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) DECEMBER 24, 1997
Trans-World Insurance Company d/b/a Educaid and
Class Notes Inc.(as Sellers) on behalf of
ClassNotes Trust 1997-I.
ClassNotes Inc.
Trans-World Insurance Company
(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>
On December 24, 1997, ClassNotes Trust-I issued $265,000,000 principal
amount of its Series 1997-2 Notes (the "Notes") in the following classes:
$150,000,000 LIBOR Rate Class A-4 Notes, $57,500,000 Auction Rate Class A-5
Notes and $57,500,000 Auction Rate Class A-6 Notes. The Notes were registered
under a Registration Statement on Form S-3 (No. 333-18877) (the "Registration
Statement"). The Trust also issued $15,000,000 of Auction Rate Certificates,
Class 2 (the "Certificates"). This Current Report on Form 8-K is being filed to
file as exhibits to the Registration Statement certain agreements entered into
in connection with the issuance of the Notes and the Certificates.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) EXHIBITS
EXHIBIT NO.
1.1 Underwriting Agreement for LIBOR Rate Notes, dated
December 19, 1997, among ClassNotes Trust 1997-I,
Trans-World Insurance Company, ClassNotes Inc., The
Money Store Inc., Salomon Brothers Inc and First
Union Capital Markets Corp.
1.2 Terms Agreement for LIBOR Rate Notes, dated December
19, 1997, among ClassNotes Trust 1997-I, Trans-World
Insurance Company, ClassNotes Inc., The Money Store
Inc., Salomon Brothers Inc and First Union Capital
Markets Corp.
1.3 Underwriting Agreement for Auction Rate Notes, dated
December 19, 1997, among ClassNotes Trust 1997-I,
Trans-World Insurance Company, ClassNotes Inc., The
Money Store and Smith Barney Inc.
1.4 Terms Agreement for Auction Rate Notes, dated
December 19, 1997, among ClassNotes Trust 1997-I,
Trans-World Insurance Company, ClassNotes Inc., The
Money Store Inc. and Smith Barney Inc.
4.1 Second Terms Supplement, dated December 24, 1997,
between The York Bank and Trust Company, as Eligible
Lender Trustee, and Bankers Trust Company, as Indenture
Trustee.
4.2 Second Trust Supplement, dated December 23, 1997,
among Trans-World Insurance Company, ClassNotes Inc.
and The York Bank and Trust Company, as Eligible
Lender Trustee.
99.1 Auction Agent Agreement, dated December 24, 1997,
among The York Bank and Trust Company, as Eligible
Lender Trustee, Bankers Trust Company, as Indenture
Trustee, Bankers Trust Company, as Auction Agent, and
Trans-World Insurance Company.
99.2 Broker-Dealer Agreement, dated December 24, 1997,
among Bankers Trust Company, as Auction Agent, and
Smith Barney Inc, as Broker-Dealer.
99.3 First Supplemental Sale and Servicing Agreement,
dated December 24, 1997, among ClassNotes Trust 1997-
I, Trans-World Insurance Company, ClassNotes Inc.,
The Money Store Inc. and The York Bank and Trust
Company, as Eligible Lender Trustee.
<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 and
CLASSNOTES, INC.
By:/s/ Michael Benoff
Name: Michael Benoff
Title: Senior Vice President
Dated: January 6, 1998
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION OF EXHIBIT PAGE NO.
1.1 Underwriting Agreement for LIBOR Rate
Notes, dated December 19, 1997, among
ClassNotes Trust 1997-I, Trans-World
Insurance Company, ClassNotes Inc., The
Money Store Inc., Salomon Brothers Inc
and First Union Capital Markets Corp.
1.2 Terms Agreement for LIBOR Rate Notes,
dated December 19, 1997, among
ClassNotes Trust 1997-I, Trans-World
Insurance Company, ClassNotes Inc., The
Money Store Inc., Salomon Brothers Inc
and First Union Capital Markets Corp.
1.3 Underwriting Agreement for Auction Rate
Notes, dated December 19, 1997, among
ClassNotes Trust 1997-I, Trans-World
Insurance Company, ClassNotes Inc., The
Money Store and Smith Barney Inc.
1.4 Terms Agreement for Auction Rate Notes,
dated December 19, 1997, among
ClassNotes Trust 1997-I, Trans-World
Insurance Company, ClassNotes Inc., The
Money Store Inc. and Smith Barney Inc.
4.1 Second Terms Supplement, dated December
24, 1997, between The York Bank and
Trust Company, as Eligible Lender
Trustee, and Bankers Trust Company, as
Indenture Trustee.
4.2 Second Trust Supplement, dated
December 23, 1997, among Trans-World Insurance
Company, ClassNotes Inc. and The York
Bank and Trust Company, as Eligible
Lender Trustee.
99.1 Auction Agent Agreement, dated December
24, 1997, among The York Bank and Trust
Company, as Eligible Lender Trustee,
Bankers Trust Company, as Indenture
Trustee, Bankers Trust Company, as
Auction Agent, and Trans-World Insurance
Company.
99.2 Broker-Dealer Agreement, dated December
24, 1997, among Bankers Trust Company,
as Auction Agent, and Smith Barney Inc,
as Broker-Dealer.
99.3 First Supplemental Sale and Servicing
Agreement, dated December 24, 1997,
among ClassNotes Trust 1997-I, Trans-
World Insurance Company, ClassNotes
Inc., The Money Store Inc. and The York
Bank and Trust Company, as Eligible
Lender Trustee.
Exhibit 1.1
EXECUTION COPY
CLASSNOTES TRUST 1997-I
$150,000,00 LIBOR RATE ASSET BACKED NOTES
SERIES 1997-2
UNDERWRITING AGREEMENT
December 19, 1997
SALOMON BROTHERS INC
7 World Trade Center
33rd Floor
New York, New York 10048
FIRST UNION CAPITAL MARKETS CORP.
One First Union Center
Charlotte, North Carolina 28288
Dear Sirs:
Trans-World Insurance Company, an Arizona corporation doing business
as Educaid ("TWIC"), and ClassNotes, Inc., a Delaware corporation ("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 Salomon Brothers Inc and First Union Capital Markets Corp.
(collectively, the "Underwriters"), pursuant to the terms of this Underwriting
Agreement, $150,000,00 of Asset Backed Notes, Series 1997-2, Class A-4 (the
"Notes"). It is understood that the Companies are entering into an underwriting
agreement dated the date hereof (the "Auction Rate Underwriting Agreement")
among the Companies, the Trust and Smith Barney Inc. providing for the sale of
the Trust's $57,500,000 Asset Backed Notes, Series 1997- 2, Class A-5
$57,500,000 Asset Backed Notes, Series 1997-2 and Class A-6 (collectively, the
"Auction Rate Notes"), This Agreement and the Auction Rate Underwriting
Agreement are referred to herein collectively as, the "Underwriting Agreements."
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 Second Terms Supplement (the "Second
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 Auction Rate Underwriting Agreement, the
Sale and Servicing Agreement, the Indenture and the Indemnification Agreement
dated December 24, 1997, among Ambac Assurance Corporation, The Money Store and
the Underwriters 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 First Supplemental Sale and Servicing Agreement
dated as of December 24, 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 Underwriters. The Terms Agreement shall
specify, among other matters, the principal amount of the Notes to be sold to
each Underwriter, 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 Underwriters 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 Underwriters, 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 Underwriters 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 Underwriters, severally and not jointly, 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, each of the Underwriters
agrees to purchase from the Trust all of the Notes in the amounts, severally and
not jointly, and at such respective purchase prices as may be described in the
Terms Agreement executed by the Companies, the Trust, The Money Store and the
Underwriters pursuant to the terms hereof.
(b) It is understood that the Underwriters propose 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
Underwriters 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
December 24, 1997 (the "Closing Date"). The place of such closing and the
Closing Date may be varied by agreement among the Underwriters, the Trust and
the Companies.
The Notes will be delivered to the Underwriters 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
Underwriters 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
Underwriters shall be made available to the Underwriters 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
Underwriters 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 Underwriters specifically for use therein; and
provided further, that neither the Companies nor The Money Store make any
representations or warranties as to any information in any Computational
Materials (as defined in Section 13 below) provided by any Underwriter to the
Companies pursuant to Section 13, except to the extent of any errors in the
Computational Materials that are caused by errors in the pool information
provided by the Companies or The Money Store to the applicable Underwriter.
(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 Second Terms Supplement relating to
the Notes to be sold on the Closing Date (the " Second 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 Underwriters 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 Underwriters 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
Underwriters, 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
Underwriters 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
Underwriters, or if the Underwriters shall have reasonably objected thereto
promptly after receipt thereof; the Companies will immediately advise the
Underwriters or the Underwriters' 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 Underwriters (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 Underwriters, 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 Underwriters may reasonably request.
(e) No amendment or supplement will be made to the Registration
Statement or Prospectus which the Underwriters shall not previously have been
advised or to which it shall reasonably object after being so advised.
(f) The Companies will cooperate with the Underwriters 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 Underwriters and by
dealers under the securities or Blue Sky laws of such jurisdictions as the
Underwriters 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 Underwriters 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 Underwriters (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 Underwriters 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 Underwriters terminating this Agreement pursuant to Section
8 or Section 9 hereof) or if this Agreement shall be terminated by the
Underwriters 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 Underwriters 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 each
Underwriter and each person, if any, who controls such 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 any of the
Underwriters furnished in writing to the Companies by or on behalf of an
Underwriter expressly for use in connection therewith (including any
Computational Materials prepared by such Underwriter, except to the extent of
any errors in the Computational Materials that are caused by errors in the pool
information provided by the Companies to the applicable Underwriter. The parties
hereto agree that no Underwriter shall be under any liability to the Companies,
The Money Store or any other person for Computational Materials prepared by any
other Underwriter); PROVIDED, HOWEVER, that the indemnification contained in
this paragraph (a) with respect to any preliminary prospectus shall not inure to
the benefit of any Underwriter (or to the benefit of any person controlling any
Underwriter) on account of any such loss, claim, damage, liability or expense
arising from the sale of the Notes covered thereby by an 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 such
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 such 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 an
Underwriter or any person controlling such Underwriter in respect of which
indemnity may be sought against the Companies or The Money Store, such
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. Each 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 such 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 an
Underwriter or such controlling person and the indemnifying parties and such
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 such Underwriters 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 Underwriters
and controlling persons not having actual or potential differing interests with
the Underwriters or among themselves, which firm shall be designated in writing
by the Underwriters, 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 Underwriters, 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) Each Underwriter, severally and not jointly 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
Underwriters set forth in paragraph (a) hereof, but only with respect to
information relating to the Underwriters furnished in writing by or on behalf of
the Underwriters expressly for use in the Registration Statement, the
Prospectus, or any amendment or supplement thereto, or any related preliminary
prospectus (including any Computational Materials prepared by such Underwriter,
except to the extent of any errors in the Computational Materials that are
caused by errors in the pool information provided by the Companies or The Money
Store to the applicable Underwriter. The parties hereto agree that no
Underwriter shall be under any liability to the Companies, The Money Store or
any other person for Computational Materials prepared by any other Underwriter).
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 Underwriters pursuant to
this paragraph (c), the Underwriters 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
Underwriters 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 Underwriters' 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 Underwriters by paragraph
(b) above. The foregoing indemnity agreement shall be in addition to any
liability which the Underwriters 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 Underwriters 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 Underwriters 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
Underwriters 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 Underwriters. The relative fault of the Companies
and The Money Store on the one hand and the Underwriters 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 Underwriters 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 Underwriters 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 Underwriters
shall not be required to contribute any amount in excess of the amount received
by the Underwriters over the price paid by the Underwriters for the Notes
purchased by it and distributed to the public less the amount of any damages
which the Underwriters 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
Underwriters 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 Underwriters, 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 Underwriters, 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 UNDERWRITERS' OBLIGATIONS. The obligations of the
Underwriters 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 Underwriters, 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 Underwriters, 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 Underwriters 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 Underwriters, materially
adversely affect the market for the Notes.
(c) The Underwriters 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 Underwriters in form and scope satisfactory to
the Underwriters and its counsel.
(d) The Underwriters 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 Underwriters in form and
scope satisfactory to the Underwriters and its counsel.
(e) The Underwriters 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 Underwriters in form and scope
satisfactory to the Underwriters and its counsel.
(f) The Underwriters shall have received on the Closing Date an
opinion of counsel for Ambac Assurance Corporation (the "Surety Provider"),
dated the Closing Date and addressed to the Underwriters in form and scope
satisfactory to the Underwriters and its counsel.
(g) The Underwriters 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 Underwriters in form and scope satisfactory to
the Underwriters and its counsel.
(h) The Underwriters shall have received on the Closing Date an
opinion or opinions of Stroock & Stroock & Lavan LLP, counsel for the
Underwriters, dated the Closing Date, and addressed to the Underwriters, in form
and scope satisfactory to the Underwriters.
(i) The Underwriters 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 Underwriters, 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
Underwriters 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 Underwriters shall have received by instrument dated the
Closing Date (at the option of the Underwriters), 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 Ratings Services, a Division of The
McGraw-Hill Companies, Inc. ("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 Underwriters 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 Underwriters an executed copy of each of the Basic Documents and such
further certificates and documents as the Underwriters shall have requested.
(q) Simultaneously with or prior to the Closing Date, the Auction Rate
Notes have been sold to Smith Barney Inc.
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 Underwriters and counsel for the
Underwriters.
Any certificate or document signed by any officer of the Companies or
The Money Store and delivered to the Underwriters, or to counsel for the
Underwriters, shall be deemed a representation and warranty by the Companies or
The Money Store, respectively, to the Underwriters 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 Underwriters
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 Underwriters'
counsel (provided, however, that the Underwriters shall be responsible for such
portion of such fees and disbursements as may be agreed upon between the
Underwriters and the Money Store), (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 Companies 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 Underwriters, or by the
Underwriters, 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 Underwriters, without liability on
the part of the Underwriters 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 Underwriters, 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 Underwriters, (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
Underwriters 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
Underwriters 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 UNDERWRITERS. The statements set
forth under the heading "Underwriting" in the Prospectus constitute the only
information furnished by or on behalf of the Underwriters 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
Underwriters 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 , (iii) if to Salomon Brothers Inc, 7
World Trade Center, 33rd Floor, New York, NY 10048, and (iv) if to First Union
Capital Markets Corp., One First Union Center, Charlotte, North Carolina 28288.
This Agreement has been and is made solely for the benefit of the
Underwriters, 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
Underwriters of any of the Notes in his status as such purchaser.
12. DEFAULT BY ONE OF THE UNDERWRITERS. If any of the Underwriters
shall fail on the Closing Date to purchase the Offered Certificates which it is
obligated to purchase hereunder (the "Defaulted Certificates"), the remaining
Underwriters (the "Non-Defaulting Underwriters") shall have the right, but not
the obligation, within one (1) Business Day thereafter, to make arrangements to
purchase all, but not less than all, of the Defaulted Certificates upon the
terms herein set forth; if, however, the Non-Defaulting Underwriters shall have
not completed such arrangements within such one (1) Business Day period, then
this Agreement shall terminate without liability on the part of the
Non-Defaulting Underwriters.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a
termination of this Agreement, either the Non-Defaulting Underwriters or the
Company shall have the right to postpone the Closing Date for a period not
exceeding seven days in order to effect any required changes in the Registration
Statement or Prospectus or in any other documents or arrangements.
13. COMPUTATIONAL MATERIALS. (a) It is understood that any Underwriter
may prepare and provide to prospective investors certain Computational Materials
(as defined below) in connection with the Company's offering of the Offered
Certificates, subject to the following conditions:
(i) Each Underwriter shall comply with all applicable laws and
regulations in connection with the use of Computational Materials including
the No-Action Letter of May 20, 1994 issued by the Commission to Kidder,
Peabody Acceptance Corporation I, Kidder, Peabody & Co. Incorporated and
Kidder Structured Asset Corporation, as made applicable to other issuers
and underwriters by the Commission in response to the request of the Public
Securities Association dated May 24, 1994, and the No- Action Letter of
February 17, 1995 issued by the Commission to the Public Securities
Association (collectively, the "Kidder/PSA Letters").
(ii) As used herein, "Computational Materials" and the term "ABS
Term Sheets" shall have the meanings given such terms in the Kidder/PSA
Letters, but shall include only those Computational Materials that have
been prepared or delivered to prospective investors by or at the direction
of an Underwriter.
(iii) Each Underwriter shall provide the Company with
representative forms of all Computational Materials prior to their first
use, to the extent such forms have not previously been approved by the
Company for use by such Underwriter. Each Underwriter shall provide to the
Company, for filing on Form 8-K as provided in Section 11(b), copies of all
Computational Materials that are to be filed with the Commission pursuant
to the Kidder/PSA Letters. The Underwriters may provide copies of the
foregoing in a consolidated or aggregated form. All Computational Materials
described in this subsection (a)(iii) must be provided to the Company not
later than 10:00 a.m. New York time one business day before filing thereof
is required pursuant to the terms of this Agreement.
(iv) If an Underwriter does not provide any Computational
Materials to the Company pursuant to subsection (a)(iii) above, such
Underwriter shall be deemed to have represented, as of the Closing Date,
that it did not provide any prospective investors with any information in
written or electronic form in connection with the offering of the
Certificates that is required to be filed with the Commission in accordance
with the Kidder/PSA Letters.
(v) In the event of any delay in the delivery by any Underwriter
to the Company of all Computational Materials required to be delivered in
accordance with subsection (a)(iii) above, the Company shall have the right
to delay the release of the Prospectus to investors or to any Underwriter,
to delay the Closing Date and to take other appropriate actions in each
case as necessary in order to allow the Company to comply with its
agreement set forth in Section 11(b) to file the Computational Materials by
the time specified therein.
(vi) The Company shall file the Computational Materials (if any)
provided to it by each Underwriter under Section 11(a)(iii) with the
Commission pursuant to a Current Report on Form 8-K no later than 10:00
a.m. on the date required pursuant to the Kidder/PSA Letters.
14. 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.
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
among the Companies, the Trust, The Money Store and the Underwriters.
Very truly yours,
CLASSNOTES TRUST 1997-I
By: THE YORK BANK AND TRUST
COMPANY, as Eligible Lender
Trustee
By: /s/ Richard H. Bass
Name: Richard H. Bass
Title: Vice President
TRANS-WORLD INSURANCE COMPANY
By: /s/ Michael Benoff
Name: Michael Benoff
Title: Senior Vice President
CLASSNOTES, INC.
By: /s/ Michael Benoff
Name: Michael Benoff
Title: Senior Vice President
THE MONEY STORE INC.
By: /s/ Michael Benoff
Name: Michael Benoff
Title: Executive Vice President
Confirmed as of the date first above mentioned.
SALOMON BROTHERS INC
By:/s/ John A. Hupalo
Name: John A. Hupalo
Title: Director
FIRST UNION CAPITAL MARKETS CORP.
By:/s/ Joseph Parish
Name: Joseph Parish
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 December __, 1997
Issuer: ClassNotes Trust 1997-I
Series Designation: Series 1997-2
TERMS OF THE NOTES:
FINAL ORIGINAL
MATURITY PRINCIPAL INTEREST PRICE TO
CLASS DATE AMOUNT RATE UNDERWRITERS(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 Assurance Corporation.
INITIAL NOTE DISTRIBUTION DATES:
NOTE RATING: "AAA" by Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc. and "Aaa" by Moody's Investors
Service, Inc.
FORM OF NOTES: [Book entry] [definitive]
<PAGE>
CLOSING DATE: December __, 1997
Information Provided by the UNDERWRITERS in the
Prospectus Supplement: "Underwriting"
SALOMON BROTHERS INC
By:_____________________________
Name:
Title:
FIRST UNION CAPITAL MARKETS CORP.
By:_______________________________
Name:
Title:
TRANS-WORLD INSURANCE COMPANY
By:_____________________________
Name:
Title:
CLASSNOTES, INC.
By:_____________________________
Name:
Title:
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 1.2
EXECUTION COPY
TRANS-WORLD INSURANCE COMPANY
CLASSNOTES, INC.
LIBOR Rate Rate Asset Backed Notes
TERMS AGREEMENT
Dated: December 19, 1997
To: TRANS-WORLD INSURANCE COMPANY
CLASSNOTES, INC.
Re: Underwriting Agreement dated December 19, 1997
Issuer: ClassNotes Trust 1997-I
Series Designation: Series 1997-2
TERMS OF THE NOTES:
ORIGINAL
FINAL MATURITY PRINCIPAL INTEREST PRICE TO
CLASS DATE AMOUNT RATE UNDERWRITERS
- ----- -------------- --------- -------- ------------
A-4 January 1, 2004 $150,000,000 LIBOR plus 99.75%
0.17%
PRINCIPAL AMOUNTS TO BE PURCHASED BY EACH UNDERWRITER:
Salomon Brothers Inc $99,000,000
First Union Capital Markets Corp. $51,000,000
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 Assurance Corporation.
INITIAL NOTE
DISTRIBUTION January 15, 1998
DATES:
NOTE RATING: "AAA" by Standard & Poor's Ratings Services, a division
of The McGraw-Hill Companies, Inc. and "Aaa" by Moody's
Investors Service, Inc.
FORM OF NOTES: Book entry
CLOSING DATE: December 24, 1997
Information Provided by the Underwriters in the Prospectus Supplement: The
statements set forth under the heading "Underwriting".
<PAGE>
Additional Terms, if any, Not in Master Indenture:
SALOMON BROTHERS INC
By:/s/ John Hupalo
Name: John Hupalo
Title: Director
FIRST UNION CAPITAL MARKETS CORP.
By:/s/ Joseph Parish
Name: Joseph Parish
Title:
TRANS-WORLD INSURANCE COMPANY
By:/s/ Michael Benoff
Name: Michael Benoff
Title: Senior Vice President
CLASSNOTES, INC.
By:/s/ Michael Benoff
Name: Michael Benoff
Title: Senior Vice President
CLASSNOTES TRUST 1997-I
By: The York Bank and Trust
Company, as Eligible Lender Trustee
By:/s/ Richard Bass
Name: Richard Bass
Title: Vice President
THE MONEY STORE INC.
By:/s/ Michael Benoff
Name: Michael Benoff
Title: Executive Vice President
Exhibit 1.3
EXECUTION COPY
CLASSNOTES TRUST 1997-I
$115,000,000 AUCTION RATE ASSET BACKED NOTES
SERIES 1997-2
UNDERWRITING AGREEMENT
December 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., a Delaware Corporation ("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, $115,000,000 Asset Backed Notes, Series 1997-2, Class
A-5 and Asset Backed Notes, Series 1997-2 Class A-6 (the "Notes"). It is
understood that the Companies are entering into an underwriting agreement dated
the date hereof (the "LIBOR Rate Underwriting Agreement") among the Companies,
the Trust, Salomon Brothers Inc and First Union Mortgage Capital Corp. providing
for the sale of the Trusts $150,000,000 Asset Backed Notes, Series 1997-2, Class
A-4 (the "Class A-4 Notes"). This Agreement and the LIBOR Rate Underwriting
Agreement are referred to herein collectively as, the "Underwriting Agreements.
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 Second Terms Supplement (the "Second 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 December 24, 1997, among Ambac Assurance
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 First Supplemental
Sale and Servicing Agreement dated as of December 24, 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
December 24, 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 Second Terms Supplement relating to
the Notes to be sold on the Closing Date (the " Second 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 any
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 such 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 Assurance 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 Ratings Services, a division of The
McGraw-Hill Companies, Inc. ("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.
(p) 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.
(q) 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.
(r) Simultaneously with or prior to the Closing Date, $115,000,000
aggregate initial principal amount of Class A-4 Notes have been sold to Soloman
Brothers Inc. and First Union Capital Markets Corp.
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 such
portion of such fees and disbursements as may be agreed upon between the
Underwriters and The Money Store), (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 Companies 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.
<PAGE>
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: /s/ Richard Bass
Name: Richard Bass
Title: Vice President
TRANS-WORLD INSURANCE COMPANY
By: /s/ Michael Benoff
Name: Michael Benoff
Title: Senior Vice President
CLASSNOTES, INC.
By: /s/ Michael Benoff
Name: Michael Benoff
Title: Senior Vice President
THE MONEY STORE INC.
By: /s/ Michael Benoff
Name: Michael Benoff
Title: Executive Vice President
Confirmed as of the date first above mentioned.
SMITH BARNEY INC.
By /s/ John Hupalo
Name: John Hupalo
Title: Director
<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 December __, 1997
Issuer: ClassNotes Trust 1997-I
Series Designation: Series 1997-2
TERMS OF THE NOTES:
FINAL MATURITY PRINCIPAL INTEREST PRICE TO
CLASS DATE AMOUNT RATE UNDERWRITERS
- ----- -------------- --------- -------- ------------
- ---------
COLLATERAL: The Student Loans to be included in the Collateral are as
described in Schedule A to the First 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
TYPE OF INTEREST RATE: Auction Rate
<PAGE>
CLOSING DATE: December 24, 1997
Information Provided by the Underwriters in the
Prospectus Supplement: "Underwriting"
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 1.4
EXECUTION COPY
TRANS-WORLD INSURANCE COMPANY
CLASSNOTES, INC.
Auction Rate Asset Backed Notes
TERMS AGREEMENT
Dated: December 19, 1997
To: TRANS-WORLD INSURANCE COMPANY
CLASSNOTES, INC.
Re: Underwriting Agreement dated December 19, 1997
Issuer: ClassNotes Trust 1997-I
Series Designation: Series 1997-2
TERMS OF THE NOTES:
ORIGINAL
FINAL MATURITY PRINCIPAL INTEREST PRICE TO
CLASS DATE AMOUNT RATE UNDERWRITERS
- ----- -------------- --------- -------- ------------
A-5 April 1, 2019 $57,500,000 5.96% 99.75%
A-6 April 1, 2020 $57,500,000 5.96% 99.75%
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 Assurance Corporation.
INITIAL NOTE
DISTRIBUTION
DATES: January 14, 1998 for the Class A-5 Notes
January 21, 1998 for the Class A-6 Notes
NOTE RATING: "AAA" by Standard and Poor's Ratings Services, a
Division of The McGraw-Hill Companies, Inc. and "Aaa" by
Moody's Investors Service, Inc.
FORM OF NOTES: Book entry
<PAGE>
CLOSING DATE: December 24, 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:/s/ John Hupalo
Name: John Hupalo
Title: Director
TRANS-WORLD INSURANCE COMPANY
By:/s/ Michael Benoff
Name: Michael Benoff
Title: Senior Vice President
CLASSNOTES, INC.
By:/s/ Michael Benoff
Name: Michael Benoff
Title: Senior Vice President
CLASSNOTES TRUST 1997-I
By: The York Bank and Trust
Company, as Eligible Lender Trustee
By:/s/ Richard Bass
Name: Richard Bass
Title: Vice President
THE MONEY STORE INC.
By:/s/ Michael Benoff
Name: Michael Benoff
Title: Executive Vice President
Exhibit 4.1
EXECUTION COPY
SECOND 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 December 24, 1997
Securing
$265,000,000
ASSET-BACKED NOTES
SERIES 1997-2
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I.
DEFINITIONS
ARTICLE II
AUTHORIZATION, TERMS AND ISSUANCE
Section 2.1. Authorization of Series 1997-2 Notes................14
Section 2.2. Purposes............................................15
Section 2.3. Terms of Series 1997-2 Notes Generally..............15
Section 2.4. Series 1997-2 Notes.................................16
Section 2.5. Class Interest Rate.................................21
Section 2.6. Additional Provisions Regarding the Class Interest
Rates on the Series 1997-2 Notes....................40
Section 2.7. Qualifications of Market Agent......................41
ARTICLE III
DISTRIBUTIONS
Section 3.1. Distributions of Interest and Principal.............42
Section 3.2. Selection of Notes to Receive Payments of
Principal...........................................42
ARTICLE IV
MISCELLANEOUS
Section 4.1. Issuer for This Second Terms Supplement.............43
Section 4.2. Counterparts........................................43
Section 4.3. Indenture Constitutes a Security Agreement..........43
Section 4.4. Governing Law.......................................44
Section 4.5. Ratification of Master Indenture....................44
EXHIBIT A-1 Form of LIBOR Notes
EXHIBIT A-2 Form of Series 1997-2 Auction Rate 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>
SECOND TERMS SUPPLEMENT, dated as of December 24, 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 $265,000,000 to be known as the
Issuer's Asset Backed Notes, Series 1997-2 (the "Series 1997-2 Notes"), and the
Issuer and the Indenture Trustee are executing and delivering this Second Terms
Supplement in order to provide for the Series 1997-2 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 First Supplemental Sale and
Servicing Agreement dated as of December 24, 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 1997-2 Notes and the other parties entitled
to the benefits of the lien of the Indenture, 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-1 and Schedule A-2 to
the Sale and Servicing Agreement (as such Schedules 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 each Seller
with respect thereto (including borrower correspondence, notices of death,
disability or bankruptcy and requests for deferrals or forbearance), on and
after December 15, 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 1997-2 Notes. Such Grants are made, however, in trust, to
secure the Series 1997-2 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
1997-2 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
Second Terms Supplement with respect to the Series 1997-2 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 Second Terms
Supplement with respect to the Series 1997-2 Notes, any Series of Notes issued
previously and any Series of Notes issued hereafter, all as provided in the
Master Indenture and this Second 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 1997-2 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.
<PAGE>
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-5 Notes,
January 13, 1998 and with respect to the Class A-6 Notes, January 20, 1998; 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 1997-2 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 1997-2
Auction Rate 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) for
each Class of Series 1997-2 Auction Rate Notes initially shall consist generally
of 28 days, 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 (i) the Class A-4
Notes, $50,000 and integral multiples of $1,000 in excess thereof and (ii) the
Class A-5 and Class A-6 Notes, $50,000 and integral multiples of $50,000 in
excess thereof.
"AVAILABLE SERIES 1997-2 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 December 24, 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-4 NOTES," "CLASS A-5 NOTES," and "CLASS A-6 NOTES" have the
meanings set forth in Section 2.1 herein.
"CLASS INITIAL PERIOD" means, as to a Class of the Series 1997-2
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 % per annum for the Class A-4 Notes, 5.96%
per annum for the Class A-5 Notes, 5.96% per annum for the Class A-6 Notes.
"CLASS INITIAL RATE ADJUSTMENT DATE" means (i) with respect to the
Class A-4 Notes, January 15, 1998, (ii) with respect to the Class A-5 Notes,
January 14, 1998, (iii) with respect to the Class A-6 Notes, January 21, 1998.
"CLASS INTEREST PERIOD" means, with respect to a Class of Series
1997-2 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 1997-2 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 (1) the Class
A-4 Notes, a rate equal to 18.0% per annum and (ii) the Class A-5 and Class A-6
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 (i) with respect to the Series 1997-2 Auction Rate
Notes, the date of commencement of each related Auction Period and (ii) with
respect to the Series 1997-2 LIBOR Rate Notes, the 15th day of each calendar
month.
"CLASS RATE DETERMINATION DATE" means, (i) with respect to any Class
of Series 1997-2 Auction Rate Notes, the related Auction Date, or if no Auction
Date is applicable to such Series 1997-2 Auction Rate Notes, the Business Day
immediately preceding the date of commencement of the related Auction Period and
(ii) with respect to any Class of Series 1997-2 LIBOR Rate Notes, the LIBOR
Determination Date immediately preceding the date of commencement of an Interest
Period for the Series 1997-2 LIBOR Rate Notes.
"CLOSING DATE" means with respect to the Series 1997-2 Notes, December
24, 1997, the date of initial issuance and delivery of the Series 1997-2 Notes
hereunder.
"CUT-OFF DATE" means, with respect to the Series 1997-2 Notes,
December 15, 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 1997-2 Notes, (i)
a default in the due and punctual payment of any installment of interest or
principal on any Class of Series 1997-2 Notes, or (ii) a default in the due and
punctual payment of any interest on and principal of any Class of Series 1997-2
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
1997-2 Auction Date Notes.
"EXISTING NOTEHOLDER REGISTRY" means the registry of Persons who are
owners of the Series 1997-2 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 January 1, 2004, with respect to the Class
A-4 Notes April 1, 2019 with respect to the Class A-5 Notes; and April 1, 2020,
with respect to the Class A-6 Notes.
"FUNDING PERIOD" means, with respect to the Series 1997-2 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 March 24,
1998 or such later date as may be agreed to by the Surety Provider.
"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 December 24, 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 1997-2
Notes, the respective Class Interest Period.
"INTEREST RATE" means, with respect to a Class of the Series 1997-2
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 BUSINESS DAY" means a day which is both a Business Day and a
London Banking Day.
"LIBOR DETERMINATION DATE" means, with respect to a Class of the
Series 1997-2 Notes, the second LIBOR Business Day prior to the commencement of
each related Interest Period.
"LIBOR RATE" means, with respect to the Series 1997-2 LIBOR Rate Notes
and any date of determination, the then applicable One-Month LIBOR plus the
applicable Margin.
"LONDON BANKING DAY" means any Business Day on which dealings in
deposits in United States dollars are transacted in the London interbank market.
"MARGIN" means, with respect to the Series 1997-2 LIBOR Rate Notes,
0.17% per annum.
"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 1997-2 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 1997-2 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 1997-2 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 1997-2 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 1997-2 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
1997-2 Notes to which the Net Loan Rate applies.
"NON-PAYMENT RATE" means, with respect to the Series 1997-2 Auction
Rate Notes, One-Month LIBOR plus 1.50%.
"NOTEHOLDERS' INTEREST CARRYOVER" means, as to any Class of Series
1997-2 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 One-Month LIBOR or the Auction Rate, as the
case may be, 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 1997-2 Notes, on the related Final Maturity Date, the
portion of the Noteholders' 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' 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.
"NOTE DISTRIBUTION DATE" means, (x) with respect to the Series 1997-2
LIBOR Rate Notes, the 15th day of each month (or, if such day is not a Business
Day, the next succeeding Business Day), commencing January 1998 and (y) with
respect to each Class of Series 1997-2 Auction Rate 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- 2 Auction Rate Notes,
commencing (i) January 14, 1998 with respect to the Class A-5 Notes and (ii)
January 21, 1998 with respect to the Class A-6 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 1997-2 Notes ending in each
month.
"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 1997-2 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 1997-2
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.
"PERCENTAGE INTEREST" means, with respect to a Class of Series 1997-2
LIBOR Rate Notes, the portion of such Class held by a Note Owner, expressed as a
percentage, the numerator of which is the original denomination represented by
such Note and the denominator of which is the original aggregate principal
amount of such Class of Series 1997-2 LIBOR Rate Notes as set forth in Section
2.1 hereof.
"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 1997-2 Auction Rate Notes (or, in the case of an
Existing Noteholder thereof, an additional principal amount of Series 1997-2
Auction Rate Notes).
"PREMIUM" means, (i) with respect to any Initial Financed Student Loan
conveyed on the Closing Date relating to the Issuer's Series 1997-2 Notes, an
amount equal to 106.25% of the par amount of such Initial Financed Student Loan
as of the Initial Cut-off Date and (ii) with respect to any Additional Financed
Student Loan conveyed during the Funding Period relating to the Series 1997-2
Notes, an amount equal to 100% of the par amount of such Financed Student Loan
as of the related Subsequent Cut-off Date, as the case may be.
"RECORD DATE" means, with respect to a Class of the Series 1997-2
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
1997-2 Auction Rate Notes, as originally executed and as from time to time
amended or supplemented in accordance with the terms thereof.
"SECOND TERMS SUPPLEMENT" means this second terms supplement, as from
time to time amended or supplemented.
"SELL ORDER" has the meaning set forth in Section 2.5.1(a)(i) hereof.
"SERIES 1997-2 AUCTION RATE NOTES" means the Class A-5 Notes and the
Class A-6 Notes.
"SERIES 1997-2 LIBOR RATE NOTES" means the Class A-4 Notes.
"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 Second Terms Supplement agrees with the Indenture Trustee and the Issuer
to perform the duties of the Auction Agent under this Second 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 1997-2 NOTES. There is hereby
authorized the borrowing of funds, and to evidence such borrowing there are
hereby authorized three Classes of Series 1997-2 Notes (collectively, the
"Series 1997-2 Notes"), designated (i) the "ClassNotes Trust 1997-I Asset-Backed
Notes, Series 1997-2, Class A-4" (the "Class A-4 Notes") in the aggregate
principal amount of $150,000,000, (ii) the "ClassNotes Trust 1997-I Asset-Backed
Notes, Series 1997-2, Class A-5" (the "Class A-5 Notes") in the aggregate
principal amount of $57,500,000 and (iii) the "ClassNotes Trust 1997-I
Asset-Backed Notes, Series 1997-2, Class A-6" (the "Class A-6 Notes") in the
aggregate principal amount of $57,500,000.
SECTION 2.2. PURPOSES. The Series 1997-2 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 1997-2 NOTES GENERALLY. The Series 1997-2
Notes shall be issued in fully registered form, in substantially the form set
forth in Exhibit A-1, in the case of the Series 1997-2 LIBOR Rate Notes, and
Exhibit A-2, in the case of the Series 1997-2 Auction Rate Notes, 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
Second Terms Supplement, or be consistent with the Master Indenture and this
Second 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 1997-2 Notes may be issued only in Authorized
Denominations. The Series 1997-2 Notes shall be dated as of the Closing Date.
Each Class of Notes shall mature on its Final Maturity Date. Each Class of
Series 1997-2 Notes shall be numbered consecutively from 1 upwards with the
prefix A-[Class Designation]- preceding each number. The Series 1997-2 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 1997-2 Note shall accrue on the Outstanding
Amount of such Series 1997-2 Note until such Series 1997-2 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 1997-2
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 1997-2 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 1997-2
Notes with the earliest Final Maturity Date on the first Note Distribution Date
for such Class occurring in each month 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 previously or hereafter has an
earlier Final Maturity Date than any Class of Series 1997-2 Notes, principal
will be paid to each such Class of previously or subsequently issued Notes with
an earlier Final Maturity Date prior to the Class or Classes of Series 1997-2
Notes with a later Final Maturity Date.
SECTION 2.4. SERIES 1997-2 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 1997-2
Notes shall bear interest at the Class Initial Rate for such Class. Thereafter,
(i) the Class A-4 Notes shall bear interest during the applicable Interest
Period at a Class Interest Rate equal to the lesser of (x) the Net Loan Rate and
(y) One-Month LIBOR plus the applicable Margin, and (ii) except with respect to
an Auction Period Adjustment, the Class A-5 and Class A-6 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 Series 1997-2, 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 1997-2
Auction Rate 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 the second Business Day of the fourth following week,
subject to adjustment as described below. The Class Interest Rate on each Class
of Series 1997-2 Auction Rate 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- 2 Auction Rate Notes, an Auction is not held for any
reason, then the Class Interest Rate on such Class of Series 1997-2 Auction Rate
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 1997-2 Auction Rate Notes is
no longer maintained in Book-Entry Form, the Class Interest Rate on such Class
of Series 1997-2 Auction Rate 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 1997-2 Auction Rate 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
Second 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 1997-2 Auction Rate 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 1997-2 Auction Rate 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 1997-2 Auction Rate Notes shall be the next succeeding Business
Day.
Notwithstanding any other provision of the Series 1997-2 Notes or
this Second Terms Supplement and except for the occurrence of an Event of
Default, interest payable on each Class of Series 1997-2 Auction Rate 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 1997-2 Auction Rate Notes or the
LIBOR Rate for a Class of LIBOR Rate Notes is greater than the Net Loan
Rate, then the Class Interest Rate applicable to such Class of Series
1997-2 Notes for that Class Interest Period will be the Net Loan Rate. If
the Class Interest Rate applicable to such Class of Series 1997-2 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 1997-2 Notes for such Class Interest Period. Such
determination of the Noteholders' Interest Carryover shall be made
separately for each Class of Series 1997-2 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 Second 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 1997-2 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
1997-2 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 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 1997-2 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 1997-2 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 1997-2 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 1997-2 Notes and (2) moneys are available
pursuant to the terms of this Second 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 1997-2 Notes
shall be paid by the Indenture Trustee on Outstanding Series 1997-2 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 1997-2 Notes
and (ii) moneys are available pursuant to the terms of this Second 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 1997-2 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 Second 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 1997-2 Note on said Final Maturity Date.
To the extent that any portion of the Noteholders' Interest Carryover for a
Class of Series 1997-2 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 1997-2 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 1997-2 Note
receiving such partial payment of the Noteholders' Interest Carryover remaining
unpaid on such Series 1997-2 Note.
The Note Distribution Date in such subsequent Class Interest Period on
which such Noteholders' Interest Carryover for a Class of Series 1997-2 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 1997-2
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 1997-2 Auction Rate 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 1997-2 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
Interest Period.
SECTION 2.5. CLASS INTEREST RATE.
SECTION 2.5.1. DETERMINING THE CLASS INTEREST RATE FOR SERIES 1997-2
AUCTION RATE NOTES.
By purchasing Series 1997-2 Auction Rate Notes, whether in an Auction
or otherwise, each purchaser of the Series 1997-2 Auction Rate 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 1997-2 Auction Rate 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 1997-2 Auction Rate
Notes is maintained in Book-Entry Form, an Existing Noteholder may sell,
transfer or otherwise dispose of Series 1997-2 Auction Rate Notes only pursuant
to a Bid or Sell Order placed in an Auction or otherwise sell, transfer or
dispose of Series 1997-2 Auction Rate 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 1997-2 Auction Rate Notes:
(A) each Existing Noteholder of the applicable Class of
Series 1997-2 Auction Rate Notes may submit to a Broker-Dealer by telephone or
otherwise any information as to:
(1) the principal amount of Outstanding Series 1997-2
Auction Rate 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 1997-2
Auction Rate 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 1997-2
Auction Rate 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 1997-2 Auction
Rate 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
1997-2 Auction Rate 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 1997-2 Auction Rate 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 1997-2 Auction Rate 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
1997-2 Auction Rate Notes specified in such Sell Order; or
(2) such principal amount, or a lesser principal
amount of Outstanding Series 1997-2 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
1997-2 Auction Rate 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 1997-2 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
1997-2 Auction Rate 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
1997-2 Auction Rate Notes, if any, subject to any Hold Order
placed by such Existing Noteholder;
(2) the principal amount and Class of Series
1997-2 Auction Rate 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
1997-2 Auction Rate 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
1997-2 Auction Rate 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 1997-2 Auction Rate 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
1997-2 Auction Rate 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 1997-2
Auction Rate Notes owned by such Existing Noteholder, and if the aggregate
principal amount of the Class of Series 1997-2 Auction Rate Notes subject
to such Hold Orders exceeds the aggregate principal amount of the Class of
Series 1997-2 Auction Rate Notes owned by such Existing Noteholder, the
aggregate principal amount of the Class of Series 1997-2 Auction Rate Notes
subject to each such Hold Order shall be reduced pro rata so that the
aggregate principal amount of the Class of Series 1997-2 Auction Rate Notes
subject to such Hold Order equals the aggregate principal amount of the
Class of Outstanding Series 1997-2 Auction Rate 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 1997-2 Auction Rate Notes owned by such
Existing Noteholder over the aggregate principal amount of
the Class of Series 1997-2 Auction Rate 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 1997-2 Auction
Rate 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 1997-2 Auction Rate 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 1997-2 Auction Rate Notes owned by such Existing
Noteholder over the aggregate principal amount of the Class of Series
1997-2 Auction Rate 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 1997-2
Auction Rate 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
1997-2 Auction Rate Notes that offers to purchase additional Series
1997-2 Auction Rate 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
1997-2 Auction Rate 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 1997-2 Auction Rate 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 1997-2 Auction Rate Notes:
(A) the excess of the total principal amount of Outstanding
Series 1997-2 Auction Rate Notes of such Class over the sum of the
aggregate principal amount of Outstanding Series 1997-2 Auction Rate Notes
of such Class subject to Submitted Hold Orders (such excess being herein
referred to as the "Available Series 1997-2 Auction Rate Notes" of such
Class), and
(B) from the Submitted Orders whether:
(1) the aggregate principal amount of Outstanding
Series 1997-2 Auction Rate 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 1997-2 Auction Rate 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 1997-2 Auction Rate 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 1997-2 Auction Rate 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 1997-2
Auction Rate 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 1997-2 Auction Rate Notes of the applicable Class which,
when added to the aggregate principal amount of Outstanding Series 1997-2
Auction Rate Notes of such Class to be purchased by such Potential
Noteholders described in subclause (2) above, would equal not less than the
Available Series 1997-2 Auction Rate 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 1997-2
Auction Rate 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 1997-2 Auction Rate 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 1997-2 Auction Rate 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 1997-2 Auction Rate 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 1997-2 Auction Rate 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 1997-2 Auction Rate 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 1997-2 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 1997-2 Auction Rate Notes subject to such
Submitted Bid, unless the aggregate principal amount of Outstanding Series
1997-2 Auction Rate Notes subject to all such Submitted Bids shall be
greater than the principal amount of Series 1997-2 Auction Rate Notes of
the applicable Class (the "remaining principal amount") equal to the excess
of the Available Series 1997-2 Auction Rate Notes of such Class over the
aggregate principal amount of Series 1997-2 Auction Rate 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
1997-2 Auction Rate Notes subject to such Submitted Bid, but only in an
amount equal to the aggregate principal amount of Series 1997-2 Auction
Rate 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 1997-2 Auction Rate 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 1997-2
Auction Rate 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
1997-2 Auction Rate Notes of the applicable Class obtained by multiplying
the excess of the aggregate principal amount of Available Series 1997-2
Auction Rate Notes of such Class over the aggregate principal amount of
Series 1997-2 Auction Rate 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 1997-2 Auction Rate 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 1997-2 Auction Rate 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 1997-2 Auction Rate 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 1997-2 Auction Rate 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 1997-2 Auction Rate 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 1997-2 Auction Rate Notes
of the applicable Class obtained by multiplying the aggregate principal
amount of Series 1997-2 Auction Rate 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 1997-2 Auction Rate 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 1997-2 Auction Rate Notes of such Class subject to all such
Submitted Bids and Submitted Sell Orders.
(iii) If all Outstanding Series 1997-2 Auction Rate
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 1997-2
Auction Rate 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 1997-2 Auction Rate Notes to be purchased or sold by any Existing
Noteholder or Potential Noteholder so that the principal amount of Series
1997-2 Auction Rate 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 1997-2 Auction Rate Notes of the applicable Class, the Auction Agent
shall, in such manner as in its sole discretion it shall determine,
allocate Series 1997-2 Auction Rate Notes of such Class for purchase among
Potential Noteholders so that only Series 1997-2 Auction Rate 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 1997-2 Auction Rate Notes of such Class.
(e) Based on the result of each Auction, the Auction Agent shall
determine the aggregate principal amount of Series 1997-2 Auction Rate Notes of
the applicable Class to be purchased and the aggregate principal amount of
Series 1997-2 Auction Rate 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 1997-2 Auction Rate Notes
of the applicable Class to be sold differs from such aggregate principal amount
of Series 1997-2 Auction Rate 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 1997-2 Auction Rate Notes of the applicable
Class.
(f) On each Class Rate Determination Date relating to the Series
1997-2 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 1997-2 Auction Rate
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
1997-2 Auction Rate 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 1997-2 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 1997-2
Auction Rate Notes, and in any event at least 10 days prior to any Note
Distribution Date relating to a Class of Series 1997-2 Auction Rate 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 1997-2
Auction Rate 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 1997-2 Auction Rate 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 1997-2 Auction Rate 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 Second 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 1997-2 Auction Rate 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.
(c) The Auction Agent is acting as agent for the Issuer in
connection with Auctions. In the absence of bad faith or negligence on its part,
the Auction Agent shall not be liable for any action taken, suffered or omitted
in good faith or for any error of judgment made by it in the performance of its
duties under the Auction Agent Agreement. The Auction Agent shall not be liable
for any error of judgment made in good faith unless the Auction Agent shall have
been negligent in ascertaining the pertinent facts.
(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 1997-2 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 1997-2 Auction Rate
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 Second 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 28
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 Second 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
Second 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 1997-2 Auction Rate 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 1997-2 Auction Rate 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 Second 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 1997-2 Auction Rate 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
1997-2 Auction Rate Notes shall occur in the months of January, April, July and
October, commencing January 1998. 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 Second 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 1997-2 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 1997-2 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 1997-2 Notes (including interest calculated as
provided herein, plus any other amounts that constitute interest on the Series
1997-2 Notes of such Class under applicable law, which are contracted for,
charged, reserved, taken or received pursuant to the Series 1997- 2 Notes of
such Class or related documents) calculated from the date of issuance of the
Series 1997-2 Notes of such Class through any subsequent day during the term of
the Series 1997-2 Notes of such Class or otherwise prior to payment in full of
the Series 1997-2 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 1997-2 Notes of such Class or
related documents or otherwise contracted for, charged, reserved, taken or
received in connection with the Series 1997-2 Notes of such Class, or if the
acceleration of the maturity of the Series 1997-2 Notes of such Class results in
payment to or receipt by the Noteholder or any former Noteholder of the Series
1997-2 Notes of such Class of any interest in excess of that permitted by
applicable law, then, notwithstanding any provision of the Series 1997-2 Notes
of such Class or related documents to the contrary, all excess amounts
theretofore paid or received with respect to the Series 1997-2 Notes of such
Class shall be credited on the principal balance of the Series 1997-2 Notes of
such Class (or, if the Series 1997-2 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 1997-2 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- 2 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 Second Terms Supplement. The Market Agent may
resign and be discharged of the duties and obligations created by this Second
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 Second
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 Series 1997-2 Auction Rate 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 1997-2 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 of $50,000 in excess thereof.
With respect to each Class of Series 1997-2 LIBOR Rate Notes
entitled to receive payments of principal on a Note Distribution Date, the
Noteholders' Principal Distribution Amount being distributed to such Class shall
be distributed on a pro rata basis among the Note Owners of such Class as of the
related Record Date based on the Percentage Interest represented by their
respective Series 1997-2 LIBOR Rate Notes.
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 Auction Rate 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 SECOND TERMS SUPPLEMENT. This Second
Terms Supplement is adopted pursuant to the provisions of the Master Indenture.
SECTION 4.2. COUNTERPARTS. This Second 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
Second Terms Supplement constitutes a security agreement for the purposes of the
Uniform Commercial Code.
SECTION 4.4. GOVERNING LAW. This Second 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 Second 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 Second 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 1997-2 Notes, and shall have no
effect on any other Series of Notes issued pursuant to the Master Indenture. If
any term of this Second Terms Supplement conflicts with any term of the Master
Indenture or any previously executed Terms Supplement, this Second Terms
Supplement shall control for purposes of the Series 1997-2 Notes.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Second
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: /s/ Richard Bass
Name: Richard Bass
Title: Vice President
BANKERS TRUST COMPANY, not in its
individual capacity but solely as
Indenture Trustee,
By: /s/ Alfia Monastra
Name: Alfia Monastra
Title: Assistant Vice President
<PAGE>
EXHIBIT A-1
[FORM OF SERIES 1997-2 NOTES]
CLASSNOTES TRUST 1997-I
LIBOR RATE ASSET BACKED NOTES
SERIES 1997-2
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
----- ------- ----- -------- ------
A-4 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 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 1997-2 Note, capitalized terms used in this Series 1997-2 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 Second Terms
Supplement dated as of December 24, 1997 (the "Second Terms Supplement" and,
together with the Master Indenture, the "Indenture"), between the Issuer and
Bankers Trust Company, as Indenture Trustee.
This Series 1997-2 Note is one of a duly authorized issue of notes of
the Issuer designated as "ClassNotes Trust 1997-I Asset-Backed Notes, Series
1997-2" (herein referred to by specific Class as the "Series 1997-2, Class A-4
Notes" and collectively as the "Series 1997-2 Notes"), in the aggregate
principal amount of $_________ issued under the Indenture. The Series 1997-2
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 1997-2 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 1997-2 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 1997-2 Note, the registered owner
hereof assents to all of the provisions of the Indenture.
During the Class Initial Period, this Series 1997-2 Note shall bear
interest at the Class Initial Rate for the Series 1997-2 Notes of this Class.
Thereafter, this Series 1997-2 Note shall bear interest at the Class Interest
Rate equal to (i) the lesser of the Net Loan Rate and (ii) One-Month LIBOR plus
the Margin set forth in the Second Terms Supplement, subject to the limitations
set forth therein. Interest at a Class Interest Rate established pursuant to the
Second Terms Supplement shall be computed for the actual number of days elapsed
on the basis of a year consisting of 360 days.
In no event shall the Class Interest Rate on this Series 1997-2 Note
exceed the maximum rate set forth in the Second Terms Supplement.
Distributions of principal and interest on this Series 1997-2 Note
shall be made on each month in accordance with the terms of the Second Terms
Supplement and the First Supplemental Sale and Servicing Agreement.
The Noteholder of this Series 1997-2 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 1997-2 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 1997-2 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 1997-2 Note a new Series 1997-2 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 1997-2 Note and bearing the same
interest as this Series 1997-2 Note.
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 1997-2 Note have happened, do exist and have been performed in due
time, form and manner as required by law.
This Series 1997-2 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.
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this Series 1997-2 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 1997-2 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 1997-2 LIBOR RATE NOTE]
<PAGE>
EXHIBIT A-2
[FORM OF SERIES 1997-2 NOTES]
CLASSNOTES TRUST 1997-I
AUCTION RATE ASSET BACKED NOTES
SERIES 1997-2
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
provided in the
Second Terms
Supplement
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 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 1997-2 Note, capitalized terms used in this Series 1997-2 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 Second Terms
Supplement dated as of December 24, 1997 (the "Second Terms Supplement" and,
together with the Master Indenture, the "Indenture"), between the Issuer and
Bankers Trust Company, as Indenture Trustee.
This Series 1997-2 Note is one of a duly authorized issue of notes of
the Issuer designated as "ClassNotes Trust 1997-I Asset-Backed Notes, Series
1997-2" (herein referred to by specific Class as the "Series 1997-2, Class A-_
Notes" and collectively as the "Series 1997-2 Notes"), in the aggregate
principal amount of $ issued under the Indenture. The Series 1997-2 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 1997-2 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 1997-2 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 1997-2 Note, the registered owner
hereof assents to all of the provisions of the Indenture.
During the Class Initial Period, this Series 1997-2 Note shall bear
interest at the Class Initial Rate for the Series 1997-2 Notes of this Class.
Thereafter until an Auction Period Adjustment, if any, this Series 1997-2 Note
shall bear interest at a Class Interest Rate based on an Auction Period that
shall, until adjusted pursuant to the Second Terms Supplement, generally consist
of 28 days, all as determined in the Second Terms Supplement. Interest at a
Class Interest Rate established pursuant to the Second Terms Supplement 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 this Series 1997-2 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 Second Terms Supplement.
In no event shall the Class Interest Rate on this Series 1997-2 Note
exceed the maximum rate set forth in the Second Terms Supplement.
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 1997-2 Notes and the
Auction Procedures related thereto, including, without limitation, required
notices thereof to the Noteholders or Existing Noteholders of the Series 1997-2
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 Second 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.
Distributions of principal and interest on this Series 1997-2 Note
shall be made in accordance with the terms of the Second Term Supplement and the
First Supplemental Sale and Servicing Agreement.
The Noteholder of this Series 1997-2 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 1997-2 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 1997-2 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 1997-2 Note a new Auction Rate 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 1997-2 Note and bearing the same
interest as this Series 1997-2 Note.
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 1997-2 Note have happened, do exist and have been performed in due
time, form and manner as required by law.
This Series 1997-2 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.
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this Series 1997-2 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 1997-2 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 1997-2 AUCTION RATE NOTE]
<PAGE>
EXHIBIT B
CLASSNOTES TRUST 1997-I
ASSET BACKED NOTES, SERIES 1997-2, 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 1997-2, Class A-_ Notes will not be held. The Auction Rate for the Series
1997-2, 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 1997-2, 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 1997-2, 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 Second 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 Second 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 Second 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 1997-2, 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 Second 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 Second
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 Second 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 Second 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 1997-2, 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 Second Terms Supplement.
4. Terms not defined in this Notice shall have the meanings set forth
in the Second Terms Supplement relating to the captioned Notes.
SMITH BARNEY INC., as Market Agent
Dated: By:
Name:
Title:
Exhibit 4.2
EXECUTION COPY
SECOND TRUST SUPPLEMENT
SECOND TRUST SUPPLEMENT, dated as of December 23, 1997, by and among
TRANS-WORLD INSURANCE COMPANY d/b/a EDUCAID, an Arizona insurance company
("TWIC" or a "Depositor"), CLASSNOTES, INC., a Delaware corporation
("ClassNotes" or a "Depositor"), 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") under a Trust
Agreement dated as of March 21, 1997 (as amended and supplemented from time to
time, the "Trust Agreement") relating to ClassNotes Trust 1997-I, a Pennsylvania
business trust (the "Trust").
PRELIMINARY STATEMENT
Section 11.1(d) of the Trust Agreement provides, among other things,
that 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 may enter into a Trust Supplement to
set forth the terms of an additional Class of Trust Certificates. The Trust has
duly authorized the creation of a series of Trust Certificates to be known as
the Trust's Class 2 Certificates (the "Class 2 Certificates"), the Depositors
have delivered the required notice to the Rating Agencies and the Depositors and
the Eligible Lender Trustee are executing and delivering this Second Trust
Supplement in order to provide for the Class 2 Certificates. The Class 2
Certificates shall be Auction Date Certificates (as defined in Appendix A to the
Trust Agreement). Appendix A to the Trust Agreement contains general Definitions
and usage and provides that certain definitions that are to apply to a specific
Class of Certificates be set forth in the related Trust Supplement. Appendix B
to the Trust Agreement contains general Certificate Auction Procedures that
apply to all Classes of Auction Date Certificates and provides that certain
definitions that are to apply to a specific Class of Auction Date Certificate be
set forth in the related Trust supplement. Therefore, this Second Trust
Supplement is setting forth certain definitions and Certificate Auction
Procedures for the Class 2 Certificates. Except as otherwise specified herein,
or as the context may require, capitalized terms used but not defined herein are
defined in Appendix A or Appendix B to the Trust Agreement, which Appendix A
also contains rules as to usage that shall be applicable herein.
ARTICLE I.
DEFINITIONS
"AUCTION DATE" means, initially, January 13, 1998 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 Appendix B to the Trust Agreement.
"AUTHORIZED DENOMINATIONS" means $1,000,000 and integral multiples of
$50,000 in excess thereof.
"CERTIFICATE INITIAL RATE" means 5.96% per annum.
"CERTIFICATE INITIAL RATE ADJUSTMENT DATE" means January 14, 1998.
"CERTIFICATE DATE" means the Certificate Initial Rate for the First
Interest period and, with respect to any other Interest Period, the interest
rate per annum (computed on the basis of the actual number of days elapsed in
such Interest Period over a year of 360 days) equal to the rate determined
pursuant to the Auction procedures set forth in the Trust Agreement.
"CERTIFICATE SURETY BOND" means the surety bond dated December 24,
1997 issued by the Surety Provider in favor of the Eligible Lender Trustee on
behalf of the Certificateholders of the Class 2 Certificates.
"CLOSING DATE" means December 24, 1997.
"FINAL MATURITY DATE" means April 1, 2026.
"AUTHORIZED DENOMINATIONS" means, with respect to the Series 1997-2
Certificates, $1,000,000 and integral multiples of $50,000 in excess thereof.
"CLOSING DATE" means, December 24, 1997, or such other date as the
Depositors may determine.
"FIRST SUPPLEMENTAL SALE AND SERVICING AGREEMENT" means the First
Supplemental Sale and Servicing Agreement dated as of December 24, 1997 among
the Issuer, the Depositors, the Eligible Lender Trustee and the Master
Servicers, as amended
"INITIAL CERTIFICATE BALANCE" means $15,000,000.
"INITIAL CERTIFICATE RATE" means 5.96% per annum.
"INITIAL CERTIFICATE RATE ADJUSTMENT DATE" means January 14, 1998.
"INTEREST PERIOD" means (i) initially, the period from and including
the Closing Date through January 13, 1998 and (ii) thereafter, each period
commencing on a Certificate Rate Adjustment Date and ending on the day before
(a) the next Certificate Rate Adjustment Date for the Class 2 Certificates or
9b) the Final Maturity Date for the Class 2 Certificates.
"SECOND TRUST SUPPLEMENT" means this Second Trust Supplement, as from
time to time amended or supplemented.
"SERIES 1997-2 NOTES" means the $265,000,000 aggregate principal
amount of the Trust's Asset Backed Notes, Series 1997- 2.
"TERMS AGREEMENT" means Terms Agreement dated as of December 19, 1997
among Smith Barney Inc., the Trust, the Depositors and the Money Store Inc.
ARTICLE II.
ATHENTICATION AND TERMS
SECTION 2.1. AUTHENTICATION OF TRUST CERTIFICATES. Concurrently with
the contribution of Financed Student Loans to the Trust pursuant to the First
Supplemental Sale and Servicing Agreement and the issuance of the Series 1997-2
Notes, the Eligible Lender Trustee shall cause Trust Certificates in an
aggregate principal amount of $15,000,000 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 2 Certificates.
SECTION 2.2 TERMS OF THE CLASS 2 CERTIFICATES. Except as otherwise set
forth herein, the terms of the Class 2 Certificates shall be as set forth in the
Trust Agreement, including Appendix A and Appendix B thereto.
ARTICLE III
MISCELLANEOUS
SECTION 3.1. AUTHORITY FOR THIS SECOND TRUST SUPPLEMENT. This Second
Trust Supplement is adopted pursuant to the provisions of the Trust Agreement.
SECTION 3.2. PURCHASER'S LETTER. Notwithstanding anything set forth in
the Trust Agreement to the contrary, the Initial Purchaser (as defined in the
Purchase Agreement) shall not be required to execute and deliver a Purchaser's
Letter pursuant to Section 3.5(b) of the Trust Agreement in connection with its
acquisition of the Class 2 Trust Certificates.
SECTION 3.3. COUNTERPARTS. This Second Trust 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 3.4. GOVERNING LAW. This Second Trust Supplement shall be
governed by and construed in accordance with the internal laws of the
Commonwealth of Pennsylvania, without giving effect to principles of conflict of
laws.
SECTION 3.4. RATIFICATION OF TRUST AGREEMENT. As supplemented by this
Second Trust Supplement, the Trust Agreement is in all respects ratified and
confirmed, and the Trust Agreement as so supplemented by this Second Trust
Supplement shall be read, taken and construed as one and the same instrument.
Each addition to and amendment of the Trust Agreement contained herein is solely
for purposes of the Class 2 Certificates, and shall have no effect on any other
Certificates issued pursuant to the Trust Agreement. If any term of this Second
Trust Supplement conflicts with any term of the Trust Agreement, this Second
Trust Supplement shall control for purposes of the Class 2 Certificates.
SECTION 3.5. PLACE OF EXECUTION. This Second Trust Supplement shall be
deemed for all purposes executed and delivered at the Eligible Lender Trustee's
corporate trust office in York County, Pennsylvania.
SECTION 3.6. EFFECTIVENESS. This Second Trust Supplement shall become
effective upon filing with the Pennsylvania Department of State.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Second Trust
Supplement to be duly executed as of the day and year first above written.
THE YORK DEPOSIT BANK AND TRUST COMPANY
BY:/s/ Donald M. Whistler
Name: Donald M. Whistler
Title: Vice President and Senior Trust
Officer
TRANS-WORLD INSURANCE COMPANY,
d/b/a Educaid
BY:/s/ Michael Benoff
Name: Michael Benoff
Title: Senior Vice President
CONSENTED TO:
AMBAC ASSURANCE CORPORATION, CLASSNOTES, INC.
as Surety Provider
By:/s/ Michael Benoff
Name: Michael Benoff
Title: Senior Vice President
By:/s/ Richard Marsh
Name: Richard Marsh
Title: First Vice President
Exhibit 99.1
EXECUTION COPY
AUCTION AGENT AGREEMENT
by and among
CLASSNOTES TRUST 1997-I
as Issuer,
BANKERS TRUST COMPANY
as Indenture Trustee,
and
BANKERS TRUST COMPANY,
as Auction Agent
Dated as of December 24, 1997
Relating to
ASSET BACKED NOTES, CLASS 2
SERIES 1997-2
and
ASSET BACKED CERTIFICATES
<PAGE>
TABLE OF CONTENTS
PAGE
Section 1. Definitions and Rules of Construction..................... 2
1.1 Terms Defined by Reference to First
Terms Supplement.......................................... 2
1.2 Terms Defined Herein...................................... 2
1.3 Rules of Construction..................................... 3
Section 2. The Auction............................................... 4
2.1 Incorporation by Reference of Auction
Procedures and Settlement Procedures...................... 4
2.2 Preparation of Each Auction; Maintenance
of Existing Owner Registry................................ 5
2.3 All Hold Rates, Maximum Auction
Rates, Net Loan Rate, One-Month LIBOR
and Three-Month LIBOR..................................... 8
2.4 Auction Schedule.......................................... 9
2.5 Changes in Auction Periods or Auction
Date......................................................11
2.6 Notice of Fee Rate Change.................................12
2.7 Notices To Existing Noteholders and
Existing Certificateholders...............................12
2.8 Payment Default...........................................12
2.9 Broker-Dealers............................................12
2.10 Access to and Maintenance of Auction
Records...................................................13
Section 3. [Reserved]................................................13
Section 4. [Reserved]................................................13
Section 5. Representations and Warranties of the
Auction Agent.............................................14
Section 6. The Auction Agent.........................................14
6.1 Duties and Responsibilities...............................14
6.2 Rights of the Auction Agent...............................14
6.3 Auction Agent's Disclaimer................................15
6.4 Compensation, Remedies and Indemnification................15
6.5 Compensation of the Broker-Dealers........................16
Section 7. Miscellaneous.............................................17
7.1 Term of Agreement.........................................17
7.2 Communications............................................18
7.3 Entire Agreement..........................................19
7.4 Benefits..................................................19
7.5 Amendment: Waiver.........................................19
7.6 Successor and Assigns.....................................20
7.7 Severability..............................................20
7.8 Execution in Counterparts.................................20
7.9 Governing Law.............................................20
7.9(A) No Petition...............................................20
7.10 Indenture Trustee.........................................20
EXHIBITS
Exhibit A - List of Initial Broker-Dealers
Exhibit B - Broker-Dealer Agreement
Exhibit C - [Reserved]
Exhibit D - Notice of Notes Outstanding
Exhibit E - Notice of Fee Rate Change
Exhibit F - Notice of a Payment Default
Exhibit G - Settlement Procedures
Exhibit H - Notice of Continuation of Auction Period
Exhibit I - Notice of Interest Rate
Exhibit J - Notice of Ratings
<PAGE>
AUCTION AGENT AGREEMENT
THIS AUCTION AGENT AGREEMENT, dated as of December 24, 1997 (this
"Auction Agent Agreement"), is being entered into by and among CLASSNOTES TRUST
1997-I, a Pennsylvania business trust (together with any successors or assigns,
the "Issuer"), Bankers Trust Company, a New York banking corporation, as
Indenture Trustee (together with any successors or assigns, the "Indenture
Trustee") under a certain Master Indenture and First Terms Supplement, as
hereinafter defined and described, and Bankers Trust Company, a New York banking
corporation, (together with its successors and assigns, the "Auction Agent"),
acting not in its individual capacity but solely as agent for the Issuer.
The Issuer proposes to cause the Trustee to authenticate and deliver
up to $265,000,000 aggregate principal amount of its Asset-Backed Notes, Series
1997-2, Class A-4 (the "Class A-4 Notes"), Class A-5 (the "Class A-5 Notes")and
Class A- 6 the "Class A-6 Notes" and, together with the Class A-4 Notes and the
Class A-5 Notes, the "Series 1997-2 Notes"). The Series 1997-2 Notes will be
issued under the Second Terms Supplement (the "Second Terms Supplement"), dated
as of December 24, 1997, by and between the Issuer and the Indenture Trustee and
executed pursuant to an Indenture dated as of March 21, 1997 (as amended and
supplemented from time to time, the "Master Indenture"), by and between the
Indenture Trustee and the Issuer. After the applicable Initial Period, the Class
Interest Rate for the Class A-5 and Class A-6 Notes (the "Auction Rate Notes")
shall be based on the Auction Procedure. Pursuant to Section 2.5.5 of the Second
Terms Supplement, the Auction Agent has been appointed to act in the capacities
set forth in this Auction Agent Agreement with respect to the Auction Rate
Notes.
In connection with issuing the Series 1997-2 Notes, the Issuer
proposes to issue $15,000,000 aggregate principal amount of its Auction Rate
Asset-Backed Certificates, Class 2 (the "Certificates"). The Certificates will
be issued under the Second Trust Supplement, dated as of December 23, 1997
(herein, the "Trust Supplement") executed in accordance with the Trust
Agreement, dated as of March 21, 1997, as amended or supplemented from time to
time, the "Trust Agreement"), among Trans-World Insurance Company d/b/a/
Educaid, an Arizona corporation, and ClassNotes, Inc., as 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 Certificates are being issued as auction rate securities.
Pursuant to Section 3.15 of the Trust Agreement and the related Appendix B, the
Auction Agent has been appointed to act in the capacities set forth in this
Auction Agent Agreement with respect to the Certificates.
The Indenture Trustee is entering into this Auction Agent Agreement at
the direction of the Issuer pursuant to the terms of the Second Terms
Supplement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the Issuer, the Trustee and the Auction Agent agree
as follows:
Section 1. DEFINITIONS AND RULES OF CONSTRUCTION.
1.1 TERMS DEFINED BY REFERENCE. Capitalized terms used herein and not
otherwise defined herein shall have the meanings given such terms in the Master
Indenture, the Second Terms Supplement, the Trust Agreement, the Trust
Supplement or the Broker-Dealer Agreement.
1.2 TERMS DEFINED HEREIN. As used herein and in the Settlement
Procedures (as defined below), the following terms shall have the following
meanings, unless the context otherwise requires:
"AUCTION" shall have the meaning specified in Section 2.1 hereof.
"AUCTION AGENT FEE" shall have meaning specified in Section 6.4(b)
hereof.
"AUCTION AGENT FEE RATE" shall mean the rate per annum determined
pursuant to Section 6.4(b) hereof, as the same may be changed from time to time
in accordance with Section 6.4(b) hereof, at which the fee to be paid to the
Auction Agent for services rendered by it hereunder and under the Broker-Dealer
Agreements accrues pursuant to Section 6.4(b) hereof.
"AUCTION PROCEDURES" shall mean with respect to the Auction Rate
Notes, the provisions that are set forth in Sections 2.5 through 2.5.8,
inclusive, of the First Terms Supplement.
"AUCTION RATE NOTES" shall have the meaning specified in the second
paragraph of this Auction Agent Agreement.
"AUTHORIZED AUCTION AGENT OFFICER" shall mean, with respect to the
Auction Agent, each Managing Director, Vice President, Assistant Vice President,
and Assistant Treasurer of the Auction Agent and every other officer of the
Auction Agent assigned to its Corporate Trust Group and every other officer or
employee of the Auction Agent designated as an "Authorized Auction Agent
Officer" for purposes hereof in a communication to the Trustee and the Issuer.
"AUTHORIZED ISSUER OFFICER" shall mean any Authorized Officer (as
defined in Appendix A to the First Supplemental Sale and Servicing Agreement) of
the Eligible Lender Trustee or other person designated in writing by any of the
above-listed officers to the Auction Agent from time to time by the Issuer,
which writing may limit the functions which such other person may undertake as
an Authorized Issuer Officer hereunder.
"AUTHORIZED INDENTURE TRUSTEE REPRESENTATIVE" shall mean each Vice
President, Assistant Vice President, Assistant Secretary or Assistant Treasurer
in the Corporate Trust and Agency Group of the Indenture Trustee and every other
officer or employee of the Indenture Trustee designated as an "Authorized
Indenture Trustee Representative" for purposes hereof in a written communication
to the Auction Agent and the Issuer.
"BROKER-DEALER" shall mean a person listed on Exhibit A hereto as such
Exhibit A may be amended from time to time.
"BROKER-DEALER AGREEMENT" shall mean each agreement between the
Auction Agent and a Broker-Dealer substantially in the form attached hereto as
Exhibit B.
"BROKER-DEALER FEE" shall have the meaning specified in Section 6.5(a)
hereof.
"BROKER-DEALER FEE RATE" shall have the meaning specified in Section
6.5(b) hereof.
"EXISTING OWNER REGISTRY" shall mean the register maintained by the
Auction Agent pursuant to Section 2.2 hereof.
"NOTICE OF FAILURE TO DELIVER OR MAKE PAYMENT" shall mean a notice
substantially in the form of Exhibit D to the Broker-Dealer Agreement.
"NOTICE OF FEE RATE CHANGE" shall mean a notice substantially in the
form of Exhibit E hereof.
"NOTICE OF RATINGS" shall mean a notice substantially in the form of
Exhibit J hereto.
"NOTICE OF NOTES OUTSTANDING" shall mean a notice substantially in the
form of Exhibit D hereto.
"NOTICE OF A PAYMENT DEFAULT" shall mean a notice substantially in the
form of Exhibit F hereto.
"NOTICE OF TRANSFER" shall mean a notice substantially in the form of
Exhibit C to the Broker-Dealer Agreement.
"PARTICIPANT" shall mean a member of, or participant in, the
Securities Depository.
"SETTLEMENT PROCEDURES" shall mean the Settlement Procedures attached
as Exhibit G hereto.
1.3 RULES OF CONSTRUCTION. Unless the context or use indicates another
or different meaning or intent, the following rules shall apply to the
construction of this Auction Agent Agreement:
(a) Words importing the singular number shall include the
plural number and vice versa.
(b) The captions and headings herein are solely for
convenience of reference and shall not constitute a part of this Auction Agent
Agreement nor shall they affect its meaning, construction or effect.
(c) The words "hereof," "herein," "hereto" and other words
of similar import refer to this Auction Agent Agreement as a whole.
(d) All references herein to a particular time of day shall
be to New York City time.
Section 2. THE AUCTION.
2.1 INCORPORATION BY REFERENCE OF AUCTION PROCEDURES AND SETTLEMENT
PROCEDURES.
(a) During the applicable Initial Period, (x) each Class of
Auction Rate Notes shall bear interest at the initial Class Interest Rate as set
forth in the Second Terms Supplement and (y) the Certificates shall bear
interest at the Initial Certificate Rate as set forth in the Trust Agreement.
Thereafter, each Class of Auction Rate Notes shall bear interest at the
applicable Class Interest Rate and the Certificates shall bear interest at the
applicable Certificate Rate, in each case based on an Interest Period that shall
be an Auction Period. The Class Interest Rate or Certificate Rate, as the case
may be, for each applicable Auction Period shall be the lesser of (i) the Net
Loan Rate and (ii)(A) the Auction Rate determined in accordance with Section 2.4
and Section 2.5 of the Second Terms Supplement (not to exceed the applicable
Class Interest Rate Limitation) in the case of the Auction Rate Notes and (B)
the Auction Rate determined in accordance with Section 2.1 and Section 2.2 of
Appendix B of the Trust Agreement (not to exceed the Certificate Rate
Limitation) in the case of the Certificates. Pursuant to Section 2.5.5 of the
Second Terms Supplement, the Issuer has duly appointed Bankers Trust Company as
Auction Agent for purposes of the Auction Procedures and to perform such other
obligations and duties as are herein set forth. Bankers Trust Company hereby
accepts such appointment and agrees that, on each Auction Date, it shall follow
the procedures set forth in this Section 2 and the Auction Procedures for the
purpose of, among other things, determining the Auction Rate, and ultimately the
Class Interest Rate or Certificate Rate, as the case may be, for each Auction
Period other than the Initial Period. Each periodic operation of such procedures
is hereinafter referred to as an "Auction."
(b) All of the provisions contained in the Auction Procedures and
the Settlement Procedures are incorporated herein by reference in their entirety
and shall be deemed to be a part hereof to the same extent as if such provisions
were fully set forth herein.
2.2 PREPARATION OF EACH AUCTION; MAINTENANCE OF EXISTING OWNER
REGISTRY.
(a) A list of Broker-Dealers (showing Smith Barney Inc. as the
sole initial Broker-Dealer) is attached as Exhibit A to this Auction Agent
Agreement. Not later than seven days prior to any Auction Date for which any
change in such list of Broker-Dealers is to be effective, the Indenture Trustee,
at the direction of an Authorized Issuer Officer, will notify the Auction Agent
and the Surety Provider in writing of such change and, if any such change is the
addition of a Broker-Dealer to such list, shall cause to be delivered to the
Auction Agent for execution by the Auction Agent a Broker-Dealer Agreement
manually signed by such Broker-Dealer. 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) In the event that any day that is scheduled to be an Auction
Date shall be changed after the Auction Agent shall have given the notice of
such Auction Date pursuant to clause (vii) of paragraph (a) of the Settlement
Procedures, the Auction Agent, by such means as the Auction Agent deems
practicable, shall give notice of such change to the Broker- Dealers not later
than the earlier of 9:15 A.M., on the new Auction Date and 9:15 A.M. on the old
Auction Date.
(c) (i) The Auction Agent shall maintain a current registry of
Persons that are Broker-Dealers, compiled initially on the Closing
Date as described below, and that hold Auction Rate Notes or
Certificates for purposes of dealing with the Auction Agent in
connection with an Auction (such registry being herein called the
"Existing Owner Registry"). Such Persons shall constitute the
"Existing Noteholders" and "Existing Certificateholders,"
respectively, for purposes of dealing with the Auction Agent in
connection with an Auction. The Auction Agent shall indicate in the
Existing Owner Registry for each Existing Noteholder and Existing
Certificateholder the identity of the Broker-Dealer which submitted
the most recent Order in any Auction which resulted in such Existing
Noteholder or Existing Certificateholder continuing to hold or
purchasing the Auction Rate Notes or Certificates, as the case may be.
Pursuant to the Broker-Dealer Agreement, Smith Barney Inc., as the
sole initial Broker-Dealer, has agreed to provide to the Auction Agent
on the Closing Date the names and addresses of the Persons who are to
be initially listed on the Existing Owner Registry as constituting the
initial Existing Noteholders and Existing Certificateholders for
purposes of dealing with the Auction Agent in connection with an
Auction. The Auction Agent may rely upon, as evidence of the
identities of the Existing Noteholders and Existing
Certificateholders, such list, the results of each Auction and notices
from any Existing Noteholder or Existing Certificateholder,
Participant of any Existing Noteholder or Existing Certificateholder
or Broker-Dealer of any Existing Noteholder or Existing
Certificateholder.
(ii) The Indenture Trustee shall notify the Auction Agent in
writing when any notice of principal payment of Auction Rate Notes is
sent to the Securities Depository as the owner of Auction Rate Notes
not later than 11:00 A.M., on the date such notice is sent. Such
notice shall be substantially in the form of Exhibit D, Notice of
Notes/Certificates Outstanding. In the event the Auction Agent
receives from the Indenture Trustee written notice of any payment of
principal of any Auction Rate Notes, the Auction Agent shall, at least
two Business Days prior to the next Auction applicable to such Class
of Auction Rate Notes, request each Participant to disclose to the
Auction Agent (upon selection by such Participant of the Existing
Noteholders whose Auction Rate Notes are to receive principal
payments) the aggregate principal amount of such Auction Rate Notes of
each such Existing Noteholder, if any, which are to be paid; provided
the Auction Agent has been furnished with the name and telephone
number of a person or department at such Participant from which it is
to request such information. In the absence of receiving any such
information with respect to any Existing Noteholder from such Existing
Noteholder's Participant or otherwise, the Auction Agent may continue
to treat such Existing Noteholder, as the beneficial owner of the
principal amount of Auction Rate Notes shown in the Existing Owner
Registry.
(iiii) The Eligible Lender Trustee shall notify the Auction
Agent in writing when any notice of principal payment of Certificates
is sent to the Securities Depository as the owner of Certificates not
later than 11:00 A.M., on the date such notice is sent. Such notice
shall be substantially in the form of Exhibit D, Notice of
Notes/Certificates Outstanding. In the event the Auction Agent
receives from the Eligible Lender Trustee written notice of any
payment of principal of any Certificates, the Auction Agent shall, at
least two Business Days prior to the next Auction applicable to the
Certificates, request each Participant to disclose to the Auction
Agent (upon selection by such Participant of the Existing
Certificateholders whose Certificates are to receive principal
payments) the aggregate principal amount of such Certificates of each
such Existing Certificateholder, if any, which are to be paid;
provided the Auction Agent has been furnished with the name and
telephone number of a person or department at such Participant from
which it is to request such information. In the absence of receiving
any such information with respect to any Existing Certificateholder
from such Existing Certificateholder's Participant or otherwise, the
Auction Agent may continue to treat such Existing Certificateholder,
as the beneficial owner of the principal amount of Certificates shown
in the Existing Owner Registry.
(iv) The Auction Agent shall be required to register in the
Existing Owner Registry a transfer of Auction Rate Notes or
Certificates from an Existing Noteholder or Certificateholder,
respectively, to another Person only if such transfer is made to a
Person through a Broker-Dealer and if (A) such transfer is pursuant to
an Auction or (B) the Auction Agent has been notified in writing (1)
in a notice substantially in the form of a Notice of Transfer by such
Existing Noteholder or Certificateholder, by the Participant of such
Existing Noteholder or Existing Certificateholder or by the
Broker-Dealer of such Existing Noteholder or Existing
Certificateholder of such transfer or (2) in a notice substantially in
the form of a Notice of Failure to Deliver or Make Payment by the
Broker-Dealer of any Person that purchased or sold Auction Rate Notes
or Certificates in an Auction of the failure of such Auction Rate
Notes or Certificates to be transferred as a result of the Auction.
The Auction Agent is not required to accept any Notice of Transfer or
Notice of Failure to Deliver or Make Payment delivered prior to an
Auction unless it is received by the Auction Agent by 3:00 P.M. on the
Business Day next preceding the applicable Auction Date.
(d) The Auction Agent may request that the Broker-Dealers, as set
forth in the Broker-Dealer Agreements, provide the Auction Agent with the
aggregate principal amount of Auction Rate Notes and Certificates held by such
Broker-Dealers for purposes of the Existing Owner Registry. Except as permitted
by Section 2.10 hereof, the Auction Agent shall keep confidential any such
information and shall not disclose any such information so provided to any
person other than the relevant Broker-Dealer, the Issuer and the Trustee,
provided that the Auction Agent reserves the right to disclose any such
information if it is advised by its counsel that its failure to do so would be
unlawful.
(e) The Auction Agent shall send by telecopy or other means as
soon as reasonably practicable, but in no event later than the next Business
Day, a copy of any Notice of Notes/ Certificates Outstanding received from the
Indenture Trustee or the Eligible Lender Trustee, as applicable, to each
Broker-Dealer in accordance with Section 4.3 of the applicable Broker-Dealer
Agreement.
(f) The Auction Agent shall be entitled to rely upon written
notices from the Administrator and the Eligible Lender Trustee as to
non-Business Days in California and Pennsylvania respectively.
2.3 ALL HOLD RATES, MAXIMUM AUCTION RATES, NET LOAN RATE, ONE-MONTH
LIBOR AND THREE-MONTH LIBOR.
(a) On each Auction Date, the Auction Agent shall determine the
All Hold Rate, the Maximum Auction Rate, the Net Loan Rate (as provided by the
Administrator) and One-Month LIBOR or Three-Month LIBOR, as applicable. Not
later than 9:30 A.M. on each Auction Date, the Auction Agent shall notify the
Indenture Trustee and the Broker-Dealers of the All Hold Rate, the Maximum
Auction Rate, the Net Loan Rate and One-Month LIBOR or Three-Month LIBOR, as
applicable, so determined. On or within three (3) Business Days after each
Closing Date, the Issuer shall give written notice to the Auction Agent of the
initial ratings on the applicable Notes by Moody's and Standard & Poor's
substantially in the form of the Notice of Ratings. Thereafter, if there is a
change in one or both of such ratings, the Issuer shall give written notice to
the Auction Agent substantially in the form of the Notice of Ratings within
three (3) Business Days of its receipt of notice of such change, but not later
than the close of business on the Business Day immediately preceding an Auction
Date if the Issuer has received written notice of such change in a rating or
ratings prior to 12:00 noon on such Business Day, and the Auction Agent shall
take into account such change in rating or ratings for purposes hereof and any
Auction so long as such Notice of Ratings is received by the Auction Agent no
later than the close of business on such Business Day.
(b) (i) If, on any Auction Date for an Auction Period, an Auction
is not held for any reason, then (except as provided in (ii) and (iii)
below) the Class Interest Rate on the applicable Class of Auction Rate
Notes, or the Certificate Rate for the Certificates, as the case may
be, for the next succeeding Auction Period shall be the Net Loan Rate.
(ii) If the ownership of the Auction Rate Notes or the
Certificates is no longer maintained in Book-entry Form by the
Securities Depository, no further Auctions shall be held and the Class
Interest Rate on each Class of Auction Rate Notes for each applicable
Interest Period commencing after the delivery of certificated Auction
Rate Notes pursuant to Section 2.15 of the Master Indenture, and the
Certificate Rate on the Certificates pursuant to Section 3.14 of the
Trust Agreement, shall equal the lesser of the Net Loan Rate and the
Maximum Auction Rate as determined by the Indenture Trustee on the
Business Day immediately preceding the first day of each such
applicable subsequent Interest Period as provided in the Second Terms
Supplement.
(iii) If a Payment Default shall have occurred, the Class
Interest Rate on each Class of Auction Rate Notes, and the Certificate
Rate on the Certificates, for each applicable Interest Period
commencing on or immediately after the occurrence of such Payment
Default, and for each Interest Period thereafter, to and including the
Interest Period, if any, during which, or commencing less than two
Business Days after, such Payment Default is cured or waived in
accordance with the Second Terms Supplement or Trust Agreement, shall
equal the Non-Payment Rate, as determined by the Indenture Trustee on
the first day of each such Interest Period as provided in the Second
Terms Supplement and the Trust Agreement. The Class Interest Rate on
each Class of Auction Rate Notes, and the Certificate Rate on the
Certificates, for each applicable Interest Period commencing at least
two Business Days after any cure or waiver of a Payment Default shall
be determined through implementation of the Auction Procedures.
2.4 AUCTION SCHEDULE. The Auction Agent shall conduct Auctions on the
Auction Date in accordance with the schedule set forth below. Such schedule may
be changed by the Auction Agent with the consent of the Indenture Trustee and
the Market Agent, which consent shall not be unreasonably withheld or delayed.
The Auction Agent shall give notice pursuant to Section 4.3 of the applicable
Broker-Dealer Agreement of any such change to each Broker-Dealer. Such notice
shall be given prior to the first Auction Date on which any such change shall be
effective.
By 9:30 A.M. The Auction Agent advises the Indenture
Trustee and the Broker-Dealers of the Maximum
Auction Rate, the All Hold Rate, the Net Loan Rate
(as provided by the Administrator) and One-Month
LIBOR or Three-Month LIBOR, as applicable, to be
used in determining the Auction Rate under the
Auction Procedures, the Second Terms Supplement,
the Trust Agreement and this Auction Agent
Agreement.
9:30 A.M. - 12:30 P.M. The Auction Agent assembles information
communicated to it by Broker-Dealers as provided
in Section 2.5.1(c)(i) of the Second Terms
Supplement or Section 2.2.1(c)(i) of Appendix B of
the Trust Agreement. The Submission Deadline is
12:30 P.M.
Not earlier than The Auction Agent makes the determination
12:30 P.M. pursuant to Section 2.5.1(c)(i) of the Second
Terms Supplement or Section 2.2.1(c)(i) of
Appendix B of the Trust Agreement.
By approximately The Auction Agent advises the Indenture
3:00 P.M.* or 4:00 P.M.** Trustee of the results of the Auction
as provided in Section 2.5.1(c)(ii) of the Second
Terms Supplement or the Eligible Lender Trustee of
the results of the Auction as provided in Section
2.2.1(c)(ii) of Appendix B of the Trust Agreement.
Submitted Bids and Submitted Sell Orders are
accepted and rejected in whole or in part and (X)
Auction Rate Notes allocated as provided in
Section 2.5.1(d) of the Second Terms Supplement or
(Y) Certificates allocated as provided in Section
2.2.1 of Appendix B of the Trust Agreement, as the
case may be.
* If the Class Interest Rate or the Certificate Rate, as the case may be,
is the Auction Rate.
** If the Class Interest Rate or the Certificate Rate, as the case may be,
is the Net Loan Rate.
The Auction Agent shall follow the notification procedures set forth
in paragraph (a) of the Settlement Procedures. In accordance with Section
2.5.1(c)(ii) of the Second Terms Supplement and Section 2.2.1(c)(ii) of Appendix
B of the Trust Agreement, the Auction Agent shall give written notice to the
Indenture Trustee, the Eligible Lender Trustee, the Administrator and Surety
Provider of each Class Interest Rate.
2.5 CHANGES IN AUCTION PERIODS OR AUCTION DATE.
(a) Changes in Auction Period or Periods.
(i) The Auction Agent shall mail any notice delivered
to it pursuant to (X) Section 2.5.7(a) of the First Terms Supplement
to the Existing Noteholders of the applicable Class of Auction Rate
Notes and (Y) Section 2.2.7(a) of Appendix B of the Trust Agreement to
the Existing Certificateholders, in either case, within the two
Business Days of its receipt thereof.
(ii) The Auction Agent shall deliver any certificate
delivered to it pursuant to Section 2.5.7(c) of the Second Terms
Supplement or 2.2.7(c) of Appendix B of the Trust Agreement to the
Broker-Dealers not later than 3:00 P.M on the Business Day before the
next Auction Date by telecopy or similar means.
(iii) If, after delivery to the Auction Agent of the
notice referred to in Section 2.5.7(a) of the Second Terms Supplement
or 2.2.7(a) of Appendix B of the Trust Agreement, the Auction Agent
fails to receive the certificate referred to in Section 2.5.7(c) of
the First Terms Supplement or 2.2.7(c) of Appendix B of the Trust
Agreement by 11:00 A.M on the Business Day before the next applicable
Auction Date, the Auction Agent shall deliver a notice of such failure
in substantially the form of Exhibit H hereto to the Broker-Dealers
not later than 3:00 P.M. on such Business Day by telecopy or other
similar means.
(iv) If, after delivery to the Auction Agent of the
notice referred to in Section 2.5.7(a) and the certificate referred to
in Section 2.5.7(c) of the Second Terms Supplement or the notice
referred to in 2.2.7(a) of Appendix B of the Trust Agreement and the
certificate referred to in 2.2.7(c) of Appendix B of the Trust
Agreement, Sufficient Bids for the applicable Class of Auction Rate
Notes or Certificates are not received by the Auction Agent by the
Submission Deadline, the Auction Agent shall deliver a notice in
substantially the form of Exhibit I hereto to the Broker-Dealers not
later than 3:00 P.M on such Auction Date by telephone confirmed in
writing the next Business Day.
(b) Changes in Auction Date. The Auction Agent shall mail any
notice delivered to it pursuant to Section 2.5.8 of the Second Terms Supplement
or 2.2.8 of Appendix B of the Trust Agreement to the Broker-Dealers within three
Business Days of its receipt thereof.
2.6 NOTICE OF FEE RATE CHANGE. If the Auction Agent Fee Rate is
changed pursuant to the provisions of Section 6.4(b) hereof or the Broker-Dealer
Fee Rate is changed pursuant to the provisions of 6.5(b) hereof, the Auction
Agent shall mail a Notice of Fee Rate Change (i) to the Indenture Trustee, the
Eligible Lender Trustee, the Administrator and the Surety Provider with respect
to a change in the Auction Agent Fee Rate and the Broker-Dealer Fee Rate and
(ii) to the Broker-Dealers with respect to a change in the Broker-Dealer Fee
Rate, in each case within two Business Days of such change.
2.7 NOTICES TO EXISTING NOTEHOLDERS AND EXISTING CERTIFICATEHOLDERS.
The Auction Agent shall be entitled to rely upon the address of each
Broker-Dealer as provided in Section 4.3 of the applicable Broker-Dealer
Agreement in connection with any notice to each Broker-Dealer, as an Existing
Noteholder or Existing Certificateholder, required to be given by the Auction
Agent.
2.8 PAYMENT DEFAULT.
(a) After delivery by the Indenture Trustee to the Auction Agent
of a notice that a Payment Default shall have occurred, the Auction Agent shall
on the Business Day following its receipt of the same deliver a Notice of
Payment Default to the Broker-Dealers by telecopy or other similar means.
(b) The Auction Agent shall deliver a copy of any notice received
by it from the Indenture Trustee to the effect that a Payment Default has been
cured to the Broker-Dealers on the Business Day following its receipt of the
same by telecopy or other similar means.
2.9 BROKER-DEALERS.
(a) If the Auction Agent is provided with a copy of a
Broker-Dealer Agreement, which has been manually signed, with any person listed
on Exhibit A hereto to which the Indenture Trustee, at the direction of an
Authorized Officer of the Administrator, and the Surety Provider shall have
consented, it shall enter into such Broker-Dealer Agreement with such person.
The Issuer hereby directs the Indenture Trustee to consent to Smith Barney Inc.
as the initial Broker-Dealer.
(b) The Auction Agent may, at the written direction of an
Authorized Issuer Officer, and with the approval of the Surety Provider and the
prior written consent of Smith Barney Inc., so long as Smith Barney Inc. is
acting as a Broker-Dealer, enter into a Broker-Dealer Agreement with any other
person who requests to be selected to act as a Broker-Dealer. 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.
(c) The Auction Agent shall terminate any Broker-Dealer Agreement
as set forth therein at the direction of an Authorized Issuer Officer.
2.10 ACCESS TO AND MAINTENANCE OF AUCTION RECORDS. The Auction Agent
shall afford to the Indenture Trustee, the Issuer, their respective agents
independent public accountants and counsel, access at reasonable times during
normal business hours to review and make extracts or copies (at no cost to the
Auction Agent) of all books, records, documents and other information concerning
the conduct and results of Auctions, provided that any such agent, accountant,
or counsel shall furnish the Auction Agent with a letter from the Indenture
Trustee or the Issuer requesting that the Auction Agent afford such person
access. The Auction Agent shall maintain records relating to any Auction for a
period of two years after such Auction (unless requested by the Indenture
Trustee or the Issuer to maintain such records for such longer period not in
excess of four years, then for such longer period), and such records shall, in
reasonable detail, accurately and fairly reflect the actions taken by the
Auction Agent hereunder. At the end of such period, the Auction Agent shall
deliver such records to the Indenture Trustee, if so requested. The Indenture
Trustee and the Issuer agree to keep any information regarding the conduct and
results of the Auctions, including without limitation information regarding
customers of any Broker-Dealer, received from the Auction Agent in connection
with this Auction Agent Agreement confidential and shall not disclose such
information or permit the disclosure of such information without the prior
written consent of the applicable Broker-Dealer to anyone except such agent,
accountant or counsel engaged to audit or review the results of Auctions as
permitted by this Section 2.10, except as may otherwise be required by
applicable law or regulation. Any such agent, accountant or counsel, before
having access to such information, shall agree to keep such information
confidential and not to disclose such information or permit disclosure of such
information without the prior written consent of the applicable Broker-Dealer,
except as may otherwise be required by applicable law or regulation.
Section 3. [Reserved].
Section 4. [Reserved].
Section 5. REPRESENTATIONS AND WARRANTIES OF THE AUCTION AGENT. The
Auction Agent hereby represents and warrants to the Issuer that:
5.1 The Auction Agent (i) has been duly incorporated and is validly
existing and in good standing as a banking corporation under the laws of the
State of New York, and (ii) has all necessary authority to enter into and
perform its obligations under this Auction Agent Agreement. This Auction Agent
Agreement has been duly and validly authorized, executed and delivered by the
Auction Agent and, assuming it is a legal, valid and binding agreement among the
other parties thereto, constitutes the legal, valid, binding and enforceable
obligation of the Auction Agent.
Section 6. THE AUCTION AGENT.
6.1 DUTIES AND RESPONSIBILITIES.
(a) The Auction Agent is acting solely as agent of the Issuer and
owes no fiduciary duties to any person (other than the Issuer) by reason of this
Auction Agent Agreement. The Auction Agent undertakes to perform such duties and
only such duties as are specifically set forth in this Auction Agent Agreement,
and no implied covenants or obligations shall be read into this Auction Agent
Agreement by means of the provisions of the Second Terms Supplement, the Trust
Agreement, anything set forth in the Prospectus or Prospectus Supplement forming
a part of the Registration Statement on Form S-3 (No. 333-10877), anything set
forth in the Private Placement Memorandum dated December 22, 1997, or any other
offering material prepared in connection with the offer and sale of the Auction
Rate Notes and Certificates, or otherwise against the Auction Agent.
(b) In the absence of bad faith or negligence on its part, the
Auction Agent shall not be liable for any action taken, suffered or omitted in
good faith or for any error of judgment made by it in the performance of its
duties under this Auction Agent Agreement. The Auction Agent shall not be liable
for any error of judgment made in good faith unless the Auction Agent shall have
been negligent in ascertaining the pertinent facts.
(c) The Auction Agent shall not agree to any amendment to a
Broker-Dealer Agreement without the prior written consent of the Issuer, which
consent shall not be unreasonably withheld.
6.2 RIGHTS OF THE AUCTION AGENT.
(a) The Auction Agent may rely and shall be protected in acting
or refraining from acting upon any communication authorized hereby and upon any
written instruction, notice, request, direction, consent, report, certificate,
form of bond certificate or other instrument, paper or document believed by it
to be genuine. The Auction Agent shall not be liable for acting upon any
telephone communication authorized hereby which the Auction Agent believes in
good faith to have been given by the Indenture Trustee, the Issuer, the
Administrator or by a Broker-Dealer. The Auction Agent may record telephone
communications with the Indenture Trustee or with Broker-Dealers or both.
(b) The Auction Agent may consult with counsel of its choice, and
the advice of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon.
(c) The Auction Agent shall not be required to advance, expend or
risk its own funds or otherwise incur or become exposed to financial liability
in the performance of its duties hereunder.
(d) The Auction Agent may perform its duties and exercise its
rights hereunder either directly or by or through agents or attorneys and shall
not be responsible for any misconduct or negligence on the part of any agent or
attorney appointed by it with due care hereunder.
6.3 AUCTION AGENT'S DISCLAIMER. The Auction Agent makes no
representation as to the validity, adequacy or accuracy of the recitals in this
Auction Agent Agreement or the Broker-Dealer Agreement or the validity, adequacy
or accuracy of the Auction Rate Notes and Certificates.
6.4 COMPENSATION, REMEDIES AND INDEMNIFICATION.
(a) [Reserved]
(b) For each Interest Period, commencing on the Closing Date, the
Auction Agent shall be entitled to a fee in an amount equal to the product of
(i) the Auction Agent Fee Rate times (ii) a fraction, the numerator of which is
the number of days in such Auction Period and the denominator of which is 360,
times (iii) the aggregate principal amount of Outstanding Notes of the
applicable Class of Auction Rate Notes or Outstanding Certificates, as the case
may be, at the close of business on the applicable Note Record Date or
Certificate Record Date (the "Auction Agent Fee"). The Auction Agent Fee Rate
may be adjusted from time to time with the written approval of the Administrator
and the Surety Provider upon a written request of the Auction Agent delivered to
the Indenture Trustee and the Issuer. The initial Auction Agent Fee Rate shall
be .2675% per annum. Any change in the Auction Agent Fee Rate shall be effective
on the Auction Date next succeeding such change. The Auction Agent Fee shall be
paid monthly, in arrears, by the Indenture Trustee on the first Note
Distribution Date, for all Classes of Notes, 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), commencing January
1998. Such fee shall be paid in the manner set forth in Section 5.5 of the Sale
and Servicing Agreement.
(c) The Administrator, on behalf of the Issuer, shall indemnify
and hold harmless the Auction Agent for and against any loss, liability or
expense incurred without negligence or bad faith on the Auction Agent's part,
arising out of or in connection with the acceptance or administration of its
agency under this Auction Agent Agreement and the Broker-Dealer Agreements,
including the reasonable costs and expenses (including the reasonable fees and
expenses of its counsel) of defending itself against any such claim or liability
in connection with its exercise or performance of any of its duties hereunder
and thereunder and of enforcing this indemnification provision; provided that
the Administrator, on behalf of the Issuer, shall not indemnify the Auction
Agent pursuant to this Section 6.4(c) for any fees and expenses incurred by the
negligence or willful misconduct of the Auction Agent or incurred by the Auction
Agent in the normal course of performing its duties hereunder and under the
Broker-Dealer Agreements, such fees and expenses being payable as provided in
Section 6.4(b) above.
6.5 COMPENSATION OF THE BROKER-DEALERS.
(a) On the first Note Distribution Date for all Classes of Notes
issued by the Issuer 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), commencing January 1998, the Auction
Agent shall pay each applicable Broker-Dealer the fee (the "Broker-Dealer Fee")
required to be paid to each such Broker-Dealer pursuant to Section 2.5 of the
Broker-Dealer Agreement.
(b) After retaining the Auction Agent Fee as provided in Section
6.4 above, the Auction Agent shall pay the Broker-Dealer Fee as provided in
Section 6.5(a) above solely out of amounts received by the Auction Agent
pursuant to Section 2.5.2(b) of the Second Terms Supplement and 2.2.2(b) of
Appendix B of the Trust Agreement. The Broker-Dealer Fee Rate may be adjusted
from time to time with the approval of an Authorized Issuer Officer upon a
written request of the Auction Agent or Smith Barney Inc., as sole Initial
Broker-Dealer, delivered to the Indenture Trustee and the Issuer. The initial
Broker-Dealer Fee Rate shall be .25% per annum. If the Broker-Dealer Fee Rate is
changed pursuant to the terms hereof, the Indenture Trustee shall notify the
Auction Agent thereof. Any changes in the Broker-Dealer Fee Rate shall be
effective on the Auction Date next succeeding such change; provided, however,
that such Broker-Dealer Fee Rate will not be increased without the Surety
Provider's prior written consent.
Section 7. MISCELLANEOUS.
7.1 TERM OF AGREEMENT.
(a) This Auction Agent Agreement shall terminate on the earlier
to occur of (i) the satisfaction and discharge of the Second Terms Supplement
with respect to the Auction Rate Notes, the Trust Agreement with respect to the
Certificates or this Auction Agent Agreement and (ii) the date on which this
Auction Agent Agreement is terminated in accordance with this Section 7.1. The
Indenture Trustee may terminate this Auction Agent Agreement in accordance with
Section 2.5.5(a) of the First Terms Supplement. The Auction Agent may terminate
this Auction Agent Agreement upon written notice to the Indenture Trustee, the
Issuer and the Market Agent on the date specified in such notice, which date
shall be no earlier than 90 days after the date of delivery of such notice.
Notwithstanding the foregoing, the provisions of Section 2 hereof shall
terminate (X) with respect to the Auction Rate Notes, upon the delivery of
certificates representing Auction Rate Notes pursuant to Section 2.15 of the
Master Indenture and (Y) with respect to the Certificates upon the delivery of
the certificates representing the Certificates pursuant to Section 3.14 of the
Trust Agreement. Notwithstanding the foregoing, the Auction Agent may terminate
this Agreement without further notice if, within 25 days after notifying in
writing the Indenture Trustee, the Issuer, the Surety Provider and the Market
Agent that it has not received payment of any Auction Agent Fee due it in
accordance with the terms hereof, the Auction Agent does not receive such
payment. Any resignation of the Auction Agent or termination of the Auction
Agent Agreement, other than as described in the preceding sentence of this
paragraph, shall not become effective until a successor Auction Agent has been
appointed and acceptance of such appointment by such successor Auction Agent.
However, if a successor Auction Agent shall not have been appointed within 60
days from the date of such notice of resignation, the resigning Auction Agent
may petition any court of competent jurisdiction for the appointment of a
successor Auction Agent.
(b) Except as otherwise provided in this Section 7.1(b), the
respective rights and duties of the Indenture Trustee, the Issuer and the
Auction Agent under this Auction Agent Agreement shall cease upon termination of
this Auction Agent Agreement. The Administrator's obligations to the Auction
Agent under Section 6.4(c) hereof shall survive the termination of this Auction
Agent Agreement subject to Section 7.10 hereof. Upon termination of this Auction
Agent Agreement, the Auction Agent shall promptly deliver to the Trustee copies
of all books and records maintained by it with respect to the Auction Rate Notes
in connection with its duties hereunder.
7.2 COMMUNICATIONS. Except for (i) communications authorized to be
made by telephone pursuant to this Auction Agent Agreement or the Auction
Procedures and (ii) communications in connection with Auctions (other than those
expressly required to be in writing), all notices, requests and other
communications to any party hereunder shall be in writing (including facsimile
or similar writing) and shall be given to such party addressed to it at its
address, or facsimile number set below:
If to the Indenture
Trustee, addressed: Bankers Trust Company
4 Albany Street
New York, New York 10006
Attention: Corporate Trust and Agency
Group, Structured Finance Team
Telephone: (212) 250-6533
Facsimile: (212) 250-6439
If to the Issuer,
addressed: The York Bank and Trust Company,
c/o Dauphin Deposit Bank and Trust Company
213 Market Street
Harrisburg, Pennsylvania 17101
Attention: Corporate Trust Services
Telephone: (717) 255-2387
Facsimile: (717) 231-2615
With a copy to
the Administrator: c/o The Money Store Inc.
2840 Morris Avenue
Union, New Jersey
Attention: Chief Financial Officer
Telephone: (908) 686-2000
Facsimile: (908) 688-3846
If to the Auction Agent,
addressed: Bankers Trust Company
4 Albany Street
New York, New York 10006
Attention: Auction Rate Securities
Telephone: (212) 250-6850
Facsimile: (212) 250-6215
If to the Market Agent,
addressed: Smith Barney Inc.
390 Greenwich Street
4th Floor
New York, New York 10013
Attention: Manager, Auction Rate
Products Group
Telephone: (212) 723-7082
Facsimile: (212) 723-8809
If to the Surety
Provider, addressed: Ambac Assurance Corporation
One State Street Plaza
New York, New York 10004
Attention: Structured Finance
Department/Student Loans
Telephone: (212) 668-0340
Facsimile: (212) 363-1459
or such other address, telephone or facsimile number as such party may hereafter
specify for such purpose by notice in writing to the other party. Each such
notice, request or communication shall be effective when delivered at the
address specified herein. Communications shall be given on behalf of the
Indenture Trustee by an Authorized Trustee Representative, on behalf of the
Auction Agent by an Authorized Auction Agent Officer and on behalf of the Issuer
by an Authorized Issuer Officer.
7.3 ENTIRE AGREEMENT. This Auction Agent Agreement contains the entire
agreement between the parties relating to the subject matter hereof, and there
are no other representations, endorsements, promises, agreements or
understandings, oral, written or inferred between the parties relating to the
subject matter hereof.
7.4 BENEFITS. Nothing herein, express or implied, shall give to any
person, other than the Indenture Trustee, acting on behalf of the beneficial
Owners, the Auction Agent, the Issuer and their respective successors and
assigns, any benefit of any legal or equitable right, remedy or claim hereunder.
7.5 AMENDMENT: WAIVER.
(a) This Auction Agent Agreement shall not be deemed or construed
to be modified, amended, rescinded, canceled or waived, in whole or in part,
except by a written instrument signed by duly authorized representatives of the
parties hereto.
(b) The Indenture Trustee and the Issuer shall not enter into or
approve any amendment of or supplement to the Second Terms Supplement which
materially affects the Auction Agent's duties or obligations under the Second
Terms Supplement without obtaining the prior written consent of the Auction
Agent. The Indenture Trustee shall promptly notify the Auction Agent of any
amendment of or supplement to the Second Terms Supplement and shall provide a
copy thereof to the Auction Agent upon request.
(c) Failure of a party hereto to exercise any right or remedy
hereunder in the event of a breach hereof by any other party shall not
constitute a waiver of any such right or remedy with respect to any subsequent
breach.
7.6 SUCCESSOR AND ASSIGNS. This Auction Agent Agreement shall be
binding upon, inure to the benefit of, and be enforceable by, the respective
successors and assigns of each of the Indenture Trustee, the Issuer and the
Auction Agent. This Auction Agent Agreement may not be assigned by any party
hereto absent the prior written consent of the other parties hereto, which
consents shall not be unreasonably withheld.
7.7 SEVERABILITY. If any clause, provision or section hereof shall be
ruled invalid or unenforceable by any court of competent jurisdiction, the
invalidity or unenforceability of such clause, provision or section shall not
affect any of the remaining clauses, provisions or sections hereof.
7.8 EXECUTION IN COUNTERPARTS. This Auction Agent Agreement may be
executed in several counterparts, each of which shall be an original and all of
which shall constitute but one and the same instrument.
7.9 GOVERNING LAW. This Auction Agent Agreement shall be governed by
and construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed in such state.
7.9(A) NO PETITION. The Auction Agent, by entering into this Auction
Agent Agreement, hereby covenants and agrees that it will not at any time
institute against the Sellers or the Issuer, or join in any institution against
the Sellers 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 this Auction Agent Agreement or any of the other
Basic Documents.
7.10 INDENTURE TRUSTEE. All privileges, rights and immunities given to
the Indenture Trustee in the First Terms Supplement are hereby extended to and
applicable to the Indenture Trustee's obligations hereunder.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Auction Agent Agreement
to be duly executed and delivered by their proper and duly authorized officers
as of the date 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:/S/ Richard H. Bass
Name: Richard H. Bass
Title: Vice President
BANKERS TRUST COMPANY, not in its
individual capacity but solely as
Indenture Trustee
By:/s/ Alfia Monastra
Name: Alfia Monastra
Title: Assistant Vice President
BANKERS TRUST COMPANY,
as Auction Agent
By:/s/ Melissa Reynolds
Name: Melissa Reynolds
Title: Assistant Vice President
The Administrator hereby accepts its obligations hereunder, including those
pursuant to Section 6.4 hereof.
TRANS-WORLD INSURANCE
COMPANY, D/B/A EDUCAID
By: /s/ Michael Benoff
Name: Michael Benoff
Title: Senior Vice President
<PAGE>
EXHIBIT A
TO AUCTION AGENT AGREEMENT
LIST OF INITIAL BROKER-DEALERS
Smith Barney Inc.
<PAGE>
EXHIBIT B
TO AUCTION AGENT AGREEMENT
BROKER-DEALER AGREEMENT
<PAGE>
EXHIBIT C
[RESERVED]
<PAGE>
EXHIBIT D
TO AUCTION AGENT AGREEMENT
NOTICE OF NOTES/CERTIFICATES OUTSTANDING
CLASSNOTES TRUST 1997-I
ASSET BACKED NOTES, SERIES 1997-2, CLASS A-5 and CLASS A-6
AUCTION RATE ASSET BACKED CERTIFICATES
NOTICE IS HEREBY GIVEN that $________________ aggregate principal amount of
[Class A-5 and A-6 Notes][Certificates] were Outstanding at the close of
business on the immediately preceding Record Date. Such aggregate principal
amount of [Class A-_ Notes][Certificates], less $___________________ aggregate
principal amount of [Class A-5 and A-6 Notes][Certificates] to be repaid by the
Issuer pursuant to the [First Terms Supplement][Trust Agreement], for a net
aggregate principal amount of [Class A-5 and A-6 Notes] [Certificates] of
$__________ Notes][Certificates] of $_______________ will be available on the
next Auction scheduled to be held on ---------------------.
Terms used herein have the meanings set forth in the Second Terms Supplement and
Trust Agreement relating to the above-referenced issue.
BANKERS TRUST COMPANY as
Indenture Trustee
By:__________________________
Name:
Title:
Date:
<PAGE>
EXHIBIT E
TO AUCTION AGENT AGREEMENT
NOTICE OF FEE RATE CHANGE
CLASSNOTES TRUST 1997-I
ASSET BACKED NOTES, SERIES 1997-2
AUCTION RATE ASSET BACKED CERTIFICATES
NOTICE IS HEREBY GIVEN that the [Auction Agent Fee Rate] [Broker- Dealer Fee
Rate] has been changed in accordance with Section [6.4(b)] [6.5(b)] of the
Auction Agent Agreement. The new [Auction Agent Fee Rate] [Broker-Dealer Fee
Rate] shall be % of 1% per annum.
Terms used herein have the meanings set forth in the Second Terms Supplement and
Trust Agreement relating to the above-referenced issue.
BANKERS TRUST COMPANY, as Auction
Agent
By:______________________________
Name:
Title:
Date:
APPROVED:
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:
<PAGE>
EXHIBIT F
TO AUCTION AGENT AGREEMENT
NOTICE OF A PAYMENT DEFAULT
CLASSNOTES TRUST 1997-I
ASSET BACKED NOTES, SERIES 1997-2
AUCTION RATE ASSET BACKED CERTIFICATES
NOTICE IS HEREBY GIVEN that a Payment Default has occurred and not been cured.
Determination of the Class Interest Rate on the Auction Rate Notes and the
Certificate Rate on the Certificates pursuant to the Auction Procedures will be
suspended. The Class Interest Rate on each Class of Auction Rate Notes and the
Certificates for each applicable Auction Period commencing after the date of
Payment Default will equal the Non-Payment Rate as it is determined by the
Trustee on the first day of such Auction Period.
Terms used herein have the meanings set forth in the Second Terms Supplement and
the Trust Agreement relating to the above-referenced issue.
BANKERS TRUST COMPANY, as Auction
Agent
By:_______________________________
Name:
Title:
Date:
<PAGE>
EXHIBIT G
TO AUCTION AGENT AGREEMENT
SETTLEMENT PROCEDURES
If not otherwise defined below, capitalized terms used herein shall
have the meanings given such terms in the Second Terms Supplement and the Trust
Agreement.
(a) Not later than (1) 3:00 P.M. if the Class Interest Rate for a
Class of Auction Rate Notes or the Certificate Rate for the Certificates, as the
case may be, is the Auction Rate or (2) 4:00 P.M. if the Class Interest Rate for
a Class of Auction Rate Notes or the Certificate Rate for the Certificates, as
the case may be, is the Net Loan Rate on each Auction Date, the Auction Agent
shall notify by telephone each Broker-Dealer that participated in the Auction
held on such Auction Date and submitted an Order on behalf of an Existing
Noteholder or Existing Certificateholder or Potential Noteholder or Potential
Certificateholder:
(i) the Class Interest Rate for the applicable Class of Auction
Rate Notes or Certificate Rate fixed for the next Interest Period;
(ii) whether there were Sufficient Bids in such Auction;
(iii) if such Broker-Dealer (a "Seller's Broker- Dealer")
submitted Bids or Sell Orders on behalf of an Existing Noteholder or
Existing Certificateholder, whether such Bid or Sell Order was accepted or
rejected, in whole or in part, and the principal amount of the applicable
Class of Auction Rate Notes or Certificates, if any, to be sold by such
Existing Noteholder or Existing Certificateholder;
(iv) if such Broker-Dealer (a "Buyer's Broker-Dealer") submitted
a Bid on behalf of a Potential Noteholder or Potential Certificateholder,
whether such Bid was accepted or rejected, in whole or in part, and the
principal amount of the applicable Class of Auction Rate Notes or
Certificates, if any, to be purchased by such Potential Noteholder or
Potential Certificateholder;
(v) if the aggregate amount of Auction Rate Notes to be sold by
all Existing Noteholders, or Certificates to be sold by all Existing
Certificateholders, on whose behalf such Seller's Broker-Dealer submitted
Bids or Sell Orders exceeds the aggregate principal amount of Auction Rate
Notes or Certificates, as the case may be, to be purchased by all Potential
Noteholders or Potential Certificateholders on whose behalf such Buyer's
Broker-Dealer submitted a Bid, the name or names of one or more Buyer's
Broker-Dealers (and the name of the Participant, if any, of each such
Buyer's Broker-Dealer) acting for one or more purchasers of such excess
principal amount of Auction Rate Notes or Certificates and the principal
amount of Auction Rate Notes or Certificates to be purchased from one or
more Existing Noteholders or Existing Certificateholders on whose behalf
such Seller's Broker-Dealer acted by one or more Potential Noteholders or
Potential Certificateholders on whose behalf each of such Buyer's
Broker-Dealers acted;
(vi) if the principal amount of Auction Rate Notes or
Certificates to be purchased by all Potential Noteholders or Potential
Certificateholders on whose behalf such Buyer's Broker-Dealer submitted a
Bid exceeds the amount of Auction Rate Notes or Certificates to be sold by
all Existing Noteholders or Existing Certificateholders on whose behalf
such Sellers' Broker-Dealer submitted a Bid or a Sell Order, the name or
names of one or more Sellers' Broker-Dealers (and the name of the
Participant, if any, of each such Seller's Broker-Dealer) acting for one or
more sellers of such excess principal amount of Auction Rate Notes or
Certificates and the principal amount of Auction Rate Notes or Certificates
to be sold to one or more Potential Noteholders or Potential
Certificateholders on whose behalf such Buyer's Broker-Dealer acted by one
or more Existing Noteholders or Existing Certificateholders on whose behalf
each of such Seller's Broker-Dealers acted; and
(vii) the Auction Date for the next succeeding Auction.
(b) On each Auction Date, each Broker-Dealer that submitted an Order
on behalf of any Existing Noteholder or Existing Certificateholder or Potential
Noteholder or Potential Certificateholder shall:
(i) advise each Existing Noteholder or Existing Certificateholder
and Potential Noteholder or Potential Certificateholder on whose behalf
such Broker-Dealer submitted a Bid or Sell Order in the Auction on such
Auction Date whether such Bid or Sell Order was accepted or rejected, in
whole or in part;
(ii) in the case of a Broker-Dealer that is a Buyer's
Broker-Dealer, advise each Potential Noteholder or Potential
Certificateholder on whose behalf such Buyer's Broker-Dealer submitted a
Bid that was accepted, in whole or in part, to instruct such Potential
Owner's Participant to pay such Buyer's Broker-Dealer (or its Participant)
through the Securities Depository the amount necessary to purchase the
principal amount of Auction Rate Notes or Certificates to be purchased
pursuant to such Bid against receipt of such Auction Rate Notes or
Certificates, together with accrued interest;
(iii) in the case of a Broker-Dealer that is a Seller's
Broker-Dealer, instruct each Existing Noteholder or Existing
Certificateholder on whose behalf such Seller's Broker-Dealer submitted a
Sell Order that was accepted, in whole or in part, or a Bid that was
accepted, in whole or in part, to instruct such Existing Noteholder's or
Existing Certificateholder's Participant to deliver to such Seller's
Broker-Dealer (or its Participant) through the Securities Depository the
principal amount of Auction Rate Notes or Certificates to be sold pursuant
to such Order against payment therefor;
(iv) advise each Existing Noteholder or Existing
Certificateholder on whose behalf such Broker-Dealer submitted an Order and
each Potential Noteholder or Potential Certificateholder on whose behalf
such Broker- Dealer submitted a Bid of the Auction Rate for the next
Interest Period;
(v) advise each Existing Noteholder or Existing Certificateholder
on whose behalf such Broker-Dealer submitted an Order of the next Auction
Date; and
(vi) advise each Potential Noteholder or Potential
Certificateholders on whose behalf such Broker-Dealer submitted a Bid that
was accepted, in whole or in part, of the next Auction Date.
(c) on the basis of the information provided to it pursuant to
paragraph (a) above, each Broker-Dealer that submitted a Bid or Sell Order in an
Auction is required to allocate any funds received by it in connection with such
Auction pursuant to paragraph (b)(ii) above, and any Auction Rate Notes or
Certificates received by it in connection with such Auction pursuant to
paragraph (b)(iii) above among the Potential Noteholders or Potential
Certificateholders, if any, on whose behalf such Broker-Dealer submitted Bids,
the Existing Noteholders or Existing Certificateholders, if any, on whose behalf
such Broker-Dealer submitted Bids or Sell Orders in such Auction, and any
Broker-Dealers identified to it by the Auction Agent following such Auction
pursuant to paragraph (a)(v) or (a)(vi) above.
(d) on each Auction Date:
(i) each Potential Noteholder or Potential Certificateholder and
Existing Noteholder or Existing Certificateholder with an Order in the
Auction on such Auction Date shall instruct its Participant as provided in
(b)(ii) or (b)(iii) above, as the case may be;
(ii) each Seller's Broker-Dealer that is not a Participant of the
Securities Depository shall instruct its Participant to deliver such
Auction Rate Notes or Certificates through the Securities Depository to a
Buyer's Broker-Dealer (or its Participant) identified to such Seller's
Broker-Dealer pursuant to (a)(v) above against payment therefor; and
(iii) each Buyer's Broker-Dealer that is not a Participant in the
Securities Depository shall instruct its Participant to pay through the
Securities Depository to Seller's Broker-Dealer (or its Participant)
identified following such Auction pursuant to (a)(vi) above in the amount
necessary to purchase Auction Rate Notes or Certificates to be purchased
pursuant to (b)(ii) above against receipt of such Auction Rate Notes or
Certificates.
(e) on the Business Date following each Auction Date:
(i) each Participant for a Bidder in the Auction on such Auction
Date referred to in (d)(i) above shall instruct the Securities Depository
to execute the transactions described under (b)(ii) or (b)(iii) above for
such Auction, and the Securities Depository shall execute such
transactions;
(ii) each Seller's Broker-Dealer or its Participant shall
instruct the Securities Depository to execute the transactions described in
(d)(ii) above for such Auction, and the Securities Depository shall execute
such transactions; and
(iii) each Buyer's Broker-Dealer or its Participant shall
instruct the Securities Depository to execute the transactions described in
(d)(iii) above for such Auction, and the Securities Depository shall
execute such transactions.
(f) If an Existing Noteholder selling Notes or an Existing
Certificateholder selling Certificates in an Auction fails to deliver such
Auction Rate Notes or Certificates (by authorized book-entry), a Broker-Dealer
may deliver to the Potential Noteholder or Potential Certificateholder on behalf
of which it submitted a Bid that was accepted a principal amount of Auction Rate
Notes or Certificates that is less than the principal amount of Auction Rate
Notes or Certificates that otherwise was to be purchased by such Potential
Noteholder or Potential Certificateholder. In such event, the principal amount
of Auction Rate Notes or Certificates to be so delivered shall be determined
solely by such Broker-Dealer (but only in Authorized Denominations). Delivery of
such lesser principal amount of Auction Rate Notes or Certificates shall
constitute good delivery. Notwithstanding the foregoing terms of this paragraph
(f), any delivery or nondelivery of Auction Rate Notes or Certificates which
shall represent any departure from the results of an Auction, as determined by
the Auction Agent, shall be of no effect unless and until the Auction Agent
shall have been notified of such delivery or nondelivery in accordance with the
provisions of the Auction Agent Agreement and the Broker-Dealer Agreements.
Neither the Indenture Trustee nor the Auction Agent will have any responsibility
or liability with respect to the failure of a Potential Noteholder or Potential
Certificateholder, Existing Noteholder or Existing Certificateholder or their
respective Broker-Dealer or Participant to take delivery of or deliver, as the
case may be, the principal amount of Auction Rate Notes or Certificates
purchased or sold pursuant to an Auction or otherwise.
<PAGE>
EXHIBIT H
TO AUCTION AGENT AGREEMENT
NOTICE OF CONTINUATION OF AUCTION PERIOD
CLASSNOTES TRUST 1997-I
ASSET BACKED NOTES, SERIES 1997-2
AUCTION RATE ASSET BACKED CERTIFICATES
NOTICE IS HEREBY GIVEN that a condition for the establishment of a change in the
length of one or more Auction Periods for the Series 1997-2, Class A-5 and A-6
Notes and Certificates has not been met. An Auction will therefore be held on
the next Auction Date (_____________________) and the length of such Auction
Period shall remain an Auction Period of days.
BANKERS TRUST COMPANY,
as Auction Agent
By:___________________________________
Name:
Title:
Date:
<PAGE>
EXHIBIT I
TO AUCTION AGENT AGREEMENT
NOTICE OF INTEREST RATE
CLASSNOTES TRUST 1997-I
ASSET BACKED NOTES, SERIES 1997-2
AUCTION RATE ASSET BACKED CERTIFICATES
NOTICE IS HEREBY GIVEN that [the Issuer Certificate and the Indenture Trustee
written statements, if any,] [Sufficient Bids] necessary for the establishment
of a change in the length of one or more Auction Periods for the Series 1997-2,
Class A-5 and A-6 Notes and Certificates have not been provided. The [Class
Interest Rate][Certificate Rate] for the Auction Period commencing on
__________________________ shall be the [Maximum Auction Rate] [Net Loan Rate]
and such Auction Period shall remain an Auction Period of ______ days.
BANKERS TRUST COMPANY,
as Auction Agent
By:____________________________
Name:
Title:
Date:
<PAGE>
EXHIBIT J
TO AUCTION AGENT AGREEMENT
NOTICE OF RATINGS
CLASSNOTES TRUST 1997-I
ASSET BACKED NOTES, SERIES 1997-2
AUCTION RATE ASSET BACKED CERTIFICATES
NOTICE IS HEREBY GIVEN to the Auction Agent by the Issuer pursuant to Section
2.3(a) of the Auction Agent Agreement that:
1. as of the date of this notice the rating by [Moody's] on the
[Series 1997-2 Notes] [Certificates] is _______ [and such
rate is [*"Aa3" or higher/lower than "Aa3"]];** and
2. as of the date of this notice the rating on the [Series
1997-2 Notes][Certificates] by [Standard & Poor's] is
____________ [and such rate is [*"AA-" or higher] [lower
than "AA"]].**
The Auction Agent may rely on such ratings for all purposes of the First Terms
Supplement, and the Trust Agreement, including determination of the Maximum
Auction Rate thereunder, from the date hereof until further notice from the
undersigned.
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:
- --------
* Choose one.
* The information in the outer brackets will be used as applicable whenever
the [Moody's] rating is not equal to "Aa3" and/or the [Standard & Poor's]
rating is not equal to "AA-."
Exhibit 99.2
EXECUTION COPY
BROKER-DEALER AGREEMENT
between
BANKERS TRUST COMPANY,
as Auction Agent
and
SMITH BARNEY INC.,
as Broker-Dealer
Dated as of December 24, 1997
Relating to
CLASSNOTES TRUST 1997-I
ASSET BACKED NOTES
SERIES 1997-2
AND
AUCTION RATE ASSET BACKED CERTIFICATES, CLASS 2
<PAGE>
BROKER-DEALER AGREEMENT
This BROKER-DEALER AGREEMENT (the "Broker-Dealer Agreement"), dated as
of December 24, 1997, is by and between Bankers Trust Company, a New York
banking corporation (together with its successors and assigns, the Auction
Agent"), pursuant to authority granted to it in the Auction Agent Agreement,
defined below, acting not in its individual capacity, but solely as agent for
ClassNotes Trust l997-I, a Pennsylvania business trust (the "Issuer") and SMITH
BARNEY INC. (together with its successors and assigns, the "Broker-Dealer").
RECITALS
The Issuer proposes to cause the Trustee (defined below) to
authenticate and deliver $265,000,000 aggregate principal amount of its Asset
Backed Notes, Series 1997-2, Class A-4 (the "Class A-4 Notes"), Class A-5 (the
"Class A-5 Notes") and Class A-6 (the "Class A-6 Notes" and, together with the
Class A-4 Notes and the Class A-5 Notes, the "Series 1997-2 Notes"). The Series
1997-2 Notes are being issued under the Second Terms Supplement dated as of
December 24, 1997 (herein, the "Second Terms Supplement") executed in accordance
with the Indenture dated as of March 21, 1997 (as amended and supplemented from
time to time, the "Master Indenture"), between the Issuer and Bankers Trust
Company (the "Indenture Trustee"). The Class A-5 Notes and the Class A-6 Notes
(collectively, the "Notes") are being issued as auction rate securities.
In connection with issuing the Series 1997-2 Notes, the Issuer
proposes to issue $15,000,000 aggregate principal amount of its Auction Rate
Asset Backed Certificates, Class 2 (the "Certificates"). The Certificates are
being issued under the Second Trust Supplement, dated as of December 23, 1997
(herein, the "Trust Supplement") executed in accordance with the Trust Agreement
dated as of March 21, 1997 (as amended or supplemented from time to time, the
"Trust Agreement"), Trans-World Insurance Company d/b/a Educaid, an Arizona
corporation, and ClassNotes, Inc., a Delaware corporation, as 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 Certificates are being issued as auction rate securities.
The Second Terms Supplement provides that the Class Interest Rate for
each Class of Notes for each applicable Interest Period after the Initial Period
shall equal the lesser of the Net Loan Rate and the Auction Rate, but in no
event shall exceed the applicable Class Interest Rate Limitation.
The Trust Supplement provides that the Certificate Rate for each
applicable Interest Period after the Initial Period shall equal the lesser of
the Net Loan Rate and the Auction Rate, but in no event shall exceed the
Certificate Rate Limitation.
Pursuant to Section 2.9 (a) of the Auction Agent Agreement dated as of
December 24, 1997 among the Indenture Trustee, the Auction Agent and the Issuer
(the "Auction Agent Agreement"), the Indenture Trustee has directed the Auction
Agent to execute and deliver this Broker-Dealer Agreement.
The Auction Procedures require the participation of one or more
Broker-Dealers.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Auction Agent, as agent of the Issuer, and the
Broker-Dealer agree as follows:
Section 1. DEFINITIONS AND RULES OF CONSTRUCTION
1.1. TERMS DEFINED BY REFERENCE TO THE MASTER INDENTURE, SECOND TERMS
SUPPLEMENT, TRUST SUPPLEMENT OR TRUST AGREEMENT. Capitalized terms used herein
and not otherwise defined herein shall have the meanings given such terms in the
Master Indenture, Second Terms Supplement, Trust Supplement or Trust Agreement.
1.2. TERMS DEFINED HEREIN. As used herein and in the Settlement
Procedures, defined below, the following terms shall have the following
meanings, unless the context otherwise requires:
APPLICABLE INTEREST RATE" shall mean (i) with respect to the Notes,
the applicable Class Interest Rate for each Class of Notes, as determined
pursuant to the Second Terms Supplement and (ii) with respect to the
Certificates, the applicable Certificate Rate, as determined pursuant to the
Trust Agreement.
"AUTHORIZED OFFICER" shall mean, with respect to the Auction Agent,
each Managing Director, Vice President, Assistant Vice President, and Assistant
Treasurer of the Auction Agent and every other officer of the Auction Agent
assigned to its Corporate Trust Group and every other officer or employee of
Auction Agent designated as an "Authorized Officer" for purposes of this
Agreement in a communication to the Broker-Dealer.
"BENEFICIAL OWNER" shall mean a beneficial owner of any of the Notes
or the Certificates.
"BROKER-DEALER OFFICER" shall mean each officer or employee of the
Broker-Dealer designated as a "Broker-Dealer Officer for purposes of this
Broker-Dealer Agreement in a communication to the Auction Agent.
"NOTICE OF FAILURE TO DELIVER OR MAKE PAYMENT" shall mean a notice
substantially in the form of Exhibit D hereto.
"NOTICE OF TRANSFER" shall mean a notice substantially in the form of
Exhibit C hereto.
"ORDER FORM" shall mean the form to be submitted by any Broker-Dealer
on or prior to any Auction Date substantially in the form of Exhibits B-1 and
B-2 hereto.
"SETTLEMENT PROCEDURES" shall mean the Settlement Procedures attached
hereto as Exhibit A.
1.3. RULES OF CONSTRUCTION. Unless the context or use indicate another
or different meaning or intent, the following rules shall apply to the
construction of this Agreement;
(a) Words importing the singular number shall include the plural
number and vice versa.
(b) The captions and headings herein are solely for convenience of
reference and shall not constitute a part of this Agreement nor shall they
affect its meaning, construction or effect.
(c) The words "hereof," "herein," "hereto," and other words of similar
import refer to this Broker-Dealer Agreement as a whole.
(d) All references herein to a particular time of day shall be to New
York City time.
Section 2. THE AUCTION
2.1. INCORPORATION BY REFERENCE OF AUCTION PROCEDURES AND SETTLEMENT
PROCEDURES.
(a) On each Auction Date, the provisions of the Auction Procedures
will be followed by the Auction Agent for the purpose of determining the
Applicable Interest Rate for each Auction Period after the Initial Period. Each
periodic operation of such procedures is hereinafter referred to as an
"Auction."
(b) All of the provisions contained in the Auction Procedures and the
Settlement Procedures are incorporated herein by reference in their entirety and
shall be deemed to be a part of this Broker-Dealer Agreement to the same extent
as if such provisions were fully set forth herein.
(c) The Broker-Dealer and other Broker-Dealers may participate in
Auctions for their own accounts.
2.2. PREPARATION FOR EACH AUCTION.
(a) Not later than 9:30 A.M. on each Auction Date for a Class of the
Notes or the Certificates, the Auction Agent shall advise the Broker-Dealer by
telephone of the All Hold Rate, the Maximum Auction Rate, the Net Loan Rate
(based upon information provided by the Administrator), the One-Month LIBOR and
the Three-Month LIBOR.
(b) In the event the Auction Date for any Auction shall be changed
after the Auction Agent has given notice of such Auction Date pursuant to clause
(vii) of paragraph (a) of the Settlement Procedures, the Auction Agent, by
telephone (confirmed in writing), telecopy or such other means as the Auction
Agent deems practicable, shall give notice of such change to the Broker-Dealer
not later than the earlier of 9:15 A.M. on the new Auction Date and 9:15 A.M. on
the old Auction Date. Thereafter, the Broker-Dealer shall use its best efforts
to promptly notify its customers who are Existing Noteholders or Existing
Certificateholders, as the case may be, of such change in the Auction Date.
(c) From time to time upon request of the Auction Agent, the
Broker-Dealer shall provide the Auction Agent with a statement of the aggregate
amount of Notes held by the Broker- Dealer as an Existing Noteholder, or the
aggregate amount of Certificates held by the Broker-Dealer as an Existing
Certificateholder, in either case for its own account or otherwise.
(d) The Auction Agent shall send by telecopy or other means a copy of
any Notice of Notes Outstanding or Notice of Certificates Outstanding, as the
case may be, received from the Indenture Trustee or the Eligible Lender Trustee
to the Broker- Dealer in accordance with Section 4.3 hereof.
2.3. AUCTION SCHEDULE: METHOD OF SUBMISSION OF ORDERS.
(a) The Auction Agent shall conduct Auctions for the Notes and the
Certificates in accordance with the schedule set forth below. Such schedule may
be changed by the Auction Agent with the consent of the Indenture Trustee and
the Market Agent, which consent shall not be unreasonably withheld or delayed.
The Auction Agent shall give written notice of any such change to the
Broker-Dealer and the Eligible Lender Trustee. Such notice shall be given prior
to the close of business on the Business Day next preceding the first Auction
Date on which any such change shall be effective.
By 9:30 A.M. The Auction Agent advises the Indenture
Trustee and the Broker-Dealers of the Maximum
Auction Rate, the All Hold Rate, the Net Loan
Rate (as provided by the Administrator) and
One-Month LIBOR or Three-Month LIBOR, as
applicable, to be used in determining the
Auction Rate under the Auction Procedures,
the Second Terms Supplement, the Trust
Agreement and the Auction Agent Agreement.
9:30 A.M. - Auction Agent assembles information
12:30 P.M. communicated to it by Broker-Dealers as
provided in Section 2.5.1(c)(i) of the Second
Terms Supplement or 2.2.1(c)(i) of Appendix B
of the Trust Agreement. The Submission
Deadline is 12:30 P.M.
Not earlier The Auction Agent makes determinations
than 12:30 P.M. pursuant to Section 2.5.1(c)(i) of the
Second Terms Supplement or 2.2.1(c)(i) of
Appendix B of the Trust Agreement.
By approximately The Auction Agent advises the
3:00 P.M.* or 4:00 P.M.** Indenture Trustee of the results of
the Auction as provided in Section
2.5.1(c)(ii) of the Second Terms Supplement
or the Eligible Lender Trustee of the results
of the Auction as provided in Section
2.2.1(c)(ii) of Appendix B of the Trust
Agreement. Submitted Bids and Submitted Sell
Orders are accepted and rejected in whole or
in part and (x) Notes allocated as provided
in Section 2.5.1(d) of the Second Terms
Supplement or (y) Certificates allocated as
provided in 2.2.1(d) of Appendix B of the
Trust Agreement, as the case may be. The
Auction Agent gives notice of Auction results
as set forth in Section 2.4(a) hereof.
(b) The Broker-Dealer agrees to maintain a list of Potential
Noteholders and Potential Certificateholders and to contact the Potential
Noteholders and Potential Certificateholders on such list on or prior to each
applicable Auction Date for the purposes of participating in the Auction on such
Auction Date.
(c) The Broker-Dealer shall submit Orders to the Auction Agent in
writing by delivering an Order Form. The Broker-Dealer shall submit separate
Orders to the Auction Agent for each Potential Noteholder or Potential
Certificateholder, as the case may be, or Existing Noteholder or Existing
Certificateholder, as the case may be, on whose behalf the Broker-Dealer is
submitting an Order and shall not net or aggregate the Orders of different
Potential Noteholders or Potential Certificateholders or Existing Noteholders or
Existing Certificateholders on whose behalf the Broker-Dealer is submitting
Orders.
(d) The Broker-Dealer shall deliver to the Auction Agent (i) a Notice
of Transfer with respect to any transfer of Notes or Certificates made through
the Broker-Dealer by an Existing Noteholder or Existing Certificateholder, as
the case may be, to another person other than pursuant to an Auction, and (ii) a
Notice of Failure to Deliver or Make Payment with respect to the failure of any
Notes or Certificates to be transferred to or payment to be made by any person
that purchased or sold Notes or Certificates, as the case may be, through the
Broker-Dealer pursuant to a prior Auction. The Auction Agent is not required to
accept any notice delivered pursuant to clauses (i) or (ii) of this subparagraph
(d) with respect to an Auction unless it is received by the Auction Agent by
3:00 P.M. on the Business Day next preceding such Auction Date.
____________________
* If the Class Interest Rate or the Certificate Rate, as the case may be, is
the Auction Rate.
** If the Class Interest Rate or the Certificate Rate, as the case may be, is
the Net Loan Rate.
<PAGE>
(e) The Broker-Dealer agrees to handle its customers' Orders in
accordance with its duties under applicable securities laws and rules.
2.4. NOTICES. (a) On each Auction Date, the Auction Agent shall notify
the Broker-Dealer and the Administrator by telephone of the results of the
Auction as set forth in paragraph (a) of the Settlement Procedures. The Auction
Agent shall by 10:30 A.M. on the Business Day next succeeding such Auction Date
if previously requested by the Broker-Dealer notify the Broker- Dealer in
writing of the disposition of all Orders submitted by the Broker-Dealer in the
Auction held on such Auction Date.
(b) The Broker-Dealer shall notify each Existing Noteholder or
Existing Certificateholder or Potential Noteholder or Potential
Certificateholder on whose behalf the Broker-Dealer has submitted an Order as
set forth in paragraph (b) of the Settlement Procedures and take such other
action as is required by the Broker-Dealer pursuant to the Settlement
Procedures.
(c) The Auction Agent shall deliver to the Broker- Dealer all notices
and certificates that the Auction Agent is required to deliver to the
Broker-Dealer pursuant to Section 2 of the Auction Agent Agreement at the times
and in the manner set forth in the Auction Agent Agreement.
2.5. SERVICE CHARGE TO BE PAID TO THE BROKER-DEALER. (a) For each
Interest Period, commencing on the Closing Date, the Broker-Dealer shall be
entitled to a fee, in an amount equal to the product of (i) a fraction, the
numerator of which is the number of days in the Interest Period related to the
Auction by which the applicable Class Interest Rate or Certificate Rate was
determined and the denominator of which is 360 times (ii) the Broker-Dealer Fee
Rate times (iii) the sum of (A) the aggregate principal amount of Notes or
Certificates, as the case may be, placed by the Broker-Dealer in such Auction
that were (x) the subject of Submitted Bids of Existing Noteholders or Existing
Certificateholders submitted by the Broker-Dealer and continued to be held as a
result of such submission and (y) the subject of Submitted Bids of Potential
Noteholders or Potential Certificateholders submitted by the Broker-Dealer and
purchased as a result of such submission, plus (B) the aggregate principal
amount of Notes or Certificates, as the case may be, subject to valid Hold
Orders submitted to the Auction Agent by the Broker- Dealer plus (C) the
aggregate principal amount of Notes or Certificates, as the case may be, that
were covered by Hold Orders deemed to have been submitted by Existing
Noteholders or Existing Certificateholders that were acquired by such Existing
Noteholders or Existing Certificateholders through the Broker- Dealer. For
purposes of subclause (iii)(C) above, if any Existing Noteholders or Existing
Certificateholders who acquired Notes or Certificates, as the case may be,
through the Broker- Dealer transfers those Notes or Certificates, as the case
may be, to another person other than pursuant to an Auction, then the
Broker-Dealer shall continue to be the Broker-Dealer through which the Notes or
Certificates, as the case may be, so transferred were acquired; provided,
however, that if the transfer was effected by, or if the transferee is a
Broker-Dealer other than the Broker-Dealer, then such other Broker-Dealer shall
be the Broker-Dealer through which such Notes or Certificates, as the case may
be, were acquired.
(b) The fee payable to the Broker-Dealer pursuant to Section 2.5(a)
above shall be calculated monthly and paid monthly, in arrears, by the Auction
Agent on the First Note Distribution Date for all Classes of Notes issued by the
Issuer 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), commencing January 1998. Such fee shall be paid
by the Auction Agent out of the Auction Agent Fee received by the Auction Agent
on each such date pursuant to the Sale and Servicing Agreement.
2.6. SETTLEMENT. (a) If any Existing Noteholders or Existing
Certificateholders on whose behalf the Broker-Dealer has submitted a Bid or Sell
Order for Notes or Certificates, as the case may be, that was accepted in whole
or in part fails to instruct its Participant to deliver the Notes or
Certificates, as the case may be, subject to such Bid or Sell Order against
payment therefor, the Broker-Dealer shall instruct such Participant to deliver
such Notes or Certificates, as the case may be, against payment therefor and the
Broker-Dealer may deliver to the Potential Noteholder or Potential
Certificateholder on whose behalf the Broker-Dealer submitted a Bid that was
accepted in whole or in part, a principal amount of the Notes or Certificates,
as the case may be, that is less than the principal amount of the Notes or
Certificates, as the case may be, specified in such Bid to be purchased by such
Potential Noteholder or Potential Certificateholder. Notwithstanding the
foregoing terms of this Section, any delivery or nondelivery of Notes or
Certificates, as the case may be, that represents any departure from the results
of an Auction, as determined by the Auction Agent, shall be of no effect unless
and until the Auction Agent shall have been notified of such delivery or
non-delivery in accordance with the terms of Section 2.3(d) hereof. The Auction
Agent shall have no duty or liability with respect to enforcement of this
Section 2.6(a).
(b) Neither the Auction Agent, the Indenture Trustee, nor the Issuer
shall have any responsibility or liability with respect to the failure of an
Existing Noteholder, an Existing Certificateholder, a Potential Noteholder, a
Potential Certificateholder or its respective Participant to deliver Notes or
Certificates, as the case may be, or to pay for Notes or Certificates, as the
case may be, sold or purchased pursuant to the Auction Procedures or otherwise.
The Auction Agent shall have no responsibility for any adjustment to the fees
paid pursuant to Section 2.5 hereof as a result of any failure described in this
Section 2.6(b).
Section 3. THE AUCTION AGENT.
3.1. DUTIES AND RESPONSIBILITIES. (a) The Auction Agent is acting
hereunder solely as agent for the Issuer and owes no fiduciary duties to any
person by reason of this Broker-Dealer Agreement.
(b) The Auction Agent undertakes to perform such duties and only such
duties as are specifically set forth in this Broker-Dealer Agreement, and no
implied covenants or obligations shall be read into this Broker-Dealer Agreement
against the Auction Agent.
(c) In the absence of bad faith or negligence on its part, the Auction
Agent shall not be liable for any action taken, suffered, or omitted or for any
error of judgment made by it in the performance of its duties under this
Broker-Dealer Agreement. The Auction Agent shall not be liable for any error of
judgment made in good faith unless the Auction Agent shall have been negligent
in ascertaining (or failing to ascertain) the pertinent facts.
3.2. RIGHTS OF THE AUCTION AGENT. (a) The Auction Agent may rely and
shall be protected in acting or refraining from acting upon any communication
authorized by this Broker- Dealer Agreement and upon any written instruction,
notice request, direction, consent report, certificate, share certificate or
other instrument, paper or document reasonably believed by it to be genuine. The
Auction Agent shall not be liable for acting upon any telephone communication
authorized by this Broker-Dealer Agreement which the Auction Agent believes in
good faith to have been given by the Indenture Trustee, a Broker- Dealer, the
Administrator or the Issuer. The Auction Agent may record telephone
communications with the Broker-Dealers.
(b) The Auction Agent may consult with counsel of its own choice, and
the advice of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon.
(c) The Auction Agent shall not be required to advance, expend or risk
its own funds or otherwise incur or become exposed to financial liability in the
performance of its duties hereunder.
(d) The Auction Agent may perform its duties and exercise its rights
hereunder either directly or by or through agents or attorneys and shall not be
responsible for any willful misconduct or negligence on the part of any agent or
attorney appointed by it with due care hereunder.
3.3. THE AUCTION AQENT'S DISCLAIMER. The Auction Agent makes no
representation as to the validity, adequacy or accuracy of the recitals in this
Broker-Dealer Agreement, the Auction Agent Agreement or the validity, adequacy
or accuracy of the Notes or the Certificates.
Section 4. MISCELLANEOUS.
4.1. TERMINATION. Any party may terminate this Broker-Dealer Agreement
at any time upon five days' prior notice to the other party; provided, however,
that if the Broker-Dealer is Smith Barney Inc., neither the Broker-Dealer nor
the Auction Agent may terminate this Broker-Dealer Agreement without first
obtaining the prior written consent of the Trustee, the Surety Provider and the
Issuer to such termination, which consent shall not be unreasonably withheld or
delayed. For so long as the Auction Agent Agreement is effective and Smith
Barney Inc. is the sole Broker-Dealer, any termination of this Broker-Dealer
Agreement shall not be effective unless and until a successor, or substitute
Broker-Dealer Agreement becomes effective. This Broker-Dealer Agreement shall
automatically terminate (i) with respect to the Notes, upon the delivery of
certificates representing the Notes pursuant to Section 2.13 of the Master
Indenture, (ii) with respect to the Certificates, upon the delivery of
certificates representing the Certificates pursuant to Section 3.14 of the Trust
Agreement or (iii) with respect to the Notes and the Certificates, upon
termination of the Auction Agent Agreement.
4.2. PARTICIPANT. The Broker-Dealer is, and shall remain for the term
of this Broker-Dealer Agreement, a member of, or Participant in, the Depository
(or an affiliate of such a member or Participant).
4.3. COMMUNICATIONS. Except for (i) communications authorized to be
made by telephone pursuant to this Broker-Dealer Agreement or the Auction
Procedures and (ii) communications in connection with the Auctions (other than
those expressly required to be in writing), all notices, request and other
communications to any party hereunder shall be in writing (including facsimile
or similar writing) and shall be given to such party, addressed to it, or its
address or facsimile number set forth below:
If to the Broker-Dealer,
addressed: SMITH BARNEY INC.
390 Greenwich Street
5th Floor
New York, New York 10013
Attention: Manager, Auction Rate
Products Group
Telephone: (212) 723-7082
Facsimile: (212) 723-8809
If to the Auction Agent,
addressed: BANKERS TRUST COMPANY
4 Albany Street
New York, New York 10006
Attention: Corporate Trust and Agency Group
Telephone: (212) 250-6850
Facsimile: (212) 250-6215
If to the Indenture
Trustee,
addressed: BANKERS TRUST COMPANY
4 Albany Street
New York, New York 10006
Attention: Corporate Trust and Agency Group
Telephone: (212) 250-6533
Facsimile: (212) 250-6439
If to the Issuer,
addressed: THE YORK BANK AND TRUST COMPANY,
c/o DAUPHIN DEPOSIT BANK AND TRUST COMPANY
213 Market Street
Harrisburg, Pennsylvania 17101
Attention: Corporate Trust Services
Telephone: (717) 255-2387
Facsimile: (717) 231-2615
With a copy to
the Administrator: c/o The Money Store Inc.
2840 Morris Avenue
Union, New Jersey 07083
Attention: Chief Financial Officer
Telephone: (908) 686-2000
Facsimile: (908) 688-3846
If to the Surety
Provider,
addressed: Ambac Assurance Corporation
One State Street Plaza
New York, New York 10004
Attention: Structured Finance
Department/Student Loans
Telephone: (212) 668-0340
Facsimile: (212) 509-9190
or such other address or facsimile number as such party may hereafter specify
for such purpose by notice to the other party. Each such notice, request or
communication shall be effective when delivered at the address specified herein.
Communications shall be given on behalf of the Broker-Dealer by a Broker-Dealer
Officer and on behalf of the Auction Agent by an Authorized Officer of the
Auction Agent. The Broker-Dealer may record telephone communications with the
Auction Agent.
4.4. ENTIRE AGREEMENT. This Broker-Dealer Agreement contains the
entire agreement between the parties relating to the subject matter hereof, and
there are no other representations, endorsements, promises, agreements or
understandings, oral, written or inferred, between the parties relating to the
subject matter hereof.
4.5. BENEFITS. Nothing in this Broker-Dealer Agreement, express or
implied, shall give to any person, other than the Auction Agent, the Issuer, the
Broker-Dealer and their respective successors and assigns, any benefit of any
legal or equitable right, remedy or claim under this Broker-Dealer Agreement.
4.6. AMENDMENT; WAIVER. (a) This Broker-Dealer Agreement shall not be
deemed or construed to be modified, amended, rescinded, canceled or waived, in
whole or in part, except by a written instrument signed by a duly authorized
representative of the parties hereto. This Broker-Dealer Agreement may not be
amended without first obtaining the prior written consent of the Issuer;
provided that no amendment that changes any right of consent or any notice to
the Surety Provider shall become effective without the written consent of the
Surety Provider.
(b) Failure of either party to this Broker-Dealer Agreement to
exercise any right or remedy hereunder in the event of a breach of this
Broker-Dealer Agreement by the other party shall not constitute a waiver of any
such right or remedy with respect to any subsequent breach.
4.7. SUCCESSORS AND ASSIGNS. This Broker-Dealer Agreement shall be
binding upon, inure to the benefit of, and be enforceable by, the parties hereto
and their respective successors and assigns.
4.8. SEVERABILITY. If any clause, provision or section of this
Broker-Dealer Agreement shall be ruled invalid or unenforceable by any court of
competent jurisdiction, the invalidity or unenforceability of such clause,
provision or section shall not affect any remaining clause, provision or
sections hereof.
4.9. EXECUTION IN COUNTERPARTS. This Broker-Dealer Agreement may be
executed in several counterparts, each of which shall be an original and all of
which shall constitute but one and the same instrument.
4.10. GOVERNING LAW. This Broker-Dealer Agreement shall be governed by
and construed in accordance with the laws of the State of New York.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Broker-Dealer
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first above written.
BANKERS TRUST COMPANY,
as Auction Agent
By:/s/ Melissa Reynolds
Name: Melissa Reynolds
Title: Assistant Vice President
SMITH BARNEY INC.,
as Broker-Dealer
By:/s/ John Hupalo
Name: John Hupalo
Title: Director
Pursuant to and in accordance
with Section 2.9 of the
Auction Agent Agreement
(defined above), the
undersigned consents to the
execution of the above
Broker-Dealer Agreement.
BANKERS TRUST COMPANY,
as Indenture Trustee
By:/s/ Alfia Monastra
Name Alfia Monastra
Title: Assistant Vice President
<PAGE>
EXHIBIT A TO BROKER-DEALER AGREEMENT
SETTLEMENT PROCEDURES
If not otherwise defined below, capitalized terms used herein shall
have the meanings given such terms in the Second Terms Supplement and the Trust
Agreement.
(a) Not later than (1) 3:00 P.M. if the Class Interest Rate or
Certificate Rate, as the case may be, is the Auction Rate or (2) 4:00 P.M. if
the Class Interest Rate or Certificate Rate, as the case may be, is the Net Loan
Rate on each Auction Date, the Auction Agent shall notify by telephone each
Broker-Dealer that participated in the Auction held on such Auction Date and
submitted an Order on behalf of an Existing Noteholder or Existing
Certificateholder or Potential Noteholder or Potential Certificateholder of:
(i) the Class Interest Rate or Certificate Rate fixed for the next
Interest Period;
(ii) whether there were Sufficient Bids in such Auction;
(iii) if such Broker-Dealer (a "Seller's Broker Dealer") submitted
Bids or Sell Orders on behalf of an Existing Noteholder or Existing
Certificateholder, whether such Bid or Sell Order was accepted or rejected,
in whole or in part, and the principal amount of Notes or Certificates, if
any, to be sold by such Existing Noteholder or Existing Certificateholder;
(iv) if such Broker-Dealer (a "Buyer's Broker Dealer") submitted a Bid
on behalf of a Potential Noteholder or Potential Certificateholder, whether
such Bid was accepted or rejected, in whole or in part, and the principal
amount of Notes or Certificates, if any, to be purchased by such Potential
Noteholder or Potential Certificateholder;
(v) if the aggregate amount of Notes to be sold by all Existing
Noteholders, or Certificates to be sold by all Existing Certificateholders,
on whose behalf such Seller's Broker-Dealer submitted Bids or Sell Orders
exceeds the aggregate principal amount of Notes or Certificates, as the
case may be, to be purchased by all Potential Noteholders or Potential
Certificateholders on whose behalf such Buyer's Broker-Dealer submitted a
Bid, the name or names of one or more Buyer's Broker-Dealers (and the name
of the Participant, if any, of each such Buyer's Broker-Dealer) acting for
one or more purchasers of such excess principal amount of Notes or
Certificates and the principal amount of Notes or Certificates to be
purchased from one or more Existing Noteholders or Existing
Certificateholders on whose behalf such Seller's Broker-Dealer acted by one
or more Potential Noteholders or Potential Certificateholders on whose
behalf each of such Buyer's Broker-Dealers acted;
(vi) if the principal amount of Notes or Certificates to be purchased
by all Potential Noteholders or Potential Certificateholders on whose
behalf such Buyer's Broker- Dealer submitted a Bid exceeds the amount of
Notes or Certificates to be sold by all Existing Noteholders or Existing
Certificateholders on whose behalf such Sellers' Broker-Dealer submitted a
Bid or a Sell Order, the name or names of one or more Sellers'
Broker-Dealers (and the name of the Participant, if any, of each such
Seller's Broker- Dealer) acting for one or more sellers of such excess
principal amount of Notes or Certificates and the principal amount of Notes
or Certificates to be sold to one or more Potential Noteholders or
Potential Certificateholders on whose behalf such Buyer's Broker-Dealer
acted by one or more Existing Noteholders or Existing Certificateholders on
whose behalf each of such Seller's Broker-Dealers acted; and
(vii) the Auction Date for the next succeeding Auction.
(b) On each Auction Date, each Broker-Dealer that submitted an Order
on behalf of any Existing Noteholder or Existing Certificateholder or Potential
Noteholder or Potential Certificateholder shall:
(i) advise each Existing Noteholder or Existing Certificateholder and
Potential Noteholder or Potential Certificateholder on whose behalf such
Broker-Dealer submitted a Bid or Sell Order in the Auction on such Auction
Date whether such Bid or Sell Order was accepted or rejected, in whole or
in part;
(ii) in the case of a Broker-Dealer that is a Buyer's Broker-Dealer,
advise each Potential Noteholder or Potential Certificateholder on whose
behalf such Buyer's Broker-Dealer submitted a Bid that was accepted, in
whole or in part, to instruct such Potential Owner's Participant to pay
such Buyer's Broker-Dealer (or its Participant) through the Securities
Depository the amount necessary to purchase the principal amount of Notes
or Certificates to be purchased pursuant to such Bid against receipt of
such Notes or Certificates, together with accrued interest;
(iii) in the case of a Broker-Dealer that is a Seller's Broker-Dealer,
instruct each Existing Noteholder or Existing Certificateholder on whose
behalf such Seller's Broker-Dealer submitted a Sell Order that was
accepted, in whole or in part, or a Bid that was accepted, in whole or in
part, to instruct such Existing Noteholder's or Existing
Certificateholder's Participant to deliver to such Seller's Broker-Dealer
(or its Participant) through the Securities Depository the principal amount
of Notes or Certificates to be sold pursuant to such Order against payment
therefore;
(iv) advise each Existing Noteholder or Existing Certificateholder on
whose behalf such Broker-Dealer submitted an Order and each Potential
Noteholder or Potential Certificateholder on whose behalf such Broker-
Dealer submitted a Bid of the Auction Rate for the next Interest Period;
(v) advise each Existing Noteholder or Existing Certificateholder on
whose behalf such Broker-Dealer submitted an Order of the next Auction
Date; and
(vi) advise each Potential Noteholder or Potential Certificateholders
on whose behalf such Broker-Dealer submitted a Bid that was accepted, in
whole or in part, of the next Auction Date.
(c) On the basis of the information provided to it pursuant to
paragraph (a) above, each Broker-Dealer that submitted a Bid or Sell Order in an
Auction is required to allocate any funds received by it in connection with such
Auction pursuant to paragraph (b)(ii) above, and any Notes or Certificates
received by it in connection with such Auction pursuant to paragraph (b)(iii)
above among the Potential Noteholders or Potential Certificateholders, if any,
on whose behalf such Broker-Dealer submitted Bids, the Existing Noteholders or
Existing Certificateholders, if any, on whose behalf such Broker-Dealer
submitted Bids or Sell Orders in such Auction, and any Broker-Dealers identified
to it by the Auction Agent following such Auction pursuant to paragraph (a)(v)
or (a)(vi) above.
(d) On each Auction Date:
(i) each Potential Noteholder or Potential Certificateholder and
Existing Noteholder or Existing, Certificateholder with an Order in the
Auction on such Auction Date shall instruct its Participant as provided in
(b)(ii) or (b)(iii) above, as the case may be;
(ii) each Seller's Broker-Dealer that is not a Participant of the
Securities Depository shall instruct its Participant to deliver such Notes
or Certificates through the Securities Depository to a Buyer's
Broker-Dealer (or its Participant) identified to such Seller's
Broker-Dealer pursuant to (a)(v) above against payment therefor; and
(iii) each Buyer's Broker-Dealer that is not a Participant in the
Securities Depository shall instruct its Participant to pay through the
Securities Depository to Seller's Broker-Dealer (or its Participant)
identified following such Auction pursuant to (a)(vi) above in the amount
necessary to purchase Notes or Certificates to be purchased pursuant to
(b)(ii) above against receipt of such Notes or Certificates.
(e) On the Business Date following each Auction Date:
(i) each Participant for a Bidder in the Auction on such Auction Date
referred to in (d)(i) above shall instruct the Securities Depository to
execute the transactions described under (b)(ii) or (b)(iii) above for such
Auction, and the Securities Depository shall execute such transactions;
(ii) each Seller's Broker-Dealer or its Participant shall instruct the
Securities Depository to execute the transactions described in (d)(ii)
above for such Auction, and the Securities Depository shall execute such
transactions; and
(iii) each Buyer's Broker-Dealer or its Participant shall instruct the
Securities Depository to execute the transactions described in (d)(iii)
above for such Auction, and the Securities Depository shall execute such
transactions.
(f) If an Existing Noteholder selling Notes or an Existing
Certificateholder selling Certificates in an Auction fails to deliver such Notes
or Certificates (by authorized book-entry), a Broker-Dealer may deliver to the
Potential Noteholder or Potential Certificateholder on behalf of which it
submitted a Bid that was accepted a principal amount of Notes or Certificates
that is less than the principal amount of Notes or Certificates that otherwise
was to be purchased by such Potential Noteholder or Potential Certificateholder.
In such event, the principal amount of Notes or Certificates to be so delivered
shall be determined solely by such Broker-Dealer (but only in Authorized
Denominations). Delivery of such lesser principal amount of Notes or
Certificates shall constitute good delivery. Notwithstanding the foregoing terms
of this paragraph (f), any delivery or nondelivery of Notes or Certificates
which shall represent any departure from the results of an Auction, as
determined by the Auction Agent, shall be of no effect unless and until the
Auction Agent shall have been notified of such delivery or nondelivery in
accordance with the provisions of the Auction Agent Agreement and the
Broker-Dealer Agreements. Neither the Indenture Trustee nor the Auction Agent
will have any responsibility or liability with respect to the failure of a
Potential Noteholder or Potential Certificateholder, Existing Noteholder or
Existing Certificateholder or their respective Broker-Dealer or Participant to
take delivery of or deliver, as the case may be, the principal amount of Notes
or Certificates purchased or sold pursuant to an Auction or otherwise.
<PAGE>
EXHIBIT B-1 TO BROKER-DEALER AGREEMENT
CLASSNOTES TRUST 1997-I
ASSET-BACKED NOTES, SERIES 1997-2
ORDER FORM
AUCTION DATE________________
ISSUE_______________________
SERIES______________________
The undersigned Broker-Dealer submits the following orders on behalf
of the Bidder(s) indicated below:
BIDS BY EXISTING OWNERS
PRINCIPAL AMOUNT OF
EXISTING NOTES (AUTHORIZED
NOTEHOLDER DENOMINATIONS ONLY) BID RATE
---------- -------------------- ---------
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
* Existing Noteholders may be described by name or other reference as determined
in the sole discretion of the Broker-Dealer.
<PAGE>
EXHIBIT B-2 TO BROKER-DEALER AGREEMENT
CLASSNOTES TRUST 1997-I
AUCTION RATE ASSET BACKED CERTIFICATES
ORDER FORM
AUCTION DATE________________
ISSUE_______________________
SERIES______________________
The undersigned Broker-Dealer submits the following orders on behalf
of the Bidder(s) indicated below:
BIDS BY EXISTING OWNERS
PRINCIPAL AMOUNT
OF CERTICATES
EXISTING (AUTHORIZED
NOTEHOLDER DENOMINATIONS ONLY) BID RATE
---------- ------------------ ---------
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
* Existing Certificateholders may be described by name or other reference as
determined in the sole discretion of the Broker-Dealer.
<PAGE>
CLASSNOTES TRUST 1997-I
ASSET-BACKED NOTES, SERIES 1997-2
AUCTION RATE ASSET-BACKED CERTIFICATES
BIDS BY POTENTIAL NOTEHOLDERS AND POTENTIAL CERTIFICATEHOLDERS
EXISTING PRINCIPAL AMOUNT OF
NOTEHOLDER OR NOTES/CERTIFICATES
EXISTING (AUTHORIZED
CERTIFICATEHOLDER DENOMINATIONS ONLY) BID RATE
----------------- -------------------- --------
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
===============================================================================
NOTES:
1. If one or more Orders covering in the aggregate more than the outstanding
principal amount of Notes or Certificates held by any Existing Noteholder
or Existing Certificateholder, respectively, are submitted, such Orders
shall be considered valid in the order of priority set forth in the Auction
Procedures.
2. A Hold or Sell Order may be placed only by an Existing Noteholder or
Existing Certificateholder covering a principal account of Notes or
Certificates, as the case may be, not greater than the principal amount
currently held by such Existing Noteholder or Existing Certificateholder.
3. Potential Noteholders or Potential Certificateholder may only make Bids,
each of which must specify a rate. If more than one Bid is submitted on
behalf of any Potential Noteholders or Potential Certificateholders, each
Bid submitted shall be a separate Bid with the rate specified herein.
4. Bids may contain no more than three figures to the right of the decimal
point (.001 of 1%):
5. An order must be submitted in principal amounts of $50,000 or integral
multiples thereof.
* Potential Noteholders or Potential Certificateholders may be described by name
or other reference as determined in the sole discretion of the Broker-Dealer.
NAME OF BROKER-DEALER:_______________________
AUTHORIZED SIGNATURE:_________________________
TOTAL NUMBER OF ORDERS ON THIS ORDER FORM:____
Submit to:_________________
Telephone: (___) ____________
Telecopier:(___) ____________
<PAGE>
EXHIBIT C TO BROKER-DEALER AGREEMENT
CLASSNOTES TRUST 1997-I
ASSET-BACKED NOTES, SERIES 1997-2
AUCTION RATE ASSET-BACKED CERTIFICATES
NOTICE OF TRANSFER
(To be used only for transfers made other
than pursuant to an Auction)
We are (check one)
___________ the Existing Noteholder/Existing
Certificateholder indicated below*; or
___________ the Broker-Dealer for such Existing
Noteholder/Existing Certificateholder; or
___________ the Participant for such Existing
Noteholder/Existing Certificateholder.
We hereby notify you that such Existing Noteholder/Existing Certificateholder
has transferred $_________ (must be in units of $50,000) of Notes/Certificates
to _________________
-------------------------
(Existing Noteholder/
Existing Certificateholder)
-------------------------
(Name of Broker-Dealer)
-------------------------
(Name of Participant)
By: _____________________
Printed Name: ___________
Title:___________________
* Existing Noteholders/Existing Certificateholders may be described by name or
other reference as determined in the sole discretion of the Broker-Dealer.
<PAGE>
EXHIBIT D TO BROKER-DEALER AGREEMENT
CLASSNOTES 1997-I
ASSET-BACKED NOTES, SERIES 1997-2
AUCTION RATE ASSET-BACKED CERTIFICATES
NOTICE OF A FAILURE TO DELIVER OR MAKE PAYMENT
COMPLETE EITHER I OR II.
I. We are a Broker-Dealer for Noteholder*/ Certificateholder*
___________ (the "Purchaser"), which purchased $___________ (must be in
units of Authorized Denominators) of the Notes/Certificates in the Auction
held on ___________ from the seller of such Notes/Certificates.
II. We are a Broker-Dealer for Noteholder*/ Certificateholder*
_________ (the "Seller"), which sold $________ (must be in units of
Authorized Denominators) of the Notes/Certificates in the Auction held on
___________ to the purchaser of such Notes/Certificates.
We hereby notify you that (check one)
__________________ the Seller failed to deliver such
Notes/Certificates to the Purchaser.
__________________ the Purchaser failed to make payment
to the Seller upon delivery of such
Notes/Certificates.
--------------------------
(Name of Broker-Dealer)
By:_______________________
Name:_____________________
Title:____________________
* Noteholders/certificateholders may be described by name or other reference as
determined in the sole discretion of the Broker-Dealer.
Exhibit 99.3
EXECUTION COPY
FIRST SUPPLEMENTAL
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.,
to
SALE AND SERVICING AGREEMENT
Dated as of December 24, 1997
<PAGE>
ARTICLE I.....................................................................1
Definitions and Usage.........................................................1
ARTICLE II....................................................................2
CONVEYANCE OF FINANCED STUDENT LOANS..........................................2
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...................................................................6
THE FINANCED STUDENT LOANS....................................................6
SECTION 3.1. Representations and Warranties of Sellers
with Respect to the Financed Student Loans.....................6
SECTION 3.2. Purchase 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....................................15
SECTION 3.7. Effective Period and Termination...............................15
SECTION 3.8. Appointment of Subcustodian....................................16
ARTICLE IV...................................................................16
ADMINISTRATION AND SERVICING OF FINANCED STUDENT LOANS.......................16
SECTION 4.1. Duties of the Master Servicers.................................16
SECTION 4.2. Collection of Financed Student Loan Payments..................18
SECTION 4.3. Realization upon Financed Student Loans........................20
SECTION 4.4. No Impairment..................................................20
SECTION 4.5. Purchase of Financed Student Loans;
Reimbursement..................................................20
SECTION 4.6. Servicing Fee; Servicing Fee Carryover.........................22
SECTION 4.7. Administrator's Certificate....................................23
SECTION 4.8. Annual Statement as to Compliance; Notice of
Default........................................................24
SECTION 4.9. Annual Independent Certified Public
Accountants' Report............................................25
SECTION 4.10. Access to Certain Documentation and
Information Regarding Financed Student Loans..................25
SECTION 4.11. Master Servicer and Administrator Expenses....................26
SECTION 4.12. Appointment of Subservicer.....................................26
ARTICLE V....................................................................26
DISTRIBUTIONS; RESERVE ACCOUNT;..............................................26
SECTION 5.1. Establishment of Trust Accounts................................26
SECTION 5.2. Collections ...................................................29
SECTION 5.3. Application of Collections.....................................30
SECTION 5.4. Additional Deposits............................................30
SECTION 5.5. Distributions..................................................31
SECTION 5.6. Reserve Account................................................35
SECTION 5.7. Statements to Certificateholders and Noteholders...............37
SECTION 5.8. Pre-Funding Account............................................40
SECTION 5.9. Capitalized Pre-Funding Account................................40
SECTION 5.10. Capitalized Interest Account...................................40
SECTION 5.11. Expense Account................................................41
SECTION 5.12. Note Distribution Account and Certificate
Distribution Account...........................................41
SECTION 5.13. Monthly Advances...............................................41
SECTION 5.14. OPTIONAL DEPOSITS BY THE SURETY PROVIDER.......................42
ARTICLE VI...................................................................42
THE SELLERS AND THE MASTER SERVICERS.........................................42
SECTION 6.1. Representations of the Sellers and the
Master Servicers...............................................42
SECTION 6.2. Existence......................................................44
SECTION 6.3. Liability and Indemnities......................................44
SECTION 6.4. [Reserved] ...................................................47
SECTION 6.5. Merger or Consolidation of, or Assumption of
the Obligations of, the Sellers, the
Administrator or the Master Servicers..........................47
SECTION 6.6. Limitation on Liability of Seller, Master
Servicer and Others............................................48
SECTION 6.7. Seller May Own Certificate or Notes............................49
SECTION 6.8. Master Servicer Not to Resign..................................49
ARTICLE VII..................................................................49
THE ADMINISTRATOR............................................................49
SECTION 7.1. Representations of the Administrator...........................49
SECTION 7.2. Liability and Indemnities......................................51
SECTION 7.3. Administrator Not to Resign....................................52
ARTICLE VIII.................................................................52
DEFAULT......................................................................52
SECTION 8.1. Master Servicer Default; Administrator Default.................52
SECTION 8.2. Appointment of Successor.......................................55
SECTION 8.3. Notification to Noteholders and Certificateholders.............57
SECTION 8.4. Waiver of Past Defaults........................................57
ARTICLE IX...................................................................58
TERMINATION..................................................................58
SECTION 9.1. Termination ...................................................58
ARTICLE X....................................................................61
SURETY BONDS.................................................................61
SECTION 10.1. Note Surety Bonds.............................................61
SECTION 10.2. Further Assurances; Surety Provider Default; etc..............61
ARTICLE XI...................................................................63
MISCELLANEOUS................................................................63
SECTION 11.1. Amendment ...................................................63
SECTION 11.2. Protection of Interests in Trust..............................64
SECTION 11.3. Notices ......................................................67
SECTION 11.4. Assignment ...................................................67
SECTION 11.5. Limitations on Rights of Others...............................68
SECTION 11.6. Severability..................................................68
SECTION 11.7. Separate Counterparts.........................................68
SECTION 11.8. Headings ...................................................68
SECTION 11.9. Governing Law.................................................68
SECTION 11.10. Assignment to Indenture Trustee...............................68
SECTION 11.11. Nonpetition Covenants.........................................69
SECTION 11.12. Limitation of Liability of Eligible Lender
Trustee and Indenture Trustee.................................69
SECTION 11.13. Rights of Surety Provider.....................................69
SECTION 11.14. Conflicts with Other Documents................................70
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>
FIRST SUPPLEMENTAL SALE AND SERVICING AGREEMENT (the
"Agreement") dated as of December 24, 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 parties hereto entered into a Sale and Servicing Agreement
dated as of February 28, 1997 (as amended from time to time, the "Sale and
Servicing Agreement") in connection with the issuance by the Issuer of its
Auction Rate Asset Backed Certificates, Class 1 (the "Class 1 Certificates") and
its Series 1997-1 Auction Rate Asset Backed Notes, Class A-1, Class A-2 and
Class A-3 (the "Series 1997-1 Notes"); and
WHEREAS the Issuer is authorizing on the date hereof for issuance its
Series 1997-2 Asset Backed Notes, Class A-4, Class A-5 and Class A-6 (the
"Series 1997-2 Notes"); and
WHEREAS, the Issuer also has authorized for Issuance Certificates
designated as the Issuer's (i) Series 1997-2 Certificates (the "Series 1997-2
Certificates") pursuant to a First Trust Supplement among the Sellers and the
Eligible Lender Trustee and (ii) Auction Rate Asset Backed Certificates, Class 2
(the "Class 2 Certificates") pursuant to a Second Trust Supplement among the
Sellers and the Eligible Lender Trustee; and
WHEREAS the parties hereto are entering into this First Supplemental
Sale and Servicing Agreement in connection with the Series 1997-2 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 the Sellers on
the Closing Date of the Series 1997-2 Certificates; 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, contribute, 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) listed on
Schedule A-1 to this Agreement and the Financed Student Loans owned by
ClassNotes (other than the Additional Student Loans) listed on Schedule A-2
to this Agreement (the Financed Student Loans listed on Schedules A-1 and
A-2 collectively being, the "Initial Financed Student Loans") and all
obligations of the Obligors thereunder, including all moneys paid
thereunder, and all written communications received by TWIC or ClassNotes,
as the case may be, with respect thereto (including borrower
correspondence, notices of death, disability or bankruptcy and requests for
deferrals or forbearance), on or after the Cut-off Date relating to the
Series 1997-2 Notes;
(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 Section 5.8 and 5.10 hereof.
(b) In connection with the contribution and assignment of Financed
Student Loans to the Eligible Lender Trustee on behalf of the Issuer, on or
prior to the Closing Date relating to the Series 1997-2 Notes, 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 relating to the Series 1997-2 Notes, 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 contribution of the Initial Financed
Student Loans, on the Closing Date relating to the Series 1997-2 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 the
holder of the Series 1997-2 Certificates of the amount described in Section
5.8(a) to be delivered on such Transfer Date, each of the Sellers does hereby,
contribute, 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
1997-2 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- 2 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 contribution 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. The Sellers,
on behalf of the Trust, shall cause to be remitted to TMS Student Holdings,
Inc., in its capacity as holder of a 1% interest in the Certificates and holder
of the Series 1997-2 Certificates, any amount paid by the transferee of such
Financed Student Loan(s) in excess of the aggregate Purchase Amount.
(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.
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 1997-2 Notes and the
Financed Student Loans to be transferred to the Eligible Lender Trustee by such
Seller during the Funding Period for the Series 1997-2 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 1997-2 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 contribution, 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
1997-2 Notes and the Financed Student Loans to be transferred to the Eligible
Lender Trustee during the Funding Period for the Series 1997-2 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-1 and Schedule
A-2 to this Agreement and Schedule A-1 and Schedule A-2 to the related
Transfer Agreement is true and correct in all material respects as of the
opening of business on the Cut-off Date relating to the Series 1997-2 Notes
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 Cut-
off Date relating to the Series 1997-2 Notes.
(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 Cut-off Date relating to the Series 1997-2
Notes 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. As of the Closing
Date, no more than 20% of all Financed Student Loans (by principal balance)
then held by the Trust (including the Initial Financed Student Loans) will
be delinquent in payment.
(vii) TITLE. The transfer and assignment herein contemplated
constitutes a contribution 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 contributed,
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
contribution, 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
Financed Student Loans transferred by TWIC and ClassNotes to the Eligible
Lender Trustee on the Closing Date, plus accrued interest to be capitalized
with respect thereto, as of the Statistical Cut-off Date relating to the
Series 1997-2 Notes was $469,702,115.
(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 contribution 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. PURCHASE 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 purchase 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 purchase 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 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 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 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 Seller 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 not later
than the last day of the Collection Period in which such 60th day occurs. If
such Seller fails to purchase 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. Further, the Financed Student Loan Files relating to the Private Loans
shall be retained by PHEAA or such other custodian approved by the Surety
Provider.
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 contributed 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 1997-2 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. The parties
hereto agree that PHEAA, or such other entity approved by the Surety Provider,
shall act as custodian with respect to the Private Loans.
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 Deficiency Amount,
if any, for the upcoming Note Distribution Date or Certificate Distribution Date
and 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, 1998, 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 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, 1998, 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 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) Pursuant to the Sale
and Servicing Agreement, the Indenture Trustee, for the benefit of the
Noteholders, has established and maintains 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,
has established and maintains 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 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 such other Person acting solely for the Indenture
Trustee as required for Delivery; and
(C) If the Indenture Trustee, in its capacity as securities
intermediary, has or subsequently obtains by agreement, operation of law or
otherwise a security interest in the Trust Accounts or any security
entitlement credited thereto, the Indenture Trustee, in its capacity as
securities intermediary, hereby agrees that such security interest shall be
subordinate to the security interest of the Indenture Trustee, except as
otherwise provided in the Indenture and for purposes provided for therein.
The financial assets and other items deposited to the Trust Accounts will
not be subject to deduction, set-off, banker's lien, or any other right in
favor of any person other than the Indenture Trustee (except that the
Indenture Trustee, in its capacity as securities intermediary, may set off
(i) all amounts due to it in respect of its customary fees and expenses for
the routine maintenance and operation of the Trust Accounts, and (ii) the
face amount of any checks which have been credited to the Trust Accounts
but are subsequently returned unpaid because of uncollected or insufficient
funds). Notwithstanding any provision herein to the contrary, the
securities intermediary shall have a lien senior to that of the secured
party for any amounts required for the settlement of any purchase of
financial assets.
(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, or cause to be deposited, in
the Collection Account all amounts required to be deposited therein pursuant to,
and within the time periods provided by, Section 2.3 and all amounts remitted
pursuant to Section 5.4 (which payments shall be deemed interest payments
received on or with respect to the Financed Student Loans during the immediately
preceding Collection Period. 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 1997-2 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 1997-2 Notes has
the earliest Final Maturity Date of all Classes of Notes then Outstanding, for
the Class of Series 1997-2 Notes with the earliest Final Maturity Date, on the
first Note Distribution Date for such Class occurring in each month, commencing
January 1998, 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 (or
$15,000,000 for the period commencing on the Closing Date for the Series 1997-2
Notes and ending on January 15, 2000) (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 (other than the Class A-4 Notes) and Certificates only in amounts
equal to $50,000 and integral multiples of $50,000 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 to a Class of Notes
(other than the Class A-4 Notes) or the Certificates 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 of $50,000 in
excess thereof.
On each Note Distribution Date for which the LIBOR Rate Notes are
receiving a payment of principal, such principal will be distributed pro rata
among all owners of the Class LIBOR Rate Notes as of the related Record Date
based on the amount of LIBOR Rate Notes so owned, and such distributions may be
made in amounts less than $50,000.
SECTION 5.6. RESERVE ACCOUNT. (a) [Reserved]
(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
in writing (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
5.5(e)(i) and under the Insurance Agreement, (E) to pay to the Collection
Account any amounts required to be paid by a Seller, 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)
subject to Section 3 of the Payment Agreement to distribute the remaining amount
of such excess to TMS Student Holdings, Inc. as holder of a 1% interest in the
Class 1 Certificates, or its permitted successors, assigns or designees
("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 $75,725,000 from the net proceeds of the
sale of the Series 1997- 2 Notes. On each Transfer Date, the Administrator shall
instruct the Indenture Trustee in writing 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 1997-2 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 1997-2 Notes, the Sellers shall deposit $7,000,000 in the
Capitalized Interest Account. The Indenture Trustee also shall deposit into the
Capitalized Interest Account all amounts, if any, received pursuant to Section
5.14. 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 April 1999 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.
SECTION 5.14. OPTIONAL DEPOSITS The Surety Provider, TMSI or any of
the Sellers shall at any time, and from time to time, with respect to a Note
Distribution Date or a Certificate Distribution Date, have the option (but shall
not be required) to deliver, or cause to be delivered, amounts to the Indenture
Trustee for deposit into the Capitalized Interest Account or, after the last
Distribution Date in April 1999, the Collection Account.
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.
SECTION 11.14. CONFLICTS WITH OTHER DOCUMENTS. This First Supplemental
Sale and Servicing Agreement is being entered into in connection with the
issuance by the Issuer of the Series 1997-2 Notes. For ease of reference, this
Agreement contains provisions set forth in the Sale and Servicing Agreement that
are applicable to all Classes of Notes and all Financed Student Loans. If any
term of this First Supplemental Sale and Servicing Agreement conflicts with any
term of the Sale and Servicing Agreement or any other Supplemental Sale and
Servicing Agreement, this First Supplemental Sale and Servicing Agreement shall
control for purposes of the Series 1997-2 Notes.
<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:/s/ Richard Bass
Name: Richard Bass
Title: Vice President
TRANS-WORLD INSURANCE COMPANY d/b/a
EDUCAID, Seller, Master Servicer
and Administrator
BY:/s/ Michael Benoff
Name: Michael Benoff
Title: Senior Vice President
CLASSNOTES, INC., Seller and Master
Servicer
BY:/s/ Michael Benoff
Name: Michael Benoff
Title: Senior Vice President
THE MONEY STORE INC.
BY:/s/ Michael Benoff
Name: Michael Benoff
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 /s/ Alfia Monastra
Name: Alfia Monastra
Title: Assistant Vice President
<PAGE>
SCHEDULE A-1
TO THE
FIRST SUPPLEMENTAL SALE AND SERVICING AGREEMENT
SCHEDULE OF TWIC FINANCED STUDENT LOANS
[To be delivered by TWIC to the Indenture Trustee.]
<PAGE>
SCHEDULE A-2
TO THE
FIRST SUPPLEMENTAL SALE AND SERVICING AGREEMENT
SCHEDULE OF CLASSNOTES, INC. FINANCED STUDENT LOANS
[To be delivered by ClassNotes Inc. to the Indenture Trustee.]
<PAGE>
SCHEDULE B
TO THE
FIRST SUPPLEMENTAL 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
FIRST SUPPLEMENTAL 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
- ------------
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>
(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.
- ----------------------
4 To be included for the first Note Distribution Date on or immediately
following the end of the Funding Period.
<PAGE>
EXHIBIT B
TO THE
FIRST SUPPLEMENTAL 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
$50,000 original
principal amount of
the Certificates)5
(ii) Amount of interest being paid or distributed in
respect of the Class __ Certificates:__________
($_________ 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 $50,000
original principal
amount of Certificates)
(iv) Pool Balance at end of preceding Collection
Period:_____________
(v) After giving effect to distributions on this
Certificate Distribution Date:
(a) (1) outstanding principal amount of Class ___
Notes:_____________
- ---------------
5 Only after the Notes have been paid in full.
(b) (1) outstanding principal amount of Class ___
Notes:_____________
(c) outstanding principal amount of Class ___
Certificates:_____________
(d) (1) Certificate Balance:_______________
(vi) Applicable Interest Rate:
(a) In general:
(1) [Auction] [LIBOR] Rate for the prior
Interest Period was _____%; and
(2) the Net Loan Rate was _____%.
(b) Certificate Rate:_____% (based on [Auction Rate]
[Net Loan Rate])
(c) Amount of interest that would have been paid on such
Certificate Distribution Date if interest instead was
calculated based on the [Auction Rate] [LIBOR Rate]
[Net Loan Rate]
(vii) (a) Amount of Servicing Fee
for related Collection
Period:_____________ ($__________ 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:___________]6
(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.
- ---------------------
6 To be included for each Distribution Date during the Funding Period.
<PAGE>
EXHIBIT C
TO THE
FIRST SUPPLEMENTAL SALE AND SERVICING AGREEMENT
FORM OF ADMINISTRATOR'S CERTIFICATE
[To be provided by the Administrator pursuant to
Section 4.7 of the First Supplemental Sale and
Servicing Agreement]
<PAGE>
EXHIBIT D
TO THE
FIRST SUPPLEMENTAL SALE AND SERVICING AGREEMENT
ASSIGNMENT AND BILL OF SALE FOR
INITIAL FINANCED STUDENT LOANS
For value received, in accordance with the First Supplemental Sale and
Servicing Agreement (the "First Supplemental Sale and Servicing Agreement")
dated as of December 24, 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 contribute, 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 First Supplemental 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 contribution 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-1 and Schedule A-2 to the First
Supplemental 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 First
Supplemental 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 First Supplemental Sale and Servicing
Agreement, which also contains rules as to usage that shall be applicable
herein.
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Assignment to be
duly executed as of December 24, 1997.
TRANS-WORLD INSURANCE CORPORATION
D/B/A/ EDUCAID, as Seller
BY:_______________________________
Name: Michael Benoff
Title: Senior Vice President
CLASSNOTES, INC., as Seller
BY:_______________________________
Name: Michael Benoff
Title: Senior Vice President
<PAGE>
EXHIBIT E
TO THE FIRST SUPPLEMENTAL 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 "First Supplemental Sale and Servicing Agreement") dated as of
December 24, 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 contribute,
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
First Supplemental 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-1][A-2] 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 First Supplemental Sale and
Servicing Agreement)). The foregoing contribution 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- 1][A-2] hereto have been endorsed in the
manner set forth in the First Supplemental 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 First Supplemental 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
First Supplemental Sale and Servicing Agreement and the Insurance Agreement.
Each contribution 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 First Supplemental
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 First Supplemental 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 First Supplemental 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]
<PAGE>
EXECUTION COPY
APPENDIX A
TO THE TRUST AGREEMENT
AND THE FIRST SUPPLEMENTAL SALE AND SERVICING AGREEMENT
DEFINITIONS AND USAGE
USAGE
The following rules of construction and usage shall be applicable to
any instrument that is governed by this Appendix:
(a) All terms defined in this Appendix shall have the defined meanings
when used in any instrument governed hereby and in any certificate or other
document made or delivered pursuant thereto unless otherwise defined therein.
(b) As used herein, in any instrument governed hereby and in any
certificate or other document made or delivered pursuant thereto, accounting
terms not defined in this Appendix or in any such instrument, certificate or
other document, and accounting terms partly defined in this Appendix or in any
such instrument, certificate or other document to the extent not defined, shall
have the respective meanings given to them under generally accepted accounting
principles as in effect on the date of such instrument. To the extent that the
definitions of accounting terms in this Appendix or in any such instrument,
certificate or other document are inconsistent with the meanings of such terms
under generally accepted accounting principles, the definitions contained in
this Appendix or in any such instrument, certificate or other document shall
control.
(c) The words "hereof", "herein", "hereunder" and words of similar
import when used in an instrument refer to such instrument as a whole and not to
any particular provision or subdivision thereof; references in an instrument to
"Article", "Section" or another subdivision or to an attachment are, unless the
context otherwise requires, to an article, section or subdivision of or an
attachment to such instrument; and the term "including" means "including without
limitation".
(d) The definitions contained in this Appendix are equally applicable
to both the singular and plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
(e) Any agreement, instrument or statute defined or referred to below
or in any agreement or instrument that is governed by this Appendix means such
agreement or instrument or statute as from time to time amended, modified or
supplemented, including (in the case of agreements or instruments) by waiver or
consent and (in the case of statutes) by succession of comparable successor
statutes and includes (in the case of agreements or instruments) references to
all attachments thereto and instruments incorporated therein. References to a
Person are also to its permitted successors and assigns.
DEFINITIONS
"ACCRUAL NOTES" means any Class of Notes, the terms of which provide
for interest accrued thereon to be capitalized and added to the Outstanding
Amount thereof during the related Accrual Period.
"ACCRUAL PERIOD" means, with respect to any Class of Accrual Notes,
the period of time during which interest accrued on such Notes is capitalized
and added to the Outstanding Amount thereof.
"ACT" has the meaning specified in Section 11.3(a) of the Indenture.
"ADDITIONAL FUNDING" means, with respect to a Series of Notes, those
expenditures made on behalf of the Issuer from the Pre-Funding Account on
Transfer Dates during the applicable Funding Period, consisting of (i) amounts
paid to the Sellers to acquire Additional Student Loans as of the applicable
Transfer Dates and (ii) amounts transferred to the Collection Account
representing interest payments to Noteholders and Certificateholders in lieu of
collections of interest on certain of the Financed Student Loans to the extent
such interest is not paid currently but is capitalized and added to the
principal balance of such loans.
"ADDITIONAL FINANCED STUDENT LOANS" means the Financed Student Loans
to be transferred to the Eligible Lender Trustee during a Funding Period
pursuant to Section 2.2 of the related Sale and Servicing Agreement or
Supplemental Sale and Servicing Agreement, each of which will be listed on
Schedule A to the related Transfer Agreement.
"ADDITIONAL PRINCIPAL PAYMENTS" means, with respect to any
Distribution Date, the amount, if any, that otherwise would have been required
to be deposited into the Reserve Account that, instead, is applied as a payment
of principal on a Class of Notes or Certificates.
"ADMINISTRATION AGREEMENT" means the Administration Agreement dated as
of March 21, 1997, among the Issuer, the Indenture Trustee and the
Administrator, as amended from time to time.
"ADMINISTRATION FEE" has the meaning specified in Section 3 of the
Administration Agreement.
"ADMINISTRATOR" means Trans-World Insurance Company d/b/a Educaid, an
Arizona corporation, in its capacity as administrator of the Issuer and the
Financed Student Loans, or any successor.
"ADMINISTRATOR DEFAULT" has the meaning specified in Section 8.1(b) of
the related Sale and Servicing Agreement or Supplemental Sale and Servicing
Agreement.
"ADMINISTRATOR'S CERTIFICATE" means an Officer's Certificate of the
Administrator delivered pursuant to Section 4.7(b) of the related Sale and
Servicing Agreement or Supplemental Sale and Servicing Agreement, substantially
in the form of Exhibit C thereto.
"AFFILIATE" means, with respect to any specified Person, any other
Person controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, "control" when used with respect to
any specified Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"AGGREGATE POOL BALANCE" means the Pool Balance as of the applicable
Cut-off Date of each Series of Notes issued by the Trust plus the principal
balance of each Additional Student Loan pledged to the Indenture Trustee on
behalf of the Issuer on each Transfer Date through the last Funding Period.
"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 each Auction Agent Agreement among the
initial Auction Agent, the Eligible Lender Trustee and the Indenture Trustee, as
amended from time to time.
"AUCTION AGENT FEE" has the meaning set forth in Section 6.4(b) of the
related Auction Agent Agreement.
"AUCTION AGENT FEE RATE" has the meaning set forth in the related
Auction Agent Agreement.
"AUCTION DATE" means, with respect to each Class of Auction Rate Notes
and Auction Rate Certificates, the date set forth in the related Terms
Supplement, Trust Agreement or Trust Supplement, as the case may be, and
thereafter, the Business Day immediately preceding the first day of each Auction
Period for each respective Class of Auction Rate Notes or Auction Rate
Certificates, other than:
(A) each Auction Period commencing after the ownership of
the Notes or the Certificates, as applicable, 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
with respect to any Class of Auction Rate Notes or Auction Rate Certificates may
be changed pursuant to the Master Indenture and the related Terms Supplement or
the Trust Agreement and the related Trust Supplement, respectively, as described
therein.
"AUCTION PERIOD" means, with respect to each Class of Auction Rate
Notes and Auction Rate Certificates, the Interest Period applicable to such
Class during which time the applicable Class Interest Rate or Certificate Rate
is determined pursuant to the related Terms Supplement, Trust Agreement or Trust
Supplement, as applicable, as the same may be adjusted pursuant to such Terms
Supplement or the Trust Agreement, as applicable.
"AUCTION PERIOD ADJUSTMENT" means an adjustment to the Auction Period
as provided in the related Terms Supplement, Trust Agreement or Trust
Supplement, as appropriate, as described therein.
"AUCTION PROCEDURES" means, with respect to each Class of Auction Rate
Notes, the procedures set forth in the related Terms Supplement by which the
related Auction Rate for such Class of Notes is determined and, with respect to
each Class of Auction Rate Certificates, the procedures set forth in the Trust
Agreement or related Trust Supplement by which the related Auction Rate for such
Class of Certificates is determined.
"AUCTION RATE" means, with respect to any Series and Class of Auction
Rate Notes, the related Class Interest Rate that results from implementation of
the Auction Procedures and is determined as described in the related Terms
Supplement and, with respect to any Class of Auction Rate Certificates, the
related Certificate Rate that results from implementation of the Auction
Procedures and is determined as described in the Trust Agreement or the related
Trust Supplement.
"AUCTION RATE CERTIFICATES" means a Class of Certificates, for which
the related Certificate Rate is determined pursuant to Auction Procedures.
"AUCTION RATE NOTES" means a Class of Notes for which the related
Class Interest Rate is determined pursuant to Auction Procedures.
"AUTHENTICATING AGENT" means the Person appointed by the Indenture
Trustee at the request of the Issuer as Authenticating Agent for the Notes
pursuant to Section 2.3(8) of the Indenture, and any successor Authenticating
Agent for the Notes.
"AUTHORIZED OFFICER" means (i) with respect to the Issuer, any officer
of the Eligible Lender Trustee who is authorized to act for the Eligible Lender
Trustee in matters relating to the Issuer pursuant to the Basic Documents and
who is identified on the list of Authorized Officers delivered by the Eligible
Lender Trustee to the Indenture Trustee, with a copy to the Surety Provider, on
the Closing Date relating to the initial issuance of a Series of Notes (as such
list may be modified or supplemented from time to time thereafter), (ii) with
respect to the Administrator, any officer of the Administrator who is authorized
to act for the Administrator in matters relating to itself or to the Issuer and
to be acted upon by the Administrator pursuant to the Basic Documents and who is
identified on the list of Authorized Officers delivered by the Administrator to
the Indenture Trustee, with a copy to the Surety Provider, on the Closing Date
relating to the initial issuance of a Series of Notes (as such list may be
modified or supplemented from time to time thereafter), (iii) with respect to a
Seller, any officer of such Seller who is authorized to act for such Seller in
matters relating to or to be acted upon by such Seller pursuant to the Basic
Documents and who is identified on the list of Authorized Officers delivered by
such Seller to the Indenture Trustee, with a copy to the Surety Provider, on the
Closing Date relating to the initial issuance of a Series of Notes (as such list
may be modified or supplemented from time to time thereafter) and (iv) with
respect to a Servicer, any officer of such Servicer who is authorized to act for
such Servicer in matters relating to or to be acted upon by such Servicer
pursuant to the Basic Documents and who is identified on the list of Authorized
Officers delivered by such Servicer to the Indenture Trustee, with a copy to the
Surety Provider, on the Closing Date relating to the initial issuance of a
Series of Notes (as such list may be modified or supplemented from time to time
thereafter).
"AVAILABLE FUNDS" means, with respect to a Distribution Date, the sum
of the following amounts with respect to the related Collection Period: (i) all
collections received by the Master Servicer or any Servicer on the Financed
Student Loans (including any Guarantee Payments received with respect to the
Financed Student Loans); (ii) any payments, including without limitation
Interest Subsidy Payments, Special Allowance Payments and HEAL Insurance
Payments, received by the Eligible Lender Trustee during such Collection Period
with respect to Financed Student Loans; (iii) all proceeds from any sales of
Financed Student Loans by the Trust during such Collection Period; (iv) any
payments of or with respect to interest received by the Master Servicer or a
Servicer during such Collection Period with respect to a Financed Student Loan
for which a Realized Loss was previously allocated; (v) that portion of amounts
released from the Pre-Funding Account at the end of a Funding Period to be
applied as a payment of principal pursuant to Section 5.8(b) of the related Sale
and Servicing Agreement or Supplemental Sale and Servicing Agreement; (vi)
amounts released from the Capitalized Interest Account and the Capitalized
Pre-Funding Account to cover shortfalls in interest; (vii) the aggregate
Purchase Amounts received for those Financed Students Loans repurchased by the
Sellers or purchased by the Master Servicer or by or on behalf of TMSI under an
obligation which arose during the related Collection Period; (viii) the
aggregate amounts, if any, received from the Sellers, TMSI or the Master
Servicer, as the case may be, as reimbursement of non-guaranteed interest
amounts, lost Interest Subsidy Payments and Special Allowance Payments or lost
HEAL Insurance Payments, with respect to the Financed Student Loans pursuant to
Section 3.2 or Section 4.5, respectively, of the related Sale and Servicing
Agreement or Supplemental Sale and Servicing Agreement and (ix) Investments
Earnings for such Collection Period; PROVIDED, HOWEVER, that Available Funds
will exclude all payments and proceeds of any Financed Student Loans the
Purchase Amount of which has been included in Available Funds for a prior
Collection Period.
"AVAILABLE INTEREST AMOUNT" means, with respect to any Distribution
Date, the sum (i) the amount to be transferred from the Collection Account to
the Note Distribution Account or Certificate Distribution Account, as the case
may be, on such Distribution Date for payment of the Noteholders' Interest
Distribution Amount or Certificateholders' Interest Distribution Amount, as the
case may be, and (ii) the amount on deposit in the Capitalized Interest Account
on such Distribution Date.
"BASIC DOCUMENTS" means the Trust Agreement, the Indenture, each Terms
Supplement, each Trust Supplement, the Sale and Servicing Agreement, each
Supplemental Sale and Servicing Agreement, the Administration Agreement, the
Certificate Depository Agreement, each Note Depository Agreement, each
Certificate Surety Bond, each Note Surety Bond, the Insurance Agreement, the
Guarantee Agreements, the Auction Agent Agreement, the Underwriting Agreement,
the Purchase Agreement, each Certificate Depository Agreement, each Insurance
Agreement, the Capitalized Interest Account and Payment Agreement and other
documents and certificates delivered in connection with any thereof and all
amendments and supplements thereto.
"BENEFIT PLAN" means any employee benefit plan, retirement
arrangement, individual retirement account or Keogh Plan subject to either Title
I of ERISA or Section 4975 of the Code, or any entity (including an insurance
company general account) whose underlying assets include plan assets by reason
of a plan's investment in the entity.
"BOOK-ENTRY CERTIFICATE" means a beneficial interest in the
Certificates, ownership and transfers of which shall be made through book
entries by a Securities Depository as described in Section 3.12 of the Trust
Agreement.
"BOOK-ENTRY NOTE" means a beneficial interest in the Notes, ownership
and transfers of which shall be made through book entries by a Securities
Depository as described in Section 2.13 of the Indenture.
"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 the Indenture 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 related Auction
Agreement.
"BROKER-DEALER FEE RATE" has the meaning set forth in the related
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.
"CAPITALIZED INTEREST ACCOUNT" means the account designated as such,
established and maintained pursuant to Section 5.10 of the related Sale and
Servicing Agreement or Supplemental Sale and Servicing Agreement.
"CAPITALIZED PRE-FUNDING ACCOUNT" means the account designated as
such, established and maintained pursuant to Section 5.9 of the related Sale and
Servicing Agreement or Supplemental Sale and Servicing Agreement.
"CAPITALIZED PRE-FUNDING REQUIREMENT" means, with respect to any Class
of Notes for any Note Distribution Date, zero.
"CERTIFICATE" means a certificate (other than an Originators'
Interest) evidencing the beneficial interest of a Certificateholder in the
Trust, substantially in the form of Exhibit A to the Trust Agreement.
"CERTIFICATE BALANCE" equals, initially, the Initial Certificate
Balance and, thereafter, equals the Initial Certificate Balance increased by the
principal balance of each subsequent Class of Certificates issued pursuant to a
Trust Supplement and reduced by all amounts allocable to principal previously
distributed to Certificateholders. Notwithstanding the foregoing, where any
provision of this Agreement or a Trust Supplement permits or authorizes
Certificateholders holding a specified percentage or amount of the Certificate
Balance to take any action or grant any approval, the holders of the Trust
Certificates shall be deemed to have a Certificate Balance equal to 99% and the
holders of the Originators' Interests shall be deemed to have a Certificate
Balance equal to 1%.
"CERTIFICATE DEPOSITORY AGREEMENT" means, with respect to any Class of
Certificates, the agreement dated as of the Closing Date relating to the
Certificates of such Class, in each case among the Trust, the Eligible Lender
Trustee, the Administrator and The Depository Trust Company, as the initial
Securities Depository.
"CERTIFICATE DISTRIBUTION ACCOUNT" means the account designated as
such, established and maintained pursuant to Section 5.1 of the Sale and
Servicing Agreement.
"CERTIFICATE DISTRIBUTION DATE" means, (i) for each Class of
Certificates, the first Business Day following the expiration of each Interest
Period for such Class of Certificates and (ii) for each Originators' Interest,
the date set forth in the related Trust Supplement.
"CERTIFICATE 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.
"CERTIFICATE MONTHLY ADVANCE ACCOUNT" means the account designated as
such, established and maintained pursuant to Section 5.1 of the Sale and
Servicing Agreement.
"CERTIFICATE OWNER" means, with respect to a Book-Entry Certificate,
the Person who is the beneficial owner of such Book- Entry Certificate, as
reflected on the books of the Securities Depository, or on the books of a Person
maintaining an account with such Securities Depository (directly as a Securities
Depository Participant or as an indirect participant, in each case in accordance
with the rules of such Securities Depository).
"CERTIFICATE PAYING AGENT" means any paying agent or co-paying agent
appointed pursuant to Section 3.10 of the Trust Agreement, which shall initially
be Dauphin Deposit Bank and Trust Company.
"CERTIFICATE RATE" means, (i) with respect to the Class 1
Certificates, the Initial Certificate Rate for the first Interest Period, and,
with respect to any other Interest Period relating to the Class 1 Certificates,
the interest rate per annum (computed on the basis of the actual number of days
elapsed in such Interest Period over a year of 360 days) equal to the rate
determined pursuant to the Auction Procedures set forth in the Trust Agreement
and (ii) with respect to any other Class of Certificates, the per annum rate
determined as set forth in the related Trust Supplement.
"CERTIFICATE RECORD DATE" means, with respect to a Certificate
Distribution Date, the related Record Date.
"CERTIFICATE REGISTER" and "CERTIFICATE REGISTRAR" means the register
mentioned and the registrar appointed pursuant to Section 3.4 of the Trust
Agreement.
"CERTIFICATE SURETY BOND" means (i) with respect to the Class 1
Certificates, the surety bond dated March 21, 1997 issued by the Surety Provider
in favor of the Eligible Lender Trustee on behalf of the Certificateholders and
(ii) with respect to any other Class of Certificates, the surety bond identified
in the related Trust Supplement.
"CERTIFICATE SURETY BOND PAYMENT" means, with respect to any Class of
Certificates, (a) on each Certificate Distribution Date the amount equal to the
excess, if any, of the Certificateholders' Interest Distribution Amount for the
applicable Class of Certificates over the amount on deposit in the Certificate
Distribution Account, after taking into account the required application of
funds in the remaining Trust Accounts (but excluding any amounts on deposit in
the Monthly Advance Account if an automatic stay has been imposed with respect
to TMSI under Section 362(a) of the United States Bankruptcy Code of 1978, as
amended, 11 U.S.C. " 101 ET SEQ.), including but not limited to the Reserve
Account, pursuant to the Sale and Servicing Agreement, to the payment of the
Certificateholders' Interest Distribution Amount on such Certificate
Distribution Date (an "Interest Deficiency") and (b) the amount equal to the
excess, if any, of the unpaid principal balance of the Certificates of a Class
on the Final Maturity Date for such Class of Certificates over amounts on
deposit in the Certificate Distribution Account, after taking into account the
required application of funds in the remaining Trust Accounts, including but not
limited to the Reserve Account, pursuant to the Sale and Servicing Agreement to
the payment of principal of such Class of Certificates on such Final Maturity
Date (a "Principal Deficiency"); provided, however, that "Certificate Surety
Bond Payments" shall not include any Certificateholders' Auction Rate Interest
Carryover or any portion of any Interest Deficiency or Principal Deficiency
arising as a result of (i) any tax liability, including any tax liability
imposed on or assessed with respect to the Trust, the Trust assets, any
Noteholder, or any Certificateholder, or (ii) any tax withholding requirement,
including any such requirement applicable to Trust income or Trust
distributions.
"CERTIFICATEHOLDER" means a Person in whose name a Certificate or an
Originators' Interest is registered in the Certificate Register.
"CERTIFICATEHOLDERS' AUCTION RATE INTEREST CARRYOVER" means, as to any
Class of Auction Rate Certificates, with respect to any Certificate Distribution
Date relating to such Class as to which the Certificate Rate for such
Certificate Distribution Date is based on the Net Loan Rate, the amount equal to
the excess, if any, of (a) the amount of interest on the Certificates of such
Class 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 the Certificates of such Class 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, calculated based on One- Month LIBOR);
PROVIDED, HOWEVER, that, with respect to any Class of Auction Rate Certificates,
on the Final Maturity Date relating to such Class, the portion of the
Certificateholders' Auction Rate Interest Carryover allocable to such Class of
Certificates will be equal to the lesser of (i) the portion allocable to such
Class of Certificates of the Certificateholders' 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 Certificateholders of such Class on
such date pursuant to Sections 5.5(e)(v), 5.6(b)(C) and 5.6(c) of the Sale and
Servicing Agreement.
"CERTIFICATEHOLDERS' DISTRIBUTION AMOUNT" means, as to any Class of
Certificates, with respect to any Certificate Distribution Date relating to such
Certificates, the related Certificateholders' Interest Distribution Amount for
such Certificate Distribution Date plus, for each Certificate Distribution Date
relating to such Certificates on and after which the Notes have been paid in
full, the Certificateholders' Principal Distribution Amount for such Certificate
Distribution Date.
"CERTIFICATEHOLDERS' INTEREST CARRYOVER" means, as to any Class of
Certificates, the related Certificateholders' Auction Rate Interest Carryover or
Certificateholders' LIBOR Rate Interest Carryover, as applicable.
"CERTIFICATEHOLDERS' INTEREST CARRYOVER SHORTFALL" means as to any
Class of Certificates, with respect to any Certificate Distribution Date, the
excess, if any, of (i) the sum of the related Certificateholders' Interest
Distribution Amount on the preceding Certificate Distribution Date and any
outstanding Certificateholders' Interest Carryover Shortfall on such preceding
Certificate Distribution Date over (ii) the amount of interest actually
distributed to such Certificateholders on such preceding Certificate
Distribution Date, plus interest on the amount of such excess interest due to
such Certificateholders, to the extent permitted by law, at the related
Certificate Rate from such preceding Certificate Distribution Date to the
current Certificate Distribution Date.
"CERTIFICATEHOLDERS' INTEREST DISTRIBUTION AMOUNT" means, as to any
Class of Certificates, with respect to any Certificate Distribution Date, the
sum of (i) the amount of interest accrued at the respective Certificate Rate for
the related Interest Period on the outstanding Certificate Balance of such Class
of Certificates on the immediately preceding Certificate Distribution Date
relating to such Certificates, after giving effect to all distributions of
principal to Certificateholders of such Class on such Certificate Distribution
Date (or, in the case of the first Certificate Distribution Date for such Class,
on the related Closing Date) and (ii) the Certificateholders' Interest Carryover
Shortfall for such Class for such Certificate Distribution Date; provided,
HOWEVER, that the Certificateholders' Interest Distribution Amount will not
include any Certificateholders' Interest Carryover.
"CERTIFICATEHOLDERS' LIBOR RATE INTEREST CARRYOVER" means, as to any
Class of Certificates bearing interest based upon One-Month LIBOR, with respect
to any Certificate Distribution Date relating to such Class as to which the
Certificate Rate for such Certificate Distribution Date 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 Certificates that would have accrued in respect of the related
Interest Period had interest been calculated based on the applicable One-Month
LIBOR over (b) the amount of interest on such Class of Certificates 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 LIBOR Rate Certificates, on the related Final Maturity Date, the
portion of the Certificateholder's LIBOR Rate Interest Carryover allocable to
such Class of Certificates will be equal to the lesser of (i) the portion
allocable to such Class of Certificates of the Certificateholders' LIBOR 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 Certificates on such date pursuant to Sections 5.5(e)(v), 5.6(b)(c) and
5.6(c) of the Sale and Servicing Agreement.
"CERTIFICATEHOLDERS' PRINCIPAL CARRYOVER SHORTFALL" means, with
respect to any Class of Certificates, as of the close of any Certificate
Distribution Date on or after which the Notes have been paid in full, the excess
of (i) the sum of the Certificateholders' Principal Distribution Amount on such
Certificate Distribution Date and any outstanding Certificateholders' Principal
Carryover Shortfall for the preceding Certificate Distribution Date over (ii)
the amount of principal actually distributed to the Certificateholders on such
Certificate Distribution Date.
"CERTIFICATEHOLDERS' PRINCIPAL DISTRIBUTION AMOUNT" means, on each
Certificate Distribution Date relating to the Class of Certificates with the
earliest Final Maturity Date on and after the date when the principal balance of
each Class of Notes has been paid in full, the sum of (a) the Principal
Distribution Amount for the Collection Period in the month second preceding such
Certificate Distribution Date, (b) any Additional Monthly Payments to be made on
such Certificate Distribution Date and (c) the Certificateholders' Principal
Carryover Shortfall as of the close of the preceding Certificate Distribution
Date; PROVIDED, HOWEVER, that the Certificateholders' Principal Distribution
Amount will in no event exceed the outstanding principal balance of such Class
of Certificates. Further, on the first Certificate Distribution Date occurring
after the Note Distribution Date on which the principal balance of the Class of
Notes with the last Final Maturity Date is paid in full, the Certificateholders'
Principal Distribution Amount also will include the excess, if any, of the
amount of principal available to be distributed on such Note Distribution Date
over the amount of principal paid on the Notes on such date. In addition, with
respect to each Class of Certificates, on the related Certificate Final Maturity
Date, the Certificateholders' Principal Distribution Amount will include the
amount required to reduce the outstanding principal balance of such Certificates
to zero.
"CLASS" means, (i) with respect to any Series of Notes, all Notes of
such Series whose final installment of principal has the same Final Maturity
Date and (ii) with respect to the Certificates, all Certificates whose final
installment of principal has the same Final Maturity Date.
"CLASS INITIAL RATE" means, with respect to any Class of Notes, the
rate identified as such in the related Terms Supplement.
"CLASS INITIAL RATE ADJUSTMENT DATE" means, with respect to any Class
of Notes, the date identified as such in the related Terms Supplement.
"CLASS INTEREST RATE" means, with respect to any Class of Notes, the
interest rate determined as set forth in the related Terms Supplement.
"CLASSNOTES" means ClassNotes, Inc., a wholly owned subsidiary of
TMSI.
"CLASSNOTES TRUST 1995-I CERTIFICATE BALANCE" means the "Certificate
Balance" as that term is defined in Appendix A to the Trust Agreement dated as
of March 27, 1995 relating to ClassNotes Trust 1995-I (f/k/a Education Loan
Alliance 1995-I).
"CLASS 1 CERTIFICATES" means the Class of Certificates designated as
such and issued on the initial Closing Date pursuant to the Trust Agreement.
"CLOSING DATE" means, (i) with respect to the Class 1 Certificates,
March 21, 1997, (ii) with respect to additional Trust Certificates or the
Originators' Interests, the date identified as such in the related Trust
Supplement and (iii) with respect to any Series of Notes, the date identified as
such in the related Terms Supplement.
"CODE" means the Internal Revenue Code of 1986, as amended from time
to time, and Treasury Regulations promulgated thereunder.
"COLLECTION ACCOUNT" means the account designated as such, established
and maintained pursuant to Section 5.1 of the Sale and Servicing Agreement.
"COLLECTION PERIOD" means, with respect to the first Distribution
Date, the period beginning February 28, 1997 and ending on March 31, 1997 and
with respect to each subsequent Distribution Date thereafter, the Collection
Period means the calendar month immediately following the end of the previous
Collection Period.
"COMMISSION" means the Securities and Exchange Commission.
"CONSOLIDATION LOAN" means a Financed Student Loan designated as such,
made by a Seller to an eligible borrower that represents the refinancing of
student loans to such borrower and his or her spouse in accordance with the
applicable terms and provisions of the Higher Education Act.
"CORPORATE TRUST OFFICE" means (i) with respect to the Indenture
Trustee, the principal office of the Indenture Trustee at which at any
particular time its corporate trust business shall be administered, which office
on the initial Closing Date is located at 4 Albany Street, New York, New York
10006 Attention: Corporate Trust and Agency Group, Structured Finance Group
(telephone: (212) 250-5326; facsimile: (212) 250-6439) or at such other address
as the Indenture Trustee may designate from time to time by notice to the
Noteholders and the Sellers, or the principal corporate trust office of any
successor Indenture Trustee (the address of which the successor Indenture
Trustee will notify the Noteholders and the Sellers) and (ii) with respect to
the Eligible Lender Trustee, the trust office of the Eligible Lender Trustee
located at 107 West Market Street, York, Pennsylvania 17401, Attention:
Corporate Trust Services (telephone: (717) 843-8651; facsimile: (717) 852-3096;
or at such other address as the Eligible Lender Trustee may designate by notice
to the Certificateholders and the Sellers, or the principal corporate trust
office of any successor Eligible Lender Trustee (the address of which the
successor Eligible Lender Trustee will notify the Certificateholders and the
Sellers).
"CUT-OFF DATE" means, (i) with respect to each Series of Notes, the
date identified as such in the related Terms Supplement (ii) with respect to the
Class 1 Certificates, February 28, 1997 and (iii) with respect to any other
Class of Certificates, the date set forth in the related Trust Supplement.
"DEFAULT" means any occurrence that is, or with notice or the lapse of time or
both would become, an Event of Default.
"DEFERRAL PHASE" means the period during which the related borrower is
in school and for certain authorized periods as described in the Higher
Education Act.
"DEFICIENCY AMOUNT" means, for any Distribution Date (i) the excess,
if any, of (A) the Noteholders' Interest Distribution Amount or
Certificateholder's Interest Distribution Amount, as the case may be, for such
Distribution Date over (B) the Available Interest Amount for such Distribution
Date.
"DEFINITIVE CERTIFICATES" has the meaning specified in Section 3.12 of
the Trust Agreement.
"DEFINITIVE NOTES" has the meaning specified in Section 2.13 of the
Indenture.
"DELIVERY" when used with respect to Trust Account Property means:
(a) with respect to bankers' acceptances, commercial paper, negotiable
certificates of deposit and other obligations that constitute instruments and
are susceptible of physical delivery ("Physical Property"):
(i) transfer of possession thereof to the Indenture Trustee,
endorsed to, or registered in the name of, the Indenture Trustee or its
nominee or endorsed in blank;
(b) with respect to a certificated security:
(i) delivery thereof in bearer form to the Indenture
Trustee; or
(ii) delivery thereof in registered form to the Indenture
Trustee and
(A) the certificate is endorsed to the Indenture
Trustee or in blank by effective endorsement; or
(B) the certificate is registered in the name of the
Indenture Trustee, upon original issue or registration of transfer by
the issuer;
(c) with respect to an uncertificated security:
(i) the delivery of the uncertificated security to the
Indenture Trustee; or
(ii) the issuer has agreed that it will comply with
instructions originated by the Indenture Trustee without further
consent by the registered owner;
(d) with respect to any security issued by the U.S. Treasury, the
Federal Home Loan Mortgage Corporation or by the Federal National Mortgage
Association that is a book-entry security held through the Federal Reserve
System pursuant to Federal book-entry regulations:
(i) a Federal Reserve Bank by book entry credits the
book-entry security to the securities account (as defined in 31 CFR
Part 357) of a participant (as defined in 31 CFR Part 357) which is
also a securities intermediary; and
(ii) the participant indicates by book entry that the
book-entry security has been credited to the Indenture Trustee's
securities account;
(e) with respect to a security entitlement:
(i) the Indenture Trustee becomes the entitlement holder; or
(ii) the securities intermediary has agreed that it will
comply with entitlement orders originated by the Indenture Trustee
(f) without further consent by the entitlement holder; for the purpose
of clauses (b) and (c) hereof "delivery" means:
(i) with respect to a certificated security:
(A) the Indenture Trustee acquires possession thereof;
(B) another person (other than a securities intermediary)
either acquires possession thereof on behalf of the Indenture
Trustee or, having previously acquired possession thereof,
acknowledges that it holds for the Indenture Trustee; or
(C) a securities intermediary acting on behalf of the
Indenture Trustee acquires possession of thereof,
only if the certificate is in registered form and has
been specially endorsed to the Indenture Trustee by
an effective endorsement;
(ii) with respect to an uncertificated security:
(A) the issuer registers the Indenture Trustee as the
registered owner, upon original issue or registration of
transfer; or
(B) another person (other than a securities intermediary)
either becomes the registered owner thereof on behalf of the
Indenture Trustee or, having previously become the registered
owner, acknowledges that it holds for the Indenture Trustee;
(g) for purposes of this definition, except as otherwise indicated, the
following terms shall have the meaning assigned to each such term in the UCC:
(i) "certificated security"
(ii) "effective endorsement"
(iii) "entitlement holder"
(iv) "instrument"
(v) "securities account"
(vi) "securities entitlement"
(vii) "securities intermediary"
(viii) "uncertificated security"
(h) in each case of Delivery contemplated herein, the Indenture Trustee
shall make appropriate notations on its records, and shall cause same to be made
of the records of its nominees, indicating that securities are held in trust
pursuant to and as provided in this Agreement.
"DEPARTMENT" means the United States Department of
Education, an agency of the Federal government.
"DEPOSITOR" means each of the Sellers in their capacity as
Depositors under the Trust Agreement.
"DETERMINATION DATE" means, with respect to any Note
Distribution Date or Certificate Distribution Date, the fifth Business Day
preceding such Note Distribution Date or Certificate Distribution Date, as
applicable.
"DISTRIBUTION" means, with respect to any Financed Student
Loan, the amount of the monthly remittance payable to the holder of such
Financed Student Loan in accordance with its
terms.
"DISTRIBUTION DATE" means a Certificate Distribution Date or a
Note Distribution Date, as the context requires.
"EDUCAID STUDENT LOAN TRUST 1994-1 CERTIFICATE Balance" means
the "Certificate Balance" as that term is defined in Appendix A to the Trust
Agreement dated as of April 27, 1994 relating to Educaid Student Loan Trust
1994-1.
"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.
"ELIGIBLE DEPOSIT ACCOUNT" means either (a) a segregated
account with an Eligible Institution or (b) a segregated trust account with the
corporate trust department of a depository institution organized under the laws
of the United States of America or any one of the States (or any domestic branch
of a foreign bank), having corporate trust powers and acting as trustee for
funds deposited in such account, so long as any of the securities of such
depository institution have a credit rating from each Rating Agency in one of
its generic rating categories which signifies investment grade.
"ELIGIBLE INSTITUTION" means an entity which is an institution
whose deposits are insured by the FDIC and the unsecured and uncollateralized
long-term debt obligations of which shall be rated "A" or better by Standard &
Poor's and A2 or better by Moody's, or one of the two highest short-term ratings
by Standard & Poor's and the highest short term rating by Moody's, and which is
either (i) a federal savings association duly organized, validly existing and in
good standing under the federal banking laws, (ii) an institution duly
organized, validly existing and in good standing under the applicable banking
laws of any state, (iii) a national banking association duly organized, validly
existing and in good standing under the federal banking laws, or (iv) a
principal subsidiary of a bank holding company.
"ELIGIBLE INVESTMENTS" As used herein, Eligible Investments
shall include the following:
(1) Cash (insured at all times by the Federal Deposit
Insurance Corporation);
(2) Direct obligations of (including obligations issued or held
in book entry form on the books of) the Department of the
Treasury of the United States of America;
(3) obligations of any of the following federal agencies which
obligations represent the full faith and credit of the United
States of America, including:
- Export-Import Bank
- Farm Credit System Financial Assistance Corporation
- Rural Economic Community Development
Administration (formerly Farmers Home Administration)
- General Services Administration
- U.S. Maritime Administration
- Small Business Administration
- Government National Mortgage Association (GNMA)
- U.S. Department of Housing & Urban Development
(PHA's)
- Federal Housing Administration
- Federal Financing Bank;
(4) senior debt obligations rated "AAA" by Standard & Poor's and
"Aaa" by Moody's issued by the Federal National Mortgage
Association or the Federal Home Loan Mortgage Corporation,
debt obligations of the Resolution Funding Corporation,
senior debt obligations of the Federal Home Loan Bank System,
and senior debt of other government sponsored agencies
approved by the Surety Provider;
(5) U.S. dollar denominated deposit accounts, federal funds and
banker's acceptances with domestic commercial banks which
have a rating on their short term certificates of deposit on
the date of purchase of "A-1" or "A-1+" by Standard & Poor's
and "P-1" by Moody's and maturing no more than 360 days after
the date of purchase (ratings on holding companies not being
considered the rating of the bank);
(6) commercial paper which is rated at the time of purchase in the
single highest classification, "A-1+" by Standard & Poor's and
"P-1" by Moody's and which matures not more than 270 days
after the date of purchase;
(7) Investments in money market funds (including, but not limited
to, money market mutual funds) rated "AAAm" or "AAAm-G" or
better by Standard & Poor's;
(8) Pre-refunded Municipal Obligations defined as follows: Any
bonds or other obligations of any state of the United States
of America or of any agency, instrumentality or local
governmental unit of any such state which are not callable
at the option of the obligor prior to maturity or as to
which irrevocable instructions have been given by the
obligor to call on the date specified in the notice and
which are rated, based on an irrevocable escrow account or
fund (the "escrow"), in the highest rating category of
Standard & Poor's and Moody's or any successors thereto;
(9) other forms of investments approved in writing by the Surety
Provider with notice to Standard & Poor's and, so long as
the Issuer is subject to the Pennsylvania Capital
Stock/Foreign Franchise Tax, that pursuant to applicable
Pennsylvania law, regulation or policy, are exempt assets
for purposes of the single factor apportionment method that
may be used in calculating such tax.
The value of the above investments shall be determined as follows:
a) as to investments the bid and asked prices of which are
published on a regular basis in THE WALL STREET JOURNAL (or,
if not there, then in THE NEW YORK Times): the average of the
bid and asked prices for such investments so published on or
most recently prior to such time of determination;
b) as to investments the bid and asked prices of which are not
published on a regular basis in THE WALL -------- STREET
JOURNAL or THE NEW YORK TIMES: the average ---------------
------------------ bid price at such time of determination
for such investments by any two nationally recognized
government securities dealers (selected by the Indenture
Trustee in its absolute discretion) at the time making a
market in such investments or the bid price published by a
nationally recognized pricing service;
c) as to certificates of deposit and bankers acceptances:
the face amount thereof, plus accrued interest; and
d) as to any investment not specified above: the value
thereof established by prior agreement between the
Issuer, the Administrator, the Indenture Trustee and
the Surety Provider.
"ELIGIBLE LENDER TRUSTEE" means The York Bank and Trust
Company, a Pennsylvania bank and trust company, not in its individual capacity
but solely as Eligible Lender Trustee under the Trust Agreement, or any
successor thereto.
"ELIGIBLE LENDER TRUSTEE FEE" has the meaning specified in
Section 8.1 of the Trust Agreement.
"ELIGIBLE SUBSTITUTE FINANCED STUDENT LOAN" means, with
respect to one or more Financed Student Loans proposed to be Granted to secure a
Series of Notes in exchange for one or more Financed Student Loans previously
Granted to secure such Notes, one or more Financed Student Loans meeting the
standards set forth in the related Terms Supplement.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
"EVENT OF DEFAULT" has the meaning specified in Section 5.1
of the Indenture.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"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 Class
of Auction Rate Certificates.
"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.
"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 Auction Rate Notes.
"EXISTING NOTEHOLDER REGISTRY" means the registry of Persons
who are owners of the Auction Rate Notes, maintained by the Auction Agent as
provided in the Auction Agent Agreement.
"EXPENSE ACCOUNT" means the account designated as such
pursuant to Section 5.1 of the related Sale and Servicing Agreement or
Supplemental Sale and Servicing Agreement.
"EXPENSES" means any and all liabilities, obligations, losses,
damages, taxes, claims, actions and suits, and any and all reasonable costs,
expenses and disbursements (including reasonable legal fees and expenses) of any
kind and nature whatsoever which may at any time be imposed on, incurred by, or
asserted against the Eligible Lender Trustee or any of its officers, directors
or agents (including without limitation the Certificate Registrar and the
Certificate Paying Agent) in any way relating to or arising out of the Trust
Agreement, the other Basic Documents, the Trust Estate, the administration of
the Trust Estate or the action or inaction of the Eligible Lender Trustee under
the Trust Agreement or the other Basic Documents.
"EXECUTIVE OFFICER" means, with respect to any corporation,
the Chief Executive Officer, Chief Operating Officer, Chief Financial Officer,
President, any Executive Vice President, any Senior Vice President, any Vice
President, the Secretary or the Treasurer of such corporation; and with respect
to any partnership, any general partner thereof.
"FDIC" means the Federal Deposit Insurance Corporation.
"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.
"FEDERAL LOAN" means a Financed Student Loan which is a PLUS
Loan, SLS Loan, Consolidation Loan, Stafford Loan or Unsubsidized Stafford Loan.
"FHLMC" means Federal Home Loan Mortgage Corporation, a
corporate instrumentality of the United States created and exist ing under Title
III of the Emergency Home Finance Act of 1970, as amended, or any successor
thereto.
"FINAL MATURITY DATE" means, with respect to any Note or
Certificate, the date on which the entire unpaid principal amount of such Note
or Certificate becomes due and payable as provided in the related Terms
Supplement or Trust Supplement, respectively.
"FINANCED STUDENT LOAN" means any Federal Loan, HEAL Loan or
Private Loan which, from time to time, is Granted to the Indenture Trustee to
serve as collateral for the Notes or otherwise part of the Trust Estate. The
initial Financed Student Loans subject to the Lien of the Indenture shall be
listed on the Schedule of Financed Student Loans set forth in Schedule A to the
Sale and Servicing Agreement. The Financed Student Loans to be pledged by the
Issuer to the Indenture Trustee in connection with the issuance of each
additional Series of Notes shall be listed on the Schedule of Financed Student
Loans appearing as Schedule A to the related Supplemental Sale and Servicing
Agreement. A master Schedule of Financed Student Loans listing all Financed
Student Loans then subject to the Lien of the Indenture shall be maintained as a
Schedule to the Indenture. Each Schedule of Financed Student Loans shall be
amended from time to time by the Issuer to accurately reflect the Financed
Student Loans then subject to the Lien of the Indenture. Each Schedule of
Financed Student Loans may be in the form of microfiche.
"FINANCED STUDENT LOAN FILES" means the documents specified in
Section 3.3 of the related Sale and Servicing Agreement or Supplemental Sale and
Servicing Agreement.
"FNMA" means Federal National Mortgage Association, a federally
chartered and privately owned corporation organized and existing under the
Federal National Mortgage Association Charter Act, or any successor thereto.
"FUNDING PERIOD" means, with respect to each Series of Notes,
the period beginning on the related 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 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 the date identified in the related Terms Supplement.
"GRACE PERIOD" means certain grace periods authorized by the
Higher Education Act during which the related borrower's scheduled payments are
deferred.
"GRANT" means mortgage, pledge, bargain, sell, warrant,
alienate, remise, release, convey, assign, transfer, create, and grant a lien
upon and a security interest in and right of set-off against, deposit, set over
and confirm pursuant to the Indenture. A Grant of the Trust Estate or of any
other agreement or instrument shall include all rights, powers and options (but
none of the obligations) of the Granting party thereunder, including the
immediate and continuing right to claim for, collect, receive and give receipt
for principal and interest payments in respect of the Trust Estate and all other
moneys payable thereunder, to give and receive notices and other communications,
to make waivers or other agreements, to exercise all rights and options, to
bring Proceedings in the name of the Granting party or otherwise and generally
to do and receive anything that the Granting party is or may be entitled to do
or receive thereunder or with respect thereto.
"GREAT LAKES" means Great Lakes Higher Education Services
Corporation.
"GUARANTEE AGREEMENTS" means each agreement entered into
between the Eligible Lender Trustee and a Guarantor pursuant to which such
Guarantor guarantees payments on Financed Student Loans.
"GUARANTEE PAYMENT" means any payment made by a Guaranty
Agency pursuant to a Guarantee Agreement in respect of a Financed Student Loan.
"GUARANTOR" means each Guaranty Agency that enters into a
Guarantee Agreement with the Eligible Lender Trustee pursuant to which such
Guaranty Agency guarantees payments on Financed Student Loans. "Guarantor"
includes the Department when it performs as a successor to an insolvent or
defunct Guarantor for purposes of making Guarantee Payments.
"GUARANTY AGENCY" means (i) with respect to Federal Loans, any
agency which has an agreement with the Department of Education to be a guarantor
of Education Loans and (ii) with respect to Private Loans, any bank, insurance
company, corporation or other governmental or non-governmental agency that acts
as a guarantor of a Private Loan.
"HEAL INSURANCE PAYMENTS" means insurance payments relating to
a HEAL Loan made by the Secretary pursuant to the Public Health Service Act.
"HEAL LOAN" means a Financed Student Loan made pursuant to the
provisions of the HEAL Loan program established under Section 292 of the Public
Health Service Act.
"HIGHER EDUCATION ACT" means the Higher Education Act of 1965,
as amended, together with any rules, regulations and interpretations thereunder.
"INDENTURE" means the Master Indenture and any Terms
Supplement, each as amended or supplemented from time to time, with respect to
which the Notes issued thereunder are still Outstanding.
"INDENTURE TRUST ESTATE" means all money, instruments, rights
and other property that are, from time to time, subject or intended to be
subject to the Lien and security interest of the Indenture for the benefit of
the Noteholders (including all property and interests Granted to the Indenture
Trustee), including all proceeds thereof.
"INDENTURE TRUSTEE" means Bankers Trust Company, a New York
State banking corporation, not in its individual capacity but solely as
Indenture Trustee under the Indenture.
"INDENTURE TRUSTEE FEE" has the meaning specified in Section
6.7 of the Master Indenture, as may be amended pursuant to any Terms Supplement.
"INDEPENDENT" means, when used with respect to any specified
Person, that the Person (a) is in fact independent of the Issuer, any other
obligor upon the Notes, a Seller and any Affiliate of any of the foregoing
Persons, (b) does not have any direct financial interest or any material
indirect financial interest in the Issuer, any such other obligor, a Seller or
any Affiliate of any of the foregoing Persons and (c) is not connected with the
Issuer, any such other obligor, a Seller or any Affiliate of any of the
foregoing Persons as an officer, employee, promoter, underwriter, trustee,
partner, director or person performing similar functions.
"INDEPENDENT CERTIFICATE" means a certificate or opinion to be
delivered to the Indenture Trustee under the circumstances described in, and
otherwise complying with, the applicable requirements of Section 11.1 of the
Master Indenture, made by an Independent appraiser or other expert appointed by
an Issuer Order and approved by the Indenture Trustee in the exercise of
reasonable care, and such opinion or certificate shall state that the signer has
read the definition of "Independent" and that the signer is Independent within
the meaning thereof.
"INDIVIDUAL NOTE" means a Note of an initial principal amount
equal to $50,000, or such other amount as may be set forth in a Terms
Supplement. A Note of an original principal amount in excess thereof shall be
deemed to be a number of Individual Notes equal to the quotient obtained by
dividing such initial principal amount by $50,000, or such other amount as may
be set forth in a Terms Supplement.
"INITIAL CERTIFICATE BALANCE" means (i) with respect to the
Class 1 Certificates, $18,000,000 and (ii) with respect to any other Class of
Certificates, the amount set forth as such in the related Trust Supplement.
"INITIAL CERTIFICATE RATE" means (i) with respect to the Class
1 Certificates, 5.50% per annum, and (ii) with respect to any other Class of
Certificates, the rate set forth as such in the related Trust Supplement.
"INITIAL CERTIFICATE RATE ADJUSTMENT DATE" means (i) with
respect to the Class 1 Certificates, April 2, 1997 and (ii) with respect to any
other Class of Certificates, the date set forth as such in the related Trust
Supplement.
"INITIAL CUT-OFF DATE" means February 28, 1997 (i) with respect
to the Class 1 Certificates, and (ii) with respect to any other Class of
Certificates, the date set forth as such in the related Trust Supplement.
"INITIAL FINANCED STUDENT LOANS" has the meaning specified in
Section 2.1 of the related Sale and Servicing Agreement or Supplemental Sale and
Servicing Agreement.
"INITIAL PERIOD" means, as to any Class of Notes and Class of
Certificates, the period commencing on the Closing Date of such Class of Notes
or Certificates, as applicable, and continuing, with respect to each Class of
Notes, through the day immediately preceding the Class Initial Rate Adjustment
Date for such Class of Notes, and, with respect to each Class of Certificates,
through the day immediately preceding the Initial Certificate Rate Adjustment
Date for such Class of Certificates.
"INITIAL POOL BALANCE" means, with respect to any Series of
Notes, the sum of the related Pool Balance as of the related Cut-off Date, plus
as of each related Subsequent Cut-off Date, the principal balance of each
Additional Financed Student Loan pledged to the Eligible Lender Trustee on
behalf of the Issuer on each Transfer Date during the related Funding Period.
"INSOLVENCY EVENT" means, with respect to a specified Person,
(a) the filing of a decree or order for relief by a court having jurisdiction in
the premises in respect of such Person or any substantial part of its property
in an involuntary case under any applicable Federal or State bankruptcy,
insolvency or other similar law now or hereafter in effect, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official for such Person or for any substantial part of its property, or
ordering the winding-up or liquidation of such Person's affairs, and such decree
or order shall remain unstayed and in effect for a period of 60 consecutive
days; or (b) the commencement by such Person of a voluntary case under any
applicable Federal or State bankruptcy, insolvency or other similar law now or
hereafter in effect, or the consent by such Person to the entry of an order for
relief in an involuntary case under any such law, or the consent by such Person
to the appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official for such Person or for any
substantial part of its property, or the making by such Person of any general
assignment for the benefit of creditors, or the failure by such Person generally
to pay its debts as such debts become due, or the taking of action by such
Person in furtherance of any of the foregoing.
"INSTITUTION OF HIGHER EDUCATION" means an institution of
higher education as defined under the Higher Education Act (20 U.S.C.A. '
1085(b)).
"INSURANCE AGREEMENT" means the Insurance and Indemnity
Agreement among TMSI, the Issuer, the Surety Provider, the Indenture Trustee and
the Sellers, dated as of March 21, 1997, as amended or supplemented from time to
time.
"INTEREST PERIOD" means, (A) as to any Class of Notes, (i)
initially, the period from and including the related Closing Date through, with
respect to each Class of Notes, the date identified in the related Terms
Supplement, and (ii) thereafter, the period set forth in the related Terms
Supplement and (B) as to any Class of Certificates, (i) initially, the period
from and including the related Closing Date through, with respect to each Class
of Certificates, the date identified in the related Trust Supplement (or, in the
case of the Class 1 Certificates, the Trust Agreement), and (ii) thereafter, the
period set forth in the related Trust Supplement (or, in the case of the Class 1
Certificates, the Trust Supplement).
"INTEREST SUBSIDY PAYMENTS" means payments, designated as such,
consisting of interest subsidies by the Department in respect of the Financed
Student Loans to the Eligible Lender Trustee on behalf of the Trust in
accordance with the Higher Education Act.
"INVESTMENT EARNINGS" means, with respect to any Distribution
Date, the investment earnings (net of losses and investment expenses) on amounts
on deposit in the Trust Accounts to be deposited into the Collection Account on
or prior to such Distribution Date pursuant to Section 5.1(b) of the Sale and
Servicing Agreement.
"ISSUER" means ClassNotes Trust 1997-I until a successor
replaces it and, thereafter, means the successor and, for purposes of any
provision contained in the Indenture and required by the TIA, each other obligor
on the Notes.
"ISSUER ORDER" and "ISSUER REQUEST" means a written order or
request signed in the name of the Issuer by any one of its Authorized Officers
and delivered to the Indenture Trustee.
"LIBOR DETERMINATION DATE" means, with respect to any Class of
Notes or Class of Certificates for which One-Month LIBOR is being determined,
the applicable Rate Determination Date, which must be a Business Day and London
Banking Day, for such Class.
"LIBOR RATE" means, with respect to any Class of Notes or Class
of Certificates bearing interest based upon One-Month LIBOR, the related Class
Interest Rate or Certificate Rate, as the case may be, that results from a
determination based on One- Month LIBOR and is determined as described in the
related Terms Supplement or Trust Supplement, as the case may be.
"LIBOR RATE CERTIFICATES" means a Class of Certificates for
which the related Certificate Rate is based upon One-Month LIBOR.
"LIBOR RATE NOTES" means a Class of Notes for which the related
Class Interest Rate is based upon One-Month LIBOR.
"LIEN" means a security interest, lien, charge, pledge, equity
or encumbrance of any kind, other than tax liens and any other liens, if any,
which attach to the respective Financed Student Loan by operation of law as a
result of any act or omission by the related Obligor.
"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 Indenture, or any successor to it in such capacity
thereunder.
"MASTER INDENTURE" means the Indenture dated as of March 21,
1997 between the Issuer and the Indenture Trustee, as amended or supplemented
from time to time.
"MASTER SERVICER DEFAULT" means an event specified in Section
8.1(a) of the related Sale and Servicing Agreement or Supplemental Sale and
Servicing Agreement.
"MASTER SERVICER" means each of Trans-World Insurance Company
d/b/a Educaid and ClassNotes, Inc., each a wholly-owned subsidiary of The Money
Store Inc., and their respective successors and assigns, as Master Servicer of
the Financed Student Loans under the Sale and Servicing Agreement with respect
to the Financed Student Loans sold by it to the Trust.
"MAXIMUM AUCTION RATE" means, with respect to a Class of
Auction Rate Notes or Auction Rate Certificates, (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 Class of Auction Rate 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 Class of Auction Rate Notes
or the Certificates, as applicable, is less than "Aa3" or "AA-") or (ii) for
Auction Periods of greater than 35 days or equal to, 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 Class of Auction Rate 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 Class of Auction
Rate Notes or the Certificates, as applicable, is less than "Aa3" or "AA-"). For
purposes of each 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 related Auction Agent Agreement.
"MONTHLY ADVANCE" means the amount, if any, advanced by TMSI
pursuant to Section 5.13 of the Sale and Servicing Agreement and any
supplemental Sale and Servicing Agreement with respect to Guarantee Payments,
Interest Subsidy Payments or HEAL Insurance Payments applied for but not
received as of the end of the Collection Period immediately preceding the date
such Monthly Advance is made.
"MONTHLY ADVANCE ACCOUNT" means the account designated as such,
established and maintained pursuant to Section 5.1 of the Sale and Servicing
Agreement.
"MOODY'S" means Moody's Investors Service, Inc., or its
successor in interest.
"NET LOAN RATE" means, for any Interest Period, the weighted
average Effective Interest Rate of all the Financed Student Loans for the
Collection Period immediately preceding such Interest Period less 1.60%, or such
other amount as may be set forth in a Terms Supplement or Trust Supplement.
"NON-PAYMENT RATE" means One-Month LIBOR plus 1.50%.
"NOTE" means an Asset Backed Note issued pursuant to the Master
Indenture and a related Terms Supplement.
"NOTE DEPOSITORY AGREEMENTS" means, with respect to any Series
of Notes, the agreement dated as of the Closing Date relating to the Notes of
such Series, in each case among the Issuer, the Indenture Trustee, the
Administrator and The Depository Trust Company, as the initial Securities
Depository.
"NOTE DISTRIBUTION ACCOUNT" means the account designated as
such, established and maintained pursuant to Section 5.1 of the related Sale and
Servicing Agreement or Supplemental Sale and Servicing Agreement.
"NOTE DISTRIBUTION DATE" means, (i) with respect to the LIBOR
Rate Notes, the 15th day of each month (or if such day is not a Business Day, on
the next succeeding Business Day), commencing on the date set forth in the
related Terms Supplement and (ii) with respect to the Auction Rate Notes, unless
otherwise set forth in a Terms Supplement, (A) with respect to distributions of
interest, the first Business Day following the expiration of each Interest
Period for such Auction Rate Notes and (B) with respect to distributions of
principal, the first Business Day following the expiration of the first Interest
Period for such Auction Rate Notes ending in each month, commencing on the dates
set forth in the related Terms Supplement.
"NOTE OWNER" means, with respect to a Book-Entry Note, the
Person who is the owner of such Book-Entry Note, as reflected on the books of
the Securities Depository, or on the books of a Person maintaining an account
with such Securities Depository (directly as a Securities Depository Participant
or as an indirect participant, in each case in accordance with the rules of such
Securities Depository).
"NOTE RECORD DATE" means, with respect to a Note Distribution
Date, the related Record Date.
"NOTE REGISTER" and "NOTE REGISTRAR" have the respective
meanings specified in Section 2.6 of the Indenture.
"NOTE SURETY BOND" means, with respect to any Class or Series
of Notes, the surety bond identified in the related Terms Supplement.
"NOTE SURETY BOND PAYMENT" means, with respect to any Class of
Notes (a) on each Note Distribution Date the amount equal to the excess, if any,
of the Noteholders' Interest Distribution Amount for the applicable Class of
Notes over the amount on deposit in the Note Distribution Account, after taking
into account the required application of funds in the remaining Trust Accounts
(but excluding any amounts on deposit in the Monthly Advance Account if an
automatic stay has been imposed with respect to TMSI under Section 362(a) of the
United States Bankruptcy Code of 1978, as amended, 11 U.S.C. " 101 ET SEQ.),
including but not limited to the Reserve Account, pursuant to the Sale and
Servicing Agreement, to the payment of the Noteholders' Interest Distribution
Amount on such Note Distribution Date (an "Interest Deficiency") and (b) the
amount equal to the excess, if any, of the unpaid principal balance of the Notes
of a Class on the Final Maturity Date for the Class over amounts on deposit in
the Note Distribution Account, after taking into account the required
application of funds in the remaining Trust Accounts, including but not limited
to the Reserve Account, pursuant to the Sale and Servicing Agreement, to the
payment of principal of such Class of Notes on such Final Maturity Date (a
"Principal Deficiency"); provided, however, that "Note Surety Bond Payments"
shall not include any Noteholders' Interest Carryover or any portion of any
Interest Deficiency or Principal Deficiency arising as a result of (i) any tax
liability, including any tax liability imposed on or assessed with respect to
the Trust, the Trust assets, any Noteholder, or any Certificateholder, or (ii)
any tax withholding requirement, including any such requirement applicable to
Trust income or Trust distributions.
"NOTEHOLDER" means the Person in whose name a Note is
registered in the Note Register.
"NOTEHOLDERS' AUCTION RATE INTEREST CARRYOVER" means, as to any
Class of Auction Rate 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 Auction
Rate 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 related Sale and Servicing Agreement or
Supplemental Sale and Servicing Agreement.
"NOTEHOLDERS' DISTRIBUTION AMOUNT" means, as to any Class of
Notes, with respect to any Note Distribution Date relating to such Notes, the
sum of the related Noteholders' Interest Distribution Amount and the
Noteholders' Principal Distribution Amount for such Note Distribution Date.
"NOTEHOLDERS' INTEREST CARRYOVER" means, as to any Class of
Notes, the related Noteholders' Auction Rate Interest Carryover or Noteholders'
LIBOR Rate Interest Carryover, as applicable.
"NOTEHOLDERS' INTEREST CARRYOVER SHORTFALL" means, as to any
Class of Notes, with respect to any Note Distribution Date, the excess of (i)
the sum of the related Noteholders' Interest Distribution Amount on the
preceding Note Distribution Date and any Noteholders' Interest Carryover
Shortfall on such preceding Note Distribution Date over (ii) the amount of
interest actually allocated to such Noteholders on such preceding Note
Distribution Date, plus interest on the amount of such excess interest due to
such Noteholders, to the extent permitted by law, at the related Class Interest
Rate from such preceding Note Distribution Date to the current Note Distribution
Date.
"NOTEHOLDERS' INTEREST DISTRIBUTION AMOUNT" means, as to any
Series and Class of Notes, with respect to any Note Distribution Date, the sum
of (i) the amount of interest accrued at the respective Class Interest Rate for
each related Interest Period since the last Note Distribution Date relating to
such Notes (or in the case of the first Note Distribution Date following the
issuance of a Class of Notes, the applicable Closing Date) on the outstanding
principal balance of such Class of Notes on the immediately preceding Note
Distribution Date relating to such Notes after giving effect to all principal
distributions to holders of Notes of such Class on such date (or, in the case of
the first Note Distribution Date for such Class, on the related Closing Date)
and (ii) the Noteholders' Interest Carryover Shortfall for such Class for such
Note Distribution Date; PROVIDED, HOWEVER, that the Noteholders' Interest
Distribution Amount will not include any Noteholders' Interest Carryover.
"NOTEHOLDERS' LIBOR RATE INTEREST CARRYOVER" means, as to any
Class of Notes bearing interest based upon One-Month LIBOR, 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
One-Month LIBOR 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 LIBOR Rate Notes, on the related Final Maturity Date, the portion
of the Noteholders' LIBOR 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' LIBOR 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 related Sale and Servicing Agreement or
Supplemental Sale and Servicing Agreement.
"NOTEHOLDERS' PRINCIPAL CARRYOVER SHORTFALL" means, with
respect to any Class of Notes, as of the close of any Note Distribution Date,
the excess of (i) the sum of the Noteholders' Principal Distribution Amount on
such Distribution Date and any outstanding Noteholders' Principal Carryover
Shortfall for the preceding Note Distribution Date over (ii) the amount of
principal actually allocated to the Noteholders on such Note Distribution Date.
"NOTEHOLDERS' PRINCIPAL DISTRIBUTION AMOUNT" means, as to the
Class of Notes with the earliest Final Maturity Date on each applicable Note
Distribution Date except as otherwise set forth in a Terms Supplement, the sum
of (i) the Principal Distribution Amount for the Collection Period immediately
preceding the month prior to the month of such Note Distribution Date, (ii) any
Additional Monthly Payments to be made on such Note Distribution Date and (iii)
the Noteholders' Principal Carryover Shortfall as of the close of the preceding
Note Distribution Date relating to such Notes; PROVIDED, HOWEVER, that the
Noteholders' Principal Distribution Amount will not exceed the outstanding
principal balance of such Class of Notes. In addition, with respect to each
Class of Notes, on the related Final Maturity Date the Noteholders' Principal
Distribution Amount will include the amount required to reduce the outstanding
principal balance of such Notes to zero.
"OBLIGOR" on a Financed Student Loan means the borrower or
co-borrowers of such Financed Student Loan and any other Person who owes
payments in respect of such Financed Student Loan, including (i) the Guaranty
Agency thereof, (ii) with respect to any Interest Subsidy Payment or Special
Allowance Payment, if any, thereon, the Department and (iii) with respect to any
HEAL Insurance Payments, the Secretary.
"OFFICER'S CERTIFICATE" means (i) in the case of the Issuer, a
certificate signed by an Authorized Officer of the Issuer, under the
circumstances described in, and otherwise complying with, the applicable
requirements of Section 11.1 of the Indenture, and delivered to the Indenture
Trustee, (ii) in the case of a Seller, the Master Servicer or the Administrator,
a certificate signed by an Authorized Officer of such Seller, the Master
Servicer or the Administrator, as appropriate and (iii) in the case of the
Servicer, a certificate signed by an Authorized Officer of the Servicer.
"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.
"OPINION OF COUNSEL" means (i) with respect to the Issuer, one
or more written opinions of counsel who may, except as otherwise expressly
provided in the Master Indenture, be employees of or counsel to the Issuer and
who shall be satisfactory to the Indenture Trustee and the Surety Provider, and
which opinion or opinions shall be addressed to the Indenture Trustee as
Indenture Trustee and the Surety Provider, shall comply with any applicable
requirements of Section 11.1 of the Master Indenture, and shall be in form and
substance satisfactory to the Indenture Trustee and the Surety Provider and (ii)
with respect to a Seller, the Administrator or the Master Servicer, one or more
written opinions of counsel who may be an employee of or counsel to such Seller,
the Administrator or the Master Servicer, which counsel shall be acceptable to
the Indenture Trustee, the Eligible Lender Trustee, the Surety Provider and/or
the Rating Agencies, as applicable.
"ORIGINATORS' INTERESTS" means any interest in the Trust Estate
issued to an entity selling Financed Student Loans to a Seller, which interest
shall have the terms set forth in a Trust Supplement.
"OUTSTANDING" means, as of the date of determination, all Notes
theretofore authenticated and delivered under the Indenture except:
(i) Notes theretofore cancelled by the Note Registrar or
delivered to the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which money in
the necessary amount has been theretofore deposited with the Indenture
Trustee or any Paying Agent in trust for the Noteholders thereof
(PROVIDED, HOWEVER, that if such Notes are to be redeemed, notice of
such redemption has been duly given pursuant to the Indenture); and
(iii) Notes in exchange for or in lieu of other Notes which
have been authenticated and delivered pursuant to the Indenture unless
proof satisfactory to the Indenture Trustee is presented that any such
Notes are held by a bona fide purchaser;
PROVIDED that in determining whether the Noteholders of the requisite
Outstanding Amount of the Notes have given any request, demand, authorization,
direction, notice, consent or waiver hereunder or under any other Basic
Document, Notes owned by the Issuer, any other obligor upon the Notes, a Seller
or any Affiliate of any of the foregoing Persons shall be disregarded and deemed
not to be Outstanding, except that, in determining whether the Indenture Trustee
shall be protected in relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Notes that a Responsible Officer of
the Indenture Trustee either actually knows to be so owned or has received
written notice thereof shall be do disregarded. Notes so owned that have been
pledged in good faith may be regarded as Outstanding if the pledgee establishes
to the satisfaction of the Indenture Trustee the pledgee's right so to act with
respect to such Notes and that the pledgee is not the Issuer, any other obligor
upon the Notes, a Seller or any Affiliate of any of the foregoing Persons.
"OUTSTANDING AMOUNT" means the aggregate principal amount of
all Notes, or Class of Notes or Certificates or Class of Certificates, as
applicable, Outstanding at the date of determination.
"PARITY PERCENTAGE" shall have the meaning assigned to such
term in the Insurance Agreement.
"PARTICIPANT" means a Securities Depository Participant.
"PAYING AGENT" means the Indenture Trustee or any other Person
that meets the eligibility standards for the Indenture Trustee specified in
Section 6.11 of the Master Indenture and is authorized by the Issuer to make the
payments to and distributions from the Collection Account and payments of
principal of and interest and any other amounts owing on the Notes on behalf of
the Issuer.
"PAYMENT AGREEMENT" means the Payment Agreement dated as of
December 24, 1997 among Holdings, TWIC, ClassNotes, First Union National Bank,
the Surety Provider and the Indenture Trustee.
"PERSON" means any individual, corporation, estate,
partnership, joint venture, association, joint stock company, trust (including
any beneficiary thereof), unincorporated organization or government or any
agency or political subdivision thereof.
"PHEAA" means the Pennsylvania Higher Education Assistance
Agency, an agency of the Commonwealth of Pennsylvania.
"PHYSICAL PROPERTY" has the meaning assigned to such term in
the definition of "Delivery" above.
"PLEDGED ACCOUNT OR FUND" means the Collection Account, the
Reserve Account, the Pre-Funding Account, the Capitalized Pre-Funding Account,
the Capitalized Interest Account, the Note Distribution Account and the
Certificate Distribution Account.
"PLUS LOAN" means a Financed Student Loan made pursuant to the
provisions of the PLUS program established under Section 428B of the Higher
Education Act (or predecessor provisions).
"POOL BALANCE" means, at any time, the aggregate principal
balance of the Financed Student Loans at the end of the preceding Collection
Period (including accrued interest thereon for such Collection Period to the
extent such interest will be capitalized), after giving effect to the following,
without duplication: (i) all payments in respect of principal received by the
Trust during such Collection Period from or on behalf of borrowers and
Guarantors and, with respect to certain payments on certain Financed Student
Loans, the Department or the Secretary, (ii) the principal portion of all
Purchase Amounts received by the Trust for such Collection Period from the
Sellers, TMSI or the Master Servicers, and (iii) the principal portion of all
Additional Fundings made from the Pre-Funding Account with respect to such
Collection Period.
"POTENTIAL CERTIFICATEHOLDER" means any Person (including an
Existing Certificateholder 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 Auction Rate Certificates (or,
in the case of an Existing Certificateholder thereof, an additional principal
amount of Auction Rate Certificates).
"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 Auction Rate Notes (or, in the case of an Existing
Noteholder thereof, an additional principal amount of Auction Rate Notes).
"PREDECESSOR NOTE" means, with respect to any particular Note,
every previous Note evidencing all or a portion of the same debt as that
evidenced by such particular Note; and, for the purpose of this definition, any
Note authenticated and delivered under Section 2.7 of the Master Indenture and
in lieu of a mutilated, lost, destroyed or stolen Note shall be deemed to
evidence the same debt as the mutilated, lost, destroyed or stolen Note.
"PRE-FUNDED AMOUNT" means, with respect to any Distribution
Date, the amount on deposit in the Pre-Funding Account.
"PRE-FUNDING ACCOUNT" means the account designated as such,
established and maintained pursuant to Section 5.1 of the Sale and Servicing
Agreement.
"PREMIUM" means, (i) with respect to any Initial Financed
Student Loan conveyed on the initial Closing Date relating to the Issuer's
Series 1997-1 Notes, an amount equal to 4.90% of the par amount of such Initial
Financed Student Loan as of the Initial Cut-off Date, (ii) with respect to any
Additional Financed Student Loan conveyed during the Funding Period relating to
the Series 1997-1 Notes, an amount equal to 0% of the par amount of such
Financed Student Loan as of the related Subsequent Cut-off Date, and (iii) with
respect to any other Financed Student Loan conveyed, the amount set forth in the
related Terms Supplement or Trust Supplement, as the case may be.
"PRIMARY SERVICER" means, with respect to any Financed Student
Loan, the entity responsible for the primary servicing of such Financed Student
Loan on a day to day basis.
"PRINCIPAL DISTRIBUTION AMOUNT" means, with respect to any
Collection Period, the sum of the following amounts: (i) that portion of all
collections received by the Master Servicer or any Servicer on the Financed
Student Loans that is allocable to principal (including the portion of any
Guarantee Payments received that is allocable to principal of the Financed
Student Loans); (ii) the portion of the proceeds allocable to principal from the
sale of Financed Student Loans by the Trust during such Collection Period; (iii)
all Realized Losses incurred during the related Collection Period; (iv) to the
extent attributable to principal, the Purchase Amount received with respect to
each Financed Student Loan repurchased by the Sellers or purchased by the Master
Servicer or TMSI under an obligation which arose during the related Collection
Period; and (v) amounts, if any, transferred from the Pre-Funding Account at the
end of the applicable Funding Period; PROVIDED, HOWEVER, that the Principal
Distribution Amount will exclude all payments and proceeds of any Financed
Student Loans the Purchase Amount of which has been included in Available Funds
for a prior Collection Period.
"PRIVATE LOAN" means a Financed Student Loan that is made under
programs established by banks, insurance companies, private non-profit
corporations and other non-governmental entities.
"PRIVATE LOAN PROGRAM" means a program under which a Private
Loan is originated.
"PROCEEDING" means any suit in equity, action at law or other
judicial or administrative proceeding.
"PROPRIETARY SCHOOL" means a privately-owned school offering
post-secondary education and operating on a for profit basis.
"PUBLIC HEALTH SERVICE ACT" means the Public Health Service
Act, as most recently amended by the Health Professions Education Extension
Amendments of 1992, as amended from time to time, together with any rules,
regulations and interpretations thereunder.
"PURCHASE AMOUNT" means, as to any Financed Student Loan on any
date of determination, the sum of (i) the amount required to prepay in full the
outstanding principal balance of such Financed Student Loan as of the last day
of the most recently completed Collection Period, including all accrued but
unpaid interest thereon (including interest to be capitalized) through the last
day of the Collection Period in which such Financed Student Loan is being
purchased (or, with respect to Section 2.3(b) of the related Sale and Servicing
Agreement or Supplemental Sale and Servicing Agreement, through the last day of
the Collection Period in which the related Serial Loan is transferred to a
Seller's designee) plus (ii) the related Unamortized Premium, if any; provided,
however, that with respect to any Financed Student Loan required to be purchased
pursuant to Section 4.5 of the related Sale and Servicing Agreement or
Supplemental Sale and Servicing Agreement, the Purchase Amount shall not exceed
the amount the related Guarantor would have been be obligated to pay the Trust
but for the related breach of a representation or warranty under Section 4.1,
4.2, 4.3 or 4.4 of the related Sale and Servicing Agreement or Supplemental Sale
and Servicing Agreement.
"PURCHASE AGREEMENT" means the Purchase Agreement dated March
21, 1997 among the Trust, the Eligible Lender Trustee, the Administrator, The
Money Store Inc. and Smith Barney Inc., relating to the purchase and sale of the
Certificates, including each Terms Agreement.
"PURCHASED STUDENT LOAN" means a Financed Student Loan
purchased pursuant to Section 4.5 of the related Sale and Servicing Agreement
or Supplemental Sale and Servicing Agreement or repurchased pursuant to Section
3.2 of the related Sale and Servicing Agreement or Supplemental Sale and
Servicing Agreement.
"QUALIFIED LETTER OF CREDIT" means a letter of credit
delivered or to be delivered to the Indenture Trustee in lieu of a deposit of
cash or Eligible Investments in the Reserve Account for such Class or Series,
which letter of credit shall
(a) be irrevocable and name the Indenture Trustee, in its
capacity as such, as the sole beneficiary thereof;
(b) be issued by a bank whose credit standing is acceptable to
each of the rating agencies which are rating or have rated
the Notes of such Series and the Surety Provider;
(c) provide that if at any time the then current credit standing
of the issuing bank is such that the continued reliance on
such letter of credit for the purpose or purposes for which
it was originally deliv ered to the Indenture Trustee would
result in a downgrading of any rating of the Notes of such
Class or Series, the Indenture Trustee may either draw under
such letter of credit any amount up to and including the
entire amount then remaining available for drawing
thereunder or terminate such letter of credit;
(d) be transferable to any successor trustee hereunder with
respect to such Class or Series; and
(e) meet such other standards as may be specified in the Terms
Supplement for such Class or Series or required by the
Surety Provider.
"QUALIFIED INSTITUTIONAL BUYER" has the meaning ascribed to
such term in Rule 144A under the Securities Act.
"RATE ADJUSTMENT DATE" means, with respect to each Class of
Notes and each Class of Certificates, the date on which the applicable Class
Interest Rate or the Certificate Rate, as appropriate, is effective and means,
with respect to each such Class of Notes and Certificates, the date of
commencement of each related Interest Period.
"RATE DETERMINATION DATE" means, (i) with respect to any Class
of Auction Rate Notes and Auction Rate Certificates, the Auction Date, or if no
Auction Date is applicable to such Class of Notes or Certificates, the Business
Day immediately preceding the date of commencement of an Auction Period and (ii)
with respect to any Class of LIBOR Rate Notes and LIBOR Rate Certificates, the
date which is both a Business Day and a London Business Day immediately
preceding the related Rate Adjustment Date.
"RATING AGENCY" means Moody's and Standard & Poor's. If no such
organization or successor is any longer in existence, "Rating Agency" shall be a
nationally recognized statistical rating organization or other comparable Person
designated by the Sellers, notice of which designation shall be given to the
Indenture Trustee, the Eligible Lender Trustee, the Servicer and the Surety
Provider.
"RATING AGENCY CONDITION" means, with respect to any action,
that each Rating Agency shall have been given 10 days' prior notice thereof and
that each of the Rating Agencies shall have notified the Sellers, the Servicer,
the Eligible Lender Trustee, the Indenture Trustee and the Surety Provider in
writing that such action will not result in and of itself in a reduction or
withdrawal of the then current rating of the Notes or the Certificates.
"REALIZED LOSS" means the excess, if any, of (i) the unpaid
principal balance of such Financed Student Loan on the date it was first
submitted to a Guarantor for a Guarantee Payment over (ii) all amounts received
on or with respect to principal on such Financed Student Loan (including amounts
received pursuant to Sections 3.2 and 4.5 of the related Sale and Servicing
Agreement or Supplemental Sale and Servicing Agreement) up through the earlier
to occur of (A) the date a related Guarantee Payment is made or (B) the last day
of the Collection Period occurring 7 months after the date the claim for such
Guarantee Payment is first denied.
"RECORD DATE" means, with respect to a Note Distribution Date
or Certificate Distribution Date, the close of business on the second Business
Day preceding such Note Distribution Date or Certificate Distribution Date.
"REDUCED INTEREST RATE PROGRAM" means a program under which
Obligors who make 48 consecutive on-time payments on a Financed Student Loan are
granted a reduction in interest charges at an amount up to 2% per annum.
"REPAYMENT PHASE" means the period during which the related
borrower is required to make payments of principal and interest on the related
Financed Student Loan.
"REQUISITE AMOUNT" means, with respect to any Series for which
a Reserve Account is required to be maintained, an amount specified in or
determined pursuant to the related Terms Supplement.
"RESERVE ACCOUNT" means the account designated as such,
established and maintained pursuant to Section 5.1 of the related Sale and
Servicing Agreement or Supplemental Sale and Servicing Agreement.
"RESERVE ACCOUNT INITIAL DEPOSIT" means, with respect to any
Series for which a Reserve Account Initial Deposit is required to be maintained,
an amount specified in or determined pursuant to the related Terms Supplement.
"RESPONSIBLE OFFICER" means, with respect to the Indenture
Trustee, any officer within the Corporate Trust Office of the Indenture Trustee
with direct responsibility for the administration of the Indenture and the other
Basic Documents on behalf of the Indenture Trustee, including any Vice
President, Assistant Vice President, Assistant Treasurer, Assistant Secretary,
or any other officer of the Indenture Trustee customarily performing functions
similar to those performed by any of the above designated officers and also,
with respect to a particular matter, any other officer to whom such matter is
referred because of such officer's knowledge of and familiarity with the
particular subject.
"SALE AND SERVICING AGREEMENT" means the Sale and Servicing
Agreement dated as of February 28, 1997, among the Issuer, the Sellers, the
Administrator, the Eligible Lender Trustee and the Master Servicer, as amended
from time to time.
"SCHEDULE OF FINANCED STUDENT LOANS" means the listing of the
Financed Student Loans set forth in Schedule A to the related Sale and Servicing
Agreement or Supplemental Sale and Servicing Agreement and to the Indenture
(which Schedules may be in the form of microfiche), as from time to time amended
or supplemented. Each such Schedule relating to a Sale and Servicing Agreement
or Supplemental Sale and Servicing Agreement shall list the Financed Student
Loans then being conveyed pursuant to such Agreement (along with any related
Additional Financed Student Loans to be conveyed). The Schedule relating to the
Indenture shall be a master list of all Financed Student Loans then subject to
the Lien of the Indenture.
"SECRETARY" means the United States Secretary of Health and
Human Services.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES DEPOSITORY" means an organization registered as a
"clearing agency" pursuant to Section 17A of the Exchange Act.
"SECURITIES DEPOSITORY PARTICIPANT" means a broker, dealer,
bank, other financial institution or other Person for whom from time to time a
Securities Depository effects book-entry transfers and pledges of securities
deposited with the Securities Depository.
"SELLER" means each of Trans-World Insurance Co. d/b/a Educaid
and ClassNotes, Inc., each a wholly-owned subsidiary of The Money Store Inc.
"SERIAL LOAN" means a Financed Student Loan owned by the Trust,
the obligor on which is a borrower who has one or more Financed Student Loans
which are owned by the Student Loan Marketing Association. The definition of
Serial Loan may be changed from time to time by the Sellers, with the prior
consent of the Surety Provider.
"SERIES" means a separate Series of Notes issued pursuant to
the Master Indenture, which Series may, as provided in the related Terms
Supplement, be divided into two or more Classes.
"SERVICER" means PHEAA or another entity appointed by a Master
Servicer to service the Financed Student Loans, in its capacity as servicer of
the Financed Student Loans.
"SERVICER'S REPORT" means any report of a Master Servicer
delivered pursuant to Section 4.8(a) of the related Sale and Servicing Agreement
or Supplemental Sale and Servicing Agreement, substantially in the form
acceptable to the Administrator.
"SERVICING FEE" means, except as may otherwise be set forth in
a Terms Supplement or Trust Supplement, a monthly fee equal to the sum of (i)
0.35% per annum of the aggregate principal balance of Financed Student Loans in
the Deferral Phase as of the last day of the preceding calendar month, (ii)
1.00% per annum of the aggregate principal balance of Financed Student Loans
(other than Consolidation Loans) in the Repayment Phase as of the last day of
the preceding calendar month (iii) with respect to each Consolidation Loan, the
greater of 0.65% per annum of the principal balance of each such Consolidation
Loan as of the last day of the preceding calendar month and $3.00 per
Consolidation Loan, and (iv) a one-time fixed fee equal to $15 for each Financed
Student Loan for which a guarantee claim was filed, in each case subject to
certain adjustments, together with other administrative fees and similar
charges; PROVIDED, HOWEVER, that such fee shall not exceed 1.05% per annum of
the Pool Balance as of the last day of the preceding calendar month.
"SERVICING FEE CARRYOVER" means, with respect to any month, any
amount which would have been included in the Servicing Fee had it not been
limited to 1.05% per annum (or such other percentage as may be set forth in a
Terms Supplement or Trust Supplement) of the Pool Balance as of the last day of
the preceding calendar month, together with any such excess amounts from prior
months which remain unpaid.
"SLMA" means the Student Loan Marketing Association, a
government sponsored enterprise created pursuant to 20 U.S.C. ' 1087-2.
"SLS LOAN" means a Financed Student Loan designated as such
that is made under the Supplemental Loans for Students Program pursuant to the
Higher Education Act.
"SPECIAL ALLOWANCE PAYMENTS" means payments, designated as
such, consisting of effective interest subsidies by the Department in respect of
the Financed Student Loans to the Eligible Lender Trustee on behalf of the Trust
in accordance with the Higher Education Act.
"SPECIFIED RESERVE ACCOUNT BALANCE" means, with respect to any
Note or Certificate Distribution Date, the greatest of (i) 1.0% of the sum of
the outstanding principal balance of the Notes and the Certificates on such Note
or Certificate Distribution Date, after giving effect to all payments (or, in
the case of a Class of Accrued Notes, capitalized interest) to be made on such
date, (ii) the amount required to be in the Reserve Account so that the then
applicable Parity Percentage (as defined in the Insurance Agreement) equals 103%
and (iii) $1,500,000 (or $15,000,000,000 for the period commencing on the
Closing Date and ending on January 15, 2000); PROVIDED, HOWEVER, that such
balance will be subject to adjustment in certain circumstances described in the
applicable Terms Supplement and in no event will such balance exceed the sum of
the aggregate outstanding principal amount of the Notes and the Certificate
Balance.
"STAFFORD LOAN" means a Financed Student Loan designated as
such that is made under '428 of the Higher Education Act.
"STANDARD & POOR'S" means Standard & Poor's Rating Services, a
division of Standard & Poor's Corporation and its successors and assigns.
"STATE" means any one of the 50 States of the United States of
America or the District of Columbia.
"STATISTICAL CUT-OFF DATE" means November 30, 1997 for the
Financed Student Loans pledged to the Indenture Trustee prior to and on the
Closing Date (other than the Financed Student Loans for which Educaid acts as
Servicer and which are expected to be pledged to the Indenture Trustee on the
Closing Date) and December 15, 1997 for the Financed Student Loans for which
Educaid acts as Servicer and which are expected to be pledged to the Indenture
Trustee on the Closing Date.
"SUBSEQUENT CUT-OFF DATE" means the day as of which principal
and interest accruing with respect to an Additional Student Loan are transferred
to the Eligible Lender Trustee on behalf of the Issuer pursuant to Section 2.2
of the related Sale and Servicing Agreement or Supplemental Sale and Servicing
Agreement.
"SUCCESSOR ADMINISTRATOR" has the meaning specified in Section
3.7(e) of the Indenture.
"SUCCESSOR MASTER SERVICER" has the meaning specified in
Section 3.7(e) of the Indenture.
"SUPPLEMENTAL SALE AND SERVICING AGREEMENT" means any
Supplemental Sale and Servicing Agreement among the Sellers, the Administrator,
the Trust, the Eligible Lender Trustee, the Indenture Trustee, and the Master
Servicer entered into after March 21, 1997.
"SURETY PROVIDER" means, with respect to the Trust Certificates
and the Notes, AMBAC Indemnity Corporation, a Wisconsin-domiciled stock
insurance corporation, and its successors and assigns.
"SURETY PROVIDER DEFAULT" means the occurrence and continuance
of the failure of the Surety Provider to make a Certificate Surety Bond Payment
when due pursuant to the related Certificate Surety Bond or to make a Note
Surety Bond Payment when due pursuant to the related Note Surety Bond.
"SURETY PROVIDER FEE" means the premium as defined in the
Insurance Agreement.
"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).
"TERMS AGREEMENT" means, with respect to each Series of Notes
and Class of Certificates, the separate agreement forming a part of the Purchase
Agreement or Underwriting Agreement, as the case may be, that sets forth certain
of the terms of the Notes of such Series or Certificates of such Class, as the
case may be.
"TERMS SUPPLEMENT" means each indenture supplement to the
Indenture which authorizes a particular Series.
"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.
"TMSI" means The Money Store Inc.
"TRANSACTION FEES" means, collectively, the Servicing Fee, the
Administration Fee, Auction Agent Fee, Indenture Trustee Fee, Eligible Lender
Trustee Fee and Surety Provider Fee.
"TRANSFER AGREEMENT" has the meaning specified in Section
2.2(b) of the related Sale and Servicing Agreement or Supplemental Sale and
Servicing Agreement.
"TRANSFER DATE" means the day of any month during a Funding
Period designated by a Seller as a date on which Additional Financed Student
Loans will be conveyed to the Eligible Lender Trustee on behalf of the Trust
pursuant to Section 2.2 of the related Sale and Servicing Agreement or
Supplemental Sale and Servicing Agreement.
"TREASURY REGULATIONS" means regulations, including proposed or
temporary regulations, promulgated under the Code. References in any document or
instrument to specific provisions of proposed or temporary regulations shall
include analogous provisions of final Treasury Regulations or other successor
Treasury Regulations.
"TRUST" means the Issuer, established pursuant to the Trust
Agreement.
"TRUST ACCOUNT PROPERTY" means the Trust Accounts, all amounts
and investments held from time to time in any Trust Account (whether in the form
of deposit accounts, Physical Property, book-entry securities, uncertificated
securities or otherwise), including the Reserve Account Initial Deposit, if any,
and all proceeds of the foregoing.
"TRUST ACCOUNTS" has the meaning specified in Section 5.1 of
the related Sale and Servicing Agreement or Supplemental Sale and Servicing
Agreement.
"TRUST AGREEMENT" means the Trust Agreement dated as of March
21, 1997, between the Depositor and the Eligible Lender Trustee, as amended and
supplemented from time to time.
"TRUST CERTIFICATE" means a Certificate.
"TRUST CERTIFICATEHOLDER" means a person in whose name a Trust
Certificate is registered in the Certificate Register.
"TRUST ESTATE" means all right, title and interest of the Trust
(or the Eligible Lender Trustee on behalf of the Trust) in and to the property
and rights assigned to the Trust pursuant to Article II of the Sale and
Servicing Agreement, all funds on deposit from time to time in the Trust
Accounts and all other property of the Trust from time to time, including any
rights of the Eligible Lender Trustee and the Trust pursuant to the Sale and
Servicing Agreement, any Supplemental Sale and Servicing Agreement and the
Administration Agreement.
"TRUST INDENTURE ACT" or "TIA" means the Trust Indenture Act of
1939 as in force on the date hereof, unless otherwise specifically provided.
"TRUST SUPPLEMENT" means each supplement to the Trust Agreement
which authorizes an issuance of a Class of Certificates or Originators'
Interests.
"TWIC" means Trans-World Insurance Co., d/b/a Educaid, a wholly
owned subsidiary of TMSI.
"UCC" means, unless the context otherwise requires, the Uniform
Commercial Code, as in effect in the relevant jurisdiction, as amended from time
to time.
"UNAMORTIZED PREMIUM" means, with respect to any Financed
Student Loan, the excess, if any, of (i) the Premium for such Financed Student
Loan over (ii) the product of (x) such Premium and (y) a fraction, the numerator
of which is the number of months which have elapsed since the purchase of such
Financed Student Loan by the Trust and the denominator of which is 72.
"UNDERWRITING AGREEMENT" means each Underwriting Agreement
among the Trust, the Eligible Lender Trustee, the Administrator, the Money Store
Inc. and Smith Barney Inc., relating to the purchase and sale of the Notes,
including each Terms Agreement.
"UNSUBSIDIZED STAFFORD LOAN" means a Financed Student Loan
designated as such that is made under ' 428H of the Higher Education Act.
