notices thereof to the Noteholders or Existing Noteholders of the Series 1997-1
Notes, an Auction Period Adjustment, a change in the Auction Date and the Note
Distribution Dates will be determined in accordance with the terms, conditions
and provisions of the First Terms Supplement and the Auction Agent Agreement, to
which terms, conditions and provisions specific reference is hereby made, and
all of which terms, conditions and provisions are hereby specifically
incorporated herein by reference.
If the Auction Rate for the Series 1997-1 Notes is greater than the Net
Loan Rate, then the Class Interest Rate applicable to the Series 1997-1 Notes
for that Class Interest Period will be the Net Loan Rate. If the Class Interest
Rate applicable to the Series 1997-1 Notes for any Class Interest Period is the
Net Loan Rate, the Indenture Trustee shall determine the Noteholders' Auction
Rate Interest Carryover, if any, with respect to the Series 1997-1 Notes for
such Class Interest Period. Such Noteholders' Auction Rate Interest Carryover
shall bear interest calculated at a rate equal to One-Month LIBOR from the Note
Distribution Date for each Class Interest Period with respect to which such
Noteholders' Auction Rate Interest Carryover was calculated until paid. For
purposes of this Series 1997-1 Note, any reference to "principal" or "interest"
herein shall not include within the meaning of such words Noteholders' Auction
Rate Interest Carryover or any interest accrued on any such Noteholders' Auction
Rate Interest Carryover. Such Noteholders' Auction Rate Interest Carryover shall
be separately calculated for each Series 1997-1 Note by the Indenture Trustee
during such Class Interest Period in sufficient time for the Indenture Trustee
to give notice to each Noteholder of such Noteholders' Auction Rate Interest
Carryover as required in the next succeeding sentence. On the Note Distribution
Date for a Class Interest Period with respect to which such Noteholders' Auction
Rate Interest Carryover has been calculated by the Indenture Trustee, the
Indenture Trustee shall give written notice to each Noteholder of the
Noteholders' Auction Rate Interest Carryover applicable to each Noteholder's
Series 1997-1 Note, which written notice may accompany the payment of interest
by check made to each such Noteholder on such Note Distribution Date or
otherwise shall be mailed on such Note Distribution Date by first class mall,
postage prepaid, to each such Noteholder at such Noteholder's address as it
appears on the registration books maintained by the Registrar. Such notice shall
state, in addition to such Noteholders' Auction Rate Interest Carryover, that,
unless and until the Final Maturity Date for such Class of Series 1997-1 Note
has occurred (after which no Noteholders' Auction Rate Interest Carryover (and
all accrued interest thereon) shall be paid with respect to a Series 1997-1
Note), (i) the Noteholders' Auction Rate Interest Carryover (and interest
accrued thereon calculated on the basis of One-Month LIBOR) shall be paid by the
Indenture Trustee on a Series 1997-1 Note on the first occurring Note
Distribution Date for a subsequent Class Interest Period if and to the extent
that (1) during such Class Interest Period no additional Noteholders' Auction
Rate Interest Carryover is accruing on the Series 1997-1 Notes and (2) moneys
are available on such Note Distribution Date pursuant to the terms of the First
Terms Supplement in an amount sufficient to pay all or a portion of such
Noteholders' Auction Rate Interest Carryover and (ii) interest shall accrue on
the Noteholders' Auction Rate Interest Carryover at a rate equal to One-Month
LIBOR until such Noteholders' Auction Rate Interest Carryover is paid in full or
is the related Final Maturity Date occurs.
The Noteholders' Auction Rate Interest Carryover for the Series 1997-1
Notes shall be paid by the Indenture Trustee on Outstanding Series 1997-1 Notes
on the first occurring Note Distribution Date for a subsequent Class Interest
Period if and to the extent that (i) during such Class Interest Period, no
additional Noteholders' Auction Rate Interest Carryover is accruing on the
Series 1997-1 Notes and (ii) on such Note Distribution Date there are sufficient
moneys available pursuant to the terms of the First Terms Supplement to pay all
or a portion of the Noteholders' Auction Rate Interest Carryover due on the
Series 1997-1 Notes on such Note Distribution Date. Any Noteholders' Auction
Rate Interest Carryover (and any interest accrued thereon) on any Series 1997-1
Note which is due and payable on the related Final Maturity Date, shall be paid
to the Noteholder thereof on said Final Maturity Date to the extent that moneys
are available therefor in accordance with the First Terms Supplement; provided,
however, that any Noteholders' Auction Rate Interest Carryover (and any interest
accrued thereon) which is not yet due and payable on said Final Maturity Date
shall be cancelled with respect to said Series 1997-1 Note on said Final
Maturity Date. To the extent that any portion of the Noteholders' Auction Rate
Interest Carryover remains unpaid after payment of a portion thereof, such
unpaid portion of the Noteholders' Auction Rate Interest Carryover shall be paid
in whole or in part until fully paid by the Indenture Trustee on the next
occurring Note Distribution Date or Dates, as necessary, for a subsequent Class
Interest Period or Periods, if and to the extent that the conditions in the
immediately preceding sentence are satisfied.
The Note Distribution Date in such subsequent Class Interest Period on
which such Noteholders' Auction Rate Interest Carryover for the Series 1997-1
Notes shall be paid shall be determined by the Indenture Trustee in accordance
with the provisions of the immediately preceding paragraph, and the Indenture
Trustee shall make payment of the Noteholders' Auction Rate Interest Carryover
in the same manner as, and from the same account from which, it pays interest on
the Series 1997-1 Notes on an Note Distribution Date.
The principal of and interest on the Series 1997-1 Notes and Noteholders'
Auction Rate Interest Carryover on the Series 1997-1 Notes (and interest accrued
thereon), if any, are special limited obligations of the Issuer, payable solely
from certain revenues derived by the Issuer from certain assets of the Issuer,
including certain notes evidencing Financed Student Loans. The Series 1997-1
Notes are not an indebtedness, a debt or a liability of Trans-World Insurance
Company, ClassNotes, Inc., The Money Store Inc. or Smith Barney Inc.
Distributions of principal will made to the Class of Notes with the
earliest Final Maturity Date on the first Note Distribution Date for such Class
occurring each month, commencing [April 1997], in the manner described in the
Sale and Servicing Agreement. With respect to the Class of Notes entitled to
receive payments of principal, the actual Notes of such Class that will receive
payments of principal on each applicable Note Distribution Date will be selected
no later than 15 days prior to the related Note Distribution Date by the
Indenture Trustee by lot in such manner as the Indenture Trustee in its
discretion may determine and which may provide for the selection for payment of
principal in minimum denominations of $50,000, and integral multiples in excess
thereof.
If an Event of Default as defined in the Indenture occurs, the principal of
and interest on all Notes issued under the Indenture may be declared due and
payable upon the conditions and in the manner and with the effect provided in
the Indenture. The Indenture and the rights and obligations of the Issuer, the
Indenture Trustee and the Noteholder hereof may be modified or amended in the
manner and subject to the conditions set forth in the Indenture.
The Noteholder of this Series 1997-1 Note shall have no right to enforce
the provisions of the Indenture or to institute action to enforce the covenants
therein, or to take any action with respect to any Event of Default under the
Indenture, or to institute, appear in or defend any suit or other proceeding
with respect thereto, except as provided in the Indenture.
The transfer of this Series 1997-1 Note may be registered only upon
surrender hereof to the Indenture Trustee together with an assignment duly
executed by the registered owner or its attorney or legal representative in such
form as shall be satisfactory to the Indenture Trustee. Upon any such
registration of transfer of this Series 1997-1 Note and subject to the payment
of any fees and charges as provided by the Indenture, the Issuer shall execute
and the Indenture Trustee shall authenticate and deliver in exchange for this
Series 1997-1 Note a new Series 1997-1 Note or Notes registered in the name of
the transferee, in any denomination or denominations authorized by the
Indenture, of the same maturity and in an aggregate principal amount equal to
the unredeemed principal amount of this Series 1997-1 Note and bearing the same
interest as this Series 1997-1 Note.
In any case where the date fixed for the payment of principal of or
interest on this Series 1997-1 Note shall not be a Business Day, then payment of
such principal or interest need not be made on such date but may be made on the
next succeeding Business Day with the same force and effect as if made on the
date fixed for the payment thereof.
It is hereby certified, recited and declared that all acts, conditions and
things required to have happened, to exist and to have been performed precedent
to and in the execution and delivery of the Indenture and issuance of this
Series 1997-1 Note have happened, do exist and have been performed in due time,
form and manner as required by law.
This Series 1997-1 Note shall not be valid or become obligatory for any
purpose or be entitled to any security or benefit under the Indenture until the
certificate of authentication hereon shall have been manually signed by the
Indenture Trustee.
IN WITNESS WHEREOF, the Issuer has caused this Series 1997-1 Note to be
executed in its name by the manual or facsimile signature of an Authorized
Officer.
CLASSNOTES TRUST 1997-I
By: THE YORK BANK AND TRUST
COMPANY,
not in its individual capacity but
solely as Eligible Lender Trustee
By:
--------------------------------
<PAGE>
CERTIFICATE OF AUTHENTICATION
This Note is one of the Series 1997-1 Notes designated in and issued under
the provisions of the within mentioned Indenture.
BANKERS TRUST COMPANY
New York, New York, as
Indenture Trustee
By:
-----------------------------
Authorized Representative
Date of Authentication:
- ----------------------------------
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto
, the within Note and irrevocably appoints , attorney-in-fact, to transfer the
within Note on the books kept for registration thereof, with full power of
substitution in the premises.
Dated:
----------------------------- ----------------------------
NOTICE: The signature to Signature Guaranteed:
this assignment must
correspond with the name as ----------------------------
it appears upon the face of
the within Note in every par-
ticular, without any alter-
ation whatsoever.
Name and Address:
-------------------------------
Tax Identification Number or
Social Security Number(s):
------------------------------
[END OF FORM OF SERIES 1997-1 NOTE]
<PAGE>
EXHIBIT B
CLASSNOTES TRUST 1997-I
ASSET BACKED NOTES, SERIES 1997-1, CLASS A-_
NOTICE OF PAYMENT DEFAULT
NOTICE IS HEREBY GIVEN that an Event of Default has occurred and is
continuing with respect to the Notes identified above. The next Auction for the
Series 1997-1, Class A-_ Notes will not be held. The Auction Rate for the Series
1997-1, Class A-_ Notes for the next succeeding Interest Period shall be the
Non-Payment Rate.
BANKERS TRUST COMPANY,
as Indenture Trustee
Dated: By:
-------------------------------
Name:
Title:
<PAGE>
EXHIBIT C
CLASSNOTES TRUST 1997-I
ASSET BACKED NOTES, SERIES 1997-1, CLASS A-_
NOTICE OF CURE OF PAYMENT DEFAULT
NOTICE IS HEREBY GIVEN that an Event of Default with respect to the Notes
identified above has been waived or cured. The next Note Distribution Payment
Date is and the next Auction Date is .
BANKERS TRUST COMPANY,
as Indenture Trustee
Dated: By:
---------------------------
Name:
Title:
<PAGE>
EXHIBIT D
CLASSNOTES TRUST 1997-I
ASSET BACKED NOTES, SERIES 1997-1, CLASS A-_
NOTICE OF PROPOSED AUCTION PERIOD ADJUSTMENT
Notice is hereby given that the Issuer proposes to change the length of one
or more Auction Periods pursuant to the First Terms Supplement as follows:
1. The change shall take effect on the Note Distribution Date for the
current Auction Period and the date of commencement of the next Auction Period
(the "Effective Date").
2. The Auction Period Adjustment in Paragraph 1 shall take place only if
(A) the Indenture Trustee and the Auction Agent receive, by 11:00 a.m., eastern
time, on the Business Day before the Auction Date for the Auction Period
commencing on the Effective Date, a certificate from the Market Agent, as
required by the First Terms Supplement authorizing the change in length of one
or more Auction Periods and (B) Sufficient Bids exist on the Auction Date for
the Auction Period commencing on the Effective Date.
3. If the condition referred to in (A) above is not met, the Auction Rate
for the Auction Period commencing on the Effective Date will be determined
pursuant to the Auction Procedures and the Auction Period shall be the Auction
Period determined without reference to the proposed change. If the condition
referred to in (A) is met but the condition referred to in (B) above is not met,
the Auction Rate for the Auction Period commencing on the Effective Date shall
be the Maximum Auction Rate and the Auction Period shall be the Auction Period
determined without reference to the proposed change.
4. It is hereby represented, upon advice of the Auction Agent for the Notes
described herein, that there were Sufficient Bids for such Notes at the Auction
immediately preceding the date of this Notice.
5. Terms not defined in this Notice shall have the meanings set forth in
the First Terms Supplement entered into in connection with the captioned Notes.
CLASSNOTES TRUST 1997-I
By: THE YORK BANK AND TRUST COMPANY,
not in its individual capacity
but solely as Eligible Lender
Trustee
By:
----------------------------
Name:
Title:
Dated:
<PAGE>
EXHIBIT E
CLASSNOTES TRUST 1997-I
ASSET BACKED NOTES, SERIES 1997-1, CLASS A-_
NOTICE ESTABLISHING AUCTION PERIOD ADJUSTMENT
Notice is hereby given that the Issuer hereby establishes new lengths for
one or more Auction Periods pursuant to the First Terms Supplement:
l. The change shall take effect on ___________, the Note Distribution Date
for the current Auction Period and the date of commencement of the next Auction
Period (the "Effective Date").
2. For the Auction Period commencing on the Effective Date, the Note
Distribution Date shall be _____________________, or the next succeeding
Business Day if such date is not a Business Day.
3. For Auction Periods occurring after the Auction Period the Note
Distribution Dates shall be [___________________ (date) and every _____________
(number) _______________ (day of week) thereafter] [every _______________
(number) _______________ (day of week) after the date set forth in paragraph 2
above], or the next Business Day if any such day is not a Business Day;
provided, however, that the length of subsequent Auction Periods shall be
subject to further change hereafter as provided in Section 2.5.7 of the First
Terms Supplement.
4. The changes described in paragraphs 2 and 3 above shall take place only
upon delivery of this Notice and the satisfaction of other conditions set forth
in the First Terms Supplement and our prior notice dated ______________
regarding the proposed change.
5. Terms not defined in this Notice shall have the meanings set forth in
the First Terms Supplement relating to the captioned Notes.
CLASSNOTES TRUST 1997-I
By: THE YORK BANK AND TRUST COMPANY,
not in its individual capacity
but solely as Eligible Lender
Trustee
By:
--------------------------------------
Name:
Title:
Dated:
<PAGE>
EXHIBIT F
CLASSNOTES TRUST 1997-I
ASSET BACKED NOTES, SERIES 1997-1, CLASS A-_
NOTICE OF CHANGE IN AUCTION DATE
Notice is hereby given by SMITH BARNEY INC., as Market Agent for the
captioned Notes, that with respect to the captioned Notes, the Auction Date is
hereby changed as follows:
l. With respect to the captioned Notes, the definition of "Auction Date"
shall be deemed amended by substituting "_________________ (number) Business
Day" in the second line thereof.
2. This change shall take effect on ______________ which shall be the
Auction Date for the Auction Period commencing on ______________.
3. The Auction Date for the captioned Notes shall be subject to further
change hereafter as provided in the First Terms Supplement.
4. Terms not defined in this Notice shall have the meanings set forth in
the First Terms Supplement relating to the captioned Notes.
SMITH BARNEY INC., as Market Agent
Dated: By:
Name:
Title:
TRUST AGREEMENT
among
Trans-World Insurance Company, d/b/a Educaid
as Depositor
ClassNotes, Inc.
as Depositor
and
The York Bank and Trust Company
not in its individual capacity but solely
as Eligible Lender Trustee
Dated as of March 21, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
Definitions and Usage..................................................... 1
ARTICLE II
ORGANIZATION
SECTION 2.1. Name........................................................ 1
SECTION 2.2. Office...................................................... 1
SECTION 2.3. Purposes and Powers......................................... 1
SECTION 2.4. Appointment of Eligible Lender Trustee...................... 2
SECTION 2.5. Initial Capital Contribution of Trust
Estate .................................................... 3
SECTION 2.6. Declaration of Trust........................................ 3
SECTION 2.7. Liability of the Certificateholders......................... 3
SECTION 2.8. Title to Trust Property..................................... 4
SECTION 2.9. Representations and Warranties of the
Depositors................................................ 4
SECTION 2.10. Federal Income Tax Allocations............................. 5
ARTICLE III
TRUST CERTIFICATES AND TRANSFER OF INTERESTS
SECTION 3.1. Initial Beneficial Ownership............................... 7
SECTION 3.2 The Trust Certificates..................................... 7
SECTION 3.3. Authentication of Trust Certificates....................... 7
SECTION 3.4. Registration of Transfer and Exchange
of Trust Certificates and Originators' Interests.......... 9
SECTION 3.5. Restrictions on Transfer................................... 10
SECTION 3.6. Mutilated, Destroyed, Lost or Stolen
Trust Certificates......................................... 12
SECTION 3.7. Persons Deemed Owners...................................... 12
SECTION 3.8. Access to List of Certificateholders
Names and Addresses....................................... 12
SECTION 3.9. Maintenance of Office or Agency............................ 13
SECTION 3.10. Appointment of Certificate Paying Agent.................... 13
SECTION 3.11. Disposition by TMS Student Holdings........................ 14
SECTION 3.12. Book-Entry Certificates.................................... 15
SECTION 3.13. Notices to Clearing Agency................................. 16
SECTION 3.14. Definitive Certificates.................................... 16
SECTION 3.15. Determination of Auction Rate.............................. 17
ARTICLE IV
ACTIONS BY ELIGIBLE LENDER TRUSTEE
SECTION 4.1. Prior Notice to Certificateholders with
Respect to Certain Matters................................ 17
SECTION 4.2. Action by Certificateholders with
Respect to Certain Matters................................ 18
SECTION 4.3. Action by Certificateholders with
Respect to Bankruptcy..................................... 18
SECTION 4.4. Restrictions on Certificateholders'
Power .................................................... 18
SECTION 4.5. Majority Control .......................................... 18
ARTICLE V APPLICATION OF TRUST FUNDS;
CERTAIN DUTIES
SECTION 5.1. Application of Trust Funds................................ 19
SECTION 5.2. Method of Payment......................................... 20
SECTION 5.3. No Segregation of Moneys; No Interest..................... 21
SECTION 5.4. Accounting and Reports to the Noteholders,
Certificateholders, the Internal Revenue Service
and Others .............................................. 21
SECTION 5.5. Signature on Returns; Tax Matters
Partner.................................................. 21
SECTION 5.6. Subrogation .............................................. 21
ARTICLE VI
AUTHORITY AND DUTIES OF ELIGIBLE LENDER TRUSTEE
SECTION 6.1. General Authority......................................... 22
SECTION 6.2. General Duties............................................ 23
SECTION 6.3. Action upon Instruction................................... 24
SECTION 6.4. No Duties Except as Specified in this Agreement,
the Sale and Servicing Agreement, the Supplemental
Sale and Servicing Agreement or in Instructions.......... 25
SECTION 6.5. No Action Except Under Specified
Documents or Instructions................................ 25
SECTION 6.6. Restrictions.............................................. 26
ARTICLE VII
CONCERNING THE ELIGIBLE LENDER TRUSTEE
SECTION 7.1. Acceptance of Trusts and Duties.......................... 26
SECTION 7.2. Furnishing of Documents.................................. 28
SECTION 7.3. Representations and Warranties........................... 28
SECTION 7.4. Reliance; Advice of Counsel.............................. 29
SECTION 7.5. Not Acting in Individual Capacity........................ 29
SECTION 7.6. Eligible Lender Trustee Not Liable for
Trust Certificates or Financed
Student Loans........................................... 29
SECTION 7.7. Eligible Lender Trustee May Own Trust
Certificates and Notes.................................. 30
ARTICLE VIII
COMPENSATION OF ELIGIBLE LENDER TRUSTEE
SECTION 8.1. Eligible Lender Trustee's Fees and
Expenses................................................ 30
SECTION 8.2. Payments to the Eligible Lender
Trustee.................................................. 31
ARTICLE IX
TERMINATION OF TRUST AGREEMENT
SECTION 9.1 Termination of Trust Agreement........................... 31
SECTION 9.2 Dissolution upon Insolvency of
TMS Student Holdings, Inc............................... 32
ARTICLE X
SUCCESSOR ELIGIBLE LENDER TRUSTEES AND
ADDITIONAL ELIGIBLE LENDER TRUSTEES
SECTION 10.1. Eligibility Requirements for
Eligible Lender Trustee................................. 33
SECTION 10.2. Resignation or Removal of Eligible
Lender Trustee.......................................... 34
SECTION 10.3. Successor Eligible Lender Trustee........................ 35
SECTION 10.4. Merger or Consolidation of Eligible
Lender Trustee.......................................... 36
SECTION 10.5. Appointment of Co-Eligible Lender
Trustee or Separate Eligible Lender
Trustee................................................. 36
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. Supplements and Amendments............................... 38
SECTION 11.2. No Legal Title to Trust Estate in
Certificateholders...................................... 40
SECTION 11.3. Limitations on Rights of Others ......................... 40
SECTION 11.4. Notices.................................................. 40
SECTION 11.5. Severability............................................. 41
SECTION 11.6. Separate Counterparts.................................... 41
SECTION 11.7. Successors and Assigns................................... 41
SECTION 11.8 No Petition.............................................. 41
SECTION 11.9 No Recourse.............................................. 41
SECTION 11.10 Headings................................................. 42
SECTION 11.11 Governing Law............................................ 42
SECTION 11.12 Rights of Surety Provider................................ 42
SECTION 11.13 Creation of Trust and Delivery of
Trust Agreement......................................... 42
EXHIBIT A Form of Trust Certificate
EXHIBIT B Notice of Change in Auction Date
EXHIBIT C Form of Purchaser's Letter
APPENDIX A Definitions
APPENDIX B Certificate Auction Procedures
<PAGE>
TRUST AGREEMENT dated as of March 21, 1997, among Trans-World
Insurance Company d/b/a Educaid, an Arizona corporation, as Depositor ("TWIC"
or a "Depositor"), ClassNotes Inc., a Delaware corporation, as Depositor
("ClassNotes" or a "Depositor" and, together with TWIC, the "Depositors"), and
The York Bank and Trust Company, a Pennsylvania bank and trust company, not in
its individual capacity but solely as Eligible Lender Trustee (the "Eligible
Lender Trustee").
The Depositors, the Certificate Registrar, the
Certificate Paying Agent 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 attached hereto, which also contains rules as to construction and
usage that are applicable herein.
ARTI0NIZATION
SECTION 2.1. NAME. The Trust created hereby shall be known as
"ClassNotes Trust 1997-I," 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 2.2. OFFICE AND SITUS OF THE TRUST. The registered
office in Pennsylvania and situs of the Trust shall be at the trust office of
the Eligible Lender Trustee located at 107 West Market Street, York, York
County, Pennsylvania
17401.
SECTION 2.3. PURPOSES AND POWERS. The purpose of
the Trust is to engage in the following activities:
(i) to issue one or more Classes of Trust Certificates
pursuant to this Agreement and, if applicable, one or more
Trust Supplements, and to sell the Trust Certificates in one or more
transactions;
(ii) to issue the Originators' Interests pursuant to this
Agreement and one or more Trust Supplements and to sell the
Originators' Interests in one or more transactions;
(iii) to issue one or more Series of Notes pursuant to the
Indenture and the applicable Terms Supplement and to sell the Notes in
one or more transactions in accordance with instructions received from
the Administrator;
(iv) with the proceeds of the sale of the Notes and the
Trust Certificates, to purchase, from time to time, the Financed
Student Loans and to fund one or more Pre- Funding Accounts pursuant
to the Sale and Servicing Agreement;
(v) to assign, grant, transfer, pledge, mortgage and
convey the Indenture Trust Estate pursuant to the Indenture and the
applicable Terms Supplement and to hold, manage and distribute to the
Certificateholders pursuant to the terms of the Sale and Servicing
Agreement and any related Supplemental Sale and Servicing Agreement any
portion of the Indenture Trust Estate released from the Lien of, and
remitted to the Trust pursuant to, the Indenture and the applicable
Terms Supplement;
(vi) from time to time to sell and dispose of
the Financed Student Loans in accordance with the terms
of the Basic Documents;
(vii) to enter into and perform its obligations
under the Basic Documents to which it is to be a party;
(viii) to engage in those activities, including entering
into agreements, that are necessary, suitable or convenient to
accomplish the foregoing or are incidental thereto or connected
therewith; and
(ix) 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 Certificateholders, the Noteholders
and the others specified in Article V of the Sale and Servicing
Agreement and or contemplated by the Basic Documents.
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 2.4. APPOINTMENT OF ELIGIBLE LENDER TRUSTEE.
Each Depositor hereby (i) appoints the Eligible Lender Trustee as trustee of
the Trust effective as of the date hereof, to have all the rights, powers and
duties set forth herein, and (ii) ratifies all actions of the Eligible Lender
Trustee taken on behalf of the Trust prior to the execution hereof.
SECTION 2.5. INITIAL CAPITAL CONTRIBUTION OF TRUST ESTATE.
Each Depositor hereby sells, assigns, transfers, conveys and sets over to
the Eligible Lender Trustee, as of the date hereof, the sum of $10.00. The
Eligible Lender Trustee hereby acknowledges receipt in trust from the
Depositors of theforegoing contribution, which shall constitute the initial
Trust Estate and shall be deposited in the Collection Account. The Depositors
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, including reasonable fees and
expenses of counsel, paid by the Eligible Lender Trustee.
SECTION 2.6. 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
Certificateholders, subject to the obligations of the Trust under the other
Basic Documents. It is the intention of the parties hereto that the Trust
constitute a business trust under Pennsylvania law and that this Agreement
constitute the governing instrument of such trust. If for any reason it is
determined that the Trust does not qualify as a business trust under 15 Pa.
C.S. ' 9501(a), it shall be a trust, nonetheless, under the common law of
Pennsylvania. It is the intention of the parties hereto that, solely for
Federal income tax purposes, the Trust shall be treated as a partnership, with
the assets of the partnership being the Financed Student Loans and other assets
held by the Trust, the partners of the partnership being the Certificateholders
and the Notes being debt of the partnership. The parties agree that, unless
otherwise required by appropriate Federal tax authorities, they shall treat the
Trust as a partnership for Federal tax purposes, and the Trust will file or
cause to be filed annual or other necessary returns, reports and other forms
consistent with the characterization of the Trust as a partnership for Federal
tax purposes. Effective as of the date hereof, the Eligible Lender Trustee
shall have all rights, powers and duties set forth herein with respect to
accomplishing the purposes of the Trust.
SECTION 2.7. LIABILITY OF THE CERTIFICATEHOLDERS. (a) TMS
Student Holdings, Inc., as holder of no less than a 1% interest in the Trust
Certificates and the Originators' Interests, shall be liable directly to and
will indemnify the injured party for all losses, claims, damages, liabilities
and expenses of the Trust (including Expenses, to the extent not paid out of the
Trust Estate) to the extent that TMS Student Holdings, Inc. would be liable if
the Trust were a partnership under the Pennsylvania Revised Uniform Limited
Partnership Act in which TMS Student Holdings, Inc. were a general partner;
PROVIDED, HOWEVER, that TMS Student Holdings, Inc. shall not be
liable for any principal of or interest on the Certificates, the Originators'
Interests or the Notes. In addition, any third party creditors of the Trust
(other than in connection with the obligations described in the preceding
sentence for which TMS Student Holdings, Inc. shall not be liable) shall be
deemed third party beneficiaries of this paragraph. The obligations of TMS
Student Holdings, Inc. under this paragraph shall be evidenced by the Trust
Certificates and the Originators' Interests described in Section 3.11, which
shall be deemed to be a separate class of Trust Certificates and Originators'
Interests from all other Trust Certificates and Originators' Interests issued
by the Trust; PROVIDED that the rights and obligations evidenced by all Trust
Certificates and Originators' Interests, respectively, regardless of class,
except as provided in this Section, Section 5.1 hereof and Article V of the
Sale and Servicing Agreement, shall be identical.
(b) No Certificateholder, other than to the extent set forth
in paragraph (a), shall have any personal liability for any liability or
obligation of the Trust.
(c) TMS Student Holdings, Inc. shall maintain a minimum
capital value (not including its interest in the Trust or its interests in
ClassNotes Trust 1995-I (f/k/a Education Loan Alliance 1995-I) and Educaid
Student Loan Trust 1994-1) equal to the greater of (a) $2,000,000 and (b) two
percent of the sum of (i) the Certificate Balance, (ii) the ClassNotes Trust
1995-I Certificate Balance and (iii) the Educaid Student Loan Trust 1994-1
Certificate Balance.
SECTION 2.8. TITLE TO TRUST PROPERTY. Legal title to all the
Trust Estate shall be vested at all times in the Trust as a separate legal
entity except where applicable law in any jurisdiction requires title to any
part of the Trust Estate to be vested in a trustee or trustees, in which case
title shall be deemed to be vested in the Eligible Lender Trustee, a co-trustee
and/or a separate trustee, as the case may be; provided that legal title to the
Financed Student Loans shall be vested at all times in the Eligible Lender
Trustee on behalf of the Trust.
SECTION 2.9. REPRESENTATIONS AND WARRANTIES OF THE
DEPOSITORS. Each of the Depositors hereby represents and
warrants to the Eligible Lender Trustee and the Surety Provider
that:
(a) Such Depositor is duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation, with
corporate power and authority to own its properties and to conduct its
business as such properties are currently owned and such business is
presently conducted.
(b) Such Depositor has the corporate power and authority to
execute and deliver this Agreement and to carry out its terms; such
Depositor has full corporate power and authority to sell and assign the
property to be sold and assigned to and deposited with the Trust (or
with the Eligible Lender Trustee on behalf of the Trust) and such
Depositor has duly authorized such sale and assignment and deposit to
the Trust (or to the Eligible Lender Trustee on behalf of the Trust)
by all necessary corporate action; and the execution, delivery and
performance of this Agreement has been duly authorized by such
Depositor by all necessary corporate action.
(c) This Agreement constitutes a legal, valid and binding
obligation of such Depositor enforceable in accordance with its terms,
subject to the effect of applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws relating to or
affecting creditors' rights generally and court decisions with respect
thereto and subject to the application of equitable principles in any
proceeding, whether at law or in equity.
(d) 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, the articles of incorporation or by-laws of such Depositor, or
any material indenture, agreement or other material instrument to which
such Depositor is a party or by which it is bound; nor result in the
creation or imposition of any Lien upon any of its properties pursuant
to the terms of any such indenture, agreement or other instrument
(other than pursuant to the Basic Documents); nor violate any law or,
to such Depositor's knowledge, any order, rule or regulation applicable
to the Depositor of any court or of any Federal or State regulatory
body, administrative agency or other governmental instrumentality
having jurisdiction over such Depositor or its properties.
(e) No consent of any Federal or state governmental or
administrative authority is required to be obtained by such Depositor
prior to its entering into this Agreement or in connection with its
consummation of the transactions contemplated by the Basic Documents,
other than those that have been obtained.
SECTION 2.10. FEDERAL INCOME TAX ALLOCATIONS. Net income of
the Trust for any month as determined for Federal income tax purposes (and each
item of income, gain, loss and deduction entering into the computation thereof)
shall be allocated:
(a) among the Certificateholders as of the close of business
on the last day of such month, in proportion to their ownership of
principal amount of Trust Certificates on such date, an amount of net
income up to the sum of (i) the portion of the Certificateholders'
Interest Distribution Amount and the Certificateholders' Auction Rate
Interest Carryover, if any, for the related Distribution Date allocable
to such month, (ii) interest on the excess, if any, of the
Certificateholders' Interest Distribution Amount for the preceding
Distribution Date over the amount in respect of interest that is
actually distributed to Certificateholders on such preceding
Distribution Date, to the extent permitted by law, at the Certificate
Rate for such month and (iii) the portion of the market discount on the
Financed Student Loans accrued during such quarter that is allocable to
the excess, if any, of the initial aggregate principal amount of the
Trust Certificates over their initial aggregate issue price; and
(b) to TMS Student Holdings, Inc., in its capacity as a Trust
Certificateholder, to the extent of any remaining net income.
If the net income of the Trust for any month is insufficient for the allocations
described in clause (a) above, subsequent net income shall first be allocated to
make up such shortfall before being allocated as provided in the preceding
sentence. Net losses of the Trust, if any, for any month as determined for
Federal income tax purposes (and each item of income, gain, loss and deduction
entering into the computation thereof) shall be allocated to TMS Student
Holdings, Inc. to the extent TMS Student Holdings, Inc. is reasonably expected
to bear the economic burden of such net losses, and any remaining net losses
shall be allocated among the remaining Certificateholders as of the close of
business on the last day of such month in proportion to their ownership of
principal amount of Trust Certificates on such Record Date. TMS Student
Holdings, Inc. is authorized to modify the allocations in this paragraph if
necessary or appropriate, in its sole discretion, for the allocations to fairly
reflect the economic income, gain or loss to TMS Student Holdings, Inc. or to
the Certificateholders, or as otherwise required by the Code. Moreover, TMS
Student Holdings may modify the allocations upon the issuance of Certificates
pursuant to a Trust Supplement in order to ensure that the allocations reflect
the Certificateholders' economic interests in the partnership.
ARTICLE III
TRUST CERTIFICATES, ORIGINATORS' INTERESTS
AND TRANSFER OF INTERESTS
SECTION 3.1. INITIAL BENEFICIAL OWNERSHIP. Upon the formation of
the Trust by the contribution by the Depositors pursuant to Section 2.5 and
until the initial issuance of the Trust Certificates, the Depositors shall be
the sole beneficial owners of the Trust.
SECTION 3.2. THE TRUST CERTIFICATES. Each Class of Trust
Certificates shall be issued in denominations of $50,000 or in integral
multiples in excess thereof; PROVIDED, HOWEVER, that the Trust Certificates
issued to TMS Student Holdings, Inc. pursuant to Section 3.11 may be issued in
such denomination as to include any residual amount (but in no case less than
$50,000 in principal amount). The Trust Certificates shall be executed on behalf
of the Trust by manual or facsimile signature of an authorized officer of the
Eligible Lender Trustee. Trust Certificates bearing the manual or facsimile
signatures of individuals who were, at the time when such signatures shall have
been affixed, authorized to sign on behalf of the Trust, shall be valid and
binding obligations of the Trust, notwithstanding that such individuals or any
of them shall have ceased to be so authorized prior to the authentication and
delivery of such Trust Certificates or did not hold such offices at the date of
authentication and delivery of such Trust Certificates. No Trust Certificates
may be subdivided for resale into amounts smaller than a unit the initial
offering price of which would have been at least $20,000.
SECTION 3.2.A. THE ORIGINATORS' INTERESTS. The Originators'
Interests shall be issued with minimum offering prices of $20,000. The
Originators' Interests shall be executed on behalf of the Trust by manual or
facsimile signature of an authorized officer of the Eligible Lender Trustee.
Originators' Interests bearing the manual or facsimile signatures of individuals
who were, at the time when such signatures shall have been affixed, authorized
to sign on behalf of the Trust, shall be valid obligations of the Trust,
notwithstanding that such individuals or any of them shall have ceased to be so
authorized prior to the authentication and delivery of such Originators'
Interests or did not hold such offices at the date of authentication and
delivery of such Owners' Interests. No Originators' Interest may be subdivided
for resale into amounts smaller than a unit the initial offering price of which
would have been at least $20,000.
SECTION 3.3. AUTHENTICATION OF TRUST CERTIFICATES.
Concurrently with the initial sale of Financed Student Loans to the Trust
pursuant to the Sale and Servicing Agreement and the initial sale of the
Certificates to the Initial Purchaser pursuant to the Purchase Agreement,
the Eligible Lender Trustee shall cause the Trust Certificates in an aggregate
principal amount equal to the Initial Certificate Balance to be executed on
behalf of the Trust, authenticated and delivered to or upon the written order
of the Depositors, signed by their chairman of the board, their president or
any vice president, without further action by the Depositors, in authorized
denominations. Such Trust Certificates shall be designated as the Class 1
Certificates. From time to time after such initial issuance of Trust
Certificates, with the written consent of the Surety Provider, additional
Classes of Trust Certificates may be issued in an aggregate principal amount and
with such terms and designation as shall be provided in a related Trust
Supplement. The Eligible Lender Trustee shall cause such additional Trust
Certificates, if any, to be executed on behalf of the Trust, authenticated and
delivered to or upon the written order of the Depositors, signed by their
chairman of the board, their president or any vice president, without further
action by the Depositors, in authorized denominations. No Trust Certificate
shall entitle its holder to any benefit under this Agreement, or shall be valid
for any purpose, unless there shall appear on such Trust Certificate a
certificate of authentication substantially in the form set forth in Exhibit A,
executed by the Eligible Lender Trustee by manual signature; such authentication
shall constitute conclusive evidence that such Trust Certificate shall have been
duly authenticated and delivered hereunder. All Trust Certificates shall be
dated the date of their authentication. No further Trust Certificates shall be
issued except pursuant to Section 3.4, 3.5 or 3.14 hereunder. The Final Maturity
Date for each Class of Trust Certificates shall occur later than the Final
Maturity Date for each Class of Notes.
SECTION 3.3.A. AUTHENTICATION OF ORIGINATORS' INTERESTS.
Originators' Interests may from time be issued with such terms, including
restrictions on transfer, as may be set forth in a related Trust Supplement.
The Eligible Lender Trustee shall cause such Originators' Interests, if any,
to be executed on behalf of the Trust, authenticated and delivered to
or upon the written order of the Depositors, signed by their chairman of the
board, their president or any vice president, without further action by the
Depositors, in authorized denominations. No Originators' Interest shall entitle
its holder to any benefit under this Agreement, or shall be valid for any
purpose, unless there shall appear on such Originators' Interest a certificate
of authentication substantially in the form set forth in an exhibit to the
related Trust Supplement, executed by the Eligible Lender Trustee by manual
signature; such authentication shall constitute conclusive evidence that such
Originators' Interest shall have been duly authenticated and delivered
hereunder. All Originators' Interest shall be dated the date of their
authentication. No further Originators' Interest shall be issued except pursuant
to Section 3.4, 3.5 or 3.14 hereunder.
SECTION 3.4. REGISTRATION OF TRANSFER AND EXCHANGE OF TRUST
CERTIFICATES AND ORIGINATORS' INTERESTS. The Certificate Registrar shall keep or
cause to be kept, at the office or agency maintained pursuant to Section 3.9, a
Certificate Register in which, subject to such reasonable regulations as it may
prescribe, the Certificate Registrar shall provide for the registration of Trust
Certificates and Originators' Interests and of transfers and exchanges of Trust
Certificates and Originators' Interests as herein provided. The Eligible Lender
Trustee may be the Certificate Registrar or it may appoint an agent to serve as
Certificate Registrar. The Eligible Lender Trustee hereby appoints Dauphin
Deposit Bank and Trust Company as initial Certificate Registrar.
Upon surrender for registration of transfer of any Trust
Certificate or Originators' Interest at the office or agency maintained pursuant
to Section 3.9, and compliance with the provisions set forth in Section 3.5, the
Eligible Lender Trustee shall execute, authenticate and deliver in the name of
the designated transferee or transferees, one or more new Trust Certificates
or Originators' Interests, as the case may be, in authorized denominations of a
like aggregate amount dated the date of authentication by the Eligible Lender
Trustee or any authenticating agent. At the option of a Certificateholder,
Trust Certificates or Originators' Interests, as the case may be, may be
exchanged for other Trust Certificates or Originators' Interests, as the case
may be, of authorized denominations of a like aggregate amount upon surrender
of the Trust Certificates or Originators' Interests, as the case may be, to
be exchanged at the office or agency maintained pursuant to Section 3.9.
Every Trust Certificate or Originators' Interest, as the case
may be, presented or surrendered for registration of transfer or exchange shall
be accompanied by a written instrument of transfer in form satisfactory to the
Eligible Lender Trustee and the Certificate Registrar duly executed by the
Certificateholder or his attorney duly authorized in writing, with such
signature guaranteed by an entity acceptable to the Eligible Lender Trustee.
Each Trust Certificate or Originators' Interest, as the case may be,
surrendered for registration of transfer or exchange shall be cancelled and
subsequently disposed of by the Eligible Lender Trustee in accordance with its
customary practice.
No service charge shall be made for any registration of
transfer or exchange of Trust Certificates or Originators' Interests, as the
case may be, but the Eligible Lender Trustee or the Certificate Registrar may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer or exchange of Trust Certificates
or Originators' Interests, as the case may be.
The preceding provisions of this Section 3.4 notwithstanding,
the Eligible Lender Trustee shall not be required to make and the Certificate
Registrar need not register transfers or exchanges of Trust Certificates or
Originators' Interests, as the case may be, for a period of 15 days preceding
any Certificate Distribution Date with respect to the Trust Certificates or
Originators' Interests, as the case may be.
SECTION 3.5. RESTRICTIONS ON TRANSFER. (a) Except
for the transfer of Trust Certificates to TMS Student Holdings,
Inc. pursuant to Section 3.11, the Trust Certificates may not be offered or
sold except to institutional "accredited investors" (as defined in Rule
501(a)(1)-(3) under the Securities Act who are U.S. Persons (as defined in
Section 7701(a)(30) of the Code) in reliance on an exemption from the
registration requirements of the Securities Act.
Each purchaser of the Trust Certificates (except, with respect to (i)
below, TMS Student Holdings, Inc.) will be deemed to have represented and
agreed as follows:
(i) It is an institutional "accredited investor" as defined in Rule
501(a)(1)-(3) under the Securities Act and is acquiring the Trust Certificates
for its own institutional account or for the account of an institutional
accredited investor.
(ii) It is not (i) an employee benefit plan, retirement arrangement,
individual retirement account or Keogh plan subject to either Title I of the
Employee Retirement Income Security Act of 1974, as amended, or Section 4975 of
the Internal Revenue Code of 1986, as amended, or (2) an entity (including an
insurance company general account) whose underlying assets include plan assets
by reason of any such plan's arrangements or account's investment in any such
entity.
(iii) It is a U.S. Person as defined in Section 7701(a)(30) of the Code.
(iv) It understands that the Trust Certificates will be offered in a
transaction not involving any public offering within the meaning of the
Securities Act, and that, if in the future it decides to resell, pledge or
otherwise transfer any Trust Certificates, such Trust Certificates may be
resold, pledged or transferred only (a) to a person who the seller reasonably
believes is an institutional "accredited investor" as defined in Rule
501(a)(1)-(3) under the Securities Act that purchases for its own account
or for the account of another institutional accredited investor or (b) pursuant
to an effective registration statement under the Securities Act.
(v) It understands that except for the Trust Certificate transferred to TMS
Student Holdings, Inc. pursuant to Section 3.11, each Trust Certificate will
bear a legend substantially to the following effect:
"UNLESS THIS TRUST CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER (AS
DEFINED BELOW) OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS TRUST CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"). THE HOLDER HEREOF, BY PURCHASING THIS TRUST CERTIFICATE,
AGREES THAT THIS TRUST CERTIFICATE MAY BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY IN ACCORDANCE WITH ANY APPLICABLE STATE SECURITIES LAWS AND (1)
TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS AN INSTITUTIONAL ACCREDITED
INVESTOR WITHIN THE MEANING OF RULE 501(A)(1)-(3) UNDER THE ACT THAT PURCHASES
FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF AN INSTITUTIONAL ACCREDITED INVESTOR,
OR (2) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT.
THIS TRUST CERTIFICATE MAY NOT BE TRANSFERRED DIRECTLY OR INDIRECTLY TO (1)
EMPLOYEE BENEFIT PLANS, RETIREMENT ARRANGEMENTS, INDIVIDUAL RETIREMENT ACCOUNTS
OR KEOGH PLANS SUBJECT TO EITHER TITLE I OF THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED, OR SECTION 4975 OF THE INTERNAL REVENUE CODE
OF 1986, AS AMENDED, OR (2) ENTITIES (INCLUDING INSURANCE COMPANY GENERAL
ACCOUNTS) WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF ANY SUCH
PLAN'S ARRANGEMENTS OR ACCOUNT'S INVESTMENT IN SUCH ENTITIES. FURTHER, THIS
TRUST CERTIFICATE MAY BE TRANSFERRED ONLY TO A UNITED STATES PERSON WITHIN THE
MEANING OF SECTION 7701(A)(30) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED.
THIS TRUST CERTIFICATE IS NOT GUARANTEED OR INSURED BY ANY
GOVERNMENTAL AGENCY."
(b) Each purchaser of Trust Certificates (except for TMS
Student Holdings, Inc.) shall be required, prior to purchasing a Trust
Certificate, to execute and deliver to the Broker-Dealer a Purchaser's Letter
substantially in the form attached hereto as Exhibit C. The Eligible Lender
Trustee shall be under no duty or obligation to ensure compliance with the
provisions of this Section 3.5(b).
(c) Restrictions on transfer relating to the
Originators' Interests will be as set forth in the related
Trust Supplements.
SECTION 3.6. MUTILATED, DESTROYED, LOST OR STOLEN TRUST
CERTIFICATES AND ORIGINATORS' INTERESTS. If (a) any mutilated Trust
Certificate or Originators' Interest shall be surrendered to the Certificate
Registrar, or if the Certificate Registrar shall receive evidence to its
satisfaction of the destruction, loss or theft of any Trust Certificate or
Originators' Interest, and (b) there shall be delivered to the Certificate
Registrar, the Eligible Lender Trustee and the Surety Provider such security or
indemnity as may be required by them to save each of them harmless, then in thE
absence of notice that such Trust Certificate shall have been acquired by a
bona fide purchaser, the Eligible Lender Trustee on behalf of the Trust shall
execute and the Eligible Lender Trustee shall authenticate and deliver, in
exchange for or in lieu of any such mutilated, destroyed, lost or stolen Trust
Certificate or Originators' Interest, as the case may be, a new Trust
Certificate or Originators' Interest, as the case may be, of like tenor and
denomination. In connection with the issuance of any new Trust Certificate or
Originators' Interest, as the case may be, under this Section, the Eligible
Lender Trustee and the Certificate Registrar may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection therewith. Any duplicate Trust Certificate or Originators' Interest,
as the case may be, issued pursuant to this Section shall constitute conclusive
evidence of ownership in the Trust, as if originally issued, whether or not the
lost, stolen or destroyed Trust Certificate or Originators' Interest, as the
case may be, shall be found at any time.
SECTION 3.7. PERSONS DEEMED OWNERS. Prior to due
presentation of a Trust Certificate or Originators' Interest, as the case may
be, for registration of transfer, the Eligible Lender Trustee, the Certificate
Registrar or the Surety Provider and any agent of any thereof may treat the
Person in whose name any Trust Certificate or Originators' Interest, as the
case may be, shall be registered in the Certificate Register as the owner of
such Trust Certificate or Originators' Interest, as the case may be, for the
purpose of receiving distributions pursuant to Section 5.1 and for all otheR
purposes whatsoever, and neither the Eligible Lender Trustee, the Certificate
Registrar, the Surety Provider nor any agent of any thereof shall be bound by
any notice to the Contrary.
SECTION 3.8. ACCESS TO LIST OF CERTIFICATEHOLDERS'
NAMES AND ADDRESSES. The Eligible Lender Trustee shall furnish or cause to be
furnished to the Depositor or TMS Student Holdings, Inc., as applicable, within
15 days after receipt by the Eligible Lender Trustee of a request therefor from
the Depositor or TMS Student Holdings, Inc. in writing, a list, in such form as
the Depositor or TMS Student Holdings, Inc. may reasonably require, of the
names and addresses of the Certificateholders as of the most recent Record Date.
If three or more Certificateholders or one or more Certificateholders
evidencing not less than 25% of the Certificate Balance apply in writing to the
Eligible Lender Trustee, and such application states that the applicants
desire to communicate with other Certificateholders with respect to their
rights under this Agreement or under the Trust Certificates and such
application is accompanied by a copy of the communication that such applicants
propose to transmit, then the Eligible Lender Trustee shall, within five
Business Days after the receipt of such application, afford such applicants
access during normal business hours to the current list of Certificateholders.
Upon receipt of any such application, the Eligible Lender Trustee will promptly
notify the Depositor by providing a copy of such application and a copy of the
list of Certificateholders produced in response thereto. If an Event of Default
occurs, the Eligible Lender Trustee shall furnish to the Surety Provider, upon
its request, a copy of the list of Certificateholders within 5 days of receipt
of such request. Each Certificateholder, by receiving and holding a Trust
Certificate or Originators' Interest, as the case may be, shall be deemed to
have agreed not to hold any of the Depositor, the Certificate Registrar or the
Eligible Lender Trustee accountable by reason of the disclosure of its name and
address, regardless of the source from which such information was derived.
SECTION 3.9. MAINTENANCE OF OFFICE OR AGENCY. The Eligible
Lender Trustee shall maintain in York or Harrisburg, Pennsylvania, an office or
offices or agency or agencies where Trust Certificates and Originators'
Interests may be surrendered for registration of transfer or exchange and
where notices and demands to or upon the Eligible Lender Trustee in respect
of the Trust Certificates, the Originators' Interests and the other Basic
Documents may be served. The Eligible Lender Trustee initially designates the
corporate trust office of Dauphin Deposit Bank and Trust Company at 213 Market
Street, Harrisburg, Pennsylvania, 17101, as such office or agency. The
Eligible Lender Trustee shall give prompt written notice to the Depositor,
the Surety Provider and to the Certificateholders of any change in the
location of the Certificate Register or any such office or agency.
SECTION 3.10. APPOINTMENT OF CERTIFICATE PAYING AGENT. The
Certificate Paying Agent shall make distributions to Certificateholders from the
amounts received from the Indenture Trustee out of the Trust Accounts pursuant
to Section 5.1 and shall report the amounts of such distributions to the
Eligible Lender Trustee. Any Certificate Paying Agent shall have the revocable
power to receive such funds from the Indenture Trustee for the purpose of making
the distributions referred to above. The Eligible Lender Trustee may revoke such
power and remove the Certificate Paying Agent (i) if the Eligible Lender Trustee
determines in its sole discretion that the Certificate Paying Agent shall have
failed to perform its obligations under this Agreement in any material respect,
or (ii) for any other reason with the consent of the Administrator or the Surety
Provider. The Certificate Paying Agent shall initially be Dauphin Deposit Bank
and Trust Company, and any co-paying agent chosen by the Eligible Lender Trustee
acceptable to the Administrator and the Surety Provider, which consent shall not
be unreasonably withheld. The Eligible Lender Trustee shall furnish the
Indenture Trustee and the Surety Provider notice identifying each co-paying
agent within two days of any such appointment. The Certificate Paying Agent
shall be permitted to resign as Certificate Paying Agent upon 30 days' written
notice to the Eligible Lender Trustee and the Surety Provider. If Dauphin
Deposit Bank and Trust Company or the Eligible Lender Trustee shall no longer be
the Certificate Paying Agent, the Eligible Lender Trustee, subject to the prior
written consent of the Surety Provider (which consent shall not be unreasonably
withheld), shall appoint a successor to act as Certificate Paying Agent (which
shall be a bank or trust company). The Eligible Lender Trustee shall cause such
successor Certificate Paying Agent or any additional Certificate Paying Agent
appointed by the Eligible Lender Trustee to execute and deliver to the Eligible
Lender Trustee an instrument in which such successor Certificate Paying Agent
or additional Certificate Paying Agent shall agree with the Eligible Lender
Trustee that, as Certificate Paying Agent, such successor Certificate Paying
Agent or additional Certificate Paying Agent will hold all sums, if any, held
by it for payment to the Certificateholders in trust for the benefit of the
Certificateholders entitled thereto until such sums shall be paid to such
Certificateholders. The Certificate Paying Agent shall return all unclaimed
funds to the Eligible Lender Trustee and upon removal of a Certificate
Paying Agent such Certificate Paying Agent shall also return all funds in its
possession to the Eligible Lender Trustee. The provisions of Sections 7.1, 7.3,
7.4, 7.5 and 8.1 shall apply to the Eligible Lender Trustee also in its role as
Certificate Paying Agent, for so long as the Eligible Lender Trustee shall act
as Certificate Paying Agent and, to the extent applicable, to any other paying
agent appointed hereunder. Any reference in this Agreement to the Certificate
Paying Agent shall include any co-paying agent unless the context requires
otherwise.
SECTION 3.11. DISPOSITION BY TMS STUDENT HOLDINGS, INC. On
each Closing Date, TMS Student Holdings, Inc. shall acquire from the Initial
Purchaser, pursuant to the Purchase Agreement and as agreed to by the
Depositors, and shall thereafter retain, beneficial and record ownership of
Trust Certificates in an amount such that the aggregate amount of Trust
Certificates then owned by TMS Student Holdings, Inc. represents at least 1% of
the Certificate Balance. Such Trust Certificates also shall be deemed to
represent beneficial and record ownership of 1% of each Originators' Interest
that may be issued hereafter. Any attempted transfer of any Trust Certificate
that would reduce TMS Student Holdings, Inc.'s interest below 1% of the
Certificate Balance shall be void. The Eligible Lender Trustee shall cause any
Trust Certificate issued to TMS Student Holdings, Inc. on the Closing Date (and
any Trust Certificate issued in exchange therefor) to contain a legend stating
"THIS CERTIFICATE IS NONTRANSFERABLE".
SECTION 3.12. BOOK-ENTRY CERTIFICATES. The Trust Certificates,
upon original issuance, will be issued in the form of a typewritten Trust
Certificate or Trust Certificates representing Book-Entry Certificates, to be
delivered to the Depository Trust Company, the initial Clearing Agency, by, or
on behalf of, the Trust; PROVIDED, HOWEVER, that one Definitive Certificate (as
defined below) of each Class may be issued to TMS Student Holdings, Inc.
pursuant to Section 3.11 and the Purchase Agreement. Such Book-Entry Certificate
or Book-Entry Certificates shall initially be registered on the Certificate
Register in the name of Cede & Co., the nominee of the initial Clearing Agency,
and no Certificate Owner (other than TMS Student Holdings, Inc.) will receive a
Definitive Certificate representing such Certificate Owner's interest in such
Trust Certificate, except as provided in Section 3.14. Unless and until
definitive, fully registered Trust Certificates (the "Definitive Certificates")
have been issued to Certificate Owners pursuant to Section 3.14 and except for
the Trust Certificates issued to TMS Student Holdings, Inc.
pursuant to Section 3.11:
(i) the provisions of this Section shall be in full
force and effect;
(ii) the Certificate Registrar and the Eligible Lender Trustee
shall be entitled to deal with the Clearing Agency for all purposes of
this Agreement (including the payment of principal of and interest on
the Trust Certificates and the giving of instructions or directions
hereunder) as the sole Certificateholder and shall have no obligation
to the Certificate Owners;
(iii) to the extent that the provisions of this Section conflict
with any other provisions of this Agreement, the provisions of this
Section shall control;
(iv) the rights of Certificate Owners shall be exercised only
through the Clearing Agency and shall be limited to those established
by law and agreements between such Certificate Owners and the Clearing
Agency and/or the Clearing Agency Participants. Pursuant to the
Certificate Depository Agreement, unless and until Definitive
Certificates are issued pursuant to Section 3.14, the initial Clearing
Agency will make book-entry transfers among the Clearing Agency
Participants and receive and transmit payments of principal of and
interest on the Trust Certificates to such Clearing Agency
Participants; and
(v) whenever this Agreement requires or permits actions to be
taken based upon instructions or directions of Certificateholders of
Trust Certificates evidencing a specified percentage of the Certificate
Balance, the Clearing Agency shall be deemed to represent such
percentage only to the extent that it has received instructions to
such effect from Certificate Owners and/or Clearing Agency Participants
owning or representing, respectively, such required percentage of the
beneficial interest in the Trust Certificates and has delivered such
instructions to the Eligible lender Trustee.
SECTION 3.13. NOTICES TO CLEARING AGENCY. Whenever a notice or
other communication to the Trust Certificateholders is required under this
Agreement, unless and until Definitive Certificates shall have been issued to
Trust Certificate Owners pursuant to Section 3.14 and except for the Trust
Certificate issued to TMS Student Holdings, Inc. pursuant to Section 3.11, the
Eligible Lender Trustee shall give all such notices and communications specified
herein to be given to Trust Certificateholders to the Clearing Agency, and shall
have no obligations to the Trust Certificate Owners.
SECTION 3.14. DEFINITIVE CERTIFICATES. If (i) the
Administrator advises the Eligible Lender Trustee in writing that the Clearing
Agency is no longer willing or able to discharge properly its responsibilities
with respect to the Trust Certificates, and the Administrator is unable to
locate a qualified successor, (ii) the Administrator at its option advises the
Eligible Lender Trustee in writing that it elects to terminate the book-entry
system through the Clearing Agency or (iii) after the occurrence of an Event of
Default, a Servicer Default or an Administrator Default, Certificate Owners
representing beneficial interests aggregating at least 50.1% of the Certificate
Balance advise the Clearing Agency (which shall then notify the Eligible Lender
Trustee) in writing that the continuation of a book-entry system through the
Clearing Agency is no longer in the best interest of the Certificate Owners,
then the Eligible Lender Trustee shall cause the Clearing Agency to notify all
Certificate Owners of the occurrence of any such event and of the availability
of the Definitive Certificates to Certificate Owners requesting the same. Upon
surrender to the Eligible Lender Trustee of the typewritten Trust Certificate or
Trust Certificates representing the Book-Entry Certificates by the Clearing
Agency, accompanied by registration instructions, the Eligible Lender Trustee
shall execute and authenticate the Definitive Certificates in accordance with
the instructions of the Clearing Agency. Neither the Certificate Registrar nor
the Eligible Lender Trustee shall be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be protected in relying on,
such instructions. Upon the issuance of Definitive Certificates, the Eligible
Lender Trustee shall recognize the registered holders of the Definitive
Certificates as Certificateholders. The Definitive Certificates shall, at the
expense of the Depositors, be printed, lithographed or engraved or may be
produced in any other manner as is reasonably acceptable to the Eligible Lender
Trustee, as evidenced by its execution thereof.
SECTION 3.15. DETERMINATION OF INTEREST RATE. Each Class of
Trust Certificates shall accrue interest during each Interest Period at the
Certificate Rate determined in accordance with the Auction Procedures attached
hereto as Annex I or as otherwise set forth in the related Trust Supplement.
ARTICLE IV
ACTIONS BY ELIGIBLE LENDER TRUSTEE
SECTION 4.1. PRIOR NOTICE TO CERTIFICATEHOLDERS WITH
RESPECT TO CERTAIN MATTERS. With respect to the following matters, the
Eligible Lender Trustee shall not take action unless at least 30 days before
the taking of such action the Eligible Lender Trustee shall have notified the
Trust Certificateholders and the Surety Provider in writing of the proposed
action and neither the Trust Certificateholders nor the Surety Provider
shall have notified the Eligible Lender Trustee in writing prior to the 30th day
after such notice is given that such Trust Certificateholders or the Surety
Provider has withheld consent:
(a) the initiation of any material claim or lawsuit by the
Trust (except claims or lawsuits brought in connection with the
collection of the Financed Student Loans) and the compromise of any
material action, claim or lawsuit brought by or against the Trust
(except with respect to the aforementioned claims or lawsuits for
collection of Financed Student Loans);
(b) the amendment of the Indenture or a Terms
Supplement by a supplemental indenture in circumstances
where the consent of any Noteholder is required;
(c) the amendment of the Indenture or a Terms Supplement by a
supplemental indenture in circumstances where the consent of any
Noteholder is not required and such amendment materially adversely
affects the interest of the Trust Certificateholders;
(d) the amendment, change or modification of the
Administration Agreement, except to cure any ambiguity or to amend or
supplement any provision in a manner or add any provision that would
not materially adversely affect the interests of the Trust
Certificateholders; or
(e) the appointment pursuant to the Indenture or a Terms
Supplement of a successor Note Registrar or Indenture Trustee or
pursuant to this Agreement of a successor Certificate Registrar or
Certificate Paying Agent (except if the successor Certificate Registrar
or Certificate Paying Agent is the Eligible Lender Trustee), or the
consent to the assignment by the Note Registrar, Certificate Paying
Agent or Indenture Trustee or Certificate Registrar of its obligations
under the Indenture or this Agreement, as applicable (except the
consent to the assignment by the Certificate Paying Agent or
Certificate Registrar of its obligations to the Eligible Lender
Trustee).
SECTION 4.2. ACTION BY CERTIFICATEHOLDERS WITH RESPECT TO
CERTAIN MATTERS. The Eligible Lender Trustee shall not have the power, except
upon the direction of the Surety Provider or, with the Surety Provider's
consent, the Certificateholders, to (a) remove the Servicer or the Administrator
under the Sale and Servicing Agreement pursuant to Section 8.1 thereof or (b)
except as expressly provided in the Basic Documents, sell the Financed Student
Loans after the termination of the Indenture. The Eligible Lender Trustee shall
take the actions referred to in the preceding sentence only upon written
instructions signed by the Surety Provider.
SECTION 4.3. ACTION BY CERTIFICATEHOLDERS WITH RESPECT TO
BANKRUPTCY. The Eligible Lender Trustee shall not have the power to commence a
voluntary proceeding in bankruptcy relating to the Trust without the unanimous
prior approval of all Certificateholders and the Surety Provider and the
delivery to the Eligible Lender Trustee by each such Certificateholder of a
certificate certifying that such Certificateholder reasonably believes that the
Trust is insolvent.
SECTION 4.4. RESTRICTIONS ON CERTIFICATEHOLDERS' POWER. The
Certificateholders shall not direct the Eligible Lender Trustee to take or
refrain from taking any action if such action or inaction would be contrary to
any obligation of the Trust or the Eligible Lender Trustee under this Agreement
or any of the other Basic Documents or would be contrary to Section 2.3 nor
shall the Eligible Lender Trustee be permitted to follow any such direction, if
given.
SECTION 4.5. MAJORITY CONTROL. Except as expressly provided
herein, any action that may be taken by the Certificateholders under this
Agreement may be taken by the Certificateholders evidencing not less than 50.1%
of the Certificate Balance. Except as expressly provided herein, any written
notice of the Certificateholders delivered pursuant to this Agreement shall be
effective if signed by Certificateholders evidencing not less than 50.1% of the
Certificate Balance at the time of the delivery of such notice.
ARTICLE V
APPLICATION OF TRUST FUNDS; CERTAIN DUTIES
SECTION 5.1. APPLICATION OF TRUST FUNDS. (a) No later than the
close of business on the day it receives funds distributed by the Indenture
Trustee pursuant to Sections 5.5, 5.6 and 5.10 of the Sale and Servicing
Agreement, the Certificate Paying Agent will distribute such amounts (i) to
Trust Certificateholders of the applicable Class on a pro rata basis with
respect to interest and pursuant to the procedures set forth in subsection (d)
below with respect to principal and (ii) to holders of the Originators'
Interests, as set forth in the related Trust Supplement; PROVIDED, HOWEVER, that
if the Eligible Lender Trustee receives funds for distribution to
Certificateholders after 11:00 a.m. on any day it shall use all reasonable
efforts to distribute such funds to the applicable Certificateholders on such
day but shall not be liable for any damages if such funds are distributed on the
following Business Day. Notwithstanding the foregoing, all amounts received by
the Eligible Lender Trustee from the Indenture Trustee representing amounts in
the Reserve Account in excess of the Specified Reserve Account Balance shall be
distributed to the holders of the Originators' Interests, if any, and then to
TMS Student Holdings, Inc. (but such distributions shall not reduce the
principal amount of the Trust Certificate held by TMS Student Holdings, Inc. or
its portion of the Originators' Interests) and no other Certificateholder shall
be entitled to or have a claim for such amounts. TMS Student Holdings, Inc.
shall not receive any distributions of principal until all other Trust
Certificateholders have been paid in full.
(b) No later than the Business Day following its receipt
thereof, the Eligible Lender Trustee shall send to each Trust Certificateholder
(and if a distribution is being made to holders of Originators' Interests, to
each such holder) the statement provided to the Eligible Lender Trustee by the
Administrator pursuant to Section 5.7 of the Sale and Servicing Agreement
relating to such Certificate Distribution Date.
(c) If any withholding tax is imposed on the Trust's payment
(or allocations of income) to a Certificateholder, such tax shall reduce the
amount otherwise distributable to the Certificateholder in accordance with this
Section. The Eligible Lender Trustee is hereby authorized to and shall, upon
receipt of written instructions of the Administrator identifying the appropriate
amount, to retain from amounts otherwise distributable to the Certificateholders
sufficient funds for the payment of any tax that is legally owed by the Trust
(but such authorization shall not prevent the Eligible Lender Trustee from
contesting any such tax in appropriate proceedings, and withholding payment of
such tax, if permitted by law, pending the outcome of such proceedings). The
amount of any withholding tax imposed with respect to a Certificateholder shall
be treated as cash distributed to such Certificateholder at the time it is
withheld by the Trust to be remitted to the appropriate taxing authority. If
there is a possibility that withholding tax is payable with respect to a
distribution (such as a distribution to a non-U.S. Certificateholder), the
Eligible Lender Trustee in its sole discretion may (but unless otherwise
required by law shall not be obligated to) withhold such amounts in accordance
with this paragraph (c). In the event that a Certificateholder wishes to apply
for a refund of any such withholding tax, the Eligible Lender Trustee and the
Administrator shall reasonably cooperate with such Certificateholder in making
such claim so long as such Certificateholder agrees to reimburse the Eligible
Lender Trustee and the Administrator for any out-of-pocket expenses incurred.
(d) The Certificates that will receive payments of principal on
each Certificate Distribution Date after each Class of Notes has been paid in
full will be selected no later than 15 days prior to each such Certificate
Distribution Date by the Eligible Lender Trustee by lot in such manner as the
Eligible Lender Trustee in its discretion may determine and which may provide
for the selection for payment of principal in minimum denominations of $50,000,
and integral multiples in excess thereof.
Notice of the Certificates to receive payments of principal is
to be given by the Eligible Lender Trustee by first-class mail, postage prepaid,
mailed not less than 15 days but no more than 30 days before the applicable
Certificate Distribution Date at the address of the applicable Certificateholder
appearing on the registration books. Any defect in or failure to give such
mailed notice shall not affect the validity of proceedings for the payment of
any other Certificates not affected by such failure or defect. All notices of
payment are to state (i) the applicable Certificate Distribution Date; (ii) the
amount of principal to be paid; and (iii) the Certificates to be paid.
SECTION 5.2. METHOD OF PAYMENT. Subject to Section 9.1(c),
distributions required to be made to Certificateholders on any Certificate
Distribution Date shall be made to each Certificateholder of record on the
applicable Record Date either by wire transfer, in immediately available funds,
to the account of such Certificateholder at a bank or other entity having
appropriate facilities therefore, if such Certificateholder shall have provided
to the Certificate Registrar appropriate written instructions (which may be
standing instructions) at least five Business Days prior to such Distribution
Date and such Certificateholder's Trust Certificates in the aggregate evidence a
denomination of not less than $50,000 (or, in the case of Originators'
Interests, an initial offering amount of not less than $20,000), or, if not, by
check mailed to such Certificateholder at the address of such Certificateholder
appearing in the Certificate Register; provided, however, that, unless
Definitive Certificates have been issued pursuant to Section 3.14, with respect
to Trust Certificates registered on the Record Date in the name of the nominee
of the Clearing Agency (initially, such nominee to be Cede & Co.), distributions
will be made by wire transfer in immediately available funds to the account
designated by such nominee. Notwithstanding the foregoing, the final
distribution in respect of any Trust Certificate or Originators' Interest
(whether on the Final Maturity Date or otherwise) will be payable only upon
presentation and surrender of such Trust Certificate or Originators' Interest,
as the case may be, at the Corporate Trust Office of the Eligible Lender Trustee
maintained pursuant to Section 3.9 hereof or such other location specified in
writing to the Certificateholder thereof.
SECTION 5.3. SEGREGATION OF MONEYS; NO INTEREST. Subject to
Section 5.1, moneys received by the Eligible Lender Trustee hereunder shall be
deposited in the Certificate Distribution Account and invested in Eligible
Investments in accordance with instructions received from the Administrator. The
Eligible Lender Trustee shall not be liable for any interest thereon.
SECTION 5.4. ACCOUNTING AND REPORTS TO THE NOTEHOLDERS,
CERTIFICATEHOLDERS, THE INTERNAL REVENUE SERVICE AND OTHERS. The Administrator,
on behalf of the Eligible Lender Trustee, shall (a) maintain (or cause to be
maintained) the books of the Trust on a calendar year basis on the accrual
method of accounting, (b) deliver to each Certificateholder (and to each Person
who was a Certificateholder at any time during the applicable calendar year), as
may be required by the Code and applicable Treasury Regulations, such
information as may be required (including Schedule K-1) to enable each such
Certificateholder to prepare its Federal and state income tax returns, (c) file
such tax returns relating to the Trust (including a partnership information
return, Internal Revenue Service Form 1065), and make such elections as may from
time to time be required or appropriate under any applicable state or Federal
statute or rule or regulation thereunder so as to maintain the Trust's
characterization as a partnership for Federal income tax purposes, (d) cause
such tax returns to be signed in the manner required by law and (e) collect or
cause to be collected any withholding tax as described in and in accordance with
Section 5.1(c) with respect to income or distributions to Certificateholders.
The Administrator, on behalf of the Eligible Lender Trustee, shall elect under
Section 1278 of the Code to include in income currently any market discount that
accrues with respect to the Financed Student Loans. Neither the Eligible Lender
Trustee nor the Administrator on behalf of the Eligible Lender Trustee shall
make the election provided under Section 754 of the Code.
SECTION 5.5. SIGNATURE ON RETURNS; TAX MATTERS PARTNER. (a) TMS
Student Holdings, Inc. shall sign on behalf of the Trust the tax returns of the
Trust unless otherwise required by applicable law.
(b) TMS Student Holdings, Inc. shall be designated the "tax
matters partner" of the Trust pursuant to Section 6231(a)(7)(A) of the Code and
applicable Treasury Regulations.
SECTION 5.6. SUBROGATION. Each of the Depositors and the
Eligible Lender Trustee acknowledges that to the extent of any payment made by
the Surety Provider pursuant to any Certificate Surety Bond, the Surety Provider
is to be fully subrogated to the extent of such payment and any additional
interest due on any late payment to the rights of the Holders of the
Certificates to any moneys paid or payable in respect of the Certificates under
this Trust Agreement or otherwise. Each of the Depositors and the Eligible
Lender Trustee agrees to such subrogation and, further, agrees to execute such
instruments and to take such actions as, in the sole judgment of the Surety
Provider, are necessary to evidence such subrogation and, subject to the
priority of payment provision of this Trust Agreement, to perfect the rights of
the Certificateholders to receive any moneys paid or payable in respect of the
Certificateholders under this Trust Agreement or otherwise.
ARTICLE VI
AUTHORITY AND DUTIES OF ELIGIBLE LENDER TRUSTEE
SECTION 6.1. 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 Depositors 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 such
Notes as may from time to time be authorized by the Indenture and any related
Terms Supplement. 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 Depositors or upon the direction of the Depositors and (ii) to
take all actions required pursuant to Section 4.2(c) of the Sale and Servicing
Agreement, and otherwise follow the direction of and cooperate with the
Administrator in submitting, pursuing and collecting any claims to and with the
Department, the Secretary and any Guarantor with respect to any Interest Subsidy
Payments, Special Allowance Payments, HEAL Insurance Payments and any other
payments relating to the Financed Student Loans.
The Eligible Lender Trustee is also authorized and directed on
behalf of the Trust Certificateholders, in the case of any Certificate Surety
Bond, to take any and all action necessary to collect any payments from the
Surety Provider with respect to any Certificate Surety Bond, including the
preparation and submission of the notice to the Surety Provider (a form of which
is attached as an exhibit to each of the Surety Bonds), in accordance with the
Certificate Surety Bonds and Article X of the Sale and Servicing Agreement. Any
money so received by the Eligible Lender Trustee from the Surety Provider
pursuant to a Certificate Surety Bond will be distributed to Trust
Certificateholders in the same manner as amounts received from the Indenture
Trustee pursuant to Section 5.1.
In addition to the foregoing, the Eligible Lender Trustee is
authorized 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 or with respect to the administration of the Trust 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 6.2. 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 in the best
interests of the Certificateholders, 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 6.3. ACTION UPON INSTRUCTION. (a) Subject to Article
IV, Section 7.1 and in accordance with the terms of the Basic Documents, the
Certificateholders may by written instruction direct the Eligible Lender Trustee
in the management of the Trust, subject to the Surety Provider's approval. Such
direction may be exercised at any time by written instruction of the
Certificateholders pursuant to Article IV, subject to the Surety Provider's
approval.
(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 Certificateholders 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 received from the Certificateholders of Certificates evidencing not
less than 50.1% of the Certificate Balance at the time of delivery of such
instructions, 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 30 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
Certificateholders, and shall have no liability to any Person for such action or
inaction.
(d) If the Eligible Lender Trustee is unsure as to the
application of any provision of this Agreement or any other Basic Document or
any agreement entered into by the Eligible Lender Trustee on behalf of the Trust
or any such provision is ambiguous as to its application, or is, or appears to
be, in conflict with any other applicable provision, or if 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 Certificateholders requesting instruction and, to the
extent that the Eligible Lender Trustee acts or refrains from acting in good
faith in accordance with any such instruction received from Certificateholders
evidencing not less than 50.1% of the Certificate Balance at the time of
delivery of such instructions, 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 30 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 or such other agreements, as it
shall deem to be in the best interests of the Certificateholders, and shall have
no liability to any Person for such action or inaction.
SECTION 6.4. NO DUTIES EXCEPT AS SPECIFIED IN THIS AGREEMENT,
THE SALE AND SERVICING AGREEMENT, ANY SUPPLEMENTAL SALE AND SERVICING AGREEMENT
OR IN INSTRUCTIONS. The Eligible Lender Trustee shall not have any duty or
obligation to manage, make any payment with respect to, register, record, sell,
service, dispose of or otherwise deal with the Trust Estate, or to otherwise
take or refrain from taking any action under, or in connection with, any
document contemplated hereby to which the Eligible Lender Trustee is a party,
except as expressly provided by the terms of this Agreement, the Sale and
Servicing Agreement, any Supplemental Sale and Servicing Agreement or in any
document or written instruction received by the Eligible Lender Trustee pursuant
to Section 6.3; 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 York Bank and Trust
Company 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 6.5. 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 6.3.
SECTION 6.6. RESTRICTIONS. The Eligible Lender Trustee shall
not take any action (a) that is inconsistent with the purposes of the Trust set
forth in Section 2.3 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 Certificateholders shall not direct the
Eligible Lender Trustee to take any action that would violate the provisions of
this Section.
ARTICLE VII
CONCERNING THE ELIGIBLE LENDER TRUSTEE
SECTION 7.1. 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 for the benefit of the
Certificateholders. The Eligible Lender Trustee also agrees to disburse all
moneys actually received by it constituting part of the Trust Estate under 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 7.3 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, the Depositors, the Surety Provider or
Certificateholders of Certificates evidencing the requisite
percentage of the Certificate Balance;
(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 or for any amounts owing under the Trust Certificates
or the Originators' Interest;
(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 Depositors or for the form,
character genuineness, sufficiency, value or validity of any of
the Trust Estate or for or in respect of the validity or
sufficiency of the Basic Documents, other than the certificate of
authentication on the Trust Certificates and the Originators'
Interests, and the Eligible Lender Trustee shall in no event
assume or incur any liability, duty or obligation to any
Noteholder or to any Certificateholder, 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 Depositors, the
Administrator, the Seller, TMS Student Holdings, Inc., the
Indenture Trustee or the Master Servicer under this Agreement or
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 Sale and Servicing Agreement, any
Supplemental Sale and Servicing Agreement or the Administration
Agreement, the Indenture Trustee under the Indenture or any Terms
Supplement or the Master Servicer under the Sale and Servicing
Agreement or any Supplemental Sale and Servicing Agreement; and
(g) the Eligible Lender Trustee shall be under no obligation
to exercise any of the rights or powers vested in it by this
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 any of the Certificateholders, unless such
Certificateholders have offered to the Eligible Lender Trustee
security or indemnity satisfactory to it against the costs,
expenses and liabilities that may be incurred by the Eligible
Lender Trustee therein or thereby. The right of the Eligible
Lender Trustee to perform any discretionary act enumerated in
this 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 7.2. FURNISHING OF DOCUMENTS. The Eligible Lender
Trustee shall furnish to the Certificateholders 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 7.3. REPRESENTATIONS AND WARRANTIES. The Eligible
Lender Trustee hereby represents and warrants to the Depositors, for the benefit
of the Certificateholders, and to the Surety Provider that:
(a) It is a banking corporation duly organized and validly
existing in good standing under the laws of the Commonwealth of
Pennsylvania. 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, and when so executed shall be an enforceable
obligation of the Eligible Lender Trustee in accordance with its
terms.
(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, to its knowledge, contravene any Federal
or Pennsylvania 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 Federal Loans as contemplated by this
Agreement and the other Basic Documents.
SECTION 7.4. 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. 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, including the Administrator, 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 or by the Administrator or the Depositors, and (ii) may consult
with counsel, accountants and other skilled persons to be selected with
reasonable care and employed by it or selected and employed by the Administrator
or the Depositors. The Eligible Lender Trustee shall not be liable for anything
done, suffered or omitted in good faith by it (including, without limitation,
the making of the representation in Section 7.3(d) hereof that it is an
"eligible lender") in accordance with the opinion or advice of any such counsel,
accountants or other such persons.
SECTION 7.5. NOT ACTING IN INDIVIDUAL CAPACITY. Except for the
representations and warranties set forth in Section 7.3, in accepting the trusts
hereby created The York Bank and Trust Company acts solely as Eligible Lender
Trustee hereunder and not in its individual capacity and all Persons having any
claim against the Eligible Lender Trustee by reason of the transactions
contemplated by this Agreement or any other Basic Document shall look only to
the Trust Estate for payment or satisfaction thereof.
SECTION 7.6. ELIGIBLE LENDER TRUSTEE NOT LIABLE FOR TRUST CERTIFICATES OR
FINANCED STUDENT LOANS. The recitals contained herein or in any Trust Supplement
and in the Trust Certificates and the Originators' Interests (other than the
signature and countersignature of the Eligible Lender Trustee on the Trust
Certificates and the Originators' Interests) shall be taken as the statements of
the Depositors 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, the Trust Certificates, the
Originators' Interests or any other Basic Document (other than the signature and
countersignature of the Eligible Lender Trustee on the Trust Certificates and
the Originators' Interests) 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 for or with respect to the legality, validity,
enforceability and eligibility for Guarantee Payments 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 Certificateholders under
this Agreement or the Noteholders under the Indenture, including without
limitation: 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 Depositors, Administrator,
Seller or the Master Servicer with any warranty or representation made under any
Basic Document or in any related document or the accuracy of any such warranty
or representation or any action or inaction of the Depositors, Seller,
Administrator, the Indenture Trustee or the Master Servicer or any subservicer
taken in the name of the Eligible Lender Trustee; and the failure of the
Financed Student Loans to be serviced in conformity with applicable regulations.
SECTION 7.7. ELIGIBLE LENDER TRUSTEE MAY OWN TRUST CERTIFICATES AND NOTES.
The Eligible Lender Trustee in its individual or any other capacity may become
the owner or pledgee of the Trust Certificates, Originators' Interests or Notes
and may deal with the Depositors, the Administrator, the Indenture Trustee, the
Master Servicer and the Guarantors in banking or trust transactions with the
same rights as it would have if it were not Eligible Lender Trustee, including
serving as a trustee of other trusts dealing in any student loans, including
trusts which purchase student loans from the Trust.
ARTICLE VIII
COMPENSATION OF ELIGIBLE LENDER TRUSTEE
SECTION 8.1. 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 by the Depositors and the Eligible
Lender Trustee on or before the date of acceptance hereof by the Eligible Lender
Trustee, and the Eligible Lender Trustee shall be entitled to be reimbursed by
the Depositors, to the extent provided in such separate agreement, for its other
reasonable Expenses hereunder.
SECTION 8.2. PAYMENTS TO THE ELIGIBLE LENDER Trustee. Any amounts paid to
the Eligible Lender Trustee pursuant to Section 8.1 hereof or pursuant to
Section 6.3 or 7.2 of the Sale and Servicing Agreement shall be deemed not to be
a part of the Trust Estate immediately after such payment.
ARTICLE IX
TERMINATION OF TRUST AGREEMENT
SECTION 9.1. TERMINATION OF TRUST AGREEMENT. (a) This Trust shall terminate
upon the earlier of (i) the final distribution by the Eligible Lender Trustee of
all moneys or other property or proceeds of the Trust Estate in accordance with
the terms of the Indenture, any related Terms Supplement, the Sale and Servicing
Agreement, Article V hereof and any Trust Supplement, whether at the Certificate
Final Maturity Date or otherwise, (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, living on the date
hereof, and (iii) the time provided in Section 9.2. The bankruptcy, liquidation,
dissolution, death or incapacity of any Certificateholder, other than TMS
Student Holdings, Inc. as described in Section 9.2, shall not (x) operate to
terminate this Agreement or the Trust, nor (y) entitle such Certificateholder's
legal representatives or heirs to claim an accounting or to take any action or
proceeding in any court for a partition or winding up of all or any part of the
Trust or Trust Estate nor (z) otherwise affect the rights, obligations and
liabilities of the parties hereto.
(b) Except as provided in Section 9.1(a), neither the Depositor nor any
Certificateholder shall be entitled to revoke or terminate the Trust.
(c) Notice of any termination of the Trust, specifying the Distribution
Date upon which the Certificateholders shall surrender their Trust Certificates
or Originators' Interests, as the case may be, to the Certificate Paying Agent
for payment of the final distribution and cancellation, shall be given promptly
by the Eligible Lender Trustee by letter to Certificateholders mailed within
five Business Days of receipt of notice of such termination from the
Administrator given pursuant to Section 9.1(c) of the Sale and Servicing
Agreement, stating (i) the Distribution Date upon which final payment of the
Trust Certificates and Originators' Interests shall be made upon presentation
and surrender of the Trust Certificates or Originators' Interests, as the case
may be, at the office of the Certificate Paying Agent therein designated, (ii)
the amount of any such final payment and (iii) that the Record Date otherwise
applicable to such Distribution Date is not applicable, payments being made only
upon presentation and surrender of the Trust Certificates or Originators'
Interests, as the case may be, at the office of the Certificate Paying Agent
therein specified. The Eligible Lender Trustee shall give such notice to the
Certificate Registrar (if other than the Eligible Lender Trustee) and the
Certificate Paying Agent at the time such notice is given to Certificateholders.
Upon presentation and surrender of the Trust Certificates or Originators'
Interests, as the case may be, the Certificate Paying Agent shall cause to be
distributed to Certificateholders amounts distributable on such Distribution
Date pursuant to Section 5.1 and any related Trust Supplement. Certificates
shall cease to earn interest as of the termination date of the Trust.
If all the Certificateholders shall not surrender their Trust Certificates
or Originators' Interests, as the case may be, for cancellation within six
months after the date specified in the above-mentioned written notice, the
Eligible Lender Trustee shall give a second written notice to the remaining
Certificateholders to surrender their Trust Certificates or Originators'
Interests, as the case may be, for cancellation and receive the final
distribution with respect thereto. If within one year after the second notice
all the Trust Certificates or Originators' Interests, as the case may be, shall
not have been surrendered for cancellation, the Eligible Lender Trustee may take
appropriate steps, or may appoint an agent to take appropriate steps, to contact
the remaining Certificateholders concerning surrender of their Trust
Certificates or Originators' Interests, as the case may be, and the cost thereof
shall be paid out of the funds and other assets that shall remain subject to
this Agreement. Any funds remaining in the Trust after exhaustion of such
remedies and no later than five years after the first such notice shall be
distributed by the Eligible Lender Trustee to TMS Student Holdings, Inc..
SECTION 9.2. DISSOLUTION UPON INSOLVENCY OF TMS STUDENT HOLDINGS, INC.. If
an Insolvency Event shall occur with respect to TMS Student Holdings, Inc., the
Trust shall be terminated in accordance with Section 9.1 90 days after the date
of such Insolvency Event, unless, before the end of such 90-day period, the
Eligible Lender Trustee shall have received written instructions from the Surety
Provider and Certificateholders (other than TMS Student Holdings, Inc.)
representing not less than 50.1% of the Certificate Balance (not including the
principal amount of Trust Certificates held by TMS Student Holdings, Inc.), to
the effect that each such party disapproves of the liquidation of the Financed
Student Loans and termination of the Trust, in which event the Trust shall
continue in accordance with the Basic Documents. Promptly after the occurrence
of any Insolvency Event with respect to TMS Student Holdings, Inc., (i) TMS
Student Holdings, Inc. shall give the Indenture Trustee, the Eligible Lender
Trustee and the Surety Provider written notice of such Insolvency Event, (ii)
the Eligible Lender Trustee shall, upon the receipt of such written notice from
TMS Student Holdings, Inc., give prompt written notice to the Certificateholders
and the Indenture Trustee, of the occurrence of such event and (iii) the
Indenture Trustee shall, upon receipt of written notice of such Insolvency Event
from the Eligible Lender Trustee or TMS Student Holdings, Inc., give prompt
written notice to the Noteholders of the occurrence of such event; PROVIDED,
HOWEVER, that any failure to give a notice required by this sentence shall not
prevent or delay, in any manner, a termination of the Trust pursuant to the
first sentence of this Section 9.2. Upon a termination pursuant to this Section
9.2, the Eligible Lender Trustee shall direct the Indenture Trustee promptly to
sell the assets of the Trust (other than the Trust Accounts and the Surety
Bonds) in a commercially reasonable manner and on commercially reasonable terms.
The proceeds of such a sale of the assets of the Trust shall be treated as
collections under the Sale and Servicing Agreement.
ARTICLE X
SUCCESSOR ELIGIBLE LENDER TRUSTEES AND
ADDITIONAL ELIGIBLE LENDER TRUSTEES
SECTION 10.1. 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 Federal
Loans on behalf of the Trust, with a valid lender identification number with
respect to the Trust from the Department; (ii) being authorized to exercise
corporate trust powers and hold legal title to the Financed Student Loans; (iii)
having in effect Guarantee Agreements with each of the Guaranty Agencies then
guaranteeing Financed Student Loans; (iv) having a combined capital and surplus
of at least $50,000,000 and being subject to supervision or examination by
Federal or state authorities; (v) incorporated or authorized to do business in
the Commonwealth of Pennsylvania or which is a national bank having an office
located within the Commonwealth of Pennsylvania; and (vi), with respect to any
successor Eligible Lender Trustees, having (or having a parent which has) a
rating of at least Baa3 by Moody's and at least BBB by Standard & Poor's.
Further, prior to the Depositors selling any HEAL Loans to the Trust, the
Eligible Lender Trustee shall be qualified as an "eligible lender" within the
meaning of the Public Health Service Act. Also, prior to the Depositors selling
any Private Loans to the Trust, the Eligible Lender Trustee shall be qualified
under the applicable Private Loan Program to hold such Private Loans. 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 10.1, 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 10.1, the Eligible
Lender Trustee shall resign immediately in the manner and with the effect
specified in Section 10.2.
SECTION 10.2. 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
Surety Provider, and the Surety Provider may dismiss the Eligible Lender Trustee
or any co-paying agent at any time for its failure to act in accordance with the
terms of this Agreement; provided, however, that prior to any such dismissal,
the Surety Provider shall have given the Eligible Lender Trustee or the
co-paying agent, as the case may be, notice identifying such failure, and shall
have given the Eligible Lender Trustee or the co-paying agent, as the case may
be, two Business Days to cure such failure, if such failure relates to the
distribution of funds to Certificateholders, and 30 days to cure all other
failures. Upon receiving such notice of resignation or dismissal, the
Administrator shall promptly appoint, with the Surety Provider's consent, a
successor Eligible Lender Trustee meeting the eligibility requirements of
Section 10.1 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 or dismissal, the resigning or dismissed
Eligible Lender Trustee, as the case may be, may petition any court of competent
jurisdiction for the appointment of a successor Eligible Lender Trustee;
PROVIDED, HOWEVER, that such right to appoint or to petition for the appointment
of any such successor shall in no event relieve the resigning or dismissed
Eligible Lender Trustee, as the case may be, from any obligations otherwise
imposed on it under the Basic Documents until such successor has in fact assumed
such appointment.
If at any time the Eligible Lender Trustee shall cease to be eligible in
accordance with the provisions of Section 10.1 and shall fail to resign after
written request therefor by the Administrator, or if at any time an Insolvency
Event with respect to the Eligible Lender Trustee 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,
with the prior approval of the Surety Provider, 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 10.3 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 Surety Provider and to each of the Rating
Agencies.
SECTION 10.3. SUCCESSOR ELIGIBLE LENDER TRUSTEE. Any successor Eligible
Lender Trustee appointed pursuant to Section 10.2 shall execute, acknowledge and
deliver to the Administrator and to its predecessor Eligible Lender Trustee an
instrument accepting such appointment under this Agreement, and thereupon the
resignation or removal of the predecessor Eligible Lender Trustee shall become
effective and such successor Eligible Lender Trustee, without any further act,
deed or conveyance, shall become fully vested with all the rights, powers,
duties, and obligations of its predecessor under this Agreement, with like
effect as if originally named as Eligible Lender Trustee. The predecessor
Eligible Lender Trustee shall upon payment of its fees and expenses deliver to
the successor Eligible Lender Trustee all documents, statements, moneys and
properties held by it under this Agreement and shall assign, if permissible, to
the successor Eligible Lender Trustee the lender identification number obtained
from the Department on behalf of the Trust; and the Administrator and the
predecessor Eligible Lender Trustee shall execute and deliver such instruments
and do such other things as may reasonably be required for fully and certainly
vesting and confirming in the successor Eligible Lender Trustee all such rights,
powers, duties and obligations.
No successor Eligible Lender Trustee shall accept appointment as provided
in this Section 10.3 unless at the time of such acceptance such successor
Eligible Lender Trustee shall be eligible pursuant to Section 10.1 and shall
have made the representations and warranties set forth in Section 7.3 (with the
exception of any references to the Commonwealth of Pennsylvania) to the
Depositor, for the benefit of the Certificateholders, and to the Surety
Provider.
Upon acceptance of appointment by a successor Eligible Lender Trustee
pursuant to this Section, the Administrator shall mail notice of the successor
of such Eligible Lender Trustee to all Certificateholders, the Indenture
Trustee, the Noteholders, the Surety Provider and the Rating Agencies. If the
Administrator shall fail to mail such notice within 10 days after acceptance of
appointment by the successor Eligible Lender Trustee, the successor Eligible
Lender Trustee shall cause such notice to be mailed at the expense of the
Administrator.
SECTION 10.4. 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 (by merger, asset sale or other transfer)
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 10.1;
PROVIDED FURTHER that the Eligible Lender Trustee shall mail notice of such
merger, consolidation or transfer of corporate trust business to the Surety
Provider and to the Rating Agencies.
SECTION 10.5. APPOINTMENT OF CO-ELIGIBLE LENDER TRUSTEE OR SEPARATE
ELIGIBLE LENDER TRUSTEE. Notwithstanding any other provisions of this Agreement,
at any time, for the purpose of meeting any legal requirements of any
jurisdiction in which any part of the Trust may at the time be located, the
Administrator and the Eligible Lender Trustee acting jointly shall have the
power and shall execute and deliver all instruments to appoint one or more
Persons approved by the Eligible Lender Trustee and the Surety Provider, meeting
the eligibility requirements of clauses (i) through (iii) of Section 10.1, 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; provided however, that no such appointment shall be made
without obtaining the Surety Provider's prior written consent. 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), (v) and (vi) of
Section 10.1 and no notice of the appointment of any co-trustee or separate
trustee shall be required pursuant to Section 10.3. The expenses incurred in
connection with the retention of any co-trustee shall be deemed an Expense of
the Issuer to be borne by TMS Student Holdings, Inc.
Each separate trustee and co-trustee shall, to the extent permitted by law,
be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Eligible Lender Trustee shall be conferred upon
and exercised or performed by the Eligible Lender Trustee and
such separate trustee or co-trustee jointly (it being understood
that such separate trustee or co-trustee is not authorized to act
separately without the Eligible Lender Trustee joining in such
act), except to the extent that under any law of any jurisdiction
in which any particular act or acts are to be performed, the
Eligible Lender Trustee shall be incompetent or unqualified to
perform such act or acts, in which event such rights, powers,
duties, and obligations (including the holding of title to the
Trust or any portion thereof in any such jurisdiction) shall be
exercised and performed singly by such separate trustee or
co-trustee, solely at the direction of the Eligible Lender
Trustee;
(ii) no trustee under this Agreement shall be personally
liable by reason of any act or omission of any other trustee
under this Agreement; and
(iii) the Administrator and the Eligible Lender Trustee
acting jointly may at any time accept the resignation of or
remove any separate trustee or co-trustee.
Any notice, request or other writing given to the Eligible Lender Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article. Each separate trustee and co-trustee, upon its
acceptance of the trusts conferred, shall be vested with the estates or property
specified in its instrument of appointment, either jointly with the Eligible
Lender Trustee or separately, as may be provided therein, subject to all the
provisions of this Agreement, specifically including every provision of this
Agreement relating to the conduct of, affecting the liability of, or affording
protection to, the Eligible Lender Trustee. Each such instrument shall be filed
with the Eligible Lender Trustee and a copy thereof given to the Administrator.
Any separate trustee or co-trustee may at any time appoint the Eligible
Lender Trustee as its agent or attorney-in- fact with full power and authority,
to the extent not prohibited by law, to do any lawful act under or in respect of
this Agreement on its behalf and in its name. If any separate trustee or
co-trustees shall die, become incapable of acting, resign or be removed, all its
estates, properties, rights, remedies and trusts shall vest in and be exercised
by the Eligible Lender Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. SUPPLEMENTS AND AMENDMENTS. (a) This Agreement, including the
Exhibits, Attachments and Annexes hereto, may be amended by the Depositors and
the Eligible Lender Trustee, with prior written notice to the Rating Agencies,
without the consent of any of the Noteholders or the Certificateholders, but
with the prior written consent of the Surety Provider, to cure any ambiguity, to
change the registered office and/or the situs of the Trust in Pennsylvania set
forth in Section 2.2 hereof, 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, the Certificateholders or the Surety
Provider; 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, Certificateholder or the Surety Provider.
(b) This Agreement may also be amended from time to time by the Depositors
and the Eligible Lender Trustee, with prior written notice to the Rating
Agencies, with the consent of (i) the Noteholders of Notes evidencing not less
than 50.1% of the Outstanding Amount of the Notes, (ii) the Certificateholders
evidencing not less than 50.1% of the Certificate Balance and (iii) the Surety
Provider, 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 or the Certificateholders; 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 the Certificateholders, (b) reduce the
aforesaid percentage of the Outstanding Amount of the Notes and the Certificate
Balance required to consent to any such amendment, without the consent of all
the outstanding Noteholders and Certificateholders or (c) modify Sections 2.7 or
3.11 or the last sentence of Section 3.2 (or any other Sections without an
Opinion of Counsel that such amendment will not cause the Trust to be taxed as a
corporation).
Promptly after the execution of any such amendment or consent, the Eligible
Lender Trustee shall furnish written notification of the substance of such
amendment or consent to each Certificateholder, the Indenture Trustee, each of
the Rating Agencies and to the Surety Provider.
It shall not be necessary for the consent of Certificateholders, 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 (and any other consents of Certificateholders provided for in this
Agreement or in any other Basic Document) and of evidencing the authorization of
the execution thereof by Certificateholders shall be subject to such reasonable
requirements as the Eligible Lender Trustee may prescribe.
(c) 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.
(d) Notwithstanding anything to the contrary contained in this Section
11.1, or elsewhere in this Agreement, without the consent of any
Certificateholders but with prior notice to the Rating Agencies and the prior
written consent of the Surety Provider, the Depositors and the Eligible Lender
Trustee (upon written direction from the Depositors), at any time and from time
to time, may enter into one or more Trust Supplements to set forth the terms of
any Class of Trust Certificates or Originators' Interests that have not
theretofore been authorized by a Trust Supplement.
(e) Any amendment (including a Trust Supplement) of this Agreement required
to be filed with the Pennsylvania Department of State by 15 Pa. C.S. ' 9503
shall be so filed and shall become effective upon filing or such later date and
time, if any, as may be set forth in the instrument of amendment. In any other
case, the amendment shall become effective as set forth in the instrument of
amendment.
SECTION 11.2. NO LEGAL TITLE TO TRUST ESTATE IN CERTIFICATEHOLDERS. The
Certificateholders shall not have legal title to any part of the Trust Estate.
The Certificateholders shall be entitled to receive distributions with respect
to their undivided beneficial ownership interest therein only in accordance with
Articles V and IX. No transfer, by operation of law or otherwise, of any right,
title, or interest of the Certificateholders to and in their 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.
SECTION 11.3. LIMITATIONS ON RIGHTS OF OTHERS. Except for Section 2.7, the
provisions of this Agreement are solely for the benefit of the Eligible Lender
Trustee, the Depositors, the Certificateholders, the Administrator and, to the
extent expressly provided herein, the Surety Provider, the Indenture Trustee and
the Noteholders, and nothing in this Agreement (other than Section 2.7), 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 11.4. NOTICES. (a) Unless otherwise expressly specified or
permitted by the terms hereof, all notices shall be in writing and shall be
deemed given upon receipt by the intended recipient or three Business Days after
mailing if mailed by certified mail, postage prepaid (except that notice to the
Eligible Lender Trustee shall be deemed given only upon actual receipt by the
Eligible Lender Trustee), if to the Eligible Lender Trustee, c/o Corporate Trust
Office, Dauphin Deposit Bank and Trust Company, 213 Market Street, Harrisburg,
Pennsylvania, 17101; if to the Depositors, addressed to Educaid or ClassNotes,
Inc., as applicable, 3301 C Street, Suite 100A, Sacramento, California 95816,
facsimile # (915) 446-2852, Attention: President; if to the Surety Provider,
addressed to AMBAC Indemnity Corporation, One State Street Plaza, New York, New
York 10004, facsimile # (212) 509-9190, Attention: Structured Finance
Department/Student Loans, or, as to each party, at such other address or
facsimile number as shall be designated by such party in a written notice to
each other party.
(b) Any notice required or permitted to be given to a Certificateholder
shall be given (i) by first-class mail, postage prepaid, at the address of such
Certificateholder as shown in the Certificate Register, or (ii) by facsimile if
the Certificate Register contains a facsimile number for such Certificateholder.
Any notice so mailed or sent by facsimile within the time prescribed in this
Agreement shall be conclusively presumed to have been duly given, whether or not
the Certificateholder receives such notice.
SECTION 11.5. SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 11.6. SEPARATE COUNTERPARTS. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 11.7. SUCCESSORS AND ASSIGNS. All covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, the
Depositors and their successors, the Eligible Lender Trustee and its successors,
each Certificateholder and its successors and permitted assigns and to the
Surety Provider as a third party beneficiary, all as herein provided. Any
request, notice, direction, consent, waiver or other instrument or action by a
Certificateholder shall bind the successors and assigns of such
Certificateholder.
SECTION 11.8. NO PETITION. (a) Neither Depositor will at any time institute
against the Trust any bankruptcy proceedings under any United States Federal or
State bankruptcy or similar law in connection with any obligations relating to
the Trust Certificates, the Originators' Interests, the Notes, this Agreement or
any of the other Basic Documents.
(b) The Eligible Lender Trustee (not in its individual capacity but solely
as Eligible Lender Trustee), by entering into this Agreement, and each
Certificateholder, by accepting a Trust Certificate or Originators' Interest, as
the case may be, hereby covenant and agree that they will not at any time
institute against TMS Student Holdings, Inc. or the Trust, or join in any
institution against TMS Student Holdings, Inc. or the Trust of, any bankruptcy,
reorganization, arrangement, insolvency, receivership or liquidation
proceedings, or other proceedings under any United States Federal or State
bankruptcy or similar law in connection with any obligations relating to the
Trust Certificates or Originators' Interest, as the case may be, the Notes, this
Agreement or any of the other Basic Documents.
SECTION 11.9. NO RECOURSE. Each Certificateholder by accepting a Trust
Certificate or Originators' Interest, as the case may be, acknowledges that such
Certificateholder's Trust Certificates or Originators' Interest, as the case may
be, represent beneficial interests in the Trust only and do not represent
interests in or obligations of the Depositors, the Seller, the Master Servicer,
the Administrator, the Eligible Lender Trustee, the Indenture Trustee or any
Affiliate thereof or any officer, director or employee of any thereof and no
recourse may be had against such parties or their assets, except as may be
expressly set forth in this Agreement, the Trust Certificates, the Originators'
Interests 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 Commonwealth of Pennsylvania, 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. The
Trust created by this Agreement shall be a business trust subject to the
Pennsylvania business trust statute (15 Pa.C.S. ' ' 9501 ET SEQ.). This
Agreement and any amendment or supplement thereto shall be filed after its
execution with the Pennsylvania Department of State; PROVIDED, HOWEVER, that any
failure to make such a filing shall not affect in any way the validity of the
Trust created hereby or its status as a business trust under Pennsylvania law or
the effectiveness of this Agreement.
SECTION 11.12. RIGHTS OF SURETY PROVIDER. The Surety Provider is a
third-party beneficiary of this Trust Agreement. Any right conferred to the
Surety Provider shall be suspended during any period in which the Surety
Provider is in default in its payment obligations under the Insurance Agreement.
During any period of suspension the Surety Provider's rights hereunder shall
vest in the Certificateholders and shall be exercisable by the Holders of a
majority of the aggregate principal amount of Certificates then Outstanding. At
such time as the Certificates are no longer Outstanding hereunder and the Surety
Provider has been reimbursed for all Required Surety Payments to which it is
entitled under the Basic Documents and has been paid all Premium Amounts due and
owing in respect of the Surety Bonds, the Surety Provider's rights hereunder
shall terminate.
SECTION 11.13. CREATION OF TRUST AND DELIVERY OF TRUST AGREEMENT. This
Trust Agreement shall be deemed for all purposes executed and delivered at the
Eligible Lender Trustee's trust office in York, York County, Pennsylvania and
the Trust shall be created and effective upon delivery of this Trust Agreement
executed by the Depositors to the Eligible Lender Trustee and acceptance thereof
by the Eligible Lender Trustee at such office, which acceptance shall be
evidenced conclusively by the Eligible Lender Trustee's execution hereof.
<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 YORK BANK AND TRUST COMPANY
By:____________________________
Name:
Title:
TRANS-WORLD INSURANCE COMPANY,
D/B/A EDUCAID, Depositor,
By:______________________________
Name: Morton Dear
Title: Executive Vice President
CLASSNOTES, INC., Depositor
By:______________________________
Name: Morton Dear
Title: Executive Vice President
Accepted and agreed
with respect to the
provisions relating to
TMS Student Holdings, Inc.
TMS STUDENT HOLDINGS, INC.
By:___________________________
Name: Morton Dear
Title: President
Accepted and agreed
with respect to the
provisions relating to
Dauphin Deposit Bank and Trust Company
DAUPHIN DEPOSIT BANK AND TRUST COMPANY
By:____________________________
Name:
Title:
<PAGE>
EXHIBIT A
TO THE TRUST AGREEMENT
FORM OF TRUST CERTIFICATE
SEE REVERSE FOR CERTAIN DEFINITIONS
UNLESS THIS TRUST CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER
(AS DEFINED BELOW) OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND
ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT") OR ANY STATE SECURITIES LAWS. THE HOLDER HEREOF, BY
PURCHASING THIS TRUST CERTIFICATE, AGREES THAT THIS TRUST CERTIFICATE MAY BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IN ACCORDANCE WITH ANY APPLICABLE
STATE SECURITIES LAWS AND (1) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS
AN INSTITUTIONAL ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501(A)(1)-(3)
UNDER THE ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF AN
INSTITUTIONAL ACCREDITED INVESTOR, OR (2) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT.
THIS TRUST CERTIFICATE MAY NOT BE TRANSFERRED DIRECTLY OR INDIRECTLY TO (1)
EMPLOYEE BENEFIT PLANS, RETIREMENT ARRANGEMENTS, INDIVIDUAL RETIREMENT ACCOUNTS
OR KEOGH PLANS SUBJECT TO EITHER TITLE I OF THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED, OR SECTION 4975 OF THE INTERNAL REVENUE CODE
OF 1986, AS AMENDED, OR (2) ENTITIES (INCLUDING INSURANCE COMPANY GENERAL
ACCOUNTS) WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF ANY SUCH
PLAN'S ARRANGEMENTS OR ACCOUNT'S INVESTMENT IN SUCH ENTITIES. FURTHER, THIS
TRUST CERTIFICATE MAY BE TRANSFERRED ONLY TO A UNITED STATES PERSON WITHIN THE
MEANING OF SECTION 7701(A)(30) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED.
THIS CERTIFICATE IS NOT GUARANTEED OR INSURED BY ANY
GOVERNMENTAL AGENCY.
[THIS TRUST CERTIFICATE IS NONTRANSFERABLE.]
<PAGE>
NUMBER
--- $--------------------------
CUSIP NO.
CLASSNOTES TRUST 1997-I
AUCTION RATE ASSET BACKED CERTIFICATES
EVIDENCING A FRACTIONAL UNDIVIDED INTEREST IN THE TRUST, AS DEFINED
BELOW, THE PROPERTY OF WHICH INCLUDES A POOL OF STUDENT LOANS SOLD TO
THE TRUST BY TRANS-WORLD INSURANCE COMPANY, D/B/A EDUCAID AND
CLASSNOTES, INC.
(THIS TRUST CERTIFICATE DOES NOT REPRESENT AN INTEREST IN OR OBLIGATION
OF THE DEPOSITORS (AS DEFINED BELOW), THE MASTER SERVICER (AS DEFINED
BELOW), THE ELIGIBLE LENDER TRUSTEE (AS DEFINED BELOW) OR ANY OF THEIR
RESPECTIVE AFFILIATES, EXCEPT TO THE EXTENT DESCRIBED BELOW.)
THIS CERTIFIES THAT ------------------ IS THE REGISTERED OWNER OF
- ----------------- DOLLARS NON-ASSESSABLE, FULLY-PAID, FRACTIONAL UNDIVIDED
INTEREST IN CLASSNOTES TRUST 1997-I (THE "TRUST"), A TRUST FORMED UNDER THE LAWS
OF THE COMMONWEALTH OF PENNSYLVANIA BY TRANS-WORLD INSURANCE COMPANY, D/B/A
EDUCAID AND CLASSNOTES, INC. (THE "DEPOSITORS"). THE TRUST WAS CREATED PURSUANT
TO A TRUST AGREEMENT DATED AS OF MARCH __, 1997 (THE "TRUST AGREEMENT") BETWEEN
THE DEPOSITORS AND THE YORK BANK AND TRUST COMPANY, A PENNSYLVANIA BANK AND
TRUST COMPANY, NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS ELIGIBLE LENDER
TRUSTEE ON BEHALF OF THE TRUST (THE "ELIGIBLE LENDER TRUSTEE"), A SUMMARY OF
CERTAIN OF THE PERTINENT PROVISIONS OF WHICH IS SET FORTH BELOW. TO THE EXTENT
NOT OTHERWISE DEFINED HEREIN, THE CAPITALIZED TERMS USED HEREIN HAVE THE
MEANINGS ASSIGNED TO THEM IN APPENDIX A TO THE TRUST AGREEMENT; SUCH APPENDIX A
ALSO CONTAINS RULES AS TO USAGE THAT SHALL BE APPLICABLE HEREIN.
THIS CERTIFICATE IS ONE OF THE DULY AUTHORIZED CERTIFICATES DESIGNATED AS
"AUCTION RATE ASSET BACKED CERTIFICATES" (HEREIN CALLED THE "TRUST
CERTIFICATES"). ISSUED UNDER THE INDENTURE DATED AS OF MARCH __, 1997, BETWEEN
THE TRUST AND BANKERS TRUST COMPANY, AS INDENTURE TRUSTEE, WILL BE ONE OR MORE
SERIES OF NOTES, EACH SERIES TO BE ISSUED UNDER A SEPARATE TERMS AGREEMENT (SUCH
NOTES REFERRED TO HEREIN AS, COLLECTIVELY, THE "NOTES"). THIS TRUST CERTIFICATE
IS ISSUED UNDER AND IS SUBJECT TO THE TERMS, PROVISIONS AND CONDITIONS OF THE
TRUST AGREEMENT, TO WHICH TRUST AGREEMENT THE HOLDER OF THIS TRUST CERTIFICATE
BY VIRTUE OF THE ACCEPTANCE HEREOF ASSENTS AND BY WHICH SUCH HOLDER IS BOUND.
THE PROPERTY OF THE TRUST INCLUDES A POOL OF STUDENT LOANS (THE "FINANCED
STUDENT LOANS"), ALL MONEYS PAID THEREUNDER ON OR AFTER _______ __, 1997 (OR, IN
THE CASE OF FINANCED STUDENT LOANS THAT CONSTITUTE ADDITIONAL STUDENT LOANS, ON
OR AFTER THE RESPECTIVE SUBSEQUENT CUT-OFF DATES), CERTAIN BANK ACCOUNTS AND THE
PROCEEDS THEREOF AND CERTAIN OTHER RIGHTS UNDER THE TRUST AGREEMENT AND THE SALE
AND SERVICING AGREEMENT AND ALL PROCEEDS OF THE FOREGOING. THE RIGHTS OF THE
HOLDERS OF THE TRUST CERTIFICATES TO THE ASSETS OF THE TRUST (OTHER THAN THE
CERTIFICATE SURETY BOND) ARE SUBORDINATED TO THE RIGHTS OF THE HOLDERS OF THE
NOTES, AS SET FORTH IN THE SALE AND SERVICING AGREEMENT.
UNDER THE TRUST AGREEMENT, DISTRIBUTIONS WILL BE MADE ON THE TRUST
CERTIFICATES ON EACH CERTIFICATE DISTRIBUTION DATE, COMMENCING ON [APRIL 25,
1997], IN THE MANNER SET FORTH IN THE TRUST AGREEMENT AND THE SALE AND SERVICING
AGREEMENT. THE FINAL CERTIFICATE MATURITY DATE IS _____, _____.
EACH HOLDER OF THIS TRUST CERTIFICATE ACKNOWLEDGES AND AGREES THAT ITS
RIGHTS TO RECEIVE DISTRIBUTIONS IN RESPECT OF THIS TRUST CERTIFICATE FROM
AVAILABLE FUNDS AND AMOUNTS ON DEPOSIT IN THE RESERVE ACCOUNT ARE SUBORDINATED
TO THE RIGHTS OF THE NOTEHOLDERS AS DESCRIBED IN THE SALE AND SERVICING
AGREEMENT AND THE INDENTURE.
IT IS THE INTENT OF THE DEPOSITORS, THE MASTER SERVICER, THE ADMINISTRATOR
AND THE CERTIFICATEHOLDERS THAT, SOLELY FOR FEDERAL INCOME TAX PURPOSES, THE
TRUST WILL BE TREATED AS A PARTNERSHIP AND THE CERTIFICATEHOLDERS (INCLUDING TMS
STUDENT HOLDINGS, INC. IN ITS CAPACITY AS RECIPIENT OF DISTRIBUTIONS FROM THE
RESERVE ACCOUNT) WILL BE TREATED AS PARTNERS IN THAT PARTNERSHIP. TMS STUDENT
HOLDINGS, INC. AND THE OTHER CERTIFICATEHOLDERS BY ACCEPTANCE OF A TRUST
CERTIFICATE (AND THE CERTIFICATE OWNERS BY ACCEPTANCE OF A BENEFICIAL INTEREST
IN A TRUST CERTIFICATE) OR AN ORIGINATORS' INTEREST, AGREE TO TREAT, AND TO TAKE
NO ACTION INCONSISTENT WITH THE TREATMENT OF, THE TRUST CERTIFICATES FOR SUCH
FEDERAL INCOME TAX PURPOSES AS PARTNERSHIP INTERESTS IN THE TRUST.
EACH CERTIFICATEHOLDER OR CERTIFICATE OWNER, BY ITS ACCEPTANCE OF A TRUST
CERTIFICATE OR, IN THE CASE OF A CERTIFICATE OWNER, A BENEFICIAL INTEREST IN A
TRUST CERTIFICATE, COVENANTS AND AGREES THAT SUCH CERTIFICATEHOLDER OR
CERTIFICATE OWNER, AS THE CASE MAY BE, WILL NOT AT ANY TIME INSTITUTE AGAINST
THE SELLER OR THE TRUST, OR JOIN IN ANY INSTITUTION AGAINST THE SELLER OR THE
TRUST, ANY BANKRUPTCY, REORGANIZATION, ARRANGEMENT, INSOLVENCY, RECEIVERSHIP OR
LIQUIDATION PROCEEDINGS, OR OTHER PROCEEDINGS UNDER ANY UNITED STATES FEDERAL OR
STATE BANKRUPTCY OR SIMILAR LAW IN CONNECTION WITH ANY OBLIGATIONS RELATING TO
THE TRUST CERTIFICATES, THE NOTES, THE TRUST AGREEMENT OR ANY OF THE OTHER BASIC
DOCUMENTS.
DISTRIBUTIONS ON THIS TRUST CERTIFICATE WILL BE MADE AS PROVIDED IN THE
TRUST AGREEMENT BY THE ELIGIBLE LENDER TRUSTEE BY WIRE TRANSFER OR BY CHECK
MAILED TO THE CERTIFICATE HOLDER OF RECORD IN THE CERTIFICATE REGISTER WITHOUT
THE PRESENTATION OR SURRENDER OF THIS TRUST CERTIFICATE OR THE MAKING OF ANY
NOTATION HEREON, EXCEPT THAT WITH RESPECT TO TRUST CERTIFICATES REGISTERED ON
THE RECORD DATE IN THE NAME OF THE NOMINEE OF THE CLEARING AGENCY (INITIALLY,
SUCH NOMINEE TO BE CEDE & CO.), PAYMENTS WILL BE MADE BY WIRE TRANSFER IN
IMMEDIATELY AVAILABLE FUNDS TO THE ACCOUNT DESIGNATED BY SUCH NOMINEE. EXCEPT AS
OTHERWISE PROVIDED IN THE TRUST AGREEMENT AND NOTWITHSTANDING THE ABOVE, THE
FINAL DISTRIBUTION ON THIS TRUST CERTIFICATE WILL BE MADE AFTER DUE NOTICE BY
THE ELIGIBLE LENDER TRUSTEE OF THE PENDENCY OF SUCH DISTRIBUTION AND ONLY UPON
PRESENTATION AND SURRENDER OF THIS TRUST CERTIFICATE AT THE OFFICE OR AGENCY
MAINTAINED FOR THE PURPOSE OF THE ELIGIBLE LENDER TRUSTEE IN YORK OR HARRISBURG,
PENNSYLVANIA.
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS TRUST
CERTIFICATE SET FORTH ON THE REVERSE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR
ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.
UNLESS THE CERTIFICATE OF AUTHENTICATION HEREON SHALL HAVE BEEN EXECUTED BY
AN AUTHORIZED REPRESENTATIVE OF THE ELIGIBLE LENDER TRUSTEE OR ITS
AUTHENTICATING AGENT, BY MANUAL SIGNATURE, THIS TRUST CERTIFICATE SHALL NOT
ENTITLE THE HOLDER HEREOF TO ANY BENEFIT UNDER THE TRUST AGREEMENT OR THE SALE
AND SERVICING AGREEMENT OR BE VALID FOR ANY PURPOSE.
<PAGE>
IN WITNESS WHEREOF, THE ELIGIBLE LENDER TRUSTEE ON BEHALF OF THE TRUST AND
NOT IN ITS INDIVIDUAL CAPACITY HAS CAUSED THIS TRUST CERTIFICATE TO BE DULY
EXECUTED AS OF THE DATE SET FORTH BELOW.
CLASSNOTES TRUST 1997-I
BY THE YORK BANK AND
TRUST COMPANY,
NOT IN ITS INDIVIDUAL
CAPACITY BUT SOLELY AS
ELIGIBLE LENDER TRUSTEE,
BY
-----------------------------
AUTHORIZED SIGNATORY
DATE:
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
THIS IS ONE OF THE TRUST CERTIFICATES REFERRED TO IN THE WITHIN-MENTIONED
TRUST AGREEMENT.
THE YORK BANK AND TRUST COMPANY,
NOT IN ITS INDIVIDUAL CAPACITY
BUT SOLELY AS ELIGIBLE LENDER
TRUSTEE,
BY -----------------------------
AUTHORIZED REPRESENTATIVE
DATE:
<PAGE>
[REVERSE OF TRUST CERTIFICATE]
THE TRUST CERTIFICATES DO NOT REPRESENT AN OBLIGATION OF, OR AN INTEREST
IN, THE DEPOSITORS, THE MASTER SERVICER, THE ADMINISTRATOR, THE ELIGIBLE LENDER
TRUSTEE OR ANY AFFILIATES OF ANY OF THEM, AND NO RECOURSE MAY BE HAD AGAINST
SUCH PARTIES OR THEIR ASSETS, EXCEPT AS MAY BE EXPRESSLY SET FORTH HEREIN, IN
THE TRUST AGREEMENT OR IN THE OTHER BASIC DOCUMENTS. IN ADDITION, THIS TRUST
CERTIFICATE IS NOT GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY AND
IS LIMITED IN RIGHT OF PAYMENT TO CERTAIN COLLECTIONS RESPECTING THE FINANCED
STUDENT LOANS, ALL AS MORE SPECIFICALLY SET FORTH IN THE SALE AND SERVICING
AGREEMENT. A COPY OF EACH OF THE SALE AND SERVICING AGREEMENT AND THE TRUST
AGREEMENT MAY BE EXAMINED DURING NORMAL BUSINESS HOURS AT THE PRINCIPAL OFFICE
OF THE SELLER, AND AT SUCH OTHER PLACES, IF ANY, DESIGNATED BY THE SELLER, BY
ANY CERTIFICATEHOLDER UPON REQUEST.
THE TRUST AGREEMENT PERMITS, WITH CERTAIN EXCEPTIONS THEREIN PROVIDED, THE
AMENDMENT THEREOF AND THE MODIFICATION OF THE RIGHTS AND OBLIGATIONS OF THE
SELLER AND THE RIGHTS OF THE CERTIFICATEHOLDERS UNDER THE TRUST AGREEMENT AT ANY
TIME BY THE DEPOSITOR AND THE ELIGIBLE LENDER TRUSTEE WITH THE CONSENT OF (I)
THE HOLDERS OF THE NOTES EVIDENCING NOT LESS THAN 50.1% OF THE OUTSTANDING
PRINCIPAL BALANCE OF THE NOTES (II) THE CERTIFICATES EVIDENCING NOT LESS THAN
50.1% OF THE CERTIFICATE BALANCE AND (III) THE SURETY PROVIDER. ANY SUCH CONSENT
BY THE HOLDER OF THIS TRUST CERTIFICATE SHALL BE CONCLUSIVE AND BINDING ON SUCH
HOLDER AND ON ALL FUTURE HOLDERS OF THIS TRUST CERTIFICATE AND OF ANY TRUST
CERTIFICATE ISSUED UPON THE TRANSFER HEREOF OR IN EXCHANGE HEREFOR OR IN LIEU
HEREOF WHETHER OR NOT NOTATION OF SUCH CONSENT IS MADE UPON THIS TRUST
CERTIFICATE. THE TRUST AGREEMENT ALSO PERMITS THE AMENDMENT THEREOF, IN CERTAIN
LIMITED CIRCUMSTANCES, WITHOUT THE CONSENT OF THE HOLDERS OF ANY OF THE TRUST
CERTIFICATES.
AS PROVIDED IN THE TRUST AGREEMENT AND SUBJECT TO CERTAIN LIMITATIONS
THEREIN SET FORTH, THE TRANSFER OF THIS TRUST CERTIFICATE IS REGISTERABLE IN THE
CERTIFICATE REGISTER UPON SURRENDER OF THIS CERTIFICATE FOR REGISTRATION OF
TRANSFER AT THE OFFICES OR AGENCIES MAINTAINED BY DAUPHIN DEPOSIT BANK AND TRUST
COMPANY IN ITS CAPACITY AS CERTIFICATE REGISTRAR, OR BY ANY SUCCESSOR
CERTIFICATE REGISTRAR, ACCOMPANIED BY A WRITTEN INSTRUMENT OF TRANSFER IN FORM
SATISFACTORY TO THE ELIGIBLE LENDER TRUSTEE AND THE CERTIFICATE REGISTRAR DULY
EXECUTED BY THE HOLDER HEREOF OR SUCH HOLDER'S ATTORNEY DULY AUTHORIZED IN
WRITING, AND THEREUPON ONE OR MORE NEW TRUST CERTIFICATES OF AUTHORIZED
DENOMINATIONS EVIDENCING THE SAME AGGREGATE INTEREST IN THE TRUST WILL BE ISSUED
TO THE DESIGNATED TRANSFEREE.
THE TRUST CERTIFICATES ARE ISSUABLE ONLY AS REGISTERED TRUST CERTIFICATES
WITHOUT COUPONS IN DENOMINATIONS OF $1,000,000 AND INTEGRAL MULTIPLES OF $50,000
IN EXCESS THEREOF; PROVIDED, HOWEVER, THAT THE TRUST CERTIFICATES ISSUED TO THE
TMS STUDENT HOLDINGS, INC. MAY BE ISSUED IN SUCH DENOMINATIONS AS TO INCLUDE ANY
RESIDUAL AMOUNT OF THE CERTIFICATE BALANCE. AS PROVIDED IN THE TRUST AGREEMENT
AND SUBJECT TO CERTAIN LIMITATIONS THEREIN SET FORTH, TRUST CERTIFICATES ARE
EXCHANGEABLE FOR NEW TRUST CERTIFICATES OF AUTHORIZED DENOMINATIONS EVIDENCING
THE SAME AGGREGATE DENOMINATION, AS REQUESTED BY THE HOLDER SURRENDERING THE
SAME. NO SERVICE CHARGE WILL BE MADE FOR ANY SUCH REGISTRATION OF TRANSFER OR
EXCHANGE, BUT THE ELIGIBLE LENDER TRUSTEE OR THE CERTIFICATE REGISTRAR MAY
REQUIRE PAYMENT OF A SUM SUFFICIENT TO COVER ANY TAX OR GOVERNMENTAL CHARGE
PAYABLE IN CONNECTION THEREWITH.
THE ELIGIBLE LENDER TRUSTEE, THE CERTIFICATE REGISTRAR, THE SURETY PROVIDER
AND ANY AGENT OF THE ELIGIBLE LENDER TRUSTEE, THE CERTIFICATE REGISTRAR OR THE
SURETY PROVIDER MAY TREAT THE PERSON IN WHOSE NAME THIS TRUST CERTIFICATE IS
REGISTERED AS THE OWNER HEREOF FOR ALL PURPOSES, AND NONE OF THE ELIGIBLE LENDER
TRUSTEE, THE CERTIFICATE REGISTRAR OR THE SURETY PROVIDER OR ANY SUCH AGENT
SHALL BE AFFECTED BY ANY NOTICE TO THE CONTRARY.
THIS TRUST CERTIFICATE MAY NOT BE TRANSFERRED DIRECTLY OR INDIRECTLY TO (1)
EMPLOYEE BENEFIT PLANS, RETIREMENT ARRANGEMENTS, INDIVIDUAL RETIREMENT ACCOUNTS
OR KEOGH PLANS SUBJECT TO EITHER TITLE I OF THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED, OR SECTION 4975 OF THE INTERNAL REVENUE CODE
OF 1986, AS AMENDED, OR (2) ENTITIES (INCLUDING INSURANCE COMPANY GENERAL
ACCOUNTS) WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF ANY SUCH
PLAN'S ARRANGEMENTS OR ACCOUNT'S INVESTMENT IN SUCH ENTITIES. BY ACCEPTING AND
HOLDING THIS TRUST CERTIFICATE, THE HOLDER HEREOF SHALL BE DEEMED TO HAVE
REPRESENTED AND WARRANTED THAT IT IS NOT ANY OF THE FOREGOING ENTITIES.
THIS TRUST CERTIFICATE MAY NOT BE TRANSFERRED TO ANY PERSON WHO IS NOT A
U.S. PERSON, AS SUCH TERM IS DEFINED IN SECTION 7701(A)(30) OF THE INTERNAL
REVENUE CODE, AS AMENDED.
EACH PURCHASER OF TRUST CERTIFICATES (EXCEPT FOR TMS STUDENT HOLDINGS,
INC.) SHALL BE REQUIRED, PRIOR TO PURCHASING A TRUST CERTIFICATE, TO EXECUTE AND
DELIVER TO THE BROKER-DEALER A PURCHASER'S LETTER IN THE FORM ATTACHED TO THE
TRUST AGREEMENT AS EXHIBIT C.
THE OBLIGATIONS AND RESPONSIBILITIES CREATED BY THE TRUST AGREEMENT AND THE
TRUST CREATED THEREBY SHALL TERMINATE UPON THE PAYMENT TO CERTIFICATEHOLDERS OF
ALL AMOUNTS REQUIRED TO BE PAID TO THEM PURSUANT TO THE TRUST AGREEMENT AND THE
SALE AND SERVICING AGREEMENT AND THE DISPOSITION OF ALL PROPERTY HELD AS PART OF
THE TRUST. THE DEPOSITORS MAY AT THEIR OPTION PURCHASE THE CORPUS OF THE TRUST
AT A PRICE SPECIFIED IN THE SALE AND SERVICING AGREEMENT, AND SUCH PURCHASE OF
THE FINANCED STUDENT LOANS AND OTHER PROPERTY OF THE TRUST WILL EFFECT EARLY
RETIREMENT OF THE TRUST CERTIFICATES; HOWEVER, SUCH RIGHT OF PURCHASE IS
EXERCISABLE ONLY AS OF ANY DISTRIBUTION DATE ON OR AFTER THE DATE ON WHICH THE
POOL BALANCE IS LESS THAN OR EQUAL TO 10% OF THE INITIAL POOL BALANCE.
THIS TRUST CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE COMMONWEALTH OF PENNSYLVANIA, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED THE UNDERSIGNED HEREBY SELLS, ASSIGNS AND TRANSFERS UNTO
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
- ----------------------------------------------------------------
(PLEASE PRINT OR TYPE NAME AND ADDRESS, INCLUDING POSTAL ZIP
CODE, OF ASSIGNEE)
- ----------------------------------------------------------------
THE WITHIN TRUST CERTIFICATE, AND ALL RIGHTS THEREUNDER, HEREBY
IRREVOCABLY CONSTITUTING AND APPOINTING
- -------------------------------------------------------
ATTORNEY TO TRANSFER SAID TRUST CERTIFICATE ON THE BOOKS OF THE CERTIFICATE
REGISTRAR, WITH FULL POWER OF SUBSTITUTION IN THE PREMISES.
DATED:
______________________________*
SIGNATURE GUARANTEED:
________________________________*
* NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS IT
APPEARS UPON THE FACE OF THE WITHIN TRUST CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION, ENLARGEMENT OR ANY CHANGE WHATEVER. SUCH SIGNATURE MUST BE
GUARANTEED BY AN APPROVED ELIGIBLE GUARANTOR INSTITUTION, AN INSTITUTION WHICH
IS A PARTICIPANT IN A SECURITIES TRANSFER ASSOCIATION RECOGNIZED SIGNATURE
GUARANTEE PROGRAM.
<PAGE>
EXHIBIT B
CLASSNOTES TRUST 1997-I
AUCTION RATE ASSET-BACKED CERTIFICATES
NOTICE OF CHANGE IN AUCTION DATE
NOTICE IS HEREBY GIVEN BY SMITH BARNEY INC., AS MARKET AGENT FOR THE
CAPTIONED CERTIFICATES, THAT WITH RESPECT TO THE CAPTIONED CERTIFICATES, THE
AUCTION DATE IS HEREBY CHANGED AS FOLLOWS:
1. WITH RESPECT TO THE CAPTIONED CERTIFICATES, THE DEFINITION OF "AUCTION
DATE" SHALL BE DEEMED AMENDED BY SUBSTITUTING "_________________ (NUMBER)
BUSINESS DAY" IN THE SECOND LINE THEREOF.
2. THIS CHANGE SHALL TAKE EFFECT ON ______________ WHICH SHALL BE THE
AUCTION DATE FOR THE AUCTION PERIOD COMMENCING ON ______________.
3. THE AUCTION DATE FOR THE CAPTIONED CERTIFICATES SHALL BE SUBJECT TO
FURTHER CHANGE HEREAFTER AS PROVIDED IN THE TRUST AGREEMENT.
4. TERMS NOT DEFINED IN THIS NOTICE SHALL HAVE THE MEANINGS SET FORTH IN
THE TRUST AGREEMENT.
SMITH BARNEY INC., AS MARKET AGENT
DATED: BY:
<PAGE>
EXHIBIT C
TO BE SUBMITTED TO YOUR BROKER-DEALER WHO MAY THEN
DELIVER COPIES ON YOUR BEHALF TO THE AUCTION AGENT
PURCHASER'S LETTER
RELATING TO CLASSNOTES TRUST 1997-I
AUCTION RATE ASSET BACKED CERTIFICATES
CLASSNOTES TRUST 1997-I
THE AUCTION AGENT
A BROKER-DEALER
AN AGENT MEMBER
OTHER PERSONS
DEAR SIRS:
WE MAY FROM TIME TO TIME OFFER TO PURCHASE, PURCHASE, OFFER TO SELL AND/OR
SELL AUCTION RATE ASSET BACKED CERTIFICATES (THE "CERTIFICATES"), ISSUED BY
CLASSNOTES TRUST 1997-I, A PENNSYLVANIA BUSINESS TRUST (THE "COMPANY"), AS
DESCRIBED IN A PRIVATE PLACEMENT MEMORANDUM RELATING TO THE CERTIFICATES,
INCLUDING THE ATTACHMENTS THERETO (THE "OFFERING DOCUMENT"). WE AGREE THAT THIS
LETTER SHALL APPLY TO SUCH PURCHASES, SALES, AND OFFERS AND TO ANY CERTIFICATES
OWNED BY US. WE UNDERSTAND THAT THE CERTIFICATE INTEREST RATE FOR THE
CERTIFICATES WILL GENERALLY BE BASED ON THE RESULTS OF AUCTIONS AS SET FORTH IN
THE OFFERING DOCUMENT. WE ACKNOWLEDGE THAT WE HAVE RECEIVED, AND HAVE READ AND
UNDERSTOOD, THE OFFERING DOCUMENT.
CAPITALIZED TERMS USED BUT NOT DEFINED HEREIN SHALL HAVE THE MEANINGS
ASSIGNED TO SUCH TERMS IN THE OFFERING DOCUMENT.
WE REPRESENT AND AGREE AS FOLLOWS:
(A) WE AGREE THAT ANY BID OR SELL ORDER PLACED BY US
SHALL CONSTITUTE AN IRREVOCABLE OFFER BY US TO PURCHASE
OR SELL THE CERTIFICATES SUBJECT TO SUCH BID OR SELL ORDER, OR SUCH
LESSER PRINCIPAL AMOUNT OF CERTIFICATES AS WE SHALL BE REQUIRED TO SELL
OR PURCHASE AS A RESULT OF SUCH AUCTION, AT THE APPLICABLE PRICE, ALL
AS SET FORTH IN THE OFFERING DOCUMENT, AND THAT IF WE FAIL TO PLACE A
BID OR SELL ORDER WITH RESPECT TO CERTIFICATES OWNED BY US WITH A
BROKER- DEALER ON ANY AUCTION DATE FOR SUCH CERTIFICATES, OR A
BROKER-DEALER TO WHICH WE COMMUNICATE A BID OR SELL ORDER FAILS TO
SUBMIT SUCH BID OR SELL ORDER TO THE AUCTION AGENT, WE SHALL BE DEEMED
TO HAVE PLACED A HOLD ORDER WITH RESPECT TO SUCH CERTIFICATES AS
DESCRIBED IN THE OFFERING DOCUMENT. WE AUTHORIZE ANY BROKER-DEALER THAT
SUBMITS A BID OR SELL ORDER AS OUR AGENT IN AUCTIONS TO EXECUTE
CONTRACTS FOR THE SALE OF CERTIFICATES COVERED BY SUCH BID OR SELL
ORDER. WE RECOGNIZE THAT THE PAYMENT BY SUCH BROKER-DEALER FOR
CERTIFICATES PURCHASED ON OUR BEHALF SHALL NOT RELIEVE US OF ANY
LIABILITY TO SUCH BROKER-DEALER FOR PAYMENT FOR SUCH CERTIFICATES.
(B) WE HEREBY CONFIRM THAT ANY PURCHASE OF CERTIFICATES MADE
BY US WILL BE FOR OUR OWN ACCOUNT, OR FOR THE ACCOUNT OF ONE OR MORE
PARTIES (EACH OF WHOM ARE INSTITUTIONS) FOR WHOM WE ARE ACTING AS
TRUSTEE OR AGENT WITH COMPLETE INVESTMENT DISCRETION AND WITH AUTHORITY
TO BIND SUCH PARTIES, AND NOT WITH A VIEW TO ANY PUBLIC RESALE OR
DISTRIBUTION THEREOF. WE AND EACH OTHER PARTY FOR WHOM WE ARE ACTING
WHICH WILL ACQUIRE CERTIFICATES WILL BE (A) AN INSTITUTION THAT IS AN
"ACCREDITED INVESTOR" AS DEFINED IN RULE 501(A)(1)-(3) UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), (B) KNOWLEDGEABLE,
SOPHISTICATED AND EXPERIENCED IN BUSINESS AND FINANCIAL MATTERS AND (C)
ABLE AND PREPARED TO BEAR THE ECONOMIC RISK OF INVESTING IN AND HOLDING
SUCH CERTIFICATES.
(C) WE UNDERSTAND AND EXPRESSLY ACKNOWLEDGE THAT THE CERTIFICATES
HAVE NOT BEEN REGISTERED UNDER THE ACT AND, ACCORDINGLY, THAT THE
CERTIFICATES MAY NOT BE REOFFERED, RESOLD OR OTHERWISE PLEDGED,
HYPOTHECATED OR TRANSFERRED UNLESS SO REGISTERED OR AN APPLICABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT IS AVAILABLE
AND ONLY PURSUANT TO THE PROCEDURES SET FORTH IN THIS LETTER.
(D) WE AGREE THAT, DURING THE APPLICABLE PERIOD AS DESCRIBED IN
THE OFFERING DOCUMENT, DISPOSITIONS OF CERTIFICATES CAN BE MADE ONLY
IN THE DENOMINATIONS SET FORTH IN THE OFFERING DOCUMENT, AND WE WILL
SELL, TRANSFER OR OTHERWISE DISPOSE OF ANY CERTIFICATES HELD BY US
FROM TIME TO TIME ONLY PURSUANT TO A BID OR SELL ORDER PLACED IN AN
AUCTION TO OR THROUGH A BROKER-DEALER OR, WHEN PERMITTED IN THE
OFFERING DOCUMENT, TO A PERSON THAT HAS SIGNED AND DELIVERED, OR
CAUSED TO BE DELIVERED ON ITS BEHALF, TO THE AUCTION AGENT A LETTER
SUBSTANTIALLY IN THE FORM OF THIS LETTER (OR OTHER APPLICABLE
PURCHASER'S LETTER) PROVIDED THAT IN THE CASE OF ALL TRANSFERS OTHER
THAN PURSUANT TO AUCTIONS WE OR OUR BROKER-DEALER OR OUR AGENT MEMBER
SHALL ADVISE THE AUCTION AGENT OF SUCH TRANSFER. WE AGREE TO COMPLY
WITH ANY OTHER TRANSFER RESTRICTIONS OR OTHER RELATED PROCEDURES AS
DESCRIBED IN THE OFFERING DOCUMENT.
(E) WE AGREE THAT, DURING THE APPLICABLE PERIOD AS DESCRIBED IN
THE OFFERING DOCUMENT, OWNERSHIP OF CERTIFICATES SHALL BE REPRESENTED
BY A GLOBAL CERTIFICATE REGISTERED IN THE NAME OF THE APPLICABLE
SECURITIES DEPOSITORY OR ITS NOMINEE, THAT WE WILL NOT BE ENTITLED TO
RECEIVE ANY CERTIFICATE REPRESENTING THE CERTIFICATES AND THAT OUR
OWNERSHIP OF ANY CERTIFICATES WILL BE MAINTAINED IN BOOK-ENTRY FORM BY
THE SECURITIES DEPOSITORY FOR THE ACCOUNT OF OUR AGENT MEMBER, WHICH
IN TURN WILL MAINTAIN RECORDS OF OUR BENEFICIAL OWNERSHIP. WE
AUTHORIZE AND INSTRUCT OUR AGENT MEMBER TO DISCLOSE TO THE AUCTION
AGENT SUCH INFORMATION CONCERNING OUR BENEFICIAL OWNERSHIP OF
CERTIFICATES AS THE AUCTION AGENT SHALL REQUEST.
(F) WE ACKNOWLEDGE THAT THE BROKER-DEALERS THAT PARTICIPATE IN AN
AUCTION MAY PURCHASE CERTIFICATES AND SUBMIT ORDERS IN AUCTIONS WITH
RESPECT TO ANY CERTIFICATES FOR THEIR OWN ACCOUNT AND THAT, BECAUSE
ALL ORDERS MUST BE SUBMITTED THROUGH BROKER-DEALERS, SUCH
BROKER-DEALERS MAY HAVE KNOWLEDGE OF ORDERS PLACED THROUGH IT IN ANY
SUCH AUCTION.
(G) WE UNDERSTAND AND AGREE THAT IN MAKING DECISIONS AS TO
WHETHER TO PURCHASE OR SELL CERTIFICATES, IN AUCTIONS OR OTHERWISE, WE
MUST RELY ON OUR OWN EXAMINATION OF THE TERMS OF THE CERTIFICATES, AND
THAT NEITHER THE AUCTION AGENT NOR ANY BROKER-DEALER, BY PARTICIPATING
IN AUCTIONS, SHALL BE DEEMED TO MAKE ANY RECOMMENDATION REGARDING THE
MERITS OF ANY INVESTMENT IN THE CERTIFICATES OR THE SUITABILITY OF AN
INVESTMENT IN THE CERTIFICATES BY US, AND THAT NEITHER THE AUCTION
AGENT NOR ANY BROKER-DEALER HAS ANY OBLIGATION TO SUPPLY TO US ANY
INFORMATION CONCERNING THE CERTIFICATES.
(H) WE ACKNOWLEDGE THAT PARTIAL DELIVERIES OF CERTIFICATES
PURCHASED IN AUCTIONS MAY BE MADE TO US AND SUCH DELIVERIES SHALL
CONSTITUTE GOOD DELIVERY AS SET FORTH IN THE OFFERING DOCUMENT.
(I) WE ACKNOWLEDGE THAT PRIOR TO PURCHASING ANY CERTIFICATES WE
SHALL HAVE RECEIVED AN OFFERING DOCUMENT AND ACKNOWLEDGE THAT WE WILL
HAVE HAD ACCESS TO SUCH FINANCIAL AND OTHER INFORMATION, AND HAVE BEEN
AFFORDED THE OPPORTUNITY TO ASK SUCH QUESTIONS OF REPRESENTATIVES OF
THE REPRESENTATIVE AND THE SELLER AND RECEIVE ANSWERS THERETO, AS WE
DEEM NECESSARY IN CONNECTION WITH OUR DECISION TO PURCHASE
CERTIFICATES.
(J) WE RECOGNIZE THAT THE REPRESENTATIVE, THE SELLER AND
BROKER-DEALERS WILL RELY UPON THE TRUTH AND ACCURACY OF THE FOREGOING
INVESTMENT REPRESENTATIONS AND AGREEMENTS, AND WE AGREE THAT EACH OF
OUR PURCHASES OF CERTIFICATES NOW OR IN THE FUTURE SHALL BE DEEMED TO
CONSTITUTE OUR CONCURRENCE IN ALL OF THE FOREGOING WHICH SHALL BE
BINDING ON US AND EACH PARTY FOR WHICH WE ARE ACTING AS SET FORTH IN
PARAGRAPH 2 ABOVE.
(K) THE UNDERSIGNED IS NOT, AND WILL NOT ACQUIRE CERTIFICATES
DIRECTLY OR INDIRECTLY ON BEHALF OF, (I) AN EMPLOYEE BENEFIT PLAN,
RETIREMENT ARRANGEMENT, INDIVIDUAL RETIREMENT ACCOUNT OR KEOGH PLAN
SUBJECT TO EITHER TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY
ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED (EACH A "PLAN"), OR (II) AN ENTITY
(INCLUDING INSURANCE COMPANY GENERAL ACCOUNTS) WHOSE UNDERLYING ASSETS
INCLUDE PLAN ASSETS AS A RESULT OF A PLAN'S INVESTMENT IN SUCH ENTITY.
(L) OUR AGENT MEMBER OF THE SECURITIES DEPOSITORY, NOW THE
DEPOSITORY TRUST COMPANY, CURRENTLY IS --------------------.
(M) WE UNDERSTAND THAT A RESTRICTIVE LEGEND WILL BE PLACED ON THE
CERTIFICATES AND STOP-TRANSFER INSTRUCTIONS WILL BE ISSUED TO THE
TRANSFER AGENT FOR THE CERTIFICATES, ALL AS SET FORTH IN THE OFFERING
DOCUMENT.
(N) OUR PERSONNEL AUTHORIZED TO PLACE ORDERS WITH BROKER-DEALERS
FOR THE PURPOSES SET FORTH IN THE OFFERING DOCUMENT IN AUCTIONS
CURRENTLY IS/ARE ____________ ______________________, TELEPHONE NUMBER
(___) ________.
(O) OUR TAXPAYER IDENTIFICATION NUMBER IS ----------------.
(P) THIS LETTER IS NOT A COMMITMENT BY US TO PURCHASE ANY
CERTIFICATES.
(Q) THE DESCRIPTIONS OF AUCTION PROCEDURES SET FORTH IN APPENDIX
I TO THE OFFERING DOCUMENT ARE INCORPORATED BY REFERENCE HEREIN AND,
IN CASE OF ANY CONFLICT BETWEEN THIS LETTER AND ANY SUCH DESCRIPTION,
SUCH DESCRIPTION SHALL CONTROL.
(R) THIS LETTER SUPERSEDES ANY VERSION OF THIS LETTER DELIVERED
BY US AND DATED EARLIER THAN THE DATE HEREOF.
DATED:
-------------------------------
(NAME OF PURCHASER)
BY:____________________________
PRINTED NAME:
TITLE:
MAILING ADDRESS OF PURCHASER:
<PAGE>
APPENDIX A
DEFINITIONS
APPENDIX B
CERTIFICATE AUCTION PROCEDURES
SECTION 1.1. DEFINITIONS
"ALL HOLD RATE" MEANS NINETY PERCENT (90%) OF ONE- MONTH LIBOR.
"AUCTION" MEANS THE IMPLEMENTATION OF THE AUCTION PROCEDURES ON AN AUCTION
DATE.
"AUCTION AGENT" MEANS THE INITIAL AUCTION AGENT UNDER THE INITIAL AUCTION
AGENT AGREEMENT UNLESS AND UNTIL A SUBSTITUTE AUCTION AGENT AGREEMENT BECOMES
EFFECTIVE, AFTER WHICH "AUCTION AGENT" SHALL MEAN THE SUBSTITUTE AUCTION AGENT.
"AUCTION AGENT AGREEMENT" MEANS THE INITIAL AUCTION AGENT AGREEMENT UNLESS
AND UNTIL A SUBSTITUTE AUCTION AGENT AGREEMENT IS ENTERED INTO, AFTER WHICH
"AUCTION AGENT AGREEMENT" SHALL MEAN SUCH SUBSTITUTE AUCTION AGENT AGREEMENT.
"AUCTION AGENT FEE" HAS THE MEANING SET FORTH IN THE AUCTION AGENT
AGREEMENT.
"AUCTION AGENT FEE RATE" HAS THE MEANING SET FORTH IN THE AUCTION AGENT
AGREEMENT.
"AUCTION DATE" MEANS, INITIALLY, APRIL 1, 1997 WITH RESPECT TO THE CLASS 1
CERTIFICATES (OR SUCH OTHER DATE AS MAY BE SET FORTH IN THE TRUST SUPPLEMENT
RELATING TO A CLASS OF CERTIFICATES), AND THEREAFTER, THE BUSINESS DAY
IMMEDIATELY PRECEDING THE FIRST DAY OF EACH AUCTION PERIOD FOR EACH CLASS OF
CERTIFICATES, OTHER THAN:
(I) EACH AUCTION PERIOD COMMENCING AFTER THE OWNERSHIP OF
CERTIFICATES IS NO LONGER MAINTAINED IN BOOK-ENTRY FORM
BY THE SECURITIES DEPOSITORY;
(II) EACH AUCTION PERIOD COMMENCING AFTER AND DURING THE
CONTINUANCE OF AN EVENT OF DEFAULT; OR
(III) EACH AUCTION PERIOD COMMENCING LESS THAN TWO BUSINESS
DAYS AFTER THE CURE OR WAIVER OF AN EVENT OF DEFAULT.
NOTWITHSTANDING THE FOREGOING, THE AUCTION DATE FOR ONE OR MORE AUCTION
PERIODS MAY BE CHANGED PURSUANT TO SECTION 2.2.2 OF THIS APPENDIX I.
"AUCTION PERIOD" MEANS THE INTEREST PERIOD DURING WHICH TIME THE
CERTIFICATE RATE IS DETERMINED PURSUANT TO SECTION 2.2.1 HEREOF, WHICH AUCTION
PERIOD (AFTER THE INITIAL PERIOD) INITIALLY SHALL CONSIST GENERALLY OF 28 DAYS
(EXCEPT AS OTHERWISE SET FORTH IN A TRUST SUPPLEMENT), AS THE SAME MAY BE
ADJUSTED PURSUANT TO SECTION 2.2.2 HEREOF.
"AUCTION PERIOD ADJUSTMENT" MEANS AN ADJUSTMENT TO THE AUCTION PERIOD AS
PROVIDED IN SECTION 2.4 HEREOF OR IN THE RELATED TRUST SUPPLEMENT.
"AUCTION PROCEDURES" MEANS THE PROCEDURES SET FORTH IN SECTION 2.2.1 HEREOF
BY WHICH THE AUCTION RATE IS DETERMINED.
"AUCTION RATE" MEANS THE RATE OF INTEREST PER ANNUM THAT RESULTS FROM
IMPLEMENTATION OF THE AUCTION PROCEDURES AND IS DETERMINED AS DESCRIBED IN
SECTION 2.2.1(C)(II) HEREOF.
"AUCTION RATE CERTIFICATES" MEANS A CLASS OF CERTIFICATES, BEARING INTEREST
BASED UPON AN AUCTION RATE.
"AUTHORIZED DENOMINATIONS" MEANS $1,000,000 AND INTEGRAL MULTIPLES OF
$50,000 IN EXCESS THEREOF.
"AVAILABLE CERTIFICATES" HAS THE MEANING SET FORTH IN SECTION
2.2.1(C)(I)(A) HEREOF.
"BID" HAS THE MEANING SET FORTH IN SECTION 2.2.1(A)(I) HEREOF.
"BID AUCTION RATE" HAS THE MEANING SET FORTH IN SECTION 2.2.1(C)(I) HEREOF.
"BIDDER" HAS THE MEANING SET FORTH IN SECTION 2.2.1(A)(I) HEREOF.
"BOND EQUIVALENT YIELD - 91-DAY T-BILL" MEANS, IN RESPECT OF ANY SECURITY
WITH A MATURITY OF SIX MONTHS OR LESS THE RATE FOR WHICH IS QUOTED IN THE WALL
STREET JOURNAL (EASTERN EDITION) ON A BANK DISCOUNT BASIS, A YIELD (EXPRESSED AS
A PERCENTAGE) CALCULATED IN ACCORDANCE WITH THE FOLLOWING FORMULA AND ROUNDED UP
TO THE NEAREST ONE ONE-HUNDREDTH OF ONE PERCENT:
BOND EQUIVALENT YIELD = Q X N X 100
---------------
360 - (91 X Q)
WHERE "Q" REFERS TO THE PER ANNUM RATE FOR THE SECURITY QUOTED ON A BANK
DISCOUNT BASIS AND EXPRESSED AS A DECIMAL, AND "N" REFERS TO 365 OR 366 (DAYS),
AS THE CASE MAY BE.
"BOOK-ENTRY FORM" OR "BOOK-ENTRY SYSTEM" MEANS A FORM OR SYSTEM UNDER WHICH
(I) THE BENEFICIAL RIGHT TO PRINCIPAL AND INTEREST MAY BE TRANSFERRED ONLY
THROUGH A BOOK ENTRY, (II) PHYSICAL SECURITIES IN REGISTERED FORM ARE ISSUED
ONLY TO A SECURITIES DEPOSITORY OR ITS NOMINEE AS REGISTERED OWNER, WITH THE
SECURITIES "IMMOBILIZED" TO THE CUSTODY OF THE SECURITIES DEPOSITORY, AND (III)
THE BOOK ENTRY IS THE RECORD THAT IDENTIFIES THE OWNERS OF BENEFICIAL INTERESTS
IN THAT PRINCIPAL AND INTEREST.
"BROKER-DEALER" MEANS SMITH BARNEY SHEARSON INC. OR ANY OTHER BROKER OR
DEALER (EACH AS DEFINED IN THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED),
COMMERCIAL BANK OR OTHER ENTITY PERMITTED BY LAW TO PERFORM THE FUNCTIONS
REQUIRED OF A BROKER-DEALER SET FORTH IN THE AUCTION PROCEDURES THAT (A) IS A
PARTICIPANT (OR AN AFFILIATE OF A PARTICIPANT), (B) HAS BEEN APPOINTED AS SUCH
BY THE TRUST OR THE ADMINISTRATOR ON BEHALF OF THE ELIGIBLE LENDER TRUSTEE
PURSUANT TO THE TRUST AGREEMENT AND (C) HAS ENTERED INTO A BROKER-DEALER
AGREEMENT THAT IS IN EFFECT ON THE DATE OF REFERENCE.
"BROKER-DEALER AGREEMENT" MEANS EACH AGREEMENT BETWEEN THE AUCTION AGENT
AND A BROKER-DEALER, AND APPROVED BY THE ADMINISTRATOR ON BEHALF OF THE ISSUER,
PURSUANT TO WHICH THE BROKER-DEALER AGREES TO PARTICIPATE IN AUCTIONS AS SET
FORTH IN THE AUCTION PROCEDURES, AS FROM TIME TO TIME AMENDED OR SUPPLEMENTED.
EACH BROKER-DEALER AGREEMENT SHALL BE IN SUBSTANTIALLY THE FORM OF THE
BROKER-DEALER AGREEMENT DATED AS OF MARCH 21, 1997 BETWEEN BANKERS TRUST
COMPANY, AS AUCTION AGENT, AND SMITH BARNEY INC., AS BROKER-DEALER.
"BROKER-DEALER FEE" HAS THE MEANING SET FORTH IN THE AUCTION AGENT
AGREEMENT.
"BROKER-DEALER FEE RATE" HAS THE MEANING SET FORTH IN THE AUCTION AGENT
AGREEMENT.
"BUSINESS DAY" MEANS ANY DAY ON WHICH THE NEW YORK STOCK EXCHANGE IS OPEN
FOR TRADING AND ANY DAY OTHER THAN A SATURDAY, A SUNDAY OR A DAY ON WHICH
BANKING INSTITUTIONS OR TRUST COMPANIES IN NEW YORK, CALIFORNIA, NEW JERSEY OR
PENNSYLVANIA ARE AUTHORIZED OR OBLIGATED BY LAW, REGULATION OR EXECUTIVE ORDER
TO REMAIN CLOSED.
"CERTIFICATE DISTRIBUTION DATE" MEANS, WITH RESPECT TO ANY CLASS OF AUCTION
RATE CERTIFICATES, THE BUSINESS DAY IMMEDIATELY FOLLOWING THE EXPIRATION OF EACH
RELATED AUCTION PERIOD AND, WITH RESPECT TO ANY OTHER CLASS OF CERTIFICATES, THE
DATE SET FORTH IN THE RELATED TRUST SUPPLEMENT.
"CERTIFICATE INITIAL PERIOD" MEANS, FOR EACH CLASS OF CERTIFICATES, THE
PERIOD COMMENCING ON THE CLOSING DATE AND CONTINUING THROUGH THE DAY IMMEDIATELY
PRECEDING THE CERTIFICATE INITIAL RATE ADJUSTMENT DATE FOR SUCH CLASS.
"CERTIFICATE INITIAL RATE" MEANS (I) WITH RESPECT TO THE CLASS 1
CERTIFICATES, THE DATE SET FORTH AS SUCH IN THE PRIVATE PLACEMENT MEMORANDUM
DATED MARCH 20, 1997 RELATING TO THE OFFER AND SALE OF THE CERTIFICATES AND (II)
WITH RESPECT TO EACH OTHER CLASS OF CERTIFICATES, THE RATE SET FORTH IN THE
RELATED TRUST SUPPLEMENT.
"CERTIFICATE INITIAL RATE ADJUSTMENT DATE" MEANS APRIL 2, 1997 WITH RESPECT
TO THE CLASS 1 CERTIFICATES AND, WITH RESPECT TO ANY OTHER CLASS OF
CERTIFICATES, THE RATE SET FORTH IN THE RELATED TRUST SUPPLEMENT.
"CERTIFICATEHOLDERS' AUCTION RATE INTEREST CARRYOVER" MEANS, WITH RESPECT
TO EACH CLASS OF AUCTION RATE CERTIFICATES, THE EXCESS, IF ANY, OF (A) THE
AMOUNT OF INTEREST ON SUCH CERTIFICATE THAT WOULD HAVE ACCRUED WITH RESPECT TO
THE INTEREST PERIOD HAD INTEREST BEEN CALCULATED BASED ON THE AUCTION RATE OVER
(B) THE AMOUNT OF INTEREST ON SUCH CERTIFICATE ACTUALLY ACCRUED WITH RESPECT TO
SUCH INTEREST PERIOD BASED ON THE NET LOAN RATE, TOGETHER WITH THE UNPAID
PORTION OF ANY SUCH EXCESS FROM PRIOR INTEREST PERIODS, TOGETHER WITH INTEREST
THEREON CALCULATED IN ACCORDANCE WITH SECTION 2.2(B) HEREOF; PROVIDED THAT ANY
REFERENCE TO "PRINCIPAL" OR "INTEREST" IN THIS TRUST AGREEMENT AND IN THE
CERTIFICATES SHALL NOT INCLUDE WITHIN THE MEANINGS OF SUCH WORDS ANY
CERTIFICATEHOLDERS' AUCTION RATE INTEREST CARRYOVER OR ANY INTEREST ACCRUED ON
ANY CERTIFICATEHOLDERS' AUCTION RATE INTEREST CARRYOVER.
"CERTIFICATE RATE" MEANS, WITH RESPECT TO EACH CLASS OF AUCTION RATE
CERTIFICATES, EACH VARIABLE RATE OF INTEREST PER ANNUM BORNE BY A CERTIFICATE
FOR EACH AUCTION PERIOD AND DETERMINED IN ACCORDANCE WITH THE PROVISIONS OF
SECTIONS 2.1 AND 2.2 HEREOF; PROVIDED, HOWEVER, THAT IN THE EVENT OF AN EVENT OF
DEFAULT, THE CERTIFICATE RATE SHALL EQUAL THE NON-PAYMENT RATE; PROVIDED,
FURTHER, HOWEVER THAT SUCH CERTIFICATE RATE SHALL IN NO EVENT EXCEED THE
CERTIFICATE RATE LIMITATION.
"CERTIFICATE RATE LIMITATION" MEANS, FOR EACH CLASS OF CERTIFICATES, A RATE
EQUAL TO 16.0% PER ANNUM, EXCEPT AS OTHERWISE SET FORTH IN A TRUST SUPPLEMENT.
"CERTIFICATE RATE ADJUSTMENT DATE" MEANS, WITH RESPECT TO EACH CLASS OF
AUCTION RATE CERTIFICATES, THE DATE ON WHICH AN INTEREST RATE IS EFFECTIVE, AND
MEANS THE DATE OF COMMENCEMENT OF EACH AUCTION PERIOD.
"CERTIFICATE RATE DETERMINATION DATE" MEANS, WITH RESPECT TO EACH CLASS OF
AUCTION RATE CERTIFICATES, THE AUCTION DATE, OR IF NO AUCTION DATE IS
APPLICABLE, THE BUSINESS DAY IMMEDIATELY PRECEDING THE DATE OF COMMENCEMENT OF
AN AUCTION PERIOD.
"CLOSING DATE" MEANS (I) WITH RESPECT TO THE CLASS 1 CERTIFICATES, MARCH
21, 1997, THE DATE OF INITIAL ISSUANCE AND DELIVERY OF SUCH CERTIFICATES AND
(II) WITH RESPECT TO ANY OTHER CLASS OF CERTIFICATES, THE RATE SET FORTH IN THE
RELATED TRUST SUPPLEMENT.
"EFFECTIVE INTEREST RATE" MEANS, FOR ANY FINANCED STUDENT LOAN AND ANY
COLLECTION PERIOD, THE PER ANNUM RATE AT WHICH SUCH FINANCED STUDENT LOAN
ACCRUES INTEREST DURING SUCH COLLECTION PERIOD AND, IN THE CASE OF A FEDERAL
LOAN, AFTER GIVING EFFECT TO ALL APPLICABLE INTEREST SUBSIDY PAYMENTS AND
SPECIAL ALLOWANCE PAYMENTS DUE WITH RESPECT TO SUCH FEDERAL LOAN.
"EVENT OF DEFAULT" MEANS WITH RESPECT TO THE CERTIFICATES, (I) A DEFAULT IN
THE DUE AND PUNCTUAL PAYMENT OF ANY INSTALLMENT OF INTEREST OR PRINCIPAL ON THE
CERTIFICATES, OR (II) A DEFAULT IN THE DUE AND PUNCTUAL PAYMENT OF ANY INTEREST
ON AND PRINCIPAL OF THE CERTIFICATES AT THEIR FINAL MATURITY DATE.
"EXISTING CERTIFICATEHOLDER" MEANS (I) WITH RESPECT TO AND FOR THE PURPOSE
OF DEALING WITH THE AUCTION AGENT IN CONNECTION WITH AN AUCTION, A PERSON WHO IS
A BROKER-DEALER LISTED IN THE EXISTING CERTIFICATEHOLDER REGISTRY AT THE CLOSE
OF BUSINESS ON THE BUSINESS DAY IMMEDIATELY PRECEDING SUCH AUCTION AND (II) WITH
RESPECT TO AND FOR THE PURPOSE OF DEALING WITH THE BROKER-DEALER IN CONNECTION
WITH AN AUCTION, A PERSON WHO IS A BENEFICIAL OWNER OF ANY CERTIFICATE.
"EXISTING CERTIFICATEHOLDER REGISTRY" MEANS THE REGISTRY OF PERSONS WHO ARE
OWNERS OF THE CERTIFICATES, MAINTAINED BY THE AUCTION AGENT AS PROVIDED IN THE
AUCTION AGENT AGREEMENT.
"FEDERAL FUNDS RATE" MEANS, FOR ANY DATE OF DETERMINATION, THE FEDERAL
FUNDS EFFECTIVE RATE AS PUBLISHED ON PAGE 118 OF 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).
"FINAL MATURITY DATE" MEANS APRIL 1, 2025 WITH RESPECT TO THE CLASS 1
CERTIFICATES AND, WITH RESPECT TO ANY OTHER CLASS OF CERTIFICATES, THE DATE SET
FORTH IN THE RELATED TRUST SUPPLEMENT.
"HOLD ORDER" HAS THE MEANING SET FORTH IN SECTION 2.2.1(A)(I) HEREOF.
"INITIAL AUCTION AGENT" MEANS BANKERS TRUST COMPANY, A NEW YORK BANKING
CORPORATION, ITS SUCCESSORS AND ASSIGNS.
"INITIAL AUCTION AGENT AGREEMENT" MEANS THE AUCTION AGENT AGREEMENT DATED
AS OF MARCH 21, 1997, BY AND AMONG THE ISSUER, THE INDENTURE TRUSTEE AND THE
INITIAL AUCTION AGENT, INCLUDING ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO.
"INTEREST PERIOD" MEANS, FOR EACH CLASS OF AUCTION RATE CERTIFICATES, THE
RELATED CERTIFICATE INITIAL PERIOD AND EACH PERIOD COMMENCING ON A CERTIFICATE
RATE ADJUSTMENT DATE FOR SUCH CERTIFICATES AND ENDING ON THE DAY BEFORE (I) THE
NEXT CERTIFICATE RATE ADJUSTMENT DATE FOR SUCH CERTIFICATES OR (II) THE FINAL
MATURITY DATE FOR SUCH CERTIFICATES.
"INTEREST RATE" MEANS, WITH RESPECT TO A CLASS OF AUCTION RATE
CERTIFICATES, THE RATE OF INTEREST PER ANNUM BORNE BY SUCH CERTIFICATE AS OF THE
TIME REFERRED TO, INCLUDING, WITHOUT LIMITATION, THE RELATED CERTIFICATE INITIAL
RATE AND THE CERTIFICATE RATE.
"LIBOR DETERMINATION DATE" MEANS FOR EACH INTEREST PERIOD OTHER THAN THE
INITIAL INTEREST PERIOD, THE BUSINESS DAY PRIOR TO THE COMMENCEMENT OF EACH SUCH
INTEREST PERIOD.
"LONDON BANKING DAY" MEANS ANY BUSINESS DAY ON WHICH DEALINGS IN DEPOSITS
IN UNITED STATES DOLLARS ARE TRANSACTED IN THE LONDON INTERBANK MARKET.
"MARKET AGENT" MEANS SMITH BARNEY INC., NEW YORK, NEW YORK, IN SUCH
CAPACITY UNDER THE BROKER-DEALER AGREEMENT, OR ANY SUCCESSOR TO IT IN SUCH
CAPACITY HEREUNDER.
"MAXIMUM AUCTION RATE" MEANS, WITH RESPECT TO THE AUCTION RATE
CERTIFICATES, (I) FOR AUCTION PERIODS OF 34 DAYS OR LESS, EITHER (A) THE GREATER
OF X ONE-MONTH LIBOR PLUS 0.60% AND (Y) THE FED FUNDS RATE PLUS 0.60% (IF BOTH
RATINGS ASSIGNED BY THE RATING AGENCIES TO THE CERTIFICATES ARE "AA3" OR "AA-"
OR BETTER) OR (B) ONE-MONTH LIBOR PLUS 1.50% (IF ANY ONE OF THE RATINGS ASSIGNED
BY THE RATING AGENCIES TO THE CERTIFICATES, IS LESS THAN "AA3" OR "AA-") OR (II)
FOR AUCTION PERIODS OF GREATER THAN OR EQUAL TO 35 DAYS, EITHER (A) THE GREATER
OF ONE-MONTH LIBOR OR THREE-MONTH LIBOR, PLUS IN EITHER CASE, 0.60% (IF BOTH OF
THE RATINGS ASSIGNED BY THE RATING AGENCIES TO THE CERTIFICATES ARE "AA3" OR
"AA-" OR BETTER) OR (B) THE GREATER OF ONE-MONTH LIBOR OR THREE-MONTH LIBOR,
PLUS IN EITHER CASE, 1.50% (IF ANY ONE OF THE RATINGS ASSIGNED BY THE RATING
AGENCIES TO THE CERTIFICATES IS LESS THAN "AA3" OR "AA-"). FOR PURPOSES OF THE
AUCTION AGENT AND THE AUCTION PROCEDURES, THE RATINGS REFERRED TO IN THIS
DEFINITION SHALL BE THE LAST RATINGS OF WHICH THE AUCTION AGENT HAS BEEN GIVEN
NOTICE PURSUANT TO THE AUCTION AGENT AGREEMENT.
"NET LOAN RATE" MEANS, FOR ANY INTEREST PERIOD, THE WEIGHTED AVERAGE
EFFECTIVE INTEREST RATE FOR THE COLLECTION PERIOD IMMEDIATELY PRECEDING SUCH
INTEREST PERIOD LESS 1.6% PER ANNUM, OR SUCH OTHER AMOUNT AS MAY BE SET FORTH IN
A TRUST SUPPLEMENT.
"NINETY-ONE DAY UNITED STATES TREASURY BILL RATE" MEANS THAT RATE OF
INTEREST PER ANNUM EQUAL TO THE BOND EQUIVALENT YIELD - 91-DAY T-BILL ON THE
91-DAY UNITED STATES TREASURY BILLS SOLD AT THE LAST AUCTION THEREOF THAT
IMMEDIATELY PRECEDES THE CERTIFICATE RATE ADJUSTMENT DATE.
"NON-PAYMENT RATE" MEANS ONE-MONTH LIBOR PLUS 1.50%.
"NOTICE OF FEE RATE CHANGE" MEANS A NOTICE OF A CHANGE IN THE AUCTION AGENT
FEE RATE OR THE BROKER-DEALER FEE RATE SUBSTANTIALLY IN THE FORM OF EXHIBIT E TO
THE AUCTION AGENT AGREEMENT.
"ONE-MONTH LIBOR" MEANS THE LONDON INTERBANK OFFERED RATE FOR DEPOSITS IN
U.S. DOLLARS HAVING A MATURITY OF ONE MONTH COMMENCING ON THE RELATED LIBOR
DETERMINATION DATE (THE "INDEX MATURITY") WHICH APPEARS ON TELERATE PAGE 3750 AS
OF 11:00 A.M., LONDON TIME, ON SUCH LIBOR DETERMINATION DATE. IF SUCH RATE DOES
NOT APPEAR ON TELERATE PAGE 3750, THE RATE FOR THAT DAY WILL BE DETERMINED ON
THE BASIS OF THE RATES AT WHICH DEPOSITS IN U.S. DOLLARS, HAVING THE INDEX
MATURITY AND IN A PRINCIPAL AMOUNT OF NOT LESS THAN U.S. $1,000,000, ARE OFFERED
AT APPROXIMATELY 11:00 A.M., LONDON TIME, ON SUCH LIBOR DETERMINATION DATE TO
PRIME BANKS IN THE LONDON INTERBANK MARKET BY THE REFERENCE BANKS. THE AUCTION
AGENT WILL REQUEST THE PRINCIPAL LONDON OFFICE OF EACH OF SUCH REFERENCE BANKS
TO PROVIDE A QUOTATION OF ITS RATE. IF AT LEAST TWO SUCH QUOTATIONS ARE
PROVIDED, THE RATE FOR THAT DAY WILL BE THE ARITHMETIC MEAN OF THE QUOTATIONS.
IF FEWER THAN TWO QUOTATIONS ARE PROVIDED, THE RATE FOR THAT DAY WILL BE THE
ARITHMETIC MEAN OF THE RATES QUOTED BY MAJOR BANKS IN NEW YORK CITY, SELECTED BY
THE AUCTION AGENT, AT APPROXIMATELY 11:00 A.M., NEW YORK CITY TIME, ON SUCH
LIBOR DETERMINATION DATE FOR LOANS IN U.S. DOLLARS TO LEADING EUROPEAN BANKS
HAVING THE INDEX MATURITY AND IN A PRINCIPAL AMOUNT EQUAL TO AN AMOUNT OF NOT
LESS THAN U.S. $1,000,000; PROVIDED THAT IF THE BANKS SELECTED AS AFORESAID ARE
NOT QUOTING AS MENTIONED IN THIS SENTENCE, ONE-MONTH LIBOR IN EFFECT FOR THE
APPLICABLE LIBOR RESET PERIOD WILL BE ONE-MONTH LIBOR IN EFFECT FOR THE PREVIOUS
LIBOR RESET PERIOD.
"ORDER" HAS THE MEANING SET FORTH IN SECTION 2.2.1(A)(I) HEREOF.
"RECORD DATE" MEANS, WITH RESPECT TO THE CERTIFICATES, THE CLOSE OF
BUSINESS ON THE SECOND BUSINESS DAY IMMEDIATELY PRECEDING THE RELATED
CERTIFICATE DISTRIBUTION DATE.
"REMARKETING AGENT" MEANS A REMARKETING AGENT DESIGNATED UNDER A
REMARKETING AGREEMENT.
"REMARKETING AGREEMENT" MEANS ANY REMARKETING AGREEMENT HEREAFTER ENTERED
INTO BY THE ISSUER AND A REMARKETING AGENT WITH RESPECT TO THE CERTIFICATES, AS
ORIGINALLY EXECUTED AND AS FROM TIME TO TIME AMENDED OR SUPPLEMENTED IN
ACCORDANCE WITH THE TERMS THEREOF.
"REUTERS SCREEN LIBOR PAGE" MEANS THE DISPLAY DESIGNATED AS PAGE "LIBOR" ON
THE REUTERS MONITOR MONEY RATES SERVICE (OR SUCH OTHER PAGE AS MAY REPLACE THE
LIBOR PAGE FOR THE PURPOSES OF DISPLAYING LONDON INTERBANK OFFERED RATES OF
MAJOR BANKS).
"SELL ORDER" HAS THE MEANING SET FORTH IN SECTION 2.2.1(A)(I) HEREOF.
"SUBMISSION DEADLINE" MEANS 12:30 P.M., EASTERN TIME, ON ANY AUCTION DATE
OR SUCH OTHER TIME ON ANY AUCTION DATE BY WHICH BROKER-DEALERS ARE REQUIRED TO
SUBMIT ORDERS TO THE AUCTION AGENT AS SPECIFIED BY THE AUCTION AGENT FROM TIME
TO TIME.
"SUBMITTED BID" HAS THE MEANING SET FORTH IN SECTION 2.2.1(C)(I) HEREOF.
"SUBMITTED HOLD ORDER" HAS THE MEANING SET FORTH IN SECTION 2.2.1(C)(I)
HEREOF.
"SUBMITTED ORDER" HAS THE MEANING SET FORTH IN SECTION 2.2.1(C)(I) HEREOF.
"SUBMITTED SELL ORDER" HAS THE MEANING SET FORTH IN SECTION 2.2.1(C)(I)
HEREOF.
"SUBSTITUTE AUCTION AGENT" MEANS THE PERSON WITH WHOM THE INDENTURE TRUSTEE
ENTERS INTO A SUBSTITUTE AUCTION AGENT AGREEMENT.
"SUBSTITUTE AUCTION AGENT AGREEMENT" MEANS AN AUCTION AGENT AGREEMENT
CONTAINING TERMS SUBSTANTIALLY SIMILAR TO THE TERMS OF THE INITIAL AUCTION AGENT
AGREEMENT, WHEREBY A QUALIFIED PERSON AGREES WITH THE INDENTURE TRUSTEE AND THE
ISSUER TO PERFORM THE DUTIES OF THE AUCTION AGENT UNDER THIS TRUST AGREEMENT.
"SUFFICIENT BIDS" HAS THE MEANING SET FORTH IN SECTION 2.2.1(C)(I) HEREOF.
"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).
"THREE-MONTH LIBOR" MEANS THE LONDON INTERBANK OFFERED RATE FOR DEPOSITS IN
U.S. DOLLARS HAVING A MATURITY OF THREE MONTHS COMMENCING ON THE RELATED LIBOR
DETERMINATION DATE (THE "THREE-MONTH 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 THREE MONTH 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 AUCTION AGENT WILL REQUEST THE PRINCIPAL LONDON OFFICE OF
EACH OF SUCH REFERENCE BANKS TO PROVIDE A QUOTATION OF ITS RATE. IF AT LEAST TWO
SUCH QUOTATIONS ARE PROVIDED, THE RATE FOR THAT DAY WILL BE THE ARITHMETIC MEAN
OF THE QUOTATIONS. IF FEWER THAN TWO QUOTATIONS ARE PROVIDED, THE RATE FOR THAT
DAY WILL BE THE ARITHMETIC MEAN OF THE RATES QUOTED BY MAJOR BANKS IN NEW YORK
CITY, SELECTED BY THE AUCTION AGENT, AT APPROXIMATELY 11:00 A.M., NEW YORK CITY
TIME, ON SUCH LIBOR DETERMINATION DATE FOR LOANS IN U.S. DOLLARS TO LEADING
EUROPEAN BANKS HAVING THE THREE MONTH INDEX MATURITY AND IN A PRINCIPAL AMOUNT
EQUAL TO AN AMOUNT OF NOT LESS THAN U.S. $1,000,000; PROVIDED THAT IF THE BANKS
SELECTED AS AFORESAID ARE NOT QUOTING AS MENTIONED IN THIS SENTENCE, THREE-MONTH
LIBOR IN EFFECT FOR THE APPLICABLE INTEREST PERIOD WILL BE THREE-MONTH LIBOR IN
EFFECT FOR THE PREVIOUS INTEREST PERIOD.
"TRUST AGREEMENT" MEANS THIS TRUST AGREEMENT, AS FROM TIME TO TIME AMENDED
OR SUPPLEMENTED.
"TRUST SUPPLEMENT" MEANS EACH SUPPLEMENT TO THE TRUST AGREEMENT PURSUANT TO
WHICH A CLASS OF CERTIFICATES IS AUTHORIZED.
SECTION 2.1. CERTIFICATES. THE INITIAL RATE ADJUSTMENT DATE FOR EACH CLASS
OF CERTIFICATES SHALL BE THE RELATED CERTIFICATE INITIAL RATE ADJUSTMENT DATE.
DURING THE RELATED CERTIFICATE INITIAL PERIOD, EACH CLASS OF AUCTION RATE
CERTIFICATES SHALL BEAR INTEREST AT THE CERTIFICATE INITIAL RATE. THEREAFTER,
EXCEPT WITH RESPECT TO AN AUCTION PERIOD ADJUSTMENT, THE CERTIFICATES SHALL BEAR
INTEREST AT A CERTIFICATE RATE BASED ON A 28-DAY AUCTION PERIOD (OR SUCH OTHER
NUMBER OF DAYS AS MAY BE SET FORTH IN A TRUST SUPPLEMENT), AS DETERMINED
PURSUANT TO THIS SECTION 2.1 AND SECTION 2.2 HEREOF.
FOR THE CERTIFICATE INITIAL PERIOD AND EACH AUCTION PERIOD THEREAFTER,
INTEREST AT THE CERTIFICATE RATE SHALL ACCRUE DAILY AND SHALL BE COMPUTED FOR
THE ACTUAL NUMBER OF DAYS ELAPSED ON THE BASIS OF A YEAR CONSISTING OF 360 DAYS.
THE CERTIFICATE RATE TO BE BORNE BY THE CERTIFICATES AFTER SUCH CERTIFICATE
INITIAL PERIOD FOR EACH AUCTION PERIOD UNTIL AN AUCTION PERIOD ADJUSTMENT, IF
ANY, SHALL BE DETERMINED AS HEREIN DESCRIBED. EXCEPT AS OTHERWISE SET FORTH IN A
TRUST SUPPLEMENT, EACH SUCH AUCTION PERIOD SHALL COMMENCE ON AND INCLUDE THE
FIRST BUSINESS DAY FOLLOWING THE EXPIRATION OF THE IMMEDIATELY PRECEDING AUCTION
PERIOD AND TERMINATE ON AND INCLUDE THE DAY IMMEDIATELY PRECEDING THE FOURTH
BUSINESS DAY OF THE FOURTH FOLLOWING WEEK, SUBJECT TO ADJUSTMENT AS DESCRIBED
BELOW IN THE EVENT THAT THERE ARE FEWER THAN FOUR BUSINESS DAYS DURING ANY SUCH
WEEK; PROVIDED, HOWEVER, THAT IN THE CASE OF THE AUCTION PERIOD THAT IMMEDIATELY
FOLLOWS THE CERTIFICATE INITIAL PERIOD FOR THE CERTIFICATES, SUCH AUCTION PERIOD
SHALL COMMENCE ON THE CERTIFICATE INITIAL RATE ADJUSTMENT DATE. THE CERTIFICATE
RATE FOR EACH AUCTION PERIOD SHALL BE THE LESSER OF THE (I) NET LOAN RATE IN
EFFECT FOR SUCH AUCTION PERIOD AND (II) THE AUCTION RATE IN EFFECT FOR SUCH
AUCTION PERIOD AS DETERMINED IN ACCORDANCE WITH SECTION 2.2.1 HEREOF; PROVIDED
THAT IF, ON ANY CERTIFICATE RATE DETERMINATION DATE, AN AUCTION IS NOT HELD FOR
ANY REASON, THEN THE CERTIFICATE RATE ON THE CERTIFICATES FOR THE NEXT
SUCCEEDING AUCTION PERIOD SHALL BE THE NET LOAN RATE.
NOTWITHSTANDING THE FOREGOING:
A) IF THE OWNERSHIP OF A CLASS OF AUCTION RATE CERTIFICATES IS NO LONGER
MAINTAINED IN BOOK-ENTRY FORM, THE CERTIFICATE RATE FOR ANY CERTIFICATE INTEREST
PERIOD COMMENCING AFTER THE DELIVERY OF CERTIFICATES REPRESENTING SUCH
CERTIFICATES SHALL EQUAL THE LESSER OF (I) THE MAXIMUM AUCTION RATE AND (II) THE
NET LOAN RATE ON THE BUSINESS DAY IMMEDIATELY PRECEDING THE FIRST DAY OF SUCH
SUBSEQUENT CERTIFICATE INTEREST PERIOD; OR
B) IF AN EVENT OF DEFAULT SHALL HAVE OCCURRED, THE CERTIFICATE RATE ON THE
AUCTION RATE CERTIFICATES FOR THE INTEREST PERIOD COMMENCING ON OR IMMEDIATELY
AFTER SUCH EVENT OF DEFAULT, AND FOR THE CERTIFICATE INTEREST PERIOD THEREAFTER,
TO AND INCLUDING THE INTEREST PERIOD, IF ANY, DURING WHICH, OR COMMENCING LESS
THAN TWO BUSINESS DAYS AFTER, SUCH EVENT OF DEFAULT IS CURED IN ACCORDANCE WITH
THIS TRUST AGREEMENT, SHALL EQUAL THE NON-PAYMENT RATE ON THE FIRST DAY OF EACH
SUCH INTEREST PERIOD.
IN ACCORDANCE WITH SECTION 2.2.1(C)(II) HEREOF, THE AUCTION AGENT SHALL
PROMPTLY GIVE WRITTEN NOTICE TO THE ADMINISTRATOR, THE ELIGIBLE LENDER TRUSTEE
AND THE SURETY PROVIDER OF THE CERTIFICATE RATE (UNLESS THE CERTIFICATE RATE IS
THE NON-PAYMENT RATE) AND EITHER THE AUCTION RATE OR THE NET LOAN RATE, AS THE
CASE MAY BE, WHEN SUCH RATE IS NOT THE CERTIFICATE RATE. THE ELIGIBLE LENDER
TRUSTEE SHALL NOTIFY THE CERTIFICATEHOLDERS OF THE CERTIFICATE RATE APPLICABLE
TO THE CERTIFICATES FOR EACH AUCTION PERIOD ON THE SECOND BUSINESS DAY OF SUCH
AUCTION PERIOD.
IN THE EVENT THAT THERE ARE FEWER THAN FOUR BUSINESS DAYS IN ANY WEEK
DURING WHICH THE AUCTION PERIOD FOR CERTIFICATES WOULD OTHERWISE BE SCHEDULED TO
EXPIRE, THE EXPIRATION DATE AND CERTIFICATE DISTRIBUTION DATE FOR SUCH AUCTION
PERIOD THEN IN EFFECT, IF APPLICABLE, AND THE CERTIFICATE RATE DETERMINATION
DATE AND COMMENCEMENT DATE FOR THE IMMEDIATELY FOLLOWING INTEREST PERIOD FOR THE
CERTIFICATES MAY BE ADJUSTED TO FALL ON SUCH DATES AS THE MARKET AGENT, WITH THE
CONSENT OF THE AUCTION AGENT, MAY DETERMINE TO BE APPROPRIATE UNDER SUCH
CIRCUMSTANCES. THE MARKET AGENT SHALL PROMPTLY NOTIFY THE ELIGIBLE LENDER
TRUSTEE AND THE ADMINISTRATOR AND THE SURETY PROVIDER IN WRITING OF ANY SUCH
DETERMINATION. THE ELIGIBLE LENDER TRUSTEE, UPON RECEIPT OF SUCH NOTICE, SHALL
IMMEDIATELY GIVE WRITTEN NOTIFICATION OF SUCH DETERMINATION TO THE
CERTIFICATEHOLDERS.
NOTWITHSTANDING ANY OTHER PROVISION OF THE CERTIFICATES OR THE TRUST
AGREEMENT AND EXCEPT FOR THE OCCURRENCE OF AN EVENT OF DEFAULT, INTEREST PAYABLE
ON EACH CLASS OF AUCTION RATE CERTIFICATES FOR AN AUCTION PERIOD SHALL NEVER
EXCEED FOR SUCH AUCTION PERIOD THE AMOUNT OF INTEREST PAYABLE AT THE NET LOAN
RATE (SUBJECT TO THE CERTIFICATE RATE LIMITATION) IN EFFECT FOR SUCH AUCTION
PERIOD.
IF THE AUCTION RATE FOR A CLASS OF AUCTION RATE CERTIFICATES IS GREATER
THAN THE NET LOAN RATE, THEN THE CERTIFICATE RATE APPLICABLE TO SUCH CLASS OF
CERTIFICATES FOR THAT INTEREST PERIOD WILL BE THE NET LOAN RATE. IF THE
CERTIFICATE RATE APPLICABLE TO SUCH CLASS OF CERTIFICATES FOR ANY INTEREST
PERIOD IS THE NET LOAN RATE, THE ELIGIBLE LENDER TRUSTEE SHALL DETERMINE THE
CERTIFICATEHOLDERS' AUCTION RATE INTEREST CARRYOVER, IF ANY, WITH RESPECT TO
SUCH CERTIFICATES. SUCH CERTIFICATEHOLDERS' AUCTION RATE INTEREST CARRYOVER
SHALL BEAR INTEREST CALCULATED AT A RATE EQUAL TO ONE-MONTH LIBOR (AS DETERMINED
BY THE AUCTION AGENT, PROVIDED THE ELIGIBLE LENDER TRUSTEE HAS RECEIVED NOTICE
OF ONE-MONTH LIBOR FROM THE AUCTION AGENT, AND IF THE ELIGIBLE LENDER TRUSTEE
SHALL NOT HAVE RECEIVED SUCH NOTICE FROM THE AUCTION AGENT, THEN AS DETERMINED
BY THE ELIGIBLE LENDER TRUSTEE) FROM THE CERTIFICATE DISTRIBUTION DATE FOR THE
INTEREST PERIOD WITH RESPECT TO WHICH SUCH CERTIFICATEHOLDERS' AUCTION RATE
INTEREST CARRYOVER WAS CALCULATED, UNTIL PAID. FOR PURPOSES OF THE TRUST
AGREEMENT, ANY REFERENCE TO "PRINCIPAL" OR "INTEREST" HEREIN SHALL NOT INCLUDE
WITHIN THE MEANING OF SUCH WORDS CERTIFICATEHOLDERS' AUCTION RATE INTEREST
CARRYOVER OR ANY INTEREST ACCRUED ON ANY SUCH CERTIFICATEHOLDERS' AUCTION RATE
INTEREST CARRYOVER. SUCH CERTIFICATEHOLDERS' AUCTION RATE INTEREST CARRYOVER
SHALL BE CALCULATED IN SUFFICIENT TIME FOR THE ELIGIBLE LENDER TRUSTEE TO GIVE
NOTICE TO THE CERTIFICATEHOLDER OF SUCH CERTIFICATEHOLDERS' AUCTION RATE
INTEREST CARRYOVER AS REQUIRED IN THE NEXT SUCCEEDING SENTENCE. ON THE
CERTIFICATE DISTRIBUTION DATE FOR AN INTEREST PERIOD WITH RESPECT TO WHICH SUCH
CERTIFICATEHOLDERS' AUCTION RATE INTEREST CARRYOVER HAS BEEN CALCULATED BY THE
ELIGIBLE LENDER TRUSTEE, THE ELIGIBLE LENDER TRUSTEE SHALL GIVE WRITTEN NOTICE
TO THE CERTIFICATEHOLDERS OF THE CERTIFICATEHOLDERS' AUCTION RATE INTEREST
CARRYOVER APPLICABLE TO THE CERTIFICATES, WHICH WRITTEN NOTICE MAY BE INCLUDED
IN ANY OTHER WRITTEN STATEMENT SENT BY THE ELIGIBLE LENDER TRUSTEE TO SUCH
CERTIFICATEHOLDERS, AND SHALL BE MAILED ON SUCH CERTIFICATE DISTRIBUTION DATE BY
FIRST-CLASS MAIL, POSTAGE PREPAID, TO EACH SUCH CERTIFICATEHOLDER AT SUCH
CERTIFICATEHOLDER'S ADDRESS AS IT APPEARS ON THE REGISTRATION BOOKS MAINTAINED
BY THE REGISTRAR. SUCH NOTICE SHALL STATE, IN ADDITION TO SUCH
CERTIFICATEHOLDERS' AUCTION RATE INTEREST CARRYOVER, THAT, UNLESS AND UNTIL THE
FINAL MATURITY DATE FOR THE CERTIFICATES HAS OCCURRED (AFTER WHICH ALL ACCRUED
CERTIFICATEHOLDERS AUCTION RATE INTEREST CARRYOVER (AND ALL ACCRUED INTEREST
THEREON) THAT REMAINS UNPAID SHALL BE CANCELLED AND NO CERTIFICATEHOLDERS'
AUCTION RATE INTEREST CARRYOVER (AND INTEREST ACCRUED THEREON) SHALL BE PAID
WITH RESPECT TO THE CERTIFICATES), (I) THE CERTIFICATEHOLDERS' AUCTION RATE
INTEREST CARRYOVER (AND INTEREST ACCRUED THEREON CALCULATED AT A RATE EQUAL TO
ONE-MONTH LIBOR) SHALL BE PAID BY THE ELIGIBLE LENDER TRUSTEE ON THE
CERTIFICATES ON THE FIRST OCCURRING CERTIFICATE DISTRIBUTION DATE FOR A
SUBSEQUENT INTEREST PERIOD IF AND TO THE EXTENT THAT (1) DURING SUCH INTEREST
PERIOD NO ADDITIONAL CERTIFICATEHOLDERS' AUCTION RATE INTEREST CARRYOVER IS
ACCRUING ON THE CERTIFICATES AND (2) MONEYS ARE AVAILABLE PURSUANT TO THE TERMS
OF THE TRUST AGREEMENT IN AN AMOUNT SUFFICIENT TO PAY ALL OR A PORTION OF SUCH
CERTIFICATEHOLDERS' AUCTION RATE INTEREST CARRYOVER AND (II) INTEREST SHALL
ACCRUE ON THE CERTIFICATEHOLDERS' AUCTION RATE INTEREST CARRYOVER AT A RATE
EQUAL TO ONE-MONTH LIBOR UNTIL SUCH CERTIFICATEHOLDERS' AUCTION RATE INTEREST
CARRYOVER IS PAID IN FULL OR THE FINAL MATURITY DATE FOR THE CERTIFICATES
OCCURS.
THE CERTIFICATEHOLDERS' AUCTION RATE INTEREST CARRYOVER FOR A CLASS OF
AUCTION RATE CERTIFICATES SHALL BE PAID BY THE ELIGIBLE LENDER TRUSTEE ON
OUTSTANDING CERTIFICATES OF SUCH CLASS ON THE CERTIFICATE DISTRIBUTION DATE
FOLLOWING THE FIRST OCCURRING CERTIFICATE DISTRIBUTION DATE FOR A SUBSEQUENT
INTEREST PERIOD IF AND TO THE EXTENT THAT (I) DURING SUCH INTEREST PERIOD NO
ADDITIONAL CERTIFICATEHOLDERS' AUCTION RATE INTEREST CARRYOVER IS ACCRUING ON
SUCH CLASS OF CERTIFICATES AND (II) MONEYS ARE AVAILABLE PURSUANT TO THE TERMS
OF THE TRUST AGREEMENT IN AN AMOUNT SUFFICIENT TO PAY ALL OR A PORTION OF SUCH
CERTIFICATEHOLDERS' AUCTION RATE INTEREST CARRYOVER. ANY CERTIFICATEHOLDERS'
AUCTION RATE INTEREST CARRYOVER (AND ANY INTEREST ACCRUED THEREON) WHICH IS DUE
AND PAYABLE ON THE FINAL MATURITY DATE FOR THE CERTIFICATES, SHALL BE PAID TO
THE CERTIFICATEHOLDER THEREOF ON SAID CERTIFICATE DISTRIBUTION DATE TO THE
EXTENT THAT MONEYS ARE AVAILABLE THEREFOR IN ACCORDANCE WITH THE PROVISIONS OF
THE TRUST AGREEMENT; PROVIDED, HOWEVER, THAT ANY CERTIFICATEHOLDERS' AUCTION
RATE INTEREST CARRYOVER (AND ANY INTEREST ACCRUED THEREON) WHICH IS NOT YET DUE
AND PAYABLE ON SAID FINAL MATURITY DATE SHALL BE CANCELLED WITH RESPECT TO SAID
CLASS OF CERTIFICATES ON SAID FINAL MATURITY DATE. TO THE EXTENT THAT ANY
PORTION OF THE CERTIFICATEHOLDERS' AUCTION RATE INTEREST CARRYOVER FOR A CLASS
OF AUCTION RATE CERTIFICATES REMAINS UNPAID AFTER PAYMENT OF A PORTION THEREOF,
SUCH UNPAID PORTION OF THE CERTIFICATEHOLDERS' AUCTION RATE INTEREST CARRYOVER
SHALL BE PAID IN WHOLE OR IN PART AS REQUIRED HEREUNDER UNTIL FULLY PAID BY THE
ELIGIBLE LENDER TRUSTEE ON THE NEXT OCCURRING CERTIFICATE DISTRIBUTION DATE OR
DATES, AS NECESSARY, FOR A SUBSEQUENT INTEREST PERIOD OR PERIODS, FOR SUCH CLASS
IF AND TO THE EXTENT THAT THE CONDITIONS IN THE SECOND PRECEDING SENTENCE ARE
SATISFIED. ON ANY CERTIFICATE DISTRIBUTION DATE ON WHICH THE ELIGIBLE LENDER
TRUSTEE PAYS ONLY A PORTION OF THE CERTIFICATEHOLDERS' AUCTION RATE INTEREST
CARRYOVER ON A CLASS OF CERTIFICATES, THE ELIGIBLE LENDER TRUSTEE SHALL GIVE
WRITTEN NOTICE IN THE MANNER SET FORTH IN THE IMMEDIATELY PRECEDING PARAGRAPH TO
THE CERTIFICATEHOLDER RECEIVING SUCH PARTIAL PAYMENT OF THE CERTIFICATEHOLDERS'
AUCTION RATE INTEREST CARRYOVER REMAINING UNPAID ON SUCH CLASS OF CERTIFICATES.
THE CERTIFICATE DISTRIBUTION DATE IN SUCH SUBSEQUENT INTEREST PERIOD ON
WHICH SUCH CERTIFICATEHOLDERS' AUCTION RATE INTEREST CARRYOVER FOR A CLASS OF
AUCTION RATE CERTIFICATES SHALL BE PAID SHALL BE DETERMINED BY THE ELIGIBLE
LENDER TRUSTEE IN ACCORDANCE WITH THE PROVISIONS OF THE IMMEDIATELY PRECEDING
PARAGRAPH, AND THE ELIGIBLE LENDER TRUSTEE SHALL MAKE PAYMENT OF THE
CERTIFICATEHOLDERS' AUCTION RATE INTEREST CARRYOVER IN THE SAME MANNER AS, AND
FROM THE SAME ACCOUNT FROM WHICH, IT PAYS INTEREST ON THE CERTIFICATES ON A
CERTIFICATE DISTRIBUTION DATE.
IN THE EVENT THAT THE AUCTION AGENT NO LONGER DETERMINES, OR FAILS TO
DETERMINE, WHEN REQUIRED, THE CERTIFICATE RATE WITH RESPECT TO A CLASS OF
AUCTION RATE CERTIFICATES, OR, IF FOR ANY REASON SUCH MANNER OF DETERMINATION
SHALL BE HELD TO BE INVALID OR UNENFORCEABLE, THE CERTIFICATE RATE FOR THE NEXT
SUCCEEDING INTEREST PERIOD FOR SUCH CLASS OF AUCTION RATE NOTES SHALL BE THE NET
LOAN RATE AS DETERMINED BY THE ADMINISTRATOR (WHICH IS RESPONSIBLE FOR NOTIFYING
THE AUCTION AGENT OF SUCH NET LOAN RATE), FOR SUCH NEXT SUCCEEDING AUCTION
PERIOD.
SECTION 2.2. CERTIFICATE RATE.
SECTION 2.2.1. DETERMINING THE INTEREST RATE.
BY PURCHASING AUCTION RATE CERTIFICATES, WHETHER IN AN AUCTION OR
OTHERWISE, EACH PURCHASER OF THE AUCTION RATE CERTIFICATES, OR ITS
BROKER-DEALER, MUST AGREE AND SHALL BE DEEMED BY SUCH PURCHASE TO HAVE AGREED
(I) TO PARTICIPATE IN AUCTIONS ON THE TERMS DESCRIBED HEREIN, (II) TO HAVE ITS
BENEFICIAL OWNERSHIP OF THE AUCTION RATE CERTIFICATES MAINTAINED AT ALL TIMES IN
BOOK-ENTRY FORM FOR THE ACCOUNT OF ITS PARTICIPANT, WHICH IN TURN WILL MAINTAIN
RECORDS OF SUCH BENEFICIAL OWNERSHIP AND (III) TO AUTHORIZE SUCH PARTICIPANT TO
DISCLOSE TO THE AUCTION AGENT SUCH INFORMATION WITH RESPECT TO SUCH BENEFICIAL
OWNERSHIP AS THE AUCTION AGENT MAY REQUEST.
SO LONG AS THE OWNERSHIP OF AUCTION RATE CERTIFICATES IS MAINTAINED IN
BOOK-ENTRY FORM, AN EXISTING CERTIFICATEHOLDER MAY SELL, TRANSFER OR OTHERWISE
DISPOSE OF AUCTION RATE CERTIFICATES ONLY PURSUANT TO A BID OR SELL ORDER PLACED
IN AN AUCTION OR OTHERWISE SELL, TRANSFER OR DISPOSE OF AUCTION RATE
CERTIFICATES THROUGH A BROKER-DEALER, PROVIDED THAT, IN THE CASE OF ALL
TRANSFERS OTHER THAN PURSUANT TO AUCTIONS, SUCH EXISTING CERTIFICATEHOLDER, ITS
BROKER-DEALER OR ITS PARTICIPANT ADVISES THE AUCTION AGENT OF SUCH TRANSFER.
AUCTIONS SHALL BE CONDUCTED ON EACH AUCTION DATE, IF THERE IS AN AUCTION AGENT
ON SUCH AUCTION DATE, IN THE FOLLOWING MANNER:
(A) (I) PRIOR TO THE SUBMISSION DEADLINE ON EACH
AUCTION DATE RELATING TO A CLASS OF AUCTION RATE NOTES:
(A) EACH EXISTING CERTIFICATEHOLDER OF THE APPLICABLE
CLASS OF AUCTION RATE NOTES MAY SUBMIT TO A BROKER-DEALER BY
TELEPHONE OR OTHERWISE ANY INFORMATION AS TO:
(1) THE PRINCIPAL AMOUNT OF OUTSTANDING
AUCTION RATE CERTIFICATES OF SUCH CLASS, IF ANY, OWNED BY SUCH
EXISTING CERTIFICATEHOLDER WHICH SUCH EXISTING
CERTIFICATEHOLDER DESIRES TO CONTINUE TO OWN WITHOUT REGARD TO
THE CERTIFICATE RATE FOR THE NEXT SUCCEEDING AUCTION PERIOD;
(2) THE PRINCIPAL AMOUNT OF OUTSTANDING
AUCTION RATE CERTIFICATES OF SUCH CLASS, IF ANY, WHICH SUCH
EXISTING CERTIFICATEHOLDER OFFERS TO SELL IF THE CERTIFICATE
RATE FOR THE NEXT SUCCEEDING AUCTION PERIOD SHALL BE LESS THAN
THE RATE PER ANNUM SPECIFIED BY SUCH EXISTING
CERTIFICATEHOLDER; AND/OR
(3) THE PRINCIPAL AMOUNT OF OUTSTANDING
AUCTION RATE CERTIFICATES OF SUCH CLASS, IF ANY, OWNED BY SUCH
EXISTING CERTIFICATEHOLDER WHICH SUCH EXISTING
CERTIFICATEHOLDER OFFERS TO SELL WITHOUT REGARD TO THE
CERTIFICATE RATE FOR THE NEXT SUCCEEDING AUCTION PERIOD;
AND
(B) ONE OR MORE BROKER-DEALERS MAY CONTACT POTENTIAL
CERTIFICATEHOLDERS TO DETERMINE THE PRINCIPAL AMOUNT OF AUCTION RATE
CERTIFICATES OF SUCH CLASS WHICH EACH POTENTIAL CERTIFICATEHOLDER
OFFERS TO PURCHASE, IF THE CERTIFICATE RATE FOR THE NEXT SUCCEEDING
AUCTION PERIOD SHALL NOT BE LESS THAN THE RATE PER ANNUM SPECIFIED BY
SUCH POTENTIAL CERTIFICATEHOLDER.
THE STATEMENT OF AN EXISTING CERTIFICATEHOLDER OR A POTENTIAL
CERTIFICATEHOLDER REFERRED TO IN (A) OR (B) OF THIS PARAGRAPH (I) IS HEREIN
REFERRED TO AS AN "ORDER," AND EACH EXISTING CERTIFICATEHOLDER AND EACH
POTENTIAL CERTIFICATEHOLDER PLACING AN ORDER IS HEREIN REFERRED TO AS A
"BIDDER"; AN ORDER DESCRIBED IN CLAUSE (A)(1) IS HEREIN REFERRED TO AS A "HOLD
ORDER"; AN ORDER DESCRIBED IN CLAUSES (A)(2) AND (B) IS HEREIN REFERRED TO AS A
"BID"; AND AN ORDER DESCRIBED IN CLAUSE (A)(3) IS HEREIN REFERRED TO AS A "SELL
ORDER."
(II) (A) SUBJECT TO THE PROVISIONS OF SECTION 2.2.1(B)
HEREOF, A BID BY AN EXISTING CERTIFICATEHOLDER SHALL
CONSTITUTE AN IRREVOCABLE OFFER TO SELL:
(1) THE PRINCIPAL AMOUNT OF OUTSTANDING AUCTION RATE
CERTIFICATES SPECIFIED IN SUCH BID IF THE CERTIFICATE RATE
DETERMINED AS PROVIDED IN THIS SECTION 2.2.1 SHALL BE LESS
THAN THE RATE SPECIFIED THEREIN; OR
(2) SUCH PRINCIPAL AMOUNT, OR A LESSER PRINCIPAL AMOUNT
OF OUTSTANDING AUCTION RATE CERTIFICATES TO BE DETERMINED AS
SET FORTH IN SECTION 2.2.1(D)(I)(D) HEREOF, IF THE
CERTIFICATE RATE DETERMINED AS PROVIDED IN THIS SECTION
2.2.1 SHALL BE EQUAL TO THE RATE SPECIFIED THEREIN; OR
(3) SUCH PRINCIPAL AMOUNT, OR A LESSER PRINCIPAL AMOUNT
OF OUTSTANDING AUCTION RATE CERTIFICATES TO BE DETERMINED AS
SET FORTH IN SECTION 2.2.1(D)(II)(C) HEREOF, IF THE RATE
SPECIFIED THEREIN SHALL BE HIGHER THAN THE CERTIFICATE RATE
AND SUFFICIENT BIDS HAVE NOT BEEN MADE.
(B) SUBJECT TO THE PROVISIONS OF SECTION 2.2.1(B)
HEREOF, A SELL ORDER BY AN EXISTING CERTIFICATEHOLDER SHALL
CONSTITUTE AN IRREVOCABLE OFFER TO SELL:
(1) THE PRINCIPAL AMOUNT OF OUTSTANDING AUCTION RATE
CERTIFICATES SPECIFIED IN SUCH SELL ORDER; OR
(2) SUCH PRINCIPAL AMOUNT, OR A LESSER PRINCIPAL AMOUNT
OF OUTSTANDING AUCTION RATE CERTIFICATES SET FORTH IN
SECTION 2.2.1(D)(II)(C) HEREOF, IF SUFFICIENT BIDS HAVE NOT
BEEN MADE.
(C) SUBJECT TO THE PROVISIONS OF SECTION 2.2.1(B)
HEREOF, A BID BY A POTENTIAL CERTIFICATEHOLDER SHALL
CONSTITUTE AN IRREVOCABLE OFFER TO PURCHASE:
(1) THE PRINCIPAL AMOUNT OF OUTSTANDING AUCTION RATE
CERTIFICATES SPECIFIED IN SUCH BID IF THE CERTIFICATE RATE
DETERMINED AS PROVIDED IN THIS SECTION 2.2.1 SHALL BE HIGHER
THAN THE RATE SPECIFIED IN SUCH BID; OR
(2) SUCH PRINCIPAL AMOUNT, OR A LESSER PRINCIPAL AMOUNT
OF OUTSTANDING AUCTION RATE CERTIFICATES SET FORTH IN
SECTION 2.2.1(D)(I)(E) HEREOF, IF THE CERTIFICATE RATE
DETERMINED AS PROVIDED IN THIS SECTION 2.2.1 SHALL BE EQUAL
TO THE RATE SPECIFIED IN SUCH BID.
(B) (I) EACH BROKER-DEALER SHALL SUBMIT IN WRITING TO
THE AUCTION AGENT PRIOR TO THE SUBMISSION DEADLINE ON EACH
AUCTION DATE ALL ORDERS OBTAINED BY SUCH BROKER-DEALER AND
SHALL SPECIFY WITH RESPECT TO EACH SUCH ORDER:
(A) THE NAME OF THE BIDDER PLACING SUCH
ORDER;
(B) THE AGGREGATE PRINCIPAL AMOUNT AND
CLASS OF AUCTION RATE CERTIFICATES THAT ARE THE SUBJECT OF
SUCH ORDER;
(C) TO THE EXTENT THAT SUCH BIDDER IS AN
EXISTING CERTIFICATEHOLDER:
(1) THE PRINCIPAL AMOUNT AND CLASS OF AUCTION RATE
CERTIFICATES, IF ANY, SUBJECT TO ANY HOLD ORDER PLACED BY
SUCH EXISTING CERTIFICATEHOLDER;
(2) THE PRINCIPAL AMOUNT AND CLASS OF AUCTION RATE
CERTIFICATES, IF ANY, SUBJECT TO ANY BID PLACED BY SUCH
EXISTING CERTIFICATEHOLDER AND THE RATE SPECIFIED IN SUCH
BID; AND
(3) THE PRINCIPAL AMOUNT AND CLASS OF AUCTION RATE
CERTIFICATES, IF ANY, SUBJECT TO ANY SELL ORDER PLACED BY
SUCH EXISTING CERTIFICATEHOLDER;
AND
(D) TO THE EXTENT SUCH BIDDER IS A
POTENTIAL CERTIFICATEHOLDER, THE RATE SPECIFIED IN SUCH
POTENTIAL CERTIFICATEHOLDER'S BID.
(II) IF ANY RATE SPECIFIED IN ANY BID
CONTAINS MORE THAN THREE FIGURES TO THE RIGHT OF THE DECIMAL POINT, THE
AUCTION AGENT SHALL ROUND SUCH RATE UP TO THE NEXT HIGHER ONE
THOUSANDTH (.001) OF ONE PERCENT.
(III) IF AN ORDER OR ORDERS COVERING ALL
OUTSTANDING AUCTION RATE CERTIFICATES OF THE APPLICABLE CLASS OWNED BY
AN EXISTING CERTIFICATEHOLDER IS NOT SUBMITTED TO THE AUCTION AGENT
PRIOR TO THE SUBMISSION DEADLINE, THE AUCTION AGENT SHALL DEEM A HOLD
ORDER TO HAVE BEEN SUBMITTED ON BEHALF OF SUCH EXISTING
CERTIFICATEHOLDER COVERING THE PRINCIPAL AMOUNT OF OUTSTANDING AUCTION
RATE CERTIFICATES OF SUCH CLASS OWNED BY SUCH EXISTING
CERTIFICATEHOLDER AND NOT SUBJECT TO AN ORDER SUBMITTED TO THE AUCTION
AGENT.
(IV) NEITHER THE ISSUER, THE ELIGIBLE
LENDER TRUSTEE NOR THE AUCTION AGENT SHALL BE RESPONSIBLE FOR ANY
FAILURE OF A BROKER-DEALER TO SUBMIT AN ORDER TO THE AUCTION AGENT ON
BEHALF OF ANY EXISTING CERTIFICATEHOLDER OR POTENTIAL
CERTIFICATEHOLDER.
(V) IF ANY EXISTING CERTIFICATEHOLDER
SUBMITS THROUGH A BROKER-DEALER TO THE AUCTION AGENT ONE OR MORE ORDERS
COVERING IN THE AGGREGATE MORE THAN THE PRINCIPAL AMOUNT OF THE CLASS
OF OUTSTANDING AUCTION RATE CERTIFICATES OWNED BY SUCH EXISTING
CERTIFICATEHOLDER, SUCH ORDERS SHALL BE CONSIDERED VALID AS FOLLOWS AND
IN THE FOLLOWING ORDER OF PRIORITY:
(A) ALL HOLD ORDERS SHALL BE CONSIDERED
VALID, BUT ONLY UP TO THE AGGREGATE PRINCIPAL AMOUNT OF THE
CLASS OF OUTSTANDING AUCTION RATE CERTIFICATES OWNED BY SUCH
EXISTING CERTIFICATEHOLDER, AND IF THE AGGREGATE PRINCIPAL
AMOUNT OF THE CLASS OF AUCTION RATE CERTIFICATES SUBJECT TO
SUCH HOLD ORDERS EXCEEDS THE AGGREGATE PRINCIPAL AMOUNT OF
THE CLASS OF AUCTION RATE CERTIFICATES OWNED BY SUCH
EXISTING CERTIFICATEHOLDER, THE AGGREGATE PRINCIPAL AMOUNT
OF THE CLASS OF AUCTION RATE CERTIFICATES SUBJECT TO EACH
SUCH HOLD ORDER SHALL BE REDUCED PRO RATA SO THAT THE
AGGREGATE PRINCIPAL AMOUNT OF THE CLASS OF AUCTION RATE
CERTIFICATES SUBJECT TO SUCH HOLD ORDER EQUALS THE AGGREGATE
PRINCIPAL AMOUNT OF THE CLASS OF OUTSTANDING AUCTION RATE
CERTIFICATES OWNED BY SUCH EXISTING CERTIFICATEHOLDER.
(B) (1) ANY BID SHALL BE CONSIDERED
VALID UP TO AN AMOUNT EQUAL TO THE EXCESS OF THE PRINCIPAL
AMOUNT OF THE CLASS OF OUTSTANDING AUCTION RATE CERTIFICATES
OWNED BY SUCH EXISTING CERTIFICATEHOLDER OVER THE AGGREGATE
PRINCIPAL AMOUNT OF THE CLASS OF AUCTION RATE CERTIFICATES
SUBJECT TO ANY HOLD ORDER REFERRED TO IN CLAUSE (A) OF THIS
PARAGRAPH (V);
(2) SUBJECT TO SUBCLAUSE (1) OF THIS
CLAUSE (B), IF MORE THAN ONE BID WITH THE SAME RATE IS
SUBMITTED ON BEHALF OF SUCH EXISTING CERTIFICATEHOLDER AND
THE AGGREGATE PRINCIPAL AMOUNT OF THE CLASS OF OUTSTANDING
AUCTION RATE CERTIFICATES SUBJECT TO SUCH BIDS IS GREATER
THAN SUCH EXCESS, SUCH BIDS SHALL BE CONSIDERED VALID UP TO
AN AMOUNT EQUAL TO SUCH EXCESS;
(3) SUBJECT TO SUBCLAUSES (1) AND (2) OF
THIS CLAUSE (B), IF MORE THAN ONE BID WITH DIFFERENT RATES
ARE SUBMITTED ON BEHALF OF SUCH EXISTING CERTIFICATEHOLDER,
SUCH BIDS SHALL BE CONSIDERED VALID FIRST IN THE ASCENDING
ORDER OF THEIR RESPECTIVE RATES UNTIL THE HIGHEST RATE IS
REACHED AT WHICH SUCH EXCESS EXISTS AND THEN AT SUCH RATE UP
TO THE AMOUNT OF SUCH EXCESS; AND
(4) IN ANY SUCH EVENT, THE AMOUNT OF THE
CLASS OF OUTSTANDING AUCTION RATE CERTIFICATES, IF ANY,
SUBJECT TO BIDS NOT VALID UNDER THIS CLAUSE (B) SHALL BE
TREATED AS THE SUBJECT OF A BID BY A POTENTIAL
CERTIFICATEHOLDER AT THE RATE THEREIN SPECIFIED; AND
(C) ALL SELL ORDERS SHALL BE CONSIDERED
VALID UP TO AN AMOUNT EQUAL TO THE EXCESS OF THE PRINCIPAL
AMOUNT OF THE CLASS OF OUTSTANDING AUCTION RATE CERTIFICATES
OWNED BY SUCH EXISTING CERTIFICATEHOLDER OVER THE AGGREGATE
PRINCIPAL AMOUNT OF THE CLASS OF AUCTION RATE CERTIFICATES
SUBJECT TO HOLD ORDERS REFERRED TO IN CLAUSE (A) OF THIS
PARAGRAPH (V) AND VALID BIDS REFERRED TO IN CLAUSE (B) OF
THIS PARAGRAPH (V).
(VI) IF MORE THAN ONE BID FOR A CLASS OF
AUCTION RATE CERTIFICATES IS SUBMITTED ON BEHALF OF ANY
POTENTIAL CERTIFICATEHOLDER, EACH BID SUBMITTED SHALL BE A
SEPARATE BID WITH THE RATE AND PRINCIPAL AMOUNT THEREIN
SPECIFIED.
(VII) AN EXISTING CERTIFICATEHOLDER OF A
CLASS OF AUCTION RATE CERTIFICATES THAT OFFERS TO PURCHASE
ADDITIONAL AUCTION RATE CERTIFICATES IS, FOR PURPOSES OF
SUCH OFFER, TREATED AS A POTENTIAL CERTIFICATEHOLDER.
(VIII) ANY BID OR SELL ORDER SUBMITTED
BY AN EXISTING CERTIFICATEHOLDER COVERING AN AGGREGATE
PRINCIPAL AMOUNT OF A CLASS OF AUCTION RATE CERTIFICATES NOT
EQUAL TO AN AUTHORIZED DENOMINATION SHALL BE REJECTED AND
SHALL BE DEEMED A HOLD ORDER. ANY BID SUBMITTED BY A
POTENTIAL CERTIFICATEHOLDER COVERING AN AGGREGATE PRINCIPAL
AMOUNT OF A CLASS OF AUCTION RATE CERTIFICATES NOT EQUAL TO
AN AUTHORIZED DENOMINATION SHALL BE REJECTED.
(IX) ANY BID SPECIFYING A RATE HIGHER
THAN THE MAXIMUM AUCTION RATE WILL (A) BE TREATED AS A SELL
ORDER IF SUBMITTED BY AN EXISTING CERTIFICATEHOLDER AND (B)
NOT BE ACCEPTED IF SUBMITTED BY A POTENTIAL
CERTIFICATEHOLDER.
(X) ANY BID SUBMITTED BY AN EXISTING
CERTIFICATEHOLDER OR A POTENTIAL CERTIFICATEHOLDER
SPECIFYING A RATE LOWER THAN THE MINIMUM AUCTION RATE SHALL
BE TREATED AS A BID SPECIFYING THE MINIMUM AUCTION RATE.
(XI) ANY ORDER SUBMITTED IN AN AUCTION
BY A BROKER-DEALER TO THE AUCTION AGENT AT THE SUBMISSION
DEADLINE ON ANY AUCTION DATE SHALL BE IRREVOCABLE.
(C) (I) NOT EARLIER THAN THE SUBMISSION DEADLINE ON EACH AUCTION DATE, THE
AUCTION AGENT SHALL ASSEMBLE ALL VALID ORDERS SUBMITTED OR DEEMED SUBMITTED TO
IT BY THE BROKER-DEALERS (EACH SUCH ORDER AS SUBMITTED OR DEEMED SUBMITTED BY A
BROKER-DEALER BEING HEREIN REFERRED TO INDIVIDUALLY AS A "SUBMITTED HOLD ORDER,"
A "SUBMITTED BID" OR A "SUBMITTED SELL ORDER," AS THE CASE MAY BE, OR AS A
"SUBMITTED ORDER," AND COLLECTIVELY AS "SUBMITTED HOLD ORDERS," "SUBMITTED BIDS"
OR "SUBMITTED SELL ORDERS," AS THE CASE MAY BE, OR AS "SUBMITTED ORDERS") AND
SHALL DETERMINE FOR THE APPLICABLE CLASS OF AUCTION RATE NOTES:
(A) THE EXCESS OF THE TOTAL PRINCIPAL AMOUNT OF OUTSTANDING AUCTION RATE
CERTIFICATES OF SUCH CLASS OVER THE SUM OF THE AGGREGATE PRINCIPAL AMOUNT OF
OUTSTANDING AUCTION RATE CERTIFICATES OF SUCH CLASS SUBJECT TO SUBMITTED HOLD
ORDERS (SUCH EXCESS BEING HEREIN REFERRED TO AS THE "AVAILABLE AUCTION RATE
CERTIFICATES" OF SUCH CLASS), AND
(B) FROM THE SUBMITTED ORDERS WHETHER:
(1) THE AGGREGATE PRINCIPAL AMOUNT OF
OUTSTANDING AUCTION RATE CERTIFICATES OF SUCH CLASS SUBJECT
TO SUBMITTED BIDS BY POTENTIAL CERTIFICATEHOLDERS SPECIFYING
ONE OR MORE RATES EQUAL TO OR LOWER THAN THE MAXIMUM AUCTION
RATE;
EXCEEDS OR IS EQUAL TO THE SUM OF:
(2) THE AGGREGATE PRINCIPAL AMOUNT OF
OUTSTANDING AUCTION RATE CERTIFICATES OF SUCH CLASS SUBJECT
TO SUBMITTED BIDS BY EXISTING CERTIFICATEHOLDERS SPECIFYING
ONE OR MORE RATES HIGHER THAN THE MAXIMUM AUCTION RATE; AND
(3) THE AGGREGATE PRINCIPAL AMOUNT OF
OUTSTANDING AUCTION RATE CERTIFICATES OF SUCH CLASS SUBJECT
TO SUBMITTED SELL ORDERS;
(IN THE EVENT SUCH EXCESS OR SUCH EQUALITY EXISTS, OTHER THAN BECAUSE
ALL OF THE OUTSTANDING AUCTION RATE CERTIFICATES OF SUCH CLASS ARE
SUBJECT TO SUBMITTED HOLD ORDERS, SUCH SUBMITTED BIDS DESCRIBED IN
SUBCLAUSE (1) ABOVE SHALL BE REFERRED TO COLLECTIVELY AS "SUFFICIENT
BIDS"); AND
(C) IF SUFFICIENT BIDS EXIST, THE "BID
AUCTION RATE", WHICH SHALL BE THE LOWEST RATE SPECIFIED IN
SUCH SUBMITTED BIDS SUCH THAT IF:
(1) (X) EACH SUBMITTED BID FROM EXISTING
CERTIFICATEHOLDERS SPECIFYING SUCH LOWEST RATE AND (Y) ALL
OTHER SUBMITTED BIDS FROM EXISTING CERTIFICATEHOLDERS
SPECIFYING LOWER RATES WERE REJECTED, THUS ENTITLING SUCH
EXISTING CERTIFICATEHOLDERS TO CONTINUE TO OWN THE PRINCIPAL
AMOUNT OF AUCTION RATE CERTIFICATES OF SUCH CLASS SUBJECT TO
SUCH SUBMITTED BIDS; AND
(2) (X) EACH SUCH SUBMITTED BID FROM
POTENTIAL CERTIFICATEHOLDERS SPECIFYING SUCH LOWEST RATE AND
(Y) ALL OTHER SUBMITTED BIDS FROM POTENTIAL
CERTIFICATEHOLDERS SPECIFYING LOWER RATES WERE ACCEPTED;
THE RESULT WOULD BE THAT SUCH EXISTING CERTIFICATEHOLDERS DESCRIBED IN SUBCLAUSE
(1) ABOVE WOULD CONTINUE TO OWN AN AGGREGATE PRINCIPAL AMOUNT OF OUTSTANDING
AUCTION RATE CERTIFICATES OF THE APPLICABLE CLASS WHICH, WHEN ADDED TO THE
AGGREGATE PRINCIPAL AMOUNT OF OUTSTANDING AUCTION RATE CERTIFICATES OF SUCH
CLASS TO BE PURCHASED BY SUCH POTENTIAL CERTIFICATEHOLDERS DESCRIBED IN
SUBCLAUSE (2) ABOVE, WOULD EQUAL NOT LESS THAN THE AVAILABLE AUCTION RATE
CERTIFICATES OF SUCH CLASS.
(II) PROMPTLY AFTER THE AUCTION AGENT
HAS MADE THE DETERMINATIONS PURSUANT TO SECTION 2.2.1(C)(I)
HEREOF, THE AUCTION AGENT SHALL ADVISE THE ELIGIBLE LENDER
TRUSTEE OF THE NET LOAN RATE, THE MAXIMUM AUCTION RATE AND
THE ALL HOLD RATE AND THE COMPONENTS THEREOF ON THE AUCTION
DATE AND, BASED ON SUCH DETERMINATIONS, THE AUCTION RATE FOR
THE NEXT SUCCEEDING INTEREST PERIOD FOR SUCH CLASS OF
AUCTION RATE CERTIFICATES AS FOLLOWS:
(A) IF SUFFICIENT BIDS EXIST, THAT THE
AUCTION RATE FOR THE NEXT SUCCEEDING INTEREST PERIOD FOR
SUCH CLASS OF AUCTION RATE CERTIFICATES SHALL BE EQUAL TO
THE BID AUCTION RATE SO DETERMINED;
(B) IF SUFFICIENT BIDS DO NOT EXIST
(OTHER THAN BECAUSE ALL OF THE OUTSTANDING AUCTION RATE
CERTIFICATES OF SUCH CLASS ARE SUBJECT TO SUBMITTED HOLD
ORDERS), THAT THE AUCTION RATE FOR THE NEXT SUCCEEDING
INTEREST PERIOD FOR SUCH CLASS OF AUCTION RATE CERTIFICATES
SHALL BE EQUAL TO THE MAXIMUM AUCTION RATE; OR
(C) IF ALL OUTSTANDING AUCTION RATE
CERTIFICATES OF SUCH CLASS ARE SUBJECT TO SUBMITTED HOLD
ORDERS, THAT THE AUCTION RATE FOR THE NEXT SUCCEEDING
INTEREST PERIOD FOR SUCH CLASS OF AUCTION RATE CERTIFICATES
SHALL BE EQUAL TO THE ALL HOLD RATE.
(III) PROMPTLY AFTER THE AUCTION AGENT
HAS DETERMINED THE AUCTION RATE, THE AUCTION AGENT SHALL
DETERMINE AND ADVISE THE ELIGIBLE LENDER TRUSTEE OF THE
APPLICABLE CERTIFICATE RATE, WHICH RATE SHALL BE THE LESSER
OF (A) THE AUCTION RATE AND (B) THE NET LOAN RATE; PROVIDED,
HOWEVER, THAT IN NO EVENT SHALL THE CERTIFICATE RATE EXCEED
THE CERTIFICATE RATE LIMITATION.
(D) EXISTING CERTIFICATEHOLDERS SHALL
CONTINUE TO OWN THE PRINCIPAL AMOUNT OF AUCTION RATE
CERTIFICATES THAT ARE SUBJECT TO SUBMITTED HOLD ORDERS. IF
THE NET LOAN RATE IS EQUAL TO OR GREATER THAN THE BID
AUCTION RATE AND IF SUFFICIENT BIDS HAVE BEEN RECEIVED BY
THE AUCTION AGENT, THE BID AUCTION RATE WILL BE THE
CERTIFICATE RATE, AND SUBMITTED BIDS AND SUBMITTED SELL
ORDERS WILL BE ACCEPTED OR REJECTED AND THE AUCTION AGENT
WILL TAKE SUCH OTHER ACTION AS DESCRIBED BELOW IN
SUBPARAGRAPH (I).
IF THE NET LOAN RATE IS LESS THAN THE
AUCTION RATE, THE NET LOAN RATE WILL BE THE CERTIFICATE
RATE. IF THE AUCTION RATE AND THE NET LOAN RATE ARE BOTH
GREATER THAN THE CERTIFICATE RATE LIMITATION, THE
CERTIFICATE RATE SHALL BE EQUAL TO THE CERTIFICATE RATE
LIMITATION. IF THE AUCTION AGENT HAS NOT RECEIVED SUFFICIENT
BIDS (OTHER THAN BECAUSE ALL OF THE OUTSTANDING AUCTION RATE
CERTIFICATES OF SUCH CLASS ARE SUBJECT TO SUBMITTED HOLD
ORDERS), THE CERTIFICATE RATE WILL BE THE LESSER OF THE
MAXIMUM AUCTION RATE AND THE NET LOAN RATE. IN ANY OF THE
CASES DESCRIBED ABOVE, SUBMITTED ORDERS WILL BE ACCEPTED OR
REJECTED AND THE AUCTION AGENT WILL TAKE SUCH OTHER ACTION
AS DESCRIBED BELOW IN SUBPARAGRAPH (II).
(I) IF SUFFICIENT BIDS HAVE BEEN MADE
AND THE NET LOAN RATE IS EQUAL TO OR GREATER THAN THE BID
AUCTION RATE (IN WHICH CASE THE CERTIFICATE RATE SHALL BE
THE BID AUCTION RATE), ALL SUBMITTED SELL ORDERS SHALL BE
ACCEPTED AND, SUBJECT TO THE PROVISIONS OF PARAGRAPHS (IV)
AND (V) OF THIS SECTION 2.2.1(D), SUBMITTED BIDS SHALL BE
ACCEPTED OR REJECTED AS FOLLOWS IN THE FOLLOWING ORDER OF
PRIORITY, AND ALL OTHER SUBMITTED BIDS SHALL BE REJECTED:
(A) EXISTING CERTIFICATEHOLDERS'
SUBMITTED BIDS SPECIFYING ANY RATE THAT IS HIGHER THAN THE
CERTIFICATE RATE SHALL BE ACCEPTED, THUS REQUIRING EACH SUCH
EXISTING CERTIFICATEHOLDER TO SELL THE AGGREGATE PRINCIPAL
AMOUNT OF AUCTION RATE CERTIFICATES SUBJECT TO SUCH
SUBMITTED BIDS;
(B) EXISTING CERTIFICATEHOLDERS'
SUBMITTED BIDS SPECIFYING ANY RATE THAT IS LOWER THAN THE
CERTIFICATE RATE SHALL BE REJECTED, THUS ENTITLING EACH SUCH
EXISTING CERTIFICATEHOLDER TO CONTINUE TO OWN THE AGGREGATE
PRINCIPAL AMOUNT OF AUCTION RATE CERTIFICATES SUBJECT TO
SUCH SUBMITTED BIDS;
(C) POTENTIAL CERTIFICATEHOLDERS'
SUBMITTED BIDS SPECIFYING ANY RATE THAT IS LOWER THAN THE
CERTIFICATE RATE SHALL BE ACCEPTED;
(D) EACH EXISTING CERTIFICATEHOLDERS'
SUBMITTED BID SPECIFYING A RATE THAT IS EQUAL TO THE
CERTIFICATE RATE SHALL BE REJECTED, THUS ENTITLING SUCH
EXISTING CERTIFICATEHOLDER TO CONTINUE TO OWN THE AGGREGATE
PRINCIPAL AMOUNT OF AUCTION RATE CERTIFICATES SUBJECT TO
SUCH SUBMITTED BID, UNLESS THE AGGREGATE PRINCIPAL AMOUNT OF
OUTSTANDING AUCTION RATE CERTIFICATES SUBJECT TO ALL SUCH
SUBMITTED BIDS SHALL BE GREATER THAN THE PRINCIPAL AMOUNT OF
AUCTION RATE CERTIFICATES OF THE APPLICABLE CLASS (THE
"REMAINING PRINCIPAL AMOUNT") EQUAL TO THE EXCESS OF THE
AVAILABLE AUCTION RATE CERTIFICATES OF SUCH CLASS OVER THE
AGGREGATE PRINCIPAL AMOUNT OF AUCTION RATE CERTIFICATE OF
SUCH CLASS SUBJECT TO SUBMITTED BIDS DESCRIBED IN CLAUSES
(B) AND (C) OF THIS SECTION 2.2.1(D)(I), IN WHICH EVENT SUCH
SUBMITTED BID OF SUCH EXISTING CERTIFICATEHOLDER SHALL BE
REJECTED IN PART, AND SUCH EXISTING CERTIFICATEHOLDER SHALL
BE ENTITLED TO CONTINUE TO OWN THE PRINCIPAL AMOUNT OF SUCH
CLASS OF AUCTION RATE CERTIFICATES SUBJECT TO SUCH SUBMITTED
BID, BUT ONLY IN AN AMOUNT EQUAL TO THE AGGREGATE PRINCIPAL
AMOUNT OF AUCTION RATE CERTIFICATES OF SUCH CLASS OBTAINED
BY MULTIPLYING THE REMAINING PRINCIPAL AMOUNT BY A FRACTION,
THE NUMERATOR OF WHICH SHALL BE THE PRINCIPAL AMOUNT OF
OUTSTANDING AUCTION RATE CERTIFICATES OF SUCH CLASS OWNED BY
SUCH EXISTING CERTIFICATEHOLDER SUBJECT TO SUCH SUBMITTED
BID AND THE DENOMINATOR OF WHICH SHALL BE THE SUM OF THE
PRINCIPAL AMOUNT OF OUTSTANDING AUCTION RATE CERTIFICATES OF
SUCH CLASS SUBJECT TO SUCH SUBMITTED BIDS MADE BY ALL SUCH
EXISTING CERTIFICATEHOLDERS THAT SPECIFIED A RATE EQUAL TO
THE CERTIFICATE RATE; AND
(E) EACH POTENTIAL CERTIFICATEHOLDER'S
SUBMITTED BID SPECIFYING A RATE THAT IS EQUAL TO THE
CERTIFICATE RATE SHALL BE ACCEPTED, BUT ONLY IN AN AMOUNT
EQUAL TO THE PRINCIPAL AMOUNT OF AUCTION RATE CERTIFICATES
OF THE APPLICABLE CLASS OBTAINED BY MULTIPLYING THE EXCESS
OF THE AGGREGATE PRINCIPAL AMOUNT OF AVAILABLE AUCTION RATE
CERTIFICATES OF SUCH CLASS OVER THE AGGREGATE PRINCIPAL
AMOUNT OF AUCTION RATE CERTIFICATES OF SUCH CLASS SUBJECT TO
SUBMITTED BIDS DESCRIBED IN CLAUSES (B), (C) AND (D) OF THIS
SECTION 2.2.1(D)(I) BY A FRACTION THE NUMERATOR OF WHICH
SHALL BE THE AGGREGATE PRINCIPAL AMOUNT OF OUTSTANDING
AUCTION RATE CERTIFICATES OF SUCH CLASS SUBJECT TO SUCH
SUBMITTED BID AND THE DENOMINATOR OF WHICH SHALL BE THE SUM
OF THE PRINCIPAL AMOUNT OF OUTSTANDING AUCTION RATE
CERTIFICATES OF SUCH CLASS SUBJECT TO SUBMITTED BIDS MADE BY
ALL SUCH POTENTIAL CERTIFICATEHOLDERS THAT SPECIFIED A RATE
EQUAL TO THE CERTIFICATE RATE.
(II) IF SUFFICIENT BIDS HAVE NOT BEEN MADE (OTHER THAN
BECAUSE ALL OF THE OUTSTANDING AUCTION RATE CERTIFICATES OF
THE APPLICABLE CLASS ARE SUBJECT TO SUBMITTED HOLD ORDERS),
OR IF THE NET LOAN RATE IS LESS THAN THE BID AUCTION RATE
(IN WHICH CASE THE CERTIFICATE RATE SHALL BE THE NET LOAN
RATE), OR IF THE CERTIFICATE RATE LIMITATION APPLIES,
SUBJECT TO THE PROVISIONS OF SECTION 2.2.1(D)(IV) HEREOF,
SUBMITTED ORDERS SHALL BE ACCEPTED OR REJECTED AS FOLLOWS IN
THE FOLLOWING ORDER OF PRIORITY AND ALL OTHER SUBMITTED BIDS
SHALL BE REJECTED:
(A) EXISTING CERTIFICATEHOLDERS' SUBMITTED BIDS
SPECIFYING ANY RATE THAT IS EQUAL TO OR LOWER THAN THE
CERTIFICATE RATE SHALL BE REJECTED, THUS ENTITLING SUCH
EXISTING CERTIFICATEHOLDERS TO CONTINUE TO OWN THE AGGREGATE
PRINCIPAL AMOUNT OF AUCTION RATE CERTIFICATES SUBJECT TO
SUCH SUBMITTED BIDS;
(B) POTENTIAL CERTIFICATEHOLDERS' SUBMITTED BIDS
SPECIFYING (1) ANY RATE THAT IS EQUAL TO OR LOWER THAN THE
CERTIFICATE RATE SHALL BE ACCEPTED AND (2) ANY RATE THAT IS
HIGHER THAN THE CERTIFICATE RATE SHALL BE REJECTED; AND
(C) EACH EXISTING CERTIFICATEHOLDER'S SUBMITTED BID
SPECIFYING ANY RATE THAT IS HIGHER THAN THE CERTIFICATE RATE
AND THE SUBMITTED SELL ORDER OF EACH EXISTING
CERTIFICATEHOLDER SHALL BE ACCEPTED, THUS ENTITLING EACH
EXISTING CERTIFICATEHOLDER THAT SUBMITTED ANY SUCH SUBMITTED
BID OR SUBMITTED SELL ORDER TO SELL THE AUCTION RATE
CERTIFICATES SUBJECT TO SUCH SUBMITTED BID OR SUBMITTED SELL
ORDER, BUT IN BOTH CASES ONLY IN AN AMOUNT EQUAL TO THE
AGGREGATE PRINCIPAL AMOUNT OF AUCTION RATE CERTIFICATES OF
THE APPLICABLE CLASS OBTAINED BY MULTIPLYING THE AGGREGATE
PRINCIPAL AMOUNT OF AUCTION RATE CERTIFICATES SUBJECT TO
SUBMITTED BIDS DESCRIBED IN CLAUSE (B) OF THIS SECTION
2.2.1(D)(II) BY A FRACTION THE NUMERATOR OF WHICH SHALL BE
THE AGGREGATE PRINCIPAL AMOUNT OF OUTSTANDING AUCTION RATE
CERTIFICATES OF SUCH CLASS OWNED BY SUCH EXISTING
CERTIFICATEHOLDER SUBJECT TO SUCH SUBMITTED BID OR SUBMITTED
SELL ORDER AND THE DENOMINATOR OF WHICH SHALL BE THE
AGGREGATE PRINCIPAL AMOUNT OF OUTSTANDING AUCTION RATE
CERTIFICATES OF SUCH CLASS SUBJECT TO ALL SUCH SUBMITTED
BIDS AND SUBMITTED SELL ORDERS.
(III) IF ALL OUTSTANDING AUCTION RATE CERTIFICATES OF
SUCH CLASS ARE SUBJECT TO SUBMITTED HOLD ORDERS, ALL
SUBMITTED BIDS SHALL BE REJECTED.
(IV) IF, AS A RESULT OF THE PROCEDURES DESCRIBED IN
PARAGRAPH (I) OR (II) OF THIS SECTION 2.2.1(D), ANY EXISTING
CERTIFICATEHOLDER WOULD BE ENTITLED OR REQUIRED TO SELL, OR
ANY POTENTIAL CERTIFICATEHOLDER WOULD BE ENTITLED OR
REQUIRED TO PURCHASE, A PRINCIPAL AMOUNT OF AUCTION RATE
CERTIFICATES OF THE APPLICABLE CLASS THAT IS NOT EQUAL TO AN
AUTHORIZED DENOMINATION, THE AUCTION AGENT SHALL, IN SUCH
MANNER AS IN ITS SOLE DISCRETION IT SHALL DETERMINE, ROUND
UP OR DOWN THE PRINCIPAL AMOUNT OF AUCTION RATE CERTIFICATES
TO BE PURCHASED OR SOLD BY ANY EXISTING CERTIFICATEHOLDER OR
POTENTIAL CERTIFICATEHOLDER SO THAT THE PRINCIPAL AMOUNT OF
AUCTION RATE CERTIFICATES PURCHASED OR SOLD BY EACH EXISTING
CERTIFICATEHOLDER OR POTENTIAL CERTIFICATEHOLDER SHALL BE
EQUAL TO AN AUTHORIZED DENOMINATION OR AN INTEGRAL MULTIPLE
OF $50,000 IN EXCESS THEREOF.
(V) IF, AS A RESULT OF THE PROCEDURES DESCRIBED IN
PARAGRAPH (II) OF THIS SECTION 2.2.1(D), ANY POTENTIAL
CERTIFICATEHOLDER WOULD BE ENTITLED OR REQUIRED TO PURCHASE
LESS THAN AN AUTHORIZED DENOMINATION OF AUCTION RATE
CERTIFICATES OF THE APPLICABLE CLASS, THE AUCTION AGENT
SHALL, IN SUCH MANNER AS IN ITS SOLE DISCRETION IT SHALL
DETERMINE, ALLOCATE AUCTION RATE CERTIFICATES OF SUCH CLASS
FOR PURCHASE AMONG POTENTIAL CERTIFICATEHOLDERS SO THAT ONLY
AUCTION RATE CERTIFICATES OF SUCH CLASS IN AUTHORIZED
DENOMINATIONS OR INTEGRAL MULTIPLES OF $50,000 IN EXCESS
THEREOF ARE PURCHASED BY ANY POTENTIAL CERTIFICATEHOLDER,
EVEN IF SUCH ALLOCATION RESULTS IN ONE OR MORE OF SUCH
POTENTIAL CERTIFICATEHOLDERS NOT PURCHASING ANY AUCTION RATE
CERTIFICATES OF SUCH CLASS.
(E) BASED ON THE RESULT OF EACH AUCTION, THE AUCTION AGENT
SHALL DETERMINE THE AGGREGATE PRINCIPAL AMOUNT OF AUCTION RATE CERTIFICATES OF
THE APPLICABLE CLASS TO BE PURCHASED AND THE AGGREGATE PRINCIPAL AMOUNT OF
AUCTION RATE CERTIFICATES OF THE APPLICABLE CLASS TO BE SOLD BY POTENTIAL
CERTIFICATEHOLDERS AND EXISTING CERTIFICATEHOLDERS ON WHOSE BEHALF EACH
BROKER-DEALER SUBMITTED BIDS OR SELL ORDERS AND, WITH RESPECT TO EACH
BROKER-DEALER, TO THE EXTENT THAT SUCH AGGREGATE PRINCIPAL AMOUNT OF AUCTION
RATE CERTIFICATES OF THE APPLICABLE CLASS TO BE SOLD DIFFERS FROM SUCH AGGREGATE
PRINCIPAL AMOUNT OF AUCTION RATE CERTIFICATES OF THE APPLICABLE CLASS TO BE
PURCHASED, DETERMINE TO WHICH OTHER BROKER-DEALER OR BROKER-DEALERS ACTING FOR
ONE OR MORE PURCHASERS SUCH BROKER-DEALER SHALL DELIVER, OR FROM WHICH OTHER
BROKER-DEALER OR BROKER-DEALERS ACTING FOR ONE OR MORE SELLERS SUCH
BROKER-DEALER SHALL RECEIVE, AS THE CASE MAY BE, AUCTION RATE CERTIFICATES OF
THE APPLICABLE CLASS.
(F) ANY CALCULATION BY THE AUCTION AGENT, THE ADMINISTRATOR OR THE ELIGIBLE
LENDER TRUSTEE, AS APPLICABLE, OF THE CERTIFICATE RATE, ONE-MONTH LIBOR,
THREE-MONTH LIBOR, THE MAXIMUM AUCTION RATE, THE ALL HOLD RATE, THE NET LOAN
RATE AND THE NON-PAYMENT RATE SHALL, IN THE ABSENCE OF MANIFEST ERROR, BE
BINDING ON ALL OTHER PARTIES.
(G) NOTWITHSTANDING ANYTHING IN THE TRUST AGREEMENT TO THE CONTRARY
NOTWITHSTANDING, NO AUCTION WILL BE HELD ON ANY AUCTION DATE HEREUNDER ON WHICH
THERE ARE INSUFFICIENT MONEYS HELD UNDER THE TRUST AGREEMENT AND AVAILABLE TO
PAY THE PRINCIPAL OF AND INTEREST DUE ON THE CERTIFICATE DISTRIBUTION DATE
IMMEDIATELY FOLLOWING SUCH AUCTION DATE.
SECTION 2.2.2. CHANGES IN THE AUCTION DATE. THE MARKET AGENT, WITH THE
WRITTEN CONSENT OF AN AUTHORIZED OFFICER, MAY SPECIFY AN EARLIER AUCTION DATE
(BUT IN NO EVENT MORE THAN FIVE BUSINESS DAYS EARLIER) THAN THE AUCTION DATE
THAT WOULD OTHERWISE BE DETERMINED IN ACCORDANCE WITH THE DEFINITION OF "AUCTION
DATE" IN SECTION 1.1 OF THIS APPENDIX I, OR ANY APPLICABLE TRUST SUPPLEMENT,
WITH RESPECT TO ONE OR MORE SPECIFIED AUCTION PERIODS IN ORDER TO CONFORM WITH
THEN CURRENT MARKET PRACTICE WITH RESPECT TO SIMILAR SECURITIES OR TO
ACCOMMODATE ECONOMIC AND FINANCIAL FACTORS THAT MAY AFFECT OR BE RELEVANT TO THE
DAY OF THE WEEK CONSTITUTING AN AUCTION DATE AND THE CERTIFICATE RATE BORNE ON
THE AUCTION RATE CERTIFICATES OF THE APPLICABLE CLASS. THE MARKET AGENT SHALL
DELIVER A WRITTEN REQUEST FOR CONSENT TO SUCH CHANGE IN THE LENGTH OF THE
AUCTION DATE TO THE ISSUER NOT LESS THAN THREE DAYS NOR MORE THAN 20 DAYS PRIOR
TO THE EFFECTIVE DATE OF SUCH CHANGE TOGETHER WITH A CERTIFICATE DEMONSTRATING
THE NEED FOR CHANGE IN RELIANCE ON SUCH FACTORS. THE MARKET AGENT SHALL PROVIDE
NOTICE OF ITS DETERMINATION TO SPECIFY AN EARLIER AUCTION DATE FOR ONE OR MORE
AUCTION PERIODS BY MEANS OF A WRITTEN NOTICE DELIVERED AT LEAST 10 DAYS PRIOR TO
THE PROPOSED CHANGED AUCTION DATE TO THE ELIGIBLE LENDER TRUSTEE, THE AUCTION
AGENT, THE ISSUER AND THE SECURITIES DEPOSITORY. SUCH NOTICE SHALL BE
SUBSTANTIALLY IN THE FORM OF, OR CONTAIN SUBSTANTIALLY THE INFORMATION CONTAINED
IN, EXHIBIT C TO THIS TRUST AGREEMENT.
IN CONNECTION WITH ANY CHANGE DESCRIBED IN THIS SECTION 2.2.2, THE AUCTION
AGENT SHALL PROVIDE SUCH FURTHER NOTICE TO SUCH PARTIES AS IS SPECIFIED IN
SECTION 2.2 OF THE AUCTION AGENT AGREEMENT.
SECTION 2.3. ADDITIONAL PROVISIONS REGARDING THE CERTIFICATE RATES. THE
DETERMINATION OF A CERTIFICATE RATE BY THE AUCTION AGENT OR ANY OTHER PERSON
PURSUANT TO THE PROVISIONS OF THIS APPENDIX B SHALL BE CONCLUSIVE AND BINDING ON
THE CERTIFICATEHOLDERS, AND THE ISSUER AND THE ELIGIBLE LENDER TRUSTEE MAY RELY
THEREON FOR ALL PURPOSES.
IN NO EVENT SHALL THE CUMULATIVE AMOUNT OF INTEREST PAID OR PAYABLE ON THE
CERTIFICATES (INCLUDING INTEREST CALCULATED AS PROVIDED HEREIN, PLUS ANY OTHER
AMOUNTS THAT CONSTITUTE INTEREST ON THE CERTIFICATES UNDER APPLICABLE LAW, WHICH
ARE CONTRACTED FOR, CHARGED, RESERVED, TAKEN OR RECEIVED PURSUANT TO THE
CERTIFICATES OR RELATED DOCUMENTS) CALCULATED FROM THE DATE OF ISSUANCE OF THE
CERTIFICATES THROUGH ANY SUBSEQUENT DAY DURING THE TERM OF THE CERTIFICATES OR
OTHERWISE PRIOR TO PAYMENT IN FULL OF THE CERTIFICATES EXCEED THE AMOUNT
PERMITTED BY APPLICABLE LAW. IF THE APPLICABLE LAW IS EVER JUDICIALLY
INTERPRETED SO AS TO RENDER USURIOUS ANY AMOUNT CALLED FOR UNDER THE
CERTIFICATES OR RELATED DOCUMENTS OR OTHERWISE CONTRACTED FOR, CHARGED,
RESERVED, TAKEN OR RECEIVED IN CONNECTION WITH THE CERTIFICATES, OR IF THE
ACCELERATION OF THE MATURITY OF THE CERTIFICATES RESULTS IN PAYMENT TO OR
RECEIPT BY THE CERTIFICATEHOLDER OR ANY FORMER CERTIFICATEHOLDER OF ANY INTEREST
IN EXCESS OF THAT PERMITTED BY APPLICABLE LAW, THEN, NOTWITHSTANDING ANY
PROVISION OF THE CERTIFICATES OR RELATED DOCUMENTS TO THE CONTRARY, ALL EXCESS
AMOUNTS THERETOFORE PAID OR RECEIVED WITH RESPECT TO THE CERTIFICATES SHALL BE
CREDITED ON THE PRINCIPAL BALANCE OF THE CERTIFICATES (OR, IF THE CERTIFICATES
HAVE BEEN PAID OR WOULD THEREBY BE PAID IN FULL, REFUNDED BY THE RECIPIENT
THEREOF), AND THE PROVISIONS OF THE CERTIFICATES AND RELATED DOCUMENTS SHALL
AUTOMATICALLY AND IMMEDIATELY BE DEEMED REFORMED AND THE AMOUNTS THEREAFTER
COLLECTIBLE HEREUNDER AND THEREUNDER REDUCED, WITHOUT THE NECESSITY OF THE
EXECUTION OF ANY NEW DOCUMENT, SO AS TO COMPLY WITH THE APPLICABLE LAW, BUT SO
AS TO PERMIT THE RECOVERY OF THE FULLEST AMOUNT OTHERWISE CALLED FOR UNDER THE
CERTIFICATES AND UNDER THE RELATED DOCUMENTS.
SECTION 2.4. CHANGES IN AUCTION PERIOD OR PERIODS.
(A) WHILE ANY OF THE AUCTION RATE CERTIFICATES ARE OUTSTANDING, THE ISSUER
MAY, FROM TIME TO TIME, CONVERT THE LENGTH OF ONE OR MORE AUCTION PERIODS (AN
"AUCTION PERIOD ADJUSTMENT"), IN ORDER TO CONFORM WITH THEN CURRENT MARKET
PRACTICE WITH RESPECT TO SIMILAR SECURITIES OR TO ACCOMMODATE ECONOMIC AND
FINANCIAL FACTORS THAT MAY AFFECT OR BE RELEVANT TO THE LENGTH OF THE AUCTION
PERIOD AND THE CERTIFICATE RATE BORNE BY THE AUCTION RATE CERTIFICATES. THE
ISSUER SHALL NOT INITIATE AN AUCTION PERIOD ADJUSTMENT UNLESS IT SHALL HAVE
RECEIVED THE WRITTEN CONSENT OF THE MARKET AGENT AND THE SURETY PROVIDER, WHICH
CONSENT SHALL NOT BE UNREASONABLY WITHHELD, NOT LESS THAN THREE DAYS NOR MORE
THAN 20 DAYS PRIOR TO THE EFFECTIVE DATE OF AN AUCTION PERIOD ADJUSTMENT. THE
ISSUER SHALL INITIATE THE AUCTION PERIOD ADJUSTMENT BY GIVING WRITTEN NOTICE BY
ISSUER ORDER TO THE INDENTURE TRUSTEE, THE AUCTION AGENT, THE MARKET AGENT, THE
SURETY PROVIDER AND THE SECURITIES DEPOSITORY IN SUBSTANTIALLY THE FORM OF, OR
CONTAINING SUBSTANTIALLY THE INFORMATION CONTAINED IN, EXHIBIT D TO THE FIRST
TERMS SUPPLEMENT AT LEAST 10 DAYS PRIOR TO THE AUCTION DATE FOR SUCH AUCTION
PERIOD.
(B) ANY SUCH ADJUSTED AUCTION PERIOD SHALL NOT BE LESS THAN 7 DAYS NOR MORE
THAN 91 DAYS. IF ANY SUCH ADJUSTED AUCTION PERIOD WILL BE LESS THAN THE NUMBER
OF DAYS IN THE THEN CURRENT AUCTION PERIOD, THE NOTICE DESCRIBED ABOVE WILL BE
EFFECTIVE ONLY IF IT IS ACCOMPANIED BY A WRITTEN STATEMENT OF THE ELIGIBLE
LENDER TRUSTEE, THE AUCTION AGENT AND THE SECURITIES DEPOSITORY TO THE EFFECT
THAT THEY ARE CAPABLE OF PERFORMING THEIR DUTIES, IF ANY, UNDER THIS APPENDIX B,
THE AUCTION AGENT AGREEMENT AND ANY BROKER-DEALER AGREEMENT WITH RESPECT TO SUCH
CHANGED AUCTION PERIOD.
(C) AN AUCTION PERIOD ADJUSTMENT SHALL TAKE EFFECT ONLY IF (A) THE ELIGIBLE
LENDER TRUSTEE AND THE AUCTION AGENT RECEIVE, BY 11:00 A.M., EASTERN TIME, ON
THE BUSINESS DAY BEFORE THE AUCTION DATE FOR THE FIRST SUCH AUCTION PERIOD, AN
ISSUER CERTIFICATE IN SUBSTANTIALLY THE FORM ATTACHED AS, OR CONTAINING
SUBSTANTIALLY THE SAME INFORMATION CONTAINED IN, EXHIBIT E TO THE FIRST TERMS
SUPPLEMENT, AUTHORIZING THE AUCTION PERIOD ADJUSTMENT SPECIFIED IN SUCH
CERTIFICATE ALONG WITH A COPY OF THE CERTIFICATE OF THE MARKET AGENT DESCRIBED
ABOVE IN SUBPARAGRAPH (A) ABOVE AND, IF APPLICABLE, THE WRITTEN STATEMENT OF THE
ELIGIBLE LENDER TRUSTEE, THE AUCTION AGENT AND THE SECURITIES DEPOSITORY
DESCRIBED IN SUBPARAGRAPH (B) ABOVE AND (B) SUFFICIENT BIDS EXIST AS OF THE
AUCTION ON THE AUCTION DATE FOR SUCH FIRST AUCTION PERIOD. IF THE CONDITION
REFERRED TO IN (A) ABOVE IS NOT MET, THE CERTIFICATE RATE FOR THE APPLICABLE
CLASS OF AUCTION RATE CERTIFICATES FOR THE NEXT AUCTION PERIOD SHALL BE
DETERMINED PURSUANT TO THE ABOVE PROVISIONS OF SECTION 2.2 AND THE AUCTION
PERIOD SHALL BE THE AUCTION PERIOD DETERMINED WITHOUT REFERENCE TO THE PROPOSED
CHANGE. IF THE CONDITION REFERRED TO IN (A) IS MET BUT THE CONDITION REFERRED TO
IN (B) ABOVE IS NOT MET, THE CERTIFICATE RATE FOR THE APPLICABLE CLASS OF
AUCTION RATE CERTIFICATES FOR THE NEXT AUCTION PERIOD SHALL BE THE LESSER OF THE
MAXIMUM AUCTION RATE AND THE NET LOAN RATE AND THE AUCTION PERIOD SHALL BE THE
AUCTION PERIOD DETERMINED WITHOUT REFERENCE TO THE PROPOSED CHANGE.
IN CONNECTION WITH ANY AUCTION PERIOD ADJUSTMENT, THE AUCTION AGENT SHALL
PROVIDE SUCH FURTHER NOTICE TO SUCH PARTIES AS IS SPECIFIED IN SECTION 2.2 OF
THE AUCTION AGENT AGREEMENT.
[EXECUTION COPY]
SALE AND SERVICING AGREEMENT
among
CLASSNOTES TRUST 1997-I
as Issuer,
TRANS-WORLD INSURANCE COMPANY D/B/A EDUCAID
as Seller, Master Servicer and Administrator,
CLASSNOTES, INC.
as Seller and Master Servicer,
THE YORK BANK AND TRUST COMPANY
not in its individual capacity but solely
as Eligible Lender Trustee,
and
THE MONEY STORE INC.,
Dated as of February 28, 1997
<PAGE>
ARTICLE I
Definitions and Usage ....................................................2
ARTICLE II
Conveyance of Financed Student Loans
SECTION 2.1. Conveyance of Initial Financed Student Loans...................2
SECTION 2.2. Conveyance of Additional Financed Student
Loans...............................................3
SECTION 2.3. Conveyance of Certain Financed Student Loans
by the Eligible Lender Trustee to the
Sellers.............................................5
SECTION 2.4. Security Agreement..............................................6
ARTICLE III
The Financed Student Loans
SECTION 3.1. Representations and Warranties of Sellers
with Respect to the Financed Student Loans.........6
SECTION 3.2. Repurchase upon Breach; Reimbursement..........................11
SECTION 3.3. Custody of Financed Student Loan Files.........................12
SECTION 3.4. Duties of Master Servicers as Custodian........................13
SECTION 3.5. Instructions; Authority to Act.................................14
SECTION 3.6. Custodian's Indemnification....................................14
SECTION 3.7. Effective Period and Termination...............................15
SECTION 3.8. Appointment of Subcustodian....................................15
ARTICLE IV
Administration and Servicing of Financed Student Loans
SECTION 4.1. Duties of the Master Servicers.................................16
SECTION 4.2. Collection of Financed Student Loan Payments..................17
SECTION 4.3. Realization upon Financed Student Loans........................19
SECTION 4.4. No Impairment..................................................20
SECTION 4.5. Purchase of Financed Student Loans;
Reimbursement......................................20
SECTION 4.6. Servicing Fee; Servicing Fee Carryover.........................21
SECTION 4.7. Administrator's Certificate....................................22
SECTION 4.8. Annual Statement as to Compliance; Notice of
Default............................................23
SECTION 4.9. Annual Independent Certified Public
Accountants' Report................................24
SECTION 4.10. Access to Certain Documentation and
Information Regarding Financed Student Loans......24
SECTION 4.11. Master Servicer and Administrator Expenses...................25
SECTION 4.12. Appointment of Subservicer....................................25
ARTICLE V
Distributions; Reserve Account
SECTION 5.1. Establishment of Trust Accounts................................25
SECTION 5.2. Collections ...................................................28
SECTION 5.3. Application of Collections.....................................29
SECTION 5.4. Additional Deposits............................................29
SECTION 5.5. Distributions..................................................30
SECTION 5.6. Reserve Account................................................34
SECTION 5.7. Statements to Certificateholders and
Noteholders........................................36
SECTION 5.8. Pre-Funding Account............................................38
SECTION 5.9. Capitalized Pre-Funding Account................................38
SECTION 5.10. Capitalized Interest Account..................................39
SECTION 5.11. Expense Account...............................................39
SECTION 5.12. Note Distribution Account and Certificate
Distribution Account...............................39
SECTION 5.13. Monthly Advances..............................................39
ARTICLE VI
The Sellers and the Master Servicers
SECTION 6.1. Representations of the Sellers and the
Master Servicers...................................40
SECTION 6.2. Existence ...................................................42
SECTION 6.3. Liability and Indemnities......................................42
SECTION 6.4. [Reserved] ...................................................44
SECTION 6.5. Merger or Consolidation of, or Assumption of
the Obligations of, the Sellers, the
Administrator or the Master Servicers..............44
SECTION 6.6. Limitation on Liability of Seller, Master
Servicer and Others................................45
SECTION 6.7. Seller May Own Certificate or Notes............................46
SECTION 6.8. Master Servicer Not to Resign..................................46
ARTICLE VII
The Administrator
SECTION 7.1. Representations of the Administrator...........................47
SECTION 7.2. Liability and Indemnities......................................48
SECTION 7.3. Administrator Not to Resign....................................49
ARTICLE VIII
Default
SECTION 8.1. Master Servicer Default; Administrator
Default............................................50
SECTION 8.2. Appointment of Successor.......................................53
SECTION 8.3. Notification to Noteholders and
Certificateholders.................................54
SECTION 8.4. Waiver of Past Defaults........................................55
ARTICLE IX
Termination
SECTION 9.1. Termination ...................................................55
ARTICLE X
Surety Bonds
SECTION 10.1. Note Surety Bonds..............................................58
SECTION 10.2. Further Assurances; Surety Provider Default;
etc................................................59
ARTICLE XI
Miscellaneous
SECTION 11.1. Amendment ...................................................60
SECTION 11.2. Protection of Interests in Trust..............................61
SECTION 11.3. Notices ...................................................64
SECTION 11.4. Assignment ...................................................64
SECTION 11.5. Limitations on Rights of Others...............................65
SECTION 11.6. Severability..................................................65
SECTION 11.7. Separate Counterparts.........................................65
SECTION 11.8. Headings ...................................................65
SECTION 11.9. Governing Law.................................................65
SECTION 11.10. Assignment to Indenture Trustee...............................65
SECTION 11.11. Nonpetition Covenants.........................................65
SECTION 11.12. Limitation of Liability of Eligible Lender
Trustee and Indenture Trustee.....................66
SECTION 11.13. Rights of Surety Provider.....................................66
APPENDIX A Definitions and Usage
SCHEDULE A Schedule of Financed Student Loans
SCHEDULE B Location of Financed Student Loans
EXHIBIT A Form of Report to Noteholders
EXHIBIT B Form of Report to Certificateholders
EXHIBIT C Form of Administrator's Certificate
EXHIBIT D Form of Assignment of Initial Financed
Student Loans
EXHIBIT E Form of Assignment and Bill of Sale for
Additional Financed Student Loans
<PAGE>
SALE AND SERVICING AGREEMENT (the "Agreement") dated as of February 28,
1997, among CLASSNOTES TRUST 1997-I, a Pennsylvania business trust (the
"Issuer"), TRANS-WORLD INSURANCE COMPANY D/B/A EDUCAID, an Arizona corporation
("TWIC," a "Seller," a "Master Servicer" or the "Administrator"), CLASSNOTES,
INC., a Delaware corporation ("ClassNotes," a "Seller" or a "Master Servicer"
and, together with TWIC, the "Sellers" or the "Master Servicers"), THE YORK BANK
AND TRUST COMPANY, a Pennsylvania bank and trust company, solely as eligible
lender trustee and not in its individual capacity (the "Eligible Lender
Trustee"), and THE MONEY STORE INC., a New Jersey corporation ("TMSI").
WHEREAS the Issuer desires to purchase student loans originated or acquired
by the Sellers in the ordinary course of business;
WHEREAS TMSI is willing to assist its wholly-owned subsidiaries, the
Sellers, to sell such student loans so as to provide a source of funding for the
Sellers' respective student loan businesses, and the Sellers are willing to sell
such student loans to the Issuer;
WHEREAS the Eligible Lender Trustee is willing to hold legal title to, and
serve as eligible lender trustee with respect to, such student loans on behalf
of the Issuer; and
WHEREAS the Master Servicers and the Administrator are willing to service
such student loans and undertake certain administrative functions with respect
thereto; and
WHEREAS, the parties hereto expect to enter into additional sale and
servicing agreements substantially identical to this Agreement from time to time
in connection with the issuance of additional series of debt instruments by the
Issuer.
WHEREAS the Issuer is authorizing on the date hereof for issuance its
Auction Rate Asset Backed Certificates, Class 1 (the "Certificates") and its
Series 1997-1 Asset Backed Notes, Class A-1, Class A-2 and Class A-3 (the
"Series 1997-1 Notes");
WHEREAS the parties hereto are entering into this Sale and Servicing
Agreement in connection with the Certificates and the Series 1997-1 Notes.
NOW THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND USAGE
Capitalized terms used but not defined herein are defined in Appendix A
hereto, which also contains rules as to usage and construction that shall be
applicable herein.
ARTICLE II
CONVEYANCE OF FINANCED STUDENT LOANS
SECTION 2.1. CONVEYANCE OF INITIAL FINANCED STUDENT LOANS. (a) In
consideration of the Issuer's delivery to or upon the order of TWIC on the
Closing Date of $239,134,328.76 and the other amounts to be distributed from
time to time to the Sellers in accordance with the terms of this Agreement, each
of the Sellers agrees to, and the Sellers do hereby, as evidenced by a duly
executed written assignment and bill of sale in the form of Exhibit D, sell,
transfer, assign, set over and otherwise convey to the Eligible Lender Trustee
on behalf of the Issuer, without recourse (subject to the obligations herein):
(i) all right, title and interest in and to the Financed
Student Loans owned by TWIC (other than the Additional Financed Student
Loans) (the "Initial Financed Student Loans") listed on Schedule A to
this Agreement and all obligations of the Obligors thereunder,
including all moneys paid thereunder, and all written communications
received by TWIC with respect thereto (including borrower
correspondence, notices of death, disability or bankruptcy and requests
for deferrals or forbearance), on or after the
Initial Cut-off Date;
(ii) all right, title and interest in all funds on deposit
from time to time in the Trust Accounts and in all investments and
proceeds thereof (including all income thereon);
(iii) the proceeds of any and all of the foregoing;
and
(iv) the amounts specified in Sections 5.8, 5.9 and
5.10 hereof.
(b) In connection with the sale and assignment of Financed Student Loans to
the Eligible Lender Trustee on behalf of the Issuer, on or prior to the Closing
Date, the Sellers shall cause the Surety Provider to deliver (i) the Certificate
Surety Bond to the Eligible Lender Trustee on behalf of the Certificateholders
and (ii) the Note Surety Bond to the Eligible Lender Trustee on behalf of the
related Noteholders.
(c) On the Closing Date, the Sellers shall have delivered (A) to the Rating
Agencies and the Surety Provider an Opinion of Counsel with respect to the
transfer of the Initial Financed Student Loans and the Additional Financed
Student Loans to be transferred on each Transfer Date, and (B) to the Eligible
Lender Trustee, the Surety Provider and the Indenture Trustee the Opinion of
Counsel required by Section 11.2(i)(1).
(d) In connection with the sale of the Initial Financed Student Loans, on
the Closing Date relating to the Series 1997-1 Notes each Seller and the Issuer
shall execute a cross-receipt, which will evidence receipt by such Seller of the
purchase price for its Initial Financed Student Loans, and receipt by the Issuer
of such Initial Financed Student Loans.
SECTION 2.2. CONVEYANCE OF ADDITIONAL FINANCED STUDENT LOANS. (a) Subject
to the conditions set forth in paragraph (b) below, in consideration of the
Issuer's delivery on the related Transfer Date to or upon the order of a Seller
of the amount described in Section 5.8(a) to be delivered to such Seller, such
Seller does hereby, sell, transfer, assign, set over and otherwise convey to the
Eligible Lender Trustee on behalf of the Issuer, without recourse (subject to
the obligations herein) all right, title and interest of such Seller in and to
each Additional Financed Student Loan, and all moneys received thereon, and all
written communications received by such Seller with respect thereto (including
borrower correspondence, notices of death, disability or bankruptcy and requests
for deferrals or forbearances), on and after the related Subsequent Cut-off
Date, made from time to time during the Funding Period relating to the Series
1997-1 Notes.
(b) A Seller shall transfer to the Issuer the Additional Financed Student
Loans for a given Transfer Date and the other property and rights related
thereto described in paragraph (a) above only upon the satisfaction of each of
the following conditions on or prior to such Transfer Date:
(i) such Seller shall have delivered to the Eligible Lender
Trustee and the Indenture Trustee, with a copy to the Surety Provider,
a duly executed written assignment and bill of sale in substantially
the form of Exhibit E (each, a "Transfer Agreement"), which shall
include supplements to Schedule A hereto, listing such Additional
Financed Student Loans;
(ii) such Seller shall have delivered, at least 2 Business
Days prior to such Transfer Date, notice of such transfer to the
Eligible Lender Trustee and the Indenture Trustee, with a copy to the
Surety Provider, including a listing of the type and the aggregate
principal balance of such Additional Financed Student Loans;
(iii) such Seller shall, to the extent required by Section 5.2
of this Agreement, have deposited in the Collection Account all
collections in respect of the Additional Financed Student Loans on and
after each applicable Subsequent Cut-off Date;
(iv) as of each Transfer Date, such Seller was not insolvent
nor will it have been made insolvent by such transfer nor is it aware
of any pending insolvency;
(v) as of each Transfer Date, such Seller was in
compliance with all applicable provisions of the Insurance
Agreement and no default, or event which with notice or the
passage of time, or both, would constitute a default,
thereunder has occurred;
(vi) such addition will not result in a material
adverse Federal or Pennsylvania tax consequence to the
Issuer, the Noteholders or the Certificateholders;
(vii) the Funding Period relating to the Series
1997- 1 Notes shall not have terminated;
(viii) such 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 Indenture
Trust Estate; and
(ix) no selection procedures believed by such Seller to be
adverse to the interests of the Certificateholders, the Noteholders or
the Surety Provider shall have been utilized in selecting the
Additional
Financed Student Loans.
(c) In addition to Additional Financed Student Loans
originated by a Seller, with the prior consent of the Surety Provider, such
Seller may direct the Eligible Lender Trustee to acquire one or more portfolios
of specified student loans as Additional Financed Student Loans hereunder
subject to satisfaction of the conditions specified in Section 2.2(b); PROVIDED,
HOWEVER, that the Transfer Agreement delivered by such
Seller may be modified to reflect the sale to the Issuer by such Seller of its
rights to acquire such Additional Financed Student Loans.
SECTION 2.3. CONVEYANCE OF CERTAIN FINANCED STUDENT LOANS BY THE ELIGIBLE
LENDER TRUSTEE TO THE SELLERS. (a) Upon receipt of written notice (or telephonic
or facsimile notice followed by written notice) from a Seller (or from the
applicable Master Servicer on behalf of such Seller) by the Eligible Lender
Trustee and the Indenture Trustee, a copy of such notice to be concurrently
delivered to the Surety Provider, the Eligible Lender Trustee will convey to
such Seller the Financed Student Loans identified in such notice, which are to
be repaid with proceeds of the Consolidation Loans to be made by or on behalf of
such Seller. Simultaneously with each such conveyance by the Eligible Lender
Trustee and the making by a Seller of each such Consolidation Loan, such Seller
shall deposit into the Collection Account an amount equal to the aggregate
Purchase Amount of such Financed Student Loans, as payment for such conveyance.
(b) Upon receipt of written notice (or telephonic or facsimile notice
followed by written notice) from a Seller (or from the applicable Master
Servicer on behalf of such Seller) by the Eligible Lender Trustee and the
Indenture Trustee, that a Financed Student Loan that is a Serial Loan is to be
conveyed to the holder of one or more student loans to which such Financed
Student Loan is serial, a copy of such notice to be concurrently delivered to
the Surety Provider, the Eligible Lender Trustee shall convey to the order of
such Seller's designee the Financed Student Loan(s) identified in such notice.
Within 75 days of each such conveyance by the Eligible Lender Trustee, a Seller
shall either (i) cause the transferee of such Financed Student Loan(s) to pay
into the Collection Account an amount at least equal to the aggregate Purchase
Amount of such Financed Student Loan(s) in consideration for such conveyance or
(ii) reconvey to the Eligible Lender Trustee such Financed Student Loan(s).
Until such time, if any, as the amount set forth in clause (i) above is
deposited into the Collection Account, all payments received on or with respect
to such Financed Student Loan shall remain an asset of the Trust.
(c) Upon receipt of written notice (or telephonic or facsimile notice
followed by written notice) from a Master Servicer by the Eligible Lender
Trustee and the Indenture Trustee, a copy of such notice to be concurrently
delivered to the Surety Provider, the Eligible Lender Trustee will convey to
such Master Servicer the Financed Student Loans identified in such notice, which
are to be transferred to a Guarantor in consideration of a related Guarantee
Payment. Within one Business Day of its receipt of the related Guarantee
Payment, a Master Servicer shall deposit, or cause to be deposited, into the
Collection Account an amount equal to such Guarantee Payment, as payment of such
conveyance.
(d) Upon receipt of written notice (or telephonic or facsimile notice
followed by written notice) from the Administrator by the Eligible Lender
Trustee and the Indenture Trustee, a copy of such notice to be concurrently
delivered to the Surety Provider, the Eligible Lender Trustee shall convey to
the order of the Administrator or the Administrator's designee the Financed
Student Loans identified in such notice. Simul taneously with each such
conveyance by the Eligible Lender Trustee, the Administrator shall deposit, or
cause to be deposited, into the Collection Account an amount at least equal to
the aggregate Purchase Amount of such Financed Student Loans as payment for such
conveyance. Notwithstanding the foregoing, any such conveyance of a Financed
Student Loan pursuant to this Section 2.3(d) shall conform to the applicable
requirements of the Insurance Agreement.
SECTION 2.4. SECURITY AGREEMENT. Although it is the intent of the parties
to this Agreement that the conveyance of the Sellers' right, title and interest
in and to the Financed Student Loans pursuant to this Agreement shall constitute
a purchase and sale and not a loan, in the event that such conveyance is deemed
to be a loan, it is the intent of the parties to this Agreement that the Sellers
shall be deemed to have granted to the Eligible Lender Trustee, on behalf of the
Issuer, a first priority perfected security interest in all of the Sellers'
right, title and interest in, to and under the Financed Student Loans and the
proceeds thereof, and that this Agreement shall constitute a security agreement
under applicable law.
ARTICLE III
THE FINANCED STUDENT LOANS
SECTION 3.1. REPRESENTATIONS AND WARRANTIES OF SELLERS WITH RESPECT TO THE
FINANCED STUDENT LOANS. TMSI and the applicable Seller, as the case may be,
jointly and severally, make the following representations and warranties as to
the Financed Student Loans being transferred to the Eligible Lender Trustee by
such Seller on the Closing Date relating to the Series 1997-1 Notes and the
Financed Student Loans to be transferred to the Eligible Lender Trustee by such
Seller during the Funding Period for the Series 1997-1 Notes, on which the
Issuer is deemed to have relied in acquiring (through the Eligible Lender
Trustee) such Financed Student Loans. Such representations and warranties speak
as of the execution and delivery of this Agreement and as of the Closing Date
relating to the Series 1997-1 Notes, in the case of the Initial Financed Student
Loans, and as of the applicable Transfer Date, in the case of the Additional
Financed Student Loans, but shall survive the sale, transfer and assignment of
such Financed Student Loans to the Eligible Lender Trustee on behalf of the
Issuer and the pledge thereof to the Indenture Trustee pursuant to the
Indenture. As used in this Article III, unless otherwise indicated the term
"Financed Student Loans" shall include only the Financed Student Loans being
transferred to the Eligible Lender Trustee on the Closing Date for the Series
1997-1 Notes and the Financed Student Loans to be transferred to the Eligible
Lender Trustee during the Funding Period for the Series 1997-1 Notes.
(i) CHARACTERISTICS OF FINANCED STUDENT LOANS. Each Financed
Student Loan (A) was originated in the United States of America, its
territories, its possessions or other areas subject to its
jurisdiction to an eligible borrower under applicable law and
agreements and was fully and properly executed by the parties thereto,
(B) was originated or acquired by such Seller in the ordinary course
of its business, (C) has been serviced since the date of its
origination in accordance with all applicable requirements of the
applicable Guarantor and the Higher Education Act and (D) provides or,
when the payment schedule with respect thereto is determined, will
provide for payments on a periodic basis that fully amortize the
principal amount of such Financed Student Loan by its maturity and
yields interest at the rate applicable thereto, as such maturity may
be modified in accordance with any applicable deferral or forbearance
periods granted in accordance with applicable laws and restrictions,
including those of the Higher Education Act or any Guarantee
Agreement. Each Financed Student Loan that is a Stafford Loan
qualifies the holder thereof to receive Interest Subsidy Payments and
Special Allowance Payments from the Department. Each Financed Student
Loan that is a Consolidation Loan qualifies the holder thereof to
receive Interest Subsidy Payments and Special Allowance Payments from
the Department to the extent applicable. Each Financed Student Loan
that is a PLUS Loan, a SLS Loan or an Unsubsidized Stafford Loan
qualifies the holder thereof to receive Special Allowance Payments
from the Department to the extent applicable. Each Financed Student
Loan qualifies the holder thereof to receive Guarantee Payments from
the applicable Guarantor.
(ii) SCHEDULE OF FINANCED STUDENT LOANS. The information
concerning the Initial Financed Student Loans set forth in Schedule A
to this Agreement and Schedule A to the related Transfer Agreement is
true and correct in all material respects as of the opening of
business on the Initial Cut-off Date or each applicable Subsequent
Cut-off Date, as applicable, and no selection procedures believed to
be adverse to the Noteholders, the Certificateholders or the Surety
Provider were utilized in selecting the Initial Financed Student Loans
or the Additional Financed Student Loans, as applicable. The computer
tape or electronic data transmission regarding the Initial Financed
Student Loans made available to the Issuer and its assigns and the
Surety Provider is true and correct in all respects as of the Initial
Cut-off Date.
(iii) COMPLIANCE WITH LAW. Each Financed Student Loan complied
at the time it was originated or made and at the execution of this
Agreement or the applicable Transfer Agreement, as the case may be,
complies, and such Seller and its agents, with respect to each such
Financed Student Loan, have at all times complied, in all material
respects with all requirements of applicable Federal, State and local
laws and regulations thereunder, including the Higher Education Act,
the Equal Credit Opportunity Act, the Federal Reserve Board's
Regulation B and other applicable consumer credit laws and equal credit
opportunity laws.
(iv) BINDING OBLIGATION. Each Financed Student Loan represents
the genuine, legal, valid and binding payment obligation in writing of
the related Obligor, enforceable by or on behalf of the holder thereof
against the related Obligor in accordance with its terms, and no
Financed Student Loan has been satisfied, subordinated or rescinded.
(v) NO DEFENSES. No right of rescission, setoff, counterclaim
or defense has been asserted or threatened with respect to any Financed
Student Loan. No counterclaim, offset, defense or right of rescission
exists with respect to any Financed Student Loan which could be
asserted and maintained, or which, with notice, lapse of time, or the
occurrence or failure to occur of any act or event, could be asserted
and maintained by the borrower against the Eligible Lender Trustee as a
result of any act or omission to act on the part of such Seller, the
applicable Master Servicer, the Servicer, the Administrator, the
Eligible Lender Trustee, the Indenture Trustee or any of their
respective agents, employees or other designees.
(vi) NO DEFAULT. No Financed Student Loan has a payment that is
more than 90 days overdue as of the Initial Cut-off Date or the
applicable Subsequent Cut-off 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 90 days, no continuing condition that with notice or
the lapse of time or both would constitute a default, breach,
violation or event permitting acceleration under the terms of any
Financed Student Loan has arisen; and such Seller has not waived and
shall not waive any of the foregoing other than as permitted by the
Basic Documents.
(vii) TITLE. The transfer and assignment herein contemplated
constitutes a sale of the Financed Student Loans from such Seller to
the Eligible Lender Trustee on behalf of the Issuer and the beneficial
interest in and title to such Financed Student Loans shall not be part
of the debtor's estate in the event of the appointment of a receiver
with respect to such Seller. No Financed Student Loan has been sold,
transferred, assigned or pledged by such Seller to any Person other
than the Eligible Lender Trustee on behalf of the Issuer or any such
assignment or pledge has been released. Immediately prior to the
transfer and assignment herein contemplated, such Seller had good
title to each Financed Student Loan, free and clear of all Liens and,
immediately upon the transfer thereof, the Eligible Lender Trustee on
behalf of the Issuer shall have good title to each such Financed
Student Loan, free and clear of all Liens, and the transfer to the
Indenture Trustee, shall have been perfected under the UCC.
(viii) LAWFUL ASSIGNMENT. No Financed Student Loan has been
originated in, or is subject to the laws of, any jurisdiction under
which the sale, transfer and assignment of such Financed Student Loan
or any Financed Student Loan under this Agreement, each Transfer
Agreement or the Indenture is unlawful, void or voidable.
(ix) ALL FILINGS MADE. All filings (including UCC filings)
necessary in any jurisdiction to give the Issuer a first perfected
ownership interest in the Financed Student Loans, and to give the
Indenture Trustee a first perfected security interest therein, shall
have been made.
(x) ONE ORIGINAL. There is only one original executed copy of
each promissory note evidencing a Financed Student Loan.
(xi) PRINCIPAL BALANCE. The aggregate principal balance of the
Initial Financed Student Loans transferred by TWIC to the Eligible
Lender Trustee on the Closing Date, plus accrued interest to be
capitalized with respect thereto, as of the Initial Cut-off Date is
$227,934,328.76.
(xii) [Reserved]
(xiii) INTEREST ACCRUING. Each Financed Student Loan is accruing
interest (whether or not such interest is being paid currently, by the
Obligor or by the Department, or is being capitalized), except as
otherwise expressly permitted by the Basic Documents.
(xiv) SELLERS' REPRESENTATIONS. The representations and
warranties of the Sellers contained in Section 6.1 are true and
correct.
(xv) COMPLIANCE WITH REQUIREMENTS OF GUARANTORS. Each Financed
Student Loan will be maintained and serviced in all material respects
in compliance with all applicable requirements of the applicable
Guarantor and the Department and is or will be represented by one or
more promissory notes or other written agreements that adequately
document such Financed Student Loans.
(xvi) NO ADVERSE EFFECTS. The sale and assignment of Financed
Student Loans to the Eligible Lender Trustee by such Seller pursuant
to this Agreement or the applicable Transfer Agreement will not, by
reason thereof, have any adverse effect upon the validity, legality or
enforceability of the Financed Student Loans.
(xvii) GUARANTEES IN EFFECT. On the dates of making thereof and
of transfer thereof to the Eligible Lender Trustee, each Financed
Student Loan will be guaranteed by a Guarantor and, except for Private
Loans, covered by a federal reimbursement contract between such
Guarantor and the Department and each such guarantee and federal
reimbursement contract will be in full force and effect. All guarantee
fees and origination fees with respect to each Financed Student Loan
shall have been timely paid or will be timely paid. The guarantee with
respect to each Financed Student Loan will be freely transferable as
an incident to the sale of each Student Loan to the Eligible Lender
Trustee, and the Eligible Lender Trustee will be entitled to the
benefits of such guarantee, and none of the Financed Student Loans
will at any time prior to its transfer to the Eligible Lender Trustee
have been tendered to either the Department, the Secretary of
Education or the applicable Guarantor for payment.
(xviii) GUARANTEE AGREEMENTS. The Eligible Lender Trustee is
party to a valid and binding Guarantee Agreement with each Guarantee
Agency guaranteeing a Financed Student Loan.
(xix) INTEREST ON CONSOLIDATION LOANS. No Financed Student Loan
that is a Consolidation Loan shall bear a rate of interest below that
provided for in the Higher Education Act.
SECTION 3.2. REPURCHASE UPON BREACH; REIMBURSEMENT. The applicable Seller,
TMSI, the Master Servicer or the Eligible Lender Trustee, as the case may be,
shall inform the other parties to this Agreement, the Indenture Trustee and the
Surety Provider promptly, in writing, upon the discovery of any breach of the
representations and warranties made pursuant to Section 3.1. Unless any such
breach shall have been cured within 60 days following the discovery thereof by
such Seller or TMSI or receipt by such Seller or TMSI of written notice from the
Eligible Lender Trustee, the Surety Provider, TMSI or the applicable Master
Servicer of such breach, such Seller shall repurchase any Financed Student Loan
in which the interests of the Noteholders, the Certificateholders or the Surety
Provider are materially and adversely affected by any such breach as of the
first day succeeding the end of such 60-day period that is the last day of a
Collection Period; provided that it is understood that any such breach that does
not affect any Guarantor's obligation to guarantee payment of such Financed
Student Loan to the Eligible Lender Trustee will not be considered to have a
material adverse effect for this purpose. In consideration of and simultaneously
with the repurchase of the Financed Student Loan, such Seller shall remit the
Purchase Amount, in the manner specified in Section 5.4, and the Issuer shall
execute such assignments and other documents reasonably requested by such Seller
in order to effect such transfer. If such Seller fails to repurchase within the
time period provided hereby any Financed Student Loan it is required to
repurchase hereunder, TMSI shall remit, or cause to be remitted, no later than
the date such Seller would be required to remit such amount, the Purchase Amount
for such Financed Student Loan, in the manner specified in Section 5.4, and the
Issuer shall execute such assignments and other documents reasonably requested
by TMSI or its designee in order to effect such transfer; provided, however,
that if a designee of TMSI purchases any Financed Student Loans, such designee
shall not have any pre-existing debt with respect to such purchase, and any
transfer of a Financed Student Loan pursuant to this Section shall be made
contemporaneously with repayment or the incurrence of the repayment obligation.
Upon any such transfer of a Financed Student Loan, legal title to, and
beneficial ownership and control of, the related Financed Student Loan File will
thereafter belong to such Seller or TMSI's designee, as the case may be. In
addition, if any such breach does not trigger such a repurchase obligation but
does result in the refusal by a Guarantor to guarantee the applicable portion of
the accrued interest, or the loss of (including any obligation of the Issuer to
repay to the Department) certain Interest Subsidy Payments and Special Allowance
Payments, with respect to a Financed Student Loan, then, unless such breach, if
curable, is cured within 60 days, such Seller shall, at its option, either
repurchase such Financed Student Loan at the applicable Purchase Amount or
reimburse the Issuer by remitting an amount equal to the sum of all amounts that
would have been payable if not for such breach in the manner specified in
Section 5.4 not later than the last day of the Collection Period in which such
60th day occurs. If such Seller fails to repurchase such Financed Student Loan
or reimburse the Issuer such amount, TMSI shall reimburse the Issuer such amount
in the manner specified in Section 5.4 no later than the date such Seller would
be required to remit such amount. Subject to the provisions of Section 5.6 and
Section 6.3 and the Insurance Agreement, the sole remedy of the Issuer, the
Eligible Lender Trustee, the Indenture Trustee, the Noteholders, the
Certificateholders or the Surety Provider with respect to a breach of
representations and warranties pursuant to Section 3.1 and the agreement
contained in this Section 3.2 shall be to require the applicable Seller, TMSI or
TMSI's designee, as the case may be, to repurchase Financed Student Loans or to
reimburse the Issuer as provided above pursuant to this Section 3.2, subject to
the conditions contained herein.
SECTION 3.3. CUSTODY OF FINANCED STUDENT LOAN FILES. To assure uniform
quality in servicing the Financed Student Loans and to reduce administrative
costs, the Issuer hereby revocably appoints each Master Servicer, and each
Master Servicer hereby accepts such appointment, to act for the benefit of the
Issuer and the Indenture Trustee as custodian of the following documents or
instruments which are hereby constructively delivered to the Indenture Trustee,
as pledgee of the Issuer (or, in the case of the Additional Financed Student
Loans, will as of the applicable Transfer Date be constructively delivered to
the Indenture Trustee, as pledgee of the Issuer) with respect to each Financed
Student Loan sold by such Master Servicer, as Seller, to the Trust (such
documents are referred to collectively as the "Financed Student Loan File").
(a) the original fully executed copy of the note evidencing the
Financed Student Loan (which may be included in the application) unless such
note is in the custody of a Guarantor;
(b) to the extent such Seller has retained it on hard copy, the
original loan application fully executed by the Obligor (which may be included
in the note evidencing a Financed Student Loan);
(c) the notice of guarantee; and
(d) any and all other documents and computerized records that
any of such Master Servicer, the Administrator or such Seller shall keep on
file, in accordance with its customary procedures, relating to such Financed
Student Loan or any Obligor with respect thereto.
Notwithstanding the foregoing, such Master Servicer shall transfer possession of
the Financed Student Loan Files in accordance with Section 2.02(r) of the
Insurance Agreement. Moreover, notwithstanding the foregoing, if set forth in a
supplement to this Agreement approved by the Surety Provider, with respect to
Financed Student Loans originated by third parties and subsequently purchased by
such Seller, the originators of such Financed Student Loans or another party may
act as custodian of the Financed Student Loan Files for such Financed Student
Loans.
SECTION 3.4. DUTIES OF MASTER SERVICERS AS Custodian. (a) SAFEKEEPING.
Either a Master Servicer, as custodian, or a subcustodian appointed pursuant to
Section 3.8, shall hold the Financed Student Loan Files with respect to each
Financed Student Loan sold by such Master Servicer, as Seller, to the Trust for
the benefit of the Issuer and maintain such accurate and complete accounts,
records and computer systems pertaining to each such Financed Student Loan File
as shall enable the Issuer to comply with this Agreement and the other Basic
Documents. In performing its duties as custodian, each Master Servicer shall act
with reasonable care, using that degree of skill and attention that such Master
Servicer exercises with respect to the student loan files relating to all
comparable student loans that such Master Servicer services for itself or others
and shall ensure that it complies fully and completely with all applicable
Federal and State laws, including the Higher Education Act, with respect
thereto. Each Master Servicer shall cause to be conducted periodic audits of the
Financed Student Loan Files held by it under this Agreement and of the related
accounts, records and computer systems, in such a manner as shall enable the
Issuer or the Indenture Trustee to verify the accuracy of such Master Servicer's
record keeping. A Master Servicer shall promptly report to the Issuer, the
Indenture Trustee and the Surety Provider any failure on its part to hold the
Financed Student Loan Files and maintain its accounts, records and computer
systems as herein provided and promptly take appropriate action to remedy any
such failure. Nothing herein shall be deemed to require an initial review (other
than as specified in the Insurance Agreement) or any periodic review by the
Issuer, the Eligible Lender Trustee or the Indenture Trustee of the Financed
Student Loan Files.
(b) MAINTENANCE OF AND ACCESS TO RECORDS. Each of the Master Servicers
shall maintain each Financed Student Loan File held by it under this Agreement
at its office located at 3301 C Street, Suite 100-A, Sacramento, California
95816 or at such other office as shall be specified by written notice to the
Issuer, the Surety Provider and the Indenture Trustee not later than 30 days
prior to any change in location. The Financed Student Loan Files relating to all
Financed Student Loans subject to the Lien of the Indenture in the custody of a
Master Servicer shall be segregated by such Master Servicer from other
comparable files, by maintaining such Files in file cabinets that are physically
segregated from such other comparable files and are clearly marked to indicate
that the files contained therein have been sold to the Issuer and that a
security interest has been granted in favor of the Indenture Trustee and either
(i) each original note evidencing a Financed Student Loan shall be stamped with
a signed endorsement of the note in blank or (ii) Financed Student Loans not
originated by the applicable Seller and not indorsed pursuant to (i) above will,
with the consent of the Surety Provider, be endorsed utilizing a blanket
endorsement. Upon reasonable prior notice, each Master Servicer shall make
available to the Issuer, the Surety Provider and the Indenture Trustee or their
respective duly authorized representatives, attorneys or auditors the Financed
Student Loan Files and the related accounts, records and computer systems
maintained by such Master Servicer at such times during normal business hours as
the Issuer, the Surety Provider or the Indenture Trustee shall instruct.
SECTION 3.5. INSTRUCTIONS; AUTHORITY TO ACT. Each Master Servicer shall be
deemed to have received proper instructions with respect to the Financed Student
Loan Files held by it under this Agreement upon its receipt of written
instructions signed by a Responsible Officer of the Indenture Trustee.
SECTION 3.6. CUSTODIAN'S INDEMNIFICATION. Each Master Servicer, as
custodian, shall pay from its own funds 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 Surety Provider or
the Indenture Trustee or any of their officers, directors, employees and agents
as the result of any improper act or omission in any way relating to the
maintenance and custody by such Master Servicer as custodian of the Financed
Student Loan Files held by it under this Agreement where the final determination
that any such improper act or omission by such Master Servicer resulted in such
loss, liability or expense is established by a court of law, by an arbitrator or
by way of settlement agreed to by such Master Servicer; PROVIDED, however, that
such Master Servicer shall not be liable to the Eligible Lender Trustee for any
portion of any such amount resulting from the willful misfeasance, bad faith or
negligence of the Eligible Lender Trustee and such Master Servicer shall not be
liable to the Indenture Trustee or the Surety Provider, as the case may be, for
any portion of any such amount resulting from the willful misfeasance, bad faith
or negligence of the Indenture Trustee or the Surety Provider, as the case may
be. This provision shall not be construed to limit a Master 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 3.7. EFFECTIVE PERIOD AND TERMINATION. Each Master Servicer's
appointment as custodian of the Financed Student Loans being conveyed hereunder
by such Master Servicer as Seller shall become effective as of the Closing Date
relating to the Series 1997-1 Notes and shall continue in full force and effect
for so long as such Master Servicer shall remain a Master Servicer hereunder. If
a Master Servicer or any successor Master Servicer shall resign as a Master
Servicer in accordance with the provisions of this Agreement or if all the
rights and obligations of such Master Servicer or any such successor Master
Servicer shall have been terminated under Section 8.1 of this Agreement, the
appointment of such Master Servicer or such successor Master Servicer as
custodian shall be terminated simultaneously with the effectiveness of such
termination. As soon as practicable on or after any termination of such
appointment (and in any event within (i) 10 Business Days, with respect to that
portion of the Financed Student Loan Files consisting of electronic records and
information, and (ii) 30 Business Days, with respect to the remaining portion of
the Financed Student Loan Files), such Master Servicer shall deliver the
Financed Student Loan Files held by it under this Agreement to the Indenture
Trustee or the Indenture Trustee's agent at such place or places as the
Indenture Trustee may reasonably designate.
SECTION 3.8. APPOINTMENT OF SUBCUSTODIAN. With the consent of the Surety
Provider, a Master Servicer may, at any time or, at the request of the Surety
Provider pursuant to the terms of Section 2.02(r) of the Insurance Agreement, a
Master Servicer, shall appoint a subcustodian to perform all or any portion of
its obligations as custodian hereunder; PROVIDED, HOWEVER, that such Master
Servicer shall remain obligated and be liable to the Issuer, the Eligible Lender
Trustee, the Indenture Trustee, the Certificateholders, the Noteholders and the
Surety Provider for the custodial services with respect to the Financed Student
Loan Files in accordance with the provisions hereof without diminution of such
obligation and liability by virtue of the appointment of such subcustodian and
to the same extent and under the same terms and conditions as if such Master
Servicer alone were performing the custodial services. The fees and expenses of
the subcustodian shall be as agreed between the Master Servicer and its
subcustodian from time to time and none of the Issuer, the Eligible Lender
Trustee, the Indenture Trustee, the Certificateholders, the Noteholders or the
Surety Provider shall have any responsibility therefor.
ARTICLE IV
ADMINISTRATION AND SERVICING OF FINANCED STUDENT LOANS
SECTION 4.1. DUTIES OF THE MASTER SERVICERS. Each Master Servicer, for the
benefit of the Issuer (to the extent provided herein), shall manage, service,
administer and make collections on the Financed Student Loans held by it under
this Agreement with reasonable care, using that degree of skill and attention
that such Master Servicer exercises with respect to all comparable student loans
that it services for itself and others. 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, each
Master Servicer shall manage, service, administer and make collections with
respect to the Financed Student Loans held by it under this Agreement including,
if applicable, collection of any Interest Subsidy Payments and Special Allowance
Payments in accordance with all applicable Federal and State laws, including all
applicable standards, guidelines and requirements of the Higher Education Act
and any Guarantee Agreement, the failure to comply with which would adversely
affect the eligibility of one or more of the Financed Student Loans for Interest
Subsidy Payments, Special Allowance Payments or Guarantee Payments or would have
an adverse effect on the Certificateholders, the Noteholders or the Surety
Provider. Each Master Servicer also hereby acknowledges that its obligation to
service the Financed Student Loans includes those Additional Financed Student
Loans conveyed by it as Seller to the Eligible Lender Trustee on behalf of the
Issuer pursuant to Section 2.2 and the related Transfer Agreement, a copy of
which (if a Master Servicer is not the Seller) shall be delivered to such Master
Servicer by the applicable Seller promptly upon execution thereof; PROVIDED that
any failure by a Seller to so deliver a Transfer Agreement shall not affect such
Master Servicer's obligations hereunder to service such Financed Student Loans.
Each Master Servicer's duties shall include collection and posting of all
payments, responding to inquiries of borrowers on the Financed Student Loans
held by it hereunder, monitoring borrowers' status, making required disclosures
to borrowers, investigating delinquencies, sending bills or payment coupons to
borrowers and otherwise establishing repayment terms, reporting tax information
to borrowers, if applicable, accounting for collections and furnishing monthly
and annual statements with respect thereto to the Administrator. Subject to the
provisions of Section 4.2, each Master Servicer shall follow its customary
standards, policies and procedures in performing its duties as Master Servicer.
Without limiting the generality of the foregoing, each Master Servicer is
authorized and empowered to execute and deliver, on behalf of itself, the
Issuer, the Eligible Lender Trustee, the Indenture Trustee, the
Certificateholders, the Noteholders and the Surety Provider or any of them,
instruments of satisfaction or cancellation, or partial or full release or
discharge, and all other comparable instruments, with respect to the Financed
Student Loans held by it hereunder; PROVIDED, HOWEVER, that each Master 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, the Surety Provider 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
(notwithstanding the foregoing, a Master Servicer may, in its sole discretion,
without having to obtain the consent or approval of any other party, waive
amounts owing under a Financed Student Loan up to and including $50.00);
PROVIDED FURTHER, HOWEVER, that a Master Servicer shall not agree to any
decrease of the interest rate on (other than as provided in a Master Servicer's
Reduced Interest Rate Program), or the principal amount payable with respect to,
any Financed Student Loan. Each Master Servicer also shall be responsible for
maintaining each Guarantee Agreement, including advising the Eligible Lender
Trustee and the Indenture Trustee of any action required to be taken to maintain
each such Guarantee Agreement. The Eligible Lender Trustee on behalf of the
Issuer hereby grants a power of attorney and all necessary authorization to each
Master Servicer to sign endorsements of the notes relating to the Financed
Student Loans held by it hereunder on behalf of the Eligible Lender Trustee in
connection with conveyances pursuant to Section 2.3 hereof and to maintain any
and all collection procedures with respect to such Financed Student Loans,
including filing, pursuing and recovering claims against the Guarantors for
Guarantee Payments and taking any steps to enforce such Financed Student Loan
such as commencing a legal proceeding to enforce a Financed Student Loan in the
name of the Issuer, the Eligible Lender Trustee, the Indenture Trustee, the
Certificateholders, the Noteholders or the Surety Provider. The Eligible Lender
Trustee or the Indenture Trustee shall upon the written request of a Master
Servicer or the Administrator furnish such Master Servicer or the Administrator
with any other powers of attorney and other documents reasonably necessary or
appropriate to enable such Master Servicer or the Administrator to carry out its
servicing and administrative duties hereunder.
SECTION 4.2. COLLECTION OF FINANCED STUDENT LOAN PAYMENTS. (a) Each Master
Servicer shall make reasonable efforts (including all efforts that may be
specified under the Higher Education Act or any Guarantee Agreement, as
applicable) to collect all payments called for under the terms and provisions of
the Financed Student Loans serviced by it hereunder 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 for itself and others.
A Master 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) Each Master 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 serviced by it
hereunder as and when the same shall become due and payable, shall comply with
all applicable laws and agreements with respect to claiming, pursuing and
collecting such payments and shall follow such practices and procedures as it
follows with respect to all comparable guarantee agreements and student loans
that it services for itself and others. In connection therewith, such Master
Servicer is hereby authorized and empowered to convey to any Guarantor the note
and the related Financed Student Loan File representing any Financed Student
Loan in connection with submitting a claim to such Guarantor for a Guarantee
Payment in accordance with the terms of the applicable Guarantee Agreement
whereupon the Lien of the Indenture Trustee relating to such Financed Student
Loan shall be released.
(c) Each Master Servicer shall, 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 serviced by it hereunder 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 such Master Servicer follows with respect to its own student
loans. All amounts so collected by the Eligible Lender Trustee shall constitute
Available Funds for the applicable Collection Period and shall be deposited into
the Collection Account in accordance with Section 5.4. In connection therewith,
such Master 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 a Master Servicer,
furnish such Master Servicer with any power of attorney and other documents
reasonably necessary or appropriate to enable such Master 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 Sellers to securitize student loans, to use the Department
lender identification number applicable to the Trust. In such event, the
Eligible Lender Trustee may claim and collect Interest Subsidy Payments and
Special Allowance Payments with respect to Financed Student Loans in the Trust
and student loans in such other trusts using such common lender identification
number. Notwithstanding anything herein or in the Basic Documents to the
contrary, any amounts assessed against payments (including, but not limited to,
Interest Subsidy Payments and Special Allowance Payments) due from the
Department or any Guarantor 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 or any Guarantor from the Trust will
be deemed for all purposes hereof and of the Basic Documents (including for
purposes of determining amounts paid by the Department or any Guarantor with
respect to the student loans in the Trust and such other trust) to have been
assessed against the Trust and shall be deducted by the Eligible Lender Trustee
or the Servicer and paid to such other trust from any collections made by them
which would otherwise have been payable to the Collection Account for the Trust.
If so specified in the servicing agreement applicable to any such other trust,
any amounts assessed against payments due from the Department or any Guarantor
to the Trust as a result of amounts owing to the Department or any Guarantor
from such other trust using such common lender identification number will be
deemed to have been assessed against such other trust and will be deducted by
the Eligible Lender Trustee or the 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. Immediately upon receipt from the Department or a
Guarantor of any such payments, the Eligible Lender Trustee shall deposit such
amounts in a trust account held by the Eligible Lender Trustee, as trustee for
the holders of the notes (including the Notes) and certificates (including the
Certificates) relating to the Trust and such other trusts. As soon as
practicable (but not more than 10 days) thereafter, the Eligible Lender Trustee
shall deposit the amount of any such payments that relate to the Trust in the
Collection Account for the Trust.
SECTION 4.3. REALIZATION UPON FINANCED STUDENT Loans. For the benefit of
the Issuer, each Master 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 any Guarantee Agreement in
its servicing of any delinquent Financed Student Loans.
SECTION 4.4. NO IMPAIRMENT. Neither Master Servicer shall impair the rights
of the Issuer, the Eligible Lender Trustee, the Indenture Trustee, the
Certificateholders, the Noteholders or the Surety Provider in the Financed
Student Loans.
SECTION 4.5. PURCHASE OF FINANCED STUDENT LOANS; REIMBURSEMENT. TMSI, each
Master Servicer or the Eligible Lender Trustee, as the case maybe, shall inform
the other parties to this Agreement, the Indenture Trustee and the Surety
Provider promptly, in writing, upon the discovery of any breach of an obligation
under Section 4.1, 4.2, 4.3 or 4.4 hereof. Unless any such breach shall have
been cured within 60 days following the discovery thereof by such Master
Servicer or TMSI or receipt by such Master Servicer or TMSI of written notice
from the Eligible Lender Trustee, TMSI, such Master Servicer or the Surety
Provider of such breach (or, at such Master Servicer's election, the last day of
the first month following such discovery), such Master Servicer shall purchase
any Financed Student Loan in which the interests of the Noteholders, the
Certificateholders or the Surety Provider are materially and adversely affected
by such breach as of the first day succeeding the end of such 60-day period that
is the last day of a Collection Period; provided that it is understood that any
such breach that does not affect any 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. If a Master
Servicer takes any action or fails to take any action during any Collection
Period pursuant to the sections referred to above that impairs the rights of the
Issuer, the Indenture Trustee, the Eligible Lender Trustee, the
Certificateholders, the Noteholders or the Surety Provider in any Financed
Student Loan or otherwise than as provided in such sections, such Master
Servicer shall purchase such Financed Student Loan as of the last day of such
Collection Period. In consideration of and simultaneously with the purchase of
any such Financed Student Loan pursuant to either of the two preceding
sentences, such Master Servicer shall remit the Purchase Amount in the manner
specified in Section 5.4, and the Issuer shall execute such assignments and
other documents reasonably requested by such Master Servicer in order to effect
such transfer. If such Master Servicer fails to purchase within the time period
provided hereby any Financed Student Loan it is required to purchase hereunder,
TMSI shall remit, or cause to be remitted, no later than the date such Master
Servicer would be required to remit such amount, the Purchase Amount for such
Financed Student Loan, in the manner specified in Section 5.4, and the Issuer
shall execute such assignments and other documents reasonably requested by TMSI
or its designee in order to effect such transfer; provided, however, that if a
designee of TMSI repurchases any Financed Student Loans, such designee shall not
have any pre-existing debt with respect to such purchase, and any transfer of a
Financed Student Loan pursuant to this Section shall be made contemporaneously
with the repurchase or the incurrence of the repurchase obligation. Upon any
such transfer of a Financed Student Loan, legal title to, and beneficial
ownership and control of, the related Financed Student Loan File will thereafter
belong to such Master Servicer or TMSI's designee, as the case may be. In
addition, if any such breach by a Master Servicer does not trigger such a
purchase obligation but does result in the refusal by a Guarantor to guarantee
the applicable portion of the accrued interest, or the loss of (including any
obligation of the Issuer to repay to the Department) certain Interest Subsidy
Payments and Special Allowance Payments, with respect to a Financed Student
Loan, then, unless such breach, if curable, is cured within 60 days, such Master
Servicer shall, at its option, either purchase such Financed Student Loan at the
applicable Purchase Amount or reimburse the Issuer by remitting an amount equal
to the sum of all amounts that would have been payable if not for such breach in
the manner specified in Section 5.4. If such Master Servicer fails to repurchase
such Financed Student Loan or reimburse the Issuer such amount, TMSI shall
reimburse the Issuer such amount in the manner specified in Section 5.4 not
later than the last day of the Collection Period in which such 60th day occurs.
Subject to the provisions of Sections 5.6 and 6.3 and the Insurance Agreement,
the sole remedy of the Issuer, the Eligible Lender Trustee, the Indenture
Trustee, the Certificateholders, the Noteholders or the Surety Provider with
respect to a breach pursuant to Section 4.1, 4.2, 4.3 or 4.4 and the agreement
contained in this Section 4.5 shall be to require a Master Servicer, TMSI or
TMSI's designee, as the case may be, to purchase Financed Student Loans or to
reimburse the Issuer as provided above pursuant to this Section 4.5, subject to
the conditions contained herein. The Eligible Lender Trustee shall have no duty
to conduct any affirmative investigation as to the occurrence of any condition
requiring the purchase of any Financed Student Loan or the reimbursement for any
interest penalty pursuant to this Section 4.5.
Notwithstanding anything contained in this Section 4.5 to the contrary,
with respect to any purchase obligation arising as a result of a Guarantor
denying a Guarantee Payment on a Financed Student Loan, neither the Master
Servicer servicing such Financed Student Loan hereunder, nor TMSI, nor TMSI's
designee shall be required to purchase such Financed Student Loan pursuant to
this Section 4.5 until the last day of the Collection Period occurring seven
months after the date a claim is rejected.
SECTION 4.6. SERVICING FEE; SERVICING FEE CARRYOVER. For its services
hereunder, each Master Servicer shall be entitled to receive the Servicing Fee
and any Servicing Fee Carryover in the manner set forth in Section 5.5.
Notwithstanding anything to the contrary contained herein or in any other Basic
Document, each Master Servicer shall only be entitled to receive any Servicing
Fee Carryover on any applicable Note Distribution Date or Certificate
Distribution Date if and to the extent that sufficient funds are available
pursuant to Section 5.5(e)(iii), 5.6(b)(A) or 5.6(c).
SECTION 4.7. ADMINISTRATOR'S CERTIFICATE. (a) On each Determination Date,
the Administrator will advise the Indenture Trustee in writing of the applicable
Noteholders' Interest Distribution Amount or Certificateholders' Interest
Distribution Amount. Additionally, no later than 16 days prior to each Note
Distribution Date for the Class of Notes then entitled to receive payments of
principal (or, after all Notes have been paid in full, no later than 16 days
prior to each Certificate Distribution Date) the Administrator will advise the
Indenture Trustee in writing of the applicable Noteholders' Principal
Distribution Amount (or, after all the Notes have been paid in full, for the
Class of Certificates with the earliest Final Maturity Date, the
Certificateholders' Principal Distribution Amount). Further, on the
Determination Date relating to the first Certificate Distribution Date occurring
each month (or for each month in which a Note Distribution Date occurs earlier
than the Certificate Distribution Date, on the Determination Date relating to
such earlier Note Distribution Date), the Administrator will advise the
Indenture Trustee in writing of Transaction Fees (separately and in the
aggregate) for the preceding month.
(b) On each Determination Date, the Administrator also shall deliver to the
Eligible Lender Trustee, the Indenture Trustee and a Seller (if such Seller is
not also the Administrator), with a copy to the Surety Provider and to the
Rating Agencies, an Administrator's Certificate containing all information
necessary to make the distributions pursuant to Sections 5.5, 5.6 and 5.8(b), if
applicable, for the upcoming Note Distribution Date or Certificate Distribution
Date. Such Administrator's Certificate also shall include the amount, if any, of
Note Surety Bond Payments or Certificate Surety Bond Payments required to be
made on the upcoming Note Distribution Date or Certificate Distribution Date.
Financed Student Loans to be repurchased by a Seller (whether pursuant to
Section 2.3 or 3.2), purchased by a Master Servicer, TMSI or TMSI's designee or
acquired by any Guarantor shall be identified by the Administrator by type of
loan and borrower social security number with respect to such Financed Student
Loan (as specified in Schedule A).
(c) On or before the 15th day of each month, the Administrator shall
deliver to the Eligible Lender Trustee, the Indenture Trustee and a Seller (if
such Seller is not also the Administrator), with a copy to the Surety Provider
and the Rating Agencies, a report setting forth by component the Available Funds
for the immediately preceding Collection Period.
SECTION 4.8. ANNUAL STATEMENT AS TO COMPLIANCE; NOTICE OF DEFAULT. (a) Each
of the Master Servicers and the Administrator shall deliver to the Sellers, the
Eligible Lender Trustee and the Indenture Trustee, on or before April 30 of each
year beginning April 30, 1997, an Officer's Certificate of such Master Servicer
or the Administrator, as the case may be, dated as of December 31 of the
preceding year, stating that (i) a review of the activities of such Master
Servicer or the Administrator, as the case may be, during the preceding 12-month
period (or, in the case of the first such certificate, during the period from
the Closing Date to December 31, 1997) and of its performance under this
Agreement and any other Supplemental Sale and Servicing Agreements has been made
under such officers' supervision and (ii) to the best of such officers'
knowledge, based on such review, such Master Servicer or the Administrator, as
the case may be, has fulfilled all its obligations under such Agreements, or
under such Agreements and the Administration Agreement, respectively, throughout
such year or, if there has been a default in the fulfillment of any such
obligation, specifying each such default known to such officer and the nature
and status thereof. Pursuant to the Indenture, the Indenture Trustee shall send
a copy of each such Officers' Certificate and each report referred to in Section
4.9 to the Rating Agencies, and the Eligible Lender Trustee shall send a copy of
each such Officers' Certificate and each such report to the Surety Provider. A
copy of each such Officers' Certificate and each report referred to in Section
4.9 may be obtained by any Certificateholder, Certificate Owner, 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. Pursuant to the
Indenture, 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) Each Master Servicer shall deliver to the Eligible Lender Trustee, the
Indenture Trustee, the Sellers, the Surety Provider and the Rating Agencies,
promptly after having obtained knowledge thereof, but in no event later than
five Business Days thereafter, written notice in an Officer's Certificate of
such Master Servicer of any event which with the giving of notice or lapse of
time, or both, would become a Master Servicer Default under Section 8.1(a).
(c) The Administrator shall deliver to the Eligible Lender Trustee, the
Indenture Trustee, the Master Servicers, the Surety Provider and the Rating
Agencies, promptly after having obtained knowledge thereof, but in no event
later than five Business Days thereafter, written notice in an Officer's
Certificate of the Administrator of any event which with the giving of notice or
lapse of time, or both, would become an Administrator Default under Section
8.1(b)(1), (2) or (3).
SECTION 4.9. ANNUAL INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' REPORT. Each
of the Master Servicers and the Administrator shall cause Deloitte & Touche,
KPMG Peat Marwick, or any other firm of independent certified public accountants
approved by the Surety Provider, to deliver to the Sellers, the Eligible Lender
Trustee, the Indenture Trustee and the Surety Provider on or before April 30 of
each year beginning April 30, 1997, a report addressed to the Master Servicers
and to the Sellers, the Eligible Lender Trustee, the Surety Provider and the
Indenture Trustee, to the effect that such firm has examined certain documents
and records relating to the servicing of the Financed Student Loans, for the
administration of the Financed Student Loans and of the Trust, as the case may
be, during the preceding calendar year (or, in the case of the first such
report, during the period from the Closing Date to December 31, 1997) and that,
on the basis of the accounting and auditing procedures considered appropriate
under the circumstances, such firm is of the opinion that such servicing or
administration was conducted in compliance with the terms of this Agreement, all
Supplemental Sale and Servicing Agreements, or with the terms of such Agreements
and the Administration Agreement, as the case may be, 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.
Such report will also indicate that the firm is independent of the Master
Servicers within the meaning of the Code of Professional Ethics of the American
Institute of Certified Public Accountants.
SECTION 4.10. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING
FINANCED STUDENT LOANS. Upon reasonable prior notice, the Master Servicers shall
provide access to the Financed Student Loan Files (i) to the Surety Provider and
the Eligible Lender Trustee and (ii) to the Certificateholders or the
Noteholders in such cases where the Certificateholders or the Noteholders shall
be required by applicable statutes or regulations to review such documentation,
as demonstrated by evidence satisfactory to the Master Servicers in their
reasonable judgment. Access shall be afforded without charge, but only upon
reasonable request and during the normal business hours at the respective
offices of the Master Servicers.
SECTION 4.11. MASTER SERVICER AND ADMINISTRATOR EXPENSES. Each Master
Servicer and the Administrator shall be severally required to pay all expenses
incurred by them in connection with their respective activities hereunder and
under any Supplemental Sale and Servicing Agreements, including fees and
disbursements of independent accountants, taxes imposed on such Master Servicer
or the Administrator, as the case may be, and expenses incurred in connection
with distributions and reports to the Administrator or to the
Certificateholders, the Noteholders, the Eligible Lender Trustee and the Surety
Provider, as the case may be.
SECTION 4.12. APPOINTMENT OF SUBSERVICER. Each Master Servicer may at any
time, upon the written consent of the Surety Provider and with notice to the
Rating Agencies, appoint a subservicer to perform all or any portion of its
obligations as Master Servicer hereunder and under any Supplemental Sale and
Servicing Agreement; PROVIDED, HOWEVER, that such Master Servicer shall remain
obligated and be liable to the Issuer, the Eligible Lender Trustee, the
Indenture Trustee, the Certificateholders, the Noteholders and the Surety
Provider for the servicing and administering of the Financed Student Loans in
accordance with the provisions hereof and of any Supplemental Sale and Servicing
Agreements 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 such Master Servicer alone were servicing and administering
the Financed Student Loans. The Surety Provider may, pursuant to and in
accordance with Section 4.08 of the Insurance Agreement, direct such Master
Servicer, which shall act in accordance with such direction within a reasonable
period of time after receipt thereof, to remove any subservicer. The fees and
expenses of the subservicer shall be as agreed between such Master Servicer and
its subservicer from time to time and none of the Issuer, the Eligible Lender
Trustee, the Indenture Trustee, the Certificateholders, the Noteholders or the
Surety Provider shall have any responsibility therefor.
ARTICLE V
DISTRIBUTIONS; RESERVE ACCOUNT;
STATEMENTS TO CERTIFICATEHOLDERS AND NOTEHOLDERS
SECTION 5.1. ESTABLISHMENT OF TRUST ACCOUNTS. (a) The Indenture Trustee,
for the benefit of the Noteholders, shall establish and maintain in the name of
the Indenture Trustee each of the Collection Account, the Note Distribution
Account, the Reserve Account, the Pre-Funding Account, the Capitalized Interest
Account, the Capitalized Pre-Funding Account, the Expense Account and the
Monthly Advance Account. The Eligible Lender Trustee, for the benefit of the
Certificateholders, shall establish and maintain in the name of the Eligible
Lender Trustee the Certificate Distribution Account and the Certificate Monthly
Advance Account. The foregoing accounts are referred to collectively as the
"Trust Accounts". Each such Trust Account shall be an Eligible Deposit Account
and, except for the Certificate Distribution Account and the Certificate Monthly
Advance Account, shall be entitled as follows: "[Name of Account] for the
benefit of ClassNotes Trust 1997-I and Bankers Trust Company, as Indenture
Trustee, as their interests may appear." The Certificate Distribution Account
and the Certificate Monthly Advance Account shall be entitled as follows:
"ClassNotes Trust 1997-I [Certificate Distribution Account] [Certificate Monthly
Advance Account]."
(b) Funds on deposit in the Trust Accounts shall be invested by the
Indenture Trustee and, in the case of the Certificate Distribution Account and
the Certificate Monthly Advance Account, the Eligible Lender Trustee in Eligible
Investments pursuant to written instructions from the Administrator, on behalf
of the Issuer; PROVIDED, HOWEVER, that Certificateholders representing not less
than 66-2/3% of the Outstanding Amount of the Certificates may, by written
instructions to the Administrator, direct how such funds are invested in such
Eligible Investments; PROVIDED, FURTHER, it is understood and agreed that the
Indenture Trustee and the Eligible Lender Trustee shall not be liable for any
loss arising from such investment in Eligible Investments. All such Eligible
Investments shall be held by the Indenture Trustee and the Eligible Lender
Trustee for the benefit of the Issuer; provided that all interest and other
investment income (net of losses and investment expenses) on funds on deposit
therein shall be deposited into the Collection Account and shall be deemed to
constitute a portion of the Available Funds for the related Note Distribution
Date or Certificate Distribution Date. Funds on deposit in the Trust Accounts
shall be invested in Eligible Investments that will mature so that such funds
will be available at the close of business on the Business Day preceding the day
on which funds in the applicable Trust Account may be required to be withdrawn;
PROVIDED, HOWEVER, that funds on deposit in such Trust Accounts may be invested
in Eligible Investments of the Indenture Trustee or of the Eligible Lender
Trustee in the case of the Certificate Distribution Account which may mature so
that such funds will be available on the following Business Day. Funds deposited
in a Trust Account on a Business Day which immediately precedes a Note
Distribution Date or Certificate Distribution Date upon the maturity of any
Eligible Investments are not required to be invested overnight.
(c) (i) The Indenture Trustee (or the Eligible Lender Trustee
with respect to the Certificate Distribution Account and the
Certificate Monthly Advance Account) 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 (or the Eligible Lender Trustee with
respect to the Certificate Distribution Account and the Certificate
Monthly Advance Account) for the benefit of the Issuer. If, at any
time, any of the Trust Accounts ceases to be an Eligible Deposit
Account, the Administrator, on behalf of the Issuer, agrees that it
shall within 10 Business Days (or such longer period, not to exceed 30
calendar days, as to which the Surety Provider 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, on behalf of the Issuer, agrees
that, in the event that any of the Trust Accounts are not accounts with
the Indenture Trustee (or the Eligible Lender Trustee with respect to
the Certificate Distribution Account and the Certificate Monthly
Advance Account), the Administrator shall notify the Indenture Trustee
and the Eligible Lender Trustee in writing promptly upon any of such
Trust Accounts ceasing to be an Eligible Deposit Account.
(ii) With respect to the Trust Account Property,
the Indenture Trustee agrees (or, with respect to the Certificate
Distribution Account and the Certificate Monthly Advance Account, the
Eligible Lender Trustee agrees), by its acceptance thereof, that:
(A) any Trust Account Property that is held in
deposit accounts shall be held solely in Eligible Deposit
Accounts, subject to the last sentence of Section 5.1(c)(i);
and each such Eligible Deposit Account shall be subject to the
exclusive custody and control of the Indenture Trustee (or the
Eligible Lender Trustee with respect to the Certificate
Distribution Account and the Certificate Monthly Advance
Account), and the Indenture Trustee (or the Eligible Lender
Trustee with respect to the Certificate Distribution Account
and the Certificate Monthly Advance Account) shall have sole
signature authority with respect thereto;
(B) any Trust Account Property that constitutes
Physical Property shall be Delivered to the Indenture Trustee
in accordance with paragraph (a) of the definition of
"Delivery" and shall be held, pending maturity or disposition,
solely by the Indenture Trustee or a financial intermediary
(as such term is defined in Section 8-313(4) of the UCC)
acting solely for the Indenture Trustee;
(C) any Trust Account Property that is a book-
entry security held through the Federal Reserve System
pursuant to Federal book-entry regulation shall be Delivered
in accordance with paragraph (b) of the definition of
"Delivery" and shall be maintained by the Indenture Trustee,
pending maturity or disposition, through continued book-entry
registration of such Trust Account Property as described in
such paragraph; and
(D) any Trust Account Property that is an
"uncertificated security" under Article VIII of the UCC and
that is not governed by clause (C) above shall be Delivered to
the Indenture Trustee in accordance with paragraph (c) of the
definition of "Delivery" and shall be maintained by the
Indenture Trustee, pending maturity or disposition, through
continued registration of the Indenture Trustee's (or its
nominee's) ownership of such security.
(iii) The Administrator shall have the power, revocable for
cause or upon the occurrence and during the continuance of an
Administrator Default by the Indenture Trustee or by the Eligible
Lender Trustee with the consent of the Indenture Trustee, to
instruct the Indenture Trustee to make withdrawals and payments
from the Trust Accounts (or the Eligible Lender Trustee with
respect to the Certificate Distribution Account and the
Certificate Monthly Advance Account) for the purpose of
permitting the Master Servicers, the Administrator or the
Eligible Lender Trustee to carry out its respective duties
hereunder or under the Trust Agreement or permitting the
Indenture Trustee to carry out its duties under the Indenture.
SECTION 5.2. COLLECTIONS. Each Master Servicer shall remit to the
Collection Account all payments by or on behalf of the Obligors with respect to
the Financed Student Loans for which it, rather than a subservicer, is acting as
Primary Servicer (other than Purchased Student Loans), (i) within one Business
Day after it has received an aggregate of $30,000 during any Collection Period
and (ii) on the last Business Day of each Collection Period, all other
collections received during such Collection Period. Each Master Servicer shall
cause each other Servicer to remit to the Collection Account, within one
Business Day of receipt thereof, all payments by or on behalf of the Obligors
with respect to the Financed Student Loans for which it is acting as Primary
Servicer. For purposes of this Article V, the phrase "payments by or on behalf
of Obligors" shall mean payments made with respect to the Financed Student Loans
by or on behalf of borrowers thereof and the Guarantors.
SECTION 5.3. APPLICATION OF COLLECTIONS. With respect to each Financed
Student Loan, all collections (including all Guarantee Payments) with respect
thereto shall be applied in accordance with regulations of the Department, if
applicable, and the applicable Guarantor.
SECTION 5.4. ADDITIONAL DEPOSITS. Within two Business Days after receipt
thereof, the Eligible Lender Trustee (or a Master Servicer on its behalf) shall
deposit in the Collection Account the aggregate amount of Interest Subsidy
Payments and Special Allowance Payments received by it with respect to the
Financed Student Loans, and each Seller shall deposit in the Collection Account
any amount owed pursuant to Section 3.2 no later than the last day of the
Collection Period during which any such amount is owed. The Master Servicers or
TMSI 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 Master Servicers or TMSI under Section 4.5 when such
amounts are due, and the Sellers or TMSI shall deposit or cause to be deposited
therein the aggregate Purchase Amount with respect to Purchased Student Loans
and all other amounts to be paid by the Sellers or TMSI under Sections 3.2 or
the Sellers under Section 9.1 when such amounts are due. The Sellers, the Master
Servicers and the Administrator also shall deposit in the Collection Account all
amounts required to be deposited therein pursuant to, and within the time
periods provided by, Section 2.3. Notwithstanding the foregoing, the Master
Servicers shall deposit, or cause to be deposited, directly into the Reserve
Account any payments of or with respect to principal relating to a Financed
Student Loan for which a Realized Loss was previously allocated (but only up to
the amount of such Realized Loss), and shall deposit, or cause to be deposited,
directly into the Collection Account any payments of or with respect to interest
relating to a Financed Student Loan for which a Realized Loss was previously
allocated.
TMSI also shall, in its sole discretion, deposit into the Monthly Advance
Account the amount of any Monthly Advances determined to be made by TMSI
pursuant to Section 5.13 no later than the Determination Date relating to the
Note Distribution Date or Certificate Distribution Date, as the case may be,
when such amounts are to be applied as a payment of interest. On each related
Certificate Distribution Date, the Indenture Trustee will transfer from the
Monthly Advance Account to the Eligible Lender Trustee, by wire transfer no
later than 11:00 a.m. New York time, for deposit into the Certificate Monthly
Advance Account the Monthly Advance for such Certificate Distribution Date.
Pursuant to Section 5.13, if after a Monthly Advance is made, a Master Servicer
receives the Guarantee Payment, Special Allowance Payment or Interest Subsidy
Payment for which such Monthly Advance was made, such Master Servicer may
reimburse TMSI, immediately upon demand, from such Guarantee Payment, Special
Allowance Payment or Interest Subsidy Payment, as the case may be, on deposit in
the Collection Account up to the amount of the related Monthly Advance.
SECTION 5.5. DISTRIBUTIONS. (a) On each Note Distribution Date relating to
the Series 1997-1 Notes, pursuant to the Administrator's instructions, the
Indenture Trustee will transfer from the Collection Account to the Note
Distribution Account, from payments received on or with respect to the Financed
Student Loans during the Collection Period immediately preceding the month of
such Note Distribution Date (or for such other Collection Periods as may be set
forth in a Terms Supplement), an amount up to the related Noteholders' Interest
Distribution Amount. If a Class of Series 1997-1 Notes has the earliest Final
Maturity Date of all Classes of Notes then Outstanding, for the Class of Series
1997-1 Notes with the earliest Final Maturity Date, on the first Note
Distribution Date for such Class occurring in each month, commencing May 1997,
after making the transfer set forth in the prior sentence, the Indenture Trustee
will transfer from the Collection Account to the Note Distribution Account from
payments received on or with respect to the Financed Student Loans during the
Collection Period immediately preceding the month prior to the month of such
Note Distribution Date (or for such other Collection Periods as may be set forth
in a Terms Supplement), an amount up to the Noteholders' Principal Distribution
Amount; provided, however, that for each month in which the first Note
Distribution Date for any Series of Notes occurs prior to the Certificate
Distribution Date in such month, prior to transferring amounts to the Note
Distribution Account, the Indenture Trustee will transfer to the Expense
Account, from payments received on or with respect to the Financed Student Loans
during the immediately preceding Collection Period, an amount up to the
Transaction Fees for the month preceding such Note Distribution Date and all
overdue Transaction Fees from prior months.
(b) On each Certificate Distribution Date, pursuant to information
contained in the Administrator's Certificate delivered in accordance with
Section 4.7, the Indenture Trustee will transfer from the Collection Account,
from payments received on or with respect to the Financed Student Loans during
the immediately preceding Collection Period, (i) to the Expense Account, an
amount up to the excess, if any, of the Transaction Fees for the month preceding
such Certificate Distribution Date and all overdue Transaction Fees from prior
months over the amount, if any, previously transferred to the Expense Account
during the month of such Certificate Distribution Date and (ii) to the Eligible
Lender Trustee, by wire transfer no later than 11:00 a.m. New York time, for
deposit in the Certificate Distribution Account, an amount up to the related
Certificateholders' Interest Distribution Amount. Additionally, after each Class
of Notes has been paid in full, on the first Certificate Distribution Date
occurring in each month relating to the Class of Certificates with the earliest
Final Maturity Date, the Indenture Trustee will transfer from the Collection
Account to the Eligible Lender Trustee, by wire transfer no later than 11:00
a.m. New York time, for deposit in the Certificate Distribution Account, from
payments received on or with respect to the Financed Student Loans during the
Collection Period immediately preceding the month prior to such Certificate
Distribution Date, an amount up to the applicable Certificateholders' Principal
Distribution Amount.
(c) On the first Note Distribution Date for any Series of Notes occurring
in March, June, September and December, or in the case of clause (iii) below on
the first Note Distribution Date occurring in each month (or if in any such
month a Certificate Distribution Date occurs prior to such first Note
Distribution Date, on such Certificate Distribution Date), the Indenture
Trustee, pursuant to information contained in the Administrator's Certificate
delivered in accordance with Section 4.7, will distribute from the Expense
Account (in addition to any amounts transferred from the Reserve Account
pursuant to Section 5.6) the following amounts in the following order of
priority: (i) to each Master Servicer, the Servicing Fee and all overdue
Servicing Fees payable to such Master Servicer, (ii) to the Administrator, the
Administration Fee and all overdue Administration Fees, (iii) to the Auction
Agent, the Auction Agent Fee and all overdue Auction Agent Fees, (iv) to the
Indenture Trustee, the Indenture Trustee Fee and all overdue Indenture Trustee
Fees, (v) to the Eligible Lender Trustee, the Eligible Lender Trustee Fee and
all overdue Eligible Lender Trustee Fees and (vi) to the Surety Provider, the
Surety Provider Fee and all overdue Surety Provider Fees.
(d) On each Note Distribution Date, the Indenture Trustee will distribute
to the Noteholders of the applicable Class as of the related Record Date all
amounts transferred to the Note Distribution Account as set forth above (in
addition to any amounts transferred from the Capitalized Interest Account, the
Capitalized Pre-Funding Account, the Pre-Funding Account and the Reserve
Account, each as set forth below in this Article V, any amounts received under
the applicable Note Surety Bond pursuant to Section 10.1(a) and any Monthly
Advances deposited into the Monthly Advance Account pursuant to Section 5.4). On
each Certificate Distribution Date, the Eligible Lender Trustee will distribute
to the Certificateholders as of the related Record Date all amounts transferred
to the Certificate Distribution Account as set forth above (in addition to any
amounts transferred from the Capitalized Interest Account and the Reserve
Account, each as set forth below in this Article V, any amounts received under
the applicable Certificate Surety Bond pursuant to Section 10.1(b) and any
Monthly Advances deposited into the Certificate Monthly Advance Account pursuant
to Section 5.4).
(e) On the last Note Distribution Date occurring in January, April, July
and October (or if in any such month a Certificate Distribution Date occurs
after such last Note Distribution Date, on such Certificate Distribution Date),
after making all required transfers to the Note Distribution Account and, if
applicable, the Certificate Distribution Account and the Expense Account, the
Indenture Trustee, pursuant to information contained in the Administrator's
Certificate delivered in accordance with Section 4.7, will transfer any amounts
remaining in the Collection Account (other than amounts representing payments
received during such month or payments of or with respect to principal received
in the immediately preceding month) in the following order of priority: (i) to
the Surety Provider, the amount, if any, necessary to reimburse the Surety
Provider for prior Note and Certificate Surety Bond Payments, together with
interest thereon at the rate set forth in the Insurance Agreement, (ii) to the
Reserve Account, the amount, if any, necessary to increase the balance thereof
to the Specified Reserve Account Balance, (iii) to each Master Servicer, the
aggregate unpaid amount of the Servicing Fee Carryover payable to such Master
Servicer, if any, (iv) to the Note Distribution Account, the aggregate unpaid
amount of Noteholders' Interest Carryover, if any, and (v) to the Certificate
Distribution Account, the aggregate unpaid amount of Certificateholders'
Interest Carryover, if any. Any amounts remaining in the Collection Account
after such transfers (other than amounts representing payments received during
such month or payments of or with respect to principal received in the
immediately preceding month) will be transferred to the Reserve Account. Amounts
transferred to the Note Distribution Account or the Certificate Distribution
Account pursuant to clauses (iv) and (v) above, respectively, will be paid to
the applicable Class of Notes or Certificates on the next Note Distribution Date
or Certificate Distribution Date relating to such Class of Notes or
Certificates. Notwithstanding the foregoing, if the amount on deposit in the
Reserve Account, after giving effect to all distributions otherwise required to
be made on such date, equals the greater of (i) 1% of the then outstanding
principal balance of the Notes and the Certificates and (ii) $1,500,000 (but in
no event greater than the then outstanding principal balance of the Notes and
the Certificates), amounts otherwise required to be deposited into the Reserve
Account pursuant to clause (ii) above may, instead, be applied as an Additional
Principal Payment on the next applicable Note Distribution Date for which a
payment of principal is to be made on the Class of Notes with the earliest Final
Maturity Date (or, after all the Notes have been paid in full, on the next
Certificate Distribution Date).
(f) Notwithstanding the foregoing, if there has been an Event of Default
with respect to payment of the Notes, the Certificateholders will not be
entitled to any payments of principal or interest until each outstanding Class
of Notes has been paid in full.
(g) Notwithstanding the foregoing, if during a Collection Period a Serial
Loan was transferred by the Trust to a Seller's designee pursuant to Section
2.3(b), Student Holdings, in its capacity as a holder of a 1% interest in the
Certificates, shall receive on the Note Distribution Date or Certificate
Distribution Date, as the case may be, when the related Purchase Amount is
distributed to Noteholders or Certificateholders, as applicable, any proceeds
received by the Trust in excess of the Purchase Amount of the transferred
Financed Student Loan.
(h) Distributions on a Note Distribution Date or Certificate Distribution
Date shall be initiated by 11:00 a.m. (New York City time) on such Note
Distribution Date or Certificate Distribution Date; provided, however, that any
distributions from the Certificate Distribution Account shall be made at the
times set forth in Section 5.1 of the Trust Agreement.
Notwithstanding the foregoing, principal payments will be made to each
Class of Notes and Certificates only in amounts equal to $50,000 and integral
multiples in excess thereof. If the amount in the Note Distribution Account or
the Certificate Distribution Account otherwise required to be applied as a
payment of principal either (i) is less than $50,000 or (ii) exceeds an even
multiple of $50,000, then, in the case of (i), such entire amount or, in the
case of (ii), such excess amount, will not be paid as principal on the upcoming
Note Distribution Date or Certificate Distribution Date, as the case may be, but
will be retained in the Note Distribution Account or the Certificate
Distribution Account, as the case may be, until the amount therein available for
payment of principal (including any amounts transferred from the Reserve
Account) equals $50,000 or any integral multiple thereof.
SECTION 5.6. RESERVE ACCOUNT. (a) On the Closing Date relating to the
Series 1997-1 Notes, the Sellers shall deposit the Reserve Account Initial
Deposit, if any, into the Reserve Account.
(b) If the amount on deposit in the Reserve Account on the last Note
Distribution Date occurring in January, April, July and October (or if in any
such month a Certificate Distribution Date occurs after such last Note
Distribution Date, on such Certificate Distribution Date) (after giving effect
to all deposits or withdrawals therefrom on such Note Distribution Date or
Certificate Distribution Date) is greater than the then applicable Specified
Reserve Account Balance, the Administrator shall instruct the Indenture Trustee
(A) to pay to the Master Servicers out of such excess an amount equal to the
amount described in Section 5.5(e)(iii) for such Note Distribution Date or
Certificate Distribution Date (to the extent not otherwise paid to the Master
Servicers on such Note Distribution Date or Certificate Distribution Date), (B)
to pay to the Note Distribution Account out of such remaining excess an amount
equal to the amount described in Section 5.5(e)(iv) for such Note Distribution
Date or Certificate Distribution Date (to the extent not otherwise paid to the
Note Distribution Account on such Note Distribution Date or Certificate
Distribution Date), (C) to pay to the Certificate Distribution Account out of
such remaining excess an amount equal to the amount described in Section
5.5(e)(v) for such Distribution Date (to the extent not otherwise paid to the
Certificate Distribution Account on such Distribution Date), (D) to pay to the
Surety Provider any amounts remaining unpaid and owing pursuant to Section
2.02(p) of the Insurance Agreement, (E) to pay to the Collection Account any
amounts required to be paid by a Sellers, a Master Servicer or TMSI pursuant to
Sections 3.2 or 4.5 as a result of breaches of representations and warranties
made in Section 3.1, 4.1, 4.2, 4.3 or 4.4 to the extent such Seller or TMSI has
not made such payments within the required time period, and (F) to distribute
the remaining amount of such excess to TMS Student Holdings, Inc. as holder of a
1% interest in the Certificates, or its permitted successors or assigns
("Student Holdings"). Amounts properly distributed pursuant to this paragraph
(b) shall be deemed released from the Trust Estate and the security interest
therein granted to the Indenture Trustee, and Student Holdings shall in no event
thereafter be required to refund any such distributed amounts. Notwithstanding
the foregoing, if set forth in a supplement to this Agreement or a Trust
Supplement, holders of Originators' Interests may receive amounts otherwise
distributed to TMS Student Holdings, Inc. pursuant to subclause (F) above.
(c) Following the payment in full of the aggregate outstanding principal
amount of the Notes and the Certificates and of all other amounts owing or to be
distributed hereunder or under the Indenture or the Trust Agreement to
Noteholders, Certificateholders, the Master Servicers, the Administrator or the
Surety Provider and the termination of the Trust (including any Servicing Fee
Carryovers, Noteholders' Interest Carryover and Certificateholders' Interest
Carryover), any amount remaining on deposit in the Reserve Account shall be
distributed to Student Holdings. Student Holdings shall in no event be required
to refund any amounts properly distributed pursuant to this Section 5.6(c).
(d) (i) In the event that on the first Note Distribution Date for any
Series of Notes occurring in March, June, September and December, or with
respect to Section 5.5(c)(iii) on the first Note Distribution Date occurring in
each month (or if in any such month a Certificate Distribution Date occurs prior
to such first Note Distribution Date, on such Certificate Distribution Date),
any amounts to be distributed as calculated pursuant to Section 5.5(c)(i)-(vi)
exceed the amount on deposit in the Expense Account available for such purposes,
the Administrator shall instruct the Indenture Trustee to withdraw from the
Reserve Account the lesser of such excess and the amount on deposit in the
Reserve Account (after giving effect to each withdrawal in the order specified
in Section 5.5(c)(i)- (vi)) and deposit such withdrawn amount in the Expense
Account for distribution as provided in Section 5.5; PROVIDED, HOWEVER, that,
except as provided in Sections 5.6(b)(A) and 5.6(c), amounts on deposit in the
Reserve Account will not be available to cover any unpaid Servicing Fee
Carryover to the Master Servicers.
(ii) In the event that the Noteholders' Distribution Amount
for a Note Distribution Date exceeds the amount in the Note
Distribution Account for such Note Distribution Date available
for such purposes, the Administrator shall instruct the Indenture
Trustee to withdraw from the Reserve Account an amount equal to
the lesser of such excess (after giving effect to any transfers
from the Capitalized Interest Account and the Capitalized
Pre-Funding Account on such Note Distribution Date) and the
amount on deposit in the Reserve Account, (after giving effect to
paragraph (d)(i) above), and deposit such withdrawn amount in the
Note Distribution Account for distribution as provided in Section
5.5.
(iii) In the event that the Certificateholders' Distribution
Amount for a Certificate Distribution Date exceeds the amount for
such Certificate Distribution Date available for such purposes,
the Administrator shall instruct the Indenture Trustee on such
Distribution Date to withdraw from the Reserve Account an amount
equal to the lesser of such excess (after giving effect to any
transfers from the Capitalized Interest Account on such
Certificate Distribution Date), and the amount on deposit in the
Reserve Account (after giving effect to paragraphs (d)(i) through
(d)(ii) above), and to deposit such withdrawn amount in the
Certificate Distribution Account for distribution as provided in
Section 5.5.
SECTION 5.7. STATEMENTS TO CERTIFICATEHOLDERS AND NOTEHOLDERS. On each
Determination Date preceding a Note Distribution Date and a Certificate
Distribution Date, the Master Servicers or the Administrator shall provide to
the Indenture Trustee (with a copy to the Surety Provider and to the Rating
Agencies) for the Indenture Trustee to forward on such succeeding Note
Distribution Date to each Noteholder of the applicable Class of record and to
the Eligible Lender Trustee for the Eligible Lender Trustee to forward on such
succeeding Certificate Distribution Date to each Certificateholder of the
applicable Class of record, a statement substantially in the form of Exhibits A
and B, respectively, setting forth at least the following information with
respect to such Note Distribution Date and Certificate Distribution Date or the
preceding Collection Period, to the extent applicable (provided, however, that
with respect to each Note Distribution Date other than the first Note
Distribution Date occurring in each month, such statement need only contain the
information set forth in clauses (ii), (iii), (v), (vi) and (xii) below):
(i) the amount of such distribution allocable to principal;
(ii) the amount of the distribution allocable to interest;
(iii) the amount, if any, of the distribution allocable to
any Noteholders' Auction Rate Interest Carryover, any
Noteholders' LIBOR Rate Interest Carryover, any
Certificateholders' Auction Rate Interest Carryover and any
Certificateholders' LIBOR Rate Interest Carryover, together with
any remaining outstanding amount of each thereof;
(iv) the Pool Balance as of the close of business on the
last day of the preceding Collection Period;
(v) the aggregate outstanding principal amount of the Notes
of each Class and the Certificates of each Class as of such Note
Distribution Date or Certificate Distribution Date, after giving
effect to payments allocated to principal reported under clause
(i) above;
(vi) the Class Interest Rate for the applicable Class of
Notes and the Certificate Rate for the applicable Class of
Certificates with respect to each distribution referred to in
clause (ii) above, indicating whether such interest rate is
calculated based on the Net Loan Rate or based on the applicable
Auction Rate or LIBOR Rate, as the case may be, and specifying
what each such interest would have been using the alternate basis
for such calculation;
(vii) the amount of the Servicing Fee and any Servicing Fee
Carryover allocated to the Master Servicers with respect to the
related Collection Period, and the amount, if any, of the
Servicing Fee Carryover remaining unpaid after giving effect to
any such allocation;
(viii) the amount of the Administration Fee, the Auction
Agent Fee, the Indenture Trustee Fee, the Eligible Lender Trustee
Fee and the Surety Provider Fee allocated in respect of the
preceding Collection Period;
(ix) the amount of payment to the Surety Provider in
reimbursement of prior draws under any Note Surety Bond or any
Certificate Surety Bond, including interest thereon;
(x) the amount of the aggregate Realized Losses, if any, for
such Collection Period and any recoveries of principal and
interest received during such Collection Period relating to
Financed Student Loans for which a Realized Loss was previously
allocated;
(xi) the balance of the Reserve Account on such Distribution
Date, after giving effect to changes therein on such Note
Distribution Date or Certificate Distribution Date;
(xii) the amount of any draw required to be made under the
applicable Note Surety Bond or the applicable Certificate Surety
Bond;
(xiii) for Note Distribution Dates during the Funding
Period, the remaining Pre-Funded Amount;
(xiv) for the first Note Distribution Date on or immediately
following the end of the Funding Period, the amount of any
remaining Pre-Funded Amount that has not been used to make
Additional Fundings and is being paid out to Noteholders; and
(xv) the Parity Percentage, including the numerator and
denominator used in determining such Parity Percentage.
Each amount set forth pursuant to paragraph (i), (ii), (vii), and (viii) above
shall be expressed as a dollar amount per $50,000 of original principal balance
of a Certificate or Note, as applicable.
A copy of the statements referred to above may be obtained by any Certificate
Owner or Note Owner by a written request to the Eligible Lender Trustee or the
Indenture Trustee, respectively, addressed to the respective Corporate Trust
Office.
The statements referred to above will not be provided to holders of
Originators' Interests. Any Trust Supplement authorizing the issuance of one or
more Originators' Interests also will set forth the information respecting such
Originators' Interests to be provided by the Master Servicers to the Eligible
Lender Trustee for the Eligible Lender Trustee to forward to the holders of such
Originators' Interests.
SECTION 5.8. PRE-FUNDING ACCOUNT. (a) On the Closing Date, the Issuer will
deposit in the Pre-Funding Account $59,865,671.24 from the net proceeds of the
sale of the Series 1997-1 Notes. On each Transfer Date, the Administrator shall
instruct the Indenture Trustee to withdraw from the Pre-Funding Account an
amount equal to 100% of the principal balance of, plus accrued interest from the
Subsequent Cut-off Date to the Transfer Date on, the Additional Financed Student
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 Sellers
of such Additional Financed Student Loans upon satisfaction of the conditions
set forth in Section 2.2 with respect to such transfer.
(b) If (x) the Pre-Funded Amount has not been reduced to zero on the last
day of the Funding Period relating to the Series 1997-1 Notes (or, if such
Funding Period ends prior to such Note Distribution Date, on the first Note
Distribution Date for the Class of Notes with the earliest Final Maturity Date
following the end of the Funding Period) or (y) the Pre-Funded Amount has been
reduced to $200,000 or less on any Note Distribution Date, in either case after
giving effect to any reductions in the Pre-Funded Amount on such Distribution
Date pursuant to paragraph (a) above, the Administrator shall instruct the
Indenture Trustee pursuant to Section 4.7(b) to withdraw from the Pre-Funding
Account on the next Note Distribution Date relating to the Class of Notes with
the earliest Final Maturity Date an amount equal to the Pre-Funded Amount and to
distribute such amount to Noteholders of the Class of Notes with the earliest
Final Maturity Date as a payment of principal in the same manner as the
Noteholders' Principal Distribution Amount is distributed.
SECTION 5.9. CAPITALIZED PRE-FUNDING ACCOUNT. [Reserved].
SECTION 5.10. CAPITALIZED INTEREST ACCOUNT. On the Closing Date relating to
the Series 1997-1 Notes, the Sellers shall deposit $11,200,000 in the
Capitalized Interest Account. On each Note Distribution Date, for so long as
funds remain therein, the Indenture Trustee shall withdraw from the Capitalized
Interest Account for deposit into the Note Distribution Account an amount up to
the excess, if any, of the Noteholders' Interest Distribution Amount for such
Note Distribution Date over the sum of the amounts transferred to the Note
Distribution Account pursuant to Sections 5.5(a) and 5.9. Also, on each
Certificate Distribution Date, for so long as funds remain therein, the
Indenture Trustee shall withdraw from the Capitalized Interest Account and
transfer to the Eligible Lender Trustee, by wire transfer no later than 11:00
a.m. New York time, for deposit in the Certificate Distribution Account an
amount up to the excess, if any, of the Certificateholders' Interest
Distribution Amount for such Certificate Distribution Date over the amount
transferred to the Certificate Distribution Account pursuant to Section 5.5(b).
On the last Note Distribution Date occurring in November 1998 for any Series of
Notes (after giving effect to all withdrawals from the Capitalized Interest
Account and the Certificate Monthly Advance Account), the Administrator shall
instruct the Indenture Trustee to withdraw any amounts remaining in the
Capitalized Interest Account and transfer such amounts to the Reserve Account
or, with the consent of the Surety Provider, apply such amounts as Additional
Principal Payments.
SECTION 5.11. EXPENSE ACCOUNT. The Administrator shall instruct the
Indenture Trustee to deposit funds into, and withdraw funds from, the Expense
Account as set forth in Sections 5.5 and 5.6. Any funds remaining in the Expense
Account upon termination of the Trust shall be distributed to TWIC on behalf of
the Master Servicers as additional servicing compensation.
SECTION 5.12. NOTE DISTRIBUTION ACCOUNT AND CERTIFICATE DISTRIBUTION
ACCOUNT. The Administrator shall instruct the Indenture Trustee to deposit funds
into, and withdraw funds from, the Note Distribution Account and the Certificate
Distribution Account as set forth in Sections 5.5, 5.6, 5.8, 5.9, 5.10 and 10.1.
SECTION 5.13. MONTHLY ADVANCES. If a Master Servicer has applied for a
Guarantee Payment from a Guarantor or an Interest Subsidy Payment or a Special
Allowance Payment from the Department, and such Master Servicer has not received
the related payment prior to the end of the Collection Period immediately
preceding the Note Distribution Date or Certificate Distribution Date on which
such amount would be required to be distributed as a payment of interest, TMSI
may, no later than the Determination Date relating to such Note Distribution
Date or Certificate Distribution Date, as the case may be, in its sole
discretion, deposit into the Monthly Advance Account an amount up to the amount
of such payments applied for but not received (such deposits by TMSI are
referred to herein as "Monthly Advances"). Such Monthly Advances are recoverable
by TMSI from the Guarantee Payment, Interest Subsidy Payment or Special
Allowance Payment, as the case may be, for which such Monthly Advance was made.
TMSI shall have no obligation, legal or otherwise, to make any Monthly Advance,
and the making of or decision to make a particular Monthly Advance shall not
create any obligation on TMSI, legal or otherwise, to make any future Monthly
Advances.
ARTICLE VI
THE SELLERS AND THE MASTER SERVICERS
SECTION 6.1. REPRESENTATIONS OF THE SELLERS AND THE MASTER SERVICERS. Each
of the Sellers and the Master Servicers, with respect to itself, make the
following representations on which the Issuer is deemed to have relied in
acquiring (through the Eligible Lender Trustee) the Financed Student Loans being
conveyed pursuant to this Agreement. The representations speak as of the
execution and delivery of this Agreement in the case of the Initial Financed
Student Loans, and as of the applicable Transfer Date, in the case of the
Additional Financed Student Loans, but shall survive the sale, transfer and
assignment of the Financed Student Loans to the Eligible Lender Trustee on
behalf of the Issuer and the pledge thereof to the Indenture Trustee pursuant to
the Indenture.
(a) ORGANIZATION AND GOOD STANDING. Each of the Sellers, TMSI and the
Master Servicers is duly incorporated and validly existing as a corporation in
good standing under the laws of the state of its incorporation, with the power
and authority to own its properties and to conduct its business as such
properties are currently owned and such business is presently conducted, and had
at all relevant times, and has, the power, authority and legal right, in the
case of the Sellers, to originate, acquire and own the Financed Student Loans,
and in the case of the Master Servicers, to service the Financed Student Loans
and hold the Financed Student Loan Files as custodian.
(b) DUE QUALIFICATION. Each Master Servicer is duly qualified to do
business and has obtained all necessary licenses and approvals in all
jurisdictions in which the ownership and lease of property or the conduct of its
business (including the servicing of the Financed Student Loans as required by
this Agreement) shall require such qualifications.
(c) POWER AND AUTHORITY. Each of the Sellers, the Master Servicers and TMSI
has the corporate power and authority to execute and deliver this Agreement and
to carry out its terms; each of the Sellers has full corporate power and
authority to sell and assign the property to be sold and assigned to and
deposited with the Issuer (or with the Eligible Lender Trustee on behalf of the
Issuer) and each of the Sellers 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 Sellers, the Master Servicers and
TMSI by all necessary corporate action.
(d) BINDING OBLIGATION. This Agreement constitutes a legal, valid and
binding obligation of the Sellers, TMSI and the Master Servicers, enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization and similar laws relating to creditors' rights generally or and
subject to general principles of equity.
(e) NO VIOLATION. The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof or thereof do not conflict
with, result in any breach of any of the terms and provisions of, nor constitute
(with or without notice or lapse of time or both) a default under, the articles
of incorporation or by-laws of the Sellers, TMSI or the Master Servicers, or any
indenture, agreement or other instrument to which the Sellers, TMSI or the
Master Servicers 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
Sellers, TMSI or the Master Servicers, 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 the
Sellers, TMSI or the Master Servicer or its properties.
(f) NO PROCEEDINGS. There are no proceedings or investigations pending
against the Sellers, the Master Servicers or TMSI or, to its best knowledge,
threatened against the Sellers, the Master Servicers or TMSI, before any court,
regulatory body, administrative agency or other governmental instrumentality
having jurisdiction over it or its properties: (i) asserting the invalidity of
this Agreement, the Indenture or any of the other Basic Documents, the Notes or
the Certificates, (ii) seeking to prevent the issuance of the Notes or the
Certificates or the consummation of any of the transactions contemplated by this
Agreement, the Indenture or any of the other Basic Documents, (iii) seeking any
determination or ruling that could reasonably be expected to have a material and
adverse effect on the performance by the Sellers, the Master Servicers or TMSI
of its obligations under, or the validity or enforceability of, this Agreement,
the Indenture, any of the other Basic Documents, the Notes or the Certificates
or (iv) seeking to affect adversely the Federal or State income tax attributes
of the Issuer, the Notes or the Certificates.
(g) ALL CONSENTS. All authorizations, consents, orders or approvals of or
registrations or declarations with any court, regulatory body, administrative
agency or other government instrumentality required to be obtained, effected or
given by the Sellers, TMSI or the Master Servicers in connection with the
execution and delivery by the Sellers, TMSI or the Master Servicers of this
Agreement and the performance by the Sellers, TMSI or the Master Servicers of
the transactions contemplated by this Agreement, have been duly obtained,
effected or given and are in full force and effect.
(h) NO AMENDMENT OR WAIVER. No provision of a Financed Student Loan has
been waived, altered or modified in any respect, except pursuant to a document,
instrument or writing included in the Financed Student Loan File, and no such
amendment, waiver, alteration or modification causes such Financed Student Loan
not to conform to the other warranties contained in this Section or those of the
Sellers contained in Section 3.1.
(i) LOCATION OF FINANCED STUDENT LOAN FILES. The Financed Student Loan
Files are kept in the office of the applicable Master Servicer specified in, or
in accordance with, Section 3.4(b).
SECTION 6.2. EXISTENCE. Except as permitted by Section 6.5,during the term
of this Agreement, each of the Sellers, the Master Servicers and TMSI will keep
in full force and effect its existence, rights and franchises as a corporation
under the laws of the jurisdiction of its organization.
SECTION 6.3. LIABILITY AND INDEMNITIES. (a) Each of the Sellers, the Master
Servicers and TMSI shall be liable in accordance herewith only to the extent of
the obligations specifically undertaken by the Sellers, the Master Servicers or
TMSI, as the case may be, under this Agreement.
(b) Each of the Sellers, individually, and TMSI shall jointly and severally
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 (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 and costs and expenses in
defending against the same.
(c) Each of the Sellers, individually, and TMSI shall jointly and severally
indemnify, defend and hold harmless the Issuer, the Eligible Lender Trustee, the
Indenture Trustee, the Certificateholders, the Noteholders and the Surety
Provider and the officers, directors, employees and agents of the Issuer, the
Eligible Lender Trustee, the Indenture Trustee and the Surety Provider from and
against any and all costs, expenses, losses, claims, damages and liabilities
arising out of, or imposed upon such Person through, (i) such Seller's willful
misfeasance, bad faith or negligence in the performance of their duties under
this Agreement, or by reason of reckless disregard of its obligations and duties
under this Agreement and (ii) such Seller's, the Issuer's or the Eligible Lender
Trustee's violation of Federal or state securities laws in connection with the
offering and sale of the Notes and the Certificates.
(d) The Sellers and TMSI shall be liable as primary obligors for, and shall
indemnify, defend and hold harmless the Eligible Lender Trustee and its
officers, directors, employees and agents from and against, all costs, expenses,
losses, claims, damages, obligations and liabilities arising out of, incurred in
connection with or relating to the Trust Agreement, the other Basic Documents,
the Trust Estate, the acceptance or performance of the trusts and duties set
forth herein and in the Trust Agreement or the action or the inaction of the
Eligible Lender Trustee hereunder and under the Trust Agreement, except to the
extent that such cost, expense, loss, claim, damage, obligation or liability:
(i) shall be due to the willful misfeasance, bad faith or negligence (except for
errors in judgment) of the Eligible Lender Trustee, (ii) shall arise from any
breach by the Eligible Lender Trustee of its covenants under any of the Basic
Documents; or (iii) shall arise from the breach by the Eligible Lender Trustee
of any of its representations or warranties set forth in Section 7.3 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
Sellers, which approval shall not be unreasonably withheld.
(e) The Sellers 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
Sellers' responsibilities pursuant to the parentheticals in paragraph (a)
above).
(f) Pursuant to Section 6.7 of the Indenture, and subject to the
limitations therein, the Sellers and TMSI 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 the Indenture.
(g) Each of the Master Servicers, individually, and TMSI shall indemnify,
defend and hold harmless the Issuer, the Eligible Lender Trustee, the Indenture
Trustee, the Certificateholders, the Noteholders and the Surety Provider and the
officers, directors, employees and agents of the Issuer, the Eligible Lender
Trustee, the Indenture Trustee and the Surety Provider from and against any and
all costs, expenses, losses, claims, damages and liabilities arising out of, or
imposed upon such Person through, such Master Servicer's or TMSI's willful
misfeasance, bad faith or negligence in the performance of its duties under this
Agreement. Notwithstanding the foregoing, if a Master Servicer or TMSI is
rendered unable, in whole or 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, such Master Servicer
and TMSI 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 such
Master Servicer or TMSI remains unable to perform such obligation as a result of
such event.
(h) 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 Sellers, TMSI or the Master Servicers, as the
case may be, 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 Sellers, TMSI or the Master Servicers, as the case may be without
interest.
SECTION 6.4. [Reserved]
SECTION 6.5. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS
OF, THE SELLERS, THE ADMINISTRATOR OR THE MASTER SERVICERS. Any Person (a) into
which a Seller, the Administrator or a Master Servicer, as the case may be, may
be merged or consolidated, (b) which may result from any merger or consolidation
to which a Seller, the Administrator or a Master Servicer, as the case may be,
shall be a party or (c) which may succeed to the properties and assets of a
Seller, the Administrator or a Master Servicer, as the case may be,
substantially as a whole, shall be the successor to such Seller, the
Administrator or such Master Servicer, as the case may be, without the execution
or filing of any document or any further act by any of the parties to this
Agreement or the Administration Agreement; PROVIDED, HOWEVER, that each of the
Sellers, the Administrator and the Master Servicers hereby covenants that it
will not consummate any of the foregoing transactions except upon satisfaction
of the following: (i) the surviving Seller, Administrator or Master Servicer, as
the case may be, if other than TWIC or ClassNotes, executes an agreement of
assumption to perform every obligation of such Seller, the Administrator or such
Master Servicer, as the case may be, under this Agreement and the Administration
Agreement, (ii) immediately after giving effect to such transaction, no
representation or warranty made pursuant to Section 3.1 or 6.1 shall have been
breached, (iii) such Seller, the Administrator or such Master Servicer, as the
case may be, shall have delivered to the Eligible Lender Trustee, the Surety
Provider and the Indenture Trustee an Officer's 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,
Administrator or Master Servicer, as the case may be, shall have a consolidated
net worth at least equal to that of the predecessor Seller, Administrator or
Master Servicer as of the date hereof, as the case may be, (v) such transaction
will not result in a material adverse Federal or state tax consequence to the
Issuer, the Noteholders or the Certificateholders and (vi) unless TWIC or
ClassNotes is the surviving entity, such Seller, the Administrator or such
Master Servicer, as the case may be, shall have delivered to the Eligible Lender
Trustee, the Surety Provider and the Indenture Trustee an Opinion of Counsel
either (A) stating that, in the opinion of such counsel, all financing
statements and continuation statements and amendments thereto have been executed
and filed that are necessary fully to preserve and protect the interest of the
Eligible Lender Trustee and Indenture Trustee, respectively, in the Financed
Student Loans and reciting the details of such filings, or (B) stating that, in
the opinion of such counsel, no such action shall be necessary to preserve and
protect such interests.
SECTION 6.6. LIMITATION ON LIABILITY OF THE SELLERS, THE MASTER SERVICERS
AND OTHERS. (a) The Sellers, the Master Servicers and any director or officer or
employee or agent of either 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.
(b) Neither the Sellers, the Master Servicers nor any of their directors,
officers, employees or agents shall be under any liability to the Issuer, the
Surety Provider, the Noteholders or the Certificateholders, the Indenture
Trustee or the Eligible Lender Trustee except as provided under this Agreement
or the Administration Agreement for any action taken or for refraining from the
taking of any action pursuant to this Agreement or for errors in judgment;
PROVIDED, HOWEVER, that this provision shall not protect the Sellers or the
Master Servicers or any such person against any liability that would otherwise
be imposed by reason of willful misfeasance, bad faith or negligence in the
performance of duties or by reason of reckless disregard of obligations and
duties under this Agreement or the Administration Agreement.
Except as provided in this Agreement, the Sellers and the Master Servicers
shall not be under any obligation to appear in, prosecute or defend any legal
action that shall not be incidental to their duties in accordance with this
Agreement, and that in its opinion may involve it in any expense or liability;
PROVIDED, HOWEVER, that the Sellers or the Masters Servicer may undertake any
reasonable action that they 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
Certificateholders and the Surety Provider under this Agreement and the
Noteholders under the Indenture.
SECTION 6.7. SELLERS MAY OWN CERTIFICATE OR NOTES. Each Seller and any
Affiliate thereof may in its individual or any other capacity become the owner
or pledgee of Certificates or Notes with the same rights as would have if it
were not the Seller or an Affiliate thereof, except as expressly provided herein
or in any other Basic Document.
SECTION 6.8. MASTER SERVICERS NOT TO RESIGN. Subject to the provisions of
Section 6.5, neither TWIC nor ClassNotes shall resign from the obligations and
duties imposed on it as Master Servicer under this Agreement except upon
determination that the performance of its duties under this Agreement shall no
longer be permissible under applicable law or shall violate any final order of a
court or administrative agency with jurisdiction over it or its properties.
Notice of any such determination permitting resignation shall be communicated to
the Eligible Lender Trustee, the Indenture Trustee and the Surety Provider 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 Surety
Provider concurrently with or promptly after such notice. No such resignation
shall become effective until the Indenture Trustee or a successor Master
Servicer shall have assumed the responsibilities and obligations of TWIC or
ClassNotes, as the case may be, in accordance with Section 8.2.
ARTICLE VII
THE ADMINISTRATOR
SECTION 7.1. REPRESENTATIONS OF THE ADMINISTRATOR. The Administrator makes
the following representations on which the Issuer is deemed to have relied in
acquiring (through the Eligible Lender Trustee) the Financed Student Loans being
conveyed pursuant to this Agreement. The representations speak as of the
execution and delivery of this Agreement in the case of the Initial Financed
Student Loans, and as of the applicable Transfer Date, in the case of the
Additional Financed Student Loans, but shall survive the sale, transfer and
assignment of the Financed Student Loans to the Eligible Lender Trustee on
behalf of the Issuer and the pledge thereof to the Indenture Trustee pursuant to
the Indenture.
(a) ORGANIZATION AND GOOD STANDING. The Administrator is
duly incorporated and validly existing as a corporation in good
standing under the laws of the state of its incorporation, with
the power and authority to own its properties and to conduct its
business as such properties are currently owned and such business
is presently conducted, and had at all relevant times, and has,
the power, authority and legal right, to administer the Financed
Student Loans.
(b) POWER AND AUTHORITY OF THE ADMINISTRATOR. The
Administrator has the corporate power and authority to execute
and deliver this Agreement and the Administration Agreement and
to carry out their respective terms; and the execution, delivery
and performance of this Agreement and the Administration
Agreement have been duly authorized by the Administrator by all
necessary corporate action.
(c) BINDING OBLIGATION. This Agreement and the
Administration Agreement each 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 or and subject to general principles
of equity.
(d) NO VIOLATION. The consummation of the transactions
contemplated by this Agreement and 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 of lapse of
time or both) a default under, the articles 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 (other than
pursuant to the Basic Documents); nor violate any law or, to the
knowledge of the Administrator, 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 the Administrator or its
properties.
(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 it or its
properties: (i) asserting the invalidity of this Agreement or the
Administration Agreement, (ii) seeking to prevent the
consummation of any of the transactions contemplated by this
Agreement or the Administration Agreement or (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 or the Administration
Agreement.
(f) ALL CONSENTS. All authorizations, consents, orders or
approvals of or registrations or declarations with any court,
regulatory body, administrative agency or other government
instrumentality required to be obtained, effected or given by the
Administrator in connection with the execution and delivery by
the Administrator of this Agreement or the Administration
Agreement and the performance by the Administrator of the
transactions contemplated by this Agreement or the Administration
Agreement, have been duly obtained, effected or given and are in
full force and effect.
SECTION 7.2. LIABILITY AND INDEMNITIES. (a) The Administrator shall be
liable in accordance herewith only to the extent of the obligations specifically
undertaken by the Administrator under this Agreement or the Administration
Agreement.
(b) The Administrator and TMSI shall indemnify, defend and hold harmless
from their respective funds, the Issuer, the Eligible Lender Trustee, the
Indenture Trustee, the Master Servicers, the Certificateholders, the Noteholders
and the Surety Provider and the officers, directors, employees and agents of the
Issuer, the Eligible Lender Trustee, the Indenture Trustee and the Surety
Provider from and against any and all costs, expenses, losses, claims, damages
and liabilities arising out of, or imposed upon such Person through, the
Administrator's willful misfeasance, bad faith or negligence in the performance
of its duties under this Agreement or the Administration Agreement, or by reason
of reckless disregard of its obligations and duties under this Agreement or the
Administration Agreement.
(c) 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 Administrator shall have made any indemnity
payments pursuant to this Section and the Person to or on behalf of whom such
payments are made thereafter shall collect any of such amounts from others, such
Person shall promptly repay such amounts to the Administrator without interest.
SECTION 7.3. ADMINISTRATOR NOT TO RESIGN. Subject to the provisions of
Section 6.5, Trans-World Insurance Company 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 it or its properties.
Notice of any such determination permitting resignation shall be communicated to
the Eligible Lender Trustee, the Indenture Trustee and the Surety Provider 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 Surety
Provider 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 TWIC in accordance
with Section 8.2.
ARTICLE VIII
DEFAULT
SECTION 8.1. MASTER SERVICER DEFAULT; ADMINISTRATOR DEFAULT. (a) If any one
of the following events (a "Master Servicer Default") shall occur and be
continuing:
(1) any failure by a Master Servicer (i) to deliver to the
Indenture Trustee for deposit in any of the Trust Accounts any payment
required by the Basic Documents or (ii) in the event that daily
deposits into the Collection Account are not required, to deliver to
the Administrator any payment, required by the Basic Documents, which
failure in case of either clause (i) or (ii) continues unremedied for
two Business Days after written notice of such failure is received by
such Master Servicer from the Eligible Lender Trustee, the Indenture
Trustee, the Surety Provider or the Administrator or after discovery of
such failure by an officer of such Master Servicer; or
(2) any failure by a Master Servicer or TMSI duly to observe
or to perform in any material respect any other covenants or agreements
of such Master Servicer or TMSI set
forth in this Agreement or any other Basic Document, which
failure shall (i) materially and adversely affect the
rights of Noteholders, Certificateholders or the Surety Provider and
(ii) continues unremedied for a period of 60 days after the date on
which written notice of such failure, requiring the same to be
remedied, shall have been given (A) to such Master Servicer or TMSI, as
the case may be, by the Indenture Trustee, the Eligible Lender Trustee,
the Surety Provider or the Administrator or (B) to such Master Servicer
or TMSI, as the case may be, and to the Indenture Trustee and the
Eligible Lender Trustee by the Noteholders or Certificateholders, as
applicable, representing not less than 25% of the Outstanding Amount of
the Notes or 25% of the outstanding Certificate Balance; or
(3) an Insolvency Event occurs with respect to a
Master Servicer;
then, and in each and every case, so long as a Master Servicer Default
shall not have been remedied, either the Surety Provider or, with the written
consent of the Surety Provider, the Indenture Trustee or the Noteholders of
Notes evidencing not less than 25% of the Outstanding Amount of the Notes, by
notice then given in writing to such Master Servicer (and to the Indenture
Trustee and the Eligible Lender Trustee if given by the Noteholders or the
Surety Provider) may terminate all the rights and obligations (other than the
obligations set forth in Section 6.3 hereof) of such Master Servicer under this
Agreement. On or after the receipt by such Master Servicer of such written
notice, all authority and power of such Master Servicer under this Agreement,
whether with respect to the Notes, the Certificates or the Financed Student
Loans or otherwise, shall, without further action, pass to and be vested in the
Indenture Trustee or such successor Master Servicer as may be appointed under
Section 8.2, and, without limitation, the Indenture Trustee and the Eligible
Lender Trustee are hereby authorized and empowered to execute and deliver, for
the benefit of the predecessor Master Servicer, as attorney-in-fact or
otherwise, any and all documents and other instruments, and to do or accomplish
all other acts or things necessary or appropriate to effect the purposes of such
notice of termination, whether to complete the transfer and endorsement of the
Financed Student Loans and related documents, or otherwise. The predecessor
Master Servicer shall cooperate with the successor Master Servicer, the
Indenture Trustee and the Eligible Lender Trustee in effecting the termination
of the responsibilities and rights of the predecessor Master Servicer under this
Agreement, including the transfer to the successor Master Servicer for
administration by it of all cash amounts that shall at the time be held by the
predecessor Master Servicer for deposit, or shall thereafter be received by it
with respect to a Financed Student Loan. All reasonable costs and expenses
(including attorneys' fees) incurred in connection with transferring the
Financed Student Loan Files from a current Master Servicer to the successor
Master Servicer and amending this Agreement and any other Basic Documents to
reflect such succession as Master Servicer pursuant to this Section shall be
paid by the predecessor Master Servicer upon presentation of reasonable
documentation of such costs and expenses. Upon receipt of notice of the
occurrence of a Master Servicer Default, the Eligible Lender Trustee shall give
notice thereof to the Surety Provider and the Rating Agencies.
(b) ADMINISTRATOR DEFAULT. If any one of the following events (an
"Administrator Default") shall occur and be continuing:
(1) any failure by the Administrator to direct the Indenture
Trustee or the Eligible Lender Trustee, as applicable, to make any
required distributions from any of the Trust Accounts, which failure
continues unremedied for two Business Days after written notice of such
failure is received by the Administrator from the Indenture Trustee,
the Eligible Lender Trustee or the Surety Provider or after
discovery of such failure by an officer of the
Administrator; or
(2) any failure by the Administrator duly to observe or to
perform in any material respect any other covenants or agreements of
the Administrator set forth in this Agreement, the Administration
Agreement or any other Basic Document, which failure shall (i)
materially and adversely affect the rights of Noteholders,
Certificateholders, or the Surety Provider and (ii) continues
unremedied for a period of 60 days after the date on which written
notice of such failure, requiring the same to be remedied, shall have
been given (A) to the Administrator by the Surety Provider, 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 or Certificateholders, as applicable,
representing not less than 25% of the Outstanding Amount of the Notes
or 25% of the outstanding Certificate Balance; or
(3) an Insolvency Event occurs with respect to the
Administrator;
then, and in each and every case, so long as the Administrator Default
shall not have been remedied, either the Surety Provider or, with the written
consent of the Surety Provider, the Indenture Trustee or the Noteholders
evidencing not less than 25% of the Outstanding Amount of the Notes, by notice
then given in writing to the Administrator (and to the Indenture Trustee and the
Eligible Lender Trustee if given by the Noteholders or the Surety Provider) may
terminate all the rights and obligations (other than the obligations set forth
in Sections 6.3 and 7.2 hereof) of the Administrator under this Agreement and
the Administration Agreement. On or after the receipt by the Administrator of
such written notice, all authority and power of the Administrator under this
Agreement and the Administration Agreement, whether with respect to the Notes,
the Certificates or the Financed Student Loans or otherwise, shall, without
further action, pass to and be vested in the Indenture Trustee or such successor
Administrator as may be appointed under Section 8.2; and, without limitation,
the Indenture Trustee and the Eligible Lender Trustee are hereby authorized and
empowered to execute and deliver, for the benefit of the predecessor
Administrator, as attorney-in-fact or otherwise, any and all documents and other
instruments, and to do or accomplish all other acts or things necessary or
appropriate to effect the purposes of such notice of termination. The
predecessor Administrator shall cooperate with the successor Administrator, the
Indenture Trustee and the Eligible Lender Trustee in effecting the termination
of the responsibilities and rights of the predecessor Administrator under this
Agreement and the Administration Agreement. All reasonable costs and expenses
(including attorneys' fees) incurred in connection with amending this Agreement
and the Administration Agreement to reflect such succession as Administrator
pursuant to this Section shall be paid by the predecessor Administrator upon
presentation of reasonable documentation of such costs and expenses. Upon
receipt of notice of the occurrence of a Administrator Default, the Eligible
Lender Trustee shall give notice thereof to the Surety Provider and the Rating
Agencies.
SECTION 8.2. APPOINTMENT OF SUCCESSOR. (a) Upon receipt by a Master
Servicer or the Administrator, as the case may be, of notice of termination
pursuant to Section 8.1, or the resignation by a Master Servicer or the
Administrator, as the case may be, in accordance with the terms of this
Agreement, the predecessor Master Servicer or the Administrator, as the case may
be, shall continue to perform its functions as Master Servicer or Administrator,
as the case may be, under this Agreement in the case of termination, only until
the date specified in such termination notice or, if no such date is specified
in a notice of termination, until receipt of such notice and, in the case of
resignation, until the later of (x) the date 120 days from the delivery to the
Eligible Lender Trustee and the Indenture Trustee of written notice of such
resignation (or written confirmation of such notice) in accordance with the
terms of this Agreement and (y) the date upon which the predecessor Master
Servicer or Administrator, as the case may be, shall become unable to act as
Master Servicer or Administrator, as the case may be, as specified in the notice
of resignation and accompanying Opinion of Counsel. In the event of the
termination hereunder of a Master Servicer or the Administrator, as the case may
be, the Issuer shall appoint a successor Master Servicer or Administrator, as
the case may be, acceptable to the Indenture Trustee and reasonably acceptable
to the Surety Provider, and the successor Master Servicer or Administrator, as
the case may be, shall accept its appointment by a written assumption in form
acceptable to the Indenture Trustee and the Surety Provider. In the event that a
successor Master Servicer or Administrator, as the case may be, has not been
appointed at the time when the predecessor Master Servicer or Administrator, as
the case may be, has ceased to act as Master Servicer or Administrator, as the
case may be, in accordance with this Section, the Indenture Trustee without
further action shall automatically be appointed the successor Master Servicer or
Administrator, as the case may be, and the Indenture Trustee shall be entitled
to the Master Servicing Fee and any Servicing Fee Carryover or the
Administration Fee, as the case may be in accordance with the provisions of the
Basic Documents. Notwithstanding the above, the Indenture Trustee shall, if it
shall be unwilling or legally unable so to act, appoint or petition a court of
competent jurisdiction to appoint, any established institution whose regular
business shall include the servicing of student loans, as the successor to the
departing Master Servicer or Administrator, as the case may be, 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 Master Servicer or Administrator, as
the case may be, (including the Indenture Trustee acting as successor Master
Servicer or Administrator as the case may be), shall be the successor in all
respects to the predecessor Master Servicer or Administrator, as the case may
be, and shall be subject to all the responsibilities, duties and liabilities
arising thereafter relating thereto placed on the predecessor Master Servicer or
Administrator, as the case may be, and shall be entitled to an amount agreed to
by such successor Master Servicer or Administrator as the case may be, in
accordance with the provisions of the Basic Documents (which shall not exceed
the Master Servicing Fee and any Servicing Fee Carryover or Administration Fee,
as the case may be, unless such compensation arrangements are approved in
writing by the Surety Provider and will not result in a downgrading of the Notes
or the Certificates by any Rating Agency) and all the rights granted to the
predecessor Master Servicer or Administrator, as the case may be, by the terms
and provisions of this Agreement.
(c) Neither a Master Servicer nor the Administrator may resign unless it is
prohibited from serving as such by law as evidenced by an Opinion of Counsel to
such effect delivered to the Indenture Trustee, the Eligible Lender Trustee and
the Surety Provider. Notwithstanding the foregoing or anything to the contrary
herein or in the other Basic Documents, the Indenture Trustee, to the extent it
is acting as successor Master Servicer or Administrator, as the case may be,
pursuant hereto shall be entitled to resign to the extent a qualified successor
Master Servicer or Administrator, as the case may be, has been appointed and has
assumed all the obligations of the departing Master Servicer or Administrator,
as the case may be, in accordance with the terms of this Agreement and the other
Basic Documents.
(d) Any successor Master Servicer shall assume all the obligations and
responsibilities of the departing Master Servicer under each sub-servicing
agreement with a Servicer and shall only be able to modify or terminate such
sub-servicing agreements pursuant to the provisions thereof.
SECTION 8.3. NOTIFICATION TO NOTEHOLDERS AND CERTIFICATEHOLDERS. Upon any
termination of, or appointment of a successor to, a Master Servicer or
Administrator, as the case may be, pursuant to this Article VIII, the Eligible
Lender Trustee shall give prompt written notice thereof to Certificateholders
and the Indenture Trustee shall give prompt written notice thereof to
Noteholders, the Surety Provider and the Rating Agencies (which, in the case of
any such appointment of a successor, shall consist of prior written notice
thereof to the Surety Provider and the Rating Agencies).
SECTION 8.4. WAIVER OF PAST DEFAULTS. The Surety Provider may or, with the
prior written consent of the Surety Provider, the Noteholders of Notes
evidencing not less than a majority of the Outstanding Amount of the Notes (or
the Certificateholders of Certificates evidencing not less than a majority of
the outstanding Certificate Balance, in the case of any default which does not
adversely affect the Indenture Trustee or the Noteholders) may, on behalf of all
Noteholders and Certificateholders, waive in writing any default by a Master
Servicer or Administrator, as the case may be, 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 Master
Servicer Default or Administrator Default, as the case may be, arising therefrom
shall be deemed to have been remedied for every purpose of this Agreement. No
such waiver shall extend to any subsequent or other default or impair any right
consequent thereto.
ARTICLE IX
TERMINATION
SECTION 9.1. TERMINATION. (a) OPTIONAL PURCHASE OF ALL FINANCED STUDENT
LOANS. As of the last day of any Collection Period immediately preceding a Note
Distribution Date or, if the Notes are no longer Outstanding, a Certificate
Distribution Date as of which the then outstanding Pool Balance is 10% or less
of the Aggregate Pool Balance, each of the Sellers shall have the option, with
the prior written consent of the Surety Provider, to purchase the Indenture
Trust Estate, other than the Trust Accounts; PROVIDED, HOWEVER, that, unless
Moody's agrees otherwise, a Seller may not effect any such purchase so long as
the rating on its long-term debt obligations is less than Baa3 by Moody's,
unless the Eligible Lender Trustee and the Indenture Trustee shall have received
an Opinion of Counsel to the effect that such purchase would not constitute a
fraudulent conveyance. To exercise such option, a Seller shall deposit pursuant
to Section 5.4 in the Collection Account an amount equal to the aggregate
Purchase Amount for the Financed Student Loans and the related rights with
respect thereto, plus the appraised value of any such other property held by the
Trust, such value to be determined by an appraiser mutually agreed upon by such
Seller, the Eligible Lender Trustee and the Indenture Trustee, and shall succeed
to all interests in and to the Trust; PROVIDED, HOWEVER, that such Seller may
not effect such purchase if the aggregate Purchase Amount to be so deposited in
the Collection Account does not equal or exceed an amount equal to the sum of
(x) the unpaid principal balance of the Notes plus accrued and unpaid interest
thereon at the related Class Interest Rate to the last day of the Collection
Period during which such purchase occurs and the amount of unpaid Noteholders'
Interest Carryover with respect thereto, (y) the unpaid Certificate Balance,
plus accrued and unpaid interest thereon at the related Certificate Rate to the
last day of the Collection Period during which such purchase occurs and the
amount of unpaid Certificateholders' Interest Carryover with respect thereto,
and (z) the unpaid Transaction Fees, if any.
(b) INSOLVENCY OF TMS STUDENT HOLDINGS, INC. Upon any sale of the assets of
the Trust pursuant to Section 9.2 of the Trust Agreement, the Master Servicers
shall instruct the Indenture Trustee to deposit the net proceeds from such sale
after all payments and reserves therefrom (including the expenses of such sale)
have been made (the "Insolvency Proceeds") in the Collection Account. On the
applicable Note Distribution Date or Certificate Distribution Date, or, if such
proceeds are not so deposited on a Note Distribution Date or Certificate
Distribution Date, on the first applicable Note Distribution Date or Certificate
Distribution Date following the date on which the Insolvency Proceeds are
deposited in the Collection Account, the Master Servicers shall instruct the
Indenture Trustee to make the following distributions (after the application on
such Note Distribution Date or Certificate Distribution Date of the amount of
Available Funds and amounts on deposit in the Reserve Account pursuant to
Sections 5.5 and 5.6) from the Insolvency Proceeds and any funds remaining on
deposit in the Reserve Account (including the proceeds of any sale of
investments therein as described in the following sentence):
(i) to the Noteholders, any portion of the
Noteholders' Interest Distribution Amount not otherwise
distributed to the Noteholders on such Note Distribution
Date;
(ii) to the Noteholders, the outstanding principal amount of the
Notes (after giving effect to the reduction in the outstanding
principal amount of the Notes to result from the distributions to
Noteholders on such Note Distribution Date and on prior Note
Distribution Dates);
(iii) to the Certificateholders, any portion of the
Certificateholders' Interest Distribution Amount not
otherwise distributed to the Certificateholders on such
Certificate Distribution Date;
(iv) to the Certificateholders, the Certificate Balance (after
giving effect to the reduction in the Certificate Balance to result
from the distributions to Certificateholders on such Certificate
Distribution Date);
(v) to the Indenture Trustee, any unpaid Indenture Trustee Fees
and other amounts owed the Indenture Trustee hereunder or under any
other Transaction Document and not otherwise paid on such Note
Distribution Date or Certificate Distribution Date;
(vi) to the Surety Provider, an amount equal to all unreimbursed
Certificate Surety Bond Payments and Note Surety Bond Payments made on
prior Note Distribution Dates and Certificate Distribution Dates not
otherwise reimbursed
on such Note Distribution Date or Certificate Distribution
Date, together with accrued interest thereon at the rate
set forth in the Insurance Agreement and unpaid premiums;
(vii) to the Master Servicers, any unpaid Servicing Fee Carryovers
not otherwise paid on such Note Distribution Date or Certificate
Distribution Date;
(viii) to the Noteholders, any unpaid Noteholders' Auction Rate
Interest Carryover or Noteholders' LIBOR Rate Interest Carryover not
otherwise distributed to the Noteholders on such Note Distribution
Date; and
(ix) to the Certificateholders, any unpaid Certificateholders'
Auction Rate Interest Carryover or Certificateholders' LIBOR Rate
Interest Carryover not otherwise distributed to the Certificateholders
on such Certificate Distribution Date.
Any investments on deposit in the Reserve Account which will not mature on
or before the Note Distribution Date or Certificate Distribution Date when
needed shall be sold by the Indenture Trustee at such time as will result in the
Indenture Trustee receiving the proceeds from such sale not later than the
Business Day preceding such Note Distribution Date or Certificate Distribution
Date. Any Insolvency Proceeds remaining after the deposits described above shall
be paid (i) first, to the holders of Originators' Interests any unpaid amounts
due to them pursuant to the terms of the related Trust Supplement and (ii) then
to the Seller.
(c) NOTICE. As described in Article IX of the Trust Agreement, notice of
any termination of the Trust shall be given by the Administrator to the Master
Servicers, the Eligible Lender Trustee, the Indenture Trustee and the Surety
Provider as soon as practicable after the Administrator has received notice
thereof.
(d) SUCCESSION. Following the satisfaction and discharge of the Indenture
and the payment in full of the principal of and interest on the Notes, the
Certificateholders will succeed to the rights of the Noteholders hereunder other
than Section 5.6(b) and the Eligible Lender Trustee will succeed to the rights
of, and assume the obligations of, the Indenture Trustee pursuant to this
Agreement and any other Basic Documents. Following the payment in full of the
principal of and interest on the Certificates by the Surety Provider pursuant to
the Surety Bond, the Surety Provider (or its assignee) will succeed to the
rights of the Certificateholders.
ARTICLE X
SURETY BONDS
SECTION 10.1. NOTE SURETY BONDS. (a) If for any Note Distribution Date for
a Class of Notes, a Note Surety Bond Payment is required to be made under the
terms of the related Note Surety Bond, the Indenture Trustee shall submit the
notice in the form of Attachment I to the applicable Note Surety Bond in
accordance with the terms and conditions of such Note Surety Bond in the amount
of such Note Surety Bond Payment to the Surety Provider and, if one has been
designated, to the fiscal agent for the Surety Provider no later than 12:00
noon, New York City time, on the Business Day prior to such Note Distribution
Date. Upon receipt of payment from the Surety Provider in accordance with the
terms of the applicable Note Surety Bond, the Indenture Trustee shall deposit
such amount into the Note Distribution Account for distribution solely to
Noteholders of the applicable Class.
(b) If for any Certificate Distribution Date for a Class of Certificates, a
Certificate Surety Bond Payment is required to be made under the terms of the
related Certificate Surety Bond, the Eligible Lender Trustee shall submit the
notice in the form of Attachment I to the applicable Certificate Surety Bond in
accordance with the terms and conditions of such Certificate Surety Bond in the
amount of such Certificate Surety Bond Payment to the Surety Provider and, if
one has been designated, to the fiscal agent for the Surety Provider no later
than 12:00 noon, New York City time, on the Business Day prior to such
Certificate Distribution Date. Upon receipt of payment from the Surety Provider
in accordance with the terms of the applicable Certificate Surety Bond, the
Eligible Lender Trustee shall deposit such amount into the Certificate
Distribution Account for distribution solely to Certificateholders of the
applicable Class.
SECTION 10.2. FURTHER ASSURANCES; SURETY PROVIDER DEFAULT; ETC. (a) The
Eligible Lender Trustee, the Sellers and the Master Servicers acknowledge, and
each Certificateholder by its acceptance of a Certificate and each Noteholder by
its acceptance of a Note agrees, anything herein to the contrary
notwithstanding, that any payment with respect to principal of or interest on
the Certificates which is made with moneys received pursuant to the terms of a
Certificate Surety Bond, and any payment with respect to principal of or
interest on the Notes which is made with moneys received pursuant to the terms
of a Note Surety Bond, shall not be considered payment of the Certificates, or
the Notes, as the case may be, from the Trust Estate and the Surety Provider
shall be paid such principal and interest but only from the sources and in the
manner provided herein and in the Insurance Agreement for the reimbursement to
the Surety Provider of such principal and interest.
(b) Each of the Eligible Lender Trustee, the Sellers and the Master
Servicers shall cooperate in all respects with any reasonable request by the
Surety Provider for action to preserve or enforce the Surety Provider's rights
and interests under this Agreement. In addition, each such party agrees to
forward to the Master Servicers, who shall deliver to the Surety Provider, a
copy of all written communications received by each such party from the Eligible
Lender Trustee, from 25% or more of the Certificateholders or from either Rating
Agency.
(c) Notwithstanding anything to the contrary contained in this Agreement,
if a Surety Provider Default exists, the provisions of this Agreement which (i)
permit the Surety Provider to exercise rights of the Certificateholders or the
Noteholders, (ii) restrict the ability of the Certificateholders, the
Noteholders, the Master Servicers, the Indenture Trustee or the Eligible Lender
Trustee to act without the consent or approval of the Surety Provider, (iii)
provide that a particular act or thing must be acceptable to the Surety
Provider, (iv) permit the Surety Provider to direct (or otherwise require) the
actions of the Eligible Lender Trustee, the Indenture Trustee, the Master
Servicers, the Noteholders or the Certificateholders, (v) provide that any
action or omission taken with the consent, approval or authorization of the
Surety Provider shall be authorized hereunder or shall not subject the party
taking or omitting to take such action to any liability hereunder or (vi) which
have a similar effect shall be of no further force and effect, and the Eligible
Lender Trustee, the Indenture Trustee and the Administrator shall administer the
Issuer and perform its obligations hereunder solely for the benefit of the
Noteholders and the Certificateholders. Nothing in the foregoing sentence, nor
any action taken pursuant thereto or in compliance therewith, shall be deemed to
have released the Surety Provider from any obligation or liability it may have
to any party or to the Noteholders or the Certificateholders hereunder, under
any other agreement, instrument or document (including the Surety Bonds) or
under applicable law.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. AMENDMENT. (a) This Agreement may be amended by the Sellers,
the Master Servicers and the Eligible Lender Trustee, with the consent of the
Indenture Trustee and the Surety Provider (which consent shall not be
unreasonably withheld), but without the consent of any of the Noteholders or the
Certificateholders, 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, the Certificateholders
or the Surety Provider; PROVIDED, HOWEVER, that such action shall not, as
evidenced by an Opinion of Counsel delivered to the Eligible Lender Trustee, the
Surety Provider and the Indenture Trustee, adversely affect in any material
respect the interests of any Noteholder, Certificateholder or the Surety
Provider.
(b) This Agreement may also be amended from time to time by the Sellers,
the Master Servicers and the Eligible Lender Trustee, with the consent of the
Indenture Trustee and the Surety Provider, the consent of the Noteholders of
Notes evidencing not less than a majority of the Outstanding Amount of the Notes
and the consent of the Certificateholders of Certificates evidencing not less
than a majority of the Certificate Balance, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or of modifying in any manner the rights of the Noteholders or
the Certificateholders; 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 Certificateholders or (b) reduce the aforesaid percentage of
the Outstanding Amount of the Notes and the Certificate Balance, the Noteholders
or the Certificateholders of which are required to consent to any such
amendment, without the consent of all outstanding Noteholders and
Certificateholders.
(c) Promptly after the execution of any amendment pursuant to clause (b)
above (or, in the case of the Rating Agencies, five Business Days prior
thereto), the Eligible Lender Trustee shall furnish written notification of the
substance of such amendment or consent to each Certificateholder, the Indenture
Trustee, the Surety Provider and each of the Rating Agencies.
(d) It shall not be necessary for the consent of Certificateholders or
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.
(e) Prior to the execution of any amendment to this Agreement, the Eligible
Lender Trustee and the Indenture Trustee shall be entitled to receive and rely
upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement and the Opinion of Counsel referred to
in Section 11.2(i)(1). The Eligible Lender Trustee and the Indenture Trustee
may, but shall not be obligated to, enter into any such amendment which affects
the Eligible Lender Trustee's or the Indenture Trustee's, as applicable, own
rights, duties or immunities under this Agreement or otherwise.
SECTION 11.2. PROTECTION OF INTERESTS IN TRUST. (a) The Sellers shall
execute and file such financing statements and cause to be executed and filed
such continuation statements, all in such manner and in such places as may be
required by law fully to preserve, maintain, and protect the interest of the
Issuer, the Eligible Lender Trustee and the Indenture Trustee in the Financed
Student Loans and in the proceeds thereof. The Sellers shall deliver (or cause
to be delivered) to the Eligible Lender Trustee and the Indenture Trustee
file-stamped copies of, or filing receipts for, any document filed as provided
above, as soon as available following such filing.
(b) Neither of the Sellers nor the Master Servicers 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 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 Sellers and the Master Servicers shall have an obligation
to give the Eligible Lender Trustee and the Indenture Trustee at least 60 days'
prior written notice of any relocation of its principal executive office if, as
a result of such relocation, the applicable provisions of the UCC would require
the filing of any amendment of any previously filed financing or continuation
statement or of any new financing statement and shall promptly file any such
amendment. Each of the Master Servicers 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.
(d) Each of the Master Servicer shall maintain accounts and records as to
each Financed Student Loan it is servicing (or provide access to such accounts
and records being serviced by a subservicer) accurately and in sufficient detail
to permit (i) the reader thereof to know at any time the status of such Financed
Student Loan, including payments and recoveries made and payments owing (and the
nature of each) and (ii) reconciliation between payments or recoveries on (or
with respect to) each Financed Student Loan and the amounts from time to time
deposited in the Collection Account in respect of such Financed Student Loan.
(e) Each of the Master Servicer shall maintain its computer systems so
that, from and after the time of sale under this Agreement of the Financed
Student Loans, such Master Servicer's master computer records (including any
backup archives) that refer to a Financed Student Loan shall indicate clearly
the interest of the Issuer and the Indenture Trustee in such Financed Student
Loan and that such Financed Student Loan is owned by the Issuer and has been
pledged to the Indenture Trustee. Indication of the Issuer's and the Indenture
Trustee's interest in a Financed Student Loan shall be deleted from or modified
on such Master Servicer's computer systems when, and only when, the related
Financed Student Loan shall have been paid in full or repurchased.
(f) If at any time a Seller shall propose to sell, grant a security
interest in, or otherwise transfer any interest in Financed Student Loans to any
prospective purchaser, lender or other transferee, the applicable Master
Servicer shall give notice to such prospective purchaser, lender or other
transferee that such Financed Student Loan has been sold and is owned by the
Issuer and has been pledged to the Indenture Trustee.
(g) Upon reasonable notice, each of the Master Servicers shall permit the
Indenture Trustee and its agents at any time during normal business hours to
inspect, audit and make copies of and abstracts from such Master Servicer's
records regarding any Financed Student Loan; it being understood that unless a
Surety Provider Default shall have occurred and be continuing, the Surety
Provider shall be entitled to direct the Indenture Trustee to make any such
inspection or audit on behalf of the Surety Provider.
(h) Upon request at any time the Eligible Lender Trustee or the Indenture
Trustee shall have reasonable grounds to believe that such request would be
necessary in connection with its performance of its duties under the Basic
Documents, a Master Servicer shall furnish to the Eligible Lender Trustee or to
the Indenture Trustee, within twenty 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 a comparison of such list to the
list of the Initial Financed Student Loans set forth in Schedule A as of the
Closing Date, and, for each Financed Student Loan that has been added to or
removed from the pool of loans held by the Eligible Lender Trustee on behalf of
the Issuer, information as to the date as of which and circumstances under which
each such Financed Student Loan was so added or removed.
(i) The Sellers shall deliver to the Eligible Lender Trustee,
the Surety Provider and the Indenture Trustee:
(1) promptly after the execution and delivery of this
Agreement and of each amendment thereto 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 Cut-off Date, an
Opinion of Counsel, dated as of a date during such 120-day period,
either (A) stating that, in the opinion of such
counsel, all financing statements and continuation statements have been
executed and filed that are necessary fully to preserve and protect the
interest of the Eligible Lender Trustee and the Indenture Trustee in
the Financed Student Loans, and reciting the details of such filings or
referring to prior Opinions of Counsel in which such details are given,
or (B) stating that, in the opinion of such counsel, no such action
shall be necessary to preserve and protect such interest; PROVIDED that
a single Opinion of Counsel may be delivered in satisfaction of the
foregoing requirement and that of Section 3.6(b) of the Indenture.
Each Opinion of Counsel referred to in clause (1) or (2) above
shall specify (as of the date of such opinion and given all applicable laws as
in effect on such date) any action necessary to be taken in the following year
to preserve and protect such interest.
(j) The Administrator shall file all reports with respect to
the Notes and the Certificates as may be required by the Commission or state
securities authorities.
SECTION 11.3. NOTICES. All demands, notices and communications upon or to
the Sellers, the Master Servicers, the Administrator, the Eligible Lender
Trustee, the Indenture Trustee, the Surety Provider or the Rating Agencies under
this Agreement shall be in writing, personally delivered or mailed by certified
mail, return receipt requested (or in the form of telex or facsimile notice,
followed by written notice delivered as aforesaid) and shall be deemed to have
been duly given upon receipt (a) in the case of the Sellers, the Master
Servicers, TMSI or Administrator, two copies, one to Trans-World Insurance
Company or ClassNotes, Inc., as applicable, 3301 C Street, Suite 100-A,
Sacramento, CA 95816 Attention: President (telephone: (916) 446-1626; facsimile:
(916) 441-0291) and the other to Trans-World Insurance Company or ClassNotes,
Inc., as applicable, c/o the Money Store Inc., Attention: Chief Financial
Officer, 2480 Morris Avenue, Union, New Jersey 07083 (telephone: (908) 686-2000;
facsimile: (908) 688-3846) (b) in the case of the Issuer or the Eligible Lender
Trustee, at the Corporate Trust Office of the Eligible Lender Trustee, (c) in
the case of the Indenture Trustee, at its Corporate Trust Office, (d) in the
case of the Eligible Lender Trustee, to The York Bank and Trust Company, c/o
Dauphin Deposit Bank and Trust Company, Attention: Corporate Trust Services, 213
Market Street, Harrisburg, Pennsylvania 17101, (e) in the case of the Surety
Provider, to AMBAC Indemnity Corporation, One State Street Plaza, New York, New
York 10004, Attention: Structured Finance/Student Loan Department (telephone:
(212) 668-0340; facsimile: (212) 363- 1459), (f) in the case of Moody's to
Moody's Investors Service, Inc., 99 Church Street, New York, New York 10007,
Attention: Structured Finance Department/Student Loans (telephone: (212)
553-0300; facsimile: (212) 553-4792), and (g) in the case of Standard & Poor's,
to Standard & Poor's Corporation, 25 Broadway (20th Floor), New York, New York
10004, Attention: Asset Backed Surveillance Department (telephone: (212)
208-8000; facsimile: (212) 412-0225); or, as to each of the foregoing, at such
other address as shall be designated by written notice to the other parties.
SECTION 11.4. ASSIGNMENT. Notwithstanding anything to the contrary
contained herein, except as provided in Section 6.5 and as provided in the
provisions of this Agreement concerning the resignation of a Master Servicer,
this Agreement may not be assigned by the Sellers or the Master Servicers. This
Agreement may only be assigned by the Eligible Lender Trustee to its permitted
successor pursuant to the Trust Agreement.
SECTION 11.5. LIMITATIONS ON RIGHTS OF OTHERS. The provisions of this
Agreement are solely for the benefit of the Sellers, the Master Servicers, the
Issuer and the Eligible Lender Trustee and for the benefit of the
Certificateholders, the Indenture Trustee, the Noteholders and the Surety
Provider, as third party beneficiaries, and nothing in this Agreement, whether
express or implied, shall be construed to give to any other Person any legal or
equitable right, remedy or claim in the Trust Estate or under or in respect of
this Agreement or any covenants, conditions or provisions contained herein.
SECTION 11.6. SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 11.7. SEPARATE COUNTERPARTS. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 11.8. 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 11.9. GOVERNING LAW. This Agreement shall be construed in
accordance with the laws of the State of New York, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
SECTION 11.10. ASSIGNMENT TO INDENTURE TRUSTEE. The Seller hereby
acknowledges and consents to any mortgage, pledge, assignment and grant by the
Issuer to the Indenture Trustee pursuant to the Indenture for the benefit of the
Noteholders of a security interest in all right, title and interest of the
Issuer in, to and under the Financed Student Loans and/or the assignment of any
or all of the Issuer's rights and obligations hereunder to the Indenture
Trustee.
SECTION 11.11. NONPETITION COVENANTS. Notwithstanding any prior termination
of this Agreement, the Master Servicers, the Administrator and the Sellers shall
not acquiesce, petition or otherwise invoke or cause the Issuer to invoke the
process of any court or government authority for the purpose of commencing or
sustaining a case against the Issuer under any Federal or state bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Issuer or any
substantial part of its property, or ordering the winding up or liquidation of
the affairs of the Issuer.
SECTION 11.12. LIMITATION OF LIABILITY OF ELIGIBLE LENDER TRUSTEE AND
INDENTURE TRUSTEE. (a) Notwithstanding anything contained herein to the
contrary, this Agreement has been signed by The York Bank and Trust Company not
in its individual capacity but solely in its capacity as Eligible Lender Trustee
of the Issuer and in no event shall The York Bank and Trust Company in its
individual capacity or as beneficial owner of the Issuer have any liability for
the representations, warranties, covenants, agreements or other obligations of
the Issuer hereunder or in any of the certificates, notices or agreements
delivered pursuant hereto as to all of which recourse shall be had solely to the
assets of the Issuer.
(b) Notwithstanding anything contained herein to the contrary, this
Agreement has been accepted by Bankers Trust Company not in its individual
capacity but solely as Indenture Trustee and in no event shall Bankers Trust
Company have any liability for the representations, warranties, covenants,
agreements or other obligations of the Issuer hereunder or in any of the
certificates, notices or agreements delivered pursuant hereto, as to all of
which recourse shall be had solely to the assets of the Issuer.
SECTION 11.13. RIGHTS OF SURETY PROVIDER. The Surety Provider is a
third-party beneficiary of this Sale and Servicing Agreement. Any right
conferred to the Surety Provider shall be suspended during any period in which
the Surety Provider is in default in its payment obligations under the Insurance
Agreement. During any period of suspension the Surety Provider's rights
hereunder shall vest in the Noteholders and Certificateholders and shall be
exercisable by the Holders of a majority of the aggregate principal amount of
Notes and Certificates then Outstanding. At such time as the Notes and
Certificates are no longer Outstanding and the Surety Provider has been
reimbursed for all Required Surety Payments to which it is entitled under the
Basic Documents and has been paid all Premium Amounts due and owing in respect
of the Surety Bonds, the Surety Provider's rights hereunder shall terminate.
<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.
CLASSNOTES TRUST 1997-I,
by THE YORK BANK AND TRUST COMPANY,
not in its individual
capacity but solely as
Eligible Lender Trustee on
behalf of the Trust,
BY:_____________________________
Name:
Title:
TRANS-WORLD INSURANCE COMPANY d/b/a
EDUCAID, Seller, Master Servicer
and Administrator
BY:______________________________
Name: Morton Dear
Title: Executive Vice President
CLASSNOTES, INC., Seller and Master
Servicer
BY:______________________________
Name: Morton Dear
Title: Executive Vice President
THE MONEY STORE INC.
BY:_______________________________
Name: Morton Dear
Title: Executive Vice President
Acknowledged and accepted as of the day and year first above written:
BANKERS TRUST COMPANY, not
in its individual capacity
but solely as Indenture Trustee,
by
-----------------------
Name:
Title:
<PAGE>
SCHEDULE A
TO THE
SALE AND SERVICING AGREEMENT
SCHEDULE OF FINANCED STUDENT LOANS
[To be supplied by the Sellers at Closing.]
<PAGE>
SCHEDULE B
TO THE
SALE AND SERVICING AGREEMENT
LOCATION OF FINANCED STUDENT LOAN FILES
Documents relating to the Financed Student Loans in the custody of the
Master Servicers (including original notes) are stored at Trans-World Insurance
Company's or ClassNotes, Inc.'s offices, as applicable, located at 3301 C
Street, Suite 100-A, Sacramento, California 95816.
<PAGE>
EXHIBIT A
TO THE
SALE AND SERVICING AGREEMENT
Form of Noteholders' Statement pursuant to Section 5.7(a) of Sale and
Servicing Agreement (capitalized terms used HEREIN ARE DEFINED IN APPENDIX A
THERETO)
Note Distribution Date:_____________________
(i) Amount of principal being paid or distributed:
Class ___ Notes:_________($_______ per $50,000
original principal
amount of Class ___
Notes)
(ii) Amount of interest being paid or distributed:
Class ___ Notes:_________($_______ per $50,000
original principal
amount of Class ___
Notes)
(iii) Amount of Noteholders' [Auction] [LIBOR] Rate Interest
Carryover being paid or distributed (if any) and
amount remaining (if any):
(a) Class ___ Notes:
(1) Distributed:___________ ($________per
$50,000 original
principal amount of
Class ___ Notes)
(2) Balance:___________ ($________per
$50,000 original
principal amount of
Class ___ Notes)
(b) Class ___ Notes:
(1) Distributed:___________ ($________per
$50,000 original
principal amount of
Class ___ Notes)
(2) Balance:___________ ($________per
$50,000 original
principal amount of
Class ___ Notes)
(iv) Pool Balance at end of preceding Collection
Period:________
(v) After giving effect to distributions on this Note
Distribution Date:
(a) (1) outstanding principal amount of Class ___
Notes:_______________
(b) (1) outstanding principal amount of Class ___
Notes:_______________
(c) (1) Certificate Balance:_______________
(vi) Applicable Interest Rate:
(a) In general:
(1) [Auction] [LIBOR] Rate for each of the
applicable Interest Periods since the last
Note Distribution Date for such Class of
Notes was ______%, _______% and _______%;
and
(2) the Net Loan Rate was ____, ____% and ____%.
(b) Class ___ Rate:_______% (based on [Auction Rate]
[LIBOR Rate] [Net Loan
Rate])
(c) Class ___ Rate:_______% (based on [Auction Rate]
[LIBOR Rate] [Net Loan
Rate])
(d) Amount of interest that would have been paid on such
Note Distribution Date if interest instead was
calculated based on the [Auction Rate] [LIBOR
Rate] [Net Loan Rate] was $________.
(vii) (a) Amount of Servicing Fee
for related Collection
Period:_________________ ($__________ per $50,000
original principal
amount of Notes)
(b) Amount of Servicing Fee Carryover being
distributed and remaining balance (if any):
(1) Distributed: ______________ ($__________ per
$50,000 original
principal amount
of Notes)
(2) Balance: _____________ ($___________ per
$50,000 original
principal amount of
Notes)
(viii) Amount of Administration Fee, Auction Agent Fee,
Indenture Trustee Fee, Eligible Lender Trustee Fee and
Surety Provider Fee for related Collection Period
(each stated separately):____________ ($_________ per
$50,000
original
principal amount
of Notes)
(ix) Amount of payments to the Surety Provider in
reimbursement of prior draws under any Note Surety
Bond or any Certificate Surety Bond:_______________1
(x) Aggregate amount of Realized Losses (if any) for the
related Collection Period:______________
(xi) Aggregate Amount (if any) received (stated separately for
principal and interest) with respect to Financed Student Loans
for which Realized Losses were allocated
previously:____________________
(xii) Amount in the Reserve Account:______________2
[(xiii) Amount in the Pre-Funding Account:_____________]2
(xiv) Amount of any draw required to be made under a Note
Surety Bond (together with any other information
required to make such draw): __________________
[(xv) Amount in the Pre-Funding Account at the end of the
Funding Period to be distributed as a payment of
principal in respect of:
(a) Class ___ Notes:____________
(b) Class ___ Notes (only if Class ___ Notes have
been paid in full):_____________]3
(xvi) Parity Percentage, including the numerator and
denominator in determining such Parity Percentage:
(xvii) Excess, if any, of amounts deposited into
Collection Account with respect to the sale by the Trust of
Serial Loans over the aggregate Purchase Amount of such
loans (such excess to be distributed to Student
Holdings):______________
(xviii) Amount of Additional Principal Payments, if any, made
on such Distribution Date.
- --------
1 To be included in the first Note Distribution
Date of each March, June, September or December.
2 To be included for each Note Distribution Date during the
Funding Period.
3 To be included for the first Note
Distribution Date on or immediately
following the end of the Funding Period.
<PAGE>
EXHIBIT B
TO THE
SALE AND SERVICING AGREEMENT
Form of Certificateholders' Statement pursuant to Section 5.7(a) of Sale and
Servicing Agreement (capitalized terms used herein ARE DEFINED IN APPENDIX A
THERETO)
Certificateholders' Distribution Date:__________________
(i) Amount of principal being paid or distributed in
respect of the Class __ Certificates:___________
($_________ per
$50,000 original
principal amount of
the Certificates)
(ii) Amount of interest being paid or distributed in
respect of the Class __ Certificates:__________
($_________ per
$50,000 original
principal amount of
Certificates)
(iii) Amount of Certificateholders' [Auction] [LIBOR] Rate Interest
Carryover being paid or distributed (if any) and amount
remaining (if any):
(1) Distributed: ________________ ($_________ per
$50,000 original
principal amount of
Certificates)
(2) Balance: _______________ ($__________ per $50,000
original principal
amount of Certificates)
(iv) Pool Balance at end of preceding Collection
Period:_____________
(v) After giving effect to distributions on this
Certificate Distribution Date:
(a) (1) outstanding principal amount of Class ___
Notes:_____________
(b) (1) outstanding principal amount of Class ___
Notes:_____________
(c) outstanding principal amount of Class ___
Certificates:_____________
(d) (1) Certificate Balance:_______________
(vi) Applicable Interest Rate:
(a) In general:
(1) [Auction] [LIBOR] Rate for the prior
Interest Period was _____%; and (2) the Net
Loan Rate was _____%.
(b) Certificate Rate:_____% (based on [Auction Rate]
[LIBOR Rate] [Net Loan Rate])
(c) Amount of interest that would have been paid on such
Certificate Distribution Date if interest instead was
calculated based on the [Auction Rate] [LIBOR Rate]
[Net Loan Rate]
(vii) (a) Amount of Servicing Fee
for related Collection
Period:_____________ ($__________ per $50,000
original principal amount of
Certificates)
(b) Amount of Servicing Fee Carryover being
distributed and remaining balance (if any):
(1) Distributed: ____________ ($__________ per
$50,000 original
principal amount
of Certificates)
(2) Balance: ______________ ($___________ per
$50,000 original
principal amount
of Certificates)
(viii) Amount of Administration Fee, Auction Agent Fee,
Indenture Trustee Fee and Surety Provider Fee for
related Collection Period (each stated
separately):_________ ($_________ per $50,000 original
principal amount of Certificates)
(ix) Amount of payments to the Surety Provider in
reimbursement of prior draws under any Note Surety
Bond or any Certificate Surety Bond:______________
(x) Aggregate amount of Realized Losses (if any) for the
related Collection Period:_____________
(xi) Aggregate amount (if any) received (stated separately for
principal and interest) with respect to Financed Student Loans
for which Realized Losses were allocated
previously:________________
(xii) Amount in the Reserve Account:____________
(xiii) Amount of any draw required to be made under a Certificate
Surety Bond (together with any other information required to
make such draw):
-------------------
[(xiv) Amount in the Pre-Funding Account:___________]5
(xiv) Parity Percentage, including the numerator and
denominator in determining such Parity Percentage:
(xv) Excess, if any, of amounts deposited into Collection Account
with respect to the sale by the Trust of Serial Loans over the
aggregate Purchase Amount of such loans (such excess to be
distributed to Student Holdings):_______________
(xvi) Amount of Additional Principal Payments, if any, made
on such Distribution Date.
- --------
4 Only after the Notes have been paid in full.
5 To be included for each Distribution Date during the
Funding Period.
<PAGE>
EXHIBIT C
TO THE
SALE AND SERVICING AGREEMENT
FORM OF ADMINISTRATOR'S CERTIFICATE
[To be provided by the Administrator pursuant to
Section 4.7 of the Sale and
Servicing Agreement]
<PAGE>
EXHIBIT D
TO THE
SALE AND SERVICING AGREEMENT
ASSIGNMENT AND BILL OF SALE FOR
INITIAL FINANCED STUDENT LOANS
For value received, in accordance with the Sale and Servicing Agreement
(the "Sale and Servicing Agreement") dated as of February 28, 1997, among
Trans-World Insurance Company d/b/a Educaid, as seller (a "Seller"), as master
servicer (a "Master Servicer") and as administrator (the "Administrator"),
ClassNotes, Inc., as seller (a "Seller") and as master servicer (a "Master
Servicer"), ClassNotes Trust 1997-I (the "Trust"), and The York Bank and Trust
Company, not in its individual capacity but solely as Eligible Lender Trustee
(the "Eligible Lender Trustee"), the undersigned do hereby sell, assign,
transfer and otherwise convey unto the Eligible Lender Trustee on behalf of the
Trust, without recourse (subject to the obligations set forth in the Sale and
Servicing Agreement), all right, title and interest of the undersigned in and to
(i) the Initial Financed Student Loans and all obligations of the Obligors
thereunder, including all monies paid or payable thereunder on or after the
Initial Cut-off Date with respect to the Initial Financed Student Loans,
including the right to enforce such Loans in the same manner and to the same
extent as the Sellers would have the power to do but for the execution and
delivery of this Agreement, (ii) the Assigned Rights, (iii) all funds on deposit
from time to time in the Trust Accounts, including the Reserve Account Initial
Deposit, the Capitalized Interest Account, the Capitalized Pre- Funding Account
and the Pre-Funded Amount, and in all investments and proceeds thereof
(including all income thereon) and (iv) the proceeds of any and all of the
foregoing (including proceeds derived from the voluntary or involuntary
conversion of any of the Initial Financed Student Loans into cash or other
liquidated property, such as proceeds from the applicable Guarantee Agreement).
The foregoing sale does not constitute and is not intended to result in any
assumption by the Eligible Lender Trustee or the Trust of any obligation of the
Seller to the 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, represent
and warrant that the promissory notes evidencing each Initial Financed Student
Loan described in Schedule A to the Sale and Servicing Agreement have been
endorsed in the manner set forth in the Sale and Servicing Agreement.
This Bill of Sale is made pursuant to and upon the representations,
warranties and agreements on the part of the undersigned contained in the Sale
and Servicing Agreement and is to be governed by the Sale and Servicing
Agreement.
Capitalized terms used but not defined herein shall have the meaning
assigned to them in Appendix A to the Sale and Servicing Agreement, which also
contains rules as to usage that shall be applicable herein.
IN WITNESS WHEREOF, the undersigned have caused this Assignment to be duly
executed as of March __, 1997.
TRANS-WORLD INSURANCE CORPORATION
D/B/A/ EDUCAID, as Seller
BY:_______________________________
Name: Morton Dear
Title: Executive Vice President
CLASSNOTES, INC., as Seller
BY:_______________________________
Name: Morton Dear
Title: Executive Vice President
<PAGE>
EXHIBIT E
TO THE SALE AND SERVICING AGREEMENT
ASSIGNMENT AND BILL OF SALE FOR
ADDITIONAL FINANCED STUDENT LOANS
For value received, in accordance with the Sale and Servicing Agreement
(the "Sale and Servicing Agreement") dated as of February 28, 1997, among the
undersigned, as seller (the "Seller"), as master servicer (the "Master
Servicer") [and as administrator (the "Administrator")], [Trans-world Insurance
Company d/b/a/ Educaid ("TWIC"), as seller, master servicer and
administrator][ClassNotes, Inc. ("ClassNotes"), as seller and master servicer],
ClassNotes Trust 1997-I (the "Trust"), and The York Bank and Trust Company, not
in its individual capacity but solely as Eligible Lender Trustee (the "Eligible
Lender Trustee"), the undersigned does hereby sell, assign, transfer and
otherwise convey unto the Eligible Lender Trustee on behalf of the Trust,
without recourse (subject to the obligations set forth in the Sale and Servicing
Agreement), all right, title and interest of the undersigned in and to (i) the
Additional Financed Student Loans listed on Schedule A hereto and all monies
received thereon or payable, on and after ______ (the "Subsequent Cut-off Date")
with respect to the Additional Financed Student Loans, including the right to
enforce such Loans in the same manner and to the extent as the Seller would have
the power to do but for the execution and delivery of this Agreement and (ii)
the proceeds of any and all of the foregoing (including but not limited to
proceeds derived from the voluntary or involuntary conversion of any of the
Additional Financed Student Loans into cash or other liquidated property, such
as proceeds from the applicable Guarantee Agreement (as such term is defined in
the Sale and Servicing Agreement)). The foregoing sale does not constitute and
is not intended to result in any assumption by the Eligible Lender Trustee or
the Trust of any obligation of the Seller to the borrowers of such Additional
Financed Student Loans or any other person in connection with the Additional
Financed Student Loans or any agreement or instrument relating to any of them.
In addition, the undersigned, by execution of this instrument, represents
and warrants that the promissory notes evidencing each Additional Student Loan
described in Schedule A hereto have been endorsed in the manner set forth in the
Sale and Servicing Agreement.
This Bill of Sale is made pursuant to and upon the representations,
warranties and conditions precedent on the part of the undersigned contained in
the Sale and Servicing Agreement and the Insurance and Indemnity Agreement dated
as of March 21, 1997 (as amended from time to time, the "Insurance Agreement")
among The Money Store Inc., the Seller, [ClassNotes][TWIC], Bankers Trust
Company, as Indenture Trustee, the Eligible Lender Trustee and AMBAC Indemnity
Corporation, and is to be governed by the Sale and Servicing Agreement and the
Insurance Agreement. Each sale of an Additional Financed Student Loan by the
Seller to the Eligible Lender Trustee shall be deemed a certification by the
Seller that all applicable representations and warranties contained in the Sale
and Servicing Agreement and the Insurance Agreement concerning such Additional
Financed Student Loan are true and correct as of the related Subsequent Cut-off
Date with the same force and effect as if made on such date, and that all
conditions precedent to selling such Additional Financed Student Loan set forth
in the Sale and Servicing Agreement and the Insurance Agreement have been
satisfied.
Capitalized terms used but not defined herein shall have the meaning
assigned to them in the Sale and Servicing Agreement.
IN WITNESS WHEREOF, the undersigned has caused this Assignment to be duly
executed as of ________________, 199__.
[TRANS-WORLD INSURANCE CORPORATION,
D/B/A EDUCAID, as Seller
By:_____________________________
Name:
Title:]
CLASSNOTES, INC., as Seller
By:_____________________________
Name:
Title:
<PAGE>
SCHEDULE A
TO THE
THE BILL OF SALE
[List of Additional Financed Student Loans
and their related Subsequent Cut-off Dates]
