**SALLIE MAE**

**Title 20-1087-3**

**Section 1087-3. Reorganization of Student Loan Marketing Association
through formation of Holding Company**

\(a\) Actions by Association\'s Board of Directors

The Board of Directors of the Association shall take or cause to

be taken all such action as the Board of Directors deems necessary

or appropriate to effect, upon the shareholder approval described

in subsection (b) of this section, a restructuring of the common

stock ownership of the Association, as set forth in a plan of

reorganization adopted by the Board of Directors (the terms of

which shall be consistent with this section) so that all of the

outstanding common shares of the Association shall be directly

owned by a Holding Company. Such actions may include, in the Board

of Director\'s discretion, a merger of a wholly owned subsidiary of

the Holding Company with and into the Association, which would have

the effect provided in the plan of reorganization and the law of

the jurisdiction in which such subsidiary is incorporated. As part

of the restructuring, the Board of Directors may cause -

\(1\) the common shares of the Association to be converted, on

the reorganization effective date, to common shares of the

Holding Company on a one for one basis, consistent with

applicable State or District of Columbia law; and

\(2\) Holding Company common shares to be registered with the

Securities and Exchange Commission.

\(b\) Shareholder approval

The plan of reorganization adopted by the Board of Directors

pursuant to subsection (a) of this section shall be submitted to

common shareholders of the Association for their approval. The

reorganization shall occur on the reorganization effective date,

provided that the plan of reorganization has been approved by the

affirmative votes, cast in person or by proxy, of the holders of a

majority of the issued and outstanding shares of the Association

common stock.

\(c\) Transition

In the event the shareholders of the Association approve the plan

of reorganization under subsection (b) of this section, the

following provisions shall apply beginning on the reorganization

effective date:

\(1\) In general

Except as specifically provided in this section, until the

dissolution date the Association shall continue to have all of

the rights, privileges and obligations set forth in, and shall be

subject to all of the limitations and restrictions of, section

1087-2 of this title, and the Association shall continue to carry

out the purposes of such section. The Holding Company and any

subsidiary of the Holding Company (other than the Association)

shall not be entitled to any of the rights, privileges, and

obligations, and shall not be subject to the limitations and

restrictions, applicable to the Association under section 1087-2

of this title, except as specifically provided in this section.

The Holding Company and any subsidiary of the Holding Company

(other than the Association or a subsidiary of the Association)

shall not purchase loans insured under this chapter until such

time as the Association ceases acquiring such loans, except that

the Holding Company may purchase such loans if the Association is

merely continuing to acquire loans as a lender of last resort

pursuant to section 1087-2(q) of this title or under an agreement

with the Secretary described in paragraph (6).

\(2\) Transfer of certain property

\(A\) In general

Except as provided in this section, on the reorganization

effective date or as soon as practicable thereafter, the

Association shall use the Association\'s best efforts to

transfer to the Holding Company or any subsidiary of the

Holding Company (or both), as directed by the Holding Company,

all real and personal property of the Association (both

tangible and intangible) other than the remaining property.

Subject to the preceding sentence, such transferred property

shall include all right, title, and interest in -

\(i\) direct or indirect subsidiaries of the Association

(excluding special purpose funding companies in existence on

September 30, 1996, and any interest in any

government-sponsored enterprise);

\(ii\) contracts, leases, and other agreements of the

Association;

\(iii\) licenses and other intellectual property of the

Association; and

\(iv\) any other property of the Association.

\(B\) Construction

Nothing in this paragraph shall be construed to prohibit the

Association from transferring remaining property from time to

time to the Holding Company or any subsidiary of the Holding

Company, subject to the provisions of paragraph (4).

\(3\) Transfer of personnel

On the reorganization effective date, employees of the

Association shall become employees of the Holding Company (or any

subsidiary of the Holding Company), and the Holding Company (or

any subsidiary of the Holding Company) shall provide all

necessary and appropriate management and operational support

(including loan servicing) to the Association, as requested by

the Association. The Association, however, may obtain such

management and operational support from persons or entities not

associated with the Holding Company.

\(4\) Dividends

The Association may pay dividends in the form of cash or

noncash distributions so long as at the time of the declaration

of such dividends, after giving effect to the payment of such

dividends as of the date of such declaration by the Board of

Directors of the Association, the Association\'s capital would be

in compliance with the capital standards and requirements set

forth in section 1087-2(r) of this title. If, at any time after

the reorganization effective date, the Association fails to

comply with such capital standards, the Holding Company shall

transfer with due diligence to the Association additional capital

in such amounts as are necessary to ensure that the Association

again complies with the capital standards.

\(5\) Certification prior to dividend

Prior to the payment of any dividend under paragraph (4), the

Association shall certify to the Secretary of the Treasury that

the payment of the dividend will be made in compliance with

paragraph (4) and shall provide copies of all calculations needed

to make such certification.

\(6\) Restrictions on new business activity or acquisition of

assets by Association

\(A\) In general

After the reorganization effective date, the Association

shall not engage in any new business activities or acquire any

additional program assets described in section 1087-2(d) of

this title other than in connection with -

\(i\) student loan purchases through September 30, 2007;

\(ii\) contractual commitments for future warehousing

advances, or pursuant to letters of credit or standby bond

purchase agreements, which are outstanding as of the

reorganization effective date;

\(iii\) the Association serving as a lender-of-last-resort

pursuant to section 1087-2(q) of this title; and

\(iv\) the Association\'s purchase of loans insured under this

part, if the Secretary, with the approval of the Secretary of

the Treasury, enters into an agreement with the Association

for the continuation or resumption of the Association\'s

secondary market purchase program because the Secretary

determines there is inadequate liquidity for loans made under

this part.

\(B\) Agreement

The Secretary is authorized to enter into an agreement

described in clause (iv) of subparagraph (A) with the

Association covering such secondary market activities. Any

agreement entered into under such clause shall cover a period

of 12 months, but may be renewed if the Secretary determines

that liquidity remains inadequate. The fee provided under

section 1087-2(h)(7) of this title shall not apply to loans

acquired under any such agreement with the Secretary.

\(7\) Issuance of debt obligations during the transition period;

attributes of debt obligations

After the reorganization effective date, the Association shall

not issue debt obligations which mature later than September 30,

2008, except in connection with serving as a

lender-of-last-resort pursuant to section 1087-2(q) of this title

or with purchasing loans under an agreement with the Secretary as

described in paragraph (6). Nothing in this section shall modify

the attributes accorded the debt obligations of the Association

by section 1087-2 of this title, regardless of whether such debt

obligations are incurred prior to, or at any time following, the

reorganization effective date or are transferred to a trust in

accordance with subsection (d) of this section.

\(8\) Monitoring of safety and soundness

\(A\) Obligation to obtain, maintain, and report information

The Association shall obtain such information and make and

keep such records as the Secretary of the Treasury may from

time to time prescribe concerning -

\(i\) the financial risk to the Association resulting from

the activities of any associated person, to the extent such

activities are reasonably likely to have a material impact on

the financial condition of the Association, including the

Association\'s capital ratio, the Association\'s liquidity, or

the Association\'s ability to conduct and finance the

Association\'s operations; and

\(ii\) the Association\'s policies, procedures, and systems

for monitoring and controlling any such financial risk.

\(B\) Summary reports

The Secretary of the Treasury may require summary reports of

the information described in subparagraph (A) to be filed no

more frequently than quarterly. If, as a result of adverse

market conditions or based on reports provided pursuant to this

subparagraph or other available information, the Secretary of

the Treasury has concerns regarding the financial or

operational condition of the Association, the Secretary of the

Treasury may, notwithstanding the preceding sentence and

subparagraph (A), require the Association to make reports

concerning the activities of any associated person whose

business activities are reasonably likely to have a material

impact on the financial or operational condition of the

Association.

\(C\) Separate operation of corporations

\(i\) In general

The funds and assets of the Association shall at all times

be maintained separately from the funds and assets of the

Holding Company or any subsidiary of the Holding Company and

may be used by the Association solely to carry out the

Association\'s purposes and to fulfill the Association\'s

obligations.

\(ii\) Books and records

The Association shall maintain books and records that

clearly reflect the assets and liabilities of the

Association, separate from the assets and liabilities of the

Holding Company or any subsidiary of the Holding Company.

\(iii\) Corporate office

The Association shall maintain a corporate office that is

physically separate from any office of the Holding Company or

any subsidiary of the Holding Company.

\(iv\) Director

No director of the Association who is appointed by the

President pursuant to section 1087-2(c)(1)(A) of this title

may serve as a director of the Holding Company.

\(v\) One officer requirement

At least one officer of the Association shall be an officer

solely of the Association.

\(vi\) Transactions

Transactions between the Association and the Holding

Company or any subsidiary of the Holding Company, including

any loan servicing arrangements, shall be on terms no less

favorable to the Association than the Association could

obtain from an unrelated third party offering comparable

services.

\(vii\) Credit prohibition

The Association shall not extend credit to the Holding

Company or any subsidiary of the Holding Company nor

guarantee or provide any credit enhancement to any debt

obligations of the Holding Company or any subsidiary of the

Holding Company.

\(viii\) Amounts collected

Any amounts collected on behalf of the Association by the

Holding Company or any subsidiary of the Holding Company with

respect to the assets of the Association, pursuant to a

servicing contract or other arrangement between the

Association and the Holding Company or any subsidiary of the

Holding Company, shall be collected solely for the benefit of

the Association and shall be immediately deposited by the

Holding Company or such subsidiary to an account under the

sole control of the Association.

\(D\) Encumbrance of assets

Notwithstanding any Federal or State law, rule, or

regulation, or legal or equitable principle, doctrine, or

theory to the contrary, under no circumstances shall the assets

of the Association be available or used to pay claims or debts

of or incurred by the Holding Company. Nothing in this

subparagraph shall be construed to limit the right of the

Association to pay dividends not otherwise prohibited under

this subparagraph or to limit any liability of the Holding

Company explicitly provided for in this section.

\(E\) Holding Company activities

After the reorganization effective date and prior to the

dissolution date, all business activities of the Holding

Company shall be conducted through subsidiaries of the Holding

Company.

\(F\) Confidentiality

Any information provided by the Association pursuant to this

section shall be subject to the same confidentiality

obligations contained in section 1087-2(r)(12) of this title.

\(G\) Definition

For purposes of this paragraph, the term \'\'associated

person\'\' means any person, other than a natural person, who is

directly or indirectly controlling, controlled by, or under

common control with, the Association.

\(9\) Issuance of stock warrants

\(A\) In general

On the reorganization effective date, the Holding Company

shall issue to the District of Columbia Financial

Responsibility and Management Assistance Authority a number of

stock warrants that is equal to one percent of the outstanding

shares of the Association, determined as of the last day of the

fiscal quarter preceding September 30, 1996, with each stock

warrant entitling the holder of the stock warrant to purchase

from the Holding Company one share of the registered common

stock of the Holding Company or the Holding Company\'s

successors or assigns, at any time on or before September 30,

2008\. The exercise price for such warrants shall be an amount

equal to the average closing price of the common stock of the

Association for the 20 business days prior to September 30,

1996, on the exchange or market which is then the primary

exchange or market for the common stock of the Association. The

number of shares of Holding Company common stock subject to

each stock warrant and the exercise price of each stock warrant

shall be adjusted as necessary to reflect -

\(i\) the conversion of Association common stock into Holding

Company common stock as part of the plan of reorganization

approved by the Association\'s shareholders; and

\(ii\) any issuance or sale of stock (including issuance or

sale of treasury stock), stock split, recapitalization,

reorganization, or other corporate event, if agreed to by the

Secretary of the Treasury and the Association.

\(B\) Authority to sell or exercise stock warrants; deposit of

proceeds

The District of Columbia Financial Responsibility and

Management Assistance Authority is authorized to sell or

exercise the stock warrants described in subparagraph (A). The

District of Columbia Financial Responsibility and Management

Assistance Authority shall deposit into the account established

under section 1155(e) (FOOTNOTE 1) of this title amounts

collected from the sale and proceeds resulting from the

exercise of the stock warrants pursuant to this subparagraph.

(FOOTNOTE 1) See References in Text note below.

\(10\) Restrictions on transfer of Association shares and

bankruptcy of Association

After the reorganization effective date, the Holding Company

shall not sell, pledge, or otherwise transfer the outstanding

shares of the Association, or agree to or cause the liquidation

of the Association or cause the Association to file a petition

for bankruptcy under title 11, without prior approval of the

Secretary of the Treasury and the Secretary of Education.

\(d\) Termination of Association

In the event the shareholders of the Association approve a plan

of reorganization under subsection (b) of this section, the

Association shall dissolve, and the Association\'s separate

existence shall terminate on September 30, 2008, after discharge of

all outstanding debt obligations and liquidation pursuant to this

subsection. The Association may dissolve pursuant to this

subsection prior to such date by notifying the Secretary of

Education and the Secretary of the Treasury of the Association\'s

intention to dissolve, unless within 60 days after receipt of such

notice the Secretary of Education notifies the Association that the

Association continues to be needed to serve as a lender of last

resort pursuant to section 1087-2(q) of this title or continues to

be needed to purchase loans under an agreement with the Secretary

described in subsection (c)(6) of this section. On the dissolution

date, the Association shall take the following actions:

\(1\) Establishment of a trust

The Association shall, under the terms of an irrevocable trust

agreement that is in form and substance satisfactory to the

Secretary of the Treasury, the Association and the appointed

trustee, irrevocably transfer all remaining obligations of the

Association to the trust and irrevocably deposit or cause to be

deposited into such trust, to be held as trust funds solely for

the benefit of holders of the remaining obligations, money or

direct noncallable obligations of the United States or any agency

thereof for which payment the full faith and credit of the United

States is pledged, maturing as to principal and interest in such

amounts and at such times as are determined by the Secretary of

the Treasury to be sufficient, without consideration of any

significant reinvestment of such interest, to pay the principal

of, and interest on, the remaining obligations in accordance with

their terms. To the extent the Association cannot provide money

or qualifying obligations in the amount required, the Holding

Company shall be required to transfer money or qualifying

obligations to the trust in the amount necessary to prevent any

deficiency.

\(2\) Use of trust assets

All money, obligations, or financial assets deposited into the

trust pursuant to this subsection shall be applied by the trustee

to the payment of the remaining obligations assumed by the trust.

\(3\) Obligations not transferred to the trust

The Association shall make proper provision for all other

obligations of the Association not transferred to the trust,

including the repurchase or redemption, or the making of proper

provision for the repurchase or redemption, of any preferred

stock of the Association outstanding. Any obligations of the

Association which cannot be fully satisfied shall become

liabilities of the Holding Company as of the date of dissolution.

\(4\) Transfer of remaining assets

After compliance with paragraphs (1) and (3), any remaining

assets of the trust shall be transferred to the Holding Company

or any subsidiary of the Holding Company, as directed by the

Holding Company.

\(e\) Operation of Holding Company

In the event the shareholders of the Association approve the plan

of reorganization under subsection (b) of this section, the

following provisions shall apply beginning on the reorganization

effective date:

\(1\) Holding Company Board of Directors

The number of members and composition of the Board of Directors

of the Holding Company shall be determined as set forth in the

Holding Company\'s charter or like instrument (as amended from

time to time) or bylaws (as amended from time to time) and as

permitted under the laws of the jurisdiction of the Holding

Company\'s incorporation.

\(2\) Holding Company name

The names of the Holding Company and any subsidiary of the

Holding Company (other than the Association) -

\(A\) may not contain the name \'\'Student Loan Marketing

Association\'\'; and

\(B\) may contain, to the extent permitted by applicable State

or District of Columbia law, \'\'Sallie Mae\'\' or variations

thereof, or such other names as the Board of Directors of the

Association or the Holding Company deems appropriate.

\(3\) Use of Sallie Mae name

Subject to paragraph (2), the Association may assign to the

Holding Company, or any subsidiary of the Holding Company, the

\'\'Sallie Mae\'\' name as a trademark or service mark, except that

neither the Holding Company nor any subsidiary of the Holding

Company (other than the Association or any subsidiary of the

Association) may use the \'\'Sallie Mae\'\' name on, or to identify

the issuer of, any debt obligation or other security offered or

sold by the Holding Company or any subsidiary of the Holding

Company (other than a debt obligation or other security issued to

and held by the Holding Company or any subsidiary of the Holding

Company). The Association shall remit to the account established

under section 1155(e) (FOOTNOTE 2) of this title, \$5,000,000,

within 60 days of the reorganization effective date as

compensation for the right to assign the \'\'Sallie Mae\'\' name as a

trademark or service mark.

(FOOTNOTE 2) See References in Text note below.

\(4\) Disclosure required

Until 3 years after the dissolution date, the Holding Company,

and any subsidiary of the Holding Company (other than the

Association), shall prominently display -

\(A\) in any document offering the Holding Company\'s

securities, a statement that the obligations of the Holding

Company and any subsidiary of the Holding Company are not

guaranteed by the full faith and credit of the United States;

and

\(B\) in any advertisement or promotional materials which use

the \'\'Sallie Mae\'\' name or mark, a statement that neither the

Holding Company nor any subsidiary of the Holding Company is a

government-sponsored enterprise or instrumentality of the

United States.

\(f\) Strict construction

Except as specifically set forth in this section, nothing in this

section shall be construed to limit the authority of the

Association as a federally chartered corporation, or of the Holding

Company as a State or District of Columbia chartered corporation.

\(g\) Right to enforce

The Secretary of Education or the Secretary of the Treasury, as

appropriate, may request that the Attorney General bring an action

in the United States District Court for the District of Columbia

for the enforcement of any provision of this section, or may, under

the direction or control of the Attorney General, bring such an

action. Such court shall have jurisdiction and power to order and

require compliance with this section.

\(h\) Deadline for reorganization effective date

This section shall be of no further force and effect in the event

that the reorganization effective date does not occur on or before

18 months after September 30, 1996.

\(i\) Definitions

For purposes of this section:

\(1\) Association

The term \'\'Association\'\' means the Student Loan Marketing

Association.

\(2\) Dissolution date

The term \'\'dissolution date\'\' means September 30, 2008, or such

earlier date as the Secretary of Education permits the transfer

of remaining obligations in accordance with subsection (d) of

this section.

\(3\) Holding Company

The term \'\'Holding Company\'\' means the new business corporation

established pursuant to this section by the Association under the

laws of any State of the United States or the District of

Columbia for the purposes of the reorganization and restructuring

described in subsection (a) of this section.

\(4\) Remaining obligations

The term \'\'remaining obligations\'\' means the debt obligations

of the Association outstanding as of the dissolution date.

\(5\) Remaining property

The term \'\'remaining property\'\' means the following assets and

liabilities of the Association which are outstanding as of the

reorganization effective date:

\(A\) Debt obligations issued by the Association.

\(B\) Contracts relating to interest rate, currency, or

commodity positions or protections.

\(C\) Investment securities owned by the Association.

\(D\) Any instruments, assets, or agreements described in

section 1087-2(d) of this title (including, without limitation,

all student loans and agreements relating to the purchase and

sale of student loans, forward purchase and lending

commitments, warehousing advances, academic facilities

obligations, letters of credit, standby bond purchase

agreements, liquidity agreements, and student loan revenue

bonds or other loans).

\(E\) Except as specifically prohibited by this section or

section 1087-2 of this title, any other nonmaterial assets or

liabilities of the Association which the Association\'s Board of

Directors determines to be necessary or appropriate to the

Association\'s operations.

\(6\) Reorganization

The term \'\'reorganization\'\' means the restructuring event or

events (including any merger event) giving effect to the Holding

Company structure described in subsection (a) of this section.

\(7\) Reorganization effective date

The term \'\'reorganization effective date\'\' means the effective

date of the reorganization as determined by the Board of

Directors of the Association, which shall not be earlier than the

date that shareholder approval is obtained pursuant to subsection

\(b\) of this section and shall not be later than the date that is

18 months after September 30, 1996.

\(8\) Subsidiary

The term \'\'subsidiary\'\' means one or more direct or indirect

subsidiaries.