LOAN SALE AGREEMENT
among
SMS STUDENT LOAN TRUST 1998-A,
as Issuer,
USA GROUP SECONDARY MARKET SERVICES, INC.,
as Seller,
NBD BANK, N.A., AS TRUSTEE FOR
USA GROUP SECONDARY MARKET SERVICES, INC.,
and
THE FIRST NATIONAL BANK OF CHICAGO,
not in its individual capacity but solely
as Eligible Lender Trustee
Dated as of May 1, 1998
LOAN SALE AGREEMENT dated as of May 1, 1998, among SMS STUDENT LOAN TRUST
1998-A, a Delaware trust (the "Issuer"), USA GROUP SECONDARY MARKET SERVICES,
INC, as seller (the "Seller"), NBD BANK, N.A., AS TRUSTEE FOR USA GROUP
SECONDARY MARKET SERVICES, INC. ("NBD"), and THE FIRST NATIONAL BANK OF CHICAGO,
a national banking association, solely as eligible lender trustee and not in its
individual capacity (the "Eligible Lender Trustee").
WHEREAS the Issuer desires to purchase from the Seller a portfolio of
federally reinsured student loans purchased in the ordinary course of business
by the Seller; and
WHEREAS in order to comply with the requirements of the Higher
Education Act, legal title to the Seller's student loan portfolio is vested in
NBD, as trustee on behalf of the Seller as the sole beneficiary; and
WHEREAS the Seller is willing to sell such student loans to the
Eligible Lender Trustee on behalf of the Issuer; and
WHEREAS the Eligible Lender Trustee is willing to hold legal title
to, and serve as eligible lender trustee with respect to, such student loans on
behalf of the Issuer.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I
Definitions and Usage
Capitalized terms used but not defined herein are defined in Appendix
A to the Administration Agreement, dated as of May 1, 1998, among the Issuer,
the Seller, as Administrator, and Bankers Trust Company, as Indenture Trustee,
which also contains rules as to usage and construction that shall be applicable
herein.
ARTICLE II
Conveyance of Financed Student Loans
SECTION 2.01. Conveyance of Initial Financed Student Loans. (a) In
consideration of the Issuer's delivery to or upon the order of the Seller on the
Closing Date of the net proceeds from the sale of the Notes and the other
amounts to be distributed from time to time to the Seller in accordance with the
terms of this Agreement, the Seller (and, with respect to legal title to the
Financed Student Loans, NBD as trustee on behalf of the Seller) does hereby, as
evidenced by a duly executed ▇▇▇▇ of Sale in the form of Exhibit A hereto, sell,
assign, and otherwise convey to the Issuer and, with respect to legal title to
the Initial Financed Student Loans (as defined below), to the Eligible Lender
Trustee on behalf of the Issuer) without recourse except as may be provided
herein, (i) all right, title and interest in and to the Initial Financed Student
Loans, and all obligations of the Obligors thereunder, together with all
documents, the related Student Loan Files and all rights and privileges relating
thereto, (ii) all payments on or collections received thereunder on and after
the Cutoff Date, including without limitation, Liquidation Proceeds and
Recoveries; (iii) all of its right, title and interest in all funds on deposit
from time to time in the Trust Accounts, including the Reserve Account Initial
Deposit, and in all investments and proceeds thereof (including all income
thereon); and (iv) all proceeds of any and all of the foregoing.
(b) In connection with the sale and assignment of Financed Student
Loans to the Eligible Lender Trustee on behalf of the Trust, on the Closing
Date, the Seller shall deposit the Reserve Account Initial Deposit into the
Reserve Account.
(c) On the Closing Date, the Seller will deposit, or cause to be
deposited, into the Collection Account all amounts or collections received under
the Initial Financed Student Loans on and after the Cutoff Date.
SECTION 2.02. Conveyance of New Loans and Serial Loans to the
Eligible Lender Trustee on Behalf of the Trust. (a) Subject to the conditions
set forth in paragraph (d) below, in consideration of the Issuer's delivery on
the related Transfer Date to or upon the order of the Seller of the Loan
Purchase Amount for each such New Loan or Serial Loan to be delivered to the
Seller, the Seller does hereby sell, transfer, assign, set over and otherwise
convey to the Issuer and with respect to legal title the New Loans and Serial
Loans, to the Eligible Lender Trustee on behalf of the Issuer, without recourse
except as may
be provided herein, (i) all right, title and interest of the Seller in and to
each New Loan and Serial Loan and all obligations of the Obligors thereunder,
together with all documents, the related Student Loan Files and all rights and
privileges relating thereto, (ii) all payments on or collections received
thereunder on and after the related Subsequent Cutoff Date and (iii) all
proceeds of any and all of the foregoing.
(b) During the Revolving Period, upon the tender of New Loans or
Serial Loans by the Seller on the related Transfer Date and the satisfaction of
the conditions set forth in subsection (d) of this Section 2.02, the Eligible
Lender Trustee will so inform the Administrator, the Indenture Trustee and the
Subordinate Note Insurer, and the Loan Purchase Amounts for such New Loans or
Serial Loans will be withdrawn from the Collateral Reinvestment Account, subject
to the provisions of Section 2(f) of the Administration Agreement, and will be
remitted to or upon the order of the Seller. The Seller covenants to transfer
during the Revolving Period to the Eligible Lender Trustee on behalf of the
Issuer pursuant to paragraph (a) above New Loans or Serial Loans with an
aggregate principal balance substantially equal to the amount on deposit in the
Collateral Reinvestment Account; provided, however, that the Seller shall have
no liability for a breach of the foregoing covenant as a result of the Seller
not having originated or acquired, or having caused to be originated or
acquired, during the Revolving Period New Loans or Serial Loans equal to the
amount specified above. Such transfers shall be made at such times during the
Revolving Period as the Seller may determine in its discretion, subject to the
requirement that the Seller shall make such transfers at least as frequently as
is necessary to avoid the occurrence of an Early Amortization Event.
(c) After the Revolving Period, upon the tender of Serial Loans by
the Seller on the related Transfer Date and the satisfaction of the conditions
set forth in subsection (d) of this Section 2.02, the Eligible Lender Trustee
will so inform the Administrator, the Indenture Trustee and the Subordinate Note
Insurer, and that component of the Loan Purchase Amount for such Serial Loans
represented by the Purchase Collateral Balance thereof will be withdrawn from
amounts on deposit in the Collection Account, as provided in Section 2(d)of the
Administration Agreement, and will be remitted, as provided therein to or upon
the order of the Seller or, alternatively, at the sole discretion of the Seller,
the Seller may determine that the Purchase Collateral Balance due on the related
Transfer Date for any Serial Loans then to be transferred shall be paid by the
Issuer's exchanging with the Seller one or more Exchanged Student Loans held by
the Issuer for such Serial Loans; provided, however, that the component of the
Loan Purchase Amount represented by the Purchase Premium Amounts shall not be
payable
with respect to Exchanged Serial Loans and, with respect to purchased Serial
Loans, shall be payable on a deferred basis pursuant to the final sentence of
this paragraph. In the event Exchanged Student Loans are to be so used (i) the
decision by the Issuer as to which of those Financed Student Loans then held by
the Issuer that meet the criteria for Exchanged Student Loans are to be selected
for such exchange shall be subject to the sole discretion of the Eligible Lender
Trustee; provided, however, that the Eligible Lender Trustee shall not select
for such purpose any Financed Student Loan that has the same Borrower as any
other Financed Student Loan unless all of the Financed Student Loans of such
Borrower are to be exchanged; (ii) with respect to any Serial Loan to be
delivered on a Transfer Date, only a Financed Student Loan that is an Exchanged
Student Loan with respect to such Serial Loan shall be counted toward the
Purchase Collateral Balance for such Serial Loan; and (iii) in the event that,
with respect to any Purchase Collateral Balance due on the related Transfer
Date, the aggregate principal balance (plus accrued borrower interest thereon if
and to the extent that such interest is not then payable and will, pursuant to
the term of such loan, be capitalized and added to the principal balance of such
loan), as of the related Subsequent Cutoff Date, of the Exchanged Student Loan
or Loans being remitted on such Transfer Date in satisfaction of such Purchase
Collateral Balance is less than such amount due, the Issuer shall remit funds to
cover such difference from amounts on deposit in the Collection Account as
provided in Section 2(d) of the Administration Agreement. Any Purchase Premium
Amounts for Serial Loans conveyed to the Trust after the Revolving Period will
be payable on Quarterly Payment Dates out of Reserve Account Excess pursuant to
Section 2(e) of the Administration Agreement and such Purchase Premium Amounts
will accrue no interest or yield but will be paid on each Quarterly Payment Date
to the extent such excess is available in the aggregate amount of such premiums
incurred but unpaid up to the end of the related Collection Period; provided,
however, that no Purchase Premium Amounts shall be payable on Exchanged Serial
Loans.
(d) The Seller (and with respect to legal title to the New Loans and
Serial Loans, NBD as trustee on behalf of the Seller) shall transfer to the
Issuer the New Loans and Serial Loans for a given Transfer Date and the other
property and rights related thereto described in paragraph (a) above only upon
the satisfaction of each of the following conditions on or prior to such
Transfer Date:
(i) the Seller (and with respect to legal title to the Serial Loans,
NBD as trustee on behalf of the Seller) shall have delivered to the
Eligible Lender Trustee and the Indenture Trustee a duly executed written
assignment
(including an acceptance by the Eligible Lender Trustee and the Indenture
Trustee) in substantially the form of Exhibit B hereto (each, a "Transfer
Agreement"), which shall include supplements to Schedule A hereto, listing
such New Loans and Serial Loans; and the Seller shall have delivered a
copy of such assignment to the Subordinate Note Insurer;
(ii) the Seller shall have delivered, at least two days prior to such
Transfer Date, notice of such transfer to the Eligible Lender Trustee, the
Indenture Trustee, the Subordinate Note Insurer and the Rating Agencies,
including a listing of the designation and the aggregate principal balance
of such New Loans and Serial Loans;
(iii)the Seller shall have deposited in the Collection Account all
amounts on or collections received in respect of the New Loans and Serial
Loans on and after each applicable Subsequent Cutoff Date;
(iv) as of the Transfer Date, the Seller was not insolvent nor will
it have been made insolvent by such transfer nor is it aware of any
pending insolvency;
(v) such addition will not result in a material adverse federal or
state tax consequence to the Issuer or the Noteholders;
(vi) the Seller shall have delivered to the Indenture Trustee, the
Eligible Lender Trustee and the Subordinate Note Insurer an Officers'
Certificate confirming the satisfaction of each condition precedent
specified in this paragraph (d);
(vii)the Seller shall have delivered on each November 1 and May 1,
commencing November 1, 1998 (A) to the Rating Agencies and the Subordinate
Note Insurer an Opinion of Counsel with respect to the transfer of the New
Loans and Serial Loans transferred to the Issuer on such Transfer Date,
substantially in the form of the Opinion of Counsel delivered to the
Rating Agencies and the Subordinate Note Insurer on the Closing Date, and
(B) to the Eligible Lender Trustee, the Indenture Trustee and the
Subordinate Note Insurer the Opinion of Counsel as required by Section
6.02(f)(1) hereof; provided, however, that, notwithstanding the foregoing,
no opinion shall be required under subclause (B) and, if the Revolving
Period has terminated, no opinion shall be required under subclause (A),
unless the Seller, the Eligible Lender Trustee, the Indenture Trustee or
the Subordinate Note Insurer determines that, with regard to the most
recent opinion on the matters
described in either such subclause that was delivered with respect to the
Financed Student Loans (whether on the Closing Date or thereafter under
this subsection or under another provision of the Basic Documents), the
conclusion of, or the reasoning underlying, such opinion is no longer
correct in all material respects due to a change in law or regulations or
the ruling of a court, an administrative tribunal or a regulatory or other
governmental authority; upon making any such determination, whichever of
the Seller, the Eligible Lender Trustee, the Indenture Trustee and the
Subordinate Note Insurer makes such determination shall notify the others
and the Rating Agencies; and provided, further, that none of the Eligible
Lender Trustee, the Indenture Trustee or the Subordinate Note Insurer
shall have any obligation to monitor changes in laws or regulations or the
rulings of courts or other governmental agencies for the purpose of making
any determination described in the preceding proviso;
(viiiwith respect to any New Loan which is guaranteed by an
Additional Guarantor, such Additional Guarantor shall have entered into a
Guarantee Agreement with the Eligible Lender Trustee which guarantees such
New Loan in substantially the form of the Guarantee Agreements between the
Initial Guarantors and the Eligible Lender Trustee;
(ix) the Seller shall have taken any action required to maintain the
first perfected ownership interest of the Issuer in the Trust Estate and
the first perfected security interest of the Indenture Trustee in the
Collateral;
(x) no selection procedures believed by the Seller to be adverse to
the interests of the Noteholders or the Subordinate Note Insurer shall
have been utilized in selecting the New Loans or the Serial Loans or in
selecting Exchanged Student Loans or the Exchanged Serial Loans;
(xi) no Default or Event of Default shall have occurred under the
Indenture, no Servicer Default shall have occurred under the Servicing
Agreement and no Administrator Default shall have occurred under the
Administration Agreement; and
(xii)for each Transfer Date occurring after the Revolving Period,
after giving effect to the conveyance of Serial Loans on such Transfer
Date, the amount of funds remitted for the purchase of Serial Loans on
such Transfer Date, and on each Transfer Date since the preceding
Quarterly Payment Date, shall not exceed the Net Principal Cash Flow
Amount for such Transfer Date minus the sum of (i) all amounts paid to
prepay any Add-on Consolidation Loan not
held by the Issuer since the last Quarterly Payment Date pursuant to
Section 2(d)(iii)(A) of the Administration Agreement and (ii) all amounts
which the Administrator reasonably estimates will be required to prepay
Add-on Consolidation Loans pursuant to Section 2(d)(iii)(A) of the
Administration Agreement during the remainder of the Collection Period;
provided, however, that the Seller shall not incur any liability as a result of
transferring Serial Loans on any Transfer Date at a time when the condition set
forth in clause (v) was not satisfied, if at the time of such transfer the
Authorized Officers of the Seller, after reasonable inquiry of counsel to the
Seller, were not aware of any fact that would reasonably suggest that such
condition would not be satisfied as of such date.
SECTION 2.03. Treatment as a Security Agreement. The parties intend
that the conveyance of the Seller's (and, with respect to legal title to the
loans, NBD's) right, title and interest in and to the Initial Financed Student
Loans pursuant to this Agreement and any New Loans and Serial Loans pursuant to
a related Transfer Agreement shall constitute a valid purchase and sale and not
a loan. If such conveyance is deemed to be a loan and not a sale, then the
parties also intend and agree that the Seller (and, with respect to legal title
to loans, NBD) shall be deemed to have granted, and in such event do hereby
grant to the Issuer, a first priority security interest in all of the Seller's
and NBD's right, title and interest in, to and under the Initial Financed
Student Loans and any New Loans or Serial Loans and the other items specified in
Sections 2.01 and 2.02, and that this Agreement (with respect to the Initial
Financed Student Loans) and any applicable Transfer Agreement (with respect to
the New Loans or Serial Loans conveyed thereby) shall each constitute a security
agreement under applicable law with respect to such loans. If such conveyance is
deemed to be a loan and not a sale, the Issuer may, to secure the Issuer's own
borrowings under the Indenture, repledge all or any portion of such loans and
the other items specified in Sections 2.01 and 2.02 hereof pledged to the Issuer
and not released from the security interest of this Agreement at the time of
such pledge. Such a repledge may be made by the Issuer with or without a
repledge by the Issuer of its rights under this Agreement, and without further
notice to or acknowledgement from the Seller or NBD. Each of the Seller and NBD
waives, to the extent permitted by applicable law, all claims, causes of action
and remedies whether legal or equitable (including any rights of set-off)
against the Issuer or any assignee of the Issuer relating to such action by the
Issuer in connection with the transactions contemplated by this Agreement, each
Transfer Agreement and the other Basic Documents.
SECTION 2.04. Endorsement. The Seller (and, with respect to legal
title to the Financed Student Loans, NBD as trustee on behalf of the Seller)
hereby appoint each of the Eligible Lender Trustee and the Indenture Trustee as
the Seller's (and NBD's) true and lawful attorney-in-fact with full power of
substitution to endorse the Seller's (and NBD's) name on any promissory note
evidencing the Initial Financed Student Loans and any New Loans or Serial Loans
transferred to the Eligible Lender Trustee on behalf of the Trust pursuant to
Sections 2.01 and 2.02. The Seller (and, with respect to legal title to the
Financed Student Loans, NBD as trustee on behalf of the Seller) acknowledge and
agree that this power of attorney shall be construed as a power coupled with an
interest, shall be irrevocable as long as the Trust Agreement remains in effect
and shall continue in effect until the Trust Agreement terminates.
ARTICLE III
The Financed Student Loans
SECTION 3.01. Representations and Warranties of Seller with Respect
to the Financed Student Loans. The Seller represents and warrants with respect
to the Financed Student Loans as set forth in Exhibit C hereto, in each case,
upon which representations and warranties the Subordinate Note Insurer relies in
issuing the Subordinate Note Insurance Policy. Such representations and
warranties speak as of the execution and delivery of this Agreement and as of
the Closing Date, in the case of the Initial Financed Student Loans, as of the
applicable Transfer Date, in the case of the New Loans and Serial Loans, as of
the date of the relevant Assignment in the case of any Qualified Substitute
Student Loan, as of the date of origination in the case of any Consolidation
Loan added to the Trust during the Revolving Period and as of the applicable
Add-on Consolidation Loan Funding Date, in the case of any Consolidation Loan
the principal balance of which is increased by the principal balance of any
related Add-on Consolidation Loan, but shall survive the sale, transfer and
assignment of the Financed Student Loans to the Eligible Lender Trustee on
behalf of the Issuer (and both the origination of such Consolidation Loans and
the addition of the principal balance of any Add-on Consolidation Loan) and the
pledge thereof to the Indenture Trustee pursuant to the Indenture.
SECTION 3.02. Repurchase; Reimbursement. (a) Upon
discovery by the Seller, NBD, the Servicer, the Subordinate Note
Insurer, the Eligible Lender Trustee or the Indenture Trustee of
any breach of the Seller's representations and warranties made by
the Seller pursuant to Section 3.01 or Section 4.01, the party discovering the
breach shall give prompt written notice to the others. Unless any such breach
shall have been cured within sixty (60) days after the Seller becomes aware or
receives written notice (whichever is earlier) of such breach, the Seller shall
be obligated to either (i) repurchase any Financed Student Loan in which the
interests of the Noteholders or the Subordinate Note Insurer are materially and
adversely affected by any such breach as of the first day succeeding the end of
such 60-day period that is the last day of a Monthly Collection Period or (ii)
substitute a Qualified Substitute Student Loan in the manner specified in this
Section; provided, however, that it is understood that any such breach that does
not affect the Guarantor's obligation to guarantee payment of such Financed
Student Loan to the Eligible Lender Trustee will not be considered to have a
material adverse effect for this purpose and it is further understood that any
dispute as to whether the Guarantor's obligation has been so affected will be
resolved by the decision of the Indenture Trustee for so long as Notes are
Outstanding and thereafter by the Eligible Lender Trustee. In addition, if any
such breach by the Seller does not trigger such a repurchase obligation but does
result in the refusal by the Guarantor to guarantee all or a portion of the
accrued interest, or the loss (including any obligation of the Issuer to repay
the Department) of certain Interest Subsidy Payments and Special Allowance
Payments, then, unless such breach, if curable, is cured within sixty (60) days,
the Seller shall reimburse the Issuer by remitting an amount equal to all such
non-guaranteed interest amounts and such forfeited Interest Payments and Special
Allowance Payments in the manner specified in Section 3.03. Subject to the
provisions of Section 4.03, the sole remedy of the Issuer, the Eligible Lender
Trustee, the Indenture Trustee or the Noteholders with respect to a breach of
representations and warranties pursuant to Section 3.01, and the agreement
contained in this Section, shall be to require the Seller to repurchase or
substitute for Financed Student Loans or to reimburse the Issuer as provided
above pursuant to this Section, subject to the conditions contained herein.
(b) The Seller may, at its option, cause a Financed Student Loan to be
repurchased by a Person not affiliated with the Seller as of the last day of a
Monthly Collection Period if there is a dispute with the related Borrower during
such Monthly Collection Period which in the Servicer's reasonable judgment would
call into question whether such Financed Student Loan will be repaid by the
Borrower; provided, however, that the aggregate principal balance of the
Financed Student Loans purchased pursuant to this subsection (b) shall not
exceed, in aggregate, 1% of the Initial Pool Balance.
(c) In consideration of and simultaneously with the repurchase of a
Financed Student Loan, the Seller shall remit the Purchase Amount therefor, in
the manner specified in Section 3.03, and the Issuer shall execute such
assignments and other documents reasonably requested by the Seller in order to
effect such transfer. Upon any such transfer of a Financed Student Loan, legal
title to, and beneficial ownership and control of, the related Student Loan File
will thereafter belong to the Seller or in the case of legal title thereto an
eligible lender under the Higher Education Act designated by the Seller.
With respect to any Qualified Substitute Student Loan or Loans, the
Seller shall deliver to the Eligible Lender Trustee for the benefit of the
Indenture Trustee such documents and agreements together with a duly executed
Assignment in the form of Exhibit F hereto. No substitution is permitted to be
made during the period beginning on the day after each Determination Date and
ending on the last day of the calendar month of such Determination Date.
Payments due with respect to Qualified Substitute Student Loans shall be part of
the Trust Estate on and after the date of such Assignment. Upon such
substitution, the Qualified Substitute Student Loan or Loans shall be subject to
the terms of this Agreement in all respects, and the Seller shall be deemed to
have made with respect to such Qualified Substitute Student Loan or Loans, as of
the date of substitution, the representations and warranties made pursuant to
Section 3.01 with respect to any such Student Loan. In addition, any such
substitution shall occur only upon satisfaction of each of the following
conditions on or prior to the date of the related Assignment:
(i) the Seller shall have deposited in the Collection Account all
collections in respect of the Qualified Substitute Student Loans on and
after each applicable date of Assignment;
(ii) as of the date of the related Assignment, the Seller shall not
have been insolvent nor will it have been made insolvent by such transfer
nor is it aware of any pending insolvency;
(iii)such addition will not result in a material
adverse Federal or State tax consequence to the Issuer or
the Noteholders;
(iv) the Seller shall have delivered (A) to the Rating Agencies and
the Subordinate Note Insurer, an Opinion of Counsel with respect to each
transfer of Qualified Substitute Student Loans, substantially in the form
of the
Opinion of Counsel delivered to the Rating Agencies and the Subordinate
Note Insurer on the Closing Date, and (B) to the
Eligible Lender Trustee, the Subordinate Note Insurer and the Indenture
Trustee, the Opinion of Counsel required by Section 6.02(f)(1) hereof;
provided, however, that no opinion shall be required under either
subclause (A) or (B) unless the Seller, the Eligible Lender Trustee, the
Indenture Trustee or the Subordinate Note Insurer determines that, with
regard to the most recent opinion on the matters described in either such
subclause that was delivered with respect to the Financed Student Loans
(whether on the Closing Date or thereafter under this subsection or under
another provision of the Basic Documents), the conclusion of, or the
reasoning underlying, such opinion is no longer correct in all material
respects due to a change in law or regulations or the ruling of a court,
an administrative tribunal or a regulatory or other governmental
authority; upon making any such determination, whichever of the Seller,
the Eligible Lender Trustee, the Subordinate Note Insurer and the
Indenture Trustee makes such determination shall notify the others and the
Rating Agencies; and provided, further, that none of the Eligible Lender
Trustee, the Subordinate Note Insurer or the Indenture Trustee shall have
any obligation to monitor changes in laws or regulations or the rulings of
courts or other governmental agencies for the purpose of making any
determination described in this clause (iv);
(v) the Seller shall have taken any action required to maintain the
first perfected ownership interest of the Issuer in the Trust Estate and
the first perfected security interest of the Indenture Trustee in the
Collateral;
(vi) no selection procedures believed by the Seller to be adverse to
the interests of the Noteholders or the Subordinate Note Insurer shall
have been utilized in selecting the Qualified Substitute Student Loans;
and
(vii)no Default or Event of Default shall have occurred under the
Indenture, no Servicer Default shall have occurred under the Servicing
Agreement and no Administrator Default shall have occurred under the
Administration Agreement.
Upon any such substitution and the deposit to the Collection Account
of the amount required to be deposited therein in connection with such
substitution as described in the following paragraph, the Eligible Lender
Trustee shall release any documentation held with respect to the Financed
Student Loan being substituted for (the "Deleted Student Loan") to the Seller
and shall execute and deliver at the Seller's direction such
instruments of transfer or assignment prepared by the Seller, in each case
without recourse, as shall be necessary to vest in the Seller, or (in the case
of legal title thereto an eligible lender under the Higher Education Act
designated by the Seller), the Eligible Lender Trustee's interest in any Deleted
Student Loan substituted for pursuant to this Section 3.02.
For any month in which the Seller substitutes one or more Qualified
Substitute Student Loans for one or more Deleted Student Loans, the Servicer
will determine the amount (if any) by which as of the date of the relevant
Assignment the aggregate principal balance of all such Qualified Substitute
Student Loans is less than the aggregate principal balance of all such Deleted
Student Loans. The amount of such shortage (the "Substitution Adjustment
Amount") shall be deposited in the Collection Account by the Seller on or before
the date of the relevant Assignment.
SECTION 3.03. Repurchase Deposits. The Seller shall deposit or cause
to be deposited in the Collection Account the aggregate Purchase Amount with
respect to Purchased Student Loans and all other amounts to be paid by the
Seller under Section 3.02 and Section 5.01 when such amounts are due.
ARTICLE IV
The Seller
SECTION 4.01. Representations of Seller and NBD. The Seller
represents as set forth in Exhibit D hereto and NBD represents as set forth in
Exhibit E hereto, in each case, upon which representations the Subordinate Note
Insurer relies in issuing the Subordinate Note Insurance Policy. Such
representations speak as of the execution and delivery of this Agreement and as
of the Closing Date in the case of the Initial Financed Student Loans, as of the
applicable Transfer Date in the case of the New Loans and the Serial Loans, as
of the date of the relevant Assignment in the case of any Qualified Substitute
Student Loan, and, in the case of the Seller, as of the date of origination in
the case of any Consolidation Loan added to the Trust during the Revolving
Period and as of the applicable Add-on Consolidation Loan Funding Date, in the
case of a Consolidation Loan the principal balance of which is increased by the
principal balance of any related Add-on Consolidation Loan, but shall survive
the sale, transfer and assignment of the Financed Student Loans to the Eligible
Lender Trustee on behalf of the Issuer (and both the origination of such
Consolidation Loans and the addition of the principal balance of any Add-on
Consolidation Loan) and the pledge thereof to the Indenture Trustee pursuant to
the Indenture.
SECTION 4.02. Existence. During the term of this Agreement, the
Seller will keep in full force and effect its existence, rights and franchises
as a corporation under the laws of the jurisdiction of its incorporation and
will obtain and preserve its qualification to do business in each jurisdiction
in which such qualification is or shall be necessary to protect the validity and
enforceability of this Agreement, the other Basic Documents and each other
instrument or agreement necessary or appropriate to the proper administration of
this Agreement and the transactions contemplated hereby. In addition, all
transactions between the Seller and its Affiliates will be conducted on an
arm's-length basis. For so long, during the term of this Agreement, as the
Seller shall not be an eligible lender under the Higher Education Act with
respect to federal Student Loans, the Seller agrees to keep in full force and
effect an agreement with NBD or another eligible lender under the Higher
Education Act providing for such eligible lender meeting the requirements set
forth in the following sentence to hold title to the Seller's Student Loans in
trust for and on behalf of the Seller. The Seller shall not convey any New Loan,
Serial Loan or Qualified Substitute Student Loan if the eligible lender holding
legal title to such loan is other than NBD unless, prior to such conveyance,
such other eligible lender shall agree in writing to be bound, in the conveyance
of each such loan for which it acts as eligible lender, by the provisions of
this Agreement that are applicable to NBD, to the same extent as if it were
named separately from NBD in each of such provisions.
SECTION 4.03. Liability of Seller; Indemnities. The Seller shall be
liable in accordance herewith only to the extent of the obligations specifically
undertaken by the Seller under this Agreement.
(a) The Seller shall indemnify, defend and hold harmless the Issuer,
the Subordinate Note Insurer, the Eligible Lender Trustee and the
Indenture Trustee and their officers, directors, employees and agents from
and against any taxes that may at any time be asserted against any such
Person with respect to the transactions contemplated herein and in the
other Basic Documents (except any such income taxes arising out of fees
paid to the Eligible Lender Trustee or the Indenture Trustee), including
any sales, gross receipts, general corporation, tangible personal
property, privilege or license taxes (but, in the case of the Issuer, not
including taxes in connection with the issuance and original sale of the
Notes or asserted with respect to ownership of the Financed Student Loans
or federal or other income taxes arising out of payments on the Notes) and
costs and expenses in defending against the same.
(b) The Seller shall indemnify, defend and hold harmless the Issuer,
the Subordinate Note Insurer, the Eligible Lender Trustee , the Indenture
Trustee and the Noteholders and the officers, directors, employees and
agents of the Issuer, the Eligible Lender Trustee and the Indenture
Trustee from and against any and all costs, expenses, losses, claims,
damages and liabilities arising out of, or imposed upon such Person
through, (i) the Seller's willful misfeasance, bad faith or negligence in
the performance of its duties under this Agreement, or by reason of
reckless disregard of its obligations and duties under this Agreement and
(ii) the Seller's or the Issuer's violation of Federal or state securities
laws in connection with the offering and sale of the Notes.
(c) The Seller shall be liable as primary obligor for, and shall
indemnify, defend and hold harmless the Eligible Lender Trustee and the
Subordinate Note Insurer and their respective officers, directors,
employees and agents from and against, all costs, expenses, losses,
claims, damages, obligations and liabilities arising out of, incurred in
connection with or relating to the Trust Agreement, the other Basic
Documents, the Trust Estate, the acceptance or performance of the trusts
and duties set forth herein and in the Trust Agreement or the action or
the inaction of the Eligible Lender Trustee hereunder and under the Trust
Agreement, except to the extent that such cost, expense, loss, claim
damage, obligation or liability: (i) shall be due to the willful
misfeasance, bad faith or negligence (except for errors in judgment) of
the Eligible Lender Trustee , (ii) shall arise from any breach by the
Eligible Lender Trustee of its covenants under any of the Basic Documents;
or (iii) shall arise from the breach by the Eligible Lender Trustee of any
of its representations or warranties set forth in Section 7.03 of the
Trust Agreement. In the event of any claim, action or proceeding for which
indemnity will be sought pursuant to this paragraph, the Eligible Lender
Trustee's choice of legal counsel shall be subject to the approval of the
Seller, which approval shall not be unreasonably withheld.
(d) The Seller shall pay any and all taxes levied or assessed upon
all or any part of the Trust Estate (other than those taxes expressly
excluded from the Seller's responsibilities pursuant to the parentheticals
in paragraph (a) above).
Indemnification under this Section shall survive the
resignation or removal of the Eligible Lender Trustee or the
Indenture Trustee and the termination of this Agreement or the Indenture or the
Trust Agreement, as applicable, and shall include reasonable fees and expenses
of counsel and expenses of litigation. If the Seller shall have made any
indemnity payments pursuant to this Section and the Person to or on behalf of
whom such payments are made thereafter shall collect any of such amounts from
others, such Person shall promptly repay such amounts to the Seller, without
interest.
SECTION 4.04. Merger or Consolidation of, or Assumption of the
Obligations of, Seller or NBD. Any person (a) into which the Seller or NBD may
be merged or consolidated, (b) which may result from any merger or consolidation
to which the Seller or NBD shall be a party or (c) which may succeed to the
properties and assets of the Seller or NBD substantially as a whole, shall be
the successor to the Seller or NBD, respectively, without the execution or
filing of any document or any further act by any of the parties to this
Agreement; provided, however, that the Seller hereby covenants that it will not
consummate any of the foregoing transactions except upon satisfaction of the
following: (i) the surviving Seller, if other than SMS, executes an agreement of
assumption to perform every obligation of the Seller under this Agreement, (ii)
immediately after giving effect to such transaction, no representation or
warranty made pursuant to Section 3.01 or 4.01 shall have been breached and no
Servicer Default, Event of Default or Administrator Default and no event that,
after notice or lapse of time, or both, would become a Servicer Default, Event
of Default or Administrative Default shall have occurred and be continuing,
(iii) the Seller shall have delivered to the Eligible Lender Trustee, the
Subordinate Note Insurer and the Indenture Trustee an Officers' Certificate and
an Opinion of Counsel each stating that such consolidation, merger or succession
and such agreement of assumption comply with this Section and that all
conditions precedent, if any, provided for in this Agreement relating to such
transaction have been complied with, and that the Rating Agency Condition shall
have been satisfied with respect to such transaction, (iv) the surviving Seller
shall have a consolidated net worth at least equal to that of the predecessor
Seller, (v) such transaction will not result in a material adverse federal or
state tax consequence to the Issuer or the Noteholders, (vi) unless SMS is the
surviving entity, the Seller shall have delivered to the Eligible Lender
Trustee, the Indenture Trustee and the Subordinate Note Insurer an Opinion of
Counsel either (A) stating that, in the opinion of such counsel, all financing
statements and continuation statements and amendments thereto have been executed
and filed that are necessary fully to preserve and protect the interest of the
Eligible Lender Trustee and Indenture Trustee, respectively, in the Financed
Student Loans and reciting the details of such filings, or (B) stating that, in
the opinion
of such counsel, no such action shall be necessary to preserve and protect such
interests; and (vii) the Subordinate Note Insurer has received ten Business
Days' prior written notice; and provided, further, that NBD hereby covenants
that, unless NBD is the surviving entity, it will not consummate any of the
foregoing transactions unless NBD shall have delivered to the Eligible Lender
Trustee, the Indenture Trustee and the Subordinate Note Insurer an Opinion of
Counsel either (A) stating that, in the opinion of such counsel, all financing
statements and continuation statements and amendments thereto have been executed
and filed that are necessary fully to preserve and protect the interest of the
Eligible Lender Trustee and Indenture Trustee, respectively, in the Financed
Student Loans and reciting the details of such filings, or (B) stating that, in
the opinion of such counsel, no such action shall be necessary to preserve and
protect such interests.
SECTION 4.05. Limitation on Liabilities of Seller, NBD and Others.
The Seller, NBD and any director or officer or employee or agent of the Seller
or NBD may rely in good faith on the advice of counsel or on any document of any
kind, prima facie properly executed and submitted by any Person respecting any
matters arising hereunder (provided, however, that such reliance shall not limit
in any way the Seller's obligations under Section 3.02). Neither the Seller nor
NBD shall be under any obligation to appear in, prosecute or defend any legal
action that shall not be incidental to its respective obligations under this
Agreement, and that in its opinion may involve it in any expense or liability.
SECTION 4.06. Seller and NBD May Own Notes. The Seller, NBD and any
Affiliate of either may in its individual or any other capacity become the owner
or pledgee of Notes with the same rights as it would have if it were not the
Seller or NBD, as the case may be or an Affiliate of either, except as expressly
provided herein or in any other Basic Document.
ARTICLE V
Termination
SECTION 5.01. Termination. (a) Optional Purchase of All Financed
Student Loans. As of the last day of any Collection Period immediately preceding
a Quarterly Payment Date as of which the then outstanding Pool Balance is 20% or
less of the initial aggregate principal balance of the Notes, the Company or its
designee shall have the option to purchase the Trust Estate, other than the
Trust Accounts. To exercise such option, the Company or its designee shall
deposit in the Collection Account
an amount (the "Minimum Purchase Price") equal to the greater of (i) the
aggregate Purchase Amounts for the Financed Student Loans as of the Collection
Period immediately preceding such Quarterly Payment Date and (ii) an amount that
would be sufficient to (a) reduce the outstanding principal amount of the Notes
on such Quarterly Payment Date to zero, (b) pay to the Noteholders, the
Noteholders' Interest Distribution Amount payable on such Quarterly Payment
Date, (c) pay to the Subordinate Note Insurer any amounts owed to the
Subordinate Note Insurer under the Basic Documents, (d) pay to the Swap
Counterparty any prior unpaid Net Trust Swap Payment Carryover Shortfalls and
any other amounts owed by the Trust to the Swap Counterparty under the Swap
Agreement and (e) pay to the Administrator and the Servicer all amounts owed to
them under the Basic Documents; and the related rights with respect thereto,
plus the appraised value of any such other property held by the Trust other than
the Trust Accounts, such value to be determined by an appraiser mutually agreed
upon by the Servicer, the Eligible Lender Trustee and the Indenture Trustee, and
shall succeed to all interests in and to the Trust; provided, however, that the
Company or its designee may not effect such purchase if the aggregate Purchase
Amount to be so deposited in the Collection Account does not equal or exceed an
amount equal to the unpaid principal balance of the Notes, plus accrued and
unpaid interest thereon at the applicable Note Interest Rate to the date of
exercise, and the amount of unpaid Class A-1 Noteholders' Interest Basis
Carryover, Class A-2 Noteholders' Interest Basis Carryover and Subordinate
Noteholders' Interest Basis Carryover.
ARTICLE VI
Miscellaneous
SECTION 6.01. Amendment. This Agreement may be amended by the Seller,
NBD and the Eligible Lender Trustee, with the consent of the Indenture Trustee,
but without the consent of any of the Noteholders, to cure any ambiguity, to
correct or supplement any provisions in this Agreement or for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions in this Agreement or of modifying in any manner the rights of the
Noteholders; provided, however, that such action shall not, as evidenced by an
Opinion of Counsel delivered to the Eligible Lender Trustee, the Subordinate
Note Insurer and the Indenture Trustee, adversely affect in any material respect
the interests of any Noteholder.
This Agreement may also be amended from time to time by the Seller
and the Eligible Lender Trustee, with the consent of NBD, the Indenture Trustee,
the Subordinate Note Insurer and the
Noteholders of Notes evidencing not less than a majority of the Outstanding
Amount of the Notes, for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Agreement or of
modifying in any manner the rights of the Noteholders; provided, however, that
no such amendment shall (a) increase or reduce in any manner the amount of, or
accelerate or delay the timing of, collections of payments with respect to
Financed Student Loans or distributions that shall be required to be made for
the benefit of the Noteholders or (b) reduce the aforesaid percentage of the
Outstanding Amount of the Notes, the Noteholders of which are required to
consent to any such amendment, without the consent of all outstanding
Noteholders.
Promptly after the execution of any such amendment or consent (or, in
the case of the Rating Agencies, five Business Days prior thereto), the Eligible
Lender Trustee shall furnish written notification of the substance of such
amendment or consent to NBD, the Seller, the Administrator, each Noteholder, the
Indenture Trustee, the Servicer, the Subordinate Note Insurer and each of the
Rating Agencies.
It shall not be necessary for the consent of Noteholders pursuant to
this Section to approve the particular form of any proposed amendment or
consent, but it shall be sufficient if such consent shall approve the substance
thereof.
Prior to the execution of any amendment to this Agreement, the
Eligible Lender Trustee, the Subordinate Note Insurer and the Indenture Trustee
shall receive upon request and rely upon an Opinion of Counsel stating that the
execution of such amendment is authorized or permitted by this Agreement and the
Opinion of Counsel referred to in Section 6.02(f). The Eligible Lender Trustee
and the Indenture Trustee may, but shall not be obligated to, enter into any
such amendment which affects the Eligible Lender Trustee's or the Indenture
Trustee's, as applicable, own rights, duties or immunities under this Agreement
or otherwise.
SECTION 6.02. Protection of Interests in Trust. (a) Each of the
Seller and NBD shall execute and file such financing statements and cause to be
executed and filed such continuation statements, all in such manner and in such
places as may be required by law fully to preserve, maintain, and protect the
interest of the Issuer, the Eligible Lender Trustee, the Subordinate Note
Insurer and the Indenture Trustee in the Financed Student Loans and in the
proceeds thereof. Each of the Seller and NBD shall deliver (or cause to be
delivered) to the Eligible Lender Trustee, the Indenture Trustee and the
Subordinate Note Insurer file-stamped copies of, or filing receipts for, any
document filed as provided above, as soon as available following such filing.
(b) Neither the Seller nor NBD shall change its name, identity or
corporate structure in any manner that would, could, or might make any financing
statement or continuation statement filed in accordance with paragraph (a) above
seriously misleading within the meaning of ss.9-402(7) of the UCC, unless it
shall have given the Eligible Lender Trustee, the Subordinate Note Insurer and
the Indenture Trustee at least five (5) days' prior written notice thereof and
shall have promptly filed appropriate amendments to all previously filed
financing statements or continuation statements.
(c) Each of the Seller and NBD shall have an obligation to give the
Eligible Lender Trustee, the Indenture Trustee, the Subordinate Note Insurer and
the Rating Agencies at least sixty (60) days prior written notice of any
relocation of its principal executive office if, as a result of such relocation,
the applicable provisions of the UCC would require the filing of any amendment
of any previously filed financing or continuation statement or of any new
financing statement and shall promptly file any such amendment.
(d) If at any time the Seller or NBD shall propose to sell, grant a
security interest in, or otherwise transfer any interest in student loans to any
prospective purchaser, lender or other transferee, the Seller or NBD, as the
case may be, shall give to such prospective purchaser, lender or other
transferee computer tapes, records or printouts (including any restored from
backup archives) that, if they shall refer in any manner whatsoever to any
Financed Student Loan, shall indicate clearly that such Financed Student Loan
has been sold and is owned by the Issuer and has been pledged to the Indenture
Trustee.
(e) The Seller shall, to the extent required by applicable law,
cause the Notes to be registered with the Commission pursuant to Section 12(b)
or Section 12(g) of the Exchange Act within the time periods specified in such
sections.
(f) The Seller shall deliver to the Eligible Lender Trustee, the
Subordinate Note Insurer and the Indenture Trustee:
(1) promptly after the execution and delivery of this Agreement and
of each amendment thereto, on each Transfer Date as set forth in Section
2.02 and on the date of each Assignment as set forth in Section 3.02, an
Opinion of Counsel either (A) stating that, in the opinion of such
counsel, all financing statements and continuation
statements have been executed and filed that are necessary fully to
preserve and protect the interest of the Eligible Lender Trustee and the
Indenture Trustee in the Financed Student Loans, and reciting the details
of such filings or referring to prior Opinions of Counsel in which such
details are given, or (B) stating that, in the opinion of such counsel, no
such action shall be necessary to preserve and protect such interest; and
(2) within 120 days after the beginning of each calendar year
beginning with the first calendar year beginning more than three months
after the Cutoff Date, an Opinion of Counsel, dated as of a date during
such 120-day period, either (A) stating that, in the opinion of such
counsel, all financing statements and continuation statements have been
executed and filed that are necessary fully to preserve and protect the
interest of the Eligible Lender Trustee and the Indenture Trustee in the
Financed Student Loans, and reciting the details of such filings or
referring to prior Opinions of Counsel in which such details are given, or
(B) stating that, in the opinion of such counsel, no such action shall be
necessary to preserve and protect such interest; provided, however, that a
single Opinion of Counsel may be delivered in satisfaction of the
foregoing requirement and that of Section 3.06(b) of the Indenture.
Each Opinion of Counsel referred to in clause (1) or (2) above shall
specify (as of the date of such opinion and given all applicable laws as in
effect on such date) any action necessary to be taken in the following year to
preserve and protect such interest.
SECTION 6.03. Notices. Unless otherwise agreed by the recipient, all
demands, notices and communications upon or to the Seller, NBD, the Servicer,
the Issuer, the Eligible Lender Trustee, the Indenture Trustee, the
Administrator, the Rating Agencies or the Subordinate Note Insurer under this
Agreement shall be in writing, personally delivered or mailed by certified
mail, return receipt requested (or in the form of telex or facsimile notice,
followed by written notice delivered as aforesaid or postage prepaid, first
class mail), and shall be deemed to have been duly given upon receipt;
(a) in the case of the Seller, to
USA Group Secondary Market Services, Inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: President and Chief Executive Officer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇;
with a copy to
Office of the General Counsel
USA Group, Inc.
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▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇;
(b) in the case of NBD, to
NBD Bank, N.A., as
trustee for USA Group Secondary
Market Services, Inc.
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▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇;
(c) in the case of the Servicer, to
USA Group Loan Services, Inc.
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▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to
Office of the General Counsel
USA Group, Inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇;
(d) in the case of the Issuer, to
Student Loan Trust 1998-A
c/o First Chicago Delaware, Inc.
FCC National Bank
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▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
with a copy to the Eligible Lender Trustee
at the Corporate Trust Office of the
Eligible Lender Trustee;
(e) in the case of the Issuer or the Eligible Lender Trustee, at the
Corporate Trust Office of the Eligible Lender Trustee;
(f) in the case of the Indenture Trustee, at its Corporate Trust
Office;
(g) in the case of the Administrator, to
USA Group Secondary Market Services, Inc.
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▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: President and Chief Executive Officer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇;
with a copy to
Office of the General Counsel
USA Group, Inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇;
(h) in the case of Fitch, to
Fitch IBCA, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Asset Backed Monitoring Unit
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇; and
(i) in the case of Moody's, to
▇▇▇▇▇'▇ Investors Service, Inc.
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▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ABS Monitoring Department
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇; and
(j)in the case of the Subordinate Note Insurer, to
MBIA Insurance Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Insured Portfolio Management -
Structured Finance (IPM-SF)
SMS Student Loan Trust 1998-A
$21,350,000 Floating Rate Asset-
Backed Subordinate Notes
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇;
or, as to each of the foregoing, at such other address as shall be designated by
written notice to the other parties.
SECTION 6.04. Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Section 4.04, this Agreement may not be
assigned by the Seller or NBD. This Agreement may be assigned by the Eligible
Lender Trustee only to its permitted successor pursuant to the Trust Agreement.
SECTION 6.05. Limitations on Rights of Others. The provisions of this
Agreement are solely for the benefit of the Seller, NBD, the Issuer, and the
Eligible Lender Trustee and for the benefit of the Indenture Trustee, the
Subordinate Note Insurer, the Noteholders and (with respect to Section 5.01),
the Company or its designee, as third party beneficiaries, and nothing in this
Agreement, whether express or implied, shall be construed to give to any other
Person any legal or equitable right, remedy or claim in the Trust Estate or
under or in respect of this Agreement or any covenants, conditions or provisions
contained herein; provided, however, that the right of the Subordinate Note
Insurer to enforce the provisions of this Agreement (except with respect to
subrogation rights) is conditioned upon an Insurer Default not having occurred
and being continuing.
SECTION 6.06. Severability. Any provision of this
Agreement that is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 6.07. Separate Counterparts. This Agreement may be executed
by the parties hereto in separate counterparts, each of which when so executed
and delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 6.08. Headings. The headings of the various
Articles and Sections herein are for convenience of reference
only and shall not define or limit any of the terms or provisions
hereof.
SECTION 6.09. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of Indiana, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
SECTION 6.10. Assignment to Indenture Trustee. The Seller hereby
acknowledges and consents to any mortgage, pledge, assignment and grant by the
Issuer to the Indenture Trustee pursuant to the Indenture for the benefit of the
Noteholders of a security interest in all right, title and interest of the
Issuer in, to and under the Financed Student Loans or the assignment of any or
all of the Issuer's rights and obligations hereunder to the Indenture Trustee.
SECTION 6.11. Non-Petition Covenants. Notwithstanding any prior
termination of this Agreement, neither the Seller nor NBD shall, prior to the
date which is one year and one day after the termination of this Agreement with
respect to the Issuer or the Company, acquiesce, petition or otherwise invoke or
cause the Issuer to invoke the process of any court or government authority for
the purpose of commencing or sustaining a case against the Issuer under any
Federal or state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Issuer or any substantial part of its property, or ordering the winding
up or liquidation of the affairs of the Issuer or the Company.
SECTION 6.12. Limitation of Liability of NBD, Eligible Lender Trustee
and Indenture Trustee. (a) Notwithstanding anything contained herein to the
contrary, this Agreement has been signed by NBD not in its individual capacity
but solely in its capacity as trustee for the Seller and in no event shall NBD
in its individual capacity or, except as expressly provided
herein or in the trust agreement between Seller and NBD dated February 24, 1993,
as legal owner of the Financed Student Loans, have any liability for
representations, warranties, covenants, agreements or other obligations of the
Seller hereunder or in any of the certificates, notices or agreements delivered
by the Seller pursuant hereto as to all of which recourse shall be had solely
against the Seller.
(b) Notwithstanding anything contained herein to the contrary, this
Agreement has been signed by The First National Bank of Chicago not in its
individual capacity but solely in its capacity as Eligible Lender Trustee of the
Issuer and in no event shall The First National Bank of Chicago in its
individual capacity or, except as expressly provided in the Trust Agreement, as
beneficial owner of the Issuer have any liability for the representations,
warranties, covenants, agreements or other obligations of the Issuer hereunder
or in any of the certificates, notices or agreements delivered pursuant hereto
as to all of which recourse shall be had solely to the assets of the Issuer.
(c) Notwithstanding anything contained herein to the contrary, this
Agreement has been accepted by Bankers Trust Company not in its individual
capacity but solely as Indenture Trustee and in no event shall Bankers Trust
Company have any liability for the representations, warranties, covenants,
agreements or other obligations of the Issuer hereunder or in any of the
certificates, notices or agreements delivered pursuant hereto, as to all of
which recourse shall be had solely to the assets of the Issuer.
SECTION 6.13. Agreement of Seller and NBD. Each of the Seller and NBD
agrees to execute and deliver such instruments and to take such actions as the
Eligible Lender Trustee, the Issuer, the Subordinate Note Insurer or the
Indenture Trustee may reasonably request in order to effectuate the terms and
carry out the purposes of the Agreement.
BWNY03/144438.6/11830/00274/2136 October 12, 1998
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective officers as of the day and year first above
written.
SMS STUDENT LOAN TRUST 1998-A
By: The First National Bank of
Chicago, not in its individual
capacity but solely as
Eligible Lender Trustee on
behalf of the Trust
By:
Name:
Title:
USA GROUP SECONDARY MARKET
SERVICES, INC.
By:
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President and Chief
Executive Officer
NBD BANK, N.A., AS TRUSTEE FOR USA
GROUP SECONDARY MARKET SERVICES,
INC.
By:
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO, not in its
individual capacity but solely as Eligible Lender
Trustee
By:
Name:
Title:
Acknowledged and accepted
as of the day and year first
above written:
BANKERS TRUST COMPANY, not in
its individual capacity but
solely as Indenture Trustee
By:
Name:
Title:
EXHIBIT A
TO THE LOAN SALE AGREEMENT
▇▇▇▇ OF SALE
For value received, in accordance with the Loan Sale Agreement (the
"Loan Sale Agreement") dated as of May 1, 1998, among USA Group Secondary Market
Services, Inc., as seller (the "Seller"), SMS Student Loan Trust 1998-A (the
"Trust"), NBD Bank, N.A., as trustee for the Seller ("NBD") and The First
National Bank of Chicago, not in its individual capacity but solely as Eligible
Lender Trustee (the "Eligible Lender Trustee") the Seller (and, with respect to
legal title to the Initial Financed Student Loans, NBD as trustee on behalf of
the Seller) does hereby sell, assign, transfer and otherwise convey unto the
Issuer and, with respect to legal title, unto the Eligible Lender Trustee on
behalf of the Trust, without recourse (subject to the obligations set forth in
the Loan Sale Agreement), all right, title and interest in and to (i) the
Initial Financed Student Loans and all obligations of the Obligors thereunder,
together with all documents, the related Student Loan Files and all rights and
privileges related thereto, (ii) all payments and/or collections received
thereunder on and after the Cutoff Date, (iii) all funds on deposit from time to
time in the Trust Accounts, including the Reserve Account Initial Deposit, and
in all investments and proceeds thereof (including all income thereon) and (iv)
all proceeds of any and all of the foregoing (including but not limited to
proceeds derived from the voluntary or involuntary conversion of any of the
Initial Financed Student Loans into cash or other liquidated property, such as
proceeds from the applicable Guarantee Agreement). The foregoing sale does not
constitute and is not intended to result in any assumption by the Eligible
Lender Trustee or the Trust of any obligation of the Seller or NBD to the
borrowers of Initial Financed Student Loans or any other Person in connection
with the Initial Financed Student Loans or any agreement or instrument relating
to any of them.
In addition, the undersigned, by execution of this instrument, hereby
endorses the promissory notes evidencing each Initial Financed Student Loan
described in Schedule A to the Loan Sale Agreement in favor of the Eligible
Lender Trustee on behalf of the Trust, without recourse (subject to the
obligations set forth in the Loan Sale Agreement) against the undersigned. This
endorsement may be effected by attaching a facsimile hereof to each or any of
such promissory notes.
This ▇▇▇▇ of Sale is made pursuant to and upon the representations,
warranties and agreements on the part of the undersigned contained in the Loan
Sale Agreement and is to be governed by the Loan Sale Agreement.
Capitalized terms used but not defined herein shall have the meaning
assigned to them in Appendix A to the Administration Agreement, dated as of May
1, 1998, among SMS Student Loan Trust 1998-A, as Issuer, USA Group Secondary
Market Services, Inc., as Administrator, and Bankers Trust Company, as Indenture
Trustee, which also contains rules as to usage that shall be applicable herein.
IN WITNESS WHEREOF, the undersigned has caused this ▇▇▇▇ of Sale to
be duly executed as of May 1, 1998.
USA GROUP SECONDARY MARKET
SERVICES, INC., as Seller
By:
Name:
Title:
NBD BANK, N.A., as trustee for USA Group
Secondary Market Services, Inc.
By:
Name:
Title:
A-1
EXHIBIT B
TO THE
LOAN SALE AGREEMENT
TRANSFER AGREEMENT
TRANSFER No. _____ Of [NEW] [SERIAL] LOANS dated as of
______________, _____, among SMS STUDENT LOAN TRUST 1998-A, a Delaware trust
(the "Issuer"), USA GROUP SECONDARY MARKET SERVICES, INC., as seller (the
"Seller"), NBD BANK, N.A. ("NBD"), as trustee for USA Group Secondary Market
Services, Inc., and THE FIRST NATIONAL BANK OF CHICAGO, a national banking
association, as seller, not in its individual capacity but solely as Eligible
Lender Trustee of the Issuer (the "Eligible Lender Trustee").
W I T N E S S E T H:
WHEREAS the Issuer, the Seller, NBD and the Eligible Lender Trustee
are parties to the Loan Sale Agreement dated as of May 1, 1998 (as amended or
supplemented, the "Loan Sale Agreement"); and
WHEREAS the Seller, as depositor, and the Eligible Lender Trustee are
parties to the Trust Agreement dated as of May 1, 1998 (as amended or
supplemented, the "Trust Agreement"); and
WHEREAS pursuant to the Loan Sale Agreement, the Seller wishes to
convey the [New] [Serial] Loans referred to in Section 2 (the "Additional
Student Loans") to the Eligible Lender Trustee on behalf of the Issuer; and
WHEREAS in order to comply with the requirements of the Higher
Education Act, legal title to the Seller's student loan portfolio is vested in
NBD, as trustee on behalf of the Seller as the sole beneficiary; and
WHEREAS, the Eligible Lender Trustee and the Issuer are willing to
accept such conveyance subject to the terms and conditions hereof.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Definitions and Usage. Unless otherwise
defined herein, capitalized terms used herein shall have the meanings ascribed
to them in Appendix A to the Administration Agreement, dated as of May 1, 1998,
among the Issuer, the Seller, as Administrator, and Bankers Trust Company, as
Indenture Trustee, which also contains rules of construction and usage that
shall be applicable herein.
In addition, the following terms have the following meanings:
"Subsequent Cutoff Date" means, with respect to each Additional
Student Loan, the date specified as such on Schedule A hereto.
"Transfer Date" means, with respect to the Additional Student Loans,
________________, _______.
2. Schedule of Financed Student Loans. Attached hereto as Schedule A
is a supplement to Schedule A to the Loan Sale Agreement listing the Additional
Student Loans to be conveyed on the Transfer Date to the Eligible Lender Trustee
on behalf of the Issuer pursuant to this Agreement.
3. Conveyance of Additional Student Loans. In consideration of
Issuer's delivery to or upon the order of the Seller of $___________ (during the
Revolving Period, such amount being the Loan Purchase Amounts of the Additional
Student Loans and such amount to be paid from amounts on deposit in the
Collateral Reinvestment Account subject to the provisions of Section 2.02(b) of
the Loan Sale Agreement and Section 2(f) of the Administration Agreement and
after the Revolving Period such amount being the sum of (i) the Purchase
Collateral Balance ($[ ]) to be paid from any combination of amounts on deposit
in the Collection Account and of Exchange Student Loans as shall be designated
by the Seller subject to Section 2.02(c) of the Loan Sale Agreement and Section
2(d) of the Administration Agreement) and (ii), except with respect to the
exchange of Student Loans, the Purchase Premium Amount ($[ ]) to be paid on the
immediately subsequent Quarterly Payment Date from amounts on deposit in the
Reserve Fund in excess of the Specified Reserve Account Balance subject to
Section 2.02(c) of the Loan Sale Agreement and Section 2(e) of the
Administration Agreement, the Seller (and, with respect to legal title to the
Additional Student Loans, NBD as trustee on behalf of the Seller) does hereby
sell, assign and otherwise convey, without recourse (except as expressly
provided in the Loan Sale Agreement), to the Eligible Lender Trustee on behalf
of the Issuer:
(a) All right, title and interest in and to the
Additional Student Loans and all obligations of the Obligors thereunder,
together with all documents, the related Student Loan Files and all rights
and privileges relating thereto;
(b) all payments on or collections received thereunder, on and
after the related Subsequent Cutoff Date;
(c) all proceeds of any and all of the foregoing.
4. Conditions Precedent. The obligation of the Issuer to acquire the
Additional Student Loans hereunder is subject to the satisfaction, on or prior
to the Transfer Date, of the following conditions precedent:
(a) Representations and Warranties. Each of the representations
and warranties made by the Seller in Sections 3.01 and 4.01 of the Loan
Sale Agreement and by NBD in Section 4.01 of the Loan Sale Agreement shall
be true and correct as of the Transfer Date.
(b) Loan Sale Agreement Conditions. Each of the conditions set
forth in Section 2.02(d) (and, if Exchange Student Loans are to be applied
to the Purchase Collateral Balance of the Additional Student Loans,
Section 2.02(c) and, if the trustee for the Seller with respect to the
Additional Student Loans is other than NBD, in Section 4.02) of the Loan
Sale Agreement shall have been satisfied.
(c) Delivery of ▇▇▇▇ of Sale. The Seller and NBD shall have
delivered a ▇▇▇▇ of Sale substantially in the form of Annex A hereto.
(d) Additional Information. The Seller and NBD shall have
delivered to the Issuer such information as was reasonably requested by
the Issuer (such reasonableness to be determined solely by the Seller) to
satisfy itself as to (i) the accuracy of the representations and
warranties set forth in Sections 3.01 and 4.01 of the Loan Sale Agreement
and (ii) the satisfaction of the conditions set forth in this Section 4.
(e) Delivery of Assignment with respect to Exchange Student Loans.
With respect to any Exchange Student Loans that are to be applied to the
Purchase Amount of the Additional Student Loans, the Eligible Lender
Trustee shall have delivered an Assignment substantially in the form
of Annex B hereto.
5. Ratification of Agreement. As supplemented
by this Agreement, the Loan Sale Agreement is in all respects
ratified and confirmed and the Loan Sale Agreement as so supplemented by this
Agreement shall be read, taken and construed as one and the same instrument.
6. Third-Party Beneficiaries. The Indenture Trustee and the
Subordinate Note Insurer are express third-party beneficiaries and may enforce
the provisions of this Agreement as if they were parties hereto; provided,
however, that the right of the Subordinate Note Insurer to enforce the
provisions of this Agreement (except with respect to subrogation rights) is
conditioned upon an Insurer Default not having occurred and being continuing.
7. Counterparts. This Agreement may be executed in separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which together shall constitute but one and the same instrument.
8. Governing Law. This Agreement shall be construed in accordance
with the laws of the State of Indiana, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
shall be determined in accordance with such laws.
9. Headings. The section headings hereof have been inserted for
convenience of reference only and shall not be construed to affect the meaning,
construction or effect of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective duly authorized officers as
of the day and the year first above written.
SMS STUDENT LOAN TRUST 1998-A
By: THE FIRST NATIONAL BANK OF
CHICAGO, not in its individual
capacity but solely as
Eligible Lender Trustee on
behalf of the Trust
By:
Name:
Title:
--------
NBD shall be replaced as a party to any Transfer Agreement by any other
eligible lender under the Higher Education Act that is acting as trustee for the
Seller with respect to the loans being conveyed pursuant to such Transfer
Agreement.
B-1
THE FIRST NATIONAL BANK OF CHICAGO, not in its individual capacity but solely as
Eligible Lender Trustee
By:
Name:
Title:
USA GROUP SECONDARY MARKET
SERVICES, INC., Seller
By:
Name:
Title:
NBD BANK, N.A., as trustee for USA Group Secondary Market Services, Inc.
By:
Name:
Title:
Acknowledged and accepted as of the date first above written:
BANKERS TRUST COMPANY,
not in its individual
capacity but solely as
Indenture Trustee
By:
Name:
Title:
B-2
SCHEDULE A
TO THE
TRANSFER AGREEMENT NO. ___
[List of Additional Student Loans
and their related Subsequent Cutoff Dates]
B-3
ANNEX A
TO THE TRANSFER AGREEMENT
▇▇▇▇ OF SALE
For value received, in accordance with the Loan Sale Agreement (the
"Loan Sale Agreement") dated as of May 1, 1998, among USA Group Secondary Market
Services, Inc., as seller (the "Seller"), NBD Bank, N.A., as trustee for the
Seller ("NBD"), SMS Student Loan Trust 1998-A (the "Trust") and The First
National Bank of Chicago, not in its individual capacity but solely as Eligible
Lender Trustee (the "Eligible Lender Trustee") [and as ratified by [name of
eligible lender if other than NBD with respect to the Additional Student Loans]
pursuant to Section 4.02 of the Loan Sale Agreement] and the Transfer Agreement
No. ____ dated as of ______, ______ (the "Transfer Agreement") among the Seller,
NBD, the Trust and the Eligible Lender Trustee, the Seller (and, with respect to
legal title to the Additional Student Loans, NBD as trustee on behalf of the
Seller) does hereby sell, assign, transfer and otherwise convey unto the Issuer
and, with respect to legal title, unto the Eligible Lender Trustee on behalf of
the Trust, without recourse (subject to the obligations set forth in the Loan
Sale Agreement), all right, title and interest in and to (i) the Additional
Student Loans and all obligations of the Obligors thereunder, together with all
documents, the related Student Loan Files and all rights and privileges related
thereto, (ii) all payments and collections received thereunder, on and after the
Subsequent Cutoff Date and (iii) all proceeds of any and all of the foregoing
(including but not limited to proceeds derived from the voluntary or involuntary
conversion of any of the Additional Student Loans into cash or other liquidated
property, such as proceeds from the applicable Guarantee Agreement). The
foregoing sale does not constitute and is not intended to result in any
assumption by the Eligible Lender Trustee or the Trust of any obligation of the
Seller or NBD to the borrowers of the Additional Student Loans or any other
person in connection with the Additional Student Loans or any agreement or
instrument relating to any of them.
In addition, the undersigned, by execution of this instrument, hereby
endorses the promissory notes evidencing each Additional Student Loan described
in Schedule A to the Transfer Agreement in favor of the Eligible Lender Trustee
on behalf of the Trust, without recourse (subject to the obligations set forth
in the Loan Sale Agreement) against the undersigned. This endorsement may be
effected by attaching a facsimile hereof to each or any of such promissory
notes.
This Assignment is made pursuant to and upon the
representations, warranties and agreements on the part of the
undersigned contained in the Loan Sale Agreement and the Transfer Agreement and
is to be governed by the Loan Sale Agreement and the Transfer Agreement.
Capitalized terms used but not defined herein shall have the meanings
assigned to them in the Transfer Agreement.
IN WITNESS WHEREOF, the undersigned has caused this ▇▇▇▇ of Sale to
be duly executed as of ________________, ______.
USA GROUP SECONDARY MARKET
SERVICES, INC., as Seller
By:
Name:
Title:
NBD BANK, N.A., as trustee for USA Group
Secondary Market Services, Inc.
By:
Name:
Title:
B-4
EXHIBIT C
TO THE LOAN SALE AGREEMENT
1. Characteristics of Financed Student Loans. Each Financed Student
Loan (A) was originated in the United States of America, its territories,
its possessions or other areas subject to its jurisdiction by an "eligible
lender" under the Higher Education Act in the ordinary course of its
business to an eligible borrower under applicable law and agreements and
was fully and properly executed by the parties thereto, (B) was acquired
or originated by the Seller in the ordinary course of its business, (C)
provides or, when the payment schedule with respect thereto is determined,
will provide for payments on a periodic basis that fully amortizes the
principal amount of such Financed Student Loan by its maturity, as such
maturity may be modified in accordance with any applicable deferral or
forbearance periods granted in accordance with applicable laws and
restrictions, including those of the Higher Education Act or the
applicable Guarantee Agreement, and yield interest at the rate applicable
thereto, and (D) provides that the rights with respect thereto are
assignable by the lender thereunder and its assignees without the consent
of or notice to any person other than as may be required by the Higher
Education Act and such notice has been or will be given. Each Financed
Student Loan is guaranteed by an eligible guarantor under the Higher
Education Act and qualifies the holder thereof to receive Interest Subsidy
Payments (other than SLS Loans, unsubsidized ▇▇▇▇▇▇▇▇ Loans, and those
Consolidation Loans for which the related loan application was submitted
prior to January 1, 1993) and Special Allowance Payments from the
Department and Guarantee Payments from the Guarantor and qualifies the
Guarantor to receive reinsurance payments thereon from the Department. If
such Financed Student Loan is a New Loan or a Qualified Substitute Loan
and is, in either case, guaranteed by an Additional Guarantor, the
aggregate principal balance of all Financed Student Loans guaranteed by
such Additional Guarantor (measured as of the Subsequent Cutoff Date for
such Financed Student Loan) following the addition of such Financed
Student Loan to the Trust, did not exceed 5% of the principal balance of
all Financed Student Loans as of such date, and the aggregate principal
balance of all Financed Student Loans guaranteed by all Additional
Guarantors measured as of such date, following such addition, did not
exceed 20% of the principal balance of all Financed Student Loans as of
such date. The principal balance of each Financed Student Loan is not
subject to change by reason of adjustments to the related Borrower's
account after the Cutoff Date relating to matters or events occurring
prior to the Cutoff Date.
2. Schedule of Financed Student Loans. The information set forth in
Schedule A to this Agreement is true and correct in all material respects
as of the opening of business on the Cutoff Date. With respect to any
Consolidation Loan originated by the Issuer or any New Loan, Serial Loan
or Qualified Substitute Student Loan conveyed to the Issuer after the
Closing Date, information for each category set forth in Schedule A has
been provided with respect to such loan and such information is true and
correct in all material respects, as of the date of origination, in the
case of such Consolidation Loan, and as of the opening of business on the
applicable Subsequent Cutoff Date in the case of a New Loan, Serial Loan
or Qualified Substitute Student Loan. With respect to any Consolidation
Loan, the principal balance of which has been increased by the principal
balance of any related Add-on Consolidation Loan, information for each
category set forth in Schedule A has been provided with respect to such
Add-on Consolidation Loan and such information is true and correct in all
material respects as of the related Add-on Consolidation Loan Funding
Date. No selection procedures believed to be adverse to the Noteholders
were utilized in selecting any Financed Student Loan. The computer tape
regarding the Initial Financed Student Loans made available to the Issuer
and its assigns is true and correct in all respects as of the Cutoff Date,
and, after the Closing Date, any computer tape regarding any Consolidation
Loan, New Loan, Serial Loan or Qualified Substitute Student Loan made
available to the Issuer and its assigns is true and correct in all
respects as of the date of origination, in the case of a Consolidation
Loan originated by the Trust, as of the applicable Add-on Consolidation
Loan Funding Date, in the case of a Consolidation Loan the principal
balance of which is increased by the principal balance of any related
Add-on Consolidation Loan, and as of the applicable Subsequent Cutoff
Date, in the case of a New Loan, Serial Loan or a Qualified Substitute
Student Loan.
3. Compliance with Law. Each Financed Student Loan complied at the
time of origination and at the time of the execution of this Agreement or
the applicable Transfer Agreement or Assignment, as the case may be, at
the time of origination in the case of a Consolidation Loan originated by
the Issuer and as of the applicable Add-on Consolidation Loan Funding Date
in the case of a Consolidation Loan the principal balance of which is
increased by the principal balance of any Add-on Consolidation Loan, in
all material respects with all applicable requirements of local, state,
and federal laws, rules and regulations which govern the making of such
Financed Student Loan including the requirements of the applicable
Guarantee Agreement.
4. Binding Obligation. The terms and conditions of
each Financed Student Loan are consistent with the application of the
Borrower, all signatures for the Financed Student Loans are genuine and
the Borrower Note evidencing each Financed Student Loan has been duly
executed and delivered and constitutes the legal, valid, and binding
obligation of the Borrower enforceable in accordance with its terms.
5. No Defenses. No right of rescission, setoff, counterclaim, or
defense has been asserted or threatened or exists with respect to any
Financed Student Loan.
6. No Default. No Financed Student Loan has a payment that is more
than 180 days overdue as of the Cutoff Date or more than 90 days overdue
as of the applicable Subsequent Cutoff Date, as the case may be, and,
except as permitted in this paragraph, no default, breach, violation or
event permitting acceleration under the terms of any Financed Student Loan
has occurred; and, except for payment defaults continuing for a period of
not more than 180 days or 90 days, as applicable, no continuing condition
that with notice or the lapse of time or both would constitute a default,
breach, violation or event permitting acceleration under the terms of any
Financed Student Loan has arisen; the Seller has not waived and shall not
waive any of the foregoing other than as permitted by the Basic Documents;
and not more than 10% of the Financed Student Loans shall be more than 30
days overdue as of June 20, 1998.
7. Title. It is the intention of the Seller that the transfer and
assignment herein contemplated constitute a sale of the Financed Student
Loans from the Seller to the Eligible Lender Trustee on behalf of the
Issuer and that the beneficial interest in and title to such Financed
Student Loans not be part of the estate of the Seller in the event of the
appointment of a receiver with respect to the Seller. Except in the case
of Consolidation Loans originated by the Issuer, immediately prior to the
transfer and sale of each Financed Student Loan to the Trust, each
Borrower Note is owned by the Seller and the Seller has good title to each
Financed Student Loan, free and clear of any lien, charge, encumbrance, or
other interest therein and immediately upon the transfer and sale of such
Financed Student Loan to the Trust, the Eligible Lender Trustee on behalf
of the Issuer will have good title to such Financed Student Loan free and
clear of any lien, charge, encumbrance, or other interest therein except
as contemplated by the Basic Documents.
8. All Filings Made. All filings (including UCC filings) necessary in
any jurisdiction to give the Eligible Lender Trustee on behalf of the
Issuer a first perfected ownership interest in the Financed Student Loans,
and to give the Indenture Trustee a first perfected security interest
therein, have been made.
9. No Bankruptcies. No Borrower of any Financed Student Loan as of
the Cutoff Date or the applicable Subsequent Cutoff Date (in the case of
Qualified Substitute Student Loans, New Loans or Serial Loans), as of the
date of origination (in the case of a Consolidation Loan originated by the
Issuer) or as of the applicable Add-on Consolidation Loan Funding Date (in
the case of a Consolidation Loan the principal balance of which is
increased by the principal balance of any related Add-on Consolidation
Loan) was noted in the related Student Loan File as being currently
involved in a bankruptcy proceeding.
10. Lawful Assignment. No Financed Student Loan has been originated
in, or is subject to the laws of, any jurisdiction under which the
origination, sale, transfer and assignment of such Financed Student Loan
or any Financed Student Loan under this Agreement, each Transfer Agreement
or the Indenture is unlawful, void or voidable.
11. One Original. There is only one original executed
copy of the promissory note evidencing each Financed Student
Loan.
12. U.S. Obligors. Less than 1% of the Financed Student Loans are due
from Persons not having a mailing address in the United States of America.
13. Accounts. Each Financed Student Loan may be
pledged or transferred as an "account" as defined in the
UCC.
14. Interest Accruing. Each Financed Student Loan is accruing
interest (whether or not such interest is being paid currently, by the
Borrower or by the Department, or is being capitalized) at the maximum
interest rate permitted by the Higher Education Act and qualifies for
Special Allowance Payments, except as expressly permitted by the Basic
Documents.
15. Seller's Representations. The representations and
warranties of the Seller contained in Section 4.01 are true
and correct.
C-1
EXHIBIT D
TO THE LOAN SALE AGREEMENT
1. Organization and Good Standing. The Seller has been organized and
is existing under the General Corporation Law of the State of Delaware and
is authorized to do business in every state in which it is doing business
(except where any failure to be so authorized shall not have a material
adverse effect on either the Seller or its obligations hereunder) as well
as the state in which it is organized and incorporated.
2. Power and Authority of the Seller. The Seller has the corporate
power and authority to execute and deliver this Agreement and to carry out
its terms; the Seller has full corporate power and authority to sell (with
NBD conveying legal title as trustee on behalf of the Seller) and assign
the property to be sold and assigned to and deposited with the Issuer (or
with the Eligible Lender Trustee on behalf of the Issuer) and the Seller
has duly authorized such sale and assignment to the Issuer (or to the
Eligible Lender Trustee on behalf of the Issuer) by all necessary
corporate action; and the execution, delivery and performance of this
Agreement have been duly authorized by the Seller by all necessary
corporate action.
3. Binding Obligation. This Agreement has been executed and delivered
by the Seller and, assuming authorization, execution, and delivery by the
other parties thereto, this Agreement constitutes a valid obligation of
the Seller enforceable against it in accordance with the express terms of
this Agreement, except as enforcement thereof may be limited by the
bankruptcy, insolvency, reorganization, moratorium, liquidation,
readjustment of debt, or other federal or state laws or equitable
principles relating to or affecting the enforcement of creditor's rights.
4. No Violation. The consummation of the transactions contemplated by
this Agreement or the Administration Agreement and the fulfillment of the
terms hereof or thereof do not conflict with, result in any breach of any
of the terms and provisions of, nor constitute (with or without notice or
lapse of time or both) a default under, the certificate of incorporation
or by-laws of the Seller, or any indenture, agreement or other instrument
to which the Seller is a party or by which it shall be bound; nor result
in the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such indenture, agreement or other instrument
(other than pursuant to the Basic Documents); nor violate any law or, to
the knowledge of the Seller, any order, rule or regulation applicable to
the Seller of any court or of any Federal or state regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Seller or its properties. The consummation of the
transactions contemplated by this Agreement or by the Administration
Agreement and the fulfillment of the terms hereof and thereof will not
result in the loss of any Guarantee Payments by the Trust or any
reinsurance payments with respect to any Financed Student Loans by the
Guarantor.
5. No Proceedings. There is no action, suit, claim, investigation, or
proceeding, in any such case whether pending or to the knowledge of the
Seller, threatened against the Seller before any court, governmental
agency, or arbitrator (i) asserting the invalidity of this Agreement, the
Indenture or any of the other Basic Documents or the Notes, (ii) seeking
to prevent the issuance of the Notes or the consummation of any
transactions contemplated by this Agreement, the Indenture or any of the
other Basic Documents, (iii) seeking any determination or ruling that
could reasonably be expected to have a material and adverse effect on the
performance by the Seller of its obligations under, or the validity or
enforceability of, this Agreement, the Indenture, any of the other Basic
Documents or the Notes or (iv) seeking to affect adversely the Federal or
state income tax attributes of the Issuer or the Notes.
6. All Consents. No action, including, without limitation, the
granting or issuing of any consent, permit, license, approval, or
authorization which is required to be made on or prior to the date of this
Agreement in connection with the sale of Financed Student Loans under this
Agreement (with the possible exception of routine filings which, if not
made, will not render the Seller liable to any material penalties or will
not result in the transactions contemplated by this Agreement being
subject to challenge) is required.
D-1
EXHIBIT E
TO THE LOAN SALE AGREEMENT
1. Organization and Good Standing. NBD is a national banking
association duly organized, validly existing and in good standing under
the laws of the United States and is an "eligible lender" for purposes of
the Higher Education Act.
2. Power and Authority of the NBD. NBD has authorized the execution
and delivery of this Agreement and has full legal power and authority to
consummate all transactions contemplated by this Agreement and any and all
other agreements relating hereto.
3. Binding Obligation. This Agreement has been executed and delivered
by NBD and, assuming authorization, execution, and delivery by the other
parties thereto, this Agreement constitutes a valid obligation of NBD
enforceable against it in accordance with the express terms of this
Agreement, except as enforcement thereof may be limited by the bankruptcy,
insolvency, reorganization, moratorium, liquidation, readjustment of debt,
or other federal or state laws or equitable principles relating to or
affecting the enforcement of creditor's rights.
4. No Violation. Compliance by NBD with this Agreement does not in
any material respect violate any law or regulation by which NBD or its
assets are bound, or any writ, order, judgment, or decree of any court or
government instrumentality or arbitrator in which NBD is named, or the
charter or by-laws of NBD or any indenture, contract, or agreement to
which NBD is a party or by which it is or its properties are bound or
affected.
5. No Proceedings. There is no action, suit, claim, investigation, or
proceeding, in any case pending or, to the knowledge of NBD, threatened
against NBD before any court, governmental agency, or arbitrator which, if
decided adversely to NBD, is likely to have a material adverse effect upon
the validity or enforceability of this Agreement.
6. All Consents. No action, including, without limitation, the
granting or issuing of any consent, permit, license, approval, or
authorization which is required to be made on or prior to the date of this
Agreement in connection with the sale of Financed Student Loans under this
Agreement (with the possible exception of routine filings which, if not
made, will not render NBD liable to any material penalties or will not
result in the transactions contemplated by this Agreement being subject to
challenge) is required.
E-1
EXHIBIT F
TO THE LOAN SALE AGREEMENT
ASSIGNMENT
For value received, in accordance with the Loan Sale Agreement (the
"Loan Sale Agreement") dated as of May 1, 1998, among USA Group Secondary Market
Services, Inc., as seller (the "Seller"), SMS Student Loan Trust 1998-A (the
"Trust"), NBD Bank, N.A., as trustee for the Seller ("NBD"), and The First
National Bank of Chicago, not in its individual capacity but solely as Eligible
Lender Trustee (the "Eligible Lender Trustee"), the Seller (and, with respect to
legal title to the Initial Financed Student Loans, NBD as trustee on behalf of
the Seller) does hereby sell, assign, transfer and otherwise convey unto the
Eligible Lender Trustee on behalf of the Trust, without recourse (subject to the
obligations set forth in the Loan Sale Agreement), all right, title and interest
in and to (i) the Qualified Substitute Student Loan(s) indicated in Schedule A
hereto (the "Additional Student Loans") and all obligations of the Obligors
thereunder, together with all documents, the related Student Loan Files and all
rights and privileges related thereto, (ii) all payments and/or collections
received thereunder on and after the date hereof and (iii) all proceeds of any
and all of the foregoing (including but not limited to proceeds derived from the
voluntary or involuntary conversion of any of the Additional Student Loans into
cash or other liquidated property, such as proceeds from the applicable
Guarantee Agreement). The foregoing sale does not constitute and is not intended
to result in any assumption by the Eligible Lender Trustee or the Trust of any
obligation of the Seller or NBD to the borrowers of Additional Student Loans or
any other Person in connection with the Additional Student Loans or any
agreement or instrument relating to any of them.
In addition, the undersigned, by execution of this instrument, hereby
endorse the promissory notes evidencing each Additional Student Loan in favor of
the Eligible Lender Trustee on behalf of the Trust, without recourse (subject to
the obligations set forth in the Loan Sale Agreement) against the undersigned.
This endorsement may be effected by attaching a facsimile hereof to each or any
of such promissory notes.
This Assignment is made pursuant to and upon the representations,
warranties and agreements on the part of the undersigned contained in the Loan
Sale Agreement and is to be governed by the Loan Sale Agreement.
Capitalized terms used but not defined herein shall have the meaning
assigned to them in Appendix A to the Administration Agreement, dated as of May
1, 1998, among the Trust, as Issuer, the Seller, as Administrator, and Bankers
Trust Company, as Indenture Trustee, which also contains rules as to usage that
shall be applicable herein.
F-1
IN WITNESS WHEREOF, the undersigned has caused this Agreement to be
duly executed as of ___________.
USA GROUP SECONDARY MARKET
SERVICES, INC., as Seller
By:
Name:
Title:
NBD BANK, N.A., as trustee for USA Group
Secondary Market Services, Inc.
By:
Name:
Title:
F-2
