<PAGE>
UNITED STATES
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): June 18, 1998
-------------
SLM FUNDING CORPORATION
------------------------
formerly known as SALLIE MAE FUNDING CORPORATION
(Exact name of registrant as specified in its charter)
(Originator of the Sallie Mae Student Loan Trust 1995-1,
the Sallie Mae Student Loan Trust 1996-1,
the SLM Student Loan Trust 1996-2,
the SLM Student Loan Trust 1996-3,
the SLM Student Loan Trust 1996-4,
the SLM Student Loan Trust 1997-1
the SLM Student Loan Trust 1997-2,
the SLM Student Loan Trust 1997-3,
the SLM Student Loan Trust 1997-4,
the SLM Student Loan Trust 1998-1
and the SLM Student Loan Trust 1998-2)
Delaware 33-95474/333-2502/333-24949/333-44465 23-2815650
- -------- ------------------------------------- ----------
(State or other (Commission File (I.R.S. employer
Jurisdiction of Numbers) Identification No.)
Incorporation)
777 Twin Creek Drive
Killeen, Texas 76543
--------------------
(Address of principal executive offices)
Registrant's telephone number: (817) 554-4500
Page 1 of 6
Exhibit Index appears on Page 5
<PAGE>
Item 5. Other Events
------------
On June 10, 1998, the following agreements were executed and delivered
by the respective parties thereto: (a) the Pricing Agreement relating to the
Student Loan-Backed Notes, dated June 10, 1998, by and among SLM Funding
Corporation ("SLM Funding"), the Student Loan Marketing Association ("Sallie
Mae"), Morgan Stanley & Co. Incorporated (the "Underwriters"), on behalf of each
of the underwriters named in Schedule 1 thereto; (b) the Pricing Agreement
relating to the Student Loan-Backed Certificates, dated June 10, 1998, by and
among SLM Funding, Sallie Mae and the Underwriters, on behalf of each of the
underwriters named in Schedule 1 thereto: (c) the Underwriting Agreement
relating to the Student Loan-Backed Notes, dated June 10, 1998, by and among SLM
Funding, Sallie Mae and the Underwriters, on behalf of each of the underwriters
named in Schedule 1 thereto; and (d) the Underwriting Agreement relating to the
Student Loan-Backed Certificates, dated June 10, 1998, by and among SLM Funding,
Sallie Mae and the Underwriters, on behalf of each of the underwriters named in
Schedule 1 thereto.
On June 1 or June 18, 1998, the following agreements were executed and
delivered by the respective parties thereto: (a) the Purchase Agreement, dated
as of June 18, 1998, by and among SLM Funding, Chase Manhattan Bank Delaware,
not in its individual capacity but solely as interim eligible lender trustee
(the "Interim Eligible Lender Trustee"), and Sallie Mae; (b) the Trust
Agreement, dated as of June 1, 1998, by and between SLM Funding and Chase
Manhattan Bank Delaware, not in its individual capacity but solely as eligible
lender trustee (the "Eligible Lender Trustee"); (c) the Indenture, dated as of
June 1, 1998 (the "Indenture"), by and among the SLM Student Loan Trust 1998-2
(the "Trust"), the Eligible Lender Trustee, and Bankers Trust Company, not in
its individual capacity but solely as the trustee under the Indenture (the
"Indenture Trustee"); (d) the Sale Agreement, dated as of June 18, 1998, by and
among the Trust, Sallie Mae, the Eligible Lender Trustee, Sallie Mae Servicing
Corporation (the "Servicer"), SLM Funding and the Indenture Trustee; (e) the
Administration Agreement Supplement, dated as of June 18, 1998, by and among the
Trust, Sallie Mae, the Eligible Lender Trustee, the Servicer, SLM Funding and
the Indenture Trustee; (f) the Servicing Agreement, dated as of June 18, 1998,
by and among the Servicer, Sallie Mae, the Trust, the Eligible Lender Trustee
and the Indenture Trustee; and (g) the Paying Agent Agreement, dated June 18,
1998, by and among the Eligible Lender Trustee, Bankers Trust Company (the
"Agent"), and Student Loan Marketing Association (the "Administrator").
Page 2 of 6
Exhibit Index appears on Page 5
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Statements and Exhibits
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(c) Exhibits
1.1 Pricing Agreement relating to the Student Loan-Backed
Notes, dated June 10, 1998, by and among SLM Funding,
Sallie Mae and the Underwriters, on behalf of each of the
underwriters named in Schedule 1 thereto.
1.2 Pricing Agreement relating to the Student Loan-Backed
Certificates, dated June 10, 1998, by and among SLM
Funding, Sallie Mae and the Underwriters, on behalf of each
of the underwriters named in Schedule 1 thereto.
1.3 Underwriting Agreement relating to the Student Loan-Backed
Notes, dated June 10, 1998, by and among SLM Funding,
Sallie Mae and the Underwriters, on behalf of each of the
underwriters named in Schedule 1 thereto.
1.4 Underwriting Agreement relating to the Student Loan-Backed
Certificates, dated June 10, 1998, by and among SLM
Funding, Sallie Mae and the Underwriters, on behalf of each
of the underwriters named in Schedule 1 thereto.
4.1 Trust Agreement, dated as of June 1, 1998 by and between
SLM Funding and the Eligible Lender Trustee.
4.2 Indenture, dated as of June 1, 1998, by and among the
Trust, the Eligible Lender Trustee and the Indenture
Trustee.
99.1 Purchase Agreement, dated as of June 18, 1998, by and among
SLM Funding, the Interim Eligible Lender Trustee and Sallie
Mae.
99.2 Sale Agreement, dated as of June 18, 1998, by and among SLM
Funding, the Interim Eligible Lender Trustee, the Eligible
Lender Trustee and the Trust.
99.3 Administration Agreement Supplement, dated as of June 18,
1998, by and among the Trust, Sallie Mae, SLM Funding, the
Eligible Lender Trustee, the Servicer and the Indenture
Trustee.
99.4 Servicing Agreement, dated as of June 18, 1998, by and
among the Servicer, Sallie Mae, the Trust, the Eligible
Lender Trustee and the Indenture Trustee.
99.5 Paying Agent Agreement, dated June 18, 1998, by and among
the Eligible Lender Trustee, the Agent, and the
Administrator.
Page 3 of 6
Exhibit Index appears on Page 5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
Dated: June 25, 1998
SLM FUNDING CORPORATION
By: /s/ WILLIAM M.E. RACHAL, JR.
----------------------------
Name: William M.E. Rachal, Jr.
Title: Treasurer and Controller
Page 4 of 6
Exhibit Index appears on Page 5
<PAGE>
INDEX TO EXHIBIT
----------------
Sequentially
Exhibit Numbered
Number Exhibit Page
------ ------- ----
1.1 Pricing Agreement relating to Student-Loan
Backed Notes, dated June 10, 1998, by
and among SLM Funding, Sallie Mae and the
Underwriters, on behalf of each of the
underwriters named on the Schedule 1 thereto.
1.2 Pricing Agreement relating to Student-Loan
Backed Certificates, dated June 10, 1998,
by and among SLM Funding, Sallie Mae and
the Underwriters, on behalf of each of the
underwriters named on Schedule 1 thereto.
1.3 Underwriting Agreement relating to
Student-Loan Backed Notes, dated June 10,
1998, by and among SLM Funding, Sallie Mae
and the Underwriters, on behalf of each of the
underwriters named on Schedule 1 thereto.
1.4 Underwriting Agreement relating to
Student-Loan Backed Certificates, dated
June 10, 1998, by and among SLM Funding
Funding, Sallie Mae and the Underwriters, on
behalf of each of the underwriters named on
Schedule 1 thereto.
4.1 Trust Agreement, dated as of June 1, 1998,
by and between SLM Funding and the
Eligible Lender Trustee.
4.2 Indenture, dated as of June 1, 1998, by and
among the Trust, the Eligible Lender Trustee
and the Indenture Trustee.
99.1 Purchase Agreement, dated as of June 18,
1998, by and among SLM Funding, the
Interim Eligible Lender Trustee and
Sallie Mae.
99.2 Sale Agreement, dated as of June 18, 1998,
by and among SLM Funding, the Interim
Eligible Lender Trustee and Sallie Mae.
Page 5 of 6
Exhibit Index appears on Page 5
<PAGE>
INDEX TO EXHIBIT (cont.)
- ------------------------
Sequentially
Exhibit Numbered
Number Exhibit Page
------ ------- ----
99.3 Administration Agreement Supplement,
dated as of June 18, 1998, by and among
the Trust, Sallie Mae, the Eligible Lender
Trustee, the Servicer, SLM Funding and the
Indenture Trustee.
99.4 Servicing Agreement, dated as of June 18,
1998, by and among the Servicer, Sallie Mae,
the Trust, the Eligible Lender Trustee and the
Indenture Trustee.
99.5 Paying Agent Agreement, dated June 18,
1998, by and among the Eligible Lender
Trustee, the Agent, and the Administrator.
Page 6 of 6
Exhibit Index appear on Page 5
<PAGE>
Pricing Agreement
-----------------
Morgan Stanley & Co. Incorporated
As Representatives of the several
Underwriters named on Schedule I hereto,
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
June 10, 1998
Ladies and Gentlemen:
SLM Funding Corporation, a Delaware corporation (the "Company"), and
the Student Loan Marketing Association, a corporation formed under the laws of
the United States ("Sallie Mae"), propose, subject to the terms and conditions
stated herein and in the Underwriting Agreement, dated June 10, 1998 (the
"Underwriting Agreement"), between the Company and Sallie Mae, on the one hand,
and Morgan Stanley & Co. Incorporated, on the other hand, that the Company will
cause the trust (the "Trust") formed pursuant to the Trust Agreement dated as of
June 1, 1998 between the Company and Chase Manhattan Bank Delaware, as trustee
(the "Eligible Lender Trustee"), to issue and sell to the Underwriters named in
Schedule I hereto (the "Underwriters") the Student Loan-Backed Notes (the
"Notes") specified in Schedule II hereto (the "Designated Securities"). The
Notes will be issued and secured pursuant to the Indenture, dated as of June 1,
1998 (the "Indenture"), between the Trust and Bankers Trust Company, as trustee
(the "Indenture Trustee").
Each of the provisions of the Underwriting Agreement is incorporated
herein by reference in its entirety, and shall be deemed to be a part of this
Agreement to the same extent as if such provisions had been set forth in full
herein; and each of the representations and warranties set forth therein shall
be deemed to have been made at and as of the date of this Pricing Agreement,
except that each representation and warranty which refers to the Prospectus in
Section 2 of the Underwriting Agreement shall be deemed to be a representation
or warranty as of the date of the Underwriting Agreement in relation to the
Prospectus (as therein defined), and also a representation and warranty as of
the date of this Pricing Agreement in relation to the Prospectus as amended or
supplemented relating to the Designated Securities which are the subject of this
Pricing Agreement. Each reference to the Representatives herein and in the
provisions of the Underwriting Agreement so incorporated by reference shall be
deemed to refer to you. Unless otherwise defined herein, terms defined in the
Underwriting Agreement are used herein as therein defined.
The Representatives designated to act on behalf of the Representatives
and on behalf of each of the Underwriters of the Designated Securities pursuant
to Section 12 of the
<PAGE>
Underwriting Agreement and the address of the Representatives referred to in
such Section 12 are set forth at the end of Schedule II hereto.
An amendment to the Registration Statement, or a supplement to the
Prospectus, as the case may be, relating to the Designated Securities, in the
form heretofore delivered to you is now proposed to be filed with the
Commission.
Subject to the terms and conditions set forth herein and in the
Underwriting Agreement incorporated herein by reference, the Company agrees to
cause the Trust to issue and sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Trust, at
the time and place and at the purchase price to the Underwriters set forth in
Schedule II hereto, the principal amount of Designated Securities set forth
opposite the name of such Underwriter in Schedule I hereto, less the principal
amount of Designated Securities covered by Delayed Delivery Contracts, if any,
as may be specified in Schedule II.
During the period beginning from the date of this Pricing Agreement
for the Designated Securities and continuing to and including June 18, 1998, the
Company agrees, and Sallie Mae agrees that it will cause the Company, not to,
and not to permit any affiliated entity to, offer, sell, contract to sell or
otherwise dispose of, any securities (other than the Designated Securities)
collateralized by, or any securities (other than the related Certificates)
evidencing an ownership in, Student Loans, without the prior written consent of
the Representatives.
Each Underwriter represents and agrees that (a) it has not offered or
sold and will not offer or sell any Notes or Certificates to persons in the
United Kingdom prior to the expiration of the period of six months from the
issue date of the Notes and the Certificates except to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their businesses or
otherwise in circumstances which have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995; (b) it has complied and will comply with
all applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the Notes and the Certificates in, from or
otherwise involving the United Kingdom; and (c) it has only issued or passed on
and will only issue or pass on in the United Kingdom any document received by it
in connection with the issuance of the Notes and the Certificates to a person
who is of a kind described in article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1995 or is a person to whom such
document may otherwise lawfully be issued or passed on.
If the foregoing is in accordance with your understanding, please sign
and return to us 10 counterparts hereof, and upon acceptance hereof by you, on
behalf of each of
2
<PAGE>
the Underwriters, this letter and such acceptance hereof, including the
provisions of the Underwriting Agreement incorporated herein by reference, shall
constitute a binding agreement between each of the Underwriters and the Company
and Sallie Mae. It is understood that your acceptance of this letter on behalf
of each of the Underwriters is or will be pursuant to the authority set forth in
a form of Agreement among Underwriters, the form of which shall be submitted to
the Company and Sallie Mae for examination upon request, but without warranty on
the part of the Representatives as to the authority of the signers thereof.
Very truly yours,
SLM Funding Corporation
By: /s/ William M.E. Rachal, Jr.
------------------------------
Name:
Title:
Student Loan Marketing Association
By: /s/ Somsak Chivavibul
------------------------------
Name:
Title:
3
<PAGE>
Accepted as of the date hereof:
Morgan Stanley & Co. Incorporated
By: /s/ Charles N. Atkins
------------------------------
Name: Charles N. Atkins
Title: Principal
On behalf of each of the Underwriters
4
<PAGE>
SCHEDULE I
Principal Amount of Designated Securities to be Purchased
Underwriter Class A-1 Class A-2
Morgan Stanley & Co. Incorporated $ 239,788,000 $ 176,728,000
Education Securities, Inc. $ 239,782,000 $ 176,722,000
Goldman, Sachs & Co. $ 239,782,000 $ 176,722,000
J.P. Morgan Securities Inc. $ 239,782,000 $ 176,722,000
Lehman Brothers Inc. $ 239,782,000 $ 176,722,000
Merrill Lynch, Pierce, Fenner & $ 239,782,000 $ 176,722,000
Smith Incorporated
Salomon Smith Barney $ 239,782,000 $ 176,722,000
Total $1,678,480,000 $1,237,060,000
============== ==============
<PAGE>
SCHEDULE II
Title of each Class of Designated Securities:
Floating Rate Class A-1 Student Loan-Backed Notes
(for purposes of this Schedule II, "Class A-1")
Floating Rate Class A-2 Student Loan-Backed Notes
(for purposes of this Schedule II, "Class A-2")
Aggregate principal amount of each Class:
Class A-1: $1,678,480,000
Class A-2: $1,237,060,000
Price to Public of each Class:
Class A-1: 100.00%
Class A-2: 100.00%
Purchase Price by Underwriters of each Class:
Class A-1: 99.775%
Class A-2: 99.725%
Specified funds for payment of purchase price: Same Day Funds
Indenture: Indenture, dated as of June 1, 1998, among Bankers Trust Company, as
Indenture Trustee, the SLM Student Loan Trust 1998-2, and Chase Manhattan Bank
Delaware, as Eligible Lender Trustee.
Maturity:
Class A-1: April 2007 Distribution Date
Class A-2: January 2014 Distribution Date
Interest Rate:
Class A-1: T-Bill Rate plus 0.68%
Class A-2: T-Bill Rate plus 0.73%
Form of Designated Securities: Book-Entry (DTC)
Time of Delivery: June 18, 1998
<PAGE>
Closing location for delivery of Designated Securities:
Student Loan Marketing Association
11600 Sallie Mae Drive
Reston, VA 20193
Names and addresses of Representatives:
Designated Representatives: Morgan Stanley & Co. Incorporated
Address for Notices, etc.: Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Attn: Charles Atkins
-2-
<PAGE>
Pricing Agreement
-----------------
Morgan Stanley & Co. Incorporated
As Representatives of the several
Underwriters named on Schedule I hereto,
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
June 10, 1998
Ladies and Gentlemen:
SLM Funding Corporation, a Delaware corporation (the "Company"), and
the Student Loan Marketing Association, a corporation formed under the laws of
the United States ("Sallie Mae"), propose, subject to the terms and conditions
stated herein and in the Underwriting Agreement, dated June 10, 1998 (the
"Underwriting Agreement"), between the Company and Sallie Mae, on the one hand,
and Morgan Stanley & Co. Incorporated, on the other hand, that the Company will
cause the trust (the "Trust") formed pursuant to the Trust Agreement dated as of
June 1, 1998 between the Company and Chase Manhattan Bank Delaware, as trustee
(the "Eligible Lender Trustee"), to issue and sell to the Underwriters named in
Schedule I hereto (the "Underwriters") the Student Loan-Backed Certificates (the
"Certificates") specified in Schedule II hereto (the "Designated Securities").
The Certificates will be issued pursuant to the Trust Agreement.
Each of the provisions of the Underwriting Agreement is incorporated
herein by reference in its entirety, and shall be deemed to be a part of this
Agreement to the same extent as if such provisions had been set forth in full
herein; and each of the representations and warranties set forth therein shall
be deemed to have been made at and as of the date of this Pricing Agreement,
except that each representation and warranty which refers to the Prospectus in
Section 2 of the Underwriting Agreement shall be deemed to be a representation
or warranty as of the date of the Underwriting Agreement in relation to the
Prospectus (as therein defined), and also a representation and warranty as of
the date of this Pricing Agreement in relation to the Prospectus as amended or
supplemented relating to the Designated Securities which are the subject of this
Pricing Agreement. Each reference to the Representatives herein and in the
provisions of the Underwriting Agreement so incorporated by reference shall be
deemed to refer to you. Unless otherwise defined herein, terms defined in the
Underwriting Agreement are used herein as therein defined.
<PAGE>
The Representatives designated to act on behalf of the Representatives
and on behalf of each of the Underwriters of the Designated Securities pursuant
to Section 12 of the Underwriting Agreement and the address of the
Representatives referred to in such Section 12 are set forth at the end of
Schedule II hereto.
An amendment to the Registration Statement, or a supplement to the
Prospectus, as the case may be, relating to the Designated Securities, in the
form heretofore delivered to you is now proposed to be filed with the
Commission.
Subject to the terms and conditions set forth herein and in the
Underwriting Agreement incorporated herein by reference, the Company agrees to
cause the Trust to issue and sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Trust, at
the time and place and at the purchase price to the Underwriters set forth in
Schedule II hereto, the amount of Designated Securities set forth opposite the
name of such Underwriter in Schedule I hereto, less the amount of Designated
Securities covered by Delayed Delivery Contracts, if any, as may be specified in
Schedule II.
During the period beginning from the date of this Pricing Agreement
for the Designated Securities and continuing to and including June 18, 1998, the
Company agrees, and Sallie Mae agrees that it will cause the Company, not to,
and not to permit any affiliated entity to, offer, sell, contract to sell or
otherwise dispose of, any securities (other than the Designated Securities)
evidencing an ownership in, or any securities (other than the related Notes)
collateralized by, Student Loans, without the prior written consent of the
Representatives.
Each Underwriter represents and agrees that (a) it has not offered or
sold and will not offer or sell any Notes or Certificates to persons in the
United Kingdom prior to the expiration of the period of six months from the
issue date of the Notes and the Certificates except to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their businesses or
otherwise in circumstances which have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995; (b) it has complied and will comply with
all applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the Notes and the Certificates in, from or
otherwise involving the United Kingdom; and (c) it has only issued or passed on
and will only issue or pass on in the United Kingdom any document received by it
in connection with the issuance of the Notes and the Certificates to a person
who is of a kind described in article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1996 or is a person to whom such
document may otherwise lawfully be issued or passed on.
If the foregoing is in accordance with your understanding, please sign
and return to us 10 counterparts hereof, and upon acceptance hereof by you, on
behalf of each of
2
<PAGE>
the Underwriters, this letter and such acceptance hereof, including the
provisions of the Underwriting Agreement incorporated herein by reference, shall
constitute a binding agreement between each of the Underwriters and the Company
and Sallie Mae. It is understood that your acceptance of this letter on behalf
of each of the Underwriters is or will be pursuant to the authority set forth in
a form of Agreement among Underwriters, the form of which shall be submitted to
the Company and Sallie Mae for examination upon request, but without warranty on
the part of the Representatives as to the authority of the signers thereof.
Very truly yours,
SLM Funding Corporation
By: /s/ William M.E. Rachal, Jr.
----------------------------------
Name:
Title:
Student Loan Marketing Association
By: /s/ Somsak Chivavibul
----------------------------------
Name:
Title:
3
<PAGE>
Accepted as of the date hereof:
Morgan Stanley & Co. Incorporated
By: /s/ Charles N. Atkins
-----------------------------
Name: Charles N. Atkins
Title: Principal
On behalf of each of the Underwriters
4
<PAGE>
SCHEDULE I
Amount of Designated Securities to be Purchased
Underwriter Certificates
Morgan Stanley & Co. Incorporated $ 15,108,000
Education Securities, Inc. $ 15,107,000
Goldman, Sachs & Co. $ 15,107,000
J.P. Morgan Securities Inc. $ 15,107,000
Lehman Brothers Inc. $ 15,107,000
Merrill Lynch, Pierce, Fenner & $ 15,107,000
Smith Incorporated
Salomon Smith Barney $ 15,107,000
Total $105,750,000
============
<PAGE>
SCHEDULE II
Title of each Class of Designated Securities:
Floating Rate Student Loan-Backed Certificates
Aggregate amount of Designated Securities: $105,750,000
Price to Public per Certificate: 100.00%
Purchase Price by Underwriters per Certificate:
$105,750,000 of Floating Rate Student Loan-Backed Certificates: 99.650%
Specified funds for payment of purchase price: Same Day Funds
Trust Agreement: Trust Agreement, dated June 1, 1998, among SLM Funding
Corporation, as Seller, and Chase Manhattan Bank Delaware, as Eligible Lender
Trustee
Maturity: July 2016 Distribution Date
Return Rate: T-Bill Rate plus 0.95%
Form of Designated Securities: Book-Entry (DTC)
Time of Delivery: June 18, 1998
<PAGE>
Closing location for delivery of Designated Securities:
Student Loan Marketing Association
11600 Sallie Mae Drive
Reston, VA 20193
Names and addresses of Representatives:
Designated Representatives: Morgan Stanley & Co. Incorporated
Address for Notices, etc.: Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Attn: Charles Atkins
-2-
<PAGE>
SLM Funding Corporation
Student Loan-Backed Notes
---------------
Underwriting Agreement
----------------------
June 10, 1998
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Ladies and Gentlemen:
From time to time the Student Loan Marketing Association ("Sallie Mae"), a
corporation formed under the laws of the United States, and SLM Funding
Corporation, a Delaware corporation and a wholly-owned subsidiary of Sallie Mae
(the "Company"), propose to enter into one or more Pricing Agreements (each a
"Pricing Agreement") in the form of Annex I hereto, with such additions and
deletions as the parties thereto may determine. Subject to the terms and
conditions stated herein and therein, the Company proposes to cause the Trust
specified in the applicable Pricing Agreement to issue and sell to the firms
named in Schedule I to the applicable Pricing Agreement (such firms constituting
the "Underwriters" with respect to such Pricing Agreement and the securities
specified therein) certain of such Trust's Student Loan-Backed Notes (the
"Notes") specified in Schedule II to such Pricing Agreement (with respect to
such Pricing Agreement, the "Designated Securities"), less the principal amount
of Designated Securities covered by Delayed Delivery Contracts, if any, as
provided in Section 3 hereof and as may be specified in Schedule II to such
Pricing Agreement (with respect to such Pricing Agreement, any Designated
Securities to be covered by Delayed Delivery Contracts are herein sometimes
referred to as "Contract Securities" and the Designated Securities to be
purchased by the Underwriters (after giving effect to the deduction, if any, for
Contract Securities) are herein sometimes referred to as "Underwriters'
Securities").
The Securities may be sold from time to time in one or more Series. Each
Series of Securities, which will include one or more classes of Notes and one or
more classes of Student Loan-Backed Certificates (the "Certificates," and,
together with the Notes, the "Securities") will be issued by a Trust to be
formed with respect to such Series (each, a "Trust"). Each Trust will be formed
pursuant to a trust agreement (a "Trust Agreement") to be entered into between
the Company and the Eligible Lender Trustee specified in the related Pricing
Agreement (the "Eligible Lender Trustee"). The Notes of each Series will be
issued and secured pursuant to an indenture (an "Indenture") between the Trust
and the Indenture Trustee specified in the related Pricing Agreement (the
"Indenture Trustee"). The Certificates of a Series will be issued pursuant to
the related Trust Agreement and will represent fractional
<PAGE>
undivided interests in the Trust created thereby. The property of each Trust
will include, among other things, educational student loans to students and/or
parents of dependent students ("Student Loans").
With respect to each Trust, (i) the Company will acquire the related
Student Loans from Sallie Mae pursuant to a Purchase Agreement and (ii) the
Company will sell the related Student Loans to such Trust pursuant to a Sale
Agreement, with the related Eligible Lender Trustee holding legal title thereto.
With respect to each Series, Sallie Mae Servicing Corporation, as servicer (the
"Servicer") will enter into a servicing agreement (a "Servicing Agreement") with
the Trust, the Administrator, the Eligible Lender Trustee and the Indenture
Trustee with respect to the related Student Loans. Sallie Mae, as administrator
(in such capacity, the "Administrator"), has entered into a Master
Administration Agreement with the Company dated as of May 1, 1997 and, as
contemplated by the terms of the Master Administration Agreement, will enter
into an Administration Agreement Supplement among the Company, the Trust, the
Eligible Lender Trustee, the Servicer and the Indenture Trustee with respect to
the Student Loans to be held by the Trust (the Master Administration Agreement,
as supplemented by the Administration Agreement Supplement, the "Administration
Agreement").
The terms and conditions of any particular issuance of Designated
Securities shall be as specified in the Pricing Agreement relating thereto and
in or pursuant to the related Indenture.
Capitalized terms used but not defined herein or in any Pricing Agreement
shall have the meanings ascribed thereto in the related Indenture.
1. Particular sales of Designated Securities may be made from time to time
to the Underwriters of such Securities, for whom the firms designated as
representatives of the Underwriters of such Securities in the Pricing Agreement
relating thereto will act as representatives (the "Representatives"). The term
"Representatives" also refers to a single firm acting as sole representative of
the Underwriters and to an Underwriter or Underwriters who act without any firm
being designated as its or their representatives. This Underwriting Agreement
shall not be construed as an obligation of the Company to sell any of the
Securities or as an obligation of any of the Underwriters to purchase the
Securities. The obligation of the Company to issue and sell any of the
Securities and the obligation of any of the Underwriters to purchase any of the
Securities shall be evidenced by the Pricing Agreement with respect to the
Designated Securities specified therein. Each Pricing Agreement shall specify
the aggregate principal amount of such Designated Securities, the initial public
offering price of such Designated Securities, the purchase price to the
Underwriters of such Designated Securities, the names of the Underwriters of
such Designated Securities, the names of the Representatives of such
Underwriters and the principal amount of such Designated Securities to be
purchased by each Underwriter and whether any of such Designated Securities
shall be covered by Delayed Delivery Contracts (as defined in Section 3 hereof)
and shall set forth the date, time and manner of delivery of such Designated
Securities and payment therefor. The Pricing Agreement shall also specify (to
the extent not set forth in the Indenture and the
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registration statement and prospectus with respect thereto) the terms of such
Designated Securities. A Pricing Agreement shall be in the form of an executed
writing (which may be in counterparts), and may be evidenced by an exchange of
telegraphic communications or any other rapid transmission device designed to
produce a written record of communications transmitted. The obligations of the
Underwriters under this Agreement and each Pricing Agreement shall be several
and not joint.
2. The Company and Sallie Mae represent and warrant to, and agree with,
each of the Underwriters as follows (it being agreed and understood that the
statements set forth in clauses (d), (e), (g), (h), (j), (k), (m), (n) and (o)
of this Section 2 with respect to Sallie Mae or the Servicer constitute
representations, warranties and agreements of Sallie Mae only and not of the
Company) :
(a) A registration statement on Form S-3 (File No. 333-44465),
including a form of prospectus, in respect of the Securities has been filed
with the Securities and Exchange Commission (the "Commission"); such
registration statement and any post-effective amendment thereto, each in
the form heretofore delivered or to be delivered to the Representatives
and, excluding exhibits to such registration statement, but including all
documents incorporated by reference in the prospectus contained therein, to
the Representatives for each of the other Underwriters, have been declared
effective by the Commission in such form; no other document with respect to
such registration statement or document incorporated by reference therein
has heretofore been filed or transmitted for filing with the Commission
(other than prospectuses filed pursuant to Rule 424(b) of the rules and
regulations of the Commission under the Securities Act of 1933, as amended
(the "Act"), each in the form heretofore delivered to the Representatives);
and no stop order suspending the effectiveness of such registration
statement has been issued and no proceeding for that purpose has been
initiated or, to the best of Sallie Mae's or the Company's knowledge,
threatened by the Commission (any preliminary prospectus included in such
registration statement or filed with the Commission pursuant to Rule 424(a)
under the Act, is hereinafter called a "Preliminary Prospectus;" the
various parts of such registration statement, including all exhibits
thereto and the documents incorporated by reference in the prospectus
contained in the registration statement at the time such part of the
registration statement became effective but excluding Form T-1, each as
amended at the time such part of the registration statement became
effective, are hereinafter collectively called the "Registration
Statement"; the prospectus relating to the Securities, in the form in which
it has most recently been filed, or transmitted for filing, with the
Commission on or prior to the date of this Agreement, being hereinafter
called the "Prospectus"; any reference herein to any Preliminary Prospectus
or the Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to the applicable form under the
Act, as of the date of such Preliminary Prospectus or Prospectus, as the
case may be; any reference to any amendment or supplement to any
Preliminary Prospectus or the Prospectus shall be deemed to refer to and
include any
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documents filed after the date of such Preliminary Prospectus or
Prospectus, as the case may be, under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and incorporated by reference in such
Preliminary Prospectus or Prospectus, as the case may be; any reference to
any amendment to the Registration Statement shall be deemed to refer to and
include any annual report of the Company filed pursuant to Sections 13(a)
or 15(d) of the Exchange Act after the effective date of the Registration
Statement that is incorporated by reference in the Registration Statement;
and any reference to the Prospectus as amended or supplemented shall be
deemed to refer to the Prospectus as amended or supplemented in relation to
the applicable Designated Securities in the form in which it is filed with
the Commission pursuant to Rule 424(b) under the Act in accordance with
Section 5(a) hereof, including any documents incorporated by reference
therein as of the date of such filing);
(b) The documents incorporated by reference in the Prospectus, when
they became effective or were filed with the Commission, as the case may
be, conformed in all material respects to the requirements of the Act, the
Exchange Act and the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"), as applicable, and the rules and regulations of the
Commission thereunder, and none of such documents contained an untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading; and any further documents so filed and incorporated by
reference in the Prospectus or any further amendment or supplement thereto,
when such documents become effective or are filed with the Commission, as
the case may be, will conform in all material respects to the requirements
of the Act, the Exchange Act and the Trust Indenture Act, as applicable,
and the rules and regulations of the Commission thereunder and will not
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that this representation and
warranty shall not apply to any statements or omissions made in reliance
upon and in conformity with information furnished in writing to the Company
by an Underwriter of Designated Securities through the Representatives
expressly for use in the Prospectus as amended or supplemented relating to
such Designated Securities;
(c) The Registration Statement and the Prospectus conform, and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of
the Act and the Trust Indenture Act, as applicable, and the rules and
regulations of the Commission thereunder and do not and will not, as of the
applicable effective date as to the Registration Statement and any
amendment thereto and as of the applicable filing date as to the Prospectus
and any amendment or supplement thereto, contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, however, that this representation and warranty shall not apply to
any statements or omissions made in reliance upon and in
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conformity with information furnished in writing to the Company by an
Underwriter of Designated Securities through the Representatives expressly
for use in the Prospectus as amended or supplemented relating to such
Designated Securities;
(d) Neither the Company nor Sallie Mae or any of its subsidiaries has
sustained since the date of the financial statements included in Sallie
Mae's most recently published Information Statement any material loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, otherwise than as set forth
or contemplated in such Information Statement; and, since such date, there
has not been any material adverse change in the capital stock or long-term
debt of the Company or Sallie Mae or any of its subsidiaries or any
material adverse change, or any development involving a prospective
material adverse change, in or affecting the general affairs, management,
financial position, shareholders' equity or results of operations of the
Company or Sallie Mae or any of its subsidiaries or the transactions
contemplated hereby, otherwise than as set forth or contemplated in such
Information Statement;
(e) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the state of Delaware, with
power and authority (corporate and other) to own its properties and conduct
its business as described in the Prospectus and to consummate the
transactions contemplated therein and herein, and is a wholly-owned
subsidiary of Sallie Mae. Sallie Mae has been duly organized and is
validly existing under the laws of the United States, with power and
authority (corporate and otherwise) to own its properties and conduct its
business as described in the Prospectus and to consummate the transactions
contemplated therein and herein. The Servicer has been duly incorporated
and is validly existing as a corporation in good standing under the laws of
the State of Delaware, with power and authority (corporate and other) to
own its properties and conduct its business as described in the Prospectus
and to consummate the transactions contemplated therein and herein, and is
a wholly-owned subsidiary of Sallie Mae.
(f) All of the issued shares of capital stock of the Company have been
duly and validly authorized and issued and are fully paid and non-
assessable and are owned beneficially and of record by Sallie Mae;
(g) This Agreement has been, and each Pricing Agreement with respect to
the Designated Securities upon its execution and delivery by the Company
and Sallie Mae will have been, duly authorized, executed and delivered by
the Company and Sallie Mae. The Securities have been duly authorized, and,
when Designated Securities are issued and delivered pursuant to this
Agreement and the Pricing Agreement with respect to such Designated
Securities, and, in the case of any Contract Securities, pursuant to
Delayed Delivery Contracts with respect to such Contract Securities, such
Designated Securities and Contract Securities will have been duly executed,
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authenticated, issued and delivered. The Designated Securities will
constitute valid and legally binding obligations of the related Trust
entitled to the benefits provided by the Indenture, which will be
substantially in the form filed as an exhibit to the Registration
Statement. The Indenture has been duly authorized and duly qualified under
the Trust Indenture Act. The related Certificates are intended to represent
undivided ownership interests in the Trust created by the Trust Agreement,
which will be substantially in the form filed as an exhibit to the
Registration Statement, and will be entitled to the benefits provided by
the Trust Agreement. At the Time of Delivery (as defined in Section 4
hereof) for the Designated Securities, the Indenture and the Trust
Agreement will each constitute a valid and legally binding instrument,
enforceable in accordance with its terms, subject, as to enforcement, to
bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to general
equity principles. The Indenture and Trust Agreement conform, and the
Designated Securities and the related Certificates will conform, to the
descriptions thereof contained in the Prospectus as amended or supplemented
with respect to the Designated Securities;
(h) The issue and sale of the Securities and the compliance by the
Company with all of the provisions of the Securities, the Indenture, the
Trust Agreement, each of the Delayed Delivery Contracts, this Agreement and
any Pricing Agreement, and the consummation of the transactions herein and
therein contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company or Sallie Mae is a party or by
which the Company or Sallie Mae is bound or to which any of the property or
assets of the Company or Sallie Mae is subject, nor will such action result
in any violation of the provisions of the Company's Certificate of
Incorporation or By-laws, Sallie Mae's charter, enabling legislation or By-
laws, or any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or Sallie
Mae or any of their properties; and no consent, approval, authorization,
order, registration or qualification of or with any such court or
governmental agency or body is required for the issue and sale of the
Securities or the consummation by the Company or Sallie Mae of the
transactions contemplated by this Agreement or any Pricing Agreement or the
Indenture or any Delayed Delivery Contract, except such as have been, or
will have been prior to the Time of Delivery, obtained under the Act and
the Trust Indenture Act and such consents, approvals, authorizations,
registrations or qualifications as may be required under state securities
or Blue Sky laws in connection with the purchase and distribution of the
Designated Securities by the Underwriters;
(i) The statements set forth in the Prospectus under the captions
"Description of the Notes" and "Description of the Certificates" and set
forth in the Prospectus Supplement under the caption "Description of the
Securities," insofar as they purport
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to constitute a summary of the terms of the Notes and the Certificates, are
accurate, complete and fair;
(j) Sallie Mae is not in violation of its charter as set forth in its
enabling legislation or By-laws, and the Company is not in violation of its
Certificate of Incorporation or By-laws, and neither Sallie Mae nor the
Company is in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any indenture,
mortgage, deed of trust, loan agreement, lease or other agreement or
instrument to which it is a party or by which it or any of its properties
may be bound;
(k) Other than as set forth in the Prospectus or in Sallie Mae's most
recently published Information Statement, there are no legal or
governmental proceedings pending to which the Company or Sallie Mae or any
of its subsidiaries is a party or of which any property of the Company or
Sallie Mae or any of its subsidiaries is the subject which, if determined
adversely to the Company or Sallie Mae or any of its subsidiaries, would
individually or in the aggregate have a material adverse effect on the
current or future consolidated financial position, shareholders' equity or
results of operations of the Company or Sallie Mae or any of its
subsidiaries or on the consummation of the transactions contemplated
hereby; and, to the best of the Company's and Sallie Mae's knowledge, no
such proceedings are threatened or contemplated by governmental authorities
or threatened by others;
(l) The Company is not and, after giving effect to the offering and
sale of the Securities, will not be an "investment company" or an entity
"controlled" by an "investment company", as such terms are defined in the
Investment Company Act of 1940, as amended (the "Investment Company Act");
(m) Neither the Company, Sallie Mae nor any of their affiliates does
business with the government of Cuba or with any person or affiliate
located in Cuba within the meaning of Section 517.075, Florida Statutes;
(n) Arthur Anderson LLP are independent public accountants as required
by the Act and the rules and regulations of the Commission thereunder;
(o) At the Time of Delivery of the Designated Securities, Sallie Mae's
representations and warranties in the related Purchase Agreement and the
Administration Agreement, the Company's representations and warranties in
the related Sale Agreement and Trust Agreement and the Servicer's
representations and warranties in the Servicing Agreement will be true and
correct in all material respects; and
(p) In the event any of the Securities are purchased pursuant to
Delayed Delivery Contracts, each of such Delayed Delivery Contracts has
been duly authorized by the Company and Sallie Mae and, when executed and
delivered by the Company and the purchaser named therein, will constitute a
valid and legally binding agreement of the Company enforceable in
accordance with its terms, subject, as to enforcement, to
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bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to general
equity principles; and any Delayed Delivery Contracts conform to the
description thereof in the Prospectus.
3. Upon the execution of the Pricing Agreement applicable to any
Designated Securities and authorization by the Representatives of the release of
the Underwriters' Securities, the several Underwriters propose to offer such
Underwriters' Securities for sale upon the terms and conditions set forth in the
Prospectus as amended or supplemented.
The Company may specify in Schedule II to the Pricing Agreement applicable
to any Designated Securities that the Underwriters are authorized to solicit
offers to purchase Designated Securities from the Company pursuant to delayed
delivery contracts (herein called "Delayed Delivery Contracts"), substantially
in the form of Annex III attached hereto but with such changes therein as the
Representatives and the Company may authorize or approve. If so specified, the
Underwriters will endeavor to make such arrangements, and as compensation
therefor the Company will pay to the Representatives, for the accounts of the
Underwriters, at the Time of Delivery, such commission, if any, as may be set
forth in such Pricing Agreement. Delayed Delivery Contracts, if any, are to be
with investors of the types described in the Prospectus and subject to other
conditions therein set forth. The Underwriters will not have any responsibility
with respect to the validity or performance of any Delayed Delivery Contracts.
The principal amount of Contract Securities to be deducted from the
principal amount of Designated Securities to be purchased by each Underwriter as
set forth in Schedule I to the Pricing Agreement applicable to such Designated
Securities shall be, in each case, the principal amount of Contract Securities
which the Company has been advised by the Representatives have been attributed
to such Underwriter, provided that, if the Company has not been so advised, the
amount of Contract Securities to be so deducted shall be, in each case, that
proportion of Contract Securities which the principal amount of Designated
Securities to be purchased by such Underwriter under such Pricing Agreement
bears to the total principal amount of the Designated Securities (rounded as the
Representatives may determine). The total principal amount of Underwriters'
Securities to be purchased by all the Underwriters pursuant to such Pricing
Agreement shall be the total principal amount of Designated Securities set forth
in Schedule I to such Pricing Agreement less the principal amount of the
Contract Securities. The Company will deliver to the Representatives not later
than 3:30 p.m., New York City time, on the third business day preceding the Time
of Delivery specified in the applicable Pricing Agreement (or such other time
and date as the Representatives and the Company may agree upon in writing), a
written notice setting forth the principal amount of Contract Securities.
4. Underwriters' Securities to be purchased by each Underwriter pursuant
to the Pricing Agreement relating thereto, in the form specified in such Pricing
Agreement, and in such authorized denominations and registered in such names as
the Representatives may request upon at least forty-eight hours' prior notice to
the Company, shall be delivered by or
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on behalf of the Company to the Representatives for the account of such
Underwriter, against payment by such Underwriter or on its behalf of the
purchase price therefor by wire transfer or by certified or official bank check
or checks, payable to the order of the Company in the funds specified in such
Pricing Agreement, all in the manner and at the place and time and date
specified in such Pricing Agreement or at such other place and time and date as
the Representatives and the Company may agree upon in writing, such time and
date being herein called the "Time of Delivery" for such Securities.
Concurrently with the delivery of and payment for the Underwriters'
Securities, the Company will deliver to the Representatives for the accounts of
the Underwriters a check payable to the order of the party designated in the
Pricing Agreement relating to such Underwriters' Securities in the amount of any
compensation payable by the Company to the Underwriters in respect of any
Delayed Delivery Contracts as provided in Section 3 hereof and the Pricing
Agreement relating to such Securities.
5. The Company agrees with each of the Underwriters of any Designated
Securities, and Sallie Mae agrees with such Underwriters that it will cause the
Company:
(a) To prepare the Prospectus as amended or supplemented in relation to
the applicable Designated Securities in a form approved by the
Representatives and to file such Prospectus pursuant to Rule 424(b) under
the Act not later than the Commission's close of business on the second
business day following the execution and delivery of the Pricing Agreement
relating to the applicable Designated Securities or, if applicable, such
earlier time as may be required by Rule 424(b); to make no further
amendment or any supplement to the Registration Statement or Prospectus as
amended or supplemented after the date of the Pricing Agreement relating to
such Designated Securities and prior to the Time of Delivery for such
Designated Securities which shall be disapproved by the Representatives for
such Designated Securities promptly after reasonable notice thereof; to
advise the Representatives promptly of any such amendment or supplement
after such Time of Delivery and furnish the Representatives with copies
thereof; to file promptly all reports and any definitive proxy or
information statements required to be filed by the Company with the
Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange
Act for so long as the delivery of a prospectus is required in connection
with the offering or sale of such Designated Securities, and during such
same period to advise the Representatives, promptly after it receives
notice thereof, of the time when any amendment to the Registration
Statement has been filed or becomes effective or any supplement to the
Prospectus or any amended Prospectus has been filed with the Commission, of
the issuance by the Commission of any stop order or of any order preventing
or suspending the use of any prospectus relating to the Designated
Securities, of the suspension of the qualification of such Designated
Securities for offering or sale in any jurisdiction, of the initiation or
threatening of any proceeding for any such purpose, or of any request by
the Commission for the amending or supplementing of the Registration
Statement or Prospectus or for additional information; and, in the event of
the issuance of any such
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stop order or of any such order preventing or suspending the use of any
prospectus relating to the Designated Securities or suspending any such
qualification, to promptly use its best efforts to obtain the withdrawal of
such order;
(b) Promptly from time to time to take such action as the
Representatives may reasonably request to qualify the Designated Securities
for offering and sale under the securities laws of such jurisdictions as
the Representatives may request and to comply with such laws so as to
permit the continuance of sales and dealings therein in such jurisdictions
for as long as may be necessary to complete the distribution of such
Designated Securities, provided that in connection therewith the Company
shall not be required to qualify as a foreign corporation or to file a
general consent to service of process in any jurisdiction;
(c) To furnish the Underwriters with copies of the Prospectus as
amended or supplemented, in such quantities as the Representatives may from
time to time reasonably request, and, if the delivery of a Prospectus is
required at any time in connection with the offering or sale of the
Designated Securities and if at such time any event shall have occurred as
a result of which the Prospectus as then amended or supplemented would
include an untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made when such Prospectus
is delivered, not misleading, or, if for any other reason it shall be
necessary during such same period to amend or supplement the Prospectus or
to file under the Exchange Act any document incorporated by reference in
the Prospectus in order to comply with the Act, the Exchange Act or the
Trust Indenture Act, to notify the Representatives and, upon their request,
to file such document and to prepare and furnish without charge to each
Underwriter and to any dealer in securities as many copies as the
Representatives may from time to time reasonably request of an amended
Prospectus or a supplement to the Prospectus which will correct such
statement or omission or effect such compliance;
(d) To cause the Trust to make generally available to holders of
Designated Securities, as soon as practicable, but in any event not later
than eighteen months after the effective date of the Registration Statement
(as defined in Rule 158(c) under the Act), an earnings statement of the
Trust (which need not be audited) complying with Section 11(a) of the Act
and the rules and regulations of the Commission thereunder (including, at
the option of the Company, Rule 158); and
(e) To apply the net proceeds of the offering and sale of the
Designated Securities and the related Certificates that it receives in the
manner set forth in the Prospectus.
6. The Company and Sallie Mae covenant and agree with the several
Underwriters that the Company or Sallie Mae will pay or cause to be paid the
following: (i) the fees, disbursements and expenses of the Company's and Sallie
Mae's counsel and accountants in connection with the registration of the
Securities under the Act and all other expenses in
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connection with the preparation, printing and filing of the Registration
Statement, any Preliminary Prospectus and the Prospectus and amendments and
supplements thereto and the mailing and delivering of copies thereof to the
Underwriters and dealers; (ii) the cost of printing or producing any Agreement
among Underwriters, this Agreement, any Pricing Agreement, any Indenture, any
Trust Agreement, any Delayed Delivery Contracts, any Blue Sky and Legal
Investment Memoranda, closing documents (including any compilations thereof) and
any other documents in connection with the offering, purchase, sale and delivery
of the Designated Securities; (iii) all expenses in connection with the
qualification of the Designated Securities for offering and sale under state
securities laws as provided in Section 5(b) hereof, including the fees and
disbursements of counsel for the Underwriters in connection with such
qualification and in connection with the Blue Sky and Legal Investment Surveys;
(iv) any fees charged by securities rating services for rating the Designated
Securities; (v) the cost of preparing the Designated Securities; (vi) the fees
and expenses of the Eligible Lender Trustee and the Indenture Trustee and any
agent of the Eligible Lender Trustee or the Indenture Trustee and the fees and
disbursements of counsel for the Eligible Lender Trustee and the Indenture
Trustee in connection with any Indenture and Trust Agreement and the Designated
Securities; and (vii) all other costs and expenses incident to the performance
of its obligations hereunder and under any Delayed Delivery Contracts which are
not otherwise specifically provided for in this Section. It is understood,
however, that, except as provided in this Section, and Sections 8 and 11 hereof,
the Underwriters will pay all of their own costs and expenses, including the
fees of their counsel, transfer taxes on resale of any of the Securities by
them, and any advertising expenses connected with any offers they may make.
7. The obligations of the Underwriters of any Designated Securities under
the Pricing Agreement relating to such Designated Securities shall be subject,
in the reasonable discretion of the Representatives, to the condition that all
representations and warranties and other statements of the Company and Sallie
Mae in or incorporated by reference in the Pricing Agreement relating to such
Designated Securities are, at and as of the Time of Delivery for such Designated
Securities, true and correct, the condition that the Company and Sallie Mae
shall have performed all of their obligations hereunder theretofore to be
performed, and the following additional conditions:
(a) The Prospectus as amended or supplemented in relation to the
applicable Designated Securities shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed for
such filing by the rules and regulations under the Act and in accordance
with Section 5(a) hereof; no stop order suspending the effectiveness of the
Registration Statement or any part thereof shall have been issued and no
proceeding for that purpose shall have been initiated or threatened by the
Commission; and all requests for additional information on the part of the
Commission shall have been complied with;
(b) Counsel for the Underwriters shall have furnished Representatives
such opinion or opinions, substantially in the form attached hereto as
Annex II(a), dated the
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Time of Delivery for such Designated Securities, with respect to the
Designated Securities and such other related matters as the Representatives
may reasonably request;
(c) Internal counsel for the Company, Sallie Mae and the Servicer,
satisfactory to the Representatives, shall have furnished to the
Representatives a written opinion or opinions, dated the Time of Delivery
for such Designated Securities, substantially in the form attached hereto
as Annex II(b) or as is otherwise satisfactory to the Representatives;
(d) Special counsel for the Company, Sallie Mae and the Servicer,
satisfactory to the Representatives, shall have furnished to the
Representatives a written opinion or opinions, dated the Time of Delivery
for such Designated Securities, substantially in the form attached hereto
as Annex II(a) or as is otherwise satisfactory to the Representatives;
(e) Counsel for the Eligible Lender Trustee, satisfactory to the
Representatives, shall have furnished to the Representatives a written
opinion or opinions, dated the Time of Delivery for such Designated
Securities, substantially in the form attached hereto as Annex II(d) or as
is otherwise satisfactory to the Representatives;
(f) Counsel for the Indenture Trustee, satisfactory to the
Representatives, shall have furnished to the Representatives a written
opinion or opinions, dated the Time of Delivery for such Designated
Securities, substantially in the form attached hereto as Annex II(e) or as
is otherwise satisfactory to the Representatives;
(g) At the time a Preliminary Prospectus relating to such Designated
Securities was distributed and on the date of the Pricing Agreement for
such Designated Securities, the independent public accountants of the
Company and Sallie Mae shall have furnished to the Representatives a letter
or letters with respect to the Company, Sallie Mae, the statistical and
financial information contained in the Preliminary Prospectus and the
Prospectus and certain agreed upon procedures with respect to the issuance
and offering of the Designated Securities and the related Student Loans, in
form and substance satisfactory to the Representatives and in each case
confirming that such accountants are independent public accountants with
the meaning of the Act and the applicable rules and regulations thereunder;
(h) (i) Neither the Company nor Sallie Mae shall have sustained since
the date of the financial statements included in Sallie Mae's most recently
published Information Statement any material loss or interference with its
business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as set forth or contemplated in
such Information Statement, and (ii) since such date, there shall not have
been any material adverse change in the capital stock or long-term debt of
the Company or Sallie Mae or any such change, or any development involving
a prospective such change, in or affecting the general affairs, management,
financial position, shareholders' equity or results of operations of the
Company or Sallie Mae
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otherwise than as set forth or contemplated in such Information Statement,
the effect of which, in any such case described in clause (i) or (ii), is
in the judgment of the Representatives so material and adverse as to make
it impracticable or inadvisable to proceed with the public offering or the
delivery of the Underwriters' Securities on the terms and in the manner
contemplated in the Prospectus as first amended or supplemented relating to
the Designated Securities;
(i) On or after the date of the Pricing Agreement relating to the
Designated Securities (i) no downgrading shall have occurred in the rating
accorded Sallie Mae's debt securities or preferred stock by any "nationally
recognized statistical rating organization", as that term is defined by the
Commission for purposes of Rule 436(g)(2) under the Act ("Rating Agency"),
and (ii) no such Rating Agency shall have publicly announced that it has
under surveillance or review, with possible negative implications, its
rating of any of Sallie Mae's debt securities;
(j) On or after the date of the Pricing Agreement relating to the
Designated Securities there shall not have occurred any of the following:
(i) a suspension or material limitation in trading in securities generally
on the New York Stock Exchange or any setting of minimum prices for trading
on such exchange; (ii) a general moratorium on commercial banking
activities declared by either Federal or New York State authorities; or
(iii) the outbreak or escalation of hostilities involving the United States
or the declaration by the United States of a national emergency or war, if
the effect of any such event specified in this clause (iii) in the
reasonable judgment of the Representatives makes it impracticable or
inadvisable to proceed with the public offering or the delivery of the
Underwriters' Securities on the terms and in the manner contemplated in the
Prospectus as theretofore amended or supplemented relating to the
Designated Securities;
(k) Each of the Company and Sallie Mae shall have furnished or caused
to be furnished to the Representatives at the Time of Delivery for the
Designated Securities a certificate or certificates of officers of the
Company or Sallie Mae, as the case may be, satisfactory to the
Representatives as to the accuracy of the representations and warranties of
the Company or Sallie Mae, as the case may be, herein at and as of such
Time of Delivery, as to the performance by the Company or Sallie Mae, as
the case may be, of all of their obligations hereunder to be performed at
or prior to such Time of Delivery, as to the matters set forth in
subsections (a), (h) and (i) of this Section and as to such other matters
as the Representatives may reasonably request;
(l) At the Time of Delivery, the aggregate principal amount of the
Underwriters' Securities as specified in the related Pricing Agreement for
the Designated Securities shall have been sold by the Company to the
Underwriters, and the aggregate amount of the related Certificates as
specified in the related underwriting agreement for such Certificates shall
have been sold by the Company to the underwriters specified in such
underwriting agreement; and
13
<PAGE>
(m) The Designated Securities shall be rated as set forth in the
related Prospectus by the Rating Agency (or Agencies) specified in such
Prospectus, and such Rating Agency or Agencies shall not have placed the
Designated Securities under surveillance or review with negative
implications.
8. (a) The Company and Sallie Mae, jointly and severally, will indemnify
and hold harmless each Underwriter against any losses, claims, damages or
liabilities, joint or several, to which such Underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, any preliminary prospectus supplement, the Registration
Statement, the Prospectus as amended or supplemented and any other prospectus
relating to the Designated Securities, or any amendment or supplement thereto,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse each Underwriter for any
legal or other expenses reasonably incurred by such Underwriter in connection
with investigating or defending any such action or claim as such expenses are
incurred; provided, however, that the Company and Sallie Mae shall not be liable
in any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in any Preliminary Prospectus, any
preliminary prospectus supplement, the Registration Statement, the Prospectus as
amended or supplemented and any other prospectus relating to the Securities, or
any such amendment or supplement in reliance upon and in conformity with written
information furnished to the Company or Sallie Mae by any Underwriter of
Designated Securities through the Representatives expressly for use in the
Prospectus as amended or supplemented relating to such Securities.
(b) Each Underwriter will indemnify and hold harmless the Company and
Sallie Mae against any losses, claims, damages or liabilities to which they may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, any preliminary prospectus supplement,
the Registration Statement, the Prospectus as amended or supplemented and any
other prospectus relating to the Securities, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in any Preliminary Prospectus, any preliminary
prospectus supplement, the Registration Statement, the Prospectus as amended or
supplemented and any other prospectus relating to the Designated Securities, or
any such amendment or supplement in reliance upon and in conformity with written
information furnished to the Company or Sallie Mae by such Underwriter through
the Representatives expressly for use therein; and will reimburse the Company
for any legal or other expenses reasonably incurred
14
<PAGE>
by the Company in connection with investigating or defending any such action or
claim as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the written
consent of the indemnified party, effect the settlement or compromise of, or
consent to the entry of any judgment with respect to, any pending or threatened
action or claim in respect of which indemnification or contribution may be
sought hereunder (whether or not the indemnified party is an actual or potential
party to such action or claim) unless such settlement, compromise or judgment
(i) includes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act, by or
on behalf of any indemnified party.
(d) If the indemnification provided for in this Section 8 is unavailable to
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Company and Sallie Mae, on the one hand and the Underwriters of the
Designated Securities on the other from the offering of the Designated
Securities to which such loss, claim, damage or liability (or action in respect
thereof) relates. If, however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law or if the indemnified
party failed to give the notice required under subsection (c) above, then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company and Sallie Mae, on
the one hand and the Underwriters of the Designated Securities on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well as any
other relevant
15
<PAGE>
equitable considerations. The relative benefits received by the Company and
Sallie Mae, on the one hand, and such Underwriters on the other shall be deemed
to be in the same proportion as the total net proceeds from such offering
(before deducting expenses) received by the Company and Sallie Mae bear to the
total underwriting discounts and commissions received by such Underwriters. The
relative fault 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
Company or Sallie Mae, on the one hand, or such Underwriters on the other and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Company, Sallie Mae and
the Underwriters agree that it would not be just and equitable if contribution
pursuant to this subsection (d) were determined by pro rata allocation (even if
the Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable considerations
referred to above in this subsection (d). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to above in this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this subsection (d), no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the applicable Designated Securities underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such 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. The obligations of the Underwriters
of Designated Securities in this subsection (d) to contribute are several in
proportion to their respective underwriting obligations with respect to such
Securities and not joint.
(e) The obligations of the Company and Sallie Mae under this Section 8
shall be in addition to any liability which the Company and Sallie Mae may
otherwise have and shall extend, upon the same terms and conditions, to each
person, if any, who controls any Underwriter within the meaning of the Act; and
the obligations of the Underwriters under this Section 8 shall be in addition to
any liability which the respective Underwriters may otherwise have and shall
extend, upon the same terms and conditions, to each officer and director of the
Company or Sallie Mae and to each person, if any, who controls the Company or
Sallie Mae within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase the
Underwriters' Securities which it has agreed to purchase under the Pricing
Agreement relating to such Underwriters' Securities, the Representatives may in
their discretion arrange for themselves or another party or other parties to
purchase such Underwriters' Securities on the terms contained herein and
therein. If within thirty-six hours after such default by any Underwriter the
Representatives do not arrange for the purchase of such Underwriters'
Securities, then the
16
<PAGE>
Company shall be entitled to a further period of thirty-six hours within which
to procure another party or other parties satisfactory to the Representatives to
purchase such Underwriters' Securities on such terms. In the event that, within
the respective prescribed period, the Representatives notify the Company that
they have so arranged for the purchase of such Underwriters' Securities, or the
Company notifies the Representatives that it has so arranged for the purchase of
such Underwriters' Securities, the Representatives or the Company shall have the
right to postpone the Time of Delivery for such Underwriters' Securities for a
period of not more than seven days, in order to effect whatever changes may
thereby be made necessary in the Registration Statement or the Prospectus as
amended or supplemented, or in any other documents or arrangements, and the
Company agrees to file promptly any amendments or supplements to the
Registration Statement or the Prospectus which in the opinion of the
Representatives may thereby be made necessary. The term "Underwriter" as used in
this Agreement shall include any person substituted under this Section with like
effect as if such person had originally been a party to the Pricing Agreement
with respect to such Designated Securities.
(b) If, after giving effect to any arrangements for the purchase of the
Underwriters' Securities of a defaulting Underwriter or Underwriters by the
Representatives and the Company as provided in subsection (a) above, the
aggregate principal amount of such Underwriters' Securities which remains
unpurchased does not exceed one-eleventh of the aggregate principal amount of
the Designated Securities, then the Company shall have the right to require each
non-defaulting Underwriter to purchase the principal amount of Underwriters'
Securities which such Underwriter agreed to purchase under the Pricing Agreement
relating to such Designated Securities and, in addition, to require each non-
defaulting Underwriter to purchase its pro rata share (based on the principal
amount of Designated Securities which such Underwriter agreed to purchase under
such Pricing Agreement) of the Underwriters' Securities of such defaulting
Underwriter or Underwriters for which such arrangements have not been made; but
nothing herein shall relieve a defaulting Underwriter from liability for its
default.
(c) If, after giving effect to any arrangements for the purchase of the
Underwriters' Securities of a defaulting Underwriter or Underwriters by the
Representatives and the Company as provided in subsection (a) above, the
aggregate principal amount of Underwriters' Securities which remains unpurchased
exceeds one-eleventh of the aggregate principal amount of the Designated
Securities, as referred to in subsection (b) above, or if the Company shall not
exercise the right described in subsection (b) above to require non-defaulting
Underwriters to purchase Underwriters' Securities of a defaulting Underwriter or
Underwriters, then the Pricing Agreement relating to such Designated Securities
shall thereupon terminate, without liability on the part of any non-defaulting
Underwriter or the Company, except for the expenses to be borne by the Company
and the Underwriters as provided in Section 6 hereof and the indemnity and
contribution agreements in Section 8 hereof; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties and
other statements of the Company, Sallie Mae and the several Underwriters, as set
forth in this
17
<PAGE>
Agreement or made by or on behalf of them, respectively, pursuant
to this Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Underwriter or any controlling person of any Underwriter, or the Company
or Sallie Mae or any officer or director or controlling person of the Company or
Sallie Mae, and shall survive delivery of and payment for the Securities.
11. If any Pricing Agreement shall be terminated pursuant to Section 9
hereof, the Company and Sallie Mae shall not then be under any liability to any
Underwriter with respect to the Designated Securities covered by such Pricing
Agreement except as provided in Sections 6 and 8 hereof; but, if for any other
reason Underwriters' Securities are not delivered by or on behalf of the Company
as provided herein, except for any of the reasons specified in Section 7(j), the
Company and Sallie Mae will reimburse the Underwriters through the
Representatives for all out-of-pocket expenses approved in writing by the
Representatives, including fees and disbursements of counsel, reasonably
incurred by the Underwriters in making preparations for the purchase, sale and
delivery of such Designated Securities, but the Company and Sallie Mae shall
then be under no further liability to any Underwriter with respect to such
Designated Securities except as provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, the Representatives of the Underwriters of
Designated Securities shall act on behalf of each of such Underwriters, and the
parties hereto shall be entitled to act and rely upon any statement, request,
notice or agreement on behalf of any Underwriter made or given by such
Representatives jointly or by such of the Representatives, if any, as may be
designated for such purpose in the Pricing Agreement.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Representatives as set forth in the
Pricing Agreement; and if to the Company or Sallie Mae shall be delivered or
sent by mail, telex or facsimile transmission to:
SLM Funding Corporation
777 Twin Creek Drive
Kileen, Texas 76543
Facsimile: (817) 554-4999
Attention: Phyllis A. Leeth
Vice President
Student Loan Marketing Association
11600 Sallie Mae Drive
Reston, VA 20193
Facsimile: (703) 810-7655
Attention: Mark G. Overend
Chief Financial Officer
provided, however, that any notice to an Underwriter pursuant to Section 8(c)
hereof shall be
18
<PAGE>
delivered or sent by mail, telex or facsimile transmission to such Underwriter
at its address set forth in its Underwriters' Questionnaire, or telex
constituting such Questionnaire, which address will be supplied to the Company
or Sallie Mae by the Representatives upon request. Any such statements,
requests, notices or agreements shall take effect upon receipt thereof.
13. This Agreement and each Pricing Agreement shall be binding upon, and
inure solely to the benefit of, the Underwriters, the Company, Sallie Mae and,
to the extent provided in Sections 8 and 10 hereof, the officers and directors
of the Company and Sallie Mae and each person who controls the Company, Sallie
Mae or any Underwriter, and their respective heirs, executors, administrators,
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement or any such Pricing Agreement. No
purchaser of any of the Securities from any Underwriter shall be deemed a
successor or assign by reason merely of such purchase.
14. Time shall be of the essence of each Pricing Agreement. As used
herein, "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business and "New York Business Day" shall mean any
day when banking institutions are open for business in New York City, New York.
15. This Agreement and each Pricing Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
16. This Agreement and each Pricing Agreement may be executed by any one or
more of the parties hereto and thereto in any number of counterparts, each of
which shall be deemed to be an original, but all such respective counterparts
shall together constitute one and the same instrument.
19
<PAGE>
If the foregoing is in accordance with your understanding, please sign and
return to us ___ counterparts hereof.
Very truly yours,
SLM Funding Corporation
By: /s/ William M.E. Rachal, Jr.
-----------------------------------
Name:
Title:
Student Loan Marketing Association
By: /s/ Somsak Chivavibul
-----------------------------------
Name:
Title:
Accepted as of the date hereof:
Morgan Stanley & Co. Incorporated
By: /s/ Charles N. Atkins
------------------------------
Name: Charles N. Atkins
Title: Principal
20
<PAGE>
ANNEX I
Pricing Agreement
-----------------
______________________
As Representatives of the several
Underwriters named on Schedule I hereto,
c/o____________________
_______________________
_______________________
, 1998
Ladies and Gentlemen:
SLM Funding Corporation, a Delaware corporation (the "Company"), and the
Student Loan Marketing Association, a corporation formed under the laws of the
United States ("Sallie Mae"), propose, subject to the terms and conditions
stated herein and in the Underwriting Agreement, dated __________, 199__ (the
"Underwriting Agreement"), between the Company and Sallie Mae, on the one hand,
and _____________ and _________________, on the other hand, that the Company
will cause the trust (the "Trust") formed pursuant to the Trust Agreement dated
as of _______, 199__ between the Company and _______, as trustee (the "Eligible
Lender Trustee"), to issue and sell to the Underwriters named in Schedule I
hereto (the "Underwriters") the Student Loan-Backed Notes (the "Notes")
specified in Schedule II hereto (the "Designated Securities"). The Notes will
be issued and secured pursuant to the Indenture, dated ___________ (the
"Indenture"), between the Trust and _________, as trustee (the "Indenture
Trustee").
Each of the provisions of the Underwriting Agreement is incorporated herein
by reference in its entirety, and shall be deemed to be a part of this Agreement
to the same extent as if such provisions had been set forth in full herein; and
each of the representations and warranties set forth therein shall be deemed to
have been made at and as of the date of this Pricing Agreement, except that each
representation and warranty which refers to the Prospectus in Section 2 of the
Underwriting Agreement shall be deemed to be a representation or warranty as of
the date of the Underwriting Agreement in relation to the Prospectus (as therein
defined), and also a representation and warranty as of the date of this Pricing
Agreement in relation to the Prospectus as amended or supplemented relating to
the Designated Securities which are the subject of this Pricing Agreement. Each
reference to the Representatives herein and in the provisions of the
Underwriting Agreement so incorporated by reference shall be deemed to refer to
you. Unless otherwise defined herein, terms defined in the Underwriting
Agreement are used herein as therein defined.
The Representatives designated to act on behalf of the Representatives and
on behalf of each of the Underwriters of the Designated Securities pursuant to
Section 12 of the Underwriting Agreement and the address of the Representatives
referred to in such Section 12 are set forth at the end of Schedule II hereto.
<PAGE>
An amendment to the Registration Statement, or a supplement to the
Prospectus, as the case may be, relating to the Designated Securities, in the
form heretofore delivered to you is now proposed to be filed with the
Commission.
Subject to the terms and conditions set forth herein and in the
Underwriting Agreement incorporated herein by reference, the Company agrees to
cause the Trust to issue and sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Trust, at
the time and place and at the purchase price to the Underwriters set forth in
Schedule II hereto, the principal amount of Designated Securities set forth
opposite the name of such Underwriter in Schedule I hereto, less the principal
amount of Designated Securities covered by Delayed Delivery Contracts, if any,
as may be specified in Schedule II.
During the period beginning from the date of this Pricing Agreement for the
Designated Securities and continuing to and including [Closing Date], the
Company agrees, and Sallie Mae agrees that it will cause the Company, not to,
and not to permit any affiliated entity to, offer, sell, contract to sell or
otherwise dispose of, any securities (other than the Designated Securities)
collateralized by, or any securities (other than the related Certificates)
evidencing an ownership in, Student Loans, without the prior written consent of
the Representatives.
Each Underwriter represents and agrees that (a) it has not offered or sold
and will not offer or sell any Notes or Certificates to persons in the United
Kingdom prior to the expiration of the period of six months from the issue date
of the Notes and the Certificates except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995; (b) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the Notes and the Certificates in, from or
otherwise involving the United Kingdom; and (c) it has only issued or passed on
and will only issue or pass on in the United Kingdom any document received by it
in connection with the issuance of the Notes and the Certificates to a person
who is of a kind described in article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1995 or is a person to whom such
document may otherwise lawfully be issued or passed on.
If the foregoing is in accordance with your understanding, please sign and
return to us ______ counterparts hereof, and upon acceptance hereof by you, on
behalf of each of the Underwriters, this letter and such acceptance hereof,
including the provisions of the Underwriting Agreement incorporated herein by
reference, shall constitute a binding agreement between each of the Underwriters
and the Company and Sallie Mae. It is understood that your acceptance of this
letter on behalf of each of the Underwriters is or will be pursuant to the
authority set forth in a form of Agreement among Underwriters, the form of which
shall be submitted to the Company and Sallie Mae for examination upon request,
but without warranty on the part of the Representatives as to the authority of
the signers thereof.
Very truly yours,
2
<PAGE>
SLM Funding Corporation
By:............................
Name:
Title:
Student Loan Marketing Association
By:............................
Name:
Title:
3
<PAGE>
Accepted as of the date hereof:
[__________________]
By:................................
[__________________]
By:................................
Name:
Title:
On behalf of each of the Underwriters
4
<PAGE>
SCHEDULE I
Principal Amount of Designated Securities to be Purchased
<TABLE>
<CAPTION>
Underwriter Class ___ Class ___ Class ___
<S> <C> <C> <C>
</TABLE>
<PAGE>
SCHEDULE II
Title of each Class of Designated Securities:
Aggregate principal amount of each Class:
Price to Public of each Class:
Purchase Price by Underwriters of each Class:
Specified funds for payment of purchase price:
Indenture:
Maturity:
Interest Rate:
Form of Designated Securities:
Time of Delivery:
Closing location for delivery of Designated Securities:
Names and addresses of Representatives:
Designated Representatives:
Address for Notices, etc.:
<PAGE>
ANNEX II(a)
The Company, Sallie Mae, the Servicer and the Underwriters: Outside Counsel
---------------------------------------------------------------------------
Opinion
-------
[Opinions to be issued, which together will be substantially in the form
provided for SLM Student Loan Trust 1998-1]
<PAGE>
ANNEX II(b)
The Company, Sallie Mae and the Servicer: Internal Counsel Opinion
-------------------------------------------------------------------
[Opinion to be issued substantially in the form provided for
SLM Student Loan Trust 1998-1]
<PAGE>
ANNEX II(c)
Eligible Lender Trustee: Counsel Opinion
-----------------------------------------
[Opinion to be issued substantially in the form provided for
SLM Student Loan Trust 1998-1]
<PAGE>
ANNEX II(d)
Indenture Trustee: Counsel Opinion
-----------------------------------
[Opinion to be issued substantially in the form provided for
SLM Student Loan Trust 1998-1]
<PAGE>
ANNEX III
DELAYED DELIVERY CONTRACT
-------------------------
SLM Funding Corporation
c/o
----------------------
- --------------------------
- --------------------------
Attention:...................... .............., 19
--
Ladies and Gentlemen:
The undersigned hereby agrees to purchase from SLM Funding Corporation
(hereinafter called the "Company"), and the Company agrees to sell to the
undersigned,
$.........
principal amount of the Company's ________ (hereinafter called the "Designated
Securities"), offered by the Company's Prospectus, dated .............., 19..,
as amended or supplemented, receipt of a copy of which is hereby acknowledged,
at a purchase price of .....% of the principal amount thereof, plus accrued
interest from the date from which interest accrues as set forth below, and on
the further terms and conditions set forth below.
The undersigned will purchase the Designated Securities from the Company on
.............., 19.. (the "Delivery Date") and interest on the Designated
Securities so purchased will accrue from .............., 19...
[The undersigned will purchase the Designated Securities from the Company
on the delivery date or dates and in the principal amount or amounts set forth
below:
<TABLE>
<CAPTION>
Principal Date from Which
Delivery Date Amount Interest Accrues
------------- --------- ----------------
<S> <C> <C>
................, 19.... $.... .................., 19....
................, 19.... $.... .................., 19....
</TABLE>
Each such date on which Designated Securities are to be purchased hereunder is
hereinafter referred to as a "Delivery Date."(4)]
Payment for the Designated Securities which the undersigned has agreed to
purchase on [the] [each] Delivery Date shall be made to the Company or its order
by certified or official bank check in .......... Clearing House funds at the
office of .........., ........., .........., or by wire transfer to a bank
account specified by the Company, on [the] [such] Delivery Date upon delivery to
the
<PAGE>
undersigned of the Designated Securities then to be purchased by the undersigned
in definitive fully registered form and in such denominations and registered in
such names as the undersigned may designate by written, telex or facsimile
communication addressed to the Company not less than five full business days
prior to [the] [such] Delivery Date.
The obligation of the undersigned to take delivery of and make payment for
Designated Securities on [the] [each] Delivery Date shall be subject to the
condition that the purchase of Designated Securities to be made by the
undersigned shall not on [the] [such] Delivery Date be prohibited under the laws
of the jurisdiction to which the undersigned is subject. The obligation of the
undersigned to take delivery of and make payment for Designated Securities shall
not be affected by the failure of any purchaser to take delivery of and make
payment for Designated Securities pursuant to other contracts similar to this
contract.
[The undersigned understands that Underwriters (the "Underwriters") are
also purchasing Designated Securities from the Company, but that the obligations
of the Undersigned hereunder are not contingent on such purchases]. Promptly
after completion of the sale to the Underwriters the Company will mail or
deliver to the undersigned at its address set forth below notice to such effect,
accompanied by a copy of the Opinion of Counsel for the Company delivered to the
Underwriters in connection therewith.
The undersigned represents and warrants that, as of the date of this
contract, the undersigned is not prohibited from purchasing the Designated
Securities hereby agreed to be purchased by it under the laws of the
jurisdiction to which the undersigned is subject.
This contract will inure to the benefit of and be binding upon the parties
hereto and their respective successors, but will not be assignable by either
party hereto without the written consent of the other.
This contract may be executed by either of the parties hereto in any number
of counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same instrument.
F-2
<PAGE>
It is understood that the acceptance by the Company of any Delayed Delivery
Contract (including this contract) is in the Company's sole discretion and that,
without limiting the foregoing, acceptances of such contracts need not be on a
first-come, first-served basis. If this contract is acceptable to the Company,
it is requested that the Company sign the form of acceptance below and mail or
deliver one of the counterparts hereof to the undersigned at its address set
forth below. This will become a binding contract between the Company and the
undersigned when such counterpart is so mailed or delivered by the Company.
Yours very truly,
...................................
By:
................................
(Authorized Signature)
Name:
Title:
...................................
(Address)
Accepted: ..............., 19..
SLM Funding Corporation
By:............................
Name:
Title:
F-3
<PAGE>
SLM Funding Corporation
Student Loan-Backed Certificates
-----------------
Underwriting Agreement
----------------------
June 10, 1998
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Ladies and Gentlemen:
From time to time the Student Loan Marketing Association ("Sallie Mae"), a
corporation formed under the laws of the United States, and SLM Funding
Corporation, a Delaware corporation and a wholly-owned subsidiary of Sallie Mae
(the "Company"), propose to enter into one or more Pricing Agreements (each a
"Pricing Agreement") in the form of Annex I hereto, with such additions and
deletions as the parties thereto may determine. Subject to the terms and
conditions stated herein and therein, the Company proposes to cause the Trust
specified in the applicable Pricing Agreement to issue and sell to the firms
named in Schedule I to the applicable Pricing Agreement (such firms constituting
the "Underwriters" with respect to such Pricing Agreement and the securities
specified therein) certain of such Trust's Student Loan-Backed Certificates (the
"Certificates") specified in Schedule II to such Pricing Agreement (with respect
to such Pricing Agreement, the "Designated Securities"), less the amount of
Designated Securities covered by Delayed Delivery Contracts, if any, as provided
in Section 3 hereof and as may be specified in Schedule II to such Pricing
Agreement (with respect to such Pricing Agreement, any Designated Securities to
be covered by Delayed Delivery Contracts are herein sometimes referred to as
"Contract Securities" and the Designated Securities to be purchased by the
Underwriters (after giving effect to the deduction, if any, for Contract
Securities) are herein sometimes referred to as "Underwriters' Securities").
The Securities may be sold from time to time in one or more Series. Each
Series of Securities, which will include one or more classes of Certificates and
one or more classes of Student Loan-Backed Notes (the "Notes," and, together
with the Certificates, the "Securities") will be issued by a Trust to be formed
with respect to such Series (each, a "Trust"). Each Trust will be formed
pursuant to a trust agreement (a "Trust Agreement") to be entered into between
the Company and the Eligible Lender Trustee specified in the related Pricing
Agreement (the "Eligible Lender Trustee"). The Notes of each Series will be
issued and secured pursuant to an indenture (an "Indenture") between the Trust
and the Indenture Trustee specified in the related Pricing Agreement (the
"Indenture Trustee"). The Certificates of a Series will be issued pursuant to
the related Trust Agreement and will represent fractional
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undivided interests in the Trust created thereby. The property of each Trust
will include, among other things, educational student loans to students and/or
parents of dependent students ("Student Loans").
With respect to each Trust, (i) the Company will acquire the related
Student Loans from Sallie Mae pursuant to a Purchase Agreement and (ii) the
Company will sell the related Student Loans to such Trust pursuant to a Sale
Agreement, with the related Eligible Lender Trustee holding legal title thereto.
With respect to each Series, Sallie Mae Servicing Corporation, as servicer (the
"Servicer") will enter into a servicing agreement (a "Servicing Agreement") with
the Trust, the Administrator, the Eligible Lender Trustee and the Indenture
Trustee with respect to the related Student Loans. Sallie Mae, as administrator
(in such capacity, the "Administrator"), has entered into a Master
Administration Agreement with the Company dated as of May 1, 1997 and, as
contemplated by the terms of the Master Administration Agreement, will enter
into an Administration Agreement Supplement among the Company, the Trust, the
Eligible Lender Trustee, the Servicer and the Indenture Trustee with respect to
the Student Loans to be held by the Trust (the Master Administration Agreement,
as supplemented by the Administration Agreement Supplement, the "Administration
Agreement").
The terms and conditions of any particular issuance of Designated
Securities shall be as specified in the Pricing Agreement relating thereto and
in or pursuant to the related Indenture.
Capitalized terms used but not defined herein or in any Pricing Agreement
shall have the meanings ascribed thereto in the related Indenture.
1. Particular sales of Designated Securities may be made from time to time
to the Underwriters of such Securities, for whom the firms designated as
representatives of the Underwriters of such Securities in the Pricing Agreement
relating thereto will act as representatives (the "Representatives"). The term
"Representatives" also refers to a single firm acting as sole representative of
the Underwriters and to an Underwriter or Underwriters who act without any firm
being designated as its or their representatives. This Underwriting Agreement
shall not be construed as an obligation of the Company to sell any of the
Securities or as an obligation of any of the Underwriters to purchase the
Securities. The obligation of the Company to issue and sell any of the
Securities and the obligation of any of the Underwriters to purchase any of the
Securities shall be evidenced by the Pricing Agreement with respect to the
Designated Securities specified therein. Each Pricing Agreement shall specify
the aggregate amount of such Designated Securities, the initial public offering
price of such Designated Securities, the purchase price to the Underwriters of
such Designated Securities, the names of the Underwriters of such Designated
Securities, the names of the Representatives of such Underwriters and the amount
of such Designated Securities to be purchased by each Underwriter and whether
any of such Designated Securities shall be covered by Delayed Delivery Contracts
(as defined in Section 3 hereof) and shall set forth the date, time and manner
of delivery of such Designated Securities and payment therefor. The Pricing
Agreement shall also specify (to the extent not set forth in the Indenture and
the registration
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statement and prospectus with respect thereto) the terms of such Designated
Securities. A Pricing Agreement shall be in the form of an executed writing
(which may be in counterparts), and may be evidenced by an exchange of
telegraphic communications or any other rapid transmission device designed to
produce a written record of communications transmitted. The obligations of the
Underwriters under this Agreement and each Pricing Agreement shall be several
and not joint.
2. The Company and Sallie Mae represent and warrant to, and agree with,
each of the Underwriters as follows (it being agreed and understood that the
statements set forth in clauses (d), (e), (g), (h), (j), (k), (m), (n) and (o)
of this Section 2 with respect to Sallie Mae or the Servicer constitute
representations, warranties and agreements of Sallie Mae only and not of the
Company):
(a) A registration statement on Form S-3 (File No. 333-44465),
including a form of prospectus, in respect of the Securities has been filed
with the Securities and Exchange Commission (the "Commission"); such
registration statement and any post-effective amendment thereto, each in
the form heretofore delivered or to be delivered to the Representatives
and, excluding exhibits to such registration statement, but including all
documents incorporated by reference in the prospectus contained therein, to
the Representatives for each of the other Underwriters, have been declared
effective by the Commission in such form; no other document with respect to
such registration statement or document incorporated by reference therein
has heretofore been filed or transmitted for filing with the Commission
(other than prospectuses filed pursuant to Rule 424(b) of the rules and
regulations of the Commission under the Securities Act of 1933, as amended
(the "Act"), each in the form heretofore delivered to the Representatives);
and no stop order suspending the effectiveness of such registration
statement has been issued and no proceeding for that purpose has been
initiated or, to the best of Sallie Mae's or the Company's knowledge,
threatened by the Commission (any preliminary prospectus included in such
registration statement or filed with the Commission pursuant to Rule 424(a)
under the Act, is hereinafter called a "Preliminary Prospectus;" the
various parts of such registration statement, including all exhibits
thereto and the documents incorporated by reference in the prospectus
contained in the registration statement at the time such part of the
registration statement became effective but excluding Form T-1, each as
amended at the time such part of the registration statement became
effective, are hereinafter collectively called the "Registration
Statement"; the prospectus relating to the Securities, in the form in which
it has most recently been filed, or transmitted for filing, with the
Commission on or prior to the date of this Agreement, being hereinafter
called the "Prospectus"; any reference herein to any Preliminary Prospectus
or the Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to the applicable form under the
Act, as of the date of such Preliminary Prospectus or Prospectus, as the
case may be; any reference to any amendment or supplement to any
Preliminary Prospectus or the Prospectus shall be deemed to refer to and
include any
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<PAGE>
documents filed after the date of such Preliminary Prospectus or
Prospectus, as the case may be, under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and incorporated by reference in such
Preliminary Prospectus or Prospectus, as the case may be; any reference to
any amendment to the Registration Statement shall be deemed to refer to and
include any annual report of the Company filed pursuant to Sections 13(a)
or 15(d) of the Exchange Act after the effective date of the Registration
Statement that is incorporated by reference in the Registration Statement;
and any reference to the Prospectus as amended or supplemented shall be
deemed to refer to the Prospectus as amended or supplemented in relation to
the applicable Designated Securities in the form in which it is filed with
the Commission pursuant to Rule 424(b) under the Act in accordance with
Section 5(a) hereof, including any documents incorporated by reference
therein as of the date of such filing);
(b) The documents incorporated by reference in the Prospectus, when
they became effective or were filed with the Commission, as the case may
be, conformed in all material respects to the requirements of the Act, the
Exchange Act and the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"), as applicable, and the rules and regulations of the
Commission thereunder, and none of such documents contained an untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading; and any further documents so filed and incorporated by
reference in the Prospectus or any further amendment or supplement thereto,
when such documents become effective or are filed with the Commission, as
the case may be, will conform in all material respects to the requirements
of the Act, the Exchange Act and the Trust Indenture Act, as applicable,
and the rules and regulations of the Commission thereunder and will not
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that this representation and
warranty shall not apply to any statements or omissions made in reliance
upon and in conformity with information furnished in writing to the Company
by an Underwriter of Designated Securities through the Representatives
expressly for use in the Prospectus as amended or supplemented relating to
such Designated Securities;
(c) The Registration Statement and the Prospectus conform, and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of
the Act and the Trust Indenture Act, as applicable, and the rules and
regulations of the Commission thereunder and do not and will not, as of the
applicable effective date as to the Registration Statement and any
amendment thereto and as of the applicable filing date as to the Prospectus
and any amendment or supplement thereto, contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, however, that this representation and warranty shall not apply to
any statements or omissions made in reliance upon and in
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<PAGE>
conformity with information furnished in writing to the Company by an
Underwriter of Designated Securities through the Representatives expressly
for use in the Prospectus as amended or supplemented relating to such
Designated Securities;
(d) Neither the Company nor Sallie Mae or any of its subsidiaries has
sustained since the date of the financial statements included in Sallie
Mae's most recently published Information Statement any material loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, otherwise than as set forth
or contemplated in such Information Statement; and, since such date, there
has not been any material adverse change in the capital stock or long-term
debt of the Company or Sallie Mae or any of its subsidiaries or any
material adverse change, or any development involving a prospective
material adverse change, in or affecting the general affairs, management,
financial position, shareholders' equity or results of operations of the
Company or Sallie Mae or any of its subsidiaries or the transactions
contemplated hereby, otherwise than as set forth or contemplated in such
Information Statement;
(e) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the state of Delaware, with
power and authority (corporate and other) to own its properties and conduct
its business as described in the Prospectus and to consummate the
transactions contemplated therein and herein, and is a wholly-owned
subsidiary of Sallie Mae. Sallie Mae has been duly organized and is
validly existing under the laws of the United States, with power and
authority (corporate and otherwise) to own its properties and conduct its
business as described in the Prospectus and to consummate the transactions
contemplated therein and herein. The Servicer has been duly incorporated
and is validly existing as a corporation in good standing under the laws of
the State of Delaware, with power and authority (corporate and other) to
own its properties and conduct its business as described in the Prospectus
and to consummate the transactions contemplated therein and herein, and is
a wholly-owned subsidiary of Sallie Mae.
(f) All of the issued shares of capital stock of the Company have been
duly and validly authorized and issued and are fully paid and non-
assessable and are owned beneficially and of record by Sallie Mae;
(g) This Agreement has been, and each Pricing Agreement with respect to
the Designated Securities upon its execution and delivery by the Company
and Sallie Mae will have been, duly authorized, executed and delivered by
the Company and Sallie Mae. The Securities have been duly authorized, and,
when Designated Securities are issued and delivered pursuant to this
Agreement and the Pricing Agreement with respect to such Designated
Securities, and, in the case of any Contract Securities, pursuant to
Delayed Delivery Contracts with respect to such Contract Securities, such
Designated Securities and Contract Securities will have been duly executed,
5
<PAGE>
authenticated, issued and delivered. The related Notes will constitute
valid and legally binding obligations of the related Trust entitled to the
benefits provided by the Indenture, which will be substantially in the form
filed as an exhibit to the Registration Statement. The Indenture has been
duly authorized and duly qualified under the Trust Indenture Act. The
Designated Securities are intended to represent undivided ownership
interests in the Trust created by the Trust Agreement, which will be
substantially in the form filed as an exhibit to the Registration
Statement, and will be entitled to the benefits provided by the Trust
Agreement. At the Time of Delivery (as defined in Section 4 hereof) for the
Designated Securities, the Indenture and the Trust Agreement will each
constitute a valid and legally binding instrument, enforceable in
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability relating
to or affecting creditors' rights and to general equity principles. The
Indenture and Trust Agreement conform, and the Designated Securities and
the related Notes will conform, to the descriptions thereof contained in
the Prospectus as amended or supplemented with respect to the Designated
Securities;
(h) The issue and sale of the Securities and the compliance by the
Company with all of the provisions of the Securities, the Indenture, the
Trust Agreement, each of the Delayed Delivery Contracts, this Agreement and
any Pricing Agreement, and the consummation of the transactions herein and
therein contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company or Sallie Mae is a party or by
which the Company or Sallie Mae is bound or to which any of the property or
assets of the Company or Sallie Mae is subject, nor will such action result
in any violation of the provisions of the Company's Certificate of
Incorporation or By-laws, Sallie Mae's charter, enabling legislation or By-
laws, or any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or Sallie
Mae or any of their properties; and no consent, approval, authorization,
order, registration or qualification of or with any such court or
governmental agency or body is required for the issue and sale of the
Securities or the consummation by the Company or Sallie Mae of the
transactions contemplated by this Agreement or any Pricing Agreement or the
Indenture or any Delayed Delivery Contract, except such as have been, or
will have been prior to the Time of Delivery, obtained under the Act and
the Trust Indenture Act and such consents, approvals, authorizations,
registrations or qualifications as may be required under state securities
or Blue Sky laws in connection with the purchase and distribution of the
Designated Securities by the Underwriters;
(i) The statements set forth in the Prospectus under the captions
"Description of the Notes" and "Description of the Certificates" and set
forth in the Prospectus Supplement under the caption "Description of the
Securities," insofar as they purport
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<PAGE>
to constitute a summary of the terms of the Notes and the Certificates, are
accurate, complete and fair;
(j) Sallie Mae is not in violation of its charter as set forth in its
enabling legislation or By-laws, and the Company is not in violation of its
Certificate of Incorporation or By-laws, and neither Sallie Mae nor the
Company is in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any indenture,
mortgage, deed of trust, loan agreement, lease or other agreement or
instrument to which it is a party or by which it or any of its properties
may be bound;
(k) Other than as set forth in the Prospectus or in Sallie Mae's most
recently published Information Statement, there are no legal or
governmental proceedings pending to which the Company or Sallie Mae or any
of its subsidiaries is a party or of which any property of the Company or
Sallie Mae or any of its subsidiaries is the subject which, if determined
adversely to the Company or Sallie Mae or any of its subsidiaries, would
individually or in the aggregate have a material adverse effect on the
current or future consolidated financial position, shareholders' equity or
results of operations of the Company or Sallie Mae or any of its
subsidiaries or on the consummation of the transactions contemplated
hereby; and, to the best of the Company's and Sallie Mae's knowledge, no
such proceedings are threatened or contemplated by governmental authorities
or threatened by others;
(l) The Company is not and, after giving effect to the offering and
sale of the Securities, will not be an "investment company" or an entity
"controlled" by an "investment company", as such terms are defined in the
Investment Company Act of 1940, as amended (the "Investment Company Act");
(m) Neither the Company, Sallie Mae nor any of their affiliates does
business with the government of Cuba or with any person or affiliate
located in Cuba within the meaning of Section 517.075, Florida Statutes;
(n) Arthur Anderson LLP are independent public accountants as required
by the Act and the rules and regulations of the Commission thereunder;
(o) At the Time of Delivery of the Designated Securities, Sallie Mae's
representations and warranties in the related Purchase Agreement and the
Administration Agreement, the Company's representations and warranties in
the related Sale Agreement and Trust Agreement and the Servicer's
representations and warranties in the Servicing Agreement will be true and
correct in all material respects; and
(p) In the event any of the Securities are purchased pursuant to
Delayed Delivery Contracts, each of such Delayed Delivery Contracts has
been duly authorized by the Company and Sallie Mae and, when executed and
delivered by the Company and the purchaser named therein, will constitute a
valid and legally binding agreement of the Company enforceable in
accordance with its terms, subject, as to enforcement, to
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bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to general
equity principles; and any Delayed Delivery Contracts conform to the
description thereof in the Prospectus.
3. Upon the execution of the Pricing Agreement applicable to any
Designated Securities and authorization by the Representatives of the release of
the Underwriters' Securities, the several Underwriters propose to offer such
Underwriters' Securities for sale upon the terms and conditions set forth in the
Prospectus as amended or supplemented.
The Company may specify in Schedule II to the Pricing Agreement applicable
to any Designated Securities that the Underwriters are authorized to solicit
offers to purchase Designated Securities from the Company pursuant to delayed
delivery contracts (herein called "Delayed Delivery Contracts"), substantially
in the form of Annex III attached hereto but with such changes therein as the
Representatives and the Company may authorize or approve. If so specified, the
Underwriters will endeavor to make such arrangements, and as compensation
therefor the Company will pay to the Representatives, for the accounts of the
Underwriters, at the Time of Delivery, such commission, if any, as may be set
forth in such Pricing Agreement. Delayed Delivery Contracts, if any, are to be
with investors of the types described in the Prospectus and subject to other
conditions therein set forth. The Underwriters will not have any responsibility
with respect to the validity or performance of any Delayed Delivery Contracts.
The amount of Contract Securities to be deducted from the amount of
Designated Securities to be purchased by each Underwriter as set forth in
Schedule I to the Pricing Agreement applicable to such Designated Securities
shall be, in each case, the amount of Contract Securities which the Company has
been advised by the Representatives have been attributed to such Underwriter,
provided that, if the Company has not been so advised, the amount of Contract
Securities to be so deducted shall be, in each case, that proportion of Contract
Securities which the amount of Designated Securities to be purchased by such
Underwriter under such Pricing Agreement bears to the total amount of the
Designated Securities (rounded as the Representatives may determine). The total
amount of Underwriters' Securities to be purchased by all the Underwriters
pursuant to such Pricing Agreement shall be the total amount of Designated
Securities set forth in Schedule I to such Pricing Agreement less the amount of
the Contract Securities. The Company will deliver to the Representatives not
later than 3:30 p.m., New York City time, on the third business day preceding
the Time of Delivery specified in the applicable Pricing Agreement (or such
other time and date as the Representatives and the Company may agree upon in
writing), a written notice setting forth the amount of Contract Securities.
4. Underwriters' Securities to be purchased by each Underwriter pursuant to
the Pricing Agreement relating thereto, in the form specified in such Pricing
Agreement, and in such authorized denominations and registered in such names as
the Representatives may request upon at least forty-eight hours' prior notice to
the Company, shall be delivered by or on behalf of the Company to the
Representatives for the account of such Underwriter, against
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payment by such Underwriter or on its behalf of the purchase price therefor by
wire transfer or by certified or official bank check or checks, payable to the
order of the Company in the funds specified in such Pricing Agreement, all in
the manner and at the place and time and date specified in such Pricing
Agreement or at such other place and time and date as the Representatives and
the Company may agree upon in writing, such time and date being herein called
the "Time of Delivery" for such Securities.
Concurrently with the delivery of and payment for the Underwriters'
Securities, the Company will deliver to the Representatives for the accounts of
the Underwriters a check payable to the order of the party designated in the
Pricing Agreement relating to such Underwriters' Securities in the amount of any
compensation payable by the Company to the Underwriters in respect of any
Delayed Delivery Contracts as provided in Section 3 hereof and the Pricing
Agreement relating to such Securities.
5. The Company agrees with each of the Underwriters of any Designated
Securities, and Sallie Mae agrees with such Underwriters that it will cause the
Company:
(a) To prepare the Prospectus as amended or supplemented in relation to
the applicable Designated Securities in a form approved by the
Representatives and to file such Prospectus pursuant to Rule 424(b) under
the Act not later than the Commission's close of business on the second
business day following the execution and delivery of the Pricing Agreement
relating to the applicable Designated Securities or, if applicable, such
earlier time as may be required by Rule 424(b); to make no further
amendment or any supplement to the Registration Statement or Prospectus as
amended or supplemented after the date of the Pricing Agreement relating to
such Designated Securities and prior to the Time of Delivery for such
Designated Securities which shall be disapproved by the Representatives for
such Designated Securities promptly after reasonable notice thereof; to
advise the Representatives promptly of any such amendment or supplement
after such Time of Delivery and furnish the Representatives with copies
thereof; to file promptly all reports and any definitive proxy or
information statements required to be filed by the Company with the
Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange
Act for so long as the delivery of a prospectus is required in connection
with the offering or sale of such Designated Securities, and during such
same period to advise the Representatives, promptly after it receives
notice thereof, of the time when any amendment to the Registration
Statement has been filed or becomes effective or any supplement to the
Prospectus or any amended Prospectus has been filed with the Commission, of
the issuance by the Commission of any stop order or of any order preventing
or suspending the use of any prospectus relating to the Designated
Securities, of the suspension of the qualification of such Designated
Securities for offering or sale in any jurisdiction, of the initiation or
threatening of any proceeding for any such purpose, or of any request by
the Commission for the amending or supplementing of the Registration
Statement or Prospectus or for additional information; and, in the event of
the issuance of any such stop order or of any such order preventing or
suspending the use of any prospectus
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relating to the Designated Securities or suspending any such qualification,
to promptly use its best efforts to obtain the withdrawal of such order;
(b) Promptly from time to time to take such action as the
Representatives may reasonably request to qualify the Designated Securities
for offering and sale under the securities laws of such jurisdictions as
the Representatives may request and to comply with such laws so as to
permit the continuance of sales and dealings therein in such jurisdictions
for as long as may be necessary to complete the distribution of such
Designated Securities, provided that in connection therewith the Company
shall not be required to qualify as a foreign corporation or to file a
general consent to service of process in any jurisdiction;
(c) To furnish the Underwriters with copies of the Prospectus as
amended or supplemented, in such quantities as the Representatives may from
time to time reasonably request, and, if the delivery of a Prospectus is
required at any time in connection with the offering or sale of the
Designated Securities and if at such time any event shall have occurred as
a result of which the Prospectus as then amended or supplemented would
include an untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made when such Prospectus
is delivered, not misleading, or, if for any other reason it shall be
necessary during such same period to amend or supplement the Prospectus or
to file under the Exchange Act any document incorporated by reference in
the Prospectus in order to comply with the Act, the Exchange Act or the
Trust Indenture Act, to notify the Representatives and, upon their request,
to file such document and to prepare and furnish without charge to each
Underwriter and to any dealer in securities as many copies as the
Representatives may from time to time reasonably request of an amended
Prospectus or a supplement to the Prospectus which will correct such
statement or omission or effect such compliance;
(d) To cause the Trust to make generally available to holders of
Designated Securities, as soon as practicable, but in any event not later
than eighteen months after the effective date of the Registration Statement
(as defined in Rule 158(c) under the Act), an earnings statement of the
Trust (which need not be audited) complying with Section 11(a) of the Act
and the rules and regulations of the Commission thereunder (including, at
the option of the Company, Rule 158); and
(e) To apply the net proceeds of the offering and sale of the
Designated Securities and the related Notes that it receives in the manner
set forth in the Prospectus.
6. The Company and Sallie Mae covenant and agree with the several
Underwriters that the Company or Sallie Mae will pay or cause to be paid the
following: (i) the fees, disbursements and expenses of the Company's and Sallie
Mae's counsel and accountants in connection with the registration of the
Securities under the Act and all other expenses in connection with the
preparation, printing and filing of the Registration Statement, any
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Preliminary Prospectus and the Prospectus and amendments and supplements thereto
and the mailing and delivering of copies thereof to the Underwriters and
dealers; (ii) the cost of printing or producing any Agreement among
Underwriters, this Agreement, any Pricing Agreement, any Indenture, any Trust
Agreement, any Delayed Delivery Contracts, any Blue Sky and Legal Investment
Memoranda, closing documents (including any compilations thereof) and any other
documents in connection with the offering, purchase, sale and delivery of the
Designated Securities; (iii) all expenses in connection with the qualification
of the Designated Securities for offering and sale under state securities laws
as provided in Section 5(b) hereof, including the fees and disbursements of
counsel for the Underwriters in connection with such qualification and in
connection with the Blue Sky and Legal Investment Surveys; (iv) any fees charged
by securities rating services for rating the Designated Securities; (v) the cost
of preparing the Designated Securities; (vi) the fees and expenses of the
Eligible Lender Trustee and the Indenture Trustee and any agent of the Eligible
Lender Trustee or the Indenture Trustee and the fees and disbursements of
counsel for the Eligible Lender Trustee and the Indenture Trustee in connection
with any Indenture and Trust Agreement and the Designated Securities; and (vii)
all other costs and expenses incident to the performance of its obligations
hereunder and under any Delayed Delivery Contracts which are not otherwise
specifically provided for in this Section. It is understood, however, that,
except as provided in this Section, and Sections 8 and 11 hereof, the
Underwriters will pay all of their own costs and expenses, including the fees of
their counsel, transfer taxes on resale of any of the Securities by them, and
any advertising expenses connected with any offers they may make.
7. The obligations of the Underwriters of any Designated Securities under
the Pricing Agreement relating to such Designated Securities shall be subject,
in the reasonable discretion of the Representatives, to the condition that all
representations and warranties and other statements of the Company and Sallie
Mae in or incorporated by reference in the Pricing Agreement relating to such
Designated Securities are, at and as of the Time of Delivery for such Designated
Securities, true and correct, the condition that the Company and Sallie Mae
shall have performed all of their obligations hereunder theretofore to be
performed, and the following additional conditions:
(a) The Prospectus as amended or supplemented in relation to the
applicable Designated Securities shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed for
such filing by the rules and regulations under the Act and in accordance
with Section 5(a) hereof; no stop order suspending the effectiveness of the
Registration Statement or any part thereof shall have been issued and no
proceeding for that purpose shall have been initiated or threatened by the
Commission; and all requests for additional information on the part of the
Commission shall have been complied with;
(b) Counsel for the Underwriters shall have furnished Representatives
such opinion or opinions, substantially in the form attached hereto as
Annex II(a), dated the Time of Delivery for such Designated Securities,
with respect to the Designated Securities and such other related matters as
the Representatives may reasonably request;
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<PAGE>
(c) Internal counsel for the Company, Sallie Mae and the Servicer,
satisfactory to the Representatives, shall have furnished to the
Representatives a written opinion or opinions, dated the Time of Delivery
for such Designated Securities, substantially in the form attached hereto
as Annex II(b) or as is otherwise satisfactory to the Representatives;
(d) Special counsel for the Company, Sallie Mae and the Servicer,
satisfactory to the Representatives, shall have furnished to the
Representatives a written opinion or opinions, dated the Time of Delivery
for such Designated Securities, substantially in the form attached hereto
as Annex II(a) or as is otherwise satisfactory to the Representatives;
(e) Counsel for the Eligible Lender Trustee, satisfactory to the
Representatives, shall have furnished to the Representatives a written
opinion or opinions, dated the Time of Delivery for such Designated
Securities, substantially in the form attached hereto as Annex II(c) or as
is otherwise satisfactory to the Representatives;
(f) Counsel for the Indenture Trustee, satisfactory to the
Representatives, shall have furnished to the Representatives a written
opinion or opinions, dated the Time of Delivery for such Designated
Securities, substantially in the form attached hereto as Annex II(d) or as
is otherwise satisfactory to the Representatives;
(g) At the time a Preliminary Prospectus relating to such Designated
Securities was distributed and on the date of the Pricing Agreement for
such Designated Securities, the independent public accountants of the
Company and Sallie Mae shall have furnished to the Representatives a letter
or letters with respect to the Company, Sallie Mae, the statistical and
financial information contained in the Preliminary Prospectus and the
Prospectus, as the case may be, and certain agreed upon procedures with
respect to the issuance and offering of the Designated Securities and the
related Student Loans, in form and substance satisfactory to the
Representatives and in each case confirming that such accountants are
independent public accountants with the meaning of the Act and the
applicable rules and regulations thereunder;
(h) (i) Neither the Company nor Sallie Mae shall have sustained since
the date of the financial statements included in Sallie Mae's most recently
published Information Statement any material loss or interference with its
business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as set forth or contemplated in
such Information Statement, and (ii) since such date, there shall not have
been any material adverse change in the capital stock or long-term debt of
the Company or Sallie Mae or any such change, or any development involving
a prospective such change, in or affecting the general affairs, management,
financial position, shareholders' equity or results of operations of the
Company or Sallie Mae otherwise than as set forth or contemplated in such
Information Statement, the effect of which, in any such case described in
clause (i) or (ii), is in the judgment of the
12
<PAGE>
Representatives so material and adverse as to make it impracticable or
inadvisable to proceed with the public offering or the delivery of the
Underwriters' Securities on the terms and in the manner contemplated in the
Prospectus as first amended or supplemented relating to the Designated
Securities;
(i) On or after the date of the Pricing Agreement relating to the
Designated Securities (i) no downgrading shall have occurred in the rating
accorded Sallie Mae's debt securities or preferred stock by any "nationally
recognized statistical rating organization", as that term is defined by the
Commission for purposes of Rule 436(g)(2) under the Act ("Rating Agency"),
and (ii) no such Rating Agency shall have publicly announced that it has
under surveillance or review, with possible negative implications, its
rating of any of Sallie Mae's debt securities;
(j) On or after the date of the Pricing Agreement relating to the
Designated Securities there shall not have occurred any of the following:
(i) a suspension or material limitation in trading in securities generally
on the New York Stock Exchange or any setting of minimum prices for trading
on such exchange; (ii) a general moratorium on commercial banking
activities declared by either Federal or New York State authorities; or
(iii) the outbreak or escalation of hostilities involving the United States
or the declaration by the United States of a national emergency or war, if
the effect of any such event specified in this clause (iii) in the
reasonable judgment of the Representatives makes it impracticable or
inadvisable to proceed with the public offering or the delivery
of the Underwriters' Securities on the terms and in the manner contemplated
in the Prospectus as theretofore amended or supplemented relating to the
Designated Securities;
(k) Each of the Company and Sallie Mae shall have furnished or caused
to be furnished to the Representatives at the Time of Delivery for the
Designated Securities a certificate or certificates of officers of the
Company or Sallie Mae, as the case may be, satisfactory to the
Representatives as to the accuracy of the representations and warranties of
the Company or Sallie Mae, as the case may be, herein at and as of such
Time of Delivery, as to the performance by the Company or Sallie Mae, as
the case may be, of all of their obligations hereunder to be performed at
or prior to such Time of Delivery, as to the matters set forth in
subsections (a), (h) and (i) of this Section and as to such other matters
as the Representatives may reasonably request;
(l) At the Time of Delivery, the aggregate amount of the Underwriters'
Securities as specified in the related Pricing Agreement for the Designated
Securities shall have been sold by the Company to the Underwriters, and the
aggregate principal amount of the related Notes as specified in the related
underwriting agreement for such Notes shall have been sold by the Company
to the underwriters specified in such underwriting agreement; and
(m) The Designated Securities shall be rated as set forth in the
related Prospectus by the Rating Agency (or Agencies) specified in such
Prospectus, and such Rating
13
<PAGE>
Agency or Agencies shall not have placed the Designated Securities under
surveillance or review with negative implications.
8. (a) The Company and Sallie Mae, jointly and severally, will indemnify
and hold harmless each Underwriter against any losses, claims, damages or
liabilities, joint or several, to which such Underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, any preliminary prospectus supplement, the Registration
Statement, the Prospectus as amended or supplemented and any other prospectus
relating to the Designated Securities, or any amendment or supplement thereto,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse each Underwriter for any
legal or other expenses reasonably incurred by such Underwriter in connection
with investigating or defending any such action or claim as such expenses are
incurred; provided, however, that the Company and Sallie Mae shall not be liable
in any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in any Preliminary Prospectus, any
preliminary prospectus supplement, the Registration Statement, the Prospectus as
amended or supplemented and any other prospectus relating to the Securities, or
any such amendment or supplement in reliance upon and in conformity with written
information furnished to the Company or Sallie Mae by any Underwriter of
Designated Securities through the Representatives expressly for use in the
Prospectus as amended or supplemented relating to such Securities.
(b) Each Underwriter will indemnify and hold harmless the Company and
Sallie Mae against any losses, claims, damages or liabilities to which they may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, any preliminary prospectus supplement,
the Registration Statement, the Prospectus as amended or supplemented and any
other prospectus relating to the Securities, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in any Preliminary Prospectus, any preliminary
prospectus supplement, the Registration Statement, the Prospectus as amended or
supplemented and any other prospectus relating to the Designated Securities, or
any such amendment or supplement in reliance upon and in conformity with written
information furnished to the Company or Sallie Mae by such Underwriter through
the Representatives expressly for use therein; and will reimburse the Company
for any legal or other expenses reasonably incurred by the Company in connection
with investigating or defending any such action or claim as such expenses are
incurred.
14
<PAGE>
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the written
consent of the indemnified party, effect the settlement or compromise of, or
consent to the entry of any judgment with respect to, any pending or threatened
action or claim in respect of which indemnification or contribution may be
sought hereunder (whether or not the indemnified party is an actual or potential
party to such action or claim) unless such settlement, compromise or judgment
(i) includes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act, by or
on behalf of any indemnified party.
(d) If the indemnification provided for in this Section 8 is unavailable to
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Company and Sallie Mae, on the one hand and the Underwriters of the
Designated Securities on the other from the offering of the Designated
Securities to which such loss, claim, damage or liability (or action in respect
thereof) relates. If, however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law or if the indemnified
party failed to give the notice required under subsection (c) above, then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company and Sallie Mae, on
the one hand and the Underwriters of the Designated Securities on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well as any
other relevant equitable considerations. The relative benefits received by the
Company and Sallie Mae, on the one hand, and such Underwriters on the other
shall be deemed to be in the same proportion as the total net proceeds from such
offering (before deducting expenses) received by the
15
<PAGE>
Company and Sallie Mae bear to the total underwriting discounts and commissions
received by such Underwriters. The relative fault 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 Company or Sallie Mae, on the one hand,
or such Underwriters on the other and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company, Sallie Mae and the Underwriters agree that it would not
be just and equitable if contribution pursuant to this subsection (d) were
determined by pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this
subsection (d). The amount paid or payable by an indemnified party as a result
of the losses, claims, damages or liabilities (or actions in respect thereof)
referred to above in this subsection (d) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at which
the applicable Designated Securities underwritten by it and distributed to the
public were offered to the public exceeds the amount of any damages which such
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. The obligations of the Underwriters of Designated
Securities in this subsection (d) to contribute are several in proportion to
their respective underwriting obligations with respect to such Securities and
not joint.
(e) The obligations of the Company and Sallie Mae under this Section 8
shall be in addition to any liability which the Company and Sallie Mae may
otherwise have and shall extend, upon the same terms and conditions, to each
person, if any, who controls any Underwriter within the meaning of the Act; and
the obligations of the Underwriters under this Section 8 shall be in addition to
any liability which the respective Underwriters may otherwise have and shall
extend, upon the same terms and conditions, to each officer and director of the
Company or Sallie Mae and to each person, if any, who controls the Company or
Sallie Mae within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase the
Underwriters' Securities which it has agreed to purchase under the Pricing
Agreement relating to such Underwriters' Securities, the Representatives may in
their discretion arrange for themselves or another party or other parties to
purchase such Underwriters' Securities on the terms contained herein and
therein. If within thirty-six hours after such default by any Underwriter the
Representatives do not arrange for the purchase of such Underwriters'
Securities, then the Company shall be entitled to a further period of thirty-six
hours within which to procure another party or other parties satisfactory to the
Representatives to purchase such Underwriters' Securities on such terms. In the
event that, within the respective prescribed
16
<PAGE>
period, the Representatives notify the Company that they have so arranged for
the purchase of such Underwriters' Securities, or the Company notifies the
Representatives that it has so arranged for the purchase of such Underwriters'
Securities, the Representatives or the Company shall have the right to postpone
the Time of Delivery for such Underwriters' Securities for a period of not more
than seven days, in order to effect whatever changes may thereby be made
necessary in the Registration Statement or the Prospectus as amended or
supplemented, or in any other documents or arrangements, and the Company agrees
to file promptly any amendments or supplements to the Registration Statement or
the Prospectus which in the opinion of the Representatives may thereby be made
necessary. The term "Underwriter" as used in this Agreement shall include any
person substituted under this Section with like effect as if such person had
originally been a party to the Pricing Agreement with respect to such Designated
Securities.
(b) If, after giving effect to any arrangements for the purchase of the
Underwriters' Securities of a defaulting Underwriter or Underwriters by the
Representatives and the Company as provided in subsection (a) above, the
aggregate amount of such Underwriters' Securities which remains unpurchased does
not exceed one-eleventh of the aggregate amount of the Designated Securities,
then the Company shall have the right to require each non-defaulting Underwriter
to purchase the amount of Underwriters' Securities which such Underwriter agreed
to purchase under the Pricing Agreement relating to such Designated Securities
and, in addition, to require each non-defaulting Underwriter to purchase its pro
rata share (based on the amount of Designated Securities which such Underwriter
agreed to purchase under such Pricing Agreement) of the Underwriters' Securities
of such defaulting Underwriter or Underwriters for which such arrangements have
not been made; but nothing herein shall relieve a defaulting Underwriter from
liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Underwriters' Securities of a defaulting Underwriter or Underwriters by the
Representatives and the Company as provided in subsection (a) above, the
aggregate amount of Underwriters' Securities which remains unpurchased exceeds
one-eleventh of the aggregate amount of the Designated Securities, as referred
to in subsection (b) above, or if the Company shall not exercise the right
described in subsection (b) above to require non-defaulting Underwriters to
purchase Underwriters' Securities of a defaulting Underwriter or Underwriters,
then the Pricing Agreement relating to such Designated Securities shall
thereupon terminate, without liability on the part of any non-defaulting
Underwriter or the Company, except for the expenses to be borne by the Company
and the Underwriters as provided in Section 6 hereof and the indemnity and
contribution agreements in Section 8 hereof; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties and
other statements of the Company, Sallie Mae and the several Underwriters, as set
forth in this Agreement or made by or on behalf of them, respectively, pursuant
to this Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Underwriter or any controlling person of any
17
<PAGE>
Underwriter, or the Company or Sallie Mae or any officer or director or
controlling person of the Company or Sallie Mae, and shall survive delivery of
and payment for the Securities.
11. If any Pricing Agreement shall be terminated pursuant to Section 9
hereof, the Company and Sallie Mae shall not then be under any liability to any
Underwriter with respect to the Designated Securities covered by such Pricing
Agreement except as provided in Sections 6 and 8 hereof; but, if for any other
reason Underwriters' Securities are not delivered by or on behalf of the Company
as provided herein, except for any of the reasons specified in Section 7(j), the
Company and Sallie Mae will reimburse the Underwriters through the
Representatives for all out-of-pocket expenses approved in writing by the
Representatives, including fees and disbursements of counsel, reasonably
incurred by the Underwriters in making preparations for the purchase, sale and
delivery of such Designated Securities, but the Company and Sallie Mae shall
then be under no further liability to any Underwriter with respect to such
Designated Securities except as provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, the Representatives of the Underwriters of
Designated Securities shall act on behalf of each of such Underwriters, and the
parties hereto shall be entitled to act and rely upon any statement, request,
notice or agreement on behalf of any Underwriter made or given by such
Representatives jointly or by such of the Representatives, if any, as may be
designated for such purpose in the Pricing Agreement.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Representatives as set forth in the
Pricing Agreement; and if to the Company or Sallie Mae shall be delivered or
sent by mail, telex or facsimile transmission to:
SLM Funding Corporation
777 Twin Creek Drive
Kileen, Texas 76543
Facsimile: (817) 554-4999
Attention: Phyllis A. Leeth
Vice President
Student Loan Marketing Association
11600 Sallie Mae Drive
Reston, VA 20193
Facsimile: (703) 810-7655
Attention: Mark G. Overend
Chief Financial Officer
provided, however, that any notice to an Underwriter pursuant to Section
8(c) hereof shall be delivered or sent by mail, telex or facsimile transmission
to such Underwriter at its address set forth in its Underwriters' Questionnaire,
or telex constituting such Questionnaire, which
18
<PAGE>
address will be supplied to the Company or Sallie Mae by the Representatives
upon request. Any such statements, requests, notices or agreements shall take
effect upon receipt thereof.
13. This Agreement and each Pricing Agreement shall be binding upon, and
inure solely to the benefit of, the Underwriters, the Company, Sallie Mae and,
to the extent provided in Sections 8 and 10 hereof, the officers and directors
of the Company and Sallie Mae and each person who controls the Company, Sallie
Mae or any Underwriter, and their respective heirs, executors, administrators,
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement or any such Pricing Agreement. No
purchaser of any of the Securities from any Underwriter shall be deemed a
successor or assign by reason merely of such purchase.
14. Time shall be of the essence of each Pricing Agreement. As used
herein, "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business and "New York Business Day" shall mean any
day when banking institutions are open for business in New York City, New York.
15. This Agreement and each Pricing Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
16. This Agreement and each Pricing Agreement may be executed by any one or
more of the parties hereto and thereto in any number of counterparts, each of
which shall be deemed to be an original, but all such respective counterparts
shall together constitute one and the same instrument.
19
<PAGE>
If the foregoing is in accordance with your understanding, please sign and
return to us ___ counterparts hereof.
Very truly yours,
SLM Funding Corporation
By: /s/ William M.E. Rachal, Jr.
-----------------------------
Name:
Title:
Student Loan Marketing Association
By: /s/ Somsak Chivavibul
----------------------------
Name:
Title:
Accepted as of the date hereof:
Morgan Stanley & Co. Incorporated
By: /s/ Charles N. Atkins
-----------------------------
Name: Charles N. Atkins
Title: Principal
20
<PAGE>
ANNEX I
Pricing Agreement
-----------------
- --------------------------
As Representatives of the several
Underwriters named on Schedule I hereto,
c/o_______________________
__________________________
__________________________
, 1998
Ladies and Gentlemen:
SLM Funding Corporation, a Delaware corporation (the "Company"), and the
Student Loan Marketing Association, a corporation formed under the laws of the
United States ("Sallie Mae"), propose, subject to the terms and conditions
stated herein and in the Underwriting Agreement, dated __________, 199__ (the
"Underwriting Agreement"), between the Company and Sallie Mae, on the one hand,
and _______________ and ________________, on the other hand, that the Company
will cause the trust (the "Trust") formed pursuant to the Trust Agreement dated
_______, 199__ between the Company and _______, as trustee (the "Eligible Lender
Trustee"), to issue and sell to the Underwriters named in Schedule I hereto (the
"Underwriters") the Student Loan-Backed Certificates (the "Certificates")
specified in Schedule II hereto (the "Designated Securities"). The Certificates
will be issued pursuant to the Trust Agreement.
Each of the provisions of the Underwriting Agreement is incorporated herein
by reference in its entirety, and shall be deemed to be a part of this Agreement
to the same extent as if such provisions had been set forth in full herein; and
each of the representations and warranties set forth therein shall be deemed to
have been made at and as of the date of this Pricing Agreement, except that each
representation and warranty which refers to the Prospectus in Section 2 of the
Underwriting Agreement shall be deemed to be a representation or warranty as of
the date of the Underwriting Agreement in relation to the Prospectus (as therein
defined), and also a representation and warranty as of the date of this Pricing
Agreement in relation to the Prospectus as amended or supplemented relating to
the Designated Securities which are the subject of this Pricing Agreement. Each
reference to the Representatives herein and in the provisions of the
Underwriting Agreement so incorporated by reference shall be deemed to refer to
you. Unless otherwise defined herein, terms defined in the Underwriting
Agreement are used herein as therein defined.
The Representatives designated to act on behalf of the Representatives and
on behalf of each of the Underwriters of the Designated Securities pursuant to
Section 12 of the Underwriting Agreement and the address of the Representatives
referred to in such Section 12 are set forth at the end of Schedule II hereto.
<PAGE>
An amendment to the Registration Statement, or a supplement to the
Prospectus, as the case may be, relating to the Designated Securities, in the
form heretofore delivered to you is now proposed to be filed with the
Commission.
Subject to the terms and conditions set forth herein and in the
Underwriting Agreement incorporated herein by reference, the Company agrees to
cause the Trust to issue and sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Trust, at
the time and place and at the purchase price to the Underwriters set forth in
Schedule II hereto, the amount of Designated Securities set forth opposite the
name of such Underwriter in Schedule I hereto, less the amount of Designated
Securities covered by Delayed Delivery Contracts, if any, as may be specified in
Schedule II.
During the period beginning from the date of this Pricing Agreement for the
Designated Securities and continuing to and including the later of (i) [___ days
after] the termination of trading restrictions for such Designated Securities,
as notified to the Company by the Representatives and (ii) [__ days after] the
Time of Delivery for such Designated Securities, the Company agrees, and Sallie
Mae agrees that it will cause the Company, not to, and not to permit any
affiliated entity to, offer, sell, contract to sell or otherwise dispose of, any
securities (other than the Designated Securities) evidencing an ownership in, or
any securities (other than the related Notes) collateralized by, Student Loans,
without the prior written consent of the Representatives.
Each Underwriter represents and agrees that (a) it has not offered or sold
and will not offer or sell any Notes or Certificates to persons in the United
Kingdom prior to the expiration of the period of six months from the issue date
of the Notes and the Certificates except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995; (b) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the Notes and the Certificates in, from or
otherwise involving the United Kingdom; and (c) it has only issued or passed on
and will only issue or pass on in the United Kingdom any document received by it
in connection with the issuance of the Notes and the Certificates to a person
who is of a kind described in article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1995 or is a person to whom such
document may otherwise lawfully be issued or passed on.
If the foregoing is in accordance with your understanding, please sign and
return to us ______ counterparts hereof, and upon acceptance hereof by you, on
behalf of each of the Underwriters, this letter and such acceptance hereof,
including the provisions of the Underwriting Agreement incorporated herein by
reference, shall constitute a binding agreement between each of the Underwriters
and the Company and Sallie Mae. It is understood that your acceptance of this
letter on behalf of each of the Underwriters is or will be pursuant to the
authority set forth in a form of Agreement among Underwriters, the form of
2
<PAGE>
which shall be submitted to the Company and Sallie Mae for examination upon
request, but without warranty on the part of the Representatives as to the
authority of the signers thereof.
Very truly yours,
SLM Funding Corporation
By:...............................
Name:
Title:
Student Loan Marketing Association
By:...............................
Name:
Title:
3
<PAGE>
Accepted as of the date hereof:
[______________________]
By: .....................................
[______________________]
By: .....................................
Name:
Title:
On behalf of each of the Underwriters
4
<PAGE>
SCHEDULE I
Amount of Designated Securities to be Purchased
Underwriter Class ___ Class ___ Class ___
<PAGE>
SCHEDULE II
Title of each Class of Designated Securities:
Aggregate amount of each Class:
Price to Public of each Class:
Purchase Price by Underwriters of each Class:
Specified funds for payment of purchase price:
Indenture:
Maturity:
Return Rate:
Form of Designated Securities:
Time of Delivery:
Closing location for delivery of Designated Securities:
Names and addresses of Representatives:
Designated Representatives:
Address for Notices, etc.:
<PAGE>
ANNEX II(a)
The Company, Sallie Mae, the Servicer and the Underwriters: Outside Counsel
---------------------------------------------------------------------------
Opinion
-------
[Opinions to be issued, which together will be substantially in the form
provided for SLM Student Loan Trust 1998-1]
<PAGE>
ANNEX II(b)
The Company, Sallie Mae and the Servicer: Internal Counsel Opinion
-------------------------------------------------------------------
[Opinion to be issued substantially in the form provided for
SLM Student Loan Trust 1998-1]
<PAGE>
ANNEX II(c)
Eligible Lender Trustee/Interim Eligible Lender Trustee: Counsel Opinion
-------------------------------------------------------------------------
[Opinion to be issued substantially in the form provided for
SLM Student Loan Trust 1998-1]
<PAGE>
ANNEX II(d)
Indenture Trustee: Counsel Opinion
-----------------------------------
[Opinion to be issued substantially in the form provided for
SLM Student Loan Trust 1998-1]
<PAGE>
ANNEX III
DELAYED DELIVERY CONTRACT
-------------------------
SLM Funding Corporation
c/o ________________________
____________________________
____________________________
Attention:........................ ..............., 19__
Ladies and Gentlemen:
The undersigned hereby agrees to purchase from SLM Funding Corporation
(hereinafter called the "Company"), and the Company agrees to sell to the
undersigned,
$.........
principal amount of the Company's ________ (hereinafter called the "Designated
Securities"), offered by the Company's Prospectus, dated .............., 19..,
as amended or supplemented, receipt of a copy of which is hereby acknowledged,
at a purchase price of .....% of the amount thereof, plus accrued interest from
the date from which interest accrues as set forth below, and on the further
terms and conditions set forth below.
The undersigned will purchase the Designated Securities from the Company on
.............., 19.. (the "Delivery Date") and interest on the Designated
Securities so purchased will accrue from .............., 19...
[The undersigned will purchase the Designated Securities from the Company
on the delivery date or dates and in the amount or amounts set forth below:
<TABLE>
<CAPTION>
Date from Which
Delivery Date Amount Interest Accrues
------------- ------ ----------------
<S> <C> <C>
....................., 19.. $...... ....................., 19..
....................., 19.. $...... ....................., 19..
</TABLE>
Each such date on which Designated Securities are to be purchased hereunder is
hereinafter referred to as a "Delivery Date."(4)]
Payment for the Designated Securities which the undersigned has agreed to
purchase on [the] [each] Delivery Date shall be made to the Company or its order
by certified or official bank check in .......... Clearing House funds at the
office of .........., ........., .........., or by wire transfer to a bank
account specified by the Company, on [the] [such] Delivery Date upon delivery to
the
<PAGE>
undersigned of the Designated Securities then to be purchased by the undersigned
in definitive fully registered form and in such denominations and registered in
such names as the undersigned may designate by written, telex or facsimile
communication addressed to the Company not less than five full business days
prior to [the] [such] Delivery Date.
The obligation of the undersigned to take delivery of and make payment for
Designated Securities on [the] [each] Delivery Date shall be subject to the
condition that the purchase of Designated Securities to be made by the
undersigned shall not on [the] [such] Delivery Date be prohibited under the laws
of the jurisdiction to which the undersigned is subject. The obligation of the
undersigned to take delivery of and make payment for Designated Securities shall
not be affected by the failure of any purchaser to take delivery of and make
payment for Designated Securities pursuant to other contracts similar to this
contract.
[The undersigned understands that Underwriters (the "Underwriters") are
also purchasing Designated Securities from the Company, but that the obligations
of the Undersigned hereunder are not contingent on such purchases]. Promptly
after completion of the sale to the Underwriters the Company will mail or
deliver to the undersigned at its address set forth below notice to such effect,
accompanied by a copy of the Opinion of Counsel for the Company delivered to the
Underwriters in connection therewith.
The undersigned represents and warrants that, as of the date of this
contract, the undersigned is not prohibited from purchasing the Designated
Securities hereby agreed to be purchased by it under the laws of the
jurisdiction to which the undersigned is subject.
This contract will inure to the benefit of and be binding upon the parties
hereto and their respective successors, but will not be assignable by either
party hereto without the written consent of the other.
This contract may be executed by either of the parties hereto in any number
of counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same instrument.
F-2
<PAGE>
It is understood that the acceptance by the Company of any Delayed Delivery
Contract (including this contract) is in the Company's sole discretion and that,
without limiting the foregoing, acceptances of such contracts need not be on a
first-come, first-served basis. If this contract is acceptable to the Company,
it is requested that the Company sign the form of acceptance below and mail or
deliver one of the counterparts hereof to the undersigned at its address set
forth below. This will become a binding contract between the Company and the
undersigned when such counterpart is so mailed or delivered by the Company.
Yours very truly,
...........................................
By: .......................................
(Authorized Signature)
Name:
Title:
...........................................
(Address)
Accepted: ................, 19..
SLM Funding Corporation
By: ............................
Name:
Title:
F-3
<PAGE>
================================================================================
TRUST AGREEMENT
between
SLM FUNDING CORPORATION,
as Depositor
and
CHASE MANHATTAN BANK DELAWARE,
not in its individual capacity but solely
as Eligible Lender Trustee
Dated as of June 1, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I
Section 1.1 Definitions and Usage...................................... 1
ARTICLE II
SECTION 2.1 Creation of Trust; Name.................................... 1
SECTION 2.2 Office..................................................... 1
SECTION 2.3 Purposes and Powers........................................ 1
SECTION 2.4 Appointment of Eligible Lender Trustee..................... 2
SECTION 2.5 Initial Capital Contribution of Trust Estate............... 2
SECTION 2.6 Declaration of Trust....................................... 2
SECTION 2.7 Liability of the Certificateholders........................ 3
SECTION 2.8 Title to Trust Property.................................... 3
SECTION 2.9 Representations and Warranties of the Depositor............ 4
SECTION 2.10 Application of Trust Funds................................. 5
ARTICLE III
SECTION 3.1 Initial Beneficial Ownership............................... 7
SECTION 3.2 The Trust Certificates..................................... 7
SECTION 3.3 Authentication of Trust Certificates....................... 7
SECTION 3.4 Registration of Transfer and Exchange of Trust
Certificates............................................... 8
SECTION 3.5 Mutilated, Destroyed, Lost or Stolen Trust Certificates.... 9
SECTION 3.6 Persons Deemed Owners...................................... 10
SECTION 3.7 Access to List of Certificate holders' Names and Addresses. 10
SECTION 3.8 Maintenance of Office or Agency............................ 10
SECTION 3.9 Appointment of Certificate Paying Agent.................... 11
SECTION 3.10 Book-Entry Certificates.................................... 12
SECTION 3.11 Notices to Clearing Agency................................. 13
SECTION 3.12 Definitive Certificates.................................... 13
i
<PAGE>
Page
----
ARTICLE IV
SECTION 4.1 Prior Notice to Certificateholders With Respect to
Certain Matters............................................ 14
SECTION 4.2 Action by Certificateholders with Respect to Certain
Matters.................................................... 15
SECTION 4.3 Action by Certificateholders with Respect to Bankruptcy.... 15
SECTION 4.4 Restrictions on Certificateholders' Power.................. 15
SECTION 4.5 Majority Control........................................... 15
ARTICLE V
SECTION 5.1 Application of Trust Funds................................. 15
SECTION 5.2 Method of Payment.......................................... 17
SECTION 5.3 No Segregation of Moneys; No Interest...................... 17
SECTION 5.4 Accounting and Reports to the Noteholders,
Certificateholders, the Internal Revenue Service
and Others................................................. 17
SECTION 5.5 Signature on Returns; Tax Matters Partner.................. 18
SECTION 5.6 Capital Accounts........................................... 18
ARTICLE VI
SECTION 6.1 General Authority.......................................... 19
SECTION 6.2 General Duties............................................. 20
SECTION 6.3 Action upon Instruction.................................... 20
SECTION 6.4 No Duties Except as Specified in this Agreement or in
Instructions............................................... 22
SECTION 6.5 No Action Except Under Specified Documents or Instructions. 22
SECTION 6.6 Restrictions............................................... 22
ARTICLE VII
SECTION 7.1 Acceptance of Trusts and Duties............................ 23
SECTION 7.2 Furnishing of Documents.................................... 24
SECTION 7.3 Representations and Warranties............................. 25
SECTION 7.4 Reliance; Advice of Counsel................................ 25
SECTION 7.5 Not Acting in Individual Capacity.......................... 26
SECTION 7.6 Eligible Lender Trustee Not Liable for Trust Certificates
or Trust Student Loans..................................... 26
SECTION 7.7 Eligible Lender Trustee May Own Trust Certificates and
Notes...................................................... 27
ii
<PAGE>
Page
----
ARTICLE VIII
SECTION 8.1 Eligible Lender Trustee's Fees and Expenses................ 27
SECTION 8.2 Payments to the Eligible Lender Trustee.................... 28
SECTION 8.3 Indemnity.................................................. 28
ARTICLE IX
SECTION 9.1 Termination of Trust Agreement............................. 28
SECTION 9.2 Dissolution upon Insolvency of the Depositor............... 29
ARTICLE X
SECTION 10.1 Eligibility Requirements for Eligible Lender Trustee....... 30
SECTION 10.2 Resignation or Removal of Eligible Lender Trustee.......... 31
SECTION 10.3 Successor Eligible Lender Trustee.......................... 32
SECTION 10.4 Merger or Consolidation of Eligible Lender Trustee......... 33
SECTION 10.5 Appointment of Co-Eligible Lender Trustee or Separate
Eligible Lender Trustee.................................... 33
ARTICLE XI
SECTION 11.1 Supplements and Amendments................................. 35
SECTION 11.2 No Legal Title to Trust Estate in Certificateholders....... 36
SECTION 11.3 Limitations on Rights of Others............................ 36
SECTION 11.4 Notices.................................................... 36
SECTION 11.5 Severability............................................... 37
SECTION 11.6 Separate Counterparts...................................... 37
SECTION 11.7 Successors and Assigns..................................... 37
SECTION 11.8 No Petition................................................ 37
SECTION 11.9 No Recourse................................................ 38
SECTION 11.10 Headings................................................... 38
SECTION 11.11 Governing Law.............................................. 38
Exhibit A Form of Trust Certificate
Exhibit B Form of Certificate Depository Agreement
Annex 1 to Trust Agreement
iii
<PAGE>
TRUST AGREEMENT dated as of June 1, 1998, between SLM FUNDING CORPORATION,
a Delaware corporation, as Depositor, and CHASE MANHATTAN BANK DELAWARE, a
Delaware banking corporation, not in its individual capacity but solely as
Eligible Lender Trustee.
The Depositor and the Eligible Lender Trustee hereby agree as follows:
ARTICLE I
SECTION 1.1 Definitions and Usage. Except as otherwise specified herein
---------------------
or as the context may otherwise require, capitalized terms used but not
otherwise defined herein are defined in Appendix A hereto, which also contains
rules as to usage that shall be applicable herein.
ARTICLE II
Organization
------------
SECTION II.1 Creation of Trust; Name. There is hereby created a Trust
-----------------------
which shall be known as "SLM Student Loan Trust 1998-2", in which name the
Eligible Lender Trustee may conduct the business of the Trust, make and execute
contracts and other instruments on behalf of the Trust and sue and be sued. The
Trust shall constitute a business trust within the meaning of Section 3801(a) of
the Delaware Business Trust Act for which the Trustee has filed a certificate of
trust with the Secretary of State of the State of Delaware pursuant to Section
3810(a) of the Delaware Business Trust Act.
SECTION II.2 Office. The office of the Trust shall be in care of the
------
Eligible Lender Trustee at its Corporate Trust Office or at such other address
as the Eligible Lender Trustee may designate by written notice to the
Certificateholders and the Depositor.
SECTION II.3 Purposes and Powers. The purpose of the Trust is to engage
-------------------
in the following activities:
(i) to issue the Notes pursuant to the Indenture and the Trust
Certificates pursuant to this Agreement and to sell the Notes and the Trust
Certificates in one or more transactions;
(ii) with the proceeds of the sale of the Notes and the Trust
Certificates, to fund the Reserve Account pursuant to Section 2.8 of the
Administration Agreement and to purchase the Trust Student Loans pursuant
to the Sale Agreement;
<PAGE>
(iii) to Grant the Trust Estate to the Indenture Trustee pursuant to
the Indenture, and to hold, manage and distribute to the Certificateholders
pursuant to the terms of this Agreement any portion of the Trust Estate
released from the Lien of, and remitted to the Trust pursuant to, the
Indenture;
(iv) to enter into and perform its obligations under the Basic
Documents to which it is to be a party;
(v) to engage in those activities, including entering into
agreements, that are necessary, suitable or convenient to accomplish the
foregoing or are incidental thereto or connected therewith; and
(vi) subject to compliance with the Basic Documents, to engage in
such other activities as may be required in connection with conservation of
the Trust Estate and the making of distributions to the Certificateholders,
the Noteholders and the others specified in Section 2.7 of the
Administration Agreement.
The Trust shall not engage in any activity other than in connection with the
foregoing or other than as required or authorized by the terms of this Agreement
or the other Basic Documents.
SECTION II.4 Appointment of Eligible Lender Trustee. The Depositor hereby
------------------------------ -------
appoints the Eligible Lender Trustee as trustee of the Trust effective as of
the date hereof, to have all the rights, powers and duties set forth herein.
SECTION II.5 Initial Capital Contribution of Trust Estate. The Depositor
------------------------------- ------------
hereby sells, assigns, transfers, conveys and sets over to the Eligible Lender
Trustee, as of the date hereof, the sum of $1.00. The Eligible Lender Trustee
hereby acknowledges receipt in trust from the Depositor, as of the date hereof,
of the foregoing contribution, which shall constitute the Initial Trust Estate
and shall be deposited in the Collection Account. The Depositor shall pay the
organizational expenses of the Trust as they may arise or shall, upon the
request of the Eligible Lender Trustee, promptly reimburse the Eligible Lender
Trustee for any such expenses paid by the Eligible Lender Trustee.
SECTION II.6 Declaration of Trust. The Eligible Lender Trustee hereby
--------------------
declares that it will hold the Trust Estate in trust upon and subject to the
conditions set forth herein for the use and benefit of the Certificateholders,
subject to the obligations of the Trust under the other Basic Documents. It is
the intention of the parties hereto that the Trust constitute a business trust
under Delaware law and that this Agreement
2
<PAGE>
constitute the governing instrument of such trust. It is the intention of the
parties hereto that, solely for income tax purposes, the Trust shall be treated
as a partnership, with the assets of the partnership being the Trust Student
Loans and other assets held by the Trust, the partners of the partnership being
the Certificateholders (including the Depositor as recipient of distributions
from the Reserve Account), and the Notes being debt of the partnership. The
parties agree that, unless otherwise required by appropriate tax authorities,
the Trust will file or cause to be filed annual or other necessary returns,
reports and other forms consistent with the characterization of the Trust as a
partnership for such tax purposes. Effective as of the date hereof, the
Eligible Lender Trustee shall have all rights, powers and duties set forth
herein with respect to accomplishing the purposes of the Trust.
SECTION II.7 Liability of the Certificateholders.
-----------------------------------
(a) Notwithstanding the provisions of Section 3803 of the Delaware
Business Trust Act, the Depositor shall be liable directly to and
shall indemnify the injured party for all losses, claims, damages,
liabilities and expenses of the Trust (including Expenses, to the
extent that the assets of the Trust that would remain if all of the
Notes were paid in full would not be sufficient to pay any such
liabilities, or if such liabilities in fact are not paid out of the
Trust Estate) to the extent that the Depositor would be liable if the
Trust were a partnership under the Delaware Revised Uniform Limited
Partnership Act in which the Depositor were a general partner;
provided, however, that the Depositor shall not be liable for any
-------- -------
losses incurred by a beneficial owner of a Note in its capacity as a
holder of limited recourse debt or to any Certificateholder. In
addition, any third party creditors of the Trust (other than in
connection with the obligations to Noteholders excepted above) shall
be third party beneficiaries of this paragraph.
(b) No Certificateholder shall have any personal liability for any
liability or obligation of the Trust.
SECTION II.8 Title to Trust Property. Legal title to all of the Trust
-----------------------
Estate shall be vested at all times in the Trust as a separate legal entity
except where applicable law in any jurisdiction requires title to any part of
the Trust Estate to be vested in a trustee or trustees, in which case title
shall be deemed to be vested in the Eligible Lender Trustee, a co-trustee and/or
a separate trustee, as the case may be; provided that legal title to the Trust
Student Loans shall be vested at all times in the Eligible Lender Trustee on
behalf of the Trust.
3
<PAGE>
SECTION II.9 Representations, Warranties, and Covenants of the Depositor.
-----------------------------------------------------------
The Depositor hereby represents, warrants and covenants to the Eligible Lender
Trustee as follows:
(a) The Depositor is duly organized and validly existing as a Delaware
corporation in good standing under the laws of the State of Delaware,
with power and authority to own its properties and to conduct its
business as such properties are currently owned and such business is
presently conducted.
(b) The Depositor has the corporate power and authority to execute and
deliver this Agreement and to carry out its terms; the Depositor has
full corporate power and authority to sell and assign the property to
be sold and assigned to and deposited with the Trust (or with the
Eligible Lender Trustee on behalf of the Trust) and the Depositor has
duly authorized such sale and assignment and deposit to the Trust (or
to the Eligible Lender Trustee on behalf of the Trust) by all
necessary corporate action; and the execution, delivery and
performance of this Agreement has been duly authorized by the
Depositor by all necessary corporate action.
(c) This Agreement constitutes a legal, valid and binding obligation of
the Depositor enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization and similar laws
relating to creditors' rights generally and subject to general
principles of equity.
(d) The consummation of the transactions contemplated by this Agreement
and the fulfillment of the terms hereof do not conflict with, result
in any breach of any of the terms and provisions of, or constitute
(with or without notice or lapse of time or both) a default under, the
certificates of incorporation or by-laws of the Depositor, or any
indenture, agreement or other instrument to which the Depositor is a
party or by which it is bound; nor result in the creation or
imposition of any Lien upon any of its properties pursuant to the
terms of any such indenture, agreement or other instrument (other than
pursuant to the Basic Documents); nor violate any law or, to the
Depositor's knowledge, any order, rule or regulation applicable to the
Depositor of any court or of any Federal or state regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Depositor or its properties.
(e) The Depositor agrees for the benefit of the Noteholders and of the
Certificate Holders that it will comply with
4
<PAGE>
each of the requirements set forth in Article IX, X, and XII of its
Certificate of Incorporation and with each of the undertakings set
forth in Annex I hereto.
SECTION II.10 Application of Trust Funds.
--------------------------
(a) Income and Loss Allocations. After giving effect to the special
---------------------------
allocations set forth in subparagraph (b) of this Section 2.10 and for
purposes of maintaining Capital Accounts under Section 5.6, gross
income items of the Trust for any Accrual Period as determined for
Federal income tax purposes shall be allocated as follows:
(1) first, among the Certificateholders as of the close of
business on the last day of such Accrual Period, in proportion to
the Certificate Balance of the Certificates owned by them on such
date, an amount of gross income up to the sum of (i) the portion
of the Certificateholders' Return Distribution Amount and the
Certificate Return Carryover, if any, for the related
Distribution Date allocable to such Accrual Period, (ii) return
on the excess, if any, of the Certificateholders' Return
Distribution Amount for the preceding Distribution Date over the
amount in respect of return on the Certificates that is actually
distributed to Certificateholders on such preceding Distribution
Date, to the extent permitted by law, at the Certificate Rate for
such Accrual Period and (iii) the portion of the market discount
on the Trust Student Loans accrued during such Accrual Period
that is allocable to the excess, if any, of the initial aggregate
principal amount of the Certificates over their initial aggregate
issue price; and
(2) the balance of Profits, if any, to the Depositor.
If the items of gross income of the Trust for any month are
insufficient for the allocations described in clause (1) above,
subsequent items of gross income shall first be allocated to make up
such shortfall before Profits are allocated as provided in clause (b).
Loss of the Trust for any Accrual Period shall be allocated to the
Depositor to the extent the Depositor is reasonably expected to bear
the economic burden of such Loss, and any remaining Loss shall be
allocated among the Certificateholders as of the close of business on
the last day of such Accrual Period in proportion to the Certificate
Balance of Trust
5
<PAGE>
Certificates owned by them on such date. If any items of loss or
deduction are allocated to Certificateholders and the Depositor
subsequently determines that the economic loss to Certificateholders
will be less than was expected at the time such allocations were made,
additional items of gross income will be allocated to
Certificateholders in subsequent periods to offset the excess
allocations of losses and deductions to Certificateholders before any
Profits are allocated to the Depositor as provided in clause (2)
above.
(b) Special Allocations.
-------------------
(1) In the event any Certificateholder unexpectedly receives any
adjustments, allocations or distributions described in Treasury
Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of
Trust income and gain shall be specially allocated to such
Certificateholder in an amount and manner sufficient to
eliminate, to the extent required by the Treasury Regulations,
the deficit, if any, in the balance of the Capital Account of
such Certificateholder as quickly as possible. This Section
2.10(b) is intended to comply with the qualified income offset
provision in Section 1.704-1(b)(2)(ii)(d) of the Treasury
Regulations.
(2) In the event the initial issue price of Certificates differs
from their initial Certificate Balance, there shall be specially
allocated to the Certificateholders the portion, if any, of the
offset for premium (in the case the issue price of the
Certificates exceeds the Certificate Balance) on the Trust
Student Loans accruing for a calendar month that is attributable
to such difference.
(c) Liquidating Profit or Loss. Liquidating Profit or Loss shall be
--------------------------
allocated, after all other adjustments are made to the Capital
Accounts (including adjustments to reflect the Liquidating
Distribution), as follows:
(1) First, among the Certificateholders in proportion to their
ownership of the principal amount of Certificates, in an amount
that would cause their Capital Account balances to equal zero
(in the case of the Depositor, taking into account the Capital
Account balance of the Depositor only to the extent it relates
to Certificates owned by the Depositor); and
(2) Any balance, to the Depositor.
6
<PAGE>
(d) Tax Allocations. For Federal income tax purposes, each item of
---------------
income, gain, loss and deduction of the Trust shall be allocated among
the Certificateholders and the Depositor in a manner consistent with
the allocations set forth in this Section 2.10, subject to the
provisions of Section 704(c) of the Code. Notwithstanding anything to
the contrary set forth in this Agreement, the Depositor is authorized
to modify the allocations of this Section 2.10(d) and Sections
2.10(a), (b) and (c) if necessary or appropriate, in the Depositor's
sole discretion, for the allocations to fairly reflect the economic
gain, income or loss to the Depositor or the Certificateholders, or as
otherwise required by the Code or the Treasury Regulations.
ARTICLE III
Trust Certificates and Transfer of Interests
--------------------------------------------
SECTION III.1 Initial Beneficial Ownership. Upon the formation of the
----------------------------
Trust by the contribution by the Depositor pursuant to Section 2.5 and until the
issuance of the Trust Certificates, the Depositor shall be the sole beneficial
owner of the Trust.
SECTION III.2 The Trust Certificates. The Trust Certificates shall be
----------------------
issued in denominations of $100,000 or in integral multiples of $1,000 in excess
thereof. The Trust Certificates shall be executed on behalf of the Trust by
manual or facsimile signature of an authorized officer of the Eligible Lender
Trustee. Trust Certificates bearing the manual or facsimile signatures of
individuals who were, at the time when such signatures were affixed, authorized
to sign on behalf of the Trust, shall be valid and binding obligations of the
Trust, notwithstanding that such individuals or any of them shall have ceased to
be so authorized prior to the authentication and delivery of such Trust
Certificates or did not hold such offices at the date of authentication and
delivery of such Trust Certificates.
SECTION III.3 Authentication of Trust Certificates. Concurrently with the
------------------------------------
sale of the Trust Student Loans to the Trust pursuant to the Purchase Agreement,
the Eligible Lender Trustee shall cause the Trust Certificates in an aggregate
principal amount equal to the Initial Certificate Balance to be executed on
behalf of the Trust, authenticated and delivered to or upon the written order of
the Depositor, signed by its chairman of the board, its president or any vice
president, without further action by the Depositor, in authorized
denominations. No Trust Certificate shall entitle its holder to
7
<PAGE>
any benefit under this Agreement, or shall be valid for any purpose, unless
there shall appear on such Trust Certificate a certificate of authentication
substantially in the form set forth in Exhibit A, executed by the Eligible
Lender Trustee or The Chase Manhattan Bank, as the Eligible Lender Trustee's
authenticating agent, by manual signature; such authentication shall constitute
conclusive evidence that such Trust Certificate shall have been duly
authenticated and delivered hereunder. All Trust Certificates shall be dated the
date of their authentication. No further Trust Certificates shall be issued
except pursuant to Section 3.4, 3.5 or 3.12 hereunder.
SECTION III.4 Registration of Transfer and Exchange of Trust Certificates.
-----------------------------------------------------------
The Certificate Registrar shall keep or cause to be kept, at the office or
agency maintained pursuant to Section 3.8, a Certificate Register in which,
subject to such reasonable regulations as it may prescribe, the Eligible Lender
Trustee shall provide for the registration of Trust Certificates and of
transfers and exchanges of Trust Certificates as herein provided. The Chase
Manhattan Bank shall be the initial Certificate Registrar.
Upon surrender for registration of transfer of any Trust Certificate at the
office or agency maintained pursuant to Section 3.8, the Eligible Lender Trustee
shall execute, authenticate and deliver (or shall cause The Chase Manhattan Bank
as its authenticating agent to authenticate and deliver), in the name of the
designated transferee or transferees, one or more new Trust Certificates in
authorized denominations of a like aggregate amount dated the date of
authentication by the Eligible Lender Trustee or any authenticating agent. At
the option of a Certificateholder, Trust Certificates may be exchanged for other
Trust Certificates of authorized denominations of a like aggregate amount upon
surrender of the Trust Certificates to be exchanged at the office or agency
maintained pursuant to Section 3.8.
Every Trust Certificate presented or surrendered for registration of transfer
or exchange shall be accompanied by a written instrument of transfer in form
satisfactory to the Eligible Lender Trustee and the Certificate Registrar duly
executed by the Certificateholder or his attorney duly authorized in writing,
with such signature guaranteed by a member firm of the New York Stock Exchange
or a commercial bank or trust company. Each Trust Certificate surrendered for
registration of transfer or exchange shall be cancelled and subsequently
disposed of by the Eligible Lender Trustee in accordance with its customary
practice.
No service charge shall be made for any registration of transfer or exchange
of Trust Certificates, but the Eligible Lender Trustee or the Certificate
Registrar may require payment
8
<PAGE>
of a sum sufficient to cover any tax or governmental charge that may be imposed
in connection with any transfer or exchange of Trust Certificates.
The preceding provisions of this Section notwithstanding, the Eligible Lender
Trustee shall not be required to make and the Certificate Registrar need not
register transfers or exchanges of Trust Certificates for a period of 15 days
preceding any Distribution Date with respect to the Trust Certificates.
The Trust Certificates and any beneficial interest in such Trust Certificates
may not be acquired by (a) employee benefit plans (as defined in section 3(3) of
ERISA) that are subject to the provisions of Title I of ERISA, (b) plans
described in section 4975(e)(1) of the Code, including individual retirement
accounts described in Section 408(a) of the Code or Keogh plans, or (c) entities
whose underlying assets include plan assets by reason of a plan's investment in
such entities (each, a "Benefit Plan"). By accepting and holding a Trust
Certificate or an interest therein, the Certificateholder thereof or Certificate
Owner thereof shall be deemed to have represented and warranted that it is not a
Benefit Plan, is not purchasing Trust Certificates on behalf of a Benefit Plan
and is not using assets of a Plan to purchase any Certificates and to have
agreed that if the Trust Certificate is deemed to be a plan asset, the
Certificateholder will promptly dispose of the Trust Certificate.
SECTION III.5 Mutilated, Destroyed, Lost or Stolen Trust Certificates. If
-------------------------------------------------------
(a) any mutilated Trust Certificate shall be surrendered to the Certificate
Registrar, or if the Certificate Registrar shall receive evidence to its
satisfaction of the destruction, loss or theft of any Trust Certificate, and (b)
there shall be delivered to the Certificate Registrar and the Eligible Lender
Trustee such security or indemnity as may be required by them to save each of
them and the Trust harmless, then in the absence of notice that such Trust
Certificate shall have been acquired by a bona fide purchaser, the Eligible
Lender Trustee on behalf of the Trust shall execute and the Eligible Lender
Trustee shall authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Trust Certificate, a new Trust Certificate
of like tenor and denomination. In connection with the issuance of any new
Trust Certificate under this Section, the Eligible Lender Trustee and the
Certificate Registrar may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection therewith.
Any duplicate Trust Certificate issued pursuant to this Section shall constitute
conclusive evidence of ownership in the Trust, as if originally issued, whether
or not the lost, stolen or destroyed Trust Certificate shall be found at any
time.
9
<PAGE>
SECTION III.6 Persons Deemed Owners. Prior to due presentation of a Trust
---------------------
Certificate for registration of transfer, the Eligible Lender Trustee and the
Certificate Registrar and any agent of either of them may treat the Person in
whose name any Trust Certificate shall be registered in the Certificate Register
as the owner of such Trust Certificate for the purpose of receiving
distributions pursuant to Section 5.1 and for all other purposes whatsoever, and
neither the Eligible Lender Trustee, the Certificate Registrar nor any agent
thereof shall be bound by any notice to the contrary.
SECTION III.7 Access to List of Certificateholders' Names and Addresses. The
---------------------------------------------------------
Eligible Lender Trustee shall furnish or cause to be furnished to the Depositor,
within 15 days after receipt by the Eligible Lender Trustee of a request
therefor from the Depositor in writing, a list, in such form as the Depositor
may reasonably require, of the names and addresses of the Certificateholders as
of the most recent Record Date. If three or more Certificateholders or one or
more Certificateholders evidencing not less than 25% of the Certificate Balance
apply in writing to the Eligible Lender Trustee, and such application states
that the applicants desire to communicate with other Certificateholders with
respect to their rights under this Agreement or under the Trust Certificates and
such application is accompanied by a copy of the communication that such
applicants propose to transmit, then the Eligible Lender Trustee shall, within
five Business Days after the receipt of such application, afford such applicants
access during normal business hours to the current list of Certificateholders.
Upon receipt of any such application, the Eligible Lender Trustee shall promptly
notify the Depositor by providing a copy of such application and a copy of the
list of Certificateholders produced in response thereto. Each
Certificateholder, by receiving and holding a Trust Certificate, shall be deemed
to have agreed not to hold any of the Depositor, the Certificate Registrar or
the Eligible Lender Trustee accountable by reason of the disclosure of its name
and address, regardless of the source from which such information was derived.
SECTION III.8 Maintenance of Office or Agency. The Eligible Lender Trustee
-------------------------------
shall maintain in the Borough of Brooklyn, The City of New York, an office or
offices or agency or agencies where Trust Certificates may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Eligible Lender Trustee in respect of the Trust Certificates and the other
Basic Documents may be served. The Eligible Lender Trustee initially designates
1201 Market Street, Wilmington, Delaware, as its principal Corporate Trust
Office. The Eligible Lender Trustee's New York office and its authenticating
agent's office are located at 450 West 33rd Street, 15th Floor, New York, New
York 10001, Attention: Structured Finance Services. The Eligible Lender Trustee
shall
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give prompt written notice to the Depositor and to the Certificateholders of any
change in the location of the Certificate Register or any such office or agency.
SECTION III.9 Appointment of Certificate Paying Agent. The Certificate
---------------------------------------
Paying Agent shall make distributions to Certificateholders from the amounts
received from the Indenture Trustee out of the Trust Accounts pursuant to
Section 5.1 and shall report the amounts of such distributions to the Eligible
Lender Trustee. Any Certificate Paying Agent shall have the revocable power to
receive such funds from the Indenture Trustee for the purpose of making the
distributions referred to above. The Eligible Lender Trustee may revoke such
power and remove the Certificate Paying Agent if the Eligible Lender Trustee
determines in its sole discretion that the Certificate Paying Agent shall have
failed to perform its obligations under this Agreement in any material respect.
The Certificate Paying Agent shall initially be the Eligible Lender Trustee, and
any co-paying agent chosen by the Eligible Lender Trustee and consented to by
the Administrator (which consent shall not be unreasonably withheld). The
copaying agent shall initially be the Indenture Trustee. The Eligible Lender
Trustee shall be permitted to resign as Certificate Paying Agent upon 30 days'
written notice to the Eligible Lender Trustee. In the event that the Eligible
Lender Trustee shall no longer be the Certificate Paying Agent, the Eligible
Lender Trustee shall appoint a successor to act as Certificate Paying Agent
(which shall be a bank or trust company). The Eligible Lender Trustee shall
give notice to the Rating Agencies of the appointment of a successor Paying
Agent. The Eligible Lender Trustee shall cause such successor Certificate Paying
Agent or any additional Certificate Paying Agent appointed by the Eligible
Lender Trustee to execute and deliver to the Eligible Lender Trustee an
instrument in which such successor Certificate Paying Agent or additional
Certificate Paying Agent shall agree with the Eligible Lender Trustee that as
Certificate Paying Agent, such successor Certificate Paying Agent or additional
Certificate Paying Agent will hold all sums, if any, held by it for payment to
the Certificateholders in trust for the benefit of the Certificateholder
entitled thereto until such sums shall be paid to such Certificateholder. The
Certificate Paying Agent shall return all unclaimed funds to the Eligible Lender
Trustee and upon removal of a Certificate Paying Agent such Certificate Paying
Agent shall also return all funds in its possession to the Eligible Lender
Trustee. The provisions of Sections 7.1, 7.3, 7.4, 7.5 and 8.1 shall apply to
the Eligible Lender Trustee also in its role as Certificate Paying Agent, for so
long as the Eligible Lender Trustee shall act as Certificate Paying Agent and,
to the extent applicable, to any other paying agent appointed hereunder. Any
reference in this Agreement to the Certificate Paying Agent shall include any
copaying agent unless the context requires otherwise.
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SECTION III.10 Book-Entry Certificates. The Trust Certificates, upon
-----------------------
original issuance, will be issued in the form of a typewritten Trust
Certificate or Trust Certificates representing Book-Entry Certificates, to be
delivered to The Depository Trust Company, the initial Clearing Agency, by, or
on behalf of, the Trust. Such Book-Entry Certificate or Book-Entry Certificates
shall initially be registered on the Certificate Register in the name of Cede &
Co., the nominee of the initial Clearing Agency, and no Certificate owner will
receive a Definitive Certificate representing such Certificate Owner's interest
in such Trust Certificate, except as provided in Section 3.12. Unless and until
definitive, fully registered Trust Certificates (the "Definitive Certificates")
have been issued to Certificate owners pursuant to Section 3.12:
(i) the provisions of this Section shall be in full force and effect;
(ii) the Certificate Registrar and the Eligible Lender Trustee shall
be entitled to deal with the Clearing Agency for all purposes of this
Agreement (including the payment of principal of and interest on the Trust
Certificates and the giving of instructions or directions hereunder) as the
sole Certificateholder and shall have no obligation to the Certificate
owners;
(iii) to the extent that the provisions of this Section conflict with
any other provisions of this Agreement, the provisions of this Section
shall control;
(iv) the rights of Certificate Owners shall be exercised only through
the Clearing Agency and shall be limited to those established by law and
agreements between such Certificate Owners and the Clearing Agency and/or
the Clearing Agency Participants. Pursuant to the Certificate Depository
Agreement, unless and until Definitive Certificates are issued pursuant to
Section 3.12, the initial Clearing Agency will make book-entry transfers
among the Clearing Agency Participants and receive and transmit
distribution in respect of the Certificate Balance and return on the Trust
Certificates to such Clearing Agency Participants; and
(v) whenever this Agreement requires or permits actions to be taken
based upon instructions or directions of Certificateholders of Trust
Certificates evidencing a specified percentage of the Certificate Balance,
the Clearing Agency shall be deemed to represent such percentage only to
the extent that it has received instructions to such effect from
Certificate Owners and/or Clearing Agency Participants owning or
representing, respectively, such required percentage of the beneficial
interest in the Trust
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Certificates and has delivered such instructions to the Eligible Lender
Trustee.
SECTION III.11 Notices to Clearing Agency. Whenever a notice or other
--------------------------
communication to the Certificateholders is required under this Agreement, unless
and until Definitive Certificates shall have been issued to Certificate Owners
pursuant to Section 3.12, the Eligible Lender Trustee shall give all such
notices and communications specified herein to be given to Certificateholders to
the Clearing Agency, and shall have no obligations to the Certificate Owners.
SECTION III.12 Definitive Certificates. If (i) the Administrator advises the
-----------------------
Eligible Lender Trustee in writing that the Clearing Agency is no longer willing
or able to discharge properly its responsibilities with respect to the Trust
Certificates, and the Administrator is unable to locate a qualified successor,
(ii) the Administrator at its option advises the Eligible Lender Trustee in
writing that it elects to terminate the book-entry system through the Clearing
Agency or (iii) after the occurrence of an Event of Default, a Servicer Default
or an Administrator Default, Certificate Owners representing beneficial
interests aggregating at least a majority of the Certificate Balance advise the
Clearing Agency (which shall then notify the Eligible Lender Trustee) in writing
that the continuation of a book-entry system through the Clearing Agency is no
longer in the best interest of the Certificate Owners, then the Eligible Lender
Trustee shall cause the Clearing Agency to notify all Certificate Owners of the
occurrence of any such event and of the availability of the Definitive
Certificates to Certificate Owners requesting the same. Upon surrender to the
Eligible Lender Trustee of the typewritten Trust Certificate or Trust
Certificates representing the Book-Entry Certificates by the Clearing Agency,
accompanied by registration instructions, the Eligible Lender Trustee shall
execute and authenticate the Definitive Certificates in accordance with the
instructions of the Clearing Agency. Neither the Certificate Registrar nor the
Eligible Lender Trustee shall be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be protected in relying on,
such instructions. Upon the issuance of Definitive Certificates, the Eligible
Lender Trustee shall recognize the registered holders of the Definitive
Certificates as Certificateholders. The Definitive Certificates shall, at the
expense of the Depositor, be printed, lithographed or engraved or may be
produced in any other manner as is reasonably acceptable to the Eligible Lender
Trustee, as evidenced by its execution thereof.
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ARTICLE IV
Actions by Eligible Lender Trustee
----------------------------------
SECTION IV.1 Prior Notice to Certificateholders With Respect to Certain
---------------------------------- -----------------------
Matters. With respect to the following matters, the Eligible Lender Trustee
- -------
shall not take action unless at least 30 days before the taking of such action,
the Eligible Lender Trustee shall have notified the Certificateholders and each
of the Rating Agencies in writing of the proposed action and the
Certificateholders shall not have notified the Eligible Lender Trustee in
writing prior to the 30th day after such notice is given that such
Certificateholders have withheld consent or provided alternative direction:
(a) the initiation of any material claim or lawsuit by the Trust (except
claims or lawsuits brought in connection with the collection of the
Trust Student Loans) and the compromise of any material action, claim
or lawsuit brought by or against the Trust (except with respect to the
aforementioned claims or lawsuits for collection of Trust Student
Loans);
(b) the amendment of the Indenture by a supplemental indenture in
circumstances where the consent of any Noteholder is required;
(c) the amendment of the Indenture by a supplemental indenture in
circumstances where the consent of any Noteholder is not required and
such amendment materially adversely affects the interest of the
Certificateholders;
(d) the amendment, change or modification of the Administration Agreement,
except to cure any ambiguity or to amend or supplement any provision
in a manner or add any provision that would not materially adversely
affect the interests of the Certificateholders; or
(e) the appointment pursuant to the Administration Agreement of a
successor Administrator, the appointment pursuant to the Indenture of
a successor Note Registrar, Paying Agent or Indenture Trustee, or the
appointment pursuant to this Agreement of a successor Certificate
Registrar or successor Certificate Paying Agent, or the consent to the
assignment by the Administrator, the Note Registrar, the Paying Agent,
the Indenture Trustee, the Certificate Registrar or the Certificate
Paying Agent of its obligations under the
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Administration Agreement, the Indenture or this Agreement, as
applicable.
SECTION IV.2 Action by Certificateholders with Respect to Certain Matters.
------------------------------------------------------------
The Eligible Lender Trustee shall not have the power, except upon the written
direction of the Certificateholders and except as expressly provided in the
Basic Documents, to sell the Trust Student Loans after the termination of the
Indenture.
SECTION IV.3 Action by Certificateholders with Respect to Bankruptcy. The
-------------------------------------------------------
Eligible Lender Trustee shall not have the power to commence a voluntary
proceeding in bankruptcy relating to the Trust without the unanimous prior
approval of all Certificateholders (other than the Depositor) and the delivery
to the Eligible Lender Trustee by each such Certificateholder of a certificate
certifying that such Certificateholder reasonably believes that the Trust is
insolvent.
SECTION IV.4 Restrictions on Certificateholders' Power. The
-----------------------------------------
Certificateholders shall not direct the Eligible Lender Trustee to take or
refrain from taking any action if such action or inaction would be contrary to
any obligation of the Trust or the Eligible Lender Trustee under this Agreement
or any of the other Basic Documents or would be contrary to Section 2.3 nor
shall the Eligible Lender Trustee be permitted to follow any such direction, if
given.
SECTION IV.5 Majority Control. Except as expressly provided herein, any
----------------
action that may be taken by the Certificateholders under this Agreement may be
taken by the Certificateholders of Trust Certificates evidencing a majority of
the Certificate Balance. Except as expressly provided herein, any written
notice of the Certificateholders delivered pursuant to this Agreement shall be
effective if signed by Certificateholders of Trust Certificates evidencing not
less than a majority of the Certificate Balance at the time of the delivery of
such notice.
ARTICLE V
Application of Trust Funds; Certain Duties
------------------------------------------
SECTION V.1 Application of Trust Funds.
--------------------------
(a) On each Distribution Date, the Eligible Lender Trustee shall distribute
to Certificateholders (i) the Certificateholders' Return Distribution
Amount for such Distribution Date on a pro rata basis according to
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<PAGE>
amounts payable in respect of Certificateholders' Return Distribution
Amount, (ii) the Certificate Balance Distribution Amount for such
Distribution Date, if any, on a pro rata basis according to amounts
payable in respect of the Certificate Balance, and (iii) the Certificate
Return Carryover for such Distribution Date, if any, on a pro rata basis
according to amounts payable in respect of Certificate Return Carryover,
as received from the Indenture Trustee pursuant to Sections 2.7 and 2.8
of the Administration Agreement on such Distribution Date.
(b) On each Distribution Date, the Eligible Lender Trustee shall send to each
Certificateholder the statement provided to the Eligible Lender Trustee
by the Administrator pursuant to Section 2.9 of the Administration
Agreement on such Distribution Date.
(c) In the event that any withholding tax is imposed on the Trust's payment
(or allocations of income) to a Certificateholder, such tax shall reduce
the amount otherwise distributable to the Certificateholder in accordance
with this Section. The Eligible Lender Trustee is hereby authorized and
directed to retain from amounts otherwise distributable to the
Certificateholders sufficient funds for the payment of any tax that is
legally owed by the Trust (but such authorization shall not prevent the
Eligible Lender Trustee from contesting any such tax in appropriate
proceedings, and withholding payment of such tax, if permitted by law,
pending the outcome of such proceedings). The amount of any withholding
tax imposed with respect to a Certificateholder shall be treated as cash
distributed to such Certificateholder at the time it is withheld by the
Trust to be remitted to the appropriate taxing authority. The Eligible
Lender Trustee shall withhold or cause to be withheld at the maximum
applicable rate provided in section 1441, 1442 or 1446 of the Code with
respect to all distributions made to persons that are not known to be
U.S. Persons, within the meaning of the Code, unless it is otherwise
determined in the opinion of counsel. In the event that a
Certificateholder wishes to apply for a refund of any such withholding
tax, the Eligible Lender Trustee shall reasonably cooperate with such
Certificateholder in making such claim so long as such Certificateholder
agrees to reimburse the Eligible Lender Trustee for any out-of-pocket
expenses incurred.
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SECTION V.2 Method of Payment. Subject to Section 9.1(c), distributions
-----------------
required to be made to Certificateholders on any Distribution Date shall be made
to each Certificateholder of record on the preceding Record Date either by wire
transfer, in immediately available funds, to the account of such
Certificateholder at a bank or other entity having appropriate facilities
therefor, if such Certificateholder shall have provided to the Certificate
Registrar appropriate written instructions signed by two authorized officers, if
any, at least five Business Days prior to such Distribution Date and such
Certificateholder's Trust Certificates in the aggregate evidence a denomination
of not less than $1,000,000, or, if not, by check mailed to such
Certificateholder at the address of such Certificateholder appearing in the
Certificate Register; provided, however, that, unless Definitive Certificates
-------- -------
have been issued pursuant to Section 3.12, with respect to Trust Certificates
registered on the Record Date in the name of the nominee of the Clearing Agency
(initially, such nominee to be Cede & Co.), distributions will be made by wire
transfer in immediately available funds to the account designated by such
nominee. Notwithstanding the foregoing, the final distribution in respect of
any Trust Certificate (whether on the Certificate Final Maturity Date or
otherwise) shall be payable only upon presentation and surrender of such Trust
Certificate at the Corporate Trust Office of the Eligible Lender Trustee or such
other location specified in writing to the Certificateholder thereof.
SECTION V.3 No Segregation of Moneys; No Interest. Subject to Section 5.1,
-------------------------------------
moneys received by the Eligible Lender Trustee hereunder need not be segregated
in any manner except to the extent required by law or the Administration
Agreement and may be deposited under such general conditions as may be
prescribed by law, and the Eligible Lender Trustee shall not be liable for any
interest thereon.
SECTION V.4 Accounting and Reports to the Noteholders, Certificateholders,
--------------------------------------------------------------
the Internal Revenue Service and Others. The Eligible Lender Trustee shall (a)
- ---------------------------------------
maintain (or cause to be maintained) the books of the Trust on a calendar year
basis on the accrual method of accounting, (b) deliver (or cause to be
delivered) to each Certificateholder (and to each Person who was a
Certificateholder at any time during the applicable calendar year), as may be
required by the Code and applicable Treasury Regulations, such information as
may be required (including Schedule K-1) to enable each such Certificateholder
to prepare its Federal and state income tax returns, (c) file (or cause to be
filed) such tax returns relating to the Trust (including a partnership
information return, Internal Revenue Service Form 1065), and make such elections
as may from time to time be
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required or appropriate under any applicable state or Federal statute or rule or
regulation thereunder so as to maintain the Trust's characterization as a
partnership for Federal income tax purposes, (d) cause such tax returns to be
signed in the manner required by law and (e) collect (or cause to be collected)
any withholding tax as described in and in accordance with Section 5.1(c) with
respect to income or distributions to Certificateholders. The Eligible Lender
Trustee shall elect under Section 1278 of the Code to include in income
currently any market discount that accrues with respect to the Trust Student
Loans. The Eligible Lender Trustee shall not make the election provided under
Section 754 of the Code. The Eligible Lender Trustee shall be entitled to hire
an independent accounting firm to perform the functions described in this
Section 5.4 the reasonable fees and expenses of which shall be paid by the
Depositor.
SECTION V.5 Signature on Returns; Tax Matters Partner.
--------------------------------- -------
(a) The Eligible Lender Trustee shall sign on behalf of the Trust the tax
returns of the Trust, unless applicable law requires a Certificateholder
to sign such documents, in which case such documents shall be signed by
the Depositor.
(b) The Depositor shall be designated the "tax matters partner" of the Trust
pursuant to Section 6231(a)(7)(A) of the Code and applicable Treasury
Regulations.
SECTION V.6 Capital Accounts. The Trust shall maintain accounts ("Capital
----------------
Accounts") with respect to each Certificateholder (including the Depositor) in
accordance with the following provisions:
(a) Each Certificateholder's Capital Account shall be increased by the
Capital Contributions (as defined below) of such Certificateholder, such
Certificateholder's distributive share of gross income (and any
Liquidating Profits) and any items in the nature of income or gain which
are specially allocated to such Certificateholder pursuant to Section
2.10(b) of this Agreement.
(b) Each Certificateholder's Capital Account shall be reduced by any amount
distributed to such Certificateholder (including, in the case of the
Depositor, any amount released or otherwise distributed to the Depositor
from the Reserve Account under Sections 2.8C(G) and 2.8D of the
Administration Agreement) and such Certificateholder's distributive
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<PAGE>
share of Losses and deductions (and any Liquidating Loss), including any
special allocation pursuant to Section 2.10(b).
(c) In the event all or a portion of a Certificate is transferred in
accordance with the terms of this Agreement, the transferee shall succeed
to the Capital Account of the transferor to the extent it related to such
Certificate or a portion thereof.
(d) Notwithstanding the above, the Capital Accounts shall be adjusted in
accordance with the provisions governing the economic rights of the
Certificateholders, as set forth herein and in the Basic Documents.
"Capital Contribution" means the amount of any cash and the fair market value
of any property contributed to the Trust by a Certificateholder (including any
amounts deemed to be contributed in connection with the original issuance of the
Certificates), including, in the case of the Depositor, the fair market value of
the Trust Student Loans deemed to be contributed by the Depositor to the Trust,
taking into account the provisions of Section 707(a)(2)(B) of the Code and the
Regulations thereunder. The foregoing provisions and the other provisions of
this Agreement relating to the maintenance of Capital Accounts are intended to
comply with section 1.704-1(b) of the Treasury Regulations and shall be
interpreted in a manner consistent therewith.
ARTICLE VI
Authority and Duties of Eligible Lender Trustee
-----------------------------------------------
SECTION VI.1 General Authority. The Eligible Lender Trustee is authorized
-----------------
and directed to execute and deliver the Basic Documents to which the Trust is to
be a party and each certificate or other document attached as an exhibit to or
contemplated by the Basic Documents to which the Trust is to be a party, in each
case, in such form as the Depositor shall approve as evidenced conclusively by
the Eligible Lender Trustee's execution thereof, and, on behalf of the Trust, to
direct the Indenture Trustee to authenticate and deliver Notes in the aggregate
principal amount of $2,915,540,000. The Eligible Lender Trustee is also
authorized and directed on behalf of the Trust (i) to acquire and hold legal
title to the Trust Student Loans from the Depositor and (ii) to take all actions
required pursuant to Section 3.2C of the Administration Agreement and otherwise
follow the direction of and cooperate with the Servicer in submitting, pursuing
and collecting any claims to and with the
19
<PAGE>
Department with respect to any Interest Subsidy Payments and Special Allowance
Payments relating to the Trust Student Loans.
In addition to the foregoing, the Eligible Lender Trustee is authorized to
take all actions required of the Trust pursuant to the Basic Documents. The
Eligible Lender Trustee is further authorized from time to time to take such
action as the Administrator directs or instructs with respect to the Basic
Documents and is directed to take such action to the extent that the
Administrator is expressly required pursuant to the Basic Documents to cause the
Eligible Lender Trustee to act.
SECTION VI.2 General Duties. It shall be the duty of the Eligible Lender
--------------
Trustee to discharge (or cause to be discharged) all its responsibilities
pursuant to the terms of this Agreement and the other Basic Documents to which
the Trust is a party and to administer the Trust in the interest of the
Certificateholders, subject to and in accordance with the provisions of this
Agreement and the other Basic Documents. Without limiting the foregoing, the
Eligible Lender Trustee shall on behalf of the Trust file and prove any claim or
claims that may exist on behalf of the Trust against the Depositor in connection
with any claims paying procedure as part of an insolvency or a receivership
proceeding involving the Depositor. Notwithstanding the foregoing, the Eligible
Lender Trustee shall be deemed to have discharged its duties and
responsibilities hereunder and under the other Basic Documents to the extent the
Administrator has agreed in the Administration Agreement to perform and act or
to discharge any duty of the Eligible Lender Trustee hereunder or under any
other Basic Document, and the Eligible Lender Trustee shall not be held liable
for the default or failure of the Administrator to carry out its obligations
under the Administration Agreement. Except as expressly provided in the Basic
Documents, the Eligible Lender Trustee shall have no obligation to administer,
service or collect the Trust Student Loans or to maintain, monitor or otherwise
supervise the administration, servicing or collection of the Trust Student
Loans.
SECTION VI.3 Action upon Instruction.
-----------------------
(a) [Reserved]
(b) The Eligible Lender Trustee shall not be required to take any action
hereunder or under any other Basic Document if the Eligible Lender
Trustee shall have reasonably determined, or shall have been advised by
counsel, that such action is likely to result in liability on the part of
the Eligible Lender Trustee or
20
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is contrary to the terms hereof or of any other Basic Document or is
otherwise contrary to law.
(c) Whenever the Eligible Lender Trustee is unable to determine the
appropriate course of action between alternative courses and actions
permitted or required by the terms of this Agreement or under any other
Basic Document, the Eligible Lender Trustee shall promptly give notice
(in such form as shall be appropriate under the circumstances) to the
Certificateholders requiring instruction as to the course of action to be
adopted, and to the extent the Eligible Lender Trustee acts in good faith
in accordance with any written instruction of the Certificateholders
received, the Eligible Lender Trustee shall not be liable on account of
such action to any Person. If the Eligible Lender Trustee shall not have
received appropriate instruction within 10 days of such notice (or within
such shorter period of time as reasonably may be specified in such notice
or may be necessary under the circumstances) it may, but shall be under
no duty to, take or refrain from taking such action, not inconsistent
with this Agreement or the other Basic Documents, as it shall deem to be
in the best interests of the Certificateholders, and shall have no
liability to any Person for such action or inaction.
(d) In the event that the Eligible Lender Trustee is unsure as to the
application of any provision of this Agreement or any other Basic
Document or any such provision is ambiguous as to its application, or is,
or appears to be, in conflict with any other applicable provision, or in
the event that this Agreement permits any determination by the Eligible
Lender Trustee or is silent or is incomplete as to the course of action
that the Eligible Lender Trustee is required to take with respect to a
particular set of facts, the Eligible Lender Trustee may give notice (in
such form as shall be appropriate under the circumstances) to the
Certificateholders requesting instruction and, to the extent that the
Eligible Lender Trustee acts or refrains from acting in good faith in
accordance with any such instruction received, the Eligible Lender
Trustee shall not be liable, on account of such action or inaction, to
any Person. If the Eligible Lender Trustee shall not have received
appropriate instruction within 10 days of such notice (or within such
shorter period of time as reasonably may be specified in such notice or
may be necessary under the circumstances) it may, but shall be under no
duty to, take or refrain from taking such action, not inconsistent with
this
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Agreement or the other Basic Documents, as it shall deem to be in the
best interest of the Certificateholders, and shall have no liability
to any Person for such action or inaction.
SECTION VI.4 No Duties Except as Specified in this Agreement or in
-----------------------------------------------------
Instructions. The Eligible Lender Trustee shall not have any duty or obligation
- ------------
to manage, make any payment with respect to, register, record, sell, service,
dispose of or otherwise deal with the Trust Estate, or to otherwise take or
refrain from taking any action under, or in connection with, any document
contemplated hereby to which the Eligible Lender Trustee is a party, except as
expressly provided by the terms of this Agreement or in any document or written
instruction received by the Eligible Lender Trustee pursuant to Section 6.3; and
no implied duties or obligations shall be read into this Agreement or any other
Basic Document against the Eligible Lender Trustee. The Eligible Lender Trustee
shall have no responsibility for filing any financing or continuation statement
in any public office at any time or to otherwise perfect or maintain the
perfection of any security interest or lien granted to it hereunder or to
prepare or file any Commission filing for the Trust or to record this Agreement
or any other Basic Document. The Eligible Lender Trustee nevertheless agrees
that it will, at its own cost and expense, promptly take all action as may be
necessary to discharge any Liens on any part of the Trust Estate that result
from actions by, or claims against, Chase Manhattan Bank Delaware in its
individual capacity or as the Eligible Lender Trustee that are not related to
the ownership or the administration of the Trust Estate.
SECTION VI.5 No Action Except Under Specified Documents or Instructions. The
----------------------------------------------------------
Eligible Lender Trustee shall not otherwise deal with any part of the Trust
Estate except (i) in accordance with the powers granted to and the authority
conferred upon the Eligible Lender Trustee pursuant to this Agreement, (ii) in
accordance with the other Basic Documents to which it is a party and (iii) in
accordance with any document or instruction delivered to the Eligible Lender
Trustee pursuant to Section 6.3.
SECTION VI.6 Restrictions. The Eligible Lender Trustee shall not take any
------------
action (a) that is inconsistent with the purposes of the Trust set forth in
Section 2.3 or (b) that, to the actual knowledge of the Eligible Lender Trustee,
would result in the Trust's becoming taxable as a corporation for Federal income
tax purposes. The Certificateholders shall not direct the Eligible Lender
Trustee to take action that would violate the provisions of this Section.
22
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ARTICLE VII
Concerning the Eligible Lender Trustee
--------------------------------------
SECTION VII.1 Acceptance of Trusts and Duties. The Eligible Lender Trustee
-------------------------------
accepts the trusts hereby created and agrees to perform its duties hereunder
with respect to such trusts but only upon the terms of this Agreement. The
Eligible Lender Trustee also agrees to disburse all moneys actually received by
it constituting part of the Trust Estate upon the terms of this Agreement and
the other Basic Documents. The Eligible Lender Trustee shall not be answerable
or accountable hereunder or under any other Basic Document under any
circumstances, except (i) for its own willful misconduct or negligence or (ii)
in the case of the inaccuracy of any representation or warranty contained in
Section 7.3 expressly made by the Eligible Lender Trustee. In particular, but
not by way of limitation (and subject to the exceptions set forth in the
preceding sentence):
(a) the Eligible Lender Trustee shall not be liable for any error of judgment
made by a responsible officer of the Eligible Lender Trustee;
(b) the Eligible Lender Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in accordance with the
direction or instructions of the Administrator or any Certificateholder;
(c) no provision of this Agreement or any other Basic Document shall require
the Eligible Lender Trustee to expend or risk funds or otherwise incur
any financial liability in the performance of any of its rights or powers
hereunder or under any other Basic Document, if the Eligible Lender
Trustee shall have reasonable grounds for believing that repayment of
such funds or adequate indemnity against such risk or liability is not
reasonably assured or provided to it;
(d) under no circumstances shall the Eligible Lender Trustee be liable for
indebtedness evidenced by or arising under any of the Basic Documents,
including the principal of and interest on the Notes;
(e) the Eligible Lender Trustee shall not be responsible for or in respect of
the validity or sufficiency of this Agreement or for the due execution
hereof by the Depositor or for the form, character, genuineness,
sufficiency, value or validity of any of the Trust
23
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Estate or for or in respect of the validity or sufficiency of the Basic
Documents, other than the certificate of authentication on the Trust
Certificates, and the Eligible Lender Trustee shall in no event assume or
incur any liability, duty, or obligation to any Noteholder or to any
Certificateholder, other than as expressly provided for herein and in the
other Basic Documents;
(f) the Eligible Lender Trustee shall not be liable for the action or
inaction, default or misconduct of the Administrator, the Depositor, the
Indenture Trustee or the Servicer under any of the other Basic Documents
or otherwise and the Eligible Lender Trustee shall have no obligation or
liability to perform the obligations of the Trust under this Agreement or
the other Basic Documents that are required to be performed by the
Administrator under the Administration Agreement, the Indenture Trustee
under the Indenture or the Servicer under the Servicing Agreement; and
(g) the Eligible Lender Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Agreement, or to institute,
conduct or defend any litigation under this Agreement or otherwise or in
relation to this Agreement or any other Basic Document, at the request,
order or direction of any of the Certificateholders, unless such
Certificateholders have offered to the Eligible Lender Trustee security
or indemnity satisfactory to it against the costs, expenses and
liabilities that may be incurred by the Eligible Lender Trustee therein
or thereby. The right of the Eligible Lender Trustee to perform any
discretionary act enumerated in this Agreement or in any other Basic
Document shall not be construed as a duty, and the Eligible Lender
Trustee shall not be answerable for other than its negligence or willful
misconduct in the performance of any such act.
SECTION VII.2 Furnishing of Documents. The Eligible Lender Trustee shall
-----------------------
furnish to the Certificateholders promptly upon receipt of a written request
therefor, duplicates or copies of all reports, notices, requests, demands,
certificates, financial statements and any other instruments furnished to the
Eligible Lender Trustee under the Basic Documents. On each Distribution Date
the Eligible Lender Trustee shall provide to each Certificateholder of record as
of the related Record Date the information provided by the Administrator to the
Eligible Lender
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Trustee on the related Determination Date pursuant to Section 2.9 of the
Administration Agreement.
SECTION VII.3 Representations and Warranties. The Eligible Lender Trustee
------------------------------
hereby represents and warrants to the Depositor, for the benefit of the
Certificateholders, that:
(a) It is duly organized and validly existing in good standing under the laws
of its governing jurisdiction and has an office located within the State
of Delaware. It has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement.
(b) It has taken all corporate action necessary to authorize the execution
and delivery by it of this Agreement, and this Agreement will be executed
and delivered by one of its officers who is duly authorized to execute
and deliver this Agreement on its behalf.
(c) Neither the execution nor the delivery by it of this Agreement, nor the
consummation by it of the transactions contemplated hereby nor compliance
by it with any of the terms or provisions hereof will contravene any
Federal or Delaware state law, governmental rule or regulation governing
the banking or trust powers of the Eligible Lender Trustee or any
judgment or order binding on it, or constitute any default under its
charter documents or by-laws or any indenture, mortgage, contract,
agreement or instrument to which it is a party or by which any of its
properties may be bound.
(d) It is and will maintain its status as an "eligible lender" (as such term
is defined in Section 435(d) of the Higher Education Act) for purposes of
holding legal title to the Trust Student Loans as contemplated by this
Agreement and the other Basic Documents, it has a lender identification
number with respect to the Trust Student Loans from the Department and
has and will maintain in effect a Guarantee Agreement with each of the
Guarantors with respect to the Trust Student Loans.
SECTION VII.4 Reliance; Advice of Counsel.
---------------------------
(a) The Eligible Lender Trustee shall incur no liability to anyone in acting
upon any signature, instrument, direction, notice, resolution, request,
consent, order, certificate, report, opinion, bond or other document or
paper believed by it to be genuine and believed by it
25
<PAGE>
to be signed by the proper party or parties. The Eligible Lender Trustee
may accept a certified copy of a resolution of the board of directors or
other governing body of any corporate party as conclusive evidence that
such resolution has been duly adopted by such body and that the same is
in full force and effect. As to any fact or matter the method of the
determination of which is not specifically prescribed herein, the
Eligible Lender Trustee may for all purposes hereof rely on a
certificate, signed by the president or any vice president or by the
treasurer or other authorized officers of the relevant party, as to such
fact or matter and such certificate shall constitute full protection to
the Eligible Lender Trustee for any action taken or omitted to be taken
by it in good faith in reliance thereon.
(b) In the exercise or administration of the trusts hereunder and in the
performance of its duties and obligations under this Agreement or the
other Basic Documents, the Eligible Lender Trustee (i) may act directly
or through its agents or attorneys pursuant to agreements entered into
with any of them and the Eligible Lender Trustee shall not be liable for
the conduct or misconduct of such agents or attorneys if such agents or
attorneys shall have been selected by the Eligible Lender Trustee with
reasonable care, and (ii) may consult with counsel and accountants to be
selected with reasonable care and employed by it. The Eligible Lender
Trustee shall not be liable for anything done, suffered or omitted in
good faith by it in accordance with the written opinion or advice of any
such counsel or accountants and not contrary to this Agreement or any
other Basic Document.
SECTION VII.5 Not Acting in Individual Capacity. Except as provided in this
---------------------------------
Article VII, in accepting the trusts hereby created Chase Manhattan Bank
Delaware acts solely as Eligible Lender Trustee hereunder and not in its
individual capacity and all Persons having any claim against the Eligible Lender
Trustee by reason of the transactions contemplated by this Agreement or any
other Basic Document shall look only to the Trust Estate for payment or
satisfaction thereof.
SECTION VII.6 Eligible Lender Trustee Not Liable for Trust Certificates or
------------------------------------------------------------
Trust Student Loans. The recitals contained herein and in the Trust
- -------------------
Certificates (other than the signature of and authentication by the Eligible
Lender Trustee on the Trust Certificates) shall be taken as the statements of
the Depositor and the Eligible Lender Trustee assumes no responsibility for the
26
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correctness thereof. The Eligible Lender Trustee makes no representations as to
the validity or sufficiency of this Agreement, the Trust Certificates or any
other Basic Document (other than the signature of and authentication by the
Eligible Lender Trustee on the Trust Certificates) or the Notes, or of any Trust
Student Loan or related documents. The Eligible Lender Trustee shall at no time
have any responsibility (or liability except for willfully or negligently
terminating or allowing to be terminated any of the Guarantee Agreements, in a
case where the Eligible Lender Trustee knows of any facts or circumstances which
will or could reasonably be expected to result in any such termination) for or
with respect to the legality, validity, enforceability and eligibility for
Guarantee Payments, federal reinsurance, Interest Subsidy Payments or Special
Allowance Payments, as applicable, in respect of any Trust Student Loan, or for
or with respect to the sufficiency of the Trust Estate or its ability to
generate the payments to be distributed to Certificateholders under this
Agreement or the Noteholders under the Indenture, including the existence and
contents of any computer or other record of any Trust Student Loan; the validity
of the assignment of any Trust Student Loan to the Eligible Lender Trustee on
behalf of the Trust; the completeness of any Trust Student Loan; the performance
or enforcement (except as expressly set forth in any Basic Document) of any
Trust Student Loan; the compliance by the Depositor or the Servicer with any
warranty or representation made under any Basic Document or in any related
document or the accuracy of any such warranty or representation or any action or
inaction of the Administrator, the Indenture Trustee or the Servicer or any
subservicer taken in the name of the Eligible Lender Trustee.
SECTION VII.7 Eligible Lender Trustee May Own Trust Certificates and Notes.
------------------------------- ----------------------------
The Eligible Lender Trustee in its individual or any other capacity may become
the owner or pledgee of Trust Certificates or Notes and may deal with the
Depositor, the Administrator, the Indenture Trustee and the Servicer in banking
transactions with the same rights as it would have if it were not Eligible
Lender Trustee.
ARTICLE VIII
Compensation and Indemnity of Eligible Lender Trustee
-----------------------------------------------------
SECTION VIII.1 Eligible Lender Trustee's Fees and Expenses. The Eligible
-------------------------------------------
Lender Trustee shall receive as compensation for its services hereunder such
fees as have been separately agreed upon before the date hereof between the
Depositor and the Eligible Lender Trustee, and the Eligible Lender Trustee shall
be entitled to be reimbursed by the Depositor, to the extent
27
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provided in such separate agreement, for its other reasonable expenses
(including the reasonable fees and expenses of counsel and independent
accountants) hereunder.
SECTION VIII.2 Payments to the Eligible Lender Trustee. Any amounts paid to
------------------------------- -------
the Eligible Lender Trustee pursuant to Section 8.1 hereof or pursuant to
Section 9 of the Sale Agreement, Section 4.2 of the Administration Agreement or
Section 4.2 of the Servicing Agreement shall be deemed not to be a part of the
Trust Estate immediately after such payment.
SECTION VIII.3 Indemnity. The Depositor shall cause the Administrator to
---------
indemnify the Eligible Lender Trustee in its individual capacity and any of its
officer, directors, employees and agents as and to the extent provided for in
Section 4.2 of the Administration Agreement.
ARTICLE IX
Termination of Trust Agreement
------------------------------
SECTION IX.1 Termination of Trust Agreement.
------------------------------
(a) This Agreement (other than Article VIII) and the Trust shall terminate
and be of no further force or effect upon the earlier of (i) the final
distribution by the Eligible Lender Trustee of all moneys or other
property or proceeds of the Trust Estate in accordance with the terms of
the Indenture, the Administration Agreement and Article V, and (ii) the
time provided in Section 9.2. The bankruptcy, liquidation, dissolution,
death or incapacity of any Certificateholder, other than the Depositor as
described in Section 9.2, shall not (x) operate to terminate this
Agreement or the Trust, nor (y) entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
proceeding in any court for a partition or winding up of all or any part
of the Trust or Trust Estate nor (z) otherwise affect the rights,
obligations and liabilities of the parties hereto.
(b) Except as provided in Section 9.1(a), neither the Depositor nor any
Certificateholder shall be entitled to revoke or terminate the Trust.
(c) Notice of any termination of the Trust, specifying the Distribution Date
upon which the Certificateholders shall surrender their Trust
Certificates to the Certificate Paying Agent for payment of the final
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distribution and cancellation, shall be given promptly by the Eligible
Lender Trustee by letter to Certificateholders mailed within five
Business Days of receipt of notice of such termination from the
Administrator given pursuant to Section 6.1C of the Administration
Agreement, stating (i) the Distribution Date upon which final payment of
the Trust Certificates shall be made upon presentation and surrender of
the Trust Certificates at the office of the Certificate Paying Agent
therein designated, (ii) the amount of any such final payment and (iii)
that the Record Date otherwise applicable to such Distribution Date is
not applicable, payments being made only upon presentation and surrender
of the Trust Certificates at the office of the Certificate Paying Agent
therein specified. The Eligible Lender Trustee shall give such notice to
the Certificate Registrar (if other than the Eligible Lender Trustee) and
the Certificate Paying Agent at the time such notice is given to
Certificateholders. Upon presentation and surrender of the Trust
Certificates, the Certificate Paying Agent shall cause to be distributed
to Certificateholders amounts distributable on such Distribution Date
pursuant to Section 5.1.
In the event that all the Certificateholders shall not surrender their Trust
Certificates for cancellation within six months after the date specified in the
above mentioned written notice, the Eligible Lender Trustee shall give a second
written notice to the remaining Certificateholders to surrender their Trust
Certificates for cancellation and receive the final distribution with respect
thereto. If within one year after the second notice all the Trust Certificates
shall not have been surrendered for cancellation, the Eligible Lender Trustee
may take appropriate steps, or may appoint an agent to take appropriate steps,
to contact the remaining Certificateholders concerning surrender of their Trust
Certificates, and the cost thereof shall be paid out of the funds and other
assets that shall remain subject to this Agreement. Any funds remaining in the
Trust after exhaustion of such remedies and no later than five years after the
first such notice shall be distributed by the Eligible Lender Trustee to the
Depositor.
Upon final distribution of any funds remaining in the Trust, the Eligible
Lender Trustee shall file a certificate of cancellation of the Trust's
certificate of trust pursuant to Section 3810(c) of the Delaware Business Trust
Act.
SECTION IX.2 Dissolution upon Insolvency of the Depositor. Notwithstanding
--------------------------------------------
the provisions of Section 3808 of the Delaware Business Trust Act, in the event
that an Insolvency Event shall
29
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occur with respect to the Depositor, (x) the Trust created hereunder shall
dissolve and (y) this Agreement shall be terminated in accordance with Section
9.1 90 days after the date of such Insolvency Event. Promptly after the
occurrence of any Insolvency Event with respect to the Depositor, (i) the
Depositor shall give the Indenture Trustee, the Eligible Lender Trustee and each
Rating Agency written notice of such Insolvency Event, and (ii) the Eligible
Lender Trustee shall, upon the receipt of such written notice from the
Depositor, give prompt written notice to the Certificateholders and the
Indenture Trustee, of the occurrence of such event and of the effect of such
event under this Section 9.2; provided, however, that any failure to give a
-------- -------
notice required by this sentence shall not prevent or delay, in any manner, a
termination of the Trust pursuant to the first sentence of this Section 9.2.
Upon a termination of the Trust pursuant to this Section, the Eligible Lender
Trustee shall direct the Indenture Trustee promptly to sell the assets of the
Trust (other than the Trust Accounts) in a commercially reasonable manner and on
commercially reasonable terms. The proceeds of such a sale of the assets of the
Trust shall be treated as collections under the Administration Agreement.
ARTICLE X
Successor Eligible Lender Trustees and
--------------------------------------
Additional Eligible Lender Trustees
-----------------------------------
SECTION X.1 Eligibility Requirements for Eligible Lender Trustee. The
----------------------------------------------------
Eligible Lender Trustee shall at all times be a corporation or association (i)
qualifying as an "eligible lender" as such term is defined in Section 435(d) of
the Higher Education Act for purposes of holding legal title to the Trust
Student Loans on behalf of the Trust, with a valid lender identification number
with respect to the Trust Student Loans from the Department; (ii) being
authorized to exercise corporate trust powers and hold legal title to the Trust
Student Loans; (iii) having in effect Guarantee Agreements with each of the
Guarantors; (iv) having a combined capital and surplus of at least $50,000,000
and being subject to supervision or examination by Federal or state authorities;
(v) having its principal place of business in the State of Delaware and
otherwise complying with Section 3807 of the Delaware Business Trust Act; and
(vi) having (or having a parent which has) a rating in respect of its longterm
senior unsecured debt of at least BBB- (or the equivalent) by each of the Rating
Agencies (or which, if the long-term senior unsecured debt of such corporation
or association is not rated by any Rating Agency, shall have provided to the
Indenture Trustee written confirmation from such Rating Agency that the
appointment of such corporation or
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association to serve as Eligible Lender Trustee will not result in and of itself
in a reduction or withdrawal of the then current rating of any of the Notes or
the Certificates). If the Eligible Lender Trustee shall publish reports of
condition at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purpose of this
Section, the combined capital and surplus of the Eligible Lender Trustee shall
be deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. In case at any time the Eligible Lender
Trustee shall cease to be eligible in accordance with the provisions of this
Section, the Eligible Lender Trustee shall resign immediately in the manner and
with the effect specified in Section 10.2.
SECTION X.2 Resignation or Removal of Eligible Lender Trustee. The Eligible
-------------------------------------------------
Lender Trustee may at any time resign and be discharged from the trusts hereby
created by giving written notice thereof to the Administrator. Upon receiving
such notice of resignation, the Administrator shall promptly appoint a successor
Eligible Lender Trustee meeting the eligibility requirements of Section 10.1 by
written instrument, in duplicate, one copy of which instrument shall be
delivered to the resigning Eligible Lender Trustee and one copy to the successor
Eligible Lender Trustee. If no successor Eligible Lender Trustee shall have
been so appointed and have accepted appointment within 30 days after the giving
of such notice of resignation, the resigning Eligible Lender Trustee may
petition any court of competent jurisdiction for the appointment of a successor
Eligible Lender Trustee; provided, however, that such right to appoint or to
-------- -------
petition for the appointment of any such successor shall in no event relieve the
resigning Eligible Lender Trustee from any obligations otherwise imposed on it
under the Basic Documents until such successor has in fact assumed such
appointment.
If at any time the Eligible Lender Trustee shall cease to be or shall be
likely to cease to be eligible in accordance with the provisions of Section 10.1
and shall fail to resign after written request therefor by the Administrator, or
if at any time an Insolvency Event with respect to the Eligible Lender Trustee
shall have occurred and be continuing, then the Administrator may remove the
Eligible Lender Trustee. If the Administrator shall remove the Eligible Lender
Trustee under the authority of the immediately preceding sentence, the
Administrator shall promptly appoint a successor Eligible Lender Trustee by
written instrument, in duplicate, one copy of which instrument shall be
delivered to the outgoing Eligible Lender Trustee so removed and one copy to the
successor Eligible Lender Trustee and payment of all fees owed to the outgoing
Eligible Lender Trustee.
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Any resignation or removal of the Eligible Lender Trustee and appointment of a
successor Eligible Lender Trustee pursuant to any of the provisions of this
Section shall not become effective until acceptance of appointment by the
successor Eligible Lender Trustee pursuant to Section 10.3, payment of all fees
and expenses owed to the outgoing Eligible Lender Trustee and the filing of a
certificate of amendment to the Trust's certificate of trust pursuant to Section
3810(b) of the Delaware Business Trust Act. The Administrator shall provide
notice of such resignation or removal of the Eligible Lender Trustee and to each
of the Rating Agencies.
SECTION X.3 Successor Eligible Lender Trustee. Any successor Eligible Lender
---------------------------------
Trustee appointed pursuant to Section 10.2 shall execute, acknowledge and
deliver to the Administrator and to its predecessor Eligible Lender Trustee an
instrument accepting such appointment under this Agreement, and thereupon the
resignation or removal of the predecessor Eligible Lender Trustee shall become
effective and such successor Eligible Lender Trustee, without any further act,
deed or conveyance, shall become fully vested with all the rights, powers,
duties and obligations of its predecessor under this Agreement, with like effect
as if originally named as Eligible Lender Trustee. The predecessor Eligible
Lender Trustee shall upon payment of its fees and expenses deliver to the
successor Eligible Lender Trustee all documents, statements, moneys and
properties held by it under this Agreement and shall assign, if permissible, to
the successor Eligible Lender Trustee the lender identification number obtained
from the Department on behalf of the Trust; and the Administrator and the
predecessor Eligible Lender Trustee shall execute and deliver such instruments
and do such other things as may reasonably be required for fully and certainly
vesting and confirming in the successor Eligible Lender Trustee all such rights,
powers, duties and obligations.
No successor Eligible Lender Trustee shall accept such appointment as
provided in this Section unless at the time of such acceptance such successor
Eligible Lender Trustee shall be eligible pursuant to Section 10.1.
Upon acceptance of appointment by a successor Eligible Lender Trustee pursuant
to this Section, the Administrator shall mail notice of the successor of such
Eligible Lender Trustee to all Certificateholders, the Indenture Trustee, the
Noteholders and the Rating Agencies. If the Administrator shall fail to mail
such notice within 10 days after acceptance of appointment by the successor
Eligible Lender Trustee, the successor Eligible Lender Trustee shall cause such
notice to be mailed at the expense of the Administrator.
32
<PAGE>
SECTION X.4 Merger or Consolidation of Eligible Lender Trustee. Any
--------------------------------------------------
corporation into which the Eligible Lender Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Eligible Lender Trustee shall be a
party, or any corporation succeeding to all or substantially all the corporate
trust business of the Eligible Lender Trustee, shall, without the execution or
filing of any instrument or any further act on the part of any of the parties
hereto, anything herein to the contrary notwithstanding, be the successor of the
Eligible Lender Trustee hereunder; provided that such corporation shall be
--------
eligible pursuant to Section 10.1; and provided further that the Eligible Lender
-------- -------
Trustee shall mail notice of such merger or consolidation to the Rating Agencies
not less than 15 days prior to the effective date thereof.
SECTION X.5 Appointment of Co-Eligible Lender Trustee or Separate Eligible
--------------------------------------------------------------
Lender Trustee. Notwithstanding any other provisions of this Agreement, at any
- --------------
time, for the purpose of meeting any legal requirements of any jurisdiction in
which any part of the Trust may at the time be located, the Administrator and
the Eligible Lender Trustee acting jointly shall have the power and shall
execute and deliver all instruments to appoint one or more Persons approved by
the Eligible Lender Trustee, meeting the eligibility requirements of clauses (i)
through (iii) of Section 10.1, to act as co-trustee, jointly with the Eligible
Lender Trustee, or separate trustee or separate trustees, of all or any part of
the Trust Estate, and to vest in such Person, in such capacity, such title to
the Trust Estate, or any part thereof, and, subject to the other provisions of
this Section, such powers, duties, obligations, rights and trusts as the
Administrator and the Eligible Lender Trustee may consider necessary or
desirable. If the Administrator shall not have joined in such appointment
within 15 days after the receipt by it of a request so to do, the Eligible
Lender Trustee alone shall have the power to make such appointment. No co-
trustee or separate trustee under this Agreement shall be required to meet the
terms of eligibility as a successor trustee pursuant to clauses (iv), (v) and
(vi) of Section 10.1 and no notice of the appointment of any co-trustee or
separate trustee shall be required pursuant to Section 10.3.
Each separate trustee and co-trustee shall, to the extent permitted by law, be
appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties, and obligations conferred or imposed
upon the Eligible Lender Trustee shall be conferred upon and exercised or
performed by the Eligible Lender Trustee and such separate trustee or co-
trustee
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<PAGE>
jointly (it being understood that such separate trustee or co-trustee is
not authorized to act separately without the Eligible Lender Trustee
joining in such act), except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed, the
Eligible Lender Trustee shall be incompetent or unqualified to perform such
act or acts, in which event such rights, powers, duties, and obligations
(including the holding of title to the Trust or any portion thereof in any
such jurisdiction) shall be exercised and performed singly by such separate
trustee or co-trustee, solely at the direction of the Eligible Lender
Trustee;
(ii) no trustee under this Agreement shall be personally liable by
reason of any act or omission of any other trustee under this Agreement;
and
(iii) the Administrator and the Eligible Lender Trustee acting
jointly may at any time accept the resignation of or remove any separate
trustee or cotrustee.
Any notice, request or other writing given to the Eligible Lender Trustee
shall be deemed to have been given to each of the then separate trustees and co-
trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article. Each separate trustee and co-trustee, upon its
acceptance of the trusts conferred, shall be vested with the estates or property
specified in its instrument of appointment, either jointly with the Eligible
Lender Trustee or separately, as may be provided therein, subject to all the
provisions of this Agreement, specifically including every provision of this
Agreement relating to the conduct of, affecting the liability of, or affording
protection to, the Eligible Lender Trustee. Each such instrument shall be filed
with the Eligible Lender Trustee and a copy thereof given to the Administrator.
Any separate trustee or co-trustee may at any time appoint the Eligible
Lender Trustee as its agent or attorney-in-fact with full power and authority,
to the extent not prohibited by law, to do any lawful act under or in respect of
this Agreement on its behalf and in its name. If any separate trustee or co-
trustee shall die, become incapable of acting, resign or be removed, all its
estates, properties, rights, remedies and trusts shall vest in and be exercised
by the Eligible Lender Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
34
<PAGE>
ARTICLE XI
Miscellaneous
-------------
SECTION XI.1 Supplements and Amendments. This Agreement may be amended by
--------------------------
the Depositor and the Eligible Lender Trustee, with prior written notice to the
Rating Agencies, 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 or the
Certificateholders; provided, however, that such action shall not, as evidenced
-------- -------
by an Opinion of Counsel, adversely affect in any material respect the interests
of any Noteholder or Certificateholder.
This Agreement may also be amended from time to time by the Depositor and the
Eligible Lender Trustee, with prior written notice to the Rating Agencies, with
the consent of (i) the Noteholders of Notes evidencing not less than a majority
of the Outstanding Amount of the Notes and (ii) 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 on Trust 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 required to
consent to any such amendment, without the consent of all the outstanding
Noteholders and Certificateholders.
Promptly after the execution of any such amendment or consent, the Eligible
Lender Trustee shall furnish written notification of the substance of such
amendment or consent to each Certificateholder, the Indenture Trustee and each
of the Rating Agencies.
It shall not be necessary for the consent of Certificateholders, the
Noteholders or the Indenture Trustee pursuant to this Section to approve the
particular form of any proposed amendment or consent, but it shall be sufficient
if such consent shall approve the substance thereof. The manner of obtaining
such consents (and any other consents of Certificateholders provided for in this
Agreement or in any other Basic Document) and of evidencing the authorization of
the
35
<PAGE>
execution thereof by Certificateholders shall be subject to such reasonable
requirements as the Eligible Lender Trustee may prescribe.
Prior to the execution of any amendment to this Agreement, the Eligible Lender
Trustee shall be entitled to receive and rely upon an Opinion of Counsel stating
that the execution of such amendment is authorized or permitted by this
Agreement. The Eligible Lender Trustee may, but shall not be obligated to,
enter into any such amendment which affects the Eligible Lender Trustee's own
rights, duties or immunities under this Agreement or otherwise.
SECTION XI.2 No Legal Title to Trust Estate in Certificateholders. The
----------------------------------------------------
Certificateholders shall not have legal title to any part of the Trust Estate.
The Certificateholders shall be entitled to receive distributions with respect
to their undivided beneficial ownership interest therein only in accordance with
Articles V and IX. No transfer, by operation of law or otherwise, of any right,
title, or interest of the Certificateholders to and in their beneficial
ownership interest in the Trust Estate shall operate to terminate this Agreement
or the trusts hereunder or entitle any transferee to an accounting or to the
transfer to it of legal title to any part of the Trust Estate.
SECTION XI.3 Limitations on Rights of Others. Except for Section 2.7, the
-------------------------------
provisions of this Agreement are solely for the benefit of the Eligible Lender
Trustee, the Depositor, the Certificateholders, the Administrator and, to the
extent expressly provided herein, the Indenture Trustee and the Noteholders, and
nothing in this Agreement (other than Section 2.7), whether express or implied,
shall be construed to give to any other Person any legal or equitable right,
remedy or claim in the Trust Estate or under or in respect of this Agreement or
any covenants, conditions or provisions contained herein.
SECTION XI.4 Notices.
-------
(a) Unless otherwise expressly specified or permitted by the terms hereof,
all notices shall be in writing and shall be deemed given upon receipt by
the intended recipient or three Business Days after mailing if mailed by
certified mail, postage prepaid (except that notice to the Eligible
Lender Trustee shall be deemed given only upon actual receipt by the
Eligible Lender Trustee), if to the Eligible Lender Trustee, addressed to
its Corporate Trust Office; if to the Depositor, addressed to SLM Funding
Corporation, 777 Twin Creek Drive, Killeen, Texas 76543, or, as to each
party, at
36
<PAGE>
such other address as shall be designated by such party in a written
notice to each other party.
(b) Any notice required or permitted to be given to a Certificateholder shall
be given by first-class mail, postage prepaid, at the address of such
certificateholder as shown in the Certificate Register. Any notice so
mailed within the time prescribed in this Agreement shall be conclusively
presumed to have been duly given, whether or not the Certificateholder
receives such notice.
SECTION XI.5 Severability. Any provision of this Agreement that is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION XI.6 Separate Counterparts. This Agreement may be executed by the
---------------------
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION XI.7 Successors and Assigns. All covenants and agreements contained
----------------------
herein shall be binding upon to the benefit of, the Depositor and its
successors, the Eligible Lender Trustee and its successors, each
Certificateholder and its successors and permitted assigns, all as herein
provided. Any request, notice, direction, consent, waiver or other instrument
or action by a Certificateholder shall bind the successors and assigns of such
Certificateholder.
SECTION XI.8 No Petition.
-----------
(a) The Depositor will not at any time institute against the Trust any
bankruptcy proceedings under any United States Federal or state
bankruptcy or similar law in connection with any obligations relating to
the Trust Certificates, the Notes, this Agreement or any of the other
Basic Documents.
(b) The Eligible Lender Trustee (not in its individual capacity but solely as
Eligible Lender Trustee), by entering into this Agreement, each
Certificateholder, by accepting a Trust Certificate, and the Indenture
Trustee and each Noteholder by accepting the benefits of this Agreement,
hereby covenant and agree that they
37
<PAGE>
will not at any time institute against the Depositor or the Trust, or
join in any institution against the Depositor or the Trust of, any
bankruptcy, reorganization, arrangement, insolvency, receivership or
liquidation proceedings, or other proceedings under any United States
Federal or state bankruptcy or similar law in connection with any
obligations relating to the Trust Certificates, the Notes, this Agreement
or any of the other Basic Documents.
SECTION XI.9 No Recourse. Each Certificateholder by accepting a Trust
-----------
Certificate acknowledges that such Certificateholder's Trust Certificates
represent beneficial interests in the Trust only and do not represent interests
in or obligations of the Depositor, the Servicer, the Administrator, the
Eligible Lender Trustee, the Indenture Trustee or any Affiliate thereof or any
officer, director or employee of any thereof and no recourse may be had against
such parties or their assets, except as may be expressly set forth or
contemplated in this Agreement, the Trust Certificates or the other Basic
Documents.
SECTION XI.10 Headings. The headings of the various Articles and Sections
--------
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.
SECTION XI.11 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware, without
reference to its conflict of law provisions, and the obligations, rights and
remedies of the parties hereunder shall be determined in accordance with such
laws.
38
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to be
duly executed by their respective officers hereunto duly authorized, as of the
day and year first above written.
CHASE MANHATTAN BANK DELAWARE,
not in its individual capacity
but solely as Eligible Lender
Trustee,
By /s/ Denis Kelly
--------------------------------
Name: Denis Kelly
Title: Trust Officer
SLM FUNDING CORPORATION,
Depositor,
By /s/ William M.E. Rachal, Jr.
--------------------------------
Name:
Title:
39
<PAGE>
EXHIBIT A
TO THE TRUST AGREEMENT
[FORM OF TRUST CERTIFICATE]
[SEE REVERSE FOR CERTAIN DEFINITIONS]
Unless this Trust Certificate is presented by an authorized representative of
The Depository Trust Company, a New York Corporation ("DTC"), to the Issuer (as
defined below) or its agent for registration of transfer, exchange or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
THIS TRUST CERTIFICATE MAY NOT BE ACQUIRED BY OR FOR THE ACCOUNT OF A BENEFIT
PLAN (AS DEFINED BELOW). THIS CERTIFICATE IS NOT GUARANTEED OR INSURED BY ANY
GOVERNMENTAL AGENCY.
NUMBER $105,750,000
R-1 CUSIP NO. 78442 GBC 9
SLM STUDENT LOAN TRUST 1998-2
FLOATING RATE STUDENT LOAN-BACKED CERTIFICATE
evidencing a fractional undivided interest in the Trust, as defined below,
the property of which includes a pool of student loans sold to the Trust by
SLM Funding Corporation.
(This Trust Certificate does not represent an interest in or obligation of
SLM Funding Corporation, the Servicer (as defined below), the Eligible Lender
Trustee (as defined below) or any of their respective affiliates, except to
THIS CERTIFIES THAT Cede & Co. is the registered owner of $105,750,000 dollars
non-assessable, fully-paid, fractional undivided interest in the SLM Student
Loan Trust 1998-2 (the "Trust"), a trust formed under the laws of the State of
Delaware by SLM Funding Corporation, a Delaware corporation (the "Depositor").
The Trust was created pursuant to a Trust Agreement dated as of June 1, 1998
(the "Trust Agreement"), between the Depositor and Chase Manhattan Bank
Delaware, a Delaware banking
<PAGE>
corporation, not in its individual capacity but solely as eligible lender
trustee on behalf of the Trust (the "Eligible Lender Trustee"), a summary of
certain of the pertinent provisions of which is set forth below. To the extent
not otherwise defined herein, the capitalized terms used herein have the
meanings assigned to them in Appendix A to the Trust Agreement.
This Certificate is one of the duly authorized Certificates designated as
"Floating Rate Student Loan- Backed Certificates" (herein called the "Trust
Certificates"). This Trust Certificate is issued under and is subject to the
terms, provisions and conditions of the Trust Agreement, to which Trust
Agreement the holder of this Trust Certificate by virtue of the acceptance
hereof assents and by which such holder is bound. The property of the Trust
includes a pool of student loans (the "Trust Student Loans"), all moneys paid
thereunder on or after May 25, 1998, certain bank accounts and the proceeds
thereof and certain other rights under the Trust Agreement, the Sale Agreement,
the Purchase Agreement, the Administration Agreement and the Servicing Agreement
and all proceeds of the foregoing. The rights of the holders of the Trust
Certificates to the assets of the Trust are subordinated to the rights of the
holders of the Notes issued under the Indenture dated as of June 1, 1998,
between the Trust and Bankers Trust Company, as Indenture Trustee, and
designated as "Floating Rate Student Loan-Backed Notes" (the "Notes"), as set
forth in the Trust Agreement, the Indenture and the Administration Agreement.
Under the Trust Agreement, to the extent of funds available therefor, return
on the Certificate Balance of this Trust Certificate at the Certificate Rate (as
defined below) will be distributed on the 25th day of each January, April, July
and October (or, if such 25th day is not a Business Day, the next succeeding
Business Day) (each a "Distribution Date"), commencing on October 26, 1998, to
the person in whose name this Trust Certificate is registered as of the close of
business on the day immediately preceding the Distribution Date (such day the
"Record Date"), in each case to the extent of such certificateholder's pro rata
interest in the amount or amounts to be distributed to Certificateholders on
2
<PAGE>
such Distribution Date pursuant to the Administration Agreement.
The Certificate Rate for each Accrual Period shall be equal to the lesser of
(a) the daily weighted average of the T-Bill Rates within such Accrual Period
plus 0.95% per annum and (b) the Student Loan Rate for such Accrual Period. The
"Student Loan Rate" for any Accrual Period shall equal the product of (a) the
quotient obtained by dividing (i) 365 (or 366 in the case of a leap year) by
(ii) the actual number of days elapsed in such Accrual Period and (b) the
percentage equivalent of a fraction, (i) the numerator of which is equal to
Expected Interest Collections for the related Collection Period less the Primary
Servicing Fee, the Administration Fee and any prior unpaid Administration Fees
with respect to such Collection Period and (ii) the denominator of which is the
Pool Balance as of the first day of such Collection Period.
Each holder of this Trust Certificate acknowledges and agrees that its rights
to receive distributions in respect of this Trust Certificate from Available
Funds and amounts on deposit in the Reserve Account are subordinated to the
rights of the Noteholders as described in the Trust Agreement, the Indenture and
the Administration Agreement.
It is the intent of the Depositor, the Certificateholders and the Certificate
Owners that, for purposes of Federal, state and local income and franchise and
any other income taxes, the Trust will be treated as a partnership and the
Certificateholders (including the Depositor in its capacity as Certificateholder
and as recipient of distributions from the Reserve Account) will be treated as
partners in that partnership. The Depositor and the other Certificateholders by
acceptance of a Trust Certificate (and the Certificate Owners by acceptance of a
beneficial interest in a Trust Certificate), agree to treat, and to take no
action inconsistent with the treatment of, the Trust Certificates for such tax
purposes as partnership interests in the Trust.
Each Certificateholder or Certificate Owner, by its acceptance of a Trust
Certificate or, in the case of a
3
<PAGE>
Certificate Owner, a beneficial interest in a Trust Certificate, covenants and
agrees that such Certificateholder or Certificate Owner, as the case may be,
will not at any time institute against the Depositor or the Trust, or join in
any institution against the Depositor or the Trust of, any bankruptcy,
reorganization, arrangement, insolvency, receivership or liquidation
proceedings, or other proceedings under any United States Federal or state
bankruptcy or similar law in connection with any obligations relating to the
Trust Certificates, the Notes, the Trust Agreement or any of the other Basic
Documents.
Distributions on this Trust Certificate will be made as provided in the Trust
Agreement by the Eligible Lender Trustee by wire transfer or by check mailed to
the Certificateholder of record in the Certificate Register without the
presentation or surrender of this Trust Certificate or the making of any
notation hereon, except that with respect to Trust Certificates registered on
the Record Date in the name of the nominee of the Clearing Agency, unless
Definitive Certificates have been issued (initially, such nominee to be Cede &
Co.), payments will be made by wire transfer in immediately available funds to
the account designated by such nominee. Except as otherwise provided in the
Trust Agreement and notwithstanding the above, the final distribution on this
Trust Certificate will be made after due notice by the Eligible Lender Trustee
of the pendency of such distribution and only upon presentation and surrender of
this Trust Certificate at the office or agency maintained for the purpose by the
Eligible Lender Trustee in the Borough of Manhattan, The City of New York.
Reference is hereby made to the further provisions of this Trust Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have been executed by an
authorized officer of the Eligible Lender Trustee or its authenticating agent,
by manual signature, this Trust Certificate shall not entitle the holder hereof
to any benefit under the Trust Agreement or the Administration Agreement or be
valid for any purpose.
4
<PAGE>
IN WITNESS WHEREOF, the Eligible Lender Trustee on behalf of the Trust and not
in its individual capacity has caused this Trust Certificate to be duly executed
as of the date set forth below.
SLM STUDENT LOAN TRUST 1998-2
by CHASE MANHATTAN BANK DELAWARE,
not in its individual capacity but
solely as Eligible Lender Trustee.
By:
------------------------------
Authorized Signatory
Date: June 18, 1998
5
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Trust Certificates referred to in the within-mentioned Trust
Agreement.
CHASE MANHATTAN BANK DELAWARE, not
in its individual capacity but
solely as Eligible Lender Trustee,
By:
----------------------------
Authorized Signatory
OR
THE CHASE MANHATTAN BANK, solely in
its capacity as Authenticating Agent
for the Eligible Lender Trustee,
By:
--------------------------
Authenticating Agent
Date: June 18, 1998
6
<PAGE>
[Reverse of Trust Certificate]
The Trust Certificates do not represent an obligation of, or an interest in,
the Depositor, Sallie Mae Servicing Corporation, as servicer (the "Servicer"),
Student Loan Marketing Association, as administrator (the "Administrator"), the
Eligible Lender Trustee or any affiliates of any of them, and no recourse may be
had against such parties or their assets, except as may be expressly set forth
or contemplated herein, in the Trust Agreement or in the other Basic Documents.
In addition, this Trust Certificate is not guaranteed by any governmental agency
or instrumentality and is limited in right of payment to certain collections
with respect to the Trust Student Loans, all as more specifically set forth in
the Trust Agreement. A copy of each of the Trust Agreement, the Sale Agreement,
the Purchase Agreement, the Administration Agreement, Servicing Agreement and
the Indenture may be examined during normal business hours at the principal
office of the Administrator, and at such other places, if any, designated by the
Administrator, by any Certificateholder upon request.
The Trust Agreement permits, with certain options therein provided, the
amendment thereof and the certification of the rights and obligations of the
Depositor and the rights of the Certificateholders under the Trust Agreement at
any time by the Depositor and the Eligible Lender Trustee with the consent of
the holders of the Notes and the Trust Certificates each voting as a class
evidencing not less than a majority of the outstanding principal balance of the
Notes and the Certificate Balance. Any such consent by the holder of this Trust
Certificate shall be conclusive and binding on such holder and on all future
holders of this Certificate and of any Trust Certificate issued upon the
transfer hereof or in exchange herefor or in lieu hereof whether or not notation
of such consent is made upon this Trust Certificate. The Trust Agreement also
permits the amendment thereof, in certain limited circumstances, without the
consent of the holders of any of the Trust Certificates.
7
<PAGE>
As provided in the Trust Agreement and subject to certain limitations therein
set forth, the transfer of the Trust Certificates is registerable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies maintained by Chase Manhattan Bank Delaware
in its capacity as Certificate Registrar, or by any successor Certificate
Registrar, in the Borough of Manhattan, The City of New York, accompanied by a
written instrument of transfer in form satisfactory to the Eligible Lender
Trustee and the Certificate Registrar duly executed by the holder hereof or such
holder's attorney duly authorized in writing, and thereupon one or more new
Trust Certificates of authorized denominations evidencing the same aggregate
interest in the Trust will be issued to the designated transferee.
The Trust Certificates are issuable only as registered Trust Certificates
without coupons in denominations of $100,000 or in integral multiples of $1,000
in excess thereof. As provided in the Trust Agreement and subject to certain
limitations therein set forth, Trust Certificates are exchangeable for new Trust
Certificates of authorized denominations evidencing the same aggregate
denomination, as requested by the holder surrendering the same. No service
charge will be made for any such registration of transfer or exchange, but the
Eligible Lender Trustee or the Certificate Registrar may require payment of a
sum sufficient to cover any tax or governmental charge payable in connection
therewith.
The Eligible Lender Trustee, the Certificate Registrar and any agent of the
Eligible Lender Trustee or the Certificate Registrar may treat the person in
whose name this Trust Certificate is registered as the owner hereof for all
purposes, and none of the Eligible Lender Trustee or the Certificate Registrar
or any such agent shall be affected by any notice to the contrary.
The Trust Certificates (including any beneficial interests therein) may not be
acquired by or for the account of (i) an employee benefit plan (as defined in
Section 3(3) of ERISA) that is subject to the provisions of Title I of ERISA,
(ii) a plan described in section 4975(e)(1) of the Internal Revenue Code of
1986, as amended (the "Code"), including an individual retirement
8
<PAGE>
account described in Section 408(a) of the Code or a Keogh plan or (iii) any
entity whose underlying assets include plan assets by reason of a plan's
investment in the entity (each, a "Benefit Plan"). By accepting and holding
this Trust Certificate, the Holder hereof shall be deemed to have represented
and warranted that it is not a Benefit Plan, it is not purchasing this Trust
Certificate on behalf of a Benefit Plan, is not using assets of a Benefit Plan
to purchase this Trust Certificate and to have agreed that if this Trust
Certificate is deemed to be a plan asset, the Holder will promptly dispose of
this Trust Certificate.
The obligations and responsibilities created by the Trust Agreement and the
Trust created thereby shall terminate upon the payment to Certificateholders of
all amounts required to be paid to them pursuant to the Trust Agreement, the
Administration Agreement and the Indenture and the disposition of all property
held as part of the Trust. The Depositor may at its option purchase the corpus
of the Trust at a price specified in the Administration Agreement, and such
purchase of the Trust Student Loans and other property of the Trust will effect
early retirement of the Trust Certificates; however, such right of purchase is
exercisable only on any Distribution Date on or after the date on which the Pool
Balance is less than or equal to 10% of the Initial Pool Balance. Any Trust
Student Loans remaining in the Trust as of the end of the Collection Period
immediately preceding the Trust Auction Date will be offered for sale by the
Indenture Trustee by auction in accordance with the procedure described in the
Indenture.
This Trust Certificate shall be construed in accordance with the laws of the
State of Delaware, without reference to its conflict of law provisions, and the
obligations, rights and remedies of the parties hereunder shall be determined in
accordance with such laws.
9
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
- -------------------------------------------------------------------------------
(Please print or type name and address, including postal zip code, of assignee)
- -------------------------------------------------------------------------------
the within Trust Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
Attorney
- ---------------------------------------------------------------
to transfer said Trust Certificate on the books of the Certificate Registrar,
with full power of substitution in the premises.
Dated:
*
- ------------------------------
Signature Guaranteed:
*
- ------------------------------
* NOTICE: The signature to this assignment must correspond with the name as
it appears upon the face of the within Trust Certificate in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by a member firm of the New York Stock
Exchange or a commercial bank or trust company.
10
<PAGE>
EXHIBIT B
TO THE TRUST AGREEMENT
FORM OF CERTIFICATE DEPOSITORY AGREEMENT
----------------------------------------
<PAGE>
ANNEX 1
TO THE TRUST AGREEMENT
DATED AS OF JUNE 1, 1998
BETWEEN SLM FUNDING CORPORATION,
AS DEPOSITOR, AND
CHASE MANHATTAN BANK DELAWARE,
AS ELIGIBLE LENDER TRUSTEE
All defined terms are used herein as defined in the Trust Agreement referred
to above.
Existence. The Depositor will maintain its corporate existence and its good
---------
standing under the laws of the State of Delaware.
Procedures Observed. The Depositor will observe all corporate procedures
-------------------
required by its Certificate of Incorporation, its by-laws and the corporation
law of the State of Delaware.
Management. The business and affairs of the Depositor will be managed by or
----------
under the direction of the Depositor's Board of Directors. The Depositor will
at all times ensure that its Board of Directors duly authorizes all corporate
actions requiring Board authorization. When necessary, the Depositor will
obtain proper authorization from its stockholder for corporate action. Its
stockholder will not be actively involved in the day-to-day management of the
Depositor except as contemplated by an arm's length management services
contract.
Records. The Depositor will maintain separate corporate records and books of
-------
account from those of its stockholder or any other affiliate of its stockholder.
The Depositor will keep correct and complete books and records of account and
minutes of the meetings and other proceedings of its stockholder and Board of
Directors. The resolutions, agreements and other instruments underlying the
transactions contemplated by the Trust Agreement will be continuously maintained
as official records by the Depositor.
Offices. The Depositor will have an address and telephone number
-------
distinguishable from those of its stockholder. To the extent the Depositor's
office is located in the office of its stockholder or any affiliate of its
stockholder, the Depositor will pay fair market rent for any such office space
and a fair share of any material overhead costs.
1
<PAGE>
Identifiable Assets. Except in connection with the customary operation of
-------------------
such cash management system as its stockholder may from time to time in the
ordinary course of business implement for itself and its consolidated
subsidiaries (which cash management system will be operated such that all
transfers of funds are properly documented and the respective assets and
liabilities of the Depositor and its stockholder are ascertainable at all
times), the Depositor's funds and other assets will be identifiable and will not
be commingled with those of its stockholder or any other entity. The Depositor
will maintain separate banking records and books of account from those of its
stockholder or any other affiliate of its stockholder.
Capitalization. The Depositor will not engage in any business for which its
--------------
capitalization would not be adequate.
Expenses. The Depositor will pay from its own funds and assets all
--------
obligations and indebtedness incurred by it and will provide for its own
material operating expenses and liabilities from its own funds. General
overhead and administrative expenses of its stockholder will not be charged or
otherwise allocated to the Depositor (unless directly attributable to services
provided to or for the account of the Depositor) and such expenses of the
Depositor which are material will not be charged or otherwise allocated to its
stockholder. Any organizational expenses of the Depositor and expenses relating
to the preparation, negotiation, execution and delivery of the Transaction
Documents paid by its stockholder will be charged back to the Depositor. Such
expenses will be paid by the Depositor from amounts available to it as a result
of the capital contributions made by its stockholder, from the yield earned by
it on its Certificates, or from the retained portion of Deferred Payments made
to it under the Sale Agreement.
Conduct. The Depositor will conduct its business solely in its own name so as
-------
not to mislead others as to the identity of the Depositor. Without limiting the
generality of the foregoing, all oral and written communications related to the
Depositor, including without limitation letters, invoices, purchase orders,
contracts, statements and applications, will be made solely in the name of the
Depositor except for items pursuant to the Facilities and Services Agreement
between the Depositor and its stockholder. The Depositor will utilize its own
separate stationery.
2
<PAGE>
Intercompany Claims. The Depositor will not enter into any guarantees made by
-------------------
its stockholder with respect to obligations of the Depositor and the Depositor
will make no guarantees with respect to obligations of its stockholder. There
will be no intercompany debt or claims between the Depositor and its stockholder
other than (i) the obligation of the Depositor to pay to its stockholder the
Deferred Payment under the Purchase Agreement, (ii) the demand note of its
stockholder contributed to the Depositor as part of the Depositor's
capitalization, (iii) such intercompany claims as may arise in connection with
the management services contract referred to above, including a cash management
system for its stockholder and its consolidated subsidiaries as described above,
and (iv) such amounts as may temporarily be carried in intercompany accounts
relating to expenses incurred by its stockholder or its affiliates, to the
extent the Depositor is properly obligated to reimburse its stockholder or any
such affiliate for amounts allocable to the Depositor. The demand note referred
to above will be properly documented on the books and records of the Depositor.
Reliance by Others. The Depositor will act solely in its name and through its
------------------
duly authorized officers or agents in the conduct of its businesses. The
Depositor will not: (a) hold itself out as having agreed to pay or become
liable for the debts of its stockholder; (b) fail to correct any known
misrepresentation with respect to the foregoing; (c) operate or purport to
operate as an integrated, single economic unit with respect to its stockholder
or in its dealings with any other affiliated or unaffiliated entity; (d) seek or
obtain credit or incur any obligation to any third party based upon the assets
of its stockholder or any other affiliated or unaffiliated entity; or (e) induce
any such third party to reasonably rely on the creditworthiness of its
stockholder or any other affiliated or unaffiliated entity for the payment or
performance of the Depositor.
Arm's Length. The Depositor will maintain an arm's length relationship
------------
between the Depositor and its stockholder and between the Depositor and any
affiliates of its stockholder.
Disclosure of the Transactions. The annual financial statements of the
------------------------------
Depositor will disclose the effects of the Transactions in accordance with
generally accepted accounting principles. The transfer of the Loans by its
stockholder to the Depositor pursuant to the
3
<PAGE>
Purchase Agreement will be treated as a purchase by the Depositor under
generally accepted accounting principles. In particular, the financial
statements of the Depositor will clearly indicate its existence separate from
its stockholder and will reflect its separate assets and liabilities. None of
such financial statements, nor any consolidated financial statements for its
stockholder, will suggest in any way that the assets of the Depositor are
available to pay the claims of creditors of its stockholder or any other entity.
Any consolidated financial statements of its stockholder and its subsidiaries
prepared for the benefit of third parties will disclose, through appropriate
footnotes or otherwise, the separate corporate existence of the Depositor.
4
<PAGE>
================================================================================
INDENTURE
among
SLM STUDENT LOAN TRUST 1998-2,
as Issuer,
CHASE MANHATTAN BANK DELAWARE,
not in its individual capacity but
solely as Eligible Lender Trustee
and
BANKERS TRUST COMPANY,
not in its individual capacity but
solely as Indenture Trustee
Dated as of June 1, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
Page
ARTICLE I
Definitions and Usage
SECTION 1.1 Definitions and Usage....................................3
SECTION 1.2 Incorporation by Reference of Trust Indenture Act........3
ARTICLE II
The Notes
SECTION 2.1 Form.....................................................4
SECTION 2.2 Execution, Authentication and Delivery...................4
SECTION 2.3 Temporary Notes..........................................5
SECTION 2.4 Registration; Registration of Transfer and Exchange......5
SECTION 2.5 Mutilated, Destroyed, Lost or Stolen Notes ..............7
SECTION 2.6 Persons Deemed Owner.....................................8
SECTION 2.7 Payment of Principal and Interest; Note Interest
Shortfall; Note Interest Carryover.......................8
SECTION 2.8 Cancellation............................................10
SECTION 2.9 Release of Collateral...................................10
SECTION 2.10 Book-Entry Notes........................................10
SECTION 2.11 Notices to Clearing Agency..............................11
SECTION 2.12 Definitive Notes........................................12
ARTICLE III
Covenants
SECTION 3.1 Payment to Noteholders..................................12
SECTION 3.2 Maintenance of Office or Agency.........................13
SECTION 3.3 Money for Payments To Be Held in Trust..................13
SECTION 3.4 Existence...............................................15
i
<PAGE>
Page
SECTION 3.5 Protection of Indenture Trust Estate ..................15
SECTION 3.6 Opinions as to Indenture Trust Estate...................16
SECTION 3.7 Performance of Obligations; Servicing of Trust Student
Loans...................................................16
SECTION 3.8 Negative Covenants......................................20
SECTION 3.9 Annual Statement as to Compliance.......................21
SECTION 3.10 Issuer May Consolidate, etc., Only on Certain Terms.....21
SECTION 3.11 Successor or Transferee.................................23
SECTION 3.12 No Other Business.......................................23
SECTION 3.13 No Borrowing............................................24
SECTION 3.14 Obligations of Servicer and Administrator...............24
SECTION 3.15 Guarantees, Loans, Advances and Other Liabilities.......24
SECTION 3.16 Capital Expenditures....................................24
SECTION 3.17 Restricted Payments.....................................24
SECTION 3.18 Notice of Events of Default.............................25
SECTION 3.19 Further Instruments and Acts............................25
ARTICLE IV
Satisfaction and Discharge
SECTION 4.1 Satisfaction and Discharge of Indenture.................25
SECTION 4.2 Application of Trust Money..............................27
SECTION 4.3 Repayment of Moneys Held by Paying Agent................27
SECTION 4.4 Auction of Trust Student Loans..........................27
ARTICLE IV
Remedies
SECTION 5.1 Events of Default.......................................28
SECTION 5.2 Acceleration of Maturity; Rescission and Annulment......29
SECTION 5.3 Collection of Indebtedness and Suits for Enforcement
by Indenture Trustee ..................................30
SECTION 5.4 Remedies; Priorities....................................33
SECTION 5.5 Optional Preservation of the Trust Student Loans........36
ii
<PAGE>
SECTION 5.6 Limitation of Suits ....................................36
SECTION 5.7 Unconditional Rights of Noteholders To Receive
Principal and Interest..................................37
SECTION 5.8 Restoration of Rights and Remedies......................37
SECTION 5.9 Rights and Remedies Cumulative..........................37
SECTION 5.10 Delay or Omission Not a Waiver..........................38
SECTION 5.11 Control by Noteholders..................................38
SECTION 5.12 Waiver of Past Defaults.................................39
SECTION 5.13 Undertaking for Costs...................................39
SECTION 5.14 Waiver of Stay or Extension Laws........................40
SECTION 5.15 Action on Notes.........................................40
SECTION 5.16 Performance and Enforcement of Certain Obligations......40
ARTICLE VI
The Indenture Trustee
SECTION 6.1 Duties of Indenture Trustee.............................41
SECTION 6.2 Rights of Indenture Trustee.............................43
SECTION 6.3 Individual Rights of Indenture Trustee..................44
SECTION 6.4 Indenture Trustee's Disclaimer..........................44
SECTION 6.5 Notice of Defaults; Seller Insolvency...................44
SECTION 6.6 Reports by Indenture Trustee to Noteholders.............45
SECTION 6.7 Compensation and Indemnity..............................45
SECTION 6.8 Replacement of Indenture Trustee........................46
SECTION 6.9 Successor Indenture Trustee by Merger...................47
SECTION 6.10 Appointment of Co-Trustee or Separate Trustee...........48
SECTION 6.11 Eligibility; Disqualification...........................49
SECTION 6.12 Preferential Collection of Claims Against Issuer........49
ARTICLE VII
Noteholders' Lists and Reports
SECTION 7.1 Issuer To Furnish Indenture Trustee Names and
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Addresses of Noteholders ...............................50
SECTION 7.2 Preservation of Information; Communications to
Noteholders.............................................50
SECTION 7.3 Reports by Issuer.......................................51
ARTICLE VIII
Accounts, Disbursements and Releases
SECTION 8.1 Collection of Money.....................................52
SECTION 8.2 Trust Accounts..........................................52
SECTION 8.3 General Provisions Regarding Accounts...................53
SECTION 8.4 Release of Indenture Trust Estate.......................54
SECTION 8.5 Opinion of Counsel......................................55
ARTICLE IX
Supplemental Indentures
SECTION 9.1 Supplemental Indentures Without Consent of
Noteholders.............................................56
SECTION 9.2 Supplemental Indentures with Consent of
Noteholders.............................................57
SECTION 9.3 Execution of Supplemental Indentures....................59
SECTION 9.4 Effect of Supplemental Indenture........................59
SECTION 9.5 Conformity with Trust Indenture Act.....................59
SECTION 9.6 Reference in Notes to Supplemental Indentures...........60
ARTICLE X
Redemption of Notes
SECTION 10.1 Redemption..............................................60
SECTION 10.2 Form of Redemption Notice...............................60
SECTION 10.3 Notes Payable on Redemption Date........................61
ARTICLE XI
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Miscellaneous
SECTION 11.1 Compliance Certificates and Opinions, etc. . ...........61
SECTION 11.2 Form of Documents Delivered to Indenture Trustee........64
SECTION 11.3 Acts of Noteholders...................................65
SECTION 11.4 Notices, etc., to Indenture Trustee, Issuer and Rating
Agencies................................................66
SECTION 11.5 Notices to Noteholders; Waiver..........................66
SECTION 11.6 Alternate Payment and Notice Provisions.................67
SECTION 11.7 Conflict with Trust Indenture Act.......................67
SECTION 11.8 Effect of Headings and Table of Contents................68
SECTION 11.9 Successors and Assigns..................................68
SECTION 11.10 Separability............................................68
SECTION 11.11 Benefits of Indenture...................................68
SECTION 11.12 Legal Holidays..........................................68
SECTION 11.13 Governing Law...........................................68
SECTION 11.14 Counterparts............................................69
SECTION 11.15 Recording of Indenture..................................69
SECTION 11.16 Trust Obligations.......................................69
SECTION 11.17 No Petition.............................................69
SECTION 11.18 Inspection..............................................70
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APPENDICES, SCHEDULES AND EXHIBITS
APPENDIX A Definitions and Usage
SCHEDULE A Schedule of Trust Student Loans
SCHEDULE B Location of Trust Student Loan Files
EXHIBIT A Form of Note
EXHIBIT B Form of Note Depository Agreement
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INDENTURE dated as of June 1, 1998, among SLM STUDENT LOAN TRUST 1998-2, a
Delaware business trust (the "Issuer"), CHASE MANHATTAN BANK DELAWARE, a
Delaware banking corporation, not in its individual capacity but solely as
trustee on behalf of the Issuer (the "Eligible Lender Trustee"), and BANKERS
TRUST COMPANY, a New York banking corporation, as trustee and not in its
individual capacity (the "Indenture Trustee")
Each party agrees as follows for the benefit of the other party and for the
equal and ratable benefit of the holders of the Issuer's Floating Rate Student
Loan-Backed Notes (the "Notes"):
GRANTING CLAUSE
The Issuer and, with respect to the Trust Student Loans, the Eligible Lender
Trustee hereby Grant to the Indenture Trustee, as trustee for the benefit of the
Noteholders, effective as of the Closing Date all of their right, title and
interest in and to the following:
(a) the Trust Student Loans, and all obligations of the Obligors thereunder
including all moneys accrued and paid thereunder on or after the Cutoff Date and
all guaranties and other rights relating to the Trust Student Loans;
(b) the Servicing Agreement, including the right of the Issuer to cause the
Servicer to purchase Trust Student Loans from the Issuer under circumstances
described therein;
(c) the Sale Agreement, including the right of the Issuer to cause the Seller
to repurchase Trust Student Loans from the Issuer under circumstances described
therein and including the rights of the Seller under the Purchase Agreement;
(d) the Purchase Agreement, to the extent that the rights of the Seller
thereunder have been assigned to the Issuer pursuant to the Sale Agreement,
including the right of the Seller to cause the Student Loan Marketing
Association to repurchase Trust Student Loans from the Seller under
circumstances described therein;
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(e) the Administration Agreement;
(f) each Guarantee Agreement, including the right of the Issuer to cause the
related Guarantor to make Guarantee Payments in respect of the Trust Student
Loans;
(g) the Trust Accounts and all funds on deposit from time to time in the
Trust Accounts, including the Reserve Account Initial Deposit, and all
investments and proceeds thereof (including all income thereon); and
(h) all present and future claims, demands, causes and chooses in action in
respect of any or all of the foregoing and all payments on or under and all
proceeds of every kind and nature whatsoever in respect of any or all of the
foregoing, including all proceeds of the conversion, voluntary or involuntary,
into cash or other liquid property, all cash proceeds, accounts, accounts
receivable, notes, drafts, acceptances, chattel paper, checks, deposit accounts,
insurance proceeds, condemnation awards, rights to payment of any and every kind
and other forms of obligations and receivables, instruments and other property
which at any time constitute all or part of or are included in the proceeds of
any of the foregoing (collectively, the "Collateral").
The foregoing Grant is made in trust to secure the payment of principal of and
interest on, and any other amounts owing in respect of, the Notes, equally and
ratably without prejudice, priority or distinction, and to secure compliance
with the provisions of this Indenture, all as provided in this Indenture.
The Indenture Trustee, as Indenture Trustee on behalf of the Noteholders,
acknowledges such Grant, accepts the trusts under this Indenture in accordance
with the provisions of this Indenture and agrees to perform its duties required
in this Indenture to the best of its ability to the end that the interests of
the Noteholders may be adequately and effectively protected.
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ARTICLE I
Definitions and Usage
---------------------
SECTION 1.1 Definitions and Usage. Except as otherwise specified herein or
---------------------
as the context may otherwise require, capitalized terms used but not otherwise
defined herein are defined in Appendix A hereto, which also contains rules as to
usage that shall be applicable herein.
SECTION 1.2 Incorporation by Reference of Trust Indenture Act. Whenever this
-------------------------------------------------
Indenture refers to a provision of the TIA, the provision is incorporated by
reference in and made a part of this Indenture. The following TIA terms used in
this Indenture have the following meanings:
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Notes.
"indenture security holder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Indenture Trustee.
"obligor" on the indenture securities means the Issuer and any other obligor
on the indenture securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rule have
the meaning assigned to them by such definitions.
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Article II
The Notes
---------
SECTION 2.1 Form. The Notes, together with the Indenture Trustee's
----
certificate of authentication, shall be in substantially the form set forth in
Exhibit A, with such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Indenture and may have such
letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may, consistently herewith, be determined by the
officers executing the Notes, as evidenced by their execution of the Notes. Any
portion of the text of any Note may be set forth on the reverse thereof, with an
appropriate reference thereto on the face of the Note.
The Definitive Notes shall be typewritten, printed, lithographed or engraved
or produced by any combination of these methods (with or without steel engraved
borders), all as determined by the officers executing such Notes, as evidenced
by their execution of such Notes.
Each Note shall be dated the date of its authentication. The terms of the
Notes set forth in Exhibit A are part of the terms of this Indenture.
SECTION 2.2 Execution, Authentication and Delivery. The Notes shall be
--------------------------------------
executed on behalf of the Issuer by any of its Authorized Officers. The
signature of any such Authorized Officer on the Notes may be manual or
facsimile.
Notes bearing the manual or facsimile signature of individuals who were at any
time Authorized Officers of the Issuer shall bind the Issuer, notwithstanding
that such individuals or any of them have ceased to hold such offices prior to
the authentication and delivery of such Notes or did not hold such offices at
the date of such Notes.
The Indenture Trustee shall upon Issuer Order authenticate and deliver Notes
for original issue in an aggregate principal amount of $2,915,540,000. The
aggregate principal amount of Notes outstanding at any time may not exceed such
amount except as provided in Section 2.5.
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Each Note shall be dated the date of its authentication. The Notes shall be
issuable as registered Notes in the minimum denomination of $1,000 and in
integral multiples of $1,000 in excess thereof.
No Note shall be entitled to any benefit under this Indenture or be valid or
obligatory for any purpose, unless there appears on such Note a certificate of
authentication substantially in the form provided for herein executed by the
Indenture Trustee by the manual signature of one of its authorized signatories,
and such certificate upon any Note shall be conclusive evidence, and the only
evidence, that such Note has been duly authenticated and delivered hereunder.
SECTION 2.3 Temporary Notes. Pending the preparation of Definitive Notes,
---------------
the Issuer may execute, and upon receipt of an Issuer Order the Indenture
Trustee shall authenticate and deliver, temporary Notes which are printed,
lithographed, typewritten, mimeographed or otherwise produced, of the tenor of
the Definitive Notes in lieu of which they are issued and with such variations
not inconsistent with the terms of this Indenture determined to be appropriate
by the Responsible Officer of the Issuer executing the temporary Notes, as
evidenced by his or her execution of such temporary Notes.
If temporary Notes are issued, the Issuer will cause Definitive Notes to be
prepared without unreasonable delay. After the preparation of Definitive Notes,
the temporary Notes shall be exchangeable for Definitive Notes upon surrender of
the temporary Notes at the office or agency of the Issuer to be maintained as
provided in Section 3.2, without charge to the Noteholder. Upon surrender for
cancellation of any one or more temporary Notes, the Issuer shall execute and
the Indenture Trustee shall authenticate and deliver in exchange therefor a like
principal amount of Definitive Notes of authorized denominations. Until so
exchanged, the temporary Notes shall in all respects be entitled to the same
benefits under this Indenture as Definitive Notes.
SECTION 2.4 Registration; Registration of Transfer and Exchange. The Issuer
---------------------------------------------------
shall cause to be kept a register (the "Note Register") in which, subject to
such reasonable regulations as it may prescribe, the Issuer shall provide for
the registration of Notes and the registration of transfers of Notes. The
Indenture Trustee shall be "Note Registrar" for the purpose of registering Notes
and transfers of Notes as herein provided. Upon any resignation of any Note
Registrar, the Issuer shall promptly
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appoint a successor or, if it elects not to make such an appointment, assume the
duties of Note Registrar.
If a Person other than the Indenture Trustee is appointed by the Issuer as
Note Registrar, the Issuer shall give the Indenture Trustee prompt written
notice of the appointment of such Note Registrar and of the location, and any
change in the location, of the Note Register, and the Indenture Trustee shall
have the right to inspect the Note Register at all reasonable times and to
obtain copies thereof, and the Indenture Trustee shall have the right to rely
upon a certificate executed on behalf of the Note Registrar by an Executive
Officer thereof as to the names and addresses of the Noteholders and the
principal amounts and number of such Notes.
Upon surrender for registration of transfer of any Note at the office or
agency of the Issuer to be maintained as provided in Section 3.2, if the
requirements of Section 8-401(1) of the UCC are met, the Issuer shall execute,
and the Indenture Trustee shall authenticate and the Noteholder shall obtain
from the Indenture Trustee, in the name of the designated transferee or
transferees, one or more new Notes in any authorized denominations and a like
aggregate principal amount.
At the option of the Noteholder, Notes may be exchanged for other Notes in any
authorized denominations and a like aggregate principal amount, upon surrender
of the Notes to be exchanged at such office or agency. Whenever any Notes are
so surrendered for exchange, the Issuer shall execute, and the Indenture Trustee
shall authenticate and the Noteholder shall obtain from the Indenture Trustee,
the Notes which the Noteholder making the exchange is entitled to receive.
All Notes issued upon any registration of transfer or exchange of Notes shall
be the valid obligations of the Issuer, evidencing the same debt, and entitled
to the same benefits under this Indenture, as the Notes surrendered upon such
registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or exchange
shall be duly endorsed by, or be accompanied by a written instrument of transfer
in form satisfactory to the Indenture Trustee duly executed by the Noteholder
thereof or such Noteholder's attorney duly authorized in writing, with such
signature guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in Securities
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Transfer Agent's Medallion Program ("STAMP") or such other "signature guarantee
program" as may be determined by the Note Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Exchange Act.
No service charge shall be made to a Noteholder for any registration of
transfer or exchange of Notes, but the Indenture Trustee may require payment of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of Notes,
other than exchanges pursuant to Section 2.3 or 9.6 not involving any transfer.
The preceding provisions of this Section notwithstanding, the Issuer shall not
be required to make and the Note Registrar need not register transfers or
exchanges of Notes selected for redemption or of any Note for a period of 15
days preceding the due date for any payment with respect to the Note.
SECTION 2.5 Mutilated, Destroyed, Lost or Stolen Notes. If (i) any mutilated
------------------------------------------
Note is surrendered to the Indenture Trustee, or the Indenture Trustee receives
evidence to its satisfaction of the destruction, loss or theft of any Note, and
(ii) there is delivered to the Issuer and the Indenture Trustee such security or
indemnity as may be required by each of them to hold the Issuer and the
Indenture Trustee harmless, then, in the absence of notice to the Issuer, the
Note Registrar or the Indenture Trustee that such Note has been acquired by a
bona fide purchaser, and provided that the requirements of Section 8-405 of the
UCC are met, the Issuer shall execute and upon its request the Indenture Trustee
shall authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Note, a replacement Note; provided,
--------
however, that if any such destroyed, lost or stolen Note, but not a mutilated
- -------
Note, shall have become or within 15 days shall be due and payable, or shall
have been called for redemption, instead of issuing a replacement Note, the
Issuer may pay such destroyed, lost or stolen Note when so due or payable or
upon the Redemption Date without surrender thereof. If, after the delivery of
such replacement Note or payment of a destroyed, lost or stolen Note pursuant to
the proviso to the preceding sentence, a bona fide purchaser of the original
Note in lieu of which such replacement Note was issued presents for payment such
original Note, the Issuer and the Indenture Trustee shall be entitled to recover
such replacement Note (or such payment) from the Person to whom it was delivered
or any Person taking such replacement Note from such Person to whom such
replacement Note was delivered or any assignee of such Person, except a bona
fide purchaser, and shall be entitled to recover upon the
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security or indemnity provided therefor to the extent of any loss, damage, cost
or expense incurred by the Issuer or the Indenture Trustee in connection
therewith.
Upon the issuance of any replacement Note under this Section, the Issuer may
require the payment by the Noteholder thereof of a sum sufficient to cover any
tax or other governmental charge that may be imposed in relation thereto and any
other reasonable expenses (including the fees and expenses of the Indenture
Trustee) connected therewith.
Every replacement Note issued pursuant to this Section in replacement of any
mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Issuer, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the extent
lawful) all other rights and remedies with respect to the replacement or payment
of mutilated, destroyed, lost or stolen Notes.
SECTION 2.6 Persons Deemed Owner. Prior to due presentment for registration
--------------------
of transfer of any Note, the Issuer, the Indenture Trustee and any agent of the
Issuer or the Indenture Trustee may treat the Person in whose name any Note is
registered (as of the day of determination) as the owner of such Note for the
purpose of receiving payments of principal of, interest (and any Note Interest
Carryover), if any, on such Note and for all other purposes whatsoever, whether
or not such Note be overdue, and neither the Issuer, the Indenture Trustee nor
any agent of the Issuer or the Indenture Trustee shall be affected by notice to
the contrary.
SECTION 2.7 Payment of Principal and Interest; Note Interest Shortfall; Note
----------------------------------------------------------------
Interest Carryover. (a) The Notes shall accrue interest as provided in the
- ------------------
forms of Notes set forth in Exhibit A, and such interest shall be payable on
each Distribution Date as specified therein, subject to Section 3.1. Any
installment of interest (and any Note Interest Carryover) or principal, if any,
payable on any Note which is punctually paid or duly provided for by the Issuer
on the applicable Distribution Date shall be paid to the Person in whose name
such Note (or one or more Predecessor Notes) is registered on the Record Date by
check mailed first-class,
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postage prepaid to such Person's address as it appears on the Note Register on
such Record Date, except that, unless Definitive Notes have been issued pursuant
to Section 2.12, with respect to Notes registered on the Record Date in the name
of the nominee of the Clearing Agency (initially, such nominee to be Cede &
Co.), payment shall be made by wire transfer in immediately available funds to
the account designated by such nominee and except for the final installment of
principal payable with respect to such Note on a Distribution Date or on the
Note Final Maturity Date for such Note which shall be payable as provided below.
The funds represented by any such checks returned undelivered shall be held in
accordance with Section 3.3.
(b) The principal of each Note shall be payable in installments on each
Distribution Date as provided in the forms of Note set forth in Exhibit A.
Notwithstanding the foregoing, the entire unpaid principal amount of each class
of the Notes shall be due and payable, if not previously paid, on the Note Final
Maturity Date for such class of Notes and on the date on which an Event of
Default shall have occurred and be continuing if the Indenture Trustee or the
Noteholders of the Notes representing not less than a majority of the
Outstanding Amount of the Notes have declared the Notes to be immediately due
and payable in the manner provided in Section 5.2. All principal payments on the
Notes shall be made pro rata to the Noteholders entitled thereto. The Indenture
Trustee shall notify the Person in whose name a Note is registered at the close
of business on the Record Date preceding the Distribution Date on which the
Issuer expects that the final installment of principal of and interest (and any
Note Interest Carryover) on such Note will be paid. Such notice shall be mailed
or transmitted by facsimile prior to such final Distribution Date and shall
specify that such final installment will be payable only upon presentation and
surrender of such Note and shall specify the place where such Note may be
presented and surrendered for payment of such Installment. Notices in connection
with redemptions of Notes shall be mailed to Noteholders as provided in Section
10.2.
(c) If the Issuer defaults in a payment of interest on the Notes, the
Issuer shall pay the resulting Note Interest Shortfall on the following
Distribution Date as provided in the Administration Agreement.
(d) The Note Interest Carryover for each Distribution Date shall be
payable on each Distribution Date solely to the extent of funds required and
available to be distributed to Noteholders by the Indenture Trustee pursuant to
Section 2.7C.10, 2.8C(D), 2.8D or 2.8E of the Administration Agreement. Any Note
Interest Carryover
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payable on any Distribution Date shall be paid to the Person in whose name such
Note (or one or more Predecessor Notes) is registered on the applicable Record
Date by check mailed first-class postage prepaid to such Person's address as it
appears on the Note Register on such Record Date, except that, unless Definitive
Notes have been issued pursuant to Section 2.12, with respect to the Notes
registered on the Record Date in the name of the nominee of the Clearing Agency
(initially, such nominee to be Cede & Co.), payment shall be made by wire
transfer in immediately available funds to the account designated by such
nominee. The funds represented by any such checks returned undelivered shall be
held in accordance with Section 3.3.
SECTION 2.8 Cancellation. All Notes surrendered for payment,
------------
registration of transfer, exchange or redemption shall, if surrendered to any
Person other than the Indenture Trustee, be delivered to the Indenture Trustee
and shall be promptly cancelled by the Indenture Trustee. The Issuer may at any
time deliver to the Indenture Trustee for cancellation any Notes previously
authenticated and delivered hereunder which the Issuer may have acquired in any
manner whatsoever and all Notes so delivered shall be promptly cancelled by the
Indenture Trustee. No Notes shall be authenticated in lieu of or in exchange for
any Notes cancelled as provided in this Section, except as expressly permitted
by this Indenture. All canceled Notes may be held or disposed of by the
Indenture Trustee in accordance with its standard retention or disposal policy
as in effect at the time, unless the Issuer shall direct by an Issuer Order that
they be returned to it and so long as such Issuer Order is timely and the Notes
have not been previously disposed of by the Indenture Trustee.
SECTION 2.9 Release of Collateral. Subject to Section 11.1 and the
---------------------
terms of the Basic Documents, the Indenture Trustee shall release property from
the lien of this Indenture only upon receipt of an Issuer Request accompanied by
an Officers' Certificate of the Issuer, an Opinion of Counsel and Independent
Certificates in accordance with TIA (S)(S) 314(c) and 314(d)(1) or an Opinion of
Counsel in lieu of such Independent Certificates to the effect that the TIA does
not require any such Independent Certificates.
SECTION 2.10 Book-Entry Notes. The Notes, upon original issuance,
----------------
will be issued in the form of typewritten Notes representing the Book-Entry
Notes, to be delivered to The Depository Trust Company, the initial Clearing
Agency, by, or on behalf of, the Issuer. Such Notes shall initially be
registered on the Note Register in the name of Cede & Co., the nominee of the
initial Clearing Agency, and no Note Owner
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shall receive a Definitive Note (as defined below) representing such Note
Owner's interest in such Note, except as provided in Section 2.12. Unless and
until definitive, fully registered Notes (the "Definitive Notes") have been
issued to Note Owners pursuant to Section 2.12:
(i) the provisions of this Section shall be in full force and effect;
(ii) the Note Registrar and the Indenture Trustee, and their
respective directors, officers, employees and agents, may deal with the Clearing
Agency for all purposes (including the payment of principal of and interest and
other amounts on the Notes) as the authorized representative of the Note Owners;
(iii) to the extent that the provisions of this Section conflict with
any other provisions of this Indenture, the provisions of this Section shall
control;
(iv) the rights of Note Owners shall be exercised only through the
Clearing Agency and shall be limited to those established by law and agreements
between such Note Owners and the Clearing Agency and/or the Clearing Agency
Participants pursuant to the Note Depository Agreement; and unless and until
Definitive Notes are issued pursuant to Section 2.12, the initial Clearing
Agency will make book-entry transfers among the Clearing Agency Participants and
receive and transmit payments of principal of and interest and other amounts on
the Notes to such Clearing Agency Participants; and
(v) whenever this Indenture requires or permits actions to be taken
based upon instructions or directions of Noteholders of Notes evidencing a
specified percentage of the Outstanding Amount of the Notes, the Clearing Agency
shall be deemed to represent such percentage only to the extent that it has
received instructions to such effect from Note Owners and/or Clearing Agency
Participants owning or representing, respectively, such required percentage of
the beneficial interest in the Notes and has delivered such instructions to the
Indenture Trustee.
SECTION 2.11 Notices to Clearing Agency. Whenever a notice or other
--------------------------
communication to the Noteholders is required under this Indenture, unless and
until Definitive Notes shall have been issued to Note Owners pursuant to Section
2.12, the Indenture Trustee shall give all such notices and communication
specified herein to be given to Noteholders to the Clearing Agency.
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SECTION 2.12 Definitive Notes. If (i) the Administrator advises the
----------------
Indenture Trustee in writing that the Clearing Agency is no longer willing or
able to discharge its responsibilities with respect to the Notes, and the
Administrator is unable to locate a successor, (ii) the Administrator at its
option advises the Indenture Trustee in writing that it elects to terminate the
book-entry system through the Clearing Agency or (iii) after the occurrence of
an Event of Default, a Servicer Default or an Administrator Default, Note Owners
representing beneficial interests aggregating at least a majority of the
Outstanding Amount of the Notes advise the Clearing Agency (which shall then
notify the Indenture Trustee) in writing that the continuation of a book-entry
system through the Clearing Agency is no longer in the best interests of the
Note Owners, then the Indenture Trustee shall cause the Clearing Agency to
notify all Note Owners, through the Clearing Agency, of the occurrence of any
such event and of the availability of Definitive Notes to Note Owners requesting
the same. Upon surrender to the Indenture Trustee of the typewritten Notes
representing the Book-Entry Notes by the Clearing Agency, accompanied by
registration instructions, the Issuer shall execute and the Indenture Trustee
shall authenticate the Definitive Notes in accordance with the instructions of
the Clearing Agency. None of the Issuer, the Note Registrar or the Indenture
Trustee shall be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be protected in relying on, such instructions.
Upon the issuance of Definitive Notes, the Indenture Trustee shall recognize the
holders of the Definitive Notes as Noteholders.
ARTICLE III
Covenants
---------
SECTION 3.1 Payment to Noteholders. The Issuer shall duly and punctually pay
----------------------
the principal of, interest, if any, on and any Note Interest Carryover (but only
to the extent provided in Sections 2.7(d) and 8.2(c)) with respect to the Notes
in accordance with the terms of the Notes and this Indenture. Without limiting
the foregoing, subject to Section 8.2(c), the Issuer shall cause to be
distributed to Noteholders in accordance with the Administration Agreement that
portion of the amounts on deposit in the Trust Accounts on a Distribution Date
(other than any Eligible Investments deposited therein that will mature on the
Business Day preceding a subsequent Distribution Date) which the Noteholders
are entitled to receive pursuant to the Administration Agreement. Amounts
properly withheld under the Code by any
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Person from a payment to any Noteholder of interest (including any Note Interest
Carryover) and/or principal shall be considered as having been paid by the
Issuer to such Noteholder for all purposes of this Indenture.
SECTION 3.2 Maintenance of Office or Agency. The Issuer shall maintain in
-------------------------------
the Borough of Brooklyn, The City of New York, an office or agency where Notes
may be surrendered for registration of transfer or exchange, and where notices
and demands to or upon the Issuer in respect of the Notes and this Indenture may
be served. The Issuer hereby initially appoints the Indenture Trustee to serve
as its agent for the foregoing purposes. The Issuer shall give prompt written
notice to the Indenture Trustee of the location, and of any change in the
location, of any such office or agency. If at any time the Issuer shall fail to
maintain any such office or agency or shall fail to furnish the Indenture
Trustee with the address thereof, such surrenders, notices and demands may be
made or served at the Corporate Trust Office, and the Issuer hereby appoints the
Indenture Trustee as its agent to receive all such surrenders, notices and
demands.
SECTION 3.3 Money for Payments To Be Held in Trust. As provided in Section
--------------------------------------
8.2(a) and (b), all payments of amounts due and payable with respect to any
Notes that are to be made from amounts distributed from the Collection Account
or any other Trust Account pursuant to Section 8.2(c) shall be made on behalf of
the Issuer by the Indenture Trustee or by another Paying Agent, and no amounts
so distributed from the Collection Account for payments of Notes shall be paid
over to the Issuer except as provided in this Section.
On or before the Business Day next preceding each Distribution Date and
Redemption Date, the Issuer shall distribute or cause to be distributed to the
Indenture Trustee (or any other Paying Agent) an aggregate sum sufficient to pay
the amounts then becoming due under the Notes, such sum to be held in trust for
the benefit of the Persons entitled thereto and (unless the Paying Agent is the
Indenture Trustee) shall promptly notify the Indenture Trustee of its action or
failure so to act.
The Issuer shall cause each Paying Agent other than the Indenture Trustee to
execute and deliver to the Indenture Trustee an instrument in which such Paying
Agent shall agree with the Indenture Trustee (and if the Indenture Trustee acts
as Paying Agent, it hereby so agrees), subject to the provisions of this
Section, that such Paying Agent will:
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(i) hold all sums held by it for the payment of amounts due with respect
to the Notes in trust for the benefit of the Persons entitled thereto until such
sums shall be paid to such Persons or otherwise disposed of as herein provided
and pay such sums to such Persons as herein provided;
(ii) give the Indenture Trustee notice of any default by the Issuer of
which it has actual knowledge (or any other obligor upon the Notes) in the
making of any payment required to be made with respect to the Notes;
(iii) at any time during the continuance of any such default, upon the
written request of the Indenture Trustee, forthwith pay to the Indenture Trustee
all sums so held in trust by such Paying Agent;
(iv) immediately resign as a Paying Agent and forthwith pay to the
Indenture Trustee all sums held by it in trust for the payment of Notes if at
any time it ceases to meet the standards required to be met by a Paying Agent at
the time of its appointment; and
(v) comply with all requirements of the Code with respect to the
withholding from any payments made by it on any Notes of any applicable
withholding taxes imposed thereon and with respect to any applicable reporting
requirements in connection therewith.
The Issuer may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, by Issuer Order direct
any Paying Agent to pay to the Indenture Trustee all sums held in trust by such
Paying Agent, such sums to be held by the Indenture Trustee upon the same trusts
as those upon which the sums were held by such Paying Agent; and upon such
payment by any Paying Agent to the Indenture Trustee, such Paying Agent shall be
released from all further liability with respect to such money.
Subject to applicable laws with respect to escheat of funds, any money held
by the Indenture Trustee or any Paying Agent in trust for the payment of any
amount due with respect to any Note and remaining unclaimed for two years after
such amount has become due and payable shall be discharged from such trust and
be paid to the Issuer on Issuer Request or if the Issuer has been terminated to
Seller; and the
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Noteholder thereof shall thereafter, as an unsecured general creditor, look only
to the Issuer for payment thereof (but only to the extent of the amounts so paid
to the Issuer), and all liability of the Indenture Trustee or such Paying Agent
with respect to such trust money shall thereupon cease; provided, however, that
-------- -------
the Indenture Trustee or such Paying Agent, before being required to make any
such repayment, shall at the expense and direction of the Issuer cause to be
published once, in a newspaper published in the English language, customarily
published on each Business Day and of general circulation in The City of New
York, notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such publication,
any unclaimed balance of such money then remaining will be repaid to the Issuer.
The Indenture Trustee shall also adopt and employ, at the expense of the Issuer,
any other reasonable means of notification of such repayment (including mailing
notice of such repayment to Noteholders whose Notes have been called but have
not been surrendered for redemption or whose right to or interest in moneys due
and payable but not claimed is determinable from the records of the Indenture
Trustee or of any Paying Agent, at the last address of record for each such
Noteholder).
SECTION 3.4 Existence. The Issuer shall keep in full effect its existence,
---------
rights and franchises as a business trust under the laws of the State of
Delaware (unless it becomes, or any successor Issuer hereunder is or becomes,
organized under the laws of any other State or of the United States of America,
in which case the Issuer shall keep in full effect its existence, rights and
franchises under the laws of such other jurisdiction) and shall obtain and
preserve its qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Indenture, the Notes, the Collateral and each other
instrument or agreement included in the Indenture Trust Estate.
SECTION 3.5 Protection of Indenture Trust Estate. The Issuer will from
------------------------------------
time to time execute and deliver all such supplements and amendments hereto and
all such financing statements, continuation statements, will take such other
action necessary or advisable to:
(i) maintain or preserve the lien and security interest (and the priority
thereof) of this Indenture or carry out more effectively the purposes hereof;
(ii) perfect, publish notice of or protect the validity of any grant made
or to be made by this Indenture;
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(iii) enforce any of the Collateral; or
(iv) preserve and defend title to the Indenture Trust Estate and the
rights of the Indenture Trustee and the Noteholders in such Indenture Trust
Estate against the claims of all persons and parties.
The Issuer hereby designates the Indenture Trustee its agent and
attorney-in-fact to execute any financing statement, continuation statement or
other instrument required to be executed pursuant to this Section.
SECTION 3.6 Opinions as to Indenture Trust Estate. (a) On the Closing
-------------------------------------
Date, the Issuer shall furnish to the Indenture Trustee an Opinion of Counsel
either stating that, in the opinion of such counsel, such action has been taken
with respect to the recording and filing of this Indenture as is necessary to
perfect and make effective the lien and security interest of this Indenture and
reciting the details of such action, or stating that, in the opinion of such
counsel, no such action is necessary to make such lien and security interest
effective.
(b) On or before December 31 in each calendar year, beginning in 1998, the
Issuer shall furnish to the Indenture Trustee an Opinion of Counsel either
stating that, in the opinion of such counsel, such action has been taken with
respect to the recording, filing, re-recording and refiling of this Indenture
and any indentures supplemental hereto as is necessary to maintain the lien and
security interest created by this Indenture and relating the details of such
action or stating that in the opinion of such counsel no such action is
necessary to maintain such lien and security interest. Such Opinion of Counsel
shall also describe the recording, filing, recording and refiling of this
Indenture and any indentures supplemental hereto that will, in the opinion of
such counsel, be required to maintain the lien and security interest of this
Indenture until December 31 in the following calendar year.
SECTION 3.7 Performance of Obligations; Servicing of Trust Student
------------------------------------------------------
Loans. (a) The Issuer will not take any action and will use its best efforts not
- -----
to permit any action to be taken by others that would release any Person from
any of such Person's material covenants or obligations under any instrument or
agreement included in the Indenture Trust Estate or that would result in the
amendment, hypothecation, subordination, termination or discharge of, or impair
the validity or effectiveness of,
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any such instrument or agreement, except as expressly provided in this
Indenture, any other Basic Document or such other instrument or agreement.
(b) The Issuer may contract with other Persons to assist it in performing
its duties under this Indenture, and any performance of such duties by a Person
identified to the Indenture Trustee in an Officers' Certificate of the Issuer
shall be deemed to be action taken by the Issuer; provided, however, the Issuer
shall not be liable for any acts of Persons with whom the Issuer has contracted
with reasonable care. Initially, the Issuer has contracted with the Servicer and
the Administrator to assist the Issuer in performing its duties under this
Indenture. The Issuer shall give written notice to the Indenture Trustee and
each Rating Agency of any such contract with any other Person.
(c) The Issuer shall punctually perform and observe all of its
obligations and agreements contained in this Indenture, the other Basic
Documents and the instruments and agreements included in the Indenture Trust
Estate, including filing or causing to be filed all UCC financing statements and
continuation statements prepared by the Issuer and required to be filed by the
terms of this Indenture and the Administration Agreement in accordance with and
within the time periods provided for herein and therein. Except as otherwise
expressly provided therein, the Issuer shall not waive, amend, modify,
supplement or terminate any Basic Document or any provision thereof without the
consent of the Indenture Trustee or the Noteholders of at least a majority of
the Outstanding Amount of the Notes. The Issuer shall give written notice to
each Rating Agency of any such waiver, amendment, modification, supplement or
termination.
(d) If a Responsible Officer of the Issuer shall have knowledge of the
occurrence of a Servicer Default or an Administrator Default under the Servicing
Agreement or the Administration Agreement, respectively, the Issuer shall
promptly notify the Indenture Trustee and the Rating Agencies thereof, and shall
specify in such notice the action, if any, the Issuer is taking with respect to
such default. If a Servicer Default shall arise from the failure of the Servicer
to perform any of its duties or obligations under the Servicing Agreement, or an
Administrator Default shall arise from the failure of the Administrator to
perform any of its duties or obligations under the Administration Agreement, as
the case may be, with respect to the Trust Student Loans, the Issuer shall take
all reasonable steps available to it to enforce its rights under the Basic
Documents in respect of such failure.
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(e) As promptly as possible after the giving of notice of
termination to the Servicer of the Servicer's rights and powers, pursuant
to Section 5.1 of the Servicing Agreement, or to the Administrator of the
Administrator's rights and powers, pursuant to Section 5.1 of the
Administration Agreement, the Issuer shall appoint a successor servicer
(the "Successor Servicer") or a successor administrator (the "Successor
Administrator"), respectively, and such Successor Servicer or Successor
Administrator, as the case may be, shall accept its appointment by a
written assumption in a form acceptable to the Indenture Trustee. In the
event that a Successor Servicer or Successor Administrator has not been
appointed and accepted its appointment at the time when the Servicer or
Administrator, as the case may be, ceases to act as Servicer or
Administrator, respectively, the Indenture Trustee without further action
shall automatically be appointed the Successor Servicer or Successor
Administrator, as the case may be. The Indenture Trustee may resign as the
Servicer or the Administrator by giving written notice of resignation to
the Issuer and in such event will be released from such duties and
obligations, such release not to be effective until the date a new servicer
or a new administrator enters into an agreement with the Issuer as provided
below; provided, however, that nothing herein shall require or permit the
-------- -------
Indenture Trustee to act as Servicer, or otherwise service the Trust
Student Loans, in violation of the Higher Education Act. Upon delivery of
any such notice to the Issuer, the Issuer shall obtain a new servicer as
the Successor Servicer under the Servicing Agreement or a new administrator
as the Successor Administrator under the Administration Agreement, as the
case may be. Any Successor Servicer or Successor Administrator, other than
the Indenture Trustee, shall (i) be an established institution (A) that
satisfies any requirements of the Higher Education Act applicable to
servicers and (B) whose regular business includes the servicing or
administration of student loans and (ii) enter into a servicing agreement
or an administration agreement, respectively, with the Issuer having
substantially the same provisions as the provisions of the Servicing
Agreement and the Administration Agreement, as applicable. If within 30
days after the delivery of the notice referred to above, the Issuer shall
not have obtained such a new servicer or new administrator, as the case may
be, the Indenture Trustee may appoint, or may petition a court of competent
jurisdiction to appoint, a Successor Servicer or Successor Administrator;
provided, however, that such right to appoint or to petition for the
-------- -------
appointment of any such successor shall in no event relieve the Indenture
Trustee from any obligations otherwise imposed on it under the Basic
Documents until such successor has in fact assumed such appointment. In
connection with any such appointment, the Indenture Trustee may make such
arrangements for the compensation of such successor as it and such
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successor shall agree, subject to the limitations set forth below and in
the Servicing Agreement or Administration Agreement, as applicable, and in
accordance with Section 5.2 of the Servicing Agreement and Section 5.2 of
the Administration Agreement, the Issuer shall enter into an agreement with
such successor for the servicing or administration of the Trust Student
Loans (such agreement to be in form and substance satisfactory to the
Indenture Trustee). If the Indenture Trustee shall succeed as provided
herein to the Servicer's duties as Servicer with respect to the Trust
Student Loans, or the Administrator's duties with respect to the Issuer and
the Trust Student Loans, as the case may be, it shall do so in its
individual capacity and not in its capacity as Indenture Trustee and,
accordingly, the provisions of Article VI hereof shall be inapplicable to
the Indenture Trustee in its duties as the successor to the Servicer or the
Administrator, as the case may be, and the servicing or administration of
the Trust Student Loans. In case the Indenture Trustee shall become
successor to the Servicer or the Administrator, the Indenture Trustee shall
be entitled to appoint as Servicer or as Administrator, as the case may be,
any one of its Affiliates, provided that such appointment shall not affect
or alter in any way the liability of the Indenture Trustee as Successor
Servicer or Successor Administrator, respectively, in accordance with the
terms hereof.
(f) Upon any termination of the Servicer's rights and powers
pursuant to the Servicing Agreement, or any termination of the
Administrator's rights and powers pursuant to the Administration Agreement,
as the case may be, the Issuer shall promptly notify the Indenture Trustee
and each Rating Agency. As soon as a Successor Servicer or a Successor
Administrator is appointed, the Issuer shall notify the Indenture Trustee
and each Rating Agency of such appointment, specifying in such notice the
name and address of such Successor Servicer or such Successor
Administrator.
(g) Without derogating from the absolute nature of the assignment
granted to the Indenture Trustee under this Indenture or the rights of the
Indenture Trustee hereunder, the Issuer agrees that it will not, without
the prior written consent of the Indenture Trustee or the Noteholders of at
least a majority in Outstanding Amount of the Notes, amend, modify, waive,
supplement, terminate or surrender, or agree to any amendment,
modification, supplement, termination, waiver or surrender of, the terms of
any Collateral or the Basic Documents, except to the extent otherwise
provided in the Basic Documents, or waive timely performance or observance
by the Servicer, the Administrator, the Seller, the Student Loan Marketing
Association, the Issuer or the Eligible Lender Trustee under the Basic
Documents; provided, however, that no such amendment shall (i) increase or
-------- -------
reduce in any manner the amount of, or accelerate or
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delay the timing of, distributions that are required to be made for the benefit
of the Noteholders, or (ii) reduce the aforesaid percentage of the Notes which
are required to consent to any such amendment, without the consent of the
Noteholders of all the Outstanding Notes. If any such amendment, modification,
supplement or waiver shall be so consented to by the Indenture Trustee or such
Noteholders, the Issuer shall give written notice thereof to each Rating Agency
and agrees, promptly following a request by the Indenture Trustee to do so, to
execute and deliver, in its own name and at its own expense, such agreements,
instruments, consents and other documents as the Indenture Trustee may deem
necessary or appropriate in the circumstances.
SECTION 3.8 Negative Covenants. So long as any Notes are
------------------
Outstanding, the Issuer shall not:
(i) except as expressly permitted by this Indenture or any other
Basic Document, sell, transfer, exchange or otherwise dispose of any of the
properties or assets of the Issuer, including those included in the Indenture
Trust Estate, unless directed to do so by the Indenture Trustee;
(ii) claim any credit on, or make any deduction from the principal
or interest (including any Note Interest Carryover) payable in respect of, the
Notes (other than amounts properly withheld from such payments under the Code or
applicable state law) or assert any claim against any present or former
Noteholder by reason of the payment of the taxes levied or assessed upon any
part of the Indenture Trust Estate; or
(iii) (A) permit the validity or effectiveness of this Indenture to
be impaired, or permit the lien of this Indenture to be amended, hypothecated,
subordinated, terminated or discharged, or permit any Person to be released from
any covenants or obligations with respect to the Notes under this Indenture
except as may be expressly permitted hereby, (B) permit any lien, charge,
excise, claim, security interest, mortgage or other encumbrance (other than the
lien of this Indenture) to be created on or extend to or otherwise arise upon or
burden the Indenture Trust Estate or any part thereof or any interest therein or
the proceeds thereof (other than tax liens and other liens that arise by
operation of law, and other than as expressly permitted by the Basic Documents)
or (C) permit the lien of this Indenture not to constitute a valid first
priority (other than with respect to any such tax or other lien) security
interest in the Indenture Trust Estate.
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SECTION 3.9 Annual Statement as to Compliance. The Issuer will
---------------------------------
deliver to the Indenture Trustee and each Rating Agency, within 120 days after
the end of each fiscal year of the Issuer (commencing with the fiscal year
1999), an Officers' Certificate of the Issuer stating that:
(i) a review of the activities of the Issuer during such year and of
performance under this Indenture has been made under such Authorized
Officers' supervision; and
(ii) to the best of such Authorized Officers' knowledge, based on
such review, the Issuer has complied with all conditions and covenants under
this Indenture throughout such year, or, if there has been a default in the
compliance of any such condition or covenant, specifying each such default known
to such Authorized Officers and the nature and status thereof.
SECTION 3.10 Issuer May Consolidate, etc., Only on Certain Terms.
---------------------------------------------------
(a) The Issuer shall not consolidate or merge with or into any other
Person, unless:
(i) the Person (if other than the Issuer) formed by or surviving
such consolidation or merger shall be a Person organized and existing under the
laws of the United States of America or any State and shall expressly assume, by
an indenture supplemental hereto, executed and delivered to the Indenture
Trustee, in form satisfactory to the Indenture Trustee, the due and punctual
payment of the principal of, interest on and any Note Interest Carryover, if
any, with respect to all Notes and the performance or observance of every
agreement and covenant of this Indenture on the part of the Issuer to be
performed or observed, all as provided herein;
(ii) immediately after giving effect to such transaction, no Default
shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel (and shall
have delivered copies thereof to the Indenture Trustee) to the effect that
such transac-
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tion will not have any material adverse Federal or Delaware state tax
consequence to the Issuer, any Noteholder or any Certificateholder;
(v) any action as is necessary to maintain the lien and security
interest created by this Indenture shall have been taken; and
(vi) the Issuer shall have delivered to the Indenture Trustee an
Officers' Certificate of the Issuer and an Opinion of Counsel each stating that
such consolidation or merger and such supplemental indenture comply with this
Article III and that all conditions precedent herein provided for relating to
such transaction have been complied with (including any filing required by the
Exchange Act).
(b) The Issuer shall not convey or transfer all or substantially all its
properties or assets, including those included in the Indenture Trust Estate, to
any Person, unless:
(i) the Person that acquires by conveyance or transfer the
properties and assets of the Issuer the conveyance or transfer of which is
hereby restricted shall (A) be a United States citizen or a Person organized and
existing under the laws of the United States of America or any State, (B)
expressly assume, by an indenture supplemental hereto, executed and delivered to
the Indenture Trustee, in form satisfactory to the Indenture Trustee, the due
and punctual payment of the principal of, interest on and Note Interest
Carryover, if any, with respect to all Notes and the performance or observance
of every agreement and covenant of this Indenture on the part of the Issuer to
be performed or observed, all as provided herein, (C) expressly agree by means
of such supplemental indenture that all right, title and interest so conveyed or
transferred shall be subject and subordinate to the rights of Noteholders, (D)
unless otherwise provided in such supplemental indenture, expressly agree to
indemnify, defend and hold harmless the Issuer against and from any loss,
liability or expense arising under or related to this Indenture and the Notes
and (E) expressly agree by means of such supplemental indenture that such Person
(or if a group of Persons, then one specified Person) shall make all filings
with the Commission (and any other appropriate Person) required by the Exchange
Act in connection with the Notes;
(ii) immediately after giving effect to such transaction, no Default
shall have occurred and be continuing;
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(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel (and shall
have delivered copies thereof to the Indenture Trustee) to the effect that such
transaction will not have any material adverse Federal or Delaware state tax
consequence to the Issuer, any Noteholder or any Certificateholder;
(v) any action as is necessary to maintain the lien and security
interest created by this Indenture shall have been taken; and
(vi) the Issuer shall have delivered to the Indenture Trustee an
Officers' Certificate of the Issuer and an Opinion of Counsel each stating that
such conveyance or transfer and such supplemental indenture comply with this
Article III and that all conditions precedent herein provided for relating to
such transaction have been complied with (including any filing required by the
Exchange Act).
SECTION 3.11 Successor or Transferee. (a) Upon any consolidation or
-----------------------
merger of the Issuer in accordance with Section 3.10(a), the Person formed by or
surviving such consolidation or merger (if other than the Issuer) shall succeed
to, and be substituted for, and may exercise every right and power of, the
Issuer under this Indenture with the same effect as if such Person had been
named as the Issuer herein.
(b) Upon a conveyance or transfer of all the assets and properties of the
Issuer pursuant to Section 3.10(b), SLM Student Loan Trust 1998-2 will be
released from every covenant and agreement of this Indenture to be observed or
performed on the part of the Issuer with respect to the Notes immediately upon
the delivery by the Issuer of written notice to the Indenture Trustee stating
that SLM Student Loan Trust 1998-2 is to be so released.
SECTION 3.12 No Other Business. The Issuer shall not engage in any
-----------------
business other than financing, purchasing, owning, selling and managing the
Trust Student Loans in the manner contemplated by this Indenture and the other
Basic Documents and activities incidental thereto.
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SECTION 3.13 No Borrowing. The Issuer shall not issue, incur,
------------
assume, guarantee or otherwise become liable, directly or indirectly, for any
indebtedness except for the Notes.
SECTION 3.14 Obligations of Servicer and Administrator. The Issuer
-----------------------------------------
shall cause the Servicer to comply with Sections 3.1, 3.2 and 3.3 of the
Administration Agreement and Section 3.7 of the Servicing Agreement and the
Administrator to comply with Sections 2.9, 3.1, 3.2 and 3.3 of the
Administration Agreement.
SECTION 3.15 Guarantees, Loans, Advances and Other Liabilities.
-------------------------------------------------
Except as contemplated by this Indenture and the other Basic Documents, the
Issuer shall not make any loan or advance or credit to, or guarantee (directly
or indirectly or by an instrument having the effect of assuring another's
payment or performance on any obligation or capability of so doing or
otherwise), endorse or otherwise become contingently liable, directly or
indirectly, in connection with the obligations, stocks or dividends of, or own,
purchase, repurchase or acquire (or agree contingently to do so) any stock,
obligations, assets or securities of, or any other interest in, or make any
capital contribution to, any other Person.
SECTION 3.16 Capital Expenditures. The Issuer shall not make any
--------------------
expenditure (by long-term or operating lease or otherwise) for capital assets
(either realty or personalty).
SECTION 3.17 Restricted Payments. The Issuer shall not, directly or
-------------------
indirectly, (i) pay any dividend or make any distribution (by reduction of
capital or otherwise), whether in cash, property, securities or a combination
thereof, to the Eligible Lender Trustee or any owner of a beneficial interest in
the Issuer or otherwise with respect to any ownership or equity interest or
security in or of the Issuer or to the Servicer or the Administrator, (ii)
redeem, purchase, retire or otherwise acquire for value any such ownership or
equity interest or security or (iii) set aside or otherwise segregate any
amounts for any such purpose; provided, however, that the Issuer may make, or
-------- -------
cause to be made, distributions to the Servicer, the Eligible Lender Trustee,
the Indenture Trustee, the Certificateholders, the Noteholders, the
Administrator and the Seller as contemplated by, and to the extent funds are
available for such purpose under, this Indenture and the other Basic Documents.
The Issuer will not, directly or indirectly, make payments to or distributions
from the Collection Account except in accordance with this Indenture and the
other Basic Documents.
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SECTION 3.18 Notice of Events of Default. The Issuer shall give the
---------------------------
Indenture Trustee and the Rating Agencies prompt written notice of each Event of
Default hereunder and each default on the part of the Seller of its obligations
under the Sale Agreement, the Student Loan Marketing Association of its
obligations under the Purchase Agreement, the Servicer of its obligations under
the Servicing Agreement, or the Administrator of its obligations under the
Administration Agreement. In addition, the Issuer shall deliver to the
Indenture Trustee and each Rating Agency, within five days after the occurrence
thereof, written notice in the form of an Officers' Certificate of the Issuer of
any event which with the giving of notice and the lapse of time would become an
Event of Default under Section 5.1(iii), its status and what action the Issuer
is taking or proposes to take with respect thereto.
SECTION 3.19 Further Instruments and Acts. Upon request of the
----------------------------
Indenture Trustee, the Issuer will execute and deliver such further instruments
and do such further acts as may be reasonably necessary or proper to carry out
more effectively the purpose of this Indenture.
ARTICLE IV
Satisfaction and Discharge
--------------------------
SECTION 4.1 Satisfaction and Discharge of Indenture. This Indenture
---------------------------------------
shall cease to be of further effect with respect to the Notes except as to (i)
rights of registration of transfer and exchange, (ii) substitution of mutilated,
destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments
of principal thereof and interest (including any Note Interest Carryover)
thereon, (iv) Sections 3.3, 3.4, 3.5, 3.8, 3.10, 3.12 and 3.13, (v) the rights,
obligations and immunities of the Indenture Trustee hereunder (including,
without limitation, the rights of the Indenture Trustee under Section 6.7 and
the obligations of the Indenture Trustee under Section 4.2) and (vi) the rights
of Noteholders as beneficiaries hereof with respect to the property so deposited
with the Indenture Trustee payable to all or any of them, and the Indenture
Trustee, on demand of and at the expense of the Issuer, shall execute proper
instruments acknowledging satisfaction and discharge of this Indenture with
respect to the Notes, when:
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(a) either
(1) all Notes theretofore authenticated and delivered (other than (i)
Notes that have been destroyed, lost or stolen and that have been replaced or
paid as provided in Section 2.5 and (ii) Notes for whose payment money has
theretofore been deposited in trust or segregated and held in trust by the
Issuer and thereafter repaid to the Issuer or discharged from such trust, as
provided in Section 3.3) have been delivered to the Indenture Trustee for
cancellation; or
(2) all Notes not theretofore delivered to the Indenture Trustee for
cancellation
(i) have become due and payable,
(ii) will become due and payable at their respective Note Final
Maturity Date, within one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Indenture Trustee for the giving of notice of
redemption by the Indenture Trustee in the name, and at the expense, of the
Issuer, and the Issuer, in the case of (i), (ii) or (iii) above, has irrevocably
deposited or caused to be irrevocably deposited with the Indenture Trustee cash
or direct obligations of or obligations guaranteed by the United States of
America (which will mature prior to the date such amounts are payable), in trust
for such purpose, in an amount sufficient to pay and discharge the entire
indebtedness on such Notes not theretofore delivered to the Indenture Trustee
for cancellation when due to the Note Final Maturity Date;
(b) the Issuer has paid or caused to be paid all other sums payable hereunder
by the Issuer; and
(c) the Issuer has delivered to the Indenture Trustee an Officers' Certificate
of the Issuer, an Opinion of Counsel and (if required by the TIA or the
Indenture Trustee) an Independent Certificate from a firm of certified public
accountants, each meeting the applicable requirements of Section 11.1(a) and,
subject to Section 11.2, each stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of this Indenture have
been complied with.
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SECTION 4.2 Application of Trust Money. All moneys deposited with the
--------------------------
Indenture Trustee pursuant to Section 4.1 hereof shall be held in trust and
applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Paying Agent, as the
Indenture Trustee may determine, to the Noteholders of the particular Notes for
the payment or redemption of which such moneys have been deposited with the
Indenture Trustee, of all sums due and to become due thereon for principal and
interest (including any Note Interest Carryover); but such moneys need not be
segregated from other funds except to the extent required herein or in the
Administration Agreement or required by law.
SECTION 4.3 Repayment of Moneys Held by Paying Agent. In connection with
----------------------------------------
the satisfaction and discharge of this Indenture with respect to the Notes, all
moneys then held by any Paying Agent other than the Indenture Trustee under the
provisions of this Indenture with respect to such Notes shall, upon demand of
the Issuer, be paid to the Indenture Trustee to be held and applied according to
Section 3.3 and thereupon such Paying Agent shall be released from all further
liability with respect to such moneys.
SECTION 4.4 Auction of Trust Student Loans. Any Trust Student Loans
------------------------------
remaining in the Trust as of the end of the Collection Period immediately
preceding the earliest Distribution Date on which the Pool Balance is equal to
10% or less of the initial Pool Balance three business days prior to such
Distribution Date (the "Trust Auction Date") shall be offered for sale by the
Indenture Trustee unless the Seller has exercised its option to purchase the
Trust Estate as described in Section 6.1A of the Administration Agreement with
respect to such Distribution Date. The Seller will be deemed to have waived
such option if it fails to notify the Eligible Lender Trustee and the Indenture
Trustee of its exercise thereof in writing prior to the Indenture Trustee's
acceptance of a bid to purchase such Trust Student Loans; provided, however,
that there shall be no such offer for sale if the Indenture Trustee fails to
provide notice to the Seller in accordance with this Section 4.4. The Indenture
Trustee shall provide written notice to the Seller of any such offer for sale at
least 5 business days in advance of the Trust Auction Date. The Indenture
Trustee shall permit the Seller or any of its Affiliates to offer bids only if
the Pool Balance as of the applicable Trust Auction Date is equal to 10% or less
of the Initial Pool Balance. If at least two bids are received, the Indenture
Trustee shall solicit and resolicit new bids from all participating bidders
until only one bid remains or the remaining bidders decline to resubmit bids.
The Indenture
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Trustee shall accept the highest of such remaining bids if it is equal to or in
excess of both the Minimum Purchase Amount and the fair market value of such
Trust Student Loans as of the end of the Collection Period immediately preceding
the Trust Auction Date. If at least two bids are not received or the highest bid
after the resolicitation process is completed is not equal to or in excess of
the higher of the Minimum Purchase Amount and the fair market value of the Trust
Student Loans, the Indenture Trustee shall not consummate such sale. The
Indenture Trustee may consult, and, at the direction of the Seller, shall
consult, with a financial advisor, including an underwriter of the Notes or the
Administrator, to determine if the fair market value of the Trust Student Loans
has been offered. The proceeds of any such sale will be applied in the order of
priority set forth in Section 5.4 (b). If the sale is not consummated in
accordance with the foregoing, the Indenture Trustee may, but shall not be under
any obligation to, solicit bids for sale of the Trust Student Loans with respect
to future Distribution Dates upon terms similar to those described above,
including the Seller's waiver of its option to purchase the Trust Estate in
accordance with Section 6.1A of the Administration Agreement with respect to
each such future Distribution Date.
ARTICLE V
Remedies
--------
SECTION 5.1 Events of Default. "Event of Default," wherever used herein,
-----------------
means any one of the following events (whatever the reason for such Event of
Default and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(i) default in the payment of any interest (including, subject to the
limitations of Sections 2.7(d) and 8.2(c), any Note Interest Carryover) on any
Note when the same becomes due and payable, and such default shall continue for
a period of five days; or
(ii) default in the payment of the principal of any Note when the same becomes
due and payable on the related Note Final Maturity Date; or
(iii) default in the observance or performance of any covenant or agreement
of the Issuer made in this Indenture (other than a covenant or agreement, a
28
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default in the observance or performance of which is elsewhere in this Section
specifically dealt with),or any representation or warranty of the Issuer made in
this Indenture or in any certificate or other writing having been incorrect in
any material respect as of the time when made, such default or breach having a
material adverse effect on the holders of the Notes, and such default or breach
shall continue or not be cured, or the circumstance or condition in respect of
which such misrepresentation or warranty was incorrect shall not have been
eliminated or otherwise cured, for a period of 30 days after there shall have
been given, by registered or certified mail, to the Issuer by the Indenture
Trustee or to the Issuer and the Indenture Trustee by the Noteholders of at
least 25% of the Outstanding Amount of the Notes, a written notice specifying
such default or incorrect representation or warranty and requiring it to be
remedied and stating that such notice is a notice of Default hereunder; or
(iv) the filing of a decree or order for relief by a court having jurisdiction
in the premises in respect of the Issuer or any substantial part of the
Indenture Trust Estate in an involuntary case under any applicable Federal or
state bankruptcy, insolvency or other similar law now or hereafter in effect, or
appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of the Issuer or for any substantial part of the Indenture
Trust Estate, or ordering the winding-up or liquidation of the Issuer's affairs,
and such decree or order shall remain unstayed and in effect for a period of 60
consecutive days; or
(v) the commencement by the Issuer of a voluntary case under any applicable
Federal or state bankruptcy, insolvency or other similar law now or hereafter in
effect, or the consent by the Issuer to the entry of an order for relief in an
involuntary case under any such law, or the consent by the Issuer to the
appointment or taking possession by a receiver, liquidator, assignee, custodian,
trustee, sequestrator or similar official of the Issuer or for any substantial
part of the Indenture Trust Estate, or the making by the Issuer of any general
assignment for the benefit of creditors, or the failure by the Issuer generally
to pay its debts as such debts become due, or the taking of action by the Issuer
in furtherance of any of the foregoing.
SECTION 5.2 Acceleration of Maturity; Rescission and Annulment. If an Event
--------------------------------------------------
of Default should occur and be continuing, then and in every such case the
Indenture Trustee or the Noteholders of Notes representing not less than a
majority of the Outstanding Amount of the Notes may declare all the Notes to be
immediately due and payable, by a notice in writing to the Issuer (and to the
Indenture Trustee if given
29
<PAGE>
by Noteholders), and upon any such declaration the unpaid principal amount of
such Notes, together with accrued and unpaid interest thereon through the date
of acceleration, shall become immediately due and payable.
At any time after such declaration of acceleration of maturity has been made
and before a judgment or decree for payment of the money due has been obtained
by the Indenture Trustee as hereinafter in this Article V provided, the
Noteholders of Notes representing a majority of the Outstanding Amount of the
Notes, by written notice to the Issuer and the Indenture Trustee, may rescind
and annul such declaration and its consequences if:
(i) the Issuer has paid or deposited with the Indenture Trustee a sum
sufficient to pay:
(a) all payments of principal of and interest on all Notes and all other
amounts that would then be due hereunder or upon such Notes if the Event of
Default giving rise to such acceleration had not occurred; and
(b) all sums paid or advanced by the Indenture Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the Indenture
Trustee and its agents and counsel; and
(ii) all Events of Default, other than the nonpayment of the principal of the
Notes that has become due solely by such acceleration, have been cured or waived
as provided in Section 5.12.
No such rescission shall affect any subsequent default or impair any right
consequent thereto.
SECTION 5.3 Collection of Indebtedness and Suits for Enforcement by Indenture
-----------------------------------------------------------------
Trustee. The Issuer covenants that if (i) default is made in the payment of
- -------
any interest (including, subject to the limitations of Sections 2.7(d) and
8.2(c), any Note Interest Carryover) on any Note when the same becomes due and
payable, and such default continues for a period of five days, or (ii) default
is made in the payment of the principal of any Note when the same becomes due
and payable at the related Note Final Maturity Date, the Issuer shall, upon
demand of the Indenture Trustee, pay to it, for the benefit of the Noteholders,
the whole amount then due and payable on such Notes for
30
<PAGE>
principal and interest (and any Note Interest Carryover), with interest upon the
overdue principal, and, to the extent payment at such rate of interest shall be
legally enforceable, upon overdue installments of interest (and any Note
Interest Carryover), at the rate specified in Section 2.7 and in addition
thereto such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Indenture Trustee and its agents and counsel.
(a) In case the Issuer shall fail forthwith to pay such amounts upon such
demand, the Indenture Trustee, in its own name and as trustee of an express
trust, may institute a Proceeding for the collection of the sums so due and
unpaid, and may prosecute such Proceeding to judgment or final decree, and may
enforce the same against the Issuer or other obligor upon such Notes and collect
in the manner provided by law out of the property of the Issuer or other obligor
upon such Notes, wherever situated, the moneys adjudged or decreed to be
payable.
(b) If an Event of Default occurs and is continuing, the Indenture Trustee
may, as more particularly provided in Section 5.4, in its discretion, proceed to
protect and enforce its rights and the rights of the Noteholders, by such
appropriate Proceedings as the Indenture Trustee shall deem most effective to
protect and enforce any such rights, whether for the specific enforcement of any
covenant or agreement in this Indenture or in aid of the exercise of any power
granted herein, or to enforce any other proper remedy or legal or equitable
right vested in the Indenture Trustee by this Indenture or by law.
(c) In case there shall be pending, relative to the Issuer or any other
obligor upon the Notes or any Person having or claiming an ownership interest in
the Indenture Trust Estate, Proceedings under Title 11 of the United States Code
or any other applicable Federal or state bankruptcy, insolvency or other similar
law, or in case a receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Issuer or its property or such other obligor or Person,
or in case of any other, comparable judicial Proceedings relative to the Issuer
or other obligor upon the Notes, or to the creditors or property of the Issuer
or such other obligor, the Indenture Trustee, irrespective of whether the
principal of any Notes shall then be due and payable, as therein expressed or by
declaration or otherwise and irrespective of whether the Indenture Trustee shall
31
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have made any demand pursuant to the provisions of this Section, shall be
entitled and empowered, by intervention in such proceedings or otherwise:
(i) to file and prove a claim or claims for the whole amount of principal and
interest (including any Note Interest Carryover) owing and unpaid in respect of
the Notes and to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Indenture Trustee (including any
claim for reasonable compensation to the Indenture Trustee and each predecessor
Indenture Trustee, and their respective agents, attorneys and counsel, and for
reimbursement of all expenses and liabilities incurred, and all advances made,
by the Indenture Trustee and each predecessor Indenture Trustee, except as a
result of negligence or bad faith) and of the Noteholders allowed in such
Proceedings;
(ii) unless prohibited by applicable law and regulations, to vote on behalf of
the Noteholders in any election of a trustee, a standby trustee or Person
performing similar functions in any such Proceedings;
(iii) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute all amounts received with
respect to the claims of the Noteholders and of the Indenture Trustee on their
behalf; and
(iv) to file such proofs of claim and other papers or documents as may be
necessary or advisable in order to have the claims of the Indenture Trustee or
the Noteholders allowed in any judicial proceedings relative to the Issuer, its
creditors and its property;
and any trustee, receiver, liquidator, custodian or other similar official in
any such Proceeding is hereby authorized by each of such Noteholders to make
payments to the Indenture Trustee, and, in the event that the Indenture Trustee
shall consent to the making of payments directly to such Noteholders, to pay to
the Indenture Trustee such amounts as shall be sufficient to cover reasonable
compensation to the Indenture Trustee, each predecessor Indenture Trustee and
their respective agents, attorneys and counsel, and all other expenses and
liabilities incurred, and all advances made, by the Indenture Trustee and each
predecessor Indenture Trustee except as a result of negligence or bad faith.
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(d) Nothing herein contained shall be deemed to authorize the Indenture
Trustee to authorize or consent to or vote for or accept or adopt on behalf of
any Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Noteholder thereof or to
authorize the Indenture Trustee to vote in respect of the claim of any
Noteholder in any such proceeding except, as aforesaid, to vote for the election
of a trustee in bankruptcy or similar Person.
(e) All rights of action and of asserting claims under this Indenture, or
under any of the Notes, may be enforced by the Indenture Trustee without the
possession of any of the Notes or the production thereof in any trial or other
Proceedings relative thereto, and any such action or Proceedings instituted by
the Indenture Trustee shall be brought in its own name as trustee of an express
trust, and any recovery of judgment, subject to the payment of the expenses,
disbursements and compensation of the Indenture Trustee, each predecessor
Indenture Trustee and their respective agents and attorneys, shall be for the
ratable benefit of the Noteholders.
(f) In any Proceedings brought by the Indenture Trustee (and also any
Proceedings involving the interpretation of any provision of this Indenture to
which the Indenture Trustee shall be a party), the Indenture Trustee shall be
held to represent all the Noteholders, and it shall not be necessary to make any
Noteholder a party to any such Proceedings.
SECTION 5.4 Remedies; Priorities. If an Event of Default shall have
--------------------
occurred and be continuing, the Indenture Trustee may do one or more of the
following (subject to Section 5.5):
(a) (i) institute Proceedings in its own name and as trustee of an express
trust for the collection of all amounts then payable on the Notes or under this
Indenture with respect thereto, whether by declaration or otherwise, enforce any
judgment obtained, and collect from the Issuer and any other obligor upon such
Notes moneys adjudged due;
(ii) institute Proceedings from time to time for the complete or partial
foreclosure of this Indenture, with respect to the Indenture Trust Estate;
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(iii) exercise any remedies of a secured party under the UCC with
respect to the Trust Estate and take any other appropriate action to protect and
enforce the rights and remedies of the Indenture Trustee and the Noteholders;
(iv) sell the Indenture Trust Estate or any portion thereof or rights
or interest therein, at one or more public or private sales called and conducted
in any manner permitted by law; and/or
(v) elect to have the Eligible Lender Trustee maintain ownership of the
Trust Student Loans and continue to apply collections with respect to the Trust
Student Loans as if there had been no declaration of acceleration.
provided, however, that the Indenture Trustee may not sell or otherwise
- -------- -------
liquidate the Indenture Trust Estate following an Event of Default, other than
an Event of Default described in Section 5.1(i) or (ii), unless (A) the
Noteholders of 100% of the Outstanding Amount of the Notes consent thereto, (B)
the proceeds of such sale or liquidation distributable to the Noteholders are
sufficient to discharge in full all amounts then due and unpaid upon such Notes
for principal and interest or (C) the Indenture Trustee determines that the
Indenture Trust Estate will not continue to provide sufficient funds for the
payment of principal of and interest on the Notes as they would have become due
if the Notes had not been declared due and payable, and the Indenture Trustee
obtains the consent of Noteholders of 66-2/3% of the Outstanding Amount of the
Notes; provided, further, that the Indenture Trustee may not sell or otherwise
-------- -------
liquidate the Indenture Trust Estate following an Event of Default, other than
an Event of Default described in Section 5.1(i) or (ii), unless (D) the proceeds
of such sale or liquidation distributable to the Certificateholders plus the
----
proceeds of the sale or liquidation of the Trust Estate distributable to the
Certificateholders are sufficient to pay to the Certificateholders the
outstanding Certificate Balance plus accrued and unpaid return thereon or (E)
after receipt of notice from the Eligible Lender Trustee that the proceeds of
such sale or liquidation distributable to the Certificateholders plus the
----
proceeds of the sale or liquidation of the Trust Estate distributable to the
Certificateholders would not be sufficient to pay to the Certificateholders the
outstanding Certificate Balance plus accrued and unpaid return thereon, the
Certificateholders of at least a majority of the Certificate Balance consent
thereto. In determining such sufficiency or insufficiency with respect to
clauses (B), (C), (D) and (E), the Indenture Trustee may, but need not, obtain
and rely upon an opinion of an Independent investment banking or accounting firm
of national reputation as to the feasibility of such proposed action and as to
the
34
<PAGE>
feasibility of such proposed action and as to the sufficiency of the Indenture
Trust Estate and/or Trust Estate, as applicable, for such purpose.
(b) If the Indenture Trustee collects any money or property pursuant to this
Article V, it shall pay out the money or property in the following order:
FIRST: to the Indenture Trustee for amounts due under Section 6.7;
SECOND: to the Servicer for due and unpaid Primary Servicing Fees;
THIRD: to Noteholders for amounts due and unpaid on the Notes for interest
other than any Note Interest Carryover, ratably, without preference or priority
of any kind, according to the amounts due and payable on the Notes for such
interest;
FOURTH: to Noteholders for amounts due and unpaid on the Notes for
principal, ratably, without preference or priority of any kind, according to the
amounts due and payable on the Notes for principal;
FIFTH: to the Issuer for distribution to the Certificateholders in respect
of any unpaid Certificate Balance and unpaid return on the Certificates other
than any Certificate Return Carryover;
SIXTH: to the Servicer, for any unpaid Carryover Servicing Fees;
SEVENTH: to Noteholders for any unpaid Note Interest Carryover, ratably,
without preference or priority of any kind, according to the amount of such Note
Interest Carryover attributable to each Note;
EIGHTH: to the Issuer for distribution to the Certificateholders of any
unpaid Certificate Return Carryover; and
NINTH: to the Issuer, for distribution in accordance with the terms of the
Administration Agreement and the Trust Agreement.
The Indenture Trustee may fix a record date and payment date for any
payment to Noteholders pursuant to this Section. At least 15 days before such
record
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date, the Indenture Trustee shall mail to each Noteholder and the Issuer a
notice that states the record date, the payment date and the amount to be paid.
SECTION 5.5 Optional Preservation of the Trust Student Loans. If the Notes
------------------------------------------------
have been declared to be due and payable under Section 5.2 following an Event of
Default and such declaration and its consequences have not been rescinded and
annulled, the Indenture Trustee may, but need not, elect to maintain possession
of the Indenture Trust Estate. It is the desire of the parties hereto and the
Noteholders that there be at all times sufficient funds for the payment of
principal of and interest (including any Note Interest Carryover) on the Notes,
and the Indenture Trustee shall take such desire into account when determining
whether or not to maintain possession of the Indenture Trust Estate. In
determining whether to maintain possession of the Indenture Trust Estate, the
Indenture Trustee may, but need not, obtain and rely upon an opinion of an
Independent investment banking or accounting firm of national reputation as to
the feasibility of such proposed action and as to the sufficiency of the
Indenture Trust Estate for such purpose.
SECTION 5.6 Limitation of Suits. No Noteholder shall have any right to
-------------------
institute any Proceeding, judicial or otherwise, with respect to this Indenture,
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless:
(i) such Noteholder has previously given written notice to the Indenture
Trustee of a continuing Event of Default;
(ii) the Noteholders of not less than 25% of the Outstanding Amount of
the Notes have made written request to the Indenture Trustee to institute
such Proceeding in respect of such Event of Default in its own name as
Indenture Trustee hereunder;
(iii) such Noteholder or Noteholders have offered to the Indenture
Trustee reasonable indemnity against the costs, expenses and liabilities to
be incurred in complying with such request;
(iv) the Indenture Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute such Proceeding; and
36
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(v) no direction inconsistent with such written request has been given
to the Indenture Trustee during such 60-day period by the Noteholders of a
majority of the Outstanding Amount of the Notes;
it being understood and intended that no one or more Noteholders shall
have any right in any manner whatever by virtue of, or by availing of, any
provision of this indenture to affect, disturb or prejudice the rights of any
other Noteholders or to obtain or to seek to obtain priority or preference over
any other Noteholders or to enforce any right under this Indenture, except in
the manner herein provided.
In the event the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Noteholders, each
representing less than a majority of the Outstanding Amount of the Notes, the
Indenture Trustee in its sole discretion may determine what action, if any,
shall be taken, notwithstanding any other provisions of this Indenture.
SECTION 5.7 Unconditional Rights of Noteholders To Receive Principal
------------------------------------------------------------
and Interest. Notwithstanding any other provisions in this Indenture, any
- ------------
Noteholder shall have the right, which is absolute and unconditional, to receive
payment of the principal of and interest on such Note on or after the respective
due dates thereof expressed in such Note or in this Indenture (or, in the case
of redemption, on or after the Redemption Date) and to institute suit for the
enforcement of any such payment, and such right shall not be impaired without
the consent of such Noteholder.
SECTION 5.8 Restoration of Rights and Remedies. If the Indenture Trustee
----------------------------------
or any Noteholder has instituted any Proceeding to enforce any right or remedy
under this Indenture and such Proceeding has been discontinued or abandoned for
any reason or has been determined adversely to the Indenture Trustee or to such
Noteholder, then and in every such case the Issuer, the Indenture Trustee and
the Noteholders shall, subject to any determination in such Proceeding, be
restored to severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Indenture Trustee and the Noteholders
shall continue as though no such Proceeding had been instituted.
SECTION 5.9 Rights and Remedies Cumulative. No right or remedy herein
------------------------------
conferred upon or reserved to the Indenture Trustee or to the Noteholders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall,
37
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to the extent permitted by law, be cumulative and in addition to every other
right and remedy given hereunder or now or hereafter existing at law or in
equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 5.10 Delay or Omission Not a Waiver. No delay or omission of the
------------------------------
Indenture Trustee or any Noteholder to exercise any right or remedy accruing
upon any Default shall impair any such right or remedy or constitute a waiver of
any such Default or an acquiescence therein. Every right and remedy given by
this Article V or by law to the Indenture Trustee or to the Noteholders may be
exercised from time to time, and as often as may be deemed expedient, by the
Indenture Trustee or by the Noteholders, as the case may be.
SECTION 5.11 Control by Noteholders. The Noteholders of a majority of the
----------------------
Outstanding Amount of the Notes shall have the right to direct the time, method
and place of conducting any Proceeding for any remedy available to the Indenture
Trustee with respect to the Notes or exercising any trust or power conferred on
the Indenture Trustee; provided that
--------
(i) such direction shall not be in conflict with any rule of law or with this
Indenture;
(ii) subject to the express terms of Section 5.4, any direction to the
Indenture Trustee to sell or liquidate the Indenture Trust Estate shall be
by the Noteholders of not less than 100% of the Outstanding Amount of the
Notes;
(iii) if the conditions set forth in Section 5.5 have been satisfied and the
Indenture Trustee elects to retain the Indenture Trust Estate pursuant to such
Section, then any direction to the Indenture Trustee by Noteholders of less than
100% of the Outstanding Amount of the Notes to sell or liquidate the Indenture
Trust Estate shall be of no force and effect; and
(iv) the Indenture Trustee may take any other action deemed proper by the
Indenture Trustee that is not inconsistent with such direction;
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provided, however, that, subject to Section 6.1, the Indenture Trustee need
- -------- -------
not take any action that it determines might involve it in liability or might
materially adversely affect the rights of any Noteholders not consenting to
such action.
SECTION 5.12 Waiver of Past Defaults. Prior to the time a judgment or decree
-----------------------
for payment of money due has been obtained as described in Section 5.2, the
Noteholders of not less than a majority of the Outstanding Amount of the Notes
may waive any past Default and its consequences except a Default (a) in payment
when due of principal of or interest (including, subject to the limitations of
Sections 2.7(d) and 8.2(c), any Note Interest Carryover) on any of the Notes or
(b) in respect of a covenant or provision hereof which cannot be modified or
amended without the consent of each Noteholder. In the case of any such waiver,
the Issuer, the Indenture Trustee and the Noteholders shall be restored to their
former positions and rights hereunder, respectively; but no such waiver shall
extend to any subsequent or other Default or impair any right consequent
thereto.
Upon any such waiver, such Default shall cease to exist and be deemed to have
been cured and not to have occurred for every purpose of this Indenture; but no
such waiver shall extend to any subsequent or other Default or impair any right
consequent thereto.
SECTION 5.13 Undertaking for Costs. All parties to this Indenture agree, and
---------------------
each Noteholder by such Noteholder's acceptance of any Note shall be deemed to
have agreed, that any court may in its discretion require, in any suit for the
enforcement of any right or remedy under this Indenture, or in any suit against
the Indenture Trustee for any action taken, suffered or omitted by it as
Indenture Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to (a) any suit instituted by the
Indenture Trustee, (b) any suit instituted by any Noteholder, or group of
Noteholders, in each case holding in the aggregate more than 10% of the
Outstanding Amount of the Notes or (c) any suit Instituted by any Noteholder for
the enforcement of the payment of principal of or interest (including any Note
Interest Carryover) on any Note on or after the respective due dates expressed
in such Note and in this Indenture (or, in the case of redemption, on or after
the Redemption Date).
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SECTION 5.14 Waiver of Stay or Extension Laws. The Issuer covenants
--------------------------------
(to the extent that it may lawfully do so) that it will not at any time insist
upon, or plead or in any manner whatsoever, claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, that may affect the covenants or the performance of this
Indenture; and the Issuer (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Indenture Trustee, but will suffer and permit the execution of every such
power as though no such law had been enacted.
SECTION 5.15 Action on Notes. The Indenture Trustee's right to seek
---------------
and recover judgment on the Notes or under this Indenture shall not be affected
by the seeking, obtaining or application of any other relief under or with
respect to this Indenture. Neither the lien of this Indenture nor any rights or
remedies of the Indenture Trustee or the Noteholders shall be impaired by the
recovery of any judgment by the Indenture Trustee against the Issuer or by the
levy of any execution under such judgment upon any portion of the Indenture
Trust Estate or upon any of the assets of the Issuer. Any money or property
collected by the Indenture Trustee shall be applied in accordance with Section
5.4(b).
SECTION 5.16 Performance and Enforcement of Certain Obligations. (a)
--------------------------------------------------
Promptly following a request from the Indenture Trustee to do so and at the
Administrator's expense, the Issuer shall take all such lawful action as the
Indenture Trustee may request to compel or secure the performance and observance
by the Seller, the Student Loan Marketing Association, the Administrator and the
Servicer, as applicable, of each of their obligations to the Issuer, whether
directly or by assignment, under or in connection with the Sale Agreement, the
Purchase Agreement, the Administration Agreement and the Servicing Agreement,
respectively, in accordance with the terms thereof, and to exercise any and all
rights, remedies, powers and privileges lawfully available to the Issuer under
or in connection with the Sale Agreement, the Purchase Agreement, the
Administration Agreement and the Servicing Agreement, as the case may be, to the
extent and in the manner directed by the Indenture Trustee, including the
transmission of notices of default on the part of the Seller, the Student Loan
Marketing Association, the Administrator or the Servicer thereunder and the
institution of legal or administrative actions or proceedings to compel or
secure performance by the Seller, the Student Loan Marketing Association, the
Administrator
40
<PAGE>
or the Servicer of each of their obligations under the Sale Agreement, the
Purchase Agreement, the Administration Agreement and the Servicing Agreement,
respectively.
(b) If an Event of Default has occurred and is continuing, the Indenture
Trustee may, and at the written direction of the Noteholders of 66-2/3% of the
Outstanding Amount of the Notes shall, exercise all rights, remedies, powers,
privileges and claims of the Issuer against the Seller, the Student Loan
Marketing Association, the Administrator or the Servicer under or in connection
with the Sale Agreement, the Purchase Agreement, the Administration Agreement
and the Servicing Agreement, respectively, including the right or power to take
any action to compel or secure performance or observance by the Seller, the
Student Loan Marketing Association, the Administrator or the Servicer of each of
their obligations to the Issuer thereunder, whether directly or by assignment,
and to give any consent, request, notice, direction, approval, extension or
waiver under the Sale Agreement, the Purchase Agreement, the Administration
Agreement and the Servicing Agreement, respectively, and any right of the Issuer
to take such action shall be suspended.
ARTICLE VI
The Indenture Trustee
---------------------
SECTION 6.1 Duties of Indenture Trustee. (a) If an Event of Default
---------------------------
has occurred and is continuing, the Indenture Trustee shall exercise the rights
and powers vested in it by this Indenture and use the same degree of care and
skill in their exercise as a prudent person would exercise or use under the
circumstances in the conduct such person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Indenture Trustee undertakes to perform such duties and
only such duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture against the Indenture
Trustee; and
(ii) in the absence of bad faith on its part, the Indenture Trustee
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Indenture Trustee and
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conforming to the requirements of this Indenture; provided, however, that the
-------- -------
Indenture Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
(c) The Indenture Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section;
(ii) the Indenture Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer unless it is proved that
the Indenture Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Indenture Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 5.11.
(d) The Indenture Trustee shall not be liable for interest on any money
received by it except as the Indenture Trustee may agree in writing with the
Issuer.
(e) Money held in trust by the Indenture Trustee need not be segregated
from other funds except to the extent required by law or the terms of this
Indenture or the other Basic Documents.
(f) No provision of this Indenture shall require the Indenture Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayments
of such funds or adequate indemnity satisfactory to it against any loss,
liability or expense is not reasonably assured to it.
(g) Except as expressly provided in the Basic Documents, the Indenture
Trustee shall have no obligation to administer, service or collect the Trust
Student Loans or to maintain, monitor or otherwise supervise the administration,
servicing or collection of the Trust Student Loans.
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(h) In the event that the Indenture Trustee is the Paying Agent or the
Note Registrar, the rights and protections afforded to the Indenture Trustee
pursuant to this Indenture shall also be afforded to the Indenture Trustee in
its capacity as Paying Agent or Note Registrar.
(i) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Indenture Trustee
shall be subject to the provisions of this Section and to the provisions of the
TIA.
SECTION 6.2 Rights of Indenture Trustee. The Indenture Trustee may
---------------------------
rely on any document believed by it to be genuine and to have been signed or
presented by the proper Person. The Indenture Trustee need not investigate any
fact or matter stated in such document.
(b) Before the Indenture Trustee acts or refrains from acting, it may
require and shall be entitled to receive an Officers' Certificate of the Issuer
and/or an Opinion of Counsel. The Indenture Trustee shall not be liable for any
action it takes or omits to take in good faith in reliance on such Officers'
Certificate or Opinion of Counsel.
(c) The Indenture Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys or a custodian or nominee, and the Indenture Trustee shall
not be responsible for any misconduct or negligence on the part of, or for the
supervision of, any such agent, attorney, custodian or nominee appointed with
due care by it hereunder.
(d) The Indenture Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers; provided, however, that the Indenture Trustee's conduct does
-------- -------
not constitute willful misconduct, negligence or bad faith.
(e) The Indenture Trustee may consult with counsel, and the advice or
opinion of counsel with respect to legal matters relating to this Indenture and
the Notes shall be full and complete authorization and protection from liability
in respect to any action taken, omitted or suffered by it hereunder in good
faith and in accordance with the advice or opinion of such counsel.
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SECTION 6.3 Individual Rights of Indenture Trustee. The Indenture
--------------------------------------
Trustee in its individual or any other capacity may become the owner or pledgee
of Notes and may otherwise deal with the Issuer or its Affiliates with the same
rights it would have if it were not Indenture Trustee. Any Paying Agent, Note
Registrar, co-registrar or co-paying agent may do the same with like rights.
However, the Indenture Trustee must comply with Sections 6.11 and 6.12.
SECTION 6.4 Indenture Trustee's Disclaimer. The Indenture Trustee
------------------------------
shall not be responsible for and makes no representation as to the validity or
adequacy of this Indenture or the Notes, it shall not be accountable for the
Issuer's use of the proceeds from the Notes, and it shall not be responsible for
any statement of the Issuer in the Indenture or in any document issued in
connection with the sale of the Notes or in the Notes other than the Indenture
Trustee's certificate of authentication.
SECTION 6.5 Notice of Defaults; Seller Insolvency. (a) If a Default
-------------------------------------
occurs and is continuing and if it is either actually known or written notice of
the existence thereof has been delivered to a Responsible Officer of the
Indenture Trustee, the Indenture Trustee shall mail notice of the Default to
each Noteholder within 90 days and to each Rating Agency as soon as practicable
within 30 days after it occurs. Except in the case of a Default in payment of
principal of or interest (including any Note Interest Carryover) on any Note
(including payments pursuant to the mandatory redemption provisions of such
Note), the Indenture Trustee may withhold the notice if and so long as a
committee of its Responsible Officers in good faith determines that withholding
the notice is in the interests of Noteholders. Except as provided in the first
sentence of this Section 6.5(a), in no event shall the Indenture Trustee be
deemed to have knowledge of a Default or an Event of Default.
(b) If the Indenture Trustee receives notice from the Eligible Lender
Trustee of the occurrence of an Insolvency Event with respect to the Seller
pursuant to Section 9.2 of the Trust Agreement, the Indenture Trustee shall give
prompt written notice to the Noteholders of the occurrence of such event and of
the effect of such event under such Section 9.2. Upon termination of the Trust
pursuant to such Section 9.2, the Indenture Trustee shall, if so directed by the
Eligible Lender Trustee, sell the Trust Estate (other than the Trust Accounts)
in a commercially reasonable manner and on commercially reasonable terms. The
proceeds of any such sale shall be treated as collections under the
Administration Agreement.
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SECTION 6.6 Reports by Indenture Trustee to Noteholders. The
-------------------------------------------
Indenture Trustee shall deliver to each Noteholder (and to each Person who was a
Noteholder at any time during the applicable calendar year) such information as
may be required to enable such holder to prepare its Federal and state income
tax returns. Within 60 days after each December 31 beginning with the December
31 following the date of this Indenture, the Indenture Trustee shall mail to
each Noteholder a brief report as of such December 31 that complies with TIA (S)
313(a) if required by said section. The Indenture Trustee shall also comply with
TIA (S) 313(b). A copy of each such report required pursuant to TIA (S) 313(a)
or (b) shall, at the time of such transaction to Noteholders, be filed by the
Indenture Trustee with the Commission and with each securities exchange, if any,
upon which the Notes are listed, provided that the Issuer has previously
notified the Indenture Trustee of such listing.
SECTION 6.7 Compensation and Indemnity. The Issuer shall cause the
Seller to pay to the Indenture Trustee reasonable compensation for its services
in accordance with a separate agreement between the Seller and the Indenture
Trustee and shall cause the Seller to reimburse the Indenture Trustee for all
reasonable out-of-pocket expenses incurred or made by it as provided in such
separate agreement. The Indenture Trustee's compensation shall not be limited by
any law on compensation of a trustee of an express trust. The Issuer shall cause
the Administrator to indemnify the Indenture Trustee and its directors,
officers, employees and agents against any and all loss, liability or expense
(including attorneys' fees) incurred by it in connection with the administration
of this trust and the performance of its duties hereunder and under the other
Basic Documents. The Indenture Trustee shall notify the Issuer and the
Administrator promptly of any claim for which it may seek indemnity. Failure by
the Indenture Trustee to so notify the Issuer and the Administrator shall not
relieve the Issuer or the Administrator of its obligations hereunder and under
the other Basic Documents. The Issuer shall cause the Administrator to defend
the claim and the Administrator shall not be liable for the legal fees and
expenses of the Indenture Trustee after it has assumed such defense; provided,
--------
however, that, in the event that there may be a conflict between the positions
- -------
of the Indenture Trustee and the Administrator in conducting the defense of such
claim, the Indenture Trustee shall be entitled to separate counsel acceptable to
it in its sole discretion the reasonable fees and expenses of which shall be
paid by the Administrator on behalf of the Issuer. Neither the Issuer nor the
Administrator need reimburse any expense or indemnify against any
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loss, liability or expense incurred by the Indenture Trustee through the
Indenture Trustee's own willful misconduct, negligence or bad faith.
The Issuer's payment obligations to the Indenture Trustee pursuant to
this Section shall survive the discharge of this Indenture. When the Indenture
Trustee incurs expenses after the occurrence of a Default specified in Section
5.1(iv) or (v) with respect to the Issuer, the expenses are intended to
constitute expenses of administration under Title 11 of the United States Code
or any other applicable Federal or state bankruptcy, insolvency or similar law.
SECTION 6.8 Replacement of Indenture Trustee. No resignation or
--------------------------------
removal of the Indenture Trustee and no appointment of a successor Indenture
Trustee shall become effective until the acceptance of appointment by the
successor Indenture Trustee pursuant to this Section 6.8. The Indenture Trustee
may resign at any time by so notifying the Issuer. The Noteholders of a majority
in Outstanding Amount of the Notes may remove the Indenture Trustee by so
notifying the Indenture Trustee and may appoint a successor Indenture Trustee.
The Issuer shall remove the Indenture Trustee if:
(i) the Indenture Trustee fails to comply with Section 6.11;
(ii) an Insolvency Event occurs with respect to the Indenture
Trustee;
(iii) a receiver or other public officer takes charge of the
Indenture Trustee or its property; or
(iv) the Indenture Trustee otherwise becomes incapable of acting.
If the Indenture Trustee resigns or is removed or if a vacancy exists
in the office of Indenture Trustee for any reason (the Indenture Trustee in such
event being referred to herein as the retiring Indenture Trustee), the Issuer
shall promptly appoint a successor Indenture Trustee.
A successor Indenture Trustee shall deliver a written acceptance of
its appointment to the retiring Indenture Trustee and to the Issuer. Thereupon
the resignation or removal of the retiring Indenture Trustee shall become
effective, and the
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successor Indenture Trustee shall have all the rights, powers and duties of the
Indenture Trustee under this Indenture. The successor Indenture Trustee shall
mail a notice of its succession to Noteholders. The retiring Indenture Trustee
shall promptly transfer all property held by it as Indenture Trustee to the
successor Indenture Trustee.
If a successor Indenture Trustee does not take office within 60 days
after the retiring Indenture Trustee resigns or is removed, the retiring
Indenture Trustee, the Issuer or the Noteholders of a majority in Outstanding
Amount of the Notes may petition any court of competent jurisdiction for the
appointment of a successor Indenture Trustee. The successor Indenture Trustee
shall give notice of its appointment as successor Indenture Trustee to the
Rating Agencies.
If the Indenture Trustee fails to comply with Section 6.11, any
Noteholder may petition any court of competent jurisdiction for the removal of
the Indenture Trustee and the appointment of a successor Indenture Trustee.
Notwithstanding the replacement of the Indenture Trustee pursuant to
this Section, the Issuer's and the Administrator's obligations under Section 6.7
shall continue for the benefit of the retiring Indenture Trustee.
SECTION 6.9 Successor Indenture Trustee by Merger. If the Indenture
-------------------------------------
Trustee consolidates with, merges or converts into, or transfers all or
substantially all its corporate trust business or assets to, another corporation
or banking association, the resulting, surviving or transferee corporation
without any further act shall be the successor Indenture Trustee, provided that
such corporation or banking association shall be otherwise qualified and
eligible under Section 6.11. The Indenture Trustee shall provide the Rating
Agencies prior written notice of any such transaction.
In case at the time such successor or successors by merger,
conversion or consolidation to the Indenture Trustee shall succeed to the trusts
created by this Indenture any of the Notes shall have been authenticated but not
delivered, any such successor to the Indenture Trustee may adopt the certificate
of authentication of any predecessor trustee, and deliver such Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Indenture Trustee may authenticate such
Notes either in the name of any predecessor hereunder or in the name of the
successor to the Indenture Trustee; and in all such cases such
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certificates shall have the full force which it is anywhere in the Notes or in
this Indenture provided that the certificate of the Indenture Trustee shall
have.
SECTION 6.10 Appointment of Co-Trustee or Separate Trustee. (a)
---------------------------------------------
Notwithstanding any other provisions of this Indenture, at any time, for the
purpose of meeting any legal requirement of any jurisdiction in which any part
of the Indenture Trust Estate may at the time be located, the Indenture Trustee
shall have the power and may execute and deliver all instruments to appoint one
or more Persons to act as a co-trustee or co-trustees, or separate trustee or
separate trustees, of all or any part of the Indenture Trust Estate, and to vest
in such Person or Persons, in such capacity and for the benefit of the
Noteholders, such title to the Indenture Trust Estate, or any part hereof, and,
subject to the other provisions of this Section, such powers, duties,
obligations, rights and trusts as the Indenture Trustee may consider necessary
or desirable. No such appointment shall relieve the Indenture Trustee of its
obligations hereunder. No co-trustee or separate trustee hereunder shall be
required to meet the terms of eligibility as a successor trustee under Section
6.11 and no notice to Noteholders of the appointment of any co-trustee or
separate trustee shall be required under Section 6.8 hereof.
(b) Every separate trustee and co-trustee shall, to the extent permitted
by law, be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or imposed
upon the Indenture Trustee shall be conferred or imposed upon and exercised or
performed by the Indenture Trustee and such separate trustee or co-trustee
jointly (it being understood that such separate trustee or co-trustee is not
authorized to act separately without the Indenture Trustee joining in such act),
except to the extent that under any law of any jurisdiction in which any
particular act or acts are to be performed the Indenture Trustee shall be
incompetent or unqualified to perform such act or acts, in which event such
rights, powers, duties and obligations (including the holding of title to the
Indenture Trust Estate or any portion thereof in any such jurisdiction) shall be
exercised and performed singly by such separate trustee or co-trustee, but
solely at the direction of the Indenture Trustee;
(ii) no trustee hereunder shall be personally liable by reason of
any act or omission of any other trustee hereunder; and
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(iii) the Indenture Trustee may at any time accept the resignation of
or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Indenture Trustee
shall be deemed to have been given to each of the then separate trustees and co-
trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Indenture and
the conditions of this Article VI. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Indenture Trustee or separately, as may be provided therein, subject to all the
provisions of this Indenture, specifically including every provision of this
Indenture relating to the conduct of, affecting the liability of, or affording
protection to, the Indenture Trustee. Every such instrument shall be filed with
the Indenture Trustee.
(d) Any separate trustee or co-trustee may at any time constitute the
Indenture Trustee, its agent or attorney-in-fact with full power and authority,
to the extent not prohibited by law, to do any lawful act under or in respect of
this Indenture on its behalf and in its name. If any separate trustee or co-
trustee shall die, become incapable of acting, resign or be removed, all its
estates, properties, rights, remedies and trusts shall vest in and be exercised
by the Indenture Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
SECTION 6.11 Eligibility; Disqualification. The Indenture Trustee
-----------------------------
shall at all times satisfy the requirements of TIA (S) 310(a) and the
requirements of an "eligible lender" under 20 USC (S)1085(d). The Indenture
Trustee shall have a combined capital and surplus of at least $50,000,000 as set
forth in its most recent published annual report of condition and it shall have
a long-term senior unsecured debt rating of not less than investment grade by
each of the Rating Agencies. The Indenture Trustee shall comply with TIA (S)
310(b), including the optional provision permitted by the second sentence of TIA
(S) 310(b)(9); provided, however, that there shall be excluded from the
-------- -------
operation of TIA (S) 310(b)(1) any indenture or indentures under which other
securities of the Issuer are outstanding if the requirements for such exclusion
set forth in TIA (S) 310(b)(1) are met.
SECTION 6.12 Preferential Collection of Claims Against Issuer. The
------------------------------------------------
Indenture Trustee shall comply with TIA (S) 311(a), excluding any creditor
relationship
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listed in TIA (S) 311(b). An Indenture Trustee who has resigned or been removed
shall be subject to TIA (S) 311(a) to the extent indicated.
ARTICLE VII
Noteholders' Lists and Reports
------------------------------
SECTION 7.1 Issuer To Furnish Indenture Trustee Names and Addresses of
----------------------------------------------------------
Noteholders. The Issuer will furnish or cause to be furnished to the Indenture
- -----------
Trustee (a) not more than five days after the earlier of (i) each Record Date
and (ii) three months after the last Record Date, a list, in such form as the
Indenture Trustee may reasonably require, of the names and addresses of the
Noteholders as of such Record Date, (b) at such other times as the Indenture
Trustee may request in writing, within 30 days after receipt by the Issuer of
any such request, a list of similar form and content as of a date not more than
10 days prior to the time such list is furnished; provided, however, that so
-------- -------
long as the Indenture Trustee is the Note Registrar, no such list shall be
required to be furnished.
SECTION 7.2 Preservation of Information; Communications to
----------------------------------------------
Noteholders. The Indenture Trustee shall preserve, in as current a form as is
- -----------
reasonably practicable, the names and addresses of the Noteholders contained in
the most recent list furnished to the Indenture Trustee as provided in Section
7.1 and the names and addresses of Noteholders received by the Indenture Trustee
in its capacity as Note Registrar. The Indenture Trustee may destroy any list
furnished to it as provided in such Section 7.1 upon receipt of a new list so
furnished.
(a) Noteholders may communicate pursuant to TIA (S) 312(b) with other
Noteholders with respect to their rights under this Indenture or under the
Notes. Upon receipt by the Indenture Trustee of any request by three or more
Noteholders or by one or more holders of Notes evidencing not less than 25% of
the Outstanding Amount of the Notes to receive a copy of the current list of
Noteholders (whether or not made pursuant to TIA (S) 312(b)), the Indenture
Trustee shall promptly notify the Administrator thereof by providing to the
Administrator a copy of such request and a copy of the list of Noteholders
produced in response thereto.
(b) The Issuer, the Indenture Trustee and the Note Registrar shall have
the protection of TIA (S) 312(c).
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(c) On each Distribution Date the Indenture Trustee shall provide to each
Noteholder of record as of the related Record Date the information provided by
the Administrator to the Indenture Trustee on the related Determination Date
pursuant to Section 2.9 of the Administration Agreement.
(d) The Indenture Trustee shall furnish to the Noteholders promptly upon
receipt of a written request therefor, duplicates or copies of all reports,
notices, requests, demands, certificates, financial statements and any other
instruments furnished to the Indenture Trustee under the Basic Documents. The
Indenture Trustee shall furnish to the Noteholders promptly upon receipt thereof
from the Eligible Lender Trustee notice of any amendment of the Administration
Agreement pursuant to Section 8.5 of the Administration Agreement.
SECTION 7.3 Reports by Issuer. (a) The Issuer shall:
-----------------
(i) file with the Indenture Trustee, within 15 days after the
Issuer is required to file the same with the Commission, copies of the annual
reports and of the information, documents and other reports (or copies of such
portions of any of the foregoing as the Commission may from time to time by
rules and regulations prescribe) which the Issuer may be required to file with
the Commission pursuant to Section 13 or 15(d) of the Exchange Act;
(ii) file with the Indenture Trustee and the Commission in
accordance with rules and regulations prescribed from time to time by the
Commission such additional information, documents and reports with respect to
compliance by the Issuer with the conditions and covenants of this Indenture as
may be required from time to time by such rules and regulations; and
(iii) supply to the Indenture Trustee (and the Indenture Trustee shall
transmit by mail to all Noteholders described in TIA (S) 313(c)) such summaries
of any information, documents and reports required to be filed by the Issuer
pursuant to clauses (i) and (ii) of this Section 7.3(a) as may be required by
rules and regulations prescribed from time to time by the Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of the Issuer
shall end on December 31 of each year.
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ARTICLE VIII
Accounts, Disbursements and Releases
------------------------------------
SECTION 8.1 Collection of Money. Except as otherwise expressly
-------------------
provided herein, the Indenture Trustee may demand payment or delivery of, and
shall receive and collect, directly and without intervention or assistance of
any fiscal agent or other intermediary, all money and other property payable to
or receivable by the Indenture Trustee pursuant to this Indenture. The Indenture
Trustee shall apply all such money received by it on behalf of Noteholders
pursuant to the Administration Agreement as provided in this Indenture. Except
as otherwise expressly provided in this Indenture, if any default occurs in the
making of any payment or performance under any agreement or instrument that is
part of the Indenture Trust Estate, the Indenture Trustee may take such action
as may be appropriate to enforce such payment or performance, including the
institution and prosecution of appropriate Proceedings. Any such action shall be
without prejudice to any right to claim a Default under this Indenture and any
right to proceed thereafter as provided in Article V.
SECTION 8.2 Trust Accounts. (a) On or prior to the Closing Date,
--------------
the Issuer shall cause the Administrator to establish and maintain, in the name
of the Indenture Trustee, for the benefit of the Noteholders and the
Certificateholders, the Trust Accounts as provided in Section 2.3 of the
Administration Agreement.
(b) On or before the Business Day preceding each Distribution Date, all
Available Funds with respect to the preceding Collection Period will be
deposited in the Collection Account as provided in Section 2.4 of the
Administration Agreement. On or before each Distribution Date, the Noteholders'
Distribution Amount and any Note Interest Carryover, if any, with respect to the
preceding Collection Period will be distributed from the Collection Account and
any other Trust Account to the Indenture Trustee (or any other Paying Agent) on
behalf of the Noteholders as provided in Sections 2.7 and 2.8 of the
Administration Agreement.
(c) On each Distribution Date and Redemption Date, the Indenture Trustee
(or any other Paying Agent) shall distribute all amounts received by it on
behalf of Noteholders pursuant to paragraph (b) above to Noteholders in respect
of the Notes to the extent of amounts payable on the Notes for principal,
interest and any Note Interest
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Carryover in the following amounts and in the following order of priority
(except as otherwise provided in Section 5.4(b)):
(i) the Noteholders' Interest Distribution Amount, to the Noteholders
in an amount equal to the accrued and unpaid interest on the Notes at the
respective Note Rates; provided that if there are not sufficient funds received
--------
to pay the entire amount of accrued and unpaid interest then due on the Notes at
the respective Note Rates, the amounts so received shall be applied to the
payment of such interest on the Notes on a pro rata basis;
(ii) the Noteholders' Principal Distribution Amount, to the
Noteholders of the Class A-1 Notes until the Outstanding Amount of the Class A-1
Notes is reduced to zero; provided, that if there are not sufficient funds
received to pay the Outstanding Amount of the Class A-1 Notes, the amounts so
received shall be applied to the payment of principal on the Class A-1 Notes on
a pro rata basis;
(iii) the Noteholders' Principal Distribution Amount, to the
Noteholders of the Class A-2 Notes until the Outstanding Amount of the Class A-2
Notes is reduced to zero; provided, that if there are not sufficient funds
received to pay the Outstanding Amount of the Class A-2 Notes, the amounts so
received shall be applied to the payment of principal on the Class A-2 Notes on
a pro rata basis; and
(iv) the Note Interest Carryover, if any, to the Noteholders; provided
that if insufficient funds are received to pay the entire Note Interest
Carryover, the amounts so received shall be applied to the payment of such Note
Interest Carryover on a pro rata basis.
SECTION 8.3 General Provisions Regarding Accounts. (a) So long as
-------------------------------------
no Default shall have occurred and be continuing, all or a portion of the funds
in the Trust Accounts shall be invested in Eligible Investments and reinvested
by the Indenture Trustee upon Issuer Order, subject to the provisions of Section
2.3B of the Administration Agreement. All income or other gain from investments
of moneys deposited in the Trust Accounts shall be deposited by the Indenture
Trustee in the Collection Account, and any loss resulting from such investments
shall be charged to such Trust Account. The Issuer will not direct the Indenture
Trustee to make any investment of any funds or to sell any investment held in
any of the Trust Accounts unless the security interest granted and perfected in
such account will continue to be perfected in
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such investment or the proceeds of such sale, in either case without any further
action by any Person, and, in connection with any direction to the Indenture
Trustee to make any such investment or sale, if requested by the Indenture
Trustee, the Issuer shall deliver to the Indenture Trustee an Opinion of
Counsel, acceptable to the Indenture Trustee, to such effect.
(b) Subject to Section 6.1(c), the Indenture Trustee shall not in any way
be held liable for the selection of Eligible Investments or by reason of any
insufficiency in any of the Trust Accounts resulting from any loss on any
Eligible Investment included therein except for losses attributable to the
Indenture Trustee's failure to make payments on such Eligible Investments issued
by the Indenture Trustee, in its commercial capacity as principal obligor and
not as trustee, in accordance with their terms.
(c) If (i) the Issuer shall have failed to give investment directions
for any funds on deposit in the Trust Accounts to the Indenture Trustee by 10:00
a.m. Eastern Time (or such other time as may be agreed by the Issuer and
Indenture Trustee) on any Business Day; or (ii) a Default shall have occurred
and be continuing with respect to the Notes but the Notes shall not have been
declared due and payable pursuant to Section 5.2, or, if such Notes shall have
been declared due and payable following an Event of Default, amounts collected
or receivable from the Indenture Trust Estate are being applied in accordance
with Section 5.5 as if there had not been such a declaration; then the Indenture
Trustee shall invest and reinvest funds in the Trust Accounts in the Eligible
Investments described in clause (d) of the definition thereof.
SECTION 8.4 Release of Indenture Trust Estate. (a) Subject to
---------------------------------
the payment of its fees and expenses pursuant to Section 6.7, the Indenture
Trustee may, and when required by the provisions of this Indenture shall,
execute instruments to release property from the lien of this Indenture, or
convey the Indenture Trustee's interest in the same, in a manner and under
circumstances that are not inconsistent with the provisions of this Indenture.
No party relying upon an instrument executed by the Indenture Trustee as
provided in this Article VIII shall be bound to ascertain the Indenture
Trustee's authority, inquire into the satisfaction of any conditions precedent
or see to the application of any moneys.
(b) The Indenture Trustee shall, at such time as there are no Notes
Outstanding and all sums due the Indenture Trustee pursuant to Section 6.7 have
been paid, release any remaining portion of the Indenture Trust Estate that
secured the Notes
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from the lien of this Indenture and release to the Issuer or any other Person
entitled thereto any funds then on deposit in the Trust Accounts. The Indenture
Trustee shall release property from the lien of this Indenture pursuant to this
Section 8.4(b) only upon receipt of an Issuer Request accompanied by an
Officers' Certificate of the Issuer, an Opinion of Counsel and (if required by
the TIA) Independent Certificates in accordance with TIA (S)(S) 314(c) and
314(d)(1) meeting the applicable requirements of Section 11.1.
(c) Each Noteholder, by the acceptance of a Note, acknowledges that from
time to time the Indenture Trustee shall release the lien of this Indenture on
any Trust Student Loan to be sold to (i) the Seller in accordance with Section 6
of the Sale Agreement, (ii) to the Servicer in accordance with Section 3.5 of
the Servicing Agreement and (iii) to another eligible lender holding one or more
Serial Loans with respect to such Trust Student Loan, in accordance with Section
3.11E of the Servicing Agreement, and each Noteholder, by the acceptance of a
Note, consents to any such release.
SECTION 8.5 Opinion of Counsel. The Indenture Trustee shall
receive at least seven days' notice when requested by the Issuer to take any
action pursuant to Section 8.4(a), accompanied by copies of any instruments
involved, and the Indenture Trustee shall also require, except in connection
with any action contemplated by Section 8.4(c), as a condition to such action,
an Opinion of Counsel, in form and substance satisfactory to the Indenture
Trustee, stating the legal effect of any such action, outlining the steps
required to complete the same, and concluding that all conditions precedent to
the taking of such action have been complied with and such action will not
materially and adversely impair the security for the Notes or the rights of the
Noteholders in contravention of the provisions of this Indenture; provided,
--------
however, that such Opinion of Counsel shall not be required to express an
- -------
opinion as to the fair value of the Indenture Trust Estate. Counsel rendering
any such opinion may rely, without independent investigation, on the accuracy
and validity of any certificate or other instrument delivered to the Indenture
Trustee in connection with any such action.
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ARTICLE IX
Supplemental Indentures
-----------------------
SECTION 9.1 Supplemental Indentures Without Consent of Noteholders.
------------------------------------------------------
Without the consent of any Noteholders but with prior notice to the Rating
Agencies, the Issuer and the Indenture Trustee, when authorized by an Issuer
Order, at any time and from time to time, may enter into one or more indentures
supplemental hereto (which shall conform to the provisions of the Trust
Indenture Act as in force at the date of the execution thereof), in form
satisfactory to the Indenture Trustee, for any of the following purposes:
(i) to correct or amplify the description of any property at any
time subject to the lien of this Indenture, or better to assure, convey and
confirm unto the Indenture Trustee any property subject or required to be
subjected to the lien of this Indenture, or to subject to the lien of this
Indenture additional property;
(ii) to evidence the succession, in compliance with the applicable
provisions hereof, of another person to the Issuer, and the assumption by any
such successor of the covenants of the Issuer herein and in the Notes contained;
(iii) to add to the covenants of the Issuer, for the benefit of the
Noteholders, or to surrender any right or power herein conferred upon the
Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any property to
the Indenture Trustee;
(v) to cure any ambiguity, to correct or supplement any provision
herein or in any supplemental indenture which may be inconsistent with any other
provision herein or in any supplemental indenture or to make any other
provisions with respect to matters or questions arising under this Indenture or
in any supplemental indenture; provided that such action shall not materially
--------
adversely affect the interests of the Noteholders;
(vi) to evidence and provide for the acceptance of the appointment
hereunder by a successor trustee with respect to the Notes and to add to or
change any
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of the provisions of this Indenture as shall be necessary to facilitate the
administration of the trusts hereunder by more than one trustee, pursuant to the
requirements of Article VI; or
(vii) to modify, eliminate or add to the provisions of this Indenture
to such extent as shall be necessary to effect the qualification of this
Indenture under the TIA or under any similar Federal statute hereafter enacted
and to add to this Indenture such other provisions as may be expressly required
by the TIA.
The Indenture Trustee is hereby authorized to join in the execution
of any such supplemental indenture and to make any further appropriate
agreements and stipulations that may be therein contained.
(b) The Issuer and the Indenture Trustee, when authorized by an Issuer
Order, may, also without the consent of any of the Noteholders but with prior
notice to the Rating Agencies, enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to, or changing in
any manner or eliminating any of the provisions of, this Indenture or of
modifying in any manner the rights of the Noteholders under this Indenture;
provided, however, that such action shall not, as evidenced by an Opinion of
Counsel, adversely affect in any material respect the interests of any
Noteholder.
SECTION 9.2 Supplemental Indentures with Consent of Noteholders.
---------------------------------------------------
The Issuer and the Indenture Trustee, when authorized by an Issuer Order, also
may, with prior notice to the Rating Agencies and with the consent of the
Noteholders of not less than a majority of the Outstanding Amount of the Notes,
by Act of such Noteholders delivered to the Issuer and the Indenture Trustee,
enter into an indenture or indentures supplemental hereto for the purpose of
adding any provisions to, or changing in any manner or eliminating any of the
provisions of, this Indenture or of modifying in any manner the rights of the
Noteholders under this Indenture; provided, however, that no such supplemental
indenture shall, without the consent of the Noteholder of each Outstanding Note
affected thereby:
(i) change the date of payment of any installment of principal of
or interest (including any Note Interest Carryover) on any Note, or reduce the
principal amount thereof, the interest rate thereon or the Redemption Price with
respect thereto, change the provisions of this Indenture relating to the
application of collections on, or
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the proceeds of the sale of, the Indenture Trust Estate to payment of principal
of or interest (including any Note Interest Carryover) on the Notes, or change
any place of payment where, or the coin or currency in which, any Note or the
interest thereon is payable, or impair the right to institute suit for the
enforcement of the provisions of this Indenture requiring the application of
funds available therefor, as provided in Article V, to the payment of any such
amount due on the Notes on or after the respective due dates thereof (or, in the
case of redemption, on or after the Redemption Date);
(ii) reduce the percentage of the Outstanding Amount of the Notes,
the consent of the Noteholders of which is required for any such supplemental
indenture, or the consent of the Noteholders of which is required for any waiver
of compliance with certain provisions of this Indenture or certain defaults
hereunder and their consequences provided for in this Indenture;
(iii) modify or alter the provisions of the proviso to the definition
of the term "Outstanding";
(iv) reduce the percentage of the Outstanding Amount of the Notes
required to direct the Indenture Trustee to direct the Issuer to sell or
liquidate the Indenture Trust Estate pursuant to Section 5.4;
(v) modify any provision of this Section except to increase any
percentage specified herein or to provide that certain additional provisions of
this Indenture or the other Basic Documents cannot be modified or waived without
the consent of the Noteholder of each Outstanding Note affected thereby;
(vi) modify any of the provisions of this Indenture in such manner
as to affect the calculation of the amount of any payment of interest (including
any Note Interest Carryover) or principal due on any Note on any Distribution
Date (including the calculation of any of the individual components of such
calculation) or to affect the rights of the Noteholders to the benefit of any
provisions for the mandatory redemption of the Notes contained herein; or
(vii) permit the creation of any lien ranking prior to or on a parity
with the lien of this Indenture with respect to any part of the Indenture Trust
Estate or, except as otherwise permitted or contemplated herein, terminate the
lien of this
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Indenture on any property at any time subject hereto or deprive any Noteholder
of any Note of the security provided by the lien of this Indenture.
It shall not be necessary for any Act of Noteholders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the Issuer and the Indenture Trustee of any
supplemental indenture pursuant to this Section, the Indenture Trustee shall
mail to the Noteholders of the Notes to which such amendment or supplemental
indenture relates a notice setting forth in general terms the substance of such
supplemental indenture. Any failure of the Indenture Trustee to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such supplemental indenture.
SECTION 9.3 Execution of Supplemental Indentures. In executing, or
------------------------------------
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modifications thereby of the trusts created
by this Indenture, the Indenture Trustee shall be entitled to receive, and
subject to Sections 6.1 and 6.2, shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Indenture Trustee may, but shall
not be obligated to, enter into any such supplemental indenture that affects the
Indenture Trustee's own rights, duties, liabilities or immunities under this
Indenture or otherwise.
SECTION 9.4 Effect of Supplemental Indenture. Upon the execution of any
--------------------------------
supplemental indenture pursuant to the provisions hereof, this Indenture shall
be and be deemed to be modified and amended in accordance therewith with respect
to the Notes affected thereby, and the respective rights, limitations of rights,
obligations, duties, liabilities and immunities under this Indenture of the
Indenture Trustee, the Issuer and the Noteholders shall thereafter be
determined, exercised and enforced hereunder subject in all respects to such
modifications and amendments, and all the terms and conditions of any such
supplemental indenture shall be and be deemed to be part of the terms and
conditions of this Indenture for any and all purposes.
SECTION 9.5 Conformity with Trust Indenture Act. Every amendment of this
-----------------------------------
Indenture and every supplemental indenture executed pursuant to this Article IX
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shall conform to the requirements of the Trust Indenture Act as then in effect
so long as this Indenture shall then be qualified under the Trust Indenture Act.
SECTION 9.6 Reference in Notes to Supplemental Indentures. Notes
---------------------------------------------
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Indenture Trustee shall,
bear a notation in form approved by the Indenture Trustee as to any matter
provided for in such supplemental indenture. If the Issuer or the Indenture
Trustee shall so determine, new Notes so modified as to conform, in the opinion
of the Indenture Trustee and the Issuer, to any such supplemental indenture may
be prepared and executed by the Issuer and authenticated and delivered by the
Indenture Trustee in exchange for Outstanding Notes.
ARTICLE X
Redemption of Notes
-------------------
SECTION 10.1 Redemption. The Indenture Trustee shall, upon receipt of
----------
written notice from the Eligible Lender Trustee or the Depositor pursuant to
Section 9.2 of the Trust Agreement of an Insolvency Event with respect to the
Depositor, give prompt written notice to the Noteholders of the occurrence of
such event. In the event that the assets of the Trust are sold pursuant to
Section 9.2 of the Trust Agreement, that portion of the amounts on deposit in
the Trust Accounts to be distributed to the Noteholders shall be paid to the
Noteholders up to the Outstanding Amount of the Notes and all accrued and unpaid
interest thereon and any accrued Note Interest Carryover with respect thereto
(but only to the extent provided by Sections 2.7(d) and 8.2(c)). If amounts are
to be paid to Noteholders pursuant to this Section 10.1, the notice of such
event from the Indenture Trustee to the Noteholders shall include notice of the
redemption of Notes by application of such amounts on the next Distribution Date
which is not sooner than 15 days after the date of such notice (the "Redemption
Date"), whereupon all such amounts shall be payable on the Redemption Date.
SECTION 10.2 Form of Redemption Notice. Notice of redemption under Section
-------------------------
10.1 shall be given by the Indenture Trustee by first-class mail, postage
prepaid, or by facsimile, mailed or transmitted on or prior to the applicable
Redemption Date to each Noteholder, as of the close of business on the Record
Date preceding the
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applicable Redemption Date, at such Noteholder's address or facsimile number
appearing in the Note Register.
All notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price; and
(iii) the place were such Notes are to be surrendered for payment
of the Redemption Price (which shall be the office or agency of the Issuer to be
maintained as provided in Section 3.2).
Notice of redemption of the Notes shall be given by the Indenture
Trustee in the name and at the expense of the Issuer. Failure to give notice of
redemption, or any defect therein, to any Noteholder of any Note shall not
impair or affect the validity of the redemption of any other Note.
SECTION 10.3 Notes Payable on Redemption Date. The Notes or
--------------------------------
portions thereof to be redeemed shall on the Redemption Date become due and
payable at the Redemption Price and (unless the Issuer shall default in the
payment of the Redemption Price) no interest shall accrue on the Redemption
Price for any period after the date to which accrued interest is calculated for
purposes of calculating the Redemption Price.
ARTICLE XI
Miscellaneous
-------------
SECTION 11.1 Compliance Certificates and Opinions, etc. Upon any
------------------------------------------
application or request by the Issuer to the Indenture Trustee to take any action
under any provision of this Indenture, the Issuer shall furnish to the Indenture
Trustee and the Rating Agencies (i) an Officers' Certificate of the Issuer
stating that all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with, (ii) an Opinion of
Counsel stating that in the opinion of such counsel all such conditions
precedent, if any, have been complied with and (iii) (if
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required by the TIA) an Independent Certificate from a firm of certified public
accountants meeting the applicable requirements of this Section, except that, in
the case of any such application or request as to which the furnishing of such
documents is specifically required by any provision of this Indenture, no
additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this indenture shall include:
(i) a statement that each signatory of such certificate or opinion has
read or has caused to be read such covenant or condition and the definitions
herein relating thereto;
(ii) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(iii) a statement that, in the opinion of each such signatory, such
signatory has made such examination or investigation as is necessary to enable
such signatory to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(iv) a statement as to whether, in the opinion of each such signatory,
such condition or covenant has been complied with.
(b) (i) Prior to the deposit of any Collateral or other property or
securities with the Indenture Trustee that is to be made the basis for the
release of any property or securities subject to the lien of this Indenture, the
Issuer shall, in addition to any obligation imposed in Section 11.1(a) or
elsewhere in this Indenture, furnish to the Indenture Trustee and the Rating
Agencies an Officers' Certificate of the Issuer certifying or stating the
opinion of each person signing such certificate as to the fair value (within 90
days of such deposit) to the Issuer of the Collateral or other property or
securities to be so deposited.
(ii) Whenever the Issuer is required to furnish to the Indenture Trustee
and the Rating Agencies an Officers' Certificate of the Issuer certifying or
stating the opinion of any signer thereof as to the matters described in clause
(i) above,
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the Issuer shall also deliver to the Indenture Trustee an Independent
Certificate as to the same matters, if the fair value to the Issuer of the
securities to be so deposited and of all other such securities made the basis of
any such withdrawal or release since the commencement of the then-current fiscal
year of the Issuer, as set forth in the certificates delivered pursuant to
clause (i) above and this clause (ii), is 10% or more of the Outstanding Amount
of the Notes, but such a certificate need not be furnished with respect to any
securities so deposited, if the fair value thereof to the Issuer as set forth in
the related Officers' Certificate is less than $25,000 or less than one percent
of the Outstanding Amount of the Notes.
(iii) Other than any property released as contemplated by clause (v)
below, whenever any property or securities are to be released from the lien of
this Indenture, the Issuer shall also furnish to the Indenture Trustee an
Officers' Certificate of the Issuer certifying or stating the opinion of each
person signing such certificate as to the fair value (within 90 days of such
release) of the property or securities proposed to be released and stating that
in the opinion of such person the proposed release will not impair the security
under this Indenture in contravention of the provisions hereof.
(iv) Whenever the Issuer is required to furnish to the Indenture
Trustee an Officers' Certificate of the Issuer certifying or stating the opinion
of any signer thereof as to the matters described in clause (iii) above, the
Issuer shall also furnish to the Indenture Trustee an Independent Certificate as
to the same matters if the fair value of the property or securities and of all
other property, other than property as contemplated by clause (v) below, or
securities released from the lien of this Indenture since the commencement of
the then-current calendar year, as set forth in the certificates required by
clause (iii) above and this clause (iv), equals 10% or more of the Outstanding
Amount of the Notes, but such certificate need not be furnished in the case of
any release of property or securities if the fair value thereof as set forth in
the related Officers' Certificate is less than $25,000 or less than one percent
of the then Outstanding Amount of the Notes.
(v) Notwithstanding Section 2.9 or any other provision of this
Section, the Issuer may, without compliance with the requirements of the other
provisions of this Section, (A) collect, liquidate, sell or otherwise dispose of
Trust Student Loans as and to the extent permitted or required by the Basic
Documents, (B) make cash payments out of the Trust Accounts as and to the extent
permitted or required by the Basic Documents and (C) convey to the Seller, the
Servicer or another eligible
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lender those specified Trust Student Loans as and to the extent permitted or
required by and in accordance with Section 8.4(c) hereof and Section 6 of the
Sale Agreement, Section 3.5 of the Servicing Agreement or Section 3.11E of the
Servicing Agreement, respectively, so long as the Issuer shall deliver to the
Indenture Trustee every six months, commencing January 25, 1999, an Officers'
Certificate of the Issuer stating that all the dispositions of Collateral
described in clauses (A), (B) or (C) above that occurred during the immediately
preceding six calendar months were in the ordinary course of the Issuer's
business and that the proceeds thereof were applied in accordance with the Basic
Documents.
SECTION 11.2 Form of Documents Delivered to Indenture Trustee. In any case
------------------------------------------------
where several matters are required to be certified by, or covered by an opinion
of, any specified Person, it is not necessary that all such matters be certified
by, or covered by the opinion of, only one such Person, or that they be so
certified or covered by only one document, but one such Person may certify or
give an opinion with respect to some matters, and one or more other such Persons
as to other matters, and any such Person may certify or give an opinion as to
such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer may
be based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such certificate of an Authorized Officer or
Opinion of Counsel may be based, insofar as it relates to factual matters, upon
a certificate or opinion of, or representations by, an officer or officers of
the Servicer, the Seller, the Issuer or the Administrator, stating that the
information with respect to such factual matters is in the possession of the
Servicer, the Seller, the Issuer or the Administrator, unless such counsel
knows, or in the exercise of reasonable care should know, that the certificate
or opinion or representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this indenture, they may, but need not, be consolidated and
form one instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Issuer
shall deliver
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any document as a condition of the granting of such application, or as evidence
of the Issuer's compliance with any term hereof, it is intended that the truth
and accuracy, at the time of the granting of such application or at the
effective date of such certificate or report (as the case may be), of the facts
and opinions stated in such document shall in such case be conditions precedent
to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Indenture Trustee's right to rely upon the truth and
accuracy of any statement or opinion contained in any such document as provided
in Article VI.
SECTION 11.3 Acts of Noteholders. (a) Any request, demand, authorization,
---------------------
direction, notice, consent, waiver or other action provided by this Indenture to
be given or taken by Noteholders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Noteholders in person
or by agents duly appointed in writing; and except as herein otherwise expressly
provided such action shall become effective when such instrument or instruments
are delivered to the Indenture Trustee, and, where it is hereby expressly
required, to the Issuer. Such instrument or instruments (and the action
embodied therein and evidenced thereby) are herein sometimes referred to as the
"Act" of the Noteholders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Indenture and (subject to Section 6.1)
conclusive in favor of the Indenture Trustee and the Issuer, if made in the
manner provided in this Section.
(b) The fact and date of the execution by any person of any such instrument
or writing may be proved in any manner that the Indenture Trustee deems
sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent, waiver or
other action by the Noteholder of any Notes shall bind the Noteholder of every
Note issued upon registration of transfer thereof or in exchange therefor or in
lieu thereof, in respect of anything done, omitted or suffered to be done by the
Indenture Trustee or the Issuer in reliance thereon, whether or not notation of
such action is made upon such Note.
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SECTION 11.4 Notices, etc., to Indenture Trustee, Issuer and Rating
------------------------------------------------------
Agencies.
- --------
Any request, demand, authorization, direction, notice, consent, waiver or Act of
Noteholders or other documents provided or permitted by this Indenture shall be
in writing and if such request, demand, authorization, direction, notice,
consent, waiver or Act of Noteholders is to be made upon, given or furnished to
or filed with:
(a) The Indenture Trustee by any Noteholder, the Servicer, the
Administrator or by the Issuer shall be sufficient for every purpose hereunder
if made, given, furnished or filed in writing to or with the Indenture Trustee
at its Corporate Trust Office, or
(b) The Issuer by the Indenture Trustee or by any Noteholder shall be
sufficient for every purpose hereunder if in writing and mailed, first-class,
postage prepaid, to the Issuer addressed to: SLM Student Loan Trust 1998-2, in
care of Chase Manhattan Bank Delaware, 1201 Market Street, Wilmington, Delaware
19801-1167, Attention: Corporate Trust Department; with copies to The Chase
Manhattan Bank, 450 West 33rd Street 15th Fl., New York, New York 10001,
Attention: Structured Finance Services; 11600 Sallie Mae Drive, Reston, VA
20193, Attention: Director, Corporate Finance Operations, or any other address
previously furnished in writing to the Indenture Trustee by the Issuer or the
Administrator. The Issuer shall promptly transmit any notice received by it from
the Noteholders to the Indenture Trustee.
Notices required to be given to the Rating Agencies by the Issuer, the
Indenture Trustee or the Eligible Lender Trustee shall be in writing, personally
delivered or mailed by certified mail, return receipt requested, to (i) in the
case of Moody's, at the following address: Moody's, ABS Monitoring Department,
99 Church Street, New York, New York 10007, (ii) in the case of Standard &
Poor's, at the following address: Standard & Poor's, 25 Broadway (20th Floor),
New York, New York 10004, Attention of Asset Backed Surveillance Department, and
(iii) in the case of Fitch, at the following address: One State Street Plaza,
New York, New York 10004, Attention Municipal Structured Finance Group; or as to
each of the foregoing, at such other address as shall be designated by written
notice to the other parties.
SECTION 11.5 Notices to Noteholders; Waiver. Where this Indenture
------------------------------
provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at his address as it appears
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on the Note Register, not later than the latest date, and not earlier than the
earliest date, prescribed for the giving of such notice. In any case where
notice to Noteholders is given by mail, neither the failure to mail such notice
nor any defect in any notice so mailed to any particular Noteholder shall affect
the sufficiency of such notice with respect to other Noteholders, and any notice
that is mailed in the manner herein provided shall conclusively be presumed to
have been duly given.
Where this Indenture provides for notice in any manner, such notice may be
waived in writing by any Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Noteholders shall be filed with the Indenture Trustee but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a result of a
strike, work stoppage or similar activity, it shall be impractical to mail
notice of any event to Noteholders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a
sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies, failure to
give such notice shall not affect any other rights or obligations created
hereunder, and shall not under any circumstance constitute a Default.
SECTION 11.6 Alternate Payment and Notice Provisions. Notwithstanding any
---------------------------------------
provision of this Indenture or any of the Notes to the contrary, the Issuer may
enter into any agreement with any Noteholder providing for a method of payment,
or notice by the Indenture Trustee or any Paying Agent to such Noteholder, that
is different from the methods provided for in this Indenture for such payments
or notices. The Issuer will furnish to the Indenture Trustee a copy of each
such agreement and the Indenture Trustee will cause payments to be made and
notices to be given in accordance with such agreements.
SECTION 11.7 Conflict with Trust Indenture Act. If any provision hereof
---------------------------------
limits, qualifies or conflicts with another provision hereof that is required to
be included in this Indenture by any of the provisions of the Trust Indenture
Act, such required provision shall control.
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The provisions of TIA (S)(S) 310 through 317 that impose duties on any Person
(including the provisions automatically deemed included herein unless expressly
excluded by this Indenture) are a part of and govern this Indenture, whether or
not physically contained herein.
SECTION 11.8 Effect of Headings and Table of Contents. The Article and
----------------------------------------
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
SECTION 11.9 Successors and Assigns. All covenants and agreements in this
----------------------
Indenture and the Notes by the Issuer shall bind its successor and assigns,
whether so expressed or not. All agreements of the Indenture Trustee in this
Indenture shall bind the successors, co-trustees and agents (excluding any legal
representatives or accountants) of the Indenture Trustee.
SECTION 11.10 Separability. In case any provision in this Indenture or in
------------
the Notes shall be invalid, illegal or unenforceable, the validity, legality,
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
SECTION 11.11 Benefits of Indenture. Nothing in this Indenture or in the
---------------------
Notes, express or implied, shall give to any Person, other than the parties
hereto and their successors hereunder, and the Noteholders, and any other party
secured hereunder, and any other Person with an ownership interest in any part
of the Indenture Trust Estate, any benefit or any legal or equitable right,
remedy or claim under this Indenture.
SECTION 11.12 Legal Holidays. In any case where the date on which any
--------------
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the date on which nominally due, and no interest shall
accrue for the period from and after any such nominal date.
SECTION 11.13 Governing Law. This Indenture shall be construed in accordance
-------------
with the laws of the State of New York, without reference to its conflict of law
provisions (other than (S)5-1401 of the New York General Obligations Law), and
the
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<PAGE>
obligations, rights and remedies of the parties hereunder shall be determined in
accordance with such laws.
SECTION 11.14 Counterparts. This Indenture may be executed in any number of
------------
counterparts, each of which so executed shall be deemed to be an original, but
all such counterparts shall together constitute but one and the same instrument.
SECTION 11.15 Recording of Indenture. If this Indenture is subject to
----------------------
recording in any appropriate public recording offices, such recording is to be
effected by the Issuer and at its expense accompanied by an Opinion of Counsel
(which may be counsel to the Indenture Trustee or any other counsel reasonably
acceptable to the Indenture Trustee) to the effect that such recording is
necessary either for the protection of the Noteholders or any other Person
secured hereunder or for the enforcement of any right or remedy granted to the
Indenture Trustee under this Indenture.
SECTION 11.16 Trust Obligations. No recourse may be taken, directly or
-----------------
indirectly, with respect to the obligations of the Issuer, the Seller, the
Administrator, the Servicer, the Eligible Lender Trustee or the Indenture
Trustee on the Notes or under this Indenture or any certificate or other writing
delivered in connection herewith or therewith, against (i) the Indenture Trustee
or the Eligible Lender Trustee in its individual capacity, (ii) any owner of a
beneficial interest in the Issuer or (iii) any partner, owner, beneficiary,
agent, officer, director or employee of the Indenture Trustee or the Eligible
Lender Trustee in its individual capacity, any holder or owner of a beneficial
interest in the Issuer, the Eligible Lender Trustee or the Indenture Trustee or
of any successor or assign thereof in its individual capacity, except as any
such Person may have expressly agreed (it being understood that the Indenture
Trustee and the Eligible Lender Trustee have no such obligations in their
individual capacity) and except that any such partner, owner or beneficiary
shall be fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity. For all purposes of this Indenture,
in the performance of any duties or obligations of the Issuer hereunder, the
Eligible Lender Trustee shall be subject to, and entitled to the benefits of,
the terms and provisions of Article VI, VII and VIII of the Trust Agreement.
SECTION 11.17 No Petition. The Indenture Trustee, by entering into this
-----------
Indenture, and each Noteholder, by accepting a Note, hereby covenant and agree
that they shall not at any time institute against the Seller or the Issuer, or
join in any
69
<PAGE>
institution against the Seller or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency, receivership or liquidation proceedings, or other
proceedings under any United States Federal or state bankruptcy or similar law
in connection with any obligations relating to the Notes, this Indenture or any
of the other Basic Documents. The foregoing shall not limit the rights of the
Indenture Trustee to file any claim in, or otherwise take any action with
respect to, any insolvency proceeding that was instituted against the Issuer by
any Person other than the Indenture Trustee.
SECTION 11.18 Inspection. The Issuer agrees that, on reasonable prior
----------
notice, it shall permit any representative of the Indenture Trustee, during the
Issuer's normal business hours, to examine all the books of account, records,
reports, and other papers of the Issuer, to make copies and extracts therefrom,
to cause such books to be audited by Independent certified public accountants,
and to discuss the Issuer's affairs, finances and accounts with the Issuer's
officers, employees, and Independent certified public accountants, all at such
reasonable times and as often as may be reasonably requested. The Indenture
Trustee shall and shall cause its representatives to hold in confidence all such
information obtained from such examination or inspection except to the extent
disclosure may be required by law (and all reasonable applications for
confidential treatment are unavailing) and except to the extent that the
Indenture Trustee may reasonably determine that such disclosure is consistent
with its obligations hereunder.
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IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have caused this
Indenture to be duly executed by their respective officers, thereunto duly
authorized and duly attested, all as of the day and year first above written.
SLM STUDENT LOAN TRUST 1998-2,
by CHASE MANHATTAN BANK DELAWARE, not in its
individual capacity but solely as Eligible Lender Trustee,
By: /s/ Denis Kelly
--------------------------------------
Name: Denis Kelly
Title: Trust Officer
CHASE MANHATTAN BANK DELAWARE, not in its individual
capacity but solely as Eligible Lender Trustee,
By: /s/ Denis Kelly
--------------------------------------
Name: Denis Kelly
Title: Trust Officer
BANKERS TRUST COMPANY, not in its individual
capacity but solely as Indenture Trustee,
By: /s/ Raymond Delli Colli
--------------------------------------
Name: Raymond Delli Colli
Title: Assistant Treasurer
71
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APPENDIX A
TO THE INDENTURE
Definitions and Usage
---------------------
72
<PAGE>
SCHEDULE A
TO THE INDENTURE
Schedule of Trust Student Loans
-------------------------------
[See Schedule A to the Bill of Sale
(Attachment B to the Sale Agreement)]
73
<PAGE>
SCHEDULE B
TO THE INDENTURE
Location of Trust Student Loan Files
------------------------------------
[See Attachment B to the Servicing Agreement]
74
<PAGE>
EXHIBIT A
TO THE INDENTURE
[FORM OF CLASS A-1 NOTE]
SEE REVERSE FOR CERTAIN DEFINITIONS
Unless this Note is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Issuer (as
defined below) or its agent for registration of transfer, exchange or payment,
and any Note issued is registered in the name of Cede & Co. or in such other
name as is requested by an authorized representative of DTC (and any payment is
made to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. THIS NOTE IS NOT GUARANTEED OR
INSURED BY ANY GOVERNMENTAL AGENCY.
NUMBER $200,000,000
R-1 CUSIP NO. 78442 GBA 3
75
<PAGE>
SLM STUDENT LOAN TRUST 1998-2
FLOATING RATE CLASS A-1 STUDENT LOAN-BACKED NOTES
SLM Student Loan Trust 1998-2, a business trust organized and existing under
the laws of the State of Delaware (herein referred to as the "Issuer"), for
value received, hereby promises to pay to CEDE & CO., or registered assigns, the
principal sum of 200,000,000 DOLLARS payable on each Distribution Date in an
amount equal to the result obtained by multiplying (i) a fraction the numerator
of which is $200,000,000 and the denominator of which is $1,678,480,000 by (ii)
the aggregate amount, if any, payable to Class A-1 Noteholders on such
Distribution Date in respect of principal of the Notes pursuant to Section 3.1
of the Indenture dated as of June 1, 1998, among the Issuer, Chase Manhattan
Bank Delaware, a Delaware banking corporation, as Eligible Lender Trustee on
behalf of the Issuer, and Bankers Trust Company, a New York banking corporation,
as Indenture Trustee (the "Indenture Trustee") (capitalized terms used but not
defined herein being defined in Appendix A to the Indenture, which also contains
rules as to usage that shall be applicable herein); provided, however, that the
-------- -------
entire unpaid principal amount of this Note shall be due and payable on the
April 2007 Distribution Date (the "Class A-1 Maturity Date").
The Issuer shall pay interest on this Note at the rate per annum equal to the
Class A-1 Rate (as defined on the reverse hereof), on each Distribution Date
until the principal of this Note is paid or made available for payment, on the
principal amount of this Note outstanding on the preceding Distribution Date
(after giving effect to all payments of principal made on the preceding
Distribution Date), subject to certain limitations contained in Section 3.1 of
the Indenture. Interest on this Note shall accrue from and including the
preceding Distribution Date (or, in the case of the first Accrual Period, the
Closing Date) to but excluding the following Distribution Date (each an "Accrual
Period"). Interest shall be calculated on the basis of the actual number of
days elapsed in each Accrual Period divided by 365 (or 366 in the case of a leap
year). Such principal of and interest on this Note shall be paid in the manner
specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for
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<PAGE>
payment of public and private debts. All payments made by the Issuer with
respect to this Note shall be applied first to interest due and payable on this
Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the Indenture referred to on the reverse
hereof, or be valid or obligatory for any purpose.
77
<PAGE>
[REVERSE OF NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Floating Rate Class A-1 Student Loan-Backed Notes (the "Class
A-1 Notes"), which, together with the Issuer's Floating Rate Class A-2 Student
Loan-Backed Notes (the "Class A-2 Notes" and, together with the Class A-1 Notes,
the "Notes") are issued under and secured by the Indenture, to which Indenture
and all indentures supplemental thereto reference is hereby made for a statement
of the respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the Noteholders. The Notes are subject to all terms of the
Indenture.
The Class A-1 Notes are and will be equally and ratably secured by the
Collateral pledged as security therefor as provided in the Indenture. The Class
A-1 Notes are senior in right of payment to the Class A-2 Notes as and to the
extent provided in the Indenture.
Principal of the Class A-1 Notes shall be payable on each Distribution
Date in an amount described on the face hereof. "Distribution Date" means the
25th day of each January, April, July and October or, if any such date is not a
Business Day, the next succeeding Business Day, commencing October 26, 1998.
As described on the face hereof, the entire unpaid principal amount of
this Note shall be due and payable on the Class A-1 Maturity Date.
Notwithstanding the foregoing, the entire unpaid principal amount of the Notes
shall be due and payable on the date on which (i) an Event of Default shall have
occurred and be continuing and (ii) the Indenture Trustee or the Noteholders
representing not less than a majority of the Outstanding Amount of the Notes
shall have declared the Notes to be immediately due and payable in the manner
provided in Section 5.2 of the Indenture. All principal payments on the Class
A-1 Notes shall be made pro rata to the Noteholders entitled thereto.
Interest on the Class A-1 Notes shall be payable on each Distribution
Date on the principal amount outstanding of the Class A-1 Notes until the
principal amount thereof is paid in full, at a rate per annum equal to the Class
A-1 Rate. The "Class A-1 Rate" for each Accrual Period shall be equal to the
lesser of (a) the daily weighted average of the T-Bill Rates within such Accrual
Period plus 0.68% per annum
78
<PAGE>
and (b) the Student Loan Rate for such Accrual Period. The "Student Loan Rate"
for any Accrual Period shall equal the product of (a) the quotient obtained by
dividing (i) 365 (or 366 in the case of a leap year) by (ii) the actual number
of days elapsed in such Accrual Period and (b) the percentage equivalent of a
fraction, (i) the numerator of which is equal to Expected Interest Collections
for the Collection Period relating to such Accrual Period less the Primary
Servicing Fee and the Administration Fee with respect to such Collection Period,
and (ii) the denominator of which is the Pool Balance as of the first day of
such Collection Period.
Any Note Interest Carryover that may exist on any Distribution Date
attributable to the Notes shall be payable to the Noteholders on that
Distribution Date and any succeeding Distribution Dates, solely out of the funds
available and required to be applied thereto pursuant to the Administration
Agreement.
Payments of interest on this Note on each Distribution Date, together
with the installment of principal, if any, to the extent not in full payment of
this Note, shall be made by check mailed to the Person whose name appears as the
Registered Holder of this Note (or one or more Predecessor Notes) on the Note
Register on the Record Date, except that with respect to Notes registered on the
Record Date in the name of the nominee of the Clearing Agency, unless Definitive
Notes have been issued (initially, such nominee to be Cede & Co.), payments
shall be made by wire transfer in immediately available funds to the account
designated by such nominee. Such checks shall be mailed to the Person entitled
thereto at the address of such Person as it appears on the Note Register as of
the applicable Record Date without requiring that this Note be submitted for
notation of payment, and the mailing of such check shall constitute payment of
the amount thereof regardless of whether such check is returned undelivered.
Any reduction in the principal amount of this Note (or any one or more
Predecessor Notes) effected by any payments made on any Distribution Date shall
be binding upon all future Noteholders of this Note and of any Note issued upon
the registration of transfer hereof or in exchange hereof or in lieu hereof,
whether or not noted hereon. If funds are expected to be available, as provided
in the Indenture, for payment in full of the then remaining unpaid principal
amount of this Note on a Distribution Date, then the Indenture Trustee, in the
name of and on behalf of the Issuer, shall notify the Person who was the
Noteholder hereof as of the preceding Record Date by notice mailed no later than
five days prior to such Distribution Date and the amount then due and payable
shall be payable only upon presentation and surrender of this Note at the
Indenture Trustee's Corporate Trust Office or at the office of the
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<PAGE>
Indenture Trustee's agent appointed for such purposes located in the Borough of
Manhattan, The City of New York.
The Issuer shall pay interest on overdue installments of interest on
this Note at the Class A-1 Rate to the extent lawful.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Noteholder hereof or his attorney duly
authorized in writing, with such signature guaranteed by an "eligible guarantor
institution" meeting the requirements of the Note Registrar, which requirements
include membership or participation in Securities Transfer Agent's Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution for, STAMP
(all in accordance with the Exchange Act), and such other documents as the
Indenture Trustee may require, and thereupon one or more new Notes of authorized
denominations and in the same aggregate principal amount shall be issued to the
designated transferee or transferees. No service charge will be charged for any
registration of transfer or exchange of this Note, but the transferor may be
required to pay a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any such registration of transfer or
exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in the Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer or the Indenture Trustee on the Notes or under the Indenture or
any certificate or other writing delivered in connection therewith, against (i)
the Indenture Trustee or the Eligible Lender Trustee in its individual capacity,
(ii) any owner of a beneficial interest in the Issuer or (iii) any partner,
owner, beneficiary, agent, officer, director or employee of the Indenture
Trustee or the Eligible Lender Trustee in its individual capacity, any holder or
owner of a beneficial interest in the Issuer, the Eligible Lender Trustee or the
Indenture Trustee or of any successor or assign thereof in its individual
capacity, except as any such Person may have expressly agreed (it being
understood that the Indenture Trustee and the Eligible Lender Trustee have no
such obligations in their individual capacity) and except that any such partner,
owner or beneficiary shall be fully liable, to
80
<PAGE>
the extent provided by applicable law, for any unpaid consideration for stock,
unpaid capital contribution or failure to pay any installment or call owing to
such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees that by
accepting the benefits of the Indenture such Noteholder or Note Owner will not
at any time institute against the Seller or the Issuer, or join in any
institution against the Seller or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency, receivership or liquidation proceedings or other
proceedings under any United States Federal or state bankruptcy or similar law
in connection with any obligations relating to the Notes, the Indenture or the
other Basic Documents.
Prior to the due presentment for registration of transfer of this
Note, the Issuer, the Indenture Trustee and any agent of the Issuer or the
Indenture Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes whether or not this Note be
overdue, and neither the Issuer, the Indenture Trustee nor any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Noteholders under the Indenture at any time by the
Issuer with the consent of the Noteholders representing a majority of the
Outstanding Amount of all Notes at the time outstanding. The Indenture also
contains provisions permitting the Noteholders representing specified
percentages of the Outstanding Amount of the Notes, on behalf of all the
Noteholders, to waive compliance by the Issuer with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the holder of this Note (or any one of more
Predecessor Notes) shall be conclusive and binding upon such holder and upon all
future holders of this Note and of any Note issued upon registration of transfer
hereof or in exchange hereof or in lieu hereof whether or not notation of such
consent or waiver is made upon this Note. The Indenture also permits the
Indenture Trustee to amend or waive certain terms and conditions set forth in
the Indenture without the consent of holders of the Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to
the Issuer under the Indenture.
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<PAGE>
The Issuer is permitted by the Indenture, under certain circumstances,
to merge or consolidate, subject to the rights of the Indenture Trustee and the
Noteholders under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note shall be construed in accordance with the laws of the State
of New York, without reference to its conflict of law provisions, and the
obligations, rights and remedies of the parties hereunder and thereunder shall
be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place, and rate, and in the coin or currency, herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, neither Bankers Trust Company in its individual
capacity, Chase Manhattan Bank Delaware in its individual capacity, any owner of
a beneficial interest in the Issuer, nor any of their respective partners,
beneficiaries, agents, officers, directors, employees or successors or assigns
shall be personally liable for, nor shall recourse be had to any of them for,
the payment of principal of or interest on, or performance of, or omission to
perform, any of the covenants, obligations or indemnifications contained in this
Note or the Indenture; it being expressly understood that said covenants,
obligations and indemnifications have been made by the Eligible Lender Trustee
for the sole purposes of binding the interests of the Eligible Lender Trustee in
the assets of the Issuer. The Noteholder of this Note by the acceptance hereof
agrees that, except as expressly provided in the Basic Documents, in the case of
an Event of Default under the Indenture, the Noteholder shall have no claim
against any of the foregoing for any deficiency, loss or claim therefrom;
provided, however, that nothing contained herein shall be taken to prevent
- -------- -------
recourse to, and enforcement against, the assets of the Issuer for any and all
liabilities, obligations and undertakings contained in the Indenture or in this
Note.
82
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ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee
- --------------------------------------------------------------------------------
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto__
- --------------------------------------------------------------------------------
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints
--------------------------------------------------------------------
attorney, to transfer said Note on the books kept for registration thereof, with
full power of substitution in the premises.
Dated:
---------------------
*/
-------------------------
Signature Guaranteed:
*/
-------------------------
- -----------------------
*/ NOTICE: The signature to this assignment must correspond with the name of
- -
the registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in STAMP or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.
83
<PAGE>
[FORM OF CLASS A-2 NOTE]
SEE REVERSE FOR CERTAIN DEFINITIONS
Unless this Note is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Issuer (as
defined below) or its agent for registration of transfer, exchange or payment,
and any Note issued is registered in the name of Cede & Co. or in such other
name as is requested by an authorized representative of DTC (and any payment is
made to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. THIS NOTE IS NOT GUARANTEED OR
INSURED BY ANY GOVERNMENTAL AGENCY.
NUMBER $200,000,000
R-1 CUSIP NO. 78442 GBB 1
84
<PAGE>
SLM STUDENT LOAN TRUST 1998-2
FLOATING RATE CLASS A-2 STUDENT LOAN-BACKED NOTES
SLM Student Loan Trust 1998-2, a business trust organized and existing under
the laws of the State of Delaware (herein referred to as the "Issuer"), for
value received, hereby promises to pay to CEDE & CO., or registered assigns, the
principal sum of $200,000,000 DOLLARS payable on each Distribution Date in an
amount equal to the result obtained by multiplying (i) a fraction the numerator
of which is $200,000,000 and the denominator of which is $1,237,060,000 by (ii)
the aggregate amount, if any, payable to Class A-2 Noteholders on such
Distribution Date in respect of principal of the Notes pursuant to Section 3.1
of the Indenture dated as of June 1, 1998, among the Issuer, Chase Manhattan
Bank Delaware, a Delaware banking corporation, as Eligible Lender Trustee on
behalf of the Issuer, and Bankers Trust Company, a New York banking corporation,
as Indenture Trustee (the "Indenture Trustee") (capitalized terms used but not
defined herein being defined in Appendix A to the Indenture, which also contains
rules as to usage that shall be applicable herein); provided, however, that the
-------- -------
entire unpaid principal amount of this Note shall be due and payable on the
January 2014 Distribution Date (the "Class A-2 Maturity Date").
The Issuer shall pay interest on this Note at the rate per annum equal to the
Class A-2 Rate (as defined on the reverse hereof), on each Distribution Date
until the principal of this Note is paid or made available for payment, on the
principal amount of this Note outstanding on the preceding Distribution Date
(after giving effect to all payments of principal made on the preceding
Distribution Date), subject to certain limitations contained in Section 3.1 of
the Indenture. Interest on this Note shall accrue from and including the
preceding Distribution Date (or, in the case of the first Accrual Period, the
Closing Date) to but excluding the following Distribution Date (each an "Accrual
Period"). Interest shall be calculated on the basis of the actual number of
days elapsed in each Accrual Period divided by 365 (or 366 in the case of a leap
year). Such principal of and interest on this Note shall be paid in the manner
specified on the reverse hereof.
85
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The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the Indenture referred to on the reverse
hereof, or be valid or obligatory for any purpose.
86
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly executed,
manually or in facsimile, as of the date set forth below.
SLM STUDENT LOAN TRUST 1998-2
by CHASE MANHATTAN BANK DELAWARE, not
in its individual capacity but solely as
Eligible Lender Trustee under the Trust
Agreement,
By:
-------------------------------------
Authorized Signatory
Date: June 18, 1998
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
BANKERS TRUST COMPANY, not in its indi-
vidual capacity but solely as Indenture Trustee,
By:
---------------------------------------
Authorized Signatory
Date: June 18, 1998
87
<PAGE>
[REVERSE OF NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Floating Rate Class A-2 Student Loan-Backed Notes (the "Class
A-2 Notes"), which, together with the Issuer's Floating Rate Class A-1 Student
Loan-Backed Notes (the "Class A-1 Notes" and, together with the Class A-2 Notes,
the "Notes") are issued under and secured by the Indenture, to which Indenture
and all indentures supplemental thereto reference is hereby made for a statement
of the respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the Noteholders. The Notes are subject to all terms of the
Indenture.
The Class A-2 Notes are and will be equally and ratably secured by the
Collateral pledged as security therefor as provided in the Indenture. The Class
A-1 Notes are senior in right of payment to the Class A-2 Notes as and to the
extent provided in the Indenture.
Principal of the Class A-2 Notes shall be payable on each Distribution
Date in an amount described on the face hereof. "Distribution Date" means the
25th day of each January, April, July and October or, if any such date is not a
Business Day, the next succeeding Business Day, commencing October 26, 1998.
As described on the face hereof, the entire unpaid principal amount of
this Note shall be due and payable on the Class A-2 Maturity Date.
Notwithstanding the foregoing, the entire unpaid principal amount of the Notes
shall be due and payable on the date on which (i) an Event of Default shall have
occurred and be continuing and (ii) the Indenture Trustee or the Noteholders
representing not less than a majority of the Outstanding Amount of the Notes
shall have declared the Notes to be immediately due and payable in the manner
provided in Section 5.2 of the Indenture. All principal payments on the Class
A-2 Notes shall be made pro rata to the Noteholders entitled thereto.
Interest on the Class A-2 Notes shall be payable on each Distribution
Date on the principal amount outstanding of the Class A-2 Notes until the
principal amount thereof is paid in full, at a rate per annum equal to the Class
A-2 Rate. The "Class A-2 Rate" for each Accrual Period shall be equal to the
lesser of (a) the daily
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weighted average of the T-Bill Rates within such Accrual Period plus 0.73% per
annum and (b) the Student Loan Rate for such Accrual Period. The "Student Loan
Rate" for any Accrual Period shall equal the product of (a) the quotient
obtained by dividing (i) 365 (or 366 in the case of a leap year) by (ii) the
actual number of days elapsed in such Accrual Period and (b) the percentage
equivalent of a fraction, (i) the numerator of which is equal to Expected
Interest Collections for the Collection Period relating to such Accrual Period
less the Primary Servicing Fee and the Administration Fee with respect to such
Collection Period, and (ii) the denominator of which is the Pool Balance as of
the first day of such Collection Period.
Any Note Interest Carryover that may exist on any Distribution Date
attributable to the Notes shall be payable to the Noteholders on that
Distribution Date and any succeeding Distribution Dates, solely out of the funds
available and required to be applied thereto pursuant to the Administration
Agreement.
Payments of interest on this Note on each Distribution Date, together
with the installment of principal, if any, to the extent not in full payment of
this Note, shall be made by check mailed to the Person whose name appears as the
Registered Holder of this Note (or one or more Predecessor Notes) on the Note
Register on the Record Date, except that with respect to Notes registered on the
Record Date in the name of the nominee of the Clearing Agency, unless Definitive
Notes have been issued (initially, such nominee to be Cede & Co.), payments
shall be made by wire transfer in immediately available funds to the account
designated by such nominee. Such checks shall be mailed to the Person entitled
thereto at the address of such Person as it appears on the Note Register as of
the applicable Record Date without requiring that this Note be submitted for
notation of payment, and the mailing of such check shall constitute payment of
the amount thereof regardless of whether such check is returned undelivered.
Any reduction in the principal amount of this Note (or any one or more
Predecessor Notes) effected by any payments made on any Distribution Date shall
be binding upon all future Noteholders of this Note and of any Note issued upon
the registration of transfer hereof or in exchange hereof or in lieu hereof,
whether or not noted hereon. If funds are expected to be available, as provided
in the Indenture, for payment in full of the then remaining unpaid principal
amount of this Note on a Distribution Date, then the Indenture Trustee, in the
name of and on behalf of the Issuer, shall notify the Person who was the
Noteholder hereof as of the preceding Record Date by notice mailed no later than
five days prior to such
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Distribution Date and the amount then due and payable shall be payable only upon
presentation and surrender of this Note at the Indenture Trustee's Corporate
Trust Office or at the office of the Indenture Trustee's agent appointed for
such purposes located in the Borough of Manhattan, The City of New York.
The Issuer shall pay interest on overdue installments of interest on
this Note at the Class A-1 Rate to the extent lawful.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Noteholder hereof or his attorney duly
authorized in writing, with such signature guaranteed by an "eligible guarantor
institution" meeting the requirements of the Note Registrar, which requirements
include membership or participation in Securities Transfer Agent's Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution for, STAMP
(all in accordance with the Exchange Act), and such other documents as the
Indenture Trustee may require, and thereupon one or more new Notes of authorized
denominations and in the same aggregate principal amount shall be issued to the
designated transferee or transferees. No service charge will be charged for any
registration of transfer or exchange of this Note, but the transferor may be
required to pay a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any such registration of transfer or
exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in the Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer or the Indenture Trustee on the Notes or under the Indenture or
any certificate or other writing delivered in connection therewith, against (i)
the Indenture Trustee or the Eligible Lender Trustee in its individual capacity,
(ii) any owner of a beneficial interest in the Issuer or (iii) any partner,
owner, beneficiary, agent, officer, director or employee of the Indenture
Trustee or the Eligible Lender Trustee in its individual capacity, any holder or
owner of a beneficial interest in the Issuer, the Eligible Lender Trustee or the
Indenture Trustee or of any successor or assign thereof in its individual
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capacity, except as any such Person may have expressly agreed (it being
understood that the Indenture Trustee and the Eligible Lender Trustee have no
such obligations in their individual capacity) and except that any such partner,
owner or beneficiary shall be fully liable, to the extent provided by applicable
law, for any unpaid consideration for stock, unpaid capital contribution or
failure to pay any installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees that by
accepting the benefits of the Indenture such Noteholder or Note Owner will not
at any time institute against the Seller or the Issuer, or join in any
institution against the Seller or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency, receivership or liquidation proceedings or other
proceedings under any United States Federal or state bankruptcy or similar law
in connection with any obligations relating to the Notes, the Indenture or the
other Basic Documents.
Prior to the due presentment for registration of transfer of this
Note, the Issuer, the Indenture Trustee and any agent of the Issuer or the
Indenture Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes whether or not this Note be
overdue, and neither the Issuer, the Indenture Trustee nor any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Noteholders under the Indenture at any time by the
Issuer with the consent of the Noteholders representing a majority of the
Outstanding Amount of all Notes at the time outstanding. The Indenture also
contains provisions permitting the Noteholders representing specified
percentages of the Outstanding Amount of the Notes, on behalf of all the
Noteholders, to waive compliance by the Issuer with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the holder of this Note (or any one of more
Predecessor Notes) shall be conclusive and binding upon such holder and upon all
future holders of this Note and of any Note issued upon registration of transfer
hereof or in exchange hereof or in lieu hereof whether or not notation of such
consent or waiver is made upon this Note. The Indenture also permits the
Indenture
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Trustee to amend or waive certain terms and conditions set forth in the
Indenture without the consent of holders of the Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to
the Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances,
to merge or consolidate, subject to the rights of the Indenture Trustee and the
Noteholders under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note shall be construed in accordance with the laws of the State
of New York, without reference to its conflict of law provisions, and the
obligations, rights and remedies of the parties hereunder and thereunder shall
be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place, and rate, and in the coin or currency, herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, neither Bankers Trust Company in its individual
capacity, Chase Manhattan Bank Delaware in its individual capacity, any owner of
a beneficial interest in the Issuer, nor any of their respective partners,
beneficiaries, agents, officers, directors, employees or successors or assigns
shall be personally liable for, nor shall recourse be had to any of them for,
the payment of principal of or interest on, or performance of, or omission to
perform, any of the covenants, obligations or indemnifications contained in this
Note or the Indenture; it being expressly understood that said covenants,
obligations and indemnifications have been made by the Eligible Lender Trustee
for the sole purposes of binding the interests of the Eligible Lender Trustee in
the assets of the Issuer. The Noteholder of this Note by the acceptance hereof
agrees that, except as expressly provided in the Basic Documents, in the case of
an Event of Default under the Indenture, the Noteholder shall have no
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claim against any of the foregoing for any deficiency, loss or claim therefrom;
provided, however, that nothing contained herein shall be taken to prevent
- -------- -------
recourse to, and enforcement against, the assets of the Issuer for any and all
liabilities, obligations and undertakings contained in the Indenture or in this
Note.
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ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee
- -------------------------------------------------------------------------------
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto_
- --------------------------------------------------------------------------------
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints
--------------------------------------------------------------------
attorney, to transfer said Note on the books kept for registration thereof, with
full power of substitution in the premises.
Dated:
---------------------
*/
------------------------ -
Signature Guaranteed:
*/
------------------------ -
- -------------------------
*/ NOTICE: The signature to this assignment must correspond with the name of
- -
the registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in STAMP or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.
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EXHIBIT B
TO THE INDENTURE
Note Depository Agreement
-------------------------
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PURCHASE AGREEMENT MASTER SECURITIZATION TERMS NUMBER 1000
These Purchase Agreement Master Securitization Terms Number 1000 ("Master
Terms") dated as of June 18, 1998 among SLM Funding Corporation ("Funding"),
Chase Manhattan Bank Delaware, not in its individual capacity but solely as
Interim Eligible Lender Trustee (the "Interim Eligible Lender Trustee") for the
benefit of Funding under the Interim Trust Agreement dated as of June 1, 1998
between Funding and the Interim Eligible Lender Trustee, and Student Loan
Marketing Association ("Sallie Mae"), shall be effective upon execution by the
parties hereto. References to Funding herein mean the Interim Eligible Lender
Trustee for all purposes involving the holding or transferring of legal title to
the Eligible Loans.
WHEREAS, Sallie Mae is the owner of certain student loans guaranteed under the
Higher Education Act;
WHEREAS, Sallie Mae may desire to sell its interest in such loans from time to
time and Funding may desire to purchase such loans from Sallie Mae;
WHEREAS, the Interim Eligible Lender Trustee is willing to hold legal title
to, and serve as eligible lender trustee with respect to, such loans on behalf
of Funding;
NOW, THEREFORE, in connection with the mutual promises contained herein, the
parties hereto agree as follows:
SECTION 1. TERMS
-----
These Master Terms establish the terms under which Sallie Mae may sell and
Funding (and with respect to legal title, the Interim Eligible Lender Trustee
on behalf of Funding) may purchase the Loans (and all obligations of the
Borrowers thereunder) specified on each Purchase Agreement as the parties may
execute from time to time pursuant to these Master Terms. Each such Purchase
Agreement shall be substantially in the form of Attachment A hereto,
incorporating by reference the terms of these Master Terms, and shall be a
separate agreement among Sallie Mae, Funding, and the Interim Eligible Lender
Trustee on behalf of Funding with respect to the Loans covered by the terms of
such Purchase Agreement. If the terms of a Purchase Agreement conflict with the
terms of these Master Terms, the terms of such Purchase Agreement shall
supersede and govern.
SECTION 2. DEFINITIONS
-----------
Capitalized terms used but not otherwise defined herein shall have the
definitions set forth in Appendix A hereto.
For purposes hereof:
<PAGE>
(A) "Account" means all of the Eligible Loans hereunder of one (1) Borrower
that are of the same Loan type made under the identical subsection of the Higher
Education Act and in the same status.
(B) "Bill of Sale" means that document executed by an authorized officer of
Sallie Mae which shall set forth the Loans offered by Sallie Mae and accepted
for purchase by the Interim Eligible Lender Trustee for the benefit of Funding
and which shall sell, assign and convey to the Interim Eligible Lender Trustee
for the benefit of Funding and its assignees all rights, title and interest of
Sallie Mae in the Loans listed on the Bill of Sale and will certify that the
representations and warranties made by Sallie Mae pursuant to Section 5(A) of
these Master Terms are true and correct.
(C) "Borrower" means the obligor on a Loan.
(D) "Consolidation Loan" means a Loan made pursuant to and in full compliance
with Section 428C of the Higher Education Act.
(E) "Cutoff Date" means with respect to the first sale hereunder, May 25, 1998,
and, with respect to subsequent sales hereunder, a date agreed to by Sallie Mae
and Funding to use in determining the Principal Balance and accrued interest to
be capitalized for purposes of completing the Loan Transmittal Summary Form.
(F) "Deferred Payment" means an amount equal to 66 2/3% of the amount
distributed to Funding pursuant to Section 2.8 C(G) of the Administration
Agreement (exclusive of the amount of any such distribution attributable to the
reduction from time to time of the Specified Reserve Account Balance).
(G) "Delinquent" means the period any payment of principal or interest due on
the Loan is overdue.
(H) "Eligible Loan" means a Loan offered for sale by Sallie Mae under the
Purchase Agreement which as of the Cutoff Date is current or no more Delinquent
than permitted under the Purchase Agreement in payment of principal or interest
and which meets the following criteria as of the effective date of the Bill of
Sale:
(i) is a Stafford Loan, a Consolidation Loan, a PLUS Loan or SLS Loan;
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(ii) is owned by Sallie Mae and is fully disbursed;
(iii) is guaranteed as to principal and interest by the applicable
Guarantor to the maximum extent permitted by the Higher Education Act
for such Loan;
(iv) bears interest at a stated rate of not less than the maximum rate
permitted under the Higher Education Act for such Loan;
(v) is eligible for the payment of the quarterly special allowance at the
full and undiminished rate established under the formula set forth in
the Higher Education Act for such Loan;
(vi) if not yet in repayment status, is eligible for the payment of
interest benefits by the Secretary or, if not so eligible, is a Loan
for which interest either is billed quarterly to Borrower or deferred
until commencement of the repayment period, in which case such
accrued interest is subject to capitalization to the full extent
permitted by the applicable Guarantor;
(vii) is supported by the following documentation:
(a) for each Loan:
1. loan application, and any supplement thereto,
2. original promissory note and any addendum thereto or a certified
copy thereof if more than one loan is represented by a single
promissory note and all loans so represented are not being sold
at the same time,
3. evidence of guarantee,
4. any other document and/or record which Funding may be required to
retain pursuant to Regulations; and
(b) for each Loan only if applicable:
1. payment history (or similar document) including (i) an indication
of the Principal Balance and the date through which interest has
been paid, each as of the Cutoff Date and (ii) an accounting of
the allocation of all payments by Borrower or on Borrower's
behalf to principal and interest on the Loan,
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2. documentation which supports periods of current or past
deferment or past forbearance,
3. a collection history, if the Loan was ever in a delinquent
status, including detailed summaries of contacts and including
the addresses or telephone numbers used in contacting or
attempting to contact Borrower and any endorser and, if required
by the Guarantor, copies of all letters and other correspondence
relating to due diligence processing,
4. evidence of all requests for skip-tracing assistance and
current address of Borrower, if located,
5. evidence of requests for pre-claims assistance, and evidence
that the Borrower's school(s) have been notified,
6. a record of any event resulting in a change to or confirmation of
any data in the Loan file.
(I) "Initial Payment" means the dollar amount specified in the applicable
Purchase Agreement.
(J) "Loan" means the Note or Notes offered for sale pursuant to the Purchase
Agreement and related documentation together with any guaranties and other
rights relating thereto including, without limitation, Interest Subsidy Payments
and Special Allowance Payments.
(K) "Loan Transmittal Summary Forms" means the forms provided to Sallie Mae by
Funding and completed by Sallie Mae which list, by Borrower, the Loans subject
to the Bill of Sale and the outstanding Principal Balance and accrued interest
thereof as of the Cutoff Date.
(L) "Note" means the promissory note of the Borrower and any amendment thereto
evidencing the Borrower's obligation with regard to a student loan guaranteed
under the Higher Education Act.
(M) "PLUS Loan" means a Loan which was made pursuant to the PLUS Program
established under Section 428B of the Higher Education Act (or predecessor
provisions).
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(N) "Principal Balance" means the outstanding principal amount of the
Loan, plus interest expected to be capitalized (if any), less amounts
which may not be insured (such as late charges).
(O) "Purchase Agreement" means a Purchase Agreement (including any
attachments thereto), substantially in the form of Attachment A hereto,
of which these Master Terms form a part by reference.
(P) "Purchase Price" means the sum of the Initial Payment and Deferred
Payment.
(Q) "Sale Agreement" means the Sale Agreement Master Securitization
Terms Number 1000 among SLM Funding Corporation as Seller, Chase
Manhattan Bank Delaware as Interim Eligible Lender Trustee and Eligible
Lender Trustee.
(R) "Secretary" means the United States Secretary of Education or any
successor.
(S) "SLS Loan" means a Loan which was made pursuant to the Supplemental
Loans for Students Program established under Section 428A of the Higher
Education Act (or predecessor provisions), including Loans referred to
as ALAS Loans or Student PLUS Loans.
(T) "Stafford Loans" mean Subsidized Stafford Loans and Unsubsidized
Stafford Loans.
(U) "Subsidized Stafford Loan" means a Loan for which the interest rate
is governed by Section 427A(a) or 427A(d) of the Higher Education Act.
(V) "Unsubsidized Stafford Loan" means a Loan made pursuant to Section
428H of the Higher Education Act.
SECTION 3. SALE/PURCHASE
-------------
(A) Consummation of Sale and Purchase
The sale and purchase of Eligible Loans pursuant to a Purchase
Agreement shall be consummated upon Funding's receipt from Sallie Mae of
the Bill of Sale and the payment by Funding to Sallie Mae of the Initial
Payment, and when consummated such sale and purchase shall be effective
as of the date of the Bill of Sale. Sallie Mae and Funding shall use
their best efforts to perform promptly their respective obligations
pursuant to such Purchase Agreement.
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(B) Settlement of the Initial Payment
Funding on the date of the Bill of Sale shall pay Sallie Mae the
Initial Payment by wire transfer of immediately available funds to the
account specified by Sallie Mae.
(C) Interest Subsidy and Special Allowance Payments and Rebate Fees
On the date of the Bill of Sale, Sallie Mae shall be entitled to
all Interest Subsidy Payments and Special Allowance Payments on the
Loans and shall be responsible for the payment of any rebate fees
applicable to the Consolidation Loans subject to each Bill of Sale
accruing up to but not including the date of the Bill of Sale. The
Interim Eligible Lender Trustee on behalf of Funding shall be entitled
to all Special Allowance Payments and Interest Subsidy Payments and
shall be responsible for the payment of any rebate fees accruing from
the date of the Bill of Sale.
(D) Special Programs
In consideration of the sale of the Eligible Loans under these
Master Terms and each Purchase Agreement, Funding agrees to cause the
Servicer to offer borrowers of Trust Student Loans all special programs,
whether or not in existence as of the date of any Purchase Agreement,
generally offered to the obligors of comparable loans owned by Sallie
Mae subject to terms and conditions of Section 3.12 of the Servicing
Agreement.
(E) Deferred Payment
Funding shall pay the Deferred Payment to Sallie Mae when and as
the same is received by Funding. If the Trust Student Loans are
purchased by Funding pursuant to Section 6.1 of the Administration
Agreement, Funding shall pay to Sallie Mae as part of the Deferred
Payment 66 2/3% of the present value of the excess of the projected
future yield on the Trust Student Loans after the date of such purchase
over the projected cost to Funding of carrying the Trust Student Loans
as reasonably estimated by Funding assuming (1) that interest rates
applicable to the Trust Student Loans in effect on the date of such
purchase remain in effect, (2) that the cost to Funding of carrying the
Trust Student Loans is equal to the blended rate on the Notes and
Certificates on the date of such purchase, (3) that the servicing costs
and loss experience applicable to the Trust Student Loans during the one
year period preceding such purchase continue during the remaining life
of the Trust Student Loans and (4) a discount rate equal to the blended
rate on the Notes and Certificates on the date of such
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purchase. If the Trust Student Loans are sold pursuant to the auction
provision in Section 4.4 of the Indenture, Funding shall pay to Sallie
Mae as part of the Deferred Payment 66 2/3% of the amount, if any, by
which the sale price exceeds the Minimum Purchase Amount and any costs
of terminating the Trust. Funding shall also be obligated to pay Sallie
Mae as part of the Deferred Payment, in the event that the provisions of
Section 2.8C(F) of the Administration Agreement are operative, upon
payment in full of the Notes and Certificates to the extent of amounts
then distributable by the Trust to Funding, 66 2/3% of the aggregate
amount that would have been distributed to Funding pursuant to Section
2.8C(G) of the Administration Agreement (exclusive of the amount of any
such distribution attributable to the reduction from time to time of the
Specified Reserve Account Balance) but for the operation of Section
2.8C(F) of the Administration Agreement.
SECTION 4. CONDITIONS PRECEDENT TO PURCHASE
--------------------------------
(A) Activities Prior to the Purchase Date
Sallie Mae shall provide any assistance requested by Funding in
determining that all required documentation on the Loans is present and
correct.
(B) Continued Servicing
Following the execution of each Purchase Agreement, Sallie Mae
shall service, or cause to be serviced, all Loans subject to such
Purchase Agreement as required under the Higher Education Act until the
date of the Bill of Sale.
(C) Bill of Sale/Loan Transmittal Summary Form
Sallie Mae shall deliver to Funding:
(i) a Bill of Sale executed by an authorized officer of Sallie Mae,
covering Loans offered by Sallie Mae and accepted by Funding as set
forth thereon, selling, assigning and conveying to the Interim
Eligible Lender Trustee on behalf of Funding and its assignees all
right, title and interest of Sallie Mae, including the insurance
interest of Sallie Mae, in each of the Loans, and stating that the
representations and warranties made by Sallie Mae in Section 5 of
these Master Terms are true and correct on and as of the date of
the Bill of Sale; and
(ii) the Loan Transmittal Summary Form, attached to the Bill of
Sale, identifying each of the Eligible Loans which is the subject
of the Bill of Sale and setting forth the unpaid Principal Balance
of each such Loan.
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(D) Endorsement
Sallie Mae shall provide a blanket endorsement transferring the
entire interest of Sallie Mae in the Loans to the Interim Eligible
Lender Trustee on behalf of Funding with the form of endorsement
provided for in the Purchase Agreement.
At the direction of and in such form as Funding may designate,
Sallie Mae also agrees to individually endorse any Eligible Loan as
Funding may request from time to time.
(E) Officer's Certificate
Sallie Mae shall furnish to Funding, with each Bill of Sale
provided in connection with each purchase of Loans pursuant to these
Master Terms, an Officer's Certificate, dated as of the date of such
Bill of Sale.
(F) Loan Transfer Statement
Upon Funding's request, Sallie Mae shall deliver to Funding one (1)
or more Loan Transfer Statements (Department of Education Form OE 1074
or its equivalent) provided by Funding, executed by Sallie Mae and dated
the date of the Bill of Sale. Sallie Mae agrees that Funding and the
Interim Eligible Lender Trustee may use the Bill of Sale, including the
Loan Transmittal Summary Form attached to the Bill of Sale, in lieu of
OE Form 1074, as official notification to the Guarantor of the
assignment by Sallie Mae to the Interim Eligible Lender Trustee on
behalf of Funding of the Loans listed on the Bill of Sale.
(G) Power of Attorney
Sallie Mae hereby grants to Funding and the Interim Eligible Lender
Trustee for the benefit of Funding an irrevocable power of attorney,
which power of attorney is coupled with an interest, to individually
endorse or cause to be individually endorsed in the name of Sallie Mae
any Eligible Loan to evidence the transfer of such Eligible Loan to
Funding and the Interim Eligible Lender Trustee for the benefit of
Funding and to cause to be transferred physical possession of any Note
from Sallie Mae or the Servicer to Funding or the Interim Eligible
Lender Trustee or any custodian on their behalf.
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SECTION 5. REPRESENTATIONS AND WARRANTIES OF SALLIE MAE AND
------------------------------------------------
INTERIM ELIGIBLE LENDER TRUSTEE
-------------------------------
(A) General
Sallie Mae represents and warrants to Funding that with respect to a
portfolio of Loans, as of the date of each Purchase Agreement and Bill of Sale:
(i) Sallie Mae is an eligible lender or other qualified holder of
loans originated pursuant to the Federal Family Education Loan
Program established under the Higher Education Act;
(ii) Sallie Mae is duly organized and existing under the laws of
the applicable jurisdiction;
(iii) Sallie Mae has all requisite power and authority to enter
into and to perform the terms of the Purchase Agreement; and
(iv) Sallie Mae will not, with respect to any Loan purchased under
Purchase Agreements executed pursuant to these Master Terms, agree
to release any Guarantor from any of its contractual obligations
as an insurer of such Loan or agree otherwise to alter, amend or
renegotiate any material term or condition under which such Loan
is insured, except as required by law or rules and regulations
issued pursuant to law, without the express prior written consent
of Funding.
(B) Particular
Sallie Mae represents and warrants to Funding as to the Loans
purchased by Funding under each Purchase Agreement and each Bill of Sale
executed pursuant these Master Terms that:
(i) Sallie Mae has good title to, and is the sole owner of, the
Loans, free and clear of all security interests, liens, charges,
claims, offsets, defenses, counterclaims or encumbrances of any
nature and no right of rescission, offsets, defenses or
counterclaims have been asserted or threatened with respect to the
Loans;
(ii) The Loans are Eligible Loans and the description of the Loans
set forth in the Purchase Agreement is true and correct;
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(iii) Sallie Mae is authorized to sell, assign, transfer and
repurchase the Loans; and the sale, assignment and transfer of
such Loans is or, in the case of a Loan repurchase by Sallie Mae,
will be made pursuant to and consistent with the laws and
regulations under which Sallie Mae operates, and will not violate
any decree, judgment or order of any court or agency, or conflict
with or result in a breach of any of the terms, conditions or
provisions of any agreement or instrument to which Sallie Mae is a
party or by which Sallie Mae or its property is bound, or
constitute a default (or an event which could constitute a default
with the passage of time or notice or both) thereunder;
(iv) The Loans are each in full force and effect in accordance
with their terms and are legal, valid and binding obligations of
the respective Borrowers thereunder subject to no defenses (except
the defense of infancy);
(v) Each Loan has been duly made and serviced in accordance with
the provisions of the Federal Family Education Loan Program
established under the Higher Education Act, and has been duly
insured by a Guarantor; such guarantee is in full force and effect
and is freely transferable to the Interim Eligible Lender Trustee
on behalf of Funding as an incident to the purchase of each Loan;
and all premiums due and payable to such Guarantor shall have been
paid in full as of the date of the Bill of Sale;
(vi) Any payments on the Loans received by Sallie Mae which have
been allocated to reduction of principal and interest on such
Loans have been allocated on a simple interest basis; the
information with respect to the Loans as of the Cutoff Date as
stated on the Loan Transmittal Summary Form is true and correct;
(vii) Due diligence and reasonable care have been exercised in the
making, administering, servicing and collecting the Loans and,
with respect to any Loan for which repayment terms have been
established, all disclosures of information required to be made
pursuant to the Higher Education Act have been made;
(viii) All origination fees authorized to be collected pursuant to
Section 438 of the Higher Education Act have been paid to the
Secretary;
(ix) Each Loan has been duly made and serviced in accordance with
the provisions of all applicable federal and state laws;
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(x) No Loan is more than one hundred and twenty (120) days
delinquent as of the Cutoff Date and no default, breach, violation
or event permitting acceleration under the terms of any Loan has
arisen; and neither Sallie Mae nor any predecessor holder of any
Loan has waived any of the foregoing other than as permitted by
the Basic Documents;
(xi) It is the intention of Sallie Mae, the Interim Eligible
Lender Trustee and Funding, and Sallie Mae hereby warrants that,
the transfer and assignment herein contemplated constitute a valid
sale of the Loans from Sallie Mae to the Interim Eligible Lender
Trustee on behalf of Funding and that the beneficial interest in
and title to such Loans not be part of Sallie Mae's estate in the
event of the bankruptcy of Sallie Mae or the appointment of a
receiver with respect to Sallie Mae;
(xii) There is only one original executed copy of the promissory
note evidencing each Loan; and
(xiii) No Borrower of any Loan as of the Cutoff Date is noted in
the related Loan File as being currently involved in a bankruptcy
proceeding.
(C) The Interim Eligible Lender Trustee represents and warrants that as
of the date of each Purchase Agreement and each Bill of Sale:
(i) The Interim Eligible Lender Trustee is duly organized and
validly existing in good standing under the laws of its governing
jurisdiction and has an office located within the State of
Delaware. It has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Purchase
Agreement;
(ii) The Interim Eligible Lender Trustee has taken all corporate
action necessary to authorize the execution and delivery by it of
the Purchase Agreement, and the Purchase Agreement will be
executed and delivered by one of its officers who is duly
authorized to execute and deliver the Purchase Agreement on its
behalf;
(iii) Neither the execution nor the delivery by it of the
Purchase Agreement, nor the consummation by it of the
transactions contemplated hereby nor compliance by it with any of
the terms or provisions hereof will contravene any Federal or
Delaware state law, governmental rule or regulation governing the
banking or trust powers of the Interim Eligible Lender Trustee or
any judgment or order binding on it, or constitute any default
under its charter
11
<PAGE>
documents or by-laws or any indenture, mortgage, contract, agreement or
instrument to which it is a party or by which any of its properties may be
bound; and
(iv) The Interim Eligible Lender Trustee is an "eligible lender" as
such term is defined in Section 435(d) of the Higher Education Act, for
purposes of holding legal title to the Trust Student Loans as contemplated
by the Purchase Agreement and the other Basic Documents, it has a lender
identification number with respect to the Trust Student Loans from the
Department and has in effect a Guarantee Agreement with each of the
Guarantors with respect to the Trust Student Loans.
SECTION 6. PURCHASE OF TRUST STUDENT LOANS; REIMBURSEMENT
----------------------------------------------
Each party to this Agreement shall give notice to the other parties
promptly, in writing, upon the discovery of any breach of Sallie Mae's
representations and warranties made pursuant to Section 5 hereof which has a
materially adverse effect on the interest of Funding in any Trust Student Loan.
In the event of such a material breach which is not curable by reinstatement of
the Guarantor's guarantee of such Trust Student Loan, Sallie Mae shall
repurchase any affected Trust Student Loan not later than 120 days following the
earlier of the date of discovery of such material breach and the date of receipt
of the Guarantor reject transmittal form with respect to such Trust Student
Loan. In the event of such a material breach which is curable by reinstatement
of the Guarantor's guarantee of such Trust Student Loan, unless the material
breach shall have been cured within 360 days following the earlier of the date
of discovery of such material breach and the date of receipt of the Guarantor
reject transmittal form with respect to such Trust Student Loan, Sallie Mae
shall purchase such Trust Student Loan not later than the sixtieth day following
the end of such 360-day period. Sallie Mae shall also remit as provided in
Section 2.6 of the Administration Agreement on the date of purchase of any Trust
Student Loan pursuant to this Section 6 an amount equal to all nonguaranteed
interest amounts and forfeited Interest Subsidy Payments and Special Allowance
Payments with respect to such Trust Student Loan. In consideration of the
purchase of any such Trust Student Loan pursuant to this Section 6, Sallie Mae
shall remit the Purchase Amount in the manner specified in Section 2.6 of the
Administration Agreement.
In addition, if any breach of Section 5 hereof by Sallie Mae does not
trigger such purchase obligation but does result in the refusal by a Guarantor
to guarantee all or a portion of the accrued interest (or any obligation of
Funding to repay such interest to a Guarantor), or the loss (including any
obligation of Funding to repay the Department) of Interest Subsidy Payments and
Special Allowance Payments, with respect to any Trust Student Loan affected by
such breach, then Sallie Mae shall reimburse
12
<PAGE>
Funding by remitting an amount equal to the sum of all such nonguaranteed
interest amounts and such forfeited Interest Subsidy Payments or Special
Allowance Payments in the manner specified in Section 2.6 of the Administration
Agreement not later than (i) the last day of the next Collection Period ending
not less than 60 days from the date of the Guarantor's refusal to guarantee all
or a portion of accrued interest or loss of Interest Subsidy Payments or Special
Allowance Payments, or (ii) in the case where Sallie Mae reasonably believes
such losses are likely to be collected, not later than the last day of the next
Collection Period ending not less than 360 days from the date of the Guarantor's
refusal to guarantee all or a portion of accrued interest or loss of Interest
Subsidy Payments or Special Allowance Payments. At the time such payment is
made, Sallie Mae shall not be required to reimburse Funding for interest that is
then capitalized, however, such amounts shall be reimbursed if the borrower
subsequently defaults and such capitalized interest is not paid by the
Guarantor.
Anything in this Section 6 to the contrary notwithstanding, if as of the
last Business Day of any month the aggregate outstanding principal amount of
Trust Student Loans with respect to which claims have been filed with and
rejected by a Guarantor or with respect to which the Servicer determines that
claims cannot be filed pursuant to the Higher Education Act as a result of a
breach by Sallie Mae or the Servicer, exceeds 1% of the Pool Balance, Sallie Mae
(and the Servicer as provided in the Servicing Agreement) shall purchase, within
30 days of a written request of the Eligible Lender Trustee or the Indenture
Trustee, such affected Trust Student Loans in an aggregate principal amount such
that after such purchase the aggregate principal amount of such affected Trust
student Loans is less than 1% of the Pool Balance. The Trust Student Loans to be
purchased by Sallie Mae and the Servicer pursuant to the preceding sentence
shall be based on the date of claim rejection (or the date of notice referred to
in the first sentence of this Section 6) with Trust Student Loans with the
earliest such date to be purchased first.
In lieu of repurchasing Trust Student Loans pursuant to this Section 6,
Sallie Mae may, at its option, substitute Eligible Loans or arrange for the
substitution of Eligible Loans which are substantially similar on an aggregate
basis as of the date of substitution to the Trust Student Loans for which they
are being substituted with respect to the following characteristics:
(1) status (i.e., in-school, grace, deferment, forbearance or
repayment),
(2) program type (i.e., Unsubsidized Stafford, Subsidized Stafford,
Consolidation (pre-1993 vs. post-1993), PLUS or SLS),
13
<PAGE>
(3) school type,
(4) total return,
(5) principal balance, and
(6) remaining term to maturity.
In addition, each substituted Eligible Loan will comply, as of the date of
substitution, with all of the representations and warranties made hereunder. In
choosing Eligible Loans to be substituted pursuant to this Section 6, Sallie Mae
shall make a reasonable determination that the Eligible Loans to be substituted
will not have a material adverse effect on the Noteholders and the
Certificateholders.
In the event that Sallie Mae elects to substitute Eligible Loans pursuant
to this Section 6, Sallie Mae will remit to the Administrator the amount of any
shortfall between the Purchase Amount of the substituted Eligible Loans and the
Purchase Amount of the Trust Student Loans for which they are being substituted.
Sallie Mae shall also remit to the Administrator an amount equal to all
nonguaranteed interest amounts and forfeited Interest Subsidy Payments and
Special Allowance Payments with respect to the Trust Student Loans in the manner
provided in Section 2.6 of the Administration Agreement. The sole remedy of
Funding, the Eligible Lender Trustee, the Certificateholders and the Noteholders
with respect to a breach by Sallie Mae pursuant to Section 5 hereof shall be to
require Sallie Mae to purchase Trust Student Loans, to reimburse Funding as
provided above or to substitute Student Loans pursuant to this Section. 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 Trust Student Loan or the reimbursement for any interest penalty pursuant to
this Section 6.
SECTION 7. OBLIGATION TO REMIT SUBSEQUENT PAYMENTS
---------------------------------------
AND FORWARD COMMUNICATIONS
--------------------------
(A) Any payment received by Sallie Mae with respect to amounts accrued
after the Date of the Bill of Sale for any Loan sold to Funding, which
payment is not reflected in the Loan Transmittal Summary Form, shall be
received by Sallie Mae in trust for the account of Funding and Sallie Mae
hereby disclaims any title to or interest in any such amounts. Within two
(2) business days following the date of receipt, Sallie Mae shall remit to
Funding an amount equal to any such payments on a list provided by Funding
identifying the Loans with respect to which such payments were made, the
amount of each such payment and the date each such payment was received.
14
<PAGE>
(B) Any written communication received at any time by Sallie Mae with
respect to any Loan subject to this Purchase Agreement shall be transmitted
by Sallie Mae to Servicer within two (2) business days of receipt. Such
communications shall include, but not be limited to, letters, notices of
death or disability, notices of bankruptcy, forms requesting deferment of
repayment or loan cancellation, and like documents.
SECTION 8. CONTINUING OBLIGATION OF SALLIE MAE
-----------------------------------
Sallie Mae shall provide all reasonable assistance necessary for Funding to
resolve account problems raised by any Borrower, the Guarantor or the Secretary
provided such account problems are attributable to or are alleged to be
attributable to (a) an event occurring during the period Sallie Mae owned the
Loan, or (b) a payment made or alleged to have been made to Sallie Mae. Further,
Sallie Mae agrees to execute any financing statements at the request of Funding
in order to reflect Funding's interest in the Loans.
SECTION 9. LIABILITY OF SALLIE MAE; INDEMNITIES
------------------------------------
Sallie Mae shall be liable in accordance herewith only to the extent of the
obligations specifically undertaken by Sallie Mae under this Purchase Agreement.
(i) Sallie Mae shall indemnify, defend and hold harmless Funding and
the Interim Eligible Lender Trustee in its individual capacity and their
officers, directors, employees and agents from and against any taxes that
may at any time be asserted against any such Person with respect to the
transactions contemplated herein and in the other Basic Documents (except
any such income taxes arising out of fees paid to the Interim Eligible
Lender Trustee), including any sales, gross receipts, general corporation,
tangible personal property, privilege or license taxes (but, in the case of
Funding, not including any taxes asserted with respect to, and as of the
date of, the sale of the Loans to the Interim Eligible Lender Trustee on
behalf of Funding, or asserted with respect to ownership of the Trust
Student Loans) and costs and expenses in defending against the same.
(ii) Sallie Mae shall indemnify, defend and hold harmless Funding and
the Interim Eligible Lender Trustee in its individual capacity, and the
officers, directors, employees and agents of Funding, and the Interim
Eligible Lender Trustee from and against any and all costs, expenses,
losses, claims, damages and liabilities arising out of, or imposed upon
such Person through, Sallie Mae's willful misfeasance, bad faith or gross
negligence in the performance of its duties under the Purchase Agreement,
or by
15
<PAGE>
reason of reckless disregard of its obligations and duties under the
Purchase Agreement.
(iii) Sallie Mae shall be liable as primary obligor for, and shall
indemnify, defend and hold harmless the Interim Eligible Lender Trustee in
its individual capacity 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 Purchase Agreement, the other Basic Documents, the acceptance or
performance of the trusts and duties set forth herein and in the Sale
Agreement or the action or the inaction of the Interim Eligible Lender
Trustee hereunder, except to the extent that such cost, expense, loss,
claim, damage, obligation or liability: (a) shall be due to the willful
misfeasance, bad faith or negligence (except for errors in judgment) of the
Interim Eligible Lender Trustee, (b) shall arise from any breach by the
Interim Eligible Lender Trustee of its covenants made under any of the
Basic Documents; or (c) shall arise from the breach by the Interim Eligible
Lender Trustee of any of its representations or warranties made in its
individual capacity set forth in these Master Terms or any Purchase
Agreement. In the event of any claim, action or proceeding for which
indemnity will be sought pursuant to this paragraph, the Interim Eligible
Lender Trustee's choice of legal counsel shall be subject to the approval
of Sallie Mae, which approval shall not be unreasonably withheld.
Indemnification under this Section shall survive the resignation or removal
of the Interim Eligible Lender Trustee and the termination of these Master
Terms, and shall include reasonable fees and expenses of counsel and expenses of
litigation. If Sallie Mae 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 Sallie Mae, without interest.
SECTION 10. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
------------------------------------------------
OBLIGATIONS OF SALLIE MAE
-------------------------
Any Person (a) into which Sallie Mae may be merged or consolidated, (b)
which may result from any merger or consolidation to which Sallie Mae shall be a
party or (c) which may succeed to the properties and assets of Sallie Mae
substantially as a whole, shall be the successor to Sallie Mae without the
execution or filing of any document or any further act by any of the parties to
this Purchase Agreement; provided, however, that Sallie Mae hereby covenants
-------- -------
that it will not consummate any of the foregoing transactions except upon
satisfaction of the following: (i) the surviving Person, if other than Sallie
Mae, executes an agreement of assumption to perform every obligation
16
<PAGE>
of Sallie Mae under the Purchase Agreement, (ii) immediately after giving effect
to such transaction, no representation or warranty made pursuant to Section 5
shall have been breached, (iii) the surviving Person, if other than Sallie Mae,
shall have delivered to the Interim Eligible Lender Trustee an Officers'
Certificate and an Opinion of Counsel each stating that such consolidation,
merger or succession and such agreement of assumption comply with this Section
and that all conditions precedent, if any, provided for in this Purchase
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) if Sallie Mae is not the surviving entity, Sallie Mae shall
have delivered to the Interim Eligible Lender 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
Funding and the Interim Eligible Lender Trustee in the 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 11. LIMITATION ON LIABILITY OF SALLIE MAE AND OTHERS
------------------------------------------------
Sallie Mae and any director or officer or employee or agent thereof may
rely in good faith on the advice of counsel or on any document of any kind,
prima facie properly executed and submitted by any Person respecting any matters
arising hereunder (provided that such reliance shall not limit in any way Sallie
Mae's obligations under Section 6.) Sallie Mae shall not be under any obligation
to appear in, prosecute or defend any legal action that shall not be incidental
to its obligations under these Master Terms or any Purchase Agreement, and that
in its opinion may involve it in any expense or liability. Except as provided
herein, the repurchase (or substitution) and reimbursement obligations of Sallie
Mae will constitute the sole remedy available to Funding for uncured breaches;
provided, however, that the information with respect to the Loans listed on the
Bill of Sale may be adjusted in the ordinary course of business subsequent to
the date of the Bill of Sale and to the extent that the aggregate Principal
Balance of the Loans listed on the Bill of Sale is less than the aggregate
Principal Balance stated on the Bill of Sale, Sallie Mae shall remit such amount
to the Interim Eligible Lender Trustee on behalf of Funding. Such reconciliation
payment shall be made from time to time but no less frequently than semi-
annually.
SECTION 12. LIMITATION OF LIABILITY OF INTERIM ELIGIBLE LENDER
--------------------------------------------------
TRUSTEE
-------
Notwithstanding anything contained herein to the contrary, these Master
Terms and any Purchase Agreement have been signed by Chase Manhattan Bank
Delaware not in its individual capacity but
17
<PAGE>
solely in its capacity as Interim Eligible Lender Trustee for Funding and in no
event shall Chase Manhattan Bank Delaware in its individual capacity have any
liability for the representations, warranties, covenants, agreements or other
obligations of Funding, under these Master Terms or any Purchase Agreement 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 Funding.
SECTION 13. EXPENSES
--------
Except as otherwise provided herein, each party to these Master Terms or
any Purchase Agreement shall pay its own expense incurred in connection with the
preparation, execution and delivery of these Master Terms and any Purchase
Agreement and the transactions contemplated herein or therein.
SECTION 14. SURVIVAL OF COVENANTS/SUPERSESSION
----------------------------------
All covenants, agreements, representations and warranties made herein and
in or pursuant to any Purchase Agreements executed pursuant to these Master
Terms shall survive the consummation of the purchase of the Loans provided for
in each Purchase Agreement. All covenants, agreements, representations and
warranties made or furnished pursuant hereto by or on behalf of Sallie Mae shall
bind and inure to the benefit of any successors or assigns of Funding and shall
survive with respect to each Loan. Each Purchase Agreement supersedes all
previous agreements and understandings between Funding and Sallie Mae with
respect to the subject matter thereof. These Master Terms and any Purchase
Agreement may be changed, modified or discharged, and any rights or obligations
hereunder may be waived, only by a written instrument signed by a duly
authorized officer of the party against whom enforcement of any such waiver,
change, modification or discharge is sought. The waiver by Funding of any
covenant, agreement, representation or warranty required to be made or furnished
by Sallie Mae or the waiver by Funding of any provision herein contained or
contained in any Purchase Agreement shall not be deemed to be a waiver of any
breach of any other covenant, agreement, representation, warranty or provision
herein contained, nor shall any waiver or any custom or practice which may
evolve between the parties in the administration of the terms hereof or of any
Purchase Agreement, be construed to lessen the right of Funding to insist upon
the performance by Sallie Mae in strict accordance with said terms.
SECTION 15. COMMUNICATION AND NOTICE REQUIREMENTS
-------------------------------------
All communications, notices and approvals provided for hereunder shall be in
writing and mailed or delivered to Sallie Mae or Funding, as the case may be,
addressed as set forth in the
18
<PAGE>
Purchase Agreement or at such other address as either party may hereafter
designate by notice to the other party. Notice given in any such communication,
mailed to Sallie Mae or Funding by appropriately addressed registered mail,
shall be deemed to have been given on the day following the date of such
mailing.
SECTION 16. FORM OF INSTRUMENTS
-------------------
All instruments and documents delivered in connection with these Master
Terms and any Purchase Agreement, and all proceedings to be taken in connection
with these Master Terms and any Purchase Agreement and the transactions
contemplated herein and therein, shall be in a form as set forth in the
attachments hereto, and Funding shall have received copies of such documents as
it or its counsel shall reasonably request in connection therewith. Any
instrument or document which is substantially in the same form as an Attachment
hereto or a recital herein will be deemed to be satisfactory as to form.
SECTION 17. AMENDMENT
---------
These Master Terms and any Purchase Agreement may be amended by the parties
thereto without the consent of the related Noteholders or Certificateholders for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of such Master Terms and Purchase Agreements or of
modifying in any manner the rights of such Noteholders or Certificateholders;
provided that such action will not, in the opinion of counsel satisfactory to
the related Indenture Trustee and Eligible Lender Trustees, materially and
adversely affect the interest of any such Noteholder or Certificateholder.
In addition, these Master Terms and any Purchase Agreement may also be
amended from time to time by Sallie Mae, the Interim Eligible Lender Trustee and
Funding, with the consent of the Noteholders of Notes evidencing a majority of
the Outstanding Amount of the Notes and the consent of the Certificateholders of
Certificates evidencing 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 these Master Terms or any Purchase Agreements 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 time of, collections of payments with
respect to 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 of
Certificates, the Noteholders or the Certificateholders of which are required to
consent to any such amendment, without the consent of all outstanding
Noteholders and Certificateholders.
19
<PAGE>
Promptly after the execution of any such amendment or consent (or, in the
case of the Rating Agencies, five Business Days prior thereto), the Interim
Eligible Lender Trustee shall furnish written notification of the substance of
such amendment or consent to the Indenture Trustee, each Certificateholder, and
each of the Rating Agencies.
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.
Prior to the execution of any amendment to these Master Terms, the Interim
Eligible Lender Trustee shall be entitled to receive and rely upon an Opinion of
Counsel stating that execution of such amendment is authorized or permitted by
this Agreement and the Opinion of Counsel referred to in Section 7.1 I((i) of
the Administration Agreement. The Interim Eligible Lender Trustee may, but shall
not be obligated to, enter into any such amendment which affects the Interim
Eligible Lender Trustee's own rights, duties or immunities under this Agreement
or otherwise.
SECTION 18. NONPETITION COVENANTS
---------------------
Notwithstanding any prior termination of these Master Terms Sallie Mae and
the Interim Eligible Lender Trustee shall not acquiesce, petition or otherwise
invoke or cause Funding to invoke the process of any court or government
authority for the purpose of commencing or sustaining a case against Funding
under any Federal or state bankruptcy, insolvency or similar law or appointing a
receiver, liquidator, assignees, trustee, custodian, sequestrator or other
similar official of Funding or any substantial part of its property, or ordering
the winding up or liquidation of the affairs of the Funding.
SECTION 19. GOVERNING LAW
-------------
These Master Terms and any Purchase Agreement shall be government by and
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.
20
<PAGE>
STUDENT LOAN MARKETING SLM FUNDING CORPORATION
ASSOCIATION (Seller) (Purchaser)
By Sallie Mae, Inc., Authorized
Agent for the Student Loan
Marketing Association
By: /s/ J. Lance Franke By: /s/ William M.E. Rachal, Jr.
--------------------------- -----------------------------
Name: Name:
------------------------- ---------------------------
Title: Title:
------------------------ --------------------------
CHASE MANHATTAN BANK DELAWARE,
- ------------------------------
Not in its individual capacity but
solely as Interim Eligible Lender Trustee
By: /s/ Denis Kelly
---------------------------
Name: Denis Kelly
-------------------------
Title: Trust Officer
------------------------
21
<PAGE>
ATTACHMENT A
PURCHASE AGREEMENT
Dated as of June 18, 1998
PURCHASE AGREEMENT NUMBER 1
---
Sallie Mae hereby offers for sale to Chase Manhattan Bank Delaware as
Interim Eligible Lender Trustee for the benefit of SLM Funding Corporation
("Funding") under the Interim Trust Agreement dated as of June 1, 1998 between
Funding and the Interim Eligible Lender Trustee, the entire right, title and
interest of Sallie Mae in the Loans described in the Bill of Sale and Loan
Transmittal Summary Form incorporated herein and, to the extent indicated
below, the Interim Eligible Lender Trustee for the benefit of Funding accepts
Sallie Mae's offer. In order to qualify as Eligible Loans, no payment of
principal or interest shall be more than one hundred and twenty (120) days
Delinquent as of the Cutoff Date which date shall be May 25, 1998.
TERMS, CONDITIONS AND COVENANTS
-------------------------------
In consideration of the Purchase Price, Sallie Mae hereby sells to the
Interim Eligible Lender Trustee for the benefit of Funding the entire right,
title and interest of Sallie Mae in the Loans accepted for purchase, subject
to all the terms and conditions of the Purchase Agreement Master
Securitization Terms Number 1000 ("Master Terms") and any amendments thereto,
incorporated herein by reference, among Sallie Mae, Funding, and the Interim
Eligible Lender Trustee. The Initial Payment of the Loans shall equal
$3,006,200,749 (equal to $3,013,741,380 (representing the offering price of
the Securities less underwriters' commissions) less $7,515,631 (representing
the Reserve Account Initial Deposit), less $25,000 (representing the initial
deposit into the Collection Account).
This document shall constitute a Purchase Agreement as referred to in the
Master Terms and, except as modified herein, each term used herein shall have
the same meaning as in the Master Terms. All references in the Master Terms to
Loans or Eligible Loans shall be deemed to refer to the Loans governed by this
Purchase Agreement. Sallie Mae hereby makes, as of the date hereof, all the
representations and warranties contained in the Master Terms and makes such
representations and warranties with respect to the Loans governed by this
Purchase Agreement.
Sallie Mae authorizes the Interim Eligible Lender Trustee for the benefit
of Funding to use a copy of the Bill of Sale, including the Loan Transmittal
Summary Form attached to the Bill of Sale (in lieu of OE Form 1074), as
official notification to the Guarantor of assignment to the Interim Eligible
Lender Trustee on behalf of Funding of the Loans on the date of purchase.
1
<PAGE>
The parties hereto intend that the transfer of Loans described in the Bill
of Sale and Loan Transmittal Summary Form be, and be construed as, a valid
sale of such Loans from Sallie Mae to the Interim Eligible Lender Trustee for
the benefit of Funding. However, in the event that notwithstanding the
intention of the parties, such transfer is deemed to be a transfer for
security, then Sallie Mae hereby grants to the Interim Eligible Lender Trustee
for the benefit of Funding a first priority security interest in and to all
Loans described in the Bill of Sale and Loan Transmittal Summary Form to
secure a loan in an amount equal to the Purchase Price of such loans.
STUDENT LOAN MARKETING SLM FUNDING CORPORATION
------------------------
ASSOCIATION (Seller) (Purchaser)
By Sallie Mae, Inc., Authorized
Agent for the Student Loan
Marketing Association
By: By:
--------------------------- -----------------------------
Name: Name:
------------------------- ---------------------------
Title: Title:
------------------------ --------------------------
CHASE MANHATTAN BANK DELAWARE,
- ------------------------------
Not in its individual capacity but
solely as Interim Eligible Lender Trustee
By:
---------------------------
Name:
-------------------------
Title:
------------------------
2
<PAGE>
PURCHASE AGREEMENT NUMBER 1
---
BLANKET ENDORSEMENT DATED JUNE 18, 1998
---------------------------------------
Student Loan Marketing Association ("Sallie Mae"), by execution of this
instrument, hereby endorses the attached promissory note which is one (1) of the
promissory notes ("the Notes") described in the Bill of Sale executed by Sallie
Mae in favor of Chase Manhattan Bank Delaware as the Interim Eligible Lender
Trustee for the benefit of SLM Funding Corporation ("Funding"). This endorsement
is in blank, unrestricted form and without recourse except as provided in
Section 6 of the Master Terms referred to in the Purchase Agreement among Sallie
Mae, Funding, and the Interim Eligible Lender Trustee which covers this
promissory note.
This endorsement may be effected by attaching either this instrument or a
facsimile hereof to each or any of the Notes.
Notwithstanding the foregoing, Sallie Mae agrees to individually endorse
each Note in the form provided by Funding as Funding may from time to time
require or if such individual endorsement is required by the Guarantor of the
Note.
THE SALE AND PURCHASE OF THE LOANS SHALL BE SUBJECT TO THE TERMS, CONDITIONS AND
COVENANTS, INCLUDING THE BLANKET ENDORSEMENT, AS SET FORTH IN THE PURCHASE
AGREEMENT. BY EXECUTION HEREOF, SALLIE MAE ACKNOWLEDGES THAT SALLIE MAE HAS
READ, UNDERSTANDS AND AGREES TO BE BOUND BY ALL TERMS, CONDITIONS AND COVENANTS
OF THE PURCHASE AGREEMENT. THE SALE AND PURCHASE SHALL BE CONSUMMATED UPON
FUNDING'S PAYMENT TO SALLIE MAE OF THE INITIAL PAYMENT (AS DEFINED IN THE MASTER
TERMS) AND, UNLESS OTHERWISE AGREED BY SALLIE MAE AND FUNDING, SHALL BE
EFFECTIVE AS OF THE DATE OF THE BILL OF SALE.
SELLER PURCHASER
____________________________________________________________________
Student Loan Marketing Association Chase Manhattan Bank Delaware,
11600 Sallie Mae Drive not in its individual capacity
Reston, Virginia 20190 but solely as Interim Eligible
Lender Trustee for the benefit
Lender Code: of SLM Funding Corporation
-------------- under the Interim Trust
By: Agreement dated Jun. 1, 1998
------------------------------
(Signature of Authorized
Officer of Sallie Mae, Inc. By:
as Authorized Agent for ------------------------------
Seller) (Signature of Authorized
Signatory for Purchaser)
Name: Name:
---------------------------- ----------------------------
Title: Title:
--------------------------- ---------------------------
Date of Purchase: Jun. 18, 1998
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ATTACHMENT B
BILL OF SALE DATED JUNE 18, 1998
The undersigned ("Sallie Mae"), for value received and pursuant to the
terms and conditions of Purchase Agreement Number 1 ("Purchase Agreement") among
-
SLM Funding Corporation ("Funding"), and Chase Manhattan Bank Delaware as
Interim Eligible Lender Trustee for the benefit of Funding under the Interim
Trust Agreement dated as of June 1, 1998 between Funding and the Interim
Eligible Lender Trustee, does hereby sell, assign and convey to the Interim
Eligible Lender Trustee for the benefit of Funding and its assignees all right,
title and interest of Sallie Mae, including the insurance interest of Sallie Mae
under the Federal Family Education Loan Program (20 U.S.C. 1071 et seq.), in the
------
Loans identified herein which the Interim Eligible Lender Trustee for the
benefit of Funding has accepted for purchase. The portfolio accepted for
purchase by the Interim Eligible Lender Trustee for the benefit of Funding and
the effective date of sale and purchase are described below and the individual
Accounts are listed on the Schedule A attached hereto.
Sallie Mae hereby makes the representations and warranties set forth in
Section 5 of the Purchase Agreement Master Securitization Terms Number 1000
incorporated by reference in the Purchase Agreement. Sallie Mae authorizes the
Interim Eligible Lender Trustee on behalf of Funding to use a copy of this
document (in lieu of OE Form 1074) as official notification to the Guarantor(s)
of assignment to the Interim Eligible Lender Trustee for the benefit of Funding
of the Loans on the date of purchase.
LISTING OF LOANS
OFFERED BY ACCEPTED BY ELIGIBLE
SELLER LENDER TRUSTEE
Number of Principal Number of Principal
LOAN TYPE Loans* Balance** Loans* Balance**
- --------------------------------------------------------------------------------
SUBSIDIZED STAFFORD
- -------------------
Interim 198,198 678,788,854 198,198 678,788,854
Repayment 281,525 699,978,701 281,525 699,978,701
------- ----------- ------- -----------
479,723 1,378,767,555 479,723 1,378,767,555
UNSUBSIDIZED STAFFORD
- ---------------------
Deferred 88,240 385,350,505 88,240 385,350,505
Repayment 40,514 158,262,613 40,514 158,262,613
------ ----------- ------ -----------
128,754 543,613,118 128,754 543,613,118
PLUS/SLS
- --------
Deferred 10,522 71,139,748 10,522 71,139,748
Non-Deferred 72,489 360,353,464 72,489 360,353,464
------ ----------- ------ -----------
83,011 431,493,212 83,011 431,493,212
CONSOLIDATION
- -------------
Deferred 2,053 31,554,873 2,053 31,554,873
Repayment 38,549 620,823,672 38,549 620,823,672
------ ----------- ------ -----------
40,602 652,378,545 40,602 652,378,545
TOTAL 732,090 3,006,252,430 732,090 3,006,252,430
======= ============= ======= =============
ADDITIONAL LOAN CRITERIA
- ------------------------
Not in claims status, not previously rejected
Not in litigation
Last disbursement is greater than 120 days from cutoff date
Loan is not swap-pending
*Based upon Sallie Mae's estimated calculations, which may be adjusted upward or
downward based upon Funding's reconciliation.
**Includes interest to be capitalized.
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Guarantor(s):
American Student Assistance Guarantor
California Student Aid Commission
Colorado Student Loan Program
Connecticut Student Loan Foundation
Education Assistance Corporation
Educational Credit Management Corporation
Finance Authority of Maine
Florida Department of Education Office of Student Financial Assistance
Georgia Higher Education Assistance Corp.
Great Lakes Higher Education Corporation
Illinois Student Assistance Commission
Iowa College Student Aid Commission
Kentucky Higher Education Assistance Authority
Louisiana Student Financial Assistance Commission
Michigan Higher Education Assistance Authority
Missouri Coordinating Board for Higher Education
Nebraska Student Loan Program
New Jersey Higher Education Assistance Authority
N.Y State Higher Education Services Corporation
Northwest Education Loan Association
Oklahoma State Regents for Higher Education
Oregon State Scholarship Commission
Pennsylvania Higher Education Assistance Agency
Rhode Island Higher Education Assistance Authority
Student Loan Guarantee Foundation of Arkansas, Inc.
Tennessee Student Assistance Corporation
Texas Guaranteed Student Loan Corporation
United Student Aid Funds, Inc.
Utah Higher Education Assistance Authority
SELLER PURCHASER
- --------------------------------- --------------------------------------
Student Loan Marketing Association
1050 Thomas Jefferson Street, N.W. Chase Manhattan Bank Delaware,
Washington, D.C. 20007 not in its individual capacity
but solely as Interim Eligible
Lender Code: Lender Trustee for the benefit
-------------- of SLM Funding Corporation
By:
------------------------------ By:
(Signature of Authorized ----------------------------
Officer of Sallie Mae, Inc. (Signature of Authorized
as Authorized Agent for Signatory for Purchaser)
Seller)
Name: Name:
---------------------------- --------------------------
Title: Title:
--------------------------- -------------------------
Date of Purchase: Jun. 18, 1998
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NOTE: Boxed areas are for completion by Purchaser
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SALE AGREEMENT MASTER SECURITIZATION TERMS NUMBER 1000
These Sale Agreement Master Securitization Terms Number 1000 ("Master Sale
Terms") dated as of June 18, 1998 among SLM Funding Corporation ("Seller"),
Chase Manhattan Bank Delaware, not in its individual capacity but solely as
Interim Eligible Lender Trustee (the "Interim Eligible Lender Trustee") for the
benefit of the Seller under the Interim Trust Agreement dated as of June 1, 1998
between Seller and the Interim Eligible Lender Trustee, Chase Manhattan Bank
Delaware, not in its individual capacity but solely as Eligible Lender Trustee
on behalf of SLM Student Loan Trust 1998-2 (the "Eligible Lender Trustee"), and
SLM Student Loan Trust 1998-2 (the "Purchaser"), shall be effective upon
execution by the parties hereto. References to the Seller herein mean the
Interim Eligible Lender Trustee, and references to the Purchaser mean the
Eligible Lender Trustee, for all purposes involving the holding or transferring
of legal title to the Trust Student Loans.
WHEREAS, the Seller is the owner of certain student loans guaranteed under the
Higher Education Act;
WHEREAS, legal title to such loans is vested in the Interim Eligible Lender
Trustee, as trustee for the benefit of the Seller as the sole beneficiary;
WHEREAS, Seller may desire to sell its interest in such loans from time to
time and Purchaser may desire to purchase such loans from Seller;
WHEREAS, the Eligible Lender Trustee is willing to hold legal title to, and
serve as eligible lender trustee with respect to, such loans for the benefit of
the Purchaser;
NOW, THEREFORE, in connection with the mutual promises contained herein, the
parties hereto agree as follows:
SECTION 1. TERMS
-----
These Master Sale Terms establish the terms under which Seller (and with
respect to legal title, the Interim Eligible Lender Trustee for the benefit of
Seller) may sell and Purchaser (and with respect to legal title, the Eligible
Lender Trustee on behalf of the Purchaser) may purchase the Loans (and all
obligations of the Borrowers thereunder) specified on each Sale Agreement ("
Sale Agreement") as the parties may execute from time to time pursuant to these
Master Sale Terms. Each such Sale Agreement shall be substantially in the form
of Attachment A hereto, incorporating by reference the terms of these Master
Sale Terms, and shall be a separate agreement among Seller, Purchaser, Eligible
Lender Trustee on behalf of Purchaser, and the Interim Eligible Lender Trustee
for the benefit of Seller with respect to the Loans covered by the terms of such
Sale Agreement for all purposes. If the terms of a
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Sale Agreement conflict with the terms of these Master Sale Terms, the terms of
such Sale Agreement shall supersede and govern.
SECTION 2. DEFINITIONS
-----------
Capitalized terms used but not otherwise defined herein shall have the
definitions set forth in Appendix A hereto.
For purposes hereof:
(A) "Account" means all of the Eligible Loans hereunder of one (1) Borrower
that are of the same Loan type made under the identical subsection of the
Higher Education Act and in the same status.
(B) "Bill of Sale" means that document executed by an authorized officer of
the Seller and the Interim Eligible Lender Trustee for the benefit of Seller
which shall set forth the Loans offered by the Seller and the Interim Eligible
Lender Trustee for the benefit of the Seller and accepted for purchase by the
Eligible Lender Trustee on behalf of the Purchaser and which shall sell,
assign and convey to the Eligible Lender Trustee on behalf of the Purchaser
and its assignees all right, title and interest of the Seller and of the
Interim Eligible Lender Trustee for the benefit of the Seller in the Loans
listed on the Bill of Sale and will certify that the representations and
warranties made by the Seller pursuant to Section 5(A) of these Master Sale
Terms are true and correct.
(C) "Borrower" means the obligor on a Loan.
(D) "Consolidation Loan" means a Loan made pursuant to and in full compliance
with Section 428C of the Higher Education Act.
(E) "Cutoff Date" means with respect to the first sale hereunder, May 25,
1998, and, with respect to subsequent sales hereunder, a date agreed to by
Seller and Purchaser to use in determining the Principal Balance and accrued
interest to be capitalized for purposes of completing the Loan Transmittal
Summary Form.
(F) "Deferred Payment" means all amounts equal to amounts distributed to the
Seller pursuant to Section 2.8C(G) of the Administration Agreement (exclusive
of the amount of any such distribution attributable to the reduction from time
to time of the Specified Reserve Account Balance).
(G) "Delinquent" means the period any payment of principal or interest due on
the Loan is overdue.
(H) "Eligible Loan" means a Loan offered for sale by Seller under the Sale
Agreement which as of the Cutoff Date is current or no more Delinquent than
permitted under the Sale
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Agreement in payment of principal or interest and which meets the following
criteria as of the effective date of the Bill of Sale:
(i) is a Stafford Loan, a Consolidation Loan, a PLUS Loan or SLS Loan;
(ii) is owned by Seller and is fully disbursed;
(iii) is guaranteed as to principal and interest by the applicable
Guarantor to the maximum extent permitted by the Higher Education Act
for such Loan;
(iv) bears interest at a stated rate of not less than the maximum rate
permitted under the Higher Education Act for such Loan;
(v) is eligible for the payment of the quarterly special allowance at the
full and undiminished rate established under the formula set forth in the
Higher Education Act for such Loan;
(vi) if not yet in repayment status, is eligible for the payment of
interest benefits by the Secretary or, if not so eligible, is a Loan for
which interest either is billed quarterly to Borrower or deferred until
commencement of the repayment period, in which case such accrued interest
is subject to capitalization to the full extent permitted by the applicable
Guarantor;
(vii) is supported by the following documentation:
(a) for each Loan:
1. loan application, and any supplement thereto,
2. original promissory note and any addendum thereto or a
certified copy thereof if more than one loan is represented
by a single promissory note and all loans so represented
are not being sold at the same time,
3. evidence of guarantee,
4. any other document and/or record which Purchaser may be
required to retain pursuant to the Higher Education Act;
and
(b) for each Loan only if applicable:
1. payment history (or similar document) including (i) an
indication of the
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Principal Balance and the date through which interest has
been paid, each as of the Cutoff Date and (ii) an
accounting of the allocation of all payments by Borrower or
on Borrower's behalf to principal and interest on the Loan,
2. documentation which supports periods of current or past
deferment or past forbearance,
3. a collection history, if the Loan was ever in a delinquent
status, including detailed summaries of contacts and
including the addresses or telephone numbers used in
contacting or attempting to contact Borrower and any
endorser and, if required by the Guarantor, copies of all
letters and other correspondence relating to due diligence
processing,
4. evidence of all requests for skip-tracing assistance and
current address of Borrower, if located,
5. evidence of requests for pre-claims assistance, and
evidence that the Borrower's school(s) have been notified,
6. a record of any event resulting in a change to or
confirmation of any data in the Loan file.
(I) "Initial Payment" means the dollar amount specified in the applicable
Sale Agreement.
(J) "Loan" means the Note or Notes offered for sale pursuant to the Sale
Agreement and related documentation together with any guaranties and other
rights relating thereto including, without limitation, Interest Subsidy
Payments and Special Allowance Payments.
(K) "Loan Transmittal Summary Forms" means the forms provided to Seller by
Purchaser and completed by Seller which list, by Borrower, the Loans subject
to the Bill of Sale and the outstanding Principal Balance and accrued interest
thereof as of the Cutoff Date.
(L) "Note" means the promissory note of the Borrower and any amendment
thereto evidencing the Borrower's obligation with regard to a student loan
guaranteed under the Higher Education Act.
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(M) "PLUS Loan" means a Loan which was made pursuant to the PLUS Program
established under Section 428B of the Higher Education Act (or predecessor
provisions).
(N) "Principal Balance" means the outstanding principal amount of the Loan,
plus interest expected to be capitalized (if any), less amounts which may
not be insured (such as late charges).
(O) "Purchase Price" means the sum of the Initial Payment and Deferred
Payment.
(P) "Secretary" means the United States Secretary of Education or any
successor.
(Q) "SLS Loan" means a Loan which was made pursuant to the Supplemental Loans
for Students Program established under Section 428A of the Higher Education
Act(or predecessor provisions), including Loans referred to as ALAS Loans or
Student PLUS Loans.
(R) "Stafford Loans" means Subsidized Stafford Loans and Unsubsidized
Stafford Loans.
(S) "Subsidized Stafford Loan" means a Loan for which the interest rate is
governed by Section 427A(a) or 427A(d) of the Higher Education Act.
(T) "Unsubsidized Stafford Loan" means a Loan made pursuant to Section 428H
of the Higher Education Act.
SECTION 3. SALE/PURCHASE
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(A) Consummation of Sale and Purchase
The sale and purchase of Eligible Loans pursuant to a Sale Agreement
shall be consummated upon Purchaser's receipt from the Seller and the Interim
Eligible Lender Trustee for the benefit of the Seller of the Bill of Sale and
the payment by Purchaser to Seller of the Initial Payment, and when
consummated such sale and purchase shall be effective as of the date of the
Bill of Sale. Seller and Purchaser shall use their best efforts to perform
promptly their respective obligations pursuant to such Sale Agreement.
(B) Settlement of the Initial Payment
Purchaser on the date of the Bill of Sale shall pay Seller the Initial
Payment by wire transfer in immediately available funds to the account
specified by Seller.
(C) Interest Subsidy And Special Allowance Payments
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(C) Interest Subsidy And Special Allowance Payments And Rebate Fees
On the date of the Bill of Sale, Seller shall be entitled to all
Interest Subsidy Payments and Special Allowance Payments on the Loans and
shall be responsible for the payment of any rebate fees applicable to the
Consolidation Loans subject to each Bill of Sale accruing up to but not
including the date of the Bill of Sale. The Purchaser and the Eligible
Lender Trustee for the benefit of Purchaser shall be entitled to all
Special Allowance Payments and Interest Subsidy Payments and shall be
responsible for the payment of any rebate fees accruing from the date of
the Bill of Sale.
(D) Special Programs
In consideration of the sale of the Eligible Loans under these Master
Sale Terms and each Sale Agreement, Purchaser agrees to cause the Servicer
to offer borrowers of Trust Student Loans all special programs whether or
not in existence as of the date of any Sale Agreement generally offered to
the obligors of comparable loans owned by Sallie Mae subject to the terms
and conditions of Section 3.12 of the Servicing Agreement.
(E) Deferred Payment
Receipt by the Seller of amounts distributed to the Seller pursuant to
Section 2.8C(G) of the Administration Agreement (exclusive of the amount of
any such distribution attributable to the reduction from time to time of
the Specified Reserve Account Balance) shall constitute payment to the
Seller of the Deferred Payment portion of the Purchase Price.
SECTION 4. CONDITIONS PRECEDENT TO SALE AND PURCHASE
-----------------------------------------
(A) Activities Prior to the Sale
Following the execution of a Sale Agreement, Seller shall provide any
assistance requested by Purchaser in determining that all required
documentation on the Loans is present and correct.
(B) Continued Servicing
Seller shall service, or cause to be serviced, all Loans as required
under the Higher Education Act until the date of the Bill of Sale.
(C) Bill of Sale/Loan Transmittal Summary Form
Seller shall deliver to Purchaser:
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(i) a Bill of Sale executed by an authorized officer of the Seller
and the Interim Eligible Lender Trustee for the benefit of the Seller,
covering Loans offered by the Seller and accepted by Purchaser as set
forth thereon, selling, assigning and conveying to the Eligible Lender
Trustee for the benefit of the Purchaser and its assignees all right,
title and interest of the Seller and the Interim Eligible Lender
Trustee for the benefit of the Seller, including the insurance
interest of the Interim Eligible Lender Trustee for the benefit of the
Seller, in each of the Loans, and stating that the representations and
warranties made by Seller in Section 5 of these Master Sale Terms are
true and correct on and as of the date of the Bill of Sale; and
(ii) the Loan Transmittal Summary Form, attached to the Bill of Sale,
identifying each of the Eligible Loans which is the subject of the
Bill of Sale and setting forth the unpaid Principal Balance of each
such Loan.
(D) Endorsement
The Seller shall provide a blanket endorsement transferring the entire
interest of the Seller and the Interim Eligible Lender Trustee for the
benefit of Seller in the Loans to the Eligible Lender Trustee for the
benefit of the Purchaser with the form of endorsement provided for in the
Sale Agreement.
At the direction of and in such form as Purchaser may designate, the
Seller also agrees to individually endorse any Eligible Loan as Purchaser
may request from time to time.
(E) Officer's Certificate
Seller shall furnish to Purchaser, with each Bill of Sale provided in
connection with each sale of Loans pursuant to these Master Sale Terms, an
Officer's Certificate, dated as of the date of such Bill of Sale.
(F) Loan Transfer Statement
Upon Purchaser's request, Seller shall deliver to Purchaser one (1) or
more Loan Transfer Statements (Department Form OE 1074 or its equivalent)
provided by Purchaser, executed by the Interim Eligible Lender Trustee for
the benefit of the Seller and dated the date of the Bill of Sale. Seller
agrees that Purchaser and the Eligible Lender Trustee may use the Bill of
Sale, including the Loan Transmittal Summary Form attached to the Bill of
Sale, in lieu of OE Form 1074, as official notification to the Guarantor of
the assignment by the Interim Eligible Lender Trustee for the benefit of
the Seller to the Eligible Lender Trustee for the
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benefit of the Purchaser of the Loans listed on the Bill of Sale.
(G) Power of Attorney
Seller and the Interim Eligible Lender Trustee hereby grant to the
Eligible Lender Trustee on behalf of the Purchaser an irrevocable power of
attorney, which power of attorney is coupled with an interest, to
individually endorse or cause to be individually endorsed in the name of
the Seller and the Interim Eligible Lender Trustee for the benefit of the
Seller any Eligible Loan to evidence the transfer of such Eligible Loan to
the Eligible Lender Trustee on behalf of the Purchaser and to transfer or
to cause to be transferred physical possession of any Note from Sallie Mae
or the Servicer to the Eligible Lender Trustee or the Indenture Trustee or
any other custodian on behalf of either of them.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF SELLER AND
---------------------------------------------
ELIGIBLE LENDER TRUSTEE
-----------------------
(A) General
Seller represents and warrants to Purchaser that with respect to a
portfolio of Loans as of the date of each Sale Agreement and Bill of Sale;
(i) The Interim Eligible Lender Trustee is an eligible lender or
other qualified holder of loans originated pursuant to the Federal
Family Education Loan Program established under the Higher Education
Act;
(ii) The Interim Eligible Lender Trustee and the Seller are duly
organized and existing under the laws of the applicable jurisdiction;
(iii) The Interim Eligible Lender Trustee and the Seller have all
requisite power and authority to enter into and to perform the terms
of these Master Sale Terms and each Sale Agreement; and
(iv) The Interim Eligible Lender Trustee and the Seller will not,
with respect to any Loan purchased under Sale Agreements executed
pursuant to these Master Sale Terms, agree to release any Guarantor
from any of its contractual obligations as an insurer of such Loan or
agree otherwise to alter, amend or renegotiate any material term or
condition under which such Loan is insured, except as required by law
or rules and regulations issued pursuant to law, without the express
prior written consent of Purchaser.
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(B) Particular
Seller represents and warrants to Purchaser as to the Loans purchased
by Purchaser under each Sale Agreement and each Bill of Sale executed
pursuant to these Master Sale Terms:
(i) The Interim Eligible Lender Trustee for the benefit of the
Seller has good title to, and is the sole owner of, the Loans, free
and clear of all security interests, liens, charges, claims, offsets,
defenses, counterclaims or encumbrances of any nature and no right of
rescission, offsets, defenses, or counterclaims have been asserted or
threatened with respect to the Loans;
(ii) The Loans are Eligible Loans and the description of the Loans
set forth in the Sale Agreement and the Loan Transmittal Summary Form
is true and correct;
(iii) The Interim Eligible Lender Trustee and the Seller are
authorized to sell, assign, transfer and repurchased the Loans; and
the sale, assignment and transfer of such Loans is or, in the case of
a Loan repurchased by the Seller and or the Interim Eligible Lender
Trustee, will be made pursuant to and consistent with the laws and
regulations under which the Seller and the Interim Eligible Lender
Trustee operate, and will not violate any decree, judgment or order of
any court or agency, or conflict with or result in a breach of any of
the terms, conditions or provisions of any agreement or instrument to
which the Interim Eligible Lender Trustee or the Seller is a party or
by which the Interim Eligible Lender Trustee or Seller or its property
is bound, or constitute a default (or an event which could constitute
a default with the passage of time or notice or both) thereunder;
(iv) The Loans are each in full force and effect in accordance with
their terms and are legal, valid and binding obligations of the
respective Borrowers thereunder subject to no defenses (except the
defense of infancy);
(v) Each Loan has been duly made and serviced in accordance with
the provisions of the Federal Family Education Loan Program
established under the Higher Education Act, and has been duly insured
by a Guarantor; such guarantee is in full force and effect and is
freely transferable to the Eligible Lender Trustee for the benefit of
the Purchaser as an incident to the purchase of each Loan; and all
premiums due and payable to such Guarantor shall have been paid in
full as of the date of the Bill of Sale;
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(vi) Any payments on the Loans received by the Interim Eligible
Lender Trustee for the benefit of the Seller which have been allocated
to reduction of principal and interest on such Loans have been
allocated on a simple interest basis; the information with respect to
the Loans as of the Cutoff Date as stated on the Loan Transmittal
Summary Form is true and correct;
(vii) Due diligence and reasonable care have been exercised in the
making, administering, servicing and collecting the Loans and, with
respect to any Loan for which repayment terms have been established,
all disclosures of information required to be made pursuant to the
Higher Education Act have been made;
(viii) All origination fees authorized to be collected pursuant to
Section 438 of the Higher Education Act have been paid to the
Secretary;
(ix) Each Loan has been duly made and serviced in accordance with
the provisions of all applicable federal and state laws;
(x) No Loan is more than one hundred and twenty (120) days
Delinquent as of the Cutoff Date and no default, breach, violation or
event permitting acceleration under the terms of any Loan has arisen;
and neither the Seller nor any predecessor holder of any Loan has
waived any of the foregoing other than as permitted by the Basic
Documents;
(xi) It is the intention of Seller, the Interim Eligible Lender
Trustee, the Eligible Lender Trustee, and the Purchaser, and the
Seller hereby warrants, that the transfer and assignment herein
contemplated constitute a valid sale of the Loans from Seller and the
Interim Eligible Lender Trustee to the Eligible Lender Trustee for the
benefit of Purchaser and that the beneficial interest in and title to
such Loans not be part of the Seller's estate in the event of the
bankruptcy of the Seller or the appointment of a receiver with respect
to Seller;
(xii) There is only one original executed copy of the promissory note
evidencing each Loan; and
(xiii) No Borrower of any Loan as of the Cutoff Date is noted in the
related Loan File as being currently involved in a bankruptcy
proceeding.
(C) The Eligible Lender Trustee and the Purchaser represent and warrant
that as of the date of each Sale Agreement and each Bill of Sale:
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(i) The Eligible Lender Trustee is duly organized and validly existing in
good standing under the laws of its governing jurisdiction and has an office
located within the State of Delaware. It has all requisite corporate power and
authority to execute, deliver and perform its obligations under this Sale
Agreement;
(ii) The Eligible Lender Trustee has taken all corporate action necessary to
authorize the execution and delivery by it of these Master Sale Terms and each
Sale Agreement, and these Master Sale Terms and each Sale Agreement have been
and will be executed and delivered by one of its officers who is duly
authorized to execute and deliver the Sale Agreement on its behalf;
(iii) Neither the execution nor the delivery by it of these Master Sale
Terms and each Sale Agreement, nor the consummation by it of the transactions
contemplated hereby or thereby nor compliance by it with any of the terms or
provisions hereof or thereof will contravene any Federal or Delaware state
law, governmental rule or regulation governing the banking or trust powers of
the Eligible Lender Trustee or any judgment or order binding on it, or
constitute any default under its charter documents or by-laws or any
indenture, mortgage, contract, agreement or instrument to which it is a party
or by which any of its properties may be bound; and
(iv) The Eligible Lender Trustee is an "eligible lender" as such term is
defined in Section 435(d) of the Higher Education Act, for purposes of holding
legal title to the Trust Student Loans as contemplated by these Master Sale
Terms and each Sale Agreement and the other Basic Documents, it has a lender
identification number with respect to the Trust Student Loans from the
Department and has in effect a Guarantee Agreement with each of the Guarantors
with respect to the Trust Student Loans.
SECTION 6. PURCHASE OF TRUST STUDENT LOANS; REIMBURSEMENT
----------------------------------------------
Each party to this Agreement shall give notice to the other such parties and
to the Servicer, the Administrator and Sallie Mae promptly, in writing, upon the
discovery of any breach of Seller's representations and warranties made pursuant
to Section 5 hereof which has a materially adverse effect on the interest of the
Purchaser in any Trust Student Loan. In the event of such a material breach
which is not curable by reinstatement of the applicable Guarantor's guarantee of
such Trust Student Loan, Seller shall repurchase any affected Trust Student Loan
not later than 120 days following the earlier of the date of discovery of such
material breach and the date of receipt of the Guarantor reject transmittal form
with respect to such Trust Student Loan. In the event of such a material breach
which is curable by reinstatement of the applicable Guarantor's guarantee of
such Trust Student Loan, unless the material breach shall have been cured within
360 days
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following the earlier of the date of discovery of such material breach and the
date of receipt of the Guarantor reject transmittal form with respect to such
Trust Student Loan, the Seller shall purchase such Trust Student Loan not later
than the sixtieth day following the end of such 360-day period. The Seller shall
also remit as provided in Section 2.6 of the Administration Agreement on the
date of purchase of any Trust Student Loan pursuant to this Section 6 an amount
equal to all nonguaranteed interest amounts and forfeited Interest Subsidy
Payments and Special Allowance Payments with respect to such Trust Student Loan.
In consideration of the purchase of any such Trust Student Loan pursuant to this
Section 6, the Seller shall remit the Purchase Amount in the manner specified in
Section 2.6 of the Administration Agreement.
In addition, if any breach of Section 5 hereof by the Seller does not trigger
such purchase obligation but does result in the refusal by a Guarantor to
guarantee all or a portion of the accrued interest (or any obligation of the
Purchaser to repay such interest to a Guarantor), or the loss (including any
obligation of the Purchaser to repay the Department) of Interest Subsidy
Payments and Special Allowance Payments, with respect to any Trust Student Loan
affected by such breach, then the Seller shall reimburse the Purchaser by
remitting an amount equal to the sum of all such nonguaranteed interest amounts
and such forfeited Interest Subsidy Payments or Special Allowance Payments in
the manner specified in Section 2.6 of the Administration Agreement not later
than (i) the last day of the next Collection Period ending not less than 60 days
from the date of the Guarantor's refusal to guarantee all or a portion of
accrued interest or loss of Interest Subsidy Payments or Special Allowance
Payments, or (ii) in the case where the Seller reasonably believes such losses
are likely to be collected, not later than the last day of the next Collection
Period ending not less than 360 days from the date of the Guarantor's refusal to
guarantee all or a portion of accrued interest or loss of Interest Subsidy
Payments or Special Allowance Payments. At the time such payment is made, the
Seller shall not be required to reimburse the Purchaser for interest that is
then capitalized, however, such amounts shall be reimbursed if the borrower
subsequently defaults and such capitalized interest is not paid by the
Guarantor.
Anything in this Section 6 to the contrary notwithstanding, if as of the last
Business Day of any month the aggregate outstanding principal amount of Trust
Student Loans with respect to which claims have been filed with and rejected by
a Guarantor or with respect to which the Servicer determines that claims cannot
be filed pursuant to the Higher Education Act as a result of a breach by the
Seller or the Servicer, exceeds 1% of the Pool Balance, the Seller or the
Servicer shall purchase, within 30 days of a written request of the Eligible
Lender Trustee or the Indenture Trustee, such affected Trust Student Loans in an
aggregate principal amount such that after such purchase the aggregate principal
amount of such affected Trust Student Loans is less than 1% of the Pool Balance.
The Trust Student Loans to be purchased by the Seller or the Servicer pursuant
to the preceding sentence shall be based on
12
<PAGE>
the date of claim rejection (or the date of notice referred to in the first
sentence of this Section 6), with Trust Student Loans with the earliest such
date to be purchased first.
In lieu of repurchasing Trust Student Loans pursuant to this Section 6, the
Seller may, at its option, substitute Eligible Loans or arrange for the
substitution of Eligible Loans which are substantially similar on an aggregate
basis as of the date of substitution to the Trust Student Loans for which they
are being substituted with respect to the following characteristics:
(1) status (i.e., in-school, grace, deferment, forbearance or
repayment),
(2) program type (i.e., Unsubsidized Stafford, Subsidized Stafford,
Consolidation (pre-1993 vs. post-1993), PLUS or SLS),
(3) school type,
(4) total return,
(5) principal balance, and
(6) remaining term to maturity.
In addition, each substituted Eligible Loan will comply, as of the date of
substitution, with all of the representations and warranties made hereunder. In
choosing Eligible Loans to be substituted pursuant to this Section 6, the Seller
shall make a reasonable determination that the Eligible Loans to be substituted
will not have a material adverse effect on the Noteholders and the
Certificateholders.
In the event that Seller elects to substitute Eligible Loans pursuant to this
Section 6, the Seller will remit to the Administrator the amount of any
shortfall between the Purchase Amount of the substituted Eligible Loans and the
Purchase Amount of the Trust Student Loans for which they are being substituted.
The Seller shall also remit to the Administrator an amount equal to all
nonguaranteed interest amounts and forfeited Interest Subsidy Payments and
Special Allowance Payments with respect to the Trust Student Loans in the manner
provided in Section 2.6 of the Administration Agreement. The sole remedy of the
Purchaser, the Eligible Lender Trustee, the Certificateholders and the
Noteholders with respect to a breach by the Seller pursuant to Section 5 hereof
shall be to require the Seller to purchase Trust Student Loans, to reimburse the
Purchaser as provided above or to substitute Student Loans pursuant to this
Section. 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 Trust Student Loan or the reimbursement for any interest penalty
pursuant to this Section 6.
13
<PAGE>
SECTION 7. OBLIGATION TO REMIT SUBSEQUENT PAYMENTS AND FORWARD COMMUNICATIONS
------------------------------------------------------------------
(A) Any payment received by Seller with respect to amounts accrued after
the Date of the Bill of Sale for any Loan sold to Purchaser, which payment
is not reflected in the Loan Transmittal Summary Form, shall be received by
Seller in trust for the account of Purchaser and the Seller hereby
disclaims any title to or interest in any such amounts. Within two (2)
business days following the date of receipt, Seller shall remit to
Purchaser an amount equal to any such payments along with a listing on a
form provided by Purchaser identifying the Loans with respect to which such
payments were made, the amount of each such payment and the date each such
payment was received.
(B) Any written communication received at any time by Seller with respect
to any Loan subject to any Sale Agreement shall be transmitted by Seller to
Servicer within two (2) business days of receipt. Such communications shall
include, but not be limited to, letters, notices of death or disability,
notices of bankruptcy, forms requesting deferment of repayment or loan
cancellation, and like documents.
SECTION 8. CONTINUING OBLIGATION OF SELLER
-------------------------------
Seller shall provide all reasonable assistance necessary for Purchaser to
resolve account problems raised by any Borrower, the Guarantor or the Secretary
provided such account problems are attributable to or are alleged to be
attributable to (a) an event occurring during the period Seller owned the Loan,
or (b) a payment made or alleged to have been made to Seller. Further, the
Seller agrees to execute any financing statements at the request of the
Purchaser in order to reflect the Purchaser's interest in the Loans.
SECTION 9. LIABILITY OF SELLER; INDEMNITIES
--------------------------------
The Seller shall be liable in accordance herewith only to the extent of the
obligations specifically undertaken by the Seller under this Sale Agreement.
(i) The Seller shall indemnify, defend and hold harmless the Purchaser and
the Eligible Lender Trustee in its individual capacity and their officers,
directors, employees and agents from and against any taxes that may at any
time be asserted against any such Person with respect to the transactions
contemplated herein and in the other Basic Documents (except any such
income taxes arising out of fees paid to the Eligible Lender Trustee),
including any sales, gross receipts, general corporation, tangible and
intangible personal property, privilege or license taxes and costs and
expenses in defending against the same.
14
<PAGE>
(ii) The Seller shall indemnify, defend and hold harmless the Purchaser and
the Eligible Lender Trustee in its individual capacity and their officers,
directors, employees and agents of the Purchaser and the Eligible Lender
Trustee from and against any and all costs, expenses, losses, claims,
damages and liabilities arising out of, or imposed upon such Person
through, the Seller's willful misfeasance, bad faith or gross negligence in
the performance of its duties under the Sale Agreement, or by reason of
reckless disregard of its obligations and duties under the Sale Agreement.
(iii) The Seller shall be liable as primary obligor for, and shall
indemnify, defend and hold harmless the Eligible Lender Trustee in its
individual capacity 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
Sale Agreement, the other Basic Documents, the acceptance or performance of
the trusts and duties set forth herein and in the Sale Agreement or the
action or the inaction of the Eligible Lender Trustee hereunder, except to
the extent that such cost, expense, loss, claim, damage, obligation or
liability: (a) shall be due to the willful misfeasance, bad faith or
negligence (except for errors in judgment) of the Eligible Lender Trustee,
(b) shall arise from any breach by the Eligible Lender Trustee of its
covenants in its individual capacity under any of the Basic Documents; or
(c) shall arise from the breach by the Eligible Lender Trustee of any of
its representations or warranties in its individual capacity set forth in
these Master Sale Terms or any Sale Agreement. In the event of any claim,
action or proceeding for which indemnity will be sought pursuant to this
paragraph, the Eligible Lender Trustee's choice of legal counsel shall be
subject to the approval of the Seller, which approval shall not be
unreasonably withheld.
Indemnification under this Section shall survive the resignation or removal of
the Eligible Lender Trustee and the termination of these Master Sale Terms and
shall include reasonable fees and expenses of counsel and expenses of
litigation. If the Seller shall have made any indemnity payments pursuant to
this Section and the Person to or for the benefit of whom such payments are made
thereafter shall collect any of such amounts from others, such Person shall
promptly repay such amounts to the Seller, without interest.
SECTION 10. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS OF
---------------------------------------------------------------
SELLER
------
Any Person (a) into which the Seller may be merged or consolidated, (b) which
may result from any merger or consolidation to which the Seller shall be a party
or (c) which may succeed to the properties and assets of the Seller
substantially as a whole, shall
15
<PAGE>
be the successor to the Seller without the execution or filing of any document
or any further act by any of the parties to these Master Sale Terms; provided,
--------
however, that the Seller hereby covenants that it will not consummate any of
- -------
the foregoing transactions except upon satisfaction of the following: (i) the
surviving Person, if other than the Seller, executes an agreement of assumption
to perform every obligation of the Seller under these Master Sale Terms, (ii)
immediately after giving effect to such transaction, no representation or
warranty made pursuant to Section 5 herein shall have been breached, (iii) the
surviving Person, if other than the Seller, shall have delivered to the Eligible
Lender Trustee an Officers' Certificate and an Opinion of Counsel each stating
that such consolidation, merger or succession and such agreement of assumption
comply with this Section and that all conditions precedent, if any, provided for
in these Master Sale Terms relating to such transaction have been complied with,
and that the Rating Agency Condition shall have been satisfied with respect to
such transaction, (iv) if the Seller is not the surviving entity, such
transaction will not result in a material adverse Federal or state tax
consequence to the Purchaser, the Noteholders or the Certificateholders and (v)
if the Seller is not the surviving entity, the Seller shall have delivered to
the Eligible Lender 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 Purchaser and the
Eligible Lender Trustee, respectively, in the 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 11. LIMITATION ON LIABILITY OF SELLER AND OTHERS
--------------------------------------------
The Seller and any director or officer or employee or agent thereof may rely
in good faith on the advice of counsel or on any document of any kind, prima
facie properly executed and submitted by any Person respecting any matters
arising hereunder (provided that such reliance shall not limit in any way the
Seller's obligations under Section 5 herein). The Seller shall not be under any
obligation to appear in, prosecute or defend any legal action that shall not be
incidental to its obligations under these Master Sale Terms or any Sale
Agreement, and that in its opinion may involve it in any expense or liability.
Except as provided herein, the repurchase (or substitution) and reimbursement
obligations of Seller will constitute the sole remedy available to Purchaser for
uncured breaches; provided, however, that the information with respect to the
Loans listed on the Bill of Sale may be adjusted in the ordinary course of
business subsequent to the date of the Bill of Sale and to the extent that the
aggregate Principal Balance listed on the Bill of Sale is less than the
aggregate Principal Balance stated on the Bill of Sale, Seller shall remit such
amount to the Eligible Lender Trustee for the benefit of the Purchaser. Such
reconciliation payment shall be made from time to time but no less frequently
than semi-annually.
16
<PAGE>
SECTION 12. LIMITATION OF LIABILITY OF ELIGIBLE LENDER
-------------------------------------------
TRUSTEE
-------
Notwithstanding anything contained herein to the contrary, these Master Sale
Terms and any Sale Agreement have been signed by Chase Manhattan Bank Delaware
not in its individual capacity but solely in its capacity as Eligible Lender
Trustee for the Purchaser and the Interim Eligible Lender Trustee for the
Seller, as the case may be, and in no event shall Chase Manhattan Bank Delaware
in its individual capacity, have any liability for the representations,
warranties, covenants, agreements or other obligations of the Eligible Lender
Trustee, the Interim Eligible Lender Trustee, the Purchaser or of the Seller,
respectively, under these Master Sale Terms or any Sale Agreement 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 Purchaser or the Seller,
as the case may be.
SECTION 13. EXPENSES
--------
Except as otherwise provided herein, each party to these Master Sale Terms or
any Sale Agreement shall pay its own expense incurred in connection with the
preparation, execution and delivery of these Master Sale Terms or any Sale
Agreement and the transactions contemplated herein or therein.
SECTION 14. SURVIVAL OF COVENANTS/SUPERSESSION
----------------------------------
All covenants, agreements, representations and warranties made herein and in
or pursuant to any Sale Agreements executed pursuant to these Master Sale Terms
shall survive the consummation of the purchase of the Loans provided for in each
Sale Agreement. All covenants, agreements, representations and warranties made
or furnished pursuant hereto by or for the benefit of Seller shall bind and
inure to the benefit of any successors or assigns of Purchaser and shall survive
with respect to each Loan. Each Sale Agreement supersedes all previous
agreements and understandings between Purchaser and Seller with respect to the
subject matter thereof. A Sale Agreement may be changed, modified or
discharged, and any rights or obligations hereunder may be waived, only by a
written instrument signed by a duly authorized officer of the party against whom
enforcement of any such waiver, change, modification or discharge is sought.
The waiver by Purchaser of any covenant, agreement, representation or warranty
required to be made or furnished by Seller or the waiver by Purchaser of any
provision herein contained or contained in any Sale Agreement shall not be
deemed to be a waiver of any breach of any other covenant, agreement,
representation, warranty or provision herein contained or contained in any Sale
Agreement, nor shall any waiver or any custom or practice which may evolve
between the parties in the administration of the terms hereof or of any Sale
Agreement, be construed to lessen the right of Purchaser to insist upon the
performance by Seller in strict accordance with said terms.
17
<PAGE>
SECTION 15. COMMUNICATION AND NOTICE REQUIREMENTS
-------------------------------------
All communications, notices and approvals provided for hereunder shall be in
writing and mailed or delivered to Seller or Purchaser, as the case may be,
addressed as set forth in the Sale Agreement or at such other address as either
party may hereafter designate by notice to the other party. Notice given in any
such communication, mailed to Seller or Purchaser by appropriately addressed
registered mail, shall be deemed to have been given on the day following the
date of such mailing.
SECTION 16. FORM OF INSTRUMENTS
-------------------
All instruments and documents delivered in connection with these Master Sale
Terms and any Sale Agreement, and all proceedings to be taken in connection with
these Master Sale Terms and any Sale Agreement and the transactions contemplated
herein and therein, shall be in a form as set forth in the attachments hereto,
and Purchaser shall have received copies of such documents as it or its counsel
shall reasonably request in connection therewith. Any instrument or document
which is substantially in the same form as an Attachment hereto or a recital
herein will be deemed to be satisfactory as to form.
SECTION 17. AMENDMENT
---------
These Master Sale Terms and any Sale Agreement may be amended by the parties
thereto without the consent of the related Noteholders or Certificateholders for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of such Master Sale Terms and Sale Agreements or of
modifying in any manner the rights of such Noteholders or Certificateholders;
provided that such action will not, in the opinion of counsel satisfactory to
the related Eligible Lender Trustees, materially and adversely affect the
interest of any such Noteholder or Certificateholder.
In addition, these Master Sale Terms and any Sale Agreement may also be
amended from time to time by the Seller, the Interim Eligible Lender Trustee,
the Eligible Lender Trustee and the Purchaser, with the consent of the
Noteholders of Notes evidencing a majority of the Outstanding Amount of the
Notes and the consent of the Certificateholders of Certificates evidencing 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 these Master
Sale Terms or any Sale 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 time of, collections of payments with respect to 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
18
<PAGE>
Certificate Balance of Certificates, the Noteholders or the Certificateholders
of which are required to consent to any such amendment, without the consent of
all outstanding Noteholders and Certificateholders.
Promptly after the execution of any such amendment or consent (or, in the case
of the Rating Agencies, five Business Days prior thereto), the Eligible Lender
Trustee shall furnish written notification of the substance of such amendment or
consent to the Indenture Trustee, each Certificateholder, and each of the Rating
Agencies.
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.
Prior to the execution of any amendment to these Master Sale Terms, the
Eligible Lender Trustee shall be entitled to receive and rely upon an Opinion of
Counsel stating that execution of such amendment is authorized or permitted by
this Sale Agreement and the Opinion of Counsel referred to in Section 7.1 I((i)
of the Administration Agreement. The Eligible Lender Trustee may, but shall not
be obligated to, enter into any such amendment which affects the Eligible Lender
Trustee's own rights, duties or immunities under this Agreement or otherwise.
SECTION 18. NONPETITION COVENANTS
---------------------
Notwithstanding any prior termination of these Master Sale Terms, Seller and
the Interim Eligible Lender Trustee shall not acquiesce, petition or otherwise
invoke or cause Purchaser to invoke the process of any court or government
authority for the purpose of commencing or sustaining a case against Purchaser
under any Federal or state bankruptcy, insolvency or similar law or appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of Purchaser or any substantial part of its property, or
ordering the winding up or liquidation of the affairs of the Purchaser.
Notwithstanding any prior termination of these Master Sale Terms, the Eligible
Lender Trustee and the Purchaser shall not acquiesce, petition or otherwise
invoke or cause Seller to invoke the process of commencing or sustaining a case
against the Seller under any federal or state bankruptcy, insolvency or similar
law or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of Seller or any substantial part of its
property, or ordering the winding up or liquidation of the affairs of the
Purchaser.
19
<PAGE>
SECTION 19. ASSIGNMENT
----------
Seller and the Interim Eligible Lender Trustee each hereby assigns its entire
right, title and interest as purchaser and as the Interim Eligible Lender
Trustee under the Purchase Agreement Master Securitization Terms Number 1000 and
any Purchase Agreement thereunder to Purchaser as of the date hereof and
acknowledges that the Purchaser and the Eligible Lender Trustee on behalf of the
Purchaser will assign the same, together with the right, title and interest of
the Purchaser and the Eligible Lender Trustee hereunder, to the Indenture
Trustee under the Indenture.
SECTION 20. GOVERNING LAW
-------------
These Master Sale Terms and any Sale Agreements shall be governed by and
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.
20
<PAGE>
SLM STUDENT LOAN TRUST 1998-2 SLM FUNDING CORPORATION
(Purchaser) (Seller)
by Chase Manhattan Bank Delaware,
not in its individual capacity
but solely as Eligible Lender By: /s/ William M.E. Rachal, Jr.
Trustee ----------------------------
Name:
--------------------------
Title: -------------------------
By: /s/ Denis Kelly
-----------------------------
Name: Denis Kelly
---------------------------
Title: Trust Officer
--------------------------
CHASE MANHATTAN BANK DELAWARE CHASE MANHATTAN BANK DELAWARE,
(Not in its individual (Not in its individual capacity
capacity but solely as but solely as Interim Eligible
Eligible Lender Trustee) Lender Trustee)
By: /s/ Denis Kelly By: /s/ Denis Kelly
----------------------------- ----------------------------
Name: Denis Kelly Name: Denis Kelly
-------------------------- ---------------------------
Title: Trust Officer Title: Trust Officer
-------------------------- -------------------------
21
<PAGE>
ATTACHMENT A
SALE AGREEMENT
Dated as of June 18, 1998
SALE AGREEMENT NUMBER 1
---
Each of the Chase Manhattan Bank Delaware as Interim Eligible Lender
Trustee (the "Interim Eligible Lender Trustee") for the benefit of SLM Funding
Corporation (the "Seller") and the Seller hereby offer for sale to the
Eligible Lender Trustee on behalf of SLM Student Loan Trust 1998-2
("Purchaser") the entire right, title and interest of the Seller and the
Interim Eligible Lender Trustee in the Loans described in the Bill of Sale
and Loan Transmittal Summary Form incorporated herein and, to the extent
indicated below, the Eligible Lender Trustee on behalf of the Purchaser
accepts the Seller's and the Interim Eligible Lender Trustee's offer. In
order to qualify as Eligible Loans, no payment of principal or interest shall
be more than one hundred and twenty (120) days Delinquent as of the Cutoff
Date which date shall be May 25, 1998.
TERMS, CONDITIONS AND COVENANTS
-------------------------------
In consideration of the Purchase Price, each of the Seller and the Interim
Eligible Lender Trustee for the benefit of the Seller hereby sells to the
Eligible Lender Trustee for the benefit of the Purchaser the entire right,
title and interest of the Seller and the Interim Eligible Lender Trustee in
the Loans accepted for purchase, subject to all the terms and conditions of
the Sale Agreement Master Securitization Terms Number 1000 ("Master Sale
Terms") and amendments, each incorporated herein by reference, among Seller,
Interim Eligible Lender Trustee, Purchaser, and the Eligible Lender Trustee.
The Initial Payment of the Loans shall equal $3,006,200,749 (equal to
$3,013,741,380 (representing the offering price of the Securities less
underwriters' commissions and reimbursements to the underwriters) less
$7,515,631 (representing the Reserve Account Initial Deposit) less $25,000
(representing the initial deposit into the Collection Account).
This document shall constitute a Sale Agreement as referred to in the
Master Sale Terms and, except as modified herein, each term used herein shall
have the same meaning as in the Master Sale Terms. All references in the
Master Sale Terms to Loans or Eligible Loans shall be deemed to refer to the
Loans governed by this Sale Agreement. Seller hereby makes, as of the date
hereof, all the representations and warranties contained in the Master Sale
Terms and makes such representations and warranties with respect to the Loans
governed by this Sale Agreement.
Each of the Seller and the Interim Eligible Lender Trustee for the benefit
of the Seller authorizes the Eligible Lender Trustee for the benefit of the
Purchaser to use a copy of the Bill of Sale, including the Loan Transmittal
Summary Form attached to the Bill of Sale (in lieu of OE Form 1074) as
official notification
6
<PAGE>
to the applicable Guarantors of assignment to the Eligible Lender Trustee for
the benefit of the Purchaser of the Loans on the date of purchase.
The parties hereto intend that the transfer of Loans described in the Bill
of Sale and Loan Transmittal Summary Form be, and be construed as, a valid sale
of such Loans. However, in the event that notwithstanding the intentions of the
parties, such transfer is deemed to be a transfer for security, then each of the
Interim Eligible lender Trustee and the Seller hereby grants to the Eligible
Lender Trustee on behalf of the Purchaser a first priority security interest in
and to all Loans described in the Bill of Sale and Loan Transmittal Summary Form
to secure a loan in an amount equal to the Purchase Price of such Loans.
2
<PAGE>
SLM FUNDING CORPORATION SLM STUDENT LOAN TRUST 1998-2
- ----------------------- -----------------------------
(Seller) (Purchaser)
by Chase Manhattan Bank Delaware,
not in its individual capacity but
By: solely as Eligible Lender Trustee
---------------------------
Name:
-------------------------
Title: By:
------------------------ -------------------------------
Name:
-----------------------------
Title:
----------------------------
CHASE MANHATTAN BANK DELAWARE CHASE MANHATTAN BANK DELAWARE
- ----------------------------- -----------------------------
(not in its individual (not in its individual
capacity but solely as Interim capacity but solely as Eligible
Eligible Lender Trustee) Lender Trustee)
By: By:
--------------------------- ---------------------------
Name: Name:
------------------------- -------------------------
Title: Title:
------------------------ ------------------------
3
<PAGE>
SALE AGREEMENT NUMBER 1
--
BLANKET ENDORSEMENT DATED JUNE 18, 1998
---------------------------------------
SLM Funding Corporation ("Seller") and Chase Manhattan Bank Delaware as
Interim Eligible Lender Trustee for the benefit of the Seller, by execution of
this instrument, hereby endorses the attached promissory note which is one (1)
of the promissory notes ("the Notes") described in the Bill of Sale executed by
the Seller and the Interim Eligible Lender Trustee for the benefit of the Seller
in favor of Chase Manhattan Bank Delaware as Eligible Lender Trustee on behalf
of SLM Student Loan Trust 1998-2 (the "Purchaser"). This endorsement is in
blank, unrestricted form and without recourse except as provided in Section 6 of
the Master Sale Terms referred to in the Sale Agreement among Seller, Purchaser,
Interim Eligible Lender Trustee, and the Eligible Lender Trustee which covers
this promissory note.
This endorsement may be effected by attaching either this instrument or a
facsimile hereof to each or any of the Notes.
Notwithstanding the foregoing, the Interim Eligible Lender Trustee for the
benefit of the Seller agrees to individually endorse each Note in the form
provided by Purchaser as Purchaser may from time to time require or if such
individual endorsement is required by the Guarantor of the Note.
THE SALE AND PURCHASE OF THE LOANS SHALL BE SUBJECT TO THE TERMS, CONDITIONS AND
COVENANTS, INCLUDING THE BLANKET ENDORSEMENT, AS SET FORTH IN THE SALE AGREEMENT
MASTER LOAN SECURITIZATION TERMS 1000. BY EXECUTION HEREOF, THE SELLER
ACKNOWLEDGES THAT THE SELLER HAS READ, UNDERSTANDS AND AGREES TO BE BOUND BY ALL
TERMS, CONDITIONS AND COVENANTS OF THE SALE AGREEMENT (" SALE AGREEMENT"). THE
SALE AND PURCHASE SHALL BE CONSUMMATED UPON PURCHASER'S PAYMENT TO SELLER OF THE
INITIAL PAYMENT AS DEFINED IN THE MASTER SALE TERMS AND, UNLESS OTHERWISE AGREED
BY SELLER AND PURCHASER, SHALL BE EFFECTIVE AS OF THE DATE OF THE BILL OF SALE.
- -----------------------------------------
SELLER
-----------------------------------
Chase Manhattan Bank Delaware
not in its individual capacity
but solely in its individual
capacity but solely as Interim Eligible
Lender Trustee for the Benefit of SLM
Funding Corporation
Lender Code: 833 253
By:
-----------------------------
(Signature of Authorized
Officer)
Name:
---------------------------
Title:
--------------------------
- -----------------------------------------
- -----------------------------------------
PURCHASER
-------------------------------
Chase Manhattan Bank Delaware
not in its individual capacity
but solely as Eligible Lender
Trustee on behalf of SLM
Student Loan Trust 1998-2
By:
----------------------------
(Signature of Authorized
Signatory for Purchaser)
Name:
--------------------------
Title:
-------------------------
Date of Purchase: Jun. 18, 1998
- -----------------------------------------
-------------------------------------------------------------------
NOTE: Boxed areas on this form are to be completed by Purchaser.
-------------------------------------------------------------------
<PAGE>
BILL OF SALE DATED JUNE 18, 1998
The undersigned SLM Funding Corporation ("Seller") and Chase Manhattan Bank
Delaware as Interim Eligible Lender Trustee for the benefit of the Seller under
the Interim Trust Agreement dated as of June 1, 1998 ("Interim Eligible Lender
Trustee"), for value received and pursuant to the terms and conditions of Sale
Agreement Number 1 ("Sale Agreement") among Seller, the Interim Eligible Lender
Trustee, SLM Student Loan Trust 1998-2 ("Purchaser") and Chase Manhattan Bank
Delaware as the Eligible Lender Trustee, do hereby sell, assign and convey to
the Eligible Lender Trustee on behalf of Purchaser and its assignees all right,
title and interest of Seller and the Interim Eligible Lender Trustee, including
the insurance interest of Seller and the Interim Eligible Lender Trustee under
the Federal Family Education Loan Program (20 U.S.C. 1071 et seq.), in the Loans
------
identified herein which the Eligible Lender Trustee on behalf of Purchaser has
accepted for purchase. The portfolio accepted for purchase by the Eligible
Lender Trustee on behalf of Purchaser and the effective date of sale and
purchase are described below and the individual Accounts are listed on the
Schedule A attached hereto.
Seller hereby makes the representations and warranties set forth in Section 5
of the Sale Agreement Master Securitization Terms Number 1000 incorporated by
reference in the Sale Agreement. Seller and the Interim Eligible Lender Trustee
authorize the Eligible Lender Trustee on behalf of Purchaser to use a copy of
this document (in lieu of OE Form 1074) as official notification to the
Guarantor(s) of assignment to the Eligible Lender Trustee on behalf of Purchaser
of the Loans on the date of purchase.
LISTING OF LOANS
OFFERED BY ACCEPTED BY ELIGIBLE
SELLER LENDER TRUSTEE
Number of Principal Number of Principal
LOAN TYPE Loans* Balance** Loans* Balance**
- ------------------------------------------------------------------------------
SUBSIDIZED STAFFORD
- -------------------
Interim 198,198 678,788,854 198,198 678,788,854
Repayment 281,525 699,978,701 281,525 699,978,701
------- ------------- ------- -------------
479,723 1,378,767,555 479,723 1,378,767,555
UNSUBSIDIZED STAFFORD
- ---------------------
Deferred 88,240 385,350,505 88,240 385,350,505
Repayment 40,514 158,262,613 40,514 158,262,613
------- ------------- ------- -------------
128,754 543,613,118 128,754 543,613,118
PLUS/SLS
- --------
Deferred 10,522 71,139,748 10,522 71,139,748
Non-Deferred 72,489 360,353,464 72,489 360,353,464
------- ------------- ------- -------------
83,011 431,493,212 83,011 431,493,212
CONSOLIDATION
- -------------
Deferred 2,053 31,554,873 2,053 31,554,873
Repayment 38,549 620,823,672 38,549 620,823,672
------- ------------- ------- -------------
40,602 652,378,545 40,602 652,378,545
TOTAL 732,090 3,006,252,430 732,090 3,006,252,430
======= ============= ======= =============
ADDITIONAL LOAN CRITERIA
- ------------------------
Not in claims status, not previously rejected
Not in litigation
Last disbursement is greater than 120 days from cutoff date
Loan is not swap-pending
*Based upon Seller's estimated calculations, which may be adjusted upward or
downward based upon Purchaser's reconciliation.
**Includes interest to be capitalized.
<PAGE>
Guarantor(s):
American Student Assistance Guarantor
California Student Aid Commission
Colorado Student Loan Program
Connecticut Student Loan Foundation
Education Assistance Corporation
Educational Credit Management Corporation
Finance Authority of Maine
Florida Department of Education Office of Student Financial Assistance
Georgia Higher Education Assistance Corp.
Great Lakes Higher Education Corporation
Illinois Student Assistance Commission
Iowa College Student Aid Commission
Kentucky Higher Education Assistance Authority
Louisiana Student Financial Assistance Commission
Michigan Higher Education Assistance Authority
Missouri Coordinating Board for Higher Education
Nebraska Student Loan Program
New Jersey Higher Education Assistance Authority
N.Y. State Higher Education Services Corporation
Northwest Education Loan Association
Oklahoma State Regents for Higher Education
Oregon State Scholarship Commission
Pennsylvania Higher Education Assistance Agency
Rhode Island Higher Education Assistance Authority
Student Loan Guarantee Foundation of Arkansas, Inc.
Tennessee Student Assistance Corporation
Texas Guaranteed Student Loan Corporation
United Student Aid Funds, Inc.
Utah Higher Education Assistance Authority
SELLER
----------------------------------
Chase Manhattan Bank Delaware,
not in its individual capacity
but solely as Interim Eligible
Lender Trustee on behalf of SLM
Funding Corporation
Lender Code:
------------
By:
------------------------------
(Signature of Authorized Officer)
Name:
----------------------------
Title:
---------------------------
SLM FUNDING CORPORATION
By:
------------------------------
(Signature of Authorized Officer)
Name:
----------------------------
Title:
---------------------------
<PAGE>
PURCHASER
Chase Manhattan Bank Delaware,
not in its individual capacity
but solely as Eligible Lender
Trustee on behalf of SLM
Student Loan Trust 1998-2
By:
------------------------------
(Signature of Authorized
Signatory for Purchaser)
Name:
----------------------------
Title:
---------------------------
Date of Purchase: Jun. 18, 1998
------------------------------------------------------
NOTE: Boxed areas are for completion by Purchaser
------------------------------------------------------
<PAGE>
================================================================================
SLM STUDENT LOAN TRUST 1998-2
ADMINISTRATION AGREEMENT SUPPLEMENT
Dated as of June 18, 1998
to
MASTER ADMINISTRATION AGREEMENT
Dated as of May 1, 1997
Between
SLM FUNDING CORPORATION
and
STUDENT LOAN MARKETING ASSOCIATION
================================================================================
<PAGE>
SLM Student Loan Trust 1998-2 Administration Agreement Supplement dated as
of June 18, 1998 (the "Supplement") to the Master Administration Agreement dated
as of May 1, 1997 (the "Agreement") between SLM Funding Corporation (the
"Seller") and Student Loan Marketing Association (the "Administrator").
This Supplement is being delivered to the Administrator pursuant to and in
satisfaction of the conditions set forth in Section 1.2(a) of the Agreement with
respect to SLM Student Loan Trust 1998-2 (the "Trust"). The provisions of this
Supplement shall be applicable only to SLM Student Loan Trust 1998-2.
1. The following entities are hereby designated in accordance with clause 1 of
Section 1.2(a) of the Agreement:
The Trust: SLM Student Loan Trust 1998-2
The Eligible Lender Trustee: Chase Manhattan Bank Delaware
The Interim Eligible Lender Trustee: Chase Manhattan Bank
Delaware
The Indenture Trustee: Bankers Trust Company
The initial deposit into the Collection Account on the Closing Date in
accordance with Section 2.6.C of the Agreement shall be: $25,000.
2. Attached hereto are (i) Appendix A (SLM Student Loan Trust 1998-2)
containing those definitions which shall be applicable to this Supplement and to
the Agreement in connection with the Trust and this Supplement in place of the
definitions contained in Appendix A (Master) attached to the Agreement; and (ii)
a cross-reference table indicating modifications to the articles and sections of
the Basic Documents referred to in the Agreement.
3. Each of the Basic Documents (other than the Agreement) has been executed
and delivered by each of the parties thereto, are being delivered to the
Administrator together with this Supplement and are in substantially the
respective forms attached to the Agreement as Exhibits B through I;
4. Notwithstanding anything to the contrary set forth in Section 2.3.C.2 of
the Master Administration Agreement, the Indenture Trustee shall have no
liability or obligation in respect of any failed Delivery, as contemplated
therein, other than with respect to a Delivery which fails as a result of any
action or inaction on behalf of the Indenture Trustee.
5. Each of the parties named on the signature pages to this Supplement by
execution of this Supplement agrees, for the benefit of the Administrator and
the other signatories hereto, to be bound by the terms of the Agreement in
connection with the Trust, this Supplement and the other Basic Documents to the
extent reference is made in the Agreement to such party. The
<PAGE>
rights and obligations of such parties under the Agreement resulting from the
execution of this Supplement (other than the Seller) shall be applicable only
with respect to the Trust, this Supplement and the other Basic Documents.
This Supplement shall be construed in accordance with the laws of the State
of New York, without reference to the conflict of law provisions thereof, and
the obligations, rights and remedies of the parties hereunder shall be
determined in accordance with such laws.
This Supplement may be executed in counterparts, each of which when so
executed shall together constitute but one and the same instrument.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplement to be
duly executed and delivered as of the date first above written.
SLM FUNDING CORPORATION
By: /s/ William M.E. Rachal, Jr.
-----------------------------
Name:
---------------------------
Title:
--------------------------
SALLIE MAE SERVICING CORPORATION
By: /s/ Thomas P. Brisson
-----------------------------
Name:
---------------------------
Title:
--------------------------
SLM STUDENT LOAN TRUST 1998-2
By Chase Manhattan Bank Delaware,
not in its individual capacity but
solely as Eligible Lender Trustee
By: /s/ Denis Kelly
----------------------------
Name: Denis Kelly
--------------------------
Title: Trust Officer
-------------------------
CHASE MANHATTAN BANK DELAWARE, not
in its individual capacity but
solely as Eligible Lender Trustee
By: /s/ Denis Kelly
----------------------------
Name: Denis Kelly
--------------------------
Title: Trust Officer
-------------------------
3
<PAGE>
BANKERS TRUST COMPANY
not in its individual capacity but
solely as Indenture Trustee
By: /s/ Raymond Delli Colli
----------------------------
Name: Raymond Delli Colli
--------------------------
Title: Assistant Treasurer
-------------------------
The Administrator hereby acknowledges receipt of the foregoing Supplement and
hereby confirms to the Seller and the other signatories to the foregoing
Supplement that the representations of the Administrator contained in Article V
of the Agreement are true and correct as of the date of such Supplement.
STUDENT LOAN MARKETING ASSOCIATION
By Sallie Mae, Inc., Authorized
Agent for the Student Loan
Marketing Association
By: /s/ J. Lance Franke
-------------------------------
Name:
-----------------------------
Title:
----------------------------
4
<PAGE>
================================================================================
SERVICING AGREEMENT
among
SALLIE MAE SERVICING CORPORATION,
STUDENT LOAN MARKETING ASSOCIATION,
as Administrator
SLM STUDENT LOAN TRUST 1998-2,
CHASE MANHATTAN BANK DELAWARE
not in its individual capacity
but solely as Eligible Lender Trustee
and
BANKERS TRUST COMPANY
not in its individual capacity
but solely as Indenture Trustee
Dated as of June 18, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I
Section 1.1 Definitions and Usage ....................................... 1
ARTICLE II
Section 2.1 Custody of Trust Student Loan Files ......................... 1
Section 2.2 Duties of Servicer as Custodian ............................. 2
Section 2.3 Maintenance of and Access to Records ........................ 3
Section 2.4 Release of Documents ........................................ 3
Section 2.5 Instructions; Authority To Act .............................. 3
Section 2.6 [RESERVED] .................................................. 3
Section 2.7 Effective Period and Termination ............................ 3
ARTICLE III
Section 3.1 Duties of Servicer .......................................... 4
Section 3.2 Collection of Trust Student Loan Payments.................... 6
Section 3.3 Realization upon Trust Student Loans ........................ 7
Section 3.4 No Impairment ............................................... 7
Section 3.5 Purchase of Trust Student Loans; Reimbursement .............. 7
Section 3.6 Primary Servicing Fee; Carryover Servicing Fee .............. 10
Section 3.7 Access to Certain Documentation and
Information Regarding Trust Student Loans .................. 11
Section 3.8 Servicer Expenses ........................................... 11
Section 3.9 Appointment of Subservicer .................................. 11
Section 3.10 Reports ..................................................... 12
Section 3.11 Covenants and Agreements of the Issuer,
Administrator, Eligible Lender Trustee
and Servicer ............................................... 12
Section 3.12 Special Programs ............................................ 13
Section 3.13 Financial Statements ........................................ 14
Section 3.14 Insurance ................................................... 14
Section 3.15 Administration Agreement .................................... 14
Section 3.16 Lender Identification Number ................................ 14
ARTICLE IV
Section 4.1 Representations of Servicer ................................. 15
Section 4.2 Indemnities of Servicer ..................................... 16
Section 4.3 Merger or Consolidation of, or Assumption of
the Obligations of, Servicer ............................... 17
Section 4.4 Limitation on Liability of Servicer.......................... 18
Section 4.5 Sallie Mae Servicing Corporation Not to Resign
as Servicer ................................................ 19
i
<PAGE>
ARTICLE V
Page
----
Section 5.1 Servicer Default ........................................... 19
Section 5.2 Appointment of Successor .................................... 21
Section 5.3 Notification to Noteholders and Certificateholders .......... 22
Section 5.4 Waiver of Past Defaults ..................................... 22
ARTICLE VI
Section 6.1 Amendment.................................................... 22
Section 6.2 Notices ..................................................... 23
Section 6.3 Counterparts ................................................ 24
Section 6.4 Entire Agreement; Severability .............................. 24
Section 6.5 Governing Law ............................................... 25
Section 6.6 Relationship of Parties ..................................... 25
Section 6.7 Captions .................................................... 25
Section 6.8 Nonliability of Directors, Officers and Employees of
Servicer, the Eligible Lender Trustee, the Indenture Trustee
and the Administrator ...................................... 25
Section 6.9 Assignment .................................................. 25
Section 6.10 Limitation of Liability of Eligible Lender
Trustee and Indenture Trustee .............................. 25
Attachment A Schedule of Fees
Attachment B Servicer Locations
Attachment C Reports
Appendix A
ii
<PAGE>
SERVICING AGREEMENT
Sallie Mae Servicing Corporation ("Servicer"), a corporation organized under
the laws of the State of Delaware, hereby agrees with SLM Student Loan Trust
1998-2 (the "Issuer"), Chase Manhattan Bank Delaware, not in its individual
capacity but in its capacity as trustee under a trust agreement dated June 1,
1998 between SLM Funding Corporation and Chase Manhattan Bank Delaware
("Eligible Lender Trustee"), the Student Loan Marketing Association, a federally
chartered corporation ("Administrator") and Bankers Trust Company, a New York
banking corporation, not in its individual capacity but in its capacity as
Indenture Trustee under an Indenture dated June 1, 1998 between SLM Student Loan
Trust 1998-2 and Bankers Trust Company (the "Indenture Trustee"), as follows:
WHEREAS, Eligible Lender Trustee will acquire certain education loans to be
held in the Trust formed pursuant to a trust agreement (the "Trust Agreement"),
dated as of June 1, 1998, between SLM Funding Corporation and Eligible Lender
Trustee;
WHEREAS, the Issuer will issue notes (the "Notes") pursuant to an indenture
(the "Indenture"), dated as of June 1, 1998, between the Issuer and the
Indenture Trustee and trust certificates (the "Certificates") pursuant to the
Trust Agreement, which Notes and Certificates are payable from the assets of the
Issuer;
WHEREAS, the Issuer, the Administrator and the Eligible Lender Trustee desire
Servicer to service said education loans held by the Eligible Lender Trustee on
behalf of the Issuer, and Servicer is willing to service said education loans
for the Issuer, the Administrator, the Eligible Lender Trustee and the Indenture
Trustee;
NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained, the parties hereto agree as follows:
Article I
Section 1.1 Definitions and Usage. Except as otherwise specified herein or as
---------------------
the context may otherwise require, capitalized terms used but not otherwise
defined herein are defined in Appendix A hereto, which also contains rules as to
usage that shall be applicable herein.
Article II
Section 2.1 Custody of Trust Student Loan Files. To assure uniform quality in
------------------------------------
servicing the Trust Student Loans and to reduce administrative costs, the Issuer
hereby revocably appoints the Servicer, and the Servicer hereby accepts such
appointment,
<PAGE>
to act for the benefit of the Issuer and the Indenture Trustee as custodian of
the following documents or instruments (collectively the "Trust Student Loan
Files") which are hereby constructively delivered to the Indenture Trustee, as
pledgee of the Issuer with respect to each Trust Student Loan:
(a) the original fully executed copy of the note evidencing the Trust
Student Loan; and
(b) any and all other documents and computerized records that the Servicer
shall keep on file, in accordance with its customary procedures,
relating to such Trust Student Loan or any obligor with respect
thereto.
Section 2.2 Duties of Servicer as Custodian. The Servicer shall hold the Trust
--------------------------------
Student Loan Files for the benefit of the Issuer and the Indenture Trustee and
maintain such accurate and complete accounts, records and computer systems
pertaining to each Trust Student Loan File as shall enable the Issuer to comply
with this Agreement. In performing its duties as custodian the Servicer shall
act with reasonable care, using that degree of skill and attention that the
Servicer exercises with respect to the student loan files relating to comparable
student loans that the Servicer services on behalf of the Student Loan Marketing
Association and shall ensure that it fully complies with all applicable Federal
and state laws, including the Higher Education Act, with respect thereto. The
Servicer shall take all actions necessary with respect to the Trust Student Loan
Files held by it under this Agreement and of the related accounts, records and
computer systems, in order to enable the Issuer or the Indenture Trustee to
verify the accuracy of the Servicer's record keeping with respect to the
Servicer's obligations as custodian hereunder. The Servicer shall promptly
report to the Issuer, the Administrator and the Indenture Trustee any material
failure on its part to hold the Trust Student Loan Files and maintain its
accounts, records and computer systems as herein provided and promptly take
appropriate action to remedy any such failure. Nothing herein shall be deemed
to require an initial review or any periodic review by the Issuer, the Eligible
Lender Trustee or the Indenture Trustee of the Trust Student Loan Files. If in
the reasonable judgment of the Eligible Lender Trustee it is necessary to
preserve the interests of the Noteholders, Certificateholders and the Trust in
the Trust Student Loans or at the request of the Administrator, the Servicer
shall transfer physical possession of the notes evidencing the Trust Student
Loans to the Eligible Lender Trustee, the Indenture Trustee or any other
custodian for either of them designated by the Eligible Lender Trustee.
Section 2.3 Maintenance of and Access to Records. The Servicer shall maintain
-------------------------------------
each Trust Student Loan File at one of its offices
2
<PAGE>
specified in Attachment B to this Agreement or at such other office as shall be
consented to by the Issuer and the Indenture Trustee upon written notice to the
Issuer and the Indenture Trustee. Upon reasonable prior notice, the Servicer
shall make available to the Issuer and the Indenture Trustee or their respective
duly authorized representatives, attorneys or auditors a list of locations of
the Trust Student Loan Files and the related accounts, records and computer
systems maintained by the Servicer at such times during normal business hours as
the Issuer or the Indenture Trustee shall instruct.
Section 2.4 Release of Documents. Upon written instruction from the Indenture
---------------------
Trustee, the Servicer shall release any Trust Student Loan File to the Indenture
Trustee, the Indenture Trustee's agent, or the Indenture Trustee's designee, as
the case may be, at such place or places as the Indenture Trustee may reasonably
designate, as soon as practicable. The Indenture Trustee shall cooperate with
the Servicer to provide the Servicer with access to the Trust Student Loan Files
in order for the Servicer to continue to service the Trust Student Loans after
the release of the Trust Student Loan Files. In the event the Servicer is not
provided access to the Trust Student Loan Files, the Servicer shall not be
deemed to have breached its obligations pursuant to Section 3.1, 3.2, 3.3 or 3.4
if it is unable to perform such obligations due to its inability to have access
to the Trust Student Loans Files. The Servicer shall not be liable for any
losses with respect to the servicing of such Trust Student Loans arising after
the release of the related Trust Student Loan Files to the extent the losses are
attributable to the Servicer's inability to have access to the related Trust
Student Loan Files.
Section 2.5 Instructions; Authority To Act. The Servicer shall be deemed to
-------------------------------
have received proper instructions with respect to the Trust Student Loan Files
upon its receipt of written instructions signed by a Responsible Officer of the
Indenture Trustee.
Section 2.6 [RESERVED].
-----------
Section 2.7 Effective Period and Termination. Sallie Mae Servicing
---------------------------------
Corporation's appointment as custodian shall become effective as of the Closing
Date and shall continue in full force and effect for so long as Sallie Mae
Servicing Corporation shall remain the Servicer hereunder. If Sallie Mae
Servicing Corporation or any successor Servicer shall resign as Servicer in
accordance with the provisions of this Agreement or if all the rights and
obligations of Sallie Mae Servicing Corporation or any such successor Servicer
shall have been terminated under Section
3
<PAGE>
5.1, the appointment of Sallie Mae Servicing Corporation or such successor
Servicer as custodian shall be terminated simultaneously with the effectiveness
of such resignation or termination. On or prior to the effective date of any
resignation or termination of such appointment, the Servicer shall deliver the
Trust Student Loan Files to the successor Servicer, the Indenture Trustee or the
Indenture Trustee's agent, at the direction of the Indenture Trustee, at such
place or places as the Indenture Trustee may reasonably designate. In
establishing an effective date for the termination of the Servicer as custodian
of the Trust Student Loan Files, the parties shall provide for a reasonable
period for the Servicer to deliver the Trust Student Loan Files to its
designated successor.
Article III
Section 3.1 Duties of Servicer. The Servicer, for the benefit of the Issuer
-------------------
(to the extent provided herein), shall manage, service, administer and make
collections on the Trust Student Loans with reasonable care, using that degree
of skill and attention that the Servicer exercises with respect to comparable
student loans that it services on behalf of the Student Loan Marketing
Association from the Closing Date (or with respect to Trust Student Loans which
are sold to the Issuer following the Closing Date, such later date as the Trust
Student Loans are delivered to Servicer for servicing hereunder) until the Trust
Student Loans are paid in full. At any time that substantially all remaining
Trust Student Loans are repurchased by SLM Funding Corporation from the Issuer
pursuant to Section 6.1 of the Administration Agreement, the Servicer agrees to
execute, at the request of SLM Funding Corporation, a new servicing agreement
which agreement shall include terms and conditions substantially the same as the
terms and conditions of this Agreement; provided, however, the Servicer shall
not be required to so execute a new servicing agreement until it has received
all Servicing Fees then due and payable hereunder. Without limiting the
generality of the foregoing or of any other provision set forth in this
Agreement and notwithstanding any other provision to the contrary set forth
herein, the Servicer shall manage, service, administer and make collections with
respect to the Trust Student Loans (including collection of any Interest Subsidy
Payments and Special Allowance Payments on behalf of the Eligible Lender
Trustee) in accordance with, and otherwise comply with, all applicable Federal
and state laws, including all applicable rules, regulations and other
requirements of the Higher Education Act and the applicable Guarantee Agreement,
the failure to comply with which would adversely affect the eligibility of one
or more of the Trust Student Loans for Federal reinsurance or Interest Subsidy
Payments or Special Allowance Payments or one or more of the Trust Student Loans
for receipt of Guarantee Payments.
4
<PAGE>
The Servicer's duties shall include, but shall not be limited to, collection
and posting of all payments, responding to inquiries of borrowers on such Trust
Student Loans, monitoring borrowers' status, making required disclosures to
borrowers, performing due diligence with respect to borrower delinquencies,
sending payment coupons to borrowers and otherwise establishing repayment terms,
reporting tax information to borrowers, if applicable, accounting for
collections and furnishing monthly statements with respect thereto to the
Administrator. The Servicer shall follow its customary standards, policies and
procedures in performing its duties as Servicer. Without limiting the
generality of the foregoing, the Servicer is authorized and empowered to execute
and deliver, on behalf of itself, the Issuer, the Eligible Lender Trustee, the
Indenture Trustee, the Certificateholders and the Noteholders or any of them,
instruments of satisfaction or cancellation, or partial or full release or
discharge, and all other comparable instruments, with respect to such Trust
Student Loans; provided, however, that the Servicer agrees that it will not (a)
-------- -------
permit any rescission or cancellation of a Trust Student Loan except as ordered
by a court of competent jurisdiction or governmental authority or as otherwise
consented to in writing by the Eligible Lender Trustee and the Indenture Trustee
provided, however, that the Servicer may write off any delinquent Trust Student
- -------- -------
Loan if the remaining balance of the borrower's account is less than $50 or (b)
reschedule, revise, defer or otherwise compromise with respect to payments due
on any Trust Student Loan except pursuant to any applicable interest only,
deferral or forbearance periods or otherwise in accordance with all applicable
standards, guidelines and requirements with respect to the servicing of Student
Loans; provided further, however, that the Servicer shall not agree to any
---------------- -------
reduction of yield with respect to any Trust Student Loan (either by reducing
borrower payments or reducing principal balance) except as permitted in
accordance with Section 3.12 or otherwise if, and to the extent, the Servicer or
the Administrator reimburses the Issuer in an amount sufficient to offset any
such effective yield reduction made by the Servicer consistent with such
customary servicing procedures as it follows with respect to comparable Student
Loans which it services on behalf of the Student Loan Marketing Association.
The Eligible Lender Trustee on behalf of the Issuer hereby grants a power of
attorney and all necessary authorization to the Servicer to maintain any and all
collection procedures with respect to the Trust Student Loans, including filing,
pursuing and recovering claims with the Guarantors for Guarantee Payments and
with the Department for Interest Benefit Payments and Special Allowance
Payments and taking any steps to enforce such Trust Student Loans such as
commencing a legal proceeding to enforce a Trust Student Loan in the names of
the Issuer, the Eligible Lender Trustee, the Indenture Trustee, the
Certificateholders and the Noteholders. The Eligible Lender Trustee shall upon
the written request of the
5
<PAGE>
Servicer furnish the Servicer with any other powers of attorney and other
documents reasonably necessary or appropriate to enable the Servicer to carry
out its servicing and administrative duties hereunder.
Section 3.2 Collection of Trust Student Loan Payments.
------------------------------------------
A. The Servicer shall make reasonable efforts (including all efforts that
may be specified under the Higher Education Act or any Guarantee Agreement) to
collect all payments called for under the terms and provisions of the Trust
Student Loans as and when the same shall become due and shall follow such
collection procedures as it follows with respect to comparable student loans
that it services on behalf of the Student Loan Marketing Association. The
Servicer shall allocate collections with respect to the Trust Student Loans
between principal and interest in accordance with Section 2.5 of the
Administration Agreement. The Servicer may in its discretion waive any late
payment charge or any other fees that may be collected in the ordinary course of
servicing a Trust Student Loan.
B. The Servicer shall make reasonable efforts to claim, pursue and collect
all Guarantee Payments from the Guarantors pursuant to the Guarantee Agreements
with respect to any of the Trust Student Loans as and when the same shall become
due and payable, shall comply with all applicable laws and agreements with
respect to claiming, pursuing and collecting such payments and shall follow such
practices and procedures as it follows with respect to comparable guarantee
agreements and student loans that it services on behalf of the Student Loan
Marketing Association. In connection therewith, the Servicer is hereby
authorized and empowered to convey to any Guarantor the note and the related
Trust Student Loan File representing any Trust 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. All amounts so collected by the
Servicer shall constitute Available Funds for the applicable Collection Period
and shall be deposited into the Collection Account or transferred to the
Administrator in accordance with Section 2.4 of the Administration Agreement.
The Eligible Lender Trustee shall, upon the written request of the Servicer,
furnish the Servicer with any power of attorney and other documents necessary or
appropriate to enable the Servicer to convey such documents to any Guarantor and
to make such claims.
C. The Servicer on behalf of the Eligible Lender Trustee 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 Trust Student Loans as and when the same shall become due and
payable, shall comply with all applicable laws and agreements
6
<PAGE>
with respect to claiming, pursuing and collecting such payments and shall follow
such practices and procedures as the Servicer follows with respect to comparable
student loans that it services on behalf of the Student Loan Marketing
Association. All amounts so collected by the Servicer shall constitute Available
Funds for the applicable Collection Period and shall be deposited into the
Collection Account or transferred to the Administrator in accordance with
Section 2.4 of the Administration Agreement. In connection therewith, the
Servicer shall prepare and file with the Department on a timely basis all claims
forms and other documents and filings necessary or appropriate in connection
with the claiming of Interest Subsidy Payments and Special Allowance Payments on
behalf of the Eligible Lender Trustee and shall otherwise assist the Eligible
Lender Trustee in pursuing and collecting such Interest Subsidy Payments and
Special Allowance Payments from the Department. The Eligible Lender Trustee
shall upon the written request of the Servicer furnish the Servicer with any
power of attorney and other documents reasonably necessary or appropriate to
enable the Servicer to prepare and file such claims forms and other documents
and filings.
Section 3.3 Realization upon Trust Student Loans. For the benefit of the
------------------------------------
Issuer, the Servicer shall use reasonable efforts consistent with its servicing
practices and procedures that it utilizes with respect to comparable student
loans that it services on behalf of the Student Loan Marketing Association and
including all efforts that may be specified under the Higher Education Act or
any Guarantee Agreement in its servicing of any delinquent Trust Student Loans.
Section 3.4 No Impairment. The Servicer shall not impair the rights of the
-------------
Issuer, the Eligible Lender Trustee, the Indenture Trustee, the
Certificateholders or Noteholders in such Trust Student Loans.
Section 3.5 Purchase of Trust Student Loans; Reimbursement.
----------------------------------------------
A. The Servicer, the Administrator, the Eligible Lender Trustee and the
Indenture Trustee shall give notice to the other parties promptly, in writing,
upon the discovery of any breach of the provisions of Section 3.1, 3.2, 3.3 or
3.4 which has a materially adverse effect on the interest of the Issuer. In the
event of such a material breach which is not curable by reinstatement of the
Guarantor's guarantee of such Trust Student Loan, the Servicer shall purchase
the affected Trust Student Loan not later than 120 days following the earlier of
the date of discovery of such material breach and the date of receipt of the
Guarantor reject transmittal form with respect to such Trust Student Loan. In
the event of a material breach with respect to such Trust Student Loan which is
curable by reinstatement of the Guarantor's guarantee of such Trust Student
Loan, unless the
7
<PAGE>
material breach shall have been cured within 360 days following the earlier of
the date of discovery of such material breach and the date of receipt of the
Guarantor reject transmittal form with respect to such Trust Student Loan, the
Servicer shall purchase such Trust Student Loan not later than the sixtieth day
following the end of such 360-day period. The purchase price hereunder will be
the unpaid principal amount of such Trust Student Loan plus accrued interest
(calculated using the applicable percentage that would have been insured
pursuant to Section 428(b)(1)(G) of the Higher Education Act) plus an amount
equal to all forfeited Interest Subsidy Payments and Special Allowance Payments
with respect to such Trust Student Loan. The Servicer shall remit the purchase
price to the Administrator as provided in Section 2.6 of the Administration
Agreement on the date of purchase of any Trust Student Loan pursuant to this
Section 3.5. In consideration of the purchase of any such Trust Student Loan
pursuant to this Section 3.5, the Servicer shall remit the Purchase Amount in
the manner specified in Section 2.6 of the Administration Agreement. Any breach
that relates to compliance with the requirements of the Higher Education Act or
of the applicable Guarantor but that does not affect such Guarantor's obligation
to guarantee payments of a Trust Student Loan will not be considered to have a
material adverse effect for purposes of this Section 3.5A.
B. In addition, if any breach of Section 3.1, 3.2, 3.3 or 3.4 by the
Servicer does not trigger such purchase obligation but does result in the
refusal by a Guarantor to guarantee all or a portion of the accrued interest (or
any obligation of the Issuer to repay such interest to a Guarantor), or the loss
(including any obligation of the Issuer to repay to the Department) of Interest
Subsidy Payments and Special Allowance Payments, with respect to any Trust
Student Loan affected by such breach, then the Servicer shall reimburse the
Issuer in an amount equal to the sum of all such nonguaranteed interest amounts
that would have been owed to the Issuer by the Guarantor but for such breach by
the Servicer and such forfeited Interest Subsidy Payments or Special Allowance
Payments by netting such sum against the Servicing Fee payable to the Servicer
for such period and remitting any additional amounts owed in the manner
specified in Section 2.6 of the Administration Agreement not later than (i) the
last day of the next Collection Period ending not less than 60 days from the
date of the Guarantor's refusal to guarantee all or a portion of accrued
interest or loss of Interest Subsidy Payments or Special Allowance Payments, or
(ii) in the case where the Servicer reasonably believes such amounts are likely
to be collected, not later than the last day of the next Collection Period
ending not less than 360 days from the date of the Guarantor's refusal to
guarantee all or a portion of accrued interest or loss of Interest Subsidy
Payments or Special Allowance Payments. At the time such payment is made, the
Servicer shall not be required to reimburse the Issuer for
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interest that is then capitalized, however, such amounts shall be reimbursed if
the borrower subsequently defaults and such capitalized interest is not paid by
the Guarantor.
C. Anything in this Section 3.5 to the contrary notwithstanding, if as of
the last Business Day of any month the aggregate outstanding principal amount of
Trust Student Loans with respect to which claims have been filed with and
rejected by a Guarantor or with respect to which the Servicer determines that
claims cannot be filed pursuant to the Higher Education Act as a result of a
breach by the Servicer or the Seller, exceeds 1% of the Pool Balance, the
Servicer or the Seller, as appropriate, shall purchase, within 30 days of a
written request of the Eligible Lender Trustee or Indenture Trustee, such
affected Trust Student Loans in an aggregate principal amount such that after
such purchase the aggregate principal amount of such affected Trust Student
Loans is less than 1% of the Pool Balance. The Trust Student Loans to be
purchased by the Servicer or the Seller pursuant to the preceding sentence shall
be based on the date of claim rejection (or date of notice referred to in the
first sentence of this Section 3.5) with the Trust Student Loans with the
earliest such date to be purchased first.
D. In lieu of repurchasing Trust Student Loans pursuant to this Section
3.5, the Servicer may, at its option, with the prior consent of the
Administrator, substitute Student Loans or arrange for the substitution of
Student Loans which are substantially similar as of the date of substitution on
an aggregate basis to the Trust Student Loans for which they are being
substituted with respect to the following characteristics:
(1) status (i.e., in-school, grace, deferment, forbearance or repayment),
(2) program type (i.e., unsubsidized Stafford, subsidized Stafford,
Consolidation (pre-1993 vs. post-1993) PLUS or SLS),
(3) school type,
(4) total return,
(5) principal balance, and
(6) remaining term to maturity.
In addition, each substituted Student Loan shall comply, as of the date of
substitution, with the representations and warranties made by the Seller in the
Sale Agreement. In choosing Student Loans to be substituted pursuant to this
subsection D, the Servicer shall make a reasonable determination that the
Student Loans to be substituted will not have a material adverse effect on the
Noteholders and the Certificateholders.
In the event the Servicer elects to substitute Student Loans pursuant to
this Section 3.5 and the Administrator consents to
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such substitution, the Servicer will remit to the Administrator the amount of
any shortfall between the Purchase Amount of the substituted Student Loans and
the Purchase Amount of the Trust Student Loans for which they are being
substituted. The Servicer shall also remit to the Administrator an amount equal
to all nonguaranteed interest amounts that would have been owed to the Issuer by
the Guarantor but for the breach of the Servicer and forfeited Interest Subsidy
Payments and Special Allowance Payments with respect to the Trust Student Loans
in the manner provided in Section 2.6 of the Administration Agreement.
E. The sole remedy of the Issuer, the Eligible Lender Trustee, the
Indenture Trustee, the Certificateholders and the Noteholders with respect to a
breach pursuant to Section 3.1, 3.2, 3.3 or 3.4 shall be to require the Servicer
to purchase Trust Student Loans, to reimburse the Issuer as provided above or to
substitute Student Loans pursuant to this Section.
F. 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 Trust Student Loan or the reimbursement for any interest penalty
pursuant to this Section 3.5.
G. The Servicer shall not be deemed to have breached its obligations
pursuant to Section 3.1, 3.2, 3.3 or 3.4 if it is rendered unable to perform
such obligations, in whole or in part, by a force outside the control of the
parties hereto (including acts of God, acts of war, fires, earthquakes,
hurricanes, floods and other disasters). The Servicer shall diligently perform
its duties under this Agreement as soon as practicable following the termination
of such interruption of business.
Section 3.6 Primary Servicing Fee; Carryover Servicing Fee. The Primary
----------------------------------------------
Servicing Fee for each calendar month and any Carryover Servicing Fees payable
on any Distribution Date in arrears by the Issuer shall be equal to the amounts
determined by reference to the schedule of fees attached hereto as Attachment A.
Notwithstanding anything to the contrary contained herein or in any other Basic
Document, the Servicer shall be entitled to receive any Carryover Servicing Fee
on any Distribution Date only if and to the extent that sufficient funds are
available pursuant to Section 2.7.C of the Administration Agreement.
Section 3.7 Access to Certain Documentation and Information Regarding Trust
---------------------------------------------------------------
Student Loans. Upon reasonable prior notice, the Servicer shall provide to the
- -------------
Administrator and its agents access to the Trust Student Loan Files and shall
permit the Administrator to examine and make copies of, and abstracts from, the
records and books of account of the Servicer relating to the Trust Student Loans
and shall permit the Administrator to
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undertake periodic site reviews of the Servicer's operations relating to the
servicing of the Trust Student Loans (including on the premises of any agent of
the Servicer). Reasonable access shall be afforded to the Administrator without
charge, but only upon reasonable request and during the normal business hours at
the respective offices of the Servicer. Nothing in this Section shall affect the
obligation of the Servicer to observe any applicable law prohibiting disclosure
of information regarding the Obligors and the failure of the Servicer to provide
access to information as a result of such obligation shall not constitute a
breach of this Section.
Section 3.8 Servicer Expenses. The Servicer shall be required to pay all
-----------------
expenses incurred by it in connection with its activities hereunder, including
fees and disbursements of independent accountants, taxes imposed on the Servicer
and expenses incurred in connection with distributions and reports to the
Administrator provided, however, the Carryover Servicing Fee will be subject to
-------- -------
increase agreed to by the Administrator, the Eligible Lender Trustee and the
Servicer to the extent that a demonstrable and significant increase occurs in
the costs incurred by the Servicer in providing the services to be provided
hereunder, whether due to changes in applicable governmental regulations,
Guarantor program requirements or regulations or postal rates.
Section 3.9 Appointment of Subservicer. The Servicer may at any time, upon the
--------------------------
written consent of the Administrator, appoint a subservicer to perform all or
any portion of its obligations as Servicer hereunder; provided, however, that
-------- -------
any applicable Rating Agency Condition shall have been satisfied in connection
therewith; provided further that the Servicer shall remain obligated and be
----------------
liable to the Issuer, the Eligible Lender Trustee, the Indenture Trustee, the
Certificateholders and the Noteholders for the servicing and administering of
the Trust Student Loans in accordance with the provisions hereof without
diminution of such obligation and liability by virtue of the appointment of such
subservicer and to the same extent and under the same terms and conditions as if
the Servicer alone were servicing and administering the Trust Student Loans. The
fees and expenses of the subservicer shall be as agreed between the Servicer and
its subservicer from time to time and none of the Issuer, the Eligible Lender
Trustee, the Indenture Trustee, the Certificateholders or the Noteholders shall
have any responsibility therefor. With respect to satisfying the Rating Agency
Condition referred to above, the term "subservicer" shall be deemed not to
include systems providers, systems developers or systems maintenance
contractors, collection agencies, credit bureaus, lock box providers, mail
service providers and other similar types of service providers.
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Section 3.10 Reports. With respect to Trust Student Loans, Servicer shall
-------
prepare reports and data and furnish the following information to the Issuer,
the Administrator, the Eligible Lender Trustee and the Indenture Trustee, unless
otherwise noted, at the specified times:
(a) The reports and data listed in Attachment C, at the times indicated in
the attachment;
(b) Within 30 days following the end of each calendar quarter, to the
Department, owner's request for interest and Special Allowance
Payments (ED 799);
(c) To credit bureaus selected by Servicer, credit bureau reporting in
accordance with the Higher Education Act;
(d) At any time the Eligible Lender Trustee or the Indenture Trustee, as
the case may be, shall have reasonable grounds to believe that such
request would be necessary in connection with its performance of its
duties under related documents, and within five (5) business days of
receipt of a request therefor, the Servicer shall furnish to the
Eligible Lender Trustee or to the Indenture Trustee a list of all
Trust Student Loans (by borrower social security number, type and
outstanding principal balance) and any additional information
requested relating to the Trust Student Loans; and
(e) From time to time as may be reasonably requested, reports and data
providing additional information on the Trust Student Loans.
Section 3.11 Covenants and Agreements of the Issuer, Administrator, Eligible
---------------------------------------------------------------
Lender Trustee and Servicer. The Issuer, the Administrator, the Servicer and
- ---------------------------
the Eligible Lender Trustee each agree that:
A. Any payment and any communications received at any time by the Issuer,
Administrator and the Eligible Lender Trustee with respect to a Trust Student
Loan shall be immediately transmitted to the Servicer. Such communications shall
include, but not be limited to, requests or notices of loan cancellation,
notices of borrower disqualification, letters, changes in address or status,
notices of death or disability, notices of bankruptcy and forms requesting
deferment of repayment or forbearance.
B. The Servicer may change any part or all of its equipment, data
processing programs and any procedures and forms in connection with the services
performed hereunder so long as Servicer continues to service the Trust Student
Loans in
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conformance with the requirements herein. The Servicer shall not make any
material change in its servicing system and operations with respect to the Trust
Student Loans without the prior written consent of the Administrator which
consent will not be unreasonably withheld. Each written request for consent by
the Servicer shall be acted upon promptly by the Administrator. Anything in this
paragraph B. to the contrary notwithstanding, the Servicer will not be required
to request the consent of the Administrator with respect to any changes in the
Servicer's servicing system and operations which the Servicer reasonably
determines are required due to changes in the Higher Education Act or Guarantor
program requirements.
C. The Eligible Lender Trustee will furnish Servicer with a copy of any and
all Guarantee Agreements relating to the Trust Student Loans serviced hereunder.
D. The Servicer may and, at the direction of the Administrator, shall
include marketing or informational material generally provided to borrowers of
loans owned by the Student Loan Marketing Association with communications sent
to a borrower.
E. The Servicer may, in its discretion, if requested by a borrower of a
Trust Student Loan, arrange for the sale of such Trust Student Loan to another
lender which holds another student loan of such borrower at a price not less
than the Purchase Amount.
F. The Servicer shall arrange for the sale of a Trust Student Loan to the
Student Loan Marketing Association upon receipt of notice from the Student Loan
Marketing Association that it has received an executed consolidation loan
application from the borrower of such Trust Student Loan. The sale price for
such Trust Student Loan shall equal the Purchase Amount.
Section 3.12 Special Programs. The Servicer shall offer borrowers of the Trust
----------------
Student Loans all special programs (e.g., Great Rewards(SM), Great Returns(SM)
and Direct Repay), whether or not in existence as of the date of this Agreement,
generally offered to the obligors of comparable loans owned by the Student Loan
Marketing Association and serviced by the Servicer; provided, however, to the
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extent any such program is not required by the Higher Education Act and
effectively reduces borrower interest rate or principal balances on the Trust
Student Loans, such special program shall be applied to the Trust Student Loans
only if and to the extent the Issuer receives payment from the Student Loan
Marketing Association (and the Servicer receives notice of such payment) in an
amount sufficient to offset such effective yield reductions. The Student Loan
Marketing Association shall be deemed to be a third party beneficiary of this
Section 3.12
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<PAGE>
and shall make appropriate arrangements to compensate the Servicer for increased
costs associated with material changes to existing special programs or the
implementation and support of any new special programs.
Section 3.13 Financial Statements. The Servicer shall provide to the
--------------------
Administrator at any time that the Servicer is not an Affiliate of the
Administrator (a) as soon as possible and in no event more than 120 days after
the end of each fiscal year of the Servicer audited financials as at the end of
and for such year and (b) as soon as possible and in no event more than 30 days
after the end of each quarterly accounting period of the Servicer unaudited
financials as at the end of and for such period.
Section 3.14 Insurance. The Servicer shall maintain or cause to be maintained
---------
insurance with respect to its property and business against such casualties and
contingencies and of such types and in such amounts as is customary in the case
of institutions of the same type and size.
Section 3.15 Administration Agreement. The Servicer agrees to perform all
------------------------
duties required of the Servicer under the Administration Agreement using that
degree of skill and attention that the Servicer exercises with respect to its
comparable business activities.
Section 3.16 Lender Identification Number. The Eligible Lender Trustee may
----------------------------
permit trusts, other than the Issuer, established by the Seller to securitize
student loans, to use the Department lender identification number applicable to
the Issuer if the servicing agreements with respect to such other trusts include
provisions substantially similar to this paragraph. In such event, the Servicer
may claim and collect Interest Subsidy Payments and Special Allowance Payments
with respect to Trust Student Loans and student loans in such other trusts using
such common lender identification number. Notwithstanding anything herein or in
the Basic Documents to the contrary, any amounts assessed against payments
(including, but not limited to, Interest Subsidy Payments and Special Allowance
Payments) due from the Department to any such other trust using such common
lender identification number as a result of amounts owing to the Department from
the Issuer will be deemed for all purposes hereof and of the Basic Documents
(including for purposes of determining amounts paid by the Department with
respect to the student loans in the Trust and such other trust) to have been
assessed against the Issuer and shall be deducted by the Administrator 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 Issuer. Any
amounts assessed against payments due from the Department to the Issuer as a
result of amounts owing to the Department from such other trust using such
common
14
<PAGE>
lender identification number will be deemed to have been assessed against such
other trust and will be deducted by the Administrator 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 Issuer.
Article IV
Section 4.1 Representations of Servicer. The Servicer makes the following
---------------------------
representations on which the Issuer is deemed to have relied in acquiring
(through the Eligible Lender Trustee) the Trust Student Loans and appointing the
Servicer as servicer hereunder. The representations speak as of the execution
and delivery of this Agreement and as of the Closing Date, but shall survive the
sale, transfer and assignment of the Trust 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 Servicer is duly organized and
------------------------------
validly existing as a corporation chartered under the laws of the State of
Delaware and in good standing under the laws of the State of Delaware, with the
power and authority to own its properties and to conduct its business as such
properties are currently owned and such business is presently conducted, and had
at all relevant times, and has, the power, authority and legal right to service
the Trust Student Loans and to hold the Trust Student Loan Files as custodian.
B. Due Qualification. The Servicer is duly qualified to do business and has
-----------------
obtained all necessary licenses and approvals in all jurisdictions in which the
ownership or lease of property or the conduct of its business (including the
servicing of the Trust Student Loans as required by this Agreement) shall
require such qualifications.
C. Power and Authority. The Servicer has the power and authority to execute
-------------------
and deliver this Agreement and to carry out its terms; and the execution,
delivery and performance of this Agreement have been duly authorized by the
Servicer by all necessary action. No registration with or approval of any
governmental agency is required for the due execution and delivery by, and
enforceability against, the Servicer of this Agreement.
D. Binding Obligation. This Agreement constitutes a legal, valid and
------------------
binding obligation of the Servicer enforceable in accordance with its terms
subject to bankruptcy, insolvency and other similar laws affecting creditors
rights generally and subject to equitable principles.
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E. No Violation. The consummation of the transactions contemplated by this
------------
Agreement and the fulfillment of the terms hereof will 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 charter or by-laws
of the Servicer, or any indenture, agreement or other instrument to which the
Servicer is a party or by which it shall be bound; 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 this Agreement and the
other Basic Documents); nor violate any law or, to the best of the Servicer's
knowledge, any order, rule or regulation applicable to the Servicer of any court
or of any Federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Servicer or its
properties.
F. No Proceedings. There are no proceedings or investigations pending, or,
--------------
to the Servicer's best knowledge, threatened, before any court, regulatory body,
administrative agency or other governmental instrumentality having jurisdiction
over the Servicer or its properties: (i) asserting the invalidity of this
Agreement or any of the other Basic Documents to which the Servicer is a party,
(ii) seeking to prevent the consummation of any of the transactions contemplated
by this Agreement or any of the other Basic Documents to which the Servicer is a
party, (iii) seeking any determination or ruling that could reasonably be
expected to have a material and adverse effect on the performance by the
Servicer of its obligations under, or the validity or enforceability of, this
Agreement or any of the other Basic Documents to which the Servicer is a party,
or (iv) relating to the Servicer and which might adversely affect the Federal or
state income tax attributes of the Notes or the Certificates.
Section 4.2 Indemnities of Servicer. The Servicer shall be liable in
-----------------------
accordance herewith only to the extent of the obligations specifically
undertaken by the Servicer under this Agreement.
The Servicer shall pay for any loss, liability or expense, including
reasonable attorneys' fees, that may be imposed on, incurred by or asserted
against the Issuer or the Eligible Lender Trustee by the Department pursuant to
the Higher Education Act, to the extent that such loss, liability or expense
arose out of, or was imposed upon the Issuer through, the negligence, willful
misfeasance or bad faith of the Servicer in the performance of its obligations
and duties under this Agreement or by reason of the reckless disregard of its
obligations and duties under this Agreement, where the final determination that
any such loss, liability or expense arose out of, or was imposed upon the Issuer
16
<PAGE>
or the Eligible Lender Trustee through, any such negligence, willful
misfeasance, bad faith or recklessness on the part of the Servicer is
established by a court of law, by an arbitrator or by way of settlement agreed
to by the Servicer. Notwithstanding the foregoing, if the Servicer is rendered
unable, in whole or in part, by a force outside the control of the parties
hereto (including acts of God, acts of war, fires, earthquakes, hurricanes,
floods and other disasters) to satisfy its obligations under this Agreement, the
Servicer shall not be deemed to have breached any such obligation upon delivery
of written notice of such event to the other parties hereto, for so long as the
Servicer remains unable to perform such obligation as a result of such event.
For purposes of this Section, in the event of the termination of the rights
and obligations of Sallie Mae Servicing Corporation (or any successor thereto
pursuant to Section 4.3) as Servicer pursuant to Section 5.1, or a resignation
by such Servicer pursuant to this Agreement, such Servicer shall be deemed to be
the Servicer pending appointment of a successor Servicer pursuant to Section
5.2.
Liability of the Servicer under this Section shall survive the resignation
or removal of the Eligible Lender Trustee or the Indenture Trustee or the
termination of this Agreement. If the Servicer shall have made any payments
pursuant to this Section and the Person to or on behalf of whom such payments
are made thereafter collects any of such amounts from others, such Person shall
promptly repay such amounts to the Servicer, without interest.
Section 4.3 Merger or Consolidation of, or Assumption of the Obligations of,
----------------------------------------------------------------
Servicer. The Servicer hereby agrees that, upon (a) any merger or consolidation
- --------
of the Servicer into another Person, (b) any merger or consolidation to which
the Servicer shall be a party resulting in the creation of another Person or (c)
any Person succeeding to the properties and assets of the Servicer substantially
as a whole, the Servicer shall (i) cause such Person (if other than the
Servicer) to execute an agreement of assumption to perform every obligation of
the Servicer hereunder, (ii) deliver to the Eligible Lender Trustee and
Indenture Trustee an Officers' Certificate and an Opinion of Counsel each
stating that such consolidation, merger or succession and such agreement of
assumption comply with this Section and that all conditions precedent provided
for in this Agreement relating to such transaction have been complied with,
(iii) cause the Rating Agency Condition to have been satisfied with respect to
such transaction and (iv) cure any existing Servicer Default or any continuing
event which, after notice or lapse of time or both, would become a Servicer
Default. Upon compliance with the foregoing requirements, such Person shall be
17
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the successor to the Servicer under this Agreement without further act on the
part of any of the parties to this Agreement.
Section 4.4 Limitation on Liability of Servicer. The Servicer shall not be
-----------------------------------
under any liability to the Issuer, the Noteholders, the Certificateholders, the
Administrator, the Eligible Lender Trustee or the Indenture Trustee except as
provided under this Agreement, for any action taken or for refraining from the
taking of any action pursuant to this Agreement, for errors in judgment, for any
incorrect or incomplete information provided by schools, borrowers, Guarantors
and the Department, for the failure of any party to this Servicing Agreement or
any other Basic Document to comply with its respective obligations hereunder or
under any other Basic Document or for any losses attributable to the insolvency
of any Guarantor; provided, however, that this provision shall not protect the
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Servicer against its obligation to purchase Student Loans from the Trust
pursuant to Section 3.5 hereof or to pay to the Trust amounts required pursuant
to Section 3.5 hereof or against any liability that would otherwise be imposed
by reason of willful misfeasance, bad faith or negligence in the performance of
duties or by reason of reckless disregard of obligations and duties under this
Agreement. The Servicer may rely in good faith on any document of any kind
prima facie properly executed and submitted by any person respecting any matters
arising under this Agreement.
Except as provided in this Agreement, the Servicer shall not be under any
obligation to appear in, prosecute or defend any legal action where it is not
named as a party; provided, however, that the Servicer may undertake any
-------- -------
reasonable action that it may deem necessary or desirable in respect of this
Agreement and the other Basic Documents and the rights and duties of the parties
to this Agreement and the other Basic Documents and the interests of the
Certificateholders and the Noteholders. To the extent that the Servicer is
required to appear in or is made a defendant in any legal action or other
proceeding relating to the servicing of the Trust Student Loans, the Issuer
shall indemnify and hold the Servicer harmless from all cost, liability or
expense of the Servicer not arising out of or relating to the failure of the
Servicer to comply with the terms of this Agreement.
Section 4.5 Sallie Mae Servicing Corporation Not To Resign as Servicer.
----------------------------------------------------------
Subject to the provisions of Section 4.3, Sallie Mae Servicing Corporation shall
not resign from the obligations and duties hereby imposed on it as Servicer
under this Agreement except upon determination that the performance of its
duties under this Agreement are no longer permissible under applicable law.
Notice of any such determination permitting the resignation of Sallie Mae
Servicing Corporation shall be communicated to the Eligible Lender Trustee and
the Indenture Trustee at the earliest practicable time (and, if such
communication is not in writing,
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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 and the Indenture Trustee concurrently
with or promptly after such notice. No such resignation shall become effective
until the Indenture Trustee or a successor Servicer shall have assumed the
responsibilities and obligations of Sallie Mae Servicing Corporation in
accordance with Section 5.2.
Article V
Section 5.1 Servicer Default. If any one of the following events (a "Servicer
----------------
Default") shall occur and be continuing:
(1) any failure by the Servicer (i) to deliver to the Indenture Trustee
for deposit in the Trust Accounts any payment required by the Basic
Documents to which the Servicer is a signatory 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 five Business Days after written notice of
such failure is received by the Servicer from the Eligible Lender
Trustee, the Indenture Trustee or the Administrator or five Business
Days after discovery of such failure by an officer of the Servicer; or
(2) any failure by the Servicer duly to observe or to perform in any
material respect any other covenant or agreement of the Servicer set
forth in this Agreement or any other Basic Document to which the
Servicer is a signatory, which failure shall (i) materially and
adversely affect the rights of Noteholders or Certificateholders 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 Servicer by the Indenture
Trustee, the Eligible Lender Trustee or the Administrator or (B) to
the Servicer, 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 not less than 25% of the outstanding Certificate Balance provided,
however any breach of Sections 3.1, 3.2, 3.3 or 3.4 shall not be
deemed a Servicer Default so long as the Servicer is in compliance
with its repurchase and reimbursement obligations under Section 3.5;
or
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(3) an Insolvency Event occurs with respect to the Servicer; or
(4) any failure by the Servicer to comply with any requirements under the
Higher Education Act resulting in a loss of its eligibility as a
third-party servicer;
then, and in each and every case, so long as the Servicer Default shall not have
been remedied, either the Indenture Trustee, or the Noteholders of Notes
evidencing not less than 25% of the Outstanding Amount of the Notes, by notice
then given in writing to the Servicer (and to the Indenture Trustee and the
Eligible Lender Trustee if given by the Noteholders) may terminate all the
rights and obligations (other than the obligations set forth in Section 3.5 and
Section 4.2) of the Servicer under this Agreement. As of the effective date of
termination of the Servicer, all authority and power of the Servicer under this
Agreement, whether with respect to the Notes, the Certificates or the Trust
Student Loans or otherwise, shall, without further action, pass to and be vested
in the Indenture Trustee or such successor Servicer as may be appointed under
Section 5.2. The predecessor Servicer shall cooperate with the successor
Servicer, the Indenture Trustee and the Eligible Lender Trustee in effecting the
termination of the responsibilities and rights of the predecessor Servicer under
this Agreement, including the transfer to the successor Servicer for
administration by it of all cash amounts that shall at the time be held by the
predecessor Servicer for deposit, or shall thereafter be received by it with
respect to a Trust Student Loan. All reasonable costs and expenses (including
attorneys' fees) incurred in connection with transferring the Trust Student Loan
Files to the successor Servicer and amending this Agreement and any other Basic
Documents to reflect such succession as Servicer pursuant to this Section shall
be paid by the predecessor Servicer (other than the Indenture Trustee acting as
the Servicer under this Section 5.1) upon presentation of reasonable
documentation of such costs and expenses. Upon receipt of notice of the
occurrence of a Servicer Default, the Eligible Lender Trustee shall give notice
thereof to the Rating Agencies.
Section 5.2 Appointment of Successor.
------------------------
A. Upon receipt by the Servicer of notice of termination pursuant to Section
5.1, or the resignation by the Servicer in accordance with the terms of this
Agreement, the predecessor Servicer shall continue to perform its functions as
Servicer under this Agreement, in the case of termination, only until the date
specified in such termination notice or, if no such date is specified in a
notice of termination, until receipt of such notice and, in the case of
resignation, until the Indenture Trustee or a successor Servicer shall have
assumed the
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responsibilities and duties of Sallie Mae Servicing Corporation. In the event of
the termination hereunder of the Servicer, the Issuer shall appoint a successor
Servicer acceptable to the Indenture Trustee, and the successor Servicer shall
accept its appointment by a written assumption in form acceptable to the
Indenture Trustee. In the event that a successor Servicer has not been appointed
at the time when the predecessor Servicer has ceased to act as Servicer in
accordance with this Section, the Indenture Trustee without further action shall
automatically be appointed the successor Servicer and the Indenture Trustee
shall be entitled to the Servicing Fee and any Carryover Servicing Fees.
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 Servicer under
this Agreement; provided, however, that such right to appoint or to petition for
-------- -------
the appointment of any such successor Servicer shall in no event relieve the
Indenture Trustee from any obligations otherwise imposed on it under the Basic
Documents until such successor has in fact assumed such appointment.
B. Upon appointment, the successor Servicer (including the Indenture Trustee
acting as successor Servicer) shall be the successor in all respects to the
predecessor Servicer and shall be subject to all the responsibilities, duties
and liabilities placed on the predecessor Servicer that arise thereafter or are
related thereto and shall be entitled to an amount agreed to by such successor
Servicer (which shall not exceed the Servicing Fee unless the Rating Agency
Condition is satisfied with respect to such compensation arrangements) and all
the rights granted to the predecessor Servicer by the terms and provisions of
this Agreement.
C. The Servicer may not resign unless it is prohibited from serving as such
by law as evidenced by an Opinion of Counsel to such effect delivered to the
Indenture Trustee and the Eligible Lender Trustee. Notwithstanding the
foregoing or anything to the contrary herein or in the other Basic Documents,
the Indenture Trustee, to the extent it is acting as successor Servicer pursuant
hereto and thereto, shall be entitled to resign to the extent a qualified
successor Servicer has been appointed and has assumed all the obligations of the
Servicer in accordance with the terms of this Agreement and the other Basic
Documents.
Section 5.3 Notification to Noteholders and Certificateholders. Upon any
--------------------------------------------------
termination of, or appointment of a successor to, the Servicer pursuant to this
Article V, the Eligible Lender Trustee shall give prompt written notice thereof
to Certificateholders and the Indenture Trustee shall give prompt written notice
thereof to Noteholders and the Rating Agencies (which, in the
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case of any such appointment of a successor, shall consist of prior written
notice thereof to the Rating Agencies).
Section 5.4 Waiver of Past Defaults. The Noteholders of Notes evidencing 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 the Servicer in the
performance of its obligations hereunder and any consequences thereof, except a
default in making any required deposits to or payments from any of the Trust
Accounts (or giving instructions regarding the same) in accordance with this
Agreement. Upon any such waiver of a past default, such default shall cease to
exist, and any Servicer Default arising therefrom shall be deemed to have been
remedied for every purpose of this Agreement and the Administration Agreement.
No such waiver shall extend to any subsequent or other default or impair any
right consequent thereto.
Article VI
Section 6.1 Amendment.
---------
A. This Agreement may be amended by the Servicer, the Issuer, the
Administrator, the Eligible Lender Trustee and the Indenture Trustee, without
the consent of any of the Noteholders or the Certificateholders, to comply with
any change in any applicable federal or state law, 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; provided, however, that such action shall not, as
-------- -------
evidenced by an Opinion of Counsel delivered to the Eligible Lender Trustee and
the Indenture Trustee, adversely affect in any material respect the interests of
any Noteholder or Certificateholder.
B. This Agreement may also be amended from time to time by the Servicer, the
Issuer, the Administrator, the Eligible Lender Trustee and the Indenture
Trustee, with the consent of the Noteholders of Notes evidencing a majority of
the Outstanding Amount of the Notes and the consent of the Certificateholders of
Certificates (including any Certificates owned by the Seller) evidencing 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
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<PAGE>
respect to Trust 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.
It shall not be necessary for the consent of Certificateholders or Noteholders
pursuant to paragraph B. to approve the particular form of any proposed
amendment or consent, but it shall be sufficient if such consent shall approve
the substance thereof.
Promptly after the execution of any amendment to this Agreement (or, in the
case of the Rating Agencies, fifteen days prior thereto), the Eligible Lender
Trustee shall furnish written notification of the substance of such amendment to
each Certificateholder, the Indenture Trustee and each of the Rating Agencies.
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. The Indenture Trustee may, but shall not be
obligated to, execute and deliver such amendment which affects its rights,
powers, duties or immunities hereunder.
Section 6.2 Notices. All notices hereunder shall be given by United States
-------
certified or registered mail, by telegram or by other telecommunication device
capable of creating written record of such notice and its receipt. Notices
hereunder shall be effective when received and shall be addressed to the
respective parties hereto at the addresses set forth below, or at such other
address as shall be designated by any party hereto in a written notice to each
other party pursuant to this section.
If to Servicer, to: Sallie Mae Servicing Corporation
11600 Sallie Mae Drive, Reston, Virginia 20193
Director of ABS Administration
If to Issuer, to: SLM Student Loan Trust 1998-2
c/o Chase Manhattan Bank Delaware, 1201 Market Street,
Wilmington, Delaware 19801, Attn: Corporate Trust Dept.
with a copy to: The Chase Manhattan Bank,
450 West 33rd Street, 15th Floor, New York, New York 10001,
Attn: Structured Finance Services
23
<PAGE>
If to the Administrator, to: Student Loan Marketing
Association, 11600 Sallie Mae Drive, Reston, Virginia 20193,
Attn: Director, Corporate Finance Operations
If to the Eligible Lender Trustee, to: Chase Manhattan Bank
Delaware, 1201 Market Street, Wilmington, Delaware 19801,
Attn: Corporate Trust Dept.
with a copy to: The Chase Manhattan Bank, 450 West 33rd
Street, 15th Floor, New York, New York 10001,
Attn: Structured Finance Services.
If to the Indenture Trustee, to: Bankers Trust Company,
Four Albany Street, 10th Floor, New York, New York 10006,
Attn: Corporate Trust and Agency Group, Facsimile No.:
(212) 250-6439
Section 6.3 Counterparts. This Agreement may be executed in counterparts, each
------------
of which shall be deemed to be an original, and such counterparts shall
constitute one (1) and the same instrument.
Section 6.4 Entire Agreement; Severability. This Agreement constitutes the
------------------------------
entire agreement between the Issuer, the Administrator, the Eligible Lender
Trustee, the Indenture Trustee and Servicer. All prior representations,
statements, negotiations and undertakings with regard to the subject matter
hereof are superseded hereby.
If any term or provision of this Agreement or the application thereof to any
person or circumstance shall, to any extent, be invalid or unenforceable, the
remaining terms and provisions of this Agreement, or the application of such
terms or provisions to persons or circumstances other than those as to which it
is held invalid or unenforceable, shall not be affected thereby, and each term
and provision of this Agreement shall be valid and enforced to the fullest
extent permitted by law.
Section 6.5 Governing Law. The terms of this Agreement shall be subject to all
-------------
applicable provisions of the Higher Education Act and shall be construed in
accordance with and governed by 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.
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<PAGE>
Section 6.6 Relationship of Parties. Servicer is an independent contractor
-----------------------
and, except for the services which it agrees to perform hereunder, the Servicer
does not hold itself out as an agent of any other party hereto. Nothing herein
contained shall create or imply an agency relationship among Servicer and any
other party hereto, nor shall this Agreement be deemed to constitute a joint
venture or partnership between the parties.
Section 6.7 Captions. The captions used herein are for the convenience of
--------
reference only and not part of this Agreement, and shall in no way be deemed to
define, limit, describe or modify the meanings of any provision of this
Agreement.
Section 6.8 Nonliability of Directors, Officers and Employees of Servicer, the
------------------------------------------------------------------
Eligible Lender Trustee, the Indenture Trustee and the Administrator. No member
- --------------------------------------------------------------------
of the board of directors or any officer, employee or agent of Servicer, the
Administrator, the Eligible Lender Trustee or the Indenture Trustee (or any
Affiliate of any such party) shall be personally liable for any obligation
incurred under this Agreement.
Section 6.9 Assignment. This Agreement may not be assigned by the Servicer
----------
except as permitted under Sections 4.3, 4.5 and 5.2 hereof. This Agreement may
not be assigned by the Administrator except as permitted under Sections 4.3 and
4.6 of the Administration Agreement.
Section 6.10 Limitation of Liability of Eligible Lender Trustee and Indenture
----------------------------------------------------------------
Trustee.
- -------
A. Notwithstanding anything contained herein to the contrary, this Agreement
has been signed by Chase Manhattan Bank Delaware not in its individual capacity
but solely in its capacity as Eligible Lender Trustee of the Issuer and in no
event shall Chase Manhattan Bank Delaware in its individual capacity or, except
as expressly provided in the Trust Agreement, as Eligible Lender Trustee have
any liability for the representations, warranties, covenants, agreements or
other obligations of the Issuer or the Eligible Lender Trustee 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 signed 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
25
<PAGE>
to all of which recourse shall be had solely to the assets of the Issuer.
26
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed on their behalf by their duly authorized officers as of June 18, 1998.
SALLIE MAE SERVICING CORPORATION
By: /s/ Thomas P. Brisson
------------------------------
Name:
----------------------------
Title:
---------------------------
STUDENT LOAN MARKETING ASSOCIATION, as Administrator By Sallie Mae, Inc.,
Authorized Agent for the Student Loan Marketing Association
By: /s/ J. Lance Franke
------------------------------
Name:
----------------------------
Title:
---------------------------
SLM STUDENT LOAN TRUST 1998-2 by Chase Manhattan Bank Delaware, not in its
individual capacity but solely as Eligible Lender Trustee
By: /s/ Denis Kelly
------------------------------
Name: Denis Kelly
----------------------------
Title: Trust Officer
---------------------------
CHASE MANHATTAN BANK DELAWARE, not in its individual capacity but solely as
Trustee under a Trust Agreement dated June 1, 1998 between SLM Funding
Corporation and Chase Manhattan Bank Delaware
By: /s/ Denis Kelly
------------------------------
Name: Denis Kelly
----------------------------
Title: Trust Officer
---------------------------
27
<PAGE>
BANKERS TRUST COMPANY, not in its individual capacity but solely as Indenture
Trustee under an Indenture dated June 1, 1998 between SLM Student Loan Trust
1998-2 and Bankers Trust Company.
By: /s/ Raymond Delli Colli
------------------------------
Name: Raymond Delli Colli
----------------------------
Title: Assistant Treasurer
---------------------------
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<PAGE>
ATTACHMENT A
------------
SCHEDULE OF FEES
The Servicer will receive a Primary Servicing Fee and a Carryover Servicing
Fee (together, the "Servicing Fee"). The "Primary Servicing Fee" for any month
is an amount equal to the sum of 1/12th of 0.90% of the outstanding principal
amount of the Trust Student Loans other than Consolidation Loans plus 1/12th of
0.50% of the outstanding principal amount of the Trust Student Loans that are
Consolidation Loans, in each case as of the last day of the preceding calendar
month, plus any such amounts from prior Monthly Servicing Payment Dates that
remain unpaid. The Primary Servicing Fee will be payable out of Available Funds
and amounts on deposit in the Reserve Account on the 25th day of each month (or,
if any such date is not a business day, on the next succeeding business day),
commencing July 27, 1998 (each, a "Monthly Servicing Payment Date"). The
"Carryover Servicing Fee" is the sum of (a) the amount of certain increases in
the costs incurred by the Servicer which are agreed to pursuant to Section 3.8
of the Servicing Agreement, (b) any Conversion Fees, Transfer Fees and Removal
Fees (as defined below) incurred since the last Distribution Date and (c) any
amounts described in (a) and (b) above that remain unpaid from prior
Distribution Dates plus interest on such amounts for the period from the
Distribution Date on which such amounts become due to the date such amounts are
paid in full at a rate per annum for each Interest Period (as defined below)
equal to the sum of (a) the average accepted auction price (expressed on a bond
equivalent basis) for 91-day Treasury Bills sold at the most recent 91-day
Treasury Bill auction prior to the Interest Period as reported by the U.S.
Treasury Department and (b) 2.00%.
Interest Period" shall mean the period from each Distribution Date through the
day before the next Distribution Date. The Carryover Servicing Fee will be
payable to the Servicer on each succeeding Distribution Date out of Available
Funds after payment on such Distribution Date of the Primary Servicing Fee, the
Administration Fee, the Noteholders' Distribution Amount, the
Certificateholders' Distribution Amount, and the amount, if any, necessary to be
deposited in the Reserve Account to reinstate the balance thereof to the
Specified Reserve Account Balance. On the July 27, 1998 Monthly Servicing
Payment Date, the Servicer shall receive a pro rata portion of the Primary
Servicing Fee for the period from the Closing Date to and including June 30,
1998.
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Servicer will be paid a fee ("Conversion Fee") for any Student Loan added to
the Trust Estate which Student Loan is not serviced on the Servicer's system
unless such Student Loan is being substituted into the Trust Estate by the
Servicer pursuant to Section 3.5 of this Agreement. The Conversion Fee is equal
to the greater of $17.00 per account or the Servicer's verifiable costs plus
15%.
Servicer will be paid a fee ("Transfer Fee") for any Student Loan transferred
in or out of the Trust Estate which is at the time of transfer being serviced on
the Servicer's system (regardless of the owner) unless such Student Loans are
being removed or added to the Trust in order to comply with the Servicer's
purchase/substitution obligation under Section 3.5 of this Agreement. The
Transfer Fee is equal to $4.00 per account transaction.
Servicer will be paid a fee ("Removal Fee") for performing all activities
required to remove a Trust Student Loan from the Servicer's system to another
servicer unless such Trust Student Loan is being removed due to the termination
of the Servicer pursuant to Section 5.1 of this Agreement. The Removal Fee is
equal to $10.00 per account plus any verifiable direct expenses incurred for
shipping such Trust Student Loan to the new servicer.
2
<PAGE>
ATTACHMENT B
------------
Loan Servicing Center/Florida
P.O. Box 2975
Panama City, Florida 32402-2975
(904) 271-9207
Loan Servicing Center/Kansas
P.O. Box 309
Lawrence, Kansas 66044
(913) 841-0234
Loan Servicing Center/New England
135 Beaver Street
Waltham, Massachusetts 02154
(617) 893-9522
Loan Servicing Center/Pennsylvania
220 Lasley Avenue
Hanover Industrial Estates
Wilkes-Barre, Pennsylvania 18706
(717) 821-3600
Loan Servicing Center/Texas
777 Twin Creek Drive
Killeen, Texas 76543
(817) 554-4500
Loan Servicing Center/Washington
107 South Harvard Street
Spokane, Washington 99204
(509) 455-9224
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ATTACHMENT C
------------
REPORTS
1. CLASS Report 800 - Monthly activity summary report
2. CLASS Report 801 - Monthly average/ending balance report
3. CLASS Report 802 - Monthly activity detail
4. CLASS Report 803 - Monthly conversion/removal summary
5. CLASS Report 807 - Monthly delinquency aging report
6. CLASS Report 810 - Monthly characteristics summary
7. CLASS Report 866 - Monthly average/ending balance offset fee report
8. CLASS Report 882 - Great Rewards/Direct Repay Report
9. Monthly Cash Reconciliation Report
10. Quarterly ED799 billing (prepared from CLASS Reports 824, 825, 827, 828 and
829; supporting detail CLASS Reports 865, 868, 870 and 871; and the OE799
SAS library)
11. Portfolio Characteristics, Financial Activity, Quarterly calculation of
Accrued Interest to be capitalized, Delinquency Detail and Claims extracts.
1
<PAGE>
PAYING AGENT AGREEMENT
This PAYING AGENT AGREEMENT, dated as of June 18, 1998 (this "Agreement")
is entered into by and among (i) CHASE MANHATTAN BANK DELAWARE, a Delaware
banking corporation acting not in its individual capacity but solely as Eligible
Lender Trustee under the trust agreement referred to below (the "Trustee"), (ii)
BANKERS TRUST COMPANY, a New York banking corporation (the "Agent") and (iii)
STUDENT LOAN MARKETING ASSOCIATION, a federally chartered corporation (the
"Administrator").
W I T N E S S E T H;
- - - - - - - - - -
WHEREAS, the Trustee and the Administrator desire to appoint the Agent as
the co-paying agent under the Trust Agreement, dated as of June 1, 1998 (the
"Trust Agreement"), between the Trustee and SLM Funding Corporation;
WHEREAS, the Agent desires to accept such appointment.
NOW, THEREFORE, the Trustee, the Administrator and the Agent agree as
follow:
1. Pursuant to Section 3.9 of the Trust Agreement, the Trustee hereby
appoints the Agent as the co-paying agent to perform the duties of the
Certificate Paying Agent as set forth in the Trust Agreement and the
Agent hereby accepts such appointment and the duties relating thereto
as if the Agent had been a party to the Trust Agreement. The
Administrator hereby consents to such appointment.
2. The Agent shall be subject to the same standard of care as, and shall
be entitled to the same rights, protections and immunities afforded to,
the Trustee under the Trust Agreement.
3. The Administrator covenants to indemnify the Agent for, and to hold it
harmless against, any loss, liability or expense incurred without
willful misconduct, negligence or bad faith on the part of the Agent
arising out of or in connection with the acceptance or administration
of this Agreement and
<PAGE>
the duties hereunder, including the reasonable costs and expenses of
defending itself against any claim of liability in the premises.
4. This Agreement may be modified by agreement of the parties hereto and
may be terminated by any party upon sixty (60) days prior written
notice to the other parties.
5. Initially capitalized terms which are used herein and which are not
defined herein have the meanings set forth in the Trust Agreement.
6. This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
STUDENT LOAN MARKETING CHASE MANHATTAN BANK DELAWARE
ASSOCIATION
By: /s/ J. Lance Franke By: /s/ Denis Kelly
------------------------ --------------------------
Name: J. Lance Franke Name: Denis Kelly
---------------------- ------------------------
Title: Vice President Title: Trust Officer
--------------------- -----------------------
BANKERS TRUST COMPANY
By: /s/ Raymond Delli Colli
-------------------------
Name: Raymond Delli Colli
-----------------------
Title: Assistant Treasurer
----------------------
2
