Filed by Bowne Pure Compliance





Exhibit 10.4




Master Participation Agreement




 United States Department of Education




July 25, 2008




Participation Interests in Eligible Loans Made Pursuant to the

Federal Family Education Loan Program





 


 









 







TABLE OF CONTENTS




	 	 	 	 	 
	 	 	Page	 
	 
	 	 	 	 
	Section 1. Terms
	 	 	2	 
	Section 2. Commitment to Lend Under the FFEL Program
	 	 	3	 
	Section 3. Definitions
	 	 	3	 
	Section 4. Delivery of Loans to Custodian; Purchase and Sale of Participation
Interests
	 	 	15	 
	Section 5. Participation Certificates; Loan Schedule and Custodial Certifications
	 	 	17	 
	Section 6. Security Interest
	 	 	19	 
	Section 7. Subsequent Disbursements
	 	 	19	 
	Section 8. Reporting; Due Diligence
	 	 	20	 
	Section 9. Conditions Precedent
	 	 	22	 
	Section 10. Representations and Warranties of the Sponsor, the Eligible Lender
Trustee and
Custodian
	 	 	24	 
	Section 11. Collections; Distributions
	 	 	32	 
	Section 12. Servicing of Eligible Loans
	 	 	33	 
	Section 13. Enforcement of the Servicing Agreements
	 	 	34	 
	Section 14. Liability of the Sponsor and the Custodian; Indemnities
	 	 	35	 
	Section 15. Redemption; Put Option; Termination
	 	 	36	 
	Section 16. Sponsor Events of Default; Remedies
	 	 	38	 
	Section 17. Custodian Events of Default; Removal of Custodian
	 	 	38	 
	Section 18. Delegation of Duties by the Custodian
	 	 	39	 
	Section 19. Custodian Not to Resign
	 	 	39	 
	Section 20. Merger of the Custodian
	 	 	40	 
	Section 21. No Transfer of Participation Certificates or Participation Interests
	 	 	40	 
	Section 22. Fees and Expenses
	 	 	40	 
	Section 23. Tax Matters
	 	 	40	 
	Section 24. Set-off
	 	 	42	 
	Section 25. Survival of Covenants
	 	 	42	 
	Section 26. Communication and Notice Requirements
	 	 	42	 
	Section 27. Form of Instruments
	 	 	43	 
	Section 28. Amendment; Waiver
	 	 	43	 
	Section 29. Severability Clause
	 	 	43	 
	 






 


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	 	 	Page	 
	 
	 	 	 	 
	Section 30. Governing Law
	 	 	43	 
	Section 31. Exhibits
	 	 	43	 
	Section 32. General Interpretive Principles
	 	 	44	 
	Section 33. Reproduction of Documents
	 	 	44	 
	Section 34. Further Agreements
	 	 	44	 
	Section 35. Other Department Program
	 	 	44	 
	Section 36. Adoption
	 	 	45	 
	Section 37. Integration
	 	 	45	 






EXHIBITS




	 	 	 
	Exhibit A

	 	FORM OF ADOPTION AGREEMENT
	Exhibit B

	 	FORM OF PARTICIPATION PURCHASE REQUEST
	Exhibit C

	 	FORM OF CLASS A PARTICIPATION CERTIFICATE
	Exhibit D

	 	FORM OF CLASS B PARTICIPATION CERTIFICATE
	Exhibit E

	 	FORM OF OFFICER’S CERTIFICATE
	Exhibit F

	 	FORM OF OPINION OF COUNSEL TO THE SPONSOR
	Exhibit G

	 	FORM OF SECURITY RELEASE CERTIFICATION
	Exhibit H

	 	FORM OF NOTICE OF INTENT TO PARTICIPATE





 


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MASTER PARTICIPATION AGREEMENT




This is a Master Participation Agreement, dated as of July 25, 2008 (“Master
Participation Agreement”), among the United States Department of Education
(“Department”), an individual Eligible Lender or the holder of beneficial
interests in Loans (such entity, “Sponsor”), and if the latter, the related
Eligible Lender Trustee, each made party to this Master Participation Agreement by
executing an Adoption Agreement in the form attached hereto as Exhibit A
(“Adoption Agreement”), and the Sponsor’s Custodian made party to this Master
Participation Agreement by executing the Adoption Agreement (“Custodian”).



WHEREAS, pursuant to Section 459A of the Higher Education Act of 1965, as amended by
the Ensuring Continued Access to Student Loans Act of 2008 (Pub. L. No. 110-227) (“Higher
Education Act”), the Department has the authority to purchase Stafford Loans and
PLUS Loans, on such terms as the Secretary of Education, the Secretary of the Treasury,
and the Director of the Office of Management and Budget jointly determine are in the best
interest of the United States to encourage Eligible Lenders to provide students and
parents access to Stafford Loans and PLUS Loans made under the Federal Family Education
Loan Program for the 2008-2009 academic year;



WHEREAS, the Sponsor has an ownership interest in certain Stafford Loans and PLUS
Loans guaranteed under the Higher Education Act;



WHEREAS, the Sponsor may desire to sell Participation Interests (as defined below) in
such loans from time to time and the Department may desire to purchase such Participation
Interests from the Sponsor;



WHEREAS, to the extent that the Department, the Sponsor, the Eligible Lender Trustee
(if applicable) and the Custodian enter into an Adoption Agreement, this Master
Participation Agreement shall provide for the Sponsor to sell to the Department certain
Participation Interests in such loans by transfer to the Custodian as trustee for the
benefit of the Department and the Sponsor, as applicable, of all of the Sponsor’s right,
title and interest in, to and under such loans (including the right to service such
loans) and by the creation and conveyance to the Department and the Sponsor of the
Participation Interests, all on the terms and conditions set forth below;



WHEREAS, upon the execution of the Adoption Agreement, the Custodian shall be
appointed by the Sponsor and the Department to hold legal title to each such loan and to
hold in its physical possession (either directly or through a delegee) the related
promissory note and all documents and records related to each such loan and the Custodian
shall agree, in its capacity as trustee, to accept the transfer of legal title to such
loans from time to time, to hold such loans (including the right to service such loans)
and such documents and records in trust for the benefit of the Sponsor or the Department,
as applicable, and to issue the Participation Interests in such loans as provided herein;
and



WHEREAS, by its execution of an Adoption Agreement to this Master Participation Agreement, and
upon each transfer of Participation Interests to the Department hereunder, the Sponsor shall
represent to the Department that it or the entities on whose behalf it holds FFELP loans as an
aggregator of FFELP loans, shall continue to participate in the Federal Family
Education Loan Program and that at such time as funds become reasonably available to it or
to those entities from private sources on affordable terms, it will originate new FFELP
loans or acquire FFELP loans made by other lenders after the Department’s purchases of
Participation Interests in Loans from the Sponsor.


 


 









 





NOW, THEREFORE, in connection with the mutual promises contained herein, the
parties hereto agree as follows:



Section 1. Terms. This Master Participation Agreement establishes the terms
under which the Sponsor, together with any Eligible Lender Trustee that holds legal title
to Eligible Loans on behalf of that Sponsor and that is authorized on behalf of that
Sponsor to sell Eligible
Loans, may sell, and the Department shall purchase, Participation Interests in the Eligible
Loans specified on each Loan Schedule attached to each Participation Purchase Request as
the parties may execute from time to time pursuant to this Master Participation Agreement,
subject to the terms of this Master Participation Agreement. Each such Participation
Purchase Request shall be substantially in the form of Exhibit B, attached hereto,
incorporating by reference the terms of this Master Participation Agreement, and shall be
a separate agreement among the Sponsor, an Eligible Lender Trustee (if applicable), the
Custodian and the Department with respect to the Participation Interests covered by the
terms of such Participation Purchase Request and the Eligible Loans underlying such
Participation Interests covered by the terms of such Participation
Purchase Request for all purposes.



If the terms of a Participation Purchase Request conflict with the terms of this
Master Participation Agreement, the terms of this Master Participation Agreement shall
supersede and govern except to the extent that such conflict is specifically noted in the
Participation Purchase Request and the parties acknowledge and agree that notwithstanding
such conflict, the terms of the Participation Purchase Request shall govern.



The Department will not execute an Adoption Agreement to enter into a Master
Participation Agreement with any Sponsor after July 1, 2009. Further, in order to sell any
Participation Interests pursuant to this Master Participation Agreement, the Sponsor must
notify the Department no later than July 1, 2009 that it will sell such Participation
Interests, and must exercise the option to sell Participation Interests in Eligible Loans
on or before August 1, 2009. The Sponsor may sell a Participation Interest after August
1, 2009 only if that interest is in a Loan that is a Purchased Eligible Loan and the
following conditions are met: (a) the first disbursement on the Purchased Eligible Loan
was made by July 1, 2009, (b) such Loan became subject to a Participation Interest by
August 1, 2009, (c) the final disbursement on such Loan is made no later than September
30, 2009, (d) the Sponsor notifies the Department that the Sponsor intends to redeem the
Participation Interest in the fully-disbursed Loan and sell the loan to the Department
under the Put Option, and (e) the Sponsor completes the sale of the Participation Interest
in the fully-disbursed Loan no later than thirty (30) calendar days after the second
disbursement. If a Sponsor fails to meet these deadlines, as applicable, the right to sell
Participation Interests hereunder shall terminate and the Department will not honor any
commitment to purchase Participation Interests.


 


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No Loan will be eligible to become subject to a Participation Interest for sale
hereunder
to the Department if the first disbursement was made prior to the date on which the Department
received the Notice of Intent to Participate from the Sponsor, except that, in the event
that the Department receives such Notice of Intent to Participate on or before July 31,
2008, the related
Eligible Lender shall be permitted to sell to the Department Participation Interests in
Eligible Loans that were originated on or after May 1, 2008. In addition, no Loan will be
eligible hereunder unless the Sponsor, and, if the Loan was made by a lender other than
the Sponsor, that lender, each provided timely and appropriate notice to the Department of
its intention to enter into the Master Loan Sale Agreement.



Any Eligible Lender that claims Special Allowance Payments at the rate payable for
eligible not-for-profit holders of loans and that seeks to aggregate Eligible Loans to
become subject to Participation Interests hereunder must do so through a Sponsor that
aggregates only loans that qualify for Special Allowance Payments at that rate.



Section 2. Commitment to Lend Under the FFEL Program. By its execution of an
Adoption Agreement, and upon each sale hereunder, the Sponsor represents to the
Department:



(a) If the Sponsor acts on its own behalf, that it shall continue to participate in
the
FFELP (either itself or through an Eligible Lender Trustee) and that at such time as funds
become reasonably available to it from private sources, it will originate new FFELP loans
or acquire FFELP loans made by other lenders after the date of the sale of the
Participation Interests to the Department hereunder, and



(b) If the Sponsor acts on behalf of any other entity as an aggregator of FFELP
loans, that it is authorized to represent, and has received written assurance from each
such entity, which assurance will be provided to the Department upon request, that at such
time as funds become reasonably available to them from private sources, each of these
entities will continue, as applicable, to originate or finance the origination of FFELP
loans, or to acquire or finance the acquisition of FFELP loans made by other lenders,
after the date of the sale of the Participation Interests to the Department hereunder.



Section 3. Definitions. For purposes of this Master Participation Agreement
the
following capitalized terms shall have the respective meanings set forth
below:



“Adoption Agreement” means an Adoption Agreement, substantially in the form of
Exhibit A, attached hereto, of which this Master Participation Agreement forms a
part by reference, by and among the Department, a Sponsor, an Eligible Lender Trustee (if
applicable), and a Custodian obligating each of the parties thereto the terms of this
Master Participation Agreement.


 


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“Adverse Event” shall mean the occurrence of any of the following with
respect to a Person:




	 	(i)	 	a decree or order of a court or agency or supervisory authority having
jurisdiction for the appointment of a conservator or receiver or liquidator or other similar
official in any insolvency, readjustment of debt, marshalling of assets and liabilities or similar
proceedings, or for the winding-up or liquidation of its affairs, shall have been entered against
such Person and such decree or order shall have remained in force,
undischarged or unstayed for a period of sixty (60) days; or

	 
	 	(ii)	 	such Person shall consent to the appointment of a conservator or receiver
or liquidator or other similar official in any insolvency, readjustment of
debt, marshalling of assets and liabilities or similar proceedings of or
relating to such Person or relating to all or substantially all of such
Person’s property; or

	 
	 	(iii)	 	such Person shall admit in writing its inability to pay its debts as they
become due, file a petition to take advantage of any applicable insolvency
or reorganization statute, make an assignment for the benefit of its
creditors, or voluntarily suspend payment of its obligations.






“Agreement” shall mean, collectively, this Master Participation Agreement and
the related Adoption Agreement and all amendments thereto.



“Borrower” means the student or parent obligor on a
Loan.



“Business Day” means any day other than (i) a Federal holiday, (ii) a Saturday
or Sunday, or (iii) any other day on which banking institutions or trust companies,
operating in the state(s) or jurisdiction(s) where either the Custodian or the Servicer
are headquartered, are authorized or obligated by law, regulation or executive order to
remain closed.



“Capital Account” has the meaning set forth in Section 23(c)
hereof.



“Class A Participation Certificate” has the meaning set forth in Section
5(b) hereof.



“Class A Participation Interest” means a participation interest in one or more
Eligible Loans, which consists of (A) a 100% beneficial ownership interest in the
principal portion of such Eligible Loans, and (B) the right to receive the Participant’s
Yield in respect of such Eligible Loans.



“Class B Participation Certificate” has the meaning set forth in Section
5(b) hereof.



“Class B Participation Interest” means a participation interest in one or
more Eligible Loans which consists of (A) the right to either redeem such Eligible Loans
or to exercise the Put
Option pursuant to Section 15 hereof and (B) the right to receive all Collections on such
Eligible
Loans other than (1) the Participant’s Yield, and (2) principal collections on such
Eligible Loans.



“Code” means the United States Internal Revenue Code of 1986, as amended from
time to time, or any successor statute thereto.



“Collateral” has the meaning set forth in Section 6(a)
hereof.



“Collection Account” shall mean the segregated account established pursuant to
Section 11(a) hereof.


 


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“Collections” has the meaning set forth in Section
11(a) hereof.



“Commercial Paper Rate” means the commercial paper rate determined by the
Department on a quarterly basis and published pursuant to Section 438(b)(2)(I)(i)(I) of the
Higher Education Act.



“Custodian” means the custodian of Eligible Loans designated by the Sponsor
(or a successor custodian appointed pursuant to Section 17 hereof), which is a party
hereto pursuant to an Adoption Agreement executed and delivered pursuant to the terms
hereof, and (i) which is a National or State-chartered bank, (ii) which is an Eligible
Lender, and (iii) as to which the representations and warranties set forth in Section
10(c) of this Agreement are true and correct.



“Custodian Event of Default” means one or more of the following shall occur
and be continuing with respect to the Custodian:




	 	(i)	 	if for any reason the Custodian is no longer an Eligible Lender; or

	 
	 	(ii)	 	any failure by the Custodian to remit to the Department or the Sponsor,
as
applicable, any Collections pursuant to Section 11 hereof; or

	 
	 	(iii)	 	any failure by the Custodian to duly observe or perform, in any material
respect, any other covenants, obligations or agreements of the Custodian
as set forth in the Agreement, which failure continues unremedied for a
period of thirty (30) days after the earlier of the date on which (x) the
Custodian shall have actual knowledge of such failure, or (y) written
notice of such failure, requiring the same to be remedied, shall have been
given to the Custodian by the Sponsor or the Department; or

	 
	 	(iv)	 	an Adverse Event with respect to the Custodian shall have occurred and be
continuing beyond the expiration of any applicable grace period; or

	 
	 	(v)	 	the Custodian attempts to sell or otherwise dispose of all or
substantially
all of its property or assets, or to assign any of its obligations
hereunder or all or any portion of the Eligible Loans subject to a
Participation Interest hereunder.






“Department” has the meaning set forth in the preamble
hereto.



“Eligible Borrower Benefits” means only those borrower benefits for a Loan
that are (i) unconditional upfront fee reductions which are accrued and paid or made
prior to the date on which a Participation Interest is sold hereunder, or (ii) permitted
reductions in interest rates of not more than 0.25 percent that are contingent on the use
of an automatic payment process by the Borrower for any payments due.



“Eligible Lender” means any entity that is an eligible lender under Section
435(d) of the Higher Education Act.


 


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“Eligible Lender Trustee” means an Eligible Lender that holds legal title to
an Eligible Loan for the benefit or on behalf of the Sponsor which holds the related
beneficial ownership interest in such Eligible Loan, that is authorized to sell Eligible
Loans on behalf of the Sponsor, and that executes an Adoption Agreement together with
such Sponsor.



“Eligible Loan” means a Loan that meets the following criteria as of the
applicable Purchase Date:




	 	(i)	 	the Loan was made for a loan period that includes, or begins on or after,
July 1, 2008 and on which the first disbursement is made on or after May
1, 2008 but no later than July 1, 2009 and, if not fully disbursed on the
Purchase Date, is scheduled to be fully disbursed no later than September
30, 2009;

	 
	 	(ii)	 	the Loan has been originated and serviced in compliance with all
requirements of applicable law, including the Higher Education Act and
the implementing regulations, the Equal Credit Opportunity Act,
Regulation B and other applicable consumer credit laws and equal credit
opportunity laws, as applicable to such Loan;

	 
	 	(iii)	 	at least one disbursement has been made on the Loan;

	 
	 	(iv)	 	the Loan is guaranteed at least 97% as to principal and interest by the
applicable Guarantor and eligible for reinsurance by the Department in
accordance with the Higher Education Act;

	 
	 	(v)	 	the Loan bears interest at a stated rate equal to the maximum rate
permitted under the Higher Education Act for such loan;

	 
	 	(vi)	 	the Loan is eligible for the payment of quarterly Special Allowance
Payments;

	 
	 	(vii)	 	if the Loan is not yet in repayment status, the Loan is eligible for
payment
of Interest Subsidy Payments, or if not eligible, has interest either
billed quarterly to the Borrower or capitalized to the extent permitted
by the applicable Guarantor;

	 
	 	(viii)	 	the Loan is evidenced by a signed Promissory Note and any addendum
thereto or the electronic records evidencing the same, containing terms in accordance with those
required by the Higher Education Act, the applicable Guarantee Agreement and other applicable
requirements, and which does not require the Borrower to consent to the transfer, sale or
assignment of the rights and duties of the Sponsor and does not contain any provision that
restricts the ability of the Department to exercise its rights under this Agreement or any rights
the Department may have under the related documents;





 


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	 	(ix)	 	immediately prior to the transfer of title to the Custodian, the Sponsor,
together with the Eligible Lender Trustee (if applicable), had good and
marketable title to, and was the sole owner of, the Loan, free and clear of
all security interests, liens, charges, claims, offsets, defenses,
counterclaims or encumbrances of any nature (other than an interest or
lien that will be released simultaneously with the purchase of the related
Class A Participation Interest pursuant to a Security Release
Certification) and no right of rescission, offsets, defenses or
counterclaims have been asserted or threatened with respect to the Loan;







	 	(x)	 	the Loan has not been modified, extended or renegotiated in any way,
except as required under the Higher Education Act or other applicable
laws, rules and regulations, and the applicable Guarantee Agreement;







	 	(xi)	 	the Loan constitutes a legal, valid and binding obligation to pay on the
part
of the related Borrower enforceable in accordance with its terms and is
not subject to a current bankruptcy proceeding;







	 	(xii)	 	the Loan has no borrower benefits or other incentive programs other than
Eligible Borrower Benefits;







	 	(xiii)	 	if the Loan is subject to a servicing agreement, such servicing
agreement
is an Eligible Servicing Agreement and is terminable upon thirty
(30) days notice without any liability on the part of the Department;







	 	(xiv)	 	the sale or assignment of the Loan to the Custodian does not conflict
with
law or require notice to or consent, except for such
consent, approval, authorizations or orders, if any, that have been
obtained prior to the related Purchase Date, and for any notices to
Borrowers and Guarantors required by the Higher Education Act;







	 	(xv)	 	if the Loan is made under Section 428 (Subsidized Stafford Loans) or
Section 428H (Unsubsidized Stafford Loans) of the Higher Education Act,
Participation Interests in such Loan shall have been sold to the
Department together with Participation Interests in all of the Borrower’s
other Subsidized Stafford Loans and Unsubsidized Stafford Loans that are
Eligible Loans and that are held by or on behalf of the Sponsor; and







	 	(xvi)	 	the Loan is eligible to be sold to the Department under the Put Option,
or,
if not fully disbursed on the applicable Purchase Date, is scheduled to
be fully disbursed by September 30, 2009 and upon such final
disbursement eligible to be sold to the Department under the Put Option.





 


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Without limitation, the following loans shall not be eligible for sale to the
Department
pursuant to the terms of this Agreement:




	 	(i)	 	loans which do not comply with the representations and warranties set
forth in Section 10(b) of this Master Participation Agreement;







	 	(ii)	 	FFELP consolidation loans or any other types of loans not specifically
described in this Master Participation Agreement;







	 	(iii)	 	loans disbursed for academic years other than the 2008-2009 academic
year;







	 	(iv)	 	loans that will not have at least one disbursement as of July 1,
2009;







	 	(v)	 	loans in which the Department has previously purchased a Participation
Interest, whether or not that interest has been redeemed;







	 	(vi)	 	loans on which the lender has committed to providing the Borrower with
any borrower benefits other than Eligible Borrower Benefits;







	 	(vii)	 	loans on which a default claim or other claim for payment on the loan
has
been filed with the related Guarantor; and







	 	(viii)	 	loans made by a guarantor or other lender as a Lender of Last Resort,
pursuant to HEA Section 428(j), 20 U.S.C. Section 1078(j), whether made
with Federal advances or other funds.






“Eligible Servicing Agreement” means a servicing agreement that meets the
criteria set forth in Section 12(c) hereof.



“Equal Credit Opportunity Act” means the Equal Credit Opportunity Act (15
U.S.C.
Section 1691 et seq.) as amended.



“Exception Report” has the meaning set forth in Section 5(d)
hereof.



“FFELP” means the Federal Family Education Loan Program authorized under
title IV, Part B of the Higher Education Act.



“Guarantee Agreement” means an agreement between a Guarantor and the Sponsor
or the Eligible Lender Trustee (if applicable), that provides for the payment by such
Guarantor of amounts authorized to be paid pursuant to the Higher Education Act to holders
of qualifying FFELP loans guaranteed in accordance with the Higher Education Act.



“Guarantor” means any FFELP guaranty agency with which the Sponsor or the
Eligible Lender Trustee (if applicable) has in place a Guarantee Agreement, and which
guarantor is reinsured by the Department of Education for a percentage of claims paid for
a given federal fiscal year.



“Higher Education Act” means the Higher Education Act of 1965, as amended, 20
U.S.C.
§ 1001 et seq.



“Interest Subsidy Payments” means the interest subsidy payments on certain FFELP loans
authorized to be made by the Department pursuant to Section 428 of the Higher Education Act.


 


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“Loan” means a FFELP Subsidized Stafford Loan or Unsubsidized Stafford Loan or
FFELP PLUS Loan made to a student (or in the case of a parent PLUS loan, made to a parent
of a dependent student) evidenced by a Promissory Note and all related Loan Documents
together with any guaranties and other rights relating thereto including, without
limitation, Interest Subsidy Payments and Special Allowance Payments, together with the
servicing rights related thereto.



“Loan Documents” means with respect to each Loan, the following
documents:




	 	(i)	 	a copy of the loan application if a separate application was provided to
the
Sponsor;

	 
	 	(ii)	 	a copy of the signed Promissory Note;

	 
	 	(iii)	 	the repayment schedule;

	 
	 	(iv)	 	a record of each disbursement;







	 	(v)	 	notices of changes in a Borrower’s address and status as at least a
half-time
student;

	 
	 	(vi)	 	evidence of the Borrower’s eligibility for a deferment;

	 
	 	(vii)	 	the documents required for the exercise of
forbearance;

	 
	 	(viii)	 	documentation of the assignment of
the loan, if any;







	 	(ix)	 	a payment history showing the date and amount of each payment received
from or on behalf of the Borrower, and the amount of each payment that
was attributed to principal, interest, late charges, and other costs;







	 	(x)	 	a collection history showing the date and subject of each communication
between the Sponsor and the Borrower or endorser relating to collection of
a delinquent Loan, each communication other than regular reports by the
Sponsor showing that an account is current, between the Sponsor and a
credit bureau regarding the loan, each effort to locate a Borrower whose
address is unknown at any time, and each request by the Sponsor for
default aversion assistance on the Loan;







	 	(xi)	 	documentation of any master promissory note confirmation process or
processes;







	 	(xii)	 	any additional records that are necessary to document the validity of a
claim against the guarantee or the accuracy of reports submitted by the
Sponsor; and







	 	(xiii)	 	a statement identifying the name and location of the entity in
possession of
the original electronic promissory note and, if different, the name,
company, address and contact information of the person who is able to
provide the affidavit or certification described in 34 C.F.R. Section
682.414(a)(6)(i), including any necessary supporting documentation.





 


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“Loan Schedule” means the schedule (in the form provided by the Department)
attached to each Participation Purchase Request and completed by or on behalf of the
Sponsor and the Eligible Lender Trustee (if applicable) that lists, by Borrower, (i) the
Loans proposed to be subject to the related Participation Interests, (ii) the name and
address of the Borrower, the loan number, the qualifying institution attended by the
Borrower and the scheduled outstanding Principal Balance and accrued interest thereon as
of the related Purchase Date and (iii) any other information the Department may require
including but not limited to certain identification numbers and dates relating to the
Eligible Loans.



“Loan Schedule and Custodial Certification” means the Loan Schedule attached
to each Participation Certificate, and certified by the Custodian as a complete and
accurate listing of all of the Eligible Loans subject to Participation Interests evidenced
by each such Participation Certificate as to which the Custodian (i) holds legal title and
(ii) has physical possession (either directly or through its delegee) of all required Loan
Documents in trust for the benefit of holders of the Participation Interests.



“Master Loan Sale Agreement” means the Master Loan Sale Agreement, dated July
25, 2008, together with the related adoption agreement among the Department, the Sponsor,
and the Eligible Lender Trustee (if applicable).



“Master Participation Agreement” has the meaning set forth in the
preamble hereto.



“Notice of Intent to Participate” means the notice provided to the Department
by an Eligible Lender or a lender other than an Eligible Lender, together with an Eligible
Lender Trustee, of its intent to become a Sponsor hereunder, which shall be in the form
attached hereto as Exhibit H.



“Participant’s Yield” means with respect to each Participation Interest for
each fiscal quarter during which the Department holds the related Class A Participation
Interest, an amount equal to (a)(i) the daily average of the principal balance of such
Class A Participation Interest multiplied by (ii) the product of (x) the Commercial Paper
Rate plus the applicable Spread, and (y) the number of days in such fiscal quarter,
divided by (iii) 360, (b) reduced by any amount of such Participant’s Yield in respect of
such fiscal quarter previously paid to the Department pursuant to Section 11(b) hereof,
and (c) increased by the amount of Participant’s Yield remaining unpaid with respect to
any prior fiscal quarters.



“Participation Interest” means a Class A Participation Interest or a Class B
Participation Interest.


 


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“Participation Purchase Request” means a request substantially in the form of Exhibit
B attached hereto, executed by authorized officers of each of the Sponsor, the Eligible Lender
Trustee (if applicable) and the Custodian and delivered to the Department, which shall (i) set
forth the Eligible Loans for which Class A Participation Interests are offered for sale to the
Department, (ii) certify that the representations and warranties made by the Sponsor in
Section 10(a), and (b) of this Master Participation Agreement are true and correct, (iii)
certify that the Custodian holds legal title to each Eligible Loan for which the Class A
Participation Interests are offered for sale to the Department and (iv) certify that the
Custodian or its designee holds all required Loan Documents for each Eligible Loan for
which the Class A Participation Interests are offered for sale to the Department.



“Partner” has the meaning set forth in Section 23(b)
hereof.



“Partnership” has the meaning set forth in Section 23(a)
hereof.



“Permitted Investments” means overnight or short-term U.S. Treasury
securities that will, in all cases, mature on or prior to the day immediately preceding
the date such funds are required to be disbursed.



“Person” means an individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.



“PLUS Loan” means a Loan described in Section 428B of the Higher Education
Act and shall include loans to parents, designated as “PLUS Loans” or loans to graduate
or professional students, designated “Grad PLUS Loans.”



“Principal Balance” means the outstanding principal amount of the Loan, plus
capitalized interest.



“Promissory Note” means the master promissory note of the Borrower and any
amendment thereto evidencing the Borrower’s obligation with regard to a student loan
guaranteed under the Higher Education Act or the electronic records evidencing the same.



“Purchase Date” means the date on which the Custodian receives payment from
the Department of the Purchase Price for Class A Participation Interests, which shall be
as soon as practicable after the Department receives the related Participation Purchase
Request.



“Purchase Price” has the meaning set forth in Section 4(c)
hereof.



“Purchased Eligible Loan” means an Eligible Loan in which a Participation
Interest has been purchased by the Department.



“Put Option” means, with respect to a Purchased Eligible Loan, the right of
the Sponsor, through the Eligible Lender Trustee (if applicable), pursuant to Section 15,
to sell such Purchased Eligible Loan to the Department against the Department’s right to
receive all future Collections under such Eligible Loans.


 


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“Redemption Payment” means, with respect to a Purchased Eligible Loan to be redeemed
pursuant to Section 15, an amount equal to the greater of (x) the proceeds of the sale or other
transfer of such Purchased Eligible Loan, if any, including proceeds received subsequent to the
redemption date, and (y) the Purchase Price paid by the Department in exchange for the Class A
Participation Interest in such Purchased Eligible Loan together with any Participant’s
Yield on such Purchase Price calculated through the date of the next scheduled
distribution to the Department, less (with respect to (y)) any amount that the Sponsor
demonstrates to the satisfaction of the Department, in its sole discretion, was received
with respect to such Purchased Eligible Loan and remitted to the Department pursuant to
Section 11(b) in satisfaction of a portion of the Participant’s Yield and Purchase Price
with respect to such Purchased Eligible Loan.



“Regulation B” means the federal regulations governing the Equal Credit
Opportunity Act as it appears in Title 12, Code of Federal Regulations, Part 202.



“Reporting Date” has the meaning set forth in Section 8(a)
hereof.



“Responsible Officer” means any director, vice president, assistant vice
president, any associate or any other officer of the Custodian or Sponsor, as applicable,
customarily performing functions similar to those performed by any of the above
designated officers and with respect to a particular matter, to whom such matter is
referred because of such officer’s knowledge of and familiarity with the particular
subject and having direct responsibility for the administration of this Agreement.



“Secretary” means the Secretary of Education, and “Department” means the
United States Department of Education, and either term includes any official of the
Department duly authorized to perform any function with respect to the transactions under
this Agreement.



“Security Release Certification” means the certification executed by the
Sponsor and a lienholder with respect to one or more Loans substantially in the form
of Exhibit G hereto.



“Servicer” means the Sponsor in its capacity as servicer or another servicer
of FFELP loans that will service the Eligible Loans pursuant to an Eligible Servicing
Agreement.



“Servicer Event of Default” means one or more of the following events that
occurs and is continuing with respect to the Servicer:




	 	(i)	 	any failure by the Servicer to remit to the Custodian any Collections
within two (2) Business Days following receipt, or any failure by the
Servicer to pay any other amounts required to be paid by the Servicer
hereunder or under any related Eligible Servicing Agreement, which
failure continues unremedied for a period of one (1) Business Day
following the Servicer becoming aware of such failure; or







	 	(ii)	 	any failure by the Servicer to duly observe or perform, in any material
respect, any other covenants, obligations or agreements of the Servicer as set forth in this
Master Participation Agreement or in any Eligible Servicing Agreement, which failure continues
unremedied for a period of thirty (30) days after the date on which notice of such failure,
requiring the same to be remedied, shall have been given to the Servicer by the Sponsor, the
Custodian or the Department; or





 


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	 	(iii)	 	a decree or order of a court or agency or supervisory authority having
jurisdiction for the appointment of a conservator or receiver or
liquidator or other similar official in any insolvency, readjustment of
debt, marshalling of assets and liabilities or similar proceedings, or
for the winding-up or liquidation of its affairs, shall have been entered
against the Servicer and such decree or order shall have remained in
force, undischarged or unstayed for a period of sixty (60) days; or







	 	(iv)	 	the Servicer shall consent to the appointment of a conservator or
receiver
or liquidator or other similar official in any insolvency, readjustment of
debt, marshalling of assets and liabilities or similar proceedings of or
relating to the Servicer or relating to all or substantially all of the
Servicer’s property; or







	 	(v)	 	the Servicer shall admit in writing its inability to pay its debts as they
become due, file a petition to take advantage of any applicable insolvency
or reorganization statute, make an assignment for the benefit of its
creditors, or voluntarily suspend payment of its obligations; or







	 	(vi)	 	any representation or warranty made by the Servicer under any Eligible
Servicing Agreement shall prove to be untrue or incomplete in any
material respect, which failure shall continue unremedied for a period of
thirty (30) days after the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to the Servicer
by the Sponsor, the Custodian or the Department; or







	 	(vii)	 	the Servicer attempts to sell or otherwise dispose of all or
substantially all
of its property or assets, or to assign its servicing responsibilities
with respect to any Eligible Loans or any portion thereof, except with
the consent of the Sponsor; or







	 	(viii)	 	the Servicer fails to maintain its license to do business or service the
Eligible Loans, or for any reason the Servicer is not qualified or
eligible to service Eligible Loans.






“Special Allowance Payments” means special allowance payments on FFELP loans
authorized to be made by the Department pursuant to Section 438 of the Higher Education
Act.



“Sponsor” has the meaning set forth in the preamble
hereto.



“Sponsor Event of Default” means one or more of the following shall have
occurred and is continuing with respect to the Sponsor:




	 	(i)	 	if for any reason the Sponsor or the Eligible Lender Trustee (if
applicable)
is no longer an Eligible Lender; or







	 	(ii)	 	any failure by the Sponsor to remit or cause to be remitted to the
Custodian any Collections with respect to Purchased Eligible Loans within
two (2) Business Days following receipt, or any failure by the Sponsor to
pay when due any other amounts required to be paid by the Sponsor under
this Agreement; or





 


- 13 -









 











	 	(iii)	 	any failure by the Sponsor to duly observe or perform, in any material
respect, any other covenant, obligation or agreement of the Sponsor as set
forth in this Master Participation Agreement or in any Eligible Servicing
Agreement, which failure continues unremedied for a period of thirty (30)
days after the earlier of the date on which (x) the Sponsor shall have
actual knowledge of such failure, or (y) written notice of such failure,
requiring the same to be remedied, shall have been given to the Sponsor
by the Department; or







	 	(iv)	 	an Adverse Event with respect to the Sponsor shall have occurred and be
continuing beyond the expiration of any applicable grace period; or







	 	(v)	 	any representation or warranty made by the Sponsor pursuant to
Section 10(a) hereof shall prove to be untrue or incomplete in any
material respect, which failure shall continue unremedied for a period of
thirty (30) days after the earlier of the date on which (x) the Sponsor
shall have actual knowledge of such failure, or (y) written notice of
such failure, requiring the same to be remedied, shall have been given to
the Sponsor by the Department; or







	 	(vi)	 	the Sponsor attempts to sell or otherwise dispose of all or substantially
all
of its property or assets.






“Spread” means fifty (50) basis points or, at the option of the Department
following the occurrence of a Sponsor Event of Default, three hundred (300) basis points.



“Stafford Loan” means a Subsidized Stafford Loan or an Unsubsidized
Stafford Loan.



“Subsidized Stafford Loan” means a Loan described in Section 428(a) of the
Higher Education Act.



“Tax Liability” has the meaning set forth in Section 23(d)
hereof.



“Termination Date” means earliest to occur of (i) the date on which the
Sponsor notifies the Department that it will no longer be a participant under the
Agreement and reduces the outstanding balance of the Class A Participation Interests to
zero, (ii) at the option of the Department, upon the occurrence of a Sponsor Event of
Default, (iii) July 1, 2009, if the Sponsor shall not have entered into a Master Loan Sale
Agreement with the Department by such date, and (iv) September 30, 2009.



“Treasury Regulations” means the regulations promulgated by the United States
Department of the Treasury under the Code.


 


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“Unsubsidized Stafford Loan” means a Loan described in Section 428H of the
Higher Education Act.



Section 4. Delivery of Loans to Custodian; Purchase and Sale of Participation
Interests.



(a) The Sponsor shall request that the Department purchase Class A Participation
Interests by delivering to the Department (i) a Participation Purchase Request,
appropriately completed and executed by the Sponsor, the Eligible Lender Trustee (if
applicable) and the Custodian, and (ii) a Loan Schedule setting forth the Eligible Loans
proposed to be subject to such Class A Participation Interests and the scheduled Principal
Balance of such Eligible Loans as of the requested Purchase Date. If the Department
agrees that the Participation Purchase Request satisfies the requirements of this
Agreement, the Department shall execute such Participation Purchase Request and return a
copy to the Sponsor and the Eligible Lender Trustee (if applicable). Any such
Participation Purchase Request delivered to the Department pursuant to this Section 4(a)
shall be irrevocable and shall bind the Sponsor and the Eligible Lender Trustee (if
applicable) to transfer the Eligible Loans set forth on the related Loan Schedule in
accordance with Section 4(b) below. As a condition precedent to the Department’s purchase
of Participation Interests in Eligible Loans hereunder, both the originating lender and,
if different from the related Sponsor, the related Sponsor, must each have provided to the
Department timely Notice of Intent to Participate in the Loan Purchase Commitment Program
(as referred to therein).



(b) With respect to any Eligible Loan for which the Department has executed and
returned to the Sponsor and the Eligible Lender Trustee (if applicable) a Participation
Purchase Request pursuant to Section 4(a) hereof, prior to the Purchase Date therefor, (i)
if the Sponsor is an Eligible Lender, the Sponsor shall cause all of its right, title and
interests in and to the related Eligible Loans, including the right to service such
Eligible Loan, to be transferred to and held in the name of the Custodian, who shall hold
all such rights, title and interests in trust for the Sponsor until the Purchase Date, or
(ii) if the Sponsor is not an Eligible Lender, the Eligible Lender Trustee shall cause all
of its right, title and interests in and to the related Eligible Loans, and the Sponsor
shall cause all of its beneficial interests in such Eligible Loans and the right to
service such Eligible Loan, to be transferred to and held in the name of the Custodian, who
shall hold all such rights, title and interests in trust for the Sponsor, until the
Purchase Date. The Sponsor shall cause all related Loan Documents to be delivered to the
Custodian or its designee.
From and after the Purchase Date for such Eligible Loans, the Custodian shall hold all such
Eligible Loans and all related Loan Documents in a secure place in trust for the holders of the
Participation Interests in accordance with the terms of this Master Participation Agreement until
the Class A Participation Interests are redeemed in full; provided that if the Loan Documents
relating to such Eligible Loans are delivered to the Custodian’s designee, the Custodian shall
cause such designee to hold all such Loan Documents in trust for the holders of the Participation
Interests in accordance with the terms of this Master Participation Agreement. The Custodian
shall not release, nor shall it permit its designee to release, any Loan Documents relating to
Purchased Eligible Loans to any Person except (w) to the Sponsor upon receipt of the related
Redemption Payment by the Custodian for the benefit of the Department, (x) to the Department upon
the Sponsor’s exercise of the Put Option with respect thereto, (y) in connection with
servicing-related functions as may be required or permitted under the Higher Education
Act, or (z) as otherwise may be permitted in writing by the Department.


 


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(c) On the related Purchase Date, provided that all conditions precedent set forth
in
Section 9(a) and (b) hereof have been satisfied in the manner prescribed in this Agreement
and in accordance with any guidance interpreting the provisions of this Agreement that the
Department has published by November 1, 2008 (or if unsatisfied, the Department has
permitted in the Department’s sole discretion, such unsatisfied conditions to be cured
within an acceptable period of time following the Purchase Date), the Department shall
purchase the related Class A Participation Interests from the Sponsor by remitting to the
Custodian, who shall in turn, simultaneously remit to the Sponsor a purchase price equal
to the Principal Balance of the related Eligible Loans to become subject to such Class A
Participation Interests on such Purchase Date (“Purchase Price”). All payments
hereunder shall be made by electronic funds transfer in accordance with the Department’s
standard payment process and instructions provided by the recipient. Upon receipt of the
Purchase Price, the Sponsor shall cause the Custodian to deliver to the Department the
Class A Participation Interests in such Eligible Loans, and the related updated Loan
Schedule and Custodial Certification to be attached to the Class A Participation
Certificate. As of the date of delivery of each Eligible Loan to the Custodian, the
Sponsor hereby sells and assigns its interest in such Eligible Loan in exchange for the
Participation Interests and the agreement of the Custodian to act as custodian and trustee
pursuant to the Agreement.



(d) Any Purchased Eligible Loans redeemed by the Sponsor pursuant to Section 15
shall cease to be subject to the Participation Interests upon such
redemption.



(e) In the case of a single Purchased Eligible Loan evidenced by a separate
Promissory Note, each such Promissory Note will be held in the name of the Custodian. If
a
Purchased Eligible Loan is evidenced together with other Loans that are not Purchased
Eligible
Loans by a Master Promissory Note, the Custodian shall indicate by book entry on its books
and records that the Custodian, in its capacity as trustee, is the legal owner of the
Loan that was sold under this Master Participation Agreement and that the Sponsor is the
legal owner of those Loans evidenced by the Promissory Note that have not been sold
hereunder.



(f) The Sponsor may not sell Class A Participation Interests to the Department more
frequently than weekly.



(g) It is understood and agreed that a common law trust is hereby created into which
Eligible Loans are transferred on the related Purchase Date thereof, and the Custodian
shall hold legal title to such Eligible Loans, shall create the Participation
Certificates and shall issue and deliver the Participation Interests, in each case as
trustee for the benefit of the holders of the Participation Interests.


 


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Section 5. Participation Certificates; Loan Schedule and Custodial
Certifications.



(a) On or prior to the initial Purchase Date, the Custodian shall issue the Class A
Participation Certificate and the Class B Participation Certificate, and shall deliver the same to
the Department and the Sponsor, respectively. The Class A Participation Certificate shall
evidence all Class A Participation Interests sold to the Department on a Purchase Date,
and the Class B Participation Certificate shall evidence all Class B Participation
Interests delivered to the
Sponsor on a Purchase Date.



(b) Each Class A Participation Certificate shall be a definitive participation
certificate substantially in the form of Exhibit C hereto, to be issued in the
name of, or at the direction of, the Department (each, a “Class A Participation
Certificate”). Each Class B Participation Certificate shall be a definitive participation
certificate substantially in the form of Exhibit D hereto, to be issued in the
name of, or at the direction of, the Sponsor (each, a “Class B Participation
Certificate”). The Class B Participation Certificate, and the Class B Participation
Interests issued thereunder shall be subordinated to the Class A Participation Certificate
and the
Class A Participation Interests issued thereunder.



(c) Each Participation Certificate shall have attached thereto a Loan Schedule and
Custodial Certification listing each of the Purchased Eligible Loans evidenced by such
Participation Certificate and the current Principal Balance of each such Purchased Eligible
Loan.
Each Participation Certificate shall be executed on behalf of the Custodian, as trustee, by
a Responsible Officer of the Custodian. The signature of any such Responsible Officer on
the Participation Certificates may be manual or facsimile. Participation Certificates
bearing the manual or facsimile signatures of individuals who were at any time the
Responsible Officers of the Custodian shall bind the Custodian, notwithstanding the fact
that such individuals or any of them have ceased to hold such offices prior to the
authentication and delivery of such Participation Certificates or did not hold such
offices at the date of issuance of such Participation
Certificates.



(d) On the initial Purchase Date, in exchange for the payment of the Purchase Price
by the Department, the Custodian shall prepare and deliver to the Department (i) an initial
Loan Schedule and Custodial Certification that reflects the Eligible Loans transferred to
the Custodian as of such date, which shall be attached to the Class A Participation
Certificate, and (ii) a report listing all discrepancies from the Loan Documents that are
required to be delivered to the Custodian or its designee with respect to such Eligible
Loans (an “Exception Report”). On each subsequent Purchase Date or on any date prior to
the Termination Date on which Eligible Loans are redeemed by the Sponsor or the Put Option
is exercised, the Custodian shall prepare and deliver to the Sponsor and the Department an
updated Loan Schedule and Custodial Certification that reflects the addition or removal of
any Eligible Loans as of such date, to be attached to the Class A Participation
Certificate. Each subsequently delivered Loan Schedule and Custodial Certification shall
replace any previously delivered Loan Schedule and Custodial Certification, and any such
previously delivered Loan Schedule and Custodial Certification shall automatically be
cancelled. A copy of each Loan Schedule and Custodial Certification shall be provided to
the Sponsor.



 


- 17 -









 






(e) In connection with any delivery by the Custodian of a Loan Schedule and
Custodial Certification, the Custodian shall be deemed to represent and warrant to the Sponsor and
the Department that (i) the information set forth on each such Loan Schedule and Custodial
Certification is complete, true and correct in all respects as of the date of such delivery and at
all times until such Loan Schedule and Custodial Certification is canceled, (ii) legal title to
each Loan listed on the Loan Schedule and Custodial Certification is held by the Custodian in
trust for the benefit of holders of the Participation Interests, (iii) with respect to each Loan
listed on the Loan Schedule and Custodial Certification, all related Loan Documents have
been delivered to and are held by the Custodian or its designee in trust for the holders
of the Participation Interests, and (iv) with respect to each Loan listed on the Loan
Schedule and Custodial Certification, all Loan Documents delivered to the Custodian have
been reviewed by the Custodian and appear on their face to comply in all respects to the
requirements of the Agreement and customary custodial procedures with respect to FFELP
loans. Notwithstanding the foregoing, if the Custodian has delegated its obligation
hereunder to hold and review Loan Documents to another party pursuant to Section 18
hereof, the Custodian shall be protected against its good faith issuance of a Loan
Schedule and Custodial Certification, and related Exception Report that is in reliance on a
certification from such delegee as to any matters necessary for the Custodian to issue the
Loan Schedule and Custodial Certification and the Exception Report; provided that the
Custodian is in compliance with Section 18 hereof.




(f) In the event that the Custodian receives evidence satisfactory to it that a
Participation Certificate has been lost, mutilated, stolen or destroyed, the Custodian
shall issue and authenticate a new Participation Certificate and shall deliver a
replacement Participation Certificate of the same class, together with a replacement Loan
Schedule and Custodial Certification. Any subsequently delivered Participation Certificate
and Loan Schedule and Custodial Certification shall replace any previously delivered
Participation Certificate and Loan
Schedule and Custodial Certification and any replaced Participation Certificate and Loan
Schedule and Custodial Certification shall be automatically cancelled. The applicant for
any such new Participation Certificate may be required to pay any taxes and governmental
charges and all expenses and charges of the Custodian in connection with the issuance of
such Participation Certificate. All Participation Certificates shall be held and owned
upon the express condition that, to the extent permitted by law, the foregoing conditions
are exclusive with respect to the replacement and payment of mutilated, destroyed, stolen
or lost Participation Certificates.



(g) The outstanding principal balance of the Class A Participation Interests
evidenced by the Class A Participation Certificate shall be equal to the aggregate
Purchase Price paid with respect to the related Purchased Eligible Loans (including the
Purchase Price for any related Subsequent Disbursement), reduced by the amount of any
Redemption Payments or other payments allocable to principal received with respect to any
such Loans that have been applied to the outstanding principal balance of such Class A
Participation Interest through the end of the most recent calendar month. Upon the
purchase by the Department of additional Class A Participation Interests in Purchased
Eligible Loans, the aggregate outstanding principal balance of the Class A Participation
Interests evidenced by the Class A Participation Certificate shall be increased by the
Purchase Price with respect to each such additional Purchased Eligible Loans, and any
Subsequent Disbursements.


 


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Section 6. Security Interest.



(a) In the event, for any reason, any transfer of title to Loans and purchase of
Participation Interests hereunder is construed by any court or regulatory authority as a loan
rather than as a purchase, the Sponsor and the Eligible Lender Trustee (if applicable) hereby
grants to the Custodian, and the Custodian hereby assigns the same to the Department, as security
for the repayment of such loan and the performance of all other obligations of the Sponsor
hereunder, a
first priority security interest in all of their respective rights, title and interest in
and to the following property, whether now existing or hereafter acquired: (i) the
Purchased Eligible Loans; (ii) Collections and funds to be collected with respect to such
Purchased Eligible Loans; (iii) any monies on deposit in accounts established hereunder
(including the Collection Account), (iv) all proceeds thereon and related thereto, and (v)
all related tangible and intangible rights and security with respect thereto
(collectively, “Collateral”). Subject to Section 15(f), the lien on such Collateral
granted hereunder shall be deemed to be released with respect to any Purchased Eligible
Loan by Custodian and the Department upon the Sponsor’s remittance of the Redemption
Payment with respect to such Loan to the Department in accordance with Section 15 hereto,
and the release of such Loan from the related Class A Participation Interest. The
Department has the right to take all steps necessary to ensure perfection and priority in
the Collateral, including filing one or more Uniform Commercial Code financing statements
with the applicable filing office.



(b) Each of the Sponsor, the Eligible Lender Trustee (if applicable) and the
Custodian hereby authorize the Department, at the Sponsor’s expense, to perform all acts
which the Department deems appropriate to protect, preserve and realize upon the Purchased
Eligible Loans, including, but not limited to, the right to take possession of and endorse
and collect any checks, drafts, notes, acceptances or other instruments for the payment of
moneys due with respect to any Promissory Note, complete blanks in documents, transfer
servicing and execute assignments and other instruments on behalf of the Sponsor as its
attorney in fact. This power of attorney is coupled with an interest and is irrevocable
without Department’s consent.



(c) This Master Participation Agreement creates a valid and continuing interest (as
defined in the applicable Uniform Commercial Code) in the Purchased Eligible Loans in favor
of the Department, which security interest is prior to all other liens, charges, security
interests, mortgages or other encumbrances, and is enforceable as such as against
creditors of and purchasers from the Sponsor.



Pursuant to the Higher Education Act, a security interest in student loans is
perfected in
the same manner as “accounts” within the meaning of the applicable Uniform Commercial
Code.



This Master Participation Agreement constitutes a “financing statement” and a
“security
agreement” under Article 9 of the applicable Uniform Commercial Code.



Section 7. Subsequent Disbursements. To the extent of funds made available by or received
from the Sponsor, the Custodian shall make any disbursements that are scheduled and due after the
initial disbursement on a Purchased Eligible Loan (each, a
“Subsequent Disbursement”), and
shall issue to the Sponsor the related Participation Interests in such Subsequent Disbursements.
The Sponsor shall provide to or at the direction of the Custodian the funds necessary to make any
such Subsequent Disbursements, and the Sponsor, if requested by the Custodian, hereby agrees make
such disbursements directly to the applicable educational institution as the delegee of the
Custodian. The Sponsor shall sell to the Department Class A Participation Interests in the
Purchased Eligible Loan with respect to the initial disbursement and such Subsequent
Disbursements. Consistent with the terms of Section 4, the Department shall only purchase a Class
A Participation Interest in any Subsequent Disbursement of a Purchased Eligible Loan, if such
Subsequent Disbursement shall have been made by the Custodian or the
Sponsor pursuant to the terms of this Section 7 prior to the related Purchase Date, and
notice thereof shall have been provided to the Department.


 


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Section 8. Reporting; Due Diligence.



(a) On a monthly basis on the day of the month specified by the Department
(“Reporting Date”) or as otherwise specified below, the Sponsor shall provide or
cause the Custodian or the Servicer, as applicable, to provide to the Department, the
following:




	 	(1)	 	on the date of execution of the Adoption Agreement and on each
Reporting Date, a twelve (12) month rolling forecast, estimating the
number of Loans and the Principal Balance thereof that the Sponsor
reasonably believes, in good faith, that it will cause to become subject
to Participation Interests and sold to the Department hereunder, and the
number and Principal Balance of Purchased Eligible Loans that the Sponsor
expects to redeem in each of the months following the date of such
projection through September 2009;







	 	(2)	 	a listing of all principal and interest payments received on each
Purchased
Eligible Loan subject to a Participation Interest during the previous
calendar month and the current amount of principal and interest due and
owing on such Purchased Eligible Loans;







	 	(3)	 	information on Loans by schools, delinquencies, and other features as may
be requested by the Department from the Sponsor or the Custodian;







	 	(4)	 	with respect to each Servicer, any audit reports or other annual
compliance/operational audits performed on such Servicer relating to the
servicing of FFELP loans;







	 	(5)	 	within 60 days following the consummation of the initial Participation
Purchase Request hereunder and on any subsequent dates specified by the
Department, the Sponsor shall and shall cause each Servicer to provide to
the Department a statement of compliance with respect to this Agreement
and any related documents, Eligible Servicing Agreements and applicable
law, together with an agreed upon procedures letter delivered by an
independent public accountant with respect to this Agreement, all in forms
acceptable to the Department; and







	 	(6)	 	such other information as requested by the Department shall be delivered
to the Department, which may include Redemption Payment calculations as defined in clause (y) of
the definition of Redemption Payment, the calculation of other amounts due and owing to the
Department or Sponsor upon exercise of the Put Option with respect to Purchased Eligible loans,
and audited annual financial statements or unaudited quarterly financial statements of the Sponsor
and any Servicer or their respective consolidated groups.





 


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(b) On each Reporting Date, the Custodian shall provide to the Department the
following:




	 	(1)	 	a monthly settlement date report with respect to each Loan subject to a
Class A Participation Interest, which shall include all loan activity for
the prior calendar month including loan disbursements, and an
aggregation of the Participant’s Yield and principal paid to the
Department with respect to each Class A Participation Interest (a
“Settlement Date Report”); and







	 	(2)	 	prior to the later of (x) 90 days after the Termination Date, or (y) the
date
on which the Department publishes audit guidance, an audit of the
Custodian’s activities under that Participation Interest conducted by an
independent auditor selected by the Sponsor (which may be the same
auditor that is performing audits on behalf of the Sponsor or the
Servicer).






(c) The Sponsor shall ensure that at any time, the Department and its representatives
will have the right to request, schedule and conduct, during normal business hours and
upon reasonable prior notice, a due diligence/audit of the Servicer’s operations, the Loan
Documents, the Eligible Loans and the Settlement Date Reports. At any time and from time
to time during a calendar year, the Department shall have the right to request, schedule
and conduct, during normal business hours and upon reasonable prior notice, additional due
diligence of the Sponsor and the Custodian. All expenses incurred as a result of such due
diligence shall be borne by the Sponsor.



(d) Pursuant to Section 432(f) of the Higher Education Act, the Sponsor, the
Eligible
Lender Trustee (if applicable) and the Custodian each hereby grants the Department and its
agents (including but not limited to legal counsel and internal or external auditors), the
right at any time and from time to time during regular business hours, (i) to examine and
make copies of and abstracts from all books, records and documents (including, without
limitation, computer tapes and disks) in the possession or under the control of the
Sponsor, the Eligible Lender Trustee or the Custodian relating to Participation Interests
sold hereunder or the Loans subject to such Participation Interests and (ii) to visit the
offices of the Sponsor, the Eligible Lender Trustee or the Custodian for the purpose of
examining such material described in clause (i) above, and to discuss matters relating to
such Participation Interests or Loans or the performance of the Sponsor, the Eligible
Lender Trustee (if applicable) or the Custodian hereunder with any of their respective
officers and employees having knowledge of such matters.



(e) The Custodian may, in good faith, prepare any of the reports, statements or other information
to be delivered by the Custodian to the Department hereunder in reliance on information provided
to it by the Servicer or any other delegee so long as the Custodian is in compliance with Section
18 hereof with respect to such delegee.


 


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Section 9. Conditions Precedent.



(a) On or prior to the initial Purchase Date, the Sponsor shall deliver or cause to
be
delivered the following documents to the Department:




	 	(i)	 	the Adoption Agreement, duly executed by the Sponsor, the Eligible
Lender Trustee (if applicable) and the Custodian in four
counterparts;







	 	(ii)	 	a duly executed officer’s certificate of the Sponsor, in substantially the
form of Exhibit E hereto, together with all required attachments
thereto;







	 	(iii)	 	an opinion of counsel to the Sponsor, in substantially the form of
Exhibit F
hereto;







	 	(iv)	 	certified copies of all agreements of the Sponsor, if any, with other
Eligible Lenders or holders of beneficial interests in FFELP loans, to
aggregate, transfer or cause the transfer of legal title to, and sell
participation interests in Eligible Loans under the Agreement;







	 	(v)	 	tax lien, Uniform Commercial Code lien and judgment search reports with
respect to the Sponsor and the Eligible Lender Trustee (if applicable) in
all relevant jurisdictions;

	 
	 	(vi)	 	certified copies of all related Eligible Servicing Agreements;







	 	(vii)	 	the Class A Participation Certificate representing the Class A
Participation
Interests purchased on such Purchase Date, which shall have attached
thereto a Loan Schedule and Custodial Certification, certified by the
Custodian as an accurate listing of all of the Eligible Loans as to which
the
Custodian (i) holds legal title and (ii) has physical possession (either
directly or through its delegee) of all related Loan Documents in trust
for the benefit of the holders of the Participation Interests; and

	 
	 	(viii)	 	such other documents as the Department may request.






(b) On or prior to each Purchase Date (including the initial Purchase Date), the
Sponsor (or the Custodian, as applicable) shall be required to deliver each of the
following to the
Department or the Custodian, as applicable:




	 	(i)	 	Activities Prior to the Related Purchase Date. The Sponsor shall
have
provided any assistance requested by the Department in determining that all required documentation
on the related Eligible Loans is present and correct.





 


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	 	(ii)	 	Participation Purchase Request/Loan Schedule. The Sponsor shall deliver
to the Department:







	 	(1)	 	A Participation Purchase Request that has been duly authorized
and executed by an authorized officer of each of the Sponsor, the Eligible
Lender Trustee (if applicable) and the Custodian; and

	 
	 	(2)	 	The Loan Schedule, attached to the Participation Purchase
Request, identifying each of the Eligible Loans proposed to become subject to
Participation Interests.







	 	(iii)	 	Loan Documents. The Sponsor shall deliver to the Custodian or its
designee all Loan Documents related to each of the Eligible Loans proposed to become
subject to Participation Interests.

	 
	 	(iv)	 	Loan Schedule and Custodial Certification. The Custodian shall have
delivered to the Department an updated Loan Schedule and Custodial Certification
reflecting each of the Eligible Loans proposed to become subject to Participation
Interests and all other Eligible Loans then subject to Participation Interests
hereunder, which shall replace the previous Loan Schedule and Custodial
Certification.

	 
	 	(v)	 	Exception Report. To the extent applicable, the Custodian shall have
delivered to the Department (with a copy to the Sponsor) an Exception Report with
respect to the Eligible Loans proposed to become subject to Participation Interests;
provided that the Department shall not be obligated to purchase a Participation
Interest in any Eligible Loan as to which a discrepancy shall be listed on such
Exception Report unless in its sole discretion, the Department has either waived such
discrepancy or given the Sponsor the opportunity to cure such discrepancy and the
Sponsor shall have cured the same to the satisfaction of the Department.

	 
	 	(vi)	 	Eligible Lender Trustee. The Eligible Lender Trustee (if applicable) shall
have delivered to the Department such additional documents and information as the
Department shall have requested to evidence that the Eligible Lender Trustee is fully
authorized to transfer title to each Eligible
Loan to the Custodian on behalf of the Sponsor.

	 
	 	(vii)	 	Security Release Certification. If any of the Eligible Loans are subject
to
any security interest, pledge or hypothecation for the benefit of any Person, the
Sponsor shall deliver to the Department a fully executed Security Release
Certification with respect to such Eligible Loans.

	 
	 	(viii)	 	List of Lockboxes. The Sponsor shall have delivered to the Department a
list of lockboxes and copies of lockbox servicing instructions, to the extent not already
provided.





 


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	 	(ix)	 	Additional Documents. The Sponsor shall have delivered to the
Department such additional documents and information as the Department
shall have requested, including any documents set forth under Section
9(a) not previously delivered to the Department.






Section 10. Representations and Warranties of the Sponsor, the Eligible Lender

Trustee and Custodian.



(a) Representations as to the Sponsor and the Eligible Lender Trustee. The
Sponsor, and to the extent expressly required below, the Eligible Lender Trustee (if
applicable), represents and warrants to the Department and the Custodian, as of the date
the Adoption Agreement is executed and as of each Purchase Date:




	 	(i)	 	Each of the Sponsor and the Eligible Lender Trustee (if applicable) (1) is
duly organized, validly existing and in good standing under the laws of
the State of its formation or of the United States, as applicable, (2)
has all licenses necessary to carry out its business as now being
conducted or is otherwise exempt under applicable law from such licensing
or qualification or is otherwise not required under applicable law to
effect such licensing or qualification and no demand for such licensing
or qualification has been made upon the it by any such state, and (3) is
in compliance with the laws of any such state to the extent necessary to
ensure the enforceability of each Loan. No licenses or approvals obtained
by it have been suspended or revoked by any court, administrative agency,
arbitrator or governmental body and no proceedings are pending which
might result in such suspension or revocation;







	 	(ii)	 	The Sponsor or the Eligible Lender Trustee (if applicable) is an
“eligible
lender” as such term is defined in Section 435(d) of the Higher Education
Act, it has a lender identification number issued by the Department with
respect to the Loans;







	 	(iii)	 	The Sponsor or the Eligible Lender Trustee (if applicable) has in effect
a
Guarantee Agreement with a Guarantor with respect to each of the Loans;







	 	(iv)	 	The Sponsor intends to sell to the Department during the term of this
Agreement Class A Participation Interests in Eligible Loans, that it
estimates, in good faith, will have an aggregate Principal Balance of not
less than $50,000,000;







	 	(v)	 	With respect to each state or jurisdiction therein in which the Sponsor
undertakes origination activities, Sponsor is in full compliance with such state’s or
jurisdiction’s (as applicable) laws, rules, regulations, orders, settlement agreements and other
standards and procedures, including those promulgated by agencies or officers thereof, applicable
to it and pertaining to the conduct of participants in the student loan industry (including,
without limitation, any applicable “code of conduct” for participants in the student
loan industry);





 


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	 	(vi)	 	The Sponsor has administered, operated and maintained its student loan
program in such a manner as to ensure that such program and the Loans will benefit,
in all material respects, from the FFELP, the Guarantee Agreements related thereto
and the federal program of reimbursement for
FFELP loans pursuant to the Higher Education Act;

	 
	 	(vii)	 	Neither the Sponsor nor the Eligible Lender Trustee (if applicable) has,
with respect to any Purchased Eligible Loan, agreed to release any Guarantor from any
of its contractual obligations as a guarantor of such Loan or agreed otherwise to
alter, amend or renegotiate any material term or condition under which such Loan is
guaranteed, except as required by law or rules and regulations issued pursuant to
law, without the express prior written consent of the Department;







	 	(viii)	 	Each of the Sponsor and the Eligible Lender Trustee (if applicable) (1)
has, or, for Loans already transferred to the Custodian, had at the time of such
transfer, all requisite power and authority to hold each Loan, to transfer each Loan,
and to execute, deliver and perform, and to enter into and consummate, all
transactions contemplated by this Agreement, (2) has duly authorized the execution,
delivery and performance of this Agreement, and (3) has duly executed and delivered
this Agreement. This
Agreement, assuming due authorization, execution and delivery by the
Department, constitutes a legal, valid and binding obligation of each of the
Sponsor and the Eligible Lender Trustee (if applicable), enforceable against each of
them in accordance with its terms except as the enforceability thereof may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of rights of creditors generally, and to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in equity or
law); provided, however, that if the Sponsor is not an Eligible Lender, the power
and authority to hold and sell each Loan described in clause (1) shall refer, with
respect to the Sponsor, to the beneficial interest of the Sponsor, and with respect
to the Eligible Lender Trustee, to its interest as the legal title holder of the
Loan;

	 
	 	(ix)	 	The execution and delivery of this Agreement by each of the Sponsor and
the Eligible Lender Trustee (if applicable) and the performance of and compliance
with the terms of this Agreement will not violate its formation documents or
constitute a default under or result in a breach or acceleration of, any material
contract, agreement or other instrument to which it is a party or which may be
applicable to it or its assets;





 


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	 	(x)	 	Neither the Sponsor nor the Eligible Lender Trustee (if applicable) is in
violation of, and the execution and delivery of this Agreement by it and its
performance and compliance with the terms of this Agreement will not constitute a
violation with respect to, any order or decree of any court or any order or
regulation of any federal, state, municipal or governmental agency having
jurisdiction over it or its assets, which violation might have consequences that
would materially and adversely affect the condition (financial or otherwise) or its
operations or its assets or might have consequences that would materially and
adversely affect the performance of its obligations and duties hereunder;

	 
	 	(xi)	 	The Sponsor does not believe, nor does it have any reason or cause to
believe, that it cannot perform each and every covenant contained in this
Agreement;

	 
	 	(xii)	 	There are no actions or proceedings against, or investigations of, the
Sponsor or the Eligible Lender Trustee (if applicable) before any court,
administrative agency or other tribunal (A) that might prohibit its entering into
this Agreement, (B) that seeks to prevent the transfer of the Loans to the Custodian
or the creation and sale of the Participation Interests or the consummation of the
transactions contemplated by this Agreement, or (C) that might prohibit or
materially and adversely affect the performance of its obligations under, or the
validity or enforceability of, this Agreement;

	 
	 	(xiii)	 	No consent, approval, authorization or order of any court or governmental
agency or body is required for the execution, delivery and performance by the Sponsor
or the Eligible Lender Trustee (if applicable) of, or compliance by it with, this
Agreement or the consummation of the transactions contemplated by this Agreement,
except for such consents, approvals, authorizations or orders, if any, that have been
obtained prior to the related Purchase Date;

	 
	 	(xiv)	 	The consideration received by the Sponsor upon the sale of the
Participation Interests constitutes fair consideration and reasonably equivalent
value for such Participation Interests;

	 
	 	(xv)	 	The Sponsor is solvent and will not be rendered insolvent by the
consummation of the transactions contemplated hereby. The Sponsor is not
transferring any Participation Interests with any intent to hinder, delay or defraud
any of its creditors;

	 
	 	(xvi)	 	The Sponsor has an internal quality control program that verifies, on a
regular basis, the existence and accuracy of its legal documents, credit documents and
underwriting decisions. The program shall include evaluating and monitoring the overall quality
of the Sponsor’s loan production and the servicing of such loans. The program shall ensure that
Loans are originated and serviced in accordance with applicable law; guard against dishonest,
fraudulent, or negligent acts; and guard against
errors and omissions by officers, employees, or other authorized persons;
and





 


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	 	(xvii)	 	If the Sponsor is acting as an aggregator on behalf of any other
entity, it
has received a certification from such entity (which it will provide to
the Department upon request) that such entity has agreed to continue to
participate in the FFEL program and that at such time as funds become
reasonably available to it from private sources, it will originate new
FFELP loans after the Department’s purchases of Participation Interests
from the Sponsor hereunder.






(b) Loan Level Representations. The Sponsor, and to the extent expressly
required below, the Eligible Lender Trustee (if applicable), represents and warrants to
the Department as to the Eligible Loans subject to any Class A Participation Interest as
of each related Purchase Date and as of each date such Loans are subject to a Class A
Participation Interest:




	 	(i)	 	At the time of transfer of title to the Custodian, the Sponsor or the
Eligible
Lender Trustee (as applicable) has good and marketable title to, and the
Sponsor and Eligible Lender Trustee together are the sole owners of, the
Loans, free and clear of any security interest or lien (other than an
interest or lien that will be released simultaneously with the purchase
of the related Class A Participation Interest pursuant to a Security
Release Certification), charges, claims, offsets, defenses,
counterclaims or encumbrances of any nature and no right of rescission,
offsets, defenses or counterclaims have been asserted or threatened with
respect to the Loans;







	 	(ii)	 	Each Loan is an Eligible Loan and the description of and information
regarding the Loans set forth in the Participation Purchase Request and
the Loan Schedule is true, complete and correct;







	 	(iii)	 	The Sponsor or the Eligible Lender Trustee (if applicable) is authorized
to
transfer the Loans to the Custodian, to cause the Participation Interests
to be issued and to sell the Participation Interests to the Department;
and the transfer of the Loans to the Custodian and issuance and sale of
the Participation Interests will be made pursuant to and consistent with
the laws and regulations under which the Sponsor or the Eligible Lender
Trustee (if applicable) operates, and will not violate any decree,
judgment or order of any court or agency, or conflict with or result in a
breach of any of the terms, conditions or provisions of any agreement or
instrument to which it is a party or by which it or its property is
bound, or constitute a default (or an event which could constitute a
default with the passage of time or notice or both) thereunder;







	 	(iv)	 	The Loans are each in full force and effect in accordance with their
terms
and are legal, valid and binding obligations of the respective Borrowers thereunder subject to no
defenses;







 


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	 	(v)	 	No consents and approvals are required by the terms of the Loans
for the consummation of the sale of the Participation Interests hereunder to the
Department;







	 	(vi)	 	Each Loan has been duly made and serviced in accordance with the
provisions of the FFELP established under the Higher Education Act, and has been
duly guaranteed by a Guarantor; the Guarantee Agreement is in full force and
effect and is freely transferable to the Custodian as trustee for the benefit of
the Department as an incident to the purchase of each Participation Interest; and
all premiums due and payable to such Guarantor as of the related Purchase Date
shall have been paid in full;







	 	(vii)	 	Each Loan provides or, when the payment schedule with respect
thereto is determined, will provide for payments on a periodic basis that fully
amortize the Principal Balance thereof by its maturity, as such maturity may be
modified in accordance with any applicable deferral or forbearance periods
granted in accordance with applicable laws, including, those of the Higher
Education Act or any applicable Guarantee Agreement, as applicable;







	 	(viii)	 	Any payments on the Loans received by the Sponsor that have been allocated to
the reduction of principal and interest on such Loans have been allocated on a
simple interest basis;







	 	(ix)	 	Due diligence and reasonable care have been exercised in the
making, administering, servicing and collecting on the Loans and, with respect to
any Loan for which repayment terms have been established, all disclosures of
information required to be made pursuant to the Higher Education Act have been
made;







	 	(x)	 	Each Borrower is an eligible borrower under the terms of Section
428, 428B or 428H of the Higher Education Act, as applicable;







	 	(xi)	 	All Borrower origination fees and loan fees required pursuant to
Section 438 of the Higher Education Act have been paid to the Secretary or
appropriately reserved by the Sponsor or the Eligible Lender Trustee (if
applicable) for payment to the Secretary;







	 	(xii)	 	Each Loan is denominated and payable only in Dollars in the United
States;







	 	(xiii)	 	Sponsor has delivered or caused to be delivered to the Custodian as the legal
owner of the Loan and trustee for the Department or to the designee of the
Custodian, each of the Loan Documents with respect to such
Loan;







	 	(xiv)	 	The transfer and assignment herein contemplated constitute a valid sale of the
Participation Interests from the Sponsor to the Department, and the beneficial interest
in and title to such Participation Interests shall not be part of the Sponsor’s estate
in the event of the bankruptcy of the Sponsor or the appointment of a receiver with
respect to the Sponsor;





 


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	 	(xv)	 	Except for Loans executed electronically, there is only one original executed
copy of the Promissory Note evidencing each Loan. For Loans that were executed
electronically, the Sponsor of such Loan (or its designee) has possession of the
electronic records evidencing the Promissory Note, including all Loan Documents. The
Promissory Notes that constitute or evidence the Loans do not have any marks or
notations indicating that they have been pledged, assigned or otherwise conveyed to any
Person other than the Department;







	 	(xvi)	 	To the extent any Loan is evidenced by an electronic Promissory Note or an
electronic record, or to the extent the signature of the obligor on any Promissory Note
is an electronic signature, the Sponsor has complied (and has caused any originator or
servicer of the Loan to comply) with all regulations and other requirements provided by
the applicable Guarantor or the Department relating to the validity and enforceability
of such Promissory Note;







	 	(xvii)	 	Neither the Sponsor nor the Eligible Lender Trustee (if applicable) has pledged,
assigned, sold, granted a security interest in, or otherwise conveyed any of the Loans
other than the conveyance to the Custodian as trustee for the benefit of the Department
(other than (x) the transfer of legal title to the Eligible Lender Trustee (if
applicable), or (y) a security interest or lien that will be released simultaneously
with the purchase of the related Class A Participation Interest pursuant to a Security
Release Certification). Neither the Sponsor nor the Eligible Lender Trustee (if
applicable) has authorized the filing of or is aware of any financing statements against
either party that includes a description of collateral covering the Purchased Eligible
Loans hereunder or any other security interest that has not been terminated, or that
will not be terminated upon purchase of the related Class A Participation Interest by
the Department. Neither the Sponsor nor the Eligible Lender Trustee (if applicable) is
aware of any judgment or tax lien filings against it;







	 	(xviii)	 	No Borrower of a Loan is noted in the related loan file as being currently involved in a
bankruptcy proceeding;







	 	(xix)	 	Each grant of the Purchased Eligible Loans by the Sponsor pursuant to this Master
Participation Agreement is not subject to the bulk transfer act or any similar statutory
provisions in effect in any applicable jurisdiction; and







	 	(xx)	 	Each grant of the Purchased Eligible Loans (including all payments due or to become due
thereunder) by the Sponsor pursuant to this Master Participation Agreement is not subject
to and will not result in any tax, fee or governmental charge payable by the Sponsor to any
federal, state or local government.





 


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(c) Representations and Warranties of the Custodian. The Custodian represents and
warrants to the Department and the Sponsor, as of the date the Adoption Agreement is executed and
at all times thereafter:




	 	(i)	 	The Custodian is duly organized, validly existing and in good standing under the
laws of the State of its formation. The Custodian has all licenses necessary to carry
out its business as now being conducted or is otherwise exempt under applicable law from
such licensing or qualification or is otherwise not required under applicable law to
effect such licensing or qualification and no demand for such licensing or qualification
has been made upon the Custodian by any such state. No licenses or approvals obtained
by the Custodian have been suspended or revoked by any court, administrative agency,
arbitrator or governmental body and no proceedings are pending which might result in
such suspension or revocation;







	 	(ii)	 	The Custodian is an “eligible lender” as such term is defined in Section
435(d)(1)(A) of the Higher Education Act, and is a National or State-chartered bank;







	 	(iii)	 	The Custodian has a long-term senior unsecured debt rating of not less than
investment grade by at least one of Standard & Poor’s, a division of The McGraw-Hill
Companies, Inc., Moody’s Investors Service, Inc. or Fitch Ratings, or any of their
successors in interest;







	 	(iv)	 	The Custodian has a combined capital and surplus of at least $50,000,000, as set
forth in its most recent published annual report of condition;







	 	(v)	 	The Custodian has demonstrated, to the satisfaction of the Department, that it
has the administrative capability and operating systems adequate to discharge faithfully
the functions of the Custodian under this Agreement, and has allocated sufficient staff
(including Responsible Officers of the corporation) to carry out such duties;







	 	(vi)	 	The Custodian is not affiliated with the Sponsor or the Eligible Lender Trustee;







	 	(vii)	 	The Custodian is not aware of any liens in existence with respect to any
Purchased Eligible Loan held by the Custodian, other than the lien of the Department and
any interest or lien that will be released simultaneously with the purchase of the
related Class A Participation Interest pursuant to a Security Release Certification;





 


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	 	(viii)	 	The Custodian has all requisite power and authority to hold each Loan as trustee, and
to execute, deliver and perform, and to enter into and consummate, all transactions
contemplated by this Agreement. The Custodian has duly authorized the execution,
delivery and performance of this Agreement, has duly executed and delivered the Adoption
Agreement, and this Agreement, assuming due authorization, execution and delivery by
each of the Sponsor and the Department, constitutes a legal, valid and binding
obligation of the Custodian, enforceable against it in accordance with its terms except
as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of rights of creditors generally,
and to general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or law);







	 	(ix)	 	The execution and delivery of the Adoption Agreement by the Custodian and the
performance of and compliance with the terms of this Agreement will not violate the
Custodian’s formation documents or constitute a default under or result in a breach or
acceleration of, any material contract, agreement or other instrument to which the
Custodian is a party or which may be applicable to the Custodian or its assets;







	 	(x)	 	The Custodian is not in violation of, and the execution and delivery of this
Agreement by the Custodian and its performance and compliance with the terms of this
Agreement will not constitute a violation with respect to, any order or decree of any
court or any order or regulation of any federal, state, municipal or governmental agency
having jurisdiction over the Custodian or its assets, which violation might have
consequences that would materially and adversely affect the condition (financial or
otherwise) or the operation of the Custodian or its assets or might have consequences
that would materially and adversely affect the performance of its obligations and duties
hereunder;







	 	(xi)	 	The Custodian does not believe, nor does it have any reason or cause to believe,
that it cannot perform each and every covenant contained in this Agreement;







	 	(xii)	 	There are no actions or proceedings against, or investigations of, the Custodian
before any court, administrative agency or other tribunal (A) that might prohibit its
entering into this Agreement, (B) seeking to prevent the transfer of the Loans to the
Custodian or the creation and sale of the Participation Interests or the consummation of
the transactions contemplated by this Agreement or (C) that might prohibit or materially
and adversely affect the performance by the Custodian of its obligations under, or the
validity or enforceability of, this Agreement; and







	 	(xiii)	 	No consent, approval, authorization or order of any court or governmental agency or
body is required for the execution, delivery and performance by the
Custodian of, or compliance by the Custodian with, this Agreement or the consummation of
the transactions contemplated by this Agreement, except for such consents, approvals,
authorizations or orders, if any, that have been obtained.





 


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Section 11. Collections; Distributions.



(a) The Sponsor shall cause a Collection Account to be established at the Custodian for the
purpose of holding all payments and other proceeds of any kind received on or with respect to the
Purchased Eligible Loans and any funds received by reason of a Borrower cancellation of a Purchased
Eligible Loan or a return of Title IV, HEA funds from the institution attended by such Borrower,
and without the netting of any amounts (“Collections”) for the benefit of the Department, as holder
of the Class A Participation Interests. The Sponsor shall cause the Servicers, as defined below, to
deposit all Collections as soon as possible, but in no event later than two (2) Business Days after
receipt of funds, into the Collection Account. The Custodian hereby grants to the Department a
first priority precautionary security interest in the Collection Account, all Collections at any
time on deposit therein and all proceeds and products thereof. Amounts on deposit in the
Collection Account may be invested only in Permitted Investments.



(b) On the first Business Day of each calendar month or such other date as agreed to between
the Custodian and the Department, the Custodian shall distribute all funds then on deposit in the
Collection Account to be applied in the following order of priority:




first, to the Department to pay the aggregate outstanding Participant’s
Yield then due and owing to the Department (together with all outstanding
Participant’s Yield not paid to the Department on any previous distribution date
due to insufficient funds on deposit in the Collection Account);




second, to the Department to reduce the aggregate outstanding principal
balance of the Class A Participation Interests held by the Department (calculated
pursuant to Section 5(g) through the end of the most recent calendar month), until
such balance is reduced to zero; and




third, to the Sponsor, any remaining amounts.



(c) Upon the request of the Sponsor, the Custodian may distribute funds then on deposit in the
Collection Account to the Department on a regular basis, but not more frequently than weekly.



(d) Following the Termination Date, but on or before October 20, 2009, the Custodian shall
distribute any funds remaining on deposit in the Collection Account, in the following order of
priority:




first, to the Department, the aggregate outstanding Participant’s Yield
then due and owing;




second, to the Department to reduce the aggregate outstanding principal
balance of the Class A Participation Interests (calculated pursuant to Section 5(g)
through the end of the most recent calendar month) until such balance is reduced to
zero; and




third, to the Sponsor, any remaining amounts.


 


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(e) All distributions by the Custodian hereunder shall be made by electronic transfer in funds
available on the next business day in accordance with the instructions provided by the recipient.



(f) The Custodian shall calculate any amounts due to the Department or the Sponsor hereunder
and all such calculations shall be subject to verification by the Department.




Section 12. Servicing of Eligible Loans.



(a) Each Eligible Loan which is subject to a Participation Interest shall be serviced by a
Servicer (which may be the Sponsor) at the direction of the Custodian pursuant to the terms of an
Eligible Servicing Agreement, and in accordance with Department regulations. No such Servicer shall
be subject to sanction by the Department.



(b) The Sponsor will be responsible for the payment of any servicing related fees and expenses
incurred in connection with the servicing of the related Eligible Loans.



(c) A servicing agreement will be deemed to be an “Eligible Servicing Agreement” if the
agreement:




	 	(i)	 	contains customary terms and conditions that reflect a negotiated, arms-length
transaction;







	 	(ii)	 	provides for not more than a fair market servicing fee;







	 	(iii)	 	includes usual and customary representations, warranties, covenants and events
of default;







	 	(iv)	 	acknowledges or has been amended to acknowledge that the Department is an
intended third-party beneficiary of such agreement entitling the Department to instruct
the Servicer and exercise remedies with respect to the applicable Eligible Loans upon
the occurrence of a Servicer Event of Default;







	 	(v)	 	provides that the Servicer will deposit all Collections into the Collection
Account not later than two (2) Business Days after receipt;







	 	(vi)	 	provides that upon notice of the exercise of the Put Option or other acquisition
of an Eligible Loan by the Department, such agreement may be terminable by the
Department, in its sole discretion, upon thirty (30) days’ notice and the Eligible Loans
deconverted and transferred to a designee of the Department without the payment by the
Department of any de-boarding, deconversion or related costs, penalties or fees to the
related Servicer and that the servicing shall be transferred as instructed by the
Department; and







	 	(vii)	 	provides that the Servicer shall deliver to the Custodian all documents and
information necessary to enable the Custodian to oversee the Servicer as provided
herein.





 


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(d) The Custodian shall take all reasonable steps, actions and proceedings necessary to ensure
that each Servicer will manage, service, administer, make collections and calculate any amounts
owed to the Department with respect to the Eligible Loans (including collection of any Interest
Subsidy Payments and Special Allowance Payments and calculate any negative Special Allowance
Payments owing with respect to the Eligible Loans) in compliance with all applicable Federal and
State laws, including all applicable rules, regulations and other requirements of the Higher
Education Act and the applicable Guarantee Agreement. The Custodian shall ensure that each Servicer
shall be responsible for segregating, marking each Eligible Loan as owned by the Custodian and
remitting to the Custodian all payments received on the Eligible Loans for the benefit of the
Department as the holder of the Class A Participation Certificate, including but not limited to,
physical or electronic marking of relevant computer records.




Section 13. Enforcement of the Servicing Agreements.



(a) The Custodian shall take all reasonable steps, actions and proceedings necessary to
enforce all terms, covenants and conditions of the Servicing Agreement, and shall cause the
Servicer to specify whether Collections received by it and deposited into the Collection Account
represent principal or interest.



(b) The Custodian shall not permit the release of the obligations of the Servicer under the
Servicing Agreement except in conjunction with amendments or modifications permitted by Section
13(f) below.



(c) At all times, to the extent permitted by law, cause to be defended, enforced, preserved
and protected the rights and privileges of the Custodian and the Department under or with respect
to the Servicing Agreement.



(d) The Custodian shall notify the Department in writing promptly upon becoming aware of any
default or failure to perform any obligations on the part of the Servicer under the Servicing
Agreement.



(e) The Custodian shall not waive any default by the Servicer under the Servicing Agreement
without the written consent of the Department.



(f) The Custodian shall not consent or agree to or permit any amendment or modification of the
Servicing Agreement which will in any manner materially adversely affect the rights or security of
the Department. Pursuant to the Servicing Agreement, the Sponsor and the Custodian shall be
entitled to receive and rely upon an opinion of outside counsel that any such amendment or
modification will not materially adversely affect the rights or security of the Department.


 


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Section 14. Liability of the Sponsor and the Custodian; Indemnities.



(a) The Sponsor shall be liable in accordance herewith only to the extent of the obligations
specifically undertaken by the Sponsor under this Agreement, and to the extent of any obligations
delegated by the Custodian to the Sponsor pursuant to the terms hereof.




	 	(i)	 	The Sponsor shall indemnify, defend and hold harmless the Department and its
officers, directors, employees and agents in their individual capacity 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 documents related hereto, including
any sales, gross receipts, general corporation, tangible and intangible personal
property, privilege or license taxes and costs and expenses in defending against the
same.







	 	(ii)	 	The Sponsor shall indemnify, defend and hold harmless the Department and its
officers, directors, employees and agents in their individual capacity, from and against
any and all liability for any and all costs, expenses (including, without limitation,
costs and expenses of litigation and of investigation counsel fees, damages, judgments
and amounts paid in settlement), losses, claims, damages and liabilities that may be
imposed on, incurred by, or asserted against the Department in any way relating to or
arising out of this Agreement or, the Sponsor’s, the Eligible Lender Trustee’s (if
applicable), or the Servicer’s willful misfeasance, bad faith or negligence in the
performance of its respective duties under this Agreement or the Servicing Agreement, as
applicable, or by reason of a breach by the Sponsor, the Eligible Lender Trustee or the
Servicer of any of their respective representations, warranties, covenants or other
obligations or duties under this Agreement or the Servicing Agreement, as applicable.







	 	(iii)	 	The Sponsor shall reimburse, indemnify, defend and hold harmless the Custodian
and its directors, officers, agents and employees in their individual capacity from and
against any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, or out-of-pocket expenses of any kind or nature whatsoever,
including reasonable attorney’s fees, that may be imposed on, incurred by, or asserted
against it or them in any way relating to or arising out of this Agreement or the
Custodian’s ownership of legal title to the Purchased Eligible Loans.





 


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(b) The Custodian shall be liable in accordance herewith only to the extent of the obligations
specifically undertaken by the Custodian under this Agreement, and with respect to those
obligations delegated by it pursuant to the terms hereof, only to the extent the Custodian shall
not have complied with Section 18. The Custodian shall indemnify, defend and hold harmless the
Department and the officials, employees and agents of the Department in their individual capacity
from and against liability for any and all costs, expenses (including, without limitation, costs
and expenses of litigation and of investigation counsel fees, damages, judgments and amounts paid
in settlement), losses, claims, damages and liabilities that may be imposed on, incurred by, or
asserted against the Department in any way relating to or arising out of the Custodian’s willful
misfeasance, bad faith or negligence in the performance of its duties under this Agreement, or by
reason of its breach of any of its representations, warranties, covenants or other obligations or
duties under this Agreement. Notwithstanding anything in this Agreement to the contrary, in no
event shall the Custodian be liable for any special, consequential, punitive or indirect damages
resulting from any action taken or omitted to be taken by it hereunder or in connection herewith.
The foregoing sentence shall survive the removal of the Custodian and the termination of this
Agreement. Except to the extent of losses, claims, damages and liabilities that arise out of the
Custodian’s willful misfeasance, bad faith or negligence in the performance of its duties under
this Agreement, the amount of Custodian’s liabilities to the Department and its officials,
employees and agents under this Section 14(b) shall be limited to the amount of the aggregate fees
paid to it for its services hereunder.



(c) Indemnification under this Section 14 shall survive the resignation or the termination of
this Agreement, and shall include reasonable fees and expenses of counsel and expenses of
litigation. If the Sponsor or Custodian, as applicable, 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
Sponsor or Custodian, as applicable, without interest.




Section 15. Redemption; Put Option; Termination.



(a) On or at any time before the Termination Date with respect to each Purchased Eligible
Loan, the Sponsor shall notify the Department and the Custodian of its election to either (x) pay
to the Custodian for the benefit of the Department the related Redemption Payment, or (y) exercise
the Put Option with respect thereto. Upon receipt of such notification, the Custodian shall compute
the calculation in clause (y) of the definition of Redemption Payment based upon the data provided
by the Sponsor in such notification.



(b) Upon receipt of the Redemption Payment with respect to a Purchased Eligible Loan, the
Custodian shall promptly (i) remit such Redemption Payment to the Department, (ii) transfer legal
title and release all of its interests in and to such Purchased Eligible Loan to the Sponsor or the
Eligible Lender Trustee (if applicable), (iii) deliver or
cause to be delivered all related Loan Documents to the Sponsor, and (iv) cancel the Class A
Participation Interest and the Class B Participation Interest with respect to such Purchased
Eligible Loan.



 


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(c) In order to exercise the Put Option with respect to a Purchased Eligible Loan, the Sponsor
shall (1) together with its Eligible Lender Trustee, if applicable, have entered into a Master Loan
Sale Agreement (which may be done at any time on or before July 1, 2009 notwithstanding any other
document or agreement), (2) comply with the requirements set forth in Sections 4A, 4D and 4F of the
Master Loan Sale Agreement, (3) comply with each of the conditions precedent set forth in Sections
5A and 5B(i) of the Master Loan Sale Agreement; (4) prepare and deliver to the Custodian for
execution the documents set forth in Sections 5B(iii) through (vii) and 5C of the Master Loan Sale
Agreement; (5) make each of the representations and warranties set forth in Section 6 of the Master
Loan Sale Agreement as they pertain to the Sponsor as of both the date of the Adoption Agreement
and the date the related Put Option is exercised, and as they pertain to such Purchased Eligible
Loan as of the Purchase Date under this Agreement and as of the date the related Put Option is
exercised, (6) ensure the delivery of all related servicing rights with respect to such Purchased
Eligible Loan to the Department, and (7) cause the related Servicing Agreement with respect to such
Purchased Eligible Loan to be terminated.



(i) Upon the Custodian’s receipt of a request by the Sponsor to exercise the Put Option with
respect to a Purchased Eligible Loan, the Custodian shall promptly (1) transfer legal title and
release all of its interests in and to such Purchased Eligible Loan to the Department, (2) deliver
or cause to be delivered all related Loan Documents to the Department or its designee, and (3)
cancel the Class A Participation Interest and the Class B Participation Interest with respect to
such Purchased Eligible Loan.



(ii) The Sponsor and the Department may, at the discretion of the Department, net settle all
amounts then due and owing to either party with respect to Purchased Eligible Loans with respect to
which the Put Option has been exercised, and the Department will remit to the Custodian any net
amount due to the Sponsor, which the Custodian will deposit into the Collection Account and remit
to the Department or the Sponsor in accordance with the provisions of Section 11 of this Agreement.
The Department will credit in the foregoing settlement process the amount of any Interest Subsidy
Payments or Special Allowance Payments then due, owing, and payable with respect to the Eligible
Purchased Loans for the most recently completed fiscal quarter, and deduct any negative Special
Allowance Payments due and owing with respect to the Eligible Purchased Loans for the most recently
completed fiscal quarter.



(iii) Following the exercise of the Put Option with respect to a Purchased Eligible Loan, such
Loan shall immediately become subject to the Master Loan Sale Agreement as though it had been sold
thereunder and the Sponsor shall be bound by the terms of the Master Loan Sale Agreement in all
respects with respect to such Loan.



(iv) Notwithstanding anything herein to the contrary, a lender providing interim financing to
the Sponsor for Loans prior to the related Purchase Date therefor shall have the right to enforce
the Sponsor’s obligations to exercise the Put Option with respect to such Loans pursuant to this
Section 15 if (x) such lender presents to the Department and the Custodian of a power of attorney
that is duly executed by the Sponsor and the Eligible Lender Trustee (if applicable and to the
extent necessary) and is enforceable in each applicable jurisdiction, and (y) the Loans are
Eligible Loans. For the avoidance of doubt, such lender, in exercising its rights under this
Section 15(c)(iv), shall not be obligated to perform any of the obligations of the Sponsor or the
Eligible Lender Trustee (if applicable) hereunder, including any obligation to file a Notice of
Intent to Participate with the Department, or to make Subsequent Disbursements with respect to any
Loan put to the Department by such lender.



(d) Notwithstanding the foregoing, the following will apply with respect to the Sponsor’s
redemption or exercise of the Put Option with respect to Purchased Eligible Loans:




(1) any Purchased Eligible Loan that becomes and remains delinquent must be redeemed
by the Sponsor not later than the 255th day of such delinquency; and




(2) any redemption or exercise of the Put Option with respect to a particular
Purchased Eligible Loan that is a Stafford Loan shall require the redemption or exercise of
the Put Option, as applicable, by the Sponsor, with respect to any other Purchased Eligible
Loan that is a Stafford Loan for which the Borrower is the same.


 


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(e) On the Termination Date, all Eligible Loans then subject to Participation Interests, and
the related servicing rights attributable to such Eligible Loans, for which the Sponsor has not
made the Redemption Payment shall become the property of the Department without any further action
by the Department and the Participation Interests and the rights of the Department and the Sponsor
under this Agreement shall be automatically terminated. Upon the termination of this Agreement, the
Custodian shall remit to the Sponsor the excess (if any) of the aggregate amount of any Redemption
Payments made under this Agreement over the obligations due and owing to the Department by the
Sponsor.



(f) In no event shall the Custodian permit any Purchased Eligible Loans to be released from a
Class A Participation Interest if, after giving effect to such release, the outstanding Principal
Balance of the Purchased Eligible Loans that remain subject to the Class A Participation Interests
is less than the aggregate outstanding principal balance of the Class A Participation Interests and
Participant’s Yield then due and owing to the Department.



Section 16. Sponsor Events of Default; Remedies. Upon the occurrence of any Sponsor
Event of Default, the Department, at its sole option, shall have the right to exercise any or all
of the following rights and remedies:



(a) The Department may deem the Termination Date to immediately occur with respect to this
Agreement or all or any portion of the Purchased Eligible Loans as it may determine in its sole
discretion, whereupon the Sponsor shall remit the Redemption Payment to the Department and/or
exercise the Put Option in accordance with Section 15 with respect to each Purchased Eligible Loan
subject to such termination;




(b) The Department may increase the Spread to three hundred (300) basis points; and/or



(c) The Department may limit, suspend or terminate the eligibility of the Sponsor, if an
Eligible Lender, with respect to participation as a FFELP lender, pursuant to 34 C.F.R. part 682
subpart G, or may suspend or debar the Sponsor pursuant to 34 C.F.R. Part 85, or both.




Section 17. Custodian Events of Default; Removal of Custodian.



(a) Upon the occurrence of any Custodian Event of Default, (i) either the Department or the
Sponsor, with the consent of the Department, upon at least thirty (30) days’ prior written notice
to the Custodian, may remove and discharge the Custodian from the performance of its obligations
hereunder, and (ii) the Department shall have the further right, exercisable at its sole
discretion, to limit, suspend or terminate the eligibility of the Custodian with respect to
participation as a FFELP lender, pursuant to 34 C.F.R. part 682 subpart G, or may suspend or debar
the Custodian pursuant to 34 C.F.R. Part 85, or both.


 


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(b) Promptly after the giving of notice of removal of the Custodian, the Sponsor shall
appoint, by written instrument, a successor custodian that meets all of the criteria of eligibility
of a custodian under this Master Participation Agreement, and the Sponsor shall cause such
successor custodian to become a party to this Master Participation Agreement by executing a
counterpart of the Adoption Agreement within thirty (30) days’ of notice of removal to the
Custodian.



(c) In the event of any removal of the Custodian pursuant to Section 17(a) hereof, the
Custodian shall promptly transfer to the successor custodian, as directed in writing, legal title
to all Eligible Loans and all Loan Documents being administered under this Agreement, and shall
cooperate and comply with all other reasonable requests in connection with the transfer of the
Purchased Eligible Loans and the Collection Account to the successor custodian. Any cost of
shipment arising out of the removal of the Custodian shall be at the expense of the Sponsor.



(d) In the event a Custodian (or successor custodian) is removed, by any Person or for any
reason permitted hereunder, such removal shall not become effective until (a) in the case of
removal by the Department, the Department by instrument or concurrent instruments in writing
(signed and acknowledged by an authorized representative or an attorney-in-fact) filed with the
Custodian removed have appointed a successor custodian or otherwise the Sponsor shall have
appointed a successor, and (b) the successor custodian has accepted appointment as such.



Section 18. Delegation of Duties by the Custodian. The Custodian may delegate to
another Eligible Lender (including the Sponsor) or to the related Servicer certain of its
obligations hereunder. Notwithstanding the foregoing, the Custodian must perform and shall not
delegate its obligations to do the following: (1) hold legal title in its own name to each of the
Purchased Eligible Loans, (2) issue and authenticate the Participation Certificates, (3) issue the
Participation Interests, (4) create and deliver each Loan Schedule and Custodial Certification and
each of the reports required to be delivered by the Custodian under Section 8(b) hereof, and (5)
hold and disburse all Collections, collect any Redemption Payments in accordance with the terms
hereof, net settle any exercise of the Put Option, and perform any other collection and remittance
functions ancillary to the transactions contemplated herein between the Sponsor and the Department
(except as expressly permitted in Section 7 hereof). If the Custodian delegates any of its
obligations to a delegee as permitted in this Section 18: (i) the Custodian shall exercise due care
in its appointment of such delegee, (ii) if the Custodian performs any of its non-delegated
obligations hereunder in reliance on such delegee’s performance of delegated obligations, such
reliance shall be reasonable under the circumstances, (iii) the Custodian shall take those steps
that are reasonable under the circumstances to ascertain whether such delegee is properly
performing the delegated obligations, and (iv) if such delegee has failed to perform any of its
delegated obligations, the Custodian shall either assume the delegated obligations or promptly
appoint a successor delegee to perform such obligations.



Section 19. Custodian Not to Resign. The Custodian may not resign from its duties and
obligations as custodian hereunder unless such resignation is agreed to by the
Department and the Sponsor.


 


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Section 20. Merger of the Custodian. Any corporation into which the Custodian may be
merged or with which it may be consolidated, or any corporation resulting from any merger or
consolidation to which the Custodian shall be a party, or any corporation succeeding to all or
substantially all of the custodial or trust business of the Custodian, shall be the successor to
the Custodian hereunder, provided that such corporation shall be otherwise qualified and eligible
under this Master Participation Agreement, without the execution or filing of any paper or any
further act on the part of any other parties hereto.



Section 21. No Transfer of Participation Certificates or Participation Interests. None
of the Participation Certificates or any Participation Interest may be sold, assigned, transferred,
pledged, or hypothecated by any party hereto without the prior written consent of each other party
hereto; provided that the Sponsor may grant a security interest in any of the Class B Participation
Interests to any Person providing interim financing to the Sponsor.




Section 22. Fees and Expenses.



(a) The Sponsor shall be required to pay (i) all of the costs and expenses which are incurred
by it in connection with the negotiation, preparation, execution and delivery of this Agreement and
any other related documents, including, without limitation, the reasonable fees and out-of-pocket
expenses of counsel for such Sponsor, (ii) all costs and expenses of servicing the Eligible Loans,
(iii) the cost of audits and reports required to be delivered under this Agreement by the Sponsor,
the Custodian and the Servicer, (iv) all costs and expenses incurred in connection with the
transfer and delivery of the Eligible Loans to the Custodian and (v) the fees of the Custodian and
any fees and expenses incurred in connection with transferring ownership of any Eligible Loans to
the Custodian or to the Department in connection with the exercise of the Put Option or any other
acquisition of ownership of the Eligible Loans by the Department. The Sponsor is responsible for
any fee or other charge owed to the Department or to the guaranty agency on a Purchased Eligible
Loan after such Purchased Eligible Loan has been transferred to the Custodian, including amounts
owed to the Department as a recapture of excess interest.



(b) The Custodian shall be required to pay all of the costs and expenses which are incurred by
it in connection with the negotiation, preparation, execution and delivery of this Agreement and
any or any other related documents, including, without limitation, the reasonable fees and
out-of-pocket expenses of its counsel.



(c) The Department shall be required to pay all of the costs and expenses which are incurred
by it in connection with the negotiation, preparation, execution and delivery of this Agreement and
any or any other related documents, including, without limitation, the reasonable fees and
out-of-pocket expenses of its counsel.




Section 23. Tax Matters.



(a) The parties hereto understand and agree that the economic arrangement related to the
distribution provisions of Section 11, are intended to be treated as a partnership (the
“Partnership”) for tax purposes, and that the income, gain, loss, credit and expenses
attributable to such arrangement shall be treated as items of income, gain, loss, credit and
expenses of the Partnership. The parties agree to treat the Partnership as a partnership for tax
purposes.


 


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(b) The Partnership’s fiscal year shall end on December 31 of each year unless otherwise
required by Section 706 of the Code and the Treasury Regulations. As soon as practicable after the
end of each fiscal year (but no later than six (6) months after the end of each fiscal year), the
Custodian will prepare and mail, or cause to be prepared and mailed, to the Department and the
Sponsor (each, a “Partner”, and together, the “Partners”) information on Schedule
K-1 to Form 1065 and such additional information as shall enable each Partner to prepare its
federal, state and local income tax returns in accordance with the laws then prevailing.



(c) The Custodian shall establish and maintain a separate capital account (a “Capital
Account”) for each Partner in accordance with the Treasury Regulations promulgated under
Section 704(b) of the Code. The Capital Accounts of the Partners shall be adjusted and maintained
in a manner that as closely as possible gives economic effect to the provisions of this Agreement.
No later than as of the end of each fiscal year of the Partnership, the Partnership’s income,
gains, losses and expenses for U.S. federal, state and local income tax purposes shall be allocated
among the Capital Accounts in a manner that as closely as possible gives economic effect to the
provisions of this Agreement. With respect to any fiscal period during which any Partner’s economic
interest in the Partnership changes by reason of any event described in Section 706(d)(1) of the
Code and Treasury Regulations issued thereunder, allocations of the Partnership’s income, gain,
loss and expense shall be adjusted appropriately to take into account the varying interests of the
Partners during such period. The Partnership shall select the method of making such adjustments,
which method shall be used consistently thereafter. Items of income, gain, loss, deduction and
credit, as determined for U.S. federal income tax purposes shall be allocated in a manner
consistent with the requirements of Section 704(c) of the Code.



(d) If the Partnership incurs any obligation to pay directly any amount in respect of taxes,
including but not limited to withholding taxes imposed on any Partner’s share of the Partnership
gross or net income and gains (or items thereof), income taxes, and any interest, penalties or
additions to tax (“Tax Liability”), or the amount of cash or other property to which the
Partnership otherwise would be entitled is reduced as a result of withholding by other parties in
satisfaction of any such Tax Liability, all payments by the Partnership in satisfaction of that Tax
Liability and all reductions in the amount of cash or fair market value of property to which – but
for such Tax Liability – the Partnership would have been entitled shall be treated, pursuant to
this Agreement, as distributed to those Partners or former Partners to which the related Tax
Liability is attributable. Notwithstanding any other provision of this Agreement, subsequent
distributions to the Partners shall be adjusted by the Partnership in an equitable manner so that,
after all such adjustments have been made and to the extent feasible, the burden of taxes withheld
at the source or paid by the Partnership is borne by those Partners to which such tax obligations
are attributable. The Partnership shall determine the amount (if any) of any Tax Liability
attributable to any Partner taking into account any differences in the Partner’s status,
nationality or other characteristics.


 


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Section 24. Set-off. In addition to any rights and remedies of the Department
provided in this Agreement and by law, the Department shall have the right, without prior notice to
the Sponsor, any such notice being expressly waived by the Sponsor to the extent permitted by
applicable law, upon any amount becoming due and payable to the Department by the Sponsor hereunder
with respect to any Purchased Eligible Loan or otherwise, to set-off and appropriate and apply
against such amount any and all Collections then on deposit in the Collection Account. The
Department agrees to notify promptly the Sponsor after any such
set-off and application made by the
Department, and to provide, upon objection by the Sponsor, such review as may be required by
applicable law regarding objections to the existence and amount of the claim enforced by such
set-off. The review is to be conducted on written submissions, and failure to give such notice
shall not affect the validity of such set-off and application.



Section 25. Survival of Covenants. All covenants, agreements, representations and
warranties made herein and in or pursuant to any related documents or agreements executed pursuant
to this Agreement shall survive the consummation of the acquisition of the Participation Interests
by the Department. All covenants, agreements, representations and warranties made or furnished
pursuant hereto by or on behalf of the Sponsor shall bind and inure to the benefit of any
successors or assigns of the Department and shall survive with respect to each Participation
Interest and each Loan subject to a Participation Interest.



Section 26. Communication and Notice Requirements. All communications, notices and
approvals provided for hereunder shall be in writing and mailed or delivered to the Sponsor, the
Custodian or the Department, as the case may be, at such address as either party may hereafter
designate by notice to the other party. All demands, notices and communications hereunder shall be
in writing and shall be deemed to have been duly given if mailed, by registered or certified mail,
return receipt requested, or, if by other means, when received by the other party at the address as
follows:




If to the Department:




By U.S. Postal Service mail:




United States Department of Education
400
Maryland Avenue, SW

UCP, Room 111G3

Washington, DC 20202-5402

Attention: FFEL Agreement Process Team




By courier or express mail:




United States Department of Education
 830
First Street, N.E.

Room 111G3

Washington, DC 20202-5402

Attention: FFEL Agreement Process Team




If to the Sponsor or the Eligible Lender Trustee:




The address designated in the
Adoption Agreement.




If to the Custodian:




The address designated in
the Adoption Agreement.


 


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Section 27. Form of Instruments. All instruments and documents delivered in
connection with this Agreement and any Class A Participation Certificate, and all proceedings to be
taken in connection with this Agreement and any Class A Participation Certificate and the
transactions contemplated herein and therein, shall be in a form as set forth in the attachments
hereto, and the Department shall have received copies of such documents as it or its counsel shall
reasonably request in connection therewith. Any instrument or document which is substantially in
the same form as an attachment hereto or a recital herein will be deemed to be satisfactory as to
form.



Section 28. Amendment; Waiver. This Agreement, any Class A Participation Certificate
and any document or instrument delivered in accordance herewith or therewith may be amended by the
parties hereto and thereto with the written consent of all parties hereto or thereto. No term or
provision of this Agreement may be waived or modified unless such waiver or modification is
consistent with the requirements of Section 459A of the Higher Education Act, is in writing and is
signed by the party against whom such waiver or modification is sought to be enforced.



Section 29. Severability Clause. Any part, provision, representation or warranty of
this Agreement which is prohibited or unenforceable or is held to be void or unenforceable in any
jurisdiction shall be ineffective, as to such jurisdiction, to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction as to any Loan shall not invalidate or render unenforceable
such provision in any other jurisdiction. To the extent permitted by applicable law, the parties
hereto waive any provision of law which prohibits or renders void or unenforceable any provision
hereof. If the invalidity of any part, provision, representation or warranty of this Agreement
shall deprive any party of the economic benefit intended to be conferred by this Agreement, the
parties shall negotiate in good-faith, to develop a structure the economic effect of which is
nearly as possible the same as the economic effect of this Agreement without regard to such
invalidity.



Section 30. Governing Law. This Agreement and any Class A Participation Certificate
and the rights and obligations of the parties thereto shall be governed by and construed in
accordance with Federal law. To the extent there may be no applicable Federal law, the internal
laws of the State of New York (without giving regard to conflicts of laws principles other than
Sections 5-1401 and 5-1402 of the New York General Obligations Law) shall be deemed reflective of
Federal law to the extent that to do so would not frustrate the purposes of any provision of the
Agreement or the transactions governed thereby.



Section 31. Exhibits. The exhibits to this Agreement are hereby incorporated and made
a part hereof and are an integral part of this Agreement.


 


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Section 32. General Interpretive Principles. For purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires:




	 	(1)	 	the terms defined in this Agreement have the meanings assigned to them in this
Agreement and include the plural as well as the singular, and the use of any gender
herein shall be deemed to include the other gender;

	 
	 	(2)	 	accounting terms not otherwise defined herein have the meanings assigned to them
in accordance with generally accepted accounting principles;

	 
	 	(3)	 	references herein to “Articles,” “Sections,” “Subsections,” “Paragraphs,” and
other Subdivisions without reference to a document are to designated Articles, Sections,
Subsections, Paragraphs and other subdivisions of this Agreement;

	 
	 	(4)	 	reference to a Subsection without further reference to a Section is a reference
to such Subsection as contained in the same Section in which the reference appears, and
this rule shall also apply to Paragraphs and other subdivisions;

	 
	 	(5)	 	the words “herein,” “hereof,” “hereunder” and other words of similar import refer
to this Agreement as a whole and not to any particular provision;

	 
	 	(6)	 	the word “day” or “days” shall mean calendar day(s) unless expressly stated
otherwise; and

	 
	 	(7)	 	the term “include” or “including” shall mean without limitation by reason of
enumeration.






Section 33. Reproduction of Documents. This Agreement and all documents relating
hereto, including, without limitation, (a) consents, waivers and modifications which may hereafter
be executed, (b) documents received by any party at the closing, and (c) financial statements,
certificates and other information previously or hereafter furnished, may be reproduced by any
photographic, photostatic, microfilm, micro-card, miniature photographic or other similar process.
The parties agree that any such reproduction shall be admissible in evidence as the original itself
in any judicial or administrative proceeding, whether or not the original is in existence and
whether or not such reproduction was made by a party in the regular course of business, and that
any enlargement, facsimile or further reproduction of such reproduction shall likewise be
admissible in evidence.



Section 34. Further Agreements. Each of the Sponsor and the Eligible Lender Trustee
(if applicable) agrees to execute and deliver to the other such reasonable and appropriate
additional documents, instruments or agreements as may be necessary or appropriate to effectuate
the purposes of this Agreement.



Section 35. Other Department Program. Separately, the Department is offering a
Loan Purchase Commitment Program (as referred to in the Notice of Intent to Participate) for
eligible FFELP loans. This Agreement does not require, nor does it preclude, the participation of
an Eligible Lender in that separate program except to the extent specified in Section 15 hereof.


 


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Section 36. Adoption. This Agreement shall be effective with respect to the Sponsor,
the Eligible Lender Trustee (if
applicable) and the Custodian as of the day and year on which an
Adoption Agreement, in the form attached hereto as Exhibit A, is entered into by and among the
Sponsor, the Eligible Lender Trustee (if applicable), the Custodian and the Department.



Section 37. Integration. The Master Participation Agreement, together with the related
Adoption Agreement and any guidance interpreting the provisions of this Agreement published by, and
binding on, the Department prior to November 1, 2008, embodies the entire agreement and
understanding of the parties hereto and thereto and supersedes any and all prior agreements,
arrangements and understandings relating to the matters provided for herein and therein.



[NO FURTHER TEXT ON THIS PAGE]




 


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ADOPTION AGREEMENT




This Adoption Agreement, dated as of the date set forth on the signature page, among the
United States Department of Education (“Department”), the Sponsor (as listed in Section 1 hereof)
(“Sponsor”), the Eligible Lender Trustee (as listed in Section 1 A hereof) (“Eligible Lender
Trustee”) and the Custodian (as listed in Section 2 hereof) (“Custodian”) is made pursuant to the
Master Participation Agreement, dated as of July 25, 2008, published by the Department (“Master
Participation Agreement”). Capitalized terms used but not otherwise defined herein, shall have the
meanings set forth in the Master Participation Agreement.



a) The Department desires to purchase from the Sponsor, and the Sponsor desires to sell to
the Department, in each case through the Custodian, certain Participation Interests in Eligible
Loans from time to time pursuant to the terms and conditions set forth in the Master Participation
Agreement.



b) The Department and the Sponsor desire to set forth herein the terms and conditions of
such purchase and sale arrangements.



c) Each of the Sponsor and the Eligible Lender Trustee desires to transfer title to the
Eligible Loans to the Custodian, and the Custodian hereby accepts such delivery and agrees to
hold such Eligible Loans and all supporting documentation delivered in connection with such
Eligible Loans in trust for the benefit of the holders of the Participation Interests.



d) This Adoption Agreement shall supersede and replace all prior agreements among the
parties regarding the sale of Participation Interests in Eligible Loans by the Sponsor to the
Department.



NOW, THEREFORE, in consideration of the above recitals and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the Department and the
Sponsor hereby agree as follows:




Section 1. “Sponsor” shall mean:




National Education Loan Network, Inc.

Attention: Terry J. Heimes
 121 South 13th
Street, Suite 201
 Lincoln, NE 68508

Lender ID: 833669 (through Eligible Lender Trustee)



The above address shall be the Sponsor’s address for the purpose of receiving notices
pursuant to the Master Participation Agreement.


 


 









 






Section IA. “Eligible Lender Trustees” shall mean the following:




Union Bank and Trust Company

Attention: Jon Gross
 6801 South
27th Street
 P O Box 82535
 Lincoln
NE 68501-2535
 Lender ID: 833669




The above address shall be the Eligible Lender Trustee’s address for
the purpose of receiving notices pursuant to the Master Participation
Agreement.




Section 2. “Custodian” shall mean:




Manufacturers and Traders Trust Company

Attention: Rex F. Hood
 213 Market Street — 2nd
Floor 
Harrisburg, PA 17101




The above address shall be the Custodian’s address for the purpose
of receiving notices pursuant to the Master Participation Agreement.



Section 3. Purchase and Sale of Participation Interests. Following the date of this
Adoption Agreement, each of the Sponsor and the Eligible Lender Trustee agrees to participate in
the Department’s Participation Purchase Program for Participation Interests in Eligible Loans made
pursuant to the Federal Family Education Loan Program under the Master Participation Agreement and
to deliver to the Department such Participation Interests in the aggregate principal amounts as
evidenced by Participation Purchase Requests and related attachments entered into among the
Sponsor, the Eligible Lender Trustee, and the Custodian holding legal title to the Eligible Loans
in trust for the holders of the Participation Interests pursuant to the Master Participation
Agreement. The Sponsor agrees to sell to the Department, and the Department agrees to purchase
from the Sponsor such Participation Interests on the terms and subject to the conditions of the
Master Participation Agreement as the same may be supplemented or amended from time to time. The
Custodian agrees to hold each Eligible Loan and, either directly or through its designee, all
supporting documentation and records in trust for the benefit of the holders of the Participation
Interests, and to issue the Participation Interests pursuant to the terms and conditions of the
Master Participation Agreement as the same may be supplemented or amended from time to time. Each
of the Sponsor, the Eligible Lender Trustee, the Department and the Custodian hereby acknowledges
and agrees to all terms and provisions of the Master Participation Agreement which relate to the
creation of and selling of Participation Interests which are incorporated herein in their entirety
as if such had been set forth herein, as the same may be supplemented or amended from time to
time.


 


2









 





Section 4. Incorporation of Master Participation Agreement. Each of the Sponsor, the
Eligible Lender Trustee, the Department and the Custodian hereby acknowledges and agrees to all
terms and provisions of the Master Participation Agreement which are incorporated herein in their
entirety as if such had been set forth herein in their entirety, as the same may be
supplemented or amended from time to time.



Section 5. Governing Law. This Adoption Agreement and the rights and obligations of
the parties hereto shall be governed by and construed in accordance with Federal law. To the
extent that there may be no applicable Federal law, the internal laws of the State of New York
(without giving regard to conflicts of laws principles other than Sections 5-1401 and 5-1402 of
the New York General Obligations Law) shall be deemed reflective of Federal law to the extent that
to do so would not frustrate the purposes of any provision of this Adoption Agreement.



[Signature Page Follows]




 


3









 




IN WITNESS WHEREOF, the parties hereto have caused this Adoption Agreement to be duly
executed by their respective officers hereunto duly authorized, as of the day and year first
above written.



	 	 	 	 	 
	 	

United States Department of Education

 	 
	 	By:  	/s/ James F. Manning
 	 
	 	 	Name:  	James F. Manning 	 
	 	 	Titile:  Deputy COO Federal Student Aid 	 
	 
	 	
Date of Adoption Agreement: 8/14/08 

(to be inserted by the Department)


National Education Loan Network, Inc., 

as Sponsor

 	 
	 	By:  	/s/ Terry J. Heimes
 	 
	 	 	Name:  	Terry J. Heimes 	 
	 	 	Titile: Chief Financial Officer and Treasurer 	 
	 
	 	
Union Bank and Trust Company, 

as Eligible Lender Trustee

 	 
	 	By:  	/s/ Jon Gross
 	 
	 	 	Name:  	Jon Gross  	 
	 	 	Titile: Senior Vice President 	 
	 
	 	
Manufacturers and Traders Trust Company, 
as Custodian
 	 
	 
	 	By:  	/s/ James Deitrick
 	 
	 	 	Name:  	James Deitrick 	 
	 	 	Titile: VP